Cornwall Council 2018/19 Annual Financial Report and Statement of Accounts

Information Classification: CONTROLLED

Cornwall Council 2018/19 Annual Financial Report And Statement of Accounts

Information Classification: CONTROLLED

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Information Classification: CONTROLLED Contents Cornwall Council 2018/19 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 31 Statement of Accounts Statement of Responsibilities and Certification of the Statement of Accounts 35 Main Financial Statements 37 Comprehensive Income and Expenditure Statement 38 Movement in Reserves Statement 38 Balance Sheet 40 Cash Flow Statement 40 Notes to the Main Financial Statements 42 Index of Notes 43 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 139 Housing Revenue Account 141 Notes to the Housing Revenue Account 143 Collection Fund 149 Notes to the Collection Fund 151 Fire Fighters’ Pension Fund Account 153 Pension Fund Accounts 157 Cornwall Local Government Pension Scheme Accounts 158 Notes to the Pension Scheme Accounts 159 Glossary 189

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

Narrative Report from Chief Operating Officer and Section 151 Officer

I am pleased to introduce our Annual Financial Report and Statement of Accounts for 2018/19. This document provides a summary of Cornwall Council’s financial affairs for the financial year 1 April 2018 to 31 March 2019 and of our financial position at 31 March 2019. 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 Chief Operating Officer 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 2019 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 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 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 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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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 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 Council approved a refresh of its Business Plan and Medium term Financial Plan (MTFP), in February 2019. The refreshed Business Plan set out the Council’s aims as:

 Ensure everyone can live well and safely together  Create more homes and jobs for residents  Protect and enhance the environment

It also set out the Council’s values as:

 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

The original Business Plan 2018/19 to 2021/22 set out how the Council would 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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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

The Business Plan 2018/19 - 2021/22 explained how the Council proposed to deliver its Priorities for Cornwall and matching its spending to those priorities. It also included a number of key success measures that would be monitored and reported on a regular and public basis, so residents and businesses could track progress and hold the organisation to account for delivery.

In shaping the Business Plan the Council reflected on the results of the extensive residents’ survey conducted in July and August 2017 - reported to Cabinet in November 2017 - to ensure that the priority actions responded to what the people of Cornwall told the Council were the aspects of life that were of greatest importance and in most need of improving.

The Business Plan was purposely a succinct and readable document to engage residents, businesses, partners and our employees so that they could have their say on whether the Council’s priorities resonated with them and took on board the messages from the resident survey. It also set out how the Council spends its money both currently and how our budget proposals would change the emphasis in line with the priorities, so this could be consulted upon as well.

An Annual Report 2018/19 is due to be published in the summer of 2019 setting out how the Council has 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

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

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.

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 2018/19 the Council was organised around five Directorates:

 Adult Social Care – including adult social care and support; and adult transformation and commissioning;  Children, Schools and Families – including children’s services such as protecting; vulnerable children and supporting disabled children and services around education and supporting families;  Economic Growth and Development – including economic development, culture, public transport and planning;  Neighbourhoods – including fire and rescue, waste management and environmental services.  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.; and

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

CORMAC Wave Hub Corserv Ltd Contracting Ltd Ltd

Cornwall Cornwall Cormac Cornwall Development Housing Ltd Solutions Ltd Airport Ltd Company Ltd

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

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 previously entered into a joint venture arrangement with Nottinghamshire County Council called Via East Midlands Ltd to deliver a sustainable highways service for Nottinghamshire. This joint venture ended in 2018/19 with Nottingham County Council buying Corserv’s element of the Joint Venture. Cornwall Housing Ltd - manages and maintains over 10,000 council houses in mid and east Cornwall. The company looks after about 400 leaseholders on behalf of the Council and manages Council owned garages, shops and land in neighbourhoods with council housing. Cornwall Housing Ltd also delivers 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. 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.

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

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 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 2018/19 AGS for further information on how the Council has complied with these principles.

The Local Government Boundary Commission (LGBC) has been undertaking an electoral review for Cornwall. This review considers what electoral arrangements should be in place for an area including how many councillors are needed, how many wards or electoral divisions there should be and how many councillors should represent each ward or division.

The LGBC has recommended that the current number of councillors for Cornwall Council should be reduced from 123 to 87. The recommendations will be considered by Parliament and, if approved, the new arrangements will come in to force at the local elections in 2021.

Operational Model

The Council set its net revenue budget for 2018/19 at £550m with gross expenditure estimated at £1,160m. It also set a capital programme for investment in its assets of £567m. The budget included planned savings of £35m and the Council had general reserves of £36m and total usable reserves of £359m at the start of the year. The budget resulted in a Band D council tax of £1,482.48 which was an increase of 5.99% on 2017/18. The council tax

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

increase included 3% 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 which is set out below: Capital Programme 2018/19 - 2021/22

2021/22 2018/19 2019/20 2020/21 & beyond Total Programme Board £m £m £m £m £m

Customer & Support Services 14.135 6.326 8.464 - 28.925 Culture & Economic Development 29.851 11.262 2.381 - 43.494 Children, Families & Adults 13.974 4.766 0.788 - 19.528 Devolution 0.951 0.325 - - 1.276 Environment 13.270 10.688 2.459 0.049 26.466 Green Cornwall - 8.948 8.000 - 16.948 Growth Deal 23.687 0.714 3.216 - 27.617 Housing 26.939 29.413 24.877 13.598 94.827 Operational Asset Review (Fire & Rescue) 4.081 3.621 3.356 12.624 23.682 Property 9.336 2.935 2.745 3.371 18.387 Transportation 45.902 42.709 64.190 40.861 193.662 Waste 3.388 1.976 0.374 - 5.738

Investment Programme 33.234 32.749 - - 65.983

Total 218.748 156.432 120.850 70.503 566.533

2021/22 2018/19 2019/20 2020/21 & beyond Total Funding £m £m £m £m £m

General Fund Revenue & Reserves 44.071 30.646 30.174 0.000 104.891 HRA Revenue & Reserves 11.472 11.027 12.063 0.000 34.562 Borrowing 81.810 71.951 23.478 20.719 197.958 Capital Receipts 13.813 15.866 11.423 5.847 46.949 Grants & Contributions 67.582 26.942 43.712 43.937 182.173

Total 218.748 156.432 120.850 70.503 566.533

The figures above include the agreed spend for the HDP Pilot sites.

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

Risks and Opportunities

Risks

Strategic risks are reviewed and reported to the Audit Committee and Cabinet quarterly but there is a detailed review annually against the Strategy and Business Plan. Strategic risks are escalated/de-escalated through Directorate Leadership Teams and the Council Leadership Team and the Head of Internal Audit and Risk monitors this process. All risks were reviewed and updated positions for 20 strategic risks were reported as at Quarter 4 2018/19, by Portfolio. These risks cover a variety of issues ranging from the risk of climate change (the highest risk scored at 20/25) down through to data sharing arrangements (the lowest risk score of 4/25). Many of the risks focus on demographic changes and financial sustainability which are particularly key for Cornwall.

Opportunities

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 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. The Council is also implementing a Housing Development Programme to better enable the provision of affordable rental housing in Cornwall and is exploring the most appropriate governance arrangements to manage that Programme.

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

3. Strategy and Resource Allocation – The Council’s Budget and Medium Term Financial Plan 2019/20 to 2022/23 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 contributes to 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 £136.5m in 2018/19 to £124.9m in 2019/20 – a reduction of 9%. The settlement funding assessment represents a combination of monies receivable through Business Rates and Revenue Support Grant (RSG). Based on the Government’s estimate of the Council’s Business Rates income, the business rate ‘baseline’ - which actually increases over that timeframe - the RSG will actually reduce by a far greater amount next year from £28.6m in 2018/19 to £14.5m in 2019/20; a reduction of nearly 50%. Since the initial introduction of the settlement funding assessment in 2013/14 (under business rate retention reforms), Cornwall Council’s RSG has reduced by circa 90% and has now almost completely disappeared. 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.

Following its implementation in 2017/18, Cornwall Council agreed with central government that it would continue to pilot 100% business rate retention in 2018/19. This will continue into 2019/20 before a new national scheme is introduced which is expected to be rolled out in 2020/21. This means that the Council will forego certain other government grants in order to maintain a fiscally neutral position. 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 1.5% per annum. The Band D charge for 2019/20 is £1,527.09 which is an increase of 3.99% on the 2018/19 charge. Forecasts for future years are an increase of 2.99% in 2020/21 and 1.99% per annum thereafter.

Taking into account the above factors the Council forecasts that it will have the following resources over the period of its financial plan:

Resources

2018/19 2019/20 2020/21 2021/22 2022/23 £m £m £m £m £m 550.016 561.184 533.751 545.218 557.740

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

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

2019/20 2020/21 2021/22 2022/23 Total £m £m £m £m £m 38.910 26.190 20.574 18.895 104.569

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 below:

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

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 2019/20 to 2022/23 are made up of the following types:

The target net revenue budgets for the four years are set out as follows:

2019/20 2020/21 2021/22 2022/23 Directorate £m £m £m £m

Adult Social Care 175.733 169.997 175.999 186.162 Together for Families * 70.054 68.575 68.719 68.953 Neighbourhoods 96.208 104.216 105.139 106.340 Economic Growth & Development 70.459 46.469 46.966 47.755 Customer & Support Services 58.493 58.605 58.159 58.159 Wellbeing & Public Health 24.789 24.789 24.789 24.789 Capital Financing & Interest Receipts 47.902 51.652 53.457 55.013 Corporate Items 9.299 10.082 10.070 9.069 Net Revenue Budget before Reserve Movements 552.937 534.385 543.298 556.240

Reserve Movements 8.247 (0.634) 1.920 1.500

Net Revenue Budget 561.184 533.751 545.218 557.740

*Previously “Children, Schools and Families”

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

It is considered that the budget strategy of setting a four year MTFP is a sound and robust approach 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 updated capital programme is summarised below:

2019/20 2020/21 2021/22 2022/23 and Total beyond £m £m £m £m £m 380.993 300.169 183.879 136.711 1,001.752

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. A subsequent government announcement was made that the policy would be extended for a further three years to March 2022.

The Council has reviewed the Flexible Use of Capital Receipts guidance and identified the following schemes as meeting the eligibility criteria laid out in the guidance document, in that they are forecast to generate ongoing revenue savings through reducing costs of service delivery:

Actual Actual Actual Forecast 2016/17 2017/18 2018/19 2019/20 Total (£m) (£m) (£m) (£m) (£m) Library Information Services 0.068 0.157 0.941 - 1.166 Transformation (phase 1)

Library Information Services 0.234 0.234 Transformation (phase 2)

Adult Care & Support Day Centre 0.165 0.165 Transformation

0.068 0.157 0.941 0.399 1.565

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

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.

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

The 3rd quarter performance report made to Cabinet in February 2019 set out the Council’s performance in each of the areas above. This included performance against 27 strategic performance measures of which 17 were being reported quarterly, 4 biannually and 6 reported annually. The performance indicators are rated as either: on track to achieving or exceeding the target (green), slightly off-target and has an improving direction of travel (amber) or significantly off-track and have a worsening direction of travel (red). Performance at quarter 3 is shown in the chart below. The detailed performance can be found in the Cabinet report on the Council’s website.

Council Performance Indicators Quarter 3 2018/19

22% Green 55% 55% Amber 4%

Red 15%

Annual 22% 15% Data not availble 4%

Whilst the overall approach to risk management is covered above, Cabinet receives an update on strategic risks following their consideration by the Audit Committee.

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

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.

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.

2018/19 Financial Performance

The final revenue outturn position for the financial year 2018/19 was a net underspend of £1.234m against a net budget of £550.016m.

The Council’s Directorates overspent by £4.584m. The majority was within Children, Schools and Families totalling £2.319m along with overspends of £0.915m within Economic Growth and Development, £1.029m within Neighbourhoods and £0.481m within Customer and Support Services. Adult Social Care underspent by £0.160m. Wellbeing and Public Health delivered to budget. The total net Directorate overspend has been offset by an increase in corporate grant income which is £5.925m higher than budget.

This net underspend has been achieved despite a savings shortfall of £2.084m against planned saving targets. These savings shortfalls have mainly been mitigated by other underspends and the use of reserves. As part of the 2019/20 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 1 May 2019 Cabinet approved the underspend of £1.234m be transferred to the General Fund.

The 2018/19 outturn by Directorate and the overall position is as follows:

Approved Outturn Variance Directorate Budget £m £m £m

Adult Social Care 168.990 168.830 (0.160)

Children Schools and Families 78.447 80.766 2.319

Economic Growth & Development 54.425 55.340 0.915

Neighbourhoods 94.498 95.527 1.029

Customer and Support Services 57.963 58.444 0.481

Wellbeing & Public Health 25.461 25.461 -

Directorate Total 479.784 484.368 4.584

Corporate Items 70.232 70.339 0.107

Funding (550.016) (555.941) (5.925)

Total Variance (1.234)

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

Notes on Main Variances from the Budget

The outturn for Directorates, after proposed reserve movements, is a £4.584m overspend. Against a net budget of £479.784m this represents a 0.96% variance. This compares to a forecast outturn at the end of December 2018 of a £3.268m overspend.

The Children, Schools and Families Directorate overspent by £2.319m. The principal reason for the overspend is due to a significant increase in children in care of 12% since April 2017 creating pressures in agency care placements of £1.619m and in looked-after children exceptional need payments of £1.045m. These have been off-set by underspends within the successful “Together for Families” programme as a result of reduced activity and additional income through increased Payment by Results outcomes.

The Economic Growth and Development Directorate overspent by £0.915m. The main variances within this net overspend are Transport and Infrastructure which overspent by £0.286m mainly due to increases in charges for Public Notices and an overspend of £0.554m in Planning and Sustainable Development mainly due to shortfalls in planning income.

The Neighbourhoods Directorate overspent by £1.029m. The main reasons for this are an overspend in Resilient Cornwall of £1.746m due to high levels of operational activity and shortfalls in income generated by Phoenix and CCTV along offset by an underspend in Environment of £1.065m mainly due to a one-off receipt of £1.600m relating to a settlement with waste disposal contractors.

The Customer and Support Service Directorate overspent by £0.481m which is mainly due to increased costs of implementing the Oracle Cloud IT system.

The Wellbeing and Public Health Directorate outturn was on budget.

Corporate Items

The outturn for Corporate Items is an overspend of £0.107m. Within this net position Housing Benefit payments and support overspent by £1.552m primarily due to increases in the number and cost of temporary accommodation and homelessness along with the impact of universal credit which can have a negative impact on the amount of housing benefit that can be recovered from the Department for Work and Pensions. Corporate superannuation costs were £0.605m less than budgeted and there were corporate provisions not required resulting in a £0.716m underspend.

Corporate Funding

Funding is £5.925m higher than budgeted. This is mainly due to additional Government Section 31 grant of £3.838m relating to business rates retention and in particular compensation for reduced business rate income due to the extension of the Small Business Rate Relief policy. The Government also unexpectedly announced in the settlement that it would be redistributing surplus balances totalling £180.000m currently retained in the Business Rate Levy Account of which Cornwall has received £1.693m.

Reserve Movements

The outturn position includes proposed net movements to reserves of £39.684m. Whilst this reflects a number of transfers between reserves, it includes the following key movements:

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

 A budgeted contribution of £26.160m from Economic Growth and Development directorate for capital highway 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. Previously, a specific capital grant for highways maintenance was received to fund the capital works. However, this income is now treated as revenue as part of our retained business rates and a transfer from the revenue budget into a capital reserve is required to fund the capital programme. An amount of £4.275m will now be retained within revenue for rural cyclical maintenance and other highway maintenance works reducing the amount transferred into reserves to fund capital expenditure;  As per 2018/19 approved budget, a net transfer of £11.809m from Corporate Items being mainly: - £16.215m to the Economic Development Match Fund Reserve from the 2017/18 Collection Fund balance; - £5.844m transfer from the General Fund Reserve to smooth the impact of Government funding cuts;  A £6.816m transfer from Capital Financing and Interest Receipts to fund the future growth agenda. The planned contribution was reduced in year by £3.000m to reflect the virement which was approved by Cabinet on 24th July 2018 to part fund the cost of a strategic partner to support the adults transformation programme;  The transfer of the year end underspend of £1.234m to General Fund Reserve from revenue.

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 £484.367m and the cost of services of £505.335m 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:

2018/19 £m £m Directorate Total per the CPR Outturn 484.368 484.368 Cost of services not included in the Directorate CPR Corporate Items in the cost of services 24.656 Schools 13.668 Local Authority Housing Revenue Account (HRA) (11.020) Joint Committees (TBTF and Mount Edgcumbe) 0.806 28.110 Statutory adjustments excluded from the CPR Capital charges including depreciation and impairment (charge for use of assets) 61.124 Notional pension benefits (to comply with IAS 19) 14.449 PFI adjustments (26.387) 49.186 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 1.249 Net contribution to Reserves (17.182) Reclassification of Public Health Grant (25.461) Minor variations (1.008) (42.402)

Cost of services in the Comprehensive Income and Expenditure Statement (CIES) 519.262

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

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. 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 not charged directly to directorates;

 Reversal of items not included in the cost of services 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 Capital Grants 2. National Non-domestic Rates (NNDR) Housing Benefits and Contributions 3. Dedicated School Grant (DSG) – a Subsidy £135m £30m 2% Council Tax 11% (including in year specific grant which provides the bulk of deficit) £306m school funding 25% 4. Other specific grants – supporting General Grants particular services and Other National Non- Income £375m Domestic Rates 5. General grants and other income – 31% (including in year grants not specific to individual services deficit) £159m and income from sales, fees and 13% charges and rents and financing income Other Specific Dedicated School 6. Housing Benefits Subsidy – support from Grants £80m 7% Grant £136m 11% government for tenants’ rents 7. Capital grants and contributions – recognised as income when any attached conditions are met

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

The main categories of service that we fund are: 1. Children, Families and Adults Transfer of Academy School Exceptional LOBO 2. Economic Growth and Development Assets £24m 2% premium on Financing redemption £54m 3. Neighbourhoods Expenditure 4% £79m 6% Adult Social Care 4. Customer and Support Services £253m 19% Schools £110m 5. Wellbeing and Public Health 8% Children, Schools 6. Corporate Items and Other Services and Families Corporate Items £167m 12% 7. Schools and Other Services £258m Economic Growth 8. Financing Expenditure – including 19% interest paid on borrowing and Development £154m 12% 9. Transfer of Academy School Assets Wellbeing and Public Health Customer and Neighbourhoods 10. Exceptional LOBO premium £28m 2% Support Services £102m 8% £105m 8% 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 2018/19 was £196.844m (2017/18 £200.975m). The major areas of capital expenditure were:

 Transport schemes £92.153m  Housing schemes £32.817m  Economic development and culture schemes £28.670m  Adults and Children’s Services schemes £16.059m  Environmental schemes £8.658m  Corporate schemes £20.051m

Included within the total expenditure on transport schemes is £45.302m specifically relating to the maintenance and improvement of Cornwall’s roads. In addition a further £22.986m was spent on the Growth Deal programme which aims to deliver a wide range of transport related improvements across Cornwall.

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

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 £18.652m. A total of £11.986m 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. Within the Housing schemes £34.877m (within £64.877m above), £32.059m was spent on the Housing Development Programme (HDP). This is a Council initiative to provide more housing within Cornwall. Whilst this spend is monitored and reported through the capital programme the expenditure itself is not technically capital within accounting definitions as the resulting assets are held for sale and are treated as stock. The £32.059m is, therefore, excluded from the financing below:

Internal Our capital spending was funded from: Borrowing, Borrowing, £32m, 14% £45m, 20% 1. Capital Receipts Capital 2. Revenue Contributions and Receipts, Reserves £15m, 6% 3. Other Grants and Contributions from external bodies e.g. central Other Grants and government, European funding Contributions, Revenue and 4. Internal Borrowing £83m, 36% reserves, £55m, 24% 5. Borrowing

The main areas of expenditure were: Operational Land and 1. Operational Land and Buildings Other Capital Buildings Expenditure £24m 2. Council Dwellings £66m 11% Council Dwellings 3. Roads and Infrastructure 29% £19m 4. Vehicles, Plant and Equipment 8% 5. Assets Under Construction (assets not yet operational) Roads and 6. Housing Development Pilot Sites Infrastructure Housing £58m 7. Other Capital Expenditure, Development 25% including Revenue Expenditure Pilot Sites £32m Funded from Capital Under Statute Assets Under 14% (REFCUS), which is expenditure of Construction Vehicles, Plant a capital nature that does not result £19m and Equipment 8% £12m in a Council asset e.g. Disabled 5% Facilities Grants.

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

The Council’s Financial Position

The Council’s net assets as at 31 March 2019 stood at £400.647m, a decrease of £168.749m on the position at 31 March 2018 (£569.396m). This reduction was attributable to a number of areas, the most significant of which are:

 Increase in Property, Plant and Equipment Assets £95m  Reduction in long term investments £52m  Increase in inventories £33m  Increase in long term borrowing £52m  Increase in pensions liability £179m

At 31 March 2019 the Council’s General Fund balance amounted to £36.212m, a decrease of £0.229m on the opening balance of £36.441m. At 31 March 2019 the Council’s total usable reserves stood at £348.888m. Certain reserves are held for specific purposes such as capital, use on council dwellings, and schools curriculum.

Borrowing and Investments

At the end of 2018/19, the Council had net debt of £530.887m, an increase of £140.604m. Against this the Council also held £64.313m in cash balances, a decrease of £4.858m from the previous year. Long term borrowing increased by £51.775m to £688.547m.

The Council’s net debt is made up as follows:

2017/18 2018/19 Change £m £m £m

Long Term Investments 194.920 142.858 (52.062) Short Term Investments 143.006 122.463 (20.543) Total Investments 337.926 265.321 (72.605) Short Term Borrowing (91.437) (107.661) (16.224) Long Term Borrowing (636.772) (688.547) (51.775) Total Borrowing (728.209) (796.208) (67.999)

Net Debt (390.283) (530.887) (140.604)

Cash 69.171 64.313 (4.858)

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 2019. Overall, the Council’s net assets amounted to £400.647m 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.

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

Refinancing the Council’s Two Inverse LOBO’s

As part of its treasury portfolio the Council had two inverse LOBO loans totalling £85m. The interest rate payable on these loans varied inversely to market rates meaning that when rates increase the Council pays lower interest on them and conversely when rates decrease the Council pays higher interest. In an historically low interest rate environment the interest payable on these loans looks relatively expensive. As part of its ongoing treasury function, the Council has routinely considered the option of refinancing the two inverse LOBO’s. Due to the interest rate environment the breakage costs of premature repayment of these loans were generally prohibitive. However in 2018/19 many banks were more active in seeking to exit these loans due to changes in regulatory rules. The Council therefore instructed its treasury advisors to assess the options for reviewing the Council’s two inverse LOBO’s.

The options assessed were:

 Do nothing and let the loan run to maturity  Repay the loans using cash balances  Repay the loans and refinance through PWLB

The options were assessed against interest rate forecasts and the rate against which the inverse LOBO’s would be reset. Significant sensitivity analysis against the forecasts was undertaken.

The analysis concluded that although any premium incurred through premature redemption would be high, the discount being offered to the Council by the Royal Bank of Scotland was much higher than would normally be offered to redeem a LOBO loan.

The Council accepted the advice of its treasury advisors and redeemed the LOBO loans and refinanced them with loans from the Public Works Loans Board (PWLB). Whilst the premium on early redemption was significant - £53.623m – the report to the Council’s Portfolio Holder for Resources set out savings against the existing arrangements of £2m per annum in the Medium Term Financial Plan and potentially £85m over the life of the loans. Note 5 and note 40 in the Statement of Accounts set out the accounting treatment and provide more detail. 5. Outlook Cornwall Council refreshed its original four year business plan 2018/19 to 2021/22 to cover 2019/20 to 2022/23 in February 2019. The plan recognised that Cornwall and the Council are under increasing pressures. The Council has less money and pressure for services, especially where key areas, 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 and 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 the cost of those services is increasing. Since the inception of Cornwall Council in 2009 more

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Information Classification: CONTROLLED Narrative Report Cornwall Council 2018/19 Statement of Accounts

than £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 £70m 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 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 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 2019 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 Limited Liability Partnership (LLP) 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 has progressed the approved 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 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

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re-appraise national thinking on the tools and levers required to unlock regional growth in a post-Brexit world.

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Information Classification: CONTROLLED Independent Auditor’s Report Cornwall Council 2018/19 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 2019 which comprise the Comprehensive Income and Expenditure Statement, the Movement in Reserves Statement, the Balance Sheet, the Cash Flow Statement, the Group Movement in Reserves Statement, Group Comprehensive Income and Expenditure Statement, the Group Balance Sheet, the Group 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 notes to the financial statements. The notes to the financial statements include the EFA, Notes to the Core Statements, Policies and Judgements, Notes to the Housing Revenue Account Statement, Notes to the Collection Fund Statement, Notes to the Group Accounts. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC code of practice on local authority accounting in the United Kingdom 2018/19.

In our opinion, the financial statements:

 give a true and fair view of the financial position of the group and of the Authority as at 31 March 2019 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 2018/19; 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.

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Information Classification: CONTROLLED Independent Auditor’s Report Cornwall Council 2018/19 Statement of Accounts

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 Chief Operating Officer’s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or  the Chief Operating Officer’s 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 Chief Operating Officer is responsible for the other information. The other information comprises the information included in the Annual Financial Report and Statement of Accounts, the Annual Governance Statement, other than the Authority and group financial statements and, our auditor’s report thereon and our auditor’s report on the pension fund financial statements. 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

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 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.

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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 Annual Financial Report and Statement of Accounts, 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 issue a report 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 make 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 make an application to the court for a declaration that an item of account is contrary to law under Section 28 of the Local Audit and Accountability Act 2014 in the course of, or at the conclusion of the audit; or;  we issue an advisory notice under Section 29 of the Local Audit and Accountability Act 2014 in the course of, or at the conclusion of the audit; or  we make an application for judicial review under Section 31 of the Local Audit and Accountability Act 2014, in the course of, or at the conclusion of the audit.

We have nothing to report in respect of the above matters.

Responsibilities of the Authority, the Chief Operating Officer 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 Chief Operating Officer. The Chief Operating Officer 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 2018/19, for being satisfied that they give a true and fair view, and for such internal control as the Chief Operating Officer 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 Chief Operating Officer 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

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Information Classification: CONTROLLED Independent Auditor’s Report Cornwall Council 2018/19 Statement of Accounts

going concern basis of accounting unless there is an intention by government that the services provided by the Authority will no longer be provided.

The Audit Committee is Those Charged with Governance. Those charged with governance are responsible for overseeing the Authority’s financial reporting process.

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 2019.

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

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Information Classification: CONTROLLED Independent Auditor’s Report Cornwall Council 2018/19 Statement of Accounts

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 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 2019.

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 - Delay in certification of completion of the audit

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 the work necessary to issue our Whole of Government Accounts (WGA) Component Assurance statement for the Authority for the year ended 31 March 2019. 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 2019.

We cannot formally conclude the audit and issue an audit certificate for the Authority for the year ended 31 March 2019 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 Local Audit and Accountability Act 2014 in 2015/16. We are satisfied that these matters do 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 2019.

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Information Classification: CONTROLLED Independent Auditor’s Report Cornwall Council 2018/19 Statement of Accounts

Use of our report

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. 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.

Geraldine N Daly, Key Audit Partner for and on behalf of Grant Thornton UK LLP, Local Auditor

Bristol

4th October 2019

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Information Classification: CONTROLLED Independent Auditor’s Report Cornwall Council 2018/19 Statement of Accounts

Independent Auditor’s Report to the Members of Cornwall Council

Opinion on the pension fund financial statements

We have audited the financial statements of Cornwall Pension Fund (the ‘pension fund’) administered by Cornwall Council (the ‘Authority’) for the year ended 31 March 2019 which comprise the Fund Account, the Net Assets Statement and notes to the pension fund financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC code of practice on local authority accounting in the United Kingdom 2018/19.

In our opinion, the financial statements:

 give a true and fair view of the financial transactions of the pension fund during the year ended 31 March 2019 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 2018/19; 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 Authority in accordance with the ethical requirements that are relevant to our audit of the pension fund’s 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.

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 Chief Operating Officer’s use of the going concern basis of accounting in the preparation of the pension fund’s financial statements is not appropriate; or  the Chief Operating Officer has not disclosed in the pension fund’s 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 the pension fund for a period of at least twelve months from the date when the pension fund’s financial statements are authorised for issue.

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Other information

The Chief Operating Officer is responsible for the other information. The other information comprises the information included in the Statement of Accounts, other than the pension fund’s financial statements, our auditor’s report thereon and our auditor’s report on the Authority’s financial statements. Our opinion on the pension fund’s 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’s 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’s financial statements or our knowledge of the pension fund obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the pension fund’s 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.

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’s financial statements and our knowledge of the pension fund the other information published together with the pension fund’s financial statements in the Statement of Accounts, the Narrative Report, the Annual Governance Statement and the Annual Report for the financial year for which the financial statements are prepared is consistent with the pension fund’s 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 make an application for judicial review under Section 31 of the Local Audit and Accountability Act 2014, in the course of, or at the conclusion of the audit.

We have nothing to report in respect of the above matters.

Responsibilities of the Authority, the Chief Operating Officer 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 Chief Operating Officer. The Chief Operating Officer is responsible for the preparation of the Statement of Accounts, which includes the pension fund’s financial statements, in accordance with proper practices as set out in the CIPFA/LASAAC code of practice on local authority accounting in the United Kingdom 2018/19, for being satisfied that they give a true and fair view, and for such internal control as the Chief Operating Officer 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 pension fund’s financial statements, the Chief Operating 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 there is an intention by government that the services provided by the pension fund will no longer be provided.

The Audit Committee is Those Charged with Governance. Those charged with governance are responsible for overseeing the Authority’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the pension fund’s financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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Information Classification: CONTROLLED Independent Auditor’s Report Cornwall Council 2018/19 Statement of Accounts

Use of our report

Geraldine. N. Daly, Key Audit Partner for and on behalf of Grant Thornton UK LLP, Local Auditor Bristol

4th October 2019

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Information Classification: CONTROLLED Statement of Responsibilities Cornwall Council 2018/19 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 Chief Operating Officer and Section 151 Officer; • manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; • approve the Statement of Accounts.

Chief Operating Officer and Section 151 Officer The Chief Operating Officer 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 Chief Operating Officer 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 valuation basis for infrastructure relating to the Tamar Bridge toll bridge where we have used ‘contractors test’ methodology.

The Chief Operating Officer 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

Chief Operating Officer and Section 151 Officer This Statement of Accounts presents a true and fair view of the financial position of Cornwall Council on 31 March 2019 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 Chief Operating Officer and Section 151 Officer 3 October 2019

The Chairman of the Audit Committee’s declaration This Statement of Accounts was approved by the Audit Committee on 30 July 2019

Cllr Harris Chairman of the Audit Committee 3 October 2019

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Information Classification: CONTROLLED Statement of Responsibilities Cornwall Council 2018/19 Statement of Accounts

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Page 36

Information Classification: CONTROLLED Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Main Financial Statements

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Information Classification: CONTROLLED Main Financial Statements Cornwall Council 2018/19 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* 2018/19 2017/18

Expenditure Income Net Expenditure Income Net Notes £m £m £m £m £m £m Adult Social Care 253.164 (80.684) 172.480 243.067 (82.688) 160.379 Children, Schools and Families 167.192 (79.975) 87.217 154.976 (71.221) 83.755 Economic Growth and Development 154.285 (79.900) 74.385 162.217 (84.043) 78.174 Neighbourhoods 101.921 (27.752) 74.169 122.303 (24.639) 97.664 Customer and Support Services 105.066 (23.582) 81.484 100.786 (24.562) 76.224 Wellbeing and Public Health 27.778 (26.361) 1.417 27.644 (26.992) 0.652 Corporate Items 198.348 (173.691) 24.657 203.958 (194.961) 8.997 Schools-managed Expenditure 110.401 (96.733) 13.668 152.008 (119.570) 32.438 Local Authority HRA 28.600 (39.620) (11.020) 35.364 (39.994) (4.630) Joint Committees 6.775 (5.970) 0.805 6.217 (5.874) 0.343

Cost of services 1,153.530 (634.268) 519.262 1,208.540 (674.544) 533.996

Other operating expenditure 23.752 32.909 11 Exceptional transfer of academy school assets 24.313 90.041 11 Other operating expenditure line 48.065 122.950 11 Financing and investment income and expenditure 67.409 70.174 12 Exceptional LOBO premium on redemption 53.623 - 12 Financing and investment income and expenditure line 121.032 70.174 12 Taxation and non-specific grant income (574.821) (549.527) 13

(Surplus) or deficit on provision of services 113.538 177.593

(Surplus) or deficit on revaluation of (68.121) (21.308) property, plant and equipment (Surplus) or deficit on revaluation of 1.705 0.698 available-for-sale financial assets Remeasurements of the net defined benefit liability / (asset) 120.565 (48.651) Other recognised (gains) and losses 1.062 1.398

Other comprehensive income and expenditure 55.211 (67.863)

Total comprehensive income and expenditure 168.749 109.730

* Restated as a result of a directorate restructure, details can be found in note 1

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.

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Information Classification: CONTROLLED Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

£m

Total

Council

168.749

109.730

(400.647)

(569.396)

(679.126)

Reserves

£m

55.211

95.195

(51.759)

(67.863)

158.690

103.479

163.058

(210.449)

(305.644)

Reserves

Unusable

£m

Total

10.059

14.535

Usable

113.538

177.593

(348.888)

(103.479)

(358.947)

(163.058)

(373.482)

Reserves

£m

1.807

Major

(3.199)

(5.006)

(1.442)

(3.564)

Repairs

Reserve

£m

3.335

Grants

19.866

Capital

(17.841)

(21.176)

(41.042)

Reserve

£m

0.424

10.402

Capital

(58.571)

(68.973)

(69.397)

Reserve

Receipts

£m

HRA

8.366

3.467

Total

(2.334)

(0.650)

(4.117)

(15.815)

(10.700)

(13.481)

(12.831)

Reserves

£m

HRA

(4.968)

(1.408)

(3.560)

(0.529)

(3.031)

Reserves

Earmarked

£m

1.408

8.366

0.529

3.467

(0.926)

(9.921)

(0.121)

(4.117)

(9.800)

(10.847)

(10.700)

Account

Housing

Revenue

£m

Total

(3.151)

(3.663)

124.238

181.710

(253.462)

(127.389)

(250.311)

(185.373)

(246.648)

Reserves

General Fund

£m

Ports

0.499

(0.831)

(0.094)

(0.737)

(1.236)

Balances

£m

Fund

(3.021)

(14.364)

General

(211.827)

(208.806)

(194.442)

Reserves

Earmarked

£m

Fund

4.546

(4.592)

(0.265)

(4.327)

(8.873)

Schools

General

Balance

£m

Fund

0.229

3.380

5.656

9.319

(36.212)

(36.441)

(42.097)

124.238

181.710

General

Balance

(127.389)

(185.373)

Note

under regulations under

Balance at March31 carried 2019 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 2018/19

Balance at March31 carried 2018 forward

(Increase)/Decrease in 2017/18

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 Balance at March31 carried 2017 forward Movement inStatement Reserves

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Information Classification: CONTROLLED Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Balance Sheet (opposite) The Balance Sheet shows the value of the assets and liabilities recognised by the Council at 31 March 2019. 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.

2018/19 2017/18

£m £m Notes

Net (surplus) or deficit on the provision of services 113.538 177.593

Adjustments to net (surplus) or deficit on the provision of services for (139.173) (273.325) 24 non-cash movements Adjustments for items included in the net (surplus) or deficit on the 75.161 92.388 24 provision of services that are investing and financing activities

Net cash flows from operating activities 49.526 (3.344)

Investing activities 13.034 (8.786) 25 Financing activities (57.702) 6.562 26

Net (increase) or decrease in cash and cash equivalents 4.858 (5.568)

Cash and cash equivalents at the beginning of the reporting period 69.171 63.603

Cash and cash equivalents at the end of the reporting period 64.313 69.171

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Information Classification: CONTROLLED Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Reclassify^ Balance Sheet 31 March 2019 31 March 2018

£m £m Notes Property, Plant and Equipment 2,368.364 2,272.985 14 Heritage Assets 3.086 3.086 Intangible Assets 2.704 3.407 Long Term Investments 142.858 194.920 15 Long Term Debtors 33.017 25.750 15

Long Term Assets 2,550.029 2,500.148

Cash and Cash Equivalents^ 91.734 90.814 19 Current Intangible Asset 0.389 0.307 Short Term Investments 122.463 143.006 15 Assets Held for Sale 10.276 9.331 Inventories 44.299 11.476 16 Short Term Debtors 90.561 98.612 17

Current Assets 359.722 353.546

Cash and Cash Equivalents^ (27.421) (21.643) 19 Short Term Borrowing (107.661) (91.437) 15 Short Term Creditors (124.171) (130.895) 20 Provisions (2.732) (6.553) 21 PFI Short Term Liabilities (3.393) (4.781) 15 PFI Short Term Deferred Liabilities (1.509) (1.509) Grants Receipts in Advance - Revenue (7.233) (10.299) Grants Receipts in Advance - Capital (5.542) (7.745)

Current Liabilities (279.662) (274.862)

Long Term Creditors (2.433) (2.445) 15 Provisions (39.307) (36.049) 21 Long Term Borrowing (688.547) (636.772) 15 Pension Liability (1,322.414) (1,143.088) 39 PFI Long Term Liabilities (111.180) (114.573) 15 Other Long Term Liabilities (2.054) (4.202) 15 PFI Deferred Income (29.420) (30.929) Grants Receipts in Advance - Capital (34.087) (41.378) 33

Long Term Liabilities (2,229.442) (2,009.436)

Net Assets 400.647 569.396

Usable Reserves (348.888) (358.947) MIRS Unusable Reserves (51.759) (210.449) 23

Total Reserves (400.647) (569.396)

^ Reclassify the Cash and Cash Equivalents between current assets and current liabilities

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Notes to the Main Financial Statements

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Index of Notes Page Note 1 Accounting Policies 44 Note 2 Accounting Standards That have Been Issued But Have Not Yet Been Adopted 63 Note 3 Critical Judgements in Applying Accounting Policies 64 Note 4 Assumptions Made about the Future and Other Major Sources of Estimation 65 Uncertainty Note 5 Material Items of Income and Expense 67 Note 6 Events After the Reporting Period 67 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 81 Note 16 Inventories 85 Note 17 Debtors 85 Note 18 Debtors for Local Taxation 86 Note 19 Cash and Cash Equivalents 86 Note 20 Creditors 86 Note 21 Provisions 87 Note 22 Contingent Liabilities 87 Note 23 Unusable Reserves 88 Note 24 Cash Flow Statement – Operating Activities 92 Note 25 Cash Flow Statement – Investing Activities 94 Note 26 Cash Flow Statement – Financing Activities 94 Note 27 Cash Flow Statement – Reconciliation of Liabilities Arising from Financing Activities 94 Note 28 Pooled Budgets 95 Note 29 Members’ Allowances 96 Note 30 Officers’ Remuneration 97 Note 31 External Audit Costs 99 Note 32 Dedicated Schools Grant 100 Note 33 Grant Income 101 Note 34 Related Parties 102 Note 35 Capital Expenditure and Capital Financing 105 Note 36 Leases 106 Note 37 Private Finance Initiatives and Similar Contracts 106 Note 38 Pension Schemes Accounted for as Defined Contribution Schemes 109 Note 39 Defined Benefit Pension Schemes 109 Note 40 Nature and Extent of Risks Arising from Financial Instruments 116

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Accounting Policies 1 i General Principles

The Statement of Accounts summarises the Council’s transactions for the 2018/19 financial year and its position at the year end of 31 March 2019. The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2015, which 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 2018/19, supported by International Financial Reporting Standards (IFRS).

The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of 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 contracts with service recipients, whether for service or the provision of goods, is recognised when (or as) the goods or services are transferred to the service recipient in accordance with the performance obligations in the contract;  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.

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

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 Directorate reporting structure in the year 2018/19 has meant the comparatives have had to be restated. The main change is the creation of two Directorates, Adult Social Care and Children, School and Families from the Children, Families and Adults Directorate. Another significant change is the movement of Housing Benefits payments and income from the Directorate Customer and Support Services to Corporate Items. Details of the adjustments are shown in the table below:

Effect on Comprehensive Income and Expenditure Statement 2017/18

As Previously Stated As Restated Change Expenditure Income Expenditure Income Expenditure Income 2017/18 2017/18 2017/18 2017/18 2017/18 2017/18 £m £m £m £m £m £m

Children, Families and Adults 398.043 (153.909) - - (398.043) 153.909 Adult Social Care - - 243.067 (82.688) 243.067 (82.688) Children, Schools and Families - - 154.976 (71.221) 154.976 (71.221) Economic Growth and Development 149.539 (82.830) 162.217 (84.043) 12.678 (1.213) Neighbourhoods 122.633 (24.639) 122.303 (24.639) (0.330) - Customer and Support Services 297.833 (208.855) 100.786 (24.562) (197.047) 184.293 Wellbeing and Public Health 27.644 (26.992) 27.644 (26.992) - - Corporate Items 19.259 (11.881) 203.958 (194.961) 184.699 (183.080) Schools-managed Expenditure 152.008 (119.570) 152.008 (119.570) - - Local Authority HRA 35.364 (39.994) 35.364 (39.994) - - Joint Committees 6.217 (5.874) 6.217 (5.874) - - Cost of Services 1,208.540 (674.544) 1,208.540 (674.544) - -

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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;  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 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

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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;  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 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, Schools and Families 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 Wellbeing and 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 2.4% 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;

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 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; and  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.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 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 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. 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 three types:  Amortised cost  Fair value through profit or loss (FVLP), and  Fair value through other comprehensive income (FVOCI)

Financial Assets Measured at Amortised Cost

Financial assets measured at amortised cost are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the CIES for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the financial assets held by the authority, 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.

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

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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.

Expected Credit Loss Model

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

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

Financial Assets Measured at Fair Value through Profit of Loss

Financial assets that are measured at FVPL are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Fair value gains and losses are recognised as they arrive in the Surplus or Deficit on the Provision of Services.

The fair value measurements of the financial assets are based on the following techniques:

 instruments with quoted market prices – the market price; and

 other instruments with fixed and determinable payments – discounted cash flow analysis.

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

 Level 1 inputs – quoted prices (unadjusted) in active markets for identical assets that the authority can access at the measurement date;

 Level 2 inputs – inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly;

 Level 3 inputs – unobservable inputs for the asset.

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

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.

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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. 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.

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.

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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 115. 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;

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 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 Council 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).

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).

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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 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.

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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; and  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;  infrastructure (Tamar Bridge Toll Bridge) – contractors test methodology;  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.

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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. 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;

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 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 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.

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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. 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.

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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. 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.

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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:

Total Balances as at Loss of Control through Academy 31st March 2019 transfer during 2018/19 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 2018 2018/19 2018/19 2018/19 Fixed Assets NBV Reserves NBV Reserve transferred £m £m £m £m £m £m £m Community Primary 33 24.535 (23.651) 0.884 52.602 (2.888) 4.568 (0.414) 4 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 12.642 (12.192) 0.450 use or disposal. 43.178 (0.775) 0.000 0.000 0

Trust Primary 44 17.330 (16.515) 0.815 34.228 (3.147) 8.370 (0.398) 7 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 13 27.773 (27.529) 0.244 their disposal. 74.132 0.449 11.376 (0.398) 2

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 3.877 (3.622) 0.255 in by the Council. 0.397 (1.009) 0.000 (0.050) 1

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 1.817 (1.849) (0.032) Council. 4.264 (1.018) 0.000 0.000 0

Totals 111 87.974 (85.358) 2.616 208.801 (8.388) 24.314 (1.260) 14

The table above 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 the material items. 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.

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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 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.

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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. 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.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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. Housing Development Programme stock is valued at the cost to the Council, it is the Council’s intention to sell the properties to a Company we own, so it is outside of the ordinary course of business.

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.

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 2018/19 Code and that came into effect on or before 1 January 2019.

For 2018/19 the following potentially relevant standards include:

 Amendments to IAS 40 Investment Property: Transfers of Investment Property;  Annual Improvements to IFRS Standards 2014 - 2016 Cycle;  IFRIC 22 Foreign Currency Transactions and Advance Consideration;  IFRIC 23 Uncertainty over Income Tax Treatments;  Amendments to IFRS 9 Financial Instruments: Prepayment Features with Negative Compensation.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Application of the standards is required from 1 April 2019, therefore, these changes will be reflected in the Council’s 2019/20 or future Statement of Accounts.

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 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 is classified as an infrastructure asset. The CIPFA Code requires infrastructure assets to be valued at Depreciated Historic Cost (DHC). The value of the Tamar Bridge on a DHC basis would be £18.949m. The carrying value has been measured on a basis equivalent to Depreciated Replacement Cost (DRC) due to the expectation that there is a relationship between the income from the bridge tolls and the cost of replacing the bridge. The value of the Tamar Bridge using the current methodology is £60.685m. This is a departure from the Code of Practice as the Council believe that the current valuation methodology represents a more accurate valuation of the bridge. Upon review of the valuation in 2018/19 it has been determined that the valuation methodology used historically is not depreciated replacement cost but rather the ‘contractors test’ methodology. As at 31 March 2019 there is however no material difference between the current valuation using the ‘contractors test’ and a true DRC valuation. The bridge is due to be revalued in 2019/20 at which time the basis of valuation will also be reviewed;  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

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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, IAS39 was applicable for 2017/18 and IFRS9 is applicable for 2018/19, details of the accounting treatment are disclosed in note 40 which have been redeemed during the financial year, 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 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 40.

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 2019 for which there is a significant risk of material adjustment in the forthcoming financial year:

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 2018/19 was increased value of this long term asset at the end of the by one year it would result in a reporting period was £2,368.364m. decrease in the depreciation charged to the net cost of services of £3.030m. 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 £3.448m.

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.

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 10% increase are detailed in Note 39 to the accounts. The to the employer or £251.361m in carrying value of this long term liability at the monetary terms. A 0.5% increase in end of the reporting period was £1,322.414m. the salary interest rate would result in an increase to the employer of 1% or £34.794m and finally a 0.5% increase in the pension increase rate would result in an 8% increase or £212.578m 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.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 £24.313m. This was made up of £12.937m for the transfer of 12 primary schools and £11.376m for the transfer of 2 secondary schools;  Following a review by its treasury advisors, the Council took the option of redeeming its two inverse LOBO loans in 2018/19. Early redemption of these loans required the Council to pay a premium of £53.623m. This premium is charged to the CIES in the year that it is paid but is then reversed out through the MIRS in line with a statutory override under the CIPFA Code. The premium is then charged back to the Council’s General Fund over the remaining life of the loans, which is 39 and 50 years. See note 40 for more information, and note 23 Financial Instruments Adjustment Account for more information about the statutory override.

Note Events after the Reporting Period 6 The Statement of Accounts was authorised for issue by Chief Operating Officer and Section 151 Officer on 30 May 2019. 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 conditions existing at 31 March 2019, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information.

Since the 31st March there have been developments on two court cases that are going through the judicial system. These have both impacted upon the Council in the respect of the Pension liability. The developments are the McCloud judgement and Guaranteed Minimum Pension (GMP). In reference to McCloud this concerns age discrimination mainly in the firefighters pension schemes where there was transitional protections given to scheme members. GMP is a High Court ruling that defined benefit pension schemes must remove any discriminatory effect that GMP entitlements have had on member benefits. In response revised Actuarial reports were requested, the liability compared to the original and an increase of liability was calculated at £20.970m, as a result of this the revised numbers were applied to the accounts.

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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note

£m

0.805

1.417

(5.485)

13.668

24.657

81.484

74.169

74.385

87.217

(11.020)

113.538

519.262

172.480

(269.277)

(263.792)

(119.023)

(405.724)

the

Statement

Income and

Expenditure

Comprehensive

Net Expenditure in

£m

1.382

8.844

1.523

2.789

4.776

1.396

(3.210)

34.184

97.010

14.421

25.811

39.278

(12.171)

119.023

131.194

Total Adjustments

£m

7.899

8.266

0.001

0.006

0.122

0.019

0.103

0.006

(0.367)

(0.613)

(0.012)

59.661

51.762

(Note (Note 2)

Other Differences

£m

0.277

1.047

4.292

7.777

0.244

3.041

3.682

1.818

3.232

2.188

58.761

31.163

27.598

Pensions Pensions

Adjustment

Net change for the

£m

0.601

1.104

1.066

1.273

1.538

(5.245)

(4.257)

(0.912)

(0.780)

64.534

69.779

10.742

22.648

37.357

(63.933)

Adjustments betweenAdjustments the Funding and basis Accounting

Adjustment for Adjustment

Capital Purposes

£m

(0.577)

(7.810)

(0.753)

(0.106)

12.171

15.813

55.673

71.380

35.107

82.441

(17.656)

422.252

171.084

(439.908)

HRA

Net Expenditure

chargeable to the

General Fund and

£m

(0.577)

(7.810)

(0.753)

(6.266)

(0.261)

(0.110)

(0.624)

15.813

(46.574)

(25.465)

(20.521)

(502.023)

(455.449)

chargeable to the

at the net amount

General Fund and

Adjustment to arriveAdjustment

HRA balancesHRA (Note 1)

£m

15.541

25.359

61.939

91.901

35.368

82.551

484.367

468.826

171.708

resource

management

as reportedas for

Directorate Total

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 £43.650m in relation toin relation PublicPFI £43.650m and and grant. Health

Public Health (£25.461m) reclassification of the Public Health grant from non specific grant to specific, and the Other Income and Expenditure line (£550.767m) for Council Tax, Council Business grants, reclassification specific Publicthe non for Public toof (£25.461m) specificgrant from Health rates specific, grant non Health and line Expenditure (£550.767m) 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 £20.393m, Customer and Support Services £5.994m), £5.994m), Services Support and Customer contain £20.393m, 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 2018 General Opening

Other income expenditure Other and

Joint Committees Joint

Local Local Authority HRA

Schools-managed Expenditure Schools-managed

Corporate Items Corporate

Wellbeing and PublicWellbeing and Health

Customer and Support Services Support and Customer

Neighbourhoods

Economic Growth and Economic Development and Growth

Children, Schools Children, Families and

Adult Social Care

Closing GeneralClosing Fund,and HRA Earmarked Reserve balance at March31 2019

(Surplus) or deficit(Surplus)

Adjustments betweenAdjustments accountingand basis underfunding basis regulations

(Surplus) or deficit(Surplus) on of servicesprovision

Net Cost of ServicesNet Cost

Transfer (to)/from Reserves for Statutory for Movements Reserves (to)/from Transfer 2018/19

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note

£m

0.343

8.997

0.652

(4.313)

(4.630)

32.438

76.224

97.664

78.174

83.755

177.593

533.996

160.379

(263.792)

(259.479)

(181.906)

(356.403)

the

Statement

Income and

Expenditure

Comprehensive

Net Expenditure in

£m

1.289

2.273

1.271

0.347

5.112

3.705

28.540

25.852

21.165

44.561

(56.782)

181.906

238.688

104.573

134.115

Total Adjustments

£m

0.001

0.024

0.005

0.018

0.040

(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

4.167

4.591

2.286

4.296

2.916

(1.174)

50.691

29.891

20.800

Pensions Pensions

Adjustment

Net change for the

£m

1.024

1.178

2.444

0.798

0.749

76.774

27.935

21.680

16.617

42.339

(56.028)

135.510

191.538

114.764

Adjustments betweenAdjustments the Funding and basis Accounting

Adjustment for Adjustment

Capital Purposes

£m

3.898

7.726

0.305

(0.946)

(6.903)

56.782

50.372

76.499

33.613

78.643

(61.095)

399.881

156.674

(460.976)

HRA

Net Expenditure

chargeable to the

General Fund and

£m

3.898

7.726

(0.946)

(6.903)

(6.218)

(0.571)

(0.030)

(0.209)

(49.608)

(26.135)

(20.220)

(529.593)

(479.985)

chargeable to the

at the net amount

General Fund and

Adjustment to arriveAdjustment

HRA balancesHRA (Note 1)

£m

19.009

26.440

56.590

96.719

34.184

78.673

468.498

449.489

156.883

resource

restated for

management

Directorate Total

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).

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

* Restated to be reflective of the new Directorate structure Directorate the new of * Restated to reflective be

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-managed Expenditure Schools-managed

Corporate Items Corporate

Wellbeing and PublicWellbeing and Health

Customer and Support Services Support and Customer

Neighbourhoods

Economic Growth and Economic Development and Growth

Children, Schools Children, Families and

Adult Social Care

Closing GeneralClosing Fund,and HRA Earmarked Reserve balance at March31 2018

(Surplus) or deficit(Surplus)

Adjustments betweenAdjustments accountingand basis underfunding basis regulations

(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 Comparative2017/18 Figures Restated

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 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.

Other Statutory Adjustments Other statutory adjustments between amounts debited/credited to the CIES and amounts payable/receivable to be recognised under statute:  For Financing and investment income and expenditure the other statutory adjustments column recognises adjustments to the General Fund for the timing differences for premiums and discounts;  The charge under Taxation and non-specific grant income and expenditure represents the difference between what is chargeable under statutory regulations for Council tax and NNDR that was projected to be received at the start of the year and the income recognised under generally accepted accounting practises in the Code. This is a timing difference as any difference will be brought forward in future surpluses or deficits on the Collection Fund.

Other Non-statutory Adjustments Other non-statutory adjustments represent amounts debited/credited to service segments which need to be adjusted against the ‘Other income and expenditure from the Expenditure and Funding Analysis’ line to comply with the presentational requirements in the CIES:  For financing and investment income and expenditure the other non-statutory adjustments column recognises adjustments to service segments, eg. for interest income and expenditure and changes in the fair values of investment properties;

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

 For taxation and non-specific grant income and expenditure the other non-statutory adjustments column recognises adjustments to service segments, eg. for unringfenced government grants.

Note Expenditure and Income Analysed by Nature 8 The Council’s expenditure and income is analysed as follows:

Reconciliation to Subjective Analysis 31 March 31 March 2019 2018 £m £m

Fees, charges and other service income (222.274) (225.963) Interest and investment income (11.846) (8.438) Income from council tax (306.103) (288.055) Income from business rates (158.741) (166.021) Government grants and contributions (521.971) (544.032)

Total Income (1,220.935) (1,232.509)

Employee expenses 333.090 331.316 Other service expenses 720.605 726.946 Capital charges 130.997 180.169 Interest payments 101.716 48.721 Precepts and levies 22.108 20.531 Payments to Housing Capital Receipts Pool 1.092 1.095 Gain or loss on disposal of fixed assets 24.865 101.324

Total Expenditure 1,334.473 1,410.102

(Surplus) or deficit on the provision of services 113.538 177.593

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

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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.

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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

2018/19 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 (57.795) (17.392) - - - 75.187 Revaluation losses on property, plant and equipment (10.260) 8.938 - - - 1.322 Amortisation of intangible assets (0.950) - - - - 0.950 Capital grants and contributions applied 75.421 1.681 - (13.884) - (63.218) Revenue expenditure funded from capital under statute (46.957) - - - - 46.957 Amounts of non-current assets written off on disposal or sale as (26.085) 1.184 (5.847) - - 30.748 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 25.936 - - - - (25.936) Capital expenditure charged against the General Fund and 31.530 2.529 (0.076) - - (33.983) HRA balances Long Term Debtors/Loans - arrangements and repayments - - (0.813) - - 0.813 Adjustments primarily involving the Capital Grants Unapplied Account: Application of grants to capital financing transferred to the - - - 17.219 - (17.219) Capital Adjustment Account Adjustments primarily involving the Capital Receipts Reserve: Use of Capital Receipts to finance new capital expenditure - - 16.048 - - (16.048) Contribution from the Capital Receipts Reserve to finance the (1.092) - 1.092 - - - payments to the Government capital receipts pool Transfer from Deferred Capital Receipts Reserve upon receipt of cash - - (0.002) - - 0.002 Adjustments primarily involving the Major Repairs Reserve: Use of the Major Repairs Reserve to finance new - - - - 14.518 (14.518) capital expenditure Posting of HRA resources from revenue to the Major Repairs Reserve - 12.711 - - (12.711) - Adjustments Primarily involving the Financial Instruments Adjustment Account: Amount by which finance costs charged to the Comprehensive (51.783) 0.021 - - - 51.762 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 (107.828) (2.967) - - - 110.795 to the Comprehensive Income and Expenditure Statement Employer's pensions contributions and direct payments to 50.373 1.661 - - - (52.034) pensioners payable in the year Adjustments primarily involving the Collection Fund Adjustment Account: Amount by which council tax and non-domestic rating income credited (8.266) - - - - 8.266 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 0.367 - - - - (0.367) Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

Total Adjustments (127.389) 8.366 10.402 3.335 1.807 103.479

Total General Fund and HRA Movement (119.023)

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

2017/18 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 (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)

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 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 2018/19:

Restated* Balance Transfers Transfers Balance at Transfers Transfers Balance at at 1 April Out In 31 March Out In 31 March 2017 2017/18 2017/18 2018 2018/19 2018/19 2019 £m £m £m £m £m £m £m

Capital earmarked reserve (58.383) 73.140 (92.965) (78.208) 50.457 (60.591) (88.342) Revenue earmarked reserves:- Adult Social Care* (5.329) 0.637 (0.189) (4.881) 11.328 (10.593) (4.146) Children, Schools and Families* (10.496) 3.229 (2.354) (9.621) 16.717 (14.883) (7.787) Economic Growth and Development (5.374) 0.781 (0.613) (5.206) 1.568 (0.466) (4.104) Neighbourhoods (4.407) 0.687 (0.056) (3.776) 0.760 (0.017) (3.033) Customer and Support Services (2.084) 0.816 (1.752) (3.020) 2.337 (2.619) (3.302) Wellbeing and Public Health (1.823) 1.200 (0.893) (1.516) 0.500 (0.602) (1.618) Corporate Items (6.784) 8.474 (14.308) (12.618) 8.398 (10.749) (14.969) Schools (0.463) - (0.095) (0.558) 0.060 (0.065) (0.563) Local Authority HRA (3.031) 2.237 (2.766) (3.560) 1.592 (3.000) (4.968) Joint Committees (2.571) 0.061 (0.054) (2.564) 0.730 - (1.834) PFI Reserves (57.987) 3.178 (0.536) (55.345) 2.770 (6.806) (59.381) Wave Hub reserve (10.842) 1.920 (0.903) (9.825) 1.000 (0.312) (9.137) Redundancy reserve (13.033) 3.391 - (9.642) 4.339 - (5.303) Other general reserves (14.866) 4.440 (1.600) (12.026) 3.922 (0.204) (8.308)

Total (197.473) 104.191 (119.084) (212.366) 106.478 (110.907) (216.795)

* Restated as a result of a directorate restructure The two most significant reserves set out above are:  The Capital reserve (£88.342m) which is funds set aside to finance future investment in assets;  PFI reserves (£59.381m) which are monies set aside to offset future PFI liabilities.

Note Other Operating Expenditure 11

31 March 31 March 2019 2018 £m £m Parish Council precepts 22.108 20.531 Payments to the Government Capital Housing Receipts Pool 1.092 1.095 Exceptional transfer of academy school assets 24.313 90.041 (Gains)/losses on the disposal of non-current assets 0.552 11.283

Total 48.065 122.950

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Financing and Investment Income and Expenditure 12

31 March 31 March 2019 2018 £m £m Interest payable and similar charges 48.093 48.721 Exceptional LOBO premium on redemption 53.623 - Net interest on the net defined benefit liability/(asset) 31.162 29.891 Interest receivable and similar income (7.036) (5.935) Other investment income (4.810) (2.503)

Total 121.032 70.174

Note Taxation and Non-specific Grant Income 13

31 March 31 March 2019 2018 £m £m Council tax income (314.336) (290.150) Non-domestic rates income and expenditure (158.774) (161.834) Non ringfenced government grants (79.831) (70.938) Capital grants and contributions (30.146) (24.513) Collection Fund (surplus)/deficit 8.266 (2.092)

Total (574.821) (549.527)

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Property, Plant and Equipment 14

Movements on Balances 2018/19 Vehicles, Infrastructure Assets Total Other Plant, Infra- Tamar Bridge Comm- Under Property, PFI Assets Council Land and Furniture, structure Toll Bridge unity Con- Plant and Included Dwellings Buildings Equipment Assets Asset Assets struction Equipment in PPE £m £m £m £m £m £m £m £m £m Cost or Valuation

At 1 April 2018 496.945 933.626 262.385 812.656 58.827 30.769 25.435 2,620.643 249.430

Additions 18.652 23.478 12.161 55.248 3.522 3.374 18.432 134.867 0.082 Accumulated Depreciation and Impairment written (16.483) (14.853) (4.670) - - - - (36.006) (7.290) out to Gross Carrying Amount after Revaluation Revaluation increases/(decreases) recognised 5.588 56.810 5.800 - - 0.011 - 68.209 (0.840) in the Revaluation Reserve Revaluation increases/(decreases) recognised 8.975 (10.297) - - - - - (1.322) (0.751) in the surplus/deficit on the Provision of Services Derecognition - disposals (2.503) (28.160) (3.475) (0.010) - - - (34.148) - Assets reclassified (to)/from Held for Sale - (0.921) - (0.135) - - - (1.056) - Assets reclassified (to)/from Other Categories - - - - 0.766 - (0.766) - - Other movements in cost or valuation 0.281 (5.227) (0.002) 12.342 - 0.019 (7.415) (0.002) -

At 31 March 2019 511.455 954.456 272.199 880.101 63.115 34.173 35.686 2,751.185 240.631

Accumulated Depreciation and Impairment

At 1 April 2018 (11.765) (35.452) (106.655) (191.567) (1.904) (0.315) - (347.658) (9.229)

Depreciation charge (16.847) (17.649) (16.291) (23.857) (0.526) (0.017) - (75.187) (7.273) Accumulated Depreciation written out to 16.483 14.853 4.670 - - - - 36.006 7.290 Gross Carrying Amount Derecognition - disposals 0.001 1.044 2.863 0.010 - - - 3.918 - Assets reclassified to/(from) Held for Sale - 0.018 - - - - - 0.018 - Other movements in depreciation and impairment - (0.001) 0.082 - - - 0.001 0.082 -

At 31 March 2019 (12.128) (37.187) (115.331) (215.414) (2.430) (0.332) 0.001 (382.821) (9.212)

Net Book Value at 31 March 2019 499.327 917.269 156.868 664.687 60.685 33.841 35.687 2,368.364 231.419 at 1 April 2018 485.180 898.174 155.730 621.089 56.923 30.454 25.435 2,272.985 240.201

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Comparative Movements 2017/18 Vehicles, Infrastructure Assets Total Other Plant, Infra- Tamar Bridge Comm- Under Property, PFI Assets Council Land and Furniture, structure Toll Bridge unity Con- Plant and Included Dwellings Buildings Equipment Assets Asset Assets struction Equipment in PPE £m £m £m £m £m £m £m £m £m Cost or Valuation

At 1 April 2017 497.810 1,048.798 267.996 748.458 56.700 31.136 29.276 2,680.174 257.520

Additions 15.508 33.682 7.162 57.420 - 1.128 16.760 131.660 0.599 Accumulated Depreciation and Impairment written (13.981) (21.659) (5.088) (0.043) - (0.079) - (40.850) (6.601) out to Gross Carrying Amount after Revaluation Revaluation increases/(decreases) recognised 0.688 20.612 - - - - - 21.300 0.387 in the Revaluation Reserve Revaluation increases/(decreases) recognised 0.360 (40.539) (2.585) - - (2.855) - (45.619) (2.343) in the surplus/deficit on the Provision of Services Derecognition - disposals (4.775) (100.572) (5.250) (9.480) - (1.571) - (121.648) (0.132) Assets reclassified (to)/from Held for Sale - (0.562) - - - (0.040) - (0.602) - Assets reclassified (to)/from Other Categories - 0.003 - 0.076 2.127 - (2.206) - - Other movements in cost or valuation 1.335 (6.137) 0.150 16.225 - 3.050 (18.395) (3.772) -

At 31 March 2018 496.945 933.626 262.385 812.656 58.827 30.769 25.435 2,620.643 249.430

Accumulated Depreciation and Impairment

At 1 April 2017 (11.714) (42.405) (99.382) (169.730) (1.414) (0.141) - (324.786) (7.792)

Depreciation charge (14.201) (18.072) (16.275) (22.783) (0.490) (0.017) - (71.838) (8.170) Accumulated Depreciation written out to 13.981 21.595 5.088 0.043 - 0.079 - 40.786 6.601 Gross Carrying Amount Accumulated Impairment written out to - 0.064 - - - - - 0.064 - Gross Carrying Amount Other (losses)/reversal recognised in the - 0.010 - - - - - 0.010 - Revaluation Reserve Derecognition - disposals 0.169 3.356 3.914 2.140 - 0.027 - 9.606 0.132 Other movements in depreciation and impairment - - - (1.237) - (0.263) - (1.500) -

At 31 March 2018 (11.765) (35.452) (106.655) (191.567) (1.904) (0.315) - (347.658) (9.229)

Net Book Value at 31 March 2018 485.180 898.174 155.730 621.089 56.923 30.454 25.435 2,272.985 240.201 at 1 April 2017 486.096 1,006.393 168.614 578.728 55.286 30.995 29.276 2,355.388 249.728

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 2018/19 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 2018/19 was £154.140m (£149.784m 2017/18), split into £38.936m (£37.711m 2017/18) other land and buildings and £113.204m (£112.073m 2017/18) vehicles, plant and equipment. This asset has been constructed as part of the Waste PFI scheme, details can be found in note 37.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 2019/20, which also have capital contracts totalling £5.000m or more in place:

2018/19 2017/18* £m £m

Expenditure approved in capital programme 1,001.752 727.728

Expenditure committed for the following year 380.993 279.386

Schemes committing over £5m spend in year with capital contract commitments of over £5m in place: Housing Revenue Account Works 16.831 15.403 Structural Maintenance of Carriageways (inc LTP3) 31.588 25.563 Superfast Broadband Phase 2 6.518 7.890 Basic Need 10.742 6.921 Local Authority New Build Schemes 10.931 6.228

Schemes committing spend in year with no capital contract commitments or commitments under £5m in place: Vehicle and Plant Replacement (Fire) 7.963 6.181 HIP - Affordable Housing 1.585 5.940 Archive Centre 1.798 6.392 St Erth Multi Modal Hub (STEMMH) 1.557 8.310 Investment in Leisure Estate 2.235 7.616 Cornwall Rail Improvement Package 3.886 14.697 Hayle Harbour Development 6.717 0.031 CTO Fleet Transfer 12.000 - Development at Threemilestone 68.174 - Cornwall Investment Programme 26.853 - Aerohub Business Park Phase 1 0.685 6.598 Renewables & Wind Power Opportunities (Phase 1) 8.557 - St.Austell to A30 Link Road 8.458 2.604 Private Rented Accommodation 19.650 -

Total 246.728 120.374

*Schemes with balances under £5m with no capital commitments over £5m in 2018/19 have been removed from the comparator.

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

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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.

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 - 13.605 43.664 664.687 - 33.841 35.687 791.484

Valued at current value as at: 31 March 2019 499.327 167.833 113.204 - - - - 780.364 31 March 2018 - 328.799 - - - - - 328.799 31 March 2017 - 201.715 - - - - - 201.715 31 March 2016 - 113.953 - - - - - 113.953 31 March 2015 - 91.364 - - 60.685 - - 152.049

Net Book Value 499.327 917.269 156.868 664.687 60.685 33.841 35.687 2,368.364

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Financial Instruments 15 Categories of Financial Instrument The following categories of financial instruments are carried in the Balance Sheet:

Long-term Current Total Restated* Restated* Restated* 31 March 1 April 31 March 1 April 31 March 1 April 2019 2018 2019 2018 2019 2018 £m £m £m £m £m £m

Financial Assets

Investments Amortised cost Treasury Investments* 136.500 186.500 122.463 143.006 258.963 329.506 Local authority bonds* 5.154 5.195 - - 5.154 5.195 Fair value through profit or loss Treasury Investments* 1.204 1.520 - - 1.204 1.520

Total Investments 142.858 193.215 122.463 143.006 265.321 336.221

Debtors Amortised cost Debtors 33.017 25.750 - - 33.017 25.750 Financial assets carried at contract amounts - - 61.194 66.738 61.194 66.738 Statutory debtors~ - - 29.367 31.874 29.367 31.874

Total included in Debtors 33.017 25.750 90.561 98.612 123.578 124.362

Cash and cash equivalents Amortised cost Short Term cash investments - - 80.516 77.602 80.516 77.602 Other bank balances - - (16.203) (8.431) (16.203) (8.431)

Total Cash and cash equivalents - - 64.313 69.171 64.313 69.171

Financial Liabilities

Borrowings Amortised cost Financial liabilities at amortised cost - treasury (688.547) (636.772) (107.661) (91.437) (796.208) (728.209)

Total included in borrowings (688.547) (636.772) (107.661) (91.437) (796.208) (728.209)

Liabilities Amortised cost PFI liability (111.180) (114.573) (3.393) (4.781) (114.573) (119.354) Other liabilities - leases (2.054) (4.202) - - (2.054) (4.202)

Total Liabilities (113.234) (118.775) (3.393) (4.781) (116.627) (123.556)

Creditors Amortised cost Financial liabilities at amortised cost - creditors (2.433) (2.445) - - (2.433) (2.445) Financial liabilities carried at contract amounts - - (106.216) (111.568) (106.216) (111.568) Statutory creditors~ - - (15.814) (17.512) (15.814) (17.512) Leases - - (2.141) (1.815) (2.141) (1.815)

Total Creditors (2.433) (2.445) (124.171) (130.895) (126.604) (133.340)

~ the statutory debtors and creditors amounts are not financial instruments however have been included to match to the balance sheet *Restated due to the implementation of IFRS9 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

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 2018/19.

Financial Instruments Designated at Fair Value through Profit or Loss

The Council accounts for the Heartlands Trust endowment from the Big lottery as an investment and as a reserve. The investment is made through CCLA which is a charitable fund manager and the investment forms part of a pooled fund. Under IFRS9 the Code now requires that pooled funds are measured at Fair Value through Profit and Loss. However, to mitigate the impact of the change there is a statutory override for a period of five years meaning that there is no impact on the Council’s CIES.

Income, Expense, Gains and Losses

Restated* Income, Expense, Gains and Losses 2018/19 2017/18

Surplus or Other Surplus or Other Deficit on the Comprehensive Deficit on the Comprehensive Provision Income and Provision Income and of Services Expenditure of Services Expenditure £m £m £m £m

Net (gain)/losses on: Financial assets measured at - 1.705 - - amortised cost Financial liabilities measured at 53.623 - - - amortised cost

Total net (gains)/losses 53.623 1.705 - -

Interest revenue: Financial assets measured at (7.033) - (5.907) - amortised cost

Total interest revenue (7.033) - (5.907) -

Interest Expense 48.093 - 48.721 -

*Restated as a new note

Fair Value of Financial Assets and Financial Liabilities Financial liabilities, financial assets represented by treasury investments 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;

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

 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;

 The fair value for long term debtors is assumed to be the same as their carrying amount.

Restated* 31 March 2019 1 April 2018 Carrying Fair Value Carrying Fair Value Amount Amount £m £m £m £m Financial Assets

Treasury Investments* 258.963 271.841 331.026 332.189 Debtors 33.017 33.017 25.750 25.750

* Restated due to the implementation of IFRS 9 Finanical Instruments The £258.963m treasury 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.

Restated* 31 March 2019 31 March 2018 Carrying Fair Value Carrying Fair Value Amount Amount £m £m £m £m Financial Liabilities

Fixed interest rate PWLB* (374.185) (481.335) (239.185) (332.567) Fixed interest rate LOBO's* (274.100) (440.619) (274.100) (433.668) Inverse LOBO's* - - (85.000) (187.149) Financial liabilities held at amortised cost - treasury other* (147.923) (160.831) (129.924) (140.978) Financial liabilities held at amortised cost - treasury* (796.208) (1,082.785) (728.209) (1,094.362) PFI liability (114.573) (274.309) (119.354) (272.306) Other liabilities - leases (2.054) (2.054) (4.202) (4.202) Financial liabilities at amortised cost - creditors (2.433) (2.433) (2.445) (2.445)

* Restated to give clarity to the LOBO instruments within the treasury line The £796.208m carrying amount for financial instruments – treasury is all at fixed interest rates. 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 (£1,318.749m), which is calculated

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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.

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.

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: Financial assets and liabilities measured at fair value Input Level in Fair Value Valuation As at As at hierarchy Technique 31/03/2019 31/03/2018 Fair Value through Profit or Loss £m £m

Investments Treasury Investments Level 2 Prevailing benchmark rates 271.841 332.189 Ranging from 0.7% to 1.3% Borrowings PWLB Level 2 New borrowing discount rates ^ (481.335) (332.567) Ranging from 2.23% to 2.4% Lenders Option Borrowers Option (LOBO) Level 2 New market loan discount rates ^ (439.507) (620.817) Ranging from 2.236% to 2.3% Zero to Par Loan Level 2 New market loan discount rates ^ (54.202) (49.492) Discount rate 2.324% Short Term Level 2 New market loan discount rates ^ (107.741) (91.486) Discount rate 0.8%

Long Term Liabilities PFI Long Term Liability Level 3 PWLB annuity discount rate (274.309) (272.306) Ranging from 0.61% to 0.99%

^Where the discount rate is used the technique involves using present values of cashflow

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 Inventories 16 Housing Development TBTF and Mount Provision for Salt Fuel Programme* Other Edgcumbe Obsolete Stock Total 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 £m £m £m £m £m £m £m £m £m £m £m £m £m £m

Balance outstanding at start of year 0.144 0.370 0.033 0.024 10.459 - 0.626 4.090 0.293 0.251 (0.079) (0.087) 11.476 4.648 Purchases 0.436 0.637 0.296 0.282 32.060 10.459 2.573 0.499 0.371 0.359 - - 35.736 12.236 Recognised as an expense (0.235) (0.863) (0.285) (0.273) - - (2.075) (0.434) (0.318) (0.317) - - (2.913) (1.887) in the year Written off balances ------(3.529) - - - 0.008 - (3.521)

Balance outstanding at 0.345 0.144 0.044 0.033 42.519 10.459 1.124 0.626 0.346 0.293 (0.079) (0.079) 44.299 11.476 year end

*The Housing Development Programme is an initiative by the Council to acquire land and build houses to increase the supply of affordable housing in Cornw all. As the intention is to sell these houses (potentially to a Limited Liability Partnership) they are carried in the Council’s accounts as Inventory items.

Note Debtors 17 Current Long Term Restated* Restated* 31 March 31 March 31 March 31 March 2019 2018 2019 2018 £m £m £m £m Trade Receivables 23.660 22.707 - - Prepayments 5.705 8.578 - - Debtors for Local Taxation 26.574 25.053 - - Other Receivable Amounts 34.622 42.274 33.017 25.750

Total 90.561 98.612 33.017 25.750

* Restated to reflect the new structure of the note

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Debtors For Local Taxation 18 The past due but not impaired amount for local taxation (council tax and non-domestic rates) can be analysed by age as follows: Council Tax NNDR Restated* Restated* 31 March 31 March 31 March 31 March 2019 2018 2019 2018 £m £m £m £m Less than three months - 0.002 - - Three to six months - - - - Six months to one year 8.192 7.775 3.282 3.219 More than one year 11.225 10.493 3.875 3.564

19.417 18.270 7.157 6.783

* Restated to reflect this is a new note To offset the debt a bad debt provision of £14.160m for Council Tax and £3.343m for NNDR has been provided for.

Note Cash and Cash Equivalents 19 ^Reclassify 31 March 31 March 2019 2018 £m £m Cash held by the Council 1.592 1.215 Overdraft held by the Council (4.857) (5.880) Bank current accounts asset 7.924 9.780 Bank current accounts liability (22.564) (15.763) Short-term deposits 82.218 79.819

Total Cash and Cash Equivalents 64.313 69.171

^ Reclassify the Cash and Cash Equivalents between current assets and current liabilities

Note Creditors 20 Current Long Term Restated* Restated* 31 March 31 March 31 March 31 March 2019 2018 2019 2018 £m £m £m £m Trade Payables (13.329) (19.125) - - Receipts in Advance (13.346) (13.536) - - Other Payables (97.496) (98.234) (2.433) (2.445)

Total (124.171) (130.895) (2.433) (2.445)

* Restated to reflect the new structure of the note

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Provisions 21 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 2018 (9.015) (23.810) (3.224) (36.049) (6.553) (42.602) Additional provisions made in year - (3.290) (2.800) (6.090) (1.237) (7.327) Amounts used in year 0.135 - 2.132 2.267 3.138 5.405 Unused amounts reversed in year - - 0.565 0.565 1.920 2.485

Balance as at 31 March 2019 (8.880) (27.100) (3.327) (39.307) (2.732) (42.039)

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.

None of the other provisions were individually significant at 31 March 2019.

Note Contingent Liabilities 22

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Unusable Reserves 23

31 March 31 March 2019 2018 £m £m

Revaluation Reserve (485.581) (430.556) Available for Sale Financial Instruments Reserve - (1.705) Capital Adjustment Account (952.483) (925.521) Financial Instruments Adjustment Account 71.207 19.445 Deferred Capital Receipts Reserve (1.194) (1.179) Pensions Reserve 1,322.414 1,143.088 Collection Fund Adjustment Account (8.923) (17.189) Accumulated Absences Account 2.801 3.168

Total Unusable Reserves (51.759) (210.449)

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.

Revaluation Reserve 2018/19 2017/18 £m £m £m

Balance at 1 April (430.556) (434.113) Opening balance adjustment in year - (3.701) Upward revaluation of assets (97.542) (42.207) Downward revaluation of assets and impairment losses not 29.421 20.899 charged to the (Surplus) or deficit on the provision of services (Surplus) or deficit on revaluation of non-current assets not (68.121) (21.308) posted to the (Surplus) or deficit on the provision of services Difference between fair value depreciation and historical cost 6.438 6.302 depreciation Accumulated gains on assets sold or scrapped 6.658 22.264 Amount written off to the Capital Adjustment Account 13.096 28.566

Balance at 31 March (485.581) (430.556)

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Capital Adjustment Account 2018/19 2017/18 £m £m £m

Balance at 1 April (925.521) (1,018.807) 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 75.187 71.838 assets Revaluation losses on Property, Plant and Equipment 1.322 45.639 Amortisation of intangible assets 0.950 1.931 Revenue expenditure funded from capital under statute 46.957 59.533 Amounts of non-current assets written off on disposal or sale 30.748 116.254 as part of the (gain)/loss on disposal to the Comprehensive Income and Expenditure Statement

155.164 300.396

Adjusting amounts written out of the Revaluation Reserve (13.096) (28.566)

Net written out amount of the cost of non-current assets 142.068 271.830 consumed in the year

Capital financing applied in the year: Use of the Capital Receipts Reserve to finance new capital (16.048) (15.498) expenditure Use of the Major Repairs Reserve to finance new capital (14.518) (11.348) expenditure Capital grants and contributions credited to the (63.218) (70.765) Comprehensive Income and Expenditure Statement that have been applied to capital financing Application of grants to capital financing from the Capital (17.219) (29.627) Grants Unapplied Account Statutory provision for the financing of capital investment (25.936) (24.356) charged against the General Fund and HRA balances Capital expenditure charged against the General Fund (33.983) (28.590) and HRA balances Other adjustments 1.079 (0.002)

(169.843) (180.186)

Repayments of Long term debtors and loan agreements 0.813 1.642

Balance at 31 March (952.483) (925.521)

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 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, for the LOBO premium the balance on the account as at 31 March 2019 will be charged to the General Fund over the next 39 and 50 years.

Financial Instruments Adjustment Account 2018/19 2017/18 £m £m £m

Balance at 1 April 19.445 20.199 Premiums incurred in the year and charged to the 53.623 Comprehensive Income and Expenditure Statement Proportion of premiums incurred in previous financial years (1.861) (0.754) to be charged against the General Fund balance in accordance with statutory requirements Amount by which finance costs charged to the Comprehensive 51.762 (0.754) Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements

Balance at 31 March 71.207 19.445

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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Pensions Reserve 2018/19 2017/18 £m £m

Balance at 1 April 1,143.088 1,141.079 Opening balance adjustment in year - (0.031) Remeasurements of the net defined benefit liability/(asset) 120.565 (48.651) Reversal of items relating to retirement benefits debited or credited to 110.795 100.809 the (Surplus) or deficit on the provision of services in the Comprehensive Income and Expenditure Statement Employer's pensions contributions and direct payments to (52.034) (50.118) pensioners payable in the year

Balance at 31 March 1,322.414 1,143.088

Note Cash Flow Statement – Operating Activities 24

The cash flows for operating activities include the following items:

2018/19 2017/18 £m £m Interest received (7.350) (6.613) Interest paid 45.992 47.037 Dividends received (2.059) (0.111)

Net cash flows from operating activities 36.583 40.313

The surplus or deficit on the provision of services has been adjusted for the following non- cash movements:

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

2018/19 2017/18 £m £m

Depreciation and impairment (75.187) (71.838) Downward valuations (1.322) (45.639) Amortisation (0.950) (1.931) Adjustment for movements in fair value of investments classified (0.316) - as Fair Value through Profit & Loss a/c Losses or Gains on derecognition of loans & advances in year (1.909) - Adjustments for effective interest rates (1.817) (1.595) Increase/(decrease) in interest creditors (0.325) 0.009 Increase/(decrease) in creditors 5.934 16.836 Increase/(decrease) in interest and dividend debtors 0.368 1.206 Increase/(decrease) in debtors (7.543) 6.617 Increase/(decrease) in inventories 32.823 6.828 Movement in pension liability (58.761) (50.691) Unwinding of discount on Deferred Receipts 0.017 0.069 Contributions to/(from) provisions 0.563 (13.121) Carrying amount of non-current assets and non-current assets (30.748) (116.254) held for sale, sold or de-recognised Other non-cash items charged to the net surplus or deficit on - (0.049) 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 (139.173) (273.325)

The surplus or deficit on the provision of services has been adjusted for the following items that are investing and financing activities:

2018/19 2017/18 £m £m

Capital grants credited to (surplus)/deficit on the provision 69.314 77.422 of services Proceeds from the sale of short-term (not considered to be cash - - equivalents) and long-term investments (includes investments in associates, joint ventures and subsidiaries) Proceeds from the sale of property, plant and equipment, 5.847 14.966 investment property and intangible assets

Adjustment to net cash flows from operating activities 75.161 92.388

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Cash Flow Statement – Investing Activities 25

2018/19 2017/18 £m £m Purchase of property, plant and equipment, investment property and 137.892 119.646 intangible assets Purchase of short-term and long-term investments 110.000 204.513 Other payments for investing activities 10.043 18.480 Proceeds from the sale of property, plant and equipment, investment (5.849) (14.975) property and intangible assets Proceeds from short-term and long-term investments (170.000) (250.681) Capital grants received (64.678) (81.898) Loan repayments received (4.374) (3.871)

Net cash flows from investing activities 13.034 (8.786)

Note Cash Flow Statement – Financing Activities 26

2018/19 2017/18 £m £m

Cash receipts of short and long-term borrowing (1,042.558) (515.260) Other (receipts)/payments from financing activities 1.262 14.332 Cash payments for the reduction of the outstanding liabilities relating 6.597 5.789 to finance leases and on-balance sheet PFI contracts Repayments of short and long-term borrowing 976.997 501.701

Net cash flows from financing activities (57.702) 6.562

Note Cash Flow Statement – Reconciliation of Liabilities arising from Financing 27 Activities Other non- 2017/18 Financing cash 2018/19 1 April cash flows changes 31st March £m £m £m £m Long-term borrowings (636.772) (51.775) - (688.547) Short-term borrowings (91.437) (16.224) - (107.661) Lease Liabilities (4.202) - 2.148 (2.054) On balance sheet PFI liabilities (119.354) - 4.781 (114.573)

Total liabilities from financing activities (851.765) (67.999) 6.929 (912.835)

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Pooled Budgets 28 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:

Mental Health Pooled Fund 2018/19 2017/18 £m £m

Funding provided to the pooled budget: - - Cornwall Council - Adult Care and Support (6.866) (6.875) Kernow Clinical Commissioning Group (37.237) (37.537) (44.103) (44.412)

Expenditure met from the pooled budget: Cornwall Council - Adult Care and Support 6.866 6.864 Kernow Clinical Commissioning Group 37.243 37.527 44.109 44.391

Net (Surplus) or deficit arising on the pooled budget during the year 0.006 (0.021)

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 2018/19, 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 2018/19 these funds were allocated as budgeted contributions as follows:

• Contribution of £1.698m to the Integrating Community Equipment Services pooled budget with KCCG totalling £5.598m • Contribution of £0.649m to Carers’ Pooled Budget with KCCG totalling £2.101m

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 2018/19 with the KCCG hosting the Mental Health Pooled Fund.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Members’ Allowances 29 The Council paid the following amounts to members of the Council during the year:

2018/19 2017/18 £m £m Remuneration paid during the year: Allowances 2.094 2.001 Expenses 0.003 0.002 Travel 0.103 0.108

Total 2.200 2.111

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Officers’ Remuneration 30

The remuneration paid to the Council’s senior employees is detailed below.

Changes during the year included the Directorate for Children, Families and Adults being split into two core areas: Adult Social Care and Health; and Children, Schools and Families. Also a stand-alone post of Strategic Commercial Growth Adviser was created to concentrate on specific strategic plans within the Economic Development and Growth Directorate.

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 2018/19 176,885 - - - 30,955 207,840 2017/18 173,417 - - - 30,348 203,765 Strategic Director for Children, Families 2018/19 ------and Adults 1 2017/18 142,814 - 2,621 - 24,992 170,427

Strategic Director Adult Social Care 2018/19 148,429 - 729 - 25,975 175,133 1 and Health 2017/18 ------

Strategic Director for Children, Schools 2018/19 152,670 - 2,662 - 26,717 182,049 and Families 1 - Trevor Doughty 2017/18 ------Chief Operating Officer 2018/19 27,818 - - - 4,868 32,686 and Section 151 Officer 2 2017/18 133,276 - - - 23,323 156,599

Service Director for Resources 2018/19 76,103 - - - 13,318 89,421 and Section 151 Officer 3 2017/18 7,481 - - - 1,309 8,790 Acting Service Director for Wellbeing and 2018/19 78,883 - 4,885 - 12,603 96,371 Public Health 4 2017/18 101,402 - 1,702 - 14,582 117,686

Strategic Director for Neighbourhoods - Paul 2018/19 151,728 - 900 - 26,552 179,180 Masters 2017/18 142,814 - 1,144 - 24,992 168,950 Strategic Director for Economic Growth 2018/19 126,766 - 1,525 - 12,647 140,938 and Development 5 2017/18 142,021 - 6,034 - 20,688 168,743

Strategic Commercial Growth Advisor 5 2018/19 82,173 - 3,951 - 14,380 100,504 2017/18 ------

Service Director for Assurance 2018/19 100,349 - 6,594 - 17,561 124,504 and Monitoring Officer 2017/18 162,953 - 4,024 - 1,530 168,507 Service Director (Resilient Cornwall) 2018/19 106,998 - - - - 106,998 and Chief Fire Officer 2017/18 104,900 - - - - 104,900

Notes 1 Strategic Director for Children, Families and Adults - Post split from 1/4/18 between Adults and Children highlighting greater focus on each area. New posts created: Strategic Director for Adult Social Care and Health; and Strategic Director for Children, Schools and Families. 2 Chief Operating Officer and Section 151 Officer - due to the previous incumbent moving to lead CORSERV, a new appointment was made 1/1/2019. 3 Service Director for Resources and Section 151 Officer - joint role held until formally appointed to Chief Operating Officer and Section 151 Officer on 1/1/19. 4 Acting Service Director for Wellbeing and Public Health - Interim appointment to 5/7/18; position vacant until 1/10/18; additional secondment facility arranged with Devon County Council, utilising the services of the Director and Deputy Director of Public Health for 12mth period from 1/10/18 - 30/9/19. 5 Directorship changed during the year on 10/9/18, when an Interim appointment was made. Original Strategic Director for Economic Growth and Development appointed as Strategic Commercial Growth Adviser from 10/9/2018.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 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 2018/19 2017/18 School Other School Other From To Staff Staff Total Staff Staff Total

50,000 54,999 20 67 87 24 63 87 55,000 59,999 14 48 62 23 27 50 60,000 64,999 8 19 27 10 30 40 65,000 69,999 8 29 37 5 23 28 70,000 74,999 1 6 7 2 4 6 75,000 79,999 - 4 4 - 1 1 80,000 84,999 - 6 6 1 9 10 85,000 89,999 1 1 2 2 4 6 90,000 94,999 2 9 11 - 7 7 95,000 99,999 1 1 2 - 2 2 100,000 104,999 - 3 3 1 3 4 105,000 109,999 - 1 1 - - - 110,000 114,999 - 1 1 - 1 1 125,000 129,999 - - - - 1 1 130,000 134,999 - - - - 1 1 140,000 144,999 - - - - 3 3 145,000 154,999 - 2 2 - - - 170,000 174,999 - 2 2 - 1 1 175,000 179,999 - 2 2 - - - 55 201 256 68 180 248

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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 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) 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18

£0 - £20,000 25 35 42 51 67 86 0.625 0.728

£20,001 - £40,000 5 9 28 22 33 31 1.102 0.862

£40,001 - £60,000 1 - 6 5 7 5 0.422 0.239

£60,001 - £80,000 1 2 2 1 3 3 0.212 0.206

£80,001 - £100,000 1 1 2 1 3 2 0.350 0.176

£100,001 - £150,000 1 - 3 4 4 4 0.510 0.483

£150,001 - £200,000 - - 3 2 3 2 0.648 0.315

Total cost included in bandings and CIES 34 47 86 86 120 133 3.869 3.009

Note External Audit Costs 31 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.

2018/19 2017/18 £m £m Fees payable with regard to external audit services carried out by 0.162 0.227 the appointed auditor for the year Fees payable for the certification of grant claims and returns 0.024 0.008 for the year Fees in respect of other services provided during the year 0.028 0.007 Rebate received during the year for prior year audits from PSAA^ - (0.034) Fees in respect of extra audit work as a result of an objection 0.035 -

Total 0.249 0.208

^ PSAA - Public Sector Audit Appointments

These figures do not include audit costs for the Joint Committees.

As a result of the 2018/19 audit additional fees will be incurred by the Council in 2019/20, this is the consequence of extra work Grant Thornton has undertaken in relation to the McCloud judgement and PPE revaluations, and the use of their own experts in relation to HRA and Tamar Bridge and Torpoint Ferry.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Dedicated Schools Grant 32 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 2018/19 are as follows:-

2018/19 Individual Schools Central Budgets Expenditure (ISB) Total £m £m £m

Final DSG for 2018/19 before academy recoupment (73.576) (301.337) (374.913) Academy figure recouped for 2018/19 11.353 230.096 241.449

Total DSG after academy recoupment 2018/19 (62.223) (71.241) (133.464)

Plus: Brought forward from 2017/18 (3.606) (1.594) (5.200)

Agreed initial budgeted distribution in 2018/19 (65.829) (72.835) (138.664)

In-year adjustments (2.000) 2.000 -

Final budget distribution for 2018/19 (67.829) (70.835) (138.664)

Less: Actual central expenditure 67.160 - 67.160 Less Actual ISB deployed to schools - 69.461 69.461

Carry- forward to 2019/20 (0.669) (1.374) (2.043)

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Grant Income 33

The Council credited the following grants, contributions and donations to the CIES in 2018/19:

2018/19 2017/18 £m £m Credited to Taxation and Non-specific Grant Income Education Services Grant - (0.616) Private Finance Initiative (PFI) Grant (16.429) (16.429) Housing Benefit and Council Tax Administration Grant (1.745) (1.966) Learning Disability and Health Reform Grant (0.748) (0.387) New Homes Bonus Scheme Grant (11.988) (17.313) Small Business Rate Relief Grant (28.667) (24.483) Business Rates Cap Compensation (3.592) (2.503) Bus Service Operators Grant (0.773) (0.773) Improved Better Care Fund (9.080) (0.608) Adult Social Care Support Grant (1.746) (2.806) Other Non Specific Grants (5.063) (3.054)

Total (79.831) (70.938)

Credited to Services Children, Schools and Families Dedicated Schools Grant (135.700) (145.397) Sixth Forms Funding (2.792) (2.731) Skills Funding Agency Grant (3.073) (3.133) Pupil Premium Grant (4.778) (6.275) Troubled Families Grant (2.275) (1.639) Special Education Needs (SEN) Grant (0.925) (1.853) School PE and Sport Grant (1.089) (1.101) Big Lottery Fund HeadStart Grant (2.744) (1.309) Better Care Fund (7.940) (12.068) Economic Growth and Development Ministry of Housing, Communities and Local Government (2.457) (2.834) Department for Transport Other Non Specific Grants (0.372) (0.438) Local Authority HRA Rent Rebates Granted to HRA Tenants: subsidy (19.256) (21.084) Other Housing Services Mandatory Rent Allowances: subsidy (135.445) (149.959) Mandatory Rent Rebates outside HRA: subsidy (1.345) (1.274) Welllbeing and Public Health Public Health Grant (25.461) (26.133)

Other Revenue Grants (19.385) (15.807) REFCUS Grant Funding (46.957) (55.546)

Total (411.994) (448.581)

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 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

2018/19 2017/18 31 March 31 March £m £m

Grant Receipts in Advance - Capital Grants Ministry of Housing, Communities and Local Government (3.831) (3.493) Department for Education (1.052) (0.084) Homes and Communities Agency (1.825) - Department of Health (1.344) (1.500) Department for Transport (0.444) (5.819) Environment Agency (0.214) (0.077) Department for Business, Energy and Industrial Strategy - (2.974) South Western Ambulance Service NHSFT (0.013) (0.013) Other (25.364) (27.418)

Total (34.087) (41.378)

Note Related Parties 34 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 2019 are shown in Note 33.

Members Members of the Council have direct control over the Council’s financial and operating policies. The total of the allowances paid to Members in 2018/19 is shown in Note 29.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 2018/19 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 G12 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:  Details of transactions with subsidiary companies, associated and jointly controlled entities are provided in Notes G1 to G12 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 28. Joint Working Arrangements – the Council has a number of joint working arrangements with other public bodies.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Those with a total turnover of £1m or more are listed in the table below:

2018/19 2017/18

Gross Gross Council Gross Gross Council Income Expenditure Contribution* Income Expenditure Contribution* £m £m £m £m £m £m

Learning Disability Complex Cases Pooled Fund (1.968) 4.145 2.177 (2.035) 4.455 2.420 Learning Disability Supported Living Fund (12.678) 19.583 6.905 (11.216) 17.225 6.009 Devon and Cornwall Safety Camera Partnership (1.820) 1.842 - (1.612) 1.667 - * 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 £1.178m for expenses incurred in providing these services (£1.140m in 2017/18). This is comprised of £0.964m administrative costs and £0.214m oversight and governance costs (£0.904m administrative costs and £0.236m oversight and governance costs in 2017/18).

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 G12 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: 2018/19 2017/18 Council Council Contribution Contribution £m £m

Royal Cornwall Hospital Trust 4.724 5.146 Hall for Cornwall Trust 2.193 0.218 Falmouth University 0.871 0.953 Cornwall Community Development Ltd 0.542 0.466 Looe Harbour Comissioners 0.475 1.049 Council of the Isles of Scilly 0.335 0.187 In Caring Hands Limited 0.246 0.188 Bodmin College 0.228 0.239 Tregolls School AN Academy 0.221 1.112 Newquay Education Trust 0.121 0.102 St Austell BID 0.100 0.108 Cornwall Community Land Trust - 0.914 Peninsula Learning Academy Trust - 0.136 Heartlands - 0.100

Total 10.056 10.918

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Capital Expenditure and Capital Financing 35

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.

2018/19 2017/18 £m £m

Opening capital financing requirement 966.783 950.108

Capital investment Property, Plant and Equipment 134.867 131.660 Intangible Assets 0.327 0.374 Assets Held For Sale 0.432 - Advances to Long-Term Debtors 8.554 9.407 Revenue Expenditure Funded from Capital under Statute 52.664 59.533

Sources of finance Capital receipts (16.048) (15.498) Government grants and contributions (80.437) (100.392) Prior year long term debtor adjustment (1.651) - Sums set aside from revenue: Direct revenue contributions/specific reserves (54.208) (39.938) MRP/loans fund principal (25.936) (24.356) Disposal of assets previously acquired under finance leases (0.006) (0.015) Long term/short term debtor (0.282) (0.328) Other adjustments 1.048 (3.772)

Closing capital financing requirement 986.107 966.783

Explanation of movements in year Increase in underlying need to borrow (unsupported by government 45.319 46.726 financial assistance) Adjustment for assets previously funded by borrowing now transferred - (3.772) from property, plant and equipment to inventories Disposal of assets previously acquired under finance leases (0.006) (0.015) Other adjustments 1.048 - Amount set aside for HRA Attributable Debt (0.819) (1.580) Long term debtor adjustments (transfer to/(from) short term debtors) (0.282) (0.328) Less MRP payments (see above) (25.936) (24.356)

Increase/(decrease) in capital financing requirement 19.324 16.675

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Leases 36 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 2019 2018 £m £m Not later than one year 6.506 4.234 Later than one year and not later than five years 14.897 11.497 Later than five years 43.535 37.476

64.938 53.207

Note Private Finance Initiatives and Similar Contracts 37

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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Cornwall Council currently has four PFI schemes as detailed below:

Fire Stations PFI Scheme 2018/19 was year 18 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 2018/19 was year 15 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 2018/19 was year 15 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 2018/19 was year 13 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 2019 (excluding any estimation of inflation and availability/performance deductions) are as follows:

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Fire PFI Scheme Reimbursement Payment of Capital Contingent for Services Expenditure Interest Rent Total £m £m £m £m £m Payable in 2019/20 0.910 0.336 0.572 0.130 1.948 Payable within two to five years 3.816 1.806 1.856 0.629 8.107 Payable within six to ten years 4.114 2.836 0.874 0.828 8.652 - - - Total 8.840 4.978 3.302 1.587 18.707

Education PFI Scheme Reimbursement Payment of Capital Contingent for Services Expenditure Interest Rent Total £m £m £m £m £m Payable in 2019/20 4.553 1.314 2.921 0.253 9.041 Payable within two to five years 19.475 6.604 10.279 1.137 37.495 Payable within six to ten years 25.870 12.157 8.498 1.959 48.484 Payable within eleven to fifteen years 15.940 9.941 1.999 1.552 29.432

Total 65.838 30.016 23.697 4.901 124.452

Penzance Leisure Centre PFI Scheme Reimbursement Payment of Capital Contingent for Services Expenditure Interest Rent Total £m £m £m £m £m Payable in 2019/20 0.559 0.047 0.610 0.033 1.249 Payable within two to five years 1.766 0.684 2.301 0.408 5.159 Payable within six to ten years 3.083 0.991 2.409 0.371 6.854 Payable within eleven to fifteen years 2.867 2.228 1.459 0.804 7.358 Payable within sixteen to twenty years 1.185 0.724 0.130 0.238 2.277

Total 9.460 4.674 6.909 1.854 22.897

Waste PFI Scheme Reimbursement Payment of Capital Contingent for Services Expenditure Interest Rent Total £m £m £m £m £m Payable in 2019/20 23.151 1.696 9.115 3.135 37.097 Payable within two to five years 92.768 14.619 32.580 16.798 156.765 Payable within six to ten years 140.397 19.113 31.831 25.082 216.423 Payable within eleven to fifteen years 168.777 27.852 16.524 28.607 241.760 Payable within sixteen to twenty years 182.562 11.200 3.177 11.584 208.523 Payable within twenty one to twenty five years 20.628 0.425 0.026 0.425 21.504 - Total 628.283 74.905 93.253 85.631 882.072

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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Penzance Leisure Waste PFI Waste PFI Education Centre Scheme - Scheme - Fire PFI PFI PFI Contract Deferred 2018/19 Scheme Scheme Scheme Payment Income Total £m £m £m £m £m £m

Balance outstanding at start of year (5.283) (31.213) (4.751) (78.107) (32.438) (151.792) Payments during the year 0.305 1.197 0.077 3.202 - 4.781 Income released during the year - - - - 1.509 1.509

Balance outstanding at year-end (4.978) (30.016) (4.674) (74.905) (30.929) (145.502)

Note Pension Schemes Accounted for as Defined Contribution Schemes 38 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 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 39.

Note Defined Benefit Pension Schemes 39 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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 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 2018/19 (16.48% 2017/18) totalling £5.871m for 2018/19 (£7.346m 2017/18) and we are also responsible for costs relating to added years and associated inflation increases, totalling £1.697m in 2018/19 (£1.681m 2017/18). We are responsible for a percentage of the statutory benefits previously funded by the DfE in cases of early retirement, which amounted to £1.228m in 2018/19 (£1.197m 2017/18).

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 2018/19, we paid £1.538m (£1.528m 2017/18) 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% 2017/18) 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 2018/19 (14.3% 2017/18) totalling £0.018m (£0.020m 2017/18).

Public Health On 1 April 2013 public health staff were transferred from Primary Care Trusts (PCTs) to local authorities. Consequently, we have 30.52 FTE employees (34.39 FTE’s 2017/18) 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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

and liabilities. We contributed at a rate of 14.38% in 2018/19 (14.38% in 2017/18) totalling £0.172m (£0.199m in 2017/18).

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 2019 relating to each entity are Cornwall Council £967.658m, Cornwall Housing Limited £17.233m, Cormac Solutions Limited £76.078m, 50% Tamar Bridge Torpoint Ferry £4.541m, and 50% Mount Edgcumbe £0.905m.

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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Cornwall Council Group Firefighters Pension Scheme Pension Arrangements 31 March 31 March 31 March 31 March 2019 2018 2019 2018 £m £m £m £m Comprehensive Income and Expenditure Statement Cost of Services: Current Service Cost 62.719 62.686 5.300 5.800 Past Service Costs 5.676 11.890 9.300 - (Gain)/loss from settlements (3.362) (9.458) - - Financing and Investment Income and Expenditure Net interest on the net defined benefit liability/(asset) 24.562 24.091 6.600 5.800

Total Post-employment Benefits charged to the Surplus or 89.595 89.209 21.200 11.600 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 (51.874) (17.408) - - in the net interest expense) Actuarial (gains) and losses arising on changes in (0.117) - (17.900) (2.400) demographic assumptions Actuarial (gains) and losses arising on changes in 181.567 (41.847) 18.000 (4.100) financial assumptions Other experience 1.789 0.204 (10.900) 16.900

Total Post-employment Benefits charged to the Comprehensive Income and Expenditure Statement 220.960 30.158 10.400 22.000

Movement in Reserves Statement Reversal of net charges made to the Surplus or Deficit on the (89.595) (89.209) (21.200) (11.600) 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 47.734 45.518 4.300 4.600

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 2018/19 2017/18 2018/19 2017/18 £m £m £m £m

Present value of the defined benefit obligation (2,493.071) (2,239.328) (247.000) (240.900) Fair value of plan assets 1,417.657 1,337.140 - -

Net liability arising from defined benefit obligation (1,075.414) (902.188) (247.000) (240.900)

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Reconciliation of the movements in the Fair Value of the Scheme (plan) Assets

Cornwall Council Group Firefighters Pension Scheme Pension Arrangements 2018/19 2017/18 2018/19 2017/18 £m £m £m £m

Opening fair value of scheme assets 1,337.140 1,278.577 - -

Current Service Cost - (0.001) - - Effect of settlements (4.513) (12.704) - - Interest Income 35.959 33.348 - - Remeasurement gain/(loss): The return on plan assets, excluding the amount 51.874 17.408 - - included in the net interest expense Changes in financial assumptions 0.038 0.015 - - Contributions from employer 47.734 45.518 4.300 4.600 Contributions from employees into the scheme 10.366 9.928 1.300 1.300 Benefits paid (60.941) (59.044) (5.600) (5.900) Other - (0.025) - - Effect of business combinations and disposals - 24.120 - -

Closing fair value of scheme assets 1,417.657 1,337.140 - -

Reconciliation of Present Value of the Scheme Liabilities (Defined Benefit Obligation)

Funded Liabilities Unfunded Liabilities Cornwall Council Group Firefighters Pension Scheme Pension Arrangements 2018/19 2017/18 2018/19 2017/18 £m £m £m £m

Opening balance at 1 April (2,239.328) (2,196.156) (240.900) (223.500)

Current service cost (62.719) (62.685) (5.300) (5.800) Interest income (60.521) (57.439) (6.600) (5.800) Contributions from scheme participants (10.366) (9.928) (1.300) (1.300) Remeasurement gains and (losses): Actuarial gains/(losses) arising from changes in (181.605) 41.832 (18.000) 4.100 financial assumptions Actuarial gains/(losses) arising from changes in 0.117 - 17.900 2.400 demographic assumptions Other Experience (1.789) (0.204) 10.900 (16.900) Past service cost (5.676) (1.239) (9.300) - Benefits paid 60.941 59.044 5.600 5.900 Liabilities extinguished on settlements 7.875 22.162 - - Other - 0.056 - - Transfers (in)/out from other authorities - (34.771) - -

Closing balance at 31 March (2,493.071) (2,239.328) (247.000) (240.900)

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 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 2019 2018 2019 2018 £m £m £m £m Cash and cash equivalents 10.699 10.602 - -

Private Equity: All - - 45.502 43.890 Sub total private equity - - 45.502 43.890

Other Investment funds: Infrastructure - - 46.570 41.745 Equities 516.508 405.739 30.814 34.190 Bonds 102.910 123.042 - - Hedge Funds - - 95.660 - Commodities - - - 98.970 Other 160.097 244.720 141.319 105.806 Sub total other investment funds 779.515 773.501 314.363 280.711

Derivatives: Inflation - - - 227.278 Other - - 266.378 - Sub total derivatives - - 266.378 227.278

Total assets 790.214 784.103 626.243 551.879

* 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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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

The significant assumptions used by the actuary have been:

Cornwall Council Firefighters Pension Scheme Pension Arrangements Restated* 31 March 31 March 31 March 31 March 2019 2018 2019 2018

Long-term expected rate of return on assets in the scheme:

Equity investments 6.6% 4.0% N/A N/A Bonds 6.6% 4.0% N/A N/A Other 6.6% 4.0% N/A N/A

Mortality Assumptions: Longevity at 65 for current pensioners: Men 22.1 years 22.1 years 27.3 years 28.6 years Women 24.5 years 24.5 years 29.4 years 31.0 years Longevity at 65 for future pensioners: Men 24.0 years 24.0 years 28.4 years 29.7 years Women 26.4 years 26.4 years 30.6 years 32.2 years Rate of inflation 2.5% 2.4% 2.5% 2.4% Rate of increase in salaries 2.6% 2.5% 3.5% 3.4% Rate of increase in pensions 2.5% 2.4% 2.5% 2.4% Rate for discounting scheme liabilities 2.4% 2.7% 2.4% 2.7%

*Updated to reflect the rate of return in 2017/18

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%) 212.578 (212.578) Rate of increase in salaries (increase or decrease by 0.5%) 34.794 (34.794) Rate of increase in pensions (increase or decrease by 0.5%) 212.578 (212.578) Rate for discounting scheme liabilities (increase or decease by 0.5%) 251.361 (251.361)

* This does not contain Mount Edgcumbe

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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’ 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 (33% of scheme assets in March 2019; 32% in March 2018) and bonds (26% in March 2019; 26% in March 2018). 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 £41.618m expected contributions to the scheme in 2018/19.

The weighted average duration of the defined benefit obligation for Cornwall Council scheme members is 17.7 years, 2018/19 (17.7 years 2017/18).

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 40 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.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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. 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.

Amounts Arising from Expected Credit Losses

The Change in the loss allowance during the year are as follows:

Asset class (amortised cost) Lifetime expected 12 month credit losses - expected simplified Total credit losses approach £m £m £m £m

Opening balance as at 1st April 2018 336.221 124.362 460.583

New Financial assets orginated or purchased 110.000 6.656 116.656 Financial assets that have been derecognised (170.000) (1.913) (171.913) Other changes (10.900) (5.256) (16.156)

As at 31 March 2019 265.321 123.849 389.170

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

Credit Risk Exposure

The authority has the following exposure to credit risk at 31 March 2019.

Credit Gross risk carrying rating amount £m £m

12 month expected credit losses Loans and receivables - treasury Banks and building societies AA+ 20.000 Investments in other local authorities n/a 116.000 Shares in group companies n/a 0.500 Local authority bonds n/a 5.154 Loans and receivables - treasury Heartlands n/a 1.204

Simplified approach Loans and receivables - debtors n/a 33.017 Short term debtors n/a 90.832 Short term cash investments n/a 80.516 Other bank balances n/a (16.203)

The CIPFA Code stipulates that Investments in other local authorities are exempt from the credit risk rating meaning that Local Authority Bonds are also exempt. Similarly shares in group companies wholly owned by the Council are exempt from credit risk. The Heartland investment is backed by the Heartlands reserve.

A simplified approach was used for the other debtor financial assets, with each asset class being reviewed, short term debtors contains a bad debt provision, which amounts to £31.263m.

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 by placing limits on the proportion of investments maturing in relevant time periods. 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.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 64.313 (107.661) 122.463 79.115 Between one and two years - - 110.000 110.000 Between two and five years - - 26.893 26.893 Between five and ten years - (0.020) 0.607 0.587 Between ten and twenty years - - 3.654 3.654 Between twenty and fifty years - (673.527) - (673.527) More than fifty years - (15.000) - (15.000) No fixed maturity date - - 1.704 1.704

64.313 (796.208) 265.321 (466.574)

The category for financial assets maturing in less than one year includes investments w hich are short term - 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, treasury investments and debtors are not carried at fair value, so nominal gains and losses on fixed rate borrowings and investments (excluding investments which are short term) 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. The Treasury Management team has an active strategy for assessing interest rate exposure that feeds into the setting of the annual budget.

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

At 31 March 2019, 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 Increase in interest receivable on variable rate investments 0.130

Impact on (surplus) or deficit on the provision of services at 31 March 2019 0.130

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 Decrease in interest receivable on variable rate investments (0.130)

Impact on (surplus) or deficit on the provision of services at 31 March 2019 (0.130)

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 (178.022) Decrease in fair value of investment assets (0.185)

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 265.076 Increase in fair value of investment assets 5.327

Changes in fair value have no impact on (surplus) or deficit on the provision of services at 31 March 2019

Included within the numbers of the table above are LOBO’s financial instruments, and a 1% increase in discount rate would decrease the fair value of the LOBO liability by (£90.238m), while a 1% decrease would increase the fair value by £138.401m. As set out in the table below sets out the frequency of the LOBO options. At each option date there is potential for the interest rate to change. Any changes in these interest rates would impact on the sensitivity analysis set out above.

Lender’s Option Borrower’s Option Loans (LOBO’s)

The Council has a number of Lender Option Borrower Option (LOBO) loans. There are risks associated with these types of instruments which are impacted by their maturity dates, and in the context of the different types of LOBO’s, the frequency of the LOBO option dates. 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 2019 31 March 31 March 2019 Current Contractual 2019 31 March 2019 31 March 2019 Principal plus Interest Rate Original Remaining Frequency of Accrued Interest (Range) Maturity Maturity LOBO Options £m

Fixed interest rate LOBO's 277.596 3.53% - 5.24% 60-70 years 46-60 years 6 months - 5 years

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 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

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 carrying amounts and fair values of the Council’s LOBO’s are as follows:

31 March 31 March 31 March 31 March 2019 2019 31 March 2018 2018 31 March Carrying Accrued 2019 Fair Carrying Accrued 2018 Fair Value Interest Value Value Interest Value £m £m £m £m £m £m

Fixed interest rate LOBO's 274.100 3.496 440.619 274.100 3.488 433.668 Inverse LOBO's - - - 85.000 0.742 187.149

The Council is required to account for financial instruments in accordance with International Financial Reporting Standard 9: Financial Instruments (IFRS9). The loans do not meet the requirements under IFRS9 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 which is in compliance with the Code.

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 2018/19.

In 2018/19 the Council redeemed and refinanced its two inverse LOBO loans with a value totalling £85.000m. This removed the risk of paying relatively high interest rates during a period of prolonged low market rates. The two inverse LOBO loans were replaced by loans from the PWLB and as this is a different lender then the redemption is classified as loan extinguishment under IFRS9.

The premium payable on early redemption of the loans was £53.623m. Under the CIPFA Code premiums on early redemption of debt are chargeable to the CIES in the year of redemption. The premium is shown as an exceptional item in the Council’s CIES. However,

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Information Classification: CONTROLLED Notes to the Main Financial Statements Cornwall Council 2018/19 Statement of Accounts

under the CIPFA Code the impact on the General Fund in the year of payment of the premium is reversed out through the MIRS. The premium is then charged back to the General fund over the period of the remaining life of the loans.

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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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

Group Financial Statements

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 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.

Restated** 2018/19 2017/18

Expenditure Income Net Expenditure Income Net

£m £m £m £m £m £m Notes* Adult Social Care 246.879 (80.658) 166.221 237.053 (82.449) 154.604 Children, Schools and Families 166.202 (79.971) 86.231 153.653 (70.993) 82.660 Economic Growth and Development 131.731 (76.479) 55.252 127.902 (81.044) 46.858 Neighbourhoods 95.947 (27.528) 68.419 116.414 (24.563) 91.851 Customer and Support Services 101.966 (19.333) 82.633 293.806 (20.471) 273.335 Wellbeing and Public Health 27.737 (26.360) 1.377 27.603 (26.991) 0.612 Corporate Items 198.521 (166.701) 31.820 18.881 (184.820) (165.939) Schools-managed Expenditure 110.401 (96.733) 13.668 151.996 (119.570) 32.426 Local Authority HRA 10.911 (39.618) (28.707) 22.223 (39.993) (17.770) Joint Committees 6.775 (5.970) 0.805 6.217 (5.874) 0.343 Groups - Corserv Ltd 148.148 (35.036) 113.112 134.282 (22.407) 111.875 Groups - Cormac Contracting Ltd 1.919 (3.596) (1.677) 2.353 (4.003) (1.650)

Group cost of services 1,247.137 (657.983) 589.154 1,292.383 (683.178) 609.205

Other operating expenditure 23.781 33.154 11* Exceptional transfer of academy school assets 24.313 90.041 11* Other operating expenditure line 48.094 123.195 11* Financing and investment income and expenditure 68.282 70.905 12* Exceptional LOBO premium on redemption 53.623 - 12* Financing and investment income and expenditure line 121.905 70.905 12* Taxation and non-specific grant income (574.821) (549.527) 13*

(Surplus) or deficit on provision of services 184.332 253.778

Tax expenses of subsidiaries (0.040) 0.494

Group (Surplus)/Deficit 184.292 254.272

Surplus or deficit on revaluation of (68.121) (21.308) property, plant and equipment Surplus or deficit on revaluation of 1.705 0.698 available-for-sale financial assets Remeasurements of the pension net defined benefit liabiltiy/(asset) 122.123 (49.302) Other recognised gains and losses 0.806 1.526

Other comprehensive income and expenditure 56.513 (68.386)

Total comprehensive income and expenditure 240.805 185.886

* Note numbers refer to Cornwall Council notes that are not materially different ** Restated as a result of a directorate restructure, details can be found in note 1

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

£m

Total

(68.903)

(76.087)

171.902

240.805

109.799

185.886

(391.275)

(563.177)

(672.976)

Reserves

£m

9.372

3.153

6.219

0.069

6.150

72.056

76.156

(68.903)

(76.087)

Share of

Reserves of Reserves

Subsidiaries

£m

Total

Council

168.749

109.730

(400.647)

(569.396)

(679.126)

Reserves

£m

89.390

48.331

95.195

(72.728)

(67.863)

137.721

163.058

(210.449)

(305.644)

Reserves

Unusable

£m

Total

10.059

99.449

14.535

Usable

(89.390)

177.593

(348.888)

(358.947)

(163.058)

(373.482)

Reserves

£m

1.807

Major

(3.199)

(5.006)

(1.442)

(3.564)

Repairs

Reserve

£m

3.335

Grants

19.866

Capital

(17.841)

(21.176)

(41.042)

Reserve

£m

0.424

10.402

Capital

(58.571)

(68.973)

(69.397)

Reserve

Receipts

HRA

Total

8.366

3.467

(2.334)

(0.650)

(4.117)

(15.815)

(10.700)

(13.481)

(12.831)

Reserves

£m

HRA

(4.968)

(1.408)

(3.560)

(0.529)

(3.031)

Reserves

Earmarked

£m

1.408

8.366

0.529

3.467

(0.926)

(9.921)

(0.121)

(4.117)

(9.800)

(10.847)

(10.700)

Account

Housing

Revenue

£m

Fund

Total

(3.151)

(3.663)

110.149

181.710

General

(253.462)

(113.300)

(250.311)

(185.373)

(246.648)

Reserves

£m

Ports

0.499

(0.831)

(0.094)

(0.737)

(1.236)

Balances

£m

(3.021)

(14.364)

(211.827)

(208.806)

(194.442)

Reserves

Earmarked

£m

Fund

4.546

(4.592)

(0.265)

(4.327)

(8.873)

Schools

General

Balance

£m

Fund

0.229

3.380

5.656

9.319

(36.212)

(36.441)

(42.097)

110.149

181.710

General

Balance

(113.300) (185.373)

Notes * Notes

basis under basisregulations under

** Details of the Unusable Reserves can be seen in Cornwall Council note 23 and G3 for share of subsidiaries of share G3 for and note Council 23 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 2019 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 2018/19

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 Balance at March31 carried 2017 forward Group Movement inStatement Reserves

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 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 2019. 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 peri

2018/19 2017/18

£m £m Notes

Net (surplus) or deficit on the provision of services 184.292 254.272

Adjustments to net surplus or deficit on the provision of services for (213.398) (354.334) G8 non-cash movements Adjustments for items included in the net surplus or deficit on the 68.176 92.388 G8 provision of services that are investing and financing activities Taxation - (0.018) G8

Net cash flows from operating activities 39.070 (7.692)

Investing Activities 14.971 (11.169) G9 Financing Activities (50.122) 8.596 G10 & G11

Net (increase) or decrease in cash and cash equivalents 3.919 (10.265)

Cash and cash equivalents at the beginning of the reporting period 85.266 75.001

Cash and cash equivalents at the end of the reporting period 81.347 85.266 d. The statement shows how the Group generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities.

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

^Reclassify Balance Sheet 31 March 2019 31 March 2018

£m £m Notes* Property, Plant and Equipment 2,364.884 2,270.702 14* Heritage Assets 3.086 3.086 Investment Properties 0.550 0.550 Intangible Assets 3.746 4.139 Long Term Investments 142.358 195.303 15* Long Term Debtors 31.606 24.305 G6

Long Term Assets 2,546.230 2,498.085

Cash and Cash Equivalents 108.908 106.916 19* Current intangible assets 0.389 0.307 Short Term Investments 111.713 132.756 15* Assets Held for Sale 10.276 9.331 Inventories 46.670 13.818 16* Short Term Debtors 104.649 109.049 G6

Current Assets 382.605 372.177

Cash and Cash Equivalents (27.561) (21.650) 19* Short Term Borrowing (107.661) (91.437) G11 Short Term Creditors (140.747) (143.792) G7 Provisions (2.732) (6.553) 21* PFI Short Term Liabilities (3.393) (4.781) 15* PFI Short Term Deferred Liabilities (1.509) (1.509) Grants Receipts in Advance - Revenue (7.656) (10.771) Grants Receipts in Advance - Capital (5.555) (7.762)

Current Liabilities (296.814) (288.255)

Long Term Creditors (2.433) (2.445) 15* Provisions (40.147) (36.868) 21* Long Term Borrowing (688.513) (636.738) G11 Pension Liability (1,332.808) (1,151.574) 39* PFI Long Term Liabilities (111.180) (114.573) 15* Other Long Term Liabilities (2.140) (4.304) 15* PFI Deferred Income (29.420) (30.929) Grants Receipts in Advance - Capital (34.105) (41.399) 33*

Long Term Liabilities (2,240.746) (2,018.830)

Net Assets 391.275 563.177

Usable Reserves (339.516) (352.728) Unusable Reserves (51.759) (210.449) 23*

Total Reserves (391.275) (563.177) G3

* Note numbers with no "G" refer to Cornwall Council notes that are not materially different ^ Reclassify the Cash and Cash Equivalents between current assets and current liabilities

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

Notes to the Group Financial Statements

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 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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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 52.

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% was owned until disposal of Via during the year.

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 2018/19. 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 2018/19 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; and  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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 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 over 10,000 general needs houses across Cornwall. They look after about 400 leaseholders on behalf of the Council and manage other garages, shops and land in neighbourhoods with council housing. The company also looks after over 50 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 was a jointly owned company with Nottinghamshire County Council. Corserv Ltd owned 51% of the shares until disposal of the company during the year to Nottingham County Council. The company’s principal activity was to deliver a sustainable highways service for Nottinghamshire.

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 2018/19 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 and guidance to support the growth of the offshore renewable energy sector. The company registration number is 10166467.

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 2018/19 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 2018/19 have not been consolidated on the grounds of materiality.

Note Reconciliation to the Single Entity CIES G2 2018/19 2017/18 £m £m (Surplus) or deficit per single entity Comprehensive Income 99.449 177.593 and Expenditure Statement (Surplus) or deficit attributable to subsidiaries 70.754 76.679

Total Group (Surplus) or Deficit 170.203 254.272

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note G3 Analysis of Group Net Worth

2018/19 2017/18 £m £m

Cornwall Council 400.647 569.396 Cornwall Housing Ltd 4.560 6.056 Cornwall Airport Ltd (0.696) (0.372) Cornwall Development Company Ltd (8.498) (7.010) Rural Economic Partnership Ltd 0.516 0.611 Cormac Contracting Ltd (0.896) (0.793) Cormac Solutions Ltd 4.158 3.148 Corserv Ltd 1.710 1.144 Group Adjustments (10.226) (9.003)

Total 391.275 563.177

Note Associated Risks G4 Cornwall Council has agreed to support Corserv Ltd through the provision of a cashflow facility enabling them to manage their cash position as they do not maintain their own cash reserves. The agreement provides a facility of up to £15.000m until 31 March 2023. As at 31 March 2019 Corserv Ltd had a loan of £10.250m 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 2019 these amounted to £1.445m.

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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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Debtors G6

Current Long Term Restated* Restated* 31 March 31 March 31 March 31 March 2019 2018 2019 2018 £m £m £m £m

Trade Receivables 61.327 53.419 - - Prepayments 6.672 9.451 - - Debtors for Local Taxation 26.792 25.249 - - Other Receivable Amounts 9.858 20.930 31.606 24.305

Total 104.649 109.049 31.606 24.305

*Restated to reflect new structure of note

Note Creditors G7 Current Long Term Restated* Restated* 31 March 31 March 31 March 31 March 2019 2018 2019 2018 £m £m £m £m

Trade Payables (47.208) (47.206) - - Receipts in Advance (15.248) (15.209) - - Other Payables (78.291) (81.377) (2.433) (2.445)

Total (140.747) (143.792) (2.433) (2.445)

*Restated to reflect new structure of note

Note Cash Flow Statement – Operating Activities G8 The cash flows for operating activities include the following items:

2018/19 2017/18 £m £m

Interest received (7.291) (6.854) Interest paid 46.680 47.574 Dividends received (2.199) (0.790)

Net cash flows from operating activities 37.190 39.930

The surplus or deficit on the provision of services has been adjusted for the following non- cash movements:

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

2018/19 2017/18 £m £m

Depreciation and impairment (78.516) (72.240) Downward valuations (1.074) (45.408) Amortisation (1.255) (2.151) Adjustments for movements in fair value of investments classified (0.316) as Fair Value through Profit & Loss a/c Adjustments for effective interest rates (1.817) Losses or Gains on derecognition of loans & advances in year (1.909) (1.595) Increase/(decrease) in interest creditors (0.325) 0.009 Increase/(decrease) in creditors (1.032) 12.301 Increase/(decrease) in interest and dividend debtors 0.368 0.805 Increase/(decrease) in debtors 1.639 9.970 Increase/(decrease) in inventories 32.852 6.488 Movement in pension liability (59.084) (50.973) Unwinding of discount of Deferred Receipts 0.017 0.069 Contributions to/(from) provisions 0.165 (13.013) Carrying amount of non-current assets and non-current assets (30.748) (116.254) held for sale, sold or de-recognised Other non-cash items charged to the net surplus or deficit on (72.363) (78.570) 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)

Adjustment to net cash flows from operating activities (213.398) (354.352)

The surplus or deficit on the provision of services has been adjusted for the following items that are investing and financing activities:

2018/19 2017/18 £m £m

Capital grants credited to (surplus)/deficit on the provision 69.314 77.422 of services Proceeds from the sale of short-term (not considered to be cash (6.985) - equivalents) and long-term investments (includes investments in associates, joint ventures and subsidiaries) Proceeds from the sale of property, plant and equipment, 5.847 14.966 investment property and intangible assets

Adjustment to net cash flows from operating activities 68.176 92.388

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Cash Flow Statement –Investing Activities G9

2018/19 2017/18 £m £m

Purchase of property, plant and equipment, investment property and 140.037 120.788 intangible assets Purchase of short-term and long-term investments 108.500 201.013 Other payments for investing activities 11.316 18.480 Proceeeds from the sale of property, plant and equipment, investment (5.820) (14.975) property and intangible assets Proceeds from short-term and long-term investments (170.000) (250.681) Capital grants received (64.688) (81.923) Loan repayments received (4.374) (3.871)

Net cash flows from investing activities 14.971 (11.169)

Note Cash Flow Statement – Financing Activities G10

2018/19 2017/18 £m £m

Cash receipts of short and long-term borrowing (1,042.558) (515.260) Other (receipts)/payment from financing activities 1.262 14.142 Cash payments for the reduction of the outstanding liabilities relating 6.597 5.789 to finance leases and on-balance sheet PFI contracts Repayments of short and long-term borrowing 977.031 501.735 Dividends paid 7.546 2.190

Net cash flows from financing activities (50.122) 8.596

Note Cash Flow Statement – Reconciliation of Liabilities Arising from Financing G11 Activities Other non- 2017/18 Financing cash 2018/19 1 April cash flows changes 31st March £m £m £m £m Long-term borrowings (636.738) (51.775) - (688.513) Short-term borrowings (91.437) (16.224) - (107.661) Lease Liabilities (4.202) - 2.148 (2.054) On balance sheet PFI liabilities (119.354) - 4.781 (114.573)

Total liabilities from financing activities (851.731) (67.999) 6.929 (912.801)

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Information Classification: CONTROLLED Group Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note G12 Related Parties – Inter Group Eliminations

The following table shows the net 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:

2018/19 2018/19 2018/19 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 2.445 (1.075) 1.370 Cornwall Development Company Ltd 2.136 (0.163) 1.973 Cormac Solutions Ltd 87.480 (6.947) 80.533 Cornwall Housing Ltd 36.510 (1.232) 35.278 Cormac Contracting Ltd 0.011 (0.054) (0.043) Corserv Ltd 0.048 (2.122) (2.074) Wave Hub Ltd 0.649 - 0.649 CSW Group Ltd 1.040 - 1.040

Total 130.319 (11.593) 118.726

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

Supplementary Financial Statements

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

Housing Revenue Account (HRA)- Income and Expenditure Statement

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

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.

2018/19 2017/18

£m £m Notes Expenditure Repairs and maintenance 8.127 9.427 Supervision and management: 10.853 10.567 Rents, rates, taxes and other charges 0.796 0.848 Depreciation and impairment of non-current assets 8.454 13.968 HR6 & 7 Deminimis capital expenditure - 0.156 Debt management costs - 0.028

Total Expenditure 28.230 34.994

Income Dwelling rents (37.323) (37.864) Non-dwelling rents (1.276) (1.209) Charges for services and facilities (1.031) (0.910) Contributions towards expenditure (0.163) (0.040) Movement in the allowance for bad debts 0.173 0.029

Total Income (39.620) (39.994) - - -

Net cost of HRA Services (11.390) (5.000)

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 (11.020) (4.630)

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 (1.181) (2.689) Interest payable and similar charges 3.105 3.338 Interest and investment income (0.180) (0.164) Net interest on the pension net defined liability/(asset) 0.259 0.257 Capital grants and contributions receivable (1.683) (0.229)

(Surplus) or deficit for the year on HRA Services (10.700) (4.117)

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 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.

2018/19 2017/18 £m £m Balance on the HRA at the end of the previous year (9.921) (9.800) (Surplus) or deficit for the year on the HRA Income and Expenditure Statement (10.700) (4.117) Adjustments between accounting basis and funding basis under statute 8.366 3.467 HR1

Net (increase) or decrease before transfers to or from reserves (2.334) (0.650)

Transfers (to) or from reserves 1.408 0.529

(Increase) or decrease in year on the HRA (0.926) (0.121)

Balance on the HRA at the end of the current year (10.847) (9.921)

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

Notes to the Housing

Revenue Account (HRA)

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 over 10,000 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

Restated * 2018/19 2017/18 £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 (17.392) (14.673) * Revaluation losses on property, plant and equipment 8.938 0.829 * Amortisation of intangible assets - (0.124) * Capital grants and contributions applied 1.681 0.229 Amounts of non-current assets written off on disposal or sale as part of 1.184 2.695 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 2.529 3.054 * Adjustments primarily involving the Major Repairs Reserve: Posting of HRA resources from revenue to the Major Repairs Reserve 12.711 12.790 * Adjustments primarily involving the Financial Instruments Adjustment Account: Amount by which finance costs charged to the Comprehensive Income and 0.021 0.019 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 (2.967) (2.959) Comprehensive and Expenditure Statement Employer's pensions contributions and direct payments to pensioners 1.661 1.607 payable in the year Total Adjustments 8.366 3.467

* Restated to match note 9 of the Main Financial Statements

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Housing Stock HR2 31 March 2019 Movement 1 April 2018 1-bed dwellings 2,608 (3) 2,611 2-bed dwellings 4,183 (10) 4,193 3-bed dwellings 3,313 (26) 3,339 4 or more bed dwellings 137 1 136 Hostels 2 - 2 - Number of dwellings 10,243 (38) 10,281 -

Note Balance Sheet Valuation HR3 31 March 2019 Movement 1 April 2018 £m £m £m

Council dwellings 498.441 13.261 485.180 Housing Revenue Account land 1.226 (0.271) 1.497 Shops 0.501 (0.012) 0.513 Garages and other buildings 19.031 3.697 15.334 Vehicles, plant and equipment 0.005 (0.001) 0.006 Intangibles 0.843 0.719 0.124

Value of HRA assets 520.047 17.393 502.654

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 2019 the Vacant Possession Value of dwellings within the Council’s HRA was £1.407bn.

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Housing Revenue Account Capital Expenditure and Financing HR5

2018/19 2017/18 Capital Expenditure during the year: £m £m Improvements to Council Stock 16.293 12.335 Intangible Assets 0.001 0.001 New Build Construction 4.504 3.610

Total Expenditure 20.798 15.946

Financed from: Major Repairs Reserve 14.518 11.348 New Build Reserve 1.519 2.237 Capital Grants 2.096 0.304 Capital Receipts 0.870 1.083 Housing Revenue Account 0.935 0.974 Prudential Borrowing 0.860 -

Balance at 31 March 20.798 15.946

Note Depreciation HR6 2018/19 2017/18 £m £m Operational Assets: Council Dwellings 12.129 11.933 Other Land and Buildings 0.464 0.428 Vehicles, Plant and Equipment 0.001 0.045

Total Operational Assets Depreciation 12.594 12.406

Reversal of previous downward revaluations 4.718 2.267

Total Depreciation charged to Housing Revenue Account 17.312 14.673 Amortisation of Intangible Assets 0.080 0.124

Total Depreciation and Amortisation charged to Housing Revenue Account 17.392 14.797

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

Note Impairments and Revaluations HR7

The HRA had no impairments in 2018/19 (£0.000m in 2017/18). There were revaluations down of £9.079m (£9.694m in 2017/18) and reversal of previous revaluations down of £18.436m (£10.523m in 2017/18).

2018/19 2017/18 £m £m Operational Assets: Council Dwellings 8.938 (0.360) Other Land and Buildings - (0.469)

Total Operational Assets Revaluations 8.938 (0.829)

Note Major Repairs Reserve HR8

The movement on the MRR in the year is detailed as follows:

2018/19 2017/18 £m £m

Balance at 1 April (5.006) (3.564)

Transfer from Housing Revenue Account (12.711) (12.790) Capital expenditure financing - Housing 14.518 11.348

Balance at 31 March (3.199) (5.006)

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

Collection Fund

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

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.

2018/19 2018/19 2018/19 2017/18 2017/18 2017/18 NNDR Council Tax Total NNDR Council Tax Total £m £m £m £m £m £m Income Council tax receivable - (344.389) (344.389) - (323.974) (323.974) Business rates receivable (162.487) - (162.487) (155.362) - (155.362) - Total Income (162.487) (344.389) (506.876) (155.362) (323.974) (479.336) - - Expenditure Apportionment of previous years surplus Cornwall Council 5.206 11.160 16.366 1.000 9.800 10.800 Devon and Cornwall Police Authority - 1.304 1.304 - 1.171 1.171 Central Government 0.244 - 0.244 1.000 - 1.000 Precepts, demands and shares Cornwall Council 149.868 303.176 453.044 140.214 280.350 420.564 Cornwall Council Designated Areas Grant 0.135 - 0.135 0.125 - 0.125 Cornwall Council Renewable Energy Grant 1.570 - 1.570 2.362 - 2.362 Devon and Cornwall Police Authority - 36.036 36.036 - 32.745 32.745 Business rates transitional protection (0.042) - (0.042) 0.956 - 0.956

Charges to Collection Fund Less: write offs of uncollectable amounts 1.110 0.723 1.833 1.139 1.012 2.151 Less: increase/(decrease) in impairment allowance for doubtful debts 0.257 1.164 1.421 0.621 1.208 1.829 Less: cost of collection 1.126 - 1.126 1.125 - 1.125 Less: provision for backdated appeals 3.290 - 3.290 3.633 - 3.633

Total Expenditure 162.764 353.563 516.327 152.175 326.286 478.461

(Surplus)/deficit for the year 0.277 9.174 9.451 (3.187) 2.312 (0.875)

Collection Fund balance brought forward (5.675) (13.133) (18.808) (2.488) (15.445) (17.933) Collection Fund balance carried forward (5.398) (3.959) (9.357) (5.675) (13.133) (18.808)

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Notes to the Collection Fund

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Information Classification: CONTROLLED Supplementary Financial Statements Cornwall Council 2018/19 Statement of Accounts

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 2018/19 was 49.3p, reducing to 48.0p for properties in receipt of Small Business Rate Relief with a rateable value of up to £51,000. The total rateable value for all non-domestic properties as at 31 March 2019 was £470.395m (£464.712m 2017/18).

Note The Council Taxbase 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 2018/19

A 62,766 38,809 6/9 25,865 176 26,041 B 69,072 52,418 7/9 40,769 145 40,914 C 57,326 48,212 8/9 42,855 81 42,936 D 42,020 36,921 9/9 36,921 57 36,978 E 24,454 22,437 11/9 27,424 11 27,435 F 8,727 8,160 13/9 11,787 7 11,794 G 4,093 3,836 15/9 6,394 2 6,396 H 376 310 18/9 620 18 638

Total 268,834 211,102 192,636 497 193,132

Less: Allowance for non-collection of 0.9% 1,734 1,734

Council Taxbase 191,398

* MOD (Ministry of Defence)

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Information Classification: CONTROLLED Pension Fund Accounts Cornwall Council 2018/19 Statement of Accounts

Fire Fighters’ Pension Fund Account

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Information Classification: CONTROLLED Pension Fund Accounts Cornwall Council 2018/19 Statement of Accounts

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 2018/19 2017/18 £m £m Contributions receivable: Fire authority: Contributions in relation to pensionable pay (1.538) (1.528) Other (0.027) (0.027) Firefighters contributions (1.319) (1.266) Transfers in from other authorities (0.013) (0.007)

Benefits payable: Pensions 4.943 4.583 Commutations and lump sum retirement benefits 0.716 1.470

Payments to and on account of leavers: Transfers out to other authorities - 0.010 Refunds of contributions 0.027 0.008

Net amount payable for the year 2.789 3.243

Top-up grant payable by the Government (2.789) (3.243)

Total - -

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Information Classification: CONTROLLED Pension Fund Accounts Cornwall Council 2018/19 Statement of Accounts

Net Assets Statement 31 March 31 March 2019 2018 £m £m Current Assets Top-up receivable from the Government 0.922 1.179 Current Liabilities Amount owing to the General Fund (0.922) (1.179)

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 39 in the main financial statements.

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Pension Fund Accounts

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Cornwall Local Government Pension Scheme Accounts

Fund Account

2018-19 2017-18

Dealings with members, employers and £m £m £m £m Notes others directly involved in the Fund Contributions 91.561 89.381 P7 Transfers In from Other Pension Funds 3.559 5.467 P7

Total Contributions 95.120 94.848

Benefits Payable (75.132) (70.187) P7 Payments to and on account of leavers (3.210) (3.775) P7

Total Payments (78.342) (73.962)

Net Additions from Dealings with Members 16.778 20.886

Management Expenses (17.359) (20.698) P8

Net Additions including Fund Management Expenses (0.581) 0.188 Returns on Investments Investment Income 24.569 9.388 P9 Taxes on Income (0.071) (0.474) P9 Profit and Loss on Disposal of Investments and Changes in Market Value of Investments 107.947 79.878 P10

Net Returns on Investment 132.445 88.792

Net Increase / (Decrease) in the Net Assets Available for Benefits During the Year 131.864 88.980

Opening Net Assets of the Scheme 1,798.106 1,709.126

Closing Net Assets of the Scheme at 31 March 1,929.970 1,798.106

Net Assets Statement

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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 2019. 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 the Fund’s investment consultant, JLT (part of Mercer, a Marsh & McLennan Company), 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 2019 there were 156 employer records in the Fund with active members (150 in the previous year).

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The table below shows a breakdown of the membership.

2015 2016 2017 2018 2019 Contributors Cornwall Council 8,766 8,780 7,426 7,021 6,810 Academies 3,610 4,237 5,542 6,732 7,386 Other Bodies 4,888 4,787 4,247 4,081 3,888

Total Number of Contributors 17,264 17,804 17,215 17,834 18,084

Pensioners Receiving Benefits 11,691 12,213 12,906 13,602 14,460 Deferred Benefits 18,711 19,239 20,306 21,014 21,060

Total Number of Pensioners 30,402 31,452 33,212 34,616 35,520

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 2019. 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. The next valuation is currently taking place, based on 31 March 2019 data, which will set the contribution rates, which will be in place from April 2020.

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 2018-19 and its position at the year ending 31 March 2019. They have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2018-19 (the code), based on International Financial Reporting Standards (IFRS) as published by the Chartered Institute of Public Finance and Accountancy (CIPFA). Paragraph 3.3.1.2 of the Code requires disclosure of any accounting standards issued but not yet adopted. No such accounting standards have been identified for 2018/19.

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 2018-19.

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 These are included on an accruals basis, where these amounts have been determined on the closure of accounts.

Employee contribution rates are set in accordance with LGPS regulations, using common percentage rates for all schemes which rise according to pensionable pay. Employer contributions are set at the percentage rate recommended by the fund actuary for the 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. Any amount due in the year but unpaid will be classed as a current financial asset. Amounts not due until future years are classed as long term financial assets.

Investment Income and Expenses 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 represent amounts received and paid during the period for individual members who have either joined or left Cornwall Pension Fund during the financial year. Individual transfers in/out are accounted for on a received or paid basis during the year and are calculated in accordance with the LGPS Regulations. 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

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and investment management expenses. All items of expenditure are charged to the Fund on an accruals basis.

Administrative Expenses 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.

Oversight and Governance Costs 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 comprise of 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. The impact of the change from IAS39 to IFRS9 has not had any material impacts on both the classification and valuation of financial instruments. 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).

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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 was initially measured at cost and is subsequently revalued for any impairment.

The accounts for the year ended 31 March 2019 use the valuations for the Fund’s assets based on the figures provided by the Fund’s custodian, State Street.

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).

Contingent assets and contingent liabilities A contingent asset arises where an event has taken place giving rise to a possible asset whose existence will only be confirmed or otherwise by the occurrence of future events.

A contingent liability arises where an event has taken place prior to the year-end giving rise to a possible financial obligation whose existence will only be confirmed or otherwise by the occurrence of future events. Contingent liabilities can also arise in circumstances where a

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provision would be made, except that it is not possible at the balance sheet date to measure the value of the financial obligation reliably.

Contingent assets and liabilities are not recognised in the net asset statement but are disclosed by way of narrative in the notes.

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.

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.

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.

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The items in the Net Assets Statement at 31 March 2019, 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 £356m. A 0.5% rise in the salary increase rate would increase the A firm of consulting actuaries, Hymans Robertson, is liability by £55m. 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 the liability by £280m. 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 £188.727m. 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.

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).

No material events have occurred.

Note Analysis of Total Contributions and Benefits P7 The total contributions receivable and benefits payable during the year ending 31 March were as shown below:

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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Cornwall Scheduled Designatory Admitted Council Bodies Bodies Bodies 2019 2018 £m £m £m £m £m £m Contributions Receivable Employers' normal 25.208 18.611 4.377 2.900 51.096 51.436 Employers' fixed deficit 9.846 4.871 2.389 5.823 22.929 20.626 From Employees 8.824 6.135 1.605 0.962 17.526 17.310 (normal and additional) Transfers In Individual transfers 2.172 1.025 0.362 - 3.559 5.467 Other Income 0.006 0.003 0.001 - 0.010 0.009

Total Income 46.056 30.645 8.734 9.685 95.120 94.848

Benefits Payable Pensions (47.765) (5.773) (2.195) (3.853) (59.586) (56.450) Lump Sums (8.355) (3.173) (1.123) (0.923) (13.574) (12.283) Death Benefits (1.213) (0.442) (0.009) (0.144) (1.808) (1.393) Taxation where lifetime or (0.097) (0.067) - - (0.164) (0.061) annual allowance exceeded Payments on Account of Leavers Refunds of Contributions (0.149) (0.159) (0.010) (0.026) (0.344) (0.306) Transfers Out Individual transfers (1.234) (1.144) (0.293) (0.195) (2.866) (3.469)

Total Expenditure (58.813) (10.758) (3.630) (5.141) (78.342) (73.962)

Note P8 Management Expenses For the years ended 31 March, the analysis of management expenditure was as follows:

2019 2018 £m £m Management Expenses Administrative Costs 0.964 0.904 Investment Management Expenses Management Fees 9.730 8.743 Performance Fees 0.356 1.473 Transaction Costs1 2.779 6.806 Other Costs2 2.737 2.048 Custody Fees 0.046 0.050 Oversight and Governance Costs 0.747 0.674

Total Investment and Administration Expenses 17.359 20.698

1 One off transaction costs were incurred in 2018 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 £0.020m for the year to 31 March 2019 (£0.024m for the year to 31 March 2018) which relates to the external audit of the Pension Fund accounts.

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Note Investment Income P9

The income paid back to the Fund generated by the Fund’s investments, net of tax, amounted to £24.498m. 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:

2019 2018 £m £m Pooled Investment Vehicles Private equities, infrastructure and private debt 4.327 3.327 Pooled Property Funds 4.700 4.816 Gain on foreign currency transactions when trading1 15.473 1.077 Interest on cash deposits 0.062 0.037 Other 0.007 0.131

Gross Investment Income 24.569 9.388

Irrecoverable Witholding Tax (0.071) (0.474)

Net Investment Income 24.498 8.914 1 This gain resulted from the large change in exchange rates, from when the investment was originally purchased to when it was sold

Note Investments P10

31 March 31 March 2019 2018

£m £m Notes Long Term Investments Brunel Pension Partnership Ltd 0.395 0.840 Investment Assets Pooled Investments 1,766.079 1,646.697 Pooled Property Investments 144.931 132.667 Cash Deposits 9.307 7.787 P13 Other Investment Balances 0.158 0.100

Net Investment Assets 1,920.870 1,788.091

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

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hedging the sterling value of investments that are priced in other currencies, if they deem this risk material.

31 March 31 March 2019 2018 Investment Assets £m £m

Pooled Investment Vehicles Managed Funds UK Pooled Funds 677.745 546.270 Overseas Pooled Funds 978.137 1,100.427 UK Pooled Property 37.631 31.200 Overseas Pooled Property 5.527 2.238 UK Unit Trusts Pooled Property 101.773 99.229 Insurance Policies UK Insurance Policies 20.881 - Overseas Insurance Policies 89.316 - 1,911.010 1,779.364

Cash Deposits 9.307 7.787 Investment Income Due and tax receivable 0.158 0.100 9.465 7.887

Net Investment Assets of the Scheme as at 31 March 1,920.475 1,787.251

Profit / Loss Value and Change Value 1 April Purchases Sales in Market 31 March 2018 at cost Proceeds Value 2019 £m £m £m £m £m Long Term Investments Brunel Pensions Partnership 0.840 - - (0.445) 0.395 Investment Assets Pooled Investment Vehicles Pooled Equity Funds 575.709 223.552 (199.982) 34.562 633.841 Pooled Property Funds 132.667 8.659 (4.812) 8.417 144.931 Other Pooled Investments 1,070.988 286.508 (290.682) 65.424 1,132.238

1,780.204 518.719 (495.476) 107.958 1,911.405

Other adjustments for revaluation - (0.011) - Cash Deposits 7.787 9.307 Other Investment Balances 0.100 0.158

Net Investment Assets 1,788.091 107.947 1,920.870

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 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 fund managers’ portfolios were valued as follows:

31 March 2019 31 March 2018 % of % of £m Total £m Total Fund Manager Investments managed by Brunel Pension Partnership Brunel Infrastructure Portfolio 4.706 0.2% - - Total Investments managed by Brunel Pension Partnership 4.706 0.2% - -

Investments managed outside of Brunel Pension Partnership Aberdeen Standard Investments (Property, Private Equity 120.610 6.3% 120.819 6.7% & Frontier Markets) AXA Investment Managers (Liability Driven Investment) 362.119 18.9% 300.237 16.8% BlueBay (Private Debt) 26.703 1.4% 7.399 0.4% Capital International (Emerging Market Equities) 115.534 6.0% 101.540 5.7% Environmental Technology Fund (Private Equity) 0.975 0.1% 1.221 0.1% Golub (Private Debt) 20.145 1.0% 10.693 0.6% Hermes Investment Management (Infrastructure) 42.124 2.2% 45.864 2.6% HSBC (Frontier Market Equities) 48.559 2.5% 51.493 2.9% Infracapital Partners (Infrastructure) 16.478 0.9% 15.235 0.9% Insight Investment Management (Absolute Return Bonds & 139.899 7.3% 168.166 9.4% Multi Asset Credit) Internally Managed Property Funds (Property) 83.459 4.3% 81.581 4.6% Invesco Perpetual (Diversified Growth Fund) 217.640 11.3% 330.308 18.5% Man FRM (Hedge Fund) 130.041 6.8% 136.446 7.6% M & G UK Financing Fund (Private Debt) 0.332 0.0% 0.426 0.0% Newton Investment Management (Global Equities) 427.860 22.3% 375.111 21.0% Wilshire Associates (Private Equity) 43.629 2.3% 32.825 1.8% Legal & General Investment Management (Insurance Fund) 110.197 5.7% - 0.0% Total Inverstments managed by Cornwall Pension Fund 1,906.304 99.3% 1,779.364 99.6%

Total Investments with external managers 1,911.010 99.5% 1,779.364 99.6%

Accruals and Cash Deposits 9.465 0.5% 7.887 0.4%

Total Investment Assets 1,920.475 100.0% 1,787.251 100%

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The following holdings each represent more than 5% of the net assets of the Fund:

31 March 2019 31 March 2018

£m % of Total £m % of Total

Newton Global Equity X Shares Fund 427.860 22.3% 375.111 21.0% AXA IM Smart Matching Solutions Fund A 362.119 18.9% 300.237 16.8% Invesco Balanced Risk 8 Accumulation Shares 217.640 11.3% 212.546 11.9% Insight Investment Management (LDI Solutions Bonds Plus 400) 54.650 2.8% 168.166 9.4% ManFRM - Cornwall Hedge Fund Strategy 130.041 6.8% 136.446 7.6% Invesco Global Targeted Returns Fund - - 117.762 6.6% Capital International Emerging Markets (Growth Fund) 115.534 6.0% 101.540 5.7% Legal & General Investment Management (Insurance Fund Policy 37084) 110.197 5.7% - 0.0%

Note P11 Fair Value – Basis of Valuation

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

Insurance Policies Level 2 Closing bid price where bid and offer prices Evaluated price feeds Not Required are 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

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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 2019.

Assessed valuation Value at 31 Value on Value on range (+/-) March 2019 increase decrease £m £m £m

Private Debt 5 47.180 49.539 44.821 Property Limited Partnerships 10 16.385 18.024 14.747 Private Equities 15 61.854 71.132 52.576 Infrastructure Funds 10 63.308 69.639 56.977

Total 188.727 208.334 169.121

The comparative data for the previous year are as follows:

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

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

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determine fair value and where these techniques use inputs that are based significantly on observable market data.

 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 2019:

Quoted Market Using Observable With Significant Price Inputs Unobservable Inputs

Investment Assets Level 1 Level 2 Level 3 Total as at 31 March 2019 £m £m £m £m

Financial Assets at Fair Value Through Profit and Loss - 1,722.283 188.727 1,911.010 Other Investment Assets 9.465 - - 9.465

Total Investment Assets 9.465 1,722.283 188.727 1,920.475

The comparative table for 31 March 2018 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 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

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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 2018 56.214 61.099 18.517 7.024 142.854

Transfers into Level 3 - - - - -

Transfers out of Level 3 - - - - -

Purchases during the year 4.037 5.358 33.201 8.659 51.255

Sales during the year (10.654) (1.335) (6.191) (0.375) (18.555)

Unrealised gains/losses 6.746 (2.442) 1.531 1.076 6.911

Realised gains/losses 5.511 0.628 0.122 0.001 6.262

Market value 31 March 2019 61.854 63.308 47.180 16.385 188.727

The comparative table for 31 March 2018 is shown below:

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

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Note Financial Instruments P12 Classification of Financial Instruments

31 March 31 March 2019 2018 £m £m Financial Assets Fair value through profit or loss Pooled Investments 1,766.079 1,646.697 Pooled Property Investments 144.931 132.667 Long Term Investments 0.395 0.840 Assets at amortised cost Cash 10.330 9.200 Other Investment Balances 0.158 0.100 Debtors 12.126 12.351

Total Financial Assets 1,934.019 1,801.855

Financial Liabilities Measured at amortised cost Creditors (4.049) (3.749) Total Financial Liabilities (4.049) (3.749)

Grand Total 1,929.970 1,798.106

Net Gains and Losses on Financial Instruments

31 March 2019 31 March 2018 £m £m

Financial Assets Fair Value Through Profit and Loss 107.947 79.878 Loans and Receivables -

Total 107.947 79.878

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Note P13 Nature and Extent of Risks Arising from Financial Instruments

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.

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

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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 2019. 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.

Movements in market prices would have increased or decreased the net assets, at 31 March 2019, by the amounts shown below:

Value on Value on Value Volatility of Increase Decrease As at 31 March 2019 £m Return % £m £m

Global Equities 633.841 9.35% 693.115 574.567 Property 144.931 2.41% 148.421 141.441 Bonds 139.899 6.36% 148.795 131.004 Other pooled investment vehicles and private equities 992.339 17.50% 1,165.999 818.680

Total1 1,911.010 6.55% 2,036.134 1,785.886

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 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

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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.

The comparative data for the previous year are as follows:

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

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The following table analyses the Fund’s currency exposure as at 31 March 2019 as observed and provided by PIRC. PIRC analysed historical data and considered the potential volatility associated with foreign exchange rate movements to be 9.10% (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 Note 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:

Potential Value on Value on Overseas Assets as at 31 March 2019 Value Percentage Increase Decrease £m Change £m £m

Overseas Equities 115.534 9.10% 126.033 105.034 Cash 2.279 9.10% 2.487 2.073 Property 5.527 9.10% 6.029 5.024 Alternatives 85.730 9.10% 93.521 77.939

Total Overseas Assets 209.070 9.10% 228.070 190.070

The comparative data for the previous year are as follows:

Restated Restated Restated Potential Value on Value on Overseas Assets as at 31 March 2018 Value Percentage Increase Decrease £m Change £m £m

Overseas Equities 101.540 9.40% 111.131 91.949 Cash 2.947 9.40% 3.226 2.669 Property 2.238 9.40% 2.450 2.027 Alternatives 65.686 9.40% 71.890 59.481

Total Overseas Assets 172.411 9.40% 188.697 156.126

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.

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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 does not hold any fixed interest securities directly and the manager of the Absolute Return Bonds and Multi-Asset Credit funds are responsible for managing credit risk. The market prices of the 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 Pension Fund’s Cash Management Strategy. The Fund invests surplus cash with the Custodian in diversified, money market funds. (See table below for breakdown of this).

Liquidity Risk

Cash and cash equivalents At 31 March At 31 March 2019 2018 Rating £m £m Money Market Funds Aberdeen Standard Liquidity Fund1 AAA 4.832 4.315 Northern Trust Global Cash Fund AAA 0.000 0.239 State Street Global Advisors (SSGA) AAA 4.293 3.233 Bank Natwest Plc A+ 1.023 1.413 State Street Bank & Trust Company AA+ 0.181 0.000 Total cash and cash equivalents 10.329 9.200

1 Standard Life Investments Liquidity Fund was merged with Aberdeen Asset Liquidity Fund into the Aberdeen Standard Liquidity Fund

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 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.

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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 2019, these amounted to £188.727m, which represented 9.8% of the Fund’s investment assets (at 31 March 2018, these amounted to £142.854m, which represented 8.0% of the Fund’s investment assets).

Note P14 Actuarial Statement for 2018-19 (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.

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

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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 Future Pensioners 1 24.0 years 26.4 years

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. 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 largely offset by strong asset returns over the 3 years.

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Overall there is likely to have been a slight negative impact in terms of the funding position as at 31 March 2019.

The next actuarial valuation will be carried out based on the data as at 31 March 2019. The Funding Strategy Statement will also be reviewed at that time and come into effect in April 2020.

Kameel Kapitan FFA Fellow of the Institute and Faculty of Actuaries For and on behalf of Hymans Robertson LLP 11 April 2019

Note Actuarial present value of Promised Retirement Benefits P15 (This note was prepared by the Fund’s Actuary, Hymans Robertson)

CIPFA's Code of Practice on Local Authority Accounting 2018/19 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 2019 31 March 2018 £m £m Active members 1,662 1,363 Deferred members 670 596 Pensioners 952 944 Present value of Promised Retirement Benefits1 3,284 2,903

1 Includes £2m for the estimated impact of the recent ‘MCCloud’ ruling and £4m for the estimated impact of GMP indexation changes

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The promised retirement benefits at 31 March 2019 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 Pension Fund accounts. 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 2019 and 31 March 2018. I estimate that the impact of the change in financial assumptions to 31 March 2019 is to increase the actuarial present value by £257m. 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 2019 31 March 2018 % p.a. % p.a. Pensions Increase Rate 2.5% 2.4% Salary Increase Rate 2.6% 2.5% Discount Rate 2.4% 2.7%

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 not changed since the previous IAS26 disclosure for the Fund.

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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.

Kameel Kapitan FFA Fellow of the Institute and Faculty of Actuaries For and on behalf of Hymans Robertson LLP 12 July 2019

Note P16 Current Assets and Liabilities

31 March 31 March 2019 2018 £m £m Current Assets Administration income receivable 0.329 0.769 Employees Contributions receivable 1.930 1.803 Employers Contributions receivable 5.384 9.395 Pension strain income receivable 0.454 0.384 Cash Balances 1.023 1.413

Total Current Assets 9.120 13.764

Current Liabilities Administration expenses payable (3.117) (2.893) Pension lump sums payable (0.932) (0.856)

Total Current Liabilities (4.049) (3.749)

Total Current Assets and Liabilities 5.071 10.015

Long Term Debtors

31 March 31 March 2019 2018 £m £m Long Term Debtors Reimbursement of Lifetime Allowance Tax Charges 0.198 - Cessation Payment Due 3.831 -

Total Long Term Debtors 4.029 -

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Note Additional Voluntary Contributions (AVC) P17 Value Value at 31 March 2019 31 March 2018 £m £m AVC Scheme Standard Life 2.094 1.956 Equitable Life 0.442 0.504 Total 2.536 2.460 Changes During the Year Contributions 0.213 0.172 Paid Out (0.216) (0.722) Change in Market Value 0.078 0.082

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 in nominated money market accounts for cash flow management purposes, see Note P13 for details. 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 £1.178m incurred for the internal costs of providing these services during the year to 31 March 2019 (£1.140m for the year to 31 March 2018). For the year to 31 March 2019 this is composed of £0.964m Administrative Costs and £0.214m Oversight and Governance Costs (£0.904m Administrative Costs and £0.236m Oversight and Governance Costs for the year to 31 March 2018).

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 2019, there were two Councillors serving on the Pensions Committee who were pensioners of the Fund and one employee and one employer representative who were also pensioners of the Fund.

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 the 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. For the year ended 31st March 2019, Brunel’s service charge to the Cornwall Pension Fund totalled £0.580m.

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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.

2019 2018 £m £m

Short-term benefits 0.074 0.066 Post-employment benefits 0.007 0.006

Total 0.081 0.072

Note Contractual Commitments and Contingent Liabilities P19

Outstanding capital commitments (investments) at the prevailing exchange rate on the day at 31 March 2019 were £213.903m (£194.857m at 31 March 2018). There has been a new commitment made to the Brunel Infrastructure portfolio of £60 million and a number of the existing commitments have drawn down capital from the Fund.

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.

Thirty admitted body employer contracts in the Cornwall Pension Fund hold insurance bonds to guard against the possibility of being unable to meet their pension obligations. These bonds are drawn in favour of the Pension Fund and payment will only be triggered in the event of employer default. No such defaults have occurred in 2018/19 or 2017/18.

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.

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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 2019 and these claims are still ongoing.

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Glossary

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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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Information Classification: CONTROLLED Glossary Cornwall Council 2018/19 Statement of Accounts

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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Information Classification: CONTROLLED Glossary Cornwall Council 2018/19 Statement of Accounts

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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Information Classification: CONTROLLED Glossary Cornwall Council 2018/19 Statement of Accounts

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.

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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Cornwall Council 2018/19 Annual Financial Report and Statement of Accounts

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 2018/19 accounts the inspection period is 1 June 2019 to 12 July 2019. These dates were advertised as required on the Council’s website from the week commencing 6th May 2019.

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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