Cornwall Council 2017/18 Annual Financial Report And Statement of Accounts
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Contents Cornwall Council 2017/18 Annual Financial Report and Statement of Accounts
Contents Page
Narrative Report 2 Independent Auditor’s Report for Cornwall Council 25 Independent Auditor’s Report for Cornwall Pension Fund 30 Statement of Accounts Statement of Responsibilities and Certification of the Statement of Accounts 34 Main Financial Statements 35 Comprehensive Income and Expenditure Statement 36 Movement in Reserves Statement 36 Balance Sheet 38 Cash Flow Statement 38 Notes to the Main Financial Statements 40 Index of Notes 41 Group Financial Statements 123 Group Movement in Reserves Statement 124 Group Comprehensive Income and Expenditure Statement 124 Group Balance Sheet 126 Group Cash Flow Statement 126 Notes to the Group Financial Statements 128 Supplementary Financial Statements 141 Housing Revenue Account 142 Notes to the Housing Revenue Account 145 Collection Fund 151 Notes to the Collection Fund 153 Fire Fighters’ Pension Fund Account 155 Pension Fund Accounts 159 Cornwall Local Government Pension Scheme Accounts 160 Notes to the Pension Scheme Accounts 161 Glossary 191
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Narrative Report Cornwall Council 2017/18 Statement of Accounts
Narrative Report from Service Director for Resources and Section 151 Officer
I am pleased to introduce our Annual Financial Report and Statement of Accounts for 2017/18. This document provides a summary of Cornwall Council’s financial affairs for the financial year 1 April 2017 to 31 March 2018 and of our financial position at 31 March 2018. 1. The Financial Report and Statements Our Annual Financial Report and Statement of Accounts includes the following financial statements and disclosure notes: Narrative Report – from the Service Director for Resources and S151 Officer. This provides interested parties with an effective guide to the most significant matters reported in the Statement of Accounts including information relating to the Council’s spending and financial position and its performance in key areas. Independent Auditor’s Reports – there is an independent report from the external auditors to the Members of the Council and also for Cornwall Pension Fund. Statement of Accounts o Statement of Responsibilities – this explains the different responsibilities relating to the Statement of Accounts and confirms their approval. o The Main Financial Statements - Comprehensive Income and Expenditure Statement – this statement shows the net cost in the year of providing Council services. - Movement in Reserves Statement – this statement shows the movement in the year on the different reserves held by the Council. - Balance Sheet – the Balance Sheet shows the value at 31 March 2018 of the assets and liabilities held by the Council. - Cash Flow Statement – the Cash Flow statement shows the changes in cash and cash equivalents of the Council during the reporting period. o Notes to the Main Financial Statements – these provide additional, more detailed information on specific areas from the main financial statements. o Supplementary Financial Statements - Housing Revenue Account (HRA) Income and Expenditure Statement - the HRA Income and Expenditure Statement shows the net cost in the year of providing council housing. - Collection Fund Income and Expenditure Statement – this statement shows transactions in relation to council tax and national non-domestic rates. o Group Financial Statements – a further set of financial statements, in the same format as those described above, including companies and other organisations in which we have an interest, together with relevant notes. o Fire Fighters’ Pension Fund Account – setting out the financial arrangements for this specific scheme. o Pension Fund Accounts – relating to the main Local Government Pension Scheme we run for our employees (and those of some other organisations). Glossary – an explanation of technical terms that have been used in the document. Except where otherwise indicated, figures are presented in millions of pounds (£m) and are rounded to the nearest thousand pounds (£0.001m).
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Narrative Report Cornwall Council 2017/18 Statement of Accounts
2. An Overview of Cornwall Council Organisational Overview and External Environment
Cornwall Council is a unitary local authority serving a population of over 550,000 residents. As a unitary Council it provides all local authority services including adult social care, children’s social care, education, public health, highways, planning, housing, benefits, fire and rescue, building control and environmental services amongst many more. Cornwall is a large unitary area covering 3,500km2, predominantly rural with 480km of coastline.
The Cabinet, in June 2017, set out its aim as: “We will work with the people of Cornwall and use our resources wisely to protect and enhance our unique environment, create more homes and jobs for our residents and ensure everyone can live well and safely together.” Furthermore, it set out its values:
We listen: we will work with the people of Cornwall We are responsible: we will use resources wisely We act in the best interests of Cornwall: putting people first
To guide the administration through the next four years, the Cabinet has developed its Strategic Business Plan 2018/19 to 2021/22 which sets out how the Council will deliver its Priorities for Cornwall and demonstrates its commitment to protecting the most vulnerable, investing in jobs and homes within Cornwall and continuing to improve Cornwall’s infrastructure so that our people, places and services are connected. The priorities for Cornwall are:
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These priorities and Business Plan have been set against a backdrop of reducing government funding and uncertain economic times which continues to present significant challenges to the Council in delivering services to its residents.
An Annual Report 2017/18 was published in May 2018 which sets out how the Council delivered against its priorities. The report will be available on the Council’s website.
Since its formation in 2009, the Council has delivered over £300m in savings and has seen its central government funding reduce significantly. Consequently, the Council has become more dependent upon locally raised resources; council tax and business rates. In 2009/10 council tax made up around 33% of the Council’s funding whereas in 2021/22 it is expected to be 56%. It is assumed government policy will continue in this direction with further cuts to government funding. We recognise this impact on residents and are proactively driving down costs where possible and changing our service delivery to become more efficient wherever possible. Cornwall Council’s council tax remains the lowest in the South West.
£ Council Tax Band D 2017/18 South West Councils (excluding Police and Parishes) 1,600
1,550 Cornwall Council 1,500
1,450
1,400
1,350
1,300
Internally the Council is led by the Chief Executive Officer and the Council Directors Team, supported by the Council Leadership Team. Services are grouped into Directorates which are in turn led by Strategic Directors. In 2017/18 the Council was organised around four Directorates:
Children, Families and Adults – including adult social care, children’s services such as protecting vulnerable children and supporting disabled children and services around education and supporting families. Customer and Support Services – including commercial services such as procurement and property and assets as well as the Council’s support services such as legal services, finance etc. Economic Growth and Development – including economic development, culture, public transport and planning.
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Neighbourhoods – including fire and rescue, waste management and environmental services.
The Council owns a number of companies that form part of its group. Some of these are commercial whereas others facilitate delivery of Council services and objectives by other means than direct service provision by the Council. This is an increasingly common model of operation for local authorities as they seek alternative ways of achieving their aims within reduced funding arrangements. Cornwall Council’s Business Group is as follows: Cornwall Council
Corserv Ltd CORMAC Wave Hub Contracting (including a Joint Venture with Nottinghamshire County Ltd Council called Via East Midlands Ltd) Ltd
Cornwall Cornwall Cormac Cornwall Development Housing Ltd Solutions Ltd Airport Ltd Company Ltd
Corserv Ltd - a wholly-owned company of Cornwall Council established to provide strategic direction and oversight for its existing arm’s-length and commercial trading companies. Corserv Ltd has also entered into a joint venture arrangement with Nottinghamshire County Council called Via East Midlands Ltd to deliver a sustainable highways service for Nottinghamshire. Cornwall Housing Ltd - manages and maintains the 10,281 council houses in mid and east Cornwall. The company looks after about 300 leaseholders on behalf of the Council and manages Council owned garages, shops and land in neighbourhoods with council housing. Cornwall Housing Ltd also deliver the Homechoice and Housing Options and Advice service for the Council. CORMAC Solutions Ltd - provides services to Cornwall Council and its partners. The company's purpose is to enhance local communities by delivering innovative services which create a better local environment and contribute to sustainable economic growth, whilst facilitating resilient, self-sufficient and safer communities. Cornwall Development Company Ltd - an economic development company which has been charged with delivering economic priorities and solutions on behalf of the Council. Cornwall Airport Ltd - responsible for all airport operations including Civil Aviation Authority licensing, customer services, commercial development, route development and marketing.
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Cornwall Airport is working closely with its sister organisation, Cornwall Development Company Ltd, in the marketing and development of the Airport's huge estate. CORMAC Contracting Ltd – a trading company wholly-owned by Cornwall Council which acts as a vehicle for private sector growth. Its purpose is to generate revenues by winning work in a competitive environment and partnering with other public or private sector companies to deliver cost effective and sustainable solutions to complex engineering challenges.
Wave Hub Ltd – manages an offshore test site to advance the development of offshore renewable energy technologies. The government department for Business, Energy and Industrial Strategy (BEIS) transferred the wave hub asset which lies off the Cornish coast at Hayle to Cornwall Council in 2016/17.
Working with Partners
Increasingly the Council works with numerous partner organisations to deliver public services in Cornwall. It has worked with the Ministry for Housing, Communities and Local Government to agree a devolution deal for Cornwall and continues to press for greater local powers. It works with local Town and Parish Councils to “join-up” local government in Cornwall and particularly in deciding which Councils are best placed to provide services within a period of reduced funding within the public sector. A key challenge in Cornwall is the joining-up of health care and adult social care. This is a challenging issue with Cornwall with its demographics and a high (and increasing) proportion of its community being more elderly residents. Options for integrating health and social care are currently being considered, one of which is an Accountable Care System which could see a one strategy, one budget and one planned approach to work for people’s best interests.
Governance
The Council has 123 Councillors (Members) representing Cornwall and together they form the Council, with a Leader and Cabinet model. The Council meets approximately every six weeks. They set the budget for the year as well as the business plan, which sets out the policies and plans the Council wants to achieve. The Council also elects a Leader who is then re-elected annually. The Leader then chooses between two and nine councillors to form a Cabinet. The Cabinet’s responsibilities are divided up into Portfolios and each Cabinet Member is responsible for that Portfolio of work. The Cabinet Members are also known as Portfolio Holders or Executive Members. The Leader and Cabinet take decisions to deliver the business plan and these must usually be within the budget and policy framework set by the Council.
The Cabinet receives the Council’s Performance Report (CPR) on a quarterly basis which demonstrates how the Council is performing against a set of Key Performance Indicators (KPIs), Strategic Projects, Finance and Strategic Risks.
The Council also has a number of committees such as Overview and Scrutiny, Planning, Licencing, Standards, Pensions and an Audit Committee.
The Council has a constitution which sets out how the Council operates, how decisions are made and the procedures which are followed to ensure that these are efficient, transparent and accountable to local people. Some of these processes are required by law, while others
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are a matter for the Council to choose. The constitution includes items such as responsibility for functions, the scheme of delegation, Council procedure rules and financial regulations. The Council is required to produce an Annual Governance Statement (AGS) each year to meet the requirements of the Accounts and Audit Regulations 2015 and the principles set out in the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Society of Local Authority Chief Executives (SOLACE) Framework: “Delivering Good Governance in Local Government”. Please see the 2017/18 AGS for further information on how the Council has complied with these principles.
Operational Model
The Council set its net revenue budget for 2017/18 at £519m with gross expenditure estimated at £1,100m. It also set a capital programme for investment in its assets of £574m. The budget included planned savings of £35m and the Council had general reserves of £42m and total usable reserves of £373m at the start of the year. The budget resulted in a Band D council tax of £1,398.70 which was an increase of 3.97% on 2016/17. The council tax increase included 2% specifically towards adult social care. The net revenue budget was funded as follows:
The Council also approved a capital programme that represents its investment in assets. The original approved programme for 2017/18 totalled £279m. The programme previously approved by Council is set out overleaf.
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Narrative Report Cornwall Council 2017/18 Statement of Accounts
2020/21 2017/18 2018/19 2019/20 and beyond Total Programme Board £m £m £m £m £m
Customer and Support Services 10.530 6.091 2.147 - 18.768 Culture and Economic Development 42.617 14.831 9.062 3.000 69.510 Children, Families and Adults 33.604 9.678 4.250 8.150 55.682 Environment 6.490 5.702 3.789 - 15.981 Green Cornwall 1.964 11.500 4.000 - 17.464 Growth Deal 55.456 14.660 - 0.122 70.238 Housing 42.184 25.834 17.327 25.163 110.508 Operational Asset Review (Fire and Rescue) 4.910 2.354 2.965 15.126 25.355 Property 25.149 3.980 4.700 - 33.829 Transportation 50.566 42.468 31.702 26.161 150.897 Waste 5.110 0.320 0.080 0.225 5.735
Total 278.580 137.418 80.022 77.947 573.967
2020/21 2017/18 2018/19 2019/20 and beyond Total Funding £m £m £m £m £m
General Fund Revenue and Reserves 39.606 32.349 26.541 26.236 124.732 HRA Revenue and Reserves 15.608 10.551 11.027 12.063 49.249 Borrowing 76.564 44.735 28.471 27.799 177.569 Capital Receipts 17.476 10.073 4.642 5.500 37.691 Grants and Contributions 129.326 39.710 9.341 6.349 184.726
Total 278.580 137.418 80.022 77.947 573.967
Risks and Opportunities
Those risks that are considered strategic (high value exposures to the Council as a whole that have a high probability of occurring without continued preventative action) are reported to Cabinet on a quarterly basis as part of the Council Performance Report and also to the Audit Committee. Twenty one strategic risks were identified and monitored during 2017/18. Although all have been identified as strategic the following have been considered as principal risks relating to future service provision.
Risk Risk Score Commentary The Council will not have the Implementation plan for a new operating model underway. capacity and capability to 20/25 Joint commissioning intentions agreed with the Clinical effectively deliver services as the Commissioning Group (CCG) to address whole population population ages, becoming issues and link with Public Health work. The increasingly frail and vulnerable, recommissioning of the new (joint Council/CCG) homecare which represents an increasing framework is progressing with full implementation percentage of the population of expected in Q1 2018/19 and this will act as a key enabler Cornwall that could result in for improving service quality and the availability of compromising the quality of care community based services in Cornwall. provision to Cornwall residents.
Reduced capacity and capability of 15/25 The strategic plan for managing this risk is through the the Council’s Children’s Services Social Care Innovation Programme to integrate education, means it cannot deliver effective early years, community health, early help and social care services to children, young people under an Alternative Delivery Model. and families as demand in key Capacity continues to be a concern, with increasing areas of need increases. This could demand on services and additional duties, such as the new lead to overspending or requirement via Department for Education guidance compromised quality and February 2018 for the Children in Care Education Support effectiveness resulting in an Service to monitor and oversee all previously looked after
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increased risk of failure and a children to at least age 18 years, as well as current reduced OFSTED rating. children in care.
The compound effects of the 12/25 Inclusive Growth report is being prepared for consideration government’s welfare reforms will by Overview and Scrutiny Committee in June 2018 prior to create increased demand for consideration by Cabinet. This will set out principles of Council services and adverse approach to promote inclusive growth. A strategic welfare outcomes for residents and in reform group has been set-up and will be developing a particular children and vulnerable coordinated response for the Council and partners to adults, through increased housing welfare reform and mitigation. stress, homelessness and financial exclusion.
The Council will not prioritise 16/25 Depreciation of the asset continues with an annual spending/attract core funding so as increase in the "backlog." Vulnerability to extreme weather to maintain standards of events continues to increase as the resilience of the infrastructure long term resulting infrastructure declines. Urgent additional funding such as in sub-optimal asset condition and the One Cornwall Highway initiative included in the growth usage, increased exposure to proposals is now required and if made available will assist claims and additional cost. in mitigating this risk.
Due to the decreasing central 15/25 Although the 2017/18 outturn is a £2.692m underspend government funding, increased and a balanced budget has been set for 2018/19 to demand on services, cost 2021/22, the Council is facing the same increasing demand fluctuations due to Brexit, the for its services and its financial sustainability is dependent Council is unable to deliver and upon the delivery of significant savings in 2018/19. There provide statutory services and are still a number of external influences that are those discretionary services it unquantifiable at the moment coupled with a number of chooses to provide to a level that internal risks e.g. delivery of adult social care savings, meets the expectations of the waste strategy implications, that could impact on the communities of Cornwall and is Council’s revenue position, which in turn could have a legally defensible. detrimental impact to the level of resources available to deliver services. The workforce is unable to deliver 16/25 Mitigations relating to dependency mapping across change the amount of corporate and programmes, change readiness assessment, developing service change that is required to common change tools and identifying additional change be implemented at the same time. resources are being put in place. The impact is that changes do not deliver the anticipated desired benefits and have a detrimental impact on staff and service delivery.
Breach in compliance with health 15/25 The existing estate, consisting of corporate properties and safety checks on our property managed directly by Property Services (120) and a further estate, including but not limited to 70 Service Level Agreement’s, sit within property service the fire risk assessments. managed programs and /or are delivered by Mechanical and Engineering test and inspection programs. These are compliant. The 211 other gap properties will form the approach of the Corporate Landlord delivery model. At this point in time we cannot confirm compliance levels until survey and assessments are completed.
Property services have reviewed all 208 Fire Risk Assessment’s (FRA) and have commissioned all outstanding works arising. We have programmed 2019 FRA reviews and new surveys. Subject to resourcing / capacity. We have also programmed the fire alarms, emergency lighting, fire safety tasks and these link into the onsite fire management plans.
The Council is increasingly looking for opportunities to work differently in response to a continuing challenging public sector environment. Those opportunities are being pursued at many different levels within the organisation. Cornwall became the first rural authority in the country to be offered a devolution deal by central government with the aim of giving
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Cornwall more control over key service areas. The deal covers a range of key areas including:
Integrated health and social care Transport Employment and skills EU funding (and the transition post Brexit) Business support Energy The public estate Heritage and culture
The Council is also working with Town and Parish Councils in the County exploring the most beneficial arrangements for local service delivery.
The Council continues to use its group arrangements to provide services in alternative forms of delivery where that is beneficial. It is currently exploring the creation of a Housing Development Company to better enable the provision of affordable rental housing in Cornwall – a key priority for Cornwall’s residents.
3. Strategy and Resource Allocation – The Council’s Budget and Medium Term Financial Plan 2018/19 to 2021/22 The Council’s Medium Term Financial Plan (MTFP) sets out the Council’s journey for the next four years taking its direction from the Council’s Strategy and Business Plan. The Council’s budget is refreshed annually taking into account any local or national changes and therefore providing a four year rolling financial plan. It is updated for changes in national and local funding assumptions, local income projections, spending pressures and any changes in savings plans.
The Local Government Finance Settlement confirmed that the Council’s funding assessment will reduce from £147.697m in 2017/18 to £136.492m in 2018/19 – a reduction of nearly 8%. The Council anticipates that the funding will fall further in 2019/20 to £124.783m which is a reduction of 16% compared to current levels. Currently that funding is a combination of Revenue Support Grant (RSG) from central government and the local share of business rates. The Council is expecting that by 2019/20 the RSG element will be almost completely removed. The Council receives a number of other government grants for specific purposes, for example a Public Health grant to allow for the discharge of its public health responsibilities and Improved Better Care Fund to support integration of health and social care.
In 2017/18 Cornwall Council agreed with central government that it would pilot 100% business rate retention. This will continue into 2018/19 and will mean that the Council will forego certain other government grants in order to maintain a fiscally neutral position.
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However, the pilot includes a “no detriment” clause to ensure the Council is no worse off under the new arrangements compared with the previous position.
The Council’s other main source of funding is council tax. The Council forecasts that the equivalent number of Band D properties across which it charges council tax will increase by around 1.1% per annum. The Band D charge for 2018/19 is £1,468.50 which is an increase of 4.99% on the 2017/18 charge. Forecasts for future years are an increase of 3.99% in 2019/20 and 1.99% per annum thereafter. For the 2018/19 and 2019/20 years part of the increase funds additional social care costs (2% each year).
Taking into account the above factors the Council forecasts that it will have the following resources over the period of its financial plan:
Resources
2017/18 2018/19 2019/20 2020/21 2021/22 £m £m £m £m £m 518.780 550.016 544.017 554.557 566.001
The Council experiences budget pressures from a variety of sources such as inflation, national staff pay awards, increasing service demand and changes in legislation. The Council anticipates unavoidable spending pressures over the next four years as follows:
Unavoidable Spending Pressures
2018/19 2019/20 2020/21 2021/22 Total £m £m £m £m £m 46.741 25.935 22.668 15.542 110.886
A particular area of pressure is Adult Care and Support. A combination of increased demand, legislative changes and cost pressures means this service area presents the most significant financial challenge to the Council which spends around 30% of its overall budget in this area. An Adults Transformation Plan is in place to ensure the Council is best-placed to manage this challenge. The project will modernise the service and link to the integrated community services priority in the Sustainability and Transformation Plan (STP).
In order to keep its budgets within available resources the Council develops savings plans which are deliverable by services. The overall position for the next four years is set out overleaf:
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2017/18 2018/19 2019/20 2020/21 2021/22 £m £m £m £m £m
Service budget brought forward 498.538 527.638 539.645 540.288 552.827
Pressures 57.600 46.741 25.935 22.668 15.542
Saving plans (28.500) (34.734) (25.292) (10.129) (6.998)
Service Budget Requirement 527.638 539.645 540.288 552.827 561.371
General Fund Reserve (draw)/contribution (0.450) (5.844) 3.729 1.730 4.630 Corporate BER (draw)/contribution (8.408) - - - - Transfer to Economic Development Match Fund reserve - 16.215 - - -
Total Net Budget 518.780 550.016 544.017 554.557 566.001
Resources Available: - Council Tax 259.818 281.068 296.228 305.448 314.619 - Business Rates (retained) 160.789 178.518 185.893 191.132 196.318 - Government Grants 87.373 74.064 61.896 57.977 55.064 - Collection Fund Surplus 10.800 16.366 - - -
Total Resources 518.780 550.016 544.017 554.557 566.001
Savings can be made in a number of ways; for example increasing income, changing service delivery or cutting services (which may mean cutting staff). The Council’s savings plans for 2018/19 to 2021/22 are made up of the following types:
Corporate Other £4.1m (5%) Employees £15.9m (21%) Property £0.9m (1%) Income Generation £15.8m (21%)
Service Delivery £40.5m (52%)
The Council’s Directorate structure changed from the 1st April 2018. The most significant change being the separation of Adult Social Services from Children, Schools and Families. Wellbeing and Public Health is shown separately in the table below, but is formally under the Adult Social Services Directorate. Capital Financing and Corporate Items contain budgets which do not sit within the service Directorates.
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The target net revenue budgets for the four years are set out as follows: Net Budget 2018/19 2019/20 2020/21 2021/22 £m £m £m £m Adult Social Services 162.393 165.317 165.731 168.530 Children, Schools and Families 78.398 80.882 81.077 81.302 Neighbourhoods 92.056 90.900 90.708 90.875 Economic Growth and Development 52.190 51.414 51.162 50.527 Customer and Support Services 63.039 63.512 63.512 63.024 Wellbeing and Public Health 25.461 24.789 24.789 24.789 Capital Financing and Interest Receipts 50.647 50.612 50.612 50.612 Corporate Items (inc Contingency) 15.461 12.862 25.236 31.712
Total Net Service Expendture 539.645 540.288 552.827 561.371
Budgeted Reserves Movement 10.371 3.729 1.730 4.630
Total Net Expenditure 550.016 544.017 554.557 566.001
It is considered that the budget strategy of setting a four year MTFP is a sound and robust approach and has, and will continue to, provide time and capacity for the Council to proactively plan for the significant ongoing financial challenges. It aligns the Council’s budget to the actions set out in the Council Business Plan and objectives of the Council’s Priorities for Cornwall.
As the MTFP progresses over the next four years, challenging savings targets will continue to need to be delivered. Where these savings impact on front line services, the Council has taken steps, as far as is possible, to protect key priority services and those areas which affect the most vulnerable in society.
Capital Programme
In line with the Council’s Capital Investment Plan, the strategy for the allocation of capital funding focuses on two specific types of scheme; those which drive economic growth and investment priorities and those which have been developed on an Invest to Save basis, in other words, schemes which will either generate income or produce revenue savings.
The latest capital programme is summarised below: 2021/22 2018/19 2019/20 2020/21 and beyond Total £m £m £m £m £m
Total Capital Programme 279.386 187.091 166.111 95.140 727.728
Capital Receipts Flexibility
In 2016/17 the government introduced a policy which allowed the flexible use of capital receipts to finance the revenue costs of transformation i.e. expenditure which will generate ongoing savings to an authorities net service expenditure.
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The first such programme that the Council undertook using this flexibility was a £1.000m scheme to transform the One Stop Shop and Library services by working in partnership with, and transferring services to Town and Parish Councils. This will deliver savings and provide a more efficient and sustainable service. The investment will be used for upfront feasibility and development works, service reconfiguration and tapering of costs in agreement with Town and Parish Councils.
A further £0.165m was approved to be used for a transformation project to support day centre provision in the Adult Social Services area. The scheme will develop the centres to provide a modern service which offers life skills development for service users with an opportunity to take part in physical activity. Alongside that it will provide buildings that are fit for purpose, can be jointly used with partner organisations, creating lower maintenance and running costs.
Following a government announcement that the policy would be extended for a further three years to March 2022, an additional £0.400m was approved to support the Libraries and Information Services Transformation programme. The overall programme is £0.700m but the capital receipts flexibility will fund the Programme Team for 2018/19 and additional costs resulting from a decision to cease funded legal support for the devolution programme.
General Fund
The Council maintains financial reserves which can be general and used to fund unforeseen issues or emergencies, or earmarked which are kept for specific purposes. The Council’s statutory financial officer (the Section 151 Officer) is required to make an explicit judgement on the adequacy of reserves when the Council sets its budget. The opening General Fund reserve at the beginning of 2017/18 was £42.097m (including the Corporate Reserve) which has decreased to £36.441m by the end of the year. The Council plans to use this reserve to smooth its budget by taking money out and putting money back in over the next four years. Current forecasts show this reserve increasing to circa £40m by 2021/22.
4. Performance The Council’s Cabinet receives performance reports on a quarterly basis. The report is comprised of a number of key areas:
Strategic and critical performance indicators Financial indicators Risks Projects Devolution deal
The Council has 66 strategic and critical performance indicators. Of these 35 are quarterly measures and 31 annual measures and these are reported to the Council’s Cabinet. The performance indicators are rated as either: on track to be achieved (green), off-track (amber) or significantly off-track (red). The report to Cabinet focusses on the indicators that are rated as red i.e. significantly off-track. The number of indicators reported makes it impractical to include them all within this report. The Cabinet meeting of 20th June 2018 will
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receive the outturn performance report and details of the report will be published on the Council’s website.
Whilst the overall approach to risk management is covered above, Cabinet receives an update on strategic risks following their consideration by the Audit Committee.
Strategic projects are reported to Cabinet under a red, amber and green status. Projects deemed to be red (those outside of project tolerance with no current approved plan) are set out in more detail in the report.
As covered above, the devolution deal is the arrangement with central government for Cornwall to take on more powers locally. Progress against the 10 projects covered within the deal is reported to Cabinet.
Financial performance focusses on the Council’s budget monitoring to the most recent quarter. The report sets out the forecast net spend to the end of the year and explains any major spending variations.
2017/18 Financial Performance
The final revenue outturn position for the financial year 2017/18 was a net underspend of £2.692m against a net budget of £518.780m.
The Council’s Directorates overspent by £2.910m, with the majority within Neighbourhoods totalling £2.770m, £0.596m within Economic Growth and Development and £0.326m within Children Families and Adults. Customer and Support Services underspent by £0.782m and Wellbeing and Public Health delivered to budget. This total Directorate overspend has been offset by underspends within corporate budgets of £3.986m and additional corporate funding grant income received of £1.616m.
This net underspend has been achieved despite a savings shortfall of £8.401m against planned saving targets. These savings shortfalls have mainly been mitigated by underspends and additional income. As part of the 2018/19 budget setting process, savings have been reviewed to ensure they are still accurate and deliverable. Where it is considered savings shortfalls are still deliverable but in later years, the savings plans have been re-profiled.
On 2 May 2018 Cabinet approved the underspend of £2.692m be transferred to the General Fund for use to be determined by Cabinet in the future.
The outturn by Directorate and the overall position is as follows:
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Latest 2017/18 Outturn Budget Variance
£m £m £m Directorate
Children Families and Adults 231.642 231.968 0.326 Economic Growth and Development 53.605 54.201 0.596
Neighbourhoods 91.159 93.929 2.770 Customer and Support Services 64.632 63.850 (0.782) Wellbeing and Public Health 26.133 26.133 - Directorate total 467.171 470.081 2.910
Corporate Items 51.609 47.623 (3.986)
Total 518.780 517.704 (1.076)
Funded: - Council Tax (259.818) (259.818) -
- Business Rate Retention Scheme (160.789) (168.881) (8.092)
- Collection fund surplus (10.800) (10.800) - - Other Government Grants (87.373) (88.397) (1.024) - Reserve Movement - 7.500 7.500 Total Corporate Funding (518.780) (520.396) (1.616)
Total Variance (2.692)
Notes on Main Variances from the Budget
The outturn for Directorates, after proposed reserve movements, is a £2.910m overspend. Against a net budget of £467.171m this represents a 0.62% variance. This compares to a forecast outturn at the end of December 2017 of a £2.915m overspend.
The Children, Families and Adults Directorate overspent by £0.326m. Within this overall net overspend are two major variances; Adult Care and Support overspent by £2.259m after using one-off grants and reserves to offset significant pressures and Adult Transformation and Commissioning underspent by £1.789m due to underspends in Supporting People and Prevention contracts as the service moves to new commissioning arrangements in these areas.
The Economic Growth and Development Directorate overspent by £0.596m. The main variances within this net overspend are Planning and Sustainable Development which overspent by £0.818m mainly due to a shortfall of income in planning applications offset by reduced staffing costs. Transport and Infrastructure underspent by £0.291m which was a combination of additional highway fees off-set by reduced income from Park and Ride and an increase in Concessionary Fare usage.
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The Neighbourhoods Directorate overspent by £2.770m. Within this net overspend the Environment service overspent by £0.291m as a result of an unbudgeted contribution to the Capital Financing reserve required to finance capital expenditure in relation to the flooding at Coverack and additional costs due to storm damage and landslips, offset by strong income generation across the Natural Environment teams. Neighbourhood and Public Protection overspent by £1.521m mainly due to delayed delivery of savings plans. Resilient Cornwall overspent by £0.958m. High operational activity has put pressure on the ‘on call’ firefighter budget and led to an overspend of £0.486m. A shortfall of funding from partners for Domestic Abuse and Sexual Violence services caused an overspend of £0.297m. Waste has underspent largely due to strong income generation in relation to green waste subscriptions.
The Customer and Support Service Directorate underspent by £0.782m. The main variances within this Directorate were within Assurance and Monitoring which underspent by £0.915m due to a variety of reduced costs, Strategy and Engagement which overspent by £0.824m due to the unachievable MTFP savings target relating to the Transformation Challenge Award of £0.900m and within Customer Access and Digital which underspent by £0.528m due to a combination of factors including the profiling of Digital Cornwall, active vacancy management and one-off funding across Revenues and Assessments.
The Wellbeing and Public Health Directorate outturn was on budget.
Corporate Items
The outturn for Corporate Items is a £3.986m underspend with a net movement to reserves of £6.251m. Within the underspend, there is £4.500m of undistributed corporate contingency. In February, Cabinet approved the use of £0.500m for Fire Risk Assessments, the unspent balance has been transferred into the Capital Financing reserve for use in 2018/19.
The Council’s Group of Companies financial return has been reduced by £0.393m from the position reported in December to £5.407m. This reflects new financial risks that have emerged over the final quarter.
The capital financing and interest receipts budget has delivered on budget. In line with current policy, and as agreed as part of the 2018/19 budget setting process, this is net of a transfer of £13.669m to the Economic Development Match Fund reserve.
Corporate Funding
There is a favourable variance of £1.616m within the Council’s overall corporate funding. This variance is mainly as a result of additional section 31 grant funding relating to business rates and a technical adjustment to the business rates top-up grant.
Reserve Movements
The outturn position includes net movements to reserves of £34.577m. Whilst this reflects a number of transfers between reserves, it includes four key movements:
A transfer of £24.160m from the Highways Service within the Economic Growth and Development Directorate to the Capital Financing reserve for highways maintenance works. This is a consequence of the changes to the way the Council is funded as a result of the 100% business rates retention pilot.
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A transfer of £13.669m from Capital Financing and Interest Receipts within Corporate Items to the Economic Development Match Fund reserve.
A transfer of £7.500m from Corporate Funding into the Economic Development Match Fund reserve (£4.000m) and Capital Financing reserve (£3.500m).
A transfer from the General Fund reserve in line with the approved budget of £8.858m.
Under the delegated authority given by Cabinet on 7 February 2018, the Section 151 Officer in consultation with the Leader approved a number of transfers at outturn.
Note 10 within the Statement of Accounts details the earmarked reserve transactions and includes the technical adjustments required to produce the statutory accounts.
Statement of Accounts Comparison
There are significant differences between the Council’s directorate total per the budget monitor outturn reported as £470.081m and the cost of services of £533.996m reported in the Comprehensive Income and Expenditure Statement (CIES) in the Statement of Accounts.
Differences between the CPR outturn position and the cost of services in the CIES are set out in the following table:
2017/18 £m £m Directorate Total per the CPR Outturn* 470.081 470.081 Cost of services not included in the Directorate CPR Corporate Items in the cost of services 7.378 Schools 32.438 Local Authority Housing Revenue Account (HRA) (4.630) Joint Committees (TBTF and Mount Edgcumbe) 0.343 35.529 Statutory adjustments excluded from the CPR Capital charges including depreciation and impairment (charge for use of assets) 82.183 Notional pension benefits (to comply with IAS 19) 18.598 PFI adjustments (25.909) 74.872 Reversal of items not included in the cost of services in the Comprehensive Income and Expenditure Statement Financing and Investment Expenditure included in the budget monitor 1.815 Net contribution to Reserves (20.825) Reclassification of Public Health Grant (26.133) Minor variations (1.343) (46.486)
Cost of services in the Comprehensive Income and Expenditure Statement (CIES) 533.996
*Please refer to the table relating to the outturn position, page 16
Differences include: Service areas, such as the HRA and the Tamar Bridge and Torpoint Ferry (TBTF) Joint Committee, which are not reported through the Council’s main budget monitoring process but are required to be included in the Council’s statutory CIES. Costs, such as capital charges and the true economic cost of retirement benefits that are not included in the budget monitor but are required to be reflected in the statutory CIES.
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Narrative Report Cornwall Council 2017/18 Statement of Accounts
These charges are reversed out in the Movement in Reserves Statement (MIRS) so as not to impact on the council tax payer. Technical adjustment for the reallocation of the unitary charge in relation to PFI, no impact on the council tax payer. Some income and expenditure is accounted for corporately and therefore not charged directly to directorates. Reversal of items not included in the cost of services however included in the Council Performance Report outturn position. A more detailed breakdown of these differences is given in Note 7 to the accounts.
Revenue Expenditure and Funding
Our spending was funded from: 1. Council Tax 2. National Non-domestic Rates (NNDR) 3. Dedicated School Grant (DSG) – a specific grant which provides the bulk of school funding 4. Other specific grants – supporting particular services 5. General grants and other income – grants not specific to individual services and income from sales, fees and charges and rents and financing income
6. Housing Benefits Subsidy – support from government for tenants’ rents 7. Capital grants and contributions – recognised as income when any attached conditions are met
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Narrative Report Cornwall Council 2017/18 Statement of Accounts
The main categories of service that we fund are:
1. Children, Families and Adults Transfer of Financing Academy School Expenditure 2. Economic Growth and Development Assets £90m 6% £79m 6% 3. Neighbourhoods Schools £152m Children, Families 11% and Adults 4. Customer and Support Services £398m 28% Corporate Items 5. Wellbeing and Public Health and Other Services £93m Economic Growth 6. Corporate Items and Other Services 6% and Development Wellbeing and £150m 11% 7. Schools Public Health £28m 2% 8. Financing Expenditure – including Customer and Neighbourhoods Support Services £123m 9% interest paid on borrowing £298m 21% 9. Transfer of Academy School Assets
Capital Expenditure and Funding
In addition to our day to day running costs, we spend money on assets such as land and buildings, roads and other major infrastructure, vehicles and information and communications technology. Such expenditure is intended to contribute to service provision over a number of years and is defined as capital expenditure. Capital expenditure tends to be characterised by large individual schemes, with expenditure often incurred over several financial years. As a result, capital expenditure is not normally controlled against a fixed budget as with revenue spending, but rather through a programme of approved schemes within a multi-year capital plan. Capital schemes are approved on the basis of both affordability and council priorities.
Our actual capital expenditure in 2017/18 was £200.975m (2016/17 £235.569m). The major areas of capital expenditure were:
Transport schemes £97.452m Housing schemes £25.210m Economic development and culture schemes £30.238m Education schemes £20.997m Corporate property schemes £9.359m
Included within the total expenditure on transport schemes is £47.148m specifically relating to the maintenance and improvement of the County’s roads. In addition a further £45.643m was spent on the Growth Deal programme which aims to deliver a wide range of transport related improvements across the County, such as Truro Western Corridor, A38 Cornwall Gateway at Carkeel, St Erth Multi Modal Hub and the Cornwall Rail Improvements Package.
Capital expenditure on housing is incurred through a range of delivery methods. Major enhancements to improve and develop the Council’s own housing stock have totalled £15.945m. A further £3.707m has been contributed towards new affordable housing
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developments, through grant payments to registered social landlords. A total of £5.360m has also been spent on private sector housing, for example, in the form of disabled facilities grants and schemes to bring empty properties back into use.
Our capital spending was funded from: Borrowing, £47m, 23% 1. Capital Receipts Capital 2. Revenue Contributions and Receipts, Reserves £14m, 7% 3. Other Grants and Contributions Other Grants and from external bodies e.g. central Contributions, government, european funding £100m, 50% Revenue and 4. Borrowing reserves, £40m, 20%
The main areas of expenditure were: Operational 1. Operational Land and Buildings Land and Buildings 2. Council Dwellings £34m Other Capital 17% 3. Roads and Infrastructure Expenditure 4. Vehicles, Plant and Equipment £70m Council 35% Dwellings 5. Assets Under Construction (assets £16m not yet operational) 8% 6. Other Capital Expenditure, including Revenue Expenditure Funded from Capital Under Statute Assets Under (REFCUS), which is expenditure of Construction a capital nature that does not result £17m Vehicles, Plant Roads and in a Council asset e.g. Disabled 8% and Equipment Infrastructure Facilities Grants. £7m £57m 4% 28%
The Council’s Financial Position
The Council’s net assets as at 31 March 2018 stood at £569.396m, a decrease of £109.730m on the position at 31 March 2017 (£679.126m). The majority of this reduction was attributable to reduced short term investments (£73.706m).
At 31 March 2018 the Council’s General Fund balance amounted to £36.441m, a decrease of £5.656m on the opening balance of £42.097m. At 31 March 2018 the Council’s total usable reserves stood at £358.947m. Certain reserves are held for specific purposes such as capital, use on council dwellings, and schools curriculum.
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Narrative Report Cornwall Council 2017/18 Statement of Accounts
Borrowing and Investments
At the end of 2017/18, the Council had net debt of £390.283m, an increase of £59.950m. Against this the Council also held £69.171m in cash balances, an increase of £5.568m from the previous year. No new long term borrowing was undertaken during the financial year.
The Council’s net debt is made up as follows:
2016/17 2017/18 Change £m £m £m
Long Term Investments 165.605 194.920 29.315 Short Term Investments 216.712 143.006 (73.706) Total Investments 382.317 337.926 (44.391) Short Term Borrowing (77.602) (91.437) (13.835) Long Term Borrowing (635.048) (636.772) (1.724) Total Borrowing (712.650) (728.209) (15.559)
Net Debt (330.333) (390.283) (59.950)
Cash 63.603 69.171 5.568
The net debt should be considered in the context of the Council’s portfolio of property, plant and equipment (which, over time, it has helped to finance) which is valued at £2.3billion at the end of March 2018. Overall, the Council’s net assets amounted to £569.396m at that date.
The Council manages its borrowings and investments in line with its approved Treasury Management Strategy which is approved by the Council each year.
5. Outlook Cornwall Council approved its four year business plan 2018 to 2022 in February 2018. The plan recognised that Cornwall and the Council are under increasing pressures. The Council has less money and pressure for services, especially key ones such as Adult Social Services, are increasing. Cornwall continues to have areas of deprivation and poverty. The impact of Brexit on tourism, agriculture and fishing industries is uncertain. The business plan focusses on people, place and prosperity.
The 2018 to 2022 business plan identifies five key areas as priorities:
Healthy Cornwall Homes for Cornwall Green and Prosperous Cornwall Connecting Cornwall Democratic Cornwall
As with all Local Authorities Cornwall Council is receiving less money from central government towards its budget. More people are using services provided by the Council and
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the cost of those services is increasing. Since the inception of Cornwall Council in 2009 £300m of savings and efficiencies have been delivered to bridge the gap between rising costs, the demand for services and falling government funding. Further savings of around £77m will be needed over the next four years.
The Council is aiming at improving life chances for everyone in Cornwall and closing the gap for the most vulnerable members of its communities. It will allocate money to areas that matter most to people including spending more on care for vulnerable adults, building more affordable homes and making sure more people across Cornwall get paid a decent wage. The Council will continue to find savings and efficiencies and look to deliver more services jointly with partners.
The Council is in the process of developing some potentially significant initiatives which could have major resource implications in the future and which could also further add to the Council’s group of companies. The main initiatives are outlined below.
Investment Programme
Cornwall Council is exploring ways in which it can take a more active role in driving economic growth and realising multiple benefits for the people of Cornwall. Brexit will mean the loss of a significant European funding stream to Cornwall and at a time when central government is reducing resources to all local authorities. The Council is proposing an Investment Programme through which it will borrow funds to invest in local infrastructure, housing, workspace and social infrastructure. The purpose of the Programme is to deliver increased revenue for the Council and also to improve the lives of the people of Cornwall by providing affordable housing, space for job creation and accompanying social infrastructure. The timeframe is long term – expected to be 2018 to 2030 and the borrowing required to deliver the vision could be in the order of £600m to £1billion.
Housing Development Programme
The Council is intending setting up a wholly-owned company which will own housing stock built through the Housing Development Programme (HDP). The Council has an aspiration to provide 1,000 houses over four years and as part of this the Cabinet approved the delivery of two pilot schemes for 113 new homes at Tolvaddon and St Lawrence, Bodmin. The pilot schemes will help challenge, improve and refine the assumptions and planning for the wider HDP. The houses that are delivered within the HDP will either be sold at market rate, on an affordable basis or will be retained for either market or affordable rental. Those retained will be transferred to the wholly-owned company.
New Frontiers
New Frontiers describes how Cornwall and the Isles of Scilly will continue their economic, social and environmental transformation in a post-Brexit United Kingdom (UK). It proposes a series of policy, fiscal, sector and devolution asks that will empower Cornwall and the Isles of
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Scilly to shape a new approach to regional development. It proposes a new locally-controlled regional economic development funding model, innovative approaches to building more affordable homes through locally directed infrastructure investments and flexibilities over planning. It also aims to enable changes to regulations that inhibit business and that have a particular impact on the region and sector deals in the space, creative, digital and clean technology industries. It seeks the devolution of powers in areas such as health and social care that will promote technology and enable care through joint working and by focussing on prevention. It is a proposition to central government offering an opportunity to collectively re-appraise national thinking on the tools and levers required to unlock regional growth in a post-Brexit world.
Children’s Services Alternative Delivery Model
The Council is currently considering the possibility of establishing a wholly-owned Alternative Delivery Model (ADM) which will integrate all of the Council’s children’s services – education, early years, public health nursing, early care and social care. The aim of the proposal is to deliver the Council’s strategic ambition of giving all of Cornwall’s children and young people the best chance of a brighter future. A full business case is being developed to support Members and senior officers to make informed and evidence-based decisions about the proposal. It’s proposed that the ADM would be responsible for delivering services for children and young people from 9 months to 25 years of age.
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Independent Auditor’s Report Cornwall Council 2017/18 Statement of Accounts
Independent Auditor’s Report to the Members of Cornwall Council
Report on the Audit of the Financial Statements
Opinion on the financial statements
We have audited the financial statements of Cornwall Council (the ‘Authority’) and its subsidiaries (the ‘group’) for the year ended 31 March 2018 which comprise the Group and Authority Comprehensive Income and Expenditure Statement, the Group and Authority Movement in Reserves Statement, the Group and Authority Balance Sheet, the Group and Authority Cash Flow Statement, the Housing Revenue Account Income and Expenditure Statement, the Movement on the Housing Revenue Account Statement, the Collection Fund Statement and notes to the financial statements, including a summary of significant accounting policies, and include the firefighters' pension fund financial statements comprising the Fund Account, the Net Assets Statement and the related note. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC code of practice on local authority accounting in the United Kingdom 2017/18.
In our opinion the financial statements: give a true and fair view of the financial position of the group and of the Authority as at 31 March 2018 and of the group’s expenditure and income and the Authority’s expenditure and income for the year then ended; have been prepared properly in accordance with the CIPFA/LASAAC code of practice on local authority accounting in the United Kingdom 2017/18; and have been prepared in accordance with the requirements of the Local Audit and Accountability Act 2014.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and the Authority in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Who we are reporting to
This report is made solely to the members of the Authority, as a body, in accordance with Part 5 of the Local Audit and Accountability Act 2014 and as set out in paragraph 43 of the Statement of Responsibilities of Auditors and Audited Bodies published by Public Sector Audit Appointments Limited. Our audit work has been undertaken so that we might state to the Authority’s members those
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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 Authority and the Authority's members as a body, for our audit work, for this report, or for the opinions we have formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: the Service Director for Resources use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the Service Director for Resources has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group’s or the Authority’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Other information
The Service Director for Resources is responsible for the other information. The other information comprises the information included in the Statement of Accounts, the Narrative Report, and the Annual Governance Statement, other than the group and Authority financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge of the group and Authority obtained in the course of our work including that gained through work in relation to the Authority’s arrangements for securing value for money through economy, efficiency and effectiveness in the use of its resources or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Other information we are required to report on by exception under the Code of Audit Practice
Under the Code of Audit Practice published by the National Audit Office on behalf of the Comptroller and Auditor General (the Code of Audit Practice) we are required to consider whether the Annual Governance Statement does not comply with the ‘Delivering Good Governance in Local Government: Framework (2016)’ published by CIPFA and SOLACE or is misleading or inconsistent with the information of which we are aware from our audit. We are not required to
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consider whether the Annual Governance Statement addresses all risks and controls or that risks are satisfactorily addressed by internal controls.
We have nothing to report in this regard.
Opinion on other matter required by the Code of Audit Practice
In our opinion, based on the work undertaken in the course of the audit of the financial statements and our knowledge of the Authority gained through our work in relation to the Authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources, the other information published together with the financial statements in the Statement of Accounts, the Narrative Report, and the Annual Governance Statement for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Under the Code of Audit Practice we are required to report to you if: we have reported a matter 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; or we have made a written recommendation to the Authority under section 24 of the Local Audit and Accountability Act 2014 in the course of, or at the conclusion of the audit; or we have exercised any other special powers of the auditor under the Local Audit and Accountability Act 2014.
We have nothing to report in respect of the above matters.
Responsibilities of the Authority, the Service Director for Resources and Those Charged with Governance for the financial statements
As explained more fully in the Statement of Responsibilities the Authority is required to make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this authority, that officer is the Service Director for Resources. The Service Director for Resources is responsible for the preparation of the 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, which give a true and fair view, and for such internal control as the Service Director for Resources determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Service Director for Resources is responsible for assessing the group’s and the Authority’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the group or the Authority lacks funding for its continued existence or when policy decisions have been made that affect the services provided by the group or the Authority.
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The Audit Committee is Those Charged with Governance.
Auditor’s responsibilities for the audit of the financial statements
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 an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Report on other legal and regulatory requirements - Conclusion on the Authority’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 on the specified criterion issued by the Comptroller and Auditor General in November 2017, we are satisfied that the Authority put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2018.
Responsibilities of the Authority
The Authority is responsible for putting in place proper arrangements for securing 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.
Auditor’s responsibilities for the review of the Authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources
We are required under Section 20(1)(c) of the Local Audit and Accountability Act 2014 to be satisfied that the Authority has made 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 Authority'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 in all significant respects the Authority had proper arrangements to ensure it took
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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 the Authority put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2018.
We planned our work in accordance with the Code of Audit Practice. Based on our risk assessment, we undertook such work as we considered necessary to be satisfied that the Authority has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources.
Report on other legal and regulatory requirements
We cannot formally conclude the audit and issue an audit certificate in accordance with the requirements of the Local Audit and Accountability Act 2014 and the Code of Audit Practice until:
we have completed our consideration of objections brought to our attention by local authority electors under Section 27 of the Act during the 2015/16 audit period.
We are satisfied that this work does not have a material effect on the financial statements or on our conclusion on the Authority's arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2018.
Geraldine Daly for and on behalf of Grant Thornton UK LLP, Appointed Auditor
2 Glass Wharf Bristol BS2 0EL
19 October 2018
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Independent Auditor’s Report to the Members of Cornwall Council
Opinion on the pension fund financial statements
We have audited the pension fund financial statements of Cornwall Pension Fund (the ‘Authority’) for the year ended 31 March 2018, which comprise the Fund Account, the Net Assets Statement and notes to the Pension Scheme Accounts, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC code of practice on local authority accounting in the United Kingdom 2017/18.
In our opinion the pension fund financial statements: give a true and fair view of the financial transactions of the pension fund during the year ended 31 March 2018 and of the amount and disposition at that date of the fund’s assets and liabilities, have been prepared properly in accordance with the CIPFA/LASAAC code of practice on local authority accounting in the United Kingdom 2017/18; and have been prepared in accordance with the requirements of the Local Audit and Accountability Act 2014.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the pension fund of the Authority in accordance with the ethical requirements that are relevant to our audit of the pension fund financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Who we are reporting to
This report is made solely to the members of the Authority, as a body, in accordance with Part 5 of the Local Audit and Accountability Act 2014 and as set out in paragraph 43 of the Pension Fund Responsibilities of Auditors and Audited Bodies published by Public Sector Audit Appointments Limited. Our audit work has been undertaken so that we might state to the Authority’s members 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 Authority and the Authority's members as a body, for our audit work, for this report, or for the opinions we have formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
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The Service Director for Resources and Section 151 Officer’s use of the going concern basis of accounting in the preparation of the pension fund financial statements is not appropriate; or The Service Director for Resources and Section 151 Officer has not disclosed in the pension fund financial statements any identified material uncertainties that may cast significant doubt about the Authority’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the pension fund financial statements are authorised for issue.
Other information
The Service Director for Resources and Section 151 Officer is responsible for the other information. The other information comprises the information included in the Statement of Accounts, the Narrative Report, the Annual Governance Statement and the Annual Report, other than the pension fund financial statements, our auditor’s report thereon and our auditor’s report on the Authority’s financial statements. Our opinion on the pension fund financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the pension fund financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the pension fund financial statements or our knowledge of the pension fund of the Authority obtained in the course of our work or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the pension fund financial statements or a material misstatement in the other information. If, based on the work we have performed, we conclude that there is a material misstatement in this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matter required by the Code of Audit Practice published by the National Audit Office on behalf of the Comptroller and Auditor General (the Code of Audit Practice)
In our opinion, based on the work undertaken in the course of the audit of the pension fund financial statements the other information published together with the pension fund financial statements in the Pension Fund Accounts, the Narrative Report, the Annual Governance Statement and the Annual Report for the financial year for which the pension fund financial statements are prepared is consistent with the pension fund financial statements.
Matters on which we are required to report by exception
Under the Code of Audit Practice we are required to report to you if:
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we have reported a matter 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; or we have made a written recommendation to the Authority under section 24 of the Local Audit and Accountability Act 2014 in the course of, or at the conclusion of the audit; or we have exercised any other special powers of the auditor under the Local Audit and Accountability Act 2014.
We have nothing to report in respect of the above matters.
Responsibilities of the Authority, the Service Director for Resources and Section 151 Officer and Those Charged with Governance for the financial statements
As explained more fully in the Statement of Responsibilities set out on page 34, the Authority is required to make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this authority, that officer is the Service Director for Resources and Section 151 Officer. The Service Director for Resources and Section 151 Officer is responsible for the preparation of the Pension Fund Accounts, which includes the pension fund 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, which give a true and fair view, and for such internal control as the Chief Financial Officer determines is necessary to enable the preparation of pension fund financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the pension fund financial statements, the Service Director for Resources and Section 151 Officer is responsible for assessing the pension fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the pension fund lacks funding for its continued existence or when policy decisions have been made that affect the services provided by the pension fund.
The Audit Committee is Those Charged with Governance.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the pension fund financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these pension fund financial statements.
Page 32
Independent Auditor’s Report Cornwall Council 2017/18 Statement of Accounts
A further description of our responsibilities for the audit of the pension fund financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Geraldine Daly for and on behalf of Grant Thornton UK LLP, Appointed Auditor 2 Glass Wharf Temple Quay Bristol BS2 0EL
19th October 2018
Page 33
Statement of Responsibilities Cornwall Council 2017/18 Statement of Accounts
Statement of Responsibilities
The Council’s Responsibilities The Council is required to: • make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this Authority, that officer is the Service Director for Resources. • manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets. • approve the Statement of Accounts.
Service Director for Resources and Section 151 Officer The Service Director for Resources is responsible for the preparation of the Council’s Statement of Accounts in accordance with proper practices as set out in the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom (the Code).
In preparing this Statement of Accounts, the Service Director for Resources has: • selected suitable accounting policies and then applied them consistently • made judgements and estimates that were reasonable and prudent • complied with the requirements of the Code, except for the use of depreciated replacement cost (DRC) valuation basis with infrastructure for the Tamar Bridge toll bridge
The Service Director for Resources has also: • kept proper accounting records which were up to date • taken reasonable steps for the prevention and detection of fraud and other irregularities.
Certification of the Statement of Accounts
Service Director for Resources and Section 151 Officer This Statement of Accounts presents a true and fair view of the financial position of Cornwall Council on 31 March 2018 and of the income and expenditure for the year ended on that date and has been prepared in accordance with the requirements of the Code, except for a deviation in the valuation basis of the Tamar Bridge toll bridge.
Andy Brown Service Director for Resources and Section 151 Officer. Released to auditors 24 May 2018, approved on 15 October 2018
The Chairman of the Audit Committee’s declaration This Statement of Accounts was approved by the Audit Committee on 15 October 2018.
Cllr Kenny Chairman of the Audit Committee
Page 34
Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Main Financial Statements
Page 35
Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
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. The Council raises taxation to cover expenditure in accordance with statutory requirements; this may be different from the accounting cost. The taxation position is shown in both the Expenditure and Funding Analysis and the MIRS.
Restated^ 2017/18 2016/17
Expenditure Income Net Expenditure Income Net Notes £m £m £m £m £m £m Children, Families and Adults 398.043 (153.909) 244.134 364.601 (129.224) 235.377 Economic Growth and Development 149.539 (82.830) 66.709 124.423 (78.481) 45.942 Neighbourhoods 122.633 (24.639) 97.994 109.884 (20.410) 89.474 Customer and Support Services 297.833 (208.855) 88.978 297.709 (216.542) 81.167 Wellbeing and Public Health* 27.644 (26.992) 0.652 28.776 (28.274) 0.502 Corporate Items 19.259 (11.881) 7.378 21.192 (24.388) (3.196) Schools^ 152.008 (119.570) 32.438 178.786 (161.082) 17.704 Local Authority HRA 35.364 (39.994) (4.630) 51.047 (40.176) 10.871 Exceptional reversal of previous downward valuation (HRA) - - - (71.207) - (71.207) Joint Committees 6.217 (5.874) 0.343 5.492 (5.922) (0.430)
Cost of services 1,208.540 (674.544) 533.996 1,110.703 (704.499) 406.204
Other operating expenditure 32.909 22.149 11 Exceptional transfer of academy school assets 90.041 50.013 11 Financing and investment income and expenditure 70.174 71.493 12 Taxation and non-specific grant income (549.527) (592.102) 13
(Surplus) or deficit on provision of services 177.593 (42.243)
(Surplus) or deficit on revaluation of (21.308) (30.953) property, plant and equipment^ Transfer of function - Wave Hub asset^ - (30.000) (Surplus) or deficit on revaluation of 0.698 (0.069) available-for-sale financial assets Remeasurements of the net defined benefit liability / (asset) (48.651) 170.280 Other recognised (gains) and losses 1.398 3.906
Other comprehensive income and expenditure (67.863) 113.164
Total comprehensive income and expenditure 109.730 70.921
* Directorate renamed to Wellbeing and Public Health, originally Public Health ^ Restated to remove school asset impairment and to reclassify the Wave Hub asset from donated assets to a transfer of function
There have been a few directorate changes to the underlying cost centres that make up the directorate reporting. These changes are not material enough to restate the comparator for 2016/17.
Movement in Reserves Statement (opposite)
This statement shows the movement from the start of the year to the end on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other ‘unusable reserves’. This statement shows how the movements in year of the Council’s reserves are broken down between gains and losses incurred in accordance with generally accepted accounting practices and the statutory adjustments required to return to the amounts chargeable to council tax for the year. The Increase/Decrease In Year line shows the statutory General Fund balance and the HRA balance movements in the year following those adjustments.
Page 36
Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
-
-
-
-
£m
Total
70.921
70.921
Council
109.730
109.730
(569.396)
(679.126)
(750.047)
Reserves
-
-
£m
95.195
26.236
(67.863)
163.058
139.400
113.164
(210.449)
(305.644)
(445.044)
Reserves
Unusable
-
-
£m
Total
14.535
Usable
(68.479)
(26.236)
(42.243)
177.593
(358.947)
(163.058)
(373.482)
(305.003)
Reserves
-
-
-
-
£m
Major
(5.006)
(1.442)
(1.442)
(3.564)
(1.883)
(1.883)
(1.681)
Repairs
Reserve
-
-
-
-
£m
(2.867)
Grants
19.866
19.866
Capital
(21.176)
(41.042)
(38.175)
(38.175)
Reserve
-
-
-
-
£m
0.424
0.424
(5.679)
(5.679)
Capital
(68.973)
(69.397)
(63.718)
Reserve
Receipts
-
-
£m
HRA
3.467
Total
(0.650)
(4.117)
(0.883)
57.286
(13.481)
(12.831)
(58.169)
(11.948)
Reserves
-
-
-
-
£m
HRA
0.479
0.479
(3.560)
(0.529)
(0.529)
(3.031)
(3.510)
Reserves
Earmarked
£m
0.529
3.467
(9.921)
(0.121)
(4.117)
(9.800)
(1.362)
(0.479)
(8.438)
57.286
(58.169)
Account
Housing
Revenue
-
-
£m
Total
(3.663)
15.926
(21.859)
(37.785)
181.710
(250.311)
(185.373)
(246.648)
(224.789)
Reserves
General Fund
-
-
-
-
£m
Ports
0.499
0.499
(0.737)
(1.236)
(0.123)
(0.123)
(1.113)
Balances
-
-
-
-
£m
Fund
(14.364)
(14.364)
(38.124)
(38.124)
General
(208.806)
(194.442)
(156.318)
Reserves
Earmarked
-
-
-
-
£m
Fund
4.546
4.546
8.873
8.873
(4.327)
(8.873)
(17.746)
Schools
General
Balance
£m
Fund
5.656
9.319
7.515
29.374
15.926
(36.441)
(42.097)
(37.785)
(49.612)
181.710
General
Balance
(185.373)
9
9
10
10
Note
under regulations under
under regulations* under
* Restated to remove school asset * assets to Restated asset to and reclassifyimpairment donated Hub function remove of from the to Wave a transfer
Balance at March31 carried 2018 forward
(Increase)/Decrease in Year
Transfers (to)/from Earmarked Reserves Earmarked (to)/from Transfers
Adjustments between accounting basis and funding Adjustmentsbasis accounting basis funding between and
Total Comprehensive Income and Expenditure and Income Comprehensive Total
Movement in duringreserves 2017/18
Restated Restated Balance at March31 carried 2017 forward*
(Increase)/Decrease in 2016/17
Transfers (to)/from Earmarked Reserves Earmarked (to)/from Transfers
Adjustments between accounting basis and funding Adjustmentsbasis accounting basis funding between and
Total Comprehensive Income and Expenditure* and Income Comprehensive Total
Movement in duringreserves 2016/17 Balance at March31 carried 2016 forward Movement inStatement Reserves
Page 37
Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Balance Sheet (opposite) The Balance Sheet shows the value of the assets and liabilities recognised by the Council at 31 March 2018. The net assets of the Council are matched by the reserves held by the Council. Reserves are reported in two categories. Usable reserves are those that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use. The level of usable reserves might, therefore, be compared to the level of net expenditure on services. Unusable reserves are those reserves that the Council is not able to use to provide services, including reserves that hold unrealised gains and losses (e.g. the revaluation reserve) and reserves that hold timing differences (shown in the MIRS line “Adjustments between accounting basis and funding basis under regulations”).
Cash Flow Statement (below)
The Cash Flow Statement shows the changes to cash and cash equivalents of the Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council during the year. Restated* 2017/18 2016/17
£m £m Notes
Net (surplus) or deficit on the provision of services 177.593 (42.243)
Adjustments to net (surplus) or deficit on the provision of services for (273.325) (134.952) 22 non-cash movements Adjustments for items included in the net (surplus) or deficit on the 92.388 165.912 22 provision of services that are investing and financing activities
Net cash flows from operating activities (3.344) (11.283)
Investing activities (8.786) 6.980 23 Financing activities 6.562 (21.453) 24
Net (increase) or decrease in cash and cash equivalents (5.568) (25.756)
Cash and cash equivalents at the beginning of the reporting period 63.603 37.847
Cash and cash equivalents at the end of the reporting period 69.171 63.603
* Restated to remove school asset impairment and to reclassify the Wave Hub asset from donated assets to a transfer of function
Page 38
Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Restated* Balance Sheet 31 March 2018 31 March 2017
£m £m Notes Property, Plant and Equipment 2,272.985 2,355.388 14 Heritage Assets 3.086 3.086 Intangible Assets 3.407 4.964 Long Term Investments 194.920 165.605 15 Long Term Debtors 25.750 22.978 15
Long Term Assets 2,500.148 2,552.021
Cash and Cash Equivalents 69.171 63.603 17 Current Intangible Asset 0.307 0.616 Short Term Investments 143.006 216.712 15 Assets Held for Sale 9.331 12.975 Inventories 11.476 4.648 Short Term Debtors 98.612 91.493 16
Current Assets 331.903 390.047
Short Term Borrowing (91.437) (77.602) 15 Short Term Creditors (130.895) (148.318) 18 Provisions (6.553) (7.177) 19 PFI Short Term Liabilities (4.781) (4.251) 15 PFI Short Term Deferred Liabilities (1.509) (1.509) 15 Grants Receipts in Advance - Revenue (10.299) (11.378) Grants Receipts in Advance - Capital (7.745) (15.503)
Current Liabilities (253.219) (265.738)
Long Term Creditors (2.445) (2.056) 15 Provisions (36.049) (22.304) 19 Long Term Borrowing (636.772) (635.048) 15 Pension Liability (1,143.088) (1,141.079) 36 PFI Long Term Liabilities (114.573) (119.354) 15 Other Long Term Liabilities (4.202) (6.032) 15 PFI Deferred Income (30.929) (32.438) 15 Grants Receipts in Advance - Capital (41.378) (38.893) 30
Long Term Liabilities (2,009.436) (1,997.204)
Net Assets 569.396 679.126
Usable Reserves (358.947) (373.482) MIRS Unusable Reserves (210.449) (305.644) 21
Total Reserves (569.396) (679.126)
* Restated to remove school asset impairment.
The unaudited accounts were authorised for issue on 24 May 2018
Page 39
Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Notes to the Main Financial Statements
Page 40
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Index of Notes Page Note 1 Accounting Policies 42 Note 2 Accounting Standards That have Been Issued But Have Not Yet Been Adopted 63 Note 3 Critical Judgements in Applying Accounting Policies 63 Note 4 Assumptions Made about the Future and Other Major Sources of Estimation 65 Uncertainty Note 5 Material Items of Income and Expense 66 Note 6 Events After the Reporting Period 66 Note 7 Expenditure and Funding Analysis 67 Note 8 Expenditure and Income Analysed by Nature 71 Note 9 Adjustments between Accounting Basis and Funding Basis under Regulations 71 Note 10 Transfers to/from Earmarked Reserves 75 Note 11 Other Operating Expenditure 75 Note 12 Financing and Investment Income and Expenditure 76 Note 13 Taxation and Non-specific Grant Income 76 Note 14 Property, Plant and Equipment 77 Note 15 Financial Instruments 82 Note 16 Debtors 85 Note 17 Cash and Cash Equivalents 85 Note 18 Creditors 86 Note 19 Provisions 86 Note 20 Contingent Liabilities 87 Note 21 Unusable Reserves 87 Note 22 Cash Flow Statement – Operating Activities 91 Note 23 Cash Flow Statement – Investing Activities 93 Note 24 Cash Flow Statement – Financing Activities 93 Note 25 Pooled Budgets 93 Note 26 Members’ Allowances 94 Note 27 Officers’ Remuneration 95 Note 28 External Audit Costs 97 Note 29 Dedicated Schools Grant 98 Note 30 Grant Income 99 Note 31 Related Parties 100 Note 32 Capital Expenditure and Capital Financing 103 Note 33 Leases 105 Note 34 Private Finance Initiatives and Similar Contracts 105 Note 35 Pension Schemes Accounted for as Defined Contribution Schemes 108 Note 36 Defined Benefit Pension Schemes 108 Note 37 Nature and Extent of Risks Arising from Financial Instruments 115
Page 41
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Accounting Policies 1 i General Principles
The Statement of Accounts summarises the Council’s transactions for the 2017/18 financial year and its position at the year end of 31 March 2018. The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2015, which those Regulations require to be prepared in accordance with proper accounting practices. These practices under Section 21 of the Local Government Act 2003 primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 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 non-current assets and financial instruments.
These accounts have been prepared on a going concern basis, and it has been assumed that the functions of the Council will continue in operational existence for the foreseeable future.
ii Accruals of Income and Expenditure
Activity is accounted for in the year it takes place, not simply when cash payments are made or received. In particular:
Revenue from the sale of goods is recognised when the Council transfers the significant risks and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the Council. Revenue from the provision of services is recognised when the Council can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the Council. Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet. Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made. Interest receivable on investments and payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract. Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.
Page 42
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
iii Cash and Cash Equivalents
Cash is represented by cash-in-hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management. iv Exceptional Items
When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the CIES or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance. v Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors
Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment.
Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Council’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.
Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period.
A change in policy relating to the impairment of school assets where the school had previously transferred to academy status between the date of the balance sheet and the final accounts sign off has resulted in the prior period adjustment movements as detailed in the following tables. The Council is not required to impair these assets so this treatment has been adjusted for 2016/17.
A review of the treatment of the Wave Hub asset transfer has also resulted in a prior period adjustment. Previously it had been brought onto the balance sheet as a donated asset but this should have been shown as a transfer of function and any adjustments are detailed in the tables below.
Page 43
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Effect on Balance Sheet 31 March 2017
As Previously Stated As Restated Change 2016/17 2016/17 2016/17 £m £m £m
Property, plant and equipment - School impairments - 17.741 17.741
Total Net Assets - 17.741 17.741
Unusable Reserves Revaluation Reserve - School impairments - (1.513) (1.513) Capital Adjustment Account - School impairments - (16.228) (16.228)
Total Net Worth - (17.741) (17.741)
Effect on Comprehensive Income and Expenditure Statement 2016/17
As Previously Stated As Restated Change 2016/17 2016/17 2016/17 £m £m £m
Schools - School impairments 16.228 - (16.228) Exceptional donated asset - Wave Hub (30.000) - 30.000
(Surplus) or deficit on provision of services (13.772) - 13.772
Transfer of function - Wave Hub asset - (30.000) (30.000)
Other comprehensive income and expenditure - (30.000) (30.000)
Total comprehensive income and expenditure (13.772) (30.000) (16.228)
Effect on Movement in Reserves Statement - Unusable Reserves 2016/17
As Previously Stated As Restated Change 2016/17 2016/17 2016/17 £m £m £m
Total comprehensive income and expenditure - Transfer of function Wave Hub Asset (30.000) - 30.000 Total comprehensive income and expenditure (30.000) - 30.000
Adjustments between the accounting basis and (16.228) - 16.228 the funding basis under regulations - School impairments Adjustments between the accounting basis and 30.000 - (30.000) the funding basis under regulations - Transfer of function Wave Hub Asset Total Adjustment between the accounting basis and the 13.772 - (13.772) funding basis under regulation
Increase/Decrease in 2016/17 (16.228) - 16.228
Balance at 31 March 2017 carried forward (16.228) - 16.228
vi Charges to Revenue for Non-Current Assets
Services, support services and trading accounts are debited with the following amounts to record the cost of holding non-current assets during the year:
depreciation attributable to the assets used by the relevant service
Page 44
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off amortisation of intangible fixed assets attributable to the service
The Council is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisation. However, it is required to make an annual contribution from revenue, its Minimum Revenue Provision (MRP), towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the Council in accordance with statutory guidance. Depreciation, revaluation and impairment losses and amortisation are therefore replaced by the MRP contribution in the General Fund balance, by way of an adjusting transaction within the Capital Adjustment Account (CAA) and in the MIRS for the difference between the two. vii Employee Benefits
Benefits Payable During Employment
Short-term employee benefits are those due to be settled within twelve months of the year- end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits for current employees and are recognised as an expense for services in the year in which employees render service to the Council. An accrual is made for the cost of holiday entitlements (or any form of leave, e.g. time off in lieu) earned by employees but not taken before the year end which employees can carry forward into the next financial year. The accrual is made at the wages and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to the Surplus or Deficit on the Provision of Services, but then reversed out through the MIRS so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs.
Termination Benefits
Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy in exchange for those benefits and are charged on an accruals basis to the appropriate service or, where applicable, the Corporate Items line in the CIES at the earlier of when the Council can no longer withdraw the offer of those benefits or when the Council recognises costs of restructuring.
Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the MIRS, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with debits for cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year end.
Post Employment Benefits
Employees of the Council are members of four separate pension schemes: The Local Government Pension Scheme, administered by Cornwall Council The Fire Fighters’ Pension Schemes
Page 45
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The Teachers’ Pension Scheme, administered by Capita Teachers Pensions on behalf of the Department for Education (DfE) National Health Service (NHS) These schemes provide defined benefits to members (retirement lump sums and pensions) earned as employees work for the Council. However, the arrangements for the Teachers’ and NHS Schemes mean that liabilities for these benefits cannot ordinarily be identified specifically to the Council. These Schemes are therefore accounted for as if they were a defined contribution scheme and no liability for future payments of benefits is recognised in the Balance Sheet. The Children, Families and Adults line in the CIES is charged with the employer’s contributions payable to the Teachers’ Pension Scheme in the year, and for the employer’s contributions payable to the NHS Pension Scheme in the year this is mainly coded to the Public Health line in the CIES.
Details of the Fire Fighters’ Pension Fund Account are described separately in the Council’s accounts.
The Local Government Pension Scheme
The Local Government Pension Scheme is accounted for as a defined benefits scheme: The liabilities of the Cornwall Council Pension Fund attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc., and projected earnings for current employees. Liabilities are discounted to their value at current prices, using a discount rate of 2.7% as recommended by the Council’s actuaries. The assets of the Cornwall Council Pension Fund attributable to the Council are included in the Balance Sheet at their fair value: o Quoted securities – current bid price o Unquoted securities – professional estimate o Unitised securities – current bid price o Property – market 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 CIES 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 CIES as part of Corporate Items o Net interest on the net defined liability/(asset) i.e. net interest expense for the Council – the change during the period in the net defined liability/(asset) that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the CIES Statement – this is calculated by
Page 46
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability/(asset) during the period as a result of contribution and benefit payments Remeasurements comprising: o The return on plan assets – excluding amounts included in the net interest on the net defined 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 Cornwall Council Pension Fund – cash paid as employer’s contributions to the Pension Fund in settlement of liabilities; not accounted for as an expense.
In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the Pension Fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the MIRS this means that there are appropriations 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 Pension Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. viii Events After the Reporting Period
Events after the Balance Sheet Date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified:
Those that provide evidence of conditions that existed at the end of the reporting period – the Statement of Accounts is adjusted to reflect such events Those that are indicative of conditions that arose after the reporting period – the Statement of Accounts is not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect
Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts. ix Financial Instruments
Financial Liabilities
Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the CIES for interest payable are based on the carrying
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised. For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest) and interest charged to the CIES is the amount payable for the year according to the loan agreement. Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the CIES 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 CIES 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 CIES, regulations allow the impact on the General Fund balance to be spread over future years. The Council has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the CIES 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 MIRS.
Financial Assets
Financial assets 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
Loans and receivables are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the CIES for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans that the Council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the CIES is the amount receivable for the year in the loan agreement.
Where the Council makes soft loans to voluntary organisations and other external bodies at less than market rates (soft loans); entries will only be recorded in the financial statements for these loans where they are material. This is a departure from the requirements of the Code, made on the grounds that the sums involved would be deemed to be immaterial.
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 asset is written down and a charge made to the relevant service (for receivables specific to that service) or the Financing and Investment Income and Expenditure line in the CIES. The impairment loss is measured as
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the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate.
Any gains and losses that arise on the derecognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the CIES.
Available-for-sale Assets
Available-for-sale assets are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Where the asset has fixed or determinable payments, annual credits to the Financing and Investment Income and Expenditure line in the CIES for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the CIES when it becomes receivable by the Council.
Assets are maintained in the Balance Sheet at fair value. Values are based on the following principles: Instruments with quoted market prices – the market price Other instruments with fixed and determinable payments – discounted cash flow analysis Equity shares with no quoted market prices – independent appraisal of company valuations The inputs to the measurement techniques are categorised in accordance with the following three levels: Level 1 inputs – quoted prices (unadjusted) in active markets for identical assets that the authority can access at the measurement date. Level 2 inputs – inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. Level 3 inputs – unobservable inputs for the asset.
Changes in fair value are balanced by an entry in the Available-for-sale reserve and the gain or loss is recognised in the Surplus or Deficit on Revaluation of Available-for-sale financial assets. The exception is where impairment losses have been incurred – these are debited to the Financing and Investment Income and Expenditure line in the CIES, along with any net gain or loss for the asset accumulated in the Available-for-sale Financial Instruments reserve.
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 (fixed or determinable payments) or fair value falls below cost, the asset is written down and a charge made to the Financing Investment Income and Expenditure line in the CIES. If the asset has fixed or determinable payments, the impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Otherwise, the impairment loss is measured as any shortfall of fair value against the acquisition cost of the instrument (net of any principal repayment and amortisation).
Any gains or losses that arise on the derecognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the CIES, along with any accumulated gains or losses previously recognised in the Available-for-sale Financial Instruments reserve.
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Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses).
Instruments Entered Into Before 1 April 2006
The Council entered into a number of financial guarantees that are not required to be accounted for as financial instruments. These guarantees are reflected in the Statement of Accounts to the extent that provisions might be required or a contingent liability note is needed under the policies set out in the Provisions, Contingent Liabilities and Contingent Assets. x Foreign Currency Translation
Where the Council has entered into a transaction denominated in a foreign currency the transaction is converted into sterling at the exchange rate applicable on the date the transaction was effective. Where amounts in foreign currency are outstanding at the year end, they are reconverted at the spot exchange rate for 31 March. Resulting gains or losses are recognised in the Financing and Investment Income and Expenditure line in the CIES. xi Government Grants and Contributions
Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Council when there is reasonable assurance that: The Council will comply with the conditions attached to the payments, and The grants or contributions will be received
Amounts recognised as due to the Council are not credited to the CIES until conditions attached to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset in the form of grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor. In the event that conditions are not suitably specific with regards to claw back of grant or contributions, or where penalties could potentially be applied, the Council shall assess whether or not there is a reasonable likelihood that such a grant or contribution could be required to be returned and adopt a prudent position by treating these as creditors within Revenue and Capital Receipts in Advance.
Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants and contributions) or Taxation and Non-specific Grant Income (non-ringfenced revenue grants and all capital grants) in the CIES.
Where capital grants are credited to the CIES, they are reversed out of the General Fund balance in the MIRS. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied Reserve. Where it has been applied, it is posted to the CAA. Amounts in the Capital Grants Unapplied Reserve are transferred to the CAA once they have been applied to fund capital expenditure.
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Business Improvement Districts There are currently eight Business Improvement District (BID) schemes operating in Cornwall, in Truro, Falmouth, Newquay, Camborne, St Austell, Newham, St Ives and Penzance. These schemes are funded by a BID levy paid by non-domestic ratepayers. The Council acts as principal under the scheme and accounts for income received and expenditure incurred (including contributions to the BID project) within the relevant services within the CIES. xii Intangible Assets
Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as the result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council.
Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase (research expenditure cannot be capitalised).
Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services.
Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. In practice, no intangible asset held by the Authority meets this criterion, and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the CIES. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the CIES. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the CIES.
Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund balance. The gains and losses are therefore reversed out of the General Fund balance in the MIRS and posted to the CAA and (for any sale proceeds greater than £10,000) the Capital Receipts reserve.
xiii Interests in Companies and Other Entities
The Council has material interests in companies and other entities that have the nature of subsidiaries, associates and jointly controlled entities and require it to prepare group accounts. In the Council’s own single-entity accounts, the interests in companies and other entities are recorded as financial assets at cost, less any provision for losses. See group accounts on page 123.
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xiv Joint Operations
Joint operations are activities undertaken where the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement. The activities undertaken by the Council in conjunction with other joint operators involve the use of the assets and resources of those joint operators. In relation to its interest in a joint operation, the Council as a joint operator recognises:
its assets, including its share of any assets held jointly
its liabilities, including its share of any liabilities incurred jointly
its revenue from the sale of its share of the output arising from the joint operation
its share of the revenue from the sale of the output by the joint operation
its expenses, including its share of any expenses incurred jointly. xv Leases
Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.
The Council as Lessee
Finance Leases Property, plant and equipment held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the authority are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred. Lease payments are apportioned between: a charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability, and a finance charge (debited to the Financing and Investment Income and Expenditure line in the CIES) Property, plant and equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the authority at the end of the lease period).
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The authority is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund balance, by way of an adjusting transaction with the CAA in the MIRS for the difference between the two.
Operating Leases Rentals paid under operating leases are charged to the CIES as an expense of the services benefiting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease).
The Council as Lessor
Finance Leases Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether property, plant and equipment or assets held for sale) is written off to the Other Operating Expenditure line in the CIES as part of the gain or loss on disposal. A gain, representing the Council’s net investment in the lease, is credited to the same line in the CIES also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal) matched by a lease (long-term debtor) asset in the Balance Sheet. Lease rentals receivable are apportioned between: a charge for the acquisition of the interest in the property – applied to write down the lease debtor (together with any premiums received), and finance income (credited to the Financing and Investment Income and Expenditure line in the CIES) The gain credited to the CIES on disposal is not permitted by statute to increase the General Fund balance and is required to be treated as a capital receipt. Where a premium has been received, this is posted out of the General Fund balance to the Capital Receipts reserve in the MIRS. Where the amount due in relation to the lease asset is to be settled by the payment of rentals in future financial years, this is posted out of the General Fund balance to the Deferred Capital Receipts reserve in the MIRS. When the future rentals are received, the element for the capital receipt for the disposal of the asset is used to write down the lease debtor. At this point, the deferred capital receipts are transferred to the Capital Receipts reserve. The written-off value of disposals is not a charge against council tax, as the cost of fixed assets if fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the CAA from the General Fund balance in the MIRS.
Operating Leases Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the CIES. Credits are made on a straight-line basis over
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the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income. xvi Property, Plant and Equipment
Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as property, plant and equipment.
Recognition Expenditure on the acquisition, creation or enhancement of property, plant and equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that 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. Where the spend is on individual items, which may be properly capitalised but the total expenditure falls below the £10,000 level set as de minimis, the amounts will be charged as revenue to the CIES in place of capital charges.
Measurement Assets are initially measured at cost, comprising: the purchase price any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located
The Council does not capitalise borrowing costs incurred whilst assets are under construction.
The cost of an asset, acquired other than by purchase, is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Council). In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Council.
Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-specific Grant Income line of the CIES, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in the Donated Assets Account. Where gains are credited to the CIES, they are reversed out of the General Fund balance to the CAA in the MIRS.
Assets are then carried in the Balance Sheet using the following measurement bases: infrastructure assets – depreciated historical cost
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infrastructure (Tamar Bridge Toll Bridge) – depreciated replacement cost (DRC) community assets and assets under construction – historical cost dwellings – current value, determined using the basis of existing use value for social housing (EUV-SH) all other assets – current value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV)
Where there is no market-based evidence of current value because of the specialist nature of an asset, DRC is used as an estimate of current value.
For non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for current value.
Assets included in the Balance Sheet at current value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their current value at the year end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the CIES where they arise from the reversal of a loss previously charged to a service. Where decreases in value are identified, they are accounted for as follows: where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains) where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the CIES
The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the CAA.
Impairment Assets are assessed at each year end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for as follows: where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains) where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the CIES Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the CIES, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised.
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Depreciation Depreciation is provided for on all property, plant and equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land and certain community assets) and assets that are not yet available for use (i.e. assets under construction).
Depreciation is calculated on the following bases: dwellings and other buildings – straight-line allocation over the useful life of the property as estimated by the valuer vehicles, plant, furniture and equipment – straight-line allocation over the useful life of each class of assets in the Balance Sheet, as advised by a suitably qualified officer infrastructure – straight-line allocation over the useful life, as advised by a suitably qualified officer infrastructure (Wave Hub) – straight-line allocation over 5 years infrastructure (Tamar Bridge Toll Bridge) – straight-line over the useful life of the bridge, as estimated by the valuer
Where an item of property, plant and equipment has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately.
Revaluation gains are also 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 being transferred each year from the Revaluation Reserve to the CAA.
Disposals and Non-current Assets Held for Sale
When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an asset held for sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the CIES. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on assets held for sale.
If assets no longer meet the criteria to be classified as assets held for sale, they are reclassified back to non-current assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as held for sale, and their recoverable amount at the date of the decision not to sell.
Assets that are abandoned or scrapped are not reclassified as assets held for sale.
When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether property, plant and equipment or assets held for sale) is written off to the Other Operating Expenditure line in the CIES as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in CIES also as part of the gain
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or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the CAA.
Amounts received for a disposal in excess of £10,000 are categorised as capital receipts. A proportion of receipts relating to housing disposals are payable to the government. The balance of receipts is required to be credited to the Capital Receipts Reserve and can then only be used for new capital investment or set aside to reduce the Council’s underlying need to borrow. Receipts are appropriated to the Capital Receipts reserve from the General Fund balance in the MIRS.
The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the CAA from the General Fund balance in the MIRS. xvii Private Finance Initiative (PFI) and Similar Contracts
PFI and similar contracts are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor. As the Council is deemed to control the services that are provided under its PFI schemes and as ownership of the property, plant and equipment will pass to the Council at the end of the contracts for no additional charge, the Council carries the fixed assets used under the contracts on its Balance Sheet as part of property, plant and equipment.
The original recognition of these assets at fair value (based on the cost to purchase the property, plant and equipment) is balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment. For certain schemes, the liability may be written down by an initial capital contribution. Non-current assets recognised on the Balance Sheet are revalued and depreciated in the same way as property, plant and equipment owned by the Council. The amounts payable to the PFI operators each year are analysed into five elements: fair value of the services received during the year – debited to the relevant service in the CIES finance cost – an interest charge on the outstanding Balance Sheet liability, debited to the Financing and Investment Income and Expenditure line in the CIES contingent rent – increases in the amount to be paid for the property arising during the contract, debited to Financing Investment Income and Expenditure line in the CIES 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 – a proportion of the amount payable is posted to the Balance Sheet as a prepayment and then recognised as additions to property, plant and equipment when the relevant works are eventually carried out.
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xviii Provisions and Contingent Liabilities
Provisions Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to the appropriate service line in the CIES in the year that the Council becomes aware of the obligation and are measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made) the provision is reversed and credited back to the relevant service.
Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim) this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Council settles the obligation.
Contingent Liabilities
A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.
Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.
xix Reserves
The Council sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the General Fund balance in the MIRS. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to be included within the Surplus or Deficit on the Provision of Services in the CIES. The reserve is then appropriated back into the General Fund balance in the MIRS so that there is no net charge against council tax for the expenditure. Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments and retirement and employee benefits and do not represent usable resources for the Council – these reserves are explained in the relevant policies.
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xx Revenue Expenditure Funded from Capital under Statute
Expenditure incurred during the year that may be capitalised under statutory provisions but that does not result in the creation of a non-current asset has been charged as expenditure to the relevant service in the CIES in the year. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the MIRS from the General Fund balance to the CAA then reverses out the amounts charged so that there is no impact on the level of council tax. xxi Value Added Tax (VAT)
VAT payable is included as an expense only to the extent that is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is excluded from income. xxii Accounting for Schools
Local Authority Maintained Schools Local Authority maintained schools form an integral part of the Council’s accounts. The Code of Practice on Local Authority Accounting in the United Kingdom confirms that the balance of control for local authority maintained schools (i.e. those categories of school identified in the School Standards and Framework Act 1998, as amended) lies with the local authority. The Code also stipulates that those schools’ assets, liabilities, reserves and cash flows are recognised in the local authority financial statements (and not the Group Accounts). Their income and expenditure is included within the Schools line within the CIES and their assets and liabilities are included within the relevant headings on the Balance Sheet. Their reserves are included in the General Fund Schools balance, which forms part of the Council’s Usable Reserves.
The following table shows the number of maintained schools still held by the Council and their share of the net cost of services, fixed asset and reserve balances as these are material items:
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Total Balances as at Loss of Control through Academy 31st March 2018 transfer during 2017/18 Number of Net Cost Schools as Expenditure Income of Fixed Fixed Number of at 1st April during during Services Assets Assets Schools School Type Level 2017 2017/18 2017/18 2017/18 Fixed Assets NBV Reserves NBV Reserve transferred £m £m £m £m £m £m £m Community Primary 33 5.271 (4.663) 0.608 56.557 (2.888) 5.014 (0.383) 7 All assets owned and maintained by the Council and held on the Councils balance sheet. Capital expenditure is funded by the Council. No restrictions on Secondary 3 2.654 (2.490) 0.164 use or disposal. 49.884 (0.775) 5.878 (0.365) 1
Trust Primary 47 6.747 (5.325) 1.422 56.686 (3.147) 20.284 (1.419) 16 Assets are owned by the Trust via a freehold transfer from the Council but are maintained by the Council and held on the Councils balance sheet. Capital expenditure is funded by the Council. As part of the freehold transfer assets must be used for education and there are restrictions on Secondary 11 7.048 (5.599) 1.449 their disposal. 103.399 0.449 36.662 (0.525) 4
Assets are owned and maintained by the Church and are not held on the Councils balance sheet. The majority of the capital expenditure is funded by the Voluntary- Council. Assets are leased aided (VA) Primary 13 1.429 (1.065) 0.364 in by the Council. 0.397 (1.009) 0.010 (0.487) 6
Assets are owned by the Church but maintained by the Council and held on the Councils balance sheet. Capital expenditure is Voluntary funded by the Council. Controlled Assets are leased in by the (VC) Primary 5 0.788 (0.586) 0.202 Council. 8.421 (1.018) 4.452 (0.488) 2
Totals 112 23.937 (19.728) 4.209 275.344 (8.388) 72.300 (3.667) 36
During the year a number of maintained schools transferred to Academy status, where the Council loses control of a maintained school it will dispose of the fixed assets, through either a freehold transfer or finance lease (see below), and it will transfer any reserve balance to the Academy after all outstanding transactions, including settling any outstanding debtor and creditor balances, have been accounted for.
De-recognition of Academy School Assets Academies are independently managed schools which operate outside the control of the Council, with funding provided directly by central government. Where the Council owns the freehold for these schools and issues a long lease (125 years) to the academy trust for the land and buildings, for accounting purposes due to the length of the lease, the transfers of buildings are treated as disposals. If the school had previously transferred to trust status the Council will have transferred the freehold of the assets to the trust and therefore on conversion to academy status both the land and building assets will be treated as disposals.
Accounting for Trust School Assets The Council continues to account for trust school assets on its balance sheet even after a transfer order has been signed as it has determined that the balance of control of these assets still lies with the Council.
Funding for Academy Schools and Trust Schools Academy schools receive their revenue and capital funding direct from the government and account for their income and expenditure, together with assets and liabilities within their own accounts. Trust schools still receive their funding via the Council and their income and
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
expenditure, assets and liabilities are accounted for in the Council’s CIES and Balance Sheet. Any outstanding Trust school balances at the balance sheet date are held as part of the Council’s usable reserves. xxiii Accounting for the Collection Fund
Billing authorities are required by statute to maintain a separate fund (the Collection Fund) for the collection and distribution of amounts due in respect of council tax and national non- domestic rates.
Council Tax In its capacity as a billing authority the Council acts as an agent, collecting and distributing council tax on behalf of the major preceptors of the Fund - Devon and Cornwall Police and itself. While council tax income credited to the Collection Fund is the accrued income for the year, regulations determine when it should be released from the Collection Fund and transferred to the Council’s General Fund or transferred to Devon and Cornwall Police.
The amount credited to the Council’s General Fund under statute is the Council’s demand on the Fund for that year, plus the Council’s share of the surplus on the Collection Fund for the previous year. This amount may be more or less than the accrued income for the year, any difference is then transferred to the General Fund via the Collection Fund Adjustment Account and reversed out through the MIRS.
Since the collection of council tax is, in substance, an agency arrangement, the cash collected by the Council belongs proportionately to itself and Devon and Cornwall Police. Therefore, there will be a debtor/creditor relationship between the Council and the Police since the cash paid to the latter in the year will not be equal to their share of the total cash collected.
The balance sheet includes the Council’s share of the year end balances in respect of council tax relating to arrears, impairment allowances for doubtful debts, overpayments and prepayments and appeals.
National Non-Domestic Rates (NNDR) From 1 April 2017 the Council retained 100% of income collected compared to prior regulations where the Council retained 50% of the income collected and 50% passed to central government. Under the new legislative framework the Council bears the risks and rewards that the amount collected could be less or more than predicted.
Regulations determine the amount of NNDR that must be included in the Council’s General Fund. Therefore, the difference between the income included in the CIES and the amount required by regulation to be credited to the General Fund is taken to the Collection Fund Adjustment Account and included as a reconciling item in the MIRS. The Balance Sheet this year includes the full 100% of the end of year balances in respect of NNDR relating to arrears, impairment allowances for doubtful debts, overpayments and prepayments and appeals, as this is a transitional year there are also amounts owing to Central Government relating to the 50% in prior years.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
xxiv Fair Value
The Council measures some of its non-financial assets, such as surplus assets, assets held for sale, investment properties, and some of its financial instruments, such as equity share holdings, at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability, or Where no principal market, the most advantageous market for the asset or liability.
The Council measures the fair value of an asset or liability on the same basis that market participants would use when pricing the asset or liability (assuming those market participants were acting in their economic best interest).
When measuring the fair value of a non-financial asset, the Council takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Council uses appropriate valuation techniques for each circumstance, maximising the use of relevant known data and minimising the use of estimates or unknowns. This takes into account the three levels of categories for inputs to valuations for fair value assets:
Level 1 – quoted prices. Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – unobservable inputs for the asset or liability.
xxv Inventories
Inventories are included in the Balance Sheet at the lower of cost and net realisable value, on a “first in, first out” basis. Inventories in the Fire Brigade workshops are valued on a “last in, first out basis” – although this is a departure from IAS 2, the amounts concerned are not material to the Council’s accounts.
The Council’s inventories are not significant in value and are therefore not shown in a separate note to the accounts. xxvi Heritage Assets
Heritage assets are recognised and measured (including the treatment of revaluation gains, losses, impairments and disposals) in accordance with the Council’s accounting policies on property, plant and equipment. However, some of the measurement rules are relaxed in that additions to the Collections may be in the form of acquisitions or donations. Acquisitions are initially recognised at cost and donations are recognised at an appropriate value, such as the price paid by the donor or the value accepted in lieu of inheritance tax. Collections will be reviewed with sufficient regularity to ensure valuations remain current and items may be valued by internal or external valuers or by using insurance valuations where appropriate.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The assets within the Collections are deemed to have indeterminate lives and a high residual value, hence the Council does not consider it appropriate to charge depreciation.
There are a number of items that would not have been valued and the Council considers that obtaining valuations for these would involve a disproportionate cost in comparison to the benefits to the users of the Council’s financial statements.
The Council’s heritage assets are not significant in value and are therefore not shown in a separate note to the accounts.
Note Accounting Standards That Have Been Issued, But Have Not Yet Been 2 Adopted Where a new standard has been published but has not yet been adopted by the Code, the Council is required to disclose information relating to the impact of these accounting changes. This requirement applies to International Financial Reporting Standards (IFRS) that have not been applied in the 2017/18 Code and that came into effect on or before 1 January 2018.
For 2017/18 the following accounting policy changes have been issued but not yet adopted:
IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative
Application of the above standards is required from 1 April 2018. Therefore, these changes will be reflected in the Council’s 2018/19 or future Statement of Accounts. It is not expected that the above amendments for IFRS 15, IAS 12 or IAS 7 will have a material impact on the information provided in the Council’s financial statements. Based on the Council’s assessment of its treasury investments and borrowings as at 31st March 2018 IFRS 9 will not have a material impact on the Council’s accounts. However, this could change depending on decisions taken in 2018/19.
Note Critical Judgements in Applying Accounting Policies 3 In applying the accounting polices set out in Note 1 the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. Key judgements made in the Statement of Accounts include: Future funding - there is a high degree of uncertainty about future levels of funding for local government. However, this uncertainty is not yet sufficient to provide an indication that the Council’s assets might be impaired as a result of a need to reduce levels of service provision. Valuation of Newquay Airport - the valuation of Newquay Airport in these accounts is highly dependent on the valuation basis used which is, in turn, determined by the Council’s intentions with regard to its future ownership of the Airport and the extent to which verifiable external market evidence of value can be established. The Council remains of the view that the most appropriate basis of
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
valuation is DRC based on the remaining service potential rather than a market-based estimate. Classification of Tamar Toll Bridge as an Infrastructure Asset – The Tamar Bridge has previously been classified as land and buildings as the carrying value is currently measured on a DRC basis due to the expectation that there is a relationship between the income from the bridge tolls and the cost of replacing the bridge. It has been determined that the bridge better meets the classification of infrastructure, however, under the CIPFA Code, infrastructure assets are currently measured at historic cost. The current DRC value of the bridge is £56.923m, if the bridge was valued at its depreciated historic cost in line with other infrastructure assets the value would be £17.385m. In order to ensure that the financial statements present a fair representation of the value of the assets on the balance sheet, it has been determined that the authority will therefore depart from the Code in respect of this matter and will reclassify the toll bridge as a separate category of infrastructure but will keep the DRC valuation basis. Trust Schools and Voluntary-aided Schools Assets – a review of the accounting treatment of trust schools and voluntary-aided schools non-current assets required a determination as to whether those assets are included within the single entity balance sheet of Cornwall Council. In accordance with the Code assets can be included on the Council’s balance sheet where the asset is controlled as a result of past events and from which future economic benefits or service potential are expected to flow to the Council and as long as it can be measured reliably. This determination was undertaken after applying a number of tests to establish whether the assets were effectively controlled by the Council or the School. These tests included a combination of who employs the staff, who sets the admissions criteria, who allocates the revenue funding, who owns and/or maintains the fixed assets and who funds the capital expenditure and who can change the use of the fixed assets. As a result of applying these tests the Council has determined that trust schools should be included within its non-current assets on its balance sheet whereas voluntary-aided schools should be excluded. This is because the trust school assets had previously been transferred under a freehold transfer to the trust for the purpose of providing school premises only and with conditions on their use and disposal, the service potential still flows to the Council, who are responsible for providing the school service. The asset is measured reliably by undertaking a DRC valuation. Voluntary-aided school assets have been excluded as they belong to external organisations who control their use and disposal. Land was only considered separately where it related to playing fields which are owned by the Council but used by voluntary-aided schools. Inverse LOBO (Lender Option Borrower Option) Loans – In determining the accounting treatment for the inverse LOBO’s, further details of which are disclosed in note 37, management has exercised its judgement in determining that no embedded derivatives exist, and that the loans should be measured on the amortised cost basis, as a floating rate instrument, in accordance with IAS39 section AG7. This means that periodic re-estimation of cash flows to reflect movements in market rates of interest alters the effective interest rate of the loan, and therefore impacts future interest payments, with no significant effect on the carrying amount of the liability. For example, if the market interest benchmark increases by 1%, this leads to a decrease of 1% in the interest rate charged. The increase in future interest costs are only recognised as they are accrued. The alternative IAS 39 section AG8 treatment was not chosen by the Council. Had it been applied, the loan’s effective interest rate
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
would have been determined at the inception of the contract and not changed thereafter. When a change in expected future cash flows arises, an immediate gain or loss would arise, reflecting the difference between the net present value of the revised estimated future cash flows, discounted at the original effective interest rate, and the loan’s carrying amount. This IAS 39 section AG8 adjustment would have been recognised in the Surplus/Deficit in the Provision of Services line of the CIES and would have an undesirable and unnecessary impact on the General Fund. Had management determined that either an embedded derivative existed or that the instrument should be accounted for as a fixed rate instrument in accordance with IAS 39 section AG8 this would have introduced significant volatility to the CIES because expected future changes in the market rate of interest would have been recorded immediately. It is possible to gain a broad, but not precise, understanding of the impact this alternative treatment might have had through the disclosures concerning this instruments fair value set out in note 37.
Note Assumptions made about the Future and other major sources of Estimation 4 Uncertainty
The Statement of Accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates.
Items in the Council’s Balance Sheet at 31 March 2018 for which there is a significant risk of material adjustment in the forthcoming financial year:
Item Uncertainties Effect if Actual Results Differ from Assumptions
Property, Assets are included on the basis of valuations The impact of a change in valuation or Plant and and assessed useful lives determined by the useful life would be to affect the Equipment Council's Property Systems and Assurance carrying value of the asset in the Manager on the basis of condition surveys and balance sheet and the charge for standards of professional practice set out by the depreciation or impairment in the Royal Institute of Chartered Surveyors (RICS). CIES. The assumptions underlying such valuations and the assessment of useful lives are subject to If the average useful life for each revision and the valuation would, therefore, be category of assets charged with expected to change accordingly. The carrying depreciation in 2017/18 was increased value of this long term asset at the end of the by one year it would result in a reporting period was £2,272.985m. decrease in the depreciation charged to the net cost of services of £2.938m. If the average useful life was decreased by one year it would result in an increase in the depreciation charged to the net cost of services of £3.351m.
These changes do not have an impact on the Council's General Fund position
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Item Uncertainties Effect if Actual Results Differ from Assumptions
as the Council is not required to fund such non-cash charges from council tax receipts.
Pensions Estimation of the net liability to pay pensions The impact of a change in the Liability depends on a number of complex judgements actuarial assumptions will be to relating to the discount rate used, the rate at increase or decrease the net pension which salaries are projected to increase, changes liability shown in the balance sheet in retirement ages, mortality rates, and expected and the cost shown in the CIES. return on pension fund assets. A firm of consulting actuaries is engaged to provide the For the Cornwall Council LGPS a 0.5% Council with expert advice about the decrease in the real discount rate assumptions to be applied. Those assumptions would approximate to a 9% increase are detailed in Note 36 to the accounts. The to the employer or £189.816m in carrying value of this long term liability at the monetary terms. A 0.5% increase in end of the reporting period was £1,143.088m. the salary interest rate would result in an increase to the employer of 1% or £25.458m and finally a 0.5% increase in the pension increase rate would result in an 8% increase or £162.178m to the employer.
These changes do not have an impact on the Council's General Fund position as the Council is not required to fund such non-cash charges from council tax receipts.
This list does not include assets and liabilities that are carried at fair value based on a recently observed market price.
Note Material Items of Income and Expense 5 The Council’s CIES includes the following items which are deemed exceptional by virtue of their size and nature and which, to prevent distortion of other figures in the accounts, have therefore been separately reported. Loss on disposal of property assets transferred to academy schools during the year £90.041m. This was made up of £32.942m for the transfer of 34 primary schools and £57.099m for the transfer of 6 secondary schools.
Note Events after the Reporting Period 6 The Statement of Accounts was authorised for issue by the Service Director for Resources on 15 October 2018. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
conditions existing at 31 March 2018, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information.
Since the 1st April 2018 there have been fourteen schools transferring to Academy status, two secondary schools with a combined net book value of £11.670m and twelve primary schools with a combined net book value of £13.466m.
Note Expenditure and Funding Analysis 7 The Expenditure and Funding Analysis (EFA) shows how annual expenditure is used and funded from resources (government grants, rents, council tax and business rates) by the Council in comparison with those resources consumed or earned by the Council in accordance with generally accepted accounting practices. It also shows how this expenditure is allocated for decision making purposes between the Council’s directorates. Income and expenditure accounted for under generally accepted accounting practices is presented more fully in the CIES.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
9
Note
-
£m
0.343
7.378
0.652
(4.313)
(4.313)
(4.630)
32.438
88.978
97.994
66.709
177.593
533.996
244.134
(263.792)
(259.479)
(181.906)
(356.403)
the
Statement
Income and
Expenditure
Comprehensive
Net Expenditure in
£m
1.289
2.273
1.232
0.347
8.817
28.540
35.677
21.165
34.775
(56.782)
181.906
238.688
104.573
134.115
Total Adjustments
-
£m
0.001
0.024
0.005
0.058
(4.295)
(0.754)
(3.541)
(2.092)
(1.449)
(0.005)
(1.425)
(0.043)
(0.064)
(Note (Note 2)
Other Differences
-
£m
0.270
1.095
2.030
0.323
4.206
4.591
2.286
7.212
(1.213)
50.691
50.691
29.891
20.800
Pensions Pensions
Adjustment
Net change for the
-
£m
1.024
1.178
2.444
1.547
76.774
27.935
31.466
16.617
32.553
(56.028)
135.510
191.538
114.764
Adjustments betweenAdjustments the Funding and basis Accounting
Adjustment for Adjustment
Capital Purposes
£m
3.898
6.146
0.305
(0.946)
(6.903)
56.782
53.301
76.829
31.934
(61.095)
399.881
235.317
(460.976)
HRA
Net Expenditure
chargeable to the
General Fund and
£m
3.898
6.146
(0.946)
(6.903)
(6.221)
(0.570)
(0.239)
(51.191)
(26.135)
(20.221)
(531.176)
(479.985)
chargeable to the
at the net amount
General Fund and
Adjustment to arriveAdjustment
HRA balancesHRA (Note 1)
-
-
-
-
£m
19.009
26.440
59.522
97.050
32.504
470.081
451.072
235.556
resource
management
as reportedas for
Directorate Total
^ Directorate renamed to PublicWellbeing and renamed Directorate Health, originally Public^ Health
Transfer to/from reserves for statutory this for costs movements relates finance amount to reserves to/from for net change Instruments (Financial Adjustment Transfer Account).
Note 2: The values within net cost Accumulated to relate values for net services change Absences2:Note of The Adjustment. line relates the the Collection toon amount income expenditure Fund. Other for and net Within change The the row
and £44.814m in relation to PFI and Public Health grant (£14.094m, £4.587m and £26.133m respectively). £26.133m toand in £4.587m relation Public PFI £44.814m and (£14.094m, and grant Health
Public Health (£26.133m) reclassification of the Public Health grant from non specific grant to specific, and the Other Income and Expenditure line (£529.988m) for Council Tax, Council Business grants, reclassification specific Publicthe non for Public toof (£26.133m) specificgrant from Health rates specific, grant non Health and line Expenditure (£529.988m) Government and the Income Other and
Note 1: Neighbourhoods and Customer and Support Services contain PFI technical adjustments relating to reallocation of the unitary charge (Neighbourhoods £19.836m, Customer and Support Services £6.073m), £6.073m), Services Support and Customer contain £19.836m, PFI technicalServices Support and Customer and adjustments the to(Neighbourhoods unitary relating of charge reallocation 1:Note Neighbourhoods
Add Surplus on General Fund, HRA and Earmarked balance in balance year Earmarked Fund, and HRA Add Surplus General on
Opening General Fund, HRA and Earmarked balances Earmarked at Fund, and HRA March 31 2017 General Opening
Other income expenditure Other and
Joint Committees Joint
Local Local Authority HRA
Schools
Corporate Items Corporate
Wellbeing and Public Health^ PublicWellbeing and Health^
Customer and Support Services Support and Customer
Neighbourhoods
Economic Growth and Economic Development and Growth
Children, Families AdultsChildren, and
Closing GeneralClosing Fund,and HRA Earmarked Reserve balance at March31 2018
(Surplus) or deficit(Surplus)
Adjustments betweenAdjustments accountingand basis underfunding basis regualtions
(Surplus) or deficit(Surplus) on of servicesprovision
Net Cost of ServicesNet Cost Transfer (to)/from Reserves for Statutory for Movements Reserves (to)/from Transfer 2017/18
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
9
Note
-
£m
0.502
(0.430)
(3.196)
19.501
17.704
81.167
89.474
45.942
(22.742)
(22.742)
(42.243)
(60.336)
406.204
235.377
(259.479)
(236.737)
(448.447)
the
Statement
Income and
Expenditure
Comprehensive
Net Expenditure in
-
£m
1.094
2.161
(2.690)
14.383
27.991
11.548
27.730
15.807
25.223
(19.501)
(33.884)
(13.608)
(52.882)
Total Adjustments
-
£m
0.791
1.276
0.003
1.171
0.002
0.035
0.067
0.022
(0.182)
(0.973)
(2.249)
(0.010)
(0.014)
(Note (Note 1)
Other Differences
-
£m
0.095
0.090
0.010
0.112
0.627
0.078
0.260
(3.798)
(0.092)
(4.978)
29.244
29.244
33.042
Pensions Pensions
Adjustment
Net change for the
-
£m
0.996
2.286
1.915
30.513
10.287
27.583
15.113
25.123
(48.563)
(34.675)
(13.888)
(44.401)
(52.790)
Adjustments betweenAdjustments the Funding and basis Accounting
Adjustment for Adjustment
Capital Purposes
£m
6.156
0.502
(1.524)
(7.454)
(0.506)
33.884
53.437
73.667
20.719
(56.626)
378.213
233.216
(434.839)
HRA
Net Expenditure
chargeable to the
General Fund and
£m
6.156
1.393
(1.524)
(7.454)
(0.506)
(4.974)
(0.546)
(49.291)
(26.796)
(15.040)
(495.498)
(446.207)
HRA balancesHRA
chargeable to the
at the net amount
General Fund and
Adjustment to arriveAdjustment
-
-
-
-
£m
11.368
27.298
52.044
88.707
25.693
438.872
427.504
233.762
resource
management
as reportedas for
Directorate Total
^ Directorate renamed to PublicWellbeing and renamed Directorate Health, originally Public^ Health
Transfer to/from reserves for statutory this for costs movements relates finance amount to reserves to/from for net change Instruments (Financial Adjustment Transfer Account).
Note 1: The values within net cost Accumulated to relate values for net services change Absences1:Note of The Adjustment. line relates the the Collection toon amount income expenditure Fund. Other for and net Within change The the row
* Re-formatted to be more informative to the reader, and restated to remove school asset restated and to the remove impairment. reader, to informative more be * Re-formatted
Add Surplus on General Fund, HRA and Earmarked balance in balance year Earmarked Fund, and HRA Add Surplus General on
Opening General Fund, HRA and Earmarked balances Earmarked at Fund, and HRA March 31 2016 General Opening
Other income expenditure Other and
Joint Committees Joint
Local Local Authority HRA
Schools*
Corporate Items Corporate
Wellbeing and PublicWellbeing and Health^
Customer and Support Services Support and Customer
Neighbourhoods
Economic Growth and Economic Development and Growth
Children, Families AdultsChildren, and
Closing GeneralClosing Fund,and HRA Earmarked Reserve balance at March31 2017
(Surplus) or deficit(Surplus)
Adjustments betweenAdjustments accountingand basis underfunding basis regualtions
(Surplus) or deficit(Surplus) on of servicesprovision
Net Cost of ServicesNet Cost Transfer (to)/from Reserves for Statutory for Movements Reserves (to)/from Transfer 2016/17 Comparative2016/17 Figures Restated*
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Adjustments for Capital Purposes Adjustments for capital purposes – this column adds in depreciation and impairment and revaluation gains and losses in the services lines, and for: Other operating expenditure – adjusts for capital disposals with a transfer of income on disposal of assets and the amounts written off for those assets. Financing and Investment Income and Expenditure – the statutory charges for capital financing i.e. MRP and other revenue contributions are deducted from other income and expenditure as these are not chargeable under generally accepted accounting practices. Taxation and Non-specific Grant Income and Expenditure – capital grants are adjusted for income not chargeable under generally accepted accounting practices. Revenue grants are adjusted from those receivable in the year to those receivable without conditions or for which conditions were satisfied throughout the year. The Taxation and Non-specific Grant Income and Expenditure line is credited with capital grants receivable in the year without conditions or for which conditions were satisfied in the year.
Net Change for the Pensions Adjustments Net change for the removal of pension contributions and the addition of IAS19 Employee Benefits pension related expenditure and income. For services this represents the removal of the employer pension contributions made by the Council as allowed by statute and the replacement with current service costs and past service costs. For Financing and Investment Income and Expenditure the net interest on the defined benefit liability is charged to the CIES.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Expenditure and Income Analysed by Nature 8 The Council’s expenditure and income is analysed as follows:
Restated* Reconciliation to Subjective Analysis 31 March 31 March 2018 2017 £m £m
Fees, charges and other service income (225.963) (232.827) Interest and investment income (8.438) (8.107) Income from council tax (288.055) (272.152) Income from business rates (166.021) (100.148) Government grants and contributions (544.032) (691.474)
Total Income (1,232.509) (1,304.708)
Employee expenses 331.316 354.916 Other service expenses 726.946 691.170 Capital charges* 180.169 97.660 Interest payments 48.721 46.557 Precepts and levies 20.531 18.550 Payments to Housing Capital Receipts Pool 1.095 1.109 Gain or loss on disposal of fixed assets 101.324 52.503
Total Expenditure 1,410.102 1,262.465
(Surplus) or deficit on the provision of services 177.593 (42.243)
* Restated to remove school asset impairment and to remove the donated asset as this has been reclassified as a transfer of function
Note Adjustments between Accounting Basis and Funding Basis under 9 Regulations
This note details the adjustments that are made to total comprehensive income and expenditure in accordance with proper accounting practice to determine the resources that are available to meet future capital and revenue expenditure.
The adjustments are made against the following reserves:
General Fund Balance
The General Fund is the statutory fund into which all of the receipts of the Council are required to be paid and out of which all liabilities of the Council are to be met, except to the extent that statutory rules might provide otherwise. These rules can also specify the financial year in which liabilities and payments should impact on the General Fund balance, which is not necessarily in accordance with proper accounting practice. The General Fund balance therefore summarises the resources that the Council is statutorily empowered to spend on its services or on capital investment at the end of the financial year. For housing authorities, the balance is not available to be applied to funding HRA services.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Housing Revenue Account Balance
The Housing Revenue Account balance reflects the statutory obligation to maintain a revenue account for local authority council housing provision in accordance with Part VI of the Local Government Housing Act 1989. It contains the balance of income and expenditure as defined by the 1989 Act that is available to fund expenditure in connection with the Council’s landlord function.
Major Repairs Reserve
The Council is required to maintain the MRR which is restricted to being applied to new capital investment in HRA assets or the financing of historical capital expenditure by the HRA. The balance shows the total that has yet to be applied at year end.
Capital Receipts Reserve
The Capital Receipts reserve holds the proceeds from the disposal of land or other assets which are restricted by statute from being used other than to fund new capital expenditure or to be set aside to finance historical capital expenditure. The balance on the reserve shows the resources that have yet to be applied for these purposes at the year end.
Capital Grants Unapplied
The Capital Grants Unapplied Account (reserve) holds the grants and contributions received towards capital projects for which the Council has met the conditions that would otherwise require repayment of the monies but which have yet to be applied to the expenditure. The balance is restricted by grant terms as to the capital expenditure against which it can be applied and/or the financial year in which this can take place.
Further information describing the nature and purpose of the General Fund Schools balance, the Earmarked General Fund reserves and the Ports balances can be found in the MIRS.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
2017/18 adjustments Movement in Usable Reserves General Housing Capital Capital Major Movement Fund Revenue Receipts Grants Repairs in Unusable Balance Account Reserve Unapplied Reserve Reserves £m £m £m £m £m £m Adjustments primarily involving the Capital Adjustment Account: Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement : Charges for depreciation of non-current assets (57.165) (14.673) - - - 71.838 Revaluation losses on property, plant and equipment (46.468) 0.829 - - - 45.639 Amortisation of intangible assets (1.807) (0.124) - - - 1.931 Capital grants and contributions applied 80.297 0.229 - (9.761) - (70.765) Revenue expenditure funded from capital under statute (59.533) - - - - 59.533 Amounts of non-current assets written off on disposal or sale as (103.983) 2.695 (14.966) - - 116.254 part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement: Statutory provision for the financing of capital investment 24.356 - - - - (24.356) Capital expenditure charged against the General Fund and 25.536 3.054 - - - (28.590) HRA balances Long Term Debtors/Loans - arrangements and repayments - - (1.642) - - 1.642 Adjustments primarily involving the Capital Grants Unapplied Account: Application of grants to capital financing transferred to the - - - 29.627 - (29.627) Capital Adjustment Account Adjustments primarily involving the Capital Receipts Reserve: Use of Capital Receipts to finance new capital expenditure (0.448) - 15.946 - - (15.498) Contribution from the Capital Receipts Reserve to finance the (1.095) - 1.095 - - - payments to the Government capital receipts pool Transfer from Deferred Capital Receipts Reserve upon receipt of cash - - (0.009) - - 0.009 Adjustments primarily involving the Major Repairs Reserve: Use of the Major Repairs Reserve to finance new - - - - 11.348 (11.348) capital expenditure Posting of HRA resources from revenue to the Major Repairs Reserve - 12.790 - - (12.790) - Adjustments Primarily involving the Financial Instruments Adjustment Account: Amount by which finance costs charged to the Comprehensive 0.735 0.019 - - - (0.754) Income and Expenditure Statement are different from finance . costs chargeable in the year in accordance with statutory requirements Adjustments primarily involving the Pensions Reserve: Reversal of items relating to retirement benefits debited/credited (97.850) (2.959) - - - 100.809 to the Comprehensive Income and Expenditure Statement Employer's pensions contributions and direct payments to 48.511 1.607 - - - (50.118) pensioners payable in the year Adjustments primarily involving the Collection Fund Adjustment Account: Amount by which council tax and non-domestic rating income credited 2.092 - - - - (2.092) to Comprehensive Income and Expenditure Statement is different from council tax and non-domestic rating income calculated for the year in accordance with statutory requirements Adjustments primarily involving the Accumulated Absences Account: Amount by which officer remuneration charged to Comprehensive 1.449 - - - - (1.449) Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements
Total Adjustments (185.373) 3.467 0.424 19.866 (1.442) 163.058
Total General Fund and HRA Movement (181.906)
Page 73
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Restated 2016/17 adjustments~ Movement in Usable Reserves General Housing Capital Capital Major Movement in Fund Revenue Receipts Grants Repairs in Unusable Balance Account Reserve Unapplied Reserve Reserves £m £m £m £m £m £m Adjustments primarily involving the Capital Adjustment Account: Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement : Charges for depreciation of non current assets* (45.926) (26.432) - - - 72.358 Revaluation losses on Property, Plant and Equipment* (28.453) 66.800 - - - (38.347) Amortisation of intangible assets* (2.543) (0.124) - - - 2.667 Capital grants and contributions applied 150.460 0.046 - (38.255) - (112.251) Revenue expenditure funded from capital under statute (59.686) - - - - 59.686 Amounts of non-current assets written off on disposal or sale as (54.252) 1.819 (14.552) - - 66.985 part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement Other movements in the CIE 0.004 (0.172) 0.172 - - (0.004) Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement: Statutory provision for the financing of capital investment 23.348 - - - - (23.348) Capital expenditure charged against the General Fund and 9.329 2.736 - - - (12.065) HRA balances^ Long Term Debtors/Loans - Arrangements and Repayments - - (2.460) - - 2.460 Adjustments primarily involving the Capital Grants Unapplied Account: Application of grants to capital financing transferred to the - - - 0.080 - (0.080) Capital Adjustment Account Adjustments primarily involving the Capital Receipts Reserve: Use of Capital Receipts to finance new capital expenditure - - 10.063 - - (10.063) Contribution from the Capital Receipts Reserve to finance the (1.109) - 1.109 - - - payments to the Government capital receipts pool Transfer from Deferred Capital Receipts Reserve upon receipt of cash - - (0.011) - - 0.011 Adjustments primarily involving the Major Repairs Reserve: Use of the Major Repairs Reserve to finance new - - - - 10.835 (10.835) capital expenditure^ Posting of HRA resources from revenue to the Major Repairs Reserve* - 12.718 - - (12.718) - Adjustments Primarily involving the Financial Instruments Adjustment Account: Amount by which finance costs charged to the Comprehensive (0.812) 0.021 - - - 0.791 Income and Expenditure Statement are different from finance . costs chargeable in the year in accordance with statutory requirements Adjustments primarily involving the Pensions Reserve: Reversal of items relating to retirement benefits debited/credited (76.804) (1.740) - - - 78.544 to the Comprehensive Income and Expenditure Statement Employer's pensions contributions and direct payments to 47.686 1.614 - - - (49.300) pensioners payable in the year Adjustments primarily involving the Collection Fund Adjustment Account: Amount by which council tax and non-domestic rating income credited 2.249 - - - - (2.249) to Comprehensive Income and Expenditure Statement is different from council tax and non-domestic rating income calculated for the year in accordance with statutory requirements Adjustments primarily involving the Accumulated Absences Account: Amount by which officer remuneration charged to Comprehensive (1.276) - - - - 1.276 Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements
Total Adjustments (37.785) 57.286 (5.679) (38.175) (1.883) 26.236
Total General Fund and HRA Movement 19.501
*Restated to move HRA depreciation, revaluation and amortisation between HRA GF and MRR and to reverse impairment of schools assets ^ Restated to move funding from the MRR to the correct line from funding from General Fund and HRA balances heading ~Restated to remove the donated asset as this has been reclassified as a transfer of function
Page 74
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Transfers to/from Earmarked Reserves 10 This note shows amounts set aside from the General Fund and HRA balances in earmarked reserves to provide financing for future expenditure plans and amounts posted back from earmarked reserves to meet General Fund and HRA expenditure in 2017/18:
Balance Transfers Transfers Balance at Transfers Transfers Balance at at 1 April Out In 31 March Out In 31 March 2016 2016/17 2016/17 2017 2017/18 2017/18 2018 £m £m £m £m £m £m £m
Capital earmarked reserve (41.033) 10.727 (28.077) (58.383) 73.140 (92.965) (78.208) Revenue earmarked reserves:- Children, Families and Adults (16.472) 6.065 (5.418) (15.825) 3.866 (2.543) (14.502) Economic Growth and Development (6.162) 1.038 (0.250) (5.374) 0.781 (0.613) (5.206) Neighbourhoods (1.546) 0.624 (3.485) (4.407) 0.687 (0.056) (3.776) Customer and Support Services (1.213) 0.108 (0.979) (2.084) 0.816 (1.752) (3.020) Wellbeing and Public Health (2.328) 1.450 (0.945) (1.823) 1.200 (0.893) (1.516) Corporate Items * (4.130) 5.495 (8.149) (6.784) 8.474 (14.308) (12.618) Schools (0.398) 0.020 (0.085) (0.463) - (0.095) (0.558) Local Authority HRA (3.510) 2.251 (1.772) (3.031) 2.237 (2.766) (3.560) Joint Committees (1.962) - (0.609) (2.571) 0.061 (0.054) (2.564) PFI Reserves (56.724) - (1.263) (57.987) 3.178 (0.536) (55.345) Wave Hub reserve - - (10.842) (10.842) 1.920 (0.903) (9.825) Redundancy reserve * (14.588) 4.000 (2.445) (13.033) 3.391 - (9.642) Other general reserves (9.762) 0.350 (5.454) (14.866) 4.440 (1.600) (12.026)
Total (159.828) 32.128 (69.773) (197.473) 104.191 (119.084) (212.366)
* Last year comparator part restated as the Redundancy reserve has been split out from Corporate Items The two most significant reserves set out above are: The Capital reserve (£78.208m) which is funds set aside to finance future investment in assets PFI reserves (£55.345m) which are monies set aside to offset future PFI liabilities
Note Other Operating Expenditure 11
31 March 31 March 2018 2017 £m £m Parish Council precepts 20.531 18.550 Payments to the Government Capital Housing Receipts Pool 1.095 1.109 Exceptional transfer of academy school assets 90.041 50.013 (Gains)/losses on the disposal of non-current assets 11.283 2.490
Total 122.950 72.162
Page 75
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Financing and Investment Income and Expenditure 12
31 March 31 March 2018 2017 £m £m Interest payable and similar charges 48.721 46.557 Net interest on the net defined benefit liability/(asset) 29.891 33.043 Interest receivable and similar income (5.935) (7.058) Other investment income (2.503) (1.049)
Total 70.174 71.493
Note Taxation and Non-specific Grant Income 13
Restated* 31 March 31 March 2018 2017 £m £m Council tax income (290.150) (271.129) Non-domestic rates income and expenditure (161.834) (98.922) Non ringfenced government grants (70.938) (122.968) Capital grants and contributions (24.513) (96.834) Collection Fund (surplus)/deficit (2.092) (2.249)
Total (549.527) (592.102)
*Restated to remove the donated asset as this has been reclassified as a transfer of function
Page 76
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Property, Plant and Equipment 14
-
-
-
-
-
-
£m
0.132
6.601
0.387
0.599
(9.229)
(8.170)
(7.792)
(0.132)
(2.343)
(6.601)
in PPE
249.728
240.201
249.430
257.520
Included
PFI Assets
-
£m
Total
9.606
0.010
0.064
(1.500)
(3.772)
(0.602)
40.786
21.300
(71.838)
(45.619)
(40.850)
131.660
(347.658)
(324.786)
(121.648)
Property,
2,355.388
2,272.985
2,620.643
2,680.174
Plant and
Equipment
-
-
-
-
-
-
-
-
-
-
-
-
-
£m
Con-
Under
Assets
(2.206)
29.276
25.435
25.435
16.760
29.276
(18.395)
struction
-
-
-
-
£m
unity
0.027
0.079
3.050
1.128
Assets
(0.315)
(0.263)
(0.017)
(0.141)
(0.040)
(1.571)
(2.855)
(0.079)
30.995
30.454
30.769
31.136
Comm-
-
-
-
-
-
-
-
-
-
-
-
-
£m
Asset
2.127
(1.904)
(0.490)
(1.414)
55.286
56.923
58.827
56.700
Toll Bridge
Infrastructure
Tamar Bridge
-
-
-
-
-
£m
Infra-
2.140
0.043
0.076
Assets
(1.237)
(9.480)
(0.043)
16.225
57.420
(22.783)
578.728
621.089
812.656
748.458
(191.567)
(169.730)
structure
-
-
-
-
-
-
£m
3.914
5.088
0.150
7.162
Plant,
(5.250)
(2.585)
(5.088)
(16.275)
(99.382)
168.614
155.730
262.385
267.996
(106.655)
Vehicles,
Furniture,
Equipment
-
£m
Other
3.356
0.010
0.064
0.003
(6.137)
(0.562)
21.595
20.612
33.682
(35.452)
(18.072)
(42.405)
(40.539)
(21.659)
898.174
933.626
(100.572)
Buildings
Land and
1,006.393
1,048.798
-
-
-
-
-
£m
0.169
1.335
0.360
0.688
(4.775)
13.981
15.508
(11.765)
(14.201)
(11.714)
(13.981)
Council
486.096
485.180
496.945
497.810
Dwellings
Revaluation Reserve Revaluation
Gross Carrying Amount Gross Carrying
Gross Carrying Amount Gross Carrying
in the surplus/deficit on the Provision of Services of in the surplus/deficit the on Provision
in the Revaluation Reserve in the Revaluation
out to Gross Carrying Amount after out Revaluation to Amount Grossafter Carrying
at 1 April 2017
at 31 at March 31 2018
Net Book Net ValueBook
At 31 March31 At 2018
Other movements in depreciation and impairment and in depreciation movements Other
Derecognition - disposals Derecognition
Other (losses)/reversal recognised in the recognised (losses)/reversal Other
Accumulated Impairment written Accumulatedout written to Impairment
Accumulated Depreciation written Accumulatedout written to Depreciation
Depreciation charge Depreciation
At 1 AprilAt 2017
Accumulated Depreciation and Impairment
At 31 March31 At 2018
Other movements in cost movements Other valuation or
Assets Categories Other reclassified (to)/from
Assets reclassified (to)/from Held for AssetsSale for Held reclassified (to)/from
Derecognition - disposals Derecognition
Revaluation increases/(decreases) recognised Revaluation
Revaluation increases/(decreases) recognised Revaluation
Accumulated Depreciation and Impairment written Impairment Accumulatedand Depreciation
Additions
At 1 AprilAt 2017 Cost or ValuationCost Movements on Balances 2017/18
Page 77
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
-
-
-
-
-
-
£m
3.378
3.009
6.617
(7.792)
(3.334)
(8.315)
(1.554)
(3.009)
in PPE
30.351
(10.845)
222.585
249.728
257.520
233.430
Included
PFI Assets
-
-
£m
Total
0.003
0.040
(9.194)
15.701
49.166
30.000
38.347
30.925
(72.358)
(77.584)
(49.206)
140.026
(324.786)
(317.338)
Property,
2,259.522
2,355.388
2,680.174
2,576.860
Plant and
Equipment
-
-
-
-
-
-
-
-
-
-
-
-
-
-
£m
Con-
Under
Assets
29.276
29.276
39.699
173.555
173.555
(183.978)
struction
-
-
-
-
-
-
-
-
-
-
£m
unity
2.446
0.657
Assets
(0.141)
(0.013)
(0.128)
(0.494)
28.399
30.995
31.136
28.527
Comm-
-
-
-
-
-
-
-
-
-
-
-
-
-
£m
Asset
(1.414)
(0.473)
(0.941)
55.759
55.286
56.700
56.700
Toll Bridge
Infrastructure
Tamar Bridge
-
-
-
-
-
-
-
-
£m
Infra-
4.108
5.436
Assets
(4.695)
30.000
54.697
(15.475)
504.657
578.728
748.458
663.020
(169.730)
(158.363)
structure
-
-
-
-
-
-
-
-
£m
5.202
4.671
Plant,
(0.105)
(6.276)
57.098
(99.382)
(11.372)
(93.107)
168.614
267.996
119.396
150.205
Vehicles,
Furniture,
Equipment
-
-
£m
Other
0.105
0.003
6.355
(9.194)
25.048
56.433
25.173
26.907
(42.405)
(19.059)
(54.857)
(62.309)
(27.710)
(25.048)
Buildings
Land and
1,009.689
1,006.393
1,048.798
1,064.546
-
-
-
-
£m
0.036
0.040
0.267
5.752
(9.942)
(3.810)
24.118
66.057
13.395
(11.714)
(25.966)
(24.158)
Council
430.365
486.096
497.810
440.307
Dwellings
Gross Carrying Amount Gross Carrying
Gross Carrying Amount Gross Carrying
in the surplus/deficit on the Provision of Services in the of surplus/deficit the on Provision
in the Revaluation Reserve in the Revaluation
out out to Revaluation AmountGross after Carrying
^Reclassification of the Wave Hub donated asset as additions donated asset thistonot Hub movements function a from donated other of the was Wave of a ^Reclassification transfer
* Restated to remove school asset * Restated to remove impairment.
at 1 April 2016
at March 31 2017
Net Book Net ValueBook
At 31 March31 At 2017
Other movements in depreciation and impairment and in depreciation movements Other
Assets Sale for Held reclassified to/(from)
Derecognition - disposals Derecognition
Accumulated written out toImpairment
Accumulated written out toDepreciation
Depreciation charge Depreciation
At 1 AprilAt 2016
Accumulated Depreciation and Impairment
At 31 March31 At 2017
Other movements in cost movements Other valuation^ or
Assets Categories Other reclassified (to)/from
Assets Sale for Held reclassified (to)/from
Derecognition - disposals Derecognition
Revaluation increases/(decreases) recognised Revaluation
Revaluation increases/(decreases) recognised Revaluation
Accumulated Depreciation and Impairment written Accumulated Impairment and Depreciation
Additions^
At 1 AprilAt 2016 Cost or ValuationCost Comparative MovementsRestated* 2016/17
Page 78
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Depreciation
The following average useful lives have been used in the calculation of depreciation: Council dwellings: 30 years Other land and buildings: 20-60 years Vehicles, plant, furniture and equipment: 5-15 years Infrastructure: 35 years Infrastructure Wave Hub: 5 years Infrastructure (Tamar Bridge Toll Bridge): 120 years
Effects of Changes in Estimates
In 2017/18 the Council made no changes to its accounting estimates for property, plant and equipment.
Significant Assets
In 2016/17 the Cornwall Energy Recovery Centre (CERC) became operational and was transferred from assets under construction to other land and buildings and vehicles, plant furniture and equipment. Its net book value at the end of 2017/18 was £149.784m (£158.630m 2016/17), split into £37.711m (£39.338m 2016/17) other land and buildings and £112.073m (£119.292m 2016/17) vehicles, plant and equipment. This asset has been constructed as part of the Waste PFI scheme, details can be found in note 34.
In 2016/17 the Wave Hub asset was transferred to Cornwall Council by the Department for Business, Energy and Industrial Strategy (DBEIS). It has been recorded as an infrastructure asset and measured at depreciated historic cost with a gross book value of £30.000m, this was based on the total construction costs as supplied to Cornwall Council by DBEIS. It was originally transferred with a remaining useful life of 19 years in 2016/17, during 2017/18 this has been reduced to 5 years to reflect the current business plan supporting its operation until the financial year 2021/22.
Capital Commitments
At the year end, the Council had significant commitments under capital contracts. The following table lists all those schemes that have committed expenditure in excess of £5.000m for 2018/19, which also have capital contracts totalling £5.000m or more in place:
Page 79
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
2017/18 2016/17* £m £m
Expenditure approved in capital programme 727.728 615.620
Expenditure committed for the following year 279.386 311.344
Schemes committing over £5m spend in year with capital contract commitments of over £5m in place: HIP - Affordable Housing 5.940 6.441 Archive Centre 6.392 10.126 St Erth Multi Modal Hub (STEMMH) 8.310 10.511 Housing Revenue Account Works 15.403 14.332 Investment in Leisure Estate 7.616 14.600 Structural Maintenance of Carriageways (inc LTP3) 25.563 23.825 Cornwall Rail Improvements Package 14.697 27.241 Aerohub Business Park Phase 1 6.598 - Superfast Broadband Phase 2 7.890 - Basic Need 6.921 - Local Authority New Build Schemes 6.228 -
Schemes committing spend in year with no capital contract commitments or commitments under £5m in place: Vehicle and Plant Replacement (Fire) 6.181 5.074 Carluddon Technology Park (ESAM) 1.297 6.443 Ex-PFI Schools Backlog 3.278 6.482 Growth Deal - Truro Western Corridor - 7.663 Tamar Bridge and Torpoint Ferry Joint Committee 8.336 8.526 Targeted Basic Need 0.148 14.651
Total 130.798 155.915
*Schemes with balances under £5m with no capital commitments over £5m in 2017/18 have been removed from the comparator, which has also been adjusted to remove the HDP spend now classed as inventories.
Revaluations
The Council carries out a rolling programme that ensures that all property, plant and equipment required to be measured at current value is revalued at least every five years. Vehicles, plant, furniture and equipment assets that are of low value and/or short lives are currently not valued as their historic cost is used as a proxy for current value, however as the CERC equipment asset is significant in value and has a longer life it is valued yearly. The Wave Hub asset is also assessed yearly for impairment as it is also a significant asset. All valuations were overseen internally by the Council’s Property Systems and Assurance Manager. Valuations of land and buildings were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institute of Chartered Surveyors.
Page 80
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The significant assumptions applied to revaluations have been listed below and the detailed assumptions are set out in the Council’s “Instructions to Valuers” and “Terms of Engagement” documents:
For specialised properties it is assumed that there is no active market but that the land element could be sold at its market value. It is assumed that the building costs would be in line with published indices and asset lives are in line with those given in the depreciation note.
For council dwellings the assumption is that the Beacon assets are typical of their asset class and that all such properties will continue to be let for social housing purposes.
For other property, plant and equipment the assumption is that local market conditions provide an accurate guide as to appropriate valuation.
Valuations of land and buildings generally exclude moveable furniture and equipment but include fixed plant and machinery.
No structural surveys or internal inspections are carried out and it is assumed that the premises are in a reasonable state of repair.
No allowance is made for costs of disposal.
No allowance is made for rights, obligations or liabilities arising from the Defective Premises Act 1972 or any effect of the Environmental Protection Act 1990.
History of revaluations:
Infra- Vehicles, structure Assets Other Plant, Infra- Tamar Bridge Comm- Under Council Land and Furniture, structure Toll Bridge unity Con- Dwellings Buildings Equipment Assets Asset Assets struction Total £m £m £m £m £m £m £m £m
Carried at historical cost - 10.884 43.657 621.089 - 30.454 25.435 731.519
Valued at current value as at: 31 March 2018 485.180 344.216 112.073 - - - - 941.469 31 March 2017 - 199.960 - - - - - 199.960 31 March 2016 - 124.610 - - - - - 124.610 31 March 2015 - 149.598 - - 56.923 - - 206.521 31 March 2014 - 68.906 - - - - - 68.906
Net Book Value 485.180 898.174 155.730 621.089 56.923 30.454 25.435 2,272.985
Page 81
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Financial Instruments 15 Categories of Financial Instrument The following categories of financial instruments are carried in the Balance Sheet:
Restated* Long-term Current Total 31 March 31 March 31 March 31 March 31 March 31 March 2018 2017* 2018 2017* 2018 2017 £m £m £m £m £m £m Investments Loans and receivables - treasury 188.020 158.006 143.006 215.629 331.026 373.635 Available-for-sale financial assets 6.900 7.599 - 1.083 6.900 8.682
Total Investments 194.920 165.605 143.006 216.712 337.926 382.317
Debtors Loans and receivables - debtors 25.750 22.978 - - 25.750 22.978 Financial assets carried at contract amounts - - 66.738 62.028 66.738 62.028 Statutory debtors~ - - 31.874 29.465 31.874 29.465
Total included in Debtors 25.750 22.978 98.612 91.493 124.362 114.471
Cash and cash equivalents Short Term cash investments - - 77.602 76.668 77.602 76.668 Other bank balances - - (8.431) (13.065) (8.431) (13.065)
Total Cash and cash equivalents - - 69.171 63.603 69.171 63.603
Borrowings Financial liabilities at amortised cost - treasury (636.772) (635.048) (91.437) (77.602) (728.209) (712.650)
Total included in borrowings (636.772) (635.048) (91.437) (77.602) (728.209) (712.650)
Liabilities PFI liability (114.573) (119.354) (4.781) (4.251) (119.354) (123.605) Other liabilities - leases (4.202) (6.032) - - (4.202) (6.032)
Total Liabilities (118.775) (125.386) (4.781) (4.251) (123.556) (129.637)
Creditors Financial liabilities at amortised cost - creditors (2.445) (2.056) - - (2.445) (2.056) Financial liabilities carried at contract amounts - - (111.568) (113.753) (111.568) (113.753) Statutory creditors~ - - (17.512) (33.028) (17.512) (33.028) Leases - - (1.815) (1.537) (1.815) (1.537)
Total Creditors (2.445) (2.056) (130.895) (148.318) (133.340) (150.374)
* note restated to remove PFI deferred income as these are not financial instruments. Long term debtors have been reclassified as loans and receivables from financial assets carried at contract amount and the statutory debtor and creditor balances have been added to aid reconciliation to the balance sheet. The short term lease balance has been split out under the creditors heading. ~ the statutory debtors and creditors amounts are not financial instruments.
Interest due to be paid or received within the next 12 months in respect of both long and short term loans and investments is shown within the Current columns in the table above. Interest due at maturity of long term investments is shown within the long-term columns in the table above. Instruments which have an option for premature redemption have been categorised according to their final maturity date, rather than assumptions being made regarding the likelihood for premature redemption. The Council has no material soft loans to disclose for 2017/18.
Page 82
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Fair Value of Assets and Liabilities Financial liabilities, financial assets represented by loans and receivables and long-term debtors and creditors are carried in the Balance Sheet at amortised cost. Their fair values have been determined using a variety of techniques in order to reflect the true fair value as accurately as possible. Predominantly, valuation techniques have been employed with reference to prices quoted in an active market. In respect of some complex instruments, the counterparty to the trade has provided values. For instruments with no optionality, the present value of the cash flows have been used to determine the fair value. The following assumptions should be noted: Where an instrument will mature in the next 12 months, the carrying amount is assumed to approximate fair value No premature repayments have been assumed The fair value of trade and other receivables is taken to be the invoiced or billed amount No assumptions about credit loss have been made For loans from the Public Works Loan Board (PWLB) transfer values (new loan rates) from the PWLB have been applied to provide the fair value under PWLB debt redemption procedures Available-for-sale-assets are carried in the Balance Sheet at their fair value. These fair values are based on public price quotations where there is an active market The fair value for long term debtors is assumed to be the same as their carrying amount
31 March 2018 31 March 2017* Carrying Fair Value Carrying Fair Value Amount Amount £m £m £m £m Lending Loans and receivables - treasury 331.026 332.189 373.635 375.495 Loans and receivables - debtors 25.750 25.750 22.978 22.978
* Loans and receivables - debtors, comparator has been included. The £331.026m loans and receivables – treasury carrying amount is broken down in Note 37, the investments in banks and building societies and other local authorities are all held at fixed rates and due to the prevailing interest rates being higher the fair value in the table above is also higher than the carrying amount. For all other investments the fair value is represented by its current value.
31 March 2018 31 March 2017* Carrying Fair Value Carrying Fair Value Amount Amount £m £m £m £m Borrowing Financial liabilities - treasury (728.209) (1,094.362) (712.650) (1,099.888) PFI liability (119.354) (272.306) (123.605) (298.134) Other liabilities - leases (4.202) (4.202) (6.032) (6.032) Financial liabilities at amortised cost - creditors (2.445) (2.445) (2.056) (2.056)
*Previous heading of 'Financial liabilities carried at contract amount' has been reclassified and split between the new headings for PFI liability, other liabilities - leases and financial liabilities at amortised cost - creditors. The balance for PFI deferred income has been removed as this is not a financial instrument.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The £728.209m carrying amount for financial instruments – treasury is all at fixed interest rates except for £85.000m on two inverse LOBO’s (see note 37 for more information on LOBO’s). Due to the prevailing interest rates being lower than these fixed rates as at the balance sheet date the fair value reflected in the table above is higher.
The Council has used a transfer value for the value of financial liabilities – treasury. The Council has also calculated an exit price fair value of (£1,358.040m), which is calculated using early repayments discount rates. The Council has no contractual obligation to pay these penalty costs and would not incur any additional cost if the loans run to their planned maturity date.
Income, Expense, Gains and Losses 2017/18 2016/17 Financial Financial liabilities Financial Financial liabilities Financial Financial measured assets: assets: measured assets: assets: at amortised loans and available at amortised loans and available cost receivables for sale Total cost receivables for sale Total £m £m £m £m £m £m £m £m
Interest expense 48.721 - - 48.721 46.557 - - 46.557
Total expense in surplus or deficit 48.721 - - 48.721 46.557 - - 46.557 on the Provision of Services
Interest income - (5.304) (0.603) (5.907) - (6.761) (0.297) (7.058)
Total income in surplus or deficit - (5.304) (0.603) (5.907) - (6.761) (0.297) (7.058) on the Provision of Services
(Gains)/Losses on revaluation - - 0.630 0.630 - - (0.069) (0.069) Disposal of Local Authority Bonds - - 0.069 0.069 - - - -
(Surplus)/deficit arising on revaluation of - - 0.699 0.699 - - (0.069) (0.069) financial assets in Other Comprehensive Income and Expenditure Net (gain)/loss for the year 48.721 (5.304) 0.096 43.513 46.557 (6.761) (0.366) 39.430
Valuation of Financial Instruments carried at Fair Value
The valuation of financial instruments is classified into three levels, according to the quality and reliability of information used to determine fair values.
Level 1 - where fair values are derived from unadjusted quoted prices in active markets for identical assets or liabilities (quoted equities, quoted fixed securities, quoted index linked securities and unit trusts). Listed investments shown at bid prices. The bid value of the investment is based on the market quotation of the relevant stock exchange.
Level 2 - where market prices are not available, for example, where an instrument is traded in a market that is not considered to be active or where the valuation techniques are used to determine fair value and where these techniques use inputs that are based significantly on observable market data.
Level 3 - where at least one input that could have a significant effect on the instrument's valuation is not based on observable market data. Such instruments would include unquoted equity investments and hedge funds, neither of which the Council currently invests in.
The table below provides an analysis of the financial assets and liabilities grouped into the level at which fair value is observable.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Financial Instruments at Fair Value
The fair value hierarchy for financial assets and liabilities that are not measured at fair value in the balance sheet are as follows:
Input Level in Fair Value Valuation As at As at hierarchy Technique 31/03/2018 31/03/2017 £m £m
Investments Loans and Receivables Level 2 Prevailing benchmark rates 332.189 375.495
Borrowings PWLB Level 2 New borrowing discount rates (332.567) (333.455) Lenders Option Borrowers Option (LOBO) Level 2 New market loan discount rates (620.817) (645.716) Zero to Par Loan Level 2 New market loan discount rates (49.492) (49.413) Short Term Level 2 New market loan discount rates (91.486) (71.304)
Long Term Liabilities PFI Long Term Liability Level 3 PWLB annuity discount rate (272.306) (298.134)
The Zero to Par Loan is a particular form of treasury instrument where the interest is charged to the CIES annually but is not physically paid to the lender until the loan reaches maturity.
There were no transfers between input levels during the year and there has been no change in the valuation techniques used during the year. The rates for each category will vary due to the nature, age and length of the investments and borrowings.
Note Debtors 16
Current Long Term 31 March 31 March 31 March 31 March 2018 2017 2018 2017 £m £m £m £m Central government bodies 19.035 27.031 - - Other local authorities 0.886 0.198 - - NHS bodies 2.327 1.273 - - Other entities and individuals 76.364 62.991 25.750 22.978
Total 98.612 91.493 25.750 22.978
Note Cash and Cash Equivalents 17 31 March 31 March 2018 2017 £m £m
Cash/(Overdraft) held by the Council (4.665) (3.880) Bank current accounts (5.983) (11.999) Short-term deposits 79.819 79.482
Total Cash and Cash Equivalents 69.171 63.603
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Creditors 18 Current Long Term 31 March 31 March 31 March 31 March 2018 2017 2018 2017 £m £m £m £m Central government bodies (9.521) (25.188) - - Other local authorities (0.946) (2.140) - - NHS bodies (3.865) (4.255) - - Public corporations and trading funds - (0.037) - - Other entities and individuals (116.563) (116.698) (2.445) (2.056)
Total (130.895) (148.318) (2.445) (2.056)
Note Provisions 19 Provisions are required for any financial liabilities or losses which are likely or certain to be incurred but where the amounts or the dates on which they will arise are uncertain. All provisions are charged to the appropriate service and can be used only for the purpose for which they were established, except where a review to determine the appropriateness of the level of the charge and the balance of the provision requires a change.
National Non Closed Domestic Other Long Total Long Total Short Landfill Rates Term Term Term Total Sites Appeals Provisions Provisions Provisions Provisions £m £m £m £m £m £m
Balance as at 1 April 2017 (9.163) (10.089) (3.052) (22.304) (7.177) (29.481) Additional provisions made in year - (13.721) (1.691) (15.412) (1.433) (16.845) Transfer between short and long term - - (0.565) (0.565) 0.565 - Amounts used in year 0.148 - 2.084 2.232 1.157 3.389 Unused amounts reversed in year - - - - 0.335 0.335
Balance as at 31 March 2018 (9.015) (23.810) (3.224) (36.049) (6.553) (42.602)
Closed Landfill Sites
The Closed Landfill Sites provision reflects the costs of decommissioning, restoration and after care costs of sites owned by the Council, the full costs of which are uncertain as at the balance sheet date.
National Non Domestic Rates Appeals (NNDR)
The provision is made in the Collection Fund for the estimated effect of outstanding appeals against rateable values and historical success rates in Cornwall. The increase in the provision is in relation to the Council now retaining 100% of NNDR as opposed to 50% in the prior year.
None of the other provisions were individually significant at 31 March 2018.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Contingent Liabilities 20
A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council.
The Council is currently in negotiations with the contractor undertaking works at St Mary’s on the Isles of Scilly for additional costs as a result of an oil spillage. The Council has made an initial offer and it is anticipated that the negotiations will be concluded in 2018/19
Note Unusable Reserves 21
Restated* 31 March 31 March 2018 2017 £m £m
Revaluation Reserve* (430.556) (434.113) Available for Sale Financial Instruments Reserve (1.705) (2.403) Capital Adjustment Account* (925.521) (1,018.807) Financial Instruments Adjustment Account 19.445 20.199 Deferred Capital Receipts Reserve (1.179) (1.119) Pensions Reserve 1,143.088 1,141.079 Collection Fund Adjustment Account (17.189) (15.097) Accumulated Absences Account 3.168 4.617
Total Unusable Reserves (210.449) (305.644)
* Restated to remove school asset impairment.
Revaluation Reserve The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its property, plant and equipment and intangible assets. The balance is reduced when assets with accumulated gains are: Revalued downwards or impaired and the gains are lost Used in the provision of services and the gains are consumed through depreciation Disposed of and the gains are realised The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the CAA.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Restated* Revaluation Reserve 2017/18 2016/17 £m £m £m
Balance at 1 April (434.113) (423.721) Opening balance adjustment in year (3.701) - Upward revaluation of assets (42.207) (75.174) Downward revaluation of assets and impairment losses not 20.899 44.221 charged to the (Surplus) or deficit on the provision of services* (Surplus) or deficit on revaluation of non-current assets not (21.308) (30.953) posted to the (Surplus) or deficit on the provision of services Difference between fair value depreciation and historical cost 6.302 5.821 depreciation Accumulated gains on assets sold or scrapped 22.264 14.740 Amount written off to the Capital Adjustment Account 28.566 20.561
Balance at 31 March (430.556) (434.113)
* Restated to remove school asset impairment.
Capital Adjustment Account
The CAA 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 provision. The account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the CIES (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement. The Account contains accumulated gains and losses on investment properties and gains recognised on donated assets that have yet to be consumed by the Council. The Account 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 9 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Restated Capital Adjustment Account 2017/18 2016/17 £m £m £m
Balance at 1 April (1,018.807) (969.407) Opening balance adjustment in year 5.201 - Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement: Charges for depreciation and impairment of non-current 71.838 72.358 assets* Revaluation losses on Property, Plant and Equipment 45.639 (38.347) Amortisation of intangible assets 1.931 2.667 Revenue expenditure funded from capital under statute 59.533 59.686 Amounts of non-current assets written off on disposal or sale 116.254 66.985 as part of the (gain)/loss on disposal to the Comprehensive Income and Expenditure Statement
300.396 163.349
Adjusting amounts written out of the Revaluation Reserve (28.566) (20.561)
Net written out amount of the cost of non-current assets 271.830 142.788 consumed in the year
Capital financing applied in the year: Use of the Capital Receipts Reserve to finance new capital (15.498) (10.063) expenditure Use of the Major Repairs Reserve to finance new capital (11.348) (10.835) expenditure^ Capital grants and contributions credited to the (70.765) (112.251) Comprehensive Income and Expenditure Statement that have been applied to capital financing Application of grants to capital financing from the Capital (29.627) (0.080) Grants Unapplied Account Statutory provision for the financing of capital investment (24.356) (23.348) charged against the General Fund and HRA balances Capital expenditure charged against the General Fund (28.590) (12.065) and HRA balances^ Transfer of function - Wave Hub asset~ - (30.000) Other adjustments (0.002) -
(180.186) (198.642)
Repayments of Long term debtors and loan agreements 1.642 6.454
Balance at 31 March (925.521) (1,018.807)
* Restated to remove school asset impairment. ^ Restated comparator to show funding from MRR on correct line, moved from the charged against General Fund and HRA balances heading ~Restated to reclassify the Wave Hub asset from a donated asset to a transfer of function
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Financial Instruments Adjustment Account
The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. The Council uses the account to manage premiums paid on early redemption of loans. Premiums are debited to the CIES when they are incurred but reversed out of the General Fund balance to the account in the MIRS. Over time, the expense is posted back to the General Fund in accordance with statutory arrangements for spreading the burden on council tax. Discounts received have the opposite entries. In the Council’s case, this period is the unexpired term that was outstanding on the loans when they were redeemed. As a result the balance on the account as at 31 March 2018 will be charged to the General Fund over the next 42 years.
Financial Instruments Adjustment Account 2017/18 2016/17 £m £m £m
Balance at 1 April 20.199 19.408 Comprehensive Income and Expenditure Statement Proportion of premiums incurred in previous financial years (0.754) - to be charged against the General Fund balance in accordance with statutory requirements Amount by which finance costs charged to the Comprehensive - 0.791 Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements
Balance at 31 March 19.445 20.199
Pensions Reserve
The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post-employment benefits in the CIES as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to pension funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangement will ensure that funding will have been set aside by the time the benefits come to be paid.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Pensions Reserve 2017/18 2016/17 £m £m
Balance at 1 April 1,141.079 941.555 Opening balance adjustment in year (0.031) - Remeasurements of the net defined benefit liability/(asset) (48.651) 170.280 Reversal of items relating to retirement benefits debited or credited to 100.809 78.544 the (Surplus) or deficit on the provision of services in the Comprehensive Income and Expenditure Statement Employer's pensions contributions and direct payments to (50.118) (49.300) pensioners payable in the year
Balance at 31 March 1,143.088 1,141.079
Note Cash Flow Statement – Operating Activities 22 The cash flows for operating activities include the following items:
2017/18 2016/17 £m £m Interest received (6.613) (6.802) Interest paid 47.037 44.891 Dividends received (0.111) (1.456)
Net cash flows from operating activities 40.313 36.633
The surplus or deficit on the provision of services has been adjusted for the following non- cash movements:
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Restated* 2017/18 2016/17 £m £m
Depreciation and impairment* (71.838) (72.358) Downward valuations (45.639) 38.347 Amortisation (1.931) (2.667) Adjustments for effective interest rates (1.595) (1.694) Increase/(decrease) in interest creditors 0.009 (0.041) Increase/(decrease) in creditors 16.836 (5.492) Increase/(decrease) in interest and dividend debtors 1.206 (0.308) Increase/(decrease) in debtors 6.617 (0.974) Increase/(decrease) in inventories 6.828 0.324 Movement in pension liability (50.691) 29.244 Unwinding of discount on Deferred Receipts 0.069 0.092 Contributions to/(from) provisions (13.121) (0.036) Carrying amount of non-current assets and non-current assets (116.254) (66.985) held for sale, sold or de-recognised Other non-cash items charged to the net surplus or deficit on (0.049) (52.404) the provision of services Other opening balance movement for assets reclassified from property, (3.772) - plant and equipment to inventories in year
Adjustment to net cash flows from operating activities (273.325) (134.952)
* Restated to remove school asset impairment.
The surplus or deficit on the provision of services has been adjusted for the following items that are investing and financing activities:
2017/18 2016/17 £m £m
Capital grants credited to (surplus)/deficit on the provision 77.422 151.380 of services Proceeds from the sale of short-term (not considered to be cash - (0.020) equivalents) and long-term investments (includes investments in associates, joint ventures and subsidiaries) Proceeds from the sale of property, plant and equipment, 14.966 14.552 investment property and intangible assets
Adjustment to net cash flows from operating activities 92.388 165.912
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Cash Flow Statement – Investing Activities 23 Restated* 2017/18 2016/17 £m £m
Purchase of property, plant and equipment, investment property and 119.646 76.734 intangible assets* Purchase of short-term and long-term investments 204.513 153.500 Other payments for investing activities 18.480 35.967 Proceeds from the sale of property, plant and equipment, investment (14.975) (14.563) property and intangible assets Proceeds from short-term and long-term investments (250.681) (115.500) Capital grants received (81.898) (125.398) Loan repayments received (3.871) (3.760)
Net cash flows from investing activities (8.786) 6.980
*Restated to remove the Wave Hub donated asset as this has been reclassified as a transfer of function
Note Cash Flow Statement – Financing Activities 24
2017/18 2016/17 £m £m
Cash receipts of short and long-term borrowing (515.260) (445.265) Other (receipts)/payments from financing activities 14.332 (5.314) Cash payments for the reduction of the outstanding liabilities relating 5.789 5.366 to finance leases and on-balance sheet PFI contracts Repayments of short and long-term borrowing 501.701 423.760
Net cash flows from financing activities 6.562 (21.453)
Note Pooled Budgets 25 The Council has entered into three pooled budget arrangements with the Kernow Clinical Commissioning Group (KCCG), as listed below: Integrating Community Equipment Services, where the objective is to provide a pool for the effective procurement of health and social care equipment in Cornwall. Carers’ Pooled Budget, a joint committee to support carers in Cornwall. This budget supports the joint commissioning of support and services for carers in line with the joint Strategic Needs Assessment and Cornwall Carers Strategy. Further details of the above two have not been disclosed as they are immaterial. Mental Health Pooled Fund, where the objective is to provide a fully integrated service to mental health clients. Details are set out in the following table:
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Mental Health Pooled Fund 2017/18 2016/17 £m £m
Funding provided to the pooled budget: - - Cornwall Council - Adult Care and Support (6.875) (7.158) Kernow Clinical Commissioning Group (37.537) (37.573) (44.412) (44.731)
Expenditure met from the pooled budget: Cornwall Council - Adult Care and Support 6.864 7.158 Kernow Clinical Commissioning Group 37.527 37.690 44.391 44.848
Net (Surplus) or deficit arising on the pooled budget during the year (0.021) 0.117
The Council has entered into a Better Care Fund (BCF) Agreement with the KCCG from 1 April 2016. This is an agreement under section 75 of the NHS Act 2006. The BCF is an overarching agreement consisting of a number of separate pooled and aligned budgets – this note deals with the pooled budgets only. Although the section 75 agreement is effective for 2017/18, the BCF includes funds passed to the Council under section 256 of the NHS Act 2006 by NHS England. In addition to the Mental Health Pooled Fund (above) for 2017/18 these funds were allocated as budgeted contributions as follows:
• Contribution of £1.674m to the Integrating Community Equipment Services pooled budget with KCCG totalling £5.508m • Contribution of £0.637m to Carers’ Pooled Budget with KCCG totalling £2.062m
This expenditure is included within the net cost of services in the CIES. The Council was the host of two of the three pooled budgets for 2017/18 with the KCCG hosting the Mental Health Pooled Fund.
Note Members’ Allowances 26 The Council paid the following amounts to members of the Council during the year.
2017/18 2016/17 £m £m Remuneration paid during the year: Allowances 2.001 1.820 Expenses 0.002 0.008 Travel 0.108 0.131
Total 2.111 1.959
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Officers’ Remuneration 27
The remuneration paid to the Council’s senior employees is detailed below.
Following the Chief Executive appointment in 2015/16 the Council moved to a new Directorate basis, as follows:
Children, Families and Adults Customer and Support Services Economic Growth and Development Neighbourhoods.
There was also the introduction of Service Directors, largely replacing the Head of Service posts.
Salary, Compensation Fees and Expense for loss of Pension Allowances Bonuses Allowances office Contribution Total £ £ £ £ £ £ Chief Executive - Kate Kennally 2017/18 173,417 - - - 30,348 203,765 2016/17 171,700 - 9,298 - 30,048 211,046 Strategic Director for Children, Families 2017/18 142,814 - 2,621 - 24,992 170,427 and Adults 1 2016/17 141,400 - 1,744 - 24,745 167,889 Chief Operating Officer 2017/18 133,276 - - - 23,323 156,599 and Section 151 Officer 2 2016/17 131,300 - 983 - 22,977 155,260
Service Director for Resources 2017/18 7,481 - - - 1,309 8,790 and Section 151 Officer 3 2016/17 ------Acting Service Director for Wellbeing and 2017/18 101,402 - 1,702 - 14,582 117,686 Public Health 2016/17 101,402 - 2,732 - 14,500 118,634
Strategic Director for Neighbourhoods 4 2017/18 142,814 - 1,144 - 24,992 168,950 2016/17 139,421 - 1,531 - 24,745 165,697 Strategic Director for Economic Growth 2017/18 142,021 - 6,034 - 20,688 168,743 and Development 5 2016/17 72,316 - 575 - - 72,891 Service Director for Assurance 2017/18 162,953 - 4,024 - 1,530 168,507 and Monitoring Officer 6 2016/17 103,861 - 341 - 18,175 122,377 Service Director (Resilient Cornwall) 2017/18 104,900 - - - - 104,900 and Chief Fire Officer 7 2016/17 90,545 - - - - 90,545
Notes 1 Strategic Director for Children, Families and Adults - Post created 31/10/2016. Post filled by former Corporate Director for Education Health and Social Care when this post was deleted 31/10/2016 (remuneration for this post included in 2016/17 figures). 2 Chief Operating Officer and Section 151 Officer - Post created 31/10/2016. Post filled by former Interim Corporate Director for Communities and Organisational Development (COD) when this post was deleted 31/10/2016 (remuneration for this post included in 2016/17 figures). Seconded to the role of Group Managing Director of Corserv Ltd from 01/03/2018 on an interim basis. Remuneration is shown in full but recharged to Corserv Ltd over duration of secondment. Other senior officers collectively assumed Chief Operating Officer and Section 151 Officer duties during this period (see below for details). 3 Service Director for Resources and Section 151 Officer - Appointed 01/03/2018 as Section 151 Officer on an interim basis to provide cover for Chief Operating Officer and Section 151 Officer role during their secondment to Corserv Ltd. 4 Strategic Director for Neighbourhoods - Post created 31/10/2016. Post filled by former Interim Corporate Director for EEE when this post was deleted 31/10/2016 (remuneration for this post included in 2016/17 figures). From 01/03/2018 the post holder assumed elements of Chief Operating Officer and Section 151 Officer role to provide cover during their secondment to Corserv Ltd. 5 Strategic Director for Economic Growth and Development - Post created 01/11/2016. Post filled by an agency worker from 01/11/16 until 31/03/17. Remuneration during this period represents fees paid to the agency for services of the agency worker. Permanent appointment made April 2017. 6 Service Director (Assurance) and Monitoring Officer - Post created 31/10/2016. Post filled by former Head of Governance and Information and Monitoring Officer when this post was deleted 31/10/2016 (remuneration for this post included in 2016/17 figures). Post vacated 30/04/2017 and covered on an interim basis by agency staff between 01/05/2017 and 31/03/2018. Remuneration during this period represent fees paid to the agency for the services of the agency worker. 7 Service Director (Resilient Cornwall) and Chief Fire Officer - Post created 31/10/2016. Post filled by former Chief Fire Officer and Head of Community Safety when this post was deleted 31/10/2016 (remuneration for this post included in 2016/17 figures).
Page 95
Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The Council’s other employees receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) were paid the following amounts:
The table shows the total split between: School staff – includes teachers and other school-based staff Other staff – other Council employees
Remuneration Bands (£): Number of Employees 2017/18 2016/17 School Other School Other From To Staff Staff Total Staff Staff Total
50,000 54,999 24 63 87 47 58 105 55,000 59,999 23 27 50 41 36 77 60,000 64,999 10 30 40 14 37 51 65,000 69,999 5 23 28 10 13 23 70,000 74,999 2 4 6 2 7 9 75,000 79,999 - 1 1 3 3 6 80,000 84,999 1 9 10 3 5 8 85,000 89,999 2 4 6 2 4 6 90,000 94,999 - 7 7 1 7 8 95,000 99,999 - 2 2 1 - 1 100,000 104,999 1 3 4 - 4 4 105,000 109,999 ------110,000 114,999 - 1 1 1 1 2 115,000 119,999 - - - - 1 1 120,000 124,999 - - - 1 - 1 125,000 129,999 - 1 1 - - - 130,000 134,999 - 1 1 - 1 1 135,000 139,999 - - - - 1 1 140,000 144,999 - 3 3 - 1 1 170,000 174,999 - 1 1 - 1 1
68 180 248 126 180 306
Note that, consistent with the approach taken in prior years, this table includes senior employees also included in the previous table. It does not include employees of Joint Committees.
The number of exit packages with total cost per band and total cost of the compulsory and other redundancies are set out in the following table:
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
(a) (b) (c) (d) (e) Exit package Number of Number of other Total number of Total cost of cost band compulsory departures agreed exit packages by exit packages (including special redundancies cost band in each band payments) (b) + (c) 2017/18 2016/17 2017/18 2016/17 2017/18 2016/17 2017/18 2016/17
£0 - £20,000 35 34 51 50 86 84 0.728 0.609
£20,001 - £40,000 9 8 22 18 31 26 0.862 0.758
£40,001 - £60,000 - 3 5 2 5 5 0.239 0.261
£60,001 - £80,000 2 1 1 1 3 2 0.206 0.127
£80,001 - £100,000 1 1 1 - 2 1 0.176 0.089
£100,001 - £150,000 - - 4 1 4 1 0.483 0.105
£150,001 - £200,000 - - 2 1 2 1 0.315 0.182
Total cost included in bandings and CIES 47 47 86 73 133 120 3.009 2.131
Note External Audit Costs 28 The Council has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections and to non-audit services provided by the Council’s external auditors.
2017/18 2016/17 £m £m Fees payable with regard to external audit services carried out by 0.227 0.227 the appointed auditor for the year Fees payable for the certification of grant claims and returns 0.008 0.008 for the year Fees in respect of other services provided during the year 0.007 0.060 Rebate received during the year for prior year audits from PSAA^ (0.034) -
Total 0.208 0.295
^ PSAA - Public Sector Audit Appointments
These figures do not include audit costs for the Joint Committees.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Dedicated Schools Grant 29 The Council’s expenditure on schools is funded primarily by grant monies provided by the Department for Education, through the Dedicated Schools Grant (DSG). DSG is ring fenced and can only be applied to meet expenditure properly included in the Schools Budget. The Schools Budget includes elements for a range of educational services provided on an authority-wide basis and for the Individual School’s Budget, which is divided into a budget share for each maintained school.
Details of the deployment of DSG receivable for 2017/18 are as follows:-
2017/18 Individual Schools Central Budgets Expenditure (ISB) Total £m £m £m
Final DSG for 2017/18 before academy recoupment (71.165) (291.190) (362.355) Academy figure recouped for 2017/18 11.692 205.797 217.489
Total DSG after academy recoupment 2017/18 (59.473) (85.393) (144.866)
Plus: Brought forward from 2016/17 (5.510) (0.139) (5.649)
Agreed initial budgeted distribution in 2017/18 (64.983) (85.532) (150.515)
In-year adjustments 0.182 - 0.182
Final budget distribution for 2017/18 (64.801) (85.532) (150.333)
Less: Actual central expenditure 61.195 - 61.195 Less Actual ISB deployed to schools - 83.938 83.938
Carry- forward to 2018/19 (3.606) (1.594) (5.200)
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Grant Income 30
The Council credited the following grants, contributions and donations to the CIES in 2017/18:
2017/18 2016/17 £m £m Credited to Taxation and Non-specific Grant Income Revenue Support Grant - (65.297) Education Services Grant (0.616) (3.238) Private Finance Initiative (PFI) Grant (16.429) (16.429) Housing Benefit and Council Tax Administration Grant (1.966) (2.153) Learning Disability and Health Reform Grant (0.387) (0.382) New Homes Bonus Scheme Grant (17.313) (19.807) Small Business Rate Relief Grant (24.483) (7.050) Social Fund Grant - (3.919) Business Rates Cap Compensation (2.503) (1.449) Bus Service Operators Grant* (0.773) (0.773) Improved Better Care Fund (0.608) - Adult Social Care Support Grant (2.806) - Other Non Specific Grants* (3.054) (2.471)
Total (70.938) (122.968)
Credited to Services Education and Children's Services Dedicated Schools Grant (145.397) (172.862) Sixth Forms Funding (2.731) (4.741) Skills Funding Agency Grant (3.133) (3.518) Pupil Premium Grant (6.275) (8.386) Troubled Families Grant (1.639) (1.909) Special Education Needs (SEN) Grant (1.853) (2.230) School PE and Sport Grant (1.101) (1.038) Big Lottery Fund HeadStart Grant (1.309) (0.627) Better Care Fund (12.068) - Economic Growth and Development Ministry of Housing, Communities and Local Government*^ (2.834) (0.021) Department for Transport Other Non Specific Grants (0.438) (1.062) Local Authority HRA Rent Rebates Granted to HRA Tenants: subsidy (21.084) (22.120) Other Housing Services Mandatory Rent Allowances: subsidy (149.959) (155.830) Mandatory Rent Rebates outside HRA: subsidy (1.274) (1.439) Welllbeing and Public Health Public Health Grant (26.133) (26.839)
Other Revenue Grants* (15.807) (15.501) REFCUS Grant Funding (55.546) (53.594)
Total (448.581) (471.717)
*Last year comparator part restated to reflect the current grant headings ^renamed from Department for Communities and Local Government
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The Council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the giver if these conditions are not met.
The balances at the year-end are as follows:
Long-term Liabilities
2017/18 2016/17 31 March 31 March £m £m
Grant Receipts in Advance - Capital Grants Ministry of Housing, Communities and Local Government* (3.493) (1.748) Department for Education (0.084) (0.570) Homes and Communities Agency - (0.175) Department of Health (1.500) (0.448) Department for Transport (5.819) (1.854) Environment Agency (0.077) (0.427) Department for Business, Energy and Industrial Strategy (2.974) - South Western Ambulance Service NHSFT (0.013) (0.013) Other (27.418) (33.658)
Total (41.378) (38.893)
*renamed from Department for Communities and Local Government
Note Related Parties 31 The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council.
Central Government Central government has effective control over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants, and prescribes the terms of many of the transactions that the Council has with other parties (e.g. council tax bills, housing benefits). Grants received from government departments are set out in the subjective analysis in Note 8 Expenditure and Funding Analysed by Nature. Grant receipts outstanding at 31 March 2018 are shown in Note 30.
Members Members of the Council have direct control over the Council’s financial and operating policies.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The total of the allowances paid to Members in 2017/18 is shown in Note 26. At formal committee meetings, Members are expected to make formal declarations of interest if there is an interest that could have an effect on any of the agenda items being discussed. Details of each Member’s declarations of interest are recorded by Committee Services and are open to public inspection on the Council’s website. A review of the information contained in the declarations of interest for each of the 123 councillors for 2017/18 was carried out. Additionally, Members were asked to complete a short questionnaire in order to identify any positions held (either by them or members of their close family) with outside bodies on behalf of the Council or material transactions (over a de minimis level of £10,000) with the Council. Further cross-checks were made against the Council’s register of significant partnerships, procurement records and commercially available company search information. The information review and returned questionnaires highlighted a small number of relevant transactions with organisations to which Members were connected: Details of transactions with subsidiary companies, associated and jointly controlled entities are provided in Notes G1 to G10 to the Council’s Group accounts. The Council supports a number of charitable and other not-for-profit organisations to which Members are connected in their capacity as trustees or directors. Relevant declarations were made in respect of the majority of these organisations.
Officers Senior officers could also potentially be in a position to influence the policies of the Council (though this influence is limited by the Council’s budgetary control framework and scheme of delegation). Officers were also asked to complete the same short questionnaire as Members which highlighted a small number of relevant transactions detailed below: As at 1st April 2017 one senior officer had been appointed as a director of a company that is a subsidiary of the Council. On the 1st March 2018 the same senior officer was appointed as director of four further companies that are subsidiaries of the Council and also seconded to Corserv Ltd as Interim Group Managing Director. Another senior officer was also appointed as a director of a company that is a subsidiary of the Council during 2017/18. Details of transactions with subsidiary companies, associated and jointly controlled entities are provided in Notes G1 to G10 to the Council’s Group Accounts. The Council has entered into an arrangement with the Council of the Isles of Scilly for the provision of a number of support services. In addition the Council of the Isles of Scilly’s monitoring officer and S151 officer responsibilities were undertaken by Officers of Cornwall Council. Apart from these relationships, no related party transactions were recorded with any key management personnel.
Other Public Bodies (subject to common control by central government) Pooled Budget Arrangements – the Council has three pooled budget arrangements with the KCCG for the provision of mental health services, integrating community equipment services, and to commission support and service for carers. Transactions and balances outstanding are detailed in Note 25.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Joint Working Arrangements – the Council has a number of joint working arrangements with other public bodies. Those with a total turnover of £1m or more are listed in the table below.
2017/18 2016/17
Gross Gross Council Gross Gross Council Income Expenditure Contribution* Income Expenditure Contribution* £m £m £m £m £m £m
Learning Disability Complex Cases Pooled Fund (2.035) 4.455 2.420 (2.080) 4.003 1.923 Learning Disability Supported Living Fund (11.216) 17.225 6.009 (11.533) 17.621 6.088 Devon and Cornwall Safety Camera Partnership (1.612) 1.667 - (1.708) 1.350 - * The Cornwall Council Contribution is the only element charged to the CIES and included within the net cost of services. Pension Fund – Cornwall Council is the administering body for the Cornwall Pension Fund. During the financial year we charged the fund £1.140m for expenses incurred in providing these services (£1.114m in 2016/17). This is comprised of £0.904m administrative costs and £0.236m oversight and governance costs (£0.862m administrative costs and £0.252m oversight and governance costs in 2016/17).
Entities Controlled or Significantly Influenced by the Council Companies and Joint Ventures – the Council has substantial interests in subsidiary companies, associated and jointly controlled entities and is, therefore, required to produce Group Accounts. All Group entities are related parties and relevant details are disclosed in Notes G1 to G10 to the Council’s Group Accounts. Other Organisations – the Council has Members, officers or members of their close family that have been appointed to the following organisations which have received more than £0.100m in payments, including grants, from the Council during the year:
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
2017/18 2016/17 Council Council Contribution Contribution £m £m
Royal Cornwall Hospital Trust 5.146 3.269 Tregolls School AN Academy 1.112 - Looe Harbour Comissioners 1.049 - Falmouth University 0.953 - Cornwall Community Land Trust 0.914 - Cornwall Community Development Ltd 0.466 0.636 Bodmin College 0.239 0.225 Hall for Cornwall Trust 0.218 - In Caring Hands Limited 0.188 0.111 Council of the Isles of Scilly 0.187 - Peninsula Learning Academy Trust 0.136 - St Austell BID 0.108 - Newquay Education Trust 0.102 0.132 Heartlands 0.100 0.208 Coastline Housing Ltd* - 2.444 Tempus Leisure Ltd* - 1.299 Age UK Cornwall & isles of Scilly* - 0.461 Healthwatch Cornwall* - 0.316 BID Camborne* - 0.134
Total 10.918 9.235
* These comparators relate to members that have left the Council.
Note Capital Expenditure and Capital Financing 32
The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases and PFI/PPP contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. The CFR is analysed in the second part of this note.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Restated* 2017/18 2016/17 £m £m
Opening capital financing requirement 950.108 797.581
Capital investment Property, Plant and Equipment* 131.660 140.026 Intangible Assets 0.374 1.241 Assets Held For Sale - 0.128 Advances to Long-Term Debtors 9.407 2.411 Long Term Investments Share Capital - 0.500 De-minimis Capital Expenditure Written Out to Revenue - 1.298 Revenue Expenditure Funded from Capital under Statute 59.533 59.686
Sources of finance Capital receipts (15.498) (10.063) Government grants and contributions (100.392) (113.205) Sums set aside from revenue: Direct revenue contributions/specific reserves (39.938) (23.603) Donated Asset Account* - (30.158) MRP/loans fund principal (24.356) (23.348) Disposal of assets previously acquired under finance leases (0.015) (0.016) Long term/short term debtor (0.328) 3.902 PFI Donated Asset reversal - operational in 16/17 - 143.449 Other adjustments (3.772) 0.279
Closing capital financing requirement 966.783 950.108
Explanation of movements in year Increase in underlying need to borrow (unsupported by government 46.726 29.639 financial assistance) Adjustment for assets previously funded by borrowing now transferred (3.772) - from property, plant and equipment to inventories Assets acquired under finance leases - 0.035 PFI Donated Asset moved to PFI Liability - operational in 16/17 - 143.449 Disposal of assets previously acquired under finance leases (0.015) (0.016) Other adjustments - (0.001) Amount set aside for HRA Attributable Debt (1.580) (1.133) Long term debtor adjustments (transfer to/(from) short term debtors) (0.328) 3.902 Less MRP payments (see above) (24.356) (23.348)
Increase/(decrease) in capital financing requirement 16.675 152.527
*Restated to remove the Wave Hub donated asset as this has been reclassified as a transfer of function
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Leases 33 The Council as Lessee
The Council has acquired a number of assets for schools, waste vehicles and property under finance leases and a number of vehicles under operating leases. The notes for these balances have not been included as they are not material.
The Council as Lessor
Finance Leases
The Council leases out property under finance leases. The notes for these balances have not been included as they are not material.
Operating Leases
The Council leases out property and equipment under operating leases. The future minimum lease payments receivable under non-cancellable leases in future years are:
31 March 31 March 2018 2017 £m £m Not later than one year 4.234 3.128 Later than one year and not later than five years 11.497 9.458 Later than five years 37.476 29.071
53.207 41.657
Note Private Finance Initiatives and Similar Contracts 34
Private Finance Initiative (PFI) is an outsourcing method between a public sector body, such as Cornwall Council, and a private sector organisation to deliver public services using non- current assets. It transfers responsibility, but not accountability, for the delivery of public services to a private company or companies. The private sector company operates the non- current asset and provides finance. The details of each PFI scheme are unique, but it is essentially a way of funding major capital investments. Contracts typically last for up to 30 years, during which time the non-current asset is leased by the public sector body. For each PFI scheme there is a detailed specification of services to be provided to the public; the Council is able to specify exactly who receives the services provided and is able to restrict the ability of the operator to offer services to particular categories of users if it so wishes. The contracts specify the minimum standards that have to be adhered to with deductions from the fee payable if facilities are unavailable of if the performance drops below minimum standards. They will also specify the minimum acceptable condition to which the buildings and any plant and equipment must be maintained. The contractor is also obliged to hand over the non-current assets at the end of the contract in a specified condition at nil cost.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Cornwall Council currently has four PFI schemes as detailed below:
Fire Stations PFI Scheme 2017/18 was year 17 of a 27 year PFI contract for the construction of ten new fire stations, the refurbishment of twenty one existing fire stations and the operation and maintenance of all of these stations until the end of the PFI contract in 2028.
PFI Contract Grouped Education 2017/18 was year 14 of a 28 year contract for the repairs, maintenance and facilities management services in the schools constructed and refurbished under the contract. The contractor has constructed two new schools and upgraded/refurbished a further fifteen existing schools to the standard of the new buildings and operate and maintain the infrastructure for a period of twenty five years.
Leisure PFI Scheme 2017/18 was year 14 of a 32 year PFI contract for the construction and operation of a leisure centre in Penzance. The contractor took on the obligation to construct the leisure centre and to maintain it in a minimum acceptable condition and to procure and maintain the plant and equipment needed to operate the leisure centre.
Waste PFI Scheme 2017/18 was year 12 of a 34 year PFI contract for the construction/upgrading and subsequent operation of a number of waste disposal facilities within Cornwall. The PFI scheme was split into two distinct phases: Phase 1 - the upgrading and operation of existing and new collection and recycling facilities, along with general refuse collection. Phase 1 became operational during financial year 2006/2007. Phase 2 - the design, build and subsequent operation of the Cornwall Energy Recovery Centre (CERC). Phase 2 became operational during financial year 2016/17.
Property, plant and equipment The assets used to provide services for the PFI Schemes are recognised on the Council’s Balance Sheet. Movements in their value over the year are detailed in the analysis of the movement on the property, plant and equipment balance in Note 14.
Payments The Council makes an agreed payment each year which is increased each year by inflation and can be reduced if the contractor fails to meet availability and performance standards in any year but which is otherwise fixed. Payments remaining to be made under each PFI contract at 31 March 2018 (excluding any estimation of inflation and availability/performance deductions) are as follows:
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Fire PFI Scheme Reimbursement Payment of Capital Contingent for Services Expenditure Interest Rent Total £m £m £m £m £m Payable in 2018/19 0.877 0.305 0.607 0.124 1.913 Payable within two to five years 3.747 1.601 2.039 0.572 7.959 Payable within six to ten years 5.056 3.378 1.262 1.002 10.698 - - - Total 9.680 5.284 3.908 1.698 20.570
Education PFI Scheme Reimbursement Payment of Capital Contingent for Services Expenditure Interest Rent Total £m £m £m £m £m Payable in 2018/19 4.409 1.197 3.037 0.233 8.876 Payable within two to five years 18.847 6.025 10.865 1.056 36.793 Payable within six to ten years 25.483 11.382 9.606 1.863 48.334 Payable within eleven to fifteen years 21.013 12.609 3.226 1.905 38.753
Total 69.752 31.213 26.734 5.057 132.756
Penzance Leisure Centre PFI Scheme Reimbursement Payment of Capital Contingent for Services Expenditure Interest Rent Total £m £m £m £m £m Payable in 2018/19 0.477 0.077 0.620 0.053 1.227 Payable within two to five years 1.910 0.496 2.366 0.297 5.069 Payable within six to ten years 2.724 1.001 2.540 0.463 6.728 Payable within eleven to fifteen years 3.088 1.837 1.699 0.592 7.216 Payable within sixteen to twenty years 1.659 1.339 0.305 0.471 3.774
Total 9.858 4.750 7.530 1.876 24.014
Waste PFI Scheme Reimbursement Payment of Capital Contingent for Services Expenditure Interest Rent Total £m £m £m £m £m Payable in 2018/19 20.362 3.202 9.468 3.420 36.452 Payable within two to five years 89.807 13.740 34.290 16.247 154.084 Payable within six to ten years 139.776 15.863 33.858 23.253 212.750 Payable within eleven to fifteen years 157.609 29.230 20.071 30.668 237.578 Payable within sixteen to twenty years 185.093 13.808 4.783 14.387 218.071 Payable within twenty one to twenty five years 59.012 2.264 0.242 2.304 63.822 - Total 651.659 78.107 102.712 90.279 922.757
Although the payments made to the contractor are described as unitary payments they have been calculated to compensate the contractor for the fair value of the services they provide, the capital expenditure incurred and the interest payable whilst the capital expenditure remains to be reimbursed. The outstanding liability to effectively reimburse the contractor for capital expenditure incurred is as follows:
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Penzance Leisure Waste PFI Waste PFI Education Centre Scheme - Scheme - Fire PFI PFI PFI Contract Deferred 2017/18 Scheme Scheme Scheme Payment Income Total £m £m £m £m £m £m
Balance outstanding at start of year (5.537) (32.280) (4.915) (80.873) (33.947) (157.552) Payments during the year 0.253 1.067 0.165 2.766 - 4.251 Income released during the year - - - - 1.509 1.509
Balance outstanding at year-end (5.284) (31.213) (4.750) (78.107) (32.438) (151.792)
Note Pension Schemes Accounted for as Defined Contribution Schemes 35 Teachers employed by the Council are members of the Teachers’ Pension Scheme, administered by the DfE. The Scheme provides teachers with specified benefits upon their retirement, and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries.
The Scheme is technically a defined benefit scheme. However, the Scheme is unfunded and the DfE uses a notional fund as the basis for calculating the employers’ contribution rate paid by local authorities. The Council is not able to identify its share of underlying financial position and performance of the Scheme with sufficient reliability for accounting purposes. For the purposes of this Statement of Accounts, it is therefore accounted for on the same basis as a defined contribution scheme.
The Council is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the teachers’ scheme. These costs are accounted for on a defined benefit basis and detailed in Note 36.
Note Defined Benefit Pension Schemes 36 Participation in Pension Schemes As part of the terms and conditions of employment of its employees, the Council makes contributions towards the cost of post-employment benefits. Although these benefits will not actually be payable until employees retire, the Council has a commitment to make the payments that needs to be disclosed at the time that employees earn their future entitlement. The Council participates in two post-employment schemes: The Local Government Pension Scheme, administered locally by Cornwall Council. This is a funded defined benefit final salary scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets. Arrangements for the award of discretionary post-retirement benefits upon early retirement – this is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
built up to meet these pension liabilities and cash has to be generated to meet actual pension payments as they eventually fall due.
Teachers’ Pension Scheme This is a notionally-funded, defined benefit scheme that is managed by the Teachers Pension Agency. This means we pay contributions as if it was a funded scheme, when in fact it is not. As a consequence, it is not possible for us to identify our share of the underlying scheme assets and liabilities. This scheme is not funded, therefore there is no need for a full actuarial valuation. We made contributions at a rate of 16.48% in 2017/18 (16.48% 2016/17) totalling £7.346m for 2017/18 (£10.398m for 2016/17) and we are also responsible for costs relating to added years and associated inflation increases, totalling £1.681m in 2017/18 (£1.698m in 2016/17). We are responsible for a percentage of the statutory benefits previously funded by the DfE in cases of early retirement, which amounted to £1.197m in 2017/18 (£1.186m in 2016/17).
Uniformed Fire fighters Fire fighters have the option of joining one of the Fire Fighters’ Pension Schemes. The schemes provide defined benefits upon retirement and we contribute towards the costs by making contributions based on a percentage of members’ pensionable pay. In 2017/18, we paid £1.528m (£1.505m in 2016/17) towards fire fighters pensions in respect of fire fighters retirement benefits, representing 11.9% on the 2006 scheme and 21.7% on the 1992 scheme, 21.7% on the Modified Scheme and 14.3% on the 2015 Scheme (11.9%, 21.7%, 21.7% and 14.3% in 2016/17) of pensionable pay. There were no contributions remaining payable at the year-end across any of the schemes detailed above. The schemes are defined benefit schemes. Although the schemes are unfunded, (that is, there are no investment assets), fire fighters pensions use a notional fund as the basis for calculating the employers and employees contribution rates paid by fire authorities.
NHS Pension Scheme ICES Pooled Fund We have 5 employees who are covered by the provisions of the NHS Pension Scheme in the ICES Pooled Fund. The scheme is an unfunded, defined benefit scheme that covers NHS employers, General Practices and other bodies allowed under the direction of the Secretary of State, in England and Wales. As a consequence, it is not possible for us to identify our share of the underlying scheme assets and liabilities. We contributed at a rate of 14.3% in 2017/18 (14.3% in 2016/17) totalling £0.020m (£0.024m in 2016/17).
Public Health On 1 April 2013 public health staff were transferred from Primary Care Trusts (PCTs) to local authorities. Consequently we have 34.39 FTE employees (40.14 FTE’s 2016/17) who are covered by the provisions of the NHS Pension Scheme in Public Health. The scheme is an unfunded, defined benefit scheme that covers NHS employers, General Practices and other bodies allowed under the direction of the Secretary of State, in England and Wales. As a consequence, it is not possible for us to identify our share of the underlying scheme assets
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
and liabilities. We contributed at a rate of 14.38% in 2017/18 (14.3% in 2016/17) totalling £0.199m (£0.218m in 2016/17).
Cornwall Council Group For the purposes of the pension fund disclosure notes the following tables and narrative include the following entities, Cornwall Council, Cornwall Housing Limited, Cormac Solutions Limited, 50% Tamar Bridge Torpoint Ferry, and 50% Mount Edgcumbe. The pension liabilities as at 31 March 2018 relating to each entity are Cornwall Council £826.095m, Cornwall Housing Limited £11.335m, Cormac Solutions Limited £60.040m, 50% Tamar Bridge Torpoint Ferry £3.778m, 50% Mount Edgcumbe £0.940m.
So as to avoid confusion with Cornwall Council disclosures we have referred throughout the note to them as the Cornwall Council Group.
Cornwall Council has an agreement with Cornwall Housing Limited, Cormac Solutions Limited and the Pension Fund known as a pass through arrangement in relation to pension liabilities. This arrangement means that Cornwall Council, as the parent company, bear the risks in relation to these schemes. They are therefore included on Cornwall Council’s balance sheet.
Transactions Relating to Post-employment Benefits We recognise the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge we are required to make against council tax is based on the cash payable in the year, so the real cost of post-employment/retirement benefits is reversed out of the General Fund via the MIRS. The following transactions have been made in the CIES and the General Fund Balance via the MIRS during the year:
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Cornwall Council Group Firefighters Pension Scheme Pension Arrangements 31 March 31 March 31 March 31 March 2018 2017 2018 2017 £m £m £m £m Comprehensive Income and Expenditure Statement Cost of Services: Current Service Cost 62.686 40.018 5.800 4.700 Past Service Costs 11.890 1.014 - 5.800 (Gain)/loss from settlements (9.458) (6.030) - - Financing and Investment Income and Expenditure Net interest on the net defined benefit liability/(asset) 24.091 26.142 5.800 6.900
Total Post-employment Benefits charged to the Surplus or 89.209 61.144 11.600 17.400 Deficit on the Provision of Services
Other Post-employment Benefits Charged to the Comprehensive Income and Expenditure Statement Remeasurement of the net defined benefit liability comprising: Return on plan assets (excluding the amount included (17.408) (80.130) - - in the net interest expense) Actuarial (gains) and losses arising on changes in - (13.340) (2.400) 1.200 demographic assumptions Actuarial (gains) and losses arising on changes in (41.847) 291.500 (4.100) 40.800 financial assumptions Other experience 0.204 (48.150) 16.900 (21.600)
Total Post-employment Benefits charged to the Comprehensive Income and Expenditure Statement 30.158 211.024 22.000 37.800
Movement in Reserves Statement Reversal of net charges made to the Surplus or Deficit on the (89.209) (61.144) (11.600) (17.400) Provision of Services for post-employment benefits in accordance with the Code Actual amount charged against the General Fund Balance for pensions in the year: Employers' contributions payable to scheme 45.518 45.100 4.600 4.200
Pension Assets and Liabilities recognised in the Balance Sheet The amount included in the Balance Sheet arising from the Council’s obligation in respect of its defined benefit plans is as follows:
Cornwall Council Group Firefighters Pension Scheme Pension Arrangements 2017/18 2016/17 2017/18 2016/17 £m £m £m £m
Present value of the defined benefit obligation (2,239.328) (2,196.156) (240.900) (223.500) Fair value of plan assets 1,337.140 1,278.577 - -
Sub-total (902.188) (917.579) (240.900) (223.500)
Net liability arising from defined benefit obligation (902.188) (917.579) (240.900) (223.500)
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Reconciliation of the movements in the Fair Value of the Scheme (plan) Assets
Cornwall Council Group Firefighters Pension Scheme Pension Arrangements 2017/18 2016/17 2017/18 2016/17 £m £m £m £m
Opening fair value of scheme assets 1,278.577 1,172.891 - -
Current Service Cost (0.001) (0.048) - - Effect of settlements (12.704) (9.865) - - Interest Income 33.348 40.848 - - Remeasurement gain/(loss): The return on plan assets, excluding the amount 17.408 80.130 - - included in the net interest expense Changes in financial assumptions 0.015 0.147 - - Other Experience - (0.017) - - Contributions from employer 45.518 45.100 4.600 4.200 Contributions from employees into the scheme 9.928 10.186 1.300 1.200 Benefits paid (59.044) (60.795) (5.900) (5.400) Other (0.025) - - - Effect of business combinations and disposals 24.120 - - -
Closing fair value of scheme assets 1,337.140 1,278.577 - -
Reconciliation of Present Value of the Scheme Liabilities (Defined Benefit Obligation)
Funded Liabilities Unfunded Liabilities Cornwall Council Group Firefighters Pension Scheme Pension Arrangements 2017/18 2016/17 2017/18 2016/17 £m £m £m £m
Opening balance at 1 April (2,196.156) (1,924.546) (223.500) (189.900)
Current service cost (62.685) (39.970) (5.800) (4.700) Interest income (57.439) (66.990) (5.800) (6.900) Contributions from scheme participants (9.928) (10.186) (1.300) (1.200) Remeasurement gains and (losses): Actuarial gains/(losses) arising from changes in 41.832 (291.647) 4.100 (40.800) financial assumptions Actuarial gains/(losses) arising from changes in - 13.340 2.400 (1.200) demographic assumptions Other Experience (0.204) 48.167 (16.900) 21.600 Past service cost (1.239) (1.014) - (5.800) Benefits paid 59.044 60.795 5.900 5.400 Liabilities extinguished on settlements 22.162 15.895 - - Other 0.056 - - - Transfers (in)/out from other authorities (34.771) - - -
Closing balance at 31 March (2,239.328) (2,196.156) (240.900) (223.500)
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Local Government Pension Scheme Assets comprised:
Cornwall Council Group* Cornwall Council Group* Fair Value of Scheme Assets Fair Value of Scheme Assets Quoted prices in active markets Quoted prices not in active markets 31 March 31 March 31 March 31 March 2018 2017 2018 2017 £m £m £m £m Cash and cash equivalents 10.602 22.903 - -
Private Equity: All - - 43.890 46.499 Sub total private equity - - 43.890 46.499
Other Investment funds: Infrastructure - - 41.745 52.512 Equities 405.739 370.201 34.190 31.379 Bonds 123.042 125.952 - - Hedge Funds - - - 85.875 Commodities - - 98.970 - Other 244.720 208.132 105.806 103.418 Sub total other investment funds 773.501 704.285 280.711 273.184
Derivatives: Inflation - - 227.278 230.571 Sub total derivatives - - 227.278 230.571
Total assets 784.103 727.188 551.879 550.254
* This does not contain Mount Edgcumbe
Following the implementation of a new investment strategy by the Cornwall Pension Fund during the year 2016/17, the Fund moved all previously segregated equities into Funds. As a result the Pension Fund has no direct holdings in equities. What it does hold is units in Funds of Global Equities, Emerging Markets and Frontier Market Funds run by various investment managers.
Basis for Estimating Assets and Liabilities
Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels etc. Both the Cornwall Council pension scheme and the Firefighters’ pension scheme liabilities have been valued by Hymans Robertson LLP, an independent firm of actuaries, estimates for the Council Fund being based on the latest full valuation of the scheme as at 1 April 2016. Discretionary payment liabilities have been calculated by our Council’s Pension Fund Section.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The significant assumptions used by the actuary have been:
Cornwall Council Firefighters Pension Scheme Pension Arrangements 31 March 31 March 31 March 31 March 2018 2017 2018 2017
Long-term expected rate of return on assets in the scheme:
Equity investments 2.7% 2.6% N/A N/A Bonds 2.7% 2.6% N/A N/A Other 2.7% 2.6% N/A N/A
Mortality Assumptions: Longevity at 65 for current pensioners: Men 22.1 years 22.1 years 28.6 years 30.2 years Women 24.5 years 24.5 years 31.0 years 31.7 years Longevity at 65 for future pensioners: Men 24.0 years 24.0 years 29.7 years 31.6 years Women 26.4 years 26.4 years 32.2 years 33.2 years Rate of inflation 2.4% 2.4% 2.4% 2.4% Rate of increase in salaries 2.5% 2.5% 3.4% 3.4% Rate of increase in pensions 2.4% 2.4% 2.4% 2.4% Rate for discounting scheme liabilities 2.7% 2.6% 2.7% 2.6%
The Firefighters’ arrangement has no assets to cover its liabilities.
The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analysis below has been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period and assumes for each change that the assumption analysed changes while all the other assumptions remain constant. The assumptions in longevity, for example, assume that life expectancy increases or decreases for men and women. In practice, this is unlikely to occur, and changes in some of the assumptions may be interrelated. The estimations in the sensitivity analysis have followed the accounting policies for the scheme, i.e. on an actuarial basis using the projected unit credit method. The methods and types of assumptions used in preparing the sensitivity analysis below did not change from those used in the previous period.
Impact on the Defined Benefit Obligation in the Scheme
Increase in Decrease in Assumption Assumption £m £m
Rate of inflation (increase or decrease by 0.5%) 183.394 (183.394) Rate of increase in salaries (increase or decrease by 0.5%) 31.478 (31.478) Rate of increase in pensions (increase or decrease by 0.5%) 183.394 (183.394) Rate for discounting scheme liabilities (increase or decease by 0.5%) 217.541 (217.541)
* This does not contain Mount Edgcumbe
Asset and Liability Matching (ALM) Strategy
The Pensions Committee of Cornwall Council has agreed to an asset and liability matching strategy (ALM) that matches, to the extent possible, the types of assets invested to the liabilities in the defined benefit obligation. The Fund has matched assets to the pensions’
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
obligations by investing in long-term fixed interest securities and also by employing a liability driven investment, which hedges an element of the Fund’s interest rate and inflation risk. This is balanced with a need to maintain the liquidity of the Fund to ensure that it is able to make current payments. As is required by the pensions and (where relevant) investment regulations the suitability of various types of investment have been considered, as has the need to diversify investments to reduce the risk of being invested in too narrow a range. A large proportion of the assets relate to equities (32% of scheme assets in March 2018; 33% in March 2017) and bonds (26% in March 2018; 27% in March 2017). The scheme also invests in alternative asset classes (e.g. property unit trusts and diversified growth funds) as a part of the diversification of the scheme’s investments. The ALM strategy is monitored annually or more frequently if necessary.
Impact on the Council’s Cash Flows
The objectives of the scheme are to keep employers’ contributions at as constant a rate as possible. The Council has agreed a strategy with the scheme’s actuary to achieve a funding level of 100% over the next 20 years. Funding levels are monitored on a quarterly basis. The next triennial valuation is due to start at 31 March 2019 based on the previous 3 years data.
The Cornwall Council Group anticipated to pay £39.711m expected contributions to the scheme in 2017/18.
The weighted average duration of the defined benefit obligation for Cornwall Council scheme members is 17.7 years, 2017/18 (17.7 years 2016/17).
Further information can be found in the Pension Fund Annual Report, which is available upon request from County Hall, Truro, TR1 3AY.
Note Nature and Extent of Risks Arising from Financial Instruments 37 The Council’s activities expose it to a variety of financial risks: Credit risk – the possibility that other parties might fail to pay amounts due to the Council Liquidity risk – the possibility that the Council might not have funds available to meet its commitments to make payments Market risk – the possibility that financial loss might arise for the Council as a result of changes in such measures as interest rates and stock market movements. The over-riding objective of the Council’s Treasury Management Strategy is to seek to minimise the risks inherent within the treasury operations and the framework within which the risks are managed is contained within the Council’s detailed Treasury Management Practices. Sophisticated techniques for managing risk are being utilised to further improve the risk profile of the portfolios.
Credit Risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Council’s customers. The risk is minimised through the Annual Investment Strategy which requires that deposits are not made with financial institutions unless they meet identified minimum credit criteria.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
Caution is exercised in determining the creditworthiness of investment counterparties, even if they meet the minimum criteria above. In the event that any institutions are at the minimum criteria and are on negative rating watch, monies are not placed with that organisation until such time that the negative outlook is revised. Geographical limits are considered to ensure an appropriate spread of risk. Sovereign ratings will be taken account of when placing funds with institutions outside of the UK.
In addition, the Council monitors Credit Default Swap Spreads which also contribute to forming a view of the creditworthiness of the investment counterparties. Market intelligence is also considered before entering into any investments with proposed counterparties meeting the minimum criteria.
Customers for goods and services are assessed, taking into account their financial position, past experience and other factors, within individual credit limits being set in accordance with parameters set by the Council. The Council’s maximum exposure to risk in relation to investments in banks and building societies was £207.602m as at the balance sheet date and can be seen in the table below. This cannot be assessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual institution. Recent experience has shown that it is rare for such entities to be unable to meet their commitments. A risk of irrecoverability applies to all of the Council’s deposits but there was no evidence at 31 March 2018 that this was likely to crystallise.
The following analysis summarises the Council’s potential maximum exposure to credit risk on all financial assets, based on experience of default and uncollectability over the last five financial years, adjusted to reflect current market conditions.
Historical experience Estimated adjusted for maximum market exposure to Estimated Amount at Historical conditions at default and maximum 31 March experience 31 March uncollect- exposure at 31 2018 of default 2018 ability March 2017 £m % % £m £m A B C (AxC)
Loans and receivables - treasury Heartlands investment 1.520 0.00% 0.00% - - Shares in Group Companies 0.500 0.00% 0.00% - - Banks and building societies 130.000 0.07% 0.07% 0.086 0.146 Investments in other local authorities 186.000 0.06% 0.06% 0.108 0.062 Investments in Group Companies 10.250 0.00% 0.00% - - Accrued interest 2.756 0.00% 0.00% - -
Total 331.026 0.194 0.208
Other financial assets Cash and cash equivalents (banks and building societies) 77.602 0.00% 0.00% - - Bonds 4.500 0.21% 0.21% 0.009 0.011 Customers (short term debtors) 90.035 0.75% 0.75% 0.675 2.544
Total 172.137 0.684 2.555
Total estimated maximum exposure to default and uncollectability 0.878 2.763
The Council are responsible for supplying goods and services and in many instances there is a need to reclaim the charge. There are two distinct types of service, statutory and discretionary.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
For statutory services the range of payment options is more extensive and it is likely that credit terms may be granted, standard terms are 28 days. Where credit terms are granted the sundry debt team are responsible for ensuring payment is made and implementing recovery action where appropriate. Meetings are held with key clients on a regular basis to discuss any implications around non-payment and the effect on any bad debt provisions.
Credit checks are undertaken for certain services, such as prospective property tenants to ensure there is no adverse credit history.
For discretionary services such as garden waste the payment terms and the payment options we offer are likely to be more prescriptive. For example, with the garden waste service the customer has to sign up on-line and make their payment before the service is offered. It is important wherever practical to obtain payment before the service is delivered to reduce the risk of non-payment and potential bad debts. A payments strategy paper has been written to guide services on the most appropriate way of taking payment.
There will also be instances where we will be reacting to a particular situation. The reactive debt is more difficult to collect as we have no control over it, a good example would be clearance of a road after a road traffic collision. Again the sundry debt team are responsible for monitoring this debt and taking appropriate action.
We have recently implemented a direct debit system which can support the collection of large volumes of transactions. This has been implemented initially to support the parking service in collecting season ticket and permit charges. Further targeting of services will continue through 2018/19 to reduce the number of sales invoices issued and reduce the risk of non-payment. The total sundry debt owing to the Council is £12.244m (2016/17 £11.782m). The age debt profile below has been used to formulate the bad debt provision:
31 March 31 March 2018 2017 £m £m Less than three months 1.067 0.841 Three to six months 0.676 0.852 Six months to one year 0.866 1.179 More than one year 9.635 8.910
12.244 11.782 Against the sundry debt age profile, bad debt provisions are held totalling £9.660m (2016/17 £8.857m). These have been set in accordance with the Council’s Corporate Bad Debt policy, plus a consideration for debt over one year old. The policy takes a considered view of the likelihood of a debt becoming unrecoverable based initially on the status the debt has reached across four categories: legal action, insolvency proceedings, third party collection agents and instalment payers. Finance staff supporting individual services are responsible for setting a general provision against the remaining debt, special attention is given to any debts over £20,000 which are considered on a case by case basis.
Liquidity Risk
The Council has a comprehensive cash flow management system that seeks to ensure that cash is available as needed. If unexpected movements happen the Council has ready access to borrowings from the money markets and the Public Works Loans Board. The Council needs to ensure there is sufficient liquidity within the investment portfolio, which is achieved
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
by placing limits on the proportion of investments maturing in relevant time periods, as well as investing in available-for-sale financial assets. The Council recognises that not all financial instruments will run to their final maturity date as some instruments provide the counterparty with an option to prematurely cancel. The table below shows maturity analysis for the final maturity date.
The maturity analysis of financial liabilities and financial assets is as follows: Cash and Cash Financial Financial Equivalents Liabilities Assets Net £m £m £m £m
Less than one year 69.171 (91.437) 143.006 120.740 Between one and two years - - 110.000 110.000 Between two and five years - - 77.228 77.228 Between five and ten years - (0.020) 0.841 0.821 Between ten and twenty years - (575.752) 4.831 (570.921) Between twenty and fifty years - (61.000) - (61.000) No fixed maturity date - - 2.020 2.020
69.171 (728.209) 337.926 (321.112)
The category for financial assets maturing in less than one year includes investments which are available-for-sale - thus enabling liquidity in the event it is required.
Market Risk
Interest Rate Risk The Council is exposed to significant risk in terms of its exposure to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the authority. For instance, a rise in interest rates would have the following effects: Borrowings at fixed rates – the fair value of the borrowings will fall Borrowings at variable rates – the interest expense charged to the surplus or deficit on the provision of services will rise Investments at fixed rates – the fair value of the assets will fall Investments at variable rates – the interest income credited to the surplus or deficit on the provision of services will rise. Borrowings and Loans and Receivables are not carried at fair value, so nominal gains and losses on fixed rate borrowings and investments (excluding investments which are available- for-sale) would not impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services and affect the General Fund balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in Other Comprehensive Income and Expenditure.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The Treasury Management team has an active strategy for assessing interest rate exposure that feeds into the setting of the annual budget. At 31 March 2018, if interest rates and discount rates had been 1% higher or lower with all other variables held constant, the financial effect would be:
If interest rates had been 1% higher with all other variables held constant the financial effect would be: £m Increase in interest payable on variable rate borrowings 0.980 Increase in interest receivable on variable rate investments -
Impact on (surplus) or deficit on the provision of services at 31 March 2018 0.980
If interest rates had been 1% lower with all other variables held constant the financial effect would be: Decrease in interest payable on variable rate borrowings (0.980) Decrease in interest receivable on variable rate investments -
Impact on (surplus) or deficit on the provision of services at 31 March 2018 (0.980)
An increase of 1% in discount rates would lead to changes in the fair value of investments and borrowings: £m Decrease in fair value of borrowing liabilities (196.144) Decrease in fair value of investment assets (4.014) A decrease of 1% in discount rates would lead to changes in the fair value of investments and borrowings: £m
Increase in fair value of borrowing liabilities 267.939 Increase in fair value of investment assets 4.228
Changes in fair value have no impact on (surplus) or deficit on the provision of services at 31 March 2018
Lender’s Option Borrower’s Option Loans (LOBO’s)
The Council has two inverse LOBO loans, one for £45.000m entered into in 2009 and one for £40.000m entered into in 2011. For the £45.000m loan the initial rate of interest was fixed for a period of three years at 4.36% before switching to interest based on a rate of 8.85% less the five year swap rate, which is adjusted quarterly. For the £40.000m loan the initial rate of interest was fixed for a period of eighteen months at 2.90% before switching to interest based on a rate of 7.77% less the ten year swap rate, which is adjusted quarterly.
The Council is exposed to changes in market interest rates through its two inverse LOBO loans. An inverse LOBO loan contains two features which alter the interest rate risk profile from a normal floating rate loan. Firstly the loans contain a Lender and a Borrower’s option. The loans provide the lender with the option, at fixed points in time, to unilaterally change the interest rate charged on the loan, this is the Lender Option. If the lender chooses to exercise their option then the Council, the Borrower, has the option to repay at par, without penalty, and with accrued interest, this is the Borrower option.
The second feature, the inverse floater, means that the interest charged on the loan moves in the opposite direction to market interest rate movements, such that when interest rates decrease the rate of interest charged on the loan increases, and vice versa.
The combination of these features is such that in a low interest rate environment the interest paid on the loan is generally higher than the market rate of interest. Also, if the interest rate were to rise, causing the interest paid on the loan to fall, it increases the likelihood of the lender exercising their option to reprice the loans and could cause the Council to refinance or accept a higher rate of interest.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The risks associated with these types of instruments are impacted by their maturity dates, and in the context of the different types of LOBO’s, the frequency of the LOBO option dates. These create concentrations of risk. The carrying amounts in the balance sheet and the fair values are as disclosed below. The comparable par amounts, maturities and LOBO option frequency dates are as follows:
31 March 2018 31 March 31 March 2018 Current Contractual 2018 31 March 2018 31 March 2018 Principal plus Interest Rate Original Remaining Frequency of Accrued Interest (Range) Maturity Maturity LOBO Options £m
Fixed interest rate PWLB 240.822 3.51% - 4.85% 30-50 years 24-38 years N/A Fixed interest rate LOBO's 277.588 3.56% - 5.24% 60-70 years 47-60 years 6 months - 5 years Inverse LOBO's 85.742 6.26% - 7.69% 47-60 years 40-51 years 6 months - 5 years
31 March 2017 31 March 31 March 2017 Current Contractual 2017 31 March 2017 31 March 2017 Principal plus Interest Rate Original Remaining Frequency of Accrued Interest (Range) Maturity Maturity LOBO Options £m
Fixed interest rate PWLB 240.818 3.51% - 4.85% 30-50 years 25-39 years N/A Fixed interest rate LOBO's 252.588 3.53% - 4.63% 60-70 years 48-61 years 6 months - 5 years Inverse LOBO's 85.742 6.57% - 7.95% 47-60 years 41-52 years 6 months - 5 years Libor LOBO 25.322 4.10% - 5.65% 60-70 years 49-61 years 3 - 5 years
*The Libor LOBO was a variable rate instrument converted to fixed rate during 2017/18
The Council’s treasury management strategy considers the whole portfolio of its borrowing and investment portfolio, not just individual transactions. New borrowing would normally be taken on a short term basis to take advantage of historically low rates of interest, with a view to continuing to roll over short term debt until an interest rate increase is anticipated, at which time the Council will enter into long term agreements to “lock in” interest rates over the long term. The inverse LOBO transaction mitigates against the risk of an interest rate increase inherent in the short term loan portfolio. The loans in the short term loan portfolio need replacing as they mature if interest rates are increasing this will become more expensive. If rates rise the rate paid on the inverse LOBO would decrease until such time as the lender of the LOBO loan choose to exercise their option, at which point the council could choose to repay the principal without the penalty and with accrued interest. If interest rates fall then the rate paid on the inverse LOBO would rise.
The carrying amounts and fair values of the Council’s LOBO’s are as follows:
31 March 31 March 31 March 31 March 2018 2018 31 March 2017 2017 31 March Carrying Accrued 2018 Fair Carrying Accrued 2017 Fair Value Interest Value Value Interest Value £m £m £m £m £m £m
Fixed interest rate PWLB 239.185 1.637 332.567 239.185 1.633 333.455 Fixed interest rate LOBO's 274.100 3.488 433.668 249.100 3.488 398.619 Inverse LOBO's 85.000 0.742 187.149 85.000 0.742 199.994 Libor LOBO* - - - 25.000 0.322 47.103
*The Libor LOBO was a variable rate instrument converted to fixed rate during 2017/18
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
The Council is required to account for financial instruments in accordance with International Accounting Standard 39 Financial Instruments: Recognition and Measurement (IAS39). The Council’s inverse LOBO’s are floating rate instruments within the scope of paragraph AG7 of IAS39. The loans do not meet the requirements under IAS39 to be accounted for at fair value through profit and loss. In this case they are accounted for at amortised cost. The Code would normally require the Council to calculate Effective Interest Rate (EIR) calculations in order to arrive at an appropriate valuation of the instruments in its accounts. However, in the case where it is not possible to reliably estimate the cash flows or expected life of a financial instrument then the contractual cash flows over the full contractual term of the financial instrument shall be used. The Council has applied this accounting treatment to its LOBO’s, including the inverse LOBO’s, which is in compliance with the Code. If the Council had applied the EIR treatment then for 2017/18 there would have been a charge to the Council’s CIES of £3.500m. This initial charge to the revenue account would be reversed over the remaining life of the instruments.
The Council does perform an EIR calculation on two of its fixed rate LOBO’s. At their inception in 2005 the total adjustment recognised in the CIES was £1.178m, which will be written down over their 60 year term, £0.006m was written down during 2017/18 (£0.006m in 2016/17).
Foreign Exchange Risk
The Council has no financial assets or liabilities denominated in foreign currencies and thus have no exposure to loss arising from movements in exchange rates.
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Notes to the Main Financial Statements Cornwall Council 2017/18 Statement of Accounts
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Page 122
Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
Group Financial Statements
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
Group Movement in Reserves Statement (opposite) This statement shows the movement in the year on the different reserves held by the Group, analysed into “usable reserves” and other reserves.
Group Comprehensive Income and Expenditure Statement (below) This statement shows the accounting cost in the year of providing the Group’s services in accordance with generally accepted accounting practices.
2017/18 Restated 2016/17
Expenditure Income Net Expenditure Income Net
£m £m £m £m £m £m Notes* Children, Families and Adults 390.706 (153.442) 237.264 357.986 (128.984) 229.002 Economic Growth and Development 130.348 (80.748) 49.600 109.920 (77.797) 32.123 Neighbourhoods 116.414 (24.563) 91.851 105.284 (20.377) 84.907 Customer and Support Services 291.360 (203.847) 87.513 288.572 (212.465) 76.107 Wellbeing and Public Health^ 27.603 (26.991) 0.612 28.752 (28.274) 0.478 Corporate Items 18.881 (1.740) 17.141 21.281 (16.773) 4.508 Schools # 151.996 (119.570) 32.426 178.786 (161.082) 17.704 Local Authority HRA 22.223 (39.993) (17.770) 18.497 (40.146) (21.649) Exceptional reversal of previous downward valuation (HRA) - - - (71.207) - (71.207) Joint Committees 6.217 (5.874) 0.343 5.521 (5.922) (0.401) Groups - Corserv Ltd~ 134.282 (22.407) 111.875 136.114 (24.028) 112.086 Groups - Cormac Contracting Ltd 2.353 (4.003) (1.650) 1.958 (1.623) 0.335
Group cost of services 1,292.383 (683.178) 609.205 1,181.464 (717.471) 463.993
Other operating expenditure 33.154 22.149 11* Exceptional transfer of academy school assets 90.041 50.013 11* Financing and investment income and expenditure~ 70.905 72.358 12* Taxation and non-specific grant income (549.527) (592.102) 13*
(Surplus) or deficit on provision of services 253.778 16.411
Tax expenses of subsidiaries 0.494 0.079
Group (Surplus)/Deficit 254.272 16.490
Surplus or deficit on revaluation of (21.308) (30.945) property, plant and equipment # Transfer of function - Wave Hub asset" - (30.000) Surplus or deficit on revaluation of 0.698 (0.069) available-for-sale financial assets Remeasurements of the pension net defined benefit liabiltiy/(asset) (49.302) 171.026 Other recognised gains and losses 1.526 3.649
Other comprehensive income and expenditure (68.386) 113.661
Total comprehensive income and expenditure 185.886 130.151
* Note numbers refer to Cornwall Council notes that are not materially different ^ Directorate renamed to Wellbeing and Public Health, originally Public Health ~ Corserv Ltd 2016/17 comparators restated as Via East Midlands Ltd is a joint venture not a subsidiary # 2016/17 School comparator restated to remove school asset impairment. "2016/17 reclassification of the Wave Hub donated asset to a transfer of function
Page 124
Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
-
-
-
-
£m
Total
70.999
70.999
(76.087)
(59.152)
109.799
109.799
185.886
130.151
(563.177)
(672.976)
(743.975)
Reserves
-
-
-
-
**~
£m
6.219
0.069
0.069
6.150
0.078
0.078
6.072
76.156
59.230
(76.087)
(59.152)
Share of
Reserves of Reserves
Subsidiaries
-
-
-
-
-
-
£m
Total
70.921
70.921
70.921
Council
109.730
109.730
109.730
(569.396)
(679.126)
(750.047)
Reserves^
-
-
-
-
**
£m
95.195
26.236
(67.863)
(67.863)
163.058
139.400
113.164
113.164
(210.449)
(305.644)
(445.044)
Reserves
Unusable
-
-
-
-
£m
Total
14.535
Usable
(68.479)
(26.236)
(42.243)
(42.243)
177.593
177.593
(358.947)
(163.058)
(373.482)
(305.003)
Reserves
-
-
-
-
-
-
-
-
£m
Major
(5.006)
(1.442)
(1.442)
(3.564)
(1.883)
(1.883)
(1.681)
Repairs
Reserve
-
-
-
-
-
-
-
-
£m
(2.867)
Grants
19.866
19.866
Capital
(21.176)
(41.042)
(38.175)
(38.175)
Reserve
-
-
-
-
-
-
-
-
£m
0.424
0.424
(5.679)
(5.679)
Capital
(68.973)
(69.397)
(63.718)
Reserve
Receipts
-
-
-
-
HRA
Total
3.467
(0.650)
(4.117)
(4.117)
(0.883)
57.286
(13.481)
(12.831)
(58.169)
(58.169)
(11.948)
Reserves
-
-
-
-
-
-
-
-
£m
HRA
0.479
0.479
(3.560)
(0.529)
(0.529)
(3.031)
(3.510)
Reserves
Earmarked
-
-
£m
0.529
3.467
(9.921)
(0.121)
(4.117)
(4.117)
(9.800)
(1.362)
(0.479)
(8.438)
57.286
(58.169)
(58.169)
Account
Housing
Revenue
-
-
-
-
£m
Fund
Total
(3.663)
15.926
15.926
(21.859)
(37.785)
181.710
181.710
General
(250.311)
(185.373)
(246.648)
(224.789)
Reserves
-
-
-
-
-
-
-
-
£m
Ports
0.499
0.499
(0.737)
(1.236)
(0.123)
(0.123)
(1.113)
Balances
-
-
-
-
-
-
-
-
GF
£m
(14.364)
(14.364)
(38.124)
(38.124)
(208.806)
(194.442)
(156.318)
Reserves
Earmarked
-
-
-
-
-
-
-
-
£m
Fund
4.546
4.546
8.873
8.873
(4.327)
(8.873)
(17.746)
Schools
General
Balance
-
-
£m
Fund
5.656
9.319
7.515
29.374
15.926
15.926
(36.441)
(42.097)
(37.785)
(49.612)
181.710
181.710
General
Balance (185.373)
Notes * Notes
9
9
10
10
basis under basisregulations under
basis under basisregulations under
~ 2016/17 ~comparators restated as 2016/17 Via East Midlands not Ltd a issubsidiary a joint venture
^ 2016/17 figures updated to include final Pension Fund actuary adjustment, school impairments have been removed and the Wave Hub donated asset donated function reclassified Hub has asof been the a Wave and transfer to Pension actuary Fund include updated final removed adjustment, figures been 2016/17 school ^ impairments have
** Details of the Unusable Reserves can be seen in Cornwall Council note 21 and G3 for share of subsidiaries of share G3 for and note Council 21 can seen be in Cornwall ** Reserves Details the Unusable of
* Note numbers refer to Cornwall Council notesCouncil that tonot materiallyare Cornwall different refer * numbers Note
Balance at March31 carried 2018 forward
(Increase)/Decrease in Year
Transfers (to)/from Earmarked Reserves Earmarked (to)/from Transfers
Adjustments accounting basis between funding and
Reserves(to)/from
Net (Increase)/Decrease before transfer
AccountsCouncil
Adjustment between Group AccountsAdjustment Group Cornwall between and
Total Comprehensive Income and Expenditure Statement Expenditure and Income Comprehensive Total
Movement in duringreserves 2017/18
Restated Balance at March31 carried 2017 forward
(Increase)/Decrease in Year
Transfers (to)/from Earmarked Reserves Earmarked (to)/from Transfers
Adjustments accounting basis between funding and
Reserves(to)/from
Net (Increase)/Decrease before transfer
AccountsCouncil
Adjustment between Group AccountsAdjustment Group Cornwall between and
Total Comprehensive Income and Expenditure Statement Expenditure and Income Comprehensive Total
Movement in duringreserves 2016/17 Balance at March31 carried 2016 forward Group Movement inStatement Reserves
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
Group Balance Sheet (opposite)
The Balance Sheet shows the value of the assets and liabilities recognised by the Group at 31 March 2018. The net assets of the Group are matched by Group reserves.
Group Cash Flow Statement (below)
The cash flow statement shows the changes to cash and cash equivalents of the Group during the reporting period. The statement shows how the Group generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities.
Restated 2017/18 2016/17
£m £m Notes
Net (surplus) or deficit on the provision of services~ 254.272 16.490
Adjustments to net surplus or deficit on the provision of services for (354.334) (195.340) G8 non-cash movements * Adjustments for items included in the net surplus or deficit on the 92.388 165.912 G8 provision of services that are investing and financing activities Taxation (0.018) (0.024) G8
Net cash flows from operating activities (7.692) (12.962)
Investing Activities~ (11.169) 1.528 G9 Financing Activities 8.596 (20.463) G10
Net (increase) or decrease in cash and cash equivalents (10.265) (31.897)
Cash and cash equivalents at the beginning of the reporting period 75.001 43.104
Cash and cash equivalents at the end of the reporting period 85.266 75.001
* 2016/17 comparators restated as Via East Midlands Ltd is a joint venture not a subsidiary and school impairments have been removed ~2016/17 comaprator restated as the Wave Hub donated asset has been reclassified to a transfer of function
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
Restated Balance Sheet 31 March 2018 31 March 2017
£m £m Notes* Property, Plant and Equipment^ 2,270.702 2,353.955 14* Heritage Assets 3.086 3.086 Investment Properties 0.550 - Intangible Assets~ 4.139 5.988 Long Term Investments 195.303 165.605 15* Long Term Debtors 24.305 21.499 15*
Long Term Assets 2,498.085 2,550.133
Cash and Cash Equivalents~ 85.273 75.001 17* Current intangible assets 0.307 0.616 Short Term Investments 132.756 209.712 15* Assets Held for Sale 9.331 12.975 Inventories~ 13.818 7.330 Short Term Debtors~ 109.049 99.817 G6
Current Assets 350.534 405.451
Cash and Cash Equivalents (0.007) - 17* Short Term Borrowing (91.437) (77.602) 15* Short Term Creditors~ (143.792) (157.055) G7 Provisions (6.553) (7.177) 19* PFI Short Term Liabilities (4.781) (4.251) 15* PFI Short Term Deferred Liabilities (1.509) (1.509) 15* Grants Receipts in Advance - Revenue (10.771) (11.837) Grants Receipts in Advance - Capital (7.762) (15.515)
Current Liabilities (266.612) (274.946)
Long Term Creditors (2.445) (2.056) 15* Provisions~ (36.868) (23.456) 19* Long Term Borrowing (636.738) (635.014) 15* Pension Liability (1,151.574) (1,149.899) 36* PFI Long Term Liabilities (114.573) (119.354) 15* Other Long Term Liabilities (4.304) (6.032) 15* PFI Deferred Income (30.929) (32.438) 15* Grants Receipts in Advance - Capital (41.399) (39.413) 30*
Long Term Liabilities (2,018.830) (2,007.662)
Net Assets 563.177 672.976
Usable Reserves~ (352.728) (366.805) Unusable Reserves^ (210.449) (306.171) 21*
Total Reserves (563.177) (672.976) G3
* Note numbers with no "G" refer to Cornwall Council notes that are not materially different ~ 2016/17 comparators restated as Via East Midlands Ltd is a joint venture not a subsidiary ^ 2016/17 comparators restated to remove school asset impairment
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
Notes to the Group Financial Statements
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Accounting Policies G1 Generally, the accounting policies for the Group accounts are the same as those applied to the single entity financial statements, except for the following policies which are specific to the Group accounts:
Basis of Identification of the Group Boundary
Group accounts are prepared by aggregating the transactions and balances of the Council and all its material subsidiaries, associates and joint ventures.
Subsidiary Boundary
A subsidiary is an entity which the Council controls through the power to govern their financial and operating polices so as to obtain benefits from the entities’ activities.
Control is usually presumed where the Council owns more than half the voting power of an entity (either directly or through other subsidiaries). However, this is not a defining criterion; the Council can have more than half the voting power but exceptionally not be in control and powers other than voting rights may grant control where the Council has less than half the voting power.
Associate Boundary
An associate is an entity for which the Council is an investor that has significant influence.
Significant influence is the power to participate in the financial and operating policy decisions of the investee (stopping short of control or joint control). It is presumed that holding 20% of the voting power of an investee (either directly or indirectly) brings significant influence but this presumption can be rebutted. It is possible for significant influence to be exerted where an investor has less than 20% of the voting power or where another party has majority ownership.
Joint Venture Boundary
Entities established with contractual or binding arrangements whereby two or more parties are committed to undertake an activity that is subject to their joint control, with strategic financial and operating decisions relating to the activity requiring the unanimous consent of the parties sharing control.
Accounting for Maintained Schools
Local Authority maintained schools are capable of being treated as separate entities and fall within the scope of the control criteria in IFRS 10 Consolidated Financial Statements. However, in order to simplify the consolidation process and to avoid consolidating a considerable number of separate, relatively small entities, the CIPFA Code of Practice confirms that the definition of the single entity financial statements includes all the transactions of local authority schools, this includes school income and expenditure as well as assets and liabilities. So, instead of these transactions being consolidated in the Group
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accounts, they are consolidated into the single entity financial statements. Please refer to the Council’s Accounting for Schools policy which can be found on page 59.
Materiality
In accordance with the above policy, our group relationships have been determined as follows:
Corserv Limited Subsidiary Consolidated Includes: Cormac Solutions Limited Subsidiary Consolidated Cornwall Housing Limited Subsidiary Consolidated Cornwall Airport Limited Subsidiary Consolidated Cornwall Development Company Limited Subsidiary Consolidated Includes: Rural Economic Partnership Limited Subsidiary Consolidated Via East Midlands Limited* Joint Venture Consolidated Cormac Contracting Limited Subsidiary Consolidated
Kehelland Horticultural Centre Limited Subsidiary Not Consolidated Wave Hub Limited Subsidiary Not Consolidated Includes:Includes: Wave Hub Development Services Limited Subsidiary Not Consolidated CSW Group Limited Joint Venture Not Consolidated
* Where a company has been consolidated it is 100% owned by Cornwall Council, the only exception to this is Via, where 51% is owned. Tests of control have been performed on Via to satisfy the consolidation.
The grounds for exclusion from consolidation of certain entities (individually and in aggregate) are not material to the true and fair view of the financial statements or to the understanding of users.
In addition, under the Accounts and Audit Regulations, Cornwall Port Health Authority (a statutory function of the Council) is required to produce separate accounts for the financial year 2017/18. These are also excluded from the Council’s Group accounts on the basis of materiality.
Basis of the Preparation of the Group Financial Statements
The Group accounts have been prepared using the Group accounts requirements of the 2017/18 Code. Companies or other reporting entities that are under the ultimate control of the Council have been included in the Council’s Group accounts, to the extent that they are material to the users of the financial statements in relation to their ability to see the complete economic activities of the Council and its exposure to risk through interests in other entities and participation in their activities. Subsidiaries have been consolidated by: adding like items of assets, liabilities, reserves, income and expenses together on a line by line basis to those of other group members in the financial statements, eliminating intra-group balances and transactions in full
Joint Ventures have been consolidated using the equity method by: adjusting the investment originally recognised at cost for the company’s post- acquisition change in its share of the net assets of the investee,
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
including the company’s share of profits and losses in its Comprehensive Income and Expenditure Statement. Any share of the joint ventures profit or loss is shown in the other recognised gains and losses line under other comprehensive income and expenditure on the Comprehensive Income and Expenditure Statement.
Corserv Ltd
Corserv Ltd is a 100% wholly owned subsidiary of Cornwall Council. It provides strategic direction and oversight for its arm’s length and commercial trading companies.
The registered office of the company is Corserv Ltd Head Office, Higher Trenant Road, Wadebridge, Cornwall, PL27 6TW. The company registration number is 09598549.
Arm’s Length and Commercial Trading Companies of Corserv Ltd:-
Cormac Solutions Ltd is a company incorporated in England, the sole shareholder being Corserv Ltd. The company’s principal activity is delivering in-house construction and maintenance services for Cornwall Council and the wider public through partnership with Town and Parish Councils, local Small and Medium Enterprises (SMEs) and Social Enterprise Groups, providing a complete solution and helping communities grow and thrive in a sustainable way. The financial statements of the company can be obtained from the registered office at Cormac Head Office, Higher Trenant Road, Wadebridge, Cornwall, PL27 6TW. The company registration number is 07737430.
Cornwall Housing Ltd is an Arm’s Length Management Organisation (ALMO), limited by guarantee and without share capital. The company’s principal activity is managing and maintaining the Council’s stock of 10,281 general needs houses across Cornwall. They look after about 300 leaseholders on behalf of the Council and manage other garages, shops and land in neighbourhoods with council housing. The company also looks after 56 houses it owns itself. The financial statements of the company can be obtained from the registered office which is Chy Trevail, Beacon Technology Park, Bodmin, Cornwall, PL31 2FR. The company registration number is 04662007.
Cornwall Airport Ltd is a company limited by shares, the sole shareholder being Corserv Ltd. The principal activity of the company is airport operations at Newquay Cornwall Airport. Funding income is provided by Cornwall Council for shortfalls arising from such activities that would typically be undertaken to operate an airport. This funding is under a Public Service Obligations Agreement. The financial statements of the company can be obtained from the registered office which is St Mawgan House, Cormwall Airport, Newquay, Carloggas, St Mawgan, Newquay, TR8 4RQ. The company registration number is 06098925.
Cornwall Development Company Ltd is limited by guarantee and without share capital. The principal activity of the company is the undertaking of activities focused on achieving prosperity for Cornwall. These activities cover the promotion of the County for visitors and investors, the management of programmes of public sector funds, the development of new projects and advice and information to project promoters, a variety of services to businesses and organisations.
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Cornwall Development Company owns 100% of the ordinary share capital of Rural Economic Partnership Ltd, a company incorporated in England. The company’s principal activity is management of the three properties on the South Wheal Crofty site in Pool. The financial statements of the company can be obtained from the registered office at Bickford House, South Wheal Crofty, Station Road, Pool, Redruth TR15 3QG. The company registration number is 03668828.
Via East Midlands Ltd is a jointly owned company with Nottinghamshire County Council. Corserv Ltd own 51% of the shares. The company’s principal activity is to deliver a sustainable highways service for Nottinghamshire. The financial statements of the company can be obtained from the registered office at Corserv Ltd Head Office, Higher Trenant Road, Wadebridge, Cornwall, PL27 6TW. The company registration number is 09903246.
Cormac Contracting Ltd
Cormac Contracting Ltd is a 100% wholly owned subsidiary of Cornwall Council. It delivers competitive solutions for all major and specialist construction projects. Working together with clients and supply chain to enhance whole life value while reducing total cost, improving quality, and innovating. Cormac Contracting Ltd are recognised as being one of the South West’s leading Civil Engineering contractors for the public and private sector. The financial statements of the company can be obtained from the registered office at Cormac Head Office, Higher Trenant Road, Wadebridge, Cornwall, PL27 6TW. The company registration number is 07737521.
Kehelland Horticultural Centre Ltd
Kehelland Horticultural Centre Ltd is a charitable company limited by guarantee. The company registration number is 01714560. The company was incorporated with the object of affording relief of persons who are physically or mentally handicapped, and provides training and sheltered employment in all country pursuits.
The accounts for 2017/18 have not been consolidated on the grounds of materiality.
Wave Hub Ltd
Wave Hub Ltd is a 100% wholly owned subsidiary of Cornwall Council, its core role is to manage the Wave Hub facility and facilitate testing of a range of offshore technologies including large scale wave energy devices, wave energy arrays, floating wind, hybrid wind/wave devices, major subcomponents and associated sub-sea equipment. The company registration number is 07875270.
Wave Hub Ltd owns 100% of the ordinary share capital of Wave Hub Development Services Ltd, a company incorporated in England. The company’s principal activity provides advice
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
and guidance to support the growth of the offshore renewable energy sector. The company registration number is 10166467.
The financial statements of the companies can be obtained from the registered office at Wave Hub Ltd, Chi Gallos, Hayle Marine Renewables Business Park, North Quay, Hayle, Cornwall, TR27 4DD.
The accounts for 2017/18 have not been consolidated on the grounds of materiality.
CSW Group Ltd CSW Group Limited is a Local Authority controlled company. The company is under the joint control of Devon County Council, Cornwall Council, Plymouth City Council and Torbay Council. Members have equal voting rights so Cornwall Council’s share is 25%. For accounting purposes, the company is classified as a joint venture. The company provides a service for all young people, giving 13-19 year olds information, advice, guidance and practical help in preparing for adult and working life. It operates through a number of service brands including Connexions. The company recently changed its name to CSW Group Ltd from Careers South West Ltd (previously known as Connexions Cornwall and Devon Ltd). The registered office is at Poseidon House, Neptune Park, Plymouth, Devon, PL4 0SJ. The company registration number is 03029947. The accounts for 2017/18 have not been consolidated on the grounds of materiality.
Note Reconciliation to the Single Entity CIES G2 Restated 2017/18 2016/17 £m £m (Surplus) or deficit per single entity Comprehensive Income 177.593 (42.243) and Expenditure Statement* (Surplus) or deficit attributable to subsidiaries~ 76.679 58.733
Total Group (Surplus) or Deficit 254.272 16.490
* 2016/17 comparator restated to remove school asset impairment and to reclassify the Wave Hub donated asset to a transfer of function ~ 2016/17 comparators restated as Via East Midlands Ltd is a joint venture not a subsidiary.
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Analysis of Group Net Worth G3
Restated 2017/18 2016/17 £m £m
Cornwall Council* 569.396 679.126 Cornwall Housing Ltd 6.056 6.129 Cornwall Airport Ltd (0.372) (0.355) Cornwall Development Company Ltd (7.010) (7.421) Rural Economic Partnership Ltd 0.611 0.193 Cormac Contracting Ltd (0.793) (0.793) Cormac Solutions Ltd 3.148 3.254 Corserv Ltd~ 1.144 0.503 Group Adjustments (9.003) (7.660)
Total 563.177 672.976
~ Corserv Ltd 2016/17 comparators restated as Via East Midlands Ltd is a joint venture not a subsidiary * Cornwall Council comparator restated to remove school impairments
Note Associated Risks G4 Cornwall Council has agreed to support Cormac Solutions Ltd, Cormac Contacting Ltd and Cornwall Development Company Ltd through providing cashflow facilities to each company. These facilities enable the companies to manage their cash positions as they do not maintain their own cash reserves. The agreements provide a facility of up to £10.000m each for Cormac Solutions Ltd and Cormac Contracting Ltd available until 31 March 2019 and for Cornwall Development Company Ltd of up to £1.000m available until 31 March 2019. As at 31 March 2018 Cormac Solutions Ltd had a loan of £7.500m, Cormac Contracting Ltd had a loan of £1.750m and Cornwall Development Company Ltd had a loan of £1.000m outstanding with Cornwall Council. Cornwall Housing Ltd has two outstanding loans from Cornwall Council to enable the building of new Council houses. As at 31 March 2018 these amounted to £1.479m.
Note Prior Period Adjustments, Changes in Accounting Policies and Errors G5 Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error.
Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Group’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.
Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period.
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There have been amendments to the 2016/17 comparator figures due to a change in accounting arrangements for Corserv Ltd’s investment in Via East Midlands Ltd. When the 2016/17 accounts were prepared the investment was treated as a subsidiary and Corserv Ltd’s share of the income and expenditure was included within the group account CIES. Subsequently Corserv Ltd has reassessed it’s accounting treatment and have concluded that it is a joint venture and therefore we have removed the income and expenditure totals and replaced them with Corserv’s share of the total surplus or deficit in the CIES. The basis of the change in treatment is an assessment of the level of control exercised by Corserv at Via board level. The revised assessment concludes that, based on board membership, Corserv does not exercise overall control at Via board level and therefore the treatment as a Joint Venture is appropriate. The net effect of this change on the CIES was £0.250m and not material. This is made up of a net change in the group surplus or deficit of £0.507m, by removing £39.734m of expenditure and adding back £40.249m of income and reducing the financing and investment income and expenditure by £0.008m. The surplus of £0.257m was then included within the other comprehensive income and expenditure total. The effect on the balance sheet was also not material as net asset decreased by the £0.507m offset by a decrease in usable reserves of the same amount.
Effect on Balance Sheet 31 March 2017
As Previously Stated As Restated Change 2016/17 2016/17 2016/17 £m £m £m
Intangible Assets - Via East Midlands Ltd Joint Venture 0.609 0.454 (0.155) Cash and Cash Equivalents - Via East Midlands Ltd Joint Venture 0.823 0.229 (0.594) Short Term Debtors - Via East Midlands Ltd Joint Venture 10.477 0.336 (10.141) Inventories - Via East Midlands Ltd Joint Venture 0.650 - (0.650) Short Term Creditors - Via East Midlands Ltd Joint Venture (11.409) (0.444) 10.965 Provisions - Via East Midlands Ltd Joint Venture (0.640) (0.572) 0.068
Total Net Assets 0.510 0.003 (0.507)
Usable Reserves - Via East Midlands Ltd Joint Venture (0.262) 0.245 0.507
Total Net Worth (0.262) 0.245 0.507
Effect on Comprehensive Income and Expenditure Statement 2016/17
As Previously Stated As Restated Change 2016/17 2016/17 2016/17 £m £m £m
Via East Midlands Ltd Joint Venture (0.510) (0.003) 0.507
(Surplus) or deficit on provision of services (0.510) (0.003) 0.507
Via East Midlands Ltd Joint Venture - (0.257) (0.257)
Other comprehensive income and expenditure - (0.257) (0.257)
Total comprehensive income and expenditure (0.510) (0.260) 0.250
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
Effect on Movement in Reserves Statement - Unusable Reserves 2016/17
As Previously Stated As Restated Change 2016/17 2016/17 2016/17 £m £m £m
Total comprehensive income and expenditure - Via East Midlands Ltd Joint Venture (0.510) (0.260) 0.250 Total comprehensive income and expenditure (0.510) (0.260) 0.250
Adjustments between the accounting basis and (0.500) (0.243) 0.257 the funding basis under regulations - Via East Midlands Ltd Joint Venture Total Adjustment between the accounting basis and the (0.500) (0.243) 0.257 funding basis under regulation
Increase/Decrease in 2016/17 (1.010) (0.503) 0.507
Balance at 31 March 2017 carried forward (1.010) (0.503) 0.507
There has also been a prior period adjustment in Cornwall Council’s statement of accounts, which has been reflected in the group statements and details of this can be found on page 43.
Note Debtors G6
Current Long Term Restated 31 March 31 March 31 March 31 March 2018 2017 2018 2017 £m £m £m £m
Central government bodies 21.778 30.105 - - Other local authorities 0.889 0.205 - - NHS bodies 2.335 1.282 - - Other entities and individuals~ 84.047 68.225 24.305 21.499
Total 109.049 99.817 24.305 21.499
~ 2016/17 comparators restated as Via East Midlands Ltd is a joint venture not a subsidiary
Note Creditors G7 Current Long Term Restated 31 March 31 March 31 March 31 March 2018 2017 2018 2017 £m £m £m £m
Central government bodies (14.310) (29.045) - - Other local authorities (0.946) (2.140) - - NHS bodies (3.865) (4.255) - - Public corporations and trading funds - (0.037) - - Other entities and individuals~ (124.671) (121.578) (2.445) (2.056)
Total (143.792) (157.055) (2.445) (2.056)
~ 2016/17 comparators restated as Via East Midlands Ltd is a joint venture not a subsidiary
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Cash Flow Statement – Operating Activities G8 The cash flows for operating activities include the following items:
2017/18 2016/17 £m £m
Interest received (6.854) (6.825) Interest paid 47.574 45.852 Dividends received (0.790) (1.456)
Net cash flows from operating activities 39.930 37.571
The surplus or deficit on the provision of services has been adjusted for the following non- cash movements:
Restated 2017/18 2016/17 £m £m
Depreciation and impairment* (72.240) (72.656) Downward valuations (45.408) 38.873 Amortisation~ (2.151) (2.927) Adjustments for effective interest rates (1.595) (1.694) Increase/(decrease) in interest creditors 0.009 (0.041) Increase/(decrease) in creditors~ 12.301 (4.337) Increase/(decrease) in interest and dividend debtors 0.805 (0.308) Increase/(decrease) in debtors~ 9.970 (0.093) Increase/(decrease) in inventories~ 6.488 0.002 Movement in pension liability (50.973) 28.931 Unwinding of discount of Deferred Receipts 0.069 0.092 Contributions to/(from) provisions~ (13.013) (0.735) Carrying amount of non-current assets and non-current assets (116.254) (66.985) held for sale, sold or de-recognised Other non-cash items charged to the net surplus or deficit on (78.570) (113.462) the provision of services Other opening balance movement for assets reclassified from property, (3.772) - plant and equipment to inventories in year Taxation (0.018) (0.024)
Adjustment to net cash flows from operating activities (354.352) (195.364)
~ 2016/17 comparators restated as Via East Midlands Ltd is a joint venture not a subsidiary * 2016/17 comparator restated to remove school impairments
The surplus or deficit on the provision of services has been adjusted for the following items that are investing and financing activities:
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
2017/18 2016/17 £m £m
Capital grants credited to (surplus)/deficit on the provision 77.422 151.380 of services Proceeds from the sale of short-term (not considered to be cash - (0.020) equivalents) and long-term investments (includes investments in associates, joint ventures and subsidiaries) Proceeds from the sale of property, plant and equipment, 14.966 14.552 investment property and intangible assets
Adjustment to net cash flows from operating activities 92.388 165.912
Note Cash Flow Statement –Investing Activities G9
Restated 2017/18 2016/17 £m £m
Purchase of property, plant and equipment, investment property and 120.788 77.965 intangible assets~ Purchase of short-term and long-term investments 201.013 154.000 Other payments for investing activities 18.480 35.800 Proceeeds from the sale of property, plant and equipment, investment (14.975) (14.563) property and intangible assets Proceeds from short-term and long-term investments (250.681) (122.500) Other receipts from investing activities - other - 0.004 Capital grants received (81.923) (125.418) Loan repayments received (3.871) (3.760)
Net cash flows from investing activities (11.169) 1.528
~ 2016/17 comparators restated as Via East Midlands Ltd is a joint venture not a subsidiary and the Wave Hub asset has been reclassified from a donated asset to a transfer of function
Note Cash Flow Statement – Financing Activities G10
2017/18 2016/17 £m £m
Cash receipts of short and long-term borrowing (515.260) (445.265) Other (receipts)/payment from financing activities 14.142 (4.358) Cash payments for the reduction of the outstanding liabilities relating 5.789 5.366 to finance leases and on-balance sheet PFI contracts Repayments of short and long-term borrowing 501.735 423.794 Dividends paid 2.190 -
Net cash flows from financing activities 8.596 (20.463)
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Group Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Related Parties – Inter Group Eliminations G11 The following table shows the gross movements between Cornwall Council and its subsidiaries and joint ventures, for those companies consolidated into the group account statements these transactions have been eliminated as appropriate:
2017/18 2017/18 2017/18 Total paid to Total paid to Net Movement Group Companies Cornwall Council (to)/from from Cornwall Council from Group Companies Cornwall Council £m £m £m
Cornwall Airport Ltd 2.523 (1.395) 2.348 Cornwall Development Company Ltd 3.945 (0.253) 2.472 Cormac Solutions Ltd 105.777 (14.237) 103.380 Cornwall Housing Ltd 37.152 (2.414) 22.898 Cormac Contracting Ltd 0.550 (0.050) 0.500 Corserv Ltd 0.018 (1.073) (1.055) Wave Hub Ltd 1.745 - 1.745 CSW Group Ltd 0.913 - 0.913
Total 152.623 (19.422) 133.201
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Supplementary Financial Statements Cornwall Council 2017/18 Statement of Accounts
Supplementary Financial Statements
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Housing Revenue Account (HRA)- Income and Expenditure Statement
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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. The Council charges rents to cover expenditure in accordance with regulations; this may be different from the accounting cost. The increase or decrease in the year, on the basis of which rents are raised, is shown in the Movement on the HRA Statement.
2017/18 2016/17
£m £m Notes Expenditure Repairs and maintenance 9.427 10.986 Supervision and management: 10.567 7.617 Rents, rates, taxes and other charges 0.848 1.075 Depreciation and impairment of non-current assets 13.968 30.964 HR6 & 7 Exceptional reversal of previous losses on revaluation - (71.207) HR6 & 7 Deminimis capital expenditure 0.156 - Debt management costs 0.028 0.035
Total Expenditure 34.994 (20.530)
Income Dwelling rents (37.864) (38.385) Non-dwelling rents (1.209) (1.184) Charges for services and facilities (0.910) (0.792) Contributions towards expenditure (0.040) (0.018) Movement in the allowance for bad debts 0.029 0.203
Total Income (39.994) (40.176) - - -
Net cost of HRA Services (5.000) (60.706)
HRA services' share of Corporate and Democratic Core 0.370 0.370
Net (Income)/Expenditure of HRA services as included in the Comprehensive Income and Expenditure Statement (4.630) (60.336)
HRA share of the operating income and expenditure included in the Comprehensive Income and Expenditure Statement (Gain) or loss on sale of HRA non-current assets (2.689) (1.769) Interest payable and similar charges 3.338 3.894 Interest and investment income (0.164) (0.130) Net interest on the pension net defined liability/(asset) 0.257 0.218 Capital grants and contributions receivable (0.229) (0.046)
(Surplus) or deficit for the year on HRA Services (4.117) (58.169)
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Supplementary Financial Statements Cornwall Council 2017/18 Statement of Accounts
Movement on the HRA Statement The overall objective of this Statement is to reconcile the outturn on the HRA Income and Expenditure Statement with the net surplus or deficit for the year on the HRA Balance.
2017/18 2016/17 £m £m Balance on the HRA at the end of the previous year (9.800) (8.438) (Surplus) or deficit for the year on the HRA Income and Expenditure Statement (4.117) (58.169) Adjustments between accounting basis and funding basis under statute 3.467 57.286 HR1
Net (increase) or decrease before transfers to or from reserves (0.650) (0.883)
Transfers (to) or from reserves 0.529 (0.479)
(Increase) or decrease in year on the HRA (0.121) (1.362)
Balance on the HRA at the end of the current year (9.921) (9.800)
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Notes to the Housing
Revenue Account (HRA)
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Introduction As well as providing General Fund Housing Services, the Council is also a major provider of social rented accommodation in Cornwall. This includes sheltered facilities to meet the needs of elderly persons. The Council owns and is responsible for the management and maintenance of 10,281 dwellings throughout the county ranging from bedsit flats to seven- bedroomed houses. The income and expenditure relating to the above dwellings and the Council’s landlord function is dealt with in the HRA.
Note Adjustments between Accounting Basis and Funding Basis Under HR1 Regulations on the HRA Balance
2017/18 2016/17 £m £m Adjustments primarily involving the Capital Adjustment Account: Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement: Charges for depreciation and impairment of non-current assets (2.267) (14.217) Revaluation losses on property, plant and equipment 1.089 67.179 Capital grants and contributions applied 0.229 0.046 Other movements in the Comprehensive Income and Expenditure Statement - (0.172) Amounts of non-current assets written off on disposal or sale as part of 2.695 1.819 the gain on disposal to the Comprehensive Income and Expenditure Statement Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement: Capital expenditure charged against the General Fund and HRA balances 14.402 13.571 Adjustments primarily involving the Major Repairs Reserve: Use of the Major Repairs Reserve to finance new capital expenditure (11.348) (10.835) Adjustments primarily involving the Financial Instruments Adjustment Account: Amount by which finance costs charged to the Comprehensive Income and 0.019 0.021 Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements Adjustments primarily involving the Pensions Reserve: Reversal of items relating to retirement benefits debited or credited to the (2.959) (1.740) Comprehensive and Expenditure Statement Employer's pensions contributions and direct payments to pensioners 1.607 1.614 payable in the year
Total Adjustments 3.467 57.286
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Note Housing Stock HR2
31 March 2018 Movement 1 April 2017 1-bed dwellings 2,611 11 2,600 2-bed dwellings 4,193 (23) 4,216 3-bed dwellings 3,339 (43) 3,382 4 or more bed dwellings 136 - 136 Hostels 2 - 2 - Number of dwellings 10,281 (55) 10,336 -
Note Balance Sheet Valuation HR3 31 March 2018 Movement 1 April 2017 £m £m £m
Council dwellings 485.180 (0.916) 486.096 Housing Revenue Account land 1.497 0.293 1.204 Shops 0.513 (0.013) 0.526 Garages and other buildings 15.334 (1.524) 16.858 Vehicles, plant and equipment 0.006 (0.045) 0.051 Intangibles 0.124 (0.124) 0.248
Value of HRA assets 502.654 (2.329) 504.983
Note Vacant Possession Valuation HR4
The dwellings within the HRA are valued in the Balance Sheet on an Existing Use Value for Social Housing (EUV-SH) basis. This is different to the Vacant Possession Valuation which could be obtained if a tenant was not present, and the difference reflects the economic cost to the government of providing council housing at less than open market rents. In the South West the government has set an adjustment factor of 35% to be applied to the Vacant Possession Values to obtain the EUV-SH Valuation for the Council’s dwellings. As at 31 March 2018 the Vacant Possession Value of dwellings within the Council’s HRA was £1.371bn.
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Supplementary Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Housing Revenue Account Capital Expenditure and Financing HR5
2017/18 2016/17 Capital Expenditure during the year: £m £m Improvements to Council Stock 12.335 13.293 Intangible Assets 0.001 0.046 New Build Construction 3.610 1.335
Total Expenditure 15.946 14.674
Financed from: Major Repairs Reserve 11.348 10.835 New Build Reserve 2.237 2.251 Capital Grants 0.304 0.138 Capital Receipts 1.083 0.965 Housing Revenue Account 0.974 0.485
Balance at 31 March 15.946 14.674
Note Depreciation HR6 2017/18 2016/17 £m £m Operational Assets: Council Dwellings 11.933 11.749 Other Land and Buildings 0.428 0.421 Vehicles, Plant and Equipment 0.045 0.045
Total Operational Assets Depreciation 12.406 12.215
Reversal of previous downward revaluations 2.267 14.217
Total Depreciation charged to Housing Revenue Account 14.673 26.432 Amortisation of Intangible Assets 0.124 0.124
Total Depreciation and Amortisation charged to Housing Revenue Account 14.797 26.556
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Supplementary Financial Statements Cornwall Council 2017/18 Statement of Accounts
Note Impairments and Revaluations HR7 The HRA had no impairments in 2017/18 (£0.000m in 2016/17). There were revaluations down of £9.694m (£4.408m in 2016/17) and reversal of previous revaluations down of £10.523m (£71.207m in 2016/17).
2017/18 2016/17 £m £m Operational Assets: Council Dwellings (0.360) (66.056) Other Land and Buildings (0.469) (0.743)
Total Operational Assets Revaluations (0.829) (66.799)
Note Major Repairs Reserve HR8
The movement on the MRR in the year is detailed as follows:
2017/18 2016/17 £m £m
Balance at 1 April (3.564) (1.681)
Transfer from Housing Revenue Account (12.790) (12.718) Capital expenditure financing - Housing 11.348 10.835
Balance at 31 March (5.006) (3.564)
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Collection Fund
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Collection Fund Income and Expenditure Statement
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 Cornwall Council and to Devon and Cornwall Police of the council tax and non-domestic rates.
2017/18 2017/18 2017/18 2016/17 2016/17 2016/17 NNDR Council Tax Total NNDR Council Tax Total £m £m £m £m £m £m Income Council tax receivable - (323.974) (323.974) - (307.095) (307.095) Business rates receivable (155.362) - (155.362) (155.377) - (155.377) - Total Income (155.362) (323.974) (479.336) (155.377) (307.095) (462.472) - - Expenditure Apportionment of previous years surplus Cornwall Council 1.000 9.800 10.800 0.032 7.000 7.032 Devon and Cornwall Police Authority - 1.171 1.171 - 0.860 0.860 Central Government 1.000 - 1.000 0.032 - 0.032 Precepts, demands and shares Central Government - - - 75.672 - 75.672 Central Government Enterprise Zone Grant - - - 0.288 - 0.288 Cornwall Council 140.214 280.350 420.564 75.960 264.129 340.089 Cornwall Council Designated Areas Grant 0.125 - 0.125 - - - Cornwall Council Renewable Energy Grant 2.362 - 2.362 1.900 - 1.900 Devon and Cornwall Police Authority - 32.745 32.745 - 31.552 31.552 Business rates transitional protection 0.956 - 0.956 (1.407) - (1.407)
Charges to Collection Fund Less: write offs of uncollectable amounts 1.139 1.012 2.151 1.179 0.591 1.770 Less: increase/(decrease) in impairment allowance for doubtful debts 0.621 1.208 1.829 (0.443) 1.856 1.413 Less: cost of collection 1.125 - 1.125 1.125 - 1.125 Less: provision for backdated appeals 3.633 - 3.633 (1.413) - (1.413)
Total Expenditure 152.175 326.286 478.461 152.925 305.988 458.913
(Surplus)/deficit for the year (3.187) 2.312 (0.875) (2.452) (1.107) (3.559)
Collection Fund balance brought forward (2.488) (15.445) (17.933) (0.036) (14.338) (14.374)
Collection Fund balance carried forward (5.675) (13.133) (18.808) (2.488) (15.445) (17.933)
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Notes to the Collection Fund
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Note The Total National Non-domestic Rateable (NNDR) Value and the NNDR CF1 Multiplier
The Council is responsible for the collection of non-domestic rates in its area. From 1 April 2017 the Council retained 100% of income collected compared to prior regulations where the Council retained 50% of the income collected and 50% passed to central government.
The government specifies an amount to be collected, the multiplier, which for 2017/18 was 47.9p, reducing to 46.6p for properties in receipt of Small Business Rate Relief with a rateable value of £17,999 or less. The total rateable value for all non-domestic properties as at 31 March 2018 was £464.712m (£432.397m 2016/17).
Note The Council Tax Base CF2 To enable the Council to set the Council Tax each year, there is requirement to calculate the Council Taxbase.
This is derived from the number of domestic properties/dwellings in each Council Tax Band on the valuation list, applying discounts, exemptions and multiplying the result by a weighting factor applicable to each Band. Finally, the taxbase is adjusted to allow for an element of non-collection.
Adjusted Number of Band D Dwellings on Dwellings per Weighting Band D Non Equivalent Valuation Band Valuation List Band Factor MOD * MOD * Dwellings 2017/18
A 62,437 38,867 6/9 25,904 174 26,078 B 68,344 51,774 7/9 40,269 135 40,403 C 56,667 47,461 8/9 42,188 86 42,274 D 41,613 33,553 9/9 33,553 63 33,616 E 24,179 22,139 11/9 27,059 10 27,069 F 8,659 8,098 13/9 11,697 7 11,704 G 4,054 3,801 15/9 6,335 2 6,337 H 377 311 18/9 622 0 622
Total 266,330 206,004 187,627 477 188,103
Less: Allowance for non-collection of 1.25% 2,345 2,345
Council Tax Base 185,758
* MOD (Ministry of Defence)
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Pension Fund Accounts Cornwall Council 2017/18 Statement of Accounts
Fire Fighters’ Pension Fund Account
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Fire Fighters’ Pension Fund Account
The funding arrangements for the fire fighters’ pension scheme changed on 1 April 2006. Before April 2006, the employer did not make contributions into a fund based upon a percentage of pay. The employer was responsible for its own fire fighters on a pay-as-you- go basis.
Under the new arrangements, Cornwall Council no longer meets the cost of pensions directly, instead paying its contributions into a fund. The fund will also receive contributions from employees and transfers from other pension funds. It will also pay out pensions to retired fire fighters and to other pension funds if a scheme member transfers out. The fund has no investment assets and is balanced to zero each year either by the receipt of a top-up grant from the Ministry of Housing, Communities and Local Government, or by paying the surplus over to the government.
Employees and employer’s contribution levels are based on percentages of pensionable pay set nationally by the Ministry of Housing, Communities and Local Government and subject to triennial revaluation by the Government’s Actuary Department.
Fund Account 2017/18 2016/17 £m £m Contributions receivable: Fire authority: Contributions in relation to pensionable pay (1.528) (1.505) Other (0.027) (0.016) Firefighters contributions (1.266) (1.206) Transfers in from other authorities (0.007) (0.053)
Benefits payable: Pensions 4.583 4.347 Commutations and lump sum retirement benefits 1.470 0.779
Payments to and on account of leavers: Transfers out to other authorities 0.010 0.008 Refunds of contributions 0.008 0.013
Net amount payable for the year 3.243 2.367
Top-up grant payable by the Government (3.243) (2.367)
Total - -
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Pension Fund Accounts Cornwall Council 2017/18 Statement of Accounts
Net Assets Statement 31 March 31 March 2018 2017 £m £m Current Assets Top-up receivable from the Government 1.179 0.471 Current Liabilities Amount owing to the General Fund (1.179) (0.471)
Total - -
The accounting policies followed are those set out in the main Statement of Accounting Policies.
This Net Assets Statement does not include liabilities to pay pensions and other benefits after the Balance Sheet date.
Further information on Pension Scheme Assets and Liabilities can be found in note 36 in the main financial statements.
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Pension Fund Accounts
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Cornwall Local Government Pension Scheme Accounts
Fund Account
2017-18 2016-17
Dealings with members, employers and £m £m £m £m Notes others directly involved in the Fund Contributions 89.381 86.201 P7 Transfers In from Other Pension Funds 5.467 2.464 P7
Total Contributions 94.848 88.665
Benefits Payable (70.187) (65.750) P7 Payments to and on account of leavers (3.775) (4.553) P7
Total Payments (73.962) (70.303)
Net Additions from Dealings with Members 20.886 18.362
Management Expenses (20.698) (14.014) P8
Net Additions including Fund Management Expenses 0.188 4.348 Returns on Investments Investment Income 9.388 12.689 P9 Taxes on Income (0.474) (0.070) P9 Profit and Loss on Disposal of Investments and Changes in Market Value of Investments 79.878 217.151 P10
Net Returns on Investment 88.792 229.770
Net Increase / (Decrease) in the Net Assets Available for Benefits During the Year 88.980 234.118
Opening Net Assets of the Scheme 1,709.126 1,475.008
Closing Net Assets of the Scheme at 31 March 1,798.106 1,709.126
Net Assets Statement 31 March 31 March 2018 2017
£m £m Notes
Long Term Investments 0.840 - P10 Investment Assets 1,787.251 1,702.410 P10 Investment Liabilities - -
Total Net Investments 1,788.091 1,702.410
Current Assets 13.764 10.544 P16 Current Liabilities (3.749) (3.828) P16
Net Assets of the Scheme as at 31 March 1,798.106 1,709.126
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Pension Fund Accounts Cornwall Council 2017/18 Statement of Accounts
These accounts summarise the transactions of the Fund during the year, both for benefits and investments, and show the position of the Fund on 31 March 2018. They provide information about the financial position, performance and financial adaptability of the Fund and show how we have managed the Fund and what assets were in the Fund at the period end. Liabilities to pay pensions and other benefits in the future are not included but are dealt with in the Actuarial data included in Notes P14 and P15.
Notes to the Pension Scheme Accounts
Note Description of the Fund P1
The Cornwall Pension Fund “the Fund” is a Local Government Pension Scheme (LGPS).
General
Local Government Pension Schemes are required to be funded and the Fund is required to be sufficient to meet the estimated future pension entitlements of current and past employees. It is actuarially re-valued every three years to establish the contributions to be made by the employing authorities to achieve this objective. Transfers into or out of the Fund are sums received from, or paid to, other pension schemes. These relate to new and former members’ periods of pensionable employment, where transferable.
After meeting pension payments and other benefits, the balance of the Pension Fund is invested in a range of investments. The Fund is governed by the Public Service Pensions Act 2013 and is administered in accordance with the following secondary legislation:
The LGPS Regulations 2013 (as amended) The LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014 (as amended) The LGPS (Management and Investment of Funds) Regulations 2016
The Pensions Committee is responsible for all matters relating to the Pension Fund. The membership includes two member-nominated representatives and two representatives of the employers in the scheme. The Pensions Committee has approved a scheme of delegation to the Section 151 Officer. Whereas the Pensions Committee approves all policies, the Section 151 Officer is empowered to invest monies of the Pension Fund. The Pensions Committee receives investment advice from JLT, the Fund’s investment consultant and also receives guidance from an independent advisor who helps ensure good governance.
The Pensions Board carries out an oversight function to ensure such decisions are properly compliant with regulations, guidance and internal policies. An Investment Strategy Statement, setting out how the Fund’s investments are managed, can be viewed on the Pension Fund website at www.cornwallpensionfund.org.uk or in the Pension Fund Annual Report.
Membership
All employees (except teachers and fire fighters who have their own schemes) are entitled to join the scheme. Individuals have the right to seek alternative pension arrangements if they so wish. On 31 March 2018 there were 150 employer records in the Fund with active members (132 in the previous year).
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The table below shows a breakdown of the membership.
2014 2015 2016 2017 2018 Contributors Cornwall Council 9,740 8,766 8,780 7,426 7,021 Academies 2,736 3,610 4,237 5,542 6,732 Other Bodies 4,827 4,888 4,787 4,247 4,081
Total Number of Contributors 17,303 17,264 17,804 17,215 17,834
Pensioners Receiving Benefits 11,101 11,691 12,213 12,906 13,602 Deferred Benefits 17,035 18,711 19,239 20,306 21,014
Total Number of Pensioners 28,136 30,402 31,452 33,212 34,616
Funding
Benefits are funded by contributions and investment earning. Contributions are made by active members of the Fund in accordance with the Local Government Pension Scheme Regulations 2013 and range from 5.5% to 12.5% of pensionable pay for the financial year ending 31 March 2018. Employee contributions are matched by employers’ contributions which are set based on triennial actuarial funding valuations. The last such valuation was at 31 March 2016.
Benefits
Prior to 01 April 2014, pension benefits under the LGPS were based on final pensionable pay and length of pensionable service.
From 01 April 2014, the scheme became a career average scheme, whereby members accrue benefits based on their pensionable pay in that year at an accrual rate of 1/49th. Accrued pension is reviewed annually, in line with the Consumer Prices Index.
Note Basis of Preparation P2
These accounts summarise the Fund’s transactions for 2017-18 and its position at the year ending 31 March 2018. They have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2017-18, based on International Financial Reporting Standards (IFRS) as published by the Chartered Institute of Public Finance and Accountancy (CIPFA). The Fund’s Administering Authority is Cornwall Council and the Council’s professional staff who prepared these accounts, followed the same accounting policies, principles and practices that have been adopted for the Council’s own Statement of Accounts for 2017-18. The accounts have been prepared on a going concern basis.
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Accounting Policies Note P3 Fund Account – Revenue Recognition and Expense Items
Contributions, Investment Income and Expenses These are included on an accruals basis, where these amounts have been determined on the closure of accounts. Normal contributions from members and employers are accrued for at the rate recommended by the fund actuary in the payroll period to which they relate.
These accruals do not include the Fund’s liabilities to pay pensions and other benefits, in the future, to all the present contributors to the Fund. These liabilities are taken account of in the periodic actuarial valuations of the Fund and are reflected in the levels of employers’ contributions determined at these valuations. Lump sum benefits are accrued at year end.
Employer deficit contributions are accounted for on the due dates on which they are payable, under the schedule of contributions set by the scheme actuary or on receipt, if earlier than the due date.
Investment income for pooled funds is reinvested within the funds and is reflected in the unit price.
Interest income is recognised in the fund account as it accrues, and dividend income is recognised on the date the shares are quoted ex-dividend. Any amounts not received by the end of the reporting period are accrued for.
Changes in the net market value of investments are recognised as income and comprise all realised and unrealised profits/losses during the year.
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 disclosed in the net assets statement as current liabilities.
Transfer Values to/from Other Funds Transfer Values to/from Other Funds for individuals, are included in the accounts on the basis of the actual amounts received and paid in the year and are calculated in accordance with the LGPS Regulations 2013. Block transfers would be accrued, if they straddled the year end.
Pension Fund Management Expenses Pension Fund Management Expenses have been prepared in accordance with the CIPFA guidance, Accounting for Local Government Pension Scheme Management Expenses (2016), and as such have been split into administrative expenses, oversight and governance costs and investment management expenses.
Administrative Expenses Administrative Expenses are accounted for on an accruals basis. The staff costs of the pension administration team are charged direct to the Fund, as is the associated management, accommodation and other overheads which are apportioned to this function.
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Oversight and Governance Costs Oversight and Governance Costs are accounted for on an accruals basis. These include the staff costs of the investments team, advisors to the fund and other services which help the Fund provide effective oversight and governance. The associated management, accommodation and other overheads which are apportioned to this function are also charged to the Fund.
Investment Management Expenses Investment Management Expenses are accounted for on an accruals basis and comprise expenses which are incurred in relation to the management of pension fund assets. Where an investment manager’s fee note has not been received by the reporting period end date, an estimate based upon the market value of the mandate at the end of the reporting period has been used.
Fees are agreed in the respective mandates governing the manager’s appointments and are based on the market value of these investments under their management and therefore increase or reduce as the value of these investments change. In addition some of the Fund’s investments have an element of their fee which is performance related.
Taxation For taxation purposes, the Fund is a registered public service scheme under section 1(1) of Schedule 36 of the Finance Act 2004 and as such is exempt from UK income tax on interest received and from capital gains tax on the proceeds of investments sold. As Cornwall Council is the administering authority for the Fund, VAT input tax is recoverable on all Fund activities, including expenditure on investment expenses.
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.
Net Assets Statement
Financial Assets Financial assets are included in the net assets statement on a fair value basis at the reporting date. A financial asset is recognised in the net assets statement on the date the fund becomes party to the contractual acquisition of the asset and any gains or losses arising from changes in the fair value are recognised in the fund account.
The values of investments included in the net assets statement have been determined at fair value in accordance with the requirements of the Code and IFRS13. For the purposes of disclosing levels of fair value hierarchy, the Fund has been minded to take consideration of the classification guidelines recommended in Practical Guidance on Investment Disclosures (PRAG/Investment Association, 2016).
Cornwall Council and the other 9 shareholders each holds a 10% share in Brunel Pension Partnership Ltd (Company number 10429110). As such, no fund is deemed to have a significant influence and this long term investment is accounted for at fair value. The asset is initially measured at cost and will be subsequently revalued for any impairment. The accounts for the year ended 31 March 2018 mostly use the valuations for the Fund’s assets based on the figures provided by the Fund’s custodian, State Street.
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Foreign Currency Transactions Dividends, interest, purchases and sales of investments in foreign currencies have been accounted for at the spot market rates at the date of transaction.
Investments held in foreign currencies are converted at the closing rates of exchange, as at the financial year-end date.
Cash and Cash Equivalents Cash comprises cash in hand (Bank) and demand deposits (MMFs), which also includes amounts held by the custodian.
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to minimum risk of changes in value.
Additional Voluntary Contributions: Cornwall Pension Fund provides an AVC scheme for its contributors, the assets of which are invested separately from Cornwall Pension Fund. AVC’s are paid to the AVC provider by employers and are specifically for providing additional benefits for individual contributors. Each AVC contributor receives an annual statement showing the amount held in their account and movements in the year. The Fund has no involvement in the management of these assets and, for this reason, they are not included in Cornwall Pension Fund’s financial statements in accordance with the LGPS (Management and Investment of Funds) Regulations 2016 section 4(2)(b) but are disclosed as a note. Further details are provided in Note P17.
The Actuarial Present Value of Promised Retirement Benefits The Actuarial Present Value of Promised Retirement Benefits is disclosed and based on the requirements of IAS 19 Post-Employment Benefits and relevant actuarial standards. As permitted under the Code, Cornwall Pension Fund has included a note disclosing the actuarial present value of retirement benefits (Notes P14 and P15).
Under the Pension Fund Regulations, employers’ contribution rates are set to enable the Fund to meet, eventually, 100% of its overall liabilities to pay benefits for both local authorities and other bodies (see Note P14).
Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment.
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. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.
Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period. During the reporting period there were no prior period adjustments.
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Note Critical Judgments in Applying Accounting Policies P4 Pension Fund Liability The pension fund liability is calculated every three years by the appointed actuary, with annual updates in the intervening years. The methodology used is in line with accepted guidelines and in accordance with IAS 19. Assumptions underpinning the valuations are agreed with the actuary and are explained in Notes P14 and P15. The estimate of fund liability is subject to significant variances based on changes to the underlying assumptions. These actuarial revaluations are used to set future contribution rates and underpin the Fund’s most significant investment management policies, for example in terms of the balance. The Pension Fund includes, as admitted bodies, several limited companies. In the event that any of these companies cease to trade and staff are made redundant, there is a potentially unfunded liability to pay immediate benefits to all redundant staff aged 55 and above. In certain cases, guarantees have been obtained from other organisations that they would accept responsibility for any such liability
Note Assumptions Made About the Future and Other Major Sources of Estimation P5 Uncertainty
These financial statements contain estimated figures that are based on assumptions and judgements made by our investment managers about the future or that are otherwise uncertain. These estimates and assumptions affect the amounts reported for the assets and liabilities at balance sheet date and the amounts reported for revenues and expenses during the year. Estimates are made taking into account historical experience, current trends and other relevant factors. However, the nature of estimation means that actual outcomes could differ from the assumptions and estimates. The items in the Net Assets Statement at 31 March 2018, for which there is a significant risk of material adjustment in the forthcoming year, are as shown below: Item Uncertainties Effect if actual results differ from assumptions Actuarial present Estimation of the net liability to pay pensions The effects on the net pension liability value of promised depends on a number of complex judgements of changes in the individual retirement benefits relating to the discount rate used, the rate at which assumptions can be measured. A 0.5% salaries are projected to increase, changes in decrease in the real discount rate retirement ages, mortality rates and expected assumption would increase the pension returns on pension fund assets. liability by £307m. A 0.5% rise in the salary increase rate would increase the A firm of consulting actuaries, Hymans Robertson, is liability by £48m. A 0.5% increase in engaged to provide the fund with expert advice assumed pension increase rate would about the assumptions to be applied. increase liability by £240m. A 1 year increase in assumed life expectancy would increase the liability by 3-5%.
More details on the Actuary’s assumptions and projections are shown in notes P14 and P15. Private Equities, These investments are not publicly listed and as The total private equity, infrastructure, Infrastructure, such there is a degree of estimation involved in property limited partnerships and Property Limited their valuation. Private Debt investments in the Partnerships and financial statements are £142.854m. Private Debt See Note P11, Fair Value - Basis of Valuation for There is a risk that these investments further detail may be under - or over - stated in the accounts, see note P11.
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Note Events after the Reporting Date P6 These are events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. Two types of events can be identified: a) Those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the reporting period), and b) Those that are indicative of conditions that arose after the reporting period (non- adjusting events after the reporting period).
The Cornwall Pension Fund has come together with the local authorities of Devon, Somerset, Dorset, Avon, Wiltshire, Gloucestershire, Oxfordshire, Buckinghamshire and also the Environment Agency to form the Brunel Pensions Partnership Limited (Brunel), which is 1/10th owned by each fund.
Brunel has become FCA regulated (Company number 10429110) and started providing services to the funds from 01st April 2018. Brunel has an intense programme of tenders and investment portfolio creations over the next few years. As the portfolios which are inline with the Fund’s strategic allocation become available, the Cornwall Pension Fund’s assets will be invested in Brunel’s investment portfolios.
Each fund will be charged a service fee depending on services taken up and assets under management. For further information please see Brunel’s website.
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Note Analysis of Total Contributions and Benefits P7 The total contributions receivable and benefits payable during the year ending 31 March were as shown overleaf:
Cornwall Scheduled Designatory Admitted Council Bodies Bodies Bodies 2018 2017 £m £m £m £m £m £m Contributions Receivable Employers' normal 24.505 16.785 4.662 5.484 51.436 51.164 Employers' fixed deficit 9.086 4.370 2.231 4.939 20.626 18.675 From Employees 8.982 5.693 1.576 1.059 17.310 16.346 (normal and additional) Transfers In Individual transfers 3.267 1.868 0.010 0.322 5.467 2.464 Other Income 0.005 0.004 - - 0.009 0.016
Total Income 45.845 28.720 8.479 11.804 94.848 88.665
Benefits Payable Pensions (45.715) (5.178) (1.848) (3.709) (56.450) (54.120) Lump Sums (7.892) (1.853) (1.525) (1.013) (12.283) (9.834) Death Benefits (1.066) (0.167) (0.144) (0.016) (1.393) (1.514) Taxation where lifetime or (0.033) (0.004) (0.024) - (0.061) (0.282) annual allowance exceeded Payments on Account of Leavers Refunds of Contributions (0.135) (0.144) (0.007) (0.020) (0.306) (0.344) Transfers Out Individual transfers (2.029) (0.827) (0.118) (0.495) (3.469) (4.209)
Total Expenditure (56.870) (8.173) (3.666) (5.253) (73.962) (70.303)
Taxation arising on benefits paid or payable is in respect of members whose benefits exceeded the life time or annual allowance and who elected to take lower benefits from the Fund in exchange for the Fund settling their tax liability.
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Note Management Expenses P8 For the years ended 31 March, the analysis of management expenditure was as follows:
2018 2017 £m £m Management Expenses Administrative Costs 0.904 0.862 Investment Management Expenses Management Fees 8.743 7.462 Performance Fees 1.473 0.119 Transaction Costs1 6.806 3.702 Other Costs2 2.048 0.991 Custody Fees 0.050 0.045 Oversight and Governance Costs 0.674 0.833
Total Investment and Administration Expenses 20.698 14.014
1 2017 and 2018 incurred one off costs for mandate changes\restructures 2 Other Costs are investment management expenses incurred which do not fall into the other subheadings
In addition to these costs, indirect costs are incurred through the bid-offer spread on investments sales and purchases. These are reflected in the costs of investment acquisitions and in proceeds from the sales of investments (see note P10).
Included in Oversight and Governance Costs is £0.024m for the year to 31 March 2018 (£0.024m for the year to 31 March 2017) which relates to the external audit of the Pension Fund accounts.
Note Investment Income P9
The income paid back to the Fund generated by the Fund’s investments, net of tax, amounted to £8.914m. Other income is generated by the Fund’s investments but the holdings are invested in accumulation shares, which are held for capital growth. The income is held back and reflected in the unit price. Investment income for the years ended 31 March was received from the following sectors:
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2018 2017 £m £m
Pooled Investment Vehicles Bonds1 0.000 4.379 Private equities, infrastructure and private debt 3.327 1.884 Pooled Property Funds 4.816 4.572 Gain on foreign currency transactions when trading 1.077 1.632 Interest on cash deposits 0.037 0.089 Other 0.131 0.133
Gross Investment Income 9.388 12.689
Irrecoverable Witholding Tax (0.474) (0.070)
Net Investment Income 8.914 12.619
1 The Fund’s bond mandate is now invested in an accumulation share class, which is held for capital growth. The income is held back and reflected in the unit price.
Note Investments P10 31 March 31 March 2018 2017
£m £m Notes Long Term Investments Brunel Pension Partnership Ltd 0.840 - P10 Investment Assets Pooled Investments 1,646.697 1,561.789 P10 Pooled Property Investments 132.667 117.455 P10 Cash Deposits 7.787 18.378 P13 Other Investment Balances 0.100 4.788 P10
Net Investment Assets 1,788.091 1,702.410
The following note shows the pooled investments split between UK and Overseas at 31 March. The vast majority of these funds are denominated in sterling, for a breakdown of those which are not in sterling, see Foreign Currency Risk (contained in Note P13). The pooled funds denominated in sterling will on a day to day basis be subject to foreign currency risk (due to underlying holdings in other markets), which is taken into account with the sterling unit pricing of these pooled funds as at 31 March. The managers of the pooled funds have the ability to manage this exposure by using forward exchange contracts or hedging the sterling value of investments that are priced in other currencies, if they deem this risk material.
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31 March 31 March 2018 2017 Investment Assets £m £m
Pooled Investment Vehicles Managed Funds UK Pooled Funds 546.270 508.609 Overseas Pooled Funds 1,100.427 1,053.180 UK Pooled Property 31.200 28.473 Overseas Pooled Property 2.238 0.651 UK Unit Trusts Pooled Property 99.229 88.331 1,779.364 1,679.244
Cash Deposits 7.787 18.378 Investment Income Due and tax receivable 0.100 0.177 Amounts Receivable from Sales - 4.611 7.887 23.166
Net Investment Assets of the Scheme as at 31 March 1,787.251 1,702.410
Profit / Loss Value and Change Value 1 April Purchases Sales in Market 31 March 2017 at cost Proceeds Value 2018 £m £m £m £m £m Long Term Investments Brunel Pensions Partnership - 0.840 - - 0.840 Investment Assets Pooled Investment Vehicles Pooled Equity Funds 555.407 0.076 (3.450) 23.676 575.709 Pooled Property Funds 117.455 13.829 (7.435) 8.818 132.667 Other Pooled Investments 1,006.382 265.954 (248.726) 47.378 1,070.988
1,679.244 280.699 (259.611) 79.872 1,780.204
Other adjustments for revaluation - 0.006 - Cash Deposits 18.378 7.787 Other Investment Balances 4.788 0.100
Net Investment Assets 1,702.410 79.878 1,788.091
The comparative data for the previous year are as follows:
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Profit / Loss Value and Change Value 1 April Purchases Sales in Market 31 March 2016 at cost Proceeds Value 2017 Investment Assets £m £m £m £m £m
Pooled Investment Vehicles Pooled Equity Funds 452.200 0.061 (22.049) 125.195 555.407 Pooled Property Funds 107.027 38.325 (28.119) 0.222 117.455 Other Pooled Investments 878.018 327.929 (291.268) 91.703 1,006.382
1,437.245 366.315 (341.436) 217.120 1,679.244
Other adjustments for revaluation - 0.031 - Cash Deposits 29.917 18.378 Other Investment Balances 4.551 4.788
Net Investment Assets 1,471.713 217.151 1,702.410
The fund managers’ portfolios were valued as follows:
31 March 2018 31 March 2017 % of % of £m Total £m Total Fund Manager Aberdeen Standard Investments (Property, Private Equity 120.819 6.7% 110.722 6.5% & Frontier Markets)1 AXA Investment Managers (Liability Driven Investment) 300.237 16.8% 291.130 17.1% BlueBay (Private Debt) 7.399 0.4% - 0.0% Capital International (Emerging Market Equities) 101.540 5.7% 89.115 5.2% Environmental Technology Fund (Private Equity) 1.221 0.1% 1.399 0.1% Golub (Private Debt) 10.693 0.6% - 0.0% Hermes Investment Management (Infrastructure) 45.864 2.6% 50.582 3.0% HSBC (Frontier Market Equities) 51.493 2.9% 49.487 2.9% Infracapital Partners (Infrastructure) 15.235 0.9% 16.007 1.0% Insight Investment Management (Absolute Return Bonds) 168.166 9.4% 167.546 9.8% Internally Managed Property Funds (Property) 81.581 4.6% 76.507 4.5% Invesco Perpetual (Diversified Growth Fund) 330.308 18.5% 305.021 17.9% Man FRM (Hedge Fund) 136.446 7.6% 112.200 6.6% M & G UK Financing Fund (Private Debt) 0.426 0.0% 1.612 0.1% Newton Investment Management (Global Equities) 375.111 21.0% 373.693 21.9% Wilshire Associates (Private Equity) 32.825 1.8% 34.223 2.0%
Total Investments with external managers 1,779.364 99.6% 1,679.244 98.6%
Accruals and Cash Deposits 7.887 0.4% 23.166 1.4%
Total Investment Assets 1,787.251 100.0% 1,702.410 100.0%
1 Aberdeen Asset Management and Standard Life Investments merged in August 2017, they were previously disclosed separately.
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The following holdings each represent more than 5% of the net assets of the Fund:
31 March 2018 31 March 2017
£m % of Total £m % of Total
Newton Global Equity X Shares Fund 375.111 21.0% 373.693 21.9% AXA IM Smart Matching Solutions Fund A 300.237 16.8% 291.130 17.1% Invesco Balanced Risk 8 Accumulation Shares 212.546 11.9% 202.058 11.9% Insight LDI Solutions Plus Bonds Plus 400 S 168.166 9.4% 167.546 9.8% ManFRM - Cornwall Hedge Fund Strategy 136.446 7.6% 112.200 6.6% Invesco Global Targeted Returns Fund 117.762 6.6% 102.963 6.0% Capital International Emerging Markets 101.540 5.7% 89.115 5.2%
Note Fair Value – Basis of Valuation P11 The basis of valuation of each class of investment asset is set out below. There has been no change in valuation technique used during the year.
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Valuation Observable and Key sensitivities affecting the Description of asset hierarchy Basis of valuation unobservable inputs valuations provided
Diversified Growth Funds Level 2 Valued using vendor pricing and OTC pricing Evaluated price feeds Not Required models
Pooled Equity Funds Level 2 Closing bid price where bid and offer prices NAV-based pricing set Not Required are published. Closing single price where on a forward pricing single price published basis Absolute Return Bonds Level 2 Average of broker price feeds Evaluated price feeds Not Required
Liability Driven Investment Level 2 Valued using vendor pricing and OTC pricing Evaluated price feeds, Not Required models OTC Modelling and economics of Swap Property Unit Trusts (UK) Level 2 Closing bid price where bid and offer prices NAV-based pricing set Not Required are published on a forward pricing Closing single price where single price basis published
Hedge Funds Level 2 Closing bid price where bid and offer prices NAV-based pricing set Not Required are published on a forward pricing Closing single price where single price basis published
Private Debt Level 3 Fair value derived from the amortised cost Initial recognition cost, Valuations could be affected by measurement Principal repayments, material events occurring between effective interest method, the date of the financial Impairment reductions statements provided and the pension fund's own reporting date, as the fund is exposed to credit risk and asset determined to be uncollectible will need to be written off and by any differences between the audited and unaudited accounts
Property Limited Partnerships Level 3 Valued at fair value at the year-end using a NPV of projected cash Valuations could be affected by number of different models that relect the flows, internally- material events occurring between general partner's determination of generated pricing models the date of the financial assumptions and inputs that market utilising NAV statements provided and the participants might reasonably use in valuing methodologies, pension fund's own reporting date, the securities underlying property by changes to expected valuations, transactions cashflows, and by any differences observable in the between audited and unaudited marketplace and accounts reported NAV as provided by the investee Infrastructure Funds Level 3 Direct investments: Independent valuation Future free cash flows Valuations could be affected by performed using discounted cash flow from underlying material events occurring after the methodology in accordance with international investments preparation of the independent private equity valuation guidelines Cost of capital of reports, and by changes to underlying investments expected cash flows.
Private Equities Level 3 Comparable valuation of similar companies in EBITDA multiple Valuations could be affected by accordance with International Private Equity Revenue multiple material events occurring between and Venture Capital Valuation Guidelines Discount for lack of the date of the financial marketability statements provided and the Control premium pension fund's own reporting date, by changes to expected cashflows, and by any differences between audited and unaudited accounts
Sensitivity of assets valued at level 3
Having analysed historical data and current market trends, and consulted with independent advisors, the Fund has determined that the valuation methods described above are likely to be accurate to within the following ranges, and has set out below the consequent potential impact on the closing value of investments held at 31 March 2018.
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Assessed valuation Value at 31 Value on Value on range (+/-) March 2018 increase decrease £m £m £m
Private Debt 5 18.517 19.443 17.591 Property Limited Partnerships 10 7.024 7.727 6.322 Private equities 15 56.214 64.646 47.782 Infrastructure funds 10 61.099 67.209 54.989
Total 142.854 159.025 126.684
The comparative data for the previous year are as follows:
Assessed valuation Value at 31 Value on Value on range (+/-) March 2017 increase decrease £m £m £m
Private Debt 5 1.612 1.693 1.531 Property Limited Partnerships 10 4.146 4.561 3.731 Private equities 15 62.284 71.627 52.941 Infrastructure funds 10 66.589 73.248 59.930
Total 134.631 151.129 118.133
Fair Value Hierarchy
The Fund is required to classify its investments using a fair value hierarchy that reflects the subjectivity of the inputs used in making an assessment of fair value. Fair value is the value at which the investments could be realised within a reasonable timeframe. This hierarchy is not a measure of investment risk but a reflection of the ability to value the investments at fair value. The fair value hierarchy has the following levels:
Level 1 – Unadjusted, quoted prices in an active market for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Listed investments are shown at bid prices. The bid value of the investment is based on the bid market quotation of the relevant stock exchange.
Level 2 – Inputs, other than quoted prices under Level 1, that are observable for the asset or liability, either directly or indirectly. For example, where an instrument is traded in a market that is not considered to be active, or where valuation techniques are used to determine fair value and where these techniques use inputs that are based significantly on observable market data.
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Level 3 – These are financial instruments where at least one input that could have a significant effect on the valuation is not based on observable market data, an example of these instruments is unquoted equities.
The valuation relies on the reporting entity’s own assumptions concerning the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. This is done with reference to the International Private Equity and Venture Capital Valuation Guidelines, which follow the principles of IFRS and US GAAP.
Valuations for the Fund’s private equities are usually undertaken at the end of December and cash flow adjustments are used to roll forward valuations to 31 March.
The following table sets out the Fund's financial assets and liabilities measured at fair value according to the fair value hierarchy at 31 March 2018:
Quoted Market Using Observable With Significant Price Inputs Unobservable Inputs
Investment Assets Level 1 Level 2 Level 3 Total as at 31 March 2018 £m £m £m £m
Financial Assets at Fair Value Through Profit and Loss - 1,636.510 142.854 1,779.364 Other Investment Assets 7.887 - - 7.887
Total Investment Assets 7.887 1,636.510 142.854 1,787.251
The comparative table for 31 March 2017 is shown below:
Quoted Market Using Observable With Significant Price Inputs Unobservable Inputs
Investment Assets Level 1 Level 2 Level 3 Total as at 31 March 2017 £m £m £m £m
Financial Assets at Fair Value Through Profit and Loss - 1,544.613 134.631 1,679.244 Other Investment Assets 23.166 - - 23.166
Total Investment Assets 23.166 1,544.613 134.631 1,702.410
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Reconciliation of Fair Value Measurements within level 3
Infrastructure Property Limited Private equities funds Private Debt Partnerships Total value £m £m £m £m £m
Market value April 2017 62.284 66.589 1.612 4.146 134.631
Transfers into Level 3 - - - - -
Transfers out of Level 3 - - - - -
Purchases during the year 4.091 0.110 20.009 3.973 28.183
Sales during the year (14.927) (14.376) (2.462) (1.256) (33.021)
Unrealised gains/losses (2.541) 3.644 (0.787) 0.184 0.500
Realised gains/losses 7.307 5.132 0.145 (0.023) 12.561
Market value 31 March 2018 56.214 61.099 18.517 7.024 142.854
The comparative table for 31 March 2017 is shown below:
Infrastructure Property Limited Private equities funds Private Debt Partnerships Total value £m £m £m £m £m
Market value April 2016 58.491 56.961 3.778 4.576 123.806
Transfers into Level 3 - - - - -
Transfers out of Level 3 - - - - -
Purchases during the year 8.225 13.296 - 0.823 22.344
Sales during the year (15.488) (15.158) (2.335) (1.118) (34.099)
Unrealised gains/losses 3.782 3.112 0.169 0.148 7.211
Realised gains/losses 7.274 8.378 - (0.283) 15.369
Market value 31 March 2017 62.284 66.589 1.612 4.146 134.631
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Note Financial Instruments P12 Classification of Financial Instruments
31 March 31 March 2018 2017 £m £m Financial Assets Fair value through profit or loss Pooled Investments 1,646.697 1,561.789 Pooled Property Investments 132.667 117.455 Long Term Investments 0.840 - Loans and Receivables Cash 9.200 21.542 Other investment balances 0.100 4.788 Debtors 12.351 7.380
Total Financial Assets 1,801.855 1,712.954
Financial Liabilities Measured at amortised cost Creditors (3.749) (3.828) Total Financial Liabilities (3.749) (3.828)
Grand Total 1,798.106 1,709.126
Net Gains and Losses on Financial Instruments
31 March 2018 31 March 2017 £m £m
Financial Assets Fair Value Through Profit and Loss 79.878 217.151 Loans and Receivables -
Total 79.878 217.151
Note Nature and Extent of Risks Arising from Financial Instruments P13
The Cornwall Council Pension Fund's objective is to generate positive investment returns for a given level of risk. Therefore the Fund holds financial instruments such as equities, bonds, and cash and cash equivalents in a number of different investment vehicles. In addition, debtors and creditors arise as a result of its operations. The value of these financial instruments in the financial statements approximates to their fair value.
The main risks from the Fund's holding of financial instruments are market risk, credit risk and liquidity risk. Market risk includes price risk, interest rate risk and foreign currency risk.
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The Fund's investments are managed on behalf of the Fund by the appointed fund managers. Each fund manager is required to invest the assets managed by them in accordance with the terms of their investment guidelines or pooled fund prospectus. The Pensions Committee has determined that the investment management structure is appropriate and is in accordance with its investment strategy. The Committee regularly monitors each manager, and considers and takes advice on the nature of the investments made and associated risks.
The Fund's investments are held by State Street Bank and Trust Company, who act as custodian on behalf of the Fund, or with the custodian appointed by the pooled investment vehicle
Because the Fund adopts a long-term investment strategy, the high level risks described below will not alter significantly during the year unless there are significant strategic or tactical changes in the portfolio.
Market Risk
Market risk represents the risk that the fair value of a financial instrument will fluctuate because of changes in market prices, interest rates or currencies. The Fund is exposed through its investments in equities, bonds and investment funds, to all these market risks. The aim of the investment strategy is to manage and control market risk within acceptable parameters, while optimising the return from the investment portfolio.
In general, market risk is managed through the diversification of the investments held by asset class, investment mandate guidelines and fund managers. The risk arising from exposure to specific markets is limited by the strategic asset allocation, which is regularly monitored by the Committee.
Market Price Risk
Market price risk represents the risk that the value of a financial instrument will fluctuate caused by factors other than interest rate or foreign currency movements, whether those changes are caused by factors specific to the individual instrument, its issuer or factors affecting the market in general.
Market price risk arises from uncertainty about the future value of the financial instruments that the Fund holds. All investments present a risk of loss of capital; the maximum risk being determined by the fair value of the financial instruments. The fund managers mitigate this risk through diversification, in line with their own investment strategies and mandate guidelines.
Market Price Risk - Sensitivity Analysis
The sensitivity of the Fund's investments to changes in market prices has been analysed using the volatility of return experienced in each asset class, as observed and provided by PIRC during the year to 31 March 2018, figures to 31 March 2017 were provided by JLT. The volatility data is broadly consistent with a one-standard deviation movement in the value of the assets. The analysis assumes that all other variables remain constant.
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Movements in market prices would have increased or decreased the net assets, at 31 March 2018, by the amounts shown below:
Value on Value on Value Volatility of Increase Decrease As at 31 March 2018 £m Return % £m £m
Global Equities 575.709 10.60% 636.677 514.741 Property 132.667 2.60% 136.077 129.257 Bonds 168.166 8.80% 182.965 153.367 Other pooled investment vehicles and private equities 902.822 10.60% 998.521 807.123
Total1 1,779.364 6.70% 1,898.581 1,660.147
1 The percentage change for total assets includes the impact of correlation across asset classes. Therefore, the values on increase and decrease do not add to the totals.
The comparative data for the previous year are as follows:
Value on Value on Value Volatility of Increase Decrease As at 31 March 2017 £m Return % £m £m
Global Equities 555.407 10.24% 612.304 498.510 Property 117.455 3.54% 121.618 113.292 Bonds 167.546 7.95% 180.859 154.233 Other pooled investment vehicles and private equities 838.836 12.32% 942.157 735.515
Total1 1,679.244 7.01% 1,856.938 1,501.550
1 The percentage change for total assets includes the impact of correlation across asset classes. Therefore, the values on increase and decrease do not add to the totals
Interest Rate Risk
The Fund recognises that interest rates can vary and can affect both income to the Fund and the carrying value of fund assets, both of which affect the value of the net assets available to pay benefits.
The Liability Driven Investment is used as a hedge to reduce risk. It is worth noting that an increase in interest rates would be accompanied by a fall in the Fund’s actuarial liability.
The analysis that follows assumes that all other variables remain constant and shows the effect of a +/- 1% change in interest rates.
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Value on Value on Potential Interest Rate Interest Rate Interest Rate Risk as at 31 March 2018 Value movement Decrease Increase 1% change in interest rates £m £m £m £m
Liability Driven Investment 300.237 139.332 439.569 160.905
Total 300.237 139.332 439.569 160.905
Foreign Currency Risk Comparators
Foreign currency risk represents the risk that the fair value of financial instruments when expressed in sterling, the Fund’s base currency, will fluctuate because of changes in foreign exchange rates. The Fund is exposed to currency risk on investments denominated in a currency other than sterling. For a sterling based investor, when sterling weakens, the sterling value of foreign currency denominated investments rises. As sterling strengthens, the sterling value of foreign currency denominated investment falls.
Foreign Currency Risk - Sensitivity Analysis
The following table analyses the Fund’s currency exposure as at 31 March 2018 as observed and provided by PIRC (JLT data as at 31 March 2017). PIRC analysed historical data and considered the potential volatility associated with foreign exchange rate movements to be 12.00% (as measured by one standard deviation).
The below table reports foreign currency sensitivity only for the pooled funds denominated in a currency other than sterling, for the pooled funds which are denominated in sterling at the 31 March, the Fund is of the opinion that these represent a fair valuation of the pooled funds in sterling, when taken in conjunction with the market price risk sensitivity analysis.
The pooled funds denominated in sterling will on a day to day basis be subject to foreign currency risk (due to underlying holdings in other markets – see P10), which is taken into account with the sterling unit pricing of these pooled funds as at 31 March. The managers of the pooled funds have the ability to manage this exposure by using forward exchange contracts or hedging the sterling value of investments that are priced in other currencies, if they deem this risk material.
The analysis assumes that all other variables, in particular interest rates, remain constant:
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Potential Value on Value on Overseas Assets as at 31 March 2018 Value Percentage Increase Decrease £m Change £m £m
Overseas Equities 101.540 12.00% 113.683 89.397 Cash 2.947 12.00% 3.300 2.595 Property 2.238 12.00% 2.506 1.970 Alternatives 65.686 12.00% 73.541 57.831
Total Overseas Assets 172.411 12.00% 193.030 151.793
The comparative data for the previous year are as follows:
Potential Value on Value on Overseas Assets as at 31 March 2017 Value Percentage Increase Decrease £m Change £m £m
Overseas Equities 89.115 8.47% 96.665 81.565 Cash 0.052 8.47% 0.056 0.048 Property 0.651 8.47% 0.706 0.596 Alternatives 60.885 8.47% 66.043 55.727
Total Overseas Assets 150.703 8.47% 163.470 137.936
Credit Risk
Credit risk represents the risk that the counterparty to a financial instrument will fail to meet an obligation and cause the Fund to incur a financial loss. This is often referred to as counterparty risk.
The Fund is exposed to credit risk through its underlying investments (including cash balances) and the transactions it undertakes to manage its investments. The careful selection and monitoring of counterparties (including brokers, custodian and investment managers) minimises the credit risk that may occur through the failure to settle transactions in a timely manner. The Fund's contractual exposure to credit risk is represented by the net payment or receipt that remains outstanding and the cost of replacing the position in the event of a counterparty default. Bankruptcy or insolvency of the Custodian may affect the Fund's access to its assets. However, all assets held by the Custodian are ring-fenced as client assets and therefore cannot be claimed by creditors of the Custodian. The Fund manages its risk by monitoring the credit quality and financial position of the Custodian.
The Fund's bond portfolio has significant credit risk through its underlying investments. This risk is managed through diversification across corporate entities, credit quality and maturity of bonds. The market prices of bonds incorporate an assessment of credit quality in their valuation which reflects the probability of default (the yield of a bond will include a premium that will compensate for the risk of default).
Another source of credit risk is the cash balances held to meet operational requirements or by the managers at their discretion. Internally held cash is managed in line with Cornwall Council’s Treasury Management Policy, which sets out the permitted counterparties and
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limits. The Fund invests surplus cash with the Custodian in diversified, money market funds. (See table below for a breakdown of this)
The Fund’s bond investments are held in units of a fund run by the fund manager, Insight Investment Management Limited. Therefore, actual holdings in specific securities cannot be identified. However, the credit risk within the bond portfolio, at the year end, can be analysed in terms of proportions using standard industry credit ratings. This analysis is set out below:
Insight Investment Management Ltd At 31 March At 31 March 2018 2017 % % Rating
AAA -0.5% 0.8% AA 38.1% 38.1% A 4.4% 5.6% BBB 17.7% 13.4% BB and below 7.1% 6.8% Unrated 2.7% 0.9% Insight LDI Loan Fund 8.1% 3.8% BNYM EMD Fund 0.2% 0.2% BNYM Global Short Dated High Yield Fund 5.3% 6.0% Insight EMD Fund 18.9% 11.0% Insight Short-dated High Yield Bond Fund - - Insight Liquidity Fund 7.0% 5.7% Cash and other 1 -9.0% 7.7%
Total - Insight investment exposure 100.0% 100.0%
1 Includes forward currency, unsettled trades, margin and cash accounts
Cash and cash equivalents At 31 March At 31 March 2018 2017 Rating £m £m Money Market Funds Standard Life Investments Liquidity Fund AAA 4.315 12.637 Northern Trust Global Cash Fund AAA 0.239 5.741 State Street Global Advisors (SSGA) AAA 3.233 - Bank Natwest Plc BBB+ 1.413 3.164 Total cash and cash equivalents 9.200 21.542
Liquidity Risk
Liquidity risk represents the risk that the Fund will not be able to meet its financial obligations as they fall due. A substantial portion of the Fund's investments consist of readily-realisable securities (in particular equities and bonds). However, the main liability of the Fund is the benefits payable, which fall due over a long period and the investment strategy reflects the long term nature of these liabilities. Therefore the Fund is able to manage the liquidity risk that arises from its investments in less liquid asset classes which
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are subject to longer redemption periods and cannot be considered as liquid as the other investments. The Fund maintains a cash balance to meet working requirements.
The majority of the Fund’s invested assets could be realised within a three month period. The exceptions to this would be private equities, infrastructure, private debt and property limited partnerships. At 31 March 2018, these amounted to £142.854m, which represented 8.0% of the Fund’s investment assets (at 31 March 2017, these amounted to £134.631m, which represented 7.9% of the Fund’s investment assets).
Note Actuarial Statement for 2017-18 P14 (This note has been prepared by the Fund’s Actuary, Hymans Robertson)
This statement has been prepared in accordance with Regulation 57(1)(d) of the Local Government Pension Scheme Regulations 2013. It has been prepared at the request of the Administering Authority of the Fund for the purpose of complying with the aforementioned regulation. Description of Funding Policy The funding policy is set out in the Administering Authority’s Funding Strategy Statement (FSS), dated January 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’/dependants’ 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 which balances risk and return (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 demonstrate 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.
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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 £1,475 million, were sufficient to meet 75% 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 £486 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.
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. The key financial assumptions adopted for the 2016 valuation were as follows: 31 March 2016 Financial Assumptions Nominal % p.a.
Discount rate 3.9% Salary increase assumption 2.2% 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 these assumptions, the average future life expectancies at age 65 are as follows:
Males Females Current Pensioners 22.1 years 24.5 years 1 24.0 years 26.4 years Future Pensioners
1 Future pensioners are assumed to be aged 45 at the 2016 valuation
Copies of the 2016 valuation report and Funding Strategy Statement are available on request from Cornwall Council, the Administering Authority to the Fund.
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Experience over the period since March 2016 Since the last formal valuation, real bond yields have fallen placing a higher value on the liabilities. The effect of this has been broadly offset by strong asset returns. Both events have roughly cancelled each other out in terms of the impact on the funding position as at 31 March 2018.
The next actuarial valuation will be carried out as at 31 March 2019. The Funding Strategy Statement will also be reviewed at that time.
Catherine McFadyen FFA Fellow of the Institute and Faculty of Actuaries For and on behalf of Hymans Robertson LLP 24 April 2018
Actuarial present value of Promised Retirement Benefits Note (This note was prepared by the Fund’s Actuary, Hymans Robertson) P15 CIPFA's Code of Practice on Local Authority Accounting 2017/18 requires Administering Authorities of LGPS funds that prepare pension fund accounts to disclose what IAS26 refers to as the actuarial present value of promised retirement benefits. I have been instructed by the Administering Authority to provide the necessary information for the Cornwall Pension Fund (“the Fund”).
The actuarial present value of promised retirement benefits is to be calculated similarly to the defined benefit obligation under IAS19. There are three options for its disclosure in pension fund accounts:
showing the figure in the Net Assets Statement, in which case it requires the statement to disclose the resulting surplus or deficit;
as a note to the accounts; or
by reference to this information in an accompanying actuarial report. If an actuarial valuation has not been prepared at the date of the financial statements, IAS26 requires the most recent valuation to be used as a base and the date of the valuation disclosed. The valuation should be carried out using assumptions in line with IAS19 and not the Pension Fund’s funding assumptions.
I have been instructed by the Administering Authority to provide the necessary information for the Cornwall Pension Fund, which is in the remainder of this note.
Balance sheet
Year ended 31 March 2018 31 March 2017 £m £m Active members 1,363 1,263 Deferred members 596 600 Pensioners 944 982 Present value of Promised Retirement Benefits 2,903 2,845
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The promised retirement benefits at 31 March 2018 have been projected using a roll forward approximation from the latest formal funding valuation as at 31 March 2016. The approximation involved in the roll forward model means that the split of benefits between the three classes of member may not be reliable. However, I am satisfied that the total figure is a reasonable estimate of the actuarial present value of benefit promises.
The above figures include both vested and non-vested benefits, although the latter is assumed to have a negligible value. Further, I have not made any allowance for unfunded benefits.
It should be noted the above figures are appropriate for the Administering Authority only for preparation of the accounts of the Pension Fund. They should not be used for any other purpose (i.e. comparing against liability measures on a funding basis or a cessation basis).
Assumptions The assumptions used are those adopted for the Administering Authority’s IAS19 report and are different as at 31 March 2018 and 31 March 2017. I estimate that the impact of the change in financial assumptions to 31 March 2018 is to decrease the actuarial present value by £59m. There is no impact from any change in the demographic and longevity assumptions because they are identical to the previous period.
Financial assumptions My recommended financial assumptions are summarised below:
Year ended 31 March 2018 31 March 2017 % p.a. % p.a. Pensions Increase Rate 2.4% 2.4% Salary Increase Rate 2.5% 2.5% Discount Rate 2.7% 2.6%
Longevity assumption Life expectancy is 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 a long term rate of 1.25% p.a. Based on these assumptions, the average future life expectancies at age 65 are summarised below:
Males Females Current Pensioners 22.1 years 24.5 years Future Pensioners 1 24.0 years 26.4 years
1 Future pensioners are assumed to be aged 45 at the 2016 valuation
Please note that the longevity assumptions have changed since the previous IAS26 disclosure for the Fund.
Commutation assumptions An allowance is included for future retirements to elect to take 40% of the maximum additional tax-free cash up to HMRC limits for pre-April 2008 service and 70% of the maximum tax-free cash for post-April 2008 service.
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Catherine McFadyen FFA Fellow of the Institute and Faculty of Actuaries For and on behalf of Hymans Robertson LLP 19 April 2018
Note Current Assets and Liabilities P16 31 March 31 March 2018 2017 £m £m Current Assets Administration income receivable 0.769 0.506 Contributions receivable 11.198 6.681 Pension strain income receivable 0.384 0.193 Cash Balances 1.413 3.164
Total Current Assets 13.764 10.544
Analysis of Debtors Central Government bodies 0.008 0.087 Local authorities 6.226 4.984 Public corporations - - Other entities and individuals 6.116 2.309
Total Debtors 12.351 7.380
Current Liabilities Administration expenses payable (2.893) (2.777) Pension lump sums payable (0.856) (1.051)
Total Current Liabilities (3.749) (3.828)
Creditors Central Government bodies (0.050) (0.215) Local authorities (1.721) (1.694) NHS bodies - - Other entities and individuals (1.978) (1.919)
Total Creditors (3.749) (3.828)
Total Current Assets and Liabilities 10.015 6.716
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Note Additional Voluntary Contributions (AVC) P17
Value Value at 31 March 2018 31 March 2017 £m £m AVC Scheme Standard Life 1.956 2.326 Equitable Life 0.504 0.602 2.460 2.928 Changes During the Year Contributions 0.172 0.178 Paid Out (0.722) (0.169) Change in Market Value 0.082 0.278
Note Related Party Transactions P18
Cornwall Council is the administering authority for the purpose of the Fund. The majority of investments are managed by external fund managers, although during the year a small proportion was held as cash and controlled by Cornwall Council within a Pension Fund, nominated, money market account. Transactions with the Fund in respect of employees in the Scheme are shown in Note P7.
Included in Management Expenses (see Note P8) are charges amounting to £1.140m incurred for the internal costs of providing these services during the year to 31 March 2018 (£1.114m for the year to 31 March 2017). For the year to 31 March 2018 this is composed of £0.904m Administrative Costs and £0.236m Oversight and Governance Costs (£0.862m Administrative Costs and £0.252m Oversight and Governance Costs for the year to 31 March 2017).
Senior officers of the Pension Fund are members of the Fund as employee contributors. Following the local elections in May 2017, Cornwall Council Councillors are no longer eligible for active membership of the Pension Fund therefore, as at 31 March 2018, there were 4 pensioner members of the Fund serving on the Pensions Committee plus the two employer representatives being contributing members.
The Council made payments to each Cornwall Council elected Member serving on the Pensions Committee, in accordance with the Council’s Member’s Allowances Scheme. These payments were met by Cornwall Council and declared in their statutory accounts.
Brunel Pension Partnership Ltd (Company number 10429110) Brunel Pensions Partnership Ltd (Brunel) was formed on the 14th October 2016 and will oversee the investment of pension fund assets for Avon, Buckinghamshire. Cornwall, Devon, Dorset, Environment Agency, Gloucestershire, Oxfordshire, Somerset, and Wiltshire Funds.
Each of the 10 local authorities, including Cornwall Council own 10% of Brunel. Pension Fund transactions with Brunel were as follows, working capital £0.840m year to 31 March 2018.
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Key Management Personnel
The key management personnel of the Fund are the Section 151 Officer, the Head of Exchequer and Pensions and the Pensions Committee. The table below shows the benefits they receive. This is not the total remuneration these posts receive, but is a notional amount based on their time allocated to the pension fund. 2018 2017 £m £m
Short-term benefits1 0.066 0.039 Post-employment benefits 0.006 0.004
Total 0.072 0.043
1 Due to a member of staff leaving during 2018, there was additional senior manager support.
Note Contractual Commitments P19 Outstanding capital commitments (investments) at the prevailing exchange rate on the day at 31 March 2018 were £194.857 (£60.162m at 31 March 2017). The difference is largely due to new commitments made to Golub, Bluebay, Bridges and PP Property Finance.
These commitments relate to outstanding call payments due to the Fund’s partnerships for private equities, private debt, infrastructure and property. The amounts called by these partnerships are irregular in both size and timing over a period of between four and six years from the date of each original commitment.
Note Contingent Asset P20
Cornwall Pension Fund has ongoing claims against some European countries for tax withheld on foreign income dividends. KPMG, who submitted these claims in 2007, are still pursuing these claims on behalf of the Fund.
These claims are made on the basis that, within the European Union, all member states should enjoy the same tax status. Resident investors should not be classed differently to non-residents. Court cases such as those known as ‘Manninen’ and ‘Fokus’ have added to the strength of the arguments. The value of these claims is in excess of £250,000.
Also in 2007, claims were made against the HM Revenue and Customs for potential tax recovery in respect of manufactured dividends on equity stock lent out through the stock lending programme. Further claims were registered in the High Court in 2009-10 and again in 2012-13. These claims, to date, have a value in excess of £1.6m. According to our tax advisers, KPMG, recent developments offer some optimism on the success of these claims.
All these claims noted above are being pursued through group action along with other pension funds. No accruals have been included in the accounts for these tax claims because outcomes are uncertain, although the amounts are significant. KPMG were contacted for an update in March 2018 and these claims are still ongoing.
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Glossary Cornwall Council 2017/18 Statement of Accounts
Glossary
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Glossary Cornwall Council 2017/18 Statement of Accounts
Glossary
This section helps explains some of the more technical terms used in the Statement of Accounts.
Accounting Policies The policies, concepts and conventions used in the preparation of the accounts.
Accruals Sums included in the accounts to cover income and expenditure attributable to the accounting period, for which payment has not been received or made by 31st March.
Assets Held for Sale These are long-term assets which are surplus to the Council’s operational needs and are being actively marketed for sale.
Capital Expenditure Expenditure on the acquisition of a long-term asset or expenditure which adds to and not merely maintains the value on an existing long-term asset.
Capital Financing Costs The costs of financing long-term assets, such as the interest costs of external loans and monies used to repay debt.
Capital Receipts Income received from the sale of long-term assets.
Contingent Asset A contingent asset is a possible asset which could arise following the occurrence of a future event outside the Council’s control.
Contingent Liability A contingent liability is a possible liability which could arise following the occurrence of a future event outside the Council’s control or is a present obligation where it is not possible to measure the outcome with sufficient reliability.
Council Tax Precept A property based tax that is set and administered by the Council, alongside the share of Council Tax levied by the Devon and Cornwall Police Authority and other Town and Parish Councils in Cornwall.
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Creditors Amounts owed by the Council for goods received or services provided, but for which payment has not been made by the 31st March.
Curtailment Within the defined benefit schemes impacting on the financial results of the Council, curtailment will arise if an event occurs reducing the expected future service of employees. Normally, this arises from redundancy or early retirement or if there is an amendment to terms impacting on current employees.
Debtors Debtors represent amounts due to the Council which are unpaid at 31st March.
Defined Benefit Scheme Defined benefit pension schemes prescribe the amounts members will receive as a pension regardless of contributions and investment performance. Employers are obliged to fund any shortfalls.
Depreciation Depreciation is the fall in value of an asset, as recorded in the financial records, due to wear and tear, age and obsolescence.
Finance Leases This is where the eventual benefit of the asset will pass from the leasing company to the Council. Annual payments are a combination of interest and the purchase of the asset.
IFRS International Financial Reporting Standards.
Imprest Account Petty Cash Accounts used for small items of expenditure.
Inventory Previously referred to as ‘stock’.
LOBO - Lender Option Borrower Option A financial instrument which is typically very long-term - for example, 40 to 60 years. The initial interest rate is fixed, but the lender has the option to nominate a revised rate at periodic reset dates. The reset dates are nominated at the time the loan is taken out. The
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borrower has the ‘option’ to either accept the new imposed fixed rate or repay the loan facility.
Long-Term Assets Long-term assets are tangible assets intended to be used for several years.
Minimum Revenue Provision (MRP) The amount set aside to repay external debt.
National Non-Domestic Rates A tax collected locally by the Council from commercial undertakings.
Net Interest on the Net Defined Benefit Liability Net interest expense for the Council – the change during the period in the net defined liability/(asset) that arises from the passage of time.
Operational Assets These are long-term assets held by the Council required to support the provision of services.
Operating Leases This is where the rewards and risks of ownership of the asset remain with the leasing company and the annual rental is charged directly to the CIES.
Past Service Costs Where pension scheme members receive enhanced or new benefits, the increase in the present value of future liabilities will be accounted for as past service costs.
Provisions These are sums set aside to meet liabilities or losses that are likely to be or will be incurred, but the dates on which they will arise are not fully known at the date that the Statement of Accounts is approved.
Remeasurement of the Net Defined Benefit Liability Employees of the Council are members of defined benefit pension schemes. Actuarial gains and losses arise because events have not coincided with actuarial assumptions made in the previous valuation or because the actuarial assumptions have changed.
Reserves Amounts set aside to meet the cost of specific future expenditure.
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Revenue Contribution to Capital Expenditure The amount of capital expenditure financed directly from the annual revenue budget.
Revenue Expenditure Funded From Capital Under Statute (REFCUS) Capital expenditure for which no tangible long-term asset exists therefore is transferred to revenue.
Revenue Support Grant (RSG) A general central government grant paid to the Council in support of annual revenue expenditure.
Support Services These are services provided by the central departments of the Council in respect of finance, human resources, legal, administration and property.
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Other Versions of our Accounts
This document sets out Cornwall Council’s final Statement of Accounts in the full detail and in the formats required by law and by the Code of Practice on Local Authority Accounting, which we follow. If you need this version produced in a different format, for example, in large type or in a language other than English, please contact us using the details given below. Members of the public have a statutory right to inspect the accounts before the audit is completed. For the 2017/18 accounts the inspection period is 1 June 2018 to 12 July 2018. These dates were advertised as required on the Council’s website from Thursday 10th May 2018.
Feedback
We are constantly looking for ways to improve our publications and would welcome any feedback you may wish to provide. Please contact us with any comments or suggestions:
Email: [email protected] Telephone: 01872 323372
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