West Mercia Police Authority Statement of Accounts … · West Mercia Police Authority Statement of...

109
West Mercia Police Authority Statement of Accounts 2011/12 West Mercia Police Authority

Transcript of West Mercia Police Authority Statement of Accounts … · West Mercia Police Authority Statement of...

West Mercia Police Authority

Statement of Accounts

2011/12

West Mercia Police Authority

Statement of Accounts 2011/12

Page 1

West Mercia Police Authority

CONTENTS TREASURER’S FOREWORD TO THE ACCOUNTS .......................................................... 2 About the Accounts A Review of the Year Personal Assurance Statement of the Treasurer INDEPENDENT AUDITOR’S REPORT TO MEMBERS OF WEST MERCIA POLICE AUTHORITY FOR YEAR ENDED 31 MARCH 2012............................................................ 9 STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS........... 13 POLICE AUTHORITY APPROVAL.................................................................................... 14 ANNUAL GOVERNANCE STATEMENT ........................................................................... 15 MOVEMENT IN RESERVES STATEMENT ....................................................................... 24 COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT................................... 26 BALANCE SHEET.............................................................................................................. 28 CASH FLOW STATEMENT ............................................................................................... 29 NOTES TO THE ACCOUNTS ............................................................................................ 30 PENSIONS FUND............................................................................................................... 99 GLOSSARY OF TERMS .................................................................................................. 101

Page

Page 2

West Mercia Police Authority

TREASURER’S FOREWORD TO THE ACCOUNTS ABOUT THE ACCOUNTS This Statement of Accounts sets out the overall financial position of West Mercia Police Authority for the year ending 31 March 2012. The accounts are prepared in a format stipulated by the Chartered Institute of Public Finance and Accountancy (CIPFA) in accordance with best accounting practice. The format of the accounts changed in 2010/11 to comply with the Code of Practice on Local Authority Accounting in the United Kingdom based on International Financial Reporting Standards (IFRS). The Statement of Accounts consists of: 1. Personal Assurance Statement of the Treasurer to the West Mercia Police

Authority The Treasurer’s assurance statement to the Police Authority’s external auditors. 2. Auditor’s Report This is the External Auditor’s report and opinion on the accounts and conclusion on

arrangements for securing economy, efficiency and effectiveness in the use of resources.

3. Statement of Responsibilities for the Statement of Accounts This section details the financial responsibilities of the Police Authority and the

Treasurer in respect of the Statement of Accounts. 4. Police Authority Approval

The date and signature of the Chair of the Audit Committee for the approval of the Statement of Accounts.

5. Annual Governance Statement This section describes how the Police Authority conducts its business in accordance

with proper standards. The Annual Governance Statement does not form part of the Statement of Accounts but is included here for reporting purposes.

6. The Accounting Statements consist of the following:-

- Movement in Reserve Statement This statement shows the movement in the year on the different reserves held

by the Authority, analysed into ‘usable reserves’ which can be applied to fund expenditure or reduce local taxation and ‘unusable reserves’ which record accounting transactions.

Statement of Accounts 2011/12

Page 3

West Mercia Police Authority

- Comprehensive Income and Expenditure Statement

This statement shows the accounting cost in the year of providing services in

accordance with generally accepted accounting practices. This is different from the cost in the year of providing services which are funded from taxation. The Police Authority raises taxation to cover expenditure in accordance with regulations, this is different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

- Balance Sheet

The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Authority.

- Cash Flow Statement The Cash Flow Statement shows the changes in cash and cash equivalents of

the Authority during the reporting period.

- Notes to the Accounts The Notes to the Accounts provide further disclosures to the Accounting

Statements and detail the Accounting Policies applied in preparing the Accounting Statements.

7. Police Pension Fund, Net Assets Statement and Notes to the Police Pension

Scheme

The Police Pensions Fund Account contains the contributions from the Authority at a rate of 24.2% of police officers’ pay which are used to pay police pensions during the year. Any surplus or deficit on this account at the end of the year is paid to or claimed from the Police Fund.

Page 4

West Mercia Police Authority

A REVIEW OF THE YEAR West Mercia Police Authority provides a police service to the 1.2 million people within the local authority areas covering Herefordshire, Shropshire, Telford and Wrekin and Worcestershire. It is the fourth largest police area in the country and the largest landlocked force in England and Wales. By reference to all 31 English Shire Forces it spends 99% of the average. West Mercia has been one of the most economical forces in the country in terms of cost per 1,000 population for a long time and has enjoyed a national reputation for achieving value for money. The police service in West Mercia has a strong value for money ethos. Assets are valued at £72.8m but external long-term borrowing is limited to £10.0m. A policy of employing members of police staff where appropriate has led to West Mercia being one of the most civilianised forces in the country with a ratio of one member of police staff to 1.18 police officers, thus freeing police officers for operational duties. The Authority’s income for each year is generally fixed at the start of the year by the level of government grant and council tax. Its expenditure is dominated by the cost of its employees, which comprises the largest part of the budget. The major influences on expenditure are the number of employees recruited, the annual national pay awards and the level of major incidents which require additional resources. The Authority’s cash flow is positive as grant income tends to be received in advance of payroll dates. The Authority’s financial position is that it is holding reserves of £37.8m to meet future obligations and potential risks. One of these reserves is the Sustaining Service Delivery Reserve, standing at £22.0m. This sum will enable the current severe reduction in funding to be managed over a period of years, so that the necessary re-shaping of the service can be done judiciously. For 2011/12 planned resources were £205.6m and this was to be funded from grants (£126.3m) and council tax (£79.3m). Actual spending was £199.8m. Spending is being curtailed in response to the reduction in government funding. The Authority has made capital investments on buildings, I.T. and vehicles during the year and these will continue into 2012/13. In previous years the Authority has had a very low level of debt, however in 2007/08 £10.0m was borrowed from the Public Works Loans Board to fund part of these investments. In 2011/12, there was £10.0m of capital expenditure on assets, which will eventually require borrowing of £7.9m. However, use of working capital enables this borrowing to be delayed; thereby exploiting the best advantage in the lending and borrowing markets. Capital investment of £21.7m is planned for 2012/13 with £14.8m of this funded by borrowing and the balance by grants and internal funds. The Authority has created a pensions reserve to show the estimated liability in relation to retirement benefits. This is explained in more detail in note 24 to the accounts.

Statement of Accounts 2011/12

Page 5

West Mercia Police Authority

The Audit Commission published a review of financial management in local government (“Summing Up”). This included attention to certain balance sheet ratios: 31 March

2010 31 March

2011 31 March

2012 − Working capital ratio 1.75 2.03 1.95 − Reserves as a proportion of

expenditure 0.11 0.14 0.18

− Borrowing as a proportion of revenue funding 0.05 0.05 0.05

− Borrowing as a proportion of assets 0.12 0.12 0.14

These ratios have been assessed for the past three years for West Mercia and they provide a favourable picture of:

− Cash available to meet short term liabilities − Cash being used advantageously to avoid borrowing − Reserves to meet accrued commitments and risk based contingencies − Low cost of borrowing − Asset values well in excess of borrowing

Accounting Policies From 2010/11 all local authorities, including police authorities, have been required to prepare their accounts under International Financial Reporting Standards (IFRS). The main reason for adopting IFRS is to bring benefits in consistency and comparability between financial reports in the global economy. Operational Results The total recorded crime for 2011/12 has decreased with the main percentage reductions observed in vehicle crime, robbery and domestic burglary. • In 2011/12 there was a 3.5% decrease in total crimes recorded. Over the past two

years there has been a 2.3% reduction in the number of total crimes recorded. • A 5.5% decrease in domestic burglaries which builds on the 2.6% reduction for the

previous year. On top of the reduction in volume the force had a 0.6 percentage point improvement in the solved rate.

• 8.2% reduction in robbery and a 2.3 percentage point deterioration in solved rate. • 1.1% decrease in the level of violence against the person with injury, and a 3.0

percentage point improvement in the solved rate. • 8.5% increase in the level of serious sexual offences reported which is an area the force

and its partners are targeting to reduce the level of non reporting. With the increase in reporting there was a 1.1 percentage point deterioration in the solved rate.

Page 6

West Mercia Police Authority

• 13.2% reduction in the level of vehicle crimes which builds on the 0.3% reduction in 2010/11.

• User satisfaction indicators show that 85.3% of people are fully, very or fairly satisfied

with the policing service provided. This is a 1.3 percentage point decrease on the previous year’s figures.

Environmental Issues The Authority has endorsed the principles of the Local Government Association’s Climate Change Commission. This includes the long-term challenge to achieve a 26-32% reduction in carbon emissions by 2020. West Mercia has nominated the Head of Estate Services as the lead officer on sustainability issues and he will lead a project team charged with reducing carbon emissions. For a number of years West Mercia has been making progress in these areas primarily from an economic imperative: • In 2011/12 the Force achieved a 9.5% reduction in units of energy consumed. • Preparation for the start of the government’s ‘Carbon Reduction Commitment’, including

making a provision for the first payment of the levy in 2012/13. • During the year a Voltage Optimisation Unit has been installed at Worcester Police

Station. This assists energy conservation. • At several sites the internal and external lighting has been replaced with LED lights. • A cycle-to-work scheme has been introduced and over 300 cycles have been purchased

by employees via payroll deductions. • Reduced water consumption force wide and ‘rainwater harvesting’ has been

implemented at Headquarters. • Better and cheaper system for disposal of waste electrical equipment. • The force has achieved the ISO 14001 standard awarded by the British Standards

Institute for the quality of its energy management processes. • Capital projects are planned to incorporate design features to achieve the Building

Research Establishment Environmental Assessment Method (BREEAM) standard of “good”.

• For the past decade all of West Mercia’s buildings have been designed to standards

10% better than Building Regulation requirements without a cost penalty. • West Mercia’s 3,000 computer workstations are based on thin client technology. This

uses a small fraction of the energy which would be consumed by the equivalent number of personal computers. Also, West Mercia has completed the change of its computer

Statement of Accounts 2011/12

Page 7

West Mercia Police Authority

screens from Cathode Ray Tube (CRT) to Liquid Crystal Display (LCD) computer monitors which use less energy and produce less heat, thus reducing cooling requirements.

National Economic Climate and Medium Term Outlook It is appropriate to consider the Police Authority’s position in the light of changes to the national economic climate over the past year. During the year the Police Authority maintained its prudent policy of making cash investments only with the Bank of England and other local authorities. The Authority suffered no losses during the exceptional conditions in investment markets in recent years. Only a small part of the Authority’s income comes from trade debtors. There have been no significant losses resulting from the bankruptcy of a customer. The risk of such future losses is assessed as small. The most important influences on West Mercia’s financial position for the future are the levels of government grant and council tax. During the summer of 2010, the government confirmed that there would be significant reductions in its grants to all police authorities for 2011/12 and 2012/13. It also gave indicative figures for further reductions in 2013/14 and 2014/15. There have been no significant updates to these government plans and actual funding has been in line with these plans. There have been government initiatives to provide a grant in order to freeze the council tax. Since 2009 a programme of reviews of operational structures, termed “Making the Difference” has been completed. This aims to protect the level of service whilst addressing the budget gap. In 2011/12 real terms budget reductions of £9.8m were made. The budget for 2012/13 has achieved reductions of £11.0m. The Police Authority has projected its funding and costs over the subsequent 3 years to 2015/16 and estimates that a further £17.1m of reductions will need to be made before the funding gap is eradicated in 2016. This means that of the total required reductions of £37.9m, £20.8m have already been achieved and £17.1m remains to be implemented in future years. A major project to form a Strategic Alliance with Warwickshire Police is expected to deliver these savings. During 2011/12 the Police Authority has made preparations for the introduction of a Policing and Crime Commissioner. This elected person will replace the Police Authority in November 2012.

Page 8

West Mercia Police Authority

PERSONAL ASSURANCE STATEMENT OF THE TREASURER TO THE WEST MERCIA POLICE AUTHORITY This statement has been given to the Police Authority's external auditors The Audit Commission. I confirm, to the best of my knowledge and belief and having made appropriate enquiries of the Chief Constable, the representation set out below and given to you in connection with your audit of West Mercia Police Authority’s financial statements for the period ending 31 March 2012. Accounting Records All the accounting records have been made available to you in accordance with Section 6 of the Audit Commission Act 1998 for the purpose of your audit and all the transactions undertaken have been properly reflected and recorded in the accounting records. To the best of my knowledge and belief, reasonable efforts have been made to ensure that records and related information which might materially affect the truth and fairness of, or necessary disclosure in, the financial statements have been made available to you and no such information has been withheld. Related Party Transactions Other than stated in the accounts, there are no related party transactions in the period which require adjustment of or disclosure to the financial statements or in the notes thereto. Law and Regulations I am not aware of any instances of actual or potential breaches of, or non-compliance with, laws and regulations governing the transactions of the West Mercia Police Authority that could have a material effect on the financial statements. I am not aware of any irregularities, or allegations of irregularities including fraud, involving management or employees who have a significant role in the accounting and internal control systems, which could have a material effect on the financial statements. Subsequent Events Other than stated in the accounts, there have been no circumstances or events subsequent to the period end which require adjustment to or disclosure in the financial statements or in the notes thereto.

Patrick Birch Treasurer to the West Mercia Police Authority 21 August 2012

Statement of Accounts 2011/12

Page 9

West Mercia Police Authority

INDEPENDENT AUDITOR’S REPORT TO MEMBERS OF WEST MERCIA POLICE AUTHORITY FOR THE YEAR ENDED 31 MARCH 2012

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WEST MERCIA POLICE AUTHORITY

Opinion on the Authority and Pension Fund accounting statements

I have audited the financial statements and the police pension fund financial statements of West Mercia Police Authority for the year ended 31 March 2012 under the Audit Commission Act 1998. The financial statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement and the related notes. The police pension fund financial statements comprise the Fund Account, the Net Assets Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12.

This report is made solely to the members of West Mercia Police Authority in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 48 of the Statement of Responsibilities of Auditors and Audited Bodies published by the Audit Commission in March 2010.

Respective responsibilities of the Treasurer and auditor

As explained more fully in the Statement of the Treasurer’s Responsibilities, the Treasurer is responsible for the preparation of the Statement of Accounts, which includes the financial statements and the police pension fund financial statements, in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom, and for being satisfied that they give a true and fair view. My 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 me 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 Authority and Pension Fund’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Treasurer; and the overall presentation of the financial statements. In addition, I read all the financial and non-financial information in the explanatory foreword to identify material inconsistencies with the audited financial statements. If I become aware of any apparent material misstatements or inconsistencies I consider the implications for my report.

Page 10

West Mercia Police Authority

Opinion on financial statements

In my opinion the financial statements:

• give a true and fair view of the financial position of West Mercia Police Authority as at

31 March 2012 and of its expenditure and income for the year then ended; • give a true and fair view of the financial transactions of the police pension fund during

the year ended 31 March 2012 and the amount and disposition of the fund’s assets and liabilities as at 31 March 2012, other than liabilities to pay pensions and other benefits after the end of the scheme year; and

• have been prepared properly in accordance with the CIPFA/LASAAC Code of Practice

on Local Authority Accounting in the United Kingdom 2011/12.

Opinion on other matters

In my opinion, the information given in the explanatory foreword for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which I report by exception

I report to you if:

• in my opinion the annual governance statement does not reflect compliance with

‘Delivering Good Governance in Local Government: a Framework’ published by CIPFA/SOLACE in June 2007;

• I issue a report in the public interest under section 8 of the Audit Commission Act 1998; • I designate under section 11 of the Audit Commission Act 1998 any recommendation as

one that requires the Authority to consider it at a public meeting and to decide what action to take in response; or

• I exercise any other special powers of the auditor under the Audit Commission Act

1998. I have nothing to report in these respects.

Statement of Accounts 2011/12

Page 11

West Mercia Police Authority

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

Other matters on which I am required to conclude

I am required under Section 5 of the Audit Commission Act 1998 to satisfy myself that the Authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. I am also required by the Audit Commission’s Code of Audit Practice to report any matters that prevent me being satisfied that the audited body has put in place such arrangements.

I have undertaken my audit in accordance with the Code of Audit Practice and, having regard to the guidance issued by the Audit Commission in October 2011, I have considered the results of the following:

• my review of the annual governance statement; • the work of other relevant regulatory bodies or inspectorates, to the extent the results of

the work have an impact on my responsibilities ; and • my locally determined risk-based work on medium term financial planning, performance

monitoring, transition arrangements and severance payments.

As a result, I have concluded that there is the following matter to report:

• the policy and governance processes supporting a number of voluntary redundancy

cases relating to the Strategic Alliance were weak.

Delay in certification of completion of the audit

I cannot formally conclude the audit and issue an audit certificate until I have completed the work necessary to issue my assurance statement in respect of the authority’s Whole of Government Accounts consolidation pack. I am satisfied that this work does not have a material effect on the financial statements or on my value for money conclusion.

Elizabeth Cave

District Auditor

Room 24, West Mercia Police HQ, Hindlip Hall, PO Box 55, Worcester, WR3 8SP

24 August 2012

Page 12

West Mercia Police Authority

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WEST MERCIA POLICE AUTHORITY Issue of audit opinion on the financial statements In my audit report for the year ended 31 March 2012 issued on 24 August 2012 I reported that, in my opinion, the financial statements:

• gave a true and fair view of the financial position of West Mercia Police Authority as at 31 March 2012 and of its expenditure and income for the year then ended;

• gave a true and fair view of the financial transactions of the pension fund during the year ended 31 March 2012 and the amount and disposition of the fund’s assets and liabilities as at 31 March 2012, other than liabilities to pay pensions and other benefits after the end of the scheme year; and

• had been prepared properly in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12.

Other matters on which I am required to conclude In my audit report for the year ended 31 March 2012 issued on 24 August 2012, I reported that I had concluded that there was the following matter to report:

• the policy and governance processes supporting a number of voluntary redundancy

cases relating to the Strategic Alliance were weak

Certificate In my report dated 24 August 2012, I explained that I could not formally conclude the audit on that date until I had completed the work necessary to issue my assurance statement in respect of the authority’s Whole of Government Accounts consolidation pack. I have now completed this work. No matters have come to my attention since that date that would have a material impact on the financial statements on which I gave an unqualified opinion or a significant impact on my conclusion on the authority’s arrangements for securing economy, efficiency and effectiveness. I certify that I have completed the audit of the accounts of West Mercia Police Authority in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission.

Elizabeth Cave

District Auditor

Room 24, West Mercia Police HQ, Hindlip Hall, PO Box 55, Worcester, WR3 8SP

24 September 2012

Statement of Accounts 2011/12

Page 13

West Mercia Police Authority

STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS The Authority’s Responsibilities The Authority is required: • to make arrangements for the proper administration of its financial affairs and to secure

that one of its officers has the responsibility for the administration of those affairs. In this Authority, that officer is the Treasurer to the West Mercia Police Authority

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

• to approve the Statement of Accounts. The Treasurer’s Responsibilities The Treasurer is responsible for the preparation of the Authority's Statement of Accounts in line with the terms of the Chartered Institute of Public Finance and Accountancy Code of Practice on Local Authority Accounting in the United Kingdom ("the Code of Practice"). In preparing this statement of accounts, the Treasurer has: • selected suitable accounting policies and then applied them consistently • made judgements and estimates that were reasonable and prudent • complied with the Code of Practice. The Treasurer has also: • kept proper accounting records which were up to date • taken reasonable steps for the prevention and detection of fraud and other irregularities • ensured that the Authority’s Statement of Accounts gives a true and fair view of the

financial position of the Police Authority at 31 March 2012 and its income and expenditure for the year ended 31 March 2012.

Patrick Birch Treasurer to the West Mercia Police Authority 21 August 2012

Page 14

West Mercia Police Authority

POLICE AUTHORITY APPROVAL In accordance with Regulation 8 of the Accounts and Audit Regulations 2011, I certify that the Audit Committee approved the Statement of Accounts on 26 June 2012.

Malcolm Pate Chair of the Audit Committee

21 August 2012

Statement of Accounts 2011/12

Page 15

West Mercia Police Authority

ANNUAL GOVERNANCE STATEMENT 1. Scope of Responsibilities 1.1 The West Mercia Police Authority (“the Police Authority”) is responsible for ensuring

an efficient and effective police force. It is responsible for ensuring its business 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. The Authority also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness. In discharging this overall responsibility, the Authority is also responsible for putting in place proper arrangements for the governance of its affairs and facilitating the exercise of its 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.

1.2 This statement explains how the Police Authority has complied with these

requirements and also meets the requirements of Regulation 4(2) of the Accounts and Audit Regulations 2003 as amended by the Accounts and Audit (Amendment) (England) Regulations 2006 in relation to the publication of a statement on internal control.

2. The Purpose of the Governance Framework 2.1 The governance framework comprises the systems and processes, and culture and

values by which the Police Authority is directed and controlled and its activities through which it accounts to and engages with the community. It enables the Police Authority to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost effective services, including achieving value for money.

2.2 The system of internal control is a significant part of that 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; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on a continuing process designed to identify and prioritise the risks to the achievement of the Authority’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 effectively, efficiently and economically.

2.3 The governance framework has been in place at the Authority for the year ended 31

March 2012 and up to the date of approval of the Statement of Accounts.

Page 16

West Mercia Police Authority

3. The Governance Framework 3.1 The Chief Constable is responsible for operational policing matters, the direction and

control of police personnel and for putting in place proper arrangements for the governance of the Force. The Police Authority is required to hold him to account for the exercise of those functions and those of the persons under his direction and control. It therefore follows that the Police Authority must satisfy itself that the Force has appropriate mechanisms in place for the maintenance of good governance, and that these operate in practice.

3.2 In West Mercia this is achieved by the operation of a range of systems and

procedures, the most important of which is that the Police Authority and the Chief Constable publish a three-year Strategic Plan and Annual Joint Policing Plan in order to establish objectives for both the immediate year and for the medium term. This process includes liaison with a range of partners and stakeholder groups. A summary of how the Police Authority and the Force engage with the communities of West Mercia is as follows:

3.2.1 There are a number of mechanisms for gaining information about what communities

think about the policing service they receive across West Mercia. This includes local events under the banner of Partners and Communities Together (PACT). This information informs decisions about future policing priorities which are subsequently published in the Authority’s and Force’s Annual Joint Policing Plan. It also informs improvements or changes to the services the Force provides.

3.2.2 Since 2010 the Policy Authority has included a live webcast in its consultation on proposed priorities and budgets. This enables the public to ask questions of the Chairman, Chief Executive, Chief Constable and Treasurer directly from home computers. 3.2.3 The Force has a long established system of user satisfaction surveys for obtaining

the views of those who have had cause to contact the police in order to check that the service they received was satisfactory and inform decisions to improve the service provided. Ongoing surveys are undertaken of people who have been burgled, been the victim of vehicle crime, violent crime or racial incidents and those who have been involved in road traffic collisions. Results are produced each month and formally reported to and monitored by the Police Authority.

3.2.4 The Force conducts a local Crime and Safety Partnership Survey on a quarterly

basis for residents of West Mercia in partnership with the Police Authority and criminal justice partners. The purpose of the survey is to gain an understanding of local issues and priorities and to ascertain public perceptions of and feelings about community safety. Over the year approximately 8,000 surveys were posted to residents across West Mercia.

Statement of Accounts 2011/12

Page 17

West Mercia Police Authority

3.2.5 Members of the Police Authority are drawn from the local community (nine of whom are Local Authority Councillors drawn from across the whole Force area) with the aim of being broadly representative of the West Mercia area. In addition to their involvement with their local communities through their roles as Councillors, Magistrates and other activities, members are made aware of local concerns through their role as representatives of the Police Authority on Policing Matters Groups, Community Safety Partnerships and Policing Boards.

3.2.6 Both the Force and Police Authority’s web sites are used to keep people informed

about current policing issues, provide information regarding services and seek feedback. The Authority’s site is also intended to provide web users with a useful way to communicate with the Authority and its members, to find out what’s going on and how to get more involved.

3.3 How performance is monitored West Mercia uses a wide range of performance indicators to measure how well we

are performing. These indicators are assessed on an ongoing basis and are reviewed formally at a monthly meeting of Chief Officers and Senior Managers. The Police Authority is regularly informed of performance across a range of matters with Members receiving monthly monitoring reports and reviews of performance in detail at scheduled Panel meetings.

The indicators below are the key measures to be used to track progress in delivering

West Mercia’s our objectives:

Target / Measure 2012/13

Total crime:

a) number recorded a) Reduce by 2% from 2011/12 year end total

b) percentage solved¹ b) To be monitored by Police Authority

Violent crimes with injury:

a) number recorded a) Volume static at 2011/12 year end total2

b) percentage solved¹ b) 51%

Serious sexual offences:

a) number recorded a) Ambition to see increased reporting

b) percentage solved¹ b) 32%

House burglaries:

a) number recorded a) Reduce by 2% from 2011/12 year end total

b) percentage solved¹ b) 23%

Robbery:

a) number recorded a) Reduce by 2% from 2011/12 year end total

b) percentage solved¹ b) 33%

Page 18

West Mercia Police Authority

Monitor levels of anti-social behaviour (with emphasis upon levels of repeat incidents, repeat victimisation and anti-social behaviour directed towards individuals).

To be monitored by Police Authority

The number of road traffic collisions that result in someone being killed or seriously injured

Below 350

Satisfaction with overall service provided by the police (measured by West Mercia User Satisfaction Surveys)

85%

Improve the satisfaction for overall experience for victims of hate crime

To be monitored by Police Authority

Percentage of people who say that their local area has been ‘completely’ or ‘very’ safe over the last three months (measured by the Crime and Safety Partnership Survey).

55%

Public confidence. The percentage of people who agree the police are doing an excellent or good job in their local area (measured by the Crime and Safety Partnership Survey)

72%

¹ Solved = Sanction detections (detections resulting in action being taken against the offender responsible) plus community resolutions (community resolution delivers a victim focussed outcome, which is agreed as appropriate and proportionate to the act committed, by all parties, including the police).

2 Number of violent crimes with injury recorded – this includes crimes with injury resulting from domestic abuse incidents. Within this measure the ambition is to see increased reporting of crimes resulting from domestic abuse, whilst seeing a reduction in other forms of violent crime, such as that associated with late night disturbances within town centres.

The Police Authority and the Chief Constable assimilate the results of their consultation, together with consideration of government policies and an assessment of the financial resources available in order to create the annual policing plan within a three year framework.

3.4 The strategic aim of the Authority is to protect the public from harm. The intended

outcome is a reduction in the level of harm so that our communities feel safer.

The current objectives are: • deliver an effective emergency response • protect people from crime and anti-social behaviour taking into account their

needs and vulnerabilities • deliver a supportive and effective response to victims and witnesses taking into

account their needs and vulnerabilities

Statement of Accounts 2011/12

Page 19

West Mercia Police Authority

• plan and prepare to deliver our contribution to the Strategic Policing Requirement

• proactively target organised crime groups, drug markets and individuals who cause most harm

• disrupt the harm caused by alcohol misuse and intervene appropriately • work with partners and the public to bring offenders to account and reduce re-

offending • work with partners and the public to prevent people being killed or seriously

injured on our roads • plan and prepare to respond to any major and serious incidents • deliver an efficient and effective policing service which provides value for money

3.5 Committees 3.5.1 The Police Authority has assigned specific roles and responsibilities to a number of

subsidiary Committees and Panels in order to facilitate decision making and policy making within the context of its strategy.

3.5.2 The Committees are:

− Appointments and Remuneration Committee − Audit Committee − Standards Committee − Urgent Decisions Committee

3.5.3 Through these Committees and associated Panel structure, the Authority monitors

performance against plans and monitors quality of services for users. It also monitors standards of behaviour and adherence to regulations.

4. Risk 4.1 A process to address weaknesses and to ensure continuous improvement is in

place. The Deputy Chief Constable chairs the Force Senior Leaders Forum which highlights significant risks to the Chief Officers’ Strategy Group.

4.2 West Mercia views its responsibilities within the corporate governance arrangements

seriously and has taken positive action to address identified gaps in taking informed decisions and the managing and reporting of risk.

Page 20

West Mercia Police Authority

4.3 As an integral element of its system of internal control, West Mercia has established a corporate approach to risk management. There is a formal written Risk Management Policy and Strategic Risk Management Procedure which has undergone internal and external consultation and this is made available to all staff via the Force Intranet. Its main aim is to establish a culture whereby risk management is embedded within service delivery and Force Risk Management policy and procedures are reviewed regularly and updated as appropriate.

4.4 The Force Senior Leaders Forum is responsible for reviewing West Mercia’s Risk

Management strategies and ensures that:

• emerging significant departmental risks are communicated to the Force Risk Management Board, to the Chief Officers’ Policy Group and to the Police Authority

• corporate risks requiring departmental or individual mitigation are communicated to the correct department or risk owner

• the Force Strategic Risk Register is regularly reviewed and updated, and key risks are prioritised in terms of probability and impact

• the risk management process is reviewed and revised as necessary • risk is championed effectively across the whole organisation.

4.5 West Mercia has an established post of Force Strategic Risk Manager whose main

duty is to maintain the Force Strategic Risk Register and to advise on the total risk to which the Force is exposed. Risk focal points within each command have been nominated and risk awareness training and use of risk registers is cascaded, one to one, by the Strategic Risk Manager.

4.6 Information Risk The Force owns information collected for policing purposes, including significant

amounts of personal information. The Chief Constable manages his responsibilities, principally derived from the Data

Protection Act 1998 and the Police Act 1996 through a specific information management governance structure.

Information strategy and policy is managed in order to enhance and improve the

Force’s capability in information management. Residual risk is controlled on the Chief Constable’s behalf by Data Protection, Freedom of Information, Audit, Records Management, Information Security and Vetting functions.

Statement of Accounts 2011/12

Page 21

West Mercia Police Authority

5. Complementary Governance Arrangements 5.1 Long-standing arrangements are in place for delegation of authority supported by

Standing Orders and Financial Regulations. There has been significant delegation of budgetary responsibility to operational managers in order to enhance the effectiveness of the use of resources.

5.2 The Audit Committee has been established to undertake the core functions of the

audit process as recommended by the Chartered Institute of Public Finance and Accountancy. The Chief Executive has a formal role in ensuring that all of the Authority’s activities are properly lawful. The Authority has endorsed the CIPFA statement on the role of the Chief Financial Officer. This combination of arrangements provides confidence that compliance with relevant laws and regulations is achieved.

5.3 The Force operates a whisteblowing system, an independently provided service

(“The Integrity Line”), to receive disclosures from police officers and police staff who may have concerns about irregular behaviour within the Force. From outside of the Force, the “Crimestoppers” facility provides a similar confidential service. The Professional Standards Department proactively promotes high standards of behaviour and investigates questionable behaviour.

5.4 The Force has developed policy on the governance of partnerships and provided

advice to officers which takes account of the wide range of partnership engagements which are in place.

6. Other Developments 6.1 The Authority and the Force have responded to the economic challenges posed by

the government’s spending plans by formulating a clear Medium Term Financial Plan. Significant cost reductions have been achieved as a result of a programme of management action termed ‘Making the Difference’. This has included a more centralised approach to operational decision making and to resource management.

6.2 In June 2011 Warwickshire and West Mercia Police Authorities unanimously agreed

the formation of an Alliance between their two forces.

By working together, both forces will be able to deliver high quality, value for money policing services to protect our communities from harm. The Alliance will enable both forces to meet the challenge of reducing policing budgets while providing greater operational and organisational resilience in years ahead.

Page 22

West Mercia Police Authority

Both forces have retained Chief Constables and Deputy Chief Constables who remain accountable to their Police Authorities for the delivery of policing. Force identities have also been retained, as will separate governance and accountability arrangements, policing budgets, assets and financial accounting arrangements. Most importantly, both forces recognise that policing across both forces must continue to address the greatest harms within each area.

6.3 During 2011/12 the Police Authority has been preparing for the transition to elected

Policing and Crime Commissioners in November 2012.

7. Review of Effectiveness 7.1 The Authority has responsibility for conducting, at least annually, a review of the

effectiveness of the governance framework, including the system of internal audit and the system of internal control. These reviews have been informed by the work of internal auditors and managers within the Authority who have the responsibility for the development and maintenance of the governance environment. In addition, comments made by the external auditors and other review agencies and inspectorates have informed this review.

7.2 The signatories have been advised on the implications of the result of the review of

the effectiveness of the governance framework by the Audit Committee, the Standards Committee and the Force Performance Monitoring Panel and a process to address weaknesses and ensure continuous improvement of the system is in place.

Statement of Accounts 2011/12

Page 23

West Mercia Police Authority

8. Significant Governance Issues 8.1 The review of effectiveness of governance for 2011/12 has identified no significant

governance issues.

Sheila Blagg David Shaw David Brierley Chair of the

Police Authority Chief Constable Chief Executive

of the Police Authority 21 August 2012 21 August 2012 21 August 2012

Page 24

West Mercia Police Authority

MOVEMENT IN RESERVES STATEMENT This statement shows the movement in the year on the different reserves held by the authority, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The ‘(Surplus) or Deficit on the Provision of Services’ line shows the true economic cost of providing the authority’s services, more details of which are shown in Comprehensive Income and Expenditure Statement. This is different from the statutory amounts required to be charged to the General Fund Balance for Council Tax setting purposes. The ‘Net (Increase) / Decrease before transfers to earmarked reserves’ line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the authority.

2011/12 Not

es

Gen

eral

Fu

nd

Bal

ance

Earm

arke

d G

ener

al

Fund

R

eser

ves

Cap

ital

Rec

eipt

s R

eser

ve

Cap

ital

Gra

nts

Una

pplie

d

Tota

l U

sabl

e R

eser

ves

Unu

sabl

e R

eser

ves

Tota

l A

utho

rity

Res

erve

s

£000 £000 £000 £000 £000 £000 £000 Opening Balance at 1 April 2011

0 (32,066) (555) (2,154) (34,775) 1,488,283 1,453,508

Movement in reserves during 2011/12

(Surplus) or deficit on provision of services (accounting basis)

107,622 107,622 107,622

Other Comprehensive Income and Expenditure

Surplus/Deficit on revaluation of PPE

2,697 2,697

Actuarial gain/loss on pension assets/liabilities

23,259 23,259

Total Comprehensive Income and Expenditure

107,622 0 0 0 107,622 25,956 133,578

Adjustments between accounting basis and funding basis under regulations

8 (113,344) 0 (219) 162 (113,401) 113,401 0

Net (Increase)/ Decrease before transfers to Earmarked Reserves

(5,722) 0 (219) 162 (5,779) 139,357 133,578

Transfers to/from Earmarked Reserves 9 5,722 (5,722) 0 0

(Increase)/Decrease in Year

0 (5,722) (219) 162 (5,779) 139,357 133,578

Balance at 31 March 2012

0 (37,788) (774) (1,992) (40,554) 1,627,640 1,587,086

Statement of Accounts 2011/12

Page 25

West Mercia Police Authority

2010/11 No

tes

Gen

eral

F

un

d

Bal

ance

E

arm

arke

d

Gen

eral

F

un

d

Res

erve

s

Cap

ital

R

ecei

pts

R

eser

ve

Cap

ital

G

ran

ts

Un

app

lied

To

tal

Usa

ble

R

eser

ves

Un

usa

ble

R

eser

ves

To

tal

Au

tho

rity

R

eser

ves

£000 £000 £000 £000 £000 £000 £000

Opening Balance at 1 April 2010

0 (24,583) 0 0 (24,583) 1,643,824 1,619,241

Movement in reserves during 2010/11

(Surplus) or deficit on provision of services (accounting basis)

(86,014) (86,014) (86,014)

Other Comprehensive Income and Expenditure

(79,719) (79,719)

Total Comprehensive Income and Expenditure

(86,014) 0 0 0 (86,014) (79,719) (165,733)

Adjustments between accounting basis and funding basis under regulations

8 78,531 0 (555) (2,154) 75,822 (75,822) 0

Net (Increase)/Decrease before transfers to Earmarked Reserves

(7,483) 0 (555) (2,154) (10,192) (155,541) (165,733)

Transfers to/from Earmarked Reserves 9 7,483 (7,483) 0 0

(Increase)/Decrease in Year

0 (7,483) (555) (2,154) (10,192) (155,541) (165,733)

Balance at 31 March 2011

0 (32,066) (555) (2,154) (34,775) 1,488,283 1,453,508

Note: the Movement in Reserves Statement for 2010/11 has been restated to reflect a correction in accounting for police pensions.

Page 26

West Mercia Police Authority

COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT 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. Authorities raise 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.

2010/11 restated 2011/12 Gross

Expenditure

Gross Income

Net Expenditur

e Notes

Gross Expenditur

e Gross

Income

Net Expenditur

e £000 £000 £000 £000 £000 £000

138,039 (11,173) 126,866 Local Policing 111,645 (6,335) 105,310 18,926 (948) 17,978 Dealing with the Public 18,327 (128) 18,199

21,229 (2,060) 19,169 Criminal Justice Arrangements

22,160 (834) 21,326

9,659 (2,573) 7,086 Road Policing 11,468 (1,920) 9,548 8,422 (758) 7,664 Specialist Operations 8,292 (108) 8,184 8,542 (405) 8,137 Intelligence 12,886 (90) 12,796

20,108 (1,320) 18,788 Investigations 44,943 (1,365) 43,578 8,276 (517) 7,759 Investigative Support 7,723 (174) 7,549 3,787 (1,988) 1,799 National Policing 4,256 (1,830) 2,426

1,121 (6) 1,115 Corporate and Democratic Core

1,081 (1,976) (895)

0 (187,017) (187,017) Exceptional Item Past Service Costs 7 0 0 0

489 0 489 Non Distributed Costs - other

964 0 964

238,598 (208,765) 29,833 Cost of Services 243,745 (14,760) 228,985

131

0

131 Other operating expenditure 10

83

0

83

89,952 (149) 89,803 Financing and investment income and expenditure

11 85,919 (92) 85,827

16,469 (222,250) (205,781) Taxation and non-specific grant income 12 23,684 (230,957) (207,273)

345,150 (431,164) (86,014) (Surplus) or Deficit on Provision of Services 353,431 (245,809) 107,622

0

(417)

(417)

(Surplus) or deficit on revaluation Property, Plant & Equipment Assets

2,697

0

2,697

0

(79,302)

(79,302)

Actuarial (gains)/losses on pension assets/liabilities

23,259

0

23,259

0 (79,719) (79,719) Other Comprehensive Income & Expenditure 25,956 0 25,956

345,150 (510,883) (165,733)

Total Comprehensive Income & Expenditure

379,387 (245,809) 133,578

Statement of Accounts 2011/12

Page 27

West Mercia Police Authority

Note: SeRCOP has changed the service expenditure analysis within the Cost of Services between 2010/11 and 2011/12. The main difference is to move local investigators from Local Policing into Investigations.

Page 28

West Mercia Police Authority

BALANCE SHEET The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the authority. The net assets of the authority (assets less liabilities) are matched by the reserves held by the authority. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the authority may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example, the capital receipts reserve may only be used to fund capital expenditure or repay debt). The second category of reserves are those that the authority is not able to use to provide services. This 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 2011

31 March 2012

£000 Notes

£000 83,556 Property, Plant & Equipment 13 71,599

470 Investment Property 14 433

880 Intangible Assets 15 782

7 Long Term Debtors 16 4

84,913 Long Term Assets 72,818 0 Assets Held for Sale 17 0

457 Inventories 18 517

11,143 Short Term Debtors 19 17,400

17,271 Cash and Cash Equivalents 20 13,680

28,871 Current Assets 31,597 (14,251) Short Term Creditors 21 (16,206)

(14,251) Current Liabilities (16,206) (516) Provisions 22 (1,470)

(10,062) Long Term Borrowing 16 (10,062)

(1,542,213) Liability Relating to Defined Benefit Pension Schemes 39 (1,663,229)

(250) Capital Grants Receipts in Advance 35 (534)

(1,553,041) Long Term Liabilities (1,675,295) (1,453,508) Net Assets (1,587,086)

(34,775) Usable Reserves 23 (40,554)

1,488,283 Unusable Reserves 24 1,627,640

1,453,508 Total Reserves 1,587,086

Statement of Accounts 2011/12

Page 29

West Mercia Police Authority

CASH FLOW STATEMENT This statement shows the changes in cash and cash equivalents of the authority during the reporting period. The statement shows how the authority 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 operating activities is a key indicator of the extent to which the operations of the authority are funded by way of taxation and grant income or from the recipients of services provided by the authority. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the authority’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 authority.

Restated 2010/11

2011/12

£000 Notes

£000 (86,014) Net (surplus) or deficit on the provision of services 107,622

74,429 Adjustments to net (surplus) or deficit on the provision of services for non-cash movements 25 (113,714)

2,803 Adjustments for items included in the net (surplus) or deficit on the provision of services that are investing and financing activities

26 2,014

(8,782) Net cash flows from Operating Activities 27 (4,078)

3,225 Investing Activities 28 7,669

0 Financing Activities 29 0

(5,557) Net increase or decrease in cash and cash equivalents 3,591

(11,714) Cash and cash equivalents at the beginning of the reporting period (17,271)

(17,271) Cash and cash equivalents at the end of the reporting period 20 (13,680)

Page 30

West Mercia Police Authority

NOTES TO THE ACCOUNTS 1. Prior Period Adjustments 2. Changes in Accounting Policies 3. Accounting Policies 4. Accounting Standards that have been Issued but have not yet been Adopted 5. Critical Judgements in Applying Accounting Policies 6. Assumptions made about the future and other Major Sources of Estimation Uncertainty 7. Material Items of Income and Expense 8. Adjustments between Accounting Basis and Funding basis under Regulation 9. Transfers to/from Earmarked Reserves 10. Other Operating Expenditure 11. Financing and Investment Income and Expenditure 12. Taxation and Non-Specific Grant Income 13. Property, Plant and Equipment 14. Investment Properties 15. Intangible Assets 16. Financial Instruments Balances 17. Assets held for Sale 18. Inventories 19. Debtors 20. Cash and Cash Equivalent 21. Creditors 22. Provisions 23. Usable Reserves 24. Unusable Reserves 25.

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

26.

Cash Flow Statement – Adjustment for items included in the Net Surplus or Deficit on the Provision of Services that are Investing and Financing Activities

27. Cash Flow Statement – Operating Activities 28. Cash Flow Statement – Investing Activities 29. Cash Flow Statement – Financing Activities 30. Amounts Reported for Resource Allocation Decisions 31. Members’ Allowances 32. Officers’ Remuneration 33. External Audit Costs 34. Publicity 35. Grant Income 36. Related Parties 37. Capital Expenditure and Capital Financing 38. Leases 39. Defined Benefit Pensions Schemes 40. Nature and Extent of Risks arising from Financial Instruments and how the Authority

manages those Risks 41. Jointly Controlled Operations and Assets

Statement of Accounts 2011/12

Page 31

West Mercia Police Authority

NOTES TO THE ACCOUNTS 1. PRIOR PERIOD ADJUSTMENTS The Authority has identified that the accounting entries in respect of the treatment of Police Pensions Top Up Grant and associated costs require to be updated in order to comply fully with the Code of Practice. There is no effect on the total net expenditure in the Comprehensive Income and Expenditure Statement and no effect on Liability relating to Defined Benefit Pension Schemes or the Pensions Reserve in the Balance Sheet, so there is no requirement to restate the Balance Sheet. However, the update has meant that the service expenditure in the cost of services has been understated by £0.413m, the taxation and non-specific grant has been overstated by £16.469m, and the Actuarial (gain)/loss on pension assets/liabilities has been understated by £16.882m in the Comprehensive Income and Expenditure Statement for 2010/11. This has also meant that the General Fund Balance was overstated by £16.882m for 2010/11. In order to make this update to best practice the Authority has restated the prior year information for 2010/11. The following are the relevant extracted lines from the Comprehensive Income and Expenditure Statement. The restated Comprehensive Income and Expenditure Statement for the prior period 2010/11 can be found on page 26 of these financial statements.

Originally stated 2010/11

Net Expenditure £000

Restated 2010/11

Net Expenditure £000

Amount of Restatement

£000

Local Policing 126,586 126,866 280 Dealing with the Public 17,970 17,978 8 Criminal Justice Arrangements 19,151 19,169 18 Road Policing 7,063 7,086 23 Specialist Operations 7,652 7,664 12 Intelligence 8,128 8,137 9 Specialist Investigations 18,736 18,788 52 Investigative Support 7,758 7,759 1 National Policing 1,789 1,799 10 Corporate and Democratic Core 1,115 1,115 0 Exceptional Item Past Service Costs (187,017) (187,017) 0 Non distributed costs - other 489 489 0 Cost of Services 29,420 29,833 413 Other operating expenditure 131 131 0 Financing and Investment income and expenditure

89,803

89,803

0

Taxation and non-specific grant income (222,250) (205,781) 16,469 (Surplus) or Deficit on Provision of Services

(102,896)

(86,014)

16,882

(Surplus) or deficit on revaluation Property, Plant & Equipment Assets

(417)

(417)

0

Actuarial (gains)/losses on pension assets/liabilities

(62,420)

(79,302)

(16,882)

Total Comprehensive Income & Expenditure

(165,733)

(165,733)

0

Page 32

West Mercia Police Authority

The following restatement was also required for the Movement in Reserves Statement

for Unusable Reserves. The Restated Movement In Reserves Statement for the prior period 2010/11 can be found on page 25 of these financial statements.

Movement In Reserve Statement – Unusable Reserves 31 March 2011

Originally Stated

31 March 2011 £000

Restated 31 March 2011

£000

Amount of Reinstatement

£000 Opening Balance 1 April 2010 1,643,824 1,643,824 0 Other Comprehensive Income and Expenditure (62,837) (79,719) (16,882)

Adjustments between accounting basis and funding basis under regulation

(92,704)

(75,822)

16,882

Increase/(decrease) in year (155,541) (155,541) 0 Balance at 31 March 2011 1,488,283 1,488,283 0

The following restatement was also required for the Cash Flow Statement. The

restated Cash Flow Statement for the prior period 2010/11 can be found on page 28 of these financial statements.

Cash Flow Statement 2010/11

Originally Stated 2010/11

£000

Restated 2010/11

£000

Amount of Restatement

£000 Net (surplus) or deficit on the Provision of Services

(102,896)

(86,014)

16,882

Adjustments to net (surplus) or deficit on the provision of services for non-cash movements

91,311

74,429

(16,882)

Adjustments for items included in the net (surplus) or deficit on the provision of services that are investing and financing activities

2,803

2,803

0

Net cash flows from operating activities

(8,782)

(8,782)

0

Net increase or decrease in cash and cash equivalents

(5,557)

(5,557)

0

Cash and cash equivalents at the beginning of the reporting period

(11,714)

(11,714)

0

Cash and cash equivalents at the end of the reporting period

(17,271)

(17,271)

0

The associated notes to the accounts have been restated where appropriate for prior

period figures to take account of this update.

Statement of Accounts 2011/12

Page 33

West Mercia Police Authority

2. CHANGES IN ACCOUNTING POLICY For 2011/12 the Authority has changed its accounting policy for the measurement of

property plant and equipment. Divisional Headquarters buildings have been classed as operational specialised properties on the basis of the provision of custody suites. These properties have been valued at Depreciated Replacement Cost (DRC). The valuation of specialised property according to DRC is the aggregate amount of the value of the land for the existing use and the gross replacement cost of the buildings and other site works with appropriate deduction for age and obsolescence to reflect the reduced use value to the Authority compared to a new replacement.

The view of the valuers is that the Divisional Headquarters properties would have

market values materially below DRC should the current uses cease. The valuers believe that the appropriate basis for valuing Divisional Headquarters properties is on an existing use basis rather than DRC. It has been agreed with the valuers that this change in accounting policy will be implemented prospectively as each property becomes due for revaluation during the five year revaluation cycle.

For 2011/12 two Divisional Headquarters properties have been revalued on an

existing use basis rather than DRC. The effect of these revaluations has been to make a material charge to the Cost of

Services in the Comprehensive Income and Expenditure Statement of £8.573m and to reverse previous revaluation increases in the Revaluation Reserve by £3.102m.

3. ACCOUNTING POLICIES

3.1 General Principles

The Statement of Accounts summarises the Authority’s transactions for the 2011/12 financial year and its position at the year end of 31 March 2012. The Authority is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2011 which must be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 and the Service Reporting Code of Practice 2011/12 supported by International Financial Reporting Standards (IFRS). The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments.

Page 34

West Mercia Police Authority

3.2 Accruals of Income and Expenditure

Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular:

• Revenue from the sale of goods is recognised when the Authority transfers the

significant risks and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the Authority.

• Revenue from the provision of services is recognised when the Authority can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the Authority.

• Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet.

• Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made.

• 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.

3.3 Carbon Reduction Commitment The Authority is required to participate in the Carbon Reduction Commitment Energy Efficiency Scheme. This scheme is currently in its introductory phase which will last until 31 March 2014. The Authority is required to purchase and surrender allowances, currently retrospectively, on the basis of emissions i.e. carbon dioxide produced as energy is used. As carbon dioxide is emitted (i.e. as energy is used), a liability and an expense are recognised. The liability will be discharged by surrendering allowances. The liability is measured at the best estimate of the expenditure required to meet the obligations, normally at the current market price of the number of allowances required to meet the liability at the reporting date. The cost to the Authority is recognised and reported in the Cost of Services in the Comprehensive Income and Expenditure Statement and carried on the Balance Sheet as a Provision.

3.4 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 investments that mature in no more than three months from the date of acquisition

Statement of Accounts 2011/12

Page 35

West Mercia Police Authority

and 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 Authority’s cash management.

3.5 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 Authority’s financial performance.

3.6 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 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 Authority’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. 3.7 Charges to Revenue for Non-Current Assets

Services are debited with the following amounts to record the cost of holding fixed assets during the year:

• depreciation attributable to the assets used by the relevant service • revaluation and impairment losses on assets used by the service 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 Authority is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisations. However, it is required to make an annual contribution from revenue towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the authority in

Page 36

West Mercia Police Authority

accordance with statutory guidance. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by the contribution in the General Fund Balance (Minimum Revenue Provision), by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

3.8 Employee Benefits

3.8.1 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 (e.g. cars) for current employees and are recognised as an expense for services in the year in which employees render service to the Authority. 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, being the period in which the employee takes the benefit. 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.

3.8.2 Termination Benefits This policy applies to members of police staff only. Termination benefits are amounts payable as a result of a decision by the Authority to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy and are charged on an accruals basis to the Cost of Services in the Comprehensive Income and Expenditure Statement when the Authority is demonstrably committed to the termination of the employment of an officer or group of officers or making an offer to encourage voluntary redundancy. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund Balance to be charged with the amount payable by the Authority 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. 3.8.3 Post Employment Benefits Employees of the Authority are members of two separate pension schemes: • the Police Pension Scheme for Police Officers • the Local Government Pensions Scheme for Police Staff administered by

Worcestershire County Council

Statement of Accounts 2011/12

Page 37

West Mercia Police Authority

Both schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees worked for the Authority. However, the Police Pension Scheme for police officers is an unfunded defined benefit final salary scheme, meaning that there are no investment assets built up to meet the pensions liabilities, and cash has to be generated to meet the actual pensions payments as they eventually fall due. Under the Police Pension Fund Regulations 2007, if the amounts receivable by the pensions fund for the year is less than amounts payable, the Police Authority must annually transfer an amount required to meet the deficit to the pension fund. This cost is met by a Home Office 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 Police Authority which then must repay the amount to Home Office. If police officers retire because of an injury on duty, they may be entitled to an Injury Award Pension. This cost is not met by the Home Office Top Up grant. It is part of the operating expenses of the Police Authority. 3.8.4 Pension Schemes The Local Government Scheme and the Police Pension Scheme are accounted for as defined benefits schemes.

• the liabilities of the Worcestershire County Council pension fund attributable to the

Authority and the Police Pensions Scheme attributable to the Authority are included in the Balance Sheet on an actuarial basis using the projected unit method – ie, 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.

• International Accounting Standard (IAS)19 requires the nominal discount rate to be set by reference to market yields on high quality corporate bonds or where there is no deep market in such bonds then by reference to government bonds.

• for police pensions liabilities are discounted using the nominal discount rate based on government bond yield of appropriate duration plus an additional margin. Based on this methodology, the nominal discount rate at 31 March 2012 is assumed to be 4.9% a year, compared to 5.7% a year at 31 March 2011.

• for police staff liabilities are discounted to their value at current prices, using a discount rate of 5.1% based on corporate bond yields.

• the pension increase assumption as at 31 March 2012 is based on the Consumer Price Index (CPI) expectation of inflation rather than the Retail Price Index (RPI). This is as a result of the Government’s announcement that CPI is to be used for the indexation of public service pensions from April 2011.

• the assets of Worcestershire County Council’s pension fund attributable to the

Authority are included in the Balance Sheet at their fair value:

Page 38

West Mercia Police Authority

- 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:

- current service cost – the increase in liabilities as a result of years of service

earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked

- past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs

- interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid – debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement

- expected return on assets – the annual investment return on the fund assets attributable to the Authority, based on an average of the expected long-term return – credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement

- gains or losses on settlements and curtailments – the result of actions to relieve the Authority of liabilities or events that reduce the expected future service or accrual of benefits of employees – 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.

- actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – debited to the Pensions Reserve

- contributions paid to the Worcestershire County Council’s 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 General Fund Balance to be charged with the amount payable by the Authority 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 General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees.

Statement of Accounts 2011/12

Page 39

West Mercia Police Authority

3.8.5 Discretionary Benefits

The Authority 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 years of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme. 3.9 Financial Instruments

3.9.1 Financial Liabilities Financial liabilities are recognised on the Balance Sheet when the Authority 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 the borrowings that the Authority 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. The following recommended policy will be adopted in respect of gains and losses on the repurchase or early settlement of borrowing. However, in 2011/12 West Mercia did not have any transactions of this nature. Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repurchase/settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to spread over future years. The Authority will adopt 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 General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement. 3.9.2 Financial Assets

Page 40

West Mercia Police Authority

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.

3.9.3 Loans and Receivables Loans and receivables are recognised on the Balance Sheet when the Authority 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 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. For most of the loans that the Authority has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement. When 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. West Mercia has no impairment losses imposed on the carrying amounts in 2011/2012. Any gains and losses that arise on the derecognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. 3.9.4 Available-for-Sale Assets The following recommended policy has been adopted. However, in 2011/12 West Mercia has no financial instruments which are relevant to this policy. Available-for-sale assets are recognised on the Balance Sheet when the Authority becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Where the asset has fixed or determinable payments, annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of the interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the Comprehensive Income and Expenditure Statement when it becomes receivable by the Authority.

Statement of Accounts 2011/12

Page 41

West Mercia Police Authority

Assets are maintained in the Balance Sheet at fair value. Values are based on the following principles: • instruments with quoted market prices – the market price • other instruments with fixed and determinable payments – discounted cash flow

analysis • equity shares with no quoted market prices – independent appraisal of company

valuations.

Changes in fair value are balanced by an entry in the Available-for-Sale Reserve and the gain/loss is recognised in the Surplus or Deficit on Revaluation of Available-for-Sale Financial Assets. The exception is where impairment losses have been incurred; these are debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any net gain or loss for the asset accumulated in the Available-for-Sale Reserve. 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 (fixed or determinable payments) or fair value falls below cost, 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. If the asset has fixed or determinable payments, 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. Otherwise, the impairment loss is measured as any shortfall of fair value against the acquisition cost of the instrument (net of any principal repayment and amortisation). Any gains and losses that arise on the derecognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any accumulated gains or losses previously recognised in the Available-for-Sale Reserve. 3.10 Foreign Currency Translation Where the Authority has entered into a transaction denominated in a foreign currency, the transaction is converted into sterling at the exchange rate applicable on the date the transaction was effective. Where amounts in foreign currency are outstanding at the year end, they are reconverted at the spot exchange rate at 31 March. Resulting gains or losses are recognised in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. West Mercia has no transactions of this nature at 31 March 2012.

Page 42

West Mercia Police Authority

3.11 Government Grants and Contributions

Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Authority when there is reasonable assurance that: • the Authority will comply with the conditions attached to the payments, and • the grants or contributions will be received.

Amounts recognised as due to the Authority are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution 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 (attributable 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 General 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. 3.12 Heritage Assets The Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 has introduced a change in accounting policy in relation to the treatment of heritage assets. Heritage assets are defined as: • assets which are preserved in trust for future generations because of their

cultural, environment or historical associations • assets which have historical, artistic, scientific, geophysical or environmental

qualities • assets which are held and maintained by the Police Authority principally for the

contribution of knowledge and culture.

West Mercia has set a de minimus value of £10,000 for assets which may be deemed to be heritage assets. It has reviewed its assets and determined that it has no heritage assets which require to be specially accounted for. West Mercia has placed on display a small number of items of historical interest and these do not exceed

Statement of Accounts 2011/12

Page 43

West Mercia Police Authority

£10,000 each. West Mercia has taken reasonable steps to obtain a professional valuation of those items which it considers to merit the cost of valuation. 3.13 Intangible Assets

Expenditure on non-monetary assets that do not have physical substance but are controlled by the Authority 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 Authority. Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Authority will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase (research expenditure cannot be capitalised). Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Authority’s goods or services. Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Authority can be determined by reference to an active market. The Authority holds a cherished motor vehicle registration number licence and this is revalued every five years and is not amortised. The depreciable amount of all other intangible assets is amortised over their useful lives to the Cost of Services in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the Cost of Services in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.

3.14 Inventories

Inventories are required to be included in the Balance Sheet at the lower of cost or current replacement value. Inventories are valued at actual cost price.

3.15 Investment Property Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale.

Page 44

West Mercia Police Authority

Investment properties are measured initially at cost and subsequently at fair value, based on the amount at which the asset could be exchanged between knowledgeable parties at arm’s-length. Properties are not depreciated but are revalued annually according to market conditions at the year end. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal. Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve. 3.16 Jointly Controlled Operations and Jointly Controlled Assets

Jointly controlled operations are activities undertaken by the Authority in conjunction with other venturers that involve the use of the assets and resources of the venturers rather than the establishment of a separate entity. The Authority recognises on its Balance Sheet the assets that it controls and the liabilities that it incurs and debits and credits the Comprehensive Income and Expenditure Statement with the expenditure it incurs and the share of income it earns from the activity of the operation. Jointly controlled assets are items of property, plant or equipment that are jointly controlled by the Authority and other venturers, with the assets being used to obtain benefits for the venturers. The joint venture does not involve the establishment of a separate entity. The Authority accounts for only its share of the jointly controlled assets, 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.

3.17 Leases

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. 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.

Statement of Accounts 2011/12

Page 45

West Mercia Police Authority

3.17.1 The Authority as Lessee Finance Leases The Authority has reviewed its contracts register and has determined that is has no finance leasing arrangements. Operating Leases Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefiting 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. there is a rent-free period at the commencement of the lease). 3.17.2 The Authority as Lessor Finance Leases The Authority has reviewed its leases and has determined that is has no finance leasing arrangements. Operating Leases Where the Authority 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). 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. 3.18 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 2011/12 (SeRCOP). The total absorption costing principle is used i.e. 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 Authority’s status as a

democratic organisation • Non Distributed Costs – the cost of discretionary benefits awarded to employees

retiring early and impairment losses chargeable on Assets Held for Sale.

These two cost categories are defined in SeRCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement, as part of Net Expenditure on Cost of Services.

Page 46

West Mercia Police Authority

3.19 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. 3.19.1 Recognition Expenditure 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 Authority and the cost of the item can be measured reliably. 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. 3.19.2 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 The Authority does not capitalise borrowing costs incurred whilst assets are under construction. The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Authority). In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Authority. Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-Specific Grant Income line of the Comprehensive Income and Expenditure Statement, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in the Donated Assets Account. Where gains are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance to the Capital Adjustment Account in the Movement in Reserves Statement. Assets are then carried in the Balance Sheet using the following measurement bases:

• assets under construction – depreciated historical cost • all other assets – fair value, determined as the amount that would be paid for the

asset in its existing use (Existing Use Value – EUV).

Statement of Accounts 2011/12

Page 47

West Mercia Police Authority

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. This method has been used for valuing the Divisional Headquarters buildings. The valuer has adopted the principle that these buildings are not of a specialist nature and can be valued on an existing use basis. This is a change to accounting policy which will be applied prospectively as each property becomes due for revaluation. Where non-property assets that have short useful lives and/or low values, depreciated historical cost basis is used as a proxy for fair value. Assets included in the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to the Cost of Services. Where decreases in value are identified, they are accounted for by: • 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 Cost of Services 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. 3.19.3 Componentisation Componentisation will only be applied to new buildings and significant refurbishments completed after 1 April 2010 and to revaluations undertaken after 1 April 2010. Buildings are classed as material where the cost is above the Authority’s materiality threshold. Significant expenditure amounting to greater than 25% of the total cost will be considered for componentisation. Expenditure on improvements amounting to less than £0.250m will not be considered for componentisation.

Page 48

West Mercia Police Authority

Components of buildings and the life of each component are:

- Structure 60 years - Mechanical and electrical 15 years - Roof – pitch 60 years - Roof – flat 20 years

3.19.4 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 Cost of Services in the Comprehensive Income and Expenditure Statement.

Where an impairment loss is reversed subsequently, the reversal is credited to the Cost of Services in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss and adjusted for depreciation that would have been charged if the loss had not been recognised. 3.19.5 Depreciation Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. Exception is made for assets without a determinable finite useful life, i.e. freehold land and assets that are not yet available for use such as assets under construction. Depreciation is calculated on the following bases:

• buildings – straight-line allocation over the useful life of the property as estimated

by the valuer • plant, furniture and equipment – straight-line allocation over 5 years • vehicles – reducing balance over 4 years • helicopter – straight line over 10 years

Statement of Accounts 2011/12

Page 49

West Mercia Police Authority

Where an asset has major components and the cost is significant in relation to the total cost of the item, the components are depreciated separately. 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. 3.19.6 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 revalued 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 reclassified 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 appropriated to the Reserve from the General 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 General Fund Balance in the Movement in Reserves Statement.

Page 50

West Mercia Police Authority

3.20 Provisions, Contingent Liabilities and Contingent Assets

3.20.1 Provisions Provisions are made where an event has taken place that gives the Authority 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 Authority may be involved in a court case that could eventually result in the making of a settlement of the payment of compensation. Provisions are charged as an expense to the Cost of Services in the Comprehensive Income and Expenditure Statement in the year that the Authority 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 Cost of Services. 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 Authority settles the obligation. 3.20.2 Contingent Liabilities A contingent liability arises where an event has taken place that gives the Authority 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 Authority. 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. 3.20.3 Contingent Assets A contingent asset arises where an event has taken place that gives the Authority 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 Authority. 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.

Statement of Accounts 2011/12

Page 51

West Mercia Police Authority

3.21 Reserves

The Authority sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the Cost of Services 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 General 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 Authority. These reserves are explained in the relevant policies. 3.22 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.

4. ACCOUNTING STANDARDS THAT HAVE BEEN ISSUED BUT HAVE NOT YET BEEN ADOPTED

IFRS7 Financial Instruments: Disclosures (transfers of financial assets, issued

October 2010) are intended to assist users of the financial statements to evaluate the risk exposure that relate to transfers of financial assets and the effect of those risks on the Authority’s financial position. This Accounting Standard is not relevant to the Authority.

5. CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

In applying the accounting policies set out in Note 3, the Authority has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgement made in the Statement of Accounts is:

• There is a degree of uncertainty about longer term future levels of funding for

Police Authorities beyond 2014/15. However, the Authority has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Authority might be impaired as a result of a need to close facilities and reduce levels of service provision.

6. ASSUMPTIONS MADE ABOUT THE FUTURE AND OTHER MAJOR SOURCES OF

ESTIMATION UNCERTAINTY

The Statement of Accounts contains estimated figures that are based on assumptions made by the Authority about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The items in the Authority’s Balance Sheet at 31 March 2012 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:

Page 52

West Mercia Police Authority

Item Uncertainties Effect if Actual Results Differ

from Assumptions Property, Plant and Equipment

Assets are depreciated over useful lives that are dependant 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 Authority will be able to sustain its current spending on repairs and maintenance, bringing into doubt the useful lives assigned to the assets.

If the useful life of assets is reduced, depreciation increases and the carrying amount of the assets falls. It is estimated that the annual depreciation charge for buildings would increase by £116,000 for every year that useful lives had to be reduced.

Provisions Provisions have been made for the payment of termination benefits, carbon reduction credits, a pay award for police staff earning less than £21,000 and a payment for Municipal Mutual Insurance.

If payments for any of these provisions are not made, the provisions will be credited back to the Comprehensive Income and Expenditure Statement in 2012/13.

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. A firm of consulting actuaries is engaged to provide the Authority with expert advice about the assumptions to be applied for police staff pensions and the Government Actuaries Department for Police Pensions.

The effects on the net pensions liability of changes in individual assumptions can be measured. For instance, for police staff pensions: - a 0.1% increase in the discount rate

assumption would result in a decrease in the pension liability of £3.9m.

- a 0.1% increase in rate of inflation rate assumption would result in an increase in the pension liability of £4.0m.

- a 1 year increase in the life expectancy of pensioners would result in a increase in the pension liability of £3.8m.

For police pensions: - a 0.5% increase in the assumed rate

of return in excess of earnings would result in a decrease in the pension liability of £39.9m.

- a 0.5% increase in the assumed rate of return in excess of pensions would result in a decrease in the pension liability of £119.8m.

- an increase of pensioners living (on average) two years longer would result in an increase in the pension liability of £63.9m.

This list does not include assets and liabilities that are carried at fair value based on a recently observed market price.

Statement of Accounts 2011/12

Page 53

West Mercia Police Authority

7. MATERIAL ITEMS OF INCOME AND EXPENSE

The cost of services includes a change for revaluation losses of £8.6m as a result of a change to revaluation of Divisional Headquarters properties from Depreciated Replacement Cost to an existing use basis. This item is spread over the service expenditure headings. For 2010/11 non-distributed costs included past service costs ‘gains’ for police officers of £175m and £12m for police staff. This is in line with the government’s announcement that the Consumer Price Index rather than the Retail Price Index is used for the indexation of public service pensions from April 2011.

Page 54

West Mercia Police Authority

8. ADJUSTMENTS BETWEEN ACCOUNTING BASIS AND FUNDING BASIS UNDER REGULATION

This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Authority in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Authority to meet future capital and revenue expenditure. Usable Reserves Unusable

Reserves

2011/12

General Fund Balance

Capital Receipts Reserve

Capital Grants

Unapplied

£000 £000 £000 £000 Adjustments primarily involving the Capital Adjustment Account

Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement

Charges for depreciation and impairment of non-current assets

(5,540) (5,540)

Revaluation losses on Property, Plant & Equipment

(13,166) (13,166)

Movements in the market value of Investment Properties

(37) 37

Amortisation of intangible assets (333) 333

Capital grants and contributions applied 1,782 (1,782)

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

(302) 302

Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement

Statutory provision for the financing of capital investment

1,896 (1,896)

Capital expenditure charge against the General Fund

107 (107)

Adjustments primarily involving the Capital Grants Unapplied Account

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

13 (13) 0

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

175 (175)

Statement of Accounts 2011/12

Page 55

West Mercia Police Authority

Usable Reserves Unusable

Reserves

2011/12

General Fund Balance

Capital Receipts Reserve

Capital Grants

Unapplied

£000 £000 £000 £000 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 & Expenditure Statement

219 (219) 0

Use of Capital Receipts Reserve to finance new capital expenditure 0 0

Adjustments primarily involving the Pensions Reserve

Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income & Expenditure Statement

(126,458) 126,458

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

28,701 (28,701)

Adjustments primarily involving the Collection Fund Account

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

(77) 77

Adjustments primarily involving the Accumulated Absences Account

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

(149) (149)

Total Adjustments (113,344) (219) 162 113,401

Page 56

West Mercia Police Authority

Usable Reserves Unusable

Reserves

2010/11

General Fund Balance

Capital Receipts Reserve

Capital Grants

Unapplied

£000 £000 £000 £000 Adjustments primarily involving the Capital Adjustment Account

Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement

Charges for depreciation and impairment of non-current assets

(6,747) 6,747

Revaluation losses on Property, Plant & Equipment

(659) 659

Movements in the market value of Investment Properties

45 (45)

Amortisation of intangible assets (354) 354

Capital grants and contributions applied 94 (94)

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

(686) 686

Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement

Statutory provision for the financing of capital investment

1,666 (1,666)

Capital expenditure charge against the General Fund

2,146 (2,146)

Adjustments primarily involving the Capital Grants Unapplied Account

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

2,154 (2,154) 0

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

0

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 & Expenditure Statement

555 (555) 0

Use of Capital Receipts Reserve to finance new capital expenditure 0

Statement of Accounts 2011/12

Page 57

West Mercia Police Authority

Usable Reserves Unusable

Reserves

2010/11

General Fund Balance

Capital Receipts Reserve

Capital Grants

Unapplied

£000 £000 £000 £000 Adjustments primarily involving the Pensions Reserve

Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income & Expenditure Statement

52,486 (52,486)

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

27,815 (27,815)

Adjustments primarily involving the Collection Fund Account

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

(110) 110

Adjustments primarily involving the Accumulated Absences Account

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

126 (126)

Total Adjustments 78,531 (555) (2,154) (75,822)

Page 58

West Mercia Police Authority

9. TRANSFERS TO/FROM EARMARKED RESERVES This note sets out the amounts set aside from the General Fund balances into earmarked reserves to provide financing for future expenditure plans and the amounts posted from earmarked reserves to meet General Fund expenditure in 2011/12.

Balance at 1

April 2010

Transfers out

2010/11

Transfers in

2010/11

Balance at 31

March 2011

Transfers out

2011/12

Transfers in

2011/12

Balance at 31

March 2012

£000 £000 £000 £000 £000 £000 £000 Sustaining Service Delivery Reserve

(11,704) (6,509) (18,213) (3,787) (22,000)

Contingency Reserve (6,162) (6,162) (6,162)

Invest to Save Reserve (2,608) (2,608) (474) (3,082)

Delegated Budget Reserve (1,928) (1,928) 1,928 0

Between Year Flexibility Reserve

0 0 (989) (989)

Insurance Reserve (750) (750) (750)

Local Capital Projects Reserve (417) (417) 417 0

Equipment Reserve (750) (100) (850) (850)

Road Safety Reserve (264) (808) (1,072) (154) (1,226)

Revenue Grants and Contributions

0 (66) (66) 26 (40)

Capital Programme Support Reserve

0 0 0 (2,689) (2,689)

TOTAL (24,583) 0 (7,483) (32,066) 2,371 (8,093) (37,788) The purposes for which these reserves are held is as follows: • Sustaining Service Delivery Reserve will enable a contribution to be made to

absorbing the planned shortfall between income and expenditure in the Authority’s budgets up to 31 March 2016.

• Contingency Reserve is the Authority’s uncommitted reserve to absorb the effect of exceptional and unplanned costs in the future.

• Invest to Save Reserve enables projects to be funded on a corporate basis focusing on service improvement and cost reductions.

• Delegated Budget Reserve has been discontinued. Its purpose of allowing transfers between years is now fulfilled by the Between the Years Flexibility Reserve.

Statement of Accounts 2011/12

Page 59

West Mercia Police Authority

• Between Year Flexibility Reserve allows for the between year tolerances of routine revenue spending.

• Insurance Reserve is held primarily as a contingency against the possibility of exceptional uninsured claims. This reserve has also been used in the past to invest in risk-reducing equipment.

• Local Capital Projects Reserve is discontinued as these projects have now completed.

• Equipment Reserve is held for the future replacement of body armour and major helicopter repairs.

• Road Safety Reserve is a fund for reinvestment in road safety. • Revenue Grants and Contributions enables the carry forward of revenue grants and

contributions to be spent in future years. • Capital Programme Support Reserve has been established to enable additional

capital spending as envisaged by the Medium Term Finance Plan. 10. OTHER OPERATING EXPENDITURE

2010/11 £000

2011/12 £000

131 Gains / losses on the disposal of non-current assets 83

131 83 11. FINANCING AND INVESTMENT INCOME AND EXPENDITURE

2010/11 £000

2011/12 £000

444 Interest payable 444

89,508 Pensions interest cost and expected return on pensions assets 85,475

(62) Interest receivable (87)

(87) Income and expenditure in relation to investment properties and changes in their fair value (5)

89,803 85,827 12. TAXATION AND NON-SPECIFIC GRANT INCOME

2010/11 £000

2011/12 £000

(78,658) Council tax income (79,275)

(48,076) National non-domestic rates (39,768)

(6,982) Revenue support grant (12,292)

(69,817) Police principal grant (74,143)

(16,469) Home Office grant towards the cost of retirement benefits (23,684)

(2,248) Capital grants and contributions (1,795)

16,469 Transfer of Home Office grant to the Pensions Fund 23,684

(205,781) (207,273)

Page 60

West Mercia Police Authority

13. PROPERTY, PLANT AND EQUIPMENT 13.1 Movements on Balances

Movements in 2011/12 L

and

&

Bu

ild

ing

s

Veh

icle

s

Hel

ico

pte

r

Pla

nt,

F

urn

itu

re &

E

qu

ipm

ent

Su

rplu

s A

sset

s

Ass

ets

Un

der

C

on

stru

ctio

n

To

tal

Pro

per

ty,

Pla

nt

&

Eq

uip

men

t

£000 £000 £000 £000 £000 £000 £000 Cost or valuation

At 1 April 2011 81,880 10,888 2,880 16,716 1,727 1,335 115,426

Additions 2,076 781 0 1,132 0 5,759 9,748

Transfer from Assets under Construction 414 0 0 0 0 (414) 0

Revaluation increases / (decreases) recognised in the Revaluation Reserve

(2,696) 0 0 0 0 0 (2,696)

Revaluation increases / (decreases) recognised in the Surplus/Deficit on the Provision of Services

(13,166) 0 0 0 0 0 (13,166)

Derecognition – disposals (176) (961) 0 0 0 0 (1,137)

Derecognition – other 0 0 0 (2,454) 0 0 (2,454)

Assets reclassified (to)/from Held for Sale

0 0 0 0 0 0 0

At 31 March 2012 68,332 10,708 2,880 15,394 1,727 6,680 105,721

Accumulated Depreciation and Impairment

At 1 April 2011 (11,788) (8,462) (328) (11,292) 0 0 (31,870)

Depreciation charge Depreciation written out to the Revaluation Reserve (334) 0 0 0 0 0 (334)

Depreciation written out to the Surplus/Deficit on the Provision of Services

(1,308) (1,086) (263) (2,549) 0 0 (5,206)

Derecognition – disposals 0 834 0 0 0 0 834

Derecognition – other 0 0 0 2,454 0 0 2,454

At 31 March 2012 (13,430) (8,714) (591) (11,387) 0 0 (34,122)

Net book value At 31 March 2012 54,902 1,994 2,289 4,007 1,727 6,680 71,599 At 31 March 2011 70,092 2,426 2,552 5,424 1,727 1,335 83,556

Statement of Accounts 2011/12

Page 61

West Mercia Police Authority

Movements in 2010/11

Lan

d &

B

uil

din

gs

Veh

icle

s

Hel

ico

pte

r

Pla

nt,

F

urn

itu

re &

E

qu

ipm

ent

Su

rplu

s A

sset

s

Ass

ets

Un

der

C

on

stru

ctio

n

To

tal

Pro

per

ty,

Pla

nt

&

Eq

uip

men

t

£000 £000 £000 £000 £000 £000 £000 Cost or valuation

At 1 April 2010 79,655 10,785 2,829 17,987 1,701 97 113,054

Additions 2,493 1,019 51 1,039 1,238 5,840

Transfer from Assets under Construction

0

Revaluation increases / (decreases) recognised in the Revaluation Reserve

297 120 417

Revaluation increases / (decreases) recognised in the Surplus/Deficit on the Provision of Services

(565) (94) (659)

Derecognition – disposals (916) (916)

Derecognition – other (2,310) (2,310)

Assets reclassified (to)/from Held for Sale

At 31 March 2011 81,880 10,888 2,880 16,716 1,727 1,335 115,426

Accumulated Depreciation and Impairment

At 1 April 2010 (9,694) (7,851) (65) (10,608) 0 0 (28,218)

Depreciation charge

Depreciation written out to the Revaluation Reserve

(469) (469)

Depreciation written out to the Surplus/Deficit on the Provision of Services

(1,625) (1,396) (263) (2,994) (6,278)

Derecognition – disposals 785 785

Derecognition – other 2,310 2,310

At 31 March 2011 (11,788) (8,462) (328) (11,292) 0 0 (31,870)

Net book value At 31 March 2011 70,092 2,426 2,552 5,424 1,727 1,335 83,556 At 31 March 2010 69,961 2,934 2,764 7,379 1,701 97 84,836

Page 62

West Mercia Police Authority

13.2 Depreciation The following useful lives and depreciation rates have been used in the calculation of depreciation: • Buildings 60 years for new buildings or straight line over the

life of the property as estimated by the valuer • Vehicles Reducing balance over 4 years • Helicopter Straight line over 10 years • Plant, furniture & equipment Straight line over 5 years 13.3 Capital Commitments At 31 March 2012, the Authority has entered into contracts for the construction or enhancement of Property, Plant and Equipment in 2012/13 and future years budgeted to cost £0.976m. Similar commitments at 31 March 2011 were £6.069m. The major commitments are:

£000 Telford Custody 976 976

13.4 Revaluations The Authority carries out a rolling programme that ensures all Property, Plant and Equipment required to be measured at fair value is revalued at least every five years. All valuations were carried out by the Authority’s own internal valuers. Valuations of land and buildings were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institute of Chartered Surveyors. Valuations of vehicles, plant, furniture and equipment are based on current prices where there is an active second hand market. The significant assumptions applied in estimating the fair values are: • Assumed Date of Valuation

The assumed date of valuation is 1 April 2011 or 31 March 2012 in the case of the improvement and impairment valuations.

• Valuation Bases

- Operational, non specialised property – Fair Value based on Existing Use Value (EUV)

- Operational, specialised property – Depreciated Replacement Cost (DRC) - Surplus Assets – Market Value (MV)

Statement of Accounts 2011/12

Page 63

West Mercia Police Authority

Residential properties used for other purposes are considered unlikely to have market value for that use in excess of the value for reinstated residential use and have been valued accordingly. The valuation of specialised property according to DRC is the aggregate amount of the value of the land for the existing use and the gross replacement cost of the buildings and other site works with appropriate deduction for age and obsolescence to reflect the reduced use value to the Authority compared to a new replacement. In the view of the valuers, in these instances, the properties would have market value materially below DRC values should the current uses cease. The valuers believe that Existing Use Valuation is a more appropriate basis on which to value these properties and will apply this basis as the properties are revalued during the revaluation cycle.

• Valuation Assumptions

The valuations have been undertaken on the following assumptions: 1) That the properties are free from any undisclosed onerous burdens, outgoings or

restrictions and that good freehold title can be shown. 2) The land and property is not contaminated (including Radon Gas).

3) The property and its values are unaffected by any matters which could be revealed

by local search or inspection of any register and that the use and occupation of the asset are lawful.

4) In valuing the property, plant and machinery have been excluded unless forming

part of the structure and normally valued with the building.

5) Where occupied under user rights, the property has not been considered as having a value because of the inability to transfer such rights.

6) The valuations do not take any account of liability for taxation or costs of realising

the asset. • Hazardous Materials

No investigation has been carried out to determine whether or not any deleterious or hazardous material has been used in construction of the property or has since been incorporated. For the purpose of the valuation, it has been assumed that such investigation, would not disclose the presence of any such material to any significant extent.

• Planning Assumptions

The properties have not been discussed with the Planning Authorities and therefore certain assumptions of planning issues have been made in determining values. The assumption made in respect of properties valued as residential is that there is established use for that purpose regardless of present mode of occupation.

Page 64

West Mercia Police Authority

Lan

d &

B

uil

din

gs

Veh

icle

s

Hel

ico

pte

r

Pla

nt,

F

urn

itu

re &

E

qu

ipm

ent

Su

rplu

s A

sset

s

Ass

ets

Un

der

C

on

stru

ctio

n

To

tal

Pro

per

ty,

Pla

nt

&

Eq

uip

men

t

£000 £000 £000 £000 £000 £000 £000 Carried at historical cost 0 1,994 2,289 4,007 0 6,680 14,970

Valued at fair value as at

31 March 2008 2,472 0 2,472

31 March 2009 219 0 219

31 March 2010 36,297 1,155 37,452

31 March 2011 2,011 412 2,423

31 March 2012 13,903 160 14,063

Total cost or valuation 54,902 1,994 2,289 4,007 1,727 6,680 71,599 14. INVESTMENT PROPERTIES The following items of income and expenses have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement:

2010/11 £000

2011/12 £000

(42) Rental income from investment property (42)

0 Direct operating expenses arising from investment property 0

(42) (42) There are no restrictions on the Authority’s ability to realise the value inherent in its investment property or on the Authority’s right to the remittance of income and the proceeds of disposal. The Authority has no contractual obligations to purchase, construct or develop investment property or repairs, maintenance or enhancement. The following table summarises the movement in the fair value of investment properties over the year:

2010/11 £000

2011/12 £000

425 Balance at start of the year 470

45 Net gains/losses from fair value adjustments (37)

470 433

Statement of Accounts 2011/12

Page 65

West Mercia Police Authority

15. INTANGIBLE ASSETS The Authority 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 in Property, Plant and Equipment. All software is given a finite useful life of 5 years. The carrying amount of software assets is amortised on a straight line basis. The amortisation charge to revenue expenditure is absorbed as an overhead across all divisions of service. It is not possible to quantify exactly how much of the amortisation is attributable to each service heading. The Authority holds a cherished motor vehicle registration licence plate which is revalued every 5 years. This asset is assessed as having an indefinite useful life and is therefore not amortised. The movement of Intangible Assets during the year is as follows:

2010/11 2011/12 Vehicle Licence Software Total

Vehicle Licence Software Total

£000 £000 £000 £000 £000 £000 Balance at start of year

150 2,074 2,224 Gross carrying amounts 150 1,959 2,109

0 (1,164) (1,164) Accumulated amortisation 0 (1,229) (1,229)

150 910 1,060 Net carrying amount at start of year 150 730 880

0 174 174 Additions 0 235 235

0 (289) (289) Other disposals 0 (206) (206)

0 (354) (354) Amortisation for the period 0 (333) (333)

0 289 289 Other changes 0 206 206

150 730 880 Net carrying amount at end of year 150 632 782

Comprising:

150 1,959 2,109 Gross carrying amount 150 1,988 2,138

0 (1,229) (1,229) Accumulated amortisation 0 (1,356) (1,356)

150 730 880 150 632 782

Page 66

West Mercia Police Authority

16. FINANCIAL INSTRUMENTS BALANCES 16.1 Categories of Financial Instruments The following categories of financial instruments are carried in the Balance Sheet:

Long Term Current 31 March

2012 31 March

2011 31 March

2012 31 March

2011 £000 £000 £000 £000 Investments

Loans and receivables 4 7 809 1,210

Financial assets at fair value through profit and loss 0 0 0 0

Total investments 4 7 809 1,210

Borrowings

Financial liabilities at amortised cost 10,062 10,062 0 0

Financial liabilities at fair value through profit and loss 0 0 0 0

Total borrowings 10,062 10,062 0 0 The value of borrowings includes interest due but not paid at the end of the year. 16.2 Fair Value of Assets and Liabilities 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: • estimated interest rates at 31 March 2012 of 3.27% for loans from the PWLB • no early repayment or impairment is recognised • where an instrument will mature in the next 12 months, the carrying amount is assumed

to approximate to fair value • the fair value of trade and other receivables is taken to be the invoiced or billed

amount. The fair values calculated are as follows: 31 March 2012 31 March 2011 Carrying

amount Fair Value Carrying

amount Fair Value

£000 £000 £000 £000 Financial Liabilities 10,062 12,523 10,062 10,627

The fair value of the liabilities is higher than the carrying amount because the Authority’s portfolio of loans includes two fixed rate loans where the interest rate payable is higher than

Statement of Accounts 2011/12

Page 67

West Mercia Police Authority

the prevailing rates at the Balance Sheet date. This shows a notional future gain (based on economic conditions at 31 March 2012) arising from a commitment to pay interest to lenders at a different rate from current market rates. The calculation of fair value amount is supplied by the PWLB. 17. ASSETS HELD FOR SALE

2010/11 £000

2011/12 £000

555 Balance outstanding at start of year 0 Assets newly classified as held for sale

0 Property, Plant and Equipment 0

0 Revaluation losses 0

0 Revaluation gains 0

(555) Assets sold 0

0 Total cash and cash equivalents 0 18. INVENTORIES

2011/12 Vehi

cle

Fuel

Vehi

cle

Spar

es

Uni

form

s

Stat

ione

ry

IT

Equi

pmen

t

Scen

es o

f C

rime

Equi

pmen

t

Tota

l

£000 £000 £000 £000 £000 £000 £000 Balance outstanding at start of year 94 99 201 37 12 14 457

Purchases 857 69 213 48 87 100 1,374 Recognised as an expense in the year (811) (50) (198) (68) (87) (100) (1,314)

Written off balances 0 0 0 0 0 0 0 Balance outstanding at end of year 140 118 216 17 12 14 517

2010/11 Vehi

cle

Fuel

Vehi

cle

Spar

es

Uni

form

s

Stat

ione

ry

IT

Equi

pmen

t

Scen

es o

f C

rime

Equi

pmen

t

Tota

l

£000 £000 £000 £000 £000 £000 £000 Balance outstanding at start of year 89 97 176 40 14 16 432

Purchases 577 241 191 49 150 82 1,290 Recognised as an expense in the year (569) (239) (165) (49) (152) (84) (1,258)

Written off balances (3) 0 (1) (3) 0 0 (7) Balance outstanding at end of year 94 99 201 37 12 14 457

Page 68

West Mercia Police Authority

19. DEBTORS

31 March 2011 £000

31 March 2012 £000

6,690 Central government bodies 9,644

1,486 Other local authorities 1,446

35 NHS bodies 23

1,484 Council taxpayers 1,921

1,448 Other entities and individuals 4,366

11,143 Total 17,400 20. CASH AND CASH EQUIVALENT The balance of cash and cash equivalents is made up of the following elements:

31 March 2011 £000

31 March 2012 £000

20 Cash held by the Authority 7

150 Bank current accounts 167

17,101 Short term deposits 13,506

17,271 Total 13,680 21. CREDITORS

31 March 2011 £000

31 March 2012 £000

3,683 Central government bodies 3,963

1,097 Other local authorities 2,014

9 NHS bodies 0

1,197 Council taxpayers 1,222

8,265 Other entities and individuals 9,007

14,251 Total 16,206

Statement of Accounts 2011/12

Page 69

West Mercia Police Authority

22. PROVISIONS

2010/11

Spec

ial

Prio

rity

Paym

ents

Out

stan

ding

Le

gal C

laim

s

Term

inat

ion

Ben

efits

Car

bon

Red

uctio

n C

redi

t

Pay

Aw

ard

Mun

icip

al

Mut

ual

Insu

ranc

e

Tota

l Pr

ovis

ions

£000 £000 £000 £000 £000 £000 £000 Balance at 1 April 2011 (416) (100) 0 0 0 0 (516)

Additional provisions made in 2011/12 0 0 (823) (100) (197) (350) (1,470)

Amounts used in 2011/12 416 100 0 0 0 0 516

Unused amounts reversed in 2011/12 0 0 0 0 0 0 0

Balance at 31 March 2012 0 0 (823) (100) (197) (350) (1,470)

The following provisions have been charged to the accounts in 2011/12 in respect of events or decisions which are likely to give rise to payments in the future. Special Priority Payment This provision relates to the requirement to pay certain groups of police officers under the Special Priority Scheme. The payment is made annually in December. The provision is for the period January 2012 to March 2012 which will be paid in June 2012. The Special Priority Payment Scheme was part of mandatory national conditions of service whereby local criteria are set to reward between 20% to 30% of police officers for particular types of duty. The Special Priority Scheme is discontinued with effect from 1 April 2012. Outstanding Legal Claims The Authority’s outstanding employer’s liability claim was settled during 2011/12. Termination Benefits The estimated cost of redundancies in 2012/13 which are known or probable at 31 March 2012. Carbon Reduction Credit A payment will be required in 2012/13 in respect of energy consumed in 2011/12. Pay Award It is likely but not confirmed that a pay award to police staff earning less than £21,000 will be back dated to 1 September 2012.

Page 70

West Mercia Police Authority

Municipal Mutual Insurance Prior to 1992 the Police Authority’s insurance was provided by Municipal Mutual Insurance Ltd (MMI). As a mutual entity, MMI was jointly owned by all of local authority members including West Mercia. In 1992 MMI ceased offering new business and its assets have been engaged in order to settle historic claims. As a result of an adverse decision in the Supreme Court during 2011/12, there is a risk that these assets may be insufficient to meet the liabilities. If this occurs a “scheme of arrangement” will be triggered requiring a payment by West Mercia. Advice available from professional services suggests that up to 25% of the potential liability could now become payable. For West Mercia this sum is approximately £350,000. 23. USABLE RESERVES Movements in the Authority’s usable reserves are detailed in the Movement in Reserves Statement. 24. UNUSABLE RESERVES

31 March 2011 £000

31 March 2012 £000

(15,694) Revaluation Reserve (12,643)

(41,113) Capital Adjustment Account (26,049)

1,542,213 Pensions Reserve 1,663,229

(473) Collection Fund Adjustment Account (396)

3,350 Accumulated Absences Account 3,499

1,488,283 Total 1,627,640 24.1 Revaluation Reserve The Revaluation Reserve contains the gains made by the Authority 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: • revalued 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. 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.

Statement of Accounts 2011/12

Page 71

West Mercia Police Authority

2010/11 2011/12

£000 £000 £000 (16,301) Balance at 1 April (15,694)

(417) Upward revaluation of assets (728)

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

3,425

(16,718) Surplus or deficit on revaluation of non-current assets not posted to the Surplus or Deficit on the Provision of Services

2697

469 Difference between fair value depreciation and historical cost depreciation 334

555 Accumulated gains on assets sold or scrapped 20

1,024 Amount written off to the Capital Adjustment Account 354 (15,694) Balance at 31 March (12,643)

24.2 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 Authority as finance for the costs of acquisition, construction and enhancement. The Account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the Authority. The Account also 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 (Adjustments between accounting basis and funding basis under regulations) provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.

Page 72

West Mercia Police Authority

2010/11 2011/12

£000 £000 £000 (44,584) Balance at 1 April (41,113)

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

6,747 - Charges for depreciation and impairment of non-current assets 5,540

659 - Revaluation losses on Property, Plant and Equipment 13,166

354 - Amortisation of intangible assets 333

686 - Amounts of non-current assets written off on disposal

as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

302

8,446 19,341

(469) Adjusting amounts written out of the Revaluation Reserve

(354)

7,977 Net written out amount of the cost of non-current assets consumed in the year

18,987

Capital financing applied in the year:

(555) - Use of the Capital Receipts Reserve to finance new

capital expenditure

0

(94) - Capital grants and contributions credited to the

Comprehensive Income and Expenditure Statement that have been applied to capital financing

(1,782)

0 - Application of grants to capital financing from the Capital Grants Unapplied Account

(175)

(1,666) - Statutory provision for the financing of capital investment charged against the General Fund

(1,896)

(2,146) - Capital expenditure charged against the General Fund

(107)

(4,461) (3,960)

(45) Movements in the market value of Investment Properties debited or credited to the Comprehensive Income and Expenditure Statement

37

(41,113) Balance at 31 March (26,049) 24.3 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 Authority 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 Authority 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

Statement of Accounts 2011/12

Page 73

West Mercia Police Authority

shows a substantial shortfall in the benefits earned by past and current employees and the resources the Authority 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.

Restated 2010/11 £000

2011/12 £000

1,701,816 Balance at 1 April 1,542,213 (79,302) Actuarial gains or losses on pensions assets and liabilities 23,259

(52,486)

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

126,458

(27,815) Employer’s pensions contributions and direct payments to pensioners payable in the year (28,701)

1,542,213 Balance at 31 March 1,663,229 24.4 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 General Fund from the Collection Fund.

2010/11 £000

2011/12 £000

(583) Balance at 1 April (473)

110

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

77

(473) Balance at 31 March (396) 24.5 Accumulated Absences Account The Accumulated Absences Account absorbs the differences that would otherwise arise on the General 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 General Fund Balance is neutralised by transfers to or from the Account.

2010/11 £000

2011/12 £000

3,476 Balance at 1 April 3,350

(126)

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

149

3,350 Balance at 31 March 3,499

Page 74

West Mercia Police Authority

25. CASH FLOW STATEMENT – ADJUSTMENT TO NET SURPLUS OR DEFICIT ON THE PROVISION OF SERVICES FOR NON-CASH MOVEMENTS

2010/11

£000 2011/12

£000 (6,747) Depreciation (5,540)

(659) Downward valuations (13,166)

(354) Amortisation of intangible assets (333)

2,357 Increase/decrease in revenue creditors (1,939)

243 Increase/decrease in revenue debtors 6,254

25 Increase/decrease in inventories 60

80,301 Pension liability (97,757)

(96) Provisions (954)

45 Movement in the value of investment properties (37)

(686) Carrying amount of non-current assets sold (302)

74,429 (113,714) 26. CASH FLOW STATEMENT – ADJUSTMENT FOR ITEMS INCLUDED IN THE NET

SURPLUS OR DEFICIT ON THE PROVISION OF SERVICES THAT ARE INVESTING AND FINANCING ACTIVITIES

2010/11

£000 2011/12

£000 555 Proceeds from the sale of property, plant and equipment 219

2,248 Capital Grants 1,795

2,803 2,014 27. CASH FLOW STATEMENT – OPERATING ACTIVITIES The cash flows for operating activities include the following items:

2010/11 £000

2011/12 £000

62 Interest received 87

(444) Interest paid (444)

(382) (357) 28. CASH FLOW STATEMENT – INVESTING ACTIVITIES

2010/11 £000

2011/12 £000

6,028 Purchase of property, plant and equipment and intangible assets 9,967

(555) Proceeds from the sale of property, plant and equipment (219)

(2,248) Other receipts from investing activities (2,079)

3,225 7,669

Statement of Accounts 2011/12

Page 75

West Mercia Police Authority

29. CASH FLOW STATEMENT – FINANCING ACTIVITIES

2010/11 £000

2011/12 £000

0 Repayment of long term borrowing 0

0 0 30. AMOUNTS REPORTED FOR RESOURCE ALLOCATION DECISIONS The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the Service Reporting Code of Practice. However, decisions about resource allocation are taken by the Police Authority and the Chief Constable on the basis of the budget report allocated across subjective headings. This report is prepared on a different basis from the accounting policies used in the financial statements. In particular: • no charges are made in relation to capital charges whereas depreciation, revaluation

and impairment losses and amortisation are charged to services in the Comprehensive Income and Expenditure Statement

• the cost of retirement benefits is based on cash flows (payments of employer’s pension contributions) rather than current service cost of benefits accrued in the year.

Page 76

West Mercia Police Authority

2010/11 2011/12

£000 £000 £000 Police Authority Reporting of Income and Expenditure

118,992 Police officers pay 116,989

56,742 Police staff pay 55,856

2,662 Police pensions 2,345

35,359 Other running costs 37,085

4,256 Capital financing 2,448

218,011 Total Expenditure 214,723 (62) Interest earned (87)

(21,789) Other income (14,802)

196,160 Net Expenditure 199,834

Reconciliation of Police Authority Reporting Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement

196,160 Net expenditure in the reporting analysis 199,834

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

6,747 Depreciation 5,540

354 Amortisation of intangible assets 333

682 Revaluation loss 13,166

(23) Reversal of previous revaluation loss 0

44,534 Current cost of pensions 40,019

(126) Accumulated absences 149

(186,528) Non distributed costs 964

(134,360) 60,171 Amounts included in the analysis not included in the

Comprehensive Income and Expenditure Statement

(27,815) Cost of pensions based on cash flows (28,701)

(1,666) Minimum revenue provision (1,896)

(2,146) Revenue contributions to capital (108)

(444) Interest payable (444)

62 Interest receivable 87

42 Income from investment properties 42

(31,967) (31,020)

29,833 Cost of Services in Comprehensive Income and Expenditure Statement

228,985

Statement of Accounts 2011/12

Page 77

West Mercia Police Authority

30.1 Reconciliation to Subjective Analysis This reconciliation shows how the figures in the analysis reported for resource allocation decisions relate to the subjective analysis of the Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.

2011/12 Aut

horit

y A

naly

sis

Am

ount

s no

t re

port

ed fo

r de

cisi

on m

akin

g

Am

ount

s no

t in

clud

ed in

In

com

e an

d Ex

pend

iture

Cor

pora

te

Am

ount

s

Tota

l

£000 £000 £000 £000 £000 Fees charges and other service income (14,802) 42 (14,760)

Investment property income (42) (42)

Interest and investment income (87) (87)

Income from council tax (79,275) (79,275)

Government grants and contributions (127,998) (127,998)

Total Income (14,889) (207,315) 42 0 (222,162)

Police officers pay 116,989 116,989

Police staff pay 55,856 55,856

Police pensions 2,345 2,345

Pensions current cost of service 40,019 40,019

Cost of pensions based on cash flows (28,701) (28,701)

Accumulated absences 149 149

Other service expenditure 37,085 37,085

Non distributed costs 964 964

Depreciation 5,540 5,540

Amortisation 333 333

Revaluation loss 13,166 13,166

Fair value of investment properties 37 37

Reversal of previous revaluation loss 0 0

Interest payments 444 444

Minimum revenue provision 1,896 (1,896) 0

Revenue contributions to capital 108 (108) 0

Pensions interest cost and expected return on assets

85,475 85,475

Loss on disposal of fixed assets 83 83

Total Expenditure 214,723 144,802 (30,705) 964 329,784 Deficit on the provision of services 199,834 (62,513) (30,663) 964 107,622

Page 78

West Mercia Police Authority

2010/11 Aut

horit

y A

naly

sis

Am

ount

s no

t re

port

ed fo

r de

cisi

on m

akin

g

Am

ount

s no

t in

clud

ed in

In

com

e an

d Ex

pend

iture

Cor

pora

te

Am

ount

s

Tota

l

£000 £000 £000 £000 £000 Fees charges and other service income (21,789) 42 (21,747)

Investment property income (42) (42)

Interest and investment income (62) (62)

Income from council tax (78,658) (78,658)

Government grants and contributions (127,123) (127,123)

Total Income (21,851) (205,823) 42 0 (227,632)

Police officers pay 118,992 118,992

Police staff pay 56,742 56,742

Police pensions 2,662 2,662

Pensions current cost of service 44,534 44,534

Cost of pensions based on cash flows (27,815) (27,815)

Accumulated absences (126) (126)

Other service expenditure 35,359 35,359

Non distributed costs (186,528) (186,528)

Depreciation 6,747 6,747

Amortisation 354 354

Revaluation loss 682 682

Fair value of investment properties (45) (45)

Reversal of previous revaluation loss (23) (23)

Interest payments 444 444

Minimum revenue provision 1,666 (1,666) 0

Revenue contributions to capital 2,146 (2,146) 0

Pensions interest cost and expected return on assets

89,508 89,508

Loss on disposal of fixed assets 131 131

Total Expenditure 218,011 141,762 (31,627) (186,528) 141,618 Deficit on the provision of services 196,160 (64,061) (31,585) (186,528) (86,014)

Statement of Accounts 2011/12

Page 79

West Mercia Police Authority

31. MEMBERS’ ALLOWANCES The Authority has paid the following amounts to members of the Police Authority during the year.

2010/11 £000

2011/12 £000

326 Allowances 336

28 Expenses 27

354 Total 363 32. OFFICERS REMUNERATION Remuneration includes all sums paid to or receivable by an employee and expense allowance chargeable to tax. Regulation 4 of the Accounts and Audit (Amendment No.2) (England) Regulations 2009 [Statutory Instrument 2009 No.3322] introduces a new legal requirement to increase transparency and accountability in Local Government for reporting remuneration of senior employees and senior police officers. The officers who meet the specified criteria have been included in the remuneration bands of £5,000 and are listed below: 32.1 Senior Officers and Relevant Police Officers Emoluments:

Sala

ry, F

ees

&

Allo

wan

ces

Bon

uses

Expe

nses

A

llow

ance

s

Ben

efits

in K

ind

(eg

car

allo

wan

ce)

Oth

er P

aym

ents

(P

olic

e O

ffice

rs

only

)

Exit

Pack

ages

Pens

ion

Con

trib

utio

n

Tota

l

£ £ £ £ £ £ £ £

2011/12 47,398 0 1,732 927 9,313 0 11,470 70,840 Chief Constable 1 2010/11 140,720 0 3,278 2,400 10,368 0 34,054 190,820

2011/12 92,746 0 2,075 5,000 3,304 0 22,445 125,570 Chief Constable 2

2010/11 0 0 0 0 0 0 0 0

2011/12 102,828 0 438 1,239 0 0 10,900 115,405 Chief Executive 2010/11 98,764 0 438 1,200 0 0 13,926 114,328

2011/12 38,257 0 1,000 2,528 1,429 0 6,452 49,666 Deputy CC 2

2010/11 113,582 0 3,025 5,900 4,288 0 27,487 154,282

2011/12 73,031 0 0 2,041 9,453 0 17,195 101,720 Deputy CC 3

2010/11 141,535 0 0 1,200 8,946 0 33,318 184,999

2011/12 76,514 0 650 1,900 1,777 0 18,516 99,357 Deputy CC 4

2010/11 0 0 0 0 0 0 0 0

Page 80

West Mercia Police Authority

Sala

ry, F

ees

&

Allo

wan

ces

Bon

uses

Expe

nses

A

llow

ance

s

Ben

efits

in K

ind

(eg

car

allo

wan

ce)

Oth

er P

aym

ents

(P

olic

e O

ffice

rs

only

)

Exit

Pack

ages

Pens

ion

Con

trib

utio

n

Tota

l

£ £ £ £ £ £ £ £

2011/12 35,283 0 284 1,007 2,626 0 8,539 47,739 Asst Chief Officer 4 2010/11 104,460 0 985 6,600 4,397 0 25,279 141,721

2011/12 102,315 0 847 4,269 8,617 0 24,760 140,808 Asst Chief Officer 2010/11 98,266 0 838 4,800 8,213 0 23,780 135,897

2011/12 31,251 0 111 0 1,777 0 7,563 40,702 Temp Asst Chief Officer 5 2010/11 0 0 0 0 0 0 0 0

2011/12 40,366 0 984 0 6,851 5,931 9,764 63,896 Acting Asst Chief Officer 6

2010/11 0 0 0 0 0 0 0 0

2011/12 105,849 10,585 2,916 5,804 0 118,147 12,342 255,643 Asst Chief Officer 7 2010/11 104,753 0 2,890 5,800 0 0 14,770 128,213

2011/12 1,463 0 14 0 0 0 155 1,632 Asst Chief Officer 7 2010/11 0 0 0 0 0 0 0 0

Notes:

1 Chief Constable left the Authority on 31/07/2011

2 Deputy Chief Constable became Chief Constable on 01/08/2011

3 Deputy Chief Constable left the Authority on 04/10/2011

4 Assistant Chief Constable became Temporary Deputy Chief Constable on 01/08/2011 then Deputy Chief Constable on 19/12/2011

5 Temporary Assistant Chief Officer on secondment to Warwickshire with effect from 01/12/2011

6 Acting Assistant Chief Officer with effect from 01/08/2011 until 31/10/2011

7 An Assistant Chief Officer left on 31/03/12 and a replacement was appointed with effect from 26/03/12

- An annual fee is paid to Worcestershire County Council for the services of the Treasurer. The Treasurer is an employee of Worcestershire County Council

- Under the Strategic Alliance agreement the costs of two Assistant Chief Officers from West Mercia Police and the costs of two Assistant Chief Officers from Warwickshire are pooled and the expenditure is shared between the two Police Authorities on the basis of Warwickshire 31% and West Mercia 69%.

Statement of Accounts 2011/12

Page 81

West Mercia Police Authority

32.2 The Authority’s employees receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) and including Senior Officers listed above were paid the following amounts:

2010/11 Remuneration Band 2011/12

Number of Employees

Number of Employees

101 £50,000 - £54,999 126

68 £55,000 - £59,999 77

28 £60,000 - £64,999 11

5 £65,000 - £69,999 5

5 £70,000 - £74,999 6

6 £75,000 - £79,999 6

6 £80,000 - £84,999 4

4 £85,000 - £89,999 0

1 £90,000 - £94,999 1

0 £95,000 - £99,999 0

1 £100,000 - £104,999 1

0 £105,000 - £109,999 0

2 £110,000 - £114,999 1

1 £115,000 - £119,999 1

0 £120,000 - £124,999 1

1 £125,000 - £129,999 0

0 £130,000 - £134,999 0

0 £135,000 - £139,999 1

0 £140,000 - £144,999 0

0 £145,000 - £149,999 1

1 £150,000 - £154,999 0

1 £155,000 - £159,999 0

0 £160,000 - £244,999 1

231 Total 243

Page 82

West Mercia Police Authority

32.3 Exit Packages 2011/12 The number of exit packages resulting from redundant posts with total cost per band are set out in the table below: Exit Package cost band (including special payments)

Number of Exit Packages

Total cost of Exit Packages in each band

2010/11 2011/12 2010/11 2011/12

£000 £000

£0 - £20,000 4 86 33 886

£20,001 - £40,000 3 29 84 808

£40,001 - £60,000 3 8 142 383

£60,001 - £80,000 0 2 0 135

£80,001 - £100,000 1 3 93 259

£100,001 - £150,000 1 2 121 256

£150,001 - £200,000 0 2 0 321

Total 12 132 473 3,048 The total cost of £3,047,882 (2011/12) includes a provision of £822,545 for exit packages agreed in 2011/12 for 25 employees who will leave in 2012/13. There were no compulsory redundancies. Exit packages include charges by the Local Government Pension Fund in respect of retirements before normal retirement age. 33. EXTERNAL AUDIT COSTS The Authority has incurred the following costs in relation to the Audit of the Statement of Accounts statutory inspections and to non-audit services provided by the Authority’s external auditors.

2010/11 £000

2011/12 £000

93 Fees payable to the Audit Commission with regard to external audit services carried out by the appointed auditor for the year 78

1 Fees payable to the Audit Commission in respect of other services provided by them during the year 1

94 Total 79 34. PUBLICITY The Authority’s spending on publicity is required to be published in accordance with the requirements of Section 5 (1) of the Local Government Act 1986.

2010/11 2011/12 £000 £000

305 General publicity 494

129 Safer Roads advertising 133

3 Recruitment advertising 11

7 General advertising 1

444 Total 639

Statement of Accounts 2011/12

Page 83

West Mercia Police Authority

35. GRANT INCOME The Authority credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement 2011/12:

Restated 2010/11 £000

2011/12 £000

Credited to Taxation and Non Specific Grant Income

(69,817) Police Principal Grant (74,143)

(48,076) Non Domestic Rates (39,768)

(16,469) Home Office Grant towards the cost of retirement benefits (23,684)

(6,982) Revenue Support Grant (12,292)

(2,104) Police Capital Grant (1,591)

(144) Other capital contributions (204)

(143,592) Total (151,682) Credited to Services

(5,357) Neighbourhood Policing Fund (5,356)

0 Council Tax Freeze Grant (1,976)

(749) Speed Awareness Contributions (1,745)

(457) National Security Grant (575)

(475) Criminal Records Bureau (313)

(298) Proceeds of Crime Contributions (204)

(155) Counter Terrorism Grant: Prison (174)

(187) Other Grants (90)

(98) Other Contributions (44)

(4,328) Crime Fighting Fund 0

(3,139) Rule 2 (formerly Rural, DNA and Police Reform Grants) 0

(702) Basic Command Units 0

(15,945) Total (10,477) Note: 2010/11 figures have been restated to include significant contributions credited to services. The Authority has received capital grants and contributions that have yet to be recognised as income as they have conditions attached to them that will require the monies to be returned to the giver. The balances at the year end are as follows: 31 March 2012 £000 Home Office Grant for Custody and Case Preparation (250)

National Police Improvement Agency for mobile data (250)

Gloucestershire Police Authority contribution (34)

Total (534)

Page 84

West Mercia Police Authority

36. RELATED PARTIES The Authority is required to disclose material transactions with related parties; bodies or individuals that have the potential to control or influence the council or to be controlled or influenced by the council. Disclosure of these transactions allows readers to assess the extent to which the council 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 Authority. Central government has effective control over the general operations of the Authority. It is responsible for providing the statutory framework within which the Authority operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Authority has with other parties (e.g. council tax bills). Grants received from government departments are set out in note 35. In respect of members and senior officers, there are no related party transactions during the year which require adjustment of or disclosure in the financial statements or in the notes thereto. Other than stated in the accounts, there are no related party transactions with other public bodies or entities controlled or significantly influenced by the Authority which require adjustment of or disclosure in the financial statements or in the notes thereto. 37. 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 used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Authority, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Authority that has yet to be financed.

2010/11 2011/12 £000 £000

25,991 Opening Capital Financing Requirement 28,099 Capital investment:

5,840 Property, Plant and Equipment 9,748

174 Intangible Assets 235

Sources of finance:

0 Capital receipts 0

(94) Government grants and other contributions (1,957)

Sums set aside from revenue:

(2,146) Direct revenue contributions (107)

(1,666) Minimum revenue provision (1,896)

28,099 Closing Capital Financing Requirement 34,122 Explanation of movements in the year

1,237 Increase in underlying need to borrow (supported by government financial assistance) 0

871 Increase in underlying need to borrow (unsupported by government financial assistance) 6,023

2,108 Increase/(Decrease) in Capital Financing Requirement 6,023

Statement of Accounts 2011/12

Page 85

West Mercia Police Authority

38. LEASES 38.1 Authority as Lessee The Police Authority occupies 45 premises on an operating lease basis. The future lease payments due in future years are:

31 March 2011 £000

31 March 2012 £000

79 Not later than one year 146

283 Later than one year and not later than five years 181

497 Later than five years 518

859 845 The amount paid in 2011/12 was £1.042m (£1.042m in 2010/11). 38.2 Authority as Lessor The Authority leases out property under operating leases for the following purposes: • for the provision of community services such as the Community Hub in Evesham • for the tenancy of Hindlip Farm • for the provision of equipment on masts • for a shared vehicle workshop facility The future lease payments receivable in future years are:

31 March 2011 £000

31 March 2012 £000

67 Not later than one year 69

0 Later than one year and not later than five years 27

62 Later than five years 42

129 138 The amount received in 2011/12 was £0.146m (£0.125m in 2010/11).

Page 86

West Mercia Police Authority

39. DEFINED BENEFIT PENSIONS SCHEMES As part of the terms and conditions of employment of its officers and other employees, the Police Authority offers retirement benefits. Although these benefits will not actually be payable until employees retire, the Authority has a commitment to make the payments that need to be disclosed at the time that the employees earn their future entitlement. The Authority participates in two pension schemes:

• the Local Government Pension Scheme for police staff, administered locally by Worcestershire County Council. This is a funded defined benefit final salary scheme, meaning that the Authority and employees pay contributions into a fund, calculated at a level intended to balance the pensions liabilities with investment assets.

• the Police Pension Scheme for police officers. This is an unfunded defined benefit

final salary scheme, meaning that there are no investment assets built up to meet the pensions liabilities, and cash has to be generated to meet the actual pensions payments as they eventually fall due. Under the Police Pension Fund Regulations 2007, if the amounts receivable by the pensions fund for the year is less than amounts payable, the Police Authority must annually transfer an amount required to meet the deficit to the pension fund. This cost is met by a 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 Police Authority which then must repay the amount to central government.

39.1 Transactions Relating to Retirement Benefits The cost of retirement benefits is recognised in the Cost of Services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge against council tax is based on the cash payable in the year, so the real cost of retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year:

Statement of Accounts 2011/12

Page 87

West Mercia Police Authority

2011/12

Local Government

Pension Scheme

£000

Police Pension Scheme

1987 £000

Police Injury

Awards

£000

Police Pension Scheme

2006 £000

Total

£000

Comprehensive Income and Expenditure Statement

Cost of Services:

- current service costs 6,489 28,980 610 3,940 40,019

- past service costs 83 0 120 160 363

- curtailments 601 0 0 0 601

Financing and Investment Income and Expenditure

- interest cost 10,173 79,730 3,450 1,400 94,753

- expected return on assets in the scheme

(9,278) 0 0 0 (9,278)

Total Post Employment Benefit charged to the surplus or deficit on the Provision of Service

8,068 108,710 4,180 5,500 126,458

Other Comprehensive Income and Expenditure Statement charges

- actuarial gains and losses 12,060 (3,469) 9,840 4,828 23,259

Total Post Employment Benefit charged to the Comprehensive Income and Expenditure Statement

20,128 105,241 14,020 10,328 149,717

Movement in Reserve Statement

− reversal of net charges made for retirement benefits in accordance with IAS19

(8,068) (108,710) (4,180) (5,500) (126,458)

Actual amount charged against the General Fund Balance for pensions in the year

- employers’ contributions payable to the scheme 6,652 17,711 0 2,598 26,961

- benefits paid direct to beneficiaries 0 0 1,740 0 1,740

Page 88

West Mercia Police Authority

2010/11 Restated

Local Government

Pension Scheme

£000

Police Pension Scheme

1987 £000

Police Injury

Awards

£000

Police Pension Scheme

2006 £000

Total

£000

Comprehensive Income and Expenditure Statement

Cost of Services

- current service costs 7,444 31,900 1,260 3,930 44,534

- past service costs (11,674) (165,280) (7,780) (1,850) (186,584)

- curtailments 56 0 0 0 56

Financing and Investment Income and Expenditure

- interest cost 10,764 81,990 3,790 1,110 97,654

- expected return on assets in the scheme

(8,146) 0 0 0 (8,146)

Total Post Employment Benefit charged to the surplus or deficit on the Provision of Service

(1,556) (51,390) (2,730) 3,190 (52,486)

Other Comprehensive Income and Expenditure Statement

- actuarial gains and losses (8,740) (67,524) (6,030) 2,992 (79,302)

Total Post Employment Benefit charged to the Comprehensive Income and Expenditure Statement

(10,296) (118,914) (8,760) 6,182 (131,788)

Movement in Reserve Statement

− reversal of net charges made for retirement benefits in accordance with IAS19

1,556 51,390 2,730 (3,190) 52,486

Actual amount charged against the General Fund Balance for pensions in the year

- employers’ contributions payable to the scheme

5,967 17,776 0 2,452 26,195

- benefits paid direct to beneficiaries

0 0 1,620 0 1,620

Statement of Accounts 2011/12

Page 89

West Mercia Police Authority

39.2 Assets and Liabilities in relation to retirement benefits Reconciliation of present value of the scheme liabilities (defined benefit obligation):

2011/12

Local Government

Pension Scheme

£000

Police Pension Scheme

1987 £000

Police Injury

Awards

£000

Police Pension Scheme

2006 £000

Total

£000

Opening balance at 1st April (183,075) (1,406,800) (61,040) (22,050) (1,672,965)

Current service cost (6,489) (28,980) (610) (3,940) (40,019)

Interest cost (10,173) (79,730) (3,450) (1,400) (94,753)

Contributions by scheme participants

(2,616) (7,530) 0 (1,020) (11,166)

Actuarial gains and losses 0 (24,010) (9,840) (1,210) (35,060)

Benefits paid 5,313 52,720 1,740 0 59,773

Past service costs (83) 0 (120) (160) (363)

Curtailments (601) 0 0 0 (601)

Closing balance 31st March (197,724) (1,494,330) (73,320) (29,780) (1,795,154)

Reconciliation of fair value of the scheme assets

Opening balance at 1st April 130,752 0 0 0 130,752

Expected rate of return 9,278 0 0 0 9,278

Actuarial gains and losses (12,060) 27,479 0 (3,618) 11,801

Contributions by employer 6,652 17,711 1,740 2,598 28,701

Contributions by scheme participants

2,616 7,530 0 1,020 11,166

Benefits paid (5,313) (52,720) (1,740) 0 (59,773)

Closing balance 31st March 131,925 0 0 0 131,925

Total (65,799) (1,494,330) (73,320) (29,780) (1,663,229)

Page 90

West Mercia Police Authority

2010/11 Restated

Local Government

Pension Scheme

£000

Police Pension Scheme

1987 £000

Police Injury

Awards

£000

Police Pension Scheme

2006 £000

Total

£000

Opening balance at 1st April (185,582) (1,543,490) (71,420) (18,320) (1,818,812)

Current service cost (7,444) (31,900) (1,260) (3,930) (44,534)

Interest cost (10,764) (81,990) (3,790) (1,110) (97,654)

Contributions by scheme participants

(2,736) (7,850) 0 (960) (11,546)

Actuarial gains and losses 8,186 47,230 6,030 420 61,866

Benefits paid 3,647 45,920 1,620 0 51,187

Past service costs 11,674 165,280 7,780 1,850 186,584

Curtailments (56) 0 0 0 (56)

Closing balance 31st March (183,075) (1,406,800) (61,040) (22,050) (1,672,965)

Reconciliation of fair value of the scheme assets

Opening balance at 1st April 116,996 0 0 0 116,996

Expected rate of return 8,146 0 0 0 8,146

Actuarial gains and losses 554 20,294 0 (3,412) 17,436

Contributions by employer 5,967 17,776 1,620 2,452 27,815

Contributions by scheme participants

2,736 7,850 0 960 11,546

Benefits paid (3,647) (45,920) (1,620) 0 (51,187)

Closing balance 31st March 130,752 0 0 0 130,752

Total (52,323) (1,406,800) (61,040) (22,050) (1,542,213)

The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date. Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets. The actual return on scheme assets in the year was -£2.8m (2010/11: £9.9m).

Statement of Accounts 2011/12

Page 91

West Mercia Police Authority

39.3 Scheme History

2007/08 £000

2008/09 £000

2009/10 £000

2010/11 £000

2011/12 £000

Present value of liabilities

− Local Government Pension Scheme (141,682) (119,923) (185,582) (183,075) (197,724)

− Police Pension Scheme 1987 (1,081,570) (1,033,330) (1,543,490) (1,406,800) (1,494,330)

− Police Pension Scheme Injury Awards

(23,850) (23,880) (71,420) (61,040) (73,320)

− Police Pension Scheme 2006 (3,740) (5,770) (18,320) (22,050) (29,780)

Fair value of assets in the Local Government Pension Scheme

93,401 75,560 116,996 130,752 131,925

Total (1,157,441) (1,107,343) (1,701,816) (1,542,213) (1,663,229) Surplus/(deficit) in the scheme

− Local Government Pension Scheme (48,281) (44,363) (68,586) (52,323) (65,799)

− Police Pension Scheme 1987 (1,081,570) (1,033,330) (1,543,490) (1,406,800) (1,494,330)

− Police Pension Scheme Injury Awards

(23,850) (23,880) (71,420) (61,040) (73,320)

− Police Pension Scheme 2006 (3,740) (5,770) (18,320) (22,050) (29,780)

Total (1,157,441) (1,107,343) (1,701,816) (1,542,213) (1,663,229) The liabilities show the underlying commitments that the Authority has in the long run to pay post employment retirement benefits. The total liability of £1.663m has a substantial impact on the net worth of the Authority as recorded in the Balance Sheet, resulting in a negative overall balance of £1.587m. However, statutory arrangements for funding the deficit mean that the financial position of the Authority remains healthy: • the deficit on the local government scheme will be made good by increased

contributions over the remaining working life of employees, (i.e. before payments fall due) as assessed by the scheme actuary

• finance is only required to be raised to cover police pensions when the pensions are

actually paid. The total contributions expected to be made to the Local Government Pension Scheme by the Authority in the year to 31 March 2013 is £6.3m. Expected contributions for the Police Pension Scheme by the Authority in the year to 31 March 2013 are £20.2m.

Page 92

West Mercia Police Authority

39.4 Basis for Estimating Assets and Liabilities Liabilities have been assessed on an actuarial basis using the projected unit actuarial method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. The County Council Fund liabilities have been assessed by Mercer Ltd, an independent firm of actuaries, estimates for the County Council Fund being based on the latest full valuation of the scheme as at 1 April 2010. The liabilities for the Police Pension Scheme have been assessed by the Government Actuary’s Department. The principal assumptions used by the actuaries have been:

Local Government

Pension Scheme

Police Pension Schemes

Local Government

Pension Schemes

Police Pension Schemes

2010/11 2010/11 2011/12 2011/12 Long-term expected rate of return on

assets in the scheme:

7.5% Equity investments 7.0%

4.4% Government Bonds 3.1%

5.1% Other Bonds 4.1%

0.5% Cash Liquidity 0.5%

Mortality assumptions

Longevity at 65 for current pensioners:

22.0 years 24.1 years Men 22.1 years 23.3 years

24.5 years 27.3 years Women 24.6 years 25.7 years

Longevity at 65 for future pensioners:

23.4 years 26.1 years Men 23.5 years 25.6 years

26.1 years 29.2 years Women 26.1 years 27.8 years

3.0% 3.0% Rate of CPI inflation 2.6% 2.5%

4.5% 5.3% Rate of increase in salaries 4.1% 4.7%

3.0% 3.0% Rate of increase in pensions 2.6% 2.5%

5.5% 5.7% Rate for discounting scheme liabilities 5.1% 4.9%

50% 100% Take-up of option to convert annual pension into retirement lump sum 50% 100%

Statement of Accounts 2011/12

Page 93

West Mercia Police Authority

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

31 March 2011 31 March 2012 % %

92.7 Equity investments 88.9

2.6 Bonds 3.2

3.8 Other bonds 4.0

0.9 Cash/Liquidity 3.9

100.0 100.0 39.5 History of Experience Gains and Losses The actuarial gains identified as movements on the Pensions reserve in 2011/12 can be analysed into the following categories, measured as a percentage of asset or liabilities at 31 March 2012.

2007/08

2008/09 restated

2009/10 restated

2010/11 2011/12

% % % % % Local Government Differences between the expected and actual return on assets

14.3 38.8 26.5 0.4 9.1

Experience gains and losses on liabilities

1.6 0.0 0.0 2.6 0.0

Police Pension Scheme 1987 Experience gains and losses on liabilities

0.7 (1.5) 1.9 2.5 0.8

Police Pension Scheme 1987 Injury Awards

Experience gains and losses on liabilities

8.9 3.5 (8.4) 4.8 (3.2)

Police Pension Scheme 2006

Experience gains and losses on liabilities

(41.4) (5.0) (0.4) (1.5) 1.1

Page 94

West Mercia Police Authority

40. NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS AND HOW THE AUTHORITY MANAGES THOSE RISKS

The Police Authority’s activities expose it to a variety of financial risks: • Credit Risk Credit risk is the risk that other parties might fail to pay amounts due to the Authority. The Authority has adopted the CIPFA Code of Practice on Treasury Management.

The Authority’s treasury management policy requires that cash balances are invested with banks and building societies with strong short-term credit rating, other local authorities and the UK Government Debt Management Office. Security is also addressed by setting limits of between £2m and £10m per borrower. However, in continuance of the caution which was adopted following turbulent financial markets in 2008/09, the Authority limited its list of borrowers to the Bank of England and other local authorities in 2011/12.

At 31 March 2012 the short term cash balances were as follows:

2010/11 £000

2011/12 £000

0 - On call (available immediately) (variable rate) 4,004

17,101 - Repayable in 1 month (fixed rates) 7,501

0 - Repayable in 2 months (fixed rates) 2,001

0 - Repayable in 3 months (fixed rates) 0

17,101 13,506

There has been no experience of default on investment of these cash balances. The Authority holds no other financial investments. Receipts from customers, for example for sales of services and recoupments of costs from other public bodies, are a relatively small part of West Mercia’s income (£5.725m in 2010/11). The amount of default in 2011/12 was approximately £0.021m or 0.4%. Almost all of the number of transactions written off related to the Authority’s attempts to recover its costs of “emergency boarding up” of vulnerable premises from the owner or occupier of the premises.

The Authority does not generally allow credit for customers such that £0.167m of the £0.809m balance outstanding from customers at 31 March 2012 was past the point of 30 days from the date of invoice. This past due amount can be analysed as follows:

31 March 2011 £000

31 March 2012 £000

78 Less than 3 months 113

17 3 to 6 months 14

12 6 to 12 months 27

15 Over 12 months 13

122 167

Statement of Accounts 2011/12

Page 95

West Mercia Police Authority

The following table summarises the potential maximum exposure at the year end to

credit risks other than treasury investments and cash-equivalent investments.

% £000 Balance of debtors ledger at 31 March 2012 809 Historical experience of default 0.5% Historical experience adjusted for market conditions at 31 March 2012

0.5%

Estimated maximum exposure to default and uncollectability at 31 March 2012

4

Estimated maximum exposure to default and uncollectability at 31 March 2011

4

• Liquidity Risk

Liquidity Risk is the risk that the Authority does not have funds available to meet its commitments to make payments. As the Authority has ready access to borrowings from the Public Works Loan Board, there is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. There is a degree of risk that borrowing will need to be undertaken at a time of unfavourable interest rates. The Authority raised a loan in 2007/08 for the first time in many years. The maturity analysis of its financial liabilities is:

31 March 2011 £000

31 March 2012 £000

0 Less than one year 0

0 Between one and two years 0

0 Between two and five years 0

0 Between five and twenty years 0

10,000 More than twenty years 10,000

10,000 10,000 • Market Risk

Market risk is the risk that the Authority might suffer financial loss as a result of changes in such measures as interest rates and stock market movements. The Authority holds no stock market investments. Movements in interest rates can have several impacts on an authority. For example, a rise in interest rates would have the following effects:

Page 96

West Mercia Police Authority

- Borrowing at variable rates: this would increase the interest cost charged to the Surplus or Deficit on the Provision of Services. However, West Mercia has no borrowings at variable rates.

- The “fair value” of borrowing at fixed rates would fall. This eventuality would be disclosed in a note to the accounts, but the Surplus or Deficit on the Provision of Services would be unchanged.

- Investments at variable rates: the interest income credited to the Surplus or Deficit on the Provision of Services will rise. West Mercia has made some investments termed “call”. These permit the possibility of a change in interest rates.

- Investments at fixed rates: the fair value of the assets will fall. West Mercia generally holds its short term investments at fixed rates. The shortness of the term (up to three months) indicates that any difference between actual value and fair value would be marginal.

Borrowings are not carried at fair value, so nominal gains or losses on fixed rate borrowings would not impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure. However, changes in interest payable and receivable on variable rate borrowings and investments would be posted to the Surplus or Deficit on the Provision of Service and affect the General Fund Balance or level of reserves. Movements in the fair value of fixed rate investments which have a quoted market price (of which West Mercia has none) will be reflected in Other Comprehensive Income and Expenditure. If, at 31 March 2012, interest rates had been 1% higher with all other variables held constant, the financial effect would be: £000 Increase in interest payable on variable rate borrowings 0 Increase in interest receivable on variable rate investments 4 Increase in government grant receivable for financing costs 0 Impact on Surplus or Deficit on Provision of Services 4

The approach to borrowing for capital projects is to delay borrowing and to temporarily use working capital balances. The present relative rates of interest for borrowing and lending mean that it is advantageous to delay long term borrowing whilst the overall cash flow is positive. Capital expenditure temporarily funded from working capital up to 31 March 2011 was £20.8m. In 2011/12 a further £7.9m was funded in this way. It is probable that this expenditure will eventually require borrowing. There is a risk that rates may be adverse when and if this borrowing takes place. This risk is mitigated by monitoring medium and long term borrowing costs vis-à-vis the opportunity costs of not investing working capital.

• Foreign Exchange Risk

As a general rule the Authority holds no financial assets or liabilities denominated in foreign currencies.

Statement of Accounts 2011/12

Page 97

West Mercia Police Authority

41. JOINTLY CONTROLLED OPERATIONS AND ASSETS 41.1 Central Motorway Police Group The Authority is engaged in a jointly controlled operation with Staffordshire Police and West Midlands Police for the Policing of the Motorway network in the West Midlands area known as the Central Motorway Police (CMPG). West Midlands Police Authority provides the financial administration service for this joint unit. The assets of the unit in respect of police vehicles, equipment and land and buildings are held individually by each Police Authority and are shown on each Authority’s balance sheet. The three Police Authorities have an agreement in place for funding this unit with contributions to the agreed budget of 50.7% from West Midlands, 25.4% from West Mercia and 23.9% from Staffordshire. The same proportions are used to meet any deficit or share any surplus arising on the Group’s budget at the end of each financial year. The revenue account for the CMPG covers all operating costs. The details for 2011/12 are as follows:

2010/11 2011/12 £000 £000

Funding provided to the CMPG

4,575 Contribution from West Midlands 4,343

2,295 Contribution from West Mercia 2,179

2,161 Contribution from Staffordshire 2,052

9,031 Total funding provided to the CMPG 8,574 Expenditure

8,090 Pay and allowances 7,589

70 Premises costs 45

672 Transport costs 707

199 Supplies and Services 247

9,031 Total expenditure 8,588 Income received to the pooled Budget

0 External Funding (14)

0 Total Income (14)

9,031 Total Net Expenditure 8,574 0 Net surplus/(deficit) arising during the year 0

0 West Mercia’s share of 25.4% of the net surplus/(deficit) arising during the year 0

Page 98

West Mercia Police Authority

41.2 Central Counties’ Air Operations Unit (CCAOU) The Central Counties’ Air Operations Unit is a joint operation by West Mercia Police and Staffordshire Police. West Mercia Police Authority provides the financial administration service for this joint unit. The two police authorities jointly own the helicopter. The revenue account for the Unit covers all operating costs except for officers attached to the Unit. The details for 2011/12 are as follows:

2010/11 2011/12 £000 £000

Income

448 Contribution from Staffordshire 400

463 Contribution from West Mercia 453

911 Total Income 853

Expenditure

673 Fixed costs (eg, pilot contract and unit overheads) 553

128 Fuel 192

110 Maintenance contracts 108

911 Total Expenditure 853 The West Mercia Police Authority Comprehensive Income and Expenditure Statement includes the contribution of £453,000. The West Mercia Police Authority Balance Sheet includes within fixed assets £2.3m as the value of its 50% ownership of the helicopter.

Statement of Accounts 2011/12

Page 99

West Mercia Police Authority

41.3 Strategic Alliance with Warwickshire Police Earlier this year West Mercia Police and West Mercia Police Authority agreed to enter into a ‘Strategic Alliance’ with Warwickshire Police and Warwickshire Police Authority. The Alliance will provide an opportunity for the two neighbouring forces to work more closely together and to share resources in different service areas, but with each force retaining its own sovereignty, finances, estates and identity. The Alliance has been formed to increase efficiency and maximise police services in times of substantial funding cuts. The details for 2011/12 are as follows:

2010/11 2011/12 £000 £000

Funding provided to the Strategic Alliance

0 Contribution from Warwickshire 236

0 Contribution from West Mercia 526

0 Total Funding 762

Expenditure

0 Pay and allowances 696

0 Premises costs 0

0 Transport costs 42

0 Supplies and Services 24

0 Total Expenditure 762 The total expenditure shown above relates to the Police Officers, Staff and associated costs of the Strategic Alliance Project Officer (SAPO) team and the selected Chief Officers from each force who are leading the Alliance and implementing the change process. The expenditure is shared between the two Police Authorities on the basis of Warwickshire 31% West Mercia 69%.

Page 100

West Mercia Police Authority

PENSIONS FUND The Police Pensions Fund was established under The Police Pensions Fund Regulations 2007 [Statutory Instrument 2007 no 1932]. The arrangements for the Police Officers’ Pension Scheme are that the Police Authority and police officers’ pay contributions into the Pensions Fund in respect of the Authority’s liability to pay police pensions. This Fund is administered by the Police Authority to meet the cost of most pensions and any surplus or deficit on this account will accrue to the Police Fund. There are certain exceptions to this arrangement, such as pensions payable under the Police Injury Pensions Regulations. These costs are charged directly to the Cost of Services in the Comprehensive Income and Expenditure Statement. The following Pensions Fund shows the income and expenditure for the year. It does not take account of liabilities to pay pensions and other benefits after the year end. Details of the Authority’s long-term pensions obligation can be found in Note 39 in the main accounting statements. Employees and employer’s contribution levels are based on percentages of pensionable pay set nationally by the Home Office and subject to triennial revaluation by the Government Actuary’s Department. There are no investment assets associated with the Police Pension Scheme which is unfunded.

Statement of Accounts 2011/12

Page 101

West Mercia Police Authority

2010/11 2011/12

£000 £000 Contributions receivable

(19,688) Police Authority contributions at 24.2% of pensionable pay (19,156)

(540) Early retirements (1,153)

(8,799) Officers’ contributions (8,547)

(29,027) (28,856)

(425) Transfers in from other pension schemes (177)

(425) (177)

Benefits payable

32,829 Pensions 36,556

13,016 Commutations and lump sum retirement benefits 13,706

0 Lump sum death benefits 273

45,845 50,535

Payment to and on account of leavers

72 Transfers out to other pension schemes 2,099

4 Refunds of contributions 83

76 2,182

16,469 Net amount payable for the year 23,684

(16,469) Additional contribution from the Police General Fund (23,684)

0 0 Net Asset Statement

31 March 2011 31 March 2012 £000 £000

Current Assets 5,574 Contributions from the Police Authority 8,443

38 Transfers in 21

3 Amount recoverable from benefits paid 0

Current Liabilities

0 Commutations and lump sum retirement benefits due (610)

(5,615) Amount owing to Police Fund (7,854)

0 0

Page 101

GLOSSARY OF TERMS ACCOUNTING POLICIES – The specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements. ACCRUAL – The recognition, in the correct accounting period, of income and expenditure as it is earned and incurred, rather than as cash is received or paid. ACCRUED BENEFITS – The pension benefits for service up to a given point in time, whether vested rights or not. ACTUARIAL GAINS AND LOSSES – For a defined benefit scheme, the changes in actuarial deficits or surpluses that arise because events have not coincided with the actuarial assumptions made for the last valuation (experience gains or losses) or the actuarial assumptions have changed. ACCUMULATED ABSENCES ACCOUNT – This account holds the liability value of accumulated accrued absences (annual leave, time owing in lieu etc) that are due to employees at the end of the financial year. ACTUARIAL VALUATION – A valuation of assets held, an estimate of the present value of benefits to be paid and an estimate of required future contributions, by an actuary, on behalf of a pension fund. AIR SUPPORT GRANT – This is a grant that is used to fund the purchase of the police helicopter (CCAOU). AMORTISATION – This is the expensing of the acquisition cost minus the residual value of intangible assets in a systematic manner over their estimated useful economic lives.

AMORTISED COST – The carrying amount of some financial assets and liabilities in the Balance Sheet will be written down or up via the Comprehensive Income and Expenditure Statement over the term of the instrument. APPROPRIATIONS – Amounts transferred to or from revenue or capital reserves. ASSET – An item owned by the Authority, which has a value, for example, land and buildings, vehicles, equipment, cash. BILLING AUTHORITY – A local authority empowered to set and collect council tax and manage the collection fund. For West Mercia the billing authorities are the district or unitary authorities within the force area of Herefordshire, Shropshire, Telford and Wrekin and Worcestershire. BUDGET – A statement of the Authority’s plans in financial terms. A budget is prepared and approved by the Police Authority before the start of each financial year and is used to monitor actual expenditure throughout the year. CAPITAL ADJUSTMENT ACCOUNT – An account which accumulates the write-down of the historical cost of fixed assets as they are consumed by depreciation and impairments or written off on disposal. It also accumulates the resources which have been set aside to finance capital expenditure. CAPITAL EXPENDITURE – Expenditure on new assets or on the enhancement of existing assets so as to prolong their life or enhance market value. CAPITAL FINANCING CHARGES – The repayment of loans and interest for capital projects. CAPITAL GRANT – Grant from Central Government used to finance specific schemes in the capital programme.

Page 102

CAPITAL RECEIPTS – The proceeds from the sale of an asset, which may be used to finance capital expenditure or to repay outstanding loan debt. CASH – Comprises cash on hand and demand deposits CASH EQUIVALENTS – Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. CASH FLOWS – Inflows and outflows of cash and cash equivalents. CASHFLOW STATEMENT – This statement summarises the inflows and outflows of cash. CIPFA – The Chartered Institute of Public Finance and Accountancy. This is the professional body for accountants working in the public services. CODE OF PRACTICE ON LOCAL AUTHORITY ACCOUNTING – This code sets out the accounting requirements for local authorities and is based on International Financial Reporting Standards. COLLECTION FUND ADJUSTMENT ACCOUNT – Absorbs the effect of the timing difference between statutory requirements and full accruals accounting for the council tax precept income. CONTINGENCY – A sum of money set aside to meet unforeseen expenditure or a liability. CORPORATE & DEMOCRATIC CORE – Activities which police authorities engage in because they are elected bodies. There is therefore no logical basis for apportioning these costs to the service expenditure.

COUNCIL TAX – The local tax levied on householders, based on the relative market values of property, which helps to fund local services. CREDITORS – Individuals or organisations to whom the Authority owes money at the end of the financial year. CURRENT ASSETS AND LIABILITIES – Current assets are items that can be readily converted into cash. Current liabilities are items that are due immediately or in the short-term. CURRENT SERVICE COSTS (PENSIONS) – The increase in the present value of a defined benefit scheme’s liabilities expected to arise from the employees’ service in the current period. DEBTORS – Individuals or organisations who owe the Authority money at the end of the financial year. DEFINED BENEFIT SCHEME – A pension scheme which defines the benefits independently of the contributions payable, and the benefits are not directly related to the investments of the scheme. DEPRECIATION – An annual charge to reflect the extent to which an asset has been worn out or consumed during the financial year. DISCRETIONARY BENEFITS – Retirement benefits which the employer has no legal, contractual or constructive obligation to award and which are awarded under the Authority’s discretionary powers. EARMARKED RESERVES – Monies set aside that are intended to be used for a specific purpose. EXPECTED RATE OF RETURN ON PENSION ASSETS – For a funded defined benefit scheme, the average rate

Page 103

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 amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. FINANCE AND OPERATING LEASE – A Finance lease transfers all of the risks and rewards of ownership of a fixed asset to the lessee. If these leases are used, the assets acquired have to be included within the fixed assets in the balance sheet at the market value of the asset involved. With an operating lease, the ownership of the asset remains with the leasing company and an annual rent is charged to the revenue account. FINANCING ACTIVITIES – Activities that result in changes in the size and composition of the principal, received from or repaid to external providers of finance. FINANCIAL YEAR – The period of twelve months for the accounts, commencing 1st April. FIXED ASSETS – Tangible assets e.g. buildings and equipment that yield benefits to the Authority and the services it provides for a period of more than one year. Intangible fixed assets have no physical substance but provide a benefit for more than one year, e.g. computer software. 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 an authority in return for past or future compliance with certain conditions relating to the activities of the Authority.

HOME OFFICE GRANT (PENSIONS) – If there is insufficient money in the Pension Fund Account to meet all expenditure commitments in any particular year, the Home Office will fund the deficit by way of a grant. IMPAIRMENT – The fall in value of an asset below its carrying (or book) value. INTANGIBLE ASSET – A non-physical fixed asset, e.g. computer software. INTEREST INCOME – The money earned from the investment of surplus cash. INTEREST COSTS (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. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) – These are principles-based Standards, Interpretations and the Framework (1989) adopted by the International Accounting Standards Board (IASB) on which the Statement of Accounts is based. INVESTING ACTIVITIES – This is the buying and selling of long-term assets and investments that are not cash equivalents. MAJOR PRECEPTING AUTHORITY – Authorities that make a precept on the billing authority’s collection fund, eg county councils, police authorities. MATERIAL – Omissions or misstatements of items are material if they could, individually or collectively, influence the decisions or assessments of users made on the basis of financial statements. Materiality depends on the nature or size of the item omission or misstatement judged in the surrounding circumstances.

Page 104

MINIMUM REVENUE PROVISION (MRP) – The statutory minimum amount which an Authority is required to set aside on an annual basis as a provision to redeem debt. NATIONAL NON DOMESTIC RATES (NNDR) – The national non-domestic rate in the pound is the same for all non-domestic rate payers and is set annually by the Government. Income from non-domestic rates goes into a central Government pool that is then distributed to authorities according to resident population. NET BOOK VALUE – The amount at which fixed assets are included in the balance sheet, i.e. their historical cost or current values less the cumulative amounts provided for depreciation. NON DISTRIBUTED COSTS – Overheads which are not charged or apportioned within the Service Expenditure Analysis. NOTES – Contain information in addition to that presented in the Movement in Reserves Statement, Comprehensive Income and Expenditure Statement, Balance Sheet and Cash Flow Statement. Notes provide narrative descriptions or disaggregations of items presented in those statements and information about items that do not qualify for recognition in those statements. OTHER COMPREHENSIVE INCOME AND EXPENDITURE – Comprises items of expenses and income that are not recognised in the Surplus or Deficit on the Provision of Services as required or permitted by the Code. OPERATING ACTIVITIES – The activities of the entity that are not investing or financing activities. OUTTURN – The actual amount spent in the financial year.

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. PAYMENTS IN ADVANCE – These represent payments made prior to 31 March for supplies and services received on or after 1st April. PENSION FUND – A fund which makes pension payments on retirement of its participants. PENSIONS RESERVE – This is an accounting mechanism used to reconcile payments made for the year to various statutory pension schemes and the net change in the Authority’s recognised liability under IAS19 for the same period. POLICE PRINCIPAL GRANT – This is part of the total specific government grant support for police authorities. PRECEPT – The amount of council tax that West Mercia Police Authority, as a major precepting authority, has instructed the billing authorities to collect and pay over in order to finance its net expenditure. PROVISION – An amount set aside to provide for a liability that is likely to be incurred but the exact amount and the date on which it will arise is uncertain. PUBLIC WORKS LOAN BOARD (PWLB) – A government agency which provides long-term loans to local authorities at interest rates only slightly higher than those at which the government itself can borrow. RECEIPTS IN ADVANCE – These represent income received prior to 31 March for supplies and services

Page 105

provided by the Authority on or after 1st April. RESERVES – Monies set aside by the Authority that do not fall within the definition of provisions. Reserves held for specific purposes are known as earmarked reserves. RETIREMENT BENEFITS – All forms of consideration given by an employer in exchange for services rendered by employees that are payable after the completion of employment. REVALUATION RESERVE – The Reserve records the accumulated gains on the fixed assets held by the Authority arising from increases in value. It is debited with the part of the depreciation charge for the asset relating to the revaluation. Any balance on this account is written back to the Capital Adjustment Account upon disposal of this asset. REVENUE EXPENDITURE AND INCOME – Day to day expenses mainly salaries and general running expenses. REVENUE CONTRIBUTIONS – Contributions from the Income and Expenditure account to finance capital expenditure and thus reduce the requirement to borrow. REVENUE SUPPORT GRANT (RSG) – General government grant support towards Police Authority expenditure. SCHEME LIABILITIES (PENSIONS) – The liabilities of a defined benefit scheme for outgoings due after the valuation date. Scheme liabilities measured using the projected unit method reflect the benefits that are committed to be provided for service up to the valuation date. SERVICE REPORTING CODE OF PRACTICE (SeRCOP) – A CIPFA guide to financial reporting below the Statement of Accounts level.

SPECIFIC GRANT – A government revenue grant paid direct to the police authority for a particular project. SURPLUS OR DEFICIT ON THE PROVISION OF SERVICES – The total of income less expenses, excluding the components of Other Comprehensive Income and Expenditure. TANGIBLE FIXED ASSETS – Physical fixed assets, e.g. land, buildings, vehicles and equipment held for a period of over one year. TAXATION AND NON-SPECIFIC GRANT INCOME – Council tax and all grants and contributions recognised in the financial year. TOTAL COMPREHENSIVE INCOME AND EXPENDITURE – Comprises all components of Surplus or Deficit on the Provision of Services and of Other Comprehensive Income and Expenditure.