Cornwall Council 2019/20 Annual Financial Report And ... · The budget included planned savings of £34m and the Council had general reserves of £36m and total usable reserves of

Information Classification: CONTROLLED

Cornwall Council

2019/20

Annual Financial Report

And

Statement of Accounts


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Contents Cornwall Council 2019/20 Annual Financial Report and Statement of Accounts

Page 1


Contents Page

Narrative Report 2

Independent Auditor’s Report for Cornwall Council 23

Independent Auditor’s Report for Cornwall Pension Fund 29

Statement of Accounts

Statement of Responsibilities and Certification of the Statement of Accounts 33

Main Financial Statements 35

Comprehensive Income and Expenditure Statement 36

Movement in Reserves Statement 36

Balance Sheet 38

Cash Flow Statement 38

Notes to the Main Financial Statements 40

Index of Notes 41

Group Financial Statements 121

Group Movement in Reserves Statement 122

Group Comprehensive Income and Expenditure Statement 122

Group Balance Sheet 124

Group Cash Flow Statement 124

Notes to the Group Financial Statements 126

Supplementary Financial Statements 137

Housing Revenue Account 138

Notes to the Housing Revenue Account 141

Collection Fund 147

Notes to the Collection Fund 149

Fire Fighters’ Pension Fund Account 151

Pension Fund Accounts 155

Cornwall Local Government Pension Scheme Accounts 156

Notes to the Pension Scheme Accounts 157

Glossary 191

Narrative Report Cornwall Council 2019/20 Statement of Accounts

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Narrative Report

from Chief Operating Officer and Section 151 Officer

I am pleased to introduce our Annual Financial Report and Statement of Accounts for 2019/20. This document provides a summary of Cornwall Council’s financial affairs for the financial year 1 April 2019 to 31 March 2020 and of our financial position at 31 March 2020.

1. The Financial Report and Statements

Our Annual Financial Report and Statement of Accounts includes the following financial statements and disclosure notes:

• Narrative Report – from the Chief Operating Officer and S151 Officer. This provides interested parties with an effective guide to the most significant matters reported in the Statement of Accounts including information relating to the Council’s spending and financial position and its performance in key areas.

• Independent Auditor’s Reports – there is an independent report from the external auditors to the Members of the Council and also for Cornwall Pension Fund.

• Statement of Accounts

o Statement of Responsibilities – this explains the different responsibilities relating to the Statement of Accounts and confirms their approval.

o The Main Financial Statements

- Comprehensive Income and Expenditure Statement – this statement shows the net cost in the year of providing Council services.

- Movement in Reserves Statement – this statement shows the movement in the year on the different reserves held by the Council.

- Balance Sheet – the Balance Sheet shows the value at 31 March 2020 of the assets and liabilities held by the Council.

- Cash Flow Statement – the Cash Flow statement shows the changes in cash and cash equivalents of the Council during the reporting period.

o Notes to the Main Financial Statements – these provide additional, more detailed information on specific areas from the main financial statements.

o Group Financial Statements – a further set of financial statements, in the same format as those described above, including companies and other organisations in which we have an interest, together with relevant notes.

o Supplementary Financial Statements

- Housing Revenue Account (HRA) Income and Expenditure Statement - the HRA Income and Expenditure Statement shows the net cost in the year of providing council housing.

- Collection Fund Income and Expenditure Statement – this statement shows transactions in relation to council tax and national non-domestic rates.

o Fire Fighters’ Pension Fund Account – setting out the financial arrangements for this specific scheme.

o Pension Fund Accounts – relating to the main Local Government Pension Scheme we run for our employees (and those of some other organisations).

• Glossary – an explanation of technical terms that have been used in the document.

Except where otherwise indicated, figures are presented in millions of pounds (£m) and are rounded to the nearest thousand pounds (£0.001m).


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2. An Overview of Cornwall Council

Organisational Overview and External Environment

Cornwall Council is a unitary local authority serving a population of over 550,000 residents. As a unitary Council it provides all local authority services including adult social care, children’s social care, education, public health, highways, planning, housing, benefits, fire and rescue, building control and environmental services amongst many more. Cornwall is a large unitary area covering 3,500km2, predominantly rural with 480km of coastline.

The Council approved a refresh of its Business Plan and Medium-term Financial Plan (MTFP), in February 2020. The refreshed Business Plan set out the Council’s aims as:

• Ensure everyone can live well and safely together

• Create more homes and jobs for residents

• Protect and enhance the environment

It also set out the Council’s values as:

• We listen: we will work with the people of Cornwall

• We are responsible: we will use resources wisely

• We act in the best interests of Cornwall: putting people first

The original Business Plan 2018/19 to 2021/22 set out how the Council would deliver its Priorities for Cornwall and demonstrates its commitment to protecting the most vulnerable, investing in jobs and homes within Cornwall and continuing to improve Cornwall’s infrastructure so that our people, places and services are connected. The priorities for Cornwall are:


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The Business Plan 2018/19-2021/22 explained how the Council proposed to deliver its Priorities for Cornwall and matched its spending to those priorities. It also included a number of success measures that would be monitored and reported on a regular and public basis, so residents and businesses could track progress and hold the organisation to account for delivery. In shaping the Business Plan the Council reflected on the results of the extensive residents’ survey conducted in July and August 2017 - reported to Cabinet in November 2017 - to ensure that the priority actions responded to what the people of Cornwall told the Council were the aspects of life that were of greatest importance and in most need of improving.

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

Since its formation in 2009, the Council has delivered over £300m in savings and has seen its central government funding reduce significantly. Consequently, the Council has become more dependent upon locally raised resources; council tax and business rates. In 2009/10 council tax made up around 33% of the Council’s funding whereas in 2023/24 it is expected to be 58%. It is assumed government policy will continue in this direction with further cuts to government funding. We recognise this impact on residents and are proactively driving down costs where possible and changing our service delivery to become more efficient wherever possible.

Internally the Council is led by the Chief Executive Officer and the Council Directors Team, supported by the Council Leadership Team. Services are grouped into Directorates which are in turn led by Strategic Directors. In 2019/20 the Council was organised around five Directorates:

• Adult Social Care – including adult social care and support; and adult transformation and commissioning;

• Together for Families – including children’s services such as protecting; vulnerable children and supporting disabled children and services around education and supporting families;

• Economic Growth and Development – including economic development, culture, public transport and planning;

• Neighbourhoods – including fire and rescue, waste management and environmental services.

• Customer and Support Services – including commercial services such as procurement and property and assets as well as the Council’s support services such as legal services, finance etc.

The Council owns a number of companies that form part of its group. Some of these are commercial whereas others facilitate delivery of Council services and objectives by other means than direct service provision by the Council. This is an increasingly common model of operation for local authorities as they seek alternative ways of achieving their aims within reduced funding arrangements. Cornwall Council’s Business Group is as follows:


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Corserv Ltd - a wholly-owned company of Cornwall Council established to provide strategic direction and oversight for its existing arm’s-length and commercial trading companies.

Cornwall Housing Ltd - manages and maintains over 10,000 council houses in mid and east Cornwall. The company looks after about 400 leaseholders on behalf of the Council and manages Council owned garages, shops and land in neighbourhoods with council housing. Cornwall Housing Ltd also delivers the Homechoice and Housing Options and Advice service for the Council.

CORMAC Solutions Ltd - provides services to Cornwall Council and its partners. The company's purpose is to enhance local communities by delivering innovative services which create a better local environment and contribute to sustainable economic growth, whilst facilitating resilient, self-sufficient and safer communities.

Cornwall Development Company Ltd - an economic development company which has been charged with delivering economic priorities and solutions on behalf of the Council.

Cornwall Airport Ltd - responsible for all airport operations including Civil Aviation Authority licensing, customer services, commercial development, route development and marketing. Cornwall Airport is working closely with its sister organisation, Cornwall Development Company Ltd, in the marketing and development of the Airport's huge estate.

Corserv Property Ltd - set up to purchase, refurbish and manage a portfolio of private rented properties to provide temporary accommodation for homelessness clients in order to discharge Cornwall Council’s statutory homelessness duties.

CORMAC Contracting Ltd – a trading company wholly-owned by Cornwall Council which acts as a vehicle for private sector growth. Its purpose is to generate revenues by winning work in a competitive environment and partnering with other public or private sector companies to deliver cost effective and sustainable solutions to complex engineering challenges.

Wave Hub Ltd – manages an offshore test site to advance the development of offshore

renewable energy technologies.

Cornwall Council

Corserv Ltd

Cormac Solutions Ltd

Corserv Property Ltd

Cornwall Airport Ltd

Cornwall Housing Ltd

Cornwall Development Company Ltd

Cormac Contracting

Ltd

Wavehub Ltd


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Treveth Limited Liability Partnership

In addition to the group company arrangements set out above the Council has also set up a Limited Liability Partnership (LLP) to deliver the Council’s Investment Programme. There are two prime purposes of the LLP:

• To generate a return for the Council to supplement income;

• To support economic development priorities of economic growth, job creation and improved housing.

The LLP is structured as follows:

Working with Partners

Increasingly the Council works with numerous partner organisations to deliver public services in Cornwall. It has worked with the Ministry for Housing, Communities and Local Government to agree a devolution deal for Cornwall and continues to press for greater local powers. It works with local Town and Parish Councils to “join-up” local government in Cornwall and particularly in deciding which Councils are best placed to provide services within a period of reduced funding within the public sector. A key challenge in Cornwall is the joining-up of health care and adult social care. This is a challenging issue with Cornwall with its demographics and a high (and increasing) proportion of its community being more elderly residents. Integrating health and social care is a key challenge for the Council and its partners.


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Governance

The Council currently has 123 Councillors (Members) representing Cornwall and together they form the Council, with a Leader and Cabinet model. The Council meets approximately every six weeks. They set the budget for the year as well as the business plan, which sets out the policies and plans the Council wants to achieve. The Council also elects a Leader who is then re-elected annually. The Leader then chooses between two and nine councillors to form a Cabinet. The Cabinet’s responsibilities are divided up into Portfolios and each Cabinet Member is responsible for that Portfolio of work. The Cabinet Members are also known as Portfolio Holders or Executive Members. The Leader and Cabinet take decisions to deliver the business plan and these must usually be within the budget and policy framework set by the Council.

The Cabinet receives the Council’s Performance Report (CPR) on a quarterly basis which demonstrates how the Council is performing against a set of Key Performance Indicators (KPIs), Strategic Projects, Finance and Strategic Risks.

The Council also has a number of committees such as Overview and Scrutiny, Planning, Licencing, Standards, Pensions and an Audit Committee.

The Council has a constitution which sets out how the Council operates, how decisions are made and the procedures which are followed to ensure that these are efficient, transparent and accountable to local people. Some of these processes are required by law, while others are a matter for the Council to choose. The constitution includes items such as responsibility for functions, the scheme of delegation, Council procedure rules and financial regulations. The Council is required to produce an Annual Governance Statement (AGS) each year to meet the requirements of the Accounts and Audit Regulations 2015 and the principles set out in the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Society of Local Authority Chief Executives (SOLACE) Framework: “Delivering Good Governance in Local Government”. Please see the 2019/20 AGS for further information on how the Council has complied with these principles.

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

From May 2021 Cornwall Council elections there will be 87 Electoral Divisions each electing one Cornwall Councillor. This reduces the number of Cornwall Councillors from the current number of 123.

Operational Model

The Council set its net revenue budget for 2019/20 at £561m with gross expenditure estimated at £1,145m. It also set a capital programme for investment in its assets of £319m. The budget included planned savings of £34m and the Council had general reserves of £36m and total usable reserves of £349m at the start of the year. The budget resulted in a Band D council tax of £1,527.09 which was an increase of 3.99% on 2018/19. The council tax increase included 2% specifically towards adult social care. The net revenue budget was funded as follows:


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The Council also approved a capital programme that represents its investment in assets

which is set out below:

Capital Programme Board2018/19 2019/20 2020/21

2021/22

& beyondTotal

£m £m £m £m £m

Transportation 69.677 61.611 103.731 61.411 296.430

Growth Deal 29.094 1.546 2.950 - 33.590

Housing 35.619 64.986 67.382 84.239 252.226

Culture & Economic Development 32.287 18.238 3.261 0.056 53.842

Property 9.284 3.394 2.283 6.544 21.505

Customer & Support Services 17.549 6.200 4.088 - 27.837

Children, Families & Adults 21.863 12.301 2.532 26.709 63.405

Devolution 1.623 0.716 - - 2.339

Operational Asset Review

(Fire & Rescue)6.720 2.370 3.501 12.340 24.931

Environment 8.722 7.077 5.355 8.156 29.310

Green Cornwall 0.271 8.697 8.000 - 16.968

Waste 1.362 2.629 2.064 - 6.055

Investment Programme 38.704 129.688 82.170 122.735 373.297

Total Capital Programme 272.775 319.453 287.317 322.190 1,201.735

Funding

General Fund Revenue & Reserves 41.753 37.516 3.511 21.968 104.748

HRA Revenue & Reserves 18.344 17.116 17.515 14.459 67.434

Prudential Borrowing 97.889 201.474 146.506 164.653 610.522

Capital Receipts 16.909 21.453 16.969 8.723 64.054

Grants & Contributions 97.880 41.894 102.816 112.387 354.977

Total Funding 272.775 319.453 287.317 322.190 1,201.735


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Risks and Opportunities

Risks Strategic risks are reviewed and reported to the Audit Committee and Cabinet quarterly but there is a detailed review annually against the Strategy and Business Plan. Strategic risks are escalated/de-escalated through Directorate Leadership Teams and the Council Leadership Team and the Head of Internal Audit, Risk, Fraud and Insurance monitors this process. Updated positions for 19 strategic risks were reported to the January meeting of the Audit Committee by Directorate. These risks cover a variety of issues ranging from the risk of climate change and demographic risk (the highest risk scores at 20/25) down through to health and safety on the Council’s estate (the lowest risk score of 6/25). Many of the risks focus on demographic changes and financial sustainability which are particularly key for Cornwall. Covid-19

The impact of the Covid-19 pandemic on the Council is expected to be significant. There was some impact in 2019/20 towards the end of the financial year, particularly around parking and planning income. In 2020/21 the Council is expecting to incur significant increased costs as it works with its partners to safeguard residents of Cornwall and to put in place contingency arrangements to mitigate the potential impacts of the disease.

The Council’s Cabinet meeting of 17 June 2020 received a report “Cornwall Council’s response to Coronavirus and our approach to recovery and renewal”. The purpose of the report was to set out the exceptional and unprecedented steps taken since the outbreak of the Covid-19 pandemic. On 20 2020 March Cornwall Council declared a major incident in order to respond to the scale of the challenges of the pandemic. The Devon and Cornwall

Local Resilience Forum (LRF) established a Strategic Co-ordinating Group (including Cornwall

Council’s Chief Executive) which focussed on actions to support Public Health England and to co-ordinate partner agencies in mitigating Covid-19 within Devon, Cornwall and the Isles of Scilly.

The Council’s response to Covid-19 had three initial priorities:

• Protect and support adult social care in order to protect the local NHS;

• Protect the most vulnerable in our society – including children & young people

and the shielded;

• Protect and support our economy.

On 23 March 2020 a new governance structure was put in place to respond to the major incident and which was aligned to the LRF and the priorities above. A core group of Council Directors and key strategic officers was established along with 13 emergency “cells”. More details on the work of the cells is set out as an appendix to the Cabinet report on the Council’s website.

Whilst the understanding of the wider impacts of Covid-19 is currently difficult the Council’s Section 151 Officer put in place a range of control measures to ensure that Covid-19 expenditure through the cells is effectively controlled.

The reports sets out that at that point the Council had received £328m of revenue funding from the Government to support Cornwall’s response to the pandemic. £294m of that money was passported to businesses through grants and to operators supporting the response. The


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Council received two tranches of unringfenced Covid-19 money totalling £34m. This compares to estimated costs of £45m leaving the Council with a shortfall of £11m. On top of this an estimate of the loss of council tax and business rate income, which would impact in 2021/22 is currently estimated at £23m.

The above costs do not take in to account potential future costs of recovery and potential increase in demand in some areas. A further report will be taken to Cabinet in July giving more analyses of Covid-19 impact and budgets and reserves.

Opportunities

The Council is increasingly looking for opportunities to work differently in response to a continuing challenging public sector environment. Those opportunities are being pursued at many different levels within the organisation. Cornwall became the first rural authority in the country to be offered a devolution deal by central government with the aim of giving Cornwall more control over key service areas. The deal covers a range of key areas including:

• Integrated health and social care;

• Transport;

• Employment and skills;

• EU funding (and the transition post Brexit);

• Business support;

• Energy;

• The public estate;

• Heritage and culture.

The Council is also working with Town and Parish Councils in the County exploring the most beneficial arrangements for local service delivery.

The Council continues to use its group arrangements to provide services in alternative forms of delivery where that is beneficial. The Council has implemented a Housing Development Programme as part of its Investment Programme to better enable the provision of affordable rental housing in Cornwall and will manage this through the Treveth Limited Liability Partnership (LLP) as outlined above.

3. Strategy and Resource Allocation – The Council’s Budget and

Medium Term Financial Plan 2020/21 to 2023/24

The Council’s Medium Term Financial Plan (MTFP) sets out the Council’s journey for the next four years taking its direction from the Council’s Strategy and Business Plan. The Council’s budget is refreshed annually taking into account any local or national changes and contributes to a four-year rolling financial plan. It is updated for changes in national and local funding assumptions, local income projections, spending pressures and any changes in savings plans.


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Resources

The Council’s funding mix has changed over recent years away from central government grant in the form of Revenue Support Grant towards most funding being made up of council tax and business rates. The Council forecasts that it will have the following resources over the period of its financial plan:

Unavoidable Spending Pressures

The Council experiences budget pressures from a variety of sources such as inflation, national staff pay awards, increasing service demand and changes in legislation. The Council anticipates unavoidable spending pressures over the next four years as follows:

2020/21 £m

2021/22 £m

2022/23 £m

2023/24 £m

Total £m

52.385 29.601 19.365 22.182 123.533

A particular area of pressure is Adult Care and Support. A combination of increased demand, legislative changes and cost pressures means this service area presents the most significant financial challenge to the Council which spends around 30% of its overall budget in this area.

In order to keep its budgets within available resources the Council develops savings plans which are deliverable by services. The overall position for the next four years is set out opposite:

2019/20

£m

2020/21

£m

2021/22

£m

2022/23

£m

2023/24

£m

Resources Available:

- Council Tax 296.656 313.411 324.519 335.916 347.385

- Business Rates (retained) 187.840 196.440 146.128 150.242 154.515

- Government Grants 43.167 57.645 104.383 101.457 97.745

- Estimate on Collection Fund 7.360 8.900

Total Underlying Resources 535.023 576.396 575.030 587.615 599.645

100% rate retention pilot; roll

in Highways Capital26.161 26.161

Total Resources 561.184 602.557


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Savings can be made in a number of ways; for example, increasing income, changing service delivery or cutting services (which may mean cutting staff). The Council’s savings plans for 2020/21 to 2023/24 are made up of the following types:

2019/20

£m

2020/21

£m

2021/22

£m

2022/23

£m

2023/24

£m

Service budget brought forward 513.484 526.776 572.934 585.246 595.942

Pressures 39.199 52.385 29.601 19.365 22.182

Non delivery of prior year savings 11.048 5.936

Saving plans (34.455) (12.163) (17.289) (8.669) (4.187)

Removal of Contingency (2.500)

Service budget requirement 526.776 572.934 585.246 595.942 613.937

General Fund Reserve (draw)/contribution 2.500 2.096 1.500 1.500 1.500

Cash flow between years 5.747 (2.634) 0.420

Transfer to / (from) Earmarked Reserve - 4.000

Total Net Budget 535.023 576.396 587.166 597.442 615.437

Business Rate Retention Pilot; roll in 'Highways capital' 26.161 26.161

Adjusted Net Budget 561.184 602.557

Funded by:

Estimate on Collection Fund 7.360 8.900

Council Tax 296.656 313.411 324.519 335.916 347.385

Business Rates (retained) 187.840 196.440 146.128 150.242 154.515

Government Grant 43.167 57.645 104.383 101.457 97.745

Resources 535.023 576.396 575.030 587.615 599.645

Business Rate Retention Pilot;

roll in 'Highways capital' 26.161 26.161

Adjusted Resources 561.184 602.557

Latest Budget (Surplus) / Gap (annual) - 12.136 (2.309) 5.965

Latest Budget (Surplus) / Gap (cumulative) - 12.136 9.827 15.792

Service Delivery£28.2m

Employees£6.5m

Corporate

Other£0.7m

Income

Generation£6.2m

Property

£0.7m


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

It is considered that the budget strategy of setting a four-year MTFP is a sound and robust approach and will continue to provide time and capacity for the Council to proactively plan for the significant ongoing financial challenges. It aligns the Council’s budget to the actions set out in the Council Business Plan and objectives of the Council’s Priorities for Cornwall. As the MTFP progresses over the next four years, challenging savings targets will continue to need to be delivered. Where these savings impact on front line services, the Council has taken steps, as far as is possible, to protect key priority services and those areas which affect the most vulnerable in society. Capital Programme In line with the Council’s Capital Investment Plan, the strategy for the allocation of capital funding focuses on two specific types of scheme; those which drive economic growth and investment priorities and those which have been developed on an Invest to Save basis, in other words, schemes which will either generate income or produce revenue savings. The capital programme approved with the Council’s budget is summarised below:

2020/21

£m

2021/22

£m

2022/23

£m

2023/24 and beyond

£m

Total

£m

471.135 321.917 176.717 84.241 1,054.01

Directorate

2020/21

(£m)

2021/22

(£m)

2022/23

(£m)

2023/24

(£m)

Adult Social Care 191.912 194.024 205.079 218.136

Together for Families 74.313 77.035 78.026 80.024

Neighbourhoods 112.018 113.455 113.003 112.847

Economic Growth & Development 73.878 48.358 48.712 50.104

Customer & Support Services 60.601 61.906 61.835 63.408

Wellbeing & Public Health 25.483 25.483 25.483 25.483

Corporate Items 12.938 14.221 10.233 9.080

Capital Financing & Interest Receipts 47.952 50.764 53.571 54.855

Net Revenue Budget before Reserve Movements 599.095 585.246 595.942 613.937

Reserve Movements 3.462 1.920 1.500 1.500

Net Revenue Budget 602.557 587.166 597.442 615.437


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Capital Receipts Flexibility As part of the 2015 Spending Review, the Government announced new powers giving local authorities flexibility to spend capital receipts (excluding Right to Buy receipts) from asset sales on the revenue costs of reform projects that ‘generate ongoing savings to an authority’s net service expenditure’. The Council has previously agreed to take advantage of this new power by capitalising qualifying expenditure up to £1m, funded from capital receipts in accordance with policy guidance. Details of the Council’s approach to the use of this policy are set out in the Capital Strategy.

General Fund

The Council maintains financial reserves which can be general and used to fund unforeseen issues or emergencies or earmarked which are kept for specific purposes. The Council’s statutory financial officer (the Section 151 Officer) is required to make an explicit judgement on the adequacy of reserves when the Council sets its budget.

4. Performance

The Council’s Cabinet receives performance reports on a quarterly basis. The report is

comprised of a number of key areas:

• Performance;

• Finance and Treasury Management;

• Risks;

• Projects.

The year-end performance report was made to Cabinet in June 2020. The summary performance noted that the Council had made good progress against its performance measures included in the business plan. The report included performance against 28 agreed measures of success. The performance indicators are rated as either: on track to achieving or exceeding the target (green), slightly off-target (amber) or significantly off-track (red). Year-end performance was as follows:

• Green – 15;

• Amber – 4;

• Red – 9.

The detailed performance can be found in the Cabinet report on the Council’s website.

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

Financial performance focusses on the Council’s budget monitoring to the most recent quarter. The report sets out the forecast net spend to the end of the year and explains any major spending variations.


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2019/20 Financial Performance

The final revenue outturn position for the financial year 2019/20 was a net overspend of £2.851m against a net budget of £561.184m.

The Council’s Directorates overspent by £13.587m. The majority of that overspend was within Adult Social Care (£11.812m) with the other Directorates having a combined net overspend of £1.775m. The total net Directorate overspend has been offset by an underspend on corporate items of £6.420m and an increase in funding of £4.316m.

This net underspend has been achieved despite a savings shortfall of £7.401m against planned saving targets (albeit mitigated by other one-off savings or income generation of £3.053m). As part of the 2020/21 budget setting process, savings have been reviewed to ensure they are still accurate and deliverable. Where it is considered savings shortfalls are still deliverable but in later years, the savings plans have been re-profiled.

The Council’s Cabinet received the outturn report setting out the £2.851m overall net overspend on 17 June 2020.

The 2019/20 outturn by Directorate and the overall position is as follows:

Notes on Main Variances from the Budget The outturn for Directorates, after proposed reserve movements, is a £13.587m overspend. Against a net budget at Directorate level of £496.517m this represents a 2.74% variance. This compares to a forecast outturn at the end of December 2019 of a £8.435m overspend. The Adult Social Care Directorate overspent by £11.812m, reflecting the in-year pressures due to increased commissioned costs and under delivery of savings. The Together for Families Directorate underspent by £0.066m.

Directorate

Approved

Budget

£m

Outturn

£m

Variance

£m

Adult Social Care 175.289 187.101 11.812

Together For Families 70.054 69.988 (0.066)

Economic Growth & Development 70.859 70.445 (0.414)

Neighbourhoods 96.117 97.398 1.281

Customer and Support Services 59.409 60.383 0.974

Wellbeing & Public Health 24.789 24.789 -

Directorate Total 496.517 510.104 13.587

Corporate Items 64.667 58.247 (6.420)

Funding (561.184) (565.500) (4.316)

Total Variance 2.851


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The Economic Growth and Development Directorate underspent by £0.414m despite continued pressure on planning and car park income budgets, some of which are offset by use of the Covid-19 reserve. The Neighbourhoods Directorate overspent by £1.281m. This is comprised of an overspend on the Fire and Rescue service of £1.726m offset by an underspend in the Environment budget due to a rebate on the Waste Disposal contract.

The Customer and Support Service Directorate overspent by £0.974m which is mainly due to increased costs of implementing the Oracle Cloud IT system offset by some staffing savings in Customer and Business Operations.

Wellbeing and Public Health’s outturn was on budget.

Corporate Items The outturn for Corporate Items is an underspend of £6.420m, the majority of which came from the Capital Financing and Interest budget. Corporate Funding

Funding is £4.316m higher than budgeted which is mainly due to additional Government Section 31 grant of £3.500m relating to business rate relief. Reserve Movements

The outturn position includes proposed net movements to reserves of £19.472m. Whilst this reflects a number of transfers between reserves, it includes the following key movements:

• A budgeted contribution of £26.161m from Economic Growth and Development

directorate for capital highway maintenance works. This is a consequence of the changes to the way the Council is funded as a result of the 100% business rates retention pilot. Previously, a specific capital grant for highways maintenance was received to fund the capital works. However, this income is now treated as revenue as part of our retained business rates and a transfer from the revenue budget into a capital reserve is required to fund the capital programme. An amount of £4.896m is retained for additional revenue rural cyclical maintenance, reducing the amount available for capital.

• A budgeted net transfer of £8.247m from Corporate Items to the General Fund Reserve.

• An unbudgeted contribution from the General Fund Reserve of £8.785m to mitigate one-off pressures within Adult Social Care.

• Government COVID-19 Support Grant of £18.153m, an element of which has been required in 2019/20 as follows:

- £0.035m for various costs within Children and Family services; - £0.373m to mitigate loss of car park and penalty notice income; - £0.030m to mitigate loss of beach hut income; - £0.081m for costs of additional burials;


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- £0.100m funding for Cornwall Community Foundation for assistance to grass root organisations in response to Covid-19;

- £0.144m to mitigate loss of income within Neighbourhood and Public Protection service mainly within Registration and Licensing;

- £0.036m to mitigate loss of in income from Phoenix courses; - £0.800m to mitigate loss of income at Cornwall Airport Ltd.

Note 10 within the Statement of Accounts details the earmarked reserve transactions and includes the technical adjustments required to produce the statutory accounts.

Statement of Accounts Comparison

There are significant differences between the Council’s directorate total per the budget monitor outturn reported as £510.104m and the cost of services of £573.301m reported in the Comprehensive Income and Expenditure Statement (CIES) in the Statement of Accounts.

Differences between the CPR outturn position and the cost of services in the CIES are set out in the following table:

Differences include:

• Service areas, such as the HRA and the Tamar Bridge and Torpoint Ferry (TBTF) Joint Committee, which are not reported through the Council’s main budget monitoring process but are required to be included in the Council’s statutory CIES;

• Costs, such as capital charges and the true economic cost of retirement benefits that are not included in the budget monitor but are required to be reflected in the statutory CIES. These charges are reversed out in the Movement in Reserves Statement (MIRS) so as not to impact on the council tax payer;

• Technical adjustment for the reallocation of the unitary charge in relation to PFI, no impact on the council tax payer;

• Some income and expenditure is accounted for corporately and not charged directly to directorates;

2019/20

£m £m

Directorate Total per the CPR Outturn 510.104

510.104

Cost of services not included in the Directorate CPR

Corporate Items in the cost of services 10.678

Schools 9.044

Local Authority Housing Revenue Account (HRA) (7.562)

Joint Committees (TBTF and Mount Edgcumbe) 0.287

12.447

Statutory adjustments excluded from the CPR

Capital charges including depreciation and impairment (charge for use of assets) 62.795

Notional pension benefits (to comply with IAS 19) 26.450

PFI adjustments (23.843)

65.402

Reversal of items not included in the cost of services in the Comprehensive Income and Expenditure Statement

Financing and Investment Expenditure included in the budget monitor 0.934

Net contribution to Reserves 9.996

Reclassification of Public Health Grant (24.789)

Minor variations (0.793)

(14.652)

Cost of services in the Comprehensive Income and Expenditure Statement (CIES) 573.301


Page 18


Council Tax

(including in year

deficit) £323m

27%

National Non-

Domestic Rates

(including in year

deficit) £142m

12%

Dedicated School

Grant £132m

11%

Other Specific

Grants £119m

10%

General Grants

and Other

Income £350m

29%

Housing Benefits

Subsidy £115m

10%

Capital Grants

and Contributions

£19m 1%

Adult Social Care

£276m 22%

Together for

Families £162m

13%

Economic Growth

and Development

£173m 13%

Neighbourhoods

£128m 10%

Customer and

Support Services

£98m 8%

Wellbeing and

Public Health

£27m 2%

Corporate Items

and Other

Services £244m

19%

Schools £94m 7%

Financing

Expenditure

£78m 6%

• Reversal of items not included in the cost of services included in the Council Performance Report outturn position.

A more detailed breakdown of these differences is given in Note 7 to the accounts.

Revenue Expenditure and Funding

Our spending was funded from:

1. Council Tax

2. National Non-domestic Rates (NNDR)

3. Dedicated School Grant (DSG) – a

specific grant which provides the bulk of

school funding

4. Other specific grants – supporting

particular services

5. General grants and other income – grants not specific to individual services and income from sales, fees and charges and rents and financing income

6. Housing Benefits Subsidy – support from

government for tenants’ rents

7. Capital grants and contributions –

recognised as income when any

attached conditions are met

The main categories of service that we fund are:

1. Adult Social Care

2. Together for Families

3. Economic Growth and Development

4. Neighbourhoods

5. Customer and Support Services

6. Wellbeing and Public Health

7. Corporate Items and Other Services

8. Schools

9. Financing Expenditure – including

interest paid on borrowing


Page 19


Capital

Receipts,

£19m, 8%

Revenue and

reserves,

£43m, 19%Other Grants

and

Contributions,

£44m, 19%

Borrowing,

£123m, 54%

Capital Expenditure and Funding In addition to our day to day running costs, we spend money on assets such as land and buildings, roads and other major infrastructure, vehicles and information and communications technology. Such expenditure is intended to contribute to service provision over a number of years and is defined as capital expenditure.

Capital expenditure tends to be characterised by large individual schemes, with expenditure often incurred over several financial years. As a result, capital expenditure is not normally controlled against a fixed budget as with revenue spending, but rather through a programme of approved schemes within a multi-year capital plan. Capital schemes are approved on the basis of both affordability and council priorities.

Our actual capital expenditure in 2019/20 was £229.104m (2018/19 £196.844m). The major areas of capital expenditure were:

• Transport schemes £52.851m

• Housing schemes £46.685

• Economic development and culture schemes £14.480m

• Adults and Children’s Services schemes £14.057m

• Environmental schemes £9.067m

• Investment Programme £50.380m

Included within the total expenditure on transport schemes is £34m specifically relating to the maintenance and improvement of Cornwall’s roads. In addition, a further £10m was spent on the Growth Deal programme which aims to deliver a wide range of transport related improvements across Cornwall. Capital expenditure on housing is incurred through a range of delivery methods. Major enhancements to improve and develop the Council’s own housing stock have totalled £31m. £24m has also been spent on private sector housing, for example, in the form of disabled facilities grants and schemes to bring empty properties back into use. £15m was spent on the Housing Development Programme (HDP) which is a Council initiative to provide more housing within Cornwall. Our capital spending was funded from:

1. Capital Receipts

2. Revenue Contributions and Reserves

3. Other Grants and Contributions from external bodies e.g. central government, European funding

4. Borrowing


Page 20


Operational

Land and

Buildings

£24m

11% Council

Dwellings

£25m

11%

Roads and

Infrastructure

£48m

21%

Vehicles, Plant

and Equipment

£11m

5%

Assets Under

Construction

£42m

18%

Housing

Development

Pilot Sites

£5m

2%

Other Capital

Expenditure

£74m

32%

The main areas of expenditure were:

1. Operational Land and Buildings

2. Council Dwellings

3. Roads and Infrastructure

4. Vehicles, Plant and Equipment

5. Assets Under Construction (assets not yet operational)

6. Housing Development Pilot Sites

7. Other Capital Expenditure, including Revenue Expenditure Funded from Capital Under Statute (REFCUS), which is expenditure of a capital nature that does not result in a Council asset e.g. Disabled Facilities Grants.

The Council’s Financial Position

The Council’s net assets as at 31 March 2020 stood at £717.093m, an increase of £316.446m on the position at 31 March 2019 (£400.647m). This increase was attributable to a number of areas, the most significant of which are:

• Increase in Property, Plant and Equipment Assets £85m (+) • Reduction in long term investments £40m (-)

• Increase in long term debtors £24m (+) • Increase in cash/cash equivalents/short term investments £94m (+) • Increase in short term debtors £49m (+) • Increase in short term borrowing £128m (-) • Increase in revenue grants received in advance £39m (-) • Reduction in pensions liability £295m (+)

At 31 March 2020 the Council’s General Fund balance amounted to £35.274m, a decrease of £0.938m on the opening balance of £36.212m. At 31 March 2020 the Council’s total usable reserves stood at £358.731m. Certain reserves are held for specific purposes such as capital, use on council dwellings, and schools curriculum.

Borrowing and Investments

At the end of 2019/20, the Council had net debt of £663.641m, an increase of £132.754m. Against this the Council also held £99.067m in cash balances, an increase of £34.754m from the previous year.

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


Page 21


The net debt should be considered in the context of the Council’s portfolio of property, plant and equipment (which, over time, it has helped to finance) which is valued at £2.4billion at the end of March 2020.

The Council manages its borrowings and investments in line with its approved Treasury Management Strategy which is approved by the Council each year.

5. Outlook

Cornwall Council refreshed its original four-year business plan 2019/20 to 2022/23 to cover 2020/21 to 2023/24 in February 2020. The plan recognised that Cornwall and the Council are under increasing pressures. The Council has less money and pressure for services, especially where key areas, such as Adult Social Services, are increasing. Cornwall continues to have areas of deprivation and poverty. The impact of Brexit on tourism, agriculture and fishing industries is uncertain. The business plan focusses on people, place and prosperity and identifies five key areas as priorities:

• Healthy Cornwall; • Homes for Cornwall; • Green and Prosperous Cornwall;

• Connecting Cornwall; • Democratic Cornwall.

As with all Local Authorities Cornwall Council is receiving less money from central government towards its budget. In addition, the Council recognises there will be significant challenges though the Covid-19 pandemic which are likely to add further financial pressures.

The Council is aiming at improving life chances for everyone in Cornwall and closing the gap for the most vulnerable members of its communities. It will allocate money to areas that matter most to people including spending more on care for vulnerable adults, building more affordable homes and making sure more people across Cornwall get paid a decent wage.

The Council will continue to find savings and efficiencies and look to deliver more services jointly with partners.

2018/19 2019/20 Change

£m £m £m

Long Term Investments 142.858 102.517 (40.341)

Short Term Investments 122.463 159.871 37.408

Total Investments 265.321 262.388 (2.933)

Short Term Borrowing (107.661) (235.627) (127.966)

Long Term Borrowing (688.547) (690.402) (1.855)

Total Borrowing (796.208) (926.029) (129.821)

Net Debt (530.887) (663.641) (132.754)

Cash 64.313 99.067 34.754


Page 22


The Council is in the process of developing some potentially significant initiatives which could have major resource implications in the future and which could also further add to the Council’s group of companies. The main initiatives are outlined below.

Investment Programme

Cornwall Council is exploring ways in which it can take a more active role in driving economic growth and realising multiple benefits for the people of Cornwall. Brexit will mean the loss of a significant European funding stream to Cornwall at a time when central government is reducing resources to all local authorities. The Council is proposing an Investment Programme through which it will borrow funds to invest in local infrastructure, housing, workspace and social infrastructure. The purpose of the Programme is to deliver increased revenue for the Council and to improve the lives of the people of Cornwall by providing affordable housing, space for job creation, and accompanying social infrastructure. The timeframe is long term – expected to be to 2030; and the borrowing required to deliver the vision could be in the order of £600m to £1billion.

Housing Development Programme

The Council has setup a Limited Liability Partnership (LLP) called Treveth which will own housing stock built through the Housing Development Programme (HDP). The Council has an aspiration to provide 1,000 houses over four years and as part of this has completed the delivery of two pilot schemes for 113 new homes at Tolvaddon and St Lawrence, Bodmin. The pilot schemes will help challenge, improve and refine the assumptions and planning for the wider HDP. The houses that are delivered within the HDP will either be sold at market rate, on an affordable basis or will be retained for either market or affordable rental. Those retained will be transferred to Treveth. A number of properties have already been transferred to Treveth and further phases of the schemes are planned.

Independent Auditor’s Report Cornwall Council 2019/20 Statement of Accounts

Page 23


Independent Auditor’s Report to the Members of Cornwall Council

To follow in the final version


Page 24




Page 25




Page 26




Page 27




Page 28




Page 29


Independent Auditor’s Report to the Members of Cornwall Council

Opinion on the pension fund financial statements

To follow in the final version


Page 30




Page 31




Page 32



Statement of Responsibilities Cornwall Council 2019/20 Statement of Accounts

Page 33


Statement of Responsibilities

The Council’s Responsibilities

The Council is required to:

• make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this Authority, that officer is the Chief Operating Officer and Section 151 Officer;

• manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets;

• approve the Statement of Accounts.

Chief Operating Officer and Section 151 Officer

The Chief Operating Officer is responsible for the preparation of the Council’s Statement of Accounts in accordance with proper practices as set out in the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom (the Code).

In preparing this Statement of Accounts, the Chief Operating Officer has:

• selected suitable accounting policies and then applied them consistently;

• made judgements and estimates that were reasonable and prudent;

• complied with the requirements of the Code, except for the valuation basis for infrastructure relating to the Tamar Bridge toll bridge where we have used Depreciated Replacement Cost (DRC).

The Chief Operating Officer has also:

• kept proper accounting records which were up to date;

• taken reasonable steps for the prevention and detection of fraud and other irregularities.

Certification of the Statement of Accounts

Chief Operating Officer and Section 151 Officer This Statement of Accounts presents a true and fair view of the financial position of Cornwall Council on 31 March 2020 and of the income and expenditure for the year ended on that date and has been prepared in accordance with the requirements of the Code, except for a deviation in the valuation basis of the Tamar Bridge toll bridge.

Tracie Langley

Interim Chief Operating Officer and Section 151 Officer 30 June 2020

The Chairman of the Audit Committee’s declaration

This Statement of Accounts was approved by the Audit Committee on 31 October 2020

Cllr Harris

Chairman of the Audit Committee 31 October 2020

Statement of Responsibilities Cornwall Council 2019/20 Statement of Accounts

Page 34



Main Financial Statements Cornwall Council 2019/20 Statement of Accounts

Page 35


Main Financial

Statements


Page 36


Comprehensive Income and Expenditure Statement

This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. The Council raises taxation to cover expenditure in accordance with statutory requirements; this may be different from the accounting cost. The taxation position is shown in both the Expenditure and Funding Analysis and the MIRS.

Movement in Reserves Statement (opposite)

This statement shows the movement from the start of the year to the end on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other ‘unusable reserves’. This statement shows how the movements in year of the Council’s reserves are broken down between gains and losses incurred in accordance with generally accepted accounting practices and the statutory adjustments required to return to the amounts chargeable to council tax for the year. The Increase/Decrease In Year line shows the statutory General Fund balance and the HRA balance movements in the year following those adjustments.

Expenditure Income Net Expenditure Income Net

£m £m £m £m £m £m

Adult Social Care 276.005 (71.763) 204.242 253.164 (80.684) 172.480

Together for Families*^ 161.854 (81.479) 80.375 150.221 (79.366) 70.855

Economic Growth and Development* 173.092 (75.641) 97.451 171.256 (80.509) 90.747

Neighbourhoods 127.932 (26.571) 101.361 101.921 (27.752) 74.169

Customer and Support Services 98.461 (21.404) 77.057 105.066 (23.582) 81.484

Wellbeing and Public Health 27.095 (26.727) 0.368 27.778 (26.361) 1.417

Corporate Items 162.206 (151.528) 10.678 198.348 (173.691) 24.657

Schools-managed Expenditure 94.057 (85.013) 9.044 110.401 (96.733) 13.668

Local Authority HRA 32.695 (40.257) (7.562) 28.600 (39.620) (11.020)

Joint Committees 6.648 (6.361) 0.287 6.775 (5.970) 0.805

Cost of services 1,160.045 (586.744) 573.301 1,153.530 (634.268) 519.262

Other operating expenditure 41.789 23.752 11

Exceptional transfer of academy school assets - 24.313 11

Other operating expenditure line 41.789 48.065 11

Financing and investment income and expenditure 67.792 67.409 12

Exceptional LOBO premium on redemption - 53.623 12

Financing and investment income and expenditure line 67.792 121.032 12

Taxation and non-specific grant income (602.715) (574.821) 13

(Surplus) or deficit on provision of services 80.167 113.538

(Surplus) or deficit on revaluation of (45.526) (68.121)

property, plant and equipment

(Surplus) or deficit on revaluation of - 1.705

available-for-sale financial assets

Remeasurements of the net defined benefit liability / (asset) (364.396) 120.565

Other recognised (gains) and losses 13.309 1.062

Other comprehensive income and expenditure (396.613) 55.211

Total comprehensive income and expenditure (316.446) 168.749

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

^Directorate renamed from Children, Schools and Families to Together for Families

2019/20 2018/19

Restated*

Note

s


Page 37


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Page 38


Balance Sheet (opposite)

The Balance Sheet shows the value of the assets and liabilities recognised by the Council at 31 March 2020. The net assets of the Council are matched by the reserves held by the Council. Reserves are reported in two categories. Usable reserves are those that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use. The level of usable reserves might, therefore, be compared to the level of net expenditure on services. Unusable reserves are those reserves that the Council is not able to use to provide services, including reserves that hold unrealised gains and losses (e.g. the revaluation reserve) and reserves that hold timing differences (shown in the MIRS line “Adjustments between accounting basis and funding basis under regulations”).

Cash Flow Statement (below)

The Cash Flow Statement shows the changes to cash and cash equivalents of the Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council during the year.

2019/20 2018/19

£m £m

Net (surplus) or deficit on the provision of services 80.167 113.538

Adjustments to net (surplus) or deficit on the provision of services for (188.365) (139.173) 24

non-cash movements

Adjustments for items included in the net (surplus) or deficit on the 78.173 75.161 24

provision of services that are investing and financing activities

Net cash flows from operating activities (30.025) 49.526

Investing activities 117.390 13.034 25

Financing activities (122.119) (57.702) 26

Net (increase) or decrease in cash and cash equivalents (34.754) 4.858

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

Cash and cash equivalents at the end of the reporting period 99.067 64.313

Note

s


Page 39


Balance Sheet 31 March 2020 31 March 2019

£m £m

Property, Plant and Equipment 2,453.625 2,368.364 14

Heritage Assets 3.081 3.086

Intangible Assets 1.909 2.704

Long Term Investments 102.517 142.858 15

Long Term Debtors 57.318 33.017 15

Long Term Assets 2,618.450 2,550.029

Cash and Cash Equivalents 148.505 91.734 19

Current Intangible Asset - 0.389

Short Term Investments 159.871 122.463 15

Assets Held for Sale 10.096 10.276

Inventories 27.617 44.299 16

Short Term Debtors 139.628 90.561 17

Current Assets 485.717 359.722

Cash and Cash Equivalents (49.438) (27.421) 19

Short Term Borrowing (235.627) (107.661) 15

Short Term Creditors (108.278) (124.171) 20

Provisions (1.934) (2.732) 21

PFI Short Term Liabilities (5.571) (3.393) 15

PFI Short Term Deferred Liabilities (1.509) (1.509)

Grants Receipts in Advance - Revenue (46.554) (7.233)

Grants Receipts in Advance - Capital (3.102) (5.542)

Current Liabilities (452.013) (279.662)

Long Term Creditors (2.752) (2.433) 15

Provisions (39.090) (39.307) 21

Long Term Borrowing (690.402) (688.547) 15

Pension Liability (1,027.674) (1,322.414) 39

PFI Long Term Liabilities (105.609) (111.180) 15

Other Long Term Liabilities (2.093) (2.054) 15

PFI Deferred Income (27.912) (29.420)

Grants Receipts in Advance - Capital (39.529) (34.087) 33

Long Term Liabilities (1,935.061) (2,229.442)

Net Assets 717.093 400.647

Usable Reserves (358.731) (348.888) MIRS

Unusable Reserves (358.362) (51.759) 23

Total Reserves (717.093) (400.647)

Note

s


Page 40


Notes to the

Main Financial

Statements

Notes to the Main Financial Statements Cornwall Council 2019/20 Statement of Accounts

Page 41

Index of Notes Page Note 1 Accounting Policies 42 Note 2 Accounting Standards That have Been Issued But Have Not Yet Been Adopted 61 Note 3 Critical Judgements in Applying Accounting Policies 62 Note 4 Assumptions Made about the Future and Other Major Sources of Estimation

Uncertainty 63

Note 5 Material Items of Income and Expense 65 Note 6 Events After the Reporting Period 65 Note 7 Note 8 Note 9

Expenditure and Funding Analysis Expenditure and Income Analysed by Nature Adjustments between Accounting Basis and Funding Basis under Regulations

65 69 69

Note 10 Transfers to/from Earmarked Reserves 73 Note 11 Other Operating Expenditure 73 Note 12 Financing and Investment Income and Expenditure 74 Note 13 Taxation and Non-specific Grant Income 74 Note 14 Property, Plant and Equipment 75

Note 15 Financial Instruments 79 Note 16 Inventories 83 Note 17 Debtors 83 Note 18 Debtors for Local Taxation 83 Note 19 Cash and Cash Equivalents 84 Note 20 Creditors 84 Note 21 Provisions 84 Note 22 Contingent Liabilities 85 Note 23 Unusable Reserves 85 Note 24 Cash Flow Statement – Operating Activities 89 Note 25 Cash Flow Statement – Investing Activities 90 Note 26 Cash Flow Statement – Financing Activities 90 Note 27 Cash Flow Statement – Reconciliation of Liabilities Arising from Financing Activities 91 Note 28 Pooled Budgets 91 Note 29 Members’ Allowances 92 Note 30 Officers’ Remuneration 93 Note 31 External Audit Costs 95 Note 32 Dedicated Schools Grant 96 Note 33 Grant Income 97 Note 34 Related Parties 98 Note 35 Capital Expenditure and Capital Financing 101 Note 36 Leases 103 Note 37 Private Finance Initiatives and Similar Contracts 103 Note 38 Pension Schemes Accounted for as Defined Contribution Schemes 106 Note 39 Defined Benefit Pension Schemes 106 Note 40 Nature and Extent of Risks Arising from Financial Instruments 113


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Accounting Policies

i General Principles

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 those Regulations require to be prepared in accordance with proper accounting practices. These practices under Section 21 of the Local Government Act 2003 primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 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 non-current assets and financial instruments. These accounts have been prepared on a going concern basis, and it has been assumed that the functions of the Council will continue in operational existence for the foreseeable future.

ii Accruals of Income and Expenditure

Activity is accounted for in the year it takes place, not simply when cash payments are made or received. In particular:

• Revenue from contracts with service recipients, whether for service or the provision of goods, is recognised when (or as) the goods or services are transferred to the service recipient in accordance with the performance obligations in the contract;

• Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet;

• Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made;

• Interest receivable on investments and payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract;

• Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.

iii Cash and Cash Equivalents

Cash is represented by cash-in-hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months or less from the date of acquisition

Note 1


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and that are readily convertible to known amounts of cash with insignificant risk of change in value. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management.

iv Exceptional Items

When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the CIES or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance.

v Prior Period Adjustments, Changes in Accounting Policies and

Estimates and Errors

Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment.

Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Council’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.

Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period.

A change in Directorate reporting structure in the year 2019/20 has meant the comparatives have had to be restated. The change is the result of school transport moving from Together for Families to Economic, Growth and Development. Children, School and Families has been renamed to Together for Families. Details of the adjustments are shown in the table below:

Effect on Comprehensive Income and Expenditure Statement 2018/19

Expenditure Income Expenditure Income Expenditure Income

2018/19 2018/19 2018/19 2018/19 2018/19 2018/19

£m £m £m £m £m £m

Adult Social Care 253.164 (80.684) 253.164 (80.684) - -

Together for Families 167.192 (79.975) 150.221 (79.366) (16.971) 0.609

Economic Growth and Development 154.285 (79.900) 171.256 (80.509) 16.971 (0.609)

Neighbourhoods 101.921 (27.752) 101.921 (27.752) - -

Customer and Support Services 105.066 (23.582) 105.066 (23.582) - -

Wellbeing and Public Health 27.778 (26.361) 27.778 (26.361) - -

Corporate Items 198.348 (173.691) 198.348 (173.691) - -

Schools-managed Expenditure 110.401 (96.733) 110.401 (96.733) - -

Local Authority HRA 28.600 (39.620) 28.600 (39.620) - -

Joint Committees 6.775 (5.970) 6.775 (5.970) - -

Cost of Services 1,153.530 (634.268) 1,153.530 (634.268) - -

ChangeAs RestatedAs Previously Stated


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vi Charges to Revenue for Non-Current Assets

Services, support services and trading accounts are debited with the following amounts to record the cost of holding non-current assets during the year:

• depreciation attributable to the assets used by the relevant service;

• revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off;

• amortisation of intangible fixed assets attributable to the service.

The Council is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisation. However, it is required to make an annual contribution from revenue, its Minimum Revenue Provision (MRP), towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the Council in accordance with statutory guidance. Depreciation, revaluation and impairment losses and amortisation are replaced by the MRP contribution in the General Fund balance by way of an adjusting transaction within the Capital Adjustment Account (CAA) and in the MIRS for the difference between the two.

vii Employee Benefits

Benefits Payable During Employment

Short-term employee benefits are those due to be settled within twelve months of the year- end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits for current employees and are recognised as an expense for services in the year in which employees render service to the Council. An accrual is made for the cost of holiday entitlements (or any form of leave, e.g. time off in lieu) earned by employees but not taken before the year end which employees can carry forward into the next financial year. The accrual is made at the wages and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to the Surplus or Deficit on the Provision of Services, but then reversed out through the MIRS so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs.

Termination Benefits

Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy in exchange for those benefits and are charged on an accruals basis to the appropriate service or, where applicable, the Corporate Items line in the CIES at the earlier of when the Council can no longer withdraw the offer of those benefits or when the Council recognises costs of restructuring.

Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the MIRS, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement


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termination benefits and replace them with debits for cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year end.

Post Employment Benefits

Employees of the Council are members of four separate pension schemes:

• The Local Government Pension Scheme, administered by Cornwall Council;

• The Fire Fighters’ Pension Schemes;

• The Teachers’ Pension Scheme, administered by Capita Teachers Pensions on behalf of the Department for Education (DfE);

• National Health Service (NHS).

These schemes provide defined benefits to members (retirement lump sums and pensions) earned as employees work for the Council. However, the arrangements for the Teachers’ and NHS Schemes mean that liabilities for these benefits cannot ordinarily be identified specifically to the Council. These Schemes are accounted for as if they were a defined contribution scheme and no liability for future payments of benefits is recognised in the Balance Sheet. The Together for Families line in the CIES is charged with the employer’s contributions payable to the Teachers’ Pension Scheme in the year, and for the employer’s contributions payable to the NHS Pension Scheme in the year this is mainly coded to the Wellbeing and Public Health line in the CIES.

Details of the Fire Fighters’ Pension Fund Account are described separately in the Council’s accounts.

The Local Government Pension Scheme

The Local Government Pension Scheme is accounted for as a defined benefits scheme:

• The liabilities of the Cornwall Council Pension Fund attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc., and projected earnings for current employees;

• Liabilities are discounted to their value at current prices, using a discount rate of 2.3% as recommended by the Council’s actuaries;

• The assets of the Cornwall Council Pension Fund attributable to the Council are included in the Balance Sheet at their fair value:

o Quoted securities – current bid price;

o Unquoted securities – professional estimate;

o Unitised securities – current bid price;

o Property – market value.

The change in the net pensions liability is analysed into the following components:

• Service cost comprising:

o Current service cost – the increase in liabilities as a result of years of service earned this year – allocated in the CIES to the services for which the employees worked;


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o Past service cost – the increase in liabilities as a result of a scheme amendment or curtailment whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the CIES as part of Corporate Items;

o Net interest on the net defined liability/(asset) i.e. net interest expense for the Council – the change during the period in the net defined liability/(asset) that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the CIES Statement – this is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability/(asset) during the period as a result of contribution and benefit payments;

• Remeasurements comprising:

o The return on plan assets – excluding amounts included in the net interest on the net defined liability/(asset) – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure;

o Actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure; and

• Contributions paid to the Cornwall Council Pension Fund – cash paid as employer’s

contributions to the Pension Fund in settlement of liabilities, not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the Pension Fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the MIRS this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the Pension Fund and pensioners and any such amounts payable but unpaid at the year end. The negative balance that arises on the Pension Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees.

viii Events After the Reporting Period

Events after the Balance Sheet Date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified:

• Those that provide evidence of conditions that existed at the end of the reporting

period – the Statement of Accounts is adjusted to reflect such events;

• Those that are indicative of conditions that arose after the reporting period – the Statement of Accounts is not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect.

Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts.


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ix Financial Instruments

Financial Liabilities

Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the CIES for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised.

For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest) and interest charged to the CIES is the amount payable for the year according to the loan agreement.

Where premiums and discounts have been charged to the CIES, regulations allow the impact on the General Fund balance to be spread over future years. The Council has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the CIES to the net charge required against the General Fund balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the MIRS.

Financial Assets

Financial assets are classified into three types:

• Amortised cost;

• Fair value through profit or loss (FVLP); and

• Fair value through other comprehensive income (FVOCI)

Financial Assets Measured at Amortised Cost

Financial assets measured at amortised cost are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the CIES for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the financial assets held by the authority, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the CIES is the amount receivable for the year in the loan agreement.

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


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

Expected Credit Loss Model

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

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

Financial Assets Measured at Fair Value through Profit or Loss

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

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

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

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

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

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

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

• Level 3 inputs – unobservable inputs for the asset.

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

Instruments Entered Into Before 1 April 2006

The Council entered into a number of financial guarantees that are not required to be accounted for as financial instruments. These guarantees are reflected in the Statement of Accounts to the extent that provisions might be required, or a contingent liability note is needed under the policies set out in the Provisions, Contingent Liabilities and Contingent Assets.


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x Foreign Currency Translation

Where the Council has entered into a transaction denominated in a foreign currency the transaction is converted into sterling at the exchange rate applicable on the date the transaction was effective. Where amounts in foreign currency are outstanding at the year end, they are reconverted at the spot exchange rate for 31 March. Resulting gains or losses are recognised in the Financing and Investment Income and Expenditure line in the CIES.

xi Government Grants and Contributions

Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Council when there is reasonable assurance that:

• The Council will comply with the conditions attached to the payments; and

• The grants or contributions will be received.

Amounts recognised as due to the Council are not credited to the CIES until conditions attached to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset in the form of grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor.

Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants and contributions) or Taxation and Non-specific Grant Income (non-ringfenced revenue grants and all capital grants) in the CIES.

Where capital grants are credited to the CIES, they are reversed out of the General Fund balance in the MIRS. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied Reserve. Where it has been applied, it is posted to the CAA. Amounts in the Capital Grants Unapplied Reserve are transferred to the CAA once they have been applied to fund capital expenditure.

Business Improvement Districts

There are currently eight Business Improvement District (BID) schemes operating in Cornwall, in Truro, Falmouth, Newquay, Camborne, St Austell, Newham, St Ives and Penzance. These schemes are funded by a BID levy paid by non-domestic ratepayers. The Council acts as principal under the scheme and accounts for income received and expenditure incurred (including contributions to the BID project) within the relevant services within the CIES.

xii Intangible Assets

Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as the result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council.


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Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase (research expenditure cannot be capitalised).

Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services.

Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. In practice, no intangible asset held by the Authority meets this criterion, and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the CIES. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the CIES. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the CIES.

Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund balance. The gains and losses are therefore reversed out of the General Fund balance in the MIRS and posted to the CAA and (for any sale proceeds greater than £10,000) the Capital Receipts reserve.

xiii Interests in Companies and Other Entities

The Council has material interests in companies and other entities that have the nature of subsidiaries, associates and jointly controlled entities and require it to prepare group accounts. In the Council’s own single-entity accounts, the interests in companies and other entities are recorded as financial assets at cost, less any provision for losses. See group accounts on page 121.

xiv Joint Operations

Joint operations are activities undertaken where the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement. The activities undertaken by the Council in conjunction with other joint operators involve the use of the assets and resources of those joint operators. In relation to its interest in a joint operation, the Council as a joint operator recognises:

• its assets, including its share of any assets held jointly;

• its liabilities, including its share of any liabilities incurred jointly;

• its revenue from the sale of its share of the output arising from the joint operation;

• its share of the revenue from the sale of the output by the joint operation;

• its expenses, including its share of any expenses incurred jointly.


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xv Leases

Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases.

Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.

The Council as Lessee

Finance Leases

Property, plant and equipment held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Council are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred.

Lease payments are apportioned between:

• a charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability; and

• a finance charge (debited to the Financing and Investment Income and Expenditure line in the CIES).

Property, plant and equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the authority at the end of the lease period). The authority is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are, therefore, substituted by a revenue contribution in the General Fund balance, by way of an adjusting transaction with the CAA in the MIRS for the difference between the two.

Operating Leases

Rentals paid under operating leases are charged to the CIES as an expense of the services benefiting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease).


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The Council as Lessor

Finance Leases

Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether property, plant and equipment or assets held for sale) is written off to the Other Operating Expenditure line in the CIES as part of the gain or loss on disposal. A gain, representing the Council’s net investment in the lease, is credited to the same line in the CIES also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal) matched by a lease (long-term debtor) asset in the Balance Sheet.

Lease rentals receivable are apportioned between:

• a charge for the acquisition of the interest in the property – applied to write down the lease debtor (together with any premiums received); and

• finance income (credited to the Financing and Investment Income and Expenditure line in the CIES).

The gain credited to the CIES on disposal is not permitted by statute to increase the General Fund balance and is required to be treated as a capital receipt. Where a premium has been received, this is posted out of the General Fund balance to the Capital Receipts reserve in the MIRS. Where the amount due in relation to the lease asset is to be settled by the payment of rentals in future financial years, this is posted out of the General Fund balance to the Deferred Capital Receipts reserve in the MIRS. When the future rentals are received, the element for the capital receipt for the disposal of the asset is used to write down the lease debtor. At this point, the deferred capital receipts are transferred to the Capital Receipts reserve.

The written-off value of disposals is not a charge against council tax, as the cost of fixed assets if fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the CAA from the General Fund balance in the MIRS.

Operating Leases

Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the CIES. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income.

xvi Property, Plant and Equipment

Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as property, plant and equipment.


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Recognition

Expenditure on the acquisition, creation or enhancement of property, plant and equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred.

Where the spend is on individual items, which may be properly capitalised but the total expenditure falls below the £10,000 level set as de minimis, the amounts will be charged as revenue to the CIES in place of capital charges.

Measurement

Assets are initially measured at cost, comprising:

• the purchase price;

• any costs attributable to bringing the asset to the location and condition necessary

for it to be capable of operating in the manner intended by management; and

• the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The Council does not capitalise borrowing costs incurred whilst assets are under construction. The cost of an asset, acquired other than by purchase, is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Council). In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Council. Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-specific Grant Income line of the CIES, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in the Donated Assets Account. Where gains are credited to the CIES, they are reversed out of the General Fund balance to the CAA in the MIRS.

Assets are then carried in the Balance Sheet using the following measurement bases:

• infrastructure assets – depreciated historical cost;

• infrastructure (Tamar Bridge Toll Bridge) – depreciated replacement cost;

• community assets and assets under construction – historical cost;

• dwellings – current value, determined using the basis of existing use value for social housing (EUV-SH);

• all other assets – current value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV).

Where there is no market-based evidence of current value because of the specialist nature of an asset, DRC is used as an estimate of current value.


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For non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for current value. Assets included in the Balance Sheet at current value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their current value at the year end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the CIES where they arise from the reversal of a loss previously charged to a service.

Where decreases in value are identified, they are accounted for as follows:

• where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains);

• where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the CIES.

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the CAA.

Impairment

Assets are assessed at each year end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall.

Where impairment losses are identified, they are accounted for as follows:

• where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains);

• where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the CIES.

Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the CIES, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised.

Depreciation

Depreciation is provided for on all property, plant and equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land and certain community assets) and assets that are not yet available for use (i.e. assets under construction).

Depreciation is calculated on the following bases:

• dwellings and other buildings – straight-line allocation over the useful life of the property as estimated by the valuer;


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• vehicles, plant, furniture and equipment – straight-line allocation over the useful life of each class of assets in the Balance Sheet, as advised by a suitably qualified officer;

• infrastructure – straight-line allocation over the useful life, as advised by a suitably qualified officer;

• infrastructure (Wave Hub) – straight-line allocation over 5 years;

• infrastructure (Tamar Bridge Toll Bridge) – straight-line over the useful life of the bridge, as estimated by the valuer.

Where an item of property, plant and equipment has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately. Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the CAA. Disposals and Non-current Assets Held for Sale When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an asset held for sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the CIES. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on assets held for sale. If assets no longer meet the criteria to be classified as assets held for sale, they are reclassified back to non-current assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as held for sale, and their recoverable amount at the date of the decision not to sell. Assets that are abandoned or scrapped are not reclassified as assets held for sale. When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether property, plant and equipment or assets held for sale) is written off to the Other Operating Expenditure line in the CIES as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in CIES also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the CAA. Amounts received for a disposal in excess of £10,000 are categorised as capital receipts. A proportion of receipts relating to housing disposals are payable to the government. The balance of receipts is required to be credited to the Capital Receipts Reserve and can then only be used for new capital investment or set aside to reduce the Council’s underlying need to borrow. Receipts are appropriated to the Capital Receipts reserve from the General Fund balance in the MIRS.


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The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the CAA from the General Fund balance in the MIRS.

xvii Private Finance Initiative (PFI) and Similar Contracts

PFI and similar contracts are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor. As the Council is deemed to control the services that are provided under its PFI schemes and as ownership of the property, plant and equipment will pass to the Council at the end of the contracts for no additional charge, the Council carries the fixed assets used under the contracts on its Balance Sheet as part of property, plant and equipment.

The original recognition of these assets at fair value (based on the cost to purchase the property, plant and equipment) is balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment. For certain schemes, the liability may be written down by an initial capital contribution.

Non-current assets recognised on the Balance Sheet are revalued and depreciated in the same way as property, plant and equipment owned by the Council.

The amounts payable to the PFI operators each year are analysed into five elements:

• fair value of the services received during the year – debited to the relevant service in the CIES;

• finance cost – an interest charge on the outstanding Balance Sheet liability, debited to the Financing and Investment Income and Expenditure line in the CIES;

• contingent rent – increases in the amount to be paid for the property arising during the contract, debited to Financing Investment Income and Expenditure line in the CIES;

• payment towards liability – applied to write down the Balance Sheet liability towards the PFI operator (the profile of write-downs is calculated using the same principles as for a finance lease);

• lifecycle replacement costs – a proportion of the amount payable is posted to the Balance Sheet as a prepayment and then recognised as additions to property, plant and equipment when the relevant works are eventually carried out.

xviii Provisions and Contingent Liabilities

Provisions

Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential and a reliable estimate can be made of the amount of the obligation.

Provisions are charged as an expense to the appropriate service line in the CIES in the year that the Council becomes aware of the obligation and are measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.


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When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made) the provision is reversed and credited back to the relevant service.

Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim) this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Council settles the obligation.

Contingent Liabilities

A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.

xix Reserves

The Council sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the General Fund balance in the MIRS. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to be included within the Surplus or Deficit on the Provision of Services in the CIES. The reserve is then appropriated back into the General Fund balance in the MIRS so that there is no net charge against council tax for the expenditure.

Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments and retirement and employee benefits and do not represent usable resources for the Council – these reserves are explained in the relevant policies.

xx Revenue Expenditure Funded from Capital under Statute

Expenditure incurred during the year that may be capitalised under statutory provisions but that does not result in the creation of a non-current asset has been charged as expenditure to the relevant service in the CIES in the year. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the MIRS from the General Fund balance to the CAA then reverses out the amounts charged so that there is no impact on the level of council tax.


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xxi Value Added Tax (VAT)

VAT payable is included as an expense only to the extent that is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is excluded from income.

xxii Accounting for Schools

Local Authority Maintained Schools

Local Authority maintained schools form an integral part of the Council’s accounts. The Code of Practice on Local Authority Accounting in the United Kingdom confirms that the balance of control for local authority maintained schools (i.e. those categories of school identified in the School Standards and Framework Act 1998, as amended) lies with the local authority. The Code also stipulates that those schools’ assets, liabilities, reserves and cash flows are recognised in the local authority financial statements (and not the Group Accounts). Their income and expenditure is included within the Schools line within the CIES and their assets and liabilities are included within the relevant headings on the Balance Sheet. Their reserves are included in the General Fund Schools balance, which forms part of the Council’s Usable Reserves. The following table shows the number of maintained schools still held by the Council and their share of the net cost of services, fixed asset and reserve balances as these are material items:

The table above shows the number of maintained schools still held by the Council and their share of the Net Cost of Services, Fixed Asset and Reserve balances as these are the material items.

School Type Level

Number of

Schools as

at 1st April

2019

Expenditure

during

2019/20

Income

during

2019/20

Net Cost

of

Services

2019/20 Fixed Assets

Fixed

Assets

NBV Reserves

Fixed

Assets

NBV Reserve

Number of

Schools

transferred

£m £m £m £m £m £m £m

Community Primary 23 5.965 (4.860) 1.105 66.768 (3.133) 0.000 0.000 0

Secondary 1 1.685 (1.034) 0.651 29.440 (0.434) 0.000 0.000 0

Trust Primary 23 3.619 (2.978) 0.641 25.516 (2.113) 0.000 0.000 0

Secondary 6 3.994 (4.320) (0.326) 67.547 0.477 6.381 (0.206) 1

Voluntary-

aided (VA) Primary 6 1.149 (0.964) 0.185

Assets are owned and

maintained by the Church

and are not held on the

Council's balance sheet. The

majority of the capital

expenditure is funded by the

Council. Assets are leased

in by the Council. 0.147 (0.533) 0.000 0.000 0

Voluntary

Controlled

(VC) Primary 3 0.410 (0.413) (0.003)

Assets are owned by the

Church but maintained by

the Council and held on the

Council's balance sheet.

Capital expenditure is

funded by the Council.

Assets are leased in by the

Council. 3.813 (0.654) 0.000 0.000 0

Totals 62 16.822 (14.569) 2.253 193.231 (6.390) 6.381 (0.206) 1

Total Balances as at

31st March 2020

Loss of Control through Academy

transfer during 2019/20

All assets owned and

maintained by the Council

and held on the Council's

balance sheet. Capital


Council. No restrictions on

use or disposal.

Assets are owned by the

Trust via a freehold transfer

from the Council but are

maintained by the Council

and held on the Council's

balance sheet. Capital


Council. As part of the

freehold transfer assets

must be used for education

and there are restrictions on

their disposal.


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During the year a maintained school transferred to Academy status, where the Council loses control of a maintained school it will dispose of the fixed assets, through either a freehold transfer or finance lease (see below), and it will transfer any reserve balance to the Academy after all outstanding transactions, including settling any outstanding debtor and creditor balances, have been accounted for.

De-recognition of Academy School Assets

Academies are independently managed schools which operate outside the control of the Council, with funding provided directly by central government. Where the Council owns the freehold for these schools and issues a long lease (125 years) to the academy trust for the land and buildings, for accounting purposes due to the length of the lease, the transfers of buildings are treated as disposals. If the school had previously transferred to trust status the Council will have transferred the freehold of the assets to the trust and therefore on conversion to academy status both the land and building assets will be treated as disposals.

Accounting for Trust School Assets

The Council continues to account for trust school assets on its balance sheet even after a transfer order has been signed as it has determined that the balance of control of these assets still lies with the Council.

Funding for Academy Schools and Trust Schools

Academy schools receive their revenue and capital funding direct from the government and account for their income and expenditure, together with assets and liabilities within their own accounts. Trust schools still receive their funding via the Council and their income and expenditure, assets and liabilities are accounted for in the Council’s CIES and Balance Sheet. Any outstanding Trust school balances at the balance sheet date are held as part of the Council’s usable reserves.

xxiii Accounting for the Collection Fund

Billing authorities are required by statute to maintain a separate fund (the Collection Fund) for the collection and distribution of amounts due in respect of council tax and national non-domestic rates.

Council Tax

In its capacity as a billing authority the Council acts as an agent, collecting and distributing council tax on behalf of the major preceptors of the Fund - Devon and Cornwall Police and itself. While council tax income credited to the Collection Fund is the accrued income for the year, regulations determine when it should be released from the Collection Fund and transferred to the Council’s General Fund or transferred to Devon and Cornwall Police. The amount credited to the Council’s General Fund under statute is the Council’s demand on the Fund for that year, plus the Council’s share of the surplus on the Collection Fund for the previous year. This amount may be more or less than the accrued income for the year, any difference is then transferred to the General Fund via the Collection Fund Adjustment Account and reversed out through the MIRS.

Since the collection of council tax is, in substance, an agency arrangement, the cash collected by the Council belongs proportionately to itself and Devon and Cornwall Police.


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Therefore, there will be a debtor/creditor relationship between the Council and the Police since the cash paid to the latter in the year will not be equal to their share of the total cash collected. The balance sheet includes the Council’s share of the year end balances in respect of council tax relating to arrears, impairment allowances for doubtful debts, overpayments and prepayments and appeals. National Non-Domestic Rates (NNDR) From 1 April 2017 the Council retained 100% of income collected compared to prior regulations where the Council retained 50% of the income collected and 50% passed to central government. Under the new legislative framework, the Council bears the risks and rewards that the amount collected could be less or more than predicted. Regulations determine the amount of NNDR that must be included in the Council’s General Fund. Therefore, the difference between the income included in the CIES and the amount required by regulation to be credited to the General Fund is taken to the Collection Fund Adjustment Account and included as a reconciling item in the MIRS. The Balance Sheet this year includes the full 100% of the end of year balances in respect of NNDR relating to arrears, impairment allowances for doubtful debts, overpayments and prepayments and appeals.

xxiv Fair Value

The Council measures some of its non-financial assets, such as surplus assets, assets held for sale, investment properties, and some of its financial instruments, such as equity share holdings, at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability; or • Where no principal market, the most advantageous market for the asset or liability.

The Council measures the fair value of an asset or liability on the same basis that market participants would use when pricing the asset or liability (assuming those market participants were acting in their economic best interest). When measuring the fair value of a non-financial asset, the Council takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Council uses appropriate valuation techniques for each circumstance, maximising the use of relevant known data and minimising the use of estimates or unknowns. This takes into account the three levels of categories for inputs to valuations for fair value assets:

• Level 1 – quoted prices; • Level 2 – inputs other than quoted prices included within Level 1 that are observable

for the asset or liability, either directly or indirectly; • Level 3 – unobservable inputs for the asset or liability.


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xxv Inventories

Inventories are included in the Balance Sheet at the lower of cost and net realisable value, on a “first in, first out” basis. Inventories in the Fire Brigade workshops are valued on a “last in, first out basis” – although this is a departure from IAS 2, the amounts concerned are not material to the Council’s accounts.

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

xxvi Heritage Assets

Heritage assets are recognised and measured (including the treatment of revaluation gains, losses, impairments and disposals) in accordance with the Council’s accounting policies on property, plant and equipment. However, some of the measurement rules are relaxed in that additions to the Collections may be in the form of acquisitions or donations. Acquisitions are initially recognised at cost and donations are recognised at an appropriate value, such as the price paid by the donor or the value accepted in lieu of inheritance tax. Collections will be reviewed with sufficient regularity to ensure valuations remain current and items may be valued by internal or external valuers or by using insurance valuations where appropriate.

The assets within the Collections are deemed to have indeterminate lives and a high residual value, hence the Council does not consider it appropriate to charge depreciation.

There are a number of items that would not have been valued and the Council considers that obtaining valuations for these would involve a disproportionate cost in comparison to the benefits to the users of the Council’s financial statements.

The Council’s heritage assets are not significant in value and are therefore not shown in a separate note to the accounts.

Accounting Standards That Have Been Issued, But Have Not Yet Been

Adopted

Where a new standard has been published but has not yet been adopted by the Code, the Council is required to disclose information relating to the impact of these accounting changes. This requirement applies to International Financial Reporting Standards (IFRS) that have not been applied in the 2019/20 Code and that came into effect on or before 1 January 2020. For 2019/20 the following potentially relevant standards include:

• Amendments to IAS 28 Investments in Associates and Joint Ventures: Long-term

Interests in Associates and Joint Ventures;

• Annual Improvements to IFRS Standards 2015–2017 Cycle; and

• Amendments to IAS 19 Employee Benefits: Plan Amendment, Curtailment or

Settlement.

Note

2


Page 62

Application of the standards is required from 1 April 2019. Therefore, these changes will be reflected in the Council’s 2020/21 or future Statement of Accounts. IFRS 16 Leases will require local authorities that are lessees to recognise most leases on their balance sheets as right-of-use assets with corresponding lease liabilities (there are exemptions for low-value and short-term leases). CIPFA/LASAAC have deferred implementation of IFRS 16 for local government to 1 April 2021. Local Authorities are not required to include IFRS 16 in their consideration of accounting standards that have been issued but not adopted in their 2019/20 accounts.

Critical Judgements in Applying Accounting Policies

In applying the accounting polices set out in Note 1 the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. Key judgements made in the Statement of Accounts include:

• Future funding - there is a high degree of uncertainty about future levels of funding for local government. However, this uncertainty is not yet sufficient to provide an indication that the Council’s assets might be impaired as a result of a need to reduce levels of service provision;

• Valuation of Newquay Airport - the valuation of Newquay Airport in these accounts is highly dependent on the valuation basis used which is, in turn, determined by the Council’s intentions with regard to its future ownership of the Airport and the extent to which verifiable external market evidence of value can be established. The Council remains of the view that the most appropriate basis of valuation is DRC based on the remaining service potential rather than a market-based estimate;

• Classification of Tamar Toll Bridge as an Infrastructure Asset – The Tamar Bridge is classified as an infrastructure asset. The CIPFA Code requires infrastructure assets to be valued at Depreciated Historic Cost (DHC). The value of the Tamar Bridge on a DHC basis would be £20.056m. The carrying value has been measured on Depreciated Replacement Cost (DRC). The value of the Tamar Bridge using the DHC basis is £60.472m. This is a departure from the Code of Practice as the Council believe that the current valuation methodology represents a more accurate valuation of the bridge.

• Trust Schools and Voluntary-aided Schools Assets – a review of the accounting treatment of trust schools and voluntary-aided schools non-current assets required a determination as to whether those assets are included within the single entity balance sheet of Cornwall Council. In accordance with the Code assets can be included on the Council’s balance sheet where the asset is controlled as a result of past events and from which future economic benefits or service potential are expected to flow to the Council and as long as it can be measured reliably. This determination was undertaken after applying a number of tests to establish whether the assets were effectively controlled by the Council or the School. These tests included a combination of who employs the staff, who sets the admissions criteria, who allocates the revenue funding, who owns and/or maintains the fixed assets and who funds the capital expenditure and who can change the use of the fixed assets. As a result of applying these tests the Council has determined that trust schools should be included within its non-current assets on its balance sheet whereas voluntary-aided schools should be excluded. This is because the trust school assets had previously been transferred under a freehold transfer to the trust for the purpose

Note

3


Page 63

of providing school premises only and with conditions on their use and disposal, the service potential still flows to the Council, who are responsible for providing the school service. The asset is measured reliably by undertaking a DRC valuation. Voluntary-aided school assets have been excluded as they belong to external organisations who control their use and disposal. Land was only considered separately where it related to playing fields which are owned by the Council but used by voluntary-aided schools.

Assumptions made about the Future and other major sources of Estimation

Uncertainty

The Statement of Accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. 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:

Item

Uncertainties Effect if Actual Results Differ

from Assumptions

Property,

Plant and

Equipment

Assets are included on the basis of valuations

and assessed useful lives determined by the

Council's Property Systems and Assurance Manager on the basis of condition surveys and

standards of professional practice set out by the Royal Institute of Chartered Surveyors (RICS).

The assumptions underlying such valuations and

the assessment of useful lives are subject to revision and the valuation would, therefore, be

expected to change accordingly. The carrying value of this long term asset at the end of the

reporting period was £2,453.625m.

The Covid-19 pandemic has had a global impact

on financial markets. This makes judgements around valuations much more challenging as the

previous market evidence which is used to inform valuations is less reliable given the

substantially increased market uncertainty.

Valuations are generally undertaken within

guidance provided by the Royal Institution of Chartered Surveyors (RICS) “Red Book”. RICS

current guidance is that valuations should be reported on the basis of “material valuation

uncertainty”. This means that less certainty and

a higher degree of caution should be attached to valuations than would normally be the case.

As the future impact of Covid-19 on real estate

The impact of a change in valuation or

useful life would be to affect the

carrying value of the asset in the balance sheet and the charge for

depreciation or impairment in the CIES.

If the average useful life for each category of assets charged with

depreciation in 2019/20 was increased by one year it would result in a

decrease in the depreciation charged to the net cost of services of

£3.005m. If the average useful life

was decreased by one year it would result in an increase in the

depreciation charged to the net cost of services of £3.411m.

The above changes do not have an impact on the Council's General Fund

position as the Council is not required to fund such non-cash charges from

council tax receipts.

Note

4


Page 64

Item

Uncertainties Effect if Actual Results Differ from Assumptions

Valuation of HRA

Dwellings

markets is unknown, property valuations will be

kept under review.

The Council’s HRA properties are valued on a beacon methodology. This leads to the whole

portfolio being valued based on a number of

information sources such as local house prices and sales of comparable property.

Due to the uncertain impact of Covid-19

valuations are undertaken on the basis of “material valuation uncertainty” meaning that

valuations are less certain.

Changes in valuations of HRA properties have an impact on

depreciation charges which would

potentially impact on the HRA balance and the Major Repairs Reserve.

Pensions Liability

Impairment

allowance

for Debts

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 return on pension fund assets. A firm of consulting actuaries is engaged to provide the

Council with expert advice about the assumptions to be applied. Those assumptions

are detailed in Note 39 to the accounts. The

carrying value of this long term liability at the end of the reporting period was £1,027.674m.

As at 31st March 2020 the Council had a balance

of short-term debtors of £139.628m. The

Council makes an impairment allowance against those debts for amounts which may become

uncollectable. The impairment allowance is currently £37.596m. The Council cannot be

certain that this impairment allowance is

sufficient to offset any losses through non-payment of debts. The Covid-19 pandemic has

made the assessment of which debts may become uncollectable much more uncertain.

This is due to the uncertainty around which organisations and individuals may become

The impact of a change in the actuarial assumptions will be to

increase or decrease the net pension

liability shown in the balance sheet and the cost shown in the CIES.

For the Cornwall Council LGPS a 0.5%

decrease in the real discount rate would approximate to a 9% increase

to the employer or £174.731m in

monetary terms. A 0.5% increase in the salary interest rate would result in

an increase to the employer of 1% or £16.536m and finally a 0.5% increase

in the pension increase rate would

result in an 8% increase or £156.863m to the employer.

These changes do not have an impact

on the Council's General Fund position

as the Council is not required to fund such non-cash charges from council

tax receipts.

The Council will monitor its collection

rates of debt and will undertake a

quarterly review of those that are significant and which do not fall within

the remit of its credit control team. If there are indications the current

assumptions used in calculating the

impairment allowance are significantly wrong then they will be reviewed and

the impairment allowance adjusted accordingly with the corresponding

potential impact for the Council’s revenue account.


Page 65

Item

Uncertainties Effect if Actual Results Differ from Assumptions

Valuation

of Group Asssets

economically unviable due to the impact of the

pandemic.

The Covid-19 pandemic has had a global impact

on financial markets. This makes judgements around valuations much more challenging as the

previous market evidence which is used to inform valuations is less reliable given the

substantially increased market uncertainty.

Changes in the value of company-

owned assets could impact on their profit and loss accounts and

potentially on the return they provide the Council where it is a shareholder.

This list does not include assets and liabilities that are carried at fair value based on a recently observed market price.

Material Items of Income and Expense

The Council has no material items of income and expense.

Events after the Reporting Period

The Statement of Accounts was authorised for issue by Chief Operating Officer and Section 151 Officer on 30 June 2020. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2020, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information.

Expenditure and Funding Analysis

The Expenditure and Funding Analysis (EFA) shows how annual expenditure is used and funded from resources (government grants, rents, council tax and business rates) by the Council in comparison with those resources consumed or earned by the Council in accordance with generally accepted accounting practices. It also shows how this expenditure is allocated for decision making purposes between the Council’s directorates. Income and expenditure accounted for under generally accepted accounting practices is presented more fully in the CIES.

Note

5

Note

6

Note

7


Page 66

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10.6

78

Schools

-managed E

xpenditure

-(0

.085)

(0.0

85)

6.1

13

3.1

63

(0.1

47)

9.1

29

9.0

44

Local A

uth

ority

HR

A-

(7.9

05)

(7.9

05)

(1.2

07)

1.5

50

-0.3

43

(7.5

62)

Join

t C

om

mitte

es

-(1

.099)

(1.0

99)

1.2

02

0.1

78

0.0

06

1.3

86

0.2

87

Ne

t C

ost

of

Se

rvic

es

521.4

25

(44.9

15)

476.5

10

69.0

27

26.5

97

1.1

67

96.7

91

573.3

01

Oth

er

incom

e a

nd e

xpenditure

(11.3

21)

(511.9

01)

(523.2

22)

(1.9

29)

32.5

29

(0.5

12)

30.0

88

(493.1

34)

(Su

rplu

s) o

r d

efi

cit

on

pro

vis

ion

of

serv

ice

s510.1

04

(556.8

16)

(46.7

12)

67.0

98

59.1

26

0.6

55

126.8

79

80.1

67

Tra

nsfe

r (t

o)/

from

Reserv

es for

Sta

tuto

ry M

ove

ments

52.3

69

(50.4

90)

-(1

.879)

(52.3

69)

-

Ad

just

me

nts

be

twe

en

acco

un

tin

g b

asi

s a

nd

fu

nd

ing

ba

sis

un

de

r re

gu

lati

on

s16.6

08

59.1

26

(1.2

24)

74.5

10

(74.5

10)

9

(Su

rplu

s) o

r d

efi

cit

5.6

57

Openin

g G

enera

l F

und,

HR

A a

nd E

arm

ark

ed b

ala

nces a

t 31 M

arc

h 2

019

(269.2

77)

Add S

urp

lus o

n G

enera

l F

und,

HR

A a

nd E

arm

ark

ed b

ala

nce in y

ear

5.6

57

Clo

sin

g G

en

era

l F

un

d,

HR

A a

nd

Ea

rma

rke

d R

ese

rve

ba

lan

ce

at

31 M

arc

h 2

020

(263.6

20)

Note

1:

Neig

hbourh

oods a

nd C

usto

mer

and S

upport

Serv

ices c

onta

in P

FI te

chnic

al adju

stm

ents

rela

ting t

o r

eallo

cation o

f th

e u

nitary

charg

e (

Neig

hbourh

oods £

18.4

67m

, C

usto

mer

and S

upport

Serv

ices £

5.3

76m

),

Public

Health (

£24.7

89m

) re

cla

ssifi

cation o

f th

e P

ublic

Health g

rant

from

non s

pecifi

c g

rant

to s

pecifi

c,

and t

he O

ther

Incom

e a

nd E

xpenditure

lin

e (

£565.5

00m

) fo

r C

ouncil

Tax,

Busin

ess r

ate

s a

nd n

on s

pecifi

c G

ove

rnm

ent

gra

nts

,

and £

41.4

31m

in r

ela

tion t

o P

FI and P

ublic

Health g

rant.

Note

2:

The v

alu

es w

ithin

net

cost

of serv

ices r

ela

te t

o n

et

change for

Accum

ula

ted A

bsences A

dju

stm

ent.

The a

mount

on t

he O

ther

incom

e a

nd e

xpenditure

lin

e r

ela

tes t

o n

et

change for

the C

olle

ction F

und.

Within

the r

ow

Tra

nsfe

r to

/fro

m r

eserv

es for

sta

tuto

ry m

ove

ments

this

am

ount

rela

tes t

o n

et

change for

finance c

osts

(F

inancia

l In

str

um

ents

Adju

stm

ent

Account)

.

Ad

just

me

nts

be

twe

en

th

e F

un

din

g a

nd

Acco

un

tin

g b

asi

s

Note


Page 67

2018/1

9

Co

mp

ara

tive

Fig

ure

s R

est

ate

d

Dir

ecto

rate

To

tal

as

rep

ort

ed

fo

r

reso

urc

e

ma

na

ge

me

nt

Ad

just

me

nt

to a

rriv

e

at

the

ne

t a

mo

un

t

ch

arg

ea

ble

to

th

e

Ge

ne

ral

Fu

nd

an

d

HR

A b

ala

nce

s (N

ote

1)

Ne

t E

xp

en

dit

ure

ch

arg

ea

ble

to

th

e

Ge

ne

ral

Fu

nd

an

d

HR

A

Ad

just

me

nt

for

Ca

pit

al

Pu

rpo

ses

Ne

t ch

an

ge

fo

r th

e

Pe

nsi

on

s

Ad

just

me

nt

Oth

er

Dif

fere

nce

s

(No

te 2

)T

ota

l A

dju

stm

en

ts

Ne

t E

xp

en

dit

ure

in

the

Co

mp

reh

en

sive

Inco

me

an

d

Ex

pe

nd

itu

re

Sta

tem

en

t

£m

£m

£m

£m

£m

£m

£m

£m

Adult S

ocia

l C

are

171.7

08

(0.6

24)

171.0

84

(0.7

80)

2.1

88

(0.0

12)

1.3

96

172.4

80

Togeth

er

for

Fam

ilies

66.1

90

(0.1

10)

66.0

80

1.5

38

3.2

31

0.0

06

4.7

75

70.8

55

Econom

ic G

row

th a

nd D

eve

lopm

ent

51.7

29

(0.2

61)

51.4

68

37.3

57

1.8

19

0.1

03

39.2

79

90.7

47

Neig

hbourh

oods

91.9

01

(20.5

21)

71.3

80

(0.9

12)

3.6

82

0.0

19

2.7

89

74.1

69

Custo

mer

and S

upport

Serv

ices

61.9

39

(6.2

66)

55.6

73

22.6

48

3.0

41

0.1

22

25.8

11

81.4

84

Wellb

ein

g a

nd P

ublic

Health

25.3

59

(25.4

65)

(0.1

06)

1.2

73

0.2

44

0.0

06

1.5

23

1.4

17

Corp

ora

te Ite

ms

-15.8

13

15.8

13

1.0

66

7.7

77

0.0

01

8.8

44

24.6

57

Schools

-managed E

xpenditure

-(0

.753)

(0.7

53)

10.7

42

4.2

92

(0.6

13)

14.4

21

13.6

68

Local A

uth

ority

HR

A-

(7.8

10)

(7.8

10)

(4.2

57)

1.0

47

-(3

.210)

(11.0

20)

Join

t C

om

mitte

es

-(0

.577)

(0.5

77)

1.1

04

0.2

77

0.0

01

1.3

82

0.8

05

Ne

t C

ost

of

Se

rvic

es

468.8

26

(46.5

74)

422.2

52

69.7

79

27.5

98

(0.3

67)

97.0

10

519.2

62

Oth

er

incom

e a

nd e

xpenditure

15.5

41

(455.4

49)

(439.9

08)

(5.2

45)

31.1

63

8.2

66

34.1

84

(405.7

24)

(Su

rplu

s) o

r d

efi

cit

on

pro

vis

ion

of

serv

ice

s484.3

67

(502.0

23)

(17.6

56)

64.5

34

58.7

61

7.8

99

131.1

94

113.5

38

Tra

nsfe

r (t

o)/

from

Reserv

es for

Sta

tuto

ry M

ove

ments

12.1

71

(63.9

33)

-51.7

62

(12.1

71)

-

Ad

just

me

nts

be

twe

en

acco

un

tin

g b

asi

s a

nd

fu

nd

ing

ba

sis

un

de

r re

gu

lati

on

s0.6

01

58.7

61

59.6

61

119.0

23

(119.0

23)

9

(Su

rplu

s) o

r d

efi

cit

(5

.485)

Openin

g G

enera

l F

und,

HR

A a

nd E

arm

ark

ed b

ala

nces a

t 31 M

arc

h 2

018

(263.7

92)

Add S

urp

lus o

n G

enera

l F

und,

HR

A a

nd E

arm

ark

ed b

ala

nce in y

ear

(5.4

85)

Clo

sin

g G

en

era

l F

un

d,

HR

A a

nd

Ea

rma

rke

d R

ese

rve

ba

lan

ce

at

31 M

arc

h 2

019

(269.2

77)

Note

1:

Neig

hbourh

oods a

nd C

usto

mer

and S

upport

Serv

ices c

onta

in P

FI te

chnic

al adju

stm

ents

rela

ting t

o r

eallo

cation o

f th

e u

nitary

charg

e (

Neig

hbourh

oods £

20.3

93m

, C

usto

mer

and S

upport

Serv

ices £

5.9

94m

),

Public

Health (

£25.4

61m

) re

cla

ssifi

cation o

f th

e P

ublic

Health g

rant

from

non s

pecifi

c g

rant

to s

pecifi

c,

and t

he O

ther

Incom

e a

nd E

xpenditure

lin

e (

£550.7

67m

) fo

r C

ouncil

Tax,

Busin

ess r

ate

s a

nd n

on s

pecifi

c G

ove

rnm

ent

gra

nts

,

and £

43.6

50m

in r

ela

tion t

o P

FI and P

ublic

Health g

rant.

Note

2:

The v

alu

es w

ithin

net

cost

of serv

ices r

ela

te t

o n

et

change for

Accum

ula

ted A

bsences A

dju

stm

ent.

The a

mount

on t

he O

ther

incom

e a

nd e

xpenditure

lin

e r

ela

tes t

o n

et

change for

the C

olle

ction F

und.

Within

the r

ow

Tra

nsfe

r to

/fro

m r

eserv

es for

sta

tuto

ry m

ove

ments

this

am

ount

rela

tes t

o n

et

change for

finance c

osts

(F

inancia

l In

str

um

ents

Adju

stm

ent

Account)

.

Note

Ad

just

me

nts

be

twe

en

th

e F

un

din

g a

nd

Acco

un

tin

g b

asi

s


Page 68

Adjustments for Capital Purposes

Adjustments for capital purposes – this column adds in depreciation and impairment and revaluation gains and losses in the services lines, and for:

• Other Operating Expenditure – adjusts for capital disposals with a transfer of income on disposal of assets and the amounts written off for those assets;

• Financing and Investment Income and Expenditure – the statutory charges for capital financing i.e. MRP and other revenue contributions are deducted from other income and expenditure as these are not chargeable under generally accepted accounting practices;

• Taxation and Non-specific Grant Income and Expenditure – capital grants are adjusted for income not chargeable under generally accepted accounting practices. Revenue grants are adjusted from those receivable in the year to those receivable without conditions or for which conditions were satisfied throughout the year. The Taxation and Non-specific Grant Income and Expenditure line is credited with capital grants receivable in the year without conditions or for which conditions were satisfied in the year.

Net Change for the Pensions Adjustments

Net change for the removal of pension contributions and the addition of IAS19 Employee Benefits pension related expenditure and income.

• For services this represents the removal of the employer pension contributions made by the Council as allowed by statute and the replacement with current service costs and past service costs;

• For Financing and Investment Income and Expenditure the net interest on the defined benefit liability is charged to the CIES.

Other Statutory Adjustments

Other statutory adjustments between amounts debited/credited to the CIES and amounts payable/receivable to be recognised under statute:

• For Financing and Investment Income and Expenditure the other statutory adjustments column recognises adjustments to the General Fund for the timing differences for premiums and discounts;

• The charge under Taxation and Non-specific Grant Income and Expenditure represents the difference between what is chargeable under statutory regulations for Council tax and NNDR that was projected to be received at the start of the year and the income recognised under generally accepted accounting practises in the Code. This is a timing difference as any difference will be brought forward in future surpluses or deficits on the Collection Fund.

Other Non-statutory Adjustments

Other non-statutory adjustments represent amounts debited/credited to service segments which need to be adjusted against the ‘Other income and expenditure from the Expenditure and Funding Analysis’ line to comply with the presentational requirements in the CIES:

• For Financing and Investment Income and Expenditure the other non-statutory adjustments column recognises adjustments to service segments, e.g. for interest income and expenditure and changes in the fair values of investment properties;


Page 69

• For Taxation and Non-specific Grant Income and Expenditure the other non-statutory adjustments column recognises adjustments to service segments, e.g. for unringfenced government grants.

Expenditure and Income Analysed by Nature

The Council’s expenditure and income is analysed as follows:

Adjustments between Accounting Basis and Funding Basis under

Regulations

This note details the adjustments that are made to total comprehensive income and expenditure in accordance with proper accounting practice to determine the resources that are available to meet future capital and revenue expenditure. The adjustments are made against the following reserves: General Fund Balance The General Fund is the statutory fund into which all of the receipts of the Council are required to be paid and out of which all liabilities of the Council are to be met, except to the extent that statutory rules might provide otherwise. These rules can also specify the financial year in which liabilities and payments should impact on the General Fund balance, which is not necessarily in accordance with proper accounting practice. The General Fund balance therefore summarises the resources that the Council is statutorily empowered to

Reconciliation to Subjective Analysis 31 March 31 March

2020 2019

£m £m

Fees, charges and other service income (227.133) (222.274)

Interest and investment income (10.170) (11.846)

Income from council tax (322.115) (306.103)

Income from business rates (142.706) (158.741)

Government grants and contributions (497.505) (521.971)

Total Income (1,199.629) (1,220.935)

Employee expenses 348.637 333.090

Other service expenses 725.709 720.605

Capital charges 118.228 130.997

Interest payments 45.433 101.716

Precepts and levies 24.214 22.108

Payments to Housing Capital Receipts Pool 0.819 1.092

Gain or loss on disposal of fixed assets 16.756 24.865

Total Expenditure 1,279.796 1,334.473

(Surplus) or deficit on the provision of services 80.167 113.538

Note

9

Note

8


Page 70

spend on its services or on capital investment at the end of the financial year. For housing authorities, the balance is not available to be applied to funding HRA services. Housing Revenue Account Balance The Housing Revenue Account balance reflects the statutory obligation to maintain a revenue account for local authority council housing provision in accordance with Part VI of the Local Government Housing Act 1989. It contains the balance of income and expenditure as defined by the 1989 Act that is available to fund expenditure in connection with the Council’s landlord function. Major Repairs Reserve The Council is required to maintain the MRR which is restricted to being applied to new capital investment in HRA assets or the financing of historical capital expenditure by the HRA. The balance shows the total that has yet to be applied at year end. Capital Receipts Reserve The Capital Receipts reserve holds the proceeds from the disposal of land or other assets which are restricted by statute from being used other than to fund new capital expenditure or to be set aside to finance historical capital expenditure. The balance on the reserve shows the resources that have yet to be applied for these purposes at the year end. Capital Grants Unapplied The Capital Grants Unapplied Account (reserve) holds the grants and contributions received towards capital projects for which the Council has met the conditions that would otherwise require repayment of the monies but which have yet to be applied to the expenditure. The balance is restricted by grant terms as to the capital expenditure against which it can be applied and/or the financial year in which this can take place. Further information describing the nature and purpose of the General Fund Schools balance, the Earmarked General Fund reserves and the Ports balances can be found in the MIRS.


Page 71

2019/20 adjustments

General Housing Capital Capital Major Movement

Fund Revenue Receipts Grants Repairs in Unusable

Balance Account Reserve Unapplied Reserve Reserves

£m £m £m £m £m £m

Adjustments primarily involving the Capital Adjustment Account:

Reversal of items debited or credited to the Comprehensive

Income and Expenditure Statement :

Charges for depreciation of non-current assets (58.394) (17.567) - - - 75.961

Revaluation losses on property, plant and equipment (4.344) 5.672 - - - (1.328)

Amortisation of intangible assets (0.972) (0.027) - - - 0.999

Capital grants and contributions applied 52.710 1.755 - (16.282) - (38.183)

Revenue expenditure funded from capital under statute (41.657) - - - - 41.657

Amounts of non-current assets written off on disposal or sale as (17.869) 1.114 (22.654) - - 39.409

part of the gain/loss on disposal to the Comprehensive Income

and Expenditure Statement

Insertion of items not debited or credited to the Comprehensive

Income and Expenditure Statement:

Statutory provision for the financing of capital investment 24.564 - - - - (24.564)

Capital expenditure charged against the General Fund and 23.649 2.448 - - - (26.097)

HRA balances

Long Term Debtors/Loans - arrangements and repayments - - (4.831) - - 4.831

Adjustments primarily involving the Capital Grants Unapplied

Account:

Application of grants to capital financing transferred to the - - - 4.938 - (4.938)

Capital Adjustment Account

Adjustments primarily involving the Capital Receipts Reserve:

Use of Capital Receipts to finance new capital expenditure - - 19.984 - - (19.984)

Contribution from the Capital Receipts Reserve to finance the (0.819) - 0.819 - - -

payments to the Government capital receipts pool

Transfer from Deferred Capital Receipts Reserve upon receipt of cash - - (0.002) - - 0.002

Adjustments primarily involving the Major Repairs Reserve:

Use of the Major Repairs Reserve to finance new - - - - 15.657 (15.657)

capital expenditure

Posting of HRA resources from revenue to the Major Repairs Reserve - 13.129 - - (13.129) -

Adjustments Primarily involving the Financial Instruments

Adjustment Account:

Amount by which finance costs charged to the Comprehensive 1.874 0.005 - - - (1.879)

Income and Expenditure Statement are different from finance .

costs chargeable in the year in accordance with statutory

requirements

Adjustments primarily involving the Pensions Reserve:

Reversal of items relating to retirement benefits debited/credited (109.643) (3.630) - - - 113.273

to the Comprehensive Income and Expenditure Statement

Employer's pensions contributions and direct payments to 52.409 1.738 - - - (54.147)

pensioners payable in the year

Adjustments primarily involving the Collection Fund Adjustment

Account:

Amount by which council tax and non-domestic rating income credited 0.512 - - - - (0.512)

to Comprehensive Income and Expenditure Statement is different

from council tax and non-domestic rating income calculated for the

year in accordance with statutory requirements

Adjustments primarily involving the Accumulated Absences

Account:

Amount by which officer remuneration charged to Comprehensive (1.167) - - - - 1.167

Income and Expenditure Statement on an accruals basis is

different from remuneration chargeable in the year in

accordance with statutory requirements

Total Adjustments (79.147) 4.637 (6.684) (11.344) 2.528 90.010

Total General Fund and HRA Movement

Movement in Usable Reserves

(74.510)


Page 72

2018/19 adjustments

General Housing Capital Capital Major Movement

Fund Revenue Receipts Grants Repairs in Unusable

Balance Account Reserve Unapplied Reserve Reserves

£m £m £m £m £m £m


Reversal of items debited or credited to the Comprehensive

Income and Expenditure Statement :

Charges for depreciation of non-current assets (57.795) (17.392) - - - 75.187

Revaluation losses on property, plant and equipment (10.260) 8.938 - - - 1.322

Amortisation of intangible assets (0.950) - - - - 0.950

Capital grants and contributions applied 75.421 1.681 - (13.884) - (63.218)

Revenue expenditure funded from capital under statute (46.957) - - - - 46.957

Amounts of non-current assets written off on disposal or sale as (26.085) 1.184 (5.847) - - 30.748

part of the gain/loss on disposal to the Comprehensive Income

and Expenditure Statement



Statutory provision for the financing of capital investment 25.936 - - - - (25.936)

Capital expenditure charged against the General Fund and 31.530 2.529 (0.076) - - (33.983)

HRA balances

Long Term Debtors/Loans - arrangements and repayments - - (0.813) - - 0.813

Adjustments primarily involving the Capital Grants Unapplied

Account:

Application of grants to capital financing transferred to the - - - 17.219 - (17.219)


Adjustments primarily involving the Capital Receipts Reserve:

Use of Capital Receipts to finance new capital expenditure - - 16.048 - - (16.048)

Contribution from the Capital Receipts Reserve to finance the (1.092) - 1.092 - - -

payments to the Government capital receipts pool

Transfer from Deferred Capital Receipts Reserve upon receipt of cash - - (0.002) - - 0.002


Use of the Major Repairs Reserve to finance new - - - - 14.518 (14.518)

capital expenditure

Posting of HRA resources from revenue to the Major Repairs Reserve - 12.711 - - (12.711) -

Adjustments Primarily involving the Financial Instruments

Adjustment Account:

Amount by which finance costs charged to the Comprehensive (51.783) 0.021 - - - 51.762

Income and Expenditure Statement are different from finance .


requirements


Reversal of items relating to retirement benefits debited/credited (107.828) (2.967) - - - 110.795

to the Comprehensive Income and Expenditure Statement

Employer's pensions contributions and direct payments to 50.373 1.661 - - - (52.034)


Adjustments primarily involving the Collection Fund Adjustment

Account:

Amount by which council tax and non-domestic rating income credited (8.266) - - - - 8.266

to Comprehensive Income and Expenditure Statement is different

from council tax and non-domestic rating income calculated for the

year in accordance with statutory requirements

Adjustments primarily involving the Accumulated Absences

Account:

Amount by which officer remuneration charged to Comprehensive 0.367 - - - - (0.367)

Income and Expenditure Statement on an accruals basis is

different from remuneration chargeable in the year in


Total Adjustments (127.389) 8.366 10.402 3.335 1.807 103.479

Total General Fund and HRA Movement

Movement in Usable Reserves

(119.023)


Page 73

Transfers to/from Earmarked Reserves

This note shows amounts set aside from the General Fund and HRA balances in earmarked reserves to provide financing for future expenditure plans and amounts posted back from earmarked reserves to meet General Fund and HRA expenditure in 2019/20:

The two most significant reserves set out above are:

• The Capital reserve (£82.536m) which is funds set aside to finance future investment in assets;

• PFI reserves (£57.960m) which are monies set aside to offset future PFI liabilities.

Other Operating Expenditure

Balance Transfers Transfers Balance at Transfers Transfers Balance at

at 1 April Out In 31 March Out In 31 March

2018 2018/19 2018/19 2019 2019/20 2019/20 2020

£m £m £m £m £m £m £m

Capital earmarked reserve (78.208) 50.457 (60.591) (88.342) 64.691 (58.885) (82.536)

Revenue earmarked reserves:-

Adult Social Care (4.881) 11.328 (10.593) (4.146) 3.613 - (0.533)

Together for Families^ (9.621) 16.717 (14.883) (7.787) 3.512 (1.443) (5.718)

Economic Growth and Development (5.206) 1.568 (0.466) (4.104) 3.092 (2.667) (3.679)

Neighbourhoods (3.776) 0.760 (0.017) (3.033) 1.282 - (1.751)

Customer and Support Services (3.020) 2.337 (2.619) (3.302) 2.367 (0.500) (1.435)

Wellbeing and Public Health (1.516) 0.500 (0.602) (1.618) 0.807 (0.277) (1.088)

Corporate Items (12.618) 8.398 (10.749) (14.969) 8.667 (9.530) (15.832)

Schools (0.558) 0.060 (0.065) (0.563) 0.236 (0.020) (0.347)

Local Authority HRA (3.560) 1.592 (3.000) (4.968) 2.355 (2.308) (4.921)

Joint Committees (2.564) 0.730 - (1.834) 0.438 - (1.396)

PFI Reserves (55.345) 2.770 (6.806) (59.381) 1.944 (0.523) (57.960)

Wave Hub reserve (9.825) 1.000 (0.312) (9.137) 0.907 - (8.230)

Redundancy reserve (9.642) 4.339 - (5.303) 2.108 - (3.195)

Covid-19 Grant reserve - - - - 1.599 (18.153) (16.554)

Other general reserves (12.026) 3.922 (0.204) (8.308) 4.082 (0.250) (4.476)

Total (212.366) 106.478 (110.907) (216.795) 101.700 (94.556) (209.651)

Change of Directorate name from Children, Schools and Families to Together for Families

31 March 31 March

2020 2019

£m £m

Parish Council precepts 24.214 22.108

Payments to the Government Capital Housing Receipts Pool 0.819 1.092

Exceptional transfer of academy school assets - 24.313

(Gains)/losses on the disposal of non-current assets 16.756 0.552

Total 41.789 48.065

Note

10

Note

11


Page 74

Financing and Investment Income and Expenditure

Taxation and Non-specific Grant Income

31 March 31 March

2020 2019

£m £m

Interest payable and similar charges 45.433 48.093

Exceptional LOBO premium on redemption - 53.623

Net interest on the net defined benefit liability/(asset) 32.529 31.162

Interest receivable and similar income (6.959) (7.036)

Other investment income (3.211) (4.810)

Total 67.792 121.032

31 March 31 March

2020 2019

£m £m

Council tax income (322.853) (314.336)

Non-domestic rates income and expenditure (141.456) (158.774)

Non ringfenced government grants (119.204) (79.831)

Capital grants and contributions (18.690) (30.146)

Collection Fund (surplus)/deficit (0.512) 8.266

Total (602.715) (574.821)

Note

12

Note

13


Page 75

Property, Plant and Equipment

Movements on Balances 2019/20 Vehicles, Infrastructure Assets Total

Other Plant, Infra- Tamar Bridge Comm- Under Property, PFI Assets

Council Land and Furniture, structure Toll Bridge unity Con- Plant and Included

Dwellings Buildings Equipment Assets Asset Assets struction Equipment in PPE

£m £m £m £m £m £m £m £m £m

Cost or Valuation

At 1 April 2019 511.455 954.456 272.199 880.101 63.115 34.173 35.686 2,751.185 240.631

Additions 25.137 23.535 10.954 48.190 - 4.058 41.661 153.535 0.242

Accumulated Depreciation and Impairment written (16.633) (9.763) (4.717) - - - - (31.113) (6.272)

out to Gross Carrying Amount after Revaluation

Revaluation increases/(decreases) recognised 5.040 36.836 3.650 - - - - 45.526 7.616

in the Revaluation Reserve

Revaluation increases/(decreases) recognised 4.817 (3.489) - - - - - 1.328 (0.268)

in the surplus/deficit on the Provision of Services

Derecognition - disposals (2.659) (28.280) (26.090) (0.011) - (0.497) - (57.537) (0.342)

Assets reclassified (to)/from Held for Sale - (0.063) - - - - - (0.063) -

Assets reclassified (to)/from Other Categories - 2.741 0.001 - 0.314 - (3.056) - -

Other movements in cost or valuation 0.060 30.825 - - - 0.013 (30.898) - 0.007

At 31 March 2020 527.217 1,006.798 255.997 928.280 63.429 37.747 43.393 2,862.861 241.614

Accumulated Depreciation and Impairment

At 1 April 2019 (12.128) (37.187) (115.331) (215.414) (2.430) (0.332) 0.001 (382.821) (9.212)

Depreciation charge (16.987) (18.398) (15.376) (24.653) (0.528) (0.019) - (75.961) (7.251)

Accumulated Depreciation written out to 16.633 9.763 4.717 - - - - 31.113 6.272

Gross Carrying Amount

Derecognition - disposals - 1.837 16.587 0.008 - - - 18.432 0.028

Assets reclassified to/(from) Held for Sale - - - - - - - - -

Other movements in depreciation and impairment (0.004) 0.002 0.001 - 0.001 - 0.001 0.001 -

At 31 March 2020 (12.486) (43.983) (109.402) (240.059) (2.957) (0.351) 0.002 (409.236) (10.163)

Net Book Value

at 31 March 2020 514.731 962.815 146.595 688.221 60.472 37.396 43.395 2,453.625 231.451

at 1 April 2019 499.327 917.269 156.868 664.687 60.685 33.841 35.687 2,368.364 231.419

Comparative Movements 2018/19 Vehicles, Infrastructure Assets Total

Other Plant, Infra- Tamar Bridge Comm- Under Property, PFI Assets

Council Land and Furniture, structure Toll Bridge unity Con- Plant and Included

Dwellings Buildings Equipment Assets Asset Assets struction Equipment in PPE

£m £m £m £m £m £m £m £m £m

Cost or Valuation

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

Additions 18.652 23.478 12.161 55.248 3.522 3.374 18.432 134.867 0.082

Accumulated Depreciation and Impairment written (16.483) (14.853) (4.670) - - - - (36.006) (7.290)

out to Gross Carrying Amount after Revaluation

Revaluation increases/(decreases) recognised 5.588 56.810 5.800 - - 0.011 - 68.209 (0.840)

in the Revaluation Reserve

Revaluation increases/(decreases) recognised 8.975 (10.297) - - - - - (1.322) (0.751)

in the surplus/deficit on the Provision of Services

Derecognition - disposals (2.503) (28.160) (3.475) (0.010) - - - (34.148) -

Assets reclassified (to)/from Held for Sale - (0.921) - (0.135) - - - (1.056) -

Assets reclassified (to)/from Other Categories - - - - 0.766 - (0.766) - -

Other movements in cost or valuation 0.281 (5.227) (0.002) 12.342 - 0.019 (7.415) (0.002) -

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

Accumulated Depreciation and Impairment

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

Depreciation charge (16.847) (17.649) (16.291) (23.857) (0.526) (0.017) - (75.187) (7.273)

Accumulated Depreciation written out to 16.483 14.853 4.670 - - - - 36.006 7.290

Gross Carrying Amount

Derecognition - disposals 0.001 1.044 2.863 0.010 - - - 3.918 -

Assets reclassified to/(from) Other Categories - 0.018 - - - - - 0.018 -

Other movements in depreciation and impairment - (0.001) 0.082 - - - 0.001 0.082 -

-

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

Net Book Value

at 31 March 2019 499.327 917.269 156.868 664.687 60.685 33.841 35.687 2,368.364 231.419

at 1 April 2018 485.180 898.174 155.730 621.089 56.923 30.454 25.435 2,272.985 240.201

Note

14


Page 76

Depreciation The following average useful lives have been used in the calculation of depreciation:

• Council dwellings: 30 years • Other land and buildings: 20-60 years • Vehicles, plant, furniture and equipment: 5-15 years • Infrastructure: 35 years • Infrastructure Wave Hub: 5 years • Infrastructure (Tamar Bridge Toll Bridge): 120 years

Effects of Changes in Estimates In 2019/20 the Council made no changes to its accounting estimates for property, plant and equipment. Significant Assets In 2016/17 the Cornwall Energy Recovery Centre (CERC) became operational and was transferred from assets under construction to other land and buildings and vehicles, plant furniture and equipment. Its net book value at the end of 2019/20 was £151.621m (£154.140m 2018/19), split into £39.483m (£38.936m 2018/19) other land and buildings and £112.137m (£113.204m 2018/19) vehicles, plant and equipment. This asset has been constructed as part of the Waste PFI scheme, details can be found in note 37. Capital Commitments At the year end, the Council had significant commitments under capital contracts. The following table lists all those schemes that have committed expenditure in excess of £5.000m for 2020/21, which also have capital contracts totalling £5.000m or more in place:


Page 77

Revaluations The Council carries out a rolling programme that ensures that all property, plant and equipment required to be measured at current value is revalued at least every five years. Vehicles, plant, furniture and equipment assets that are of low value and/or short lives are currently not valued as their historic cost is used as a proxy for current value, however, as the CERC equipment asset is significant in value and has a longer life it is valued yearly. The

2019/20 2018/19

£m £m

Expenditure approved in capital programme 1,054.010 1,001.752

Expenditure committed for the following year 471.135 380.993

Schemes committing over £5m spend in year with capital contract

commitments of over £5m in place:

Housing Revenue Account Works 18.569 16.831

St Austell to A30 Link Road 30.903 8.458

Superfast Broadband Phase 2 2.662 6.518

Waste Contract 33.051 -

Local Authority New Build Schemes 52.889 10.931

Schemes committing spend in year with no capital contract

commitments or commitments under £5m in place:

Vehicle and Plant Replacement (Fire) 2.823 7.963

HIP - Affordable Housing (CCFP3) 10.072 0.281

Hayle Harbour Development 15.593 6.717

Basic Need 8.171 10.742

CTO Fleet Transfer - 12.000

Spaceport Cornwall 6.021 -

St Austell Resilent Regeneration (StARR) - Delivery ESIF 7.484 0.826

Structual Maintenance of Carriageways (inc LTP3) 34.157 31.588

Purchase of Land at Langarth Farm 5.673 0.110

Langarth Garden Village 9.952 68.174

HDP Development - Maudlin Farm 7.061 0.688

HDP - Bodmin Phase 2 10.907 0.984

Saints Trail - Cycling, Safety and Integration Schemes 15.187 1.888

Cornwall Investment Programme 22.908 26.853

Renewables & Wind Power Opportunities (Phase 1) - 8.557

Tamar Bridge and Torpoint Ferry Joint Committee 15.422 5.382

Private Sector Housing 7.577 7.403

Private Rented Accommodation 33.300 19.650

Total 350.382 252.544

Schemes with balances under £5m with no capital commitments over £5m in 2019/20 have

been removed from the comparator.


Page 78

Wave Hub asset is also assessed yearly for impairment as it is also a significant asset. All valuations were overseen internally by the Council’s Property Systems and Assurance Manager. Valuations of land and buildings were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institute of Chartered Surveyors. The significant assumptions applied to revaluations have been listed below and the detailed assumptions are set out in the Council’s “Instructions to Valuers” and “Terms of Engagement” documents:

• For specialised properties it is assumed that there is no active market but that the land element could be sold at its market value. It is assumed that the building costs would be in line with published indices and asset lives are in line with those given in the depreciation note;

• For council dwellings the assumption is that the Beacon assets are typical of their asset class and that all such properties will continue to be let for social housing purposes;

• For other property, plant and equipment the assumption is that local market conditions provide an accurate guide as to appropriate valuation;

• Valuations of land and buildings generally exclude moveable furniture and equipment

but include fixed plant and machinery;

• No structural surveys or internal inspections are carried out and it is assumed that the premises are in a reasonable state of repair;

• No allowance is made for costs of disposal;

• No allowance is made for rights, obligations or liabilities arising from the Defective

Premises Act 1972 or any effect of the Environmental Protection Act 1990. History of revaluations:

Infra-

Vehicles, structure Assets

Other Plant, Infra- Tamar Bridge Comm- Under

Council Land and Furniture, structure Toll Bridge unity Con-

Dwellings Buildings Equipment Assets Asset Assets struction Total

£m £m £m £m £m £m £m £m

Carried at historical cost - 53.475 34.458 688.221 - 37.396 43.395 856.945

Valued at current value as at:

31 March 2020 514.731 297.088 112.137 - - - - 923.956

31 March 2019 - 203.271 - - - - - 203.271

31 March 2018 - 193.667 - - - - - 193.667

31 March 2017 - 158.437 - - - - - 158.437

31 March 2016 - 55.763 - - - - - 55.763

31 March 2015 - 1.114 - - 60.472 - - 61.586

Net Book Value 514.731 962.815 146.595 688.221 60.472 37.396 43.395 2,453.625


Page 79

Financial Instruments

Categories of Financial Instrument

The following categories of financial instruments are carried in the Balance Sheet:

Interest due to be paid or received within the next 12 months in respect of both long- and short-term loans and investments is shown within the Current columns in the table above. Interest due at maturity of long-term investments is shown within the long-term columns in the table above. Instruments which have an option for premature redemption have been

31 March

2020

31 March

2019

31 March

2020

31 March

2019

31 March

2020

31 March

2019

£m £m £m £m £m £m

Financial Assets

Investments

Amortised cost

Treasury Investments 96.500 136.500 159.871 122.463 256.371 258.963

Local authority bonds 5.095 5.154 - - 5.095 5.154

Fair value through profit or loss

Treasury Investments 0.922 1.204 - - 0.922 1.204

Total Investments 102.517 142.858 159.871 122.463 262.388 265.321

Debtors

Amortised cost

Debtors 57.318 33.017 - - 57.318 33.017

Financial assets carried at contract amounts - - 107.925 61.194 107.925 61.194

Statutory debtors~ - - 31.703 29.367 31.703 29.367

Total included in Debtors 57.318 33.017 139.628 90.561 196.946 123.578

Cash and cash equivalents

Amortised cost

Short Term cash investments - - 139.448 80.516 139.448 80.516

Other bank balances - - (40.381) (16.203) (40.381) (16.203)

Total Cash and cash equivalents - - 99.067 64.313 99.067 64.313


Borrowings

Amortised cost

Financial liabilities at amortised cost - treasury (690.402) (688.547) (235.627) (107.661) (926.029) (796.208)

Total included in borrowings (690.402) (688.547) (235.627) (107.661) (926.029) (796.208)

Liabilities

Amortised cost

PFI liability (105.609) (111.180) (5.571) (3.393) (111.180) (114.573)

Other liabilities - leases (2.093) (2.054) - - (2.093) (2.054)

Total Liabilities (107.702) (113.234) (5.571) (3.393) (113.273) (116.627)

Creditors

Amortised cost

Financial liabilities at amortised cost - creditors (2.752) (2.433) - - (2.752) (2.433)

Financial liabilities carried at contract amounts - - (93.320) (106.216) (93.320) (106.216)

Statutory creditors~ - - (14.892) (15.814) (14.892) (15.814)

Leases - - (0.066) (2.141) (0.066) (2.141)

Total Creditors (2.752) (2.433) (108.278) (124.171) (111.030) (126.604)

~ the statutory debtors and creditors amounts are not financial instruments however have been included to match

to the balance sheet

Long-term Current Total

Note

15


Page 80

categorised according to their final maturity date, rather than assumptions being made regarding the likelihood for premature redemption.

The Council has no material soft loans to disclose for 2019/20.

Financial Instruments Designated at Fair Value through Profit or Loss

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

Income, Expense, Gains and Losses

Fair Value of Financial Assets and Financial Liabilities

Financial liabilities, financial assets represented by treasury investments and long-term debtors and creditors are carried in the Balance Sheet at amortised cost. Their fair values have been determined using a variety of techniques in order to reflect the true fair value as accurately as possible. Predominantly, valuation techniques have been employed with reference to prices quoted in an active market. In respect of some complex instruments, the counterparty to the trade has provided values. For instruments with no optionality, the present value of the cash flows has been used to determine the fair value.

The following assumptions should be noted:

• Where an instrument will mature in the next 12 months, the carrying amount is assumed to approximate fair value;

• No premature repayments have been assumed;

Income, Expense, Gains and Losses

Surplus or Other Surplus or Other

Deficit on the Comprehensive Deficit on the Comprehensive

Provision Income and Provision Income and

of Services Expenditure of Services Expenditure

£m £m £m £m

Net (gain)/losses on:

Financial assets measured at - - - 1.705

amortised cost

Financial liabilities measured at - - 53.623 -

amortised cost

Total net (gains)/losses - - 53.623 1.705

Interest revenue:

Financial assets measured at (6.959) - (7.033) -

amortised cost

Total interest revenue (6.959) - (7.033) -

Interest Expense 45.433 - 48.093 -

2019/20 2018/19


Page 81

• The fair value of trade and other receivables is taken to be the invoiced or billed amount;

• No assumptions about credit loss have been made;

• For loans from the Public Works Loan Board (PWLB) transfer values (new loan rates) from the PWLB have been applied to provide the fair value under PWLB debt redemption procedures;

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

The £256.371m treasury investments in banks and building societies and other local authorities are all held at fixed rates and due to the prevailing interest rates being higher the fair value in the table above is also higher than the carrying amount. For all other investments the fair value is represented by its current value.

The £926.029m carrying amount for financial instruments – treasury is all at fixed interest rates. Due to the prevailing interest rates being lower than these fixed rates as at the balance sheet date the fair value reflected in the table above is higher. The Council has used a transfer value for the value of financial liabilities – treasury. The Council has also calculated an exit price fair value of (£1,711.634m), which is calculated using early repayments discount rates. The Council has no contractual obligation to pay these penalty costs and would not incur any additional cost if the loans run to their planned maturity date.

31 March 2020

Carrying

Amount

Fair Value Carrying

Amount

Fair Value

£m £m £m £m

Financial Assets

Treasury Investments 256.371 259.757 258.963 271.841

Debtors 57.318 57.318 33.017 33.017

31 March 2019

31 March 2020

Carrying

Amount

Fair Value Carrying

Amount

Fair Value

£m £m £m £m


Fixed interest rate PWLB (413.632) (496.396) (374.185) (481.335)

Fixed interest rate LOBO's (272.995) (419.434) (274.100) (440.619)

Financial liabilities held at amortised cost - treasury other (239.402) (252.613) (147.923) (160.831)

Financial liabilities held at amortised cost - treasury (926.029) (1,168.443) (796.208) (1,082.785)

PFI liability (111.180) (264.718) (114.573) (274.309)

Other liabilities - leases (2.093) (2.093) (2.054) (2.054)

Financial liabilities at amortised cost - creditors (2.752) (2.752) (2.433) (2.433)

31 March 2019


Page 82

Valuation of Financial Instruments carried at Fair Value

The valuation of financial instruments is classified into three levels, according to the quality and reliability of information used to determine fair values. Level 1 - where fair values are derived from unadjusted quoted prices in active markets for identical assets or liabilities (quoted equities, quoted fixed securities, quoted index linked securities and unit trusts). Listed investments shown at bid prices. The bid value of the investment is based on the market quotation of the relevant stock exchange. Level 2 - where market prices are not available, for example, where an instrument is traded in a market that is not considered to be active or where the valuation techniques are used to determine fair value and where these techniques use inputs that are based significantly on observable market data. Level 3 - where at least one input that could have a significant effect on the instrument's valuation is not based on observable market data. Such instruments would include unquoted equity investments and hedge funds, neither of which the Council currently invests in. The table below provides an analysis of the financial assets and liabilities grouped into the level at which fair value is observable.

Financial Instruments at Fair Value

The fair value hierarchy for financial assets and liabilities that are not measured at fair value in the balance sheet are as follows:

The Zero to Par Loan is a particular form of treasury instrument where the interest is charged to the CIES annually but is not physically paid to the lender until the loan reaches maturity.

Financial assets and liabilities measured at fair value

Input Level

in Fair Value Valuation As at As at

hierarchy Technique 31/03/2020 31/03/2019

Fair Value through Profit or Loss £m £m

Investments

Treasury Investments Level 2 Prevailing benchmark rates 259.757 271.841

Ranging from 0.08% to 0.79%

Borrowings

PWLB Level 2 New borrowing discount rates ^ (496.396) (481.335)


Lenders Option Borrowers Option (LOBO) Level 2 New market loan discount rates ^ (419.434) (439.507)


Zero to Par Loan Level 2 New market loan discount rates ^ (56.138) (54.202)

Discount rate 2.36%

Short Term Level 2 New market loan discount rates ^ (196.475) (107.741)


Long Term Liabilities

PFI Long Term Liability Level 3 PWLB annuity discount rate (264.718) (274.309)


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


Page 83

There were no transfers between input levels during the year and there has been no change in the valuation techniques used during the year. The rates for each category will vary due to the nature, age and length of the investments and borrowings.

Inventories

Debtors

Debtors For Local Taxation

The past due but not impaired amount for local taxation (council tax and non-domestic rates) can be analysed by age as follows:

2019/20 2018/19 2019/20 2018/19 2019/20 2018/19 2019/20 2018/19 2019/20 2018/19 2019/20 2018/19 2019/20 2018/19

£m £m £m £m £m £m £m £m £m £m £m £m £m £m

Balance outstanding

at start of year 0.345 0.144 0.044 0.033 42.519 10.459 1.124 0.626 0.346 0.293 (0.079) (0.079) 44.299 11.476

Purchases 0.263 0.436 0.222 0.296 4.778 32.060 2.088 2.573 0.251 0.371 - - 7.602 35.736

Recognised as an expense (0.176) (0.235) (0.219) (0.285) (21.533) - (2.019) (2.075) (0.336) (0.318) - - (24.283) (2.913)

in the year

Written off balances - - - - - - (0.001) - - - - - (0.001) -

Balance outstanding at

year end0.432 0.345 0.047 0.044 25.764 42.519 1.192 1.124 0.261 0.346 (0.079) (0.079) 27.617 44.299

*The Housing Development Programme is an initiative by the Council to acquire land and build houses to increase the supply of affordable housing in Cornw all. As the intention

is to sell these houses (potentially to a Limited Liability Partnership) they are carried in the Council’s accounts as Inventory items.

Total

Provision for

Obsolete StockSalt Fuel Other Edgcumbe

TBTF and Mount

Programme*

Housing Development

31 March 31 March 31 March 31 March

2020 2019 2020 2019

£m £m £m £m

Trade Receivables 29.516 23.660 - -

Prepayments 32.678 5.705 - -

Debtors for Local Taxation 29.616 26.574 - -

Other Receivable Amounts 47.818 34.622 57.318 33.017

Total 139.628 90.561 57.318 33.017

Current Long Term


2020 2019 2020 2019

£m £m £m £m

Less than three months - - - -

Three to six months - - - -

Six months to one year 9.284 8.192 3.638 3.282

More than one year 12.513 11.225 4.181 3.875

21.797 19.417 7.819 7.157

A bad debt provision of £17.003m Council Tax and £4.188m NNDR has been provided for to offset the debt.

Council Tax NNDR

Note

17

Note

18

Note

16


Page 84

Cash and Cash Equivalents

Creditors

Provisions

Provisions are required for any financial liabilities or losses which are likely or certain to be incurred but where the amounts or the dates on which they will arise are uncertain.

All provisions are charged to the appropriate service and can be used only for the purpose for which they were established, except where a review to determine the appropriateness of the level of the charge and the balance of the provision requires a change.

31 March 31 March

2020 2019

£m £m

Cash held by the Council 1.720 1.592

Overdraft held by the Council (0.012) (4.857)

Bank current accounts asset 6.595 7.924

Bank current accounts liability (49.426) (22.564)

Short-term deposits 140.190 82.218

Total Cash and Cash Equivalents 99.067 64.313


2020 2019 2020 2018

£m £m £m £m

Trade Payables (10.772) (13.329) - -

Receipts in Advance (12.025) (13.346) - -

Other Payables (85.481) (97.496) (2.752) (2.433)

Total (108.278) (124.171) (2.752) (2.433)

Long TermCurrent

Closed

Landfill

Sites

National

Non

Domestic

Rates

Appeals

Other Long

Term

Provisions

Total Long

Term

Provisions

Total Short

Term

Provisions

Total

Provisions

£m £m £m £m £m £m

Balance as at 1 April 2019 (8.880) (27.100) (3.327) (39.307) (2.732) (42.039)

Additional provisions made in year - - (0.354) (0.354) (0.945) (1.299)

Amounts used in year 0.171 0.400 - 0.571 1.743 2.314

Balance as at 31 March 2020 (8.709) (26.700) (3.681) (39.090) (1.934) (41.024)

Note

19

Note

20

Note

21


Page 85

Closed Landfill Sites

The Closed Landfill Sites provision reflects the costs of decommissioning, restoration and after care costs of sites owned by the Council, the full costs of which are uncertain as at the balance sheet date.

National Non Domestic Rates Appeals (NNDR)

The provision is made in the Collection Fund for the estimated effect of outstanding appeals against rateable values and historical success rates in Cornwall. None of the other provisions were individually significant at 31 March 2020.

Contingent Liabilities

A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Currently, there are no contingent liabilities.

Unusable Reserves

Revaluation Reserve

The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its property, plant and equipment and intangible assets. The balance is reduced when assets with accumulated gains are:

• Revalued downwards or impaired and the gains are lost;

• Used in the provision of services and the gains are consumed through depreciation;

• Disposed of and the gains are realised.

The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the CAA.

31 March 31 March

2020 2019

£m £m

Revaluation Reserve (513.595) (485.581)

Capital Adjustment Account (935.110) (952.483)

Financial Instruments Adjustment Account 69.328 71.207

Deferred Capital Receipts Reserve (1.192) (1.194)

Pensions Reserve 1,027.674 1,322.414

Collection Fund Adjustment Account (9.435) (8.923)

Accumulated Absences Account 3.968 2.801

Total Unusable Reserves (358.362) (51.759)

Note

23

Note

22


Page 86


The CAA absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provision. The account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the CIES (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement.

The Account contains accumulated gains and losses on investment properties and gains recognised on donated assets that have yet to be consumed by the Council.

The Account also contains revaluation gains accumulated on property, plant and equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains.

Note 9 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.


Page 87

Capital Adjustment Account 2018/19

£m £m £m

Balance at 1 April (952.483) (925.521)

Reversal of items relating to capital expenditure debited

or credited to the Comprehensive Income and Expenditure

Statement:

Charges for depreciation and impairment of non-current 75.961 75.187

assets

Revaluation losses on Property, Plant and Equipment (1.328) 1.322

Amortisation of intangible assets 0.999 0.95

Revenue expenditure funded from capital under statute 41.657 46.957

Amounts of non-current assets written off on disposal or sale 39.409 30.748

as part of the (gain)/loss on disposal to the Comprehensive

Income and Expenditure Statement

156.698 155.164

Adjusting amounts written out of the Revaluation Reserve (17.512) (13.096)

Net written out amount of the cost of non-current assets 139.186 142.068

consumed in the year

Capital financing applied in the year:

Use of the Capital Receipts Reserve to finance new capital (19.984) (16.048)

expenditure

Use of the Major Repairs Reserve to finance new capital (15.657) (14.518)

expenditure

Capital grants and contributions credited to the (38.183) (63.218)

Comprehensive Income and Expenditure Statement that

have been applied to capital financing

Application of grants to capital financing from the Capital (4.938) (17.219)

Grants Unapplied Account

Statutory provision for the financing of capital investment (24.564) (25.936)

charged against the General Fund and HRA balances

Capital expenditure charged against the General Fund (26.097) (33.983)

and HRA balances

Other adjustments 2.779 1.079

(126.644) (169.843)

Repayments of Long term debtors and loan agreements 4.831 0.813

Balance at 31 March (935.110) (952.483)

2019/20


Page 88

Financial Instruments Adjustment Account

The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. The Council uses the account to manage premiums paid on early redemption of loans. Premiums are debited to the CIES when they are incurred but reversed out of the General Fund balance to the account in the MIRS. Over time, the expense is posted back to the General Fund in accordance with statutory arrangements for spreading the burden on council tax. Discounts received have the opposite entries. In the Council’s case, this period is the unexpired term that was outstanding on the loans when they were redeemed. As a result, for the LOBO premium the balance on the account as at 31 March 2020 will be charged to the General Fund over the next 38 and 49 years.

Pensions Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post-employment benefits in the CIES as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to pension funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangement will ensure that funding will have been set aside by the time the benefits come to be paid.

Financial Instruments Adjustment Account 2018/19

£m £m £m

Balance at 1 April 71.207 19.445

Premiums incurred in the year and charged to the - 53.623


Proportion of premiums incurred in previous financial years (1.879) (1.861)

to be charged against the General Fund balance in


Amount by which finance costs charged to the Comprehensive (1.879) 51.762

Income and Expenditure Statement are different from finance


requirements

Balance at 31 March 69.328 71.207

2019/20


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Cash Flow Statement – Operating Activities

The cash flows for operating activities include the following items:

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

Pensions Reserve 2019/20 2018/19

£m £m

Balance at 1 April 1,322.414 1,143.088

Opening balance adjustment in year 10.530 -

Remeasurements of the net defined benefit liability/(asset) (364.396) 120.565

Reversal of items relating to retirement benefits debited or credited to 113.273 110.795

the (Surplus) or deficit on the provision of services in the Comprehensive

Income and Expenditure Statement

Employer's pensions contributions and direct payments to (54.147) (52.034)


Balance at 31 March 1,027.674 1,322.414

2019/20 2018/19

£m £m

Interest received (7.611) (7.350)

Interest paid 43.599 45.992

Dividends received (2.457) (2.059)

Net cash flows from operating activities 33.531 36.583

2019/20 2018/19

£m £m

Depreciation and impairment (75.961) (75.187)

Downward valuations 1.328 (1.322)

Amortisation (0.999) (0.950)

Adjustment for movements in fair value of investments classified (0.282) (0.316)

as Fair Value through Profit & Loss a/c

Losses or Gains on derecognition of loans & advances in year (2.663) (1.909)

Adjustments for effective interest rates (1.907) (1.817)

Increase/(decrease) in interest creditors 0.014 (0.325)

Increase/(decrease) in creditors (35.569) 5.934

Increase/(decrease) in interest and dividend debtors (0.215) 0.368

Increase/(decrease) in debtors 42.091 (7.543)

Increase/(decrease) in inventories (16.682) 32.823

Movement in pension liability (59.126) (58.761)

Unwinding of discount on Deferred Receipts - 0.017

Contributions to/(from) provisions 1.015 0.563

Carrying amount of non-current assets and non-current assets (39.409) (30.748)

held for sale, sold or de-recognised

Adjustment to net cash flows from operating activities (188.365) (139.173)

Note

24


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

Cash Flow Statement – Investing Activities

Cash Flow Statement – Financing Activities

2019/20 2018/19

£m £m

Capital grants credited to (surplus)/deficit on the provision 55.519 69.314

of services

Proceeds from the sale of property, plant and equipment, 22.654 5.847

investment property and intangible assets

Adjustment to net cash flows from operating activities 78.173 75.161

2019/20 2018/19

£m £m

Purchase of property, plant and equipment, investment property and 167.748 137.892

intangible assets

Purchase of short-term and long-term investments 307.700 110.000

Other payments for investing activities 35.940 10.043

Proceeds from the sale of property, plant and equipment, investment (22.656) (5.849)

property and intangible assets

Proceeds from short-term and long-term investments (309.700) (170.000)

Capital grants received (6.282) (64.678)

Loan repayments received (55.360) (4.374)

Net cash flows from investing activities 117.390 13.034

2019/20 2018/19

£m £m

Cash receipts of short and long-term borrowing (1,428.424) (1,042.558)

Other (receipts)/payments from financing activities 0.017 1.262

Cash payments for the reduction of the outstanding liabilities relating 5.500 6.597

to finance leases and on-balance sheet PFI contracts

Repayments of short and long-term borrowing 1,300.788 976.997

Net cash flows from financing activities (122.119) (57.702)

Note

25

Note

26


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Cash Flow Statement – Reconciliation of Liabilities arising from Financing

Activities

Pooled Budgets

The Council has entered into three pooled budget arrangements with the Kernow Clinical Commissioning Group (KCCG), as listed below:

• Integrating Community Equipment Services, where the objective is to provide a pool for the effective procurement of health and social care equipment in Cornwall;

• Carers’ Pooled Budget, a joint committee to support carers in Cornwall. This budget supports the joint commissioning of support and services for carers in line with the joint Strategic Needs Assessment and Cornwall Carers Strategy;

Further details of the above two have not been disclosed as they are immaterial.

• Mental Health Pooled Fund, where the objective is to provide a fully integrated service to mental health clients. Details are set out in the following table:

The Council has entered into a Better Care Fund (BCF) Agreement with the KCCG from 1 April 2016. This is an agreement under section 75 of the NHS Act 2006. The BCF is an overarching agreement consisting of a number of separate pooled and aligned budgets – this note deals with the pooled budgets only. Although the section 75 agreement is effective for

2018/19

31st March

Financing

cash flows

Other non-

cash

changes

2019/20

31st March

£m £m £m £m

Long-term borrowings (688.547) - (1.855) (690.402)

Short-term borrowings (107.661) (128.026) 0.060 (235.627)

Lease Liabilities (2.054) - (0.039) (2.093)

On balance sheet PFI liabilities (114.573) - 3.393 (111.180)

Total liabilities from financing activities (912.835) (128.026) 1.559 (1,039.302)

Mental Health Pooled Fund

Funding provided to the pooled budget: - -

Cornwall Council - Adult Care and Support (7.025) (6.866)

Kernow Clinical Commissioning Group (38.816) (37.237)

(45.841) (44.103)

Expenditure met from the pooled budget:

Cornwall Council - Adult Care and Support 6.968 6.866

Kernow Clinical Commissioning Group 38.760 37.243

45.728 44.109

Net (Surplus) or deficit arising on the pooled budget during the year (0.113) 0.006

2018/19

£m £m

2019/20

Note

28

Note

27


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2019/20, the BCF includes funds passed to the Council under section 256 of the NHS Act 2006 by NHS England. In addition to the Mental Health Pooled Fund (above) for 2019/20 these funds were allocated as budgeted contributions as follows:

• Contribution of £1.714m to the Integrating Community Equipment Services pooled budget with KCCG totalling £5.620m

• Contribution of £0.649m to Carers’ Pooled Budget with KCCG totalling £2.101m This expenditure is included within the net cost of services in the CIES. The Council was the host of two of the three pooled budgets for 2019/20 with the KCCG hosting the Mental Health Pooled Fund.

Members’ Allowances

The Council paid the following amounts to members of the Council during the year:

2019/20 2018/19

£m £m

Remuneration paid during the year:

Allowances 2.150 2.094

Expenses 0.004 0.003

Travel 0.106 0.103

Total 2.260 2.200

Note

29


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Officers’ Remuneration

The remuneration paid to the Council’s senior employees is detailed below. During the year the Directorate for Children, Families was renamed as the Directorate for Together for Families.

The Council’s other employees receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) were paid the following amounts:

Salary,

Fees and

Allowances Bonuses

Expense

Allowances

Compensation

for loss of

office

Pension

Contribution Total

£ £ £ £ £ £

Chief Executive - Kate Kennally 2019/20 180,423 - - - 31,574 211,997

2018/19 176,885 - - - 30,955 207,840

Strategic Director, Adult Social Care - 2019/20 155,583 - 1,257 - 27,227 184,067

Helen Charlesworth-May 2018/19 148,429 - 729 - 25,975 175,133

Strategic Director, Together for 2019/20 116,687 - 2,361 - 20,420 139,468

Families 1 2018/19 152,670 - 2,662 - 26,717 182,049

Strategic Director, Together for 2019/20 54,516 - 6,165 - 9,540 70,221

Families 1 2018/19 - - - - - -

Chief Operating Officer 2019/20 109,001 - - - 18,872 127,873

and Section 151 Officer 2 2018/19 27,818 - - - 4,868 32,686

Chief Operating Officer 2019/20 85,259 - - - - 85,259

and Section 151 Officer (Interim) 2 2018/19 - - - - - -

Service Director, Resources 2019/20 - - - - - -

and Section 151 Officer 3 2018/19 76,103 - - - 13,318 89,421

Acting Service Director, Wellbeing and 2019/20 138,923 - 5,087 - - 144,010

Public Health 4 2018/19 78,883 - 4,885 - 12,603 96,371

Strategic Director, Neighbourhoods 2019/20 149,342 - 851 - 26,135 176,328

2018/19 151,728 - 900 - 26,552 179,180

Strategic Director, Economic Growth 2019/20 125,017 - 297 - (1,535) 123,779

and Development 5 2018/19 126,766 - 1,525 - 12,647 140,938

Strategic Commercial Growth Advisor 6 2019/20 - - 543 - - 543

2018/19 82,173 - 3,951 - 14,380 100,504

Service Director, Assurance 2019/20 101,235 - - - 17,716 118,951

and Monitoring Officer 2018/19 100,349 - 6,594 - 17,561 124,504

Service Director (Resilient Cornwall) 2019/20 54,569 - - - - 54,569

and Chief Fire Officer 7 2018/19 106,998 - - - - 106,998

Service Director (Resilient Cornwall) 2019/20 68,973 - 3 - - 68,976

and Chief Fire Officer (Interim) 7 2018/19 - - - - - -

Service Director Finance & Commercial 2019/20 233,585 - - - - 233,585

and Deputy Section 151 Officer (Interim) - 2018/19 20,308 - - - - 20,308

Richard Williams

Head of Financial Planning & Business 2019/20 200,176 - - - - 200,176

Intelligence (Interim) - Clare Williams 2018/19 11,905 - - - - 11,905

Notes1 Strategic Director for Together for Families - The retirement of the previous Director occurred on 31/12/19, with the appointment of a new Director being made from 31/10/19.2 Chief Operating Officer and Section 151 Officer - Officer resigned from position with effect from 28/2/20, with an Interim appointment being made from 1/12/19.3 Service Director for Resources and Section 151 Officer 18/19 - joint role held until formally appointed to Chief Operating Officer and Section 151 Officer

on 1/1/19. Equivalent figures for 19/20 not applicable.4 Acting Service Director for Wellbeing and Public Health - secondment facility arranged with Devon County Council, utilising the services of the Director

and Deputy Director of Public Health originally for a 12mth period from 1/10/18 but subsequently extended to 31/3/20.5 18/19: Directorship changed during the year on 10/9/18, when an Interim appointment was made. 19/20: formal appointment of Director made. 6 The Strategic Commercial Growth Adviser left the Council on 31/03/2019. No further appointment has been made.7 The Service Director (Resilient Cornwall) and Chief Fire Officer resigned form post on 30/9/19. An interim appointment was made on 1/9/19.

Note

30


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The table shows the total split between:

• School staff – includes teachers and other school-based staff;

• Other staff – other Council employees.

Note that, consistent with the approach taken in prior years, this table includes senior employees also included in the previous table. It does not include employees of Joint Committees. The number of exit packages with total cost per band and total cost of the compulsory and other redundancies are set out in the following table:

Remuneration Bands (£):

2019/20 2018/19

School Other School Other

From To Staff Staff Total Staff Staff Total

50,000 54,999 26 96 122 20 67 87

55,000 59,999 14 51 65 14 48 62

60,000 64,999 8 25 33 8 19 27

65,000 69,999 5 21 26 8 29 37

70,000 74,999 6 15 21 1 6 7

75,000 79,999 - 4 4 - 4 4

80,000 84,999 - 7 7 - 6 6

85,000 89,999 - 2 2 1 1 2

90,000 94,999 2 3 5 2 9 11

95,000 99,999 - 7 7 1 1 2

100,000 104,999 1 3 4 - 3 3

105,000 109,999 - 2 2 - 1 1

110,000 114,999 - - - - 1 1

115,000 119,999 1 1 - - -

125,000 129,999 - 3 3 - - -

145,000 149,999 - 1 1 - 2 2

150,000 154,999 - - - - 2 2

155,000 159,999 - 1 1 - - -

175,000 179,999 - - - - 2 2

180,000 184,999 - 1 1 - - -

62 243 305 55 201 256

Number of Employees


Page 95

External Audit Costs

The Council has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections and to non-audit services provided by the Council’s external auditors.

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

(a)

Exit package

cost band

(including special

payments)

2019/20 2018/19 2019/20 2018/19 2019/20 2018/19 2019/20 2018/19

£0 - £20,000 20 25 33 42 53 67 0.373 0.625

£20,001 - £40,000 3 5 15 28 18 33 0.485 1.102

£40,001 - £60,000 3 1 2 6 5 7 0.246 0.422

£60,001 - £80,000 - 1 5 2 5 3 0.351 0.212

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

£100,001 - £150,000 2 1 1 3 3 4 0.378 0.510

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

Total cost included

in bandings and CIES 28 34 56 86 84 120 1.833 3.869

(b) + (c)

compulsory departures agreed exit packages by exit packages

redundancies cost band in each band

Number of Number of other Total number of Total cost of

(b) (c) (d) (e)

2019/20 2018/19

£m £m

Fees payable with regard to external audit services carried out by 0.161 0.162

the appointed auditor for the year

Fees payable for the certification of grant claims and returns (0.004) 0.024

for the year

Fees in respect of other services provided during the year 0.019 0.028

Rebate received during the year for prior year audits from PSAA^ (0.021) -

Fees in respect of extra audit work as a result of an objection 0.023 0.035

Total 0.178 0.249

PSAA - Public Sector Audit Appointments

Note

31


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Dedicated Schools Grant

The Council’s expenditure on schools is funded primarily by grant monies provided by the Department for Education, through the Dedicated Schools Grant (DSG). DSG is ring fenced and can only be applied to meet expenditure properly included in the Schools Budget. The Schools Budget includes elements for a range of educational services provided on an authority-wide basis and for the Individual School’s Budget, which is divided into a budget share for each maintained school.

Details of the deployment of DSG receivable for 2019/20 are as follows: -

Central

Expenditure

Individual

Schools

Budgets

(ISB) Total

£m £m £m

Final DSG for 2019/20 before academy recoupment (76.066) (308.155) (384.221)

Academy figure recouped for 2019/20 11.653 243.089 254.742

Total DSG after academy recoupment 2019/20 (64.413) (65.066) (129.479)

Plus: Brought forward from 2018/19 (2.043) - (2.043)

Agreed initial budgeted distribution in 2019/20 (66.456) (65.066) (131.522)

In-year adjustments (2.082) 1.541 (0.541)

Final budget distribution for 2019/20 (68.538) (63.525) (132.063)

Less: Actual central expenditure 68.856 - 68.856

Less Actual ISB deployed to schools - 63.417 63.417

Carry-forward (Surplus)/Deficit to 2020/21 0.318 (0.108) 0.210

2019/20

Note

32


Page 97

Grant Income

The Council credited the following grants, contributions and donations to the CIES in 2019/20:

2019/20 2018/19

£m £m

Credited to Taxation and Non-specific Grant Income

Private Finance Initiative (PFI) Grant (16.429) (16.429)

Housing Benefit and Council Tax Administration Grant (1.713) (1.745)

Learning Disability and Health Reform Grant (0.759) (0.748)

New Homes Bonus Scheme Grant (11.706) (11.988)

Small Business Rate Relief Grant (30.910) (28.667)

Business Rates Cap Compensation (5.131) (3.592)

Bus Service Operators Grant (0.773) (0.773)

Improved Better Care Fund (16.903) (9.080)

Adult Social Care Support Grant (7.941) (1.746)

COVID-19 Government Grants (18.153) -

Other Non Specific Grants (8.786) (5.063)

Total (119.204) (79.831)

Credited to Services

Together for Families

Dedicated Schools Grant (132.063) (135.700)

Sixth Forms Funding (1.745) (2.792)

Skills Funding Agency Grant (3.135) (3.073)

Pupil Premium Grant (4.361) (4.778)

Troubled Families Grant (1.982) (2.275)

Special Education Needs (SEN) Grant (0.818) (0.925)

School PE and Sport Grant (0.955) (1.089)

Big Lottery Fund HeadStart Grant (2.459) (2.744)

Better Care Fund (3.944) (7.940)

Economic Growth and Development

Ministry of Housing, Communities and Local Government (2.217) (2.457)

Department for Transport Other Non Specific Grants (0.323) (0.372)

Local Authority HRA

Rent Rebates Granted to HRA Tenants: subsidy (17.408) (19.256)

Other Housing Services

Mandatory Rent Allowances: subsidy (114.728) (135.445)

Mandatory Rent Rebates outside HRA: subsidy (1.345) (1.345)

Wellbeing and Public Health

Public Health Grant (24.789) (25.461)

Other Revenue Grants (18.626) (19.385)

REFCUS Grant Funding (29.131) (46.957)

Total (360.029) (411.994)

Note

33


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The Council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the giver if these conditions are not met. The balances at the year-end are as follows:

Long-term Liabilities

Related Parties

The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council.

Central Government

Central government has effective control over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants, and prescribes the terms of many of the transactions that the Council has with other parties (e.g. council tax bills, housing benefits). Grants received from government departments are set out in the subjective analysis in Note 8 Expenditure and Funding Analysed by Nature. Grant receipts outstanding at 31 March 2020 are shown in Note 33.

Members

Members of the Council have direct control over the Council’s financial and operating policies.

The total of the allowances paid to Members in 2019/20 is shown in Note 29.

2019/20 2018/19

31 March 31 March

£m £m

Grant Receipts in Advance - Capital Grants

Ministry of Housing, Communities and Local Government (4.070) (3.831)

Department for Education (0.705) (1.052)

Homes and Communities Agency (2.099) (1.825)

Department of Health (0.926) (1.344)

Department for Transport - (0.444)

Environment Agency (0.041) (0.214)

Department for Business, Energy and Industrial Strategy (1.573) -

South Western Ambulance Service NHSFT - (0.013)

Other (30.115) (25.364)

Total (39.529) (34.087)

Note

34


Page 99

At formal committee meetings, Members are expected to make formal declarations of interest if there is an interest that could have an effect on any of the agenda items being discussed. Details of each Member’s declarations of interest are recorded by Committee Services and are open to public inspection on the Council’s website. A review of the information contained in the declarations of interest for each of the 123 councillors for 2019/20 was carried out.

Additionally, Members were asked to complete a short questionnaire in order to identify any positions held (either by them or members of their close family) with outside bodies on behalf of the Council or material transactions (over a de minimis level of £10,000) with the Council. Further cross-checks were made against the Council’s register of significant partnerships, procurement records and commercially available company search information.

The information review and returned questionnaires highlighted a small number of relevant transactions with organisations to which Members were connected:

• Details of transactions with subsidiary companies, associated and jointly controlled entities are provided in Notes G1 to G11 to the Council’s Group accounts;

• The Council supports a number of charitable and other not-for-profit organisations to which Members are connected in their capacity as trustees or directors. Relevant declarations were made in respect of the majority of these organisations.

Officers

Senior officers could also potentially be in a position to influence the policies of the Council (though this influence is limited by the Council’s budgetary control framework and scheme of delegation). Officers were also asked to complete the same short questionnaire as Members which highlighted a small number of relevant transactions detailed below:

• Details of transactions with subsidiary companies, associated and jointly controlled entities are provided in Notes G1 to G11 to the Council’s Group Accounts;

• The Council has entered into an arrangement with the Council of the Isles of Scilly for the provision of a number of support services. In addition, the Council of the Isles of Scilly’s monitoring officer and S151 officer responsibilities were undertaken by Officers of Cornwall Council.

Apart from these relationships, no related party transactions were recorded with any key management personnel.

Other Public Bodies (subject to common control by central government)

Pooled Budget Arrangements – the Council has three pooled budget arrangements with the KCCG for the provision of mental health services, integrating community equipment services, and to commission support and service for carers. Transactions and balances outstanding are detailed in Note 28.

Joint Working Arrangements – the Council has a number of joint working arrangements with other public bodies.


Page 100

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

Pension Fund – Cornwall Council is the administering body for the Cornwall Pension Fund. During the financial year we charged the fund £1.205m for expenses incurred in providing these services (£1.178m in 2018/19). This is comprised of £0.968m administrative costs and £0.237m oversight and governance costs (£0.964m administrative costs and £0.214m oversight and governance costs in 2018/19).

Entities Controlled or Significantly Influenced by the Council

Companies and Joint Ventures – the Council has substantial interests in subsidiary companies, associated and jointly controlled entities and is, therefore, required to produce Group Accounts. All Group entities are related parties and relevant details are disclosed in Notes G1 to G11 to the Council’s Group Accounts.

Other Organisations – the Council has Members, officers or members of their close family that have been appointed to the following organisations which have received more than £0.100m in payments, including grants, from the Council during the year:

Gross

Income

Gross

Expenditure

Council

Contribution*

Gross

Income

Gross

Expenditure

Council

Contribution*

£m £m £m £m £m £m

Learning Disability Complex Cases Pooled Fund (1.985) 4.076 2.091 (1.968) 4.145 2.177

Learning Disability Supported Living Fund (12.770) 20.249 7.479 (12.678) 19.583 6.905

Devon and Cornwall Safety Camera Partnership (1.969) 2.093 - (1.820) 1.842 -

* The Cornwall Council Contribution is the only element charged to the CIES and included within the net cost of services.

2018/192019/20

2019/20 2018/19

Council Council

Contribution Contribution

£m £m

Royal Cornwall Hospital Trust 3.401 4.724

Cornwall Community Development Ltd 1.034 0.542

Jubilee Pool 0.691 -

Hall for Cornwall Trust 0.606 2.193

Bodmin College 0.298 0.228

Tregolls School AN Academy 0.235 0.221

Cornwall Education Learning Trust 0.230 -

Peninsula Learning Academy Trust 0.230 -

In Caring Hands Limited 0.199 0.246

Falmouth University 0.186 0.871

Kernow Learning MAT 0.173 -

Barnardo's Centre 0.166 -

Newquay Education Trust 0.145 0.121

Food for Change/Cornwall Food Foundation 0.105 -

Looe Harbour Comissioners - 0.475

Council of the Isles of Scilly - 0.335

St Austell BID - 0.100

Total 7.699 10.056


Page 101

Capital Expenditure and Capital Financing

The total amount of capital expenditure incurred in the year is shown in the table as follows (including the value of assets acquired under finance leases and PFI/PPP contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. The CFR is analysed in the second part of this note.

Note

35


Page 102

2019/20 2018/19

£m £m

Opening capital financing requirement 986.107 966.783

Capital investment

Property, Plant and Equipment 152.982 134.867


Heritage Assets 0.046 -

HRA Land Appropriations now Capitalised 0.554 -

HDP Capitalised Stock 25.526 -

HDP Capitalisation of stock sold to Treveth 12.293 -

Assets Held For Sale 0.044 0.432

Advances to Long-Term Debtors 28.118 8.554

Revenue Expenditure Funded from Capital under Statute 41.657 52.664

Sources of finance

Capital receipts (19.984) (16.048)

Government grants and contributions (43.121) (80.437)

CTO Fleet Transfer to partially offset capital debtor (9.763) -

Sums set aside from revenue:

Direct revenue contributions/specific reserves (41.754) (54.208)

MRP/loans fund principal (24.564) (25.936)

Disposal of assets previously acquired under finance leases (0.034) (0.006)

Long term/short term debtor (1.415) (0.282)


Closing capital financing requirement 1,107.266 986.107

Explanation of movements in year

Increase in underlying need to borrow (unsupported by government 123.404 45.319

financial assistance)

Adjustment for HDP assets now capitalised and funded via borrowing 33.844 -

including HRA land appropriations

CTO Fleet transfer to reduce borrowing required (9.763) -

Assets acquired under finance leases 0.140 -

Disposal of assets previously acquired under finance leases (0.034) (0.006)


Amount set aside for HRA Attributable Debt (0.823) (0.819)

Long term debtor adjustments (transfer to/(from) short term debtors) (1.415) (0.282)

Less MRP payments (see above) (24.564) (25.936)

Increase/(decrease) in capital financing requirement 121.159 19.324


Page 103

Leases

The Council as Lessee

The Council has acquired a number of assets for schools, waste vehicles and property under finance leases and a number of vehicles under operating leases. The notes for these balances have not been included as they are not material.

The Council as Lessor

Finance Leases

The Council leases out property under finance leases. The notes for these balances have not been included as they are not material. Operating Leases The Council leases out property and equipment under operating leases. The future minimum lease payments receivable under non-cancellable leases in future years are:

Private Finance Initiatives and Similar Contracts

Private Finance Initiative (PFI) is an outsourcing method between a public sector body, such as Cornwall Council, and a private sector organisation to deliver public services using non-current assets. It transfers responsibility, but not accountability, for the delivery of public services to a private company or companies. The private sector company operates the non-current asset and provides finance. The details of each PFI scheme are unique, but it is essentially a way of funding major capital investments. Contracts typically last for up to 30 years, during which time the non-current asset is leased by the public sector body.

For each PFI scheme there is a detailed specification of services to be provided to the public; the Council is able to specify exactly who receives the services provided and is able to restrict the ability of the operator to offer services to particular categories of users if it so wishes.

The contracts specify the minimum standards that have to be adhered to with deductions from the fee payable if facilities are unavailable of if the performance drops below minimum standards. They will also specify the minimum acceptable condition to which the buildings and any plant and equipment must be maintained. The contractor is also obliged to hand over the non-current assets at the end of the contract in a specified condition at nil cost.

31 March 31 March

2020 2019

£m £m

Not later than one year 5.975 6.506

Later than one year and not later than five years 15.888 14.897

Later than five years 40.002 43.535

61.865 64.938

Note

36

Note

37


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Cornwall Council currently has four PFI schemes as detailed below:

Fire Stations PFI Scheme

2019/20 was year 19 of a 27 year PFI contract for the construction of ten new fire stations, the refurbishment of twenty one existing fire stations and the operation and maintenance of all of these stations until the end of the PFI contract in 2028.

PFI Contract Grouped Education

2019/20 was year 16 of a 28 year contract for the repairs, maintenance and facilities management services in the schools constructed and refurbished under the contract. The contractor has constructed two new schools and upgraded/refurbished a further fifteen existing schools to the standard of the new buildings and operate and maintain the infrastructure for a period of twenty five years.

Leisure PFI Scheme

2019/20 was year 16 of a 32 year PFI contract for the construction and operation of a leisure centre in Penzance. The contractor took on the obligation to construct the leisure centre and to maintain it in a minimum acceptable condition and to procure and maintain the plant and equipment needed to operate the leisure centre.

Waste PFI Scheme

2019/20 was year 14 of a 34 year PFI contract for the construction/upgrading and subsequent operation of a number of waste disposal facilities within Cornwall.

The PFI scheme was split into two distinct phases:

• Phase 1 - the upgrading and operation of existing and new collection and recycling facilities, along with general refuse collection. Phase 1 became operational during financial year 2006/2007.

• Phase 2 - the design, build and subsequent operation of the Cornwall Energy Recovery Centre (CERC). Phase 2 became operational during financial year 2016/17.

Property, plant and equipment

The assets used to provide services for the PFI Schemes are recognised on the Council’s Balance Sheet. Movements in their value over the year are detailed in the analysis of the movement on the property, plant and equipment balance in Note 14.

Payments

The Council makes an agreed payment each year which is increased each year by inflation and can be reduced if the contractor fails to meet availability and performance standards in any year but which is otherwise fixed. Payments remaining to be made under each PFI contract at 31 March 2020 (excluding any estimation of inflation and availability/performance deductions) are as follows:


Page 105

Although the payments made to the contractor are described as unitary payments they have been calculated to compensate the contractor for the fair value of the services they provide, the capital expenditure incurred and the interest payable whilst the capital expenditure remains to be reimbursed. The outstanding liability to effectively reimburse the contractor for capital expenditure incurred is as follows:

Fire PFI Scheme Reimbursement

Payment of Capital Contingent

for Services Expenditure Interest Rent Total

£m £m £m £m £m

Payable in 2020/21 0.922 0.380 0.534 0.143 1.979

Payable within two to five years 3.949 1.994 1.648 0.648 8.239

Payable within six to ten years 3.059 2.267 0.548 0.668 6.542

- - -

Total 7.930 4.641 2.730 1.459 16.760

Education PFI Scheme Reimbursement



£m £m £m £m £m

Payable in 2020/21 4.667 1.442 2.793 0.270 9.172



Payable within eleven to fifteen years 10.693 6.958 1.032 1.093 19.776

Total 61.285 28.702 20.776 4.648 115.411

Penzance Leisure Centre PFI Scheme Reimbursement



£m £m £m £m £m

Payable in 2020/21 0.383 0.168 0.604 0.110 1.265




Payable within sixteen to twenty years 0.121 0.275 0.036 0.308 0.740

Total 8.914 4.627 6.299 1.824 21.664

Waste PFI Scheme Reimbursement



£m £m £m £m £m

Payable in 2020/21 21.562 3.581 8.861 3.981 37.985




Payable within sixteen to twenty years 170.162 5.584 2.041 6.619 184.406

-

Total 606.663 73.209 84.137 83.102 847.111


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Pension Schemes Accounted for as Defined Contribution Schemes

Teachers employed by the Council are members of the Teachers’ Pension Scheme, administered by the DfE. The Scheme provides teachers with specified benefits upon their retirement, and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The Scheme is technically a defined benefit scheme. However, the Scheme is unfunded and the DfE uses a notional fund as the basis for calculating the employers’ contribution rate paid by local authorities. The Council is not able to identify its share of underlying financial position and performance of the Scheme with sufficient reliability for accounting purposes. For the purposes of this Statement of Accounts, it is accounted for on the same basis as a defined contribution scheme. The Council is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the teachers’ scheme. These costs are accounted for on a defined benefit basis and detailed in Note 39.

Defined Benefit Pension Schemes

Participation in Pension Schemes

As part of the terms and conditions of employment of its employees, the Council makes contributions towards the cost of post-employment benefits. Although these benefits will not actually be payable until employees retire, the Council has a commitment to make the payments that needs to be disclosed at the time that employees earn their future entitlement.

The Council participates in two post-employment schemes:

• The Local Government Pension Scheme, administered locally by Cornwall Council. This is a funded defined benefit final salary scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets;

• Arrangements for the award of discretionary post-retirement benefits upon early retirement – this is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets

2019/20

Fire PFI

Scheme

Education

PFI

Scheme

Penzance

Leisure

Centre

PFI

Scheme

Waste PFI

Scheme -

Contract

Payment

Waste PFI

Scheme -

Deferred

Income Total

£m £m £m £m £m £m

Balance outstanding at start of year (4.978) (30.016) (4.674) (74.905) (30.929) (145.502)

Payments during the year 0.336 1.314 0.047 1.696 - 3.393

Income released during the year - - - - 1.509 1.509

Balance outstanding at year-end (4.642) (28.702) (4.627) (73.209) (29.420) (140.600)

Note

38

Note

39


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built up to meet these pension liabilities and cash has to be generated to meet actual pension payments as they eventually fall due.

Teachers’ Pension Scheme

This is a notionally-funded, defined benefit scheme that is managed by the Teachers Pension Agency. This means we pay contributions as if it was a funded scheme, when in fact it is not. As a consequence, it is not possible for us to identify our share of the underlying scheme assets and liabilities. This scheme is not funded, therefore there is no need for a full actuarial valuation.

We made contributions at a rate of 16.48% (April 2019 to August 2019) and 23.68% (September 2019 to March 2020) in 2019/20 (16.48% 2018/19) totalling £6.748m for 2019/20 (£5.871m 2018/19) and we are also responsible for costs relating to added years and associated inflation increases, totalling £1.683m in 2019/20 (£1.697m 2018/19). We are responsible for a percentage of the statutory benefits previously funded by the DfE in cases of early retirement, which amounted to £1.240m in 2019/20 (£1.228m 2018/19).

Uniformed Fire fighters

Fire fighters have the option of joining one of the Fire Fighters’ Pension Schemes. The schemes provide defined benefits upon retirement and we contribute towards the costs by making contributions based on a percentage of members’ pensionable pay.

In 2019/20, we paid £3.086m (£1.538m 2018/19) towards fire fighters pensions in respect of fire fighters retirement benefits, representing 27.4% on the 2006 scheme and 37.3% on the 1992 scheme, 37.3% on the Modified Scheme and 28.8% on the 2015 Scheme (11.9%, 21.7%, 21.7% and 14.3% 2018/19) of pensionable pay. Employer Pension Contribution rates are increasing across all schemes which will apply for four years from 1 April 2019.

There were no contributions remaining payable at the year-end across any of the schemes detailed above.

The schemes are defined benefit schemes. Although the schemes are unfunded, (that is, there are no investment assets), fire fighters pensions use a notional fund as the basis for calculating the employers and employees contribution rates paid by fire authorities.

NHS Pension Scheme

ICES Pooled Fund

We have 3 employees who are covered by the provisions of the NHS Pension Scheme in the ICES Pooled Fund. The scheme is an unfunded, defined benefit scheme that covers NHS employers, General Practices and other bodies allowed under the direction of the Secretary of State, in England and Wales. As a consequence, it is not possible for us to identify our share of the underlying scheme assets and liabilities. We contributed at a rate of 14.3% in 2019/20 (14.3% 2018/19) totalling £0.014m (£0.018m 2018/19).

Public Health

On 1 April 2013 public health staff were transferred from Primary Care Trusts (PCTs) to local authorities. Consequently, we have 27.27 FTE employees (30.52 FTE’s 2018/19) who are covered by the provisions of the NHS Pension Scheme in Public Health. The scheme is an unfunded, defined benefit scheme that covers NHS employers, General Practices and other


Page 108

bodies allowed under the direction of the Secretary of State, in England and Wales. As a consequence, it is not possible for us to identify our share of the underlying scheme assets and liabilities. We contributed at a rate of 14.38% in 2019/20 (14.38% in 2018/19) totalling £0.148m (£0.172m in 2018/19).

Public Health Nursing Service

On 1 April 2019 Public Health Nursing (Health Visiting, School Nursing and Specialist Speech and Language Therapy) transferred into Cornwall Council from Cornwall Partnership NHS Foundation Trust (CFT). Consequently, we have 148.5 FTE employees who are covered by the provisions of the NHS Pension Scheme in the Public Health Nursing Service. The scheme is an unfunded, defined benefit scheme that covers NHS employers, General Practices and other bodies allowed under the direction of the Secretary of State, in England and Wales. As a consequence, it is not possible for us to identify our share of the underlying scheme assets and liabilities. We contributed at the appropriate rate in 2019/20 totalling £0.812m.

Following a consultation, the Department of Health and Social Care (DHSC) confirmed that the employer contribution rate would increase from 14.38% to 20.68% per cent (including the 0.08% scheme administration levy) from 1 April 2019. The increase is required to meet the cost of scheme benefits, following advice from the Government Actuary’s Department as part of the 2016 scheme valuation process. The government committed to providing additional funding for the NHS to cover the cost increase, with local authorities required to cover the remaining proportion of the cost increase relating to changes announced in Budget 2016. The council is responsible for 2.5% of the increase with the remaining 3.8% being funded by the Department of Health and Social Care (DHSC).

Cornwall Council Group

For the purposes of the pension fund disclosure notes the following tables and narrative include the following entities, Cornwall Council, Cornwall Housing Limited, Cormac Solutions Limited, Corserv Limited, Cornwall Development Company Limited, Cornwall Airport Limited and 50% Tamar Bridge Torpoint Ferry, and 50% Mount Edgcumbe.

The pension liabilities as at 31 March 2020 relating to each entity are Cornwall Council £735.616m, Cornwall Housing Limited £8.075m, Cormac Solutions Limited £45.021m, Corserv Limited £1.369m, Cornwall Development Company Limited £5.865m, Cornwall Airport Limited £0.813m, 50% Tamar Bridge Torpoint Ferry £3.337m, and 50% Mount Edgcumbe £0.678m. So as to avoid confusion with Cornwall Council disclosures we have referred throughout the note to them as the Cornwall Council Group. Cornwall Council has an agreement with Cornwall Housing Limited, Cormac Solutions Limited and the Pension Fund known as a pass through arrangement in relation to pension liabilities. This financial year a new agreement was signed which added Corserv Limited, Cornwall Development Company Limited and Cornwall Airport Limited. This arrangement means that Cornwall Council, as the parent company, bear the risks in relation to these schemes. They are therefore included on Cornwall Council’s balance sheet. Transactions Relating to Post-employment Benefits

We recognise the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge we are required to make against council tax is based on the cash


Page 109

payable in the year, so the real cost of post-employment/retirement benefits is reversed out of the General Fund via the MIRS. The following transactions have been made in the CIES and the General Fund Balance via the MIRS during the year:

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

2020

31 March

2019

31 March

2020

31 March

2019

£m £m £m £m


Cost of Services:

Current Service Cost 75.986 62.719 5.300 5.300

Past Service Costs 0.983 5.676 - 9.300

(Gain)/loss from settlements (1.526) (3.362) - -

Financing and Investment Income and Expenditure

Net interest on the net defined benefit liability/(asset) 26.430 24.562 6.100 6.600

Total Post-employment Benefits charged to the Surplus or 101.873 89.595 11.400 21.200

Deficit on the Provision of Services

Other Post-employment Benefits Charged to the


Remeasurement of the net defined benefit liability comprising:

Return on plan assets (excluding the amount included 47.265 (51.874) - -

in the net interest expense)

Actuarial (gains) and losses arising on changes in (88.147) (0.117) (8.000) (17.900)

demographic assumptions

Actuarial (gains) and losses arising on changes in (212.948) 181.567 (23.000) 18.000financial assumptionsOther experience (83.566) 1.789 4.000 (10.900)

Total Post-employment Benefits charged to the

Comprehensive Income and Expenditure Statement (235.523) 220.960 (15.600) 10.400

Movement in Reserves Statement

Reversal of net charges made to the Surplus or Deficit on the (101.873) (89.595) (11.400) (21.200)

Provision of Services for post-employment benefits in

accordance with the Code

Actual amount charged against the General Fund

Balance for pensions in the year:

Employers' contributions payable to scheme 49.647 47.734 4.500 4.300

Cornwall Council Group Firefighters

Pension Scheme Pension Arrangements

2019/20 2018/19 2019/20 2018/19

£m £m £m £m

Present value of the defined benefit obligation (2,215.457) (2,493.071) (226.900) (247.000)

Fair value of plan assets 1,414.683 1,417.657 - -

Net liability arising from defined benefit obligation (800.774) (1,075.414) (226.900) (247.000)




Page 110

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

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

2019/20 2018/19 2019/20 2018/19

£m £m £m £m

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

Current Service Cost (0.001) - - -

Effect of settlements (3.371) (4.513) - -

Interest Income 34.478 35.959 - -

Remeasurement gain/(loss):

The return on plan assets, excluding the amount (47.265) 51.874 - -

included in the net interest expense

Changes in financial assumptions (0.170) 0.038 - -

Contributions from employer 49.647 47.734 4.500 4.300

Contributions from employees into the scheme 10.994 10.366 1.300 1.300

Benefits paid (70.155) (60.941) (5.800) (5.600)

Other 20.762 - - -

Effect of business combinations and disposals 2.107 - - -

Closing fair value of scheme assets 1,414.683 1,417.657 - -



Unfunded Liabilities

2019/20 2018/19 2019/20 2018/19

£m £m £m £m

Opening balance at 1 April (2,493.071) (2,239.328) (247.000) (240.900)

Current service cost (75.985) (62.719) (5.300) (5.300)

Interest income (60.908) (60.521) (6.100) (6.600)

Contributions from scheme participants (10.994) (10.366) (1.300) (1.300)

Remeasurement gains and (losses):

Actuarial gains/(losses) arising from changes in 213.118 (181.605) 23.000 (18.000)

financial assumptions

Actuarial gains/(losses) arising from changes in 88.147 0.117 8.000 17.900

demographic assumptions

Other Experience 83.566 (1.789) (4.000) 10.900

Past service cost (0.468) (5.676) - (9.300)

Benefits paid 70.155 60.941 5.800 5.600

Liabilities extinguished on settlements 4.897 7.875 - -

Other (31.292) - - -

Transfers (in)/out from other authorities (2.622) - - -

Closing balance at 31 March (2,215.457) (2,493.071) (226.900) (247.000)

Funded Liabilities




Page 111

Local Government Pension Scheme Assets

The Pension Fund has no direct holdings in equities. It does hold is units in Funds of Global Equities, Emerging Markets and Frontier Market Funds run by various investment managers. Basis for Estimating Assets and Liabilities

Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels etc. Both the Cornwall Council pension scheme and the Firefighters’ pension scheme liabilities have been valued by Hymans Robertson LLP, an independent firm of actuaries, estimates for the Council Fund being based on the latest full valuation of the scheme as at 1 April 2019. Discretionary payment liabilities have been calculated by our Council’s Pension Fund Section.

The significant assumptions used by the actuary are as follows

31 March

2020

31 March

2019

31 March

2020

31 March

2019

£m £m £m £m

Cash and cash equivalents 27.962 10.699 - -

Private Equity:

All - - 38.972 45.502

Sub total private equity - - 38.972 45.502

Other Investment funds:

Infrastructure - - 63.746 46.570

Equities 562.967 516.508 - 30.814

Bonds 60.570 102.910 - -

Hedge Funds - - 88.441 95.660

Other 156.033 160.097 141.381 141.319

Sub total other investment funds 779.570 779.515 293.568 314.363

Derivatives:

Other - - 273.422 266.378

Sub total derivatives - - 273.422 266.378

Total assets 807.532 790.214 605.962 626.243

* This does not contain Mount Edgcumbe

Cornwall Council Group*

Fair Value of Scheme Assets Fair Value of Scheme Assets

Quoted prices in active markets Quoted prices not in active markets

Cornwall Council Group*


Page 112

The Firefighters’ arrangement has no assets to cover its liabilities. The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analysis below has been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period and assumes for each change that the assumption analysed changes while all the other assumptions remain constant. The assumptions in longevity, for example, assume that life expectancy increases or decreases for men and women. In practice, this is unlikely to occur, and changes in some of the assumptions may be interrelated. The estimations in the sensitivity analysis have followed the accounting policies for the scheme, i.e. on an actuarial basis using the projected unit credit method. The methods and types of assumptions used in preparing the sensitivity analysis below did not change from those used in the previous period.

Asset and Liability Matching (ALM) Strategy The Pensions Committee of Cornwall Council has agreed to an asset and liability matching strategy (ALM) that matches, to the extent possible, the types of assets invested to the liabilities in the defined benefit obligation. The Fund has matched assets to the pensions’ obligations by investing in long-term fixed interest securities and also by employing a liability driven investment, which hedges an element of the Fund’s interest rate and inflation risk.

31 March

2020

31 March

2019

31 March

2020

31 March

2019

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

Equity investments -1.7% 6.6% N/A N/A

Bonds -1.7% 6.6% N/A N/A

Other -1.7% 6.6% N/A N/A

Mortality Assumptions:

Longevity at 65 for current pensioners:

Men 21.4 years 22.1 years 26.4 years 27.3 years

Women 23.6 years 24.5 years 28.5 years 29.4 years

Longevity at 65 for future pensioners:

Men 22.3 years 24.0 years 27.5 years 28.4 years

Women 25.1 years 26.4 years 29.7 years 30.6 years

Rate of inflation 1.9% 2.5% 1.9% 2.5%

Rate of increase in salaries 1.9% 2.6% 2.8% 3.5%

Rate of increase in pensions 1.9% 2.5% 1.9% 2.5%

Rate for discounting scheme liabilities 2.3% 2.4% 2.3% 2.4%

Cornwall Council Firefighters


Increase in Decrease in

Assumption Assumption

£m £m

Rate of inflation (increase or decrease by 0.5%) 180.948 (180.948)

Rate of increase in salaries (increase or decrease by 0.5%) 20.274 (20.274)

Rate of increase in pensions (increase or decrease by 0.5%) 180.948 (180.948)

Rate for discounting scheme liabilities (increase or decease by 0.5%) 202.823 (202.823)

* This does not contain Mount Edgcumbe

Obligation in the Scheme*

Impact on the Defined Benefit


Page 113

This is balanced with a need to maintain the liquidity of the Fund to ensure that it is able to make current payments. As is required by the pensions and (where relevant) investment regulations the suitability of various types of investment have been considered, as has the need to diversify investments to reduce the risk of being invested in too narrow a range. A

large proportion of the assets relate to equities (30% of scheme assets in March 2020; 33% in March 2019) and bonds (24% in March 2020; 26% in March 2019). The scheme also invests

in alternative asset classes (e.g. property unit trusts and diversified growth funds) as a part of the diversification of the scheme’s investments. The ALM strategy is monitored annually or more frequently if necessary. Impact on the Council’s Cash Flows The objectives of the scheme are to keep employers’ contributions at as constant a rate as possible. The Council has agreed a strategy with the scheme’s actuary to achieve a funding level of 100% over the next 20 years. Funding levels are monitored on a quarterly basis. The next triennial valuation is due to start at 31 March 2022 based on the previous 3 years data. The Cornwall Council Group anticipates paying £44.090m expected contributions to the scheme in 2020/21. The weighted average duration of the defined benefit obligation for Cornwall Council scheme members is 19 years, 2019/20 (17.7 years 2018/19). Further information can be found in the Pension Fund Annual Report, which is available upon request from County Hall, Truro, TR1 3AY.

Nature and Extent of Risks Arising from Financial Instruments

The Council’s activities expose it to a variety of financial risks:

• Credit risk – the possibility that other parties might fail to pay amounts due to the Council;

• Liquidity risk – the possibility that the Council might not have funds available to meet its commitments to make payments;

• Market risk – the possibility that financial loss might arise for the Council as a result of changes in such measures as interest rates and stock market movements.

The over-riding objective of the Council’s Treasury Management Strategy is to seek to minimise the risks inherent within the treasury operations and the framework within which the risks are managed is contained within the Council’s detailed Treasury Management Practices. Sophisticated techniques for managing risk are being utilised to further improve the risk profile of the portfolios.

Credit Risk

Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Council’s customers.

The risk is minimised through the Annual Investment Strategy which requires that deposits are not made with financial institutions unless they meet identified minimum credit criteria.

Caution is exercised in determining the creditworthiness of investment counterparties, even if they meet the minimum criteria above. In the event that any institutions are at the minimum

Note

40


Page 114

criteria and are on negative rating watch, monies are not placed with that organisation until such time that the negative outlook is revised.

Geographical limits are considered to ensure an appropriate spread of risk. Sovereign ratings will be taken account of when placing funds with institutions outside of the UK.

In addition, the Council monitors Credit Default Swap Spreads which also contribute to forming a view of the creditworthiness of the investment counterparties. Market intelligence is also considered before entering into any investments with proposed counterparties meeting the minimum criteria.

Customers for goods and services are assessed, taking into account their financial position, past experience and other factors, within individual credit limits being set in accordance with parameters set by the Council.

Amounts Arising from Expected Credit Losses The Change in the loss allowance during the year are as follows:

Asset class (amortised cost)

12 month

expected

credit losses

Lifetime

expected

credit losses -

simplified

approach

Total

£m

£m £m £m

Opening balance as at 1st April 2019 265.321 123.849 389.170

New Financial assets orginated or purchased 322.700 34.517 357.217

Financial assets that have been derecognised (324.700) (6.283) (330.983)

Other changes (0.933) 44.863 43.930

As at 31 March 2020 262.388 196.946 459.334


Page 115

Credit Risk Exposure

The authority has the following exposure to credit risk at 31 March 2020.

The CIPFA Code stipulates that Investments in other local authorities are exempt from the credit risk rating meaning that Local Authority Bonds are also exempt. Similarly shares in group companies wholly owned by the Council are exempt from credit risk. The Heartland investment is backed by the Heartlands reserve. A simplified approach was used for the other debtor financial assets, with each asset class being reviewed, short term debtors contains a bad debt provision, which amounts to £37.596m.

Liquidity Risk

The Council has a comprehensive cash flow management system that seeks to ensure that cash is available as needed. If unexpected movements happen the Council has ready access to borrowings from the money markets and the Public Works Loans Board. The Council needs to ensure there is sufficient liquidity within the investment portfolio, which is achieved by placing limits on the proportion of investments maturing in relevant time periods.

The Council recognises that not all financial instruments will run to their final maturity date as some instruments provide the counterparty with an option to prematurely cancel. The table below shows maturity analysis for the final maturity date.

Credit Gross

risk carrying

rating amount

£m £m

12 month expected credit losses

Loans and receivables - treasury

Investments in other local authorities n/a 96.000

Shares in group companies n/a 0.500

Local authority bonds n/a 5.095

Loans and receivables - treasury Heartlands n/a 0.922

Simplified approach

Loans and receivables - debtors n/a 57.318

Short term debtors n/a 139.628

Short term cash investments n/a 139.448

Other bank balances n/a (40.381)


Page 116

The maturity analysis of financial liabilities and financial assets is as follows:

Market Risk

Interest Rate Risk

The Council is exposed to significant risk in terms of its exposure to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the authority. For instance, a rise in interest rates would have the following effects:

• Borrowings at fixed rates – the fair value of the borrowings will fall;

• Borrowings at variable rates – the interest expense charged to the surplus or deficit on the provision of services will rise;

• Investments at fixed rates – the fair value of the assets will fall;

• Investments at variable rates – the interest income credited to the surplus or deficit on the provision of services will rise.

Borrowings, treasury investments and debtors are not carried at fair value, so nominal gains and losses on fixed rate borrowings and investments (excluding investments which are short term) would not impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services and affect the General Fund balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in Other Comprehensive Income and Expenditure.

The Treasury Management team has an active strategy for assessing interest rate exposure that feeds into the setting of the annual budget.

Cash and

Cash

Equivalents

£m

Financial

Liabilities

£m

Financial

Assets

£m

Net

£m

Less than one year 99.067 (235.627) 159.870 23.310

Between one and two years - - 91.000 91.000

Between two and five years - - 6.125 6.125

Between five and ten years - (0.020) 0.561 0.541

Between ten and twenty years - - 3.410 3.410

Between twenty and fifty years - (674.382) - (674.382)

More than fifty years - (16.000) - (16.000)

No fixed maturity date - - 1.422 1.422

99.067 (926.029) 262.388 (564.574)

The category for f inancial assets maturing in less than one year includes investments w hich are short term

- thus enabling liquidity in the event it is required.


Page 117

At 31 March 2020, if interest rates and discount rates had been 1% higher or lower with all other variables held constant, the financial effect would be:

Included within the numbers of the table above are LOBO’s financial instruments, and a 1% increase in discount rate would decrease the fair value of the LOBO liability by (£83.565m), while a 1% decrease would increase the fair value by £127.724m. As set out in the table below sets out the frequency of the LOBO options. At each option date there is potential for the interest rate to change. Any changes in these interest rates would impact on the sensitivity analysis set out above.

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

The Council has a number of Lender Option Borrower Option (LOBO) loans. There are risks associated with these types of instruments which are impacted by their maturity dates, and in the context of the different types of LOBO’s, the frequency of the LOBO option dates. The carrying amounts in the balance sheet and the fair values are as disclosed below. The comparable par amounts, maturities and LOBO option frequency dates are as follows:

If interest rates had been 1% higher with all other variables held constant the financial effect would be: £m

Increase in interest payable on variable rate borrowings

Increase in interest receivable on variable rate investments 0.130

Impact on (surplus) or deficit on the provision of services at 31 March 2020 0.130

If interest rates had been 1% lower with all other variables held constant the financial effect would be:

Decrease in interest payable on variable rate borrowings

Decrease in interest receivable on variable rate investments (0.130)

Impact on (surplus) or deficit on the provision of services at 31 March 2020 (0.130)

An increase of 1% in discount rates would lead to changes in the fair value of investments and borrowings: £m

Decrease in fair value of borrowing liabilities (2.438)

Decrease in fair value of investment assets (164.984)

A decrease of 1% in discount rates would lead to changes in the fair value of investments and borrowings: £m

Increase in fair value of borrowing liabilities 0.922

Increase in fair value of investment assets 244.109

Changes in fair value have no impact on (surplus) or deficit on the provision of services at 31 March 2020

31 March 2020

Principal plus

Accrued Interest

31 March 2020

Current Contractual

Interest Rate

(Range)

31 March

2020

Original

Maturity

31 March 2020

Remaining

Maturity

31 March 2020

Frequency of

LOBO Options

£m

Fixed interest rate LOBO's (276.511) 3.53% - 5.24% 60-70 years 45-59 years 6 months - 5 years


Page 118

The Council’s treasury management strategy considers the whole portfolio of its borrowing and investment portfolio, not just individual transactions. New borrowing would normally be taken on a short term basis to take advantage of historically low rates of interest, with a view to continuing to roll over short term debt until an interest rate increase is anticipated, at which time the Council will enter into long term agreements to “lock in” interest rates over the long term. The carrying amounts and fair values of the Council’s LOBO’s are as follows:

The Council is required to account for financial instruments in accordance with International Financial Reporting Standard 9: Financial Instruments (IFRS9). The loans do not meet the requirements under IFRS9 to be accounted for at fair value through profit and loss. In this case they are accounted for at amortised cost. The Code would normally require the Council to calculate Effective Interest Rate (EIR) calculations in order to arrive at an appropriate valuation of the instruments in its accounts. However, in the case where it is not possible to reliably estimate the cash flows or expected life of a financial instrument then the contractual cash flows over the full contractual term of the financial instrument shall be used. The Council has applied this accounting treatment to its LOBO’s which is in compliance with the Code. The Council does perform an EIR calculation on two of its fixed rate LOBO’s. At their inception in 2005 the total adjustment recognised in the CIES was £1.178m, which will be written down over their 60 year term, £0.007 was written down during 2019/20. In 2018/19 the Council redeemed and refinanced its two inverse LOBO loans with a value totalling £85.000m. This removed the risk of paying relatively high interest rates during a period of prolonged low market rates. The two inverse LOBO loans were replaced by loans from the PWLB and as this is a different lender then the redemption is classified as loan extinguishment under IFRS9. The premium payable on early redemption of the loans was £53.623m. Under the CIPFA Code premiums on early redemption of debt are chargeable to the CIES in the year of redemption. The premium is shown as an exceptional item in the Council’s CIES. However, under the CIPFA Code the impact on the General Fund in the year of payment of the premium is reversed out through the MIRS. The premium is then charged back to the

31 March 2019

Principal plus

Accrued Interest

31 March 2019

Current Contractual

Interest Rate

(Range)

31 March

2019

Original

Maturity

31 March 2019

Remaining

Maturity

31 March 2019

Frequency of

LOBO Options

£m

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

31 March

2020

Carrying

Value

31 March

2020

Accrued

Interest

31 March

2020 Fair

Value

31 March

2019

Carrying

Value

31 March

2019

Accrued

Interest

31 March

2019 Fair

Value

£m £m £m £m £m £m

Fixed interest rate LOBO's (272.995) (3.516) (419.434) (274.100) (3.496) (440.619)


Page 119

General fund over the period of the remaining life of the loans, in 2019/20 this amounted to £1.151m.

Foreign Exchange Risk

The Council has no financial assets or liabilities denominated in foreign currencies and thus have no exposure to loss arising from movements in exchange rates.


Page 120


Group Financial Statements Cornwall Council 2019/20 Statement of Accounts

Page 121

Group Financial

Statements


Page 122

Group Movement in Reserves Statement (as follows) This statement shows the movement in the year on the different reserves held by the Group, analysed into “usable reserves” and other reserves.

Group Comprehensive Income and Expenditure Statement

(below) This statement shows the accounting cost in the year of providing the Group’s services in accordance with generally accepted accounting practices.

Expenditure Income Net Expenditure Income Net

£m £m £m £m £m £m

Adult Social Care 267.355 (71.762) 195.593 246.879 (80.660) 166.219

Together for Families**^ 160.784 (81.703) 79.081 149.241 (79.360) 69.881

Economic Growth and Development** 148.560 (75.490) 73.070 148.699 (77.088) 71.611

Neighbourhoods 120.091 (26.469) 93.622 95.937 (27.457) 68.480

Customer and Support Services 92.046 (14.890) 77.156 101.962 (19.404) 82.558

Wellbeing and Public Health 27.051 (26.727) 0.324 27.737 (26.360) 1.377

Corporate Items 162.176 (144.444) 17.732 198.528 (166.701) 31.827

Schools-managed Expenditure 94.057 (85.013) 9.044 110.401 (96.733) 13.668

Local Authority HRA 15.297 (40.257) (24.960) 10.911 (39.618) (28.707)

Joint Committees 6.648 (6.361) 0.287 6.775 (5.970) 0.805

Groups - Corserv Ltd 140.296 (21.170) 119.126 148.148 (35.036) 113.112

Groups - Cormac Contracting Ltd 3.168 (5.233) (2.065) 1.919 (3.596) (1.677)

Group cost of services 1,237.529 (599.519) 638.010 1,247.137 (657.983) 589.154

Other operating expenditure 41.543 23.781 11*

Exceptional transfer of academy school assets - 24.313 11*

Other operating expenditure line 41.543 48.094 11*

Financing and investment income and expenditure 68.841 68.282 12*

Exceptional LOBO premium on redemption - 53.623 12*

Financing and investment income and expenditure line 68.841 121.905 12*

Taxation and non-specific grant income (602.715) (574.821) 13*

(Surplus) or deficit on provision of services 145.679 184.332

Tax expenses of subsidiaries 0.044 (0.040)

Group (Surplus)/Deficit 145.723 184.292

Surplus or deficit on revaluation of (45.526) (68.121)

property, plant and equipment

Surplus or deficit on revaluation of - 1.705

available-for-sale financial assets

Remeasurements of the pension net defined benefit liabiltiy/(asset) (364.396) 122.123

Other recognised gains and losses 1.490 0.806

Other comprehensive income and expenditure (408.432) 56.513

Total comprehensive income and expenditure (262.709) 240.805

* Note numbers refer to Cornwall Council notes that are not materially different

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

** Directorate renamed from Children, Schools and Families to Together for Families

2019/20 2018/19

Restated**

No

tes *


Page 123

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Page 124

Group Balance Sheet (as follows)

The Balance Sheet shows the value of the assets and liabilities recognised by the Group at 31 March 2020. The net assets of the Group are matched by Group reserves.

Group Cash Flow Statement (below)

The cash flow statement shows the changes to cash and cash equivalents of the Group during the reporting period. The statement shows how the Group generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities.

2019/20 2018/19

£m £m

Net (surplus) or deficit on the provision of services 145.723 184.292

Adjustments to net surplus or deficit on the provision of services for (240.971) (213.398) G8

non-cash movements

Adjustments for items included in the net surplus or deficit on the 78.173 68.176 G8

provision of services that are investing and financing activities

Net cash flows from operating activities (17.075) 39.070

Investing Activities 109.017 14.971 G9

Financing Activities (122.085) (50.122) G10 & 26*

Net (increase) or decrease in cash and cash equivalents (30.143) 3.919

Cash and cash equivalents at the beginning of the reporting period 81.347 85.266

Cash and cash equivalents at the end of the reporting period 111.490 81.347

* Note numbers with no "G" refer to Cornwall Council notes that are not materially different

No

tes


Page 125

Balance Sheet 31 March 2020 31 March 2019

£m £m

Property, Plant and Equipment 2,476.394 2,364.884 14*

Heritage Assets 3.081 3.086

Investment Properties - 0.550


Long Term Investments 102.017 142.358 15*

Long Term Debtors 35.892 31.606 G6

Long Term Assets 2,619.888 2,546.230

Cash and Cash Equivalents 160.928 108.908 19*

Current intangible assets - 0.389

Short Term Investments 146.665 111.713 15*

Assets Held for Sale 10.096 10.276

Inventories 34.709 46.670 16*

Short Term Debtors 160.294 104.649 G6

Current Assets 512.692 382.605

Cash and Cash Equivalents (49.438) (27.561) 19*

Short Term Borrowing (246.119) (107.661) 26*

Short Term Creditors (119.275) (140.747) G7

Provisions (1.934) (2.732) 21*

PFI Short Term Liabilities (5.571) (3.393) 15*

PFI Short Term Deferred Liabilities (1.509) (1.509)

Grants Receipts in Advance - Revenue (46.832) (7.656)

Grants Receipts in Advance - Capital (3.113) (5.555)

Current Liabilities (473.791) (296.814)

Long Term Creditors (2.752) (2.433) 15*

Provisions (40.249) (40.147) 21*

Long Term Borrowing (691.719) (688.513) 15*

Pension Liability (1,027.674) (1,332.808) 39*

PFI Long Term Liabilities (105.609) (111.180) 15*

Other Long Term Liabilities (2.190) (2.140) 15*

PFI Deferred Income (27.912) (29.420)

Grants Receipts in Advance - Capital (39.543) (34.105) 33*

Long Term Liabilities (1,937.648) (2,240.746)

Net Assets 721.141 391.275

Usable Reserves (362.779) (339.516)

Unusable Reserves (358.362) (51.759) 23*

Total Reserves (721.141) (391.275) G3

* Note numbers with no "G" refer to Cornwall Council notes that are not materially different

No

tes *


Page 126

Notes to the Group

Financial

Statements


Page 127

Accounting Policies

Generally, the accounting policies for the Group accounts are the same as those applied to the single entity financial statements, except for the following policies which are specific to the Group accounts:

Basis of Identification of the Group Boundary

Group accounts are prepared by aggregating the transactions and balances of the Council and all its material subsidiaries, associates and joint ventures. Subsidiary Boundary A subsidiary is an entity which the Council controls through the power to govern their financial and operating polices so as to obtain benefits from the entities’ activities. Control is usually presumed where the Council owns more than half the voting power of an entity (either directly or through other subsidiaries). However, this is not a defining criterion; the Council can have more than half the voting power but, exceptionally, not be in control and powers other than voting rights may grant control where the Council has less than half the voting power. Associate Boundary An associate is an entity for which the Council is an investor that has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee (stopping short of control or joint control). It is presumed that holding 20% of the voting power of an investee (either directly or indirectly) brings significant influence but this presumption can be rebutted. It is possible for significant influence to be exerted where an investor has less than 20% of the voting power or where another party has majority ownership. Joint Venture Boundary Entities established with contractual or binding arrangements whereby two or more parties are committed to undertake an activity that is subject to their joint control, with strategic financial and operating decisions relating to the activity requiring the unanimous consent of the parties sharing control. Accounting for Maintained Schools

Local Authority maintained schools are capable of being treated as separate entities and fall within the scope of the control criteria in IFRS 10 Consolidated Financial Statements. However, in order to simplify the consolidation process and to avoid consolidating a considerable number of separate, relatively small entities, the CIPFA Code of Practice confirms that the definition of the single entity financial statements includes all the transactions of local authority schools, this includes school income and expenditure as well as assets and liabilities. So, instead of these transactions being consolidated in the Group accounts, they are consolidated into the single entity financial statements. Please refer to the Council’s Accounting for Schools policy which can be found on page 58.

Note

G1


Page 128

Materiality In accordance with the above policy, our group relationships have been determined as follows:

The grounds for exclusion from consolidation of certain entities (individually and in aggregate) are not material to the true and fair view of the financial statements or to the understanding of users. In addition, under the Accounts and Audit Regulations, Cornwall Port Health Authority (a statutory function of the Council) is required to produce separate accounts for the financial year 2019/20. These are also excluded from the Council’s Group accounts on the basis of materiality.

Basis of the Preparation of the Group Financial Statements

The Group accounts have been prepared using the Group accounts requirements of the 2019/20 Code. Companies or other reporting entities that are under the ultimate control of the Council have been included in the Council’s Group accounts, to the extent that they are material to the users of the financial statements in relation to their ability to see the complete economic activities of the Council and its exposure to risk through interests in other entities and participation in their activities.

Subsidiaries have been consolidated by:

• adding like items of assets, liabilities, reserves, income and expenses together on a line by line basis to those of other group members in the financial statements; and

• eliminating intra-group balances and transactions in full.

Joint Ventures have been consolidated using the equity method by:

• adjusting the investment originally recognised at cost for the company’s post-acquisition change in its share of the net assets of the investee;

• including the company’s share of profits and losses in its Comprehensive Income and Expenditure Statement. Any share of the joint ventures profit or loss is shown in the

Corserv Limited Subsidiary Consolidated

Includes: Cormac Solutions Limited Subsidiary Consolidated

Cornwall Housing Limited Subsidiary Consolidated

Cornwall Airport Limited Subsidiary Consolidated

Cornwall Development Company Limited Subsidiary Consolidated

Includes: Rural Economic Partnership Limited Subsidiary Consolidated

Via East Midlands Ltd Joint Venture Sold 2018/19

Corserv Property Limited Subsidiary Consolidated

Cormac Contracting Limited Subsidiary Consolidated

Treveth Holdings LLP Subsidiary Consolidated

Kehelland Horticultural Centre Limited Subsidiary Not Consolidated

Wave Hub Limited Subsidiary Not Consolidated

Includes:Includes: Wave Hub Development Services Limited Subsidiary Not Consolidated

CSW Group Limited Joint Venture Not Consolidated


Page 129

other recognised gains and losses line under other comprehensive income and expenditure on the Comprehensive Income and Expenditure Statement.

Corserv Ltd

Corserv Ltd is a 100% wholly owned subsidiary of Cornwall Council. It provides strategic direction and oversight for its arm’s length and commercial trading companies. The registered office of the company is Corserv Ltd Head Office, Higher Trenant Road, Wadebridge, Cornwall, PL27 6TW. The company registration number is 09598549. Arm’s Length and Commercial Trading Companies of Corserv Ltd: -

• Cormac Solutions Ltd is a company incorporated in England, the sole shareholder being Corserv Ltd. The company’s principal activity is delivering in-house construction and maintenance services for Cornwall Council and the wider public through partnership with Town and Parish Councils, local Small and Medium Enterprises (SMEs) and Social Enterprise Groups, providing a complete solution and helping communities grow and thrive in a sustainable way. The financial statements of the company can be obtained from the registered office at Cormac Head Office, Higher Trenant Road, Wadebridge, Cornwall, PL27 6TW. The company registration number is 07737430.

• Cornwall Housing Ltd is an Arm’s Length Management Organisation (ALMO),

limited by guarantee and without share capital. The company’s principal activity is managing and maintaining the Council’s stock of over 10,000 general needs houses across Cornwall. They look after about 400 leaseholders on behalf of the Council and manage other garages, shops and land in neighbourhoods with council housing. The company also looks after over 50 houses it owns itself. The financial statements of the company can be obtained from the registered office which is Chy Trevail, Beacon Technology Park, Bodmin, Cornwall, PL31 2FR. The company registration number is 04662007.

• Cornwall Airport Ltd is a company limited by shares, the sole shareholder being

Corserv Ltd. The principal activity of the company is airport operations at Newquay Cornwall Airport. Funding income is provided by Cornwall Council for shortfalls arising from such activities that would typically be undertaken to operate an airport. This funding is under a Public Service Obligations Agreement. The financial statements of the company can be obtained from the registered office which is St Mawgan House, Cormwall Airport, Newquay, Carloggas, St Mawgan, Newquay, TR8 4RQ. The company registration number is 06098925.

• Cornwall Development Company Ltd is limited by guarantee and without share

capital. The principal activity of the company is the undertaking of activities focused on achieving prosperity for Cornwall. These activities cover the promotion of the County for visitors and investors, the management of programmes of public sector funds, the development of new projects and advice and information to project promoters, a variety of services to businesses and organisations. Cornwall Development Company owns 100% of the ordinary share capital of Rural Economic Partnership Ltd, a company incorporated in England. The company’s


Page 130

principal activity is management of the three properties on the South Wheal Crofty site in Pool. The financial statements of the company can be obtained from the registered office at Bickford House, South Wheal Crofty, Station Road, Pool, Redruth TR15 3QG. The company registration number is 03668828.

• Corserv Property Ltd is a 100% wholly owned subsidiary of Corserv Ltd which is a 100% wholly owned subsidiary of Cornwall Council. It was set up to purchase, refurbish and manage a portfolio of private rented properties to provide temporary accommodation for homelessness clients in order to discharge Cornwall Council’s statutory homelessness duties. The registered office of the company is Head Office, Higher Trenant Road, Wadebridge, Cornwall, PL27 6TW. The company registration number is 12263854.

• Via East Midlands Ltd was a jointly owned company with Nottinghamshire County Council. Corserv Ltd owned 51% of the shares until disposal of the company in 2018/19 to Nottingham County Council. The company’s principal activity was to deliver a sustainable highways service for Nottinghamshire.

Cormac Contracting Ltd

Cormac Contracting Ltd is a 100% wholly owned subsidiary of Cornwall Council. It delivers competitive solutions for all major and specialist construction projects. Working together with clients and supply chain to enhance whole life value while reducing total cost, improving quality, and innovating. Cormac Contracting Ltd are recognised as being one of the South West’s leading Civil Engineering contractors for the public and private sector. The financial statements of the company can be obtained from the registered office at Cormac Head Office, Higher Trenant Road, Wadebridge, Cornwall, PL27 6TW. The company registration number is 07737521.

Treveth Holdings LLP

Treveth Holdings LLP is a 99% owned subsidiary of Cornwall Council with 1% owned by Corserv Ltd. Its purpose is to support Cornwall Council’s Investment plan which includes the Housing Development Project. The registered office of the company is County Hall, Treyew Road, Truro, Cornwall, United Kingdom, TR1 3AY. The company registration number is OC426719

Kehelland Horticultural Centre Ltd

Kehelland Horticultural Centre Ltd is a charitable company limited by guarantee. The company registration number is 01714560. The company was incorporated with the object of affording relief of persons who are physically or mentally handicapped and provides training and sheltered employment in all country pursuits. The accounts for 2019/20 have not been consolidated on the grounds of materiality.


Page 131

Wave Hub Ltd

Wave Hub Ltd is a 100% wholly owned subsidiary of Cornwall Council, its core role is to manage the Wave Hub facility and facilitate testing of a range of offshore technologies including large scale wave energy devices, wave energy arrays, floating wind, hybrid wind/wave devices, major subcomponents and associated sub-sea equipment. The company registration number is 07875270. Wave Hub Ltd owns 100% of the ordinary share capital of Wave Hub Development Services Ltd, a company incorporated in England. The company’s principal activity provides advice and guidance to support the growth of the offshore renewable energy sector. The company registration number is 10166467. The financial statements of the companies can be obtained from the registered office at Wave Hub Ltd, Chi Gallos, Hayle Marine Renewables Business Park, North Quay, Hayle, Cornwall, TR27 4DD. The accounts for 2019/20 have not been consolidated on the grounds of materiality.

CSW Group Ltd

CSW Group Limited is a Local Authority controlled company. The company is under the joint control of Devon County Council, Cornwall Council, Plymouth City Council and Torbay Council. Members have equal voting rights, so Cornwall Council’s share is 25%. For accounting purposes, the company is classified as a joint venture.

The company provides a service for all young people, giving 13-19 year olds information, advice, guidance and practical help in preparing for adult and working life. It operates through a number of service brands including Connexions.

The company recently changed its name to CSW Group Ltd from Careers South West Ltd (previously known as Connexions Cornwall and Devon Ltd). The registered office is at Poseidon House, Neptune Park, Plymouth, Devon, PL4 0SJ. The company registration number is 03029947.

The accounts for 2019/20 have not been consolidated on the grounds of materiality.

Reconciliation to the Single Entity CIES

Restated*

2019/20 2018/19

£m £m

(Surplus) or deficit per single entity Comprehensive Income 80.167 113.538

and Expenditure Statement*

(Surplus) or deficit attributable to subsidiaries 65.556 70.754

Total Group (Surplus) or Deficit 145.723 184.292

* Restated due to incorrect f igure reported 2018/19

Note

G2


Page 132

Analysis of Group Net Worth

Associated Risks

Cornwall Council has agreed to support Corserv Ltd through the provision of a cashflow facility enabling them to manage their cash position as they do not maintain their own cash reserves. The agreement provides a facility of up to £15.000m until 31 March 2023.

As at 31 March 2020 Corserv Ltd had a loan of £10.250m outstanding with Cornwall Council.

Cornwall Council also provided Corserv Ltd with a £12.000m loan in relation to fleet transferred to Cormac Solutions Ltd in 2019/20. Corserv Ltd are repaying quarterly over a 10 year period. At as 31 March 2020 the outstanding balance was £10.800m.

Cornwall Housing Ltd has two outstanding loans from Cornwall Council to enable the building of new Council houses. As at 31 March 2020 these amounted to £1.445m.

Cornwall Council has also provided Treveth Holdings LLP with a loan of £10.449m and a revolving credit facility of £2.956m in 2019/20.

Prior Period Adjustments, Changes in Accounting Policies and Errors

Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error.

Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Group’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.

Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period.

2019/20 2018/19

£m £m

Cornwall Council 717.093 400.647

Cornwall Housing Ltd 2.791 4.560

Cornwall Airport Ltd 0.588 (0.696)

Cornwall Development Company Ltd 0.388 (8.498)

Rural Economic Partnership Ltd 0.592 0.516

Cormac Contracting Ltd (0.937) (0.896)

Cormac Solutions Ltd 5.040 4.158

Corserv Ltd 1.123 1.710

Treveth Holdings LLP (1.011) -

Corserv Property Ltd 5.778 -

Group Adjustments (10.304) (10.226)

Total 721.141 391.275

Note

G3

Note

G4

Note

G5


Page 133

Debtors

Creditors

Cash Flow Statement – Operating Activities

The cash flows for operating activities include the following items:

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


2020 2019 2020 2019

£m £m £m £m

Trade Receivables 82.281 61.327 - -

Prepayments 33.567 6.672 - -

Debtors for Local Taxation 30.046 26.792 - -

Other Receivable Amounts 14.400 9.858 35.892 31.606

Total 160.294 104.649 35.892 31.606

Current Long Term


2020 2019 2020 2019

£m £m £m £m

Trade Payables (47.470) (47.208) - -

Receipts in Advance (14.905) (15.248) - -

Other Payables (56.900) (78.291) (2.752) (2.433)

Total (119.275) (140.747) (2.752) (2.433)

Current Long Term

2019/20 2018/19

£m £m

Interest received (7.801) (7.291)

Interest paid 44.682 46.680

Dividends received (2.457) (2.199)

Net cash flows from operating activities 34.424 37.190

Note

G6

Note

G7

Note

G8


Page 134

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

2019/20 2018/19

£m £m

Depreciation and impairment (78.579) (78.516)

Downward valuations 1.328 (1.074)

Amortisation (0.999) (1.255)

Adjustments for movements in fair value of investments classified (0.282) (0.316)

as Fair Value through Profit & Loss a/c - -

Adjustments for effective interest rates (1.907) (1.817)

Losses or Gains on derecognition of loans & advances in year (2.663) (1.909)

Increase/(decrease) in interest creditors 0.014 (0.325)

Increase/(decrease) in creditors (34.962) (1.032)

Increase/(decrease) in interest and dividend debtors (0.215) 0.368

Increase/(decrease) in debtors 56.742 1.639

Increase/(decrease) in inventories (11.961) 32.852

Movement in pension liability (59.126) (59.084)

Unwinding of discount of Deferred Receipts - 0.017

Contributions to/(from) provisions 0.422 0.165

Carrying amount of non-current assets and non-current assets (39.409) (30.748)

held for sale, sold or de-recognised

Other non-cash items charged to the net surplus or deficit on (69.374) (72.363)

the provision of services

Adjustment to net cash flows from operating activities (240.971) (213.398)

2019/20 2018/19

£m £m

Capital grants credited to (surplus)/deficit on the provision 55.519 69.314

of services

Proceeds from the sale of short-term (not considered to be cash - (6.985)

equivalents) and long-term investments (includes investments

in associates, joint ventures and subsidiaries)

Proceeds from the sale of property, plant and equipment, 22.654 5.847

investment property and intangible assets

Adjustment to net cash flows from operating activities 78.173 68.176


Page 135

Cash Flow Statement –Investing Activities

Cash Flow Statement – Financing Activities

Related Parties – Inter Group Eliminations

The following table shows the net movements between Cornwall Council and its subsidiaries and joint ventures, for those companies consolidated into the group account statements these transactions have been eliminated as appropriate:

2019/20 2018/19

£m £m

Purchase of property, plant and equipment, investment property and 185.491 140.037

intangible assets

Purchase of short-term and long-term investments 282.946 108.500

Other payments for investing activities 34.966 11.316

Proceeeds from the sale of property, plant and equipment, investment (23.035) (5.820)

property and intangible assets

Proceeds from short-term and long-term investments (309.700) (170.000)

Capital grants received (6.291) (64.688)

Loan repayments received (55.360) (4.374)

Net cash flows from investing activities 109.017 14.971

2019/20 2018/19

£m £m

Cash receipts of short and long-term borrowing (1,418.174) (1,042.558)

Other (receipts)/payment from financing activities 0.017 1.262

Cash payments for the reduction of the outstanding liabilities relating 5.500 6.597

to finance leases and on-balance sheet PFI contracts

Repayments of short and long-term borrowing 1,290.572 977.031

Dividends paid - 7.546

Net cash flows from financing activities (122.085) (50.122)

Note

G9

Note

G10

Note

G11


Page 136

2019/20 2019/20 2019/20

Total paid to Total paid to Net Movement

Group Companies Cornwall Council (to)/from

from Cornwall Council from Group Companies Cornwall Council

£m £m £m

Cornwall Airport Ltd 0.089 (1.305) (1.216)

Cornwall Development Company Ltd 3.334 (0.132) 3.202

Cormac Solutions Ltd 88.442 (4.912) 83.530

Cornwall Housing Ltd 40.659 (0.993) 39.666

Cormac Contracting Ltd 0.004 (0.122) (0.118)

Corserv Ltd 0.121 (3.928) (3.807)

Treveth Holdings LLP - (0.460) (0.460)

Corserv Property Ltd 6.000 - 6.000

Wave Hub Ltd 0.619 (0.034) 0.585

CSW Group Ltd 0.819 - 0.819

Total 140.087 (11.886) 128.201

Supplementary Financial Statements Cornwall Council 2019/20 Statement of Accounts

Page 137

Supplementary

Financial

Statements


Page 138

Housing Revenue

Account (HRA)-

Income and Expenditure

Statement


Page 139

Housing Revenue Account Income and Expenditure Statement

The HRA Income and Expenditure Statement shows the economic cost in the year of providing housing services in accordance with generally accepted accounting practices, rather than the amount to be funded from rents and government grants. The Council charges rents to cover expenditure in accordance with regulations; this may be different from the accounting cost. The increase or decrease in the year, on the basis of which rents are raised, is shown in the Movement on the HRA Statement.

2019/20 2018/19

£m £m

Expenditure

Repairs and maintenance 7.889 8.127

Supervision and management: 11.572 10.853

Rents, rates, taxes and other charges 0.941 0.796

Depreciation and impairment of non-current assets 11.923 8.454 HR6 & 7

Total Expenditure 32.325 28.230

Income

Dwelling rents (37.459) (37.323)

Non-dwelling rents (1.336) (1.276)

Charges for services and facilities (1.216) (1.031)

Contributions towards expenditure (0.401) (0.163)

Movement in the allowance for bad debts 0.155 0.173

Total Income (40.257) (39.620)- - -

Net cost of HRA Services (7.932) (11.390)

HRA services' share of Corporate and Democratic Core 0.370 0.370

Net (Income)/Expenditure of HRA services as included in the

Comprehensive Income and Expenditure Statement (7.562) (11.020)

HRA share of the operating income and expenditure included in the


(Gain) or loss on sale of HRA non-current assets (1.113) (1.181)

Interest payable and similar charges 3.283 3.105

Interest and investment income (0.181) (0.180)

Net interest on the pension net defined liability/(asset) 0.342 0.259

Capital grants and contributions receivable (1.755) (1.683)

(Surplus) or deficit for the year on HRA Services (6.986) (10.700)

No

tes


Page 140

Movement on the HRA Statement

The overall objective of this Statement is to reconcile the outturn on the HRA Income and Expenditure Statement with the net surplus or deficit for the year on the HRA Balance.

2019/20 2018/19

£m £m

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

(Surplus) or deficit for the year on the HRA Income and Expenditure Statement (6.986) (10.700)

Adjustments between accounting basis and funding basis under statute 4.637 8.366 HR1

Net (increase) or decrease before transfers to or from reserves (2.349) (2.334)

Transfers (to) or from reserves (0.047) 1.408

(Increase) or decrease in year on the HRA (2.396) (0.926)

Balance on the HRA at the end of the current year (13.243) (10.847)


Page 141

Notes to the Housing

Revenue Account (HRA)


Page 142

Introduction

As well as providing General Fund Housing Services, the Council is also a major provider of social rented accommodation in Cornwall. This includes sheltered facilities to meet the needs of elderly persons. The Council owns and is responsible for the management and maintenance of over 10,000 dwellings throughout the county ranging from bedsit flats to seven-bedroomed houses. The income and expenditure relating to the above dwellings and the Council’s landlord function is dealt with in the HRA.

Adjustments between Accounting Basis and Funding Basis Under

Regulations on the HRA Balance

2019/20 2018/19

£m £m


Reversal of items debited or credited to the Comprehensive Income

and Expenditure Statement:

Charges for depreciation and impairment of non-current assets (17.567) (17.392)

Revaluation losses on property, plant and equipment 5.672 8.938

Amortisation of intangible assets (0.027) -

Capital grants and contributions applied 1.755 1.681

Amounts of non-current assets written off on disposal or sale as part of 1.114 1.184

the gain on disposal to the Comprehensive Income and Expenditure

Statement



Capital expenditure charged against the General Fund and HRA balances 2.448 2.529


Posting of HRA resources from revenue to the Major Repairs Reserve 13.129 12.711

Adjustments primarily involving the Financial Instruments Adjustment

Account:

Amount by which finance costs charged to the Comprehensive Income and 0.005 0.021

Expenditure Statement are different from finance costs chargeable in

the year in accordance with statutory requirements


Reversal of items relating to retirement benefits debited or credited to the (3.630) (2.967)

Comprehensive and Expenditure Statement

Employer's pensions contributions and direct payments to pensioners 1.738 1.661

payable in the year

Total Adjustments 4.637 8.366

Note

HR1


Page 143

Housing Stock

Balance Sheet Valuation

Vacant Possession Valuation

The dwellings within the HRA are valued in the Balance Sheet on an Existing Use Value for Social Housing (EUV-SH) basis. This is different to the Vacant Possession Valuation which could be obtained if a tenant was not present, and the difference reflects the economic cost to the government of providing council housing at less than open market rents. In the South West the government has set an adjustment factor of 35% to be applied to the Vacant Possession Values to obtain the EUV-SH Valuation for the Council’s dwellings. As at 31 March 2020 the Vacant Possession Value of dwellings within the Council’s HRA was £1.476bn.

31 March 2020 Movement 1 April 2019

1-bed dwellings 2,614 6 2,608

2-bed dwellings 4,187 4 4,183

3-bed dwellings 3,295 (18) 3,313

4 or more bed dwellings 136 (1) 137

Hostels 2 - 2-

Number of dwellings 10,234 (9) 10,243-

31 March 2020 Movement 1 April 2019

£m £m £m

Council dwellings 514.731 16.290 498.441

Housing Revenue Account land 1.110 (0.116) 1.226

Shops 0.489 (0.012) 0.501

Garages and other buildings 24.303 5.272 19.031

Vehicles, plant and equipment 0.005 - 0.005

Intangibles 0.027 (0.816) 0.843

Value of HRA assets 540.665 20.618 520.047

Note

HR2

Note

HR3

Note

HR4


Page 144

Housing Revenue Account Capital Expenditure and Financing

Depreciation

2019/20 2018/19

Capital Expenditure during the year: £m £m

Improvements to Council Stock 24.743 16.293

Intangible Assets - 0.001

New Build Construction 6.443 4.504

Total Expenditure 31.186 20.798

Financed from:

Major Repairs Reserve 15.657 14.518

New Build Reserve 2.355 1.519

Capital Grants 2.262 2.096

Capital Receipts 3.678 0.870

Housing Revenue Account 0.093 0.935

Prudential Borrowing 7.141 0.860

Balance at 31 March 31.186 20.798

Note

HR5

Note

HR6


Page 145

Impairments and Revaluations

The HRA had no impairments in 2019/20 (Nil in 2018/19). There were revaluations down of £11.452m (£9.079m in 2018/19) and reversal of previous revaluations down of £17.124m (£18.436m in 2018/19).

Major Repairs Reserve

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

2019/20 2018/19

£m £m

Operational Assets:

Council Dwellings 4.817 8.938

Other Land and Buildings 0.855 -

Total Operational Assets Revaluations 5.672 8.938

2019/20 2018/19

£m £m

Balance at 1 April (3.199) (5.006)

Transfer from Housing Revenue Account (13.129) (12.711)

Capital expenditure financing - Housing 15.657 14.518

Balance at 31 March (0.671) (3.199)

Note

HR7

Note

HR8


Page 146



Page 147

Collection Fund


Page 148

Collection Fund Income and Expenditure Statement

The Collection Fund is an agent’s statement that reflects the statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority in relation to the collection from taxpayers and distribution to Cornwall Council and to Devon and Cornwall Police of the council tax and non-domestic rates.

2019/20 2019/20 2019/20 2018/19 2018/19 2018/19

NNDR Council Tax Total NNDR Council Tax Total

£m £m £m £m £m £m

Income

Council tax receivable - (367.678) (367.678) - (344.389) (344.389)

Business rates receivable (159.203) - (159.203) (162.487) - (162.487)-

Total Income (159.203) (367.678) (526.881) (162.487) (344.389) (506.876)- -

Expenditure

Apportionment of previous years surplus

Cornwall Council 5.398 1.983 7.381 5.206 11.160 16.366

Devon and Cornwall Police Authority - 0.236 0.236 - 1.304 1.304

Central Government - - - 0.244 - 0.244

Precepts, demands and shares

Cornwall Council 148.960 320.870 469.830 149.868 303.176 453.044

Cornwall Council Designated Areas Grant 0.140 - 0.140 0.135 - 0.135

Cornwall Council Renewable Energy Grant 1.718 - 1.718 1.570 - 1.570

Devon and Cornwall Police Authority - 41.238 41.238 - 36.036 36.036

Business rates transitional protection (0.457) - (0.457) (0.042) - (0.042)

Charges to Collection Fund

Less: write offs of uncollectable amounts 0.624 0.953 1.577 1.110 0.723 1.833

Less: increase/(decrease) in impairment allowance for doubtful debts 0.845 3.212 4.057 0.257 1.164 1.421

Less: cost of collection 1.145 - 1.145 1.126 - 1.126

Less: provision for backdated appeals (0.400) - (0.400) 3.290 - 3.290

Total Expenditure 157.973 368.492 526.465 162.764 353.563 516.327

(Surplus)/deficit for the year (1.230) 0.814 (0.416) 0.277 9.174 9.451

Collection Fund balance brought forward (5.398) (3.959) (9.357) (5.675) (13.133) (18.808)

Collection Fund balance carried forward (6.628) (3.145) (9.773) (5.398) (3.959) (9.357)


Page 149

Notes to the Collection

Fund


Page 150

The Total National Non-Domestic Rateable (NNDR) Value and the NNDR

Multiplier

The Council is responsible for the collection of non-domestic rates in its area. From 1 April 2017 the Council retained 100% of income collected compared to prior regulations where the Council retained 50% of the income collected and 50% passed to central government.

The government specifies an amount to be collected, the multiplier, which for 2019/20 was 50.4p reducing to 49.1p for properties in receipt of Small Business Rate Relief with a rateable value of up to £51,000. The total rateable value for all non-domestic properties as at 31 March 2020 was £476.547m (£470.395m 2018/19).

The Council Taxbase

To enable the Council to set the Council Tax each year, there is requirement to calculate the Council Taxbase. This is derived from the number of domestic properties/dwellings in each Council Tax Band on the valuation list, applying discounts, exemptions and multiplying the result by a weighting factor applicable to each Band. Finally, the taxbase is adjusted to allow for an element of non-collection.

Valuation Band

Dwellings on

Valuation List

Adjusted

Number of

Dwellings per

Band

Weighting

Factor

Band D Non

MOD * MOD *

Band D

Equivalent

Dwellings

2019/20

A 63,072 39,794 6/9 26,523 175 26,698

B 69,873 53,522 7/9 41,628 145 41,773

C 57,978 48,971 8/9 43,530 81 43,611

D 42,370 37,188 9/9 37,188 57 37,245

E 24,648 22,663 11/9 27,699 11 27,710

F 8,814 8,236 13/9 11,897 7 11,904

G 4,126 3,858 15/9 6,430 2 6,432

H 382 315 18/9 630 18 648

Total 271,263 214,547 195,525 496 196,021

Less: Allowance for non-collection of 0.9% 1,760 1,760

Council Taxbase 194,261

* MOD (Ministry of Defence)

Note

CF2

Note

CF1

Pension Fund Accounts Cornwall Council 2019/20 Statement of Accounts

Page 151

Fire Fighters’

Pension Fund Account


Page 152

Fire Fighters’ Pension Fund Account

The funding arrangements for the fire fighters’ pension scheme changed on 1 April 2006. Before April 2006, the employer did not make contributions into a fund based upon a percentage of pay. The employer was responsible for its own fire fighters on a pay-as-you-go basis. Under the new arrangements, Cornwall Council no longer meets the cost of pensions directly, instead paying its contributions into a fund. The fund will also receive contributions from employees and transfers from other pension funds. It will also pay out pensions to retired fire fighters and to other pension funds if a scheme member transfers out. The fund has no investment assets and is balanced to zero each year either by the receipt of a top-up grant from the Ministry of Housing, Communities and Local Government, or by paying the surplus over to the government. Employees and employer’s contribution levels are based on percentages of pensionable pay set nationally by the Ministry of Housing, Communities and Local Government and subject to triennial revaluation by the Government’s Actuary Department.

Fund Account 2019/20 2018/19

£m £m

Contributions receivable:

Fire authority:

Contributions in relation to pensionable pay (3.086) (1.538)

Other - (0.027)

Firefighters contributions (1.359) (1.319)

Transfers in from other authorities (0.185) (0.013)

Benefits payable:

Pensions 4.921 4.943

Commutations and lump sum retirement benefits 1.111 0.716

Payments to and on account of leavers:

Refunds of contributions 0.029 0.027

Net amount payable for the year 1.431 2.789

Top-up grant payable by the Government (1.431) (2.789)

Total - -

Net Assets Statement 31 March 31 March

2020 2019

£m £m

Current Assets

Top-up receivable from the Government 0.376 0.922

Current Liabilities

Amount owing to the General Fund (0.376) (0.922)

Total - -


Page 153

The accounting policies followed are those set out in the main Statement of Accounting Policies. This Net Assets Statement does not include liabilities to pay pensions and other benefits after the Balance Sheet date. Further information on Pension Scheme Assets and Liabilities can be found in note 39 in the main financial statements.


Page 154



Page 155

Pension Fund

Accounts


Page 156

Cornwall Local Government Pension Scheme Accounts

Fund Account

Net Assets Statement

Dealings with members, employers and £m £m £m £m

others directly involved in the Fund

Contributions 89.956 91.561 P7

Transfers In from Other Pension Funds 8.868 3.559 P7

Total Contributions 98.824 95.120

Benefits Payable (77.105) (75.132) P7

Payments to and on account of leavers (3.324) (3.210) P7

Total Payments (80.429) (78.342)

Net Additions from Dealings with Members 18.395 16.778

Management Expenses (19.435) (17.359) P8

Net Additions including Fund Management Expenses (1.040) (0.581)

Returns on Investments

Investment Income 24.238 24.569 P9

Taxes on Income (0.059) (0.071) P9

Profit and Loss on Disposal of Investments and

Changes in Market Value of Investments (39.009) 107.947 P10

Net Returns on Investment (14.830) 132.445

Net Increase / (Decrease) in the Net Assets

Available for Benefits During the Year (15.870) 131.864

Opening Net Assets of the Scheme 1,929.970 1,798.106

Closing Net Assets of the Scheme at 31 March 1,914.100 1,929.970

2019-20 2018-19

No

tes

31 March 31 March

2020 2019

£m £m

Long Term Investments 0.427 0.395 P10

Investment Assets 1,904.989 1,920.475 P10

Investment Liabilities - -

Total Net Investments 1,905.416 1,920.870

Long Term Assets 3.595 4.029 P16

Current Assets 9.280 9.120 P16

Current Liabilities (4.191) (4.049) P16

Net Assets of the Scheme as at 31 March 1,914.100 1,929.970

No

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These accounts summarise the transactions of the Fund during the year, both for benefits and investments, and show the position of the Fund on 31 March 2020. They provide information about the financial position, performance and financial adaptability of the Fund and show how we have managed the Fund and what assets were in the Fund at the period end. Liabilities to pay pensions and other benefits in the future are not included but are dealt with in the Actuarial data included in Notes P14 and P15.

Notes to the Pension Scheme Accounts

Description of the Fund

The Cornwall Pension Fund “the Fund” is a Local Government Pension Scheme (LGPS). General Local Government Pension Schemes are required to be funded and the Fund is required to be sufficient to meet the estimated future pension entitlements of current and past employees. It is actuarially re-valued every three years to establish the contributions to be made by the employing authorities to achieve this objective. Transfers into or out of the Fund are sums received from, or paid to, other pension schemes. These relate to new and former members’ periods of pensionable employment, where transferable. After meeting pension payments and other benefits, the balance of the Pension Fund is invested in a range of investments. The Fund is governed by the Public Service Pensions Act 2013 and is administered in accordance with the following secondary legislation: The LGPS Regulations 2013 (as amended) The LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014 (as amended) The LGPS (Management and Investment of Funds) Regulations 2016 The Pensions Committee is responsible for all matters relating to the Pension Fund. The membership includes two member-nominated representatives and two representatives of the employers in the scheme. The Pensions Committee has approved a scheme of delegation to the Section 151 Officer. Whereas the Pensions Committee approves all policies, the Section 151 Officer is empowered to invest monies of the Pension Fund. The Pensions Committee receives investment advice from the Fund’s investment consultant, JLT (part of Mercer, a Marsh & McLennan Company), and also receives guidance from an independent advisor who helps ensure good governance. The Pensions Board carries out an oversight function to ensure such decisions are properly compliant with regulations, guidance and internal policies. An Investment Strategy Statement, setting out how the Fund’s investments are managed, can be viewed on the Pension Fund website at www.cornwallpensionfund.org.uk or in the Pension Fund Annual Report.

Membership All employees (except teachers and fire fighters who have their own schemes) are entitled to join the scheme. Individuals have the right to seek alternative pension arrangements if they

Note

P1


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so wish. On 31 March 2020 there were 156 employer records in the Fund with active members (156 in the previous year). The table below shows a breakdown of the membership.

Funding

Benefits are funded by contributions and investment earning. Contributions are made by

active members of the Fund in accordance with the Local Government Pension Scheme

Regulations 2013. There are two sections in the scheme, the main section and the 50/50

section. The main section contributions range from 5.5% to 12.5% of pensionable pay for

the year ending 31 March 2020. The 50/50 section allows members of the scheme to elect to

accrue a lower personal benefit by paying half contributions. Employer contributions are set

during the triennial actuarial funding valuation, the actuary determines the appropriate level

of employer contributions for each employer and these can be found on the Rates and

Adjustments Certificate. The last such valuation was at 31 March 2019, which revealed that

the Fund’s assets, were valued at £1.926 million and were sufficient to meet 90% of the

liabilities (i.e. the present value of promised retirement benefits) accrued up to that date.

The resulting deficit at the 2019 valuation was £207 million. The next valuation will be

carried out as at 31 March 2022.

Benefits Prior to 01 April 2014, pension benefits under the LGPS were based on final pensionable pay and length of pensionable service. From 01 April 2014, the scheme became a career average scheme, whereby members accrue benefits based on their pensionable pay in that year at an accrual rate of 1/49th. Accrued pension is reviewed annually, in line with the Consumer Prices Index.

31 March 31 March

2020 2019

£m £m

Long Term Investments 0.427 0.395 P10

Investment Assets 1,904.989 1,920.475 P10

Investment Liabilities - -

Total Net Investments 1,905.416 1,920.870

Long Term Assets 3.595 4.029 P16

Current Assets 9.280 9.120 P16

Current Liabilities (4.191) (4.049) P16

Net Assets of the Scheme as at 31 March 1,914.100 1,929.970

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Basis of Preparation

These accounts summarise the Fund’s transactions for 2019-20 and its position at the year ending 31 March 2020. They have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2019-20 (the code), based on International Financial Reporting Standards (IFRS) as published by the Chartered Institute of Public Finance and Accountancy (CIPFA). Paragraph 3.3.1.2 of the Code requires disclosure of any accounting standards issued but not yet adopted. No such accounting standards have been identified for 2019/20.

The Fund’s Administering Authority is Cornwall Council and the Council’s professional staff who prepared these accounts, followed the same accounting policies, principles and practices that have been adopted for the Council’s own Statement of Accounts for 2019-20. The accounts have been prepared on a going concern basis.

Accounting Policies

Fund Account – Revenue Recognition and Expense Items Contributions These are included on an accruals basis, where these amounts have been determined on the closure of accounts. Employee contribution rates are set in accordance with LGPS regulations, using common percentage rates for all LGPS schemes which rise according to pensionable pay. Employer contributions are set at the percentage rate recommended by the fund actuary for the period to which they relate. These accruals do not include the Fund’s liabilities to pay pensions and other benefits, in the future, to all the present contributors to the Fund. These liabilities are taken account of in the periodic actuarial valuations of the Fund and are reflected in the levels of employers’ contributions determined at these valuations. Lump sum benefits are accrued at year end. Employer deficit contributions are accounted for on the due dates on which they are payable, under the schedule of contributions set by the scheme actuary or on receipt, if earlier than the due date. Any amount due in the year but unpaid will be classed as a current financial asset. Amounts not due until future years are classed as long term financial assets. Investment Income and Expenses Investment income for pooled funds is reinvested within the funds and is reflected in the unit price. Interest income is recognised in the fund account as it accrues, and dividend income is recognised on the date the shares are quoted ex-dividend. Any amounts not received by the end of the reporting period are accrued for. Changes in the net market value of investments are recognised as income and comprise all realised and unrealised profits/losses during the year.

Note

P2

Note

P3


Page 160

Benefits Payable Pensions and lump-sum benefits payable include all amounts known to be due as at the end of the financial year. Any amounts due but unpaid are disclosed in the net assets statement as current liabilities. Transfer Values to/from Other Funds Transfer Values represent amounts received and paid during the period for individual members who have either joined or left Cornwall Pension Fund during the financial year. Individual transfers in/out are accounted for on a received or paid basis during the year and are calculated in accordance with the LGPS Regulations. Block transfers would be accrued, if they straddled the year end. Pension Fund Management Expenses Pension Fund Management Expenses have been prepared in accordance with the CIPFA guidance, Accounting for Local Government Pension Scheme Management Expenses (2016), and as such have been split into administrative expenses, oversight and governance costs and investment management expenses. All items of expenditure are charged to the Fund on an accruals basis. Administrative Expenses The staff costs of the pension administration team are charged direct to the Fund, as is the associated management, accommodation and other overheads which are apportioned to this function. Oversight and Governance Costs These include the staff costs of the investments team, advisors to the fund and other services which help the Fund provide effective oversight and governance. The associated management, accommodation and other overheads which are apportioned to this function are also charged to the Fund. Investment Management Expenses Investment Management Expenses comprise of expenses which are incurred in relation to the management of pension fund assets. Where an investment manager’s fee note has not been received by the reporting period end date, an estimate based upon the market value of the mandate at the end of the reporting period has been used. Management fees are agreed in the respective mandates governing the manager’s appointments and are based on the market value of these investments under their management and therefore increase or reduce as the value of these investments change. In addition, some of the Fund’s investments have an element of their fee which is performance related. Taxation For taxation purposes, the Fund is a registered public service scheme under section 1(1) of Schedule 36 of the Finance Act 2004 and as such is exempt from UK income tax on interest received and from capital gains tax on the proceeds of investments sold. As Cornwall Council is the administering authority for the Fund, VAT input tax is recoverable on all Fund activities, including expenditure on investment expenses. Income from overseas investments suffers withholding tax in the country of origin, unless exemption is permitted. Irrecoverable tax is accounted for as a fund expense as it arises.


Page 161

Net Assets Statement Financial Assets Financial assets are included in the net assets statement on a fair value basis at the reporting date. A financial asset is recognised in the net assets statement on the date the fund becomes party to the contractual acquisition of the asset and any gains or losses arising from changes in the fair value are recognised in the fund account. The values of investments included in the net assets statement have been determined at fair value in accordance with the requirements of the Code and IFRS13. For the purposes of disclosing levels of fair value hierarchy, the Fund has been minded to take consideration of the classification guidelines recommended in Practical Guidance on Investment Disclosures (PRAG/Investment Association, 2016). Cornwall Council and the other 9 shareholders each holds a 10% share in Brunel Pension Partnership Ltd (Company number 10429110). As such, no fund is deemed to have a significant influence and this long term investment is accounted for at fair value. The asset was initially measured at cost and is subsequently revalued for any impairment. The accounts for the year ended 31 March 2020 use the valuations for the Fund’s assets based on the figures provided by the Fund’s custodian, State Street. Foreign Currency Transactions Dividends, interest, purchases and sales of investments in foreign currencies have been accounted for at the spot market rates at the date of transaction Investments held in foreign currencies are converted at the closing rates of exchange, as at the financial year-end date. Cash and Cash Equivalents Cash comprises cash in hand (Bank) and demand deposits (MMFs), which also includes amounts held by the custodian. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to minimum risk of changes in value. Additional Voluntary Contributions: Cornwall Pension Fund provides an AVC scheme for its contributors, the assets of which are invested separately from Cornwall Pension Fund. AVC’s are paid to the AVC provider by employers and are specifically for providing additional benefits for individual contributors. Each AVC contributor receives an annual statement showing the amount held in their account and movements in the year. The Fund has no involvement in the management of these assets and, for this reason, they are not included in Cornwall Pension Fund’s financial statements in accordance with the LGPS (Management and Investment of Funds) Regulations 2016 section 4(2)(b) but are disclosed as a note. Further details are provided in Note P17.


Page 162

The Actuarial Present Value of Promised Retirement Benefits The Actuarial Present Value of Promised Retirement Benefits is disclosed and based on the requirements of IAS 19 Post-Employment Benefits and relevant actuarial standards. As permitted under the Code, Cornwall Pension Fund has included a note disclosing the actuarial present value of retirement benefits (Notes P14 and P15). Under the Pension Fund Regulations, employers’ contribution rates are set to enable the Fund to meet, eventually, 100% of its overall liabilities to pay benefits for both local authorities and other bodies (see Note P14). Contingent assets and contingent liabilities A contingent asset arises where an event has taken place giving rise to a possible asset whose existence will only be confirmed or otherwise by the occurrence of future events. A contingent liability arises where an event has taken place prior to the year-end giving rise to a possible financial obligation whose existence will only be confirmed or otherwise by the occurrence of future events. Contingent liabilities can also arise in circumstances where a provision would be made, except that it is not possible at the balance sheet date to measure the value of the financial obligation reliably. Contingent assets and liabilities are not recognised in the net asset statement but are disclosed by way of narrative in the notes. Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment. Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period. During the reporting period there were no prior period adjustments. Critical Judgments in Applying Accounting Policies

Pension Fund Liability The pension fund liability is calculated every three years by the appointed actuary, with annual updates in the intervening years. The methodology used is in line with accepted guidelines and in accordance with IAS 19. Assumptions underpinning the valuations are agreed with the actuary and are explained in Notes P14 and P15. The estimate of fund liability is subject to significant variances based on changes to the underlying assumptions. These actuarial revaluations are used to set future contribution rates and underpin the

Note

P4


Page 163

Fund’s most significant investment management policies, for example in terms of the balance. Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty

These financial statements contain estimated figures that are based on assumptions and judgements made by our investment managers about the future or that are otherwise uncertain. These estimates and assumptions affect the amounts reported for the assets and liabilities at balance sheet date and the amounts reported for revenues and expenses during the year. Estimates are made taking into account historical experience, current trends and other relevant factors. However, the nature of estimation means that actual outcomes could differ from the assumptions and estimates. The items in the Net Assets Statement at 31 March 2020, for which there is a significant risk of material adjustment in the forthcoming year, are as shown below:

Item Uncertainties Effect if actual results differ from assumptions

Actuarial present value of promised retirement benefits

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. A firm of consulting actuaries, Hymans Robertson, is engaged to provide the fund with expert advice about the assumptions to be applied.

The effects on the net pension liability of changes in the individual assumptions can be measured. A 0.5% decrease in the real discount rate assumption would increase the pension liability by £285m. A 0.5% rise in the salary increase rate would increase the liability by £28m. A 0.5% increase in assumed pension increase rate would increase the liability by £254m. A 1- year increase in assumed life

expectancy would increase the liability by 3-5%. More details on the Actuary’s assumptions and projections are shown in Notes P14 and P15.

Private Equities, Infrastructure, Property Limited Partnerships and Private Debt

These investments are not publicly listed and as such there is a degree of estimation involved in their valuation. Due to the uncertainties in the financial markets caused by the current Coronavirus pandemic, there is a further risk that the valuation of these investments may have an increased level of uncertainty and the estimated valuations may be misstated. There is an extremely wide range of possible outcomes, resulting in a particularly high

degree of uncertainty about the ultimate trajectory of the pandemic and the path and time needed to a return to a “steady state.” See Note P11, Fair Value - Basis of Valuation for further detail

The total private equity, infrastructure, property limited partnerships and Private Debt investments in the financial statements are £250.669m. Having engaged with the fund managers, on the predicted outcome of COVID-19 on these valuations, there is a risk that the actual values are lower than was estimated at year-end. This could result in a fall of valuations,

estimated between 0-10% of the reported value, which is between £0-£15.7m of the above value. Please note that the top value of the range is not 10% of the total value above, as some of these assets are predicted to not have such a high sensitivity by the fund managers i.e. a range of lower than 0-10%.

Note

P5


Page 164

Estimation Uncertainty – COVID-19 As per standard private markets practise, the Level 3 assets 31st March valuations are based on the 31st December’s valuations rolled forward with cashflows from the intervening period, therefore do not take fully into account the impact of the measures taken to control the COVID-19 pandemic and the associated potential impacts on the investment valuations. The Pooled property funds leave valuers with an unprecedented set of circumstances on which to base a judgement. Due to these factors it is considered that there is a material uncertainty attached to the valuations for these assets (see above for further details). Further detail on the estimation uncertainties for Private Equities, Infrastructure, Property Limited Partnerships and Private Debt can be found in the table above. This may have an impact on these valuations post year-end, however due to the time lag in information, this was not available when the accounts were prepared. The Fund has liaised with the managers for these assets and based on a best estimate basis (which itself is difficult to prove the accuracy of) the valuations for the aforementioned assets could be overvalued in the region of £0m-£27.9m, which at most would affect the Fund’s year end valuation by 1.5%.

Events after the Reporting Date These are events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. Two types of events can be identified:

a) Those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the reporting period), and

There is always a risk that these

investments may be under - or over - stated in the accounts due to estimation uncertainties. More detail is included in Note P11.

Pooled Property Funds (excluding Property Limited Partnerships – see above)

There are uncertainties in the financial markets caused by the current Coronavirus pandemic. Market activity is being impacted in all sectors and, as at the valuation date, it is not considered that valuers can rely upon previous comparable market evidence to fully inform opinions of value. Due to these uncertainties, there is a risk that the estimated values may be under or overstated. The current response to COVID-19 means that valuers are faced with an unprecedented set of circumstances on which to base a judgement. Valuations are therefore reported on the basis of

‘material valuation uncertainty’ as set out in VPGA 10 of the RICS Valuation – Global Standards. Consequently, less certainty – and a higher degree of caution – should be attached to the valuations than would normally be the case.

The total Pooled Property Funds (excluding Property Limited Partnerships – see above) are £121.9m. Having engaged with the fund managers on the predicted outcome of COVID-19 on these estimated valuations, there is a risk that the actual values are lower than was estimated at year-end, this could result in a fall of valuations, estimated between 0-10% of the reported value, which is between £0-£12.2m of the

above.

Note

P6


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b) Those that are indicative of conditions that arose after the reporting period (non-adjusting events after the reporting period).

Non-adjusting event – COVID-19 The outbreak of COVID-19, declared by the World Health Organisation as a “Global Pandemic” on the 11th March 2020, has impacted global financial markets. Travel restrictions have been implemented by many countries. Market activity is being impacted in all sectors by the efforts and restrictions being made to reduce the spread of the virus. There have been a number of material factors which make it difficult to quantify what the outcome could be on financial markets; How long will the pandemic last? Will there be a second flare-up? How deep will its economic impacts be? There has been unprecedented government support through stimulus policies including support via the furlough scheme, central banks have reacted by immediately reducing the base rate and have embarked on substantial asset purchase programs. Both the short and long-term implications of the shut-down and the affect it will have on companies remain uncertain and longer-term performance will ultimately be impacted by how long the recovery takes. For a pension scheme, a non-adjusting event could be the significant decline in the value of investments. As a result of Covid-19, the future investment values may be more volatile, at least over the short to medium term, until a vaccine or other successful cure is found for Covid-19. However, to date, although there has been significant variation to individual fund values (both upwards and downwards), as at the end of May 2020 the investments are valued overall at a higher value than at 31 March 2020 (in these financial statements). With regards to the Fund’s Level 3 investments, these areas are well diversified between sectors and also vintage year (year in which first influx of investment capital is delivered to a project or company) meaning that there will be a wide dispersion between the potential valuation effects. Some of the underlying Level 3 investment assets could have seen positive uplifts to their valuations (e.g. broadband\telecommunications infrastructure providers) as well as those which will have seen negative (e.g. transport sectors due to short-term demand shocks).

Analysis of Total Contributions and Benefits

The total contributions receivable and benefits payable during the year ending 31 March were as shown below:

Note

P7


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Taxation arising on benefits paid or payable is in respect of members whose benefits exceeded the life time or annual allowance and who elected to take lower benefits from the Fund in exchange for the Fund settling their tax liability.

Management Expenses

For the years ended 31 March, the analysis of management expenditure was as follows:

1 Other Costs are investment management expenses incurred which do not fall into the other subheadings

In addition to these costs, indirect costs are incurred through the bid-offer spread on investments sales and purchases. These are reflected in the costs of investment acquisitions and in proceeds from the sales of investments (see Note P10).

Cornwall

Council

Scheduled

Bodies

Designatory

Bodies

Admitted

Bodies 2020 2019

£m £m £m £m £m £m

Contributions Receivable

Employers' normal 25.625 19.154 4.491 2.844 52.114 51.096

Employers' fixed deficit 10.645 5.312 2.562 1.174 19.693 22.929

From Employees 9.175 6.376 1.681 0.908 18.140 17.526

(normal and additional)

Transfers In

Individual transfers 7.012 1.486 0.331 0.039 8.868 3.559

Other Income 0.002 0.005 0.002 - 0.009 0.010

Total Income 52.459 32.333 9.067 4.965 98.824 95.120

Benefits Payable

Pensions (49.592) (6.534) (2.477) (4.286) (62.889) (59.586)

Lump Sums (7.594) (2.622) (1.453) (0.978) (12.647) (13.574)

Death Benefits (0.664) (0.379) (0.146) (0.168) (1.357) (1.808)

Taxation where lifetime or (0.174) - (0.038) - (0.212) (0.164)

annual allowance exceeded

Payments on Account of Leavers

Refunds of Contributions (0.165) (0.175) (0.009) (0.008) (0.357) (0.344)

Transfers Out

Individual transfers (1.864) (0.719) (0.057) (0.327) (2.967) (2.866)

Total Expenditure (60.053) (10.429) (4.180) (5.767) (80.429) (78.342)

2020 2019

£m £m

Management Expenses

Administrative Costs 0.968 0.964

Investment Management Expenses

Management Fees 11.077 9.730

Performance Fees 0.873 0.356

Transaction Costs 3.164 2.779

Other Costs1 2.404 2.737

Custody Fees 0.018 0.046

Oversight and Governance Costs 0.931 0.747

Total Investment and Administration Expenses 19.435 17.359

Note

P8


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Included in Oversight and Governance Costs is £0.025m for the year to 31 March 2020 (£0.020m for the year to 31 March 2019) which relates to the external audit of the Pension Fund accounts.

Investment Income

The income paid back to the Fund generated by the Fund’s investments, net of tax, amounted to £24.179m. Other income is generated by the Fund’s investments but the holdings are invested in accumulation shares, which are held for capital growth. The income is held back and reflected in the unit price. Investment income for the year ended 31 March was received from the following sectors:

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

Investments

The following note shows the pooled investments split between UK and Overseas at 31 March. The vast majority of these funds are denominated in sterling, for a breakdown of those which are not in sterling, see Foreign Currency Risk (contained in Note P13).

The pooled funds denominated in sterling will on a day to day basis be subject to foreign currency risk (due to underlying holdings in other markets), which is taken into account with

2020 2019

£m £m

Pooled Investment Vehicles

Private equities, infrastructure and private debt 7.826 4.327

Pooled Property Funds 4.930 4.700

Unit Trust Bonds 0.858 -

Gain on foreign currency transactions when trading1 10.347 15.473

Interest on cash deposits 0.277 0.062

Other - 0.007

Gross Investment Income 24.238 24.569

Irrecoverable Witholding Tax (0.059) (0.071)

Net Investment Income 24.179 24.498

31 March 31 March

2020 2019

£m £m

Long Term Investments

Brunel Pension Partnership Ltd 0.427 0.395

Investment Assets

Pooled Investments 1,744.713 1,766.079

Pooled Property Investments 135.835 144.931

Cash Deposits 20.758 9.307 P13

Other Investment Balances 3.683 0.158

Net Investment Assets 1,905.416 1,920.870

No

tes

Note

P9

Note

P10


Page 168

the sterling unit pricing of these pooled funds as at 31 March. The managers of the pooled funds have the ability to manage this exposure by using forward exchange contracts or hedging the sterling value of investments that are priced in other currencies, if they deem this risk material.

The following note shows the reconciliation of movements in investments for the year ending 31st March 2020.

31 March 31 March

2020 2019

Investment Assets £m £m


Managed FundsUK Pooled Funds 688.817 677.745

Overseas Pooled Funds 904.198 978.137

UK Pooled Property 34.186 37.631

Overseas Pooled Property 5.425 5.527

UK Unit Trusts

Pooled Property 96.224 101.773

Insurance Policies

UK Insurance Policies 19.367 20.881

Overseas Insurance Policies 132.331 89.316

1,880.548 1,911.010

Cash Deposits 20.758 9.307

Investment Income Due and tax receivable 0.072 0.158

Amounts Receivable from Sales 3.611 -

24.441 9.465

Net Investment Assets of the Scheme as at 31 March 1,904.989 1,920.475

Value

1 April

2019

Purchases

at cost

Sales

Proceeds

Profit / Loss

and Change

in Market

Value

Value

31 March

2020

£m £m £m £m £m


Brunel Pensions Partnership Ltd 0.395 - - 0.032 0.427

Investment Assets


Pooled Equity Funds 633.841 166.732 (196.985) (30.288) 573.300

Pooled Property Funds 144.931 1.879 (7.444) (3.531) 135.835

Other Pooled Investments 1,132.238 764.641 (720.244) (5.222) 1,171.413

1,911.405 933.252 (924.673) (39.009) 1,880.975

Other adjustments for revaluation - -



Net Investment Assets 1,920.870 (39.009) 1,905.416


Page 169

The comparative data for the previous year are as follows:

Value

1 April

2018

Purchases

at cost

Sales

Proceeds

Profit / Loss

and Change

in Market

Value

Value

31 March

2019

£m £m £m £m £m


Brunel Pensions Partnership Ltd 0.840 - - (0.445) 0.395

Investment Assets


Pooled Equity Funds 575.709 223.552 (199.982) 34.562 633.841

Pooled Property Funds 132.667 8.659 (4.812) 8.417 144.931

Other Pooled Investments 1,070.988 286.508 (290.682) 65.424 1,132.238

1,780.204 518.719 (495.476) 107.958 1,911.405

Other adjustments for revaluation - (0.011) -



Net Investment Assets 1,788.091 107.947 1,920.870


Page 170

The fund managers’ portfolios were valued as follows:

1 The Aberdeen Frontier Opportunities Fund sold down during the 2019-20 financial year, due to Cornwall Pension Fund no longer having a direct

allocation to frontier market equities

2 As part of LGPS Pooling, the Funds Liability Driven Investment was transitioned from AXA to Brunel during the 2019-20 financial year

3 Arcmont Asset Management became an independent private debt business, following the completion of its separation from BlueBay Asset

Management in November 2019

4 As part of LGPS Pooling, the Fund’s investment with Capital International Emerging Markets was transitioned to the Brunel Emerging Markets

portfolio during the 2019-20 financial year

5 Previously Hermes Investment Management – In February 2020, Federated Investors Inc. and Hermes Investment Management formally

announced the rebranding of the two companies into Federated Hermes, Inc.

6 The Absolute Return Bonds holding with Insight Investment Management sold down during the 2019-20 financial year

7 M & G UK Financing Fund successfully wound down during the year, as the final assets in the fund unwound

% of % of

£m Total £m Total

Fund Manager

Investments managed by Brunel Pension Partnership

Brunel Infrastructure Portfolio 11.274 0.5% 4.706 0.2%

Brunel Emerging Market Equities4 138.728 7.3% - 0.0%

Brunel Liability Driven Investment2 (BlackRock) 378.296 19.9% - 0.0%

Total Investments managed by Brunel Pension Partnership 528.298 27.7% 4.706 0.2%

Investments managed outside of Brunel Pension Partnership

Aberdeen Standard Investments1 (Property, Private Equity 68.845 3.6% 120.610 6.3%

& Frontier Markets)

AXA Investment Managers2 (Liability Driven Investment) - 0.0% 362.119 18.9%

Arcmont Asset Management3 (Private Debt) 36.294 1.9% 26.703 1.4%

Capital International4 (Emerging Market Equities) - 0.0% 115.534 6.0%

Environmental Technology Fund (Private Equity) 0.312 0.0% 0.975 0.1%

Golub (Private Debt) 35.284 1.9% 20.145 1.0%

Federated Hermes5 (Infrastructure) 59.715 3.1% 42.124 2.2%

HSBC (Frontier Market Equities) 9.397 0.5% 48.559 2.5%

Infracapital Partners (Infrastructure) 35.778 1.9% 16.478 0.9%

Insight Investment Management6 (Absolute Return Bonds & 80.026 4.2% 139.899 7.3%

Multi Asset Credit)

Internally Managed Property Funds (Property) 80.801 4.2% 83.459 4.3%

Invesco Perpetual (Diversified Growth Fund) 201.113 10.6% 217.640 11.3%

Man Institutional Solutions (Hedge Fund) 123.498 6.5% 130.041 6.8%

M & G UK Financing Fund7 (Private Debt) - 0.0% 0.332 0.0%

Newton Investment Management (Global Equities) 425.175 22.3% 427.860 22.3%

Wilshire Associates (Private Equity) 44.314 2.3% 43.629 2.3%

Legal & General Investment Management (Insurance Fund) 151.698 8.0% 110.197 5.7%

Total Investments managed by Cornwall Pension Fund 1,352.250 71.0% 1,906.304 99.3%

Total Investments with external managers 1,880.548 98.7% 1,911.010 99.5%

Accruals and Cash Deposits 24.441 1.3% 9.465 0.5%

Total Investment Assets 1,904.989 100.0% 1,920.475 100%

31 March 2020 31 March 2019


Page 171

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

1 As part of LGPS Pooling, the Fund’s Liability Driven Investment was transitioned from AXA to Brunel during the 2019-20 financial

year

2 As part of LGPS Pooling, the Fund’s investment with Capital International Emerging Markets was transitioned to the Brunel Emerging Market

Equities portfolio during the 2019-20 financial year

Fair Value – Basis of Valuation

The basis of valuation of each class of investment asset is set out below, for further detail please see P5 and P6.

£m % of Total £m % of Total

Newton Global Equity X Shares Fund 425.175 22.3% 427.860 22.3%

Brunel Liability Driven Investment (BlackRock) 378.296 19.9% - -

Invesco Balanced Risk 8 Accumulation Shares 201.113 10.6% 217.640 11.3%

Legal & General Investment Management (Insurance Fund Policy 37084) 151.698 8.0% 110.197 5.7%

Brunel Emerging Market Equities 138.728 7.3% - -

Man Institutional Solutions - Cornwall Hedge Fund Strategy 123.498 6.5% 130.041 6.8%

AXA IM Smart Matching Solutions Fund A1 - - 362.119 18.9%

Capital International Emerging Markets (Growth Fund)2 - - 115.534 6.0%

31 March 201931 March 2020

Note

P11


Page 172

1

Infracapital, one of the Fund’s Infrastructure managers has been able to quantify the potential impact of COVID-19 on its investments and so has

made negative adjustments to their 31st March 2020 valuations using a COVID-19 red, amber and green analysis as the basis for their reductions

Description of asset

Valuation

hierarchy Basis of valuation

Observable and

unobservable inputs

Key sensitivities affecting the

valuations provided

Diversified Growth Funds Level 2 Valued using vendor pricing and OTC pricing

models

Evaluated price feeds Not Required

Pooled Equity Funds Level 2 Closing bid price where bid and offer prices

are published. Closing single price where

single price published

NAV-based pricing set

on a forward pricing

basis

Not Required

Multi Asset Credit Level 2 Average of broker price feeds Evaluated price feeds Not Required

Liability Driven Investment Level 2 Valued using vendor pricing and OTC pricing

models

Evaluated price feeds,

OTC Modelling and

economics of Swap

Not Required

Property Unit Trusts (UK) Level 2 Closing bid price where bid and offer prices

are published

Closing single price where single price

published



basis

Refer to Note P5 - Pooled

Property Funds regarding

commetary on the impact of

COVID-19 on valuations

Hedge Funds Level 2 Closing bid price where bid and offer prices

are published

Closing single price where single price

published



basis

Not Required

Insurance Policies Level 2 Closing bid price where bid and offer prices

are published

Evaluated price feeds Not Required

Private Debt Level 3 Fair value derived from the amortised cost

measurement

Initial recognition cost,

Principal repayments,

effective interest method,

Impairment reductions

Valuations could be affected by

material events occurring between

the date of the financial

statements provided and the

pension fund's own reporting date,

as the fund is exposed to credit

risk and asset determined to be

uncollectible will need to be

written off and by any differences

between the audited and

unaudited accounts. Due to the

COVID-19 pandemic as at the

31st March 2020, there is a

material uncertainty attached to

these valuations - see Note P5

and P6.

Property Limited Partnerships Level 3 Valued at fair value at the year-end using a

number of different models that relect the

general partner's determination of

assumptions and inputs that market

participants might reasonably use in valuing

the securities

NPV of projected cash

flows, internally-

generated pricing models

utilising NAV

methodologies,

underlying property

valuations, transactions

observable in the

marketplace and

reported NAV as

provided by the investee






by changes to expected

cashflows, and by any differences

between audited and unaudited

accounts. Due to the COVID-19

pandemic as at the 31st March

2020, there is a material

uncertainty attached to these

valuations - see Note P5 and P6.

Infrastructure Funds1 Level 3 Direct investments: Independent valuation

performed using discounted cash flow

methodology in accordance with international

private equity valuation guidelines

Future free cash flows

from underlying

investments

Cost of capital of

underlying investments


material events occurring after the

preparation of the independent

reports, and by changes to

expected cash flows. Due to the

COVID-19 pandemic as at the

31st March 2020, there is a

material uncertainty attached to

these valuations - see Note P5

and P6.

Private Equities Level 3 Comparable valuation of similar companies in

accordance with International Private Equity

and Venture Capital Valuation Guidelines

EBITDA multiple

Revenue multiple

Discount for lack of

marketability

Control premium






by changes to expected

cashflows, and by any differences

between audited and unaudited

accounts. Due to the COVID-19

pandemic as at the 31st March

2020, there is a material

uncertainty attached to these

valuations - see Note P5 and P6.


Page 173

Sensitivity of assets valued at level 3

Having analysed historical data and current market trends, and consulted with independent advisors, the Fund has determined that the valuation methods described above are likely to be accurate to within the following ranges and has set out below the consequent potential impact on the closing value of investments held at 31 March 2020. Due to the uncertainties referred to in Notes P5 and P6 regarding COVID-19, it is estimated that there is a higher probability of the valuations falling within the “Value at 31 March 2020 and the “Value on decrease” range.


Fair Value Hierarchy

The Fund is required to classify its investments using a fair value hierarchy that reflects the subjectivity of the inputs used in making an assessment of fair value. Fair value is the value at which the investments could be realised within a reasonable timeframe. This hierarchy is not a measure of investment risk but a reflection of the ability to value the investments at fair value. The fair value hierarchy has the following levels:

Assessed

valuation

range (+/-)

Value at 31

March 2020

Value on

increase

Value on

decrease

£m £m £m

Private Debt 5 71.578 75.157 67.999

Property Limited Partnerships 10 13.887 15.276 12.498

Private Equities 15 58.437 67.202 49.671

Infrastructure Funds 10 106.767 117.444 96.090

Total 250.669 275.079 226.258

Assessed

valuation

range (+/-)

Value at 31

March 2019

Value on

increase

Value on

decrease

£m £m £m

Private Debt 5 47.180 49.539 44.821

Property Limited Partnerships 10 16.385 18.024 14.747

Private Equities 15 61.854 71.132 52.576

Infrastructure Funds 10 63.308 69.639 56.977

Total 188.727 208.334 169.121


Page 174

• Level 1 – Unadjusted, quoted prices in an active market for identical assets or liabilities

that the reporting entity has the ability to access at the measurement date.

Listed investments are shown at bid prices. The bid value of the investment is based on the bid market quotation of the relevant stock exchange.

• Level 2 – Inputs, other than quoted prices under Level 1, that are observable for the asset or liability, either directly or indirectly. For example, where an instrument is traded in a market that is not considered to be active, or where valuation techniques are used to determine fair value and where these techniques use inputs that are based significantly on observable market data.

• Level 3 – These are financial instruments where at least one input that could have a significant effect on the valuation is not based on observable market data, an example of these instruments is unquoted equities.

The valuation relies on the reporting entity’s own assumptions concerning the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. This is done with reference to the International Private Equity and Venture Capital Valuation Guidelines, which follow the principles of IFRS and US GAAP. Valuations for the Fund’s private equities are usually undertaken at the end of December and cash flow adjustments are used to roll forward valuations to 31 March. Material Valuation Uncertainty See Notes P5 and P6 regarding commentary on the impact of COVID-19 on valuations.

The following table sets out the Fund's financial assets and liabilities measured at fair value according to the fair value hierarchy at 31 March 2020:

Quoted Market Using Observable With Significant

Price Inputs Unobservable Inputs

Investment Assets Level 1 Level 2 Level 3 Total

as at 31 March 2020 £m £m £m £m

Financial Assets at Fair Value

Through Profit and Loss - 1,629.879 250.669 1,880.548

Other Investment Assets 24.441 - - 24.441

Total Investment Assets 24.441 1,629.879 250.669 1,904.989


Page 175

The comparative table for 31 March 2019 is shown below:

Reconciliation of Fair Value Measurements within level 3

The comparative table for 31 March 2019 is shown below:

Quoted Market Using Observable With Significant

Price Inputs Unobservable Inputs

Investment Assets Level 1 Level 2 Level 3 Total

as at 31 March 2019 £m £m £m £m

Financial Assets at Fair Value

Through Profit and Loss - 1,722.283 188.727 1,911.010

Other Investment Assets 9.465 - - 9.465

Total Investment Assets 9.465 1,722.283 188.727 1,920.475

Private Equities

Infrastructure

Funds Private Debt

Property Limited

Partnerships Total value

£m £m £m £m £m

Market value April 2019 61.854 63.308 47.180 16.385 188.727

Transfers into Level 3 - - - - -

Transfers out of Level 3 - - - - -

Purchases during the year 1.788 44.691 32.874 1.879 81.232

Sales during the year (12.355) (4.269) (9.581) (2.627) (28.831)

Unrealised gains/losses (0.520) 2.980 1.097 (1.750) 1.807

Realised gains/losses 7.670 0.057 0.008 - 7.735

Market value 31 March 2020 58.437 106.767 71.578 13.887 250.669

Private Equities

Infrastructure

Funds Private Debt

Property Limited

Partnerships Total value

£m £m £m £m £m

Market value April 2018 56.214 61.099 18.517 7.024 142.854

Transfers into Level 3 - - - - -

Transfers out of Level 3 - - - - -

Purchases during the year 4.037 5.358 33.201 8.659 51.255

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

Unrealised gains/losses 6.746 (2.442) 1.531 1.076 6.911

Realised gains/losses 5.511 0.628 0.122 0.001 6.262

Market value 31 March 2019 61.854 63.308 47.180 16.385 188.727


Page 176

Financial Instruments

Classification of Financial Instruments

Net Gains and Losses on Financial Instruments

31 March 31 March

2020 2019

£m £m

Financial Assets

Fair value through profit or loss

Pooled Investments 1,744.713 1,766.079

Pooled Property Investments 135.835 144.931

Long Term Investments 0.427 0.395

Assets at amortised cost

Cash 21.912 10.330


Debtors 11.721 12.126

Total Financial Assets 1,918.291 1,934.019


Measured at amortised cost

Creditors (4.191) (4.049)

Total Financial Liabilities (4.191) (4.049)

Grand Total 1,914.100 1,929.970

31 March 2020 31 March 2019

£m £m

Financial Assets

Fair Value Through Profit and Loss (39.009) 107.947

Loans and Receivables - -

Total (39.009) 107.947

Note

P12


Page 177

Nature and Extent of Risks Arising from Financial Instruments The Cornwall Council Pension Fund's objective is to generate positive investment returns for a given level of risk. Therefore, the Fund holds financial instruments such as equities, bonds, and cash and cash equivalents in a number of different investment vehicles. In addition, debtors and creditors arise as a result of its operations. The value of these financial instruments in the financial statements approximates to their fair value. The main risks from the Fund's holding of financial instruments are market risk, credit risk and liquidity risk. Market risk includes price risk, interest rate risk and foreign currency risk. The Fund's investments are managed on behalf of the Fund by the appointed fund managers. Each fund manager is required to invest the assets managed by them in accordance with the terms of their investment guidelines or pooled fund prospectus. The Pensions Committee has determined that the investment management structure is appropriate and is in accordance with its investment strategy. The Committee regularly monitors each manager, and considers and takes advice on the nature of the investments made and associated risks. The Fund's investments are held by State Street Bank and Trust Company, who act as custodian on behalf of the Fund, or with the custodian appointed by the pooled investment vehicle. Because the Fund adopts a long-term investment strategy, the high level risks described below will not alter significantly during the year unless there are significant strategic or tactical changes in the portfolio.

Market Risk

Market risk represents the risk that the fair value of a financial instrument will fluctuate because of changes in market prices, interest rates or currencies. The Fund is exposed through its investments in equities, bonds and investment funds, to all these market risks. The aim of the investment strategy is to manage and control market risk within acceptable parameters, while optimising the return from the investment portfolio. In general, market risk is managed through the diversification of the investments held by asset class, investment mandate guidelines and fund managers. The risk arising from exposure to specific markets is limited by the strategic asset allocation, which is regularly monitored by the Committee.

Market Price Risk

Market price risk represents the risk that the value of a financial instrument will fluctuate caused by factors other than interest rate or foreign currency movements, whether those changes are caused by factors specific to the individual instrument, its issuer or factors affecting the market in general e.g. COVID 19 and geopolitical trade tensions. Market price risk arises from uncertainty about the future value of the financial instruments that the Fund holds. All investments present a risk of loss of capital; the maximum risk being determined by the fair value of the financial instruments. The fund managers mitigate this

Note

P13


Page 178

risk through diversification, in line with their own investment strategies and mandate guidelines.

Market Price Risk - Sensitivity Analysis

The sensitivity of the Fund's investments to changes in market prices has been analysed using the volatility of return experienced in each asset class on a three year average basis, as observed and provided by PIRC during the year to 31 March 2020. The volatility data is broadly consistent with a one-standard deviation movement in the value of the assets. The analysis assumes that all other variables remain constant. Movements in market prices would have increased or decreased the net assets, at 31 March 2020, by the amounts shown below:

1 The percentage change for total assets includes the impact of correlation across asset classes. Therefore, the values on increase

and decrease

do not add to the totals.


1 The percentage change for total assets includes the impact of correlation across asset classes. Therefore, the values on increase and decrease

do not add to the totals

Value Volatility of

Value on

Increase

Value on

Decrease

As at 31 March 2020 £m Return % £m £m

Global Equities 573.300 10.92% 635.906 510.694

Property 135.835 2.60% 139.372 132.298

Bonds 80.026 7.45% 85.988 74.064

Other pooled investment vehicles and

private equities 1,091.387 12.75% 1,230.539 952.235

Total1 1,880.548 7.80% 2,027.202 1,733.894

Value Volatility of

Value on

Increase

Value on

Decrease

As at 31 March 2019 £m Return % £m £m

Global Equities 633.841 9.35% 693.115 574.567

Property 144.931 2.41% 148.421 141.441

Bonds 139.899 6.36% 148.795 131.004

Other pooled investment vehicles and

private equities 992.339 17.50% 1,165.999 818.680

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


Page 179

Interest Rate Risk

The Fund recognises that interest rates can vary and can affect both income to the Fund and the carrying value of fund assets, both of which affect the value of the net assets available to pay benefits. The Liability Driven Investment is used as a hedge to reduce risk. The analysis that follows assumes that all other variables remain constant and shows the effect of a +/- 1% change in interest rates.


Foreign Currency Risk Comparators

Foreign currency risk represents the risk that the fair value of financial instruments when expressed in sterling, the Fund’s base currency, will fluctuate because of changes in foreign exchange rates. The Fund is exposed to currency risk on investments denominated in a currency other than sterling. For a sterling based investor, when sterling weakens, the sterling value of foreign currency denominated investments rises. As sterling strengthens, the sterling value of foreign currency denominated investment falls.

Interest Rate Risk as at 31 March 2020 Value

Potential

movement

Value on

Interest Rate

Decrease

Value on

Interest Rate

Increase

1% change in

interest rates

£m £m £m £m

Liability Driven Investment 378.296 162.783 541.079 215.513

Total 378.296 162.783 541.079 215.513

Interest Rate Risk as at 31 March 2019 Value

Potential

movement

Value on

Interest Rate

Decrease

Value on

Interest Rate

Increase

1% change in

interest rates

£m £m £m £m

Liability Driven Investment 362.119 142.187 504.306 219.932

Total 362.119 142.187 504.306 219.932


Page 180

Foreign Currency Risk - Sensitivity Analysis

The following table analyses the Fund’s currency exposure as at 31 March 2020 as observed and provided by PIRC. PIRC analysed historical data and considered the potential volatility associated with foreign exchange rate movements to be 7.35% (as measured by one standard deviation). The below table reports foreign currency sensitivity only for the pooled funds denominated in a currency other than sterling, for the pooled funds which are denominated in sterling at the 31 March, the Fund is of the opinion that these represent a fair valuation of the pooled funds in sterling, when taken in conjunction with the market price risk sensitivity analysis. The pooled funds denominated in sterling will on a day to day basis be subject to foreign currency risk (due to underlying holdings in other markets – see Note P10), which is taken into account with the sterling unit pricing of these pooled funds as at 31 March. The managers of the pooled funds have the ability to manage this exposure by using forward exchange contracts or hedging the sterling value of investments that are priced in other currencies, if they deem this risk material. The analysis assumes that all other variables, in particular interest rates, remain constant:

1 The Overseas Equities which were denominated in a currency other than sterling (USD), were sold down in year as part of the transition from

the Capital Emerging Markets Equities holding


Overseas Assets as at 31 March 2020 Value

Potential

Percentage

Value on

Increase

Value on

Decrease

£m Change £m £m

Overseas Equities1 - - - -

Cash 1.264 7.35% 1.357 1.171

Property 5.425 7.35% 5.824 5.026

Alternatives 101.801 7.35% 109.286 94.316

Total Overseas Assets 108.490 7.35% 116.467 100.513

Overseas Assets as at 31 March 2019 Value

Potential

Percentage

Value on

Increase

Value on

Decrease

£m Change £m £m

Overseas Equities 115.534 9.10% 126.033 105.034

Cash 2.279 9.10% 2.487 2.073

Property 5.527 9.10% 6.029 5.024

Alternatives 85.730 9.10% 93.521 77.939

Total Overseas Assets 209.070 9.10% 228.070 190.070


Page 181

Credit Risk

Credit risk represents the risk that the counterparty to a financial instrument will fail to meet an obligation and cause the Fund to incur a financial loss. This is often referred to as counterparty risk. The Fund is exposed to credit risk through its underlying investments (including cash balances) and the transactions it undertakes to manage its investments. The careful selection and monitoring of counterparties (including brokers, custodian and investment managers) minimises the credit risk that may occur through the failure to settle transactions in a timely manner. The Fund's contractual exposure to credit risk is represented by the net payment or receipt that remains outstanding and the cost of replacing the position in the event of a counterparty default. Bankruptcy or insolvency of the Custodian may affect the Fund's access to its assets. However, all assets held by the Custodian are ring-fenced as client assets and therefore cannot be claimed by creditors of the Custodian. The Fund manages its risk by monitoring the credit quality and financial position of the Custodian. The Fund does not hold any fixed interest securities directly and the manager of the Multi-Asset Credit funds is responsible for managing credit risk. The market prices of the bonds incorporate an assessment of credit quality in their valuation, which reflects the probability of default (the yield of a bond will include a premium that will compensate for the risk of default). Another source of credit risk is the cash balances held to meet operational requirements or by the managers at their discretion. Internally held cash is managed in line with Cornwall Pension Fund’s Cash Management Strategy. The Fund invests surplus cash with the Custodian in diversified, money market funds. (See table below for breakdown of this).

Liquidity Risk

Liquidity risk represents the risk that the Fund will not be able to meet its financial obligations as they fall due. A substantial portion of the Fund's investments consist of readily-realisable securities (in particular equities and bonds). However, the main liability of the Fund is the benefits payable, which fall due over a long period and the investment strategy reflects the long term nature of these liabilities. Therefore the Fund is able to

Cash and cash equivalents At 31 March At 31 March

2020 2019

Rating £m £m

Money Market Funds

Aberdeen Standard Liquidity Fund AAA 12.933 4.832

State Street Global Advisors (SSGA) AAA 6.116 4.293

Bank

Natwest Plc A+ 1.154 1.023

State Street Bank & Trust Company AA+ 1.709 0.181

Total cash and cash equivalents 21.912 10.329


Page 182

manage the liquidity risk that arises from its investments in less liquid asset classes which are subject to longer redemption periods and cannot be considered as liquid as the other investments. The Fund maintains a cash balance to meet working requirements. The majority of the Fund’s invested assets could be realised within a three month period. The exceptions to this would be private equities, infrastructure, private debt and property limited partnerships. At 31 March 2020, these amounted to £250.669m, which represented 13.2% of the Fund’s investment assets (at 31 March 2019, these amounted to £188.727m, which represented 9.8% of the Fund’s investment assets).

Actuarial Statement for 2019-20

(This note has been prepared by the Fund’s Actuary, Hymans Robertson)

This statement has been prepared in accordance with Regulation 57(1)(d) of the Local

Government Pension Scheme Regulations 2013. It has been prepared at the request of the

Administering Authority of the Fund for the purpose of complying with the aforementioned

regulation.

Description of Funding Policy

The funding policy is set out in the Administering Authority’s Funding Strategy Statement

(FSS), dated April 2020. In summary, the key funding principles are as follows:

• to ensure the long-term solvency of the Fund using a prudent long term view.

This will ensure that sufficient funds are available to meet all

members’/dependants’ benefits as they fall due for payment;

• to ensure that employer contribution rates are reasonably stable where

appropriate;

• to minimise the long-term cash contributions which employers need to pay to the

Fund by recognising the link between assets and liabilities and adopting an

investment strategy which balances risk and return (this will also minimise the

costs to be borne by Council Tax payers);

• to reflect the different characteristics of different employers in determining

contribution rates. This involves the Fund having a clear and transparent funding

strategy to demonstrate how each employer can best meet its own liabilities over

future years; and

• to use reasonable measures to reduce the risk to other employers and ultimately

to the Council Tax payer from an employer defaulting on its pension obligations.

The FSS sets out how the Administering Authority seeks to balance the conflicting aims of

securing the solvency of the Fund and keeping employer contributions stable. For employers

whose covenant was considered by the Administering Authority to be sufficiently strong,

contributions have been stabilised to 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 still around a 70% likelihood that the Fund will

achieve the funding target over 20 years.

Note

P14


Page 183

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 £1,926 million, were sufficient to

meet 90% of the liabilities (i.e. the present value of promised retirement benefits) accrued

up to that date. The resulting deficit at the 2019 valuation was £207 million.

Each employer had contribution requirements set at the valuation, with the aim of achieving

full funding within a time horizon and probability measure as per the FSS. Individual

employers’ contributions for the period 1 April 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.

Method

The liabilities were assessed using an accrued benefits method which takes into account

pensionable membership up to the valuation date; and makes an allowance for expected

future salary growth to retirement or expected earlier date of leaving pensionable

membership.

Assumptions

A market-related approach was taken to valuing the liabilities, for consistency with the

valuation of the Fund assets at their market value.

The key financial assumptions adopted for the 2019 valuation were as follows:

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 a long term rate of

1.25% p.a. Based on these assumptions, the average future life expectancies at age 65 are

as follows:

31 March 2019

% p.a.

Discount rate 4.1%

Salary increase assumption 2.3%

Benefit increase assumption (CPI) 2.3%

Financial Assumptions


Page 184

1 Future

pensioners are assumed to be aged 45 at the 2019 valuation

Copies of the 2019 valuation report and Funding Strategy Statement are available on request

from Cornwall Council, the Administering Authority to the Fund.

Experience over the period since March 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 based on the data as at 31 March 2022. The

Funding Strategy Statement will also be reviewed at that time.

Julie West FFA Fellow of the Institute and Faculty of Actuaries For and on behalf of Hymans Robertson LLP

23 April 2020 Actuarial present value of Promised Retirement Benefits (This note was prepared by the Fund’s Actuary, Hymans Robertson)

CIPFA's Code of Practice on Local Authority Accounting 2019/20 requires Administering

Authorities of LGPS funds that prepare pension fund accounts to disclose what IAS26 refers

to as the actuarial present value of promised retirement benefits. I have been instructed by

the Administering Authority to provide the necessary information for the Cornwall Pension

Fund (“the Fund”).

The actuarial present value of promised retirement benefits is to be calculated similarly to

the Defined Benefit Obligation under IAS19. There are three options for its disclosure in

pension fund accounts:

showing the figure in the Net Assets Statement, in which case it requires the statement to

disclose the resulting surplus or deficit;

as a note to the accounts; or

by reference to this information in an accompanying actuarial report.

If an actuarial valuation has not been prepared at the date of the financial statements, IAS26

requires the most recent valuation to be used as a base and the date of the valuation

disclosed. The valuation should be carried out using assumptions in line with IAS19 and not

the Pension Fund’s funding assumptions.

Males Females

Current Pensioners 21.4 years 23.6 years

Future Pensioners 1 22.3 years 25.1 years

Note

P15


Page 185

I have been instructed by the Administering Authority to provide the necessary information

for the Cornwall Pension Fund, which is in the remainder of this note.

Balance sheet

The promised retirement benefits at 31 March 2020 have been projected using a roll forward

approximation from the latest formal funding valuation as at 31 March 2019. The

approximation involved in the roll forward model means that the split of benefits between

the three classes of member may not be reliable. However, I am satisfied that the total

figure is a reasonable estimate of the actuarial present value of benefit promises.

Note that there is no allowance in the above figures at 31 March 2020 for the “McCloud

ruling”, i.e. an estimate of the potential increase in past service benefits arising from this

case affecting public service pension schemes. Due to the adoption of CPI as the Fund’s

salary increase assumption, we expect the impact of the McCloud judgements to have a

negligible impact on the assessment of the Fund’s liabilities.

The figures include both vested and non-vested benefits, although the latter is assumed to

have a negligible value. Further, I have not made any allowance for unfunded benefits.

It should be noted the above figures are appropriate for the Administering Authority only for

preparation of the Pension Fund accounts. They should not be used for any other purpose

(i.e. comparing against liability measures on a funding basis or a cessation basis).

Assumptions

The assumptions used are those adopted for the Administering Authority’s IAS19 report and

are different as at 31 March 2020 and 31 March 2019. I estimate that the impact of the

change in financial assumptions to 31 March 2020 is to decrease the actuarial present value

by £290m. I estimate that the impact from of the change in the demographic and longevity

assumptions is to decrease the actuarial present value by £107m.

Financial assumptions

My recommended financial assumptions are summarised below:

Year ended 31 March 2020

£m

31 March 2019

£m

Active members 1,144 1,662

Deferred members 639 670

Pensioners 1,063 952

Present value of Promised Retirement Benefits 2,846 3,284


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Longevity assumption

Life expectancy is 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 these assumptions, the average future life expectancies at age 65

are summarised below:

1 Future

pensioners are assumed to be aged 45 at the 2019 valuation

Please note that the longevity assumptions have changed since the previous IAS26

disclosure for the Fund.

Commutation assumptions

An allowance is included for future retirements to elect to take 40% of the maximum

additional tax-free cash up to HMRC limits for pre-April 2008 service and 70% of the

maximum tax-free cash for post-April 2008 service. Julie West FFA Fellow of the Institute and Faculty of Actuaries For and on behalf of Hymans Robertson LLP

30 April 2020

31 March 2020 31 March 2019

% p.a. % p.a.

Pensions Increase Rate 1.9% 2.5%

Salary Increase Rate 1.9% 2.6%

Discount Rate 2.3% 2.4%

Year ended

Males Females

Current Pensioners 21.4 years 23.6 years

Future Pensioners 1 22.3 years 25.1 years


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Current Assets and Liabilities

Long Term Debtors

31 March 31 March

2020 2019

£m £m

Current Assets

Administration income receivable 0.443 0.329

Employees Contributions receivable 1.927 1.930

Employers Contributions receivable 5.459 5.384

Pension strain income receivable 0.297 0.454

Cash Balances 1.154 1.023

Total Current Assets 9.280 9.120

Current Liabilities

Administration expenses payable (2.689) (3.117)

Pension lump sums payable (1.502) (0.932)

Total Current Liabilities (4.191) (4.049)

Total Current Assets and Liabilities 5.089 5.071

31 March 31 March

2020 2019

£m £m

Long Term Debtors

Reimbursement of Lifetime Allowance Tax Charges 0.244 0.198

Cessation Payment Due 3.351 3.831

Total Long Term Debtors 3.595 4.029

Note

P16


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Additional Voluntary Contributions (AVC)

1 AVC provider transferred from Equitable Life to Utmost in year

Related Party Transactions

Cornwall Council is the administering authority of the Fund. The majority of investments are managed by external fund managers, although during the year a small proportion was held as cash and controlled in nominated money market accounts for cash flow management purposes, see Note P13 for details. Transactions with the Fund in respect of employees in the Scheme are shown in Note P7.

Included in Management Expenses (see Note P8) are charges amounting to £1.205m incurred for the internal costs of providing these services during the year to 31 March 2020 (£1.178m for the year to 31 March 2019). For the year to 31 March 2020 this is composed of £0.968m Administrative Costs and £0.237m Oversight and Governance Costs (£0.964m Administrative Costs and £0.214m Oversight and Governance Costs for the year to 31 March 2019). Senior officers of the Pension Fund are members of the Fund as employee contributors. Following the local elections in May 2017, Cornwall Council Councillors are no longer eligible for active membership of the Pension Fund therefore, as at 31 March 2020, there were two Councillors serving on the Pensions Committee who were pensioners of the Fund and one employee and employer representative who were also pensioners of the Fund, along with one employer representative who was active in the Fund. The Council made payments to each Cornwall Council elected Member serving on the Pensions Committee, in accordance with the Council’s Member’s Allowances Scheme. These payments were met by Cornwall Council and declared in their statutory accounts. Brunel Pension Partnership Ltd (Company number 10429110) Brunel Pensions Partnership Ltd (Brunel) was formed on the 14th October 2016 and will oversee the investment of pension fund assets for the Avon, Buckinghamshire, Cornwall, Devon, Dorset, Environment Agency, Gloucestershire, Oxfordshire, Somerset, and Wiltshire Funds.

Value Value at

31 March 2020 31 March 2019

£m £m

AVC Scheme

Standard Life 2.149 2.094

Utmost1 0.411 0.442

Total 2.560 2.536

Changes During the Year

Contributions 0.288 0.213

Paid Out 0.186- (0.216)

Change in Market Value 0.077- 0.078

Note

P17

Note

P18


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Each of the 10 local authorities, including Cornwall Council, own 10% of Brunel. For the year ended 31st March 2020, Brunel’s service charge to the Cornwall Pension Fund totalled £1.052m (this includes £85,000 true up between the partner funds from previous years).

Key Management Personnel

The key management personnel of the Fund are the Section 151 Officer, the Head of Pensions, Treasury & Technical and the Pensions Committee. The table below shows the benefits they receive. This is not the total remuneration these posts receive, but is a notional amount based on their time allocated to the pension fund.

Contractual Commitments and Contingent Liabilities

Outstanding capital commitments (investments) at the prevailing exchange rate on the day at 31 March 2020 were £142.653m (£213.903m at 31 March 2019). These commitments relate to outstanding call payments due to the Fund’s partnerships for private equities, private debt, infrastructure and property. The amounts called by these partnerships are irregular in both size and timing over a period of between four and six years from the date of each original commitment. Thirty admitted body employer contracts in the Cornwall Pension Fund hold insurance bonds to guard against the possibility of being unable to meet their pension obligations. These bonds are drawn in favour of the Pension Fund and payment will only be triggered in the event of employer default. No such defaults have occurred in 2019/20 or 2018/19.

Contingent Asset

Cornwall Pension Fund has ongoing claims against some European countries for tax withheld on foreign income dividends. KPMG, who submitted these claims in 2007, are still pursuing these claims on behalf of the Fund. These claims are made on the basis that, within the European Union, all member states should enjoy the same tax status. Resident investors should not be classed differently to non-residents. Court cases such as those known as ‘Manninen’ and ‘Fokus’ have added to the strength of the arguments. The value of these claims is in excess of £250,000. Also in 2007, claims were made against the HM Revenue and Customs for potential tax recovery in respect of manufactured dividends on equity stock lent out through the stock

2020 2019

£m £m

Short-term benefits 0.081 0.074

Post-employment benefits 0.007 0.007

Total 0.088 0.081

Note

P20

Note

P19


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lending programme. Further claims were registered in the High Court in 2009-10 and again in 2012-13. These claims, to date, have a value in excess of £1.6m. According to our tax advisers, KPMG, recent developments offer some optimism on the success of these claims. In 2019 further action was taken to protect these claims with the UK set to leave the European Union. All these claims noted above are being pursued through group action along with other pension funds. No accruals have been included in the accounts for these tax claims because outcomes are uncertain, although the amounts are significant. KPMG were contacted for an update in March 2020 and these claims are still ongoing.

Glossary Cornwall Council 2019/20 Statement of Accounts

Page 191

Glossary


Page 192

Glossary

This section helps explains some of the more technical terms used in the Statement of Accounts. Accounting Policies The policies, concepts and conventions used in the preparation of the accounts.

Accruals

Sums included in the accounts to cover income and expenditure attributable to the accounting period, for which payment has not been received or made by 31st March.

Assets Held for Sale

These are long-term assets which are surplus to the Council’s operational needs and are being actively marketed for sale.

Capital Expenditure

Expenditure on the acquisition of a long-term asset or expenditure which adds to and not merely maintains the value on an existing long-term asset.

Capital Financing Costs

The costs of financing long-term assets, such as the interest costs of external loans and monies used to repay debt.

Capital Receipts

Income received from the sale of long-term assets.

Contingent Asset

A contingent asset is a possible asset which could arise following the occurrence of a future event outside the Council’s control.

Contingent Liability

A contingent liability is a possible liability which could arise following the occurrence of a future event outside the Council’s control or is a present obligation where it is not possible to measure the outcome with sufficient reliability.

Council Tax Precept

A property based tax that is set and administered by the Council, alongside the share of Council Tax levied by the Devon and Cornwall Police Authority and other Town and Parish Councils in Cornwall.


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Creditors

Amounts owed by the Council for goods received or services provided, but for which payment has not been made by the 31st March.

Curtailment

Within the defined benefit schemes impacting on the financial results of the Council, curtailment will arise if an event occurs reducing the expected future service of employees. Normally, this arises from redundancy or early retirement or if there is an amendment to terms impacting on current employees.

Debtors

Debtors represent amounts due to the Council which are unpaid at 31st March.

Defined Benefit Scheme

Defined benefit pension schemes prescribe the amounts members will receive as a pension regardless of contributions and investment performance. Employers are obliged to fund any shortfalls.

Depreciation

Depreciation is the fall in value of an asset, as recorded in the financial records, due to wear and tear, age and obsolescence.

Finance Leases

This is where the eventual benefit of the asset will pass from the leasing company to the Council. Annual payments are a combination of interest and the purchase of the asset.

IFRS

International Financial Reporting Standards.

Imprest Account

Petty Cash Accounts used for small items of expenditure.

Inventory

Previously referred to as ‘stock’.

LOBO - Lender Option Borrower Option

A financial instrument which is typically very long-term - for example, 40 to 60 years. The initial interest rate is fixed, but the lender has the option to nominate a revised rate at periodic reset dates. The reset dates are nominated at the time the loan is taken out. The


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borrower has the ‘option’ to either accept the new imposed fixed rate or repay the loan facility.

Long-Term Assets

Long-term assets are tangible assets intended to be used for several years.

Minimum Revenue Provision (MRP)

The amount set aside to repay external debt.

National Non-Domestic Rates

A tax collected locally by the Council from commercial undertakings.

Net Interest on the Net Defined Benefit Liability

Net interest expense for the Council – the change during the period in the net defined liability/(asset) that arises from the passage of time.

Operational Assets

These are long-term assets held by the Council required to support the provision of services.

Operating Leases

This is where the rewards and risks of ownership of the asset remain with the leasing company and the annual rental is charged directly to the CIES.

Past Service Costs

Where pension scheme members receive enhanced or new benefits, the increase in the present value of future liabilities will be accounted for as past service costs.

Provisions

These are sums set aside to meet liabilities or losses that are likely to be or will be incurred, but the dates on which they will arise are not fully known at the date that the Statement of Accounts is approved.

Remeasurement of the Net Defined Benefit Liability

Employees of the Council are members of defined benefit pension schemes. Actuarial gains and losses arise because events have not coincided with actuarial assumptions made in the previous valuation or because the actuarial assumptions have changed.

Reserves

Amounts set aside to meet the cost of specific future expenditure.


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Revenue Contribution to Capital Expenditure

The amount of capital expenditure financed directly from the annual revenue budget.

Revenue Expenditure Funded From Capital Under Statute (REFCUS)

Capital expenditure for which no tangible long-term asset exists therefore is transferred to revenue.

Support Services

These are services provided by the central departments of the Council in respect of finance, human resources, legal, administration and property.

Cornwall Council 2019/20 Annual Financial Report and Statement of Accounts

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Other Versions of our Accounts

This document sets out Cornwall Council’s final Statement of Accounts in the full detail and in the formats required by law and by the Code of Practice on Local Authority Accounting, which we follow.

If you need this version produced in a different format, for example, in large type or in a language other than English, please contact us using the details given below.

Members of the public have a statutory right to inspect the accounts before the audit is completed. For the 2019/20 accounts the inspection period is 3 August 2020 to 14 September 2020. These dates were advertised as required on the Council’s website from the week commencing 13th July 2020.

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Documents

Cornwall Council 2019/20 Annual Financial Report And ... · The budget included planned savings of £34m and the Council had general reserves of £36m and total usable reserves of