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Consolidated Statement of

Accounts

2014/15

The Police and Crime Commissioner for

Hertfordshire Group

The Police and Crime Commissioner for Hertfordshire Group Statement of Accounts 2014/15

2

CONTENTS

Page

Explanatory Foreword 5

Statement of Responsibilities for the Statement of Accounts

11

Independent Auditor’s Report to the Police & Crime Commissioner for Hertfordshire

12

Movement in Reserves Statement 2014/15 15

Comprehensive Income and Expenditure Statement 2014/15 17

Balance Sheet 2014/15 19

Cash Flow Statement 2014/15 20

Notes to the Accounts

1 Accounting Policies 21

2. Accounting Standards That Have Been Issued But Not Yet Adopted

34

3. Critical Judgements in Applying Accounting Policies 35

4. Changes in Accounting Policies 37

5. Material Items of Income and Expense 37

6. Events after the Balance Sheet Date 37

7. Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty

38

8. Adjustments between Accounting Basis and Funding Basis under Regulations

39

9. Transfers To/From Earmarked Reserves 43

10. Corporate and Democratic Core and OPCC

46

11. PCC’s Commissioning Expenditure

47

12. Other Operating Expenditure 47

13. Financing and Investment Income and Expenditure 48

14. Taxation and Non Specific Grant Incomes 48


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15. PCC’s Funding for Resources Consumed 49

16. Property, Plant and Equipment 50

17. Depreciation 52

18. Revaluations 52

19. Intangible Assets 53

20. Capital Commitments 54

21. Assets Held For Investment 54

22. Assets Held For Sale 54

23. Financial Instrument Balances 55

24. Financial Instruments Gains and Losses 56

25. Fair Values of Assets and Liabilities 57

26. Inventories 59

27. Short-Term Debtors 60

28. Cash and Cash Equivalents 60

29. Short-Term Creditors 61

30. Intra-Entity Creditor / Debtor 61

31. Short-Term and Long-Term Investments 61

32 Provisions 62

33. Usable Reserves 64

34. Unusable Reserves 64

35. Cash Flow Statement - Adjustment to Net Surplus or Deficit on the Provision of Services for Non-Cash Movements

69

36. Cash Flow Statement - Adjustment For Items Included in the Net Surplus or Deficit the Provision of Services that are Investing Activities

70

37. Cash Flow Statement - Investing Activities 70

38. Cash Flow Statement - Financing Activities 71

39. Analysis of Government Grants in the Cash Flow Statement 71

40. Amounts Reported For Resource Allocation Decisions 72

41. Bedfordshire, Cambridgeshire and Hertfordshire Collaborative Units

79


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42. Chiltern Travel Consortium 80

43. National Police Air Service

80

44. Eastern Region Special Operations Unit (ERSOU) 80

45. Acquired and Discontinued Operations 82

46. Senior Officers’ Remuneration 83

47. Officers’ Emoluments 85

48. External Audit Costs 85

49. Grant & Partner Income – Government and Non-Government Grants

86

50. Interest and Investment Income 86

51. Related Parties 86

52. Long-Term Contracts – Operating Leases 87

53. Capital Expenditure and Capital Financing 88

54. Change of Chief Finance Officer 89

55. Defined Benefit Pension Schemes 89

56. Contingent Liabilities 97

57. Contingent Assets 97

58. Nature and Extent of Risks Arising From Financial Instruments

98

59. Trust and Charitable Funds 101

60. Prior Period Adjustments 101

61. Termination Benefits 101

62. Exit Packages 102

63. Post Balance Sheet Events 102

Police Pension Scheme Fund Accounts 2014/15 103

Police and Crime Commissioner for Hertfordshire Annual Governance Statement 2014/15

106

Glossary of Terms 115


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EXPLANATORY FORWARD Introduction The financial year 2014/15 was the first year following the Stage 2 transfer under the governance arrangements introduced by the Police Reform and Social Responsibility Act 2011, whereby elected local policing bodies, in the form of police and crime commissioners, replaced the previous police authorities. Stage 2 built upon the initial transfer of all employees, assets and liabilities of the former Hertfordshire Police Authority to the Police and Crime Commissioner for Hertfordshire and his subsequent delegation of powers to the Chief Constable to act on his behalf. Key to Stage 2 is the transfer of the employment of staff under the direction and control of the Chief Constable to his employment and his ability to enter into transactions in his own name, within limits consented by the Police and Crime Commission. The 2011 Act introduced two corporations sole, the Police and Crime Commissioner and the Chief Constable. The two corporations sole are both schedule 2 bodies under the 1998 Audit Commission Act and so are both required to publish accounts and are both subject to audit. The relationship between the two corporations sole is reflected in accounting terms by the existence of a group relationship. Group relationships require the completion of a consolidated group Statement of Accounts in addition to those for the individual entities. This document is the Statement of Accounts for the Group and the Police and Crime Commissioner for Hertfordshire (PCC). A statement of accounts for the Chief Constable of Hertfordshire is published as a separate document. 2014/15 also saw a continued move to wider collaboration through working with Bedfordshire Police and Cambridgeshire Constabulary, with agreement being reached to develop further collaborated units in the areas of Operational Support (Public Contact, Criminal Justice and Custody) and Organisation Support (ICT, HR, Finance etc) functions as part of a wider savings plan aimed at achieving savings of circa £10.3m for Hertfordshire over the next four years. Full details of Hertfordshire’s financial transactions with Bedfordshire Police and Cambridgeshire Constabulary are set out in note 41 below. The Stage 2 transfer was accompanied by the introduction of a revised scheme of financial governance that not only reflects the evolving financial relationship between the PCC and the Chief Constable but is also a single Bedfordshire, Cambridgeshire & Hertfordshire (BCH) document adopted by all three forces, enabling commonality of processes and procedures. It is vital that the Chief Constable has the right resources to deliver an effective and efficient police service to the people of Hertfordshire. Having the right level of funding is a key part of that and for 2014/15 the PCC, who sets the budget for policing within the county, set a budget requirement of £185.805m. Details of how this budget was spent during the year are set-out in the section Review of the Financial Year below. The PCC and Chief Constable work hard together to ensure the delivery of policing services that represent good value for money and that the financial position remains strong during the current challenging economic conditions. In the light of the continuing reduction in grant funding over the medium-term, additional financial management controls have been put in place so as to reduce planned spending to a level that is sustainable in future years. The Chief Constable has a successful record of delivering sustainable efficiency savings over a number of years and the need to maintain this strong record will be important in the years ahead in view of the reduction in public sector spending anticipated in the government’s Autumn Spending Review post the 2015 general election.


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The Accounting Statements The PCC has a statutory duty to approve and publish a Statement of Accounts covering a 12 month reporting position. These accounts cover the period 1st April 2014 to 31st March 2015 and have been compiled in accordance with recommended practice from the Chartered Institute of Public Finance and Accountancy (CIPFA). The format is largely prescribed in the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom. These accounting standards set out the format of the Accounts and the concepts and principles that should be used in deciding on the appropriate treatment of transactions and balances within the Accounts. The financial relationship between the Chief Constable and the PCC is determined by the key elements of the legislative framework as well as local arrangements set-out in the Scheme of Governance and the Financial Regulations. These local documents set-out that strategic control; ultimately the overarching responsibility for setting the Police and Crime Plan, holding the Chief Constable accountable for the delivery of an efficient and effective police force and the responsibility for the appointment and dismissal of the Chief Constable, is exercised by the PCC. As such the Accounts of the PCC contain not only the direct costs of his Office but also capital accounting transactions and balances associated with his control over the strategic non-current assets such as Land and Buildings as well as all cash backed reserves. The Chief Constable has daily direction and control over all police officers and a great majority of police staff and so his Accounts contain the direct cost of employment and other related costs and balances associated with these staff. Further details of the approach taken this year are set out below in Note to the Accounts Number 3 – ‘Critical Judgements in Applying Accounting Policies’ As set-out above, Stage 2 of the transfer of Staff and Assets required under the Police Reform and Social Responsibility Act 2011 was made on the 1st April 2014. From that date, employment of staff under the direction and control of the Chief Constable transferred to him from the PCC. In addition, a new scheme of governance was introduced to reflect the revised arrangements which set out the consents under which the Chief Constable will operate in the future. The impact of these changes has been limited to the exclusion of current service pension costs relating to police staff employed by the PCC from the Chief Constable’s Accounts. These accounts include an analysis of the Group and the PCC’s financial affairs and the financial position at 31 March 2015. The Group consists of the Police and Crime Commissioner for Hertfordshire and the Chief Constable of Hertfordshire Constabulary. They comprise of:

a) The Statement of Responsibilities for the Statement of Accounts, which sets out the responsibilities of both the PCC and the responsible Chief Finance Officer for the preparation of the Accounts.

b) The Movement in Reserves Statement shows the movement in the year on the

different reserves held by the PCC, analysed into ‘usable reserves’ and other reserves. The Surplus or (Deficit) on the Provision of Services line shows the true economic cost of providing the PCC’s services, more details of which are shown in the Comprehensive Income & Expenditure Statement.

c) The Comprehensive Income & Expenditure Statement, is a summary of the income

and expenditure received and used to provide services during the year and shows how the PCC has funded the cost of net expenditure incurred at the request of the Chief Constable by an intra-entity transfer.


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d) The Balance Sheet, which shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Group and the PCC.

e) The Cash Flow Statement, which summarises the inflows and outflows of cash arising from transactions with third parties for revenue and capital purposes.

f) Notes to the Accounts, these comprise a detailed analysis of the summarised financial information in the Core Financial Statements. These also set out the accounting policies adopted by the Group and the PCC, which explain the basis on which the financial transactions are presented.

g) The Annual Governance Statement – The statement sets out the results of the annual review of governance and internal controls within the Office of the PCC. The statement reports on any significant weaknesses and the actions undertaken to rectify these.

h) Police Officer Pension Fund Account - This identifies the payments in and out of the Police Officers Pension Fund Account for the year.

Review of the Financial Year 2014/15

Where the Money Comes From

Where the Money Comes From The graph below shows an analysis of the PCC’s key sources of revenue income during 2014/15. Home Office Settlement grant paid to the PCC by central government accounted for 58% of all gross income. This central government grant plus income raised by Council Tax forms the PCC’s budget requirement for 2014/15 of £185.805m.

What the Money is Spent On

The graph below shows an analysis of the Group’s revenue expenditure during 2014/15 of which employee costs represent the greatest component.

Home Office Settlement Grant

£123.8m

Council Tax £62.0m

Specific Government

grants and partner funding £4.1m

Pension Top-Up Grant

£14.0m

Interest income on Investments

£0.4m Other Income

£9.5m


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Revenue Spending

The PCC set the net revenue budget for the year at £185.880m, consisting of the £185.805m budget requirement plus £0.075m carried forward from 2013/14. Total net expenditure against this budget generated an underspend of £8.966m as the Chief Constable proactively drove out efficiencies due to the continuing need to reduce spending to a level that is sustainable in future years, support the early achievement of the 2015/16 Savings Programme as well as maximise reserves to support the phased implementation of savings. The balance of the underspend was transferred to earmarked reserves which stood at £42.452m at 31st March 2015, leaving a Police Fund balance of £5.450m representing the minimum prudent level of reserves. (see note 9 for details of useable reserves) It is currently anticipated that around £21.6m of these earmarked reserves will be used to support base budget expenditure over the medium term. The £8.966m revenue underspend needs to be seen in the context of the financial challenge faced by the force with an estimated budget gap of £25.6m for the period 2015/16 to 2018/19 at the time of setting the 2015/16 budget in February 2015. 2014/15 was the final year of Spending Review 2010 in which the government set out its plans to implement a 20% real terms reduction in grant funding to the Police Service over four years. To meet this significant financial challenge, savings of £7.097m were made in setting the 2014/15 budget in addition to the £27.936m of savings achieved in the first three years of the spending round. Given this challenging environment, measures were continued throughout 2014/15 targeted at driving down spend including restrictions on recruitment for non- operational police staff which contributed significantly to the underspend position as did a continued review and reduction across the full range of non-pay expenditure. The main areas of underspend are set out below: Police Officer Pay and Overtime – The Chief Constable continued to actively recruit police officers during the year, holding five recruitment intakes generating 103 FTE new recruits. 100 FTE Officers were lost through turnover meaning that overall that police officer numbers remained relatively stable throughout 2014/15 with actual establishment finishing the year at 1,920 FTE. Average actual police officer numbers were 42 FTE below budget and contribute to an overall Police Officer Pay and Overtime underspend of £3.032m. The Chief Constable plans to recruit police officers above establishment over the medium term funded from the Operational Capability Reserve of £3.000m.

Employees £156.4m (73.2%)

Police Pension Scheme Transfer

£14.6m (6.8%)

Premises £7.3m (3.4%)

Transport £2.4m (1.1%)

Supplies & Services

£21.6m (10.1%)

Other £0.3m (0.1%)

Contribution to Reserves

£11.2m (5.2%)


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Police Staff Pay and Overtime - During 2014/15 the force continued to restrict recruitment to vacancies in non-operational roles to support the savings programme and ensure redundancies and their associated costs were minimised. Turnover for the year was 12.9% which contributed to a £2.592m underspend. Non-Pay – In support of the savings programme for 2015/16 and in order to minimise the impact on police officers, the Chief Constable continues to focus on driving out non-pay savings during the year. As a result of this £2.3m of budget was removed in setting the 2015/16 budget through ensuring that future budget resource levels are aligned with capability to spend. This has been achieved through close scrutiny of non-pay budgets. The most significant areas of underspend include in year savings (£1.355m), ICT (£0.407m), Estates (£1.103m), transport related costs (£0.261m) and Change Management Costs (£0.805m). Additional income of £0.932m was generated by the Camera Tickets and Collision department and £0.475m of income received from other forces in Mutual Aid.

Capital Spending

Capital spending is expenditure incurred on the physical assets of the PCC such as buildings, vehicles, Information Technology systems and equipment as well as intangible assets such as computer software. The PCC’s capital budget for 2014/15 including planned additional funding from revenue and the application of specific grants was £13.385m. This included £8.271m on ICT, £1.556m on the purchase of vehicles, £2.376m on estates strategy, and £1.182m on technical equipment and collaborative units.

Actual expenditure incurred during the year was £6.522m resulting in an underspend of £6.863m. Of this figure, some £3.171m was slippage due to delays in the timing of the capital expenditure on a range of capital projects including £2.268m of ICT work, in particular Mobile Data (£1.017m) and the regional Project Athena (£0.467m). Slippage relating to work on the estate totalled £0.841m, which predominantly related to developments at HQ site including the Firing Range (£0.766m). Where there is slippage against the capital programme both the estimated expenditure and the funding provision are transferred to the following year and there is no impact on future years’ capital spending plans. In addition a review of spending plans has been undertaken to ensure that future budget resources are in line with our capability to spend and as a result actual cost savings against capital schemes amounted to £3.692m in 2014/15.

Investments

The PCC’s policy on investments is set out in the Annual Treasury Management Strategy. The primary consideration for the Strategy is security of the PCC’s funds. The secondary consideration is liquidity, ensuring that sufficient funds are available to meet forecasted cash flow requirements. Only once both of these matters have been taken into account will the yield be considered. The Strategy sets out the restrictions on the level of individual investments in order to spread the associated risks. In 2014/15 the PCC received £0.359m of investment interest. See note 31 for further details.

Borrowing

The PCC is able to determine his own capital borrowing requirements in accordance with the CIPFA Code of Practice on Prudential Borrowing. However as a result of the current high level of capital receipts held by the PCC (which have been generated through the sale of land and buildings in accordance with the strategy for the rationalisation and modernisation of the police estate) no further borrowing is forecast over either the short or medium term. At 31st March 2015, the PCC had outstanding loans of £18.000m.


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Disclosed Pensions Assets or Liabilities The Chief Constable’s and the PCC’s police staff employees are able to join the Local Government Pension Scheme (LGPS) administered by Hertfordshire County Council. The pension fund pays the pensions of member employees upon retirement and receives contributions from employees together with an employer’s contribution from the Chief Constable and PCC. Every three years the fund’s appointed actuary assesses how much money is in the fund and whether this is sufficient to meet the potential call from staff as they retire at a future date. Police Officers are eligible to join one of the two national Police Pension Schemes - these are unfunded defined benefit final salary schemes administrated by the Chief Constable in collaboration with Bedfordshire Police. Unfunded means 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. The net amount charged to the Police Fund is that payable for the year in question in accordance with the statutory requirements governing the pension fund. Where this amount does not match the amount charged to the Comprehensive Income and Expenditure Statement any difference is transferred to the pension reserve on the balance sheet via the Movement in Reserves Statement in order that there is no impact on the Group’s revenue expenditure funded from taxation. The Group’s liability during 2014/15 was limited to employer contributions of 24.2% of police officer pensionable pay with the Home Office paying the balance of any deficit on the Police Pension fund. Further details are shown in the accounts of the Police Pension Fund on page 103 There are many factors, including external economic factors that can affect the financial position of the fund. As a result the Group’s share of the Hertfordshire Local Government Pension Scheme Fund and Police Pension funds, shows a net liability of £1,712.520m as at 31st March 2015 (£1,466.308m at as 31st March 2014). This increase in pension liability is predominantly due to the re-measurement of the net-liability resulting from a decrease in the discount rate applied by actuaries, which for the Police Pension Fund fell from 4.4% in 2013/14 to 3.3% in 2014/15. The liability is a notional amount as it would only fall due if all circumstances remained as they are now until the current contributors retire and the Group did not seek to address the matter. The liability on the balance sheet is matched with an equivalent pension reserve. Note 55 gives further details.

Balance Sheet The balance sheet shows the net worth of the Group as at 31st March 2015 is -£1,562.660m consisting of General Police Fund £5.450m, Earmarked Reserves £42.452m, Unapplied Capital Receipts £16.579m, Pension Reserves of -£1,712.520m and Other Unusable Reserves £85.379m.

Material Events after the Reporting Date No material events have been identified after the reporting date. Further information on the financial statements presented in this document can be obtained from the Head of Finance at the Constabulary on 01707-354241 (email [email protected]). Mike Collier CPFA* Chief Finance Officer to the Police and Crime Commissioner for Hertfordshire September 2015

* The formal signed version of the accounts is held by the Chief Constable’s Chief Finance Officer


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STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS The PCC for Hertfordshire’s Responsibilities The PCC is required to: - make arrangements for the proper administration of the PCC’s financial affairs and to

secure that one of its officers has responsibility for the administration of those affairs. For Hertfordshire, that officer is the Police and Crime Commissioner’s Chief Finance Officer;

- manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets;

- approve the Statement of Accounts by the 30th September 2015. I confirm that I approve these accounts following completion of the audit. Signed* Date 24th September 2015 David Lloyd - Police and Crime Commissioner for Hertfordshire

The PCC for Hertfordshire’s Chief Finance Officer's Responsibilities The Chief Finance Officer is responsible for the preparation of the Police and Crime Commissioner’s Statement of Accounts in accordance with proper practices as set out in the CIPFA / LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2014/15 (the Code) In preparing this Statement of Accounts, the Chief Finance Officer has:

- selected suitable accounting policies and applied them consistently; - made judgements that were reasonable and prudent; - complied with the Code.

The Chief Finance 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. I confirm this Statement of Accounts gives a true and fair view of the financial position of the PCC for Hertfordshire at the accounting date and its income and expenditure for the year ended 31st March 2015. Signed* Date 24th September 2015

Mike Collier CPFA– PCC’s Chief Finance Officer



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INDEPENDENT AUDITOR’S REPORT TO THE POLICE & CRIME COMMISSIONER FOR HERTFORDSHIRE Opinion on the Police and Crime Commissioner for Hertfordshire financial statements We have audited the financial statements of the Police and Crime Commissioner for Hertfordshire for the year ended 31 March 2015 under the Audit Commission Act 1998 (as transitionally saved). The financial statements comprise the Police and Crime Commissioner for Hertfordshire and Group Movement in Reserves Statement, the Police and Crime Commissioner for Hertfordshire and Group Comprehensive Income and Expenditure Statement, the Police and Crime Commissioner for Hertfordshire and Group Balance Sheet, the Police and Crime Commissioner for Hertfordshire and Group Cash Flow Statement, the Police and Crime Commissioner for Hertfordshire Police Pension Scheme Fund Accounts, and the related notes 1 to 63 and Police Pension Scheme Fund Accounts Notes P1 to P6. 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 2014/15. This report is made solely to the Police and Crime Commissioner for Hertfordshire 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. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Police and Crime Commissioner for Hertfordshire, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Chief Finance Officer and auditor As explained more fully in the Statement of Responsibilities for the Statement of Accounts set out on page 11, the Chief Finance 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 2014/15, 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 Police and Crime Commissioner for Hertfordshire and Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Chief Finance Officer; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Consolidated Statement of Accounts 2014/15 to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.


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Opinion on financial statements In our opinion the financial statements:

give a true and fair view of the financial position of the Police and Crime Commissioner for Hertfordshire as at 31 March 2015 and of its expenditure and income for the year then ended;

give a true and fair view of the financial position of the Group as at 31 March 2015 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 2014/15.

Opinion on other matters In our opinion, the information given in the Consolidated Statement of Accounts 2014/15 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 comply with ‘Delivering Good Governance in Local Government: a Framework’ published by CIPFA/SOLACE in June 2007 (updated as at December 2012);

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 Police and Crime Commissioner 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.

Conclusion on the Police and Crime Commissioner’s arrangements for securing economy, efficiency and effectiveness in the use of resources

Respective responsibilities of the Police and Crime Commissioner and the auditor The Police and Crime Commissioner is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance, and to review regularly the adequacy and effectiveness of these arrangements. We are required under Section 5 of the Audit Commission Act 1998 to satisfy ourselves that the Police and Crime Commissioner has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires us to report to you our conclusion relating to proper arrangements, having regard to relevant criteria specified by the Audit Commission in October 2014. We report if significant matters have come to our attention which prevent us from concluding that the Police and Crime Commissioner has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. We are not required to consider, nor have we considered, whether all aspects of the Police and Crime Commissioner’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively.


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Scope of the review of arrangements for securing economy, efficiency and effectiveness in the use of resources We have undertaken our review in accordance with the Code of Audit Practice, having regard to the guidance on the specified criteria, published by the Audit Commission in October 2014, as to whether the Police and Crime Commissioner has proper arrangements for:

securing financial resilience; and

challenging how it secures economy, efficiency and effectiveness. The Audit Commission has determined these two criteria as those necessary for us to consider under its Code of Audit Practice in satisfying ourselves whether the Police and Crime Commissioner put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2015. We planned our work in accordance with the Code of Audit Practice. Based on our risk assessment, we undertook such work as we considered necessary to form a view on whether, in all significant respects, the Police and Crime Commissioner had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources.

Conclusion On the basis of our work, having regard to the guidance on the specified criteria published by the Audit Commission in October 2014, we are satisfied that, in all significant respects, the Police and Crime Commissioner for Hertfordshire put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2015.

Certificate We certify that we have completed the audit of the accounts of the Police and Crime Commissioner for Hertfordshire in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission. Neil Harris * for and on behalf of Ernst & Young LLP, Appointed Auditor Luton Date:



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Movement in Reserves Statement

This statement shows the movement during the year on the different reserves, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and ‘unusable reserves’. The Surplus or Deficit on the Provision of Services line shows the true economic cost of providing services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the Police Fund Balance for council tax setting purposes. The Net Increase / Decrease before Transfers to Earmarked Reserves line shows the statutory Police Fund Balance before any discretionary transfers to or from earmarked reserves are undertaken.

Group Movement in Reserves 2014/15

Police Fund

Earmarked Police Fund

Reserves

Capital Receipts Reserve

Total Usable

Reserves

Unusable Reserves

Total Group

Reserves

£’000 £’000 £’000 £’000 £’000 £’000

Balance at 31 March 2013 6,787 21,225 20,273 48,285 -1,418,122 -1,369,837

Movement in reserves during 2013/14 Surplus or Deficit on Provision of Services -77,483 - - -77,483 - -77,483

Other Comprehensive Income and Expenditure - - - 0 113,715 113,715

Total Comprehensive Income and Expenditure -77,483 0 0 -77,483 113,715 36,232

Adjustments between accounting basis and funding basis under regulations* 86,128 - -3,480 82,648 -82,648 0

Net Increase / Decrease in Year before transfer to Earmarked Reserves 8,645 0 -3,480 5,165 31,067 36,232

Transfer to (from) Earmarked Reserves -10,517 10,517

Balance at 31 March 2014 carried forward 4,915 31,742 16,793 53,450 -1,387,055 -1,333,605

Movement in reserves during 2014/15

Surplus or Deficit on Provision of Services -60,763 - - -60,763 - -60,763

Other Comprehensive Income and Expenditure - - - 0 -168,292 -168,292

Total Comprehensive Income and Expenditure -60,763 0 0 -60,763 -168,292 -229,055

Adjustments between accounting basis and funding basis under regulations* 72,008 - -214 71,794 -71,794 0

Net Increase / Decrease in Year 11,245 0 -214 11,031 -240,086 -229,055

Transfer to (from) Earmarked Reserves -10,710 10,710 - 0 - 0

Balance at 31 March 2015 carried forward 5,450 42,452 16,579 64,481 -1,627,141 -1,562,660

* See Note 8


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PCC Movement in Reserves 2014/15

Police Fund

Earmarked Police Fund

Reserves


Total Usable

Reserves

Unusable Reserves

Total Group

Reserves

£’000 £’000 £’000 £’000 £’000 £’000

Balance at 31 March 2013 6,787 21,225 20,273 48,285 78,109 126,394

Movement in reserves during 2013/14 Surplus or Deficit on Provision of Services 2,124 - 2,124 - 2,124


Total Comprehensive Income and Expenditure 2,124 0 0 2,124 6,687 8,811

Adjustments between accounting basis and funding basis under regulation*s 6,521 - -3,480 3,041 -3,041 0

Net Increase / Decrease in Year before transfer to Earmarked Reserves 8,645 0 -3,480 5,165 3,646 8,811


Balance at 31 March 2014 carried forward 4,915 31,742 16,793 53,450 81,755 135,205

Movement in reserves during 2014/15

Surplus or Deficit on Provision of Services 7,672 - - 7,672 - 7,672


Total Comprehensive Income and Expenditure 7,672 0 0 7,672 9,264 16,936

Adjustments between accounting basis and funding basis under regulations* 3,573 - -214 3,359 -3,359 0

Net Increase / Decrease in Year 11,245 0 -214 11,031 5,905 16,936


Balance at 31 March 2015 carried forward 5,450 42,452 16,579 64,481 87,660 152,141

* See Note 8


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Comprehensive Income and Expenditure Statement 2014/15

This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. The PCC raises taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement above.

Group Comprehensive income and Expenditure Statement 2014/15

2013/14 2014/15

Gross Expenditure

Gross Income

Net Expenditure

Note Gross Expenditure

Gross Income

Net Expenditure

£’000 £’000 £’000 £’000 £’000 £’000

89,088 -3,264 85,824 Local policing 84,558 -3,955 80,603

17,737 -288 17,449 Dealing with the public 17,407 -331 17,076

17,132 -869 16,263 Criminal justice arrangements 16,724 -846 15,878

13,168 -2,246 10,922 Road policing 11,457 -2,769 8,688

11,659 -807 10,852 Specialist operations 10,488 -627 9,861

13,185 -531 12,654 Intelligence 13,234 -1,017 12,217

50,926 -772 50,154 Specialist investigations 48,529 -2,073 46,456

9,074 -89 8,985 Investigative support 6,243 -87 6,156

2,719 -1,536 1,183 National policing 2,627 -1,497 1,130

1,317 -1 1,316 10 Corporate and Democratic Core 1,326 -14 1,312

448 - 448 Non-Distributed Costs 109 - 109

226,453 -10,403 216,050 Cost of Services 212,702 -13,216 199,486

194 -10,919 -10,725 12 Other Operating Expenditure 2,907 -17,208 -14,301

65,015 13 Financing and investment income and expenditure 64,967

-192,857 14 Taxation and Non Specific Grants -189,389

77,483 (Surplus) or Deficit on the Provision of Services 60,763

-6,687 Surplus or (deficit ) on revaluation of Property, Plant and Equipment Assets

-9,362

-107,028 Re-measurement of the net defined benefit liability 177,654

-113,715 Other Comprehensive Income and Expenditure 168,292

-36,232 Total Comprehensive Income and Expenditure 229,055


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PCC Comprehensive Income and Expenditure Statement 2014/15

2013/14 2014/15

Gross Expenditure

Gross Income

Net Expenditure

Note Gross Expenditure

Gross Income

Net Expenditure

£’000 £’000 £’000 £’000 £’000 £’000

6,270 -860 5,410 Local policing 5,761 -990 4,771

1,193 - 1,193 Dealing with the public 760 - 760

902 - 902 Criminal justice arrangements 621 - 621

677 - 677 Road policing 431 - 431

537 - 537 Specialist operations 362 - 362

687 - 687 Intelligence 448 - 448

2,842 - 2,842 Specialist investigations 1,874 - 1,874

328 - 328 Investigative support 204 - 204

120 - 120 National policing 94 - 94

1,083 -1 1,082 10 Corporate and Democratic Core 1,097 -10 1,087

- - 0 Non-Distributed Costs 135 - 135

14,639 -861 13,778 Cost of Services 11,787 -1,000 10,787

194 -10,919 -10,725 12 Other Operating Expenditure 2,907 -17,208 -14,301

346 13 Financing and investment income and expenditure 425

-192,857 14 Taxation and Non-Specific Grants -189,389

187,334 15 Funding to the Chief Constable for financial resources consumed

184,806

-2,124 (Surplus) or Deficit on the Provision of Services -7,672

-6,687 Surplus or (deficit ) on revaluation of Property, Plant and Equipment Assets

-9,362

0 Re-measurement of the net defined benefit liability 98

-6,687 Other Comprehensive Income and Expenditure -9,264

-8,811 Total Comprehensive Income and Expenditure -16,936


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Group and PCC Balance Sheet 2014/15 The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Group and the PCC. The net assets of the Group and PCC (assets less liabilities) are matched by the reserves held by the Group and PCC. Reserves are reported in two categories. The first category is usable reserves, i.e. those reserves that the Group and PCC may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use. The second category of reserves includes reserves that hold unrealised gains and losses (for example, the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’.

31 March 2014 Note 31 March 2015

PCC Group PCC Group

£’000 £’000 £’000 £’000

106,663 106,663 16,17,18 Property, Plant and Equipment: 111,476 111,476

2,070 2,070 19 Intangible Assets 2,338 2,338

435 435 21 Asset Held for Investment 435 435

0 0 Long-Term Investments 10,000 10,000

287 287 23,43 Long-Term Debtors 287 287

109,455 109,455 Long-Term Assets 124,536 124,536

2,250 2,250 22 Assets Held for Sale 1,638 1,638

23,000 23,000 23,31 Short-Term Investments 21,000 21,000

0 189 26 Inventories 0 176

4,563 16,600 27 Short-Term Debtors 6,279 23,317

20,466 20,466 28 Cash and Cash Equivalents 18,007 18,007

0 0 30 Intra-Entity Debtor 3,300 0

50,279 62,505 Current Assets 50,224 64,138

-2,596 -14,890 29 Short-Term Creditors -3,417 -16,288

-210 -210 23 Short-Term Borrowing -210 -210

0 -1,985 32 Provision for Redundancy costs 0 0

0 -2,502 34 Provisions for Accumulated Absences 0 -2,540

-2,985 0 30 Intra-Entity Creditor 0 0

-5,791 -19,587 Current Liabilities -3,627 -19,038

-735 -1,667 32 Provisions -735 -1,778

-18,003 -18,003 23 Long-Term Borrowing -17,998 -17,998

0 -1,466,308 55 Other Long-Term Liabilities -259 -1,712,520

-18,738 -1,485,978 Long Term Liabilities -18,992 -1,732,296

135,205 -1,333,605 Net Assets 152,141 -1,562,660

53,450 53,450 33 Usable Reserves 64,481 64,481

81,755 -1,387,055 34 Unusable Reserves 87,660 -1,627,141

135,205 -1,333,605 Total Reserves 152,141 -1,562,660

The unaudited accounts were issued on 30th June 2015 and the audited accounts were authorised for issue on 24th September 2015 * The formal signed version of the accounts is held by the Chief Constable’s Chief Finance Officer


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Group and PCC Cash Flow Statement 2014/15 The Cash Flow Statement shows the changes in cash equivalents of the Group and PCC during the reporting period. The statement shows how the Group and PCC generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The Amount of net cash flows arising from the operating activities is a key indicator of the extent to which the operations of the Group and PCC are funded by way of taxation and grant income. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Group and PCC’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Group and PCC.

31 March 2014 Note 31 March 2015

PCC Group PCC Group

£’000 £’000 £’000 £’000

2,124 -77,483 Net Surplus or Deficit on the Provision of

Services 7,672 -60,763

9,174 88,781 35 Adjustments to net Surplus or Deficit on the Provision of Services for non-cash movements

4,611 73,046

-2,967 -2,967 36

Adjustments for items included in the net Surplus or Deficit on the Provision of Services that are investing and financing activities

-5,629 -5,629

8,331 8,331 Net cash flows from Operating Activities

6,654 6,654

-28,261 -28,261 37 Investing Activities -11,124 -11,124

2,487 2,487 38 Financing Activities 2,011 2,011

-17,443 -17,443 Net increase or decrease in cash and cash equivalents

-2,459 -2,459

37,909 37,909 Cash and cash equivalents at the beginning of the reporting period

20,466 20,466

20,466 20,466 28 Cash and cash equivalents at the end of the reporting period

18,007 18,007


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Notes to the Statements of Accounts 2014/15 1 Accounting Policies Group and PCC i. General Principles

The Statement of Accounts summarises the Group and PCC's transactions for the 2014/15 financial year and its position at the year-end of 31 March 2015. The PCC is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2011, which those regulations require to be prepared in accordance with proper accounting practices. These practices primarily comprise of the Code of Practice on Local Authority Accounting in the United Kingdom 2014/15 and the Service Reporting Code of Practice (SeRCOP) 2014/15, which are both published by the Chartered Institute of Public Finance and Accountancy, supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under section 21(2) of the Local Government Act 2003. 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.

ii. Accruals of Income and Expenditure

Estimation techniques are the methods adopted by the PCC to arrive at the estimated monetary amounts, corresponding to the measurement bases selected for assets, liabilities, gains, losses and changes in reserves. The policies are therefore set to specify the basis on which an item will be measured: where there is uncertainty over how to measure this, the amount has been arrived at using an estimation or accrual technique. Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular:

Revenue from the provision of goods or services is recognised at the date on which

they are provided.

Supplies and services (including services provided by employees) are recorded as

expenditure when they are consumed or the services are received. Where there is a

gap between the date supplies are received and their consumption, significant

balances are carried as inventories on the Balance Sheet.

Interest receivable on investments and payable on borrowings is accounted for

respectively as income and expenditure on the basis of the effective interest rate for

the relevant financial instrument rather than the cash flows fixed or determined by the

contract.

Where revenue and expenditure have been recognised but cash has not been

received or paid, a debtor or creditor for the relevant amount is recorded in the

Balance Sheet. Where debts may not be settled, the balance of debtors is written

down and a charge made to revenue for the income that might not be collected.

The actual cost of employees and police officers is recorded in the accounts.

Accruals are made for the payment of police overtime, pension and tax liabilities

based on the actual March payments and included as creditors on the Balance Sheet.


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iii. Capital Expenditure

Expenditure is charged to capital where it meets the definition of capital as set out in the Code of Practice on Local Authority Accounting in the United Kingdom and is greater than the PCC’s de minimis level of £5,000. This includes internal staffing costs where they are directly attributable to a capital project.

iv. Capital Receipts

Capital receipts from the disposal of property, plant and equipment assets are accounted for on an accrual basis. The receipts arising from the disposal of Police assets are 100% usable by the PCC. Costs associated with the disposal of property, plant and equipment assets are charged against the appropriate capital receipts from the disposals. Capital receipts below £10,000 are treated as de minimus and are taken directly to the Comprehensive Income and Expenditure Statement. Capital receipts of £10,000 and above are considered to be material and can only be used to finance new capital investment and such receipts are appropriated to the Usable Capital Receipts Reserve on the balance sheet via the Movement in Reserves Statement.

v. Cash and Cash Equivalents

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 are highly liquid investments that mature in periods of three months or less from the date of acquisition that are readily convertible to known amounts of cash with insignificant risk of change in value. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the PCC's cash management.

vi. Charges to Revenue for Non-Current Assets

The PCC’s Comprehensive Income and Expenditure Statement is debited with the following charges to record the cost of holding fixed assets during the year: • depreciation attributable to the assets used in providing a police service • revaluation and impairment losses on assets where there are no accumulated gains in

the Revaluation Reserve against which the losses can be written off • amortisation of intangible fixed assets attributable to the service. The PCC is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisations. However, the PCC is required to make an annual contribution known as the Minimum Revenue Provision (MRP), from revenue towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the PCC in accordance with statutory guidance. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by the MRP contribution in the Police Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

vii. Contingent Assets A contingent asset arises where an event has taken place that gives the PCC a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the PCC.


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Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential. The PCC had no contingent assets at 31 March 2015.

viii. Contingent Liabilities

A contingent liability arises where an event has taken place that gives the PCC a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the PCC. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably. Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts. Details of the PCC’s contingent liabilities at 31 March 2015 are set out in note 56.

ix. Disposals and Non-current Assets Held for Sale

When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is re-valued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on Assets Held for Sale. If assets no longer meet the criteria to be classified as Assets Held for Sale, they are reclassified back to non-current assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as Held for Sale, and their recoverable amount at the date of the decision not to sell. Assets that are to be abandoned or scrapped are not re-classified as assets held for sale. When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account. Amounts received for a disposal in excess of £10,000 are categorised as capital receipts. Receipts are credited to the Capital Receipts Reserve, and can then only be used for new

capital investment or set aside to reduce the PCC's capital financing requirement. Receipts are appropriated to the Reserve from the Police Fund Balance in the Movement in Reserves Statement. The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the Police Fund Balance in the Movement in Reserves Statement.


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x. 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 and are recognised as an expense for services in the year in which employees render service to the Group / PCC. An accrual is made for the cost of holiday entitlements (or any form of leave, e.g. 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 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. All transactions and balances relating to the above are disclosed within the accounts of the Chief Constable and the Group on the basis of materiality.

Termination Benefits Termination benefits are amounts payable as a result of a decision by the Group / PCC to terminate a member of police staff’s employment before the normal retirement date or a member of police staff’s decision to accept voluntary redundancy, and are charged on an accruals basis to the Non Distributed Costs line in the Comprehensive Income and Expenditure Statement when the Group / PCC is demonstrably committed to the termination of the employment. Where termination benefits involve the enhancement of pensions, statutory provisions require the Police Fund Balance to be charged with the amount payable by the Group / PCC to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. Post-Employment Benefits The Group participates in three pension schemes. Each scheme provides members with defined benefits related to pay and service. The costs of providing pensions for employees are charged to the Police Fund in accordance with the statutory requirements governing each scheme. The schemes are as follows: Police Officer Schemes- There are two schemes for police officers; - The original Police Pension scheme which closed to new members on the 31st March 2006 and the New Police Pension scheme which was introduced from 1st April 2006. These are unfunded defined benefit final salary schemes and are both charged to the Police Fund based upon an employer’s contribution rate of 24.2% of pensionable pay. Unfunded means that there are no investment assets built up to meet the pension liabilities, and cash has to be generated to meet actual pension payments as they eventually fall due. The direct expenditure and income in respect of these schemes is accounted for in the Police Pension Fund Account. Under the Police Pension Fund Regulations 2007, if the amount payable by the pension fund for the year is less than the amount receivable, the Group must annually transfer an amount required to meet the deficit to the pension fund. Up to 100% of this cost is met by central government pension top up grant. If however the pension fund is


25

in surplus for the year, the surplus is required to be transferred from the pension fund to the Group which they must repay the amount to central government. Police Staff - All transactions and balances relating to the accounting for Post-Employment Benefits of Police Staff, other than the cost of employee contributions for staff employed by the PCC, are disclosed within the accounts of the Chief Constable and the Group on the basis of materiality. All police staff are eligible to join the Local Government Pension Scheme (LGPS), managed for the Group / PCC by Hertfordshire County Council. The total pension cost that is charged to the Police Fund equals the contribution paid to the funded pension scheme for these employees. The LGPS Scheme is accounted for as a defined benefits scheme as follows:

The liabilities of the fund attributable to the Group are included in the Balance Sheet

on an actuarial basis using the projected unit method. This is an assessment of the

future payments that will be made in relation to retirement benefits earned to date by

employees, based on assumptions about mortality rates, employee turnover rates,

etc., and projections of projected earnings for current employees.

Liabilities are discounted to their value at current prices, using a discount rate based

on the indicative rate of return on high quality corporate bonds.

The assets of the fund attributable to the Group are included in the Balance Sheet at

their fair value:

- Quoted securities – current bid price

- Unquoted securities – professional estimate

- Unitised securities – current bid price

- Property – market value

The change in the net pensions liability is analysed into seven components:

a) Current Service Cost - The increase in liabilities as a result of years of service

earned this year is allocated in the Comprehensive Income and Expenditure

Statement to the services for which the employees worked.

b) Past Service Cost - The increase in liabilities arising from current year

decisions whose effect relates to years of service earned in earlier years is

debited to the Surplus or Deficit on the Provision of Services in the

Comprehensive Income and Expenditure Statement as part of Non

Distributed Costs

c) Interest Cost - The expected increase in the present value of liabilities during

the year as they move one year closer to being paid is debited to the

Financing and Investment Income and Expenditure line in the Comprehensive

Income and Expenditure Statement

d) Expected Return on assets - The annual investment return on the fund assets

attributable to the Group, based on an average of the expected long-term


26

return is credited to the Financing and Investment Income and Expenditure

line in the Comprehensive Income and Expenditure Statement

e) Gains or Losses on settlements and curtailments - The result of actions to

relieve the Group of liabilities or events that reduce the expected future

service or accrual of benefits of employees is debited or credited to the

Surplus or Deficit on the Provision of Services in the Comprehensive Income

and Expenditure Statement as part of Non Distributed Costs

f) Re-measurements of the net defined liability. This includes actuarial gains

and losses and the return on plan assets, excluding amounts included in the

net interest on the net defined benefit liability.

g) Contributions Paid to the pension fund - Cash paid as employer's

contributions to the pension fund in settlement of liabilities; not accounted for

as an expense.

In relation to retirement benefits, statutory provisions require the Police Fund balance to be charged with the amount payable by the Group to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the Police Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. Discretionary Benefits The Group / PCC also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme or Police Pension Schemes.

xi. Events After the Balance Sheet Date

Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified: • 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.


27

xii. Exceptional Items

When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Group / PCC's financial performance. Material adjustments applicable to prior years arising from changes in accounting policy or correction of fundamental errors are accounted for by restating comparative figures for the preceding year in the Statement of Accounts and notes and adjusting the opening balances of reserves for the cumulative effect. More details are given in the individual financial statements and disclosure notes where these occur. The Group / PCC are no longer permitted to present any item of income or expenditure as an extraordinary item.

xiii. Financial Instruments

Financial Liabilities Financial liabilities are recognised on the Balance Sheet when the PCC becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised. For most of the borrowings that the PCC has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest); and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the Police Fund Balance to be spread over future years. The PCC has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the Police Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement. Financial assets are classified into two types: • loans and receivables - assets that have fixed or determinable payments but are not

quoted in an active market • available-for-sale assets - assets that have a quoted market price and / or do not have

fixed or determinable payments. The PCC has not invested in any such assets during the financial year.

Loans and Receivables Loans and receivables are recognised on the Balance Sheet when the PCC becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and


28

Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset's original effective interest rate. Any gains and losses that arise on the de-recognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

xiv. Government Grants and Contributions

All government grants are received in the name of the PCC. However, where grants and contributions are specific to expenditure incurred by the Chief Constable, they are recorded as income within the Chief Constables Accounts. Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the PCC when there is reasonable assurance that: • the PCC will comply with the conditions attached to the payments, and • the grants or contributions will be received. Amounts recognised as due to the PCC are not credited to the Comprehensive Income and Expenditure Statement until the conditions attached to the grant or contributions have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor. Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line or Taxation and Non-Specific Grant Income (non-ring fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement. Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the Police Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied reserve. Where it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied reserve are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure.


29

xv. Intangible Assets

Expenditure on non-monetary assets that do not have physical substance but are controlled by the PCC as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the PCC. Intangible assets are measured initially at cost. Amounts are only re-valued where the fair value of the assets held by the PCC can be determined by reference to an active market. In practice, no intangible asset held by the PCC meets this criterion, and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life in the Comprehensive Income and Expenditure Statement.

xvi. Inventories

Inventories are included in the Balance Sheet at the lower of cost and net realisable value. In circumstances where inventories are acquired through a non-exchange transaction, their cost is determined at their fair value at the date of acquisition.

xvii. Investments

Investments are shown in the balance sheet at cost. Where investments are fixed term deposits, the accrued interest owing at the balance sheet date of 31st March is added to the value of the investment.

xviii. Jointly Controlled Operations and Jointly Controlled Assets

Jointly controlled operations are activities undertaken by the Group in conjunction with other parties that involve the use of the assets and resources of the parties rather than the establishment of a separate entity. The Group recognises on its Balance Sheet the assets that it controls and the liabilities that it incurs. Jointly controlled assets are items of property, plant or equipment that are jointly controlled by the Group and other parties, with the assets being used to obtain benefits for all the parties. The joint operations do not involve the establishment of a separate entity. The Group accounts for only its share of the liabilities and expenses that it incurs on its own behalf or jointly with others in respect of its interest in the joint venture and income that it earns from the venture.

xix. Leases

All leases are in the name of the PCC. However, where leases are specific to the provision of policing services by the Chief Constable, substance over form requires that they are recorded within the Chief Constables accounts. Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. The PCC neither holds, nor has granted, any finance leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.


30

The PCC as Lessee Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease; even if this does not match the pattern of payments (e.g. if there were a rent-free period at the commencement of the lease). The PCC as Lessor Where the PCC grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Where significant, initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income.

xx. 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 2014/15. (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, with the exception of;

Corporate and Democratic Core – costs relating to the PCC’s status as a democratic

organisation to which material overhead costs are directly allocated.

Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring

early and impairment losses chargeable on Assets Held for Sale.

These two categories are defined in SeRCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement, as part of expenditure on continuing services.

xxi. Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors

Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment. Changes in accounting policies (see note 4 below) are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the PCC's financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period.


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xxii. Property, Plant and Equipment Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment. a) Recognition

All expenditure above £5,000 on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the PCC and the cost of the item can be measured reliably. Expenditure below £5,000 on the acquisition of individual assets is treated as being de minimis and is charged directly against the relevant service account in revenue. Expenditure that maintains but does not add to an asset's potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred.

b) Measurement Assets are initially measured at cost, comprising:

the purchase price,

any costs attributable to bringing the asset to the location and condition

necessary for it to be capable of operating in the manner intended by

management,

where appropriate, the initial estimate of the costs of dismantling and

removing the item and restoring the site on which it is located.

The PCC does not capitalise borrowing costs incurred whilst assets are under construction. Assets are then carried in the Balance Sheet using the fair value measurement bases, determined as the amount that would be paid for the asset in its existing use (Existing Use Value - EUV). Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value. Where non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value. Assets included in the Balance Sheet at fair value are reviewed annually to ensure that their carrying amount is not materially different from their fair value at the year-end. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Historically the Group has valued its non current assets carried at fair value on annual a rolling basis. Moving forward the Group will adopt a five year full valuation cycle, with intervening valuations undertaken when necessary to comply with the requirements of the Code. The last full valuation of the PCC’s Property Portfolio was undertaken as at 31st March 2015 by the Gerald Eve LLP in accordance with the Statements of Asset


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Valuation Practice and Guidance Notes of The Royal Institute of Chartered Surveyors. Where decreases in value are identified, they are accounted for as follows: • where there is a balance of revaluation gains for the asset in the Revaluation

Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains)

• where there is no balance in the Revaluation Reserve or an insufficient

balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account.

c) Impairment

Assets are assessed at each year-end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for as follows:

where there is a balance of revaluation gains for the asset in the Revaluation

Reserve, the carrying amount of the asset is written down against that balance

(up to the amount of the accumulated gains)

where there is no balance in the Revaluation Reserve or an insufficient

balance, the carrying amount of the asset is written down against the

Comprehensive Income and Expenditure Statement.

Where an impairment loss is reversed subsequently, the reversal is credited to the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised.

d) Depreciation Depreciation is provided for on all operational fixed assets other than land. Depreciation is calculated using the straight line method over the following periods:

Asset Class Estimated Life (Years)

Vehicles 2 - 10 Furniture & Equipment 1 - 10 Buildings 5 – 72

A full year’s depreciation is charged to the Income and Expenditure Account in the year of acquisition or entry into service for all classes of asset used in the provision of services.


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Where an item of Property, Plant and Equipment asset has major components whose cost is significant in relation to the total cost of the item, the components are separately depreciated. Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

e) Component Accounting

Component parts of the PCC’s property assets are separately identified and accounted for in the capital accounts and the PCC’s asset register in accordance with the Code of Practice. Recognition of components takes place at the time of the initial capital expenditure on the asset and thereafter at the times of the revaluations of the assets concerned. This includes retrospective adjustments where necessary, however retrospective adjustments can only relate to the period from 1st April 2010. No individual asset has more than three components these being Structure, Fit Out and Plant & Machinery.

f) Charges to Revenue

Service revenue accounts are charged with the following amounts to record the real cost of holding property, plant and equipment assets during the year;-

Depreciation attributable to the assets used

Impairment losses attributable to the clear consumption of economic benefits

on tangible assets used by the service and other impairment losses where

there is no cumulative gain for the asset in the Revaluation Reserve against

which they can be written off.

Amortisation of intangible assets attributable to the service.

xxiii. Provisions Provisions are made where an event has taken place that gives the PCC a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. For instance, the PCC may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation. Provisions are charged as an expense to an appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the PCC becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year. Where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service.


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Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income if it is virtually certain that reimbursement will be received if the PCC settles the obligation.

xxiv. Reserves The PCC sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the Police Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the service in that year to score against the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the Police Fund Balance in the Movement in Reserves Statement so that there is no net charge against council tax for the expenditure. Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments, retirement and employee benefits and do not represent usable resources for the PCC - these reserves are explained in the relevant policies.

xxv. Revenue Recognition

The PCC accounts for revenue recognition in accordance with International Accounting Standard 18. This applies to the accounting for revenue arising from the sale of goods, the rendering of services, interest, royalties, dividends and non-exchange transactions such as council tax where a creditor liability has previously been recognised. Revenue is recognised and measured at fair value of the consideration received or receivable except for financial assets otherwise measured as financial instruments. Revenue is only recognised when it is probable that the economic benefits of service potential associated with the transaction will flow to the PCC. Where there are doubts as to the collectability of an amount already included in revenue an impairment expense is recognised rather than an adjustment made to the revenue already recognised in the Comprehensive Income and Expenditure Statement.

xxvi. Segmental Reporting

The PCC provides a segmental report in the notes to the financial statements together with supporting details and a reconciliation to the Comprehensive Income and Expenditure Statement. The segments mirror the PCC’s internal reporting arrangements for reporting at a service level on its budget requirements and monitoring against the approved budget.

xxvii. 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 That Have Been Issued But Not Yet Adopted

For 2014/15 the following accounting standards have been issued but not yet adopted by CIPFA within the Code of Practice on Local Authority Accounting in the United Kingdom:

IFRS 13 Fair Value Measurement (May 2011);

Annual Improvements to IFRSs (2011 – 2013 Cycle)

IFRIC 21 Levies.


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3. Critical Judgements in Applying Accounting Policies

In applying the accounting policies set out in note 1, the PCC has had to make certain judgements about complex transactions or those involving uncertainty about future events. Critical judgements made in the Statement of Accounts for 2014/15 are:

i. Allocation of transactions, benefits and liabilities between the Accounts of the Chief Constable and PCC

A key critical judgement is the allocation of transactions and balances between the accounts of the PCC and those of the Chief Constable. In accordance with the principles of IAS 18 – Revenue Recognition and supported by: the Police Reform and Social Responsibility Act 2011 (Transitional Provision) Order 2013, confirming the legal status of the Chief Constable to apply Sections 21 and 22 of the Local Government Act 2003; and the LAAP bulletin 98A published by CIPFA in March 2014 established the view that the Chief Constable’s accounts should contain transactions and balances relating to officers and staff under his direction and control; that expense, income and balances are allocated as set-out in the following table.

Group CI&E

Chief Constable’s CI&E PCC's CI&E

Cost of Service Cost of Service

- Employee Cost of Officers & Staff under - OPCC Domestic Budget

the direction & control of the Chief Constable

- Commissioning Spend

- Policing Service Non Pay Expenditure - Support from Chief Constable Staff

- IAS19 Current Cost Pension Charges - IAS19 Current Cost Pension Charges

- Accumulated Absences Accruals - Capital Charges Depreciation & Impairment

- Pension Fund Top-Up Payment - Specific Grants relating to the PCC

- Income from Fees and Charges

- Specific Grants relating policing services

Other Operating Expenditure Other Operating Expenditure

Surplus/Deficit on disposal of non-current assets

- Pension Top-Up Grant Income

Financing & Investment Financing & Investment

- IAS19 Pension Net Interest - IAS19 Pension Net Interest - Capital Financing and Interest on

Balances

Taxation and Non Specific Grants Taxation and Non Specific Grants

- Settlement Funding

- Accounting for Council tax

Intra Entity Transfer Intra Entity Transfer

- Transfer of funding from the PCC - Transfer of funding to the CC


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Movement in Reserves Statement Movement in Reserves Statement

- Revenue Contributions to Capital

- Minimum Revenue Provision

Group Balance Sheet

Chief Constable’s Balance Sheet PCC's Balance Sheet

Net Assets Net Assets

- Working Capital (CC Share) - Non-Current Assets

- Provisions - Working Capital (PCC Share)

- Accumulated Absences Liability - Investments

- IAS19 Pensions Liability - Cash & Cash Equivalents

- IAS19 Pensions Liability

- Provisions

- Long Term Borrowing

Reserves Reserves

- Accumulated Absences Reserve - Revaluation Reserve

- IAS19 Pensions Reserve - IAS19 Pensions Reserve

- Capital Adjustments Reserve

- Useable Capital Receipts Reserve

- Specific Reserves

- Police Fund

The Scheme of Governance set-outs that strategic control; ultimately the overarching responsibility for setting the Police and Crime Plan, holding the Chief Constable accountable for the delivery of an efficient and effective police force and the responsibility for the appointment and dismissal of the Chief Constable, is exercised by the PCC. As such the Accounts of the PCC contain not only the direct costs of his Office but also the cost of funding the activities of the Chief Constable and the capital accounting transactions and balances associated with his control over the strategic non-current assets such as Land and Buildings as well as all cash backed reserves. The Chief Constable has daily direction and control over all police officers and a great majority of police staff and so his Accounts contain the direct cost of employment as well as associated IAS19 transactions and balances associated with his staff. As set-out above, Stage 2 of the transfer of Staff and Assets required under the Police Reform and Social Responsibility Act 2011was made on the 1st April 2014. From that date, employment of staff under the direction and control of the Chief Constable transferred to him from the PCC. In addition, a new scheme of governance was introduced to reflect the revised arrangements which set out the consents under which the Chief Constable will operate in the future. The impact of these changes has been limited to the exclusion of IAS19 transactions relating to police staff employed by the PCC from the Chief Constable’s Accounts.

ii. Collaborative Activities - The Chief Constable participates in a wide range of joint activities with other forces. During 2014/15 these were primarily with Bedfordshire Police and Cambridgeshire Constabulary, to a lesser extent with Thames Valley Police as well as Eastern Region forces. Details of these arrangements as set out in notes 41 to 44 below.


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The Chief Constable deems these arrangements to be jointly co-controlled operations in accordance with the Code of Practice Local Authority Accounting in the United Kingdom and consequently the Statement of Accounts and the accounting statements only reflect Hertfordshire’s share of the associated financial transactions and balances.

iii. Leases – existing leases have been reviewed and a decision taken whether the leases are operating leases or finance leases. A conclusion has been made that all leases are operating leases. In addition, contractual arrangements are kept under review to ensure that there are none which have the substance of a lease. A judgement has been made that, other than actual lease agreements, there are no such contractual arrangements.

iv. Possible future losses have been identified at year end and a judgement made where necessary whether or not they are to be accounted for as contingent liabilities or as provisions on the balance sheet.

4. Changes in Accounting Policies i. Inclusion of IAS19 financial transactions and balances in the PCC Accounts

In 2013/14, on the basis of materiality and to avoid additional cost associated with disaggregation, the transactions and balances relating to IAS19 pensions for staff under the direction and control of the PCC were included within the Chief Constable’s Accounts. Following the Stage 2 transfer on the 1st April 2014 of police staff under the direction and control of the Chief Constable to his employ, the IAS19 pension liabilities and transactions for police staff employed by the PCC are now shown exclusively within the accounts of the PCC and those employed by the Chief Constable within the accounts of the Chief Constable.

ii. Buildings non-current assets componentisation

The Group has reviewed the extent of componentisation of its buildings and as a result increased the proportion carried as Fit Out and Plant and Machinery, with a matching reduction in Structure of £25.344m. The reallocation has been made as an in year adjustment in 2014/15.

iii. Buildings non-current useful economic life

The Group has reviewed the useful economic lives of its building components with the result that the value of economic lives applied in the calculation of depreciation has increased from a maximum of 60 years to 72 years. This change has had a broad impact across the Group’s estate and as a result depreciation charges are estimated to have decreased by around £2m in 2014/15.

5. Material Items of Income and Expense The PCC had no material items of income or expenditure that have not been disclosed on the face of the Comprehensive Income and Expenditure Statement.

6. Events after the Balance Sheet Date The Statement of Accounts was authorised for issue by the Chief Finance Officer on the 24th September 2015. 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 31st March 2015, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information.


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7. Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for the revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The key judgements and estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:

Item Uncertainties Effect if Actual Results Differ from Assumptions

Pensions Liability

Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. Actuaries are engaged to provide the PCC with expert advice about the assumptions to be applied.

The effects on the net pension liability of changes in individual assumptions can be measured. For instance, a 0.5% decrease in the discount rate assumption would result in an increase in the pension liability of £350m. However, the assumptions interact in complex ways. During 2014/15, the PCC's actuaries for the Local Government Pension Scheme advised that the net pension liability had increased by £28m as a result of estimates being corrected as a result of updating of the previous assumptions.

Property, Plant and Equipment

The PCC’s Land and Building non-current assets are valued on a five year basis and so the potential exists for variations in value and changes in useful life. Assets are depreciated over useful lives that are dependent on assumptions about the level of repairs and maintenance that will be incurred in relation to individual assets. The current economic climate makes it uncertain that the PCC will be able to sustain its current level of spending on repairs and maintenance, bringing into doubt the estimated useful lives of the assets concerned.

A 5% variation in the value of the PCC’s Land and Building would result in an approximate £5.2m change to the PCC’s balance sheet. If useful lives are reduced the depreciation costs will increase and the carrying value of the assets will fall. It is estimated that the annual depreciation charge for buildings would increase by £0.1m for every year that useful lives had to be reduced.


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8. Adjustments between Accounting Basis and Funding Basis under Regulations Group and PCC This note details the adjustments that are made to the total comprehensive income and

expenditure recognised by the PCC in the year in accordance with proper accounting

practice to the resources that are specified by statutory provisions as being available to the

PCC to meet future capital and revenue expenditure.

2013/14 Police Fund Balance


Capital Grants

Unapplied

Movement In Unusable Reserves

£’000 £’000 £’000 £’000

Adjustments primarily involving the Capital Adjustment Account:

Charges for depreciation and impairment of non-current assets not charged to the Revaluation Reserve

-11,548 - - 11,548

Amortisation of intangible assets -921 - - 921

Amounts of non-current assets written off on disposal or sale as part of the gain / loss on disposal to the Comprehensive Income and Expenditure Statement

-194 - - 194

Statutory provision for the repayment of debt – Minimum Revenue Provision

1,854 - - -1,854

Capital expenditure charged against the Police Fund

358 - - -358

Adjustments primarily involving the Capital Grants Unapplied Account:

Capital grants and contributions unapplied credited to the Comprehensive Income and Expenditure Statement

3,273 - -3,273 0

Application of grants to capital financing transferred to the Capital Adjustment Account

- - 3,273 -3,273

Adjustments primarily involving the Capital Receipts Reserve:

Transfer of cash sale proceeds credited as part of the gain / loss on disposal to the Comprehensive Income and Expenditure Statement

Costs of disposal of non-current assets funded from capital receipts

306 -306 - 0

Use of the Capital Receipts Reserve to finance new capital expenditure

- 3,786 - -3,786


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2013/14 Continued Police Fund

Balance


Capital Grants

Unapplied


£’000 £’000 £’000 £’000

Adjustment primarily involving the Deferred Capital Receipts Reserve:

Transfer of deferred capital receipt proceeds credited as part of the gain / loss on disposal to the Comprehensive Income and Expenditure Statement

-196 - - 196

Adjustments primarily involving the Collection Fund Adjustment Account:

Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

547 - - -547

Total PCC Adjustment -6,521 3,480 0 3,041

Adjustments primarily involving the Pensions Reserve:

Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement (see note 55)

-112,767 - - 112,767

Employer's pensions contributions and direct payments to pensioners payable in the year (see note 55)

33,140 - - -33,140

Adjustment primarily involving the Accumulated Absences Account:

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

20 - - -20

Total Group Adjustments -86,128 3,480 0 82,648


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2014/15 Police Fund Balance


Capital Grants

Unapplied


£’000 £’000 £’000 £’000

Adjustments primarily involving the Capital Adjustment Account:

Charges for depreciation and impairment of non-current assets not charged to the Revaluation Reserve

-7,391 - - 7,391

Amortisation of intangible assets -1,116 - - 1,116

Amounts of non-current assets written off on disposal or sale as part of the gain / loss on disposal to the Comprehensive Income and Expenditure Statement

-2,907 - - 2,907

Statutory provision for the repayment of debt – Minimum Revenue Provision

904 - - -904

Capital expenditure charged against the Police Fund

261 - - -261

Adjustments primarily involving the Capital Grants Unapplied Account:

Capital grants and contributions unapplied credited to the Comprehensive Income and Expenditure Statement

2,794 - -2,794 0

Application of grants to capital financing transferred to the Capital Adjustment Account

- - 2,794 -2,794

Adjustments primarily involving the Capital Receipts Reserve:

Transfer of cash sale proceeds credited as part of the gain / loss on disposal to the Comprehensive Income and Expenditure Statement

Costs of disposal of non-current assets funded from capital receipts

3,254 -3,254 - 0


- 3,468 - -3,468

Adjustment primarily involving the Deferred Capital Receipts Reserve:

Transfer of deferred capital receipt proceeds credited as part of the gain / loss on disposal to the Comprehensive Income and Expenditure Statement

0 - - 0


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2014/15 Continued Police Fund

Balance


Capital Grants

Unapplied


£’000 £’000 £’000 £’000

Adjustments primarily involving the Collection Fund Adjustment Account:


790 - - -790



-230 - - 230


68 - - -68

Total PCC Adjustment -3,573 214 0 3,359



-107,283 - - 107,283


38,887 - - -38,887

Adjustment primarily involving the Accumulated Absences Account:


-39 - - 39

Total Group Adjustments -72,008 214 0 71,794


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9. Transfers To/From Earmarked Reserves Group and PCC

The PCC holds all of the Group’s reserves. This note sets out the amounts set aside from the Police Fund in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet Police Fund expenditure in 2014/15.

Balance 1 April 2013

2013/14 Transfers

Balance 31 March 2014

2014/15 Transfers

Balance 31 March 2015

Out In Out In £’000 £’000 £’000 £’000 £’000 £’000 £’000

Base Budget Support Reserve 0 0 21,567 21,567

Change Management Reserve 17,320 9,939 27,259 -17,499 9,760

Operational Capability Reserve 0 0 3,000 3,000 Redundancy Reserve 0 0 1,985 1,985

Road Safety Fund 0 0 632 632

Adults with Complex Needs Reserve 0 0 240 240

Insurance Fund 423 423 423 Ill Health Early Retirement Fund 100 100 500 600 Property Act Fund 90 -20 14 84 -21 7 70

Drugs Forfeiture Fund 745 -132 291 904 -7 397 1,294 Reactive Maintenance Property Fund 128 128 1,000 1,128

Consortium Reserves -44 201 157 157

Unconditional Funding Reserve 1,963 -2,443 2,483 2,003 -1,268 735

Police and Crime Commissioner 500 184 684 177 861

Total Specific Reserves PCC & Group

21,225 -2,595 13,112 31,742 -18,795 29,505 42,452

Police Fund: 6,787 -11,280 9,408 4,915 -8,431 8,966 5,450

Total Specific and General Reserves PCC & Group

28,012 -13,875 22,520 36,657 -27,226 38,471 47,902


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Base Budget Support Reserve The use of reserves to support the base budget is an important part of the Medium Term Financial Plan. In particular reserves provide the PCC with the flexibility to manage the bridging of the budget gap alongside the generation of savings, thereby offsetting the impact of higher standstill costs and significant reductions in grant funding. It is anticipated that the Emergency Budget in July will provide a clearer picture of the level and timing of grant reductions to be faced over the coming years and given the current level of uncertainty it is deemed prudent that a total of £21.567m of reserves is allocated to support the base budget over the medium term. Change Management Reserve This reserve is to help the PCC to mitigate the significant financial challenges it faces over the period of the medium term due to reductions in funding from the government, the precept freeze and the risks associated with the on-going need to make major savings. Operational Capability Reserve The Operational Capability Reserve was established to support police officer recruitment above establishment over the medium term. Redundancy Reserve The redundancy reserve was established to help the PCC meet the cost of redundancies arising from change plans over the medium term. The fund was established from resources previous help in the redundancy provision. Road Safety Fund This fund holds the balance of income generated in excess of the running costs of the Camera Tickets and Collisions unit in 2014/15 of £0.632m and reflects the ring-fencing of this income for re-investment in Road Safety related activity. Adults with Complex Needs Reserve This reserve was established to meet up to two years costs associated with the HCC Adults with Complex Needs pilot (pending a review at the end of year one). Insurance Fund

The Insurance Fund was set up to meet self-insured insurance risks not covered by the revenue budget. Self-insured risks include the first £0.100m of any Public or Employers Liability claims. In addition the fund meets the costs of all pre-April 2008 third party claims relating to accidents involving police vehicles. (Claims after that date are met from the Chiltern Travel Consortium’s insurance fund).

Ill-Health Retirement Fund

This reserve was established to mitigate any volatility caused by the capital equivalent lump sum payments in respect of ill-health early retirements and any volatility caused by lump sum payments in respect of injury awards. Although significant expenditure was incurred in this area during 2014/15, it was possible to manage the additional spending pressure within the overall budget for the year and so no call was made on this reserve.


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Police Property Act Fund

The PCC operates a fund for seized monies and the sale proceeds of seized and unclaimed property under the Police (Disposal of Property) Act 1997. Each year one half of the available monies is donated to charity with the balance being held to meet any administrative costs and future claims.

Drugs Forfeiture Fund

This fund is credited with the confiscated proceeds of illegal drug dealing activities. The funds are applied to fund equipment and other purchases to assist in combating drugs related crime.

Reactive Maintenance Property Fund This fund was established in order to meet the costs of reactive maintenance for non-core estates sites prior to their planned disposal. Consortium Reserve This reserve represents the Local Policing Bodies share or balances held on its behalf by its collaborative partners. Unconditional Funding Reserve

This fund was created as a result of the introduction of International Financial Reporting Standards (IFRS). The standards require the recognition of unconditional grant income within the PCC’s Comprehensive Income and Expenditure Statement in the year of receipt. The reserve represents the level of unconditional grant received but not spent at year end and is ring fenced.

Police and Crime Commissioner Reserve

Use of £0.250m of this reserve is planned in 2015/16 to support the PCC’s Community Fund, an initiative that supports innovative local schemes that aim to make communities safer.


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10. Corporate and Democratic Core Group and OPCC Consists of: i) Democratic Representation & Management – Includes all aspects of the PCC’s’

activities in that capacity, including corporate, programme and service policy making and more general activities relating to governance and the representation of local interests.

ii) Corporate Management – Those activities and costs that provide the infrastructure

that allows services to be provided, whether by the PCC or not and the information that is required for public accountability.

Set-out below is a detailed analysis of the expenditure included within the Income and Expenditure Account under the above heading.

Total

2013/14 £’000

Total 2014/15

£’000

OPCC Corporate and Democratic PCC Salary & Expenses 97 101 PCC’s Office Employee Costs 521 556 PCC’s Office Non Pay Costs 122 127

Total Commissioner’s Office Costs 740 784

Engagement And Partnership* 25 46 Internal Audit Fees 59 60 Other Operations 6 8

90 114

Total Spend Against OPCC budget 830 898 Chief Constable’s Staff support to the OPCC 145 115 Net IAS19 Pension Charge - 20 External Audit Fees 42 42 Engagement And Partnership* 55 15 Bank Charges 10 7 Income - -10

Total Corporate Charges 252 189

Total OPCC Corporate and Democratic 1,082 1,087

Chief Constable Corporate and Democratic 234 225

Total Group Corporate and Democratic 1,316 1,312

The cost of the Office of the PCC is included within the Corporate and Democratic Core. The budget for the Office of the PCC for the year 2014/15 was £1.075m against which £0.898m of net expenditure was incurred during 2014/15. In addition the PCC’s Corporate and Democratic Core costs include expenditure against the following Chief Constable budgets: external audit fees (£0.042m), bank charges (£0.007m), support provided by staff of the Chief Constable (£0.115m) and the cost of the Safer Neighbourhoods letters (£0.015m). * Included within Engagement and Partnership are the costs of the Annual Report, the Police and Crime plan and the Council Tax Leaflet.


47

11. PCC’s Commissioning Expenditure As part of the PCC’s wider role he holds a number of commissioning budgets. Total expenditure during 2014/15 against these budgets was £2.045m (£1.086m 2013/14) as follows: Community Safety Fund Grant Grants totalling £0.837m were made from the Community Safety Fund were distributed in line with the allocation determined in setting the budget; that is they have been made at the same level and to the same organisations in 2014/15 as in 2013/14. This fund was fully allocated and spent by the year end. Commissioner’s Community Fund The Commissioner’s Community Fund made payments of £0.185m (£0.230m 2013/14) to support local projects that contributed to delivery of the aims of the PCC’s Police and Crime Plan.

Victim Support Responsibility for the commissioning of victim support services (a grant stream which also includes Restorative Justice) was delegated to the PCC from October 2014. Grant for the year included brought forward grant from 2013/14 of £0.391m for capability building funding and a further allocation of £0.390m for 2014/15, was fully applied during the year. Other grants received and applied during the year included £0.162m of victims of crime funding following a successful bid to the Ministry of Justice and £0.046m to support the work of the Emergency Services Collaboration Group.

Community Drive Safe Support to the Community Drive Safe initiative in 2014/15 totalled £0.034m (£0.003m 2013/14). Income and expenditure relating to commissioning expenditure is contained within the Local Policing line within the PCC’s Comprehensive Income and Expenditure Statement.

12. Other Operating Expenditure Group and PCC

2013/14 2014/15 £’000 £’000

Carrying Value of Non-Current Assets Disposed 194 2,907 Capital Receipt from Property Disposals -75 -3,254

Police Pensions Top-Up Grant -10,844 -13,954

Total PCC & Group -10,725 -14,301


48

13. Financing and Investment Income and Expenditure Group and PCC

2013/14 2014/15 £’000 £’000

Interest payable and similar charges 779 778

Investment Gain/Loss -182 -

Interest receivable and similar income -251 -359

Net interest on the net defined liability - 6

Total PCC 346 425

Net interest on the net defined liability 64,669 64,542

Total Group 65,015 64,967

14. Taxation and Non Specific Grant Income Group and PCC

2013/14

2014/15

£’000 £’000

Home Office Settlement Grant -79,522 -114,218 Department for Communities and Local Government - Settlement Grant -39,574 - - Council Tax Grants -8,851 -9,543 Council Tax Income -61,090 -62,044 Capital grants applied -3,273 -2,794 Council Tax – Movement on Collection Fund Adjustment Account

-547 -790

Total PCC & Group -192,857 -189,389


49

15. PCC Funding for Resources Consumed The Comprehensive Income and Expenditure Statement summarises the resources that have been generated and consumed in providing policing and crime reduction services during the year. It includes all day to day expenses and related income on an accruals basis, as well as transactions measuring the value of fixed assets actually consumed and the real projected value of retirement benefits earned by employees in the year. The PCC provided funding to the Chief Constable for financial resources consumed. The funding provided covers the day to expenses on an accruals basis as well as charges for operational assets consumed in the year. These transactions are reflected in the intra-group accounts of both entities. The funding does not cover pension (IAS 19) charges and charges for compensated absences as these charges to the Comprehensive Income and Expenditure Statement are reversed in the Movement in Reserves Statement and charged to the Pensions Reserve and Accumulated Absences Account resulting.

2013/14 £’000

2014/15 £’000

Chief Constable’s Cost Of Service 202,272 188,699

Pensions interest cost 64,669 64,542

Re-measurement of the net defined benefit liability -107,028 177,556

CI&E Statement (Surplus) Deficit Pre PCC Funding 159,913 430,797

Items Removed through MIRS

Pensions

Opening Balance 1,493,709 1,466,308

Less Closing Balance -1,466,308 -1,712,260

27,401 -245,952

Accumulated Absences

Opening Balance 2,522 2,502

Less Closing Balance -2,502 -2,541

20 -39

PCC Funding for Resources Consumed 187,334 184,806

*Adjusted to remove PCC share of LGPS net liability


50

16. Property, Plant and Equipment PCC and Group

2013/14 Land and Buildings

Furniture & Equipment

Vehicles Assets Under

Construction

Surplus Assets

Total Property, Plant and

Equipment £’000 £’000 £’000 £’000 £’000 £’000

Cost or Valuation

At 1 April 2013 98,297 45,486 6,732 45 0 150,560

-Additions 2,068 2,831 1,684 - - 6,583

-Revaluations recognised in the Surplus/Deficit on Provision of Services

-1,539 - - - 509 -1,030

-De-recognition - - -1,902 - - -1,902

-Reclassified -1,564 1,129 -435

At 31 March 2014 97,262 48,317 6,514 45 1,638 153,776

Depreciation and Impairments

As at 1 April 2013 0 40,909 4,082 0 0 44,991

-Depreciation charge 4,101 2,512 1,318 - - 7,931

-Impairment 5,212 - - - - 5,212

-Revaluation -9,313 - - - - -9,313

-Disposals - - -1,708 - - -1,708

At 31 March 2014 0 43,421 3,692 0 0 47,113

Net book value PCC & Group

At 1 April 2013 98,297 4,577 2,650 45 0 105,569

At 31 March 2014 97,262 4,896 2,822 45 1,638 106,663


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2014/15 Land and Buildings

Furniture & Equipment

Vehicles Assets Under

Construction

Surplus Assets

Total Property, Plant and

Equipment £’000 £’000 £’000 £’000 £’000 £’000

Cost or Valuation

At 1 April 2014 97,262 48,317 6,514 45 1,638 153,776

-Additions 1,228 2,377 1,533 - - 5,138

-Revaluations recognised in the Surplus/Deficit on Provision of Services

5,407 - - - - 5,407

-De-recognition - - -1,079 - - -1,079

-Reclassified -571 - - - -1,638 -2,209

At 31 March 2015 103,326 50,694 6,968 45 0 161,033

Depreciation and Impairments

As at 1 April 2014 0 43,421 3,692 0 0 47,113

-Depreciation charge 2,046 2,329 1,108 - - 5,483

-Impairment - - - - - 0

-Revaluation -2,046 - - - - -2,046

-Disposals - - -993 - - -993

At 31 March 2015 0 45,750 3,807 0 0 49,557

Net book value PCC & Group

At 1 April 2014 97,262 4,896 2,822 45 1,638 106,663

At 31 March 2015 103,326 4,944 3,161 45 0 111,476


52

The additions shown in the above tables comprise of all capital expenditure on property plant and equipment in the financial year on an accruals basis. Capital expenditure that is considered to not add to the value of fixed assets is written off to the Comprehensive Income and Expenditure Statement as an impairment or revaluation loss in the same year in which the expenditure was incurred and is reversed out to the Balance Sheet in the Movement in Reserves Statement. Individual assets are also assessed in the year for any impairments or revaluation losses in line with the Code of Practice. In 2014/15 revaluation gains net of depreciation totalled £5.407m. The historical cost and fair value costs for prior years in respect of each asset classification is

shown in the following table;-

Land and Buildings

£’000

Vehicles, Furniture

and Equipment

£’000

Surplus Assets

£’000

Total

£’000

Carried at historical cost 45 8,105 - 8,150

Valued at fair value as at

31st March 2015 103,326 - - 103,326

Total cost or valuation 103,371 8,105 0 111,476

The Land and Buildings figure in the table above includes Assets under Construction valued at

£0.045m.

The carrying value of Land and Buildings assets that would have been recognised if those

assets had been carried under the cost model is estimated to be £73,029m. This represents

the original cost less cumulative depreciation.

17. Depreciation PCC & Group

The useful lives and depreciation rates used in the calculation of depreciation are set-out in the accounting policies in note 1 (xxii).

18. Revaluations PCC & Group

The properties that comprise the PCC’s property portfolio were valued in total as at 31st March 2015 by the PCC’s newly appointed estates valuer Gerald Eve LLP and in future will be valued on a five year basis unless otherwise required to meet the requirements of the Code. This approach is a change from that adopted previously when the portfolio was valued on a rolling basis. The valuation took place in March 2015 and was applied in the accounts from 31st March 2015. Land and buildings valuations were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors.


53

19. Intangible Assets PCC & Group

In order to be classed an intangible asset, the item must be identifiable, lacking in physical substance, controlled by the PCC as a result of past events and future benefits or service potential will flow to the PCC. All intangible assets held on the PCC’s balance sheet have been purchased from external suppliers. There are no internally generated intangible assets.

The PCC accounts for its software as intangible assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item of Property, Plant and Equipment. All software classed as an intangible asset is given a finite useful life of 5 years based on an assessment of the average period that the software is expected to be of use to the PCC.

The amortisation of £1.116m charged to revenue in 2014/15 (2013/14 £0.920m) was charged

to the Cost of Services in the Comprehensive Income and Expenditure Statement. It is not possible to quantify exactly how much of the amortisation is attributable to each service heading. The movement on Intangible Assets balances during the year is as follows:

2013/14 2014/15

£’000 £’000

Balance at start of year PCC & Group: Gross carrying amounts 3,772 4,604 Accumulated amortisation -1,614 -2,534

Net carrying amount at start of year PCC & Group 2,158 2,070

Purchases

832 1,384

Amortisation for the period charged to the Cost of Services in the Comprehensive Income and Expenditure Statement

-920 -1,116

Net carrying amount at end of year PCC & Group 2,070 2,338

Comprising: Gross carrying amounts 4,604 5,988

Accumulated amortisation -2,534 -3,650

Net carrying amount at end of year PCC & Group 2,070 2,338

Intangible Assets at 31st March 2015 are identified in the following table:

Asset description Carrying Value

2013/14 £’000

Carrying Value

2014/15 £’000

Remaining Amortisation

period

Athena - 509 5 years

Desktop software 748 639 4 years

Data warehouse software 35 - 3 years

Command & Control software 690 477 4 years All other software 597 713 2 to 5 years

Total PCC & Group 2,070 2,338


54

20. Capital Commitments PCC & Group At 31st March 2015, the PCC has entered into a number of contracts related to capital expenditure on Property, Plant and Equipment assets in 2015/16 and future years budgeted to cost £0.780m. Similar commitments at 31st March 2014 were £1.240m. The commitments at 31st March 2015 relate to ICT.

21. Assets Held For Investment PCC & Group

Non-Current

31 March

2014 31 March

2015

£’000 £’000

Balance outstanding at start of year 0 435

Assets newly classified as held for investment

Property, plant and equipment 435 -

Enhancement expenditure - -

Revaluation losses - -

Revaluation gains - -

Assets sold - -

Balance outstanding at year-end PCC & Group 435 435

22. Assets Held For Sale PCC & Group

Non-Current

31 March

2014 31 March

2015

£’000 £’000

Balance outstanding at start of year 2,250 2,250

Assets newly classified as held for sale

Property, plant and equipment - 2,209

Enhancement expenditure - -

Revaluation losses - -

Revaluation gains - -

Assets sold - -2,821

Balance outstanding at year-end PCC & Group 2,250 1,638

There is one asset, a surplus police station, classified as held for sale at 31st March 2015 (31st March 2014 – consisted of one surplus police station).


55

23. Financial Instrument Balances PCC & Group A financial instrument is defined as “any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity”. In practice this means that financial instruments cover cash, debt, equity instruments, contractual debtors and creditors as well as complex instruments such as commodity contracts and derivatives. The PCC holds the following types of financial instruments;

Financial liabilities held at amortised cost: trade and other payables, long term liabilities

Financial assets classed as loans and receivables: trade and other receivables, bank deposits and investments

The financial instruments carried in the Re-stated Balance Sheet are as follows:

Long Term Current

31 March

2014 £’000

31 March 2015

£’000

31 March 2014

£’000

31 March 2015

£’000

Investments:

Loans and receivables - 10,000 23,000 21,000

Total investments PCC & Group 0 10,000 23,000 21,000

Debtors:

Loans and receivables 287 287 - -

Financial assets carried at contract amounts - - 7,014 9,625

Total Debtors PCC & Group 287 287 7,014 9,625

Borrowings:

Financial liabilities at amortised cost -18,003 -17,998 -210 -210

Financial liabilities at fair value through profit and loss - -

Total borrowings PCC & Group -18,003 -17,998 -210 -210

Creditors:

Financial liabilities carried at contract amount

- PCC - - -1,620 -1837

- Chief Constable - - -10,549 -11,955

Total Creditors PCC & Group 0 0 -12,169 -13,792


56

24. Financial Instruments Gains and Losses PCC & Group

Financial Liabilities Financial Assets Liabilities measured at

amortised cost Loans and

receivables Available for

sale assets Total

£’000 £’000 £’000 £’000

2013/14

Interest Expense -775 - - -775

Interest Payable and similar charges PCC & Group -775 0 0 -775 Interest Income - 251 - 251

Interest and investment income PCC & Group 0 251 0 251

Net gain/(loss) for the year PCC & Group -775 251 0 -524

2014/15

Interest Expense

-778 - - -778

Interest Payable and similar charges PCC & Group -778 0 0 -778

Interest Income - 359 - 359

Interest and investment income PCC & Group 0 359 0 359

Net gain/(loss) for the year PCC & Group -778 359 0 -419


57

25. Fair Values of Assets and Liabilities PCC & Group

Financial liabilities, financial assets represented by loans and receivables and long-term

debtors and creditors are carried in the Balance Sheet at amortised cost. Their fair value can

be assessed by calculating the present value of the cash flows that will take place over the

remaining term of the instruments, using the following assumptions:

The fair values for financial liabilities have been determined by reference to the Public Works Loans Board (PWLB) redemption rules and prevailing PWLB redemption rates as at the balance sheet date and include accrued interest. The fair values for non-PWLB debt have also been calculated using the same procedures and interest rates and this provides a sound approximation of fair value for these instruments.

For loans receivable prevailing benchmark market rates have been used to provide the fair value;

No early repayment or impairment is recognised;

Where an instrument has a maturity of less than 12 months or is a trade or other receivable the fair value is taken to be the principal outstanding or the billed amount;

The fair value of trade and other receivables is taken to be the invoiced or billed amount.

The fair values calculated are as follows:

2013/14 2014/15 Carrying

Amount £’000

Fair Value £’000

Carrying Amount

£’000

Fair Value £’000

PWLB debt -8,141 -10,176 -8,141 -13,204

Non-PWLB debt -10,070 -10,516 -10,066 -13,989

Total debt PCC & Group -18,211 -20,692 -18,207 -27,193

Trade creditors & bank overdraft

- PCC -1,620 -1,620 -1,837 -1,837

- Chief Constable -10,549 -10,549 -11,955 -11,955

Total Financial liabilities PCC & Group -30,380 -32,861 -31,999 -40,985

The fair value is greater than the carrying amount because the PCC’s portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the rates available for similar loans in the market at the balance sheet date. This increases the fair value of financial liabilities and raises the value of loans and receivables.


58

2013/14 2014/15 Carrying

Amount £’000

Fair Value

£’000

Carrying Amount

£’000

Fair Value

£’000

Money market loans < 1 yr 19,020 19,020 6,680 6,680 Instant Access Bank Account 3,000 3,000 3,000 3,000 Fixed Loans < 1 yr 23,000 23,000 21,000 21,000 Fixed Loans > 1 yr - - 10,000 10,000 Long Term Debtors 287 287 287 287 Trade debtors 1,576 1,576 2,219 2,219 Other receivables & advances 6,280 6,280 9,740 9,740

Total Loans and Receivables PCC & Group

53,163 53,163 52,926 52,926

The fair values for loans and receivables have been determined by reference to the Public Works Loans Board (PWLB) redemption rules which provide a good approximation for the fair value of a financial instrument and includes accrued interest. The comparator market rates prevailing have been taken from indicative investment rates at each balance sheet date. In practice rates will be determined by the size of the transaction and the counterparty, but it is impractical to use these figures, and the difference is likely to be immaterial. Short term debtors and creditors are carried at cost as this is a fair approximation of their

value.


59

26. Inventories Group

Garage Stationery Fuel Other Total

£’000 £’000 £’000 £’000 £’000

Balance 1 April 2013 34 72 44 67 217

Purchases 759 33 1,591* 111 2,494

Recognised as an expense in the year

-763 -45 -1,583* -131 -2,522

Balance 31st March 2014 30 60 52 47 189

Purchases 641 152 1,377 25 2,195

Recognised as an expense in the year

-641 -154 -1,393 -20 -2,208

Balance 31st March 2015 30 58 36 52 176

*Restated


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27. Short-Term Debtors PCC & Group

The following table provides an analysis of money owed to the Group and PCC by debtors and identifies particular classes of bodies in the public sector:

31 March

2014 31 March

2015

£’000 £’000

Central government bodies 2,396 -

Other Local Authorities 2,161 3,555

Other entities and individuals 6 2,724

Total PCC 4,563 6,279

Central government bodies 1,951 7,897

Other Local Authorities 5,885 6,948

NHS bodies 25 -

Other entities and individuals 4,176 2,193

Total Group 16,600 23,317

All outstanding debts are reviewed throughout the year and a bad debt provision made in respect of those debts for which payment is considered doubtful. At 31st March 2015 the bad debt provision was £0.198m (31st March 2014 was£0.054m).

28. Cash and Cash Equivalents PCC & Group The balance of Cash and Cash Equivalents is made up of the following elements:

31 March

2014 31 March

2015

£’000 £’000

Cash held by the Group 29 33

Bank Current Accounts 20,437 17,974

Total cash and cash equivalents PCC & Group 20,466 18,007


61

29. Short-Term Creditors PCC & Group

The following table provides an analysis of money owed by the group and PCC to creditors and identifies particular classes of bodies in the public sector:

31 March

2014 31 March

2015 PCC PCC

£’000 £’000

Other local authorities -2,014 -1,630

Other entities and individuals -582 -1,787

Total Short Term Creditors PCC -2,596 -3,417

Central Government bodies -4,603 -3,625

Other local authorities -4,677 -6,253

NHS bodies -3 -

Other entities and individuals -3,011 -2,993

Total Short Term Creditors Group -14,890 -16,288

30. Intra-Entity Creditor / Debtor

31 March

2014 31 March

2015

£’000 £’000

Chief Constable’s Balance Sheet

- Inventories 189 176

- Short Term Debtors 12,037 17,038

- Short Term Creditors -12,294 -12,871

- Provision For Redundancy Costs -1,985 -

- Provisions -932 -1,043

Intra-Entity Debtor (-Creditor) to the PCC -2,985 3,300

31. Short-Term and Long-Term Investments PCC & Group

The PCC invests its surplus cash balances in banks and similar financial institutions in order to generate income by earning interest. Short term investments are those where the investment period was greater than three months but less than one year. Long term investments are where the investment term exceeds one year. The Annual Treasury Management Strategy approved by the PCC lists the classes of approved organisations and the maximum proportion of monies available for investment that can be invested short-term or long term with any one party. The interest earned on the investments has been credited to the Comprehensive Income and Expenditure Statement.


62

The analysis of investments is shown in the following table:

31 March

2014 31 March

2015

Investments £’000 £’000

Short Term

Bank deposits 23,000 21,000


Long Term Bank deposits - 10,000

Total PCC & Group 0 10,000

32. Provisions PCC & Group

Provisions are amounts set aside to meet future material liabilities of uncertain timing or amount at the end of the financial year. The provisions on the balance sheet at 31st March 2015 are set out in the following table:

PCC’s Provisions

Chief Constable’s Provisions

Total Group

Revaluation Provision

Legal and Claims Provision

Termination Benefits

£’000 £’000 £’000 £’000

Balance at 1 April 2013 -735 -813 -1,677 -3,225

Additional provisions made in 2013/14 - -119 -1,383 -1,502

Amounts used in 2013/14 - - 1,075 1,075

Balance at 31 March 2014 PCC -735 -932 -1,985 -3,652

Balance at 1 April 2014

Additional provisions made in 2014/15 - -524 - -524

Amounts used in 2014/15 - 413 - 413

Credited to I&E - - 1,985 1,985

Balance at 31 March 2015 -735 -1,043 0 -1,778

The timing of the outflow from the provisions cannot be stated with accuracy due to general uncertainty in respect of the events which will give rise to expenditure against the provisions.

The detailed information in respect of each of the provisions is set out below;


63

Legal and Claims Provision Description of the obligation and expected timing of any resulting outflows of economic benefits or service potential

Insurance and legal claims have been made against the PCC in respect of past events up to 31st March 2015

Uncertainties about the timing of outflows including assumptions on future events

The timing is influenced by the work of external insurance and legal professionals

Amounts of any expected reimbursements

None are expected

Termination Benefits Provision The Constabulary has reviewed the need to make provision for termination benefits and has concluded that the current status of change programmes does not meet the criteria set out in the code and has therefore returned the provision back to the CI&E and used this balance to establish a redundancy reserve (see note 9). This position will be reviewed as change programmes progress.

Revaluation Provision

Description of the obligation and expected timing of any resulting outflows of economic benefits or service potential

The PCC is awaiting the outcome of business rate revaluations on a number of its sites.

Uncertainties about the timing of outflows including assumptions on future events

The timing of the completion of the revaluations and any appeals.

Amounts of any expected reimbursements None are expected.


64

33. Usable Reserves PCC & Group

All of the Usable Reserves are revenue reserves. The Police Fund is a statutory usable reserve. All other earmarked reserves are discretionary and have been set up voluntarily to earmark resources to finance future spending plans. Movements in the PCC's usable reserves are detailed in the Movement in Reserves Statement and note 9.

31 March

2014 31 March

2015

£’000 £’000

Earmarked Reserves 31,742 42,452

Police Fund 4,915 5,450

Unapplied Capital Receipts 16,793 16,579


34. Unusable Reserves PCC & Group

(Restated)* 31 March

2014 31 March

2015

£’000 £’000

Revaluation Reserve 24,638 32,412

Capital Adjustment Account 55,645 53,245

Collection Fund Adjustment Account 1,185 1,975

Deferred Capital Receipts Reserve 287 287

Pensions Reserve - PCC - -259

Total PCC Unusable Reserves 81,755 87,660

Pensions Reserve – Chief Constable -1,466,308 -1,712,261

Accumulated Absences Account -2,502 -2,540

Total Group Unusable Reserves -1,387,055 -1,627,141

Revaluation Reserve

The Revaluation Reserve contains the gains made by the PCC arising from increases in the value of its Property, Plant and Equipment [and Intangible Assets]. The balance is reduced when assets with accumulated gains are:

re-valued downwards or impaired and the gains are lost

used in the provision of services and the gains are consumed through depreciation, or

disposed of and the gains are realised.


65

The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account.

(Restated)

2013/14 2014/15

£’000 £’000

Balance at 1 April PCC & Group 26,438 24,638

In Year Adjustment -7,625* -

18,813 24,638

Upward revaluation of assets 8,282 10,648

Downward revaluation of assets and impairment losses not posted to the Surplus or Deficit on the Provision of Services.

-1,595 -1,284

Surplus or deficit on revaluation of non-current assets not posted to the Surplus or Deficit on the Provision of Services

6,687 9,364

Difference between fair value depreciation and historical cost depreciation

-862 -539

Accumulated gains on assets sold or scrapped - -1,051

Amount written off to the Capital Adjustment Account

-862 -1,590

Balance at 31 March PCC & Group 24,638 32,412

*See Note 60


66

Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the PCC as finance for the costs of acquisition, construction and enhancement. The Account contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 8 gives details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.

(Restated)

2013/14 2014/15

£’000 £’000

Balance at 1 April PCC & Group 50,550 55,645

In year adjustment 7,625 -

Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement:

Charges for depreciation and impairment of non-current assets -7,931 -5,483

Revaluation losses on Property, Plant and Equipment -3,617 -1,908

Amortisation of intangible assets -920 -1,116

Current Value versus Historic Cost Depreciation Adjustment 862 539

Revaluation Gains outstanding on disposal - 1,051

Amounts of non-current assets written off on disposal or sale as part of the Gain / loss on disposal to the Comprehensive Income and Expenditure Statement

-195 -2,909

Net written out amount of the cost of non-current assets consumed in the year


3,786 3,467

Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement that have been applied to capital financing

3,273 2,794

Statutory provision for the financing of capital investment charged against the Police Fund and HRA balances

1,854 904

Capital expenditure charged against the Police Fund 358 261

Balance at 31st

March PCC & Group 55,645 53,245


67

Collection Fund Adjustment Account

The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers compared with the statutory arrangements for paying across amounts to the Police Fund from the Collection Fund.

2013/14 2014/15

£’000 £’000

Balance at 1 April PCC & Group 638 1,185


547 790

Balance at 31 March PCC & Group 1,185 1,975

Pensions Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. The PCC accounts for post-employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the PCC makes employer's contributions to pension funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the PCC has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

2013/14 2014/15 £’000 £’000

Balance at 1 April Group -1,493,709 -1,466,308 Actuarial gains or losses on pensions assets and liabilities

107,028 -177,654

Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement

-112,767 -107,513

Employer's pensions contributions and direct payments to pensioners payable in the year

33,140 38,955

Balance at 31 March Group -1,466,308 -1,712,520


68

Accumulated Absences Account The Accumulated Absences Account absorbs the differences that would otherwise arise on the Police Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the Police Fund Balance is neutralised by transfers to or from the Account.

2013/14 2014/15

£’000 £’000

Balance at 1 April Group -2,522 -2,502

Settlement or cancellation of accrual made at the end of the preceding year

2,522 2,502

Amounts accrued at the end of the current year -2,502 -2,540


20 -38

Balance at 31 March Group -2,502 -2,540

Deferred Capital Receipts Reserve The Deferred Capital Receipts Reserve holds the gains recognised on the disposal of non-current assets but for which cash settlement has yet to take place. Under statutory arrangements, the PCC does not treat these gains as usable for financing new capital expenditure until they are backed by cash receipts. When the deferred cash settlement is made, paid amounts are transferred to the Capital Receipts Reserve.

2013/14 2014/15

£’000 £’000

Balance at 1 April PCC & Group 483 287

Transfer of deferred sale proceeds credited as part of the gain / loss on disposal to the Comprehensive Income and Expenditure Statement

-196 -

Balance at 31 March PCC & Group 287 287


69

35. Cash Flow Statement - Adjustment to Net Surplus or Deficit on the Provision of Services for Non-Cash Movements The following adjustments were made to remove non-cash items from the surplus or deficit on the provision of services:

2013/14 2014/15

£’000 £’000

Adjustment for non-cash movements:

- Depreciation of Non-Current Assets 7,931 5,483

- Impairment And Downward Revaluation Of Non-Current Assets

3,617 1,908

- Amortisation of Intangible Assets 921 1,116

- Carrying Amount Of Sold Non-Current Assets 195 2,907

- Amount by which pension costs calculated in accordance with the Code are different from the contributions due under the pension scheme regulations

- 230

- Employer’s contribution payable to the Pension Fund and retirement benefits payable directly to pensioners (including additional contributions payable to balance a deficit on the Police Pension Fund Account)

- -68

- Impairment Of Financial Instruments -182 -

- Notional Interest -49 -

- Transfer To/From the Collection Fund Adjustment Account -547 -790

- Movement in Long Term Debtors 196 -

Adjust for accruals:

Increase(-)/Decrease in Inventories - -

Increase (-)/Decrease in Revenue Debtors 2,501 -147

Increase/Decrease (-) in Revenue Creditors -2,379 257

Increase/Decrease (-) in Intra-Entity Creditor/Debtor -3,030 -6,285

Total PCC Non-Cash Movements 9,174 4,611 - Transfer To/From the Accumulated Absences

Account -20 39

- Chief Constable’s Provision 427 -1,874

- Amount by which pension costs calculated in accordance with the Code are different from the contributions due under the pension scheme regulations

112,767 107,283

- Employer’s contribution payable to the Pension Fund and retirement benefits payable directly to pensioners (including additional contributions payable to balance a deficit on the Police Pension Fund Account)

-33,140 -38,887


70

Adjust for Chief Constable’s accruals:

Increase(-)/Decrease in Inventories 28 13

Increase (-)/Decrease in Revenue Debtors -1,768 -5,001

Increase/Decrease (-) in Revenue Creditors -1,717 577

Increase (-)/Decrease in Intra-Entity Debtor/Creditor 3,030 6,285

Total Group Non-Cash Movements 88,781 73,046

36. Cash Flow Statement - Adjustment for Items Included in the Net Surplus or

Deficit on the Provision of Services that are Investing Activities The cash flows for investing activities include the following items:

2013/14 2014/15

£’000 £’000

Sale Proceeds from disposal of non-current assets -271 -3,254

Interest Received -201 -359

Interest Paid 778 778

Capital Grants -3,273 -2,794

Total PCC & Group -2,967 -5,629

37. Cash Flow Statement - Investing Activities

2013/14 2014/15

£’000 £’000

Purchase of property, plant and equipment, and intangible assets -6,274 -6,570

Sale / Purchase of investments -22,494 -8,000

Proceeds from the sale of property, plant and equipment, and intangible assets applied to fund capital expenditure 271 3,254

Proceeds from the sale of property, plant and equipment, and intangible assets held in Capital Receipts Reserve

- -50

Proceeds from short-term and long-term investments 236 242

Net cash flows from investing activities PCC & Group -28,261 -11,124


71

38. Cash Flow Statement - Financing Activities

2013/14 2014/15

£’000 £’000

Cash receipts of short and long-term borrowing -9 -5

Other receipts from financing activities 3,273 2,794

Repayments of short and long-term borrowing - -

Other payments for financing activities -777 -778

Net cash flows from investing activities PCC & Group

2,487 2,011

39. Analysis of Government Grants in the Cash Flow Statement

Revenue Grants 2013/14 £000

2014/15 £000

Police settlement grants 79,522 114,218

DCLG Settlement Grants 39,574 -

Council Tax Grants 8,851 9,545

Community Safety Fund Grant 837 -

Other grants 24 781

Police Pensions Top-up Grant 10,947 13,954

Total PCC 139,755 138,498

Innovation Fund Grant 122 1,091

Other grants 3,650 4,021

Total Group 143,527 143,610


72

40. Amounts Reported For Resource Allocation Decisions

The analysis of income and expenditure on the face of the Comprehensive Income and

Expenditure Statement is that specified by the Service Reporting Code of Practice (SeRCOP) published for CIPFA. The PCC sets the annual budget and delegates the day-to-day management of the budget to the Force. The Force reports regularly to the PCC on the financial position and recommends to the PCC changes to the financial budgets which exceed the Force’s delegated limits. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular: • no charges are made in relation to capital expenditure (whereas depreciation,

revaluation and impairment losses in excess of the balance on the Revaluation Reserve and amortisations are charged to services in the Comprehensive Income and Expenditure Statement)

• the cost of retirement benefits is based on cash flows (payment of employer's

pensions contributions) rather than current service cost of benefits accrued in the year

Reconciliation of Portfolio Income to Cost of Services in the Comprehensive Income and Expenditure Statement

This reconciliation shows how the figures in the analysis of portfolio income and expenditure relate to the amounts included in the Comprehensive Income and Expenditure Statement.

PCC Group

Revised 2013/14 2014/15

Revised 2013/14 2014/15

£’000 £’000 £’000 £’000

Net expenditure in the Portfolio Analysis

1,057 1,956 173,594 176,914

Amounts in the Comprehensive Income and Expenditure Statement not reported to management in the Analysis

12,721 8,899 71,391 63,111

Amounts included in the Analysis not included in the Comprehensive Income and Expenditure Statement

- -68 -28,935 -40,539

Cost of Services in Comprehensive Income and Expenditure Statement

13,778 10,787 216,050 199,486


73

2013/14 Income and expenditure of the Group's portfolios recorded in the budget reports for the year is as follows: Territorial

Operations Protective

Services Citizen Focus

Corporate Services

Support Services

Corporate Budgets

PCC Group Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Portfolio Income and Expenditure 2013/14

Fees, Charges, and Other Service Income

-708 -1,007 -1,563 -1,114 -683 -2,559 -1 -7,635

Interest and Investment Income - - - - - -215 - -215

Government Grants - -680 -757 -122 -85 -7,261 -860 -9,765

Total Income -708 -1,687 -2,320 -1,236 -768 -10,035 -861 -17,615

Employee Expenses 83,603 18,433 25,265 13,387 5,452 12,444 619 159,203

Premises Costs - 60 24 125 6,737 - - 6,946

Transport Related Costs 1,423 666 276 185 120 37 9 2,716

Supplies and Other Services 3,893 4,742 2,346 764 5,577 3,732 1,290 22,344

Total Expenditure 88,919 23,901 27,911 14,461 17,886 16,213 1,918 191,209

Net Expenditure 88,211 22,214 25,591 13,225 17,118 6,178 1,057 173,594


74

2014/15 Income and expenditure of the Group's portfolios recorded in the budget reports for the year is as follows: Territorial

Operations Protective

Services Citizen Focus

Corporate Services

Support Services

Corporate Budgets

PCC Group Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Portfolio Income and Expenditure 2014/15

Fees, Charges, and Other Service Income

-1,090 -3,791 -1,131 -839 -964 -2,503 - -10,318

Interest and Investment Income - - - - - -359 - -359

Government Grants - -419 -709 -692 -119 - -990 -2,929

Total Income -1,090 -4,210 -1,840 -1,531 -1,083 -2,862 -990 -13,606

Employee Expenses 86,444 20,784 26,025 14,559 5,219 5,159 739 158,929

Premises Costs - 222 92 92 6,909 - - 7,315

Transport Related Costs 1,289 510 223 215 115 37 12 2,401

Supplies and Other Services 4,170 3,993 1,839 737 6,106 2,835 2,195 21,875

Total Expenditure 91,903 25,509 28,179 15,603 18,349 8,031 2,946 190,520

Net Expenditure 90,813 21,299 26,339 14,072 17,266 5,169 1,956 176,914


75

Group Reconciliation to Subjective Analysis

This reconciliation shows how the figures in the analysis of portfolio income and expenditure relate to a subjective analysis of the Surplus or (Deficit) on the Provision of Services included in the Comprehensive Income and Expenditure Statement.

Portfolio Analysis

Amounts not reported for decision making

Amounts not included in CIES

Cost of Services

Corporate Amounts

Total

£’000 £’000 £’000 £’000 £’000 £’000

2013/14

Fees, charges & other service income -7,635 -198 - -7,833 - -7,833

Interest and investment income -215 - 215 0 -7,310 -7,310

Income from council tax - - - 0 -61,090 -61,090

Government grants and contributions -9,765 - 7,195 -2,570 -142,611 -145,181

Gain on disposal of fixed asset - - - 0 -75 -75

Total Income -17,615 -198 7,410 -10,403 -211,086 -221,489

Employee expenses 159,203 58,815 -33,140 184,878 - 184,878

Other service expenses 31,227 305 -2,426 29,106 - 29,106

Depreciation, amortisation and impairment - 12,469 - 12,469 - 12,469

Interest payments 779 - -779 0 72,325 72,325

Loss on disposal of fixed assets - - - 0 194 194

Total expenditure 191,209 71,589 -36,345 226,453 72,519 298,972

Intra-Entity Transfer - - - 0 - 0

(Surplus) or Deficit on the Provision of Services 173,594 71,391 -28,935 216,050 -138,567 77,483


76

Group Reconciliation to Subjective Analysis - Continued

Portfolio Analysis



Cost of Services

Corporate Amounts

Total

£’000 £’000 £’000 £’000 £’000 £’000

2014/15

Fees, charges & other service income -10,318 -369 400 -10,287 - -10,287

Interest and investment income -359 - 359 0 -8,025 -8,025


Government grants and contributions -2,929 - - -2,929 -141,244 -144,173

Gain on disposal of fixed asset - - - 0 -3,254 -3,254

Total Income -13,606 -369 759 -13,216 -214,622 -227,838

Employee expenses 158,929 54,973 -38,887 175,015 - 175,015

Other service expenses 30,813 - -1,633 29,180 - 29,180


Interest payments 778 - -778 0 72,992 72,992

Loss on disposal of fixed assets - - - 0 2,907 2,907

Total expenditure 190,520 63,480 -41,298 212,702 75,899 288,601

Intra-Entity Transfer - - - 0 - 0

(Surplus) or Deficit on the Provision of Services 176,914 63,111 -40,539 199,486 -138,723 60,763


77

PCC Reconciliation to Subjective Analysis

This reconciliation shows how the figures in the analysis of portfolio income and expenditure relate to a subjective analysis of the Surplus or (Deficit) on the Provision of Services included in the Comprehensive Income and Expenditure Statement.

Portfolio Analysis



Cost of Services

Corporate Amounts

Total

£’000 £’000 £’000 £’000 £’000 £’000

2013/14

Fees, charges & other service income -1 - - -1 - -1

Interest and investment income - - - 0 -433 -433


Government grants and contributions -860 - - -860 -142,611 -143,471

Gain on disposal of fixed asset - - - 0 -75 -75

Total Income -861 0 0 -861 -204,209 -205,070

Employee expenses 619 145 - 764 - 764

Other service expenses 1,299 107 - 1,406 - 1,406


Interest payments - - - 0 779 779

Loss on disposal of fixed assets - - - 0 194 194

Total expenditure 1,918 12,721 0 14,639 973 15,612

Intra-Entity Transfer - - - 0 187,334 187,334

(Surplus) or Deficit on the Provision of Services 1,057 12,721 0 13,778 -15,902 -2,124


78

PCC Reconciliation to Subjective Analysis - Continued

Portfolio Analysis



Cost of Services

Corporate Amounts

Total

£’000 £’000 £’000 £’000 £’000 £’000

2014/15

Fees, charges & other service income - -10 - -10 - -10

Interest and investment income - - - 0 -381 -381


Government grants and contributions -990 - - -990 -141,244 -142,234

Gain on disposal of fixed asset - - - 0 -3,254 -3,254

Total Income -990 -10 0 -1,000 -206,978 -207,978

Employee expenses 739 402 - 1,141 - 1,141

Other service expenses 2,207 - -68 2,139 - 2,139


Interest payments - - - 0 806 806

Loss on disposal of fixed assets - - - 0 2,907 2,907

Total expenditure 2,946 8,909 -68 11,787 3,713 15,500

Intra-Entity Transfer - - - 0 184,806 184,806

(Surplus) or Deficit on the Provision of Services 1,956 8,899 -68 10,787 -18,459 -7,672


79

41. Bedfordshire, Cambridgeshire and Hertfordshire Collaborative Units

Bedfordshire Police, Cambridgeshire Constabulary and the Chief Constable operate a number of collaborative units. The units are jointly funded by the Forces in accordance with agreements approved by the Policing Bodies under Section 22 of the Police reform and Social Responsibility Act 2001. The collaborated units are jointly staffed and funded by the two or three forces as appropriate. The material benefits from working together include improved efficiency, effectiveness and resilience for each of the forces. The table below sets out the aggregate income and expenditure on all collaborative units. Each force’s contribution reflects its share of the units and its contribution towards support and accommodation costs.

2013/14 2014/15 £’000 £’000

Beds / Cambs / Herts Joint Protective Services Armed Policing Unit 7,244 7,113 Collaboration Team 233 3,789 Camera, Tickets, Collisions 1,121 -1,544 Counter Terrorism & Domestic Extremism 1,549 1,549 Dogs 2,789 2,772 Major Crime Unit 9,739 9,351 Operational Planning & Public Order 963 914 Protective Services Command Team 672 657 Roads Policing Unit 14,312 14,083 Scientific Services Unit 8,498 8,336

Total Joint Protective Services 47,120 47,020

Beds / Cambs / Herts Organisational Support Professional Standards Unit 2,866 2,853 Information Assurance - 115 Procurement 787 811

Total Expenditure 3,653 3,779

Beds / Herts Joint Protective Services Resilience 216 225

Total Expenditure 216 225

Beds / Herts Organisational Support Firearms Licensing 435 426 Information Communication Technology 11,776 12,246 Pensions Administration 263 331

Total Expenditure 12,474 13,003

Total Net Operating Costs 63,463 64,027

Set Up Costs 173 191

Total Expenditure 63,636 64,218 Bedfordshire Contribution -18,145 -18,391 Cambridgeshire Contribution -16,281 -16,438 Hertfordshire Contribution -29,210 -29,389

(Surplus) / Deficit For The Year 0 0


80

42. Chiltern Travel Consortium Hertfordshire is a member of the Chiltern Transport Consortium (CTC). CTC is a collaborative arrangement with Bedfordshire Police, Thames Valley Police and the Civil Nuclear Constabulary. CTC provides fleet management, procurement and maintenance. Each member’s vehicle charges are based the size and mix of the fleet they operate.

2013/14 2014/15 £’000 £’000

Operating Costs 13,672 13,650 Operating Income -1,496 -1,410

Net Operating Expenditure 12,176 12,240 Bedfordshire Vehicle Charges -1,779 -2,097 Civil Nuclear Vehicle Charges -885 -731 Hertfordshire Vehicle Charges -3,328 -2,863 Thames Valley Vehicle Charges -6,167 -6,231 Other Vehicle Charges -305 -368

(Surplus) / Deficit For The Year -288 -50

43. National Police Air Service The National Police Air Service (NPAS) was set up by the Home Office with effect from 1st October 2012 and upon its formation the existing assets of the Chiltern Air Support Consortium (CASU) formally transferred to the new national service provider. Unlike CASU, NPAS does not constitute a jointly controlled operation and so the Chief Constable only accounts for the expense of payments to NPAS - £0.480m in 2014/15 (£0.480m in 2013/14) and not for a share of the assets or liabilities. As part of the transfer arrangements, the PCC will receive an annual payment from NPAS to reflect the value of the air frame credits for the transferred helicopters. NPAS’s liability to the PCC is shown in the PCC’s balance sheet as a long term debtor of £0.287m, representing the discounted value of future expected cash flows from 2017/18 – 2024/25 respectively. Future payments from NPAS will be offset against these debtors.

44. Eastern Region Special Operations Unit (ERSOU)

The Eastern Region Special Operations Unit (ERSOU) was established in 2010/11 and is a joint unit consisting of the six eastern region police forces: Bedfordshire, Cambridgeshire, Essex, Hertfordshire, Norfolk and Suffolk. The unit provides a single serious and organised crime unit across the region. During 2014/15 Bedfordshire Police took over from Hertfordshire the lead force responsibility. However all transactions for the unit are recorded through the Hertfordshire ledger. Legal title to all vehicles, equipment and premises owned and used by the unit transferred from Hertfordshire to Bedfordshire and the assets are recorded in its capital accounts and asset register.

All revenue costs and capital expenditure are shared between the six forces in accordance with the percentages defined in the Section 22 agreement. All capital expenditure is fully funded in the year of expenditure and there is therefore no capital financing charge to the six participating forces.


81

ERSOU is a jointly controlled operation with no separate entity and is therefore not able to hold reserves in respect of any cumulative surplus or deficit at year end. Each participating Local Policing Body shows its share of the carried forward surplus in its accounts. The ERSOU operating account is shown in the following table. The expenditure figures do not include depreciation charges. The Home Office grants were paid to Bedfordshire as agent for the participating forces. ERSOU Income and Expenditure Statement 2014/15

2013/14 £’000

2014/15 £’000

Operating costs 7,923 11,672 Operating income -30 - Specific HO grant -2,208 -2,891

Net expenditure 5,685 8,781 Contributions Bedfordshire -1,055 -1,219 Cambridgeshire -964 -1,571 Essex -254 -419 Hertfordshire -1,506 -2,227 Norfolk -1,100 -1,773 Suffolk -841 -1,356

Total Contributions -5,720 -8,565 Surplus/Deficit for year -35 216 Surplus/Deficit b/f -3 -301 Opening Balance Adjustment -263 -

Surplus/(Deficit) c/f -301 -85

The capital assets for ERSOU at 31st March 2015 are analysed as follows:

2013/14 £’000

2014/15 £’000

Net book value brought forward 1st April 555 1,387 Expenditure for the year:

- Vehicles 308 271 - Equipment 220 38 - Building works 566 -

Depreciation for the year -262 -367

Net book value carried forward 31st March 1,387 1,329

Hertfordshire’s share of the total Net Book Value of ERSOU assets as at 31st March 2015 was £331k (£346k as at 31st March 2014).


82

The capital expenditure for 2014/15 was funded in accordance with the formulae agreed by the forces. Details are shown in the following table:

2013/14 £’000

2014/15 £’000

Home Office Grant -943 - Bedfordshire -34 -43 Cambridgeshire -19 -56 Essex -14 -16 Hertfordshire -46 -80 Norfolk -22 -64 Suffolk -16 -50

Total -1,094 -309

45. Acquired and Discontinued Operations

The PCC did not acquire or discontinue any operations during the year.


83

46. Senior Officers’ Remuneration

The remuneration paid to the PCC’s senior police officers and employees is as follows:

2013/14

Post Holder Information (Job Title) To aid comparison and

avoid complication of individuals changing roles, role titles used are those as at 31

st March 2014 or for individuals no

longer within the Force Executive team their final role title.

Salary (including

fees & Allowances)

Bonuses Expense Allowances

Benefits In Kind (e.g. Car

Allowance)

Total Remuneration

excluding pension

contributions

Pension Contributions

Total Remuneration

including pension

contributions

£ £ £ £ £ £ £

Police and Crime Commissioner 77,395 - - - 77,395 11,100 88,495

Deputy Police and Crime Commissioner Note 1 34,355 - - - 34,355 5,053 39,408

Chief Executive Note 2 52,580 - - 978 53,558 11,200 64,758

Total Police and Crime Commissioner 164,330 0 0 978 165,308 27,353 192,661

Chief Constable - Mr A Bliss 154,315 - 13,993 - 168,308 - 168,308

Deputy Chief Constable (Director of Change) Note 3 122,359 - 11,544 - 133,903 27,937 161,840

Temporary Deputy Chief Constable Note 4 118,098 - 10,647 - 128,745 - 128,745

Director of Resources Note 5 124,888 - 12,472 - 137,360 18,109 155,469

Assistant Chief Constable (Joint Protective Services) 108,101 - 10,343 - 118,444 25,030 143,474

Temporary Assistant Chief Constable (Crime and Operational Support)

102,956 - 9,430 - 112,386 22,820 135,206

Total Group 895,047 0 68,429 978 964,454 121,249 1,085,703

In addition to the requirements of the Accounts and Audit Regulations 2011, the PCC has voluntarily disclosed details for all members of the Executive team. Note 1 Deputy Police and Crime Commissioner joined on 26th July 2013 with an annualised salary of £50,000. Note 2 A part time Chief Executive was appointed to the Police and Crime Commissioner’s office from 1st April 2013, this forms part of a dual role under secondment from

Hertfordshire County Council (HCC). The annual cost represents 40% of the individual’s full remuneration as paid by HCC. Note 3 Deputy Chief Constable became Director of Change following the three-way collaboration agreement signed by Bedfordshire, Cambridge and Hertfordshire in December

2013. Note 4 Temporary Deputy Chief Constable appointed following change at note 1, from 27th January 2014. Note 5 The Director of Resources fulfilled the role of Chief Finance Officer to both the Police and Crime Commissioner and the Chief Constable in 2013/14.


84

46. Senior Officers’ Remuneration (continued)

2014/15

Post Holder Information (Job Title) To aid comparison and

avoid complication of individuals changing roles, role titles

used are those as at 31st March 2015 or for individuals no

longer within the Force Executive team their final role title.

Salary

(including

fees &

Allowances)

Bonuses Expense

Allowances

Benefits In

Kind (e.g. Car

Allowance)

Total

Remuneration

excluding

pension

contributions

Pension

Contributions

Total

Remuneration

including

pension

contributions

£ £ £ £ £ £ £

Police and Crime Commissioner Note 1 75,060 - - - 75,060 14,175 89,235

Deputy Police and Crime Commissioner Note 1 50,000 - - - 50,000 9,450 59,450

Chief Executive Note 2 53,106 - - 973 54,079 11,311 65,390

Chief Finance Officer Note 3 13,200 - - 89 13,289 2,719 16,008

Total Police and Crime Commissioner 191,366 0 0 1,062 192,428 37,655 230,083

Chief Constable - Mr A Bliss 151,534 - 14,133 - 165,667 - 165,667

Deputy Chief Constable Note 4 129,584 - 11,660 - 141,244 25,855 167,099

Temporary Deputy Chief Constable (Director of

Change) Note 5 128,172 - 10,753 - 138,925 - 138,925

Director of Resources 123,843 - 12,359 - 136,202 23,358 159,560

Assistant Chief Constable (Local Policing) 103,911 - 9,525 - 113,436 17,263 130,699

Assistant Chief Constable (Operational Support) Note 6 81,214 - 7,909 - 89,123 19,140 108,263

Assistant Chief Constable (Joint Protective Services) Note 7 28,011 - 1,958 - 29,969 4,740 34,709

Total Group 937,635 0 68,297 1,062 1,006,994 128,011 1,135,005

In addition to the requirements of the Accounts and Audit Regulations 2011, the PCC has voluntarily disclosed details for all members of the Executive team. Note 1 The effective LGPS employer contribution rate increased from 14.8% in 2013/14 to 18.9% in 2015/16 due to the inclusion of 2.0% deficit funding previously paid to the fund as

a lump sum and a 2.1% increase resulting from the statutory tri-annual fund valuation. Note 2 Chief Executive cost’s represents 40% of total annualised salary. The balance 60% is paid by Hertfordshire County Council for the role of Director Community Protection. Note 3 Chief Finance Officer joined on 1

st April 2014 and the charge represents a full year. The annual cost represents 20% of the individual’s full remuneration as paid by

Hertfordshire County Council. Note 4 Deputy Chief Constable resumed role from 1

st January 2015, formerly Director of Change.

Note 5 Temporary Deputy Chief Constable appointed Director of Change from 1st January 2015. Note 6 Assistant Chief Constable (Operational Support) joined 2nd June 2014 with annualised salary (including fees and allowances) of £107,684. Note 7 Assistant Chief Constable (Joint Protective Service) transferred to another force from 8th June 2014.


85

47. Officers’ Emoluments Group The Accounts and Audit Regulations 2011, as amended by regulations, require the Group to disclose the numbers of senior police officers and police staff whose remuneration, excluding pension contributions was £50,000 or more in the relevant financial year. The Group has extended this disclosure to include all police officers whose remuneration was greater than £50,000. Individuals whose remuneration is disclosed separately in note 46 above are not included within the table. There is one member of staff in the OPCC included in band £65,000 – £69,999 for 2014/15.

Remuneration Band Number of Employees 2013/14 2014/15

£95,000 - £99,999 - 1 £90,000 - £94,999 2 2 £85,000 - £89,999 4 4 £80,000 - £84,999 5 7 £75,000 - £79,999 6 2 £70,000 - £74,999 3 3 £65,000 - £69,999 11 9 £60,000 - £64,999 28 23 £55,000 - £59,999 85 83 £50,000 - £54,999 86 96

48. External Audit Costs

In 2014/15 the PCC incurred the following fees, payable to the appointed external auditors Ernst & Young LLP under Section 5 Audit Commission Act 1998, relating to external audit and inspection:

2013/14 2014/15 £’000 £’000

Policing Body 42 42

Total PCC 42 42 Chief Constable 20 20

Total Group 62 62


86

49. Grant & Partner Income – Government and Non-Government Grants

The PCC credited the following government grants, other grants, contributions and donations representing the receipts on an accruals basis to the Comprehensive Income and Expenditure Statement in 2014/15:

2013/14 2014/15 £’000 £’000

Credited to Cost of Service Community Safety Fund Grant -837 - Victim Support Grant -24 -781 Credited to Taxation and Non-Specific Grant Income Capital Grants -3,273 -2,794

Credited to Other Operating Expenditure Police Pension Top Up -10,844 -13,954

Total PCC Grants Credited -14,978 -17,529 Credited to Cost of Service Police Community Support Officers Local Authorities -825 -777

Innovation Fund Grant -122 -720 Other Grants and Contributions -1,675 -1,144

Total Group Grants Credited -17,600 -20,170

50. Interest and Investment Income

The PCC’s receipts from interest and investment income in respect of dividends and non-service based investments for 2014/15 amounted to £0.359m (2013/14 £0.201m).

51. Related Parties

The PCC is required to disclose material transactions with related parties - bodies or individuals that have the potential to control or influence the PCC or to be controlled or influenced by the PCC. Disclosure of these transactions allows interested parties to assess the extent to which the PCC might have been constrained in its ability to operate independently or might have secured the ability to limit another party's ability to bargain freely with the PCC.

The Chief Constable of Hertfordshire Constabulary The PCC sets the strategic direction of policing in Hertfordshire through the Police and Crime Plan and delegates funding to the Chief Constable. This relationship is set out more fully in the Explanatory Forward. Central Government The UK government has effective control over the general operations of the PCC – it is responsible for providing the statutory framework within which the PCC operates, and provides the majority of its funding in the form of specific or non-specific grants.


87

Chief Officers of the Office of the PCC and Chief Constable’s Executive Team (including their close family) No transactions were disclosed by this group.

Other Public Bodies Transactions with the County Council, district and borough councils of Hertfordshire have been disclosed within the Income and Expenditure Account, Cash Flow Statement and notes to the accounts. Pension Fund In 2014/15, the contributions paid to Hertfordshire County Council in respect of employer’s contributions, added years contributions and lump sum payments were £7.255m (7.456m in 2013/14).

52. Long-Term Contracts – Operating Leases

The PCC as Lessee

The PCC has no finance leases, but has entered into several operating lease agreements for the occupancy of premises for policing purposes. The ownership of assets acquired under operating leases does not pass to the PCC and they are not included in the PCC’s asset valuations on the balance sheet. The future minimum payments due under these leases are shown in the following table and are analysed between the time periods in which the lease payments become due for payment. There are no future minimum sub-lease payments receivable by the PCC.

31 March

2014 31 March

2015

£’000 £’000

Not later than one year 562 456

Later than one year and not later than five years 2,000 1,661

Later than five years 3,278 3,439

Total Future Minimum Payments 5,840 5,556

The amount charged to the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Statement was £0.308m (2013/14 £0.499m).

The PCC as Lessor

The PCC has not entered into any finance lease or operating lease arrangements as a lessor.


88

IFRIC 12

The PCC’s contractual arrangements with third parties are kept under continuous review and there are no service concessions under IFRIC 12.

Lease Terms

None of the PCC’s lease agreements have terms and conditions in respect of contingent rents, purchase options or escalation clauses. It is considered that there are no restrictions other than those that are standard conditions in operating lease agreements such as the occupier’s responsibilities and changes of use.

The property lease agreements include clauses in respect of the renewal of leases at specified points in the future. The PCC will wish to discuss renewal terms with lessors at such future dates.

53. Capital Expenditure and Capital Financing

The total amount of capital expenditure incurred in the year is shown in the table below, together with the resources that have been used to finance it. Where capital expenditure is to be financed by charges to revenue as assets are used by the PCC, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the PCC that has yet to be financed. The CFR is analysed in the following table:

2013/14 2014/15

£’000 £’000

Opening CFR 32,777 30,923

Capital Investment - Property, Plant and Equipment 6,583 5,138 - Intangible Assets 832 1,384 Sources Of Finance - Capital Receipts -3,784 -3,467 - Government Grants & Contributions -3,273 -2,794 Sums set aside from revenue

- Direct revenue Contributions -358 -261 - Minimum Revenue Provision -1,854 -904

Closing CFR 30,923 30,019

Explanation Of Movement In The Year

Increase (Decrease) In The Underlying Need To Borrow

-1,854 -904

Increase / (Decrease) in CFR -1,854 -904


89

54. Change of Chief Finance Officer The role of Chief Finance Officer to the PCC transferred from Mr J Franklin to Mr M Collier on the 22nd April 2015. Mr M Collier undertakes the role on a part-time basis under secondment from Hertfordshire County Council.

55. Defined Benefit Pension Schemes

Participation in Pension Schemes As part of the terms and conditions of employment of its officers and other employees the Chief Constable and PCC offer retirement benefits. Although these will not actually be payable until employees retire, the Chief Constable and PCC have a commitment to make the payments that need to be disclosed at the time that employees earn their future entitlement. The Chief Constable and PCC participate in three pension schemes:

The Local Government Pension Scheme for police staff. Administrated by Hertfordshire County Council - this is a funded defined benefit final salary scheme, meaning that the Chief Constable, PCC and their employees, pay contributions into a fund, calculated at a level estimated to balance the pensions liabilities with investment assets. On the basis of materiality transactions and balances for the PCC arising from the LGPS are shown combined with those of the Chief Constable.

The Police Pension Scheme and the New Police Pension Scheme for police officers - these are unfunded defined benefit final salary schemes administrated by the Chief Constable in collaboration with Bedfordshire Police. Unfunded means 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. Under the Police Pension Fund Regulations 2007, if the amount payable by the pension fund for the year is less than the amount receivable, the PCC must annually transfer an amount required to meet the deficit to the pension fund. Up to 100% of this cost is met by central government pension top up grant. If however the pension fund is in surplus for the year, the surplus is required to be transferred from the pension fund to the Chief Constable and must be repaid to central government.

• Arrangements for the award of discretionary post-retirement benefits to Police Officers upon early retirement - this is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets built up to meet these pensions liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due.

Transactions Relating to Post-employment Benefits

The Chief Constable and PCC recognise the cost of retirement benefits for their staff and officers in the reported cost of services in their respective Comprehensive Income and Expenditure Statement when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge the Chief Constable is required to make against council tax is based on the cash payable in the year, so the real cost of post-employment / retirement benefits is reversed out of the Police Fund within the accounts via the Movement in Reserves Statement.


90

The following transactions have been made in the Comprehensive Income and Expenditure Statement and the Police Fund Balance via the Movement in Reserves Statement during the year: Local Government

Pension Scheme Police Pension

Scheme New Police Pension

Scheme Total All Pension

Schemes 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Cost Of Service included in CIES Service Current Service Cost. 8,830 8,030 30,810 27,080 8,010 7,800 47,650 42,910

Past Service Cost / Settlements and Curtailments 448 55 - - - - 448 55

Financing and Investing Income & Expenditure

Net interest expense 2,869 2,058 59,230 59,610 2,570 2,880 64,669 64,548

Total Group Post-Employment Benefits charged to the Surplus or Deficit on the Provision of Service

12,147 10,143 90,040 86,690 10,580 10,680 112,767 107,513

Re-measurement of the net defined benefit liability comprising:

Return on plan assets (excluding amount included in net interest expense)

-12,878 -17,458 - - - - -12,878 -17,458

Actuarial gains and Losses - Demographic Assumptions 8,482 - -290 -34,020 -20 -1,950 8,172 -35,970 - Financial Assumptions -7,831 47,219 -45,390 244,670 -5,080 18,030 -58,301 309,919 - Other -8,001 -1,387 -34,340 -70,570 -1,680 -6,880 -44,021 -78,837

Total Group Post Employment Benefit Charged to the Comprehensive Income and Expenditure Statement

-8,081 38,517 10,020 226,770 3,800 19,880 5,739 285,167


91

Local Government Pension Scheme

Police Pension Scheme

New Police Pension Scheme

Total All Pension Schemes

2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Movement in Reserves Statement:

Reversal of the net charges made to the Surplus or Deficit for the provision of services for post-employment benefits in accordance with the code

-12,147 -10,143 -90,040 -86,690 -10,580 -10,680 -112,767 -107,513

Actual Amount Charged Against the General Fund Balance for Pensions During the Year:

Employer’s Contributions Payable to the Schemes 7,182 7,255 28,048 33,720 -2,090 -2,020 33,140 38,955


92

Pension Assets and Liabilities Recognised in the Balance Sheet The amount included in the Balance Sheet arising from the Groups obligation in respect of its defined benefit plans is as follows:

2013/14

2014/15

£’000 £’000

Present Value of Defined Benefit Obligations Local Government Pension Scheme -223,135 -285,087 Police Pension Scheme -1,358,190 -1,551,240 New Police Pension Scheme -60,620 -82,520

Total Group Liabilities -1,641,945 -1,918,847 Fair value of plan assets Local Government Pension Scheme 175,637 206,327

Total Group Assets 175,637 206,327 Net liability arising from defined benefit obligation:

Local Government Pension Scheme -47,498 -78,760 Police Pension Scheme -1,358,190 -1,551,240 New Police Pension Scheme -60,620 -82,520

Total Group Net Liability -1,466,308 -1,712,520

The net liabilities show the underlying commitments that the Group has in the long run to pay retirement benefits. The total liability of £1,712.520m (£1,466.308m in 2013/14) has a substantial impact on the net worth of the Group as recorded in the Balance Sheet, resulting in a negative overall balance of £1,562.660m as at 31st March 2015 (£1,333.605m as at 31st March 2014). However statutory arrangements for funding the deficit mean that the financial position of the Group remains healthy:

The deficit on the local government scheme will be made good by increased contributions over the remaining working life of employees, as assessed by the scheme actuary.

Finance is only required to be raised to cover police pensions when the pensions are actually paid. Following the introduction on the 1st April 2006 of the new scheme of finance for police officer pensions, the Chief Constables’ liability is in general limited to a defined contribution rate currently set at 24.2% of pensionable with the government meeting additional costs above this level.

The contribution expected to be made to the Local Government Scheme by the Group in 2015/16 is £6.728m. The expected contribution to the police pension schemes in 2015/16 is £16.284m.


93

Reconciliation of the Movements in the Fair Value of Scheme (Plan) Assets:


2013/14

2014/15

£’000 £‘000

Group Opening fair value of scheme assets 150,031 175,637 Interest Income 6,877 7,666 Re-measurement gain(loss)

- Return of plan assets excluding amount included in net interest expense.

12,878 17,458

Employer Contributions 7,182 7,255 Contribution by employees in the scheme 2,406 2,369 Benefits paid -3,737 -4,058

Group Assets at 31st March 175,637 206,327


94

Reconciliation of Present Value of the Scheme Liabilities’ (Defined Benefit Obligation)




Total All Pension Schemes

2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Group Opening Balance at 1 April -212,792 -223,135 -1,376,218 -1,358,190 -54,730 -60,620 -1,643,740 -1,641,945 Current service cost -8,830 -8,030 -30,810 -27,080 -8,010 -7,800 -47,650 -42,910

Interest cost -9,746 -9,724 -59,230 -59,610 -2,570 -2,880 -71,546 -72,214 Contribution from scheme participants -2,406 -2,369 -7,342 -7,290 -2,110 -2,240 -11,858 -11,899 Re-measurement of the net defined benefit liability comprising:

Actuarial gains and Losses Demographic Assumptions -8,482 - 290 34,020 20 1,950 -8,172 35,970 Actuarial gains and Losses Financial Assumptions 7,831 -47,219 45,390 -244,670 5,080 -18,030 58,301 -309,919 Actuarial gains and Losses Other 8,001 1,387 34,340 70,570 1,680 6,880 44,021 78,837

Past Service Cost / Settlements and Curtailments -448 -55 - - - -448 -55 Benefits paid / Transfers 3,737 4,058 35,390 41,010 20 220 39,147 45,288

Group Liability at 31st

March -223,135 -285,087 -1,358,190 -1,551,240 -60,620 -82,520 -1,641,945 -1,918,847


95

Fair Value of Employers Assets – LGPS Only

The Police Pension Schemes have no assets to cover their liabilities. The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:

Period Ended 31 March 2015

Period Ended 31 March 2014

Quoted Prices

in active markets

£’000

Quoted prices not in active

markets £’000

Total

£’000

Percentage of Total Assets

Quoted Prices

in active markets

£’000

Quoted prices not in active

markets £’000

Total

£’000

Percentage of Total Assets

Equity Securities:

Consumer 18,162.5 - 18,162.5 9% 17,686.1 - 17,686.1 10%

Manufacturing 21,517.2 - 21,517.2 10% 20,236.2 - 20,236.2 12%

Energy and Utilities

5,937.4 - 5,937.4 3% 7,802.1 - 7,802.1 4%

Financial Institutions

18,487.9 - 18,487.9 9% 19,075.1 - 19,075.1 11%

Health and Care 3,050.4 - 3,050.4 1% 2,697.1 - 2,697.1 2%

Information Technology

12,775.9 - 12,775.9 6% 12,351.9 - 12,351.9 7%

Other 1,517.1 - 1,517.1 1% 2,003.2 - 2,003.2 1%

Debt Securities:

Corporate Bonds (investment grade)

- - 0 0% 14,558.7 - 14,558.7 8%

Corporate Bonds (non-investment grade)

- - 0 0% - - - 0%

UK Government - - 0 0% 10,819.5 - 10,819.5 6%

Other - - 0 0% 3,717.4 - 3,717.4 2%

Private Equity:

All - 8,520.7 8,520.7 4% - 7,120.1 7,120.1 4%

Real Estate:

UK Property - - 0 0% - 6,799.9 6,799.9 4%

Overseas Property

- - 0 0% - 3,858.0 3,858.0 2%

Investment Funds and Unit Trusts:

Equities 29,556.4 - 29,556.4 14% 26,724.7 - 26,724.7 15%

Bonds 54,868.5 - 54,868.5 27% 4,282.4 - 4,282.4 2%

Hedge Funds - - 0 0% - - - 0%

Commodities 891.1 - 891.1 0% 746.0 - 746.0 0%

Infrastructure - 183.8 183.8 0% - - - 0%

Other 646.0 24,608.8 25,254.8 12 9,290.6 - 9,290.6 5%

Derivatives:

Inflation - - 0 0% - - - 0%

Interest Rate - - 0 0% - - - 0%

Foreign Exchange - (446.0) (446.0) 0% - 152.7 152.7 0%

Other - - 0 0% - - - 0%

Cash and Cash Equivalents:

All 5,424.3 - 5,424.3 3% 5,715.4 - 5,715.4 3%

Totals 172,835 32,867 205,702 100% 157,706 17,931 175,637 100%


96

Basis for Estimating Assets and Liabilities Liabilities have been assessed on an actuarial basis. For both Schemes the projected unit credit method has been used to estimate the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. For the Police Pension Schemes a full actuarial valuation is required every four years under the Public Service Pensions Act 2013. The Police Scheme has been assessed by the Government Actuary’s Department. The most recent valuation was undertaken as at 31 March 2012, and the next scheduled valuation is as at 31 March 2016. The appointed actuaries produce pension disclosures by rolling forward data for years between full valuations. For the Local Government Scheme a full actuarial review is undertaken every three years, with the latest valuation being as at 31st March 13. The Local Government Pension Scheme Fund is assessed by Hymans Robertson, an independent firm of actuaries. The principal assumptions used by the actuaries have been:


Police Pension Schemes

2013/14 2014/15 2013/14 2014/15 % % % %

Mortality Assumptions: Longevity at 65 for current pensioners: Men 22.3 22.3 23.4 23.3 Women 24.5 24.5 25.9 25.7 Longevity at 65 for future pensioners: Men 24.3 24.3 25.6 25.4 Women 26.7 26.7 28.0 27.9 Rate of increase in salaries 4.1 3.8 4.5 4.2 Rate of increase in pensions 2.8 2.4 2.5 2.2 Rate for discounting scheme liabilities 4.3 3.2 4.3 3.3


97

Sensitivity of the defined benefit obligation in the significant actuarial assumptions

Approximate % increase to Employer Liability

Approximate monetary amount

(£’m)


0.5% decrease in real discount rate 13 38 1 year increase in member life expectancy 3 9 0.5% increase in the Salary Increase Rate 5 16 0.5% increase in the Pension Increase Rate 7 21





56. Contingent Liabilities In late 2014 the Bear Scotland Ltd v Fulton case held that non-guaranteed overtime which an employee is required to work must be included in holiday pay in respect of the four weeks leave provided for in the Working Time Directive 1998. The status of pay for genuinely voluntary, irregular overtime is still unclear. Given that a majority of police officers and some police staff are eligible to receive overtime payments within agreed parameters as set out within national regulations or local terms and conditions, this ruling may impact upon the Group. Given the uncertainty around the case at this stage it is disclosed as a contingent Liability.

57. Contingent Assets

At 31 March 2015, the Group had no material contingent assets.


98

58. Nature and Extent of Risks Arising From Financial Instruments

Key Risks

The Group’s activities expose it to a variety of financial risks, the key risks are:

Credit risk – the possibility that other parties might fail to pay amounts due to the PCC;

Liquidity risk – the possibility that the PCC might not have funds available to meet its commitments to make payments;

Re-financing risk – the possibility that the PCC might be requiring to renew a financial instrument on maturity at disadvantageous interest rates or terms.

Market risk - the possibility that financial loss might arise for the PCC as a result of changes in such measures as interest rate movements.

Overall Procedures for Managing Risk

The Group’s overall risk management procedures focus on the unpredictability of financial markets, and implementing restrictions to minimise these risks. The procedures for risk management are set out through a legal framework set out in the Local Government Act 2003 and the associated regulations. These require the PCC to comply with the CIPFA Prudential Code, the CIPFA Treasury Management in the Public Services Code of Practice and Investment Guidance issued through the Act. Overall these procedures require the PCC to manage risk in the following ways:

by formally adopting the requirements of the Code of Practice within our Treasury Management Practices;

by approving annually in advance prudential indicators for the following three years limiting:

The PCC’s overall borrowing; Its maximum and minimum exposures to fixed and variable rates; Its maximum and minimum exposures to the maturity structure of its debt; Its maximum annual exposures to investments maturing beyond a year.

by approving an investment strategy for the forthcoming year setting out its criteria for both investing and selecting investment counterparties in compliance with the Government Guidance;

These are required to be reported and approved at or before the PCC’s annual Council Tax setting budget meeting. These items are reported with the annual treasury management strategy which outlines the detailed approach to managing risk in relation to the PCC’s financial instrument exposure. Actual performance is also reported annually to Members. These policies are implemented on behalf of the PCC by Hertfordshire County Council’s central treasury team. The PCC maintains written principles for overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk, and the investment of surplus cash through Treasury Management Practices (TMPs). These TMPs are a requirement of the Code of Practice and are reviewed regularly.

Credit Risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Group’s customers. Deposits are not made with banks and financial institutions unless they meet the minimum requirements of the investment criteria outlined in the Treasury Strategy.


99

The Group’s maximum exposure to credit risk of £0.198m cannot be assessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual institution. Recent experience, with the exception of the Icelandic banking sector, has shown that it is rare for such entities not to be able to meet their commitments. The following analysis summarises the Group’s potential maximum exposure to credit risk. The risk of default by banks and financial institutions is based on historical experience of default data taken from Moody’s, a credit rating organisation used by the PCC. The risk of default by trade debtors is based on the amount of impairment provision as a percentage of total debt outstanding as at 31 March 2015.

Amount at 31 March

2015

£’000

Historical experience of

default

%

Estimated maximum

exposure at 31st

March 2015

£’000

AAA Rated Counter Parties 6,680 0.0 - AA Rated Counter Parties 3,000 0.0 - Fixed Loan < 1 year 21,000 0.0 - Fixed Loan > 1 year 10,000 0.0 - Long Term Debtors 287 0.0 - Trade debtors 2,219 8.9 198 Other receivables and advances 9,740 0.0 -

52,926 198

No credit limits were exceeded during the reporting period and no losses are expected from non-performance of any of the counterparties in relation to the PCC’s deposits.

The PCC does not generally allow credit for its trade debtors, such that £0.369m of the £2.219m balance at 31st March is past its due date for payment. The past due amount can be analysed by age as follows:

2013/14 £'000

2014/15 £'000

Less than three months 47 268

Three to six months 2 -

Six to nine months 7 2

Nine months to one year 1 61

More than one year 30 38

Balance as at 31st March 87 369

During the reporting period the PCC held no collateral as security


100

Liquidity Risk

The PCC has a comprehensive cash flow management process that seeks to ensure that cash is available as necessary. If unexpected movements happen, the PCC has ready access to borrowings from the money markets and the Public Works Loans Board. There is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. Instead the risk is that the PCC may be bound to replenish a significant amount of its borrowings at a time of unfavourable interest rates. The PCC sets limits on the proportion of its fixed rate borrowing during specified periods.

The maturity analysis of financial liabilities is as follows:

2013/14 £'000

2014/15 £'000

Less than one year -11,727 -12,244

Between one and two years - -

Between two and seven years - -

Between seven and fifteen years - -

More than fifteen years -18,003 -17,998

Balance as at 31st March -29,730 -30,242

Market risk

Interest rate risk - The Group is exposed to risk in terms of its exposure to interest rate movements on its borrowings and investments. Movements in interest rates have a complex effect on the Group. For instance, a rise in interest rates could have the following effects:

borrowings at variable rates – the interest expense charged to the Surplus or Deficit on the Provision of Services will rise;

borrowings at fixed rates – the fair value of the liabilities borrowings will fall;

investments at variable rates – the interest income credited to the Surplus or Deficit on the Provision of Services will rise; and

investments at fixed rates – the fair value of the assets will fall.

Borrowings are not carried at fair value on the balance sheet, so nominal gains and losses on fixed rate borrowings would not impact on the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Account. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services and effect the Police Fund Balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected on Other Comprehensive Income and Expenditure. The PCC has a number of strategies for managing interest rate risk. The Annual Treasury Management Strategy draws together the PCC’s prudential indicators and its expected treasury operations, including an expectation of interest rate movements. From this Strategy a prudential indicator is set which provides maximum and minimum limits for fixed and variable interest rate exposure. Hertfordshire County Council’s central treasury team monitor the market and forecast interest rates within the year to adjust exposures appropriately. For instance during periods of falling interest rates, and where economic circumstances make it favourable, fixed rate investments may be taken for longer periods to secure better long term returns.


101

During 2014/15 the Group had no variable rate investments or liabilities and so was not exposed to interest rate risk. If interest rates had been 1% higher during 2014/15 with all other variables held constant, the financial effect would be:

£'000

Increase in interest receivable on variable rate investments 612

Impact on Surplus or Deficit on the Provision of Services 612

Impact on Other Comprehensive Income and Expenditure 612

Price risk - The Group, excluding the pension fund, has no investments in equity shares and so is not subject to any form of price risk currently.

Foreign exchange risk - The Group has no financial assets or liabilities denominated in foreign currencies. It therefore has no exposure to loss arising from movements in exchange rates.

59. Trust and Charitable Funds

The Group does not hold any trust or charitable funds on behalf of third parties.

60. Prior Period Adjustments

Prior Period Adjustments were made to the 2013/14 comparative figures to reflect a restatement of the Revaluation Reserve (£7.625m debit) and Capital Adjustment Account (£7.625m credit) in-line with an agreed audit adjustment in 2013/14. The Audit Results Report set-out that the 2012/13 closing balances on the Revaluation Reserve and Capital Adjustment Accounts were overstated due to the inclusion of properties that had been disposed of during that year. This adjustment affected only these two balances and had no impact upon any other part of the Accounts including any of the core financial statements.

61. Termination Benefits

The PCC terminated the contracts of a number of employees in 2014/15 incurring liabilities

of £0.162m (£1.201m in 2013/14). See note 62 for the number of exit packages and total

costs per band. There were no payments to Directors or equivalent in the form of

compensation for loss of office or for enhanced pension benefits and all costs relate to

police staff who were made redundant in a number of cost centres as part of the PCC’s

savings plan and financial strategy.


102

62. Exit Packages

All redundancies in 2013/14 and 2014/15 were compulsory redundancies. The numbers of

exit packages and total costs of the compulsory redundancies including pension strain

costs paid to the Local Government Pension Scheme are set out in the table below.

Exit package cost band including special payments

Total number of

exit packages by

cost band 2013/14

Total number of

exit packages by

cost band 2014/15

Total cost of exit

packages in each band

2013/14 £’000

Total cost of exit

packages in each band

2014/15 £’000

£0 - £20,000 1 - 19 -

Total PCC 1 0 19 0

£0 - £20,000 39 8 393 59

£20,001 - £40,000 11 - 299 -

£40,001 - £60,000 4 - 192 -

£60,001 - £80,000 3 - 211 -

£80,001 - £100,000 1 - 87 -

£100,001 - £120,000 - 1 - 103

Total Group 59 9 1,201 162

63. Post Balance Sheet Events

The Group has one material non adjusting post balance sheet event as follows: In May 2015, the Pensions Ombudsman (Ombudsman) published their Final Determination in the case of Milne v Government Actuaries Department (GAD). This case centred on whether GAD had a proactive responsibility to review the commutation factors used in the calculation of the lump sum payments made to pensioners when they opt to take an increased amount of their pension benefit in that form. The Ombudsman found in favour of the plaintiff, which meant that for all Police Pension Scheme 1987 cases where pension entitlements were drawn between 1 December 2001 and 1 December 2006 recalculation of lump sum payments should take place based upon revised commutation factors to be issued by GAD. Payment of any additional amounts identified as due should be made with simple interest calculations as well. We are currently working through the revised calculations and expect to make the necessary payments by within the financial year 2015/16. The Home Office has agreed that they will provide full reimbursement of the payments made. There has therefore been no impact on the financial statements for 2014/15.


103

POLICE PENSION SCHEME FUND ACCOUNTS 2014/15

FUND ACCOUNT

Police Pension Scheme New Police Pension Scheme

Total Police Pension Schemes

2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 Note £’000 £’000 £’000 £’000 £’000 £’000

Contributions receivable From employer - normal P3 -12,674 -12,196 -3,740 -4,127 -16,414 -16,323 - early retirements -208 -404 - - -208 -404 From members P3 -7,078 -7,157 -1,758 -2,013 -8,836 -9,170 Transfers in - individual transfers in from other schemes P4 -259 -132 -355 -228 -614 -360 Benefits payable - pensions 29,927 31,355 - - 29,927 31,355 - commutations and lump sum retirement benefits 6,817 8,044 - - 6,817 8,044 - lump sum death benefits - 93 - - 0 93 Payments to and on account of leavers - refunds of contributions 3 17 - - 3 17 - individual transfers out to other schemes P4 169 702 - - 169 702

Net amount receivable for the year before top-up grant

16,697 20,322 -5,853 -6,368 10,844 13,954

Transfer received from the Policing Body P5 -16,697 -20,322 5,853 6,368 -10,844 -13,954

Balance as at 31

March 0 0 0 0 0 0


104

NET ASSETS STATEMENT AS AT 31 MARCH

31 March 2014

31 March 2015

£’000 £’000

April pension paid in advance in March 2,556 2,674

Total Assets 2,556 2,674 Commutation Payments -65 - Amount Owing To Police Fund -2,491 -2,674

Total Liabilities -2,556 -2,674

Net Assets 0 0

P1. Summary of the Police Pension Scheme Fund Operations Employee contributions and employer's contribution are paid into the Police Pension

Scheme Fund from which pension payments are made. The fund has no investments and is topped up by the PCC if the contributions are insufficient to meet the cost of pension payments. The PCC is then reimbursed by the Home Office. Any surplus in the fund is recouped by the PCC and paid to the Home Office. The underlying principle is that employer and employee contributions together will meet the full costs of pension liabilities being accrued in respect of currently serving employees while the Home Office will meet the costs of retirement pensions in payment, net of employee and the new employer contributions.

The financing of pension payments was taken out of the Formula Grant from April 2006

which instead takes into account the funding needed to support the cost of the employer contributions and lump sum payments, in respect of ill-health retirements.

P2. Accounting Policies The accounts have been prepared in accordance with the 2014 Code of Practice on Local

Authority Accounting in the United Kingdom, issued by the Chartered Institute of Public Finance and Accountancy.

The accounts summarise the transactions and net assets of the Police Pension Scheme

Fund. They do not, however, take account of liabilities to pay pensions and other benefits after 31 March 2015.

All amounts have been prepared on an accruals basis except pension transfers to and from the scheme.

P3. Contributions Receivable Employer and Employee Contributions

The purpose of the employee and employer contribution rates under the new arrangements is to meet the accruing pension liabilities of currently serving police officers. This means the PCC meets all the costs of employing police officers, including the cost of future pension liabilities, at the time of employing them.

Separate contribution rates, a percentage of pensionable pay as shown below, apply to the old Police Pension Scheme and the new 2006 Police Pension Scheme.


105

Employer Employee

% %

Police Pension Scheme 24.2 13.5 to 14.0 New Police Pension Scheme 24.2 10.7 to 12.0

Early Retirements

Early retirements due to ill-health from 1 April 2006 require the PCC to make a lump sum payment into the pension fund of twice the average pensionable pay in respect of all ill-health retirements.

P4. Transfers to or from other schemes

Where a police officer transfers to or from another police force there is no need for a cash transfer. A police officer who transfers out of the Police Pension Scheme to another pension scheme is entitled to ask for a cash equivalent transfer value to be paid across, equivalent to the value of their pension rights on leaving the scheme. This is paid from the Police Pension Fund. Similarly an inward Transfer Value should be paid into the fund.

P5. Top-up Grant

Where employer and employee contributions paid into the Police Pension Scheme Fund are not sufficient to meet pension payments for that year, the deficit will be met by the PCC who is in turn reimbursed by a central government top-up grant paid by the Home Office. Any surplus in the fund would be paid back to the PCC who would then reimburse the Home Office as the party that brings the account into balance.

P6. Liabilities after year end

The Fund’s financial statements do not take account of the liabilities to pay pensions and other benefits after 31 March 2015. The details in respect of the PCC’s long-term police pension obligations are set out in the Pensions-related disclosure note 55 that follows the main financial statements.


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POLICE AND CRIME COMMISSIONER FOR HERTFORDSHIRE

ANNUAL GOVERNANCE STATEMENT 2014/15

Police and Crime Commissioner for Hertfordshire Annual Governance Statement 2014-15 1. Scope of Responsibility The PCC for Hertfordshire is responsible for ensuring that the business of his office is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. In discharging this overall responsibility, the PCC is responsible for putting in place proper arrangements for the governance of his affairs and facilitating the effective exercise of functions, which includes ensuring a sound system of internal control is maintained through the year and that arrangements are in place for the management of risk. In exercising this responsibility the PCC also relies on the Chief Constable (CC) to support the governance and risk management processes. Therefore, in considering this Annual Governance Statement, in addition to considering his own arrangements, the PCC has also relied upon on the governance processes within Hertfordshire Constabulary (HC), as reflected in the CC’s Annual Governance Statement. This is the third Annual Governance statement produced by the PCC and reflects the governance arrangements that were in place until 31 March 2015, and up to the date of signing of this document. 2. The Purpose of the Governance Framework This statement has been prepared for the 2014/15 financial year, and reflects the significant governance changes from 1 April 2015. In particular, as part of the arrangements for Stage 2 transfer the Chief Constable now has responsibility for all staff except those directly employed within the Commissioner’s Office. The Commissioner has also agreed a number of consents to the Chief Constable (e.g. management of the estate). The statement also, reports on the effectiveness of the governance arrangements throughout the year and outlines future actions to enhance the governance arrangements. The governance framework comprises the systems and processes, and culture and values, by which the PCC and his office are directed and controlled, and the activities through which he and his office account to and engage with the community. It enables the PCC to monitor the achievement of his strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost-effective services, including value for money. At the strategic level the framework forms part of the three forces Scheme of Governance, jointly agreed with Bedfordshire and Cambridgeshire in April 2014. In September 2014 the joint scheme of governance was extended to include Financial Regulations and contract standing orders. The financial management arrangements set-out in the scheme of governance conform with the governance requirements of the CIPFA Statement on the Role of the Chief Financial Officer in Local Government (2010) as set out in the Application Note to Delivering Good Governance in Local Government: Framework. The governance of the collaboration programme (and the


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collaborated functions that it delivers) remains an area of ongoing development as the work progresses. The Scheme of Corporate Governance is available on the PCC’s website. The system of internal control is a significant part of the governance framework and is designed to manage risk to a reasonable and foreseeable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an on-going process designed to identify and prioritise the risks to the achievement of the PCC’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. 3. Governance Framework The CC is accountable to the PCC. Both the CC and PCC must have due regard to the Strategic Policing Requirement set by the Home Secretary. The key elements of the systems and processes that comprise the governance arrangements that have been put in place for the PCC and the CC include:

A definition of the roles of the PCC and the CC

Delegations from the PCC

Consents to the CC

Financial Regulations

The Operating Model for the PCC and Constabulary

Risk Management and Business Continuity arrangements

A Treasury Management Policy

A Gifts Loans and Sponsorship Policy

Contract Standing Orders

Anti – Fraud and Anti – Bribery policies The governance arrangements for the PCC’s office have been developed in line with the Police Reform and Social Responsibility Act 2011, The Policing Protocol Order 2011, the Home Office Financial Management Code of Practice (FMCP) and existing guidance on financial and governance matters that continue to apply, such as the CIPFA/SOLACE framework. The Chief Executive of the PCC’s office has provided assurance that the scheme of governance works within the seven principles of public life:

Selflessness

Integrity

Objectivity

Accountability

Openness

Honesty

Leadership. Following his election the PCC consulted on his first Police and Crime Plan. The plan (Everybody’s Business) is published on the PCC’s website and has three key themes:

Building on success


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Public Focus

Offender Pays

Business Sense The PCC is currently out to consultation to refresh his Police and Crime plan. The PCC has the following board and meeting structure to support decision making processes:

The Commissioner’s Executive Board is the primary decision making forum for the Commissioner, particularly where decisions are not required to be taken in consultation with the Chief Constable, or where wider partnership issues or statutory duties are involved.

The Strategic Executive Board is the forum for issues related to the effectiveness and efficiency of the policing service delivered in Hertfordshire and where decisions need to be taken that require both parties to agree in accordance with the scheme of governance and the respective duties of each holder of office.

Engagement and Advisory Forums – which allow the PCC to consult on planned actions. Reliance is also placed on the Constabulary’s internal boards which monitor performance on a weekly and monthly basis and form the decision making arrangements for the CC. Compliance The PCC is held to account by the Police and Crime Panel, who meet monthly and produce an annual report summarising their key decisions. During the year they:

Agreed to take public questions

Agreed the Appointment of a Chief Financial Officer

Agreed the appointment of a Deputy Police and Crime Commissioner

Considered statutory transparency requirements

Considered the reliability of crime statistics

Supported the PCC’s proposed precept. Audit Committee The PCC and CC have a joint Audit Committee that provides independent scrutiny and assurance on the adequacy of the corporate governance and risk management frameworks and the associated control environments. In addition, the Audit Committee gives advice according to good governance principles and proper practices and oversees the financial reporting processes. In particular the Audit Committee:

Supports the PCC, the CC and statutory officers in ensuring that effective governance is in place and functioning efficiently and effectively, and making any recommendations for improvement

Monitors the effective development and operation of the internal control environment and risk management processes and make recommendations for improvement to the PCC and CC, as appropriate

Reviews any issue referred to it by the statutory officers of the PCC and CC in relation to corporate governance, risk management or assurance and make recommendations, as appropriate


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Reviews and endorse the PCC’s and the CC’s Governance Statements and Statements of Accounts, including the Commissioner’s group accounts, bringing to the attention of the PCC and CC any omissions or any amendments proposed for consideration

Receives and scrutinise performance reports on treasury management and ensure effective scrutiny of the treasury management strategy and policies.

Undertake an annual review of the PCC’s and the CC’s system of internal audit

Reviews and endorse the strategy and plans of internal and external audit, bringing to the attention of the PCC and CC any significant issues which the committee considers merit inclusion

Reviews progress in delivering the work and reports of internal and external audit and provide an opinion to the PCC and CC on the quality and strength of investigations and findings

Reviews matters arising from the work of internal and external audit, including the external auditor’s Annual Governance Report and Audit letters and advise the PCC and CC on the adequacy of response plans

Monitors management action in response to the work of internal and external audit and bring to the attention of the PCC and CC where further or timelier action is considered appropriate.

Scrutiny and Monitoring of Performance The Police and Crime Panel hold the PCC to account for his performance. The PCC places reliance on the Constabulary’s performance management processes to ensure that the policing priorities are translated into specific objectives and then on into individual performance targets for officers. This applies equally to collaboration projects. The PCC attends the Constabulary’s Strategic Performance Board where the performance of the Constabulary is regularly reviewed. The Office of the PCC reviewed the staff requirements for the PCC to identify the objectives and activity in relation to numbers, skills and mix required to deliver in line with the PCC’s vision, purpose and values. During the year staff have been recruited to fill all vacancies. Individual performance and development reviews are carried out for each member of staff in the PCC’s Office. Risk Management During the year risk management arrangements were embedded within the PCC’s office with a regular programme of risk review introduced. The PCC’s risks were reported to the Audit Committee on a six monthly basis. Compliance with the law The Chief Executive of the PCC’s office is the monitoring officer. He has delegated his responsibilities to the Deputy Chief Executive. Where necessary the Deputy Chief Executive is able to seek legal advice from the Legal Services Department at the Constabulary. Going forward the recently recruited Deputy Chief Executive is himself a legal officer and so there will be to independent legal advice readily available to the PCC. Ethical Standards of Behaviour including Confidential Reporting The PCC’s governance framework includes an anti-fraud and an anti-bribery policy that has been cascaded to all staff in the PCC’s office and the Constabulary. Policing in Hertfordshire follows the “Herts Way” which identifies three core policing objectives:


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Keep People Safe

Catch Criminals

Reduce Crime The three core policing objectives have recently been updated to link to the Code of Ethics for Police Officers have to follow that was introduced in June 2014. This provides the ethical standards to which Officers adhere. The Constabulary has a collaborated Professional Standards Department (PSD) with Bedfordshire and Cambridgeshire. PSD has continued to maintain its focus on criminal, misconduct and anti-corruption investigations during 2014/15 with some significant success. In addition, new measures and procedures have been established to demonstrate integrity and openness with regards to Gifts and Hospitality and Business Interests. The main aim of PSD is to prevent and detect unethical behaviour, dishonesty and corruption and so provide an enhanced quality of service and reassurance to the public. PSD continue to deliver a range of briefings and communications to officers and staff to ensure that all staff are aware of required standards of professional behaviour and of their responsibility to challenge and report potential wrong doing. The Governance arrangements for Bedfordshire, Cambridgeshire and Hertfordshire PSD are being enhanced with a newly constituted tri-force PSD Governance Board chaired by the designated DCC lead (Cambridgeshire) and attended by respective DCCs and senior HR and Finance representatives. PSD’s internal website gives a range of methods that employees may use to contact them, including options for confidential and anonymous reporting. All allegations made are investigated by PSD or the Independent Police Complaints Commission. Complaints Procedure Complaints from members of the public can be made at any police station, in writing to the Professional Standards Department, electronically via the Constabulary’s website or via a gateway organisation. Alternatively complaints may be addressed to the Independent Police Complaints Commission. A complaint against the PCC can be raised with the Police and Crime Panel and full details are provided on the Borough of Broxbourne’s website. There is a Public Complaints Team that forms part of the Professional Standards Department. This team investigates those complaints made by members of the public that have been evaluated as sufficiently serious to warrant a formal investigation or where local resolution has not resolved the complaint. Where a complaint means that corrective action to policy or procedures is required the Professional Standards Department take the lead on this and action is taken in a speedy and appropriate manner. Communication and Quality of Service The public and local partners were consulted on the production of the policing plan and are currently being consulted on revisions to the plan. The PCC has a programme of engagement meetings and information is widely accessible via the internet with members of the public able to comment via twitter and other forums. The PCC’s precept leaflet has been circulated to the public of Hertfordshire and his plan: Everybody’s Business is available on his website.


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Partnerships During 2014/15 the Constabulary worked in partnership with the Eastern Region, Bedfordshire Police Force, Cambridgeshire Constabulary and Hertfordshire County Council covering primarily community safety and protective services. In addition, the Constabulary were part of the Chiltern Transport Consortium and the National Police Air Service hosted by West Yorkshire. There is an overarching memorandum of association for the collaboration work stream and a formal section 22 agreements for each collaborated area Collaboration arrangements form three work streams:

Joint Protective Services

Operational Support

Organisational Support Collaborative boards have been established for all three work streams and meet on a monthly basis. There is a designated PCC and Chief Officers lead for each stream, with Hertfordshire being responsible for Operational Support. In addition PCC oversight is supplemented through the BCH Strategic Alliance Meeting. The joint County Community Safety Unit brings together professionals from the police and the county council’s former Crime and Drugs Strategy unit (CDSU). This unit has more than 120 staff working in four key areas:

vulnerable people, which includes domestic violence, safeguarding adults and child protection

offender management, involving the support of Hertfordshire Probation Service

safer communities, which takes responsibility for work around anti-social behaviour and alcohol misuse

County drug strategy. 4. Review of Effectiveness The PCC has the responsibility for conducting, at least annually, a review of the effectiveness of the governance framework for his office, including the system of internal control. The PCC has commissioned Internal Audit to co-ordinate and contribute to the annual review of the effectiveness of the governance arrangements. Internal Audit has conducted its review and drafted this Annual Governance Statement with the involvement of the Chief Executive to the Office of the PCC who acts as the Monitoring Officer, the Chief Financial Officer to the PCC and the Deputy Chief Executive of the PPC’s office. The results of this review have also been discussed by the Senior Officers in the Office of the PCC and Senior Officers of the Constabulary. The effectiveness of the governance arrangements as reported in the Annual Governance Statement will be considered by the Audit Committee. Office of the PCC The Chief Executive has produced an assurance statement to support the review of effectiveness.


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Hertfordshire Constabulary The Chief Constable has responsibility for conducting a review of the effectiveness of the governance framework within the Constabulary at least annually. This review is informed by the Director of Resources, internal audit and senior officers within the Constabulary. The PCC’s own review of effectiveness has taken the Constabulary’s review into account. Internal Audit Internal audit provided an independent opinion on the adequacy and effectiveness of the Constabulary’s system of internal control, including in particular:

Internal audit gave either full or substantial assurance on the operation of controls to mitigate the risks in the operation of the key financial systems in Hertfordshire

Internal audit gave substantial assurance on the operation of controls to mitigate risks in all areas that were selected for audit because of their risk profile in Hertfordshire, with the exception of the IT Strategy where we gave moderate assurance. - In addition, Internal Audit consider that the Constabulary now has a robust plan to achieve Code of Connection compliance but work to implement this is still in progress.

Internal Audit gave substantial assurance on the audits that covered the operation of the PCC’s office and the Crime aspect of the PCC’s role

The Internal Audit Service is provided by the Shared Internal Audit Service (SIAS). SIAS has recently conducted a review of its compliance with the Public Sector Internal Audit Standard (PSIAS) effective from 1 April 2013 and determined that the standard is met with no significant exemptions. External Audit The external auditors issued the following reports during the year:

Opinion on financial statements

Annual audit letter. The key matters that the Audit Commission reported were that Hertfordshire had:

an unqualified opinion on their accounts and had prepared its financial statements well

had an adequate internal control environment

had an unqualified value for money conclusion. HMIC The first PEEL Inspection was completed for Hertfordshire using the evidence from inspections undertaken in the previous 12 months the findings were that:

In terms of its effectiveness, Hertfordshire Constabulary is good at reducing crime and preventing offending. It is also good at investigating crime and tackling anti-social behaviour. There were some initial concerns about the approach to domestic abuse, but there were improvements in this area over the course of the year.

The efficiency with which the force carries out its responsibilities is good.


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The force is acting to achieve fairness and legitimacy in some of its practices that were examined this year.

When considering value for money HMIC found that Hertfordshire Constabulary has impressive and well-established joint working arrangements with Bedfordshire Police and Cambridgeshire Constabulary. The force is very well-placed to be able to continue to provide an effective service to the public while reducing its costs further. When considering whether Hertfordshire Constabulary acts with integrity HMIC found that the joint professional standards department with Bedfordshire Police and Cambridgeshire Constabulary had insufficient capacity to prevent, reduce and investigate corruption matters effectively. Since the inspection there has been a successful growth bid to increase capacity. In addition, the three forces are continuing to develop their joint policies and procedures to improve the efficiency and effectiveness of how they jointly manage and respond to unprofessional behaviour, misconduct and corruption. The HMIC Crime and Data Integrity report on Hertfordshire Constabulary was released in August 2014. The report was critical of our crime recording standards, however the recommendations in the report have been implemented and there is now confidence that the figures are more accurate with compliance improving. Other Sources of Assurance on Governance Came from:

Risk Management, where risks were managed to acceptable levels and reported to the Audit Committee

Performance monitoring arrangements within the Constabulary

The Professional Standards Department who comply with National Guidelines for their operation, in the year their investigations resulted in one criminal prosecution.

Follow up of actions raised in previous Annual Governance Statements:

Revisions to the governance arrangements were consolidated during the following the Stage 2 transfer, leading to a combined scheme of governance for Bedfordshire, Cambridgeshire and Hertfordshire.

The staffing structure of the PCC’s office was reviewed in the year and arrangements are the office is now fully staffed The Constabulary has worked to ensure that crime recording statics are more accurate.

The collaborated Procurement unit has worked to resolve the control failures that needed to be addressed to provide the robust service that the Constabulary and PCC require. This involved putting in place consistent scheme of governance, a joint contracts register and appropriate tender authorisation procedures.

Work continued to complete the action plan to implement Management of Police Information Requirements.

Work continued to achieve Code of Connection compliance.


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Conclusion Internal Audit has co-ordinated the review which has led to this Annual Governance Statement. Assistance has been received from senior officers in the Office of the PCC and the Constabulary. The PCC and his Chief Financial Officer have been advised on the implications of the review of the effectiveness of the governance framework by the Audit Committee, and a plan to address weaknesses and ensure continuous improvement of the system of internal control is in place. Significant Governance Issues The governance arrangements have evolved during the year and provision was made for Stage 2 transfer, these changes will need to be further embedded. In addition, a code of governance will be delivered to improve the clarity of the governance arrangements. The Constabulary has to make significant savings over the coming years. These savings have to be delivered whilst maintaining an efficient and effective police service. During the year there were issues around baseline IT security and there is now a sound plan to ensure external accreditation for the Code of Connection compliance. In the coming months further work is required to achieve resilience in this area. Hertfordshire Constabulary has a collaborated ICT department with Bedfordshire, working to an informal IT Strategy, pending the extension of collaborative ICT provision with Cambridgeshire. Work to achieve a three force collaborated ICT department is progressing and as part of this the collaboration partners have recognised that a joint ICT strategy will need to be developed. Bedfordshire, Cambridgeshire and Hertfordshire have worked up an IT Strategy Roadmap, including details of timeframes, financial costs and accountabilities for the ICT infrastructure. HMIC found that the joint professional standards department with Bedfordshire Police and Cambridgeshire Constabulary had insufficient capacity to prevent, reduce and investigate corruption matters effectively. Since the report the capacity of the unit has increased We propose over the coming year to take steps to address the above matters to enhance our governance arrangements further. We are satisfied that these steps will address the need for improvements that were identified in our review of effectiveness and will monitor their implementation and operation as part of our next annual review.

Signed*

………………………….. …………………………..

David Lloyd Gavin Miles

Police and Crime Commissioner Deputy Chief Executive of the Office

of the Police and Crime

Commissioner on behalf of

Roy Wilsher Chief Executive of the

Office of the Police and Crime

24th September 2015



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GLOSSARY OF TERMS

The definitions within this glossary are designed to give the user an understanding of the technical terminology contained within the Statement of Accounts. Accounting Policies Those principles, bases, conventions, rules and practices applied by the PCC, that specify how the effects of transactions and other events are to be reflected in its financial statements through: i) recognising, ii) selecting measurement bases for, and iii) presenting assets, liabilities, gains, losses and changes to reserves. Accrual The recognition of income and expenditure as it is earned or incurred, rather than as cash is received or paid. Actuarial Gains and Losses For a defined benefit pension scheme, the changes in actuarial deficits or surpluses that arise because: a) events have not coincided with the actuarial assumptions made for the last valuation (experience gains and losses), or b) the actuarial assumptions have changed. Budget A statement of the PCC’s financial plans for a specified period of time, usually one year. Capital Programme A statement of proposed capital projects for current and future years. Capital Financing Requirement The Capital Financing Requirement (CFR) represents the level of capital investment not financed by grant, capital receipts or revenue contribution and which therefore needs to be financed either by external borrowing or internal borrowing through the use of cash balances. The CFR attracts a statutory annual revenue charge

known as Minimum Revenue Provision (MRP) Capital Receipts Proceeds of not less than £10,000 from the sale of fixed assets. They may be used to finance new capital expenditure or repay debt. They cannot be used to finance normal day to day revenue spending. Carry-forwards These are underspends at the year-end which are carried forward into the next financial year to support that year’s expenditure plans. Creditors Amounts owed by the PCC at the 31st March for goods received or services rendered but not yet paid for. Capital Expenditure Expenditure on the acquisition of a fixed asset or expenditure which adds to and not merely maintains the value of an existing fixed asset. Current Service Cost (Pensions) The increase in the present value of a defined benefit scheme’s liabilities expected to arise from employee service in the current period. Debtors Amounts owed to the PCC which are collectable or outstanding at 31st March. Defined Benefit Scheme A pension or other retirement benefit scheme where the scheme rules define the benefits independently of the contributions payable, and the benefits are not directly related to the investments of the scheme. The scheme may be funded as in the case of the LGPS or unfunded as in the case of the Police Pension Scheme.


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Depreciation The measure of the cost or re-valued amount of the benefits of the fixed asset that have been consumed during the period. Consumption includes the wearing out, using up or other reduction in the useful life of a fixed asset whether arising from use, passing of time or obsolescence, through either changes in technology or demand for the goods and services produced by the asset. Emoluments All sums paid to or receivable by an employee and sums due by way of expenses allowances (as far as those sums are chargeable to UK income tax) and the money value of any other benefits received other than in cash. Pension contributions payable by either employer or employee are excluded. Expected Rate of Return on Pensions Assets For a funded, defined benefit scheme, the average rate of return, including both income and changes in fair value but net of scheme expenses, expected over the remaining life of the related obligation on the actual assets held by the scheme. Fair Value The fair value of an asset is the price at which it could be exchanged in an arm’s-length transaction less, where applicable, any grants receivable towards the purchase or use of the asset. Finance Lease A finance lease is one that transfers substantially all of the risks and rewards of ownership of a fixed asset to the lessee. Government Grants Assistance by government and inter-government agencies and similar bodies, whether local, national or international, in the form of cash or transfers of assets to a PCC in return

for past or future compliance with certain conditions relating to the activities of the PCC. Impairment A reduction in the value of a fixed asset, reflecting a general fall in prices or losses due to physical damage or deterioration in an asset. Intangible Fixed Assets Non-financial fixed assets that do not have physical substance but are identified and controlled by the PCC through custody and legal rights. Interest Cost (Pensions) For a defined benefit scheme, the expected increase during the period in the present value of the scheme liabilities because the benefits are one period closer to settlement. Inventories The amount of unused or unconsumed stocks held in expectation of future use. When use will not arise until a later period, it is appropriate to carry forward the amount to be matched to the use or consumption when it arises. Investments A long-term investment is an investment that is intended to be held for use on a continuing basis in the activities of the PCC. Investments should be so classified only where an intention to hold the investment for the long term can clearly be demonstrated or where there are restrictions as to the investor’s ability to dispose of the investment. Liquid Resources Current asset investments that are readily disposable by the PCC without disrupting its business and are either: readily convertible to known amounts of cash at or close to the carrying amount, or traded in an active market. Minimum Revenue Provision (MRP) The aim of the MRP charge is to set cash aside in order to ensure the PCC


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has the funds to repay outstanding principal or replenish internal cash balances. Each year the PCC is required to set a policy as to the approach it will take in making MRP. Net Book Value The amount at which fixed assets are included in the balance sheet, i.e. their historical cost or current value less the cumulative amounts provided for depreciation. Net Current Replacement Cost The cost of replacing or recreating the particular asset in its existing condition and in its existing use, i.e. the cost of its replacement or of the nearest equivalent asset, adjusted to reflect the current condition of the existing asset. Net Debt The PCC’s borrowings less cash and liquid resources. Where cash and liquid resources exceed borrowings, reference should be to net funds rather than net debt. Net Realisable Value The open market value of the asset in its existing use (or market value in the case of non-operational assets), less the expenses to be incurred in realising the asset. Non Distributed Costs These are overheads for which no user now benefits and should not be apportioned to services. Operating Lease A lease other than a finance lease. Police Grant A specific grant paid by the Home Office to support the PCC’s revenue expenditure. It is a fixed sum calculated by the government on an assumed needs basis. Precept A levy which the PCC makes through the council tax to pay for services.

Past Service Cost For a defined benefit scheme, the increase in the present value of the scheme liabilities related to employee service in prior periods arising in the current period as a result of the introduction of, or improvement to, retirement benefits. Prior Period Adjustments Those material adjustments applicable to prior years arising from changes in accounting policies or from the correction of fundamental errors. A fundamental error is one that is of such significance as to destroy the validity of the financial statements. They do not include normal recurring corrections or adjustments of accounting estimates made in prior years. Reserves Amounts set aside to cover general expenditure needs in the future. Revenue Contributions to Capital Outlay (RCCO) Contributions from revenue to finance capital expenditure and thus reduce the requirement to borrow. Revenue Expenditure Spending on day to day items, including salaries, premises costs and supplies and services. Revenue Support Grant A grant paid by central government towards the costs of the service. Specific Reserves Amounts set aside for a specific purpose to meet future commitments or liabilities. Sponsorship The voluntary provision of non-public funds, services or equipment which enables the police to enhance or extend the normal services provided

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