Explanatory Foreword_________________________________________________________

1. Introduction

1.1 This foreword gives:

· a summary of the various statements which make up the 2004/05 accounts

· a broad picture of where the money comes from and what it is spent on

· a summary of the revenue expenditure on services and capital expenditure on new assets over the course of the year.

2. Summary of Statement of Accounts

2.1 The accounts for 2004/05 are set out on pages 4 - 6 and 17 - 36. They consist of:

· statement of accounting policies

· summary revenue account - this covers income and expenditure on the service

· balance sheet - this sets out the financial position on 31 March 2005

· cash flow statement - this summarises cash coming in or going out from

transactions with others for revenue and capital purposes

· statement of total movements in reserves - this sets out how reserves have changed and been used during the year.

3. Where the money comes from

3.1 On 1 April 2004 the Authority moved to a precept status. The Authority's income now comes from general Government grants, a share of national business rates and the council tax. In addition specific Government grants are received for certain services and fees are charged to customers for some services. Interest is also earned on day to day balances.

The proportion of the Council's income from these sources is as follows:

	%
Council tax	50.9
National business rates	26.4
General Government grants	18.9
Fees, charges & interest	2.2
Specific Government grants	1.6
	100

4. What the money is spent on

4.1 The Authority spent its money as follows:

Explanatory Foreword_________________________________________________________

5. Overview of the year - revenue account

5.1 The Authority set its budget requirement at £58,368,000 which was 13.75% more than the original budget for 2003/04.

The main components of the 2004/05 budget and actual income and expenditure are set out below.

5.2 At the end of the year net expenditure totalled £54.1m which was £4.3m lower than the original budget.

Explanatory Foreword_________________________________________________________

5.3 This position reflects three main factors:

· a precautionary approach to setting up the Authority's financial position on moving to precepting status from 2004/05

· a number of difficult-to-predict spending and income areas which have all moved in the same direction over 2004/05 and

· efforts made by the service to minimise spending in order to achieve the best possible position for future development.

6. Overview of the year - capital expenditure

6.1 In 2004/05 the Authority spent £1,574,000 on capital projects:

7. Debt

7.1 The Authority currently has thirteen loans totalling £5,100,000.

On a day to day basis the Authority is able to lend to and borrow from Hampshire County Council.

8. Changes

8.1 The Authority ceased to levy on Hampshire County Council, Portsmouth City Council and Southampton City Council on 31 March 2004. The Authority now receives a share of the national business rate and Government grant directly and sets its own council tax precept. On 1 April 2004 the Authority received £615,000 for its starting revenue account balance based on a formula agreed between the three former constituent authorities and this Authority.

8.2 The Authority implemented the new Financial Reporting Standard on Retirement benefits (FRS17) in preparing its financial statements for 2003/04. In 2003/04 the present value of pension liabilities was assessed using a rate determined by the Government Actuaries Department based on the assumed long term real rate of return on long dated index linked stocks. In 2004/05 the Accounting Code of Practice required liabilities to be discounted on the AA corporate bond rate, as prescribed by FRS17. This had the effect of reducing the discount rate by 1.1% in 2004/05 and this revised assumption added approximately £50m to the value of pension liabilities in 2004/05. This liability is both long term and volatile. Employer's rates on the Local Government Pension Scheme have been subject to an annual phased increase as a result of the March 2001 actuarial valuation and will continue to increase on a phased basis following the March 2004 valuation, with the aim of restoring full funding over the longer term.

9. Further information

9.1 Further information can be obtained about the accounts from the Treasurer to the Fire and Rescue Authority at the County Treasurer's Department, Hampshire County Council, The Castle, Winchester, Hampshire, SO23 8UB, telephone (01962) 847518, or e-mail [email protected].