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Contents Page Explanatory Foreword 3 Introduction from the County Treasurer 4 Statement of Internal Control 10 Statement of Responsibility & Certification of the Statement of Accounts 13 Auditors’ Certificate 14 Main Financial Statements Consolidated Revenue Account 19 Consolidated Balance Sheet 21 Statement of Total Movements in Reserves 22 Cashflow Statement 23 Notes to the Main Financial Statements 25 Additional Financial Statements 53 Group Accounts for Related Companies 57 Pension Fund Accounts 69 Statement of Accounting Policies and Valuation Certificate 81 Glossary of Financial Terms 95

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Introduction from the Responsible Finance Officer I am pleased to introduce the Council’s Statement of Accounts for 2005-2006. Cornwall County Council is a large and wide-ranging organisation committed to continuing improvement in performance and standard of services. This publication incorporates all the financial statements and disclosure notes required by statute. Explaining the Main Accounting Statements The accounts are split into five sections:

i) The Main Financial Statements. The main financial statements comprise the consolidated revenue account, the consolidated balance sheet, the statement of total movement in reserves and the cashflow statement. The consolidated revenue account shows how much the Authority has spent during the year on each of its services along with any corporate income or expenditure, which relates to the Authority as a whole. It also shows how much of this cost has been met by local taxpayers and how much has been funded by central government through the revenue support grant. Any surplus or deficit on this account is transferred to the Authority’s general fund reserve. The consolidated balance sheet shows a snap shot at the financial year end of all the Authority's assets and liabilities. Assets include both the value of our fixed assets such as buildings, land, equipment etc, and our current assets such as money owed to the Authority, stocks and investments. Liabilities mainly relate to money owed by the Authority. The balance of the assets and liabilities is represented on the balance sheet by the Authority’s reserves. The statement of total movement in reserves brings together all of the movements in the Authority’s reserves. The statement also splits the reserves between those which can be used to support future revenue expenditure and those which are of a capital nature. The cashflow statement shows the Authority’s cash transactions over the year, indicating the sources of cash income received and actual cash spent. The cash transactions are split between those which are of a revenue nature, those which are capital, and those which are in respect of the Authority’s borrowing.

ii) Notes to the Main Financial Statements. The second section covers the requirement under the Accounting Code Of Practice to produce certain additional financial information by way of disclosure notes. The aim of this additional information is to inform the reader of specific financial issues, which are not readily identifiable from the other financial statements.

iii) Additional Financial Statement.

Group Accounts for Related Companies.

The final sections cover the accounts of the following bodies:

iv) Extract from the Accounts of the Pension Fund, which show the operation of the Fund run by the Council for its own employees and for those of admitted authorities and other organisations.

v) Statement of Accounting Policies and Valuation Certificate.

Statement of Accounting Policies This section explains the accounting principles used to produce the figures in the accounts. These accounting principles are set nationally and ensure accounts from different organisations are consistent and comparable. Valuation certificate The Valuation Certificate relates to the value of certain fixed assets.

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1 Revenue Expenditure and Services Provided in 2005-2006 Revenue Funding The Council’s revenue spending is funded from 5 main sources as illustrated. 1. Revenue Support Grant – funding from

Central Government towards the Council’s Services

2. Council Tax 3. Non-Domestic Rates i.e. Business Rates 4. Fees, charges and interest from our bank

balances and temporary investments. 5. Specific Grants.

Specific Grant 19%

Fees, Charges, Revenue Surplus & Interest 12%

Council Tax 22%

Non-Domestic

Rates22%

Revenue Support Grant

25%

Services Provided This chart shows the main categories of expenditure over statutory headings for all general fund services: Education Services include School Budgets, Special Education, and Adult Education. Social Services include social care for the mentally ill, physically disabled, sensory impaired and those with learning disabilities. Cultural, Environment and Planning Services includes services such as the County’s Libraries Arts Service, Archaeological Service and, Countryside Service. Central Services cover the legal, administration and accounting functions of the authority.

Social Services 27%

Fire Service 3%

Highways, Roads & Transport Services

7%

Cultural, Environment& Planning Services

8%

Central Services

2%

Education Services

53%

Revenue Expenditure This chart shows the proportion of Council expenditure on a subjective basis. Employee costs account for 53% of total expenditure. This covers a wide range of people from teachers and ancillary staff in schools, to home helps, to lawyers providing advice to the Council. Running expenses include property costs like the maintenance of buildings, vehicle costs such as fuel and maintenance, and purchase of supplies and services. External Interest Charges are incurred when the authority borrows externally to fund its capital programme.

Employees 53%

Running Cost 44%

External Interest Charges

3%

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2 The 2005-2006 Budget 2005-2006 Original Budget

The net budget agreed by the County Council on 15 February 2005 for the 2005-2006 financial year was £504.828m. As a result, the County Council’s element of the Council Tax increased by 5%. This was in line with the average increase of the shire counties. The shire counties are a group of counties which are, like Cornwall, essentially rural in nature. The County Council’s three year strategy allowed budget increases for Education and Social Services equivalent to the Government’s funding increases (which were all above the general inflation rate), the provision of 3.5% pay and 3.0% price increases for all other services plus provision for some ‘unavoidable’ increases in other services such as Waste Disposal. Within the overall net budget, a sum of £0.970m was set aside as a contingency to fund emergency items. The budget has been monitored throughout the year with variances being reported to members. Portfolio holders and chief officers have managed their service budgets throughout the financial year through the use of reserves and a number of self-balancing adjustments between portfolios and the central contingency. The most significant variation at year end was within the Corporate Support Portfolio, where significant surpluses were generated through the Council’s Treasury Management operations. These surpluses led to a net underspend of £2.485m on the interest receipts and capital financing budgets combined. This reflected exceptional performance in minimising borrowing costs and maximising investment returns when benchmarked against other public bodies. The overspend of £1.496m on the Adults Portfolio reflected significant pressure on the budget mainly from unavoidable residential placements. The Children, Young People and Families Portfolio also underspent its budget, by £1.440m. This reflected lower expenditure across a number of budgets especially those concerned with the transition to the new Children, Young People and Families Directorate, and including a relatively small underspend of £0.334m against Schools’ delegated budgets.

Comparison of 2005-2006 Net Revenue Expenditure with the Original Budget

Actual Expenditure

Original Budget

Variation Above/(Below) Original Budget

Portfolio Budget

£'000 £’000 £’000

Leader 2,459 3,561 (1,102)

Corporate Support

35,469 37,934 (2,465)

Strategic Planning & Transport

32,139 32,669 (530)

Environment & Heritage

21,702 21,881 (179)

Economy

4,740 5,153 (413)

Public Protection

20,470 20,445 25

Adults

81,340 79,844 1,496

Children, Young People & Families

291,814 293,254 (1,440)

Community Services

7,288 7,458 (170)

Allocation of Non-Earmarked Underspends

217 - 217

Total including Budgeted Use of Reserves 497,638 502,199 (4,561)

Budgeted Use of Reserves

2,629

2,629

-

Total Net Revenue Expenditure 500,267 504,828 (4,561)

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3 Reserves and Balances The County Council’s general balances, currently £15.068m, are used to meet general rather than specific future expenditure requirements, although £5.510m of this is earmarked to individual Portfolios in the form of Budget Equalisation Reserves (BERs). The total of the County Fund balance increased by £1.069m – being an increase in Portfolio BER’s of £1.069m and due to the ongoing review of the Council’s existing reserves by the Resource and Performance Management Policy Development and Scrutiny Committee – Single Issue Panel. In addition, there is a Capital Reserve balance of £12.680m used to fund capital spending, including commitments from current schemes. Reserves held by Portfolios for specific purposes, such as equipment replacement, amount to £52.369m and schools hold balances of £19.528m. The schools balances are controlled by school governors and are not available to the County Council for general use. These reserves are described in the notes to the Consolidated Balance Sheet. A PFI Reserve is reported separately in the Accounts. Grant is received from the Government for PFI schemes which in the early years of projects is more than the amount needed to pay the contractor. This situation is reversed in the latter years of projects. The policy of the Council is to place the early surpluses in a reserve to be invested until such time as the funds are needed. The PFI Grant Equalisation Reserve holds the surplus from the Fire Stations scheme and the two Schools’ schemes. Because of the prudent approach to PFI affordability this represents, and because of the large sums involved which are increasing at this stage of the schemes, the PFI Reserve is being controlled and reported separately. 4 Capital Capital Spending

There is a continuing need for the Council to invest in capital spending on schools, roads, and other service assets. Capital expenditure for 2005-2006 totalled £107.089m (2004-2005 £101.457m), examples are detailed below.

Examples of Major Capital Schemes in 2005-2006

£’000

Highways Structural Maintenance of Roads 12,652 Bridge Strengthening & Assessment 4,266 CTO – Vehicles & Plant 2,779 Local Area Based Initiatives 2,515 Education New Deal for Schools Devolved Capital 3,208 New Deal for School Condition Funding 2,913 Surestart / Children’s Centres 4,001 Individual School Schemes 3,529

Capital Receipts and Revenue Financing

The ability of the Council to make significant inroads into the backlog of priority capital schemes depends very much on the generation of additional funds and capital receipts from the sale of surplus assets. In 2005-2006 capital receipts totalling £5.536m were used to finance capital spending. In total, £22.849m was funded from within the revenue budget rather than from borrowing. A substantial part of this sum was supported by reserve contributions (£7.413m advanced from the Central Capital reserve) and the balance came from Portfolios’ own earmarked reserves and from external bodies such as the Lottery funds. Capital grants received by the County Council amounted to £26.029m, this total included amounts received from European Union funding sources. Borrowing

Total external borrowing in support of the capital programme in 2005-2006 amounted to £46.867m (2004-2005 £47.205m).

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5 Treasury Management Proactive treasury management continues to ensure that the Authority minimises its interest payable on external borrowings, and invests any temporary cash surpluses to generate investment income. The graph below illustrates how the Authority’s average borrowing rate has been steadily reduced over recent years.

4.00

4.50

5.00

5.50

6.00

6.50

7.00

2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006

%

Over the last two years, the Treasury Manager has actively sought to utilize market aberrations to restructure the Council’s debt portfolio. Over the period, £144m has been successfully and cost effectively restructured, reducing the average cost of the portfolio by over 1.10%. The numbers of opportunities in this area are a function of market conditions and consequently it is extremely difficult to predict the rate at which future savings may be made. 6 FRS 17 Pensions Assets & Liabilities The net pensions liability of £285.8m (2004-05 £269.6m) should be considered alongside the Council’s overall level of County Fund reserve £15.068m (2004-05 £13.999m) and total assets less liabilities of £404.619m as at 31 March 2006 (£398.546m 31 March 2005). Further information is disclosed in Note 37 to the Accounts.

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Statement of Internal Control 1. Scope of Responsibility Cornwall County Council is responsible for ensuring that its business is conducted in accordance

with the law and proper standards, and that public money is safeguarded and properly accounted for, and used effectively. We also have a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which our functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

In discharging this overall responsibility, we are also responsible for ensuring that there is a

sound system of internal control which facilitates the effective exercise of the County Council’s functions and which includes arrangements for the management of risk.

2. The Purpose of the System of Internal Control The system of internal control is designed to manage risk to a reasonable level rather than to

eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the Council’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically.

3. The Internal Control Environment

The Council’s internal control environment is a dynamic process, which is designed to:

o establish and monitor the achievement of the Council’s objectives o facilitate policy and decision-making o ensuring compliance with established policies, procedures, laws and regulations o ensure the economical, effective and efficient use of resources and secure continuous

improvement in the way functions are exercised o facilitate the financial management of the Council o facilitate the performance management of the authority and its reporting

The control environment has developed over many years, responding to changing needs as required. It follows therefore that it comprises a large number of different but related elements. Historically these had been managed in an individual way – this process has now led us to look at the operating of these elements in a more coherent manner. There are 3 key elements to the framework now in place:

• Departmental Controls – These comprise all the processes chief officers have in place within their departments and in particular include departmental approaches (based on the corporate strategy) to risk management. These also now include individual signed Statements of Assurance from each Chief Officer.

• The Independent View – of the Internal Audit Service, our external auditors (Audit Commission) and the various inspection regimes. All these agencies comment upon the operation of the Council. The Council is proactive in its dealings with all these agencies, and responsive to findings and rectifying any issues raised.

• Corporate Controls – These comprise a large number of policies, processes and strategies by which the Council exercises control over the operation of all activities within its remit. The most significant of these have been drawn together and updated so we can ensure they are disseminated appropriately and monitored and reviewed regularly. These include the Council’s Constitution, its financial and service planning processes, performance management and codes of conduct for members and officers.

• Improvements To The Statement On Internal Control Process - The existing process is being improved in three ways: o Improvements are being made to the Member process, mainly focussing on helping

Members to understand their role in the process. o The officer process is being given a sharper focus to ensure that where problems exist

the necessary action is taken and reported to the Audit Committee.

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o There will, from this year, be a “shadow” list of Control Issues in addition to the issues raised formally in this statement. Anything reported on the SIC will be included in the Strategic Risk List, Risk Registers, the Council Improvement Plan and the Audit Plan. The “shadow” list represents items which have been removed from the SIC because action has been taken to restore control. The purpose of the “shadow” list is to ensure that the actions taken have had the desired effect and to ensure we can now place assurance on the improved controls.

4. Review of Effectiveness

The Council now has a responsibility for conducting, at least annually, a review of the effectiveness of the system of internal control. The review is informed by the work of the internal auditors and the service managers within the Council who have responsibility for the development and maintenance of the internal control environment. It will also be informed by comments made by the external auditors and other review agencies and inspectorates. The Council has a comprehensive Service Planning process with a Performance Management Framework which regularly monitors achievement against priorities.

External Audit and Inspection

The new Comprehensive Performance Assessment update in 2005 scored the Council three out

of four for use of resources demonstrating a commitment by the Council to manage its affairs wisely. The assessment covered:

• financial reporting 3 out of 4

• financial management 2 out of 4

• financial standing 3 out of 4

• internal control 3 out of 4

• value for money 3 out of 4

Internal Audit Services

The Council’s Internal Audit and Computer Audit Plans are risk based and are discussed with Chief Officers before approval by the Audit Committee annually. They provide the basis for the review of internal control, risk management and governance within the Council. Achievement of the plan is monitored by the Audit Committee.

The Code of Practice (COP) requires internal and computer auditors to provide a written report to those charged with governance timed to support the statement on internal control (COP 9.1.6). Also under the COP (para 9.3) they are required to:

• include an opinion on the overall adequacy and effectiveness of the Council’s control

environment • disclose any qualification to that opinion, together with the reasons for the qualification • present a summary of audit work undertaken to formulate that opinion, including reliance

placed upon work by other assurance bodies • draw attention to any issues they judge particularly relevant to the preparation of the

statement of internal control • compare the work actually undertaken with the work that was planned and summarise the

performance of the function against our performance measures and criteria • comment on compliance with the standards set out in the Code of Practice and

communicate the results of our quality assurance programme.

In addition they are required to make provision to form an opinion where:

• key systems are being operated, or key systems provided, on behalf of other organisations • key systems are being operated, or key services provided, by other organisations on behalf

of the Council

Notwithstanding any review by our auditors, the prime responsibility for ensuring that adequate internal control exists over all systems rests with management. Audit’s role is to periodically test the effectiveness of those management systems and controls. Their selection of audits is risk-based but also includes those areas they would be expected to cover by the Audit Commission (specifically the key financial systems). The scope of each audit is risk-based. They cannot give absolute assurance but, given the coverage of their work, the auditors are of the opinion that, generally:

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• Cornwall County Council has an adequate and effective control environment • agreed policies, regulations and Standing Orders are complied with.

This opinion includes the Council’s key financial systems and the auditors are of the opinion that the County Treasurer is fulfilling his legal responsibilities under S151 of the Local Government Act 1972 and the 1996 Finance Act. In the course of their work, both planned and unplanned audits, they have not found any areas of such significant fundamental weakness that would affect this opinion. Where areas of weakness have been identified, action has been proposed or agreed to address those weaknesses. Specific areas of concern where action is still needed have been outlined to the Chief Executive and the County Treasurer and have been incorporated into section 5 below.

5. Significant Internal Control Issues

We drew attention to six areas in last years’ statement where further improvement was needed. There were a mixture of short and longer term issues, some of which continue into this statement. In general we have made good progress in all the areas raised last year. Where they remain a control issue, the notes below reflect the action taken to date.

• Risk Management – we identified this as a control concern last year because it was clear

the process had not been embedded into departmental and service processes. Much work has gone into resolving this issue and it would appear that risk assessment and management is much more part of normal departmental business. The focus of attention now must be to similarly embed the process at a corporate level.

o Performance Management – progress has been made in this area, with reporting

software purchased and the outcome of the Single Issue Panel being incorporated into a detailed action plan for the coming 12-18 months. Whilst there is much development planned for the immediate future, this will remain a control concern until the action plan has been substantially delivered.

o Children’s Service Reorganisation – the service has been through a significant

reorganisation. Such change sometimes results in controls being forgotten or by-passed. Whilst there is no evidence to suggest there has been a significant loss of control, it has not been possible yet to review all the major system controls and we therefore lack the necessary assurance at this stage.

o Capital Projects – we identified a concern about the way property capital scheme costs

and funding were being accounted for. This issue appears to have been resolved with the introduction of a single record of all aspects of cost and funding, thereby removing the former duplication and need for reconciliation. The auditors will be reviewing the adequacy of the new system and the control it represents.

A related control concern has arisen following a significant overspending on a capital scheme. This issue is being examined by the Resource and Performance PDSC. Until we can obtain assurance that controls are working appropriately, this will remain a control concern.

o Treasury Management – concern regarding the time delay between the transactions and

their accounting was also identified earlier in the year. Management have taken steps to rectify the problem and controls appear to be working appropriately. This is a complex area, responsible for very large amounts of money and any changes therefore represent potential risk to the authority. The departure therefore of the Treasury Manager represents a control concern. Again Management have acted to support the function in an appropriate manner. Until we can be assured that appropriate levels of control have been maintained, this remains a concern.

o Confidential Data on Mobile Equipment – Internal Audit Services have expressed

concern at the current arrangements for securing data on such mobile equipment as laptops, PDAs, Blackberrys and USB pen drives. The corporate Information Management Group has considered options for tackling this issue and has recommended a way forward. Until a satisfactory solution has been implemented this will remain a control concern.

David Whalley Frank Twyning Leader Chief Executive

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Statement of Responsibilities & Certification of the Statement of Accounts The following statement describes the respective responsibilities of the County Council and the County Treasurer for the accounts. The County Treasurer is responsible for:

• the preparation of the Council’s statement of accounts and the accounts of the Cornwall County Council Pension Fund so as to present fairly the financial position at the accounting date and its income and expenditure for the year;

• making reasonable and prudent judgements and estimates;

• complying in all material aspects with the Code of Practice on Local Authority Accounting in Great Britain and applying accounting policies consistently;

• keeping proper, up to date, accounting records;

• taking reasonable steps for the prevention and detection of fraud and other irregularities. The County Council is responsible for:

• securing appropriate arrangements for the proper administration of its financial affairs ensuring that the nominated officer, namely the County Treasurer, has responsibility for them;

• managing its affairs so as to ensure the economic, effective and efficient use of resources and the safeguarding of assets.

Certification by Treasurer I certify that, in my opinion, the Statement of Accounts presents fairly the financial position of Cornwall County Council at 31 March 2006, and its income and expenditure for the year then ended.

Frank Twyning MBA, FCCA, CPFA County Treasurer Date 14 June 2006 Certification by Chairman of Audit Committee I confirm that these accounts were approved by the Audit Committee as Agenda Item Number 7 dated 26 June 2006. Chairman of Audit Committee Date 26 June 2006 Further Information Further information about the accounts is available from the Treasurers’ Department, Cornwall County Council, New County Hall, Truro, TR1 3AY. Interested members of the public have a statutory right to inspect the accounts before the audit is completed. For the 2005-2006 accounts the inspection period was 17 July 2006 to 11 August 2006. These dates were advertised in the local press and on the Council’s website.

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Auditors’ Certificate

Independent auditor’s report to Cornwall County Council

Opinion on the financial statements I have audited the financial statements and pension fund accounts of Cornwall County Council and its Group for the year ended 31 March 2006 under the Audit Commission Act 1998. The financial statements comprise the Consolidated Revenue Account, the Consolidated Balance Sheet, the Statement of Total Movements in Reserves, the Cash Flow Statement, the Group Accounts and the related notes. The pension fund accounts comprise the Fund Account, the Net Assets Statement and the related notes. The financial statements and pension fund accounts have been prepared under the accounting policies set out within them. This report is made solely to Cornwall County Council in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 36 of the Statement of Responsibilities of Auditors and of Audited Bodies prepared by the Audit Commission.

Respective responsibilities of the Chief Finance Officer and auditors The Chief Finance Officer’s responsibilities for preparing the financial statements, including the pension fund accounts, in accordance with applicable laws and regulations and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2005 are set out in the Statement of Responsibilities. My responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). I report to you our opinion as to whether the financial statements and the pension fund accounts present fairly, in accordance with applicable laws and regulations and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2005:

• the financial position of the Authority and its income and expenditure for the year; and

• the financial transactions of its pension fund during the year and the amount and disposition of the fund’s assets and liabilities, other than liabilities to pay pensions and other benefits after the end of the scheme year.

I review whether the statement on internal control reflects compliance with CIPFA’s guidance, ‘The Statement on Internal Control in Local Government: Meeting The Requirements of the Accounts and Audit Regulations 2003’ published on 2 April 2004. I report if it does not comply with proper practices specified by CIPFA or if the statement is misleading or inconsistent with other information I am aware of from my audit of the financial statements. I am not required to consider, nor have I considered, whether the statement on internal control covers all risks and controls. I am also not required to form an opinion on the effectiveness of the Authority’s corporate governance procedures or its risk and control procedures I read other information published with the financial statements, and consider whether it is consistent with the audited financial statements. This other information comprises only the Explanatory Foreword. I consider the implications for my report if I become aware of any apparent misstatements or material inconsistencies with the financial statements. My responsibilities do not extend to any other information.

Basis of audit opinion I conducted my audit in accordance with the Audit Commission Act 1998, the Code of Audit Practice issued by the Audit Commission and International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board, except that the scope of my work was limited as explained below. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Authority in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Authority’s circumstances, consistently applied and adequately disclosed.

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I planned my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. However, with respect to the consolidation into the Council’s group accounts of its subsidiary company, County Environmental Services Limited (CES), at a net worth of £8m, the evidence available to me was limited because, although the company is due to cease trading following the signing of the integrated waste management PFI contract, the company has been valued on the basis of it being a going concern rather than break-up value. As no accounts have been prepared by the company on the basis that it plans to cease trading, I have been unable to obtain sufficient appropriate evidence regarding the value of the assets and liabilities of CES Ltd included in the Council’s group accounts. In forming my opinion I also evaluated the overall adequacy of the presentation of information in the financial statements.

Qualified opinion arising from limitation in audit scope Except for the financial effects of any such adjustments, if any, as might have been determined to be necessary had I been able to satisfy myself of the value of the assets and liabilities of County Environmental Services Limited included in the Council’s group accounts, in my opinion: The financial statements present fairly, in accordance with applicable laws and regulations and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2005, the financial position of the Authority and its Group as at 31 March 2006 and its income and expenditure for the year then ended; and The pension fund accounts present fairly, in accordance with the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2005, the financial transactions of the Pension Fund during the year ended 31 March 2006, and the amount and disposition of the fund’s assets and liabilities as at 31 March 2006, other than liabilities to pay pensions and other benefits after the end of the scheme year. Auditor Alun Williams Signature Address Audit Commission 3-6 Blenheim Court Matford Business Park Lustleigh Close Exeter EX2 8PW Date 28 September 2006

Conclusion on arrangements for securing economy, efficiency and effectiveness in the use of resources

Authority’s Responsibilities The authority is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance, and to regularly review the adequacy and effectiveness of these arrangements. Under the Local Government Act 1999, the authority is required to prepare and publish a best value performance plan summarising the authority’s assessment of its performance and position in relation to its statutory duty to make arrangements to ensure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

Auditor’s Responsibilities I am required by the Audit Commission Act 1998 to be satisfied that proper arrangements have been made by the authority for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires me to report to you my conclusion in relation to proper arrangements, having regard to relevant criteria specified by the Audit Commission for principal local authorities. I report if significant matters have come to my attention which prevent me from concluding that the authority has made such proper arrangements. I am not required to

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consider, nor have I considered, whether all aspects of the authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively. I am required by section 7 of the Local Government Act 1999 to carry out an audit of the authority’s best value performance plan and issue a report:

• certifying that I have done so;

• stating whether I believe that the plan has been prepared and published in accordance with statutory requirements set out in section 6 of the Local Government Act 1999 and statutory guidance; and

• where relevant, making any recommendations under section 7 of the Local Government Act 1999.

Conclusion I have undertaken my audit in accordance with the Code of Audit Practice and I am satisfied that, having regard to the criteria for principal local authorities specified by the Audit Commission and published in July 2005, in all significant respects, Cornwall County Council made proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ending 31 March 2006.

Best Value Performance Plan I issued my statutory report on the audit of the authority’s best value performance plan for the financial year 2005/06 on 30 September 2005. I did not identify any matters to be reported to the authority and did not make any recommendations on procedures in relation to the plan.

Certificate I certify that I have completed the audit of the accounts in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission. Auditor Alun Williams Signature Address Audit Commission 3-6 Blenheim Court Matford Business Park Lustleigh Close Exeter EX2 8PW Date 28 September 2006

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MMaaiinn FFiinnaanncciiaall SSttaatteemmeennttss

Main Financial Statements

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Consolidated Revenue Account This statement sets out the net cost of the services for which the Authority is responsible, and also shows corporate income and expenditure relating to the Authority as a whole and appropriations to and from reserves. In addition, the statement identifies how the total net cost of the Authority has been financed by general Government grant and local tax payers.

2005-2006

2004-2005 Net

Expenditure £’000

Service Expenditure Analysis (Note 4)

Gross Expenditure

£’000

Specific Grants £’000

Other Income £’000

Net Expenditure

£’000

NoteNo:

265,839 Education Services 388,828 (88,862) (15,302) 284,664 112,612 Social Services 196,669 (37,252) (35,659) 123,758 18,603 Fire Services 22,601 (2,009) (240) 20,352 42,582 Highways, Roads & Transport

Services 50,650 (2,314) (3,487) 44,849

1,138 Court Services 769 - (72) 697 37,449 Cultural, Environmental & Planning

Services 55,358 (10,408) (6,623) 38,327

8,618 Central Services 19,969 (880) (7,498) 11,591 3 486,841 Net Cost of Services 734,844 (141,725) (68,881) 524,238

Other Operating Expenditure

(3,557) Net (Surplus)/Deficit on Trading Services (4,494) 2 29,600 FRS17 Interest Cost (Pensions) 36,100

(24,600) FRS17 Expected Return on Assets (Pensions) (28,000) (16,250) Transfer from asset management revenue account (14,618) 6 (9,693) Interest and Investment Income (14,339) 5

462,341 Net Operating Expenditure 498,887 Appropriations Contributions to/(from) Capital Financing Account:- 8

26,107 - Financing of Capital Expenditure 22,849 (2,817) - Deferred Charges Funding (2,041)

(399) - De Minimus Capital Funding (1,116) 2,997 - Amortisation of Government Grant deferred 3,725

(13,300) - Minimum Revenue Provision Depreciation adjustment (14,708) 7 (2,209) - PFI Deferred Consideration Amortisation (2,209) (1,788) - Financing of Fixed Asset Impairment Write Offs (952)

(1,011) Contributions to/(from) FRS17 Pensions Reserve (5,600)

0 Contributions to/(from) Capital Receipts Applied Account (806)

2,240 Contributions to/(from) repairs, capital, renewals and other earmarked reserves 4,531

472,161 Amounts to be met from Government Grants and Local Taxation 502,560 This was financed by:

(153,707) - Council Tax Income (162,010) (132,534) - Non-domestic rate income (161,556) (187,387) - Revenue Support Grant (180,395)

(473,628) Total Sources of Financing (503,961)

(1,467) (Surplus)/Deficit for Year (1,401)


20

2004-2005

£’000 Treatment of (Surplus)/Deficit 2005-2006

£’000 i) Contributions to/(from) County Fund Balances:

1,272 - Contributions to/(from) General Reserve 0 (61) - Contributions to/(from) Portfolios Budget Equalisation Reserves 1,069 256 ii) Contributions to/(from) Schools Reserve 332

1,467 1,401 Changes in County Fund & School Balances County Fund – Usable Reserve Balances: (a) General Reserve

8,286 Balance as at 1 April 2005 9,558 1,272 Net Contribution (to)/from Revenue Account 0 9,558 Balance as at 31 March 2006 9,558

(b) Budget Equalisation Reserves 4,502 Balance as at 1 April 2005 4,441

(61) Net Contribution(to)/from Revenue Account 1,069 4,441 Balance as at 31 March 2006 5,510

13,999 Total County Fund Balances 15,068 Schools Reserves

18,940 Balance as at 1 April 2005 19,196 256 Net Contribution (to)/from Revenue Account 332

19,196 Balance as at 31 March 2006 19,528 (see additional disclosed notes to balance sheet)

33,195 Total 34,596


21

Consolidated Balance Sheet The Consolidated Balance Sheet summarises the financial position of the whole Council. It shows the value of the Council’s assets and liabilities at the end of the financial year (31 March 2006). Prior year adjustments have been made to 2004-2005 comparative figures, for the effects of reclassifying a Current Asset Sundry Debtor as a Long Term Debtor. Please see Notes 1 and 17 to the Accounts.

2006 Amended

2005 Note

£’000 £’000 £’000 No: Net Fixed Assets 12(a) Intangible Fixed Assets (128) - Tangible Fixed Assets 12(b) Operational Assets Other land and buildings 562,741 536,591 Vehicles, plant, furniture & equipment 19,230 18,209 Infrastructure 207,497 181,385 Community Assets 2,289 2,289 Non-operational assets Surplus Assets, held for disposal 12,083 6,671 Assets under construction 40,322 34,311 Total Net Fixed Assets 844,034 779,456 PFI Scheme Deferred Consideration 43,744 45,953 13 PFI Scheme Residual Values 12,864 8,984 14 Long Term Investments 219,306 93,791 15 Long Term Debtors 6,806 4,892 17 Total Long Term Assets 1,126,754 933,076 Current Assets Stocks and Work in Progress 2,897 2,263 16 Debtors and Payments in advance 51,587 41,409 17 Short Term Temporary Investments 50,250 65,479 15 Cash in hand and in transit 154 128 Total Current Assets 104,888 109,279 Current Liabilities Short Term Borrowing (71,745) (18,818) Creditors (63,384) (57,146) 18 Cash Overdrawn (32,090) (18,145) Total Current Liabilities (167,219) (94,109) (62,331) 15,170 Total Assets less Current Liabilities 1,064,423 948,246 Long Term Borrowing (368,410) (273,262) 19 FRS17 Pensions Liability (285,800) (269,600) 37 Creditors due after one year (213) (548) 20 Provisions (5,381) (6,290) 21 (659,804) (549,700) Total Assets less Liabilities 404,619 398,546 Represented by: Deferred Premiums (28,284) (7,762) Government Grants Deferred Account 119,270 98,317 22 Capital Grant Unapplied 7,497 7,549 22 FRS17 Pensions Reserve (285,800) (269,600) 37 Fixed Asset Restatement Account 329,237 321,346 22 Capital Financing Account 160,690 150,871 22 Reserves - Other Specific 84,577 79,715 22 - Usable Capital Receipts 2,364 4,111 22 Revenue Balances County Fund – Usable Reserves 15,068 13,999 22 Total Equity 404,619 398,546


22

Statement of Total Movements in Reserves The statement of total movements in reserves brings together all the recognised gains and losses of the authority during the period and identifies those which have and have not been recognised in the Consolidated Revenue Account. The statement separates the movements between revenue and capital reserves. 2005-06 2004-05 Note £’000 £’000 £’000 No: Surplus/(deficit) for the year 1,401 1,467 Add back movements on specific revenue reserve

4,530 2,240

Movement on Deferred Premiums (20,522) 0 Movement on FRS17 Pension Reserve (5,600) (1,011) FRS17 Actuarial gains/(losses) (10,600) (72,839) Total increase/(decrease) in revenue resources

(30,791) (70,143) 22

Increase/(decrease) in usable capital receipts

(1,747) (1,420)

Increase/(decrease) in unapplied capital grants and contributions

(52) (734)

Total increase/(decrease) in realised capital resources (note i)

(1,799) (2,154) 22

Gains/(losses) on revaluation of fixed assets

11,256 3,279

Impairment losses on fixed assets due to general changes in prices

0 0

Total increase/(decrease) in unrealised value of fixed assets (note ii)

11,256 3,279 22

Value of assets sold, disposed of or decommissioned (note iii)

(3,365) (422) 22

Credit Approval Restatement (1,804) 0 Capital receipts set aside 5,536 2,388 Revenue resources set aside 4,736 8,195 Movement on Grants in year 22,304 19,375 Total Increase/(decrease) in amounts set aside to finance capital investment (note iv)

30,772 29,958 22

Total recognised gains and losses 6,073 (39,482)


23

Cash Flow Statement 2006 2005 Note £’000 £’000 £’000 No: Revenue Activities Cash Outflows Cash Paid on behalf of employees 386,445 366,529 Other operating costs 393,649 392,083 780,094 758,612 Cash inflows Council Tax (162,010) (153,707) Non-Domestic Rates (161,556) (132,534) Revenue Support Grant (180,395) (187,387) Other Government Grants (141,725) (163,245) Cash Received from Goods or Services (141,114) (142,339) (786,800) (779,212) Revenue Activities net cash flow (6,706) (20,600) 26 Servicing of Finance Cash Outflows Interest paid 15,303 12,567 Cash Inflows Interest Received (19,824) (13,186) (4,521) (619) (11,227) (21,219) Capital Activities Cash Outflows Purchase of fixed assets 97,403 87,507 97,403 87,507 Cash Inflows Sale of fixed assets (2,980) (572) Capital grants received (31,488) (27,593) (34,468) (28,165) 62,935 59,342 Net Cash outflow before financing 51,708 38,123 Financing Cash Outflows Repayments of amounts borrowed 169,758 53,108 Short Term Investments (15,229) (51,671) Long Term Investments 125,515 80,807 Cash Inflows New Loans Raised (317,833) (114,350) (37,789) (32,106) Decrease in cash 13,919 6,017


24

25

NNootteess ttoo MMaaiinn FFiinnaanncciiaall

SSttaatteemmeennttss

27

The following notes provide more detailed information in order to assist in the interpretation of the main Financial Accounts. Note 1 Prior Year Adjustments to Consolidated Revenue Account Prior year adjustments have been made to 2004-2005 comparative figures, for the effects of reclassifying a Current Asset Sundry Debtor as a Long Term Debtor. Note 2 Trading Services The Council’s main Trading Services are: • CORMAC – who provide construction and maintenance of the County’s highways and footpaths. • Planning, Transportation & Estates Consultancies – who provide design services and engineering

services for road schemes, bridges etc. • Workshops – who repair and maintain the Council’s vehicles and plant. • Commercial Services – who provide cleaning and grounds maintenance for schools and other parts of

the Council. • Central Transport Organisation – who provide fleet management of the Council’s vehicles and plant. • Education Business Units – providing specialist services (for example music lessons and outdoor

education) and advisory support to front line education services.

Other Trading Services include the following: • Notter Bridge Training Unit • Tremorvah Industries Trading Unit Trading Services Turnover

£’000

Expenditure

£’000

(Surplus)/deficit

2005-2006 £’000

(Surplus)/ deficit

2004-2005 £’000

CORMAC 46,321 45,602 (719) (391) Planning, Transport & Estates Consultancies 21,568 21,015 (553) (395) Workshops 3,192 3,152 (40) (27) Commercial Services 11,293 11,082 (211) 78 Central Transport Organisation 10,606 7,600 (3,006) (2,872) Education Business Units 12,374 12,484 110 43 Other Trading Services 4,632 4,557 (75) 7 Total 109,986 105,492 (4,494) (3,557)

Note 3 Central Services An analysis of Central Services expenditure is shown in the table below. 2005-2006

£’000

2004-2005

£’000 Corporate & Democratic Costs Democratic Representation 1,984 1,811 Corporate Management 2,666 2,348 Non Distributable Costs 4,333 910 Central Services to the Public 1,338 878 Other Income & Expenditure 1,270 2,671 11,591 8,618

Note 4 Service Expenditure Analysis

The Accounting Code of Practice 2005 (Statement of Recommended Practice) requires the service expenditure analysis to comply with the requirements of the Best Value Accounting Code of Practice (BVACOP) 2005 issued by CIPFA.

28

Note 5 Interest on General Balance Surplus cash generated by the County Fund is placed temporarily on deposit or used to reduce the need for external borrowing and the resulting interest is credited to the County Fund. Note 6 Transactions on the Asset Management Revenue Account Service Revenue Accounts are charged with depreciation (representing the drop in value of an asset due to wear and tear and age), impairment (representing loss in the value of an asset) and a capital financing charge calculated by applying a notional interest rate to the amount at which the asset is included in the balance sheet (representing the cost of tying up financial resources in the asset). The purpose of the Asset Management Revenue Account is to ensure that these capital charges do not impact on the level of Council Tax and that the Authorities accounts are charged only with the actual capital financing costs. The amount is summarised below:

2005-2006 2004-2005 £’000 £’000 Income Capital Charges: Notional Interest 31,275 28,501 Depreciation 25,261 23,009 Impairment Charges 952 1,788 Transfer from Government Grants Deferred Account

3,725 2,997

61,213 56,295 Expenditure Provision for depreciation 25,261 23,009 Impairment Write-off 952 1,788 External Interest Charges 20,382 15,248 46,595 40,045 Balance to Consolidated Revenue Account

14,618 16,250

Note 7 Minimum Revenue Provision

The Asset Management Revenue Account above attempts to minimise departures from generally accepted accounting practice for charging capital financing costs to the revenue account. However, under part IV of the Local Government and Housing Act 1989 there is a requirement to set aside a minimum revenue provision (MRP) from the Revenue Account for debt repayment. Therefore, in order to reflect the true cost of capital to government grants and local tax payers the following adjustments have been made. 2005-2006

£’000 2004-2005

£’000 Minimum Revenue Provision 10,553 9,709 Amount Charged as Depreciation

(25,261) (23,009)

Surplus depreciation credited to Consolidated Revenue Account Appropriation Account

(14,708) (13,300)

Note 8 Contributions to/ (from) Reserves A detailed analysis of appropriations to/(from) the Capital Financing Account and other Specific Reserves can be found in Note 22 to the Consolidated Balance Sheet.

29

Note 9 Social Services Pooled Budget Use of Health Flexibilities Act 2002-2003 and other arrangements under Section 31 Health Act 1999. Mental Health Pooled Fund – objective is to provide a fully integrated service to mental health clients.

Gross income of the joint working

arrangement

Gross expenditure of the joint working

arrangement

County Council Contribution

Identities of partner bodies: £’000 £’000 £’000 Cornwall County Council Cornwall Partnership Trust West Cornwall PCT Central Cornwall PCT North and East PCT

Total 2005-06 40,059 39,890 6,153 Total 2004-05 38,062 37,809 5,843 Integrating Community Equipment Services


arrangement


arrangement


Identities of partner bodies: £’000 £’000 £’000 Cornwall County Council West Cornwall PCT Central Cornwall PCT North and East PCT

Total 2005-06 2,382 2,202 1,159 Total 2004-05 0 0 0 Note 10 Prior Year Adjustments to the Consolidated Balance Sheet Prior year adjustments have been made to 2004-2005 comparative figures, for the effects of reclassifying a Current Asset Sundry Debtor as a Long Term Debtor. Note 11 Movement on Deferred Charges

£’000

Balance as at 1 April 2005 0 Expenditure in year 7,183 Deferred Charges on Work in Progress schemes completed in 2005-2006 184 Education balances written off as Deferred Charges 185 Amounts written off to Consolidated Revenue Account* (7,552) Balance as at 31 March 2006 0 *Funded by: Grant 5,511 Transfer from Capital Financing Account 2,041

Note 12(a) Intangible Assets

Relates to the purchase of the remaining 60% shares in the Council’s existing Associate Company, Cornwall Paper Company, at the end of December 2005. The life of the Intangible Asset has been estimated at two years and will therefore be amortised by way of impairment in the 2005-06 and 2006-07 Accounts.

2005-2006 £’000

Balance as at 1 April 2005 0 Negative Goodwill (256) Impairment to Revenue Account 128 Balance as at 31March 2006 (128)

30

Note 12(b) Net Fixed Assets

Other land and buildings

£’000

Vehicles, Plant &

Equipment £’000

Infra-Structure

£’000

Community Assets

£’000

Work in Progress

£’000

Surplus/ Investment Properties

£’000

Total

£’000

Gross Book Value as at 31 March 2005

575,151 40,001 211,017 2,289 34,311 7,103 869,872

Restatements/Revaluations 5,155 854 (1,596) 5,858 10,271

Impairment Charges (789) - - - - (291) (1,080) Transfer to Deferred Charges

-

-

-

-

(184)

-

(184) Value as at 1 April 2005 579,517 40,855 211,017 2,289 32,531 12,670 878,879

Expenditure 19,041 5,383 32,192 - 26,286 44 82,946

Transfer 17,632 990 - - (18,495) (127) - Disposals (2,543) (3,792) - - (504) (6,839)

Gross book value as at 31 March 2006

613,647 43,436 243,209 2,289 40,322 12,083 954,986

Accumulated Depreciation

and Impairment as at 1 April 2005

(38,560) (21,792) (29,632) 0 0 (432) (90,416)

Restatements/Revaluations 862 86 - - - 432 1,380

Disposals 119 3,354 - - - - 3,473 Depreciation for year (13,327) (5,854) (6,080) - - - (25,261)

Accumulated Depreciation as at 31 March 2006

(50,906)

(24,206)

(35,712)

-

-

-

(110,824)

Amended Net Book Value as at

31 March 2005 536,591 18,209 181,385 2,289 34,311 6,671 779,456

Net Book Value as at 31

March 2006 562,741 19,230 207,497 2,289 40,322 12,083 844,162

Total Capital Control Expenditure and Financing was:

2005-2006 £’000

2004-2005 £’000

Expenditure Fixed Assets (as above) 82,946 73,846 Long Term Investments 11,441 13,800 Non Enhancements * 469 1,286 Deferred Charges 7,184 8,013 De Minimus** 1,116 775 Capital Grants 53 147 PFI Residual Values 3,880 3,590

107,089 101,457 Financing Borrowing 46,867 47,205 Direct Revenue Financing 22,849 26,107 Capital Receipts 5,536 2,388 Capital Grants 26,029 22,372 Deferred Charges Grants 5,511 5,957 Other 297 (2,572)

107,089 101,457

*Non Enhancement relates to Capital Expenditure that does not increase the value of assets held as included in the balance sheet. Such expenditure on Other Land and Building is transferred to the Fixed Asset Restatement Account.

** De Minimus expenditure on Vehicles, Plant and Equipment is written off to revenue and funded by way of grant/contribution, or by transfer from the Capital Financing Account.

31

Note 13 PFI Schemes Deferred Consideration

£’000

Balance as at 1 April 2005 48,162

Amounts amortised to Revenue Account in 2005-2006 (2,209)

Balance as at 31 March 2006 45,953 Due Within One Year 2,209

Due After One Year 43,744

Under the requirement of ACOP, the value of assets transferred for nil consideration to the PFI Schemes contractor is transferred from Fixed Assets to Prepayments and amortised to the Revenue Account over the length of the contract. The amounts amortised are matched by a corresponding transfer from the Capital Financing Account.

The value of completed construction work undertaken by the end of the financial year 2005-2006 is accounted for in Note 14. The Council’s two school’s PFI contracts and the Fire PFI Scheme are now in their operation phase.

Note 14 PFI Schemes Residual Values

£’000

Balance as at 1 April 2005 8,984 Amounts transferred from Revenue Account in 2005-2006 3,880 Balance as at 31 March 2006 12,864

Under the requirements of ACOP, the agreed residual value of assets to be received from the PFI Schemes contractor at the end of the contract, must be built up over the life of the contract as a long term debtor prepayment.

The accumulated prepayment balance at the end of the contract should exactly match the estimated fair value of the residual. The prepayment balance will then be reduced to nil and transferred to the relevant fixed assets classification. Note 15 Investments

The authority has the following investments:

31 March 2006

£’000 2005 £’000

Long Term: Eurobonds 36,680 20,545 Tamar Bridge/Torpoint Ferry Joint Committee Loan 21,298 12,603 Local Authority Bond 12,198 739 Medium Term Deposits 122,000 56,000 Government Securities 21,675 2 After Care Community Loan 9 9 County Environmental Services Ltd. 3,093 3,093 Cornwall Paper Company 2,353 800 Total Long Term 219,306 93,791 Short Term: Temporary Investments 50,250 65,479

32

Note 16 Stocks and Work In Progress As at 31 March, 2006, the Authority held stocks and work in progress to the value of £2.897m (£2.263m as at 31 March, 2005) after accounting for obsolete stock. The stocks and work in progress held are analysed by category as follows:

31 March 2006

£’000 2005 £’000

Salt Stocks 99 138 Materials* 1,390 942 Fuel 16 25 Printing, Stationery, etc 9 18 Plant and Equipment Spares 265 303 Work in Progress 249 283 Other 1,008 664 3,036 2,373 Less provision for obsolete stock (139) (110)

2,897 2,263

* The bulk of these materials are in respect of road works. Note 17 Analysis of Debtors The Authority’s Balance Sheet represents the financial position at the end of the financial year, there will be outstanding monies owed to the Authority at that date which are yet to be received as cash. The following analysis shows the amounts owed to the Authority which have not been received at 31 March 2006. The Authority makes provision for outstanding monies where there is doubt whether they will be recovered. This is known as a provision for bad debts. These amounts are then deducted from the total value of Debtors shown in the accounts.

31 March 2006

£’000

Original 2005 £’000

Long Term Debtor

Adjustment

Amended 2005 £’000

Short Term: Amounts falling due in one year Government Departments 8,167 4,540 - 4,540 Sundry Debtors 37,539 30,317 (500) 29,817 Payments in advance* 7,078 8,090 - 8,090 52,784 42,947 (500) 42,447 Less Provision for bad debts (1,197) (1,038) - (1,038) 51,587 41,909 (500) 41,409 Long Term: Amounts falling due after one year

Car loans to employees 139 229 - 229 Other** 6,667 4,163 500 4,663 6,806 4,392 500 4,892

* Includes £2.209m relating to PFI Schemes Deferred Consideration (see note 13) A prior year adjustment has been made to 2004-2005 comparative figures, for the effect of reclassifying £0.500m Sundry Debtor as a Long Term Debtor. ** This balance includes:

• An amount of £1.854m (2004-05 £1.545m) that the Council has advanced to the Millennium Project. • An amount of £0.283m (2004-05 £0.283m) relating to the Cornwall Enterprise Loan (£0.266m) and

Brussel’s Office Bond (£0.017m).

33

Note 17 Analysis of Debtors (continued) • Amounts totalling £1.822m relating to Education Services (2004-05 £0.741m) • Amounts totalling £1.408m relating to Social Services (2004-05 £1.309m) • Amounts totalling £1.000m relating to Cornwall Care Loan (2004-05 £0.500m) Note 18 Analysis of Creditors The Authority’s Balance Sheet represents the financial position at the end of the financial year, there will be outstanding monies that the Authority owes at that date which have yet to be paid. For example for goods received at the end of March where invoices have not been paid. The following analysis shows the amounts owed by the Authority which have not been paid as at 31 March 2006. 31 March 2006

£’000

2005

£’000 Inland Revenue 9,774 9,599 Sundry Creditors 39,185 34,642 Receipts in Advance 14,415 12,895 63,374 57,136 Long Term Borrowing Repayable within one year (see note 19)

10 10

63,384 57,146

Note 19 Long term Borrowing The table below shows the Authority’s borrowing by lender, and by maturity. Total Outstanding as at 31 March

Range of Interest rates

payable %

2006 £’000

2005 £’000

Source of Loan External Borrowing Lawn Tennis Association 0 100 100 Public Works Loan Board-Maturity 3.80 – 4.45 90,000 168,960 Public Works Loan Board-Instalment 4.35 – 4.75 8,210 12,612 Market Loans 3.53 – 4.75 270,100 91,600 Total Long Term Borrowing 368,410 273,272 An analysis of loans by maturity: External Borrowing * Maturing within one year 10 10 Maturing within 1-2 years 10 10 Maturing within 2-5 years 30 30 Maturing within 5-10 years 3,850 57 Maturing in more than 10 years 364,510 273,165 368,410 273,272 Payable within one year (see note 18) 10 10 Payable after one year 368,400 273,262 368,410 273,272

Note 20 Creditors Due After One Year 31 March 2006

£’000 2005 £’000

Sundry 213 548 213 548

34

Note 21 Provisions Provisions are required for any financial liabilities or losses which are likely or certain to be incurred but the amounts or the dates on which they will arise is uncertain. All provisions are charged to the appropriate service and can be used only for the purpose for which they were established, except where a review to determine the appropriateness of the level of the charge and the balance of the provision requires a change. Balance as

at 1 April, 2005

£’000

Additions

£’000

Deductions

£’000

Balance as at 31 March,

2006

£’000 Insurance Claims 5,257 192 (1,437) 4,012 FEFC Grant Clawback 341 0 0 341 Parts Initiative 10 0 0 10 Unused Leave 31 0 (31) 0 Contract Penalties 63 0 (30) 33 Future Liabilities 588 422 (25) 985 6,290 614 (1,523) 5,381

Insurance Claims

When an insurance claim is received the possible cost of the claim is estimated by the claims handler and a provision for that cost placed in the Insurance Fund. Insurance claims can take up to 10 years to finalise, during which time the potential cost to the Authority remains. When the claim is finalised the actual cost is met from the provision. £1.437m was written back to revenue in 2005-2006. Education FEFC Grant Clawback The Adult Education Service receives FEFC funding (approximately £1.5m p.a.) for Vocational Adult Education schedule 2 courses. This funding is measured by a complex formula which determines a number of units by which authorities are funded. This provision is to allow for variations in funding in future years and for the increased participation in schedule 2 courses. Future Liabilities Countryside: This provision of £0.034m relates to possible loss of rental income that was originally grant funded. Education: This provision of £0.025m related to Student Awards agreed but not yet paid, and was fully utilised in 2005-2006.

CORMAC: This provision of £0.624m relates to the major works area of the Council’s Trading Organisation (CORMAC) such as surfacing/surface dressing, major road schemes, basic highway maintenance and the reinstatement of waste disposal sites. Highways: This provision of £0.327m is required for refunds due to loss of court cases relating to safety cameras.

Contract Penalties

This provision of £0.033m relates to PFI contract penalty deductions for non-performance of certain tasks by the Council’s Commercial Services. Parts Initiative

Cornwall County Council workshops will have to pay a one off payment to Hendy Lennox Ltd, or bear any loss of the parts venture, which terminated on 31/03/03. A provision of £0.010m has therefore been made.

Unused Leave

This provision of £0.031m was made due to staff in Environment & Heritage working excess hours in 2004-2005, giving additional leave in 2005-2006 thus reducing income achievable and was fully utilised in 2005-2006.

35

Note 22 Statement of Total Movements on Reserves 2005-2006 Usable Capital

Receipts

£’000

Unapplied Capital Grants and

Contributions £’000

Note i – Movements in realised capital resources Amounts received in year 4,595 25,977 * Amounts applied to finance new capital investment in year (5,536) (26,029) Amounts appled to Debt Premiums (806) - Total increase/(decrease) in realised capital resources during year

(1,747) (52)

Balance brought forward at beginning of year 4,111 7,549 Balance carried forward at end of year 2,364 7,497

* This applies mainly to standard fund capital grant.

2005-2006 2005-2006 Capital

Financing Account £’000

Government Grants

Deferred £’000

Totals

£’000 Note iv – Movements in amounts set aside to finance capital investment

Capital receipts set aside in year: - useable receipts applied 5,536 0 5,536 Total capital receipts set aside in year 5,536 0 5,536 PFI Deferred Consideration Amortised (2,209) 0 (2,209) Revenue resources set aside in year: - capital expenditure financed from revenue 21,653 0 21,653 - reconciling amount for provisions for loan repayment (14,708) 0 (14,708) Total revenue resources set aside in year 4,736 0 4,736 Grants applied to capital investment in year 0 26,029 26,029 Amounts credited to the Asset Management Revenue Account

0 (3,725) (3,725)

Total movement of grants in year 0 22,304 22,304 Total increase/(decrease) in amounts set aside to finance capital/investment

Total movement on Account in year 10,272 22,304 Magistrates Courts Restatement 1,351 (1,351) Prior Year Use of Credit Approval Restatement (1,804) 0 Balance brought forward at begininning of year 150,871 98,317 Balance carried forward at end of year 160,690 119,270

2005-2006 Fixed Asset

Restatement Account £’000

Note ii – Movements in unrealised value of fixed assets Gains/losses on revaluation of assets in year 11,256 Impairment losses due to general changes in prices in year 0 Total increase/(decrease) in unrealised capital resources in year 11,256

Note iii – Value of assets sold, disposed of or decommissioned

Amounts written off asset balances for disposals in year (3,365) Total movement on reserve in year 7,891 Balance brought forward at beginning of year 321,346 Balance carried forward at end of year 329,237

36

Note 22 Statement of Total Movements on Reserves (continued)

Revenue Reserves

The Revenue Reserves can be used to meet capital or revenue expenditure. However, the sum of £84.577m under the heading of “specific reserves” has been earmarked for specific purposes. A more detailed analysis of these reserves is shown against note (d).

For additional information, a detailed analysis of the transactions against the Fixed Asset Restatement Account, Capital Financing Account and Usable Capital Receipts Reserve appear below:

Note (a) Fixed Asset Restatement Account

Note (b) Capital Financing Account

The Capital Financing Account contains the amounts of capital expenditure financed from revenue, capital receipts and capital grants, relating to non depreciable assets, e.g. land.

It also contains appropriations from the revenue account for differences between the authority’s MRP and depreciation charges.

Note (c) Usable Capital Receipts Reserve

Income from the sale of fixed assets for example land and buildings is credited to the Usable Receipts Reserve. These receipts can be used to pay for new capital expenditure. Any balance remains in this account.

Note (d) Specific Reserves 2005-2006 2004-2005 £’000 £’000 Usable: Capital Reserve 12,680 12,542 Other Specific Reserves* 23,920 23,316

(excluding P.F.I.)

Non Usable: LMS School** 19,528 19,196 Sub-total 56,128 55,054 P.F.I. Reserve 28,449 24,661 Total 84,577 79,715

£’000 Balance as at 1 April 2005 321,346 Non Enhancement Capital Expenditure (469) Restatments & Revaluations 11,725 Disposal of Fixed Assets (3,365) Balance as at 31March 2006 329,237

£’000 Balance as at 1 April 2005 150,871 2005-2006 Capital Financing :

- Capital Receipts (Usable) 5,536 - Revenue Contributions 22,849 - Deferred Charge Financing (2,041) - De Minimus Financing (1,116) - PFI Deferred Consideration Amortisation (2,209)

Fixed Asset Impairment Write Off Financing (952) Amortisation of Government Grants deferred 3,725 2005-2006 Minimum Revenue Provision (MRP) (less depreciation provision) (14,708) Long Term Loan Write Off Financing (812) Magistrates Courts Restatement 1,351 Prior Year Use of Credit Approval Restatement (1,804) Balance as at 31 March 2006 160,690

£’000 Balance as at 1 April 2005 4,111 Capital receipts in year 4,595 Capital receipts applied to finance capital expenditure (5,536) Capital receipts applied to Debt Premium (806) Balance as at 31 March 2006 2,364

37

Note 22 Statement of Total Movements on Reserves (continued) * These reserves are for specific purposes such as repairs and renewals, I.T. and computing renewals and upgrades, economic regeneration and corporate objectives (see Note (e)). ** This amount includes a sum £0.628m representing an amalgamation of overspend at 15 schools. Note (e) Other Usable Specific Reserves 2005-2006 2004-2005 £’000 £’000 Waste Disposal 244 73 Renewals and Repairs 3,222 3,372 Computers and IT 2,097 1,928 Consultancy 97 194 Matched Funding 1,301 1,151 Objective One 1,707 1,571 Premises and Accommodation 140 229 Redundancy 1,100 1,100 Social Services: - Doubletrees 0 50 - Mental Health 0 175 Capital Related 352 493 Democratic Representation 152 499 Partnerships/Joint Arrangements 697 703 Schools: - Small Loans Scheme 224 282 - Nursery Schools 93 93 Adult FEFC 2,877 2,833 School and Post 16 Transport 8 448 Fire Service Pensions 1,037 820 Insurance Premium 1,687 0 Interest Receipts Fluctuations 658 658 Pay & Grading 744 795 Local Committees 307 91 Fire Service Transitional Funding Loan 304 304 Revenue Support Grant Repayment 258 1,161 Customer Services Centre 0 380 Special Education 622 250 Children’s Service Transition 600 996 Other Usable Specific Reserves 3,392 2,667 Sub-total 23,920 23,316 P.F.I: - Development 250 250 - Grant Income Equalisation 28,199 24,279 - Contract Equalisation 0 132 Total 52,369 47,977

Note (f) County Fund - Usable Reserves General

Reserve

£’000

Budget Equalisation

Reserves £’000

Total

£’000 Balance as at 1 April 2005 9,558 4,441 13,999 Transfers (to)/from Revenue Account 0 1,069 1,069 Balances as at 31 March 2006 9,558 5,510 15,068

Note (g) FRS17 Pensions Reserve

£’000 Balance as at 1 April 2005 (269,600) Actuarial* loss relating to pensions (10,600) Transfer to Revenue Account (5,600) Balance as at 31 March 2006 (285,800)

38

Note 22 Statement of Total Movements on Reserves (continued) *The actuarial gains/(losses) identified as movements on the Pensions Reserve can be analysed into the following categories, measured as absolute amounts and as a percentage of assets or liabilities at 31 March. 2002-03 2003-04 2004-05 2005-06 £’000

% £’000 % £’000 % £’000 %

Differences between the expected and actual return on assets

(77,343) (28.6) 40,595 11.9 16,500 4.2 75,700 14.8

Differences between actuarial assumptions about liabilities and actual experience

(925) 0.2 (8,822) 1.6 18,100 2.7 (700) 0.1

Changes in the demographic and financial assumptions used to estimate liabilities

6,600 1.3 - - (107,439) 16.2 (85,600) 10.7

(71,668) 31,773 (72,839) (10,600) Note 23 Trust Fund Accounts The County Council Acts as sole or custodian trustee for numerous funds. These funds do not represent assets of the County Council and are therefore not included in the Consolidated Balance Sheet. Income and Expenditure for the year ended 31 March

2006 2005 Fowey

School Fund

St. Blazey School Fund

Criminal Injuries

Compensation Board

Other Funds

Total Total

£'000 £'000 £'000 £'000 £'000 £'000 (Income) (24) 0 (296) (2) (322) (50) Expenditure 1 0 111 0 112 3 Total (23) 0 (185) (2) (210) (47)

Value of Funds Assets

as at 31 March 2006 £'000

Liabilities as at 31 March

2006 £'000

Net Assets as at 31 March

2006 £’000

Net Assets as at 31 March

2005 £'000

Significant School Fund 563 0 563 540 Criminal Injuries Compensation Board 412 0 412 227 Other Funds 57 0 57 55

Total 1,032 0 1,032 822

The Fowey School Fund came from the sale of the former County Schools at Fowey. It is to be used for the benefit of children in the age group 5-14 who receive their education in Fowey. Other funds relate to numerous prize funds, endowments, scholarships and bequests which have been provided from gifts and legacies.

39

Note 24 Best Value Performance Plan 2005-2006 What we spent in 2005-06 compared to the spending plans in the 2005-06 plan.

What we planned to spend in the year 2005-06

£m

What we spent in 2005-06

£m

(Under) or over spend

£m

Main explanations for difference

Corporate Support & Leader Members, Corporate items, youth offending team, estate management and corporate support costs

4.2 0.4 (3.8) Underspend mainly on Leaders Contingency, this formed part of the non-earmarked underspends which were allocated by the Executive based upon a proposal from the Leader (£1.1m)

Net surplus on Interest Receipts / Capital Financing (£2.5m)

Increase in Estate Management charges £0.7m Increase in capital financing / capital reserve

reallocation (£3.7m) FRS17 pension adjustment, deferred charges and

Past Service Costs pension adjustment £2.8m Strategic Planning & Transport Planning policy and development control, highways maintenance, traffic management and road safety and support for public transport

46.5

52.0 5.5 Additional road maintenance £0.4m Reduction in capital financing costs due to lower

interest rates (£0.2m) Additional CORMAC profit (£0.3m) A39 Detrunking, slippage on improvement

schemes (£0.3m) Increased capital charges, Past Service Costs

pension adjustment, FRS 17 pension adjustment and Deferred Charges £5.9m

Environment & Heritage Countryside and historic environment, levies and payments, waste disposal and civic amenity sites

22.1 22.0 (0.1) Additional income for Waste Disposal (£0.1m)

Economy Economic development and tourism, county farms and agriculture

6.0 6.3 0.3 Increased deficit on Newquay Airport part funded from underspend on Economy pressures budget £0.3m

Use of Corporate Matching Funds Reserve not in budget £0.7m

Corporate Matching Funds carried forward to 2006/07 (£0.6m)

Reduction in Estate Management Charges (£0.1m) Public Protection Fire brigade, emergency planning, magistrates courts trading standards, registration service, and coroners

22.1 22.5 0.4 Increased Capital Charges £0.1m FRS 17 pension adjustment £0.3m

Adults Social work and other social services for adults, adult education

80.8 83.2 2.4 Overspend on adult social care, mainly additional residential placements £1.5m

FRS17 pension adjustment, deferred charges, Past Service Costs pension adjustment £0.9m

Children, Young People & Families Council schools, children’s social care, special education needs, early years service, continuing education,

329.5 331.6 2.1 Lower expenditure across a number of budgets especially those concerned with the transition to the new Children, Young People and Families Directorate (£1.4m)

Reduction in Estate Management Charges (£0.6m) Increased Capital Charges £1.9m FRS17 pension adjustment, deferred charges, Past

Service Costs pension adjustment £2.2m Community Services Libraries, Arts & Museums

7.4 7.3 (0.1) Reduced spend on IT / staffing budgets to assist with 2006/07 budget (£0.2m)

FRS 17 pension adjustment £0.1m

Net ‘Total’ Cost of Services 518.6 525.3 6.7 Adjustment for capital charges, deferred charges, reserves & income

-13.8 -25.1 (11.3) Underspends in this column are shown in (brackets)

COUNTY COUNCIL BUDGET 504.8 500.2 (4.6)

Note: What we planned to spend has been adjusted to reflect the transfer of the Children with a Disability budget from the Adults portfolio to the Children, Young People and Families portfolio (£7.3m).

40

Note 25 Publicity Expenditure

The Authority is required by Section 5.1(1) of the Local Government Act 1986 to provide details of its spending on publicity. The Act does not provide a clear definition of publicity, the following analysis shows the element of expenditure which is judged by the Authority to be relevant.

2005-2006 2004-2005 £'000 £'000

Employees Press & Publicity

Officers 184 156

Advertising Recruitment 729 975 Promotional and

Other Advertising 904 962

Other Costs 58 50

1,875 2,143 Note 26 Cashflow Statement

(i) Reconciliation of revenue cash flow

2005-2006 2004-2005 £’000 £’000 £’000 Surplus for the year (1,401) (1,467) Deduct Interest Paid (19,576) (15,248) Contributions (to)/from provisions and reserves (3,622) (2,445) Deduct contributions to capital outlay (22,849) (26,107) Deduct depreciation (25,261) (23,009) Add minimum revenue provision adjustment 14,708 13,300 (56,600) (53,509) Increase/(decrease) in debtors 15,663 14,217 Increase/(decrease) in long term debtors 1,914 (5,543) Increase/(decrease) in deferred premiums 20,522 0 (Increase)/decrease in creditors (1,777) 16,167 Increase/(decrease) in stock and Work in Progress 634 (158) 36,956 24,683 Deduct: Interest received 14,339 9,693 Revenue Activities net contributions (6,706) (20,600)

(ii) Reconciliation of net cash flow to the movement in net debt

£’000 Decrease in cash in the period (13,919) Cash inflow from increase in debt financing (148,075) Cash outflow from decrease in liquid resources 110,286 (51,708) Movement in net debt in the period Net debt at 1 April 2005 (150,827) Net debt as at 31 March 2006 (202,535)

(iii) Analysis of net debt

Balance as at 1 April 2005 £’000

Cash Flow

£’000

Balance as at 31 March 2006 £’000

Cash in hand and in transit 128 26 154 Cash overdrawn (18,145) (13,945) (32,090) Debt due after one year (273,262) (95,148) (368,410) Debt due within one year (18,818) (52,927) (71,745) Short term investments 65,479 (15,229) 50,250 Long term investments 93,791 125,515 219,306 (150,827) (51,708) (202,535)

41

Note 26 Cash Flow Statement (continued)

(iv) Other Government Grants and Contributions

2005- 2006 2004-2005 £'000 £'000 £'000 £'000

Education Services Standards Fund 36,632 32,381 Special Grant 8,746 8,228 Learning Skills Council 21,126 19,279 Private Finance Initiative Grant 10,894 13,915 Other 11,464 9,267

88,862 83,070

(iv) Other Government Grants and Contributions (continued) 2005-2006

£’000 2004-2005

£’000 Social Services Supporting People 14,332 15,350 Preserved Rights 4,312 5,780 Access & System Capacity 6,593 5,090 Health Services delivered by County Council 1,129 13,934 Residential Allowances 3,153 5,572 Other 7,733 9,540 37,252 55,266 Fire Service 2,009 2,535

Highways, Roads & Transport Services 2,314 2,782

Court Services Magistrates Courts 0 10,843

Cultural, Environmental & Planning Services 10,408 6,077

Central Services 880 2,672

141,725 163,245 Note 27 Officer Emoluments Under the Accounts and Audit Regulations, the Authority is required to disclose the number of staff, including teachers, whose remuneration falls within the following ranges.

Remuneration includes all amounts paid to or receivable by an employee including sums due by way of expense allowances and the estimated monetary value of any other benefits received by an employee otherwise than in cash (for example through a leased car).

The increase in staff numbers shown in this table is mainly due to the annual pay awards moving staff into the static remuneration bands. The numbers shown in the table will continue to grow each year because the remuneration levels are statutory and not adjusted to take into account the effects of inflation. Variations are also due to employees starting or leaving employment within the financial year.

2005-2006 2004-2005

Remuneration: No. of staff No. of staff

£50,001 - £60,000 102 59

£60,001 - £70,000 26 28

£70,001 - £80,000 15 13

£80,001 - £90,000 6 3

£90,001 - £100,000 2 1

£100,001 - £110,000 1 2

£110,001 - £120,000 0 1

£120,001 - £130,000 1 0

153 107

42

Note 28 Income & Expenditure Under The Local Authority (Goods & Services) Act 1970

The Authority is required to provide details of work carried out by Service Departments for other Public Bodies. The purpose of this disclosure is to show the extent to which the Authority is engaged in trading activities which would not otherwise be part of its function as a Local Authority. All Local Authorities are allowed to supply goods and services to a number of prescribed Public Bodies by the 1970 Act. The income and expenditure in respect of these activities is included in the Authority’s Consolidated Revenue Account. Details are shown overleaf.

2005-2006 2004-2005

£'000 £'000

Other Public Bodies:

Income (24,321) (26,150)

Expenditure 22,281 24,718

Net Surplus 2,040 1,432 Note 29 Agency Service Under a number of statutory powers the Authority completes certain works on behalf of other bodies. All expenditure is fully reimbursed by the entities concerned. Social Services The County Council administers money on behalf of the Primary Care Trusts under S28 and other agreements.

2005-2006 2004-2005

£'000 £'000

Income (12,316) (11,650)

Expenditure 12,316 11,650

Net Surplus 0 0

Note 30 Members Allowances The total amount of Members Allowances paid during the year is shown in the table below.

2005-2006 2004-2005

£'000 £'000

Amounts paid during year:

Basic Allowance 826 779

Special Allowances 118 119

Subsistence 13 19

957 917 Note 31 Significant Commitments Under Capital Contracts as at 31 March, 2006

£’000 Expenditure Approved and Contracted 72,959 Expenditure Approved but not yet Contracted 68,411

As At 31 March, 2005

£’000 Expenditure Approved and Contracted 43,266 Expenditure Approved but not yet Contracted 55,653

43

Note 32 Pensions Costs

The Accounting Code of Practice requires the costs of providing pensions to be charged to the accounts in accordance with the statutory requirements covering the respective funds to which the employees belong. The disclosures required cover the nature of the scheme, the pensions costs charged, details of any discretionary payments, the pensions costs that would have been charged to the accounts on a FRS17 basis, details of the latest actuarial valuation and capital costs of any discretionary increases in pension payments.

Pensions are provided for all full-time County Council employees under the requirements of statutory regulations. In certain circumstances these regulations extend to cover part-time employees. The principal schemes in operation are: Teachers

This is a defined benefit scheme administered by the Department for Education and Skills (DfES). Although the scheme is unfunded, the Department has established a notional fund as the basis of calculating the employer contribution. The Council contributed at a rate of 13.5% in 2005-2006 totalling £17.8m (£16.8m in 2004-2005) and is also responsible for any pension costs relating to added years and associated inflation increases, totalling £1.477m in 2005-2006 (£1.478m in 2004-2005). Additionally, the Council is responsible for paying for a percentage of the statutory benefits previously funded by the DfES in cases of early retirement, which amounted to £0.969m in 2005-2006 (£0.954m in 2004-2005). Uniformed Fire-fighters

The Pension Scheme for fire-fighters is unfunded. As such, the net cost of pensions is charged to the Fire Service’s Revenue Account, after allowing for contributions made by employees for the year. In 2005-2006, the net cost of pensions amounted to £2.3m, representing 35.57% (35.57% in 2004-05) of pensionable pay. Other Employees

In 2005-2006 the Council paid an employer’s contribution of £22.6m into the Pension Fund representing 18.4% of pensionable pay. The contribution rate is determined by the Fund’s Actuary based on the triennial valuations (the last review being at 31 March 2004 with an effective date of 1 April 2005). Under Pension Fund Regulations, contributions are set to meet 100% of the overall liabilities of the Fund (UK GAAP). The results of the 2004 valuation show that at 31 March 2004 for the whole fund there was an overall shortfall of £178.9m which means that the Fund has assets equivalent to 78.0% of its liabilities. To make up the deficit requires an additional employer’s contribution of 6.0% of pensionable pay if recovery of the deficit is targeted over a period of 20 years. To meet the cost to the Fund of any early retirements before the next actuarial valuation, the Council is contributing an additional 1% of pension pay. For 2005-06 this amounted to £1.23m. The Council is also responsible for all pension payments relating to added years together with the related increases. In 2005-2006 these amounted to £1.460m (2004-2005 £1.394m), representing 1.19% (2004-2005 1.23%) of pensionable pay. The capital cost of any discretionary increases in pensions payments (added years, Statutory Benefits and graduates, including those made to teachers) agreed by the authority is £68.3m (£23.5m for Local Government Pension Scheme and £44.8m for teachers). (2004-2005 £21.9m for Local Government Pension Scheme and £39.4m for Teachers). Further information can be found in the Council’s Pension Fund Annual Report, which is available upon request from the County Treasurer’s Department, County Hall, Truro, TR1 3AY.

44

Note 33 Major Fixed Assets

The Authority is required to disclose details of the major fixed assets which support its functions. The following table shows the number of each type of asset, as at 31 March, 2006

Land Land in Council Ownership:- (Approx) Farms 4,598 ha All other purposes 1,636 ha Jointly held with other authorities 395 ha

Property (Number) Education: Schools - Nursery 2 - Primary (excluding VA and VC Schools) 197 - VC Schools 8 - VA Playing Fields etc 37 - Secondary 31 - Special 4 Horticultural Education Establishments 2 Youth Centres and Related Establishments 11 Outdoor Education Centres and Stores 5 Adult Education Centres 9

Fire Stations 31

Highway Depots 29 Refuse sites (including closed but not being monitored) 15 Civic Amenity Sites 6 Waste Transfer Stations 2 Libraries 29 Museums and Galleries 2 Magistrates Courts 6 Offices/Administrative Buildings 74 Aerodromes/Airports 1 Country Parks 3 Camel Trail/Picnic Areas 2 Stores/Workshops (not highways depots) 6 Park and Ride Car Parks 2 Non-Operational, Surplus Properties 12 Non-Operational, let or Investment Properties 14 Non-Operational, or indirect service properties - held for service 34

Social Services: Hostels and Other Homes 5 Family and Day Care Centres 23 Respite Care Facilities 5 Training Centres 10 Gypsy Sites 3

Infrastructure Highway Authority Roads 7,243 Km

Vehicles, Plant and Equipment

Fire Brigade: Operational Vehicles 89 Cars and Vans 106

Central Transport Organisation: Equipment hired to other departments

- Lease and provided cars (owned by CCC) 381 - Vehicles and Plant 1,697

45

Note 34 Leases The Authority is required to disclose the amounts of any finance and operating lease rentals paid to lessors in the year, and an estimate of the undischarged obligations at year end.

Rentals paid in 2005-06

£’000

* Outstanding Obligations 31 March,

2006 £’000

Rentals paid in 2004-05

£’000

Finance Leases 114 161 123 Operating Leases 1,520 8,013 921

* Outstanding

Obligations 31 March, 2006

Due within 1 Year

£’000

Due within 2 to 5 Years £’000

Due after 5 Years

£’000 Finance Leases 89 72 0 Operating Leases 1,688 3,447 2,878

Rentals

Receivable in 2005-2006

Rentals Receivable in 2004-2005

£'000 £'000

Finance Leases 0 0

Operating Leases 214 779

214 779

Finance Leases – Gross Book Value and Accumulated Depreciation. 31 March 2006 31 March 2005 Gross Book

Value £’000

Accumul- ated

Depreciation £’000

Gross Book Value £’000

Accumul- ated

Depreciation £’000

Land and Buildings 0 0 0 0 Vehicles, Plant and Equipment 502 246 454 101 502 246 454 101

Note 35 Long Term Contracts Private Finance Initiative (PFI) Schemes Developed to complement the disclosures about leases, a note is required about the contracts under which the authority has committed revenue resources for future financial years. The Council in 2001-02 entered into the following PFI contracts for the supply of services accommodation. Payments under the contract and receipt of special grant support from the Government commenced in 2002-03.

Scheme Period 2005-06 Cash Value

(£m)

Year Of Operation

Cornwall Grouped Schools 1

25 Years 209.967 5

Cornwall Fire Station

27 Years 47.021 5

Cornwall Grouped Schools 2

28 Years 228.888 2

Note 36 Private Finance Initiative (PFI) Schemes The Council entered into contracts for two PFI Schemes at the end of March 2001. The first payments under these contracts became due on August 2001. An Education Scheme covers the unification of four split site secondary schools onto single sites, refurbishment and backlog maintenance to the schools and their associated primary school clusters including the replacement of two schools with new buildings, the combination of two primary schools in one new building and the substantial redevelopment of another school to combine infant and junior age ranges in an extended building. It also covers facilities management services and lifecycle maintenance for a period of twenty five years. The other scheme, the Fire Service Scheme, covers the facilities management and repair and maintenance of the Council’s 31 Fire

46

Note 36 Private Finance Initiative (PFI) Schemes (continued) Stations for a period of twenty seven years. It includes the construction of ten new fire stations and the substantial refurbishment of two others, the back log repairs for the whole estate, and some related support officer functions. Schools’ PFI 2 The County Council entered into a second schools’ PFI contract to relocate one secondary school and one primary school in new buildings, and to refurbish and extend sixteen further primary schools in the Truro and Penryn areas. The contract was commercially closed on 31st March 2004 and limited services started on that date. The effective date for the transfer of responsibility for the properties was 7 June 2004. The Executive Committee agreed on 24 January 2001 to ring-fence any surplus PFI Schemes income in Specific Reserves due to timing differences between matching income and expenditure. Note 37 FRS17 Pension Scheme Assets and Liabilities In accordance with the requirements of Financial Reporting Standard No 17 – Retirement Benefits (FRS17) the Council has to disclose its share of assets and liabilities related to Pension Schemes for its employees. As explained in a Note to the Consolidated Revenue Account, the Cornwall County Council Pension Scheme is governed by regulations made under the Superannuation Act 1972. This scheme is administered by the County Treasurer on behalf of the County Council, the six district Councils in the County and various other organisations which have been admitted to the schemes. In addition the Authority has made arrangements for the payment of added years to certain retired employees outside the provisions of the scheme. The Fire fighters Pension Scheme is an unfunded scheme. There is no fund and pension payments are made as they fall due. The Cornwall County Council pension scheme was last formally valued for actuarial purposes as at 31 March 2001, (an interim valuation was carried out in September 2003). As at 31 March 2006, the Authority had the following net pensions liability which has been included in the balance sheet under the disclosure requirements of the FRS.

The net pensions liability of £285.8m (2004-05 £269.6m) should be considered alongside the Council’s overall level of County Fund reserve £15.068m (2004-05 £13.999m) and total assets less liabilities of £404.619m as at 31 March 2006 (£398.546m 31 March 2005) Liabilities have been assessed on an actuarial basis using the projected unit method which assesses the future liabilities of the fund discounted on their present value. Both the Fire fighters and the County Council Fund liabilities have been valued by Hymans Robertson and Company, an independent firm of actuaries. Discretionary payment liabilities have been calculated by the Council’s Pension Fund Section. Assets in the County Council Pension Fund are valued at a fair value, principally market value for investments, and consists of the following categories, by proportion:

The Authorities Assets and liabilities Are: 2006 £’000

2005 £’000

Estimated Liabilities in Firefighters Pension Arrangements 99,300 85,500 Estimated Liabilities in County Council Fund 629,200 517,100 Estimated Unfunded Liabilities 68,300 61,300 Total Liabilities 796,800 663,900 Share of Assets in County Council Fund 511,000 394,300 Net Pensions Deficit 285,800 269,600

47

Note 37 FRS17 Pension Scheme Assets and Liabilities (continued)

The movement in the net pensions deficit for the year can be analysed as follows:

Cornwall County Council

£’000

Fire Fighters

£’000

Total

£’000 Net deficit at beginning of year (184,100) (85,500) (269,600) Movement in year: Current Service cost (21,200) (2,600) (23,800) Contributions 22,500 2,500 25,000 Unfunded benefits contributions 4,000 0 4,000 Past service costs (100) 0 (100) Impact of settlements and curtailments (2,700) 0 (2,700) Transfers to/(from) other authorities 0 100 100 Finance income - expected return on Pension Fund assets 28,000 0 28,000 - interest on pension liabilities (31,500) (4,600) (36,100) (185,100) (90,100) (275,200) Actuarial gain/(loss) (see below) (1,400) (9,200) (10,600) Net pension deficit at end of year (186,500) (99,300) (285,800) The actuarial gain/(loss) can be further analysed as follows:

Differences between the expected and actual return on pension fund assets

75,700 0 75,700

Value of Assets 511,000 0 511,000 Percentage of Scheme Assets 14.8% 0 Differences between actuarial assumptions about liabilities and actual experience

(1,200) 500 (700)

Total present value of Liabilities (697,500) (99,300) (796,800) Percentage of the present value of liabilities (0.2%) 0.5% Actuarial Gains/(Losses) recognised in STMR (1,400) (9,200) (10,600) Note 38 Consortium for Purchasing and Distribution (CPD)

The County Council became a member of the CPD in 1973 with nine other member authorities. The CPD was run by Wiltshire County Council until October 1995 when the business was transferred, under a management buy out, to Hammond Bridge Limited. Cornwall County Council’s share of the initial working capital of the CPD amounted to £55,217 which was met from revenue. However, at the date of transfer to the new company this initial sum had increased in value to £312,650 which is being repaid, together with interest, in 14 equal instalments from 31 March 1999 to 30 September 2005.

31 March

2006 %

2005 %

Equity Investments 74.3 72.8 Bonds 12.7 14.5 Other Assets: Property 9.7 9.7 Cash 3.3 3.0 Total 100.0 100.0

Actuarial assumptions Cornwall County Council

%

Fire Fighters Pension

Arrangements %

2006

2005 2006 2005

Rate of Inflation 3.1 2.9 3.1 2.9 Rate of increase in salaries 5.1 4.9 4.6 4.4 Proportion of employees opting to take a commuted lump sum

0 n/a n/a n/a

Rate of increase in pensions 3.1 2.9 3.1 2.9 Rate for discounting scheme liabilities 4.9 5.4 4.9 5.4

48

Note 39 Foundation Schools

The School Standards and Framework Act 1998 changed the status of Grant maintained schools to Foundation Schools maintained by the Local Education Authority. The change for funding purposes took effect from 1 April 1999. This change has resulted in the inclusion of opening and closing balances for current assets and liabilities controlled by Foundation Schools in the consolidated balance sheet. Fixed assets and long term liabilities remain vested in the Governing Bodies of individual Foundation Schools and therefore values and amounts have not been consolidated in this balance sheet.

Note 40 Analysis of Net Assets

The Accounting Code of Practice requires disclosure of the Authority’s overall net asset position with regards to the General Fund, Joint Committees and other trading undertakings.

31 March 2006 31 March 2005

Net Fixed Assets £'000

Net Fixed Assets £'000

Cornwall County Council 402,895 396,970

Trading Services:

CORMAC 1,452 1,275

Mechanical Engineering Workshops 88 88

Catering, Cleaning and Grounds 184 213

Total as per Consolidated Balance Sheet 404,619 398,546

Note 41 Audit Commission Fees

Fees payable to the Audit Commission with regard to:

31March 2006 £’000

31 March 2005 £’000

External audit services carried out by the appointed auditor under the Audit Commission’s Code of Audit Practice in accordance with Section 5 of the Audit Commission Act 1998

128 161

Statutory inspection under Section 10 of the Local Government Act 1999

8 8

Certification of grant claims and returns by the appointed auditor under Section 28 of the Audit Commission Act 1998

20 40

Any other services provided by the appointed auditor not disclosed above

0 0

Total 156 209

Note 42 Contingent Liabilities/ Post Balance Sheet Events

Contingent Liabilities If a Local Authority has acquired or discontinued any operations with material effect then a note is required explaining that has taken place. Where operations are disclosed, the note should detail any outstanding liabilities that still remain for these services. i) The County Council’s Liability in Respect of Waste Disposal Sites For closed sites, which are the County Council’s direct responsibility, the valuer has estimated the restoration costs over a 20 year period to be £1.9m. The Planning and Transport Portfolio’s revenue budget includes £0.322m p.a. for maintaining and restoring closed sites. With respect to operational sites which were transferred to County Environmental Services Ltd, (CES), the Company makes provision in its accounts for both restoration and aftercare costs, as required by Financial Reporting Standard (FRS) 12. In addition to these liabilities the County Council has given CES a limited and reducing indemnity against environmental impairment arising from the sites transferred on vesting.

49

Note 42 Contingent Liabilities/ Post Balance Sheet Events (continued)

No assessment can be made of any possible liability because (based on the advice of KPMG) these are contingent liabilities and should not be brought into account.

ii) Integrated Waste Management (IWM) and County Environmental Services (CES)

Currently, the Council discharges its responsibility for waste disposal through a contract with County Environmental Services Limited (CES). CES is a company limited by shares wholly owned by the County Council. It operates on an “arms length” basis.

The existing contract was awarded in 1992 and runs to 2013. CES also operate the current Civic Amenity Sites Contract which is due to expire at the end of September 2006.

The Council is proposing to let a major contract for IWM procured with the assistance of Private Finance Initiative (PFI) support from the Government. It is now expected that the IWM contract will commence in September 2006. The letting of the IWM will require the termination of the existing waste disposal contract with CES.

In recognition of the impact the termination of the existing waste disposal contract will have on CES’s ability to trade and meet its long term liabilities the County Council agreed on 26 October 2004 to provide CES with a working capital facility of £1,000,000 and to underwrite its liabilities. The detailed terms of the underwrite are still to be finalised with the CES Board. CES liabilities relate particularly to its pension fund, the providers of lease finance to it, and to provide for reinstatement and aftercare of the landfill sites it uses. On the basis that the underwrite was in place the external auditors for CES certified the company’s accounts for the year ending 31 August 2004 on a going concern basis. The County Council will assess any potential call on the indemnity as part of the financial assessment of the value for money case for the IWM contract. The external auditors have not yet certified the company’s accounts for the year ending 31 August 2005 on a going concern basis.

iii) Section 117 Mental Health Act 1983

Section 117 of the Mental Health Act 1983 requires the provision of aftercare services for any person who has been discharged from compulsory detention in hospital until such time as the authority is satisfied that the person concerned no longer needs such services.

In common with other authorities, Cornwall made charges for aftercare services for people in residential accommodation. Recent clarification of the law has confirmed that charges may not be made for these services. The Council is required to reimburse people who have either paid the Council for these services or funded their own accommodation.

The Local Government Ombudsman published a report on 18 July 2003 which provided guidance to Authorities on the process of ensuring reimbursements are made to those people who have been improperly charged. This requires the Council to be proactive in identifying those who have paid for aftercare services. While all cases supported by the Council can be dealt with, there are likely to be a number of people who have self funded their costs who are eligible to claim against the Council for these costs. The number of these cases has been established and the potential costs assimilated. To date these costs have been contained within the existing revenue budget. No assessment can be made of any possible liability as at present.

iv) FRS17 Pensions Liabilities – Changes to the local government pension scheme

Changes to the Local Government Pension Scheme permit employees retiring on or after 6 April 2006 to take an increase in their lump sum payment on retirement in exchange for a reduction in their future annual pension. On the advice of our actuaries we have taken the view that there is insufficiently reliable evidence to assume a level of take-up of the change in the pension scheme. Consequently the valuation of the Council’s retirement benefit liabilities as at 31 March 2006 does not include any allowance for this change to the pension scheme.

Note 43 Related Party Transactions

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

Central Government has effective control over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has

50

Note 43 Related Party Transactions (continued) with other parties. Details of transactions with government departments are set out in a note to the Cash Flow Statement. Members of the Council have direct control over the Council’s financial and operating policies. If a Member declares an interest in a transaction which involves the Council, these transactions are recorded in the Register of Members’ Interests, open to public inspection at County Hall, Truro.

Officers - under the requirements of the Local Government Act 2000, the Council has developed a Code of Conduct for officers and established a Register of Officers interests from April 2002.

Non-Section 31 Pooled Budgets:

Camborne Pool Redruth Urban Regeneration Company (CPR URC)


arrangement


arrangement


Identities of partner bodies: £’000 £’000 £’000 Camborne Pool Redruth Urban Regeneration Company (CPR URC) Cornwall County Council English Partnerships Kerrier District Council Princes Foundation South West Regional Development Agency

Total (1,275) 1,400 125 Cornwall and Isles of Scilly Drug and Alcohol Action Team


arrangement


arrangement


Identities of partner bodies: £’000 £’000 £’000 Cornwall County Council Central Cornwall Primary Care Trust North and East Primary Care Trust Devon and Cornwall Constabulary Cornwall Community Safety Partnership Carrick District Council Penwith District Council Cornwall Partnership Trust Isles of Scilly Authority Devon and Cornwall Probation Service

Total (5,400) 5,400 7

Other public bodies and Assisted Organisations – the Council is involved in partnerships and other forms of joint working arrangements with several organisations. The major involvements are as follows:

South West Initiative for Training


arrangement


arrangement


Identities of partner bodies: £’000 £’000 £’000 Plymouth University College of St Mark and St John Plymouth LEA Devon LEA Torbay LEA South Somerset LEA Dorset LEA

Total (1,321) 310 -

51

Note 43 Related Party Transactions (continued)

Youth Offending Team Gross income of the joint working

arrangement


arrangement


Identities of partner bodies: £’000 £’000 £’000 Devon & Cornwall Police Devon & Cornwall Probation Cornwall & I.O.S. Health Authority Devon & Cornwall Magistrates

Total (1,370) 701 669

Sure Start Schemes Gross income of

the joint working arrangement


arrangement


Identities of partner bodies: £’000 £’000 £’000 WILD Young Parents Plymouth University West Cornwall Primary Care Trust Carrick District Council Central Cornwall Primary Care Trust NSPCC Speakeasy Churches together in Camborne Camborne Pool Redruth Success Zone

Total (14,342) 14,342 - St. Austell Public Transport Interchange Steering Group


arrangement


arrangement


Identities of partner bodies: £’000 £’000 £’000 South West Regional Development Agency First Devon and Cornwall Restormel Borough Council Network Rail Wessex Trains Rail Passengers Committee Western England Eden Project

Total (2,500) 2,500 850 Pension Fund – during the financial year, the pension fund had an average balance of £10.668m of surplus cash deposited within the Council. The Council paid the fund a total for interest of £0.488m (£0.221m in 2004-2005) on these deposits. The Council charged the fund £0.547m in 2005-2006 (£0.516m for 2004-2005) for expenses incurred in administering the fund.

Assisted Organisations.- there are two disclosures: The County Treasurer sits on the Board of Finance Cornwall which received a grant of £180,000 from Cornwall County Council in 2005-06; The Director of Children, Young People and Families sits on the Board of the Bishops Forum which received income of £29,000 from Cornwall County Council in 2005-06; Companies and joint ventures – the Council has substantial interests in companies and relevant transactions are disclosed in the relevant disclosure note on Group Accounts.

During the year, none of the Members of the Council nor any of the Chief Officers, nor any persons related to them, have had any material transactions with the Authority. Joint Committees – the Council jointly administers the Tamar Bridge/Torpoint Ferry Joint Committee with Plymouth City Council. Relevant transactions are disclosed in the financial statements. Local Government – the Council precepts the six district/borough councils in Cornwall. Relevant transactions are disclosed in the financial statements.

52

Note 44 Statement of Accounts – Authorisation for issue The Statement of Accounts was authorised for issue by the County Treasurer on 30 September 2006.

53

AAddddiittiioonnaall FFiinnaanncciiaall

SSttaatteemmeennttss

Additional Financial Statements

54


55

Group Financial Statements A major change to the 2005 SORP is modified Group Accounting requirements. These require the County Council to consider all their interests (including those in other local authorities and similar bodies), and to prepare a full set of group financial statements where they have material interests in subsidiaries, associates or joint ventures. The group financial statements will be comprised of a revenue account, balance sheet, statement of realised gains and losses, cashflow statement, and relevant notes to accounts. Any exceptions to the County Council’s accounting policies disclosed elsewhere will also be included. The Group Accounts have been prepared according to the 2004 SORP’s modified Group Accounts requirements. For 2005-06, the SORP requires comparative figures to be disclosed in the group financial statements. The County Council’s interests have been determined as follows: County Environmental Services Ltd – Subsidiary Cornwall Enterprise Company (includes Rural Economic Partnership Ltd.) – Subsidiary Kehelland Horticultural Centre Ltd. – Subsidiary Cornwall Paper Company – Associate to end of December 2005 – then became a Subsidiary Subsidiaries have been consolidated on a line by line basis in accordance with FRS 2. The equity method has been used when consolidating associates in accordance with FRS 9. The County Council accounts have been prepared under FRS17 Accounting for Pension Costs. The accounts of CES Ltd, CEC Ltd and REP Ltd have disclosed FRS17 balances and transactions where relevant.

County Environmental Services Ltd This Authority owns 100% of the issued share capital of County Environmental Services Limited (CES Ltd), a company set up in 1991 as an arms-length company of the County Council, whose principal activity is the provision of waste disposal facilities by the operation and management of landfill sites. The company has various subsidiary undertakings providing transport and waste disposal/consultancy services and has participating interests in training and insurance services. The accounting year end of CES Ltd is 31 August. For the purpose of consolidation, the statutory group accounts prepared as at 31 August 2005, have been amended to reflect transactions for the period 1 September 2005 to 31 March 2006. These modified group accounts as at 31 March 2006 have been used to prepare the County Council’s group financial statements. County Environmental Services Limited (CES Ltd) was incorporated on 12 June 1991 as an arms-length company of the County Council with an authorised share capital of 100 £1 shares. Two shares were initially issued, one to the County Council and the other to an employee as a nominee shareholder for the Authority. The principal activity of the company is the provision of waste disposal facilities by the operation and management of landfill sites. Modified Group accounts of the company for the year ended 31 March 2006 show profits of £506,000 and net assets of £6,573,000. The County Council holds 3,093,248 ordinary shares in CES Ltd being 100% of the issued Share Capital (see notes to the balance sheet). As at 31 March 2006, the net indebtedness of the County Council to CES Ltd, was £1,285,000. The accounts of the company can be obtained from the company’s registered office at United Downs, St Day, Redruth, Cornwall, TR16 5HU. Cornwall Enterprise Company

Cornwall Enterprise Company (CEC) was incorporated on 17 November 1998 and commenced trading on 1 April 1999 and is limited by guarantee whose sole guarantor is Cornwall County Council. On incorporation the company became a wholly owned subsidiary of Cornwall County Council. The company is a local authority company controlled by Cornwall County Council.

The principal activity of the company is the undertaking of activities which are focused on achieving prosperity for Cornwall. These activities cover the promotion of the County for visitors and investors, the management of programmes of public sector funds, the development of new projects and advice and information to project promoters, a variety of services to businesses and organisations.

On 1 April 1999, CEC acquired 100% of the ordinary share capital of Rural Economic Partnership Ltd (REP), a company incorporated in England. The Company’s principal activity has been to deliver West Cornwall LEADER Project on behalf of partners in the area. The delivery of this Project is now complete


56

except for the conclusion of financial monitoring and audit. On conclusion of the audit the company is to become an investment property company operating the assets provided by the Project.

The Statutory Accounts of CEC and REP have not yet been completed and modified management accounts for the year ended 31 March 2006 have been used to prepare the County Council’s group financial statements. The accounts of Cornwall Enterprise Company for the year ended 31 March 2006 show profits of £58,000. The accounts of the Rural Economic Partnership Ltd for the year ended 31 March 2006 showed a profit of £3,000. As at 31 March 2006 the net indebtedness of Cornwall County Council to CEC and REP was £353,000. The accounts of the company can be obtained from the registered office at Pydar House, Pydar Street, Truro, Cornwall, TR1 1EA. Kehelland Horticultural Centre Ltd Kehelland Horticultural Centre Ltd is a charitable company limited by guarantee, incorporated on 13 April 1983 and registered as a charity on 20 January 1984. The company was incorporated with the object of affording relief of persons who are physically or mentally handicapped, and provides training and sheltered employment in all country pursuits. Management Accounts for the year ended 31 March 2006 have been used for inclusion in the County Council’s Group Accounts. The registered office and operation address of the company is Kehelland Horticultural Centre, Kehelland, Camborne, Cornwall, TR14 ODD. Cornwall Paper Company Ltd In March 2004, the County Council resolved to acquire a share holding in Cornwall Paper Company Ltd (CPC). On 2 July 2004 the County Council entered into a Sale and Purchase Agreement. The company was valued at £2,000,000 using accounts for the year ended 31 March 2004 and other valuation bases. Under this agreement, the County Council immediately acquired a 40% shareholding in CPC for a consideration of £800,000. Under the terms of the agreement the County Council, or it’s approved agent (i.e. the successful Integrated Waste Management PFI contractor, if appointed), had to acquire the remaining 60% of the shares, for a consideration of £1,200,000 on or before 31 March 2006. The Council acquired the remaining 60% of the shares at the end of December 2005. As at 31 March 2006 the net indebtedness of Cornwall County Council to CPC was £25,000. The principal activities of the company are waste paper recycling and retailing of paper and packaging products. Joint Venture The Tamar Bridge and Torpoint Ferry Joint Committee is jointly administered by Cornwall County Council and Plymouth City Council. Cornwall County Council’s share of the Joint Committee’s financial statements have been included in the Council’s Group Financial Statements using the gross equity method.


57

Group Consolidated Revenue Account

(150) Profit on Disposal of Assets (1,203) 0 0 (1,203)

2004-2005

2005-2006

Net Expenditure

£’000

Service Expenditure Analysis

Gross Expenditure

£’000

Specific Grants £’000


Net Expenditure

£’000

Note No:

249,211 Education Services 371,332 (88,862) (15,302) 267,168 112,225 Social Services 196,294 (37,252) (35,731) 123,311 1 18,315 Fire Services 22,261 (2,009) (240) 20,012 33,846 Highways, Roads & Transport

Services 40,353 (2,314) (3,487) 34,552

1,047 Court Services 769 0 (72) 697 36,096 Cultural, Environmental &

Planning Services 72,286 (10,408) (25,422) 36,456 2

7,232 Central Services 18,489 (880) (7,498) 10,111 3 (2,997) Government Grants Amortised (3,725) 0 0 (3,725)

666 Share of the Operating Results of Joint Venture

4,210 0 (3,367) 843

455,491 Net Cost of Services 721,066 (141,725) (91,119) 488,222 Other Operating Expenditure

(3,930) Net (Surplus)/Deficit on Trading Services (4,919) 30,051 FRS17 Interest Cost (Pensions) 36,618 4

(25,017) FRS17 Expected Return on Assets (Pensions) (28,479) 5 (2) Share of Joint Venture FRS17 Expected Return on Assets (Pensions) 5 13 Share of loss in Joint Venture 228 6 (7) Minority Interest 9 10

361 Corporation Tax 458 7 3 Share of Joint Venture Impairment Losses 0

15,248 External Interest Charges 20,382 182 Share of Joint Venture External Interest Charges 402

(9,733) Interest and Investment Income (14,384) 8 (70) Share of Joint Venture Interest and Investment Income (171)

462,590 Net Operating Expenditure 498,371 Appropriations

8,591 Contributions to/(from) Capital Financing Account 5,548 (1,843) Share of Joint Venture Contributions to/(from) Capital Financing Account (2,069) (1,163) Contributions to/(from) FRS17 Pensions Reserve (5,620) 9

22 Share of Joint Venture Contributions to/(from) FRS17 Pensions Reserve (14) 2,240 Contributions to/(from) repairs, capital, renewals and other earmarked reserves 4,531

0 Transfer from Unapplied Capital Receipts to repay debt premium (806) 572 Transfer to Unapplied Capital Receipts 4,568

(422) Transfer from Fixed Asset Restatement Account (3,365)

470,587 Amounts to be met from Government Grants and Local Taxation 501,144 This was financed by:

(153,707) - Council Tax Income (162,010) (132,534) - Non-domestic rate income (161,556) (187,387) - Revenue Support Grant (180,395)

(473,628) Total Sources of Financing (503,961)

(3,041) (Surplus)/Deficit for Year (2,817) 11


58

Group Consolidated Balance Sheet

2006 2005 Note £’000 £’000 £’000 No: Net Fixed Assets Intangible Fixed Assets (128) 0 Tangible Fixed Assets Operational Assets Other land and buildings 580,209 549,902 Vehicles, plant, furniture & equipment 21,825 20,082 Infrastructure 207,497 181,385 Community Assets 2,289 2,289 Non-operational assets Surplus Assets, held for disposal 40,322 6,671 Assets under construction 12,083 34,311 Total Net Fixed Assets 864,097 794,640 12 PFI Scheme Deferred Consideration 43,744 45,953 PFI Scheme Residual Values 12,864 8,984 Investment in Associate 0 800 Long Term Investments 213,687 90,034 13 Long Term Debtors 6,612 4,698 Share in Gross Assets of Joint Venture 119,634 116,552 Share in Gross Liabilities of Joint Venture (12,498) (7,740) Total Long Term Assets 1,248,140 1,053,921 Current Assets Stocks and Work in Progress 3,022 2,354 14 Debtors and Payments in advance 57,765 45,325 15 Short Term Temporary Investments 50,250 65,479 Cash in hand and in transit 154 128 Total Current Assets 111,191 113,286 Current Liabilities Short Term Borrowing (71,745) (18,818) Creditors (70,263) (62,459) 16 Cash Overdrawn (28,780) (16,142) 17 Total Current Liabilities (170,788) (97,419) (59,597) 15,867 Total Assets less Current Liabilities 1,188,543 1,069,788 Long Term Borrowing (368,410) (273,262) FRS17 Pensions Liability (288,678) (272,058) 18 Creditors due after one year (1,218) (1,359) Provisions (16,231) (13,502) 19 (674,537) (560,181) Total Assets less Liabilities 514,006 509,607 Represented by: Deferred Premiums (28,284) (7,762) Government Grants Deferred Account 119,270 98,317 Capital Grant Unapplied 7,497 7,549 FRS17 Pensions Reserve (288,678) (272,058) 18 Share of Joint Venture FRS17 Pensions Reserve (1,044) (1,073) Fixed Asset Restatement Account 329,237 321,346

Share of Joint Venture Fixed Asset Restatement Account

95,293 95,943

Capital Financing Account 160,690 150,871 Share of Joint Venture Capital Financing Account 11,077 13,135 Reserves - Other Specific 84,577 79,715 - Usable Capital Receipts 2,364 4,111 Revenue Balances County Fund – Usable Reserves 14,998 14,080 20 Profit & Loss Accounts 5,165 4,601 20 Share of Joint Venture General Fund 1,810 807 Minority Interests 34 25 21 Total Equity 514,006 509,607


59

Group Statement of Total Movements in Reserves The statement of total movements in reserves brings together all the recognised gains and losses of the authority during the period and identifies those which have and have not been recognised in the Consolidated Revenue Account. The statement separates the movements between revenue and capital reserves. 2005-06 2004-05 £’000 £’000 £’000 £’000 Surplus/(deficit) for the year 1,813 1,999 Add back movements on specific revenue reserve

4,531 2,240

Movement on Minority Interest 9 (7) Movement on Deferred Premiums

(20,522) 0

Share of movement of Joint Venture

(1,676) 0

Movement on FRS17 Pension Reserve

(5,620) (1,163)

FRS17 Actuarial gains/(losses) (11,000) (72,988) Total increase/(decrease) in revenue resources

(32,465) (69,919)

Increase/(decrease) in usable capital receipts

(1,747) (1,420)

Increase/(decrease) in unapplied capital grants and contributions

(52) (734)

Total increase/(decrease) in realised capital resources (note i)

(1,799) (2,154)

Gains/(losses) on revaluation of fixed assets

11,256 3,279

Impairment losses on fixed assets due to general changes in prices

0 0

Total increase/(decrease) in unrealised value of fixed assets (note ii)

11,256 3,279

Value of assets sold, disposed of or decommissioned (note iii)

(3,365) (422)

Credit Approval Restatement (1,804) 0 Capital receipts set aside 5,536 2,388 Revenue resources set aside 4,736 8,195 Movement on Grants in year 22,304 19,375 Total Increase/(decrease) in amounts set aside to finance capital investment (note iv)

30,772 29,958

Total recognised gains and losses

4,399 (39,258)


60

Group Cash Flow Statement 2006 2005 Note £’000 £’000 £’000 No: Revenue Activities Cash Outflows 788,696 778,051 Cash inflows Council Tax (162,010) (153,707) Non-Domestic Rates (161,556) (132,534) Revenue Support Grant (180,395) (187,387) Other Government Grants (142,325) (163,245) Cash Received from Goods or Services (155,574) (160,614) (801,860) (797,487) Revenue Activities net cash flow (13,164) (19,436) 22 Servicing of Finance Cash Outflows Interest paid 15,303 12,567 Cash Inflows Interest Received (19,869) (13,226) (4,566) (659) (17,730) (20,095) Capital Activities Cash Outflows Purchase of fixed assets 105,261 91,873 Other capital cash payments 0 0 105,261 91,873 Cash Inflows Sale of fixed assets (2,980) (572) Other capital cash income 0 0 Capital grants received (31,488) (27,595) (34,468) (28,167) 70,793 63,706 Net Cash outflow before financing 53,063 43,611 22 Financing Cash Outflows Repayments of amounts borrowed 169,758 53,108 Short Term Investments (15,229) (51,671) Long Term Investments 122,853 80,836 Cash Inflows New Loans Raised (317,833) (114,350) (40,451) (32,077) Decrease in cash 12,612 11,534 22


61

Notes to Group Financial Statements The following notes provide more detailed information in order to assist in the interpretation of the main Financial Accounts. Note 1 Social Services Net Expenditure and Other Income 2005-2006 2004-2005 2005-2006 2004-2005 Net


Net Expenditure

£’000



Cornwall County Council 123,308 112,225 (35,659) (18,920) Kehelland Horticulture Centre Ltd 3 0 (72) (95) Total 123,311 112,225 (35,731) (19,015)

Note 2 Cultural, Environmental & Planning Services Net Expenditure and Other Income 2005-2006 2004-2005 2005-2006 2004-2005 Net


Net Expenditure

£’000



Cornwall County Council* 37,699 36,801 (6,623) (4,992) Rural Economic Partnership Ltd (1) (13) (39) (381) Cornwall Enterprise Company 5 278 (7,294) (8,401) County Environmental Services Group (1,247) (970) (11,466) (8,383) Total 36,456 36,096 (25,422) (22,157)

* Net expenditure includes £(0.081)m share of the operating results of Associate, deemed immaterial to be disclosed separately on the Group Consolidated Revenue Account. Note 3 Central Services Net Expenditure and Other Income 2005-2006 2004-2005 2005-2006 2004-2005 Net


Net Expenditure

£’000



Cornwall County Council 10,104 7,187 (7,498) (3,257) Cornwall Enterprise Company 7 45 0 0 Total 10,111 7,232 (7,498) (3,257)

Note 4 FRS17 Interest Cost (Pensions) 2005-2006 2004-2005 £’000 £’000 Cornwall County Council 36,100 29,600 County Environmental Services Group 178 156 Cornwall Enterprise Company 340 295 Total 36,618 30,051

Note 5 FRS17 Expected Return on Assets (Pensions) 2005-2006

£’000 2004-2005

£’000 Cornwall County Council (28,000) (24,600) County Environmental Services Group (150) (138) Cornwall Enterprise Company (329) (279) Total (28,479) (25,017)

Note 6 Share of Loss in Joint Venture This amount of £0.228m relates to County Environmental Services Group.


62

Note 7 Corporation Tax 2005-2006

£’000 2004-2005

£’000 County Environmental Services Group 458 364 Cornwall Enterprise Company 0 (3) Total 458 361

Note 8 Interest and Investment Income 2005-2006

£’000 2004-2005

£’000 Cornwall County Council (14,339) (9,693) Rural Economic Partnership Ltd (2) (2) Cornwall Enterprise Company (43) (38) Total (14,384) (9,733)

Note 9 Contributions from FRS17 Pensions Reserve 2005-2006

£’000 2004-2005

£’000 Cornwall County Council (5,600) (1,011) County Environmental Services Group 18 (18) Cornwall Enterprise Company (38) (134) Total (5,620) (1,163)

Note 10 Minority Interest This amount of £0.009m relates to County Environmental Services Group. Note 11 (Surplus)/deficit for Year 2005-2006

£’000 2004-2005

£’000 Cornwall County Council (1,249) (3,581) County Environmental Services Group (506) (600) Rural Economic Partnership Ltd (3) (15) Kehelland Horticulture Centre Ltd 3 0 Cornwall Enterprise Company (58) 164 Total (1,813) (4,032)

Note 12(a) Intangible Assets 31 March

2006 £’000

31 March 2005 £’000

Cornwall County Council (128) 0 Total (128) 0

Relates to purchase of Cornwall Paper Company.


63

Note 12(b) Total Net Tangible Fixed Assets 31 March

2006 £’000

31 March 2005 £’000

Cornwall County Council 844,162 779,456 County Environmental Services Group 16,964 14,150 Rural Economic Partnership Ltd 693 707 Kehelland Horticulture Centre Ltd 3 4 Cornwall Enterprise Company 213 323 Cornwall Paper Company 2,190 0 Total 864,225 794,640

Other Land and

Buildings £’000

Vehicles, Plant &

Equipment £’000

Infra-Structure

£’000

Community Assets

£’000

Work in Progress

£’000

Surplus/ Investment Properties

£’000

Total

£’000

Gross Book Value as at

31 March 2005

602,495 44,877 211,017 2,289 34,311 7,103 902,092

Restatements 6,254 3,741 0 0 (1,596) 5,858 14,257

Impairment Charges (789) 0 0 0 0 (291) (1,080)

Transfer to Deferred Charges

0 0 0 0 (184) 0 (184)

Value as at 1 April 2005 607,960 48,618 211,017 2,289 32,531 12,670 915,085

Expenditure 24,650 5,665 32,192 0 26,286 44 88,837

Transfer 17,632 990 0 0 (18,495) (127) 0

Disposals (2,552) (3,967) 0 0 0 (504) (7,023)

Gross book value as at 31 March 2006

647,690 51,306 243,209 2,289 40,322 12,083 996,899

Accumulated Depreciation and Impairment as at

1 April 2005

(52,593) (24,795) (29,632) 0 0 (432) (107,452)

Restatements 842 (1,746) 0 0 0 432 (472)

Disposals 128 3,510 0 0 0 0 3,638

Depreciation for year (15,858) (6,450) (6,080) 0 0 0 (28,388)

Accumulated Depreciation as at 31

March 2006

(67,481) (29,481) (35,712) 0 0 0 (132,674)

Amended Net Book Value as at 31 March 2005

549,902 20,082 181,385 2,289 34,311 6,671 794,640

Net Book Value as at 31 March 2006

580,209 21,825 207,497 2,289 40,322 12,083 864,225


64

Note 13 Long Term Investments 31 March

2006 £’000

31 March 2005 £’000

Cornwall County Council 213,860 89,979 *County Environmental Services Group (173) 55 Total 213,687 90,034

* Relates to investment in Joint Venture Note 14 Stocks 31 March

2006 £’000

31 March 2005 £’000

Kehelland Horticulture Centre Ltd 60 68 County Environmental Services Group 22 23 Cornwall County Council 2,897 2,263 Cornwall Paper Company 43 0 Total 3,022 2,354

Analysis of Stocks: 31 March

2006 £’000

31 March 2005 £’000

Salt Stocks 99 138 Materials 1,390 1,033 Fuel 45 25 Printing, Stationary, etc 27 18 Plant and equipment Spares 265 303 Work in Progress 276 283 Other 1,068 664 3,170 2,464 Less provision for obsolete stock (148) (110)

3,022 2,354

Note 15 Debtors and Payments in Advance 31 March

2006 £’000

31 March 2005 £’000

Kehelland Horticulture Centre Ltd 5 6 County Environmental Services Group 2,481 1,512 Cornwall Enterprise Company 3,004 2,341 Rural Economic Partnership Ltd 95 114 Cornwall County Council 51,582 41,352 Cornwall Paper Company 598 0 Total 57,765 45,325

Analysis of Debtors: 31 March

2006 £’000

31 March 2005 £’000

Short Term: Amounts falling due in one year Government Departments 8,167 4,540 Sundry Debtors 43,420 33,396 Payments in advance 7,389 8,427 58,976 46,363 Less Provision for bad debts (1,211) (1,038) 57,765 45,325


65

Note 16 Creditors 31 March

2006 £’000

31 March 2005 £’000

Kehelland Horticulture Centre Ltd 32 33 County Environmental Services Group 3,804 3,606 Cornwall Enterprise Company 4,099 3,599 Rural Economic Partnership Ltd 48 38 Cornwall County Council 61,527 55,183 Cornwall Paper Company 753 0 Total 70,263 62,459

Analysis of Creditors 31 March

2006 £’000

31 March 2005 £’000

Inland Revenue 10,046 9,820 Sundry Creditors 43,535 38,178 Receipts in Advance 16,672 14,451 70,253 62,449 Long Term Borrowing Repayable within one year

10 10

70,263 62,459

Note 17 Cash Overdrawn 31 March

2006 £’000

31 March 2005 £’000

Kehelland Horticulture Centre Ltd 10 4 County Environmental Services Group 1,777 894 Cornwall Enterprise Company 913 971 Rural Economic Partnership Ltd 172 134 Cornwall County Council (32,090) (18,145) Cornwall Paper Company 438 0 Total (28,780) (16,142)

Note 18 FRS17 Pensions Liability 31 March

2006 £’000

31 March 2005 £’000

County Environmental Services Group (1,129) (878) Cornwall Enterprise Company (1,749) (1,580) Cornwall County Council (285,800) (269,600) Total (288,678) (272,058)

Assets in the County Council Pension Fund are valued at a fair value, principally market value for investments, and consists of the following categories, by proportion:


%

CES Group

%

CEC

% 2006 2005 2006 2005 2006 2005 Equity Investments 74.3 72.8 70.5 70.6 74.3 72.8 Bonds 12.7 14.5 27.1 27.0 12.7 14.5 Other Assets: Property 9.7 9.7 0.0 0.0 9.7 9.7 Cash 3.3 3.0 2.4 2.4 3.3 3.0 Total 100.0 100.0 100.0 100.0 100.0 100.0


66

Note 18 FRS17 Pensions Liability (continued) The movement in the net pensions deficit for the year can be analysed as follows:

Cornwall

County Council £’000

CES Group

£’000

CEC

£’000

Total

£’000 Net deficit at beginning of year (269,600) (878) (1,580) (272,058) Movement in year: Current Service cost (23,800) (103) (318) (24,221) Contributions 25,000 149 298 25,447 Unfunded benefits contributions 4,000 0 0 4,000 Past service costs (100) 0 (7) (107) Impact of settlements and curtailments (2,700) 0 0 (2,700) Transfers to/(from) other authorities 100 0 0 100 Finance income - expected return on Pension Fund assets

28,000 150 329 28,479

- interest on pension liabilities (36,100) (178) (340) (36,618) (275,200) (860) (1,618) (277,678) Actuarial gain/(loss) (see below) (10,600) (269) (131) (11,000) Net pension deficit at end of year (285,800) (1,129) (1,749) (288,678) The actuarial gain/(loss) can be further analysed as follows:

Differences between the expected and actual return on pension fund assets

75,700 280 888 76,868

Value of Assets 511,000 2,794 6,080 519,874 Percentage of Scheme Assets 14.8% 10.2% 14.6% Differences between actuarial assumptions about liabilities and actual experience

(700) (192) 2 (890)

Total present value of Liabilities (796,800) (3,923) (7,829) (808,552) Actuarial Gains/(Losses) recognised in STMR

(10,600) (269) (131) (11,000)

Note 19 Provisions includes 31 March

2006 £’000

31 March 2005 £’000

County Environmental Services Group* (10,850) (7,212) Cornwall County Council (5,381) (6,290) Total (16,231) (13,502)

* Relates to after site care for waste disposal sites.


%

CES Group

%

CEC

% 2006 2005 2006 2005 2006 2005 Actuarial assumptions Rate of Inflation 3.1 2.9 2.8 3.0 3.1 2.9 Rate of increase in salaries 5.1 4.9 3.8 4.0 5.1 4.9 Rate of increase in pensions 3.1 2.9 2.8 3.0 3.1 2.9 Proportion of employees opting to take a commuted lump sum

0 n/a n/a n/a n/a n/a

Rate for discounting scheme liabilities 4.9 5.4 4.9 5.6 4.9 5.4


67

Note 20 Revenue Balances 31 March

2006 £’000

31 March 2005 £’000

Kehelland Horticulture Centre Ltd 46 49 County Environmental Services Group 4,575 4,069 Cornwall Enterprise Company 494 436 Rural Economic Partnership Ltd 50 47 Cornwall County Council 14,998 14,080 Total 20,163 18,681

Note 21 Minority Interest This amount of £0.034m relates to County Environmental Services Group. Note 22 Cashflow Statement

(i) Reconciliation of revenue cash flow 2005-2006 2004-2005 £’000 £’000 £’000 Surplus for the year (2,817) (3,041) Share of Movement of Joint Venture 1,004 1,042 Add Minority Interest (9) 7 Deduct Interest Paid (19,576) (15,248) Contributions (to)/from provisions and reserves (7,260) (1,002) Deduct contributions to capital outlay (22,849) (26,107) Deduct depreciation (28,388) (25,549) Add minimum revenue provision adjustment 14,708 13,300 (62,370) (53,557) Increase/(decrease) in debtors 17,925 13,175 Increase/(decrease) in deferred premiums 20,522 0 Increase/(decrease) in long term debtors 1,914 (5,666) (Increase)/decrease in creditors (3,390) 20,075 Increase/(decrease) in stock and Work in Progress 668 (155) 37,639 27,429 Deduct: Interest received 14,384 9,733 Revenue Activities net contributions (13,164) (19,436)

(ii) Reconciliation of net cash flow to the movement in net debt

£’000 Decrease in cash in the period (12,612) Cash inflow from increase in debt financing (148,075) Cash outflow from decrease in liquid resources 107,624 (53,063) Movement in net debt in the period Net debt at 1 April 2005 (151,781) Net debt as at 31 March 2006 (204,844)

(iii) Analysis of net debt Balance as at 1 April

2005 £’000

Cash Flow

£’000

Balance as at 31

March 2006 £’000

Cash in hand and in transit 128 26 154 Cash overdrawn (16,142) (12,638) (28,780) Debt due after one year (273,262) (95,148) (368,410) Debt due within one year (18,818) (52,927) (71,745) Short term investments 65,479 (15,229) 50,250 Long term investments 90,834 122,853 213,687 (151,781) (53,063) (204,844)


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69

PPeennssiioonn FFuunndd AAccccoouunntt

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Fund Account 2006 2005 £’000 £’000 £’000 £’000 Contributions and Benefits Contributions Receivable From employers 38,464 33,607 From employees 12,480 11,464 Receipts on Account of Joiners Transfers in 7,169 7,129 Total Contributions 58,113 52,200 Less: Benefits Payable Pensions 26,457 25,065 Lump Sums 3,453 3,584 Death Benefits 449 528 Augmentation 9 9 Payments to and on Account of Leavers Refunds on Contributions 96 188 Transfers out 2,884 5,792 Administration and Other Expenses 388 374 Total Payments and Deductions 33,736 35,540 Net Gains from Dealing with Members 24,377 16,660 Returns on Investments Investment Income 25,701 19,576 Other Income 126 24 Change in Market Value of Investments 167,462 54,860 Less: Investment Management Expenses (3,581) (2,946) Net Returns on Investment 189,708 71,514 Net Increase/(Decrease) in the Fund During the Year 214,085 88,174 Opening Net Assets of the Scheme 705,430 617,256 Closing Net Assets of the Scheme at 31 March 919,515 705,430

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Net Assets Statement 2006 2005 £’000 £’000 £’000 £’000 Investment Assets Fixed Interest Securities UK Public Sector 31,849 36,165 Overseas Government Bonds 5,236 5,209 Corporate Bonds 21,507 20,455 Index Linked Securities UK Public Sector 54,890 35,377 Overseas Government Bonds 1,257 3,192 Corporate Bonds - 284 Equities UK Equities 367,255 282,788 Overseas Equities 306,388 224,955 Private Equity 7,596 - Unit Trusts Property Unit Trusts 88,193 70,324 Total Investment Assets 884,171 678,749 Current Assets Cash 27,995 18,027 Cash Vehicles - 3,000 Investment income receivable 6,515 4,447 Contributions receivable 1,795 1,442 Contribution adjustments receipt 29 Income tax receivable 292 581 36,626 27,497 Less: Current Liabilities Investment expenses payable 1,135 779 Income tax payable 18 37 Contribution adjustments refund 129 - 1,282 816 Current Assets less Current Liabilities 35,344 26,681 Net Assets as at 31 March 919,515 705,430 2006 *2005 Turnover £m £m Cost of purchases during year 613 582 Net proceeds of sales 568 600 1,181 1,182 Total number of transactions 4,500 3,428 *Figures for 2005 includes data relating to changes of fund managers

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Notes to the Accounts: Note 1 Specific Items The accounts for the year ended 31 March 2006 use the valuations for the Fund’s assets based on the figures provided by the Council’s custodian, The Northern Trust Company. Under standard accounting practices, equity dividends due to the fund, as at 31 March 2006, have been accrued in these accounts. This accrual amounts to £6.515m compared with £4.447m as at 31 March 2005.

The Pension Fund includes, as admitted bodies, several limited companies. In the event that any of these

companies cease to trade and staff are made redundant, there is a potentially unfunded liability to pay immediate benefits to all redundant staff aged 50 and above. In certain cases, guarantees have been obtained from other organisations that they would accept responsibility for any such liability.

The tax debtor for amounts receivable as at the end of March 2006 stood at £0.292m, of which £0.141m was in respect of monies due on property unit trusts.

The tax creditor for amounts repayable to the Inland Revenue as at the end of March 2006 stood at £0.018m.

Note 2 Accounting Policies The accounts have been prepared to meet the requirements of the Local Government Pension Scheme Regulations 1997 (as amended) and the Local Government Pension Scheme (Management and Investment of Funds) Regulations 1998 (as amended). They are also required to meet the requirements of the Statement of Recommended Practice Number 1 (SORP 1) of the Accounting Standards Board of professional accounting bodies of the United Kingdom. The accounts have also been prepared in accordance with the current CIPFA Code of Practice on Local Authority Accounting. Contributions, investment income and expenses (where material) such as management expenses and benefits are on an accruals basis, where these amounts have been determined on the closure of accounts. These accruals do not include the Fund’s liabilities to pay pensions and other benefits, in the future, to all the present contributors to the Fund. These liabilities are taken account of in the periodic actuarial valuations of the Fund and are reflected in the levels of employers’ contributions determined at these valuations. Transfer Values to/from other funds, for individuals, are included in the accounts on the basis of the actual amounts received and paid in the year. Block transfers would be accrued, where relevant, although there were none affecting this financial year. Market valuations of listed securities are based on mid-market values as at the last day of trading, if this is not the Balance Sheet date. Investments shown in the Statement of Net Assets are shown at market values. Prices in foreign currencies are converted at the closing rates of exchange, as at the Balance Sheet date. Under the Pension Fund Regulations, employers’ contribution rates are set to enable the Fund to meet eventually 100% of its overall liabilities to pay benefits for both local authorities and other bodies. (See Note 10). The amount of cash stated in the Net Assets Statement as at 31 March includes all monies held externally by fund managers on behalf of the County Council and reflects all commitments in respect of transactions realised and unrealised as at that date. Note 3 Analysis of Managed Fund Type Investments For the purpose of these accounts, Managed Fund holdings are those pooled products issued by an investment house in order to gain an exposure to a particular investment area, such as overseas fixed interest or to a geographical area such as Pacific Basin or Far East emerging markets. They usually take the form of an investment or unit trust and could have a restricted membership for the purpose of tax exemption.

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Note 3 Analysis of Managed Fund Type Investments (continued) The market values of managed funds (unitised and other) held at 31 March were: 2006

£’000 2005 £’000

Managed Funds Fixed interest securities - - Index linked securities - - UK equities 18,958 16,090 Overseas equities 30,739 23,120 Private equity 7,596 - Property unit trusts 88,193 70,324 Cash funds - - 145,486 109,534

Note 4 Additional Voluntary Contributions (AVC) Contributions made to the three Council AVC providers have fallen steadily in the past four years. In the previous financial year ending 31 March 2005 contributions for AVC’s were £0.245m. The outturn figures for 2006 are not yet available but preliminary indications show that this trend continues with contributions for the year expected to be approximately £0.230m. Note 5 Analysis of Listed and Unlisted Holdings The listed and unlisted holdings as at 31 March were: Investment Assets Unlisted

£’000 Listed £’000

2006 £’000

Unlisted £’000

Listed £’000

2005 £’000

Fixed Interest Securities UK Public sector - 31,849 31,849 - 36,165 36,165 Overseas Government bonds - 5,236 5,236 - 5,209 5,209 Corporate bonds - 21,507 21,507 - 20,455 20,455 - 58,592 58,592 - 61,829 61,829 Index Linked Securities UK Public sector - 54,890 54,890 - 35,377 35,377 Overseas Government bonds - 1,257 1,257 - 3,192 3,192 Corporate bonds - - - - 284 284 - 56,147 56,147 - 38,853 38,853 Equities UK equities 18,487 348,768 367,255 16,090 266,698 282,788 Overseas equities 30,739 275,649 306,388 23,120 201,835 224,955 Private equity 7,596 - 7,596 - - - 56,822 624,417 681,239 39,210 468,533 507,743 Unit Trusts Property unit trusts - 88,193 88,193 - 70,324 70,324 Other investments Cash Funds - - - - 3,000 3,000 Total Investment Assets 56,822 827,349 884,171 39,210 642,539 681,749

Many of the unitised management funds set out in note 3 will be included in the “unlisted” category above because they are only open to investors who have tax exemption status. Those assets in the “listed” category are included in the appropriate stock exchange listings.

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Note 6 Analysis of Total Contributions and Benefits The total contributions receivable and benefits payable during the year ending 31 March were: CCC Scheduled

Bodies Admitted

Bodies

2006

2005 £’000 £’000 £’000 £’000 £’000 Contributions Receivable From Employers 22,631 11,778 4,055 38,464 33,607 From Employees 7,410 3,705 1,365 12,480 11,464

Transfers In 5,090 1,303 776 7,169 7,129 Total Income 35,131 16,786 6,196 58,113 52,200 Benefits Payable Pensions 14,055 10,427 1,975 26,457 25,065 Lump sums 1,685 1,270 498 3,453 3,584 Death Benefits 340 31 78 449 528 Augmentation 9 - - 9 9 Payments on Account of Leavers Refunds of contributions 63 29 4 96 188 Transfers out 1,864 706 314 2,884 5,792 Total Expenditure 18,016 12,463 2,869 33,348 35,166 Note 7 Overview and Regulation Changes The Cornwall County Council Pension Scheme is governed by regulations made under the Superannuation Act 1972. The Local Government Pension Scheme Regulations 1997 came into force on 1 April 1998. The Scheme is administered by the County Treasurer on behalf of the County Council, the six District Councils in the County and various other organisations which have been admitted to the scheme (a full list of admitted bodies can be found in the Pension Fund Annual Report and Accounts). Police, Fire and Teaching Staff are not covered by the Fund. They have their own arrangements. The Department of Communities and Local Government formerly the Office of the Deputy Prime Minister (ODPM) issued changes to the regulations which came into force on 1 April 2005. However these were subsequently revoked in August 2005 following pressure from the trade unions. Further changes to the Regulations were introduced in April 2006. The principal changes are:

• Allowing employees to remain in the Scheme until age 75 years;

• Providing an option for employees to obtain a higher lump sum at retirement in exchange for a lower pension;

• Introducing the possibility of flexible retirement, subject to employer consent. This would allow an individual to retire and draw their pension but also continue in employment, subject to a reduction in hours or pay;

• Removal of the “rule of 85” for service from October 2006. This is where unreduced benefits could be paid to those individuals whose age plus service total 85 years;

• Transitional protection to be provided to those individuals who attain the age of 60 by April 2013. However, this protection is still subject to consultation between the employers and the unions.

In finalising the 2004 valuation the Actuary made no allowance for the potential savings resulting from the abolition of the “rule of 85”. This was on the basis that the 2004 valuation did not allow for potential further improvement in life expectancy. The Actuary assumed that the potential saving would be used for a more prudent allowance for longevity in the 2007 valuation.

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Note 8 Contributors and Pensioners All employees (except teachers and fire fighters who have their own schemes) are entitled to join the scheme. Individuals have the right to seek alternative pension arrangements, either through the State Second Pension Scheme (S2P) or by taking out their own personal pension. During the last five years, the number of contributors and pensioners has increased as follows:

Note 9 How the Scheme Works

Local Government Pension Schemes are required to be funded, and the Pension Fund is required to be sufficient to meet the estimated future pension entitlements of the current and past employees. It is actuarially re-valued every three years to establish the contributions to be made by the employing authorities to achieve this objective.

Transfers into or out of the Fund are sums received from, or paid to, other pension schemes. These relate to new and former members’ periods of pensionable employment, where transferable. After meeting pension payments and other benefits the balance of the Pension Fund is invested in a range of investments. These are governed under the Local Government Pension Scheme Regulations 1997 (as amended) and subsequently amended by the Local Government Pension Scheme (Management and Investment of Funds) Regulations 1998 as amended (latest amendment issued November 2003). Note 10 Actuarial Report

2004 Valuation New employer contribution rates came into effect on 1 April 2005 based on the actuarial valuation of the Pension Fund carried out as at 31 March 2004. The actuarial valuation provides a profile of the funding level of current and future liabilities for the employers in meeting provision of pensions for their employees in the Scheme. The County Council, as Administering Authority, is required to establish a Funding Strategy Statement (FSS) that sets out how the Fund will meet employers’ pensions liability over the long term, whilst maintaining as stable employers’ contribution rates as possible. The County Council approved the current FSS in January 2005. The 2004 Valuation used the same projected unit method as employed in the 2001 valuation. The key financial assumptions are set out below:

March 2004 Unsmoothed

% p.a.

Nominal

% p.a. Real

Minimum Risk rate of return 4.7% 1.8% Anticipated extra long-term return from: Equities 1.75% Corporate Bonds 0.40% Overall anticipated long term return from: Equities 6.50% 3.6% Bonds (50% gilt, 50% corporates)

4.90% 2.0%

Discount Rate 6.1% 3.2% Pay Increases 4.9% 2.0% Price Inflation/Pension Increases 2.9% -

2002 2003 2004 2005 2006 Contributors

County Council 9,158 9,771 10,360 10,504 11,118 District Councils 2,348 2,405 2,528 2,539 2,534 Other Bodies 1,868 1,972 2,085 2,090 2,265

Total Number of Contributors 13,374 14,148 14,973 15,133 15,917 Pensioners

Receiving Benefits 6,269 6,519 6,689 6,915 7,093 Deferred Benefits 3,681 4,250 5,010 6,144 7,370

Total Number of Pensioners 9,950 10,769 11,699 13,059 14,463

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Note 10 Actuarial Report (continued) The 2004 Valuation used actual investment returns and asset values as at 31 March 2004 rather than smoothing the results over a 12 month period. Overall the financial assumptions are at the same strength as the 2001 Valuation. A comparison of the results of the 2001 and 2004 Valuations is shown below:

Valuation Results

31 March 2004 £m

31 March 2001 £m

Total liabilities 795 650 Market value of Assets 617 (actual) 615 (smoothed) Deficit 178 35 Funding level 78% 95% Employers’ contribution rate Future Service Rate 14.0% 13.1% Past Service Adjustment 6.0% 2.1% Total Common Contribution Rate 20.0% 15.2% Deficit Recovery Period 20 years 15 years

Copies of the Funding Strategy Statement and the Actuarial Valuation Report can be obtained from the Pensions Investments Section of the County Treasurer’s Department of Cornwall County Council, County Hall, Truro, TR1 3AY. Note 11 Investment Report The Investment Advisory Panel was replaced, in June 2003, by a Pensions Committee which has a wider remit to include pension matters. The membership now includes representatives of the major employers in the scheme, and a Trade Unions’ representative also attends the Committee meetings as an observer. The Pensions Committee has approved a scheme of delegation to the County Treasurer. Whereas the Pensions Committee approves all policies, the County Treasurer is empowered to invest monies of the Pension Fund. The Pensions Committee receives professional advice from two external advisors. A Statement of Investment Principles, setting out how the Fund’s investments are managed, is available from the Pension Fund Investments Section of the County Treasurer’s Department of Cornwall County Council, County Hall, Truro, Cornwall, TR1 3AY. Note 12 Post Balance Sheet Events The cash balance held at 31 March 2006 amounted to £27.995m, of which £12.612m was held internally. The internal balance was held in temporary loans pending investment in private equity holdings and rebalancing, programmed for early in the next financial year. The Cornwall Fund is currently contemplating making a potential claim against HM Revenue and Customs for reclaiming tax withheld on foreign income dividends. The process, organised by KPMG, will require the Cornwall Fund to submit a claim, together with other local authority pension funds. A report detailing any potential income to the Fund that could be recovered will be included in next year’s accounts. At this early stage it is prudent to avoid making any assumptions as to the success of the actions and therefore no financial provision has been made for the Fund for this year. Note 13 Market Value The net asset position representing the market value of the Fund’s investments, cash and other assets, as at 31 March 2006, was £919.515m, compared with a value of £705.430m as at 31 March 2005. A breakdown of these investments is shown in the Net Assets Statement. Note 14 Overall Income Yield During 2005-06, the gross income to the Fund generated by the Fund’s investments amounted to £25.827m and represented a return of 3.2% on the mean market value for the year of the investments. The figure for 2004-05 was 3.0%.

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Note 14 Overall Income Yield (continued) At 31 March 2006, the fund managers’ portfolios were valued as follows:

Note 15 Performance The County Council subscribes to a portfolio performance analysis service provided by Mellon Analytical Solutions (formerly known as CAPS), a consortium of actuaries. The Mellon annual report examines the performance and structure on both private and public sector portfolios, representing a combined market value of several hundred billion pounds. The Cornwall Fund employs a fixed benchmark thus enabling comparisons to be made directly with the underlying financial markets, both in respect of asset class and geographical distribution. The benchmark, as set out below, comprises weightings for each of the asset classes as specified by region. Before 2001-02, comparison was made to a ‘peer group’ i.e. other local authority pension funds. During the year ended 31 March 2006 the total return for the combined Fund was 26.6% (provisional figure), compared to the benchmark index return of 26.7%. The returns for the individual fund managers, in the same period, were as follows: Returns 2005-06

Portfolio Return

%

Benchmark Return

%

Alliance Bernstein 26.9 28.0 Capital International 32.5 32.8 RREEF (UK) 22.4 21.0 GMO UK 33.4 28.0 Insight Investment Management 8.9 9.0 Newton Investment Management 31.9 32.3 Total Fund (inc. Property) 26.6 26.7

Note 16 Taxation The Fund is exempt from UK income tax on interest and from capital gains tax on the proceeds of the sale of investments. The Fund is also exempt from Australian and United States’ withholding tax on dividends from investments and recovers withholding tax deducted in some European countries. The Chancellor of the Exchequer, in his July 1997 budget, removed the ability of pension funds, and others who enjoyed tax exempt status, to recover UK Tax on UK Equity dividends. Note 17 Administration Expenses For the years ended 31 March, the analysis of administration expenditure was as follows:

Administration Expenses

2006 £’000

2005 £’000

Investments 3,581 2,946 Pensions 388 374 3,969 3,320

£’000 % of Total

Fund Manager Alliance Bernstein 82,529 9.1 Capital International 267,978 29.4 RREEF (UK) 90,167 9.9 GMO UK 86,500 9.5 Hermes Focus Asset Management 12,879 1.4 Insight Investment Management 114,054 12.5 Newton Investment Management 237,373 26.0 Standard Life Investments 2,789 0.3 Wilshire Associates 4,829 0.5 Internally Controlled Investments 13,068 1.4 Total Investments (inc. cash) 912,166

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Note 17 Administration Expenses (continued) The significant changes to the management structure of the Fund reported last year took effect at the end of that year and therefore had minimal effect on the overall costs in that year. The current year’s accounts reflect a full year of change and the accompanying investment management costs. In addition, higher management fees were incurred as a result of the increase in the market value of the Fund in the year. Pension administration costs reflect staffing changes introduced at the end of the year. Note 18 Related Party Transactions Cornwall County Council is the administering authority for the purpose of the Fund, under the Local Government Pension Scheme Regulations 1997 (as amended). Included in Administration expenses and Investment Management expenses are charges amounting to £546,645, incurred for the internal costs of providing these services during the year to 31 March 2006. Note 19 Investment Income Investment Income for the years ended 31 March was received from the following sectors:

2006

£’000 2005 £’000

Fixed interest securities 2,984 3,097 Index linked securities 1,060 454 UK equities 10,050 6,324 Overseas equities 4,848 3,878 Property unit trusts 4,813 4,286 Commission recapture* 62 - Stock lending* 63 - Temporary loans and other 1,947 1,561 25,827 19,600

*Treated as `Other Income` as it is not interest or dividend, but a gain from employing those assets. Note 20 Valuation of Investments Note 2 explains the accounting policies for the basis of valuation. Change to investment assets in the year: Investment Assets

Value 1 April 2005 £’000

Purchases

at cost £’000

Sales

proceeds £’000

Change in market value £’000

Value 31 March

2006 £’000

Fixed Interest Securities UK Public sector 36,165 202,888 208,240 1,036 31,849 Overseas Government bonds 5,209 23,556 23,912 383 5,236 Corporate bonds 20,455 13,874 13,879 1,057 21,507 Index Linked Securities UK Public sector 35,377 135,567 118,879 2,825 54,890 Overseas Government bonds 3,192 10,442 12,513 136 1,257 Corporate bonds 284 - 288 4 - Equities UK equities 282,788 90,618 76,455 70,304 367,255 Overseas equities 224,955 100,383 95,424 76,474 306,388 Private equity - 7,341 - 255 7,596 Unit Trusts Property unit trusts 70,324 14,501 11,499 14,867 88,193 Temporary Bonds 3,000 4,100 7,221 121 - Cash movements, allowing for currency adjustments and end of year settlements

18,027

9,968

-

-

27,995 Total Investment Assets 699,776 613,238 568,310 167,462 912,166

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Note 21 Statement of Investment Principles A copy of the updated Statement of Investment Principles adopted by the Pension Fund will be available on the website, along with the Pension Fund Annual Report and Accounts, in Autumn 2006. Note 22 Annual Report The Pension Fund Annual Report and Accounts provides more detailed information on the Fund and on the Pension Scheme. It may be viewed on the Council’s website at www.cornwall.gov.uk or a printed copy may be obtained by writing to: Pension Fund Investments Section, County Treasurer’s Department, Cornwall County Council, County Hall, Truro, Cornwall, TR1 3AY

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SSttaatteemmeenntt ooff AAccccoouunnttiinngg PPoolliicciieess && VVaalluuaattiioonn CCeerrttiiffiiccaattee

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The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting, in the United Kingdom: A Statement of Recommended Practice (the 2005 SORP) issued by the Chartered Institute of Public Finance and Accountancy. The accounts comply with the Statements of Standard Accounting Practice (SSAPs) and Financial Reporting Standards (FRS’s) appropriate to local authorities also taking into account the guidance note issued by the Accounting Standards Board. The accounting convention adopted is historical cost modified by revaluation of land and buildings. The authority also complies with the Best Value Accounting Code of Practice (BVACOP). This code is also an approved SORP and establishes proper practice with regard to consistent financial reporting below the Statement of accounts level. The concepts and polices which have a material impact on the accounts are as follows:- A. Accounting Concepts i) Qualitative Characteristics of Financial Information There are four Accounting concepts against which authorities should judge the appropriate of accounting policies for their particular circumstances. These are as follows:- Relevance The aim of the financial statements is to show information about the Council’s performance and position that is useful for assessing how the authority has looked after public money and for making economic decisions. Reliability The Council’s aim is to provide reliable financial information. Financial information is reliable only if: a) it can be depended upon to represent faithfully what it either purports to represent or could

reasonably be expected to represent, and therefore reflects the substance of the transactions and other events that have taken place;

b) it is neutral and free from bias; c) it is free from material error; d) it is complete and no significant transactions have been left out; e) under conditions of uncertainty, it has been prudently prepared (i.e. a degree of caution has been

applied in exercising judgement and making the necessary estimates). Subject to legislative requirements, the accounting statements have been prepared to reflect the reality or substance of the transactions and activities underlying them, rather than only their formal legal character. In determining the substance of a transaction, it is necessary to identify all of the transaction’s aspects and implications. A group or series of transactions that achieved or is designed to achieve an overall economic effect has been viewed as a whole.

Often there is uncertainty either about the existence of assets, liabilities, income and expenditure, or about the amount at which they are to be measured. Such uncertainty is a normal part of the accounting process. Prudence requires that accounting policies take account of such uncertainty in recognising and measuring those assets, liabilities, income and expenditure. Sound stewardship of public funds calls for a prudent approach to financial management. However in financial reporting the aim should be to properly represent the economic effects on the Council of transactions and events. In financial reporting prudence is to be used in conditions of uncertainty to inform the selection and application of accounting policies and estimation techniques and the use of professional judgement. It is not appropriate to use prudence in financial reporting as a reason to, for example, create hidden reserves or excessive provisions, deliberately understate assets or income, or deliberately overstate liabilities or expenditure, because this would mean that the financial statements are not neutral and therefore not reliable.

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Comparability

The information contained in financial statements is more useful if it can be compared with similar information about the Council for previous years, and with similar information about other Councils. Comparability depends upon consistency and adequate disclosure. In considering the accounting policies to be adopted and their disclosure, the Council have paid due regard to the importance of consistency and comparability. Application of the terms of the Code of Practice, and of the Code of Practice for Best Value Accounting where relevant, should ensure adequate disclosure and consistency, and thus comparability. Understandabilty

The accounting principles on which the Code of Practice is based include accounting concepts, treatments and terminology which require reasonable knowledge of accounting and local government, and reasonable diligence in reading the financial statements if they are to be properly understood. However, all reasonable efforts have been taken in the preparation of the financial statements to ensure they are as easy to understand as possible. ii) Materiality Materiality is the final test of whether information should be included in a particular set of financial statements.

An item of information is material to the financial statements if its misstatement or omission might reasonably be expected to influence assessments of the Council’s stewardship, economic decisions, or comparisons with other Councils, based upon its financial statements. If there are two or more similar items the materiality of the items in aggregate, as well as of items individually needs to be considered. Whether an item is material will depend on the size and nature of the item in question. The principal factors, to be taken into consideration include:

a) the item’s size, judged in the context of both the financial statements as a whole and of such other

information available as would affect consideration of the financial statements (for example consideration of how the item affects the evaluation of trends);

b) the item’s nature, in relation to:

i) the transactions or other events giving rise to it;

ii) the legality, sensitivity, normality and potential consequences of the event or transaction;

iii) the identity of the parties involved;

iv) the particular headings or disclosures affected. Strict compliance with the Code, both as to disclosure and accounting principles is not necessary where the amounts involved are not material to the fair presentation of the financial position and transactions of the Council and to the understanding of the Statement of Accounts by a reader. iii) Pervasive Accounting Concepts Three further concepts – accruals, going concern, and the primacy of legislative requirements – play a pervasive role in the financial statements, and hence in the selection and application of accounting policies and estimation techniques and the exercise of professional judgement. Accruals The financial statements, other than cash flow information, have been prepared on an accruals basis as required by ACOP. The accruals basis of accounting requires the non-cash effects of transactions to be reflected in the financial statements for the accounting period in which those effects are experienced and not in the period in which cash is received or paid. The following areas of income and expenditure are required to be accounted for under ACOP using the accruals and matching concept:

a) Customer and Client receipts b) Employee related costs c) Interest payable and income d) Cost of supplies and services e) Capital income and expenditure

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Going Concern The Council’s Statement of Accounts have been prepared on a going concern basis, that is the accounts should be prepared on the assumption that the authority will continue in operational existence for the foreseeable future. This means in particular that the income and expenditure accounts and balance sheet assume no intention to curtail significantly the scale of operation. Primacy of Legislative Requirements Local authorities derive their powers from statute and their financial and accounting framework is closely controlled by primary and secondary legislation. To the extent that treatments are prescribed by the accounting law the accounting concepts outlined above may not apply in all cases. It is a fundamental principle of local authority accounting that, where specific legislative requirements and accounting principles conflict, legislative requirements shall apply. B. Accounting Policies In simple terms, accounting policies determine which facts about a business are to be presented in financial statements, and how those facts are to be presented and what estimation techniques are used to establish what those facts are. The accounting policies are reviewed regularly to ensure that they remain the most appropriate for the authority’s circumstances. 1. Fixed Assets Capitalisation All expenditure on the purchase, creation or enhancement of fixed assets has been capitalised on an accruals basis. This includes any assets acquired under finance leases which have been capitalised and included in the balance sheet on the basis of the outstanding obligation to make future rental payments. Valuation Fixed Assets are valued on the basis recommended by the CIPFA and in accordance with the Statements of Asset Valuation Principles and Guidance Notes issued by the Royal Institution of Chartered Surveyors (RICS). Fixed Assets have been classified into groupings required by the Local Authority Accounting SORP 2005 and are included in the balance sheet, net of depreciation where applicable on the following basis:

a) land and operational properties – open market value for their existing use; b) specialised operational assets where there is no established market have been valued on a

depreciated replacement cost basis. For waste disposal sites for which there is an established market have been included at historical cost;

c) infrastructure and community assets are included at historical cost. Operational assets have been included in the balance sheet at the lower of net current replacement cost or net realisable value in existing use. Non-operational assets have been included in the balance sheet at the lower of net current replacement cost or net realisable value. Infrastructure assets and community assets have been included in the balance sheet at historical cost, net of depreciation, where appropriate.

• The current asset values in the accounts are based upon a certificate issued by the Council’s Chief Valuation Officer as at 1 April 2005. Additions since that date are included in the accounts at their cost of acquisition.

2. Deferred Charges Deferred charges represent expenditure which may be properly capitalised but which does not represent tangible fixed assets. The County Council operates a policy of charging 100% of such expenditure to service revenue accounts, along with any matching funds i.e. grants or contributions. If no matching funding is available, any outstanding deferred charge expenditure will be from the Capital Financing Account.

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3. De Minimus Capital Expenditure This is the expenditure on individual items which may be properly capitalised as part of the Council’s Capital Programme but falls below the £10,000 de minimus level set by the Council for Capital Accounting. Items above this level are added to the Council’s Balance Sheet. Those items below the de minimus level are charged to service revenue accounts in place of capital charges. These charges will be reflected in the net cost of services, along with any matching funding i.e grants or contributions. If no matching funding is available, any outstanding de minimus capital expenditure will be met from the Capital Financing Account. 4. Financial Reporting Standard 15 ‘Tangible Fixed Assets’ FRS15 sets out the principles of accounting for tangible fixed assets, with the exception of investment properties, which are dealt with in SSAP 19 ‘Investment Properties’ which it will supersede in due course. The FRS acknowledges that in a limited number of cases, depreciation charges will not be made on the grounds that they are immaterial. Where this is the case, or where depreciation is calculated on a basis that assumes that the useful economic life of an asset is longer than fifty years, annual impairment reviews are performed, to ensure that the value of the asset is not overstated.

The Council’s policy is to depreciate all building assets where required and to complete annual impairment reviews. 5. Depreciation

Assets, other than land, are being depreciated as required by FRS 15 over their useful economic lives, except where the Council is making regular repairs and maintenance to extend the asset’s life in its existing use so that any depreciation would not be material. The majority of the Council’s buildings have been depreciated over a 35 year life. Where depreciation is provided for, assets are being depreciated using the straight line method over the following periods:

6. Basis of Charges for Capital The capital charges made to service revenue accounts, central support services and Trading Services equate to the sum of depreciation, plus a notional interest charge. The interest charge is based on the net amount at which the fixed asset was included in the balance sheet at 31 March 2006. The notional rates of interest used are 4.95% for infrastructure assets, community assets and 3.5% for those assets included in the balance sheet at current value.

7. Capital Receipts

Capital receipts from the sale of assets are used to finance new capital expenditure and to repay debt premiums. 8. Debtors and Creditors

The accounts have been prepared on an accruals basis which means that sums due to or from the Council are included whether or not the cash has actually been received or paid in the year. There are general exceptions as follows:-

a) electricity and similar quarterly payments are charged at the date of meter reading rather than apportioned between years and

b) items of less than £1,000 are not normally included. 9. Stocks and Works in Progress Stocks and works in progress are normally valued at cost price (first in – first out), except in the case of Highways where they are valued at average price. Stocks in the Highways and Fire Brigade workshops are valued on a “last in first out” basis, which is a departure from SSAP9.

Buildings (where appropriate) 0-100 years Waste Disposal Sites Over lives of individual sites depending on usage Infrastructure 40 years Motor Vehicles and Plant 3-25 years

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A provision for obsolete stocks is included in the accounts. 10. Basis of Valuation of Investment Investments in related companies are shown in the accounts at cost price. Any profit or loss on realisation is only taken into account at the time of realisation. 11. Investments in Related Companies Investments are shown in the accounts at cost price. Any profit or loss on realisation is provided for and only in related companies taken into account at the time of realisation. 12. Support Services and Overheads Total Cost Principles The Best Value Accounting Code of Practice (BVACOP) requires the accounts to follow the principle of total absorption costing. This means that the outturns for services should reflect all of the direct, indirect and overhead costs that have been incurred in providing the service. The significant exception to this, are costs that relate to the elected and multi-purpose nature of authorities. These costs of the Corporate and Democratic Core (CDC) and Non Distribution Costs (NDC) are disclosed separately. BVACOP 2003 altered the definition of total cost with the full adoption of FRS17 and remodelled Unapportionable Central Overheads as Non Distributed Costs (NDC) (to include past service costs). 13. Provisions and Reserves Provisions Provisions are required for any liabilities of uncertain timing or amount that have been incurred. The Council provides for any liabilities or losses which are likely to be incurred, or will be incurred, but where the amounts or the dates on which they will arise is uncertain. Provisions are maintained for bad debts, insurance claims and future commitments as required by Financial Reporting Standard (FRS) 12. The Group Accounts Balance Sheet include a significant provision for waste disposal site aftercare costs and restoration care costs. Reserves Amounts set aside for purposes falling outside the definition of provisions should be considered as reserves. The Council’s reserves are generally established from underspendings or amounts set aside for specific future expenditure. Reserves are maintained for the replacement or acquisition of capital items, repairs and renewals and other earmarked items. The Revenue Account Balance (County Fund Balance) of £15.068m represents an accumulation over successive years of surpluses of revenue income over revenue expenditure. Of this sum, £5.510m has been earmarked to support future spending needs with the remaining balance of £9.558m acting as a general reserve and a working balance. In addition, accumulated underspendings on schools’ delegated budgets (£19.528m) are, by law, earmarked to individual schools. 14. Trust Funds In accordance with recommended Accounting Standards, the Trust Funds administered by the County Council are shown separately. 15. Accounting for Value Added Tax (VAT) VAT is separately accounted for in accordance with SSAP5 and is not included as expenditure of the County Council, except where it is not recoverable.

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16. Accountable Bodies

Any income/expenditure relating to Accountable Bodies is treated as per the requirements of Local Authority Accounting Panel Bulletin (LAAP) 50. The Council is currently reviewing the area of Accountable Bodies. 17. Private Finance Initiative (PFI) Schemes

Where the Council has entered into PFI contracts the accounting treatment will accord with proper practice as determined by the Accounting Standards Board. This means the correct application of FRS 5 as regards substance over form in determining the accounting treatment of assets involved with the transaction. The Council follows the guidance issued by the Treasury in their PFI Technical Note Number 1 (revised) as far as it relates to local authorities. The accounts have also been prepared in accordance with advice received from specialised consultants as regards the guidance in relation to each PFI contract.

18. Grants

Government grants are accounted for on an accruals basis and income has been credited, in the case of revenue grants, to the appropriate revenue account or, in the case of capital grants, to a Government Grants Deferred Account. Amounts are released from the Government Grants Deferred Account to off set any provision for depreciation charges to the revenue account in respect of assets to which the grants relate. The Council uses an estimated average life of all assets of 35 years, as it is not possible to fully comply with the SORP requirement to match each grant to each relevant asset. 19. Redemption of Debt External borrowings are generally repaid at maturity. In accordance with the Local Government and Housing Act 1989, a minimum revenue provision, calculated at 4% of the Capital Financing Requirement as calculated at 31 March 2005, is set aside annually in order to repay these borrowings. When writing off debt, restructuring premium costs the Council takes a prudent view with the costs being written off over the shortest period, this could be over the life of the old replaced debt or the new borrowings. This differs from recommended practice (ACOP) which states the write off should be over the life of the new replacement borrowings. 20. Leases Under the requirements of the Prudential Code, a finance lease is treated as external borrowing. The Council’s policy is to minimise the use of finance leases and to use operating leases where appropriate. Rental payments under finance leases are apportioned between the finance charge and the reduction of the outstanding obligation, with the finance charge being allocated and charged to the revenue over the term of the lease. Rental payments under operating leases are charged to revenue on a straight line basis over the term of the lease. The Council has a policy of disclosing information on those leases which have annual lease payments of £1,000 per annum or above. 21. Pensions The County Council has three types of pension schemes for its employees. Each provides members with defined benefits related to their pay and service. The schemes are:

Teachers: This is an unfunded scheme administered by the Department for Education and Skills. The pension cost charged to the accounts is the contribution rate set by the Government Actuary on the basis of a notional fund.

Uniformed Firefighters: This scheme is unfunded and the charge to the accounts each year represents the net cost of pensions and other benefits paid in the year, after allowing for contributions made by employees for that year.

Other Employees: Other employees, subject to certain qualifying criteria, are eligible to join the Local Government Pension Scheme. The pension contributions that are charged to the Council’s accounts in respect of these employees are paid into the pension fund and costs are met from the fund. Further costs arise in respect

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of an element of pensions paid to certain retired employees on an unfunded basis. (See also notes to the Consolidated Revenue Account.) 22. Euro No direct costs have been incurred during 2005-2006 on the proposed introduction of the Euro. The possibility of joining the single European currency continues to inform investment and borrowing policies. 23. Trading Services Disclosure Requirements Trading operations that fall within the definition and above the agreed level of materiality are required to disclose the nature, turnover and surplus for their service area in the Best Value Performance Plan and as a disclosure note in the Statement of Accounts. Definition The BVACOP widens the definition of the areas of service that we should disclose as trading activities. The 2004 BVACOP (see Section 2 Annex D for detail) highlights six instances of trading:

• Trading services or undertakings with the public or with third parties. • External trading organisations which have won contracts from other public bodies, for example

under Local Authority (Goods and Services) Act 1970. • Continuing Compulsory Competitive Tendering arrangements. Contracts for work previously won

by Direct Service Organisations, that are still carried out within the original contract specifications and period.

• Work carried out by internal trading organisations arising from Voluntary Competitive Tendering

exercises. • Support Services provided in a free internal market, i.e. to schools or to other budget holders

who have been given freedom to buy externally if they wish. • Support Services provided in a limited internal market, i.e. where budget holders are free to

decide the quantity and type of the work to be done on the basis of the prices quoted to them, but not to buy externally.

Materiality: Separate disclosure requirements for trading operations are subject to a reasonable level of materiality to be decided by authorities. In agreement with Audit Commission, materiality of a £5 million turnover has been set for individual disclosure of accounts, with the addition of Highways Workshops due to their previous Direct Service Organisation status. Service areas that operate in a trading environment but below the £5 million threshold will be added together and reported as a single figure in the consolidation of the accounts. These areas will not be required for the Best Value Performance Plan. 24. Insurance Policies The County Council contracts for insurance provision were re-let from 1 June 2003 with it’s existing insurer, Zurich Municipal.

The arrangements for the 2005-2006 financial year were as follows:

Liability and motor (fleet) insurance’s The Council insures itself for the first £129,650 for liability and £120,000 for motor of each and every claim. With claims in excess of this is insured with Zurich Municipal. A provision to cover this risk is held by the County Treasurer.

Council Properties These are insured with Zurich Municipal for perils, such as storm and flood. These have excess amounts of £1,000,000, with a stop loss of £5m in any one year.

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Education Properties (Fire) The Council insures itself for the first £1,000,000 of each and every fire claim. A provision to cover this risk is administered by the County Treasurer. Claims in excess of £1,000,000 are insured with Zurich Municipal, with a stop loss of £5m in any one year. 25. Contingent Assets Any contingent assets are excluded from accruals in the accounts and disclosed by way of a note to the accounts. 26. Contingent Liabilities Any contingent liabilities are excluded from accruals in the accounts and disclosed by way of a note to the accounts. 27. Foreign Currency Translation Income and expenditure arising from a transaction in a foreign currency are translated into £ sterling at the exchange rate in operation on the day the transaction occurred. At the Balance Sheet date, any monetary assets and liabilities denominated in a foreign currency have been translated into £ sterling by using the closing rate or where appropriate the rate of exchange fixed under the terms of the relevant transaction. 28. Financial Reporting Standard 17 (Accounting for pension costs) The Council’s policy is to comply with the FRS 17 requirements by including in the Council’s Statement of Accounts, actuarial valuation data for the purposes of FRS 17, as supplied by the Council’s Actuaries. Current service costs are prorated over employee’s pension contributions held in each ledger.

Accounting entries for FRS 17 adhere to the guidelines set out in the Local Authority Accounting Panel Bulletin (LAAP 56). From 2004-2005, the Discount Rate for Defined Pension Scheme Liabilities has been changed from a rate determined each year by the Government Actuaries Department (3.5% for 2003-2004) to the ‘current rate of return on a high quality corporate bond of equivalent currency and term to the scheme liabilities’, which is often referred to as the ‘AA Corporate Bond Rate’. This is a change of measuring technique and not a change in accounting policy. 29. Group Accounts The Group Accounts have been prepared using the modified group accounts requirements of the 2005 SORP. Subsidiaries have been consolidated on a line by line basis in accordance with FRS 2. The equity method has been used when consolidating associates in accordance with FRS 9. The accounting year end of CES Ltd is 31 August. For the purpose of consolidation, the statutory group accounts prepared as at 31 August 2005, have been amended to reflect transactions for the period 1 September 2005 to 31 March 2006. These modified group accounts as at 31 March 2006 have been used to prepare the County Council’s group financial statements. 30. Partnerships and Other Joint Working Arrangements The Council’s policy is to disclose separately those partnerships/joint working arrangements if they have a turnover of £1,000,000 or more. 31. Landfill Allowances Trading Scheme (LATS) The Council’s policy is to comply with the accounting entries and guidelines as set out in the Local Authority Accounting Panel Bulletin (LAAP 64).

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32. Intangible Fixed Assets Expenditure on assets that do not have physical substance but are identifiable and controlled by the Council (e.g. goodwill) is capitalised when it will bring benefits to the Council for more than one financial year. The Council’s policy is to write off intangible assets to revenue, by way of impairment, over their useful lives funded by a transfer to or from the Capital Financing Account.

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Asset Valuation of Freehold Properties The freehold and leasehold properties which comprise that part of the Authority's property portfolio as listed have been valued as at 1st April 2005 by an Internal Valuer, Robert John Perry, Chief Valuer, Property Group, Planning, Transportation and Estates Department, on the under-mentioned bases. In line with the agreed 5-year rolling programme I have carried out a valuation of the agreed freehold and leasehold land and property held by the County Council above the de minimis level of £10,000. My valuation, which has been completed in accordance with the Appraisal and Valuation Standards 5th Edition (UKPS 1.12 as amended) published by the Royal Institution of Chartered Surveyors and the guidance issued by the Chartered Institute of Public Finance and Accountancy, is subject to the conditions, restrictions and assumptions set out in this Certificate. Properties regarded by the Authority as operational have been valued on the basis of Existing Use Value or, where this could not be assessed because there is no market for the subject asset, the Depreciated Replacement Cost (DRC), subject to the prospect and viability of the occupation and use. The DRC value indicated is the net cost of replacement after allowances for physical and functional obsolescence, and may not equate to the realisable open market value of the property. Properties regarded by the Authority as non-operational have been valued on the basis of Open Market Value. The valuations set out below have been carried out with a Valuation Date of 1st April 2005 in accordance with the 5-year rolling programme agreed with the Capital Accountant. Identified capital expenditure since the date of valuation has been added to the individual assets. As part of the rolling programme of revaluation, the following County Council Assets have been revalued with a revaluation date of 1st April 2005:

- County Offices premises - Mount Edgcumbe premises - Fire Brigade premises - Family Support Services premises - Smallholdings - Adult Education premises - Primary and Secondary Schools

The purpose of the valuation is to include the value of the assets in the County Council’s accounts. The valuation figures incorporated in the accounts are the aggregate of separate valuations of parts of the portfolio, not a valuation or apportioned valuation of the portfolio valued as a whole. Based on the conditions, restrictions and assumptions set out in the Certificate, I am of the opinion that the aggregate value of all the freehold land and buildings, as set out below (per notes to the accounts) held by Cornwall County Council, above the de minimis level, as at 1st April 2005, is fairly represented in the sum of £626,678,000 (six hundred and twenty six million, six hundred and seventy eight thousand pounds). 2005-2006

£’000

(Other) Land and Buildings 579,517

Community Assets 1,960

Surplus/Investment Property and W.I.P. 45,201

626,678

It should be noted that waste disposal sites, including closed sites, may have significant, continuing liabilities arising from monitoring and treating leachate. These liabilities have not been subtracted from the value above. R J Perry MA MRICS Chief Valuer Planning, Transportation and Estates Cornwall County Council 9 June 2006

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Conditions and Assumptions Impairment of Fixed Assets Under the requirements of FRS 15 I have carried out an Impairment Review of Fixed Assets during the financial year 2005-2006. The revised depreciation policy and building lives is in line with recommended Best Practice advocated by the Association of Chief Estates Surveyors. Impairment charges have been disclosed in accordance with ACOP requirements and no further changes to asset values are required for any impairment of land and building assets. Furniture and Equipment The value of moveable furniture and equipment has not been included in this valuation. Plant and Machinery Fixed plant and machinery is included in the valuation of the buildings, except in the case of specialised fixed equipment located in the Highways maintenance workshops. Statutory Liabilities No allowance has been made for rights, obligations or liabilities arising from the Defective Premises Act 1972, or any effect of the Environmental Protection Act 1990. State of Repair No structural surveys or investigations into the services in any buildings have been carried out for this valuation but it is assumed that the premises are in a reasonable state of repair, except as allowed for specifically. Realisation of Value No allowance has been made for any costs of disposal of the assets nor has any allowance been made for any possible liability to VAT or Capital Gains Tax on any such disposal. Publication Neither the whole nor any part of this Valuation Certificate nor any reference thereto may be included in any published document, circular or statement nor published in any way whatsoever without the Chief Valuer’s written approval to the form and content in which it may appear. Limit of Responsibility This Valuation Certificate is provided for the stated purpose and for the sole use of the County Council. Date of Certificate This Certificate is dated 9 June 2006.

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Accounting Policies Those principles, bases, conventions, rules and practice applied by Cornwall County Council that specify how the effects of transactions and other events are to be reflected in its financial statements through:

(i) recognising

(ii) selecting measurements bases for, and

(iii) presenting

assets, liabilities, gains, losses and changes to reserves. Accounting policies do not include estimation techniques. Accounting policies define the process whereby transactions and other events are reflected in financial statements. For example, an accounting policy for a particular type of expenditure may specify whether an asset or a loss is to be recognised; the basis on which it is to be measured; and where in the revenue account or balance sheet it is to be presented.

Accruals An amount shown in our accounts to cover money we owe or money owed to us, in the financial year, but which we will not actually pay or receive until the following year. Actuarial Gains and Losses The actuarial gains or losses to the pension fund is made up of:

• actual gains or losses to the value of the fund’s investments; • changes to the number, age and sex of staff that contribute to the pension fund; and • changes to the assumptions regarding the growth of investments and the liabilities of the

scheme. Admitted Organisations Organisations that take part in the Local Government Pension Scheme with our agreement under an “admission agreement”. Examples would include housing associations, development agencies and certain companies providing services we previously carried out ourselves. Agency Work When an organisation provides services on our behalf which we pay for. Apportionment A way of sharing the cost of management and administration to services using an appropriate method (for example, floor space for accommodation-related support services). Asset Management Revenue Account (AMRA) An account that charges each service for the cost of using its assets. Balances (Revenue Account) The accumulated surplus of income over expenditure. Balances can be used to reduce future Council Tax precepts. Best Value Under the Local Government Act 1999, we must constantly aim to improve our services. We must review all our functions within a five-year period. The aim is to make a real and positive difference to services which local people receive. Budget Equalisation Reserve (BER) Amounts set aside to meet future commitments and unforeseen or exceptional demands. Capital Charge Charges we make to services for using fixed assets when providing the service. Capital Expenditure Expenditure on the acquisition of a fixed asset or expenditure which adds to and not merely maintains the value of an existing fixed asset.

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Capital Financing Account A reserve built up from:

• capital receipts; • amounts charged to revenue; and • amounts set aside to repay loans.

Capital Programme The Authority’s plan of capital projects and spending over future years. Included in this category are the purchase of land and buildings, the erection of new buildings and works, design fees and the acquisition of vehicles and major items of equipment. Capital Receipts The proceeds from selling assets such as buildings. Capital Reserves An internal fund set up to finance capital expenditure as an alternative to external borrowing. Income to the reserve is derived from annual contributions by service committees or notional instalments of principal and interests. Cash Flow Statement Summarises the inflows and outflows of cash arising from transactions with third parties for capital and revenue purposes. Central Government Grants There are three types of grant.

• Revenue Support Grant – the main government grant to support local-authority services. • Specific service grants – payments from the Government to cover local-authority spending on

a particular service or project (for example, Standards fund for schools). Specific grants are often a fixed percentage of the costs of a service or project.

• Supplementary grants – grants towards capital spending for highway schemes.

CIPFA The Chartered Institute of Public Finance and Accountancy. This is the professional institute governing how public money is used and how it has to be reported. Class of Tangible Fixed Assets The classes of tangible fixed assets required to be included in the accounting statements are: Operational assets

• Other land and buildings

• Vehicles, plant, furniture and equipment

• Infrastructure assets

• Community assets Non-operational assets

• Investment properties • Assets under construction

• Surplus assets, held for disposal

Further analysis of any of these items should be given if it is necessary to ensure fair presentation. Community Assets Assets that we plan to hold for ever, have no set useful life, and may have restrictions on how we sell or otherwise dispose of them. Examples of community assets are parks, historic buildings and various conservation works.

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Consistency The concept that the accounting treatment of like items within an accounting period and from one period to the next one is the same. Consolidated Balance Sheet The accounting statement which sets out the Council’s total net assets and how they were financed. Consolidated Revenue Account This account sets out the Council’s income and expenditure for the year. It brings together all the services and functions performed by the County Council in one statement. Contingent Liability A possible liability which may arise when the outcome of unsettled claims made against us is known. Corporate and Democratic Core Spending relating to our need to co-ordinate and account for the many services we provide to the public. Creditors People we owe money to for work, goods or service we receive but which we have not paid for by the end of the financial year. Current Service Cost (Pensions) The increase in the present value of a defined benefit scheme’s liabilities expected to arise from employee service in the current period. Curtailment For a defined benefit scheme, an event that reduces the expected years of future service of present employees or reduces for a number of employees the accrual of defined benefits for some or all their future services. Curtailments include:

(a) termination of employee’s services earlier than expected, for example as a result of closing a factory or discounting a segment of a business, and

(b) termination of, or amendment to terms of, a defined benefit scheme so that some or all future

service by current employees will no longer qualify for benefits or will qualify only for reduced benefits.

Debtors People who owe us money that we are due to receive but which we have not been paid by the end of the financial year. Deferred Charges These charges are made up of our contributions over time towards paying for capital spending which does not result in, or remain matched with, tangible assets, such as voluntary-aided and voluntary-controlled schools (which we do not own). It also includes capital grants to outside organisations. We write them off in the year that they occur. Defined Benefit Scheme A pension or other retirement benefit scheme other than a defined contribution scheme. Usually, the scheme rules define the benefits independently of the contribution payable, and the benefits are not directly related to the investment of the scheme. The scheme may be funded or unfunded (including notionally funded). Defined Contribution Scheme A pension or other retirement benefit scheme into which an employer pays regular contributions fixed as an amount or as a percentage of pay and will have no legal or constructive obligation to pay further contributions if the scheme does not have sufficient assets to pay all employees benefits relating to employees service in the current and prior periods. Depreciation The reduction in the value of assets, for example, through wear and tear.

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De Minimus Expenditure This is the term given to expenditure incurred by local authorities that does not fall within the Code of Practice’s definition of fixed assets but is classified as expenditure for capital purposes with respect to capital controls i.e. part of an authority’s approved capital programme expenditure. A de minimus of £10,000 has been set for capital accounting purposes. This will result in expenditure on items under £10,000, that are included in the approved capital control programme, being classified as revenue and charged to service revenue accounts. Direct Revenue Financing The amount of capital expenditure financed directly from revenue. Direct Service Organisation The term Direct Service Organisation (DSO) is used to cover both District Labour Organisations (DLOs) established under the Local Government, Planning and Land Act 1980 and DSOs established under the Local Government Act 1988. Discretionary Benefits Retirement benefits which the employer has no legal, contractual or constructive obligation to award and are awarded under the authority’s discretionary powers, such as The Local Government (Discretionary Payment) Regulations 1996, the Local Government (Discretionary Payments and Injury Benefits) (Scotland) Regulations 1998, or The Local Government (Discretionary Payments) Regulations (Northern Ireland) 2001. Estimation Techniques The methods adopted by an entity to arrive at estimated monetary amounts, corresponding to the measurement bases selected, for assets, liabilities, gains, loses and changes to reserves. Estimation techniques implement the measurement aspects of accounting policies. An accounting policy will specify the basis on which an item is to be measured; where there is uncertainty over the monetary amount corresponding to that basis, the amount will be arrived at by using an estimation technique. Estimation techniques include, for example:

(a) methods of depreciation, such as straight-line and reducing balance, applied in the context of a particular measurement basis, used to estimate the proportion of the economic benefits of a tangible fixed asset consumed in a period

(b) different methods used to estimate the proportion of debts that will not be recovered,

particularly where such methods consider a population as a whole rather than individual balances.

Euro The Economic Monetary Union (EMU) has introduced a single European Currency. This is known as the Euro. Exceptional Items Material items which derive from events or transactions that fall within the ordinary activities of the authority and which need to be disclosed separately, by virtue of their size or incidence, to give fair presentation of the accounts. Expected Rate of Return on Pensions Assets For a funded defined benefit scheme, the average rate of return, including both income and changes in fair value but net of scheme expenses, expected over the remaining life of the related obligation on the actual assets held by the scheme. Extraordinary Items Material items possessing a high degree of abnormality, which derive from events or transactions that fall outside the ordinary activities of the authority and which are not expected to recur. They do not include exceptional items nor do they include prior period items merely because they relate to a prior period. Fees and Charges Money we raise by charging for the use of facilities or services.

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Finance Lease Leases where we treat the organisation paying the lease as if they own the goods. The organisation gains the profits that would come with ownership but it also suffers the losses. Fixed Asset Restatement Account This account represents the difference between the current value of our assets and the amounts we paid for them. Fixed Assets Items such as land, buildings, vehicles and major items of equipment, which benefit us over more than one year. Going Concern The concept that the authority will remain in operational existence for the foreseeable future and, in particular, that the revenue accounts and balance sheet assume no intention to curtail significantly the scale of operations. Government Grants Deferred Account This account shows the government grants and contributions we receive towards paying for capital spending on a particular service or scheme, and the extent to which they have been applied to the revenue account. An allocation is made to the Asset Management Revenue Account (AMRA) over the life of the assets being financed in the same way that depreciation is applied to the life of an asset. Gross Book Value This is the original or revalued cost of an asset before any depreciation is taken off it. Historic Cost What a fixed asset costs us to buy originally. Impairment Where an asset’s value has been reduced by physical deterioration or other factors beyond usual wear and tear. The asset’s value in the accounts also has to be reduced to reflect this impairment. Income The amount which we receive, or expect to receive, from any source. Service revenue income includes grants, sales, rents, fees and charges. Infrastructure Assets Fixed assets that are inalienable, expenditure on which is recoverable only by the continued use of the asset created. Examples of infrastructure assets are highways and footpaths. Investments A long-term investment is an investment that is intended to be held for use on a continuing basis in the activities of the authority. Investments should be so classified only where an intention to hold the investment for the long term can clearly be demonstrated or where there are restrictions as to the investor’s ability to dispose of the investment. Investments which do not meet the above criteria should be classed as current assets. Investment Properties Interest in land and/or buildings: (a) in respect of which construction work and development have been completed; and (b) which is held for its investment potential, any rental income being negotiated at arm’s length. Minimum Revenue Provision (MRP) The amount we have to set aside to repay loans. It is set at 4% of our Capital Financing Requirement. Net Book Value The value of an asset as recorded in the accounts. It is usually the net current replacement or original cost less any depreciation we have charged. Net Current Replacement Cost The cost of replacing an asset in its existing condition and use.

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Net Realisable Value The selling value of an asset less the costs of selling it. Non-funded Pension Schemes These are pension schemes that do not have an actual fund from which pensions are paid and contributions are made into. Instead payments are made to current pensioners directly from the year’s budget. The teachers and Firefighters pension schemes are examples of non-funded schemes that we run. Non-Operational Assets Those assets we hold but do not directly use when delivering services. Examples of non-operational assets are investment properties and assets that we do not actually need before they are sold or developed. Notionally Funded Pension Schemes These are a form of non-funded pension scheme that are treated similarly to funded schemes. There is no stock of investments, but employer contribution rates are set as if there were investments, based upon figures set by government actuaries. The Teachers Pension scheme is notionally funded. Operating Lease Under this type of lease, the risks and rewards of ownership of the leased goods stay with the company leasing out the goods. Operational Assets Those assets, for example land and buildings, we use in delivering services. Passporting This is the Government’s expectation that we increase schools’ budgets by at least as much as the increase in the FSS for schools. Past Service Cost For a defined benefit scheme, the increase in the present value of the scheme liabilities related to employee services in prior periods arising in the current period as a result of the introduction of, or improvements to, retirement benefits. Post Balance Sheet Events Those events, both favourable and unfavourable, which occur between the balance sheet date and the date on which the Statement of Accounts is signed by the Responsible Financial Officer. Precept What we demand from the collection funds maintained by the district councils for the contribution to our services from Council Tax payers. Prior Year Adjustments Those material adjustments applicable to prior years arising from changes in accounting policies or from the correction of fundamental errors. A fundamental error is one that is of such significance as to destroy the validity of the financial statements. They do not include normal recurring corrections or adjustments of accounting estimates made in prior years. Private Finance Initiative 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. Projected Unit Method This is a common method by which actuaries estimate the cost of future benefits to a pension scheme. The method works out the costs of future benefits members are expected to earn over a period (usually a year) following the valuation date, allowing for future increases in pay until retirement or the date a member leaves service.

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Provision for Credit Liabilities (PCL) Money we set aside to repay debts or to cover spending which we have borrowed money for. We include these details in the Capital Financing Account. Provisions This is money we keep to pay for known, future costs. Prudence The concept that revenue is not anticipated but is recognised only when realised in the form either of cash or of other assets, the ultimate cash realisation of which can be assessed with reasonable certainty. Prudential Code for Capital The Prudential Code has been introduced by the regulations supporting the Local Government Act 2003. Local authorities can borrow money to pay for capital spending in a similar way as people can get a mortgage to buy a house. Until April 2004, the Government used to tell local authorities how much they could borrow. This code replaces central government control with self-regulation – each local authority is now responsible for deciding out much it can afford to borrow. Under the regulations, when we are making this decision we must keep within the Prudential Code, which sets out the principles that local authorities must follow. These include the following.

• Affordability – can we afford to make the repayments? • Prudence – are we planning to borrow sensibly? • Value for money – will the loan pay for something that is good value for money? • Service delivery – will the loan help us to deliver our service aims?

PWLB The Public Works Loan Board, a government agency which lends money to the public sector. Related Parties Under accounting rules, we have to show transactions between us and other organisations which are also funded by the Government. We have to show transactions between us and the immediate families of county councillors or senior officers, and any companies or organisations that they have a controlling interest in. Reserves Reserves are established by the County Council by transfers from the County Fund, in order to meet future commitments such as capital charges and unforeseen or exceptional expenditure demands. Residual Value The net realisable value of an asset at the end of its useful life. Residual values are based on price prevailing at the acquisition (or revaluation) of the asset and do not take account of expected future price changes. Retirement Benefits All forms of consideration given by an employer in exchange for services rendered by employees that are payable after the completion of employment. Retirement benefits do not include termination benefits payable as a result of either (i) an employer’s decision to terminate an employee’s employment before the normal retirement date or (ii) an employee’s decision to accept voluntary redundancy in exchange for those benefits, because these are not given in exchange for services rendered by employees. Revenue Account An account that records an authority’s day to day expenditure and income on such items as salaries and wages, running costs of services and the financing of capital expenditure. Revenue Support Grant The main Government general grant which is not specific to any service. It is distributed according to a formula which takes account of the Government’s assessment of spending needs (Formula Spending Share).

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Scheme Liabilities The liabilities of a defined benefit scheme for outgoings due after the valuation date. Scheme liabilities measured using the projected unit method reflect the benefits that the employer is committed to provide for service up to the valuation date. Service Level Agreements (SLAs) Agreements drawn up mainly between our departments which provide management and administrative support (for example financial, legal, personnel and property) and the client services for whom the service is provided. They give details of the nature, quality and timing of the service provided, but no longer the cost. Settlement An irrevocable action that relieves the employer (or the defined benefit scheme) of the primary responsibility for the pension obligation and eliminates significant risks relating to the obligation and the assets used to effect the settlement. Settlements include:

(a) a lump-sum cash payment to scheme members in exchange for their rights to receive specified pension benefits

(b) the purchase of an irrevocable annuity contract sufficient to cover vested benefits, and (c) the transfer of scheme assets and liabilities relating to a group of employees leaving the

scheme. Slippage The term we use to describe capital spending which happened later than we originally planned. SORP A statement of recommended practice issued by the Accounting Standards Board or by one of the accountancy institutes (such as CIPFA). SORPs are developed in the public interest and set out current best accounting practice. They are produced for subjects for which it is not considered appropriate to issue a financial reporting standard. Our accounts keep to the relevant SORPs (unless we say otherwise), particularly to the Code of Practice on Local Authority Accounting in Great Britain, and the Best Value Accounting Code of Practice. Specific Grants Central Government grants towards specific services, usually calculated on a fixed percentage basis for particular services. Stocks Comprise the following categories: (a) goods or other assets purchased for resale; (b) consumable stores; (c) raw materials and components purchased for incorporation into products for sale; (d) products and services in intermediate stages of completion; (e) long term contract balances; and (f) finished goods Supported Capital Expenditure Approvals (SCE’s) Authorisations to use credit to finance capital expenditure. They are required as cover for both external borrowing and credit arrangements, which include leasing and deferred purchase agreements. Tangible Fixed Assets Operational assets, non-operational assets currently being built. Total Cost The total cost of a service or activity includes all costs which relate to the provision of the service (directly or brought in) or to the undertaking of the activity. Gross total cost includes employee costs, expenditure relating to premises and transport, supplies and services, third party payments, transfer payments, support services and capital charges. This includes an appropriate share of all support services and overheads, which need to be apportioned.

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Transfer Values Payments made between pension schemes of accumulated pension funds for employees who change their employment. Trust Funds Money that we do not own that we manage for the owners of the money. Useful Life The period over which the local authority will derive benefits from the use of a fixed asset. Work-in-progress The value of work on an uncompleted project at the end of the year which we have yet to recover from the client. Write Down To reduce the value of an asset in a set of accounts. Write Off The reduce the value of an asset to nothing in a set of accounts.

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