Corporate report

The Coal Authority annual report and accounts 2019 to 2020: Financial statements

Published 24 September 2020

Statement of Comprehensive Net Expenditure year ended 31 March 2020

	Note	2019-20 £000	2018-19 £000
Revenue from contracts with customers	4	16,777	18,831
Other operating income	4	1,504	3,755
Total operating income	4	18,281	22,586
Staff costs	3	(15,056)	(14,071)
Purchase of goods and services	3	(8,953)	(8,348)
Depreciation, revaluation and impairment charges	3	(14,965)	(7,776)
Operating expenditure before provision movement		(38,974)	(30,195)
Provisions movement	3	(27,316)	2,011,258
Total operating expenditure	3	(66,290)	1,981,063
Net operating income/(expenditure)		(48,009)	2,003,649
Finance expense		(9)	(9)
Net income/(expenditure) for the year		(48,018)	2,003,640
Other comprehensive net expenditure
Net gain / (loss) on revaluation of property, plant and equipment	6	55	(190)
Comprehensive net income/(expenditure) for the year		(47,963)	2,003,450

The Statement of Comprehensive Net Expenditure and supporting Notes to the Accounts have been prepared and presented in accordance with the 2019-20 Government Financial Reporting Manual (FReM) issued by HM Treasury.

The notes to the accounts form part of these accounts

Statement of Financial Position as at 31 March 2020

	Note	2020 £000	2019 £000
Non-current assets:
Property, plant and equipment	6	9,064	14,188
Investment property	7	330	542
Intangible assets	8	2,095	2,443
Total non-current assets		11,489	17,173
Current assets:
Assets classified as held for sale	9	1,015	19
Trade and other receivables	10	3,404	3,757
Cash and cash equivalents	11	5,108	6,000
Total current assets		9,527	9,776
Total assets		21,016	26,949
Current liabilities:
Trade and other payables	12	(13,581)	(13,936)
Provisions	13	(33,292)	(27,353)
Total current liabilities		(46,873)	(41,289)
Total assets less current liabilities		(25,857)	(14,340)
Non-current liabilities:
Other payables	12	(4,456)	(5,518)
Provisions	13	(2,272,708)	(2,269,647)
Total non-current liabilities		(2,277,164)	(2,275,165)
Net liabilities		(2,303,021)	(2,289,505)
Taxpayers’ equity and reserves:
General fund		(2,303,371)	(2,289,805)
Revaluation reserve		350	300
Total taxpayers’ equity and reserves		(2,303,021)	(2,289,505)

The financial statements were approved and authorised by the board and signed on its behalf by:

Lisa Pinney, Chief Executive and Accounting Officer

14 September 2020

Statement of Cash Flows year ended 31 March 2020

	Note	2019-20 £000	2018-19 £000
Cash flows from operating activities:
Net income/(expenditure) for the year		(48,018)	2,003,640
Adjustments for non-cash transactions:
Depreciation, amortisation and revaluation of non-current assets	3	14,965	7,776
Profit on disposal of fixed assets	4	(1,099)	(3,114)
Decrease/(increase) in trade and other receivables		353	(50)
Decrease in trade and other payables		(298)	(5,383)
Increase/(decrease) in provisions	3	9,000	(2,029,000)
Net cash outflow from operating activities		(25,097)	(26,131)
Cash flows from investing activities:
Purchase of non-financial assets:
Purchase of property, plant and equipment		(11,231)	(8,818)
Purchase of intangible assets		(458)	(517)
Proceeds from disposal of non-financial assets:
Proceeds from sale of property, plant and equipment	4	1,099	3,119
Net cash outflow from investing activities		(10,590)	(6,216)
Net cash outflow from activities		(35,687)	(32,347)
Cash flows from financing activities:
Grant in aid from BEIS		34,795	28,500
Net financing		34,795	28,500
Net decrease in cash and cash equivalents		(892)	(3,847)
Cash and cash equivalents at the beginning of the period		6,000	9,847
Cash and cash equivalents at the end of the period		5,108	6,000

The notes to the accounts form part of these accounts

Statement of Changes in Taxpayers’ Equity year ended 31 March 2020

	General fund £000	Revaluation reserve £000	Total reserves £000
Balance as at 1 April 2018	(4,321,955)	500	(4,321,455)
Changes in taxpayers’ equity for 2018-19
Grant in aid from BEIS – capital	10,658	0	10,658
Grant in aid from BEIS – revenue	17,842	0	17,842
Transfers between reserves	10	(10)	0
Net gain/(loss) on revaluation of fixed assets	0	(190)	(190)
Comprehensive income/(expenditure) for the year	2,003,640	0	2,003,640
Balance as at 31 March 2019	(2,289,805)	300	(2,289,505)
Changes in taxpayers’ equity for 2019-20
Grant in aid from BEIS – capital	10,515	0	10,515
Grant in aid from BEIS – revenue	24,280	0	24,280
Transfers between reserves	5	(5)	0
Net gain/(loss) on revaluation of fixed assets	(55)	55	0
Disposal of investment property (amounts payable to Consolidated Fund)	(293)	0	(293)
Comprehensive income/(expenditure) for the year	(48,018)	0	(48,018)
Balance as at 31 March 2020	(2,303,371)	350	(2,303,021)

The notes to the accounts form part of these accounts

Notes to the Accounts year ended 31 March 2020

1. Statement of accounting policies

1.1 Basis of preparation

The Coal Authority is an executive non-departmental public body (NDPB) established under the Coal Industry Act 1994 and is sponsored by the Department for Business, Energy and Industrial Strategy (BEIS). Under paragraph 15(1)(b) of Schedule 1 of the Act the Coal Authority is required to prepare a statement of accounts for each financial year in the form and on the basis set out in the Accounts Direction, as determined by the Secretary of State, with the consent of HM Treasury.

These financial statements have been prepared in accordance with the 2019-20 government Financial Reporting Manual (FReM), and addendum, issued by HM Treasury. The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context. Where the FReM permits a choice of accounting policy, the accounting policy which is judged to be most appropriate to the particular circumstances of the Coal Authority for the purpose of giving a true and fair view has been selected. The particular policies adopted are described below. They have been applied consistently in dealing with items that are considered material to the accounts.

1.2 Accounting convention

These accounts have been prepared under the historical cost convention modified to account for the revaluation of investments, property, plant and equipment and intangible assets.

1.3 Going concern

The Statement of Financial Position at 31 March 2020 shows net liabilities of £2,303.0 million. This reflects the inclusion of expenditure for liabilities falling due in future years, which cover periods of 50 and 100 years into the future. To the extent that they are not met from other sources of income, they may only be met by future grants or grants in aid from our sponsoring department, BEIS. This is because, under the normal conventions applying to parliamentary control over income and expenditure, such grants may not be issued in advance of need.

Paragraph 14(1) of Schedule 1 to the Coal Industry Act 1994 states: ‘The Secretary of State shall, in respect of each accounting year, pay to the Coal Authority such amount as he may determine to be the amount required by the Coal Authority for the carrying out during that year of its functions under this Act.’

On that basis, the board has a reasonable expectation that we’ll continue to receive funding so as to be able to meet our liabilities. The Coal Authority has therefore prepared its accounts on a going concern basis.

1.4 Grant in aid

Grant in aid is paid to the Coal Authority on an annual basis to cover the net cash revenue and capital requirements in the year. Grant in aid utilised in the settlement of its statutory and other obligations is credited to the general reserve in the year in which it is received because it is regarded as a contribution from a controlling party which gives rise to a financial interest in the Coal Authority.

1.5 Revenue from contracts with customers and other operating income

Revenue from contracts with customers

Income represents the amounts, exclusive of VAT, arising from leases/licences and invoiced sales of goods and services from contracts with customers.

Income is measured at the fair value of the consideration received or receivable and is recognised in the Statement of Comprehensive Net Expenditure, following performance of contractual obligations by the Coal Authority, where amounts can be reliably measured and it is probable that the economic benefits will flow to the Coal Authority. Where this applies to services income, the amount recognised will be dependent upon the stage of completion.

Income received in advance of discharging contractual obligations is held on the Statement of Financial Position, and is released to the Statement of Comprehensive Net Expenditure as contractual obligations are fulfilled.

Operating lease income

Lease income from head office freehold property is accounted for in equal annual amounts and recognised either over the term of the lease, or to a date where a break clause may be applied, whichever is the earliest.

Consolidated fund income

Income collected under statute in relation to licensing activities is surrendered to the government as consolidated fund income when received, other than the element retained to finance licensing activities as a cost of collection.

The Coal Authority is deemed to be acting in the capacity of an agent and these income streams therefore fall outside of normal operating activities and are not reported through the Statement of Comprehensive Net Expenditure, but disclosed separately within the Notes to the Accounts.

Royalties and mining income are recognised on an accruals basis, relating to the period in which the income is earned, and following receipt of amounts owed cash payments are made to the consolidated fund.

1.6 Staff costs

Under IAS 19 Employee Benefits, all staff costs must be recorded as an expense as soon as the organisation is obligated to pay them. This includes the cost of any untaken leave as at the year end. The cost of the untaken leave has been determined using data from electronic leave records.

1.7 Pensions

Past and present employees are covered by the provisions of the Principal Civil Service Pension Scheme (PCSPS), which is an unfunded multi-employer defined benefit scheme. The Coal Authority recognises the expected cost of providing pensions on a systematic and rational basis, over the period during which it benefits from employees’ services by payment to the PCSPS of amounts calculated on an accruing basis. Liability for payment of future benefits is a charge on the PCSPS and is not the responsibility of the Coal Authority. The costs of all employer pension contributions are charged to the Statement of Comprehensive Net Expenditure when incurred.

1.8 Operating lease expenditure

Rentals are charged to the Statement of Comprehensive Net Expenditure in equal annual amounts over the lease term.

1.9 Research and development

Research

Expenditure is recognised as an expense in the period in which it is incurred.

Development

Expenditure is capitalised as an internally generated intangible asset only if the criteria of IAS 38 are met.

Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

1.10 Taxation

VAT

The Coal Authority is involved in a number of statutory obligations and these are outside the scope of output VAT. The Coal Authority also makes exempt supplies relating to property lettings. Output VAT is charged on all other fee paying services. Where output VAT is charged, income is stated net of VAT.

No input VAT is recoverable where this can be directly attributable to a statutory function. A partial exemption calculation is performed on the recovery of input VAT for overhead departmental costs which carry out duties for both statutory and exempt functions. Irrecoverable input VAT is charged to the relevant expenditure category.

Deferred taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill, or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each Statement of Financial Position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Statement of Comprehensive Net Expenditure, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

1.11 Assets and liabilities inherited from the British Coal Corporation

Various assets and liabilities were transferred from the British Coal Corporation under a number of restructuring schemes made by the then Secretary of State for Trade and Industry pursuant to Section 12 of the Coal Industry Act 1994. The assets and liabilities included in these restructuring schemes were originally transferred into the Coal Authority’s accounts at their net book values, as previously stated in the financial statements of the British Coal Corporation, under the accounting policies adopted by the Coal Authority.

1.12 Property, plant and equipment

Assets are capitalised as property, plant and equipment if they are intended for use on a continuing basis and their original purchase cost, on an individual or group basis, is £2,000 or more.

Property

Freehold land and buildings relate to the Coal Authority’s head office and operational properties and are carried at fair value based on existing use, with external professional valuations undertaken biennially.

In addition, the Coal Authority owns a number of shafts that access abandoned mines. These are used in the monitoring of underground movements in water and gases. As there is no open market on which to base a valuation, these are held at nil value.

Non-property

Information technology, plant and machinery and furniture and fittings

In accordance with the FReM, the option has been taken to value these assets on a depreciated historical cost basis over the assets’ remaining service potential as a proxy to fair value, where assets have short useful economic lives or are of low value, or both.

At each reporting date the Coal Authority reviews asset carrying amounts, for both residual values and useful economic lives, to determine whether there is any indication that an impairment loss has been suffered.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount, where the recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

Assets under construction are valued at cost.

Mine water treatment schemes and subsidence pumping stations

Operational schemes relating to coal are held at nil value on the Statement of Financial Position. The cost of building these schemes has been provided for in previous periods as these assets are commissioned to resolve legacy mining issues, for which the benefits have previously been received.

Costs incurred in the design, build, refurbishment and bringing the assets into working condition for their intended operational use are capitalised following completion of a feasibility study and gateway review. When the assets are brought into operational use, the carrying values are subject to an impairment review and are impaired to nil value, with the loss being recognised through the Statement of Comprehensive Net Expenditure.

Schemes that relate to metal mining activity are reviewed on an individual basis in accordance with the guidance provided under IAS 16 Property Plant and Equipment and other relevant standards. This review will be completed in conjunction with reference to the underlying contractual agreement in place with third parties.

Decommissioning costs are not provided for on the basis that the mine water schemes and subsidence pumping stations will continue to operate in perpetuity.

Assets under construction are valued at cost.

1.13 Depreciation

Property, plant and equipment assets are depreciated at rates calculated to write them down to their estimated residual value on a straight line basis over their estimated useful economic lives.

The rates of depreciation are as follows:

Freehold land: not depreciated

Long leasehold land: not depreciated

Operational properties: 50 years

Freehold buildings: 50 years

Information technology: 3 to 5 years

Plant and machinery: 3 to 5 years

Furniture and fittings: 5 to 10 years

Assets under construction are not depreciated until they are brought into operational use.

1.14 Investment properties

The Coal Authority holds a number of properties and is undertaking a rolling disposal programme, the timing of which is dependent on property market conditions. These have been classified as investment properties and are not depreciated in accordance with IAS 40, but may be impaired or revalued to provide a carrying value at their estimated fair value.

Full valuations by external chartered surveyors are undertaken by means of a rolling programme over 5 years. A desk top review is undertaken by in-house chartered surveyors on those properties that have not been subject to a full external valuation during the year.

Gains and losses arising from changes in fair value of investment property are recognised in the Statement of Comprehensive Net Expenditure.

Investment properties identified as held for sale are disclosed where conditions established under IFRS 5 have been met.

1.15 Intangible assets

Expenditure on intangible assets consists of bespoke software development and other software licences and is capitalised where the cost is £2,000 or more.

Bespoke software development expenditure is either as a result of an external cost of development or as a result of work undertaken by the Coal Authority’s internal resources. Internal resource costs are only capitalised for detail design and implementation phases of the software development, using salary and associated payroll costs. Intangible assets are reviewed annually for impairment and are carried at modified historic cost as a proxy for fair value.

Software licences and bespoke software are amortised on a straight line basis between 2-5 years over their estimated useful economic lives.

The mining records database was revalued upon transfer from the British Coal Corporation and is held at a nil value, being fully depreciated replacement cost.

1.16 Financial instruments

The Coal Authority does not hold any complex financial instruments. The only financial instruments included in the accounts are receivables and payables, as disclosed within Notes 10 and 12 to the Accounts.

Trade receivables, financial and other current assets are recognised initially at fair value and carried net of any provision for impairment, following customer level risk assessments and consideration of wider economic factors. A provision for impairment is made to recognise expected credit losses and when there is evidence that the Coal Authority will be unable to collect an amount due.

1.17 Security fund payables

Trade payables and other current liabilities include security fund payables. Licensees of mining operations are required to provide security to the Coal Authority to cover the potential future costs of settling subsidence damage liabilities within their areas of responsibility. One mechanism for providing security is by means of cash deposit. If the licensees fulfil their obligations, the deposits are returned, together with interest accrued under the terms of the lease/licence.

Deposits received are credited to security fund payables in order to recognise the Coal Authority’s liability to the licensees. Repayments of deposits or the costs of making mining properties secure on default of the licensee are provided from the grant in aid received.

Interest payable on deposits is charged to the Statement of Comprehensive Net Expenditure as it accrues. The security fund payable is reduced by security costs incurred each year or when repayments are made to the licensee.

Other forms of security may include guarantee bonds in favour of the Coal Authority, escrow accounts, or charges over land. These arrangements do not give rise to any entries in the Coal Authority’s financial statements.

1.18 Provisions

The Coal Authority is responsible for dealing with liabilities relating to its ownership of abandoned coal mines. These include preventing and remediating mine water pollution, settling subsidence claims, making safe surface hazards, managing tips, rehabilitating opencast sites and dealing with closed colliery sites and spoil heaps.

Provisions are recognised when the Coal Authority has a present obligation (legal or constructive) as a result of a past event, that can be reliably measured, and it is probable that an outflow of economic benefits will be required to settle that obligation.

Provisions are made for the external costs of managing the Coal Authority’s obligations. Internal costs are not provided for.

Where the time value of money is material, the Coal Authority applies Consumer Price Index (CPI) inflation rates to external costs and then discounts each provision to its present value using the nominal discount rates as specified annually by HM Treasury.

These rates are disclosed within the relevant Note to the Accounts.

Each year the Statement of Comprehensive Net Expenditure includes the borrowing costs of provisions, being the adjustments to unwind 1 year’s discount so that liabilities are shown at current day price levels.

Provisions are utilised against the Statement of Comprehensive Net Expenditure or against Property, Plant and Equipment in the Statement of Financial Position as expenditure is incurred.

Significant Public Safety incidents are kept under review. Provisions will be released and an accrual recognised when the Coal Authority has a present obligation as a result of a past event, where there is certainty over the measurement of the obligation and that an outflow of economic benefits will be required to settle that obligation.

Specific provision periods have been established as follows:

Mine water treatment schemes: 100 years

Subsidence pumping stations: 100 years

Public safety and subsidence: 50 years

Tip management: 50 years

Obligations under other property related provisions are provided for on a specific basis where timeframes are certain and known.

Where provisions remain calculated over a period of 50 or 100 years, as the Coal Authority moves into the next financial year it is necessary to add another year onto the provisions to maintain that timeframe.

Provisions are reviewed annually at the year end to ensure all obligations and work programmes have been provided for.

1.19 Contingent assets and liabilities

In addition to contingent liabilities or assets disclosed in accordance with IAS 37, the Coal Authority discloses for parliamentary reporting and accountability purposes certain statutory and non-statutory contingent liabilities where the likelihood of a transfer of economic benefit is remote, but which have been reported to parliament in accordance with the requirements of HM Treasury’s Managing Public Money.

Where the time value of money is material, contingent liabilities which are required to be disclosed under IAS 37 are stated at discounted amounts and the amount reported to parliament separately noted. Contingent liabilities that are not required to be disclosed by IAS 37 are stated at the amounts reported to parliament.

1.20 Accounting judgements, estimates and assumptions

In relation to provisions, to the extent that it is sometimes impracticable to ascertain and disclose the full extent of the possible effects of assumptions or management estimates at the end of a reporting period, based on the best existing knowledge at the time, it is reasonably possible that outcomes for the next accounting period could require material adjustments to the provisions balance of £2,306.0 million as at 31 March 2020.

Provisions balances are calculated over timescales which are supported by reasonable evidence. These liabilities may extend beyond stated periods, but there is insufficient evidence to support provisions beyond these timescales.

Other than in the review and calculation of provisions, no material accounting judgements, estimates or assumptions were made by the Coal Authority in preparing these accounts.

1.21 New standards, amendments and interpretations not yet effective

The following standards were in issue but not yet effective and have not been adopted in these financial statements:

IFRS 16 “Leases”

Eliminates the distinction between operating and finance leases, as a lessee, and imposes a single model geared towards the recognition of all but low value or short term leases. There is no change in relation to the treatment of operating and finance leases as a lessor.

HM Treasury have issued implementation guidance covering adaptation and transition arrangements in application of the standard. As a result of COVID-19, HM Treasury have deferred the implementation by one year and this will now be introduced to the FReM from 2021-22, effective from 1 April 2021.

The impact of the new standard has been considered, and operational leases (lessee) will be brought onto the Statement of Financial Position, recognising the lease as a ‘right of use’ asset and a corresponding liability for the cash flow commitments associated with future expenditure. Operating lease cash flows are disclosed at £14.7 million (Note 15.1 to the Accounts) and materially relate to land.

2. Statement of operating expenditure by operating segments

The following analysis by operating segment of gross expenditure, income, net (income)/expenditure and total assets is stated below in accordance with IFRS 8.

2019-20	Development & Information £000	Operations £000	Commercial & Innovation £000	Total £000
Expenditure incurred during the year before internal recharge	7,424	26,156	9,969	43,549
Internal recharges for data and services	(2,178)	0	2,178	0
Expenditure incurred during the year	5,246	26,156	12,147	43,549
Impairments	0	13,750	0	13,750
Less provision utilised	(301)	(18,015)	0	(18,316)
Adjustment to provisions	7,301	20,015	0	27,316
Gross expenditure	12,246	41,906	12,147	66,299
Income	(3,110)	(244)	(14,927)	(18,281)
Net (income)/ expenditure	9,136	41,662	(2,780)	48,018
Total assets	3,647	13,721	3,648	21,016
Memo: Net (income)/expenditure excluding provisions movements	2,136	39,662	(2,780)	39,018

2018-19	Development & Information £000	Operations £000	Commercial & Innovation £000	Total £000
Expenditure incurred during the year before internal recharges	6,033	25,486	9,602	41,121
Internal recharges for data and services	(3,404)	0	3,404	0
Expenditure incurred during the year	2,629	25,486	13,006	41,121
Impairments	0	6,825	0	6,825
Less provision utilised	(260)	(17,482)	0	(17,742)
Adjustment to provisions	(740)	(2,010,518)	0	(2,011,258)
Gross expenditure	1,629	(1,995,689)	13,006	(1,981,054)
Income	(4,629)	(457)	(17,500)	(22,586)
Net (income)/ expenditure	(3,000)	(1,996,146)	(4,494)	(2,003,640)
Total assets	3,981	18,955	4,013	26,949
Memo: Net (income)/expenditure excluding provisions movements	(2,000)	31,854	(4,494)	25,360

Segmental analysis

The reported segments as analysed above are consistent with the Coal Authority’s organisational structure, directors’ responsibilities and the management information used by the Coal Authority’s management team for the period reported.

Further information in relation to average number of persons employed, by segment, can be found in the remuneration and staff report and fees and charges can be found in the parliamentary accountability and audit report.

Development and information

Development and information provides data, information and expertise to help people make informed decisions.

Development manages our property and mineral estate. It provides planning advice to local authorities, coal mining licenses to operators, and permission, through a permit and indemnity process, to enter or intersect coal. Income from licensing and permissions indemnities provide the funding for these activities, which are charged at cost, plus an allowance for overhead recovery. Income from property and estate management is derived from operating lease rental income and profits on the disposal of property, including clawback arrangements.

Information includes the licensing and provision of mining information, as well as follow on support with its interpretation. Information is provided both internally and to external customers and charged at cost, plus an allowance for overhead recovery.

Total assets includes properties valued at £1,015,000 that have been identified as being held for sale, as they are incorporated onto the property disposal strategy for 2020-21 (2019: £19,000). Further information is provided in Note 9 to the Accounts.

Operations

Operations includes environmental programmes (mine water and subsidence pumping stations) that protect and enhance the environment and public safety and subsidence work (claims, hazards, mine entry inspections and tip management) that keep people safe and provide peace of mind. Income includes management fees, charged against UK Coal security funds, associated with discharging public safety liabilities during the year.

Commercial and innovation

Commercial and innovation activities create value and minimise cost to the taxpayer.

Commercial income is derived from the provision of mining reports, which are charged at commercial rates, and, advisory and technical services which are charged at either cost recovery, plus an allowance for overhead recovery, or at commercial rates. Advisory and technical services include the provision of metal mine water treatment programmes for Defra (Department for Environment, Food and Rural Affairs) in England and NRW (Natural Resources Wales) in Wales, as well as support for national infrastructure projects and local authorities in managing the risks associated with mining.

Innovation activities are focused on efficiency and net cost reduction, as well as providing income streams from ochre sales and providing power to the national grid, both as a by-product of the Coal Authority’s coal mine water treatment activities.

MDA Hub Limited (for the provision of mining reports) and Defra (for the provision of advisory and technical services, relating to the delivery of an on-going metal mine water treatment programme) provided income streams of greater than 10% of the revenue from contracts with customers (2018-19: TM Property Searches Limited – mining reports and Defra – advisory and technical services). The directors do not consider reliance on either of these customers to pose a significant risk to the Coal Authority’s operations.

Analysis of operating income by segment

2019-20	Development & Information £000	Operations £000	Commercial & Innovation £000	Total £000
Mining reports	0	0	9,489	9,489
Advisory and technical services	0	0	5,342	5,342
Data licensing and mining information	994	0	0	994
Licensing and permissions indemnities	834	0	0	834
By-products	0	0	59	59
Other income	59	0	0	59
Revenue from contracts with customers	1,887	0	14,890	16,777
Profit on disposal of property, plant and equipment and investment properties	1,099	0	0	1,099
Rental income	124	73	37	234
Public safety management fee	0	146	0	146
Other income	0	25	0	25
Other operating income	1,223	244	37	1,504
Total operating income	3,110	244	14,927	18,281

2018-19	Development & Information £000	Operations £000	Commercial & Innovation £000	Total £000
Mining reports	0	0	11,648	11,648
Advisory and technical services	0	0	5,520	5,520
Data licensing and mining information	498	0	0	498
Licensing and permissions indemnities	824	0	0	824
By-products	0	0	277	277
Other income	64	0	0	64
Revenue from contracts with customers	1,386	0	17,445	18,831
Profit on disposal of property, plant and equipment and investment properties	3,114	0	0	3,114
Rental income	123	117	52	292
Public safety management fee	0	309	0	309
Other income	6	31	3	40
Other operating income	3,243	457	55	3,755
Total operating income	4,629	457	17,500	22,586

3. Expenditure

	Note	2019-20 £000	£000	2018-19 £000	£000
Staff costs:
Wages and salaries		10,904		9,935
Social security costs		1,147		1,041
Other pension costs		2,687		1,963
Agency staff costs		318		1,132
Sub-total			15,056		14,071
Purchase of goods and services:
Operating leases
Equipment		182		148
Land and buildings		162		108
			344		256
Goods and services
Expenditure incurred during the year		25,951		24,755
Less provision utilised	13	(18,316)		(17,742)
			7,635		7,013
Research and development expenditure		532		590
Auditors’ remuneration and expenses		55		45
Travel and subsistence		387		444
			974		1,079
Sub-total			8,953		8,348
Depreciation, revaluation and impairment charges:
Depreciation and amortisation
Property, plant and equipment	6	538		449
Intangibles	8	832		725
			1,370		1,174
Revaluation
Property, plant and equipment	6	(2)		0
Investment properties	7	(153)		(223)
			(155)		(223)
Impairments
Property, plant and equipment	6	13,749		6,825
Intangibles	8	1		0
			13,750		6,825
Sub-total			14,965		7,776
Provisions movement:
Other provisions movements	13	81,814		691,950
Borrowing costs of provisions (unwinding of discount)	13	41,502		(69,208)
Discount rate changes	13	(96,000)		(2,634,000)
Sub-total			27,316		(2,011,258)
Total operating expenditure			66,290		(1,981,063)

Staff and related costs of £257,000 were charged to capital projects during 2019-20 (2018-19: £309,000). Other staff and related disclosures are included in the staff and remuneration report within the accountability report.

Staff costs include one exit package (2018-19: no exit packages). Further information is available in the Exit packages disclosure in the Remuneration and staff report.

No auditors’ remuneration and expenses have been incurred for professional fees associated with non-audit work during 2019-20 (2018-19: £5,500).

Detailed information on provisions and provisions movements is provided in Note 13 to the Accounts.

4. Income

4.1 Revenue from contracts with customers

	2019-20 £000	2018-19 £000
Mining reports	9,489	11,648
Advisory and technical services	5,342	5,520
Data licensing and mining information	994	498
Licensing and permissions indemnities	834	824
By-products	59	277
Other income	59	64
Revenue from contracts with customers	16,777	18,831

Income is recognised in line with IFRS 15 – Revenue from contracts with customers.

Mining reports, licensing and permissions indemnities, data licensing and mining information, and by-products income is recognised when performance obligations are satisfied at a point in time.

Advisory and technical services income is recognised as performance obligations are satisfied over time.

No assets are recognised from costs to obtain or fulfil a contract with a customer, and no significant judgements have been made in determining the satisfaction of performance obligations or in determining and allocating the transaction price to performance obligations.

Further information is provided on products and services in Note 2 to the Accounts and fees and charges in the parliamentary accountability and audit report.

4.2 Other operating income

	2019-20 £000	2018-19 £000
Profit on disposal of property, plant and equipment and investment properties (detailed in table below)	1,099	3,114
Rental income	234	292
Public safety management fee	146	309
Other income	25	40
Other operating income	1,504	3,755

Rental income relates to operating lease income from property.

The public safety management fee relates to charges made against the security fund as the liabilities are discharged during the year.

Profit on disposal of property, plant and equipment and investment properties:	2019-20 £000	2018-19 £000
Proceeds from clawback on sale of land	1,090	3,063
Proceeds from sale of investment properties	9	56
Total proceeds	1,099	3,119
Fair value of investment properties	0	(5)
Total	1,099	3,114

Where the British Coal Corporation or the Coal Authority’s sale agreements, in the disposal of land, include provisions for restrictive covenants or clawback, proceeds are received at a future date when these provisions have been satisfied. This could include the removal of a restrictive covenant or following development of the land, recognising the Coal Authority’s share of the increased value.

Further information is provided on products and services in Note 2 to the Accounts and fees and charges in the parliamentary accountability and audit report.

4.3 Consolidated fund income

The Coal Authority acts as an agent on behalf of the consolidated fund (HM Treasury). Cash collected and payable to the consolidated fund is reduced to cover the Coal Authority’s cost of collection. This income adjustment is included within licensing and permissions indemnities income within Note 4.1 to the Accounts.

	2019-20 £000	£000	2018-19 £000	£000
Production related rent (gross)	346		315
Cost of collection	(25)		(29)
Expected credit losses	50		0
Production related rent (net)		371		286
Incidental coal (gross and net)		2		10
Options for lease		9		19
Property sale proceeds		418		7
Income payable to the consolidated fund		800		322

	2019-20 £000	2018-19 £000
Balances held at start of year	53	114
Income payable to the consolidated fund	800	322
Payments made to the consolidated fund	(381)	(383)
Balances held at end of year	472	53

Production related rent is earned on each tonne of coal extracted from existing operating coal mining sites.

Incidental coal is royalty income from other sites where coal production is incidental to the main purpose of the activity being carried out.

Options for lease for future coal mining sites are granted in the form of a conditional licence and option for lease for the coal. Income is recognised on the granting of the option. The site cannot become operational until certain conditions (for example, planning consent) have been met and payments are made annually based on the area of the option.

Property sale proceeds are recognised where the initial purchase was made from grant in aid in previous periods. Income is recognised following the exchange of contracts and on completion of the sale of property.

Cost of collection relates to the element of income retained to finance licensing activities. Expected credit losses relate to amounts owed that have been assessed as unrecoverable.

Balances held at end of year represent amounts still to be remitted to the consolidated fund.

Consolidated fund payments amounted to £381,000 (2018-19: £383,000), being cash collections of £53,000 (2018-19: £114,000) relating to prior year and £328,000 (2018-19: £269,000) relating to current year.

5. Taxation

	2019-20 £000	2018-19 £000
Current tax	0	0
Deferred tax	0	0

Corporation tax is calculated at 19% (2018-19: 19%) of the estimated assessable profit for the year.

The charge can be reconciled to the Statement of Comprehensive Net Expenditure as follows:

	2019-20 £000	2018-19 £000
Net income/(expenditure) for the year	(48,018)	2,003,640
Tax at the UK corporation tax rate of 19% (2018-19: 19%)	(9,123)	380,692
Tax effect of expenses that are not deductible in determining taxable profit	2,790	1,442
Tax effect of temporary differences on property, plant and equipment not recognised	(140)	(540)
Tax effect of losses created/(utilised) in the period not recognised	3,628	523
Tax effect of temporary differences on provisions not recognised	1,712	(385,507)
Tax effect of grant in aid finance for revenue purposes	1,133	3,390
Tax expense for the year	0	0

The following are the major deferred tax liabilities / (assets):

Recognised at 31 March:

	2020 £000	2019 £000
Tax losses	0	0
Provisions	0	0
Property, plant and equipment	0	0
Revaluation of assets	0	0
Total	0	0

Unrecognised at 31 March:

	2020 £000	2019 £000
Tax losses	(12,347)	(7,805)
Provisions	(438,184)	(390,527)
Property, plant and equipment	(5,430)	(5,047)
Revaluation of assets	0	0
Total	(455,961)	(403,379)

No deferred tax asset has been recognised on excess carried forward tax losses due to the unpredictability of future profit streams against which the unused losses can be offset. The losses may be carried forward indefinitely.

Deferred tax has also not been recognised in respect of temporary differences arising on taxed reserves. Reserves totaling £2,306.0 million at 31 March 2020 will be deductible when the expenditure is charged against the provision in later periods.

The main rate of Corporation Tax reduced to 19% with effect from 1 April 2017. In March 2016, the government announced that the rate would further reduce to 17% from 1 April 2020. The rate reduction to 17% was not enacted during the period and therefore the deferred tax liabilities /(assets) have been calculated at 19% (2019: 17%) on the basis that this balance will not materially reverse after 1 April 2020 as expected.

6. Property, plant and equipment

	Land £000	Buildings £000	Information technology £000	Plant and machinery £000	Furniture and fittings £000	Mine water schemes £000	Subsidence pumping stations £000	Assets under construction £000	Total £000
Cost or valuation
At 1 April 2019	4,172	3,618	5,913	1,411	600	99,765	13,135	5,238	133,852
Additions	190	6	15	171	0	7,849	1,258	541	10,030
Reclassifications	0	17	305	0	0	1,953	2,343	(4,618)	0
Disposals	0	0	(18)	(3)	0	0	(15)	0	(36)
Transfer to Assets held for sale	0	(924)	0	0	0	0	0	0	(924)
Revaluations	0	20	0	0	0	0	0	0	20
At 31 March 2020	4,362	2,737	6,215	1,579	600	109,567	16,721	1,161	142,942
Depreciation
At 1 April 2019	0	18	5,084	1,062	600	99,765	13,135	0	119,664
Charged in year	0	111	385	42	0	0	0	0	538
Disposals	0	0	(18)	(3)	0	0	(15)	0	(36)
Revaluations	0	(37)	0	0	0	0	0	0	(37)
Impairments	0	0	0	346	0	9,802	3,601	0	13,749
At 31 March 2020	0	92	5,451	1,447	600	109,567	16,721	0	133,878
Net book value at 31 March 2019	4,172	3,600	829	349	0	0	0	5,238	14,188
Net book value at 31 March 2020	4,362	2,645	764	132	0	0	0	1,161	9,064

The Coal Authority owns all of its assets and has no finance leases or Private Finance Initiative (PFI) contracts.

Valuations of head office land and buildings and properties that are held for operational purposes are undertaken on a biennial basis (Note 1.12 to the Accounts). Changes in valuation are reflected as appropriate in land and buildings.

A valuation was undertaken of the head office land and buildings as at 31 March 2019 by external Chartered Surveyors (Lambert Smith Hampton, a multi-disciplinary chartered surveying practice) in accordance with Royal Institution of Chartered Surveyors’ guidelines. The valuation of £2,825,000 is reflected above (current net book value of £2,775,000), with the next valuation due to be completed in March 2021. A gain of £190,000 was recognised through the Revaluation Reserve in 2018-19.

A valuation was undertaken of all properties held for operational purposes as at 31 March 2020 by external Chartered Surveyors (Valuation Office Agency – District Valuation Services) in accordance with Royal Institution of Chartered Surveyors’ guidelines. The valuations totaling £924,000 are reflected above. A gain of £2,000 has been recognised through the Statement of Comprehensive Net Expenditure and £55,000 through the Revaluation Reserve in the year. All of these operational properties have now been transferred to Assets held for sale (Note 9 to the Accounts) as they are no longer required for operational purposes and are to be sold during 2020-21.

Costs incurred in the development, construction or refurbishment of mine water schemes and subsidence pumping stations are recognised as assets under construction until such time that they are brought into operational use, whereby the assets are then subject to an impairment review and impaired to nil with a charge being made to the Statement of Comprehensive Net Expenditure.

	Land £000	Buildings £000	Information technology £000	Plant and machinery £000	Furniture and fittings £000	Mine water schemes £000	Subsidence pumping stations £000	Assets under construction £000	Total £000
Cost or valuation
At 1 April 2018	4,026	4,004	5,775	1,193	600	95,418	10,663	2,542	124,221
Additions	146	0	112	177	0	3,854	1,823	3,915	10,027
Reclassifications	0	0	30	41	0	499	649	(1,219)	0
Disposals	0	0	(4)	0	0	(6)	0	0	(10)
Revaluations	0	(386)	0	0	0	0	0	0	(386)
At 31 March 2019	4,172	3,618	5,913	1,411	600	99,765	13,135	5,238	133,852
At 1 April 2018	0	97	4,795	1,025	598	95,418	10,663	0	112,596
Charged in year	0	117	293	37	2	0	0	0	449
Disposals	0	0	(4)	0	0	(6)	0	0	(10)
Revaluations	0	(196)	0	0	0	0	0	0	(196)
Impairments	0	0	0	0	0	4,353	2,472	0	6,825
At 31 March 2019	0	18	5,084	1,062	600	99,765	13,135	0	119,664
Net book value at 31 March 2018	4,026	3,907	980	168	2	0	0	2,542	11,625
Net book value at 31 March 2019	4,172	3,600	829	349	0	0	0	5,238	14,188

7. Investment properties

Land	2020 £000	2019 £000
Fair value at 1 April	542	232
Additions	0	111
Disposals	(293)	(5)
Transfer to Assets held for sale	(72)	(19)
Revaluations	153	223
Fair value at 31 March	330	542

The Coal Authority owns all of its investment properties and undertakes a 5 year rolling programme to ensure that all material investment properties are subject to an external valuation. 2019-20 is the third year of the current rolling programme.

All investment properties that have not been subject to an external valuation during the year have been subject to an internal valuation, undertaken by a suitably qualified Coal Authority Property Manager. Internal valuations have been established using appropriate property indices to reflect the movement in the property market over the previous year.

As at 31 March 2019 certain properties valued at £19,000 identified as being held for sale were included within this note. A separate note (Note 9 to the Accounts) has now been included for Assets held for sale as a result of the increased size of this balance as at 31 March 2020.

There are no material rental incomes or operating costs in respect of investment properties.

8. Intangible assets

	Information technology £000	Software licences £000	Assets under construction £000	Total £000
Cost or valuation
At 1 April 2019	19,406	1,366	172	20,944
Additions	210	39	236	485
Reclassifications	161	0	(161)	0
At 31 March 2020	19,777	1,405	247	21,429
Amortisation
At 1 April 2019	17,167	1,334	0	18,501
Charged in year	817	15	0	832
Impairments	1	0	0	1
At 31 March 2020	17,985	1,349	0	19,334
Net book value at 31 March 2019	2,239	32	172	2,443
Net book value at 31 March 2020	1,792	56	247	2,095

The Coal Authority owns all of its intangible assets.

Information technology includes information systems developed in-house or by third parties and assets under construction consist predominantly of cost incurred in the further development of these information systems.

	Information technology £000	Software licences £000	Assets under construction £000	Total £000
Cost or valuation
At 1 April 2018	18,943	1,362	119	20,424
Additions	344	4	172	520
Reclassifications	119	0	(119)	0
At 31 March 2019	19,406	1,366	172	20,944
Amortisation
At 1 April 2018	16,459	1,317	0	17,776
Charged in year	708	17	0	725
At 31 March 2019	17,167	1,334	0	18,501
Net book value at 31 March 2018	2,484	45	119	2,648
Net book value at 31 March 2019	2,239	32	172	2,443

9. Assets held for sale

Non-current assets held for sale	2020 £000	2019 £000
Land	91	19
Buildings	924	0
Balance at 31 March	1,015	19

Land comprises 8 packages of land, previously held under investment properties, which have been revalued during the year. One larger piece of land has been subject to an external valuation (Savills), with the remaining pieces of land revalued using appropriate property market indices (see note 7 to the Accounts).

Buildings comprises a number of specific regional properties which were previously used for operational purposes to provide temporary accommodation to members of the public whose own properties had been affected as a result of past mining activities. These properties are no longer required for operational purposes due to decreasing activity levels in the region. Proceeds from the sale of these properties will be paid into the UK Coal security fund to cover subsidence liabilities, as these properties relate to previously called-in security.

In January 2020, the directors approved a property disposal strategy for 2020-21, which incorporates all of the above assets, and are committed to the sale of these assets through private treaty or at auction.

10. Trade receivables, financial and other current assets

Amounts falling due within 1 year:	2020 £000	2019 £000
VAT	424	424
Trade and other receivables	1,081	931
Prepayments	1,151	1,295
Accrued income	1,109	1,167
Expected credit losses	(361)	(60)
Balance at 31 March	3,404	3,757

There are no amounts falling due after more than 1 year.

Expected credit losses relate to amounts owed that have been assessed at a customer level as unrecoverable. 2020 balances have been assessed and reflect the increased economic uncertainty as a result of COVID-19.

11. Cash and cash equivalents

	2020 £000	2019 £000
Balance at 1 April	6,000	9,847
Net change in cash and cash equivalent balances	(892)	(3,847)
Balance at 31 March	5,108	6,000
The following balances were held at:
Government Banking Services	5,108	6,000
Balance at 31 March	5,108	6,000

Cash balances incorporate £2,910,000 (2019: £4,894,000) of ring fenced funds held in a separate account. These ring fenced funds represent receipts from UK Coal following disclaiming the lease/ licence for Thoresby Colliery and from bond providers following the termination of operations of ATH Resources PLC, Benhar Developments Ltd and Scottish Coal Company Ltd. The balances will be offset against the settlement of the operators’ liabilities. Balances are to remain ring fenced until such time that all future liabilities are settled.

12. Trade payables and other current liabilities

Amounts falling due within 1 year:	2020 £000	2019 £000
Other taxation and social security	591	500
Trade and other payables	752	1,046
Security fund payables	143	143
Liabilities in relation to called-in security	738	1,637
Amounts due to government (consolidated fund income)	472	53
Accruals	10,691	10,169
Deferred income	194	388
Total at 31 March	13,581	13,936

Security fund payables (due within 1 year and after more than 1 year) relate to cash receipts from licensed coal operators and are held by the Coal Authority until such time that either, the licensee fulfils their obligations under the terms of a lease/licence, whereby the cash is returned to the operator, or to ensure debts and future liabilities are settled should a licensee fail to meet their obligations under a lease/licence. These cash receipts are not ring fenced, but are recognised as an operating cash inflow, with any payments being recognised as a cash outflow financed by grant in aid.

The amounts due to government represent amounts still to be remitted to the consolidated fund (HM Treasury) once cash has been collected in relation to licensing activities. The balance consists of trade receivables of £26,000 (2019: £28,000), cash of £418,000 (2019: £nil) and accrued income of £28,000 (2019: £25,000). See Note 4.3 to the Accounts for further details.

Liabilities in relation to called-in security are in respect of the expected costs of settling future subsidence claims following the termination of operations and disclaiming of a lease/licence. (Called-in security is in the form of cash receipts or property assets. Cash receipts are ring fenced. Property assets generate further cash receipts on disposal. See Notes 6, 9 and 11 to the Accounts for further details). Amounts due within 1 year and after more than 1 year are in respect of UK Coal - Thoresby Colliery. Amounts due after 1 year are also in respect of ATH Resources PLC, Benhar Developments Ltd and the Scottish Coal Company Ltd.

Amounts falling due after more than 1 year:	2020 £000	2019 £000
Security fund payables:
In more than 1 year, but not more than 2 years	164	338
In more than 2 years, but not more than 5 years	108	107
In more than 5 years	1,173	1,166
	1,445	1,611
Liabilities in relation to called-in security:
In more than 1 year, but not more than 2 years	410	790
In more than 2 years, but not more than 5 years	0	484
In more than 5 years	2,601	2,633
	3,011	3,907
Balance at 31 March	4,456	5,518

Where cash has been received from bond providers, any amounts not utilised, following the settlement of all future liabilities, will remain payable to the respective bond provider.

Analysis of movements on security fund payables:	2020 £000	2019 £000
Opening balance - falling due within 1 year	143	72
Opening balance - falling due after more than 1 year	1,611	1,637
Opening balance	1,754	1,709
Invoiced and cash receipts	1	117
Bond proceeds transferred	0	70
Interest payable	9	9
Repayments	(105)	(150)
Utilisation	(71)	(1)
Movements during the year	(166)	45
Closing balance - falling due within 1 year	143	143
Closing balance - falling due after more than 1 year	1,445	1,611
Closing balance	1,588	1,754

Analysis of movements on liabilities in relation to called-in security:	2020 £000	2019 £000
Opening balance - falling due within 1 year	1,637	2,958
Opening balance - falling due after more than 1 year	3,907	5,365
Opening balance	5,544	8,323
Bond proceeds transferred	(65)	(70)
Utilisation	(1,730)	(2,709)
Movements during the year	(1,795)	(2,779)
Closing balance - falling due within 1 year	738	1,637
Closing balance - falling due after more than 1 year	3,011	3,907
Closing balance	3,749	5,544

13. Provisions for liabilities and charges

	Mine water schemes £000	Public safety and subsidence £000	Subsidence pumping stations £000	Other property related provisions £000	Total 2019-20 £000	Total 2018-19 £000
Opening balance	1,822,000	279,000	138,000	58,000	2,297,000	4,326,000
Utilised against operating spend	(9,279)	(6,713)	(1,028)	(1,296)	(18,316)	(17,742)
Utilised against capital spend	(8,604)	0	(1,318)	0	(9,922)	(9,571)
Created/(released)	54,210	28,768	(220)	8,978	91,736	701,521
Borrowing costs of provisions (unwinding of discount)	33,673	4,945	2,566	318	41,502	(69,208)
Discount rate change	(82,000)	(6,000)	(7,000)	(1,000)	(96,000)	(2,634,000)
Closing balance	1,810,000	300,000	131,000	65,000	2,306,000	2,297,000

Provisions and movements in provisions are provided for in line with accounting policies stated in Note 1.18 to the Accounts.

The provision for liabilities and charges at 31 March 2020 is £2,306.0 million (2019: £2,297.0 million). Forecast cash flows, which reflect latest assumptions within the Coal Authority’s control, included within this provision before inflation and discounting are forecast at £2,275.0 million (2019: £2,174.0 million). Therefore, the impact of applying the HM Treasury specified rates is an increase of £31.0 million (2019: £123.0 million increase).

In calculating each provision at its present value, CPI (Consumer Price Index) inflation has been applied to cash flows that are based on 2020 prices and then nominal discount rates, as specified by HM Treasury, have been applied. Specified HM Treasury rates used are presented below:

CPI Inflation	2019-20	2018-19
Year 1	1.9%	2.0%
Year 2	2.0%	2.0%
Years 3-100	2.0%	2.1%

Nominal Discount Rate	2019-20	2018-19
Short term Years 1-5	0.51%	0.76%
Medium term Years 6-10	0.55%	1.14%
Long term Years 11-40	1.99%	1.99%
Very long term Years 41-100	1.99%	1.99%

The change in rates has resulted in a decrease to the provisions balance of £96.0 million for 2019-20 (2018-19: decrease of £2,634.0 million).

Where provisions remain calculated over a period of 50 or 100 years, it is necessary to add another year onto the provisions to maintain that timeframe. Forecast cash flows associated with the additional year are £25.4 million (2018-19: £24.5 million).

Other key assumptions and sensitivities in establishing the provisions at 31 March 2020 are explained below.

Mine water schemes

The provision relating to mine water treatment schemes is £1,810.0 million (2019: £1,822.0 million).

In order to comply with legislation, including the Water Environment (Water Framework Directive) (England and Wales) Regulations 2003 and the Water Environment and Water Services (Scotland) Act 2003, a strategy has been developed to design and build a further 9 schemes by 2027 to remediate existing pollution identified by the Environment Agency (EA), Natural Resources Wales (NRW) and Scottish Environment Protection Agency (SEPA). A further 15 preventative schemes are programmed to be built to avoid new pollution based on scientific projections of water quality and levels.

The legislation includes the principle of disproportionate cost and since 2010-11 this principle has been applied in assessing the viability of remedial schemes, through cost benefit analysis. Schemes will be deferred whilst new technologies are sought to build schemes for a cost in line with the benefits generated. Should such technology not become available these schemes may not be built and are therefore not provided for. Currently 55 schemes (2019: 55 schemes) have been deferred, at average scheme build cost of £3.3 million and operating costs of £0.1 million per annum.

Cash flows over the next 100 years, before inflation and discounting, based on latest forecast and which are within the Coal Authority’s control, total £1,785.1 million (2019: £1,719.5 million). Cash flows are calculated over 100 years as scientists have concluded that the conditions for causing pollution will continue and there is no foreseeable option to dispense with treatment schemes. These cash flows incorporate:

• the estimated cost of commissioning the build of future schemes at £81.7 million (2019: £76.1 million). The 10 year rolling programme for preventative scheme builds has been updated to include 2 new schemes. The programme, and associated cost, is subject to review with key stakeholders (Defra, NRW – Natural Resources Wales and SEPA – Scottish Environment Protection Agency)

• the estimated cost of a refurbishment programme and capitally maintaining schemes, including solar panel installation, maintenance and replacement, at £640.3 million (2019: £623.7 million). These costs relate to both existing and future schemes, and are reassessed each year to reflect changes to the future scheme build programme

• the estimated cost of operating schemes, which include efficiencies as they are delivered through an ongoing innovation programme, for the next 100 years at £1,063.1 million (2019: £1,019.7 million). These costs relate to both existing and future schemes (per the latest build programme), as they are built and become operational, and are reassessed each year based on experience and actual costs incurred. Operating costs at scheme level vary dependent upon the size and type of treatment scheme, the volume of water flow, as well as the chemistry and quality of the water. Operating costs remain subject to sustained pressure, particularly power and chemicals, leading to significant cost increases and include costs associated with the 2 new preventative schemes

Beyond 100 years the inherent uncertainties to the future costs and timing of cash flows prevent provisions being made.

Significant uncertainties beyond 100 years include new technologies; environmental regulations; price inflation of construction and operating costs; positioning of schemes and related land costs; and, the number of future preventative schemes required.

Public safety and subsidence

The provision relating to public safety and subsidence activity is £300.0 million (2019: £279.0 million).

Subsidence provisions relate to the estimated cost of settlement of subsidence claims. The Coal Authority has obligations under the 1994 Act and Subsidence Act 1991 to investigate and settle claims in respect of coal mining subsidence damage arising outside designated areas of responsibility associated with licenses granted to coal mining operators.

Public safety provisions relate to surface hazards and the costs of treating ground collapses, shaft collapses and other hazards relating to former coal mining activities. The Coal Authority has obligations under the 1994 Act and Subsidence Act 1991 to investigate and treat hazards arising from coal and to have regard for public safety.

Cash flows over the next 50 years, before inflation and discounting, based on latest forecast and which are within the Coal Authority’s control, total £295.3 million (2019: £268.7 million). Cash flows are calculated over 50 years as the Coal Authority expects to settle subsidence claims and surface hazards for a considerable period of time as the conditions for subsidence and surface hazards will always be in existence. These cash flows incorporate:

• the estimated costs for investigating and treating claims at £5.4 million per annum (2019: £4.8 million per annum). Costs are reassessed each year based on experience and actual expenditure incurred over periods of up to 10 years

• the estimated annual costs for the ongoing mine entry inspection programme through to 2024 at £0.5 million per annum (2019: £0.5 million per annum). Mine entry inspections and re-inspections are undertaken as part of a risk assessed rolling programme, and alternate every 5 years. The next 5 year cycles commence from 2025 at a cost of £0.7 million per annum and 2030 at a cost of £0.4 million per annum (2019: £0.7 million and £0.4 million per annum)

Beyond 50 years the inherent uncertainties of the future costs and timing of cash flows prevent provisions being made. Inherent uncertainties for public safety and subsidence are significantly higher than for mine water schemes and subsidence pumping stations.

Significant uncertainties beyond 50 years include; new technologies or methods of treatment which may be introduced; price inflation of contractor and material costs; new planning regulations to stabilise land prior to development; regeneration projects; or land stabilisation programmes. In addition to new damage, as time passes, shallow workings and shafts which have been treated in the past may need further remediation and monitoring. It is difficult to predict where surface hazards will next occur, or the profile and approach towards managing public safety and subsidence events, which impacts on the ability to reliably determine costs associated with these issues.

Subsidence pumping stations

The provision relating to subsidence pumping stations is £131.0 million (2019: £138.0 million).

Subsidence pumping station provisions relate to the costs of 83 pumping stations which control water on land affected by subsidence. This includes obligations under the Doncaster Drainage Act 1929.

Cash flows over the next 100 years, before inflation and discounting, based on latest forecast and which are within the Coal Authority’s control, total £129.9 million (2019: £129.9 million). Cash flows are calculated over 100 years as scientific evidence indicates that due to the effects of subsidence, certain pumping stations will be required for a considerable period of time. These cash flows incorporate:

• the estimated cost of a refurbishment programme, which is due to complete by 2034, at £11.7 million (2019: £12.3 million). There is an ongoing requirement to continue refurbishment beyond 2034 and into the foreseeable future. This ongoing refurbishment programme has been incorporated at £0.6 million per annum (2019: £0.6 million per annum). The programme, and associated cost, is subject to review with key stakeholders (Environment Agency and Internal Drainage Boards)

• the estimated cost of operating these stations for the next 100 years at £0.7 million per annum (2019: £0.7 million per annum)

Beyond 100 years the inherent uncertainties of the future costs and timing of cash flows prevent provisions being made.

Significant uncertainties beyond 100 years include; the expected operational life of the stations and plant and machinery; and, the levels of refurbishment or replacement that may be required.

Other property related provisions

The provision relating to other property is £65.0 million (2019: £58.0 million).

The Coal Authority provides for costs to meet its statutory obligations. These liabilities are managed by our Property and Public Safety and Subsidence teams. When made aware of a site requiring rehabilitation, restoration or requiring future expenditure related to safety and security, provisions are initially recognised following an assessment of the action required and where costs can be reliably estimated, and subsequently kept under review.

These include the following items and associated cash flows, before inflation and discounting, reflecting latest assumptions:

• obligations under the Bridgewater Canal Act 1907 to maintain elements of the canal which have been affected by coal mining subsidence. A 50 year programme of works has been prepared and costs estimated at £34.1 million remain at 31 March 2020 (2019: £32.6 million)

• obligations under the 1994 Act, the Mines and Quarries (Tips) Act 1969 and the Mines and Quarries (Tips) Regulations 1971 to have regard to public safety. Tips may become insecure when water or ground conditions make them unstable. The Coal Authority has responsibility for 41 tips and keeps them secure, monitors water drainage, constructs tunnels and ponds to capture the water runoff and undertakes a regular programme of maintenance. Costs over the next 50 years have been forecast at £17.0 million (2019: £17.3 million), incorporating annual costs at £0.3 million per annum (2019: £0.3 million per annum). Beyond 50 years the inherent uncertainties of the future costs and timing of cash flows prevent provisions being made. Significant uncertainties beyond 50 years include the future costs of major repair projects following adverse weather conditions

• closed colliery site obligations are assessed to be £13.2 million (2019: £5.8 million) and relate to returning colliery sites to a condition that is safe and secure and consistent with any required planning permission or lease requirement. Amounts for dilapidations have been reviewed during the year, resulting in an increased provision of £7.6 million

Sensitivity of trends and assumptions

The calculations as explained above necessarily include estimates and assumptions, therefore, due to their nature, provisions balances are reasonably sensitive. For example:

Should estimated future cash flows increase or decrease by £1.0 million per annum:

• in relation to subsidence, surface hazards and tip management, the total provision over 50 years at current day prices would increase or decrease by £51.0 million (2%)

• in relation to mine water schemes or subsidence pumping stations, the total provision over 100 years in current day prices would increase or decrease by £101.0 million (4%)

Should inflation or discount rates as specified by HM Treasury change, there would be an impact on the provisions balance:

• an increase in the inflation rates of 0.5% would increase the total provision held by £594.0 million (26%)

• a decrease in the inflation rates of 0.5% would decrease the total provision held by £434.0 million (19%)

• an increase in the discount rates of 0.5% would decrease the total provision held by £432.0 million (19%)

• a decrease in the discount rates of 0.5% would increase the total provision held by £597.0 million (26%)

Analysis of timing of discounted flows:	Mine water £000	Public safety and subsidence £000	Subsidence pumping stations £000	Other property related provisions £000	Total £000
Up to 2021	24,375	5,654	1,997	1,266	33,292
Between 2021 and 2025	110,312	24,897	7,078	5,357	147,644
Between 2025 and 2040	302,142	92,573	20,650	20,078	435,443
Thereafter	1,373,171	176,876	101,275	38,299	1,689,621
Total	1,810,000	300,000	131,000	65,000	2,306,000

14. Capital commitments

Contracted capital commitments at 31 March not otherwise included in these accounts:

	2020 £000	2019 £000
Land and Buildings	680	0
Mine water schemes	959	856
Intangible assets	35	40
Total	1,674	896

Land and buildings commitments represent maintenance and refurbishment of Head Office buildings.

Mine water schemes represent amounts relating to the build and maintenance of metal mine water schemes, and are recoverable from Defra (Department for Environment, Food and Rural Affairs).

15. Commitments under leases

15.1 Operating leases (lessee)

Total future minimum lease payments under operating leases are given in the table below for each of the following periods:

	2020 £000	2019 £000
Land and buildings:
Within 1 year	527	527
Between 1 to 5 years	1,807	1,887
After 5 years	12,118	12,565
	14,452	14,979
Other:
Within 1 year	113	91
Between 1 to 5 years	145	123
	258	214
Total	14,710	15,193

Land and building leases represent commitments of future expenditure on property held for operational purposes and for the Coal Authority’s disaster recovery offices. Of this future expenditure, £1,415,000 (2019: £1,591,000) represent amounts that will be recoverable from Defra (Department for Environment, Food and Rural Affairs) in relation to metal mine water schemes. The remaining balance is substantially included within the provisions balances provided for mine water schemes, subsidence pumping stations and other property related provisions (Note 13 to the Accounts).

Other leases represent commitments of future expenditure for vehicles and IT equipment.

15.2 Operating leases (lessor)

Total future minimum income receipts under operating leases in relation to head office freehold property rental and other income are given in the table below for each of the following periods:

	2020 £000	2019 £000
Head office - freehold property:
Within 1 year	185	180
Between 1 to 5 years	323	480
Total	508	660

The Coal Authority has no finance leases or Private Finance Initiative (PFI) contracts.

16. Contingent liabilities

Licensees of mining operations are required to provide security to the Coal Authority to cover the anticipated future costs of settling subsidence damage liabilities within their areas of responsibility. Outside the areas of responsibility of the holders of licences under Part II of the 1994 Act, the Coal Authority is responsible for making good subsidence damage. Where an area of responsibility is extinguished this would transfer to the Coal Authority who would become responsible for the discharge of outstanding subsidence liabilities. The Coal Authority also has an ongoing liability to secure and keep secured the majority of abandoned coal mines. In all cases the liability for operating collieries is the responsibility of the licensees/lessees and security is held to address those liabilities.

The above liabilities have been provided for within the Public Safety and Subsidence provision (Note 13 to the Accounts) based on analysis of trends and claims experience. However it is possible that significant, unexpected events outside of this provision may materialise. It is expected that any deficit will be covered by future allocations of grant in aid.

Where liabilities transferred under the various Coal Authority Restructuring Schemes (CARS) have crystallised due to planning conditions, agreements, claims etc, provision has been made in these financial statements. It has not, however, been possible to quantify contingent liabilities that may arise in the future. It is expected that any costs will be covered by future allocations of grant in aid.

The Coal Authority is subject to various claims and legal actions in the ordinary course of its activities. Where appropriate, provisions are made in the accounts on the basis of information available and in accordance with guidance provided under the FReM and IFRS. The Coal Authority does not expect that the outcome of the above issues will materially affect its financial position.

In addition to the contingent liabilities outlined above the following should be noted:

Environmental Information Regulations 2004

The Coal Authority is aware of potential legal proceedings in respect of past fees paid for mining information.

If we receive formal notification to commence legal proceedings, the Coal Authority will strongly defend its position.

17. Contingent assets

By virtue of the seventh and ninth Coal Authority Restructuring Schemes (CARS 7 and 9) the Coal Authority is the beneficiary of restrictive covenants and clawback provisions relating to land and properties sold by the British Coal Corporation. In the event that the purchasers are able to retrospectively secure added value by obtaining planning consent for alternative uses the Coal Authority will receive a share of the added value. Quantification of this asset is not possible.

18. Related party transactions

The Coal Authority is a Non-Departmental Public Body (NDPB) of the Department for Business, Energy and Industrial Strategy (BEIS) and received grant in aid during the year, as well as surrendering income due to the consolidated fund in relation to statutory licensing activities.

BEIS continues to provide a consolidated annual report and accounts for the core department and incorporating NDPBs, including the Coal Authority, that are classified within its consolidation boundary.

In addition, the Coal Authority had a number of transactions with other government departments and bodies. The most significant of these transactions include the purchase of goods and services from the Ministry of Housing, Communities and Local Government and the provision of advisory and technical services to the Department for Environment, Food and Rural Affairs (Defra).

There have been no material transactions undertaken between board or executive members, or other related parties, and the Coal Authority during the year, that require disclosure.

19. Events after the reporting period

There were no significant events after the reporting period that require disclosure.

Date accounts authorised for issue

The Chief Executive and Accounting Officer has authorised these accounts to be issued on the date they were certified by the Comptroller and Auditor General.

ACCOUNTS DIRECTION GIVEN BY THE SECRETARY OF STATE FOR BUSINESS, ENERGY AND INDUSTRIAL STRATEGY IN ACCORDANCE WITH THE COAL INDUSTRY ACT 1994

1. This direction applies to the Coal Authority.

2. The Coal Authority shall prepare accounts for the financial year ended 31 March 2020 and subsequent financial years in compliance with the accounting principles and disclosure requirements of the edition of the Government Financial Reporting Manual issued by HM Treasury and the FReM Addendum 2019-20 issued by HM Treasury on 20 May 2020 (collectively referred to as “the FReM”) which were in force for the financial year for which the accounts are being prepared, together with any additional disclosure or other requirements as agreed with the Department.

3. The accounts shall be prepared so as to: (a) give a true and fair view of the state of affairs at 31 March 2020 and subsequent financial year-ends and of the income and expenditure, total recognised gains and losses and cash flows for the financial year then ended; and (b) provide disclosure of any material expenditure or income that has not been applied to the purposes intended by Parliament or material transactions that have not conformed to the authorities which govern them.

4. Compliance with the requirements of the FReM will, in all but exceptional circumstances, be necessary for the accounts to give a true and fair view. If, in these exceptional circumstances, compliance with the requirements of the FReM is inconsistent with the requirement to give a true and fair view, the requirements of the FReM should be departed from only to the extent necessary to give a true and fair view. In such cases, informed and unbiased judgement should be used to devise an appropriate alternative treatment which should be consistent with both the economic characteristics of the circumstances concerned and the spirit of the FReM. Any material departure from the FReM should be discussed in the first instance with the Department for Business, Energy and Industrial Strategy who will consult HM Treasury as necessary.

5. This Direction supersedes the Direction dated 30 April 2019.

Christopher Whelan

Assistant Director - Coal Liabilities Unit (An official of the Department for Business, Energy and Industrial Strategy authorised to act on behalf of the Secretary of State)

22 June 2020