Chief Constable. of Durham Constabulary. Statement of Accounts

Chief Constable of Durham Constabulary Statement of Accounts for the year ended 31st March 2013

Contents Page Explanatory Foreword 1-4 Independent Auditor's Report 5-7 Statement of Responsibilities 8 Movement in Reserves Statement 9 Comprehensive Income and Expenditure Statement 10 Balance Sheet 11 Cashflow Statement 12 Notes to the Accounts 13-21 Pension fund accounts 22-24 Glossary 25-26 Annual Governance Statement 27-41 The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013

Explanatory foreward Introduction Following the Police Reform and Social Responsibility Act 2011, the Durham Police Authority was abolished on 21 November 2012 and replaced with two corporation sole bodies, The Office of the Durham Police and Crime Commissioner (Police and Crime Commissioner, PCC) and the Chief Constable of Durham Constabulary (Chief Constable, CC). This set of accounts is the first to show the financial position of the Chief Constable of Durham Constabulary. The financial position of the PCC and the consolidated Group of the PCC and CC are set out in the PCC and Group accounts. Statement of Accounts The purpose of this foreword is to provide a clear guide to the most significant matters reported in the Chief Constable s Accounts. It explains the purpose of the financial statements that follow and provides a summary of financial activities during 2012/13 and the financial position as at 31 March 2013. This Statement of Accounts covers the financial year ended 31st March 2013 and has been prepared in accordance with the provisions of the Accounts and Audit Regulations 2011, in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2012/13 and the Service Reporting Code of Practice for Local Authorities 2012/13 (SeRCOP), supported by International Financial Reporting Standards (IFRS). The Statements required by the Code of Practice on Local Authority Accounting in the United Kingdom 2012/13 (the Code) are detailed below along with the objective of each statement. Information and Financial Statements The financial statements are as follows: Independent Auditor's Report to the Chief Constable (pages 5 to 7): The Report of the External Auditor on Chief Constable s Accounts for the year ended 31 March 2013. Statement of Responsibilities for the Statement of Accounts (page 8): This sets out the responsibilities of the Chief Constable and the Chief Constable s Chief Finance Officer. Movement in Reserves Statement (page 9): This statement does not show any transactions for the year ended 31 March 2013 as the CC does not hold any reserves. All reserves are held and managed by the PCC. Comprehensive Income and Expenditure Statement (page 10): This discloses the expenditure incurred in operating the Constabulary for the year. Balance Sheet (page 11): The CC does not hold any assets, liabilities or reserves, all are held by the PCC. Cash Flow Statement (page 12): All payments were made and income received into the Police Fund which is held by the PCC. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 1

Review of the Financial Year 2012/13 The Chief Constable s spending is planned and controlled by a rigorous budget and financial management process. The Chief Constable receives resources delegated from the PCC to deliver policing services to the force area of County Durham and Darlington. Revenue Spending A comparison of actual revenue expenditure compared with budget is shown below together with an explanation of the major variances. Original (Overspent) or Actual Budget Underspent '000 '000 '000 Employees Premises Transport Agency Services Supplies and Services Support Costs Gross Expenditure 101,803 101,018 785 4,734 4,481 253 3,056 3,020 36 2,430 2,325 105 7,871 8,585 (714) 23 20 3 119,917 119,449 468 Explanation of major variances: Employee Related Costs The employee costs are under budget due to the timing of retirement and recruitment of police officers and vacancies of police staff posts. Premises Related Costs The main reasons why costs were underspent were related to more effective energy and building maintenance management and energy prices not increasing as much as expected. Transport Related Costs These costs impacted positively by effective fleet management were within budget. Regional Collaborations Reduced demand for forensic science services was the main reason for spending within budget. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 2

Supplies and Services The main reasons for expenditure exceeding budget were related to the replacement of computing equipment and professional fees. Cash Flow All payments were made and income received into the Police Fund which is held by the PCC so there were no cashflows within the Chief Constable's accounts. Looking Ahead to 2013/14 Looking ahead, the Chief Constable plans to consume resources of 117.6m in 2013/14. The Government s four year Spending Review, covering the period 2011/12 to 2014/15 sets out Government spending plans and the HM Treasury Spending Round 2013 announced in June 2013 set out spending plans for 2015/16. As a result of the current Review, the PCC has faced severe reductions in Formula Grant during the period. The Spending Round announcement in June 2013 continues that trend of reductions in Formula Grant. Significant spend reductions and efficiencies were made to enable services to be delivered within the allocated budget. Further spend reductions and efficiencies are being planned to manage the further expected reductions in grant funding as part of the ongoing medium term financial planning process for 2014/15, 2015/16 and future years. International Accounting Standard 19 The Statement of Accounts also incorporates the effect of pensions liabilities accrued in order to comply with International Accounting Standard 19 (IAS 19). Rather than accounting for the actual expenditure on pensions, an assessment must be made by the Actuary of the costs accruing during the year and this is incorporated within the accounts. The effect of the standard is to account for the annual increase in pensions liability and total liability of both the unfunded and funded schemes as a result of pension benefits earned by employees at the end of the financial year, which the PCC Group is potentially committed to pay. Roundings The financial statements as detailed on pages 8 to 24 have been rounded to the nearest 1,000. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 3

Acknowledgements I would like to take this opportunity to thank the officers of the Chief Constable, who have produced this Statement of Accounts. I hope that this document proves to be both informative and of interest to readers. It is important to try and improve the quality and suitability of information provided and feedback is welcomed. If you have any suggestions or comments on both the format of the report and its contents, or if you would like any further information please contact, my office. Gary Ridley Chief Constable's Chief Finance Officer Telephone: 0191 375 2108 E-mail: julie.diamond@durham.pnn.police.uk or write to: The Assistant Chief Officer Police HQ Aykley Heads Durham DH1 5TT The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 4

Independent Auditor's Report to the Chief Constable of Durham Constabulary Opinion on the Chief Constable financial statements We have audited the financial statements of the Chief Constable of Durham Constabulary for the year ended 31 March 2013 under the Audit Commission Act 1998. The financial statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement, the Police Pension Fund Net Assets Statement and the Police Pension Fund Account, and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2012/13. This report is made solely to the Chief Constable of Durham Constabulary in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 48 of the Statement of Responsibilities of Auditors and Audited Bodies published by the Audit Commission in March 2010. Respective responsibilities of the Assistant Chief Officer and auditor As explained more fully in the Statement of the Assistant Chief Officer s Responsibilities, the Assistant Chief Officer is responsible for the preparation of the Statement of Accounts, which includes the financial statements, in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom, and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the body s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Assistant Chief Officer; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the explanatory foreword to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 5

Opinion on financial statements In our opinion the financial statements: give a true and fair view of the financial position of the Chief Constable of Durham Constabulary as at 31 March 2013 and of its expenditure and income for the year then ended; and have been prepared properly in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2012/13. Opinion on other matters In our opinion, the information given in the explanatory foreword for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we report by exception We report to you if: in our opinion the annual governance statement does not reflect compliance with Delivering Good Governance in Local Government: a Framework published by CIPFA/SOLACE in June 2007 and the December 2012 addendum; we issue a report in the public interest under section 8 of the Audit Commission Act 1998; we designate under section 11 of the Audit Commission Act 1998 any recommendation as one that requires the Authority to consider it at a public meeting and to decide what action to take in response; or we exercise any other special powers of the auditor under the Audit Commission Act 1998. We have nothing to report in these respects. Other matters on which we are required to conclude We are required under Section 5 of the Audit Commission Act 1998 to satisfy ourselves that the Chief Constable of Durham Constabulary has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. We have undertaken our audit in accordance with the Code of Audit Practice and, having regard to the guidance issued by the Audit Commission in November 2012, we have considered the results of the following: our review of the annual governance statement; the work of other relevant regulatory bodies or inspectorates, to the extent the results of the work have an impact on our responsibilities; our locally determined risk-based work. As a result, we have concluded that there are no matters to report. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 6

Certificate We certify that we have completed the audit in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission. Cameron Waddell CPFA For and on behalf of Mazars LLP, Appointed Auditors The Rivergreen Centre Aykley Heads Durham, DH1 5TS 27 September 2013 The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 7

Statement of Responsibilities The Chief Constable's Responsibilities The Chief Constable is required to: Make arrangements for the proper administration of his financial affairs and to secure that one of his officers has the responsibility for the administration of those affairs. In this organisation, that officer is the Assistant Chief Officer. Manage his affairs to secure economic, efficient and effective use of resources and safeguard his assets. Approve the Statement of Accounts. The Assistant Chief Officer's Responsibilities The Assistant Chief Officer is responsible for the preparation of the Chief Constable's Statement of Accounts in accordance with proper practices as set out in the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom 2012/13. In preparing this Statement of Accounts, the Assistant Chief Officer has: selected suitable accounting policies and then applied them consistently made judgements and estimates that were reasonable and prudent complied with the Local Authority Code. The Assistant Chief Officer has also: kept proper accounting records which were up to date taken reasonable steps for the prevention and detection of fraud and other irregularities Assistant Chief Officer's Certificate I certify that the accounts present a true and fair view of the financial position of the Chief Constable of Durham as at 31 March 2013 and of his income and expenditure for the year ended 31 March 2013. These financial statements replace the unaudited financial statements certified by myself on 28 June 2013. G Ridley G Ridley MBA CPFA Date 26 March 2013 Assistant Chief Officer Chief Constable's Certificate I confirm I have approved these accounts M Barton M Barton LL.B. Date 26 March 2013 The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 8

Movement in Reserves Statement for the Chief Constable of Durham Constabulary Years ended Police Earmarked Capital Total Unusable Total 31 March 2012 & Fund GF Receipts Useable Reserves Group 31 March 2013 Balances Reserves Reserves Reserves Reserves '000 '000 '000 '000 '000 '000 Balance at 31 March 2011 - - - - - - Total Comprehensive - - - - - - Income and Expenditure Adjustments between - - - - - - accounting basis & funding basis under regulations Net (Increase)/Decrease - - - - - - before Transfers to Earmarked Reserves Transfers to/from Earmarked - - - - - - Reserves Balance at 31 March 2012 - - - - - - Total Comprehensive - - - - - - Income and Expenditure Adjustments between - - - - - - accounting basis & funding basis under regulations Net (Increase)/Decrease - - - - - - before Transfers to Earmarked Reserves Transfers to/from Earmarked - - - - - - Reserves Balance at 31 March 2013 - - - - - - This statement shows the movement in the year on the different reserves held by the Chief Constable, analysed into 'usable reserves' (ie those that can be applied to fund expenditure or reduce local taxation) and other reserves. This statement does not show any transactions for the year ended 31 March 2013 as the Chief Constable does not hold any reserves. All reserves are held and managed by the PCC. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 9

Comprehensive Income and Expenditure Statement for the Chief Constable of Durham Constabulary for the Year Ended 31 March 2013 2011/12 2011/12 2011/12 2012/13 2012/13 2012/13 Restated Restated Restated Gross Income Net Gross Income Net Expenditure Expenditure Expenditure Expenditure '000 '000 '000 '000 '000 '000 53,537-53,537 Local Policing 50,098-50,098 12,218-12,218 Dealing with the Public 11,827-11,827 13,209-13,209 Criminal Justice Arrangements 13,699-13,699 7,346-7,346 Road Policing 7,324-7,324 5,690-5,690 Specialist Operations 5,293-5,293 8,108-8,108 Intelligence 7,997-7,997 27,577-27,577 Investigations 28,368-28,368 4,554-4,554 Investigative Support 4,331-4,331 3,905-3,905 National Policing 3,069-3,069 10-10 Corporate and Democratic Core 6-6 Non Distributed Costs 450-450 Past Service Costs 970-970 136,604-136,604 Net Cost of Services before Funding 132,982-132,982 - (136,604) (136,604) PCC funding for resources consumed (132,982) (132,982) 136,604 (136,604) - Net Cost of Services 132,982 (132,982) - This statement shows the accounting cost in the year for the Chief Constable of providing services at the request of the PCC in accordance with generally accepted accounting practices. All costs are paid by the PCC, the CC deploys assets, police officers and police staff to deliver the Police and Crime Plan. The transfer of funding results in a nil cost of services in the CC accounts. The 2011/12 figures have been restated to reflect classification changes as detailed in the Service Reporting Code of Practice for Local Authorities - 2012/13 SeRCOP update The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 10

Balance Sheet for the Chief Constable of Durham Constabulary at 31 March 2013 31 March 2012 31 March 2013 '000 '000 '000 '000 - Property, Plant and Equipment - - Intangible Assets - - Total Long Term Assets - - Assets held for Sale - - Inventories - - Short Term Debtors - - Cash and Cash Equivalents - - Total Current Assets - - Short term Creditors - - Total Current Liabilities - - Provisions - - Other Long Term Liabilities - - Pensions Liability - - Total Long Term Liabilities - - Net Assets - - Useable Reserves - - Unusable Reserves - - Total Reserves - The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Chief Constable. The net assets are matched by the reserves held by the Chief Constable. The Chief Constable does not hold any assets, liabilities and reserves, these are all held by the PCC. Therefore this statement does not show any balances at 31 March 2013. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 11

Cashflow Statement for the Chief Constable of Durham Constabulary for the Year Ended 31 March 2013 2011/12 2012/13 OPERATING ACTIVITIES '000 '000 Cash Inflow - Cash Inflows generated from operating activities - Cash Outflow - Cash outflows generated from operating activities - - Net cash flows from operating activities - INVESTING ACTIVITIES - Net cash flows from investing activities - FINANCING ACTIVITIES - Net cash flows from financing activities - - Net increase or decrease in cash and cash equivalent - - Cash and cash equivalents at the beginning of the reporting period - Less - Cash and cash equivalents at the end of the reporting period - - - The Cashflow Statement shows the changes in cash and cash equivalents of the Chief Constable during the reporting period. All payments were made and income received into the Police Fund which is held by the PCC. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 12

Notes to the Financial Statements for the Chief Constable of Durham for the year to 31 March 2013 1 ACCOUNTING POLICIES 1.1 General Principles The Statement of Accounts summarises the Chief Constable of Durham's transactions for the 2012/13 financial year and the position at the year-end of 31 March 2013. The Chief Constable is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2011 which require accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2012/13 and the Service Reporting Code of Practice for Local Authorities 2012/13 (SeRCOP), supported by International Financial Reporting Standards (IFRS). The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments. On 22 November 2012, Durham Police Authority was replaced by two corporation sole bodies, the Office of the Durham Police and Crime Commissioner and the Chief Constable for Durham Constabulary. Both bodies are required to prepare separate Statements of Accounts. The financial statements cover the 12 months to 31 March 2013. 1.2 Revenue and Expenditure Recognition All expenditure is paid for by the Office of the Durham Police and Crime Commissioner, including the wages of officers and police staff. The PCC is the recipient of all funding. The actual recognition in the accounts of the two bodies is based on the economic benefit. 1.3 Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular: Supplies are recorded as expenditure when they are consumed where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet of the Police and Crime Commissioner. Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made. 1.4 Cash and Cash Equivalents All cash is held by the Police and Crime Commissioner. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 13

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 nonmonetary benefits for current employees and are recognised as an expense for services in the year in which employees render service to the Group. An accrual is made by the PCC for the cost of holiday entitlements (or any form of leave, eg time off in lieu) earned by employees but not taken before the year-end, which employees can carry forward into the next financial year. The accrual is charged to PCC's Surplus or Deficit on the provision of Services, but then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs. Termination Benefits Termination benefits are amounts payable as a result of a decision by the PCC to terminate an officer s employment before the normal retirement date or an officer s decision to accept voluntary redundancy and are charged on an accruals basis to the Net Cost of Services in the Comprehensive Income and Expenditure Statement when the Group is demonstrably committed to the termination of the employment of an officer or group of officers or making an offer to encourage voluntary redundancy. Post Employment Benefits Employees of the Group are members of two separate pension schemes: The Police Pension Scheme for Police Officers, which is unfunded The Local Government Pensions Scheme, administered by Durham County Council. Both schemes provide defined benefits to members (retirement lump sums and pensions), related to pay and service earned as employees working for the Group. The Police Pension Scheme for Police Officers This is an unfunded defined benefit final salary scheme meaning that there are no investment assets built up to meet the pensions liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due. If the amounts receivable by the pensions fund for the year are less than amounts payable, the Durham Police and Crime Commissioner must annually transfer an amount to meet the deficit to the pension fund. This cost is then met by central government. If however the pension fund is in surplus for the year, the surplus is required to be transferred from the pension fund to the Durham Police and Crime Commissioner who then must repay the amount to central government. 1.6 Events after the Balance Sheet date Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur those that provide evidence of conditions that existed at the end of the reporting period the Statement of Accounts is adjusted to reflect such events those that are indicative of conditions that arose after the reporting period the Statement of Accounts is not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect. Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 14

1.7 Financial Instruments The CC does not hold any assets or liabilities, these are held by the PCC and details of the Financial Instruments are shown in the financial statements of that body. 1.8 Overheads and Support Services The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2012/13 (SeRCOP). The total absorption costing principle is used the full cost of overheads and support services are shared between users in proportion to the benefits received. 1.9 Government Grants and Contributions All government grants and contributions are paid to the Durham Police and Crime Commissioner. 1.10 VAT VAT payable is included as an expense only to the extent that it is not recoverable from Her Majesty s Revenue and Customs. VAT receivable is excluded from income. 2 ACCOUNTING STANDARDS ISSUED NOT ADOPTED In accordance with the Code, the Chief Constable shall disclose information relating to the the impact of an accounting change that will be required by a new standard that has been issued but not yet adopted. This requirement applies to accounting standards that come into effect for financial years commencing on or before 1 January 2013. IAS 1 Presentation of Financial Statements. The main change is a requirement to group items presented in Other Comprehensive Income on the basis of whether they are potentially reclassifiable to profit or loss at a future date. The main items which are most likely to require reclassifying are exchange differences on translating operations, cash flow hedging and available for sale financial assets, At present the CC does not hold these types of instruments and so this will not impact the financial statements of the CC. IAS 19 Employee Benefits. The revised standard will increase the expenses recognise for funded benefits. If this was adopted for the year ended 31 March 2013, the Local Government Pension Scheme expenses recognised for funded benefits would increase from 5,260k to 5,960k. There would be no effect on the Balance Sheet. The Police Officer Pension fund would remain unchanged. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 15

3 CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES In applying the accounting policies set out in Note 1, the Chief Constable has had to make certain judgements about complex transactions or those involving uncertainty about future events. Transition Basis. The transition has been accounted for in line with the CIPFA Code of Practice for Local Authority Accounting 2012/13 and LAAP Bulletin 95 Accounting for the Impact of Police Reform which suggest that this is accounted for using merger accounting as per FRS 6 Acquisitions and Mergers. PCC has applied merger accounting from 1 April 2012. This has resulted in the accounts for the Durham Police and Crime Commissioner, for the Group and for the Chief Constable showing the financial information from 1 April 2012. Statutory Accounts. Both the PCC and the CC are separate bodies listed under schedule 2 of the Audit Commission ct 1998 and so must produce statutory accounts. Both bodies comply with chapter 9 of the code and so group accounts must be produced also. Pension Fund Accounts. All payments are made from and receipts made to the Police Fund administered by the PCC. The CC is responsible for administering the Police Pension Fund in accordance with the Police Reform and Social Responsibility Act 2011. Therefore the Pension Fund Accounts have been included in financial statements of the CC and the Group. Asset and Liability Recognition. Long term control and long term access to the economic benefits associated with assets such as buildings rests with the PCC. All expenditure is made by the PCC and CC deploys assets to deliver the Police and Crime Plan. Therefore the assets and liabilities are recognised on the Balance Sheet of the PCC. Pension Fund Liability. The PCC as holder of the Police Fund is responsible for the the long term funding and payment of pension costs to the pension fund. Any funding is received by the PCC. The pension fund liability is recognised on the Balance Sheet of the PCC. Staff Costs. All staff are employed and paid by the PCC. These staff deliver the Police and Crime Plan. All staff costs and IAS 19 costs are shown in the accounts of the PCC. 4 MATERIAL ITEMS OF INCOME AND EXPENSE There are no material items of income and expense which are not already disclosed on the face of the Comprehensive Income and Expenditure Statement or in the associated notes 5 EVENTS AFTER THE BALANCE DATE The Chief Constaable's Statement of Accounts was authorised for issue by the Assistant Chief Officer on 28 June 2013. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2013, the figures in the financial statements have been adjusted in all material respects to reflect the impact of this information. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 16

6 THE CREATION OF THE OFFICE OF THE DURHAM POLICE AND CRIME COMMISSIONER AND THE CHIEF CONSTABLE OF DURHAM CONSTABULARY 6.1 Introduction Following the Police Reform and Social Responsibility Act 2011 (The Act), The Durham Police Authority was replaced on 22 November 2012 with two corporation sole bodies, The Office of the Durham Police and Crime Commissioner and the Chief Constable of Durham Constabulary. This set of accounts is the first to show the financial position of The Chief Constable of Durham Constabulary. 6.2 Basis of transition The transition has been accounted for in line with the CIPFA Code of Practice for Local Authority Accounting 2012/13 and LAAP Bulletin 95 Accounting for the Impact of Police Reform which suggest that this is accounted for using merger accounting as per FRS 6 Acquisitions and Mergers. The Office of the Durham Police and Crime Commissioner has applied merger accounting from 1 April 2012. This has resulted in the accounts for the Durham Police and Crime Commissioner, for the Group and for the Chief Constable showing the financial information from 1 April 2012. 6.3 Accounting Principles On 22 November 2012 the assets, liabilities and reserves of the Durham Police Authority were transferred to the Durham Police and Crime Commissioner. The International Accounting Standards Board states that assets, liabilities and reserves should be recognised where it is probable that any future benefit associated with the item will flow to or from the entity. The PCC holds all assets, liabilities and reserves and is responsible for the police pension liability. Local arrangements confirm this. Based on the statutory responsibilities and local arrangements, it has been agreed that all the assets, liabilities and reserves are recognised on the Balance Sheet of the Durham Police and Crime Commissioner. All payments for the group are made by from the Police Fund and all income and funding is received into it. This includes all staff costs. The PCC is responsible for the funding of pension liabilities. The Comprehensive Income and Expenditure Statement of the CC shows the accounting cost in the year for the CC of providing services at the request of the PCC to deliver the Police and Crime Plan. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 17

7 OFFICERS' REMUNERATION The remuneration paid to the senior staff of the Chief Constable as follows: 31 March 2013 Salary Benefits Allowances Employers Total in kind Pension Contributions Chief Constable - M Barton (from 4/10/2012) 66,346 2,529 1,794-70,669 Chief Constable - TJ Stoddart (to 3/10/2012) 65,946 3,650 7,025 15,959 92,580 Deputy Chief Constable (from 4/10/2012) 54,859 2,842 1,202 13,276 72,179 Deputy Chief Constable (to 3/10/2012) 54,891 2,529 4,109-61,529 Assistant Chief Constable (from 4/10/2012) 45,304 2,230 1,201 10,954 59,689 Assistant Chief Constable (to 3/10/2012) 52,924 2,841-12,807 68,572 Assistant Chief Officer 94,167-4,264 14,502 112,933 31 March 2012 Salary Benefits Allowances Employers Total in kind Pension Contributions Chief Constable - TJ Stoddart 130,264 7,164 5,980 31,402 174,810 Deputy Chief Constable 109,782 5,058 5,789-120,629 Assistant Chief Constable 106,410 4,549 2,403 25,752 139,114 Assistant Chief Officer 91,288-4,263 13,740 109,291 The Chief Constable's other employees receiving more than 50,000 remuneration for the year (excluding employer's pension contributions) were paid the following amounts Remuneration Band Number of Employees 2011/12 2012/13 50,000-54,999 79 73 55,000-59,999 33 40 60,000-64,999 6 6 65,000-69,999 3 3 70,000-74,999 4 5 75,000-79,999 6 3 80,000-84,999 3 2 85,000-89,999 3 2 The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 18

The numbers of exit packages for the Chief Constable with the total cost per band and total cost of the compulsory and other redundancies are set out in the table below: Exit package cost band (including special payments) Number of compulsory redundancies Number of other departures agreed Total number of exit packages by cost band Total cost of exit packages in each band 2011/12 2012/13 2011/12 2012/13 2011/12 2012/13 2011/12 2012/13 0-20,000 - - 9 12 9 12 65,270 124,253 20,001-40,000 40,001-60,000 - - 1 1 1 1 36,600 22,688 - - 1 1-54,505 - - - 11 13 11 13 156,375 146,941 8 EXTERNAL AUDIT COSTS The Chief Constable has incurred the following costs in relation to the audit of the Statement of Accounts 20,000. An additional fee of 500 was charged to facilitate an IAS 19 workshop. 9 RELATED PARTIES The Chief Constable is required to disclose material transactions with related parties ie bodies or individuals that have the potential to control or influence or be controlled/influenced by the Chief Constable. Disclosure of these transactions allows readers to assess the extent to which the Chief Constable may have been constrained in his ability to operate independently or might have secured the ability to limit another party s ability to bargain freely with the Chief Constable. Transactions should be disclosed where material to either the organisation or individual with whom the transaction has been incurred. Central Government Central government has effective control over the general operations of the Chief Constable. It is responsible for providing the statutory framework within which the Chief Constable operates, provides the majority of its funding in the form of grants which are paid to the Police and Crime Commissioner and prescribes the terms of many of the transactions that the Group has with other parties. Grants received by the Group from government departments are included within the Comprehensive Income and Expenditure Statement of the Police and Crime Commissioner and the Group. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 19

Other Public Bodies All transactions with other public bodies were made with the PCC and are disclosed in the PCC's financial statements. Officers There were no related party transactions involving the Chief Constable, or chief officers of the Constabulary. 10 DEPRECIATION AND AMORTISATION Within the CC's Comprehensive Income and Expenditure Statement, gross service expenditure includes 4,647k of depreciation and amortisation borne by the PCC relating to the property, plant and equipment of the PCC. 11 REGIONAL COLLABORATION The Commissioner has collaborative arrangements with other local Forces as follows: Cleveland and Durham Fingerprint Bureau (CDFB) Contribution for 2012/13 was 328,725 ( 339,606 in 2011/12) North East Air Support Unit (NEASU) Contribution for 2012/13 was 571,166 ( 622,208 in 2011/12). On 1 April 2013, the assets Tactical Training Centre (TTC) Contribution for 2012/13 was 506,116 ( 510,924 in 2011/12) Regional Intelligence Unit (RIU) Contribution for 2012/13 was 108,992 ( 108,911 in 2011/12) Cleveland and Durham Special Operations Unit (CDSOU) The Special Operations Unit was set up during 2011/12 and is collaboration between the Durham Police and Crime Commissioner and the Police and Crime Commissioner for Cleveland to deliver roads policing and firearms response. Employees Transport Supplies and Services Gross Expenditure Funded by :- The Office of the Durham Police and Crime Commissioner The Police and Crime Commissioner for Cleveland Balance 31 March 31 March 2012 2013 '000 '000 11,243 11,428 618 686 194 153 12,055 12,267 (6,045) (6,137) (6,010) (6,130) 0 0 The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 20

12 LEASES Operating Leases In 2007/08 Durham Police Authority acquired Livescan under an operating lease relating to the taking of fingerprints. This has been taken over by the Durham Police and Crime Commissioner. Rentals amounting to 65,328 have been charged to the Comprehensive Income and Expenditure Statement during 2012/13 ( 65,328 in 2011/12). Future years rentals are 65,328 each year for 2013/14 and 2014/15. 13 DEFINED BENEFIT PENSION SCHEMES Transactions Relating to Retirement Benefits The PCC recognises the costs of retirement benefits in the Net Cost of Services part of the Comprehensive Income and Expenditure Statement when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge required to be made against Council Tax is based on the cash payable in the year, so the actual cost of retirement benefits following transactions have been made in the Comprehensive Income and Expenditure Statement during the year as follows: Comprehensive Income and Expenditure Statement Net Cost of Service Current service cost Past service cost Finance and Investment Income and Expenditure Interest cost Expected return on assets in the scheme Total post employment benefit charged to the Other post employment benefit charged to the CIES Actuarial gain/loss Net Charge to the CIES Local Government Police Pension Scheme Pension Scheme 2011/12 2012/13 2011/12 2012/13 '000 '000 '000 '000 3,440 3,630 22,380 21,250 390 30 60 940 5,530 5,700 55,470 51,500 (4,520) (4,080) - - 4,840 5,280 77,910 73,690 10,028 (2,810) 15,120 126,360 14,868 2,470 93,030 200,050 The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 21

PENSION FUND ACCOUNTS The funding arrangements for the Police Pension Scheme in England and Wales changed from 1 April 2006. Before 1 April 2006 the scheme did not have a percentage of pensionable pay type of employer s contributions: rather each Police Authority was responsible for paying the pensions of its former employees on a pay-as-you-go basis. Under the current funding arrangements the Scheme remains unfunded but no longer on a pay-as-you-go basis as far as an individual Police and Crime Commissioner is concerned. The Police and Crime Commissioner no longer meets the pension outgoings directly: instead they pay an employer s pension contribution based on a percentage of pay into the Pension Fund. Each individual Policeand Crime Commissioner is required to operate a Pension Fund and the amounts that must be paid into and paid out of the Pension Fund are specified by regulations. Under the new arrangements the Pension Fund is balanced to nil at the end of the year by transferring from the Police and Crime Commissioner s Income and Expenditure Account an amount equivalent to the deficit on the Fund. There are no investment assets relating to the Police Pension Fund. The transactions of the Police Pension Fund are as follows. Net assets are included within the Police and Crime Commissioner s Balance Sheet. Police Officer Pension Fund Account 2012/13 2011/12 2011/12 2012/13 2012/13 '000 '000 '000 '000 Contributions receivable (14,608) From employer (12,540) (35) Reimbursement of unabated pensions of 30+ police officers (15) (5,666) From members (6,073) (20,309) (18,628) Transfers in (57) Individual transfers in from other schemes (893) Recharges to other local Authorities (389) Net recharges (337) 25,730 Benefits payable Pensions 27,572 9,328 Commutations and lump sum retirement benefits 6,419 83 Lump Sum Death Benefit 0 35,141 33,991 Payments to and on account of leavers - Refund of contributions - 139 Individual transfers out to other schemes 641 Net amount payable for the year receivable from the Home 14,525 Office 14,774 Contribution from PCC in respect of deficit on the Police (14,525) Pension Fund Account (14,774) - Year end balance - The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 22

PENSION FUND ACCOUNTS cont. Police Officer Pension Fund Asset Statement As at 31 March 2012 '000 As at 31 March 2013 '000 Current Assets 3,862 Short Term Debtors 2,136 Current Liabilities -87 Payables -1-3,775 Cash -2,135 - Net Current Assets/Liabilities - 0 0 1 Basis of Preparation The pension fund accounts have been prepared in accordance with the CIPFA Code of Practice on local Authority Accounting in the United Kingdom 2012/13. The financial statements do not take account of liabilities to pay pensions and other benefits which fall due after the end of the financial year. 2 Accounting Policies The principal accounting policies are as follows: Contributions Contributions represent the total amount receivable from the Police and Crime Commissioner and pensionable employees. The contributions are made at rates determined by the Government Actuaries Department. The Employer s contributions are set at a nationally applied rate of 24.2% pensionable pay. For 2012/13 the employee s contributions are dependant on salary: 12.25 or 12.5% for the Police Officers Pension Scheme 1987 and 10.1,10.5 or 10.75% for the Police Officers Pension Scheme 2006. The Police and Crime commissioner is also required to make payments into the Pension Fund in respect of ill-health retirements when they are granted. Benefits In accordance with the accruals concept benefits are accounted for in the year in which they become due for payment. Transfer Values Transfer values are those sums paid payable by or receivable from, other pension schemes for individuals only and relate to periods of previous pensionable employment. Transfers are accounted for on a receipts and payments basis. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 23

PENSION FUND ACCOUNTS cont. Current Assets and Liabilities The current assets and liabilities are measured at fair value and carried at their amortised cost. Net Current Assets The carrying amounts of current assets is shown below:- Debtors Government Departments Local Authorities As at 31 March 2012 '000 As at 31 March 2013 '000 3,862 2,136 - - 3,862 2,136 Net Current Liabilities As at 31 March 2012 '000 As at 31 March 2013 '000 Payables Government Departments (64) - Local Authorities (23) (1) Others - - (87) (1) The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 24

GLOSSARY Accruals The concept that income and expenditure are recognised as they are earned or incurred, not as money happens to be received or paid. Budget The Commissioner s plans and policies expressed in financial terms. Cash Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash Equivalents Cash equivalents are investments that mature within three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value. Chartered Institute of Public Finance and Accountancy (CIPFA) The principal accountancy body dealing with local authority finance. CIPFA Service Reporting Code of Practice (SeRCOP) Replaced the previous Best Value Accounting Code of Practice. SeRCOP provides a consistent framework for reporting local authority,including police authority,data. Collection Funds Funds administered by Durham County Council and Darlington Borough Council in which individuals Council Tax payments are paid. The Commissioner raises precepts on the funds to finance part of net revenue expenditure. Collection Fund Adjustment Account The account through which to implement the accruals basis for recording the precept without affecting the bottom line for taxpayers. Contingency The sum of money set aside to meet unforeseen expenditure or liability. Council Tax The local tax levied on householders, based on the relative market values of property, which helps to fund local services. Current Assets Items that can be readily converted into cash. Current Liabilities Items that are due immediately or in the short-term. Debtors Persons or bodies who owe sums to the Commissioner. Earmarked Reserves These represent monies set aside that can only be used for a specific purpose. Employee Benefits Short-term employee benefits are those due to be settled within 12 months of the year end. They include salary, paid annual leave, paid sick leave, bonuses and non-monetary benefits for current employees and are recognised as an expense in the year in which the employee renders service to the Commissioner. An accrual is made for the cost of the benefit earned by an employee but not taken before the year end. The accrual is charged to the surplus or deficit on the provision of Services, but then reversed out through the Movement in Reserves Statement. Interest Income The money earned from the investment of surplus cash. The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 25

International Financial Reporting Standards (IFRS) TheCommissioner s financial statements have been prepared in accordance with the following statutory accounting standards adopted by the International Accounting Standards Board (IASB): International Financial Reporting Standards (IFRS) International Accounting Standards (IAS) Interpretations of the International Financial Reporting Interpretations Committee (IFRIC) Interpretations of the Standing Interpretations Committee (SIC) National Non-Domestic Rates (NNDR) The business rate in the pound is the same for all non-domestic ratepayers and is set annually by the government. Income from business rates goes into a central government pool that is then distributed to authorities according to resident population. Net Book Value The amount at which fixed assets are included in the balance sheet, ie their historical cost or current value less the cumulative amounts provided for depreciation. Outturn The actual amount spent in the financial year. Payables Persons or bodies to whom sums are owed by the Authority. Payments in Advance These represent payments prior to 31st March for supplies and services received after 1st April. Receipts in Advance These represent income received prior to 31st March for supplies and services provided after 1st April. Retirement Benefits All forms of consideration given by an employer in exchange for services rendered by employees that are payable after the completion of employment. Revenue Expenditure and Income Expenditure and income arising from the day to day operation of the Commissioner s service. Revenue Support Grant (RSG) General government grant to assist in financing the overall net cost of services. Running Expenses All expenses other than those relating to employees and the financing costs of capital expenditure (capital financing costs and revenue contributions). Running expenses include expenditure on maintenance of buildings, consumable supplies, transport etc. Termination Benefits Amounts payable as a result of a decision to terminate an officer s employment before the normal retirement date or an officer s decision to accept voluntary redundancy. They are charged on an accruals basis to the Net Cost of Service in the Comprehensive Income and Expenditure Statement. UK GAAP Generally Accepted Accounting Standards As IFRS is primarily drafted for the commercial sector and therefore does not address all accounting issues relevant to local government in the UK, the Code prescribes a hierarchy of alternative standards on which the accounting treatment and disclosures should be based where appropriate. The hierarchy comprises: Financial Reporting Standards (FRS) Statements of Standard Accounting Practice (SSAP) Pronouncements of the Urgent Issues Task Force (UITF) The Chief Constable of Durham Constabulary Statement of Accounts 31 March 2013 Page 26