Archived decisions
AT A MEETING of the FINANCIAL AFFAIRS PANEL of the HAMPSHIRE POLICE AUTHORITY held at The Chute Room, Queen Elizabeth II Court, The Castle, Winchester on Friday 17 January, 2003.
PRESENT:
Mr. M.J. Attenborough-Cox (Chairman); Mrs. R. Atkinson; Mrs. L. Cawsey JP; Councillor A. Collett; Councillor S. A. Hayes; Councillor P. Heath.
Also present: Mr. P. Kernaghan (Chief Constable); Mr. J. Pittam (Treasurer); Mr. I. Readhead (Deputy Chief Constable); Mr. M. Coombes (Director of Finance); Mr. A. Clarke (Assistant Director of Finance); Chief Supt. G. Stogdon (Corporate Services); Ms K. Huck (Finance Department); Mr. M. Catlow and Mr. N. Childs (District Audit); Ms. C. Vagg and Mrs. M. Boyes (Clerk's Office).
231 APOLOGIES
Apologies were received from Councillor J. Fazackarley and the Clerk.
232 MINUTES
The Minutes of the meeting of the Panel held on 5 November, 2002 were confirmed as a correct record and signed by the Chairman.
233 DISTRICT AUDIT ANNUAL AUDIT LETTER
The Panel considered a report of the Chief Constable and Treasurer (Item 3 in the Minute Book) on the Annual Audit Letter which was attached to the report.
Representatives from the District Audit Service attended the meeting and summarised the key issues identified by the Auditor contained within the report. The Auditor reported that the Authority had responded appropriately and positively to a number of changes and developments it had faced in the year, and confirmed that he had issued an unqualified opinion on the statement of accounts for 2001/02.
The report highlighted two issues which the Auditor considered needed addressing by the Authority to avoid qualification on financial statements in future years. The two issues were firstly, ensuring that the full cost of pensions liabilities for those officers entitled to retire, but who have not, were reflected in the annual accounts, and secondly that payments of compensatory grant were treated on an accruals rather than cash basis.
The Annual Audit Letter outlined that there was an effective financial planning framework in place and that good progress in developing performance management arrangements had been made and also in developing a broader approach to quality management.
Some issues were still to be addressed in terms of developing performance targets and ensuing action plans that needed to focus on key issues and outcomes.
The Auditor further commented that the Best Value Performance Plan was a very well presented, readable document containing informative data. On the matter of basic command units delegation he stated that a measured approach was being taken. Appropriate processes in relation to sickness absence were developing. Arising from the Best Value Review of Personnel, sickness levels would improve across the force as the appointment of a co-ordinator was being recommended to oversee work in this area.
He concluded that, the Authority is a low risk organisation with sound processes in place. The Chairman asked that a report be brought to the Panel later in the year on Crime Recording Data.
The Panel thanked the Auditor for his comments on the Best Value Performance Plan, and also thanked Mr Readhead, the Scrutiny Board and the Best Value and Performance Management Panel of the Authority for their continued support.
The Director of Finance advised the Panel that delegation arrangements needed to provide the best solution to aid delivery within the force, and that pilots were now at the stage where the pace and future of delegation needed to be discussed further. A further paper would be provided to the Panel in due course.
The Panel discussed the issue of pension liabilities and accruals for compensatory housing grants. The Auditor confirmed that there was lack of clarity with the interpretation of the accounting rules and that the Authority's view had been shared with the Audit Commission. The Treasurer expressed concern in relation to the practical consequences of having to change processes for compensatory grant and charge two years cash in one financial year, which would significantly impact on the budget.
The Panel would await a response from the Auditor to confirm the situation.
RESOLVED:
That it be a RECOMMENDATION to the Authority that the Annual Audit Letter be accepted.
234 PROVISION FOR POLICE PENSIONS
The Panel considered a report of the Treasurer (Item 4 in the Minute Book) detailing the arguments around creating provisions for the cost of future pension lump sum payments.
The Treasurer presented the report and outlined the main points, he advised that there was no accounting logic in creating a provision solely for this element of police pension liabilities. The Chancellor's pre-budget announcement that he did not intend to tax such payments should reduce the risk of a sudden exodus of police officers who are eligible to retire but have not yet chosen to do so. He further advised that, the phased implementation of Financial Reporting Standard (FRS) 17 dealt comprehensively with the issue of pension liabilities, and that FRS 17 now supersedes FRS 12, this maintained his view that provisions were not necessary. The basis for setting a budget and an associated reserve should have regard to past experience and future predictions, and not solely the maximum possible level of expenditure, if this is unlikely to occur. The Auditor had raised an issue not about the fundamentals of accounting for pension liabilities, but the management of budgetary implications for tax setting of the uncertain cash flow associated with payment of benefits to police officers.
The Chairman confirmed the current position of the Authority would remain until a response from the Audit Commission was received.
RESOLVED:
That, no provisions for police pensions be made, but that sufficient reserves be maintained to meet the risks of budget volatility.
235 DISTRICT AUDIT REPORT - COMMAND AND CONTROL PROJECT
The Panel considered a report of the Chief Constable (Item 5 in the Minute Book) on the project review of the command control centre conducted by District Audit, following an invitation from the Deputy Chief Constable to conduct the review. The District Auditor's summary report was appended to the report.
The report identified the lessons learned from the whole process including success factors and good practice that could be replicated elsewhere in the organisation and areas that could be improved in subsequent projects.
The Deputy Chief Constable introduced the report and felt it was appropriate to subject the command and control process to inspection by District Audit. He drew members attention to paragraph 4.1 which outlined the lessons learned for the future. The review had been well received and areas identified for improvement would be considered in future projects. The Deputy Chief Constable further emphasised that the delivery of the command and control project was a complex programme which was fully functional and the improvements coming through were significant.
The Panel congratulated the Deputy Chief Constable on an excellent project outcome and were reassured in relation to the make up of project teams for the future, that the people appointed would be prepared and committed with the right skills.
Members were content that there were no other issues which required further explanation or reports.
RESOLVED:
That the report be noted.
236 2003/04 PROVISIONAL POLICE FUNDING SETTLEMENT
The Panel considered a report of the Treasurer (Item 6 in the Minute Book) outlining the overall increase in police grant and formula grant (revenue support grant and business rates) for the Authority which is 3%. This was barely sufficient for inflation costs let alone other spending increases of 7% for 2003/04 including the implementation of police reform. Changes in grant formula have been made which are detrimental to the Authority, in the geography and weighting given to the area cost adjustment, which had previously reflected the higher costs of policing in the Hampshire and Isle of Wight area, compared with other parts of the country outside the south east. Formula Spending Share (FSS) which replaces Standard Spending Assessments (SSA) has actually reduced by 1.5% in cash terms. The other substantial loss had been caused by the introduction of resource equalisation. The Government has redistributed the grant towards high needs, low resource (low council tax) areas at the expense of low needs, high resource areas such as Hampshire and the Isle of Wight and shire police authorities generally.
The Treasurer introduced the report and gave a presentation to members on the impact of the budget. He identified that from the information available it was not possible to calculate the precise loss of grant, but it was about £5.9m (2.6% of the budget), however, the settlement was below that of the worst case.
A response had been sent by the Treasurer on the settlement, the final settlement being expected in the first week in February. The new system was not simpler, fairer or more intelligible but it was still a formula driven system.
The Treasurer reinforced the need to know the 2004/05 cash increase, otherwise sensible long term planning decisions could not be made. Essentially, the settlement was not enough to meet current policies, which would mean that the burden would have to be borne by the Council Tax payer.
The Panel discussed at length the provisional settlement and felt it was important to make representations to the Minister on the settlement that had been provisionally advised to the Police Authority. Members were disappointed that the settlement was driven by national policy and undermined the principle of local services being decided locally.
The Chief Constable reiterated that the funding was being taken away from Hampshire to other areas in the country which transferred the political pain from central government to police authorities. The South East Regional ACPO Group felt that transferring funding was totally wrong when a good police service was being delivered.
In conclusion, members agreed that strong representations should be made to the Minister, and that the public should also be made aware of these representations to central government.
RESOLVED:
(a) That, the grant loss from changes in the grant formula be noted.
(b) That, representations be made to the Minister as set out in paragraph 7.7 of the report in seeking a meeting with other police authorities similarly affected in the south east.
237 FORWARD REVENUE BUDGET 2003/04 - CURRENT POLICIES ONLY
The Panel considered a report of the Chief Constable and Treasurer (Item 7 in the Minute Book) on the forward budget for the next financial year in respect of current policies and providing a very preliminary assessment of the likely council tax precept for 2003/04. The figures contained therein were the best estimates that could be provided at this time and some changes may be required before the formal approval of the precept at the Authority's meeting in February, 2003.
The Treasurer introduced the report and detailed the summary revenue budget for the current policies for next year which showed net expenditure to be met from general grants and local taxation of £243.6m, an increase of just over 7% on the original budget for the current year. £6.9m (3%) of the increase was due to inflation - the cost of police pay awards. The remaining increase of £9.1m (4.0%) is due to police reform, the National Insurance increase of 1%, police salary increments. It was also possible to provide for 116 extra recruits appointed during this year by use of the Crime Fighting Fund (CFF), and to meet increased forensic and police surgeon costs for specific grant for DNA expansion. On the basis of the net expenditure shown in Appendix 1 of the report and 3% increase in grants received the amount to be met by local taxation would be £59.2m. This results in a 21% council tax increase (£15.77 or 30p per week).
The Panel discussed the report at length and agreed it was important that the current level of policing was maintained. It was reiterated that the national insurance increases had been forced upon the Authority by Central Government, and that insufficient provision had been made in the settlement to meet the underlying increases in local policing for 2003/04.
RESOLVED:
That, the current policies budget as set out in Appendix 1 to the report be approved.
238 FORWARD REVENUE BUDGET 2003/04 - PROPOSALS FOR ADDITIONAL NET EXPENDITURE
The Panel considered a report of the Chief Constable and Treasurer (Item 8 in the Minute Book) on the Chief Constable's proposals for additional resources required for investment in policing in the year ahead. The report also considered the impact of accruing for compensatory grant and the increase in the pensions reserve/provision as raised in the District Auditor's Annual Audit Letter.
The Treasurer introduced the report and brought members attention to the Chief Constable's priorities as being split into "no choice" or "high priority". A preliminary review of the proposals for additional resources had been reviewed by the Chairman and Vice-Chairman of the Panel, and the Chairman of the Authority. Each proposal had been considered in detail and concluded that those totalling just over £2m should be brought to the Panel. In addition, it would be necessary to consider increasing the pension reserve by a minimum of £0.4m, and if necessary to set aside £0.6m towards a phased accrual of compensatory grant.
The Director of Finance drew members attention to paragraph 3 of the report. Initial bids were scrutinised by the appropriate ACPO portfolio holder and then brought to the Constabulary's Resource Management Board (RMB) for further consideration. The value of the proposals brought to (RMB) were just over £7m and following the boards detailed review this was reduced to £3.3m. Following the further detailed scrutiny of the proposals the value of the proposals had been reduced to just over £2m. The additional items considered would increase the budget by 8.3% (a further (£3m) and would result in an overall council tax for Band D of £96 (a 27% increase). The final decision would be taken by the Authority in February 2003.
The Panel discussed in detail the additional net expenditure items and sought clarification on costs and figures. It was agreed that, the consequences of any growth items not being included in the budget should be reported to the Authority.
RESOLVED:
(a) That, it be a RECOMMENDATION to the Authority that the overall strategy in respect of growth for the 2003/04 revenue budget be approved.
(b) That, it be a RECOMMENDATION to the Authority that the pensions reserve be increased by a minimum of £0.4m.
(c) That, the position in relation to accrual of compensatory grant be deferred until a written response is received from the Audit Commission.
(d) That, additional provision for the increase in the level of reserves be deferred until the written response is received from the Audit Commission.
239 IT AND COMMUNICATIONS - REVENUE BUDGET IN THE INFORMATION SYSTEM STRATEGY - OPTIONS 2003/04
The Panel considered a report of the Chief Constable (Item 9 in the Minute Book) on the first annual update of the five year investment plan produced at the end of 2001. The report summarised the projects underway and the bids for new systems. The main aim was to quantify and evaluate the potential impact on resources both budgetary and staffing.
Members sought clarification on a few items within the report specifically where there was the possibility for collaboration. The Deputy Chief Constable confirmed that they would be looking to collaborate in as many areas as possible to assist with driving down costs. He further provided clarification to members on savings. He confirmed that the IT Director would speak to the Panel at a future meeting. He further confirmed that the expected length of service remaining for Automatic Crime Recording (ACR) was approximately 18 months.
RESOLVED:
That, the report be noted for consideration in the setting of budgets for the next financial year.
240 POLICE AUTHORITY'S FORWARD REVENUE BUDGET 2003/04
The Panel considered a report of the Treasurer (Item 10 in the Minute Book) on the 2003/04 current policies budget for serving the Police Authority which is £1.1m, an increase of £75,000 over 2002/03 of which £61,000 was the result of an increased level of activity by Authority Members.
The Treasurer introduced the report which set out the forward budget for 2003/04 based on current policies. The premises costs were based on current levels and the arrangements for occupation of the additional space at Westgate Chambers provided for a rent free period in 2003/04. The figures in column 4 of the appendix reflect the higher level of activity by Authority Members than what was anticipated when the forward budget for the current year was prepared.
The Panel discussed the Police Authority budget and asked that the Best Value Review of the Police Authority be brought to the February meeting of the Panel so that additional costs could be considered in making final decisions on the 2003/04 budget.
RESOLVED:
That, the Panel forward budget for 2003/04 for servicing the Police Authority based on current policies as set out in the Appendix be approved.
241 INTERNAL AUDIT PROGRESS REPORT
The Panel considered a report of the Treasurer (Item 11 in the Minute Book) on the progress of work by Internal Audit included in the 2002/03 Audit Plan. The report identified that there were a number of audits now in progress, and at this stage there were no expected difficulties in delivering the plan in the year. Based on the reviews completed during the period the overall opinion remains that the control environment is sound.
RESOLVED:
That, the progress on the 2002/03 Internal Audit Plan be noted.
242 HMIC PRE-INSPECTION - FINANCE AND RESOURCES
The Panel considered a report of the Chief Constable (Item 12 in the Minute Book) on the visit by Her Majesty's Inspectorate of Constabulary (HMIC) who undertook a pre-inspection. This will form the basis for the finance and resources elements of a subsequent full inspection. It also flagged up the issues that the HMIC would expect to see addressed in future Best Value Reviews.
The Director of Finance introduced the report and took members through the actions allocated to senior managers. He advised that the pre-inspection addressed the management of finance and resources across the Authority and Constabulary including the specific functions of finance, estates, procurement, stores and transport.
The Panel were content that there were no other issues which required further explanation or reports.
RESOLVED:
That the report be noted.
243 EXCLUSION OF THE PRESS AND PUBLIC
RESOLVED:
That, by virtue of Paragraph 1 of Part I of Schedule 12A of the Local Government Act 1972 the press and public be excluded from this part of the meeting.
244 BRIEFING NOTE FOR MEMBERS - INTERNAL AUDIT PROGRESS REPORT
The Panel discussed the content of the briefing note which had been circulated in advance to members. They raised concerns to the Director of Finance who confirmed that action had been taken, and that in future a more hands-on role in monitoring would be undertaken by the finance manager.
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