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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

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 Primary Care Trust PCT

Blackwater Valley & Hart PCT

Mid Hampshire PCT

East Hampshire PCT

Fareham & Gosport PCT

Eastleigh & Test Valley PCT

New Forest PCT

The gross income for 2005/06 is £1,708,221 (£853,040 for 2004/05) and

expenditure £903,436 (£383,347 in 2004/05) giving a surplus of

£804,785 (£469,693 in 2004/05).

The County Council's contribution was £774,640 (£500,000 in 2004/05

including contributions in kind of £32,040).

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Notes to the Consolidated Revenue Account continued

3

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 2005/06 income from this source was

£9.5m (£11.1m in 2004/05), which covered the costs involved.

4

Change in provisions

2004/05

2005/06

Corporate contributions were:

£'000

£'000

Provision for doubtful debts

447

576

Provision for known insurance liabilities

-3,766

-2,866

Provision for part-time pensions

-150

0

-3,469

-2,290

See note 15 to the balance sheet for further information on provisions.

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Notes to the Consolidated Revenue Account continued

5

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 2006 the payments

remaining under the contract are estimated to be £1,502m of which £1,162m

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. This has now been extended

to November 2009. At 31 March 2006 the payments remaining under

the contract are estimated at £20.79m (£4.85m at 31 March 2005).

6

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 2005/06 spending under section 137 amounted to £146,391 or 12p per head

(£110,187 or 9p per head in 2004/05).

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

under any other statutory power.

29

Notes to the Consolidated Revenue Account continued

7

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 need 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.

Since 2003/04, 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 2005/06 is £50.0m (£45.17m in 2004/05). 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 2005/06 the County Council paid an employers' contribution of £39.8m

into the Hampshire County Pension Fund (£33.3m in 2004/05). This was 15.0%

of pensionable pay (13.5% in 2004/05).

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 2004 resulted in the actuary recommending a phased

increase in the employers' rate. The rate was 225% of employees'

contributions in 2004/05, 250% in 2005/06 rising to 275% in 2006/07,

and 295% in 2007/08.

30

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 2005/06 is £2.5m (£1.6m in 2004/05).

This includes £1.03m for teachers as the County Council

is responsible for all pension payments relating to added

years awarded by the County Council and for

meeting the additional cost of early retirement.

This is included in non-distributed costs in the

Consolidated Revenue Account, in accordance with

BVACOP, but a charge of £2.3m (£1.8m in 2004/05)

has been made after adjusting for the difference between

actuarial assumptions and estimated cashflow in 2005/06.

The past service cost for early retirements in previous years is

assessed by the actuary at £38.62m in respect of teachers

pensions (£37.13m in 2004/05) and £28.61m in respect of

unfunded benefits to former employees in the LGPS

(£27.24m in 2004/05). 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 2005/06 contributions paid to cover the cost of early

retirements were:

LGPS

Teachers

Total

£'000

£'000

£'000

Early retirements in 2005/06

526

60

586

Early retirements in previous years

2,538

2,534

5,072

for which payments are still being made

Total payments in 2005/06

3,064

2,594

5,658

31

Notes to the Consolidated Revenue Account continued

Other pension transactions included in the Consolidated Revenue Account are set out below.

For 2004/05, Magistrates' Courts Committee figures are shown separately in order to

allow the Hampshire County Council figures to be comparable with the 2006 figures.

Pensions interest cost and expected return on pension fund assets

2004/05

Magistrates'

Hampshire

Total

2005/06

Courts

County

Committee

Council

£'000

£'000

£'000

£'000

Interest cost on pension liabilities

1,630

68,230

69,860

72,890

Expected return on pension fund assets

-1,180

-45,850

-47,030

-53,930

450

22,380

22,830

18,960

Contribution from Pensions Reserve

Current Service cost of pensions

1,040

45,170

46,210

50,000

Employer's contributions to the

-758

-33,300

-34,058

-39,800

local government pension scheme

282

11,870

12,152

10,200

Added years and early retirement cashflows

-121

-4,438

-4,559

-4,857

in the year

Charge to non-distributed costs for early

123

1,774

1,897

2,327

retirement in the year

2

-2,664

-2,662

-2,530

Pensions interest cost and return on assets

450

22,380

22,830

18,960

Total charge to net operating expeniture

734

31,586

32,320

26,630

Contribution from pension reserve

-734

-31,586

-32,320

-26,630

Net effect on Consolidated Revenue Account

0

0

32

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 2004/05).

In 2005/06 the net cost was £41.8m (£40.4m in 2004/05).

8

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.

33

Notes to the Consolidated Revenue Account continued

9

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 2005/06 was

£4.2m (£5.0m in 2004/05). The main components are:

2004/05

2005/06

£'000

£'000

Advertising for staff

3,104

2,295

Corporate Communications Team costs (including staffing)

816

810

Promotion of tourism

125

163

Publicising public transport services

231

218

Road safety publicity

173

169

Promotion of economic development and

71

71

investment in Hampshire

Early Education publicity

98

73

Waste management publicity

85

105

Planning policy promotion

137

61

Social services publicity

73

108

10

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:

2004/05

2005/06

£'000

£'000

£'000

£'000

Capital charges to services

-131,026

-148,114

Depreciation provision

46,390

54,953

Less Government grant released

-13,114

33,276

-20,152

34,801

Net interest payable

13,188

15,138

Asset management revenue account surplus

-84,562

-98,175

34

Notes to the Consolidated Revenue Account continued

11

Contribution from Capital Financing Account

The contribution from capital financing account comprises:

2004/05

2005/06

£'000

£'000

Provision for repaying loans

18,457

20,988

Depreciation provision

(net of Government grants released)

-33,276

-34,801

Contribution from capital financing account

-14,819

-13,813

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.

12

Earmarked reserve accounts

2004/05

2005/06

Variations in reserve accounts are as follows:

£'000

£'000

Schools

2,410

2,635

Capital

-4,787

-3,615

Landfill allowances trading scheme

0

3,538

Public Services Agreement reward grant

0

2,712

Insurance

541

665

Designated underspendings

1,534

-791

On-street-parking

-210

0

Grant equalisation

7,857

2,825

Modernisation, restructuring and efficiency plan

0

3,505

Job evaluation implementation

750

5,650

Trading accounts

873

202

Invest-to-save

239

-75

Other

-2

-16

9,205

17,235

35

Notes to the Consolidated Revenue Account continued

13

Internal Trading Accounts

The trading units had an overall deficit of £75,000 (2004/05 overall surplus

of £761,000) as follows:

2004/05

2005/06

£'000

£'000

Former Direct Services Organisation

Income

23,027

23,345

- provides catering and cleaning services

to schools and some non-educational

Expenditure

22,823

23,231

sites in Hampshire and supplies vehicles

to departments of the County Council.

Surplus

204

114

Education Business Units

Income

29,042

26,992

- provide support services principally

to schools but also to other

Expenditure

28,899

26,532

departments and other local authorities.

Surplus

143

460

Information Technology Services

Income

31,887

31,471

- are provided to County Council

departments and some other local

Expenditure

31,771

32,432

authorities.

Surplus(Deficit)

116

(961)

County Supplies

- operate the central purchasing

Income

9,505

9,236

warehouse and arranges direct delivery

and other contracts for County

Expenditure

9,359

9,120

Council departments, other local authorities

and voluntary organisations.

Surplus

146

116

Hampshire Printing Services

Income

2,531

2,345

- provide printing and reprographic

services to County Council

Expenditure

2,497

2,313

departments.

Surplus

34

32

Five other smaller trading units

Income

1,386

1,468

- including a surplus of £83,000

(£80,000 surplus in 2004/05) on the

Expenditure

1,268

1,304

management of the River Hamble.

Surplus

118

164

Total Surplus(Deficit)

761

(75)

36

Notes to the Consolidated Revenue Account continued

14

Members expenses

The totals of members' allowances paid in the year was £1,244,000 (£1,147,000 in

2004/05).

15

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

2004/05

2005/06

£50,000 - £59,999

151

214

£60,000 - £69,999

53

63

£70,000 - £79,999

15

26

£80,000 - £89,999

7

1

£90,000 - £99,999

6

6

£100,000 - £109,999

1

3

£110,000 - £119,999

-

1

£120,000 - £129,999

2

1

£130,000 - £139,999

1

1

£140,000 - £149,999

2

3

£150,000 - £159,999

-

-

£160,000 - £169,999

-

-

£170,000 - £179,999

-

-

£180,000 - £189,999

1

-

£190,000 - £199,999

-

1

239

320

37

Notes to the Consolidated Revenue Account continued

16

Related-party transactions

During the year transactions with related parties arose as follows:

2004/05

2005/06

£'000

£'000

Central Government

Receipt of Government Grants

- Revenue

818,092

854,248

- Capital

41,269

46,520

859,361

900,768

Levy paid to Environment Agency

638

742

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 214 other scheduled and admitted bodies (204 in 2004/05).

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 2005/06 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:

2004/05

2005/06

£'000

£'000

Pension Fund

Interest paid

2,686

2,668

Temporary investments 31 March

77,883

73,252

Administration charge

1,396

1,539

Hampshire Police Authority

Interest paid

1,464

838

Temporary investments 31 March

26,003

8,383

Hampshire Fire and Rescue Authority

Interest paid

306

206

Temporary investments 31 March

4,826

5,607

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

officers of the Council.

38

Notes to the Consolidated Revenue Account continued

17

Operational leases

The annual sum payable for leased vehicles and items of equipment

is £2.4m (£2.1m in 2004/05). For property it is £3.2m (£3.3m in 2004/05).

The annual rent received from leased properties is £2.5m.

18

External Audit fees

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

as follows:

2004/05

2005/06

£'000

£'000

Code of Audit Practice

261

248

Grant Claims

81

17

Other

22

18

364

283

19

Contribution from other authorities

These are principal repayments of debt charges relating to former

County Council services that have transferred to other authorities.

39