1. Authorisation of the Statement of Accounts

Authorisation of the Statement of Accounts - These accounts were authorised for issue by Ian Gutsell, Chief Finance Officer (Section 151 Officer), and the Statement of Accounts (approved on 30 September 2021) is published with an audit opinion.

2. Accounting Policies

i. General

The Statement of Accounts summarises the Council’s transactions for the 2020/21 financial year and its position at the year end 31 March 2021. The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2015. These require them to be prepared in accordance with proper accounting practices as set out in the Code of Practice on Local Authority Accounting in the United Kingdom 2020/21, supported by International Financial Reporting Standards (IFRS).

The Statement of Accounts are prepared on a going concern basis and adopt the accounting convention of principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments. They are prepared with the overriding requirement that they give a true and fair view of the financial position, performance and cash flows of the Council. Information is presented in a manner that provides relevant, reliable, comparable and understandable information.

The Council uses rounding to the nearest £000 in presenting amounts in its financial statements and also has abbreviated £million to £m.

ii. Accruals of Income and Expenditure

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

§ Revenue from contracts with service recipients, whether for services 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; and

§ 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. Revenue Recognition

Revenue is recognised in accordance with IFRS 15 - Revenue Recognition from Contracts with Customers and IPSAS 23 Revenue from Non-Exchange Transactions (Taxes and Transfers). Which of the two standards is applicable depends on determining whether the transaction is an exchange (IFRS 15) or non-exchange transaction (IPSAS 23). With non-exchange transactions there is no, or only nominal, consideration in return. The obligating extent is often determined by statutory prescription (e.g. council tax, VAT or a fine for breach of law) or may be a donation or bequest. For exchange transactions, assets or services and liabilities of approximately equal value are exchanged (e.g. fees and charges for services and the sale of goods provided). There is a contract which creates both right and obligations. Under IFRS 15 the performance obligations in the contract have to be measured and the transaction price allocated to these obligations. Revenue is recognised when the performance obligations are satisfied.

iv. Debtors and Creditors

We record all material transactions on the basis of income and expenditure. In order to achieve this we account for actual or estimated debtors and creditors at the end of the year, except in two cases:

· Charges for utilities (gas, electricity and telephones) are not accrued, so long as we have paid for a full twelve months during each financial year;

· Accruals are generally not raised where amounts are immaterial, although managers’ discretion may be used. This exception has no material effect on the financial statements.

Most accounts for Trust Funds are kept on a receipts and payments basis.

Lump sum payments relating to redundancy cases are accounted for in the period when the related decision was taken.

v. Cash and Cash Equivalents

Cash is represented by cash in hand and deposits held by the Council as part of its normal cash management including all deposit accounts with financial institutions repayable without penalty on notice of not more than 24 hours. Cash Equivalents are generally defined as short-term, highly liquid investments that are readily convertible to cash. They are held for short term cash flow requirements rather than for investment gain and have an insignificant risk of a change in their value.

The Code of Practice defines cash equivalents as highly liquid investments that are readily convertible to known amounts of cash and any investment that could be recalled the same day without penalty, which includes call accounts, money market funds and instant deposits. However, the Council uses these products for both short term cash flow requirements and investment gain purposes. The Council therefore defines only its accounts that are held for cash flow requirements as a cash equivalent used for short term cash flow requirements. 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. Short Term Investments are those investments that are not classified as a cash equivalent as they are held for investment gain purposes. The Council’s annual Treasury Management Strategy sets out the type of investments that meet its security, liquidity and yield criteria.

vi. Exceptional Items

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

vii. 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.

viii. Charges to Revenue and Non-Current Assets

Services, support services and trading accounts are debited with the following amounts to record the cost of holding Property, Plant and Equipment assets and Intangible assets during the year:

· Depreciation is provided for on all assets used by the relevant service with a determinable finite life (except for investment properties, assets under construction and community assets), by allocating the value of the asset in the Balance Sheet over the periods expected to benefit from their use.

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

· Amortisation of intangible assets attributable to the service.

The Council is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisations. However, it is required to make an annual contribution from revenue 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 amortisations are therefore replaced by the contribution in the General Fund Balance (Minimum Revenue Provision), by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

ix. Employee Benefits

Employee benefits are accounted for in accordance with the Code’s interpretation of IAS 19 – Employee Benefits. This standard covers both benefits payable during and after employment.

Benefits Payable During Employment

Short-term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, recognition for additional responsibility 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 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 wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out through the Movement in Reserves Statement 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. These costs are charged on an accruals basis to the appropriate service line in the Comprehensive Income and Expenditure Statement when the Council is demonstrably committed to the termination of the employment of an officer or group of officers or making an offer to encourage voluntary redundancy.

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 Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end.

Post Employment Benefits

The Council contributes to three separate pension schemes that meet the needs of different groups of employees. The schemes are:

· The Teachers’ Pension Scheme, administered by Capita Teachers’ Pensions on behalf of the Department for Education;

· The Local Government Pension Scheme;

· The NHS Pension Scheme, administered by the NHS Business Service Authority.

The schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees work for the Council.

Teachers’ Pensions

The arrangements for the teachers’ scheme mean that liabilities for these benefits cannot ordinarily be identified specifically to the Council. The scheme is therefore accounted for as if it was a defined contribution scheme and no liability for future payments of benefits is recognised in the Balance Sheet. The Children’s and Education Services line in the Comprehensive Income and Expenditure Statement is charged with the employer’s contributions payable to Teachers’ Pensions in the year.

Local Government Pensions Scheme

Most other employees can join the Local Government Pension Scheme. The Council administers the pension fund for all local authorities within the geographical area of East Sussex. The Local Government Scheme is accounted for as a defined benefits scheme. The liabilities of the pension scheme attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc., and projections of earnings for current employees.

The assets of the pension fund attributable to the Council are included in the Balance Sheet at their fair value:

· quoted securities – current bid price;

· unquoted securities – professional estimate of fair value;

· unitised securities – current bid price;

· property – market value.

The change in the net pension’s liability is analysed into seven components:

· current service cost – the increase in liabilities as a result of years of service earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked;

· past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs;

· interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid – debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement;

· expected return on assets – the annual investment return on the fund assets attributable to the Council, based on an average of the expected long-term return – credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement;

· gains or losses on settlements and curtailments – the result of actions to relieve the Council of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs;

· 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 – debited to the Pensions Reserve;

· contributions paid to the pension fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense.

In assessing liabilities for retirement benefits at 31 March 2021, the actuary has advised a discount rate of 2.0%, derived so that the net present value of the notional cashflows, discounted at this single rate, equates to the net present value of the cashflows. In assessing liabilities for retirement benefits at 31 March 2020, the actuary advised that a rate of 2.3% is appropriate.

In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are 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 Pensions 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.

Discretionary Benefits - The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.

x. Events After the Balance Sheet Date

The accounts have taken into consideration any material event after the balance sheet, which 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 approved and 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 for which the Council shall adjust the amounts recognised in its financial statements or recognise items that were not previously recognised (adjusting events);

· Those that are indicative of conditions that arose after the end of 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.

xi. 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 Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. 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 the Council’s borrowings, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest); and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement.

Where loans are replaced through restructuring, there are distinct accounting treatments, as follows:

· Modification - Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repurchase/settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate.

· Substantially Different - Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading 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 Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.

· Early repayment of loans - The accounting treatment for premiums and discounts arising on the early repayment of loans is largely dictated by the general principle that financial instruments are derecognised when the contracts that establish them come to an end. The amounts payable or receivable are cleared to the Comprehensive Income and Expenditure Statement upon extinguishment. In line with regulations and statutory guidance, the impact of premiums is spread over future financial years. These provisions are effected in the Movement in Reserves Statement on the General Fund Balance, after debits and credits have been made to the Comprehensive Income and Expenditure Statement. The adjustments made in the Movement in Reserves Statement are managed via the Financial Instruments Adjustment Account.

Financial Assets

Financial assets are classified based on a classification and measurement approach that reflects the business model for holding the financial assets and their cash flow characteristics. There are three main classes of financial assets measured at:

· amortised cost

· fair value through profit or loss (FVPL)

· fair value through other comprehensive income (FVOCI)

The Council’s business model is to hold investments to collect contractual cash flows. Financial assets are therefore classified as amortised cost, except for those whose contractual payments are not solely payment of principal and interest (i.e. where the cash flows do not take the form of a basic debt instrument).

Financial Assets Measured at Amortised Cost

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

Where loans are made at less than market rates (soft loans), a loss is recorded in the CIES (debited to the appropriate service) for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal. Interest is credited to the Financing and Investment Income and Expenditure line in the CIES at a marginally higher effective rate of interest than the rate receivable, 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 Movement in Reserves Statement.

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

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

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

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

· Level 1 inputs – quoted prices (unadjusted) in active markets for identical assets that the Council can access at the measurement date.

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

· Level 3 inputs – unobservable inputs for the asset.

For pooled investment funds (i.e. money market fund, collective investment scheme as defined in section 235 (1) of the Financial Services and Markets Act 2000, investment scheme approved by the Treasury under section 11(1) of the Trustee Investments Act 1961 (local authority schemes)) regulations allow a statutory override (for a period of 5 years from 1/4/18) any unrealised gains or losses can be transferred via the Movement in Reserves Statement to a Pooled Investment Funds Adjustment Account in the Balance Sheet.

Any gains and losses that arise on de-recognition of the asset are debited or credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

Expected Credit Losses

The Council recognises expected credit losses (impairments) on all of its financial assets held at amortised cost or FVOCI either on a 12-month or lifetime basis. 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. The expected credit loss model applies to financial assets measured at amortised cost and FVOCI, trade receivables, lease debtors, third party loans and financial guarantees.

A simplified approach is applied to trade receivables and lease debtors whereby consideration of changes in credit risk since initial recognition are not required and losses are automatically recognised on a lifetime basis. A collective assessment is made for groups of instruments where reasonable and supportable information is not available for individual instruments without undue cost or effort. The aim will be to approximate the result of recognising lifetime expected credit losses if significant increases in credit risk since recognition had been measurable for the individual instruments.

Loans have been grouped into three types for assessing loss allowances:

Group 1 – loans made to individual organisations. Loss allowances for these loans can be assessed on an individual basis.

Group 2 – loans supported by government funding. As the loan repayments are recycled and the contract allows for a level of default then no additional impairment loss is required.

Group 3 - car loans to employees. Loss allowances are based on a collective assessment.

Impairment losses are debited to the Financing and Investment Income and Expenditure line in the CIES. For assets carried at amortised cost, the credit entry is made against the carrying amount in the Balance Sheet. For assets carried at FVOCI, the credit entry is recognised in Other Comprehensive Income against the Financial Instruments Revaluation Reserve. For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision.

Impairment losses are not applicable to FVPL assets as the future contractual cash flows are of lesser significance and instead current market prices are considered to be an appropriate reflection of credit risk, with all movements in fair value, including those relating to credit risk, impacting on the carrying amount and being posted to the Surplus or Deficit on the Provision of Services as they arise. Impairment losses on loans supporting capital purposes, lease debtors and share capital are not a proper charge to the General Fund balance and any gains or losses can be reversed out through the Movement in Reserves Statement to the Capital Adjustment Account.

xii. Foreign Currency Transaction

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 at 31 March. Resulting gains or losses are recognised in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

xiii. 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.

Government grants and third party contributions and donations to the Council are not credited to the Comprehensive Income and Expenditure Statement 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 acquired using the 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-ring fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement.

Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. 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 Capital Adjustment Account. Amounts in the Capital Grants Unapplied reserve are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure.

Community Infrastructure Levy (CIL)

CIL is a planning charge on developments used to fund a wide range of infrastructure that is needed because of the development. The Charging Authorities (District & Borough Councils) are required to produce a CIL Charging Schedule, which sets out the rates of CIL to be charged on development. The Council can then approach the Charging Authority to drawdown some or all of the CIL to fund infrastructure projects. The CIL is recognised in the Comprehensive Income and Expenditure Statement in accordance with the grants and contributions policy above.

xiv. Intangible Assets

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

Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase. 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 re-valued 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 Council meets this criterion, and they are therefore carried at amortised cost. The expected useful life is normally up to seven years. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. 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 Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement.

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 Movement in Reserves Statement and posted to the Capital Adjustment Account and on disposal (for any sale proceeds greater than £10,000) the Capital Receipts Reserve. Capital receipts (if more than the de minimis level of £10,000) from the sale of assets are held in a reserve until they are required to finance capital expenditure.

xv. Interests in Companies and Other Entities

An assessment of the Council’s interests has been carried out during the year in accordance with the Code of Practice to determine the group relationships that exist. Inclusion in the group is dependent upon the extent of the Council’s control over the entity demonstrated through ownership, such as a shareholding in an entity or representation on an entity’s board of directors. The Council has no material interests in companies and other entities that have the nature of subsidiaries, associates and jointly controlled entities, which would require it to prepare group accounts alongside its own financial statements. The investments in the Council’s accounts are shown at fair value through profit and loss or at amortised cost.

xvi. Inventories

Inventories are included in the Balance Sheet at the lower of cost and net realisable value. The cost of inventories is assigned using the latest invoice price.

xvii. Investment Property

Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale.

Investment properties are measured initially at cost and subsequently at fair value, highest and best use, based on the amount at which the asset could be exchanged between knowledgeable parties at arm’s-length. Properties are not depreciated but are revalued annually according to market conditions at the year-end. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal.

Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and on disposal (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.

xviii. Joint Operations

Joint operations are arrangements 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 authority 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 authority 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.

xix. 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 Comprehensive Income and Expenditure Statement).

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 Council at the end of the lease period).

The Council 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 Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

Operating Leases - Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense to the services benefitting from use of the leased Property, Plant or Equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments, (e.g. there is a rent-free period at the commencement of the lease).

The Council as Lessor

Finance Leases - Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement 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 Comprehensive Income and Expenditure Statement 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 Comprehensive Income and Expenditure Statement).

The gain credited to the Comprehensive Income and Expenditure Statement 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 Movement in Reserves Statement. 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 Movement in Reserves Statement. 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 is fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

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 Comprehensive Income and Expenditure Statement. 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.

xx. Overheads and Support Services

Following changes to the 2016/17 Code of Practice on Local Authority Accounting in the UK, support service costs are no longer apportioned across service segments but are reported as a single segment so that they are based on the way in which services are operated and managed internally. For the Council this segment is the Business Services department.

xxi. Property, Plant and Equipment and Assets Held for Sale

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

Recognition

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

Recorded as capital expenditure are all transactions that involve the purchase of new Property, Plant and Equipment or expenditure that adds to their value. The purchase of furniture and equipment is treated as capital if it is associated with capital building works. Otherwise individual items of vehicles and equipment are treated as capital if the value is over £20,000. If the value is less than this sum we charge it to revenue.

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, including 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 assets 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.

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

· operational land, buildings and plant – 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 fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of current value;

· infrastructure, community assets and assets under construction – at depreciated historical cost;

· surplus assets – at fair value in highest and best use, 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.

Assets included in the Balance Sheet at fair value are re-valued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year-end, but as a minimum every three years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to a service.

Where decreases in value are identified, they are accounted for by:

· 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 Comprehensive Income and Expenditure Statement.

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 Capital Adjustment Account.

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 by:

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

Componentisation Policy

The Council ensures that the overall value of an asset is fairly apportioned over significant components that need to be accounted for separately and that their useful lives and the method of depreciation are determined on a reasonable and consistent basis. The Council’s adopted componentisation policy is as follows:

· Each part of an item of Property Plant and Equipment (PP&E) with a cost that is significant in relation to the total cost of the items is depreciated separately. Where there is more than one significant part of the same asset, which has the same useful life and depreciation method, such parts are grouped in determining the depreciation charge;

· Where a component is replaced or restored, the carrying amount of the old component is derecognised to avoid double counting and the new component reflected in the carrying amount, subject to the recognition principles of capitalising expenditure with a de minimus level of £20,000;

· All components that have a different useful economic life from the main asset are identified separately – provided the amount is above the £20,000 de minimus level, and then only if the component has a different useful life for depreciation purposes so as to result in depreciation charges that differ materially from the depreciation charges had the asset not been componentised. Component assets could include building structure, roof, heating, electrical, lifts and external works. The expected useful economic lives of components are shown in the depreciation section below.

· De-recognition of a component of PP&E takes place when no future economic benefits are expected from its use (i.e. its service potential is used up) and it is removed from the Balance Sheet. For example, if a new roof is significant in relation to the total value of the asset, part of the existing carrying value of the building would be derecognised and then the new roof recognised;

· For revalued assets (as part of the rolling programme), the individual valuation sheets produced by the external valuers would be compared to the beacon analysis. If a particular asset conforms to the components identified in the beacon, and it is significant in relation to the total value, those percentages will be applied to the carrying value. If it does not conform to the beacon, revised percentages will be obtained;

· On componentisation, any Revaluation Reserve balances will remain with the structure of the building. Any future revaluation gains and losses will be applied across components as appropriate.

Depreciation

Depreciation is provided for on all Property, Plant and Equipment assets (with the exceptions shown in the table below) and calculated on a straight-line basis over the expected life of the asset, on the difference between the net book value and any estimated residual value. The depreciation charge is calculated on an asset’s opening balance and therefore the first charge is in the year after the expenditure is initially incurred.

The life expectancies of the assets and the depreciation are calculated on the following bases:

Operational land	Not depreciated as an infinite life expectancy
Operational buildings, buildings structure, roof and external works	Individually assessed by valuers, usually up to 60 years
Heating and lighting components	Individually assessed by valuers, usually up to 25 years
Lifts	Individually assessed by valuers, usually up to 15 years
Vehicles	Individually assessed on acquisition, usually up to 10 years
Information Technology	Individually assessed on acquisition, usually up to 10 years
Other plant, furniture and equipment	Individually assessed on acquisition, usually up to 20 years
Infrastructure	New roads 40 years; Highways component assets between 10 & 40 years
Infrastructure land	Not depreciated as an infinite life expectancy
Community land	Not depreciated as an infinite life expectancy
Assets under construction	Not depreciated until the asset becomes operational
Surplus buildings	Individually assessed by valuers
Surplus land	Not depreciated as an infinite life expectancy

Where an item of Property, Plant and Equipment asset 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 Capital Adjustment Account.

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 re-valued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Held for sale assets are measured at highest and best use. 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 Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previously recognised losses 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 to be 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 Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement 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 Capital Adjustment Account.

Amounts received for a disposal in excess of £10,000 are categorised as capital receipts. The written-off value of disposals is not a charge against Council tax, as the cost of non-current assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. F

Accounting for Schools

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). Therefore schools’ transactions, cash flows and balances are recognised in each of the financial statements of the Council as if they were the transactions, cash flows and balances of the Council.

The Council has the following types of maintained schools under its control:

· Community

· Voluntary Aided

· Voluntary Controlled

· Trust / Foundation Schools

Schools Non-Current (fixed) Assets are recognised in the Balance Sheet where the Council directly owns the assets or where the School/Governing body own the assets or have had rights to use the assets transferred to them. Community Schools are owned by the Council and are, therefore, recognised on the Balance Sheet.

Of the Council’s Voluntary Aided and Controlled schools, the majority are controlled by the respective Diocese with no formal rights to use the assets passed to the School or Governing Bodies. As a result these schools are not recognised on the Balance Sheet.

There are currently twenty Voluntary Controlled schools under the Council’s ownership which are recognised on the Balance Sheet. Where the ownership of Trust/Foundation Schools lies with a charitable Trust, the school is not recognised on the Council’s Balance Sheet. Where the ownership lies with the school/Governing Body the school is recognised on the Council’s Balance sheet.

All other income, expenditure, assets, liabilities, reserves and cash flows of maintained schools are recognised in the Council’s accounts.

xxii. Private Finance Initiative 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 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) was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment.

Any payments towards the operator’s capital investment before the assets become operational (and recognised as Property, Plant and Equipment and finance leases) are included in debtors as a prepayment. When the asset is made available (i.e., operational), the prepayment is written out against the set aside PFI reserve.

Non-current assets recognised on the Balance Sheet are re-valued 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 Comprehensive Income and Expenditure Statement;

· finance cost – an interest charge (based on Internal Rate of Return of 9.80% for Peacehaven Schools and 5.97% for the Joint Integrated Waste Management Service PFI Contract) on the outstanding Balance Sheet liability, debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement;

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

· 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 amounts 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 for the Joint Integrated Waste Management Service PFI Contract. This expenditure is recognised as revenue expenditure for Peacehaven Schools, where there are non-significant lifecycle replacements costs charged to prepayment.

xxiii. Provisions, Contingent Liabilities and Contingent Assets

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. For instance, the Council may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation.

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

When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – 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.

Landfill Allowance Schemes

The Waste and Emissions Trading Act 2003 placed a duty on waste disposal authorities in the UK to reduce the amount of biodegradable municipal waste disposed to landfill. It provided the legal framework for the Landfill Allowances Trading Scheme (LATS), which applied to waste disposal authorities in England from 2005/06 to 2012/13.

Closed Landfill Sites

The Environment Agency’s landfill permit requires restoration and after care of sites previously used for landfill. The Council continue to own a number of closed landfill sites and also retain responsibility for a number of sites that have been disposed of. Aftercare is usually required for a period of sixty years following the closure and restoration of the landfill site. Aftercare includes leachate management, gas management and environmental monitoring. The Council is required to recognise a provision as there is a legal present obligation arising from the past event of landfill. The amount recognised is the best estimate of the expenditure required to settle the obligation and is discounted to reflect the time value of money.

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.

Contingent Assets

A contingent asset arises where an event has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential.

xxiv. 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 Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to score against the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against council tax for the expenditure.

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

xxv. Revenue Expenditure Funded from Capital under Statute (Refcus)

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 Comprehensive Income and Expenditure Statement in the year. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, the cost of revenue expenditure funded from capital under statute is immediately charged to the revenue account for the appropriate service, and a transfer in the Movement in Reserves Statement from the General Fund Balance to the Capital Adjustment Account then reverses out the amounts charged so that there is no impact on the level of council tax. In some cases, this includes expenditure on assets not owned by the Council, capital grants and on feasibility studies for schemes that may or may not take place.

Expenditure on academy or voluntary aided schools’ assets, i.e. properties not owned by the Council, is treated as Refcus. In addition, the Government may direct the Council to treat as capital expenditure items, which would normally be considered as revenue expenditure. These would not result in an asset or an increase to the value of existing assets and are therefore also treated as Refcus.

xxvi. Value Added Tax (VAT)

VAT paid by the Council is only shown in the accounts as an amount recoverable from HM Customs and Revenue. VAT charged by the Council to its customers is payable to Customs and Revenue, and is therefore shown only as a reduction of the net amount payable.

xxvii. Redemption of Debt

There is a legal requirement for the Council to make an annual provision from revenue to contribute towards the reduction in its overall borrowing requirement of an amount calculated on a prudent basis determined by the Council in accordance with statutory guidance. The Council adopted the Asset Life Method (annuity method) as a result of any PFI assets coming on the Balance Sheet and any related Minimum Revenue Provision (MRP) will be equivalent to the “capital repayment element” of the annual service charge payable to the PFI Operator and for finance leases. MRP will also be equivalent to the “capital repayment (principal) element” of the annual rental payable under the lease agreement. This is not a cost to the Comprehensive Income & Expenditure Statement but is charged to the General Fund through the Movement in Reserve Statement.

xxviii. Carbon Reduction Commitment (CRC)

The government closed the CRC Energy Efficiency Scheme following the 2018/19 compliance year, to be replaced by increases in the Climate Change levy. The CRC scheme applied to large energy users in the public and private sectors. Organisations that met the qualification criteria were required to participate and buy allowances for every tonne of carbon emitted. The Council were below the threshold.

xxix. Council Tax and Business Rates

Business rates and council tax are collected on behalf of the Council on an agency basis by the five billing authorities in East Sussex: Eastbourne Borough Council, Hastings Borough Council, Lewes District Council, Rother District Council and Wealden District Council. The Council as a precepting authority is required to show business rates and council tax income in the Comprehensive Income and Expenditure Statement on an accruals basis.

The difference between the income included in the Comprehensive Income and Expenditure Statement and the amount required by legislation to be credited to the General Fund is taken to the Collection Fund Adjustment Account and included as a reconciling item in the Movement in Reserves Statement. The Council is also required to recognise its share of arrears, bad debt allowances, overpayments, prepayments, cash and business rates appeal provision in its Balance Sheet.

xxx. Heritage Assets

The Council’s Heritage Assets are managed by East Sussex Record Office, which holds the historic and administrative archives for the County of East Sussex and, under an SLA agreement, for the City of Brighton & Hove. These comprise records dating from 1101 to the present and they are held for: increasing the knowledge, understanding and appreciation of the Council’s history and local area, ensuring their preservation and providing public access to information recording the county’s and city’s heritage.

The archives, ranging from a single piece of paper to thousands of documents, are held by the Council under a variety of terms, the most common ones being deposit (long-term loan), gift or purchase. The majority of archives held by the Council are on deposit.

Heritage Assets are recognised and measured (including the treatment of revaluation gains and losses) in accordance with the Council’s accounting policies on property, plant, and equipment. However, some of the measurement rules are relaxed in relation to heritage assets as detailed below. The accounting policies in relation to heritage assets that are deemed to include elements of intangible heritage assets are also present below. The Council’s collections of heritage assets are accounted for as follows:

Art Collection

· The art collection is reported in the Balance Sheet at insurance replacement value as an estimate of market value. The assets within the art collection are deemed to have indeterminate lives and a high residual value; hence, the Council does not consider it appropriate to charge depreciation.

· Acquisitions are made by purchase or donation. Acquisitions are initially recognised at cost, and donations are recognised at fair value and with reference to appropriate commercial markets for the paintings using the most relevant and recent information from sales at auctions.

Equipment and other Artefacts

· The Council considers that obtaining valuations for the vast majority of equipment and other artefacts would involve a disproportionate cost in comparison to the benefits to the users of the Council’s financial statements. This is because of the diverse nature of the assets held and the lack of comparable values. Other than the small number of items that have been acquired recently, i.e., bequeathed to the Council, the Council does not recognise this collection of heritage assets on the Balance Sheet.

· The Council own the contents of Bentley Museum, which is recognised in the Balance Sheet in accordance with a valuation carried out by Sotheby’s.

· Other collections held by the ESCC Records office are not recognised in the Balance Sheet as cost information is not readily available and the Council believes that the benefits of obtaining the valuation for these items would not justify the cost. Nearly all items in the collection are believed to have a value of less than £500 and as far as the Council is aware no individual item is worth more than £20,000. The majority of the collection was acquired by donation over a century ago.

· In addition, there is wealth of material available for study in East Sussex, thus drawing attention to groups of records, i.e., the records of businesses, and of societies; and the existence of some deposits, which are not yet fully listed. Again, the Council considers that due to the lack of comparable market values it is not possible to provide either cost or valuation information for either the intangible or the tangible element of these assets. Consequently, the Council does not recognise the assets on the Balance Sheet.

Archaeology

· The Council does not consider that reliable cost or valuation information can be obtained for the items held by the Records Offices as the Council’s Archaeological collection. This is because of the diverse nature of the assets held and lack of comparable market values. Consequently, the Council does not recognise these assets on the balance sheet.

· The Council’s acquisitions principally relate to the collection of donated assets. The Council does not (normally) make any purchases of archaeological items.

Heritage Assets – General

The carrying amounts of heritage assets are reviewed where there is evidence of impairment for heritage assets, e.g. where an item has suffered physical deterioration or breakage, or where doubts arise as to its authenticity. Any impairment is recognised and measured in accordance with the Council’s general policies on impairments.

xxxi. Fair Value Measurement

The Council measures some of its non-financial assets such as surplus assets, assets held for sale and investment properties, 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:

a. in the principal market for the asset or liability, or

b. in the absence of a principal market, in the most advantageous market for the asset or liability.

The Council uses External Valuers to measure the fair value of an asset or liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

When measuring the fair value of a non-financial asset, the Council’s external Valuers take 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 Valuers uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Inputs to the valuation techniques in respect of assets and liabilities for which fair value is measured or disclosed in the Council’s financial statements are categorised within the fair value hierarchy, as follows:

· Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the Council can access at the measurement date;

· 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.

3. Accounting Standards that have been issued but have not yet been adopted

The Code of Practice on Local Authority Accounting in the United Kingdom 2021/22 (the Code) will introduce several changes in accounting policies which will be required from 1 April 2021. The Code requires the disclosure of information relating to the expected impact of an accounting change that will be required by a new standard that has been issued but not yet adopted.

At the balance sheet date the following new standards and amendments to existing standards have been published but not yet adopted by the Code of Practice of Local Authority Accounting in the United Kingdom:

· Definition of a Business: Amendments to IFRS 3 Business Combinations

· Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7

· Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

The Code does not anticipate that the above amendments will have a material impact on the information provided in local authority financial statements i.e. there is unlikely to be a change to the reported information in the reported net cost of services or the Surplus or Deficit on the Provision of Services. The Code requires implementation from 1 April 2021 and there is therefore no impact on the 2020/21 Statement of Accounts.

The implementation of IFRS 16 - Leases was due in 2021/22 (effective date 1 January 2022) but has been deferred until 2022/23. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases, unless the lease term is less than one year or the underlying asset has a low value. Transition work is underway but currently the impact of IFRS 16 cannot be reasonably estimated.

4. Critical Judgements in applying Accounting Policies

In applying the accounting policies set out in Note 2, the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the Accounting Statements are:

· Financial Pressures - the Council anticipates that the pressures on public expenditure will continue to be severe. These pressures will be mitigated by further service area and corporate savings, and a limited use of reserves. An assessment of the ongoing pressures and means of mitigation has been made by way of the Council’s Medium Term Financial Planning process which has assessed the period to 31 March 2024 As a consequence, the Council is of the view that the level of uncertainty is not significant enough in terms of its anticipated impact to warrant an impairment of assets due to reduced levels of service provision, or a need to close facilities.

· Accounting for Schools – the Council recognises the land and buildings used by schools in line with the provisions of the Code of Practice. It states that property used by local authority maintained schools should be recognised in accordance with the asset recognition tests relevant to the arrangements that prevail for the property. The Council recognises the schools land and buildings on its Balance Sheet where it directly owns the assets, the school or school Governing Body own the assets or rights to use the assets have been transferred from another entity.

Where the land and building assets used by the school are owned by an entity other than the Council, school or school Governing Body then it is not included on the Council’s Balance Sheet. The exception is where the entity has transferred the rights of use of the asset to the Council, school or school Governing Body. The Council has completed a school by school assessment across the different types of schools it controls within the County. Judgements have been made to determine the arrangements in place and the accounting treatment of the land and building assets. The Council regards that the economic benefits or service potential of a school flows to the Council where the Council has the ability to employ the staff of the school and is able to set the admission criteria.

There are currently 6 types of schools within the County:

· Community schools

· Special schools

· Voluntary Controlled (VC) schools

· Voluntary Aided (VA) schools

· Foundation (Trust) schools

· Academy schools

Community schools’ staffs are appointed by the Council and the Council sets the admission criteria. These schools are, therefore, recognised on the Council’s Balance Sheet. Legal ownership of twenty seven VC school land and buildings rests with a charity, normally a religious body.

Foundation Trust, Voluntary Aided, and Academy schools’ staffs are appointed by the schools’ governing body, who also set the admission criteria. Therefore, the Council does not receive the economic benefit or service potential of these schools and does not recognise them on the Council’s balance sheet.

For VA schools, legal ownership of the VA school land and buildings rests with the relevant Dioceses. The Diocese has granted a licence to the school to use the land and buildings. Under this licence arrangement, the rights of use of the land and buildings have not transferred to the school and thus are not included on the Council’s Balance Sheet.

Foundation and Foundation Trust schools were created to give greater freedom to the Governing Body responsible for school staff appointments and who also set the admission criteria. For a Foundation school, the school Governing Body has legal ownership of the land and buildings and thus are included on the Council’s Balance Sheet. For the remaining Foundation Trust School, a separate Trust owns the land and buildings so these assets are not included on the Council’s Balance Sheet.

Academies are not considered to be maintained schools in the Council’s control. Thus the land and building assets are not owned by the Council and are not included on the Council’s Balance Sheet. When a school held on the Council’s Balance Sheet transfers to Academy status the Council treats this as an asset disposal for nil consideration. The disposal is completed on the date that the school converts to Academy status.

The table below illustrates the number and type of schools within the County at March 2021:

Type of School	Primary	Secondary	Special	All Through	Total
Community	44	7	1	-	52
Voluntary Controlled	44	-	-	-	44
Voluntary Aided	21	1	-	-	22
Foundation / Trust	2	1	-	-	3
Academy	37	14	10	3	64
Total	148	23	11	3	185

5. Assumptions made about the future and other major sources of estimation uncertainty

The accounting statements contain estimates and assumptions about the future or events that are otherwise uncertain, which affect the application of policies and reported amounts of assets and liabilities, income and expenses. 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. This means that the Council is required to make estimates and assumptions. Estimates and underlying assumptions are regularly reviewed. Any change to estimates is recognised in the period if the change affects only that period, or in future periods if it also affects future periods. The items in the Council’s Balance Sheet at 31 March 2021 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:

Item	Uncertainties	Effect if Actual Results Differ from Assumptions
Property Plant and Equipment	The Council estimates the useful lives of Property, Plant and Equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of Property, Plant, and Equipment are reviewed annually and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of Property, Plant, and Equipment is based on external technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the Property, Plant and Equipment would increase recorded expenses and decrease non-current assets. The Council operates a policy of revaluing its Property, Plant, and Equipment on a rolling three year basis, with the aim of revaluing all of its assets within this period. Indexation may be applied to those assets not valued in the year if the carrying value is calculated as materially different to the fair value at the Balance Sheet date.	The total depreciation and amortisation charged in 2020/21 is £53.0m and the net book value of property, plant and equipment at 31 March 2021 is £937.6m. If the useful life of assets reduces, depreciation increases and the carrying amount of each asset falls. It is estimated that the annual depreciation charge for non-current assets would increase by £7.9m for every one year that useful lives had to be reduced.
Impairment / reversal of impairment - The Council has significant investments in Property, Plant and Equipment and intangible assets. Changes in the circumstances or expectations of future performance of an individual asset may be an indicator that the asset is impaired, thus requiring the book value to be written down to its recoverable amount. Impairments are reversed if conditions for impairment are no longer present. Evaluating whether an asset is impaired or if impairment should be reversed requires a high degree of judgement and may depend to a large extent on the selection of key assumptions about the future use. Assets / properties are assessed for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount, and at least annually.	The Council carries out an annual impairment review of its asset base, which takes into account such factors as the current economic climate. There were no adjustments due to asset impairment made in 2020/21 however the level of revaluation decreases charged in 2020/21 to the Surplus on Provision of Services is £59.3m and £59.2m to the Revaluation Reserve.
Fair Value estimations	When the fair values of Investment Properties, Surplus Assets and Assets Held for Sale cannot be measured based on quoted prices in active markets (i.e. Level 1 inputs), their fair value is measured using the following valuation techniques: · For Level 2 inputs, quoted prices for similar assets or liabilities in active markets at the balance sheet date; · For level 3 inputs, valuations based on most recent valuations adjusted to current valuation by the use of indexation and impairment review. Where possible, the inputs to these valuation techniques are based on observable data, but where this is not possible, judgment is required in establishing fair values. These judgments typically include considerations such as uncertainty and risk. Changes in assumptions used could affect the fair value of the Council’s assets and liabilities. Where Level 1 inputs are not available, the authority employs RICS qualified valuers (Bruton Knowles) to identify the most appropriate valuation techniques to determine fair value. All valuations are carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. The Council’s valuation experts work closely with property services, and the accounts team on a regular basis regarding all valuation matters.	The Council uses External valuer valuations models to measure the fair value of its Investment Properties, Surplus Assets and Assets Held for Sale under IFRS13 depending on which technique it considers most appropriate. The significant unobservable inputs used in the fair value measurement include management assumptions regarding rent growth, occupancy levels, floor area repairs backlogs, beacon classifications and others. Significant changes in any of the unobservable inputs would result in a significantly lower or higher fair value measurement for these assets Information about the valuation techniques and inputs used in determining the fair value of these assets is set out in Notes 2, 14 and 15.
Investment Properties are valued using comparable house prices, land values, rent/yield basis or deferred market value. A 1% reduction in market rents or house prices and land values would reduce the Investment Property valuations by £0.1m or a 1% yield increase would reduce the valuations by £0.3m. A 10% reduction in house prices and land values would reduce them by £1.1m. Surplus Properties are valued using comparable land values, residual site values and rent/yield basis. A 1% reduction in land values would reduce the surplus property valuations by £0.1m. A 10% reduction would reduce them by £1.2m.
Pension Liability	The Council recognises and discloses its retirement benefit obligation in accordance with the measurement and presentational requirement of IAS 19 ‘Employee Benefits’. When estimating the present value of defined pension benefit obligations that represent a gross long-term liability in the Balance Sheet, and, indirectly, the period's net pension expense in the Comprehensive Income and Expenditure Statement, the actuary makes a number of critical assumptions affecting these estimates. Most notably, assumptions include a number of judgements and estimations in respect of the expected rate of return on assets, the discount rate, inflation assumptions, the rate of increase in salaries, life expectancy, and the annual rate of compensation increase, which have a direct and potentially material impact on the amounts presented. Significant changes in these assumptions between periods can have a material effect on the financial statements. However, the assumptions interact in complex ways.	The value of the Pension Liability is calculated by a qualified Actuary in accordance with current accounting requirements and based on the information provided by the Pension Fund. During 2020/21, the Council’s actuary advised that the net pension’s liability has increased from £416.9m at the start of the year to £559.4m at 31 March 2021. Note 42 to the Accounting Statements provide detailed information. Details of the sensitivity analysis of the actuarial assumptions can be found in Note 42 on pages 96-100. The Council included the estimated impact of the McCloud judgement in the 2019/20 accounts as an IAS 19 liability and have done the same for 2020/21. However until the new legislation is agreed, the impact is only estimated and therefore there could be a significant risk of material adjustment to the carrying amount of the liability.

Item

Uncertainties

Effect if Actual Results Differ from Assumptions

Property Plant and Equipment

The Council estimates the useful lives of Property, Plant and Equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of Property, Plant, and Equipment are reviewed annually and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of Property, Plant, and Equipment is based on external technical evaluation and experience with similar assets.

It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the Property, Plant and Equipment would increase recorded expenses and decrease non-current assets.

The Council operates a policy of revaluing its Property, Plant, and Equipment on a rolling three year basis, with the aim of revaluing all of its assets within this period. Indexation may be applied to those assets not valued in the year if the carrying value is calculated as materially different to the fair value at the Balance Sheet date.

The total depreciation and amortisation charged in 2020/21 is £53.0m and the net book value of property, plant and equipment at 31 March 2021 is £937.6m.

If the useful life of assets reduces, depreciation increases and the carrying amount of each asset falls. It is estimated that the annual depreciation charge for non-current assets would increase by £7.9m for every one year that useful lives had to be reduced.

Impairment / reversal of impairment - The Council has significant investments in Property, Plant and Equipment and intangible assets. Changes in the circumstances or expectations of future performance of an individual asset may be an indicator that the asset is impaired, thus requiring the book value to be written down to its recoverable amount. Impairments are reversed if conditions for impairment are no longer present. Evaluating whether an asset is impaired or if impairment should be reversed requires a high degree of judgement and may depend to a large extent on the selection of key assumptions about the future use. Assets / properties are assessed for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount, and at least annually.

The Council carries out an annual impairment review of its asset base, which takes into account such factors as the current economic climate. There were no adjustments due to asset impairment made in 2020/21 however the level of revaluation decreases charged in 2020/21 to the Surplus on Provision of Services is £59.3m and £59.2m to the Revaluation Reserve.

Fair Value estimations

When the fair values of Investment Properties, Surplus Assets and Assets Held for Sale cannot be measured based on quoted prices in active markets (i.e. Level 1 inputs), their fair value is measured using the following valuation techniques:

· For Level 2 inputs, quoted prices for similar assets or liabilities in active markets at the balance sheet date;

· For level 3 inputs, valuations based on most recent valuations adjusted to current valuation by the use of indexation and impairment review.

Where possible, the inputs to these valuation techniques are based on observable data, but where this is not possible, judgment is required in establishing fair values. These judgments typically include considerations such as uncertainty and risk. Changes in assumptions used could affect the fair value of the Council’s assets and liabilities.

Where Level 1 inputs are not available, the authority employs RICS qualified valuers (Bruton Knowles) to identify the most appropriate valuation techniques to determine fair value. All valuations are carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. The Council’s valuation experts work closely with property services, and the accounts team on a regular basis regarding all valuation matters.

The Council uses External valuer valuations models to measure the fair value of its Investment Properties, Surplus Assets and Assets Held for Sale under IFRS13 depending on which technique it considers most appropriate.

The significant unobservable inputs used in the fair value measurement include management assumptions regarding rent growth, occupancy levels, floor area repairs backlogs, beacon classifications and others.

Significant changes in any of the unobservable inputs would result in a significantly lower or higher fair value measurement for these assets

Information about the valuation techniques and inputs used in determining the fair value of these assets is set out in Notes 2, 14 and 15.

Investment Properties are valued using comparable house prices, land values, rent/yield basis or deferred market value. A 1% reduction in market rents or house prices and land values would reduce the Investment Property valuations by £0.1m or a 1% yield increase would reduce the valuations by £0.3m. A 10% reduction in house prices and land values would reduce them by £1.1m.

Surplus Properties are valued using comparable land values, residual site values and rent/yield basis. A 1% reduction in land values would reduce the surplus property valuations by £0.1m. A 10% reduction would reduce them by £1.2m.

Pension Liability

The Council recognises and discloses its retirement benefit obligation in accordance with the measurement and presentational requirement of IAS 19 ‘Employee Benefits’.

When estimating the present value of defined pension benefit obligations that represent a gross long-term liability in the Balance Sheet, and, indirectly, the period's net pension expense in the Comprehensive Income and Expenditure Statement, the actuary makes a number of critical assumptions affecting these estimates. Most notably, assumptions include a number of judgements and estimations in respect of the expected rate of return on assets, the discount rate, inflation assumptions, the rate of increase in salaries, life expectancy, and the annual rate of compensation increase, which have a direct and potentially material impact on the amounts presented. Significant changes in these assumptions between periods can have a material effect on the financial statements. However, the assumptions interact in complex ways.

The value of the Pension Liability is calculated by a qualified Actuary in accordance with current accounting requirements and based on the information provided by the Pension Fund.

During 2020/21, the Council’s actuary advised that the net pension’s liability has increased from £416.9m at the start of the year to £559.4m at 31 March 2021. Note 42 to the Accounting Statements provide detailed information.

Details of the sensitivity analysis of the actuarial assumptions can be found in Note 42 on pages 96-100.

The Council included the estimated impact of the McCloud judgement in the 2019/20 accounts as an IAS 19 liability and have done the same for 2020/21. However until the new legislation is agreed, the impact is only estimated and therefore there could be a significant risk of material adjustment to the carrying amount of the liability.

(a) Adjustments between Funding and Accounting Basis

Adjustments from General Fund to arrive at the CIES amounts	Adjustments for Capital Purposes	Net Change for the Pensions Adjustments	Other Differences	Total Adjustments
2020/21	£000	£000	£000	£000

Adult Social Care	2,182	8,600	269	11,051
Public Health	-	394	-	394
Governance Services	-	787	21	808
Children’s Services	57,171	20,573	664	78,408
Business Services	7,062	3,500	107	10,669
Communities, Economy & Transport	48,504	2,840	81	51,425
Total	114,919	36,694	1,142	152,755
Corporate Expenditure	-	5,179	-	5,179
Net Cost of Services	114,919	41,873	1,142	157,934
Other income and expenditure from the Expenditure and Funding Analysis	(38,671)	11,445	8,850	(18,376)
Difference between General Fund deficit and CIES deficit in provision of services	76,248	53,318	9,992	139,558

Adjustments from General Fund to arrive at the CIES amounts	Adjustments for Capital Purposes	Net Change for the Pensions Adjustments	Other Differences	Total Adjustments
2019/20	£000	£000	£000	£000

Adult Social Care	3,449	5,510	19	8,978
Public Health	-	243	-	243
Governance Services	-	491	1	492
Children’s Services	27,589	12,940	(29)	40,500
Business Services	7,199	2,191	3	9,393
Communities, Economy & Transport	33,769	1,787	6	35,562
Total	72,006	23,162	-	95,168
Corporate Expenditure	-	3,958	-	3,958
Net Cost of Services	72,006	27,120	-	99,126
Other income and expenditure from the Expenditure and Funding Analysis	(42,357)	12,859	(1,252)	(30,750)
Difference between General Fund deficit and CIES deficit in provision of services	29,649	39,979	(1,252)	68,376

Adjustments for Capital Purposes

This column adds in depreciation and impairment and revaluation gains and losses in the services line, 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. Minimum Revenue Provision 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 IAS 19 Employee Benefits pension related expenditure and income. For services this represents the removal of the employer pension contributions made by the authority as allowed by statute and the replacement with current service costs and past service costs. For Financing and investment income and expenditure – the net interest on the defined benefit liability is charged to the CIES.

Other Differences

Other differences between amounts debited/credited to the Comprehensive Income and Expenditure Statement and amounts payable/receivable to be recognised under statute. For financing and investment income and expenditure the Other Differences 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 practices in the Code. This is a timing difference as any difference will be brought forward in future surpluses or deficits on the Collection Fund.

(b) Income received on a segmental basis is analysed below:

	2019/20	2020/21

	£000	£000

Adult Social Care	94,282	161,355
Public Health	26,832	31,020
Governance Services	896	654
Children’s Services	276,227	298,247
Business Services	17,035	16,469
Communities, Economy & Transport	38,194	44,561
Corporate Expenditure	21,478	1,598
Total Income analysed on a segmental basis	474,944	553,904

(c) The subjective nature of expenditure and income is analysed below:

	2019/20	2020/21

	£000	£000
Expenditure
Employee benefits expenses	348,510	371,733
Other service expenses	502,174	568,377
Depreciation, amortisation, impairment	65,626	102,498
Interest payments	17,914	17,246
Precepts and levies	569	583
Loss on the disposal of assets	24,804	43,852
Total Expenditure	959,597	1,104,289

Income
Fees, charges and other service income	(74,092)	(67,639)
Interest and investment income	(2,415)	(1,714)
Income from council tax & non domestic rates	(368,199)	(372,631)
Government grants and contributions	(469,634)	(584,694)
Total Income	(914,340)	(1,026,678)
Deficit on the Provision of Services	45,257	77,611

IFRS 15 (Revenue from Contracts with Customers)

Of the £67.6m total of income received from fees, charges and other service income listed above for 2020/21, £62.6m of this balance would been accounted for under IFRS 15 and £5.0m would have been outside the scope of this reporting standard.

7. Adjustments between accounting basis and funding basis under regulations

This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Council in the year in accordance with proper accounting practice to arrive at the resources that are specified by statutory provisions as being available to the authority to meet future capital and revenue expenditure. The following sets out a description of the reserves that the adjustments are made against.

General Fund Balance

The General Fund is the statutory fund into which all the receipts of the Council are required to be paid and out of which all liabilities are to be met, except to the extent that statutory rules might provide otherwise. These rules can also specify the financial year in which liabilities and payments should impact on the General Fund Balance, which is not necessarily in accordance with proper accounting practice. The General Fund Balance therefore summarises the resources that the Council is statutorily empowered to spend on its services or on capital investment (or the deficit of resources that the Council is required to recover) at the end of the financial year.

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 meet 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.

2020/21	Usable Reserves
	General Fund Balance	Capital Receipts Reserve	Capital Grants Unapplied
	£000	£000	£000
Adjustments to the Revenue Resources
Amounts by which income and expenditure included in the Comprehensive Income and Expenditure Statement are different from revenue for the year calculated in accordance with statutory requirements:
Pensions Costs transferred to / (from) the Pensions Reserve	53,319	-	-
Financial Instruments transferred to the Financial Instruments Adjustment Account	(190)	-	-
Financial Instruments transferred to the Pooled Investment Funds Adjustment Account	32	-
Council tax and NNDR (transfers to or from Collection Fund Adjustment Account)	8,972	-	-
Holiday pay (transferred to the Accumulated Absences Reserve)	1,143	-	-
Reversal of entries included in the Surplus or Deficit on the Provision of Services in relation to capital expenditure (these items are charged to the Capital Adjustment Account):	92,489	-	3,191
Total Adjustments to Revenue Resources	155,765	-	3,191

Adjustments between Revenue and Capital Resources
Transfer of non-current asset sale proceeds from revenue to the Capital Receipts Reserve	(2,796)	2,796	-
Statutory provision for the repayment of debt (transfer from the Capital Adjustment Account)	(7,004)	-	-
Capital expenditure financed from revenue balances (transfer to the Capital Adjustment Account)	(6,407)	-	-
Total Adjustments between Revenue and Capital Resources	(16,207)	2,796	-

Adjustments to Capital Resources
Use of the Capital Receipts Reserve to finance capital expenditure	-	-	-
Total Adjustments to Capital Resources	-	-	-
Total Adjustments	139,558	2,796	3,191

2019/20
	General Fund Balance	Capital Receipts Reserve	Capital Grants Unapplied
	£000	£000	£000
Adjustments to the Revenue Resources
Amounts by which income and expenditure included in the Comprehensive Income and Expenditure Statement are different from revenue for the year calculated in accordance with statutory requirements:
Pensions Costs transferred to / (from) the Pensions Reserve	39,979	-	-
Financial Instruments transferred to the Financial Instruments Adjustment Account	(190)
Financial Instruments transferred to the Pooled Investment Funds Adjustment Account	167
Council tax and NNDR (transfers to or from Collection Fund Adjustment Account)	(1,191)	-	-
Holiday pay (transferred to the Accumulated Absences Reserve)	-	-	-
Reversal of entries included in the Surplus or Deficit on the Provision of Services in relation to capital expenditure (these items are charged to the Capital Adjustment Account):	47,780	-	(4,091)
Total Adjustments to Revenue Resources	86,545	-	(4,091)

Adjustments between Revenue and Capital Resources
Transfer of non-current asset sale proceeds from revenue to the Capital Receipts Reserve	(3,044)	3,044	-
Statutory provision for the repayment of debt (transfer from the Capital Adjustment Account)	(10,507)	-	-
Capital expenditure financed from revenue balances (transfer to the Capital Adjustment Account)	(4,618)	-	-
Total Adjustments between Revenue and Capital Resources	(18,169)	3,044	-

Adjustments to Capital Resources
Use of the Capital Receipts Reserve to finance capital expenditure	-	(3,122)	-
Total Adjustments to Capital Resources	-	(3,122)	-
Total Adjustments	68,376	(78)	(4,091)

8. Material items of income and expenses

The Council has disposed of the following property, plant and equipment from its Balance Sheet as the schools obtained academy status during 2020/21. This is included within the total net losses on disposals of non-current assets of £43.852m (see Note 11). The assets were transferred for no consideration and the amount is recognised as losses on disposal.

School	Type of School	£000
The Causeway	Secondary	22,863
Ropemakers Academy	Special	15,302
Total		38,165

9. Events after the Balance Sheet date

The financial statements have not been adjusted for the following events that took place after 31 March 2021 as they provide information that is relevant to an understanding of the Council’s financial position, but do not relate to existing conditions at that date.

Academy Schools

Two schools are expected to convert to Academy status in 2021/22. The net book value (NBV) of the property, plant and equipment will be written out of the Council’s balance sheet at the date of conversion. The net book values at 31 March 2021 is shown in the table below.

School

Type of School

Date of Conversion

NBV

£000

Stafford Junior

Primary

September 2021

2,405

Roseland Infants

Primary

September 2021

1,890

Countryside Management

In 2021/22 the ownership of the Seven Sisters Country Park will transfer to the South Downs National Park Authority. In addition, Ditchling Common Country Park will be leased to the Sussex Wildlife Trust, ownership of the Ouse Estuary Nature Reserve transferred to Newhaven Town Council and Riverside Park leased to Newhaven Town Council. The Seven Sisters Country Park and Ouse Estuary Nature Reserve are classed as community land assets and valued at their existing use value. The net book values are £0.68m and £0.10m respectively.

Authorised for Issue

The Statement of Accounts was authorised for issue by the Chief Finance Officer on 23 July 2021. Events taking place after this date are not reflected in the financial statements. Where events taking place before this date provide information about conditions existing at 31 March 2021, the figures in the accounting statements have been adjusted in all material respects to reflect the impact of this information.

10. Transfers to/from Earmarked Reserves

This note sets out the amounts set aside from the general fund in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet general fund expenditure in 2020/21.

	Balance at 1 April 2019	Transfers In 2019/20	Transfers Out 2019/20	Balance at 31 March 2020	Transfers In 2020/21	Transfers Out 2020/21	Balance at 31 March 2021
	£000	£000	£000	£000	£000	£000	£000
Strategic Reserves
Priority Outcomes & Transformation	8,214	-	(1,041)	7,173	852	-	8,025
Financial Management	32,381	2,620	-	35,001	15,114	-	50,115
Service Reserves
Capital Programme	10,510	-	(1,176)	9,334	3,083	-	12,417
Waste	12,843	1,770	-	14,613	1,500	-	16,113
Insurance	4,781	1,682	-	6,463	937	-	7,400
Other Reserves
Public Health	4,996	-	(970)	4,026	1,708	-	5,734
Held on behalf of others	4,952	977	-	5,929	114	-	6,043
Total	78,677	7,049	(3,187)	82,539	23,308	-	105,847

Revenue Grants and Contributions Reserve
Services	20,506	-	(826)	19,680	20,988	-	40,668
Dedicated Schools Grant	3,248	2,933	-	6,181	5,954	-	12,135
Business Rates/Council Tax					7,385	-	7,385
COVID-19	-	16,297	-	16,297	-	(1,159)	15,138
Total	23,754	19,230	(826)	42,158	34,327	(1,159)	75,326
Total	102,431	26,279	(4,013)	124,697	57,635	(1,159)	181,173

Types of Reserve
Priority Outcomes and Transformation	Priority outcomes and transformation reserve: to fund the specified initiatives to change, protect and improve Council services, with particular emphasis on: · Invest-to-save · Seed funding for innovation (notably digital) and developments contributing to the County Council’s priorities · Investment in the redesign of the way services are delivered.
Financial Management	This is to enable the effective management of the medium-term financial strategy by managing cash flow across financial years; along with providing funding to invest to save and attract other sources of income.
Capital Programme	To provide resources which may be used for capital spending, and in recognition of the reducing forecasts of capital receipts.
Waste	To smooth the large year-on-year budget increases that will be needed to finance the Waste PFI project over the whole life of the service.
Insurance	To cater for internal insurance and risk management on Council services. Self Insurance through this reserve is more economical than external insurance for these classes of risks.
Public Health	The Public Health Reserve represents income from Government received which have no conditions attached, and set aside for the health and wellbeing of the local communities under the Government’s healthcare.
Held on behalf of others	Represents money that is held on behalf of others or statutorily ring-fenced.
Revenue Grants and Contributions	These are grants and contributions that have been received with no conditions attached but are yet to be applied to expenditure. The Council has earmarked these revenue grants and contributions until they are applied.

Balances held by schools under a scheme of delegation

The schools balances reserve holds the balances held by the Council’s schools under a scheme of delegation. These reserves are held by each individual school and are used to provide education to the pupils of that school. They are not used for any other purpose. Additional information on Dedicated School Grants and Schools Balances are detailed within Note 36.

The following table shows the level of reserves held by the schools:

	Balance at 1 April 2019	Transfers In 2019/20	Transfers Out 2019/20	Balance at 31 March 2020	Transfers In 2020/21	Transfers Out 2020/21	Balance at 31 March 2021
	£000	£000	£000	£000	£000	£000	£000

Balances held by schools	14,188	2,563	(1,710)	15,041	5,471	-	20,512

11. Other Operating Expenditure

	2019/20	2020/21
	£000	£000
Levies
§ Ashdown Forest Conservators	30	-
§ Sussex Inshore Fisheries & Conservation Authority	414	423
§ Environment Agency - Flood & Coastal Erosion	154	161
Loss on the disposal of non-current assets (net of receipts)	24,804	43,852
Total	25,402	44,436

Note - The 2020/21 loss on the disposal of non-current assets figure of £43.9m (shown net of £2.8m capital receipts) includes the removal of two schools from the Balance Sheet, that have attained Academy status at a value of £38.2m (details are included in Note 8). The comparative figures for 2019/20 are £24.8m loss (shown net of £3.0m receipts) and two schools with a value of £20.5m.

12. Financing and Investment Income and Expenditure

	2019/20	2020/21
	£000	£000
Interest payable on debt and finance leases	17,676	17,137
Net interest on pension assets and liabilities	12,859	11,413
Impairment losses/(reversals)	10	(51)
Fair Value movement of Pooled Funds	167	32
Premium on loan repayment	-	-
Soft Loan interest	(3)	(3)
Interest receivable	(2,563)	(1,852)
Decrease in fair value of Investment Properties	6,476	17
Net income from Investment Properties	(196)	(138)
Surplus on Trading Undertakings	(38)	(17)
Total	34,388	26,538

Note: The Council has trading units where the service manager is required to operate in a commercial environment and balance the budget by generating income from other parts of the Council or other organisations. These services include catering, transport and services under the Local Authorities (Goods and Services) 1970 Act (e.g. School Library Service, Parking, Legal, Street Lighting and some Financial Services). Some areas are an integral part of one of the Council’s services to the public whilst others are support services to the Council. The scale of these operations is small in relation to the Council’s total expenditure. Music Service provision is now delivered by the Brighton Dome and Brighton Festival under a concession contract.

13. Taxation and Non Specific Grant Income

	2019/20	2020/21
	£000	£000
Revenue Support Grant (RSG)	-	3,548
Social Care Grant	-	14,631
Business Rates	84,752	82,266
Business Rates Relief Funding	-	6,698
Local Income Tax Guarantee Funding	-	687
Council Tax	287,676	300,874
Council Tax – prior years surplus	3,008	879
New Home Bonus Grant	886	761
Business Rates Levy	252	-
Total	376,574	410,344
Share of Collection Fund Surplus / (Deficit)	1,191	(8,972)
Capital Grants and Contributions	58,512	69,129
Total	436,277	470,501

Note: The Council were part of an East Sussex business rate pilot scheme in 2019/20 and so Revenue Support Grant was foregone in that year.

14. Property, Plant, and Equipment

Movements in 2020/21:	Other Land and Buildings	Vehicles, Plant, Furniture & Equipment		Infrastructure Assets	Community Assets	Surplus Assets	Assets Under Construction	Total Property, Plant and Equipment	PFI Assets Included in Property, Plant and Equipment*
	£000	£000		£000	£000	£000	£000	£000	£000
Cost or Valuation
At 1 April 2020	365,168	165,155		604,936	2,521	16,130	33,137	1,187,047	71,653
Additions	21,287	2,954		33,210	-	99	1,144	58,694	87
Revaluation increases recognised in the Revaluation Reserve	108,888	6,003		-	248	9,338	-	124,477	4,689
Revaluation decreases recognised in the Revaluation Reserve	(45,066)	(26,389)		-	(57)	(1,876)	-	(73,388)	(7,725)
Revaluation increases (reversal of previous losses) recognised in the Provision of Services	8,639	108		-	49	31	-	8,827	279
Revaluation decreases recognised in the Provision of Services	(55,425)	(7,618)	-		-	(2,807)	-	(65,850)	(13,508)
Derecognition – disposals	(6,590)	(260)		-	-	(430)	-	(7,280)	-
Derecognition – disposals - schools	(31,940)	(8,569)		-	-	-	-	(40,509)	-
Assets reclassified within PPE	2,358	(1,535)		28,402	-	2,914	(32,139)	-	-
Assets reclassified (to)/from Held for Sale	(85)	-		-	-	(10,094)	-	(10,179)	-
Assets reclassified (to)/from Investment Property	(611)	-		-	-	510	-	(101)	-
At 31 March 2021	366,623	129,849		666,548	2,761	13,815	2,142	1,181,738	55,475
Accumulated Depreciation and Impairment
At 1 April 2020	(4,594)	(27,314)		(192,284)	-	-	-	(224,192)	(1,042)
Depreciation charge	(10,208)	(15,423)		(25,371)	-	(200)	-	(51,202)	(3,234)
Depreciation written out to the Revaluation Reserve	8,345	12,766		-	-	99	-	21,210	2,794
Revaluation losses recognised in the deficit on the Provision of Services	4,882	1,471		-	-	143	-	6,496	1,312
Reversal of previous losses	848	229		-	-	-	-	1,077	170
Derecognition – disposals	20	79		-	-	13	-	112	-
Derecognition – disposals – schools	746	1,571		-	-	-	-	2,317	-
Assets reclassified within PPE	(42)	101		-	-	(59)	-	-	-
Assets reclassified (to)/from Held for Sale	-	-		-	-	-	-	-	-
Assets reclassified (to)/from Investment Property	-	-		-	-	-	-	-	-
At 31 March 2021	(3)	(26,520)		(217,655)	-	(4)	-	(244,182)	-
Movements in 2020/21:	Other Land and Buildings	Vehicles, Plant, Furniture & Equipment		Infrastructure Assets	Community Assets	Surplus Assets	Assets Under Construction	Total Property, Plant and Equipment	PFI Assets Included in Property, Plant and Equipment*
Net Book Value
At 31 March 2021	366,620	103,329		448,893	2,761	13,811	2,142	937,556	55,475

At 31 March 2020	360,574	137,841		412,652	2,521	16,130	33,137	962,855	70,611
Movements in 2019/20:	Other Land and Buildings	Vehicles, Plant, Furniture & Equipment		Infrastructure Assets	Community Assets	Surplus Assets	Assets Under Construction	Total Property, Plant and Equipment	PFI Assets Included in Property, Plant and Equipment*
	£000	£000		£000	£000	£000	£000	£000	£000
Cost or Valuation									Restated*
At 1 April 2019	369,877	171,981		570,163	2,521	16,041	16,199	1,146,782	92,947
Additions	19,473	6,898		34,725	-	102	17,654	78,852	199
Revaluation increases recognised in the Revaluation Reserve	16,964	3,905		-	-	1,026	-	21,895	1,010
Revaluation decreases recognised in the Revaluation Reserve	(16,346)	(6,301)		-	-	(1,281)	-	(23,928)	(2,310)
Revaluation increases (reversal of previous losses) recognised in the Provision of Services	7,099	291		-	-	44	-	7,434	2,732
Revaluation decreases recognised in the Provision of Services	(11,741)	(3,799)		-	-	(951)	-	(16,491)	(5,324)
Derecognition – disposals	(5,361)	(849)		-	-	(425)	-	(6,635)	-
Derecognition – disposals - schools	(14,170)	(6,747)		-	-	-	-	(20,917)	(17,601)
Assets reclassified within PPE	(627)	(224)		48	-	1,519	(716)	-	-
Assets reclassified (to) / from Held for Sale	-	-		-	-	(220)	-	(220)	-
Assets reclassified (to) / from Investment Property	-	-		-	-	275	-	275	-
At 31 March 2020	365,168	165,155		604,936	2,521	16,130	33,137	1,187,047	71,653
Accumulated Depreciation and Impairment
At 1 April 2019	(340)	(19,193)		(167,883)	-	(86)	-	(187,502)	-
Depreciation charge	(10,468)	(15,479)		(24,401)	-	(200)	-	(50,548)	(4,372)
Depreciation written out to the Revaluation Reserve	3,923	5,600		-	-	276	-	9,799	1,102
Revaluation losses recognised in the deficit on the Provision of Services	1,228	1,257		-	-	-	-	2,485	1,416
Reversal of previous losses	763	7		-	-	9	-	779	232
Derecognition – disposals	1	1		-	-	-	-	2	-
Movements in 2019/20:	Other Land and Buildings	Vehicles, Plant, Furniture & Equipment		Infrastructure Assets	Community Assets	Surplus Assets	Assets Under Construction	Total Property, Plant and Equipment	PFI Assets Included in Property, Plant and Equipment*
Derecognition – disposals - schools	299	492		-	-	-	-	791	580
Assets reclassified within PPE	-	1		-	-	(1)	-	-	-
Assets reclassified (to) / from Held for Sale	-	-		-	-	2	-	2	-
Assets reclassified (to) / from Investment Property	-	-		-	-	-	-	-	-
At 31 March 2020	(4,594)	(27,314)		(192,284)	-	-	-	(224,192)	(1,042)

Net Book Value
At 31 March 2020	360,574	137,841		412,652	2,521	16,130	33,137	962,855	70,611

At 31 March 2019	369,537	152,788		402,280	2,521	15,955	16,199	959,280	92,947

*The 2019/20 PFI asset balances included within Property, Plant and Equipment have been restated to include some assets previously omitted.

Depreciation

Depreciation is calculated on a straight-line basis over the expected life of the asset, on the difference between the book value and any estimated residual value. Depreciation is charged on all classes of Property, Plant and Equipment, with the exception of land, community assets, surplus land and assets under construction. The useful lives used in the calculation of depreciation are set out in the accounting policy xxi (Note 2).

Revenue Expenditure Funded from Capital Under Statute (Refcus)

Refcus represents capital expenditure on assets which are not owned by the Council (e.g. capital grants, adapting the homes of people with disabilities). Refcus is written off in the year in which the expenditure is incurred. However, the financing cost, in terms of interest and Minimum Repayment Provision, is deferred over a number of years. In 2020/21, £12.42m (£13.03m in 2019/20) of the Council’s capital investment related to Refcus (Note 38), and all was written off in the year the expenditure was incurred.

Revaluation and Impairment Losses

Each year the Council revalues a proportion of its land and building assets including schools and undertakes an impairment review of the entire asset portfolio. Where land and property assets have increased in value, the revaluation gains are shown in the revaluation reserve (see Note 25) and totalled £131.5m for 2020/21 (£27.4m in 2019/20). Where assets previously had a revaluation loss taken to the Comprehensive Income and Expenditure Statement then any subsequent increase first goes to the Comprehensive Income and Expenditure Statement to reverse that previous loss before any remining balance is taken to the revaluation reserve, the reversal of losses in 2020/21 totalled £10.0m (£8.2m 2019/20).

Some assets will also lose value on revaluation. In 2020/21, the Council has recognised revaluation losses of £118.5m (£33.7m in 2019/20). Of the £118.5m total, £59.3m (£14.0m 2019/20) has been charged to the Comprehensive Income and Expenditure Statement and £59.2m (£19.7m in 2019/20) to the Revaluation Reserve. The net charge to the Comprehensive Income and Expenditure Statement of losses less reversals was £49.3m (£5.8m 2019/20). Overall the total valuation movements for 2020/21 was a net gain of £23.0m (£1.9m in 2019/20).

For 2020/21 the values shown above for revaluation movements are significantly higher compared to the prior year figures. This movement is primarily due to the appointment of a new firm of valuers, Bruton Knowles, for the 2020/21 valuations and the impact of changes in their valuation methodology. As this is the first year of Bruton Knowles valuing the Council’s assets we asked them to undertake a full valuation of the entire portfolio so that all assets would be valued on a consistent basis.

Capital Commitments

As at 31st March 2021, the Council had not entered into any material contracts for the construction or enhancement of Property, Plant and Equipment in 2021/22 and future years that amounted to the value of £10m or more.

Valuation of Property, Plant and Equipment (PPE)

The Council operates a policy of revaluing its Property, Plant and Equipment on a rolling three year basis, with the aim of revaluing all of its assets within this period. An index (based on assets that have been formally valued in the year) may be applied to those assets not valued in the year if the carrying value is calculated as materially different to the fair value at the Balance Sheet date. The Council also reviews the asset register each year, and, if necessary adjusts the value of assets if a significant impairment has been identified.

Freehold and long leasehold buildings properties regarded by the Council as operational are valued on the basis of existing use value or, where there is insufficient market evidence of current value because the asset is specialised or rarely sold, the depreciated replacement cost. This is in line with the Statement of Asset Valuation Practice and Guidance Notes of the Royal Institution of Chartered Surveyors. Buildings and plant are depreciated in line with the estimated life expectancies of the assets. Land is revalued but not depreciated.

Items of school and offices furniture, IT and other equipment are measured at historic cost as a proxy for current value. Their value is updated for capital expenditure and depreciated in line with the estimated lives of the assets. The total is £39.11m as shown in the table below.

Infrastructure and community assets are not revalued and are updated for capital expenditure and in the case of infrastructure, depreciated in accordance with the expected life of the asset created or enhanced. Community assets include country parks, common ground, nature reserves and forested areas.

Surplus assets are non-operational but are not deemed to be held for sale and are measured at fair value. The fair value 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 following statement shows the progress of the Council’s programme for the revaluation of land, buildings and plant. The valuations are carried out by an external firm of valuers, Bruton Knowles (a national Chartered Surveying practice), on behalf of the Council. The valuation dates are at 31 March each year. In addition to the valuation certificate, the valuers provide an annual Impairment Report. Usually the Council operates a three year rolling programme to ensure that the carrying value of assets is not materially different to their fair values at the Balance Sheet date, however as 2020/21 was the first year that the valuations had been carried out by Bruton Knowles the entire portfolio was revalued to ensure consistency in the valuations. In addition, an annual indexation may be applied to the remaining portfolio (based on those assets that were valued by the valuer in the year) if the values are deemed to be materially different to their carrying value. Indexation was last applied in 2018/19.

	Other Land and Buildings	Vehicles, Plant, Furniture and Equipment	Surplus Assets	Total
	£000	£000	£000	£000

Carried as at historical cost	84	39,030	-	39,114
Valued at fair value in:
31 March 2021	366,539	90,819	13,815	471,173
31 March 2020	-	-	-	-
31 March 2019	-	-	-	-
Gross Valuation	366,623	129,849	13,815	510,287

Fair value hierarchy

As at 31 March 2021, there are twenty-one properties classed as surplus, an increase of five on the previous year. Four properties were reclassified as held for sale. The fair value hierarchy of surplus assets at 31 March are as follows:

Recurring fair value measurements using:	Quoted prices in active markets for identical assets (Level 1)	Other significant observable Inputs (Level 2)	Significant unobservable inputs (Level 3)	Total
	£000	£000	£000	£000
Surplus assets (NBV) 31 March 2021	-	4,799	9,012	13,811
Surplus assets (NBV 31 March 2020	-	14,222	1,908	16,130

The surplus assets measured at Level 3 in the fair value hierarchy where the measurement technique uses significant unobservable inputs to measure the fair value. The fair value has been derived on a comparable basis for income producing assets or residential properties (using rent yield or capital value per square metre) or derived through an assessment of prevailing land values for unconsented sites or a residual land appraisal. For assets offering development potential (alternative use) the valuation is based on the highest value that has a reasonable prospect of securing an appropriate planning consent. Restrictions on the sale or use of an asset affect its fair value only if market participants would also be impacted by those restrictions.

Highest and best use is determined only from the perspective of market participants, even if the Council intends a different use. Alternative uses of those assets are considered if there is an alternative use that would maximise their fair value. However, the Council is not required to perform an exhaustive search for other potential uses of the assets if there is no evidence to suggest that the current use of an asset is not its highest and best use.

15. Investment Properties

An investment property is held solely to earn rentals and/or for capital appreciation. Examples include land held for capital appreciation, land held for currently undetermined future use and a building or vacant building rented out under operating leases without service objectives. There are 27 assets classed as investment property, a decrease of one from the previous year.

The following items of income have been accounted for in the Comprehensive Income and Expenditure Statement:

	2019/20	2020/21
	£000	£000
Rental Income from Investment Property	(248)	(257)
Direct Operating Expenses arising from Investment Property	52	119
Net (gain)	(196)	(138)

The following table summarises the movement in the fair value of investment properties over the year:

	2019/20	2020/21
	£000	£000
Balance at start of the year	17,962	11,063
Additions	2	4
Net (Losses) from fair value adjustments	(6,476)	(17)
Transfers (to) / from Property, Plant & Equipment & Assets Held for Sale	(425)	101
Balance at end of the year	11,063	11,151

Fair value measurement

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. As a non-financial asset, an investment property is measured at its highest and best use. Highest and best use is determined only from the perspective of market participants, even if the Council intends a different use. Restrictions on the sale or use of an asset affect its fair value only if market participants would also be impacted by those restrictions. Alternative uses of those assets are considered if there is an alternative use that would maximise their fair value. However, the Council is not required to perform an exhaustive search for other potential uses of the assets if there is no evidence to suggest that the current use of an asset is not its highest and best use. The properties are categorised as Level 3 in the fair value hierarchy as the measurement technique uses significant unobservable inputs to measure the fair value. The valuation techniques used are the market approach and income approach using estimated land values, sales value, rents and yield. In estimating the fair value of the investment property, the highest and best use is the current use.

Fair value hierarchy

The fair value hierarchy at 31 March is as follows:

	31 March 2021
Recurring fair value measurements using:	Quoted prices in active markets for identical assets (Level 1)	Other significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total
	£000	£000	£000	£000
Offices	-	4,923	-	4,923
Farm Business Tenancy	-	1,669	-	1,669
Land	-	628	-	628
Residential Property	-	1,395	-	1,395
Other	-	1,970	566	2,536
Total	-	10,585	566	11,151

	31 March 2020
Recurring fair value measurements using:	Quoted prices in active markets for identical assets (Level 1)	Other significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total
	£000	£000	£000	£000
Offices	-	4,750	-	4,750
Farm Business Tenancy	-	-	950	950
Land	-	750	6	756
Residential Property	-	1,490	-	1,490
Other	-	1,173	1,944	3,117
Total	-	8,163	2,900	11,063

16. Intangible Assets

The Council accounts for its software as Intangible Assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item of Property, Plant and Equipment. Intangible Assets represent purchased software licences and are valued at acquisition cost and written off over the period of the licence. The Council has no material intangible asset trademarks, artistic originals, or patents.

All software is given a finite useful life, based on assessments of the period that the software is expected to be of use to the Council. The carrying amount of Intangible Assets is amortised on a straight-line basis. The amortisation of £1.82m charged to revenue in 2020/21 (£2.47m in 2019/20) was charged to Business Services.

The movement on Intangible asset balances during the year is as follows:

	2019/20	2020/21
	£000	£000
Balance at start of year:
Gross carrying amounts	14,239	13,496
Accumulated amortisation	(8,997)	(8,751)
Net carrying amount at start of year	5,242	4,745
Purchases	1,971	577
Amortisation for the period	(2,468)	(1,817)
Disposal (Gross carrying amount)	(2,714)	-
Disposal (Accumulated amortisation)	2,714	-
Net carrying amount at end of year	4,745	3,505

Comprising:
Gross carrying amounts	13,496	14,073
Accumulated amortisation	(8,751)	(10,568)
Net carrying amount at end of year	4,745	3,505

The individual items of capitalised software in the Balance Sheet are:

Description	Carrying Amount		Remaining Amortisation (Years)
	31 March 2020	31 March 2021
	£000	£000
LiquidLogic – ASC & Children’s clients	1,132	712	2
Virtual Infrastructure	1,672	1,506	3
Desktop Anywhere – remote access	40	-	-
SAP Software - ERP	312	207	2
Microsoft Enterprise Solution	58	-	-
Czone Platform – education providers	100	50	1
Compliance Management	40	14	1
Security Incident Management	66	-	-
Web Content Management System	46	-	-
HRMS Financials	63	32	1
Atrium – asset management	59	15	1
Mapping Outlet	238	178	3
Citrix	302	151	1
SharePoint	120	118	10
Other	497	522	1 – 3
Total	4,745	3,505

17. Heritage Assets

The Council has identified the following heritage assets:

§ East Sussex Record Office which preserves and makes accessible records relating to the County and its people;

§ Schools Library and Museum Service (SLAMS) which provides library services, historical artefacts and advice for all teachers at all schools in East Sussex and Brighton;

§ A small art collection within offices at County Hall, Lewes;

§ Chattels at Bentley House, Halland;

§ Battle Abbey Estate Archives;

§ Lewes Castle Precinct Wall; and

§ Listed buildings and monuments owned by the Council or on Council land.

No individual item in the Record Office or SLAMS is valued at more than £20,000 which is the Council’s de-minimus level for capital expenditure to be recognised as an asset in the Balance Sheet. For assets where information on cost or value is not available and the cost of obtaining the information outweighs the benefits to the users of the financial statements, the assets are not included on the Balance Sheet.

Reconciliation of the carrying value of Heritage Asset:

Heritage Assets	Art Collection	Chattels at Bentley House	The Sugar Loaf Folly	Battle Abbey Estate Archives	Castle Precincts Wall	Total
Cost or valuation	£000	£000	£000	£000	£000	£000
1 April 2019	13	484	60	116	65	738
Additions	-	-	-	-	-	-
Revaluation (Loss)	-	-	(21)	-	(65)	(86)
31 March 2020	13	484	39	116	0	652
Additions	-	-	-	-	-	-
Revaluation Gain	-	-	2	-	-	2
31 March 2021	13	484	41	116	-	654

Heritage Assets – Further Information

East Sussex Record Office, The Keep - holds the historic and administrative archives for the County of East Sussex and, under an agreement, for the City of Brighton & Hove. These comprise records dating from 1101 to the present and they are held for the express purpose of ensuring their preservation and providing public access to resources recording the county’s and city’s heritage. The archives, ranging from a single piece of paper to thousands of documents, include paper and parchment, books, maps, photographs and modern media, and are held by us under a variety of terms, the most common ones being deposit (long-term loan), gift or purchase. The majority of archives held are on deposit. Obtaining a valuation of all these assets would be a lengthy, resource intensive and costly exercise, and therefore no valuation was obtained.

East Sussex Schools Library and Museum Service - the Artefact loan box collection was established in 1962 and developed throughout the 1960’s and 1970’s. Record keeping consisted of hand written ledgers with rather sparse information about the provenance of items. Most were purchased or gifted from individuals or other museums. Many of the artefacts have been presented in wooden loan boxes which are available for schools to borrow as part of a subscription service. The loan boxes are catalogued using the same computerised management system as for book loans. There are still a large number of items owned by the service which are not included in loan boxes. The collection has a wide scope, including natural history e.g. taxidermy specimens, British wildlife, fossils and minerals, historical artefacts, both original items e.g. small mummified animals, Roman and Greek items, flints and tools, and museum standard models e.g. model of the ‘Victory’, replica Viking helmet, geographical and cultural items e.g. bronzes and beadwork from Africa, textiles and masks from South East Asia and Art and design e.g. samples of fabric, ceramics, large collection of posters depicting well known works of art. There are also some travelling displays which are large sets that can be constructed in schools depicting a Victorian classroom, laundry or kitchen and a World War Two living room with many original artefacts. These items have not been included in the accounts because the Council does not consider that a reliable cost or valuation information can be obtained for these items, due to the diverse nature of these items and lack of comparable market values.

Art Collection - consists of four oil on canvas paintings, three dating from the 1880’s and one more recent; being a portrait of Henry Thomas Pelham by Frank Holl, a portrait of John George Dodson by Frank William Warwick Topham, Lewes from Chapel Hill by Edmund Niemann and a portrait of HM Queen Elizabeth II by Amanda Bigden. The Council’s external valuer for its art work (Gorringe’s Auction House) has previously carried out a full valuation of the collection of paintings with the valuations based on those for insurance replacement purposes.

Chattels at Bentley House, Halland - Bentley House, Halland including the Motor Museum and Wild Fowl Reserve is owned by the Bentley Trust. However some of the contents of the house are under the ownership of East Sussex County Council. The contents or chattels include furniture, furnishings paintings and sculptures. The last valuation was undertaken by Sotheby’s who provided a saleroom estimate for each inventory item.

Listed Buildings - the Council has reviewed its listed buildings register and established that a number of the buildings are being used for the delivery of services. These buildings therefore continue to be included as operational Property, Plant and Equipment on the Council’s Balance Sheet. In addition there are a number of listed buildings that are non operational assets and are not included in the Council’s Balance Sheet as there is no cost or value information available and the cost of obtaining that information outweighs the benefits to the user of the Statement of Accounts. The assets are Remains of Wayside Cross, Firle and Albert Memorial Well, Frant.

Battle Abbey Estate Archives - date from 1101 to the 20^th century. The earliest records relate to the period when the lands were owned by Battle Abbey before its dissolution in 1538 but the majority date from the 18^th century onwards when the estates were owned by the Webster family.

Castle Precincts Wall – remains of castle wall at Lewes Castle. A section of the wall collapsed in November 2019 and work is being undertake to restore it to the requirements of Heritage England, the cost of which are currently unknown.

18. Financial Instruments

A. Categories of Financial Instruments

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

Financial Assets	31 March 2020	31 March 2021
	£000	£000
Fair value through profit or loss
Long Term Investments	4,493	4,461
Long Term Debtors	-	-
Short Term Investments & Cash Equivalents	18,150	73,602
Short Term Debtors	-	-
Total	22,643	78,063

Amortised Cost
Long Term Investments	20,001	15,001
Long Term Debtors	4,960	4,893
Short Term Investments	182,146	195,364
Short Term Debtors	28,137	34,244
Total	235,244	249,502
Total Financial Assets	257,887	327,565
Non Financial Assets	33,903	31,106
Total	291,790	358,671

Financial Liabilities	31 March 2020	31 March 2021
	£000	£000
Fair value through profit or loss
Short & Long Term Borrowings and Creditors	-	-

Amortised Cost
Long Term Borrowings	(237,923)	(232,980)
Long Term Creditors	(67,051)	(66,569)
Short Term Borrowings	(2,312)	(4,615)
Short Term Creditors	(92,428)	(84,316)
Total Financial Liabilities	(399,714)	(388,480)
Non Financial Liabilities	(54,747)	(69,800)
Total	(454,461)	(458,280)

The balance on Soft Loans at 31 March 2021 was £0.142m (£0.139m at 31 March 2020).

B. Financial Instruments Designated at Fair Value through Profit or Loss

The balance of financial assets at 31 March 2021 was £78.06m, an increase of £55.42m from the previous year. Financial assets include £73.6m low volatility money market funds (LVNAV) and £4.46m property fund (carrying amount £5.00m). Total holdings in the five money market funds have increased by £55.45m over the year. The value of the Property fund has reduced further by £0.032m during the year.

The constant net asset value (CNAV) money market funds were reclassified as LVNAV under European Money Market reform.

There were no financial liabilities designated at fair value through profit or loss. No financial assets or liabilities were classed as fair value through other comprehensive income. No financial assets or liabilities were re-classified during the year.

C. Income, Expense, Gains and Losses

	2019/20		2020/21
	Surplus or Deficit on the Provision of Services	Other Comprehensive Income and Expenditure	Surplus or Deficit on the Provision of Services	Other Comprehensive Income and Expenditure
	£000	£000	£000	£000
Net gains/losses on:
Financial assets measured at fair value through profit or loss – fair value	167	-	32	-
Financial assets measured at fair value through profit or loss – dividend	(201)	-	(200)	-
Total net (gains) / losses	(34)	-	(168)	-

Interest revenue:
Financial assets measured at amortised cost	(2,362)	-	(1,652)	-
Interest expense:
Financial assets measured at amortised cost	17,673	-	17,134	-

D. Fair Value

The basis for recurring fair value measurements is:

§ Level 1 Inputs – quoted prices (unadjusted) in active markets for identical assets or liabilities 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 or liability, either directly or indirectly.

§ Level 3 Inputs – unobservable inputs for the asset or liability.

Some of the authority’s financial assets are measured at fair value on a recurring basis and are described in the following table, including the valuation techniques used to measure them.

Recurring fair value measurements

Input level in fair value hierarchy

Valuation technique used to measure fair value

As at 31/3/20

£000

As at 31/3/21

£000

Fair Value through Profit or Loss

Other financial instruments

Level 1

Unadjusted quoted prices in active markets for identical shares

22,643

78,063

There were no transfers between levels 1 and 2 during the year. There has been no change in the valuation technique used during the year for the financial instruments.

There were no instruments, measured at fair value, that were at level 3 in the hierarchy.

E. Fair Values of Financial Assets and Financial Liabilities that are not measured at fair value [but for which fair value disclosures are required]

Except for the financial assets carried at fair value, all other financial liabilities and financial assets represented by amortised cost and long-term debtors and creditors are carried on the balance sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that take place over the remaining life of the instruments, using the following assumptions:

§ For loans from the PWLB payable, under debt redemption procedures, prevailing market rates have been applied to provide the fair value;

§ For non-PWLB loans payable, under debt redemption procedures, prevailing market rates have been applied to provide the fair value;

§ For loans receivable prevailing benchmark market rates have been used to provide the fair value;

§ No early repayment or impairment is recognised;

§ Where an instrument has a maturity of less than 12 months or is a trade or other receivable the fair value is taken to be the carrying amount or the billed amount;

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

The fair values calculated are as follows:

Financial Liabilities	31 March 2020		31 March 2021
	Carrying amount	Fair value	Carrying amount	Fair value
	£000	£000	£000	£000
Financial liabilities held at amortised cost	(237,923)	(309,439)	(232,980)	(322,312)
Long Term Creditors	(78)	(78)	(222)	(222)
PFI and Finance Lease Liabilities	(66,973)	(91,406)	(66,347)	(92,688)
Total Long Term	(304,974)	(400,923)	(299,549)	(415,222)
Short Term Borrowings and Creditors	(94,740)	(94,740)	(88,931)	(88,931)
Total Long and Short Term	(399,714)	(495,663)	(388,480)	(504,153)

The fair value of borrowings is higher than the carrying amount because the portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the prevailing rates at the Balance Sheet date.

This shows a notional future loss, based on economic conditions at 31 March 2021, arising from a commitment to pay interest to lenders above current market rates.

Financial Assets	31 March 2020		31 March 2021
	Carrying amount	Fair value	Carrying amount	Fair value
	£000	£000	£000	£000
Financial assets held at amortised cost	20,001	20,383	15,001	15,192
Long Term Debtors	4,960	4,960	4,893	4,893
Total Long Term	24,961	25,343	19,894	20,085
Short Term Investments and Debtors	210,283	210,283	229,608	229,608
Total Long and Short Term	235,244	235,626	249,502	249,693

The fair value of the financial assets is higher than the carrying amount because the portfolio of investments includes a number of fixed rate loans where the interest rate receivable is higher than the rates available for similar loans at the Balance Sheet date. This shows a notional future gain, based on economic conditions at 31 March 2021, attributable to the commitment to receive interest below current market rates.

Short term debtors and creditors are carried at cost as this is a fair approximation of their value.

Fair value hierarchy of financial assets and financial liabilities that are not measured at fair value

	31 March 2021
Recurring fair value measurements using:	Quoted prices in active markets for identical assets (Level 1)	Other significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total
	£000	£000	£000	£000
Financial liabilities
Financial liabilities held at amortised cost	-	(322,312)	-	(322,312)
Long Term Creditors	-	(222)	-	(222)
PFI and Finance Lease Liabilities	-	-	(92,688)	(92,688)
Total	-	(322,534)	(92,688)	(415,222)

Financial assets
Financial assets held at amortised cost	-	15,192	-	15,192
Long Term Debtors	-	4,893	-	4,893
Total	-	20,085	-	20,085

	31 March 2020
Recurring fair value measurements using:	Quoted prices in active markets for identical assets (Level 1)	Other significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total
	£000	£000	£000	£000
Financial liabilities
Financial liabilities held at amortised cost	-	(309,439)	-	(309,439)
Long Term Creditors	-	(78)	-	(78)
PFI and Finance Lease Liabilities	-	-	(91,406)	(91,406)
Total	-	(309,517)	(91,406)	(400,923)

Financial assets
Financial assets held at amortised cost	-	20,383	-	20,383
Long Term Debtors	-	4,960	-	4,960
Total	-	25,343	-	25,343

The fair value for financial liabilities and financial assets that are not measured at fair value included in levels 2 and 3 in the table above have been arrived at using a discounted cash flow analysis, with the most significant inputs being the discount rate.

The fair value for financial liabilities and financial assets that are not measured at fair value can be assessed by calculating the present value of the cash flows that will take place over the remaining term of the instruments, using the following assumptions.

Financial Assets

§ no early repayment or impairment is recognised;

§ estimated ranges of interest rates at 31 March 2021 for loans receivable and for property fund, are based on new lending rates for equivalent loans at that date;

§ the fair value of trade and other receivables is taken to be the invoiced or billed amount.

Financial Liabilities

§ no early repayment is recognised;

§ estimated ranges of interest rates at 31 March 2021 of 2.6% to 7.8% for loans payable based on new lending rates for equivalent.

19. Assets Held for Sale

	2019/20	2020/21
	£000	£000
Balance outstanding at start of year	3,445	2,624
Assets newly classified as held for sale	368	10,179
Revaluations	(99)	(31)
Assets declassified as held for sale	-	-
Assets sold / disposed of	(1,090)	(651)
Balance outstanding at year end	2,624	12,121

Assets Held for Sale are valued at fair value which 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. As at 31 March 2021 there are nine assets that were held for sale. During the year, one asset was sold and one asset disposed of from the register.

20. Current & Long Term Debtors and Payments in Advance

	31 March 2020	31 March 2021
	£000	£000
Current
Debtor System Control	12,572	12,288
HMRC	4,615	2,363
Payments In Advance	9,237	9,040
Council Tax & NNDR	20,052	19,703
Other	15,564	21,956
Total	62,040	65,350

Long Term
Higher Education Institution	849	792
South East Local Enterprise Partnership	1,600	1,483
Economic Development	2,406	2,387
Other Entities and Individuals	105	231
Total	4,960	4,893

Allowance for expected credit losses

The Council makes allowance for impairment of debts based on an assessment of the recoverability of its receivables. A decrease in the total allowance for credit losses of £0.043m was made in 2020/21, bringing the total allowance for impairment from £1.712m down to £1.669m as at 31 March 2021. These amounts are netted off the figures shown above. Management specifically review all debts, and evaluate the adequacy of the allowance for impairment of receivables. However, most categories of the Council’s debtors are not subject to substantial fluctuation and past experience is used within material limits to judge the percentages of each type of debt that will not eventually be recovered.

In addition, there are allowances for impairment in respect of Council Tax & Business Rates debtors which are assessed by the District Councils in their role as Council Tax collection authorities. At 31 March 2021 the Council’s share of these allowances amounts to £14.942m (£11.356m at 31 March 2020) out of its share of Council Tax & Business Rates arrears totalling £33.932m (£27.210m at 31 March 2020).

21. Cash and Cash Equivalents, Bank overdraft and accrued balances for third parties

	31 March 2020	31 March 2021	Movement
	£000	£000	£000
Cash in hand	113	108	(5)
Short-term deposits	18,159	45,800	27,641
Total Cash and Cash Equivalents	18,272	45,908	27,636

Imputed cash adjustment for pooled budget re the purchase of integrated community equipment	(497)	(349)	148
Bank overdraft	(10,164)	(10,320)	(156)
Accrued balance at bank and for third parties	2,236	4,417	2,181
Total bank overdraft and accrued balance for third parties	(8,425)	(6,252)	2,173

Net cash and cash equivalent balances/(overdrawn)	9,847	39,656	(29,809)

Note 30 sets out some details of the arrangements under which the Council ‘hosts’ the finances of pooled arrangements for Pooled Budgets (with Clinical Commissioning Boards). These arrangements relate to a number of different organisations and it is necessary to allocate their balance sheets between the different participants. The result of adjusting the balances for debtors, creditors, etc. is to create an imbalance, which represents the difference between the cash actually held by the Council and the share of the arrangements’ cash, which is eventually allocable to the Council. This difference is recorded above as ‘imputed cash’.

The Council manages and invests its cash balances with the aim of achieving a balance at the bank as close as possible to zero. As it manages cash balances on behalf of its share of Orbis and some trust funds alongside its own balances, the Council allows its own balances to become overdrawn if there is cash held in its own bank accounts on behalf of the other authorities, which results in a notional overdrawn balance because cheques and BACS payments are recorded when they are drawn, rather than when they are presented at the bank.

The accrued balance for third parties shown above was made up as follows:

	31 March 2020	31 March 2021
	£000	£000
Orbis	2,539	4,721
Trust Funds (see Note 46)	(303)	(304)
Accrued balance at bank and for third parties	2,236	4,417

The pooled bank balances at 31 March 2021 include £14.32m (£13.27m at 31 March 2020) relating to bank accounts operated by schools under local management arrangements.

22. Creditors and Income in Advance

	31 March 2020	31 March 2021
	£000	£000
Creditor System Control	5,086	5,240
Income in Advance	26,419	25,161
Pension Schemes	5,054	5,173
HMRC	5,078	5,397
PFI Schemes	4,692	4,895
Council Tax & NNDR	8,748	18,772
East Sussex Fire Authority	24,348	20,469
Capital	-	5,278
Other	49,774	42,067
Total	129,199	132,452

23. Provisions

Provisions are amounts set aside in the Accounting Statements for liabilities or losses which are certain or very likely to occur and for which a reliable estimate of the amount of the obligation can be made. The provision has been established for material liabilities of uncertain timing. The following table shows the level of the Council’s provisions:

Long Term Provisions	31 March 2020	Additional provisions	Amounts used	31 March 2021
	£000	£000	£000	£000

Insurance claims	2,553	-	(883)	1,670
Closed Landfill Sites	8,811	-	(137)	8,674
Total Long Term	11,364	-	(1,020)	10,344

Short Term Provisions	31 March 2020	Additional provisions	Amounts used	31 March 2021
	£000	£000	£000	£000

Municipal Mutual Insurance (MMI)	105	24	-	129
NNDR Appeals	3,250	-	(1,884)	1,366
Adult Social Care	1,593	923	-	2,516
CET	-	64	-	64
Closed Landfill Sites	490	-	-	490
Redundancy	6	-	(6)	-
Total Short Term	5,444	1,011	(1,890)	4,565

Total Provisions

16,808

1,011

(2,910)

14,909

Insurance claims - the provision (pre 1997 & post 1997 liabilities) represents an estimate of the amounts which the Council will have to pay for claims arising before 31 March 2015, but where the exact amount and the date of payment are uncertain.

Closed Landfill Sites - The Council has 19 closed landfill sites that require restoration and aftercare. An accounting model has been developed to determine the required provision for these future costs taking into consideration the annual costs relating to leachate removal, gas monitoring and water quality monitoring. The Council has a legal obligation to restore, monitor and maintain landfill sites.

Municipal Mutual Insurance Limited (MMI) was the main Local Authority Insurer up until they entered administration in 1992. Being a mutual company, the members, including the Council, signed up to a ‘Scheme of Arrangement’, meaning once all claims have been discharged any outstanding assets would be distributed to the members, or conversely, the members would meet the cost of any liabilities, once all assets had been utilised.

The NNDR appeals provision represents amounts set aside to meet potential future liabilities for Business Rates Appeals. Local Authorities are liable for successful appeals against business rates charged to businesses in 2012/13 and earlier financial years in their proportionate share. Therefore, a provision has been recognised as a best estimate of the amount that businesses have been overcharged up to 31 March 2021.

Adult Social Care - is an estimate of payments due to other local authorities for costs incurred for clients with care and support needs commissioned by those authorities, whose ordinary residence (as defined under the Care Act) is deemed to be in East Sussex.

Communities, Economy & Transport (CET) – is for additional COVID related costs being claimed by South Downs Waste Services Ltd.

Redundancy – the provision relates to the potential costs associated with various services redundancies.

24. Usable Reserves

The Council holds a number of usable reserves, being those reserves that the Council can use to provide services subject to the need to maintain a prudent level of reserves and any statutory limitations on their use. Movements in the Council’s usable reserves are detailed in the Movement in Reserves Statement.

§ General Fund & School Balances - The General Fund and School balances shows the resources available to meet future running costs. See Note 10 for school balances.

§ Earmarked Reserves - The Council holds a number of earmarked reserves which are used to earmark resources for specific projects/purposes. See Note 10 for a breakdown of General Fund earmarked reserves.

§ Capital Receipts Reserve – see note below.

§ Capital Grant & Contributions Unapplied Account – see note below.

	31 March 2020	31 March 2021
	£000	£000
Usable Capital Receipts Reserve	3,044	5,840
Capital Grants & Contributions Unapplied	14,132	17,323
Earmarked Reserves	82,539	105,847
Earmarked Reserves – Revenue Grants & Contributions	42,158	75,326
General Fund Balances	9,999	9,999
School Balances	15,041	20,512
Total Usable Reserves	166,913	234,847

Capital Receipts Reserve

The capital receipts reserve holds the proceeds of non-current asset sales available to meet future capital investment. The Capital Receipts Reserve is only used to fund capital expenditure or repay debt. Capital receipts are held in this reserve until such time they are used to finance capital expenditure.

	2019/20	2020/21
	£000	£000
Balance at 1 April	3,122	3,044
Amounts receivable during the year	3,044	2,796
Amounts applied to finance new capital investment	(3,122)	-
Net Transfer to / (from) the Capital Receipts Reserve	(78)	2,796
Balance at 31 March	3,044	5,840

Capital Grants and Contributions Unapplied Account

This account holds capital grants and contributions received by the Council, with either no conditions or where conditions have been met, where expenditure is yet to be incurred. The account holds grants and contributions available to meet future capital investment. The grants and contributions are held in this reserve until such time they are used to finance capital expenditure.

	2019/20	2020/21
	£000	£000
Balance at 1 April	18,223	14,132
Amounts receivable during the year	58,512	69,129
Amounts applied to finance new capital investment	(62,603)	(65,938)
Net Transfer to/(from) the Capital Unapplied Account	(4,091)	3,191
Balance at 31 March	14,132	17,323

25. Unusable Reserves

	31 March 2020	31 March 2021
	£000	£000
Revaluation Reserve	227,245	266,767
Capital Adjustment Account	417,309	367,819
Financial Instruments Adjustment Account	(7,327)	(7,137)
Pooled Investment Funds Adjustment Account	(507)	(539)
Collection Fund Adjustment Account	4,028	(4,944)
Accumulated Absences Account	(5,179)	(6,322)
Pensions Reserve	(416,868)	(559,382)
Total Unusable Reserves	218,701	56,262

Revaluation Reserve

The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its Property, Plant, and Equipment. 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; or

· 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 Capital Adjustment Account.

	2019/20	2020/21
	£000	£000	£000
Balance at 1 April	246,588		227,245
Upward revaluation of assets	27,442	131,465
Downward revaluation of assets and impairment losses not charged to the Deficit on the Provision of Services	(19,697)	(59,164)
Surplus on revaluation of non-current assets not posted to the Deficit on the Provision of Services	7,745		72,301
Difference between fair value depreciation and historical cost depreciation	(10,628)	(10,209)
Accumulated gains on assets sold or scrapped	(16,460)	(22,570)
Amount written off to the Capital Adjustment Account	(27,088)		(32,779)
Balance at 31 March	227,245		266,767

Capital Adjustment Account

The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (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 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 7 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.

	2019/20	2020/21
	£000	£000	£000
Balance at 1 April	415,663		417,309
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 assets	(50,548)	(51,202)
Revaluation losses on non-current assets	(14,073)	(59,497)
Revaluation losses on assets held for sale	(98)	(174)
Revaluation loss reversals on non-current assets	8,213	10,048
Revaluation loss reversals on assets held for sale	-	143
Amortisation of intangible assets	(2,468)	(1,817)
Financial Asset Impairment (Gains)/Losses	37	(36)
Revenue expenditure funded from capital under statute	(13,032)	(12,418)
Amounts of non-current assets written off on disposal or sale as part of the loss on disposal to the Comprehensive Income and Expenditure Statement	(27,847)	(46,648)
	(99,816)		(161,601)
Adjusting amounts written out of the Revaluation Reserve	27,088		32,779
Net written out amount of the cost of non-current assets consumed in the year	(72,728)		(128,822)
Capital financing applied in the year
Use of the Capital Receipts Reserve to finance new capital expenditure	3,122	-
Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement that have been applied to capital financing	62,603	65,938
Statutory provision for the financing of capital investment charged against the General Fund balance	10,507	7,004
Capital expenditure charged against General Fund balances	4,618	6,407
	80,850		79,349
Movements in the market value of Investment Properties credited or debited to the Comprehensive Income and Expenditure Statement	(6,476)		(17)
Balance at 31 March	417,309		367,819

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 the early redemption of loans. Premiums are debited to the Comprehensive Income and Expenditure Statement when they are incurred, but reversed out of the General Fund Balance to the Account in the Movement in Reserves Statement. Over time, the expense is posted back to the General Fund Balance in accordance with statutory arrangements for spreading the burden on council tax. In the Council’s case, this period is the unexpired term that was outstanding on the loans when they were redeemed. As a result, the balance on the Account at 31 March 2021 will be charged to the General Fund over a specific period.

	2019/20	2020/21
	£000	£000	£000
Balance at 1 April	(7,517)		(7,327)
Premiums	187	187
Soft Loan Interest	3	3
Net movement in the Financial Instruments Adjustment Account	190		190
Balance at 31 March	(7,327)		(7,137)

Pooled Investment Funds Adjustment Account

The account mitigates the impact of fair value movements on pooled investment funds.

	2019/20	2020/21
	£000	£000
Balance at 1 April	(340)	(507)
Fair value of Property Fund	(167)	(32)
Balance at 31 March	(507)	(539)

Pensions Reserve

The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post-employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to pension funds or eventually pay 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 arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

	2019/20	2020/21
	£000	£000
Balance at 1 April	(521,412)	(416,868)
Remeasurement of the net defined liability	144,523	(89,195)
Benefits credited to the Provision of Services in the Comprehensive Income and Expenditure Statement	(80,544)	(91,421)
Employer’s pension contributions charged to General Fund Balance	40,565	38,102
Balance at 31 March	(416,868)	(559,382)

Collection Fund Adjustment Account

The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax and business rates income in the Comprehensive Income and Expenditure Statement as it falls due from council tax and business rate payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund. Council Tax and Business Rates income is collected on behalf of the Council on an agency basis by the five billing authorities in East Sussex: Eastbourne Borough Council, Hastings Borough Council, Lewes District Council, Rother District Council and Wealden District Council.

	2019/20	2020/21
	£000	£000
Balance at 1 April	2,837	4,028
Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements	511	(1,754)
Amount by which business rates income debited to the Comprehensive Income and Expenditure Statement is different from business rates income calculated for the year in accordance with statutory requirements	680	(7,218)
Net movement in the Collection Fund Adjustment Account	1,191	(8,972)
Balance at 31 March	4,028	(4,944)

Accumulated Absences Account

The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account.

	2019/20	2020/21
	£000	£000
Balance at 1 April	(5,179)	(5,179)
Settlement or cancellation of accrual made at the end of the preceding year	5,179	5,179
Amounts accrued at the end of the current year	(5,179)	(6,322)
Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements	-	(1,143)
Balance at 31 March	(5,179)	(6,322)

The increase of £1.1m accrued for accumulated absences during 2020/21 was due to an increase in untaken leave being carried forwards as a result of COVID-19.

26. Cash Flow Statement – Operating Activities

The cash flows for operating activities include the following items:

	2019/20	2020/21
	£000	£000
Net deficit on the provision of services	45,257	77,611

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

Depreciation	(50,548)	(51,202)
Impairment and downward valuations	(5,958)	(49,480)
Amortisation	(2,468)	(1,817)
(Increase)/decrease in creditors	1,753	(10,576)
Increase in debtors	10,785	3,327
Increase/(decrease) in inventories	(2)	-
Movement in pension liability	(39,979)	(53,319)
Carrying amount of non-current assets and non-current assets held for sale, sold or derecognised	(27,847)	(46,648)
Other non-cash items charged to the net deficit on the provision of services	(9,348)	1,834
Total	(123,612)	(207,881)

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

Proceeds from the sale of PPE, investment property and intangible assets	3,044	2,178
Capital grants credited to deficit on provision of services	58,512	69,747
Total	61,556	71,925

Net cash flows from operating activities

(16,799)

(58,345)

The cash flows for operating activities include the following items:

	2019/20	2020/21
	£000	£000
Interest received	(2,348)	(1,864)
Interest paid	13,376	17,134
Dividends received	(201)	(200)

27. Cash Flow Statement – Investing Activities

	2019/20	2020/21
	£000	£000
Purchase of PPE, Investment Property and Intangibles	83,869	60,597
Other payments for investing activities	646	654
Proceeds from the sale of PPE, Investment Property and Intangibles	(3,044)	(2,178)
Proceeds from short and long term investments (net)	(8,000)	36,000
Other receipts from investing activities	(59,068)	(69,799)
Net cash flows from investing activities	14,403	25,274

28. Cash Flow Statement – Financing Activities

	2019/20	2020/21
	£000	£000
Cash payments for the reduction of PFI Liabilities	4,686	626
Repayments of short and long term borrowing	5,272	2,636
Net cash flows from financing activities	9,958	3,262

29. Cash Flow Statement – Reconciliation of Liabilities arising from Financing Activities

	1 April 2020	Financing Cash Flows	Non Cash Changes	31 March 2021
	£000	£000	£000	£000
Long Term Borrowings	(237,923)	1,318	3,624	(232,981)
Short Term Borrowings	(1,318)	1,318	(3,624)	(3,624)
PFI Liabilities	(66,973)	626	-	(66,347)
Net cash flows from financing activities	(306,214)	3,262	-	(302,952)

	1 April 2019	Financing Cash Flows	Non Cash Changes	31 March 2020
	£000	£000	£000	£000
Long Term Borrowings	(240,559)	2,636	-	(237,923)
Short Term Borrowings	(3,954)	2,636	-	(1,318)
PFI Liabilities	(71,659)	4,686	-	(66,973)
Net cash flows from financing activities	(316,172)	9,958	-	(306,214)

30. Pooled Budget and Partnership Arrangements

In 2020/21 the Council participated in partnership schemes involving pooled budget arrangements under Section 75 of the National Health Service Act 2006:

· The Integrated Community Equipment Service (ICES) started in September 2004 and comprises the Council as host agency and East Sussex Clinical Commissioning Group (ES CCG).

· The Better Care Fund (BCF) started in April 2015.

BCF planning was required for the whole of East Sussex and was signed off by the Health and Wellbeing Board in October 2017. This arrangement is supported by a Section 75 pooled budget legal agreement, of which ESCC is the lead body. In practice, the substance of the Better Care Fund arrangement is not one of a pooled budget due to a local agreement for ESCC to invoice the CCG for BCF funded expenditure commissioned directly by ESCC, while the CCG retains the remainder of its contribution to the pool to fund any expenditure commissioned through the CCG. Use of funding is agreed in partnership under joint governance arrangements as set out in the Section 75 agreement. The CCGs and ESCC will continue to work towards greater integration and joint commissioning of services in future years and the accounting for the Better Care Fund will therefore be reviewed each year.

The financial transactions of these schemes can be summarised as follows:

	2019/20			2020/21
Arrangement	Expenditure	Income	County Council Contribution	Expenditure	Income	County Council Contribution
	£000	£000	£000	£000	£000	£000
Integrated Community Equipment	5,187	(5,187)	(2,593)	4,938	(4,938)	(2,469)
Better Care Fund	69,037	(69,037)	(28,991)	69,998	(69,998)	(31,406)

Mental Health Community Forensic scheme

The Mental Health Community Forensic scheme, which started in April 2010, comprises the Council and the Sussex Partnership NHS Foundation Trust. This operates under a section 75 agreement, but not as a pooled budget. The financial value of transactions during 2020/21 was £276,130 (£237,211 in 2019/20).

Orbis Joint Operating Budget

The expenditure and funding is detailed below:

	2019/20	2020/21
	£000	£000
Funding provided to the joint budget:
- Surrey County Council (43%)	(33,430)	(17,218)
- East Sussex County Council (30%)	(13,644)	(11,740)
- Brighton & Hove City Council (27%)	(13,277)	(10,953)
Total Funding	(60,351)	(39,911)

Expenditure met from the joint budget	60,351	39,911

Net surplus/deficit on the joint budget	-	-

Overall expenditure in the pooled Orbis budget decreased notably between 2019/20 and 2020/21, due to changes in the Partnership arrangements. Property Services budgets were removed from the Partnership and returned to Sovereign control. In addition, Finance and HR became “Partially Integrated” as Surrey County Council withdrew in these areas, thereby reducing the net Orbis Finance and HR budget.

Regional Adoption Agency (RAA) Adoption South East (ASE)

In line with the Government's requirement for all LA adoption to be carried out on a regional level, East Sussex, West Sussex, Brighton & Hove, and Surrey councils have formed the Regional Adoption Agency (RAA) Adoption South East (ASE). The RAA has been operational since April 2020 and ESCC is the host organisation. Each member Local Authority provides their contribution towards the running of ASE into a pooled budget which is held by ESCC as the lead body. The amount carried forward remains ASE's funding, held within the ESCC bank account.

	2019/20	2020/21
	£000	£000
ASE Total Budget	-	5,118

Expenditure	-	4,865
Income	-	(5,118)
ASE carry forward into 2021/22	-	253

Brighton & Hove City Council Contribution (19%)	-	994
East Sussex County Council Contribution (19%)	-	955
Surrey County Council Contribution (26%)	-	1,333
West Sussex County Council Contribution (36%)	-	1,836
	-	5,118

31. Members’ Allowances

The Council paid the following amounts to Members of the Council during the year.

	2019/20	2020/21
	£000	£000
Salaries - basic allowances	639	648
Special responsibility allowances	223	231
Expenses	30	3
Total	892	882

The table below shows the actual amounts paid to individual members in the 2020/21 financial year (excluding employer NI & pension contributions). The amounts to which Members are entitled, including the basic allowance for every member and expenses for special responsibilities, travel, phones etc., are published annually and form part 6 of the Constitution.

Member			Members Basic Allowance	Special Responsibility Allowance	Travel by Car	Fares and Subsistence
			£	£	£	£
Cllr.	Barnes	Anthony	13,149	-	-	-
Cllr.	Beaver	Matthew	13,149	-	-	-
Cllr.	Belsey	Colin	13,149	6,711	-	-
Cllr.	Bennett	Nicholas	13,149	18,792	166	6
Cllr.	Bentley	William	13,149	16,107	-	-
Cllr.	Boorman	Phillip *	4,878	-	-	-
Cllr.	Bowdler	Robert	13,149	6,711	-	-
Cllr.	Charman	Tania	13,149	-	-	-
Cllr.	Clark	Charles	13,149	-	-	-
Cllr.	Clarke	Martin	13,149	-	100	-
Cllr.	Daniel	Philip**	13,149	(2,306)	-	-
Cllr.	Daniel	Thomas	13,149	2,687	81	-
Cllr.	Davies	Angharad	13,149	6,711	105
Cllr.	Dowling	Christopher	13,149	-	135	-
Cllr.	Dowling	Claire	13,149	16,107	214	-
Cllr.	Earl-Williams	Deidre	13,149	-	-	-
Cllr.	Elford	Simon	13,149	-	-	-
Cllr.	Elkin	David	13,149	13,420	-	-
Cllr.	Enever	Nigel	13,149	-	-	-
Cllr.	Ensor	Michael	13,149	-	-	-
Cllr.	Field	Kathryn	13,149	3,487	71	-
Cllr.	Fox	Gerard	13,149	6,711	-	-
Cllr.	Galley	Roy	13,149	-	90	-
Cllr.	Glazier	Keith	12,300	36,817	-	-
Cllr.	Grover	Darren	13,149	-	-	-
Cllr.	Lambert	Carolyn	13,149	-	-	-
Cllr.	Liddiard	Thomas	13,149	-	-	-
Cllr.	Loe	Laurence	13,149	-	-	-
Cllr.	Maynard	Carl	13,149	16,107	-	-
Cllr.	O'Keeffe	Christina	13,149	-	-	-
Cllr.	Osborne	Sarah	13,149	-	-	-
Cllr.	Pragnell	Peter	13,149	-	-	-
Cllr.	Rodohan	Patrick	13,149	-	-	-
Cllr.	Scott	Philip	13,149	-	-	-
Cllr.	Sheppard	Henry	13,149	5,374	-	-
Cllr.	Shing	Daniel	13,149	-	-	-
Cllr.	Shing	Stephen	13,149	-	71	-
Cllr.	Shuttleworth	Alan	13,149	-	-	-
Cllr.	Simmons	Rupert	13,149	16,107	-	170
Cllr.	Smith	Andy	13,149	-	-	-
Cllr.	Standley	Robert	13,149	16,107	387	13
Cllr.	Stogdon	Richard	13,149	6,711	261	-
Cllr.	Swansborough	Colin	13,149	6,711	323	-
Cllr.	Taylor	Barry	13,149	-	-	-
Cllr.	Tidy	Sylvia	13,149	16,107	393	-
Cllr.	Tutt	David	13,149	13,420	14	-
Cllr.	Ungar	John	13,149	-	-	-
Cllr.	Wallis	Steven	13,149	-	-	-
Cllr.	Webb	Trevor	13,149	2,687	-	-
Cllr.	Whetstone	Francis	13,149	-	-	-
Total			648,330	231,286	2,411	189

Notes:

* Resigned in August 2020.

** Negative value is due to a payroll adjustment relating to the prior year.

32. Officers’ Remuneration

The following table sets out information about the remuneration of those senior managers who influence the decisions of the Council as a whole. In addition, the disclosures below include all Senior Officers whose salary is more than £150,000 per year. The remuneration paid to the Council’s senior employees is as follows:

Senior Employees Remuneration 2020/21
	Notes	Salary, Fees and Allowances	Additional duties and Acting up	Expenses Allowances (incl. Benefit in Kind)	Compensation for Loss of Office	Employer’s Pension Contribution	Total
		£	£	£	£	£	£
Chief Executive - Becky Shaw	1	101,927	16,236	-	-	20,797	138,960
Executive Director of Adult Social Care – Keith Hinkley	2	9,012	14,650	2,316	-	4,164	30,142
Director of Adult Social Care – Keith Hinkley	3	95,019	6,936	3,472	-	17,944	123,371
Director of Adult Social Care	4	52,702	-	-	-	9,276	61,978
Director of Children’s Services – Stuart Gallimore	5	152,031	11,097	784	-	28,711	192,623
Director of Communities, Economy & Transport – Rupert Clubb	6	149,115	-	5,544	-	26,757	181,416
Assistant Chief Executive		146,190	-	-	-	25,729	171,919
Chief Operating Officer	7	122,910	-	-	68,008	21,632	212,550
Chief Operating Officer	8	40,163	-	-	-	-	40,163
Director of Public Health		115,440	-	-	-	20,317	135,757
Chief Finance Officer		99,384	-	-	-	17,492	116,876

Notes:

1. The Chief Executive is formally employed by East Sussex County Council but the post is shared with West Sussex County Council under a partnering arrangement. West Sussex County Council make a 50% contribution to the total salary and remuneration costs. The “Additional duties and Acting up” amount is in respect of payment made to reflect the requirement to work across both East and West Sussex County Councils.

2. The Executive Director of Adult Social Care is formally employed by East Sussex County Council but from 15 November 2020 the post is shared with West Sussex County Council under a partnering arrangement. West Sussex County Council make an 80% contribution to the total salary and remuneration costs. The “Additional duties and Acting up” amount reflect the requirement to work across both Councils.

3. Figures shown above detail the remuneration costs up until 15 November 2020 when appointment to the Executive Director of Adult Social Care post commenced.

4. Prior to being appointed to post on 15 November 2020, the Director of Adult Social Care was the Assistant Director – Operations in Adult Social Care. Total earnings for 2020/21 (across both roles) was £130,865 with total employer pension contributions of £23,032.

5. Additional duties and acting up amounts are honorarium payments of 7.5% in respect of 2019/20.

6. Pension Contributions based on salary before childcare vouchers salary sacrifice (£2,916) of £152,031.

7. Ceased employment on 10 January 2021.

8. Employed under an agency contract from January 2021. Figures above include £13,813 relating to March 2021 that was paid in April 2021.

Senior Employees Remuneration 2019/20
	Notes	Salary, Fees and Allowances	Additional duties and Acting up	Expenses Allowances (incl. Benefit in Kind)	Compensation for Loss of Office	Employer’s Pension Contribution	Total
		£	£	£	£	£	£
Chief Executive - Becky Shaw	1	178,669	-	-	-	31,892	210,561
Chief Operating Officer		147,962	-	-	-	26,411	174,373
Director of Adult Social Care & Health	2	147,962	10,880	6,824	-	28,353	194,019
Director of Children’s Services		147,962	-	1,227	-	26,411	175,600
Director of Communities, Economy & Transport	3	145,046	-	5,572	-	26,411	177,029
Assistant Chief Executive		112,350	-	-	-	20,054	132,404
Chief Finance Officer		93,901	-	-	-	16,761	110,662
Director of Public Health		108,467	-	-	-	19,361	127,828

Notes:

1. The Chief Executive is formally employed by East Sussex County Council but the post is shared with West Sussex/County Council under a partnering arrangement from 6 January 2020. West Sussex County Council make a 50% contribution to the total salary and remuneration costs;

2. Additional duties and acting up amounts are honorarium payments of 7.5% for April 2018 to March 2019, paid in April 2019;

3. Pension Contributions based on salary before childcare vouchers salary sacrifice (£2,916) of £147,962.

The Council’s employees, excluding those shown in the Senior Employees Remuneration table above, receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) were:

Remuneration band	2019/20 Number of employees (Restated)			2020/21 Number of employees
Remuneration band	Non Schools	Schools	Total	Non Schools	Schools	Total
£50,000 - £54,999	94	71	165	97	86	183
£55,000 - £59,999	28	43	71	42	46	88
£60,000 - £64,999	27	25	52	19	26	45
£65,000 - £69,999	32	16	48	35	20	55
£70,000 - £74,999	6	18	24	11	17	28
£75,000 - £79,999	2	4	6	3	8	11
£80,000 - £84,999	3	3	6	5	4	9
£85,000 - £89,999	5	1	6	6	3	9
£90,000 - £94,999	-	1	1	2	2	4
£95,000 - £99,999	-	4	4	1	1	2
£100,000 - £104,999	1	1	2	1	1	2
£105,000 - £109,999	2	-	2	-	1	1
£110,000 - £114,999	-	-	-	-	-	-
£115,000 - £119,999	2	-	2	1	-	1
£120,000 - £124,999	1	-	1	-	-	-

*The 2019/20 balances have been restated to remove people included within the Senior Employees Remuneration table above.

33. Termination Benefits & Exit Packages

The Council normally offers both voluntary early retirement and voluntary redundancy as part of organisational restructures undertaken in accordance with the Managing Change Suite of Policies. In addition, there is a Voluntary Severance Scheme, which allows Council employees to apply for voluntary severance. Its purpose is to help ensure the efficient running of the Council, to help the Council reach its cost reduction targets and to minimise the need for compulsory redundancies in the future.

The Council terminated the contracts of 100 employees during 2020/21, incurring costs of £0.883m (134 terminations at a cost of £1.5m in 2019/20). An analysis of the numbers and amounts broken down by pay band and split between compulsory redundancies and other departures for both 2020/21 and 2019/20 are shown in the tables below.

Exit Packages 2020/21

Exit package cost Band	Compulsory redundancies		Other departures agreed		Total number of exit packages
Exit package cost Band	Number of employees	£000	Number of employees	£000	Number of employees	£000

less than £20,000	36	206	52	257	88	463
£20,000 to £39,999	2	46	6	143	8	189
£40,000 to £59,999	1	41	1	48	2	89
£60,000 to £79,999	1	74	1	68	2	142
Total	40	367	60	516	100	883

The total cost of £0.883m in the table above is the amount that has been charged to the Comprehensive Income and Expenditure Statement in 2020/21. There was a total of £0.006m in provision amounts for exit packages charged to the Comprehensive Income and Expenditure Statement in 2020/21.

Exit Packages 2019/20

Exit package cost Band	Compulsory redundancies		Other departures agreed		Total number of exit packages
Exit package cost Band	Number of employees	£000	Number of employees	£000	Number of employees	£000

less than £20,000	22	141	90	581	112	722
£20,000 to £39,999	4	135	11	313	15	448
£40,000 to £59,999	5	250	1	41	6	291
£60,000 to £79,999	1	65	-	-	1	65
Total	32	591	102	935	134	1,526

The total cost of £1.5m in the table above is the amount that has been charged to the Comprehensive Income and Expenditure Statement in 2019/20. There was a total of £0.006m in provision amounts for exit packages charged to the Comprehensive Income and Expenditure Statement in 2019/20.

34. External Audit Costs

The Council has incurred the following costs in relation to the audit of the accounting statements, certification of grant claims, statutory inspections and for non-audit services provided by the Council’s external auditors for services rendered during the year. Grant Thornton have been the Council’s external auditors since 2018/19 and all fees below relate to work carried out by them unless specified otherwise.

	2019/20	2020/21
	£000	£000
Fees payable to Grant Thornton with regard to external audit services carried out by the appointed auditor for the year *	80	111
Additional fee relating to the previous year’s audit work**	11	12
Fees payable in respect of other audit services provided by external auditors***	8	12
Total External auditor remuneration	99	135
Refund from Public Sector Audit Appointments (PSAA) ****	(8)	-
Total	91	135

Notes

* For 2019/20, in addition to the £64,350 scale fee, this included an additional agreed charge of £16,000. For 2020/21 Grant Thornton are proposing additional audit fees of £46,500 bringing the total audit fee to £110,850 if approved by the PSAA;

**The PSAA has agreed a further £12,053 of additional fees relating to work carried out during the 2019/20 audit (total fees for 2019/20 were £92,403).

*** For 2019/20 £3,000 was payable to KPMG and £5,000 was payable to Grant Thornton for work carried out in respect of the Teachers’ Pension Scheme. For 2020/21 an additional £12,000 was payable to Grant Thornton for other audit services carried out during 2019/20 on the Teachers’ Pension Scheme and for the provision of IAS 19 assurances to Scheme employer auditors;

**** PSAA refund as a result of national refund.

35. Grant Income

The Council credited the following grants, contributions, and donations to the Comprehensive Income and Expenditure Statement in 2020/21:

	2019/20		2020/21
	£000	£000	£000	£000
Credited to Taxation and Non Specific Grant Income
Council Tax		291,195		299,999
Business Rates		85,684		74,493
Social Care Grant		-		14,631
Revenue Support Grant:		-		3,548
General
Covid Grant	-		555
New Homes Bonus	886		761
Business Rates Relief Funding	-		6,698
Local Income Tax Guarantee Funding	-		687
		886		8,701
Capital grants and contributions recognised		58,512		69,129
Total		436,277		470,501

Grants Credited to Services
Dedicated Schools		225,645		234,305
Public Health		26,550		27,702
Infection Control		-		20,704
Better Care Fund		17,099		17,304
COVID-19		16,297		19,712
Control Outbreak Management Funding		-		13,149
Pupil Premium		8,748		8,686
Disabled Facilities		7,160		8,124
Private Finance Initiative		4,755		4,755
Adult Social Care Reform		4,417		6,277
Teachers’ Pension		3,591		6,211
Universal Infant Free School Meals		3,364		3,626
16-19 Sixth Form		3,321		3,322
Test and Trace		-		2,535
Winter Pressures		2,401		-
Opportunity Areas		2,200		1,250
PE & Sport		2,073		2,033
Teachers Pay		1,861		2,128
Unaccompanied Asylum Seeking Children		1,612		2,471
Other Grants		13,221		20,162
Total		344,315		404,456

Notes – Details of the Dedicated Schools Grant figure are included in Note 36 below. Council Tax and Business Rates figures include share of Collection fund surplus or deficits.

The Council has received a number of grants and contributions that have yet to be recognised as income as they have conditions attached to them which could require them to be returned to the giver. The balances at the year end are as follows:

	31 March 2020	31 March 2021
	£000	£000
Current Liabilities – Receipts in Advance
Revenue Grants & Contributions*	8,328	2,780

Long Term Liabilities – Receipts in Advance
Capital Grants & Contributions	9,551	15,412

*The balance of revenue grants and contributions as at 31 March 2020 has been restated as the figure had been omitted from the prior year accounts. Of the balance of £8.328m as at 31 March 2020, £5.167m related to section 31 Business Rates grants.

36. Dedicated Schools Grant

The Council’s expenditure on schools is funded primarily by a grant awarded by the Education and Skills Funding Agency, the Dedicated Schools Grant (DSG). An element of the DSG is recouped by the Education and Skills Funding Agency to fund academy schools in the Council’s area. DSG is ring-fenced and can only be applied to meet expenditure properly included in the Schools Budget, as defined in the School and Early Years Finance (England) Regulations 2018. The Schools Budget includes elements for a range of educational services provided on an authority-wide basis and for the Individual Schools Budget (ISB), which is divided into a budget share for each maintained school.

Details of the deployment of DSG receivable for 2020/21 are as follows:

	Central Expenditure £000	Individual Schools Budget £000	Total £000
Final DSG for 2020/21 before Schools Block Academy recoupment	79,465	307,412	386,877
Academy figure recouped for 2020/21	-	(152,571)	(152,571)
Total DSG after Academy recoupment for 2020/21	79,465	154,841	234,306
Plus: Brought Forward from 2019/20	6,181	-	6,181
Less: Carry forward to 2021/22 agreed in advance	(5,576)	-	(5,576)
Agreed initial budgeted distribution in 2020/21	80,070	154,841	234,911
Less: Actual central expenditure	(67,934)	-	(67,934)
Less: Actual ISB deployed to schools	-	(154,841)	(154,841)
Carry forward to 2021/22	12,136	-	12,136

School Reserve

The total value of the Individual Schools Budget (the budget which is delegated to schools) for 2020/21 was £154.8m. Schools carried forward (reserve) a net total of £20.5m (13.2%) at the end of the financial year at 31 March 2021, which was an increase of £0.55m compared to 31 March 2020. Table below shows the numbers and value of schools with surplus and deficits.

		Primary	Secondary	Special	Total
All schools with surpluses
Number of schools	No.	111	9	1	121
Total surplus	£000	15,046	5,270	196	20,512
All schools with deficits
Number of schools	No.	-	-	-	-
Total deficit	£000	-	-	-	-

Carry forward	£000	15,046	5,270	196	20,512

Less: Capital Loan to Schools	£000	-	-	-	-
Net carry forward	£000	15,046	5,270	196	20,512

This reserve represents unspent balances remaining at the year-end against school’s delegated budgets. The main reasons why schools hold balances are - anticipation of future budget pressures usually arising from pupil variation, to fund specific projects such as building work and IT and to hold a contingency for reasons of prudence. These balances are committed to be spent on the education service and are not available to the Council for general use.

37. Related Parties

The Council is obliged to disclose material transactions with related parties, a term that includes central government, the Pension Fund, some partnerships, as well as any financial relationships with Members and Chief Officers other than payments of salaries, expenses, etc. We disclose these transactions to indicate the extent to which the Council might have been constrained in its ability to operate independently, or to have secured the ability to limit another party’s ability to bargain freely with the Council.

Central Government

UK government has significant influence over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties. Grants received from government departments are set out in the subjective analysis in Note 35 on reporting for resources allocation decisions, and further details are shown in Note 35. Grant receipts in advance at 31 March 2021 are shown in Note 35.

Members and Chief Officers

Members of the Council have direct control over the Council’s financial and operating policies. The Register of Members’ Interests is held at County Hall, Lewes, and is open to public inspection. The total of members’ allowances paid in 2020/21 is shown in Note 31. None of Members or Chief Officers had control or influence in any related party transactions during the year.

During 2020/21, works and services to the value of £0.036m were commissioned from a company in which the Chief Operating Officer had an interest. The contracts were commissioned prior to the Chief Operating Officer commencing his employment with East Sussex County Council, they were entered into in full compliance with the Council’s standing orders and the Chief Operating Officer played no part in the decision making process to procure these services.

A survey of the related party interests of members and their immediate family members was carried out in preparing this Statement of Accounts. Interests were declared within the Register of Members’ Interests by members who held positions with organisations that have transacted with the Council during the year, which include –

· Director and Member of Woodland Enterprise Centre. In 2020/21, goods and services to the value of £0.023m were commissioned from this entity.

· Chairman and Member of Ashdown Forest Trust. In 2020/21, rents of the golf course to the value of £0.070m were paid to this entity.

Entities that are controlled or significantly influenced by the Council

The Council acts as sole trustee for the Ashdown Forest Trust (see Note 46), for the balances held by the Council at 31 March 2021.

East Sussex Pension Fund

The East Sussex Pension Fund is administered by East Sussex County Council. The Treasurer of the Pension Fund and members of the County Council have no material transactions with the Pension Fund. The Council incurred costs in administering the fund and charged £1.9m to the fund in 2020/21 (£1.2m in 2019/20). The Council’s contribution to the fund was £43.2m in 2020/21 (£42.5m in 2019/20).

East Sussex Fire Authority

East Sussex County Council provides financial services to the East Sussex Fire Authority. The arrangement has been in operation since 1997. The services provided include accounts payable, accounts receivable, payroll, pension administration, treasury management, accountancy and internal audit. The cost of these services was £0.232m in 2020/21 (£0.280m in 2019/20)

Other Public Bodies

The Council is involved in several partnerships under Section 75 of the National Health Services Act 2006. Details of these arrangements are shown in Note 30.

The Council is aware that the following entities do not meet the requirements of IAS 24 Related Party Disclosures. For transparency and for members of the public to understand the relationships held, this has been disclosed.

East Sussex County Council have 19% of the voting rights for Woodland Enterprises Ltd. The High Weald Unit of the Economy, Transport and Environment Department rented part of the Woodland Enterprises Centre from Woodland Enterprises Ltd during 2020/21. There were no long term debts to the company at 31 March 2021.

Sea Change Sussex (SCS) is a company limited by guarantee and is a key delivery partner for the County Council. Hastings Borough Council, Rother District Council and the County Council together hold 19.9% of the company, University of Brighton 30.1% and local businesses the remaining 50%. The County Council has appointed the Lead Cabinet Member for Economy as a Director of the Company. SCS is a not-for-profit economic development and regeneration company, working to expand the area’s economy and business community by working with the County Council and other key partners.

The High Weald AONB is managed by a Joint Advisory Committee. The committee membership includes 16 principal partners and funding members (Natural England plus 15 local authorities whose area is covered by the High Weald AONB designation) and 5 advisory partners and non-funding members co-opted from forum member organisations. East Sussex County Council is a principal partner and funding member.

38. Capital Expenditure and Capital Financing

The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases and PFI 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 Council accounts fully for depreciation of assets in line with accounting standards in the Comprehensive Income & Expenditure Statement, but it is legally obliged to provide for the repayment of a proportion of its Capital Financing Requirement (the Minimum Revenue Provision) in its charge to taxpayers.

The Capital Financing Requirement represents the Council’s net need to borrow to finance its capital investment, made up of all loan investment in previous years, less amounts set aside each year for the redemption of debt.

	2019/20	2020/21
	£000	£000
Opening Capital Financing Requirement	329,085	342,222

Property, Plant and Equipment	78,852	58,694
Investment Properties	2	4
Intangible assets	1,971	577
Capital Loans	-	652
Heritage assets	-	-
Revenue Expenditure Funded from Capital under Statute	13,032	12,418
Total capital investment	93,857	72,345
Capital receipts	(3,122)	-
Government grants and contributions	(62,603)	(65,938)
Revenue financing	(4,618)	(6,407)
Total financing other than from loans	(70,343)	(72,345)
Long Term capital debtors	130	(83)
Net investment financed from loans
Minimum Revenue Provision (MRP) for the repayment of loans	(10,507)	(7,004)
Closing Capital Financing Requirement	342,222	335,135

Explanation of movements in year
Increase/(decrease) in underlying need to borrow, that is not supported by government financial assistance	13,137	(7,087)

39. Leases

Authority as Lessee

Finance Leases - As at 31 March 2021, the Council has no assets classed as finance leases. There are 10 properties on the Balance Sheet which are valued as long leasehold however these properties do not have a corresponding liability on the Balance Sheet.

Operating Leases - The Council leases land and buildings and vehicles, plant, furniture and equipment under operating leases. The lease period of land and buildings is typically 10 to 15 years, vehicles 5 to 7 years and equipment 3 to 5 years.

The minimum lease payments payable in future years are:

	31 March 2020	31 March 2021
	£000	£000
Not later than one year	2,822	2,793
Later than one year and not later than five years	6,613	5,329
Later than five years	6,645	6,346
Total	16,080	14,468

The expenditure charged to Net Cost of Services during the year in relation to these leases was:

	2019/20	2020/21
	£000	£000
Land and Buildings	2,051	2,273
Schools	825	725
Vehicles	71	325
Total	2,947	3,323

Other payments for the renting and hiring of facilities in 2020/21 was £0.128m (£0.128m 2019/20).

Authority as Lessor

Finance Leases - As at 31 March 2021, the Council has no assets classed as finance leases.

Operating Leases - The Council leases out property under operating leases for the following purposes:

· schools and community centres for sports and other community uses;

· depots in relation to service contracts;

· properties surplus to requirements that are awaiting disposal.

The future minimum lease payments receivable in future years are:

	31 March 2020	31 March 2021
	£000	£000
Not later than one year	1,896	1,674
Later than one year and not later than five years	3,786	4,032
Later than five years	7,718	5,688
Total	13,400	11,394

The total income received from leasing, renting and hiring of facilities in 2020/21 was £1.638m (£2.068m 2019/20).

40. Other long term liabilities, including Private Finance Initiatives and Similar Contracts

Other Long Term Liabilities in the Balance Sheet consist of:

	31 March 2020	31 March 2021
	£000	£000

Long Term PFI Liabilities	66,973	66,347
Financial Guarantees	60	60
Long Term Creditors	18	162
Total	67,051	66,569

Schools PFI

The Council has a contract with Peacehaven Schools Ltd (PSL) under the Private Finance initiative to provide a new secondary school and replace or refurbish four primary schools in Peacehaven and Telscombe Cliffs. The first school became operational in January 2000.

Waste PFI

In conjunction with Brighton and Hove City Council, the Council jointly entered into a 25 year agreement, on the 31 March 2003, for the provision of an integrated waste management service with South Downs Waste Services Ltd. In 2009/10 the agreement extended by a further 5 years to 31 March 2033.

Value of PFI assets at each balance sheet date and analysis of movement in those values:

Peacehaven Schools PFI	Telscombe Cliffs	Meridian	Peacehaven Heights	Total
	£000	£000	£000	£000
1 April 2020 (restated)*	6,775	3,359	5,107	15,241
Additions	20	58	9	87
Revaluations	(1,043)	2,409	(1,890)	(524)
Depreciation	(247)	(171)	(232)	(650)
Disposals	-	-	-	-
31 March 2021	5,505	5,655	2,994	14,154

*The 1 April 2020 opening balance for Meridian PFI school has been restated from £0.232m closing balance in the 2019/20 accounts to include the full asset value of the school.

Waste PFI	Hollingdean WTS & MRF	Maresfield WTS & HWRS	Whitesmith Composting Facility	Newhaven Energy Recovery Facility	Pebsham HWRS	Total
	£000	£000	£000	£000	£000	£000
1 April 2020	6,802	7,047	14,542	26,517	463	55,371
Revaluations	1,715	(4,007)	1,423	(10,630)	34	(11,465)
Depreciation	(385)	(324)	(657)	(1,196)	(23)	(2,585)
31 March 2021	8,132	2,716	15,308	14,691	474	41,321

Notes:

(i) Land values are excluded from the schools and waste PFI accounting models with the exception of the Whitesmith Composting Facility;

Details of payments to be made under PFI contracts

Waste PFI

Based on a projected 2.5% annual inflation rate the details of the payments due to be made are detailed below:

	Reimbursement of capital expenditure	Interest	Service Charge	Contingent Rent	Lifecycle Maintenance	Total
	£000	£000	£000	£000	£000	£000
Within 1 year: 2021/22	3,678	3,433	17,358	3,120	-	27,589
Within 2 to 5 years: 2022/23 to 2025/26	17,218	11,626	75,028	15,311	-	119,183
Within 6 to 10 years: 2026/27 to 2030/31	28,295	8,641	106,477	25,607	-	169,020
Within 11 to 12 years: 2031/32 to 2032/33	13,885	1,157	46,758	12,394	-	74,194
Total	63,076	24,857	245,621	56,432	-	389,986

Peacehaven Schools PFI

Based on actual inflation to 31 March 2021, and assuming a 3.0% inflation rate for the remaining life of the contract, the payments to be made are set out below:

	Reimbursement of capital expenditure	Interest	Service Charge	Contingent Rent	Lifecycle Maintenance	Total
	£000	£000	£000	£000	£000	£000
Within 1 year: 2021/22	1,217	800	1,791	913	384	5,105
Within 2 to 5 years: 2022/23 to 2025/26	6,186	1,886	7,717	4,148	1,654	21,591
Within 6 years: 2026/27	763	75	865	485	185	2,373
Total	8,166	2,761	10,373	5,546	2,223	29,069

Operational PFI contracts are accounted for in a manner that is consistent with the adaptation of IFRIC 12 Service Concession Arrangements contained in the government’s Financial Reporting Manual. The original recognition of these fixed assets is balanced by the recognition of a liability for amounts due to the scheme operator to pay for the assets. The deferred liability as at 31 March 2021 is £71.2m (£63m for Waste PFI, and £8.2m for Peacehaven Schools PFI), and as at 31 March 2020 was £71.7m (£62.4m for Waste PFI, and £9.3m for Peacehaven Schools PFI).

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 interest payable whilst the capital expenditure remains to be reimbursed. In all cases the authority has the right to use the assets provided by the PFI contractor and is entitled to receive the services specified within each contract. Each of the PFI contracts contain a payment mechanism whereby the authority only pays for the services it receives. On expiry of the contracts, the assets created under the PFI arrangements automatically revert to the authority at nil consideration. Termination of the contracts prior to the expiry is permitted by either party but only in exceptional circumstances and only after a period of negotiation. There have been no material changes to any of the PFI contracts in the reporting period.

That part of the deferred liability due to be repaid in the next year is included under short term creditors in the Balance Sheet with the balance being shown under Other Long Term Liabilities. The breakdown between short term and long term, the total value of the liability and an analysis of movement in those values is shown below.

	Waste PFI	Schools PFI	Total	Included in Short Term Creditors	Included in Long term Liabilities
	£000	£000	£000	£000	£000
Balance outstanding at 1 April 2020	62,391	9,274	71,665	4,692	66,973
Lease principal repayment	685	(1,108)	(423)	203	(626)
Balance outstanding at 31 March 2021	63,076	8,166	71,242	4,895	66,347

41. Pensions Schemes Accounted for as Defined Contribution Schemes

Teachers’ Pension Scheme

Teachers employed by the Council are members of the Teachers’ Pension Scheme, administered by the Department for Education. It provides teachers with defined benefits upon their retirement and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries.

In 2020/21 the Council incurred a total of £17.7m payable to Teachers Pensions Scheme in respect of teacher’s pension costs, which represents 23.68% of teacher’s pensionable pay. In addition the Council is responsible for all pension payments related to added years it has awarded, together with the related increase which amounted to £3.17m. These figures compare to an amount of £15.5m payable in 2019/20 (16.48% of pensionable pay) and £2.4m for added years pensions payable to former teachers.

This is a defined benefit scheme, and although it is unfunded, Teachers Pensions Scheme uses a notional fund as the basis for calculating the employer’s contribution rate. However, it is not possible to identify the Council’s share of the underlying liabilities

of the scheme for its own employees. For the purposes of these accounts, it is therefore accounted for as a defined contribution scheme. The Council is responsible for the costs of the additional benefits awarded upon early retirement, and these benefits are fully accrued in the liability included in the balance sheet.

As at March 2021, the Council owed £2.08m to Teachers Pensions for the employer’s and employee’s contribution to the Teachers Pensions Scheme (£2.0m at March 2020). 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 42.

NHS Pension Scheme

In 2013/14, NHS staff transferred to the Council. These employees have maintained their membership of the NHS Pension Scheme. The scheme provides these staff with specified benefits upon their retirement and the Council contributes towards the

costs by making contributions based on a percentage of members’ pensionable pay.

The scheme is an unfunded defined benefit scheme. However, the Council is not able to identify its share of the underlying financial position and performance of the scheme with sufficient reliability for accounting purposes. For the purposes of this

statement of accounts, it is therefore accounted for on the same basis as a defined contribution scheme.

In 2020/21, the Council incurred a total of £0.14m payable to the NHS Pension Scheme in respect of former NHS staff retirement benefits, and there was £0.021m contributions remaining payable at the year end. This compares to an amount of £0.139m payable in 2019/20.

42. Defined Benefits Pension Schemes

Participation in Pension Schemes

As part of the terms and conditions of employment of its employees, the Council offers retirement benefits. Although these will not actually be payable until employees retire, the Council has a commitment to make the payments, and this needs to be disclosed at the time that employees earn their future entitlement.

The Accounting Policies note explains that the Council participates in three schemes, the Local Government Pension Scheme, the Teachers’ Pension Scheme and the NHS Pension Scheme. The Teachers’ Pension Scheme is administered nationally, and the Comprehensive Income and Expenditure Statement contain actual contributions made to the scheme. The Local Government Scheme is administered through the East Sussex Pension Fund, and in addition, the Council has liabilities for discretionary payments for added years, and other benefits, both for local government employees and for teachers. These are charged as an expense to the accounts of the Council, rather than those of the Pension Fund.

Transactions Relating to Post-employment Benefits - the cost of retirement benefits is recognised in the Net 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 contributions made in the year, so the real cost of retirement benefits is reversed out through the General Fund via the Movement in Reserves Statement and the contributions made in the year are included.

The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year:

	2019/20	2020/21
	£000	£000
Comprehensive Income and Expenditure Statement
Cost of Services:
Service Cost Comprising:
· current service cost	67,211	80,008
· past service costs	474	-
Financing and Investment Income and Expenditure
Net interest expense	12,859	11,413
Total Post-employment Benefits charged to the Surplus or Deficit on the Provision of Services	80,544	91,421
Other Post-employment Benefits charged to the Comprehensive Income and Expenditure Statement

Re-measurement of the net defined benefit liability comprising:
· Return on plan assets (excluding the amount included in the net interest expense)	146,603	(245,682)
· Actuarial gains and losses arising on changes in demographic assumptions	(50,573)	(27,187)
· Actuarial gains and losses arising on changes in financial assumptions	(159,336)	384,767
· Other (if applicable)	(81,217)	(22,703)
Total Post-employment Benefits charged to the Comprehensive Income and Expenditure Statement	(63,979)	180,616

Movement in Reserves Statement
· Reversal of net charges made to the Surplus or Deficit on the Provision of Services for post-employment benefits in accordance with the Code	104,544	(142,514)

Actual amount charged against the General Fund Balance for pensions in the year:
Employers’ contributions payable to the scheme	40,565	38,102

Pensions Assets and Liabilities Recognised in the Balance Sheet

The amount included in the Balance Sheet arising from the authority’s obligation in respect of its defined benefit plans is as follows:

	2016/17	2017/18	2018/19	2019/20	2020/21
	£000	£000	£000	£000	£000

Present Value of the define benefit obligations: Local Government Pension Scheme	(1,671,821)	(1,691,088)	(1,890,390)	(1,666,341)	(2,066,436)

Fair value of plan assets in the Local Government Pension Scheme	1,256,670	1,281,300	1,368,978	1,249,473	1,507,054

Deficit in the scheme: Local Government Pension Scheme	(415,151)	(409,788)	(521,412)	(416,868)	(559,382)

The liabilities show the underlying commitments that the Council has in the long run to pay retirement benefits. The total liability of £2,066.4m (£1,666.3m in 2019/20) has a substantial impact on the net worth of the Council as recorded in the Balance Sheet, resulting in a negative overall balance of £559.4m (£416.9m in 2019/20).

However, statutory arrangements for funding the deficit mean that the financial position of the Council remains healthy. The deficit on the Local Government Scheme will be made good by increased contributions over a 20 year period, as assessed by the scheme actuary.

The total contributions expected to be made to the Local Government Pension Scheme by the Council in the year to 31 March 2022 is 17.6% of payroll plus monetary amounts of £5.568m.

Assets and Liabilities in Relation to Post-employment Benefits

Reconciliation of present value of the scheme liabilities (defined benefit obligation):

	2019/20	2020/21
	£000	£000
Opening balance at 1 April:	1,890,390	1,666,341

Current Service Cost	67,211	68,452
Interest Cost	45,700	31,205
Contributions by scheme participants	9,153	9,818
Re-measurement (gains) and losses:
· Actuarial gains/losses arising from changes in demographic assumptions	(50,573)	(27,187)
· Actuarial gains/losses arising from changes in financial assumptions	(159,336)	384,767
· Other	(81,217)	(22,703)
Past Service Cost	474	405
Benefits paid	(49,846)	(48,200)
Liabilities extinguished on settlements		8,592
Unfunded Benefits paid	(5,615)	(5,054)

Closing balance at 31 March	1,666,341	2,066,436

Reconciliation of fair value of the scheme assets:

	2019/20	2020/21
	£000	£000
Opening fair value of scheme asset at 1 April:	1,368,978	1,249,473

Interest Income	32,841	19,792
Re-measurement gain / (loss):
· The return on plan assets, excluding the amount included in the net interest expense	(146,603)	245,682
· Other	-	-
Contributions from employer	40,565	38,102
Contributions from employees into the scheme	9,153	9,818
Benefits paid	(49,846)	(53,254)
Unfunded benefits paid	(5,615)	(2,559)

Closing fair value of scheme assets at 31 March	1,249,473	1,507,054

The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date. Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets.

The interest income on plan assets in the year was £19.79m (£32.84m in 2019/20).

Local Government Pension Scheme assets comprised:

	Fair value of scheme assets	%	Fair value of scheme assets	%
	2019/20		2020/21
	£000		£000

Cash and cash equivalents	23,100	2	21,099	1

Bonds:
By sector
· Government	-	-	46,719	3
· Other	11,026	1	-	-
Sub-total bonds	11,026	1	46,719	3

Private equity:
All	82,369	7	123,578	8
Overseas	-	-	-	-
Sub-total private equity	82,369	7	123,578	8

Other investment funds:
· UK Property	114,692	9	113,029	8
· Overseas Property	-	-	-	-
Sub-total other investment funds	114,692	9	113,029	8

Investment funds and unit trusts:
· Equities	424,115	33	669,132	44
· Bonds	214,759	17	159,748	11
· Infrastructure	22,692	2	4,521	-
· Other	356,720	29	369,228	25
Sub-total Investment funds and unit trusts	1,018,286	81	1,202,629	80
Total assets	1,249,473	100	1,507,054	100

Basis for Estimating Assets and Liabilities

Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. The County Council Fund liabilities have been assessed by Barnett Waddingham, an independent firm of actuaries, based on the calculations in the latest full valuation of the scheme as at 31 March 2020 rolled forward to the Balance Sheet date allowing for the different assumptions required by accounting standards.

The principal assumptions used by the actuary have been:

	2019/20	2020/21
Mortality assumptions:
Longevity at 65 for current pensioners
Men	21.6	21.1
Women	23.9	23.7
Longevity at 65 for future pensioners
Men	22.5	21.9
Women	25.3	25.0

Rate of increase in salaries	1.9%	2.8%
Rate of inflation/increase in pensions	1.9%	2.8%
Rate for discounting scheme liabilities	2.3%	2.0%

The mortality improvement projection has been updated to use the latest version of the Continuous Mortality Investigation’s model, CMI_2020, which was released in March 2021. This update has been made in light of the coronavirus pandemic and reflects the latest information available from the CMI.

The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analyses below have 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.

Change in assumptions at 31 March 2021:	Impact on the Defined Benefit Obligation in the Scheme
Change in assumptions at 31 March 2021:	Approximate increase to Employer	Approximate monetary amount
	%	£000
0.1% decrease in Real Discount Rate	2	38,872
0.1% increase in the Salary Increase Rate	-	2,287
0.1% increase in the Pension Increase Rate	2	36,242
1 year increase to life expectancy assumptions	5	100,547

At 31 March 2021, the Council owed £3.58m (£3.49m 31 March 2020) to the Pension Fund in respect of employer’s and employees’ contributions.

Details of the East Sussex Pension Fund, for which a full actuarial valuation was last carried out at 31 March 2020, can be found on pages 106 to 140.

Impact on the Authority’s Cash Flows

The objectives of the scheme are set out in East Sussex Pension Fund’s Funding Strategy Statement (FSS), dated March 2020. In summary, these are;

· to ensure the long-term solvency of the Fund;

· 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;

· to reflect the different characteristics of different employers in determining contribution rates; and

· to use reasonable measures to reduce the risk from an employer defaulting on its pension obligations.

The funding level for the Fund is monitored on a regular basis. The next triennial valuation is due to be completed on 31 March 2022.

The contributions paid by the Employer are set by the Fund Actuary at each triennial actuarial valuation or at any other time as instructed to do so by the Fund. The contributions payable over the period to 31 March 2022 are set out in the Rate and Adjustments certificate. For further details on the approach adopted to set contribution rates for the Employer, please refer to the 2019 actuarial valuation report (link below) dated March 2020.

https://www.eastsussex.gov.uk/yourcouncil/pension-fund-financial-reports-and-accounts/

The weighted average duration of the defined benefit obligation for scheme members as at the date of the 2019 valuation was 17.4 years.

43. Contingent Liabilities

The Ministry of Housing, Communities and Local Government (MHCLG) has published a consultation on draft regulations to end age discrimination in public sector pensions. The discrimination was identified by the 2019 Supreme Court verdict in the McCloud case brought by judges and firefighters. MHCLG has published a consultation to rectify the situation after the Treasury released proposals for other public sector pension schemes, which operate differently to the Local Government Pension Scheme (LGPS). The 2015 reforms moved public sector pensions from a final salary to career average calculation of pension benefits. However, the LGPS provided an “underpin” mechanism ensuring that members within 10 years of their retirement would not lose out on their expected benefits. After the judge in the McCloud case ruled the special measures for older scheme members were discriminatory, the MHCLG is now proposing to extend the underpin to all scheme members who joined the LGPS 2012. The consultation proposes that the amended regulations will apply retrospectively from 1 April 2014.

44. Contingent Assets

The council is part of a class action, led by the Local Government Association, against a number of vehicle manufacturers which it is alleged have participated in price fixing across Europe. The council has bought many of its vehicles outright over many years. It is not yet possible to assess the likelihood of success or quantify any potential financial recompense. The council has no liability in relation to any potential costs if the claim is lost as it has entered into an insurance arrangement negotiated by the LGA and involving, with a large number of other claimants.

45. Nature and extent of risks arising from Financial Instruments

The Council’s activities expose it to a variety of financial risks. The key risks are:

§ 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;

§ Re-financing risk - the possibility that the Council might be requiring to renew a financial instrument on maturity at disadvantageous interest rates or terms;

§ Market risk - the possibility that financial loss might arise for the Council as a result of changes in such measures as interest rates or stock market movements.

Overall procedures for managing risk

The Council’s overall risk management programme focuses on the unpredictability of financial markets, and seeks to minimise potential adverse effects on the resources available to fund services.

The procedures for risk management are set out through a legal framework based on the Local Government Act 2003 and associated regulations. These require the Council to comply with the CIPFA Prudential Code, the CIPFA Code of Practice on Treasury Management in the Public Services and investment guidance issued through the Act. Overall, these procedures require the Council to manage risk in the following ways:

§ by formally adopting the requirements of the CIPFA Treasury Management Code of Practice;

§ by the adoption of a Treasury Policy Statement and treasury management clauses within its financial regulations, standing orders and constitution;

§ by approving annually in advance prudential and treasury indicators for the following three years limiting:

v The Council’s overall borrowing;

v Its maximum and minimum exposures to the maturity structure of its debt;

v Its management of interest rate exposure;

v Its maximum annual exposures to investments maturing beyond a year.

§ by approving an investment strategy for the forthcoming year setting out its criteria for both investing and selecting investment counterparties in compliance with government guidance.

These are required to be reported and approved at or before the Council’s annual Council Tax setting budget or before the start of the year to which they relate. These items are reported with the annual treasury management strategy which outlines the detailed approach to managing risk in relation to the Council’s financial instrument exposure. Actual performance is also reported after each year, as is a mid-year update.

The annual treasury management strategy which incorporates the prudential indicators was approved by Council on 11 February 2020 and is available on the Council website.

The key issues within the strategy were:

§ The Authorised Limit for 2020/21 was set at £425m. This is the maximum limit of external borrowings or other long-term liabilities;

§ The Operational Boundary was expected to be £405m. This is the expected level of debt and other long-term liabilities during the year;

§ The maximum amounts of fixed and variable interest rate exposure were set at 100% and 15% based on the Council’s net debt;

§ The maximum and minimum exposures to the maturity structure of debt (see table below).

Risk management is carried out by a central treasury team, under policies approved by the Council in the annual treasury management strategy. The Council provides written principles for overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk, and the investment of surplus cash.

1. Credit Risk

Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the authority’s customers. This risk is minimised through the Annual Investment Strategy, which is available on the authority’s website.

There are significant financial risks of COVID-19 that will be felt into 2021/22 and later years due to the uncertainty surrounding its impact on residents and Council Tax collection rates, the slowdown in house building and the reduction in the Council Tax base and income and on businesses and Business Rates collection rates.

Credit Risk Management Practices

The Council’s credit risk management practices are set out in the Annual Investment Strategy. With particular regard to determining whether the credit risk of financial instruments has increased significantly since initial recognition.

The Annual Investment Strategy requires that deposits are not made with financial institutions unless they meet identified minimum credit criteria, in accordance with the Fitch, Moody’s and Standard & Poor’s Credit Ratings Services. The Annual Investment Strategy also considers maximum amounts and time limits with a financial institution located in each category.

The credit criteria in respect of financial assets held by the Council are detailed below:

The Council uses the creditworthiness service provided by Link Asset Services. This service uses a sophisticated modelling approach with credit ratings from all three rating agencies - Fitch, Moody’s and Standard and Poor’s, forming the core element. However, it does not rely solely on the current credit ratings of counterparties but also uses the following as overlays:

§ credit watches and credit outlooks from credit rating agencies;

§ CDS spreads to give early warning of likely changes in credit ratings;

§ sovereign ratings to select counterparties from only the most creditworthy countries.

The full Investment Strategy for 2020/21 was approved by Full Council on 11 February 2020 and is available on the Council’s website.

Customers for goods and services are assessed, taking into account their financial position, past experience and other factors, with individual credit limits being set in accordance with internal ratings in accordance with parameters set by the Council.

The Council’s maximum exposure to credit risk in relation to its investments in financial institutions of £288m cannot be assessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual institution. Recent experience has shown that it is rare for such entities to be unable to meet their commitments.

A risk of irrecoverability applies to all of the Council’s deposits, but there was no evidence at the 31 March 2021 that this was likely to crystallise.

Amounts Arising from Expected Credit Losses (ECL)

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

	12 Month ECL	Lifetime ECL	Lifetime ECL – Simplified Approach	Total
	£000	£000	£000	£000
Opening balance 1 April 2020	33	117	1,587	1,737
Change in credit loss	(10)	36	(78)	(52)
Closing balance 31 March 2021	23	153	1,509	1,685

12 Month ECL includes some third party loan and investment balances. Lifetime ECL includes some third party loans and treasury investments. Lifetime ECL simplified includes debtor balances.

Collateral

During the reporting period the council held no collateral as security.

2. Liquidity risk

The Council manages its liquidity position through the risk management procedures above (the setting and approval of prudential indicators and the approval of the treasury and investment strategy reports), as well as through a comprehensive cash flow management system, as required by the CIPFA Treasury Management Code of Practice. This seeks to ensure that cash is available when needed.

The Council has ready access to borrowings from the money markets to cover any day to day cash flow need, and the PWLB and money markets for access to longer term funds. The Council is also required to provide a balanced budget through the Local Government Finance Act 1992, which ensures sufficient monies are raised to cover annual expenditure. There is therefore no significant risk that it will be unable to raise finance to meet its commitments under financial instruments.

The maturity analysis of financial assets, excluding sums due from customers £12.29m at 31 March 2021 (£12.57m 31 March 2020), is as follows:

	31 March 2020	31 March 2021
	£000	£000
Less than one year	215,862	290,921
Between one and two years	29,454	24,355
Total	245,316	315,276

3. Refinancing and Maturity risk

The Council maintains a significant debt and investment portfolio. Whilst the cash flow procedures above are considered against the refinancing risk procedures, longer-term risk to the Council relates to managing the exposure to replacing financial instruments as they mature. This risk relates to both the maturing of longer term financial liabilities and longer term financial assets.

The approved treasury indicator limits for the maturity structure of debt and the limits placed on investments placed for greater than one year in duration are the key parameters used to address this risk. The Council approved treasury and investment strategies address the main risks and the central treasury team address the operational risks within the approved parameters. This includes:

§ monitoring the maturity profile of financial liabilities and amending the profile through either new borrowing or the rescheduling of the existing debt; and

§ monitoring the maturity profile of investments to ensure sufficient liquidity is available for the Council’s day to day cash flow needs, and the spread of longer-term investments provide stability of maturities and returns in relation to the longer term cash flow needs.

The maturity analysis of financial liabilities is as follows, with the maximum and minimum limits for fixed interest rates maturing in each period approved by Council in the Treasury Management Strategy:

	Approved Minimum Limit	Approved Maximum Limit	31 March 2020	31 March 2021
	%	%	£000	£000
Less than one year (current liabilities)	0%	25%	107,640	88,931
Between one and two years	0%	40%	5,568	17,303
Between two and five years	0%	60%	31,844	32,470
Between five and ten years	0%	70%	54,775	59,648
More than ten years	0%	90%	199,887	190,128
Total			399,714	388,480

4. Market risk

Interest rate risk - The Council is exposed to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the Council, depending on how variable and fixed interest rates move across differing financial instrument periods. For instance, a rise in variable and fixed interest rates would have the following effects:

§ Borrowings at variable rates – the interest expense charged to the Comprehensive Income and Expenditure Statement will rise;

§Borrowings at fixed rates – the fair value of the borrowing will fall (no impact on revenue balances);

§ Investments at variable rates – the interest income credited to the Comprehensive Income and Expenditure Statement will rise; and

§ Investments at fixed rates – the fair value of the assets will fall (no impact on revenue balances).

Borrowings are not carried at fair value on the balance sheet, so nominal gains and losses on fixed rate borrowings 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 the Other Comprehensive Income and Expenditure Statement.

The Council has a number of strategies for managing interest rate risk. The Annual Treasury Management Strategy draws together Council’s prudential and treasury indicators and its expected treasury operations, including an expectation of interest rate movements. From this Strategy a treasury indicator is set which provides maximum limits for fixed and variable interest rate exposure. The central treasury team will monitor market and forecast interest rates within the year to adjust exposures appropriately. For instance, during periods of falling interest rates, and where economic circumstances make it favourable, fixed rate investments may be taken for longer periods to secure better long term returns, similarly the drawing of longer term fixed rates borrowing would be postponed.

According to this assessment strategy, at 31 March 2021, if all interest rates had been 1% higher (with all other variables held constant) the financial effect would be:

	£000
Increase in interest payable on variable rate borrowings (none held)	-
Increase in interest receivable on variable rate investments	735
Impact on Comprehensive Income and Expenditure	735

Price risk

The Council, excluding the pension fund, does not generally invest in equity shares or marketable bonds.

The Council has a 19% voting rights interest in Woodland Enterprises Ltd, a company limited by guarantee, which was set up to create prosperity in woodland and wood industries through sustainable development. The net assets of the company at 31 March 2020 were £276,916 (£343,404 at 31 March 2019).

The legal liability of the County Council is limited to £4 between its four guarantors. As no amount has been invested in this company, since it is limited by guarantee, and investments are carried at cost, the Council has not recognised any amount as an investment in this company.

The Council does hold £5m in a property asset fund, and its price varies. The fair value at 31 March 2021 is £4.5m. However, any movement in price will not impact on the General Fund Balance as regulations are in force to ameliorate the impact of fair value movements.

Foreign exchange risk

The Council has no financial assets or liabilities denominated in foreign currencies and therefore has no exposure to loss arising from movements in exchange rates.

46. Trust Funds

The Council administers various funds for the benefit of individuals or groups of people. The income of such funds is not available for general use and the accounts are kept separate from those of the Council.

The term ‘trust fund’ includes money held on behalf of individuals, such as Social Services clients. In these cases, the holding is virtually a personal bank account and is not invested by the Council. The Council holds monies and acts as sole trustee for the following trusts:

· East Sussex Music Trust: for the provision of music education opportunities for children and young people in East Sussex;

· Robertsbridge Youth Centre: interest from money raised by the sale of land at the youth centre, applied towards youth services in Robertsbridge;

· Lewes Educational Charity: interest from money raised by the sale of former educational premises, applied towards education in Lewes and the surrounding area;

· How Scholarship: assistance to individuals in the Borough of Hastings;

· Wright Legacy: for the purchase of particular classes of books for Eastbourne Library;

· The Ashdown Forest Trust: a registered charity that was set up by a declaration of trust in 1988. The Council is trustee and agrees grants made to the Ashdown Forest conservators, from the Ashdown Forest Trust Fund. An independent examination of the Trust Fund accounts is provided by external auditors.

· Performing Arts Centre, Lewes: the centre is leased to the Council by East Sussex College as trustee of the East Sussex Music Trust.

The transactions during the year of all the funds are summarised below:

	2020/21
	Opening Balance	Expenditure	Income	Closing Balance
	£000	£000	£000	£000
Sole trustee funds
East Sussex Music Trust	(32)	-	-	(32)
Robertsbridge Youth Centre	(107)	-	-	(107)
Lewes Educational Charity	(62)	-	-	(62)
Heathfield Youth Centre	(58)	-	(1)	(59)
How Scholarship	(5)	-	-	(5)
Wright Legacy	(2)	-	-	(2)
Total sole trustee funds	(266)	-	(1)	(267)
Comforts funds	(37)	6	(6)	(37)
Total trust funds	(303)	6	(7)	(304)

Ashdown Forest Trust	(1,353)	-	-	(1,353)
Performing Arts Centre, Lewes	(524)	16	-	(508)

*Restated opening balance due to an incorrect brought forward balance in the prior year

47. Closed Landfill Sites

A former or closed landfill site is an area that has previously been used to dispose of rubbish from the construction industry, commercial businesses and households. The closed site will have ceased accepting rubbish and will be under restoration. When a landfill site is originally granted planning permission, the future land use is sometimes agreed as part of the planning application. If not, the site will usually be restored so that it can be used for either recreational purposes or agriculture such as grazing.

To ensure closed landfill sites are safe, they are regularly monitored. The Council currently monitors 19 closed landfill sites of which most are over 30 years old and closed in the 1980’s. The Council is responsible for aftercare costs as there is a potential risk from leachate (toxic water) and escaped gases such as methane, carbon dioxide and other gases which may be flammable.

In accordance with Environment Agency legislation, the Council has made a provision for a past event of up to 60 years for future aftercare costs for each site. The provision is the best estimate of the expenditure required to settle the obligation. Over the remaining aftercare life for each site, the Council will charge aftercare costs to the provision and so reduce the liability. At 31 March 2021, the liability had reduced to £9.16m (£9.30m at 31 March 2020).

The Council own the freehold or part freehold of eight of the nineteen sites and in accordance with IAS 16 Property, Plant & Equipment and the Council’s own accounting policy (see accounting policy xxi on page 41), has recognised the land value in the Balance Sheet. Four of the sites are located on land included elsewhere in the Council’s Balance Sheet and the remaining four sites are valued separately as Property, Plant & Equipment at £1.2m at 31 March 2021 (£1.3m at 31 March 2020).

1: Description of fund

The East Sussex Pension Fund (“the Fund”) is part of the Local Government Pension Scheme and is administered by East Sussex County Council (“the Scheme Manager”). The County Council is the reporting entity for this pension fund.

The following description of the fund is a summary only. For more detail, references should be made to the East Sussex Pension Fund Annual Report 2020/21 and the underlying statutory powers underpinning the scheme, namely the Public Service Pensions Act 2013 and The Local Government Pension Scheme (LGPS) Regulations.

a) General

The scheme is governed by the Public Service Pensions Act 2013. The Fund is administered in accordance with the following secondary legislation:

- The Local Government Pension Scheme Regulations 2013 (as amended)

- The Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 (as amended)

- The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016.

The Fund is a contributory defined benefit pension scheme administered by East Sussex County Council to provide pensions and other benefits for pensionable employees of East Sussex County Council, the district councils in East Sussex County and a range of other scheduled and admitted bodies within the county area.

The Fund is also empowered to admit the employees of certain other bodies, town and parish councils, educational establishments, contractors providing services transferred from scheduled bodies and community interest bodies. The Fund does not provide pensions for teachers, for whom separate arrangements exist. Uniformed police and fire staff are also subject to separate pension arrangements.

The Council has delegated its pension functions to the East Sussex Pension Committee. Responsibility for the administration and financial management of the Fund has been delegated to the Chief Finance Officer along with the Head of Pensions. The Scheme Manager is also required to establish and maintain a Pension Board, for the purposes of assisting with the ongoing compliance of the Fund. The role of the Board is to assist the East Sussex Pension Fund in complying with all the legislative requirements making sure the scheme is being effectively and efficiently governed and managed.

Independent investment managers have been appointed to manage the investments of the Fund. The Fund also invests in illiquid investments such as private equity, infrastructure and private debt. The Committee oversees the management of these investments and the Fund and its advisers meet regularly with the investment managers to monitor their performance against agreed benchmarks.

b) Membership

Membership of the LGPS is voluntary and employees are free to choose whether to join the scheme, remain in the scheme or make their own personal arrangements outside the scheme.

Organisations participating in the East Sussex Pension Fund include:

- Scheduled bodies, which are local authorities and similar bodies whose staff are automatically entitled to be members of the fund

- Admitted bodies, which are other organisations that participate in the fund under an admission agreement between the fund and the relevant organisation. Admitted bodies include voluntary, charitable and similar bodies or private contractors undertaking a local authority function following outsourcing to the private sector.

There are 127 employer organisations within East Sussex Pension Fund including the County Council itself, as detailed below:

East Sussex Pension Fund	31 March 2020	31 March 2021
Number of employers with active members	128	127
Number of employees
County Council	7,980	8,163
Other employers	15,855	16,839
Total	23,835	25,002
Number of pensioners
County Council	9,500	9,805
Other employers	11,835	12,425
Total	21,335	22,230
Deferred pensioners
County Council	13,860	13,805
Other employers	17,762	17,429
Total	31,622	31,234
Total number of members in pension scheme	76,792	78,466

c) Funding

Benefits are funded by contributions and investment earnings. Contributions are made by active members of the Fund in accordance with The LGPS Regulations 2013 and range from 5.5% to 12.5% of pensionable pay for the financial year ending 31 March 2021. Employee contributions are matched by employers’ contributions, which are set, based on triennial actuarial funding valuations. The last such valuation was at 31 March 2019.Currently, employer contribution rates range from 0.0% to 49.2% of pensionable pay.

d) Benefits

Prior to 1 April 2014, pension benefits under the LGPS were based on final pensionable pay and length of pensionable service.From 1 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 uprated annually in line with the Consumer Prices Index.

There are a range of other benefits provided under the scheme including early retirement, disability pensions and death benefits. For more details, please refer to the East Sussex Pension Fund Website.

2: Basis of preparation

The Statement of Accounts summarises the Fund’s transactions for the 2020/21 financial year and its position at year-end as at 31 March 2021. The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2020/21 which is based upon International Financial Reporting Standards (IFRS) as amended for UK public sector. The accounts have been prepared on a going concern basis.

Accounting standards issued but not yet adopted - Under the Code of Practice on Local Authority Accounting in the United Kingdom 2020/21, the Fund is required to disclose information setting out the impact of an accounting change required by a new accounting standard that has been issued on or before 1 January 2020 but not yet adopted by the Code. IFRS 16, introduced on 1 January 2019, is due to be adopted by the Code for accounting periods commencing on or after 1 April 2022. This new accounting standard largely removes the distinction between operating and finance leases by introducing an accounting model that requires lessees to recognise assets and liabilities for all leases with a term of more than 12 months unless the underlying asset is of low value. This will bring assets formerly off-Balance Sheet onto the Balance Sheet of lessees. Implementation of IFRS16 is not expected to have a material impact on the pension fund because it does not hold any assets as a lessee.

There were no amendments for 2020/21 for the accounts of the Pension Fund.

The accounts report on the net assets available to pay pension benefits. They do not take account of obligations to pay pensions and benefits which fall due after the end of the financial year nor do they take into account the actuarial present value of promised retirement benefits. The code gives administering authorities the option to disclose this information in the net asset statement, in the notes to the accounts or appending an actuarial report prepared for this purpose. The Pension Fund has opted to disclose this information in Note 20.

The Pension Fund publishes a number of statutory documents, including an Investment Strategy Statement, a Funding Strategy Statement, Governance and Compliance Policy Statement and Communications Policy Statement. Copies can be obtained by contacting the Council’s Pensions team or alternatively are available from https://www.eastsussexpensionfund.org/

ACCESS Pool – There is no specific accounting policy for the Pool. The ACCESS Pool is not a legal entity in itself but is governed by the Inter Authority Agreement signed by each Administering Authority. The formal decision-making body within the ACCESS Pool is the ACCESS Joint Committee, which has let the management of the asset pool to Link Fund Solutions Ltd, appointed to provide a pooled operator service. There is no direct investment in the third party, only a contractual arrangement to provide services, so there is no investment balance to carry forward in the net asset statement.

3: Summary of significant accounting policies

Fund account – revenue recognition

a) Contribution income

Normal contributions are accounted for on an accruals basis as follows:

· Employee contribution rates are set in accordance with LGPS regulations, using common percentage rates for all schemes, which rise according to pensionable pay.

· Employer contributions are set at the percentage rate recommended by the fund actuary for the period to which they relate.

Employer deficit funding contributions are accounted for on the basis advised by the fund actuary in the rates and adjustment certificate issued to the relevant employing body.

Additional employers’ contributions in respect early retirements are accounted for in the year the event arose. 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.

b) Transfers to and from other schemes

Transfers in and out relate to members who have either joined or left the fund.

Individual transfers in/out are accounted for when received or paid. Transfers in from members wishing to use the proceeds of their additional voluntary contributions (see below) to purchase scheme benefits are accounted for on a receipts basis and are included in Transfers In (Note 8).

Bulk (group) transfers are accounted for in accordance with the terms of the transfer agreement.

c) Investment income

i. Interest income

Interest income is recognised in the fund account as it accrues, using the effective interest rate of the financial instrument as at the date of acquisition or origination.

ii. Dividend income

Dividend income is recognised on the date the shares are quoted ex-dividend. Any amount not received by the end of the reporting period is disclosed in the net assets statement as a current financial asset.

iii. Distributions from pooled funds

Distributions from pooled funds are recognised at the date of issue. Any amount not received by the end of the reporting period is disclosed in the net assets statement as a current financial asset.

iv. Movement in the net market value of investments

Changes in the net market value of investments are recognised as income and comprise all realised and unrealised profits/losses during the year.

Fund account – expense items

d) 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.

e) Taxation

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. 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.

f) Management expenses

The Fund discloses its pension fund management expenses in accordance with the CIPFA guidance Accounting for Local Government Pension Scheme Management Expenses (2016), as shown below. All items of expenditure are charged to the fund on an accruals basis as follows:

i) Administrative expenses

All staff costs of the pensions administration team are charged direct to the fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as expenses to the fund.

ii) Oversight and governance costs

All staff costs associated with governance and oversight are charged direct to the fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as expenses to the fund.

iii) Investment management expenses

Investment management expenses are charged directly to the fund as part of management expenses and are not included in, or netted off from, the reported return on investments. Where fees are netted off quarterly valuations by investment managers, these expenses are shown separately in Note 11A and grossed up to increase the change in value of investments.

Fees of the external investment managers and custodian are agreed in the respective mandates governing their appointments. Broadly, these are based on the market value of the investments under their management and therefore increase or reduce as the value of these investments change.

Where an investment manager’s fee has not been received by the balance sheet date, an estimate based upon the market value of their mandate as at the end of the year is used for inclusion in the fund account. In 2020/21, £0.8m of fees is based on such estimates (2019/20: £0.3m).

Net assets statement

g) Financial assets

All investment assets are included in the financial statements on a fair value basis as 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. Any amounts due or payable in respect of trades entered into but not yet complete at 31 March each year are accounted for as financial instruments held at amortised cost and reflected in the reconciliation of movements in investments and derivatives in Note 14a. Any gains or losses on investment sales arising from changes in the fair value of the asset are recognised in the fund account.

The values of investments as shown in the net assets statement have been determined at fair value in accordance with the requirements of the Code and IFRS13 (see Note 16). For the purposes of disclosing levels of fair value hierarchy, the fund has adopted the classification guidelines recommended in Practical Guidance on Investment Disclosures (PRAG/Investment Association, 2016).

h) Foreign currency transactions

Dividends, interest and purchases and sales of investments in foreign currencies have been accounted for at the spot market rates at the date of transaction. End-of-year spot market exchange rates are used to value cash balances held in foreign currency bank accounts, market values of overseas investments and purchases and sales outstanding at the end of the reporting period.

i) Derivatives

The Fund uses derivative financial instruments to manage its exposure to specific risks arising from its investment activities. The Fund does not hold derivatives for speculative purposes.

j) Cash and cash equivalents

Cash comprises cash in hand and demand deposits and includes amounts held by the Fund’s external managers.

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to minimal risk of changes in value.

k) Financial liabilities

A financial liability is recognised in the net assets statement on the date the fund becomes party to the liability. The fund recognises financial liabilities relating to investment trading at fair value as at the reporting date, and any gains or losses arising from changes in the fair value of the liability between contract date, the year-end date and the eventual settlement date are recognised in the fund account as part of the Change in Value of Investments.

Other financial liabilities classed as amortised costs are carried at amortised cost i.e. the amount carried in the net asset statement are the outstanding principal repayable plus accrued interest. Any interest charged is accounted for on an accruals basis.

l) Actuarial present value of promised retirement benefits

The actuarial present value of promised retirement benefits is assessed on a triennial basis by the scheme actuary in accordance with the requirements of IAS 19 and relevant actuarial standards.

As permitted under the Code, the Fund has opted to disclose the actuarial present value of promised retirement benefits by way of a note to the net assets statement (Note 20).

m) Additional voluntary contributions

East Sussex Pension Fund provides an additional voluntary contributions (AVC) scheme for its members, the assets of which are invested separately from those of the pension fund. The Fund has appointed Prudential as its AVC provider. AVCs 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 the movements in the year.

AVCs are not included in the accounts in accordance with Regulation 4(1)(b) of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 but are disclosed as a note only (Note 23).

n) Contingent assets and contingent liabilities

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.

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.

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

4: Critical judgements in applying accounting policies

Unquoted private equity investments

It is important to recognise the highly subjective nature of determining the fair value of private equity investments. They are inherently based on forward-looking estimates and judgements involving many factors. Unquoted private equities are valued by the investment managers using International Private Equity and Venture Capital Valuation Guidelines 2015. The value of unquoted private equities at 31 March 2021 was £265 million (£229 million at 31 March 2020).

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 summarised in Note 19. This estimate is subject to significant variances based on changes to the underlying assumptions.

Use of Financial Instruments

The Fund uses financial instruments to manage its exposure to specific risks arising from its investments. In applying the accounting policies set out within the notes that accompany the financial statements the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the financial statements are based around determining a fair value for the alternative investments shown in the Net Asset Statement. It is important to recognise valuations for these types of investments are highly subjective in nature. They are inherently based on forward‐looking estimates and judgements that involve many factors.

5: Assumptions made about the future and other major sources of estimation uncertainty

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts. Estimates and assumptions are made take into account historical experience, current trends and other relevant factors. However, actual outcomes could be different from the assumptions and estimates made. The items in the net asset statement for which there is a significant risk of material adjustment the following year are as follows:

Item

Uncertainties

Effect if actual results differ from assumptions

Actuarial present value of promised retirement benefits (Note 20)

Estimation of the net liability to pay pensions depends on a number of complex judgments 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. As a result of Coronavirus pandeminc there is an increase in the uncertainty around the mortalilty provisions within the Fund, however it is too early to assess this figure at the current time so has not been included in our calculations. A firm of consulting actuaries 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 individual assumptions can be measured. For instance, for the 2019 Valuation the actuary advised that:

· A 0.2% increase in the discount rate assumption would result in a decrease in the pension liability by approximately £113 million (3%).

· A 0.2% increase in benefit increases and CARE revaluation would increase the value of liabilities by approximately £95 million (3%).

· A 0.25% change in mortality rates would increase the liability by approximately £25 million (0.7%).

Private equity

Private equity investments are valued at fair value in accordance with International Private Equity and Venture Capital Valuation Guidelines (2015). Investments are not publicly listed and as such there is a degree of estimation involved in the valuation.

The total private equity investments in the financial statements are £265.0 million. There is a risk that this investment may be under or overstated in the accounts depending on use of estimates applied in the valuation models by the fund managers. The sensitivity of this figure is discussed further in Note 16 and Note 18.

6: Events after the balance sheet date

There have been no events since 31 March 2021, and up to the date when these accounts were authorised that require any adjustments to these accounts.

7: Contributions Receivable

	2019/20	2020/21
	£000	£000
By category
Employee’s contributions	31,403	31,435
Employer’s contributions
Normal contributions	80,302	83,643
Deficit recovery contributions	17,662	15,336
Augmentation contributions	1,054	1,063
Total	130,421	131,477
By authority
Scheduled bodies	83,613	84,803
Admitted bodies	4,303	3,653
Administrative Authority	42,505	43,021
Total	130,421	131,477

8: Transfers in from other pension funds

	2019/20	2020/21
	£000	£000
Group transfers	-	-
Individual transfers	8,298	6,044
Total	8,298	6,044

9: Benefits payable

	2019/20	2020/21
	£000	£000
By category
Pensions	104,544	108,927
Commutation and lump sum retirement benefits	18,555	17,194
Lump sum death benefits	2,571	2,586
Total	125,670	128,707
By authority
Scheduled bodies	73,625	76,492
Admitted bodies	3,690	3,781
Administrative Authority	48,355	48,434
Total	125,670	128,707

10: Payments to and on account of leavers

	2019/20	2020/21
	£000	£000
Refunds to members leaving service	389	242
Group transfers	-	-
Individual transfers	8,207	5,319
Total	8,596	5,561

11: Management expenses

	2019/20	2020/21
	£000	£000
Administrative costs	1,106	1,680
Investment management expenses	15,019	13,785
Oversight and governance costs	1,208	1,831
Total	17,333	17,296

11a: Investment management expenses

2020/21	Total	Management Fees	Performance Related Fees	Transaction costs*
	£000	£000	£000	£000
Bonds	38	14	-	24
Equities	802	113	-	689
Pooled investments
Fixed Income	1,769	1,769	-	-
Equity	2,872	2,593	-	279
Diversified growth funds	3,373	3,373	-	-
Pooled property investments	1,307	1,307	-	-
Private equity / infrastructure	3,563	3,563	-	-
	13,724	12,732	-	992
Custody	61
Total	13,785

*In addition to these costs, indirect costs are incurred through the bid-offer spread on investments within pooled investments.

2019/20	Total	Management Fees	Performance Related Fees	Transaction costs*
	£000	£000	£000	£000
Bonds	18	18	-	-
Equities	-	-	-	-
Diversified growth	2,131	1,942	-	189
Pooled investments	-	-	-	-
Fixed Income	1,298	1,298	-	-
Equity	1,843	1,843	-	-
Diversified growth funds	2,876	2,846	-	30
Pooled property investments	1,652	1,652	-	-
Private equity / infrastructure	5,147	5,147	-	-
	14,965	14,746	-	219
Custody	54
Total	15,019

*In addition to these costs, indirect costs are incurred through the bid-offer spread on investments within pooled investments.

During the year, the Pension Fund incurred management fees which were deducted at source for 2020/21 of £2.2m (£3.7m in 2019/20) on its private equity investments, fees of £1.1m (£1.3m in 2019/20) on its infrastructure investments, fees of £5.1m (£2.6m in 2019/20) on investments in the ACCESS Pool and fees of £1.9m (£3.0m in 2019/20) on other mandates. These fees are deducted at the individual portfolio level rather than being paid directly by the Pension Fund.

12: Investment income

	2019/20	2020/21
	£000	£000
Income from bonds	154	122
Income from equities	1,507	654
Private equity/Infrastructure income	1,531	1,458
Pooled property investments	11,972	9,584
Pooled investments - unit trusts and other managed funds	10,705	25,402
Interest on cash deposits	673	1,869
Class Actions	4	-
Total	26,546	39,089

13: Other fund account disclosures

13a: Taxes on income

	2019/20	2020/21
	£000	£000
Withholding tax – equities	(59)	(19)
Total	(59)	(19)

13b: External audit costs

	2019/20	2020/21
	£000	£000
Payable in respect of external audit for 2018/19	3*	-
Payable in respect of external audit for 2019/20	27	5**
Payable in respect of external audit for 2020/21	-	35
Payable in respect of other services	5	5
Total	35	45

*The final fee for 2018/19 was agreed after the audit opinion was received for 2018/19.

** The final fee for 2019/20 was agreed after the audit opinion was received for 2019/20

14: Investments

	2019/20	2020/21
	£000	£000
Investment assets
Bonds	212,331	128,765
Pooled Investments
Fixed Income	413,943	485,996
Equity	1,332,597	1,864,834
Diversified growth funds	833,253	1,002,298
Pooled property investments	318,129	319,533
Private equity/infrastructure	291,413	372,564
Derivative contracts:
Forward Currency Contracts	-	-
	3,401,666	4,173,990
Cash deposits with Custodian	63,715	56,736
Other Investment balances (Note 21)	340	357
Total investment assets	3,465,721	4,231,083
Investment Liabilities (Note 22)	(475)	(775)
Derivative contracts:
Forward Currency Contracts	-	-
Total Investment Liabilities	(475)	(775)
Net investment assets	3,465,246	4,230,308

14a: Reconciliation of movements in investments and derivatives

	Market value 1 April 2020	Purchases during the year and derivative payments	Sales during the year and derivative receipts	Change in market value during the year	Market value 31 March 2021
	£000	£000	£000	£000	£000

Bonds	212,331	-	(92,246)	8,680	128,765
Equities	-	618,587	(534,059)	(84,528)	-
Pooled investments	2,579,793	253,354	(246,139)	766,120	3,353,128
Pooled property investments	318,129	11,928	(9,059)	(1,465)	319,533
Private equity/infrastructure	291,413	77,295	(47,943)	51,799	372,564
	3,401,666	961,164	(929,446)	740,606	4,173,990
Derivative contracts
■ Forward currency contracts	-	575	(162)	(413)	-
	3,401,666	961,739	(929,608)	740,193	4,173,990
Other investment balances:
■ Cash deposits	63,715			(279)	56,736
■ Other Investment Balances	340				357
■ Investment Liabilities	(475)				(775)
Net investment assets	3,465,246			739,914	4,230,308

	Market value 1 April 2019	Purchases during the year and derivative payments	Sales during the year and derivative receipts	Change in market value during the year	Market value 31 March 2020
	£000	£000	£000	£000	£000

Bonds	499,750	68,143	(379,592)	24,030	212,331
Equities	153,695	81,336	(244,125)	9,094	-
Pooled investments	2,232,435	1,055,608	(493,067)	(215,183)	2,579,793
Pooled property investments	339,442	10,551	(15,342)	(16,522)	318,129
Private equity/infrastructure	245,135	57,631	(41,228)	29,875	291,413
Commodities	6,125	992	(7,925)	808	-
Multi Asset	2,342	6,030	(7,534)	(838)	-
	3,478,924	1,280,291	(1,188,813)	(168,736)	3,401,666
Derivative contracts
■ Forward currency contracts	(415)	12,995	(12,095)	(485)	-
	3,478,509	1,293,286	(1,200,908)	(169,221)	3,401,666
Other investment balances:
■ Cash deposits	149,156			2,496	63,715
■ Other Investment Balances	4,937				340
■ Investment Liabilities	(9,392)				(475)
Net investment assets	3,623,210			(166,725)	3,465,246

14b: Investments analysed by fund manager

	Market value 31 March 2020		Market value 31 March 2021
	£000	£000	£000	%
Investments in the ACCESS Pool
ACCESS - Global Equity (Longview)	238,840	6.9%	458,786	10.8%
ACCESS - Absolute Return (Ruffer)	418,469	12.1%	158,430	3.7%
ACCESS - Real Return (Newton)	414,784	12.0%	492,250	11.6%
ACCESS - Corporate Debt (M&G)	144,259	4.2%	510,048	12.1%
	1,216,352	35.2%	1,619,514	38.2%
Investments held directly by the Fund
Prudential M&G	-	-	-	-
East Sussex Pension Fund Cash	24,736	0.7%	30,674	0.7%
UBS Infrastructure Fund	16,720	0.5%	37,697	0.9%
Prudential Infracapital	20,676	0.6%	32,707	0.8%
Pantheon	30,109	0.9%	38,120	0.9%
Schroders Property*	343,707	9.9%	344,204	8.1%
Harbourvest Strategies	106,192	3.1%	110,515	2.6%
Adams St Partners	122,874	3.5%	154,497	3.7%
M&G Absolute Return Bonds	239,101	6.9%	285,150	6.7%
UBS Passive Funds	1,305,987	37.6%	557,483	13.3%
M&G Real Estate Debt VI	38,793	1.1%	42,416	1.0%
Atlas Infrastructure	-	-	77,324	1.8%
Storebrand Smart Beta & ESG	-	-	454,529	10.7%
Wellington Active Impact Equity	-	-	222,751	5.3%
Wheb Active Impact Equity			222,727	5.3%

	2,248,894	64.8%	2,610,794	61.8%
	3,465,246		4,230,308

* Schroders mandate is to oversee the East Sussex Pension Fund’s investments in a range of underlying property funds this is not a single investment into a Schroders property fund.

The following investments represent more than 5% of the investment assets of the scheme -

Security	Market Value 31 March 2020	% of total fund	Market value 31 March 2021	% of total fund
	£000		£000
ACCESS - Real Return (Newton)	414,784	11.9%	510,048	12.1%
ACCESS - Global Equity (Longview)	238,840	6.9%	492,250	11.6%
ACCESS - Absolute Return (Ruffer)	418,469	12.0%	458,786	10.8%
Storebrand Smart Beta & ESG Fund	-	-	454,529	10.7%
M&G Absolute Return Bonds	239,101	6.9%	285,150	6.7%
Wellington Active Impact Equity Fund	-	-	222,751	5.3%
Wheb Active Impact Equity Fund	-	-	222,727	5.3%
UBS Over 5 year Index Gilt Linked	212,331	6.1%	128,765	3.0%
UBS UK Equity	221,992	6.4%	66,680	1.6%
UBS Fundamental Index	363,155	10.4%	-	-

14c: Stock lending

The East Sussex Pension Fund has not operated a stock lending programme since 13^th October 2008.

15: Analysis of derivatives

Objectives and policies for holding derivatives

Derivatives can be used to hedge liabilities or hedge exposures to reduce risk in the Fund. Derivatives maybe used to gain exposure to an asset more efficiently than holding the underlying asset. The use of derivatives is managed in line with the investment management agreement agreed between the Fund and the various investment managers.

a) Futures

The scheme’s objective is to decrease risk in the portfolio by entering into futures positions to match assets that are already held in the portfolio without disturbing the underlying assets.

b) Forward foreign currency

In order to maintain appropriate diversification and to take advantage of overseas investment returns, a significant proportion of the Fund’s quoted equity portfolio is in overseas stock markets. The Fund can participate in forward currency contracts in order to reduce the volatility associated with fluctuating currency rates.

c) Options

The Fund wants to benefit from the potentially greater returns available from investing in equities but wishes to minimise the risk of loss of value through adverse equity price movements. The Fund buys equity option contracts that protect it from falls in value in the main markets in which the scheme invests.

The East Sussex Pension Fund did not hold any derivatives as at 31^st March 2021 (nil as at 31 March 2020).

16: Fair value – basis of valuation

The basis of the valuation of each class of investment asset is set out below. There has been no change in the valuation techniques used during the year. All assets have been valued using fair value techniques, which represent the highest and best price available at the reporting date

Description of asset	Valuation hierarchy	Basis of valuation	Observable and unobservable inputs	Key sensitivities affecting the valuations provided
Market-quoted investments	Level 1	Published bid market price ruling on the final day of the accounting period	Not Required	Not Required
Quoted bonds	Level 1	Fixed interest securities are valued at a market value based on current yields	Not Required	Not Required
Futures and options in UK bonds	Level 1	Published exchange prices at the year-end	Not Required	Not Required
Exchange traded pooled investments	Level 1	Closing bid value on published exchanges	Not Required	Not Required
Unquoted bonds	Level 2	Average of broker prices	Evaluated price feeds	Not Required
Forward foreign exchange derivatives	Level 2	Market forward exchange rates at the year-end	Exchange rate risk	Not Required
Overseas bond options	Level 2	Option pricing model	Annualised volatility of counterparty credit risk	Not Required
Pooled investments – Equity and bonds Funds	Level 2	Closing bid price where bid and offer prices are published Closing single price where single price published	The valuation is undertaken by the investment manager or responsible entity and advised as a unit or security price. Observable inputs are used. The valuation standards followed in these valuations adhere to industry guidelines or to standards set by the constituent documents of the pool or the management agreement.	Not Required
Pooled investments – Property Funds	Level 3	Closing bid price where bid and offer prices are published Closing single price where single price published Investments in unlisted property funds are valued at the net asset value (NAV). The underlying real estate assets values have been derived by independent valuers on a fair value basis and generally in accordance with the Royal Institute of Chartered Surveyors’ Valuation Standards.	The significant inputs and assumptions are developed by the respective fund manager.	Valuations could be affected by the frequency of the independent valuations between the funds.
Unquoted equity – Private Equity / Infrastructure	Level 3	Comparable valuation of similar companies in accordance with International Private Equity and Venture Capital Valuation Guidelines (2012)	Observable inputs are subject to judgment by the respective manager, but are applied in accordance with the appropriate industry guidelines. Valuations are audited as at 31 December, and the valuations as at 31 March reflect cash flow transactions since 31 December.	Valuations could be affected by material events occurring between the date of the financial statements provided and the pension fund’s own reporting date, by changes to expected cashflows, and by any differences between audited and unaudited accounts

Sensitivity of assets valued at level 3

Having analysed historical data and current market trends, and consulted with independent investment 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 consequential potential impact on the closing value of investments held at 31 March 2021 and 31 March 2020.

Asset Type	Assessed valuation range (+/-)	Values at 31 March 2021	Value on increase	Value on decrease
		£000	£000	£000
Pooled Investment (a)	9%	42,416	46,233	38,599
Pooled property investments (b)	13%	319,533	361,072	277,994
Private Equity/Infrastructure (c)	25%	372,564	464,960	280,168
Total		734,513	872,266	596,761

Asset Type	Assessed valuation range (+/-)	Values at 31 March 2020	Value on increase	Value on decrease
		£000	£000	£000
Pooled Investment (a)	7%	30,583	32,759	28,407
Pooled property investments (b)	14%	318,129	362,031	274,227
Private Equity/Infrastructure (c)	27%	291,413	370,095	212,731
Total		640,125	764,884	515,366

(a) All movements in the assessed valuation range derive from changes in the net asset value of the underlying real estate assets, the range in the potential movement of 9% is caused by how this value is measured.

(b) All movements in the assessed valuation range derive from changes in the net asset value of the underlying real estate assets, the range in the potential movement of 13% is caused by how this value is measured.

(c) All movements in the assessed valuation range derive from changes in the underlying profitability of component companies, the range in the potential movement of 25% is caused by how this profitability is measured.

16a: Fair value hierarchy

The following table provides an analysis of the financial assets and liabilities of the pension fund grouped into Levels 1 to 3, based on the level at which the fair value is observable.

	Quoted market price	Using observable inputs	With Significant unobservable inputs
Values at 31 March 2021	Level 1	Level 2	Level 3	Total
	£000	£000	£000	£000
Financial assets at fair value through profit and loss	357	3,439,477	734,513	4,174,347
Non-financial assets at fair value through profit and loss	-	-	-	-
Financial liabilities at fair value through profit and loss	-	(775)	-	(775)
Net investment assets	357	3,438,702	734,513	4,173,572

	Quoted market price	Using observable inputs	With Significant unobservable inputs
Values at 31 March 2020	Level 1	Level 2	Level 3	Total
	£000	£000	£000	£000
Financial assets at fair value through profit and loss	222,079	2,539,802	640,125	3,402,006
Non-financial assets at fair value through profit and loss	-	-	-	-
Financial liabilities at fair value through profit and loss	-	(475)	-	(475)
Net investment assets	222,079	2,539,327	640,125	3,401,531

16b: Transfers between levels 1 and 2

During 2020/21 the fund has transferred 1 financial assets between levels 1 and 2. This was the Funds UK Passive Fund with UBS which was moved to level 2 from level 1 as the Fund assessment was that this was more aligned to the Pooled investments – Equity and bonds Funds category and as the valuation is advised as a unit price.

16c: Reconciliation of fair value measurements within level 3

	Market value 1 April 2020	Transfers into Level 3	Transfers out of Level 3	Purchases during the year	Sales during the year	Unrealised gains/(losses)	Realised gains/(losses)	Market value 31 March 2021
Period 2020/21	£000	£000	£000	£000	£000	£000	£000	£000
Pooled investments	30,583	-	-	18,074	(6,715)	474	-	42,416
Pooled property investments	318,129	-	-	11,928	(9,274)	(4,459)	3,209	319,533
Private Equity/Infrastructure	291,413	-	-	77,295	(47,943)	24,207	27,592	372,564
Total	640,125	-	-	107,297	(63,932)	20,222*	30,801*	734,513

*Reconciliation to Change in market value during the year in Note 14a

Level	Unrealised gains/(losses)	Realised gains/(losses)	Change in market value during the year
1 and 2	566,319	122,572	688,891
3	20,222	30,801	51,023
Total	586,541	153,373	739,914

	Market value 1 April 2019	Transfers into Level 3	Transfers out of Level 3	Purchases during the year	Sales during the year	Unrealised gains/(losses)	Realised gains/(losses)	Market value 31 March 2020
Period 2019/20	£000	£000	£000	£000	£000	£000	£000	£000
Equities	33,670	-	-	4,344	(31,669)	8,716	(15,061)	-
Pooled investments	-	-	-	44,179	(14,239)	643	-	30,583
Pooled property investments	339,442	-	-	10,551	(15,342)	(22,256)	5,734	318,129
Private Equity/Infrastructure	245,135	-	-	57,631	(35,970)	1,863	22,754	291,413
Total	618,247	-	-	116,705	(97,220)	(11,034)*	13,427*	640,125

*Reconciliation to Change in market value during the year in Note 14a

Level	Unrealised gains/(losses)	Realised gains/(losses)	Change in market value during the year
1 and 2	(269,121)	100,003	(169,118)
3	(11,034)	13,427	2,393
Total	(280,155)	(113,430)	(166,725)

17: Classification of financial instruments

Accounting policies describe how different asset classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the carrying amounts of financial assets and liabilities (including cash) by category and net assets statement heading. No financial assets were reclassified during the accounting period.

31 March 2020				31 March 2021
Fair value through profit and loss	Assets at amortised cost	Liabilities at amortised cost		Fair value through profit and loss	Assets at amortised cost	Liabilities at amortised cost
£000	£000	£000		£000	£000	£000
			Financial Assets
212,331	-	-	Bonds	128,765	-	-
-	-	-	Equities	-	-	-
2,579,793	-	-	Pooled investments	3,353,128	-	-
318,129	-	-	Pooled property investments	319,533	-	-
291,413	-	-	Private equity/infrastructure	372,564	-	-
-	-	-	Derivative contracts	-	-	-
-	63,715	-	Cash	-	56,736	-
-	1,746	-	Cash held by ESCC*	-	1,560	-
340	-	-	Other investment balances	357	-	-
-	14,876	-	Debtors *	-	14,115	-
3,402,006	80,337	-	Total Financial Assets	4,174,347	72,411	-
			Financial liabilities
-	-	-	Derivative contracts	-	-	-
(475)	-	-	Other investment balances	(775)	-	-
-	-	-	Cash held by ESCC	-	-	-
-	-	(2,774)	Creditors	-	-	(1,933)
(475)	-	(2,774)	Total Financial Liabilities	(775)	-	(1,933)
3,401,531	80,337	(2,774)	Total Financial Instruments	4,173,572	72,411	(1,933)

*Reconciliation to Current Assets Note 21

	2019/20	2020/21
	£000	£000
Cash held by ESCC	1,746	1,560
Debtors	14,876	14,115
Current Assets	16,622	15,675

17a: Net gains and losses on financial instruments

	31 March 2020	31 March 2021
	£000	£000
Financial assets
Fair value through profit and loss	(167,355)	729,207
Amortised cost – realised gains on derecognition of assets	-	-
Amortised cost – unrealised gains	665	(598)
Financial liabilities
Fair value through profit and loss	(35)	-
Amortised cost – realised gains on derecognition of assets	-	-
Amortised cost – unrealised gains	-	-
Total	(166,725)	728,609

18: Nature and extent of risks arising from financial instruments

Risk and risk management

The Fund’s primary long-term risk is that the Fund’s assets will fall short of its liabilities (i.e. promised benefits payable to members). Therefore, the aim of investment risk management is to minimise the risk of an overall reduction in the value of the Fund and to maximise the opportunity for gains across the whole portfolio. The Fund achieves this through asset diversification to reduce exposure to market risk (price risk, currency risk and interest rate risk) and credit risk to an acceptable level. In addition, the Fund manages its liquidity risk to ensure there is sufficient liquidity to meet the forecast cash flows. The Fund manages these investment risks as part of its overall risk management programme.

Responsibility for the Fund’s risk management strategy rests with the Pension Committee. Risk management policies are established to identify and analyse the risks faced by the Fund’s pensions operations. Policies are reviewed regularly to reflect changes in activity and in the market conditions.

a) Market risk

Market risk is the risk of loss from fluctuations in equity and commodity prices, interest and foreign exchange rates and credit spreads. The Fund is exposed to market risk from its investment activities, particularly through its equity holdings. The level of risk exposure depends on market conditions, expectations of future price and yield movements and the asset mix.

The objective of the Fund’s risk management strategy is to identify, manage and control market risk exposure within acceptable parameters, whilst optimising the return on risk.

In general, excessive volatility in market risk is managed through the diversification of the portfolio in terms of geographical and industry sectors and individual securities. To mitigate market risk, the Fund and its investment advisors undertake appropriate monitoring of market conditions and benchmark analysis.

The Fund manages these risks in two ways:

- the exposure of the fund to market risk is monitored through a factor risk analysis, to ensure that risk remains within tolerable levels

- specific risk exposure is limited by applying risk-weighted maximum exposures to individual investments.

Equity futures contracts and exchange traded option contracts on individual securities may also be used to manage market risk on equity investments. It is possible for over-the-counter equity derivative contracts to be used in exceptional circumstances to manage specific aspects of market risk.

Other price risk

Other price risk represents the risk that the value of a financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or foreign exchange risk), whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all such instruments in the market.

The Fund is exposed to share and derivative price risk. This arises from investments held by the fund for which the future price is uncertain. All securities investments present a risk of loss of capital. Except for shares sold short, the maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. Possible losses form shares sold short is unlimited.

The Fund’s investment managers mitigate this price risk through diversification and the selection of securities and other financial instruments is monitored by the fund to ensure it is within limits specified in the Fund’s investment strategy.

Other price risk – sensitivity analysis

Following analysis of historical data and expected investment return movement during the financial year, in consultation with the Fund’s investment advisors, the Fund has determined that the following movements in market price risk are reasonably possible for the 2020/21 reporting period:

Asset Type	Potential Market Movements (+/-)
Index Linked	12%
Other Bonds	5%
UK Equities	20%
Global Equities	21%
Absolute Return	13%
Pooled Property Investments	13%
Private Equity	30%
Infrastructure Funds	12%

The potential price changes disclosed above are broadly consistent with a one-standard deviation movement in the value of the assets. The sensitivities are consistent with the assumptions contained in the investment advisors’ most recent review. This analysis assumes that all other variables, in particular foreign currency exchange rates and interest rates, remain the same.

Had the market price of the Fund investments increased/decreased in line with the above, the change in the net assets available to pay benefits in the market price would have been as follows.

Asset Type	Values at 31 March 2021	Value on increase	Value on decrease
	£000	£000	£000
Index Linked	128,765	143,573	113,957
Other Bonds	485,996	512,310	459,682
UK Equities	825,342	990,410	660,274
Global Equities	1,039,492	1,257,785	821,199
Absolute Return	1,002,298	1,127,585	877,011
Pooled Property Investments	319,533	361,072	277,994
Private Equity	264,039	343,251	184,827
Infrastructure Funds	108,525	121,548	95,502
Net Derivative Assets	-	-	-
Total assets available to pay benefits	4,173,990	4,857,534	3,490,446

Asset Type	Values at 31 March 2020	Value on increase	Value on decrease
	£000	£000	£000
Index Linked	212,331	231,441	193,221
Other Bonds	413,943	443,397	384,489
UK Equities	221,992	284,150	159,834
Global Equities	1,110,605	1,421,574	799,636
Absolute Return	833,253	949,908	716,598
Pooled Property Investments	318,129	362,031	274,227
Private Equity	228,472	292,444	164,500
Infrastructure Funds	62,941	75,529	50,353
Net Derivative Assets	-	-	-
Total assets available to pay benefits	3,401,666	4,060,474	2,742,858

Interest rate risk

The Fund invests in financial assets for the primary purpose of obtaining a return on investments. These investments are subject to interest rate risks, which represent the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Fund’s interest rate risk is routinely monitored by the Fund and its investment advisors in accordance with the risk management strategy, including monitoring the exposure to interest rates and assessment of actual interest rates against the relevant benchmarks.

The Fund’s direct exposure to interest rate movements as at 31 March 2021 and 31 March 2020 is set out below. These disclosures present interest rate risk based on the underlying financial assets at fair value.

Interest rate risk sensitivity analysis

The Fund recognises that interest rates can vary and can affect both income to the Fund and the value of the net assets available to pay benefits. A 100 basis point (bps) movement in interest rates is consistent with the level of sensitivity applied as part of the Fund's risk management strategy. The Fund's investment adviser has advised that this is consistent with an annual one standard deviation move in interest rates, where interest rates are determined by the prices of fixed interest UK government bonds.

The analysis that follows assumes that all other variables, in particular exchange rates, remain constant, and shows the effect in the year on the net assets available to pay benefits of a +/- 100 bps change in interest rates:

Asset type	Carrying amount as at 31 March 2021	Impact of 1% increase	Impact of 1% decrease
	£000	£000	£000
Cash and cash equivalents	56,736	56,736	56,736
Cash balances	1,560	1,560	1,560
Fixed interest securities	485,996	490,856	481,136
Index linked securities	128,765	128,765	128,765
Total change in assets available	673,057	677,917	668,197

Asset type	Carrying amount as at 31 March 2020	Impact of 1% increase	Impact of 1% decrease
	£000	£000	£000
Cash and cash equivalents	63,715	63,715	63,715
Cash balances	1,746	1,746	1,746
Fixed interest securities	413,943	418,082	409,804
Index linked securities	212,331	212,331	212,331
Total change in assets available	691,735	695,874	687,596

Income Source	Interest receivable 2020/21	Value on 1% increase	Value on 1% decrease
	£000	£000	£000
Cash deposits/cash and cash equivalents	1,869	2,452	1,286
Fixed interest securities	14,072	14,072	14,072
Index linked securities	122	1,410	(1,166)
Total change in assets available	16,063	17,934	14,192

Income Source	Interest receivable 2019/20	Value on 1% increase	Value on 1% decrease
	£000	£000	£000
Cash deposits/cash and cash equivalents	673	1,328	18
Fixed interest securities	6,665	6,665	6,665
Index linked securities	169	2,292	(1,954)
Total change in assets available	7,507	10,285	4,729

This analysis demonstrates that a 1% increase in interest rates will not affect the interest received on fixed interest assets but will reduce their fair value, and vice versa. Changes in interest rates do not impact on the value of cash/cash equivalent balances but they will affect the interest income received on those balances.

Currency risk

Currency risk represents the risk that future cash flows will fluctuate because of changes in foreign exchange rates. The Fund is exposed to currency risk on any cash balances and investment assets not denominated in pound sterling. Following analysis of historical data in consultation with the Fund investment advisors, the Fund considers the likely volatility associated with foreign exchange rate movements not more than 10%. A 10% strengthening/weakening of the pound against the various currencies in which the Fund holds investments would increase/decrease the net assets available to pay benefits as follows:

Currency exposure - asset type	Values at 31 March 2021	Potential Market movement	Value on increase	Value on decrease
	£000	£000	£000	£000
Overseas unit trusts	2,326,940	225,713	2,552,653	2,101,227
Total change in assets available	2,326,940	225,713	2,552,653	2,101,227

Currency exposure - asset type	Values at 31 March 2020	Potential Market movement	Value on increase	Value on decrease
	£000	£000	£000	£000
Overseas unit trusts	2,182,959	218,296	2,401,255	1,964,663
Total change in assets available	2,182,959	218,296	2,401,255	1,964,663

b) Credit risk

Credit risk represents the risk that the counterparty to a transaction or a financial instrument will fail to discharge an obligation and cause the Fund to incur a financial loss. The market values of investments generally reflect an assessment of credit in their pricing and consequently the risk of loss is implicitly provided for in the carrying value of the Fund’s financial assets and liabilities.

In essence, the Fund’s entire investment portfolio is exposed to some form of credit risk, with the exception of the derivatives positions, where the risk equates to the net market value of a positive derivative position. However, the selection of high quality counterparties, brokers and financial institutions minimise credit risk that may occur through the failure to settle a transaction in a timely manner.

Contractual credit risk is represented by the net payment or receipts that remains outstanding, and the cost of replacing the derivative position in the event of a counterparty default. The residual risk is minimal due to the various insurance policies held by the exchanges to cover defaulting counterparties.

Credit risk on over-the-counter derivative contracts is minimised as counterparties are recognised financial intermediaries with acceptable credit ratings determined by a recognised rating agency.

The Fund believes it has managed its exposure to credit risk, and has had no experience of default or uncollectable deposits in recent years.

Summary	Asset value as at 31 March 2020	Asset value as at 31 March 2021
	£000	£000
UK Treasury bills	86	-
Overseas Treasury bills		23,531
Bank current accounts
NT custody cash accounts	63,629	33,205
Total overseas assets	63,715	56,736

c) Liquidity risk

Liquidity risk represents the risk that the Fund will not be able to meet its financial obligations as they fall due. The fund therefore takes steps to ensure that the Fund has adequate cash resources to meet its commitments. This will particularly be the case for cash from the cash flow matching mandates from the main investment strategy to meet the pensioner payroll costs; and also cash to meet investment commitments.

The Fund has immediate access to its cash holdings and the Fund also has access to an overdraft facility for short-term cash needs. This facility is only used to meet timing differences on pension payments. As these borrowings are of a limited short-term nature, the Fund’s exposure to liquidity risk is considered negligible.

All financial liabilities at 31 March 2021 are due within one year.

Refinancing risk

The key risk is that the Fund will be bound to replenish a significant proportion of its pension Fund financial instruments at a time of unfavourable interest rates. The Fund does not have any financial instruments that have a refinancing risk as part of its treasury management and investment strategies.

19: Funding arrangements

Introduction

The last full triennial valuation of the East Sussex County Council Pension Fund (the Fund) was carried out as at 31 March 2019 as required under Regulation 62 of the Local Government Pension Scheme Regulations 2013 (the Regulations) and in accordance with the Funding Strategy Statement of the Fund. The results were published in the triennial valuation report dated 31 March 2020.

Asset value and funding level

The results for the Fund at 31 March 2019 were as follows:

· The market value of the Fund’s assets as at 31 March 2019 was £3,633m.

· The Fund had a funding level of 107% i.e. the value of assets for valuation purposes was 107% of the value that they would have needed to be to pay for the benefits accrued to that date, based on the assumptions used. This corresponded to a surplus of £247m.

Contribution rates

The employer contributions rates, in addition to those paid by the members of the Fund, are set to be sufficient to meet:

· the annual accrual of benefits allowing for future pay increases and increases to pensions in payment when these fall due;

· plus an amount to reflect each participating employer’s notional share of the Fund’s assets compared with 100% of their liabilities in the Fund, in respect of service to the valuation date.

The primary rate of contribution on a whole Fund level was 18.0% of payroll p.a. The primary rate as defined by Regulation 62(5) is the employer’s share of the cost of benefits accruing in each of the three years beginning 1 April 2020.

In addition, each employer pays a secondary contribution as required under Regulation 62(7) that when combined with the primary rate results in the minimum total contributions. This secondary rate is based on their particular circumstances and so individual adjustments are made for each employer.

Details of each employer’s contribution rate are contained in the Rates and Adjustments Certificate in Appendix 3 of the triennial valuation report.

Assumptions

The key assumptions used to value the liabilities at 31 March 2019 are summarised below:

Assumptions	Assumptions used for the 2019 valuation
Assumptions	Assumptions used for the 2019 valuation
Financial assumptions
Market date	31 March 2019
CPI inflation	2.3% p.a.
Long-term salary increases	2.3% p.a.
Discount rate	4.0% p.a.
Demographic assumptions
Post-retirement mortality
Base tables	Based on Club Vita analysis
Projection model	CMI 2018
Long-term rate of improvement	1.25% p.a.
Smoothing parameter	7.0
Initial addition to improvements Males Females	0.5% p.a. 0.25% p.a.

Full details of the demographic and other assumptions adopted as well as details of the derivation of the financial assumptions used can be found in the 2019 valuation report.

Updated position since the 2019 valuation

Update to funding basis and assumptions

The Fund appointed a new fund actuary with effect from 1 January 2021. For employers commencing participation in the Fund on or after 1 January 2021, the calculated contribution rate will be set to meet a funding target over a specified time horizon. The funding target is set based on a single set of financial assumptions. These assumptions are set so as to achieve broad consistency with the previous fund actuary’s approach.

With effect from 1 January 2021, the salary growth assumption was reviewed and salaries are now assumed to increase at CPI plus 1.0% p.a. with no additional promotional salary scale. The derivation of CPI is discussed below.

We have updated the derivation of the CPI inflation assumption to be 0.8% p.a. below the 20 year point on the Bank of England (BoE) implied inflation curve. The assumption adopted at the 2019 valuation was that CPI would be 1.0% p.a. below the 20 year point on the BoE implied inflation curve. This update was made following the Government’s response (on 25 November 2020) to the consultation on the reform of RPI, and the expectation that the UK Statistics Authority will implement the proposed changes to bring RPI in line with CPIH from 2030. This updated approach leads to a small increase in the value of liabilities.

The discount rate assumption is set with reference to the Fund’s long term investment strategy and therefore reflects the long term expected return on assets for the Fund. We have included in the discount rate assumption an explicit prudence allowance of 1.1%. This incorporates an allowance for current uncertainties in LGPS benefits (relating to the effects of the McCloud/Sargeant judgement and the cost cap).

Liabilities

The key assumption which has the greatest impact on the valuation of liabilities is the real discount rate (the discount rate relative to CPI inflation) – the higher the real discount rate the lower the value of liabilities. As at 31 March 2021, the real discount rate is estimated to be lower than at the 2019 valuation due to lower future expected returns on assets in excess of CPI inflation.

The update to the CPI assumption mentioned above leads to a small increase in the value of liabilities. The value of liabilities will also have increased due to the accrual of new benefits net of benefits paid.

It is currently unclear what the impact of the COVID-19 pandemic is on the Fund’s funding position. It is expected that COVID-related deaths will not have a material impact on the Fund’s current funding level, however, impact on future mortality rates may be more significant and we will be reviewing the Fund’s mortality assumption as part of the next valuation.

Assets

Returns over the year to 31 March 2021 have been strong, helping to offset the significant fall in asset values at the end of the previous year. As at 31 March 2021, in market value terms, the Fund assets were more than where they were projected to be based on the previous valuation.

Overall position

On balance, we estimate that the funding position (allowing for the revised funding basis) has improved compared to the funding position as at 31 March 2019.

Future investment returns that will be achieved by the Fund in the short term are more uncertain than usual, in particular the return from equites due to actual and potential reductions and suspensions of dividends.

There is also uncertainty around future benefits due to the McCloud/Sargeant cases and the cost cap process.

The Fund could opt to monitor the funding level using LGPS Monitor on a regular basis.

20: Actuarial present value of promised retirement benefits

Introduction

We have been instructed by East Sussex County Council, the administering authority to the East Sussex County Council Pension Fund (the Fund), to undertake pension expense calculations in respect of pension benefits provided by the Local Government Pension Scheme (the LGPS) to members of the Fund as at 31 March 2021. We have taken account of current LGPS Regulations, as amended, as at the date of this report.

This report is addressed to the administering authority and its advisers; in particular, this report is likely to be of relevance to the Fund’s auditor.

This is the first accounting period for which the report has been prepared by Barnett Waddingham LLP; previous disclosures were prepared by Hymans Robertson LLP and we have relied on those disclosures as being accurate in the preparation of this report.

These figures are prepared in accordance with our understanding of IAS26. In calculating the disclosed numbers we have adopted methods and assumptions that are consistent with IAS19.

This advice complies with Technical Actuarial Standard 100: Principles for Technical Actuarial Work (TAS 100).

The LGPS is a defined benefit statutory scheme administered in accordance with the Local Government Pension Scheme Regulations 2013 and currently provides benefits based on career average revalued earnings.

An allowance was made for the potential impact of the McCloud & Sargeant judgement in the results provided to the Fund at the last accounting date and therefore is already included in the starting position for this report. This allowance is therefore incorporated in the roll forward approach and is remeasured at the accounting date along with the normal LGPS liabilities.

Valuation data

Data sources

In completing our calculations for pension accounting purposes we have used the following items of data, which we received from East sussex County Council:

· The results of the valuation as at 31 March 2019 which was carried out for funding purposes and the results of the 31 March 2020 IAS26 report which was prepared for accounting purposes;

· Estimated whole Fund income and expenditure items for the period to 31 March 2021;

· Estimated Fund returns based on Fund asset statements provided (or estimated where necessary) as at 31 March 2019, 31 March 2020 and 31 March 2021; and

· Details of any new early retirements for the period to 31 March 2021 that have been paid out on an unreduced basis, which are not anticipated in the normal service cost.

Although some of these data items have been estimated, we do not believe that they are likely to have a material effect on the results of this report. Further, we are not aware of any material changes or events since we received the data. The data has been checked for reasonableness and we are happy that the data is sufficient for the purposes of this advice.

Fund membership statistics

The table below summarises the membership data, as at 31 March 2019.

Member data summary	Number	Salaries/Pensions £000	Average age
Active members	22,718	414,051	52
Deferred pensions	36,094	43,738	51
Pensioners	20,328	102,766	69

The average ages shown are weighted by liability.

Early retirements

We requested data on any early retirements in respect of the Fund from the administering authority for the year ending 31 March 2021.

We have been notified of 105 new early retirements during the year which were not allowed for at the previous accounting date. The total annual pension that came into payment was £1,012,200.

Assets

The return on the Fund (on a bid value to bid value basis) for the year to 31 March 2021 is estimated to be 22.56%. The actual return on Fund assets over the year may be different.

The estimated asset allocation for East Sussex County Council Pension Fund as at 31 March 2021 is as follows:

Asset breakdown	31 Mar 2021		31 Mar 2020
	£000s	%	£000s	%
Equities	3,227,118	76%	2,460,325	71%
Bonds	627,339	15%	589,092	17%
Property	319,533	8%	346,525	10%
Cash	70,882	2%	69,305	2%
Total	4,244,872	100%	3,465,246	100%

We have estimated the bid values where necessary. The final asset allocation of the Fund assets as at 31 March 2021 may be different from that shown due to estimation techniques.

Unfunded benefits

We have excluded any unfunded benefits as these are liabilities of employers rather than the Fund.

Actuarial methods and assumptions

Valuation approach

To assess the value of the Fund’s liabilities at 31 March 2021, we have rolled forward the value of Fund’s liabilities calculated for the funding valuation as at 31 March 2019, using financial assumptions that comply with IAS19.

A full actuarial valuation involved projecting future cashflows to be paid from the Fund and placing a value on them. These cashflows include pensions currently being paid to members of the Fund as well as pensions (and lump sums) that may be payable in future to members of the Fund or their dependants. These pensions are linked to inflation and will normally be payable on retirement for the life of the member or a dependant following a member’s death.

It is not possible to assess the accuracy of the estimated liability as at 31 March 2021 without completing a full valuation. However, we are satisfied that the approach of rolling forward the previous valuation data to 31 March 2021 should not introduce any material distortions in the results provided that the actual experience of the Fund has been broadly in line with the underlying assumptions, and that the structure of the liabilities is substantially the same as at the latest formal valuation. From the information we have received there appears to be no evidence that this approach is inappropriate.

This has been updated since the last accounting date when the results were based on a continuation of the roll forward from the 31 March 2016 funding valuation.

Experience items allowed for since the previous accounting date

Experience items arise due to differences between the assumptions made as part of the roll forward approach and actual experience. This includes (but is not limited to) assumptions made in respect of salary increases, pension increases, mortality, and member transfers. We have allowed for actual pension increase experience for the period from 2019-2021. This assumes that pension increases are in line with the annual pension increases set by HM Treasury Revaluation Order.

As a result of allowing for actual experience, an experience item is observed in the reconciliation to 31 March 2021, as shown in the Asset and benefit obligation reconciliation for the year to 31 March 2021 below.

Guaranteed Minimum Pension (GMP) Equalisation

As a result of the High Court’s recent Lloyds ruling on the equalisation of GMPs between genders, a number of pension schemes have made adjustments to accounting disclosures to reflect the effect this ruling has on the value of pension liabilities. It is our understanding that HM Treasury have confirmed that the judgement “does not impact on the current method used to achieve equalisation and indexation in public service pension schemes”. More information on the current method of equalisation of public service pension schemes can be found here Consultation on indexation and equalisation of GMP in public service pension schemes - GOV.UK (www.gov.uk)

On 22 January 2018, the Government published the outcome to its Indexation and equalisation of GMP in public service pension schemes consultation, concluding that the requirement for public service pension schemes to fully price protect the GMP element of individuals’ public service pension would be extended to those individuals reaching State Pension Age (SPA) before 6 April 2021. HM Treasury published a Ministerial Direction on 4 December 2018 to implement this outcome, with effect from 6 April 2016. Details of this outcome and the Ministerial Direction can be found here Indexation of public service pensions - GOV.UK (www.gov.uk).

The valuation assumption for GMP is that the Fund will pay limited increases for members that have reached SPA by 6 April 2016, with the Government providing the remainder of the inflationary increase. For members that reach SPA after this date, we have assumed that the Fund will be required to pay the entire inflationary increase. Therefore we do not believe we need to make any adjustments to the value placed on the liabilities as a result of the above outcome.

Demographic/Statistical assumptions

We have adopted a set of demographic assumptions that are consistent with those used for the most recent Fund valuation, which was carried out as at 31 March 2019, except for the CMI projection model. The post retirement mortality tables have been constructed based on Club Vita analysis. These base tables are projected using the CMI_2020 Model, with a long-term rate of improvement of 1.25% p.a., smoothing parameter of 7.0, an initial addition parameter of 0.5% p.a. for males and 0.25% p.a. for females, and a 2020 weighting of 25%.

Although the post retirement mortality tables adopted are consistent with the previous accounting date, the mortality improvement projection has been updated to use the latest version of the Continuous Mortality Investigation’s model, CMI_2020, which was released in March 2021. This update has been made in light of the coronavirus pandemic and reflects the latest information available from the CMI. The new CMI_2020 Model introduces a “2020 weight parameter” for the mortality data in 2020 so that the exceptional mortality experienced due to the coronavirus pandemic can be incorporated without having a disproportionate impact on results.

Our view is that placing too much weight on the 2020 mortality experience would not be appropriate given the abnormality of the 2020 data, however, the overall outlook for best-estimate future mortality improvements looks less positive as a result of the pandemic. Therefore we have updated to use the CMI_2020 Model with a 2020 weight parameter of 25%. At the last accounting date, the CMI_2018 Model was adopted. The effect on the Employer’s liabilities of updating to the most recent model is reflected in the Change in demographic assumptions figure in the Asset and benefit obligation reconciliation for the year to 31 March 2021 below, and the effect on the assumed life expectancies is demonstrated in the table below.

The assumed life expectations from age 65 are:

Life expectancy from age 65 (years)	31 Mar 2021 (after CMI_2020 update)	31 Mar 2021 (before CMI_2020 update)
Retiring today
Males	21.1	21.4
Females	23.7	23.9
Retiring in 20 years
Males	21.9	22.4
Females	25.0	25.2

We have also assumed that:

· Members will exchange half of their commutable pension in respect of pre-April 2008 service and 75% of their commutable pension in respect of their post 2008 service, for cash at retirement. For every £1 of pension that members commute, they will receive a cash payment of £12 as set out in the Regulations;

· Members retire following the retirement age pattern assumption as specified by the Scheme Advisory Board for preparing Key Performance Indicators.; and

· 1% of active members will take up the option to pay 50% of contributions for 50% of benefits.

Financial assumptions

The financial assumptions used to calculate the results in the Appendices are as follows:

Year ended	31 Mar 2021	31 Mar 2020
Year ended	% p.a.	% p.a.
Discount Rate	1.95%	2.30%
Pension Increase Rate	2.85%	1.90%
Salary Increase rate	2.85%	1.90%

These assumptions are set with reference to market conditions at 31 March 2021.

Our estimate of the Fund’s past service liability duration is 17 years.

An estimate of the Fund’s future cashflows is made using notional cashflows based on the estimated duration above. These estimated cashflows are then used to derive a Single Equivalent Discount Rate (SEDR). The discount rate derived is such that the net present value of the notional cashflows, discounted at this single rate, equates to the net present value of the cashflows, discounted using the annualised Merrill Lynch AA rated corporate bond yield curve (where the spot curve is assumed to be flat beyond the 30 year point). At the previous accounting date a “Hymans Robertson” corporate bond yield curve was constructed based on the constituents of the iBoxx AA corporate bond index.

Similar to the approach used to derive the discount rate, the Retail Prices Index (RPI) increase assumption is set using a Single Equivalent Inflation Rate (SEIR) approach, using the notional cashflows described above. The single inflation rate derived is that which gives the same net present value of the cashflows, discounted using the annualised Merrill Lynch AA rated corporate bond yield curve, as applying the BoE implied inflation curve. As above, the Merrill Lynch AA rated corporate bond yield spot curve is assumed to be flat beyond the 30 year point and the BoE implied inflation spot curve is assumed to be flat beyond the 40 year point. At the previous accounting date cashflow weighted single RPI rates were derived from the market implied inflation curve that recognise the weighted average duration of each corresponding duration category defined in the accounting disclosure.

The BoE implied inflation curve may suggest a higher rate of inflation, over longer terms, than actually expected by market participants due to a willingness to accept a lower return on investments to ensure inflation linked returns. To reflect this, we include an Inflation Risk Premium (IRP) adjustment such that our assumed level of future annual RPI increase is 0.25% p.a. lower than the SEIR calculated using the BoE inflation curve alone. This differs from the previous accounting date. The impact of this change in derivation on the liability value is shown in the Asset and benefit obligation reconciliation for the year to 31 March 2021 below.

As future pension increases are expected to be based on the Consumer Prices Index (CPI) rather than RPI, we have made a further assumption about CPI which is that it will be 0.40% p.a. below RPI i.e. 2.85% p.a. We believe that this is a reasonable estimate for the future differences in the indices, based on the different calculation methods, recent independent forecasts and the duration of the Fund’s liabilities. The difference between RPI and CPI is less than assumed at the previous accounting date. This reflects the movement in market implied RPI inflation that occurred following the UK Statistics Authority’s proposal to change how RPI is calculated and subsequent announcements from the Chancellor on the issue. The impact of this change in derivation on the liability value is shown in the Asset and benefit obligation reconciliation for the year to 31 March 2021 below.

Salaries are assumed to increase at 0.0% p.a. above CPI. This is consistent with the approach at the previous accounting date.

Results and disclosures

We estimate that the net liability as at 31 March 2021 is a liability of £1,364,741,000.

The results of our calculations for the year ended 31 March 2021 are set out below.

The figures presented in this report are prepared only for the purposes of FRS102. In particular, they are not relevant for calculations undertaken for funding purposes or for other statutory purposes under UK pensions legislation.

Statement of financial position as at 31 March 2021

Net pension asset as at	31 Mar 2021 £000s
Present value of defined benefit obligation	5,609,613
Fair value of Fund assets (bid value)	4,244,872
Deficit / (Surplus)	1,364,741
Present value of unfunded obligation	-
Unrecognised past service cost	-
Impact of asset ceiling	-
Net defined benefit liability / (asset)	1,364,741

*Present value of funded obligation consists of £5,607,717,000 in respect of vested obligation and £0 in respect of non-vested obligation.

Asset and benefit obligation reconciliation for the year to 31 March 2021

Reconciliation of opening & closing balances of the present value of the defined benefit obligation	31 Mar 2021 £000s
Opening defined benefit obligation	4,378,000
Current service cost	151,881
Interest cost	99,610
Change in financial assumptions	1,202,783
Change in demographic assumptions	(71,775)
Experience loss/(gain) on defined benefit obligation	(55,900)
Liabilities assumed / (extinguished) on settlements	-
Estimated benefits paid net of transfers in	(128,225)
Past service costs, including curtailments	3,809
Contributions by Scheme participants	29,430
Unfunded pension payments	-
Closing defined benefit obligation	5,609,613

The change in financial assumptions item includes the change in derivation of future assumed RPI and CPI inflation as noted above. These changes have resulted in a gain of £3,382,820,000 on the defined benefit obligation; comprising a gain of £410,211,000 from the change in assumed IRP and a gain of £2,972,609,000 from the change in the assumed gap between RPI and CPI inflation.

Reconciliation of opening & closing balances of the fair value of Fund assets	31 Mar 2021 £000s
Opening fair value of Fund assets	3,465,246
Interest on assets	79,719
Return on assets less interest	701,817
Other actuarial gains/(losses)	-
Administration expenses	(3,496)
Contributions by employer including unfunded	100,381
Contributions by Scheme participants	29,430
Estimated benefits paid plus unfunded net of transfers in	(128,225)
Settlement prices received / (paid)	-
Closing Fair value of Fund assets	4,244,872

The total return on the Fund’s assets for the year to 31 March 2021 is £781,536,000.

Sensitivity Analysis

Sensitivity Analysis	Approximate % increase to liabilities	Approximate monetary amount (£m)
0.5% increase in pensions increase rate	5,609,613
Sensitivity to	+0.1%	-0.1%
Discount rate	5,514,731	5,706,223
Long term salary increase	5,618,061	5,601,211
Pension increases and deferred revaluation	5,696,828	5,523,865
Sensitivity to	+1 Year	- 1 Year
Life expectancy assumptions	5,879,433	5,352,534

21: Current assets

	31 March 2020	31 March 2021
	£000	£000
Other Investment Balances
Sales inc Currency	-	-
Investment Income Due	193	82
Recoverable Taxes	147	275
Total	340	357

	31 March 2020	31 March 2021
	£000	£000
Current Assets
Contributions receivable from employers and employees	13,436	10,870
Sundry Debtors	1,440	3,245
Cash	1,746	1,560
Total	16,622	15,675

22: Current liabilities

	31 March 2020	31 March 2021
	£000	£000
Investment Liabilities
Purchases including currency	-	-
Managers Fees	(475)	(775)
Total	(475)	(775)

	31 March 2020	31 March 2021
	£000	£000
Current Liabilities
Pension Payments (inc Lump Sums)	(264)	(184)
Cash	-	-
Professional Fees	(434)	(64)
Administration Recharge	(1,194)	(51)
Sundry Creditors	(882)	(1,649)
Total	(2,774)	(1,948)

23: Additional voluntary contributions

	Market value 31 March 2020	Market value 31 March 2021
	£000	£000
Prudential	21,221

The Pension Fund Scheme provides an Additional Voluntary Contribution (AVC) facility for scheme members. In 2020/21 the AVC provider changed some back office systems which have caused them unforeseen complications and have been unable to provide the Pension Fund Scheme with information as at 31 March 2021.

Information relating to the values at the 31 March 2020 are provided here. Some members of the pension scheme paid voluntary contributions and transfers in of £2.277m to Prudential to buy extra pension benefits when they retire. £3.050m was disinvested from the AVC provider in 2019/20. Contributions and benefits to scheme members are made directly between the scheme member and the AVC provider. The AVC funds are not, therefore, included in the Pension Fund Accounts.

24: Agency Services

The East Sussex Pension Fund pays discretionary awards to former employees on behalf of some employers in the Fund. The amounts paid are provided as a service and are fully reclaimed from the employer bodies. The sums are disclosed below.

	2019/20	2020/21
	£000	£000
East Sussex County Council	4,899	4,793
Brighton & Hove City Council	2,291	2,261
Eastbourne Borough Council	304	308
Magistrates	209	212
Hastings Borough Council	174	175
Wealden District Council	176	174
Rother District Council	115	111
Lewes District Council	73	71
South East Water	35	29
Brighton University	26	24
Mid-Sussex District Council	19	19
Westminster (used to be LPFA)	18	18
East Sussex Fire Authority	17	17
Capita Hartshead	16	14
London Borough of Camden	7	7
London Borough of Southwark	6	6
The Eastbourne Academy	6	6
West Midlands Pension Fund	5	5
West Sussex County Council	4	4
Torfaen Borough Council	4	4
Sussex University	3	3
Varndean College	2	2
London Borough of Ealing	2	2
East Sussex College Group	1	1
Plumpton College	1	1
Eastbourne Homes*	6	-
Newhaven TC	1	-
Total	8,420	8,267

* Eastbourne Homes liabilities have been included in the Eastbourne Borough Council figures for 2020/21.

25: Related party transactions

East Sussex County Council

The East Sussex Pension Fund is administered by East Sussex County Council. Consequently, there is a strong relationship between the Council and the Pension Fund.

Each member of the Pension Committee is required to declare their interests at each meeting.

The Treasurer of the Pension Fund, and Members of the County Council and the Pension Committee have no material transactions with the Pension Fund.

The Council incurred costs in administering the Fund and charged £1.9m to the Fund in 2020/21 (£1.2m in 2019/20). The Council`s contribution to the Fund was £43.0m in 2020/21 (£42.5 in 2019/20). All amounts due to the Fund were paid in the year. At 31 March 2021 the Pension Fund bank account held £1.6m in cash (£1.7m at 31 March 2020). The average throughout the year was £8.4m (£6.0 in 2019/20).

25a: Key management personnel

The Chief Finance Officer of East Sussex County Council holds the key position in the financial management of the East Sussex Pension Fund.

	31 March 2020	31 March 2021
	£000	£000
Short-term benefits	18	26
Post-employment benefits	3	5
Total	21	31

26: Contingent liabilities and contractual commitments

Outstanding capital commitments (investments) at 31 March 2021 totalled £232.3m (31 March 2020: £322.0m).

These commitments relate to outstanding call payments due on unquoted limited partnership funds held in the private equity and infrastructure parts of the portfolio. The amounts ‘called’ by these funds are irregular in both size and timing, typically over a period of between four and six years from the date of each original commitment.

At 31 March 2021, the unfunded commitment was £122.0m for private equity, £91.6m for infrastructure and £18.7 for private debt. The commitments are paid over the investment timeframe of the underlying partnerships. As these partnerships mature they are due to distribute capital back to investors. Commitments are made in US Dollars or Euros and the figures presented here are based on relevant Sterling exchange rates as at 31 March 2021.

Exit Payments

There were 6 employers whose contracts were due to end by the 31 March 2021 where an exit credit may need to be paid out. The Fund needs to obtain final information from the employers and then will need to commission the final cessation report from the actuaries to ascertain if an exit payment is due for these employers.

GMP Reconciliation Project

The Guaranteed Minimum Pension (GMP) Reconciliation project was split into number stages for Local Government Pension Schemes (LGPS). The Fund has completed the discovery and GMP reconciliation phases, which reviewed data inconsistencies, raised issues with HMRC and agreed outcomes. GMP elements of LGPS pension where State Pension Age is prior to 6 April 2016 has not increased in respect of the period 6 April 1978 to 5 April 1988. While the Post 1988 GMP element in respect of the period 6 April 1988 to 5 April 1997 might be increased up to a maximum of 3% p.a. The Government increase the State Pension for the member fully on the Pre 1988 GMP element and for Post 1988 GMP element has only increased if CPI is above 3% p.a.

The effect of LGPS pensions not showing the correct amount of GMP for its members would mean that their pension might be increased incorrectly. This can result in underpayments and overpayments, at a member specific level. The next stage which is GMP Rectification, will amend LGPS pensions in line with the reconciled GMP information. Rectification will also involve a significant member communication exercise to explain the changes taking place.

HMRC have only recently provided the final reports required to complete the reconciliation so this means that the rectification stage has been delayed until now. The contracted provider Mercer are currently commencing the rectification project with the aim of completing the project by the 31st October 2021 at the latest. As such, we are unable to quantify the under/overpayment liability values as at 31 March 2021

27: Contingent assets

There are 9 admitted body employers in the Fund that hold insurance bonds to guard against the possibility of them 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. In addition to these bonds, pension’s obligations in respect of 12 other admitted bodies are covered by:

· 9 guarantees by local authorities participating in the Fund;

· 2 Parent company guarantee;

· 1 deposit held by East Sussex County Council

At 31 March 2021, the Fund has invested £354.5 million in private equity funds managed by Adams Street and HarbourVest. The Fund has also invested £41.3 million in the M&G real estate debt fund VI and £116.8 million in the infrastructure funds managed by UBS, Pantheon and Infracapital.

Following Rulings given by the European Court of Justice, along with a number of other local authority pension funds, the East Sussex Pension Fund is pursuing the recovery of tax paid on certain dividends. If successful, this may be of material benefit to the Fund. The amount, which may be recoverable, is not currently quantifiable.

28: Impairment losses

During 2020/21, the fund has not recognised any impairment losses.

29: East Sussex Pension Fund – Active Participating Employers

Employer Name	2020/21		2021/22		2022/23
Employer Name	Payroll %	Amount £(000)	Payroll %	Amount £(000)	Payroll %	Amount £(000)
Scheduled Bodies - Major Authorities
Brighton and Hove City Council	20.8	-	20.3	-	19.8	-
East Sussex County Council	17.6	6,141	17.6	5,568	17.6	4,966
East Sussex Fire and Rescue Service	17.9	164	17.9	137	17.9	109
Eastbourne Borough Council	19.9	-	19.4	-	18.9	-
Hastings Borough Council	17.6	538	17.6	508	17.6	476
Lewes District Council	24.1	-	23.6	-	23.1	-
Rother District Council	26.1	-	25.6	-	25.1	-
University of Brighton	18.2	-	17.7	-	17.2	-
Wealden District Council	17.6	576	17.6	538	17.6	499
Other Scheduled Bodies
Arlington Parish Council	22.1	-	21.6	-	21.1	-
Battle Town Council	22.1	-	21.6	-	21.1	-
Berwick Parish Council	22.1	-	21.6	-	21.1	-
Buxted Parish Council	22.1	-	21.6	-	21.1	-
Camber Parish council	22.1	-	21.6	-	21.1	-
Chailey Parish Council	22.1	-	21.6	-	21.1	-
Chiddingly Parish Council	22.2	-	21.6	-	21.1	-
Conservators of Ashdown Forest	22.1	-	21.6	-	21.1	-
Crowborough Town Council	22.1	-	21.6	-	21.1	-
Danehill Parish Council	22.1	-	21.6	-	21.1	-
Ditchling Parish Council	22.1	-	21.6	-	21.1	-
Fletching Parish Council	22.1	-	21.6	-	21.1	-
Forest Row Parish Council	22.1	-	21.6	-	21.1	-
Frant Parish Council	22.1	-	21.6	-	21.1	-
Hadlow Down Parish Council	22.1	-	21.6	-	21.1	-
Hailsham Town Council	22.1	-	21.6	-	21.1	-
Hartfield Parish Council	22.1	-	21.6	-	21.1	-
Heathfield & Waldron Parish Council	22.1	-	21.6	-	21.1	-
Herstmonceux Parish Council	22.1	-	21.6	-	21.1	-
Hurst Green Parish Council	22.1	-	21.6	-	21.1	-
Icklesham Parish Council	22.1	-	21.6	-	21.1	-
Isfield Parish Council	22.1	-	21.6	-	21.1	-
Lewes Town Council	22.1	-	21.6	-	21.1	-
Maresfield Parish Council	22.1	-	21.6	-	21.1	-
Newhaven Town Council	22.1	-	21.6	-	21.1	-
Newick Parish Council	22.1	-	21.6	-	21.1	-
Peacehaven Town Council	22.1	-	21.6	-	21.1	-
Pett Parish Council	22.1	-	21.6	-	21.1	-
Plumpton Parish Council	22.1	-	21.6	-	21.1	-
Ringmer Parish Council	22.1	-	21.6	-	21.1	-
Rye Town Council	22.1	-	21.6	-	21.1	-
Salehurst & Robertsbridge Parish Council	22.1	-	21.6	-	21.1	-
Seaford Town Council	22.1	-	21.6	-	21.1	-
Telscombe Town Council	22.1	-	21.6	-	21.1	-
Uckfield Town Council	22.1	-	21.6	-	21.1	-
Wartling Parish Council	22.1	-	21.6	-	21.1	-
Willingdon and Jevington Parish Council	22.1	-	21.6	-	21.1	-
Wivelsfield Parish Council	22.1	-	21.6	-	21.1	-
Academy Schools
Annecy Catholic Primary Academy	15.5	-	15.0	-	14.5	-
Aquinas Trust	21.0	-	20.5	-	20.0	-
ARK Schools Hastings	20.6	-	20.1	-	19.6	-
Aurora Academies Trust	20.4	-	19.9	-	19.4	-
Beacon Academy	23.0	-	22.5	-	22.0	-
Beckmead Ropemakers Academy	16.3	-	16.3	-	16.3	-
Bexhill Academy	22.9	-	22.4	-	21.9	-
Bilingual Primary School	15.6	-	15.1	-	14.6	-
Breakwater Academy	17.0	-	16.5	-	16.0	-
Burfield Academy (Hailsham Primary)	20.0	-	19.5	-	19.0	-
Cavendish Academy	20.5	-	20.0	-	19.5	-
Diocese of Chichester Academy Trust	24.4	-	23.9	-	23.4	-
Eastbourne Academy	21.2	-	20.7	-	20.2	-
Falmer (Brighton Aldridge Community Academy)	20.0	-	19.5	-	19.0	-
Gildredge House Free School	19.6	-	19.1	-	18.6	-
Glyne Gap Academy	21.4	-	20.9	-	20.4	-
Hailsham Academy	20.0	-	19.5	-	19.0	-
Hawkes Farm Academy	16.4	-	15.9	-	15.4	-
High Cliff Academy	20.0	-	19.5	-	19.0	-
Jarvis Brook Academy	14.5	-	14.0	-	13.5	-
King's Church of England Free School	16.2	-	15.7	-	15.2	-
Langney Primary Academy	13.4	-	12.9	-	12.4	-
Ore Village Academy	18.5	-	18.0	-	17.5	-
Parkland Infant Academy	14.8	-	14.3	-	13.8	-
Parkland Junior Academy	14.4	-	13.9	-	13.4	-
Peacehaven Academy	13.0	-	12.5	-	12.0	-
Pebsham Academy	19.5	-	19.0	-	18.5	-
Phoenix Academy	20.4	-	19.9	-	19.4	-
Portslade Aldridge Community Academy	19.9	-	19.4	-	18.9	-
King's Academy Ringmer	20.8	-	20.3	-	19.8	-
SABDEN Multi Academy Trust	23.6	-	23.1	-	22.6	-
Saxon Shore Academy	22.7	-	22.7	-	22.7	-
Seaford Academy	21.1	-	20.6	-	20.1	-
Seahaven Academy	21.5	-	21.0	-	20.5	-
Shinewater Primary Academy	14.5	-	14.0	-	13.5	-
Sir Henry Fermor Academy	14.8	-	14.3	-	13.8	-
The South Downs Learning Trust	12.2	-	11.7	-	11.2	-
The Southfield Trust	14.4	-	13.9	-	13.4	-
Torfield & Saxon Mount Academy Trust	22.6	-	22.1	-	21.6	-
University of Brighton Academies Trust	20.0	-	19.5	-	19.0	-
White House Academy	17.5	-	17.0	-	16.5	-
Colleges
Bexhill College	21.2	-	21.2	-	21.2	-
Brighton, Hove & Sussex Sixth Form College	19.8	-	19.8	-	19.8	-
East Sussex College Group	20.7	-	20.7	-	20.7	-
Plumpton College	18.9	-	18.9	-	18.9	-
Varndean Sixth Form College	19.8	-	19.8	-	19.8	-
Admission Bodies
BHCC - Wealden Leisure Ltd	33.0	11	33.0	-	33.0	-
Biffa Muncipal Ltd	28.8	-	28.8	-	28.8	-
Brighton and Hove CAB	0.00	-	0.0	-	0.0	-
Brighton Dome & Festival Limited (Music & Arts Service)	0.0	-	0.0	-	0.0	-
Care Outlook Ltd	0.0	-	0.0	-	0.0	-
Care Quality Commission	49.2	92	49.2	92	49.2	92
Churchill St Leonards	29.7	-	29.7	-	29.7	-
Churchill St Pauls	34.1	-	34.1	-	34.1	-
De La Warr Pavilion Charitable Trust	4.8	-	4.8	-	4.8	-
Eastbourne Homes - SEILL	19.2	-	19.2	-	19.2	-
East Sussex Energy, Infrastructure & Development Ltd (ESEIDL)	29.2	13	29.2	13	29.2	13
EBC - Towner	31.0	7	31.0	7	31.0	7
ESCC - NSL Ltd	3.6	-	3.6	-	3.6	-
Glendale Grounds Management Ltd	29.4	-	29.4	-	29.4	-
Grace Eyre	0.0	-	0.0	-	0.0	-
Halcrow Group Ltd	5.4	-	5.4	-	5.4	-
Just Ask Estates Ltd	32.6	3	32.6	-	32.6	-
Nviro Ltd	35.3	-	35.3	-	35.3	-
Optivo	45.8	920	45.8	920	45.8	920
Royal Pavilion & Museums Trust	17.8	-	17.8	-	17.8	-
Sussex County Sports Partnership	18.2	-	17.7	-	17.2	-
Sussex Housing & Care	0.0	-	0.0	-	0.0	-
Telent Technology Services Ltd	20.8	-	20.8	-	20.8	-
Wave Leisure - Newhaven Fort	0.0	-	0.0	-	0.0	-
Wave Leisure Trust Ltd	0.0	-	0.0	-	0.0	-
WDC - Wealden Leisure Ltd	33.0	-	33.0	-	33.0	-
Wealden Leisure Ltd - Portslade Sports Centre	0.0	-	0.0	-	0.0	-
White Rock Theatres Hastings Ltd	0.0	-	0.0	-	0.0	-

30: Investment Performance

The County Council uses an independent Investment performance measurement service, provided by Pensions & Investment Research Consultants Ltd (PIRC), which measures the performance of the Fund compared with 62 other local authority pension funds. Pension Fund investment is a long-term business so as well as showing the annual performance of the Fund, comparison to peers over longer periods is also detailed below.

Performance relative to the Fund’s strategic benchmark

	1 year (%)	3 years (%p.a.)	5 years (%p.a.)	10 years (%p.a.)
Fund	22.1	7.8	9.0	8.2
Benchmark	19.5	6.5	8.1	7.0
Relative*	2.6	1.3	1.0	1.2

Investment performance relative to peer group

	1 year (%)	3 years (%p.a.)	5 years (%p.a.)	10 years (%p.a.)
Fund	22.1	7.8	9.0	8.2
Local Authority Average	22.8	7.6	9.5	8.3
Relative*	(0.6)	0.2	(0.5)	(0.1)

The Fund underperformed the (weighted) average local authority fund over the year by 0.6% (1.3% outperformance 2019/20), ranking the East Sussex Fund in the 69 percentile (48^th 2019/20) in the local authority universe. Over three years the fund outperformed by 0.2% (inline 2019/20) and was placed in the 56 percentile (55^th 2019/20). Over five years the fund underperformed by 0.5% (0.1% outperformance in 2019/20) and was placed in the 67 percentile (37^th 2019/20). Over ten years the fund years, the fund underperformed by 0.1% (0.1% underperformance 2019/20) and was placed in the 54 percentile (45^th 2019/20).

*Relative performance is calculated on a geometric basis as follows:

( ( 1 + Fund Performance ) / ( 1 + Benchmark Performance ) ) - 1

As opposed to the simpler arithmetic method, the geometric method makes it possible to directly compare long-term relative performance with shorter-term relative performance.

Dept	£m	Description
ASC	45.7	Including £22.9m distributed to providers, £19.1m to secure timely hospital discharges, £1.9m on PPE and £1.6m on support to vulnerable and shielded groups delivered via the Community Hubs.
CSD	13.2	Key pressures included £3.7m placements costs, £1.6m activity relating to the Winter Grant Scheme, £1.4m income loss at Lansdowne residential children's home, £1.3m Home to Schools Transport, £0.9m support to schools for social distancing measures, £0.8m agency costs at Lansdowne, £0.6m incentivisation payments to Early Years providers, £0.5m Locality, £0.4m agency staffing in Brodrick Road, Homefield Cottage and Hazel Lodge residential children's homes and £0.4m Youth Homeless placements.
CET	6.0	The most significant pressures were in Transport and Operations where car parking income was down £2.5m. Increased collection volumes and the cost of reopening household waste sites with social distancing, resulted in a COVID-19 related overspend of £1.2m in the Waste service. The overspend of £0.7m in Customer, Libraries and Registration was mostly due to lost income from marriages and other ceremonies, income from Libraries, and reduced Road Safety training.
BSD	1.2	Additional expenditure was incurred, for example additional cleaning and staff, as well as the loss of income streams with HR&OD and Property due to closure of various premises. There was also a savings target within the Council’s contribution to Orbis, which has been delayed.
PH	0.7	Activity relating to Test & Trace, community mass testing and Contain Outbreak Management.
	66.8

Departments	Current Estimate	Actual Outturn	Variation
	£m	£m	£m
Adult Social Care	182.95	178.99	(3.96)
Public Health	-	-	-
Governance Services	6.95	6.89	(0.06)
Children's Services	88.14	88.73	0.59
Orbis	11.76	11.38	(0.38)
Business Services	12.28	12.68	0.40
Communities, Economy and Transport	59.08	57.78	(1.30)
Service Spend (incl. DSG Related)	361.16	356.45	(4.71)
Corporate Budgets	20.80	15.66	(5.14)
Transfers to Reserves	2.51	15.33	12.82
Treasury Management	18.24	15.52	(2.72)
Net Expenditure	402.71	402.96	0.25

Financed from:
Revenue Support Grant	(3.55)	(3.55)	-
Social Care Grant	(14.63)	(14.63)	-
Business Rate Retention	(12.11)	(12.11)	-
Business Rate Top-up	(62.77)	(62.77)	-
Business Rates Compensation Grants	(5.16)	(5.41)	(0.25)
Business Rate Pool	(1.63)	(1.63)	-
Business Rates adjustments for previous years	(0.35)	(0.35)	-
Council Tax	(300.87)	(300.87)	-
Council Tax adjustments for previous years	(0.88)	(0.88)	-
New Home Bonus Grant	(0.76)	(0.76)	-
	(402.71)	(402.96)	(0.25)

Balances:
Opening	10.00	10.00
Added / (withdrawn) during the year	-	-
Closing	10.00	10.00

	£m
Budget as per February 2020	100.5
Project re-profiling following reviews	(26.8)
Approved Variations	5.0
Budget as per February 2021	78.7
Post budget approved variations	2.6
Revised Budget as per March 2021	81.3

At 31 March 2020		At 31 March 2021
£m		£m
1,008,769	Long Term Assets (including Property, Plant & Equipment)	977,221
264,982	Current Assets (including debtors and short term investments)	346,459
(145,380)	Current Liabilities (including creditors and bank overdraft)	(147,884)
(742,757)	Long Term Liabilities	(884,687)
385,614	Net Assets	291,109

	Represented by:
166,913	Usable Reserves	234,847
218,701	Unusable Reserves	56,262
385,614	Total Reserves	291,109

What the relationship is between the body and the local authority	ESCC is a shareholder in TRICS Consortium Ltd. The Council has a 16.7% share - equal share with the five other county council shareholders
What is the structure and form of the body (e.g. private limited company etc)	TRICS is a local authority trading company. It has a board of directors (one from each of six counties that are shareholders plus a managing director). It is a private company limited by shares.
How the Council oversee its activities and provided assurance on its governance including financial governance	The ESCC nominated company director attends monthly board meetings to oversee the business of the company to ensure it is run to maximise the business for the benefit of ESCC. The ESCC Director shares the annual report with the relevant Head of Service.
What the relationship is between the body and individual councillors and whether councillor’s’ involvement is likely to constitute a conflict of interest	There is no relationship, aside from the Lead Member for Transport & Environment is updated on the work of TRICS through briefing meetings.
How can councillors scrutinise the activities of the body, in particular if it will fall within the remit of the audit or scrutiny committee, and if not, how else scrutiny will happen	The scrutiny of the work undertaken by the Body is through the planning process. The Council’s role within the TRICS consortium falls within the remit of the Places Scrutiny Committee.
Designated Officer contact	Alex Jack, Communities, Economy and Transport


Contents		Page



Narrative Report		4


Statement of Responsibilities for the Statement of Accounts		15


Independent Auditor’s Report to East Sussex County Council		16


Annual Governance Statement		19


Accounting Statements


	Comprehensive Income and Expenditure Statement	28


	Movement in Reserves Statement	29


	Balance Sheet	31


	Cash Flow Statement	32


Notes to the Accounting Statements		33


East Sussex Pension Fund Accounts		105


Glossary of Terms		140

	£m
Borrowing	32.5
Scheme Specific grants and contributions	24.4
Non-specific grants	20.9
Capital reserves and revenue contributions	5.8
Capital Receipts	6.9
Section 106 / Community Infrastructure Levy Target	1.6
Total resources	92.1

What the relationship is between the body and the local authority	ESCC is a Member of this company. This is a company without shares but in terms of "influence" ESCC has one seventh (14.3%).
What is the structure and form of the body (e.g. private limited company etc)	The Company is limited by guarantee.
How the Council oversee its activities and provided assurance on its governance including financial governance	ESCC receives copies of Woodland Enterprise Limited’s annual accounts. ESCC is required to disclose its interest in Woodland Enterprises in its own statements of accounts. A copy of the Woodland Enterprise Ltd annual accounts are requested each year and are included in the ESCC Statement of Accounts.
What the relationship is between the body and individual councillors and whether councillor’s’ involvement is likely to constitute a conflict of interest	The Council has appointed a councillor to serve as a Director on the Board of Woodland Enterprise Limited (Councillor Kirby-Green). There might be possible conflicts of interest (eg. grant funding from ESCC etc).
How can councillors scrutinise the activities of the body, in particular if it will fall within the remit of the audit or scrutiny committee, and if not, how else scrutiny will happen	The Council’s role within the Woodland Enterprise Limited consortium falls within the remit of the Place Scrutiny Committee
Designated Officer contact	Andy Fowler, Business Services

What the relationship is between the body and the local authority	East Sussex is a member of Sea Change Sussex, with Councillor Bennett sitting on the Board of Directors. The company members do not hold shares, but have a percentage voting right in the company. The County Council alongside Rother District Council and Hastings Borough Council a 19.9% voting right in ESEID Limited company. The University of Brighton have a 30.1% voting right and local businesses the remaining 50%. Sea Change Sussex is a delivery partner developing and managing key economic development and infrastructure schemes in East Sussex. The partner delivers capital infrastructure schemes which unlock housing and employment sites in the county – this includes new site infrastructure (access roads) as well as employment space. These schemes are largely funded by external funding from either the South East Local Enterprise Partnership (SELEP) - Local Growth Fund capital grant programme or the SELEP - Growing Places Fund (GPF) loan programme or the Getting Building Fund (GBF) capital grant programme that Sea Change Sussex has secured, alongside some of their own capital receipts from the sale of commercial properties/land in their portfolio. East Sussex County Council acts as the Local Accountable Body for overseeing the devolution of funds from the SELEP to external partners such as Sea Change Sussex and has contract agreements in place for each scheme awarded.
What is the structure and form of the body (e.g. private limited company etc)	Not-for-profit economic development company limited by guarantee
How the Council oversee its activities and provided assurance on its governance including financial governance	Councillor Bennett is the Council appointed Director of the Sea Change Sussex Board and, supported by senior officers, attends the quarterly Board meetings. These meetings provide quarterly reporting on legal commitments, operations and finance statement and updates on all individual projects. As a scheme promoter of LGF, GBF and GPF funded projects, Sea Change Sussex enters into legal agreements for the County Council to monitor the delivery of this public funding and report back to SELEP. The authority to enter into these agreements is sought from the Lead Member for Strategic Management and Economic Development. Sea Change Sussex are bound by the terms of individual Grant and Loan agreements stipulating the guidelines for which Sea Change must adhere to. East Sussex officers regularly meet with Sea Change Sussex representatives and attend project progress meetings for individual schemes, along with attendance and participation at the SELEP Programme progress meetings. The Section 151 Officer carries out the stewardship role in terms of monitoring and accounting in respect of the financial case within the overall business case and agreeing to the receipt of the funding. Capital Programme management of projects includes financial management of the public funds, monthly invoicing and spend review with the delivery partner. This information is used to inform quarterly reports to Team East Sussex (TES), and SELEP and within the County Council, quarterly reporting to the Departmental (CET) Capital Board and Corporate Strategic Asset Board. A report is considered by the Lead Member for Strategic Management and Economic Development annually on the year-end financial statement of public funding (e.g. SELEP Funding managed by ESCC (Local Growth Fund grants, Growing Places Fund loans, and more recently Getting Building Fund grant) invested in the delivery of the capital infrastructure delivered by Sea Change Sussex) and the forecast spend for the coming financial year, all of which are compiled with finance colleagues and signed off by S151 officer. Schemes can be subject to review by Internal Audit.
What the relationship is between the body and individual councillors and whether councillor’s’ involvement is likely to constitute a conflict of interest	Councillor Bennett is a member on the Sea Change Sussex Board of directors and attends the quarterly Board meetings. Councillor Bennett regularly attends TES and occasionally attends SELEP Board and SELEP Accountability Board meetings as a substitute for Councillor Keith Glazer. If an agenda item relating to projects delivered by Sea Change Sussex is on the agenda, a declaration of interest is declared and recorded in the minutes.
How can councillors scrutinise the activities of the body, in particular if it will fall within the remit of the audit or scrutiny committee, and if not, how else scrutiny will happen	Councillor Keith Glazier sits on both the SELEP Board and SELEP Accountability Board and regularly attends meetings. In his absence, a member of the Cabinet attends meetings. There are scrutiny arrangements in place for all funding decisions taken by the Accountability Board. Under the SELEP Assurance framework, the Places Scrutiny Committee has the power to call in and scrutinise the decisions before they are implemented. Under the SELEP Accountability Board Joint Committee Agreement, each of the six Partner Authorities has the ability to challenge a decision made by the SELEP Accountability Board. Accountability Board decisions may be called-in by members of any Partner Authority in the same way they call-in decisions of their own executive arrangements, call-in may only be made if the decision affects that partner area. The 6 upper tier Authority Areas that form the SELEP are East Sussex, Essex, Kent, Medway, Southend and Thurrock. Furthermore, to facilitate Local Authority scrutiny of SELEP work and decisions, requests to attend Local Authority partner scrutiny committees are welcomed, and attendance prioritised.
Designated Officer contact	Richard Dawson, Communities, Economy and Transport

What the relationship is between the body and the local authority	The County Council is a partner authority of SELEP Ltd – one of six county/unitary authorities, as listed above. The Leader of the County Council is a Company Director of SELEP Ltd. There are no shares/shareholders in the company. The County Council has one seat on the Board of Directors of SELEP Ltd, occupied by the Leader of the County Council.
What is the structure and form of the body (e.g. private limited company etc)	SELEP Ltd became a ‘company limited by guarantee’ in Feb 2020. SELEP Ltd has a Board of 20 Directors (plus an additional 5 co-opted Directors). East Sussex, Essex, Kent, Medway, Southend and Thurrock are members of the company. SELEP Ltd operates a federated model of governance, with four ‘federated boards’ covering its geography, allowing for decision-making and project prioritisation at a local level. The federated board for East Sussex is ‘Team East Sussex’ (TES).
How the Council oversee its activities and provided assurance on its governance including financial governance	The SELEP Strategic Board (Board of Directors) meets at least quarterly, so the Leader of the County Council can directly oversee the activities of SELEP Ltd. SELEP Ltd has also established the following groups: · Accountability Board – a ‘joint committee’ made up of SELEP’s six county/unitary authority members, to oversee the financial governance of SELEP Ltd, responsible for the sign-off of all funding decisions. The Leader of the County Council is our representative on the SELEP Accountability Board. · Investment Panel – a sub-committee of the Strategic Board to act as an advisory committee on matters pertaining to project prioritisation, recommendations on provisional funding allocations and future priorities. The Leader of the County Council is our representative on the SELEP Investment Panel. · Senior Officer Group – an advisory group made up of a senior officer from each of SELEP’s six county/unitary authorities. ESCC’s Head of Economic Development, Skills, Culture and Infrastructure is our representative on the SELEP Senior Officer Group. For projects within our local federated area, the County Council acts as the local accountable body for the defraying of funds (such as the Government’s Growing Places Fund, Local Growth Fund or Getting Building Fund) from SELEP Ltd to external partners. A Service Level Agreement (SLA) is in place between the County Council and Essex CC as the accountable body to SELEP Ltd, and the County Council’s S151 Officer is required to sign-off on all contract agreements between the County Council and project promoters. All of the governance arrangements for SELEP Ltd are set out in the SELEP Articles of Association, SELEP Framework Agreement and SELEP Local Assurance Framework. ESCC senior officers, including the Chief Finance Officer, collaborated on the development of all of these documents, and they have been approved through our own internal governance procedures (Lead Member SMED and Governance Committee).
What the relationship is between the body and individual councillors and whether councillor’s’ involvement is likely to constitute a conflict of interest	The Leader of the County Council is a Company Director of SELEP Ltd, and has filed an appropriate declaration with SELEP Ltd in accordance with the SELEP Register of Interests policy. Where the Leader cannot attend a SELEP meeting, a substitute Cabinet Member may attend in their place, subject to full compliance with the same Register of Interests policy (the Lead Member for Economy has also filed an appropriate declaration with SELEP Ltd for such an eventuality). The declaration of a disclosable pecuniary interest does not apply where the interest concerned relates primarily to the general interest of any public sector member in her/his area of geographical responsibility; therefore the involvement of the ESCC Leader on SELEP Ltd is not likely to constitute a conflict of interest.
How can councillors scrutinise the activities of the body, in particular if it will fall within the remit of the audit or scrutiny committee, and if not, how else scrutiny will happen	The activities of SELEP Ltd do not fall within the remit of the County Council’s audit or scrutiny committee, but SELEP Ltd does have its own scrutiny arrangements for all funding decisions taken by the SELEP Accountability Board, whereby each of the six county/unitary authority members of SELEP Ltd has the ability to challenge a decision made by the Accountability Board, and the scrutiny committees of the six county/unitary authorities have the power to call-in the funding decisions before they are implemented.
Designated Officer contact	Richard Dawson, Communities, Economy and Transport.

2019/20				2020/21

Gross Expenditure	Gross Income	Net Expenditure		Gross Expenditure	Gross Income	Net Expenditure

£000	£000	£000		£000	£000	£000

274,547	(94,282)	180,265	Adult Social Care	332,695	(161,355)	171,340
28,045	(26,832)	1,213	Public Health	27,838	(31,020)	(3,182)
8,721	(896)	7,825	Governance Services	8,348	(654)	7,694
400,936	(276,227)	124,709	Children’s Services	451,954	(298,247)	153,707
46,350	(17,035)	29,315	Business Services	47,769	(16,469)	31,300
122,349	(38,194)	84,155	Communities, Economy & Transport	146,909	(44,561)	102,348
15,740	(21,478)	(5,738)	Corporate Expenditure	15,529	(1,598)	13,931
896,688	(474,944)	421,744	Cost of Services	1,031,042	(553,904)	477,138
25,402	-	25,402	Other operating expenditure - Note 11	44,436	-	44,436
37,184	(2,796)	34,388	Financing and investment (income) and expenditure - Note 12	28,544	(2,006)	26,538
-	(436,277)	(436,277)	Taxation and non-specific grant income - Note 13	-	(470,501)	(470,501)
		45,257	Deficit on Provision of Services			77,611
		(7,745)	Surplus on revaluation of non-current assets – Note 25			(72,301)
		(144,523)	Remeasurement of the net defined pension liability – Note 25			89,195
		(152,268)	Other Comprehensive (Income) and Expenditure			16,894
		(107,011)	Total Comprehensive (Income) and Expenditure			94,505

2019/20	General Fund Balance	Schools Balance	Earmarked Reserves	Total General Fund	Capital Receipts Reserve	Capital Grants Unapplied	Total Usable Reserves	Unusable Reserves	Total Council Reserves
	£000	£000	£000	£000	£000	£000	£000	£000	£000
Balance at 31 March 2019 - Notes 24 and 25	9,999	14,188	102,431	126,618	3,122	18,223	147,963	130,640	278,603
Movement in Reserves during 2019/20
Total Comprehensive Income and Expenditure	(45,257)	-	-	(45,257)	-	-	(45,257)	152,268	107,011
Adjustments between accounting basis & funding basis under regulations - Note 7	68,376	-	-	68,376	(78)	(4,091)	64,207	(64,207)	-
Net Increase / (Decrease) before Transfers to Earmarked Reserves	23,119	-	-	23,119	(78)	(4,091)	18,950	88,061	107,011
Transfers to / (from) Earmarked Reserves - Note 10	(23,119)	853	22,266	-	-	-	-	-	-
Increase / (Decrease) in Year	-	853	22,266	23,119	(78)	(4,091)	18,950	88,061	107,011
Balance at 31 March 2020 - Notes 24 and 25	9,999	15,041	124,697	149,737	3,044	14,132	166,913	218,701	385,614

2019/20	As Reported for Resource Management	Adjustment to arrive at the net amount chargeable to General Fund	Net Expenditure Chargeable to the General Fund	Adjustments between the Funding and Accounting Basis (Note 7)	Net Expenditure in the Comprehensive Income and Expenditure Statement
	£000	£000	£000	£000	£000
Adult Social Care	171,544	(257)	171,287	8,978	180,265
Public Health	-	970	970	243	1,213
Governance Services	7,334	(1)	7,333	492	7,825
Children’s Services	83,116	1,093	84,209	40,500	124,709
Business Services	23,114	(3,192)	19,922	9,393	29,315
Communities, Economy & Transport	58,828	(10,235)	48,593	35,562	84,155
Total	343,936	(11,622)	332,314	95,168	427,482
Corporate Expenditure	(9,696)	-	(9,696)	3,958	(5,738)
Net Cost of Services	334,240	(11,622)	322,618	99,126	421,744
Other Income and Expenditure from the Expenditure and Funding Analysis
Other Corporate Expenditure	42,334	(11,497)	30,837	28,953	59,790
Financing	(376,574)	-	(376,574)	(59,703)	(436,277)
Total	(334,240)	(11,497)	(345,737)	(30,750)	(376,487)
Deficit for the Year	-	(23,119)	(23,119)	68,376	45,257

General Fund Balance at 1 April 2019			(9,999)
Less: Deficit for the Year			(23,119)
Add: Transfer from Reserves			23,119
General Fund Balance at 31 March 2020			(9,999)

1. Cambridgeshire	5. Norfolk	8. Hertfordshire
2. Kent	6. Essex	9. Suffolk
3. Hampshire	7. Northamptonshire	10. Isle of Wight
4. West Sussex