East Sussex County Council
Statement of Accounts
2022/23
Additional Information
In addition to the Statement of Accounts, financial information can be gathered from the County Council's agendas and other publications, which are on display in the major public libraries in the County. Information on the Council’s budget and finances can also be found on the website
Further information on particular aspects of the County Council's finances may be obtained from:
Joanna Membry
Financial Accounting Team
P O Box 3
County Hall
Lewes, East Sussex
BN7 1UE
or by email to: ClosureOfAccounts@eastsussex.gov.uk
Index of Notes to the Accounting Statements
Note Page
1. Authorisation of the Statement of Accounts
3. Accounting Standards that have been issued but have not yet been adopted
4. Critical Judgements in applying Accounting Policies
5. Assumptions made about the future and other major sources of estimation uncertainty
6. Expenditure and Funding Analysis
7. Adjustments between accounting basis and funding basis under regulations
8. Material items of income and expenses
9. Events after the Balance Sheet date
10. Transfers to/from Earmarked Reserves
11. Other Operating Expenditure
12. Financing and Investment Income and Expenditure
13. Taxation and Non Specific Grant Income
14. Property, Plant, and Equipment
20. Current & Long Term Debtors and Payments in Advance
21. Cash and Cash Equivalents, Bank overdraft and accrued balances for third parties
22. Creditors and Income in Advance
26. Cash Flow Statement – Operating Activities
27. Cash Flow Statement – Investing Activities
28. Cash Flow Statement – Financing Activities
29. Cash Flow Statement – Reconciliation of Liabilities arising from Financing Activities
30. Pooled Budget and Partnership Arrangements
33. Termination Benefits & Exit Packages
38. Capital Expenditure and Capital Financing
40. Other long term liabilities, including Private Finance Initiatives and Similar Contracts
41. Pensions Schemes Accounted for as Defined Contribution Schemes
42. Defined Benefits Pension Schemes
45. Nature and extent of risks arising from Financial Instruments
About East Sussex County Council
East Sussex County Council (ESCC) is one of 26 county councils in England, covering an area of around 172,000 hectares, with a population of about 558,900 people in mid-2020. The Council forms the upper tier of local government within East Sussex (excluding Brighton & Hove).
East Sussex has a rich natural environment, with over two thirds of the county being covered by one or more environmental designations: the three largest being Area of Outstanding Natural Beauty 43.5%, Environmental Stewardship Agreement 15.6% and National Park 12.0%. The key habitats are grassland, arable farmland and woodland.
The county is divided into 50 electoral divisions, each represented by one Councillor. Local elections are held every four years, with the last taking place on 6 May 2021; the outcome of which saw the return of the Conservative administration:
· Conservative – 26 seats
· Liberal Democrats – 11 seats
· Labour – 5 seats
· Green – 4 seats
· Independent Democrats – 2 seats
· Independents – 1 seat
· Vacancy – 1 seat
Councillors make sure that the services that ESCC provides meet the needs of residents and those who work in the county, by setting the overall policies and strategies for the Council and by monitoring the way in which these are carried out.
They have set four overarching priority outcomes: driving sustainable economic growth; keeping vulnerable people safe; helping people help themselves; and making best use of resources in the short and long term. Making best use of resources in the short and long term is the gateway priority through which any activity and accompanying resources must pass.
Chief Officers, led by our Chief Executive Becky Shaw, help Councillors to develop policies and objectives. Their main role is to provide the public with the highest possible standards of service within the money that the Councillors make available.
Council Officers are the people who work for the Council and who are paid to deliver the services agreed by Councillors. Overall, the workforce comprises 9,219 people and 7,299 ‘full time equivalent’ employees as at 31 March 2023.
The five ESCC departments and their main responsibilities are:
· Adult Social Care and Health: Provide social care services for residents over 16, including residential care and sensory care services. It also has the public health remit.
· Children’s Services: Provide social care for people under 16, state education and other childcare services.
· Communities, Economy and Transport: Responsible for community services such as libraries and registrars, customer access/services, roads, transport planning, economy and the East Sussex environment.
· Business Services: Responsible for managing our finances, IT, human resources, procurement and property.
· Governance Services: Provides advice on governance of the Council, including legal and constitutional arrangements.
Financial Report
In presenting these draft accounts for 2022/23, they have been prepared in line with the CIPFA code of accounting practice. It should be noted that the accounts for 2020/21 and 2021/22 have yet to be formally certified by the Council’s external auditors, an issue facing a number of local authorities and as part of a national audit debate.
The net outturn at year end was £450.94m against a revised net budget of £451.63m, a net underspend of £0.69m. This comprised a significant overspend in Children's Services, reflecting a national picture of market and demand challenges for the provision of services, in particular to looked after children and home to school transport, offset by an underspend in Corporate Budgets, driven by improved investment returns resulting from higher than forecast interest rates. This is after transfers to reserves and before Corporate Funding and therefore differs in presentation from the Quarter 4 Monitoring Report presented to Cabinet on 27 June 2023.
Homes for Ukraine Scheme
Since March 2022, a programme of services has been established to support Ukrainian guests to settle in East Sussex. The programme is led by East Sussex County Council (ESCC) with oversight and governance being provided by the Homes for Ukraine Programme Board. The programme is delivered in cross-sector partnership against shared priorities; independence & wellbeing, English language support, access to employment & education, sustainable and affordable housing/accommodation and sustainable sponsorship. Funding for the programme is provided by the Department for Levelling Up, Housing & Communities (DLUHC) and the allocation is calculated on the bases of i) a tariff payment per guest arriving and ii) a thank you payment to each sponsoring household. The final grant settlement is yet to be confirmed by DLUHC but has been estimated at a total of £17.8m. Of this, £5.967m was spent in 2022/23 in supporting 1,569 guests who were reported to have arrived in East Sussex in the period 1 March 2022 to 31 March 2023. The balance of the grant funding will be carried forward to 2023/24 to fund ongoing costs of supporting guests. The government has also provided additional funding to ESCC in 2022/23 to provide education and childcare services for children from families arriving from Ukraine under the scheme. The Department for Education (DfE) has allocated funding pro-rata on a per pupil basis for the 3 phases of education - early years, primary and secondary.
Household Support Fund
To address the impact of the cost-of-living crisis, the government announced 2 extensions to the original Household Support Fund (HSF) which ended on 31 March 2022. The extensions covered the periods 1 April 2022 to 30 September and 1 October 2022 to 31 March 2023. The grant is intended to support those most in need and the expectation is that the funding should be used in a similar way as the original HSF scheme but with a new focus on pensions and a greater emphasis on supporting households with energy bills. East Sussex County Council received a total allocation in 2022-23 of £7.794m and the allocation was fully spent in supporting eligible households in several ways including:
· Distribution of £2.807m on targeted support through District and Borough Councils.
· £2.787m on provision of food vouchers to eligible free school meal pupils for the school holidays.
· Distribution of £1.503m on targeted support through Voluntary Community and Social Enterprises.
· £0.400m on provision of food through Foodbanks and Food Partnerships.
· Distribution of £0.200m directly to vulnerable families and children via Children’s Services teams.
· Provision of £0.050m support through Warmer Homes.
Continued Impact of COVID-19
The Council experienced residual COVID-19 related costs and income losses which were fully mitigated from general and specific funding. The following table shows use of this funding by department in 2022/23:
General Tranche Funding |
Specific |
|
£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 |
The 2022/23 Approved Budget
The Council’s 2022/23 original net budget of £453.23m comprises three main elements: Council Tax, business rates and Government grant.
The Council’s business planning process, known as Reconciling Policy, Performance and Resources (RPPR):
· Enables us to be business-like and test comparative returns on investment so that the Council can be confident it is making best use of resources. It also ensures savings in one area do not give rise to unforeseen consequences in another area;
· Maximises efficiency, exploits technology, and makes the best use of all our assets;
· Maximises East Sussex resources through strong partnership working, income generation, lobbying and exploring new ways of working;
· Removes management and support costs wherever possible, to maximise the resources available to the front line;
· Sustains investment in activity that will most help manage demand;
· Encourages communities to help achieve their priority outcomes;
· Is open and transparent to provide clarity about priorities and consequences, specifying clearly what the County Council will do;
· Delivers service change and facilitative programmes aimed at providing modern services which meet the needs of local people, working with others to do this in a way that makes the best use of resources; and
· Uses our local evidence base to meet the most important needs of our communities and leading to innovative solutions which build a compelling future, rather than managing decline.
The Council’s RPPR process matches available resources with delivery plans for priority outcomes. It has enabled us to give relative protection to priority services. The RPPR process has been applied across all services in the development of the Council Plan supported by the Medium-Term Financial Plan (MTFP) and Capital Programme. Savings of over £138m have been made between 2010/11 and 2022/23.
The Capital Programme is also very constrained by limited resources. In the past, Members have been able to meet core need and make investment in the County’s economy, for example significant additional investment in road and broadband infrastructure. The current programme, based on an assumption of significantly reduced future funding, contains only basic need for school places, highways, building maintenance, ICT, libraries and house adaptations.
The Authority’s 10 year planned programme is supported by a 20 year Capital Strategy. The purpose of the strategy is to drive the authority’s capital investment ambition in support of the Council Plan, whilst ensuring appropriate capital expenditure, capital financing and treasury management. The strategy was approved by Council as part of the RPPR process, the link is below.
The revenue and capital budget for 2022/23 was presented to Council on 8 February 2022. Attached below is a link to the report on the Council’s website:
Agenda for Full Council on Tuesday, 8th February, 2022, 10.00 am | East Sussex County Council
How much was spent on the revenue account
The Expenditure and Funding Analysis (EFA) on page 72 shows how the Council money is spent and where the money comes from. The Council services expenditure is presented in the chart below. The chart below presents a full break down of how the money was spent:
What the money was spent on
County Council services are staff intensive and employee costs account for 31% of the expenditure. Non-employee expenditure includes costs of premises at 3%, supplies and services at 15% and third party payments at 35%, with other expenditure at 12%. Capital financing (the cost of borrowing, interest and repayments) and accounting for on-going Private Finance Initiative (PFI) within the ESCC Balance Sheet accounts for the remaining 4%.
Where the money came from
The chart shows that 42% of our income came from Specific Government grants, 29% came from residents through Council Tax, 10% from other grants & contributions, 11% from other income including use of reserves and bank interest. Business Rates consisted of 1%, and 7% of our income came from users of our services, with Revenue Support Grant representing 0.32% of the Council’s Funding.
Analysis of the Revenue Budget
The Council maintains a robust framework of budget monitoring to ensure pressures are identified early and action taken by directorates to manage potential variations within their cash limited budgets. Despite this, the council’s service budgets overspent by £10.67m in 2022/23. This included a significant overspend in Children's Services by £11.48m with the largest pressures seen in Early Help and Social Care and Home to School Transport. Containing costs in Children’s Services continues to be a significant challenge across the country, against the background of increased demand and complexity of needs emerging from the pandemic and acute supply side shortages. Public Health expenditure continues to be funded by the ring-fenced Public Health grant and therefore shows a nil outturn position.
This overspend was offset by an underspend of £9.59m in Corporate Budgets, where all of the General Contingency budget was required to be applied and Treasury Management underspent by £6.22m due to no additional borrowing during the year plus favourable interest rates. The Council has seen levels of aged unsecured debt rise significantly during 2022/23, particularly in relation to fees for Adult Social Care. The increased debt required an accounting adjustment of £1.02m to reflect the risk that outstanding debt relating to 2022/23 has to be written off, reported as a net reduction in the underspend on Corporate Budgets. The total net revenue underspend for 2022/23 is £0.69m.
The table below shows actual net spending of £450.94m during 2022/23, based on the total cost of providing services including charges for support services, treasury management and use of assets.
The Council’s general fund balance of £10.0m at the year end plus general contingency of £4.3m is in line with the target minimum level of 2.5% (actual 3.17%) of the net revenue budget set by the Council.
The analysis of revenue expenditure provided is for budgetary comparison purposes and reconciles to the analysis contained in the Expenditure and Funding Analysis (EFA) on page 72. The table below sets out the revenue budget for 2022/23 using the standard management reporting format and how these compare with outturn:
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 |
Earmarked Reserves and Provisions
The financial statements also set out details of the Council’s earmarked reserves, which are another essential tool to manage risk exposure and smooth the impact of major costs and unexpected events. The requirement for financial reserves is acknowledged in statute. Sections 32 and 43 of the Local Government Finance Act 1992 require billing and precepting authorities in England and Wales to have regard to the level of reserves needed for meeting estimated future expenditure when calculating the budget requirement, and regard to LAAP Bulletin 99 - Local Authority Reserves and Balances.
It is the S151 Officer’s duty to consider the robustness of the Council’s budgets, the adequacy of reserves and the general fund when they are set annually. This consideration is summarised in the annual Robustness Statement which is published as part of RPPR. The Council’s reserves policy supports the Council’s strategic agenda and corporate cross cutting priorities, and in particular:
· The impact of inflation at levels not seen for decades on the costs of services
· Uncertainty over future funding from Government
· The service response to the national policy agenda
· The residual impact of the COVID-19 pandemic
· The heightened risk profile across Local Government
Reserves are the only source of financing available to fund risks and one-off pressures over a number of years. Reserves can only be spent once and the possibility of creating new reserves in an era where budgets are tight and can become overspent, not just individually but corporately, is increasingly limited. However, in recognition of the increasingly uncertain financial position and pressures on services, the Council has looked to bolster its reserves where possible and considers them sufficient and its budget robust.
Details of the Council’s earmarked reserves can be found on page 78, Note 10 to the Accounting Statements. Current earmarked reserves held at 31 March 2023 totalled £117.8m. Of this, £19.9m relates to reserves to meet the estimated future costs of managing the Private Finance Initiative (PFI) waste facility, £13.4m relates to future funding for the capital programme and £97.1m relates to services revenue grants and contributions set aside for future years. The remainder of the significant reserves are to help meet some of the cost of insurance liabilities to manage litigation and other corporate risks not otherwise recognised.
The level of the general fund is consistent with the overall financial environment and the key financial risks faced by the Council. This risk assessment is formally carried out at least twice annually and takes account of circumstances at the time.
In calculating the level of provisions, the Council exercises judgement; they are measured at the Council’s best estimate of the costs required to settle obligations at the Balance Sheet date. The level of the Council’s provisions is set out in Note 23.
Future Years
The General Fund balance of £10.0m is a minimum general balance which, whilst it remains lower proportionately than a lot of other authorities, is considered adequate on the basis that an in-year budgeted general contingency is also held. Should the General Fund Balance have to be used, the Council would have to consider how this could be topped back up to an adequate level to manage future years’ risks.
The general contingency for 2023/24 is £4.9m and will be used in the first instance to cushion the impact of pressures in-year. Any unused balance will be transferred to strategic reserves at the end of the financial year, in line with the approved reserves policy.
Of the balance on the Revenue Grants and Contributions Reserve, £9.1m relates to general COVID-19 funding, £3.1m of which is committed to fund covid-related pressures relating to future Looked After Children costs. The remaining balances are committed for specific purposes. Within the Financial Management & Transformation Reserves, £20.5m is considered to be available for any unforeseen budgetary pressures, noting that its use would impact on the Authority's MTFP: firstly the reserve would need to be built up again, thereby adding an additional budget pressure; secondly, if the reserve is not available to support the development and investment in services then this would place additional burdens on the future financial viability of the authority. The Council does not hold large balances for capital receipts or unapplied capital grants, and any balances have a planned use.
The Capital Programme
Capital expenditure represents money spent by the Council on purchasing, upgrading, and improving assets that will be of benefit to the community over many years. The approved capital budget (gross) at February 2022 for 2022/23 was £101.9m. This was further adjusted to reflect the variation at outturn (March 2023), re-profiling of budgets and approved variations in line with financial regulations and governance (detail of which is shown below).
Capital Programme gross movements during 2022/23:
|
£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 |
During the financial year the capital programme is regularly reviewed and where necessary projects are re-profiled as part of the ongoing RPPR process. The revised gross budget for the end of March 2023 was £84.1m.
In 2022/23 the County Council spent £75.4m gross of which £8.3m was supported by scheme specific resources, giving a net expenditure of £67.1m. The larger schemes that took place during the year included the structural maintenance of roads throughout the county, delivering school places, IT & digital strategy implementation, capital building improvements, and many other improvements to schools, buildings, roads. Of the £8.7m variation to the revised gross budget, £1.4m relates to Local Enterprise Partnership (LEP) funded projects being delivered by, or in partnership with others, where the timing of expenditure and delivery is largely outside of the Council’s control. There has been slippage on a number of other projects, including IT & digital strategy implementation largely relating to delivery of projects outside of the council’s control and delays to new system implementation, delays to building improvements due to contractor constraints, and various highway schemes for reasons including redirection of resources to address higher priority works and lack of contractor availability. There was also an overspend on a major road network scheme due to compensation claims payable.
The chart below shows a high level analysis of the 2022/23 capital expenditure.
As per the approved budget at February 2023, the County Council plans to invest £96.7m in capital projects in 2023/24, funded by:
|
£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 |
Financial Challenges in 2022/23
The County Council plans and monitors its performance, policy and resources through a single process, called Reconciling Policy, Performance and Resources (RPPR). For full details of the County Council’s challenges and the financial implications, the attached is a link to the report on the Council’s website, which was presented to Council on 8 February 2022:
Agenda for Full Council on Tuesday, 8th February, 2022, 10.00 am | East Sussex County Council
Financial Challenges for 2023/24 and beyond
At a national level, the Government funding that ESCC will receive between 2024/25 – 2026/27 is yet to be confirmed. While the provisional local government settlement in December 2022, included some indicative figures for two years of funding – notably for social care – the Local Government Financial Settlement was only a detailed one-year settlement for 2023/24. We therefore await the provisional settlement for 2024/25, which will be in the late autumn of 2023.
To address pressures in the social care system, the Government announced grant funding as part of the Autumn Statement 2022 to support social care and hospital discharge, together with the continuation of the Services Grant and the delayed rollout of adult social care charging reform from October 2023 to October 2025. While this will enable us to maintain a degree of financial stability for 2023/24, demand and costs will continue to grow, and there will be additional expectations arising from national reforms, bringing new and sustained financial and service pressures which will impact on our Medium-Term Financial Plan (MTFP) and ability to meet the needs of our residents.
Issues related to the national policy agenda, such as the Children’s SEND strategy, wider reviews of social care, and the climate change agenda, are likely to bring new responsibilities to the Council. It is unclear at this stage what levels of funding will come with these and our MTFP will be updated as the financial impact becomes clearer. The current economic climate has meant levels of inflation remain at levels not seen for several decades, which has led to an unprecedented level of financial uncertainty.
The delay to the Fairer Funding Review has meant greater uncertainty about the shape of any long-term sustainable settlement for local authorities. At a local level, the potential impact the economic downturn and cost of living crisis will have on the collection of business rates and council tax respectively has yet to be fully assessed. There is a risk that the extension of Local Council Tax Reduction Schemes discounts by our District and Borough Councils will see reductions in the collection of Council Tax.
Existing financial pressures that have already impacted in 2022/23 are expected to continue into 2023/24. This includes pressures in Children’s Services; rising levels of debt, particularly for adult social care contributions; and the need to offer pay awards above levels agreed in previous years, driven by the impact of the cost of living on staff.
The risk to revenue budgets are offset to an extent by increased interest rates for Treasury Management, and the recent triennial pension valuation has the potential to release some budget.
For the Capital Programme, there remain challenges in the supply chain for materials and price pressures within existing contracts, the impact of which is exacerbated by delays to delivery. Further significant pressures may materialise as new schemes are developed and go out to tender. The current technical consultation on the Infrastructure Levy has added a level of uncertainty to the value of future developer contributions, which remain an important funding stream for the Programme. The Capital Programme holds a contingency of £7.5m to meet these uncertainties.
While the council’s reserves have been applied and maintained within a robust reserve policy, the level of reserves held by local government is coming under increasing levels of scrutiny. There remains a likelihood that national government will require us to review our reserves strategy, with a potential to constrain our use of our reserves in maintaining a stable financial position.
All these factors, alongside the underlying demographic and economic factors of the county, combine to create the volatile and highly challenging backdrop against which we must plan for the future.
East Sussex has a much older age profile compared to England and the South East. 26% of the county’s population is aged 65 or over, compared to 19% in England and 20% regionally. The median age of the county is 48.4, compared to the national average of 40.2.
In East Sussex there are 329 LSOAs, 22 are in the most deprived 10% nationally, 16 of these are in Hastings, 4 Eastbourne, and 2 Rother. 21 Lower Super Output Areas (LSOAs) are in the least deprived 10%, 13 are in Wealden, 6 Lewes, and 2 Eastbourne. People that are more deprived may produce higher demand for Council and other public services. Deprived LSOAs are characterised by poorer health and disability, lower skills, educational disadvantage, higher crime and drug misuse.
77.5% of the East Sussex working age population (age 16-64) were in employment between January – December 2021 (up from 76.9% in 2020). This was higher than the national average of 75.1% and in line with the average across the South East of 77.6%.
There remains a significant gap between the income we currently expect to receive and the costs of providing core services, with significant additional risk arising from Adult Social Care and other reforms. Fundamentally, without further Government support or sustainable reform of local government finances we will not have the funding we need for the future.
Non-Financial Performance
The non-financial performance of the Council is reported quarterly and the year end position for 2022/23 was reported to Cabinet on 27 June 2023. Attached below is a link to the report on the Council’s website:
Climate Change
In October 2019 the County Council declared a climate emergency and in February 2023 it approved its latest corporate climate emergency action plan, covering the period up to March 2025. The action plan commits to reducing the County Council’s own corporate carbon emissions by half every 5 years, which is a science-based reduction target and equates to an average reduction of 13% per year.
In 2021/22 the County Council agreed funding of £9.6m up to March 2025 to reduce corporate carbon emissions. The County Council has also secured over £1.8m of external funding to support delivery of corporate carbon reduction. The table below provides a summary of actual spend to date and forecast spend to the end of March 2025 of the £9.6m budget. Not all the budget has been allocated, in order to address future costs that have not yet been worked up (e.g. to decarbonise scope 3 emissions, to implement the staff travel plan, to purchase carbon offsets and so on).
|
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 |
The corporate Climate Emergency Plan sets out the actions that will be delivered up to March 2025, including capital investment in measures to cut carbon. The majority of the £9.6m budget will cover the cost of delivering energy efficient lighting, solar PV panels on roofs and decarbonisation of heating, including in schools. Modelling work completed in 2022 by an independent specialist asset management and construction consultancy confirmed that investing in this combination of interventions represents the most effective use of resources to cut carbon at least cost.
The key challenges to delivery of the Climate Emergency Plan are:
1) The scale of funding available, as the modelling referred to above indicated that the County Council would need to invest approximately £18m per year over the next decade or so in order to meet the 13% per year carbon reduction target.
2) Constraints within the supply chain of labour and parts, which are causing both a rapid increase in costs and delays to scheme delivery.
The accounts have been prepared based on current accounting standards. The risks associated with climate change, whilst it may be argued are being felt now, are longer term and are not reflected in these accounts.
East Sussex Pension Fund
In line with the accounting standard IAS19, the Council’s net liability for future pension payments, as shown in the Balance Sheet, has decreased by £571.4m from a liability of £479.9m at the start of the year to a net asset balance of £91.5m at 31 March 2023. Note 42 to the accounting statement provides detailed information. The resultant impact on the CIES is a net credit of £2.1m to reflect the present value of the defined benefit obligation and a net Actuarial gain on pension assets and liabilities of £569.3m.
The explanations for this significant change are as follows:
· Since assessing liabilities for retirement benefits at 31 March 2022, discount rates have increased and future inflation assumptions have decreased, both of which will have significantly improved the balance sheet position as at 31 March 2023. The change in the real discount rate over the year along with revised financial and demographic assumptions has resulted in a decrease in the liabilities measured at today’s prices of around £684.2m
· Asset returns on the Fund in the year to 31 March 2023 were lower than expected for the Council, which worsened the balance sheet position by £114.9m.
Based on the current benefit structure of the Local Government Pension Scheme (LGPS), and using the roll forward model, the actuarial estimate of the present value of funded liabilities is approximately £1,449.1m in respect of employee members, deferred pensioners and pensioners as at 31 March 2023. There is also a liability of approximately £42.9m in respect of LGPS and Teachers’ unfunded pensions. It is assumed that all unfunded pensions are payable for the remainder of the member’s life.
Treasury Management Borrowing Facilities and Investments
The strategy for 2022/23, agreed in February 2022, was set against a background of market uncertainty and a prudent approach was taken with all investments. The emphasis continues to be on security (protection of the capital sum invested) and liquidity (keeping money readily available for expenditure when needed). The strategy and limits are consistent with the capital programme and revenue budget. As will be clear from the current global events, it is impossible in practical terms to eliminate all credit and market risk. This Council seeks to be as prudent as possible.
This Council has always adopted a prudent approach on its investment strategy and, in the last few years, there have been changes to the list of the approved organisations used for investment of short-term surpluses. This list is regularly reviewed to ensure that the Council is able to invest at the best available rates consistent with low risk. The organisations are also regularly monitored to ensure that their financial strength and low risk has been maintained.
The average level of funds available for investment purposes during 2022/23 was £289m. These funds were available on a temporary basis, and the level of funds available was mainly dependent on the timing of precept payments, receipt of grants and progress on the Capital Programme. The total amount received in short term interest and dividends for the twelve months to 31 March 2023 was £5.5m at an average rate of 1.89%.
At 31 March 2023, the majority of the Council’s external debt was held as long-term loans (£217m), and no additional longer-term borrowing was undertaken during 2022/23.
During 2022/23 an opportunity was taken to repay the last remaining LOBO loan in the debt portfolio at no additional breakage cost. £6.45m was repaid after the lender (Commerzbank) proposed exercising their option to increase the coupon rate on the loan.
Capital expenditure levels, market conditions and interest rate levels will continue to be monitored in order to minimise borrowing costs over the medium to longer-term and to maintain stability. Given the on-going cuts to local government funding, the Council’s borrowing strategy continues to address the key issue of affordability without compromising the longer-term stability of the debt portfolio.
The authority manages cashflow daily with a high level forecast out to 30 September 2024. This is reviewed daily from an estimate to actual and updated for all known material items of income and expenditure.
The Department for Levelling Up, Housing and Communities (DLUHC) requires Councils to set aside ‘prudent’ provision for the repayment of debt where they have used borrowing arrangements to finance capital expenditure (historic and current) but allows certain flexibility as to how this is calculated.
The authority has a steady debt and investment maturity profile, but when cashflows are forecasted on a downward trend investment notice accounts can be redeemed to support the authority’s daily activity. In addition, any ‘pinch points’ can be funded through short term borrowing in the local authority market, an approved method of borrowing. In the near-term surplus balances are kept liquid but opportunities are taken within the parameters of the investment strategy to support expenditure and any reduced income profile. This is also undertaken following the fundamental principles of security, liquidity and then yield in this current economic climate.
The Balance Sheet
Despite the challenges, the Council continues to maintain a strong balance sheet -
At 31 March 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 |
The main changes to the balance sheet in 2022/23 are a decrease in long term liabilities and corresponding increase in both long term assets and in unusable reserves due to the decrease in the pension liability of £571.4m.
Academy Schools – four schools are expected to convert to Academy status in 2023/24. Two are already off balance-sheet due to being Voluntary Controlled schools, whereas the net book value of property, plant and equipment of the other two will be written out of the Council’s balance sheet at the date of conversion. Their net book value included within the balance sheet at 31 March 2023 is £9.785m.
Statement of Accounts
The purpose of the Statement of Accounts is to give electors, those subject to locally levied taxes and charges, Members of the Council, employees and other interested parties clear information about the Council’s finances. The format of the Statement of Accounts is governed by the Code of Practice on Local Authority Accounting in the United Kingdom (the Code). To make the document as useful as possible to its audience and make meaningful comparisons between authorities the Code requires:
· All Statements of Accounts to reflect a consistent presentation;
· Interpretation and explanation of the Statement of Accounts to be provided; and
· The Statement of Accounts and supporting notes to be written in plain language.
This Statement of Accounts comprises various sections and statements, which are briefly explained below:
· Narrative Report - this provides information on the format of this Statement of Accounts as well as a review of the financial position of the Council for the financial year 2022/23;
· The Statement of Responsibilities which details the responsibilities of the Council and the Chief Finance Officer (S151 Officer) concerning the Council’s financial affairs and the actual Statement of Accounts;
· The Independent Auditor’s Report to the Council – this is provided by the external auditors, Grant Thornton UK LLP, following the completion of the annual audit;
· Annual Governance Statement – the Council is required to carry out an annual review of the effectiveness of the system of internal control and to include a status report with the Statement of Accounts. The Statement explains how the Council has complied with the Code of Corporate Governance during 2022/23. However, any significant events or developments that occur between 31 March 2023 and the date on which the Statement of Accounts is signed by the Chief Finance Officermust also be reported;
· The Core Accounting Statements comprise:
~ TheComprehensive Income and Expenditure Statement (CIES) – this is fundamental to the understanding of a Council’s activities. It brings together all of the functions of the Council and summarises all of the resources that the Council has generated, consumed or set aside in providing services during the year.
~ The Movement in Reserves Statement (MiRS) – this statement shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure and mitigate the risk and impact of unplanned events) and other reserves.
~ The Balance Sheet – this shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council.
~ The Cash Flow Statement – this summarises the changes in cash and cash equivalents of the Council during the reporting period.
· The Accounting Policies Note explains the basis for the recognition, measurement, and disclosure of transactions in the Accounting Statements;
· The Notes to the Accounting Statements provide supporting and explanatory information and are fundamentally important in the presentation of a true and fair view;
· The Pension Fund Accounts – the East Sussex Pension Fund is administered by the Council; however, the Pension Fund must be completely separate from the Council’s own finances. This statement is an extract from the Pension Fund Annual Report and summarises the financial position of the East Sussex Pension Fund, including all income and expenditure for 2022/23, together with assets and liabilities as at 31 March 2023; and
· A glossary to the Statement of Accounts is also included to help to make what is ultimately a technical accounting document more understandable to the reader.
Changes to financial reporting requirements and accounting policies
The Code of Practice is based on International Financial Reporting Standards (IFRSs) and has been developed by the CIPFA/LASAAC Code Board under the oversight of the Financial Reporting Advisory Board. The Code is based on approved accounting standards issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee, except where these are inconsistent with specific statutory requirements. The Code also draws on approved accounting standards issued by the International Public Sector Accounting Standards Board and the UK Accounting Standards Board where these provide additional guidance.
The Code has been prepared on the basis of accounting standards and interpretations in effect for accounting periods commencing on or before 1 January 2022 and applies for accounting periods commencing on or after 1 April 2022. The key accounting changes principally introduced by the Code in 2022/23 are:
· Amendments to Section 1.3 (Applicability of the Code) to clarify and expand the applicability of the Code to Welsh authorities and bodies including corporate joint committees.
· Revision of Section 4.2 (Leases) to allow authorities to voluntarily adopt the provisions of IFRS 16 in advance of mandatory implementation.
· Revision of Section 4.3 (Service Concession Arrangements: Local Authority as Grantor) to specify that if IFRS 16 is adopted in advance of mandatory implementation, then the service concession arrangement liability is measured in accordance with the measurement requirements of IFRS 16.
· Amendments to Section 8.2 (Provisions, Contingent Liabilities and Contingent Assets) to clarify the treatment of social benefits under IAS 37/IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets.
· Confirmation of the transitional reporting requirements of the new standards introduced in the 2022/23 Code, while also having regard to requirements in relation to voluntary adoption of IFRS 16.
· Confirmation of the new standards introduced to the 2022/23 Code.
Under the Code, the Authority is required to disclose details on the impact of an accounting change required by new accounting standards that have been issued, but not yet adopted, by the Code. The standards introduced by the 2023/24 Code where disclosures are required in the 2022/23 financial statements are:
· 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 Council’s Stewardship, Responsibilities and Financial Management Polices
The Council deals with considerable sums of public money. The Council’s Financial Regulations provide the framework within which financial control operates. To conduct its business efficiently, a council needs to ensure that it has sound financial management and procedures in place and that they are strictly adhered to. Strict compliance with these policies ensures that the Council’s policy objectives are pursued in a prudent and efficient way. These Financial Regulations provide clarity about the accountability of individuals – Cabinet; Members; the Chief Executive; the Monitoring Officer; the Chief Finance Officer and Service Directors.
There are five key areas covered by the Financial Regulations. These are:
1. General financial management and planning;
2. Accounting and audit arrangements;
3. Control of resources (finances, staffing, systems and contracts);
4. Banking, treasury, investment, and insurance; and
5. External arrangements.
These Financial Regulations link with other internal regulatory documents forming part of the County Council’s Constitution, including Standing Orders, Standard Financial Procedures and Departmental Guidance and Procedures. This Statement of Accounts is part of that stewardship process, i.e. the process for being publicly accountable for the collection and application of public money. The responsibilities of the Council and its designated Chief Finance Officer are set out in the Constitution.
The Annual Governance Statement, which accompanies this Statement of Accounts, covers more than just financial matters and is set out in full on pages 21 – 46.
Our financial framework relies on the quality of the financial systems of the Council. There is a commitment to continually seek to improve systems to ensure information is available in an accessible and timely manner and that key financial processes are managed efficiently and economically.
The Audit Opinion
The 2022/23 Audit Opinion and Certificate is available on pages 17 – 20.
After the audit is finished the auditor will issue a certificate of completion, however for both 2020/21 and 2021/22, Grant Thornton have not yet been able to issue these. The reason the delay has arisen is due to awaiting the issuing of a statutory instrument, by Government, setting out the required approach for accounting for infrastructure assets and due to ongoing audit work surrounding asset valuations.
The Authority’s Responsibilities
The Authority is required:
· to make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs. In this authority, that officer is the Chief Finance Officer – Section 151 Officer.
· to manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; and
· to approve the Statement of Accounts, which include the accounting statements for East Sussex Pension Fund.
The Responsibilities of the Chief Finance Officer – Section 151 Officer
The Chief Finance Officer is responsible for the preparation of the Authority’s Statement of Accounts which, in terms of the Chartered Institute of Public Finance and Accountancy/Local Authorities (Scotland) Accounts Advisory Committee Code of Practice on Local Authority Accounting in the United Kingdom (‘the Code’), is required to provide a true and fair view of the Authority at the accounting date and its income and expenditure for the year ended 31 March 2023.
In preparing this Statement of Accounts, the Chief Finance Officer has:
· selected suitable accounting policies and then applied them consistently;
· made judgements and estimates that were reasonable and prudent; and
· complied with the Code.
The Chief Finance Officer has also:
· kept proper accounting records which were up to date;
· taken reasonable steps for the prevention and detection of fraud and other irregularities;
· assessed the Council’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern;
· used the going concern basis of accounting on the assumption that the functions of the Council will continue in operational existence for the foreseeable future; and
· maintained such internal controls as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
I certify that the Statement of Accounts gives a true and fair view of the Council’s financial position and its income and expenditure for the year ended 31 March 2023.
Ian Gutsell
Chief Finance Officer (Section 151 Officer)
24 November 2023
TO FOLLOW
TO FOLLOW
TO FOLLOW
TO FOLLOW
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. |
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.
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.
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.
|
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:
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.
|
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.
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.
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.
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.
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.
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.
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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.
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.
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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 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.
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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.
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.
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.
· 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.
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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.
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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
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.
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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.
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Register of Officer Interests |
Restricted access |
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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.
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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.
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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
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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
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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.
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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 |
TRICS Consortium Ltd – TRICS is an international system of trip generation analysis that is used in the transport planning industry. TRICS collect data relating to trip rates of different land uses, with members paying to access the database to use the data for a variety of uses.
What the relationship is between the body and the local authority |
East Sussex County Council is a shareholder in TRICS Consortium Ltd. The Council has a 16.7% share - equal share with the five other County Council shareholders
|
What is the structure and form of the body (e.g., private limited company etc.) |
TRICS is a local authority trading company, and is a company limited by shares. It has a board of directors (one from each of six counties that are shareholders plus a managing director). It is a private company limited by shares.
|
How the Council oversee its activities and provided assurance on its governance including financial governance |
The East Sussex County Council nominated company director attends monthly board meetings to oversee the business of the company to ensure it is run to maximise the business for the benefit of East Sussex County Council. The East Sussex County Council Director shares the annual report with the relevant Head of Service.
|
What the relationship is between the body and individual councillors and whether councillors’ involvement is likely to constitute a conflict of interest
|
There is no relationship, aside from the Lead Member for Transport & Environment is updated on the work of TRICS through briefing meetings.
|
How can councillors scrutinise the activities of the body, in particular if it will fall within the remit of the Audit or Scrutiny Committee, and if not, how else scrutiny will happen
|
The scrutiny of the work undertaken by the Body is through the planning process. The Council’s role within the TRICS consortium falls within the remit of the Places Scrutiny Committee. |
Designated Officer contact |
Claire Warwick, Communities, Economy and Transport
|
Woodland Enterprise Limited. - The principal activity of the company is creating prosperity in woodland and wood using industries through sustainable development. The business works with woodcutters and other local businesses to promote sustainable use of wood.
What the relationship is between the body and the local authority |
East Sussex County Council is a member of this company. This is a company without shares but in terms of "influence" East Sussex County Council has a 19% voting right.
|
What is the structure and form of the body (e.g., private limited company etc.)
|
The Company is limited by guarantee.
|
How the Council oversee its activities and provided assurance on its governance including financial governance
|
East Sussex County Council receives copies of Woodland Enterprise Limited’s annual accounts. East Sussex County Council is required to disclose its interest in Woodland Enterprises in its own statements of accounts. A copy of the Woodland Enterprise Ltd annual accounts are requested each year and are included in the East Sussex County Council Statement of Accounts.
|
What the relationship is between the body and individual councillors and whether councillors’ involvement is likely to constitute a conflict of interest
|
Councillor Kirby-Green has been appointed to serve as a Director on the Board of Woodland Enterprise Limited. There might be possible conflicts of interest (e.g. grant funding from East Sussex County Council, etc).
|
How can councillors scrutinise the activities of the body, in particular if it will fall within the remit of the Audit or Scrutiny Committee, and if not, how else scrutiny will happen
|
East Sussex County Council’s role within the Woodland Enterprise Limited consortium falls within the remit of the Place Scrutiny Committee. |
Designated Officer contact |
Andy Fowler, Business Services
|
East Sussex Energy Infrastructure and Development Ltd (ESEID Ltd) trading as ‘Sea Change Sussex’– This is a not-for-profit economic development company delivering capital infrastructure schemes in the County
What the relationship is between the body and the local authority |
East Sussex County Council (with others including Rother District Council and Hastings Borough Council) is a member of Sea Change Sussex. The Council is entitled to appoint a Director to the Board of Directors - Councillor Bennett is appointed to this role. As Sea Change Sussex is a company limited by guarantee without share capital its members do not hold shares, but have a percentage voting right in in decision-making by members of the company. The County Council alongside Rother District Council and Hastings Borough Council have a combined maximum voting right of 19.9%. Hastings Borough Council and Rother District Council currently do not have Directors appointed to the Sea Change Sussex Board and so East Sussex County Council is currently the only active A Member.
Sea Change Sussex develops and manages key economic development and infrastructure schemes in East Sussex. The company delivers capital infrastructure schemes which unlock housing and employment sites in the county – this includes new site infrastructure (access roads) as well as employment space.
These schemes are largely funded by external funding from either the South East Local Enterprise Partnership (SELEP) - Local Growth Fund capital grant programme or the SELEP - Growing Places Fund (GPF) loan programme alongside some of their own capital receipts from the sale of commercial properties/land in their portfolio. East Sussex County Council acts as the Local Accountable Body for overseeing the devolution of funds from the SELEP to external partners such as Sea Change Sussex and has grant or loan agreements (as applicable) in place for each scheme awarded.
|
What is the structure and form of the body (e.g., private limited company etc.) |
Private company limited by guarantee without share capital.
The company has four classes of membership: A Members – East Sussex County Council together with Hastings Borough Council and Rother District Council; B Members - Hastings, Bexhill and East Sussex Business Association Limited; C Members – representative(s) of the education sector; D Members – representative(s) of the voluntary and community sector.
Under the company’s articles of association, so long as there are at least three A Members, one B Member and one D member, votes cast by the B member constitute 50% of the voting rights. The aggregated voting rights of C members constitute no more than 19.9%. |
How the Council oversee its activities and provided assurance on its governance including financial governance |
Councillor Bennett is the East Sussex County Council appointed Director of the Sea Change Sussex Board of Directors and attends the quarterly Board meetings. These meetings provide quarterly reporting on legal commitments, operations and finance statement and updates on all individual projects.
As a scheme promoter of LGF and GPF funded projects, Sea Change Sussex enters into legal agreements for the County Council to monitor the delivery of this public funding and report back to SELEP. The authority to enter into these agreements is sought from the Lead Member for Strategic Management and Economic Development on a project by project basis. Sea Change Sussex are bound by the terms of individual Grant and Loan agreements stipulating the guidelines which Sea Change Sussex must adhere to.
East Sussex officers regularly meet with Sea Change Sussex representatives and attend project progress meetings for individual schemes, along with attendance and participation at the SELEP Programme progress meetings.
The Section 151 Officer carries out the stewardship role in terms of monitoring and accounting in respect of the financial case within the overall business case and agreeing to the receipt of the funding.
Capital Programme management of projects includes financial management of the public funds, monthly invoicing and spend review with Sea Change Sussex. This information is used to inform quarterly reports to Team East Sussex (TES), and SELEP and within the County Council, quarterly reporting to the Departmental (CET) Capital Board and Corporate Strategic Asset Board.
A report is considered by the Lead Member for Strategic Management and Economic Development annually on the year-end financial statement of public funding (e.g. SELEP Funding managed by East Sussex County Council (Local Growth Fund grants, Growing Places Fund loans, and more recently Getting Building Fund grant) including that invested in the delivery of the capital infrastructure delivered by Sea Change Sussex) and the forecast spend for the coming financial year, all of which are compiled with finance colleagues and signed off by S151 officer.
Schemes can be subject to review by Internal Audit. |
What the relationship is between the body and individual councillors and whether councillors’ involvement is likely to constitute a conflict of interest
|
Councillor Bennett is a director of the company on the Sea Change Sussex Board of Directors and attends the quarterly Board meetings.
If reports relating to Sea Change Sussex were to be considered by Full Council, Cabinet or any Committees that Councillor Bennett attends, he would declare an interest as a Director of Sea Change Sussex. |
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 has appointed Councillor Bennett as a director to the Sea Change Sussex Board of Directors. Councillor Bennett attends Board Meetings at which progress reports on projects are considered.
Councillor Keith Glazier sits on both the SELEP Strategic Board and SELEP Accountability Board and regularly attends meetings. The Accountability Board receives updates on project progress, which include projects delivered by Sea Change Sussex and therefore provides a level of assurance or a forum for raising concerns.
There are scrutiny arrangements in place for all funding decisions taken by the Accountability Board. Under the SELEP Assurance framework, the Places Scrutiny Committee has the power to call in and scrutinise the decisions before they are implemented. Under the SELEP Accountability Board Joint Committee Agreement, each of the six Partner Authorities has the ability to challenge a decision made by the SELEP Accountability Board.
Accountability Board decisions may be called-in by Members of any Partner Authority in the same way they call-in decisions of their own executive arrangements, call-in may only be made if the decision affects that partner area. The 6 upper tier Authority Areas that form the SELEP are East Sussex, Essex, Kent, Medway, Southend and Thurrock.
Furthermore, to facilitate Local Authority scrutiny of SELEP work and decisions, requests to attend Local Authority partner Scrutiny Committees are welcomed, and attendance prioritised. |
Designated Officer contact |
Richard Dawson, Communities, Economy and Transport
|
South East LEP Limited (SELEP Ltd) - Local Enterprise Partnerships (LEPs) were set up by Government in 2011 to identify and support local strategic growth priorities, encourage business investment and promote economic development. As one of 38 LEPs across England, the South East LEP is a business-led partnership between business, government, education and the third sector, plus other groups, covering the local authority areas of East Sussex, Essex, Kent, Medway, Southend and Thurrock.
What the relationship is between the body and the local authority |
The County Council is a partner authority of SELEP Ltd – one of six county/unitary authorities, as listed above 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).
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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
|
Hastings and Bexhill Renaissance Ltd (HBRL) – This is a company limited by guarantee without share capital offering business support services for economic development and to improve local education
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 |
Combe Valley Countryside Park (CVCP) Community Interest Company (CIC)
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.
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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%.
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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
|
The Comprehensive Income and Expenditure Statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Council’s raise taxation to cover expenditure in accordance with statutory requirements; this may be different from the accounting cost. The taxation position is shown in both the Expenditure and Funding Analysis and the Movement in Reserves Statement.
2021/22
|
|
2022/23 |
||||
|
|
|
|
|
||
Gross Income |
Net Expenditure |
|
Gross Income |
Net Expenditure |
||
|
|
|
|
|
||
£000 |
£000 |
£000 |
|
£000 |
£000 |
£000 |
|
|
|
||||
334,309 |
(146,741) |
187,568 |
337,714 |
(152,475) |
185,239 |
|
32,265 |
(31,844) |
421 |
33,209 |
(33,267) |
(58) |
|
9,208 |
(611) |
8,597 |
8,595 |
(715) |
7,880 |
|
447,477 |
(312,041) |
135,436 |
443,361 |
(312,161) |
131,200 |
|
48,741 |
(17,070) |
31,671 |
53,017 |
(19,419) |
33,598 |
|
141,608 |
(47,869) |
93,739 |
138,492 |
(50,074) |
88,418 |
|
15,789 |
(1,114) |
14,675 |
10,998 |
(799) |
10,199 |
|
1,029,397 |
(557,290) |
472,107 |
1,025,386 |
(568,910) |
456,476 |
|
|
||||||
The Movement in Reserves Statement shows the movement from the start of the year to the end on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure and mitigate risk and impact of unplanned events) and other ‘unusable’ reserves. It shows how the movements in year of the reserves are broken down between gains and losses incurred in accordance with generally accepted accounting practices and the statutory adjustments required to return to the amounts chargeable to council tax for the year. The Net Increase/Decrease line shows the statutory General Fund balance and Schools balance movements in the year following those adjustments.
Total Usable Reserves |
Unusable Reserves |
Total Council Reserves
|
|||||||
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Total Usable Reserves |
Unusable Reserves |
Total Council Reserves
|
|||||||
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the authority (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use. The second category of reserves represents those that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’.
31 March 2022 |
|
|
|
31 March 2023 |
£000 |
|
|
Note |
£000 |
|
|
|
|
|
I certify that this Statement of Accounts provides a true and fair view of the financial position of the Council as at 31 March 2023 and its Comprehensive Income and Expenditure Statement for the year then ended.
Ian Gutsell
Chief Finance Officer (Section 151 Officer)
The Governance Committee approved the Statement of Accounts on 24 November 2023
The Cash Flow Statement shows the changes in cash and cash equivalents of the Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council.
2021/22 |
|
2022/23 |
£000 |
|
£000 |
65,934 |
Net deficit on the provision of services |
3,321 |
(145,070) |
Adjustments to net deficit on the provision of services for non-cash movements |
(42,436) |
45,589 |
Adjustments for items included in the net deficit on the provision of services that are investing and financing activities |
39,170 |
(33,547) |
Net cash inflow from Operating Activities - Note 26 |
55 |
29,435 |
Investing Activities - Note 27 |
(8,101) |
7,824 |
Financing Activities - Note 28 |
18,165 |
3,712 |
Net decrease in net cash and cash equivalents - Note 21 |
10,119 |
|
|
|
(39,656) |
Net cash and cash equivalents at the beginning of the reporting period - Note 21 |
(35,944) |
(35,944) |
Net cash and cash equivalents at the end of the reporting period - Note 21 |
(25,825) |
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.
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
vi. Exceptional Items
vii. Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors
viii. Charges to Revenue and Non-Current Assets
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
Termination Benefits
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.
Teachers’ Pensions
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.
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.
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.
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
xiii. Government Grants and Contributions
· 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.
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
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
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).
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.
· 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
xxi. Property, Plant and Equipment and Assets Held for Sale
Recognition
Measurement
· 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.
· 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.
· 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.
Impairment
· 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.
· 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.
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 |
Disposals and Non-current Assets Held for Sale
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
· 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
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
Contingent Assets
xxiv. Reserves
xxv. Revenue Expenditure Funded from Capital under Statute (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.
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.
· 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 |
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:
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. |
The Expenditure and Funding Analysis shows how annual expenditure is used and funded from resources (government grants, rents, council tax and business rates) by the Council in comparison with those resources consumed or earned by adjustments that are made in accordance with generally accepted accounting practices. It also shows how this expenditure is allocated for decision making purposes between the council’s service departments. Income and expenditure accounted for under generally accepted accounting practices is presented more fully in the Comprehensive Income and Expenditure Statement.
As Reported for Resource Management |
Adjustment to arrive at the net amount chargeable to 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 |
|
As Reported for Resource Management |
Adjustment to arrive at the net amount chargeable to 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 |
|
(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.
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
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
£000 |
£000 |
£000 |
|
Council tax and NNDR (transfers to or from Collection Fund Adjustment Account) |
|||
Holiday pay (transferred to the Accumulated Absences Reserve) |
|||
Reversal of entries included in the Surplus or Deficit on the Provision of Services in relation to capital expenditure (these items are charged to the Capital Adjustment Account): |
|||
Total Adjustments to Revenue Resources |
|||
|
|||
Adjustments between Revenue and Capital Resources |
|||
Transfer of non-current asset sale proceeds from revenue to the Capital Receipts Reserve |
|||
Statutory provision for the repayment of debt (transfer from the Capital Adjustment Account) |
|||
Capital expenditure financed from revenue balances (transfer to the Capital Adjustment Account) |
|||
Total Adjustments between Revenue and Capital Resources |
|||
Adjustments to Capital Resources |
|||
Use of the Capital Receipts Reserve to finance capital expenditure |
|||
Recognition of deferred capital receipt |
|||
Receipt of deferred capital receipt |
|||
Total Adjustments to Capital Resources |
|||
Council tax and NNDR (transfers to or from Collection Fund Adjustment Account) |
|||
Holiday pay (transferred to the Accumulated Absences Reserve) |
|||
Reversal of entries included in the Surplus or Deficit on the Provision of Services in relation to capital expenditure (these items are charged to the Capital Adjustment Account): |
|||
Total Adjustments to Revenue Resources |
|||
|
|||
Adjustments between Revenue and Capital Resources |
|||
Transfer of non-current asset sale proceeds from revenue to the Capital Receipts Reserve |
|||
Statutory provision for the repayment of debt (transfer from the Capital Adjustment Account) |
|||
Capital expenditure financed from revenue balances (transfer to the Capital Adjustment Account) |
|||
Total Adjustments between Revenue and Capital Resources |
|||
Adjustments to Capital Resources |
|||
Use of the Capital Receipts Reserve to finance capital expenditure |
|||
Recognition of deferred capital receipt |
|||
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.
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.
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 |
|||||||
Financial Management |
|||||||
Service Reserves |
|||||||
Capital Programme |
|||||||
Waste |
|||||||
Insurance |
|||||||
Social Care Reform |
|||||||
Other Reserves |
|||||||
Public Health |
|||||||
Held on behalf of others |
|||||||
Total |
|||||||
|
|||||||
Revenue Grants and Contributions Reserve |
|||||||
Services |
|||||||
Dedicated Schools Grant |
|||||||
Business Rates/Council Tax |
|||||||
COVID-19 |
|||||||
Total |
|||||||
Total |
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 |
£000 |
£000 |
|
Levies |
||
§ Sussex Inshore Fisheries & Conservation Authority |
||
§ Environment Agency - Flood & Coastal Erosion |
||
Loss on the disposal of non-current assets (net of receipts) |
||
Total |
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.
£000 |
£000 |
|
Interest payable on debt and finance leases |
||
Net interest on pension assets and liabilities |
||
Impairment losses/(reversals) |
||
Fair Value movement of Pooled Funds |
||
Soft Loan interest |
||
Interest receivable |
||
Movement in fair value of Investment Properties |
||
Net income from Investment Properties |
||
(Surplus) / deficit on Trading Undertakings |
||
Total |
£000 |
£000 |
|
Revenue Support Grant (RSG) |
||
Council Tax Support Grant |
||
Social Care Grant |
||
Business Rates |
||
Business Rates Relief Funding |
||
Business Rates Levy surplus |
||
Local Income Tax Guarantee Funding |
||
Council Tax |
||
Council Tax – prior years surplus |
||
Services Grant |
||
New Home Bonus Grant |
||
Total |
||
Share of Collection Fund Surplus |
||
Capital Grants and Contributions |
||
Total |
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 |
||
Additions |
|||||||||
Revaluation increases recognised in the Revaluation Reserve |
|||||||||
Revaluation decreases recognised in the Revaluation Reserve |
|||||||||
Revaluation increases (reversal of previous losses) recognised in the Provision of Services |
|||||||||
Revaluation decreases recognised in the Provision of Services |
|||||||||
Derecognition – disposals |
|||||||||
Derecognition – disposals - schools |
|||||||||
Assets reclassified within PPE |
|||||||||
Assets reclassified (to)/from Held for Sale |
|||||||||
Assets reclassified (to)/from Investment Property |
|||||||||
Other movements |
|||||||||
At 31 March 2023 |
|||||||||
Accumulated Depreciation and Impairment |
|||||||||
At 1 April 2022 |
|||||||||
Depreciation charge |
|||||||||
Depreciation written out to the Revaluation Reserve |
|||||||||
Revaluation losses recognised in the deficit on the Provision of Services |
|||||||||
Reversal of previous losses |
|||||||||
Derecognition – disposals |
|||||||||
Derecognition – disposals – schools |
- |
||||||||
Assets reclassified within PPE |
|||||||||
Assets reclassified (to)/from Held for Sale |
|||||||||
Assets reclassified (to)/from Investment Prop |
|||||||||
At 31 March 2023 |
|||||||||
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 |
|||||||||
|
|
|
|
|
|
|
|
|
|
At 31 March 2022 |
|||||||||
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 |
||
Additions |
|||||||||
Revaluation increases recognised in the Revaluation Reserve |
|||||||||
Revaluation decreases recognised in the Revaluation Reserve |
|||||||||
Revaluation increases (reversal of previous losses) recognised in the Provision of Services |
|||||||||
Revaluation decreases recognised in the Provision of Services |
|||||||||
Derecognition – disposals |
|||||||||
Derecognition – disposals - schools |
|||||||||
Assets reclassified within PPE |
|||||||||
Assets reclassified (to) / from Held for Sale |
|||||||||
Assets reclassified (to) / from Investment Property |
|||||||||
Assets reclassified (to)/from Intangibles |
|||||||||
At 31 March 2022 |
|||||||||
Accumulated Depreciation and Impairment |
|||||||||
At 1 April 2021 |
|||||||||
Depreciation charge |
|||||||||
Depreciation written out to the Revaluation Reserve |
|||||||||
Revaluation losses recognised in the deficit on the Provision of Services |
|||||||||
Reversal of previous losses |
|||||||||
Derecognition – disposals |
|||||||||
Derecognition – disposals - schools |
|||||||||
Assets reclassified within PPE |
|||||||||
Assets reclassified (to) / from Held for Sale |
|||||||||
Assets reclassified (to) / from Investment Property |
|||||||||
At 31 March 2022 |
|||||||||
|
|
|
|
|
|
|
|
|
|
Net Book Value |
|||||||||
At 31 March 2022 |
|||||||||
|
|
|
|
|
|
|
|
|
|
At 31 March 2021 |
|||||||||
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).
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 |
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.
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:
£000 |
£000 |
|
Rental Income from Investment Property |
||
Direct Operating Expenses arising from Investment Property |
||
Net (gain) |
The following table summarises the movement in the fair value of investment properties over the year:
£000 |
£000 |
|
Balance at start of the year |
||
Additions |
||
Net gains / (losses) from fair value adjustments |
||
Transfers (to) / from Property, Plant & Equipment & Assets Held for Sale |
||
Disposals |
||
Balance at end of the year |
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.
|
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 |
|
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 |
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 |
|
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.
Heritage Assets |
Art Collection |
Chattels at Bentley House |
The Sugar Loaf Folly |
Battle Abbey Estate Archives |
Castle Precincts Wall |
Total |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
1 April 2021 |
||||||
Additions |
||||||
Revaluation Gain |
||||||
31 March 2022 |
||||||
Additions |
||||||
Revaluation Gain |
||||||
31 March 2023 |
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 20th 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 18th 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.
A. Categories of Financial Instruments
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 |
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) |
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 |
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:
31 March 2022 |
31 March 2023 |
|||
|
Carrying |
Fair |
Carrying |
Fair |
|
£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) |
Financial Assets |
31 March 2022 |
31 March 2023 |
||
|
Carrying |
Fair |
Carrying |
Fair |
|
£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 |
250,262 |
250,262 |
281,292 |
281,292 |
|
Total Long and Short Term |
270,639 |
270,485 |
286,082 |
286,082 |
|
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.
|
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 |
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.
|
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).
|
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.
|
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 |
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.
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.
|
£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.
|
£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 |
|
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
· 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.
|
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 |
Capital Adjustment Account
|
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.
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 |
Pooled Investment Funds Adjustment Account
The account mitigates the impact of fair value movements on pooled investment funds.
|
£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.
|
£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
|
£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
|
£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.
|
£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 |
|
£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) |
55 |
|
£000 |
£000 |
Interest received |
(1,421) |
(2,387) |
Interest paid |
16,707 |
15,647 |
Dividends received |
(171) |
(184) |
|
£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) |
|
£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 |
|
£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) |
|
|
|
|
|
|
£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) |
· 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 |
|
£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.
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:
|
|
£ |
£ |
£ |
£ |
£ |
£ |
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:
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 |
||||
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 |
- |
- |
- |
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 |
|||||
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 |
|||||
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 |
||
|
|
|
|
|
|
|
|
||
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 |
|
||||
|
£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 |
|
||
|
£000 |
£000 |
|
|
|
Revenue Grants & Contributions |
2,878 |
5,519 |
Capital Grants & Contributions |
- |
2,360 |
|
|
|
|
|
|
Capital Grants & Contributions |
14,102 |
18,961 |
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.
Central Government
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.
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 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.
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 |
Increase/(decrease) in underlying need to borrow, that is not supported by government financial assistance |
14,448 |
(7,793) |
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 |
|
2021/22 |
2022/23 |
|
£000 |
£000 |
Land and Buildings |
2,225 |
2,560 |
Schools |
825 |
651 |
Vehicles |
358 |
299 |
Total |
3,408 |
3,510 |
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.
|
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).
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 |
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.
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 |
|
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/
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.
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.
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.
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 |
|
|
|
|
|
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 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.
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) |
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).
.
The Local Government Pension Scheme (LGPS) is a statutory pension scheme, whose rules are governed by Parliament in accordance with the Public Services Pensions Act 2013. The rules of the scheme are provided in the Local Government Pension Scheme Regulations and provide the statutory basis within which the Scheme can operate.
Although a national pension scheme, mainly set up for the benefit of local government employees, the LGPS is administered locally. The LGPS is open to all non teaching employees of the County, District and Borough Councils and Unitary Authorities in East Sussex, as well as Further Education Colleges, Academies, Town and Parish Councils and a small number of charitable organisations who have applied to be treated as “admission bodies”. In addition, the LGPS allows employees of private contractors to participate in the Scheme where they are providing a service or assets in connection with the functions of a scheme employer, in accordance with the specific requirements of the LGPS Regulations. The scheme is not open to teachers or fire fighters, as these groups of employees have separate pension schemes.
Currently within the East Sussex Pension Fund there are 140 participating employers. A full list of participating employers is given at note 29.
Administering Authority Responsibilities
East Sussex County Council has a statutory responsibility to administer and manage the East Sussex Pension Fund (the Fund) on behalf of all the participating employers of the Fund, and in turn the past and present contributing members, and their dependents.
The Fund receives contributions from both employees and employers, as well as income from its investments, these elements then meet the cost of paying benefits of the pension scheme. As part of its responsibilities as the administering authority the County Council is responsible for setting the funding and investment strategies and reviewing the performance of the Fund’s external investment managers and advisers. The administration and management of the Pension Fund has been delegated to the East Sussex Pension Committee supported by the East Sussex Pension Board.
The Fund increased its governance arrangements in 2020 following a good governance review resulting in a change to terms of reference, delegations, policies and team structure with all decision-making residing with the Pension Committee. The Fund ensures that all the participating employers within the Fund are aware of their own responsibilities through its Pension Administration Strategy, as well as any changes to the provisions of the Scheme that may be introduced though an employer engagement team, communications and an annual employer forum.
A major responsibility of the administering authority is to undertake a valuation of the Pension Fund’s assets and liabilities (triennial valuation). The main purpose of this exercise is to assess the size of the Fund’s current and future liabilities against the size of assets, and then set the employer contribution rate for each participating employer for the following three-year period. The most recent actuarial valuation of the Fund was carried out at 31 March 2022 and the next triennial valuation will be on the 31 March 2025 with new contribution rates set then.
Asset Pools
The East Sussex Pension Fund has joined with 10 other Local Government Pension Schemes (LGPS) Administering Authorities to form the ACCESS (A Collaboration of Central, Eastern and Southern Shires) Pool. The other members of the ACCESS Pool are:
1. Cambridgeshire |
5. Norfolk |
8. Hertfordshire |
2. Kent |
6. Essex |
9. Suffolk |
3. Hampshire |
7. West Northamptonshire |
10. Isle of Wight |
4. West Sussex |
At the 31 March 2022 collectively, the pool has assets of £61.4 billion (of which 57% has been pooled) serving approximately 3,500 employers with over 1.1 million members including 310,000 pensioners.
The ACCESS Pool is not a legal entity in itself but is governed by the Inter Authority Agreement signed by each Administering Authority established in 2017. The Inter Authority Agreement sets out the terms of reference and constitution of ACCESS.
The formal decision-making body within the ACCESS Pool is the ACCESS Joint Committee. The Joint Committee has been appointed by the 11 Administering Authorities under s102 of the Local Government Act 1972, with delegated authority from the Full Council of each Administering Authority to exercise specific functions in relation to the Pooling of Pension Fund assets.
The Joint Committee is responsible for ongoing
contract management and budget management for the Pool and is
supported by the Section 151 Officers Group, Officer Working Group
and the ACCESS Support Unit. More information on the ACCESS pool
can be found on their website https://www.accesspool.org/.
2021/22 |
|
|
2022/23 |
||
£000 |
£000 |
|
Notes |
£000 |
£000 |
|
|
Dealings with members, employers and others directly involved in the fund |
|
|
|
|
|
Contributions |
7 |
|
|
(99,617) |
|
From Employers |
|
(108,941) |
|
(34,556) |
|
From Members |
|
(37,980) |
|
|
(134,173) |
|
|
|
(146,921) |
|
(8,246) |
Transfers in from other pension funds |
8 |
|
(10,071) |
|
(142,419) |
|
|
|
(156,992) |
|
|
|
|
|
|
|
134,595 |
Benefits |
9 |
|
140,411 |
|
10,744 |
Payments to and on account of leavers |
10 |
|
6,283 |
|
145,339 |
|
|
|
146,694 |
|
|
|
|
|
|
|
2,920 |
Net (additions)/withdrawals from dealings with members |
|
|
(10,298) |
|
|
|
|
|
|
|
26,671 |
Management expenses |
11 |
|
30,756 |
|
|
|
|
|
|
|
29,591 |
Net (additions)/withdrawals including fund management expenses |
|
|
20,458 |
|
|
|
|
|
|
|
|
Returns on investments |
|
|
|
|
(40,549) |
Investment income |
12 |
|
(73,668) |
|
2 |
Taxes on income |
13a |
|
66 |
|
(432,676) |
Profit and losses on disposal of investments and changes in the value of investments |
14a |
|
162,262 |
|
(473,223) |
Net return on investments |
|
|
88,660 |
|
(443,632) |
Net (increase)/decrease in net assets available for benefits during the year |
|
|
109,118 |
|
(4,244,035) |
Opening net assets of the scheme |
|
|
(4,687,667) |
|
(4,687,667) |
Closing net assets of the scheme |
|
|
(4,578,549) |
|
31 March 2022 |
|
|
31 March 2023 |
|
|||
|
£000 |
|
Notes |
£000 |
|
|||
|
|
|
|
|
|
|||
4,587,145 |
Investment assets |
14 |
4,505,386 |
|||||
774 |
Other Investment balances |
21 |
1,062 |
|||||
(1,173) |
Investment liabilities |
22 |
(1,061) |
|||||
90,216 |
Cash deposits |
14 |
54,418 |
|||||
4,676,962 |
Total net investments |
|
4,559,805 |
|||||
15,391 |
Current assets |
21 |
23,305 |
|||||
(4,686) |
Current liabilities |
22 |
(4,561) |
|||||
4,687,667 |
Net assets of the fund available to fund benefits at the year end. |
|
4,578,549 |
|||||
The fund’s financial statements do not take account of liabilities to pay pensions and other benefits after the period end. The actuarial present value of promised retirement benefits is disclosed at Note 20.
Treasurers Certificate
I certify that the accounts of the East Sussex Pension Fund provide a true and fair view of the Pension Fund at 31 March 2023 and of the movements for the year then ended.
Ian Gutsell
Chief Finance Officer (Section 151 Officer)
Business Services Department
24 November 2023
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:
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.
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.
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).
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.
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.
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 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. |
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.
|
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 |
|
2021/22 £000 |
2022/23 £000 |
Group transfers |
- |
- |
Individual transfers |
8,246 |
10,071 |
Total |
8,246 |
10,071 |
|
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 |
|
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.
|
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 |
|
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.
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 grossed up.
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.
|
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 |
|
2021/22 £000 |
2022/23 £000 |
Withholding tax – equities |
(2) |
(66) |
Total |
(2) |
(66) |
|
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 |
|
|
|
|
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 |
|
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 |
|
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% |
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.
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)
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.
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 |
During 2022/23 the fund has transferred no financial assets between levels 1 and 2.
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 |
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 |
|
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) |
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 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 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 |
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 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 |
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 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 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.
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.
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.
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.
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.
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.
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.
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.
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
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
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.
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 |
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
We have excluded any unfunded benefits as these are liabilities of employers rather than the Fund.
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
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% |
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.
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.
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.
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.
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)
|
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.
|
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 |
|
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) |
|
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.
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 |
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).
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 |
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.
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
During 2022/23, the fund has not recognised any impairment losses.
|
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
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.
|
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 |
|
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 39th 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 27th 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.
Academy Schools
Academies are independently-managed, all-ability schools which operate outside the control of the local authority.
Accounting Standards
A set of rules about how accounts are to be kept. By law, local authorities must follow "proper accounting practices" which are set out both in acts of parliament and in professional codes and statements of recommended practice.
Accruals
Provision made at the year-end to bring into account outstanding debtors, creditors, etc., in order to show income and expenditure as it is earned or incurred.
Actuarial Gains and Losses
The change in pension liabilities since the previous year, caused either by events differing from the previous forecast, or a change in actuarial assumptions.
Actuarial Valuation
A review of the Pension Fund normally carried out at 3-year intervals, which assesses the contributions required from employing bodies in order to maintain the Fund’s ability to pay benefits in future years to pensioners, contributors and their dependants.
Admitted Bodies
Bodies whose staff can become members of the Pension Fund by virtue of an admission agreement made between the Pension Fund and the relevant body (contrasting with Scheduled Bodies – see below).
Amortisation
A charge to services in the Comprehensive Income & Expenditure Account, assessed as the amounts by which the value of intangible assets are consumed during the year, calculated from the estimated life expectancy and any residual value.
Bad Debt Provision (Impairment)
Amount of money set aside to meet cost of monies owed to the Council that are not expected to be repaid.
Balances
A working balance maintained as a cushion against unexpected expenditure during the year. It is the amount of money left over at the end of the year after allowing for all expenditure and income that has taken place. These are also known as financial reserves.
Business Rates Retention
Under the Business Rates Retention scheme, Councils will retain a 50% share of all and any additional business rates they get above a determined baseline. This potentially provides a direct local incentive to encourage growth within local boundaries.
Capital / Capital Expenditure / Capital Receipts
Capital expenditure pays for the acquisition of assets or the enhancement (rather than maintenance) of existing assets. It is financed mainly from borrowing, and charged to revenue over a number of years. We plan for capital expenditure over several years in the published capital programme. The term ‘capital receipts’ covers income from the sale of assets, together with grants and contributions received specifically for financing the capital programme. Capital receipts can only be used for capital purposes, and not to support the revenue budget.
Cash Equivalents
These are investments, which amount to short term deposits.
Community Assets
These are assets, which the County Council intends to hold in perpetuity and have no determinable finite useful life.
Community Schools
In a community school, the local education authority owns the land and buildings, but the governing body is responsible for running the school. The local education authority funds the school, employs the staff, provides support services and determines and administers the admissions policy. The pupils have to follow the national curriculum.
Contingent Assets and Liabilities
A statement of a possible gain or loss to the Council, which is contingent upon the outcome of an event, which is not known for certain when the accounts are drawn up.
Corporate and Democratic Core (CDC)
Corporate and Democratic Core is defined as the two divisions of Democratic Representation and Management and Corporate Management.
Corporate Management
Corporate management concerns those activities and costs that provide the infrastructure that allows services to be provided, whether by the Council or not, and the information that is required for public accountability. Activities that relate to the provision of services, even indirectly, are overheads on those services. There are no subdivisions recommended for corporate management.
General Fund
The main revenue fund of the County Council into which is paid income from the council tax precept, grants and charges for services and from which is met the cost of providing services.
Creditors
Amounts owed by the County Council but not paid at the date of the Balance Sheet.
Currencies
Japanese Yen (JPY), British Pound (GBP), Canadian Dollar (CAD), Swiss Franc (CHF), European Euro (EUR), Swedish Kroner (SEK) and United States Dollar (USD).
Curtailments
This heading covers the additional cost arising from the early payment of pension benefits when an employee is made redundant. The full estimated discounted cost is charged immediately to the Comprehensive Income and Expenditure Statement, under the heading of ‘non-distributed costs’, but this is offset by a transfer from the Pensions Reserve.
Debtors
Amounts owed to the County Council but unpaid at the date of the Balance Sheet.
Defined Benefit and Contribution Pension Schemes
Pension schemes generally fall into one of these two categories. Defined Benefit schemes are those such as the Local Government Pension Scheme, where the benefits to employees are based on their final salaries, and where employers’ contributions have to be adjusted to match estimates of future liabilities. Defined Contribution schemes are those where the employer’s liability is restricted to the amount that they contribute. As the Teachers’ Pension Scheme is administered nationally, it is treated in local authority accounts as a Defined Contribution scheme, but is actually a defined benefits scheme.
Democratic Representation and Management
This includes all aspects of members’ activities in that capacity, including corporate, programme and service policy making and more general activities relating to governance and the representation of local interests. To give authorities maximum flexibility in reflecting their own constitutional arrangements, there are no recommended subdivisions of service.
Depreciation
A charge to services in the Comprehensive Income & Expenditure Account, assessed as the amounts by which the value of property, plant and equipment are consumed during the year, calculated from the estimated life expectancy and any residual value.
External Audit
The independent examination of the activities and accounts of Local Authorities to ensure the accounts have been prepared in accordance with legislative requirements and proper practices and to ensure the Authority has made proper arrangements to secure value for money in its use of resources. The auditor Grant Thornton was appointed by the Public Sector Audit Appointments Ltd to carry out an audit of the Council's accounts.
Equities
Ordinary shares issued by companies.
Fair value
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction. The concept of fair value is used in many accounting standards including the IFRS covering acquisition, valuation of assets, and financial instruments, but it is not limited to these.
Foundation Schools
In foundation schools, the land and buildings are owned by a governing body, who are also responsible for running the school. The local education authority funds the school. The governing body employs the staff and buys in and administers most of the support services. The pupils have to follow the national curriculum. The admissions policy is determined and administered by the governing body, in consultation with the local education authority.
Heritage Assets
Heritage assets are assets that are held by the Council principally for their contribution to knowledge or culture. The heritage assets held by the Council are the collections of assets and artefacts either exhibited or stored in the local authority museum.
Impairment
Impairment to assets may be physical in nature, such as damage by fire, or caused by a general or specific reduction in prices during the financial year.
Infrastructure
This term covers capital investment on assets such as carriageways, footways, structures and street lighting.
Intangible Assets
This term includes such items as development expenditure or goodwill, but for local authorities it usually only covers licences for the use of computer software.
IFRS
International Financial Reporting Standards.
Leasing
A method of obtaining the use of assets: a rental charge is paid for a specified period, but under operating lease conditions the asset remains the property of the lessor and the County Council has no rights to purchase. Finance leases transfer substantially all the risks and rewards of ownership.
Levies
A contribution which the County Council is required to make towards the costs of the Environment Agency (for flood defence), Ashdown Forest Conservators and the Sussex Inshore Fisheries & Conservation Authority.
Liabilities
These are amounts due to individuals or organisations which will have to be paid at some time in the future. Current liabilities are usually payable within one year of the Balance Sheet date.
Local Council Tax Support (LCTS)
As part of the major changes to the Welfare Benefits system, from 1 April 2013, Council Tax Benefit ended and was replaced by a new scheme called Localised Support for Council Tax or Council Tax Support. Both systems are means tested which means that they compare your income and capital against an assessment of your needs.
Minimum Revenue Provision
An amount set aside from revenue for the redemption of debt.
Net Book Value (NBV)
The amount at which fixed assets are included in the Balance Sheet. The NBV is the historical cost or current value less any accumulated depreciation.
Net Worth
The total of all assets less the total of all liabilities. It helps to determine the value of an entity and is also known as Total Net Assets or Total Equity.
Non-Distributed Costs
These are costs which the County Council has to bear, but which do not support any statutory services. This includes three elements of the pension cost (Past Service Cost, Settlements, and Curtailments) which are defined elsewhere, and the costs of properties, which have been declared surplus and are awaiting disposal.
Non-Domestic Rates
A charge on commercial and industrial buildings fixed by the Government and reallocated to local authorities.
Post Balance Sheet Events
A statement of the financial implications of an event taking place after the Balance Sheet date, which has a material effect on the County Council’s financial position at the balance sheet date.
Prior Period Adjustments
Material adjustments that is applicable to prior years and which arise from changes in accounting policy or the correction of material errors. They do not include normal recurring corrections or adjustments of accounting estimates made in prior years.
Private Equity
Investments into new and developing companies and enterprises, which are not publicly traded on a recognised stock exchange.
Private Finance Initiative (PFI)
A long-term contractual public-private partnership, under which the private sector takes on the risks associated with the delivery of public services in exchange for payments tied to agreed standards of performance.
Property, Plant and Equipment (PPE)
Property, plant and equipment covers all assets with physical substance (tangible assets) that are held for use in the production or supply of goods and services, for rental to others, or for administrative purposes, and expected to be used during more than one period. PPE is a summation of all the Council’s purchases of property, plant, and pieces of equipment to that point in time, less any depreciation.
Provisions
Provisions are made for liabilities and losses which have already been incurred at the date of the balance sheet, and for which the amount or dates on which they will arise can be reliably measured.
Public Works Loan Board (PWLB)
A Government agency, which provides the main source of borrowing for local authorities.
Related Parties
This term covers individuals or bodies with which the County Council has a close economic relationship. It includes Members and Chief Officers, Government departments that provide funding, and other bodies that are involved in partnerships with the County Council.
Reserves
Internal reserves set aside to finance future expenditure for purposes falling outside the definition of provisions.
Revenue
Recurring expenditure principally on pay, running costs of buildings, equipment, and capital financing costs.
Revenue Expenditure Funded from Capital Under Statute (Refcus)
Expenditure which may properly be charged to capital but does not result in a tangible asset.
Scheduled Bodies
Local authorities and other similar bodies whose staff automatically qualify to become members of the Pension Fund.
Service Reporting Code of Practice for Local Authorities (SeRCOP)
The code gives a mandatory definition of total cost and the divisions of service at which total cost must be aggregated when presenting cost based information and performance indicators in a published format. SeRCOP provides guidance to support the objective to establish the widest range of financial reporting requirements, in order that data consistency and comparability are achieved. SeRCOP particularly aims to meet the demands of both the Best Value and the Transparency initiatives and its various stakeholders. (Following the changes introduced by the 2016/17 Code to reflect the Telling the Story Review of the Presentation of Local Authority Financial Statements, the Code no longer requires statements or notes to be prepared in accordance with SeRCOP. Instead the Code requires that the service analysis is based on the organisational structure under which the authority operates).
Settlements
These are adjustments to the County Council’s pension liability arising from bulk transfers of employees. The full estimated discounted cost or gain is charged immediately to the Comprehensive Income and Expenditure Statement, under the heading of ‘non-distributed costs’, but this amount is offset by a transfer from the Pensions Reserve.
Unusable Reserves
This include unrealised gains and losses, particularly in relation to the revaluation of property, plant and equipment (e.g. the Revaluation Reserve) adjustment accounts that absorb the difference between the outcome of applying proper accounting practices and the requirements of statutory arrangements for funding expenditure (e.g. the Capital Adjustment Account and the Pensions Reserve).
Usable Reserves
This includes the revenue and capital resources available to meet future expenditure (e.g. General Balances, Earmarked Reserves, and the Capital Receipts Reserve).
Voluntary Schools
These schools are also called religious or faith schools and there are two types: voluntary controlled and voluntary aided. In a voluntary controlled school, the land and buildings are owned by a charity often a religious organisation such as a church. The charity appoints some of the members of the governing body, but the local education authority is responsible for running the school. The school is funded by the local education authority who also employs the staff and provides support services and determine the admissions policy. The pupils have to follow the national curriculum. With a voluntary aided school, the governing body is responsible for running the school, the school is funded partly by the local education authority, partly by the governing body and partly by the charity. The governing body employs the staff and the pupils have to follow the national curriculum. The admissions policy is determined and administered by the governors in consultation with the local education authority.