East Sussex County Council Annual Governance Statement 2022/23

Executive Summary

The Annual Governance Statement (AGS) explains the processes and systems which give assurance for the effectiveness of the County Council’s discharge of its responsibilities. It covers the period 1 April 2022 to 31 March 2023.

A summary of assurance is given for each of the seven principles on which the Statement is based.

The Purpose of the Governance Assurance Framework

1. East Sussex County Council (the ‘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 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.

2. In discharging this overall responsibility, County Councillors (‘Members’) and senior officers are responsible for putting in place proper arrangements for the governance of the 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, the Council has approved and adopted a Local Code of Corporate Governance (the ‘Local Code’), which is consistent with the principles of the Chartered Institute of Public Finance and Accountancy (CIPFA)/ Society of Local Authority Chief Executives and Senior Managers (SOLACE) Framework Delivering Good Governance in Local Government. A copy of the Local Code is on our website and is set out in Annex C. This Statement also sets out how the 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.

3. 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.

4. The Local Code can provide only reasonable and not absolute assurance that the Council achieves its aim of good governance. Equally, the Council’s system of internal control is designed to identify and prioritise the risks to the achievement of 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.

5. The Local Code and the system of internal control have been in place at the Council for the year ended 31 March 2023 and up to the date of the approval of the statement of accounts.

6. The East Sussex County Council Framework for the Annual Governance Statement is set out at Annex D.

Review of effectiveness

7. The 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 (SOG);

· 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, ongoing 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 and Social Care Ombudsman, the Care Quality Commission and the Office for Standards in Education.

Key elements of the governance and internal control environments

8. 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 CIPFA’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 and Contract 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 whistleblowing, 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.

The Governance Assurance Framework Principles

9. There are seven principles and sub-principles of Corporate Governance adopted by the Council, as set out below. Assurance for how they are met is provided in the text below each principle in this Statement. Whilst descriptions of how the principles are met are included in each section, this Statement should be viewed in its entirety as there is overlap between the principles and how they are met. Further work to be done is highlighted and set out at Annex E.

Principle	Description of Principle
A	Behaving with integrity, demonstrating strong commitment to ethical values and respecting the rule of law.
B	Ensuring openness and comprehensive stakeholder engagement.
C	Defining outcomes in terms of sustainable economic, social and environmental benefits.
D	Determining the interventions necessary to optimize the achievement of the intended outcomes.
E	Developing the entity’s capacity including the capability of its leadership and the individuals within it.
F	Managing risks and performance through robust internal control and strong public financial management.
G	Implementing good practices in transparency, reporting and audit to deliver effective accountability.

The County Council’s Governance Framework

10. The governance framework covers the allocation of functions, the rules for how they are carried out and the mechanisms for tracking that this happens correctly. The relationship of responsibilities is shown here:

Diagram Description automatically generated

Section A: Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law

Assured

The Council has high standards for sound governance as set out in law and government guidance. It promotes a culture of compliance.

The Council’s codes of conduct set out expectations and requirements for behaving with integrity for both Members and officers. Action was taken to promote these and provide assurance that they continue to be implemented fully and correctly.

11. The Governance Committee oversees the democratic arrangements of the Council and reviews and advises Full Council on the Constitution. The Responsibility for Functions (including the Scheme of Delegation) and Standing Orders require Members and officers to ensure that all decisions are compliant with internal policies and procedures, as well as with the law. These help ensure transparent decision-making, giving authority and certainty to the allocation of responsibilities as set out in the Constitution.

12. Part 5 of the Constitution contains the Code of Conduct for Members. A parallel Code of Conduct for officers sits in the suite of employee policies. The Council has also adopted policies relating to responsibilities for ethical behaviour including equality and sustainability, such as the Equality of Opportunity and Diversity Policy Statement. Decision-making is supported by advice from officers and internal guidance that should ensure compliance with these policies.

13. The statutory roles of the Chief Financial Officer (s.151 officer) and the Monitoring Officer are set out in the Constitution and in the scheme of delegation. They provide oversight of propriety and lawfulness. They have a direct reporting line to the Chief Executive and are involved in all major decision-making as part of the Corporate Management Team, as well as being signatories to all key and other significant decisions.

14. The codes of conduct define the standards of behaviour for Members and officers. All Members undertake training from the Monitoring Officer on the Member Code of Conduct. Member conduct is monitored by the Standards Committee, which has a remit to deal with complaints of breaches of the Member Code of Conduct. All Members complete the register of interests and receive quarterly reminders on the subject of personal interest declarations, and it is a standing item on all formal meeting agendas for both officers and Members. In relation to the appointment of Members to outside bodies, the Council will avoid structural conflict of interests where possible.

15. The Council has a whistleblowing policy to offer a route for challenges to processes or actions within the Council where complainants need confidentiality. The use and effectiveness of the policy is overseen by the SOG made up of the Chief Executive, Monitoring Officer, Chief Finance Officer, Chief Internal Auditor, Assistant Director for HR, and the Chief Operating Officer.

16. A system for recording officer interests, including gifts and hospitality, is in place and kept under review. A review of the system was undertaken in 2020 and actions were identified to improve the current system. The system was purchased from an external company who developed the operating software which no longer supports the software. The Council is in the process of implementing a new Enterprise Resource Planning software system as part of the Modernising Back Office Systems (MBOS) programme and it is hoped that the new system will address the issues identified with the current system. The SOG receives regular reports on the system and the progress on implementing the actions identified.

17. The Council’s Procurement and Contract Standing Orders and the Financial Regulations and Procedures provide rules for lawful and sound processes for contract and spending decisions. These are managed by the Chief Operating Officer, Monitoring Officer, and Chief Financial Officer in consultation with the Governance Committee. These Standing Orders help ensure transparency and a Governance framework in relation to how decisions are made.

18. The Officer Scheme of Delegation is held under regular review by the Chief Executive and the Monitoring Officer, with any new delegations needing the agreement of the Leader of the Council (for executive functions) or the Governance Committee (for non-executive functions).

Section B: Ensuring openness and comprehensive stakeholder engagement

Assured

The Council exists to serve its residents and is dependent on a wide range of stakeholders for working effectively in partnership.

Consultation and engagement mechanisms are in place and are used effectively.

The Council has clear decision-making processes and rules and procedures to enforce them which emphasise openness and transparency.

Decision-making and Scrutiny

19. The Council is the principal decision-making body and forum for political debate. All Council meetings take place in public and are webcast. The Council sets the strategic aims that form the Policy Framework and determines the Council’s budget following a well-developed process of Member engagement and scrutiny.

20. The Executive (Cabinet) takes decisions on most matters of Council policy and service delivery. The non-executive responsibilities of the Council are discharged through its non-executive committees as described in the Constitution. The Council appoints Members to Scrutiny Committees, by which Cabinet is held to account through Member overview and scrutiny. Scrutiny Committees are politically proportionate. Chairs and Vice-Chairs are appointed by Full Council. Influential scrutiny is achieved by ensuring the Scrutiny Committee’s involvement in the Reconciling Policy, Performance and Resources (RPPR) process and having significant decisions or proposals previewed. Proposals may also be called in for scrutiny after a decision has been proposed in final form. The Council has determined that all Scrutiny Committee meetings take place in public and be webcast. An overview and summary of the work of the Scrutiny Committees is reported to the Governance Committee on a 6 monthly basis.

21. The Forward Plan describes all significant (key) decisions planned to be taken in the following four months and is published and updated at least monthly. The Forward Plan is used by Scrutiny Committees to help plan business. As decisions become more significant in terms of service changes and savings proposals there is a greater need to ensure early awareness by, and engagement with, all Members.

22. Decision-making operates with a presumption of openness. Cabinet, Lead Member and committee meetings are held in public. Members of the public can subscribe to email updates on Council committee meetings in which they have expressed an interest. Agendas and reports for Cabinet and committee meetings, unless considered exempt from publication, are published at least five clear working days in advance – exceptions are explained in public documents.

23. Decisions and agendas are held on the Council’s website. The content management system, Modern.Gov, is the principal method of publishing the Forward Plan, decisions, agendas, and minutes. Members and staff have portable devices which can easily access Modern.gov information. The Constitution also prescribes the rules and constraints around urgent decisions (including those not notified in the Forward Plan). Key decisions taken under special urgency provisions (as set out in the Constitution) are reported to the Council. The report to the Council includes a summary of the decisions taken under these provisions.

24. To retain the benefits identified through remote meetings, the Council has agreed the following measures, which are permitted under existing legislation:

Full Council– All Council Members must attend in person.

Cabinet – all Members of the Cabinet must attend in person. Officers and other Members (including opposition spokespersons and local Members), as well as petitioners are permitted (with the agreement of the Chair) to attend and speak remotely.

Planning Committee – All Members of the Committee must attend in person. Officers and members of the public or local Members making representations are permitted to attend remotely.

At the Council’s Panels and Committees (including Governance Committee, Pension Committee, Scrutiny Committees, Audit Committee and Health and Wellbeing Board) – Committee and Panel Members must be present in person (unless legally permitted to attend remotely). Other participants, including officers and advisors, may attend remotely.

Pension Board– may be wholly remote or a hybrid meeting with some Members present physically and others remotely at the Chair’s discretion.

Lead Member decisions are not subject to the same legislation that applies to the majority of Council and committee meetings (i.e., that requires the Members of those committees to meet in person). The Council agreed that Lead Member decisions can continue to be made remotely on an ongoing basis, subject to the discretion of the Lead Member to hold a physical meeting if preferred. Other Members, with the agreement of the Lead Member, are able to attend and speak virtually at Lead Member meetings, whether the meeting itself is a remote or a physical meeting. All Lead Member meetings held remotely are webcast to facilitate public access and provision is made at County Hall for those members of the public who may not have access to the webcast to be able to watch it.

25. These changes have, where appropriate, been reflected through updates to the Constitution approved by the Governance Committee. Currently no long-term changes have been included in Regulations from the government.

26. Communication to the public is via the Council’s website, in public meetings, and through social media. The Council’s corporate website has been updated with new page templates to ensure it is modern, easy to use, and meets new legal requirements to ensure content is accessible to as many people as possible. A transition to the new, accessible corporate pages was completed in May 2022. Work is also continuing to make all historical websites, microsites and applications meet accessibility requirements. Given the size of the Council’s web estate, this is expected to take some time.

Stakeholders and Partnership

27. The Council works with a range of stakeholders. This includes a range of public bodies, local authorities, the NHS, and Sussex Police. Other tiers of local government are important partners in many areas of service delivery, strategic planning, and community development. There are both formal and informal forums in place for regular liaison with elected Members and senior officers in the district and borough councils, including regular meetings of all the leaders of the councils (East Sussex Joint Leaders Meetings), to discuss issues of common interest, and regular meetings of all chief executives, including the Chief Fire Officer, Chief Superintendent and the Chief Executive of East Sussex College Group (East Sussex Chief Executives Group). The Leader and Chief Executive of the Council are members of the East Sussex Strategic Partnership, which brings together public services, local businesses, community groups, and Voluntary, Community and Social Enterprise (VCSE) sector organisations to work together in a co-ordinated way to plan local services, tackle issues that matter to residents, and improve quality of life in East Sussex.

28. Regular meetings with other partners, most notably the NHS Clinical Commissioning Group and local NHS Providers, are held at various levels between officers to oversee operational, commissioning and service planning. For several years the Council has operated a joint service commissioning and pooled budget agreement with the NHS to cover a range of social care and NHS services, principally through the Better Care Fund.

29. Due to changes in NHS configuration, including the creation of a pan-Sussex Integrated Care System (ICS) to replace Clinical Commissioning Groups and the formation of an Integrated Care Partnership (ICP), revised member representation on these groups has been confirmed prior to commencing in July 2022. The Leader of the Council is a member of the statutory Sussex Health and Care Assembly (the ICP) in his role as Chair of the East Sussex Health and Wellbeing Board, the principal forum for health and social care liaison and partnership. By agreement of the Chief Executives of each of the Councils, the three upper tier Councils in Sussex (namely East Sussex County Council, West Sussex County Council and Brighton and Hove City Council) are represented on the NHS Sussex Integrated Care Board (the ICB) by the ESCC Director of Adult Social Care and Health, the BHCC Director of Children’s Services and the WSCC Director of Public Health. Each Officer provides a collective view from their professional peers drawn from across all three councils.

30. The systems and arrangements for joint commissioning on an East Sussex and pan-Sussex basis were reviewed during 2022/23. The terms of reference and membership of the Health and Wellbeing Board were updated in July 2022 and again in September 2022 to reflect the new NHS statutory arrangements and the membership changes this required. The Board monitors the progress being made through integrated working between the local NHS, East Sussex County Council and wider partners in the district and borough councils and the VCSE sector. During 2022/23 members of the HWB worked together to lead and agree a refresh of our five-year rolling strategy ‘Healthy Lives, Healthy People’ (2022 – 2027), which was approved by the HWB in July 2022. A set of shared priorities are governed as four strategic integration programmes all aimed at delivering improved health, care and wellbeing and reduced health inequalities, based on the needs of our population. A specific emphasis is given to increasing prevention and early intervention and delivering personalised, integrated care across services for children and young people, mental health and community services for adults and older people with long term complex care needs and multiple conditions. Work in these programmes also supports improved delivery of NHS objectives for urgent care and planned care and greater access to service availability locally. The programmes are delivered by the East Sussex Health and Care Partnership which brings together the local NHS, ESCC, and voluntary and community sector and district and borough council partners.

31. Building on this between August 2022 – December 2022 the shared overarching Sussex Integrated Care Strategy ‘Improving Lives Together’ was developed. This was built on the three Joint Strategic Needs Assessments and HWB Strategies for the populations of East Sussex, West Sussex and Brighton and Hove, as the three Places in the Sussex ICB footprint, and aligns around a shared vision for communities supported by a critical focus on priorities for our workforce, the use of IT and digital and health and wellbeing across the whole life course, and particularly the early years of life. As a result, the East Sussex HWB was able to fully endorse Improving Lives Together on 13 December, prior to the wider Sussex Assembly approving it on 14 December 2022.

32. The Council has set out its commitment to working in partnership with residents, businesses, communities, the VCSE sector, and local authority partners through a number of initiatives. It has a set of partnership principles with the VCSE sector for the commitment to more effective ways of working together, building stronger alliances, and empowering joint action.

Consultation and engagement in East Sussex

33. The Council is committed to working with residents, businesses, communities, service users, and partners to help prioritise what it does, to give them a say over the approach and to have the chance to get involved in delivery and change. This requires sound arrangements for engagement and consultation.

34. The Council uses a variety of ways to engage residents and other stakeholders - publications (printed and digital), press releases and social media to keep people informed of plans or decisions, and engagement via questionnaires, public events, workshops, focus groups, satisfaction surveys and feedback forms.

35. The Council is developing a communications strategy setting out how ESCC’s communications are designed to support the council’s priority outcomes and keep residents well informed of services, information and activities that may be useful to them, which will be available for public inspection.

36. Consultation and Engagement Quality Assurance is managed within departments. Services must develop projects which are robust and produce reliable valid data upon which decisions can be made.

Formal consultation

37. Formal consultation will generally only be undertaken where there is a statutory duty or legitimate expectation and where there is a service or policy need to do so. Consultations are carried out in accordance with current national Consultation Principles guidance and, where applicable, the Council’s ‘Statement of Community Involvement’. Individual services are required to maintain open channels of communication with relevant stakeholder groups and representative bodies where relevant to service planning.

38. All formal public consultations and engagement projects are made accessible online using the ‘Citizen Space’ consultation hub software. Other formats are available on request. They are also published on the Council’s News and Press Release webpages. The Council ensures compliance with the public sector equality duty when processing and securing formal key decisions. The Council has taken steps to improve consistency and appropriateness of use of Equality Impact Assessments, and the template documentation for Key Decisions has been updated to include a prompt for officers to consider Equality implications. Further attention is required to ensure consistent compliance across all types of decisions.

39. The information gathered is analysed and considered as part of the decision-making process. Analysis reports and decisions are made available on the ‘Citizen Space’ engagement hub webpages as a means of ensuring clarity and increasing public trust in decision-making processes.

40. All elected Members, as part of their induction, were offered Equality, Diversity, and Inclusion in Leadership training to enable them to recognise the considerations that underpin fair decision-making in the Council and to ensure they can fulfil their legal obligations under the Equality Act 2010. All elected Members, as part of their induction, were offered “Let’s Talk Equality” training which explored language and terminology around equality characteristics as well as training on Census 2021 equality data.

41. The Council has established a new Corporate Equality Board, the purpose of which is to champion and support the integration of Equality, Diversity and Inclusion in day-to-day business throughout the Council’s services and to help secure its vision of creating services that understand and effectively respond to our local communities. The Board meets every two months and is chaired by the Assistant Chief Executive. Through the Board, the Council has developed an Equality, Diversity & Inclusion Action Plan for the period 2023-24. The Action Plan defines the next important steps the Council will take to embed Equality, Diversity and Inclusion into our culture and business as usual. It covers four themes:

· Leadership on equality and demonstrating commitment;

· Using data and engagement effectively to make improvements;

· Quality services taking into account diverse needs of local people;

· Diverse workforce with equality confidence, knowledge and skills.

The Council has adopted new equality objectives as part of our public sector equality duty compliance.

42. The Council has a Petitions Scheme describing how petitions from residents are dealt with by the Council. These enable a petitioner to speak with a Cabinet Member or at a committee, or to the Council if prescribed thresholds for signatures are reached. A response is made to each petition, explaining what the Council will or will not do in response.

SECTION C: Defining outcomes in terms of sustainable economic, social, and environmental benefits

Assured

The Council has established arrangements to define outcomes and monitor performance against agreed measures. These cover the strategic aims for supporting the economy, complement the social value policy of the Council and are built against a theme to address sustainability to support the Council’s climate change commitments.

In setting policies and strategies, the Council takes a long-term view of outcomes, taking into account sustainable economic, social, and environmental aims and has effective, comprehensive performance monitoring in place.

The corporate document ‘the Council Plan’ was adopted by the Council in February 2023. The Plan covers the period 2023-26 and performance has and will continue to be monitored in a structured, timely and transparent way by the leadership team, by Cabinet Members and through Scrutiny Committees.

43. The Council Plan 2023-2024 outlines the priorities for the Council over the next three years and how they are to be assessed in terms of delivery and measures to monitor performance. It was agreed by Full Council in February 2023 and is subject to quarterly performance monitoring by Cabinet and Full Council. The Council Plan was developed by the Cabinet and Corporate Management Team with the engagement of elected Members, Scrutiny Committees, and officers at all levels. Measures and targets were developed and approved as part of the agreed plan and are published online as well as being reported and scrutinised in public.

44. Active monitoring of performance is undertaken through regular reviews of business plans and with all staff through individual staff performance conversations. These arrangements link to performance and regular reviews of business plans. The Cabinet reviews the Quarterly Monitoring Report on a quarterly basis and this is reported to Full Council.

45. The Council is committed to championing the economy of the area. One of its priorities is to ensure East Sussex is a prosperous place and for the County to continue to thrive through supporting businesses. The County Council is developing with partners a new Growth Strategy for East Sussex. The previous Growth Strategy covered the period between 2014 and 2020, and was followed by an Economy Recovery Plan which was a short term plan to aid the recovery of the East Sussex economy following the Covid 19 pandemic. The new strategy will need to consider and take account of a number of factors before it is finalised, and an action plan is developed.

46. The factors are numerous and wide-ranging, and include:

· cost of living challenges brought about by a downturn in the UK economy and rising energy prices;

· the longer term impacts of the pandemic on working patterns and productivity;

· tackling climate change, decarbonising economic sectors to reduce emissions;

· a lack of available, and suitably skilled workers in most sectors; and

· a changing landscape of Government funding programmes for economic development.

The new Growth Strategy will be developed in partnership, principally with Team East Sussex, the de facto growth board for the county. The board has representatives from the business community, District & Borough Councils, skills and education providers and the voluntary and community sector.

47. Following the Council’s Notice of Motion on climate change, agreed in September 2019, a Climate Emergency Plan was formulated with the aim for the organisation to achieve carbon neutrality from its activities as soon as possible and in any event by 2050. A revised climate action plan for the period 2022-25 was adopted in February 2023 after Member engagement and scrutiny.

48. An internal Officer Climate Emergency Board is in place to lead and oversee the delivery of our climate change action plan. The Board reports on progress each year to Full Council. A dedicated budget of £9.587 is in place to deliver the action plan, supplemented by £1.9m of successful bids for external funding.

49. In 2022/23, the Council’s climate programme was the subject of an Orbis internal audit report. The report concluded ‘Partial Assurance’ in respect of the climate change governance and project management arrangements in place, identifying several key risks. The Climate Emergency Board are monitoring these risks via the quarterly reporting process for the Climate Emergency Plan.

50. The creation of the Council Plan 2023/24 is underpinned by the ambitions of the Council in responding to the challenges of climate change. All Directorates have reflected this ambition in their 2022/23 Portfolio Plans with a view to embedding the ownership of climate change activity across the organisation. Quarterly reporting to Cabinet and monthly management reporting (internal) will highlight progress on key climate change indicators.

51. The Council adopted a new Social Value Policy in September 2022 which seeks to infuse Social Value into the Council’s culture through Good Commissioning, Good Procurement and Good Contract Management. To help bring the policy to life and promote best practice, a Social Value Review Group has been established which consists of a group of subject matter experts that are able to identify the needs of the local communities and establish strategies to help us meet those needs. This enables the Council to deliver real, meaningful value to local communities and residents.

52. The Place Scrutiny Committee carried out a Scrutiny Review of Procurement in 2022/23 which focussed on Social Value and ‘Buying Local’ policies and procedures. The Review considered a wide range of evidence and was also able to comment on and endorse the Social Value Policy. The Review found that a great deal of work has been undertaken to make sure the Council’s Social Value requirements are well understood and considered at an early stage of the procurement process, and that the Buying Local policy area and processes are well developed and meeting the Council’s targets.

53. The Review made nine recommendations for improvements to the Council’s approach to Social Value which include: continued engagement and training on social value requirements; improvements in monitoring the delivery of social value commitments; changes to strengthen linkages between social value requirements and achieving the Council’s objectives; changes in the Council’s approach to carbon reduction and climate change measures; and a recommendation to conduct a trial with the Adult Social Care and Health department to pilot a more qualitative approach to measuring social value, which may have benefits for the Council, local communities, our Voluntary, Community and Social Enterprise partners.

SECTION D: Determining the interventions necessary to optimise the achievement of the intended outcomes

Assured

The Council takes decisions on interventions based on the priorities agreed in the Council Plan. In areas identified for improvement systems for governance, oversight, and scrutiny of interventions will continue to be given particular focus.

54. All Directorates are expected to prepare and monitor Portfolio Plans which set out the actions required to meet the outcomes set in the Council Plan and the measures, targets and milestones used to monitor their delivery. These are in place and progress is reviewed regularly by Departmental Management Teams (DMTs) alongside financial performance and the directorate’s risk register. The Portfolio Plans are refreshed each year as part of the annual update of the Council Plan.

55. The Quarterly Monitoring Report provides details of our performance against our objectives in the Council Plan. The Cabinet and Full Council review performance through quarterly monitoring and the work of the Scrutiny Committees and Audit Committee.

56. The Quarterly Monitoring Report provides an overview of performance against the agreed priorities within the Council Plan and tracks financial performance and our strategic risks to ensure intended outcomes are kept in focus and expenditure controlled. The Quarterly Monitoring Report focuses on the delivery of:

· Council Plan and Performance Measures;

· Medium Financial Term Strategy and in-year budget;

· Strategic Risk Management.

57. Executive decision reports provide a public record of all significant decisions to implement service plans and spend. They are required to show the intended outcomes, the rationale for the proposal, implications for Council resources, other options considered, advice received, consultation undertaken and how risks are managed.

58. A number of officer boards chaired by senior officers ensure oversight of strategic areas of Council business on behalf of the Corporate Management Team. These boards co-ordinate subject matter expertise as well as overseeing arrangements for the delivery of priorities at an officer level, prior to Member consideration. They include the Corporate Equality Board, the Corporate Climate Emergency Board, the Communications Management Board, the Corporate Digital Board, the Customer Experience Board, the Capital Board and the HR Management Board.

SECTION E: Developing the entity’s capacity, including the capability of its leadership and the individuals within it

Assured

Officers and Members are expected to have a clear sense of their purpose, roles, and responsibilities in line with the Council’s vision and the suite of policies and processes which support it.

The Chief Executive and the Corporate Management Team manage the Council’s workforce, skills and resource planning. All officers are expected to have their performance monitored and their development needs identified and addressed. Specific attention is paid to programmes for leadership development. Work continues to enable the Council’s leaders to promote a positive and supportive culture and to provide the means of enhancing or reinforcing good leadership skills.

The Council launched a new leadership programme (Ladder to Leadership) in May 2022 to encourage junior/mid-level managers to develop the skills required for senior leadership positions. This included coaching, mentoring and masterclasses focussed on leadership styles and strategic leadership as well as the opportunity to work on inter-departmental projects. All senior leaders are also offered a series of masterclasses designed to support the development of Heads of Service and Assistant Directors. These masterclasses provide insight into key topic areas that are relevant for strategic leadership in the public sector.

A system is in place to ensure that all elected Members have an understanding of their roles and responsibilities when appointed or elected to particular positions within the Council. Members are expected to be able to fulfil the expectations and demands of their roles as local Members and those positions to which they may be appointed. Areas of focus for review are identified. Members have received training and support to help them to focus on the strategic nature of their roles.

59. Arrangements for the Council’s Member appointments to specific roles are open and set out in the Constitution. The Council elects the Leader who decides the composition and responsibilities of the Cabinet. The Council makes appointments to all committees. Changes can be made at each Full Council meeting. All terms of reference are published. There is a system for reviewing and refreshing all constitutional terms of reference for committees and boards which transact Council business.

60. Member roles – Executive and non-executive roles are defined and published within the Constitution on the Council’s website and as part of the Members’ Area of the intranet. The Member induction and training programmes cover these roles. All Member development sessions have attendance and feedback recorded.

61. The knowledge and development needs of Members are identified and addressed through a cross-party Member Reference Group (MRG). The MRG oversees the delivery of a planned programme of development to meet Member training needs, taking into account Members’ views on priorities through surveys and feedback. It reviews the impact of Member development work and identifies areas for improvement.

62. All Members have been provided with access to training sessions designed to help them focus on their strategic roles. Courses delivered include Audit, understanding the Council’s Finances, the RPPR process, East Sussex Highways, Emergency Planning, the Local Transport Plan and various scrutiny sessions. Members also received training on their duties around Confidentiality and the Code of Conduct.

63. Specialist training is given to Members according to the roles they carry out. This includes training for Cabinet Members, Members appointed to the Scrutiny Committees and Members of the Regulatory Committee, Audit Committee, Planning Committee, Pensions Committee and Appeals Panels. Enhanced DBS checks are carried out for Members in Adult and Children’s Services related roles, with an online training module also available. As part pfthe Member Induction, training was also provided to ensure awareness of Information Governance and data protection responsibilities as they apply to elected Members. Members also received guidance on cyber security.

Officers

64. Statutory roles include the designation of the Chief Executive as Head of Paid Service, the Assistant Chief Executive as the Monitoring Officer and the Chief Finance Officer as s.151 officer. Other critical statutory and leadership roles and their responsibilities are described in the Council’s Constitution. These include the Director of Children’s Services, the Director of Adult Social Care (ASC) and the Director of Public Health. All Directors are formally required each year to give assurance as to their compliance and that of their Service with a range of requirements and expectations of them as senior leaders within the Council.

65. All levels of management within the Council have a designated role profile and these profiles are accessible via the Council’s intranet. Officers are given copies of their roles on appointment and are supported through induction training, their personal development review and supervision in understanding and developing their roles. Internally published HR procedures cover all aspects of performance and procedure to support managers.

66. Personal development priorities are agreed through a personal development review process. There is an established programme of induction training for new staff. Training is available increasingly through an online learning system. Leadership skills and development for senior officers is led by the Assistant Director of Human Resources and Organisational Development.

67. Issues of capacity and service resilience to ensure service effectiveness are covered through workforce planning as part of directorate business planning. Being an employer of choice is key to ensuring the Council can attract and retain the high calibre staff it needs. There are a number of initiatives underway that support this, including:

· the implementation of hybrid working arrangements as part of the Workstyles review;

· the launch of a new employer recruitment brand – ‘We Choose East Sussex’;

· a range of targeted recruitment and retention strategies including a ‘Refer a Friend Scheme’, ‘Apprenticeships Incentives Policy’, an updated relocation policy, salary sacrifice schemes, employee loans policy and financial wellbeing resources;

· targeted actions such as the use of market supplements etc. for specifically identified job roles where a particular focus is needed;

· the development and adoption of the corporate Equality, Diversity and Inclusion Action Plan 2023/24 which includes a number of workforce specific actions to support having a diverse workforce.

SECTION F: Managing risks and performance through robust internal control and strong public financial management

Assured

Risk management is robust overall and risks are being considered during business planning and decision-making processes, corporately and across all services.

Service and corporate performance management has been addressed in earlier sections of the report.

The Council has robust internal financial controls in place, displays strong public financial management and operates systems to manage risks and performance in the most effective manner.

68. The Constitution sets out the rules to ensure robust internal control over the Council’s finances. The system and arrangements for financial performance management and budget monitoring demonstrate sound internal monitoring and control and have formal and well published arrangements for Member and officer oversight and transparency.

69. The system of internal financial control is based upon a framework of comprehensive financial regulations and procedures which comply with the CIPFA ‘Good Practice Guide for Financial Regulations in a modern English Council’. Control is maintained through regular management information, supervision and a structure of delegation and accountability. External audit of the Council’s accounts in 2021/22 concluded that arrangements remained robust. The external audit for 2022/23 is in the process of being concluded so the opinion has not yet been given. The Council’s financial management arrangements conform to the governance requirements of the CIPFA ‘Statement on the Role of the Chief Financial Officer in Local Government 2010’. A continuous review is maintained. The Financial Regulations and Procedures are kept under review by the Chief Finance Officer.

70. In completing and signing the Directorate Assurance Statement, each Chief Officer reviews the effectiveness of governance arrangements, risk management processes and the system of internal control and considers:

· The adequacy and effectiveness of management review processes;

· The work of the department’s management team and other managers and staff;

· The regular review of the department’s performance against both financial and non-financial targets;

· Outcomes from the strategic and operational risk management processes;

· The level of compliance with the Council’s key policies and procedures;

· Relevant internal audit reports and results of follow-ups regarding implementation of agreed actions in relation to audit findings; and

· Outcomes from reviews of services by other bodies including our external auditors, inspectorates and other statutory and regulatory review bodies.

71. Evidence of assurance given is supplemented in the Annual Assurance Statement for each directorate. These include actions for improvement.

72. The officer scheme of delegation is critical for the effectiveness of controls of spending and performance. Directors are required to ensure and confirm the effectiveness of the scheme of officer authorisation and have worked with the Assistant Chief Executive to ensure that there is shared understanding of the operation of delegations and the need to continually review them.

73. The County Council annually reviews the effectiveness of its governance framework including the system of internal control. The review is informed by the Chief Internal Auditor’s annual report and opinion 2022/23, by the external auditor and other agencies and inspectorates. These findings are brought together within this Statement and are reported annually to the Audit Committee. The Audit Committee undertakes the functions of an audit committee. This includes review of the work and findings of Internal Audit. The audit arrangements which support and reinforce financial controls and assurance are fully addressed under Principle G below.

74. The appropriate management of risk is a fundamental element of the Council’s ability to provide cost effective, quality services and to deliver its four priority outcomes. To achieve this, sound risk management policy and practice are firmly embedded within the culture of the Council, providing a proportionate and effective mechanism for the identification, assessment and, where appropriate, management of risk. In developing its Risk Management Framework, the Council recognises that risks cannot be fully managed and that, in being more innovative, efficient and effective in the delivery of its services, it may choose to take and/or accept more risk. Where this is the case, robust risk management practice will help ensure that the Council takes appropriately informed decisions, having properly evaluated the potential risks and the associated opportunities. The Council’s risk profile is dynamic and continually changing due to the influence of external factors and/or internal influences. The level of risk can alter and consequently, identified risks and associated mitigations are regularly re-assessed to address and combat the impact of these changes. In addition, new risks will periodically emerge which must be identified and analysed to reduce the Council’s exposure to adverse risk.

75. Risk information is recorded within registers maintained at a corporate (strategic) level and individual department/divisional level. As a minimum, all risk registers should be formally reviewed and updated on a quarterly basis as part of the Council monitoring process. This process includes a review of departmental risk registers by each DMT, including any strategic risks for which the Chief Officer concerned has responsibility, prior to subsequent review by the Corporate Management Team. The Strategic Risk Register is also reviewed and updated by the Corporate Management Team prior to being reported to Cabinet and the Audit Committee.

76. As part of the above process, consideration is given as to the escalation and de-escalation of risks between the Departmental and Strategic Risk Registers.

77. There is a separate requirement for material risks connected with proposals, policies and spending decisions to be formally identified with actions taken to manage such risks in all recorded and published decision reports.

78. Risk management is delivered through robust directorate controls including the business planning process, supported by the Risk Management Framework. The Chief Operating Officer carries the operational officer responsibility for risk management. The Chief Executive is accountable to the Council for the effectiveness of the risk strategy.

SECTION G: Implementing good practices in transparency, reporting and audit, to deliver effective accountability

Assured

The Council has transparent processes in place through publication of the Forward Plan of key decisions as well as agendas and reports of its meetings and those of its committees. This includes key decision reports on the website and the prominence given to reporting and enforcing of agreed audit actions through the Audit Committee, which meets in public.

The Council has effective, open data reporting arrangements to ensure the accessibility of significant spend, contractual and other data relevant to financial performance. This has also been addressed through the development of the performance management reporting arrangements linked to the implementation of the Council Plan.

79. All meetings of the Full Council and of the committees which discharge executive, non-executive or scrutiny functions take place in public and have their reports and minutes published on the Council’s website. Cabinet, Lead Member and Committee decisions, agendas and reports are published on the website and are available to the press and public. This is driven by the publication of the Forward Plan of key decisions. A limited number of reports are considered in private session, but only when the subject matter of the report meets the prescribed criteria set out in the Local Government Act 1972.

Assurance and Significant Governance Issues

80. The Audit Committee undertakes the functions of an audit committee. This includes review of the findings of Internal Audit. The Committee meets regularly and in public and holds officers to account for the timely implementation of agreed audit actions.

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

82. The Annual Internal Audit Annual Report and Opinion provides an opinion on the adequacy of the 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 Internal Audit Annual Report and Opinion. Based on the internal audit work completed, the Orbis Chief Internal Auditor has provided substantial assurance that the Council had in place an adequate and effective framework of governance, risk management and internal control for the period 1 April 2022 to 31 March 2023.

83. Additionally, every five years, Orbis internal audit is subject to an independent external assessment, with the scope including assessment of compliance, benchmarking against best practice and assessment of internal audit’s profile and impact with client organisations. The most recent review was completed in Autumn 2022 by the Chartered Institute of Internal Auditors who assessed Orbis internal audit as achieving the highest level of conformance against professional standards, with no areas of non-compliance identified.

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

85. 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.

86. Both governance and internal control arrangements must be kept under review to ensure that they continue to operate effectively, meet changing legislative needs and 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 in Annex A to this Statement, together with the department responsible for them. Each Director has included in their Directorate Assurance Statement confirmation that the actions identified for 2022/23 have been completed or provided an update and explanation regarding progress.

87. The National Audit Office (NAO) has issued guidance on how Audit Committees can carry out a self-assessment of the effectiveness of the Committee. The Council’s external auditors report for 2022/23 noted a strong attendance record for the Council’s Audit Committee members as well as the attendance of independent members which is representative of strong governance. The external auditor recommended the Council to carry out a self-assessment of the effectiveness of the Council’s Audit Committee as per the NAO guidance, which would be a strong means of reinforcing this good governance. The self-assessment will be undertaken in 2023/23 and will review the effectiveness of previous training as well as the robustness of discussion and challenge by the Audit Committee.

88. In 2022 CIPFA updated its position statement on audit committees in local authorities and police bodies in England and Wales. In the 2022 position statement, CIPFA recommends that each local authority audit committee should include at least two co-opted independent members to provide appropriate technical expertise. A recommended response to the position statement will be presented to Members for consideration in 2023/24.

89. A review of the AGS is currently being undertaken by Internal Audit for 2022/23.

90. 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 Annex A will be monitored through departmental business plans.

92. Details of bodies where the Council is a Member or appoints a Director are set out in Annex B. Where members are appointed to outside bodies, the Council avoids structural conflict of interests where possible.

Keith Glazier Leader of the Council September 2023

Becky Shaw Chief Executive September 2023

Annex A - Sources of Assurance and Actions

Key:

ACE = Assistant Chief Executive

ASC = Adult Social Care

CET = Communities, Economy and Transport

CFO = Chief Finance Officer

COO = Chief Operating Officer

HR&OD = Human Resources & Organisational Development

MRG = Member Reference Group

Table of assurance for Principle A: Integrity and Compliance

Source of assurance	Where found	Who is responsible	Role	last review/ action planned*
Constitution	Website and intranet	Full Council, Governance Committee and ACE	A single source for rules and procedure for lawful sound business and meeting management	Constitution has been reviewed and updated several times during 2022/23. Will continue to be reviewed on a regular basis
Code of Conduct for Members	Website, webshop for schools, intranet, Constitution	Standards Committee & ACE	Defines standards of behaviour and how to enforce them	Approved by the Full Council in May 2019. Reviewed by Standards Committee April 2022.
Code of Conduct for employees	Website, webshop for schools, intranet, Constitution	Governance Committee HR&OD	Defines standards of behaviour and how to enforce them	The Code of Conduct was last reviewed and updated in February 2022, and reflects current Council policy, best practice, and legislation. The changes in February 2022 were: · To state that any potential CoI should also be declared when assessing/evaluating contract tenders. The document is considered fit for purpose for 2022/23 and beyond.
Whistleblowing Policy	Intranet	Governance Committee & All Chief Officers	Defines process to report breaches of rules or standards confidentially	Reviewed March 2020 and no further changes in legislation.
Anti-fraud and corruption strategy	Intranet	COO	Statutory obligations recorded and enforced	A major review was undertaken in 2021 and the refreshed strategy and policy was approved by Audit Committee in 2021. The strategy remains fit for purpose and a refresh to the strategy will be considered following the publication of the revised Fighting Fraud & Corruption Locally Strategy (a guidance note for local authorities).
Anti-Money Laundering Policy	Intranet	COO	Statutory obligations recorded and enforced	Reviewed by Audit Committee 2021. Annual review of Policy and compliance as part of LEXCEL accreditation
Register of Member Interests	Website	ACE	Statutory list of interests	Entries updated on an ongoing basis. Quarterly reminders to Members to review.
Register of Officer Interests	Restricted access		Record of financial and conflicting business interests	On going review through regular reports submitted to SOG regarding system issues and actions
Corporate Complaints Policy	Website, intranet	Chief Executive & Governance Committee	Describes mechanism for handling all complaints	Reviewed annually. Quarterly reports raise awareness with heads of services and team managers of the number and nature of complaints being received. *Action to have an ongoing dialogue regarding sharing lessons learnt within the complaints team and colleagues handling complaints across the Council.
Employment Policies	Intranet	Governance Committee and Assistant Director HR&OD	Defines rules of conduct and procedures to manage	Policies reviewed in line with changes in legislation and best practice
Information Security and Data Protection Policy	Intranet	COO	Defines rules and procedures to protect data.	Reviewed and updated March 2023. *Improvements are informed by feedback from the Information Governance Board (IGB) and the Information Security & Governance Group (ISGG) Guidance documents have also been created to accompany policy. A training and awareness programme is ongoing which includes raising awareness of relevant policy. Training is deployed to ensure comprehensive awareness of information governance and security including tests of understanding.
Freedom of Information policy	Website	Director of CET	Defines rules and procedures	Policy reviewed in 2022/23. *Encourage services across the Council, on an ongoing basis, to make more information available on the website for the public.
Standing Orders on Procurement and Contracts	Website, Constitution	COO	To prescribe the rules for all contracts and procurement activity	Reviewed January 2022. The production of the Procurement and Contract Standing Orders are developed in conjunction with our stakeholders and our processes are subject to ongoing review. A series of procurement activities are selected for Audit across each financial year. In addition, we provide reports back to Statutory Officer’s Group on a regular basis about the processes we support.

Table of Assurance for Principle B: Openness and Stakeholders

Source of assurance	Where found	Who is responsible	Role	last reviewed/ action planned*
Scheme of Delegation	Website, Constitution	Full Council, Governance Committee & All Chief Officers	To fully define who takes what decisions and how and how recorded	Scheme updated in 2022/23. Action to continue to monitor and update. Ensure that Internal Schemes of Authorisation are updated accordingly
Forward Plan	Website	ACE	Describes planned key decisions for next 4 months	Ongoing
Scrutiny Committee business planning	Scrutiny Committee reports	Statutory Scrutiny Officer	Records planned scrutiny work	Continuous with annual work programme published with each Scrutiny Committee agenda
Openness and access to meetings/ decisions.	Constitution and Website	ACE	Describes rules and process for ensuring transparency of business	Web casting of meetings extended to all formal meetings during 2020 during Covid restrictions. Meetings held remotely continue to be webcast
Equality , Diversity and Inclusion Commitment	Website And decision-making protocol	Chief Executive. Relevant Director (for decisions) COO (for staff)	Source of guidance for ensuring compliance with public sector equality duty	Reviewed in 2023 and changed from the Equality Policy to Equality, Diversity and Inclusion Commitment.
Health and Wellbeing Board arrangements	Constitution	Director of ASC	Forum for strategic joint business and service oversight	Terms of reference were reviewed again in June 2022 to reflect ICS changes.

Table of Assurance for Principle C: Sustainability

Source of assurance	Where found	Who is responsible	Role	last reviewed/ action planned*
Our Council Plan	Website	Ful Council, Cabinet & Chief Executive	Describes the measure and targets for key corporate & service aims	The County Council agreed current Plan in February 2022. Quarterly reports to Cabinet and Full Council
Climate Change Strategy	Website	Director of CET	Sets Council’s commitment to becoming carbon neutral and climate resilient by 2050 at the latest	The Climate Emergency Plan was in 2020. Annual report on progress submitted to the Cabinet and Full Council January 2023.

Source of assurance

Where found

Who is responsible

Role

last reviewed/ action planned*

Our Council Plan

Website

Ful Council, Cabinet & Chief Executive

Describes the measure and targets for key corporate & service aims

The County Council agreed current Plan in February 2022. Quarterly reports to Cabinet and Full Council

Climate Change Strategy

Website

Director of CET

Sets Council’s commitment to becoming carbon neutral and climate resilient by 2050 at the latest

The Climate Emergency Plan was in 2020. Annual report on progress submitted to the Cabinet and Full Council January 2023.

Sources of Assurance for Principle D: Optimising Interventions

Source of assurance	Where found	Who is responsible	Role	last reviewed/ action planned*
Policy, Performance and Resources Reports	Website	Chief Executive & Cabinet and	Reviews policy and financial and operational performance	Regular reports to Full Council, Cabinet and Scrutiny Committees
Executive Decisions process	Website	ACE	To record rationale, legality and financial compliance of decisions	Format revised 2018. New publication system by Modern.gov 2018
Business Plans	Share Point	All Directors	Record of actions and objectives for delivery of Our Council Plan	Annual. Action taken to ensure better coordination of plans between Directorates implemented as part of Our Council Plan
Financial Regulations (FR) and compliance with Financial Management Code (FMC)	Website, Constitution	CFO	Provide sound systems for financial management	FR - Revision February 2019. Further review in May 2022. FMC – annual compliance report to Audit Committee

Sources of Assurance for Principle E: Leadership Capability

Source of assurance	Where found	Who is responsible	Role	last reviewed/action planned
Scheme of delegation	Website, Constitution	Full Council, Governance Committee, All Chief Officers	Formal allocation of key roles and functions, including Statutory and senior officers	Scheme updated several times in 2022/23. Action to continue to monitor and update. Ensure that Internal Schemes of Authorisation are updated accordingly.
Budget, including medium term financial plan (MTFP)	Reports to Cabinet and Full Council	County Council Chief Executive, CFO	To agree a sound budget and financial strategy	Budget set in February 2022. The MTFP is subject to review as part of the RPPR process
Member Training and Development	Councillors’ area of intranet	Governance Committee, MRG, ACE	Plan and record all Member training	Plan reviewed as part of the induction arrangements for May 2021 onwards. Survey undertaken with councillors to identify training needs. Rolling plan that is updated during the year and Members are surveyed to help identify training needs.
Employment Policies	Intranet	Governance Committee, HR&OD	Describe all officer duties, rules and requirements	Policies reviewed in line with changes in legislation and best practice
Workforce Planning arrangements	HR policies and Directorate plans	Relevant Director	Provides rationale and scheme for ensuring resilience and capacity	Particular focus on service improvement plans
Staff role profiles	Intranet	Heads of Service	Describe all officer roles	Updated as roles change
Member Induction Programme	Intranet	MRG, ACE	To determine the content of the programme	Plans completed in early 2021, for induction programme for post May 2021
Officer Performance management	Intranet	HR&OD & all Directors for delivery	To manage performance and development	Annual performance review process for all staff

Sources of Assurance for Principle F: Risk and Performance

Source of assurance	Where found	Who is responsible	Role	last reviewed/action planned
Governance Statement	Website	Governance and Audit Committees, ACE	Captures all sources of governance assurance	Annual (this document)
Guidance to Members on Outside Bodies	Website, Constitution	ACE	To provide guidance to Members in relation to roles and responsibilities when appointed to outside bodies	Reviewed March 2023. Two training sessions to Councillors as part of the induction programme in 2021.
Local Code of Corporate Governance	Governance agenda	Governance Committee ACE	To confirm the corporate governance principles in place	Reviewed on an annual basis
Risk Management Framework	Intranet	COO	Strategic aims and objectives for corporate risk management	Last updated in May 2022 and subject to regular review ESCC is committed to formalising the training for Audit committee members, in line with the CIPFA Position Statement 2022. This will cover risk management.
Health and Safety Policies	Intranet and Webshop for schools	Assistant Director HR&OD	Provides rules, procedures and systems for assurance in relation to health and safety at work and in relation to property risk	All policies regularly reviewed. *Action to continue the regular policy review with the consideration of accessibility.
Internal Audit Function	Website, Constitution	Audit Committee Chief Internal Auditor COO	To manage and ensure the effectiveness of Audit	External Quality Assessment of Internal Audit in accordance with the Public Sector Internal Audit Standards. Annual internal audit report and opinion review. Quarterly internal audit report to the Audit Committee. Annual External Audit Plan. Annual Audit Letter
Treasury Management Strategy	Website	COO	For sound strategy to limit risks to borrowings and investments	Reviewed and updated by Council February 2022
Financial Regulations (FR) and compliance with Financial Management Code (FMC)	Website, Constitution		To prescribe the rules for all financial transactions in line with Financial Management Code.	*It is proposed to undertake a full review of the Financial Regulations during 2023/24 in time for the implementation of the Modernising Back-Office Systems (MBOS) Programme.
Business Continuity	SharePoint	Director of CET	To provide safe systems and procedures to manage local and civil emergencies	Regularly reviewed. Promotion of business continuity Awareness Week 2023 to raise the profile of business continuity within ESCC and provide additional knowledge. Review of intranet pages to make the documentation more accessible to staff members.

Sources of Assurance for Principle G: Audit and Transparency

Source of assurance	Where found	Who is responsible	Role	last reviewed/action planned*
Internal Audit Function	Website, Constitution	Audit Committee Chief Internal Auditor COO	To manage and ensure the effectiveness of Audit	External Quality Assessment of Internal Audit in accordance with the Public Sector Internal Audit Standards. Annual internal audit report and opinion review Annual internal audit report and opinion review. Quarterly internal audit report to the Audit Committee. Annual External Audit Plan. Annual Audit Letter
External Audit of Accounts	Website	COO, CFO	To give external assurance to the quality of the Council’s accounts and accounting practice	The 2021/22 audit is completed with the published report expected in July 2023

Source of assurance

Where found

Who is responsible

Role

last reviewed/action planned*

Internal Audit Function

Website, Constitution

Audit Committee

Chief Internal Auditor

COO

To manage and ensure the effectiveness of Audit

External Quality Assessment of Internal Audit in accordance with the Public Sector Internal Audit Standards. Annual internal audit report and opinion review Annual internal audit report and opinion review. Quarterly internal audit report to the Audit Committee. Annual External Audit Plan. Annual Audit Letter

External Audit of Accounts

Website

COO, CFO

To give external assurance to the quality of the Council’s accounts and accounting practice

The 2021/22 audit is completed with the published report expected in July 2023

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 24 November 2023) is published with an audit opinion.

2. Accounting Policies

i. General

The Statement of Accounts summarises the Council’s transactions for the 2022/23 financial year and its position at the year end 31 March 2023. 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 2022/23, 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 2023, the actuary has advised a discount rate of 4.8%, 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 2022, the actuary advised that a rate of 2.6% is appropriate.

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

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

x. Events After the Balance Sheet Date

The accounts have taken into consideration any material event after the balance sheet, which are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is approved and authorised for issue. Two types of events can be identified:

· Those that provide evidence of conditions that existed at the end of the reporting period for which the Council shall adjust the amounts recognised in its financial statements or recognise items that were not previously recognised (adjusting events);

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

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

xi. Financial Instruments

Financial Liabilities

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

For the Council’s borrowings, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest); and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement.

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

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

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

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

Financial Assets

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

· amortised cost

· fair value through profit or loss (FVPL)

· fair value through other comprehensive income (FVOCI)

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

Financial Assets Measured at Amortised Cost

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

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

Statutory provisions require that the impact of soft loans on the General Fund Balance is the interest receivable for the financial year – the reconciliation of amounts debited and credited to the CIES to the net gain required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.

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

Financial Assets Measured at Fair Value through Profit or Loss

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

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

· instruments with quoted market prices – the market price

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

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

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

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

· Level 3 inputs – unobservable inputs for the asset.

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

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

Expected Credit Losses

The Council recognises expected credit losses (impairments) on all of its financial assets held at amortised cost or FVOCI either on a 12-month or lifetime basis. Impairment losses are calculated to reflect the expectation that the future cash flows might not take place because the borrower could default on their obligations. Credit risk plays a crucial part in assessing losses. Where risk has increased significantly since an instrument was initially recognised, losses are assessed on a lifetime basis. Where risk has not increased significantly or remains low, losses are assessed on the basis of 12-month expected losses. The expected credit loss model applies to financial assets measured at amortised cost and FVOCI, trade receivables, lease debtors, third party loans and financial guarantees.

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

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

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

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

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

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

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

xii. Foreign Currency Transaction

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

xiii. Government Grants and Contributions

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

· the Council will comply with the conditions attached to the payments, and

· the grants or contributions will be received.

Government grants and third party contributions and donations to the Council are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor.

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

Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied Reserve. Where it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied reserve are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure.

Community Infrastructure Levy (CIL)

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

xiv. Intangible Assets

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

Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase. Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services.

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

Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and on disposal (for any sale proceeds greater than £10,000) the Capital Receipts Reserve. Capital receipts (if more than the de minimis level of £10,000) from the sale of assets are held in a reserve until they are required to finance capital expenditure.

xv. Interests in Companies and Other Entities

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

xvi. Inventories

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

xvii. Investment Property

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

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

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

xviii. Joint Operations

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

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

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

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

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

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

xix. Leases

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

Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification.

Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.

The Council as Lessee

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

Lease payments are apportioned between:

· a charge for the acquisition of the interest in the Property, Plant or Equipment – applied to write down the lease liability, and;

· a finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

Property, Plant and Equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the Council at the end of the lease period).

The Council is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

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

The Council as Lessor

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

Lease rentals receivable are apportioned between:

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

· finance income (credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

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

The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

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

xx. Overheads and Support Services

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

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

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

Recognition

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

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

Measurement

Assets are initially measured at cost, comprising:

· the purchase price;

· any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, including the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The Council does not capitalise borrowing costs incurred whilst assets are under construction.

The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Council). In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Council.

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

· operational land, buildings and plant – current value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV). Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of current value;

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

· surplus assets – at fair value in highest and best use, the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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

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

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

· where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

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

Impairment

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

Where impairment losses are identified, they are accounted for by:

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

Componentisation Policy

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

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

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

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

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

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

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

Depreciation

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

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

Operational land	Not depreciated as an infinite life expectancy
Operational buildings, buildings structure, roof and external works	Individually assessed by valuers, usually up to 60 years
Heating and lighting components	Individually assessed by valuers, usually up to 25 years
Lifts	Individually assessed by valuers, usually up to 15 years
Vehicles	Individually assessed on acquisition, usually up to 10 years
Information Technology	Individually assessed on acquisition, usually up to 10 years
Other plant, furniture and equipment	Individually assessed on acquisition, usually up to 20 years
Infrastructure	New roads 30 years; Highways component assets between 10 & 80 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 2023/24 (the Code) will introduce several changes in accounting policies which will be required from 1 April 2023. 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 Accounting Estimates (Amendments to IAS 8)

· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

· Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

· Updating a Reference to the Conceptual Framework (Amendments to IFRS 3).

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 2023 and there is therefore no impact on the 2022/23 Statement of Accounts.

The implementation of IFRS 16 - Leases has been deferred until the 2024/25 financial year. 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 2023:

Type of School	Primary	Secondary	Special	All Through	Total
Community	39	6	1	-	46
Voluntary Controlled	41	-	-	-	41
Voluntary Aided	20	1	-	-	21
Foundation / Trust	2	1	-	-	3
Academy	46	15	11	3	75
Total	148	23	12	3	186

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 2023 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 2022/23 is £48.1m and the net book value of property, plant and equipment at 31 March 2023 is £967.7m. 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 £6.5m 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 2022/23, however the level of revaluation decreases charged in 2022/23 to the Surplus on Provision of Services is £4.88m and £7.16m 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 £0.12m. A 10% reduction in house prices and land values would reduce them by £1.21m. 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 £0.08m. A 10% reduction would reduce them by £0.80m.
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 2022/23, the Council’s actuary advised that the net pension’s liability has decreased from £479.9m at the start of the year to a net asset of £91.5m at 31 March 2023. 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 page 119. The IAS 19 liability includes an estimate for the impact of the McCloud judgement. However, until the new legislation is agreed, the impact is only estimated and therefore there could be a significant risk of material adjustment to the carrying amount of the liability.

Item

Uncertainties

Effect if Actual Results Differ from Assumptions

Property Plant and Equipment

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

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

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

The total depreciation and amortisation charged in 2022/23 is £48.1m and the net book value of property, plant and equipment at 31 March 2023 is £967.7m.

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 £6.5m 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 2022/23, however the level of revaluation decreases charged in 2022/23 to the Surplus on Provision of Services is £4.88m and £7.16m 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 £0.12m. A 10% reduction in house prices and land values would reduce them by £1.21m.

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 £0.08m. A 10% reduction would reduce them by £0.80m.

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 2022/23, the Council’s actuary advised that the net pension’s liability has decreased from £479.9m at the start of the year to a net asset of £91.5m at 31 March 2023. 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 page 119.

The IAS 19 liability includes an estimate for the impact of the McCloud judgement. However, until the new legislation is agreed, the impact is only estimated and therefore there could be a significant risk of material adjustment to the carrying amount of the liability.

(a) Adjustments between Funding and Accounting Basis

Adjustments from General Fund to arrive at the CIES amounts	Adjustments for Capital Purposes	Net Change for the Pensions Adjustments	Other Differences	Total Adjustments
2022/23	£000	£000	£000	£000

Adult Social Care	(52)	1,702	(256)	1,394
Public Health	-	106	-	106
Governance Services	-	158	(15)	143
Children’s Services	10,282	3,956	(825)	13,413
Business Services	7,394	705	(97)	8,002
Communities, Economy & Transport	34,022	564	(84)	34,502
Total	51,646	7,191	(1,277)	57,560
Corporate Expenditure	-	879	-	879
Net Cost of Services	51,646	8,070	(1,277)	58,439
Other income and expenditure from the Expenditure and Funding Analysis	(33,944)	(10,164)	(3,945)	(48,053)
Difference between General Fund deficit and CIES deficit in provision of services	17,702	(2,094)	(5,222)	10,386

Adjustments from General Fund to arrive at the CIES amounts	Adjustments for Capital Purposes	Net Change for the Pensions Adjustments	Other Differences	Total Adjustments
2021/22	£000	£000	£000	£000

Adult Social Care	2,307	8,632	63	11,002
Public Health	-	468	-	468
Governance Services	-	771	3	774
Children’s Services	24,482	20,479	340	45,301
Business Services	6,068	3,603	32	9,703
Communities, Economy & Transport	43,130	2,881	24	46,035
Total	75,987	36,834	462	113,283
Corporate Expenditure	-	4,855	-	4,855
Net Cost of Services	75,987	41,689	462	118,138
Other income and expenditure from the Expenditure and Funding Analysis	(27,529)	11,237	(8,714)	(25,006)
Difference between General Fund deficit and CIES deficit in provision of services	48,458	52,926	(8,252)	93,132

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:

	2021/22	2022/23
	£000	£000

Adult Social Care	36,959	40,961
Public Health	42	103
Governance Services	286	345
Children’s Services	8,071	9,698
Business Services	10,247	10,344
Communities, Economy & Transport	18,347	23,193
Corporate Expenditure	818	263
Total Income analysed on a segmental basis	74,770	84,907

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

	2021/22	2022/23

	£000	£000
Expenditure
Employee benefits expenses	389,954	352,043
Other service expenses	603,825	623,328
Depreciation, amortisation, impairment	46,816	40,539
Interest payments	16,704	15,920
Precepts and levies	595	606
Loss on the disposal of assets	25,133	39,289
Total Expenditure	1,083,027	1,071,725

Income
Fees, charges and other service income	(74,770)	(84,907)
Interest and investment income	(1,091)	(5,780)
Income from council tax & non domestic rates	(391,656)	(407,956)
Government grants and contributions	(549,576)	(569,761)
Total Income	(1,017,093)	(1,068,404)
Deficit on the Provision of Services	65,934	3,321

IFRS 15 (Revenue from Contracts with Customers)

Of the £84.9m total of income received from fees, charges and other service income listed above for 2022/23, £76.6m of this balance would been accounted for under IFRS 15 and £8.3m would have been outside the scope of the 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.

2022/23	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	(2,093)	-	-
Financial Instruments transferred to the Financial Instruments Adjustment Account	(190)	-	-
Financial Instruments transferred to the Pooled Investment Funds Adjustment Account	865	-	-
Council tax and NNDR (transfers to or from Collection Fund Adjustment Account)	(4,605)	-	-
Holiday pay (transferred to the Accumulated Absences Reserve)	(1,279)	-	-
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):	54,425	-	(1,318)
Total Adjustments to Revenue Resources	47,123	-	(1,318)

Adjustments between Revenue and Capital Resources
Transfer of non-current asset sale proceeds from revenue to the Capital Receipts Reserve	(1,997)	1,997	-
Statutory provision for the repayment of debt (transfer from the Capital Adjustment Account)	(13,366)	-	-
Capital expenditure financed from revenue balances (transfer to the Capital Adjustment Account)	(21,374)	-	-
Total Adjustments between Revenue and Capital Resources	(36,737)	1,997	-

Adjustments to Capital Resources
Use of the Capital Receipts Reserve to finance capital expenditure	-	(9,591)	-
Recognition of deferred capital receipt	-	-	-
Receipt of deferred capital receipt	-	35	-
Total Adjustments to Capital Resources	-	(9,556)	-
Total Adjustments	10,386	(7,559)	(1,318)

2021/22
	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	52,925	-	-
Financial Instruments transferred to the Financial Instruments Adjustment Account	(191)	-	-
Financial Instruments transferred to the Pooled Investment Funds Adjustment Account	(783)	-	-
Council tax and NNDR (transfers to or from Collection Fund Adjustment Account)	(7,759)	-	-
Holiday pay (transferred to the Accumulated Absences Reserve)	463	-	-
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):	77,532	-	(3,200)
Total Adjustments to Revenue Resources	122,187	-	(3,200)

Adjustments between Revenue and Capital Resources
Transfer of non-current asset sale proceeds from revenue to the Capital Receipts Reserve	(9,931)	9,931	-
Statutory provision for the repayment of debt (transfer from the Capital Adjustment Account)	(11,590)	-	-
Capital expenditure financed from revenue balances (transfer to the Capital Adjustment Account)	(6,694)	-	-
Total Adjustments between Revenue and Capital Resources	(28,215)	9,931	-

Adjustments to Capital Resources
Use of the Capital Receipts Reserve to finance capital expenditure	-	(5,840)	-
Recognition of deferred capital receipt	(840)	-	-
Total Adjustments to Capital Resources	(840)	(5,840)	-
Total Adjustments	93,132	4,091	(3,200)

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 2022/23. This is included within the total net losses on disposals of non-current assets of £39.289m (see Note 11). The assets were transferred for no consideration and the amount is recognised as losses on disposal.

School	Type of School	£000
Ditchling St Margaret’s*	Primary	-
Uplands	Secondary	13,543
Chyngton	Primary	3,593
The Haven**	Primary	36
Total		17,172

* School is off balance sheet due to being a Voluntary Controlled school

** Land value only as school is already off balance sheet due to being a Voluntary Aided school

During 2022/23 thirteen Voluntary Controlled Primary schools with a combined net book value of £22.769m were also removed from the balance sheet following confirmation from the Diocese that they have now registered their ownership of the school land. This balance will also form part of the loss on disposal balance in Note 11.

9. Events after the Balance Sheet date

The financial statements have not been adjusted for the following events that took place after 31 March 2023 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

Four schools are expected to convert to Academy status in 2023/24. 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 2023 are shown in the table below.

School	Type of School	Date of Conversion	NBV £000
Ninfield	Primary	May 2023	Off balance sheet (Voluntary Controlled School)
Little Common	Primary	TBC	6,018
St Andrews	Primary	TBC	Off balance sheet (Voluntary Controlled School)
Tollgate	Primary	TBC	3,767

Authorised for Issue

The Statement of Accounts was authorised for issue by the Chief Finance Officer on 31 May 2023. 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 2023, 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 2022/23.

	Balance at 1 April 2021	Transfers In 2021/22	Transfers Out 2021/22	Balance at 31 March 2022	Transfers In 2022/23	Transfers Out 2022/23	Balance at 31 March 2023
	£000	£000	£000	£000	£000	£000	£000
Strategic Reserves
Priority Outcomes & Transformation	8,025	9,259	-	17,284	114	-	17,398
Financial Management	50,115	-	(2,811)	47,304	-	(5,422)	41,882
Service Reserves
Capital Programme	11,295	7,647	-	18,942	-	(5,516)	13,426
Waste	16,113	900	-	17,013	2,870	-	19,883
Insurance	7,400	-	(147)	7,253	109	-	7,362
Social Care Reform	-	-	-	-	3,099	-	3,099
Other Reserves
Public Health	5,734	1,123	-	6,857	955	-	7,812
Held on behalf of others	6,043	955	(57)	6,941	40	-	6,981
Total	104,725	19,884	(3,015)	121,594	7,187	(10,938)	117,843

Revenue Grants and Contributions Reserve
Services	40,668	12,924	(1,125)	52,467	28,282	(14,932)	65,817
Dedicated Schools Grant	12,135	2,289	-	14,424	7,511	(3,352)	18,583
Business Rates/Council Tax	7,385	2,311	(5,823)	3,873	610	(1,116)	3,367
COVID-19	15,138	-	(1,063)	14,075	-	(4,941)	9,134
Total	75,326	17,524	(8,011)	84,839	36,403	(24,341)	96,901
Total	180,051	37,408	(11,026)	206,433	43,590	(35,279)	214,744

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	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.
Social Care Reform	To provide resources that support the implementation and manage the risks of Adult Social Care Reform. Government have deferred implementation until at least 2025.
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 2021	Transfers In 2021/22	Transfers Out 2021/22	Balance at 31 March 2022	Transfers In 2022/23	Transfers Out 2022/23	Balance at 31 March 2023
	£000	£000	£000	£000	£000	£000	£000

Balances held by schools	20,512	816	-	21,328	-	(1,246)	20,082

11. Other Operating Expenditure

	2021/22	2022/23
	£000	£000
Levies
§ Sussex Inshore Fisheries & Conservation Authority	431	440
§ Environment Agency - Flood & Coastal Erosion	164	167
Loss on the disposal of non-current assets (net of receipts)	25,133	39,289
Total	25,728	39,896

Note - The 2022/23 loss on the disposal of non-current assets figure of £39.9m (shown net of £1.2m capital receipts) includes the removal of four schools from the Balance Sheet, that have attained Academy status at a value of £17.2m and thirteen Voluntary Schools with a value of £22.8m (details are included in Note 8). The comparative figures for 2021/22 are a £25.1m loss (shown net of £11.0m receipts) which includes the removal of five schools from the Balance Sheet, that attained Academy status at a value of £21.1m.

12. Financing and Investment Income and Expenditure

	2021/22	2022/23
	£000	£000
Interest payable on debt and finance leases	16,646	15,479
Net interest on pension assets and liabilities	11,217	(10,167)
Impairment losses/(reversals)	98	1,005
Fair Value movement of Pooled Funds	(783)	864
Soft Loan interest	(3)	(3)
Interest receivable	(1,230)	(5,932)
Movement in fair value of Investment Properties	440	(1,354)
Net income from Investment Properties	(185)	(292)
(Surplus) / deficit on Trading Undertakings	(4)	35
Total	26,196	(365)

13. Taxation and Non Specific Grant Income

	2021/22	2022/23
	£000	£000
Revenue Support Grant (RSG)	3,568	3,687
Council Tax Support Grant	4,734	-
Social Care Grant	17,083	23,674
Business Rates	72,396	71,914
Business Rates Relief Funding	5,698	13,610
Business Rates Levy surplus	-	629
Local Income Tax Guarantee Funding	36	-
Council Tax	310,355	327,722
Council Tax – prior years surplus	1,146	3,715
Services Grant	-	5,175
New Home Bonus Grant	504	816
Total	415,520	450,942
Share of Collection Fund Surplus	7,759	4,605
Capital Grants and Contributions	34,818	37,139
Total	458,097	492,686

14. Property, Plant, and Equipment

Movements in 2022/23:	Other Land and Buildings	Vehicles, Plant, Furniture & Equipment		Infrastructure Assets	Community Assets	Surplus Assets	Assets Under Construction	Total Property, Plant and Equipment	PFI Assets Included in Property, Plant and Equipment*
	£000	£000		£000	£000	£000	£000	£000	£000
Cost or Valuation
At 1 April 2022	369,686	129,007		681,147	2,079	10,101	5,321	1,197,341	49,412
Additions	7,401	4,014		40,172	-	1,012	8,335	60,934	-
Revaluation increases recognised in the Revaluation Reserve	37,831	10,097		-	-	761	-	48,689	257
Revaluation decreases recognised in the Revaluation Reserve	(5,962)	(597)		-	-	(1,362)	-	(7,921)	(1,649)
Revaluation increases (reversal of previous losses) recognised in the Provision of Services	8,809	1,111		-	-	-	-	9,920	2,347
Revaluation decreases recognised in the Provision of Services	(4,563)	(1,352)	-		-	(98)	-	(6,013)	-
Derecognition – disposals	-	(7,248)		(6,084)	-	-	-	(13,332)	-
Derecognition – disposals - schools	(33,728)	(8,221)		-	-	-	-	(41,949)	-
Assets reclassified within PPE	(216)	(23)		-	-	239	-	-	-
Assets reclassified (to)/from Held for Sale	-	-		-	-	(2,431)	-	(2,431)	-
Assets reclassified (to)/from Investment Property	204	-		-	-	(222)	-	(18)	-
Other movements	-	-		-	-	-	(174)	(174)
At 31 March 2023	379,462	126,788		715,235	2,079	8,000	13,482	1,245,046	50,367
Accumulated Depreciation and Impairment
At 1 April 2022	(3,424)	(26,397)		(232,848)	-	(3)	-	(262,672)	(977)
Depreciation charge	(7,471)	(10,171)		(28,787)	-	(7)	-	(46,436)	(2,417)
Depreciation written out to the Revaluation Reserve	4,476	7,147		-	-	3	-	11,626	375
Revaluation losses recognised in the deficit on the Provision of Services	951	180		-	-	8	-	1,139	-
Reversal of previous losses	2,643	1,211		-	-	-	-	3,854	1,580
Derecognition – disposals	-	7,240		6,084	-	-	-	13,324	-
Derecognition – disposals – schools	598	1,410		-	-	-	-	2,008	-
Assets reclassified within PPE	3	2		-	-	(5)	-	-	-
Assets reclassified (to)/from Held for Sale	-	-		-	-	-	-	-	-
Assets reclassified (to)/from Investment Prop	-	-		-	-	-	-	-	-
At 31 March 2023	(2,224)	(19,378)		(255,551)	-	(4)	-	(277,157)	(1,439)
Movements in 2022/23:	Other Land and Buildings	Vehicles, Plant, Furniture & Equipment		Infrastructure Assets	Community Assets	Surplus Assets	Assets Under Construction	Total Property, Plant and Equipment	PFI Assets Included in Property, Plant and Equipment*
Net Book Value
At 31 March 2023	377,238	107,410		459,684	2,079	7,996	13,482	967,889	48,928

At 31 March 2022	366,262	102,610		448,299	2,079	10,098	5,321	934,669	48,435
Movements in 2021/22:	Other Land and Buildings	Vehicles, Plant, Furniture & Equipment		Infrastructure Assets	Community Assets	Surplus Assets	Assets Under Construction	Total Property, Plant and Equipment	PFI Assets Included in Property, Plant and Equipment*
	£000	£000		£000	£000	£000	£000	£000	£000
Cost or Valuation
At 1 April 2021	366,623	129,849		666,548	2,761	13,815	2,142	1,181,738	55,475
Additions	7,923	3,948		27,733	-	150	3,350	43,104	32
Revaluation increases recognised in the Revaluation Reserve	15,794	8,487		-	-	561	-	24,842	2,428
Revaluation decreases recognised in the Revaluation Reserve	(2,310)	(479)		-	-	1	-	(2,788)	-
Revaluation increases (reversal of previous losses) recognised in the Provision of Services	4,872	23		-	-	-	-	4,895	-
Revaluation decreases recognised in the Provision of Services	(2,918)	-		-	-	(150)	-	(3,068)	-
Derecognition – disposals	(3,220)	(8,218)		(13,134)	(682)	(339)	-	(25,593)	-
Derecognition – disposals - schools	(17,195)	(4,687)		-	-	-	-	(21,882)	(8,523)
Assets reclassified within PPE	(86)	84		-	-	1	-	(1)	-
Assets reclassified (to) / from Held for Sale	203	-		-	-	(3,515)	-	(3,312)	-
Assets reclassified (to) / from Investment Property	-	-		-	-	(423)	-	(423)	-
Assets reclassified (to)/from Intangibles	-	-		-	-	-	(171)	(171)	-
At 31 March 2022	369,686	129,007		681,147	2,079	10,101	5,321	1,197,341	49,412
Accumulated Depreciation and Impairment
At 1 April 2021	(3)	(26,520)		(217,655)	-	(4)	-	(244,182)	-
Depreciation charge	(7,231)	(11,751)		(28,327)	-	(2)	-	(47,311)	(2,551)
Depreciation written out to the Revaluation Reserve	2,360	3,158		-	-	2	-	5,520	1,208
Revaluation losses recognised in the deficit on the Provision of Services	420	-		-	-	-	-	420	-
Reversal of previous losses	712	90		-	-	-	-	802	-
Derecognition – disposals	65	8,082		13,134	-	1	-	21,282	-
Movements in 2021/22:	Other Land and Buildings	Vehicles, Plant, Furniture & Equipment		Infrastructure Assets	Community Assets	Surplus Assets	Assets Under Construction	Total Property, Plant and Equipment	PFI Assets Included in Property, Plant and Equipment*
Derecognition – disposals - schools	250	547		-	-	-	-	797	366
Assets reclassified within PPE	3	(3)		-	-	-	-	-	-
Assets reclassified (to) / from Held for Sale	-	-		-	-	-	-	-	-
Assets reclassified (to) / from Investment Property	-	-		-	-	-	-	-	-
At 31 March 2022	(3,424)	(26,397)		(232,848	-	(3)	-	(262,672)	(977)

Net Book Value
At 31 March 2022	366,262	102,610		448,299	2,079	10,098	5,321	934,669	48,435

At 31 March 2021	366,620	103,329		448,893	2,761	13,811	2,142	937,556	55,475

Infrastructure

In accordance with the temporary relief offered by the Update to the Code on infrastructure assets, the balances for gross cost and accumulated depreciation are greyed out in the tables above to acknowledge that, potentially, due historical reporting practices and resultant information deficits they may not faithfully represent the asset position to the users of the financial statements.

The Authority has determined in accordance with Regulation of the Local Authorities (Capital Finance and Accounting) (England/Wales) (Amendment) Regulations 2022 that the carrying amounts to be derecognised for infrastructure assets when there is replacement expenditure is nil, this is because work is only usually carried out on assets that have fully depleted in value.

Please note that this is a situation faced by all Authorities across the Country as, due to the level of data that is currently held, very few Authorities can demonstrate that their depreciation and derecognition balances meet the latest interpretation of the Code and are therefore having to adopt this temporary solution until a more permanent solution can be agreed.

Depreciation

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

Revaluation movements

Each year the Council revalues a proportion of its land and building assets including schools and undertakes an impairment review of the entire asset portfolio. Where land and property assets have increased in value, the revaluation gains are shown in the revaluation reserve (see Note 25) and totalled £59.6m for 2022/23 (£29.8m in 2021/22).

Where assets previously had a revaluation loss taken to the Comprehensive Income and Expenditure Statement then any subsequent increase first goes to the Comprehensive Income and Expenditure Statement to reverse that previous loss before any remining balance is taken to the revaluation reserve, the reversal of losses in 2022/23 totalled £13.8m (£5.7m 2021/22).

Some assets will also lose value on revaluation. In 2022/23, the Council has recognised revaluation losses of £12.0m (£4.8m in 2021/22). Of the £12.0m total, £4.9m (£2.6m 2021/22) has been charged to the Comprehensive Income and Expenditure Statement and £7.1m (£2.2m in 2021/22) to the Revaluation Reserve. The net charge to the Comprehensive Income and Expenditure Statement of losses less reversals was a gain of £8.9m (net gain of £3.1m 2021/22). Overall the total valuation movements for 2022/23 was a net gain of £61.3m (£30.6m in 2021/22).

The revaluation gains and losses movements shown above differ quite significantly for 2022/23 compared to the prior year comparator figures. This movement is primarily due to the impact of applying indexation to the schools, day centre and children’s home assets that were not valued in year.

Capital Commitments

As at 31st March 2023, the Council had not entered into any material contracts for the construction or enhancement of Property, Plant and Equipment in 2022/23 and future years that amounted to the value of £10m or more.

Valuation of Property, Plant and Equipment (PPE)

The Council operates a policy of revaluing its Property, Plant and Equipment on a rolling three year basis, with the aim of revaluing all of its assets within this period. An index (based on assets that have been formally valued in the year) may be applied to those assets not valued in the year if the carrying value is calculated as materially different to the fair value at the Balance Sheet date. Indexation was applied in 2022/23 to schools, childrens’ homes and day centres as the movement was considered to be material.

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

Items of school and offices furniture, IT and other equipment are measured at historic cost as a proxy for current value. Their value is updated for capital expenditure and depreciated in line with the estimated lives of the assets. The total is £26.1m as shown in the table below.

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

Surplus assets are non-operational but are not deemed to be held for sale and are measured at fair value. The fair value takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The following statement shows the progress of the Council’s programme for the revaluation of land, buildings and plant. The valuations are carried out by an external firm of valuers, Bruton Knowles (a national Chartered Surveying practice), on behalf of the Council. The valuation dates are at 31 March each year. In addition to the valuation certificate, the valuers provide an annual Impairment Report. Usually the Council operates a three year rolling programme to ensure that the carrying value of assets is not materially different to their fair values at the Balance Sheet date, however as 2020/21 was the first year that the valuations had been carried out by Bruton Knowles the entire portfolio was revalued to ensure consistency in the valuations.

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

Carried as at historical cost	-	26,128	-	26,128
Valued at fair value in:
31 March 2023	153,666	37,743	8,000	199,409
31 March 2022	192,543	56,164	-	248,707
31 March 2021	33,253	6,753	-	40,006
Gross Valuation	379,462	126,788	8,000	514,250

Fair value hierarchy

As at 31 March 2023, there are eleven properties classed as surplus, a decrease of one on the previous year. Two properties were reclassified out of surplus, one was added and one new property was acquired. The fair value hierarchy of surplus assets at 31 March are as follows:

Recurring fair value measurements using:	Quoted prices in active markets for identical assets (Level 1)	Other significant observable Inputs (Level 2)	Significant unobservable inputs (Level 3)	Total
	£000	£000	£000	£000
Surplus assets (NBV) 31 March 2023	-	1,327	6,669	7,996
Surplus assets (NBV) 31 March 2022	-	106	9,992	10,098

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

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

15. Investment Properties

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

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

	2021/22	2022/23
	£000	£000
Rental Income from Investment Property	(359)	(332)
Direct Operating Expenses arising from Investment Property	174	40
Net (gain)	(185)	(292)

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

	2021/22	2022/23
	£000	£000
Balance at start of the year	11,151	10,770
Additions	90	6
Net gains / (losses) from fair value adjustments	(440)	1,354
Transfers (to) / from Property, Plant & Equipment & Assets Held for Sale	423	(25)
Disposals	(454)	-
Balance at end of the year	10,770	12,105

Fair value measurement

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

Fair value hierarchy

The fair value hierarchy at 31 March is as follows:

	31 March 2023
Recurring fair value measurements using:	Quoted prices in active markets for identical assets (Level 1)	Other significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total
	£000	£000	£000	£000
Offices	-	5,743	-	5,743
Farm Business Tenancy	-	255	545	800
Land	-	402	128	530
Residential Property	-	1,521	-	1,521
Other	-	2,345	1,166	3,511
Total	-	10,266	1,839	12,105

	31 March 2022
Recurring fair value measurements using:	Quoted prices in active markets for identical assets (Level 1)	Other significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total
	£000	£000	£000	£000
Offices	-	5,000	-	5,000
Farm Business Tenancy	-	1,002	-	1,002
Land	-	628	-	628
Residential Property	-	1,485	-	1,485
Other	-	2,050	605	2,655
Total	-	10,165	605	10,770

16. Intangible Assets

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

All software is given a finite useful life, based on assessments of the period that the software is expected to be of use to the Council. The carrying amount of Intangible Assets is amortised on a straight-line basis. The amortisation of £1.66m charged to revenue in 2022/23 (£1.58m in 2021/22) was charged to Business Services.

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

	2021/22	2022/23
	£000	£000
Balance at start of year:
Gross carrying amounts	14,073	9,850
Accumulated amortisation	(10,568)	(4,359)
Net carrying amount at start of year	3,505	5,491
Purchases	3,392	2,608
Transfers from PPE	171	-
Amortisation for the period	(1,577)	(1,660)
Disposal (Gross carrying amount)	(7,786)	(632)
Disposal (Accumulated amortisation)	7,786	632
Net carrying amount at end of year	5,491	6,439
Comprising:
Gross carrying amounts	9,850	11,826
Accumulated amortisation	(4,359)	(5,387)
Net carrying amount at end of year	5,491	6,439

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

Description	Carrying Amount		Remaining Amortisation (Years)
	31 March 2022	31 March 2023
	£000	£000
LiquidLogic – ASC & Children’s clients	356	-	-
Virtual Infrastructure	1,188	672	1
SAP Software - ERP	104	-	-
Mapping Outlet	119	59	1
Citrix	357	238	2
SharePoint	106	94	8
Link	2,603	4,055	5-13
PAMS	208	187	4
Network Detection and Response	-	496	4
Other	450	638	1 – 7
Total	5,491	6,439

17. Heritage Assets

The Council has identified the following heritage assets:

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

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

§ Chattels at Bentley House, Halland;

§ Battle Abbey Estate Archives;

§ Lewes Castle Precinct Wall; and

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

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

Reconciliation of the carrying value of Heritage Asset:

Heritage Assets	Art Collection	Chattels at Bentley House	The Sugar Loaf Folly	Battle Abbey Estate Archives	Castle Precincts Wall	Total
Cost or valuation	£000	£000	£000	£000	£000	£000
1 April 2021	13	484	41	116	-	654
Additions	-	-	-	-	-	-
Revaluation Gain	-	-	-	-	-	-
31 March 2022	13	484	41	116	-	654
Additions	-	-	-	-	-	-
Revaluation Gain	-	-	-	-	-	-
31 March 2023	13	484	41	116	-	654

Heritage Assets – Further Information

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

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

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

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

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

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

18. Financial Instruments

A. Categories of Financial Instruments

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

Financial Assets	31 March 2022	31 March 2023
	£000	£000
Fair value through profit or loss
Long Term Investments	5,244	4,380
Long Term Debtors	-	-
Short Term Investments & Cash Equivalents	75,900	49,700
Short Term Debtors	-	-
Total	81,144	54,080

Amortised Cost
Long Term Investments	15,001	-
Long Term Debtors	5,376	4,790
Short Term Investments	222,806	219,364
Short Term Debtors	27,456	61,928
Total	270,639	286,082
Total Financial Assets	351,783	340,162
Non Financial Assets*	34,268	39,614
Total	386,051	379,776

*Balance of assets that are not classed as Financial Instruments

Financial Liabilities	31 March 2022	31 March 2023
	£000	£000
Fair value through profit or loss
Short & Long Term Borrowings and Creditors	-	-

Amortised Cost
Long Term Borrowings	(229,072)	(217,824)
Long Term Creditors	(61,166)	(55,527)
Short Term Borrowings	(7,011)	(5,556)
Short Term Creditors	(96,544)	(87,055)
Total Financial Liabilities	(393,793)	(365,962)
Non Financial Liabilities*	(69,361)	(81,112)
Total	(463,154)	(447,074)

*Non Financial Liabilities are those which are not classed as Financial Instruments

The balance on Soft Loans at 31 March 2023 was £0.149m (£0.145m at 31 March 2022).

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

The balance of financial assets at 31 March 2023 was £54.08m, an decrease of £27.06m from the previous year. Financial assets include £49.7m low volatility money market funds (LVNAV) and £4.38m property fund (carrying amount £5.00m). Total holdings in the five money market funds have decreased by £26.2m over the year. The value of the Property fund has decreased by £0.864m during the year. The Property fund valuation is based on the bid market value which is the bid price per number of units held.

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

C. Income, Expense, Gains and Losses

	2021/22		2022/23
	Surplus or Deficit on the Provision of Services	Other Comprehensive Income and Expenditure	Surplus or Deficit on the Provision of Services	Other Comprehensive Income and Expenditure
	£000	£000	£000	£000
Net gains/losses on:
Financial assets measured at fair value through profit or loss – fair value	(783)	-	864	-
Financial assets measured at fair value through profit or loss – dividend	(171)	-	(184)	-
Total net (gains) / losses	(954)	-	680	-

Interest revenue:
Financial assets measured at amortised cost	(1,059)	-	(5,748)	-
Interest expense:
Financial assets measured at amortised cost	16,643	-	15,476	-

D. Fair Value

The basis for recurring fair value measurements is:

§ Level 1 Inputs – quoted prices (unadjusted) in active markets for identical assets or liabilities that the authority can access at the measurement date.

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

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

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

Recurring fair value measurements

Input level in fair value hierarchy

Valuation technique used to measure fair value

As at 31/3/22

£000

As at 31/3/23

£000

Fair Value through Profit or Loss

Other financial instruments

Level 1

Unadjusted quoted prices in active markets for identical shares

81,144

54,080

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

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

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

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

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

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

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

§ No early repayment or impairment is recognised;

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

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

The fair values calculated are as follows:

Financial Liabilities	31 March 2022		31 March 2023
	Carrying amount	Fair value	Carrying amount	Fair value
	£000	£000	£000	£000
Borrowing held at amortised cost	(236,083)	(295,546)	(223,380)	(215,539)
Long Term Creditors	(70)	(70)	(64)	(64)
PFI and Finance Lease Liabilities	(66,348)	(80,397)	(61,096)	(66,287)
Total Long Term	(302,501)	(376,013)	(284,540)	(281,890)
Short Term Creditors	(91,292)	(91,292)	(81,422)	(81,422)
Total Long and Short Term	(393,793)	(467,305)	(365,962)	(363,312)

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

This shows a notional future loss, based on economic conditions at 31 March 2023, arising from a commitment to pay interest to lenders above current market rates.

Financial Assets	31 March 2022		31 March 2023
	Carrying amount	Fair value	Carrying amount	Fair value
	£000	£000	£000	£000
Financial assets held at amortised cost	15,001	14,847	-	-
Long Term Debtors	5,376	5,376	4,790	4,790
Total Long Term	20,377	20,223	4,790	4,790
Short Term Investments and Debtors	250,262	250,262	281,292	281,292
Total Long and Short Term	270,639	270,485	286,082	286,082

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

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

	31 March 2023
Recurring fair value measurements using:	Quoted prices in active markets for identical assets (Level 1)	Other significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total
	£000	£000	£000	£000
Financial liabilities
Borrowing held at amortised cost	-	(215,539)	-	(215,539)
Long Term Creditors	-	(64)	-	(64)
PFI and Finance Lease Liabilities	-	-	(66,287)	(66,287)
Total	-	(215,603)	(66,287)	(281,890)

Financial assets
Financial assets held at amortised cost	-	-	-	-
Long Term Debtors	-	4,790	-	4,790
Total	-	4,790	-	4,790

	31 March 2022
Recurring fair value measurements using:	Quoted prices in active markets for identical assets (Level 1)	Other significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total
	£000	£000	£000	£000
Financial liabilities
Borrowing held at amortised cost	-	(295,546)	-	(295,546)
Long Term Creditors	-	(70)	-	(70)
PFI and Finance Lease Liabilities	-	-	(80,397)	(80,397)
Total	-	(295,616)	(80,397)	(376,013)

Financial assets
Financial assets held at amortised cost	-	14,847	-	14,847
Long Term Debtors	-	5,376	-	5,376
Total	-	20,223	-	20,223

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

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

Financial Assets

§ no early repayment or impairment is recognised;

§ estimated ranges of interest rates at 31 March 2023 for loans receivable and for property fund, are based on new lending rates for equivalent loans at that date;

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

Financial Liabilities

§ no early repayment is recognised;

§ estimated ranges of interest rates at 31 March 2023 of 2.6% to 7.8% for loans payable based on new lending rates for equivalent.

19. Assets Held for Sale

	2021/22	2022/23
	£000	£000
Balance outstanding at start of year	12,121	4,753
Assets newly classified as held for sale	3,515	2,473
Additions	29	17
Revaluation losses	(1,221)	(828)
Assets declassified as held for sale	(204)	-
Assets sold / disposed of	(9,487)	(622)
Balance outstanding at year end	4,753	5,793

Assets Held for Sale are valued at fair value which takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. As at 31 March 2023 there are nine assets that were held for sale. During the year, two assets were transferred into held for sale, and one asset was sold.

20. Current & Long Term Debtors and Payments in Advance

	31 March 2022	31 March 2023
	£000	£000
Current
Debtor System Control	11,132	37,298
HMRC	2,768	1,846
Payments In Advance	8,689	10,646
Council Tax & NNDR	22,811	27,123
Other	16,324	24,629
Total	61,724	101,542

Long Term
Higher Education Institution	741	686
South East Local Enterprise Partnership	1,483	1,483
Economic Development	2,190	1,712
Seven Sisters Country Park	793	758
Other Entities and Individuals	169	151
Total	5,376	4,790

Allowance for expected credit losses

The Council makes allowance for impairment of debts based on an assessment of the recoverability of its receivables. An increase in the total allowance for expected credit losses of £1.015m was made in 2022/23, bringing the total allowance for impairment from £1.756m up to £2.771m as at 31 March 2023 (these amounts are already netted off the figures shown above). The reason for such a large increase in the expected credit loss adjustment is primarily due to a higher balance being held in the debtor system control account at the year end, the majority of which related to Adult Social Care debtors. Management specifically review all debts, and evaluate the adequacy of the allowance for impairment of receivables. However, most categories of the Council’s debtors are not subject to substantial fluctuation and past experience is used within material limits to judge the percentages of each type of debt that will not eventually be recovered.

In addition, there are allowances for impairment in respect of Council Tax & Business Rates debtors which are assessed by the District Councils in their role as Council Tax collection authorities. At 31 March 2023 the Council’s share of these allowances amounts to £18.756m (£16.210m at 31 March 2022) out of its share of Council Tax & Business Rates arrears totalling £41.402m (£36.22m at 31 March 2022).

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

	31 March 2022	31 March 2023	Movement
	£000	£000	£000
Cash in hand	105	109	4
Short-term deposits	45,912	29,818	(16,094)
Total Cash and Cash Equivalents	46,017	29,927	(16,090)

Imputed cash adjustment for pooled budget re the purchase of integrated community equipment	(374)	(740)	(366)
Bank overdraft	(16,243)	(10,382)	5,861
Accrued balance at bank and for third parties	6,544	7,020	476
Total bank overdraft and accrued balance for third parties	(10,073)	(4,102)	5,971

Net cash and cash equivalent balances/(overdrawn)	35,944	25,825	(10,119)

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

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

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

	31 March 2022	31 March 2023
	£000	£000
Orbis	6,843	7,326
Trust Funds (see Note 46)	(299)	(306)
Accrued balance at bank and for third parties	6,544	7,020

The pooled bank balances at 31 March 2023 include £5.20m (£10.52m at 31 March 2022) relating to bank accounts operated by schools under local management arrangements.

22. Creditors and Income in Advance

	31 March 2022	31 March 2023
	£000	£000
Creditor System Control	6,429	6,022
Pension Schemes	5,745	5,599
HMRC	6,438	5,957
PFI Schemes	5,251	5,633
Council Tax & NNDR	13,304	12,544
East Sussex Fire Authority	18,405	15,580
Capital	7,819	9,305
Other	48,421	46,273
Total Creditors	111,812	106,913
Income in Advance	29,918	38,191
Total	141,730	145,104

23. Provisions

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

Long Term Provisions	31 March 2022	Additional provisions	Amounts used	31 March 2023
	£000	£000	£000	£000

Insurance claims	1,658	-	-	1,658
Closed Landfill Sites	8,531	-	(149)	8,382
Total Long Term	10,189	-	(149)	10,040

Short Term Provisions	31 March 2022	Additional provisions	Amounts used	31 March 2023
	£000	£000	£000	£000

Municipal Mutual Insurance (MMI)	77	-	-	77
NNDR Appeals	1,036	75	-	1,111
Adult Social Care	2,851	115	-	2,966
Corporate	613	-	(613)	-
BSD	60	-	(60)	-
Closed Landfill Sites	490	-	-	490
Total Short Term	5,127	190	(673)	4,644

Total Provisions

15,316

190

(822)

14,684

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

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

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

The NNDR appeals provision represents amounts set aside to meet potential future liabilities for Business Rates Appeals. Local Authorities are liable for successful appeals against business rates charged to businesses in their proportionate share. Therefore, a provision has been recognised as a best estimate of the amount that businesses have been overcharged up to 31 March 2023.

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

24. Usable Reserves

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

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

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

§ Capital Receipts Reserve – see note below.

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

	31 March 2022	31 March 2023
	£000	£000
Usable Capital Receipts Reserve	9,931	2,372
Capital Grants & Contributions Unapplied	14,123	12,805
Earmarked Reserves	121,594	117,843
Earmarked Reserves – Revenue Grants & Contributions	84,839	96,901
General Fund Balances	9,999	9,999
School Balances	21,328	20,082
Total Usable Reserves	261,814	260,002

Capital Receipts Reserve

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

	2021/22	2022/23
	£000	£000
Balance at 1 April	5,840	9,931
Amounts receivable during the year	9,931	2,032
Amounts applied to finance new capital investment	(5,840)	(9,591)
Net Transfer to / (from) the Capital Receipts Reserve	4,091	(7,559)
Balance at 31 March	9,931	2,372

Capital Grants and Contributions Unapplied Account

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

	2021/22	2022/23
	£000	£000
Balance at 1 April	17,323	14,123
Amounts receivable during the year	35,623	39,667
Amounts applied to finance new capital investment	(38,823)	(40,985)
Net Transfer to/(from) the Capital Unapplied Account	(3,200)	(1,318)
Balance at 31 March	14,123	12,805

25. Unusable Reserves

	31 March 2022	31 March 2023
	£000	£000
Revaluation Reserve	264,609	287,697
Capital Adjustment Account	347,342	367,872
Financial Instruments Adjustment Account	(6,946)	(6,756)
Pooled Investment Funds Adjustment Account	244	(621)
Collection Fund Adjustment Account	2,815	7,420
Accumulated Absences Account	(6,785)	(5,506)
Pensions Reserve	(479,862)	91,499
Deferred capital receipts	840	805
Total Unusable Reserves	122,257	742,410

Revaluation Reserve

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

· revalued downwards or impaired and the gains are lost;

· used in the provision of services and the gains are consumed through depreciation; or

· disposed of and the gains are realised.

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

	2021/22	2022/23
	£000	£000	£000
Balance at 1 April	266,767		264,609
Upward revaluation of assets	29,764	59,556
Downward revaluation of assets and impairment losses not charged to the Deficit on the Provision of Services	(2,191)	(7,162)
Surplus on revaluation of non-current assets not posted to the Deficit on the Provision of Services	27,573		52,394
Difference between fair value depreciation and historical cost depreciation	(5,544)	(6,866)
Accumulated gains on assets sold or scrapped	(24,187)	(22,440)
Amount written off to the Capital Adjustment Account	(29,731)		(29,306)
Balance at 31 March	264,609		287,697

Capital Adjustment Account

The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council to finance the costs of capital acquisition, construction, and enhancement. The Account contains accumulated gains and losses on Investment Properties and revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 7 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.

	2021/22	2022/23
	£000	£000	£000
Balance at 1 April	367,819		347,342
Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement:
Charges for depreciation and impairment of non-current assets	(47,311)	(46,436)
Revaluation losses on non-current assets	(2,649)	(4,875)
Revaluation losses on assets held for sale	(1,229)	(828)
Revaluation loss reversals on non-current assets	5,697	13,775
Revaluation loss reversals on assets held for sale	8	-
Amortisation of intangible assets	(1,577)	(1,660)
Financial Asset Impairment (Gains)/Losses	(19)	14
Revenue expenditure funded from capital under statute	(28,926)	(11,622)
Capital grants repaid in year	(805)	(2,528)
Amounts of non-current assets written off on disposal or sale as part of the loss on disposal to the Comprehensive Income and Expenditure Statement	(35,904)	(41,286)
	(112,715)		(95,446)
Adjusting amounts written out of the Revaluation Reserve	29,731		29,306
Net written out amount of the cost of non-current assets consumed in the year	(82,984)		(66,140)
Capital financing applied in the year
Use of the Capital Receipts Reserve to finance new capital expenditure	5,840	9,591
Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement that have been applied to capital financing	38,823	40,985
Statutory provision for the financing of capital investment charged against the General Fund balance	11,590	13,366
Capital expenditure charged against General Fund balances	6,694	21,374
	62,947		85,316
Movements in the market value of Investment Properties credited or debited to the Comprehensive Income and Expenditure Statement	(440)		1,354
Balance at 31 March	347,342		367,872

Financial Instruments Adjustment Account

The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. The Council uses the Account to manage premiums paid on the early redemption of loans. Premiums are debited to the Comprehensive Income and Expenditure Statement when they are incurred, but reversed out of the General Fund Balance to the Account in the Movement in Reserves Statement. Over time, the expense is posted back to the General Fund Balance in accordance with statutory arrangements for spreading the burden on council tax. In the Council’s case, this period is the unexpired term that was outstanding on the loans when they were redeemed. As a result, the balance on the Account at 31 March 2023 will be charged to the General Fund over a specific period.

	2021/22	2022/23
	£000	£000	£000
Balance at 1 April	(7,137)		(6,946)
Premiums	188	187
Soft Loan Interest	3	3
Net movement in the Financial Instruments Adjustment Account	191		190
Balance at 31 March	(6,946)		(6,756)

Pooled Investment Funds Adjustment Account

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

	2021/22	2022/23
	£000	£000
Balance at 1 April	(539)	244
Fair value of Property Fund	783	(865)
Balance at 31 March	244	(621)

Pensions Reserve

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

As at 31 March 2023 the Pensions Reserve moved from a debit to a credit balance which indicates a surplus in the assessed pension resources over pension liabilities.

	2021/22	2022/23
	£000	£000
Balance at 1 April	(559,382)	(479,862)
Remeasurement of the net defined liability	132,445	569,268
Benefits credited to the Provision of Services in the Comprehensive Income and Expenditure Statement	(90,202)	(37,550)
Employer’s pension contributions charged to General Fund Balance	37,277	39,643
Balance at 31 March	(479,862)	91,499

Collection Fund Adjustment Account

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

	2021/22	2022/23
	£000	£000
Balance at 1 April	(4,944)	2,815
Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements	5,337	2,270
Amount by which business rates income debited to the Comprehensive Income and Expenditure Statement is different from business rates income calculated for the year in accordance with statutory requirements	2,422	2,335
Net movement in the Collection Fund Adjustment Account	7,759	4,605
Balance at 31 March	2,815	7,420

Accumulated Absences Account

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

	2021/22	2022/23
	£000	£000
Balance at 1 April	(6,322)	(6,785)
Settlement or cancellation of accrual made at the end of the preceding year	6,322	6,785
Amounts accrued at the end of the current year	(6,785)	(5,506)
Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements	(463)	1,279
Balance at 31 March	(6,785)	(5,506)

Deferred capital receipts reserve

The deferred capital receipts reserve holds the gains recognised on the disposal of non‑current assets but for which cash settlement has yet to take place. Under statutory arrangements, the authority does not treat these gains as usable for financing new capital expenditure until they are backed by cash receipts. When the deferred cash settlement eventually takes place, amounts are transferred to the capital receipts reserve.

	2021/22	2022/23
	£000	£000
Balance at 1 April	-	840
Transfer of deferred sale proceeds credited as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement	840	-
Transfer to the capital receipts reserve upon receipt of cash	-	(35)
Balance at 31 March	840	805

A transfer of £0.840m deferred sale proceeds was made in 2021/22 in respect of the sale of the South Downs Country Park to the South Downs National Park Authority. The balance is due to paid to the Council over a period of 25 years.

26. Cash Flow Statement – Operating Activities

The cash flows for operating activities include the following items:

	2021/22	2022/23
	£000	£000
Net deficit on the provision of services	65,934	3,321

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

Depreciation	(47,311)	(46,436)
Impairment and downward valuations	1,827	8,073
Amortisation	(1,577)	(1,660)
(Increase) in creditors	(5,220)	(6,569)
Increase/(decrease) in debtors	(3,820)	42,361
(Decrease) in inventories	(7)	-
Movement in pension liability	(52,925)	2,093
Carrying amount of non-current assets and non-current assets held for sale, sold or derecognised	(35,904)	(41,286)
Other non-cash items charged to the net deficit on the provision of services	(133)	988
Total	(145,070)	(42,436)

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

Proceeds from the sale of PPE, investment property and intangible assets	10,771	2,032
Capital grants credited to deficit on provision of services	34,818	37,138
Total	45,589	39,170

Net cash flows from operating activities

(33,547)

The cash flows for operating activities include the following items:

	2021/22	2022/23
	£000	£000
Interest received	(1,421)	(2,387)
Interest paid	16,707	15,647
Dividends received	(171)	(184)

27. Cash Flow Statement – Investing Activities

	2021/22	2022/23
	£000	£000
Purchase of PPE, Investment Property and Intangibles	44,074	61,904
Other payments for investing activities	379	220
Proceeds from the sale of PPE, Investment Property and Intangibles	(9,176)	(1,231)
Purchase of short and long term investments	44,850	289,350
Proceeds from short and long term investments	(15,000)	(320,350)
Other receipts from investing activities	(35,692)	(37,994)
Net cash flows from investing activities	29,435	(8,101)

28. Cash Flow Statement – Financing Activities

	2021/22	2022/23
	£000	£000
Cash receipts of short and long term borrowing	(1,275)	-
Cash payments for the reduction of PFI Liabilities	5,251	5,633
Repayments of short and long term borrowing	3,848	12,532
Net cash flows from financing activities	7,824	18,165

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

	1 April 2022	Financing Cash Flows	Non Cash Changes	31 March 2023
	£000	£000	£000	£000
Long Term Borrowings	(229,072)	6,451	4,797	(217,824)
Short Term Borrowings	(6,081)	6,081	(4,797)	(4,797)
PFI Liabilities	(61,096)	5,633	-	(55,463)
Net cash flows from financing activities	(296,249)	18,165	-	(278,084)

	1 April 2021	Financing Cash Flows	Non Cash Changes	31 March 2022
	£000	£000	£000	£000
Long Term Borrowings	(233,878)*	(1,275)	6,081	(229,072)
Short Term Borrowings	(3,848)*	3,848	(6,081)	(6,081)
PFI Liabilities	(66,347)	5,251	-	(61,096)
Net cash flows from financing activities	(304,073)*	7,824	-	(296,249)

*Restated due to SALIX loan correction

30. Pooled Budget and Partnership Arrangements

In 2022/23 the Council participated in partnership schemes involving pooled budget arrangements under Section 75 of the National Health Service Act 2006:

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

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

BCF planning was required for the whole of East Sussex and was signed off by the Health and Wellbeing Board in October 2017. Use of funding is agreed in partnership under joint governance arrangements as set out in a Section 75 agreement, of which ESCC is the lead body. In practice, the substance of the BCF arrangement is not that of a formal pooled budget due to a local agreement for ESCC to invoice the NHS for BCF-funded expenditure which it commissions directly, while the NHS retains the remainder of its contribution to the pool to fund expenditure which it commissions itself. NHS Sussex was established in July 2022 as the regional Integrated Care Board, with responsibility for agreeing the strategic priorities and resource allocation for all NHS organisations in Sussex and has taken on the commissioning functions which were previously carried out by CCG's.

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

	2021/22			2022/23
Arrangement	Expenditure	Income	ESCC Contribution	Expenditure	Income	ESCC Contribution
	£000	£000	£000	£000	£000	£000
Integrated Community Equipment	5,423	(5,423)	(2,712)	5,846	(5,846)	(2,923)
Better Care Fund	72,375	(72,375)	(29,954)	77,555	(77,555)	(30,594)

Mental Health Community Forensic scheme

The Mental Health Community Forensic scheme, which started in April 2010, comprises the Council and the Sussex Partnership NHS Foundation Trust. This operates under a section 75 agreement, but not as a pooled budget. The financial value of transactions during 2022/23 was £322,277 (£283,584 in 2021/22).

Orbis Joint Operating Budget

The expenditure and funding is detailed below:

	2021/22	2022/23
	£000	£000
Funding provided to the joint budget:
- Surrey County Council	(17,249)	(6,166)
- East Sussex County Council	(9,446)	(3,471)
- Brighton & Hove City Council	(8,491)	(2,732)
Total Funding	(35,186)	(12,369)

Expenditure met from the joint budget	35,186	12,369

Net (surplus)/deficit on the joint budget	-	-

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

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

	2021/22	2022/23
	£000	£000
ASE Total Budget	5,340	5,818

Expenditure	5,160	5,859
Income	(5,593)	(6,251)
ASE carry forward into 2023/24	433	392

Brighton & Hove City Council Contribution (18%)	1,041	1,067
East Sussex County Council Contribution (21%)	1,027	1,211
Surrey County Council Contribution (25%)	1,424	1,469
West Sussex County Council Contribution (36%)	1,848	2,071
	5,340	5,818

31. Members’ Allowances

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

	2021/22	2022/23
	£000	£000
Salaries - basic allowances	658	680
Special responsibility allowances	212	231
Expenses	8	14
Total	878	925

The table below shows the actual amounts paid to individual members in the 2022/23 financial year (excluding employer NI & pension contributions). The amounts to which Members are entitled, including the basic allowance for every member and expenses for special responsibilities, travel, phones etc., are published annually and form part 6 of the Constitution.

Member			Basic Allowance	Special Responsibility Allowance	Travel by Car	Fares and Subsistence
			£	£	£	£
Cllr	Samuel	Adeniji	13,584	-	69	-
Cllr	Abul	Azad	13,584	-	403	-
Cllr	John	Barnes	25	-	-	-
Cllr	Matthew	Beaver	13,609	6,928	362	-
Cllr	Colin	Belsey	13,609	6,945	593	-
Cllr	Nicholas	Bennett	13,961	19,450	1,419	220
Cllr	Bill	Bentley	25	-	-	-
Cllr	Robert	Bowdler	13,609	16,629	1,298	134
Cllr	Tania	Charman	25	-	-	-
Cllr	Charles	Clark	13,609	-	-	-
Cllr	Martin	Clarke	25	-	-	-
Cllr	Christopher	Collier	13,584	2,775	-	-
Cllr	Philip	Daniel	25	-	-	-
Cllr	Godfrey	Daniel	13,609	-	271	-
Cllr	Angharad	Davies	25	-	-	-
Cllr	Johnny	Denis	13,584	-	-	-
Cllr	Penelope	di Cara	13,584	-	-	-
Cllr	Christopher	Dowling	13,609	-	209	-
Cllr	Claire	Dowling	13,609	16,671	481	4
Cllr	Deidre	Earl-Williams	25	-	-	-
Cllr	Simon	Elford	25	-	-	-
Cllr	David	Elkin	35	-	-	-
Cllr	Nigel	Enever	25	-	-	-
Cllr	Michael	Ensor	25	-	-	-
Cllr	Kathryn	Field	13,609	3,609	708	264
Cllr	Gerard	Fox	13,609	6,945	-	164
Cllr	Roy	Galley	13,609	5,548	255	-
Cllr	Nuala	Geary	13,584	-	713	8
Cllr	Keith	Glazier	13,609	38,105	1,881	171
Cllr	Darren	Grover	25	-	-	-
Cllr	Alan	Hay	13,584	-	-	-
Cllr	Julia	Hilton	13,584	-	-	146
Cllr	Ian	Hollidge	13,584	-	-	-
Cllr	Stephen	Holt	13,584	-	-	-
Cllr	Johanna	Howell	13,584	12,646*	-	-
Cllr	Eleanor	Kirby-Green	13,584	-	514	-
Cllr	Carolyn	Lambert	13,609	-	-	-
Cllr	Thomas	Liddiard	13,609	6,928	-	-
Cllr	Laurence	Loe	25	-	-	-
Cllr	Philip	Lunn	13,584	-	-	-
Cllr	James	MacCleary	13,584	-	-	-
Cllr	Wendy	Maples	13,584	-	-	-
Cllr	Sorrell	Marlow-Eastwood	13,584	-	170	-
Cllr	Carl	Maynard	13,609	16,671	217	-
Cllr	Matthew	Milligan	13,149	-	-	-
Cllr	Steve	Murphy	13,584	-	-	-
Cllr	Ruth	O'Keeffe	25	-	-	-
Cllr	Sarah	Osborne	13,609	-	54	178
Cllr	Peter	Pragnell	13,609	13,855	-	-
Cllr	Paul	Redstone	13,149	-	1,118	447
Cllr	Christine	Robinson	13,584	-	-	-
Cllr	Patrick	Rodohan	13,609	-	-	-
Cllr	Philip	Scott	13,609	-	-	-
Cllr	Jim	Sheppard	35	-	-	-
Cllr	Daniel	Shing	13,609	-	37	-
Cllr	Stephen	Shing	13,609	-	301	-
Cllr	Alan	Shuttleworth	13,609	-	-	-
Cllr	Rupert	Simmons	13,609	16,671	238	8
Cllr	Andy	Smith	25	-	-	-
Cllr	Bob	Standley	13,609	16,671	282	-
Cllr	Richard	Stogdon	25	-	-	-
Cllr	Colin	Swansborough	13,609	6,945	-	-
Cllr	Barry	Taylor	13,609	-	-	-
Cllr	Georgia	Taylor	13,584	-	-	-
Cllr	Sylvia	Tidy	25	-	-	-
Cllr	David	Tutt	13,609	13,890	325	-
Cllr	John	Ungar	13,609	-	-	-
Cllr	Steve	Wallis	25	-	-	-
Cllr	Trevor	Webb	13,609	2,781	-	37
Cllr	Francis	Whetstone	25	-	-	-
Total			679,927**	230,663	11,918	1,781

Notes:

*Includes a backdated pay adjustment.

**Members basic allowance differs between individuals due to the back dated pay award for 2021/22 that was paid in 2022/23.

32. Officers’ Remuneration

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

Senior Employees Remuneration 2022/23
	Notes	Salary, Fees and Allowances	Additional duties and Acting up	Expenses Allowances (incl. Benefit in Kind)	Compensation for Loss of Office	Employer’s Pension Contribution	Total
		£	£	£	£	£	£
Chief Executive - Becky Shaw	1	105,947	16,723	211	-	21,590	144,471
Executive Director of Adult Social Care – Keith Hinkley	2	3,013	4,662	-	-	1,206	8,881
Director of Communities, Economy & Transport – Rupert Clubb	3	155,600	-	6,340	-	27,899	189,839
Director of Adult Social Care – Mark Stainton		154,439	-	138	-	27,181	181,758
Assistant Chief Executive – Philip Baker		154,475	-	10	-	27,188	181,673
Director of Children’s Services		149,620	-	-	-	26,333	175,953
Chief Operating Officer	4	143,263	-	195	-	25,214	168,672
Director of Public Health		120,829	-	1,131	-	21,266	143,226
Chief Finance Officer		108,601	-	-	-	19,114	127,715

Notes:

1. The Chief Executive is formally employed by East Sussex County Council but the post is shared with West Sussex County Council under a partnering arrangement. West Sussex County Council make a 50% contribution to the total salary and remuneration costs, the figures above reflect the costs incurred by East Sussex County Council only. The “Additional duties and Acting up” amount is in respect of payment made to reflect the requirement to work across both East and West Sussex County Councils.
2. The Executive Director of Adult Social Care is formally employed by East Sussex County Council but the post is shared with West Sussex County Council under a partnering arrangement. West Sussex County Council make an 80% contribution to the total salary and remuneration costs. The figures above reflect the costs incurred by East Sussex County Council only. Ceased employment on 31 May 2022. 3. Pension Contributions based on salary before CCV salary sacrifice (£2,916) of £158,516. 4. Commenced employment on 4 April 2022. 5. A backdated pay increase of 1.75% for 2021/22 was paid to all Local Management Grade posts in May 2022 and is included in the balances shown above.
Senior Employees Remuneration 2021/22
	Notes	Salary, Fees and Allowances	Additional duties and Acting up	Expenses Allowances (incl. Benefit in Kind)	Compensation for Loss of Office	Employer’s Pension Contribution	Total
		£	£	£	£	£	£
Chief Executive - Becky Shaw	1	101,927	16,236	141	-	20,797	139,100
Executive Director of Adult Social Care – Keith Hinkley	2	36,000	-	5,152	-	6,336	47,488
Director of Adult Social Care		141,885	-	-	-	24,290	166,175
Director of Children’s Services	3	60,614	-	-	-	8,919	69,533
Director of Children’s Services	4	81,920	-	-	-	14,418	96,338
Director of Communities, Economy & Transport – Rupert Clubb	5	149,115	-	7,138	-	26,757	183,010
Assistant Chief Executive		144,301	-	-	-	25,397	169,698
Chief Operating Officer – Phil Hall	6	160,905	-	-	-		160,905
Director of Public Health		115,440	-	148	-	20,317	135,906
Chief Finance Officer		99,384	-	80	-	17,492	116,956

Notes:

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

2. The Executive Director of Adult Social Care is formally employed by East Sussex County Council but the post is shared with West Sussex County Council under a partnering arrangement. West Sussex County Council make an 80% contribution to the total salary and remuneration costs. The figures above reflect the costs incurred by East Sussex County Council only.

3. Ceased employment on 31 July 2021.

4. Commenced employment on 1 September 2021.

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

6. Engaged as a consultant. Figures above include £17,000 relating to March 2022 that was paid in April 2022.

7. A backdated pay increase of 1.75% for 2021/22 was paid to all Local Management Grade posts in May 2022. As this pay award was not approved until after 31 March 2022 it is not reflected in the figures above.

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

Remuneration band	2021/22 Number of employees			2022/23 Number of employees
Remuneration band	Non Schools	Schools	Total	Non Schools	Schools	Total
£50,000 - £54,999	135	76	211	177	106	283
£55,000 - £59,999	43	48	91	125	49	174
£60,000 - £64,999	27	31	58	45	31	76
£65,000 - £69,999	38	26	64	23	27	50
£70,000 - £74,999	11	16	27	42	13	55
£75,000 - £79,999	5	9	14	8	9	17
£80,000 - £84,999	4	3	7	5	8	13
£85,000 - £89,999	10	1	11	3	1	4
£90,000 - £94,999	-	3	3	10	2	12
£95,000 - £99,999	2	1	3	1	1	2
£100,000 - £104,999	1	1	2	3	2	5
£105,000 - £109,999	-	2	2	1	1	2
£110,000 - £114,999	1	1	2	1	1	2
£115,000 - £119,999	1	-	1	1	1	2
£120,000 - £124,999	-	-	-	-	-	-
£125,000 - £129,999	1	-	1	-	-	-

33. Termination Benefits & Exit Packages

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

The Council terminated the contracts of 59 employees during 2022/23, incurring costs of £0.527m (81 terminations at a cost of £0.887m in 2021/22). An analysis of the numbers and amounts broken down by pay band and split between compulsory redundancies and other departures for both 2022/23 and 2021/22 are shown in the tables below.

Exit Packages 2022/23

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

less than £20,000	17	86	36	207	53	293
£20,000 to £39,999	2	56	1	25	3	81
£40,000 to £59,999	2	98	1	55	3	153
£60,000 to £79,999	-	-	-	-	-	-
Total	21	240	38	287	59	527

The total cost of £0.527m in the table above is the amount that has been charged to the Comprehensive Income and Expenditure Statement in 2022/23.

Exit Packages 2021/22

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

less than £20,000	14	81	51	298	65	379
£20,000 to £39,999	7	205	6	166	13	371
£40,000 to £59,999	2	92	1	45	3	137
£60,000 to £79,999	-	-	-	-	-	-
Total	23	378	58	509	81	887

34. External Audit Costs

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

	2021/22	2022/23
	£000	£000
Fees payable to Grant Thornton with regard to external audit services carried out by the appointed auditor for the year	121	127
Additional fee relating to the previous year’s audit work	8	-
Fees payable in respect of other audit services provided by external auditors*	8	10
Total External auditor remuneration	137	137
Refund from Public Sector Audit Appointments (PSAA)	(13)	-
Department for Levelling Up, Housing and Communities - Redmond Review – Local Audit Fees Grant **	(33)	(33)
Total	91	104

Notes

* For 2022/23 £10,000 was payable to Grant Thornton for work carried out in respect of the Teachers’ Pension Scheme.
**A national grant to support affected local bodies to meet the anticipated rise in fees, driven by new requirements on auditors, including new burdens relating to the implementation of the Redmond Recommendations and the National Audit Office’s Code of Audit Practice 2020.

35. Grant Income

The Council credited the following grants, contributions, and donations to the Comprehensive Income and Expenditure Statement in 2022/23:

	2021/22		2022/23
	£000	£000	£000	£000
Credited to Taxation and Non Specific Grant Income
Council Tax		316,838		333,707
Business Rates		74,818		74,249
Social Care Grant		17,083		23,674
Revenue Support Grant:		3,568		3,687
General
New Homes Bonus	504		816
Business Rates Relief Funding	5,698		13,610
Business Rates Levy surplus	-		629
Services Grant	-		5,175
Local Income Tax Guarantee Funding	36		-
Local Council Tax Support	4,734		-
		10,972		20,230
Capital grants and contributions recognised		34,818		37,139
Total		458,097		492,686

Grants Credited to Services
Dedicated Schools		246,888		244,475
Public Health		28,074		28,862
Better Care Fund		21,136		21,777
Ukrainian Scheme		-		17,843
COVID Infection Control		14,955		-
COVID-19 Grant		11,979		-
COVID Workforce Capacity Grant		4,930		-
COVID Winter Funding*		2,430		-
Household Support Fund*		2,055		7,794
Pupil Premium		9,004		9,073
Private Finance Initiative		4,755		4,755
Unaccompanied Asylum Seeking Children		3,064		4,423
Universal Infant Free School Meals		3,197		3,074
16-19 Sixth Form		3,321		2,974
Homes for Ukraine		-		2,660
Opportunity Areas		1,285		-
PE & Sport		1,985		-
Teachers Pay		92		2,175
Teachers’ Pension		258		117
Other Grants		25,495		25,108
Total		384,903		375,110

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

*One 2021/22 grant balance has been restated as it was made up of two different grants.

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

	31 March 2022	31 March 2023
	£000	£000
Current Liabilities – Receipts in Advance
Revenue Grants & Contributions	2,878	5,519
Capital Grants & Contributions	-	2,360

Long Term Liabilities – Receipts in Advance
Capital Grants & Contributions	14,102	18,961

36. Dedicated Schools Grant

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

Details of the deployment of DSG receivable for 2022/23 are as follows:

	Central Expenditure £000	Individual Schools Budget £000	Total £000
Final DSG for 2022/23 before academy and high needs recoupment			437,941
Academy and high needs figure recouped for 2022/23			(189,681)
Total DSG after academy and high needs recoupment for 2022/23			248,260
Plus: Brought forward from 2021/22			14,425
Less: Carry-forward to 2023/24 agreed in advance			(14,364)
Agreed initial budgeted distribution in 2022/23	90,849	157,472	248,321
In-year adjustments	615	-	615
Final budget distribution for 2022/23	91,464	157,472	248,936
Less: Actual central expenditure	(87,830)	-	(87,830)
Less: Actual ISB deployed to schools	-	(157,472)	(157,472)
Plus: Local authority contribution for 2022/23	585	-	585
In-year carry-forward to 2023/24	4,219	-	4,219
Plus: Carry-forward to 2023/24 agreed in advance			14,364
Carry-forward to 2023/24			18,583
DSG unusable reserve at the end of 2021/22			-
Addition to DSG unusable reserve at the end of 2022/23			-
Total of DSG unusable reserve at the end of 2022/23			-
Net DSG position at the end of 2022/23			18,583

School Reserve

The total value of the Individual Schools Budget (the budget which is delegated to schools) for 2022/23 was £157.5m. Schools carried forward (reserve) a net total of £20.1m (12.8%) at the end of the financial year 31 March 2023, which was a decrease of £1.2m compared to 31 March 2022. The table above shows the number and value of schools with surpluses and deficits.

		Primary	Secondary	Special	Total
All schools with surpluses
Number of schools	No.	99	7	1	107
Total surplus	£000	13,353	6,731	73	20,157
All schools with deficits					-
Number of schools	No.	4	1	-	5
Total deficit	£000	(74)	(2)	-	(76)
Carry forward	£000	13,279	6,729	73	20,081
Less: Capital Loan to Schools	£000	-	-	-	-
Net Carry forward	£000	13,279	6,729	73	20,081

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

37. Related Parties

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

Central Government

UK government has significant influence over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties. Grants received from government departments are set out in the subjective analysis in Note 35 on reporting for resources allocation decisions, and further details are shown in Note 35. Grant receipts in advance at 31 March 2023 are shown in Note 35.

Members and Chief Officers

Members of the Council have direct control over the Council’s financial and operating policies. The Register of Members’ Interests is held at County Hall, Lewes, and is open to public inspection. The total of members’ allowances paid in 2022/23 is shown in Note 31. None of Members or Chief Officers had control or influence in any related party transactions during the year.

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

· Director and Member of Woodland Enterprise Centre. In 2022/23, goods and services to the value of £0.039m were commissioned from this entity.

· Chairman and Member of Ashdown Forest Trust. In 2022/23, rents of the golf course to the value of £0.070m were paid to this entity.

Entities that are controlled or significantly influenced by the Council

The Council acts as sole trustee for the Ashdown Forest Trust (see Note 46), for the balances held by the Council at 31 March 2023.

East Sussex Pension Fund

The East Sussex Pension Fund is administered by East Sussex County Council. The Treasurer of the Pension Fund and members of the County Council have no material transactions with the Pension Fund. The Council incurred costs in administering the fund and charged £2.0m to the fund in 2022/23 (£1.6m in 2021/22). The Council’s contribution to the fund was £46.6m in 2022/23 (£43.4m in 2021/22).

East Sussex Fire Authority

East Sussex County Council provides financial services to the East Sussex Fire Authority. The arrangement has been in operation since 1997. The services provided include accounts payable, accounts receivable, payroll, treasury management, accountancy, VAT, IT services and internal audit. The cost of these services was £0.221m in 2022/23 (£0.234m in 2021/22)

Other Public Bodies

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

Other entities in which the Council has an interest

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

East Sussex County Council have 19% of the voting rights for Woodland Enterprises Ltd. The High Weald Unit of the Economy, Transport and Environment Department rented part of the Woodland Enterprises Centre from Woodland Enterprises Ltd during 2022/23. There were no long term debts to the company at 31 March 2023.

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

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

38. Capital Expenditure and Capital Financing

The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases and PFI contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed.

The Council accounts fully for depreciation of assets in line with accounting standards in the Comprehensive Income & Expenditure Statement, but it is legally obliged to provide for the repayment of a proportion of its Capital Financing Requirement (the Minimum Revenue Provision) in its charge to taxpayers.

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

	2021/22	2022/23
	£000	£000
Opening Capital Financing Requirement	335,135	349,583

Property, Plant and Equipment	43,104	60,760
Investment Properties	90	6
Intangible assets	3,392	2,608
Assets Held for Sale	29	17
Capital Loans	378	220
Capital grants repaid	804	2,528
Revenue Expenditure Funded from Capital under Statute	28,926	11,622
Total capital investment	76,723	77,761
Capital receipts	(5,840)	(9,591)
Government grants and other contributions	(38,823)	(40,985)
Revenue financing	(6,694)	(21,374)
Total financing other than from loans	(51,357)	(71,950)
Long Term capital debtors movement	672	(238)
Minimum Revenue Provision (MRP) for the repayment of loans	(11,590)	(13,366)
Closing Capital Financing Requirement	349,583	341,790

Explanation of movements in year
Increase/(decrease) in underlying need to borrow, that is not supported by government financial assistance	14,448	(7,793)

39. Leases

Authority as Lessee

Finance Leases - As at 31 March 2023, the Council has no assets classed as finance leases. There are 10 properties on the Balance Sheet which are valued as long leasehold however these properties do not have a corresponding liability on the Balance Sheet.

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

The minimum lease payments payable in future years are:

	31 March 2022	31 March 2023
	£000	£000
Not later than one year	2,980	2,572
Later than one year and not later than five years	7,191	7,087
Later than five years	5,713	5,512
Total	15,884	15,171

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

	2021/22	2022/23
	£000	£000
Land and Buildings	2,225	2,560
Schools	825	651
Vehicles	358	299
Total	3,408	3,510

Other payments for the renting and hiring of facilities in 2022/23 was £0.123m (£0.170m 2021/22).

Authority as Lessor

Finance Leases - As at 31 March 2023, the Council has no assets classed as finance leases.

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

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

· depots in relation to service contracts;

· properties surplus to requirements that are awaiting disposal.

The future minimum lease payments receivable in future years are:

	31 March 2022	31 March 2023
	£000	£000
Not later than one year	1,758	2,326
Later than one year and not later than five years	4,790	4,921
Later than five years	5,618	4,706
Total	12,166	11,953

The total income received from leasing, renting and hiring of facilities in 2022/23 was £2.405m (£1.905m 2021/22).

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

Other Long Term Liabilities in the Balance Sheet consist of:

	31 March 2022	31 March 2023
	£000	£000

Long Term PFI Liabilities	61,096	55,463
Financial Guarantees	54	54
Long Term Creditors	16	10
Total	61,166	55,527

Schools PFI

The Council has a contract with Peacehaven Schools Ltd (PSL) under the Private Finance initiative to provide a new secondary school and replace or refurbish four primary schools in Peacehaven and Telscombe Cliffs. The first school became operational in January 2000. During 2021/22 two of the remaining three PFI schools transferred into academies and were removed from the balance sheet leaving one school remaining on balance sheet.

Waste PFI

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

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

Peacehaven Schools PFI	Meridian
	£000
1 April 2022	5,554
Additions	-
Revaluations	(779)
Depreciation	(110)
Disposals	-
31 March 2023	4,665

Waste PFI	Hollingdean WTS & MRF	Maresfield WTS & HWRS	Whitesmith Composting Facility	Newhaven Energy Recovery Facility	Pebsham HWRS	Total
	£000	£000	£000	£000	£000	£000
1 April 2022	8,539	2,583	17,329	13,981	449	42,881
Revaluations	-	321	-	3,318	50	3,689
Depreciation	(561)	(134)	(877)	(710)	(25)	(2,307)
31 March 2023	7,978	2,770	16,452	16,589	474	44,263

Notes:

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

Details of payments to be made under PFI contracts

Waste PFI

Based on the OBR projected RPIX annual inflation rate to 2027/28 and a projected 2.5% annual inflation rate beyond, the details of the payments due to be made are detailed below:

	Reimbursement of capital expenditure	Interest	Service Charge	Contingent Rent	Lifecycle Maintenance	Total
	£000	£000	£000	£000	£000	£000
Within 1 year: 2023/24	4,165	3,026	18,942	3,960	-	30,093
Within 2 to 5 years: 2024/25 to 2027/28	19,454	9,707	85,124	20,886	-	135,171
Within 6 to 10 years: 2028/29 to 2032/33	31,865	5,455	119,813	33,013	-	190,146
Total	55,484	18,188	223,879	57,859	-	355,410

Peacehaven Schools PFI

Based on actual inflation to 31 March 2023, and assuming a 3.0% inflation rate for the remaining life of the contract, the payments to be made are set out below:

	Reimbursement of capital expenditure	Interest	Service Charge	Contingent Rent	Lifecycle Maintenance	Total
	£000	£000	£000	£000	£000	£000
Within 1 year: 2023/24	1,468	550	2,182	1,358	373	5,931
Within 2 to 4 years: 2024/25 to 2026/27	4,144	729	5,556	3,544	949	14,922
Total	5,612	1,279	7,738	4,902	1,322	20,853

Operational PFI contracts are accounted for in a manner that is consistent with the adaptation of IFRIC 12 Service Concession Arrangements contained in the government’s Financial Reporting Manual. The original recognition of these fixed assets is balanced by the recognition of a liability for amounts due to the scheme operator to pay for the assets. The deferred liability as at 31 March 2023 is £61.1m (£55.5m for Waste PFI, and £5.6m for Peacehaven Schools PFI), and as at 31 March 2022 was £66.3m (£59m for Waste PFI, and £6.9m for Peacehaven Schools PFI).

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

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

	Waste PFI	Schools PFI	Total	Included in Short Term Creditors	Included in Long term Liabilities
	£000	£000	£000	£000	£000
Balance outstanding at 1 April 2022	59,398	6,949	66,347	5,251	61,096
Lease principal repayment	(3,914)	(1,337)	(5,251)	382	(5,633)
Balance outstanding at 31 March 2023	55,484	5,612	61,096	5,633	55,463

41. Pensions Schemes Accounted for as Defined Contribution Schemes

Teachers’ Pension Scheme

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

In 2022/23 the Council incurred a total of £17.65m payable to Teachers Pensions Scheme in respect of teacher’s pension costs, which represents 23.68% of teacher’s pensionable pay. In addition, the Council is responsible for all pension payments related to added years it has awarded, together with the related increase which amounted to £3.29m. These figures compare to an amount of £17.87m payable in 2021/22 (23.86% of pensionable pay) and £3.11m for added years pensions payable to former teachers.

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

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

As at March 2023, the Council owed £2.03m to Teachers Pensions for the employer’s and employee’s contribution to the Teachers Pensions Scheme (£2.04m at March 2022). The Council is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the teachers’ scheme. These costs are accounted for on a defined benefit basis and detailed in Note 42.

NHS Pension Scheme

In 2013/14, NHS staff transferred to the Council. These employees have maintained their membership of the NHS Pension Scheme. The scheme provides these staff with specified benefits upon their retirement and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable pay.

The scheme is an unfunded defined benefit scheme. However, the Council is not able to identify its share of the underlying financial position and performance of the scheme with sufficient reliability for accounting purposes. For the purposes of this statement of accounts, it is therefore accounted for on the same basis as a defined contribution scheme.

In 2022/23, the Council incurred a total of £0.165m payable to the NHS Pension Scheme in respect of former NHS staff retirement benefits, and there was £0.024m contributions remaining payable at the year end. This compares to an amount of £0.15m payable in 2021/22.

42. Defined Benefits Pension Schemes

Participation in Pension Schemes

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

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

Transactions Relating to Post-employment Benefits - the cost of retirement benefits is recognised in the Net Cost of Services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge we are required to make against council tax is based on the contributions made in the year, so the real cost of retirement benefits is reversed out through the General Fund via the Movement in Reserves Statement and the contributions made in the year are included.

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

	2021/22	2022/23
	£000	£000
Comprehensive Income and Expenditure Statement
Cost of Services:
Service Cost Comprising:
· current service cost	82,481	48,305
· past service costs	-	-
· (gain)/loss from settlements	(3,496)	(588)
Financing and Investment Income and Expenditure
Net interest expense	11,217	(10,167)
Total Post-employment Benefits charged to the Surplus or Deficit on the Provision of Services	90,202	37,550
Other Post-employment Benefits charged to the Comprehensive Income and Expenditure Statement

Re-measurement of the net defined benefit liability comprising:
· Return on plan assets (excluding the amount included in the net interest expense)	(153,162)	114,948
· Actuarial gains and losses arising on changes in demographic assumptions	35,854	-
· Actuarial gains and losses arising on changes in financial assumptions	(67,057)	(862,375)
· Other (if applicable)	51,920	178,159
Total Post-employment Benefits charged to the Comprehensive Income and Expenditure Statement	(42,243)	(531,718)

Movement in Reserves Statement
· Reversal of net charges made to the Surplus or Deficit on the Provision of Services for post-employment benefits in accordance with the Code	79,520	571,361

Actual amount charged against the General Fund Balance for pensions in the year:
Employers’ contributions payable to the scheme	37,277	39,643

Pensions Assets and Liabilities Recognised in the Balance Sheet

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

	2018/19	2019/20	2020/21	2021/22	2022/23
	£000	£000	£000	£000	£000

Present Value of the define benefit obligations: Local Government Pension Scheme	(1,890,390)	(1,666,341)	(2,066,436)	(2,119,869)	(1,491,954)

Fair value of plan assets in the Local Government Pension Scheme	1,368,978	1,249,473	1,507,054	1,640,007	1,583,453

Surplus / (Deficit) in the scheme: Local Government Pension Scheme	(521,412)	(416,868)	(559,382)	(479,862)	91,499

The liabilities show the underlying commitments that the Council has in the long run to pay retirement benefits. The total liability of £1,492.0m (£2,119.9m in 2021/22) has a substantial impact on the net worth of the Council as recorded in the Balance Sheet, resulting in a positive overall balance of £91.5m (£479.9m negative balance in 2021/22).

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

The total contributions expected to be made to the Local Government Pension Scheme by the Council in the year to 31 March 2024 is 19.6% of payroll.

Assets and Liabilities in Relation to Post-employment Benefits

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

	2021/22	2022/23
	£000	£000
Opening balance at 1 April:	2,066,436	2,119,869

Current Service Cost	81,170	46,973
Interest Cost	34,144	59,669
Contributions by scheme participants	10,527	11,809
Re-measurement (gains) and losses:
· Actuarial gains/losses arising from changes in demographic assumptions	35,854	-
· Actuarial gains/losses arising from changes in financial assumptions	(67,057)	(862,375)
· Other	23,149	178,159
Past Service Costs, including curtailments	519	134
Benefits paid	(52,657)	(53,355)
Liabilities assumed/(extinguished) on settlements	(8,237)	(5,019)
Unfunded Benefits paid	(3,979)	(3,910)
Closing balance at 31 March	2,119,869	1,491,954

Reconciliation of fair value of the scheme assets:

	2021/22	2022/23
	£000	£000
Opening fair value of scheme asset at 1 April:	1,507,054	1,640,007

Interest Income	22,927	69,836
Re-measurement gain / (loss):
· The return on plan assets, excluding the amount included in the net interest expense	153,162	(114,948)
· Other	(28,771)	-
Contributions from employer	37,277	39,643
Contributions from employees into the scheme	10,527	11,809
Benefits paid	(52,657)	(53,355)
Unfunded benefits paid	(3,979)	(3,910)
Other payments	(5,533)	(5,629)
Closing fair value of scheme assets at 31 March	1,640,007	1,583,453

Other payments for scheme assets include administration expenses and settlement prices paid.

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

The interest income on plan assets in the year was £69.84m (£22.93m in 2021/22).

Local Government Pension Scheme assets comprised:

	Fair value of scheme assets	%	Fair value of scheme assets	%
	2021/22		2022/23
	£000		£000

Cash and cash equivalents	32,800	2	15,835	1

Bonds:
By sector
· Government	49,200	3	47,504	3
Sub-total bonds	49,200	3	47,504	3

Private equity:
All	131,201	8	126,676	8
Sub-total private equity	131,201	8	126,676	8

Other investment funds:
· UK Property	131,201	8	110,842	7
Sub-total other investment funds	131,201	8	110,842	7

Investment funds and unit trusts:
· Equities	705,202	43	696,718	44
· Bonds	147,601	9	142,511	9
· Infrastructure	49,200	3	142,511	3
· Other	393,602	24	300,856	19
Sub-total Investment funds and unit trusts	1,295,605	79	1,282,596	81
Total assets	1,640,007	100	1,583,453	100

Basis for Estimating Assets and Liabilities

Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. The County Council Fund liabilities have been assessed by Barnett Waddingham, an independent firm of actuaries, based on the calculations in the latest full valuation of the scheme as at 31 March 2022 rolled forward to the Balance Sheet date allowing for the different assumptions required by accounting standards.

The principal assumptions used by the actuary have been:

	2021/22	2022/23
Mortality assumptions:
Longevity at 65 for current pensioners
Men	21.1	21.1
Women	24.0	24.1
Longevity at 65 for future pensioners
Men	22.1	22.2
Women	25.5	25.6

Rate of increase in salaries	3.25%	2.9%
Rate of inflation/increase in pensions	3.25%	2.9%
Rate for discounting scheme liabilities	2.6%	4.8%

The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period and assumes for each change that the assumption analysed changes while all the other assumptions remain constant. The assumptions in longevity, for example, assume that life expectancy increases or decreases for men and women. In practice, this is unlikely to occur, and changes in some of the assumptions may be interrelated. The estimations in the sensitivity analysis have followed the accounting policies for the scheme i.e. on an actuarial basis using the projected unit credit method.

Change in assumptions at 31 March 2023:	Impact on the Defined Benefit Obligation in the Scheme
Change in assumptions at 31 March 2023:	Approximate increase to Employer	Approximate monetary amount
	%	£000
0.1% decrease in Real Discount Rate	2	23,741
0.1% increase in the Salary Increase Rate	-	1,298
0.1% increase in the Pension Increase Rate	2	22,864
1 year increase to life expectancy assumptions	4	63,121

At 31 March 2023, the Council owed £3.96m (£4.15m 31 March 2022) to the Pension Fund in respect of employer’s and employees’ contributions.

Details of the East Sussex Pension Fund, for which a full actuarial valuation was last carried out at 31 March 2022, can be found on pages 125 to 160.

Impact on the Authority’s Cash Flows

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

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

· to ensure that employer contribution rates are reasonably stable where appropriate;

· to minimise the long-term cash contributions which employers need to pay to the Fund;

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

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

The funding level for the Fund is monitored on a regular basis. The next triennial valuation is due to be completed on 31 March 2025.

The contributions paid by the Employer are set by the Fund Actuary at each triennial actuarial valuation or at any other time as instructed to do so by the Fund. The contributions payable over the period to 31 March 2023 are set out in the Rate and Adjustments certificate. For further details on the approach adopted to set contribution rates for the Employer, please refer to the 31 March 2022 actuarial valuation report (link below).

https://www.eastsussexpensionfund.org/resources/

43. Contingent Liabilities

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

44. Contingent Assets

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

45. Nature and extent of risks arising from Financial Instruments

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

§ Credit risk - the possibility that other parties might fail to pay amounts due to the Council;

§ Liquidity risk - the possibility that the Council might not have funds available to meet its commitments to make payments;

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

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

Overall procedures for managing risk

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

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

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

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

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

v The Council’s overall borrowing;

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

v Its management of interest rate exposure;

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

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

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

The annual treasury management strategy which incorporates the prudential indicators was approved by Full Council on 8 February 2022 and is available on the Council website.

The key issues within the strategy were:

§ The Authorised Limit for 2022/23 was set at £433m. This is the maximum limit of external borrowings or other long-term liabilities;

§ The Operational Boundary was expected to be £415m. This is the expected level of debt and other long-term liabilities during the year;

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

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

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

1. Credit Risk

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

Credit Risk Management Practices

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

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

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

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

§ credit watches and credit outlooks from credit rating agencies;

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

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

The full Investment Strategy for 2022/23 was approved by Full Council on 8 February 2022 and is available on the Council’s website.

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

The Council’s maximum exposure to credit risk in relation to its investments in financial institutions of £273m cannot be assessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual institution. Recent experience has shown that it is rare for such entities to be unable to meet their commitments.

A risk of irrecoverability applies to all of the Council’s deposits, but there was no evidence at the 31 March 2023 that this was likely to crystallise.

Amounts Arising from Expected Credit Losses (ECL)

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

	12 Month ECL	Lifetime ECL	Lifetime ECL – Simplified Approach	Total
	£000	£000	£000	£000
Opening balance 1 April 2022	34	172	1,577	1,783
Change in credit loss	(10)	(19)	1,034	1,005
Closing balance 31 March 2023	24	153	2,611	2,788

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

Collateral

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

2. Liquidity risk

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

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

The maturity analysis of financial assets, excluding sums due from customers of £37.30m at 31 March 2023 (£11.13m at 31 March 2022), is as follows:

	31 March 2022	31 March 2023
	£000	£000
Less than one year	315,030	293,692
Between one and two years	25,621	9,170
Total	340,651	302,862

3. Refinancing and Maturity risk

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

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

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

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

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

	Approved Minimum Limit	Approved Maximum Limit	31 March 2022	31 March 2023
	%	%	£000	£000
Less than one year (current liabilities)	0%	25%	103,555	92,611
Between one and two years	0%	40%	10,432	11,521
Between two and five years	0%	60%	34,999	33,793
Between five and ten years	0%	70%	65,121	71,390
More than ten years	0%	90%	179,686	156,647
Total			393,793	365,962

4. Market risk

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

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

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

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

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

Borrowings are not carried at fair value on the balance sheet, so nominal gains and losses on fixed rate borrowings would not impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services and affect the General Fund Balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in the Other Comprehensive Income and Expenditure Statement.

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

According to this assessment strategy, at 31 March 2023, if all interest rates had been 1% higher (with all other variables held constant) the financial effect would be:

	£000
Increase in interest payable on variable rate borrowings (none held)	-
Increase in interest receivable on variable rate investments	497
Impact on Comprehensive Income and Expenditure	497

Price risk

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

The Council has a 19% voting rights interest in Woodland Enterprises Ltd, a company limited by guarantee, which was set up to create prosperity in woodland and wood industries through sustainable development. The net assets of the company in the unaudited financial statements at 31 March 2022 were £247,600 (£258,258 at 31 March 2021).

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

The Council does hold £5m in a property asset fund, and its price varies. The fair value at 31 March 2023 is £4.4m. However, any movement in price will not impact on the General Fund Balance as regulations are in force to ameliorate the impact of fair value movements.

Foreign exchange risk

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

46. Trust Funds

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

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

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

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

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

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

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

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

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

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

	2022/23
	Opening Balance	Expenditure	Income	Closing Balance
	£000	£000	£000	£000
Sole trustee funds
East Sussex Music Trust	(27)	-	-	(27)
Robertsbridge Youth Centre	(107)	-	(3)	(110)
Lewes Educational Charity	(62)	-	(1)	(63)
Heathfield Youth Centre	(60)	-	(1)	(61)
How Scholarship	(5)	-	-	(5)
Wright Legacy	(2)	-	-	(2)
Total sole trustee funds	(263)	-	(5)	(268)
Comforts funds	(36)	3	(5)	(38)
Total trust funds	(299)	3	(10)	(306)

Ashdown Forest Trust	(1,367)	-	-	(1,367)
Performing Arts Centre, Lewes	(492)	16	-	(476)

47. Closed Landfill Sites

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

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

In accordance with Environment Agency legislation, the Council has made a provision for a past event of up to 60 years for future aftercare costs for each site. The provision is the best estimate of the expenditure required to settle the obligation. Over the remaining aftercare life for each site, the Council will charge aftercare costs to the provision and so reduce the liability. At 31 March 2023, the liability had reduced to £8.87m (£9.02m at 31 March 2022).

The Council own the freehold or part freehold of eight of the nineteen sites and in accordance with IAS 16 Property, Plant & Equipment and the Council’s own accounting policy (see accounting policy xxi on page 60), has recognised the land value in the Balance Sheet. Four of the sites are located on land included elsewhere in the Council’s Balance Sheet and the remaining four sites are valued separately as Property, Plant & Equipment at £1.2m at 31 March 2023 (£1.2m at 31 March 2022).

1: Description of Fund

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

The following description of the Fund is a summary only. For more detail, references should be made to the underlying statutory powers underpinning the scheme, namely the Public Service Pensions Act 2013 and The Local Government Pension Scheme (LGPS) Regulations and policies and reports published on the website (www.eastsussexpensionfund.org).

General

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

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

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

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

The Fund is a contributory defined benefit pension scheme administered by East Sussex County Council to provide pensions and other benefits for pensionable employees of East Sussex County Council, Brighton and Hove City Council, the district and borough councils in East Sussex County and a range of other scheduled and admitted bodies within the county area. The Fund does not provide pensions for teachers, for whom separate arrangements exist. Uniformed police and fire staff are also subject to separate pension arrangements.

The Council has delegated its pension functions to the East Sussex Pension Committee. Responsibility for the administration and financial management of the Fund has been delegated to the Chief Finance Officer along with the Head of Pensions.

The Fund is also required to establish and maintain a Pension Board, for the purposes of assisting with the governance, administration and ongoing compliance of the Fund. The role of the Board is to assist the East Sussex Pension Fund in complying with all the legislative requirements making sure the scheme is being effectively and efficiently governed and managed.

Independent investment managers have been appointed to manage the investments of the Fund. The Fund invests in liquid investments such as equities and bonds as well as illiquid investments such as private equity, infrastructure, and private debt. The Pension Committee oversees the management of these investments and officers and advisers meet regularly with the investment managers to monitor their performance against agreed benchmarks. The Pension Committee take proper advice from specialist advisers when making investment decisions.

Membership

Membership of the LGPS is voluntary and employees are free to choose whether to join the scheme, remain in the scheme or make their own personal arrangements outside the scheme. Employees are auto enrolled into the scheme every three years and on appointment.

Organisations participating in the East Sussex Pension Fund include:

a) Scheduled bodies, which are local authorities and similar bodies whose staff are automatically entitled to be members of the Fund

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

There are 140 employer organisations within East Sussex Pension Fund including the County Council itself, and 84,028 members as detailed below:

East Sussex Pension Fund	31 March 2022	31 March 2023
Number of employers with active members	134	140
Number of employees
County Council	8,059	8,123
Other employers	16,455	16,568
Total	24,514	24,691
Number of pensioners
County Council	10,125	10,505
Other employers	13,006	13,619
Total	23,131	24,124
Deferred pensioners
County Council	14,223	14,460
Other employers	19,423	20,753
Total	33,646	35,213
Total number of members in pension scheme	81,291	84,028

Funding

Benefits are funded by contributions and investment earnings. Contributions are made by active members of the Fund in accordance with the LGPS Regulations 2013 and range from 5.5% to 12.5% of pensionable pay for the financial year ending 31 March 2023. Employee contributions are matched by employers’ contributions, which are set, based on triennial actuarial funding valuations. The last such valuation was at 31 March 2022. Currently, employer contribution rates range from 0% to 49.2% of pensionable pay.

Benefits

Prior to 1 April 2014, pension benefits under the LGPS were based on final pensionable pay and length of pensionable service. From 1 April 2014, the scheme became a career average scheme (CARE), whereby members accrue benefits based on their pensionable pay in that year at an accrual rate of 1/49th. Accrued pension is updated annually in line with the Consumer Prices Index.

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

2: Basis of preparation

The Statement of Accounts summarises the Fund’s transactions for the 2022/23 financial year and its position at year-end as at, 31 March 2023. The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2022/23 which is based upon International Financial Reporting Standards (IFRS) as amended for UK public sector. The accounts have been prepared on a going concern basis.

Accounting standards issued but not yet adopted - Under the Code of Practice on Local Authority

Accounting standards issued but not yet adopted - Under the Code of Practice on Local Authority Accounting in the United Kingdom 2022/23, the Fund is required to disclose information setting out the impact of an accounting change required by a new accounting standard that has been issued on or before 1 January 2020 but not yet adopted by the Code.

The standards introduced by the 2023/24 Code where disclosures are required in the 2022/23 financial statements are:

a) IFRS 16 Leases (but only for those local authorities that have decided to voluntarily

implement IFRS 16 in the 2023/24 year).

b) Where an authority adopted IFRS 16 in 2022/23 but chose to defer implementation of IFRS

16 to PFI/PPP arrangements until 2023/24 information on that more specific accounting

change will be required in its 2022/23 statements of accounts.

c) Definition of Accounting Estimates (Amendments to IAS 8) issued in February 2021.

d) Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

issued in February 2021.

e) Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments

to IAS 12) issued in May 2021.

f) Updating a Reference to the Conceptual Framework (Amendments to IFRS 3) issued in May 2020.

Note that a) will only be applicable to local authorities that intend to voluntarily implement IFRS 16 in 2023/24, and item b) will only be applicable to local authorities that have voluntarily implemented IFRS 16 in 2022/23 but chose to defer implementation for PFI/PPP arrangements until 2023/24. It is likely that though they lead to improved reporting that items c) and d) will not have a significant impact on the amounts anticipated to be reported in the financial statements. Item e) will only be applicable to local authorities with group accounts and it is likely that there will be limited application of item f).

There were no amendments for 2022/23 for the accounts of the Pension Fund.

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

The Pension Fund publishes a number of statutory documents, including an Investment Strategy Statement, a Funding Strategy Statement, Governance and Compliance Policy Statement and Communications Strategy Statement. are available on the Fund website from https://www.eastsussexpensionfund.org/

The Fund invest a large portion of its investment assets through the ACCESS (A Collaboration of Central, Eastern and Southern Shires) LGPS Pool. There is no specific accounting policy for the Pool. The ACCESS Pool is not a legal entity in itself but is governed by an Inter Authority Agreement signed by each Administering Authority.

The formal decision-making body within the ACCESS Pool is the ACCESS Joint Committee, which has let the management of the asset pool to Link Fund Solutions Ltd, appointed to provide a pooled operator service and is FCA regulated. There is no direct investment in the third party, only a contractual arrangement to provide services, so there is no investment balance to carry forward in the net asset statement.

3. Summary of significant accounting policies

Fund account – revenue recognition

1. Contribution income

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

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

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

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

Additional employers’ contributions in respect early retirements are accounted for in the year the event arose. Any amount due in the year but unpaid will be classed as a current financial asset. Amounts not due until future years are classed as long-term financial assets.

Ill-health insurance policy some employers have opted into an ill-health insurance policy administered by the Fund on their behalf. Contributions calculated by the actuary include an allowance for ill-health claims this allowance is used to pay for the policy and a reduction in contributions based on the premium and membership of the employer is made. Within the policy a profit sharing mechanism has been included which is based on the claims made an assessment will be taken if any profit share will be appropriate and an accrual made on the likely share of the profits the employers are entitled to.

2. Transfers to and from other schemes

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

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

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

3. Investment income

a) Interest income

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

b) Dividend income

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

c) Distributions from pooled funds

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

d) Movement in the net market value of investments

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

Fund account – expense items

4. Benefits payable

Pensions and lump-sum benefits payable include all amounts known to be due as at the end of the financial year. Any amounts due but unpaid are disclosed in the net assets statement as current liabilities.

5. Taxation

The Fund is a registered public service scheme under section 1(1) of Schedule 36 of the Finance Act 2004 and as such is exempt from UK income tax on interest received and from capital gains tax on the proceeds of investments sold. Income from overseas investments suffers withholding tax in the country of origin, unless exemption is permitted. Irrecoverable tax is accounted for as a Fund expense as it arises.

6. Management expenses

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

a) Administrative expenses

All staff costs relating to the pensions administration team are charged direct to the Fund. Council recharges for management, accommodation and other overhead costs are also accounted for as administrative expenses of the Fund.

b) Oversight and governance costs

All costs associated with governance and oversight are separately identified, apportioned to this activity and charged as expenses to the Fund

c) Investment management expenses

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

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

Where an investment manager’s fee has not been received by the balance sheet date, an estimate based upon the market value of their mandate as at the end of the year is used for inclusion in the fund account. In 2022/23, £0.7m of fees is based on such estimates (2021/22: £1.2m).

Net assets statement

7. Financial assets

All investment assets are included in the financial statements on a fair value basis as at the reporting date. A financial asset is recognised in the net assets statement on the date the Fund becomes party to the contractual acquisition of the asset.

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

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

8. Foreign currency transactions

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

9. Derivatives

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

10. Cash and cash equivalents

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

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

11. Financial liabilities

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

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

12. Actuarial present value of promised retirement benefits

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

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

13. Additional voluntary contributions

East Sussex Pension Fund provides an additional voluntary contributions (AVC) scheme for its members, the assets of which are invested separately from those of the pension fund. The Fund has appointed Prudential as its AVC provider. AVCs are paid to the AVC provider by employers and are specifically for providing additional benefits for individual contributors. Each AVC contributor receives an annual statement showing the amount held in their account and the movements in the year.

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

14. Contingent assets and contingent liabilities

A contingent liability arises where an event has taken place prior to the year-end giving rise to a possible financial obligation whose existence will only be confirmed or otherwise by the occurrence of future events. Contingent liabilities can also arise in circumstances where a provision would be made, except that it is not possible at the balance sheet date to measure the value of the financial obligation reliably.

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

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

4. Critical judgements in applying accounting policies

Unquoted private equity investments

It is important to recognise the highly subjective nature of determining the fair value of private equity investments. They are inherently based on forward-looking estimates and judgements involving many factors. Unquoted private equities are valued by the investment managers using International Private Equity and Venture Capital Valuation Guidelines 2015. The value of unquoted private equities at 31 March 2023 was £375 million (£374 million at 31 March 2022).

Pension fund liability

The Pension Fund liability is calculated every three years by the appointed actuary, with annual updates in the intervening years. The methodology used is in line with accepted guidelines and in accordance with IAS 19. Assumptions underpinning the valuations are agreed with the actuary and are summarised in Note 19. This estimate is subject to significant variances based on changes to the underlying assumptions.

Use of Financial Instruments

The Fund uses financial instruments to manage its exposure to specific risks arising from its investments. In applying the accounting policies set out within the notes that accompany the financial statements the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events.

The critical judgements made in the financial statements are based around determining a fair value for the alternative investments shown in the Net Asset Statement. It is important to recognise valuations for these types of investments are highly subjective in nature. They are inherently based on forward-looking estimates and judgements that involve many factors.

Ill Health Profit Share

The Ill health profit share is based upon the claims that the Fund has successfully made against the policy. The Fund considers that all the claims that have been made but not yet agreed by the insurer are to be successful when determining the profit share calculation.

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

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

Item	Uncertainties	Effect if actual results differ from assumptions
Actuarial present value of promised retirement benefits (Note 20)	Estimation of the net liability to pay pensions depends on a number of complex judgments relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. As a result of Coronavirus pandemic there is an increase in the uncertainty around the mortality provisions within the Fund, however it is too early to assess this figure at the current time so has not been included in our calculations. A firm of consulting actuaries is engaged to provide the Fund with expert advice about the assumptions to be applied.	The effects on the net pension liability of changes in individual assumptions can be measured. For instance, for the 2022 Valuation the actuary advised that: 1. A 0.1% decrease in the discount rate assumption would result in a increase in the pension liability by approximately £63.0m (2%). 2. A 0.1% increase in CPI Inflation would increase the value of liabilities by approximately £58.0 million (2%). 3. A 0.25% Increase in mortality rates would result in an increase in the pension liability by approximately £29.0m (1%). 4. A 0.5% Increase in Salary Assumption would result in an increase in the pension liability by approximately £36.0m (1%)
Private equity	Private equity investments are valued at fair value in accordance with International Private Equity and Venture Capital Valuation Guidelines (2015). Investments are not publicly listed and as such there is a degree of estimation involved in the valuation.	The total private equity investments in the financial statements are £375.1 million. There is a risk that this investment may be under or overstated in the accounts depending on use of estimates applied in the valuation models by the fund managers. The sensitivity of this figure is discussed further in Note 16 and Note 18.
Infrastructure	Infrastructure investments are valued at fair value in accordance with industry guidelines, based on the Fund manager valuations as at the end of the reporting period. These investments are not publicly, listed and as such there is a degree of estimation involved in the valuation.	The total infrastructure investments in the financial statements are £404.6 million. There is a risk that this investment may be under or overstated in the accounts depending on use of estimates applied in the valuation models by the investment managers. The sensitivity of this figure is discussed further in Note 16 and Note 18.
Private Debt	Private debt investments are valued at fair value in accordance with industry guidelines, based on the Fund manager valuations as at the end of the reporting period. These investments are not publicly, listed and as such there is a degree of estimation involved in the valuation.	The total private debt investments in the financial statements are £43.0m. There is a risk that this investment may be under or overstated in the accounts depending on use of estimates applied in the valuation models by the investment managers. The sensitivity of this figure is discussed further in Note 16 and Note 18.
Climate Risk	Climate risk is the potential for adverse consequences for human or ecological systems, recognising the diversity of values and objectives associated with such systems. In the context of climate change, risks can arise from potential impacts of climate change as well as human responses to climate change. The outcomes of these risks is unknown and as such there is a degree of estimation involved in the valuation of companies.	The total net investment assets of the Fund are £4,560.0 million. There is a risk that the investments may be over or understated in the accounts depending on the assumptions around policy responses to climate change in the valuation of investments. The sensitivity of the investments to valuations changes are discussed further in Note 16 and Note 18.

6. Events after the balance sheet date

There have been no events after the balance sheet date of 31 March 2023, and up to the date when these accounts were authorised that require any adjustments to these accounts.

7. Contributions Receivable

	2021/22 £000	2022/23 £000
By category
Employee’s contributions	34,553	37,980
Employer’s contributions
Normal contributions	83,884	96,231
Deficit recovery contributions	14,936	12,290
Augmentation contributions	800	420
Total	134,173	146,921
By authority
Scheduled bodies	85,174	94,278
Admitted bodies	4,166	3,864
Administrative Authority	44,833	48,779
Total	134,173	146,921

8. Transfers in from other pension funds

	2021/22 £000	2022/23 £000
Group transfers	-	-
Individual transfers	8,246	10,071
Total	8,246	10,071

9. Benefits payable

	2021/22 £000	2022/23 £000
By category
Pensions	111,786	118,076
Commutation and lump sum retirement benefits	19,179	19,491
Lump sum death benefits	3,630	2,844
Total	134,595	140,411
By authority
Scheduled bodies	79,660	83,518
Admitted bodies	3,977	4,309
Administrative Authority	50,958	52,584
Total	134,595	140,411

10. Payments to and on account of leavers

	2021/22 £0	2022/23 £0
Refunds to members leaving service	326	342
Group transfers	2,700	(1,595)
Individual transfers	7,718	7,536
Total	10,744	6,283

The group transfer are members from East Sussex Fire transferring to the Surrey Pension Fund.

The estimated cost given from the actuary has reduced to £1.1m this year (£2.7m estimated in 21/22).

At 31 of March 2023 the payment for the group transfer has not taken place.

11. Management expenses

	2021/22 £000	2022/23 £000
Administrative costs	2,216	3,145
Investment management expenses	23,929	27,293
Oversight and governance costs	526	318
Total	26,671	30,756

11a) Investment management expenses – 2022/23

	Total £000	Management Fees £000	Performance Related Fees £000	Transaction costs* £000
Bonds	7	7	-	-
Equities	350	350	-	-
Pooled investments
Fixed Income	2,452	2,424	-	28
Equity	7,373	6,687	-	686
Diversified growth funds	5,903	5,275	-	628
Pooled property investments	1,455	1,437	-	18
Private equity / infrastructure	9,652	6,383	3,269	-
	27,192	22,563	3,269	1,360
Custody	101
Total	27,293

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

2021/22	Total £000	Management Fees £000	Performance Related Fees £000	Transaction costs* £000
Bonds	10	10	-	-
Equities	392	81	-	311
Pooled investments
Fixed Income	2,219	2,158	-	61
Equity	7,124	6,652	-	472
Diversified growth funds	6,072	5,561	-	511
Pooled property investments	1,601	1,508	-	93
Private equity / infrastructure	6,372	4,787	1,585	-
	23,790	20,757	1,585	1,448
Custody	139
Total	23,929

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

During the year, the Pension Fund incurred management fees which were deducted at source for 2022/23 of £4.2m (£4.0m in 2021/22) on its private equity investments, fees of £5.5m (£2.4m in 2021/22) on its infrastructure investments, fees of £10.7m (£9.1m in 2021/22) on investments in the ACCESS Pool and fees of £3.6m (£4.6m in 2021/22) on other mandates. These fees are deducted at the individual portfolio level rather than being paid directly by the Pension Fund.

12. Investment income

	2021/22 £000	2022/23 £000
Income from equities	985	4,994
Private equity/Infrastructure income	2,161	7,059
Pooled property investments	11,971	12,476
Pooled investments - unit trusts and other managed funds	24,752	47,352
Interest on cash deposits	680	1,787
Total	40,549	73,668

13. Other fund account disclosures

13a) Taxes on income

2021/22

£000

2022/23

£000

Withholding tax – equities

(2)

(66)

Total

(2)

(66)

13b) External audit costs

	2021/22 £000	2022/23 £000
Payable in respect of external audit for 2020/21	8	-
Payable in respect of external audit for 2021/22	35	12
Payable in respect of external audit for 2022/23	-	47
Payable in respect of other services	5	10
Grant	(10)	(10)
Total	38	59

14. Investments

	2021/22 £000	2022/23 £000
Investment assets
Bonds	134,975	93,755
Equities	237,482	235,630
Pooled Investments
Fixed Income	476,264	459,852
Equity	1,797,637	1,789,063
Diversified growth funds	1,036,214	819,737
Pooled property investments	390,179	328,542
Private equity/infrastructure	514,383	778,754
Derivative contracts:
Futures	11	53
	4,587,145	4,505,386
Cash deposits with Custodian	90,216	54,418
Other Investment balances (Note 21)	774	1,062
Total investment assets	4,678,135	4,560,866
Investment Liabilities (Note 22)	(1,170)	(1,061)
Derivative contracts:
Futures	(3)	-
Total Investment Liabilities	(1,173)	(1,061)
Net investment assets	4,676,962	4,559,805

14a) Reconciliation of movements in investments and derivatives

	Market value 1 April 2022 £000	Purchases during the year and derivative payments £000	Sales during the year and derivative receipts £000	Change in market value during the year £000	Market value 31 March 2023 £000
Bonds	134,975	-	-	(41,220)	93,755
Equities	237,482	65,356	(61,086)	(6,122)	235,630
Pooled investments	3,310,115	60,289	(223,622)	(78,130)	3,068,652
Pooled property investments	390,179	16,648	(21,597)	(56,688)	328,542
Private equity/infrastructure	514,383	326,052	(77,324)	15,643	778,754
	4,587,134	468,345	(383,629)	(166,517)	4,505,333
Derivative contracts
■ Futures	8	1,860	(1,785)	(30)	53
■ Forward currency contracts	-	-	-	-	-
	4,587,142	470,205	(385,414)	(166,547)	4,505,386
Other investment balances:
■ Cash deposits	90,216			4,286	54,418
■ Other Investment Balances	774				1,062
■ Investment Liabilities	(1,170)				(1,061)
Net investment assets	4,676,962			(162,262)	4,559,805

	Market value 1 April 2021 £000	Purchases during the year and derivative payments £000	Sales during the year and derivative receipts £000	Change in market value during the year £000	Market value 31 March 2022 £000
Bonds	128,765	-	-	6,210	134,975
Equities	-	346,994	(272,967)	163,455	237,482
Pooled investments	3,353,128	155,487	(223,349)	24,849	3,310,115
Pooled property investments	319,533	34,405	(23,111)	59,352	390,179
Private equity/infrastructure	372,564	71,813	(107,111)	177,117	514,383
	4,173,990	608,699	(626,538)	430,983	4,587,134
Derivative contracts
■ Futures	-	16	(23)	15	8
■ Forward currency contracts		726	(132)	(594)	-
	4,173,990	609,441	(626,693)	430,404	4,587,142
Other investment balances:
■ Cash deposits	56,736			2,272	90,216
■ Other Investment Balances	357				774
■ Investment Liabilities	(775)				(1,170)
Net investment assets	4,230,308			432,676	4,676,962

14b) Investments analysed by fund manager

	Market value 31 March 2022 £000	Market value 31 March 2022 %	Market value 31 March 2023 £000	Market value 31 March 2023 %
Investments in the ACCESS Pool
ACCESS - Alpha Opportunities (M&G)	287,673	6.2%	293,179	6.4%
ACCESS - Absolute Return (Ruffer)	537,861	11.5%	478,853	10.5%
ACCESS - Corporate Debt (M&G)	148,858	3.2%	123,637	2.7%
ACCESS - Global Alpha (Baillie Gifford)	197,397	4.2%	187,271	4.1%
ACCESS - Global Equity (Longview)	525,660	11.2%	555,749	12.2%
ACCESS - Real Return (Newton)	498,354	10.7%	340,884	7.5%
ACCESS - UBS Passive	134,974	2.9%	93,752	2.1%
ACCESS - UBS Osmosis	238,150	5.1%	236,761	5.2%
	2,568,927	55.0%	2,310,086	50.7%
Investments held directly by the Fund
Adams St Partners	206,010	4.4%	195,685	4.3%
Atlas Infrastructure	95,964	2.1%	100,931	2.2%
East Sussex Pension Fund Cash	77,869	1.7%	35,526	0.8%
Harbourvest Strategies	167,729	3.6%	179,466	3.9%
M&G Real Estate Debt	39,733	0.8%	43,036	0.9%
Pantheon	62,374	1.3%	81,166	1.8%
Prudential Infracapital	42,449	0.9%	52,959	1.2%
Schroders Property	402,175	8.6%	345,720	7.6%
Storebrand Smart Beta & ESG	510,338	10.8%	501,170	10.9%
UBS Infrastructure Fund	35,821	0.8%	36,335	0.8%
Wellington Active Impact Equity	237,481	5.1%	221,782	4.9%
Wheb Active Impact Equity	230,092	4.9%	221,839	4.9%
IFM Global Infrastructure	-	-	234,104	5.1%
	2,108,035	45.0%	2,249,719	49.3%
	4,676,962	100.0%	4,559,805	100.0%

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

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

Security	Market Value 31 March 2022 £000	% of total fund	Market value 31 March 2023 £000	% of total fund
ACCESS - Global Equity (Longview)	525,660	11.2%	555,749	12.2%
Storebrand Smart Beta & ESG Fund	510,338	10.9%	501,170	11.0%
ACCESS - Absolute Return (Ruffer)	537,861	11.5%	478,853	10.5%
ACCESS - Real Return (Newton)	498,354	10.7%	340,884	7.5%
ACCESS - Alpha Opportunities (M&G)	287,673	6.2%	293,179	6.4%
IFM Global Infrastructure	287,673	6.2%	234,104	5.1%
Wellington Active Impact Equity Fund	237,481	5.1%	221,782	4.9%

14c) Stock lending

The East Sussex Pension Fund has not operated a direct stock lending programme since 13 October 2008 but stock lending may occur in some of our pooled vehicles the fund is in invested in.

15. Analysis of derivatives

Objectives and policies for holding derivatives

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

1. Futures

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

Type	Expires	Economic Exposure £000	Market Value 31 March 2022 £000	Economic Exposure £000	Market Value 31 March 2023 £000
Assets
UK Equity Futures	Less than one year	150	4	153	2
Overseas Equity Futures	Less than one year	516	7	875	51
Total assets			11		53
Liabilities
Overseas Equity Futures	Less than one year	129	(3)	-	-
Total liabilities			(3)		0
Net futures			8		53

2. Forward foreign currency

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

No forward foreign currency investments were held at the 31 March 23 (Nil 31 March 22)

3. Options

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

No options investments were held at the 31 March 23 (Nil 31 March 22)

16. Fair value – basis of valuation

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

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

Sensitivity of assets valued at level 3

Having analysed historical data and current market trends, and consulted with independent investment advisors, the Fund has determined that the valuation methods described above are likely to be accurate to within the following ranges and has set out below the consequential potential impact on the closing value of investments held at 31 March 2023 and 31 March 2022.

Asset Type	Assessed valuation range (+/-)	Values at 31 March 2023 £000	Value on increase £000	Value on decrease £000
Pooled Investment (1)	9%	43,035	46,908	39,162
Pooled property investments (2)	13%	328,541	371,251	285,831
Private Equity/Infrastructure (3)	24%	778,754	962,540	594,968
Total		1,150,330	1,380,699	919,961

Asset Type	Assessed valuation range (+/-)	Values at 31 March 2022 £000	Value on increase £000	Value on decrease £000
Pooled Investment (1)	9%	39,733	43,309	36,157
Pooled property investments (2)	13%	390,179	440,902	339,456
Private Equity/Infrastructure (3)	25%	514,383	643,493	385,273
Total		944,295	1,127,704	760,886

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

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

3. All movements in the assessed valuation range derive from changes in the underlying profitability of component companies, the range in the potential movement of 24% is caused by how this profitability is measured.

16a) Fair value hierarchy

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

Values at 31 March 2023

	Quoted market price Level 1 £000	Using observable inputs Level 2 £000	With Significant unobservable inputs Level 3 £000	Total £000
Financial assets at fair value through profit and loss	236,747	3,119,370	1,150,330	4,506,447
Non-financial assets at fair value through profit and loss	-	-	-	-
Financial liabilities at fair value through profit and loss	(53)	(1,008)	-	(1,061)
Net investment assets	236,694	3,118,362	1,150,330	4,505,386

Values at 31 March 2022

	Quoted market price Level 1 £000	Using observable inputs Level 2 £000	With Significant unobservable inputs Level 3 £000	Total £000
Financial assets at fair value through profit and loss	238,267	3,405,357	944,295	4,587,919
Non-financial assets at fair value through profit and loss	-	-	-	-
Financial liabilities at fair value through profit and loss	(11)	(1,162)	-	(1,173)
Net investment assets	238,256	3,404,195	944,295	4,586,746

16b) Transfers between levels 1 and 2

During 2022/23 the fund has transferred no financial assets between levels 1 and 2.

16c) Reconciliation of fair value measurements within level 3

Period 2022/23 (values in £000)

	Market value 1 April 2022	Transfers into Level 3	Transfers out of Level 3	Purchases during the year	Sales during the year	Unrealised gains/(losses)	Realised gains/(losses)	Market value 31 March 2023
Pooled investments	39,733	-	-	11,899	(7,258)	(1,339)	-	43,035
Pooled property investments	390,179	-	-	16,648	(21,597)	(61,429)	4,740	328,541
Private Equity/Infrastructure	514,383	-	-	326,052	(77,325)	(18,049)	33,693	778,754
Total	944,295	-	-	354,599	(106,180)	(80,817)	38,433	1,150,330

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

Level	Unrealised gains/(losses)	Realised gains/(losses)	Change in market value during the year
1 and 2	(156,344)	36,463	(119,881)
3	(80,817)	38,433	(42,384)
Total	(237,161)	74,896	(162,265)

Period 2021/22 (values in £000)

	Market value 1 April 2021	Transfers into Level 3	Transfers out of Level 3	Purchases during the year	Sales during the year	Unrealised gains/(losses)	Realised gains/(losses)	Market value 31 March 2022
Pooled investments	42,416	-	-	6,150	(11,175)	2,342	-	39,733
Pooled property investments	319,533	-	-	34,405	(23,093)	58,566	768	390,179
Private Equity/Infrastructure	372,564	-	-	71,813	(100,760)	114,336	56,430	514,383
Total	734,513	-	-	112,368	(135,028)	175,244	57,198	944,295

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

Level	Unrealised gains/(losses)	Realised gains/(losses)	Change in market value during the year
1 and 2	(8,876)	209,110	200,234
3	175,244	57,198	232,442
Total	166,368	266,308	432,676

17. Classification of financial instruments

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

31 March 2022 31 March 2023

Fair value through profit and loss £000	Assets at amortised cost £000	Liabilities at amortised cost £000		Fair value through profit and loss £000	Assets at amortised cost £000	Liabilities at amortised cost £000
			Financial Assets
134,975	-	-	Bonds	93,755	-	-
237,482	-	-	Equities	235,630	-	-
3,310,115	-	-	Pooled investments	3,068,652	-	-
390,179	-	-	Pooled property investments	328,542	-	-
514,383	-	-	Private equity/infrastructure	778,754	-	-
11	-	-	Derivative contracts	53	-	-
-	90,216	-	Cash	-	54,418	-
-	2,178	-	Cash held by ESCC*	-	9,332	-
774	-	-	Other investment balances	1,062	-	-
-	13,213	-	Debtors *	-	13,973	-
4,587,919	105,607	-	Total Financial Assets	4,506,448	77,723	-
			Financial liabilities
(3)	-	-	Derivative contracts	-	-	-
(1,170)	-	-	Other investment balances	(1,061)	-	-
-	-	-	Cash held by ESCC	-	-	-
-	-	(4,686)	Creditors	-	-	(4,561)
(1,173)	-	(4,686)	Total Financial Liabilities	(1,061)	-	(4,561)
4,586,746	105,607	(4,686)	Total Financial Instruments	4,505,387	77,723	(4,561)

*Reconciliation to Current Assets Note 21

	2021/22 £000	2022/23 £000
Cash held by ESCC	2,178	9,332
Debtors	13,213	13,973
Current Assets	15,391	23,305

17a) Net gains and losses on financial instruments

	31 March 2022 £000	31 March 2023 £000
Financial assets
Fair value through profit and loss	430,660	(166,553)
Amortised cost – realised gains on derecognition of assets	-	-
Amortised cost – unrealised gains	2,024	4,274
Financial liabilities
Fair value through profit and loss	(8)	17
Amortised cost – realised gains on derecognition of assets	-	-
Amortised cost – unrealised gains	-	-
Total	432,676	(162,262)

18. Nature and extent of risks arising from financial instruments

Risk and risk management

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

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

Market risk

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

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

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

The Fund manages these risks in two ways:

1. the exposure of the Fund to market risk is monitored through a factor risk analysis, to ensure that risk remains within tolerable levels

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

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

Other price risk

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

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

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

Other price risk – sensitivity analysis

Following analysis of historical data and expected investment return movement during the financial year, in consultation with the Fund’s investment advisors, the Fund has determined that the following movements in market price risk are reasonably possible for the 2022/23 reporting period:

Asset Type	Potential Market Movements (+/-)
Index Linked	12.0%
Other Bonds	8.1%
UK Equities	20.5%
Global Equities	21.0%
Absolute Return	12.5%
Pooled Property Investments	13.0%
Private Equity	26.0%
Infrastructure Funds	15.0%

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

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

Asset Type	Values at 31 March 2023 £000	Value on increase £000	Value on decrease £000
Index Linked	93,755	105,006	82,504
Other Bonds	459,852	497,071	422,633
UK Equities	9,639	11,615	7,663
Global Equities	2,015,054	2,438,215	1,591,893
Absolute Return	819,737	922,204	717,270
Pooled Property Investments	328,542	371,252	285,832
Private Equity	608,293	766,449	450,137
Infrastructure Funds	170,461	196,030	144,892
Net Derivative Assets*	53	(333)	439
Total assets available to pay benefits	4,505,386	5,307,509	3,703,263

*Movement on net derivative assets is based on the underlying economic exposure of the derivative instrument.

Asset Type	Values at 31 March 2022 £000	Value on increase £000	Value on decrease £000
Index Linked	134,975	150,497	119,453
Other Bonds	476,264	510,397	442,131
UK Equities	9,738	11,686	7,790
Global Equities	2,025,381	2,450,711	1,600,051
Absolute Return	1,036,214	1,165,741	906,687
Pooled Property Investments	390,179	440,902	339,456
Private Equity	373,740	485,862	261,618
Infrastructure Funds	140,643	157,520	123,766
Net Derivative Assets	8	260	(244)
Total assets available to pay benefits	4,587,142	5,373,576	3,800,708

Interest rate risk

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

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

The Fund’s direct exposure to interest rate movements as of 31 March 2023 and 31 March 2022 is set out below. These disclosures present interest rate risk based on the underlying financial assets at fair value.

Interest rate risk sensitivity analysis

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

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

Asset type	Carrying amount as at 31 March 2023 £000	Impact of 1% increase £000	Impact of 1% decrease £000
Cash and cash equivalents	54,418	54,418	54,418
Cash balances	9,332	9,332	9,332
Fixed interest securities	459,852	464,451	455,253
Index linked securities	93,755	93,755	93,755
Total change in assets available	617,357	621,956	612,758

Asset type	Carrying amount as at 31 March 2022 £000	Impact of 1% increase £000	Impact of 1% decrease £000
Cash and cash equivalents	90,216	90,216	90,216
Cash balances	2,178	2,178	2,178
Fixed interest securities	476,264	481,027	471,501
Index linked securities	134,975	134,975	134,975
Total change in assets available	703,633	708,396	698,870

Income Source	Interest receivable 2022/23 £000	Value on 1% increase £000	Value on 1% decrease £000
Cash deposits/cash and cash equivalents	1,787	2,425	1,149
Fixed interest securities	16,702	16,702	16,702
Index linked securities	-	938	(938)
Total change in assets available	18,489	20,065	16,913

Income Source	Interest receivable 2021/22 £000	Value on 1% increase £000	Value on 1% decrease £000
Cash deposits/cash and cash equivalents	680	1,604	(244)
Fixed interest securities	7,325	7,325	7,325
Index linked securities	-	1,350	(1,350)
Total change in assets available	8,005	10,279	5,731

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

Currency risk

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

Currency exposure - asset type	Values at 31 March 2023 £000	Potential Market movement £000	Value on increase £000	Value on decrease £000
Overseas quoted securities	225,992	22,147	248,139	203,845
Overseas unit trusts	3,387,552	331,980	3,719,532	3,055,572
Total change in assets available	3,613,544	354,127	3,967,671	3,259,417

Currency exposure - asset type	Values at 31 March 2022 £000	Potential Market movement £000	Value on increase £000	Value on decrease £000
Overseas quoted securities	227,744	22,091	249,835	205,653
Overseas unit trusts	3,348,234	324,779	3,673,013	3,023,455
Total change in assets available	3,575,978	346,870	3,922,848	3,229,108

Climate Change risk

Current asset pricing may not take into account the emerging climate risk to the underlying holdings, markets may be over or underestimating the value of the assets and could lead to future price volatility. Climate change will affect economic growth and there is uncertainty in the economic outlook due to climate change which could lead to lower returns on equities or risk to future discounted cash flows. High carbon emitters are more exposed to risks from climate change particularly from a transition risk perspective. The Fund mitigates this climate change market risk through diversification and the selection of securities and other financial instruments is monitored by the Fund to ensure it is within limits specified in the Fund’s investment strategy. In addition, the Fund is underweighted in high carbon emitting stocks such as fossil fuel companies and carries out carbon foot printing of the Fund’s investments and asset managers and the Fund through its collaborative partners engage with corporate management of the underling holdings to ensure companies are responsibly managing their climate change risks. The Fund’s Taskforce for Climate Related Financial Disclosure (TCFD) report is included in the Annual Report.

Credit risk

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

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

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

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

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

Summary	Asset value as at 31 March 2022 £000	Asset value as at 31 March 2023 £000
Overseas Treasury bills	11,556	17,087
NT custody cash accounts	78,660	37,332
Total overseas assets	90,216	54,419

Liquidity risk

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

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

All financial liabilities at 31 March 2023 are due within one year.

Refinancing risk

The key risk is that the Fund will be bound to replenish a significant proportion of its pension Fund financial instruments at a time of unfavourable interest rates. The Fund does not have any financial instruments that have a refinancing risk as part of its treasury management and investment strategies.

19. Funding arrangements

Introduction

The last full triennial valuation of the Fund was carried out as at 31 March 2022 as required under Regulation 62 of the Local Government Pension Scheme Regulations 2013 (the Regulations) and in accordance with the Funding Strategy Statement of the Fund. The results were published in the triennial valuation report dated 31 March 2023.

Asset value and funding level

The results for the Fund at 31 March 2022 were as follows:

• The market value of the Fund’s assets as at 31 March 2022 was £4.69bn.

• The Fund had a funding level of 123% i.e., the value of assets for valuation purposes was 123% of the value that they would have needed to be to pay for the benefits accrued to that date, based on the assumptions used. This corresponded to a surplus of £858m.

Contribution rates

The employer contributions rates, in addition to those paid by the members of the Fund, are set to be sufficient to meet:

• the annual accrual of benefits allowing for future pay increases and increases to pensions in payment when these falls due.

• plus, an amount to reflect each participating employer’s notional share of the Fund’s assets compared with 100% of their liabilities in the Fund, in respect of service to the valuation date.

The primary rate of contribution on a whole Fund level was 20.2% of payroll p.a. The primary rate as defined by Regulation 62(5) is the employer’s share of the cost of benefits accruing in each of the three years beginning 1 April 2023.

In addition, each employer pays a secondary contribution as required under Regulation 62(7) that when combined with the primary rate results in the minimum total contributions. This secondary rate is based on their particular circumstances and so individual adjustments are made for each employer.

Details of each employer’s contribution rate are contained in the Rates and Adjustments Certificate in the triennial valuation report.

Assumptions

The key assumptions used to value the liabilities at 31 March 2022 are summarised below:

Assumptions	Assumptions used for the 2022 valuation
Financial assumptions Market date	31 March 2022
CPI inflation	2.9% p.a.
Long-term salary increases	3.9% p.a.
Discount rate	4.6% p.a.
Demographic assumptions
Post-retirement mortality
Base tables	Based on Club Vita analysis
Projection model	CMI 2021
Long-term rate of improvement	1.25% p.a.
Smoothing parameter	7.0
Initial addition to improvements Males Females	0.5% p.a. 0.5% p.a.
2020/21 weighting parameter	5%

Full details of the demographic and other assumptions adopted as well as details of the derivation of the financial assumptions used can be found in the 2022 valuation report.

Updated position since the 2022 valuation

Assets

Returns over the year to 31 March 2023 have been lower than expected. As at 31 March 2023, in market value terms, the Fund assets were less than they were projected to be at the previous valuation.

Liabilities

The key assumption which has the greatest impact on the valuation of liabilities is the real discount rate (the discount rate relative to CPI inflation) – the higher the real discount rate the lower the value of liabilities. As at 31 March 2023, the real discount rate is estimated to be higher than at the 2022 valuation due to a reduction in the long term rate of inflation.

The value of liabilities will have increased due to the accrual of new benefits net of benefits paid and interest on the liabilities.

The 2023 pension increase order is 10.1%. The increase in liabilities associated with this has however been more than offset by the reduction in the long-term inflation assumption. This short-term high inflation and longer term lower inflation is broadly consistent with what was assumed at the 2022 formal valuation.

Overall position

On balance, we estimate that the funding position has reduced when compared on a consistent basis to 31 March 2022.

The change in the real discount rate since 31 March 2022 will place a lower value on the cost of future accrual which results in a lower primary contribution rate. The impact on secondary contributions will vary by employer.

However, the next formal valuation will be carried out as at 31 March 2025 with new contribution rates set from 1 April 2026. As part of the 2025 valuation, the Fund and us as the Fund Actuary will work together in setting the assumptions for the valuation.

Dr Barry McKay FFA

Partner, Barnett Waddingham LLP

20. Actuarial present value of promised retirement benefits

Introduction

Barnett Waddingham, the Fund Actuary, have been instructed by East Sussex County Council, the administering authority to the East Sussex County Council Pension Fund (the Fund), to undertake pension expense calculations in respect of pension benefits provided by the Local Government Pension Scheme (the LGPS) to members of the Fund as at 31 March 2023. The Fund Actuary have taken account of current LGPS Regulations, as amended, as at the date of this report.

This report is addressed to the administering authority and its advisers; in particular, this report is likely to be of relevance to the Fund’s auditor.

The LGPS is a defined benefit statutory scheme administered in accordance with the Local Government Pension Scheme Regulations 2013 and currently provides benefits based on career average revalued earnings. Full details of the benefits being valued are as set out in the Regulations and summarised on the LGPS website (www.lgpsregs.org/) and the Fund’s membership booklet (www.lgpsmember.org/).

This report is prepared in accordance with our understanding of IAS26 and complies with Technical Actuarial Standard 100: Principles for Technical Actuarial Work (TAS 100). In calculating the disclosed numbers we have adopted methods and assumptions that are consistent with IAS19.

This report should be read in conjunction with the post accounting date briefing note for disclosures as at 31 March 2023.

This report supersedes previous versions of this report and has been updated to reflect the use of the results of the revised March 2022 accounting report as a starting position, and the use of an updated salary increase assumption.

Rosin McGuire FFA

Barnett Waddingham

Data used

We have used the following items of data which we received from the administering authority:

Results of the latest funding valuation - 31 March 2022

Results of the previous IAS26 report - 31 March 2022

Fund asset statement as at - 31 March 2023

Fund income and expenditure items to- 31 March 2023

Details of any new unreduced early retirement payments out - 20 March 2023

The data has been checked for reasonableness and we are happy that the data is sufficient for the purposes of our advice.

Although some estimation of the data to the accounting date may be required, we do not believe that they are likely to have a material effect on the results of this report.

We are not aware of any material changes or events since we received the data.

Employer membership statistics

The table below summarises the membership data at 31 March 2022

Member data summary

	Number	Salaries/Pensions £000	Average age
Actives	24,672	500,451	47
Deferred pensioners	39,993	48,986	51
Pensioners	23,182	116,050	72

Payroll

The total pensionable payroll for the employers in the Fund is set out below and is based on information provided to us by the administering authority. Estimated payroll of the year to 31 March 2023 £539,979,000

Unfunded benefits

We have excluded any unfunded benefits as these are liabilities of employers rather than the Fund.

Early retirements

We have requested data on any early retirements in respect of the Fund from the administering authority for the year ending 31 March 2023. We have been notified of 19 new early retirements during the year which were not allowed for at the previous accounting date. The total annual pension that came into payment was £260,020

Assets

The return on the Fund (on a bid value to bid value basis) for the year to 31 March 2023 is calculated to be --2.75% based on the Fund asset statements and Fund cashflows as set out in the Data section above.

The estimated asset allocation for the Fund is as follows (noting that due to rounding they may not total 100%):

Asset breakdown	31 Mar 2022 £000	31 Mar 2022 %	31 Mar 2023 £000	31 Mar 2023 %
Equities	3,445,081	73%	3,219,201	71%
Bonds	611,239	13%	553,606	12%
Property	530,822	11%	733,175	16%
Cash	100,525	2%	54,520	1%
Total	4,687,667	100%	4,560,502	100%

Actuarial methods and assumptions

Valuation approach

To value the Fund’s liabilities at 31 March 2023, we roll forward the value of the liabilities calculated for the latest full funding valuation using financial assumptions compliant with IAS19. This will involve an update this year to be based on the fund’s 2022 funding valuation.

The full actuarial valuation involved projecting future cashflows to be paid from the Fund and placing a value on them. These cashflows include pensions currently being paid to members of the Fund as well as pensions (and lump sums) that may be payable in future to members of the fund or their dependants. These pensions are linked to inflation and will normally be payable on retirement for the life of the member or a dependant following a member’s death.

It is not possible to assess the accuracy of the estimated value of liabilities as at 31 March 2023 without completing a full valuation. However, we are satisfied that the approach of rolling forward the previous valuation data to 31 March 2023 should not introduce any material distortions in the results provided that the actual experience of the employer and the fund has been broadly in line with the underlying assumptions, and that the structure of the liabilities is substantially the same as at the latest formal valuation. From the information we have received there appears to be no evidence that this approach is inappropriate.

As required under the IAS19, we have used the projected unit credit method of valuation.

Experience items allowed for since the previous accounting date

2022 valuation update

The liability roll forward will be updated to be based on the fund’s 2022 valuation. This update ensures the accounting results are based on the latest information available. The impact of this update will result in experience items on the liabilities and the assets, and could be a positive or negative effect. The experience item reflects how experience over the intervaluation period has differed from that assumed as part of the roll forward approach.

Further detail on the experience item can be provided on request and will incur additional fees.

Allowance for actual pension increases

Our default approach is to allow for actual pension increases up to the accounting date as confirmed by the HM Treasury Order. In addition we allow for actual inflation experience from September 2022 to the most recent known date available. Any difference between this and the pension increase previously assumed will give rise to an experience item.

The 2023 pension increase is higher than previously assumed which will result in a higher value being placed on the defined benefit obligation and a worsening in the overall position. The impact will come through as an experience item.

McCloud/Sargeant judgments

There are currently uncertainties in relation to LGPS benefits due to the McCloud and Sargeant judgments. Remedial regulations are expected in 2023 and uncertainty over the benefit changes proposed for the LGPS will remain until these have been finalised.

Impact on liabilities

The McCloud remedy may impact the value of the liabilities in respect of accrued benefits and therefore an allowance may need to be included in an employer's report.

An allowance has already been made for McCloud at a previous accounting date in our IAS26 report. No explicit adjustment will be made in our results this year. The estimated cost of McCloud will be updated as part of the 2022 valuation update and this will reflect the approach adopted at the valuation in estimating the cost of the McCloud remedy. The difference between this cost and the cost previously incorporated into the Fund’s accounting liabilities will be reflected in the liability experience item and we do not expect this to be material. It should be noted that the cost of the McCloud remedy varies with member experience (for example due to salary increases), and therefore the cost calculated at each actuarial valuation will vary, however, generally we do not expect this to be material.

Settlements and curtailments

Employers accounting under the IAS19 standard

When determining any past service cost or gain or loss on settlement IAS19 requires that the net defined benefit liability is remeasured using current assumptions and the fair value of plan assets at the time of the event. Common events for LGPS employers that this may apply to include outsourcings and unreduced early retirements.

Additional calculations are required to determine the cost before and after each event, and to rebase the standard roll forward approach on updated assumptions based on each event date. The extra remeasurement does not need to be applied where the application of that remeasurement is immaterial. The assessment of materiality will be subject to each employer and auditor’s discretion. We can provide additional information to help assess materiality but we cannot conclude whether an event is material or not.

Goodwin case

We do not intend to make any adjustments to accounting valuations as a result of the Goodwin case.

Guaranteed Minimum Pension (GMP) equalisation and indexation

Impact of Lloyds judgment on past transfer values

The latest news on the Lloyds Banking Group court case involved a ruling that, in cases where a member exercised their right to a transfer value out of the scheme, the trustee had the duty to make a transfer payment that reflects the member’s right to equalised benefits and remains liable if an inadequate transfer payment had been paid.

It is not yet known if, or how, this will affect the LGPS. We await further guidance from CIPFA and DLUHC on this. Whilst no guidance nor data is available, our standard approach currently is to make no allowance to reflect this judgment.

GMP Indexation Consultation response

On 23 March 2021, the Government published the outcome to its Guaranteed Minimum Pension Indexation consultation, concluding that all public service pension schemes, including the LGPS, will be directed to provide full indexation to members with a GMP reaching State Pension Age (SPA) beyond 5 April 2021. This is a permanent extension of the existing ‘interim solution’ that has applied to members with a GMP reaching SPA on or after 6 April 2016.

Our assumption for GMP is that the Fund will pay limited increases for members that have reached SPA by 6 April 2016, with the Government providing the remainder of the inflationary increase. For members that reach SPA after this date, we assume that the fund will be required to pay the entire inflationary increase. Therefore, our assumption is consistent with the consultation outcome and we do not believe we need to make any adjustments to the value placed on the liabilities as a result of the above outcome.

Demographic assumptions

Mortality assumption

The key demographic assumption is the mortality assumption and there are two main steps in setting this assumption:

• Making a current assumption of members’ mortality (the base mortality); and

• Projecting these current mortality rates into the future, allowing for further potential improvements in mortality. Future members’ mortality is almost impossible to predict and therefore there is a lot of judgment involved and we naturally have to refine our view on this over time.

Base table mortality

The base table mortality assumptions adopted for the Funds’ latest triennial funding valuations were best estimate assumptions and we will therefore be using the same assumptions as standard for accounting.

Our standard approach is to update the mortality assumption to be based on those adopted for the Fund’s 2022 actuarial valuation.

Future improvements to mortality

To project future improvements in mortality, we use a model prepared by the Continuous Mortality Investigation Bureau (CMI). The CMI update their model on an annual basis, incorporating the latest mortality data in the national population.

Our standard approach is to update the improvements model to be based on that adopted for the fund’s 2022 actuarial valuation.

The assumed life expectations from age 65 are:

Life expectancy from age 65 (years)	31 Mar 2022	31 Mar 2023
Males – retiring today	21.1	21.1
Females – retiring today	24.0	24.1
Males – retiring in 20 years	22.1	22.2
Females – retiring in 20 years	25.5	25.6

Unless stated otherwise in the employer’s accounting report, the other key demographic assumptions are:

Commutation

Members will exchange pension to get 50% of the maximum available cash on retirement. For every £1 of pension that members commute, they will receive a cash payment of £12 as set out in the Regulations

Normal retirement

Members will retire at one retirement age for all tranches of benefit, which will be the pension weighted average tranche retirement age

50:50 take up

The proportion of the membership that had taken up the 50:50 option at the previous valuation date will remain the same

Other demographic assumptions

Unless stated otherwise in the employer’s accounting report, the other key demographic assumptions are:

Financial assumptions

The key financial assumptions required for determining the defined benefit obligation for accounting are the discount rate, linked to high quality corporate bond yields, and the rate of future inflation.

We set out our standard approach to the derivation of these assumptions and sample assumptions using market conditions at 31 March 2023.

Discount rate

Under IAS19 the discount rate should be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. Our standard approach to derive the appropriate discount rate is known as the Single Equivalent Discount Rate (SEDR) methodology.

We use sample cashflows for employers at each year and derive the single discount rate which results in the same liability value as that which would be determined using a full yield curve valuation (essentially each year’s cashflows has a different discount rate). In carrying out this derivation we use the annualised Merrill Lynch AA rated corporate bond yield curve and assume the curve is flat beyond the 30 year point.

The sample cashflows are updated on a three-yearly basis using a full valuation of membership data. These are currently based on cashflows derived as at 31 March 2022. At 31 March 2022, using liability durations at that date, each employer is matched with a set of sample cashflows which best reflects the employer’s cashflow profile and maturity. Although employers’ liability duration will be remeasured at each accounting date, we assume that their cashflow profile will remain stable over the three-year period and so the sample cashflows allocated remain appropriate.

In addition, we have allowed for actual pension increases up to and including the 2023 Pension Increase Order. This is reflected in the Experience loss/(gain) on defined benefit obligation figure in the results. We have also allowed for actual CPI inflation experienced from September 2022 to March 2023.

Inflation expectations

Whilst the change in corporate bond yields is an important factor affecting the valuation of the liabilities, so too is the assumed level of future inflation as this determines the rate at which the benefits increase.

IAS19 suggests that in assessing future levels of long-term inflation we should use assumptions that would result in a best estimate of the ultimate cost of providing benefits whilst also giving consideration to the gilt market (in line with general price levels) to give us an indication of market expectation.

Pension increases in the LGPS are expected to be based on the Consumer Prices Index (CPI). As there is limited market information on CPI-linked assets, to derive our CPI assumption we first make an assumption on the Retail Prices Index (RPI) then make an adjustment.

Retail Prices Index (RPI) assumption

Similar to the SEDR approach described above we intend to adopt a Single Equivalent Inflation Rate (SEIR) approach in deriving an appropriate RPI assumption.

The SEIR adopted is such that the single assumed rate of inflation results in the same liability as that resulting from applying the BoE implied inflation curve. The BoE implied inflation curve is assumed to be flat beyond the 40 year point.

Following a recent review of the market, and in particular noting the muted market reaction to the likely alignment of RPI with CPIH (Consumer Prices Index with Housing) from 2030, our view is that gilt-implied inflation rates are currently distorted by supply and demand factors at medium and longer terms. We have therefore allowed for an Inflation Risk Premium (IRP) of 0.4% at medium and longer terms (from 9 years). This results in an overall IRP of between 0.0% p.a. and 0.25% p.a. depending on the term of the liabilities (for terms ranging from 1 year up to 30 years).

Consistent with the SEDR approach, assumptions are rounded to the nearest 0.05%

Difference between RPI and CPI

It is expected that RPI will be on average 1.0% p.a. lower than it would have otherwise been from 2030 as a result of the proposed alignment of RPI to CPIH (and CPI) from that date. We have therefore assumed that the annual increase in CPI inflation will be 1.0% p.a. lower than the market implied increases in RPI for each year prior to 2030, and will be in line with RPI inflation thereafter. This results in an assumed gap between the two inflation measures of between 0.25% p.a. and 0.80% p.a. depending on the term of the liabilities (for terms ranging from 30 years down to 5 years).

Consumer Prices Index (CPI) assumption

Using a similar approach described above to calculate the SEIR for our RPI assumption, we have calculated a single equivalent rate of CPI increase that results in the same liability value as would be calculated by applying the implied CPI curve.

Salary increases

The Fund will adopt the standard approach which is in line with the latest actuarial valuation. For more information please see the latest valuation report.

Results and disclosures

We estimate that the net asset as at 31 March 2023 is assets of £517,989

The results of our calculations for the year ended 31 March 2023 are set out below. The figures presented in this report are prepared only for the purposes of FRS102. In particular, they are not relevant for calculations undertaken for funding purposes or for other statutory purposes under UK pensions legislation.

Statement of financial position as at 31 March 2023

Net pension asset in the statement of financial position as at	31-Mar-21 £000	31-Mar-22 £000	31-Mar-23 £000
Present value of defined benefit obligation *	(5,609,613)	(5,669,531)	(4,042,513)
Fair value of Fund assets (bid value)	4,244,872	4,678,667	4,560,502
Net (Liability)/Assets in balance sheet	(1,364,741)	(981,864)	517,989

* The present value of the defined benefit obligation consists of £4,004,340,000 in respect of vested obligation and £38,173,000 in respect of non-vested obligation.

Asset and benefit obligation reconciliation for the year to 31 March 2023

Reconciliation of opening & closing balances of the present value of the defined benefit obligation	31-Mar-22 £000		31-Mar-23 £000
Opening defined benefit obligation	(5,609,613)		(5,669,531)
Current service cost	(228,898)		(242,639)
Interest cost	(108,384)		(146,099)
Change in financial assumptions	363,842		2,392,022
Change in demographic assumptions	(46,930)		-
Experience loss/(gain) on defined benefit obligation	(142,974)		(477,886)
Liabilities assumed / (extinguished) on settlements	-		-
Estimated benefits paid net of transfers in	137,093		137,997
Past service costs, including curtailments	(2,491)		(1,158)
Contributions by Scheme participants	(31,176)		(35,219)
Unfunded pension payments	-		-
Closing defined benefit obligation	(5,669,531)		(4,042,513)
Reconciliation of opening & closing balances of the fair value of Fund assets		31-Mar-22 £000		31-Mar-23 £000
Opening fair value of Fund assets		4,244,872		4,687,667
Interest on assets		82,721		121,965
Return on assets less interest		367,843		(252,372)
Other actuarial gains/(losses)		-		-
Administration expenses		(2,208)		(3,424)
Contributions by employer including unfunded		100,356		109,444
Contributions by Scheme participants		31,176		35,219
Estimated benefits paid plus unfunded net of transfers in		(137,093)		(137,997)
Settlement prices received / (paid)		-		-
Closing Fair value of Fund assets		4,687,667		4,560,502

The total return on the Fund’s assets for the year to 31 March 2023 is loss of £-130,407,000 (2022 £450,564,000)

Sensitivity Analysis

	Approximate % increase to liabilities	Approximate monetary amount (£m)
Present value of total obligation	4,042,513	4,042,513
Sensitivity to	+0.1%	-0.1%
Discount rate	3,977,568	4,109,165
Long term salary increase	4,046.474	4,038,578
Pension increases and deferred revaluation	4,106,385	3,980,225
Sensitivity to	+1 Year	- 1 Year
Life expectancy assumptions	4,204,035	3,887,936

The information in the above note is all from our Fund Actuary - Barnett Waddingham.

21. Current Assets

	31 March 2022 £000	31 March 2023 £000
Other Investment Balances
Sales inc Currency	-	-
Investment Income Due	500	674
Recoverable Taxes	274	388
Total	774	1,062

	31 March 2022 £000	31 March 2023 £000
Current Assets
Contributions receivable from employers and employees	11,136	11,796
Sundry Debtors	2,077	2,177
Cash	2,178	9,332
Total	15,391	23,305

22. Current liabilities

	31 March 2022 £000	31 March 2023 £000
Investment Liabilities
Purchases including currency	-	(309)
Derivative Contracts Futures	(3)	-
Variation Margin	(8)	(53)
Managers Fees	(1,162)	(699)
Total	(1,173)	(1,061)

	31 March 2022 £000	31 March 2023 £000
Current Liabilities
Pension Payments (inc Lump Sums)	(306)	(221)
Cash	-	-
Professional Fees	(2,798)	(2,237)
Administration Recharge	(72)	(72)
Sundry Creditors	(1,510)	(2,031)
Total	(4,686)	(4,561)

23. Additional voluntary contributions

Market value 31 March 2022

£000

Market value 31 March 2023

£000

Prudential

22,647

17,232¹

1 This does not include the terminal bonuses for the members with profits investments as these were not available from the Funds AVC provider the comparative figure for 31 March 2022 was £17,472k.

The Pension Fund Scheme provides an Additional Voluntary Contribution (AVC) facility for scheme members. Some members of the pension scheme paid voluntary contributions and transfers in of £2.504m (£2.241m 2021/22) to Prudential to buy extra pension benefits when they retire. £3.187m was disinvested from the AVC provider in 2022/23 (£3.479m 2021/22). Contributions and benefits to scheme members are made directly between the scheme member and the AVC provider. The AVC funds are not, therefore, included in the Pension Fund Accounts.

24. Agency Services

The East Sussex Pension Fund pays discretionary awards to former employees on behalf of some employers in the Fund. The amounts paid are provided as a service and are fully reclaimed from the employer bodies. The sums are disclosed below.

	2021/22 £000	2022/23 £000
East Sussex County Council	4,638	4,618
Brighton & Hove City Council	2,105	2,056
Eastbourne Borough Council	289	281
Magistrates	192	199
Wealden District Council	170	168
Hastings Borough Council	169	165
Rother District Council	102	99
Lewes District Council	69	66
Brighton University	23	24
South-East Water	32	22
Westminster (used to be LPFA)	18	20
Mid-Sussex District Council	19	19
East Sussex Fire Authority	14	14
London Borough of Camden	7	8
London Borough of Southwark	6	7
The Eastbourne Academy	6	6
West Midlands Pension Fund	5	5
West Sussex County Council	4	4
Torfaen Borough Council	4	4
Sussex University	3	3
Varndean College	2	2
London Borough of Ealing	2	2
East Sussex College Group	1	1
Plumpton College	1	1
Optivo	1	1
Total	7,882	7,795

25. Related party transactions

East Sussex County Council

The East Sussex Pension Fund is administered by East Sussex County Council. Consequently, there is a strong relationship between the Council and the Pension Fund.

Each member of the Pension Committee is required to declare their interests at each meeting. The Treasurer of the Pension Fund, and Members of the County Council and the Pension Committee have no material transactions with the Pension Fund.

The Council incurred costs in administering the Fund and charged £2.0m to the Fund in 2022/23 (£1.6m in 2021/22). The Council`s contribution to the Fund was £46.6m in 2022/23 (£43.0 in 2021/22). All amounts due to the Fund were paid in the year. At 31 March 2023 the Pension Fund bank account held £9.8m in cash (£3.7m at 31 March 2022). The average throughout the year was £8.2m (£6.1m in 2021/22).

Key management personnel

The Chief Finance Officer of East Sussex County Council holds the key position in the financial management of the East Sussex Pension Fund.

	31 March 2022 £000	31 March 2023 £000
Short-term benefits	26	28
Post-employment benefits	5	5
Total	31	33

26. Contingent liabilities and contractual commitments

1. Outstanding capital commitments (investments) at 31 March 2023 totaled £236.8m (31 March 2022: £304.1m).

These commitments relate to outstanding call payments due on unquoted limited partnership funds held in the private equity and infrastructure parts of the portfolio. The amounts ‘called’ by these funds are irregular in both size and timing, typically over a period of between four and six years from the date of each original commitment.

At, 31 March 2022, the unfunded commitment was £168.8m for private equity, £48.1m for infrastructure and £19.9m for private debt. The commitments are paid over the investment timeframe of the underlying partnerships. As these partnerships mature, they are due to distribute capital back to investors. Commitments are made in US Dollars or Euros and the figures presented here are based on relevant Sterling exchange rates as at 31 March 2022.

2. Exit Payments

There were no employers whose contracts were due to end by the 31 March 2023 where an exit credit may need to be paid out. If there was the Fund needs to obtain final information from the employers and then will need to commission the final cessation report from the actuaries to ascertain if an exit payment is due for these employers.

3. GMP Reconciliation Project

The Guaranteed Minimum Pension (GMP) Reconciliation project was split into number stages for Local Government Pension Schemes (LGPS). The Fund has completed the discovery and GMP reconciliation phases, which reviewed data inconsistencies, raised issues with HMRC and agreed outcomes.

GMP elements of LGPS pension where State Pension Age is prior to 6 April 2016 has not increased in respect of the period 6 April 1978 to 5 April 1988. While the Post 1988 GMP element in respect of the period 6 April 1988 to 5 April 1997 might be increased up to a maximum of 3% p.a. The Government increase the State Pension for the member fully on the Pre 1988 GMP element and for Post 1988 GMP element has only increased if CPI is above 3% p.a.

The effect of LGPS pensions not showing the correct amount of GMP for its members would mean that their pension might be increased incorrectly. This can result in underpayments and overpayments, at a member specific level. The next stage, which is GMP Rectification, will amend LGPS pensions in line with the reconciled GMP information. Rectification will also involve a significant member communication exercise to explain the changes taking place.

The GMP rectification project has been postponed this year. We are still using the same third-party specialist (Mercer) to undertake the work but due to the delay they will first need to revisit the reconciliation phase as many members impacted will have changed status in the intervening period. We have now reignited the project in May 2023 and have completed a LGPS Benefit Specification and expect to export the data in June 2023. The project is expected to be completed in 2023 but we are still not in a position to quantify any under/overpayment liabilities values as at 31 March 2023.

4. Tax charges

The Fund is currently undertaking a review of the Annual Allowance pension saving statements issued and has identified some discrepancies in tax liabilities. Where the Fund has incorrectly advised a member of a tax payment, the Fund will pay any interest payments and penalties due to HMRC. As at the balance sheet date these potential interest and penalties payments were unknown.

5. Infrastructure holding

One of the Funds infrastructure managers has a minority holding in asset that it was in the process of selling which was expected to conclude in January 2023. The expected purchase of this asset did not take place and the manager has been looking into how it might now sell this asset. The company has encountered a more challenging operating environment than anticipated and it is expected that an additional equity capital raise. There is currently a lack of visibility on the price of the equity raise and the fact that the manager do not want to set a value which could create an adverse benchmark against which to set a price for the equity raise, the manager have decided to leave the Q1 2023 valuation flat versus Q4 2022 valuation. A price for the potential equity raise is expected to be set in Q2 2023 and will establish a new valuation point for the asset, based on this new information the manager will revisit the valuation of the asset. It is our expectation that the assets Q2 2023 valuation may need to be revised downward.

27. Contingent assets

1. Employer bonds/guarantees

There are 9 admitted body employers in the Fund that hold insurance bonds to guard against the possibility of them being unable to meet their pension obligations. 4 employers are currently negotiating new bonds due to expiry of their current bonds. These bonds are drawn in favour of the pension fund and payment will only be triggered in the event of employer default.

In addition to these bonds, pension’s obligations in respect of 18 other admitted bodies are covered by:

2 guarantees by Academies participating in the Fund.

12 guarantees by local authorities participating in the Fund.

3 Parent company guarantee.

1 deposit held by East Sussex County Council

2. Private market investments

At 31 March 2023, the Fund has invested £375.1 million in private equity funds managed by Adams Street and HarbourVest. The Fund has also invested £43 million in the M&G real estate debt fund VI and £404.6 million in the infrastructure funds managed by UBS, Pantheon and Infracapital and IFM

28. Impairment losses

During 2022/23, the fund has not recognised any impairment losses.

29. East Sussex Pension Fund – Active Participating Employers

	21/22 Payroll %	21/22 Amount £(000)	22/23 Payroll %	22/23 Amount £(000)	23/24 Payroll %	23/24 Amount £(000)
Scheduled Bodies - Major Authorities
Brighton and Hove City Council	20.3	-	19.8	-	19.8	-
East Sussex County Council	17.6	5,568	17.6	4,966	19.7	-
East Sussex Fire and Rescue Service	17.9	137	17.9	109	18.7	-
Eastbourne Borough Council	19.4	-	18.9	-	17.9	-
Hastings Borough Council	17.6	508	17.6	476	22.1	-
Lewes District Council	23.6	-	23.1	-	22.1	-
Rother District Council	25.6	-	25.1	-	24.1	-
University of Brighton	17.7	-	17.2	-	17.2	-
Wealden District Council	17.6	538	17.6	499	21.0	-
Other Scheduled Bodies
Arlington Parish Council	21.6	-	21.1	-	20.1	-
Battle Town Council	21.6	-	21.1	-	20.1	-
Berwick Parish Council	21.6	-	21.1	-	20.1	-
Bexhill on Sea Town Council	-	-	18.2	-	20.1	-
Buxted Parish Council	21.6	-	21.1	-	20.1	-
Camber Parish council	21.6	-	21.1	-	20.1	-
Chailey Parish Council	21.6	-	21.1	-	20.1	-
Chiddingly Parish Council	21.6	-	21.1	-	20.1	-
Conservators of Ashdown Forest	21.6	-	21.1	-	20.1	-
Crowborough Town Council	21.6	-	21.1	-	20.1	-
Danehill Parish Council	21.6	-	21.1	-	20.1	-
Ditchling Parish Council	21.6	-	21.1	-	20.1	-
East dean & Fristan Parish Council	-	-	18.2	-	20.1	-
Fletching Parish Council	21.6	-	21.1	-	20.1	-
Firle Parish Council	-	-	18.2	-	20.1	-
Forest Row Parish Council	21.6	-	21.1	-	20.1	-
Frant Parish Council	21.6	-	21.1	-	20.1	-
Hadlow Down Parish Council	21.6	-	21.1	-	20.1	-
Hailsham Town Council	21.6	-	21.1	-	20.1	-
Hartfield Parish Council	21.6	-	21.1	-	20.1	-
Heathfield & Waldron Parish Council	21.6	-	21.1	-	20.1	-
Herstmonceux Parish Council	21.6	-	21.1	-	20.1	-
Hurst Green Parish Council	21.6	-	21.1	-	20.1	-
Icklesham Parish Council	21.6	-	21.1	-	20.1	-
Isfield Parish Council	21.6	-	21.1	-	20.1	-
Kingston Parish Council	-	-	18.2	-	20.1	-
Lewes Town Council	21.6	-	21.1	-	20.1	-
Maresfield Parish Council	21.6	-	21.1	-	20.1	-
Newhaven Town Council	21.6	-	21.1	-	20.1	-
Newick Parish Council	21.6	-	21.1	-	20.1	-
Peacehaven Town Council	21.6	-	21.1	-	20.1	-
Pett Parish Council	21.6	-	21.1	-	20.1	-
Plumpton Parish Council	21.6	-	21.1	-	20.1	-
Rye Town Council	21.6	-	21.1	-	20.1	-
Salehurst & Robertsbridge Parish Council	21.6	-	21.1	-	20.1	-
Seaford Town Council	21.6	-	21.1	-	20.1	-
Telscombe Town Council	21.6	-	21.1	-	20.1	-
Uckfield Town Council	21.6	-	21.1	-	20.1	-
Wartling Parish Council	21.6	-	21.1	-	20.1	-
Willingdon and Jevington Parish Council	21.6	-	21.1	-	20.1	-
Wivelsfield Parish Council	21.6	-	21.1	-	20.1	-
Academy Schools
Annecy Catholic Primary Academy	15.0	-	14.5	-	13.4	-
Aquinas Trust	20.5	-	20.0	-	19.0	-
ARK Schools Hastings	20.1	-	19.6	-	18.9	-
Aurora Academies Trust	19.9	-	19.4	-	18.9	-
Beacon Academy	22.5	-	22.0	-	21.0	-
Beckmead Ropemakers Academy	16.3	-	16.3	-	17.3	-
Bexhill Academy	22.4	-	21.9	-	20.9	-
Bilingual Primary School	15.1	-	14.6	-	15.6	-
Breakwater Academy	16.5	-	16.0	-	19.8	-
Burfield Academy (Hailsham Primary)	19.5	-	19.0	-	19.8	-
Cavendish Academy	20.0	-	19.5	-	18.9	-
Chyngton School	-	-	21.0	-	20.4
Diocese of Chichester Academy Trust	23.9	-	23.4	-	22.4	-
Ditchling CE Primary	-	-	21.0	-	20.4	-
Eastbourne Academy	20.7	-	20.2	-	19.2	-
Falmer (Brighton Aldridge Community Academy)	19.5	-	19.0	-	18.9	-
Flagship School	-	-	22.3	-	21.3	-
Gildredge House Free School	19.1	-	18.6	-	18.9	-
Glyne Gap Academy	20.9	-	20.4	-	19.4	-
Hailsham Academy	19.5	-	19.0	-	18.9	-
Hawkes Farm Academy	15.9	-	15.4	-	19.8	-
High Cliff Academy	19.5	-	19.0	-	19.8	-
Jarvis Brook Academy	14.0	-	13.5	-	14.5	-
King's Church of England Free School	15.7	-	15.2	-	16.2	-
Langney Primary Academy	12.9	-	12.4	-	13.4	-
Ore Village Academy	18.0	-	17.5	-	18.5	-
Mouslecoombe Primary School	-	-	27.2	-	26.2	-
Parkland Infant Academy	14.3	-	13.8	-	14.8	-
Parkland Junior Academy	13.9	-	13.4	-	14.4	-
Peacehaven Academy	12.5	-	12.0	-	13.5	-
Peacehaven Heights	-	-	25.7	-	19.8	-
Pebsham Academy	19.0	-	18.5	-	18.9	-
Phoenix Academy	19.9	-	19.4	-	19.8	-
Portslade Aldridge Community Academy	19.4	-	18.9	-	19.9	-
King's Academy Ringmer	20.3	-	19.8	-	18.9	-
Roseland Infants	-	-	24.9	-	23.9	-
SABDEN Multi Academy Trust	23.1	-	22.6	-	19.6	-
Saxon Shore Academy	22.7	-	22.7	-	21.7	-
Seaford Academy	20.6	-	20.1	-	19.1	-
Seahaven Academy	21.0	-	20.5	-	19.5	-
Shinewater Primary Academy	14.0	-	13.5	-	14.5	-
Sir Henry Fermor Academy	14.3	-	13.8	-	14.8	-
Stafford Junior	-	-	25.7	-	24.7
The South Downs Learning Trust	11.7	-	11.2	-	12.2	-
The Southfield Trust	13.9	-	13.4	-	14.4	-
Telscombe Cliffs	-	-	23.8	-	19.8	-
Torfield & Saxon Mount Academy Trust	22.1	-	21.6	-	20.6	-
University of Brighton Academies Trust	19.5	-	19.0	-	18.9	-
White House Academy	17.0	-	16.5	-	19.8	-
Colleges
Bexhill College	21.2	-	21.2	-	21.2	-
Brighton, Hove & Sussex Sixth Form College	19.8	-	19.8	-	19.8	-
East Sussex College Group	20.7	-	20.7	-	20.7	-
Plumpton College	18.9	-	18.9	-	18.9	-
Varndean Sixth Form College	19.8	-	19.8	-	19.8	-
Admission Bodies
BHCC - Wealden Leisure Ltd	33.0	-	33.0	-	27.7	-
Biffa Muncipal Ltd	28.8	-	28.8	-	27.8	-
Brighton and Hove CAB	0.0	-	0.0	-	0.0	-
Brighton and Hove Housing Trust	-	-	31.4	-	31.4
Brighton Dome & Festival Limited (Music & Arts Service)	0.0	-	0.0	-	4.3	-
Brighton Dome and Fest BHCC ceased	0.0	-	0.0	-	0.0	-
Care Outlook Ltd	0.0	-	0.0	-	0.0	-
Care Quality Commission	49.2	92	49.2	92	44.8	-
Churchill St Leonards	29.7	-	29.7	-	-	-
Churchill St Pauls	34.1	-	34.1	-	33.1	-
Churchill Contract Services - St Paul's CoE Academy	0.0	-	0.0	-	33.1	-
Churchill East Sussex joined and ceased*	0.0	-	0.0	-	0.0	-
Compass (The Causeway)	-	-	34.0	-	32.0	-
De La Warr Pavilion Charitable Trust	4.8	-	4.8	-	2.9	-
East Sussex Energy, Infrastructure & Development Ltd (ESEIDL)	29.2	13	29.2	13	28.2	-
EBC – Towner	31.0	7	31.0	7	22.1	-
ESCC - NSL Ltd	3.6	-	3.6	-	0.0	-
Glendale Grounds Management Ltd	29.4	-	29.4	-	28.4	-
Grace Eyre	0.0	-	0.0	-	0.0	-
Halcrow Group Ltd	5.4	-	5.4	-	23.6	-
Idverdue*	0.0	-	0.0	-	33.1	-
Just Ask Estates Ltd	32.6	-	32.6	-	0.0	-
Nviro Ltd	35.3	-	35.3	-	-	-
Southern Housing	45.8	920	45.8	920	45.9	111
Royal Pavilion & Museums Trust	17.8	-	17.8	-	17.8	-
Sussex County Sports Partnership	17.7	-	17.2	-	17.2	-
Sussex Housing & Care	0.0	-	0.0	-	0.0	-
Sussex IFCA Insure Fisheries and Conversation Authority	-	-	18.2	-	20.1	-
Telent Technology Services Ltd	20.8	-	20.8	-	20.8	-
Vardean School BHCC*	0.0	-	0.0	-	0.0	-
Wave Leisure - Newhaven Fort	0.0	-	0.0	-	7.0	-
Wave Leisure Trust Ltd	0.0	-	0.0	-	7.1	-
Wave Leisure Trust Ltd - EBC	0.0	-	22.4	-	7.1	-
WDC - Wealden Leisure Ltd	33.0	-	33.0	-	26.1	-
Wealden Leisure Ltd - Portslade Sports Centre	0.0	-	0.0	-	0.0	-
White Rock Theatres Hastings Ltd	0.0	-	0.0	-	0.0	-

*Employers have active members but no longer getting contributions

30. Investment Performance

The Fund uses an independent Investment performance measurement service, provided by Pensions & Investment Research Consultants Ltd (PIRC), which measures the performance of the Fund compared with 47 other local authority pension funds. Pension Fund investment is long-term, so as well as showing the annual performance of the Fund, comparison to peers over longer periods is also detailed below.

Performance relative to the Fund’s strategic benchmark

	1 year (%)	3 years (%p.a.)	5 years (%p.a.)	10 years (%p.a.)
Fund	(2.5)	9.6	6.2	7.5
Benchmark	(1.1)	9.2	5.7	6.7
Relative*	(1.4)	0.4	0.6	0.8

Investment performance relative to peer group

	1 year (%)	3 years (%p.a.)	5 years (%p.a.)	10 years (%p.a.)
Fund	(2.5)	9.6	6.2	7.5
Local Authority Average	(1.5)	9.6	6.0	7.3
Relative*	(1.0)	0.0	0.6	0.2

The Fund outperformed the (weighted) average local authority Fund over the year by 1.0% (1.8% outperformance 2021/22), ranking the East Sussex Fund in the 39^th percentiles (14th 2021/22) in the local authority universe. Over three years the Fund was in line with the average (0.2% outperformance 2020/21) and was placed in the 43rd percentiles (56th 2020/21). Over five years the Fund outperformed by 0.2% (0.5% underperformance in 2020/21) and was placed in the 27^th percentiles (67th 2020/21). Over ten years the fund years, the fund outperformed by 0.2% (0.1% underperformance 2020/21) and was placed in the 21st percentiles (54th 2020/21).

*Relative performance is calculated on a geometric basis as follows:

( ( 1 + Fund Performance ) / ( 1 + Benchmark Performance ) ) - 1

As opposed to the simpler arithmetic method, the geometric method makes it possible to directly compare long-term relative performance with shorter-term relative performance.

	General Tranche Funding	Specific Covid-19 Grants
	£m	£m
Adult Social Care	-	4.73
Public Health	-	-
Governance Services	-	-
Children's Services	3.66	-
Orbis	-	-
Business Services	0.37	-
Communities, Economy and Transport	0.91	-
Corporate Budgets	-	-
Total	4.94	4.73

Funding carried forward	9.12	4.28

Departments	Current Estimate	Actual Outturn	Variation
	£m	£m	£m
Adult Social Care	204.85	204.98	0.13
Public Health	-	-	-
Governance Services	7.65	7.60	(0.05)
Children's Services	103.54	115.02	11.48
Orbis	3.89	3.87	(0.02)
Business Services	23.05	22.85	(0.20)
Communities, Economy and Transport	62.57	61.90	(0.67)
Service Spend (incl. DSG Related)	405.55	416.22	10.67
Corporate Budgets	19.36	14.96	(4.40)
Debt Impairment	-	1.02	1.02
Transfers to/from Reserves	9.32	7.56	(1.76)
Treasury Management	17.40	11.18	(6.22)
Net Expenditure	451.63	450.94	(0.69)

Financed from:
Revenue Support Grant	(3.69)	(3.69)	-
Social Care Grant	(23.67)	(23.67)	-
Service Grant	(5.18)	(5.18)	-
Business Rate Retention	(11.30)	(11.30)	-
Business Rate Top-up	(62.77)	(62.77)	-
Business Rates Compensation Grants	(10.85)	(10.85)	-
Business Rate Pool	(1.79)	(1.11)	0.68
Business Rates adjustments for previous years	0.51	(0.12)	(0.63)
Council Tax	(332.07)	(331.43)	0.64
New Home Bonus Grant	(0.82)	(0.82)	-
	(451.63)	(450.94)	0.69

Balances:
Opening	10.00	10.00
Added / (withdrawn) during the year	-	-
Closing	10.00	10.00

	£m
Budget as per February 2022	101.9
Project re-profiling following reviews	(25.9)
Approved Variations	6.2
Budget as per February 2023	82.2
Post budget approved variations	1.9
Revised Budget as per March 2023	84.1

	£m
Borrowing	34.9
Scheme Specific grants and contributions	18.7
Non-specific grants	25.2
Capital reserves and revenue contributions	12.8
Capital Receipts	5.1
Total resources	96.7

At 31 March 2022		At 31 March 2023
£m		£m
977,205	Long Term Assets (including Property, Plant & Equipment)	1,087,756
365,198	Current Assets (including debtors and short term investments)	376,414
(163,941)	Current Liabilities (including creditors and bank overdraft)	(159,406)
(794,391)	Long Term Liabilities	(302,352)
384,071	Net Assets	1,002,412

	Represented by:
261,814	Usable Reserves	260,002
122,257	Unusable Reserves	742,410
384,071	Total Reserves	1,002,412


Contents		Page



Narrative Report		4


Statement of Responsibilities for the Statement of Accounts		16


Independent Auditor’s Report to East Sussex County Council		17


Annual Governance Statement		21


Accounting Statements


	Comprehensive Income and Expenditure Statement	47


	Movement in Reserves Statement	48


	Balance Sheet	50


	Cash Flow Statement	51


Notes to the Accounting Statements		52


East Sussex Pension Fund Accounts		125


Glossary of Terms		161

	2021/22	2022/23	2023/24	2024/25	2025 +	Total
	actual	actual	estimate	estimate	estimate	estimate
	£'000	£'000	£'000	£'000	£'000	£'000
Capital:
LED lighting schemes	35	197	278	-	-	510
Solar PV schemes	-	488	1,078	1,718	1,000	4,284
Heat decarbonisation schemes	20	414	2,263	1,055	2	3,754
Revenue:
Salaries	-	53	125	128	132	438
Training	-	32	10	10	10	62
Consultancy support for bids	-	5	10	10	10	35
Total	55	1,189	3,764	2,921	1,154	9,083

Budget Available						9,587

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 and has one seat on the Board. The Leader of the Council (Councillor Glazier) is the East Sussex County Council appointed Company Director of SELEP Limited occupying this seat. As SELEP Limited is a company limited by guarantee without share capital there are no shares/shareholders in the company. The Council has one seat on the Board of Directors of SELEP Ltd, occupied by the Leader of the 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. East Sussex County Council’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 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 Council and Essex CC as the accountable body to SELEP Ltd, and the Council’s S151 Officer is required to sign-off on all grant and loan agreements between the 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. Senior officers of the Council, 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 councillors’ involvement is likely to constitute a conflict of interest	The Leader of the 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 attends as substitute and 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 East Sussex County Council 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

What the relationship is between the body and the local authority	Alongside Rother District Council, Hastings Borough Council, East Sussex County Council is a Member of Hastings and Bexhill Renaissance Ltd (HBRL) which trades as ‘Seaspace’. HBRL was established as part of the transition arrangements agreed between Government and the South East England Development Agency (SEEDA) and associated organisations. The responsibility for the management of the land and assets SEEDA had acquired was entrusted to HBRL. HBRL no longer holds any land or assets of significance. Hastings Borough Council and Rother District Council currently do not have Directors appointed to the HBRL Board and so East Sussex County Council is currently the only active A Member. The Articles of Association for HBRL identifies that the Members are divided into three classes of membership: A. Each of the Councils B. Hastings, Bexhill and East Sussex Business Association Limited C. Up to seven other Members Councillor Bennett sits as a Director on the Board of Directors alongside the above representatives. The company Members do not hold shares but have a percentage voting right in the decision-making by the members of the company. The local authorities between them have a maximum aggregated voting right of 19.9%.
What is the structure and form of the body (e.g., private limited company etc.)	Private company limited by guarantee without share capital.
How the Council oversee its activities and provided assurance on its governance including financial governance	Annual General Meetings (AGM) attended by the Directors (Councillor Bennett is the Council appointed Director on HBRL) are held where the following agenda items are considered: - the Annual Accounts - Key Issues Memorandum - Letter of Representation The Council appointed Director’s attendance at the AGM is supported by a senior officer.
What the relationship is between the body and individual councillors and whether councillors’ involvement is likely to constitute a conflict of interest	Councillor Bennett, as a Director of the company, attends the AGM as the Council appointed Director to HBRL. If reports relating to HBRL were to be considered by Full Council, Cabinet or any Committees that Councillor Bennett attends, he would declare an interest as Director of HBRL.
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 in HBRL falls under the remit of the Place Scrutiny Committee.
Designated Officer contact	Richard Dawson, Communities, Economy and Transport

What the relationship is between the body and the local authority	East Sussex County Council is a member of the company. East Sussex County Council has one vote on the Board (equal to all other board members). Cllr Beaver has been appointed by the Council to sit on the Board of Directors.
What is the structure and form of the body (e.g., private limited company etc.)	The Company is a private company limited by guarantee and a Community Interest Company. The company is a not-for-profit organisation. The other Members of the company are: - Hastings Borough Council; - Rother District Council; - Crowhurst Parish Council; - Friends of Combe Valley; - Bourne Leisure Limited; - Kitchenham and Worsham Farms. In February 2022 the Board approved a new company structure with 12 Directors as follows: · 8 Co-opted Directors: 6 from Company Members and 2 independents appointed by the Board; · 4 nominated by Local Authority company Members. This proposal is due to be put to Members for approval in June 2022. Currently there are 15 Directors. 8 Co-opted (as above) and 7 nominated by Local Authority Members. The Boards role is to provide leadership and oversight of all the CIC activities and is primarily concerned with strategy, planning, fundraising & development and governance. The CIC has appointed Groundwork South as their managing agent (via an agreed SLA) who report progress back to the Board.
How the Council oversee its activities and provided assurance on its governance including financial governance	The Council appointed two Members of the Council to sit as Directors on the Board of Directors. On 14 March 2022, the Lead Member for Transport and Environment considered a report regarding the Council’s representation on the CIC and agreed to support a proposal to reduce the number of Council appointed Directors from two to one. The Council still has one vote on the Board. The East Sussex Councillor Representative attends CIC board meetings. The Board meets 4 times per year, standing papers and minutes are circulated to all Directors. Annual accounts are approved at the February Board meeting and are submitted to Companies House, so are publicly available. Local Authority officers attend the Board meetings which enables them to contribute to discussions of the Board as appropriate. Officers are not Directors so as such do not have voting rights. The CIC has established a Local Authority Officers Group which includes the representatives to the Board meeting and other officers. This group meets 2/3 times per year to take forward project ideas and support the process of project approval and delivery. The directors have equal votes at CVCP CIC meetings, except for decisions related to the appointment or removal of a majority of Directors, where Local Authority voting rights are restricted to 49%.
What the relationship is between the body and individual councillors and whether councillors’ involvement is likely to constitute a conflict of interest	The East Sussex Councillor Representative attends CIC board meetings and has voting rights. There could be potential conflict of interest if the CIC Board need to make decisions with regard to matters being promoted by the County Council. This is kept under review.
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	By being present at the CIC meetings and making comments/voting on proposals being put forward by the CIC. Progress reports and management accounts are provided to the Board quarterly and annual accounts are presented to the Board for approval annually.
Designated Officer contact	Virginia Pullan, Communities, Economy and Transport

2021/22				2022/23

Gross Expenditure	Gross Income	Net Expenditure		Gross Expenditure	Gross Income	Net Expenditure

£000	£000	£000		£000	£000	£000

334,309	(146,741)	187,568	Adult Social Care	337,714	(152,475)	185,239
32,265	(31,844)	421	Public Health	33,209	(33,267)	(58)
9,208	(611)	8,597	Governance Services	8,595	(715)	7,880
447,477	(312,041)	135,436	Children’s Services	443,361	(312,161)	131,200
48,741	(17,070)	31,671	Business Services	53,017	(19,419)	33,598
141,608	(47,869)	93,739	Communities, Economy & Transport	138,492	(50,074)	88,418
15,789	(1,114)	14,675	Corporate Expenditure	10,998	(799)	10,199
1,029,397	(557,290)	472,107	Cost of Services	1,025,386	(568,910)	456,476
25,728	-	25,728	Other operating expenditure - Note 11	39,896	-	39,896
27,615	(1,419)	26,196	Financing and investment (income) and expenditure - Note 12	5,824	(6,189)	(365)
-	(458,097)	(458,097)	Taxation and non-specific grant income - Note 13	-	(492,686)	(492,686)
		65,934	Deficit on Provision of Services			3,321
		(27,573)	Surplus on revaluation of non-current assets – Note 25			(52,394)
		(132,445)	Remeasurement of the net defined pension liability – Note 25			(569,268)
		(160,018)	Other Comprehensive (Income) and Expenditure			(621,662)
		(94,084)	Total Comprehensive (Income) and Expenditure			(618,341)

2021/22	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 2021 - Notes 24 and 25	9,999	20,512	180,051	210,562	5,840	17,323	233,725	56,262	289,987
Movement in Reserves during 2021/22
Total Comprehensive Income and Expenditure	(65,934)	-	-	(65,934)	-	-	(65,934)	160,018	94,084
Adjustments between accounting basis & funding basis under regulations - Note 7	93,132	-	-	93,132	4,091	(3,200)	94,023	(94,023)	-
Net Increase / (Decrease) before Transfers to Earmarked Reserves	27,198	-	-	27,198	4,091	(3,200)	28,089	65,995	94,084
Transfers to / (from) Earmarked Reserves - Note 10	(27,198)	816	26,382	-	-	-	-	-	-
Increase / (Decrease) in Year	-	816	26,382	27,198	4,091	(3,200)	28,089	65,995	94,084
Balance at 31 March 2022 - Notes 24 and 25	9,999	21,328	206,433	237,760	9,931	14,123	261,814	122,257	384,071

2021/22	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	186,719	(10,153)	176,566	11,002	187,568
Public Health	-	(47)	(47)	468	421
Governance Services	7,163	660	7,823	774	8,597
Children’s Services	94,499	(4,364)	90,135	45,301	135,436
Business Services	23,663	(1,695)	21,968	9,703	31,671
Communities, Economy & Transport	59,489	(11,785)	47,704	46,035	93,739
Total	371,533	(27,384)	344,149	113,283	457,432
Corporate Expenditure	39,660	(29,840)	9,820	4,855	14,675
Net Cost of Services	411,193	(57,224)	353,969	118,138	472,107
Other Income and Expenditure from the Expenditure and Funding Analysis
Other Corporate Expenditure	4,327	30,026	34,353	17,571	51,924
Financing	(415,520)	-	(415,520)	(42,577)	(458,097)
Total	(411,193)	30,026	(381,167)	(25,006)	(406,173)
Deficit for the Year	-	(27,198)	(27,198)	93,132	65,934

General Fund Balance at 1 April 2021			(9,999)
Less: Deficit for the Year			(27,198)
Add: Transfer from Reserves			27,198
General Fund Balance at 31 March 2022			(9,999)

1. Cambridgeshire	5. Norfolk	8. Hertfordshire
2. Kent	6. Essex	9. Suffolk
3. Hampshire	7. West Northamptonshire	10. Isle of Wight
4. West Sussex

East Sussex County Council Annual Governance Statement 2022/23

The Purpose of the Governance Assurance Framework

The Governance Assurance Framework Principles

The County Council’s Governance Framework

Section A: Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law

Section B: Ensuring openness and comprehensive stakeholder engagement

Decision-making and Scrutiny

Stakeholders and Partnership

SECTION C: Defining outcomes in terms of sustainable economic, social, and environmental benefits

SECTION D: Determining the interventions necessary to optimise the achievement of the intended outcomes

SECTION E: Developing the entity’s capacity, including the capability of its leadership and the individuals within it

Officers

SECTION F: Managing risks and performance through robust internal control and strong public financial management

SECTION G: Implementing good practices in transparency, reporting and audit, to deliver effective accountability

Annex A - Sources of Assurance and Actions

Annex B - Separate bodies where the County Council is a member or appoints a Director

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

7. Adjustments between accounting basis and funding basis under regulations

18. Financial Instruments

20. Current & Long Term Debtors and Payments in Advance

26. Cash Flow Statement – Operating Activities

32. Officers’ Remuneration

35. Grant Income

39. Leases

41. Pensions Schemes Accounted for as Defined Contribution Schemes

47. Closed Landfill Sites

1: Description of Fund

3. Summary of significant accounting policies

Fund account – revenue recognition

Net assets statement

4. Critical judgements in applying accounting policies

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

6. Events after the balance sheet date

7. Contributions Receivable

8. Transfers in from other pension funds

9. Benefits payable

11. Management expenses

11a) Investment management expenses – 2022/23

12. Investment income

13. Other fund account disclosures

13a) Taxes on income

13b) External audit costs

14. Investments

14a) Reconciliation of movements in investments and derivatives

14b) Investments analysed by fund manager

14c) Stock lending

15. Analysis of derivatives

Objectives and policies for holding derivatives

16. Fair value – basis of valuation

16a) Fair value hierarchy

16b) Transfers between levels 1 and 2

16c) Reconciliation of fair value measurements within level 3

17. Classification of financial instruments

17a) Net gains and losses on financial instruments

18. Nature and extent of risks arising from financial instruments

Risk and risk management

Market risk

Other price risk

Interest rate risk

Currency risk

Climate Change risk

Credit risk

Liquidity risk

Refinancing risk

19. Funding arrangements

Introduction

Asset value and funding level

Contribution rates

Assumptions

Updated position since the 2022 valuation

Assets

Liabilities

Overall position

20. Actuarial present value of promised retirement benefits

Data used

Employer membership statistics

Payroll

Unfunded benefits

Early retirements

Assets