1 Prior period adjustments

1.1 There are no prior period adjustments required in 2007/08.

2 Provisions

2.1 The Authority holds two provisions. The first is for the provision for bad debts, which totals nil in 2007/08 (£18,000 in 2006/07).

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. All costs in connection with the scheme except those relating to injury pensions and any ill-health early retirement costs are funded by the Government.

· 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. All costs in connection with the scheme except those relating to injury pensions and any ill-health early retirement costs are funded by the Government.

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. This is the first year that injury pension costs have been separately accounted for. Previously they were included with the firefighters' pension scheme figures. 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. The Authority pays for injury pensions and the costs of ill-health early retirement.

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, 31 March 2007 for the Local Government scheme and 31 March 2008 for Firefighters' injury pensions. No formal valuation has taken place for the new Firefighters' scheme but the actuary carried out an approximate valuation as at 31 March 2007.

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 £2,934.4m for the fund as a whole as at 31 March 2008 (£2,885.48m as at 31 March 2007). 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 2008:

· Local Government Pension Scheme

· Firefighters' Pension Scheme

· New Firefighters' Pension Scheme

· Firefighters' Injury Pensions

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 2007/08 was £154,000 (£150,000 in 2006/07), of which £50,000 (£52,000 in 2007/08) 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 £327,000 (£37,000 in 2006/07) which represents the expenditure incurred. The reasons for this significant increase included assisting Gloucestershire and South Yorkshire Fire Authorities during the summer floods, charging West Sussex and Surrey Fire Services for cross border calls and training charges to Royal Berkshire Fire Authority.

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 2007/08 £128,000 was paid to Members under this scheme (£122,000 in 2006/07).

7 Officers remuneration

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

7.2 The definition of remuneration has been changed to gross pay plus taxable expenses from taxable pay plus expenses. The comparative data for 2006/07 has been restated on this basis.

7.3 The reason for the decrease in numbers in 2007/08 compared with 2006/07 is that in 2006/07 firefighters received a large back-pay award payment.

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. No interest was received in 2007/08 (£207,000 in 2006/07) and there was no balance temporarily invested as at 31 March 2008 (£517,000 on 31 March 2007). This is shown in the balance sheet under Temporary Lending.

8.4 The total interest paid was £76,000 (£nil in 2007/08) and the balance temporarily borrowed as at 31 March 2008 was £3,164,000 (£nil on 31 March 2007). This is shown in the balance sheet under Temporary Borrowing.

8.5 The Board of Directors of the Fire and Rescue Authorities' Mutual Limited (FRAML) comprises representatives from the member fire authorities as well as independent specialists. The Director of Corporate Services is the Chairman of FRAML and on the Board of Directors.

8.6 During 2007/08 a capital contribution of £282,000 was made to FRAML and insurance premiums totalling £290,000 were paid.

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

9 Disclosure of audit costs

9.1 In 2007/08 the Authority paid the following fees to the Audit Commission for external audit and inspection:

10 Net loss on disposal of assets

10.1 The following statement shows the analysis of the net loss on the disposal of assets:

10.2 The sale proceeds in 2007/08 reflects a £10,000 discount given to a firefighter who bought his home as part of the Authority's decision to sell its dwellings following the change in crewing arrangements at certain fire stations.

Summary of capital expenditure and fixed asset disposals

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

12 Capital spending and financing

12.1 Capital spending on fixed assets was as follows:

12.2 Capital spending was financed as follows:

12.3 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.

13 Capital commitments

13.1 The Authority has authorised expenditure in future years under its capital programme of £1,378,000 of which £341,000 is contracted.

14 Non-financial information on assets held

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

15 Assets held under finance leases

15.1 In 2007/08 the Authority acquired breathing apparatus and further vehicles through finance lease arrangements.

15.2 The rentals payable under these arrangements in 2007/08 were £33,000 (£500 in 2006/07), charged to the Income and Expenditure Account as £6,000 finance costs (debited as interest payable) and £27,000 relating to the write-down of obligations to the lessor (debited as part of the appropriation to the Capital Adjustment Account in the Statement of Movement on the General Fund Balance).

15.3 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):

15.4 Outstanding obligations to make payments under these finance leases (excluding finance costs) at 31 March 2008 are as follows:

15.5 At 31 March 2008 the Authority had not signed any leases for vehicles or equipment where payments had not started.

16 Assets held under operational lease

16.1 The following operational lease payments have been made:

16.2 The Authority is committed to make payments totalling £815,000 in 2007/08 (£952,000 in 2006/07) for operational leases which expire over the following timescales:

17 Valuation information

17.1 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.

17.2 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.

18 Depreciation

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

18.2 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.

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

19 Stocks

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

20 Financial Instruments

20.1 In accordance with Financial Reporting Standard (FRS 26) long-term debtors, debtors, payments in advance and temporary lending are classified as loans and receivable financial instruments. Creditors, receipts in advance and temporary and long-term borrowing are classified as financial liabilities at amortised cost. An assessment of the associated risks is given in notes 27 to 29 below.

21 Long term debtors

21.1 These mainly represent the car loans to staff of £6,000 in 2007/08 (£16,000 in 2006/07). They attract a market rate of interest are for a period of less than five years. Their amortised cost in the balance sheet is a reasonable assessment of fair value. All loans are expected to be repaid in full and so a reduction for impairment is not considered necessary.

22 Debtors

22.1 Receipts are due within one year without interest and as such the fair value of receivables equals the original invoice amount. The total amount in 2007/08 has not been reduced in accordance with the requirements of FRS 26 (impairments) to take account of debts that are unlikely to be collectable as it is believed all debts will be repaid in full. The 2006/07 balance was reduced by £18,000.

22.2 The debtors balance on the balance sheet can be further analysed as amounts due to:

22.3 The reason for the large decrease in Government is that the New Dimensions grant (£668,000) had not been received in 2006/07.

23 Payments in advance

23.1 This balance mainly represents the proportion of operational leasing payments made that relate to 2008/09 as payments are made annually in advance. As the balance relates to less than a financial year the fair value is equivalent to the proportion of the original invoice that relates to 2008/09.

24 Temporary lending and borrowing

24.1 This balance represents the money lent to/borrowed from Hampshire County Council. The reason for the significant drop between the years is due to the significant level of capital spending which has not been backed up by long-term borrowing.

24.2 The temporary lending balance is lent on a daily basis to the County Council and as such the loan amount is a reasonable assessment of fair value. Any temporary borrowing is also on a daily basis and therefore the amortised value in the balance sheet is also reasonable assessment of fair value.

25 Creditors

25.1 The Authority's policy is to pay creditors within 30 days of the date shown on the invoice. As such, the invoice amount is a reasonable assessment of the fair value of the financial liability.

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

26 Receipts in advance

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

26.2 The balance is in the main relating to next years expenditure and as such their amortised cost in the balance sheet is a reasonable assessment of fair value.

27 Long-term borrowing

27.1 The Authority has 15 fixed rate long-term loans all from the Public Works Loan Board (PWLB). The interest rates payable range from 4.2% to 5.875%.

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

The figures above include accrued interest payable of £42,000 as at 31 March 2008 and £37,000 as at 31 March 2007. *The first column excludes accrued interest and reflects the balance sheet comparator information.

27.3 Long term borrowing is carried in the balance sheet at amortised cost. Their fair value has been assessed by the PWLB by calculating the present value of the cash flows that will take place over the remaining term of the instruments, using premature repayment interest rates.

27.4 The fair values of PWLB loans have been calculated as follows:

27.5 The fair value is more than the carrying amount as the Authority's portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the rates that would be applied to calculate the premiums if the loans were repaid on the balance sheet date. This commitment to pay interest above current market rates increases the amount that the Authority would have to pay if it repaid the loans early.

28 Credit risk.

28.1 Credit risk arises from deposits with banks and financial institutions. As any surplus cash is temporarily invested with the County Council the Authority is therefore exposed to minimal risk.

29 Liquidity risk

29.1 As the Authority has ready access to borrowings through the PWLB there is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. Instead, the risk is that the Authority will be bound to replenish a significant proportion of its borrowings at a time of unfavourable interest rates.

29.2 The Authority mitigates this risk by its policy of taking out its long-term borrowing requirements reasonably evenly from one year to the next. In real terms the value of the debt will be substantially eroded through the remainder of its term by inflation.

30 Market risks

Interest rate risk

30.1 The Authority is exposed to risk in terms of its exposure to interest rate movements on its borrowings and investments. Movements in interest rates could have an impact on the Authority. For instance, a rise in interest rates would have the following effects:

· The cost of temporary borrowing at variable rates would increase

· The fair value of borrowings at fixed rates would fall

· The interest income from any temporary lending to the County Council credited to the income and expenditure account would rise.

30.2 Borrowings are not carried at fair value, so nominal gains and losses on fixed rate borrowings would not impact on the income and expenditure account or the statement of recognised gains and losses. However, changes in interest payable and receivable on variable rate temporary borrowing and lending will be charged to the income and expenditure account and affect the general balance pound for pound.

Foreign exchange risk

30.3 The Authority has no financial asset or liability denominated in foreign currencies and thus has no exposure to loss arising from movements in exchange rates.

31 Deferred Government grants and contributions

31.1 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.

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

32 Reserves

32.1 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:

Revaluation reserve

32.2 The revaluation reserve stores gains on the revaluation of fixed assets (since 1^st April 2007) not yet realised through sales. Losses are charged to the income and expenditure account. The reserve, together with the capital adjustment account, is matched by fixed assets within the balance sheet and is not resources available to the Authority.

32.3 The movement in the account is analysed below:

Capital adjustment account

32.4 This account represents the store of capital resources set aside to meet past capital expenditure. It is a balancing mechanism between the different rates at which assets are depreciated and actually financed. The account together with the revaluation reserve is matched by fixed assets within the balance sheet and is not resources available to the Authority.

32.5 The movement in the account is analysed below:

Useable capital receipts reserve

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

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

Earmarked reserves

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

*There was an in-year contribution to the capital payments reserve of £111,000 which was also used during the year.

33

34 Insurance Mutual

34.1 The Fire and Rescue Authorities' Mutual Limited (FRAML) is the mutual insurance company created by Fire and Rescue Authorities to serve the insurance needs of Fire and Rescue Authorities. It started business on 1 September 2007. The Authority is a participating member and having contributed to the capital setup costs of the company will in due course receive a share of the surpluses. The Authority holds 17% of the members paid up capital within the company.

34.2 The following Fire and Rescue Authorities were also members during the year:

34.3 The Authority's paid up capital is £282,000 and this is shown as a long term investment in the balance sheet.

34.4 As the Authority's percentage share in the Company exceeds 15% the Authority is required under FRS 9 to reflect its share of the business in the balance sheet. The table below sets out the adjustments made:

35 Notes relating to the Cash Flow Statement

Reconciliation to the Income and Expenditure Account

35.1 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

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

Movement in net debt in the balance sheet

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

36 Authorisation of accounts for issue and post balance sheet events

36.1 The statement of accounts were authorised for issue on 26 June 2008 when they were presented by the Treasurer to the Governance Committee.

37 Post balance sheet event

37.1 A legal challenge has been made against the London Borough of Brent's participation in the London Authorities' Mutual Limited (LAML) which could have implications for FRAML.

37.2 Alternative short-term insurance cover has been put in place by FRAML (including retrospective cover) pending the outcome of the legality of the of the current FRAML arrangements.

37.3 It is therefore likely that FRAML's surplus could be adversely affected.

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

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

38.2 There were no exceptional items, extraordinary items or prior period adjustments in the year.

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

38.4 The Authority does not have any intangible fixed assets.

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

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

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

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

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

38.10 The Authority does not administer any Trust Funds.

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

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

38.13 The Authority does not have any PFI schemes.