1 Summary

1.1 This report summarises the spending of the Authority for the last financial year.

1.2 Overall, there is a net underspending (before any additional revenue contributions to capital) of £164,000 against the revised budget. This can be summarised as follows:

Explanations for the adjustments to the budget are made throughout this report.

1.3 This report recommends that this underspending is used for additional revenue contributions to capital in 2001/02 so that more Basic Credit Approvals (BCA) can be carried forward to 2002/03 to fund part of the repairs to Copnor Fire Station (£123,000) and the `hot fire' units (£41,000). This would result in the outturn being the same as the budget.

2 Part A - Cash limited revenue expenditure

2.1 There were 26,501 incidents in 2001/02 compared with the 22,747 allowed for in the original budget. This is 3,754 (16.5%) above the original budget level. This will trigger the contingency arrangements agreed with the constituent authorities as all the following criteria have been met:

· number of incidents more than 5% above funded level

· retained pay overspent

· cash limited expenditure overspent.

2.2 When the revised budget was approved there was £20,000 overall spare and a retained contingency was created. In January when the budget monitoring report was considered a further £2,000 was added.

2.3 The formula allows for the additional pay costs for all incidents above the 5% allowed for in the original budget. This equates to a £222,000 increase. However, when the revised budget was prepared an increased level of spend was predicted and the cash limit was increased by £120,000. In January it was felt this could be reduced by £30,000 giving a net increase in the budget of £90,000. Expenditure on retained pay and allowances exceeded this budget by just £21,000 and so this is the amount by which the cash limit is increased.

2.4 The major areas of variation are explained below and in more detail in Appendix 1.

Insurance (+£467,000)

2.5 The main area of overspend was on insurance. Members will be aware that one of the Authority's insurers, Independent Insurance Company, went into liquidation in June 2001. Retrospective employer's liability insurance was taken out for 2001/02 and 2002/03 (£127,000) on the advice of the Authority's insurance broker and endorsed by the Clerk and Treasurer. In addition, a provision for £330,000 has been made, for payment of a retrospective insurance premium for 2003/04 and for claims which were made for the uninsured period before the retrospective insurance was taken out which the Authority is liable for.

Wholetime firefighters (-£170,000)

2.6 A combination of careful recruitment management and higher than anticipated turnover savings has resulted in this saving.

Income (-£196,000)

2.7 Several areas of income exceeded that expected. In particular commercial services, which is from outside organisations, exceeded its budget by £166,000.

Copnor Fire Station

2.8 Members will be aware from the Authority's meeting on 6 June that minimum repairs at Copnor to the value of £135,000 are to be undertaken with an additional contingency of £115,000 making a maximum of £250,000. With the £123,000 funding from the year's underspending a balance of £127,000 will still have to be found if it is required.

3 Part B - Pensions

3.1 Pensions' expenditure was £194,000 below the revised budget. Small areas of overspending totalling £71,000 were more than offset by two main areas of underspending which were:

· lump sum payments (-£125,000). Although more retirements occurred in the year than anticipated (three ordinary, one ill-health), there were several individual payments that were less than predicted and those who were expected to retire were not exactly the same as those who did.

· transfer values paid (-£140,000). Just three transfers were paid compared with the budget which was based on the average cost in the last five years. In 2000/01 seven transfers were paid.

4 Part C - Capital

4.1 Capital payments during the year totalled £2,165,000 was £60,000 less than that forecast in January due to an overall slippage in payments. Full details are given on a scheme by scheme basis in Appendix 2.

4.2 It was planned to lease all the 2000/01 front line appliances and 2001/02 support vehicles during the year. By 31 March 2002 four of the frontline appliances and all but one of the support vehicles had been leased. A lease for the remaining vehicles will be drawn down shortly.

Revenue contributions to capital

4.3 Revenue contributions to capital were budgeted to be £75,000. This was for two schemes, the `hot fire' units (£50,000) and the Incident Control Unit 1997/98 (£25,000). The expenditure on the `hot fire' scheme will now nearly all be in 2002/03 resulting in a requirement of £41,000 financing in 2002/03. The balance was planned to be funded from BCA will also slip into 2002/03.

4.4 Works done at the workshops fitting out new vehicles is charged to capital. During the year a new charging methodology was introduced which resulted in an additional £73,000 being charged to capital. As this is a technical adjustment, £73,000 of revenue contributions (financed from the extra internal charges from the work) will be made.

Financing of 2001/02 payments

4.5 Capital payments can be financed as follows:

4.6 The Authority received £1,234,000 BCA for 2001/02, all of which will be used. In addition £347,000 will be returned to the Authority from the County Council. This leaves a balance of £703,453 BCA. The Treasurer has consulted the Treasurers of Portsmouth and Southampton City Councils. They have agreed that as neither of them can make use of the balance, it should remain with the County Council until it is required by this Authority.

5 Part D - Treasury Management

External borrowing

5.1 At its meeting in February 2001, the Authority set limits on total and temporary external debt of £8.7m and £8.3m respectively and borrowing levels remained within these limits during the year.

Long term borrowing

5.2 The following strategy was followed throughout the year:

· long and short-term rates to be closely monitored

· long-term fixed rate borrowing to be considered if long-term rates stand at 5% or below

· long-term fixed rate borrowing to be considered at rates higher than this if clear signs of a rising trend occur.

5.3 During the year this strategy was followed and three long-term loans were taken from the Public Works Loan Board for £650,000 (4.875%), £750,000 (4.875%) and £450,000 (4.5%).

Short term borrowing

5.4 Daily surpluses or deficits on the cash balance are lent to or borrowed from the County Council. Interest was paid to the County Council at the local authority seven-day notice rate, which averaged 4.55% over the year.

6 Part E - Authority assurance statement

6.1 The Code of Practice on Local Authority Accounting with which the Authority's statement of accounts complies, introduces a new requirement from 2002/03 for the inclusion in the statement of account of an internal control statement, covering as a minimum the system of internal financial control. The statement sets out the framework within which financial control is managed and reviewed, including the arrangement for internal audit and reports on any identified weaknesses and the actions undertaken to rectify these.

6.2 This requirement is seen as a good practice which is therefore anticipated in this year's report. As part of the process of enabling the Treasurer to form a view of the effectiveness of internal financial control the Chief Internal Auditor has produced an independent assurance statement on the adequacy and effectiveness of the system of internal control in each department. Appendix 3 contains the statement relating to the Authority and concludes that the Authority has an effective framework of control.

7 Determinations by the Authority

7.1 Part IV of the Local Government and Housing Act 1989 requires the Authority to make determinations for each year on certain capital issues. These are set out in recommendation 4 below.

8 European Convention on Human Rights and the Human Rights Act 1998

8.1 The proposals within this report are compatible with the provision of the European Convention on Human Rights and the Human Rights Act 1998.

Recommendations

1 That the accounts for 2001/02 be approved.

2 That it be recommended to the Authority that the underspending from 2001/02 be used as additional revenue contributions in 2001/02, resulting in additional BCA being carried forward and used to finance the `hot fire' scheme (£41,000), and repairs to Copnor Fire Station (£123,000)

3 That capital payments for the year be financed as set out in paragraph 4.5.

4 That it be determined that:

i) £346,922 of BCA lent to Hampshire County Council in 2000/01 be returned to this Authority and that the balance of £703,453 BCA remains with Hampshire County Council until it is required by the Authority.

ii) £314,910 of capital receipts be used to meet capital expenditure in 2001/02.

iii) £87,415 be set aside as provision for credit liabilities from the revenue account and applied to avoid new loans authorised by credit approvals.

5 That the treasury management activities as set out in Part D be approved

6 That the Authority assurance statement as set out in Appendix 3 be approved.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

TITLE FILE

Fire Final Accounts 2001/02 (1) General papers

(2) Stocks, etc.

Appendix 1

Major variations in revenue expenditure

(excluding pensions)

Appendix 2

Capital payments 2001/02

* Includes £233,000 creditors from 2000/01.

Appendix 3

Authority assurance statement for the year ended 31 March 2002

Ejner Knudsen

Chief Internal Auditor

Hampshire Fire and Rescue Authority

24 June 2002