STATEMENT OF ACCOUNTS 2019/20 (UNAUDITED)
CONTENTS
Narrative report………..………...…………………………………………..………………….……………………………….2
Auditors' report……………………………….…………………………………………………………..…………………………….14
Statement of responsibilities for the statement of accounts…………..………...………………………………………………….17
Core financial statements:
Balance sheet …………..………………………...…………..……………………………………………………18
Comprehensive income and expenditure statement………………………………….……………………………………..19
Movement in reserves statement …………………………………………………………………………………….………………………………20
Cash flow statement………………………………………………………………..………………………………21
Notes to the core financial statements………………………………..………………………………………………………………………22
Supplementary financial statements and explanatory notes:
Housing revenue account…………………………………………….…………………………………………………..104
Collection fund……………………………………………………...………………………………………………..115
Pension fund accounts……………………………...………………………………………………………………………………..117
Glossary of terms………………………………..…………………………………………………………………………………153
Abbreviations……………………………………..………………………………………………………………………………..172
Index…………………………………………………...……………………………………………………………………………..173
Copies of this and previous years’ accounts are available for viewing, along with other information on the Council’s services, on our website at www.eastriding.gov.uk or from East Riding of Yorkshire Council, County Hall, Beverley, East Riding of Yorkshire, HU17 9BA.
East Riding of Yorkshire Council 1 Statement of Accounts 2019/20
NARRATIVE REPORT
1. ABOUT THE COUNCIL
The East Riding is one of the largest local authority areas in the country, and is predominately rural, covering over 930 square miles with a population of approximately 341,000 people. With many residents enjoying a good quality of life, benefiting from strong and supportive communities, low unemployment, low crime, good educational attainment and life expectancy. It is ranked amongst the least socially deprived areas in England but it also faces significant challenges, some of which include; Pockets of deprivation in places such as Bridlington, Goole and south-east Holderness. Around half of the population live in rural areas and sometimes isolated communities, which can provide additional challenges, such as increased costs in service delivery, rural transport and access to services. An ageing and growing population of older people and the rising costs of commissioning care from private providers. A 48 kilometre coastline of soft glacial till (clay, pebbles and sand), particularly vulnerable to coastal erosion. The coastline is eroding at an average rate of 1.5-2.5 metres per year, with some locations which are not defended experiencing individual cliff losses of 20 metres or more. The area’s propensity to both flooding and coastal erosion due to our complex geography, combined with increasing impacts of extreme weather events, poses a substantial risk to the local infrastructure and the economy. With around half of the population living in areas at risk of flooding. There will be as yet unquantified impacts on, and opportunities for, local government and its public sector partners from the ‘Brexit’ process as this progresses. Likewise there are likely to be impacts on and opportunities for our communities and local businesses and the Council will endeavour to respond positively to such challenges, working closely with its partners across a range of sectors. There may also be changes to ongoing Government programmes and legislation which have a direct impact on the Council and its partners, such as in relation to the UK Prosperity Fund. The Covid-19 pandemic has had a significant impact on the way in which we live and work. To address the challenges brought about by the pandemic, the Council has worked with partners to develop its emergency response, working very hard to maintain essential services, prioritising resources where they are needed most whilst dealing with the impacts of Covid-19 on residents, businesses and its own workforce. Within the narrative report, the financial outlook and risks facing the Council as a result of the Covid-19 pandemic are reported. The Council’s Business Plan sets out the Council’s vision and priorities for addressing some of these key challenges, together with progress made in the previous year and supports the wider ambitions set out in the Community Plan for the area. The five year plan 2020-25 also contains important headline information on how the Council will use our resources effectively to achieve our priorities through sound financial planning.
OUR VISION Your East Riding... where everyone matters
OUR VALUES Quality: We work together to provide the best possible services Pride: We are proud of what we do and we positively embrace change Respect: We treat people fairly and are open, honest and lead by example
OUR PRIORITIES Growing the economy – Working with others to support sustainable economic growth and strong communities, ensuring the East Riding is a great place to invest in, live, work and visit
Valuing the environment – Responding to climate change, developing our infrastructure and safeguarding our heritage
Promoting healthy lifestyles – Helping people to stay healthy, strong and fit for the future
East Riding of Yorkshire Council 2 Statement of Accounts 2019/20
NARRATIVE REPORT
Protecting the vulnerable – Supporting in times of need, protecting from harm and improving the quality of life
Helping children and young people achieve – Supporting and inspiring children to raise their aspirations and reach their potential
COMMUNITY PLAN The Council is working together with public sector and voluntary sector partners through the East Riding Place Partnership to deliver the ambitions set out in the Community Plan and the East Riding Health, Care and Wellbeing Plan. These plans for the area builds on previous community plans, and reflects the continued changes and challenges affecting the East Riding. Partner organisations were closely involved in its development to ensure that it recognises the issues faced by both residents and partner organisations operating in the area. The Plan provides a sense of ‘place’, describing, for example, the key geographical and socio-economic aspects of the East Riding and aligning itself to key documents including the East Riding Local Plan. The Community Plan set out a range of agreed priorities: Children and young people are happy, healthy, confident, safe and resilient, to reach their full potential Older people enjoy a healthy, independent lifestyle Communities are healthy, thriving, prosperous and safe Regeneration transforms deprived areas and reduces health and other inequalities The built and natural environment is protected through sustainable development and economic growth. The Community Plan also includes the partners’ commitment to a shared direction of travel around how they will work together to transform their organisations (through, for example, use of technology, joint use of assets and more efficient working practices), in order to collectively respond to the financial and demographic challenges. Details of the key actions the Council planned to take to deliver the corporate priorities can be found in the Council’s Business Plan at www.eastriding.gov.uk.
East Riding of Yorkshire Council 3 Statement of Accounts 2019/20
NARRATIVE REPORT
2. OPERATIONAL PERFORMANCE
It is a priority for the Council to ensure that performance is monitored and managed effectively. To make sure that Elected Members and officers are able to make informed decisions that will drive service improvement, a new corporate performance framework was developed during 2018/19 which provides greater flexibility to adapt to emerging priorities and has an even greater focus on outcomes. The resulting outcome based framework measures activities identified in the Council’s key corporate strategies, so providing an assessment of the impact that the Council is making. It is intended that all strategically important activity across the organisation will be captured and aligned with the Council’s new vision and priorities.
East Riding of Yorkshire Council 4 Statement of Accounts 2019/20
NARRATIVE REPORT The key corporate strategies are: Asset Management and Capital Investment Strategy 2016-2046 Strategy and Vision for Adults Social Care and Support in the East Riding of Yorkshire 2019-2022. Children and Young People’s Strategic Plan 2017-2020 Economic Development Strategy 2018-2022 Joint Health and Wellbeing Strategy 2019-2022 East Riding Local Plan 2012-2029 Each strategy is broken down to its strategic aims and within each strategic aim segment are outcome measures which drive the results of each tier of performance (these are being developed for the new Adults Social Care Strategy). Current performance measures and monitoring processes ensure that progress in this area is effectively managed. The framework is represented by a performance ‘wheel’ which provides a graphical visualisation of hierarchical data underpinning the corporate strategies, showing performance and status through colour, using a ‘Red/Amber/Green’ (RAG) performance rating scheme. Performance, as measured at the end of Quarter 4 2019/20, shows that, overall all of the key strategies for which performance measures have been agreed are performing above or within their set tolerance targets (shown as ‘Green’ in the inner circle of segments below).
At the end of Quarter 4, there were 54 measures which were achieving or exceeding their milestone target, 14 measures that were within their agreed tolerance and 14 measures that had not achieved their milestone target. The two remaining measures are new and no data is available yet. In light of the Covid-19 pandemic, it is proposed that all the key strategies in the Corporate Performance Framework will be reviewed, which may result in new or alternative measures being proposed for future quarterly reports. Given the lag in national datasets being available, it is to soon so identify any immediate effects of the pandemic on the existing measures in the Corporate Performance Framework. A detailed report on Quarter 4 performance was reported to the Council’s Cabinet on 7 July 2020 and is accessible on the Council’s website at: https://www.eastriding.gov.uk/council/committees/the-cabinet
East Riding of Yorkshire Council 5 Statement of Accounts 2019/20
NARRATIVE REPORT
3. FINANCIAL PERFORMANCE
GENERAL FUND The 2019/20 financial position of the General Fund as reported to management is set out in the table below. Through successful implementation of budget plans, business transformation projects and vacancy management, a net General Fund underspend of £0.2m has been achieved.
Full year budget Outturn Variance £m £m £m Chief Executive 0.7 0.7 0.0 Corporate Resources 24.4 23.9 -0.5 Adults, Health & Customer Services 98.5 94.2 -4.3 Children, Families & Schools (exc Schools) 54.3 55.9 1.6 Communities & Environment 37.5 37.3 -0.2 Planning & Economic Regeneration 34.3 33.7 -0.6 Total services excluding schools and HRA 249.7 245.7 -4.0
Other items Levies & charges 2.9 2.9 0.0 Capital Financing and Interest Receivable 27.3 25.2 -2.1 Use of (-) / contributions to (+) reserves -19.9 -13.0 6.9 Total other items 10.3 15.1 4.8 TOTAL REQUIREMENTS 260.0 260.8 0.8
TOTAL RESOURCES -260.0 -260.5 -0.5 BUDGET SURPLUS (-) / DEFICIT 0.0 0.2 0.2
The Council’s robust financial strategy has four core aspects: Transformation of the Council’s business processes, utilising technology and enabling digital services to reduce costs. Using reserves to support the budget as part of a prudent and planned strategy to provide time for services to prepare for budget reductions and to enable further savings which may impact upon service delivery to be delayed until the Council’s funding position for future years is more certain. Maximising income by taking a more commercial approach to income generation to maximise existing and developing new income streams. Cost reduction through a rigorous value for money approach to service delivery. This principle is entrenched in the culture of the Council and examples of its application include fundamental service reviews and driving down costs through robust contracting procedures. This strategy has delivered planned budget savings of £12.1m in 2019/20, which were required to meet continuing reductions to the local government finance settlement from the Government and unavoidable budget pressures. The inherent risks have been successfully managed and spend in key areas maintained. Further budget savings of £4.9m in 2020/21 are required, along with a continued focus on planning ahead to deliver savings whilst maintaining service outcomes. The Expenditure and Funding Analysis on page 37 analyses the movement from the outturn reported to management (as shown in the previous table) to the Comprehensive Income and Expenditure Statement on page 19.
East Riding of Yorkshire Council 6 Statement of Accounts 2019/20
NARRATIVE REPORT CORE FUNDING AND BUSINESS RATES RETENTION The Council has seen a reduction in its funding settlement from Government in recent years. In 2019/20, the settlement funding assessment was £57.1m, a reduction of £6.5m from the amount received in 2018/19. The Council’s actual business rates demand on the collection fund for 2019/20 was £52.1m. Business Rates top-up grant of £14.3m and section 31 grants of £8.0m were also receivable from Government to compensate for policy decisions made that affected the Council’s retainable business rate income in 2019/20. It remains the intention of the Government to move towards a funding system where local authorities retain 75% of business rates from 2021/22. Alongside the move to the new rates retention scheme, the Government is conducting a fair funding review, which involves a full review of the spending needs assessment methodology in time for the introduction of the new business rates system. It is this review that will determine the level of business rates that individual local authorities will retain to deliver local services. The new spending needs assessment will set a new funding baseline for each local authority, representing the amount of funding that each local authority needs from the system to run its services. The Government has not yet released any firm proposals to allow local authorities to assess the potential impact of the new business rates retention scheme and more importantly the associated fair funding review with any certainty at this point in time.
COUNCIL TAX The Government allowed increases to council tax of up to 6% in 2019/20, including a core council tax increase of up to 3% and an adult social care precept of up to 3%. The social care precept was introduced by the Government in recognition of the challenges faced by local authorities with adult social care responsibilities. In 2017/18, the Government introduced “flexibility” over the social care precept, enabling local authorities to charge up to 3% per year but no more than 6% in total over the period 2017/18 to 2019/20. In 2019/20 the council tax increased by 2.99% after previously exhausting the social care precept in 2018/19. The council tax charge on a band D equivalent property was £1,444.69. The Council’s council tax requirement was set at £168.4m in 2019/20.
SCHOOLS The ring-fenced Schools Budget, funded by the Dedicated Schools Grant (DSG), has an outturn overspend of £1.3m. This overspend has been funded from the schools earmarked reserves. The Council continues to work with schools to help plan ahead to bring school budgets back into balance through deficit reduction plans where needed. As at 31 March 2020, local authority maintained schools totalled 109 (2018/19 117). During the year, Our Lady and Saint Peter’s Bridlington, St Mary and St Joseph’s Pocklington, St John of Beverley, St Mary’s Market Weighton, Hessle All Saints, Keyingham and North Cave primary schools and All Saints Junior School converted to academies. Further details on schools are disclosed in notes 7 and 51.
HOUSING REVENUE ACCOUNT The Council owns and manages 11,299 domestic houses and flats. The housing revenue account records all revenue expenditure and income relating to the provision of council dwellings and related services. The account is ring-fenced, meaning that tenant rents cannot be used to subsidise other Council services. The HRA business plan sets out the long term strategy for managing the Council’s housing stock. Further details are disclosed from page 104. For 2019/20, the HRA outturned with an overspend of £0.3m against budget and has been funded from the HRA general reserve. The overspend primarily relates to repairs and maintenance on dwelling stock being overspent by £0.5m due to an increase in the amount of responsive works required this financial year, including works to void dwellings and an increase in regulatory standards for electrical testing, resulting in more consequential works. Overall, HRA reserves stand at £54.260m (2018/19 £50.9m) which include general reserves and reserves earmarked for debt repayment and investment in new stock and repairs.
CAPITAL The Council successfully delivered its planned capital programme during 2019/20 amounting to investment of £114.4m across the various service areas. The outturn spend was £0.9m (0.8%) less than planned. The majority of the net underspend is due to timing of the planned spend which will now take place in future years. Key areas of investment in 2019/20 included: Completion of the final phase of Riverside Special School Scheme, This included the replacement of mobile classrooms with state of the art classrooms and refurbishment of the old part of the school.
East Riding of Yorkshire Council 7 Statement of Accounts 2019/20
NARRATIVE REPORT
An additional 83 new properties were added to the supply of affordable housing, including shared ownership and rented accommodation. (Note - this figure will differ to that in the Notes to the Housing Revenue Account at Section 5. Housing Assets (a) Housing Stock table Acquisitions of 56. This is due to slightly differing technical counting methodologies, 83 for practically completed properties, 56 for accounting purposes). The South Cliff Caravan Park has been completed. This has increased the park by 15.1 hectares and has the ability to offer an additional 232 pitches to visitors including static caravans and lodges. Completion of major transport improvement schemes on the A1079 at Shiptonthorpe and the A164/Great Gutter Lane/Riplingham Road junction, improving safety and reducing congestion for thousands of motorists each day. Continued investment in major flood alleviation schemes to reduce flood risk across the East Riding, including completion of the Pocklington Flood Alleviation Scheme and ongoing works on multi-million pound schemes at Cottingham, Anlaby and East Ella, and Hessle Foreshore. Delivery of an extensive highway maintenance programme across an asset base including over 2,200 miles of carriageway, 1,000 miles of footway and 38,000 street lights. The programme for 2019/20 of £114.4m was funded by loans of £14.0m, capital grants and contributions of £57.0m, capital receipts of £11.4m, and revenue and reserves of £32.0m.
SUMMARY OF PENSION FUND ACTIVITY FOR 2019/20 At 31 March 2020, the Fund was valued at £4.764bn, representing an decrease in the Fund value of £294m from 31 March 2019. The Fund generated a return of -4.8% for the year to 31 March 2020 compared to the strategic benchmark return of -7.3%. Over the three years to 31 March 2020 the Fund returned 1.8% per annum, compared to the strategic benchmark return of 0.6% per annum and the long term investment objective of 6.0% per annum. These returns were due to a significant capital appreciation across all major equity markets in the final quarter of the year as the impact of the coronavirus epidemic became apparent. There was a substantial deterioration in investor risk sentiment together with an associated flight to safety. The strongest relative returns were seen in the Alternatives Sector, in particular Private Equity, along with Corporate Bonds in the Fixed Income Sector. UK Government Bonds, Overseas Bonds and Infrastructure all contributed positive absolute returns despite the difficult market conditions. In addition, sterling returns from overseas investments received a significant boost due to the depreciation of the currency following the exit from the European Union and the coronavirus crisis. The Fund also benefitted from the strong performance of the internal manager and Border to Coast Pension Partnership (Border to Coast), the funds chosen pooling partner. During the year, the Fund paid out £181.3m of benefits to scheme members. At 31 March 2020, the number of employers in the Fund was 318 (31 March 2019: 321). The slight decrease during the year was due to the inclusion of those employers with active members as opposed to those employers with an interest in the Fund The Fund continues to be managed in a cost effective manner with total pension administration, investment management, and oversight and governance costs equating to just 0.17% (2019: 0.14%) of funds under management. The average pension payment is £4,547.70 per annum, equivalent to a weekly payment of £87.22. Further details are disclosed from page 117.
East Riding of Yorkshire Council 8 Statement of Accounts 2019/20
NARRATIVE REPORT
4. COUNCIL WORKFORCE
The Council (excluding schools) employs just over 5,100 whole time equivalents (WTE) in approximately 6,264 posts. Key facts about the workforce include: 42.4% of the workforce have part time contracts 65% of the Council’s workforce are female Turnover is currently 9.4% 27% of the workforce is over 55 6.3% of the workforce is under 25 3.7% of the workforce consider themselves to have a disability non-white British employees represent 2.4% of the workforce The Council has a long and proud record as an excellent and supportive employer that people want to work for and enjoy working for once they do. The Council has always made it a priority to support and invest in its staff. It remains critical to its future success that the Council has a talented, well-motivated workforce guided by a clear strategic direction and underpinned by excellent leadership. Achieving this has been assisted by the recently refreshed Council values, behaviours and priorities, and its new vision: ‘Your East Riding – Where Everyone Matters’. The nature of the workplace has changed greatly in recent years and is likely to continue to change significantly in the coming years. This is changing how people work, what people expect from their employer and is providing employers with both opportunities and challenges. Successfully meeting these challenges will be aided by the Council having a ‘modern workforce in a modern workplace’. During the last twelve months, the Council has intensified its focus on workforce development particularly through the implementation of projects considering the following: flexible working recruitment of staff retention of staff coaching and mentoring leadership development apprenticeships These projects play an important part in helping the Council to deliver the workforce element of its new vision. The collaborative, whole council approach that has been adopted is indicative of a developing shift in culture, welcoming the input and views from employees across all services and at all levels.
5. RISK MANAGEMENT
Risk management is an integral part of our planning and decision making framework. The Council regularly reviews its strategic risks, being the principal risks faced by the Council in relation to future service provision, to ensure that effective controls are in place to manage them. These most significant current risks include:
Risk Key Controls / Mitigation
All local authorities are facing considerable financial Financial strategy uncertainty over the medium term. Business Plan Financial reserves The Coronavirus (COVID-19) pandemic has resulted in Capital investment strategy significant additional costs and losses in customer receipts Asset management plans during 2020-21. The financial impact on the Council will Governance framework for financial decision extend beyond 2020-21 and this is likely to be significant, but making and regular monitoring of the financial it remains extremely difficult to predict with any degree of plan certainty at this early stage. Engagement with the Government and national The Government has provided additional funding in 2020-21 forums on future funding arrangements to help manage these financial pressures, but no firm Pandemic recovery plans commitment has been made for future years. This will remain unclear until further announcements are made in the Spending Review scheduled for Autumn 2020. These funding pressures and uncertainty have a direct impact on the Council’s ability to deliver a balanced medium term
East Riding of Yorkshire Council 9 Statement of Accounts 2019/20
NARRATIVE REPORT financial plan fully aligned to the achievement of the business plan, and a balanced and sustainable long term capital investment programme which allows the Council to maximise the potential of its assets.
Local authorities are experiencing significant and continuing Contract arrangements and supplier increases in demand for both social care services and services relationships for children with special education needs. The pandemic Professional expertise situation is exacerbating this demand and uncertainty Governance arrangements continues over the possibility of further peaks in future Care identification and market intelligence infection rates. There is further uncertainty over the potential Transformation programmes impact of Brexit on the social care work force. Furthermore, Workforce development and multi-agency ongoing increases to the number of children with special training education needs requiring education and health care plans Inspections continues to provide a significant challenge in service delivery Partnership arrangements within the resources provided by Government. Pandemic recovery plans These pressures can all have an impact on the Council’s ability Children’s services improvement plan to provide the required and relevant services to adults and children & young people.
All schools closed to the majority of pupils with effect from 23 East Riding School Improvement Partnership March 2020 as a consequence of the pandemic. This extended (ERSIP) period of closure may have a lasting impact on pupils’ learning School Improvement and Learning Service and development. Although schools are set to open for the Monitoring of provision and evaluation of Autumn term in 2020, restrictions to control infection rates effectiveness against national frameworks and may have a continuing impact on delivery of education services. local plans Monitoring, review and evaluation of sufficiency This may impact on the Council’s ability to provide mandatory of school places education to a high standard which ensures all East Riding Recruitment and monitoring of quality teaching children and young people have the best start in life and builds provision the capacity and capability of our future residents. Monitoring and support of those Not in Education, Employment or Training (NEETS) Curriculum and standards monitoring Inspections
Due to the infection itself, its impact on demand for health East Riding Community Plan services, and ongoing infection control measures, the Health and Wellbeing Strategy Coronavirus (COVID-19) pandemic may impact on the ability Strategic partnership arrangements of the Council to improve the health and wellbeing of the Public Health strategies and work programme population of the East Riding over the longer term. Safe systems of work for infection control Outbreak Management Plan and governance arrangements Joint working agreements for high risk settings and vulnerable communities Humber Test, Trace and Isolate governance arrangements
The Coronavirus (COVID-19) pandemic and associated East Riding Economic Strategy 2018-2022 infection control measures may impact on the Council’s ability East Riding Local Plan to facilitate growth of the local economy. Local Industrial Strategy Visit Hull and East Yorkshire Tourism Strategy 2019-2024 Enterprise Zones East Riding Economic Recovery Plan (in development) East Riding Housing Strategy 2017-2022 National and local business support arrangements
East Riding of Yorkshire Council 10 Statement of Accounts 2019/20
NARRATIVE REPORT The Council’s Annual Governance Statement provides assurance on the effectiveness of the Council’s systems of governance including internal control and risk management during 2019/20 and can be found on the Council’s website: www.eastriding.gov.uk.
6. OUTLOOK
The public sector, and in particular local government, has continued to experience a period of unprecedented change and uncertainty, with no indication of when this period may end. The pressure on resources, brought about by the largest public sector budget cuts in history over the 2010 to 2018 period, is immense, and comes at a time of continuing increases in demand from vulnerable people and children with high needs, a substantial growth in the number of older people living in and moving to the East Riding, and an increase in extreme climate related events. Furthermore, the worldwide Coronavirus (COVID-19) pandemic brought and unprecedented period of lockdown and infection control measures which have a profound impact on the UK economy across all sectors, as well as people’s daily lives.
The enormity of the challenges faced by the Council require us to develop new models for service delivery if we are to maintain those services vital to the quality of life in the East Riding and address the needs of the most vulnerable in our communities. Going forward, the Council will maintain its strategy to manage these key challenges and deliver its priorities.
The Council’s business plan and financial strategy set out how we will deliver the Council’s corporate priorities and provides a clear focus for the Council as it faces the challenges ahead including continued funding uncertainty, growing pressures on annual revenue budgets, and increasing service demand (particularly from an ageing population).
The Council’s financial strategy has four core aspects of digitalisation, commercialisation, and value for money, underpinned by the overarching theme of resilience.
Resilience
Financial resilience for local authorities means remaining viable, stable and effective. Financial resilience has become a significant issue in local government in recent years, and a lack of financial resilience can have very serious consequences for a local authority.
The financial strategy and plan aim to provide resilience in the following ways:
• Service delivery By directing revenue resources to ensure that they provide the means to sustain and deliver the Council’s services whilst reflecting the priorities identified in the business plan
• Investment By providing the means to invest both in service delivery and in the maintenance and improvement of public assets and infrastructure across the East Riding
• Risk management By ensuring that the Council has sufficient reserves to manage financial risk and uncertainty
Providing this resilience underpins the Council’s business plan and financial strategy, as it is essential to ensure that the Council remains fit for purpose both now and in the future.
Digitalisation
As the world becomes more digital, residents and the Council itself are becoming more reliant on connectivity and digital technology. It is important that the Council considers how it as an organisation and the East Riding as a place thrives in what will be an increasingly digital world.
A strategic way forward for digital in the East Riding will be developed which will identify how the Council will use digital technology to improve its business, enable economic growth, support the environment and improve the lives of the people living in the East Riding. The strategy will support the delivery of the Council’s business plan, and has the potential to transform the region and the lives of residents whilst also generating long-term savings for the organisation. It will also ensure that the Council is a modern, technologically enabled organisation and workplace.
The financial strategy and plan are designed to provide the means to invest in new technologies with our residents and workforce at the forefront of our decision making.
East Riding of Yorkshire Council 11 Statement of Accounts 2019/20
NARRATIVE REPORT Commercialisation
Commercialisation for the Council means that we apply a commercial approach, where appropriate, to generate and maximise income and deliver improvement and efficiency, whilst retaining strong public service values. We need to have an awareness and understanding of the commercial sectors within which some council services operate, encouraging our workforce to be entrepreneurial and innovative whilst also being considerate of our role in the community and our customers.
Our commercial approach enhances the Council’s longer term financial sustainability by maximising existing income streams and developing new ones which will help to provide funds to support service delivery and invest in the Council’s future. It is also recognised that the Council must carefully manage commercial risk and not become over-dependent on commercial activity to support statutory services.
Value for Money
We want to be as efficient as we possibly can, and being more efficient means more than achieving cost reductions. It is critical that the Council works hard to minimise the cost to taxpayers and the public purse, whilst ensuring that the services we provide are sustainable and meet expectations. This is achieved through a rigorous value for money approach to service delivery. This principle is deeply entrenched in the culture of the Council and is evidenced by our regular financial and performance monitoring, benchmarking to inform service reviews, and our pursuit of lower costs through robust contracting procedures.
In response to concerns about financial resilience in the local government sector, the Chartered Institute for Public Finance and Accountancy (CIPFA - the membership body for local government finance professionals) has developed a financial resilience index. The index is an analytical tool that shows a council’s performance against a range of measures associated with financial risk and is designed to support and improve discussions around local authority financial resilience. The index was launched on 16 December 2019 and the latest data available in the index is for 2018-19.
The resilience index shows that the majority of councils are not showing signs of financial stress, but around 10% of authorities have some signs of potential risk to their financial stability.
We have reviewed the index and the Council has only 4 of the 18 measures at the higher risk end of the range for unitary authorities:
• Growth Above Baseline – this indicator highlights that we have benefitted from a significant level of business rates growth since the Council’s baseline funding level was set in 2013-14. The indicator highlights this as high risk for councils where retained business rates growth is a higher proportion of their revenue budget because this growth could be re- distributed across all local authorities when the fair funding review is implemented and the funding system is reset. The Council is aware of this risk and the potential loss in business rate growth is provided for in the financial plan, as discussed in the Local Government Fair Funding Review section.
• Unallocated Reserves – this measure represents the ratio of the General Fund reserve to net revenue expenditure. The Council’s level of General Fund reserve reflects a probability based calculation of the risk of overspends in the different services areas within the revenue budget. This level represents 5% of the revenue budget, whilst the level for unitary authorities ranges from 0.73% to 36%. The Council’s level of General Fund earmarked reserves is towards the low risk end of the scale and this mitigates the risk that the 5% unallocated reserve level is insufficient to meet overspends.
• Change in Unallocated Reserves – the measure represents the average percentage change in the General Fund reserve over the last three years. A high level of reduction could indicate that a council is overspending and using up its reserve. However, in our case, it reflects that the level of underspend on the General Fund budget has reduced over the last three years, rather than an overspend position.
• Change in Housing Revenue Account Reserves – this measure is looking at the movement on the Housing Revenue Account General Reserve over the last three years. The balance fell in 2016-17 as a result of increased depreciation charges on council dwellings due to a national technical adjustment to how council dwellings are valued. The reserve balance has been increased to a small degree in the intervening years, however the Housing Revenue Account budget proposals ensure the reserve balance is replenished during 2020-21.
In conclusion, these measures do not represent a high risk position for the Council when set into local context. The Council has demonstrated strong financial management and resilience during the last decade’s austerity measures and this needs to continue, particularly to allow management of the high level of risk and uncertainty going forward whilst also providing opportunities for the Council to invest in the East Riding’s future.
East Riding of Yorkshire Council 12 Statement of Accounts 2019/20
NARRATIVE REPORT Although the full impact of Coronavirus (COVID-19) is difficult to predict locally, nationally and globally, it is clear that the pandemic will have a severe financial impact on the Council. It also heightens uncertainty considerably, as there is currently a high degree of uncertainty surrounding the Government’s funding intentions to support the local government sector’s recovery.
In response to the pandemic, the Council has agreed a revised revenue budget for 2020-21 which includes allocation of additional Government funding to meet cost pressures as well as £9.6m of savings measures. Although this provides a manageable financial position for 2020-21, the financial impact on the Council is likely to extend beyond 2020-21, particularly the Council’s core sources of revenue funding from council tax and business rates. This impact remains extremely difficult to predict with any degree of certainty at this early state, as our income from local taxation will heavily depend on the pace and sustainability of recovery of the UK economy, local businesses and household incomes.
The Council’s financial plan, approved in February 2020, includes a projected General Fund revenue budget shortfall of £3.8m by 2023-24. This financial plan is currently being fundamentally re-assessed to reflect the potential impact of the pandemic on the Council’s costs and funding levels. Whilst this brings considerable challenges, it is important that opportunities are also taken to embed lessons learned from changes to service delivery during the pandemic to enhance productivity and realise potential savings arising from new ways of working. The Council’s response will continue to be developed and refined as the pandemic and its effects continue, and the impacts will be addressed through the Council’s medium term financial planning process.
The approved Capital Strategy sets out the Council’s priorities for investment in its asset base, and the subsequent levels of investment required to keep the asset base sustainable in the future. The level of need for future investment in the Council’s assets far outweighs the available resources. One way to bridge some of this gap is to competitively bid for grants which the Council would otherwise not receive. The Capital Strategy therefore provides a coordinated approach to investment in assets and shapes all capital funding proposals including the submission of bids for competitive grants which ultimately lead to investment in the asset base. All projects, irrespective of their funding source, seeking capital funding are directed through the Council’s approved capital appraisal process. New investment has now become very much focused not only on an 'Invest to Save' approach, but also on investing in key infrastructure to ensure the continued delivery of key services to the public at the centre of its focus.
Despite the continued reductions in Government funding and future investment being constrained, the current capital programme remains substantial in value. The overall capital programme for 2020/21 and future years totals £380m. Key financial investment within the Council’s capital programme includes: £190m to be invested in the Highway and Flooding schemes to improve and maintain the Council's infrastructure. £66m of capital to be invested in improving existing council homes, for example kitchens and bathrooms, re- roofing and window replacement, including £22m to be used to improve energy efficiency. £53m to be invested in remodelling, replacement and new builds for Council housing. £17m investment in schools in order to provide a safe and secure place for learning. Over £11m in the Technology to improve the IT infrastructure for the residents of the East Riding.
Sources of funding for the future capital programme are summarised in the following table:
2020/21 2021/22 2022/23 Later Total £000 £000 £000 £000 £000 Sources of Funding Grants & Contributions 35,537 7,406 4,873 15,772 63,588 Revenue & Reserves 75,783 16,980 25,394 31,664 149,821 Borrowing 16,333 8,688 5,055 2,470 32,546 Capital Receipts 53,591 27,344 23,202 29,574 133,711 181,244 60,418 58,524 79,480 379,666
East Riding of Yorkshire Council 13 Statement of Accounts 2019/20
NARRATIVE REPORT
7. THE ACCOUNTS
This statement of accounts summarises the financial performance of the Council (the Council) for the year ended 31 March 2020. The pension fund accounts for the year ended 31 March 2020 are included at pages 117 to 152. The accounts consist of: - The Statement of Responsibilities for the Statement of Accounts (page 17) identifies the officer who is responsible for the proper administration of the Council’s financial affairs and sets out theirs and the Council’s responsibilities in respect of the statement of accounts. The Auditor’s Report (page 14) sets out the independent auditor’s opinion on the financial statements including the conclusion on arrangements for securing economy, efficiency and effectiveness in the use of resources. The Balance Sheet (page 18) sets out the financial position of the Council as at 31 March 2020. The balance sheet shows the value of the assets and liabilities recognised by the Council at the balance sheet date. The Comprehensive Income and Expenditure Statement (page 19) identifies the income and expenditure on all services the Council provides except the pension fund (see below) and brings together all the recognised gains and losses of the Council during the period 1 April 2019 to 31 March 2020. The Movement in Reserves Statement (page 20) reconciles the outcome of the comprehensive income and expenditure statement with the outcome on the general fund balance and details the movement on all other reserves that the Council holds, both usable reserves (i.e. those that can be used to fund expenditure) and other reserves. The Cash Flow Statement (page 21) shows the changes in cash and cash equivalents of the Council during the reporting period. The Housing Revenue Account (page 104) summarises the income and expenditure in respect of the provision of local council housing accommodation. The Collection Fund (page 115) shows the level of non-domestic rates and council tax that have been received by the Council during the period and the distribution of these funds. The Pension Fund Accounts (page 117) In addition to its local authority functions, the Council is the administering authority for the East Riding Pension Fund (the pension fund) on behalf of 317 employers and 116,442 members. The pension fund accounts show the operation of the pension fund administered by the Council for its employees, employees of scheme employers and those of admitted bodies. The accounting arrangements of local government and a large organisation such as the Council are complex. The Council has prepared the accounts in accordance with International Financial Reporting Standards (IFRS) as required by the Code of Practice on Local Authority Accounting in the United Kingdom 2019/20 (the Code). To help you understand the accounts, the main statements are supported by explanatory notes and a glossary of terms and abbreviations is provided at page 153.
East Riding of Yorkshire Council 14 Statement of Accounts 2019/20
AUDITORS REPORT
East Riding of Yorkshire Council 15 Statement of Accounts 2019/20
AUDITORS REPORT
East Riding of Yorkshire Council 16 Statement of Accounts 2019/20
STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS
1. 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 Council, that officer is the Head of Finance; manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; approve the statement of accounts.
2. THE RESPONSIBILITIES OF THE HEAD OF FINANCE
The Head of Finance is responsible for the preparation of the Council’s statement of accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom based on International Financial Reporting Standards (the Code). In preparing this statement of accounts, the Head of Finance has: selected suitable accounting policies and then applied them consistently; made judgements and estimates that were reasonable and prudent; complied with the local authority code; kept proper accounting records which are up to date; taken reasonable steps for the prevention and detection of fraud and other irregularities; assessed the Council’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; used the going concern basis of accounting on the assumption that the functions of the Council will continue in operational existence for the foreseeable future; and maintained such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
3. CERTIFICATE
I hereby certify that the following statement of accounts give a true and fair view of the financial position of East Riding of Yorkshire Council and East Riding of Yorkshire Pension Fund as at 31 March 2020 and its income and expenditure for the financial year then ended. The statement of accounts are currently unaudited and may be subject to change.
Julian Neilson Section 151 Officer 28 August 2020
East Riding of Yorkshire Council 17 Statement of Accounts 2019/20
CORE FINANCIAL STATEMENTS
BALANCE SHEET
The balance sheet shows the value as at the balance sheet date of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. The first category of reserves is usable reserves, i.e. those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the capital receipts reserve may only be used to fund capital expenditure or repay debt). The second category of reserve is unusable reserves, i.e. those that the council is not able to use to provide services. This category includes reserves that hold unrealised gains and losses (for example the revaluation reserve), where amounts would only become available to fund future capital expenditure if the assets are sold and reserves that hold timing differences shown in the movement in reserves statement line ‘Adjustments between accounting basis and funding basis under regulations’.
31 March 2019 Note 31 March 2020 £000 £000 1,560,121 Property, plant & equipment 14a 1,632,221 976 Heritage assets 976 3,002 Intangible assets 3,033 154 Long-term investments 19,159 1,817 Long-term debtors 1,676 1,566,070 Total long-term assets 1,657,065
2,378 Assets held for sale 799 201 Intangible assets 0 3,917 Inventories 3,536 63,526 Short-term debtors 22 61,391 104,538 Short-term investments 23 158,806 32,547 Cash and cash equivalents 46 46,768 207,107 Total current assets 271,300
-10,874 Short-term borrowing 40 -12,772 -73,111 Short-term creditors 24 -86,857 -22,160 Revenue grants receipts in advance 24 / 26 -24,347 -20,275 Capital grants receipts in advance 24 / 26 -10,101 -5,447 Current provisions -6,599 -131,867 Total current liabilities -140,676 -307,816 Long-term borrowing 40 -369,298 -12,103 Deferred liabilities 25 -11,656 -136 Long-term creditors -136 -3,768 Long-term provisions -2,884 -265 Deferred credits -245 -1,795 Revenue grants receipts in advance -1,966 -115 Capital grants receipts in advance -116 -465,002 Net pension liability 27c -372,266 -791,000 Total long-term liabilities -758,567
850,310 NET ASSETS 1,029,122
Financed by 248,403 Usable reserves 28 243,706 601,907 Unusable reserves 32 785,416
850,310 TOTAL RESERVES 1,029,122
Julian Neilson Section 151 Officer 28 August 2020
East Riding of Yorkshire Council 18 Statement of Accounts 2019/20 CORE FINANCIAL STATEMENTS
COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT
This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation or rents. The statement has been restated (for 2018/19) to reflect changes in the way the Council is structured to enable meaningful comparison between financial years. Authorities raise taxation and rents to cover expenditure in accordance with statutory requirements and this may be different from to the accounting cost. The taxation position is shown in the movement in reserves statement. The accounting (surplus)/deficit on the provision of services shown below can become a larger or smaller (surplus)/deficit in the movement in reserves statement when the adjustments between the accounting basis and the funding basis under regulations and transfers to/from earmarked reserves are applied to show the amount funded from the taxation position.
2018/19 Restated Note 2019/20
Gross Gross Net Gross Gross Net expenditure income expenditure expenditure income expenditure £000 £000 £000 £000 £000 £000 Service expenditure 607 -10 596 Chief Executive 716 -11 705 34,250 -6,766 27,483 Corporate Resources 25,795 -4,681 21,114 205,791 -116,590 89,201 Adults, Health & Customer Services 222,483 -116,069 106,414 58,816 -4,203 54,613 Children, Families and Schools (exc. schools) 67,553 -5,302 62,251 112,653 -67,437 45,216 Communities & Environment 114,301 -63,377 50,924 73,440 -25,833 47,607 Planning & Economic Regeneration 67,476 -16,902 50,574 29,327 -48,845 -19,518 Housing Revenue Account Pg104 30,328 -48,229 -17,901 -403 0 -403 Significant Item - local authority housing (HRA) revaluation loss/reversal HRA 5c 7,720 0 7,720 211,473 -188,880 22,592 Children, Families and Schools (Schools Budget) 207,077 -186,557 20,520 725,953 -458,565 267,387 Total continuing services - cost of services 743,449 -441,128 302,321 38,735 -35 38,700 Other Operating Expenditure 7a 10,434 -66 10,368 65,721 -42,862 22,859 Financing and Investment Income and Expenditure 7b 65,765 -41,426 24,339 1,631 -328,300 -326,669 Taxation and Non-Specific Grant Income and Expenditure 7c 0 -331,991 -331,991 832,039 -829,761 2,277 Surplus (-) or deficit on the provision of services 819,648 -814,611 5,037 -15,400 Surplus (-) /Deficit on Revaluation of Non-Current Assets 34 -22,964 -2,455 Impairment Loss taken to Revaluation Reserve 34 -18 80,175 Remeasurement of the pension net defined benefit liability (asset) 27b -160,867 62,320 Other comprehensive income and expenditure MIRS -183,849 64,597 Total comprehensive income and expenditure -178,812
East Riding of Yorkshire Council 19 Statement of Accounts 2019/20 CORE FINANCIAL STATEMENTS
MOVEMENT IN RESERVES STATEMENT (MiRS)
This statement shows the movement from the start of the year to the end on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other ‘unusable’ reserves. The movement in reserves statement shows how the movements in year of the Council’s reserves are broken down between gains and losses incurred in accordance with generally accepted accounting practices and the statutory adjustments required to return to the amounts chargeable to council tax setting and dwellings rent-setting purposes for the year. The net increase /decrease line shows the statutory general fund balance and housing revenue account balance movements in the year following these adjustments.
General & Housing Major Usable Capital grant Total Total Total Cross ref earmarked revenue repairs capital unapplied usable unusable authority page balances account reserve receipts account reserve reserves reserves £000 £000 £000 £000 £000 £000 £000 £000 Balance at 31 March 2018 78 / 81 164,070 4,285 43,952 17,679 676 230,662 684,245 914,907 Movement in reserves during 2018/19 Total comprehensive income and expenditure -16,991 14,714 0 0 0 -2,277 -62,320 -64,597
Adjustments between accounting basis and funding basis under regulations 44 / 45 27,390 -14,337 2,310 4,720 -65 20,018 -20,018 0 Increase/decrease (-) in year 10,399 377 2,310 4,720 -65 17,741 -82,338 -64,597 Balance at 31 March 2019 carried forward 78 / 81 174,469 4,662 46,262 22,399 611 248,403 601,907 850,310
Movement in reserves during 2019/20 Total comprehensive income and expenditure -11,706 6,669 0 0 0 -5,037 183,849 178,812 Adjustments between accounting basis and funding basis under regulations 42 / 43 5,716 -6,920 3,590 -5,687 3,641 340 -340 0 Increase/decrease (-) in year 78 / 81 -5,990 -251 3,590 -5,687 3,641 -4,697 183,509 178,812 Balance at 31 March 2020 carried forward 78 / 81 168,479 4,411 49,852 16,712 4,252 243,706 785,416 1,029,122
General and earmarked balances consist of £17.691m general fund (£12.970m 2018/19) and £150.789m of earmarked general fund reserves (£161.499m 2018/19). A detailed analysis of the movements in earmarked reserves can be found in note 30. The adjustments between accounting basis and funding basis under regulations are further analysed in note 5.
East Riding of Yorkshire Council 20 Statement of Accounts 2019/20 CORE FINANCIAL STATEMENTS
CASH FLOW STATEMENT
The cash flow statement shows the changes in cash and cash equivalents of the Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery.
2018/19 Note 2019/20 £000 £000 £000 2,277 Net (surplus) or deficit on the provision of services Pg 19 5,037 Adjust net surplus or deficit on the provision of services for -125,745 non cash movements 47 -132,282 Adjustments for items included in the net surplus or deficit on the 64,457 provision of services that are investing and financing activities 48 60,433 -59,011 Net cash flows from operating activities -66,812 Investment activities 105,095 Purchase of property, plant & equipment and intangible assets 105,388 181,127 Purchase of short-term and long-term investments 268,828 118 Other payments for investing activities 508 -9,271 assets and non-current assets held for sale -9,345 -183,990 Proceeds from short-term and long-term investments -195,680 -60,470 Capital grants received -41,321 32,609 Net cash flows from investing activities 128,378
Financing activities 0 Cash receipts of short-term and long-term borrowing -77,000 -542 Net (inflow)/outflow NNDR financing activities -13,364 872 Principal element of finance leases and on balance sheet PFI contracts 938 10,083 Repayment of short-term and long-term borrowing 13,639 10,413 Net cash flows from financing activities -75,787 -15,989 Net Increase in cash and cash equivalents -14,221 16,558 Cash and cash equivalents at 1 April 46 32,547
32,547 Cash and cash equivalents at 31 March 46 46,768
East Riding of Yorkshire Council 21 Statement of Accounts 2019/20 ACCOUNTING POLICIES
1. ACCOUNTING POLICIES
I. GENERAL The statement of accounts summarises the Council’s transactions for the 2019/20 financial year and its position at the year-end of 31 March 2020. The Council is required to prepare an annual statement of accounts by the Accounts and Audit Regulations 2015, which require that they be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2019/20 (the Code), the 2019/20 Code update and the Service Reporting Code of Practice 2019/20, supported by International Financial Reporting Standards (IFRS). The accounting convention adopted in the statement of accounts is principally historical cost, modified by the revaluation of certain categories of property, plant and equipment and financial instruments. Currently, along with many other nations globally, the United Kingdom is dealing with the consequences of Coronavirus (COVID-19). This worldwide pandemic has no known cure and as yet, no vaccine. Whilst the COVID-19 pandemic is expected to have a significant financial impact on the Council’s financial position in 2020-21 and beyond, the Council has taken steps to address this. A fundamental review of the 2020-21 General Fund revenue budget has been undertaken to understand the impact of the Coronavirus Covid-19 pandemic and identify savings to help manage the budget pressures. The Government has also provided local authorities with emergency funding to support Council’s with additional costs and lost income and continues to consider measures the Government can take to help Council’s to address their financial challenges. The Government is expected to announce these measures in the forthcoming Autumn statement and Spending Review. Within this context, the statement of accounts have been prepared on a going concern basis. As permitted under the Code, the concept of materiality has been utilised when determining appropriate disclosures to be made in the financial statements. Information is not material if omitting or misstating it would not influence the decisions of an informed user of the statements.
II. PRIOR PERIOD ADJUSTMENTS, CHANGES IN ACCOUNTING POLICIES, ESTIMATES AND ERRORS Prior period adjustments may arise as a result of a material change in accounting policies or to correct a material error. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period i.e. as prior period adjustments. Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Council’s financial position or financial performance. Where a material change is required, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied i.e. a prior period adjustment is made unless stated otherwise. A change in accounting policy generally requires the disclosure of three balance sheets to reflect the impact on the current period, the end of the preceding period and the impact on the opening balance sheet of the previous period. The nature and impact of any prior period adjustments required will be explained in a separate note to the accounts. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change, there is no prior period adjustment. Changes to accounting standards adopted by CIPFA’s Code of Practice for 2019-20 include the following, none of which are expected to impact on the Council’s Statement of Accounts nor are they expected to have a material impact on the Pension Fund Statement of Accounts: IAS 40 “Investment Property” transfers of Investment Property provides further explanation of the instances in which a property can be reclassified as investment property. IFRIC 22 “Foreign Currency Transactions and Advance Considerations” clarifies the treatment of payments in a foreign currency made in advance of obtaining or delivering services or goods. IFRIC 23 “Uncertainty over Income Tax Treatments” provides additional guidance on income tax treatment where there is uncertainty.
East Riding of Yorkshire Council 22 Statement of Accounts 2019/20
ACCOUNTING POLICIES IFRS 9 “Financial instruments: prepayment features with negative compensation” amends IFRS 9 to make clear that amortised cost should be used where prepayments are substantially lower than the unpaid principal and interest. In 2019/20 there are no prior period adjustments.
III. INTERESTS IN COMPANIES AND OTHER ENTITIES The Council does not have material interests in companies and other entities that have the nature of subsidiaries, associated companies or jointly controlled entities. Group accounts have therefore not been prepared. In the Council’s own single entity accounts, the interests in companies and other entities are recorded as financial assets at cost, less any provision for losses. Should the Council be required to prepare group accounts, an entity will not be included if it is not material.
IV. ACCRUALS OF EXPENDITURE AND INCOME (CREDITORS AND DEBTORS The accounts of the Council are prepared on an accruals basis. This means that the sums due to or from the Council during the year are included in the accounts, whether or not the cash has actually been received or paid in the year in question. Accruals have been made for all known material revenue and capital debtors and creditors for goods and services supplied by and to the Council during the year, including services provided by employees.
V. SIGNIFICANT ITEMS When items of income and expenditure are material, their nature and amount is disclosed separately, either on the face of the comprehensive income and expenditure statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance.
VI. REVENUE RECOGNITION The revenue recognition policy covers the sale of goods (produced by the Council for the purpose of sale or purchased for resale), the rendering of services (excluding services directly related to construction contracts), interest, royalties and dividends, non-exchange transactions (i.e. council tax) and where previously a liability had been recognised (i.e. creditor) on satisfying the revenue recognition criteria. Revenue is recognised when (or as) the Council satisfies a performance obligation and is measured at the transaction price of the consideration receivable (i.e. the amount to which the Council expects to be entitled in exchange for transferring promised goods or services). However, if payment is on deferred terms, the consideration receivable is recognised initially at the cash price equivalent. The difference between this amount and the total payments received is recognised as interest revenue in the surplus or deficit on provision of services. Short duration receivables with no stated interest rate are measured at original invoice amount where the effect of discounting is immaterial. There is no difference between the delivery and payment dates for non- contractual, non-exchange transactions, i.e. revenue relating to council tax and non-domestic rates, and therefore these transactions are measured at their full amount receivable.
VII. TRADE AND OTHER RECEIVABLES AND PAYABLES Trade and other receivables are not recognised when the Council becomes committed to supply the goods or services but when the ordered goods or services have been delivered or rendered. Trade and other payables are not recognised when the Council becomes committed to purchase the goods or services but when the ordered goods or services have been delivered or rendered. With the exception of financial instruments, they are recognised and measured in accordance with the revenue recognition policy.
VIII. CASH AND CASH EQUIVALENTS Cash includes all bank credit balances and overdrafts held by the Council as part of its normal cash management, including all deposit accounts accessible without notice. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Cash equivalents include investments with a fixed maturity of three months or less from the date of acquisition and fair value through profit or loss financial assets such as cash placed in money market funds.
East Riding of Yorkshire Council 23 Statement of Accounts 2019/20
ACCOUNTING POLICIES
IX. SUPPORT SERVICE COSTS The Code requires that the net cost of services within the Comprehensive Income and Expenditure Statement (CIES) is presented based on how income and expenditure are reported internally to management rather than the total cost principle described by the SERCoP. For this Council, corporate and support services operate and are managed separately throughout the financial year and are, therefore, reported separately on the face of the CIES and not apportioned.
X. INTEREST RECEIVABLE OR PAYABLE The effective interest rate method is used to measure the carrying value of a financial asset or liability measured at amortised cost, and to allocate associated interest income or expense to the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to equal the amount at initial recognition. The effective interest is adjusted to the actual interest payment or receipt through the movement in reserves statement to ensure only actual interest is charged to council tax. For financial assets and liabilities carried at cost because the effective rate of interest is the same as the carrying rate of interest, the carrying value is adjusted for accrued interest.
XI. GRANTS AND CONTRIBUTIONS All revenue, revenue expenditure funded from capital under statute (REFCUS) and capital grants and contributions with conditions attached are held as receipts in advance on the balance sheet. This is until such time as the condition no longer applies, at which point the grant/contribution is recognised as income in the comprehensive income & expenditure statement. Specific revenue and REFCUS grants and contributions are accrued and credited to income within service revenue accounts when the conditions regarding their use are met. Any income credited to service revenue accounts in excess of the expenditure they are intended to fund are, subject to approval, appropriated to revenue grants and contributions unapplied earmarked reserves until the expenditure is incurred. Revenue and REFCUS grants and contributions to cover general expenditure, including revenue support grant, national non domestic rate redistribution and unringfenced government grants, are credited to taxation and non-specific grant income and expenditure at the foot of the comprehensive income and expenditure statement. General revenue grants and contributions are subject to the normal carry-forward processes attributable to general fund balances. Grants and contributions relating to the funding of non-current asset (capital) expenditure are credited to taxation and non-specific grant income and expenditure at the foot of the comprehensive income and expenditure statement when the conditions regarding their use are met. Both REFCUS and capital grants and contributions are reversed out of the general fund balance in the movement in reserves statement to either the capital adjustment account if the grant/contribution has been used to finance capital expenditure in the year, or to the capital grants unapplied account reserve until it is applied to fund capital expenditure, at which point it is transferred to the capital adjustment account.
XII. OPERATING LEASE CHARGES Leases that do not meet the definition of finance leases are accounted for as operating leases. Assets leased out under operating leases are held on the balance sheet and rentals are credited to the relevant service line in the comprehensive income and expenditure statement on a straight line basis. Assets leased in under operating leases do not appear on the Council’s balance sheet. Rentals payable are charged on a straight-line basis over the term of the lease to the service receiving the benefit of the lease.
XIII. PRIVATE FINANCE INITIATIVE (PFI) AND SIMILAR ARRANGEMENTS Private Finance Initiatives (PFI) and similar contracts are agreements to receive services, where the responsibility for making available the non-current assets needed to provide the services passes to the PFI contractor. As the Council is deemed to control the services that are provided under its PFI schemes, and as ownership of the non-current assets will pass to the Council at the end of the contracts for no additional charge, the Council carries the property, plant and equipment assets used in the contracts on the balance sheet. The Council’s PFI (Bridlington schools) scheme has been accounted for in accordance with these requirements. The original recognition of these property, plant and equipment was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the assets. For the Bridlington PFI scheme, the liability was written down by an initial capital contribution of £0.910m. Property, plant and equipment recognised on the balance sheet are revalued and depreciated in the same way as property, plant and equipment owned by the Council.
East Riding of Yorkshire Council 24 Statement of Accounts 2019/20
ACCOUNTING POLICIES The amounts payable to the Bridlington Schools Services Limited PFI operators each year as a unitary payment are analysed into five elements: Fair value of the services received during the year – debited to the children, family and schools (schools budget) in the comprehensive income and expenditure statement cost of services. Finance cost – an interest charge of 9.24% on the outstanding balance sheet liability, debited to financing and investment income and expenditure in the comprehensive income and expenditure statement. Contingent rent – increases in the amount to be paid for the property arising during the contract, debited to financing and investment income and expenditure in the comprehensive income and expenditure statement. There are no contingent rentals for this scheme. Payment towards liability – applied to write down the balance sheet liability towards the PFI operator (the profile of write-downs is calculated using the same principles as for a finance lease). Lifecycle replacement costs – recognised as property, plant and equipment on the balance sheet.
XIV. DEBT REDEMPTION Each year the Council sets aside sums to meet its credit liabilities, i.e. monies it owes from borrowings and other methods it has used to finance capital spending. The sums set aside can include: A minimum revenue provision, including the principal element of finance lease-type arrangements. Commuted payments in respect of government grants on loan charges. Voluntary amounts set aside from revenue. Voluntary amounts set aside from usable capital receipts. Voluntary amounts set aside from the major repairs reserve
XV. EMPLOYEE BENEFITS Employee benefits are accounted for in accordance with the code’s interpretation of IAS 19 – Employee Benefits. This standard covers both benefits payable during and after employment. a) Benefits payable during employment Liabilities for employees’ entitlements to ‘short term employee benefits’ i.e. wages, salaries, annual leave and other employee benefits which are expected to be paid or settled wholly within 12 months of the balance sheet date, are recognised as an expense in the year in which employees render service to the Council. Annual leave is accrued at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit where these rates are available, otherwise the accrual will be based on the prevailing rates. The accrual is charged to surplus or deficit on the provision of services, but then reversed out through the movement in reserves statement to the accumulated absences account (unusable reserve) so that annual leave benefits are charged to the financial year in which the absence occurs. The Council does not award long-term employee benefits i.e. those which are not expected to be paid or settled within 12 months of the balance sheet date. b) Termination benefits Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy in exchange for those benefits. Such benefits are charged on an accruals basis to the relevant service in the comprehensive income and expenditure statement from which the officer is being made redundant at the earlier of when the Council can no longer withdraw the offer of those benefits or when the Council recognises costs for a restructuring. c) Post-employment benefits The Council participates in three different pension schemes that meet the needs of employees in particular services. Each of the schemes provides members with defined benefits related to pay and service. The schemes are as follows: Teachers – this is an unfunded scheme administered by Capita Teachers’ Pensions on behalf of the Department for Education (DfE). Public health employees transferred from the NHS – this scheme is administered on behalf of the NHS by NHS Pensions.
East Riding of Yorkshire Council 25 Statement of Accounts 2019/20
ACCOUNTING POLICIES Other employees – subject to certain qualifying criteria, employees are eligible to join the funded Local Government Pension Scheme. The pension costs charged to the Council’s accounts in respect of these employees are calculated in accordance with IAS 19 – Employee Benefits. The arrangements for the teachers’ and NHS schemes mean that liabilities for these benefits cannot be identified specifically to the Council. The schemes are therefore accounted for as a defined contribution scheme – no liability for future payments of benefits is recognised in the balance sheet and the service revenue accounts in the comprehensive income and expenditure statement are charged with the employer’s contributions payable to teachers’ and NHS pensions in the year. d) The local government pension scheme The local government scheme is accounted for as a defined benefits scheme: The liabilities of the pension fund attributable to the Council are included in the balance sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and projections of projected earnings for current employees. Liabilities are discounted to their value at current prices, using a discount rate of 2.4%, based on the indicative rate of return on a high quality corporate bond. The corporate bond yield curve is constructed as follows: o An approach to setting the discount rate has been adopted whereby a “Hymans Robertson” corporate bond yield curve is constructed based on the constituents of the iBoxx AA corporate bond index. The assets of the fund attributable to the Council are included in the balance sheet at their fair value. The change in the net pensions liability is analysed into the following components:
Service cost comprising: o current service cost – the increase in liabilities as a result of years of service earned this year – allocated in the comprehensive income and expenditure statement to the services for which the employees worked. o past service cost – the increase in liabilities as a result of a scheme amendment or curtailment whose effect relates to years of service earned in earlier years – debited to the surplus or deficit on the provision of services in the comprehensive income and expenditure statement as part of non- distributed costs. o net interest on the net defined benefit liability (asset), i.e. net interest expense for the Council – the change during the period in the net defined benefit liability (asset) that arises from the passage of time charged to the financing and investment income and expenditure line of the comprehensive income and expenditure statement – this is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined liability (asset) at the beginning of the period – taking into account any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payments. Remeasurements comprising: o return on fund assets – excluding amounts included in net interest on the net defined benefit liability (asset) – charged to the pensions reserve as other comprehensive income and expenditure. o actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – charged to the pensions reserve as other comprehensive income and expenditure.
Contributions paid to the fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense. In relation to retirement benefits, statutory provisions require the general fund balance to be charged with the amount payable by the Council to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the movement in reserves statement, this means that there are transfers to and from the pensions reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the pensions reserve thereby measures the beneficial impact on the general fund of being
East Riding of Yorkshire Council 26 Statement of Accounts 2019/20
ACCOUNTING POLICIES required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the local government pension scheme. e) Long term disability benefits Long term disability benefits are accounted for in accordance with the rebuttable presumption of International Public Sector Accounting Standard 25 – Employee Benefits, in which all long-term disability benefits are accounted for in the same way as defined benefit post-employment benefits rather than IAS 19 where they are presumed not to be subject to the same degree of uncertainty as the measurement of post- employment benefits and are accounted for immediately when the obligation arises.
XVI. PROPERTY, PLANT AND EQUIPMENT a) Recognition and valuation All expenditure on the acquisition, construction or enhancement of property, plant and equipment assets is capitalised on an accruals basis. Expenditure on the acquisition of, or expenditure which adds to, and not merely maintains, the value of an existing asset, is capitalised and classified as a non-current asset, provided that it yields benefits to the Council and the cost or fair value of the expenditure can be measured reliably. Expenditure which maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred. The Council maintains a detailed asset register of all assets above deminimis levels that it owns or recognises under finance leases and PFI type arrangements. Deminimis levels for each class of` asset are: HRA and Non-HRA (operational and non-operational) dwellings, land and other buildings £10,000 Intangible assets £100,000 Vehicles, furniture, plant and equipment (operational and non-operational) £10,000 Infrastructure assets £0 Community assets – parks and open spaces £10,000 The basis of valuation and depreciation for each category of asset is included in Note 17 to the core financial statements. Assets included in the balance sheet at current value are revalued at least every five years. Increases in valuations are credited to the revaluation reserve, except where they arise from the reversal of an impairment or revaluation loss previously charged to the surplus or deficit on the provision of services. Revaluation gains are depreciated with an amount equal to the difference between current value depreciation charged on assets, and the depreciation that would have been chargeable based on their historical cost. This amount is transferred each year from the revaluation reserve to the capital adjustment account. The revaluation reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation with an opening zero balance. Gains arising before that date are consolidated in the capital adjustment account. The Council does not capitalise borrowing costs where it is incurred during the period an asset is under construction. b) Impairment Asset values are reviewed each year for impairment due to the consumption of economic benefit such as obsolescence or physical damage to specific assets. Impairment loss – the difference between the carrying amount and estimated recoverable amount - is firstly written off against any revaluation gains attributable to the relevant asset in the revaluation reserve, with any excess charged to the service. Revaluation losses, which are the result of a general fall in prices not specific to an asset, are treated in the same way as impairment losses. The reversal of both impairments and revaluation losses made to services cannot exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment or revaluation loss been recognised for the asset in prior years. The reversal of an impairment loss is recognised in the circumstance that the increase in value is mirrored by the reversal of the external event that caused the original impairment to be recognised. This is not the case for a revaluation loss as it is implicit that a revaluation gain reverses a previous revaluation loss.
East Riding of Yorkshire Council 27 Statement of Accounts 2019/20
ACCOUNTING POLICIES c) Charges to revenue All services are charged with an annual provision for depreciation for property, plant and equipment used in the provision of the service, and impairment/revaluation loss as described above. These charges are reversed out in the movement in reserves statement, and therefore have a neutral impact on the amount that is required from local taxation. Assets are recognised into components for depreciation purposes when the component has a significant cost compared to the total cost of the item and a different useful life to the remainder of the asset. Significant cost is deemed to be 20% or more compared to the total asset, and the depreciable life is 20 years or more different to the remainder of the asset, or the depreciation method is different. Enhancement expenditure requires de-recognition of the component replaced or refurbished, and the new component reflected in the carrying amount, even where parts of an asset were not previously recognised as a separate component. Consideration for components takes place when an asset that has a carrying value of £500,000 or more is revalued in the five-year rolling valuation programme. Consideration also takes place when an asset is acquired at a cost of £200,000 or more, or on completion of construction or enhancement expenditure totalling £200,000 or more which is at least equal to 20% of the carrying value of existing enhanced or restored assets with a value of £200,000 or more. Amounts set aside from revenue to finance capital expenditure or as transfers to other earmarked reserves are disclosed separately in the movement in reserves statement as reconciling amounts not included in the general fund balance.
XVII. DERECOGNITION OF NON-CURRENT ASSETS With regard to the de-recognition proceeds, for the Housing Revenue Account, the Local Government Act 2003 (under various capital finance and accounting regulations), after calculating transaction costs and compensating authorities for loss of income above what has been covered in the self-financing settlement, allows HM Treasury and local authorities to receive the amounts they would have expected to receive had the policy on Right to Buy (RTB) of council dwellings remained unchanged. Other non-RTB dwelling and land disposals at market value require a percentage of these proceeds (75% for dwellings and 50% for land and other assets, net of statutory deductions) to be paid over to central government to reduce the national debt, (although if applicable to an Council, the use of the capital allowance calculation for this non-RTB category, will reduce the pool-able amount to nil). The balance is credited to the usable capital receipts reserve along with the proceeds from the sale of non-housing assets greater than £10,000. These can only be used to fund new capital investment or set aside to reduce the Council’s underlying need to borrow (the capital financing requirement). Capital receipts less than £10,000 are categorised as revenue receipts. The carrying amount of an asset is derecognised on disposal or when no future economic benefits or service potential is expected from its use or disposal. The amount by which de-recognition proceeds (capital receipts) from an asset are more (gain) or less (loss) than the value at which the asset was included in the balance sheet is credited or debited to the other operating expenditure line in the comprehensive income and expenditure statement. The gain or loss is then reversed out as a reconciling item in the movement in reserves statement, resulting in a neutral impact on the amount that is required from local taxation, other than related disposal costs which are chargeable to revenue. Any revaluation gains in the revaluation reserve for the assets disposed of are transferred to the capital adjustment account.
XVIII. REVENUE EXPENDITURE FUNDED FROM CAPITAL UNDER STATUTE (REFCUS) REFCUS encompasses expenditure which, defined by regulation or by direction of the secretary of state, may be included in the capital programme, but which does not result in the expenditure being carried on the balance sheet as property, plant and equipment. The purpose of this is to enable the expenditure to be funded from capital resources. Examples include grants, advances and financial assistance to others for expenditure of a capital nature, and revenue items treated as capital for capital control purposes as a result of Government directions e.g. redundancy costs. The Code requires the expenditure to be charged to the relevant service in the comprehensive income and expenditure statement, but statutory provision allows this to be funded by capital resources via a reconciling item in the movement in reserves statement to ensure there is no impact on the amount that is required from local taxation.
XIX. PROVISIONS Provisions are required for any liabilities of uncertain timing or amount that have been incurred. In accordance with the code, provisions are made when the Council has a present obligation (either legal or constructive) as
East Riding of Yorkshire Council 28 Statement of Accounts 2019/20
ACCOUNTING POLICIES a result of a past event; it is probable that a transfer of economic benefit will be required to settle it; and a reliable estimate can be made of the financial obligation. If it becomes probable that a transfer of economic benefit is no longer required to settle the obligation, the provision is reversed. Provisions are charged as an expense to the appropriate service line in the comprehensive income and expenditure statement in the year that the Council becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the balance sheet. Estimated settlements are reviewed at the end of each financial year and where it becomes less than probable that a transfer of economic benefits will be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Council settles the obligation.
XX. RESERVES Amounts set aside for purposes falling outside the definition of provisions are reserves. Transfers into and out of reserves are shown in the movement in reserves statement and not within service expenditure in the surplus or deficit on the provision of services. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to score against the surplus or deficit on the provision of services in the comprehensive income and expenditure statement. The appropriate reserve amount is then appropriated back into the general fund balance in the movement in reserves statement so that there is no net charge against council tax for the expenditure. Reserves are an accumulation of previous years’ surpluses, deficits and transfers and are categorised as either ‘usable’ or ‘unusable’ and are detailed in the notes to the core financial statements. Usable reserves are those the Council may use to fund either revenue or capital expenditure as prescribed. None of the other reserves can be used to support revenue spending and are kept to manage the accounting processes for non-current assets, financial instruments and retirement benefits. However an element of the capital adjustment account can be used to repay external loan debt.
XXI. SELF-INSURANCE To obtain insurance in the most cost effective manner, the Council has chosen to carry excesses in respect of claims made under various insurance policies. The amounts set aside from the Council’s services to cover the uninsured risks at 31 March 2020 are based on the potential total liability at that date. To comply with IAS 37 this amount is allocated between a provision for known liabilities and the self-insurance reserve for claims ‘incurred but not reported’.
XXII. CONTINGENT ASSETS AND LIABILITIES Contingent liabilities are disclosed within the notes to the financial statements if there is a possible obligation that may require a payment or transfer of economic benefits as a result of past events. Contingent assets are not recognised in the financial statements but are disclosed within the notes if the inflow of a receipt or economic benefit is probable.
XXIII. FINANCIAL ASSETS The financial assets of the Council are classified based on a classification and measurement approach that reflects the business model for holding the financial assets and their cashflow characteristics. There are three main classes of financial assets measured at: amortised cost fair value through profit or loss (FVPL), and fair value through other comprehensive income (FVOCI) The council’s business model is to hold investments to collect contractual cash flows. Financial assets are therefore classified as amortised cost, except for those whose contractual payments are not solely payment of principal and interest (ie where the cash flows do not take the form of a basic debt instrument)
East Riding of Yorkshire Council 29 Statement of Accounts 2019/20
ACCOUNTING POLICIES Financial Assets Measured at Amortised Cost Financial assets measured at amortised cost are recognised on the Balance Sheet when the council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement (CIES) for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest the instrument. The effective interest rate is the rate that exactly discounts estimated future cash flows over the life of the instrument to the amount at which it was originally recognised. For most of the financial assets held by the council, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the CIES is the amount receivable for the year in the loan agreement. However, the Council has taken the decision, for policy reasons, to make a number of loans at less than market rates (soft loans). When soft loans are made, a loss is recorded in the comprehensive income and expenditure statement (debited to the appropriate service) for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal. Interest is credited at a marginally higher effective rate of interest than the rate receivable from the loan recipients, with the difference serving to increase the amortised cost of the loan in the balance sheet. Statutory provisions require that the impact of soft loans on the general fund balance is the actual interest receivable for the financial year – the reconciliation of amounts debited and credited to the comprehensive income and expenditure statement to the net gain required against the general fund balance is managed by a transfer to or from the financial instruments adjustment account in the movement in reserves statement. Any gains and losses that arise on de-recognition of assets are credited/debited to the financing and investment income and expenditure line in the comprehensive income and expenditure statement surplus or deficit on the provision of services. Expected Credit Loss Model The council recognises expected credit losses on all of its financial assets held at amortised cost, either on a 12-month or lifetime basis. The expected credit loss model also applies to lease receivables and contract assets. Only lifetime losses are recognised for trade receivables (debtors) held by the council. Impairment losses are calculated to reflect the expectation that the future cash flows might not take place because the borrower could default on their obligations. Credit risk plays a crucial part in assessing losses. Where risk has increased significantly since an instrument was initially recognised, losses are assessed on a lifetime basis. Where risk has not increased significantly or remains low, losses are assessed on the basis of 12-month expected losses. Financial Assets Measured at Fair Value through Profit of Loss Financial assets that are measured at FVPL are recognised on the Balance Sheet when the council becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Fair value gains and losses are recognised as they arrive in the Surplus or Deficit on the Provision of Services. The fair value measurements of the financial assets are based on the following techniques: instruments with quoted market prices – the market price other instruments with fixed and determinable payments – discounted cash flow analysis. The inputs to the measurement techniques are categorised in accordance with the following three levels: Level 1 inputs – quoted prices (unadjusted) in active markets for identical assets that the council can access at the measurement date. Level 2 inputs – inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. Level 3 inputs – unobservable inputs for the asset. Where fair value of an equity instrument cannot be measured reliably and the best estimate of fair value is cost, it is carried at cost (less any impairment losses). Any gains and losses that arise on the de-recognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.
XXIV. FINANCIAL LIABILITIES Financial liabilities are recognised on the Balance Sheet when the council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and thereafter carried at their amortised cost. Annual charges to the financing and investment income and expenditure line in the East Riding of Yorkshire Council 30 Statement of Accounts 2019/20
ACCOUNTING POLICIES comprehensive income and expenditure statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. For most of the borrowings that the Council has, this means that the amount presented in the balance sheet is the outstanding principal repayable (plus accrued interest); and interest charged to the comprehensive income and expenditure statement is the amount payable for the year in the loan agreement. Gains and losses on the repurchase or early settlement of borrowings are credited and debited to the financing and investment income and expenditure line in the comprehensive income and expenditure statement in the year of repurchase/settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the surplus or deficit on the provision of services is spread over the life of the loan by an adjustment to the effective interest rate. Where premiums and discounts have been charged to the comprehensive income and expenditure statement, regulations allow the impact on the general fund balance to be spread over future years. The Council has a policy of spreading a premium against the term of the new loan taken out, or 10 years for a discount received. The reconciliation of amounts charged to the comprehensive income and expenditure statement to the net charge required against the general fund balance is managed by a transfer to or from the financial instruments adjustment account in the movement in reserves statement.
XXV. EVENTS AFTER THE REPORTING PERIOD Where an event occurs after the balance sheet date, favourable or unfavourable, which provides evidence of conditions that existed at the balance sheet date, the amounts recognised in the statement of accounts are adjusted to reflect this. Where an event occurs after the balance sheet date that is indicative of conditions that arose after the balance sheet date, the amounts recognised in the statement of accounts are not adjusted but are disclosed as a separate note to the accounts. Events after the reporting period are reflected up to the date when the statement of accounts are authorised for issue, which is the date they are authenticated by the Section 151 officer by signing and dating them before publishing.
XXVI. VALUE ADDED TAX VAT is included in relevant income and expenditure, whether of a capital or revenue nature, only to the extent that it is irrecoverable from HM Revenue & Customs.
XXVII. LOCAL TAXATION The Council is a council tax and business rates billing authority collecting on behalf of other authorities as well as itself. The collection on behalf of other authorities is treated as being on an agency basis, and thus only the elements of council tax and business rates that relate to the Council’s own income and expenditure are included in its main financial statements. The collection fund account covers all local taxation collected by the Council on behalf of itself, other local authorities and the government.
XXVIII. ACCOUNTING FOR SCHOOLS The Council has the following types of maintained schools under its control: Community Voluntary aided Voluntary controlled Trust/foundation Income, expenditure, assets (excepting some non-current assets below), liabilities, reserves and cash flows of maintained schools are recognised in the Council’s accounts. Non-current assets are recognised in the balance sheet where the Council directly owns the assets or where the school/governing body own the assets or have had rights to use the assets transferred to them. Community schools are owned by the Council and are, therefore, recognised on the balance sheet. All the Council’s voluntary aided and voluntary controlled schools are owned by religious bodies with no formal rights to use the assets passed to the school or governing bodies. As a result these schools are not recognised on the balance sheet.
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ACCOUNTING POLICIES Where ownership of trust/foundation schools’ non-current assets is with a charitable trust/religious body, the assets are not recognised on the Council’s balance sheet. Where ownership of the assets lies with the school/governing body they are recognised on the Council’s balance sheet.
XXIX. ACCOUNTING STANDARDS THAT HAVE BEEN ISSUED BUT HAVE NOT YET BEEN ADOPTED Accounting standards that have been issued before 1 January 2020 but not yet adopted by the Code relate to: IFRS 16 Leases The new Standard replaces IAS 17 Leases and comes into effect 1 April 2021. The new Standard changes the accounting for leases substantially. It eliminates a lessee’s classification for leases as either operating leases or finance leases. Instead all leases are treated in a similar way to finance leases applying IAS 17 meaning that the leases will be brought onto the balance sheet. The Council currently has a rigorous procedure identifying operating leases and finance leases however the effect of this new standard is not limited to arrangements that have the legal form of a lease. They apply to any arrangement that meets the Code’s definition of a lease as a contract (or part of a contract) that conveys the right to use an asset for a period of time. Work is being undertaken with service areas to identify such contracts which will ensure the correct identification and accounting treatment. The Council will be required to recognise all lease assets and liabilities on the balance sheet (except those agreed to and unchanged before 1 April 2021) rather than just finance leases as in previous years. IFRS 16 Leases would have come into effect from 1 April 2020 but due to the COVID-19 pandemic the implementation has been delayed by an additional year. This will therefore have an impact to the Council’s 2021/22 Statement of Accounts. This cannot be quantified at this time but it is not expected to have a material impact due to the current controls and processes in place in the identification of leases.
XXX. SIGNIFICANT JUDGEMENTS IN APPLYING ACCOUNTING POLICIES In applying the accounting policies set out above, the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The Council has to decide whether the leases it enters into should be treated as operating or finance leases, and whether contractual arrangements it enters into have the substance of a lease. These judgements are made on the professional opinion of the Council’s valuers, accountants and procuring officers using flowchart assessments in the contract procedure rules based on criteria set out in IAS 17 Leases and IFRIC 4 Determining whether an arrangement contains a lease. The relevant accounting policy is applied based on the outcome of the assessment. The Council is deemed to control the services provided under the Private Finance Initiative (PFI) agreement for six schools and a library at Bridlington and also to control the residual value of the properties at the end of the agreement. The accounting policies for PFI schemes and similar contracts have been applied to the arrangement and the schools and library (with a net book value of £51.0m) are recognised as property, plant and equipment on the Council’s balance sheet. This judgement was made by the Council’s accountants and the special projects manager and independently assured by the accountancy firm Ernst & Young. In 2014/15 one of the schools covered by the PFI arrangement converted to an academy. The Council still manages the PFI scheme on behalf of this academy, but all property, plant and equipment has been written out of the balance sheet. The Council has to decide whether land and buildings owned by the Council are investment properties. The Council’s valuers and accountants make judgements in accordance with IAS 40 Investment Property. It has been determined that the Council does not have any investment property as it does not hold land and/or buildings solely for rental income or capital appreciation purposes or both. The Council has to decide whether the Council’s exposure to possible losses is to be accounted for as a provision or a contingent liability. These decisions are taken by a combination of the Council’s accountants, solicitors and departmental officers based on their detailed knowledge of the circumstances, assessed using a contingent liability decision tree. The Council has to decide whether there is a group relationship between the Council and other entities. The accountants assess each relationship that exists between the Council and other entities that may result in a group accounts relationship using a flowchart of decisions based on CIPFA group accounting guidance. It has been determined that there are no significant relationships that require the production of group accounts for 2019/20.
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ACCOUNTING POLICIES At the start of the year the Council had a 19.9% shareholding in arvato government services Limited, which comprised 199 ‘B’ class shares. However, these shares were sold back to arvato for £1 per share on 10 April 2019, the same price as the purchase cost. The Council has an investment of 1,693,380 ordinary shares issued, valued at £16,145.40 representing a 39% shareholding in Correct Compliance Ltd a private limited company wholly owned by the four Humber unitary authorities. The value of the councils fully paid up shares at 31 March 2020 is £16,145.40. The Council was granted 1,792,522 deferred shares (47% shareholding) recognised at nil value. It has been determined that the Council does not have control of the company and it is not a subsidiary of the Council. The fair value of the shares cannot be determined as they do not have a quoted market price in an active market; therefore the ordinary shares are carried at cost as a proxy for fair value. The company was set up in 1999 to protect the interests of the authorities when disposing of the Humberside International Airport Ltd. This was achieved through a 999 year head lease that required the ownership of the airport property and operational land to revert back to the authorities free of charge within the first 10 years if it ceased to be used and promoted as a civil airport, and at market value within 10 to 50 years from the date of sale. The company has no trading function, and no realisable value. The deferred shares are therefore recognised at nil value. The Council has an investment of 1 ordinary share in Nite Direct Limited which represents a 100% shareholding; this is a wholly owned subsidiary of the Council. Further disclosures are included in the related party transactions Note 49. All local Council maintained schools are considered to be entities controlled by the Council. A dispensation in the Code allows the income, expenditure, assets and liabilities of these schools to be recognised within the single entity statements rather than requiring preparation of group accounts. An accounting policy is included at section XXVIII above. There are several categories of maintained school: • Community • Voluntary Aided • Voluntary Controlled • Trust/Foundation Income, expenditure, assets (excepting some non-current assets detailed further below), liabilities, reserves and cash flows of maintained schools are required to be recognised in the Council’s single entity statements. The Council’s financial statements report the balances and transactions for all maintained schools with the exception of land and buildings owned by voluntary aided, voluntary controlled and foundation schools. Non-Current Assets In accordance with the Code, non-current assets are recognised in the balance sheet where the Council directly owns the assets or where the school/governing body own the assets or have had rights to use the assets transferred to them. The Council completed an assessment of the schools to determine the arrangements in place and the accounting treatment required: Community schools are owned by the Council therefore the land and buildings are included in the balance sheet. Voluntary aided and voluntary controlled schools are owned by religious bodies with no formal rights to use the assets passed to the school or governing bodies. As a result, these schools are not recognised on the balance sheet. Where ownership of trust/foundation schools’ non-current assets is with a charitable trust/religious body, the assets are not recognised on the Council’s balance sheet. Where ownership of the assets lies with the school/governing body they are recognised on the Council’s balance sheet. Three of the four local authority maintained foundation schools are owned by religious bodies with no formal rights to use the assets passed to the school or governing bodies. As a result, these schools are not recognised on the balance sheet. Wold Newton Foundation School non-current assets are owned by the school governing body which is controlled by the school and thus the Council. The assets are therefore included in the Council’s balance sheet. Disclosures relating to the Council’s interests in schools can be found at Note 51. When a school that is held on the Council’s balance sheet becomes an academy, any property, plant and equipment except land is written out of the balance sheet with nil consideration on the date the school coverts. Land is leased to the academy on a 125 year lease, however on conversion it is revalued to a deminimis value (to show the Council’s remaining interest) and consequently written out of the balance sheet. East Riding of Yorkshire Council 33 Statement of Accounts 2019/20
ACCOUNTING POLICIES Judgement is required to determine whether the Council can be reasonably assured that the conditions of grant and contribution monies received have been met before recognising them as income in the comprehensive income and expenditure statement. Where conditions require specified expenditure to have taken place, the grant monies will not be recognised until this happens. Equally, where conditions specify that a grant or contribution must be repaid in the event of non-expenditure, the income is not recognised until the expenditure is incurred. The valuation and estates department is required to exercise professional judgement in determining the carrying value of land and buildings on the Council’s balance sheet. The Council owns a large and diverse range of property assets. Being a largely rural area, the commercial property market in the East Riding has always been relatively subdued and it is considered that property prices in this area are generally less volatile than in other more urbanised parts of the country. The recent emergence of the Covid-19 pandemic has had unprecedented implications which has had large parts of the economy being shut down or disrupted to limit the spread of the disease. Whilst there will be almost inevitably be some implications for UK property values, it is too early to assess what the effects will be. In the period up to March 2020, because of the nature of many of its property assets and the general lack of market volatility in this area, it is considered that there was no material changes in the value of Council’s property assets from the current carrying values on the balance sheet that would cause a need for a revaluation outside of the normal five yearly cycle. The onset of the Covid-19 pandemic and the need to introduce strict social distancing measures has had severe short term consequences for the economy. It is impossible at this early stage to quantify what, if any, implications this will have for property values. A great deal will depend on the course of the pandemic in the coming months and the success of measures to control its spread and the extent that economic activity can resume. In the circumstances it is not considered necessary or appropriate to adjust the value of the Council’s property assets because these is no evidence on which to base such an exercise. However we would advise in accordance with RICS guidance that:
Market activity is being impacted in many sectors. As at 31 March 2020, we consider that we can attach less weight to previous market evidence for comparison purposes, to inform opinions of value. Indeed, the current response to COVID-19 means that we are faced with an unprecedented set of circumstances on which to base a judgement.
Our review is therefore reported on the basis of ‘material valuation uncertainty’ as per VPS 3 and VPGA 10 of the RICS Red Book Global. Consequently, less certainty – and a higher degree of caution – should be attached to our opinion than would normally be the case. Given the unknown future impact that COVID-19 might have on the real estate market, we recommend that you keep the valuation of the Council’s property assets under frequent review. When a review for impairment is conducted, the recoverable amount is determined based on value in use calculations prepared on the basis of the valuers’ assumptions and estimates. Judgement is required in determining the significant components of property, plant and equipment assets and their related useful lives for accurate depreciation purposes. The Council’s quantity surveyors, valuers and accountants work together to determine this. It has been judged that the useful lives of the Council’s council dwellings as they currently stand provide a depreciation charge that is an accurate proxy for component accounting purposes. The calculation of the Council’s net pension liability consists of a number of complex judgements. Professional actuarial firm Hymans Robertson are contracted by the Council to calculate this net liability. The judgements used by the firm as detailed in Note 27f.
East Riding of Yorkshire Council 34 Statement of Accounts 2019/20
ACCOUNTING POLICIES
XXXI. ASSUMPTIONS MADE ABOUT THE FUTURE AND OTHER MAJOR SOURCES OF ESTIMATION UNCERTAINTY The full impact of Covid-19 is difficult to predict locally, nationally and globally, it is clear that the pandemic will have profound effects across many sectors in the United Kingdom including that of local government. The economic impact of Covid-19 and global stock markets have also adversely affected however the full extent of the impact is not known with certainty. It is recognised that the impact of Covid-19 may have had an effect with the return on investment and the valuations in relation to the pension liability. Valuation of non-current assets are reported on the basis of ‘material valuation uncertainty’ as per VPS 3 and VPGA 10 of the RICS red book Global. Consequently, less certainty – and a higher degree of caution – should be attached to the valuations than would normally be the case. Given the unknown future impact that COVID- 19 might have on the real estate market valuation will be subject to more frequent future review. The statement of accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The items in the Council’s balance sheet at 31 March 2020 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows: a) Pensions Liability Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. Hymans Robertson as actuaries are contracted to provide the Council with their professional opinion on the estimate of the net pension liability. The effects on the net pension liability of changes in individual assumptions can be measured and a sensitivity analysis is included in Pensions Note 27. During 2019/20 the Council’s actuary has advised that the net pensions liability is £402.69m. b) Accruals and provisions The accounts of the Council are prepared on an accruals basis meaning that the sums due to or from the Council during the year are included in the accounts, whether or not the cash has actually been received or paid in the year in question. Accruals may be made on exact amounts where invoices, although not received in time to be processed in the correct year, are received in time to inform the amount provided for. Where it is known that amounts are due to or from the Council relating to the current year, but no exact information is available to inform this, an estimate has to be made. If the amount estimated is different to the eventual invoice amount, the value of debtor and creditor balances included in the balance sheet will not have been correct and there will be a knock on effect of under or over provision in the following years’ comprehensive income and expenditure statement as the balances are written out. Many of the Council’s accruals are based on invoiced amounts. A liability that becomes apparent in the financial year as a result of a past event and it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation, results in a provision being made rather than an accrual. Provisions are different to accruals in that they are of uncertain timing or amount as to when they will be discharged, but a charge is still made to the comprehensive income and expenditure statement in the year. Depending on the certainty of the amount provided for, there is a risk that it may be insufficient and further amounts may need to be charged when the actual payment is made. Conversely, if the actual payment is less, the over provided amount is credited back to the comprehensive income and expenditure statement in the year the liability is discharged. The provisions total £9.5m at 31 March 2020. The best estimate amounts provided for are based on the professional opinion of the officer best placed to make it. If the outflow of resources is only possible rather than probable, then no estimated charge is made to the accounts until the circumstances change, only narrative disclosure is made in the Contingent Liabilities Note 39. The estimates of contingent liability amounts are based on information from the insurance companies involved, otherwise on the best estimate by the legal team of the maximum amount that could be payable. c) Valuations and depreciation charges Professional opinions of the values of land and buildings are made by the valuation and estates team and estimates of the useful lives of property, plant and equipment are made by the relevant officers who have knowledge of such issues based on their professional judgement e.g. useful lives of properties are provided by in-house RICS qualified valuers in consultation with the Council's quantity surveyors based on the East Riding of Yorkshire Council 35 Statement of Accounts 2019/20
ACCOUNTING POLICIES Council's current maintenance and investment policies. The present pressure on public sector expenditure could potentially have implications for the useful economic lives of the Council's property due to reduced spending on repairs leading to a decline in the condition of its buildings. There is no evidence that the estimated economic lives are being materially affected at this time, but this issue will be monitored. These values and useful lives impact on the depreciation, impairment and revaluation charges that are made to services for usage of the assets in question as well as the carrying value of the assets. Depreciation and impairment charged totalled £43.3m and net revaluation losses charged were £6.2m in 2019/20. These charges do not impact on the general fund balance as they are reversed out under statutory mitigation provisions. d) Fair Value Measurements The fair value of surplus assets cannot be measured based on quoted prices in active markets (i.e. Level 1 inputs), therefore fair value would be based on significant observable inputs (i.e. Level 2) or significant unobservable inputs (i.e. Level 3). Where possible, the inputs to these valuation techniques are based on observable data, but where this is not possible the Council employs the expertise of the in-house RICS qualified valuers to identify the most appropriate technique to determine fair value. These judgements typically include considerations such as uncertainty and risk. Changes in the assumptions used could affect the fair value of the Council’s assets and liabilities. Information about the valuation techniques and inputs used in determining the fair value of the Council’s assets and liabilities is disclosed in Notes 17 and 40.
East Riding of Yorkshire Council 36 Statement of Accounts 2019/20
NOTES TO THE MOVEMENT IN RESERVES STATEMENT
2. EXPENDITURE AND FUNDING ANALYSIS
The objective of the expenditure and funding analysis is to demonstrate to council tax and rent payers how the funding available to the Council (i.e. government grants, rents, council tax and business rates) for the year has been used in providing services in comparison with those resources consumed or earned by authorities in accordance with generally accepted accounting practices. The expenditure and funding analysis also shows how this expenditure is allocated for decision making purposes between the Council’s directorates. Income and expenditure accounted for under generally accepted accounting practices is presented more fully in the comprehensive income and expenditure statement on page 19.
2019/20 Current Year Difference between Outturn and Net Net Adjustments Outturn Expenditure Chargeable to between Funding Net Reported to to General Fund General Fund & Accounting Expenditure Management and HRA Balances HRA Balances Basis CI&E £000 £000 £000 £000 £000
Chief Executive 651 0 651 54 705 Corporate Resources 23,915 -109 23,806 -2,692 21,114 Adults, Health & Customer Services 94,188 -27 94,161 12,253 106,414 Children, Family & Schools (exc. Schools) 55,860 -17 55,843 6,408 62,251 Communities & Environment 37,366 2,078 39,444 11,480 50,924 Planning & Economic Regeneration 33,711 79 33,790 16,784 50,574 Local Authority Housing (HRA) 251 -28,571 -28,320 18,139 -10,181 Children, Family & Schools (Schools Budget) 2,020 -2,111 -91 20,611 20,520
Net Cost of Services 247,962 -28,678 219,284 83,037 302,321 Other Income & Expenditure -247,733 34,691 -213,042 -84,242 -297,284
Surplus (-) or Deficit on the Provision of Services 229 6,013 6,242 -1,205 5,037
Opening General Fund & HRA Balance at 31 March 2019 -179,131 Add Surplus on General Fund and HRA Balance in Year 6,241 Closing General Fund & HRA Balance at 31 March 2020* -172,890
*The split of this balance between the general fund, earmarked reserves and the HRA can be found in the movement in reserves statement on page 20. An analysis of the adjustments between the outturn reported to management, expenditure chargeable to the general fund and HRA and expenditure in the comprehensive income and expenditure statement can be found in Note 3.
East Riding of Yorkshire Council 37 Statement of Accounts 2019/20 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
2018/19 Prior Year Restated Difference between Outturn and Net Net Expenditure Adjustments Outturn Expenditure charged Chargeable to the between Funding Net Reported to to General Fund General Fund and & Accounting Expenditure in Management and HRA Balances HRA Balances Basis CI&E £000 £000 £000 £000 £000
Chief Executive 557 -1 556 40 596 Corporate Resources 26,587 -212 26,727 756 27,483 Adults, Health & Customer Services 77,984 -52 77,890 11,311 89,201 Children, Family & Schools (exc. Schools) 49,305 -48 49,303 5,310 54,613 Communities & Environment 34,772 1,875 36,065 9,151 45,216 Planning & Economic Regeneration 31,504 31 31,765 15,842 47,607 Local Authority Housing (HRA) -377 -28,855 -29,232 9,311 -19,921 Children, Family & Schools (Schools Budget) 7 -1,878 -1,875 24,467 22,592 Net Cost of Services 220,339 -29,140 191,199 76,188 267,387
Other Income & Expenditure -222,211 20,236 -201,975 -63,135 -265,110 Surplus (-) or Deficit on the Provision of Services -1,872 -8,904 -10,776 13,053 2,277
Opening General Fund & HRA Balance at 31 March 2018 -168,355 Add Surplus on General Fund and HRA Balance in Year -10,776 Closing General Fund & HRA Balance at 31 March 2019 -179,131
East Riding of Yorkshire Council 38 Statement of Accounts 2019/20 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
3. ANALYSIS OF ADJUSTMENTS WITHIN THE EXPENDITURE AND FUNDING ANALYSIS
The tables below provide a reconciliation of the main adjustments required within the expenditure and funding analysis to arrive at the expenditure within the comprehensive income and expenditure statement from the outturn reported to management. a) Reconciliation between Outturn Reported to Management and Expenditure Chargeable to the General Fund and HRA
2018/19 Restated 2019/20 HRA Trading and Use of Adjustments from Outturn to arrive at Net HRA Trading and Use of Presentational Holding Reserves Other Total Expenditure Charged to the General Fund and HRA Presentational Holding Reserves Other Total Differences Accounts in Outturn Differences Adjustments Differences Accounts in Outturn Differences Adjustments £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 0 0 0 -1 -1 Chief Executive 0 0 0 0 0 0 0 0 -212 -212 Corporate Resources 0 0 0 -109 -109 0 -23 0 -29 -52 Adults, Health & Customer Services 0 -143 0 116 -27 0 0 0 -48 -48 Children, Family & Schools (exc. Schools) 0 0 0 -17 -17 0 1,102 0 773 1,875 Communities & Environment 0 1,221 0 857 2,078 0 -210 0 241 31 Planning & Economic Regeneration 0 39 0 40 79 -28,855 0 0 0 -28,855 Local Authority Housing (HRA) -28,571 0 0 0 -28,571 0 0 0 -1,878 -1,878 Children, Family & Schools (Schools Budget) 0 0 0 -2,111 -2,111
-28,855 869 0 -1,154 -29,140 Net Cost of Services -28,571 1,117 0 -1,224 -28,678
28,855 -869 -8,910 1,160 20,236 Other Income and Expenditure 28,571 -1,117 6,138 1,099 34,691 Difference between Outturn and General Fund 0 0 -8,910 6 -8,904 Surplus or Deficit 0 0 6,138 -125 6,013
HRA Presentational Differences – This consists of year end housing revenue account (HRA) transactions, including capital expenditure charged to the HRA, transfers to the major repairs reserve and interest on loans under the Item 8 Debit and Credit determinations. These transactions are reported within the revenue outturn report under ‘Local Authority Housing’, but are included within ‘Other Income and Expenditure’ under net expenditure chargeable to the general fund and HRA balances. Trading and Holding Accounts – Some trading and holding accounts are reported within the revenue outturn report under the specific directorate they operate within. Within the comprehensive income and expenditure statement, they are all reported under financing and investment income which is part of other income and expenditure within the expenditure and funding analysis. Use of Reserves in Outturn – The surplus or deficit reported within the revenue outturn report includes the use of reserves (general fund, HRA and earmarked). This is not comparable to the surplus or deficit reported within the comprehensive income and expenditure statement, which shows the position before the funding from reserves. This results in a £5.997m difference between the surplus or deficit figures within the accounts. Other Differences – Consists of other minor presentational differences, including PFI and Finance Lease adjustments, direct revenue financing, and CRC allowance transactions which are presented in different lines within the Outturn Report, compared to the Net Expenditure charged to the General Fund and HRA balances.
East Riding of Yorkshire Council 39 Statement of Accounts 2019/20 NOTES TO THE MOVEMENT IN RESERVES STATEMENT b) Reconciliation between Expenditure Chargeable to the General Fund and HRA and Expenditure included within the Comprehensive Income and Expenditure Statement
2018/19 Restated 2019/20 Adjustments Net Change Adjustments from General Fund to arrive at the Comprehensive Adjustments Net Change for Capital for the Other Total Income & Expenditure Statement amounts for Capital for the Other Total Purposes Adjustment Differences Adjustments Purposes Adjustment Differences Adjustments £000 £000 £000 £000 £000 £000 £000 £000
0 39 1 40 Chief Executive 0 54 0 54 1,766 -1,022 12 756 Corporate Resources 1,780 -4,522 50 -2,692 4,618 6,586 107 11,311 Adults, Health & Customer Services 2,551 9,448 254 12,253 1,719 3,521 70 5,310 Children, Family & Schools (exc. Schools) 1,043 5,289 76 6,408 3,852 5,233 66 9,151 Communities & Environment 3,950 7,365 165 11,480 13,413 2,388 41 15,842 Planning & Economic Regeneration 13,451 3,296 37 16,784 8,639 667 5 9,311 Local Authority Housing (HRA) 17,094 1,027 18 18,139 13,462 10,051 954 24,467 Children, Family & Schools (Schools Budget) 9,959 12,890 -2,238 20,611
47,469 27,463 1,256 76,188 Net Cost of Services 49,828 34,847 -1,638 83,037 -75,209 11,354 720 -63,135 Other Income and Expenditure -97,356 14,473 -1,359 -84,242
Difference between General Fund Surplus or Deficit and -27,740 38,817 1,976 13,053 -47,528 49,320 -2,997 -1,205 Comprehensive Income and Expenditure Statement Surplus or Deficit
Adjustments for Capital Purposes – include the charge to services for depreciation, impairment and revaluation losses. The addition of capital grants and contributions applied from in-year income and removal of capital expenditure charged to the general Fund and HRA balance. Also, adjustments for disposals of non-current assets with a transfer of income on disposal of assets and the amounts written off for those assets. Net Change for the Pensions Adjustments – includes the removal of the employer pension contributions made by the council as allowed by statute and the replacement with current service costs and past service costs, alongside the net interest on the defined benefit liability charged within other income & expenditure. Other Differences – includes the addition of accumulated absences charges as required by IAS19 to services and adjustments involving the amount by which council tax and NNDR income credited to the comprehensive income and expenditure statement is different from the amount calculated in accordance with statutory requirements. A detailed breakdown of the main adjustments included within the above table can be found in Note 5.
East Riding of Yorkshire Council 40 Statement of Accounts 2019/20 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
4. SEGMENTAL INCOME
The following segmental analysis shows revenues from external customers included within the Net Expenditure chargeable to the General Fund and HRA Balances in the Expenditure and Funding Analysis on page 37.
2018/19 2019/20 Restated £000 £000 -10 Chief Executive -11 -1,055 Corporate Resources -1,452 -58,357 Adults, Health & Customer Services -52,454 -888 Children, Family & Schools (exc. Schools) -938 -6,444 Communities & Environment -6,360 -10,993 Planning & Economic Regeneration -11,102 -48,578 Local Authority Housing (HRA) -48,056 -7,011 Children, Family & Schools (Schools Budget) -6,703 -133,336 Revenues from External Customers -127,076
East Riding of Yorkshire Council 41 Statement of Accounts 2019/20 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
5. ADJUSTMENTS BETWEEN ACCOUNTING BASIS AND FUNDING BASIS UNDER REGULATIONS
This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Council in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure.
Earmarked Capital General Housing General Major Usable Grant Total Fund Revenue Fund Repairs Capital Unapplied Usable Unusable 2019/20 Balance Account Reserves Reserve Receipts Account Reserve Reserves £000 £000 £000 £000 £000 £000 £000 £000 Adjustments involving the Capital Adjustment Account Reversal of items debited or credited to the Income and Expenditure Statement Charge for depreciation -33,233 -9,160 0 0 0 0 -42,393 42,393 Charge for impairment -24 -59 0 0 0 0 -83 83 Revaluation losses on Property, Plant and Equipment -1,981 -14,260 0 0 0 0 -16,241 16,241 Reversal of past impairment and revaluation losses 3,652 6,415 0 0 0 0 10,067 -10,067 Amortisation of intangible assets -752 -30 0 0 0 0 -782 782 Capital grants and contributions applied from in-year income 49,272 1,850 0 0 0 0 51,122 -51,122 Donated asset 18 0 0 0 0 0 18 -18 Non-current asset written out in gain or loss on disposal/sale of non-current assets -6,296 -4,039 0 0 0 0 -10,335 10,335 Revenue expenditure funded from capital under statute -7,114 0 0 0 0 0 -7,114 7,114 Grant funded revenue expenditure funded from capital understatute 5,827 0 0 0 0 0 5,827 -5,827 Additions of items not debited or credited to the Comprehensive Income and Expenditure Statement Provision for repayment of debt 12,475 0 0 0 0 0 12,475 -12,475 Contribution to provision for repayment of debt -2,304 0 0 0 2,304 0 0 0 Capital expenditure charged to General Fund and HRA balance 14,215 7,724 0 0 0 0 21,939 -21,939 Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of disposal/sale of non-current assets 3,180 6,218 0 0 -9,399 0 -1 1 Usable Capital Receipts financing new capital expenditure 0 0 11,415 0 11,415 -11,415 Contribution from Capital Receipts Reserve towards administrative costs of non-current asset disposals 0 -100 0 0 100 0 0 0 Contribution from Capital Receipts Reserve to finance the payments to the Government Capital Receipt Pool -1,312 0 0 0 1,312 0 0 0 New Finance Lease Out within year 0 0 0 0 0 0 Other Income 0 16 0 0 -16 0 0 0 Sub-total of adjustment to carry forward to next page 35,623 -5,425 0 0 5,716 0 35,914 -35,914
East Riding of Yorkshire Council 42 Statement of Accounts 2019/20 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
Earmarked Capital General Housing General Major Usable Grant Total Fund Revenue Fund Repairs Capital Unapplied Usable Unusable 2019/20 Balance Account Reserves Reserve Receipts Account Reserve Reserves £000 £000 £000 £000 £000 £000 £000 £000 Adjustment carried over from previous page 35,623 -5,425 0 0 5,716 0 35,914 -35,914 Adjustments involving the Major Repairs Reserve Additional transfer to MRR in excess of depreciation 0 4,492 0 -4,492 0 0 0 0 Reversal of the Major Repairs Allowance credited to HRA 0 0 0 0 0 0 0 0 Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 10,092 0 0 10,092 -10,092 Repayment of Self-Financing Debt 0 0 0 0 0 0 0 0 Additional transfer to the MRR (to be credited with HRA depreciation) 0 9,190 0 -9,190 0 0 0 0
Adjustments involving the Capital Grants Unapplied Account Reserve Capital grants and contributions unapplied credited to CI&ES 3,736 0 0 0 0 -3,736 0 0 Application of grants and contributions to capital financing 0 0 0 0 0 95 95 -95 Adjustments involving the Financial Instrument Adjustment Account Replacing soft loan effective interest with actual interest 4 0 0 0 0 0 4 -4 Soft loan fair value adjustments 0 0 0 0 0 0 0 0 Adjustments involving the Pensions Reserve Reversal of items relating to retirement benefits debited or credited to -79,530 -2,059 0 0 0 0 -81,589 81,589 the comprehensive income and expenditure account Employer's contributions payable to the East Riding Pension Fund 31,528 740 0 0 0 0 32,268 -32,268
Adjustments involving the Collection Fund Adjustment Account Amount by which council tax and non-domestic rating income credited 1,292 0 0 0 0 0 1,292 -1,292 to the Comprehensive income and expenditure account is different from the amount calculated in accordance with statutory requirements
Adjustments involving Deferred Capital Receipts Finance lease statutory adjustment -141 0 0 0 0 0 -141 141 Deferred capital receipts received - transferred to Usable Capital Receipts 0 0 0 0 -29 0 -29 29
Adjustments involving the Accumulating Absences Account Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements 1,772 -18 0 0 0 0 1,754 -1,754 Total adjustments between accounting basis and funding basis -5,716 6,920 0 -3,590 5,687 -3,641 -340 340 under regulations Transfer between reserves - Voluntary 0 0 0 0 0 0 0 0 Total Adjustments between accounting basis and funding -5,716 6,920 0 -3,590 5,687 -3,641 -340 340
East Riding of Yorkshire Council 43 Statement of Accounts 2019/20 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
Earmarked Capital General Housing General Major Usable Grant Total Fund Revenue Fund Repairs Capital Unapplied Usable Unusable 2018/19 Comparatives Balance Account Reserves Reserve Receipts Account Reserve Reserves £000 £000 £000 £000 £000 £000 £000 £000 Adjustments involving the Capital Adjustment Account Reversal of items debited or credited to the Charge for depreciation -33,041 -9,073 0 0 0 0 -42,114 42,114 Charge for impairment -4,279 0 0 0 0 0 -4,279 4,279 Revaluation losses on Property, Plant and Equipment -5,215 -13,319 0 0 0 0 -18,534 18,534 Reversal of past impairment and revaluation losses 3,147 13,783 0 0 0 0 16,930 -16,930 Amortisation of intangible assets -610 -30 0 0 0 0 -640 640 Capital grants and contributions applied from in-year income 54,251 939 0 0 0 0 55,190 -55,190 Donated asset 5,945 0 0 0 0 0 5,945 -5,945 Non-current asset written out in gain or loss on disposal/sale of non-current assets -35,008 -3,973 0 0 0 0 -38,981 38,981 Revenue expenditure funded from capital under statute -8,236 0 0 0 0 0 -8,236 8,236 Grant funded revenue expenditure funded from capital understatute 8,219 0 0 0 0 0 8,219 -8,219
Additions of items not debited or credited to the Comprehensive Income and Expenditure Statement Provision for repayment of debt 12,065 0 0 0 0 0 12,065 -12,065 Contribution to provision for repayment of debt -2,273 0 0 0 2,273 0 0 0 Capital expenditure charged to General Fund and HRA balance 14,936 7,962 0 0 0 0 22,898 -22,898 Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of disposal/sale of non-current assets 3,932 5,403 0 0 -9,335 0 0 0 Usable Capital Receipts financing new capital expenditure 0 0 0 0 966 0 966 -966 Contribution from Capital Receipts Reserve towards administrative costs of non-current asset disposals 0 -104 0 0 104 0 0 0 Contribution from Capital Receipts Reserve to finance the payments to the Government Capital Receipt Pool -1,312 0 0 0 1,312 0 0 0 New Finance Lease Out within year 0 0 0 0 0 0 0 0 Other Income 0 35 0 0 -35 0 0 0
Sub-total of adjustment to carry forward to next page 12,521 1,623 0 0 -4,715 0 9,429 -9,429
East Riding of Yorkshire Council 44 Statement of Accounts 2019/20 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
Earmarked Capital General Housing General Major Usable Grant Total Fund Revenue Fund Repairs Capital Unapplied Usable Unusable 2018/19 Comparatives Balance Account Reserves Reserve Receipts Account Reserve Reserves £000 £000 £000 £000 £000 £000 £000 £000 Adjustment carried over from previous page 12,521 1,623 0 0 -4,715 0 9,429 -9,429 Adjustments involving the Major Repairs Reserve Additional transfer to MRR in excess of depreciation 0 4,494 0 -4,494 0 0 0 0 Reversal of the Major Repairs Allowance credited to HRA 0 0 0 0 0 0 0 0 Use of the Major Repairs Reserve to finance new capital expenditure 0 0 11,288 0 0 11,288 -11,288 Repayment of Self-Financing Debt 0 0 0 0 0 0 0 0 Additional transfer to the MRR (to be credited with HRA depreciation) 0 9,104 0 -9,104 0 0 0 0
Adjustments involving the Capital Grants Unapplied Account Reserve Capital grants and contributions unapplied credited to CI&ES 0 0 0 0 0 0 0 0 Application of grants and contributions to capital financing 0 0 0 0 0 65 65 -65 Adjustments involving the Financial Instrument Adjustment Account Replacing soft loan effective interest with actual interest 4 0 0 0 0 0 4 -4 Soft loan fair value adjustments 0 0 0 0 0 0 0 0 Adjustments involving the Pensions Reserve Reversal of items relating to retirement benefits debited or credited to -67,801 -1,537 0 0 0 0 -69,338 69,338 the comprehensive income and expenditure account Employer's contributions payable to the East Riding Pension Fund 29,862 658 0 0 0 0 30,520 -30,520
Adjustments involving the Collection Fund Adjustment Account Amount by which council tax and non-domestic rating income credited -679 0 0 0 0 0 -679 679 to the Comprehensive income and expenditure account is different from the amount calculated in accordance with statutory requirements
Adjustments involving Deferred Capital Receipts Finance lease statutory adjustment 0 0 0 0 0 0 0 0 Deferred capital receipts received - transferred to Usable Capital Receipts 0 0 0 0 -5 0 -5 5
Adjustments involving the Accumulating Absences Account Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements -1,297 -5 0 0 0 0 -1,302 1,302 Adjustments between accounting basis and funding basis -27,390 14,337 0 -2,310 -4,720 65 -20,018 20,018 under regulations Transfer between reserves - Voluntary 0 0 0 0 0 0 0 0 Total Adjustments between accounting basis and funding -27,390 14,337 0 -2,310 -4,720 65 -20,018 20,018
East Riding of Yorkshire Council 45 Statement of Accounts 2019/20 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
6. NATURE OF EXPENSES
The following is a subjective analysis of the surplus or deficit on the provision of services within the comprehensive income and expenditure statement on page 19.
2018/19 2019/20 £000 £000
-141,912 Fees, charges and other service income -135,122 -1,436 Interest and investment income -2,739 -222,724 Income from council tax and non-domestic rates -228,592 -381,646 Government grants -362,751 -50,931 Other grants, reimbursements and contributions -56,442 -40 Payments due from academies -9 -31,073 Interest income on plan assets -28,956 -829,762 Total Income -814,611
323,602 Employee benefit expenses 337,545 366,339 Other service expenses 368,508 48,638 Depreciation, amortisation and impairment 49,431 77 Other capital charges 96 29,819 Loss on disposal of fixed assets 1,130 12,188 Interest payments 12,220 1,631 Expenditure re council tax and non-domestic rates 0 7,604 Precepts and Levies 7,992 1,312 Payments to housing capital receipts pool 1,312 305 Payments to academies 570 40,524 Pension interest cost 40,844 832,039 Total Expenditure 819,648 2,277 Surplus or Deficit on the Provision of Services 5,037
East Riding of Yorkshire Council 46 Statement of Accounts 2019/20 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
7. COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT LINE NOTES
a) Other operating expenditure
2018/19 Note 2019/20 £000 £000
7,604 Precepts and levies 49 7,992 1,312 Amounts payable into the housing capital receipts pool 1,312 -35 Other income / expenditure -66 -925 Gains (-) and losses on disposal of non current assets 13 -2,128 30,744 Loss on transfer of schools assets to academies * 13 3,258 38,700 10,368
*Following the Academies Act 2010, the following schools formerly under the control of the Council, converted to academy status during 2019/20: Keyingham Primary School - 1 March 2020 The following voluntary controlled schools also converted: St Johns Beverley RC Primary School – 1 June 2020 Our Lady and St Peter RCVA Primary School -1 July 2020 St Mary’s and St Joseph’s Primary School – 1 July 2020 St Mary’s Market Weighton Primary School – I July 2020 All Saints CEVC Infant School – 1 September 2020 All Saints CEVC Junior School – 1 September 2019 North Cave CEVC Primary School – 1 November 2019 The following treatment was applied to the academy conversions in 2019/20: Convertor academies are regarded as ‘continuing’ schools therefore they retain any surplus/deficit balance on their conversion. The Council has four months from the date of transfer to calculate the financial position including any debtors or creditors. The transfer of schools balances can include items such as outstanding debtors, creditors, insurance claims and reserve balances. Following the adoption of new accounting standards on groups, all Local Authority maintained schools are considered entities controlled by the Council – they are effectively subsidiaries of the Council. Transactions and balances owned and controlled by the schools are deemed to be Financing Investment Income and Expenditure – see note 7b below. For 2019/20, the balances transferred totalled £0.560m (2018/19 £0.265m). This balance is comprised of £0.570m owed to academies and £0.010m owed from academies to the Council on conversion. The transfer of the property, plant and equipment owned by the Council to the new academy for nil proceeds is treated as a loss on disposal, as part of the Other Operating Expenditure Gain or Loss on Disposal of Non-Current Assets. In 2019/20, a total of £3.258m of property, plant and equipment was transferred to the new academies listed above. Net expenditure of £6.3m for the schools that converted to academies in 2019/20 was included in the Comprehensive Income and Expenditure Statement - Children, Family and Schools (Schools Budget) line in 2018/19, and £2.2m in 2019/20 up to the point of conversion.
East Riding of Yorkshire Council 47 Statement of Accounts 2019/20 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT b) Financing and Investment Income and Expenditure
2018/19 Note 2019/20 £000 £000
9,451 Net interest on the net defined benefit liability (asset) 27b 11,888 12,023 Interest payable on PWLB borrowing 44 12,062 164 Other interest payable and similar charges 44 158 2,392 Deficit / (Surplus) of trading operations not allocated back to services 2,409 -1,436 Interest and investment income 44 -2,739 Payments relating to academy school conversions: 305 Balances paid to schools converting to academy status * 570 -40 Balances received from schools converting to academy status * -9 22,859 24,339
*See Note 7a narrative. c) Taxation and Non-Specific Grant Income and Expenditure
2018/19 Note 2019/20 £000 £000
167,421 Precept demanded from the Collection Fund Page 115 174,731 51,536 Retained Business Rates Page115 52,108
General Government Grants 12,494 Revenue Support Grant 4,772
3,509 New Homes Bonus 3,406 14,074 Business Rate Top-Up 14,286 5,862 S.31 Business Rate Re-imbursement Grants 7,992 1,866 Rural Services Delivery Grant 1,866 838 Housing and Council Tax Benefit Subsidy Administration Grant 735 910 Independent Living Grant 882 779 Troubled Families Grant 725 0 COVID 19 Local Authority Support Grant 9,312 904 Adult Social Care Grant 2,470 804 Levy Account Surplus Grant 179 2,400 Other General Government Grants 1,903
Capital Grants and Contributions 18,303 Local Transport Scheme Funding 21,431 15,036 Coastal Protection and Flood Alleviation Funding 11,027 7,105 Department for Education Capital Grants 8,788 766 Coastal Communities Funding 2,800 810 Homes & Communities Agency 1,850 11,251 Regional and Local Growth Funds 5,869 1,919 Other Capital Grants and Contributions 3,088 5,945 Donated Assets 18 2,661 Transfer from the Collection Fund in respect of surpluses/deficit (-) Council Tax 3,087 -524 Transfer from the Collection Fund in respect of surpluses/deficit (-) Business Rates -1,334 326,669 331,991
East Riding of Yorkshire Council 48 Statement of Accounts 2019/20 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
8. GOVERNMENT GRANTS, CONTRIBUTIONS AND DONATED ASSETS
The following specific grants and contributions were included in the Comprehensive Income and Expenditure Statement. Non-specific grants are shown in Note 7c above. An analysis of grants and contributions still held as liabilities on the Balance Sheet, as the conditions preventing them from being recognised are not yet met, is shown at Note 27.
2018/19 2019/20 Restated £000 £000 £000 Department for Work and Pensions (DWP) Grants for Benefits 31,879 Rent allowances 25,602 24,533 HRA Rent Rebates 21,135 1,323 DWP New Burdens Grant 227 46,964
Other Government Grants 158,441 Dedicated Schools Grant 154,175 10,759 Public Health Grant 10,475 8,094 Improved Better Care Fund 9,833 7,956 Pupil Premuim Grant 7,623 3,355 Universal Infant Free School Meals Grant 3,166 2,489 Disabled Facility Grant 3,072 0 Teachers' Pension Employer Contribution Grant 2,673 3,465 Sixth Form Grant 2,498 1,791 Primary & PE Sports Grant 1,995 1,552 Support for Adult Education 1,490 1,446 Winter Pressures Grant 1,446 1,346 Bridlington Schools Private Finance Initiative 1,425 646 Teachers Pay Grant 1,332 697 DfE Capital Grants 1,059 358 UASC grant 876 197 Yorkshire Coast Communities ERDF 780 309 Partners in Practice 586 117 Flexible Homelessness Support Grant 530 343 Apprenticeship Levy Digital Account 529 514 Bus Service Operator Department for Transport Grant 514 7,286 Regional Growth Fund 309 2,087 Broadband Delivery Grant 0 5,003 Other Revenue Government Grants 5,944 212,330
Other Grants and Contributions 36,322 Section 256 CCG Contributions 39,923 2,225 Contributions from other Local Authorities & Other Public Bodies 2,530 113 Education Music Tuition & other Parental Contributions 1,181 699 Other Education Grants 446 3,153 Other Grants and Contributions 2,290 46,370
318,498 Total Grants & Contributions credited to Cost of Services 305,664
East Riding of Yorkshire Council 49 Statement of Accounts 2019/20 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
9. AUDIT FEES
This note discloses, in accordance with the Code, the fees payable to the auditors appointed under the Local Audit and Accountability Act 2014 for work carried out relating to the 2019/20 year of account.
2018/19 2019/20 £000 £000
107 External audit services 107 14 Certification of grant claims and returns 13 7 Other services provided 9 0 Rebate for fee reductions -13 128 116
10. SIGNIFICANT ITEMS
In 2019/20, the size of the revaluation loss on HRA assets is £7.720m and is significant in relation to the HRA gross expenditure and is therefore shown separately on the face of the statement. See HRA Note 5 for further information.
11. OPERATING LEASES
(a) Council as lessor The Council leases out property for the following purposes aligned with its statutory and discretionary responsibilities and corporate objectives - 1) economic development purposes e.g. business units which provide suitable, affordable accommodation for new and small businesses in the area is a provision not met by the private sector and the grant funding was received from European Government and Government Office to pay for their construction on this basis. This supports the corporate priority Maximising our Potential , or 2) to retain estate management control over the assets for the benefit of the development of the East Riding as an area – in line with the corporate priority Valuing our Environment, or 3) for the provision of community services, in partnership with third party organisations, such as sports facilities, tourism services and community centres. The Council has future minimum lease payments receivable under non-cancellable operating leases as set out below. The Council leases out property but not vehicles, plant, furniture and equipment under operating leases.
31 March 2019 31 March 2020 £000 £000 Minimum lease rentals receivable: 1,518 Within one year 1,587 2,947 One to five years 3,240 12,214 After five years 14,777 16,679 19,604
Minimum lease payments do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2019/20 £0.467m contingent rentals were receivable by the Council (2018/19 £0.421m).
East Riding of Yorkshire Council 50 Statement of Accounts 2019/20 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
12. OFFICERS’ REMUNERATION
a) Officers’ remuneration by band (excluding Senior Officers) Detailed below is the number of employees, in the accounting period to which the accounts relate, whose remuneration, excluding employer’s pension contributions fell in each bracket of a scale in multiples of £5,000, starting from £50,000. Senior Officers are not included in the analysis as their remuneration is disclosed separately in Note 12b.
2018/19 2019/20 Teachers Other Total Teachers Other Total Employees Employees Remuneration Band 47 42 89 £50,000 to £54,999 54 45 99 29 19 48 £55,000 to £59,999 34 25 59 39 5 44 £60,000 to £64,999 26 5 31 15 1 16 £65,000 to £69,999 25 1 26 7 0 7 £70,000 to £74,999 8 1 9 2 1 3 £75,000 to £79,999 5 2 7 0 6 6 £80,000 to £84,999 1 4 5 5 3 8 £85,000 to £89,999 1 0 1 3 2 5 £90,000 to £94,999 4 0 4 1 4 5 £95,000 to £99,999 1 9 10 0 0 0 £100,000 to £104,999 1 0 1 0 1 1 £105,000 to £109,999 1 0 1 1 0 1 £110,000 to £114,999 0 1 1 149 84 233 161 93 254
Individuals employed at Voluntary Aided and Foundation Schools are not employees of the Council, but of the governing body of the school. However, for group accounts purposes the transactions relating to these schools are included in the Council’s Comprehensive Income and Expenditure Account. The number of employees at these schools remunerated above £50,000 is as follows:
2018/19 2019/20 Teachers Other Total Teachers Other Total Employees Employees Remuneration Band 1 0 1 £50,000 to £54,999 1 0 1 1 0 1 £55,000 to £59,999 0 0 0 1 0 1 £60,000 to £64,999 2 0 2 1 0 1 £65,000 to £69,999 1 0 1 1 0 1 £70,000 to £74,999 0 0 0 5 0 5 4 0 4
East Riding of Yorkshire Council 51 Statement of Accounts 2019/20 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT b) Senior Officers’ remuneration Statutory regulations require the separate disclosure by name of individual remuneration details for senior local government employees earning over £150,000, and for all other ‘senior’ employees for each financial year by post title. Senior officers are individuals earning over £150,000 per year, or individuals whose salary is more than £50,000 per year (pro-rata) and hold defined ‘senior’ positions.
2019/20 Total Remuneration Salary, Fees Expense Compensation excluding & Allowances Allowances for Loss of Benefits Pension Employers' Total Employment in Kind Contributions Pension Remuneration £000 £000 £000 £000 £000 £000 £000 Chief Executive Caroline Lacey 166 5 0 0 171 26 197 Director of Planning and Economic Regeneration 137 5 0 0 142 0 142 Corporate Resources 124 5 0 0 129 19 148 Communities & Environment 124 5 0 0 129 19 148 Children, Family & Schools (left 31/08/19) 54 2 0 0 56 8 64 Children, Family & Schools (started 01/09/19) 75 3 0 0 78 11 89 Adults, Health and Customer Services 124 5 0 0 129 19 148 Public Health (left 30/04/2019) 10 0 106 0 116 1 117
Head of Public Health (started 05/08/19) 61 2 0 0 63 9 72 Head of Finance 93 4 0 0 97 14 111
Total 968 36 106 0 1,110 126 1,236
2018/19 Total Remuneration Salary, Fees Expense Compensation excluding & Allowances Allowances for Loss of Benefits Pension Employers' Total Employment in Kind Contributions Pension Remuneration £000 £000 £000 £000 £000 £000 £000 Chief Executive Caroline Lacey 163 5 0 0 168 25 193 Director of Planning and Economic Regeneration 134 5 0 0 139 0 139 Corporate Resources 121 5 0 0 126 19 145 Environment & Neighbourhood Services 121 5 0 0 126 19 145 Children, Family & Schools 126 5 0 1 132 19 151 Adults, Health and Customer Services 121 5 0 0 126 19 145 Public Health 116 0 0 0 116 17 133 Head of Finance 91 4 0 0 95 14 109
Total 993 34 0 1 1,028 132 1,160
The salary, fees and allowance figures are shown before the deduction of contributions made to the Pension Fund. All employees who are members of the Local Government Pension Scheme pay individual contributions deducted from salary.
13. GAINS AND LOSSES ON THE DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT
The net loss on the disposal of property, plant and equipment during the year was £1.217m (2018/19 £29.819m loss). This comprised a £2.832m gain for disposals from Assets Held for Sale (2018/19 £1.407m gain), a ‘loss’ for the transfer of Academy assets from the Council to the individual schools of £3.258m (2018/19 £30.744m loss) and £0.791m loss (2018/19 £0.482m loss) for the disposal of other property, plant and equipment.
East Riding of Yorkshire Council 52 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
14. MOVEMENT OF PROPERTY, PLANT AND EQUIPMENT
a) Movements of property, plant and equipment during the year are shown below. These are the values of assets included in the Balance Sheet.
2019/20 Vehicles, Restated Other plant, Infra- Comm- Council land and furniture and structur unity Surplus Assets under Dwellings buildings equipment assets assets assets construction Total £000 £000 £000 £000 £000 £000 £000 £000 Cost or Valuation 1 April 2019 449,469 769,788 39,314 453,656 355 22,699 43,763 1,779,044 Additions / Enhancement 15,429 20,142 8,051 32,595 0 709 29,580 106,506 Donated / Other Additions 0 0 18 0 00 0 18 Revaluation increases / (decreases) to RR -4,372 7,950 0 0 0 4,424 0 8,002 Revaluation losses to SDPS -14,020 -1,542 0 0 0 -469 0 -16,031 Revaluation loss reversals to SDPS 6,300 3,750 0 0 0 17 0 10,067 Derecognition - Disposals -519 0 -529 0 0 0 0 -1,048 Derecognition - Academy Transfers 0 -3,914 -12 0 0 0 0 -3,926 Derecognition - Other 0 0 -3,298 -66 0 0 0 -3,364 Reclassification (to) / from Held for Sale -3,472 0 0 0 0 -1,526 0 -4,998 Other movements 5,820 -8,094 1 8,639 0 707 -7,073 0 At 31 March 2020 454,635 788,080 43,545 494,824 355 26,561 66,270 1,874,270 Depreciation and Impairment 1 April 2019 8,591 83,877 20,746 103,662 0 0 1,960 218,836 Charge for the year 8,739 17,144 5,344 11,142 0 24 0 42,393 Depreciation written out to the RR -8,631 -6,326 0 0 0 -36 0 -14,993 Depreciation written out to the SDPS 00 0000 00 Impairment losses to RR 0 18 0 0 00 0 18 Impairment losses to SDPS 58 25 0 0 0 0 0 83 Impairment losses reversed to SDPS 00 0000 00 Derecognition - Disposals -4 0 -489 0 0 0 0 -493 Derecognition - Academy Transfers 0 -656 -12 0 0 0 0 -668 Derecognition - Other 0 0 -3,061 -66 0 0 0 -3,127 Reclassification (to) / from Held for Sale 00 0000 00 Other movements -2 -1,100 0 352 0 12 738 0 At 31 March 2020 8,751 92,982 22,528 115,090 0 0 2,698 242,049 Net Book Value At 1 April 2019 440,791 685,911 18,568 349,994 355 22,699 41,803 1,560,208 At 31 March 2020 445,884 695,098 21,017 379,734 355 26,561 63,572 1,632,221
RR = Revaluation Reserve SDPS = Surplus or deficit on the Provision of Services As well as the revaluation loss to SDPS shown in the above table, £0.210m was charged in relation to Assets Held for Sale, giving a total revaluation loss charge of £16.241m.
East Riding of Yorkshire Council 53 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
2018/19 Movement of property, plant and equipment
2018/19 Vehicles, Other plant, Infra- Comm- Council land and furniture structure unity Surplus Assets under Dwellings buildings and equipment assets assets assets construction Total £000 £000 £000 £000 £000 £000 £000 £000 Cost or Valuation 1 April 2018 435,439 774,574 38,221 442,348 349 19,084 6,399 1,716,414 Additions / Enhancement 15,455 25,406 4,541 50,008 73 159 10,226 105,868 Donated / Other Additions 0 5,945 0 0 0 0 0 5,945 Revaluation increases / (decreases) to RR -4,797 7,338 0 0 0 4,355 0 6,896 Revaluation losses to SDPS -13,043 -4,575 0 0 -67 -754 0 -18,439 Revaluation loss reversals to SDPS 13,446 3,394 0 0 0 86 0 16,926 Derecognition - Disposals -137 -1,820 -71 0 0 0 0 -2,028 Derecognition - Academy Transfers 0 -35,409 0 0 0 0 0 -35,409 Derecognition - Other 0 -14 -3,377 -7,329 0 -257 0 -10,977 Reclassification (to) / from Held for Sale -3,546 0 0 0 0 -2,693 0 -6,239 Other movements 6,565 -5,051 0 -31,371 0 2,719 27,138 0 At 31 March 2019 449,382 769,788 39,314 453,656 355 22,699 43,763 1,778,957
Depreciation and Impairment 1 April 2018 8,372 71,351 18,737 100,840 0 0 1,278 200,578 Charge for the year 8,634 17,254 5,362 10,825 0 39 0 42,114 Depreciation written out to the RR -8,363 -4,858 0 0 0 -180 0 -13,401 Depreciation written out to the SDPS 0 0 0 0 0 0 0 0 Impairment losses to RR -48 2,503 0 0 0 0 0 2,455 Impairment losses to SDPS 0 4,279 0 0 0 0 0 4,279 Impairment losses reversed to SDPS 0 0 0 0 0 0 0 0 Derecognition - Disposals -2 -1,790 -40 0 0 0 0 -1,832 Derecognition - Academy Transfers 0 -4,666 0 0 0 0 0 -4,666 Derecognition - Other 0 0 -3,313 -7,321 0 -57 0 -10,691 Reclassification (to) / from Held for Sale 0 0 0 0 0 0 0 0 Other movements -2 -196 0 -682 0 198 682 0
At 31 March 2019 8,591 83,877 20,746 103,662 0 0 1,960 218,836 Net Book Value At 1 April 2018 427,067 703,223 19,484 341,508 349 19,084 5,121 1,515,836
At 31 March 2019 440,791 685,911 18,568 349,994 355 22,699 41,803 1,560,121
RR = Revaluation Reserve SDPS = Surplus or deficit on the Provision of Services As well as the revaluation loss to SDPS shown in the above table, £0.096m was charged in relation to Assets Held for Sale, giving a total revaluation loss charge of £18.535m. Also, as well as the revaluation loss reversals to SDPS shown in the above table, £0.004m was credited in relation to Assets Held for Sale, giving a total revaluation loss reversal of £16.930m.
East Riding of Yorkshire Council 54 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
b) The net property, plant and equipment at 31 March analysed by fund and nature of the asset is shown below.
31 March 2020 Vehicles, Other plant, Infra- Comm- Council land and furniture and structur unity Surplus Assets under Dwellings building equipment assets assets assets construction Total £000 £000 £000 £000 £000 £000 £000 £000 General Fund 0 690,896 20,868 378,117 355 26,395 53,759 1,170,390 HRA 445,884 4,202 149 1,617 0 166 9,813 461,831
Total 445,884 695,098 21,017 379,734 355 26,561 63,572 1,632,221
31 March 2019 Vehicles, Other plant, Infra- Comm- Council land and furniture structure unity Surplus Assets under Dwellings buildings and equipment assets assets assets construction Total £000 £000 £000 £000 £000 £000 £000 £000 General Fund 0 682,057 18,565 348,779 355 22,182 35,002 1,106,940 HRA 440,791 3,854 3 1,215 0 517 6,801 453,181
Total 440,791 685,911 18,568 349,994 355 22,699 41,803 1,560,121
The Council does not have any investment properties as it does not hold property solely to earn rentals or for capital appreciation purposes or both, which the Code, in adapting IAS 40 Investment Property, requires in order to classify land and buildings under this category.
East Riding of Yorkshire Council 55 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
c) Within the movement of property, plant and equipment are buildings, vehicles, plant and equipment recognised under finance leases and Private Finance Initiative school and library assets as follows:
2019/20 Finance Leased Other Vehicles, plant, Restated land and furniture and PFI Owned buildings equipment assets assets Total £000 £000 £000 £000 £000 Cost or Valuation 1 April 2019 389 0 58,608 1,720,047 1,779,044 Additions / Enhancement 0 0 254 106,252 106,506 Donated / Other Additions 0 0 0 18 18 Revaluation increases / (decreases) to RR 0 0 0 8,002 8,002 Revaluation losses to SDPS 0 0 0 -16,031 -16,031 Revaluation losses reversals to SDPS 0 0 0 10,067 10,067 Derecognition - Disposals 0 0 0 -1,048 -1,048 Derecognition - Academy Transfers 0 0 0 -3,926 -3,926 Derecognition - Other 0 0 0 -3,364 -3,364 Reclassification (to) / from Held for Sale 0 0 0 -4,998 -4,998 Other movements 0 0000
At 31 March 2020 389 0 58,862 1,815,019 1,874,270
Depreciation and Impairment 1 April 2019 22 0 6,555 212,259 218,836 Charge for the year 20 0 1,327 41,046 42,393 Depreciation written out to the RR 0 0 0 -14,993 -14,993 Depreciation written out to the SDPS 0 0000 Impairment losses to RR 0 0 0 18 18 Impairment losses to SDPS 0 0 0 83 83 Impairment losses reversed to SDPS 0 0000 Derecognition - Disposals 0 0 0 -493 -493 Derecognition - Academy Transfers 0 0 0 -668 -668 Derecognition - Other 0 0 0 -3,127 -3,127 Reclassification (to) / from Held for Sale 0 0000 Other movements 0 0000
At 31 March 2020 42 0 7,882 234,125 242,049
Net Book Value
At 1 April 2019 367 0 52,053 1,507,788 1,560,208
At 31 March 2020 347 0 50,980 1,580,894 1,632,221
RR = Revaluation Reserve SDPS = Surplus or Deficit on the Provision of Services
East Riding of Yorkshire Council 56 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
2018/19 Finance Leased Other Vehicles, plant, land and furniture PFI Owned buildings and equipment assets assets Total £000 £000 £000 £000 £000 Cost or Valuation 1 April 2018 404 49 58,386 1,657,575 1,716,414 Additions / Enhancement 0 0 222 105,646 105,868 Donated / Other Additions 0 0 0 5,945 5,945 Revaluation increases / (decreases) to RR -15 0 0 6,911 6,896 Revaluation losses to SDPS 0 0 0 -18,439 -18,439 Revaluation losses reversals to SDPS 0 0 0 16,926 16,926 Derecognition - Disposals 0 0 0 -2,028 -2,028 Derecognition - Academy Transfers 0 0 0 -35,409 -35,409 Derecognition - Other 0 -49 0 -10,928 -10,977 Reclassification (to) / from Held for Sale 0 0 0 -6,239 -6,239 Other movements 0 0 0 0 0
At 31 March 2019 389 0 58,608 1,719,960 1,778,957
Depreciation and Impairment 1 April 2018 112 49 5,222 195,195 200,578 Charge for the year 22 0 1,333 40,759 42,114 Depreciation written out to the RR -112 0 0 -13,289 -13,401 Depreciation written out to the SDPS 0 0 0 0 0 Impairment losses to RR 0 0 0 2,455 2,455 Impairment losses to SDPS 0 0 0 4,279 4,279 Impairment losses reversed to SDPS 0 0 0 0 0 Derecognition - Disposals 0 0 0 -1,832 -1,832 Derecognition - Academy Transfers 0 0 0 -4,666 -4,666 Derecognition - Other 0 -49 0 -10,642 -10,691 Reclassification (to) / from Held for Sale 0 0 0 0 0 Other movements 0 0 0 0 0
At 31 March 2019 22 0 6,555 212,259 218,836
Net Book Value
At 1 April 2018 292 0 53,164 1,462,380 1,515,836
At 31 March 2019 367 0 52,053 1,507,701 1,560,121
RR = Revaluation Reserve SDPS = Surplus or Deficit on the Provision of Services
East Riding of Yorkshire Council 57 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
15. DATES AND AMOUNTS OF VALUATIONS OF PROPERTY, PLANT AND EQUIPMENT
2019/20 Vehicles, Other plant, Infra- Comm- Council land and furniture and structure unity Surplus Assets under Dwellings buildings equipment assets assets assets construction Total £000 £000 £000 £000 £000 £000 £000 £000 Year of revaluation: 2019/20 445,884 130,259 0 0 0 26,561 0 602,704 2018/19 0 124,056 0 0 0 0 0 124,056 2017/18 0 216,252 0 0 0 0 0 216,252 2016/17 0 25,844 0 0 0 0 0 25,844 2015/16 0 198,687 0 0 0 0 0 198,687 Valued at historical cost 0 0 21,017 379,734 355 0 63,572 464,678
Total 445,884 695,098 21,017 379,734 355 26,561 63,572 1,632,221
2018/20 Vehicles, Other plant, Infra- Comm- Council land and furniture structure unity Surplus Assets under Dwellings buildings and equipment assets assets assets construction Total £000 £000 £000 £000 £000 £000 £000 £000 Year of revaluation: 2018/19 440,791 120,967 0 0 0 22,699 0 584,457 2017/18 0 214,565 0 0 0 0 0 214,565 2016/17 0 57,602 0 0 0 0 0 57,602 2015/16 0 210,060 0 0 0 0 0 210,060 2014/15 0 82,717 0 0 0 0 0 82,717 Valued at historical cost 0 0 18,568 349,994 355 0 41,803 410,720
Total 440,791 685,911 18,568 349,994 355 22,699 41,803 1,560,121
East Riding of Yorkshire Council 58 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
16. INFORMATION ON ASSETS HELD
Property, plant and equipment held on the Council’s balance sheet includes the following:
Restated 31 March 2019 31 March 2020 Number of Assets Number of Assets Intangible Assets 7 Purchased Software 8 7 Internally Generated 5 Council Dwellings 11,314 Operational 11,285 Other Land and Buildings 4 Adult Education Centres 4 8 Cemeteries 8 16 Children's Centres 16 4 Corporate Offices and Accomodation Buildings 4 7 Customer Service Centres and Citizen Links 6 10 Depots 10 3 Gypsy Sites 3 10 Household Waste Recycling Sites 10 297 HRA - non-dwellings 301 196 Industrial and Commercial Units 191 11 Libraries 11 8 Multi Service Centres 8 5 Museums 5 32 Public Conveniences 31 6 Registrars Offices 6 78 Schools 77 6 School Houses 5 11 Sports and Leisure Centres 10 16 Social Services Establishments 16 64 Surface Car Parks 63 134 Smallholding Leases 137 18 Other Offices 18 104 Other 100 195 Assets Under Construction 170 32 Surplus 72 Vehicles, Plant and Equipment 30 IT Equipment 35 727 Vehicles and Plant 738 Infrastructure Assets 960 Bridges *1051 3,365 Highways (km) 3,365 Community Assets 5 Parks and Open Spaces 4 Heritage Assets 11 Civic Regalia (items) 11 52 Works of Art (items) 52
*The increase is due to a recent exercise undertaken by the Council to verify and record the number of bridges. Also, under the new methodology, the criteria used to record has changed, from bridges that span >1000mm to those which span >900mm.
East Riding of Yorkshire Council 59 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
17. PROPERTY, PLANT AND EQUIPMENT VALUATION
Whilst the impact of the current COVID-19 pandemic has been considered, no adjustments have been made in the Financial Statements to the valuations of Property, Plant and Equipment. Whilst there will almost inevitably be some implications for the UK property values it is impossible to assess at such an early stage. The effect on property values in the UK and this region will depend on how quickly the outbreak can be brought under control and how much the government will intervene to keep the economy and markets moving. At present property transactions are still going through albeit more slowly and there is no evidence of a decline in property values.
a) Intangible Assets Intangible assets comprise software licences and website development costs and are valued at historical cost as a proxy for current value. Software is not a physical asset and it is therefore only recorded when the work has been capitalised and when the cost is material. A de minimis limit of £100,000 has been set to exclude items valued below this level on the grounds of materiality. b) Land and Buildings Land and buildings are valued in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation Professional Standards (the ‘Red Book’) and the Code of Practice on Local Authority Accounting (the ‘Code’). The Council operates a five-year rolling programme for the revaluation of land and buildings and ensures that all of the land and buildings on the balance sheet are valued at least once every five years. To comply with the requirements of the Red Book, a valuation date of 1 April is adopted, but a review is undertaken to ensure that the valuations reported are accurate at the effective date for revaluations of 31 March. Land and buildings are valued at Current Value as defined in the Code. The basis of valuation for Current Value under the Code is Existing Use Value (EUV) for non-specialised operational properties. The Depreciated Replacement Cost (DRC) instant build method is the basis of valuation for specialised operational properties. Internal valuers employed by East Riding of Yorkshire Council are qualified as either members (MRICS) or fellows (FRICS) of the RICS have overseen and approved the valuations of all land and buildings (except HRA dwellings). The Council’s Valuation and Estates Department and its valuers are registered with the RICS Valuation Registration Scheme for the purposes of carrying out Red Book valuations. These valuers are listed below: Employed John Read FRICS Richard Holmes MRICS Neil Archbutt MRICS Chris Mills MRICS Rebecca Valentine MRICS Nina Mitchell MRICS Jenny Myers MRICS EUV is in summary the amount that would be paid for the asset in an arm’s length transaction in its existing use disregarding other potential uses. It is the least cost of replacing the remaining service potential of the asset. DRC is a specified method of establishing the Current Value where there is no market evidence. It is the current cost of replacing an asset with its modern equivalent less deductions for physical deterioration and all relevant forms of obsolescence and optimisation. The Instant Build assumption means that no allowance is made in the valuation for finance costs that would be incurred during the notional course of construction of the replacement modern equivalent property. Following valuation by the Council’s valuers, assets are assessed under the Council’s componentisation policy. A £10,000 de minimis level is adopted for land and buildings, on the grounds of materiality. c) HRA Dwellings, Land and Buildings Council dwelling stock valuations were undertaken in accordance with Government guidance by the Valuation Office, which is an executive agency of HM Revenue and Customs, specialising in property valuation. The beacon principle has been used to value the HRA council housing stock. A sample property, ‘the beacon’, is selected from a group of properties that are of similar design, age, type or construction, and a detailed valuation carried out. This valuation is then applied to all properties in that group with appropriate adjustments. The basis of valuation is existing use value for social housing (EUV–SH). EUV-SH uses the vacant possession value of the dwellings as a starting point, on the assumption that each property is to be used as residential accommodation that will be occupied by a secure tenant. This is then amended by a regional adjustment factor to reflect the fact that sitting tenants enjoy lower than open market rents and rights including Right to Buy.
East Riding of Yorkshire Council 60 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
HRA non-dwelling properties use the EUV basis of valuation for non-specialised operational properties and the DRC instant build method for specialised operational properties. A £10,000 de minimis level is adopted for HRA Dwellings, Land and Buildings, on the grounds of materiality. d) Vehicles, Plant, Furniture and Equipment The vehicles, plant, furniture and equipment recognised were either purchased outright and are all valued at historical cost as a proxy for current value, or leased in as finance leases under sale and leaseback arrangements and included at the present value of the minimum lease payments. A de minimis limit of £10,000 for vehicles, plant, furniture and equipment has been set to exclude items valued at below this level on the grounds of materiality, unless they are purchased via prudential borrowing. If assets are financed through prudential borrowing, they are added to the asset register at cost, even if below the de minimis. e) Infrastructure Infrastructure assets include roads and bridges. Outstanding debt was initially used as a proxy to establish the historical cost of assets brought forward from the former authorities at 1 April 1996 however, since then, any new assets or improvements are recognised at historical cost. f) Community Assets Community assets include parks and open spaces and are valued on a historical cost basis. Community assets are intended to be held in perpetuity and have no determinable useful life. As such, no depreciation has been applied except to buildings in parks and open spaces, which are depreciated over their estimated useful economic life and classified as operational buildings. A £10,000 de minimis level is adopted for Community Assets, on the grounds of materiality. g) Surplus Assets Surplus assets are not used for direct service provision but do not yet meet the strict criteria to be classified as assets held for sale. They are valued at fair value, based on the price that would be received to sell an asset in its highest and best use in an orderly transaction between market participants at the measurement date. A £10,000 de minimis level is adopted for surplus assets, on the grounds of materiality. h) Assets under Construction Assets under construction are valued at accumulated historical cost. Depreciation is charged over the asset’s estimated useful economic life from the point at which the asset is reclassified as operational and brought into use. i) Depreciation and amortisation Depreciation or amortisation (intangible assets), where charged, is always on a straight-line basis against gross book value, except for assets held at current value which are depreciated against carrying value, less any estimated residual value, over the asset’s estimated useful economic life. Depreciation is charged on an asset from the point it is brought into use until the point of derecognition or it becomes an asset held for sale. Intangible assets are amortised in the same way. Land is considered to have an infinite life and is therefore not depreciated. The useful economic lives for the different asset categories are: HRA dwellings, land and other buildings 10 – 50 years Other land and buildings 1 – 100 years Intangible assets 5 – 18 years Vehicles, plant, furniture and equipment 2 – 30 years Infrastructure assets 1 – 120 years Surplus assets 10 – 50 years Due to componentisation of some assets the useful lives have been revised. When asset lives are revised, the carrying value of the asset at that point is depreciated over the remaining useful life. If an asset is retained beyond its original useful economic life, its current value and expected remaining useful economic life are reassessed. The results are reflected with appropriate amendments to the non current asset accounting records and respective depreciation calculations. j) Asset Values A review has been carried out by the Council’s Valuation & Estates department across all categories of the Council’s property assets. This is to ascertain whether there were any material differences in asset values at 31 March 2020 from those stated on the Balance Sheet, due to general economic/market factors or specific
East Riding of Yorkshire Council 61 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
impairment. During March 2020 the COVID-19 pandemic took hold of this country which has had far reaching consequences for the economy. The implications for property values of the unprecedented event are considered elsewhere. The assets have been reviewed using a wide range of information including independent research carried out by local and national property agents. It has also been the experience of the Council’s professional staff over the last 12 months, despite the vote to leave the European Union, that the markets for the property types which the Council holds have generally remained stable with no significant or abnormal movements in value. In respect of council dwellings, it is the opinion of the Valuation Office that general market conditions have, looking at the portfolio as a whole, been broadly stable over the last year. In summary, the Valuation & Estates department considers that, in general, having regard to the nature of many of the Council’s property assets and the general lack of market volatility in this largely rural area, it is considered that there have been no material changes in the valuation of the Council’s property assets from the current carrying values on the Balance Sheet.
18. FAIR VALUE OF SURPLUS ASSETS
IFRS 13 Fair Value Measurement requires surplus assets to be valued at their “highest and best use from a market participant’s perspective”. a) Details of the Council's surplus assets and information about the fair value hierarchy are as follows:
2019/20 Significant Other significant unobservable observable inputs Fair Value as at (Level 2) (Level 3) 31 March 2020 Recurring fair value measurements £000 £000 £000
Redevelopment Properties 25,742 0 25,742 Other Property 514 0 514 Bridlington Regeneration Properties 305 0 305
26,561 0 26,561
2018/19 Significant Other significant unobservable observable inputs inputs Fair Value as at (Level 2) (Level 3) 31 March 2019 Recurring fair value measurements using: £000 £000 £000
Redevelopment Properties 21,821 0 21,821 Other Property 527 0 527 Bridlington Regeneration Properties 351 0 351
22,699 0 22,699 b) Transfers between levels of the Fair Value Hierarchy There have been no transfers between levels during the year. c) Valuation Techniques used to determine Level 2 The fair values have primarily been arrived at by using the Comparative Valuation Method. This is the most common valuation method and involves using evidence from the sale and marketing of appropriate comparable properties to estimate the amount for which the asset should exchange on the valuation between a willing buyer and willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. Significant Observable Inputs – Level 2
East Riding of Yorkshire Council 62 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
The principal observable inputs are market information on current and recent sales and marketing of comparable properties in the local area. This market information is derived from reliable sources including Land Registry records and sales, or agreed terms for the disposal of Council properties. These observable inputs are adjusted as appropriate, for example to take account of the different physical size of the comparable in relation to the subject property. d) Highest and Best Use In estimating the fair value of the Council’s surplus assets, the highest and best use of the assets is: Redevelopment Properties - the highest and best use is considered to be for redevelopment in a form that would be in accordance with planning policy. Typically, this is for residential or industrial development. Other Property & Other Land - the highest and best use of these properties is considered to be for continued use in their existing purpose. Bridlington Regeneration Properties - the highest and best use for these properties at the valuation date is considered to be for continued use as mixed retail and residential premises. e) Valuation Techniques There has been no change in the valuation techniques used during the year for surplus assets. f) Valuation Process for Surplus Assets The fair value of the Council’s surplus assets is measured annually at each reporting date. All valuations are carried out internally according with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. The Council’s valuation experts work closely with finance officers reporting directly to the chief financial officer.
19. ASSETS RECOGNISED UNDER PFI AND SIMILAR ARRANGEMENTS
Bridlington Schools and Library PFI On 20 December 2000, a contract was signed with Bridlington Schools Services Limited (BSSL) for the building and refurbishment of six schools and a community library in Bridlington, and payments under this contract commenced on 29 April 2003, after the building works were complete. The scheme is accounted for in a manner that is consistent with the adaptation of IFRIC 12 Service Concession Arrangements contained in the Government’s Financial Reporting Manual (FReM). In accordance with IFRIC 12, the schools and the library are included on the Council’s Balance Sheet and a corresponding liability recognised for the requirement to pay BSSL for the construction and enhancement work they undertook. An amount equal to this is included in the Minimum Revenue Provision in the Movement in Reserves Statement to recognise the annual repayment in the General Fund. The schools and library are depreciated and revalued in the same way as all other assets on the Council’s Balance Sheet. The payment for the facilities management services that BSSL provides, e.g. cleaning, grounds maintenance and caretaking, are included in the Children, Family and Schools (Schools Budget) line of the Comprehensive Income and Expenditure Statement Cost of Services, but the interest element of the contract payment is recognised in Financing and Investment Income and Expenditure. At 5 yearly intervals, the facilities management services are benchmarked or market tested to ensure value for money is being achieved. The results of value testing exercises can result in an increase or decrease in the cost of the service(s) to the Council. The next value testing exercise is due in 2023/24. Utility payments are adjusted each year for indexation, and consumption reviewed against notional volumes, which may be adjusted if consumption changes by more than plus or minus 5% and depending on the cause of the change in volume following review. The Council has opted to include energy supplies to the PFI schools in its corporate contract. This arrangement is considered more likely to result in competitive energy prices through the aggregation of demand. The PFI contract is an agreement to receive services, where the responsibility for making available the property, plant and equipment assets needed to provide the services passes to the PFI contractor. The nature and standard of the services provided are set out in the contract output specifications. The payment mechanism incentivises the PFI contractor to perform these services and to ensure that the facilities are available for use. The Project Agreement sets out the rights of the Council, the governing bodies, school staff, libraries staff, registered pupils and visitors to use the project facilities. A “Core Time Specification” is included in the Agreement setting out the Council’s user requirements. Third party use of the schools and the library is encouraged but educational and community use is given priority in terms of access to facilities.
East Riding of Yorkshire Council 63 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
At the end of the concession period, the Council has the option to receive the assets at nil value. The Council is also able to consider a number of other renewal and termination options on expiry or otherwise as set out in the Project Agreement. There are provisions within the contract to ensure that BSSL maintains the assets in accordance with their obligations. This includes an independent final survey before the expiry date of the concession. The Lifecycle Programme is intended to ensure that the buildings and their components are maintained and replaced in order that the schools and the library meet the criteria at all times as set out in the contract output specifications. The PFI contractor is entitled to receive income derived from “third-party” use of the project facilities outside of core time up to an index linked amount set out in the Project Agreement. Any third party income generated above this amount is shared equally between the PFI contractor and the Council. In 2014/15 Quay Primary, one of the schools covered by the PFI agreement, converted to an academy. The Council continues to manage the PFI agreement on behalf of the academy and therefore the liability still remains with the Council. The receipts from Quay Primary during 2019/20 have been set against the revenue service charges relating to the agreement. An analysis of the movement in the values of assets recognised under the PFI scheme is included in Note 14c. An analysis of the movement in the value of the liability for the scheme is shown below.
2018/19 2019/20 £000 £000
13,547 Opening liability 1 April 12,679 -868 Principal Repaid -934 12,679 Closing Liability 31 March 11,745
At the Balance Sheet date, the amount of payments (at Balance Sheet date prices) due to be made under the PFI and scheme, separated into repayment of liability, interest and service charges, is as follows.
31 March 2019 31 March 2020 £000 £000 Principal Repayable: 934 Within one year 782 4,780 In two to five years 5,647 6,964 In six to ten years 5,316 0 In eleven to fifteen years 0 12,678 11,745 Interest Repayable: 1,210 Within one year 1,125 3,834 In two to five years 3,324 1,444 In six to ten years 830 0 In eleven to fifteen years 0 6,488 5,279 Service Charges Payable: 3,354 Within one year 3,636 13,383 In two to five years 13,544 13,941 In six to ten years 11,007 0 In eleven to fifteen years 0 30,678 28,187 Total Amount payable: 5,498 Within one year 5,543 21,997 In two to five years 22,515 22,349 In six to ten years 17,153 0 In eleven to fifteen years 0 49,844 45,211
East Riding of Yorkshire Council 64 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
The principal liability payable within one year of £0.782m for the PFI contract is classified as a short term liability in the Balance Sheet and is not included in the Deferred Liabilities disclosure Note 25 as this shows long term
liabilities only.
East Riding of Yorkshire Council 65 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
20. CAPITAL EXPENDITURE AND FINANCING
The following table illustrates capital expenditure analysed by asset type. All such expenditure is funded firstly through the utilisation of external resources (e.g. grants and contributions) and, where these are insufficient, by internal resources such as revenue and usable capital receipts.
2018/19 2019/20 £000 Note £000 471,926 Opening Capital Financing Requirement 476,488 Capital Investment 105,970 Property, Plant and Equipment 14a 106,506 1,047 Intangible Assets 813 8,236 REFCUS 7,114 Sources of Finance -966 Capital Receipts 31 -11,417 -63,474 Government Grants and Other Contributions 36 -57,041 Sums set aside from revenue: -11,560 Direct Revenue Contributions 36 -11,215 -22,626 Earmarked Reserves 36 -20,816 -12,065 Minimum Revenue Provision (MRP) 36 -12,475 476,488 Closing Capital Financing Requirement 477,957
4,562 Movement in Capital Financing Requirement 1,469 Explanation of Movements in Year -4,922 Increase / Decrease (-) in Supported Borrowing -4,900 9,484 Increase in Unsupported Borrowing 6,370
4,562 increase in Capital Financing Requirement 1,470
21. CAPITAL COMMITMENTS
The Council has entered into a number of contracts for the construction or enhancement of Property, Plant and Equipment in 2019/20 and future years. The values below represent the remaining value of the contracts that were signed in 2019/20 that will be discharged in 2020/21. The major commitments are:
£000 South Withernsea Tidal Defence Scheme 6,107 Broadband Delivery Phase 3 4,779 Jocks Lodge Improvement Scheme 2,679 S106 St Johns Fold, Beverley 1,190 Hagg Bridge Stage 2 910 Pocklington Flood Alleviation Scheme 697 Anlaby & East Ella Flood Alleviation Scheme 647
East Riding of Yorkshire Council 66 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
22. SHORT-TERM DEBTORS
The debtors have been disclosed by type of debt.
31 March 2019 31 March 2020 £000 £000 £000 Collection Fund 8,813 Council Tax 9,325 -3,228 Impairment allowance for Council Tax -3,102 1,436 Business Rates 1,363 -857 Impairment allowance for Business Rates -930 6,656 Other Debtors 20,925 Sundry debtors 23,906 12,742 Grant applied in advance 10,629 4,919 Payment in advance 5,750 11,847 Year-end accruals 7,753 5,689 HM Revenue and Customs 5,638 3,745 Housing benefits 3,317 -493 Impairment allowance for housing benefits -508 2,366 Housing rents 2,776 -1,819 Impairment allowance for housing rents -2,178 320 Car loans 383 -2,879 Impairment of other loans & receivables -2,731 54,735
63,526 61,391
East Riding of Yorkshire Council 67 Statement of Accounts 2019/20
NOTES TO THE BALANCE SHEET
23. SHORT-TERM INVESTMENTS
31 March 2019 31 March 2020 £000 £000 5,039 Certificates of deposit greater than 3 months 20,097 99,499 Fixed maturity greater than 3 months 138,709
104,538 158,806
24. SHORT-TERM CREDITORS & GRANT RECEIPTS IN ADVANCE
The creditors have been disclosed by the different types of amounts the Council owes.
31 March 2019 Note 31 March 2020 £000 £000 £000
44,937 Year-end accruals 47,085 12,466 Sundry creditors 10,631 6,043 Collection Fund 19,749 4,589 HM Revenue & Customs 4,688 4,130 Cash received in advance 3,910 946 Finance lease and PFI liabilities 794 86,857 Revenue Grants Receipts in Advance: 14,482 Other Grants Received in Advance 26 14,279 7,678 Earmarked Developer Contributions 26 10,068 24,347 95,271 111,204
20,275 Capital Grant Receipts in Advance 26 10,101 115,546 Total Creditors 121,305
25. DEFERRED LIABILITIES
Deferred liabilities relate to the finance lease elements of the PFI arrangements (Note 20), finance leased Property, Plant and Equipment, and CPO monies held.
31 March 2019 31 March 2020 £000 £000
11,745 PFI service concession arrangement 10,963 284 CPO monies held 624 74 Finance lease outstanding obligation 69
12,103 11,656
East Riding of Yorkshire Council 68 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
26. GRANT AND CONTRIBUTION RECEIPTS IN ADVANCE
The Council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies to be returned to the provider if not utilised for the specific purpose. The balances at the year-end are included in the Balance Sheet as follows.
2018/19 Note 2019/20 Restated £000 £000 Current Liabilities Capital Grants 5,570 Schools Capital Grants 1,543 0 Challenge Drainage 1,785 3,984 Coast Protection Grant 1,302 8,786 LTP Settlement 2,592 1,935 Other Grants & Contributions Unapplied 2,879 20,275 24 10,101 Revenue Grants 390 Regional Growth Fund 82 7,678 Developer Contributions (including S106) 10,068 1,856 Community Housing Fund 1,788 3,006 BT Open Reach 3,329 0 Spring Board Young Persons Praogramme 11 11 Department of Work and Pensions Benefits Grant 10 931 Schools Capital Grants (REFCUS) 1,119 328 Coast Protection Grant 155 7,960 Other Grants & Contributions Unapplied 7,785 22,160 24 24,347 Long Term Liabilities Capital Grants 115 Other Developers Contributions 116 115 116 Revenue Grants 1,795 Other Developers Contributions 1,966 1,795 1,966
44,345 36,530
27. PENSION ASSETS AND LIABILITIES
a) Scheme Details As part of the terms and conditions of employment of its officers and other employees, the Council offers retirement benefits. Although these will not actually be payable until employees retire, the Council has a commitment to make the payments, and this needs to be disclosed at the time that employees earn their future entitlement. The Council participates in three pension schemes: The Local Government Pension Scheme (LGPS) - this is a funded defined benefits scheme, meaning that the Council and its employees pay contributions into a fund, calculated at a level estimated to balance the pensions liabilities with investment assets. East Riding of Yorkshire Council is an employer in the East Riding Pension Fund which the Council administers on behalf of 259 employers and 58 Community Admission Bodies.
East Riding of Yorkshire Council 69 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
The Teachers’ Pension Scheme – this is an unfunded defined benefits scheme, meaning that there are no investment assets built up to meet the pension liabilities, and cash has to be generated to meet actual pension payments as they eventually fall due. This Scheme is administered by Teachers’ Pensions (under contract to Capita Business Services Ltd) on behalf of the Department for Education and provides teachers with specified benefits upon their retirement. The scheme is not the direct responsibility of the Council although it contributes together with teachers towards the costs by making contributions based on a percentage of members’ pensionable salaries. The arrangements for the teachers’ scheme mean that liabilities for these benefits cannot be identified to the Council. The scheme is therefore accounted for as if it were a defined contribution scheme – no liability for future payments of benefits is recognised in the Balance Sheet and the Children’s and Education service revenue account is charged with the employer’s contributions payable to Teachers’ Pensions in the year. The Council has granted discretionary additional pensions to some of its former teachers for which it is directly responsible and, under the IAS 19 guidelines, these discretionary pensions are required to be treated as a defined benefit scheme. The NHS Pension Scheme (NHSPS) – from the 1 April 2013, NHS staff transferred to the Council as part of the transfer of responsibilities for delivering Public Health. The NHSPS is a defined public service pension scheme, which operates on a pay as you go basis. The NHSPS is administered by the NHS Business Service Council. The scheme is not the responsibility of the Council although it contributes together with public health staff towards the cost of making contributions based on a percentage of members’ pensionable salaries. The award of discretionary post-retirement benefits is an unfunded defined benefit arrangement under which liabilities are recognised when awards are made. No investment assets are built up to meet these pension liabilities and cash is generated to meet the actual pension payments as they are due. b) IAS 19 Disclosure Post employment benefits are accounted for in accordance with International Accounting Standard 19 (IAS 19). The actuary – Hymans Robertson LLP – carried out an actuarial valuation of the East Riding Pension Fund as at 31 March 2016, and this was reported to the East Riding – Pension Fund in a report dated March 2017. The valuation is made on a number of assumptions which fall in to two main categories: Demographic assumptions – try to forecast when benefits will become payable and what form they will take, e.g. when members will retire (at their normal retirement age or earlier), how long they will live and whether a dependants pension will be paid. Financial assumptions – try to anticipate the size of the benefits. For example, how large members’ final salaries will be at retirement and how their pensions will increase over time. In addition, the financial assumptions also help us to estimate how much all these benefits will cost the Fund in today’s money by making an assumption about the return on the Fund’s investments in the future. More details on the results of the Pension Fund valuation are shown in Pension Fund section of these accounts. The Council is the administering authority for the East Riding Pension Fund, whose members are listed in the Pension Fund Section of these accounts. The following notes relate solely to the East Riding of Yorkshire Council’s share of the East Riding Pension Fund. IAS 19 (Employee Benefits) is based on a simple principle – that an organisation should account for employment and post-employment benefits when employees earn them and the council is committed to providing them, even if the actual provision might be many years in the future. The IAS19 principles give a better reflection of the economic reality of the relationship between an employer and their employees (and with pension funds) than might be appreciated from cash flows. The following notes provide more information on the post – employment benefits of the Council. Eight schools which converted to academies were transferred out of the scheme during 2019/20 (Our Lady & St Peter RC School, St John of Beverley RC Primary School, St Mary & St Joseph RC Primary School, St Mary’s Market Weighton RC Primary School, All Saints CE infant School, All Saints CE Junior School, North Cave CE Primary School, Keyingham Primary School). Transactions Relating to Post-employment Benefits The cost of retirement benefits is reported in the cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. The charge the Council makes against council tax is based on the cash payable in the year, so the real cost of post employment/retirement benefits, as determined by the actuary, is reversed out of the General Fund and HRA via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year. East Riding of Yorkshire Council 70 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
Transactions within the Comprehensive Income and Expenditure Statement
2018/19 2019/20 £000 £000 58,876 Current service cost 71,541 2,717 Past service cost (including curtailments) 379 -1,706 (Gain)/loss from settlements -2,219 59,887 Total Service Cost 69,701
Financing and Investment Income and Expenditure -31,073 Interest income on plan assets -28,956 40,524 Interest cost on defined benefit obligation 40,844 9,451 Net interest on the net defined benefit liability (asset) 11,888 Total Post-employment Benefits charged to the Surplus or Deficit 69,338 on the Provision of Services 81,589
Remeasurement of the net defined benefit liability comprising -47,641 87,930 Return on plan assets (excluding the amount included in net interest expense)
0 Actuarial (gains)/losses arising from changes in -70,700 demographic assumptions 127,626 Actuarial (gains)/losses arising from changes in -125,167 financial assumptions 190 Other (if applicable) -52,930 80,175 Total remeasurements recognised in Other Comprehensive Income -160,867 Total Post-Employment Benefits charged to the Comprehensive Income and 149,513 Expenditure Statement -79,278 Movement in Reserves Statement -69,338 Reversal of net charges made to the Surplus or Deficit on the Provision of -81,589 Services for post employment benefits 30,520 Employers' Contributions Payable to the Scheme 32,268
Current service cost has increased in line with the actuaries forecast due to a decline in market conditions. This amount differs from what the Council is paying in cash contributions which is based on certified rates from the last formal valuation. In 2017-18, the Council prepaid three years of employer contributions for non- school based staff, as agreed with the actuary, with the intention that the Council will receive a discount to recognise that the Pension Fund has received an up-front payment of £58.612m. The overall discount received over the three year period was £3.823m. The employers’ contributions shown above recognise one year of all employer contributions, whilst the table below (scheme assets) shows the contributions relating to those employees which were not part of the prepayment. The remeasurement of the net defined liability reflects the change in market conditions since 31 March 2019. As at the end of March 2020, the net discount rate is 2.3%, a small decrease of 0.1% compared to the previous year. This has led to a slight decrease in the value placed on liabilities. Pension Assets and Liabilities Recognised in the Balance Sheet The amount included in the Balance Sheet arising from the Council’s obligation in respect of its defined benefit plans is as follows:
31 March 2019 31 March 2020 £000 £000 1,218,003 Fair value of plan assets (LGPS) 1,134,170 -1,651,471 Present value of defined benefit obligation (LGPS) -1,477,815 -31,534 Present value of unfunded liabilities (LGPS & Teachers) -28,621
-465,002 Net Pension Liability -372,266
East Riding of Yorkshire Council 71 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
The Council’s Balance Sheet includes a pension liability of £372.266m at 31 March 2020 (£465.002m 31 March 2019) and pension reserve of £372.266m as at 31 March 2020 (£483.812m at 31 March 2019). The pension liability reflects the fair value of future pension liabilities that have been incurred less the assets that have already been set aside to fund them. This liability has decreased by £92.736m since last year. This is principally due to the fact that the plan obligation has reduced by £176.569m and plan assets have also decreased by £83.833m. The net pension liability takes into account the McCloud ruling regarding age discrimination arising from public sector pension scheme transition arrangements. The net pension liability decreases the overall level of reserves, however this does not represent an increase in cash reserves and does not impact on Council Tax levels. Whilst the pension liability suggests a shortfall between the forecast cost of future pensions and the current level of assets built up in the Pension Fund, these figures are a snapshot at a point in time and the Pension Fund assets are subject to fluctuations in value depending on the current state of the stock market. Therefore, this information needs to be considered with the long-term view provided by the triennial actuarial valuation. c) Reconciliation of the Movements in the Fair Value of the Scheme Reconciliation of present value of the scheme assets (defined benefit obligation):
2018/19 2019/20 £000 £000
1,164,835 Opening fair value of scheme assets as at 1 April 1,218,003 31,073 Interest income 28,956 Remeasurement gain/(loss): 47,641 The return on plan assets (excluding the amount -87,930 included in net interest expense) Other (if applicable) 10,186 Contributions from employer 12,725 9,074 Contributions from employees 9,637 -39,717 Benefits paid -43,516 -4,861 Effect of Settlements -3,883 -228 Other (if applicable) 178 1,218,003 Balance as at 31 March 1,134,170
Reconciliation of present value of the scheme liabilities (defined benefit obligation):
2018/19 2019/20 £000 £000
1,490,510 Opening fair value of scheme liabilities as at 1 April 1,683,005 58,876 Current Service Cost 71,541 40,524 Interest Cost 40,844 9,074 Contributions from scheme participants 9,637 Remeasurement gain/(loss): 0 Actuarial (gains)/losses arising from changes in -70,700 demographic assumptions 127,626 Actuarial (gains)/losses arising from changes in -125,167 financial assumptions -38 Other (if applicable) -53,485 2,717 Past Service Cost 379 -39,717 Benefits paid -43,516 -6,567 Effect of settlements -6,102
1,683,005 Balance as at 31 March 1,506,436
East Riding of Yorkshire Council 72 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET d) Local Government Pension Scheme assets The Authorities’ assets consist of the following categories, further analysed by those that have a quoted market price in an active market and those that do not. The assets detailed below are at bid value as required under IAS19. As shown, 73.21% of the assets are quoted in an active market and 26.79% are in unquoted markets. By definition, the investments in unquoted markets are not publicly quoted and the valuation depends on estimation techniques and non-marketable observable inputs. Therefore there is a higher risk that the valuations for £303.898m –26.79% (unquoted markets) are either over or under stated. This is mitigated by the level of assets in unquoted markets and the expertise of the actuary appointed to undertake the valuation.
31 March 2019 Asset Type Quoted in an Unquoted 31 March 2020 £000 Active market £000
Equity Securities 27,017.3 Consumer 0.0 0.0 0.0 26,244.5 Manufacturing 0.0 0.0 0.0 5,630.0 Energy & Utilities 0.0 0.0 0.0 18,192.6 Financial Institutions 0.0 0.0 0.0 11,057.5 Health & Care 0.0 0.0 0.0 12,025.0 Information Technology 0.0 0.0 0.0 612 Other 98,582.1 0.0 98,582.1 100,778.9 98,582.1 0.0 98,582.1 Debt Securities 16,108.1 Corporate Bonds (Investment Grade) 0.0 0.0 0.0 75,892.8 Corporate Bonds (Non -Investment Grade) 11,868.0 65,983.7 77,851.7 53,424.1 UK Government 50,364.4 0.0 50,364.4 32,965.8 Other 21,477.7 0.0 21,477.7 178,390.8 83,710.1 65,983.7 149,693.8 Private Equity 61,826.3 All 15,824.9 44,387.9 60,212.8 Real Estate 143,709.5 UK Property 43,848.1 107,085.1 150,933.2 Investment Funds and Unit Trusts 570,763.9 Equities 483,836.1 0.0 483,836.1 Bonds 26,167.7 26,167.7 59,034.3 Infrastructure 16,200.2 50,967.5 67,167.7 55,343.1 Other 8,452.0 35,473.9 43,925.9 685,141.3 534,656.0 86,441.4 621,097.4
48,156.1 Cash and Cash Equivalents 53,650.7 0.0 53,650.7 1,218,002.9 830,271.9 303,898.1 1,134,170.0
The Council does not have any financial instruments held as scheme assets nor does it occupy or use any of the property assets included above. e) Basis for Estimating Assets and Liabilities Assets The administering authority does not account for each employer’s assets separately. Instead, the Fund’s actuary is required to apportion the assets of the whole Fund between the employers, at each triennial valuation. This apportionment uses the income and expenditure figures provided for certain cash flows for each employer. This process adjusts for transfers of liabilities between employers participating in the Fund, but does make a number of simplifying assumptions. The split is calculated using an actuarial technique known as “analysis of surplus”. The methodology adopted means that there will inevitably be some difference between the asset shares calculated for individual employers and those that would have resulted had they participated in their own ring-fenced section of the Fund. East Riding of Yorkshire Council 73 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
The administering authority recognises the limitations in the process, but it considers that the Fund actuary’s approach addresses the risks of employer cross-subsidisation to an acceptable degree. Liabilities IAS19 states that the discount rate used to place a value on the liabilities should be ‘determined by reference to market yields on high quality corporate bonds at the reporting date’. In addition, ‘the currency and term of the high quality corporate bonds used to set the discount rate shall be consistent with the currency and terms of the liabilities’. The approach to setting the recommended discount rate as at 31 March 2020 follows the same principles to those adopted at 31 March 2019. At 31 March 2017, the “Hymans Robertson” corporate bond yield curve was constructed based on the constituents of the iBoxx AA corporate bond index. To improve accuracy, the actuary has determined that a separate discount rate should be calculated for individual employers, dependent on their own weighted average duration. This Council has been classified as having a weighted average duration between 17 and 23 years which is in the ‘medium’ discount rate category. The main demographic assumption to which the valuation results are most sensitive is that relating to the longevity of the Fund’s members. As a member of Club Vita, the baseline longevity assumptions that have been adopted are a bespoke set of Vitacureves specifically tailored to fit the membership profile of the Fund. The actuary has used the same demographic assumptions as used for the 2019 actuarial valuation. The changes to the longevity assumptions used have resulted in a modest reduction in life expectancies. Other demographic assumptions include assumptions for ill health retirements, family details, and commutation of pension. The change in demographic assumptions has reduced the liabilities by £70.7m The recommended retail price index (RPI) inflation assumption is based on the use of a market implied inflation curve over a range of maturities. The pension increase assumption is set in line with the actuaries default consumer price index (CPI) assumption. As a market in CPI linked bonds does not exist, the actuary estimates the long term gap between the RPI and CPI in order to derive a CPI assumption for accounting purposes. Our default assumed RPI-CPI gap will be 0.9% p.a. (1.0% in 2019). The salary increase assumption at the 2019 valuation has been set to RPI less 0.1% p.a. This has changed from the previous valuation which assumed RPI less 0.8%. This reflects both short term pay constraints and the belief that general economic growth and hence pay growth may be at a lower level than historically experienced for a prolonged period of time. This assumption is made in respect of general level of salary increases (as a result of inflation and other macroeconomic factors). There is a separate allowance for expected pay rises granted in the future as a result of promotion.
31 March 2019 31 March 2020 % p.a % p.a
Mortality Assumptions: Longevity at 65 for current pensioners: 21.7 years Men 20.9 years 24.2 years Women 23.3 years Longevity at 65 for future pensioners: 23.7 years Men 21.8 years 26.4 years Women 24.8 years 2.5 Pensions increase rate (CPI) 1.9 2.7 Rate of increase in salaries 2.8 2.4 Rate for discounting scheme liabilities 2.3 Take-up of option to convert annual pension into lump sum 60.0% Pre April 2008 service 60.0% 80.0% Post April 2008 service 80.0%
East Riding of Yorkshire Council 74 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
The estimation of the defined benefit obligations are sensitive to the actuarial assumptions as set out in the table above. The actuary has determined sensitivity analyses as detailed below:
Approximate Approximate % increase to monetary Employer Liability amount % £000 0.5% decrease in Real Discount Rate 10 147,558 1 year increase in member life expectancy 3-5% 0 0.5% increase in the Salary Increase Rate 1 15,240 0.5% increase in the Pension Increase Rate 9 130,945
ThePage costs 007 of a pension arrangement require estimates regarding future experience. The assumptions used are largely prescribed at any point and reflect market conditions at the reporting date. Changes in market conditions that result in changes in the net discount rate can have a significant effect on the value of the liabilities reported. A reduction in the net discount rate will increase the assessed value of liabilities as a higher value is placed on benefits paid in the future. A rise in the net discount rate will have an opposite effect of similar magnitude. The longevity assumptions (member life expectancy) are in line with the Club Vita analysis which was used by the actuary at the formal funding valuation as at 31 March 2019. For sensitivity purposes, the actuary has estimated that a one year increase in life expectancy would approximately increase the Employer’s Defined Benefit Obligation by around 3-5%. In practice, the actual cost of a one year increase in life expectancy will depend on the structure of the revised assumption (i.e. if improvements to survival rates predominantly apply at younger or older ages). The salary increase assumption has been set to consistent with the most recent formal valuation which has assumed the long term pay assumption of RPI -0.8%. The sensitivity analysis shows the impact of an additional salary increase of 0.5% which would increase the employer liability by 1%. Pension increase assumptions are based on CPI which is calculating as RPI less 0.9% p.a. An additional 0.5% increase in the pension rate would increase the employer liability by 9%. The approach taken in preparing the sensitivity analysis shown is consistent with that adopted in the previous year. Asset and Liability Matching Strategy The Fund does not have a formal Asset and Liability Matching Strategy, but it does select investments that are expected to meet the payment of liabilities over the long term and this is set out in its Investment Strategy. The Fund’s primary long term risk is that the Fund’s assets do not meet its liabilities, i.e. the benefits payable to its members. Therefore, the aim of the Fund’s investment management is to achieve the long term expected rate of return with an acceptable level of risk. The Fund achieves this through setting the strategic asset allocation on a triennial basis, following the latest actuarial valuation, which is expected to achieve the target rate of return over the long term. The Fund’s appetite for risk will vary depending on market conditions and the types of investments available to it but will be commensurate with meeting the long term target investment rate of return. The Fund has a dedicated strategic risk register which identifies the key risks inherent in the Pension Fund, an estimate of the severity of each risk, and the risk controls that are in place to mitigate these risks. The risk register is reviewed by the Pensions Committee on a semi-annual basis. In addition, a risk management schedule is reviewed by the Pensions Committee on a quarterly basis which considers issues such as performance, regulation and compliance, and personnel. The Pension Fund section of the accounts provides further details on the how risk is managed and the investments in place. Impact on the Council’s Cash flows One of the main objectives of the scheme is to maintain a relatively stable employer contribution rate. The Council’s contribution rate is determined by the actuary and is currently set at 15.3% of pensionable pay as a result of the 31 March 2019 valuation. The rate was 15.3% in the previous valuation and will remain at 15.3% until 31 March 2023. Past service deficit lump sums from 1 April 2020 will be £4.179m annually until 31 March 2023. In 2020-21 the Council will prepay three years of employer contributions for non- school based staff, as agreed with the actuary, with the intention that the Council will receive a discount to recognise that the Pension Fund has received an up-front payment. Staff that are based in schools but are part of the LGPS have a East Riding of Yorkshire Council 75 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
different rate of 19.3% as per the 31 March 2019 valuation from 1 April 2020 to 31 March 2023 and the rate includes a contribution to the past service deficit. The latest triennial valuation was completed as at 31 March 2019 with the next one due in March 2022. The scheme will take account of the national changes to the scheme under the Public Pensions Act 2013. Under the Act, the Local Government Pension Scheme in England and Wales and the other main existing public service schemes may not provide benefits in relation to service after 31 March 2014 (or service after 31 March 2015 for other existing public service pension schemes in England and Wales). The Act provides the scheme regulations to be made within a common framework to establish new career average revalued earnings schemes to pay pensions and other benefits to certain public servants. The total contributions expected which relate to the LGPS by the Council in the year to 31 March 2021 is £33.520m. This excludes contributions deducted and paid across from employee members of the scheme. f) Pension Schemes Accounted for as a Defined Contribution Schemes The Teachers Pension Scheme The Council pays an employer’s contribution to the Department for Education in respect of teachers’ pension costs based on a percentage of members’ pensionable salary. The Scheme provides teachers with specified benefits upon their retirement. In addition, the Council is responsible for all pension payments relating to added years awarded, together with the related increases. The Scheme is an unfunded statutory public service pension scheme with the benefits underwritten by the Government. The Scheme is financed by payments from the employer and from those current employees who are members of the Scheme, who pay contributions at different rates which depend on their salaries. The Scheme is a multi employer scheme; therefore the Council is not able to identify its share of the underlying financial position and performance of the scheme with sufficient reliability for accounting purposes. The Scheme Actuary completed an actuarial valuation of the Scheme as at 31 March 2016 (report issued March 2019). The actuary valuation recommended an increase to the employers contribution rate from 16.4% to 23.6% effective from 1 September 2019 to 31 March 2023. For the purposes of these accounts, the scheme is accounted for as a defined contribution scheme. As a proportion of the total contributions into the Teachers’ Pension Scheme during 2019/20, the Council’s own contributions equate to 20.68% (16.48% in 2018/19). In 2019/20, the Council paid £11.971m (£9.971m in 2018/19) to the Teachers Pensions Agency. A balance of contributions of £1.144m is owed to the Teachers’ Pension Agency as at 31 March 2020. The contributions expected to be paid in the next financial year are £13.357m. The Council is responsible for the costs of any additional benefits awarded upon early retirement outside of the teachers pension scheme. These are accounted for on a defined benefit basis and are included in the assets and liabilities detailed above (amounts are shown separately for information below). The discretionary pensions funded on an ongoing basis were awarded in previous years; no new benefits have been awarded in 2018/19 or 2019/20.
2018/19 2019/20 £000 £000
Teachers 9,971 Employer primary contributions 11,971 1,473 Discretionary pensions funded on an ongoing basis 1,489
The NHS Pension Scheme (NHSPS) The Council pays an employer’s contribution to the Department of Health in respect of NHS staff pension costs, based on a percentage of members’ pensionable salary. The Scheme provides NHS staff with specified benefits upon their retirement. The Scheme provides pensions to employees who have worked in the National Health Service. The Scheme is an unfunded statutory public service pension scheme with the benefits underwritten by the Government. The Scheme is financed by payments from the employer and from those current employees who are members of the Scheme, who pay contributions at different rates based on pay and as specified in the regulations. The rate of employer contributions is typically set following an actuarial valuation. The actuary valuation recommended an increase to the employers contribution rate from 14.3% to 20.6% effective from 1 April 2019. A transitional arrangement was put in place whereby employers continued to pay 14.38% in 19/20 and this arrangement will continue in 20/21.
East Riding of Yorkshire Council 76 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
For the purposes of these accounts the scheme is accounted for as a defined contribution scheme. As a proportion of the total contributions into the NHSPS during 2019/20 the Council’s own contributions equate to 14.38%. In 2019/20 the Council paid £0.042m to the NHSPS. There are contributions remaining payable to the NHSPS of £0.006m as at 31 March 2020 which relate to 2019/20. The contributions expected to be paid in the next financial year are £0.040m. The Council is responsible for the costs of any additional benefits awarded upon early retirement outside of the scheme and this would be funded from the Public Health ring fenced grant. There were no additional benefits awarded in 2018/19 or 2019/20.
28. USABLE RESERVES
The Council keeps a number of reserves in the Balance Sheet. Some are required to be held for statutory reasons, some have been set up voluntarily to earmark resources for future spending plans and others are needed to comply with proper accounting practice. Usable reserves are those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use, for example the Usable Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt.
Balance Net Balance Net Movement Balance Further Detail 31 March 2018 in-year 31 March 2019 in-year 31 March 2020 of Movements £000 £000 £000 £000 £000 Usable Reserves
15,176 -2,206 General Fund 12,970 4,720 17,690 MiRS page 20 4,285 377 Housing Revenue Account 4,662 -251 4,411 MiRS page 20 676 -65 Capital Grant Unapplied Account 611 3,641 4,252 Note 29 below 148,894 12,605 Earmarked Reserves 161,499 -10,710 150,789 Note 30 below 17,679 4,720 Usable Capital Receipts 22,399 -5,687 16,712 Note 31 below 43,952 2,310 Major Repairs Reserve 46,262 3,590 49,852 HRA note 7c
230,662 17,741 248,403 -4,697 243,706
29. CAPITAL GRANTS UNAPPLIED ACCOUNT RESERVE
These reserves hold capital grants and contributions recognised through the Comprehensive Income and Expenditure Statement as income, but which have not yet been applied to fund expenditure. When the expenditure is eventually incurred, the relevant grant or contribution is transferred to the Capital Adjustment Account. As these transactions are in advance of the actual expenditure, it may become apparent that the income is to be used for revenue rather than capital purposes or vice versa, hence the transfer between revenue reserves and the General Fund, also made within this account.
East Riding of Yorkshire Council 77 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
30. EARMARKED REVENUE RESERVES
Restated Movement Total 31 March in-year 31 March Movement 31 March 2018 restated 2019 in-year Income Expenditure 2020 £000 £000 £000 £000 £000 £000 £000
0 10,018 A164 Jocks Lodge Reserve 10,018 -304 0 -304 9,714 16,128 2,520 Adult Services Reserve 18,648 -4,351 4,591 -8,942 14,297 1,946 105 Bridlington Schools PFI Reserve 2,051 137 137 0 2,188 5,131 0 Business Rates Reserve 5,131 0 0 0 5,131 0 2,153 Culture & Customer Service Development & Renewal 2,153 -1,810 39 -1,849 343 38 2 Calibration Test Centre Reserve 40 -28 -28 0 12 6,117 4,891 Capital Investment Fund 11,008 3,594 5,354 -1,760 14,602 3,898 -1,220 Children's Services Reserve 2,678 29 1,720 -1,691 2,707 1,765 500 Debt Management Reserve 2,265 1,564 2,250 -686 3,829 503 39 Development Control Reserve 542 -172 25 -197 370 45,143 -9,711 Economic Development & Bridlington Regeneration Reserve 35,432 -648 6,090 -6,738 34,784 291 -190 Employment, Education & Skills 101 0 0 0 101 14,798 2,637 Efficiency Fund 17,435 -3,993 258 -4,251 13,442 687 -82 Election Reserve 605 -379 141 -520 226 87 136 Emergency Planning Reserve 223 -126 15 -141 97 9 1 Extended Schools Reserve 10 95 95 0 105 1,254 551 Financial Systems Development and Replacement Reserve 1,805 342 342 0 2,147 0 125 Home to School Transport Reserve 125 -110 0 -110 15 3,093 180 Highways & Flooding Reserve 3,273 -156 0 -156 3,117 6,473 2,167 ICT Replacement & Investment Fund 8,640 -731 1,356 -2,087 7,909 8,085 241 Individual Schools Budget * 8,326 -2,137 1,871 -4,008 6,189 218 -218 Local Public Service Agreeement (LPSA) Reserve 0 0 0 0 0 298 0 Procurement and Supplies Reserve 298 67 67 0 365 9,122 -2,863 Property Services Reserve 6,259 -3,386 252 -3,638 2,873 2,029 80 Public Health Reserve 2,109 -61 26 -87 2,048 120 40 Refurbishment Reserve 160 80 80 0 240 78 -31 Regional Growth Fund 47 -19 0 -19 28 2,542 847 Revenue Grant and Contributions Unapplied Reserves 3,389 1,209 1,452 -243 4,598 269 0 Safety Camera Reserve 269 -15 0 -15 254 911 -44 School Improvement Reserve 867 -259 0 -259 608 9,368 0 Self Insurance Reserve 9,368 -142 -1 -141 9,226 1,506 -883 Service Development and Renewals Reserve 623 572 680 -108 1,195 3,131 548 Vehicle Renewals Reserve 3,679 1,317 2,196 -879 4,996 3,556 47 Waste Management Reserve 3,603 -910 612 -1,522 2,693 299 20 Yorhub Reserve 319 21 22 -1 340 148,893 12,606 161,499 -10,710 29,642 -40,352 150,789 * Individual Schools Budget consists of: 10,904 664 Unspent schools' budget 11,568 1,198 12,766 -2,994 -322 Overspent schools' balances -3,316 58 -3,258 175 -101 Centrally managed services 74 -3,393 -3,319 8,085 241 8,326 -2,137 6,189
A164 Jocks Lodge Reserve – this reserve has been set up for the Council’s contribution to the A164 and Jocks Lodge Junction Improvement Scheme. The Department for Transport will contribute over £40m to the scheme. Adult Services Reserve - this reserve has been created to assist the management of anticipated future pressures resulting from the increasing cost and demand for adult social care. Bridlington Schools PFI Reserve - the Bridlington PFI scheme is a 25 year contract due to finish in 2028. As part of the scheme, unitary charge payments are paid to the PFI provider, offset by government grant and contributions from schools. Business Rates Reserve – this reserve has been established to manage the risk of fluctuations in the business rates yield. Culture & Customer Services Development & Renewals Reserve – this reserve is used to fund service development works such as site refurbishments and is also used to manage unplanned one off pressures such as income risk within Culture and Customer Services. Calibration Test Centre Reserve - this reserve is used to manage any surplus or deficit made by the Calibration Test Centre, which operates as a partnership between the four Humber Authorities, with East Riding as the host partner. The CTC provides metrology and calibration services in the area. The partners plan to build-up a sufficient balance to allow for renewal of specialist equipment should the need arise.
East Riding of Yorkshire Council 78 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
Capital Investment Fund - this reserve holds budgeted revenue funding of the capital programme which has not yet been applied to schemes, either because the scheme spend has been reprofiled into later years or to allow greater flexibility in funding future service investment. Children’s Services Reserve - this reserve has been earmarked to fund areas of improvement following service inspections, and to ensure that child protection services are sound. In addition, the remaining unallocated balance of £0.3m in the reserve was used to part fund the outturn overspend on the CFS Directorate’s approved budget in 2019/20. The reserve is also used to set aside temporary funding for the troubled families programme approved by Cabinet and other temporary funding set aside for Children’s Service’s budgets in future years. Debt Management Reserve - this reserve includes amounts set aside to cover unforeseen exceptional debt write offs that were previously covered by a subjective bad debt provision and may not be provided for when debts are objectively impaired. The benefit of such a reserve, should it be called upon, would be to prevent significant variations between years. The reserve is also available to manage potential fluctuations in housing benefit subsidy entitlement, debt management costs and fluctuations in interest receipts. Development Control Reserve - this reserve is earmarked to fund future service developments, including backscanning. Economic Development & Bridlington Regeneration Reserve - the purpose of the reserve is to provide match funding for regeneration projects and take advantage of economic development and regeneration opportunities across the East Riding area including funding for approved capital projects for the regeneration of Bridlington in accordance with the Area Action Plan. Efficiency Fund - this reserve has been created from revenue budget savings. It will be used to mitigate the impact of the Government’s cuts to local government funding, to provide pump priming investment for projects that are expected to improve services and generate efficiency savings, and to support other one-off pressures arising from savings initiatives, such as redundancy costs. Election Reserve - elections of councillors within the East Riding of Yorkshire Council and all the town and parish councils within its area take place every four years. The costs of these elections are borne by the Council although those costs that relate to town and parish councils are subsequently recharged to them. In order to avoid a significant budget pressure every fourth year, it has been the election department’s practice to make contributions to the Election Reserve when appropriate, which will then be used to cover these costs. In light of legislative changes this reserve may also be required to cover any costs arising from additional elections or local referendums. Emergency Planning Reserve - this reserve holds planned savings made by Humber Emergency Planning Service (HEPS) as a contingency for the HEPS function, as agreed by the Unitary Finance Officers for emergency planning. HEPS is a joint arrangement between the four local authorities in the Humber region. Employment, Education & Skills Reserve - this reserve contains the balance of specific funding which is for use on the Employment, Education & Skills Service. The reserve is, in part, held to manage resources that are received on an academic year basis but spent within financial years. Extended Schools Reserve - this reserve holds balances ring-fenced to schools, relating to the support services they are required to provide to the community under the Every Child Matters Agenda. Financial Systems Development and Replacement Reserve - this reserve is to fund Finance Service developments including, the integration of the ledger with other systems, Procure to Pay, systems implementation, enhancement, upgrades and other associated costs. The financial system is integral to the financial standing of the Council and the effective stewardship of public funds. Highways Maintenance and Flood Resilience Reserve – this reserve is used to manage the impact of pressures on the highways budget, mainly to help address damage caused by a severe weather event or other circumstances leading to significant disruption of the highway network such as flooding. The reserve is called upon where the Council has incurred additional costs but not at a level to trigger emergency financial assistance from Central Government e.g. Bellwin. The creation and retention of a highway and flood reserve is in line with government guidance advising that Councils should retain a contingency to cover such events. Home to School Transport Reserve - the home to school transport budget is significantly affected each year by the fluctuating number of school days in each financial year, which is dependent on the timing of the Easter holidays. This reserve was created to reduce the impact of these fluctuations by allowing transfers to and from the reserve, according to the actual number of school days in a financial year. ICT Replacement and Investment Fund - this reserve has been established to ensure that the ICT infrastructure is sustainable and will continue to meet the increased demands of the Council to deliver front line services.
East Riding of Yorkshire Council 79 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
Individual Schools Budget Reserve - this reserve represents balances held by schools under delegated schemes, committed to be spent on the education service. The reserve also includes any balance on those centrally managed school budgets that are funded by the Dedicated Schools Grant. Local Public Service Agreement (LPSA) Reserve - this reserve held the remaining balance of the Performance Reward Grant received from the Government for achieving a wide range of agreed service improvement targets from two separate local public service agreements, LPSA1 and LPSA2. This was being used to fund a range of East Riding and partner organisation initiatives over a number of financial years. Procurement and Supplies Reserve - this reserve was created to fund ongoing replacement of systems and can also be used to offset against future downturns in trading, particularly related to academisation and other service developments. Property Services Reserve - savings are set-aside in this reserve to undertake specific major planned maintenance schemes and for contributions to the replacement of buildings where significant investment is planned as part of the capital programme. This enables the avoidance of future maintenance burdens, achievement of value for money through the use of major contracts, and improvement in the condition and suitability of Authority assets extending their potential life. Public Health Reserve - the unused ring-fenced Public Health grant has been transferred to the Public Health reserve to be used to manage and cushion the effect of Public Health pressures and commissioning changes in future years. Refurbishment Reserve - a proportion of rent income is set-aside for future maintenance of pitches and sites. Regional Growth Fund - the reserve is earmarked to fund management costs relating to the Green Port Growth, Regional Growth Fund grant. Revenue Grants and Contributions Unapplied Reserve - this reserve is for grants and contributions received with no condition attached as to their repayment, e.g. no condition to repay to the providing body if not spent by a certain date, but whereas restriction has been placed upon the future use of the grant, either by the awarding body or through an internal decision. The grants and contributions in this reserve will be transferred to the Comprehensive Income and Expenditure Statement to match them to relevant expenditure when it occurs in future financial years. Safer Roads Humber Reserve – Safer Roads Humber is a joint arrangement between the four local authorities in the Humber region, Humberside Police and Humberside Fire and Rescue Service. It is responsible for the management and operation of safety cameras and speed awareness courses. The balance on the reserve represents the Council’s share of the amount set-aside for the partnership being dissolved and a risk assessed amount to manage a reduction in income from speed seminars. School Improvement Reserve - the reserve is used to support schools that are currently judged by Ofsted to be satisfactory or require improvement, to attain a good or better Ofsted outcome within 3 years. Self-Insurance Reserve - the Council self-funds a proportion of liability, property and motor claims. This includes insurances delegated to schools. Service Development and Renewals Reserve - this reserve is used to fund service development works and unplanned pressures, including site refurbishment and plant and equipment costs within the Communities and Environment Directorate. Vehicle Replacement Reserve - this reserve is required to maintain the replacement and renewal of vehicles which are critical to the delivery of the Council’s services and supports the vehicle maintenance unit’s budget and enables them to stabilise the charges made to service users for the life of the vehicle. Waste Management Reserve - this reserve is earmarked to address pressures on the waste management budget, which is volatile and subject to external forces. Changes in the policy of accepting recyclable waste has resulted in lower income from recyclates. Yorhub Reserve - this reserve has been set up to hold the Council’s element of the YorHub partnership balance. It is committed to fund set up costs of future frameworks, involving various procurement exercises and framework initiatives on behalf of the partner authorities, including the re-procurement of the YORBuild and YORCivils framework and the YORHub major contracts framework.
East Riding of Yorkshire Council 80 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
31. USABLE CAPITAL RECEIPTS
The Usable Capital Receipts Reserve holds the proceeds from the disposal of assets which are restricted by statute from being used for anything other than to fund new capital expenditure or to be set aside to finance historical capital expenditure. The balance on this reserve represents resources that have yet to be applied for these purposes at the year end.
2018/19 2019/20 £000 Note £000 Movements in Realised Capital Resources (Usable Capital Receipts) 5 9,375 Amounts received 9,445 -966 Amounts applied to finance new capital investment -11,417 -1,312 Contribution of housing capital receipts to government pool -1,312 -2,273 Receipts set-aside to repay debt -2,304 -104 To fund disposal costs -100 4,720 Total Increase in Realised Capital Resources in Year -5,688 17,680 Balance as at 1 April 22,400 4,720 In year activity -5,688 22,400 Balance as at 31 March 16,712
32. UNUSABLE RESERVES
Unusable reserves are those that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’. This is expenditure incurred but not yet funded. It will however have to be funded in the future, either from taxation or from usable reserves. The purpose of each reserve is explained in the individual notes.
Balance Net Balance Net Balance Further 1 April Movement 1 April Movement 31 March Detail of 2018 in-year 2019 in-year 2020 Movements £000 £000 £000 £000 £000 Unusable Reserves -53 1 Financial Instruments -52 4 -48 Note 33 below Adjustment Account 281,859 -1,104 Revaluation Reserve 280,755 16,061 296,816 Note 34 below -4,765 -1,302 Accumulated Absences Account -6,067 1,754 -4,313 -12 12 Available-for-sale Reserve 0 0 0 -364,819 -118,993 Pensions Reserve -483,812 111,546 -372,266 Note 35 below 769,500 39,733 Capital Adjustment Account 809,233 53,022 862,255 Note 36 below 1,578 -680 Collection Fund Adjustment 898 1,293 2,191 Account 957 -5 Deferred Capital Receipts Reserve 952 -171 781
684,245 -82,338 601,907 183,509 785,416
East Riding of Yorkshire Council 81 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
33. FINANCIAL INSTRUMENT ADJUSTMENT ACCOUNT
The Financial Instrument Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. The Council uses the account to manage the issuing of soft loans, which are loans that are made at less than the market rate in order to achieve a specific service objective. The adjustment account is used to charge the interest foregone over the lifetime of the loan, rather than all in the year of issue. It also ensures that the effective interest credited to the Comprehensive Income and Expenditure Statement, as required by the Code, is replaced with the actual interest received in the General Fund Balance.
34. REVALUATION RESERVE
The Revaluation Reserve records increases in the valuation of any property, plant or equipment asset above its historical cost since 1 April 2007, the date the Reserve was created. Accumulated gains arising before that date are consolidated into the Capital Adjustment Account. The total balance on the Revaluation Reserve is the sum of individual balances for each asset. Any subsequent reductions in the value of assets with a Revaluation Reserve balance due to either impairment or revaluation losses, is reversed out of this account, and with any further reduction in value below historical cost charged to the Comprehensive Income & Expenditure Statement. Individual asset values in the Reserve are written out to the Capital Adjustment Account when the asset is sold or scrapped.
2018/19 2019/20 £000 Note £000 £000 281,859 Balance as at 1 April 280,755 24,006 Upward revaluation of non-current assets 25,471 Downward revaluation and impairment losses not charged to the -6,157 Surplus/Deficit on the Provision of Services -2,489 Surplus or Deficit (-) on revaluation of non-current assets posted 17,849 to the Comprehensive Income and Expenditure Statement Pg 19 22,982 -3,857 Difference between fair value depreciation and historical cost depreciation 36 -3,862 -15,096 Balance of reserve removed for assets sold or scrapped 36 -3,059 -18,953 Amount written off to the Capital Adjustment Account -6,921
-1,104 Total Movement in Year 16,061
280,755 Balance as at 31 March 296,816
East Riding of Yorkshire Council 82 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
35. PENSIONS RESERVE
The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post-employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to the Pension Fund, or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits fall to be paid.
2018/19 2019/20 £000 Note £000 -364,819 Balance as at 1 April -483,812
-80,175 Actuarial gains and losses on pension assets and liabilities Page 18 160,867 Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive -69,338 Income and Expenditure Statement 5 / 27b -81,589 Employer's pension contributions and direct payments to pensions 30,520 payable in the year 5/ 27b 32,268 -118,993 Total Increase in the account in year 111,546 -483,812 Balance as at 31 March -372,266
East Riding of Yorkshire Council 83 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
36. CAPITAL ADJUSTMENT ACCOUNT
The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisation are charged to the Comprehensive Income and Expenditure Statement (with reconciling amounts from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement (the minimum revenue provision). The Account contains gains recognised on donated assets that have yet to be consumed by the Council and also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 5 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.
2018/19 2019/20 £000 Note £000 £000
769,500 Balance as at 1 April 809,233 Reversal of items relating to capital expenditure either debited or credited to the Comprehensive Income and Expenditure Statement -8,236 Revenue expenditure funded from capital under statute 5 -7,114 -9,104 Housing Revenue Account depreciation / amortisation and impairment -9,249 -37,929 General Fund depreciation / amortisation and impairment -34,008 -18,535 Revaluation losses on Property, Plant & Equipment -16,241 16,930 Reversal of past impairment and revaluation losses 10,067 5,945 Donated assets received 18 Amounts of non-current assets written off on sale or scrapped as part of the -38,981 gain/loss on disposal in the Comprehensive Income and Expenditure Statement -10,336 -89,910 -66,863 Amounts written off from the Revaluation Reserve 34 3,857 Additional depreciation for revaluation above historic cost 3,862 15,096 Transfer from Revaluation Reserve for disposals 3,059 18,953 6,921
-70,957 Net amount written out of the cost of non current assets consumed in the year -59,942
Capital financing applied in the year 20 / 5 966 Usable receipts applied 11,417 11,560 Capital expenditure financed from revenue 11,215 11,338 Capital expenditure financed from earmarked reserves 10,724 11,288 Capital expenditure financed from Major Repairs Allowance 10,092 Capital grants and contributions credited to the Comprehensive Income 55,190 and Expenditure Statement that have been applied to capital financing 51,118 Application of grants to capital financing from the Capital Grants 64 Unapplied Account 95 8,219 Grant funded revenue expenditure funded from capital under statute 5,828 Provision for financing of capital investment charged against the 12,065 General Fund (MRP) 12,475
110,690 112,964
39,733 Total in-year activity 53,022
809,233 Balance as at 31 March 862,255
East Riding of Yorkshire Council 84 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
37. COLLECTION FUND ADJUSTMENT ACCOUNT
The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax and non-domestic rates income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers and business rate payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund.
38. DEFERRED CAPITAL RECEIPTS RESERVE
The Deferred Capital Receipts Reserve holds the gains recognised on the disposal of non-current assets but for which cash settlement has yet to take place. Under statutory arrangements, the Council does not treat these gains as usable for financing new capital expenditure until they are backed by cash receipts. When the deferred cash settlement eventually takes place, amounts are transferred to the Capital Receipts Reserve. Deferred capital receipts include mortgages advanced by the former authorities to former tenants to purchase their council houses and soft loans made to external organisations. Due to statutory mitigation granted under the transition to IFRS, the deferred capital receipts for finance leases entered into before 31 March 2010 continue to be treated as revenue income receivable, with the receipt transferred from deferred capital receipts to the Movement in Reserves Statement. Leases entered into after this time are done so in the full knowledge of the IFRS requirement, therefore deferred capital receipts received from 1 April 2010 become usable capital receipts, i.e. capital not revenue income.
39. CONTINGENT LIABILITIES
(a) Business rate appeals The Local Government Finance Act 2012 introduced a business rates retention scheme that enabled local authorities to retain a proportion of the business rates generated in their area. The new arrangements for the business rates came into effect on 1 April 2013. The Council as a Billing Council acts as agents on behalf of Humberside Fire and Rescue Services (1%), Central Government (50%) and ourselves (49%). Under this scheme the Council will assume their share of the liability for refunding ratepayers who have successfully appealed against the rateable value of their properties. The Council has estimated the total provision for appeals in the Collection Fund to be £8.7m and this Council’s share of these appeals at 49% is £4.3m. Appeals received by the valuation office on or after 1 April 2017 relating to the 2010 valuation list cannot be backdated before that date. The valuation office will continue to alter rating assessments if new information comes to light indicating that a valuation is inaccurate – this can only be backdated to 1 April 2015. Consequently, there is potential for any business property’s historical rates liability to change which could result in a further business rates liability or refund being issued by the Council as billing authority, but the timing, amount and probability of these changes are unknown. (b) Beverley Southern Relief Road The council has received over 100 claims under the Land Compensation Act for noise nuisance and other physical factors following the completion of the Beverley Southern Relief road. The value of the claims is currently around £5m. Noise surveys have been undertaken to help assess the validity of claim and any successful claims will be subject to negotiation. The likelihood of success of these claims is unknown and actual costs cannot be reliably determined at this time. (c) Municipal Mutual Insurance (MMI) In addition to the amounts paid to date and the closing provision for outstanding claims there is a potential that further payments could be required under this scheme. Administrators have indicated that this could amount to 28% of claims paid and outstanding, the amount levied by the administrators to date represents 25% of claims paid. Currently, the value, timing and likelihood of further payments cannot be predicted with any certainty. (d) Public Liability Claim The Council has received a public liability claim and the Council’s insurers, at the time, have informed the Council that they are applying a full reservation of rights. As a consequence, there is potential for the Council to have an unknown liability in relation to the claim. Investigations are currently underway and there is a significant uncertainty over the outcome and any potential Council liability, therefore the value, timing and likelihood cannot be predicted with any certainty.
East Riding of Yorkshire Council 85 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
(e) NHS Business Rate Charitable Relief Appeals have been brought by a number of NHS Foundation Trusts for charitable status in relation to business rates charitable relief. This follows a High Court ruling in November 2019 that Foundation Trusts are not charities for the purposes of the Local Government Finance Act 1988. An appeal has been granted and if it is found in favour of the NHS then there would be a cost to local authorities potentially in the £millions. The NHS are claiming backdated relief for a maximum of 6 years. (f) Flood Alleviation Schemes There are a number of ongoing disputes with contractors between certified payments and their alleged defined costs. These disputes relate mainly to flood alleviation schemes. Collectively these disputes could exceed £1m in payments to contractors.
East Riding of Yorkshire Council 86 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
The following notes 40 to 45 comply with International Accounting Standard IAS 32 and International Financial Reporting Standards IFRS 7, 9 and 13 concerning financial instruments.
40. CARRYING AMOUNT OF CATEGORIES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The financial assets and liabilities disclosed in the Balance Sheet are made up of the following categories of financial instrument.
31 March 2019 31 March 2020 Total Total Note Total Total Carrying Fair Carrying Fair Long term Current Value Value Long term Current Value Value £000 £000 £000 £000 £000 £000 £000 £000 Category of Financial Instrument 137 0 137 137 Investments at amortised cost 19,143 0 19,143 19,143 16 0 16 16 Equities designated FVTOCI 16 0 16 16 153 0 153 153 Total Included in Long-Term Investments 19,159 0 19,159 19,159 1,510 0 1,510 1,532 Soft loans 1,510 0 1,510 1,540 257 0 257 257 Finance lease receivable 125 0 125 125 50 0 50 50 Other assets at amortised cost 41 0 41 41 1,817 0 1,817 1,839 Total Included in Long-Term Debtors 1,676 0 1,676 1,706 0 104,538 104,538 104,538 Investments at amortised cost 0 158,806 158,806 158,806 0 23,101 23,101 23,101 Investments at FVTPL 0 28,137 28,137 28,137 0 320 320 320 Soft loans 0 383 383 383 0 21 21 21 Finance lease receiveables 0 13 13 13 0 31,204 31,204 31,204 Other assets at amortised cost 0 45,684 45,684 45,684 0 159,184 159,184 159,184 Total Included in Current Assets 0 233,023 233,023 233,023 -307,816 -10,874 -318,690 -344,291 Financial liabilities at amortised cost Page 18 -369,298 -12,772 -382,070 -405,537 -307,816 -10,874 -318,690 -344,291 Total Borrowings -369,298 -12,772 -382,070 -405,537
0 -945 -945 -945 PFI and Finance Lease Liabilities 0 -794 -794 -794 0 -21,056 -21,056 -21,056 Financial liabilities carried at contract amount 0 -22,718 -22,718 -22,718 0 -22,001 -22,001 -22,001 Total included in Current Liabilities 0 -23,512 -23,512 -23,512
-11,819 0 -11,819 -10,578 PFI and Finance Lease Liabilities 26 -11,032 0 -11,032 -10,174 -11,819 0 -11,819 -10,578 Total included in Deferred Liabilites -11,032 0 -11,032 -10,174 -136 0 -136 -136 Financial liabilities carried at contract amounts -136 0 -136 -136 -136 0 -136 -136 Total included in Long Term Liabilities -136 0 -136 -136 -317,801 126,309 -191,492 -215,830 Total Financial Instruments -359,631 196,739 -162,892 -185,471
1,041,802 Non-financial Instrument Assets and Liabilities 1,192,014 850,310 Net Assets less Total Liabilities Page 18 1,029,122
East Riding of Yorkshire Council 87 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
Fair Value Financial liabilities and financial assets taking the form of a basic lending arrangement are carried on the Balance Sheet at amortised cost. Their fair value can be assessed by calculating the present value of cash flows that will take place over the remaining terms of the instruments. Disclosure of fair value is not required where the carrying amount is thought to be a reasonable approximation of fair value, such as when the interest rate remains the same for the life of the instrument. The carrying amount for Council House Mortgages is used as a materially accurate estimate of fair value. The interest rate of the mortgages/loans is recalculated every six months in accordance with the Housing Act 1985 S438 Schedule 16. Similarly, prior to 9 January 2017 the loan rate for car loans to employees was reviewed annually in line with the PWLB 5-year annuity rate on 1 April 2016 and presently, the fair value and carrying value are not materially different. Car loans from 9 January 2017 were issued at a below market APR of Bank Rate + 1% qualifying as soft loans. However, as they are below the £30,000 de-minimis level, these are held at par. Financial Assets Measured At Fair Value
Recurring fair value Input level in fair Valuation technique used As at As at measurements value hierarchy to measure fair value 31 March 2019 31 March 2020 £000 £000
Investments in equity instruments designated at fair value through other comprehensive income Level 3 At cost, method described below 16 16
Investments in LVNAV money Unadjusted quoted prices in active market funds classified as fair value markets for identical financial through profit and loss Level 1 instruments 23,101 28,137
Total 23,117 28,153
Equity instruments that do not have a quoted market price The Council has two investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be measured reliably, where cost has been used as the best estimate of fair value. These have been classified as equity instruments designated to fair value through other comprehensive income, but as they are held at cost there are no gains or losses to be recognised: An investment of 1,693,380 ordinary shares issued, valued at £16,933.80 representing a 39% shareholding in Correct Compliance Ltd a private limited company wholly owned by the four Humber Unitary Authorities. The value of the Authorities fully paid up shares at 31 March 2020 is £16,145.40. The Council was granted 1,792,522 deferred shares (47% shareholding) recognised at nil value. The fair value of the shares cannot be determined as they do not have a quoted market price in an active market; therefore the ordinary shares are carried at cost as a proxy for fair value. The company was set up in 1999 to protect the interests of the Authorities when disposing of the Humberside International Airport Ltd. This was achieved through a 999 year head lease that required the ownership of the airport property and operational land to revert back to the Authorities free of charge within the first 10 years if it ceased to be used and promoted as a civil airport, and at market value within 10 to 50 years from the date of sale. The company has no trading function, and no realisable value. The deferred shares are therefore recognised at nil value and the ordinary shares are carried at cost which is deemed to be the best estimate of their fair value. The Council has no intention of disposing of the shares in the near future. An investment of 1 ordinary share, representing a 100% shareholding in Nite Direct Limited, a private limited company, is carried at a nominal value of £1. The company has a year-end date of 30 June. The audited accounts as at 30 June 2019 showed a loss of £0.026m and net liabilities of £0.026m. Management accounts at 31 December 2019 are currently showing profit of £0.032m and net assets of £0.006m. It is expected that the company will break even and net assets will be nil at 30 June 2020. Therefore the fair value of the shares are deemed to be £1. The Council has no intention of disposing of the shares in the near future. Transfers Between Levels Of The Fair Value Hierarchy There were no transfers between input levels during the year. Changes in Valuation Technique There were no changes in valuation technique during the year.
East Riding of Yorkshire Council 88 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
Fair Values of Financial Assets and Liabilities Not Measured at Fair Value
Input level in Valuation technique used 31 March 2019 31 March 2020 value hierarchy to measure fair value Carrying Value Fair Value Carrying Fair £000 £000 £000 £000 Financial Assets Soft loans Level 2 Discounted cash flow 1,830 1,852 1,893 1,923 Total 1,830 1,852 1,893 1,923
Financial Liabilities Financial liabilities at amortised cost PWLB Loans Level 2 Discounted cash flow -318,690 -344,291 -382,070 -405,537 PFI and Liabilities Level 2 Discounted cash flow -12,764 -11,522 -11,825 -10,968
Total -331,454 -355,813 -393,895 -416,505
The fair value of soft loans was determined by calculating the present value of all future cash receipts for each loan using the prevailing market rate of interest for a similar instrument in an organisation with a similar credit rating. Where no such comparison existed, a rate based on the council’s borrowing cost plus an allowance for the risk that the loan will not be repaid, was used. The interest rate estimates used range from 1.1% to 6.88%. The difference between the fair value and carrying amount represents the interest foregone from issuing the loans at below the market rate of interest. The fair value of Public Works Loan Board (PWLB) loans of £405.537m measures the economic effect of the terms agreed with the PWLB compared with estimates of the terms that would be offered for market transactions undertaken at the Balance Sheet date. The difference between the carrying amount and the fair value measure the additional interest that the authority will pay over the remaining terms of the loans under the agreements with the PWLB, against what would be paid if the loans were at prevailing market rates ranging between 1.94% and 2.69%. The range of interest rates at 31 March 2020 for PWLB loans was between 1.29% and 9.25%. However, the authority has a continuing ability to borrow at concessionary rates from the PWLB rather than from the markets. A supplementary measure of the additional interest that the authority will pay as a result of its PWLB commitments for fixed rate loans is to compare the terms of these loans with the new borrowing rates available from the PWLB. If a value is calculated on this basis, the carrying amount of £382.070m would be valued at £411.481m. But, if the authority were to seek to realise the projected gain by repaying the loans to the PWLB, the PWLB would raise a penalty charge for early redemption in addition to charging a premium for the additional interest that will not now be paid. The exit price for the PWLB loans including the penalty charge would be £500.370m. The fair value of the Council’s PFI scheme of £10.968m measures the economic effect of the terms agreed with the operator compared with estimates of the terms that would be offered for market transactions undertaken at the Balance Sheet date. The difference between the carrying amount and the fair value measure the reduced interest that the council will pay over the remaining terms of the PFI scheme under the agreement with the operator, against what would be paid if an equivalent loan was taken out at the prevailing market rate on the balance sheet date.
East Riding of Yorkshire Council 89 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
41. MOVEMENTS IN INVESTMENTS AND BORROWINGS
There has been no reclassification or derecognition of financial assets during the year.
42. DEFAULTS AND BREACHES
There have been no defaults of loans payable as at 31 March 2020.
43. COLLATERAL
(a) Collateral pledged The Council has not pledged any financial assets as collateral for liabilities or contingent liabilities in 2019/20 as this is not permitted under Section 13 of the Local Government Act 2003. (b) Collateral held Where the Council is permitted to sell or re-pledge collateral in the absence of default by the owner of the collateral, the Code requires its fair value to be disclosed. At 31 March this was £15.377m (2018/19 £15.084m), including £10.075m for Right-to-Buy discounts and £2.207m for housing grants which may or may not be repayable depending on certain time-expiring conditions. The figures exclude collateral held for council tax and non-domestic rates as required by the Code. The Council holds collateral by way of security on property for Right-to-Buy discounts, Social Services Residential Charges, legal charges for grants and loans, mortgages held by the Council, and general credit debts. The Council chooses not to sell or re-pledge the collateral it holds on the basis of the vulnerability of many of the parties concerned, the time-expiry of the discounts, loans and grants, and the considered opinion that the categories are thought to be of such little commercial value that it is unlikely that they would be an attractive proposition for a third party. (c) Collateral obtained The Council has not taken possession of any collateral during this accounting period.
East Riding of Yorkshire Council 90 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
44. FINANCIAL INSTRUMENT GAINS/LOSSES
The gains and losses recognised in the Comprehensive Income and Expenditure Statement in relation to financial instruments are made up as follows:
Financial Liabilities Financial Assets Note Liabilities Balances Measured at Measured at Finance on Behalf Amortised Measured at Measured at Amortised Cost Leases of Others Cost FVTPL FVTOCI Total At 31 March 2020 (contracted amounts) £000 £000 £000 £000 £000 £000 £000 Net Cost of Services Fee expenses 81 11 0 89 9 0 190 81 11 0 89 9 0 190 Financing and Investment Income and Expenditure Interest payable on PWLB borrowing 12,062 0 0 0 0 0 12,062 Interest payable on other borrowing 0 0 0 0 0 0 0 Other interest payable 0 8 150 0 0 0 158 Total Expense in Surplus/Deficit on the Provision of Services 12,220 Interest and investment income 0 -18 -32 -1,775 -182 0 -2,007 Impairment gains 0 0 0 -140 0 0 -140 Net Financing and Investment Income and Expenditure 7b 12,062 -10 118 -1,915 -182 0 10,073 Other Comprehensive Income and Expenditure Gains on revaluation 0 0 Losses on revaluation 0 0 Amounts recycled to the surplus or deficit on the provision of services after impairment 0 0 Net (Gain)/Losses for the Year 12,143 1 118 -1,826 -173 0 10,263
Financial Liabilities Financial Assets Note Liabilities Balances Held Measured at Measured at Finance on Behalf Amortised Measured at Measured at Amortised Cost Leases of Others Cost FVTPL FVTOCI Total At 31 March 2019 (contracted amounts) £000 £000 £000 £000 £000 £000 £000 Net Cost of Services Fee expenses 53 11 0 85 10 0 159 53 11 0 85 10 0 159 Financing and Investment Income and Expenditure Interest payable on PWLB borrowing 12,023 0 0 0 0 0 12,023 Interest payable on other borrowing 0 0 0 0 0 0 0 Other interest payable 0 8 156 0 0 0 164 Impairment losses 0 0 0 92 0 0 92 Total Expense in Surplus/Deficit on the Provision of Services 12,279 Interest and investment income 0 -21 -28 -1,242 -145 0 -1,436 Net Financing and Investment Income and Expenditure 7b 12,023 -13 128 -1,150 -145 0 10,843
Other Comprehensive Income and Expenditure Gains on revaluation 0 0 0 Losses on revaluation 0 0 0 Amounts reecycled to the surplus or deficit on the provision of services after impairment 0 0 0 Net (Gain)/Losses for the Year 12,076 -2 128 -1,065 -135 0 11,002
45. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Council is a local authority as defined by the Local Government Act 1972, and primarily provides statutory services to its population on a not-for-profit basis. As such, few financial instruments are used by way of commercial business. However, the funding mechanism means that, during the year, the Council may hold substantial assets and liabilities. The Council uses financial instruments to manage the risks arising from holding assets and liabilities; it does not undertake financial instruments for trading or speculative purposes. Instruments commonly used to hedge financial and treasury type risks include derivative securities, such as an option, future or swap, of which the criteria and value are determined by those of an underlying asset. The Council has not used any derivative financial instruments.
East Riding of Yorkshire Council 91 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
The Council has adopted the CIPFA Code of Practice for Treasury Management in Public Services. It maintains and operates a Treasury Management Policy comprising an overview of the principles and practices to which the activity will comply. Alongside this Policy, the Department for Communities and Local Government has issued guidance under section 15(1) (a) of the Local Government Act 2003, to which local authorities must have regard. Annually, the Council approves a Treasury Management Strategy for the forthcoming year. Taken together, these documents form the structure for managing risk. The main financial risks arising from the Council’s activities are credit risk, liquidity risk and interest rate risk. The way these risks are managed is summarised below. Other risks include insurance risk, price risk and foreign exchange risk, although the Council has limited exposure to those instruments. (a) Credit risk Credit risk is the probability that other parties might fail to pay amounts due to the Council. Appropriate credit limits have been established by the Council for individual counterparties for treasury management purposes. As a statutory service provider, the Council is not able to apply normal commercial principles to credit risk for all its counterparties. The Council’s Treasury Management Policy specifies the following framework for credit limits:
Actual at Maximum Actual at 31 March 2019 31 March 2020 £000 £000 £000 Specified Investments (limit per counterparty) 0 UK Government Unlimited 0 4,710 Institutions or funds with a minimum rating of AAA/A1 20,000 8,800 10,000 Institutions with a minimum rating of AA-/A2 15,000 10,000 10,000 Institutions with a minimum rating of A-/A2 10,000 10,000 7,000 Local Authorities 20,000 10,000 0 Building Societies - assets greater than £5,000 million 5,000 0 0 Building Socieites - assets greater than £1,000 million 2,500 0 0 Building Societies - assets greater than £250 million 1,000 0 Non-Specified Investments (limit per counterparty) 0 Other non-specified investments 5,000 0 0 Investments with any institution for more than 365 days 5,000 5,000
Loans (limit per counterparty) 0 Other Public Bodies and Educational Establishments 5,000 0 166 Wholly Owned Companies or Associates 10,000 134 0 Partnership Arrangements 10,000 0 0 Charities 500 0
Other Limits (on day of investment) 10,000 10% of the portfolio with a single institution 21,841 10,000 10,000 15% of the portfolio with a group with common ownership 32,762 15,000 10,000 25% of the portfolio in Asia 54,603 20,000 10,000 25% of the portfolio in Australia & New Zealand 54,603 15,000 15,000 25% of the portfolio in non-UK Europe 54,603 25,000 0 25% of the portfolio in Middle East 54,603 0 25,000 25% of the portfolio in North America (including Canada) 54,603 30,000 4,710 20% of the portfolio with individual funds 43,682 8,800 0 Aggregate value of Non-specified Investments 30,000 19,000 166 Aggregate value of Loans 15,000 134
Actual at Actual at 31 March 2019 31 March 2020 £000 £000 Specified Investments 23,101 Institutions or funds with a minimum rating of AAA/A1 28,137 35,180 Institutions with a minimum rating of AA-/A2 35,144 50,237 Institutions with a minimum rating of A-/A2 98,614 24,092 Local Authorities 38,160
Non-Specified Investments (limit per counterparty) 0 Investments with any institution for more than 365 days 19,038 170 Wholly Owned Companies or Associates 137 132,780 219,230
East Riding of Yorkshire Council 92 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
The aggregate value of loans will not exceed £15 million at any one time. There was one such investment: a £0.134 million loan to Nite Direct Marketing Ltd. at 31 March 2020 (£0.166m at 31 March 2019). The aggregate value of non-specified investments will not exceed £30 million at any one time. There were five such investments of between £2 million and £5 million, to different Local Authorities with durations over a year, totalling £19.000 million in aggregate and maturing between January 2022 and September 2024 (nil at 31 March 2019). The above table shows the maximum credit risk associated with an individual counterparty, rather than separate investments. Investments with the Council’s own bank are permitted to exceed the institutional and portfolio limits on an overnight basis when unexpected income is received. Treasury credit risk has been managed dynamically during the year, responding to national and international events in financial markets. Security of principal sums invested continues to be the prime objective. The Council makes use of Low Volatility Net Asset Value (LVNAV) Money Market Funds which are instant access funds whose objectives match those of the Council, being security of principal and diversification of investments.
East Riding of Yorkshire Council 93 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
Total credit risk associated with all investments, including accrued interest, is as follows:
Actual at Actual at 31 March 2019 31 March 2020 £000 £000 Specified Investments 23,101 Institutions or funds with a minimum rating of AAA/A1 28,137 35,180 Institutions with a minimum rating of AA-/A2 35,144 50,237 Institutions with a minimum rating of A-/A2 98,614 24,092 Local Authorities 38,160
Non-Specified Investments (limit per counterparty) 0 Investments with any institution for more than 365 days 19,038 170 Wholly Owned Companies or Associates 137 132,780 219,230
Expected Credit Losses The Council has assessed its short and long term investments at amortised cost, using average cumulative credit loss rates published by the Moody’s credit rating agency for those with credit ratings. The total expected credit loss calculated was below £10,000, therefore not material and no impairment allowances have been made. All sundry debtors past due are assessed for expected credit loss and the level of impairment allowance has been calculated with changes in loss allowances accounted for against Financing Investment Income and Expenditure in the surplus or deficit on the provision of service. The approach taken is to individually assess those over £10,000 and to do so collectively for the others based on an aged debt analysis using historical default rates. Debt over 6 years old are impaired at 100%. Finance Lease receivables have been assessed and there was no evidence to suggest an impairment allowance is required. (b) Liquidity risk Liquidity risk is the risk that the Council is not able to meet its financial obligations as they fall due or can do so only at an excessive cost. The Council’s policy is to maintain sufficient funds in a liquid form at all times to ensure that it can cover all fluctuations in cash flow and to meet its financial obligations. This is achieved by holding a prudent level of assets in short-term wholesale funds together with undrawn, committed borrowing facilities. Local authorities also have ready access to borrowing from the Public Works Loans Board. Refinancing risk is managed by limiting the amount of borrowing that matures within any specified period. The table below analyses the Balance Sheet by significant class of asset and liability into relevant maturity bands based on the remaining period at the balance sheet date to the contractual maturity date. The figures are analysed gross to better reflect the purpose of the disclosure, therefore there is no obvious link comparing net assets to total equity unless the balance sheet figures are considered in the same manner.
East Riding of Yorkshire Council 94 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
Not More No Note than 3 3 - 12 1 -5 than 5 specific At 31 March 2020 months months years years maturity Total £000 £000 £000 £000 £000 £000 Assets Property, plant & equipment 0 0 0 0 1,636,230 1,636,230 Cash & cash equivalents 46,768 0 0 0 0 46,768 46 Other assets 161,370 59,626 20,362 427 3,582 245,367 Total Assets 208,138 59,626 20,362 427 1,639,812 1,928,365 Page 18
Liabilities Borrowing 0 12,772 65,325 303,973 0 382,070 40 Other liabilities 77,225 44,275 15,247 377,725 2,701 517,173 Usable reserves 2,498 7,611 13,450 0 220,147 243,706 28 Unusable reserves -4,313 2 0 -371,537 1,161,264 785,416 32 Total Liabilities 75,410 64,660 94,022 310,161 1,384,112 1,928,365 Page 18
Liquidity Surplus/(Gap) 132,728 -5,034 -73,660 -309,734 255,700 0
Not more More No Note than 3 3 - 12 1 -5 than 5 specific At 31 March 2019 months months years years maturity Total £000 £000 £000 £000 £000 £000 Assets Property, plant & equipment 0 0 0 0 1,564,099 1,564,099 Cash & cash equivalents 32,547 0 0 0 0 32,547 46 Other assets 98,518 72,182 1,259 610 3,962 176,531 Total Assets 131,065 72,182 1,259 610 1,568,061 1,773,177Page 17
Liabilities Borrowing 0 10,874 55,080 252,736 0 318,690 40 Other liabilities 93,689 24,790 10,751 472,755 2,192 604,177 Usable reserves 1,840 5,839 10,018 0 230,707 248,404 28 Unusable reserves -6,066 2 0 -482,913 1,090,883 601,906 32 Total Liabilities 89,463 41,505 75,849 242,578 1,323,782 1,773,177 Page 17
Liquidity Surplus/(Gap) 41,602 30,677 -74,590 -241,968 244,279 0
(c) Interest Rate risk The Council is exposed to movements in interest rates reflecting the mismatch between the dates on which interest receivable on assets and interest payable on liabilities are next reset to market rates or, if earlier, the dates on which the instruments mature. The Council manages this exposure by borrowing mainly at fixed rates and on a principal repayment basis for longer dated liabilities, thus maintaining a stable charge to Financing and Investment Income and Expenditure in the Comprehensive Income and Expenditure Statement. The table below analyses the Balance Sheet by asset and liability class and summarises interest rate sensitivity exposure as at 31 March 2020. Items are allocated to time bands by reference to the earlier of the next interest rate repricing date and the maturity date.
East Riding of Yorkshire Council 95 Statement of Accounts 2019/20 NOTES TO THE BALANCE SHEET
Not More No Note than 3 3 - 12 1 -5 than 5 specific At 31 March 2020 months months years years maturity Total £000 £000 £000 £000 £000 £000 Assets Property, plant & equipment 0 0 0 0 1,636,230 1,636,230 Cash & cash equivalents 38,634 0 0 0 8,134 46,768 46 Other assets 100,644 59,091 20,309 356 64,967 245,367 Total Assets 139,278 59,091 20,309 356 1,709,331 1,928,365 Page 18 Liabilities Borrowing 0 12,772 65,325 303,973 0 382,070 40 Other liabilities 978 3,230 0 11,032 501,933 517,173 Usable reserves 0 58,790 0 0 184,916 243,706 28 Unusable reserves 0 1 0 -372,266 1,157,681 785,416 32 Total Liabilities 978 74,793 65,325 -57,261 1,844,530 1,928,365 Page 18
Interest Rate Surplus/(Gap) 138,300 -15,702 -45,016 57,617 -135,199 0
Not more More No Note than 3 3 - 12 1 -5 than 5 specific At 31 March 2019 months months years years maturity Total £000 £000 £000 £000 £000 £000 Assets Property, plant & equipment 0 0 0 0 1,564,099 1,564,099 Cash & cash equivalents 25,802 0 0 0 6,745 32,547 46 Other assets 35,329 70,031 1,190 412 69,569 176,531 Total Assets 61,131 70,031 1,190 412 1,640,413 1,773,177Page18
Liabilities Borrowing 0 10,874 55,080 252,736 0 318,690 40 Other liabilities 1,782 3,140 0 11,819 587,436 604,177 Usable reserves 0 55,385 0 0 193,019 248,404 28 Unusable reserves 0 2 0 -483,812 1,085,716 601,906 32 Total Liabilities 1,782 69,401 55,080 -219,257 1,866,171 1,773,177 Page18
Interest Rate Surplus/(Gap) 59,349 630 -53,890 219,669 -225,758 0
If interest rates had been 0.5% higher throughout the year, based on the transactions undertaken in the year and all other variables constant, the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement would have benefited by £0.857m, comprising £1.056m additional interest income on investments less additional interest charges of £0.199m in relation to the new borrowing of £77 million taken in September 2019. There would be no additional interest charges in relation to the historic borrowing portfolio as the interest rates are fixed. A 0.5% fall in interest rates would have resulted in a decrease to interest rate receipts of £1.056m and a decrease to interest charges on the additional borrowing of £0.199m, a net decrease of £0.857m. There would be no material impact on the Balance Sheet and Other Comprehensive Income and Expenditure since the carrying amount of the respective assets and liabilities is a reasonable approximation of fair value.
East Riding of Yorkshire Council 96 Statement of Accounts 2019/20 NOTES TO THE CASH FLOW STATEMENT
46. CASH AND CASH EQUIVALENTS
The balance of cash and cash equivalents is made up of the following elements:
2018/19 2019/20 £000 £000 4,007 School bank balances 3,658 24 Petty cash imprest accounts 24 42 Cash floats 42 28,105 Cash equivalents 41,281 369 Cash at bank 1,763 32,547 Cash and cash equivalents Page 18 46,768
47. ADJUSTMENT TO NET SURPLUS OR DEFICIT ON THE PROVISION OF SERVICES FOR NON CASH MOVEMENTS
2018/19 2019/20 £000 Note £000 -42,114 Depreciation 5 -42,393 -5,883 Impairment and downwards valuation 5 -6,257 -640 Amortisation 5 -782 0 Increase (-) / decrease in impairment provision for bad debts 0 5,438 Increase (-) / decrease in creditors -1,793 -8,785 Increase / decrease (-) in debtors -20,637 -934 Increase / decrease (-) in inventories -381 -38,818 Pension liability 5 -49,321 -38,981 Carrying amount of non-current assets (and those held for sale) sold 5 -10,335 4,972 Other non-cash items charged to the Surplus or Deficit -383 Total non-cash movements in surplus or deficit on the provision of -125,745 -132,282 services
48. ITEMS INCLUDED IN OPERATING ACTIVITIES AND ADJUSTMENT FOR ITEMS INCLUDED IN THE NET SURPLUS OR DEFICIT ON THE PROVISION OF SERVICES THAT ARE INVESTING AND FINANCING ACTIVITIES
2018/19 2019/20 £000 £000 9,267 Proceeds from non current assets sold 9,315 55,190 Capital grants credited to surplus or deficit on the provision of services 51,118 64,457 Investing and Financing Activities included in net surplus or deficit on 60,433 the provision of services -1,364 Interest received -2,603 1,210 Interest paid 12,201
-154 Items included in operating activities 9,598
East Riding of Yorkshire Council 96 Statement of Accounts 2019/20 NOTES TO THE CASH FLOW STATEMENT
49. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
2019-20 Non-cash Changes Other non- 1st April Financing Cash 31 March 2019 Cash Flows Acquisition Changes 2020 £000 £000 £000 £000 £000
Long Term Borrowings -307,816 -61,482 0 0 -369,298 Short Term Borrowings -10,874 -1,564 0 -334 -12,772 Lease Liabilities -74 4 0 0 -70 On balance Sheet PFI Liabilities -11,745 782 0 0 -10,963 Total Liabilities from financing activities -330,509 -62,260 0 -334 -393,103
2018-19 Non-cash Changes Other non- 1st April Financing Cash 31 March 2018 Cash Flows Acquisition Changes 2019 £000 £000 £000 £000 £000
Long Term Borrowings -318,375 10,559 0 0 -307,816 Short Term Borrowings -10,421 -138 0 -315 -10,874 Lease Liabilities -77 3 0 0 -74 On balance Sheet PFI Liabilities -12,679 934 0 0 -11,745 Total Liabilities from financing activities -341,552 11,358 0 -315 -330,509
East Riding of Yorkshire Council 97 Statement of Accounts 2019/20 OTHER NOTES TO THE FINANCIAL STATEMENTS
49. RELATED PARTY TRANSACTIONS
The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council. a) Central Government UK Central government has significant influence over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. council tax bills, housing benefits). Grants received from government departments are set out in the analysis Notes 7c, 8 and 26. Transactions outstanding at 31 March 2020 are shown in Note 24. b) Members Members of the Council have direct control over the Council’s financial and operating policies. Information on Members’ remuneration is published on the Council’s website. Many of the Council’s Councillors are Town and Parish Councillors and sit on Internal Drainage Boards. However the Council has satisfied itself that all the transactions entered into have been concluded in accordance with its procedures for preventing undue influence. Former Councillor Birmingham works for family owned care homes which provide residential services to the Council. The contract was entered into in full compliance with the Council’s Standing Orders and payments totalled £0.728m in 2019/20 (£0.461m for 2018/19). The Members’ Register of Interest is on the Council’s website (address shown on page 1). c) Officers Officers that might be in a position to influence significantly the policies of the Council are considered to be members of the Corporate Management Team as disclosed in Note 13b. There were no declarable transactions between any of these officers and the Council on a personal basis. d) Pension Fund The Head of Finance is S151 Officer for East Riding of Yorkshire Council and the East Riding Pension Fund, as the Council is the administering authority for the Fund. Ten Members of the Council sit on the Pensions Committee, which is responsible for the administration of the Pension Fund. Under legislation introduced in 2003/04, Councillors were entitled to join the Pension Scheme. The LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014 removed this entitlement for Councillors from the later of 1 April 2014 or the end of their current term in office (or to age 75 if earlier). None of the members of the Pensions Committee received pension benefits from the Fund during the financial year and none made contributions to the Fund during the financial year, because all contributions ceased after re-election in May 2015. As the benefits received by pensioners from the Fund are determined by statute, the officers or councillors are unable to gain any advantage to the benefits they receive as pensioners from being advisors to the Fund or members of the Committee. As administering authority, the summarised accounts of the Pension Fund are included in these accounts from page 117 including a list of admitted bodies many of which are subject to the same common control as the Council by central government. The key management personnel of the Pension Fund for 2019/20 were the Director of Corporate Resources and the Head of Finance. Details regarding the remuneration of the Director of Corporate Resources and the Head of Finance these are included in Note 13b. e) Assisted Organisations A review has been under taken and no entities have been identified as assisted organisations.
East Riding of Yorkshire Council 98 Statement of Accounts 2019/20 OTHER NOTES TO THE FINANCIAL STATEMENTS f) Group relationships The Council is the major shareholder in Correct Compliance Limited, a company formed between this Council, Kingston Upon Hull City Council, North Lincolnshire Council and North East Lincolnshire Council on the disposal of their interest in Humberside Airport. The Chief Executive is a Director and the Secretary to this company, which is an associate of the Council but is dormant and there were no transactions between the Company and the Council during 2019/20 (2018/19 £nil). The Council also owns Nite Direct Limited a wholly owned subsidiary of the Council. The directors of the company are the Chief Executive, Director of Planning and Economic Regeneration and the Head of Legal & Democratic Services (as at 31 March 2020). During the year 2019/20 the Council received £0.011m (2018/19 £0.026m) and paid out £0.148m (2018/19 £0.201m) to the company. The Council granted a loan to the company of £0.300m, to be repaid over 10 years of which £0.134m remains outstanding at the 31 March 2020. Information in respect of material transactions with related parties, not disclosed elsewhere in this Statement of Accounts, is presented below.
Precepts 2019/20 and Other Levies Payments Receipts Debtors Creditors Levying & Precepting Bodies £000 £000 £000 £000 £000
Humberside Police & Crime Commissioner 26,025 329 618 9 3,324 Humberside Fire and Rescue Service 10,859 92 91 29 56 36,884 Town & Parish Councils 5,917 328 314 113 - 14 Internal Drainage Boards 1,572 12 0 0 0 North Eastern Inshore Fisheries and Conservation 272 44 138 0 0 Environment Agency - Yorkshire & Severn Trent Region 196 308 6 0 0 Hull & Goole Port Health Authority 35 0 0 0 0 7,992 Payments Receipts Debtors Creditors Other Organisations £000 £000 £000 £000
Age UK 133 10 0 0 Bishop Burton College 423 16 2 0 Brough Manor Care Home 118 1 0 0 Civica 647 0 52 0 East Riding College 401 58 6 0 Glenfields Care Home 370 2 0 0 Hessle Federation of Schools 271 28 0 0 Hull & East Yorkshire MIND 174 10 0 1 Hull University Teaching Hospitals NHS Trust 334 22 12 0 Humber Bridge Board 3 58 18 1 Humber NHS Foundation Trust 6,224 348 211 1,342 LEP- Humber 70 196 23 0 Lissett Wind Farm 0 85 0 0 Local Government Association 95 0 0 0 NHS East Riding of Yorkshire CCG 2,866 38,624 11,886 12,084 Santuary Housing 52 36 0 2 Sirius Academy 130 2 0 0 Swanland Primary 153 154 9 8 TCAT (the consortium academy trust) 1 98 0 174 The Green Team 18 0 0 0 The Old Vicarage Care Home Ltd 240 1 0 0 The Smile Foundation 88 3 0 0 University of Hull 443 191 15 1 Wolferton School 116 29 0 0 Yorkshire Ambulance Service 3 111 0 0 Yorkshire Tourist Board/ Welcome to Yorkshire 192 0 0 0 Yorkshire Water 661 182 56 496
East Riding of Yorkshire Council 99 Statement of Accounts 2019/20 OTHER NOTES TO THE FINANCIAL STATEMENTS
50. DISCLOSURE OF DEPLOYMENT OF DEDICATED SCHOOLS GRANT
The Council's expenditure on schools is funded primarily by grant monies provided by the Department for Education, the Dedicated Schools Grant (DSG). DSG is ringfenced and can only be applied to meet expenditure properly included in the Schools Budget, as defined in the School and Early Years Finance (England) Regulations 2018. The Schools Budget includes elements for a range of educational services provided on a council-wide basis and for the Individual Schools Budget, which is divided into a budget share for each maintained school. Details of the use of DSG receivable for 2019/20 are as follows:
Central Individual Total Expenditure Schools Budget £000 £000 £000 Final DSG for 2019/20 before Academy recoupment 227,337 Less Academy figure recouped for 2019/20 -73,418 Total DSG after Academy recoupment for 2019/20 153,919 Plus Brought Forward from 2018/19 74 Less Carry Forward to 2020/21 agreed in advance
Agreed initial budgeted distribution in 2019/20 153,993 In year adjustments 256 256 Final budgeted distribution for 2019/20 0 256 154,249 Less Actual Central Expenditure -25,825 -25,825 Less Actual ISB deployed to schools -131,742 -131,742 Plus Local Authority contribution for 2019/20 0 Carry Forward to 2020/21 -25,825 -131,486 -3,318
Due to pressures within the High Needs education budget the actual carry forward reported on the Dedicated Schools Grant note is a deficit of £3.319m. This relates purely to the balance of central expenditure (deficit of £3.317m) less a shortfall in DSG of £0.002m. In June 2020 the Education and Skills Funding Agency changed the operational guide for Schools Revenue Funding 2020 to 2021. As a consequence a management plan now needs to be produced for any deficit value on the Dedicated Schools Grant. Previously a deficit recovery plan was required when deficits exceeded 1% of the cash value of the overall Dedicated Schools Grant. A management plan for the recovery of the deficit has yet to be agreed with the schools forum. The deficit is shown separately within the earmarked reserves disclosure on page 78. The ISB as funded through DSG has an under spend in 2019/20 of £1.256m and cumulative carry forward of £9.508m, which is reported separately under schools reserves.
East Riding of Yorkshire Council 100 Statement of Accounts 2019/20 OTHER NOTES TO THE FINANCIAL STATEMENTS
51. DISCLOSURE OF INTERESTS IN SCHOOLS
All local authority maintained schools are considered to be entities controlled by the Council. Their income, expenditure, assets (excepting some non-current assets), liabilities, reserves and cash flows are required to be recognised in the Council’s single entity statements. The Council’s financial statements report the balances and transactions for all maintained schools with the exception of non-current assets (land and buildings) owned by Voluntary Aided, Voluntary Controlled and Foundation Schools. The Council’s accounting policies on accounting for schools and the judgements made in applying the policy are on page 7. The Council completed an assessment of all maintained schools to determine the arrangements in place and the accounting treatment required. The categories of schools that were assessed are included in the table below:
2018/19 2019/20 Secondary Primary Special Total Secondary Primary Special Total 6 62 4 72 Community Schools 6 61 4 71 1 33 0 34 Voluntary Controlled 1 30 0 31 0 7 0 7 Voluntary Aided 0 3 0 3 0 4 0 4 Foundation 0 4 0 4 7 106 4 117 7 98 4 109
The reduction in schools in 2019/20 is as a result of eight schools converting to an academy and the inclusion of The Hub School (Pupil Referral Unit). The non-current assets of all Voluntary Aided and Controlled Schools and three of the Foundation Schools are owned by religious bodies and are therefore not included on the Council’s balance sheet. The table below shows the income and expenditure and the resulting surplus or deficit for each category of school:
2019/20 Secondary Primary Special Surplus/ Surplus/ Surplus/ Expenditure Income (Deficit) Expenditure Income (Deficit) Expenditure Income (Deficit) £000 £000 £000 £000 £000 £000 £000 £000 £000 Community Schools 31,464 -31,677 213 76,233 -76,574 341 10,738 -10,941 203 Voluntary Controlled 7,026 -7,199 173 24,948 -24,958 10 0 Voluntary Aided 0 0 0 2,641 -2,648 7 0 Foundation 0 0 0 2,768-2,694 -74 0 38,490 -38,876 386 106,590 -106,874 284 10,738 -10,941 203
2018/19 Secondary Primary Special Surplus/ Surplus/ Surplus/ Expenditure Income (Deficit) Expenditure Income (Deficit) Expenditure Income (Deficit) £000 £000 £000 £000 £000 £000 £000 £000 £000 Community Schools 34,656 -35,236 580 72,394 -72,791 397 10,177 -9,791 -386 Voluntary Controlled 6,972 -7,023 51 26,485 -26,689 204 0 Voluntary Aided 0 0 0 4,831 -4,791 -40 0 Foundation 0 0 0 2,668-2,739 71 0 41,628 -42,259 631 106,378 -107,010 632 10,177 -9,791 -386
Note 7a includes the financial consequences of the transfer of schools to academy status. In 2019/20 seven primary schools and one junior school transferred to an academy.
East Riding of Yorkshire Council 101 Statement of Accounts 2019/20 OTHER NOTES TO THE FINANCIAL STATEMENTS
52. EVENTS AFTER THE REPORTING PERIOD
This note considers events that arise after the balance sheet date, which concerns conditions that did not exist at that time and are of such materiality that their disclosure is required for the fair presentation of the final statements. Events after the balance sheet date are reflected up to the date when the Statement of Accounts was authorised by the Head of Finance as Section 151 Officer on 31 May 2019.
The Covid-19 pandemic has had a huge impact on the way in which we have worked and lived during the final few weeks of the financial year and has continued into 2020/21. To address these challenges brought about by the pandemic, the council has been working with partners to develop its emergency response, working very hard to maintain essential services, prioritising resources where they are needed most whilst dealing with the impacts of Covid-19 on residents, businesses and its own workforce. Within the narrative reports the financial outlook and risks facing the Council are addressed as a result of the Covid-9 Pandemic. At the date of signing there has been no adjusting or non-adjusting events after the reporting period.
East Riding of Yorkshire Council 102 Statement of Accounts 2019/20 OTHER NOTES TO THE FINANCIAL STATEMENTS
53. POOLED BUDGETS FOR HEALTH AND SOCIAL CARE
The Better Care Fund (BCF) is a programme spanning both the NHS and local government which seeks to join- up health and care services, so that people can manage their own health and wellbeing, and live independently in their communities for as long as possible.. This Council is a partner within the pooled budget hosted by the East Riding of Yorkshire CCG (ERYCCG), which also includes the Vale of York CCG (VOYCCG). The Section 75 arrangement allocates budgets across schemes including; Community Services, Reablement and Rehablilitation, Home and Residential Care, Avoidable Admissions and Social Care. The performance of each of these schemes is monitored and reported to the Local Health & Wellbeing Board and NHS England on a quarterly basis. Details of the pooled income and expenditure are as follows:
Spend from the Pooled Budget 2019/20 ERYCCG VoYCCG ERYC Total £000 £000 £000 £000 Contributions to the Pooled Budget: East Riding of Yorkshire Clinical Commissioning Group (ERYCCG) 13,746 0 6,885 20,631 Vale of York Clinical Commissioning Group (VoYCCG) 0 886 478 1,364 East Riding of Yorkshire Council (ERYC) 0 0 14,585 14,585 13,746 886 21,948 36,580
Spend from the Pooled Budget 2018/19 ERYCCG VoYCCG ERYC Total £000 £000 £000 £000 Contributions to the Pooled Budget: East Riding of Yorkshire Clinical Commissioning Group (ERYCCG) 13,275 0 6,549 19,824 Vale of York Clinical Commissioning Group (VoYCCG) 0 845 444 1,289 East Riding of Yorkshire Council (ERYC) 0 0 11,438 11,438 13,275 845 18,431 32,551
East Riding of Yorkshire Council 103 Statement of Accounts 2019/20 HOUSING REVENUE ACCOUNT
HOUSING REVENUE ACCOUNT INCOME AND EXPENDITURE STATEMENT
The HRA Income and Expenditure Statement shows the economic cost in the year of providing housing services in accordance with generally accepted accounting practices, rather than the amount to be funded from rents and government grants. Authorities charge rents to cover expenditure in accordance with the legislative framework; this may be different from the accounting cost. The increase or decrease in the year, on the basis on which rents are raised, is shown in the Movement on the Housing Revenue Account Statement.
2018/19 Note 2019/20 £000 £000
Expenditure Supervision and management 6,309 General 6,505 2,770 Special 2,948 367 Rents, rates, taxes and other charges 438 10,030 Repairs and maintenance 10,227 176 Contribution to Supporting People - Transitional Protection 170 530 Increase in provision for bad / doubtful debts 579 -403 Revaluation loss on council dwellings 5c 7,720 -134 Revaluation loss on non-dwellings 5c 25 8,634 Depreciation on council dwellings 5c 8,739 0 Impairment on council dwellings 5c 58 464 Depreciation on non-dwellings 5c 443 81 Debt management costs 88 28,824 Total Expenditure 37,940
Income -46,399 Dwelling rents -46,007 -446 Non-dwelling rents -454 -238 Charges for services and facilities -277 -265 Contributions towards expenditure -192 -1,211 Contributions towards welfare warden service -973 -286 Photovoltaic cells income -326 -48,845 Total income -48,229
-20,021 Net Cost of HRA Services as included in the whole authority -10,289 Comprehensive Income and Expenditure Statement 22 Service share of Corporate and Democratic Core 0 Service share of Non Distributed Costs (NDC) 71 Non-operational revaluation loss on Assets Held for Sale/Surplus 100 6 Non-operational depreciation on non-dwellings 8 -19,922 Net Expenditure of HRA Services -10,181
HRA share of the operating income and expenditure included in the whole authority Comprehensive Income and Expenditure Statement 4,077 Gain on sale of HRA non current assets 4,138 -5,403 Usable capital receipts - sale proceeds 7b -6,218 212 Net interest on the net defined benefit liability (asset) 8 293 7,734 Interest payable on positive credit ceiling 7,680 -438 Interest receivable 6 -514 -35 Other Income (Right To Buy (RTB) Discounts repaid) 7b -16 -939 Capital grants and contributions relating to fixed assets 7a -1,851 -14,714 Surplus (-) / deficit for the Year on HRA services -6,669
East Riding of Yorkshire Council 104 Statement of Accounts 2019/20 NOTES TO THE HOUSING REVENUE ACCOUNT
MOVEMENT ON THE HOUSING REVENUE ACCOUNT STATEMENT
2018/19 Note 2019/20 £000 £000 4,284 Balance at 1 April brought forward 4,659
Movement in reserves during 2019/20 14,714 Surplus / deficit (-) on HRA Income and Expenditure Statement 6,669 Adjustments between accounting basis and funding basis under -14,339 the legislative framework 2 -6,920
375 Net Increase / (Decrease) before Transfers to / from Reserves -251 0 Transfers to / (from) Earmarked Reserves 0
375 Increase / (decrease) in year on the HRA -251 4,659 Balance at 31 March carried forward 4,408
1. HOUSING REVENUE ACCOUNT RECONCILIATION
The reduction in year on the Statutory HRA balance was £0.251m. This was £6.920m less than the HRA Income and Expenditure Account surplus of £6.669m. This is explained as follows. The HRA reflects a statutory obligation to maintain a revenue account for local authority housing provision in accordance with Part 6 of the Local Government Housing Act 1989, which also sets out the framework for ring-fencing the HRA, preventing subsidisation of rents from the General Fund income of the authority and vice versa. Information to be disclosed in the notes is prescribed in The Housing Revenue Account (Accounting Practices) Directions 2016 as issued by the Department for Communities and Local Government in May 2016. The HRA includes the credit and debit items, which are taken into account in determining the surplus or deficit on the HRA for the year. The amounts included in the HRA differ from the amounts in respect of HRA services included in the Comprehensive Income and Expenditure Statement for the Council as a whole, which includes income and expenditure in accordance with the Accounting Code of Practice rather than statute and non-statutory proper practices. For this reason the HRA statement has two parts: HRA Income and Expenditure Statement – shows in more detail the income and expenditure on HRA services included in the whole Council Comprehensive Income and Expenditure Statement; and Movement on the Housing Revenue Account Statement – shows how the HRA Income and Expenditure Statement surplus or deficit for the year reconciles to the movement on the HRA Balance for the year. The surplus or deficit on the Income and Expenditure Statement is a measure of the Council’s operating financial performance for the year for HRA services. The surplus or deficit on the Statutory HRA indicates whether the Council has added to or drawn on the brought forward balance on its statutory HRA Reserve during the year. This in turn affects the amount of the balance upon the HRA that the Council can take into account when determining its spending plans on HRA services for the following year. Note 3 summarises the movements on the two separate sections of the account.
East Riding of Yorkshire Council 105 Statement of Accounts 2019/20 NOTES TO THE HOUSING REVENUE ACCOUNT
2. ADJUSTMENT BETWEEN ACCOUNTING BASIS AND FUNDING BASIS UNDER REGULATIONS
Housing Major Earmarked Usable Total Revenue Repairs Revenue Capital Usable Unusable 2019/20 Note Account Reserve Reserves Receipts Reserves Reserves £000 £000 £000 £000 £000 £000
Reversal of items debited or credited to the HRA Income and Expenditure Statement Adjustments involving the Capital Adjustment Account Item 8 determination to reverse impairment losses -14,318 0 0 0 -14,318 14,318 Item 8 determination to reverse impairment losses (previous year adjustments) 6,415 0 0 0 6,415 -6,415 Non-current asset written out in gain or loss on disposal/sale of non-current assets -4,040 0 0 0 -4,040 4,040 Capital grant/contributions to finance fixed assets from in-year income 1,851 0 0 0 1,851 -1,851 Reverse depreciation to CAA -9,190 0 0 0 -9,190 9,190 Addition of items not debited or credited to the HRA Income and Expenditure Statement Capital expenditure charged to HRA balance 7a 7,724 0 0 0 7,724 -7,724 Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of disposal/sale of non-current assets 7b 6,218 0 0 -6,218 0 0 Contribution from Capital Receipts Reserve towards administrative costs of non current asset disposals 7b -100 0 0 100 0 0 Other income (RTB Discounts) 7b 16 0 0 -16 0 0 Deferred capital receipts received (Mortgage repayments) 7b 0 0 0 -1 -1 1 Adjustments involving the Major Repairs Reserve Additional transfer to MRR for Depreciation 7c 9,190 -9,190 0 0 0 0 Additional transfer to MRR in excess of depreciation 7c 0 0 0 0 0 0 Use of the Major Repairs Reserve to finance new capital expenditure 7c 0 10,092 0 0 10,092 -10,092 Use of the Major Repairs Reserve to repay debt 7c 0 0 0 0 0 0 Transfer to MRR - Debt Repayment 2,344 -2,344 0 0 0 0 Transfer to MRR - New Build 2,148 -2,148 0 0 0 0
Adjustments involving the Pensions Reserve Net charges made for retirement benefits in accordance with IAS 19 8 -2,060 0 0 0 -2,060 2,060 Employer's contributions payable to the East Riding Pension Fund 8 740 0 0 0 740 -740 Adjustments involving the Accumulating Absences Account Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargable in the year in accordance with statutory requirement -18 0 0 0 -18 18 Total adjustments between accounting basis and funding basis under regulations 6,920 -3,590 0 -6,135 -2,805 2,805 Transfer to or from earmarked reserves - voluntary 0 0 0 0 0 0 Net additional amount required to be credited to the HRA balance for the year 6,920 -3,590 0 -6,135 -2,805 2,805
East Riding of Yorkshire Council 106 Statement of Accounts 2019/20
NOTES TO THE HOUSING REVENUE ACCOUNT
Housing Major Earmarked Usable Total Revenue Repairs Revenue Capital Usable Unusable 2018/19 Note Account Reserve Reserves Receipts Reserves Reserves £000 £000 £000 £000 £000 £000 Reversal of items debited or credited to the HRA Income and Expenditure Statement Adjustments involving the Capital Adjustment Account Item 8 determination to reverse impairment losses -13,000 0 0 0 -13,000 13,000 Item 8 determination to reverse impairment losses (previous year adjustments) 13,466 0 0 0 13,466 -13,466 Non-current asset written out in gain or loss on disposal/sale of non-current assets -3,972 0 0 0 -3,972 3,972 Capital grant/contributions to finance fixed assets from in-year income 939 0 0 0 939 -939 Write down - REFCUS - Other expenditure 0 0 0 Reverse depreciation to CAA -9,104 0 0 0 -9,104 9,104 Addition of items not debited or credited to the HRA Income and Expenditure Statement Capital expenditure charged to HRA balance 7,962 0 0 0 7,962 -7,962 Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of disposal/sale of non-current assets 5,403 0 0 -5,403 0 0 Contribution from Capital Receipts Reserve towards administrative costs of non current asset disposals -104 0 0 104 0 0 Other income (RTB Discounts) 35 0 0 -35 0 0 Deferred capital receipts received (Mortgage repayments) 0 0 0 -1 -1 1 Adjustments involving the Major Repairs Reserve Additional transfer to MRR for Depreciation 9,104 -9,104 0 0 0 0 Additional transfer of MRR in excess of depreciation 0 0 0 0 0 0 Use of the Major Repairs Reserve to finance new capital expenditure 0 11,288 0 0 11,288 -11,288 Use of the Major Repairs Reserve to repay debt 0 0 0 0 0 0 Transfer to MRR - Debt Repayment 3,582 -3,582 0 0 0 0 Transfer to MRR - New Build 912 -912 0 0 0 0
Adjustments involving the Pensions Reserve Net charges made for retirement benefits in accordance with IAS 19 -1,537 0 0 0 -1,537 1,537 Employer's contributions payable to the East Riding Pension Fund 658 0 0 0 658 -658 Adjustments involving the Accumulating Absences Account Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargable in the year in accordance with statutory requirement -5 0 0 0 -5 5 Total adjustments between accounting basis and funding basis under regulations 14,339 -2,310 0 -5,335 6,694 -6,694 Transfer to or from earmarked reserves - voluntary 0 0 0 0 0 0 Net additional amount required to be credited to the HRA balance for the year 14,339 -2,310 0 -5,335 6,694 -6,694
East Riding of Yorkshire Council 107 Statement of Accounts 2019/20
NOTES TO THE HOUSING REVENUE ACCOUNT
3. SUMMARY OF 2019/20
Following abolition by the Government of HRA subsidy in 2011/12, the HRA now operates on a self-financing basis, resourced from the rent it receives. This required the Council taking on additional debt of £208.082m, as calculated by a Government formula. Adequate rent income is required as a first call to meet the cost of servicing the debt, followed by maintaining the Decent Home Standard on all dwellings, with any remaining income, set aside for future major investment in new/existing stock. The HRA Income and Expenditure Statement showed a surplus on HRA services of £6.669m. After applying the Movement on the HRA Statement, the net reduction to the HRA was £0.251m, giving a balance on the account to be carried forward of £4.408m The 2019/20 deficit of £0.251m was £0.261m overspent against the £0.010m budgeted surplus. This was mainly due to Repairs and Maintenance on dwelling stock being overspent by £0.509m due to an increase in the amount of responsive works required this financial year, including works to void dwellings. This was partially offset by an underspend on Interest Payable against HRA borrowing, due to a small reduction in the interest rate being charged, alongside lower than anticipated new Prudential Borrowing undertaken in year. In total all HRA reserves stand at £54.260m, which includes the general reserve and monies set aside for debt repayment and investment in new stock and repairs.
4. RENT ACCOUNT
The specific provision for the possible non-collection of all rent related charges at 31 March is £2.178m, which represents 78% of the total outstanding arrears. The calculation assesses the potential for future impairment based on an analysis of arrears with and without arrangements with current and former tenants. These are then further analysed on an age outstanding basis and provisions made on established percentages, relating to the age of debt outstanding. The provision has been increased in recent years to reflect the non-collection of rent due to the reduction in rebates from the removal of the spare room subsidy as well as the introduction of Universal Credit where claimants have a period without benefits at the start of their claim. Rent Arrears
2018/19 2019/20 £000 £000
Arrears by tenant 1,365 Current tenants 1,762 1,001 Former tenants 1,014 2,366 Total arrears 2,776
Assistance towards payment of rent is available via Universal Credit or through Housing Benefit for those on low incomes. In 2019/20 £21.281m (46%) of the £46.743m gross rent was funded via Housing Benefit rebates and 46.5% (55.25% in 2018/19) of the Council’s tenants receive some help with the cost of their rent via this method, resulting in an average Housing Benefit caseload in 2019/20 of 5,458 (6,137 in 2018/19). The decrease in the rent rebate figures is due to the phasing out of Housing Benefit, which is gradually being replaced with Universal Credit (administered by central government).
East Riding of Yorkshire Council 108 Statement of Accounts 2019/20 NOTES TO THE HOUSING REVENUE ACCOUNT
5. HOUSING ASSETS
(a) Housing Stock The Council was responsible for managing the following operational dwellings in 2019/20. Flats or maisonettes sold under the Right to Buy Scheme are sold as long leasehold. This allows the purchaser and their successors to live in it for a fixed time, usually 125 years. The block is still owned by the Council, which is responsible for the upkeep of the building as a whole and for any communal areas or facilities. Leaseholders have to pay a nominal ground rent of £10 per year and a reasonable share of the costs for works, services and management of the block as incurred by the Council. The Council also has a number of Shared Ownership properties (where tenants can purchase a proportion of equity in the property and pay rent on the remainder). The in-year movements are categorised below:
2018/19 2019/20 Shared Houses Flats Ownership** Total
Operational Dwellings 11,349 As at 1 April 7,620 3,684 10 11,314 -81 Sales -74 -5 0 -79 49 Acquisitions 35 6 15 56 11 Newly built dwellings 0 0 0 0 -21 Surplus to requirements -2 0 0 -2 7 Reclassification 0 -4 0 -4
11,314 As at 31 March 7,579 3,681 25 11,285 Leasehold Dwellings 227 As at 1 April 0 225 225 7 Additions 05 5 -9 Removal* 0 -4 * -4
225 As at 31 March 0 226 226
*Four leasehold dwellings have been repurchased, however, none have been brought back into the HRA as operational dwellings, as they are still assets under construction. **This is the total number of properties in which the Council holds an equity stake - the retained proportion of each property will vary from this. There are also 13 shared ownership properties still accounted for as assets under construction, making 38 in total. (b) The Vacant Possession Value of Council Dwellings In accordance with Government guidance, the basis of valuation for the Council’s housing stock in the balance sheet is its existing use value for social housing (EUV-SH). To arrive at EUV-SH, the vacant possession value of the dwellings is used as a base on the assumption that each property is used as residential accommodation that will be occupied by a secure tenant. At 1 April 2019, following revaluation, this value was £1,051.8m. This value is then adjusted by a regional adjustment factor, in this case 41%, to arrive at the value for inclusion in the Balance Sheet. At 1 April 2019 this was £431.2m. The difference between the vacant possession value and balance sheet value of dwellings shows the economic cost of providing council housing at less than open market rents. The Council’s housing stock is revalued annually at 1 April.
East Riding of Yorkshire Council 109 Statement of Accounts 2019/20 NOTES TO THE HOUSING REVENUE ACCOUNT
(c) Movement of Property, Plant & Equipment
2019/20 Restated Other Vehicles, plant, Council land and furniture and Infra- Surplus Assets under Dwellings buildings equipment structure assets construction Total £000 £000 £000 £000 £000 £000 £000 Cost or Valuation 1 April 2019 449,469 4,047 5 1,444 517 6,801 462,283 Additions / Enhancement 15,429 80 157 434 0 9,054 25,154 Revaluation increases / (decreases) to RR -4,372 85 0 0 27 0 -4,260 Revaluation increases / (decreases) to SDPS -14,020 -139 0 0 -5 0 -14,164 Revaluation loss reversal to SDPS 6,300 114 0 0 1 0 6,415 Derecognition - Other -519 0 0 0 0 0 -519 Reclassification (to) / from Held for Sale -3,472 0 0 0 -466 0 -3,938 Other movements 5,820 129 0 1 92 -6,042 0
At 31 March 2020 454,635 4,316 162 1,879 166 9,813 470,971 Depreciation and Impairment 1 April 2019 8,591 193 2 229 0 0 9,015 Charge for the year 8,739 83 11 33 8 0 8,874 Depreciation written out to the RR -8,631 -163 0 0 -8 0 -8,802 Impairment losses to RR 00 000 00 Impairment losses to SDPS 58 0 0 0 0 0 58 Derecognition - Other -4 0 0 0 0 0 -4 Reclassification (to) / from Held for Sale 00 000 00 Other movements -2 1 0 0 0 0 -1 At 31 March 2020 8,751 114 13 262 0 0 9,140
Net Book Value At 1 April 2019 440,791 3,854 3 1,215 517 6,801 453,268
At 31 March 2020 445,884 4,202 149 1,617 166 9,813 461,831
SDPS = Surplus or Deficit on the Provision of Services RR = Revaluation Reserve
The £14.020m revaluation loss on Council Dwellings includes a £1.048m loss on the 41 dwellings acquired and £1.667m on the 15 shared ownership properties. In addition to the revaluation loss shown in the above table, the HRA was also charged £0.096m in relation to the revaluation of Council Dwellings reclassified to Current Assets Held for Sale. The HRA was also charged £0.029m amortisation in relation to an intangible asset and £0.287m depreciation for the use of general fund assets (depots, fleet vehicles and equipment). In addition to the capital expenditure of £25.154m shown in the above table, the HRA spent £0.343m on three General Fund assets awaiting appropriation into the HRA and £0.094m on an intangible asset, resulting in total capital expenditure of £25.591m.
East Riding of Yorkshire Council 110 Statement of Accounts 2019/20 NOTES TO THE HOUSING REVENUE ACCOUNT
2018/19 Other Vehicles, plant, Council land and furniture and Infra- Surplus Assets under Dwellings buildings equipment structure assets construction Total £000 £000 £000 £000 £000 £000 £000 Cost or Valuation 1 April 2018 435,439 4,698 5 1,162 230 2,636 444,170 Additions / Enhancement 15,455 3 0 282 0 10,189 25,929 Revaluation increases / (decreases) to RR -4,797 1 0 0 124 0 -4,672 Revaluation increases / (decreases) to SDPS -13,043 -8 0 0 -1 0 -13,052 Revaluation loss reversal to SDPS 13,446 21 0 0 20 0 13,487 Derecognition - Other -137 0 0 0 0 0 -137 Reclassification (to) / from Held for Sale -3,546 0 0 0 0 0 -3,546 Other movements 6,565 -668 0 0 144 -6,024 17 At 31 March 2019 449,382 4,047 5 1,444 517 6,801 462,196
Depreciation and Impairment 1 April 2018 8,372 174 1 202 0 0 8,749 Charge for the year 8,634 75 1 27 6 0 8,743 Depreciation written out to the RR -8,363 -56 0 0 -9 0 -8,428 Impairment losses to RR -48 0 0 0 0 0 -48 Impairment losses to SDPS 0 0 0 0 0 0 0 Derecognition - Other -2 0 0 0 0 0 -2 Reclassification (to) / from Held for Sale 0 0 0 0 0 0 0 Other movements -2 0 0 0 3 0 1
At 31 March 2019 8,591 193 2 229 0 0 9,015 Net Book Value At 1 April 2018 427,067 4,524 4 960 230 2,636 435,421 At 31 March 2019 440,791 3,854 3 1,215 517 6,801 453,181
SDPS = Surplus or Deficit on the Provision of Services RR = Revaluation Reserve
The £13.043m revaluation loss on Council Dwellings includes a £1.804m loss on the 47 dwellings acquired, £0.929m on the 11 newly built dwellings and £0.709m on the 10 shared ownership properties. In addition to the revaluation loss shown in the above table, the HRA was also charged a net £0.090m in relation to the revaluation of Council Dwellings reclassified to Current Assets Held for Sale. The HRA was also charged £0.030m amortisation in relation to an intangible asset and £0.331m depreciation and a net revaluation loss of -£0.121m, (£0.171m revaluation loss and -£0.292m revaluation loss reversal) for the use of general fund assets (depots, fleet vehicles and equipment). In addition to the capital expenditure of £25.929 shown in the above table, the HRA spent £0.139m on three General Fund assets awaiting appropriation into the HRA, resulting in total capital expenditure of £26.068m.
East Riding of Yorkshire Council 111 Statement of Accounts 2019/20 NOTES TO THE HOUSING REVENUE ACCOUNT
6. CAPITAL FINANCING CHARGES
Charges and credits to the Housing Revenue Account, as determined by the Government, contain the following amounts calculated in accordance with the prescribed ‘Item 8 Debit and Credit’ determinations.
2018/19 2019/20 £000 £000 £000 Revaluation loss / Impairment -403 Council dwellings 7,778 -63 Other HRA assets / NDCs 125 7,903 Depreciation 8,634 Council dwellings 8,739 470 Other HRA assets / NDCs 451 9,190 8,638 17,093 81 Debt management expenses 88 Transfer to the MRR 912 - investment in new major schemes 2,148 3,582 - loan debt repayment provision 2,344 4,492 7,734 Interest on loans 7,680 20,947 Item 8 Debit 29,353 -438 Interest on cash balances -514 0 Mortgage interest 0 -514 466 Reversal of impairment on dwellings -7,903 28 Item 8 Credit -8,417 20,975 Net Debit 20,936
7. SUMMARY OF CAPITAL EXPENDITURE AND FINANCING
(a) Financing of Capital Expenditure Details of capital expenditure within the HRA and the financing of that expenditure are set out below.
2018/19 2019/20 Vehicles, Land & Infra- Plant & Assets General Total Dwellings Buildings structure Equipment construction Fund Assets Intangibles Total £000 Capital Investment £000 £000 £000 £000 £000 £000 £000 £000 26,068 Non-current assets 15,429 80 434 157 9,054 343 94 25,591 Financing
502 Capital Receipts 0 0 0 0 2,373 0 0 2,373 939 Grants/contributions 151 0 0 157 1,543 0 0 1,851 7,962 Revenue contributions 7,153 2 434 0 135 0 0 7,724 2,184 Investment Reserve 0 0 0 0 807 0 94 901 9,104 Major Repairs Reserve 8,118 78 0 0 651 343 0 9,190 5,377 Borrowing 7 0 0 0 3,545 0 0 3,552 26,068 15,429 80 434 157 9,054 343 94 25,591
The total capital expenditure of £25.591m above includes £0.308m on two General Fund surplus assets and £0.035m on a General Fund asset under construction, all awaiting appropriation into the HRA.
East Riding of Yorkshire Council 112 Statement of Accounts 2019/20 NOTES TO THE HOUSING REVENUE ACCOUNT (b) Capital Receipts Capital receipts in respect of the HRA received during the year are as follows:
2018/19 2019/20 Council Land/ Total Dwelling Other Total £000 £000 £000 £000
5,403 Sales proceeds* 6,204 14 6,218 -104 Less administrative costs -100 -100
5,299 Net proceeds 6,104 14 6,118
35 Right to buy discount repaid 16 0 16 1 Mortgage principal repaid 1 0 1
5,335 6,121 14 6,135
*includes 2 surplus dwellings at £0.288m and the part-sale of 20 shared ownership properties at £1.227m in 2019/20. (c) Major Repairs Reserve The following is an analysis of the movement on the Major Repairs Reserve.
2018/19 2019/20 £000 £000 43,952 As at 1 April 46,262
Improvements to Existing Stock Amount transferred from HRA to reserve during the year 9,104 Depreciation 9,190
Amount transferred from reserve during the year -9,104 Capital expenditure on existing stock -9,190
Investment in New Build Programmes 912 Transfer from HRA to reserve during the year 2,148 -2,184 Capital Expenditure Funded from reserve -902
Debt Repayment 3,582 Transfer from HRA to reserve during the year 2,344 46,262 As at 31 March 49,852
Balances on each reserve at 31 March
24,898 Investment in New Build Programmes 26,144 21,364 Debt Repayment 23,708 46,262 49,852
The reserve allows for spending on HRA capital expenditure only, including repayment of HRA debt, with the flexibility of carrying over any unspent funds from one year to another. No restrictions, other than demolition works, are imposed on what types of capital works the funds can be used for and, as with other capital resources, the council will determine stock investment and major maintenance priorities as part of its business planning process.
East Riding of Yorkshire Council 113 Statement of Accounts 2019/20 NOTES TO THE HOUSING REVENUE ACCOUNT
8. PENSION COSTS
The charges in the HRA relating to the defined benefit scheme, accounted for in accordance with IAS 19 are shown below. These costs have been apportioned to the HRA on the basis of pensionable pay.
2018/19 2019/20 £000 £000 1,325 Current service cost 1,767 1,325 Operating Charges 1,767
212 Interest on pension scheme liabilities 293 212 Amount Debited to Other Operating Costs 293 1,537 Net Housing Revenue Account Cost 2,060 -658 Employer contributions -740 879 Appropriation from the Pension Reserve 1,320
East Riding of Yorkshire Council 114 Statement of Accounts 2019/20 COLLECTION FUND
The Collection Fund is an agent’s statement that reflects the statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority in relation to the collection from taxpayers and distribution to local authorities and the Government of council tax and non- domestic rates.
2018/19 2019/20 Business Council Business Council Rates Tax Total Rates Tax Total £000 £000 £000 £000 Income -204,252 -204,252 Council taxpayers -214,988 -214,988 -109,684 -109,684 Business ratepayers -110,398 -110,398
-109,684 -204,252 -313,936 Total Income -110,398 -214,988 -325,386
Expenditure Apportionment of previous years surplus/ deficit -898 -898 Central Government -1,095 -1,095 -880 3,767 2,887 East Riding of Yorkshire Council -1,073 1,676 603 513 513 Humberside Police and Crime Commissioner 229 229 -18 220 202 Humberside Fire and Rescue Service -22 95 73
-1,796 4,500 2,704 -2,190 2,000 -190 Precepts 47,589 47,589 Central Government 47,958 47,958 51,536 167,421 218,957 East Riding of Yorkshire Council 52,109 174,731 226,840 22,931 22,931 Humberside Police & Crime Commissioner 26,025 26,025 955 9,492 10,447 Humberside Fire and Rescue Service 960 9,899 10,859 100,080 199,844 299,924 101,027 210,655 311,682 Charges to Collection Fund 434 434 Costs of Collection 434 434 7,585 7,585 Transitional protection payments payable 11,814 11,814 -144 -144 Renewables and Enterprize zones balance 51 51 394 579 973 Increase / Decrease (-) in Bad Debt Provision 717 -125 592 0 649 649 Write-offs of uncollectable amounts 0 738 738 2,112 2,112 Increase / Decrease (-) in Provision for Appeals -820 -820
10,381 1,228 11,609 12,196 613 12,809 108,665 205,572 314,237 Total Expenditure 111,033 213,268 324,301
-1,019 1,320 301 Surplus (-)/Deficit arising during the Year 635 -1,720 -1,085
-3,102 3,788 686 Surplus / Deficit (-) b/fwd 1 April -2,083 2,468 385 1,019 -1,320 -301 Surplus / Deficit (-) for the Year -635 1,720 1,085
-2,083 2,468 385 Surplus / Deficit (-) c/fwd 31 March -2,718 4,188 1,470
East Riding of Yorkshire Council 115 Statement of Accounts 2019/20 COLLECTION FUND
1. COUNCIL TAX
Council tax is charged on a series of property valuation bands. The number of chargeable dwellings in each band (adjusted for exemptions and discounts), the calculation of the council tax base, and the average council tax chargeable in each band are shown in the table below:
2018/19 2019/20 Number of Band D Number of Band D Chargeable Equivalent Average Council Tax Band Chargeable Equivalent Average Dwellings Dwellings Council Tax (ratio to Band D) Dwellings Dwellings Council £ £ 26,733 17,822 1,158.04 A (6/9) 27,072 18,048 1,205.03 28,917 22,491 1,351.05 B (7/9) 29,330 22,812 1,405.87 26,151 23,245 1,544.05 C (8/9) 26,437 23,500 1,606.71 21,788 21,788 1,737.06 D (9/9) 21,970 21,969 1,807.55 14,120 17,258 2,123.07 E (11/9) 14,344 17,532 2,209.23 6,414 9,265 2,509.09 F (13/9) 6,628 9,573 2,610.91 2,962 4,937 2,895.10 G (15/9) 2,966 4,944 3,012.58 206 411 3,474.12 H (18/9) 212 423 3,615.10
127,291 117,217 Total 128,959 118,801
-2,171 Adjustment* -2,257 115,046 Council Tax Base 116,544 * For anticipated collection rate and Ministry of Defence properties
The average council tax chargeable in each band includes charges from East Riding of Yorkshire Council, the Humberside Police and Crime Commissioner, Humberside Fire and Rescue Service, and town and parish councils. The estimated council tax collectable is calculated by multiplying the tax base by the Band D average council tax. The estimated council tax collectable in 2019/20 was £210.659m (2018/19 £199.841m) when the council tax base was set by the billing authority prior to the start of the financial year. This corresponds with the council tax precepts set by East Riding of Yorkshire Council (including town and parish councils), the Humberside Police and Crime Commissioner, and Humberside Fire and Rescue Service, as shown in the Collection Fund Statement. The actual amount collectable from council taxpayers is subject to changes during the year to the number of properties eligible to be charged and individual taxpayers’ circumstances, as well as the collection rate. The actual amount collectable during 2019/20 is £214.988m (2018/19 £204.252m), as shown in the income section of the Collection Fund Statement.
2. NON - DOMESTIC RATES (BUSINESS RATES)
Non-Domestic ratepayers contribute to local services based on a nationally agreed rate poundage levied by the Government. This poundage is multiplied by the rateable value of their business premises and paid to the council. The total amount collected is distributed to the Government (50%), the Council (49%), and Humberside Fire and Rescue (1%) after making allowable deductions e.g. losses in collection. The total business rateable value for East Riding at 31 March 2020 was £254.593m (2018/19 £254.829m), of which £32.230m (2018/19 £30.982m) related to small businesses. The poundage for 2019/20 was 50.4p (2018/19 49.3p) and 49.1p for small businesses (2018/19 48.0p). This gives a gross collectable figure at 31 March 2020 of £127.896m (£125.228m at 31 March 2019). The collectable amount is adjusted for several mandatory and discretionary reliefs (i.e. discounts), such as those applied to premises occupied by charities or those that are empty in order to derive the business rates income figure shown in the Collection Fund Statement.
East Riding of Yorkshire Council 116 Statement of Accounts 2019/20 PENSION FUND
1. FOREWORD
The Fund was created on the reorganisation of local government in 1974 and East Riding of Yorkshire Council became the Administering Authority on 1 April 1996. At 31 March 2020 the Fund was valued at £4.764bn, having paid out £181.3m during the year for the benefit of Scheme members. This is a decrease in the Fund value of £294m from 31 March 2019, due to a significant capital depreciation across all major equity markets in the final quarter of the year as the impact of the coronavirus epidemic became apparent. There was a substantial deterioration in investor risk sentiment together with an associated flight to safety. The strongest relative returns were seen in the Alternatives Sector, in particular Private Equity, along with Corporate Bonds in the Fixed Income Sector. UK Government Bonds, Overseas Bonds and Infrastructure all contributed positive absolute returns despite the difficult market conditions. In addition, sterling returns from overseas investments received a significant boost due to the depreciation of the currency following the exit from the European Union and the coronavirus crisis. The Fund also benefitted from the strong performance of the internal manager and Border to Coast Pension Partnership (Border to Coast), the funds chosen pooling partner. Throughout 2019/20 the number of employers in the Fund with active members was 317 (31 March 2019: 321). The slight decrease during the year was due to only counting employers with active members as opposed to the inclusion of those employers with an interest in the Fund also. All employees, other than teachers, of the Administering Authority and the majority of the Scheme Employers are entitled to participate in the Scheme. Employees of Scheme Employers classed as designating bodies, such as town and parish councils, and employees of the 57 Admission Bodies may be nominated for membership by their employer. Teachers, police officers and firefighters have separate pension arrangements. Although membership is not compulsory, it is automatic for all employees who have a contract of employment that is for at least 3 months and who are under the age of 75. Employees have freedom of choice to leave the Scheme and make alternative pension arrangements. At 31 March 2020 the total membership records administered by the East Riding Pension Fund was 116,422, an increase of 1.4% in the year (2019: 114,882). For active members, each separate employment contract is classed as a record where an individual has multiple employments, and the number of active member records has decreased by 3.8% to 38,761 (2019: 40,234). For pensioner members each pension entitlement is classed as a record where an individual is in receipt of more than one pension and the number of pensioner member records, including the pensions paid to spouses and dependants of the former scheme members, has increased by 5.5% to 33,194 (2019: 31,470). All the membership figures are based on the up to date position recorded on the pension administration system, with all previous years restated on a consistent basis. The average pension payment is £4,547.70 per annum, equivalent to a weekly payment of £87.22. The Fund generated a return of -4.8% for the year to 31 March 2020 compared to the strategic benchmark return of -7.3%. Over the three years to 31 March 2020 the Fund returned 1.8% per annum, compared to the strategic benchmark return of 0.6% per annum and the long term investment objective of 6.0% per annum. The Fund continues to be managed in a cost effective manner with total pension administration, investment management, and oversight and governance costs equating to just 0.17% (2019: 0.14%) of funds under management. The key challenges for the Fund in the year ahead is to maintain the strong investment performance in an increasingly volatile market environment whilst continuing to manage the transition of assets to Border to Coast. The Fund is participating fully in the pooling process and will ensure that there is appropriate governance oversight of the activities of our pooling partner.
2. REPORT OF THE PENSIONS COMMITTEE
The Pensions Committee is responsible for the administration of the East Riding Pension Fund in accordance with Statutory Regulations, under delegation contained in the Constitution of East Riding of Yorkshire Council. During the past year the Committee consisted of ten Members of East Riding of Yorkshire Council. In addition, a Member from each of the other three unitary Councils and four trade union representatives attend Committee meetings to ensure that the views of the other major employers and individual members of the scheme are taken into account. The Committee met quarterly to consider investment reports from the Director of Corporate Resources, the external managers and the independent advisor. The Committee also met on three further occasions to consider pension administration issues and to receive training as part of the member training programme. East Riding of Yorkshire Council 117 Statement of Accounts 2019/20 PENSION FUND
During the year the Committee: Approved the Investment Strategy Statement (ISS) which sets out in detail how the Fund is managed and the Governance Policy Statement which sets out in detail how the Fund is governed; Approved the proposed amendments to the Fund’s Communication Policy; Approved the Annual Report and Accounts 2018/19; Reviewed the management of the Fund and analysed the performance of the Fund and individual investment managers; Reviewed and approved the recommendations of the Pensions Sub Committee with regards to the strategic asset allocation review; Reviewed the current status of the Fund’s outstanding UK and Overseas Withholding Tax reclaims; Reviewed the Fund’s Treasury Management policy and treasury activity during the year; Reviewed the Fund’s corporate governance and voting activity; Reviewed the audit and assurance reports of the Fund’s investment managers and the global custodian; Reviewed the Fund’s expenditure against budget for the 2018/19 financial year and approved the budget for the 2019/20 financial year; Reviewed the Fund’s strategic risk register; Reviewed a number of the Fund’s pension administration policies; Reviewed the preliminary and final results of the Fund’s triennial actuarial valuation; Reviewed the Government Actuary Department’s (GAD) Section 13 report with regards to the 2016 actuarial valuation; Received training as part of the Member training programme; Received a number of reports on the development of Border to Coast, the pool selected by the Pension Fund to meet its requirements of the Government’s LGPS reform process; and For the year ended 31 March 2020, the Fund generated a return of -4.8%, compared to the strategic benchmark return of 6.4% and the Retail Price Index, which was 1.8% over the period. Global economic growth had slowed notably during 2019, possibly due to rising trade tensions, weak business confidence in Europe especially in manufacturing and a decline in growth in China although global monetary conditions were beginning to ease. Markets were further undermined by the speed of the spread of the coronavirus pandemic in the final quarter of the year. All major equity markets fell significantly as volatility increased but this was somewhat offset by the positive impact of currency depreciation on the sterling returns from overseas investments, and strong stock selection from the Fund’s internal manager and Border to Coast. Over the three years to 31 March 2020, the Fund has generated a return of 1.8% per annum, compared to the strategic benchmark return of 0.8% per annum and the long term investment objective of 6.0% per annum. Strong stock selection from the Fund’s investment managers has been the main contributor to performance over this period. The Government issued a consultation document in November 2015 which required LGPS funds to enter into pooling arrangements with other LGPS funds in order to generate economies of scale and facilitate investment in infrastructure. The Pension Fund is actively participating in the Border to Coast, initially a pool of 12 LGPS funds with c. £48bn in assets. Border to Coast became fully operational in July 2018 and is an alternative investment manager, authorised and regulated by the Financial Conduct Authority (FCA). It is wholly owned by the twelve LGPS administering authorities including East Riding of Yorkshire Council. Since inception some £1.93bn of internally managed assets have been successfully transitioned to Border to Coast. Commitments to other asset classes such as Alternatives and Fixed Income totalling c£110m per annum have been made for the next three years. It is important to note that this only relates to the pooling of assets and the associated management arrangements. The Pensions Committee will still be responsible for determining the Pension Fund’s strategic and tactical asset allocation and pension administration responsibilities will remain with East Riding of Yorkshire Council. It is anticipated that there will continue to be significant changes to the Local Government Pension Scheme in the next few years which will represent a considerable challenge to the Pension Fund. The Pensions Committee will strive to ensure the long term sustainability of the Pension Fund in the light of any proposed changes and ensure members are aware of their potential impact.
East Riding of Yorkshire Council 118 Statement of Accounts 2019/20 PENSION FUND
3. STATEMENT OF RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
Responsibility for the Financial Statements of the Fund is set out below. a) The Administering Authority The Administering Authority is East Riding of Yorkshire Council. The Administering Authority is required to: make arrangements for the proper administration of the financial affairs of the Fund and to secure that an officer has the responsibility for the administration of those affairs. In this Authority, that officer is the Head of Finance; manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; approve the Statement of Accounts. b) The Head of Finance The Head of Finance is responsible for the preparation of the 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 based on International Financial Reporting Standards (the Code). In preparing these financial statements, the Head of Finance has: selected suitable accounting policies and then applied them consistently; made judgements and estimates that were reasonable and prudent; complied with the Code; kept proper accounting records which were up to date; taken reasonable steps for the prevention and detection of fraud and other irregularities; assessed the Authority’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; used the going concern basis of accounting on the assumption that the functions of the Authority will continue in operational existence for the foreseeable future; and maintained such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. c) Certificate I hereby certify that the following accounts give a true and fair view of the financial position of the East Riding Pension Fund as at 31 March 2020 and its income and expenditure for the financial year then ended.
Julian Neilson Section 151 Officer 28 August 2020 East Riding of Yorkshire Council County Hall Beverley, East Riding of Yorkshire, HU17 9BA
East Riding of Yorkshire Council 119 Statement of Accounts 2019/20 PENSION FUND
4. FUND MEMBERSHIP
The 317 employers, including East Riding of Yorkshire Council, with an interest in the Fund are listed below: a) Administering Authority
East Riding of Yorkshire Council b) Schedule 2 Employers (259)
Adelaide Primary Academy Enfield Academy of New Waltham Ainthorpe Primary Academy Engineering UTC Northern Lincolnshire Airmyn Park Primary School Epworth Academy Alderman Cogan Primary Academy Epworth Town Council All Saints Church of England Infant Academy Estcourt Primary Academy All Saints Church of England Junior Academy Fairfield Academy Anlaby Common Parish Council Francis Askew Primary School Appleton Primary Academy Franklin College Archbishop Sentamu Academy Frederick Holmes Academy Aspire Academy Ganton School Barrow upon Humber Parish Council Gilberdyke Academy Barton upon Humber Town Council Gillshill Primary Academy Beacon Academy Goole High School Bellfield Academy Goole Town Council Beverley Grammar School Great Coates Primary Academy Beverley Town Council Griffin Primary Academy Biggin Hill Primary Academy Grimsby Institute of Further & Higher Education Bishop Burton College Hall Road Academy Bottesford Town Council Havelock Academy Bricknell Primary Academy Healing Primary School Bridgeview School Healing Science Academy Limited Bridlington Town Council Hedon Town Council Brigg Town Council Hessle Community Academy Broadacre Primary Academy Hessle Town Council Broughton Town Council Hibaldstow Academy Buckingham Primary Academy Highlands Primary Academy Bude Park Primary Academy Holderness Academy and Sixth Form College Bursar Primary Academy Hook C of E Primary School Burton upon Stather Parish Council Hornsea Town Council Cambridge Park Academy Howden School Canon Peter Hall Academy Hull College Cavendish Primary Academy Hull Culture and Leisure Limited Chiltern Primary School Humber Bridge Board Christopher Pickering Primary School Humberside Fire Authority Cleethorpes Academy Humberston Academy Cleeve Primary Academy Humberston Cloverfields Academy Clifton Primary School Humberston Park Academy Collingwood Academy Hunsley Primary School Compass Academy Huntcliff Academy Consortium Academy Trust - Winifred Holtby Academy Immingham Town Council Coritani Academy Ings Primary School Cottingham Croxby Primary Academy John Leggott College Cottingham High School John Whitgift Academy Craven Primary Academy Kelvin Hall School Crowle Academy Keyingham Primary School Dorchester Primary Academy Kingston upon Hull City Council Driffield School Kingstown Works Limited Driffield Town Council Kingswood Academy Dunswell Primary Academy Kingswood Parks Primary Academy Easington CE Primary Academy Kirk Ella and West Ella Parish Council East Ravendale Academy Laceby Acres East Riding College Lisle Marsden Academy Eastfield Primary Academy (Immingham) Littlecoates Primary Academy Eastfield Academy (Hull) Longhill Primary Academy Edward Heneage Academy Macaulay Academy Elliston Primary Academy Malet Lambert Academy Elloughton cum Brough Town Council Marfleet Primary Academy Emergency Services Fleet Management (Humberside) Limited Market Weighton Town Council Endike Primary School Maybury Primary Academy Endsleigh Holy Child VC Academy Melbourne Community Academy
East Riding of Yorkshire Council 120 Statement of Accounts 2019/20 PENSION FUND
Melior Community College Academy Sidmouth Primary Academy Mersey Academy Sigglesthorne Primary Academy Middlethorpe Academy Signhills Academy Mountbatten Academy Signhills Infants Academy Neasden Primary Academy Sirius Academy North New Waltham Academy Sirius Academy West Newbald Parish Council South Axholme Academy Newington Academy South Cave Parish Council Newland School for Girls South Hunsley School and Sixth Form College Newland St John’s CE Academy Southcoates Primary Academy North Cave Church of England Primary Academy Spring Cottage Academy North Cave Parish Council Springfield Primary Academy North East Lincolnshire Council Sproatley Endowed Primary Academy North Eastern Inshore Fisheries and Conservation Authority Stamford Bridge School North Ferriby Parish Council Stepney Primary Academy North Lincolnshire Council Stockwell Academy Oasis Academy Henderson Avenue Stoneferry Primary School Oasis Academy Immingham Strand Academy Oasis Academy Nunsthorpe Sullivan Centre Oasis Academy Parkwood Sutton Park Primary Academy Oasis Academy Wintringham Swanland Parish Council Old Clee Primary Academy Swanland Primary School Academy Trust Oldfleet Primary Foundation Trust School Thanet Primary Academy Ormiston Maritime Academy The Axholme Academy Ormiston South Parade Academy The Boulevard Academy Our Lady and St Peter Catholic Primary School The Boulevard Centre Ouse and Humber Drainage Board The Chief Constable of Humberside Police Outwood Academy Brumby The Green Way Academy Outwood Academy Foxhills The Marvell College Outwood Junior Academy Brumby The Parks Academy Paisley Primary Academy The Police and Crime Commissioner for Humberside Parkstone Primary Academy The St Lawrence Academy Patrington CE Primary Academy The Snaith School Pearson Primary School The Vale Academy PHASE Thoresby Academy Phoenix Park Academy Thorpepark Academy Pilgrim Academy Thrunscoe Primary Academy Pocklington Junior School Tollbar Academy Limited Priory Primary Academy Trinity House Academy Quay Academy Tweendykes Academy Reynolds Primary Academy Ulceby St Nicholas Primary School Rise Academy University of Lincoln Riston Primary Academy Waltham Leas Primary Academy Rokeby Park Academy Wansbeck Academy Ron Dearing UTC Weelsby Primary Academy Rowley Parish Council Welholme Primary Academy St Anthonys Primary Academy Welton Parish Council St Augustine Webster Academy Westcott Primary Academy St Bede’s Academy Westwoodside Academy St Bernadette’s Academy Wheeler Academy St Charles RC Primary Academy Whitehouse Pupil Referral Unit St George’s Primary Academy Wilberforce College St James’ CE Academy Willerby Parish Council St John of Beverley Catholic Primary School William Barcroft Junior Academy St Joseph’s Academy Willoughby Road Primary Academy St Mary Queen of Martyrs VC Academy Willows Academy St Mary and St Joseph (Pocklington) Catholic Primary School Winterton Academy St Mary’s Academy Winterton Town Council St Mary’s Catholic Academy Withernsea Primary Academy St Mary's College Withernsea Town Council St Mary's (Market Weighton) Catholic Primary School Wold Academy St Nicholas Primary Academy Woldgate School and Sixth Form College St Norbert’s Academy Wolfreton School and Sixth Form College St Peter’s CE Primary Academy Woodland Primary Academy St Richards RC Primary School Woodlands Primary Academy St Thomas More Academy Worlaby Academy St Vincents VC Academy Wybers Wood Academy Scartho Junior Academy Wyke College Scawby Academy Yarborough Primary Academy Sevenhills Academy
East Riding of Yorkshire Council 121 Statement of Accounts 2019/20 PENSION FUND c) Admission Bodies (57)
Aspens Services Ltd (Tollbar MAT) Independent Cleaning Services Ltd (Wolfreton) Barnardo’s ISS Facility Services PFI Bulloughs Cleaning Services Ltd KGB Cleaning Services Ltd Cater Link Limited (Franklin College) Lincolnshire Housing Partnership Ltd Churchill Contract Services Ltd (Outwood Foxhills) Lincolnshire Partnership NHS Foundation Trust City Health Care Partnership CIC Lincs Inspire Limited Civica UK Ltd Mellors Catering Services Ltd (Cottingham) Compass Contract Services UK Ltd (Delta MAT) Mellors Catering Services Ltd (South Holderness College) Compass Contract Services UK Ltd (East Ravendale) Mountain Healthcare Ltd Compass Contract Services (UK) Ltd (Hessle Academy Community Trust) North East Lincolnshire Clinical Commissioning Group Compass Contract Services UK Ltd (Howden School) NPS Humber Ltd Compass Contract Services UK Ltd (Humberston Academy) Ongo Homes Ltd Compass Contract Services UK Ltd (Lisle Marsden) Pickering and Ferens Homes Compass Contract Services UK Ltd (Old Clee) Pinnacle Housing Ltd Compass Contract Services (UK) Ltd (The Vale) Robertson Facilities Management Ltd Compass Contract Services (UK) Ltd (Waltham Leas) Robertsons Facilities Management Ltd PFI Compass Contract Services UK Ltd (Winterton Community Academy) Sodexo Ltd (Beacon Academy) Compass Contract Services UK Ltd (Winterton Junior School) Sodexo Ltd Nunsthorpe Compass Contract Services UK Ltd (Wolds Learning Partnership) Sodexo Ltd (Oasis Community Learning) Compass Contract Services UK Ltd (Wolfreton) T(n)S Catering Management Ltd (Delta - Melior) ENGIE Services Limited T(n)S Catering Management Ltd (Delta – Willoughby Road) Green Commercial Cleaning Taylor Shaw Ltd (Frederick Gough) Hull and Goole Port Health Authority Taylor Shaw Ltd (St Bedes) Hull Charterhouse Trustees Taylor Shaw Ltd (The St Lawrence Academy) Hull Resettlement Project Ltd The Deep (EMIH) Ltd Humber NHS Foundation Trust (ERYC) The Riverside Group Ltd Humber NHS Foundation Trust (Hull) University of Lincoln Students’ Union Humberside Independent Care Association Your Community Hub CIC Independent Cleaning Services Ltd (Driffield)
East Riding of Yorkshire Council 122 Statement of Accounts 2019/20 PENSION FUND
5. LEGAL FRAMEWORK
The Local Government Pension Scheme (LGPS) has been in existence since 1922 and has developed into a comprehensive scheme providing pensions for all members and their spouses, civil partners or eligible cohabitating partners and eligible children. The current scheme, LGPS 2014, is a Career Average Revalued Earnings (CARE) scheme. The scheme rules for LGPS 2014 are contained within the LGPS Regulations 2013 (Statutory Instrument Number 2013 No. 2356) and subsequent amendments and the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 (Statutory Instrument Number 2014 No 525). Amendments to LGPS 2014 are made under the Public Service Pensions Act 2013. Details of the main provisions of LGPS 2014 can be found at http://lgpsregs.org/schemeregs/lgpsregs2013.php. The Regulations specify the type and amounts of pension and other benefits payable in respect of scheme members who leave, retire or die, and also fix the member contributions rates payable on an ongoing basis. Employees have freedom to opt-out and make their own pension provision. Employer contribution rates are set by the Fund’s Actuary every three years following the valuation of the Fund, in order to maintain the solvency of the Fund. Following the 2019 Actuarial Valuation, the Actuary issued the new rates payable by scheme employers for the period from 1 April 2020 to 31 March 2023. Whilst the Regulations are fixed on a national basis, the LGPS is managed by a designated Administering Authority, and throughout England and Wales there are 89 such authorities. East Riding of Yorkshire Council is responsible for administering “The East Riding Pension Fund” for the benefit of its own employees and the employees of the scheme employers and admission bodies. Full details of the employers participating within the Fund are shown on pages 113 to 115. Teachers, Police Officers and Firefighters are excluded from the LGPS, as they are members of separate statutory pension schemes. The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 make the provision in relation to the management and investment of pension funds held by administering authorities required to maintain pension funds by the Local Government Pension Scheme Regulations 2013. HM Revenues and Customs has granted the LGPS ‘exempt approval’ for the purposes of the Income and Corporation Taxes Act 1988. Since April 2006, the LGPS has been classified as a registered public service pension scheme under Part 4 of Chapter 2 of the Finance Act 2004. It complies with the relevant provisions of the Pension Schemes Act 1993, the Pensions Act 1995, the Pensions Act 2004 and meets the Government’s new standards under the automatic enrolment provisions of the Pensions Act 2008. The East Riding Pension Fund Local Pension Board As required under section 5 of the Public Service Pensions Act 2013 and regulation 106 of the LGPS Regulations 2013 (as amended), the East Riding Pension Fund Local Pension Board (ERPFLPB) was established on 25 February 2015 and is made up of three employer representatives and three member representatives. The ERPFLPB is responsible for assisting East Riding of Yorkshire Council (as administering authority) in securing compliance with the LGPS regulations, overriding legislation and guidance from the Pensions Regulator. Details of the activities of the ERPFLPB can be found on the East Riding Pension Fund website at https://www.erpf.org.uk/local-pension-board/.
East Riding of Yorkshire Council 123 Statement of Accounts 2019/20 PENSION FUND
6. ACTUARIAL VALUATION
Legislation requires an actuarial valuation of the Fund every three years. The purpose of the valuation is to establish that the Fund is able to meet its liabilities to past and present contributors. The valuation is carried out in accordance with Regulation 62 of the Local Government Pension Scheme 2013 and the most recent valuation was carried out as at 31 March 2019 and resulted in a funding level of 109% (2016 88%). The next triennial valuation is due as at 31 March 2023 and any change in employers’ contribution rates as a result of that valuation will take effect from 1 April 2020. The results of the 2016 and 2019 valuations are set out in the tables below:
2016 2019 £m £m Past Service Liabilities - Employees 1,538 1,643 - Deferred pensioners 835 953 - Pensioners 1,853 2,038 Total Past Service liabilities 4,226 4,634 Assets 3,714 5,058 (Deficit) / Surplus -512 424
The past service adjustment assumes that the deficit will be funded over a 20 year period. The improvement in the funding position in the three years to 31 March 2019 is mainly due to strong investment performance over the period. The liabilities have also increased due to a reduction in the future expected investment return, although this has been partially offset by lower than expected pay and benefit growth.
East Riding of Yorkshire Council 124 Statement of Accounts 2019/20 PENSION FUND
7. REPORT OF THE ACTUARY
This statement has been prepared in accordance with Regulation 57(1)(d) of the Local Government Pension Scheme (Administration) Regulations 2013. 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). In summary, the key funding principles are as follows: to ensure the long-term solvency of the Fund using a prudent long term view. This will ensure that sufficient funds are available to meet all members / dependents benefits as they fall due for payment; to ensure that employer contribution rates are reasonably stable where appropriate; to minimise the long-term cash contributions which employers need to pay to the Fund, by recognising the link between assets and liabilities and adopting an investment strategy that balances risk and return (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 have a sufficiently high likelihood of achieving the funding target over 20 years. 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 at least a 70% likelihood that the Fund will achieve the funding target 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 2019. This valuation revealed that the Fund’s assets, which at 31 March 2019 were valued at £5.058 million, were sufficient to meet 109% of the liabilities (i.e. the present value of promised retirement benefits) accrued up to that date. The resulting surplus at the 2019 valuation was £424 million. Each employer had contribution requirements set at the valuation, with the aim of achieving their funding target within a time horizon and liability measure as per the FSS. Individual employers’ contributions for the period 1 April 2020 to 31 March 2023 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 2019 valuation report, available on the Funds website. Method The liabilities were assessed using an accrued benefits method which takes into account pensionable membership up to the valuation date, and makes an allowance for expected future salary growth to retirement or expected earlier date of leaving pensionable membership. Assumptions A market-related approach was taken to valuing the liabilities, for consistency with the valuation of the Fund assets at their market value.
East Riding of Yorkshire Council 125 Statement of Accounts 2019/20 PENSION FUND
The key financial assumptions adopted for the 2019 valuation were as follows:
Financial Assumptions 31 March 2019 % p.a.
Discount Rate 4.1 Salary increase assumption 3.2 Benefit increase assumption (CPI)* 2.3
*Consumer Prices Index 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 2018 model, an allowance for smoothing of recent mortality experience and a long term rate of 1.25% p.a. Based on the assumptions, the average future life expectancies at age 65 are as follows:
Females Males Current Pensioners 23.3 20.9 Future Pensioners * 24.8 21.8
*currently aged 45 Copies of the 2019 valuation report and Funding Strategy Statement are available on request from the Administering Authority to the Fund. Experience over the period since 31 March 2019 Markets were disrupted by COVID 19 which resulted in difficult market conditions towards the end of the financial year. As a result, the funding level of the Fund as at 31 March 2020 has reduced versus that reported in the previous formal valuation. The next actuarial valuation will be carried out as at 31 March 2022. The Funding Strategy Statement will also be reviewed at that time.
Hymans Robertson Craig Alexander FFA For and on behalf of Hymans Robertson LLP 20 Waterloo Street 12 May 2020 GLASGOW G2 6BD
East Riding of Yorkshire Council 126 Statement of Accounts 2019/20 PENSION FUND
8. FUND ACCOUNT
2018/19 Note 2019/20 £000 £000 £000 Dealings with Members and Employers Contributions 119,882 Contributions receivable 10g 125,794 8,348 Individual transfer values receivable 11,769 524 Group transfer values receivable 3,262 140,825 128,754 140,825 Benefits -159,232 Benefits payable 10h -167,674 -37,935 Payment to and on account of leavers 10i -13,575 Net Additions / Withdrawals from dealings -68,413 with Members -40,424
-7,258 Management Expenses 10j -7,839 Net Additions / Withdrawals (-) including -75,671 Fund Management Expenses -48,263
Returns on Investments 134,724 Investment income 10k 158,066 -829 Taxes on income 10l -618 213,690 Profit and losses on disposal of investment and 10m -402,281 changes in the market value of investments 347,585 Net Return on Investments -244,833
Net Increase in the Net Assets Available 271,914 for Benefits during the Year -293,096
2018/19 2019/20 £000 £000 Net Assets of the Fund 4,785,805 Opening Net Assets as at 1 April 5,057,719 271,914 Surplus on the pension fund for the year -293,096 5,057,719 Closing Net Assets as at 31 March 4,764,623
East Riding of Yorkshire Council 127 Statement of Accounts 2019/20 PENSION FUND
9. NET ASSETS STATEMENT
31 March 2019 Note 31 March 2020 £000 £000 833 Long Term Investments 10m 833
5,056,306 Investment Assets 10m 4,753,455 5,057,139 4,754,288
-13,340 Investment Liabilities -8,043
5,043,799 Total Net Investments 4,746,245 15,475 Current Assets 10n 19,572
5,059,274 4,765,817 -1,555 Current Liabilities 10o -1,812
Net Assets of the Scheme Available to Fund 5,057,719 Benefits at 31 March 4,764,005
The Accounts summarise the transactions and deals with the net assets of the Fund and do not take into account liabilities to pay pensions and other benefits in the future. The above Net Assets Statement should be read in conjunction with the Actuarial Certificate page 126.
East Riding of Yorkshire Council 128 Statement of Accounts 2019/20 PENSION FUND
10. NOTES TO THE ACCOUNTS
a) Fund Status The Fund is a funded defined benefits scheme. b) Audit of the East Riding Pension Fund Accounts These accounts are subject to external audit. c) Accounting Policies 1. General These Accounts have been prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2019/20 based on International Financial Reporting Standards, which requires that the Fund’s Accounts comply with IAS 26 Accounting and Reporting by Retirement Benefit Plans, subject to the interpretations and adaptations detailed in the Code and the Statement of Recommended Practice on Financial Reports of Pension Schemes (the SORP). The accounts do not take account of liabilities to pay pensions and other benefits in the future. The accounts have been prepared on a going concern basis. 2. Changes in Accounting Policies 2.1 There are no changes to accounting policies. 3. Income a) Contributions income Normal contributions are accounted for on an accruals basis as follows: o Employee contribution rates are set in accordance with LGPS regulations, using common percentage rates for all schemes which rise according to pensionable pay. Any amounts due but not received are shown in the Net Asset Statement as a current asset; o Employer contributions are set at the percentage rate recommended by the Fund Actuary for the period to which they relate. Employers’ pensions strain contributions are accounted for in the period in which liability arises. Employers’ contributions are based on a percentage of employees’ pensionable pay as recommended by the Actuary of the Fund in his valuation of 31 March 2019 effective from 1 April 2020. Further information regarding the Actuary’s Report and Actuarial Valuation, as at 31 March 2019, effective from 1 April 2020, can be found on pages 124 to 126 of these accounts. Employer deficit funding contributions are accounted for on the due dates on which they are payable under the schedule of scheme contributions set by the scheme Actuary or on receipt if earlier than the due date. Deficit funding payments are payable over a maximum of 20 years. b) Transfer values receivable Transfer values receivable relate to amounts received for members joining the Fund during the financial year and are accounted for in the year of receipt. Transfer values are disclosed as individual transfers and group transfers. c) Investment income i) Dividend income Dividend income is accounted for on an accruals basis and any outstanding amount is included in the Net Asset Statement as an investment asset. Dividend income is recognised on the date the asset is quoted ex-dividend. ii) Interest income Interest income is accounted for on an accruals basis using the effective interest rate of the financial instrument as at the date of origination. Accrued interest income is shown in the Net Assets Statement as an investment asset.
East Riding of Yorkshire Council 129 Statement of Accounts 2019/20 PENSION FUND iii) Stock lending income Stock lending income is accounted for on an accrual basis and any outstanding amount is included in the Net Asset Statement as an investment asset. iv) Distributions from pooled investment assets Distributions from pooled investment vehicles are recognised at the date of issue. Distribution income is accounted for on an accruals basis and any outstanding amount is included in the Net Asset Statement as an investment asset. v) Movement in the net market value of investments Changes in the net market value of investments, including all realised and unrealised profits/losses are shown as returns on investments. vi) Currency conversion Investment income received in overseas currency is converted at the appropriate exchange rate quoted in the Financial Times on the date of receipt. 4. Expenditure a) Benefits payable Pensions and lump sum benefits payable include all amounts known to be due as at the end of the financial year. Any amounts due but unpaid are shown in the Net Assets Statement as current liabilities. b) Transfer values payable Transfer values payable relate to amounts paid relating to members leaving the Fund during the financial year and are accounted for in the year of payment. 5. Expenses Expenses are accrued appropriately to ensure charges are incurred within the relevant accounting period. 6. Valuation of Assets Investments are included in the Net Assets Statement at their fair value. Investments made through the UK Stock Exchanges are valued at bid market price at the close of business on 31 March 2020. Investments made on overseas stock exchanges are valued at bid price or last trade price. Cash comprises cash in hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to minimal risk of changes in value. Unquoted investments are inherently difficult to value and rely, to a certain extent, on estimation techniques and non-market observable inputs; where market values are available at the date of the Statement these are used as above. Fair value is calculated as the net asset value as at the date of the Statement in accordance with recognised valuation standards e.g. Royal Institution of Chartered Surveyors (RICS). Where the net asset value at the date of the Statement is not available, fair value is calculated based on the last available set of audited financial statements, adjusted for subsequent cash flows. Where there has been a material reduction in the valuation of the investment since the date of the last available set of audited statements, the Fund will consider writing down the value of the investment. 7. Future Liabilities The Accounts summarise the transactions and net assets of the Fund and do not take into account liabilities to pay pensions and other benefits in the future. The adequacy of the Fund’s investments and contributions in relation to its overall obligations is dealt with in the report by the Actuary on pages 125 and 126 of these accounts and should be read in conjunction with the report. The Actuarial information disclosed on pages 124 to 126 complies with the accounting requirements of International Accounting Standard 19 Employee Benefits. 8. Taxation The scheme is a Registered Pension Scheme in accordance with Paragraph 1 (1) of Schedule 36 to the Finance Act 2004 and for UK taxation purposes is wholly exempt from income tax and capital gains tax. Income from overseas investments suffers withholding tax in the country of origin, unless exemption is permitted. Irrecoverable tax is accounted for as a fund expense as it arises.
East Riding of Yorkshire Council 130 Statement of Accounts 2019/20 PENSION FUND 9. Value Added Tax The Fund is reimbursed VAT by HM Revenue and Customs and the accounts are shown exclusive of VAT. 10. Management Expenses All pension administration expenses are accounted for on an accruals basis. All employee costs of the pension administration section are charged direct to the Fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as expenses to the Fund. All investment management expenses, including external management and custody, are accounted for on an accruals basis. All employee costs of the investment section are charged directly to the Fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as expenses to the Fund. The external manager’s (Schroder Investment Management) fee is based on the market value of funds under management at the end of each quarter and is calculated on a sliding scale, where percentage fee diminishes on marginal value. External manager Border to Coast fee is based on an agreed budget. Custody fees are agreed in the mandate for the provision of custodian services. All oversight and governance costs are accounted for on an accruals basis. All staff costs associated with governance and oversight are charged directly to the Fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as expenses to the Fund. 11. Currency Conversion Rates Overseas investments have been converted at the exchange rate quoted in the Financial Times at close of business on 31 March 2020 to arrive at sterling values in the Net Asset Statement. 12. Additional Voluntary Contributions An additional voluntary contribution (AVC) scheme is provided for members of the Fund by Prudential. Contributions are paid to Prudential by scheme members and are specifically for providing additional benefits for individual contributors. AVC’s do not form part of the Fund accounts in accordance with the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 see note u. 13. Actuarial Present Value of Promised Retirement Benefits The actuarial present value of promised retirement benefits is based on the triennial valuation of the Fund by the Actuary, with liabilities at 31 March 2020 being projected using a roll forward approximation from the latest formal funding valuation as at 31 March 2019. The Fund has opted to disclose the actuarial present value of promised retirement benefits as a note to the accounts, see note w. 14. Policy for Funding the Promised Retirement Benefits The funding policy is set out in the Funding Strategy Statement. Fund liabilities were assessed by the Actuary using an accrual benefits method which takes into account pensionable membership up to the valuation date and makes an allowance for expected future salary growth to retirement or expected earlier date of leaving pensionable membership. A market-related approach was taken to valuing the liabilities for consistency with the valuation of the Fund assets at their market value. The key financial assumptions adopted for were as follows:
Financial Assumptions 31 March 2019 % p.a.
Discount Rate 4.1 Salary increase assumption 3.2 Benefit increase assumption (CPI)* 2.3
*Consumer Prices Index
East Riding of Yorkshire Council 131 Statement of Accounts 2019/20 PENSION FUND The key demographic assumption was the allowance made for longevity. The life expectancy assumptions are based on the Fund’s VitaCurves with improvements in line with the CMI 2018 model, assuming the current rate of improvements has reached a peak and will converge to long term rate of 1.25% p.a. Based on these assumptions, the average future life expectancies at age 65 are as follows:
Females Males Current Pensioners 23.3 20.9 Future Pensioners * 24.8 21.8
*currently aged 45 15. Derivatives The Pension Fund has entered into a series of derivative transactions which are designed to protect the value of the Fund’s UK and US equity portfolios from a fall in market prices. This is managed by River and Mercantile and the basis of valuing the over the counter derivatives is the Black-Scholes model. 16. Critical Judgements in Applying Accounting Policies Pension Fund Liability The Fund liability is calculated every three years by the Fund’s Actuary with the purpose of the valuation being to establish that the Fund is able to meet its liabilities to past and present contributors. The valuation is carried out in accordance with Regulation 62 of the Local Government Pension Scheme Regulations 2013 and complies with IAS 19. The principal actuarial assumptions and method used to value the liabilities are shown in the Report of the Actuary which can be found on pages 124 and 126. 17. Assumptions Made About the Future and Other Major Source of Estimation Uncertainty The Statement of Accounts includes estimated figures that are based on assumptions and estimates, which take into account historical experience, current trends and other relevant factors. Therefore these estimated figures cannot be determined with certainty and actual results could be materially different from the assumptions and estimates. The items in the Statement of Accounts for which there is a significant risk of material adjustment in the forthcoming financial year are as follows: Actuarial present value of promised retirement benefits The calculation of the actuarial present value of promised retirement benefits is undertaken by the Actuary and is projected using a roll forward approximation from the latest formal funding valuation as at 31 March 2019. Estimates and assumptions are made in a number of judgements including discount rate, salary increases, inflation, pensions increase rate, longevity of current and future pensioners, type of member in scheme and commutation sums. Any variance in the estimates and assumptions in any of the elements used to calculate the actuarial present value of promised retirement benefits would impact on the quoted figure. For example a 0.5% decrease in the discount rate used would result in an increase in the pension liability of 10%, equivalent to £625m, a 0.5% increase in the salary increase rate used would increase the value of liabilities by 1% or £62m, and a 0.5% increase in the pensions increase rate used would increase the pension liability by 9% or £557m. A one year increase in life expectancy would approximately increase the liabilities by around 3% to 5%. Unquoted Investments By definition these investments are not publicly quoted and the valuation depends on estimation techniques and non-marketable observable inputs. Unquoted investments are stated at market value where available, otherwise fair value is used. Unquoted investments are valued at £1.2bn in the financial statements and a 10% variance in the valuation risks these investments being under or overstated in the accounts by up to £12m. 18. Contingent Assets and Contingent Liabilities A contingent asset arises where an event has taken place giving rise to a possible asset whose existence will only be confirmed by the occurrence of future events. A contingent liability arises where an event has taken place prior to the year-end giving rise to a possible financial obligation whose existence will only be confirmed or otherwise by the occurrence of future events. Contingent liabilities can also arise in circumstances where a provision would be made, except that it is not possible at the balance sheet date to measure the value of the financial obligation reliably. Contingent assets and liabilities are not recognised in the net asset statement but are disclosed in the notes.
East Riding of Yorkshire Council 132 Statement of Accounts 2019/20 PENSION FUND d) Concentration of Investments The Code require disclosure where there is a concentration of investment which exceeds 5% of the total value of the net assets of the scheme.
2018/19 2019/20 % of Number % of Number of Units Value Net Assets of Units Value Net Assets
1,565,628,704.780 1,553,416 30.7 Border to Coast PE UK Listed Equity A 1,513,050,159.030 1,254,167 26.3 22,954,247.123 285,728 5.6 Schroder North American Equity Fund 19,826,260.710 223,534 4.7 e) Stock Lending State Street, the Fund’s Custodian has authorisation to release stock to third parties as determined by the contract between State Street and the Fund. During the year to 31 March 2020 stock lending income of £0.060m (2019 £0.247m) was raised against expenditure for the activity of £0.020m (2019 £0.068m). At 31 March 2020 the total value of securities on loan was £85.9m (2019 £61.5m) and are analysed by asset class as follows:
31 March 2019 31 March 2020 £000 £000 0 Equities - UK 10,254 57,436 UK Bonds - Public Sector 74,454 58 Equities - Overseas 0 4,004 Overseas Bonds - Public Sector 1,236 61,498 85,944
Against the stock on loan the Fund held collateral at 31 March 2020 of £89.3m (2019 £63.4m) analysed by asset class as follows:
31 March 2019 31 March 2020 £000 £000 0 Equities - UK 10,610 59,239 UK Bonds - Public Sector 77,381 63 Equities - Overseas 0 4,087 Overseas Bonds - Public Sector 1,261 63,389 89,252
f) Derivatives In June 2017 the Pension Fund entered into a contract with River and Mercantile to manage a derivatives portfolio. A derivative, which is a permitted investment under the LGPS Investment Regulations, is a contract between two or more parties whose value is derived from the performance of an underlying financial asset, for example an equity index such as FTSE 100 index. Derivatives can be used for a number of purposes, including the issuing against price movements ie hedging, increasing exposure to expected price movements, or getting access to otherwise hard to trade assets or markets. In a simple form the contract that the Fund has entered into will generate a return based on the current value of the index plus any increase in that index up to a certain point, irrespective of the actual value at the end of the contract term. The duration of the contract is between 2.75 and 3.25 years. Equities continue to be the largest asset class in the Pension Fund and as such the Fund needs to generate a suitable rate of return from the equity portfolio, over the long term, in order to meet the investment rate of return required to fund its liabilities. The long term total return from UK equities has been c9% however, the return profile has been very volatile with the potential for significant drawdowns in any one year. Therefore it was agreed in 2016 to implement an equity protection product to protect a proportion of the UK and US equity portfolios from an equity market correction whilst continuing to participate in some of the upside. However, there is obviously a cost to protecting the downside but this can be offset by sacrificing the upside potential beyond a certain point.
East Riding of Yorkshire Council 133 Statement of Accounts 2019/20 PENSION FUND
The movement in the value of the derivative can be seen in note m, Reconciliation of Movements in Investments. At 31 March 2020 the value of the derivative holding was as follows:
Equity Option:
Value at Value at 31 March 2019 Counterparty Maturity Date Notional 31 March 2020 £000 £000 1,935 Barclays 16 June 2020 £125m 7,353 2,089 Goldman Sachs 20 July 2020 £125m 7,200 800 Investec 20 July 2020 £50m 2,983 -5,495 Investec 10 August 2020 $130m -1,279 -671 16,257 Collateral: 59,572 UK Bonds 59,689 6,000 Cash 6,000 65,572 65,689
64,901 81,946
g) Contributions Receivable
2018/19 2019/20 Restated £000 £000 £000 Employers 71,575 Normal 79,771 11,588 Deficit Recovery 9,118 88,889
36,719 Employees 36,905 119,882 125,794 From 16,248 Administering Authority 20,063 94,261 Scheme Employers 97,377 9,373 Transferee Admission Bodies 8,354 119,882 125,794
h) Benefits Payable
2018/19 2019/20 £000 £000 126,515 Pensions 133,700 29,023 Commutations, compounded and lump sum retirement benefits 29,415 3,694 Lump sum death benefits 4,559 159,232 167,674 Paid to 27,496 Administering Authority 30,911 120,218 Scheme 2 Employers 124,700 11,518 Transferee Admission Bodies 12,063 159,232 167,674
East Riding of Yorkshire Council 134 Statement of Accounts 2019/20 PENSION FUND i) Payments to and on account of leavers
2018/19 2019/20 £000 £000 452 Refunds to Members leaving service 607 11,565 Individual transfer values payable 12,968 25,918 Group transfer values payable 0 37,935 13,575
j) Pension, Investment Management and Oversight and Governance Expenses
2018/19 2019/20 £000 £000
1,629 Pensions Administration 2,682 4,991 Investment Management 4,519 638 Oversight and Governance 638 7,258 7,839
Of the Investment Management expenses in 2019/20, no payment was made in respect of performance related fees paid to the Fund’s internal investment manager (2018/19 £0.087m). Of the Oversight and Governance expenses in 2019/20, the external audit fee payable to Mazars LLP is £0.035m (2018/19 £0.033m). Externally managed funds are managed by Schroder Investment Management Ltd and Border to Coast. It should be noted that the Net Asset Statement and any performance data disclosed in the Annual Report are disclosed net of all costs incurred.
East Riding of Yorkshire Council 135 Statement of Accounts 2019/20 PENSION FUND k) Investment Income
2018/19 2019/20 £000 £000 £000
Bonds 2,232 United Kingdom 2,238 1,720 Overseas 1,964 901 Corporate 1,733 1,446 Multi Asset Credit - quoted 972 15,235 Multi Asset Credit - unquoted 14,896 21,803 Index-Linked 13 United Kingdom 13 32 Overseas 33 58 Corporate 79 125 Equities 16,872 United Kingdom 786 11,279 Overseas 12,090 12,876 Managed Funds 38,974 Equities 73,150 7,757 Property - quoted 9,812 10,695 Property - unquoted 14,048 1,642 Private equity - quoted 1,018 2,805 Private equity - unquoted 1,210 2,639 Infrastructure - quoted 3,063 5,130 Infrastructure - unquoted 3,183 4,574 Other investments - quoted 5,348 4,700 Other investments - unquoted 8,082 118,914 934 Derivatives 952 3,962 Accrued interest on Ex-dividend Investments 1,291 133,600 155,961
12 Underwriting 0 -393 Currency Loss (-) / gain 204 248 Stock lending 65 1,257 Cash deposits 1,218
1,124 1,487 134,724 157,448
l) Taxes on Income
2018/19 2019/20 £000 £000 Withholding Tax 829 Overseas Equities 618 829 618
East Riding of Yorkshire Council 136 Statement of Accounts 2019/20 PENSION FUND m) Reconciliation of Movements in Investments
2019/20 Change in Value Purchases Sales Market Value at 1 April 2019 at Cost Proceeds Value 31 March 2020 Investment Assets £000 £000 £000 £000 £000
Bonds UK - Public Sector 129,700 0 0 7,069 136,769 UK - Other Quoted 59,177 0 -63,343 4,166 0 Overseas - Public Sector 70,852 0 0 5,451 76,303 Overseas - Corporate 46,283 0 -50,137 3,854 0 Multi Asset Credit - quoted 74,090 0 -19,454 -4,416 50,220 Multi Asset Credit - unquoted 233,717 76,077 -38,097 -2,109 269,588 613,819 76,077 -171,031 14,015 532,880
Equities UK 36,108 5,663 -18,583 -3,857 19,331 BCPP Share Capital 833 0 0 0 833 Overseas 411,550 264,676 -258,715 -36,774 380,737 448,491 270,339 -277,298 -40,631 400,901 Derivatives UK Treasury 59,572 588 0 -699 59,461 Cash 6,000 0 0 0 6,000 Derivatives Option -671 0 0 16,927 16,256 64,901 588 0 16,228 81,717
Index-Linked Bonds UK - Public Sector 16,261 2,625 -2,645 649 16,890 UK Corporate 7,056 0 -7,198 142 0 Overseas - Public Sector 13,182 0 0 1,399 14,581 36,499 2,625 -9,843 2,190 31,471 Pooled Investment Vehicles Managed Funds 2,456,915 227,973 -138,842 -382,281 2,163,765 Property - Quoted 175,690 28,528 0 -18,672 185,546 Property - Unquoted 404,913 77,072 -54,695 11,851 439,141 Private Equity - Quoted 106,958 0 -24,540 -15,454 66,964 Private Equity - Unquoted 139,122 42,575 -26,858 23,585 178,424 Infrastructure - Quoted 54,653 14,791 0 -892 68,552 Infrastructure - Unquoted 176,307 35,242 -18,355 18,189 211,383 Other Investments - Quoted 75,924 0 -10,721 -29,438 35,765 Other Investments - Unquoted 129,713 34,870 -23,551 -1,278 139,754 3,720,195 461,051 -297,562 -394,390 3,489,294 4,883,905 810,680 -755,734 -402,588 4,536,263 Investment Cash Sterling 134,253 840,590 -795,758 0 179,085 Euros 1,962 11,187 -12,577 71 643 US Dollar 143 38,204 -36,170 236 2,413 136,358 889,981 -844,505 307 182,141 5,020,263 1,700,661 -1,600,239 -402,281 4,718,404
Net Gains and Losses on Financial Instruments All net gains and losses on financial assets are fair value through profit and loss.
East Riding of Yorkshire Council 137 Statement of Accounts 2019/20 PENSION FUND Further analysis of Multi Asset Credit, Derivatives Option and Managed Funds
Value at 1 April 2019 Value at 31 March 2020 UK Overseas Total UK Overseas Total £000 £000 £000 £000 £000 £000
Multi Asset Credit - quoted 26,428 47,662 74,090 4,903 45,317 50,220 Multi Asset Credit - unquoted 72,147 161,570 233,717 95,997 173,591 269,588 Derivatives Option 4,824 -5,495 -671 17,535 -1,279 16,256 Managed Funds 1,940,470 516,445 2,456,915 1,738,032 425,733 2,163,765
Reconciliation to Net Asset Statement
2019/20 £000
Net Asset Statement Long term Investments 833 Investment Assets 4,753,455
4,754,288 Less Cash -207,719 Other Investment balances -9,027 Investment Liability -1,279 Value 31/03/20 Reconciliation of Movements in Investments 4,536,263
East Riding of Yorkshire Council 138 Statement of Accounts 2019/20 PENSION FUND
2018/19 Change in Value Purchases Sales Market Value at 1 April 2018 at Cost Proceeds Value 31 March 2019 Investment Assets £000 £000 £000 £000 £000 Bonds UK - Public Sector 125,491 1,834 0 2,375 129,700 UK - Other Quoted 59,254 0 0 -77 59,177 Overseas - Public Sector 67,240 0 0 3,612 70,852 Overseas - Corporate 43,102 0 0 3,181 46,283 Multi Asset Credit - quoted 70,217 0 0 3,873 74,090 Multi Asset Credit - unquoted 197,246 69,812 -34,348 1,007 233,717 562,550 71,646 -34,348 13,971 613,819 Equities UK 1,411,721 3,874 -1,487,798 108,311 36,108 BCPP Share Capital 0 833 0 0 833 Overseas 507,856 382,397 -465,038 -13,665 411,550 1,919,577 387,104 -1,952,836 94,646 448,491
Derivatives UK Treasury 58,975 1,138 0 -541 59,572 Cash 6,000 0 0 0 6,000 Derivatives Option 2,424 0 0 -3,095 -671 67,399 1,138 0 -3,636 64,901 Index-Linked Bonds UK - Public Sector 15,294 0 0 967 16,261 UK Corporate 6,702 0 0 354 7,056 Overseas - Public Sector 11,888 0 0 1,294 13,182 33,884 0 0 2,615 36,499 Pooled Investment Vehicles Managed Funds 885,484 1,805,415 -260,081 26,097 2,456,915 Property - Quoted 159,656 13,001 0 3,033 175,690 Property - Unquoted 384,242 63,372 -60,623 17,922 404,913 Private Equity - Quoted 97,700 0 -1,938 11,196 106,958 Private Equity - Unquoted 122,154 37,689 -33,928 13,207 139,122 Infrastructure - Quoted 41,542 15,315 -8,421 6,217 54,653 Infrastructure - Unquoted 152,610 28,978 -23,901 18,620 176,307 Other Investments - Quoted 71,497 10,641 -2,876 -3,338 75,924 Other Investments - Unquoted 132,503 32,038 -47,877 13,049 129,713 2,047,388 2,006,449 -439,645 106,003 3,720,195
4,630,798 2,466,337 -2,426,829 213,599 4,883,905 Investment Cash Sterling 116,334 685,219 -667,300 0 134,253 Euros 382 10,628 -9,049 1 1,962 US Dollar 1,092 17,148 -18,187 90 143 117,808 712,995 -694,536 91 136,358 4,748,606 3,179,332 -3,121,365 213,690 5,020,263
East Riding of Yorkshire Council 139 Statement of Accounts 2019/20 PENSION FUND n) Current Assets
31 March 2019 31 March 2020 £000 £000 £000 Current Assets Contributions due 5,242 Employers 9,017 2,165 Employees 3,124 12,141 864 Recharge of Pensions increase and 1,477 supplementary allowance 4,642 East Riding of Yorkshire Council 4,099 2,562 Other Debtors 1,855 15,475 19,572
o) Current Liabilities
31 March 2019 31 March 2020 £000 £000 Current Liabilities 118 East Riding of Yorkshire Council 1,243 671 Overdaim of Recharges 340 766 Other creditors 229 1,555 1,812 p) Managerial Arrangements of Assets
31 March 2019 31 March 2020 £000 % £000 %
2,197,382 43 Internally managed 2,208,354 46 1,092,977 22 Externally managed (Schroder Investment Management Limited) 948,974 20 1,767,360 35 Externally managed (Border to Coast Pensions Partnership) 1,606,677 34 5,057,719 100 4,764,005 100
q) Contingent Liabilities and Contractual Commitments At 31 March 2020 the Fund had commitments to the purchase of investments of £546.440m (2019 £570.653m) analysed as follows:
2018/19 2019/20 Foreign £000 Foreign £000 Currency Currency
0 211,374 Sterling Denominated ( £ ) 0 217,067 296,180 226,316 US Dollar Denominated ( $ ) 284,587 229,506 154,304 132,963 Euro Denominated ( € ) 112,860 99,867 570,653 546,440
Following the ruling of the Court of Appeal that younger members of the Judges and Firefighters Pension schemes were discriminated against because protections had only been introduced for older scheme members of those pension schemes, the Government has confirmed that there will be changes to all public sector pension schemes to remove this age discrimination. The Government and the Scheme Advisory Board (SAB) are currently having high level discussions about what this means for the LGPS. Changes to the LGPS will be backdated to April 2014 and will apply to qualifying members who left the LGPS after that date. SAB has advised that many members of public service pension schemes will not see an increase to their pension benefits and for others any increase is likely to be small because of low salary growth since the new schemes were introduced.
East Riding of Yorkshire Council 140 Statement of Accounts 2019/20 PENSION FUND r) Members’ Allowances Following modernisation of the Committee structures, allowances are not paid to Members directly in respect of Pensions Committee attendance. The Chairman of the Pensions Committee is paid a special responsibility allowance. However, allowances are not cumulative, and only the highest allowance for any committee responsibility is paid to the Member. Payments to Members are disclosed on the Council’s website. s) Related Party Transactions In accordance with International Accounting Standard (IAS) 24 and International Public Sector Accounting Standard (IPSAS) 20 ‘Related Party Disclosures’, material transactions with related parties not disclosed elsewhere are detailed below. The officer responsible for the proper administration of the financial affairs of the East Riding Pension Fund (the Section 151 officer) is also the Section 151 officer of East Riding of Yorkshire Council. The East Riding Pension Fund is administered by East Riding of Yorkshire Council. During the financial year the Council incurred costs of £7.839m (2019 £7.258m) comprising pensions administration costs of £2.682m (2019 £1.629m), investment management costs of £4.519m (2019 £4.991m) and oversight and governance costs of £0.638m (2019 £0.638m). The Council was subsequently reimbursed by the Fund for these expenses. The Council is also the largest employer of members of the Pension Fund and, during the financial year, made contributions of £20.063m to the Fund (2019 £16.1606m). £9.651m of this total sum is in respect of contributions paid by members of the Pension Fund. As at 31 March 2020 the Council was a net debtor to the Fund of £2.856m (2019 £4.524m). Under legislation introduced in 2003/04, Councillors were entitled to join the Pension Scheme. The LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014 removed this entitlement for Councillors from the later of 1 April 2014 or the end of their current term in office (or to age 75 if earlier). Therefore, no members of the Pension Committee made contributions to the Fund during the financial year in their member capacity. Councillors Rudd and Whittle declared being members of the Local Government Scheme during 2019/20. No senior officers responsible for the administration of the Fund have entered into any contract, other than their contract of employment with the Council, for the supply of goods or services to the Fund. The key management personnel of the Pension Fund are the Director of Corporate Resources and the Head of Finance. The charge to the Pension Fund for these two posts in 2019/20 was £42,292. t) Currency Conversion Rates Overseas investments have been converted at the exchange rates quoted in the Financial Times at close of business on 31 March 2020 to arrive at the sterling values in the Net Assets Statement. The exchange rates used per £1 sterling were:
n Australian Dollar 2.0259 n Canadian Dollar 1.7649 n Danish Krone 8.4327 n Euro 1.1301 n Japanese Yen 133.8595 n New Zealand Dollar 2.0915 n Norwegian Krona 13.0208 n Swedish Krona 12.2851 n Swiss Franc 1.1997 n US Dollar 1.2400
u) Additional Voluntary Contributions The Fund’s approved Additional Voluntary Contribution (AVC) provider is Prudential and during the year to 31 March 2020 scheme members made contributions to this facility of £1.675m (2019 £1.866m). The total value of the funds invested by Prudential on behalf of members of the East Riding Pension Fund at 31 March 2020 is £17.974m (2019 £18.609m). AVC’s do not form part of the Pension Fund Accounts in accordance with the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016.
East Riding of Yorkshire Council 141 Statement of Accounts 2019/20 PENSION FUND v) Investment Strategy Statement The East Riding Pension Fund is required to maintain an Investment Strategy Statement (ISS) in accordance with the LGPS Regulations. Full details of the ISS for the Fund are set out within the East Riding Pension Fund Annual Report and Accounts. The Pensions Committee approved the ISS at its meeting on 15 March 2019, and it complies with the LGPS Regulations. The Fund is also required to maintain a Funding Strategy Statement (FSS) in accordance with the LGPS Regulations. The FSS for the Fund has been revised to take into account the results of the actuarial valuation, effective 31 March 2017. The FSS, which was approved by the Pensions Committee at its meeting on 16 March 2018, complies with these Regulations. The FSS effective 31 March 2020 was approved by Pensions Committee on 13 March 2020, taking into account the results of the 2019 actuarial valuation. In preparing the ISS and the FSS, the Pensions Committee has taken professional advice from its advisers and investment managers, whom it considers are suitably qualified and experienced in investment matters. The principal employers and trade unions are represented at the Pensions Committee, enabling their views to be taken into account. The investment managers and the investment advisers are required to adhere to the principles set out in the ISS. The Pensions Committee requires an annual, written statement from its investment managers confirming that they have adhered to the principles set out in the statement. The ISS of the Fund is reviewed by the Pensions Committee on an annual basis. w) The Actuarial Present Value of Promised Retirement Benefits The actuarial present value of promised retirement benefits at 31 March 2020 was £6.215bn (31 March 2019 £7.096bn). The value includes an allowance for the 'McCloud ruling', ie an estimate of the potential increase in past service benefits arising from a Supreme Court case affecting public sector pension schemes which concluded during June 2019. Liabilities have been projected using a roll forward approximation from the latest formal funding valuation as at 31 March 2019. The fund accounts do not take account of liabilities to pay pensions and other benefits in the future. The actuarial valuation carried out as at 31 March 2019 revealed that the Fund’s assets valued at £5.058bn were sufficient to meet 109% of the liabilities (ie the present value of promised retirement benefits) accrued up to that date. The resulting surplus at the 2019 valuation was £424m. The assumptions made by the Actuary can be found on page 124. Significant actuarial assumptions are shown below:
Year ended (% p.a.) 31 March 2020 31 March 2019 Pension Increase Rate 1.9% 2.5% Salary Increase Rate 2.8% 2.7% Discount Rate 2.3% 2.4%
East Riding of Yorkshire Council 142 Statement of Accounts 2019/20 PENSION FUND x) Disclosure Relating to Financial Instruments The items in the Net Asset Statement are made up of the following categories of financial instrument.
31 March 2019 31 March 2020 £000 £000 £000 Financial Assets at fair value through profit or loss 613,819 Bonds 532,880 447,658 Equities 400,068 36,499 Index-Linked Bonds 31,471 3,720,195 Pooled Investment Vehicles 3,489,294 70,396 Derivatives 82,996 3,739 Foreign Currency 3,010 12,568 Other Investment Balances 9,027 4,904,874 Total Financial Assets 4,548,746 Financial Assets at cost 833 Long term investments 833 4,905,707 Total Financial Assets 4,549,579
Financial Assets at Amortised Cost 151,432 Cash Deposits - Sterling 204,709 15,475 Current Assets 19,572 166,907 Total Financial Assets at Amortised Cost 224,281 Financial Liabilities at fair value through profit or loss -13,340 Other Investment Balances -8,043 Financial Liabilities at Amortised Cost -1,555 Current liabilities -1,812 5,057,719 Net Financial Assets 4,764,005
The methodology used for the valuation of investment assets is described in Note to the Accounts 6 Valuation of Assets. The Fund’s primary long term risk is that the Fund’s assets do not meet its liabilities i.e. the benefits payable to members. Therefore, the aim of the Fund’s investment management is to achieve the long term expected rate of return with an acceptable level of risk. The Fund achieves this by setting a strategic asset allocation on a triennial basis which is expected to achieve the target rate of return over the long term. The tactical asset allocation is determined by the Pensions Committee on a quarterly basis. The Fund has a dedicated strategic risk register which identifies the key risks within the Pension Fund and the risk controls that are in place to mitigate these risks. The risk register is reviewed by the Pensions Committee on a semi-annual basis. In addition, an investment risk management schedule is reviewed by the Pensions Committee on a quarterly basis which considers issues such as performance; regulation and compliance; and personnel and structure. The key risks inherent in the Pension Fund in relation to its financial assets are: Market risk Market risk is the risk that the value of an investment decreases as a result of changing market conditions. The risk is mitigated by: An appropriate strategic asset allocation is determined on a triennial basis in conjunction with the actuarial valuation exercise. This aims to meet the target long term rate of return with an acceptable level of risk and includes an appropriate diversification of asset classes. The allocation is agreed by the Pensions Committee and the Fund’s advisers and investment managers. The strategic asset allocation is disclosed in the Fund’s Investment Strategy Statement including the permitted asset classes, their allocations, and the permitted ranges. Tactical asset allocation is determined on a quarterly basis by the Pensions Committee in light of financial market conditions and following advice from the Fund’s advisers and investment managers.
East Riding of Yorkshire Council 143 Statement of Accounts 2019/20 PENSION FUND
The Pensions Committee regularly reviews the long term investment strategy to ensure that it remains appropriate. The investment policy of the East Riding Pension Fund does not permit any employer related investment, either in the assets, stock, land or property of the Principal Employers or the assets, stock, land or property of any associated employers. The Pensions Committee considers that employer related investments pose too great a risk to the security of the Fund. The Fund has adopted the CIPFA Code of Practice for Treasury Management in Public Services and maintains and operates a Treasury Management Policy comprising an overview of the principles and practices to which the activity will comply. The Treasury Management Policy is approved by the Pensions Committee on an annual basis and they also receive a half-yearly and annual report on treasury activity. The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 state the following regarding the use and investment of Pension Fund monies: an administering authority must invest any fund money that is not needed immediately to make payments from the fund; they may vary their investments; their investment policy must be formulated with a view to the advisability of investing fund money in a wide variety of investments and to the suitability of particular investments and types of investments; an administering authority must obtain proper advice at reasonable intervals about their investments; and the authority must consider such advice in taking any steps about their investments.
The Fund has determined that the following movements in market price risk are possible for the 2019/20 reporting period:
Potential market movements (+/-)
Asset Type % Bonds 5.1 Index Linked Bonds 5.1 UK Equities 9.4 Overseas Equities 9.4 Pooled Property Investments 1.8 Other Pooled Investments 9.4 Private Equity 3.5 Cash 0.9
Had the market price of the fund investments increased or decreased in line with the above, the change in the net assets available to fund benefits would have been as follows:
Value as at the Potential value Potential value 31 March 2020 on increase on decrease Asset Type £000 £000 £000 Bonds 592,341 622,550 562,132 Index Linked Bonds 31,471 33,076 29,866 UK Equities 36,240 39,647 32,833 Overseas Equities 380,737 416,526 344,948 Pooled Property Investments 624,687 635,931 613,443 Other Pooled Ivestments 2,619,219 2,865,426 2,373,012 Private Equity 245,388 253,977 236,799 Cash 213,719 215,643 211,796 . Total 4,743,802 5,082,776 4,404,829
East Riding of Yorkshire Council 144 Statement of Accounts 2019/20 PENSION FUND The Fund determined that the following movements in market price risk were possible for the 2018/19 reporting period:
Value as at the Potential value Potential value 31 March 2019 on increase on decrease Asset Type £000 £000 £000 Bonds 673,391 694,266 652,516 Index Linked Bonds 36,499 39,419 33,579 UK Equities 36,270 39,716 32,824 Overseas Equities 411,550 453,117 369,983 Pooled Property Investments 580,603 589,312 571,894 Other Pooled Ivestments 2,893,512 2,974,530 2,812,494 Private Equity 246,080 252,970 239,190 Cash 161,171 162,138 160,204 . Total 5,039,076 5,205,468 4,872,684
Performance risk Performance risk is the risk that the Fund’s investment managers fail to deliver returns in line with the underlying asset classes. This risk is mitigated by: Investment management responsibilities are split between the internal and external investment managers. Each investment manager has a robust investment process including detailed research and analysis. Analysis of market performance and investment managers’ performance relative to their index benchmark on a quarterly basis by an independent third party. Detailed analysis of investment managers’ performance on an annual basis. Valuation risk This is the risk that the valuations disclosed in the financial statements are not reflective of the value that could be achieved on disposal. The valuation of financial instruments has been classified into three levels, according to the quality and reliability of information used to determine fair values. Level 1 – Level 1 valuations are those derived from unadjusted quoted prices in active markets for identical assets or liabilities. Products classified as level 1 include quoted equities. Level 2 – Level 2 valuations are those where quoted market prices are not available. Products classified as level 2 include property funds, fixed interest securities, index linked securities and unit trusts. Level 3 – Level 3 valuations are those where at least one input which could have a significant effect on an instruments valuation is not based on observable market data. Products classified as level 3 include unquoted investments.
Level 1 Level 2 Level 3 Total Values at 31 March 2020 £000 £000 £000 £000
Financial Assets 1,007,782 2,375,076 1,160,721 4,543,579 Financial Assets at Amortised Cost 230,281 0 0 230,281 1,238,063 2,375,076 1,160,721 4,773,860
Financial Liabilities 9,855 0 0 9,855 9,855 0 0 9,855
1,228,208 2,375,076 1,160,721 4,764,005
Border to Coast funds have been reassessed at Level 2 from Level 1 31 March 2019.
East Riding of Yorkshire Council 145 Statement of Accounts 2019/20 PENSION FUND
Level 1 Level 2 Level 3 Total Values at 31 March 2019 £000 £000 £000 £000
Financial Assets 2,903,226 958,151 1,022,023 4,883,400 Loans and Receivables 189,214 0 0 189,214 3,092,440 958,151 1,022,023 5,072,614
Financial Liabilities 14,895 0 0 14,895 14,895 0 0 14,895 3,077,545 958,151 1,022,023 5,057,719
Level 3 Analysis Value at Change Value at 1 April 2019 Purchases at Sales Proceeds Market Value 31 March 2020 £000 £000 £000 £000 £000
1,022,023 265,824 -154,584 27,458 1,160,721
Level 3 Analysis Value at Change Value at 1 April 2018 Purchases at Sales Proceeds Market Value 31 March 2019 £000 £000 £000 £000 £000
907,531 231,889 -200,677 83,280 1,022,023
The main characteristic of Level 3 assets is the absence of any observable market data. The inputs used to determine the fair value of Level 3 assets includes audited and unaudited financial information from the underlying investment managers. No investment assets transferred between the levels of fair value hierarchy during the year. The table below shows the effect of potential market movements on those assets classified at Level 3.
Value at Potential market Potential value Potential value 31 March 2020 movements (+/-) on increase on decrease £000 % £000 £000 Multi Asset Credit 269,588 5.1 283,337 255,839 UK Equities 1,674 9.4 1,831 1,517 Property 368,063 1.8 374,688 361,438 Private Equity 178,424 3.5 184,669 172,179 Infrastructure 211,383 3.5 218,781 203,985 Other 131,589 3.5 136,195 126,983 1,160,721 1,199,501 1,121,941
Value at Potential market Potential value Potential value 31 March 2019 movements (+/-) on increase on decrease £000 % £000 £000 Multi Asset Credit 233,717 3.1 240,962 226,472 Property 351,537 1.5 356,810 346,264 Private Equity 139,122 2.8 143,017 135,227 Infrastructure 176,307 2.8 181,244 171,370 Other 121,340 2.8 124,738 117,942 1,022,023 1,046,770 997,275
East Riding of Yorkshire Council 146 Statement of Accounts 2019/20 PENSION FUND Credit risk This is the risk that the Fund’s counterparties fail to pay amounts due. Appropriate credit limits have been established by the Fund for individual counterparties for Treasury Management purposes. The Pension Fund Treasury Management Policy specifies the following framework for credit limits for individual counterparties:
31 March 2019 Maximum 31 March 2020 Actual Limit Actual £000 £000 £000 0 UK Government No Limit 0 25,000 Institutions or Funds with a minimum rating of AAA/A2 25,000 15,000 15,000 Institutions with a minimum rating of AA/A2 20,000 0 15,000 Institutions with a minimum rating of A/A2 15,000 15,000 10,000 Local Authorities 10,000 10,000 0 Building Societies - top 15 ranked by asset value 10,000 0
The investment balances at the end of the financial year were:
31 March 2019 31 March 2020 £000 £000 0 UK Government 0 52,153 Institutions or Funds with a minimum rating of AAA/A2 60,895 15,000 Institutions with a minimum rating of AA/A2 0 54,205 Institutions with a minimum rating of A/A2 30,000 15,000 Local Authorities 94,190 0 Building Societies - top 15 ranked by asset value 0 136,358 185,085
Treasury credit risk has been managed dynamically during the year, responding to national and international events in financial markets. Security of principal sums invested continues to be the prime objective. The duration of investments is limited to a maximum of twelve months to enable a reasonable exit strategy to be implemented if necessary. The Pension Fund makes use of Money Market Funds which are instant access funds whose objectives match those of the Pension Fund, being security of principal and diversification of investments. The present restrictions within the approved Treasury Management Policy will continue until economic and market conditions normalise.
East Riding of Yorkshire Council 147 Statement of Accounts 2019/20 PENSION FUND Liquidity risk Liquidity risk is the risk that the Pension Fund is not able to meet its financial obligations as they fall due or can do so only at an excessive cost. The Pension Fund’s policy is to maintain sufficient funds in a liquid form at all times to ensure that it can cover all fluctuations in cash flow and meet its financial obligations. The accounts do not take into account liabilities to pay pensions and other benefits. The table below profiles investment assets by maturity date, however it should be noted that those investments in the 1 - 5 years and more than 5 years categories, ie bonds, can be liquidated at any given time.
Not more More No than 3 3 - 12 1 - 5 than 5 specific months months years years maturity Total £000 £000 £000 £000 £000 £000 As at 31 March 2020 Assets Cash 18,000 104,500 0 0 91,228 213,728 Investments 0 66,840 80,950 156,215 4,227,528 4,531,533 Other investment balances 9,027 0 0 0 0 9,027 Current assets 19,572 0 0 0 0 19,572 Total assets 46,599 171,340 80,950 156,215 4,318,756 4,773,860 Liabilities Other investment balances 8,043 0 0 0 0 8,043 Current liabilities 1,812 0 0 0 0 1,812
Total liabilities 9,855 0 0 0 0 9,855 Liquidity Surplus 36,744 171,340 80,950 156,215 4,318,756 4,764,005
Not more More No than 3 3 - 12 1 - 5 than 5 specific months months years years maturity Total £000 £000 £000 £000 £000 £000 As at 31 March 2019 Assets Cash 45,000 25,000 0 0 91,171 161,171 Investments 0 0 134,986 267,097 4,481,317 4,883,400 Other investment balances 12,568 0 0 0 0 12,568 Current assets 15,475 0 0 0 0 15,475 Total assets 73,043 25,000 134,986 267,097 4,572,488 5,072,614
Liabilities Other investment balances 13,340 0 0 0 0 13,340 Current liabilities 1,555 0 0 0 0 1,555 Total liabilities 14,895 0 0 0 0 14,895
Liquidity Surplus 58,148 25,000 134,986 267,097 4,572,488 5,057,719
East Riding of Yorkshire Council 148 Statement of Accounts 2019/20 PENSION FUND Interest rate risk Interest rate risk is the risk that a change in interest rates will result in a change in the valuation of an investment. The Fund’s direct exposure to changes in interest rates is as follows:
31 March 2019 31 March 2020 £000 £000 Asset Type
Cash and cash equivalents 75,327 85,152 Fixed interest securities 650,318 564,350
725,645 649,502
The table below shows the effect in the year on assets exposed to interest rate changes of a + / - 100 basis points in interest rates:
Asset exposed to Value as at Potential movement on Value on Value on interest rate risk 31 March 2020 1% change in interest rates Increase Decrease £000 £000 £000 £000 Cash and cash equivalents 85,152 852 86,004 84,300 Bonds 564,350 5,643 569,993 558,707
Total 649,502 6,495 655,997 643,007
Asset exposed to Value as at Potential movement on 1% Value on Value on interest rate risk 31 March 2019 change in interest rates Increase Decrease £000 £000 £000 £000 Cash and cash equivalents 75,327 753 76,080 74,574 Bonds 650,318 6,503 656,821 643,815
Total 725,645 7,256 732,901 718,389
The table below shows the impact on income exposed to interest rate changes of + / - 100 basis points change in interest rates:
Value as at Potential movement on Value on Value on Income exposed to 31 March 2020 1% change in interest rates Increase Decrease interest rate risk £000 £000 £000 £000 Cash and cash equivalents 1,218 12 1,230 1,206 Bonds 21,928 219 22,147 21,709
Total 23,146 231 23,377 22,915
Value as at Potential movement on 1% Value on Value on Income exposed to 31 March 2019 change in interest rates Increase Decrease interest rate risk £000 £000 £000 £000 Cash and cash equivalents 1,257 13 1,270 1,244 Bonds 21,637 216 21,853 21,421
Total 22,894 229 23,123 22,665
East Riding of Yorkshire Council 149 Statement of Accounts 2019/20 PENSION FUND Foreign exchange risk Foreign exchange risk is the risk that an adverse movement in foreign exchange rates will impact on the value of the Fund’s investments denominated in foreign currencies. The following table summarises the Fund’s currency exposure:
USD EUR JPY CHF SEK DKK NOK AUD CAD Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 As at 31 March 2020 Bonds Overseas Public Sector 28,466 19,433 20,000 0 1,596 0 0 3,527 3,281 76,303 Multi Asset Credit - quoted 45,317 0 0 0 0 0 0 0 0 45,317 Multi Asset Credit - unquoted 75,016 98,575 0 0 0 0 0 0 0 173,591 Overseas Corporate 0 0 0 0 0 0 0 0 0 0 Equities Overseas -1,279 154,176 164,489 56,020 7,977 0 2,839 0 0 384,222 Index-Linked Bonds Overseas Public Sector 14,581 0 0 0 0 0 0 0 0 14,581 Pooled Investment Vehicles Managed Funds 425,733 0 0 0 0 0 0 0 0 425,733 Property - unquoted 27,655 97,998 0 0 0 0 0 0 0 125,653 Private Equity - quoted 11,056 0 0 0 0 0 0 0 0 11,056 Private Equity - unquoted 66,404 69,065 0 0 0 0 0 0 0 135,469 Infrastructure - unquoted 28,754 77,780 0 0 0 0 0 0 0 106,534 Other investments - unquoted 128,181 11,574 0 0 0 0 0 0 0 139,755 849,884 528,601 184,489 56,020 9,573 0 2,839 3,527 3,281 1,638,214
USD EUR JPY CHF SEK DKK NOK AUD CAD Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 As at 31 March 2019 Bonds Overseas Public Sector 24,890 18,696 18,876 0 1,642 0 0 3,605 3,143 70,852 Multi Asset Credit - quoted 47,662 0 0 0 0 0 0 0 0 47,662 Multi Asset Credit - unquoted 68,518 93,052 0 0 0 0 0 0 0 161,570 Overseas Corporate 32,420 4,545 0 0 0 0 0 0 0 36,965 Equities Overseas -5,495 162,591 172,524 53,121 11,854 2,258 10,844 0 0 407,697 Index-Linked Bonds Overseas Public Sector 13,182 0 0 0 0 0 0 0 0 13,182 Pooled Investment Vehicles Managed Funds 516,444 0 0 0 0 0 0 0 0 516,444 Property - unquoted 20,513 54,214 0 0 0 0 0 0 0 74,727 Private Equity - quoted 11,392 0 0 0 0 0 0 0 0 11,392 Private Equity - unquoted 47,278 57,444 0 0 0 0 0 0 0 104,722 Infrastructure - unquoted 20,121 47,731 0 0 0 0 0 0 0 67,852 Other investments - unquoted 101,591 19,750 0 0 0 0 0 0 0 121,341 898,516 458,023 191,400 53,121 13,496 2,258 10,844 3,605 3,143 1,634,406
East Riding of Yorkshire Council 150 Statement of Accounts 2019/20 PENSION FUND A percentage strengthening or weakening of sterling against the various currencies in which the Fund holds investments would, it has been calculated using the likely volatility associated with foreign exchange movements, increase or decrease the net assets available to fund benefits as follows:
Asset value Potential market Value on Value on Assets exposed to at 31 March 2020 movement Increase Decrease currency risk £000 £000 £000 £000
Overseas Public Sector Bonds 76,303 6,217 82,520 70,086 Multi Asset Credit - quoted 45,317 3,852 49,169 41,465 Multi Asset Credit - unquoted 173,591 12,586 186,177 161,005 Overseas Public Sector I/L Bonds 14,581 1,239 15,820 13,342 Overseas Equities 384,222 30,995 415,217 353,227 Managed Funds 425,733 36,187 461,920 389,546 Property - unquoted 125,653 8,525 134,178 117,128 Private Equity - quoted 11,056 940 11,996 10,116 Private Equity - unquoted 135,469 9,995 145,464 125,474 Infrastructure - unquoted 106,534 7,344 113,878 99,190 Other investments - unquoted 139,755 11,624 151,379 128,131
Total 1,638,214 129,504 1,767,718 1,508,710
Asset value Potential market Value on Value on Assets exposed to at 31 March 2019 movement Increase Decrease currency risk £000 £000 £000 £000
Overseas Public Sector Bonds 70,852 6,235 77,087 64,617 Multi Asset Credit - quoted 47,662 4,194 51,856 43,468 Multi Asset Credit - unquoted 161,570 14,218 175,788 147,352 Overseas Corporate 36,965 3,229 40,194 33,736 Overseas Public Sector I/L Bonds 13,182 1,160 14,342 12,022 Overseas Equities 407,697 35,877 443,574 371,820 Managed Funds 516,444 45,447 561,891 470,997 Property - unquoted 74,727 6,576 81,303 68,151 Private Equity - quoted 11,392 1,003 12,395 10,389 Private Equity - unquoted 104,722 9,216 113,938 95,506 Infrastructure - unquoted 67,852 5,971 73,823 61,881 Other investments - unquoted 121,341 10,678 132,019 110,663
Total 1,634,406 143,804 1,778,210 1,490,602 y) Contingent assets As at 31 March 2020 the Fund had submitted claims totalling £8.73m relating to the reclaiming of UK and overseas withholding tax on investment income received, of which £1.83m has been received to date. Professional costs to date have totalled £0.69m. z) Accounting standards that have been issued but not yet adopted Accounting standards that have been issued before 1 January 2020 but not yet adopted by the Code relate to: IFRS 16 Leases - the new standard replaces IAS 17 Leases and comes into effect 1 April 2021. The new standard changes the accounting for leases substantially. It eliminates a lessee’s classification for leases as either operating leases or finance leases. Instead all leases are treated in a similar way to finance leases applying IAS 17 meaning that the leases will be brought onto the balance sheet. The introduction of the above accounting standard is not expected to have a material impact on the 2021/22 Pension Fund Accounts.
East Riding of Yorkshire Council 151 Statement of Accounts 2019/20 PENSION FUND aa) Events after Balance Sheet Date This note considers events that arise after the balance sheet date, which concerns conditions that did not exist at that time and are of such materiality that their disclosure is required for the fair presentation of the final statements. Events after the balance sheet date are reflected up to the date when the Statement of Accounts was authorised by the Head of Finance as Section 151 Officer on 28 August 2020. At the date of signing there has been no adjusting or non-adjusting events after the reporting period. ab) Scheme Registration Number The Fund’s scheme registration number with the Pensions Regulator is 10079121.
11. FURTHER DETAIL
The complete Annual Report and Accounts of the East Riding Pension Fund can be found on the Fund’s website www.erpf.org.uk.
East Riding of Yorkshire Council 152 Statement of Accounts 2019/20 GLOSSARY OF TERMS
A CHANGE IN ACCOUNTING An adjustment of the carrying amount of an asset or a liability, or the amount ESTIMATE of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits/obligations. Changes in accounting estimates result from new information or new developments and, accordingly, are not correction of errors.
A PRINCIPLE MARKET The market with the greatest volume and level of activity for the asset or liability.
ACADEMIES Academies are publicly funded independent schools, no longer under Local Authority (LA) control. Their funding is received directly from the Education Funding Agency (EFA) rather than from the LA.
ACCOUNTING PERIOD The period of time covered by the accounts, normally a period of twelve months commencing on 1 April. The end of the accounting period is the balance sheet date.
ACCOUNTING POLICIES Specific principles, bases, conventions, rules and practices applied by an authority in preparing and presenting financial statements.
ACCRUALS Sums included in the final accounts to recognise revenue and capital income and expenditure earned or incurred in the financial year, but for which actual payment had not been received or made as at 31 March.
ACCRUAL BASIS The authority recognises items as assets, liabilities, income and expenses when they satisfy the definitions and recognition criteria for those elements in the Code. Accrual accounting depicts the effects of transactions and other events and circumstances on an authority's economic resources and claims in the periods in which those effects occur, even if the resulting cash receipts and payments occur in a different period.
ACQUIRED OPERATION Services acquired by the authority during the accounting period as a consequence of legislation, e.g. a new statutory responsibility transferred from
another entity
ACTIVE MARKET A market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing
basis.
ACTUARIAL GAINS AND For a defined benefit pension scheme, the changes in actuarial surpluses or LOSSES deficits that arise because: events have not coincided with the actuarial assumptions made for the last valuation (experience gains and losses); or the actuarial assumptions have changed.
AGENCY ARRANGEMENTS An arrangement between two organisations where one will act as an agent, collecting money on behalf of the other party, to whom the money is then paid over. An example of this is National Non Domestic Rate (NNDR) collections, where the Local Authority is acting as the billing agent for Central Government and Humberside Fire and Rescue Service, collecting money from tax payers and then paying it over.
AGENT This is where the authority is acting as an intermediary.
AMORTISATION The depreciable amount of an intangible asset with a finite useful life. It is amortised (depreciated) on a systematic basis over its useful life, beginning when the intangible asset is available for use.
ASSET CEILING The present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.
East Riding of Yorkshire Council 153 Statement of Accounts 2019/20 GLOSSARY OF TERMS
ASSETS A resource controlled by the authority, as a result of past events and from which future economic benefits or service potential are expected flow to the authority.
ASSETS HELD BY A LONG- Are assets (other than non-transferable financial instruments issued by the TERM EMPLOYEE BENEFIT reporting authority) that are either: FUND a) held by a fund that is separated within the reporting authority in accordance with Local Government Pension Scheme requirements and exists solely to pay or b) held by an entity (a fund) that is legally separate from the reporting authority and exists solely to pay or fund employee benefits, and c) are available to be used only to pay or fund employee benefits, are not available to the reporting authority’s own creditors (even in bankruptcy), and cannot be returned to the reporting authority, unless either: i) the remaining assets of the fund are sufficient to meet all the related employee benefit obligations of the plan or the reporting authority, or ii) the assets are returned to the reporting authority to reimburse it for employee benefits already paid.
ASSOCIATE An entity over which an investor has significant influence.
AUDIT OF ACCOUNTS An independent examination of the Authority’s financial affairs.
AVAILABLE FOR SALE Those non-derivative financial assets that are not classified as loans and FINANCIAL ASSETS receivables or held-to-maturity investments or financial assets at fair value through profit or loss.
BALANCE SHEET A statement of the recorded assets, liabilities and other balances at the end of the accounting period.
BID Business Improvement District are projects for the benefit of a particular area that are financed (in whole or in part) by a BID levy paid by the non-domestic ratepayers, or a class of such ratepayers, in the BID area. There are two key participants - the billing authority for the area and the BID body.
BORROWING COST Interest and other costs that an authority incurs in connection with the borrowing of funds.
BRS Business Rate Supplements were introduced by the Business Rate Supplements Act 2009 and related regulations and statutory guidance. The Act confers powers on relevant local authorities "to impose a levy on non-domestic ratepayers to raise money for expenditure on projects expected to promote economic development".
BUDGET The forecast of net revenue and capital expenditure over the accounting period.
CAPITAL EXPENDITURE Expenditure on the acquisition of a non-current asset, which will be used in providing services beyond the current accounting period or expenditure that adds to, and not merely maintains, the value of an existing non-current asset.
CAPITAL FINANCING Funds used to pay for capital expenditure. There are various methods of financing capital expenditure including borrowing, leasing, direct revenue financing, usable capital receipts, capital grants, capital contributions, revenue reserves and earmarked reserves.
CAPITAL PROGRAMME The capital schemes the Authority intends to carry out over a specified period of time.
East Riding of Yorkshire Council 154 Statement of Accounts 2019/20 GLOSSARY OF TERMS
CAPITAL RECEIPT The proceeds from the disposal of land or other non-current assets. Proportions of Housing capital receipts can be used to finance new capital expenditure, within rules set down by the Government, but they cannot be used to finance revenue expenditure except for Revenue Expenditure Funded from Capital under Statute.
CARRYING AMOUNT The amount at which an asset is recognised after deducting any accumulated depreciation and impairment losses.
CASH Cash on hand and demand deposits.
CASH EQUIVALENTS Short-term, highly liquid investments readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
CASH FLOW STATEMENT The financial statement that shows the changes in cash and cash equivalents of the authority during the reporting period.
CASHFLOWS Inflows and outflows of cash and cash equivalents.
CHANGE IN ACCOUNTING An adjustment of the carrying amount of an asset or a liability, or the amount ESTIMATE of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not correction of errors.
CIL The Community Infrastructure Levy (CIL) is a discretionary charge which relevant local authorities are empowered to charge on new development in their area. CIL charges are based on a formula which relates the charge to the size of the development. The proceeds of the levy must be spent on infrastructure to support the development of the area.
CLASS OF PROPERTY, PLANT A grouping of assets of a similar nature and use in an authority's operations. AND EQUIPMENT
CLOSE MEMBERS OF THE These are those family members who may be expected to influence, or be FAMILY OF A PERSON influenced by, that person in their dealings with the entity and include: that person's children and spouse or domestic partner; children of that person's spouse or domestic partner and dependants of that person or that person's spouse or domestic partner.
COLLECTION FUND A separate fund that records the income and expenditure relating to council tax and non-domestic rates.
COMMENCEMENT OF THE The date from which the lessee is entitled to exercise its right to use the leased LEASE TERM asset. It is the date of initial recognition of the lease.
COMMUNITY ASSETS Non-current assets that the Authority intends to hold in perpetuity, that have no determinable useful life and that may have restrictions on their disposal. Examples of community assets are parks and historical buildings
COMPARABILITY Information about an authority is more useful if it can be compared with similar information about other authorities and entities and with similar information about the same authority for another period or another date
COMPONENT A part of an asset requiring separating from the total (host) asset into an asset in its own right as it has a cost that is significant in relation to the total cost of the asset. If the components also has a significantly different depreciable life from the host, then it is depreciated separately.
East Riding of Yorkshire Council 155 Statement of Accounts 2019/20 GLOSSARY OF TERMS
COMPREHENSIVE INCOME Shows the accounting economic cost in the year of providing services in AND EXPENDITURE accordance with generally accepted accounting practices, rather than the STATEMENT amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.
CONDITIONS ON Stipulations that specify that the future economic benefits or service potential TRANSFERRED ASSETS embodied in the asset are required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor.
CONSISTENCY The concept that the accounting treatment of like items within an accounting period and from one period to the next are the same.
CONSTRUCTIVE An obligation that derives from the Authority’s actions where: OBLIGATION by an established pattern of past practice, published policies or a sufficiently specific current statement, the Authority has indicated to other parties that it will accept certain responsibilities; and as a result, the Authority has created a valid expectation on the part of those other parties that it will discharge those responsibilities.
CONTINGENT ASSET A possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Authority.
CONTINGENT LIABILITY A contingent liability is either: a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Authority, or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
CONTROL OF AN INVESTEE An investor controls an investee when the reporting authority is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
CONSTRUCTION A contract, or a similar binding arrangement, specifically negotiated for the CONTRACT construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. Construction contracts include contracts for the rendering of services which are directly related to the construction, destruction or restoration of assets, and the restoration of the environment following the demolition of assets.
CONTRACTOR An entity that performs construction work pursuant to a construction contract
CORPORATE AND The corporate and democratic core comprises all activities that local DEMOCRATIC CORE authorities engage in specifically because they are elected, multi-purpose authorities. The cost of these activities are thus over and above those which would be incurred by a series of independent, single purpose, nominated bodies managing the same services. There is therefore no logical basis for apportioning these costs to services.
East Riding of Yorkshire Council 156 Statement of Accounts 2019/20 GLOSSARY OF TERMS
COST The amount of cash or cash equivalent paid or the fair value of the other consideration given to acquire an asset at the time of acquisition or construction
COST APPROACH A valuation technique that reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost).
COSTS TO SELL The incremental costs directly attributable to the disposal of an asset, excluding finance costs.
CRC The Carbon Reduction Commitment Energy Efficiency Scheme commenced in April 2010.
CREDITOR Amount owed by the Authority for works done, goods received or services rendered within the accounting period, but for which payment has not been made by the end of that accounting period.
CURRENT ASSET An item having value to the Authority in monetary terms. A current asset will be consumed or cease to have material value within the next financial year (e.g. cash and inventories).
CURRENT REPLACEMENT The cost the authority would incur to acquire the asset on the reporting date. COST
CURRENT SERVICE COST The increase in the present value of a defined benefit pension scheme’s (PENSIONS) liabilities, expected to arise from employee service in the current period.
CURRENT VALUE Measurements reflect the economic environment prevailing for the service or function the asset is supporting at the reporting date. DEBTOR Amount owed to the Authority for works done, goods received or services rendered within the accounting period, but for which payment has not been received by the end of that accounting period. DECISION MAKER An entity with decision-making rights that is either a principal or an agent for other parties.
DEFINED BENEFIT PENSION Pension schemes in which the benefits received by the participants are SCHEME independent of the contributions paid and are not directly related to the investments of the scheme.
DEFINED CONTRIBUTION Post-employment benefit plans under which an authority pays fixed PLANS contributions into a separate entity and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient asset to pay all employee benefits relating to employee service in the current and prior periods.
DEPRECIATION(TANGIBLES)/ The measure of the cost of the wearing out, consumption or other reduction AMORTISATION in the useful economic life of the Authority’s non-current assets during the (INTANGIBLES) accounting period, whether from use, the passage of time, or obsolescence through technological or other changes.
DEPRECIATED (DRC) is a method of valuation which provides the current cost of replacing REPLACEMENT COST an asset with its modern equivalent asset less deductions for all physical deterioration and all relevant forms of obsolescence and optimisation.
DERECOGNITION The removal of a previously recognised financial asset or financial liability from an authority's Balance Sheet.
East Riding of Yorkshire Council 157 Statement of Accounts 2019/20 GLOSSARY OF TERMS
DERIVATIVE A financial instrument with all three of the following characteristics: its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of anon-financial variable that the variable is not specific to a party to the contract; it requires no initial net investment or an initial investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; it is settled at a future date.
DISCONTINUED OPERATION Activity of an authority that must cease completely; that is, responsibilities transferred from one part of the public sector to another are not discontinued operations.
DISCRETIONARY BENEFITS Retirement benefits which the employer has no legal, contractual or (PENSIONS) constructive obligation to award and are awarded under the Authority’s discretionary powers such as The Local Government (Discretionary Payments) Regulations 1996.
DISPOSAL GROUP A group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.
DONATED ASSETS Assets (including heritage assets) transferred at nil value or acquired at less than fair value.
DRC Depreciated replacement cost is a method of valuation which provides the current cost of replacing an asset with its modern equivalent asset less deductions for all physical deterioration and all relevant forms of obsolescence and optimisation.
ECONOMIC COST Economic cost incorporates the total cost of everything involved in providing a service in accordance with accounting standards i.e. includes non-cash charges such as depreciation and the employee benefit accrual. These are then adjusted in the Movement in Reserves Statement in accordance with statute to produce the General Fund balance. Statute always takes precedence over accounting standard treatment.
EFFECTIVE INTEREST RATE This is the rate of interest necessary to discount the estimated stream of principal and interest cash flows through the expected life of a financial instrument to equal the amount at initial recognition.
EMPLOYEE BENEFITS All forms of consideration given by an authority in exchange for service rendered by employees or for the termination of employment.
ENTRY PRICE The price paid to acquire an asset or received to assume a liability in an exchange transaction.
EQUITY INSTRUMENT Any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
EQUITY METHOD A method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor's share of net assets of the investee. The reporting authority's Surplus or Deficit on the Provision of Services includes its share of the investee's profit or loss and the reporting authority's Other Comprehensive Income and Expenditure includes its share of the investee's Other Comprehensive Income and Expenditure
EVENTS AFTER THE Events after the reporting period are those events, favourable or unfavourable, REPORTING PERIOD that occur between the balance sheet date and the date when the Statement of Accounts is authorised for issue.
East Riding of Yorkshire Council 158 Statement of Accounts 2019/20 GLOSSARY OF TERMS
EXCHANGE TRANSACTIONS Transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another entity in exchange.
EXECUTORY CONTRACTS Contracts under which neither party has performed any of its obligation or both parties have partially performed their obligations to an equal extent.
EXISTING USE VALUE (EUV) The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion, assuming that the buyer is granted vacant possession of all parts of the property required by the business and disregarding potential alternative uses and any other characteristics of the property that would cause its market value to differ from that needed to replace the remaining service potential at least cost. Under IFRS this is the same as Fair Value.
EXISTING USE VALUE- The estimated amount for which a property should exchange, on the date of SOCIAL HOUSING (EUV-SH) valuation, between a willing buyer and a willing seller, in an arm’s-length transaction, after proper marketing where in the parties had each acted knowledgeably, prudently and without compulsion, subject to the following further assumptions that; the property will continue to be let by a body and used for social housing at the valuation date, any regulatory body, in applying its criteria for approval, would not unreasonably better the vendor’s ability to dispose of the property to organisations intending to manage their housing stock in accordance with that regulatory body’s requirements properties temporarily vacant pending re letting should be valued, if there is a letting demand, on the basis that the prospective purchaser intends to re-let them, rather than with vacant possession. Any subsequent sale would be subject to all of the above assumptions.
EXPECTED RETURN ON For a funded defined benefit scheme, this is the average rate of return, including PENSION ASSETS both income and changes in fair value but net of scheme expenses, which is expected over the remaining life of the related obligation on the actual assets held by the scheme.
EXPENDITURE AND The Expenditure and Funding Analysis takes the net expenditure that is FUNDING ANALYSIS chargeable to taxation and rents and reconciles it to the Comprehensive Income and Expenditure Statement. The Expenditure and Funding Analysis promotes accountability and stewardship by providing a direct link with the annual decision making process of the authority and its budget i.e. the General Fund.
EXPENSES Decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or increases of liabilities that result in decreases in reserves.
FAIR VALUE The amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction. Under IFRS there is no consistent definition of Fair Value; different definitions apply in different circumstances.
FAITHFUL REPRESENTATION To be useful, financial information must not only represent relevant phenomena, but it must also faithfully represent the phenomena that it purports to represent. To be a perfectly faithful representation, a depiction would have three characteristics. It would be complete, neutral and free from error.
FINANCIAL ASSET OR A financial asset or financial liability that meets the following conditions. It’s is FINANCIAL LIABILITY AT classified as held for trading FAIR VALUE THROUGH PROFIT OR LOSS
East Riding of Yorkshire Council 159 Statement of Accounts 2019/20 GLOSSARY OF TERMS
FINANCIAL INSTRUMENT Any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another. The term covers both financial assets and financial liabilities, from straightforward trade receivables (invoices owing) and trade payables (invoices owed) to complex derivatives and embedded derivatives.
FINANCE LEASE A lease that transfers substantially all the risks and rewards of ownership of an asset to the lessee (even though title to the property may not be transferred). The asset is recorded on the Balance Sheet of the lessee.
FINANCING ACTIVITIES Activities that result in changes in the size and composition of the principal, received from or repaid to external providers of finance.
FReM Financial Reporting Manual.
FUND ACCOUNT A fund account disclosing changes in net assets available for benefits.
GAAP Generally Accepted Accounting Practice.
GENERAL FUND This is the main revenue fund of the Authority and includes the net cost of all services financed by local taxpayers and Government grants (excluding the Housing Revenue Account).
GOING CONCERN The concept that the Statement of Accounts are prepared on the assumption that the Authority will continue in operational existence for the foreseeable future.
GOVERNMENT This refers to government, government agencies and similar bodies whether local, national or international.
GOVERNMENT – RELATED An entity that is controlled, jointly controlled or significantly influenced by a ENTITY government
GOVERNMENT GRANTS Grants made by the Government towards either revenue or capital expenditure in return for past or future compliance with certain stipulations relating to the activities of the Authority. Grants may be specific to a particular scheme or may support the revenue or capital spend (respectively) of the Authority in general.
GRANTOR Is the authority that grants the right to use the service concession asset to the operator.
GRANTS AND Assistance in the form of transfers of resources to an authority in return for CONTRIBUTIONS past or future compliance with certain conditions relating to the operation of activities. They exclude those forms of assistance which cannot reasonably have a value placed upon them and transactions with organisations which cannot be distinguished from the normal service transactions of the authority.
GROSS INVESTMENT IN THE This is the aggregate of (a) the minimum lease payments receivable by the LEASE lessor under a finance lease, and (b) any unguaranteed residual value accruing to the lessor.
GROUP A parent and all its subsidiaries
GROUP ACCOUNTS The financial statements of a group in which the assets, liabilities, reserves, income, expenses and cash flows of the parents (reporting authority) and its subsidiaries plus the investments in associates and interests in joint ventures are presented as those of a single economic entity
HELD FOR SALE Property Plant and Equipment assets held by the Authority pending sale. Assets must meet strict criteria before being classified as Held for Sale.
East Riding of Yorkshire Council 160 Statement of Accounts 2019/20 GLOSSARY OF TERMS
HELD TO MATURITY Non-derivative financial assets with fixed or determinable payments and fixed INVESTMENTS maturity that an authority has the positive intention and ability to hold to maturity.
HERITAGE ASSETS An asset with historic, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture and this purpose is central to the objectives of the entity holding it.
HISTORICAL COST The carrying amount of an asset as at 1 April 2007 or at the date of acquisition, whichever is the later, and adjusted for subsequent depreciation or impairment (if applicable).
HOUSING BENEFITS A system of financial assistance to individuals towards certain housing costs administered by authorities and subsidised by Central Government.
HOUSING REVENUE A separate account to the General Fund that includes the expenditure and ACCOUNT (HRA) income arising from the provision of housing accommodation by the Authority.
IASB International Accounting Standards Board.
IDB Internal Drainage Boards
IFRIC INTERPRETATION IFRS Interpretations Committee
IFRS International Financial Reporting Standards
IMPAIRMENT A reduction in the value of a non-current asset to below its carrying amount on the Balance Sheet. Impairment is caused by a consumption of economic benefit, such as obsolescence or physical damage of an asset.
IMPAIRMENT LOSS The amount by which the carrying amount of an asset exceeds its recoverable amount.
IMPRACTICABLE Applying a requirement is impracticable when the authority cannot apply it after making every reasonable effort to do so.
INCEPTION OF THE LEASE The earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease.
INCOME Amounts that the Authority receives or expects to receive from any source, including fees, charges, sales and grants.
INCOME APPROACH Is a valuation technique that converts future amounts (e.g. cash flows or income and expenses) to a single current (i.e. discounted) amount. The fair value measurement is determined on the basis of the value indicated by current market expectations about those future amounts.
INCOME FROM A Recurring and non-recurring fees, interest, dividends, gains or losses on the STRUCTURED ENTITY re-measurement or de-recognition of interests in structured entities and gains or losses from the transfer of assets and liabilities to the structured entity.
INFRASTRUCTURE ASSETS Non-current assets belonging to the Authority that cannot be transferred or sold, on which expenditure is only recoverable by continued use of the asset created. Examples are highways, footpaths and bridges.
INPUT TAX VAT charged on purchases
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INSTANT BUILD A method of valuation which provides the current cost of replacing an asset DEPRECIATED with its modern equivalent asset less deductions for all physical deterioration REPLACEMENT COST (DRC) and all relevant forms of obsolescence and optimisation. The ‘instant build’ element reflects the fact that the valuation is prepared excluding an allowance for borrowing costs incurred over an assets construction period i.e. the asset is assumed to be replaced immediately.
INTANGIBLE ASSETS An intangible (non-physical) item may be defined as an identifiable non- monetary asset when it is probable that the expected future economic benefits attributable to the asset will flow to the entity, and its cost can be measured reliably. An asset meets the identifiability criterion when it: (a) is separable, i.e. capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, asset or liability; or (b) arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
INTEREST COST (PENSIONS) For a defined benefit scheme, the expected increase during the period in the present value of the scheme liabilities because the benefits are one period closer to settlement.
INTEREST IN ANOTHER This refers to contractual and non-contractual involvement that exposes a ENTITY reporting authority to variability of returns from the performance of the other entity. An interest in another entity can be evidenced by, but not limited to, the holding of equity or debt instruments as well as other forms of involvement such as the provision of funding, liquidity support, credit enhancement and guarantees. It includes the means by which an entity has control or joint control of, or significant influence over, another entity. a reporting authority does not necessarily have an interest in another entity solely because of a typical customer-supplier relationship.
INVENTORIES Items of raw materials and stores an authority has procured and holds in expectation of future use. Examples are consumable stores, raw materials and products and services in intermediate stages of completion (work in progress).
INVESTING ACTIVITIES The acquisition and disposal of long-term assets and other investments not included in cash equivalents.
INVESTMENT PROPERTY Property (land, building) held solely to earn rentals or for capital appreciation or both, rather than for: 1) use in the production or supply of goods or services or for administrative purposes or 2) sale in the ordinary course of operations.
INVESTMENTS (PENSION The investments of the Pension Fund will be accounted for in the statements FUND) of that fund. However, authorities are also required to disclose, as part of the disclosures relating to retirement benefits, the attributable share of pension scheme assets associated with their underlying obligations.
IPSAS International Public Sector Accounting Standards.
JOINT ARRANGEMENT An arrangement of which two or more parties have joint control.
JOINTLY CONTROLLED The operation of some joint ventures involves the use of the assets and other OPERATIONS resources of the ventures rather than the establishment of a corporation, partnership or other entity, or a financial structure that is separate from the ventures themselves. Each venture uses its own property, plant and equipment and carries its own inventories. It also incurs its own expenses and liabilities and raises its own finance, which represent its own obligations. The joint venture activities may be carried out by the venture’s employees alongside the venture’s similar activities. The joint venture agreement usually provides a means by which the revenue from the sale of the joint product/service and any expenses incurred in common are shared among the ventures.
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JOINT VENTURE This is a contractual or binding arrangement whereby two or more parties are committed to undertake an activity that is subject to joint control. The contractual or binding arrangement is usually in writing.
KEY MANAGEMENT These are all chief officers, elected members, chief executive of the authority PERSONNEL and other persons having the authority and responsibility for planning, directing and controlling the activities of the authority, including the oversight of these activities.
LEASE An agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time.
LEASE TERM The non-cancellable period for which the lessee has contracted to lease the asset together with any further terms for which the lessee has the option to continue to lease the asset, with or without further payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option.
LEGAL OBLIGATION An obligation that derives from: a contract (through its explicit or implicit terms), legislation or other operation of law.
LIABILITY A liability is where the Authority owes payment to an individual or another organisation, arising from past events. A current liability is an amount which will become payable or could be called in within the next accounting period, e.g. creditors or cash overdrawn. A deferred liability is an amount which by arrangement is payable beyond the next year at some point in the future or to be paid off by an annual sum over a period of time.
LOANS AND RECEIVABLES Are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
LOBO Lender option borrower option loan debts.
LONG-TERM CONTRACT A contract entered into for the design, manufacture or construction of a single substantial asset or the provision of a service (or a combination of assets or services which together constitute a single project), where the time taken to substantially complete the contract is such that the contract activity falls into more than one accounting period.
MARKET APPROACH A valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (ie similar) assets, liabilities or a group of assets and liabilities, such as a business.
MARKET PARTICIPANTS Buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the following characteristics: a) They are independent of each other, i.e. they are not related parties, although the price in a related party transaction may be used as an input to a fair value measurement if the entity has evidence that the transaction was entered into at market terms. b) They are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information, including information that might be obtained through due diligence efforts that are usual and customary. c) They are able to enter into a transaction for the asset or liability. d) They are willing to enter into a transaction for the asset or liability, i.e. they are motivated but not forced or otherwise compelled to do so.
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MATERIAL Omissions or misstatements of items are material if they could, individually or collectively, influence the decisions or assessments of users made on the basis of the financial statements.
MATERIALITY The concept that the Statement of Accounts should include all amounts which, if omitted, or misstated, could be expected to lead to a distortion of the financial statements and ultimately mislead a user of the accounts.
MEASUREMENT Measurement is the process of determining the monetary amounts at which the elements of the financial statements are to be recognised and carried in the Balance Sheet and Comprehensive Income and Expenditure Statement.
MINIMUM REVENUE The minimum amount, which must be charged to the revenue account each PROVISION (MRP) year in order to provide for the repayment of loans and other amounts borrowed by the Authority.
MINORITY INTEREST The equity in a subsidiary not attributable, directly or indirectly , to a parent.
MULTI-EMPLOYER PLANS Defined contribution plans (other than state plans) or defined benefit plans (other than state plans) that: a) pool the assets contributed by various entities that are not under common control, and b) use those assets to provide benefits to employees of more than one entity, on the basis that contribution and benefit levels are determined without regard to the identity of the entity that employs the employees.
NET ASSET STATEMENT A statement that shows the assets available for benefits at the year end.
NET BOOK VALUE (NBV) The amount at which non-current assets are included in the Balance Sheet, i.e. their historical costs or current value less the cumulative amounts provided for depreciation and impairment.
NET DEFINED BENEFIT The deficit or surplus, adjusted for any effect of limiting a net defined benefit LIABILITY asset to the asset ceiling.
NET INTEREST ON THE NET The change during the period in the net defined benefit liability that arises from DEFINED BENEFIT LIABILITY the passage of time.
NET INVESTMENT IN THE The gross investment in the lease discounted at the interest rate implicit in the LEASE lease.
NET REALISABLE VALUE The estimated selling price in the ordinary course of operations less the estimated costs of completion and the estimated costs necessary to make the sale, exchange or distribution.
NON CURRENT ASSET An item having value to the Authority in monetary terms. A non-current asset provides benefits to the Authority and to the services it provides for a period of more than one year and may be tangible e.g. a school building, or intangible, e.g. computer software licences.
NON-DISTRIBUTED COSTS These are overheads for which no user now benefits and as such are not (NDC) apportioned to services.
NON-DOMESTIC RATES The Non-Domestic Rate is a levy on businesses, based on a national rate in (NDR) the pound set by the Government and multiplied by the assessed rateable value of the premises they occupy. It is collected by the Authority on behalf of itself, Central Government and Humberside Fire and Rescue Service.
NON-EXCHANGE Transactions that are not exchange transactions. In a non-exchange TRANSACTIONS transaction, an authority either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange.
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NOTES Contain information in addition to that presented in the Movement in Reserves Statement, Comprehensive Income and Expenditure Statement, Balance Sheet and Cash Flow Statement. Notes provide narrative descriptions or disaggregation of items presented in those statements and information about items that do not qualify for recognition in those statements.
OBLIGATING EVENT An event that creates a legal or constructive obligation that results in an authority having no realistic alternative to settling that obligation.
ONEROUS CONTRACT A contract for the exchange of assets or services in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits or service potential expected to be received under it
OPERATING ACTIVITIES The activities of the authority that are not investing or financing activities.
OPERATING LEASE A lease other than a finance lease. The risks and rewards of ownership of a non-current asset that is leased remain with the lessor and on the lessor’s Balance Sheet. The lessee accounts for the rental payments as revenue income and expenditure.
OPERATOR Is the entity that uses the service concession asset to provide public services subject to the local authority's control of the asset.
ORDERLY TRANSACTION A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (e.g. a forced liquidation or distress sale).
OTHER COMPREHENSIVE Comprises items of expense and income (including reclassification INCOME AND EXPENDITURE adjustments) that are not recognised in the Surplus or Deficit on the Provision of Services as required or permitted by the Code. Examples include changes in revaluation surplus; actuarial gains and losses on defined benefit plans; and gains and losses on re-measuring available-for-sale financial assets.
OTHER LONG-TERM All employee benefits other than short-term employee benefits, post- EMPLOYEE BENEFITS employment benefits and termination benefits
OUTPUT TAX VAT charged in sales.
OVERSIGHT This means the supervision of the activities of an authority, with the authority and responsibility to control, or exercise significant influence over, the financial and operating decisions of the authority.
OWNER-OCCUPIED Property held for use in the delivery of services or production of goods or for PROPERTY administrative purposes.
PARENT An entity that has one or more subsidiaries.
PARTY TO A JOINT An entity that participates in a joint arrangement, regardless of whether that ARRANGEMENT entity has joint control of the arrangement.
PAST SERVICE COST The change in the present value of the defined benefit obligation for employee service in prior periods, resulting from a plan amendment or a curtailment and any gain or loss on settlement.
PAST SERVICE COST For a defined benefit pension scheme, the increase in the present value of the (PENSIONS) scheme liabilities related to employee service in prior periods arising in the current period as a result of the introduction of, or improvement to, retirement benefits.
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PENSION SCHEME The liabilities of a defined benefit scheme for outgoings due after the valuation LIABILITIES date. Scheme liabilities measured using the projected unit method reflect the benefits that the employer is committed to provide for service up to the valuation date.
PFI Private finance initiative
PLAN ASSETS comprise: a) assets held by a long-term employee benefit fund, and b) qualifying insurance policies.
POST-EMPLOYMENT Formal or informal arrangements under which an authority provides post- BENEFIT PLANS employment benefits for one or more employees.
POST-EMPLOYMENT Employee benefits that are payable after the completion of employment. BENEFITS
POWER Existing rights that give the current ability to direct the relevant activities
PPP Public-private partnerships
PRECEPT The levy made by precepting authorities on billing authorities, requiring the latter to collect income from council taxpayers on their behalf.
PRESENT VALUE OF A The present value, without deducting any plan assets, of expected future DEFINED BENEFIT payments required to settle the obligation resulting from employee service in OBLIGATION the current and prior periods.
PRINCIPAL Where the authority is acting on its own behalf
PRIOR PERIOD ERRORS Omissions from and misstatements in, the authority's financial statement for one or more prior periods
PRIOR YEAR ADJUSTMENT Material adjustments applicable to prior years arising from changes in accounting policies or from the correction of material errors. This does not include normal recurring corrections or adjustments of accounting estimates made in prior years.
PRIVATE FINANCE A contract between a public sector body and a private sector entity. This INITIATIVE (PFI) typically involves the private sector entity constructing or enhancing property used in the provision of a public service, and operating and maintaining that property for a specified period of time on behalf of the public sector body. In return the public sector body pays for the use of the assets and associated services over the period of the arrangement through a unitary payment
PROPERTY, PLANT AND Property, Plant and Equipment held and occupied, used or consumed by the EQUIPMENT Authority in the pursuit of its strategic objectives and in the direct delivery of those services for which it has either a statutory or discretionary responsibility.
PROSPECTIVE APPLICATION Applying new accounting policies to transactions, other events and conditions occurring after (not before) the date as at which the policy is changed and recognising the effect of the change in the accounting estimate in the current and future periods affected by the change.
PROTECTIVE RIGHTS Rights designed to protect the interest of the party holding those rights without giving that party power over the entity to which those rights relate.
PROVISION An amount put aside in the accounts for future liabilities or losses which are certain or very likely to occur as a result of a past event, but the amounts or dates of when they will arise are uncertain.
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PUBLIC PRIVATE A joint venture in which a private sector partner agrees to provide services to PARTNERSHIPS (PPP) or on behalf of a public sector organisation. A Public Finance Initiative is a form of PPP.
PUBLIC WORKS LOAN A Central Government Agency, which provides loans for one year and above BOARD (PWLB) to authorities at interest rates only slightly higher than those at which the Government itself can borrow.
QUALIFIED VALUER A person conducting the valuations who holds a recognised and relevant professional qualification and having sufficient current local and national knowledge of the particular market, and the skills and understanding to undertake the valuation competently.
QUALIFYING ASSET An asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
QUALIFYING INSURANCE An insurance policy issued by an insurer that is not a related party of the POLICY reporting authority, if the proceeds of the policy: a) can be used only to pay or fund employee benefits under a under a defined benefit plan and b) are not available to the reporting authority’s own creditors (even in bankruptcy) and cannot be paid to the reporting authority, unless either: i) the proceeds represent surplus assets that are not needed for the policy to meet all the related employee benefit obligations, or ii) the proceeds are returned to the reporting authority to reimburse it for employee benefits already paid.
RATEABLE VALUE The annual assumed rental value of a hereditament, which is used for Non Domestic Rate purposes.
RECLASSIFICATION Amounts reclassified to Surplus or Deficit on the Provision of Services in the ADJUSTMENTS current period that were recognised in Other Comprehensive Income and Expenditure in the current or previous periods.
RECOVERABLE AMOUNT An asset is the higher of fair value less costs to sell and its value in use.
REGULAR WAY PURCHASE Purchase or sale of a financial asset under a contract whose terms require OR SALE delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.
RELATED PARTIES There is a detailed definition of related parties in IPSAS 20. For the Council’s purposes, related parties are deemed to include the Authority’s Members, the Chief Executive, its Directors and their close family and household members, partners, levying bodies, other public sector bodies, the Pension Fund and Assisted Organisations.
RELATED PARTY The Code requires the disclosure of any material transactions between the TRANSACTIONS Authority and related parties to ensure that stakeholders are aware when these transactions occur and the amount and implications of such.
RELEVANCE Relevant financial information is capable of making a difference in the decisions made by users. Information may be capable of making a difference in a decision even if some users choose not to take advantage of it or are already aware of it from other sources. financial information is capable of making a difference in decisions if it has predictive value, confirmatory value or both.
RELEVANT ACTIVITIES Activities of the investee that significantly affect the investee's returns.
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REMUNERATION All sums paid to or receivable by an employee and sums due by way of expenses allowances (as far as those sums are chargeable to UK income tax) and the monetary value of any other benefits received other than in cash. Pension contributions payable by the employer are excluded.
RESERVES The residual interest in the assets of the Authority after deducting all its liabilities. These are split into two categories, usable and unusable. Usable reserves are those reserves that contain resources that an authority can apply to fund expenditure of either a revenue or capital nature (as defined). Unusable reserves are those that an authority is not able to utilise to provide services. They hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences between expenditure being incurred and its financing e.g. Capital Adjustment Account.
RESIDUAL VALUE The net realisable value of an asset at the end of its useful life.
RESTRICTIONS ON Stipulations that limit or direct the purposes for which a transferred asset may TRANSFERRED ASSETS be used, but do not specify that future economic benefits or service potential are required to be returned to the transferor if not deployed as specified
RESTRUCTURING A programme that is planned and controlled by management, and materially changes either: the scope of an authority’s activities or the manner in which those activities are carried out
RETIREMENT BENEFITS All forms of consideration given by an employer in exchange for services rendered by employees that are payable after the completion of employment.
RETROSPECTIVE Applying a new accounting policy to transactions, other events and conditions APPLICATION as if that policy had always been applied. Opening balances and prior year income and expenditure comparatives must be adjusted.
RETROSPECTIVE Correcting the recognition, measurement and disclosure of amounts of RESTATEMENT elements of financial statements as if a prior period error had never occurred.
REVALUATION LOSS A reduction in the value of a non-current asset below its carrying amount on the Balance Sheet, caused by a general fall in prices across a whole class of assets.
REVENUE Gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net worth.
REVENUE EXPENDITURE The day-to-day expenses of providing services.
REVENUE EXPENDITURE Expenditure that is revenue in nature, which can be funded from capital FUNDED FROM CAPITAL resources in accordance with statutory direction. It does not result in the UNDER STATUTE (REFCUS) expenditure being carried on the Balance Sheet as a non-current asset. Examples of REFCUS are grants of a capital nature to voluntary organisations.
REVENUE SUPPORT GRANT A grant paid by Central Government to authorities, contributing towards the general cost of their services.
SALE AND LEASEBACK The Authority sells an asset and then leases the same asset back. The arrangement may be treated as finance lease or an operating lease depending on the circumstances and in accordance with the finance lease criteria.
SEPARATE VEHICLE Separately identifiable financial structure, including separate legal entities or entities recognised by statute, regardless of whether those entities have a legal personality.
SeRCOP Service Reporting Code of Practice
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SETTLEMENT A transaction that eliminates all further legal or constructive obligations for part or all of the benefits provided under a defined benefit plan, other than a payment of benefits to, or on behalf of, employees that is set out in the terms of the plan and included in the actuarial assumptions.
SERVICE CONCESSION A contract is deemed to be a service concession arrangement if: ARRANGEMENT 1. The operator (usually a private sector entity) provides services to the grantor (usually a public sector body) and/or services to other parties on behalf of the grantor. The contract must involve the use of an infrastructure asset, such as roads or schools that are dedicated to providing the services under the arrangement. These typically involve the operator constructing or upgrading the infrastructure used to provide the public service and operating and maintaining it for a specified period of time. 2. The grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price; and 3. The grantor controls, through ownership, beneficial entitlement or otherwise, a significant residual interest in the infrastructure at the end of the term of the arrangement.
SERVICE CONCESSION An asset used to provide public services in a service concession arrangement ASSET that: a) is provided by the operator which: i) the operator constructs, develops, or acquires from a third party, or ii) is an existing asset of the operator, or b) is provided by the local authority which: i) is an existing asset of the local authority, or ii) is an upgrade to an existing asset of the local authority. Service concession assets include providing assets (and related services) for the direct use of a public sector entity where these services contribute to the provision of services to the public.
SHORT-TERM EMPLOYEE Employee benefits that are expected to be settled wholly before 12 months BENEFITS after the end of the annual reporting period in which the employees render the related service.
SIC The Standard Interpretations Committee
SIGNIFICANT INFLUENCE The power to participate in the financial and operating policy decisions of an authority, but not control those policies. Significant influence may be exercised in several ways, usually by representation on the board of directions or equivalent governing body but also by, for example, participation in the policy- making process, material transactions between entities within an economic entity, interchange of managerial personnel or dependence on technical information. Significant influence may be gained by an ownership interest, statute or agreement.
SINGLE ENTITY FINANCIAL Statements presented by a parent or an investor with joint control, or STATEMENTS significant influence over, an investee, in which the investments are accounted for at cost
SOCIAL BENEFITS Goods, services and other benefits provided in the pursuit of the social policy objectives of an authority
SOFT LOAN A loan made interest free or at a rate less than the market rate, usually for policy reasons. Such loans are often made to individuals or organisations that the authority considers benefits the local population.
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STIPULATIONS ON Terms in laws or regulation, or a binding arrangement, imposed upon the use TRANSFERRED ASSETS of a transferred asset by entities external to the reporting authority.
STRUCTURED ENTITY An entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.
SUBSIDIARY An entity, including an unincorporated entity such as a partnership that is controlled by another entity
SURPLUS OR DEFICIT ON The total of income less expenses, excluding the components of Other THE PROVISION OF Comprehensive Income and Expenditure SERVICES
TEMPORARY BORROWING Money borrowed for a period of less than one year.
TERMINATION OF BENEFITS Employee benefits provided in exchange for the termination of an employee's employment.
THE CODE The Code of Practice on Local Authority Accounting in the United Kingdom.
THE EFFECTIVE INTEREST A method of calculating the amortised cost of a financial asset or a financial METHOD liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period.
THE RETURN ON PLAN Interest, dividends and other income derived from the plan assets, together ASSETS with realised and unrealised gains or losses on the plan assets, less any costs of managing plan assets and any tax payable by the plan itself, other than tax included in the actuarial assumptions used to measure the present value of the defined benefit obligation.
TIMELINESS This means having information available to decision-makers in time to be capable of influencing their decisions.
TOTAL COMPREHENSIVE Compresses all components of Surplus or Deficit on the Provision of Services INCOME AND EXPENDITURE and of Other Comprehensive Income and Expenditure.
TRANSACTION COSTS Are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability (see Appendix A, paragraph AG13).An incremental cost is one that would not have been incurred if the authority had not acquired, issued or disposed of the financial instrument.
TRUE AND FAIR VIEW The Statement of Accounts should be the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Code. Compliance with the Code is presumed to result in financial statements that achieve a true and fair presentation.
UNAUDITED ACCOUNTS The date on which the responsible financial officer certifies that the accounts give a true and fair view of the authority's financial position and financial performance in advance of approval.
UNDERSTANDABILITY Classifying characterising and presenting information clearly and concisely makes it understandable.
USEFUL LIFE The period which an asset is expected to be available for use by an authority.
USEFUL ECONOMIC LIFE The period over which the Authority will derive benefits from the use of a non-current asset.
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VALUE IN USE Non-cash generating asset is the expected present value of the asset’s remaining service potential. Value in use of a cash-generating asset is the present value of the future cash flows expected to be derived from an asset.
VAT An indirect tax levied on most business transactions and on many goods and some services.
VERIFIABILITY Verifiability means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation.
VESTING PERIOD The vesting period is the window of service when members can get a refund on their contributions if they leave the LGPS instead of having a small deferred pension in the LGPS until retirement.
WDA Waste Disposal Authorities.
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AGS Annual Governance Statement IPSAS International Public Sector Accounting Standards AVC Additional Voluntary Contribution ISB Individual Schools Budget BSSL Bridlington Schools Service Limited LAPFF Local Authority Pension Fund Forum CAA Capital Adjustment Account LASAAC Local Authority (Scotland) Accounts Advisory Committee CCG Clinical Commissioning Group LATS Landfill Allowance Trading Scheme CF&S Children, Family and Schools Directorate LEA Local Education Authority CFO Chief Finance Officer LGPS Local Government Pension Scheme CI&ES Comprehensive Income and Expenditure Statement LPSA Local Public Service Agreement CIPFA The Chartered Institute of Public Finance and Accountancy MiRS Movement in Reserves Statement CMT Corporate Management Team MMI Municipal Mutual Insurance CPI Consumer Prices Index MRA Major Repairs Allowance CRC Carbon Reduction Commitment MRICS Member of Royal Institution of Chartered Surveyors DCLG Department for Communities and Local Government MRP Minimum Revenue Provision DEFRA Department for Environment, Foods and Rural Affairs MRR Major Repairs Reserve DfE Department for Education NAV Net Asset Value DRC Depreciated Replacement Cost NBV Net Book Value DSG Dedicated Schools Grant NDC Non-Distributed Costs DWP Department for Work and Pensions NDR Non-Domestic Rates EDR Employee Development Review NHS National Health Service EFA Education Funding Agency NNDR National Non-Domestic Rates ERPF East Riding Pension Fund OEIC Open Ended Investment Company EUV Existing Use Value PFI Private Finance Initiative EUV-SH Existing Use Value - Social Housing PIRC Pensions Investment Research Consultants FMSiS Financial Management Standard in Schools PPP Public Private Partnership FReM Financial Reporting Manual PWLB Public Works Loan Board FRICS Fellow of Royal Institution of Chartered Surveyors REFCUS Revenue Expenditure Funded from Capital under Statute FRS Financial Reporting Standard RICS Royal Institution of Chartered Surveyors FSS Funding Strategy Statement RPI Retail Prices Index FUM Funds Under Management RR Revaluation Reserve HEPS Humber Emergency Planning Services RTB Right to Buy HMRC Her Majesty's Revenue and Customs SeRCOP Service Reporting Code of Practice HMU Housing Maintanance Unit SDPS Surplus or Deficit on the Provision of Services HR Human Resources SFVS Schools Financial Value Standard HRA Housing Revenue Account SIP Statement of Investment Principles HRAM Hymans Robertson Asset Model SLA Service Level Agreement I&F Infrastructure and Facilities SOLACE The Society of Local Authority Chief Executives and Senior Managers IAS International Accounting Standards SORP Statement of Recommended Practice IFRIC International Financial Reporting Interpretations Committee VAT Value Added Tax IFRS International Financial Reporting Standards VOA Valuation Office Agency
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A I
Accounting Policies………………………………...…………...….. 22 Information on Assets Held………………….....…...…………………… 59 Analysis of Adjustments between Accounting basis and Funding Interests in Schools….………………….....…...…………………… 100 basis under Regulations…………………….....………...…………..42 Analysis of Adjustments within the Expenditure and L Funding Analysis……...…………...…………….……….………. 37 Audit Fees……………………………...…………………………. 50 Levies…………………………………….…………………………… 99 Auditors' Report………………………...………………………….. 14 M B Major Repairs Reserve…………………..………...………….…………. 113 Balance Sheet…………………………………………………………..18 Movement in Reserves Statement………………...……………………. 20 Movement in Property, Plant and Equipment…………...…...………………53 C N Capital Expenditure and Financing…………………………………66 Narrative Report………...………….………….………...………….…… 2 Adjustment Account……………………………………….84 Nature of Expenses……….………...………….…………….…….…… 46 Grants Unapplied Account Reserve…………………………77 Net Surplus or Deficit on the Provision of Services Cash Flow Note… 96 Commitments…………………………………… 66 Non-Domestic Rates………………………………………………….. 116 Cash and Cash Equivalents……………………………………. 96 Cash Flow Statement……………………………………………. 21 O Collection Fund………………………………………………. 115 Collection Fund Adjustment Account………………..……….. 85 Officers' Remuneration………………………………………………… 51 Comprehensive Income and Expenditure Statement………….. 19 Operating Leases ………………………………….…..…..…….…… 50 Comprehensive Income and Expenditure Line Notes…………. 46 Contingent Assets / Liabilities………………………………… 85 P Council Tax……………………………………………………… 116 Pension Fund…………………………………………………………. 117 D Pension Assets and Liabilities…………………………………………. 69 Pension Reserve………………………………………………………. 83 Debtors……………………………………………………….. 67 Pooled Budgets for Health and Social Care……………………………. 103 Dedicated Schools Grant………………………………………. 100 Precepts……………………………………………………………….. 99 Deferred Capital Receipts………………………………………. 85 Private Finance Initiative and Similar Contracts……………………….. 63 Deferred Liabilities……………………………………………… 68 Property, Plant and Equipment - Valuation…………………………….. 60
E R
Earmarked Revenue Reserves…………….…………………….. 78 Related Party Transactions…………………………………………….. 98 Events After the Reporting Period……………………………… 102 Revaluation Reserve……………………………………………………. 82 Expenditure and Funding Analysis…………………………………37 S F Segmental Income…………………………………………………… 41 Fair Value of Surplus Assets………………………………………………61 Short Term Creditors and Grant Receipts in Advance………………. 68 Financial Instruments Adjustment Account…………………… 82 Short Term Investments…………………………………………… 68 Financial Instruments Disclosure Note………………………… 87 Statement of Responsibilities for the Statement of Accounts………… 17 Significant Items……………………………………………………… 50 G T Gains and Losses on Assets Held for Sale or Sold…….………. 53 Glossary of Terms and Abbreviations…………………...……. 153 Taxation and Non-Specific Grant Income…………….………………………48 Government Grants, Contributions and Donated Assets………. 49 Grant and Contribution Receipts in Advance……………………. 69 U
H Usable Capital Receipts…………………………………………………. 81 Unusable Reserves……………………………………………………… 81 Housing Assets………………………………………………… 109 Usable Reserves………………………………………………………… 77 Housing Rent Arrears………………………………………….. 108 Housing Revenue Account…………………………………….……..104 HRA - Capital Expenditure and Financing..……………..112 HRA - Capital Financing Charges…………………………..112 HRA - Pension Costs………………..………………………….114
East Riding of Yorkshire Council 173 Statement of Accounts 2019/20