STATEMENT OF ACCOUNTS

Transcription

1 STATEMENT OF ACCOUNTS 2007/2008

2 Description C O N T E N T S Page Statement of Accounts Explanatory Foreword 3 Annual Governance Statement (replacing Statement on the System of Internal Control) 9 Statement of Responsibilities for the Statement of Accounts 16 Independent Auditors Report to Authority (to follow) 18 Accounting Policies 19 Core Financial Statements: Income & Expenditure Account objective version 26 Income & Expenditure Account subjective version 27 Statement of Movement on the General Fund Balance 28 Statement of Total Recognised Gains and Losses 30 Balance Sheet 31 Cash Flow Statement 33 Notes on the Core Financial Statements 34 Supplementary Financial Statements: Police Pension Fund Account 56 Notes to the Police Pensions Fund Account 57 Glossary of Terms 58 2

3 STATEMENT OF ACCOUNTS 2007/08 EXPLANATORY FOREWORD This Statement of Accounts sets out the financial position of for the year ending 31 March It has been prepared in accordance with the Accounts and Audit Regulations and the Code of Practice on Local Authority Accounting. BACKGROUND Authority was established in 1995 and is one of 43 police authorities covering England and Wales providing policing services to a population of 677,000. The Authority s key duties are to ensure an efficient and effective police service, provide strategic direction for the Force, set the budget and the council tax and act as a transparent link between the public and the police. The Authority is responsible for managing overall expenditure within the budget, however responsibility for day-to-day financial management is delegated to the Chief Constable, in accordance with the financial framework agreed by the Authority. Changes to the Accounts for 2007/08 The Statement of Recognised Practice (SORP) 2007 has required several changes to the accounts this year. The main changes are: the creation of two new accounts, the revaluation reserve which replaced the fixed asset restatement account and the capital adjustment account which replaced the capital financing account; the new annual governance statement replacing the statement on the system of internal control; the reclassification of various items within the main accountancy statements; 3 new accounting policies to bring local government accounts in line with UK generally accepted accounting practice and revisions to the notes to accounts In addition a glossary of terms has been added for information. The Authority s Accounts consist of: The Annual Governance Statement which is a joint corporate document bringing together legislative requirements, governance principles and management processes for the Authority and the Force. Statement of Responsibilities for the Accounts which sets out the responsibilities of the Police Authority, the Treasurer and the role of the Chief Constable. Independent Auditor s Report to Members of Authority which is provided in the published accounts only, following audit. Accounting Policies which sets out the principles on which the accounts have been based. 3

4 Income and Expenditure Account which summarises the income and expenditure for the year. This is in twin format with the objective version broken down into various police services and the subjective version analysed into expenditure type pay, premises, transport etc. Statement of Movement on General Fund Balance which reconciles final expenditure for the year and the use of balances Statement of Total Recognised Gains and Losses which summarises the gains and losses for the year to show the total movement in the Authority s net worth on the balance sheet. The Balance Sheet which sets out the Authority s financial position at 31 March 2008 and identifies reserves and balances at that date The Cashflow Statement which summarises the movement of cash throughout the year arising from transactions with third parties Notes to Core Statements which provide additional explanation, as prescribed by the SORP. Police Pension Fund Account which shows the movement of funds relating to officer pensions. Notes to Pension Fund Account which provides additional information and explanation Glossary of Terms for information 4

5 FINANCIAL PERFORMANCE FOR THE YEAR Revenue Budget 2007/08 In February 2007, the Police Authority approved a net revenue budget requirement of million, an increase of 4.66% over 2006/07. The 2007/08 budget increase covered pay awards, general inflation and specific service changes including: an additional 25 police community support officers revenue implications of the new CJC essential estate maintenance increases in the Public Protection Unit increased capital investment The government formula grant increase of 3.6% in 2007/08 and capping constraints meant that budget cutbacks were also made in some areas, namely: a net loss of 4 police officer posts a net loss of 27.6 support staff posts a reduction in ICT expenditure The overall impact on the police council tax for Northamptonshire was an increase of 5% taking the Band D council tax from to for 2007/08. The Authority achieved the required 3% efficiency gains in budget during the year - a process audited independently, realising efficiency savings of over 3 million. All gains achieved through the redeployment of resources were redirected into operational police services. Revenue Expenditure 2007/2008 Expenditure during 2007/08 was as follows: '000 Police Pay and Pensions 72,815 Police Community Support Officers 4,325 Support staff pay and pensions 33,607 Running Costs 21,757 Interest Payable and Receivable (1,031) Specific Grants (10,881) Other Income (10,315) Operational Expenditure 110,277 Payment to Reserves 28 Net Expenditure 110,305 Funded by: Council Tax (38,567) Police Grant (40,695) Revenue Support Grant (4,461) Non Domestic Rates (26,582) Total funding (110,305) 5

6 The table above shows an under-spend for the year of 28,000 which is to be returned to general balances. It is made up of: 000's Net under-spend for the year 2,242 General Reserve Transfer not required (600) Carry forward to 2008/09 (688) Pensions under-spend to reserve (790) Insurance under-spend to reserve (136) Under-spend returned to general balances 28 Significant variances on the revenue budget, in percentage terms, were: under-spends of 0.249m on devolved operational budgets which were carried forward an under-spend on the pensions budget of 0.79m which was taken to the pension reserve additional interest earnings of 0.38m, taken to balances savings of 0.136m on insurance taken to the insurance reserve an under-spend of 133,000 on the DNA budget, taken to balances In total the Force carried forward 688,000 of net under-spent budget into 2008/09 to meet specific projects that were unavoidably delayed or to meet one-off items of expenditure. This figure, which is within expected tolerances for budget variance, represents the net outcome of both overspends and under-spends carried forward by individual areas and spending departments. The deficit for the year of m shown in the Income and Expenditure Account on page 26 represents the net deficit for the year before accounting for the appropriations to/from reserves and other adjustments required by statute. The FRS17 pensions entries account for m of the deficit. When the other required adjustments are made, shown in the Statement of Movement on General Fund Balances on Page 28, there is a net surplus of 0.028m for the year. The Authority undertook a 5 year revaluation of all its land and buildings during , which resulted in an upward valuation of 17.37m on its assets. This is explained in notes 16 and 30 to the accounts. The Authority recognised its one third share of the new EMASU helicopter within the fixed assets, the value transferred from Assets Under Construction of 1.127m was re-valued to 1.511m. The Authority also acquired land for the purposes of building a new Criminal Justice Centre 1.851m. Please refer to note 16 to the accounts. The Net Cost of Service has been adjusted in to allow for the proper treatment of prior year items; Government Grants Released in previous years was overstated by 2.584m. Please refer to note 28 to the accounts for further information. The potential insurance liability was classed as a reserve in the accounts due to difficulties in assessing the extent of the liability. A professional assessment has valued the liability at 2.03m, 0.767m less than the reserve. 2.03m of expenditure was therefore appropriated back to Supplies and Services during the year, inflating the Net Cost of Service, and was then transferred into a provision. This event is referred to in note 33 to the accounts. 6

7 The Authority made past savings from Debt Restructuring that allowed it to invest money for future loan repayment. Following recommended practice and for clarity, the payments made ( 0.53m), previously shown as voluntary revenue provisions have been transferred into a new invested reserve for loan repayment. Please refer to note 33 to the accounts. Capital Budget and Expenditure 2007/08 In February 2007 the Authority approved a capital budget of million. Actual expenditure for 2007/08 was million representing an under-spend of 1.347m (22%). This variance against the original budget was due to slippage and savings on capital projects including Project Global 0.2m, Airwave 0.3m, vehicle purchase 0.4m and replacement of microwave equipment 0.4m. The capital programme was monitored continuously throughout the year with the Police Authority approving adjustments to project costs and timeframes within the programme on a regular basis. Major items of capital expenditure which took place in 2007/08 include the acquisition of land and initial work for the new criminal justice centre (CJC) 1.9m, the vehicle replacement programme 0.7m, ICT equipment 0.6m and Airwave 0.3m. Capital funding for 2007/08 varied from budget as follows: Budget Actual Funding Source 000's 000's Capital Grant 909 1,380 Capital Receipts Borrowing 1,274 0 Transfer from Revenue 1,207 4,921 External Funding Transfer (to) from Reserves 2,724 (1,826) Total 6,114 4,767 The principle variations were an approved use of revenue and capital under-spends transferred to capital reserves to meet future spending on the CJC, additional capital grant paid by the Home Office and some unexpected capital receipts and external funds. These funds and the slippage in some capital schemes enabled the Authority to fund all its capital expenditure without the need to borrow in 2007/08. Reserves and Balances At 31 March 2007 our general balances increased slightly from million to million with the increase approved by the Police Authority. This increase leaves general balances at 4.2% of our budget requirement, slightly above the approved policy range of 2-4%. Any unused balances continue to be invested and earn interest, which supports our revenue expenditure. The Police Authority regularly monitors this position. A number of specific, earmarked reserves also exist, totalling million at 31 March 2008, to fund commitments such as the criminal justice centre, ill health pensions and insurance. These are listed in full in Note 33. 7

8 Pensions The 2007/08 Statement of Accounts includes the full implementation of FRS17 for pensions. The main effect is recognising retirement benefits as a cost in the income and expenditure account as they are earned, even though the pensions will not be paid until employees retire. Within the Balance Sheet, there is a liability of 597.3m shown, representing the future pension liabilities under FRS17. The implementation of FRS 17 has a NIL impact on council tax and the only charge levied to taxpayers is the actual employer contributions payable in year. Removal of the above technical accounting entry would show the true net worth of the Authority as m. Statutory arrangements for funding the deficit on police officer pensions via H M Treasury means that the financial position of the Authority remains healthy. Any deficit on the pension fund account is met initially by a contribution by the Authority which is reimbursed through Home Office pension top-up grant. For police staff actuarial valuations are undertaken every three years to determine employer contribution rates that are needed to meet future liabilities. Please refer to note 9 to the accounts for further information. FINANCIAL OUTLOOK FOR 2008/09 AND BEYOND On 26 February 2008 the Police Authority approved a revenue budget for 2008/09 of million and a council tax of This represented increases of 4.1% in budget requirement and 4.9% in council tax over 2007/08. The government has now provided a provisional 3-year grant settlement over the CSR period until 2010/11 with proposed grant increases of 2.6% and 2.7% in future years. Authority s medium term financial strategy proposes that future budgets and council tax increases will be kept within capping limits, currently 5%. Northamptonshire will continue to work closely with our 4 regional East Midlands forces to drive out the benefits and savings of collaboration work. FURTHER INFORMATION Every effort has been made to ensure that the information provided in this Statement of Accounts is clear and informative. Should you require any further information or if you have any comments please contact the Treasurer, Ms Rosemary Yule at: Authority, 36 Billing Road, Northampton NN1 5DQ telephone rosemaryy@northants-pa.gov.uk viewing the Authority website at Rosemary Yule ACMA Treasurer Authority 8

9 Joint Annual Governance Statement (AGS) of and Authority Publication of this statement is a legal requirement from 1 st April It is a key corporate document, wider than financial governance alone, and brings together legislative requirements, governance principles and management processes. This joint Annual Governance Statement (AGS) is based on the CIPFA model for a combined Force/Authority approach and is the shared responsibility of the Chair of the Authority, the Chief Executive of the Authority and the Chief Constable. Position as at 31 March 2008 including plans for the financial year 2008/09 1. SCOPE OF RESPONSIBILITIES Authority ( the Authority ) must ensure that its business is conducted legally and that public money is safeguarded, accounted for and used economically, efficiently and effectively. The Authority has a duty under the Local Government Act 1999 to secure continuous improvement in the way it works, having regard to a combination of economy, efficiency and effectiveness. The Authority must put in place proper arrangements for the governance of its affairs and the exercise of its functions. It must ensure that a sound system of internal control is maintained through the year and that risk management arrangements are in place. In March 2008 the Authority approved and adopted a Code of Corporate Governance, which is consistent with the principles of CIPA/SOLACE Framework: Delivering Good Governance in Local Government. A copy is on our website at or can be obtained from The Treasurer, Authority, 36 Billing Road, Northampton NN1 5DQ. This Annual Governance Statement explains how the Authority has complied with the Code and also meets the requirements of Accounts and Audit Regulations in relation to the publication of a statement on internal control. 2. THE PURPOSE OF THE GOVERNANCE FRAMEWORK The governance framework comprises the systems, processes, culture and values through which the Authority works and engages with the local community. It enables the Authority to monitor whether it meets its objectives to secure an efficient and effective local police service, providing value for money. The system of internal control is a significant part of the framework and is designed to manage risk to a reasonable level rather than to eliminate all risk. It can only provide reasonable and not absolute assurance of effectiveness. 9

10 Our system of internal control is designed to: identify and prioritise the risks to achieving the Authority s policies, aims and objectives, evaluate the likelihood and impact of those risks and manage them effectively, efficiently and economically. The governance framework is in place at the Authority at the year-end 31 March 2008 and up to the date of approval of the Statement of Accounts. 3. THE GOVERNANCE FRAMEWORK The Authority and Force work within a tripartite arrangement shared with the Home Office. The Chief Constable is responsible for all operational policing matters, the direction and control of police personnel, and for putting in place proper arrangements for the governance of the Force. The Authority holds the Chief Constable to account for his policing responsibilities and it follows that the Authority be satisfied that the Force has mechanisms in place for the maintenance of good governance, and that these operate in practice. The Authority s Vision is as follows: To ensure and maintain the best and most cost effective policing for the County of Northamptonshire, meeting the needs of our diverse communities This was fully reviewed by the Strategy Development Group in 2007/08 along with the Authority s business plan to meet this vision and objectives. It was approved in February 2008 and published within the Authority s business plan. It complements the Force Vision, which is: To deliver the best possible quality of policing services to the people of Northamptonshire This was also reviewed and amended in 2007/08 as part of the Force Making the Difference vision, mission and values statement. Objectives and Targets The Policing Northamptonshire plan, agreed by the Authority and the Force, sets out the medium and long-term strategy for policing the area and the fundamental vision and core values of Force and Authority. This incorporates the annual Local Policing and Performance Plan (LPPP) and the 3-Year Strategic Plan. Policing Northamptonshire contains the policing objectives and targets for the forthcoming year based on consultation with the community, the force and the requirements of the National Policing Plan. It also contains details of achievements against targets in the previous year, incorporating both statutory and local targets. Monitoring Performance Our high level plans are supported by operational plans, which cascade down throughout managerial and supervisory levels of the Force. Monitoring within the Force is through the Chief Officers Group (COG) and the supporting Process Groups each chaired by a Chief Officer: 10

11 Managing Performance Group is chaired by the Deputy Chief Constable Improving Performance Group is chaired by the Assistant Chief Constable (Territorial) All operational Commanders, Head of Department for Service Improvement, Head of Human Resources and Head of Finance attend these 2 groups 4-weekly, where current issues are tasked to be resolved. Managing Finance Group is chaired by the Director of Resources, and attended by ACC/DCC, Head of Finance, Head of DSI, Operational Commander, Departmental Commander and Departmental Representative, Unison and Federation. This body scrutinises the finances of the Force and leads budget planning. Other process groups in existence are Facilities Management Group, Project Management Board, Managing Staff Group and Citizen Focus. Lead members are from COG. The Police Authority monitors performance, resources, partnership arrangements, community engagement issues, standards and overall strategy by receiving regular reports to the following Committees and Groups which exist within the Authority structure: Police Authority overseeing policy and strategy, standing orders, terms of reference, delegated powers, financial regulations, local strategic policing plan Resources Committee - covering internal and external audit, risk management areas, corporate governance and HR matters Performance Monitoring Committee performance scrutinising and challenging Force Partnership and Collaboration Committee pooled and shared service arrangements Equalities and Engagement Committee across diverse communities governance within partnership, public accountability and engagement Standards Committee Grants Working Group scrutiny of Members standards, conduct and behaviour scrutiny of discretionary payments to third parties In addition the Crime and Disorder Reduction Partnerships (CDRP s) and Independent Lay Visitors Panel exist to ensure community involvement in improving performance in services. Measuring the quality of services for users Quality of service is monitored and reported through the Citizens Focus Board monthly, the Authority's Equalities and Engagement Committee and the Performance Monitoring Committee. The Force carries out telephone surveys with victims of crime and also undertakes a general public attitude survey, which measures the opinions of members of the public about policing across the County. The Force have also introduced a survey at police station front counters to obtain feedback on the service they have received and there is a Citizen Focus Process Group that is looking at how the Force delivers the service to the public. Individual Safer Community Team s are concentrating on priorities set by their local communities. The Authority together with the Force's Professional Standards Department sends out surveys to complainants and monitors the feedback obtained. The Authority and Force are planning to run several focus groups in 2008 to gather more qualitative information from victims of crime and other members of the public on specific areas of service delivery. 11

12 Risk Management The Force and Authority continue to implement and embed risk management arrangements across the organisation. The internal audit plan for 2007/08 reviewed risk management and provided assurances over the processes in place and being established for the management of risk. There is an established risk management policy on the Internet and the Project Management Board chaired by the Assistant Chief Constable and attended by the Authority Chair, reviews the force risk register monthly. All area and departments maintain their own risk registers. The Authority risk register, and the mitigation of risk, is reviewed by members and officers of Resources Committee. Roles and Responsibilities The Authority and Force ensure that Members, staff and officers work together, with clearly defined functions and roles, to achieve a common purpose. To achieve this, the Authority has: Set out the respective roles, responsibilities and standards required of the Authority s officers, members and Committees within the Business Plan; Monitored that we are achieving our Aims both individually through personal development reviews/plans and collectively through Police Authority meetings and seminars; Allocated lead members for monitoring specific functions, for example Professional Standards Dept, and reporting back via Committees. Determined a Scheme of Delegations (February 2008), Financial Regulations (August 2007) and reserve powers within the Standing Orders (December 2007), including a formal schedule of those matters specifically reserved for collective decision of the Police Authority. These documents take account of relevant legislation and will be updated when required. Approved a Code of Conduct (June 2007) which sets out obligations, disclosures of interest, protocol, roles, access to information, conduct at meetings and other aspects of members standard of conduct The Force has in place: A framework of statutory and local delegated powers, procedures and regulations Officers and staff allocated to Authority meetings to present reports and answer questions with the agenda for each meeting planned jointly between the Force and Authority so that relevant issues are covered. Regular seminars and presentations for the Authority and Force as part of the budget and planning process. The Head of Executive Support as the designated liaison officer between the Force and the Authority providing a single point of contact. Effective and professional communications for the Force and Authority via the Communications Department including reactively and proactively representing the Authority's interests to the media, the production of Home Beat community newspaper, the management of the Force and Authority's website and the organisation and promotion of events 12

13 Compliance A statement of values for officers and staff within the core Force document Making the Difference Well publicised codes of conducts for both officers and staff with the code of conduct for officers regulated by police regulations and an effective disciplinary process for breaches of Code of Conduct, managed by the Professional Standards Department. The Authority and Force will ensure compliance with relevant laws and regulations, internal policies and procedures, and that expenditure is lawful. The Authority S151 Officer (Treasurer) and the Monitoring Officer (Chief Executive) have legal and professional responsibilities in this respect, assisted by assurances from internal and external audit. The Resources Committee undertakes the core functions of an audit committee as defined by CIPFA and the Standards Committee exists to scrutinise members standards, behaviour and conduct. In 2007/08 the Force received many substantial assurance scores on internal audit reports for financial control and only 1 minor recommendation within the external audit Annual Audit letter. It also received an improved Police Use of Resources (PURE) score of 3/Good under the Audit Commission assessment. There are checks and balances built into the financial procedures to ensure that expenditure is lawful, and this is underpinned by financial regulations, which apply to each Member, officer and employee of the Authority. Departmental Heads and the relevant process groups are responsible for ensuring the Force policies and procedures are lawful. The Force has internal procedures managed by Professional Services Department for complaints by both officers and staff, and for members of the public to use. Performance Monitoring Committee will monitor complaints received through the PSD twice yearly. The Force is also regulated by the Independent Police Complaints Commission (IPPC), an external body that has the power to investigate the Force. A Public Interest Disclosure (whistle-blowing) policy is in place to protect any employee who may wish to raise concerns of public interest. Officers and Staff The Force are responsible for determining the conditions of employment and remuneration of Force officers and staff. There are clear local HR policies and procedures as well as national police and staff regulations that determine the officer and staff conditions of employment and remuneration. The Authority are responsible for employment of ACPO officers and the Authority s own staff. These are also governed by both local and national terms and conditions. Members allowances are determined by an independent review panel. The development needs of members and senior officers/staff in relation to their strategic roles is identified through the Performance and Development Review (PDR) processes and 360- degree feedback. Members of the Authority receive an induction programme and regular training through Authority seminars. They also complete a work and development plan, which is reviewed annually with the Chair of the Authority to assess performance. Community Liaison The Authority and Force will establish clear channels of communication with all sections of the community, staff and other stakeholders, ensuring accountability and encouraging open consultation. 13

14 The Force work closely with all communities through the Safer Community Teams (SCTs) to identify and feedback local priorities. SCT s work with established groups such as Neighbourhood Watch, Tenants and Residents Associations, Parish Councils and aim to identify new and emerging groups and communities. Authority members sit on the SCT community panels to monitor community concerns and to feed any key themes or barriers back to the Authority. Our policing newspaper Home Beat is sent out twice yearly and the council tax/budget leaflet is sent to all 287,000 households. Regular press releases are sent out to communicate the work of the Force and the Authority and to ask for feedback. The Force and Authority are encouraging the public to access our websites, and sections are translated into the most commonly used languages. Complaints can be made via the website and members of the public are asked to "Ask the Chief" questions. The Authority encourage members of the public to ask questions at public Authority meetings. The Authority and Force have a joint approach to consultation. The joint consultation plan together with the Force Citizen Focus Board and the Authority's Equalities and Engagement Committee will continue to develop public engagement activities to improve service delivery. Consultation methods include the Force's ongoing public attitude survey which captures public opinions at a localised level. The Authority and Force will continue to work with "seldom heard" communities with representation on advisory groups where appropriate. Governance within partnerships is covered by agreements and/or terms of reference which set out the key responsibilities of each party. The financial requirements for partnerships by either the Force or Authority are covered within the Financial Regulations whilst the Partnership and Collaboration Committee monitors activity and outputs of partnerships throughout the year. 4. REVIEW OF EFFECTIVENESS The Authority has responsibility for conducting, at least annually, a review of the effectiveness of the governance framework, including: the system of internal audit (review of the work of RSM Bentley Jennison) the system of internal control (annual statement of assurance by RSM Bentley Jennison and annual audit letter from KPMG LLP) The Resources Committee remains responsible for reviewing the Code of Governance and the Performance Monitoring Committee for challenging Force performance and compliance. The Standards Committee is responsible for maintain high standards of conduct by Members of the Authority and to assist Members to observe its code of conduct. 5. SIGNIFICANT GOVERNANCE ISSUES There are no significant governance issues outstanding and 2007/08 has seen improvements in governance at the Authority with the approval of the Code of Corporate Governance, the Business Plan and the risk register. Risk management arrangements have also been strengthened at the Force. An internal audit review of Corporate Governance published in June 2008 gave substantial assurance to the framework with no recommendations at all, following 20 risk areas of governance reviewed in detail. However our governance arrangements remain subject to continuous development and we shall continue to seek improvements in the framework. 14

15 Signed Mrs D Newham JP Chair of Authority Mr P Maddison Chief Constable of Force Mrs D Roe Chief Executive of Authority On behalf of the members and senior officers of Authority and Force 15

16 STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS The Police Authority s Responsibilities The Police Authority is responsible for ensuring that financial management of the police service is adequate and effective and that a sound system of internal control is in place including arrangements for risk management. The Police Authority must make arrangements for the proper administration of its financial affairs and to ensure that one of its officers, namely the Treasurer, has the responsibility for that administration. From 1 April 2004 the Chair of the Authority also has a specific responsibility to sign the Statement of Accounts following approval at the appropriate meeting. The Treasurer s Responsibilities The Treasurer is responsible for the preparation of the Authority s Statement of Accounts in line with statutory best practice set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in Great Britain ( the Code ) and the Accounts and Audit Regulations The accounts are required to present fairly the financial position of the Authority at the accounting date and its income and expenditure for the year ended 31 March In preparing this Statement of Accounts, the Treasurer has: selected suitable accounting policies and applied them consistently; made judgements and estimates that were reasonable and prudent; and complied with the Local Authority SORP The Treasurer has also: kept proper accounting records which are up to date; and taken reasonable steps for the prevention and detection of fraud and other irregularities. The Role of the Chief Constable The Chief Constable, assisted and advised by the Force Director of Resources, is responsible for day-to-day financial management of the Force and for ensuring that the Force stays within its approved revenue and capital budgets, in accordance with the financial framework agreed by the Police Authority. Financial Services staff under the supervision of, and with the assistance of the Treasurer, carries out the preparation of the accounts and liaises with the external auditors, KPMG LLP, during the audit process. Treasurer s Certificate I certify that the Statement of Accounts presents fairly the financial position of the Authority as at 31 March 2008 and its income and expenditure for the year then ended. Rosemary Yule BSc ACMA Treasurer to Authority Date: 25 th June

17 Chair of the Police Authority Certificate I certify that the Statement of Accounts have been approved by the Police Authority, at a meeting on 25 th June 2008 in accordance with Section 3 of the Accounts and Audit Regulations Mrs Deirdre Newham JP Chair of Authority Date: 25 th June

18 INDEPENDENT AUDITORS REPORT TO MEMBERS OF NORTHAMPTONSHIRE POLICE AUTHORITY This Report has been provided independently by the external auditors KPMG LLP, at the conclusion of their audit. See Audit Letter ISA260 SoA pdf 18

19 ACCOUNTING POLICIES GENERAL PRINCIPLES The accounts have been prepared in accordance with the 2007 Code of Practice on Local Authority Accounting: A Statement of Recommended Practice (SORP) issued by the Chartered Institute of Public Finance and Accountancy (CIPFA), and the CIPFA guidance notes on Statements of Standard Accounting Practice (SSAPs) and Financial Reporting Standards (FRSs) relevant to Police Authorities. Any exceptions are disclosed below. The SORP 2007 made various changes to the Statement of Accounts 2007/08. The changes affecting this Authority s Accounts are, firstly the creation of two new accounts from 1 st April 2007,viz- 1. Revaluation Reserve Account (RRA) which replaces the Fixed Asset Restatement Account (FARA). 2. Capital Adjustment Account (CAA) which replaces the Capital Financing Account (CFA) and Fixed Asset Restatement Account (FARA). The SORP requires the RRA to commence with a zero balance, and also requires the balances on the FARA and the CFA to be transferred to the CAA at 1 st April The Accounting Policies incorporate these accounting changes. Secondly, the SORP also introduced 3 new accounting policies for to bring local authority accounting further into line with UK Generally Accepted Accounting Practice (GAAP). These were all related to Financial Instruments. FRS25 - Presentation and Disclosure, FRS26 - Recognition and Measurement and FRS29 Disclosures. Accounting polices have been adjusted or incorporated to reflect these changes and a new note to the accounts (note 43) added. 1 Recognition of Income and Expenditure The Authority complies with FRS 26 in only recognising creditor liabilities when services are rendered or goods receipted. Debtors are recorded at historical cost, but the balance has been written down to fair value through a bad debt provision (see note 22). Both revenue and capital transactions are recorded on an accruals basis. This means that income and expenditure is accounted for in the year in which it becomes due regardless of whether cash has actually been received or paid in the year. In particular: - Fees, charges and rents due from the customers are accounted for as income at the date the council provides the relevant goods or services. The cost of supplies and services are accrued in that accounting period during which they were consumed or received except for works, which are charged as expenditure when they are completed, before which they are carried as works in progress on the balance sheet. Interest payable and receivable on borrowings is accounted for in the year to which it relates, on a basis that it reflects the overall effect of the loan or investment. Where income and expenditure has been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the balance sheet. Where it is doubtful that debts will be settled, the balance of debtors is written down and a charge made to the income and expenditure account for the income that might not be collected. 19

20 2 Financial Instruments 2.1 Financial Liabilities As suggested will be the case for most local authorities in the recommended practice, the authority s loans and other liabilities are held at amortised cost. 2.2 Financial Assets Although the authority invests reserve balances and has actively managed financial instruments, they are ultimately held for re-investment by the authority, not for speculative motives, they are not equity investments and are not therefore available for sale. They are therefore classified as part of loans and receivables They do not need to be recognised at fair value through profit and loss (the recommended practice suggests this would be extremely rare in a local authority). To comply with the new financial instrument disclosure and presentation requirements in the SORP, a new note has been added to the accounts (note 43), itemised in accordance with the recommended practice requirements in that financial liabilities (creditors and borrowing) are now classified as other liabilities at amortised cost and financial assets (cash, bank, debtors and investments) as loans and receivables. 3 Government Grants and Contributions Government grants and other contributions are accounted for on an accruals basis and recognised in the accounting statements when the conditions for their receipts have been complied with and there is reasonable assurance that the grant or contribution will be received. Capital grants and contributions are credited to the Capital Grants and Contributions unapplied account pending its application to finance capital expenditure, when it is transferred to the Government Grants and Contributions Deferred account. Amounts are then written off to the Income and Expenditure account over the useful life of the asset to offset any depreciation on assets to which it relates. As these write offs are not an allowable charge against Council Tax, it is neutralised by an entry in the Statement of Movement in General Fund Balance, with the corresponding entry to the Capital Adjustment Account. Revenue grants and contributions are credited to the Income and Expenditure account in the same period as the expenditure to which they relate. Grants to support expenditure in general (e.g. Revenue Support Grant) are credited to the foot of the Income and Expenditure Account after Net Operating Expenditure. 4 Intangible Fixed Assets Intangible assets consist of the purchase of software licences and agreements and are capitalised at cost. Intangible assets are amortised on a straight line basis over the useful life of the asset (between 3 and 5 years). As the amortisation charge is not an allowable charge against Council Tax, it is neutralised by an entry in the Statement of Movement in the General Fund Balance, with the corresponding entry in the Capital Adjustments Account. 5 Tangible Fixed Assets 5.1 Recognition All expenditure on the acquisition, creation or enhancement of fixed assets is capitalised in accordance with FRS 15 (Tangible Fixed Assets). Subsequent capital expenditure is capitalised where it provides an enhancement of the economic benefits of the asset in excess of those previously assessed. The de minimis level policy is to capitalise all capital expenditure 10,000 and over on an individual asset basis (or a grouping of assets). 20

21 5.2 Measurement Land and buildings are revalued at five yearly intervals by Lambert Smith Hampton, Saddlers House, Cutter Lane, Cheapside, London. The latest revaluation was on 31 st March 2008; the previous revaluation was on 31 st March All valuations are in accordance with Royal Institute of Chartered Surveyors Appraisal and Valuation Standards. Surplus arising from revaluations of land and buildings are taken to the Revaluation Reserve, with the corresponding entries against fixed assets. Any reductions in values are covered in Paragraph 5.4 Impairment Losses. Land, operational properties and other operational assets are valued in the balance sheet at the lower of net current replacement cost or net realisable value. Vehicles, IT and Communication Equipment, and other equipment continue to be valued at historic costs net of depreciation. 5.3 Depreciation A depreciation charge is made to the Income and Expenditure account for all tangible fixed assets, which have a finite useful life. Depreciation is calculated on a straight line basis as follows: Operational Buildings Vehicles IT Hardware Other Plant & Equipment Over the life of the asset Over the life of the asset (2-10 years) 3 years 5 years In accordance with FRS15, freehold land is not depreciated. Assets under construction are not depreciated until completion. As the depreciation charge is not an allowable charge against Council Tax, it is neutralised by an entry in the Statement of Movement in General Fund Balance, with the corresponding entry to the Capital Adjustment Account. 5.4 Impairment Losses Besides identifying impairments at the five year revaluation review, impairment reviews are carried out in the intervening periods but only if an event or circumstances indicate that the charging amount of the fixed asset may not be recoverable. When an impairment loss is clearly due to clear consumption of economic benefit the loss is recognised in the Income and Expenditure Account. However, other impairment losses offset any balance held in the revaluation reserve, with any balance charged to the Income and Expenditure account. As these impairment adjustments are not an allowable charge against Council Tax, it is neutralised by an entry in the Statement of General Fund Balance, with the corresponding entry to the Capital Adjustment Account. 5.5 Disposals The gain or loss on disposal is the amount by which the disposal proceeds together with any balance on the Government Grants Deferred Account, are more or less than the carrying amount (net book value) of the fixed asset. The Income and Expenditure Account recognises this gain or loss. In order that this gain or loss is excluded from the charge to Council Tax, it is neutralised in the Statement of Movement in General Fund Balance. 21

22 If however, the asset is carried at current value, in addition to the entries above, the balance on the revaluation reserve in respect of asset disposals is written off to the Capital Adjustment Account. In most cases the asset will be revalued to its carrying value at the point of disposal so there will be no profit or loss, unless there is an unammortised grant attached to the asset, which will be released to the Income and Expenditure account in full resulting in a profit on disposal. For the authority only recognises a profit on disposal if the asset disposed of is more than 10, Redemption of Debt Outstanding loan debt relating to police services was transferred to Northamptonshire Police from Northamptonshire County Council on 1 April Instalments of principal are charged to revenue in accordance with the statutory minimum revenue provision. This is calculated at 4% of the Capital Financing Requirement at the beginning of the year. This is charged to the Statement of Movement on the General Fund Balance. 7 Capital Receipts Capital receipts from the disposal of assets are held in the Capital Receipts Reserve Account until such time as they are used to finance capital expenditure. Individual receipts of less than 10,000 are credited to revenue income. 8 Stocks and Stores Stocks and stores are maintained covering such items as vehicle spares, uniforms, stationery, office equipment and provisions. Stocks are valued at the lower of cost or net realisable value in line with the requirements of SSAP9. 9 Reserves Reserves are maintained to finance expenditure on projects that will be carried out in future years and to protect the Authority against unexpected events. Certain reserves/accounts are kept to manage the accounting process for tangible fixed assets (Revaluation Reserve, Capital Adjustment Account) and retirement benefits (Pensions Reserve FRS17). These do not represent usable resources for the Authority. 10 Provisions Provisions are made for liabilities or losses which are likely to be incurred, or certain to be incurred, but with uncertain amounts or dates on which they will arise, by charging expenditure to Income and Expenditure account in anticipation of the liability having to be met. When expenditure is incurred to which the provision relates they should be charged to the Provisions Account. 11 Investments Investments are shown in the balance sheet at cost less any provision required for loss in value. Note 2.2 covers how the Authority s investments are disclosed in relation to recently introduced Financial Reporting Standards covering Financial Instruments. 22

23 12 Retirement Benefits The Authority participates in two pension schemes for police officers and a single scheme for police staff. They are all defined benefits schemes. (a) Police Officers The Police Pension Scheme (PPS) is governed by the Police Pension Regulations 1987 (as amended) and related regulations that are made under the Police Pensions Act The new Police Pensions Scheme (NPPS) is also governed by the Police Pensions Act 1976 (as amended by the Police Pension Regulations 2006). They are unfunded which means there are no investment assets built up to meet pensions liabilities from pensions or other retirement benefits for former employees. The funding arrangements for police officers pensions changed on 1 st April Before April 2006 each Police Authority was responsible for paying the pensions of its former employees on a pay as you go basis. Instead, from April 2006 there is an employer s contribution rate set by the Home Office (currently 24.6% of pensionable salary), which is charged to the Income and Expenditure Account. Also from 1 st April 2006 each Police Authority is required by legislation to operate a Pension Fund Account (shown on page 50). The amounts that must be paid into and out of the Account are specified by regulation. Officer s contributions and the employer s contribution are paid into the pensions account from which pension payments are made. Any shortfall on the Account is met by a contribution from the Police Authority. Home Office Grant is received by the Authority to cover this contribution. Conversely, a surplus on the Pension Fund Account would mean a contribution to the Authority, and the Home Office recoup any surplus paid to the Authority. (b) Other Employees Other employees, subject to certain qualifying criteria, are eligible to join the Local Government Pension Scheme administered by Northampton County Council. It is a funded scheme. Pensions and other retirement benefits are paid from the fund. Employers and employees make regular contributions into the fund so that the liabilities are paid for evenly over the employment period. Actuarial valuations of the fund are undertaken every three years to determine the contributions rates needed to meet its liabilities. The Accounts show the full implementation of FRS17 (Retirement Benefits). FRS17 requires organisations to recognise retirement benefits in the Income and Expenditure Account when they are earned, even though the benefits will not be payable until employees retire. However, as statutory procedures require the charge against Council Tax to be based on the amounts payable by the Authority to the pension fund during the year, an appropriation is made with the pensions reserve which equals the net change in the pensions liability recognised in the Income and Expenditure Account. The neutralising entry is made in the Statement of Movement in General Fund Balance. The Balance Sheet discloses the Authority s net liability in relation to retirement benefits. The figures are based on the Actuary s latest estimate. Notes 8-10 to the Core Financial Statements provide further information about the pension schemes. 23

24 13 Leasing These accounts have been prepared in accordance with SSAP21. Rentals paid under operating leases have been accrued and accounted for in the period to which they relate. Further information on Operating Leases is available in note 2 to the accounts. 14 Overheads and Support Services Departments, such as finance, property services and ICT, are traditionally apportioned over the divisions of service shown in the Income and Expenditure Account as recommended in the Best Value Accounting Code of Practice (BVACOP). The Income and expenditure account reflects the change to one Police Services heading as recommended in the BVACOP, and the Authority is aware of likely further changes from the ongoing work between police authorities, CIPFA, and key stakeholders such as HMI Constabulary and the Association of Police Authorities as well as the CIPFA Police Panel and Police Statistics Working Party. The cost of Corporate and Democratic Core and of Non Distributable Costs are not allocated to services but shown separately in the Income and Expenditure Account. 15 Joint Arrangements The Police Authority has an interest in two Joint Arrangements, the East Midlands Air Support Unit (EMASU) and the East Midlands Special Operations Unit (EMSOU). Leicestershire Police acts as lead authority for both Joint Venture schemes. The Northampton Police Authority contributes to the running costs of EMASU and EMSOU which are included in the Income & Expenditure account. The Authority s balance sheet also includes a share of the reserves and assets of these two ventures. The Authority share is 33% and 15% respectively of EMASU and EMSOU. The Authority has had regard to FRS9 where applicable in incorporating the Joint Venture entries into its accounting statements. As demonstrated in note 44 to the accounts, these adjustments have no effect on the overall amount to be met from government grants and precepts. 16 Value Added Tax VAT is included in the accounts of the Authority, whether of a capital or revenue nature, only to the extent that it is not recoverable. 17 Contingent Assets and Contingent Liabilities They are not recognised in the accounting statements but disclosed in the notes to Core Statement. There are no Contingent Assets or Contingent Liabilities. 18 Exceptional Items, Extraordinary Items and Prior Period Adjustments Exceptional items are included in the cost of the service to which they relate or on the face of the Income and Expenditure Account if that degree of prominence is necessary in order to give a fair presentation of the accounts. Extraordinary items are disclosed and described on the Income and Expenditure Account after dealing with all items within the ordinary activities of the authority. Material adjustments applicable to prior years, arising from changes in accounting policies or from the correction of fundamental errors, are accounted for by restating the comparative figures for the preceding period in the statement of account and notes and 24