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2022-03-31-accounts

Historic Royal Palaces

Trustees’ Report and Financial Statements For the year ended 31 March 2022

Financial Statements

For the year ended 31 March 2022

Financial Statements presented to Parliament by the Secretary of State for Digital, Culture, Media and Sport by Command of His Majesty

Text and Images © Historic Royal Palaces 2022

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This publication is available on our website at www.hrp.org.uk.

Any enquiries regarding this publication should be sent to us at dan.lill@hrp.org.uk Apt 22 | Hampton Court Palace |East Molesey |Surrey | KT8 9AU

ISBN 978-1-5286-3760-2

E02816105 12/22

Printed on paper containing 40% recycled fibre content minimum

Printed in the UK by HH Associates Ltd. on behalf of the Controller of His Majesty’s Stationery Office

Trustees’ Report

and

Financial Statements

for the Year Ended 31 March 2022

Table of content

Administrative Details 2
Objectives and Activities 3 - 4
Achievements and Performance 5 – 9
Financial Review 10 - 14
Structure, Governance and Management 15 – 23
Structure & Governance Framework 15 – 16
Governance Effectiveness 17 – 18
Risk Management Statement 19 – 22
Other Reports & Disclosures 23 - 25
Statement of Responsibility 26
Statement of Trustees’ Responsibilities
Statement of the Accounting Officer’s Responsibilities
Independent Auditor’s Report to the Trustees of Historic Royal Palaces and
27 - 31
the Houses of Parliament
Consolidated Statement of Financial Activities for the year ended 31 March 2022
32
Consolidated and Charity Balance Sheet as at 31 March 2022 34
Consolidated Cash Flow Statement for the year ended 31 March 2022 35 - 36
Notes to the Consolidated Accounts for the year ended 31 March 2022 37 - 72

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Administrative Details

Trustees

Rupert Gavin (Chair)(until 31 July 22) Carole Souter CBE (Chair)(from 01 Aug 22) Zeinab Badawi (until 31 March 22) Lisa Burger CBE (from 01 Apr 22) Baron Houghton of Richmond in the County of North Yorkshire (Lord Houghton) GCB CBE DL (until 31 July 22) Camilla Finlay (from 7 June 21) Sarah Jenkins Jane Kennedy OBE (until 18 May 21) Tim Knox FSA General Sir Gordon Messenger KCB DSO OBE DL (from 01 Aug 22) Sir Michael Stevens KCVO (Deputy Chairman) Robert Swannell CBE Dr Jo Twist OBE Sue Wilkinson OBE Professor Michael Wood OBE

Executive Board

John Barnes (Chief Executive and Accounting Officer) Nicola Andrews (Palaces Group Director) Howard Beeston (Interim Finance Director from 12 Jan22 to 31 Oct 22) Jane Crowther (HR Director until 31 Dec 21, Director of Corporate Resources from 1 Jan 22) Anupam Ganguli (Finance Director from 31 Oct 22) Sue Hall (Finance Director until 31 Dec 21) Andrew Jackson (Tower of London Director) Tom O’Leary (Public Engagement Director) Adrian Phillips (Palaces and Collections Director) Dan Wolfe (Commercial Director)

Registered Office

Hampton Court Palace, Surrey KT8 9AU

Auditors of the Group

The Comptroller and Auditor General National Audit Office 157-197 Buckingham Palace Road London SW1W 9SP

Bankers

Barclays Bank plc 1 Churchill Place, London, E14 5HP

Solicitors

Farrer & Co 66 Lincoln’s Inn Fields, London WC2A 3LH

Historic Royal Palaces

Charity registered with the Charity Commission for England and Wales Registration number: 1068852

Historic Royal Palaces Enterprises Ltd

Company limited by share capital, Companies House: 03418583

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Objectives and Activities

The Purpose and Activities of the Organisation

Historic Royal Palaces (HRP) was established in 1998 as a Royal Charter Body with charitable status. It is responsible for the care, conservation and presentation to the public of the unoccupied Royal Palaces: HM Tower of London, Hampton Court Palace, Kensington Palace State Apartments, the Banqueting House at Whitehall and Kew Palace with the Royal Kitchens, Queen Charlotte’s Cottage and the Great Pagoda. These palaces are owned by HM The King in right of Crown. HRP is contracted by the Secretary of State for Digital, Culture, Media and Sport to manage the five London palaces on his behalf. The contract is re-authorised until 31 March 2028.

HRP is also contracted by the Secretary of State for Northern Ireland to manage Hillsborough Castle and Gardens in Northern Ireland. The Castle is owned by the Government and is the official residence in Northern Ireland of HM The King.

HRP is a Public Corporation but receives no public funding - all costs are met by selfgenerated income. HRP is governed by a Board of Trustees, all of whom are nonexecutive. The Chief Executive is accountable to the Board of Trustees.

Further information can be obtained from www.hrp.org.uk.

The objectives of HRP, as set out in its Royal Charter are, for the benefit of the nation:

Historic Royal Palaces Enterprises Limited is a company wholly owned by Historic Royal Palaces. It forms the charity’s general trading arm, responsible for running the commercial activities such as retail, functions, sponsorship and other events at HRP. It gift aids its taxable profits to the Charity.

Our Cause

We stir every spirit to inspire and provoke change.

Our work is guided by five principles:

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Four major strategic aims to face the challenges of the future

In setting HRP’s aims and planning our activities, the Trustees have had regard to the Charity Commission’s guidance on public benefit.

i) Palaces – Give the palaces a future as bright as their past

We are guardians of six of the nation’s most important historic sites. One is a World Heritage Site (the Tower of London) and another is situated within a World Heritage Site (Royal Botanic Gardens, Kew); four are Scheduled Ancient Monuments; within these sites are many individual grade 1 listed buildings.

Conserving our palaces is a Royal Charter objective and a continuous strategic priority. Through consistent year-on-year investment, we improve the condition, presentation, curation and records of the palaces. Our planned building conservation programme is supplemented by improvements that we make through our major development projects.

ii) Experiences – Create unique and memorable experiences, onsite, offsite and online

Helping everyone to learn about the Palaces, providing access, enjoyment and engagement with the Palaces (physically and virtually) is also a Royal Charter objective and a continuous strategic priority. Most of our overall investment goes into this area through operations, programming, investment in the visitor offer and, increasingly, in reaching beyond the Palaces with their stories.

iii) Culture - Nurture a culture that unites us behind our cause

Creating an environment where all staff are performing to a high standard, are engaged and consistently demonstrate the Performance Framework qualities is central to this aim. Payroll costs are still the largest single expenditure element of our budget and our staff are the means by which we will succeed.

iv) Money - Generate the money to rebuild our charity

Our reserves have been significantly depleted due to the impact of closures required by the Government in response to the pandemic, and the charity has had to take on Government-backed debt to ensure its viability. The first step in our recovery will be to reach operating breakeven, then to rebuild to pre-pandemic levels of income and create surpluses once again. This strategic aim will require rigour about costs, and creativity to generate income. This is the objective shared by everyone in HRP – staff and trustees alike.

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Achievements and Performance

Performance Overview

Our three-year Operating Plan was adapted to reflect the impact of COVID-19 in 202021, however the performance targets to measure our success in achieving our objectives remain. We monitor visit numbers, visitor satisfaction and operating surplus.

Measure Target 2021/22(*) Performance
Visit
Numbers		 Achieve at least 980k visits across all sites 1,486k
Visitor
Satisfaction		 Achieve the following scores, as measured through
the ALVA benchmarking (new scale: 1 to 10):
Enjoyment – 8.3
Value for Money – 8.0
Staff Friendliness & Welcome – 8.8		 8.8
8.5
9.5
Operating
Surplus
()**		 Keep the operating deficit to no more than (£15.1m) £2.1m
surplus

Within each of the strategic aims are various three-year priorities to drive value and ensure we deliver our aims, which have been adapted to reflect the effects of COVID19 on HRP:

Palaces

  1. Adopt new approaches to maintaining and conserving our palaces and collections

  2. Focus our research outputs on overlooked history

  3. Accelerate our environmental sustainability actions, and progress towards net zero greenhouse gas emissions by 2050

Experiences

  1. Deliver special moments and new approaches to public programming at scale, that drive recovery

  2. Introduce diverse narratives and perspectives into our public content

  3. Develop a digital engagement programme and deliver greater reach online and offsite

  4. Deliver seamless visitor journeys

Culture

  1. Embed the Performance Framework behaviours to align staff with our new operating challenges and ways of working

  2. Secure the benefits from the restructure

  3. Become a more diverse and inclusive organisation

  4. Involve staff in the conversations about HRP through new forums and mechanisms

  5. Roll out the external expression of the cause and the new visual identity

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Money

  1. Use the Culture Recovery Fund loan to manage losses and make targeted investments until breakeven is achieved.

  2. Optimise the income generated by each Palace

  3. Develop offsite and online commercial opportunities to become a major new source of income

  4. Increase fundraising revenue by implementing a new development strategy

  5. Develop a technology programme and deliver our next technology needs

Performance Analysis

We have designed a series of reports and charts that will show our progress to breakeven and against our deficit. These will be shared across the organisation to enable all staff to track and play their part in our recovery.

We agreed three key objectives, these were shared by all staff across HRP. These are:

Departmental data and performance monitoring continue within flash reports, performance reviews, management accounts and KPIs.

1. Palaces - Give the palaces a future as bright as their past

Thanks to two rounds of grants from the Heritage Stimulus Fund and a Public Bodies Infrastructure Grant, a major grant from the DCMS, we were able to continue a programme of conservation across the Palaces whilst also replacing essential services. At Hampton Court Palace, a significant project to conserve the historic ironwork Tijou screens in the Privy Garden is underway. This year, one of the panels was restored by specialist metalworkers and blacksmiths.

Vital chimney conservation and reconstruction projects were completed at Hampton Court Palace by specialist brick makers and conservators. At Kensington Palace, we strengthened the floors of the historic Cupola Room, where Queen Victoria was christened, and undertook some conservation work to care for the original William Kent painted pilasters and panelling. Another major project saw us conserve the masonry of Queen Anne’s Orangery at Kensington Palace.

At the Tower of London, conservation work at 4 & 5 Tower Green presented a substantial opportunity for archaeology prior to stabilisation of the structures and essential masonry conservation. Archaeology was also undertaken in the moat in advance of our ‘Superbloom’ project and one of the moat’s revetment walls was conserved as part of our preparations. ‘Superbloom’ is an installation of millions of

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flowers to celebrate HM The Queen’s Platinum Jubilee in June 2022. The aim is to create a biodiverse landscape in The Tower’s moat for people to come together and experience the benefits of nature. It will be linked nationally to schools and to local communities and have a permanent legacy.

Authentic research underpins everything we do, from bringing our palaces and their stories to life by exploring new and diverse perspectives alongside the more familiar histories for which they are known, to tackling conservation threats and the impact of climate change by experimenting with innovative technologies and scientific techniques. This year, research from our Inclusive History curator explored the story of Edward Francis, an enslaved African who lived at the Tower in the 17th century.

His story shed new light on slavery and resistance at the Tower of London and we created a new web resource to explain this important aspect of the Tower’s history.

In 2021, HRP’s Heritage Science Laboratory gained considerable capability following a £1 million grant from the Arts & Humanities Research Council (AHRC) Capability for Collections Fund. State of the art infrastructure was installed in the laboratory at Hampton Court Palace, which will transform our ability to undertake detailed scientific analysis of heritage assets, as well as providing in-depth information and data on the condition of the Palaces and the remarkable collections they contain.

As the custodians of the Royal Ceremonial Dress Collection, we were pleased to send some items out on loan to external institutions and partners. To mark the tercentenary of the death of Master Craftsman Grinling Gibbons, whose work adorns Hampton Court Palace and Kensington Palace, fragments of our collection were loaned to an exhibition at Compton Verney, staged by the Grinling Gibbons Society. Items from the Royal Ceremonial Dress Collection, including a suit once worn by the Duke of Windsor, were loaned to the V & A Museum for their Fashioning Masculinities exhibition.

2. Experiences - Create unique and memorable experiences, onsite, offsite and online

It was a busy year for exhibitions. We staged three shows we postponed in 2020 and added a new display into our programme.

The Orangery at Kensington Palace was re-purposed as an exhibition space and housed ‘Royal Style in the Making’, a display exploring the unique relationship between fashion designers and their royal clients. The star item featured was the wedding dress worn by Diana, Princess of Wales, in 1981, on loan from her sons, HRH The Prince of Wales and the Duke of Sussex. The show proved enormously popular, attracting almost 200,000 visitors to Kensington Palace during its seven-month run. In March, it was succeeded by ‘Life Through a Royal Lens’, an exhibition bringing together some of the most iconic images of the Royal Family ever taken, including contributions from members of the public.

At Hampton Court Palace, we celebrated the 500th anniversary of the legendary meeting between King Henry VIII and his contemporary, Francois I – the Field of Cloth of Gold – a year later than planned. A dazzling array of Tudor treasures went on display in the rooms once occupied by the architect of the occasion – Cardinal Wolsey. A highlight was a never-before-seen 16th century French tapestry featuring a black trumpeter – one of only a handful of surviving visual depictions of people of colour at a 16th century court.

Two centuries on from the death of King George III, conversations about male mental health are changing. At Kew Palace, where George III grew up and spent time at the

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palace convalescing during periods of mental ill health, we staged a display exploring the life of this fascinating and much-misunderstood monarch. Our Communities team partnered with groups local to Kew, to interpret some of the items in the exhibition and explore how George III’s experiences speak to men’s experiences in 21st century London. We also featured a display of objects submitted by members of the public, to inspire discussion and reflection on how we think and talk about mental health today.

Attracting domestic visitors was a key priority for the year, as inbound tourism continued to recover slowly. At Hillsborough Castle, we staged our inaugural Hillsborough Honey Fair, working with local producers and Food NI. We focused our efforts on seasonal programming and produced two new Halloween offers for visitors at Hampton Court Palace and the Tower of London. Meanwhile, the Wild Raven Walk returned to Hillsborough Castle and attracted record numbers. At Christmas, light trails were staged at Hampton Court Palace and Hillsborough Castle, whilst the Tower was dressed in a festive display celebrating its long history as a menagerie, kindly supported by the ‘Let’s Do London’ campaign.

Offsite and online, we continued to tell the stories of the Palaces to visitors who were not able to visit us in person. Another successful series of Crowdcast talks, hosted by our Chief Curator, Lucy Worsley, explored, amongst other things, the history of Royal Jubilees, and LGBT stories from the Palaces. On television, the fourth series of ‘Inside the Tower of London’ aired to audiences upwards of 1.5 million on Channel 5 in the Autumn. A further two TV series followed, featuring staff and stories from Hampton Court Palace and Kensington Palace respectively.

3. Culture - Nurture a culture that’s united behind our cause

In 2020, we restructured the charity to ensure that we were in the best possible position to recover from the financial challenges presented by the pandemic. We began the 2021-22 financial year still heavily using the Coronavirus Job Retention Scheme, which was a vital lifeline during a period in which our income all but disappeared. In September 2021, the scheme came to an end and all staff returned to work, with some having been on furlough for 18 months.

To help all staff understand the challenges we faced, three shared objectives were set for the whole organisation: to continue to deliver our Cause to ‘Stir Every Spirit’, to adapt our ways of working to the new environment and to work towards achieving break-even. These clear objectives helped to focus the attention of the organisation on HRP’s recovery.

In Summer 2021, we conducted a staff listening exercise, to gather staff feedback and to inform our work to build a more diverse and inclusive organisation. The feedback showed that staff are proud to work for HRP and inspired by their work but are keen to see wider diversity across the charity.

In response to this feedback, in November 2021, we established the Historic Royal Palaces Staff Inclusivity Network. Chaired by a team of three Co-Chairs from across directorates, the network meets regularly to discuss a broad range of topics. The network advises on internal training and language and terminology, and champions inclusive history research internally.

Alongside this piece of work, Sarah Jenkins, Trustee and Chair of our People Committee, conducted a Staff Diversity, Inclusivity and Equality Review, looking at internal culture and some of our HR mechanisms. Her recommendations were presented to Trustees and the Executive Board to inform future strategy.

The gender pay gap has substantially improved since last year. This is largely due to

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the restructure in 2020 – larger reductions in allowances in some more predominantly male teams, compulsory and voluntary redundancy leavers who were males on higher rates of pay or females on lower rates of pay, and most of our casuals (larger proportion are female) were not given any work during the reporting period and were therefore excluded from the pay gap calculations.

Our MA in Heritage Management continues to go from strength to strength, with 35 students enrolling in 2021 from the UK and overseas. Students have received masterclasses from HRP’s leading heritage professionals and undertaken integral work placements across all directorates. To date, the 65 alumni of the course have achieved astounding success in securing jobs with leading heritage organisations in the UK and abroad. Several have returned to work with HRP.

4. Money - Generate the money to grow our impact

In 2020, a Commercial department was established within Historic Royal Palaces, to focus on income generation following the financial challenges we faced during the pandemic. In 2021, a new Development Director was appointed, to grow and expand our fundraising operation. Fundraising efforts were focused on ‘Superbloom’ at the Tower of London and the £2 million target was met thanks to support from generous sponsors and donors, including a lead sponsor, Burberry.

The CRF Loan has been used to manage losses made in 2020/21 and 2021/22 and provide long term financial stability. It will also be used to invest in future projects such as ‘Superbloom’ and the new orangery learning centre at Kensington Palace as well as new programmes around sustainability, accessibility and accommodation.

Membership

2021/22 was a record year for membership. We recruited 71,360 new members to the base which is the highest number ever acquired in a single year. We opened the year with 77,058 coming out of the pandemic and ended the year with a record base of 119,745 members. The membership scheme generated £3.2m in income, +13% vs. 2020/21.

Retail

Retail sales recovered significantly after a difficult year and were back up to £5.9 million from £1.6 million. The improvement was primarily driven by our on-site shops across the estate, as visitor numbers improved throughout the year.

Functions and Events

Functions, events and other licencing income improved substantially too. Income rose from £281k the previous year, to £3.4 million. A strong performance on this side of the business was driven by the return of some of our large-scale commercial events, corporate events and weddings, once Covid restrictions had been lifted.

It was a strong year for filming, with many large-scale productions still limiting filming within the UK due to Covid restrictions. We hosted two shoots for Bridgerton (Netflix) and two shoots for The Great (Hulu). The second series of Bridgerton, in which Hampton Court Palace featured heavily, was watched for 193 million hours in its opening weekend alone.

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Financial Review

Funds and reserves

The Trustees recognise the need to establish a level of free reserves that enables financial stability, is adequate to meet the requirements of working capital and acts as a cushion against fluctuations in income levels. Reserves enable HRP to make longterm commitments to projects. In determining a realistic level of reserves, several key factors are considered including the level of risk associated with the main income and expenditure streams, the adequacy of the controls in place to mitigate those risks and other contingencies available to call on in emergencies. This is balanced by the general legal duty that Trustees are under to apply income funds on the objects of the charity within a reasonable period of receiving them. In the past, designated funds were created to protect long-term commitments to major projects.

Prior to the pandemic, we had built designated funds of £22.4m for this purpose but, due to the sudden and devastating impact of COVID-19, Trustees agreed at the end of 2019/20 to transfer all designated funds to free reserves to meet operating commitments during 2020/21 and subsequently 2021/22.

At the beginning of 2020/21 we had £27.4m total free reserves available but by the end of 2020/21 the Group was left with free reserves of £5.2m and by the end of 2021/22 with negative free reserves of £1.2m.

Funds Funds Funds
as at 31 as at 31 as at
March2022 March 2021 1 April 2020
£000 £000 £000
General (Free) reserves (1,243) 5,163 27,405
Designated funds - - -
Fixed assets 28,826 29,116 28,448
Pensionplan 9,437 (829) (686)
Unrestricted funds 37,020 33,450 55,167
Restricted funds 7,103 7,417 5,667
Total funds 44,123 40,867 60,834

Restricted funds (£7.1m)

These are funds subject to specific restrictions imposed by donors that are still within the wider objects of the charity.

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Unrestricted funds (£37.0m)

These are funds that are expendable at the discretion of the Trustees in furtherance of the charity’s objects. They are made up of:

The pension surplus or liability recorded in the Consolidated and Charity Balance Sheet is calculated annually for accounting purposes under FRS102. As at 31 March 2022, the pension surplus has been calculated as £9.4m (March 2021: -£0.8m) and shown in the accounts in accordance with accounting standards. Details of the retirement benefit scheme are disclosed in the Notes to the accounts.

The defined benefit pension scheme is also valued for funding purposes by an actuary in a more detailed assessment, every three years. The last triennial valuation was at 31 March 2021 and showed a deficit of £4.1m.

HRP, as employer, agreed with the trustees of the scheme that no deficit contributions will be required between May 2022 and June 2025. See note 12 for further details on how the actuarial deficit may be eliminated and for more information on the different valuations of the scheme.

The scheme was closed to future accrual on 31 March 2019. HRP will continue to meet the expenses of the scheme and levies to the Pension Protection Fund.

Future free reserves

It appears the worst of the negative impact of closures due to COVID-19 on the Group’s financial position may be over but a high level of uncertainty remains around the UK economy. The Trustees intend to replenish free reserves to an appropriate level as soon as practically possible as a safeguard against future fluctuations in income. Additionally, the Trustees plan a return to setting aside designated funds for major projects and programmes when surpluses in future years allow and these funds could also be undesignated by the Trustees to compliment free reserves.

A minimum level of free reserves equivalent to 3 month’s operating expenditure will allow sufficient time to implement expenditure reductions in the event of a sudden loss of income. Based on the 2022/23 budget, a minimum level of free reserves would be £16m. In 2022/23 the organisation is budgeting to break-even prior to expenditure on

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major projects so a contribution to free reserves is unlikely. However, despite an uncertain economic outlook, we anticipate surpluses in future years which will restore our free reserves.

The Statement Of Financial Activities

Total visits of 1.5m in 2021/22 were better than originally targeted at the beginning of the year, but when compared to the 2019/20 visits total of 4.8m, it shows the impact of the Covid-19 pandemic continues to affect our activity and performance.

Total income was £54.4m, with visitor facing activities generating £33.6m, and the return of the HCP Flower Show and Music Festival helping achieve Function and Events total income of £3.4m.

Coronavirus Job Retention Scheme (CJRS) grants continued into 2021/22 and totalled £2.4m, and we received project grants of £8.0m, including £6.1m from the DCMS Public Bodies Infrastructure awards, English Heritage & Historic England for the funding of additional programme and project expenditure.

Cost control measures were kept in place all year to help offset the expected income shortfalls, with any recruitment and discretionary spend kept to a minimum.

Despite the cost control put in place and the additional monies received from grants, the loss of traditional income compared to pre-covid years resulted in an operational net deficit of £7.0m for the year (19.5m deficit in 2020/21).

The Balance Sheet

Excluding the pension surplus, overall total funds over the year have decreased by £6.2m. Fixed assets reduced by £3.8m to £38.1m, primarily driven by disinvestments in financial assets. Although none of the multi-asset portfolios were sold in-year, investments in the bonds portfolio continued to be liquidated on maturity.

Debtors have increased by £4.5m and amounts owed falling due within one year has increased by £7.2m in line with increased activity as the organisation recovers from the pandemic. Overall, net current assets decreased by £2.5m year on year.

Long-term creditors increased due to accrued interest on the £40m loan from the Culture Recovery Fund. Repayment of the capital and associated accrued interest is due by March 2035 with repayments commencing from March 2025.

The Group’s cash flows returned to a more traditional pattern in 2021/22 with cash inflows being generated by Admissions from June to October. The overall cash outflow from operating activities for the 12 month period was negative £0.7m (£28.3 outflow in 2020/21).

Finance & Investment policy

The Trustees continued to adhere to the investment policy over the period. The receipt of the £40m CRF loan in March 2021, in a global context that is still uncertain, resulted in a re-balancing of investments in both term and risk profile.

In 2021/22, the Finance & Investment Committee continued to release bonds as they matured and not invest in new bonds. The bond portfolio investment returned -2.15% against +3.75% in 2020/21, although this is a negative, it is still f a v o u r a b l e t o the

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benchmark return. Since inception in January 2014, the portfolio has returned an annualised +1.2% (+1.68% in 2020/21), compared to the benchmark return of +1.28%. The multi-asset portfolios performed in line with the market and their respective benchmarks, with a combined annualised return of 1.36% interest/dividend income return (1.74% 2020/21) and a capital revaluation of+3.78% at 31 March 2022 (+21.65% as at 31 March 2021).

HRP’s investment policy is currently as follows:

Investment objectives

Risk mitigation

Amount invested and time horizon

Ethical Investment

Going Concern and Future Plans (see note 1 q)

The 2022-23 operating budget has been set in line with the Culture Recovery Fund (CRF) requirements. Income targets have been updated to reflect our latest visit number projections, with expenditure being limited to what we can afford once all essential expenditure has been allowed for.

We remain in a period of uncertainty, and the volatile operating context makes it difficult to forecast. However, the strong visitor performances we have seen at the Palaces to date in 2022 gives us confidence that we will achieve our proposed targets for 2022/23. In addition, we are well placed to hold back expenditure to reduce costs in order to create further financial headroom should circumstances require.

Performance will be scrutinised very closely throughout the year and any significant deviation from our current income assumptions will be mitigated by imposing stricter

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controls on expenditure to ensure we achieve at least breakeven in 2022/23.

The Board of trustees is content to adopt the going concern basis for preparing these financial statements.

Further details are provided in Note 1 (q).

Report of the People Committee

Membership

The membership of the Remuneration Committee in 2021/22 consisted of four trustees. Sarah Jenkins (Chair), Tim Knox, Sue Wilkinson served on the committee throughout the year. Rupert Gavin was in attendance at all meetings.

Policy statement

The remit of the People Committee is governed by the legal framework of HRP as set out in the Royal Charter. In establishing the level of remuneration for each Director, the People Committee considers the guidelines laid down by the Combined Code and HM Treasury and has a remuneration policy similar to comparable and competing organisations. This policy aims to ensure that remuneration packages are in line with the general market practice and consistent with recruiting and retaining Directors of the highest calibre.

Members of the Board of Trustees receive no remuneration. However, they are entitled to claim expenses and to make charges if instructed by the Charity to apply their specialist skills or knowledge. Details are set out in Note 10 to the accounts.

Review of activity during the year

The People Committee only met once in April 2021 due to COVID-19. The Committee approved the Terms of Reference for the newly renamed sub-committee previously known as the Remuneration Committee. Sarah Jenkins took on the role of Chair of the People Committee. The Committee also approved the Terms of Reference for the ‘Review of how the culture of HRP can fully reflect our commitment to equality and diversity’. Other approvals by the People Committee included the CEO and Directors’ objectives for 2021/22, the Report for the annual report and accounts and the HRPwide performance management process.

No further meetings/actions were carried out by the People Committee in 2021/22.

Details of the emoluments of the Chief Executive are set out in Note 11 to the accounts, together with information on the number of employees whose remuneration (excluding pension contributions) exceeds £60,000.

Trade Union relationships

We continue to work in partnership with the Trade Unions and their local representatives. To facilitate information flows and discussion between the organisation and Trade Union representatives, partnership meetings are regularly held.

Carole Souter CBE Chair of the Board of Trustees 5 December 2022

Hampton Court Palace Surrey KT8 9AU

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Governance Statement

Structure and Governance Framework

HRP’s governance reflects its constitution and contractual responsibilities. We are directly accountable to the Charity Commission through the Chairman and Trustees but also accountable to Government through the Chief Executive (as Accounting Officer). The contract with Government includes a management statement and a financial memorandum with which we comply.

Memoranda of Understanding are in place with key partner bodies, such as the Royal Household and the Royal Armouries; governing operations in areas of common interest.

HRP considers the UK Corporate Governance Code as a source of good practice as relevant to us as a Public Corporation and a Charity. The Charity’s governance is broadly aligned with the Charity Governance Code endorsed by the Charity Commission. HRP is also subject to the Freedom of Information Act and Environmental Information Regulations.

Details of the Trustees are given in the Administrative Details section. The Board consists of a Chair and eleven Trustees, chosen for their skills and experience. All are nonexecutive and unpaid.

The Chair is appointed by the Sovereign on the advice of the Secretary of State. Four Trustees are appointed by the Sovereign, of whom three are ex-officio appointments: the Director of the Royal Collection; the Keeper of the Privy Purse and the Lord Chamberlain (unless he/she chooses not to take up the appointment, in which case the Sovereign may appoint someone to take his/her place, as currently). The remaining seven Trustees are appointed by the Secretary of State, two of whom are ex-officio; the Constable of the Tower of London and the Chairman of the Campaign Board.

The appointments are initially for three years. With the exception of ex-officio appointments, Trustees may be appointed for a further two periods of up to three years, subject to review at the end of each period. Third period appointments are only made exceptionally.

Trustees are recruited through advertisement, by using existing contacts and by further research. New Trustees are supported through an induction process tailored to their needs and experience. This includes meetings, visits and a substantial amount of written material on their responsibilities, and about the organisation.

The Chief Executive is granted a general delegation to act on behalf of the Trustees, except for matters reserved by the Trustees for decision by themselves. Such matters include approval of strategic plans, annual budgets and major projects, remuneration of the Directors, acceptance of donations over a set amount and variations to governing documents.

The Trustees and Chief Executive (as Accounting Officer) are jointly responsible for maintaining a sound system of internal control that:

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Managing Public Money ;

There are four sub-committees of the Board:

The Audit & Risk Committee formally reports annually to the Board on the adequacy of HRP’s arrangements for governance, risk management and internal control. During the year the following Trustees served on the committee: Sir Michael Stevens (Chair), Carole Souter and Robert Swannell. Ian Starkey is a co-opted member.

Oversight of financial and investment activities is provided by the Finance & Investment Committee, whose remit includes reviewing the balance of risk/return, the impact of external factors, and HRP’s use of the long-term borrowing facility. During the year, the committee comprised the following Trustees: Rupert Gavin (Chair), Sir Michael Stevens, Robert Swannell. William Fall is a co-opted member of the committee. The Chief Executive and the Finance Director attend by invitation.

Remuneration policy for the Chief Executive and Directors of HRP is agreed by the People Committee which oversee and advise on issues concerning HRP’s human resources. Sarah Jenkins served as Chair. Other Trustees who served on the committee during the year were Tim Knox and Sue Wilkinson, with Rupert Gavin in attendance. The Chief Executive and the Corporate Services Director attend by invitation.

The Nominations & Governance Committee reviews and advises on Trustee appointments and succession planning and makes recommendations to the Board to ensure the appropriate balance of competencies, skills, experience and diversity on the Trustee Board. During the year the following Trustees served on the committee: Rupert Gavin (Chair), Sir Michael Stevens, Lord Houghton and Zeinab Badawi.

The Board agrees the terms of reference for each committee.

The work of the Board is further supported by the Campaign Board, which brings specialist expertise on fundraising to HRP. Robert Swannell chairs this Board. As Chair of Trustees, Rupert Gavin was invited to attend the Board during the year, joining external Campaign Board members with expertise in this area.

Further Trustee input to HRP’s work comes through advisory/working groups, set up as and when required, where Trustees work with members of the Executive Team to advise on particular areas such as major projects. An Inclusivity Working Group maintains oversight and ensures the sustained development of HRP’s actions and ambitions in this area. Other working groups include the Research Strategy Board, Superbloom Working Group, and the Digital & Technology Working Group.

The Trustees’ and Directors’ register of interests and their biographical details are available for inspection on application to the Head of Governance, Risk & Assurance Apartment 39, Hampton Court Palace, Surrey KT8 9AU. Day to day management of HRP is carried out by an Executive Board. The Executive Board is chaired by the Chief Executive and comprises Directors of Palaces & Collections, Finance, Palaces Group, Tower, Commercial, Public Engagement and Corporate Services.

16

Trustees’ Report

Governance Effectiveness

The effectiveness of the Board of Trustees and its Committees is usually reviewed by the Chairman in consultation with Trustees each year, with periodic external reviews. The Chairman undertook a Board effectiveness review in Spring 2022.

The most recent external review of Board effectiveness was undertaken in 2018. This concluded that the governance of HRP is sound, with a high degree of unanimity and positivity within the Trustees and the Executive Board about the Board’s performance. As with internal reviews of Board performance, the report and findings were discussed by the Board, and actions agreed.

Attendance at Board and Committee meetings is monitored and discussed with each Trustee as part of each Board Effectiveness Review. Attendance at the full Trustee Board meetings over the year was 94% (20/21: 94%), Audit & Risk Committee 92% (20/21: 100%), Finance & Investment Committee 100% (20/21: 100%), People Committee 100% (20/21: 100%) and Nominations & Governance Committee 100% (20/21: 100%).

The attendance record of individual Trustees is summarised in the table below:

Trustee Board Audit & Finance & People Nominations
Risk Investment Committee & Governance
Committee Committee Committee
Rupert Gavin 4/4 4/4 1/1 3/3
Zeinab Badawi 3/4 3/3
Lord Houghton 4/4 3/3
Camilla Finlay 3/3
Sarah Jenkins 4/4 1/1
Jane Kennedy 4/4
Tim Knox 4/4 1/1
Carole Souter 4/4 3/3
Sir Michael
Stevens		 4/4 3/3 4/4 3/3
Robert Swannell 4/4 3/3
Jo Twist 4/4
Sue Wilkinson 4/4 1/1
Michael Wood 2/4
William Fall(note 1) 4/4
Ian Starkey (note 2) 2/3
Francis Runacres
(note 3)		 1/1

Note 1: William Fall is a co-opted member of the Finance & Investment Committee Note 2: Ian Starkey a co-opted member of the Audit & Risk Committee. Note 3: Francis Runacres is an observer from the Arts Council, England

17

Trustees’ Report

Highlights of Board Committee Reports

The Trustee Board meet regularly throughout the year. Minutes of Trustees meetings are published on our website once approved by the Board.

The financial performance of the organisation is reviewed at each Trustee meeting through summary management information that reports key aspects of financial performance and key non-financial organisational performance indicators. Updates on major projects are also provided at each meeting.

The work of committees of the Board is reviewed by Trustees through either circulation of the minutes or a verbal report from each committee.

The scheme for delegating authority reserves a number of matters for decision by Trustees. These matters are considered at Board meetings and include approval of expenditure above a certain limit. Variations to budgeted approved expenditure of more than the lower of 10% or £750,000 on any project are also referred to the Board for further approval. The threshold for approval of projects and contracts at the Board is £750,000 excluding VAT, although projects not agreed in budgets, will still be brought to Trustees’ attention.

During the year, the Board monitored and considered the progress of the organisation through strategic updates on the palaces, experiences, culture and money. The Board also reviewed HRP’s governance arrangements and approved various amendments.

Audit & Risk Committee agendas are similarly structured, considering matters of risk management, the external audit and internal audit plans and progress. Progress with all major projects is reported at each meeting using red/amber/green indicators to highlight the status of each project. The committee met three times in the year to March 2022.

The Finance and Investment Committee met four times in the year. The committee reviewed HRP’s current and projected cash balances, the allocation between investment asset types and term deposits, the spread of counterparties, the rates of return and the retention levels for instant access. As a result of the financial pressures bought about by the COVID-19 pandemic, the committee also discussed how best to deploy existing reserves, and how to utilise borrowing facilities including the government’s Culture Recovery Fund.

The Nominations and Governance committee provides guidance on Trustee appointment requirements, and other governance arrangements. This year the committee met three times to consider Trustee vacancies, and the recruitment of a new Chair.

The newly renamed People Committee met once in the year with Sarah Jenkins assuming the role of Chair, replacing Lord Houghton. The Committee approved the Terms of Reference for the People Committee for review by the Board of Trustees. They also approved the Terms of Reference for the “Review of how the culture of HRP can fully reflect our commitment to equality and diversity” (Equality and Inclusivity Review). Due to the terms of the CRF loan no bonuses were approved for the Executive Board in 2021/22 (£0 in 2020/21).

18

Trustees’ Report

Risk Management Statement

The Trustees of HRP have considered the major risks to which HRP is exposed and satisfied themselves that systems or procedures are established to manage those risks.

The responsibility for the management and control of HRP rests with the Board of Trustees and therefore they are involved in the key aspects of risk management, particularly in setting the parameters of the process and reviewing and considering the results. The Trustees do not undertake each aspect of the process themselves; they delegate elements of the risk management process to staff and professional advisers. The Trustees review and consider the key aspects of the process and results. The level of involvement is such that the Trustees can make this risk management statement with reasonable confidence.

The Audit & Risk Committee (ARC) is a sub-committee of the Board. The purpose of the Committee is to support the Board and the Chief Executive Officer (CEO)/ Accounting Officer by reviewing the comprehensiveness and reliability of assurances on governance, risk management, control, and the integrity of the financial statements and annual report.

The ARC is responsible for reviewing management’s mechanisms for the assessment and management of risk, the planned activity of external and internal audit and the results of their work, the adequacy of management’s responses to issues identified by audit activity and the adequacy of assurances relating to corporate governance. In line with best practice, the Committee publishes an annual report on its work for the Board.

Strategic leadership of the risk management process comes from the Executive Board, and the Trustees and CEO/ Accounting Officer oversee the process. The Audit & Risk Committee reports annually to the Board on the effectiveness of the internal control system established to ensure that the aims, objectives and key performance targets of HRP are achieved in the most economic and effective manner. Directors, managers and staff are responsible for identifying, assessing and managing the corporate and operational risks in their areas. The Audit & Risk Department is responsible for providing advice and assurance on the adequacy and effectiveness of HRP’s risk management process.

HRP’s system of governance, risk and control (GRC) is based on the three lines of defence model as per HM Treasury and Institute of Internal Auditor’s guidance. There is an escalation process to ensure key and emerging risks are reviewed at the correct level as they arise.

19

Trustees’ Report

to the Trustees. The Executive Board also assesses future risks and opportunities annually as part of the Operating Plan process.

Cookie Compliance: Following an audit, a cookie tool was rolled out (OneTrust); a Cookies Policy included within the Privacy Policy, and one website was removed from service due to non-compliance. All issued actions completed.

Information Commissioner’s Office (ICO) Accountability Framework: Over 10 key areas, HRP’s ability to meet the ICO’s expectations were assessed; 60% of the time, HRP meet, or partially meet expectations. With a new Data Protection Officer (DPO) in place, and work underway, a review of this will take place in 2022-3.

Security Audit Framework: An internal audit framework has been developed and tested; it audits the services provided by HRP’s Security staff including training, exercising, technical equipment, and procedures. This tool will be rolled out in 2022-23.

Cyber Essentials: A report was produced for the Executive Board and the ARC in Summer 2021 outlining compliance against Cyber Essentials. We are currently working towards Cyber Essentials certification. Ongoing assurance reporting in this field will include updates on our compliance against this standard.

Lessons Learned from the Pandemic: As the pandemic continued, this report was not completed. The scope of this audit has been defined as identifying key learnings and to inform a business continuity strategy which will make HRP more resilient and inform colleagues of the future on how to manage major impacts on the organisation. This report will be completed in 2022-23.

Website Accessibility: The Government Digital Service reviewed the HRP website for compliance against the Web Content Accessibility Guidelines (WCAG) 2.1AA Standard, and we were found to be partially compliant. 10 actions were issued; these were completed within the timeframe allocated. As the new website is built, accessibility will be part of the design.

20

Trustees’ Report

(concerns@hrp.org.uk) goes direct to the Whistleblowing Officer mailboxes. No alerts were received in the current year;

The combined approaches provide assurance that the operational levels of HRP are run following sound GRC methods and where issues are identified, they are acted upon. The system of internal control is designed to manage risk to an appropriate level rather than to eliminate all risk of failure to achieve HRP’s cause and strategy.

HRP’s risk appetite is a balance between managing risk, enhancing innovation and creativity, whilst carefully weighing up risks with all rewards and our charitable objectives. HRP considers risk and its management in a structured way to ensure that the identification, assessment and management of risk is linked to the achievement of HRP’s objectives and that all areas of risk are covered - for example, financial, governance, operational and reputational. The corporate risk register at HRP focuses on high impact and/ or likelihood risks aligned with our strategy. Major risks are those risks that have a major impact and a probable or highly probable likelihood of occurring and would have a major impact across any area of HRP.

Following on from last year, the operational and strategic risk registers operated as live documents for all Executive and Senior Leaders. The table below shows the type and volume and the review date of the register. Actions required to mitigate the risk were also monitored via this tool, ensuring timely completion.

The Board has gained assurance that the data quality of the information it receives is sound through a mix of audit work on data held and challenges of the data presented.

July 2021 December 2021 April 2022
4 Operational
3 Strategic		 1 Operational
1 Strategic		 7 Operational
0 Strategic
Red
19 Operational
2 Strategic		 22 Operational
1 Strategic		 13 Operational
3 Strategic
Amber
15 Operational
0 Strategic		 21 Operational
3 Strategic		 9 Operational
2 Strategic
Green
Closed
Risks		 22 6 9

An amalgamation of the most significant risks rated as red at Year End are:-

21

Trustees’ Report

Area Risk Mitigation
Phishing A risk of scammers being able to gain
access to HRP information resulting in
the erroneous transfer of data, etc.		 A Security Steering Group has
been established and is working
on recommendations for
minimum security standards to
be met.
Regular communications and
training to staff, reminding them
to remain vigilant, and of the key
indicators of phishing emails.
Maintenance of multiple layers of
filtering to prevent messages
accessing HRP systems.
Website
outage		 The risk that there is an outage or fault
on either the corporate website, or the
ticket selling site, resulting in HRP being
unable to sell tickets or memberships
online with no out-of-hours tech
support.		 An automated alert system is in
place, with a rota to update
banner notifications for
customers (if needed)
overnight/at weekends.
A project team is in place to
review and update the ticketing
system.
Unpredicted
security
incidents
Arisk that an incident either on or off
HRP property could lead to a massive
impact on HRP operations and
finances; horizon scanning of
potential new legislation on the ‘Duty
to Protect’, following the bombing at
the Manchester Arena, has prompted
a review of the ways in which HRP
deal with evacuation and
invacuations, with consultation from
the Crown Fire Inspectorate, Counter
Terrorism Police, and other subject
matter experts across Fire, Health &
Safety, and Security in the
management of such events, should
there be a change in the duties placed
on HRP		 Plans are in place, and threat
levels are monitored (and have
been reduced in this year) but
police and government reports
suggest ongoing caution is
required.
Audits have been introduced to
provide assurance on
operational response and
competence.
A focus on completion of key
security training has been in
place for 21/22, and continues.

General Data Protection Regulations (GDPR) effective since May 2018 set out clear requirements for management and control of personal data. Over the last financial year, HRP has taken effective measures to demonstrate our ongoing compliance with data protection legislation. In 2021/22, there were no personal data incidents recorded.

Carole Souter CBE Chair of the Board of Trustees

John Barnes Chief Executive and Accounting Officer

5 December 2022

22

Statement of Res onsibilities p

Our Environment

In 2021/22 as we emerged from the pandemic, we took the opportunity to update our sustainability plan. Historic Royal Palaces is committed to working towards net zero greenhouse emissions by 2050, but our changed financial circumstances and rising energy costs require us to be increasingly focused in our approach.

In September 2021 Trustees approved our revised plan, which is in 3 parts. Firstly, we will measure our carbon footprint across all emission categories and establish science- based reduction targets; secondly, we will reduce our emissions through wide-ranging decarbonisation activity; and thirdly we will offset our residual emissions. Our focus for the first 3 years is on parts 1 and 2 of our plan, and within that we are prioritising the measurement and reduction of scope 1 and 2 emissions.

In 2021/22 we made good progress in improving the quality of our data and the insight derived from it, focusing in the first instance on energy and water use. This will better enable us to manage demand and also help us identify where we might best invest to reduce use.

We also focused on reducing energy and water use. The majority of our Palaces and office spaces remained closed until at least June 2021 which meant overall use was significantly lower in the first quarter of the year than in pre-pandemic times. Thereafter we concentrated on reducing demand and on increasing efficiency, achieved through actions such as switching things off, rationalising use of space across our sites, and by replacing boilers which were at the end of their life cycles with more efficient models. It was also a warm winter which kept usage lower.

Overall, our energy use, and thereby scope 1 and 2 emissions, remained significantly below pre-pandemic levels:

Greenhouse 2021/22 2020/21 2019 2018 2017
GasEmissions
(*)
Emissions Scope 1
(tonnes CO2e)		 1,519 1,075 2,367 1,981 1,716
Emissions
Scope 2
(tonnes CO2e)		 1,010 839 1,631 1,932 2,552
Sub total GHG
emissions (tonnes
CO2e)		 2,529 1,914 3,998 3,913 4,268
Emissions Scope 3
(tonnes CO2e)		 36 79 608 755 721
Total GHG emissions
(tonnesCO2e)		 2,565 1,993 4,606 4,668 4,989

23

Statement of Res onsibilities p

Scope 3 emissions are not yet covered in full. Included in the calculation at present are business travel and water supply.

Our intensity measure for SECR (streamlined energy and carbon reporting) is ‘per visitor’. Based on 1,486,340 physical visitors to our sites in 2021/22, we emitted 1.73kg of CO2e per visitor.

Whistleblowing Disclosure

Whistleblowing policy

HRP is committed to maintaining high ethical standards and takes all concerns seriously. We have a policy in place to support HRP’s values/ethics and ensure compliance with the Public Interest Disclosure Act 1998 (PIDA) and subsequent amendments under the Enterprise and Regulatory Reform Bill 2013 and the Bribery Act 2010.

There are a number of different routes suggested for reporting concerns in addition to the direct management and HR routes:

Suppliers’ payment policy

HRP observes the principles of the CBI Better Payment Practice code. The code requires bills to be paid in accordance with contractual obligations, or where no such conditions exist, within 30 days of the receipt of the goods or services, or the presentation of a valid invoice, whichever is the latter. It is the policy of HRP to pay all invoices not in dispute in accordance with contractual terms. Payments are made fortnightly and include all invoices received in Finance and due for payment by the time of the next payment run.

During 2021/22, 69% of supplier invoices were paid within 30 days of date of invoice (55% in 2020/21). This payment performance is not adjusted for invoices delayed for payment due to a query with the supplier. These figures reflect the challenging trading environment during the pandemic.

Related parties

Details of material dealings with any related parties are set out in Note 25.

24

Statement of Res onsibilities p

Fundraising Regulator

25

Statement of Res onsibilities p

Statement of Trustees’ and Accounting Officer’s responsibilities

Law applicable to incorporated charities in England and Wales requires the Trustees of Historic Royal Palaces to prepare financial statements for each financial year. The Secretary of State (with the consent of HM Treasury) has also directed the Trustees to prepare a statement of accounts in the form, and on the basis, set out in the Accounts Direction. The Secretary of State also requires the Accounting Officer to prepare for each financial year a statement of accounts.

The accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs, the net expenditure and cash flows of the Historic Royal Palaces and its group during the year. In preparing those financial statements, the Trustees and Accounting Officer are required to comply with the requirements of FRS 102: UK GAAP and the Accounting and Reporting by Charities: Statement of Recommended Practice (FRS 102). In addition, they shall also have regard to the Government Financial Reporting Manual. In particular to:

The Trustees and Accounting Officer have taken all the steps that we ought to have taken to make ourselves aware of any relevant audit information and to establish that Historic Royal Palaces’ auditors are aware of that information. As far as we are aware there is no relevant audit information of which the auditors are unaware.

The Trustees are responsible for ensuring that proper accounting records are maintained which disclose with reasonable accuracy at any time the financial position of Historic Royal Palaces and its group and which enable them to ensure that the financial statements comply with the applicable law. They also have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of Historic Royal Palaces and its group and to prevent and detect fraud and other non-compliance with laws and regulations.

The Principal Accounting Officer for the Department for Digital, Culture, Media and Sport has designated the Chief Executive as the Accounting Officer for Historic Royal Palaces and its group. His responsibilities as Accounting Officer, including his responsibility for the propriety and regularity of the public finances for which he is answerable and for the keeping of proper records and for the safeguarding of the Historic Royal Palaces’ and its group’s assets, are set out in Managing Public Money published by HM Treasury.

Carole Souter CBE John Barnes Chair of the Board of Trustees Chief Executive and Accounting Officer 5 December 2022

26

Independent Auditor’s Report to the Trustees of Historic Royal Palaces and the Houses of Parliament

Opinion on financial statements

I have audited the financial statements of Historic Royal Palaces and its group for the year ended 31 March 2022.

The financial statements comprise the:

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and United Kingdom accounting standards including Financial Reporting Standards (FRS) 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In my opinion, the financial statements:

Opinion on regularity

In my opinion, in all material respects, the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

Basis for opinions

I conducted my audit in accordance with International Standards on Auditing (UK) (ISAs UK), applicable law and Practice Note 10 Audit of Financial Statements and Regularity of Public Sector Entities in the United Kingdom. My responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of my report.

Those standards require me and my staff to comply with the Financial Reporting Council’s Revised Ethical Standard 2019. I have also elected to apply the ethical standards relevant to listed entities. I am independent of Historic Royal Palaces and its group in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these requirements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a

27

Independent Auditor’s Report to the Trustees of Historic Royal Palaces and the Houses of Parliament

basis for my opinion.

Conclusions relating to going concern

In auditing the financial statements, I have concluded that Historic Royal Palaces’ and its group’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on Historic Royal Palaces’ and its group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

My responsibilities and the responsibilities of the Trustees and Accounting Officer with respect to going concern are described in the relevant sections of this report.

Other Information

The other information comprises information included in the Trustees’ Report but does not include the financial statements nor my auditor’s report. The Trustees and Accounting Officer are responsible for the other information.

My opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in my report, I do not express any form of assurance conclusion thereon.

In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit or otherwise appears to be materially misstated.

If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact.

I have nothing to report in this regard.

Opinion on other matters

In my opinion, based on the work undertaken in the course of the audit, the information given in the Trustees’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements and is in accordance with the applicable legal requirements.

Matters on which I report by exception

In the light of the knowledge and understanding of Historic Royal Palaces and its group and its environment obtained in the course of the audit, I have not identified material misstatements in the Trustees’ Report.

28

Independent Auditor’s Report to the Trustees of Historic Royal Palaces and the Houses of Parliament

I have nothing to report in respect of the following matters which I report to you if, in my opinion:

Responsibilities of the Trustees and Accounting Officer for the financial statements

As explained more fully in the Statement of Trustees’ and Accounting Officer’s Responsibilities, the Trustees and the Accounting Officer are responsible for:

Auditor’s responsibilities for the audit of the financial statements

My responsibility is to audit and express an opinion on the financial statements.

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was considered capable of detecting non-compliance with laws and regulations including fraud

29

Independent Auditor’s Report to the Trustees of Historic Royal Palaces and the Houses of Parliament

I design procedures in line with my responsibilities, outlined above, to detect material misstatements in respect of non-compliance with laws and regulations, including fraud. The extent to which my procedures are capable of detecting non-compliance with laws and regulations, including fraud is detailed below.

Identifying and assessing potential risks related to non-compliance with laws and regulations, including fraud

In identifying and assessing risks of material misstatement in respect of non-compliance with laws and regulations, including fraud, we considered the following:

As a result of these procedures, I considered the opportunities and incentives that may exist Historic Royal Palaces and its group for fraud and identified the greatest potential for fraud in the following areas: revenue recognition, posting of unusual journals, complex transactions, bias in management estimates and the Coronavirus Job Retention Scheme. In common with all audits under ISAs (UK), I am also required to perform specific procedures to respond to the risk of management override of controls.

I also obtained an understanding of Historic Royal Palace’s and its group’s framework of authority as well as other legal and regulatory frameworks in which it operates, focusing on those laws and regulations that had a direct effect on material amounts and disclosures in the financial statements or that had a fundamental effect on the operations of Historic Royal Palaces and its group. The key laws and regulations I considered in this context included the Royal Charter, The Charities Act 2011, Managing Public Money, employment law, pensions legislation, tax legislation and the Coronavirus Act 2020.

Audit response to identified risk

As a result of performing the above, the procedures I implemented to respond to identified risks included the following:

30

Independent Auditor’s Report to the Trustees of Historic Royal Palaces and the Houses of Parliament

I also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists and significant component audit teams and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

A further description of my responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of my report.

Other auditor’s responsibilities

I am required to obtain evidence sufficient to give reasonable assurance that the income and expenditure reported in the financial statements have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them.

I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

Gareth Davies Comptroller and Auditor General National Audit Office 157-197 Buckingham Palace Road Victoria London SW1W 9SP

Date 12 December 2022

31

Consolidated Statement of Financial Activities for the year ended 31 March 2022

Note Unrestricted Restricted Total Total Total
funds funds 2022 2021
£000 £000 £000 £000
INCOME
Donations and legacies:
Grants 3 104 7,890 7,994 6,339
CJRSgrant 4 - 2,377 2,377 14,220
Donations 796 143 939 509
Gifts in Kind - 83 83 4
Income from other
trading activities		 900 10,493 11,393 21,072
Retail income 5,908 - 5,908 1,613
Functions and events 3,382 - 3,382 281
Licenses, rent
Recharges
&		 5 4,932 - 4,932 2,130
Sponsorship 384 - 384 260
Total 14,606 - 14,606 4,284
Investments 224 - 224 330
Income from charitable activities:
Admissions 6 24,302 - 24,302 4,065
Membership 3,244 - 3,244 2,865
Concessions 676 - 676 79
Total 28,222 - 28,222 7,009
Total income 7 43,952 10,493 54,445 32,695
EXPENDITURE
Costs of raisingfunds:
Fundraising 302 64 366 462
Retail activities 5,425 265 5,690 5,301
Investment
management costs		 23 - 23 51
Other commercial
activities		 2,305 67 2,372 1,649
8 8,055 396 8,451 7,463
Expenditure on charitable activities:
Palaces 12,435 7,586 20,021 16,638
Experiences:
Public Access 16,654 1,144 17,798 17,692
Interpretation
learning
and		 8,654 1,564 10,218 8,507
Money -
Growth
Organisational		 3,703 83 3,786 2,099
Culture 971 34 1,005 1,493
8 42,417 10,411 52,828 46,429
Other
Defined Pension scheme net
interest cost		 12 18 - 18 12
Losses (gains)
curtailments
on		 12 - - - (352)

32

Consolidated Statement of Financial Activities

for the year ended 31 March 2022


Total Expenditure
8
50,490		 10,807 61,297 53,552
Net (losses)/gains on
investments		 15 (138) - (138) 1,393
Net Income /
(Expenditure)		 (6,676) (314) (6,990) (19,464)
Actuarial (loss) / gain
onpensionplan		 12 10,246 - 10,246 (503)
Net movement in funds 3,570 (314) 3,256 (19,967)
Fund balances brought
forward at 1 April		 7 33,450 7,417 40,867 60,834
Fund balances carried
forward at 31 March		 7 37,020 7,103 44,123 40,867

Note: The amounts shown above derive from continuing activities. There were no recognised gains or losses other than those disclosed above. The notes on pages 37 to 72 form an integral part of these accounts .

33

Consolidated and Charity Balance Sheet for the ear ended 31 March 2022 y

Fixed assets: Note Group Charity Group Charity
2022 2022 2021 2021
£000 £000 £000 £000
Intangible assets 256 256 463 463
Tangible assets 13 23,489 23,489 23,917 23,917
Heritage assets 14 9,601 9,601 9,173 9,173
Investments 15 4,795 4,795 8,426 8,426
38,141 38,141 41,979 41,979
Current assets:
Stocks -goods for resale 1,521 - 2,257 -
Debtors 16 7,243 10,927 2,724 4,122
Short-term cash deposits 27,000 27,000 20,000 20,000
Cash at bank and in-hand 17,948 13,169 24,012 23,668
53,712 51,096 48,993 47,790
Creditors:
Amounts fallingdue within oneyear 17 15,784 13,324 8,596 7,501
Net current assets 37,928 37,772 40,397 40,289
Total assets less current
Liabilities excluding Pension
Plan asset/liability		 76,069 75,913 82,376 82,268
Creditors: Amounts falling due after
more than one year		 18 40,864 40,864 40,193 40,193
Provision for liabilities and charges 19 519 418 487 434
Net assets excl Pension Plan
asset/liability		 34,686 34,631 41,696 41,641
Pension Plan asset/(liability) 12 9,437 9,437 (829) (829)
Net assets including Pension
Plan liability		 44,123 44,068 40,867 40,812
Funds:
Unrestricted funds 37,020 36,965 33,450 33,395
Restricted funds 7,103 7,103 7,417 7,417
Total funds 7 44,123 44,068 40,867 40,812

These financial statements were approved by the Trustees and the Accounting Officer on 5 December 2022 and were signed on their behalf by

Carole Souter CBE Chair of the Board of Trustees 5 December 2022

John Barnes Chief Executive and Accounting Officer

The notes on pages 37 to 72 form an integral part of these accounts.

34

Consolidated Cash Flow Statement for the ear ended 31 March 2022 y

Cash flows from operating activities Note 2022 2021
£000 £000
Net cash outflow from operating activities_(Note A below)_ (715) (28,308)
Cash flows from investing activities:
Purchase of tangible assets 13 (1,932) (2,786)
Purchase of heritage assets 14 (42) -
Redemption of investments 15 3,413 6,502
Interest received 224 330
Cash flows from financing activities:
Net (purchase)/sale of short-term deposits (7,000) 5,006
Cash inflows from new borrowing - 40,050
Interest paid on overdraft (12) (24)
Increase/(Decrease) in cash **(6,064) ** **20,770 **
Note A: Reconciliation of net incoming/outgoing resources to net cash inflow
from operating activities:
Net incoming /(outgoing) resources from charitable and
tradingactivities		 (6,990) (19,464)
Net (Gains)/Losses on Investments 15 138 (1,393)
Interest receivable (224) (330)
Interest paid 12 24
Pension scheme: non-cash movements 12 (20) (360)
Donated heritage assets 14 (83) -
Depreciation & amortisation 13 2,211 2,074
(Profit)/Loss on disposal of fixed assets 13 53 -
Other decrease in fixed asset investments 15 79 83
(Increase)/Decrease in stocks 2 736 132
(Increase)/Decrease in debtors 16 (4,519) 2,080
Increase/(Decrease) in creditors: current liabilities 17 7,188 (10,763)
Increase/(Decrease) in longterm creditors 18 671 8
Increase/(Decrease) in provisions for liabilities & charges 19 32 (440)
Other non-cash movements 1 41
Net cash outflow from operating activities (715) (28,308)

35

Consolidated Cash Flow Statement for the ear ended 31 March 2022 y

Analysis of cash and cash equivalents:

Analysis of cash and cash equivalents:
2022 2021 Change in
£000 £000
year
£000
Cash at bank and in hand 17,948 24,012 (6,064)

Analysis of changes in net debt:

Cash and cash equivalents As at 1 Cash flows Other non- As at 31
April 2021 £000 cash changes March 2022

£000
£000		 £000
Cash 24,012 (6,064) - 17,948
24,012 (6,064) - 17,948
Borrowing
Debt due within one year - - - -
Debt due after one year (40,050) - (809) (40,859)
(40,050) - (809) (40,859)

The notes on pages 37 to 72 form an integral part of these accounts.

36

Notes to the Consolidated Accounts for the year ended 31 March 2022

1 Accounting Policies

The following accounting policies are applied consistently in dealing with items which are considered material in relation to the financial statements of the Charity, Historic Royal Palaces (HRP), and its trading subsidiary, Historic Royal Palaces Enterprises Ltd (HRPE), together ‘the Group’.

a) Status of charity

HRP is a registered charity (No: 1068852) established by Royal Charter.

b) Basis of preparation

The financial statements are prepared in accordance with the Statement of Recommended Practice (SORP): Accounting and Reporting by Charities (effective 1 January 2019), applicable United Kingdom accounting standards (FRS 102) and the Charities Act 2011. The financial statements are prepared on a going concern basis under the historical cost convention (see also note 1 q). They are prepared in accordance with the Accounts Direction (a copy of which can be obtained from the Head of Audit, Risk and Assurance) issued by the Secretary of State in accordance with HRP’s Royal Charter.

HRP meets the definition of a public benefit entity under FRS 102.

c) Basis of consolidation

The Group accounts consolidate HRP and its subsidiary, HRPE Ltd, which has a co-terminus year-end. Consolidation is carried out on a line-by-line basis.

d) Funds

Incoming resources and resources expended are allocated to particular funds according to their purpose.

Unrestricted funds − the unrestricted funds include income from admissions, donations and other income received without restriction including retained profits of HRPE Ltd. Unrestricted funds are available for use at the discretion of the Trustees in furtherance of the general objectives of the charity. Trustees may earmark unrestricted funds for a particular project or use, without restricting or committing the funds legally. Such amounts are known as designated funds. Restricted funds - restricted funds include those receipts, which are subject to specific restrictions imposed by donors, including grants towards specific conservation and improvement projects undertaken at the palaces.

e) Incoming resources

37

Notes to the Consolidated Accounts for the year ended 31 March 2022

Group earns the right to consideration by its performance. Where income is received in advance of performance, its recognition is deferred and included in creditors. Where entitlement occurs before receipt, the income is accrued.

f) Resources expended

All expenditure is accounted for on an accruals basis and is classified under the principal categories of ‘Costs of raising funds’ and ‘Charitable activities’. The expenditure classifications comprise direct expenditure, including staff costs, attributable to the activity.

Support costs, which include functions such as Accounting, Payroll, Procurement, Information Systems and Governance Costs are allocated across the categories of costs of raising funds and expenditure on charitable activities. The basis of the cost allocation is explained in the Notes to the accounts.

g)

Tangible fixed assets

38

Notes to the Consolidated Accounts for the year ended 31 March 2022

Depreciation is provided to write off the cost of tangible fixed assets by equal instalments over their useful economic lives. The fixed asset policy was reviewed during the year resulting in setting new guidance of useful economic lives as follows:

New buildings 20 -50years
Buildingrefurbishments 10 - 20years
Fixtures and fittings 3- 10years
Plant and machinery 5- 20years
Furniture and equipment 3- 10years
Exhibitions 3- 10years
Vehicles 3-5 years
Computer hardware 3-5 years

Decision on appropriate useful economic life will be reviewed by management at the point of capitalisation to ensure that the depreciation charge for each asset is appropriately reflected in the accounts. The new guidance resulted in no material impact in this financial year.

h) Heritage Assets

SORP 2019 defines heritage assets as assets of historical and artistic importance that are held to advance preservation, conservation and the educational objectives of the Charity. Those heritage assets acquired since September 1989 are reported in the balance sheet at cost or, in the case of donated assets, at an approximate valuation estimated by HRP’s curators to be an appropriate market value at the time of acquisition. Such assets are not depreciated as they are deemed to have indeterminate lives and a high residual value. Regular impairment reviews of heritage assets are undertaken.

Those items that were purchased by or gifted to the Charity’s predecessors prior to September 1989 have not been capitalised. These comprise the majority of the collection but Trustees do not consider that relevant cost or valuation information can be obtained at a cost commensurate with the benefit to readers of the financial statements. This is because of the diverse nature of the assets held, the volume, and the lack of comparable market values.

Further information about HRP’s collection of heritage assets is set out in the Notes to the Accounts.

i)Investments, Short-term cash deposits and cash at hand & in bank Investment income comprises interest receivable from cash at bank and liquid resources as well as income from investments held in a fixed income bond portfolio and multi-assets funds. All investments are held to provide investment returns. Dividend and interest income are recognised on a receivable basis.

Fixed income investments are short-dated high credit rated bonds with fixed and determinable coupons. The bonds are retained with the intention and ability to be held to maturity. The bond portfolio is measured at fair value upon purchase and amortised cost using the effective interest method. The carrying value is reduced if there is any impairment.

39

Notes to the Consolidated Accounts

for the year ended 31 March 2022

The investments in multi-asset funds are measured at market value each year. They yield dividends income at set times in the year.

Funds placed on money market deposits are short-term cash deposits of up to 18 months and are defined as liquid resources. All liquid resources are held in commercial banks with appropriate credit ratings, in line with HRP’s investment policy at the time of contracting.

Funds held in cash or in current/premium accounts are defined as cash at bank and in hand. They represent the deposits and cash used to finance Historic Royal Palaces on a day-to-day basis.

j) Investment in subsidiary

In the Charity’s accounts, the investment in its subsidiary undertaking, HRPE Ltd, is stated at cost.

Historic Royal Palaces Inc. is a US-based private non-operating foundation. This is not consolidated into the Group accounts, as it is not controlled by the Charity.

k) Current assets & liabilities

Stock consists of purchased goods for resale. Stock is stated at the lower of cost and net realisable value. Cost of sales is determined on a weighted average cost basis and includes all costs of purchase such as associated transportation charges. Debtors are measured at their recoverable amounts and creditors at their settlement amounts when these can be measured or estimated reliably.

l) Financial instruments

HRP primarily carries financial instruments in the form of a concessionary loan from the CRF fund initially recognised at the amount received, with the carrying amount adjusted in subsequent years to reflect repayments and any accrued interest and adjusted if necessary for any impairment.

HRP also has basic financial instruments in the form of cash, debtors and creditors at fair value, other than where a provision for specific doubtful debts has been made. Since almost all of these are expected to be realised within one year, there is no material difference between fair value, amortised cost and historical cost. Fixed income investments are measured at amortised cost.

m) Leases

The Group has no finance leases. Costs relating to operating leases are charged in the Statement of Financial Activities over the life of the lease. Income from operating leases is recognised over the life of the lease.

n) Pensions

The Charity operates a funded pension scheme providing benefits based on final pensionable pay. The assets of the scheme are held separately from those of HRP. From October 2002, the scheme was closed to new members and from April 2019, the scheme was closed to future accruals. The Charity has implemented the full reporting requirements of FRS 102: Employee Benefits in relation to the defined benefit scheme.

The present value of the HRP’s liability for its obligations and the fair value of the scheme assets are calculated by an independent actuary. The net asset or liability, is recognised in the Balance Sheet and is treated as an unrestricted fund.

Changes in the net asset or liability during the period that result from employee

40

Notes to the Consolidated Accounts

for the year ended 31 March 2022

service or interest on the net liability are recognised in the appropriate heading in the Consolidated Statement of Financial Activities in that period. Changes as a result of actuarial gains or losses are recognised in ‘Other recognised gains or losses’.

A group personal pension scheme based on defined contributions was established for new members of established staff and staff on contracts exceeding 1 year with effect from October 2002. An additional group personal pension scheme based on defined contributions was set up for casual staff and staff on contracts of less

than 1 year with effect from October 2013. The cost to HRP of both defined contribution schemes is the contributions paid during the year.

o) Taxation

As a charity, the Charity is exempt from corporation tax under section 505 ICTA 1988. HRPE normally distributes its profits before tax by Gift Aid to the Charity to leave reserves at or close to nil. The amount gift aided in 2021/22 was £2,554,580 (£nil in 2020/21 due to the impact of the pandemic and uncertainty in HRPE Ltd’s future trading).

Admissions to the Palaces administered by HRP are exempt from VAT under Schedule 9 of the VAT Act 1994. Due to this exemption, approximately 64.4% of VAT incurred by HRP is irrecoverable in 2021/22 (59.6% in 2020/21).

p) Key judgements and estimates

The Group makes estimates and assumptions concerning the future which will impact the accounting estimates. The significant judgements and estimates made in preparing these accounts are disclosed throughout the document, and briefly outlined below:

41

Notes to the Consolidated Accounts for the year ended 31 March 2022

q) Going Concern

The Trustees have considered all factors and risks that may influence the company within the next 12 months, most importantly the recovery from Covid19 pandemic, the new risk of the war in Ukraine and the organisation’s resilience.

The factors considered are a combination of the economic outlook, the domestic context, the strength of income projections, mitigating actions against potential risks and the measures to improve liquidity.

Global outlook

According to the OECD March interim report on the global economic outlook, economic prospects were starting to return to normality in 2022-23 following the COVID-19 pandemic. However, the outbreak of the war in Ukraine in late February 2022 is placing more uncertainty on the economic impact of the conflict and the rate of recovery. Amid the uncertainty, the OECD estimates global economic growth could be 3.5%, so circa 1% point lower this year than was projected before the conflict.

Domestic & Sector Outlook

From the Office for Budget Responsibility March 2022 economic & fiscal outlook, the Russian invasion of Ukraine is likely to have major repercussions for the global economy.

Higher inflation is projected to erode real incomes and consumption, cutting domestic GDP growth. With inflation outpacing growth in nominal earnings and net taxes rising in April, real living standards are not expected to start recovering to their pre-pandemic level until 2024-25. Some mitigating actions from Government will help cushion the impact on household income in this financial year.

Tourism was hit particularly hard by the pandemic, as lockdowns restricted people to travelling around their homes and neighbourhoods rather than around the world. But there are strong signs that tourist numbers are starting to recover as limitations on movement are removed. The travel outlook for Europe as a whole remains positive in the first quarter of 2022

Organisation context

The 2022-23 operating budget has been set in line with the Culture Recovery Fund (CRF) requirement that we achieve a breakeven position in 2022-23. Income targets have been updated to reflect our latest visit number projections, with expenditure being limited to what we can afford once all essential expenditure has been allowed for.

We remain in a period of uncertainty, and the volatile operating context makes it difficult to forecast with accuracy. However, the strong visitor performances we have seen at the Palaces to date in 2022 gives us confidence that we will achieve our proposed objectives for 2022/23.

42

Notes to the Consolidated Accounts for the year ended 31 March 2022

Income projections rely on:

Total expenditure is based upon ensuring that all areas of essential expenditure are covered. Any excess monies are being prioritised for activities to generate income, whilst ensuring breakeven for the year is achieved.

Risks and further actions

The Trustees acknowledge that some risks remain (e.g. new variants of and lower efficacy of the vaccine) or are emerging (e.g. war in Ukraine).

However, the Trustees have already identified the following mitigations against those risks and have further levers to call upon if needed including

Additional cost savings include: continuing to hold headcount vacancies, reintroducing payroll saving initiatives, removing elective operating expenditure currently phased in the latter part of the year, using periods of closure or working from home to rein in site costs, including cleaning, heating, power etc, deferring project expenditure if visit performance falls behind budget, generally, reviewing and restricting operating expenditure by monitoring committed versus noncommitted expenditure throughout the year.

43

Notes to the Consolidated Accounts

for the year ended 31 March 2022

Summary

The Trustees take comfort in the overall economic outlook, recovery trends experienced so far in 2022 and the organisation’s exciting plans. The fact that the organisation’s model has been successful and has historically generated surpluses also support this opinion.

The Trustees recognise the emerging external risks associated with the war in Ukraine and it’s potential impact on tourism and visitor numbers but trust the entity’s ability to continue as a going concern is soundly based on the factors outlined above.

2. Historic Royal Palaces Enterprises Ltd

The Charity has one wholly owned trading subsidiary, Historic Royal Palaces Enterprises Limited (HRPE), with a paid-up share capital of £2. HRPE is incorporated in the UK (registration number 03418583). The principal activities of the company are retailing, functions, and other events held at the palaces managed by the Charity. A summary of its trading results and its net assets is shown below. Audited accounts are filed with the Registrar of Companies.

Profit and loss account 2022 2021
£000 £000
Turnover (other tradingactivities) 12,055 4,617
Cost of sales (costs of raisingfunds) (1,802) (473)
Grossprofit 10,253 4,144
Administrative expenses (7,698) (4,075)
Interest receivable 1 -
Profit on ordinary activities before taxation 2,556 69
Taxation (1) (14)
Totalprofit for the financialyear 2,555 55
Amount distributable under Gift Aid to HRP (2,555) -
Retained in subsidiary - 55
Balance Sheet as at 31March 2021 2022 2021
£000 £000
Stocks - goods for resale 1,521 2,257
Debtors 844 640
Cash 4,779 343
Current liabilities (7,089) (3,185)
Creditors due after more than oneyear - -
Net assets 55 55
Share capital and reserves 55 55

44

Notes to the Consolidated Accounts for the year ended 31 March 2022

3. Grant Income

Total grant income of £7,994k (2020/21: £6,339k) includes £6,422k (2020/21: £5,262k) funding from government bodies as follows:

Grantor Amount Purpose
DCMS – Public Bodies
Infrastructure Fund		 £3,151k Conservation projects at the
Palaces
English Heritage £2,148k Heritage Stimulus
Fund
Historic England £769k Heritage Stimulus Fund
Local Councils £315k Superbloom, Christmas at the
Tower
Memorials Grant Scheme £39k Diana Princess of Wales
statue, Kensington

4. Coronavirus Job Retention Scheme (CJRS) grant income

The CJRS grant was a temporary Scheme launched by Government to support organisations whose operations have been severely affected by Covid-19. CJRS income is recognised in income and accrued to match the period staff were furloughed.

It was vital that HRP took advantage of the CJRS scheme in 2020/21 and furloughed the majority of staff from the start. Required staff were brought out of furlough as soon as reopening the sites became a possibility. This continued in 2021/22, HRP claimed support from the CJRS grant every month from April 2021 to September 2021 inclusive, when the nationwide scheme ended. A total of £2,377k was claimed in the financial year (£14,220k in 20/21).

The number of furloughed staff varied month-on-month between 58%-86% (75%-90% in 20/21) depending on operational requirements. There was a noticeably significant decline in the amount of furlough being claimed as Covid restrictions eased and more and more of our staff returned to work on a higher proportion of, or their full hours from the summer period until the end of the CJRS in September 2021. On average throughout the April to September period, 499 (around 70%) of staff were on flexi- or full-furlough (847 in 20/21).

45

Notes to the Consolidated Accounts for the year ended 31 March 2022

5. Licence, rent & recharges income

Licence & rent income includes a range of activities which can be summarised as follows:

2022
£000		 2021
£000
Licences 2,612 757
Recoveryof Costs 1,852 855
Rents 356 352
Other Income 112 166
Total Licence & rent income 4,932 2,130

6. Admissions income

Admissions income includes visitor admissions, gift aid on admissions, car park, royalpasses, etc and can be broken down as follows:

2022
£000		 2021
£000
Tower of London 14,945 2,023
Hampton Court Palace 4,346 1,359
Kensington Palace 3,677 132
Hillsborough Castle 408 241
Otherpalaces 0 0
Education 321 3
Other admissions income 605 307
Total admissions income 24,302 4,065

46

Notes to the Consolidated Accounts for the year ended 31 March 2022

7. Total funds (Group basis)

Current Year
Total Funds:		 Funds as a
at 1 April
2021
£000


Incoming
resources
2021/22

£000		 Resources
expended
2021/22

£000		 Revaluatio
ns
2021/22

£000


Transfers
between
funds
2021/22

£000



Funds
as at31
March
2022

£000
Unrestrictedfunds
General (Free)reserves		 5,163
43,932
(50,490)
(138)
290
(1,243)
Designated funds -
-
-
-
-
-
Fixed assets 29,116
-
-
-
(290)		 28,826
Pensionplan (829) 20
-
10,246
-
9,437
Total **33,450 **
**43,952 **		 (50,490) 10,108
-
37,020
Restrictedfunds
Donated assets		 4,437
83
-
-
-
4,520
Hillsborough
Castle & Gardens		 553
1
(185)
-
-
369
Hampton CourtPalace
projects_incl. Field of the_
Cloth of Gold		 10
2
(10)
-
-
2
Tower of London projects
incl. TowerEntry		 262
1,453
(442)
-
-
1,273
Kensington Palace projects
incl. Orangery Learning
Centreand the Sunken
Garden statue		 1,150
124
(794)
-
-
480
Banqueting House
project		 -
240
-
-
-
240
AHRC-funded Research
projects		 374
(1)
(373)
-
-
-
Support for Heritage & re-
opening		 563
6,104
(6,565)
-
-
102
CJRSgrant -
2,377		 (2,377) -
-
-
Otherprojects 68
110
(61)		 -
-
117
Total 7,417 **10,493 ** (10,807) -
-
7,103
Total funds 40,867 **54,445 ** (61,297) 10,108
-
44,123
Prior Year Total Funds: Funds as
at 1 April
2020
£000


Incoming
resources
2020/21
£000

Resources
expended
2020/21

£000

Revalua-
tions
2020/21

£000		 Transfers
between
funds
2020/21
£000



Funds as
at 31
March
2021

£000

47

Notes to the Consolidated Accounts

for the year ended 31 March 2022


Unrestricted funds
General (Free)
reserves
27,405
12,196
(35,163)
1,393
(668)
5,163
Designated Funds - -
-
-
-
-
Fixed assets 28,448 -
-
-
668
29,116
Pensionplan (686) 20
340
(503)		 -
(829)
Total 55,167 12,216
(34,823)		 890
-
**33,450 **
Restricted funds
Donated assets		 4,433 4 - - - 4,437
Hillsborough
Castle & Gardens		 537 215 (199)
-		 - 553
Hampton Court Palace
projects incl. Field of
the ClothofGold		 20 4 (14)
-		 - 10
Tower of London
projects incl. Tower
Entry		 195 98 (31)
-		 - 262
Kensington Palace projects
incl. Orangery Learning
Centre and the Sunken
Garden statue		 407 798 (55)
-		 - 1,150
AHRC-funded
Research projects		 7 985 (618)
-		 - 374
Support for Heritage & re-
opening		 - 4,154 (3,591) 563
CJRSgrant - 14,220 (14,220) - - -
Otherprojects 68 1 (1) - - 68
Total 5,667 20,479 (18,729) - - 7,417
Total funds 60,834 32,695 (53,552)
890		 - 40,867

8. Total expenditure (Group basis)

Total Allocation Total Total
direct of support 2022 2021
costs costs £000 £000
£000 £000

Costs of raising funds
Generating the money to make it possible:
Fundraising 325 41 366 462
Retail activities 4,782 908 5,690 5,301
Investment management costs 23 - 23 51
Other commercial activities 2,110 262 2,372 1,649
Total 7,240 1,211 8,451 7,463

Expenditure on charitable objectives:

48

Notes to the Consolidated Accounts

for the year ended 31 March 2022


Palaces
17,887		 2,134 20,021 16,638
Experiences:
Public Access 15,594 2,204 17,798 17,692
Interpretation and learning 9,081 1,137 10,218 8,507
Money – Organisational Growth 3,411 375 3,786 2,099
Culture 894 111 1,005 1,493
Total 46,867 5,961 52,828 46,429
Other:
Pension finance(income)/ costs 18 - 18 12
Pension losses/(gains) on
curtailments		 - - - (352)
18 - 18 (340)
Total 54,125 7,172 61,297 53,552
Resources expended include charges for: Total 2022
£000		 Total 2021
£000
Auditors’ remuneration:
The auditors did not provide any non-audit services
Audit
-
HRP
-
HRPE		 65
30		 53
25
Operating lease charges 1,044 1,096
Stock recognised as an expense 1,780 426
Impairment of stock (included in cost of sales) 20 47
Depreciation charged on fixed assets:
Tangible 2,004 1,867
Intangible 207 207
Corporation tax 1 14

49

Notes to the Consolidated Accounts

for the year ended 31 March 2022

9. Support costs (Group basis)

Costs of raising funds: Information Finance Pension Management Governance Total Total
Systems Department Department Costs Costs 2022 2021
£000 £000 £000 £000 £000 £000 £000
Fundraising 20 5 2 12 2 **41 ** 99
Retail activities 343 294 29 203 39 908 1,316
Other commercial activities 91 100 8 54 10 263 406
Charitable expenditure:
Palaces 570 1,115 49 336 64 2,134 3,524
Experiences: Public access 857 670 73 506 97 2,203 4,643
Interpretation and learning 441 348 38 260 50 1,137 1,857
Money– Organisation Growth 86 222 7 50 10 375 412
Culture 49 23 4 29 6 111 316
Total 2,457 2,777 210 **1,450 ** **278 ** **7,172 ** 12,573

The basis of apportionment for support costs is staff headcount (see note 11 Staff numbers and costs (Group & Charity ), except for the Finance Department which is based upon expenditure excluding payroll.

Governance Costs 2022 2021
(included in Support costs) (*) £000 £000
Internal and external audit 145 209
Trustee expenses and costs 4 -
Trustee and chairman recruitment costs 14 6
Production of annual report - -
Management costs 115 150
Total 278 365

(*) Trustees and chairman also attend subcommittees alongside Trustees and staff of HRP. The costs associated with those meetings are included in the support costs above

50

Notes to the Consolidated Accounts for the year ended 31 March 2022

Free Reserves

Due to the sudden and devastating impact of COVID-19, Trustees agreed at the end of 2019/20 to transfer all designated funds to free reserves to meet operating commitments over 2020/21. As uncertainties remain over the coming months, the same approach has been adopted for this financial year. Target levels of reserves will be reviewed by Trustees in 2022/23.

Designated funds

There was no movement on designated funds in year.

Transfers between funds

As set out in our Reserves policy in the Funds and Reserves section, a permanent designated fund is matched to fixed assets, as this cannot be quickly utilised to realise cash in the event of a cash requirement. Any excess above this is designated at Trustees’ discretion, and this year again are transferred to free reserves.

Donated assets funds

These refer to restricted heritage assets and donated items including work of art and artefacts (see note 14 for more details).

Analysis of net assets between funds

Fund balances of the Group and Charity at 31 March 2022 are represented by:

Unrestrict
ed
funds		 Restricted
funds		 2022 Unrestricted
funds		 Restricted
funds		 2021
£000 £000 £000 £000 £000 £000
Intangible
assets		 256 - 256 463 - 463
Tangible
assets		 23,489 - 23,489 23,917 - 23,917
Heritage
assets		 5,081 4,520 9,601 4,736 4,437 9,173
Investments 4,795 - 4,795 8,426 - 8,426
Net current
assets		 35,344 2,583 37,927 37,417 2,980 40,397
Creditors >
oneyear		 (40,863) - (40,863) (40,193) - (40,193)
Provisions (519) - (519) (487) - (487)
Pension Plan
Asset/
(Liability)		 9,437 - 9,437 (829) - (829)
Total net
assets		 37,020 7,103 44,123 33,450 7,417 40,867

51

Notes to the Consolidated Accounts for the year ended 31 March 2022

10. Remuneration of Trustees

None of the Trustees received any remuneration during the year in connection with services to the Charity or its subsidiary. Reimbursement of travel and subsistence expenses incurred by 2 Trustees (20/21: 1) whilst carrying out their responsibilities for the Charity totalled £1,150 (2020/21: £321) for the year ended 31 March 2022. Liability insurance for Trustees is included as part of HRP’s total insurance cost.

11. Staff numbers and costs (Charity only. HRPE Ltd has no employees)

a) Average staff numbers

2022 2021
FTE FTE
Fundraising 5.0 6.5
Retail activities 87.0 80.1
Other Commercial Activities 23.1 28.3
Palaces 144.6 192.4
Experiences:
Public Access		 217.5 292.5
Interpretation and Learning 112.0 126.0
Money – organisational
growth		 21.8 25.9
Culture 12.4 20.3
Support functions 55.3 67.4
Total 678.7 839.4

b) Staff costs

2022 2021
£000 £000
Wages and salaries 23,988 28,484
Loss of office 17 352
Severance & ex gratia
payments		 41 4,885
Social securitycosts 2,398 2,849
Pension costs 2,534 2,810
Total **28,978 ** 39,380
Agencystaff 135 22
Total 29,113 39,402

Employee numbers reduced significantly during the second half of 2020/21 following the restructuring programme and reduced seasonal employees, and headcount was maintained at the lower level reached in March 2021. This explains the 19% year-onyear reduction in average staff numbers.

Following on from last year’s COVID-19 related redundancy programmes the Loss of office, severance and ex gratia payments were minimal in this financial year. These expenses are recognised when incurred or when there is a legal or constructive obligation to make the payment.

52

Notes to the Consolidated Accounts for the year ended 31 March 2022

c) Pay bands

Excluding the Chief Executive, there were 28 staff during the year earning in excess of £60,000 (2020/21: 32). Six were in a defined benefit scheme closed to accruals since 1 April 2019 (2020/21: 4) where the employer contributions were nil (2020/21: nil), and 26 were in a defined contribution scheme (2020/21: 32) where the employer contributions were £214,627 (2020/21: £241,990).

The number of employees, excluding the Chief Executive, whose total remuneration and staff benefits (excluding pension contributions) was over £60k was as follows:

2022 2021
No. of Staff No. of Staff
£60,001 to £70,000 16 21
£70,001 to £80,000 5 3
£80,001 to £90,000 1 1
£90,001 to £100,000 - 5
£100,001 to £110,000 5 2
£110,001 to £120,000 1 -
£120,001 to £130,000 - -
£130,001 to £140,000 - -
£140,001 to £150,000 - -
Total 28 **32 **

The remuneration of the Chief Executive in 2021/22 was £144,329 (2020/21: £134,798) with pension contributions of £8,720 (2020/21: £8,145) and staff benefits of £923 (2020/21: £923).

Excluding the Chief Executive, the total remuneration to the Executive Board was £707,966 (2020/21: £782,282) with pension contributions of £56,885 (2020/21: £105,803) and staff benefits of £5,031 (2020/21: £5,725).

12. Retirement benefits (Group & Charity)

a) Historic Royal Palaces Pension Scheme

HRP operates a defined benefit scheme in the UK. The scheme is closed to new entrants and was closed to future accrual from 31 March 2019. This is a separate trustee administered fund holding the pension scheme assets to meet long-term pension liabilities.

The most recent full triennial actuarial valuation was carried out at 31 March 2021 and showed a deficit of £4,111k. The employer has agreed with the trustees of the scheme that it will aim to eliminate the deficit over a period of 7 years and 6 months from 1 April 2021 by the payment of contributions as follows:

53

Notes to the Consolidated Accounts for the year ended 31 March 2022

2025 to 31 December 2028.

The funding shortfall is expected to be eliminated by December 2028 through the return on existing assets and the new contributions.

In accordance with the actuarial valuation, the employer has agreed with the trustees that it will meet expenses of the scheme and levies to the Pension Protection Fund.

A qualified actuary, independent of the scheme’s sponsoring employer, updated to 31 March 2022 the annual accounting valuation required under Section 28 of FRS 102. The major assumptions used by the actuary are shown below.

The basis of apportionment for pension expense costs is payroll costs.

Present values of defined benefit obligation, fair value of assets and defined benefit asset/ (liability):

31/03/2022 31/03/2021 31/03/2020
£000 £000 £000
Fair value of plan
assets		 100,739 95,998 85,775
Present value of
defined benefit
obligation		 91,302 96,827 86,461
Surplus / (Deficit) in
plan		 9,437 (829) (686)
Defined benefit
asset/(liability)to
be recognised		 9,437 (829) (686)

A note on pension valuations

Two valuations are included in the notes to the accounts. They use different assumptions and are at different points in time.

Actuaries acting on behalf of HRP undertake a triennial valuation based on a set of prudent assumptions determining how much future funding the scheme may require. The last valuation was 31 March 2021 and showed a deficit of £4.1m.

Each year, the scheme is valued at fair value under accounting standard FRS102 using ‘best estimate’ assumptions. As at 31 March 2022, this year’s valuation produced a surplus of £9.4m (2020/21: -£0.8m). As the charity is entitled under the scheme rules to net refunds at least equivalent to the amount of the asset recognised, it is this figure that is shown in the accounts. This is in line with accounting standard IFRIC14.

Given the significant increase in gilt market-implied RPI price inflation over the past year and evidence from the Government Actuary’s Department (September 2021) and the Bank Of England (November 2021), the scheme actuary recommended introducing an inflation risk premium adjustment 0.2% p.a. in 2021/22 to reduce any potential market distortion. The impact of removing the inflation risk premium of 0.2% would be to increase the Defined Benefit Obligation at 31 March 2022 from £91,302k to £93,941k.

54

Notes to the Consolidated Accounts for the year ended 31 March 2022

Reconciliation of opening and closing balances of the defined benefit obligation:

Period Ending
31/03/2022		 Period Ending
31/03/2021
£000 £000
Defined benefit obligation at
start ofperiod		 96,827 86,461
Interest expense 2,058 1,995
Benefit payments
fromplan assets		 (2,260) (2,797)
Actuarial losses / (gains):
-
Changes in assumptions
-
Changes in experience		 (5,196)
(127)		 12,900
(1,380)
Losses
/
(gains)
on
curtailments		 - (352)
Defined benefit
obligation at end of
period		 91,302 96,827

Reconciliation of opening and closing balances of the fair value of plan assets:


assets:
Period Ending
31/03/2022		 Period Ending
31/03/2021
£000 £000
Fair value of scheme assets
at start ofperiod		 95,998 85,775
Interest income 2,040 1,983
Actuarialgains/(losses) 4,923 11,017
Contributions by the
employer		 38 32
Benefitspaid (2,260) (2,797)
Expenses - (12)
Fair value of plain
assets at end ofperiod		 100,739 95,998

The actual return on the plan assets over the period ended 31 March 2022 was a gain of £6,963k (£13,000k gain in 2020/21).

55

Notes to the Consolidated Accounts for the year ended 31 March 2022

Defined benefit cost recognised in Statement of Financial Activities (SOFA):

(SOFA):
Period Ending
31/03/2022		 Period Ending
31/03/2021
£000 £000
Expenses - 12
Net Interest cost 18 12
Losses / (gains) on
curtailments		 - (352)
Total expense recognised
in SOFA		 18 (328)

Defined benefit costs recognised in other comprehensive income:

Period Ending
31/03/2022		 Period Ending
31/03/2021
£’000 £’000
Return on plan assets
(excluding amounts
included in net interest cost)
–gain/(loss)		 4,923 11,017
Experience gains and losses
arising on the plan liabilities
–gain/ (loss)		 127 1,380
Net effects of changes in the
demographic and financial
assumptions underlyingthe		 5,196 (12,900)
Total amount
recognised in other
comprehensive income
–gain/(loss)		 10,246 (503)
Assets 31/03/2022 31/03/2021 31/03/2020
£000 £000 £000
Equities 45,751 43,032 33,532
Debt instruments 38,848 39,743 38,495
Property 13,337 12,274 12,010
Cash 2,803 949 1,738
Total assets 100,739 **95,998 ** 85,775

None of the fair values of the assets shown above include any direct investments in the employer’s own financial instruments or any property occupied by, or other assets used by, the employer.

56

Notes to the Consolidated Accounts

for the year ended 31 March 2022

Assumptions 31/03/2022
%per annum		 31/03/2021
%per annum		 31/03/2020
%per annum
Discount Rate 2.75% 2.15% 2.35%
Inflation(RPI) 3.70% 3.50% 2.85%
Inflation(CPI) 3.10% 2.80% 2.05%
Salary growth 3.10% 2.80% 2.50%
Allowance for:
Revaluation of
deferred pensions of
CPI or5%p.a. if less		 3.10% 2.80% 2.05%
Revaluation of
deferred pensions of
CPI or 2.5% p.a. if
less		 2.50% 2.50% 2.05%
Pension in
payment increases
of RPI or 5% p.a. if
less		 3.45% 3.30% 2.80%
Pension in
payment increases
of RPI or 3% p.a. if
less		 2.60% 2.50% 2.25%
Pension in
payment increases
of RPI		 3.70% 3.50% 2.85%
Commutation of
pension for cash at
retirement		 70% of Post A
Day		 70% of Post A
Day		 70% of Post A
Day

The mortality assumptions adopted at 31 March 2022 imply the following life expectancies at age 60yrs:

31/03/2022 31/03/2021
Male retiring in 2022 26.7 25.8
Female retiring in 2022 28.7 28.0
Male retiring in 2042 28.3 27.4
Female
retiring
in
2042		 30.2 29.6

b) Defined Contribution Schemes

A group personal pension scheme based on defined contributions was set up for new members of established staff and staff on contracts exceeding one year with effect from October 2002. The cost for the year was £2,269,516 (2020/21: £3,629,051 included payroll element sacrificed to pension through the redundancy programme), with no outstanding contributions at the balance sheet date. The cost forms part of staff costs that as stated in note 1(f) are classed as direct expenditure attributable to the activity

57

Notes to the Consolidated Accounts for the year ended 31 March 2022

and are all from unrestricted funds.

An additional group personal pension scheme based on defined contributions was set up for casual staff and staff on contracts of less than 1 year with effect from October 2013, to meet pension auto-enrolment requirements. The cost for the year was £19,797 (2020/21: £12,460), with no outstanding contributions at the balance sheet date.

58

Notes to the Consolidated Accounts for the year ended 31 March 2022

13. Tangible fixed assets (Group & Charity)

Cost Buildings &
refurbishments
£000		 Fixtures &
fittings
£000		 Furniture,
equipment &
exhibitions
£000		 Computers
£000		 Plant,
machinery
& vehicles
£000		 Assets in course
of construction
£000		 Total
£000
At 1 April 2021 27,269 6,040 2,915 959 6,186 5,231 48,600
Additions - 340 134 166 - 1,292 1,932
Disposals - (171) (94) (243) (421) - (929)
Transfers to
Heritage assets		 - - - - - (303) (303)
Transfers within
Tangible fixed
assets		 - 43 614 - - (657) -
At 31 March
2022		 27,269 6,252 3,569 882 5,765 5,563 49,300
Accumulated
depreciation
At 1 April
2021		 11,704 4,469 2,609 861 5,040 - 24,683
Charge for theyear 1,124 359 145 77 299 - 2,004
Disposals - (171) (94) (243) (368) - (876)
At 31 March
2022		 12,828 4,657 2,660 695 4,971 - 25,811
Net book value
At 31 March 14,441 1,595 909 187 794 5,563 23,489

59

Notes to the Consolidated Accounts

for the year ended 31 March 2022


2022
At 31 March 2021 15,565 1,571 306 98 1,146 5,231 23,917
The net book
value as at 31
March 2022
represents
fixed assets
used for:
Retail activities 570 130 - 25 14 0 739
Other commercial
activities		 - 4 2 2 2 0 10
Charitable
expenditure:
Palaces 11,402 1,202 859 130 712 5,563 19,868
Experiences
Public access 2,130 158 21 20 56 - 2,385
Interpretation
and learning		 339 101 27 7 10 - 484
Money– Grow
our impact		 - - - 2 - - 2
Culture - - - 1 - - 1
At 31 March
2022		 14,441 1,595 909 187 794 5,563 23,489

60

Notes to the Consolidated Accounts for the year ended 31 March 2022

14. Heritage assets (Group & Charity)

Cost and net
book value		 Artefacts
2022
£000		 _No. _ Artefacts
2021
£000
_No. _		 Artefacts
2020
£000		 Artefacts
2019
£000		 Artefacts
2018
£000
Balance as at 1
April		 9,173 456 9,156 452 8,561 8,155 8,010
Additions, at
cost		 42 0 17 4 488 290 159
Transfers from
assets in the
course of
construction		 303 1 - - 12 1 -
Disposals - - - - - (8) (39)
Donated works, at
deemed value		 83 1 -- 95 124 25
Balance as at 31
March		 9,601 458 9,173 456 9,156 8,561 8,155
Made up of:
Interpretation
and learning		 9,601 458 9,173 456 9,156 8,561 8,155

There were two significant additions to Heritage assets in the year:

A statue of Diana, Princess of Wales, valued at £345,000, this item has been added at cost to the General Collection. A collection of 51 miniatures related to the Hill family, valued at £83,160 by Ellison Fine Art in January 2019. These miniatures were gifted to Historic Royal Palaces by the trustees of the Sandys Trust (Registered Charity Number 1168357). These items have been added to the General Collection for Hillsborough Castle and Gardens

a) Further information on HRP’s collections of heritage assets

The Palaces are not owned by HRP, but by HM The King on behalf of the nation. Expenditure on their conservation is recognised in the Statement of Financial Activities when it is incurred.

The main categories of accessioned heritage assets, including those shown on the balance sheet, are:

61

Notes to the Consolidated Accounts for the year ended 31 March 2022

In addition, HRP curates un-accessioned assets as follows:

HRP also displays items on short and long-term loan. In particular:

Our collections remain on public display whenever possible. Storage is normally limited to items providing a research resource, unsuitable for display for conservation reasons or archaeological finds. We loan historic objects from our collections to public exhibitions and museum/ gallery displays.

The priority for acquisition or long term loan of heritage assets is to enhance and explain the historic buildings of the palaces with relevant objects. Acquisitions are made by purchase or donation, taking six criteria into consideration. Significant acquisitions require Trustee approval. The highest priority is given to items deriving from the existing buildings of the palaces. Additional criteria apply to the Royal Ceremonial Dress Collection.

Exceptionally, the Trustees will approve the disposal of objects for curatorial reasons but not disposal motivated by financial reasons. The principle of retaining disposed items in public ownership is preferred. Any proceeds of sale are applied for the benefit of the collections.

b) Heritage assets of particular importance

The most significant heritage asset shown on the balance sheet is the van Dyck portrait of Princess Mary, received as a donation from the Museums Libraries and Archives Council in 2008/09 and valued at acquisition at £1.5m.

Of particular significance is the only surviving in-situ ceiling painting by Peter Paul Rubens, at the Banqueting House, installed in 1636.

We display and provide day-to-day care for the Crown Jewels in the Tower of London. Like the Palaces themselves, the Crown Jewels are owned by HM The King in right of Crown.

c) Management and Conservation

HRP maintains a register of heritage assets, which includes records of ownership, conservation status and location. The conservation and curatorial teams manage the collections, including loan items, in accordance with the policies approved by Trustees. These teams report to the Palaces & Collections Director.

The long-term conservation requirements of the collections are identified and prioritised by HRP’s conservators through a programme of condition audits.

62

Notes to the Consolidated Accounts for the year ended 31 March 2022

15. Investments

HRP held £4.8m (2020/21: £8.4m) in Fixed Asset Investments as at 31[st ] March 2022. These investments fall into three main vehicles, the movement on each is shown in the tables below:-

Bond Portfolio Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
Balance as at 1
April		 7,353 7,353 8,304 8,304
Effective interest
earned		 80 80 127 127
Interest coupons
received		 (160) (160) (210) (210)
Bondspurchased - - - -
Bonds redeemed (3,413) (3,413) (1,110) (1,110)
Gain / (Loss) on
valuation		 (179) (179) 242 242
Balance as at 31
March		 3,681 3,681 7,353 7,353

These consist of short dated, investment grade, sterling, fixed income securities. The bond portfolio is accounted for using the effective interest method as the bonds are intended to be held to maturity.

Ethical
Investment Fund		 Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
Balance as at 1
April		 390 390 2,602 2,602
Units disposed of - - (2,642) (2,642)
Gain / (Loss) on
revaluation		 33 33 430 430
Balance as at 31
March		 423 423 390 390

This is a diversified multi-asset fund with ethical and responsible investment standards. It consists of global and UK equities, with a proportion allocated to infrastructure & operating assets, property and cash.

63

Notes to the Consolidated Accounts for the year ended 31 March 2022

Multi-Asset
Investment
Fund		 Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
Balance as at
1 April		 683 683 2,713 2,713
Units disposed
of		 - - (2,750) (2,750)
Gain / (Loss)
on revaluation		 8 8 720 720
Balance as at
31 March		 691 691 683 683

This is a balanced mixed asset fund with a focus on funds that contribute to society or the environment. It includes global and UK growth equity funds, with a proportion allocated to corporate bonds, gilts and cash.

16. Debtors

16. Debtors
Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
Trade debtors 2,137 1,501 395 128
Amounts due from
subsidiary		 - 4,528 - 1,892
Other debtors 937 937 122 45
Prepayments and
accrued income		 4,169 3,961 2,207 2,057
Total 7,243 10,927 2,724 4,122

All of the above debtors are due within one year.

The service charge calculation for HRPE Ltd was agreed through resolution in March 1999 and had been in use ever since. The historic calculation consists of a payroll recharge (all trading staff payroll) and a facility recharge (depreciation, accommodation, support services) of 20% of turnover.

In 2021/22, HRP Audit & Risk Committee Trustees approved a long-term update in the service charge calculation to better reflect changes in the structure of the organisation. This follows a temporary reduction in 2020/21 to keep HRPE Ltd solvent and maximise the outcome for the Group formed by HRP the charity and HRPE Ltd its trading subsidiary.

The changes implemented from 2021/22 are as follows:

64

Notes to the Consolidated Accounts for the year ended 31 March 2022

Turnover Facility charge %
Less than £5m 10%
£5m to £10m 15%
£10m - £20m 18%
£20m + 21%

17. Creditors: amounts falling due within one year

Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
Trade creditors 1,834 1,569 465 509
Taxation and
social security		 763 628 618 618
Other creditors 382 382 138 257
Accruals 6,150 5,744 4,214 3,902
Deferred income 6,655 5,001 3,161 2,215
Total 15,784 13,324 8,596 7,501

Deferred Income

Deferred Income comprises advance visitor bookings, rent, membership income and function and event deposits.

Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
Balance at the
beginning of the year
3,161		 2,215 3,564 2,408
Amount released to
income in year		 (3,040) (2,104) (3,250) (2,330)
Amount deferred in
year		 6,534 4,890 2,847 2,137
Balance at the end of
the year		 6,655 5,001 3,161 2,215

18. Creditors: amounts falling due after more than one year

Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
Trade creditors 4 4 143 143
Amounts drawn
down on the
Culture Recovery
Fund Loan Facility		 40,860 40,860 40,050 40,050
Total 40,864 40,864 40,193 40,193

65

Notes to the Consolidated Accounts for the year ended 31 March 2022

In 2020/21, HRP was awarded a £40m repayable loan from the Culture Recovery Fund for Heritage jointly managed by the Arts Council England (ACE) and the National Lottery Heritage Fund (NLHF). This was part of the £1.57 billion rescue package announced by the Department for Digital, Culture, Media and Sport to safeguard cultural and heritage organisations across the UK from the economic impact of COVID-19. The repayable loan is met by Government guarantee, with no specific requirements and no specific security. The loan attracts a 2% interest rate which accrues from its March 2021 receipt. After a four-year repayment holiday, the loan must be repaid in 21 equal repayment instalments over a tenyear period and by March 2035.

19. Provision for liabilities and charges

Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
Balance as at 1 April 2021 487 434 927 927
Amounts used inyear (69) (16) (493) (493)
Newprovisions inyear 101 - 53 -
Balance as at31 March 2022 519 418 487 434

The provision includes amounts for pension scheme closure compensation payments and rent reviews.

20. Financial commitments under operating leases

The Group and Charity had the following future minimum lease payments under noncancellable operating leases for each of the following periods:

Operating
Lease
payments due:		 Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
< 1 year 1,038 828 1,096 886
Between 2 -5
years		 3,607 3,189 3,865 3,239
> 5 years 52,420 52,420 53,346 53,346
Totalpayable 57,065 56,437 58,307 57,471

21. Operating lease receipts

The Group and Charity had the following future minimum rental income under noncancellable operating leases for each of the following periods:

Operating
Lease
payments
due:		 Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
< 1 year 100 32 209 142
Between 2 -5
years		 201 25 597 353
> 5 years - - - -
Total
receivable		 301 57 806 495

66

Notes to the Consolidated Accounts for the year ended 31 March 2022

22. Capital commitments

Group
2022
£000		 Charity
2022
£000		 Group
2021
£000		 Charity
2021
£000
Contracted capital
commitments as at 31
March 2022, for which
noprovision has been
made
in the accounts:		 2,730 2,730 394 394

Commitments include no amount (2021: nil) relating to projects that are being funded by donations from third parties.

23. Contingent Assets

HRP has received notification it will benefit from a residue legacy. As at 31st March 2022 it is thought the funds will be received in the financial year ending 31st March 2023 and will be in the region of £0.8m

24. Contingent liabilities

Either HRP or the Secretary of State for Digital, Culture, Media and Sport may give one year’s notice of termination of the contract to manage the Palaces. Upon termination, a calculated net asset value would revert to the Secretary of State, being the lower of the value of the net assets transfer of £7.795m on 1 April 1998 (indexed for inflation and as revised for material changes in accounting policy) or the value of the equivalent assets held at the date of termination of the contract.

67

Notes to the Consolidated Accounts for the year ended 31 March 2022

25. The summary financial performance of the charity alone

INCOME Unrestricted
funds
£000		 Restricted
funds
£000		 Total
2022
£000		 Total
2021
£000
Donations and
legacies:
Grants 104 7,890 7,994 6,339
CJRS grants - 2,377 2,377 14,220
Donations 794 143 937 509
Gifts in Kind - 83 83 4
Total 898 10,493 11,391 21,072
Income from
other trading
activities
Retail income - - - -
Functions and
events		 180 - 180 3
Licences, rent &
recharges		 2,606 - 2,606 1,656
Sponsorship - - - -
2,786 - 2,786 1,659
Investments 223 - 223 330
Income from
charitable
activities:
Admissions 24,302 - 24,302 4,065
Memberships 3,244 3,244 2,865
Concessions 676 - 676 79
28,222 - 28,222 7,009
Other Income
Service charge to &
Gift aid distributed
from HRPE		 8,800 - 8,800 3,434
Total income 40,929 10,493 51,422 33,504
EXPENDITURE
Costs of raising
funds:
Fundraising 302 65 367 455
Retail activities 2,332 248 2,580 4,704
Investment
management costs		 23 - 23 51
Other commercial
activities		 1,432 60 1,492 1,763
4,089 373 4,462 6,973
Expenditure on
charitable
activities:
Palaces 12,745 7,597 20,342 16,428
Experiences:
Public access 16,828 1,150 17,978 17,383
Interpretation and
learning		 8,743 1,568 10,311 8,375

68

Notes to the Consolidated Accounts for the year ended 31 March 2022

Money
–
Organisational
Growth		 3,765 86 3,851 2,072
Culture 977 33 1,010 1,472
43,058 10,434 53,492 45,730
Other
Defined Pension
scheme net interest
cost		 18 - 18 12
Losses (gains) on
curtailments		 - - - (352)
Losses (gains) due
to benefit changes		 - - - -
CJRS grant received
on
behalf
of
the
subsidiary		 302 - 302 2,052
Total
Expenditure		 47,467 10,807 58,274 54,415
Net (losses)/gains
on investments		 (138) - (138) 1,393
Net Income /
(Expenditure)		 (6,676) (314) (6,990) (19,518)
Actuarial
(loss)/gain on
pensionplan		 10,246 - 10,246 (503)
Net movement in
funds		 3,570 (314) 3,256 (20,021)
Fund balances
brought forward
at 1 April		 33,395 7,417 40,812 60,834
Fund balances
carried forward
at 31 March		 36,965 7,103 44,068 40,812

26. Related party transactions

This note lists material transactions with other entities in which either Trustees or senior employees of HRP or their close family members hold positions of authority. It also details all transactions with Trustees, with the exception of remuneration of Trustees which is covered in Note 10 and donations made by them, £75k in year, (2020/21: £250).

The Palaces and much of their contents are held by HM The King in right of Crown. These contents are the responsibility of The Royal Collection Trust.

HRP is contracted by the Secretary of State for Digital, Culture, Media and Sport to manage the five London palaces on his behalf. This contract has been re-authorised until 31 March 2028.

The contribution to the Charity’s funds by its wholly owned subsidiary, Historic Royal Palaces Enterprises Limited is disclosed in Note 2.

69

Notes to the Consolidated Accounts for the year ended 31 March 2022

The figures in brackets represent the amounts due at the balance sheet date.

Related party Connected party (a) 2022
£000		 2021
£000		 Detail of transaction
Association des
Residences
Royales
Europeennes
(ARRE)		 John Barnes (Chief Executive
of HRP) is a member of
ARRE on behalf of HRP		 6
(6)		 8
(nil)		 Charges made to HRP by the
Association for HRP’s annual
membership
BBC Zeinab Badawi (Trustee of
HRP) is a broadcaster at the
BBC		 4
(nil)		 15
(nil)		 Charges made by HRPE for
filming at our palaces
The Choral
Foundation,
Chapel Royal,
Hampton Court
Palace		 Sue Hall (Director of HRP)
was a trustee of The Choral
Foundation and was
replaced by Nigel Walley (a
Senior Manager at HRP)
Jane Crowther (Director of
HRP) is a trustee of The
Choral Foundation		 -
(nil)
0
(nil)		 7
(nil)
-
(nil)		 Charges for choral services and
recitals made by the Choral
Foundation to HRP
Function hosted for the Choral
Foundation - cost borne by HRP
Founders Forum
LLP		 Rupert Gavin (Chair of the
Trustees of HRP) is on the
Advisory Board		 12
(nil)		 -
(nil)		 Charges made by HRPE for
Event Hire at Kensington
Palace
The Foundation
of the Chapels
Royal of HM
Tower of London		 Andrew Jackson (Director of
HRP from 27 May 2019) is a
trustee of the Foundation		 14
(nil)		 8
(nil)		 Charges made by the
Foundation to HRP for choral
services at HM Tower of
London
Historic Royal
Palaces Inc. (HRP
Inc.)(b)		 John Barnes (Chief Executive
of HRP is President of HRP
Inc.), Dan Wolfe and Sue
Hall (Trustees of HRP) are
respectively director and
secretary & treasurer of HRP
Inc.		 50
(nil)
365
(nil)
-
(0)		 759
(nil)
80
(nil)
19
(0)
Grants received by HRP from
HRP Inc. for Kensington Palace
Projects, Orangery & Sunken
garden conservation
Grants received by HRP from
HRP Inc. for Tower of London
projects
Grants received by HRP from
HRP Inc. for re-opening the
palaces
Purcell UK
(trading name of
Purcell Miller
Tritton LLP)		 Jane Kennedy OBE (Trustee
of HRP) is a senior partner of
Purcell UK		 80
(nil)		 18
(1)		 Charges made by Purcell to
HRP for architectural services
at Kensington Palace Orangery
Royal Armouries
(RA)		 Lord Houghton (Trustee of
HRP since 1 August 2016) isa
trustee of RA		 103
(40)
3
(3)		 12
(12)
-
(nil)		 Charges made by RA to HRP for
goods and services provided at
HM Tower of London
Recovery of costs from RA for
goods, services and
maintenance provided by HRP
at HM Tower of London

70

Notes to the Consolidated Accounts

for the year ended 31 March 2022

Royal Household
(RH)		 Sir Michael Stevens KVCO
(Trustee of HRP) is Keeper of
the Privy Purse and Receiver
General of the Duchy of
Lancaster		 159
(4)
51
(48)		 131
(9)
26
(23)
Charges made by RH to HRP
for rent and services provided
at Kensington Palace &
vetting clearance costs
Charges made by HRP and
HRPE to RH for share of staff
costs and grazing licence
Royal Collection
Trust (RCT), and
Royal Collection
Enterprises
Limited (RCEL),
which is a wholly
owned subsidiary
of RCT		 Sir Michael Stevens KVCO
(Trustee of HRP) is Keeper of
the Privy Purse and a Trustee
of RCT
Tim Knox (Trustee of HRP)
is a Director of RCEL and
Director of the Royal
Collection at RCT		 49
(nil)
32
(5)		 -
(nil)
30
(15)		 Charges made by RCEL to HRP
and HRPE for the right to
produce images of Royal
Collection items and for the
purchase of goods for resale.
Recovery by RCT from HRP of a
proportion of the costs of
maintaining and recording
Royal Collection and other
items displayed in the palaces,
and from HRPE for the
purchase of goods for resale
Saatchi & Saatchi Sarah Jenkins (HRP Trustee
since 2 September 2019) is a
managing director of M&C
Saatchi		 -
(nil)		 (19)
(nil)		 Refunds of charges made by
HRP to M & C Saatchi for
cancelled function at the Tower
Todd Longstaffe-
Gowan Ltd		 Tim Knox (Trustee of HRP)
is a director at Todd
Longstaffe-Gowan Ltd		 5
(nil)		 8
(nil)		 Charges made by Todd
Longstaffe-Gowan Ltd to HRP
for garden design

27. Financial instruments

Disclosure is required of the role financial instruments have played during the year in creating or changing the risks HRP faces in undertaking its activities.

Liquidity and Credit Risk

Long-term liquidity was secured by the receipt of a £40m long-term repayablefinance loan from the CRF fund in March 2021. Surplus funds are held on short-term fixed interest rate deposits with institutions with low credit risk ratings. Risks relating to interest rates are managed by budgeting conservatively for investment income. HRP has no finance leases.

HRPE Ltd had a bank overdraft facility for £0.5m until 5[th ] September 2022

Since most income was generated from donations, grants and visitors to the Palaces, most of HRP’s income was received as cash.

HRP is exposed to a credit risk of £2.1m trade debtors (2020/21: £0.4m). The risk is not

71

Notes to the Consolidated Accounts for the year ended 31 March 2022

considered significant since major customers are known to HRP or are required to pay for services in advance and provisions against bad debts are minimal.

Market risk

HRP is subject to market risk in that the defined benefit pension fund holds investments. Plans are in place to fund the past service deficit, as detailed in Note 12.

HRP is subject to credit and market risk in its investment portfolio (note 15). These risks are mitigated by investing only in investment grade bonds and by using a professional investment manager.

HRP is not subject to any significant foreign currency risk.

28. Post balance sheet events

There have been no significant events after 31 March 2022 that require adjustment to, or disclosure in the financial statements.

The financial statements were approved by the Accounting Officer and Trustees on 5 December 2022 and authorised for issue on the date the Comptroller and Auditor General signed the independent auditor’s report.

72

E02816105 978-1-5286-3760-2