2 The clarity of the Duchies' accounts
15. Under the Duchy of Cornwall
and Duchy of Lancaster Act 1838, the Duchies are required to prepare
their accounts in accordance with the Accounts Directions given
by the Treasury. They have to comply with generally accepted accounting
practice in the United Kingdom but are not bound to meet the disclosure
requirements for public sector organisations or publicly listed
companies.[18]
16. For example, in line with Financial Reporting
Standard 13,[19] public
sector bodies are required to make various disclosures on the
nature of and risks associated with their portfolios of investments,
cash and loan balances. In the notes to its accounts, the Duchy
of Lancaster gives some details about its investment portfolio
(worth £57.8 million at 31 March 2004), breaking it down
by type, such as equities and government securities. The Duchy
of Cornwall provides only a total figure for its investments (£47.6
million at 31 March 2004) but confirmed that it would consider
disclosing more information on this area in the future.[20]
17. Similarly, publicly listed companies and public
sector organisations are required to disclose details of the remuneration
of individually named senior managers and board members. In the
notes to its accounts, the Duchy of Lancaster provides information
about the payments made to individual members of its Council,
although not those to managers other than the Clerk to the Council.
The Duchy of Cornwall does not give details of the payments made
to members of the Prince's Council or disclose the names of individuals
within its salary bandings, and considered such information would
not be of assistance to the readers of its accounts.[21]
18. The accounting policies of the Duchies have implications
for the level of the revenue surpluses payable to The Queen and
The Prince of Wales. Both Duchies take certain staff and development
costs out of their revenue account and charge them to the capital
account, which has the effect of increasing the surpluses payable
by corresponding amounts. For example, in 2003-04 the Duchy
of Lancaster recovered development costs of £419,000 from
its capital account. Neither Duchy has set out its accounting
policy in this area to explain how the amounts to be recharged
are calculated and the Duchy of Lancaster considers that in its
case the amounts concerned are too small to be worthy of a note.[22]
19. Both Duchies agreed, however, to provide in future
years more details of who conducts their property valuations and
their qualifications. The Duchy of Cornwall said that its estate
(worth £428.1 million at 31 March 2004) was valued on
a rotational basis - each year 20% of properties by number are
valued by external valuers, and the remaining 80% by internal
valuers, chartered surveyors who act under the direction of its
professional advisers. The Duchy of Lancaster explained that its
freehold property (worth £198.6 million at 31 March
2004) was valued by chartered surveyors.[23]
20. Under generally accepted accounting practice,
it would be usual for the profit on disposal of investment properties
to reconcile to the difference between the proceeds received and
the book value of the assets sold. In 2003-04 the Duchy of Cornwall
received £29.5 million from the sale of investment properties.
The book value of disposals was £20.6 million, leaving
an apparent profit of £8.9 million. However, the profit
figure shown in the Duchy's accounts was £7.0 million. The
Duchy explained that it was not possible to reconcile these figures
from the face of the accounts since some of the cash received
was not recognised as sales as it related to deposits received
for sales which would be recognised in future years.[24]
21. The disclosures required under Financial Reporting
Standard 17[25] show
that the pension schemes of both Duchies were in deficit at 31
March 2004, by £1.1 million for the Duchy of Lancaster and
£637,000 in the case of the Duchy of Cornwall. Had the Treasury
required the Duchies to adopt Financial Reporting Standard 17
in full in the year ending 31 March 2004 in line with the
public sector, the deficits would have been recognised in their
accounts and the surpluses payable to The Queen and The Prince
of Wales would have been reduced accordingly.[26]
22. The Duchy of Cornwall expects to rectify the
deficit on its pension scheme quickly and the Duchy of Lancaster
has increased the contributions it is making and reported that
the position in respect of the deficit is improving. The Duchy
of Lancaster closed its final salary pension scheme to new entrants
with effect from 6 February 2002 because of the volatility in
the payments that had to be made into the fund, and now provides
a money purchase scheme for new members of staff.[27]
23. The Duchy of Cornwall's annual accounts include
a narrative section, running over several pages, which discusses
the results for the year and future prospects, supplementing the
financial information contained in the accounts. It also produces
from time to time a Duchy Review, the last in 2002, covering matters
of corporate social responsibility, but agreed it could do more
to publicise its charitable and other activities. The Duchy aims
to set an example by following high standards in terms of the
environment and sustainability, but we might have felt more assured
on this point if the Duchy had not refused to provide details
of the properties in which it had invested.
24. The Duchy of Lancaster provides less narrative
in its accounts but explained that it set out on its website more
details of its activities, including work with tenants, and its
commitment to sustainability.[28]
18 Qq 82, 305 Back
19
Financial Reporting Standard 13 sets out the disclosure requirements
for derivatives and other financial instruments Back
20
Qq 10-13 Back
21
Qq 138-140 Back
22
Qq 17, 80-82 Back
23
Qq 227, 233-236, 310-312 Back
24
Q 41 Back
25
Financial Reporting Standard 17 sets out the requirements for
accounting for retirement benefits Back
26
Qq 8-9, 93 Back
27
Qq 14, 30, 93-94 Back
28
Q 206 Back
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