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Notes to the Consolidated Revenue Account

1

Format

The Consolidated Revenue Account brings together income and expenditure on all

services. The net cost of services is presented using the service expenditure

analysis set out in the Best Value Accounting Code of Practice (BVACOP). This

helps comparison between authorities.

2

Prior period adjustments

The County Council ceased to contribute to the costs of the Magistrates

Courts Committee when responsibility for funding of the service

passed to a national agency from 1 April 2005.

These prior period adjustments are shown below

2003/04

2003/04

original

adjusted

difference

£'000

£'000

£'000

Net expenditure

Court services

4,990

268

-4,722

Magistrates courts

0

4,722

4,722

4,990

4,990

0

3

Pooled Budgets

The County Council is a partner in the Hampshire Children's Trust. The

purpose of this is to establish a Children's Trust for Child and Adolescent

Mental Health Services in Hampshire under Section 31 of the Health

Act 1999.

The other partner bodies are:

Hampshire County Council (Host Partner)

North Hampshire PCT

Blackwater Valley & Hart PCT

East Hampshire PCT

Fareham & Gosport PCT

Eastleigh & Test Valley PCT

New Forest PCT

The gross income for 2004/05 is £853,040 and expenditure £383,347

giving a surplus of £469,693

The County Council's contribution was £500,000 (including

contributions in kind of £32,040).

26

Notes to the Consolidated Revenue Account continued

4

Hampshire Fire and Rescue Authority

The revenue account included Hampshire County Council's share of the costs

of the Hampshire Fire and Rescue Authority, prior to 1 April 2004, when

the Authority became a precepting authority.

5

Local Authorities (Goods & Services) Act 1970

Services are provided to other local authorities and public bodies under the Local

Authorities (Goods and Services) Act 1970. In 2004/05 income from this source was

£11.1m (£11.3m in 2003/04), which covered the costs involved.

6

Change in provisions

2003/04

2004/05

Corporate contributions were:

£'000

£'000

Provision for doubtful debts

-22

447

Provision for known insurance liabilities

-347

-3,766

Provision for part-time pensions

250

-150

-119

-3,469

See note 16 to the balance sheet for further information on provisions.

27

Notes to the Consolidated Revenue Account continued

7

Undischarged obligations

Project Integra

Project Integra is being implemented as the long-term solution to household

waste management in Hampshire. It is a partnership between the County Council,

the unitary and district councils in Hampshire and the private contractor

Hampshire Waste Services (HWS). The partnership is underpinned by a long-term

contract with HWS which is jointly administered by the County Council

and Portsmouth and Southampton unitary authorities. The contract began

in January 1996 and will run until 2024/25. At 31 March 2005 the payments

remaining under the contract are estimated to be £1,507m of which £1,183m

will be charged to the County Council.

Hampshire Public Service Network

A seven year contract for a new integrated voice and data network was entered into

with Unisys at the end of 1999. At 31 March 2005 the payments remaining

under the contract are estimated at £4.85m.

South Hampshire Rapid Transit project

In 2001, the County Council and Portsmouth City Council, as joint promoters of

the South Hampshire Rapid Transit project, received Transport and Works Act

funding approval to procure a capital project linking Fareham, Gosport and

Portsmouth via an immersed tube tunnel and a light rail line. Bids were received

from the private sector at above the level of funding approved in 2001

and the Department for Transport confirmed that it did not regard

the scheme as affordable at its increased cost. Having reviewed the project

and allocation of risk a revised submission has been made to the Department

of Transport, to which a response is awaited.

8

Discretionary expenditure

The County Council used to rely on Section 137 of the Local Government

Act 1972 for the power to incur expenditure of up to £1.90 per head of population

on activities or projects "in the interests of the area or some of its inhabitants" which

are not specifically authorised in other powers. Most of this power was repealed

and replaced with a "well-being" power in the Local Government Act 2000 with effect

from 18 October 2000. Section 137 remains as a power only for contributions to

charities and not-for-profit bodies.

In 2004/05 spending under section 137 amounted to £110,187 or 9p per head

(£211,289 or 17p per head in 2003/04).

Most was spent on grants to voluntary organisations which could not be made

under any other statutory power.

28

Notes to the Consolidated Revenue Account continued

9

Pensions

As part of the terms and conditions of employment of its staff, the County

Council provides retirement benefits. These will not actually be

payable until employees retire but the County Council has a commitment to

make the payments that needs to be disclosed in accordance with

Financial Reporting Standard No 17 - Retirement benefits ( FRS 17),

at the time that employees earn their future entitlement.

The County Council participates in two pension schemes:

a) the Teachers' Pension Scheme for teachers - this is an unfunded

defined benefit scheme. However, it is not possible to attribute the

scheme liabilities to individual local authorities on a consistent

and reasonable basis so, in accordance with FRS17, pension costs

are recorded as if the scheme was a defined contribution scheme.

b) the Local Government Pension Scheme (LGPS) for other employees - this

is a funded defined benefit scheme, administered by the County Council.

Employers and employees pay contributions into a fund at a level

estimated to balance pension liabilities with investment assets.

In 2004/05, pension costs have been charged to the Consolidated

Revenue Account in accordance with FRS 17.

Current service cost of pensions

The LGPS fund's actuary has advised that the current service cost of

pensions in 2004/05 is £46.21m (£31.84m in 2003/04). This is

included in the net cost of services in the Consolidated Revenue

Account. However, the charge met by taxpayers is based on employers

contributions payable in the year. This is achieved by adjusting

the Consolidated Revenue Account after Net Operating Expenditure.

In 2004/05 the County Council paid an employers' contribution of £34.1m

into the Hampshire County Pension Fund (£29.5m in 2003/04). This was 13.5%

of pensionable pay (12.9% in 2003/04).

The contribution rate is determined by the fund's actuary (Hewitt,Bacon and Woodrow),

based on valuations every three years. The actuarial valuation of the

Scheme as at 31 March 2001 resulted in the actuary recommending a phased

increase in the employers' rate. The rate was 205% of employees'

contributions in 2002/03, 215% in 2003/04 and 225% in 2004/05.

29

Notes to the Consolidated Revenue Account continued

Past service cost of pensions

The actuary has advised that the past service cost for early

retirements in 2004/05 is £1.6m (£1.7m in 2003/04). This

includes teachers as the County Council is responsible for all

pension payments relating to added years awarded by the

County Council. This is included in non-distributed costs

in the Consolidated Revenue Account, in accordance with

BVACOP, but a charge of £1.9m (£1.3m in 2003/04)

has been made after adjusting for the difference between

actuarial assumptions and estimated cashflow in 2004/05.

The past service cost for early retirements in previous years is

assessed by the actuary at £37.13m in respect of teachers

pensions (£32.58m in 2003/04) and £27.24m in respect of

unfunded benefits to former employees in the LGPS

(£24.49m in 2003/04). This is added

to the pension liability in the Consolidated Balance

Sheet. However, as for current service costs, the charge for

council tax setting purposes is based on the cash paid in the

year. In 2004/05 contributions paid to cover the cost of early

retirements were:

LGPS

Teachers

Total

£'000

£'000

£'000

Early retirements in 2004/05

93

110

203

Early retirements in previous years

2,004

2,352

4,356

for which payments are still being made

Total payments in 2004/05

2,097

2,462

4,559

30

Notes to the Consolidated Revenue Account continued

Other pension transactions included in the Consolidated Revenue Account are

set out below:

Pensions interest cost and expected return on pension fund assets

2003/04

2004/05

£'000

£'000

Interest cost on pension liabilities

62,260

69,860

Expected return on pension fund assets

-37,480

-47,030

99,740

116,890

Contribution from Pensions Reserve

Current Service cost of pensions

31,840

46,206

Employer's contributions to local government pension scheme

-29,262

-34,054

2,578

12,152

Added years and early retirement cashflows in the year

-4,479

-4,559

Charge to non-distributed costs for early retirement in the year

1,311

1,897

-3,168

-2,662

Pensions interest cost and return an assets

24,780

22,830

99,150

126,380

Contribution from pension reserve

-24,190

-32,320

Net effect on Consolidated Revenue Account

74,960

94,060

31

Teachers' Pension Scheme

This is a defined benefit scheme administered by the Department for Education

and Skills. The scheme is unfunded, which means that the pensions of past

employees are paid for by present employers' and employees' contributions.

However, the Department has established a notional fund as the basis of calculating

the employers' contribution. Contributions are at the rate of 13.5% (13.5% in 2003/04).

In 2004/05 the net cost was £40.4m (£38.8m in 2003/04).

10

Non-distributed costs

In accordance with the BVACOP the additional pension costs for added

years and early retirements are not charged to individual services

They are aggregated as non-distributed costs.

32

Notes to the Consolidated Revenue Account continued

11

Publicity account

Section 5 of the Local Government Act 1986 requires local authorities to keep a

separate account of expenditure on publicity. Publicity spending in 2004/05 was

£5.0m (£4.6m in 2003/04). The main components are:

2003/04

2004/05

£'000

£'000

Advertising for staff

2,741

3,104

Corporate Communications Team costs (including staffing)

841

816

Promotion of tourism

127

125

Publicising public transport services

179

231

Road safety publicity

186

173

Promotion of economic development and

64

71

investment in Hampshire

Early Education publicity

120

98

Waste management publicity

47

85

Promotion of other transportation initiatives

11

6

Planning policy promotion

92

137

Social services publicity

72

73

12

Asset management revenue account

The balance on this account reflects the difference between capital charges levied on

services (which represent a realistic economic cost of using assets in the delivery of

services) less the cost to the Council of financing its assets (from borrowing) and

depreciation suffered on the assets during the year:

2003/04

2004/05

£'000

£'000

£'000

£'000

Capital charges to services

-120,135

-131,026

Depreciation provision

42,206

46,390

Less Government grant released

-9,707

32,499

-13,114

33,276

Net interest payable

12,107

13,188

Asset management revenue account surplus

-75,529

-84,562

33

Notes to the Consolidated Revenue Account continued

13

Contribution from Capital Financing Account

The contribution from capital financing account comprises:

2003/04

2004/05

£'000

£'000

Provision for repaying loans

16,637

18,457

Depreciation provision

(net of Government grants released)

-32,499

-33,276

Contribution from capital financing account

-15,862

-14,819

The Local Government Act 2003 requires the Council to

make provision within its revenue account to repay external debt.

The provision is defined as a percentage of the Authority's capital

financing requirement The current provision rate is the mimimum, 4%.

The debt arises from borrowing to finance

previous years' capital programmes.

14

Earmarked reserve accounts

2003/04

2004/05

Variations in reserve accounts are as follows:

£'000

£'000

Schools

12

2,410

*

Capital

-1,953

-4,787

Insurance

1,072

541

Designated underspendings

-372

1,534

On-street-parking

-4,036

-210

Delayed hospital discharge

-950

0

Grant equalisation

7,857

7,857

Job evaluation implementation

2,000

750

Trading accounts

1,213

873

Invest-to-save

-75

239

Other

12

-2

4,780

9,205

*

The increase in the Schools reserve reflects the impact on Schools Balances of

allowing the temporary use of up to 25% of school reserves to fund Education capital

projects in advance of the availability of capital receipts. Schools spent £6.656m less

than their delegated budgets in 2004/05 but £4.246m was utilized for capital

financing purposes in accordance with the School balances loan scheme.

34

Notes to the Consolidated Revenue Account continued

15

Internal Trading Accounts

The trading units had an overall surplus of £761,000 (2003/04 overall surplus

of £1,202,000) as follows:

2003/04

2004/05

£'000

£'000

Former Direct Services Organisation

Income

21,930

23,027

- provides catering and cleaning services

to schools and some non-educational

Expenditure

21,672

22,823

sites in Hampshire and supplies vehicles

to departments of the County Council.

Surplus

258

204

Education Business Units

Income

24,016

29,042

- provide support services principally

to schools but also to other

Expenditure

24,247

28,899

departments and other local authorities.

(Deficit)Surplus

-231

143

Information Technology Services

Income

27,864

31,887

- are provided to County Council

departments and some other local

Expenditure

27,050

31,771

authorities.

Surplus

814

116

County Supplies

- operate the central purchasing

Income

9,176

9,505

warehouse and arranges direct delivery

and other contracts for County

Expenditure

8,979

9,359

Council departments, other local authorities

and voluntary organisations.

Surplus

197

146

Hampshire Printing Services

Income

2,274

2,531

- provide printing and reprographic

services to County Council

Expenditure

2,215

2,497

departments.

Surplus

59

34

Five other smaller trading units

Income

1,213

1,386

- including a surplus of £83,000

(£80,000 surplus in 2003/04) on the

Expenditure

1,108

1,268

management of the River Hamble.

Surplus

105

118

Total Surplus

1,202

761

35

Notes to the Consolidated Revenue Account continued

16

Members expenses

The totals of members' allowances paid in the year was £1,147,000 (£1,112,000 in

2003/04).

17

Officers' emoluments

The number of employees whose remuneration, excluding pension contributions, was

£50,000 or more, in bands of £10,000, is as follows:

Number of employees

2003/04

2004/05

£50,000 - £59,999

81

151

£60,000 - £69,999

43

53

£70,000 - £79,999

9

15

£80,000 - £89,999

6

7

£90,000 - £99,999

3

6

£100,000 - £109,999

1

1

£110,000 - £119,999

-

-

£120,000 - £129,999

3

2

£130,000 - £139,999

1

1

£140,000 - £149,999

-

2

£150,000 - £159,999

-

-

£160,000 - £169,999

-

-

£170,000 - £179,999

1

-

£180,000 - £189,999

-

1

148

239

36

Notes to the Consolidated Revenue Account continued

18

Related-party transactions

During the year transactions with related parties arose as follows:

2003/04

2004/05

£'000

£'000

Central Government

Receipt of Government Grants

- Revenue

783,730

818,092

- Capital

34,550

41,269

818,280

859,361

Levy paid to Environment Agency

5,728

638

The County Council administers the Hampshire Pension Fund on behalf of

its non-teaching employees, and those of other local authorities in the county

area together with 204 other scheduled and admitted bodies (190 in 2003/04).

The Pension Fund pools its surplus cash balances with the County Council's

to gain the benefits of scale and interest was paid to the Pension Fund

in 2004/05 at the average monthly 7 day rate.

The County Treasurer is also the appointed Treasurer of the Hampshire

Police Authority and Hampshire Fire and Rescue Authority.

These two authorities also pool surplus cash balances with the County

Council and are paid interest at the average monthly 7-day rate.

Transactions with these related parties are shown below:

2003/04

2004/05

£'000

£'000

Pension Fund

Interest paid

2,183

2,686

Temporary investments 31 March

51,204

77,883

Administration charge

1,203

1,396

Hampshire Police Authority

Interest paid

658

1,464

Temporary investments 31 March

30,569

26,003

Hampshire Fire and Rescue Authority

Interest paid

43

306

Temporary investments 31 March

738

4,826

There were no other related-party transactions involving members or chief

officers of the Council.

37

Notes to the Consolidated Revenue Account continued

19

Operational leases

The annual sum payable for leased vehicles and items of equipment

is £2.1m (£2.2m in 2003/04). For property it is £3.3m.

20

External Audit fees

Fees charged by the Audit Commission to the County Council can be analysed

as follows:

2003/04

2004/05

£'000

£'000

Code of Audit Practice

248

261

Grant Claims

116

81

Other

21

22

385

364

38