Commissioner of Police of the Metropolis. Un-audited Statement of Accounts 2014/15

Transcription

1 Commissioner of Police of the Metropolis Un-audited Statement of Accounts 2014/15

2 How to Contact Us We welcome your feedback. If you have any comments about this Statement of Accounts they should be sent to: Corporate Finance - Finance Services Metropolitan Police Service 10th Floor (West) Empress State Building, Lillie Road, London SW6 1TR Consultation Opportunities The Mayor s Office for Policing and Crime (MOPAC) holds regular meetings about policing with people who live and work in London. Details of these can be found on MOPAC Internet site at Copies The Audited Statement of Accounts 2014/15 will be published at the end of July 2015 as an internet document. Please consider the environment before printing the document. Internet Addresses: Mayor of London: Metropolitan Police Service: Commissioner of Police of the Metropolis Statement of Accounts 2014/15

3 Contents Contents Explanatory foreword and financial review Independent Auditor s Report to the Commissioner of Police of the Metropolis Statement of responsibilities for the Accounts (ii) (xi) (xii) Comprehensive Income and Expenditure Statement 1 Movement in Reserves Statement 2 Balance Sheet 4 Cash Flow Statement 5 Notes to the Financial Statements 6 Police officer pension fund 34 Glossary of terms 37 i Commissioner of Police of the Metropolis Statement of Accounts 2014/15

4 Explanatory foreword and financial review Explanatory foreword and financial review Introduction These Accounts set out the overall financial position of the Commissioner of Police of the Metropolis (CPM), who is responsible for the Metropolitan Police Service (MPS), for the year ended 31 March The MPS is the largest police force in the UK and amongst the largest in the world. Headquartered in New Scotland Yard, the MPS delivers territorial and specialist policing services to over eight and a half million Londoners across 620 square miles; to millions of commuters, tourists and visitors to the capital; and to many National and International communities. Sir Bernard Hogan-Howe Commissioner of Police of the Metropolis The CPM was established as a separate body on the 16 January 2012 under the Police Reform and Social Responsibility Act The CPM is headed by the Commissioner and responsible for the MPS. The primary function of the CPM is the exercise of operational policing duties under the Police Act A separate body called the Mayor s Office for Policing and Crime (MOPAC) function was established at the same time. MOPAC holds the CPM to account for the exercise of these duties, thereby securing the maintenance of an efficient and effective metropolitan police force in London. For accounting purposes MOPAC and the CPM together are known as the MOPAC Group. In the MOPAC Group Accounting Statements the financial activities of MOPAC and the CPM are consolidated. A separate set of statutory accounts has been published for MOPAC and the MOPAC ii Commissioner of Police of the Metropolis Statement of Accounts 2014/15

5 Explanatory foreword and financial review Group to recognise all the financial transactions incurred during 2014/15 for policing London. This Foreword provides an overview of the accounting arrangements and outlines the financial performance of the CPM during 2014/15. The Statement of Accounts The 2014/15 Statement of Accounts is prepared in accordance with the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on Local Authority Accounting 2014/15. The Accounts reflect the current legislative framework as well as the local arrangements operating in practice. Key elements of this framework in 2014/15 include: The Police Reform and Social Responsibility Act 2011 (the Act); The Home Office Financial Management Code of Practice for the Police Forces of England and Wales 2013; MOPAC Scheme of Delegation and Consent; MOPAC Financial Regulations; MOPAC Contract Regulations. Under the legislative framework and local arrangements, MOPAC is responsible for the finances of the whole Group and controls the assets, liabilities and reserves. MOPAC receives all income and funding and makes all the payments for the Group from the MOPAC Police Fund. In turn the CPM fulfils its functions under the Act within an annual budget (set by MOPAC in consultation with the CPM). The Accounts reflect the Government s intention to phase in the reforms within the Police Reform and Social Responsibility Act 2011 over a number of years. The second phase of the transition commenced on 1 April 2014, when police staff under the direction of the Commissioner transferred their contracts of employment from MOPAC to the CPM. The existing governance framework was modified to reflect the new support staffing arrangements and a new Scheme of Delegation and Consent established for the MOPAC Group. The accounting arrangements between MOPAC and the CPM are detailed more fully in Note 4 to the Accounts on page 10. Financial statements The financial statements for the CPM required under the 2014/15 Code consist of: A Comprehensive Income and Expenditure Statement (CIES) - this recognises the accounting cost in the year of providing policing services under the direction of the CPM for the 12 months to 31 March 2015 (as opposed to the overall cost of policing London which includes the cost of administering MOPAC and MOPAC expenditure on community safety and crime prevention, as shown in the Group Accounts). The CIES has been prepared by applying the accounting principles set out in the CIPFA Accounting Code of Practice. The headings used are from CIPFA s Service Reporting Code of Practice (SeRCOP) and highlight the financial consequences of the different policing activities in London last year under the direction of the Commissioner; iii Commissioner of Police of the Metropolis Statement of Accounts 2014/15

6 Explanatory foreword and financial review Movement in Reserves Statement this summarises movements to and from the reserves for the year 2014/15. It is analysed into usable reserves i.e. those that can be applied to fund expenditure and unusable reserves. Under the MOPAC/CPM Financial Regulations and the Scheme of Delegation, MOPAC holds all reserves and accordingly the reserve balances on the CPM Movement in Reserves Statement as at 31 March 2015 are nil; The Balance Sheet this summarises the financial position of the CPM at 31 March 2015 and sets out any assets, liabilities and reserves. All liabilities are ultimately the responsibility of MOPAC, so at year end the net worth (total assets minus liabilities) is nil. The liability for police pensions is offset by an intra-group debtor reflecting MOPAC s continuing responsibility to provide funds from the Police Fund to enable the CPM to administer pension payments; The Cash Flow Statement as all of the Group's cash flows during the reporting period are presented in the MOPAC Accounts, this statement simply shows the net surplus on provision of services adjusted for non-cash movements. In addition to the financial statements, the Annual Accounts include a Statement of Responsibilities for the Accounts and information on the Police Officer Pension Fund (providing statements for pension fund income and expenditure, assets and liabilities). An Annual Governance Statement (AGS) accompanies the Statement of Accounts. Financial performance Setting the budget The Deputy Mayor for Policing and Crime recommends an annual budget to the Mayor, following consultation with the Commissioner. The approved budget for 2014/15 provided for gross expenditure of 3,247 million. The net budget (taking into account income, specific grant and reserve usage) was 2,448 million. Of this amount, 2,431 million was attributable to the MPS and the remaining 37 million (before transfer to/from reserves) to MOPAC. Final outturn The financial year 2014/15 presented a number of key challenges with savings and efficiencies of 134 million required to balance the budget. The MOPAC Group has delivered a balanced outturn position against the budget. MOPAC has made a net transfer of 28.2 million to reserves to help manage future challenges. Table 1 (overleaf) provides a summary of the final MOPAC Group outturn position for 2014/15 compared with the revised budget. Figures in brackets in the variance column represent an underspend for expenditure or an over receipt of income against the revised annual budget. Key points to note in Table 1 are provided under the following headings: Police officer pay and overtime (underspend of 14.2 million) The underspend in police officer pay was principally due to new officers being recruited at a later date in 2014/15 than originally planned for in the budget. There were 31,944 FTE officers in post at the end of the financial year. There was also a small decrease in the average pay of officers due to the number of new recruits. Although these factors have resulted in an underspend, the CPM along with other forces faces a small number of pay related legal challenges. At present the financial impacts of these can not be adequately quantified although they are not thought to be material and will be covered from MOPAC s earmarked reserves if necessary. Further details of these contingent liabilities are available in Note 31 of the Group Accounts. iv Commissioner of Police of the Metropolis Statement of Accounts 2014/15

7 Explanatory foreword and financial review Table 1 Gross expenditure attributed to CPM compared with the annual budget* for 2014/15 MOPAC Group Approved annual budget Revised annual budget Outturn Variance Overspend/ (underspend) CPM Revised annual budget Outturn Variance Overspend/ (underspend) Pay 1,844,306 1,847,986 1,833,787 (14,199) Police officer pay 1,847,986 1,833,787 (14,199) 654, , ,566 4,768 Police staff pay 616, ,352 5,986 2,499,292 2,472,784 2,463,353 (9,431) Total pay 2,464,352 2,456,139 (8,213) Running expenses 19,504 27,847 24,403 (3,444) Employee related expenditure 27,612 24,233 (3,379) 169, , ,440 2,940 Premises costs 166, ,111 2,938 61,163 61,730 62, Transport costs 61,708 62, , , ,829 (6,391) Supplies & services 358, ,786 ( 470) 59,653 59,566 51,093 (8,473) Capital financing costs 59,566 51,093 (8,473) 38,025 37,875 33,785 (4,090) Discretionary pension costs 37,875 33,785 (4,090) 748, , ,638 (19,100) Total running expenses 711, ,053 (13,137) 3,247,300 3,224,522 3,195,991 (28,531) Total gross expenditure 3,175,542 3,154,192 (21,350) (742,031) (756,712) (776,014) (19,302) Total income and specific grants (744,385) (764,744) (20,359) 2,505,269 2,467,810 2,419,977 (47,833) Net expenditure 2,431,157 2,389,448 (41,709) (57,119) (19,660) 28,173 47,833 Transfer to/(from) earmarked reserve Transfer to/(from) general reserve 2,448,150 2,448,150 2,448,150 0 Budget requirement * The amount of budget attributed to the CPM is equal to the MOPAC Group budget less the costs of administering MOPAC. v Commissioner of Police of the Metropolis Statement of Accounts 2014/15

8 Explanatory foreword and financial review Police staff pay and overtime (overspend of 6.0 million) The overspend is first and foremost due to actual strength of police staff (including agency) being above the budgeted levels for the first 6 months of the year, the significant number of agency staff often costing more than the average costs for an equivalent permanent member of staff. The police staff pay award which was higher than budgeted also resulted in a cost pressure for 2014/15. This overspend is partially offset by an underspend on pay for Police Community Support Officers (PCSOs) due to numbers being below the levels assumed in the original budget. There are only minor variances on overtime costs. Employee related expenditure (underspend of 3.4 million) The underspend is principally within the external training budgets due to delays in implementing the Leading for London initiative and savings in recruitment advertising. Premises costs (overspend of 2.9 million) The overspend is predominantly due to changes in the planned timetable for exiting surplus buildings which led to delays in realising planned savings. Transport costs (overspend of 0.3 million) A minor variation against the budget Supplies and services costs (underspend of 0.5 million) A minor variation against the budget Capital financing costs (underspend of 8.5 million) The budget assumed a level of borrowing in 2014/15. Due to higher than expected capital receipts and reduced capital expenditure, no borrowing was required. Discretionary pension costs (underspend of 4.1 million) This saving is due to reduced payments under the police officers 30 years+ abatement scheme as the scheme is now closed so there are no new officers coming through the scheme. The numbers of officers retiring on ill-health has reduced, and the provision for injury award pensions has also been reduced. Income and specific grants (additional income of 20.4 million) MOPAC received additional income in regard to reimbursements for mutual aid, contributions from Police Officers for subsidised rail travel and additional counter terrorism grant. Review of 2014/15 performance In 2014/15 there were large reductions across the majority of key neighbourhood crimes in London offences such as robbery, burglary and theft. Overall the seven neighbourhood crimes a key focus of the Police and Crime Plan show a 7% reduction, equating to nearly 25,000 fewer offences in the Capital between 1 April 2014 and 31 March 2015 compared to the preceding 12 months. Robbery, theft from the person, burglary and theft from motor vehicles showed significant reductions in the number of offences following targeted operations to cut crime being carried out in a wide range of areas and an additional 2,600 police officers being placed in local neighbourhood teams over the past year. Robberies are down by 22% (6,347 fewer offences), with reductions in both personal robbery and business robbery - down by 23% and 13% respectively. There has been a particularly significant drop in the numbers of robberies of mobile phones by 38% (over 5,000 fewer offences). The MPS has worked to tackle this offence through use of specialist response cars on boroughs tasked to prioritise 999 calls for robbery as well as constantly striving to raise public awareness among capital-dwellers of steps they can take to reduce their chances of becoming victims. vi Commissioner of Police of the Metropolis Statement of Accounts 2014/15

9 Explanatory foreword and financial review Theft from the person (when no threat of violence has been used) showed a similarly big drop in offences, with a 26% reduction (11,250 fewer offences) and an even larger cut in the number of personal thefts where mobiles are stolen, a 37% drop, which represents around 60% of these cases. There were 11,635 fewer burglaries across both residential and business categories in London in 2014/15 compared with 2013/14 - a reduction of 14%, continuing the long-term downward trend. Theft from motor vehicles also reduced by 20% (over 12,300 fewer crimes). The MPS has introduced a range of innovative methods to tackle burglary, including predictive crime mapping and biggest ever roll out of the Met Trace pilot under which half a million London home owners will be provided with free kits. These kits will allow them to mark their possessions with a unique forensic code which can be used by police to trace items and link suspects to crime scenes. It has been estimated this could prevent over 7,000 residential burglary offences, saving the MPS almost 5 million and freeing up 140,000 police hours (equivalent to 17,400 police working days). Most recently the use of new technology in the form of a device that captures shoe prints of individuals who are arrested and then compares these against those found at crime scenes has already achieved impressive results in catching offenders. It enables forensics teams to access the images of footwear from remote locations and reduces the process of developing foot prints from five days to two minutes. Violence with injury (VWI) has gone up, by 19%, (11,096 offences) - with around a third of this total made up of domestic abuse VWI. While figures show a consistent rise, analysis shows this is largely attributable to more accurate crime recording rather than an actual rise in violence per se. Data from the London Ambulance Service supports this view, with 5,000 fewer calls to their control room to attend to victims of violent injury over the last nine months. Although the rise in VWI has been driven by more accurate recording of individual offences, the MPS has put concerted efforts into tackling this issue through a coordinated crackdown in all 32 boroughs that was launched last year and is now integrated into every area s daily crime plans. This involves enhanced resources being deployed at the locations where violence disproportionately occurs and encompasses a range of activities from high visibility patrols and enforcing no drinking zones to new licensing initiatives such as the breathalyser machines shortly to be rolled out in ten boroughs. These are aimed at preventing violence occurring in late night venues by identifying individuals who arrive 'pre-loaded' with alcohol and barring them from entry. Other tactics employed under Operation Equinox include 5,600 weapon sweeps carried out over the last six months during which police have recovered 500 weapons, as well as over 5,000 visits to licensed premises. Knife crime offences reduced by 3.9% over the comparison period with almost 400 fewer offences making the lowest total in the last eight years. Nearly half (49%) of knife crime relates to knife enabled robberies which have reduced by 19%, mirroring the downward trend in robbery overall. However, in contrast to overall knife crimes, knife injuries are up by 12% (374 offences), particularly among the under 25 age group. Gun crime offences show a very small increase of 1.7% (28) during the last 12 months. Around two fifths of gun crime (40%) relates to robberies - which have reduced by 13%. The number of homicides has decreased, with 11 fewer over the last year than the previous 12 months. Whilst the number of homicides in January this year (15) was the highest individual month for some years, annual homicide levels have been reducing and reached their lowest number in the last 45 years during the 2014 calendar year (92). Tackling weapon-related violence is a priority for the Met and we work with parents, schools, local authorities and charitable organisations as part of an overall programme to address this issue. Operations continually take place throughout the capital focusing on key times and places where intelligence points to the highest risk. We proactively target known violent offenders, vii Commissioner of Police of the Metropolis Statement of Accounts 2014/15

10 Explanatory foreword and financial review stopping and searching people to detect and deter the carrying of weapons and deploy screening arches in locations such as transport hubs. During 2014/15, more than 1,910 gang members were arrested and those involved in gangrelated crime were jailed for over 1,418 years. A further 1,393 gang members are subject to judicial restrictions such as gang injunctions, ASBOs, electronically tagged or managed under licence or got Youth Referral Orders. Of those, 1,023 gang members are in custody. The total number of all sexual offences increased by 29% over the comparison period, with recorded rape offences up by 20% (857 offences) and other serious sexual offences up by 36% (1,885 offences). The number of reported sexual offences saw a significant increase after October 2012, coinciding with the widespread publicity around Jimmy Savile. The positive effect of Operation Yewtree has been a major factor in increased confidence of victims to come forward. In 2014, more recent cases have contributed to the rise in offence levels. This rise has been driven by both victim confidence and improved crime recording, with significant emphasis on ethical recording practices. Nevertheless, we know that sexual offences are still underreported, and would encourage all victims to come forward to access the specialist support we can offer. Each case will be rigorously investigated and the Met currently has 1,000 specially trained employees working in this area - this includes an increase of 50 officers in the last year alone. The number of detections for rape achieved by the MPS in 2011/12 was 556 and in 2014/15 this rose to 645. Finally domestic abuse offences also rose by 20%, while racist and religious hate crime has increased by 26%. The MPS believes these increases are down to a range of factors, including the improvements in VWI crime recording, a growing willingness of victims to report hate crime; an improved awareness of MPS staff to identify these offences; the support provided by more than 500 specialist hate crime investigators working in our 32 dedicated hate crime Community Safety Units (CSUs); and work with the partners to support victims. Outlook for 2015/16 and key challenges During the coming year the MPS will continue driving improvements in our service delivery to London, and carry on developing our governance framework. The MPS has developed a business plan with activity for 2015/16 and will track progress using the One Met Scorecard. Alongside this the MPS is developing the One Met Model 2020 for policing the Capital in the future. Plans for the coming year include continuing work to increase public confidence, and developing an increasingly preventative approach to sustain the significant and long term crime reduction achieved up until now. The MPS will be working to ensure the organisation has the skills required to deal with current and emerging areas of investigation, the latter including online crime, and will continue to implement significant amounts of change as part of work to transform the MPS, reduce costs and develop the technology that supports officers in policing London. It is expected that the effect of increasingly accurate crime recording, causing rises in levels of recorded offences such as violence, will continue into 2015/16. The 2015/16 gross revenue budget is set at 3,166 million, a decrease of 2.6 % over the 2014/15 figure. The budget is funded by a general Government grant of 1,794 million and council tax income of 566 million. Additionally, MOPAC is budgeting to receive 742 million in specific grants and income and is planning to utilise 64 million of budget pressures reserves. The policing element of the Band D council tax precept for 2015/16 is viii Commissioner of Police of the Metropolis Statement of Accounts 2014/15

11 Explanatory foreword and financial review The Mayor approved a balanced budget for 2015/16 including additional savings of 206 million. These savings principally relate to reductions in police staff numbers, and savings in technology and supplies & services budgets. Going forward the budget for 2016/17 requires significant savings to be made. Between 2016/17 and 2019/20, the MPS's overall savings requirement has been assessed as 800m based on the ongoing austerity programme (and resulting reductions in government grants) and likely inflation levels for pay and non-pay. The MPS's financial strategy has been devised to address this savings requirement and will aim to achieve the following: Maximise future spend on the frontline by aiming to keep expenditure on back office functions to about 15% of affordable gross expenditure by 2019/20 (currently 23%). The commercial strategy, including potential decisions to outsource business support services, will be key to achieving this; Making best use of the capital receipts, i.e. investing in retained property and IT capability to ensure improvements in the productivity of front and middle office services. A Priority Based Budgeting process has commenced that will examine MPS services with a view to delivering the organisation's financial strategy. The Balance Sheet Under MOPAC/CPM financial regulations the CPM is not responsible for the acquisition, disposal or maintenance of long term assets which are instead the responsibility of the Deputy Mayor through the MOPAC Capital programme. All long term assets are therefore recognised on the MOPAC Balance Sheet rather than on the CPM Balance Sheet. The CPM does, however, make use of these assets in the discharge of policing duties. Details of assets held by MOPAC as well as information on other categories of assets and liabilities can be found in the 2014/15 MOPAC and the MOPAC Group Statement of Accounts. Reserves The reserves of the Group are held by MOPAC and are available for the Commissioner to utilise in the performance of his duties subject to approval by the Deputy Mayor. These reserves and their purposes can be reviewed in the MOPAC Group Statement of Accounts. Pensions The Police Officer Pension Liability and Police Officer Pension Reserve reflect the implementation of International Financial Reporting Standard IAS19. The pension liability shows the underlying commitments that the Group has in the long run to pay retirement benefits obligations as they fall due. The CPM Balance Sheet also recognises a long-term debtor with the MOPAC equivalent to the IAS19 liability. This debtor reflects the commitment of the MOPAC to provide funding to the CPM to meet these obligations. The most recent Police Pension fund valuation by the scheme s actuary shows an increase in liabilities due in the main to the change in actuarial assumptions used to calculate the pensions liability and changes to members commutation terms. The pension contributions of 24.2% of pensionable pay are made to finance the liability, with the actual pensions and commuted lump sums being met directly by the Police Pension Fund Revenue Account. The shortfall on the Pension Fund between contributions and other income receivable and benefits payable was met by the Home Office in 2014/15. ix Commissioner of Police of the Metropolis Statement of Accounts 2014/15

12 Explanatory foreword and financial review Accounting changes in 2014/15 There were no new CIPFA Code 2014/15 requirements which affected the MPS Statement of Accounts. Annual Governance Statement The Accounts and Audit Regulations 2011 require that the Annual Governance Statement (AGS) accompanies the Statement of Accounts. The CPM has elected to publish the AGS as a separate document to the Statement of Accounts. The AGS is a statutory document which explains the governance processes and procedures in place to enable the MPS to carry out its functions effectively. The AGS highlights the CPM s internal control environment, comments on its effectiveness and identifies issues for future work. The CPM performs an annual assurance review appraising the governance arrangements currently in place. x Commissioner of Police of the Metropolis Statement of Accounts 2014/15

13 Independent auditor s report Independent Auditor s Report to the Commissioner of Police of the Metropolis To be completed in July after 2015 audit xi Commissioner of Police of the Metropolis Statement of Accounts 2014/15

14 Statement of responsibilities Statement of responsibilities for the Accounts Commissioner s Responsibilities The Commissioner of Police of the Metropolis (CPM) is required to: Make arrangements for the proper administration of the Metropolitan Police Service financial affairs and to secure that one of its officers (Chief Financial Officer) has responsibility for the administration of those affairs; Manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; and Approve the Statement of Accounts. xii Commissioner of Police of the Metropolis Statement of Accounts 2014/15

15 Statement of responsibilities Statement of responsibilities for the Accounts Chief Financial Officer s Responsibilities The Chief Financial Officer of the CPM is responsible for the preparation of the Statement of Accounts for the CPM in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom ( the Code ). In preparing this Statement of Accounts, the CPM has: Selected suitable accounting policies and then applied them consistently; Made judgements and estimates that were reasonable and prudent; Complied with the Code; Kept proper accounting records which were up to date; and Taken reasonable steps for the prevention and detection of fraud and other irregularities. I certify that the Statement of Accounts gives a true and fair view of the financial position of the CPM at the accounting date and of the income and expenditure for the year ended 31 March signed Lynda McMullan Chief Financial Officer Dated: 1 June 2015 xiii Commissioner of Police of the Metropolis Statement of Accounts 2014/15

16 Financial statements CPM Comprehensive Income and Expenditure Statement for 2014/15 CIES * MOPAC funding during the year for financial resources of MOPAC consumed at the request of the CPM Year ending 31 March 2015 Year ending 31 March 2015 Year ending 31 March 2015 Year ending 31 March Restated 2014 Year ending 31 March Restated 2014 The Comprehensive Income and Expenditure Statement (CIES) above reflects MOPAC financial resources consumed at the request of the CPM for 2014/15 and 2013/14. In practice all the respective costs are paid for by MOPAC and the CIES includes the intra-group adjustment referred to in Note 4 to the Accounts, resulting in a nil balance for total comprehensive income and expenditure. The comparative figures are restated to reflect refinements in the MOPAC Police Objective Analysis Model used to identify costs against policing activities. Only those disclosure notes that are directly relevant have been restated. Year ending 31 March Restated Notes Gross exp Income Net exp Gross exp Income Net exp Financial resources of MOPAC consumed at the request of the CPM Local policing 1,297,660 (151,496) 1,146,164 1,152,105 (136,231) 1,015,874 Dealing with the public 216,431 (1,048) 215, ,141 (5,699) 211,442 Criminal justice arrangements 240,272 (12,560) 227, ,027 (19,132) 202,895 Road policing 76,977 (11,816) 65,161 84,170 (14,935) 69,235 Specialist operations 243,755 (53,097) 190, ,738 (56,625) 205,113 Intelligence 186,767 (10,313) 176, ,402 (11,862) 165,540 Investigation 753,282 (21,069) 732, ,669 (25,939) 703,730 Investigative support 104,381 (1,564) 102,817 92,737 (4,070) 88,667 National policing 538,140 (378,181) 159, ,207 (373,972) 134,235 Community safety & crime reduction 2,100 (2,100) 0 2,089 (2,089) 0 Corporate and democratic core 1, ,317 1, ,483 Non distributed cost 2, ,000 2, ,200 Financial resources of MOPAC consumed at the request of the CPM 3,663,082 (643,244) 3,019,838 3,450,968 (650,554) 2,800,414 Intra-group adjustment* (3,663,082) 643,244 (3,019,838) (3,450,968) 650,554 (2,800,414) Net cost of policing services Other operating expenditure Financing and investment Interest on Police Officer Pension Defined Benefit Liability ,072,500 1,001,600 Intra-group adjustment* (interest on police officer pension defined benefit liability ) (1,072,500) (1,001,600) Non specific grant income and contributions Intra-group adjustment* (remeasurements of the defined benefit liability) 10.1 (3,728,700) (1,460,500) Surplus on provision of services (3,728,700) (1,460,500) Other comprehensive income and expenditure Re-measurements of the defined benefit liability ,728,700 1,460,500 Total comprehensive income and expenditure Commissioner of Police of the Metropolis Statement of Accounts 2014/15

17 Financial statements CPM Movement in Reserves Statement for 2014/15 This statement shows the movement in the year on the different reserves. 000 General Fund Balance Earmarked revenue reserves Capital Receipts Reserve Other usable capital reserves Total usable reserves Unusable reserves Total reserves At 1 April Surplus on provision of services (3,728,700) (3,728,700) 0 (3,728,700) Other comprehensive income and expenditure 3,728, ,728, ,728,700 Total comprehensive income and expenditure Adjustments between accounting basis and funding basis under regulations Adjustments between accounting basis and intra-group adjustment Net (increase) / decrease before transfers to earmarked reserves Transfers to / from earmarked reserves (Increase) / decrease in year Balance at 31 March This statement shows only pension related transactions for the year ending 31 March 2015 as all reserves are managed by the Mayor s Office for Policing and Crime (MOPAC). The financial consequences of the operational activities undertaken by the CPM can be seen in the Comprehensive Income and Expenditure Statement. 2 Commissioner of Police of the Metropolis Statement of Accounts 2014/15

18 Financial statements CPM Movement in Reserves Statement for 2013/14 This statement shows the movement in the year on the different reserves. 000 General Fund Balance Earmarked revenue reserves Capital Receipts Reserve Other usable capital reserves Total usable reserves Unusable reserves Total reserves At 1 April Surplus on provision of services (1,460,500) (1,460,500) 0 (1,460,500) Other comprehensive income and expenditure 1,460, ,460, ,460,500 Total comprehensive income and expenditure Adjustments between accounting basis and funding basis under regulations Adjustments between accounting basis and intra-group adjustment Net (increase) / decrease before transfers to earmarked reserves Transfers to / from earmarked reserves (Increase) / decrease in year Balance at 31 March This statement shows only pension related transactions for the year ending 31 March 2014 as all reserves are managed by the Mayor s Office for Policing and Crime (MOPAC). The financial consequences of the operational activities undertaken by the CPM can be seen in the Comprehensive Income and Expenditure Statement. 3 Commissioner of Police of the Metropolis Statement of Accounts 2014/15

19 Financial Statements CPM Balance Sheet The Balance Sheet sets out the assets, liabilities and reserves at the year end. As stated previously the CPM does not own any assets nor hold any reserves at year end. It does include two accounting adjustments to show the reader its accounting for pension liabilities and accumulated absences on the Balance Sheet at 31 March Notes Year ending 31 March 2015 Year ending 31 March 2014 Non current assets Police Officer pension - Intra-group debtor 30,058,100 24,852,500 Total long term assets 30,058,100 24,852,500 Current assets Accumulated absences - Intra-group debtor 102, ,822 Total current assets 102, ,822 Current liabilities Creditors 11 (102,786) (108,822) Total current liabilities (102,786) (108,822) Long term liabilities Police officer pension liabilities 10.1 (30,058,100) (24,852,500) Total long term liabilities (30,058,100) (24,852,500) Net assets 0 0 Financed by: Unusable reserves 0 0 Usable reserves 0 0 Total reserves Commissioner of Police of the Metropolis Statement of Accounts 2014/15

20 Financial Statements CPM Cash Flow Statement This statement does not show any cash-flows for the year ending 31 March 2015, since all payments were made from the Police Fund which is held by the Mayor s Office for Policing and Crime (MOPAC). Similarly all income receipts and funding are received by MOPAC during the year. The financial consequences of the operational activities undertaken by the CPM can be seen in the Comprehensive Income and Expenditure Statement. 000 Notes Year ending 31 March 2015 Year ending 31 March 2014 Net (surplus) or deficit on the provision of services 13.1 (3,728,700) (1,460,500) Adjustments to net (surplus) or deficit on the provision of services for Non-Cash Movements ,728,700 1,460,500 Adjustments for items in the net (surplus) or deficit on the provision of services that are investing or financing activities 0 0 Net cash flows from operating activities 0 0 Investing activities 0 0 Financing activities 0 0 Net (increase) or decrease in cash and cash equivalents 0 0 Cash and cash equivalents at the beginning of the period 0 0 Cash and cash equivalents at the end of the period Commissioner of Police of the Metropolis Statement of Accounts 2014/15

21 Notes to the Financial Statements for the Commissioner of Police of the Metropolis The notes for the Statement of Accounts for 2014/15 are presented in the following pages (6 to 36). 1. Statement of accounting policies 1.1 General principles These financial statements have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom (the Code), issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) 2014/15 and the Accounts and Audit [England] Regulations 2011 and the Service Reporting Code of Practice for Local Authorities 2014/15 (SeRCOP). The accounting policies apply EU adopted International Financial Reporting Standards (IFRS) as amended by International Public Sector Reporting Standards (IPSAS) for the public sector. The accounting policies below also reflect the powers and responsibilities of the Commissioner of Police of the Metropolis (CPM) as designated by the Police Reform and Social Responsibility Act 2011 and the Home Office Financial Management Code of Practice for the Police Service, England and Wales The accounting policies defined here are consistent with local regulations, local agreement and practice as well as the MOPAC Group policies. The Accounts cover the 12 months to 31 March Cost and intra-group income recognition All external income is received by MOPAC, which holds the Police Fund for London and all related financial reserves and cash balances. MOPAC provides an annual budget to the CPM. All resources consumed at the request of the Commissioner are funded by MOPAC, including the wages of police staff and officers, and no actual cash transactions or events take place between the two entities. From an accounting perspective costs are recognised within the CPM Accounts to reflect the financial resources consumed at the request of the CPM and the economic benefit and service potential this brings about. For instance, an economic benefit is recognised to reflect the utilisation of MOPAC owned fixed assets which mirrors depreciation of property, plant and equipment (amortisation in respect of intangible assets), and impairment from obsolescence or physical damage. Income is recognised in the Comprehensive Income and Expenditure Statement of the CPM Accounts, to reflect the funding by MOPAC for expenditure incurred by the CPM. 1.3 Accruals and prepayments Activity is accounted for in the year it takes place, not simply when cash payments are made. In particular: Intra-group income is recognised when it is probable that the associated economic benefit or service potential will flow to the CPM; Supplies are recorded as expenditure when it is probable that the associated economic benefit or service potential will flow to the CPM; Short term compensated absences - these are periods during which an employee does not provide services to the employer, but employee benefits continue to be earned (such as periods of annual leave and rest days). Short term accumulated absences are recognised in the Comprehensive Income and Expenditure Statement in the period in which officers or 6 Commissioner of Police of the Metropolis Statement of Accounts 2014/15

22 police staff render the service which entitles them to the benefit, not necessarily when they enjoy the benefit. An accrual to reflect the cost of leave earned, but not taken by police officers and staff at the end of the financial year recognised on the CPM Balance Sheet, is offset by an intra-group debtor to reflect the responsibility placed on MOPAC to provide funds from the Police Fund to meet this liability. 1.4 Provisions Provisions are made where an event has taken place that gives an obligation where it is probable that settlement by a transfer of economic benefits will be required and where the amount of the obligation can be estimated reliably, but where the timing of the transfer is uncertain. Under the MOPAC/CPM Financial Regulations, the revenue charge for provisions recognised on the MOPAC Balance Sheet is recognised in the CIES of the CPM. Estimated provisions are reviewed at the end of each financial year. Where it is likely that a provision will not be required, the relevant amount is reversed in the CIES of CPM. 1.5 Employee benefits Benefits payable during employment Short-term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non monetary benefits for current employees. The financial consequences of these benefits are recognised in the CPM CIES in the year in which the employee renders service to the CPM. IAS19 Employee Benefits also requires the CPM to account for short-term compensating absences which include time owing and annual leave accrued by accruing for the benefits which have accumulated but are untaken by the 31 March 2015 (See 1.3 for more information). Termination benefits Termination benefits are amounts payable as a result of a decision to terminate a member of staff s employment before their normal retirement date or their decision to accept voluntary redundancy. These are recognised in the CIES of the CPM at the earlier of when the organisation can no longer withdraw the offer of those benefits or when the organisation recognises the costs for a restructuring. Post employment benefits There are two pension schemes for police officers and a single scheme for police staff. Police officers The Police Pension Scheme (PPS) is a contributory occupational pension scheme (contracted out from the State Earnings Related Pension Scheme), governed by the Police Pension Regulations 1987 (as amended) and related regulations that are made under the Police Pensions Act The 2006 New Police Pension Scheme (NPPS), which started on 1 April 2006, is a contributory occupational pension scheme (contracted out from the State Earnings Related Pension Scheme), governed by the Police Pensions Act 1976 (as amended by the Police Pensions Regulations 2007). Officers make contributions of between 14.25% and 15.05% of pensionable pay for the 1987 police pension scheme or 11% to 12.75% for the new 2006 police pension scheme. The employees contribution is set nationally by the Home Office and is subject to triennial revaluation. A Pension Fund was set up on 1 April 2006 to administer both schemes. The NPPS and PPS are defined benefit schemes paid from revenue (without managed pension assets). The net liability for both Pension Schemes is recognised initially on the CPM Balance Sheet in accordance with IAS19 Employee Benefits. All liabilities are ultimately the responsibility of MOPAC as MOPAC provides the sole source of funding to meet the CPM s costs, so at year end the net pension liability for police pensions is offset by an intra-group debtor, reflecting MOPAC s continuing responsibility to provide funds from the Police Fund to enable the CPM to administer pension payments. 7 Commissioner of Police of the Metropolis Statement of Accounts 2014/15

23 Recognition of the total liability has a substantial impact on the net worth of the CPM and by virtue of the funding arrangement the net worth of MOPAC. Accrued net pension liabilities are assessed on an actuarial basis. The change in net pension liability can be broken down into the following components: Service cost comprising: Current service cost the increase in liabilities as a result of years of service earned this year allocated to the CPM Comprehensive Income and Expenditure Statement to the services for which the police officers worked; Past service cost the increase in liabilities arising as a result of a scheme amendment or curtailment whose effect relates to years of service earned in earlier years debited to the Net Cost of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs; Interest on the defined benefit liability the increase during the period in the defined benefit liability which arises because the benefits are one year closer to being paid debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. Re-measurements comprising: Actuarial gains and losses changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions debited to the Pensions Reserve; Transfers into and out of the Scheme representing joining and leaving police officers, are recorded on a cash basis in the Pension Fund, because of the length of time taken to finalise the sums involved. Police staff The Group joined the Principal Civil Service Pension Scheme (PCSPS) in 2002/03. The PCSPS is an unfunded defined benefit scheme but police staff may opt for a defined contribution alternative. The PCSPS is deemed to be a multi-employer scheme and as such the underlying assets and liabilities within the Scheme are not broken down and attributed to individual employers. The appropriate level of disclosure has been followed in accordance with IAS Value Added Tax (VAT) The CPM does not submit a VAT return and MOPAC submits a single VAT return on behalf of the MOPAC Group. Expenditure in the CPM CIES excludes any amounts relating to VAT as all VAT is remitted to/from the HM Revenue & Customs. 1.7 Contingent liabilities The Group recognises material contingent liabilities as either: Possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the organisation, or Present obligations that arise from past events but are not recognised because; a) it is not probable that outflows of resources embodying economic benefits or service potential will be required to settle the obligations, or b) the amount of the obligations cannot be measured with sufficient reliability. A material contingent liability is not recognised within the accounts as an item of expenditure. It is, however, disclosed in a note unless the possibility of a transfer of economic benefits or service potential in settlement is remote (in which case no action is needed). 8 Commissioner of Police of the Metropolis Statement of Accounts 2014/15

24 MOPAC also recognises a contingent asset as a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the organisation. 1.8 Events after the balance sheet date When an event occurs after the Balance Sheet date which provides evidence of conditions that existed at the Balance Sheet date an adjusting event occurs and the amounts recognised in the Statement of Accounts will be adjusted to take into account any values that reflect the adjusting event. Where an event occurs after the Balance Sheet date that is indicative of conditions that arose after the date, the amounts recognised in the Statement of Accounts are not adjusted but disclosed as a separate note to the Accounts. Events after the Balance Sheet date are reflected up to the date when the Statement of Accounts is authorised for issue and published. 1.9 Overhead Costs In line with the SeRCOP and the Police Objective Analysis, the costs of support services are fully allocated to services in the CIES. Support service costs identified as Corporate and Democratic Core costs and Non Distributed Costs are not charged to services but are shown separately in the CIES (Note 5). 2. Accounting standards that have been issued, but not yet adopted There are a number of accounting standards that have been issued but not yet adopted: IFRS 13 Fair Value Measurement provides a single definition of fair value which applies to assets and liabilities covered by International Accounting Standards that currently permit or require measurement at fair value. This standard is to be applied prospectively and it is anticipated that it will not have a material impact on the statement of Accounts. The Annual Improvements to IFRS ( Cycle) cover the following issues IFRS 1: Meaning of effective IFRSs IFRS 3: Scope exceptions for joint ventures IFRS 13: Scope of portfolio exception IFRS 40: Clarifying the interrelationship of IFRS3 Business Combinations and IAS 40 Investment Property when classifying property as investment property or owner-occupied property. As none of the issues covered by the improvements are relevant to the Group, there will be no impact on the statement of accounts. IFRIC 21 Levies provides guidance on when to recognise a liability for a levy imposed by a government that is not in the scope of another accounting standard. As the Group does not expect to have any levies imposed on it by a government, there will be no impact on the statement of accounts. 3. Significant estimates and judgements in applying the accounting policies The preparation of the financial statements requires the CPM to make judgements, estimates and assumptions that affect the application of policies and reporting amounts of assets and liabilities, income and expenditure. The estimates and associated assumptions are based on historical 9 Commissioner of Police of the Metropolis Statement of Accounts 2014/15