1 Prior period adjustments

1.1 In the 2006/07 Statement of Accounts, the Authority has adopted two significant new accounting policies that impact on the comparative figures for 2005/06 in the Income and Expenditure Account:

· Capital financing charges for the use of fixed assets are no longer made to service revenue accounts or support services

· Credits for government grants deferred are now posted to service revenue accounts or support services rather than credited as a corporate income item

1.2 In addition an adjustment in respect of FRS 17 to reflect the difference between actuarial assumptions and actual cash flow in 2005/06 has also been made to the 2005/06 comparator figures.

1.3 None of these changes impact on the actual cash position of the Authority.

1.4 These changes have had the following impact on the comparative figures for 2005/06 compared with those published in the 2005/06 Statement of Accounts:

2 Provisions

2.1 The Authority holds two provisions. The first is for the provision for bad debts, which totals £18,000 (£991 in 2005/06).

2.2 The second is for uninsurable and other claims. This covers costs which may arise as a result of the Authority being uninsured for a period (the Authority's insurers went into liquidation some years ago), possible employment tribunals (together with their associated costs) and other claims made against the Authority. These cases may take a number of years to settle.

2.3 The movement on this provision can be summarised as follows:

3 Retirement benefits

Participation in pension schemes

3.1 As part of the terms and conditions of employment of its employees, the Authority offers retirement benefits. Although these benefits will not actually become payable until the employees retire, the Authority has a commitment to make the payments that needs to be disclosed at the time that employees earn their future entitlement.

3.2 The Authority participates in three pension schemes:

· the Local Government Pension Scheme (LGPS) for support staff which is administered by Hampshire County Council. This is a funded scheme, meaning that the Authority and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets

· the Firefighters' Pension Scheme (FPS) for firefighters. This is an unfunded scheme, meaning that there is no investment assets built up to meet the pensions liabilities, and cash has to be generated to meet the actual pension payments as they eventually fall due. This scheme was closed to new members from 31 March 2006.

· the New Firefighters' Pension Scheme (NFPS) for firefighters. This is an unfunded scheme, meaning that there is no investment assets built up to meet the pensions liabilities, and cash has to be generated to meet the actual pension payments as they eventually fall due. This scheme was opened to new members from 1 April 2006.

Revenue Transactions relating to retirement benefits

3.3 The cost of retirement benefits is recognised in the Net Cost of Services when they are earned by employees, rather than when the benefits are eventually paid as pensions. The charge made against the council tax is based on the cash payable in the year, so the real cost of retirement benefits is reversed out in the Statement of Movement in the General Fund Balance. The following transactions have been made in the Income and Expenditure Account and Statement of Movement in the general Fund Balance during the year:

Added years and early retirements

3.4 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.

Assets and liabilities in relation to retirement benefits

3.5 The following assets and liabilities attributable to the Authority are included in the balance sheet:

3.6 The liabilities show the underlying commitments that the Authority has in the long run to pay retirement benefits. The liability has a substantial impact on the net worth of the Authority recorded in the balance sheet. However, statutory arrangements for funding the deficit mean that the financial position of the Authority remains healthy:

· the deficit on the local government pension scheme will be made good by increased contributions over the remaining life of employees, as assessed by the actuary

· finance is only required to be raised to cover firefighters' pensions when the pensions are actually paid. Under current financing arrangements most of this expenditure is paid for by the Government.

Basis for estimating Assets and Liabilities

3.7 Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels etc. All three schemes have been assessed by an independent actuary, Hewitt, Bacon and Woodrow Limited against a formal actuarial valuation as at 31 March 2005 for the firefighters' scheme and 31 March 2004 for the Local Government scheme. No formal valuation has taken place for the new Firefighters' scheme but the actuary has carried out an approximate valuation.

3.8 The main assumptions in their calculations have been:

3.9 The firefighters' schemes have no assets to cover its liabilities. Assets in the County Council Pension Fund are valued at fair value, principally market value for investments totalling £2,885.48m for the fund as a whole as at 31 March 2007 (£2,667.53 as at 31 March 2006). The funds assets consist of the following categories, by proportion of the total assets held by the Fund:

Actuarial gains and losses

3.10 The actuarial gains and losses identified as movements on the Pensions Reserve can be analysed into the following categories measured as absolute amounts and as a percentage of assets or liabilities as at 31 March 2007:

· Local Government Pension Scheme

· Firefighters' Pension Scheme

· New Firefighters' Pension Scheme

4 Publicity

4.1 Section 5 of the Local Government Act 1986 requires local authorities to keep a separate account of expenditure on publicity. Spending on publicity in 2006/07 was £150,000 (£186,000 in 2005/06), of which £52,000 (£71,000 in 2005/06) related to staff advertising.

5 Local Authority (Goods and Services) Act 1970

5.1 Services are provided to other authorities and public bodies under the Local Authorities (Goods and Services) Act 1970. The income from this was £37,000 (£36,000 in 2005/06) which represents the expenditure incurred.

6 Members allowances

6.1 Under the Local Authorities (Members' Allowances) Act 2003 the Authority is required to make a scheme for the payments of certain allowances to Members. In 2006/07 £122,000 was paid to Members under this scheme (£114,000 in 2005/06).

7 Officers remuneration

7.1 The number of employees whose remuneration, excluding pension contributions, was £50,000 or more is set out below:

8 Related party transactions

8.1 The following Government grants were received during the year:

8.2 The statement below sets out further details of the capital grants:

8.3 The Treasurer is also the County Treasurer of Hampshire County Council.

The Authority's daily cash surplus or deficit is pooled with that of the County Council and interest is paid based on the average 7 day rate. The total interest received was £207,000 (£207,000 in 2005/06) and the balance temporarily invested as at 31 March 2007 was £22,000 (£6,343,000 on 31 March 2006). This is shown in the balance sheet under Temporary Lending.

8.4 During the year there were no related party transactions involving Members or Chief Officers of the Authority.

9 Disclosure of audit costs

9.1 In 2006/07 the Authority paid the following fees to the Audit Commission for external audit and inspection:

10 Summary of capital expenditure and fixed asset disposals

10.1 The movement in fixed assets during the year was as follows:

11 Capital spending and financing

11.1 Capital spending on fixed assets was as follows:

11.2 Capital spending was financed as follows:

11.3 Deferred charges represent expenditure which has been capitalised but which does not add to the value of Authority owned assets. The expenditure during the year relates to the cost of Home Fire Safety Visits which is written out to revenue as it is incurred.

12 Capital commitments

12.1 The Authority has authorised expenditure in future years under its capital programme of £8,582,000 of which £583,000 is contracted.

13 Non-financial information on assets held

13.1 The table below sets out further details on the assets held as at 31 March.

14 Assets held under finance leases

14.1 The Authority has acquired a vehicle under a finance lease. The rental payable under this arrangement in 2006/07 was £500 (nil in 2005/06), charged to the Income and Expenditure Account as £100 finance costs (debited as interest payable) and £400 relating to the write-down of obligations to the lessor (debited as part of the appropriation to the Capital Financing Account in the Statement of Movement on the General Fund Balance).

14.2 The following values of assets are held under finance leases by the Authority, accounted for as part of Tangible Fixed Assets (vehicles, plant and equipment):

14.3 Outstanding obligations to make payments under this finance lease (excluding finance costs) at 31 March 2007 are as follows:

14.4 At 31 March 2007 the Authority had not signed any leases for vehicles or equipment where payments had not started.

15 Assets held under operational lease

15.1 The following operational lease payments have been made:

15.2 The Authority is committed to make payments totalling £952,000 in 2007/08 (£1,131,000 in 2005/06) for operational leases which expire over the following timescales:

16 Valuation information

16.1 Land and buildings are required to be valued every five years, or sooner when there are material changes. The last quinquennial revaluation was completed in 2004/05. From 2005/06 the Authority adopted a rolling programme for valuing its assets. The following statement shows the progress of the Authority's rolling programme for the revaluation of fixed assets. The valuations were carried out by qualified personnel from the Estates Practice, Hampshire County Council.

17 Depreciation

17.1 Depreciation charges are made on all fixed assets other than land and non-operational assets in line with FRS 15.

17.2 Depreciation is calculated on a straight line basis over the useful economic lives of the assets. In the case of permanent buildings a provisional average residual life has been assumed of 25 years for building components and 100 years for other parts of the building. Furniture and equipment is assumed to have a life of ten years and vehicles between 10 and 15 years.

17.3 No change in the depreciation methodologies were made during the year.

18 Long term debtors

18.1 These mainly represent the car loans to staff of £16,000 in 2006/07 (£25,000 in 2005/06).

19 Stocks

19.1 The balance is made up of the following stocks held:

20 Debtors

20.1 The debtors balance on the balance sheet cam be further analysed as amounts due to:

20.2 The reason for the large increase in Government is that the New Dimensions grant (£668,000) had not been received.

21 Temporary lending and borrowing

21.1 This balance represents the money lent to/borrowed from Hampshire County Council. The reason for the significant drop between the years is the change in debtors and creditors balances and also the significant capital spending which has not been backed up by long-term borrowing.

22 Creditors

22.1 The creditors balance on the balance sheet can be further analysed as amounts due to:

22.2 The main reason for the reduction in the value of creditors is that in 2005/06 there was a large creditor for back pay.

23 Receipts in advance

23.1 The balance shown represents some leasing rebates received in advance and funding for some local fire initiatives.

24 Long-term borrowing

24.1 The Authority has 14 long-term loans all from the Public Works Loans Board. The interest rates payable range from 4.2% to 5.875%.

24.2 The statement below sets out details of the maturity dates of these loans:

25 Deferred Government grants and contributions

25.1 This account contains the external grants and contributions that have been used to finance capital expenditure. It is adjusted for depreciation (written down) to offset depreciation charges generated by the relevant assets, and when these assets are sold.

25.2 The movement on the account can be summarised as follows:

26 Reserves

26.1 The Authority keeps a number of reserves in the Balance Sheet. Some are required to be held for statutory reasons, some are needed to comply with proper accounting practice, and others have been set up voluntarily to earmark resources for future spending plans:

Fixed asset restatement account

26.2 The fixed asset restatement account allows assets to be maintained in the accounts at their current value.

26.3 The movement in the account is analysed below:

Capital financing account

26.4 The capital financing account contains expenditure financed from revenue and capital receipts together with the statutory amount required to provide for the repayment of external loans less the amounts included for depreciation and writing down of deferred charges.

The movement in the account is analysed below:

Useable capital receipts reserve

26.5 Capital receipts arise from the sale of assets. It is a cash-backed reserve that is available to help finance capital expenditure.

26.6 The balance on the useable capital receipts reserve is made up as follows:

Earmarked reserves

26.7 The following statement sets out the movements on all the Authority's earmarked reserves during the year:

27 Notes relating to the Cash Flow Statement

Reconciliation to the Income and Expenditure Account

27.1 The statement below reconciles the net deficit on the Income and Expenditure Statement to the revenue activities net cash flow in the Statement:

Reconciliation between movement in cash and movement in net debt

27.2 The following statement reconciles the movement in cash with the movement in net debt:

Movement in net debt in the balance sheet

27.3 The following statement reconciles the items shown in financing and management of liquid resources to the related items in the balance sheet:

28 Authorisation of accounts for issue and post balance sheet events

28.1 The statement of accounts were authorised for issue on XX September 2007 by the Treasurer. At this date there were no post balance sheet events that require disclosure.

29 Other notes that require disclosure but which this Authority has nothing to report

29.1 There have been no acquired or discontinued operations during the year.

29.2 There were no exceptional items or extraordinary items in the year.

29.3 The Authority has no undischarged obligations from long-term projects.

29.4 Under various statutory powers the Authority is permitted to do work on behalf of other authorities. The Authority does not undertake work of this nature.

29.5 The Authority does not have any intangible fixed assets.

29.6 The Authority does not have a controlling or dominant influence in any company.

29.7 There are no contingent liabilities that have been provided for in the accounts.

29.8 The Authority has no interests that interests that would require the production of Group Accounts.

29.9 The Authority has no Business Improvement District Schemes in operation.

29.10 The Authority has no discretionary expenditure or pooled funds under the Health Act 1999.

29.11 The Authority has no contingent liabilities.

29.12 The Authority does not administer any Trust Funds.

29.13 The Authority does not have any interest in Building Control and therefore no requirement to produce building control accounts.

29.14 The Authority does not operate a scheme under the Transport Act 2000.

29.15 The Authority does not have any PFI schemes.