East Sussex County Council

 

Statement of Accounts

 

2020/21

 

                  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

 

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

 

Additional Information

In addition to the Statement of Accounts, financial information can be gathered from the County Council's agendas and other publications, which are on display in the major public libraries in the County.  Information on the Council’s budget and finances can also be found on the website

Further information on particular aspects of the County Council's finances may be obtained from:

 

Joanna Knightley

Financial Accounting Team

P O Box 3

County Hall

Lewes, East Sussex

BN7 1UE

or by email to: ClosureOfAccounts@eastsussex.gov.uk

 

 


 

Index of Notes to the Accounting Statements

Note                                                                                                                                                   Page

1.      Authorisation of the Statement of Accounts. 33

2.      Accounting Policies. 33

3.      Accounting Standards that have been issued but have not yet been adopted. 48

4.      Critical Judgements in applying Accounting Policies. 48

5.      Assumptions made about the future and other major sources of estimation uncertainty. 50

6.      Expenditure and Funding Analysis. 52

7.      Adjustments between accounting basis and funding basis under regulations. 56

8.      Material items of income and expenses. 58

9.      Events after the Balance Sheet date. 58

10.         Transfers to/from Earmarked Reserves. 59

11.         Other Operating Expenditure. 60

12.         Financing and Investment Income and Expenditure. 60

13.         Taxation and Non Specific Grant Income. 61

14.         Property, Plant, and Equipment. 62

15.         Investment Properties. 66

16.         Intangible Assets. 67

17.         Heritage Assets. 69

18.         Financial Instruments. 70

19.         Assets Held for Sale. 73

20.         Current & Long Term Debtors and Payments in Advance. 74

21.         Cash and Cash Equivalents, Bank overdraft and accrued balances for third parties. 74

22.         Creditors and Income in Advance. 75

23.         Provisions. 75

24.         Usable Reserves. 76

25.         Unusable Reserves. 77

26.         Cash Flow Statement – Operating Activities. 81

27.         Cash Flow Statement – Investing Activities. 81

28.         Cash Flow Statement – Financing Activities. 82

29.         Cash Flow Statement – Reconciliation of Liabilities arising from Financing Activities. 82

30.         Pooled Budget and Partnership Arrangements. 82

31.         Members’ Allowances. 83

32.         Officers’ Remuneration. 85

33.         Termination Benefits & Exit Packages. 87

34.         External Audit Costs. 87

35.         Grant Income. 89

36.         Dedicated Schools Grant. 89

37.         Related Parties. 90

38.         Capital Expenditure and Capital Financing. 91

39.         Leases. 92

40.         Other long term liabilities, including Private Finance Initiatives and Similar Contracts. 93

41.         Pensions Schemes Accounted for as Defined Contribution Schemes. 95

42.         Defined Benefits Pension Schemes. 95

43.         Contingent Liabilities. 99

44.         Contingent Assets. 99

45.         Nature and extent of risks arising from Financial Instruments. 100

46.         Trust Funds. 104

47.         Closed Landfill Sites. 104

 

 

 


 


About East Sussex County Council

East Sussex County Council (ESCC) is one of 26 county councils in England, covering an area of around 172,000 hectares, with a population of about 563,000 people. The Council forms the upper tier of local government within East Sussex (excluding Brighton & Hove).

 

East Sussex has a rich natural environment, with over two thirds of the county being covered by one or more environmental designations: the three largest being Area of Outstanding Natural Beauty 43.5%, Environmental Stewardship Agreement 15.6% and National Park 12.0%. The key habitats are grassland, arable farmland and woodland.

 

The county is divided into 50 electoral divisions, each represented by one Councillor. Local elections are held every four years, with the last taking place on 6 May 2021. Councillors make sure that the services that ESCC provides meet the needs of residents and those who work in the county, by setting the overall policies and strategies for the Council and by monitoring the way in which these are carried out.

 

They have set four overarching priority outcomes: driving sustainable economic growth; keeping vulnerable people safe; helping people help themselves; and making best use of resources in the short and long term. Making best use of resources in the short and long term is the gateway priority through which any activity and accompanying resources must pass.

                                               

Chief Officers, led by our Chief Executive Becky Shaw, help Councillors to develop policies and objectives. Their main role is to provide the public with the highest possible standards of service within the money that the Councillors make available.

 

Council Officers are the people who work for the Council and who are paid to deliver the services agreed by Councillors. Overall, the workforce comprises 9,411 people and 7,372 ‘full time equivalent’ employees as at 31 March 2021.

 

The five ESCC departments and their main responsibilities are:

·         Adult Social Care and Health: Provide social care services for residents over 16, including residential care and sensory care services. It also has the public health remit.

·         Children’s Services: Provide social care for people under 16, state education and other childcare services.

·         Communities, Economy and Transport: Responsible for community services such as libraries and registrars, customer access/services, roads, transport planning, economy and the East Sussex environment.

·         Business Services: Responsible for managing our finances, IT, human resources, procurement and property.

·         Governance Services: Provides advice on governance of the Council, including legal and constitutional arrangements.

 

Financial Report

For East Sussex, the impact of the COVID-19 pandemic started to be felt from March 2020 and, in line with CIPFA Bulletin 09, issued in April 2021, the statement of accounts has been prepared with appropriate reference to COVID-19.

 

The net outturn at year end was £402.96m against a revised net budget of £402.71m, a net overspend of £0.25m. This is after transfers to reserves and before Corporate Funding and therefore differs in presentation from the Q4 Monitoring Report.

 

 

The 2020/21 Approved Budget

The Council’s 2020/21 original net budget of £403.4m comprises three main elements: Council Tax, business rates and Government grant. The level of grant funding to Local Government has been reducing, ahead of promised funding reform. The revenue support grant received by the Council will have reduced to £1.3m by 2023/24.

 

The Council’s business planning process, known as Reconciling Policy, Performance and Resources (RPPR):

·         Enables us to be business-like and test comparative returns on investment so that the Council can be confident it is making best use of resources. It also ensures savings in one area do not give rise to unforeseen consequences in another area;

·         Maximises efficiency, exploits technology, and makes the best use of all our assets;

·         Maximises East Sussex resources through strong partnership working, income generation, lobbying and exploring new ways of working;

·         Removes management and support costs wherever possible, to maximise the resources available to the front line;

·         Sustains investment in activity that will most help manage demand;

·         Encourages communities to help achieve their priority outcomes;

·         Is open and transparent to provide clarity about priorities and consequences, specifying clearly what the County Council will do;

·         Delivers service change and facilitative programmes aimed at providing modern services which meet the needs of local people, working with others to do this in a way that makes the best use of resources; and

·         Uses our local evidence base to meet the most important needs of our communities and leading to innovative solutions which build a compelling future, rather than managing decline.

 

The Council’s RPPR process matches available resources with delivery plans for priority outcomes. It has enabled us to give relative protection to priority services. The RPPR process has been applied across all services in the development of the Council Plan supported by the Medium Term Financial Plan (MTFP) and Capital Programme.  Savings of over £135m have been made between 2010/11 and 2020/21, with further savings planned as funding continues to be constrained whilst demands for our services grows.

 

One-off funding for 2020/21 announced in the Spending Round offered the welcome opportunity to invest in services to reduce future demand, make one-off capital investment and reprofile savings. Chief Officers developed options for use of this funding that was considered by Scrutiny Committees and Members, noting that the funding could only be used once and therefore did not change the savings requirement or budget gap over the MTFP period. The options were developed with consideration of the following principles:

·         No ongoing revenue costs which add to future savings are created;

·         Future pressures and/or demand are reduced;

·         The effect on partners is considered; and

·         Recognising the MTFP is for 3 years, the funding does not have to be spent in year one.

Investment totalling £6.5m was approved; £1.1m to reprofile savings, £4.2m one-off revenue investment and £1.1m one-off capital investment. Due to the impact of the pandemic, the profile of savings has changed further, and the revenue projects have slipped to future years.

 

The Capital Programme is also very constrained by limited resources. In the past, Members have been able to meet core need and make investment in the County’s economy, for example significant additional investment in road and broadband infrastructure. The current programme, based on an assumption of significantly reduced future funding, contains only basic need for school places, highways, building maintenance, ICT, libraries and house adaptations.

 

The Authority’s 10 year planned programme is supported by a 20 year Capital Strategy. The purpose of the strategy is to drive the authority’s capital investment ambition in support of the Council Plan, whilst ensuring appropriate capital expenditure, capital financing and treasury management. The strategy was approved by Council as part of the RPPR process, the link is below.

 

The revenue and capital budget for 2020/21 was presented to Council on 11 February 2020.  Attached below is a link to the report on the Council’s website:

 

Agenda for Full Council on Tuesday, 11th February, 2020, 10.00 am | East Sussex County Council

 

COVID-19 in 2020/21 and beyond

Since the pandemic began, staff across the Council have been, and continue to be, delivering a huge amount of work to support the ongoing national and local response to the pandemic. Services continue to be adapted to meet the challenging situation over the winter and maintained focus on looking after the most vulnerable people and preventing Covid-19 transmission wherever possible.

A report detailing the Council’s COVID-19 response and future plans was presented to Cabinet on 20 April 2021, the link to the report on the Council’s website is:

 

(Public Pack)Agenda Document for Cabinet, 20/04/2021 10:00 (eastsussex.gov.uk)

 

Since November 2020 the Council responded to increasing case rates, including the emergence of new variants of Covid-19, the tightening of restrictions locally and subsequent national lockdown, and the second period of schools being closed to most pupils. Although some frontline staff have worked from office bases or directly with clients throughout the pandemic where this has been essential to maintain services, many staff have now been working from home for over a year in order to help contain the spread of the virus and to prioritise the use of buildings for essential purposes.

 

Members have received regular briefings on the work the Council is undertaking to help tackle the Covid-19 pandemic and progress has been reported through the quarterly monitoring process as well as specific reports to Cabinet.

 

 

 

Key Financial Implications

The Council undertook service and financial planning for 2021/22 in the new context. Through the well-established Reconciling Policy, Performance and Resources process, the Council integrated planning for the recovery from Covid-19 with understanding of other trends and pressures to form an integrated view of future service needs set out in the Council Plan and financial plans for the coming year. Planning recognised that the changes made, and the economic upheaval brought about by the pandemic have had profound and potentially permanent impacts on services and finances.

 

The Council has monitored all the additional costs incurred as a result of its response to the pandemic. Whilst the Government has made additional funding available to reflect the additional costs to local authorities in 2020/21, with some continuing into 2021/22, lobbying with continue for longer-term, sustainable funding to continue to meet residents’ needs and to support recovery, particularly in relation to adult social care. The Council will continue to emphasise the potential for the pandemic and accompanying economic disruption to increase demand for local services in future, and the need for a funding settlement for local government that reflects that in the next Spending Review.

 

COVID-19 related revenue pressures in each department totalled £66.8m in 2021/22. The main headlines were:

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

 

Within Centrally Held Budgets and Corporate Funding there were further COVID-19 related pressures of £2.4m, the key areas being £0.6m reduced investment income within Treasury Management, a capital overspend of £1.2m, £0.1m for Corporate PPE costs within Levies Grants & Other, and reduced proceeds of £0.5m from the Business Rates Pool with Districts and Boroughs.

 

The COVID-19 related pressures and slippage in the 2020/21 capital programme comprised a net £1.3m; of which there was a net £1.2m overspend (reduced by £0.4m for project specific funding received), and £2.5m slippage. The £1.2m overspend has been funded from government grant in order to maintain the integrity of the basic need targets set. Ongoing pressures on the programme will continue to be reviewed as part of the Council’s performance monitoring process and funding options will be considered if specific mitigations are not forthcoming.

 

Work will be ongoing to review and update the capital programme, in line with the future service offer and any investment required in support of this, including consideration of basic need and further updates to grants, S106, CIL and capital receipts and to present a rounded picture in terms of the pressures and slippage verses available resource.

 

In response to the pandemic, the Government has continued to provide funding to Local Authorities. £14.5m was received/accrued in quarter 4 bringing our total for 2020/21 to £99.7m; 63% of which is ringfenced funding aligned to specific outcomes being delivered by departments whilst the remaining £36.6m is general funding which is not ringfenced and allows more flexibility. The £15.1m carry forward of general funding reflects this up-front cashflow; funding flows received are not aligned to spending patterns. It also reflects that meeting the costs of COVID-19 will continue into 2021/22 and beyond.

 

 

How much was spent on the revenue account

The Expenditure and Funding Analysis (EFA) on page 52 shows how the Council money is spent and where the money comes from.  The Council services expenditure is presented in the chart below. The chart below presents a full break down of how the money was spent:

 

Pie chart showing the % spend by each department

 

What the money was spent on 

 

Pie chart showing what money was spent on

 

County Council services are staff intensive and employee costs account for 33% of the expenditure. Non-employee expenditure includes costs of premises at 3%, supplies and services at 16% and third party payments at 36%, with other expenditure at 9%.  Capital financing (the cost of borrowing, interest and repayments) and accounting for on-going Private Finance Initiative (PFI) within the ESCC Balance Sheet accounts for the remaining 3%.

 

Where the money came from

The chart shows that 47% of our income came from Specific Government grants, 29% came from residents through Council Tax, 8% from other grants & contributions, 7% from other income including use of reserves and bank interest.  Business Rates consisted of 1%, and 7% of our income came from users of our services, with Revenue Support Grant representing 1% of the Council’s Funding.

 

 

Pie chart showing where the money to fund the expenditure came from

 

Analysis of the Revenue Budget

The Council’s careful monitoring of budgets during the year has ensured that service pressure areas have been identified early and action was taken by directorates to manage potential variations within their cash limited budgets.   The table below shows actual net spending of £402.71m during 2020/21, based on the total cost of providing services including charges for support services, treasury management and use of assets.

 

2020/21 budget monitoring was split into ‘Business as Usual’ and ‘COVID-19 related’ to ensure transparency. 

The total revenue underspend for 2020/21 is £26.921m. £15.132m relates to COVID-19 general funding which has yet to be spent and will be carried forward to 2021/22 to meet the ongoing costs of COVID-19. More than £99m of COVID-19 funding has been received, the carry forward reflecting the cashflow of when funding was provided and when the costs are incurred. The remaining £11.789m underspend relates to Business as Usual activity and arises primarily from underspending in Adult Social Care (£4m), as a result of the level of client deaths being in excess of normal modelled levels, and in Corporate Budgets (£6.8m), where the £3.9m General Contingency budget was not required to be applied and Treasury Management underspent by £2.7m due to no additional borrowing during the year.

The 2020/21 budget outturn position is exceptional, with neither the underspending on COVID-19 or Business as Usual being able to be relied upon in future years. Until there is a longer term financial settlement for local government beyond the current one-year approach, the medium to long term financial outlook for the Council remains very uncertain.

The Council’s general fund balance of £10.0m at the year end plus general contingency of £3.9m is in line with the target minimum level of 2.5% (actual 3.45%) of the net revenue budget set by the Council. 

The analysis of revenue expenditure provided is for budgetary comparison purposes and reconciles to the analysis contained in the Expenditure and Funding Analysis (EFA) on page 52.  The table below sets out the revenue budget for 2020/21 using the standard management reporting format and how these compare with outturn:

 

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

 

 

Earmarked Reserves and Provisions

The financial statements also set out details of the Council’s earmarked reserves, which are another essential tool to manage risk exposure and smooth the impact of major costs and unexpected events.  The requirement for financial reserves is acknowledged in statute. Sections 32 and 43 of the Local Government Finance Act 1992 require billing and precepting authorities in England and Wales to have regard to the level of reserves needed for meeting estimated future expenditure when calculating the budget requirement, and regard to LAAP Bulletin 99 - Local Authority Reserves and Balances.

 

It is the S151 Officer’s duty to consider the robustness of the Council’s budgets, the adequacy of reserves and the general fund when they are set annually. This consideration is summarised in the annual Robustness Statement which is published as part of RPPR.  The Council’s reserves policy supports the Council’s strategic agenda and corporate cross cutting priorities, and in particular:

·         The challenges posed by a likely decade of austerity;

·         Uncertainty over the timing of changes in the level of government financial support;

·         The requirement to manage significant organisational change;

·         The heightened risk profile across public services delivery arrangements; and

·         The emphasis planned on a unified organisation response.

 

Reserves are the only source of financing available to fund risks and one-off pressures over a number of years. Reserves can only be spent once and the possibility of creating new reserves in an era where budgets are tight and can become overspent, not just individually but corporately, is increasingly limited. However, in recognition of the increasingly uncertain financial position and pressures on services, the Council has looked to bolster its reserves where possible and considers them sufficient and its budget robust.

 

Details of the Council’s earmarked reserves can be found on page 59, Note 10 to the Accounting Statements. Current earmarked reserves held at 31 March 2021 totalled £181.2m. Of this, £16.1m relates to reserves to meet the estimated future costs of managing the Private Finance Initiative (PFI) waste facility, £12.1m relates to future funding for the capital programme and £75.3m relates to services revenue grants and contributions set aside for future years. The remainder of the significant reserves are to help meet some of the cost of insurance liabilities to manage litigation and other corporate risks not otherwise recognised. 

 

The level of the general fund is consistent with the overall financial environment and the key financial risks faced by the Council.  This risk assessment is formally carried out at least twice annually and takes account of circumstances at the time.

 

In calculating the level of provisions, the Council exercises judgement; they are measured at the Council’s best estimate of the costs required to settle obligations at the Balance Sheet date. The level of the Council’s provisions is set out in Note 23.

 

 

Future Years

The General Fund balance of £10.0m is a minimum general balance which, whilst it remains lower proportionately than a lot of other authorities, is considered adequate on the basis that an in-year budgeted general contingency is also held. Should the General Fund Balance have to be used, the Council would have to consider how this could be topped back up to an adequate level to manage future years’ risks.

 

The general contingency for 2021/22 is £4.0m and will be used in the first instance to cushion the impact of pressures in-year. Any unused balance will be transferred to strategic reserves at the end of the financial year, in line with the approved reserves policy.

 

Of the £67.5m balance on the Revenue Grants and Contributions Reserve, £30.5m relates to COVID-19 funding. The remaining balances are committed for specific purposes.  Within the Financial Management & Transformation Reserves, £19.9m is considered to be available for any unfunded COVID-19 pressures, noting that its use would impact on the Authority's MTFP: firstly the reserve would need to be built up again, thereby adding an additional budget pressure; secondly, if the reserve is not available to support the development and investment in services then this would place additional burdens on the future financial viability of the authority.  The Council does not hold large balances for capital receipts or unapplied capital grants, and any balances have a planned use.

 

 

 

 

 

 

 

 

 

 

 

 

 

The Capital Programme

Capital expenditure represents money spent by the Council on purchasing, upgrading, and improving assets that will be of benefit to the community over many years. The approved capital budget (gross) at February 2020 for 2020/21 was £100.5m.  This was further adjusted to reflect the variation at outturn (March 2021), re-profiling of budgets and approved variations in line with financial regulations and governance (detail of which is shown below).

 

Capital Programme gross movements during 2020/21:

 

£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

 

During the financial year the capital programme is regularly reviewed and where necessary projects are re-profiled as part of the ongoing RPPR process. The revised gross budget for the end of March 2021 was £81.3m.

 

In 2020/21 the County Council spent £72.3m gross of which £19.2m was supported by scheme specific resources, giving a net expenditure of £53.1m. The larger schemes that took place during the year included the structural maintenance of roads throughout the county, delivering school places, capital building improvements, Newhaven Port Access Road and many other improvements to schools, buildings, roads. Of the £9.0m variation to the revised gross budget, £1.3m was COVID-19 related (£2.5m of slippage offset by an estimated £1.2m overspend), £2.0m was slippage of projects where the delivery is outside of the Councils control as they are provided by third parties as part of the Local Enterprise Partnership (LEP) programme, and £2.1 related to Broadband project slippage where delivery is largely outside of the Council’s control. There has been smaller scale slippage on a number of other projects, including on Newhaven Port Access and Bexhill Link Road as a result of delays to potential compensation claims. Delays to the IT & Digital Strategy Implementation due to delays to devices being received and at Westfield Land due to an ongoing legal process.  These were able to be offset in part by spend in advance on other areas such as Special Provision in Secondary Schools following earlier than anticipated commencement of Phase 2 at Robertsbridge Community College.

 

 

The chart below shows a high level analysis of the 2020/21 capital expenditure.

Pie chart to show a breakdown of capital expenditure categories

 

 

 

 

 

 

 

As per the approved budget at February 2021, the County Council plans to invest £92.1m in capital projects in 2021/22, funded by:

 

£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

 

 

Financial (non-Covid) Challenges in 2020/21

The County Council plans and monitors its performance, policy and resources through a single process, called Reconciling Policy, Performance and Resources (RPPR). For full details of the County Council’s challenges and the financial implications, the attached is a link to the report on the Council’s website, which was presented to Council on 11 February 2020:

 

Agenda for Full Council on Tuesday, 11th February, 2020, 10.00 am | East Sussex County Council

 

 

Financial (non-Covid) Challenges for 2021/22 and beyond

Looking ahead, the Authority faces unprecedented challenges in managing its budget; not only because of COVID-19, but also with the underlying demographic and economic factors of the county.

 

Around 4.0% of the population are aged 85+ and ESCC is ranked 1st in England for the highest proportion of population 85+ (ONS estimate 2019). In East Sussex there are 329 Lower Super Output Areas (LSOA), 22 are in the most deprived 10% nationally and 21 are in the least deprived 10%; people that are more deprived may produce higher demand for Council and other public services. Deprived LSOAs are characterised by poorer health and disability, lower skills, educational disadvantage, higher crime and drug misuse.

 

76.3% of the working age population (age 16-64) was in employment in 2020 (down from 77.0% in 2019), compared to England 75.7% and South East 78.3% (ONS Annual Population Survey).

 

The level of government funding that the Council will receive between 2022/23 – 2024/25 is yet to be confirmed; Spending Review (SR) 2020 was for a single year, therefore funding will be announced at SR21, the date of which is still to be confirmed, but which could be subject to delay. Additionally, the Fair Funding Review and Business Rate Retention reform have been confirmed as delayed. Government funding is therefore assumed to continue to reduce while in the same period there is considerable uncertainty as to the medium to longer term impact of COVID-19.

 

Non Financial Performance

The non-financial performance of the Council is reported quarterly and the year end position for 2020/21 was reported to Cabinet on 29 June 2021. Attached below is a link to the report on the Council’s website:

(Public Pack)Agenda Document for Cabinet, 29/06/2021 10:00 (eastsussex.gov.uk)

 

East Sussex Pension Fund

In line with the accounting standard IAS19, the Council’s net liability for future pension payments, as shown in the Balance Sheet, has increased by £142.5m from £416.9m at the start of the year to £559.4m at 31 March 2021. Note 42 to the accounting statement provides detailed information.  The resultant impact on the CIES is a net charge of £53.3m to reflect the present value of the defined benefit obligation and a net Actuarial loss on pension assets and liabilities of £89.2m.

The explanations for this significant change are as follows:

·         In assessing liabilities for retirement benefits at 31 March 2020, the actuary assumed a discount rate of negative 0.4% real (2.3% nominal), which is based on the rate of return at the accounting date on a high-quality corporate bond of equivalent currency and term to scheme liabilities. In assessing liabilities for retirement benefits at 31 March 2021, the actuary has advised that a rate of 0.8% real (2.0% nominal) is appropriate. The change in the real discount rate over the year along with revised financial and demographic assumptions has resulted in an increase in the liabilities measured at today’s prices of around £334.9m.

·         Asset returns on the Fund in the year to 31 March 2021 were higher than expected for the Council.  The increase in the Fund’s assets due to investment performance in equity and other markets was estimated to be 22.1%, compared to the expected return on assets at the start of the year of 7.3%, with a total increase of around £245.7m.

Based on the current benefit structure of the Local Government Pension Scheme (LGPS), and using the roll forward model, the actuarial estimate of the present value of funded liabilities is approximately £1,979.7m in respect of employee members, deferred pensioners and pensioners as at 31 March 2021. There is also a liability of approximately £86.7m in respect of LGPS and Teachers’ unfunded pensions. It is assumed that all unfunded pensions are payable for the remainder of the member’s life.

 

 

Treasury Management Borrowing Facilities and Investments

 

The strategy for 2020/21, agreed in February 2020, was set against a background of market uncertainty and a prudent approach was taken with all investments.  The emphasis continues to be on security (protection of the capital sum invested) and liquidity (keeping money readily available for expenditure when needed). The strategy and limits are consistent with the capital programme and revenue budget.  As will be clear from the current global events, it is impossible in practical terms to eliminate all credit and market risk. This Council seeks to be as prudent as possible.

 

This Council has always adopted a prudent approach on its investment strategy and in the last few years, there have been changes to the list of the approved organisations used for investment of short-term surpluses. This list is regularly reviewed to ensure that the Council is able to invest at the best available rates consistent with low risk. The organisations are also regularly monitored to ensure that their financial strength and low risk has been maintained. 

The average level of funds available for investment purposes during 2020/21 was £241m. These funds were available on a temporary basis, and the level of funds available was mainly dependent on the timing of precept payments, receipt of grants and progress on the Capital Programme. The total amount received in short term interest and dividends for the twelve months to 31 March 2021 was £1.74m at an average rate of 0.72%.

At 31 March 2021, the majority of the Council’s external debt was held as long-term loans (£233m), and no additional longer-term borrowing was undertaken during 2020/21.       

Capital expenditure levels, market conditions and interest rate levels will continue to be monitored in order to minimise borrowing costs over the medium to longer-term and to maintain stability. Given the on-going cuts to local government funding, the Council’s borrowing strategy continues to address the key issue of affordability without compromising the longer-term stability of the debt portfolio.

The Ministry of Housing, Communities and Local Government (MHCLG) requires Councils to set aside ‘prudent’ provision for the repayment of debt where they have used borrowing arrangements to finance capital expenditure (historic and current) but allows certain flexibility as to how this is calculated.

On 29 April 2020, CIPFA released a Treasury Management & Capital Management update, specifically as a response to COVID-19 and highlighted the areas of focus for practitioners - cashflow being a key area.

 

The authority manages cashflow daily with a high level forecast out to the 30th September 2022. This is reviewed daily from an estimate to actual and updated for all known material items of income and expenditure.

The major change to a normal cashflow cycle during the COVID-19 pandemic included the advance funding of central government grants and the additional emergency funding made available. The increased liquidity reduced the near term cashflow risk and the forecast was updated to reflect any re-profiling of government grant funding.

 

The authority has a steady debt and investment maturity profile, but when cashflows are forecasted on a downward trend investment notice accounts can be redeemed to support the authority’s daily activity. In addition, any ‘pinch points’ can be funded through short term borrowing in the local authority market, an approved method of borrowing. In the near-term surplus balances are kept liquid to support expenditure and any reduced income profile. This is also undertaken following the fundamental principles of security, liquidity and then yield in this current economic climate. 

 

The Balance Sheet

Despite the challenges, the Council continues to maintain a strong balance sheet -

 

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

The main changes to the balance sheet in 2020/21 are (i) the increase in current assets and corresponding increase in usable reserves due to higher cash balances from a large number of grants paid during 2020/21 that are yet to be applied, and (ii) an increase in long term liabilities and corresponding decrease in unusable reserves due to the increase in the pension liability of £142.5m.

 

Academy Schools – two schools are expected to convert to Academy status in 2021/22. The net book value of property, plant and equipment will be written out of the Council’s balance sheet at the date of conversion. Their net book value at 31 March 2021 is £4.295m.

 

Statement of Accounts

The purpose of the Statement of Accounts is to give electors, those subject to locally levied taxes and charges, Members of the Council, employees and other interested parties clear information about the Council’s finances. The format of the Statement of Accounts is governed by the Code of Practice on Local Authority Accounting in the United Kingdom (the Code).   To make the document as useful as possible to its audience and make meaningful comparisons between authorities the Code requires:

·         All Statements of Accounts to reflect a consistent presentation;

·         Interpretation and explanation of the Statement of Accounts to be provided; and

·         The Statement of Accounts and supporting notes to be written in plain language.

 

This Statement of Accounts comprises various sections and statements, which are briefly explained below:

·         Narrative Report - this provides information on the format of this Statement of Accounts as well as a review of the financial position of the Council for the financial year 2020/21;

·         The Statement of Responsibilities which details the responsibilities of the Council and the Chief Finance Officer (S151 Officer) concerning the Council’s financial affairs and the actual Statement of Accounts;

·         The Independent Auditor’s Report to the Council – this is provided by the external auditors, Grant Thornton LLP, following the completion of the annual audit;

·         Annual Governance Statement – the Council is required to carry out an annual review of the effectiveness of the system of internal control and to include a status report with the Statement of Accounts. The Statement explains how the Council has complied with the Code of Corporate Governance during 2020/21. However, any significant events or developments that occur between 31 March 2021 and the date on which the Statement of Accounts is signed by the Chief Finance Officermust also be reported;

·         The Core Accounting Statements comprise:

~ TheComprehensive Income and Expenditure Statement (CIES) – this is fundamental to the understanding of a Council’s activities. It brings together all of the functions of the Council and summarises all of the resources that the Council has generated, consumed or set aside in providing services during the year.

~ The Movement in Reserves Statement (MiRS) - this statement shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure and mitigate the risk and impact of unplanned events) and other reserves.

~ The Balance Sheet – this shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council.

~ The Cash Flow Statement – this summarises the changes in cash and cash equivalents of the Council during the reporting period.

·         The Accounting Policies Note explains the basis for the recognition, measurement, and disclosure of transactions in the Accounting Statements;

·         The Notes to the Accounting Statements provide supporting and explanatory information and are fundamentally important in the presentation of a true and fair view;

·         The Pension Fund Accounts – the East Sussex Pension Fund is administered by the Council; however, the Pension Fund must be completely separate from the Council’s own finances. This statement is an extract from the Pension Fund Annual Report and summarises the financial position of the East Sussex Pension Fund, including all income and expenditure for 2020/21, together with assets and liabilities as at 31 March 2021; and

·         A glossary to the Statement of Accounts is also included to help to make what is ultimately a technical accounting document more understandable to the reader.

 

Changes to financial reporting requirements and accounting policies

The Code of Practice is based on International Financial Reporting Standards (IFRSs) and has been developed by the CIPFA/LASAAC Code Board under the oversight of the Financial Reporting Advisory Board. The Code is based on approved accounting standards issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee, except where these are inconsistent with specific statutory requirements.  The Code also draws on approved accounting standards issued by the International Public Sector Accounting Standards Board and the UK Accounting Standards Board where these provide additional guidance.

 

The Code has been prepared on the basis of accounting standards and interpretations in effect for accounting periods commencing on or before 1 January 2020 and applies for accounting periods commencing on or after 1 April 2020. 

The key accounting changes principally introduced by the Code in 2020/21 are:

§  Amendments to IAS 19 Employee Benefits: Plan Amendment, Curtailment or Settlement.

§  Amendments to implement and emphasise the application of Amendments to IAS 1 and IAS 8: Definition of Material.

§  Reference to arrangements for the application of accounting standards arising as a consequence of the United Kingdom’s withdrawal from the European Union.

§  Amendments relating to financial instruments.

§  Amendment to Accounting and Reporting by Pensions Funds to align specific investment asset line item descriptions in the net asset statements with the Pensions SORP.

§  Legislative amendments

Under the Code, the Authority is required to disclose details on the impact of an accounting change required by new accounting standards that have been issued, but not yet adopted, by the Code. The new standards introduced by the Code that will need to be adopted by the Council in 2020/21 are:

·         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 Council’s Stewardship, Responsibilities and Financial Management Polices

The Council deals with considerable sums of public money. The Council’s Financial Regulations provide the framework within which financial control operates.  To conduct its business efficiently, a council needs to ensure that it has sound financial management and procedures in place and that they are strictly adhered to. Strict compliance with these policies ensures that the Council’s policy objectives are pursued in a prudent and efficient way. These Financial Regulations provide clarity about the accountability of individuals – Cabinet; Members; the Chief Executive; the Monitoring Officer; the Chief Finance Officer and Service Directors. 

 

There are five key areas covered by the Financial Regulations. These are:

 

1. General financial management and planning;

2. Accounting and audit arrangements;  

3. Control of resources (finances, staffing, systems and contracts);

4. Banking, treasury, investment, and insurance; and

5. External arrangements.

 

These Financial Regulations link with other internal regulatory documents forming part of the County Council’s Constitution, including Standing Orders, Standard Financial Procedures and Departmental Guidance and Procedures. This Statement of Accounts is part of that stewardship process, i.e. the process for being publicly accountable for the collection and application of public money. The responsibilities of the Council and its designated Chief Finance Officer are set out in the Constitution. 

 

The Annual Governance Statement, which accompanies this Statement of Accounts, covers more than just financial matters and is set out in full on pages 19 - 27.

 

Our financial framework relies on the quality of the financial systems of the Council. There is a commitment to continually seek to improve systems to ensure information is available in an accessible and timely manner and that key financial processes are managed efficiently and economically.

 

 The Audit Opinion

The 2020/21 Audit Opinion and Certificate is available on pages 16 - 18.   

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 


The Authority's Responsibilities

The Authority is required:

·              to make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs.  In this authority, that officer is the Chief Finance Officer – Section 151 Officer.

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

·              to approve the Statement of Accounts, which include the accounting statements for East Sussex Pension Fund.

 

The Responsibilities of the Chief Finance Officer – Section 151 Officer

The Chief Finance Officer is responsible for the preparation of the Authority's Statement of Accounts which, in terms of the Chartered Institute of Public Finance and Accountancy/Local Authorities (Scotland) Accounts Advisory Committee Code of Practice on Local Authority Accounting in the United Kingdom ('the Code'), is required to provide a true and fair view of the Authority at the accounting date and its income and expenditure for the year ended 31 March 2021.

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

·              selected suitable accounting policies and then applied them consistently;

·              made judgements and estimates that were reasonable and prudent; and

·              complied with the Code.

 

The Chief Finance Officer has also:

·              kept proper accounting records which were up to date;

·              taken reasonable steps for the prevention and detection of fraud and other irregularities;

·              assessed the Council’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern;

·                   used the going concern basis of accounting on the assumption that the functions of the Council will continue in operational existence for the foreseeable future; and

·              maintained such internal controls as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

I certify that the Statement of Accounts gives a true and fair view of the Council’s financial position and its income and expenditure for the year ended 31 March 2021.

 

 

 

 

 

 


 

 

 


Ian Gutsell

               

Chief Finance Officer (Section 151 Officer)

30 September 2021

 

 

               


 

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 


TO FOLLOW

 

 

 


TO FOLLOW


 

TO FOLLOW

 


 


Annual Governance Statement for the year ended 31 March 2021

 

1.             Scope of responsibility

East Sussex County Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. The County Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised.  In discharging this overall responsibility, Members and senior officers are responsible for putting in place proper arrangements for the governance of the County Council’s affairs, the effective exercise of its functions, the management of risk and the stewardship of the resources at its disposal. To this end, East Sussex County Council has approved and adopted a Local Code of Corporate Governance, which is consistent with the principles of the CIPFA/SOLACE Framework Delivering Good Governance in Local Government.  A copy of the Local Code is on our website at www.eastsussex.gov.uk or can be obtained from the Council’s Monitoring Officer.  This statement also sets out how the County Council has complied with its Local Code and also meets the requirements of the Accounts and Audit (England) Regulations 2015, regulation 4(3), which requires all relevant bodies to prepare an annual governance statement.

 

2.             Purpose of the governance framework

Good governance is about how the Council ensures that it is doing the right things, in the right way, for the right people, in a timely, inclusive, open, honest and accountable manner.  Our governance framework comprises the systems, processes, culture and values by which the Council is directed and controlled.  Through effective governance the Council is accountable to, engages with and, where appropriate, leads the community.

 

The code of corporate governance can provide only reasonable and not absolute assurance that the Council achieves its aim of good governance.  Equally the County Council’s system of internal control is designed to identify and prioritise the risks to the achievement our policies, aims and objectives, to evaluate the likelihood and impact of those risks being realised and to manage those risks efficiently, effectively and economically.  It cannot eliminate all risk of failure; it can therefore only provide reasonable and not absolute assurance that our policies, aims and objectives are achieved.

 

The Local Code of Corporate Governance and the system of internal control have been in place at East Sussex County Council for the year ended 31 March 2021 and up to the date of the approval of the statement of accounts. 

 

3.             Review of effectiveness

East Sussex County Council reviews the effectiveness of its governance arrangements, including its system of internal control, on an ongoing basis.  This review of effectiveness is informed by:

·         the work of Members through the Cabinet, Committees including Governance Committee, Standards Committee, Audit Committee, Scrutiny Committees generally and the full Council;

·         the work of Chief Officers and managers within the Council, who have primary responsibility for the development and maintenance of the internal control environment;

·         the work of the Chief Executive, Monitoring Officer, Chief Finance Officer and the Statutory Officers’ Group;

·         the risk management arrangements, including the maintenance and regular review of strategic risks by Chief Officers and departmental risks by management teams;

·         the work of the internal audit service including their quarterly progress reports, on-going action tracking arrangements and overall annual report and opinion;

·         the external auditors in their audit annual letter and annual governance report;

·         the judgements of a range of external inspection and other statutory bodies including the Local Government Ombudsman, the Care Quality Commission and the Office for Standards in Education

 

4.             Key elements of the governance and internal control environments

The key elements that comprise the Council’s governance arrangements are set out in the Local Code and they include:

§  a Council Plan that sets out our vision for the community and the outcomes we intend to achieve;

§  an established medium term planning process including the process for reconciling policy priorities with financial resources, which takes account of performance and the need to improve both customer focus and efficiency;

§  a business planning and performance management framework which includes setting clear objectives and targets, both financial and otherwise;

§  regular reporting of performance against the Council’s key objectives, as set out in the Council Plan, to officers and Members;

§  established budgeting systems, clear budget management guidance and regular reporting of financial performance against budget forecasts to officers and Members;

§  financial management structures which promote ownership of financial issues within service departments;

§  compliance with the Chartered Institute of Public Finance and Accountancy’s Statement on the Role of the Chief Finance Officer;

§  the Council’s constitution which sets out clear arrangements for decision making, scrutiny, communication and the delegation of powers to officers and Members;

§  codes of conduct for Members and employees which set out clear expectations for standards of behaviour;

§  a clear framework for financial governance based on Procurement Standing Orders, Financial Regulations and Standard Financial Procedures;

§  a risk management framework, which takes account of both strategic and operational risks and ensures that they are appropriately managed and controlled;

§  Member committees with clear responsibilities for governance, audit and standards;

§  established arrangements for dealing with complaints and whistle-blowing, and combating fraud and corruption;

§  schemes for identifying the development needs of Members and officers, supported by appropriate training;

§  strategies for communication and consultation with the people of East Sussex and our key stakeholders;

§  clear guidance that promotes good governance in our partnership working;

§  a range of policies and processes designed to ensure best practice and legal compliance for personnel matters, ICT security, access to information, data protection and project management.

 

5.             The Authority’s governance response to the Covid-19 Pandemic

 

The Council responded positively to the implementation of The Local Authorities and Police and Crime Panels (Coronavirus) (Flexibility of Local Authority and Police and Crime Panel Meetings) (England and Wales) Regulations 2020, which enable the Council to hold meetings in public by electronic means, in order to operate effectively during the period of the pandemic. The Council agreed to make temporary updates to its Standing Orders, making provision for virtual meetings and associated processes, to be effective for the period during which the regulations apply.  The Council also agreed a range of temporary measures to enable the County Council’s business to be conducted efficiently throughout the period of disruption due to Covid-19. This included putting in place specific delegations to officers which can be used if necessary, should practical, health or capacity related constraints limit the Council’s ability to hold virtual meetings.

 

A series of training sessions, including one to one meetings, were held to ensure that all councillors were able to join and participate in virtual meetings. Specific training and guidance was been offered to Chairs of Committees and Lead Members in relation to chairing virtual meetings. Attendance at formal meetings was good.

Virtual Meetings took place throughout 2020/21 including the Full Council, Cabinet, Committees, Panels and individual Cabinet decision making meetings. The reporting and monitoring of performance, finance and ongoing updates to the Corporate Strategic Risk Register reflect issues arising from the pandemic.

Members provided feedback on their experiences of virtual meetings and their views on proposals for the conduct of meetings, including ongoing Member support needs. The responses received were considered by the cross-party Member ICT and Development Reference Group which supported the approach being taken.

All county councillors were invited to two Whole Council Forums (July and September) at which officers provided an update in relation to Covid-19 and the implications for the Council. The Forums provided an opportunity for councillors to raise questions and issues in relation to the pandemic which can inform future decisions of the Council.

 

The Cabinet has considered two reports (which was referred to the Full Council for debate) in relation to the measures taken in response to Covid-19 and on the proposed approach to resetting the Council’s activities. The Council is using its existing political and business planning processes to develop its plans. The following principles will guide the planning of Covid-19 recovery for East Sussex County Council services and the Council’s wider support for residents and businesses:

 

·         Our usual business planning process (RPPR), led by Cabinet and CMT, was used to develop a short-term recovery plan 2020/21 and medium/long-term full planning from 2021/22

·         The Council’s Core Offer, Priority Outcomes and subsidiary Delivery Outcomes will be reviewed and revised as needed to ensure they are right for recovery plans – recognising the fundamental changes that have taken place in society and the way it works and building on the positive lessons we have learnt. Some services we set up in response to the pandemic will need to continue into the foreseeable future and the impact of decisions we have taken could have long lasting service and financial consequences (for example in ASC).

·         The Council’s financial resource allocations for current and future years will be reviewed and revised to take account of changes in availability and priorities

·         Learning from what has worked well and what has not during the crisis will be fully considered in recovery planning and long-term planning for services and partnerships

 

A flexible approach to planning and delivery is required as we move through the pandemic. Our integrated monitoring and risk processes provide a vehicle to allow us to do that.  Our plans for future years will also need to take into account the broader context in which we are working: the impact of the pandemic on the national economy and our funding prospects, the changed needs of our residents and businesses and the impact of exiting the EU on both the economy and our services.  

 

In July 2020 the East Sussex Health and Wellbeing Board approved the East Sussex Outbreak Control Plan. Planning to prevent and respond to cases of Covid-19 in our communities requires a whole system and multi-agency approach, including the NHS Test and Trace programme.  A wide range of stakeholders contributed and commented on the Plan and will continue to shape its development.  The Board approved an updated versions of the Plan in September, December and March and is to consider a further report on the development of the Plan in July 2021. 

 

The Senior Management Group has been meeting regularly (twice a week) in order to review and evaluate the impact of Covid-19 on service provision and resources and consider future actions.

 

6.             Assurance and Significant Governance Issues

No assurance can ever be absolute; however this statement seeks to provide a reasonable assurance that there are no significant weaknesses in the County Council’s governance arrangements. On the basis of the review of the sources of assurance set out in this statement, we are satisfied that the County Council has in place satisfactory governance arrangements, including a satisfactory system of internal control, both of which are operating effectively. 

 

The Annual Internal Audit Annual Report and Opinion provides an opinion on the adequacy of County Council’s control environment as a contribution to the proper, economic, efficient and effective use of resources.  The Council must undertake an effective internal audit to evaluate the effectiveness of its risk management, control and governance processes, taking into account public sector internal auditing standards or guidance.  Annually, the Chief Internal Auditor is required to provide an overall opinion on the Council’s internal control environment, risk management arrangements and governance framework to support the Annual Governance Statement and this is provided in the Annual Internal Audit Annual Report and Opinion. Based on the internal audit work completed, the Orbis Chief Internal Auditor has provided reasonable assurance that East Sussex County Council had in place an adequate and effective framework of governance, risk management and internal control for the period 1 April 2020 to 31 March 2021.

 

As part of our review, we have not identified any gaps in assurance over key risks or significant governance issues.

 

The Council will continue to regularly monitor issues that may seriously prejudice or prevent achievement of its key objectives through its strategic risk review process

 

Both governance and internal control arrangements must be kept under review to ensure that they continue to operate effectively and meet changing legislative needs, reflect best practice and our intention to achieve excellence in all our activities.  The Council, through the Directorate Assurance Statements and the Chief Finance Officer’s Assurance Statement, has identified a number of areas where it wishes to enhance its governance arrangements. These are set out on the attached Annex A together with the department responsible for them. Each Director has included in their Directorate Assurance Statement confirmation that the actions identified for 2020/21 have been completed or provided an update and explanation regarding progress.

 

A review of the AGS was undertaken by Internal Audit during 2020/21 and an opinion of Substantial Assurance was given. This opinion means that controls are in place and are operating as expected to manage key risks to the achievement of system or service objectives. The minor actions agreed for further improvement have been implemented.

The Council Plan identifies a number of areas that have governance implications and these will be monitored through the Council Plan monitoring process. The areas outlined in the attached Annex A will be monitored through departmental business plans.

The Council has also identified a need to develop its approach to transparency and to respond to the Government’s open data agenda which will be monitored and managed.

 

Actions plans are in place to address these issues, and their implementation will be monitored and reviewed during the year.

A report from the Committee on Standards in Public Life included a best practice recommendation: Councils should report on separate bodies they have set up or which they own as part of their annual governance statement, and give a full picture of their relationship with those bodies. Separate bodies created by local authorities should abide by the Nolan principle of openness, and publish their board agendas and minutes and annual reports in an accessible place. Details of relevant bodies are set out in Annex B.

 

 

 

 

 

Councillor Keith Glazier, Leader

Becky Shaw, Chief Executive

13 July 2021

                                                                               

 

 

 

 

 

 

 

 

 


 

Annex A

 

The following actions will be taken to strengthen governance, risk management and internal control environment during the current year. The actions are shown for each department and will be monitored through departmental business plans. Alongside these all departments will contribute to the council’s Covid 19 response and recovery plan and consider what actions are required to return to business as usual and the identification of any learning (Ongoing) 

 

Business Services (BSD)

 

·                Progress the chosen supplier software through the design and testing phase, prior to implementation in 2022/23, for the Managing Back Office Services (MBOS) programme. The programme seeks to replace the Council’s core finance and HR systems with a suite a back office systems that best meet the current and future needs of the Council. (Throughout 2021)

·                Implement outcomes from the review of the Orbis partnership, which will result in a reshaped partnership model and strengthened arrangement for delivery of savings. (March 2022)

·                Embedding and recruiting the approved increased integrated structure for Pensions Fund and Administration (September 2021)

·                Implement new target operating model for the property service. (September 2021)

·                Migration of systems and services onto hyper-converged infrastructure to further enhance resilience by moving away from the traditional model of disaster recovery to one of heightened availability. (September 2021)

·                Maximise robotic process automation opportunities in consultation with key stakeholders where appropriate to introduce simple but effective validation and control gateways to key processes. (August 2021)

·                Implementation of the Procurement modernisation programme to improve governance, reporting and decision making. Key changes will be the provision of a nominated Procurement Business Partner for each directorate, the establishment of a resourcing hub to improve the management of projects, and a revised operating model with proportionate governance, processes, and updated systems. (March 2022)

·                Rollout Contract Management training across the Council through a series of e-learning modules to support the contract management framework available on the intranet and dedicated SharePoint site. (November 2021)

·                Undertake assessment against the new CIPFA Financial Management Code and, where appropriate, agree actions for areas of improvement (September 2021)

 

Children’s Services

 

·                Continue to review, monitor and report on the children and young people’s priorities for the East Sussex Health and Care Plan and embed the new Children and Young People’s Oversight Board. March 2022

·                Develop the new Excellence for All strategy 2021-23, which will respond directly to the challenges and opportunities posed by disruptions to learning caused by the pandemic. September 2021

·                Develop a new SEND strategy incorporating the gaps identified in the JSNA August 2021

·                Further develop the integrated 0-19 Early Help Service to embed a whole system, whole family approach to support us to create a more sustainable system and to improve outcomes for children, young people and families.  March 2022

 

Communities, Economy and Transport

 

·                Development of corporate strategy for the digital preservation of modern records - audit and options analysis undertaken (March 2022)

·                Review of progress and governance of the highway’s re-procurement project (Ongoing until contract award)

·                Review of highways cultural compliance actions identified by Internal Audit (March 2022) – all actions complete / on-going annually and awaiting follow-up audit

·                Audit of grants and loans governance and process (March 2022)

·                Review of our effectiveness as a statutory consultee on planning applications (March 2022)

·                Travel Audit Plan Fees – audit to ascertain whether ESCC receive all payments due as part of new development

·                Review of the Council’s role in relation to Sea Change Sussex

 

Adult Social Care and Health

 

·                Delivery of the ASCH Programme (Covid-19 Recovery Plan) on target for August 2021.

·                Developing by December 2021 our East Sussex Health and Social Care  Partnership model to respond to the White Paper and the further development of the Sussex Integrated Care System (ICS), with a specific focus on our place based plans for integrated commissioning, provider collaboration and integration, and working in partnership to strengthen community wellbeing.

 

·                In the context of the plans to establish ICSs on a legal footing and absorb the existing functions of Clinical Commissioning Groups by April 2022, establish by December 2021 a shared framework for our system financial model and ongoing MTFP at place level within our Sussex ICS.  This will align with organisational budget-setting processes for future years and will include appropriate shifts in investment and relevant Discharge to Assess and Better Care Fund targets, as well as any risk share arrangements that may be developed to support new models of care.

·                Complete the review of Public Health and by March 2022 establish a delivery plan and governance arrangements to ensure all agreed proposals are delivered.

 

Governance Services

 

·                Ensure the successful election of 50 councillors at the County Council election in May. Target date – May 2021

·                Finalise and implement the induction and training programme for new councillors whilst maximising the experience and knowledge of returning councillors, including on decision making, business planning, the Code of Conduct for Councillors, equalities; and belonging to Outside Bodies. Target date – to complete the main induction programme by July 2021 and then ongoing training and development throughout the year.

·                Review the arrangements for virtual decision making in light of the lapsing of the Local Authorities and Police and Crime Panels (Coronavirus) (Flexibility of Local Authority Police and Crime Panel Meetings) (England and Wales) Regulations 2020 and clarification from the High Court. Target date for completion October 2021

·                Ensure decision-making arrangements and school admission appeal arrangements are revised to reflect any Regulations published during the year as a result of Coronavirus. Target completion date – ongoing throughout 2021/22

·                Complete the business risk assessment of the School Appeals Management System. Target date - August 2021

 

 

                               


ANNEX B

Separate bodies owned or set up by the County Council

A report from the Committee on Standards in Public Life included the following best practice recommendation: Councils should report on separate bodies they have set up or which they own as part of their annual governance statement, and give a full picture of their relationship with those bodies. Details regarding relevant bodies is set out below:

TRICS Consortium Ltd – TRICS is an international system of trip generation analysis that is used in the transport planning industry. TRICS collect data relating to trip rates of different land uses, with members paying to access the database to use the data for a variety of uses.

 

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

 

Woodland Enterprise Ltd. - The principal activity of the company is creating prosperity in woodland and wood using industries through sustainable development. The business works with woodcutters and other local businesses to promote sustainable use of wood.

 

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

 

Sea Change Sussex is a trading name of East Sussex Energy Infrastructure & Development Ltd (ESEID Ltd) – This is a not for profit economic development company delivering capital infrastructure schemes in the County

 

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

 

South East Local Enterprise Partnership Ltd (SELEP Ltd) - Local Enterprise Partnerships (LEPs) were set up by Government in 2011 to identify and support local strategic growth priorities, encourage business investment and promote economic development. As one of 38 LEPs across England, the South East LEP is a business-led partnership between business, government, education and the third sector, plus other groups, covering the local authority areas of East Sussex, Essex, Kent, Medway, Southend and Thurrock.

 

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.

                               


The Comprehensive Income and Expenditure Statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Council’s raise taxation to cover expenditure in accordance with statutory requirements; this may be different from the accounting cost. The taxation position is shown in both the Expenditure and Funding Analysis and the Movement in Reserves Statement.

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

 

 

 

 

  


 

 

 

The Movement in Reserves Statement shows the movement from the start of the year to the end on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure and mitigate risk and impact of unplanned events) and other ‘unusable’ reserves. It shows how the movements in year of the reserves are broken down between gains and losses incurred in accordance with generally accepted accounting practices and the statutory adjustments required to return to the amounts chargeable to council tax for the year. The Net Increase/Decrease line shows the statutory General Fund balance and Schools balance movements in the year following those adjustments.

 

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

 

 

 

 

 

 

 

 

 

 

 

2020/21

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 2020 - Notes 24 and 25

9,999

15,041

124,697

149,737

3,044

14,132

166,913

218,701

385,614

Movement in Reserves during 2020/21

 

 

 

 

 

 

 

 

 

Total Comprehensive Income and Expenditure

(77,611)

-

-

(77,611)

-

-

(77,611)

(16,894)

(94,505)

Adjustments between accounting basis & funding basis under regulations - Note 7

139,558

-

-

139,558

2,796

3,191

145,545

(145,545)

-

Net Increase / (Decrease) before Transfers to Earmarked Reserves

61,947

-

-

61,947

2,796

3,191

67,934

(162,439)

(94,505)

Transfers to / (from) Earmarked Reserves - Note 10

(61,947)

5,471

56,476

-

-

-

-

-

-

Increase / (Decrease) in Year

-

5,471

56,476

61,947

2,796

3,191

67,934

(162,439)

(94,505)

Balance at 31 March 2021 - Notes 24 and 25

9,999

20,512

181,173

211,684

5,840

17,323

234,847

56,262

291,109

               

 

 

 

 

 

 

 


The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the authority (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use.  The second category of reserves represents those that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’.

31 March 2020

 

 

 

31 March 2021

£000

 

 

Note

£000

962,855

 

Property, Plant & Equipment

14

937,556

652

 

Heritage Assets

17

654

11,063

 

Investment Property

15

11,151

4,745

 

Intangible Assets

16

3,505

24,494

 

Long Term Investments

18

19,462

4,960

 

Long Term Debtors

20

4,893

1,008,769

 

Long Term Assets

 

977,221

 

 

 

 

 

182,024

 

Short Term Investments

18

223,058

2,624

 

Assets Held for Sale

19

12,121

9,237

 

Payments in Advance

20

9,040

22

 

Inventories

 

22

52,803

 

Short Term Debtors

20

56,310

18,272

 

Cash and Cash Equivalents

21

45,908

264,982

 

Current Assets

 

346,459

 

 

 

 

 

(26,419)

 

Income in Advance

22

(25,161)

(2,312)

 

Short Term Borrowing

18

(4,615)

(8,425)

 

Bank overdraft and Accrued balance for third parties

21

(6,252)

(5,444)

 

Provisions

23

(4,565)

(102,780)

 

Short Term Creditors

22

(107,291)

(145,380)

 

Current Liabilities

 

(147,884)

 

 

 

 

 

(416,868)

 

Liabilities related to defined benefit pension schemes

42

(559,382)

(11,364)

 

Provisions

23

(10,344)

(237,923)

 

Long Term Borrowing

18

(232,980)

(9,551)

 

Capital Grants & Contributions Receipts in Advance

35

(15,412)

(67,051)

 

Other Long Term Liabilities

40

(66,569)

(742,757)

 

Long Term Liabilities

 

(884,687)

385,614

 

Net Assets

 

291,109

 

 

 

 

 

166,913

 

Usable Reserves

24

234,847

218,701

 

Unusable Reserves

25

56,262

385,614

 

Total Reserves

 

291,109

 

I certify that this Statement of Accounts provides a true and fair view of the financial position of the Council as at 31 March 2021 and its Comprehensive Income and Expenditure Statement for the year then ended.

 

 

 

 

 

Ian Gutsell

Chief Finance Officer (Section 151 Officer)

The Governance Committee approved the Statement of Accounts on 30 September 2021


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

 

 

2019/20

 

 

2020/21

£000

 

£000

45,257

Net deficit on the provision of services

77,611

(123,612)

Adjustments to net deficit on the provision of services for non-cash movements

(207,881)

61,556

Adjustments for items included in the net deficit on the provision of services that are investing and financing activities

71,925

(16,799)

Net cash inflow from Operating Activities - Note 26

(58,345)

14,403

Investing Activities - Note 27

25,274

9,958

Financing Activities - Note 28

3,262

7,562

Net (increase) / decrease in net cash and cash equivalents - Note 21

(29,809)

 

 

 

(17,409)

Net cash and cash equivalents at the beginning of the reporting period - Note 21

(9,847)

(9,847)

Net cash and cash equivalents at the end of the reporting period - Note 21

(39,656)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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 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.

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.


6.             Expenditure and Funding Analysis

 

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

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020/21

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

178,993

(18,704)

160,289

11,051

171,340

Public Health

-

(3,576)

(3,576)

394

(3,182)

Governance Services

6,888

(2)

6,886

808

7,694

Children’s Services

88,727

(13,428)

75,299

78,408

153,707

Business Services

24,065

(3,434)

20,631

10,669

31,300

Communities, Economy & Transport

57,781

(6,858)

50,923

51,425

102,348

Total

356,454

(46,002)

310,452

152,755

463,207

Corporate Expenditure

33,551

(24,799)

8,752

5,179

13,931

Net Cost of Services

390,005

(70,801)

319,204

157,934

477,138

Other Income and Expenditure from the Expenditure and Funding Analysis

 

 

 

 

 

Other Corporate Expenditure

20,339

8,854

29,193

41,781

70,974

Financing

(410,344)

-

(410,344)

(60,157)

(470,501)

Total

(390,005)

8,854

(381,151)

(18,376)

(399,527)

Deficit for the Year

-

(61,947)

(61,947)

139,558

77,611

 

 

 

 

 

 

General Fund Balance at 1 April 2020

 

 

(9,999)

 

 

Add: Surplus for the Year

 

 

(61,947)

 

 

Less: Transfer to Reserves

 

 

61,947

 

 

General Fund Balance at 31 March 2021

 

 

(9,999)

 

 


(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