cwgc financial statements

COMMONWEALTH WAR GRAVES COMMISSION

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015



Index Page Commissioners and executive directors 1 Commissioners' report and operating and financial review 2 - 4 Statement of internal controls 5 Commissioners' responsibilities statement 6 Independent auditor's report 7 - 8 Statement of financial activities 9 Balance sheet 10 Cash flow statement 11 Principal accounting policies 12 - 14 Notes to the financial statements 15 - 27



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Commissioners

President: HRH The Duke of Kent KG GCMG GCVO ADC

Chairman: The Rt. Hon. Philip Hammond MP (To July 2014) The Rt. Hon. Michael Fallon MP (From July 2014)

Vice Chairman: Air Chief Marshal Sir Joe French KCB CBE

New Zealand HE The Rt. Hon. Sir Lockwood Smith KNZM PhD Australian HE Michael Rann CNZM (To May 2014) Australian HE The Hon. Alexander Downer AC (From June 2014) South African HE Mr Obed Thembinkosi Mlaba Indian HE Mr Ranjan Mathai Canadian HE Mr Gordon Campbell

Professor Sir Hew Strachan PhD FRSE Mr Keith Simpson MP Mr Kevan Jones MP Vice Admiral Sir Tim Laurence KCVO CB ADC (P) Mr Edward Chaplin CMG OBE The Hon Mrs Ros Kelly AO Mr Robert Fox MBE Lieutenant General Sir William Rollo KCB CBE

Executive Directors

Victoria Wallace Director General (from Oct 2014) Alan Pateman-Jones Director General (to June 2014) Brian Davidson Director of Estates (Acting Director General from June 2014 to Oct 2014) Richard Hills Director of Corporate Planning & Communications Colin Kerr Director of Finance Steve Luckhurst Director of Human Resources David Richardson Acting Director of Estates (from June 2014 to April 2015) Gillian Stedman Director of Legal Services

Advisors Bankers HSBC 9 The Boulevard Crawley West Sussex RH10 1UT United Kingdom

Independent auditor Grant Thornton UK LLP Grant Thornton House Melton Street Euston Square London NW1 2EP


COMMISSIONERS' REPORT AND OPERATING AND FINANCIAL REVIEW FOR THE YEAR ENDED 31 MARCH 2015

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Introduction

The Commonwealth War Graves Commission accounts are prepared in line with best practice in the UK Charities sector (Accounting and Reporting by Charities: Statement of Recommended Practice (the “SORP”)). Compliance with best practice extends beyond the numbers themselves and addresses the need to report on “public benefit”, reflecting that the principal funding source is the taxpayers of the six Member Governments.

Public Benefit

The “core business” of the Commission, as defined in the Royal Charter of 1917, is to maintain the graves and the memorials of the war dead “in perpetuity” and to maintain the relevant records. This remit was extended subsequently to include the war dead of the Second World War. To that end, the Member Governments contributed £59.9m in 2014/15, in proportion to the war dead of each of the six countries, being 1.7 million.

These men and women are commemorated either on a headstone (where identification was possible) or on a memorial. “Memorials” means, in this case, those central locations such as the Thiepval Memorial, the Menin Gate and the Runnymede memorial, where the names of the missing are inscribed. Moreover, where there is a grave of an unidentified casualty (i.e. in Kipling’s words, “a soldier of the Great War, known unto God”), then that grave, too, is maintained.

The Royal Charter tasks the Commission with “maintaining fit provision” of the graves and memorials. Consequently, the Commission’s primary objective is to ensure that each headstone and memorial is well maintained, that the names are legible and that the surrounding infrastructure (i.e. walls, gates, benches) is sound. Also and in accordance with guidelines laid down in 1918, horticulture (including shrubs and trees) is undertaken on each site in order “to strike the proper note of brightness and life”.

There is no charge to the public for visiting our cemeteries.

The overwhelming response from the public – through visitors’ books, through letters, through the website and through our enquiries team – is that our sites are valued very highly. This has been illustrated most recently by the huge public interest in the 70th anniversary of Normandy (our sites at Bayeux and Beny sur Mer), the 100th anniversary of the outbreak of the First World War (our site at St.Symphorien, Mons) and the 100th anniversary of the Gallipoli landings (our sites at Cape Helles and at Anzac Cove). We are already working with Member Governments on the planning for the 100th anniversary of the Battles of the Somme campaign (our sites at Thiepval, Longueval, Pozieres, Delville Wood and Courcelette) and of the Battle of Jutland (our sites in Lyness, Queensferry and Frederikstad).

One challenge in recent years has been to engage with the public on campaigns that have been forgotten, such as the First World War campaigns in Italy, Salonica, Palestine and Tanzania. Moreover, whilst we have many visitors to our high profile sites, equally moving sites, sometimes a few hundred yards distant, can be overlooked. To that end, we have been putting in significant effort: the installation of information panels at the cemeteries, working with Embassies to instigate anniversary events at sites, developing web content and a range of media initiatives.



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We are also looking at ways to engage with the UK public with regard to the 300,000 war dead in this country, for which the Commission is responsible. In the last year, we hosted more than 200 MPs to their constituency sites, we introduced an “app” (“what’s near me?”) and we have begun to work with a range of groups to increase community engagement.

As stated previously, we are also responsible for the relevant burial records. In August 2014, we made available online the digitised burial records for the First World War. Our Second World War records were made available on the 70th anniversary of VJ Day – August 2015. The public response has been very encouraging. In the last year, we have begun the large task of organising properly our document and photo archives and these treasures (including correspondence from King George V, Lutyens and Kipling) will become available to the public this year.

Strategy

The Commission’s own centenary is in 2017. To that end, the Commissioners and senior Directors are taking steps to enunciate a new strategy, focussed on the next 100 years. In so doing, however, opportunities will be taken to ensure that the quality of all aspects of our work is at the appropriate level and that the founding principles of equality of commemoration are being applied with the necessary rigour. This new strategy will be finalised towards the end of 2015.

Governance

The Commissioners comprise “the Board”. The Chairman is the serving UK Secretary of State for Defence, whilst the Vice Chairman (the de facto operational Chairman) is a retired senior UK military officer. The Commissioners include the High Commissioners of the five Commonwealth Member Governments, together with two Members of Parliament and other lay members.

The Commissioners meet four times a year, with the attendance of the Director General and the senior directors.

The Commissioners are supported by Committees on Finance, Audit and Ethics. The Audit Committee reviews risk at each meeting (and the risk management procedures were reviewed and strengthened in 2014/15).

Risk management

For the Commission, the primary areas of risk are the maintenance of funding from Member Governments, together with the reputational risk inherent in failing to maintain adequately our sites, particularly the “iconic” memorials. To that end, risk reporting mechanisms are now in place, reviewed by management monthly and by the Commissioners quarterly. The risk reporting processes are audited independently each year.

The condition of the sites (the walls, headstones, memorials, paths, gates) is assessed for every site on a cyclical basis: this is the key annual budget pressure. The cyclical review process is gradually being replaced by a more dynamic inspection process, with a “sharpening” of priorities.



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Financial results for the year ended 31 March 2015

The Commission’s results for the year were in line with target, in spite of significant cost pressures on foreign exchange movement, impairment of foreign assets and restructuring. The weak financial markets were reflected in a 9% reduction in the income passed from the Endowment Fund.

The Commission has had to make a “prior year adjustment” of £477k (see note 22) in terms of restating its opening balance sheet. This relates primarily to a potential liability for income taxes in Egypt, incorrectly calculated, going back to 2004. Professional advice and service is being obtained from the Grant Thornton International member firm in Cairo.

The key numbers show a surplus of £1.3m on income of £67.5m. This surplus is split:

- An underlying surplus of £0.2m (2013/14: £0.3m) - A FRS 17 accounting cost adjustment of £1.1m (2013/14: £1.1m)

The second key number is net current assets (i.e. working capital): this shows a reduction from £2.04m to £0.91m, a reduction of £1.13m. However, the underlying figures are positive:

- £0.8m of the March 2014 balance was budgeted to be committed to the 2014/15 capital programme, primarily the second phase of the Head Office refurbishment. This funding had been generated originally through the sale and leaseback initiative on motor vehicles

- A further £0.8m relates to a target sales figure for the disposal of the surplus office in Rome. The sale did not proceed in 2014/15, but this is now going through

When the Rome proceeds are received, underlying working capital – after other adjustments – should be circa £1.5m which, with the target surplus of £0.7m in 2015/16, should mean that the Commission’s agreed objective of £2m of balance sheet working capital should be achieved in 2015/16.

Reflecting the experience in the wider economy, the Commission’s pension deficit – as defined by FRS 17 - moved from £5.6m to £18.7m, a deterioration of £13.1m. Most of this deterioration was due to the effect of the tri-ennial valuation, informed by a collapse of the yield rates for investments. This has resulted in the Commission’s overall balance sheet value of £12.5m being adjusted to a deficit figure of £6.2m when the pension deficit is played in. In considering the practical consequences of this deficit, three factors must be considered:

- Firstly, the Commission’s pension arrangements are in the process of being reviewed with a final decision anticipated this year

- Secondly, this liability will not crystallise in cash in the foreseeable future, if at all - Thirdly, the liquidity of the Commission is sound – as discussed previously – and future funding

streams have been confirmed for the next three years As with the previous two years, the audit opinion shows a “True and Fair View”.

Sir Joe French Victoria Wallace Vice-Chairman Director General

Date: 9th September 2015


STATEMENT OF INTERNAL CONTROLS FOR THE YEAR ENDED 31 MARCH 2015

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As Accounting Officer to the UK Ministry of Defence, I am responsible for ensuring that the internal controls of the organisation are fit for purpose and that reliance can be placed on the control of resources used in the Commission.

The Corporate Governance of these processes centres on the Audit Committee, chaired by Sir Tim Laurence, with two other Commissioners. The Committee’s terms of reference have been set by the Commissioners and the accountability is to the Commission; all minutes are presented to the Commissioners. The Committee met three times during 2014-15.

The Audit Committee appointed Moore Stephens to undertake internal audit services for the three year period from April 2014. Moore Stephens work to a three year strategic audit plan, prepared in line with best practice and approved by the Committee. Moore Stephens attend each meeting of the Audit Committee, at which they present a full report on activities; they also have direct access to the Committee Chairman.

The Commissioners have previously appointed Grant Thornton UK LLP as external auditors. They attend each meeting of the Audit Committee. Their audit plan for each year is discussed with the Committee and they submit a “management letter” each year, summarising their findings. In line with best practice, Grant Thornton met with the Committee at the conclusion of their audit, without CWGC management being present.

At an operational level, the Finance Director is responsible for the internal controls of the organisation. An “in house” audit function is in place with a remit on internal controls and transactional testing. During the year the team has been strengthened and expanded with the recruitment of an additional full time resource. This team, based in Tel Aviv, co-ordinates its activities with the programme of Moore Stephens.

The Audit Committee is responsible for ensuring that the Commission’s risk reporting is fit for purpose. The governance related to this is reviewed annually by internal audit and reported to the Audit Committee.

Moore Stephens, in their annual report to the Audit Committee, concluded that while governance, risk and most day to day operational internal controls are in place, there is some risk that management's objectives may not be fully achieved. Improvements are required in those areas to enhance the adequacy and / or effectiveness of governance, risk management and internal control.

Victoria Wallace Director General

Date: 9th September 2015


COMMISSIONERS' RESPONSIBILITIES STATEMENT FOR THE YEAR ENDED 31 MARCH 2015

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The Commissioners are responsible for preparing the Annual report and the financial statements in accordance with applicable law and regulations.

The Commission’s Royal Charter of Incorporation requires the Commission to prepare financial statements for each financial year. The Commission has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting standards and applicable law). Guidance under Company law recommends that the Commissioners must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Commission and of the incoming resources and application of resources, including the income and expenditure, of the Commission for that period. In preparing these financial statements, the Commissioners are required to:

- Select suitable accounting policies and then apply them consistently; - Observe the methods and principles in the Charities Statement of Recommended Practice (SORP);

and - Make judgments and accounting estimates that are reasonable and prudent. - Prepare the financial statements on the going concern basis unless it is inappropriate to presume that

the Commission will continue in operation

The Commissioners are responsible for keeping adequate accounting records that are sufficient to show and explain the Commission’s transactions and to disclose with reasonable accuracy at any time the financial position of the Commission and to enable them to ensure that the financial statements comply with the requirements of the Charities SORP. They are also responsible for safeguarding the assets of the Commission and hence for taking steps for the prevention and detection of fraud and other irregularities.

The Commissioners confirm that:

- So far as each Commissioner is aware, there is no relevant audit information of which the Commission’s auditor is unaware; and

- Commissioners have taken all the steps that they ought to have taken as Commissioners in order to make themselves aware of any relevant audit information and to establish that the Commission’s auditor is aware of that information.

INDEPENDENT AUDITOR'S REPORT TO THE COMMISSIONERS OF THE COMMONWEALTH WAR GRAVES COMMISSION

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We have audited the financial statements of the Commonwealth War Graves Commission for the year ended 31 March 2015 which comprise the Statement of Financial Activities, the Balance Sheet, the Cash Flow Statement, the principal accounting policies and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Commission as a body. Our audit work has been undertaken so that we might state to the Commissioners those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Commission and its Commissioners as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Commissioners and auditor

As explained more fully in the Commissioners’ Responsibilities Statement set out on page 6, the Commissioners are responsible for the preparation of financial statements which give a true and fair view. We have been appointed as auditor under the requirements of the Commission's Royal Charter of Incorporation. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB's) Ethical Standards for Auditors. Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

In our opinion, the financial statements: • give a true and fair view of the state of the Commission’s affairs as at 31 March 2015, and of its incoming

resources and application of resources, for the year then ended; and • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting

Practice.

INDEPENDENT AUDITOR'S REPORT TO THE COMMISSIONERS OF THE COMMONWEALTH WAR GRAVES COMMISSION (CONTINUED)

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Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where we are required to report to you if, in our opinion: • the information given in the Commissioners’ report and operating and financial review is inconsistent in

any material respect with the financial statements; or • sufficient accounting records have not been kept; or • the financial statements are not in agreement with the accounting records and returns; or • we have not received all the information and explanations we require for our audit.

Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London Date: 9th September 2015


STATEMENT OF FINANCIAL ACTIVITIES FOR THE YEAR ENDED 31 MARCH 2015

The accompanying accounting policies and notes form an integral part of these financial statements Page |9

General Purposes

2015

Agency Purposes

2015

Restricted Funds

2015

Total 2015

Re-stated Total 2014

Note £'000 £'000 £'000 £'000 £'000 Incoming resources Funds received from member governments 1 59,884 - - 59,884 59,387 Funds received for agency purposes 2 - 5,304 - 5,304 5,456 Investment income 3 941 - - 941 1,080 Other incoming resources 4 1,369 - - 1,369 1,123 Total incoming resources 62,194 5,304 - 67,498 67,046 Resources expended Expenditure in respect of general activities 5 59,197 - 58 59,255 59,643 Expenditure in respect of agency purposes 6 - 5,304 - 5,304 5,456 Governance costs 7 384 - - 384 343 Net exchange (gain)/loss 8 184 - - 184 (412) Other resources expended 8 1,051 - - 1,051 1,060 Total resources expended 60,816 5,304 58 66,178 66,090 Net incoming resources for the year before other recognised gains and losses 1,378 - (58) 1,320 956 Other recognised gains/(losses) Actuarial (loss)/gain on defined benefit pension scheme 16 (14,204) - - (14,204) 1,506 Net movement in funds (12,826) - (58) (12,884) 2,462 Reconciliation of funds Total funds brought forward 19 6,733 (106) 93 6,720 4,258 Net movement in funds as previously reported 19 - - - 2,939 Impact of prior period adjustments 22 - - - (477) Net movement in funds(2014 - as restated) 19 (12,826) - (58) (12,884) 2,462

Total funds carried forward 19 (6,093) (106) 35 (6,164) 6,720 All incoming resources and resources expended in the general purpose fund have been derived from continuing activities


BALANCE SHEET AS AT 31 MARCH 2015

The accompanying accounting policies and notes form an integral part of these financial statements Page |10

General Purposes

2015

Agency Purposes

2015

Restricted Funds

2014

Total 2015


Note £'000 £'000 £'000 £'000 £'000 Fixed assets Tangible assets 11 16,349 44 - 16,393 15,269 16,349 44 - 16,393 15,269 Current assets Stocks 12 727 - - 727 1,006 Debtors 13 2,060 589 - 2,649 2,587 Cash at bank and in hand 21 15,489 (93) 35 15,431 16,269 18,276 496 35 18,807 19,862 Creditors: amounts falling due within one year 14 (17,244) (646) - (17,890) (17,818) Net current assets/(liabilities) 1,032 (150) 35 917 2,044 Total assets less current liabilities 17,381 (106) 35 17,310 17,313

Provisions for liabilities and charges 15 (4,775) - - (4,775) (4,908) Total assets/(liabilities) excluding pension scheme liability 12,606 (106) 35 12,535 12,405

Defined benefit pension scheme liability 16 (18,699) - - (18,699) (5,685) Net assets/(liabilities) including pension scheme liability (6,093) (106) 35 (6,164) 6,720 Funds of the Commission Funds carried forward (2014 – restated) 19 6,570 (106) 35 6,499 6,369 Revaluation reserve carried forward 19 6,036 - - 6,036 6,036 Pension reserve 19 (18,699) - - (18,699) (5,685) 19 (6,093) (106) 35 (6,164) 6,720 The financial statements were approved by the Commission on 9th September 2015 Sir Joe French Victoria Wallace Vice-Chairman Director General


CASHFLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2015

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General Purposes

2015

Agency Purposes

2015

Restricted Funds

2015

Total 2015


Note £'000 £'000 £'000 £'000 £'000 Net cash inflow from operating activities

Net incoming resources 1,378 - (58) 1,320 956 Pension scheme adjustment (1,189) - - (1,189) (1,150) Depreciation 1,391 - - 1,391 1,785 Profit on sale of fixed assets (15) - - (15) 7 Impairment of fixed assets 218 - - 218 281 Decrease/(Increase) in stocks 279 - - 279 (331) (Increase)/Decrease in debtors (129) 66 - (63) (81) Increase in creditors 49 23 - 72 1,842 Increase in termination indemnities

369 - - 369 541

Termination indemnities exchange revaluation

(1) - - (1) (336)

Disbursement of Termination indemnities

(235) - - (235) (484)

(Decrease) /Increase in other provisions

(266) - - (266) 221

Net cash inflow from operating activities 1,849 89 (58) 1,880 3,251 Capital expenditure

Payments to acquire tangible fixed assets

(3,183) (44) - (3,227) (2,096)

Transfer of Assets (54) 54 - - - Receipts from sales of tangible fixed assets

509 - - 509 788

(2,728) 10 - (2,718) (1,308)

Decrease in cash 20/21 (879) 99 (58) (838) 1,943


PRINCIPAL ACCOUNTING POLICIES FOR THE YEAR ENDED 31 MARCH 2015

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Basis of Accounting

The Commissioners report and accompanying financial statements have been produced in accordance with the requirements of the Charities Act 2011 as set out in the Statement of Recommended Practice (SORP) 2005 and applicable United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The financial statements have been prepared under the historical cost convention, as modified by the inclusion of investments and freehold property at market value.

Fund accounting

General Purposes reserves are unrestricted funds that are available for use at the Commissioners’ discretion in furtherance of the objectives of the Commission.

Restricted funds are subject to specific restrictions imposed by the donors of the relevant investments.

In accordance with FRS 17 – "Retirement benefits", a pension reserve is included within unrestricted funds representing the pension deficit.

Incoming resources

Income, including funding from member governments, investment income and income due from the Trustees of the Imperial War Graves Endowment Fund is recognised in the period in which the Commission is entitled to receipt and where the amount can be measured with reasonable clarity.

Resources expended

Expenditure is analysed between Charter activities and agency activities. Costs are included in the statement of financial activities on an accruals basis.

Governance costs Governance costs represent the direct expenditure incurred by the Commissioners and the internal audit, in compliance with constitutional and statutory requirements, as well as external audit costs.

Allocation and apportionment All costs are allocated to general purposes, other than costs directly attributable to agency work (for example, memorials or non-world war cemeteries) and costs apportioned to agency work (for non-world war or agency government headstones, situated within wider Commission world war cemeteries).



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Tangible fixed assets and depreciation

Tangible fixed assets costing more than £5,000 are capitalised and included at cost, including any incidental costs of acquisition. For IT procurement, the provisions of Grouped Assets apply to all items of equipment forming part of the Commission’s IT infrastructure.

The Commission has adopted a policy of revaluing its freehold property. A full valuation is provided every five years by a qualified external valuer and in an interim period where a material movement in valuation is expected.

Depreciation is provided on tangible fixed assets at rates calculated to write off the cost by equal annual instalments, on a straight line basis, over their expected useful economic lives as follows:

- Freehold land and buildings No depreciation is charged on freehold property - Vehicles 5 years - Trucks 10 years - Machinery 5 years - Computer infrastructure 3 years - Information systems 7 years

In year the Commission continued its process, in countries where there was a suitable business case, for vehicles less than 5 years to be transferred on to a sale and leaseback contract; this resulted in a cash receipt of £35k, and a small loss on disposal. A restatement of the prior year information systems balances took place, to re-align these assets from a 3 year depreciation period to 7 years; this now represents a more suitable life period for these particular asset categories.

Stocks

Stocks of uninscribed headstones and other consumables are included as stock, valued at cost.

Provisions

Provisions for future liabilities are recognised when the Commission has a legal or constructive financial obligation that can be readily estimated and for which there is a reasonable expectation that payment will be made.

Foreign currencies

Transactions in foreign currencies are translated into Sterling at fixed internal rates of exchange set before the beginning of the financial year. For each foreign currency in which the Commission has material expenditure, these are the floor rates at which budgeted cash flows in these currencies have been set for the ensuing year by the use of derivatives. Balances at March 31 are re-translated at the equivalent fixed rates of exchange set for the ensuing year. The net exchange gain or loss arising on foreign currency transactions is shown as a separate item within expenditure in respect of general purposes activities.



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Pension schemes

The Commission operates a defined benefit scheme in the UK, and for foreign staff contracted in the UK. In 2013/14, a defined contribution scheme was set up for new UK employees to the Commission. In most European countries, the Commission complies with local schemes which are mandated legally. Across the rest of the countries in which the Commission operates, a range of "Termination Indemnity” schemes are in place, some of which are mandated legally and some of which have been established voluntarily by the Commission.

The defined benefit pension scheme is accounted for in accordance with FRS 17. Scheme assets are measured at fair values and quoted securities are measured at bid price. Scheme liabilities are measured on an actuarial basis using the projected unit method and are discounted at appropriate high quality bond rates. The net surplus or deficit is presented separately from other net assets on the balance sheet. A net surplus is recognised only to the extent that it is considered recoverable under the terms of FRS 17 by the Commission.

The current service cost and costs from settlements and curtailments are charged against net incoming resources. Past service costs are spread over the period until the benefit increases vest. Interest on the scheme liabilities and the expected return on scheme assets are included net of support costs. Actuarial gains and losses are reported within other recognised gains/ (losses) in the statement of financial activities.

Operating leases

Rentals payable under operating leases are charged to the statement of financial activities as incurred, on a straight line basis, over the term of the lease.

Heritage assets

The Commission holds a large number of cemeteries and memorials, none of which have been recognised in the Balance Sheet as the assets are held in perpetuity on behalf of the Member Governments and there is therefore no question of disposal for commercial gain.

UK Value Added Tax (VAT)

Until March 2011, all VAT costs incurred by the Commission were reimbursed in full by the UK Ministry of Defence. The reimbursement figure was capped at £850,000 per annum from 2011-12.

The funding received from the UK Ministry of Defence is shown separately within other incoming resources and the VAT incurred by the Commission is shown separately within other resources expended.

Restricted funds

The Commission accounts for restricted funds, being one fund for which the capital was donated independently of Member Governments, although the income can be used for the Commission’s general activities. The details are shown in Note 19.2.


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31 2015

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1 Incoming resources from member governments

The value and percentage of contributions being made by member governments is as follows:

Percentage 2015 2014 contribution £'000 £'000 United Kingdom 78.48% 46,996 46,623 Canada 10.01% 5,994 6,012 Australia 6.05% 3,626 3,597 New Zealand 2.14% 1,283 1,273 South Africa 2.11% 1,261 1,175 India 1.21% 724 706 100% 59,884 59,387 Apart from Exchange rate rounding, the percentage basis of contributions has remained unchanged since 2007 and is reviewed annually by the Commission.

2 Incoming resources for agency purposes

The value of the funds received / receivable for agency purposes by government and other associations is as follows:

2015 2014 £'000 £'000 Canada 1,639 1,626 United Kingdom 1,696 1,666 Germany 835 886 Australia 544 704 South Africa 231 182 New Zealand 117 96 Other 242 296 5,304 5,456 3 Investment income

2015 2014 £'000 £'000

Income from the Imperial War Graves Endowment Fund 904 1,038 Interest on bank deposits and investment income 37 42

941 1,080



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4 Other incoming resources

2015 2014 £'000 £'000

United Kingdom government funding for offset against VAT 850 850 Legacies and donations 31 78 Grant funding, Flanders walls & Thiepval memorial projects 250 100 Other income, equipment sales etc. 238 95

1,369 1,123

5 Expenditure in respect of general activities

2015 Restated

2014 £'000 £'000 Staff costs (note 9) 39,497 41,042 Termination indemnity provision charge (note 15) 369 541 Termination indemnity state payments 162 - Staff support 1,899 1,827 Supplies and equipment 5,898 5,417 Contract costs 7,046 6,887 Travel costs 2,922 2,968 Transport costs 1,842 1,414 Facilities costs - rent, rates and insurance 1,123 1,141 Maintenance 500 426 Depreciation 1,391 1,785 Restructuring 717 677 Legal costs and provisions 67 412 Net financial income on pension scheme liabilities (note 17) (1,552) (1,720) Professional fees 1,079 848 Marketing and publications 299 209 Communications 413 397 IT 678 531 Other administrative expenses 209 297 64,559 65,099 Less: Recoverable costs incurred for agency purposes (note 6) (5,304) (5,456) 59,255 59,643



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6 Expenditure in respect of agency purposes

2015

2014 £'000 £'000 Indirect staff and staff support cost 1,816 1,695 Indirect non staff costs 905 1,148 Direct staff costs 721 664 Direct non staff costs 1,256 1,396

4,698 4,903 Management charges 606 553 5,304 5,456

7 Governance costs

2015 2014 £'000 £'000 Internal audit fees 38 47 CWGC Internal audit costs 157 112 Commissioners' costs and expenses (note 10) 117 129 External audit fees – statutory audit 72 55 384 343 8 Other resources expended

2015 2014 £'000 £'000 UK Input VAT 1,051 1,060 Net exchange loss/(gain) 184 (412) 1,235 648



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9 Employees and staff costs

2015 2014 £'000 £'000 Wages and salaries 29,339 30,167 Social security costs 6,698 6,825 Staff allowances 1,166 1,263 Casual labour costs 438 585 Pension – Defined Contribution Scheme 205 110 Pensions – current service cost (note 17) 1,647 2,092 Pensions - past service cost (note 17) 4 -

39,497

41,042

Restructuring

717 677 40,214 41,719 The number of staff employed as at 31st March by the Commission, including contracted part time staff on a full time equivalent basis, was: 2015 2014 Number Number Western European Area 586 622 United Kingdom area 106 101 Asia, Africa & Pacific area 181 173 Mediterranean area 248 248 Canada 9 6 South Africa 5 5 Headstone production unit 13 13 Head office – United Kingdom 106 102 1,254 1,270 The table below shows the number of higher paid staff with emoluments falling in the following ranges. Emoluments include salary and taxable benefits in kind and other payments to employees. 2015 2014 Number Number £60,000 to £69,999 10 3 £70,000 to £79,999 6 3 £80,000 to £89,999 2 4 £90,000 to £99,999 - 2 £100,000 to £109,999 1 1 £130,000 to £139,999 - 1 £140,000 to £149,999 1 - £160,000 to £169,999 - 1



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10 Commissioners' and Director General expenses

The Vice Chairman of the Commission receives a salary of £55,800 (2014: £55,800). No other Commissioners receive remuneration for their services. Directly incurred expenditure of the Commissioners borne by the Commission in the year, paid to 14 Commissioners (2014: 14), were £61,439 (2014: £73,326).

The total emoluments of the Director Generals (the old and new appointment spanned the financial year) for the year were £129,754 (2014: £139,091) this includes the Self-Invested Pension Plan for the year of £9,718 (2014: £19,250). In addition, the directly incurred expenses of the Director Generals in the year were £33,002 (2014: £17,973).

The most significant element of the Commissioners’ and Director General’s expenses is the cost of visits to overseas sites.

11 Tangible fixed assets

Freehold & leasehold property

Machinery

Motor

vehicles

Computer & Office equipment & Comms

Assets in course of

Construction

Total

£'000 £'000 £'000 £'000 £’000 £'000 Cost At 1 April 2014 10,593 4,122 2,970 3,322 1,371 22,378 Additions 284 471 193 547 1,732 3,227 Transfer 47 71 32 889 (1,039) - Impairment (200) - (18) (218) Disposals (450) (8) (226) - - (684) At 31 March 2015 10,274 4,656 2,969 4,758 2,046 24,703 Depreciation At 1 April 2014 - 2,789 2,187 2,134 - 7,110 Charge for year - 560 244 587 - 1,391 Eliminated on disposals - (1) (190) - - (191) At 31 March 2015 - 3,348 2,241 2,721 - 8,310 Net Book Value At 31 March 2015 10,274 1,308 728 2,037 2,046 16,393 At 31 March 2014 10,593 1,333 783 1,189 1,371 15,269 All tangible fixed assets are used for the general purposes of the Commission.

The Commission has adopted a policy of revaluation of freehold land and buildings in line with FRS 15: "Tangible Fixed Assets". A formal revaluation of all the freehold land and buildings was carried out by an



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external valuer, Cushman & Wakefield LLP, as at 31 March 2012. The valuations were in accordance with the RICS Valuation standards and FRS 15 “Tangible Fixed Assets”.

The value of freehold land and buildings under the historical accounting rules was £2.8m at 31 March 2012. All other assets are held at cost. In year, impairment has been made to a property in Italy, pending its disposal. The current value is based on its potential market value.

The major capital project still in progress, at the balance sheet date, was the Head Office Phase 2 refurbishment, £1.38m, which was at its final ‘snagging’ stage. A significantly lower level of information systems projects was still in progress, £0.4m, (2014 £1m) which included SharePoint, CRM and Payroll. Expenditure not yet complete or operational remains under the assets in the course of construction category; once operational it is accounted for as an addition and where applicable, depreciation commences.

Disposals of vehicles during the year relates to the sale and leaseback in Italy.

Information systems, including the Microsoft General Dynamics finance system and the headstone production system capitalisation policy was amended in year to be re-stated to 7 years, from 3 years; which reflects more accurately the life of these systems. This change in policy generated an in year depreciation write back of £171k.

12 Stocks

2015

£'000 2014

£'000

Stock of uninscribed headstones 672 821 Stock of other materials 55 185

Total stock 727 1,006 Headstone inventory includes uninscribed headstones, headstones in transit from the quarries and panels awaiting engraving.

13 Debtors

General

Purposes 2015

Agency Purposes

2015 Total 2015

Total 2014

£'000 £'000 £'000 £'000 Amounts falling due within one year Recoverable taxes 394 - 394 313 Accrued income from Member Governments and other agencies 465

589 1,054 1,063

Staff advances 150 - 150 185 Other debtors and prepayments 1,051 - 1,051 1,026 Total debtors 2,060 589 2,649 2,587



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14 Creditors: amounts falling due within one year

General

Purposes 2015

Agency Purposes

2015 Total 2015


£'000 £'000 £'000 £'000 Member government funding received in advance 12,149 499 12,648 12,444 Trade creditors 1,953 - 1,953 1,918 Trade accruals 1,681 - 1,681 1,567 Social security and other taxes 1,087 - 1,087 1,075 Holiday pay accrual 374 - 374 673 Other creditors - 147 147 141 17,244 646 17,890 17,818 There were no balances due after more than one year (2014: none). 15 Provisions for liabilities and charges

Restructuring

provision

Provision for legal

costs

Restated taxation Termination

indemnities Total £'000 £'000 £’000 £'000 £'000 At 1 April 2014 423 137 331 4,017 4,908 Paid (434) (92) - (235) (761) Released/transferred - (75) - - (75) Exchange rate revaluation - - - (1) (1) Charged during the year 305 30 - 369 704 At 31 March 2015 294 - 331 4,150 4,775

The restructuring costs relate to decisions taken prior to 31 March 2015 in relation to the reorganisation of the Commission’s horticultural operations in Italy, for which estimates of the liability at 31 March 2015 has been provided.

The opening provision for legal costs related to staff issues in France was resolved in year, resulting in a payment of £92k and a release of £75k. In 2014/15, £331k has been provided as a prior period adjustment in relation to payroll taxation, this amount reflects a best estimate of the potential obligation.

The termination indemnity provision relates to both mandatory and voluntary schemes which the Commission has in place outside of the UK to provide for staff benefits on retirement.



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16 Retirement benefits

The Commission operates a defined benefit pension scheme for the benefit of its employees holding UK contracts of employment.

The assets of the pension scheme are held separately from those of the Commission and are administered by the Trustees of the Superannuation Fund. The pension cost is determined on the advice of independent qualified actuaries. An actuarial valuation was carried out at 31 March 2013 by a qualified independent actuary, based on the provisions of FRS 17.

The scheme is funded and the employer’s contribution is 22.4% of pensionable pay (2014: 22.4%). The employees’ contribution is 1.5% of pensionable pay (2014: 1.5%). Contributions paid by the Commission during the year were £1,285k (2014: £1,522k).

The last full actuarial valuation was carried out for the Trustees of the Superannuation Fund as at 31 March 2014 and was used by the actuary for the disclosure requirements of FRS 17 as at 31 March 2015.

The assumptions used in determining the overall expected return of the scheme’s assets have been set with reference to yields available on government bonds and appropriate risk margins and, where relevant with consideration to the Bank of England base rate.

The tables below state the FRS 17 actuarial assumptions upon which the valuation of the scheme was based.

2015

% 2014

%

Discount rate 3.10 4.40 Rate of increase in salaries 2.50 2.95 Rate of increase in pensions 2.00 2.45 Expected long-term rate of return on scheme assets 6.6 6.6 Inflation – CPI assumption 2.00 2.45 Inflation – RPI assumption 3.00 3.45

The underlying mortality assumption adopted imply the following life expectancies at 65 years old:

Male 2015

Years

Male 2014

Years

Female 2015

Years

Female 2014

Years

Current pensioner aged 65 22.1 22.3 24.5 24.7 Future retiree upon reaching 65 23.4 23.7 26.0 26.2



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The assets of the pension scheme are identifiable by category.

2015 2015 2014 2014 % £'000 % £'000

Cash at Bank 0.1 108 0.3 246 Standard Life Global Absolute Fund 51.0 44,045 50.8 42,443 Schroder Life Diversified Growth Fund 35.0 30,203 36.4 30,420 L&G Active Corporate Bond 8.5 7,381 7.5 6,243 Schroder LDI Portfolio 5.4 4,629 5.0 4,207 Fair value of pension scheme assets 100 86,366 100 83,559

The amounts recognised in the balance sheet are as follows:

2015

£'000 2014

£'000

Present value of pension scheme liabilities (105,065) (89,244) Fair value of pension scheme assets 86,366 83,559

Net pension deficit at end of year (18,699) (5,685) The amounts to be recognised in the statement of financial activities for the year ended 31 March 2015 are as follows:

2015

£'000 2014

£'000 Included within resources expended Current service costs 1,647 2,092 Past service cost 4 - 1,651 2,092 Interest on pension scheme liabilities (3,877) (3,751) Expected return on pension scheme assets 5,429 5,471 Net financial income on pension scheme liabilities 1,552 1,720 Other recognised gains/(losses): Actuarial gain /(loss) on pension scheme liabilities (14,217) 4,737 Actuarial gain /(loss) on pension scheme assets 13 (3,231) Net actuarial (loss)/gain on defined benefit pension scheme (14,204) 1,506



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Changes in the present value of the defined benefit obligation are as follows:

2015

£'000 2014

£'000

Opening defined benefit obligation 89,244 92,741 Current service cost 1,647 2,092 Employee contributions 86 102 Interest cost 3,877 3,751 Past service cost 4 - Net transfers (out)/in (105) (110) Benefits paid (3,905) (4,595) Actuarial gain /(loss) 14,217 (4,737)

Closing defined benefit obligation 105,065 89,244 Changes in the fair value of scheme assets are as follows:

2015

£'000 2014

£'000

Opening fair value of scheme assets 83,559 84,400 Expected return 5,429 5,471 Employer contributions 1,285 1,522 Payment in respect of past service cost 4 - Employee contributions 86 102 Net transfers (out)/in (105) (110) Benefits paid (3,905) (4,595) Actuarial gain /(loss) 13 (3,231)

Closing fair value of scheme assets 86,366 83,559 The history of experience gains and losses is as follows:

2015

£'000 2014

£'000

Experience adjustments on scheme liabilities

(14,217) 4,737 As a percentage of scheme liabilities (13.5)% 5.31% Experience adjustments on scheme assets 13 (3,231) As a percentage of scheme assets 0.02% (3.9)%

The cumulative amount of actuarial gains and losses recognised in the Statement of Financial Activities since 1 April 2009 is a £23.362m loss (2014: £9.158m loss).

The expected contributions to be paid for the year to 31st March 2016 are £2m.



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17 Contingent liabilities

The potential tax liability in Egypt, advised in the 2014 report, is still being dealt with. Additional independent advice has been provided by Grant Thornton, in Cairo, (coordinated through Grant Thornton UK) to ratify the PricewaterhouseCoopers information, given the potential level of payment. Following further investigation, it is now considered appropriate to make a provision in relation to this matter, see note 15.

18 Commitments

18.1 Capital commitments

There were no material capital commitments at 31 March 2015 (2014: none)

18.2 Leasing commitments

At the 31 March 2015 the Commission had commitments under non-cancellable operating leases. In 2014/15, an additional 6 vehicles were transferred through Sale & Leaseback. 110 new vehicle leases were placed as vehicles came to the end of their useful life period.

2015

£'000 2014

£'000 Within One Year Office Equipment 36 81 Vehicles 108 25 Between 2 and 5 Years Office Equipment 3 47 Vehicles 883 347

1,030 500

19 Retained funds

2015

£'000 2014

£'000

Unrestricted fund – 2014 restated (note 19.1) (6,199) 6,627 Restricted funds (note 19.2) 35 93

(6,164) 6,720



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19.1 Unrestricted funds

General

Purposes Agency

Purposes Revaluation

reserve Pension reserve Total

£'000 £'000 £'000 £'000 £'000 Funds brought forward (2014 restated) 6,382 (106) 6,036 (5,685) 6,627 Net movement in funds for year 188 - - (13,014) (12,826) Funds carried forward 6,570 (106) 6,036 (18,699) (6,199) 19.2 Restricted funds

At 31 March

2015 At 31 March

2014 £'000 £'000

Cash Investments held for:

The special purposes fund (see 19.3) 35 93 35 93 19.3 The Special Purposes Fund

The capital of this fund is held on behalf of the individuals and organisations that originally endowed the value of the fund and is therefore shown on the balance sheet as restricted funds, and as cash, post the dis-investment. During 2014/15, this fund was re-aligned to the show the correct outstanding amount. This re-alignment is shown as a cost in the Restricted Fund column of the Statement of Financial Activities.

20 Analysis of change in net funds

At 1 April

2014 Cash flow At 31 March

2015 £'000 £'000 £'000

Cash at bank and in hand 16,269 (838) 15,341



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21 Reconciliation of net cash flow to movements in net funds

2015

£'000 2014

£'000 Movement in net funds arising from cashflows (838) 1,943 Net funds at 1 April 16,269 14,326 Net funds at 31 March 15,431 16,269 22 Prior Year Adjustments

Two prior period adjustments have been booked during 2014/15, due to their significant value and the obligations relating solely to previous year activities.

£’000 Payroll taxes - prior year payments 331 Pension fund fees 146 Total prior year adjustment 477

23 Related party transactions

There were no material related party transactions during the year (2014: none), except for the funds received from the Imperial War Graves Endowment Fund and the charges incurred by the Commissioners as disclosed in note 3 to the financial statements.

24 Post balance sheet event

In June 2015, the Commission announced formally a period of consultation with regard to the closure to future accrual of the defined benefit pension scheme. This consultation will finish in December 2015: if the final decision is to close the scheme on this basis, then there is likely to be a material change to the quantum of pension liability shown on the balance sheet, under FRS 17 reporting requirements.

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