1 Prior period adjustments

1.1 The only prior period adjustment relates to the value of pension scheme assets. The reasons for this are set out in paragraph 10.2 of the Accounting polices. The effect of this change is to decrease the value of scheme assets by £20,000 and make a corresponding increase in the pension reserve.

2 Provisions

2.1 The Authority holds three provisions. The first is for the provision for bad debts, which totals nil in 2008/09 (nil in 2007/08).

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:

	2007/08	2008/09
	£'000	£'000
Balance as at 1 April	57	38
Payments made during the year	-9	-2
Increase/decrease (-) made during the year	-10	+17
Balance as at 31 March	38	53

2.4 The third is a provision for the interest payable as a result of the Government's expected implementation of new actuarial factors for the commutation of pension into lump sums being further backdated to August 2006. This totals £95,000. It is expected that this cost will be matched by Government grant. The cost of the increased lump sums will be met from the Pension Fund Account and also matched by Government Grant.

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 unfunded local government pension scheme costs have been separately accounted for. Previously they were included within the local government 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:

Assets and liabilities in relation to retirement benefits

3.4 The following tables set out the reconciliation of the present value of the various schemes liabilities:

Added years and early retirements

3.5 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.

3.6 The following table set out the reconciliation of the fair value of the Local Government Pension Scheme:

	2007/08
	(restated)	2008/09
	£000	£000
1 April	17,040	17,870
Expected return on assets	1,190	1,210
Actuarial gains and losses	-1,630	-5,010
Employer contributions	1,170	1,270
Contributions by scheme participants	410	470
Net benefits paid out	-310	-460
31 March	17,870	15,350

3.7 The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date. Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets.

3.8 The actual return on assets in the year was £3,080,000 (£440,000 in 2007/08).

History of retirement scheme deficits

3.9 The following tables set out the history of the pension scheme deficits:

* The Authority has elected not to restate fair value of scheme assets for period ending 2005 and 2006 as permitted by FRS 17 (as revised) and are shown at mid-market value. Asset values previously measured at mid-market value for periods ending 2007 and 2008 have been re-measured for this purpose.

3.10 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

3.11 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.

3.12 All schemes have been assessed by an independent actuary, Hewitt, Bacon and Woodrow Limited against a formal actuarial valuation as at the following dates:

Scheme	Date
Local Government Pension Scheme - funded	31 March 2007
Local Government Pension Scheme - unfunded	31 March 2009
Firefighters' Pension Scheme	31 March 2008
New Firefighters' Pension Scheme	31 March 2008
Firefighters' Injury and Ill-Health Pensions	31 March 2009

3.13 The main financial assumptions in their calculations have been:

	2007/08 (%)	2008/09 (%)
Inflation - Firefighter schemes	3.7	3.4
Inflation - LGPS schemes	3.7	3.6
Rate of general increase in salaries - Firefighters	5.2	4.9
Rate of general increase in salaries - LGPS	5.2	5.1
Rate of increase to pensions in payment - Firefighters	3.7	3.4
Rate of increase to pensions in payment - LGPS	3.7	3.6
Rate of increase to deferred pensions - Firefighters	3.7	3.4
Rate of increase to deferred pensions - LGPS	3.7	3.6
Proportion of LGPS employees opting to take a commuted lump sum :
for pre 2008 service	25	25
for post 2008 service	75	75
Discount rate - Firefighters	6.8	6.7
Discount rate - LGPS	6.8	6.5
Long-term expected rate of return on equities	7.6	7.0
Long-term expected rate of return on property	6.6	6.0
Long-term expected rate of return on Gov't bonds	4.6	4.0
Long-term expected rate of return on corporate bonds	6.8	5.8
Long-term expected rate of return on other assets	6.0	1.6
Average long-term expected rate of return	6.7	5.7

3.14 The principal demographic assumptions concerning post retirement mortality are:

LGPS schemes
Males:	31 March 2008	31 March 2009
Base table (in 2007)	PNMA00 with allowance for MC improvement factors to 2007	PNMA00 with allowance for MC improvement factors to 2007
Scaling to above base table rates	110%	110%
Cohort improvement factors (from 2007)	100% of LC	80% of LC
Minimum underpin to improvement factors	1.0%	1.25%
Future lifetime from age 65 (currently aged 65)	21.3	22.2
Future lifetime from age 65 (currently aged 45)	23.2	24.5
Females:
Base table (in 2007)	PNFA00 with allowance for MC improvement factors to 2007	PNFA00 with allowance for MC improvement factors to 2007
Scaling to above base table rates	110%	110%
Cohort improvement factors (from 2007)	100% of LC	60% of LC
Minimum underpin to improvement factors	0.5%	1.25%
Future lifetime from age 65 (currently aged 65)	23.4	24.2
Future lifetime from age 65 (currently aged 45)	24.6	26.4
Firefighter schemes
Males:	31 March 2008	31 March 2009
Base table	PMA92 making allowance for MC improvement factors to 2007	S1NMA
Scaling to above base table rates	100%	100%
Cohort improvement factors	100% of MC to 2027 for non pensioners and 2017 for pensioners (from 2007)	80% of LC
Minimum underpin to improvement factors	1.0%	1.25%
Future lifetime from age 65 (currently aged 65)	21.8	22.0
Future lifetime from age 65 (currently aged 45)	22.6	24.3
Females:
Base table (in 2007)	PFA92 with allowance for improvements in line with MC improvement factors to 2007	S1NFA
Scaling to above base table rates	100%	100%
Cohort improvement factors (from 2007)	100% of MC to 2027 for non pensioners and 2017 for pensioners (from 2007)	60% of LC
Minimum underpin to improvement factors	0.5%	1.25%
Future lifetime from age 65 (currently aged 65)	24.6	24.1
Future lifetime from age 65 (currently aged 45)	25.2	26.4

Pension Scheme Assets

3.15 The firefighters' schemes have no assets to cover its liabilities. The Local Government Pension Scheme assets consist of the following categories, by proportion of the total assets held by the Fund:

	31 March 2008	31 March 2009
	%	%
Equities	62	55
Property	6	7
Government bonds	26	28
Other assets	6	10
Total	100	100

History of experience gains and losses

3.16 The following table sets out the history of experience gains and losses on liabilities:

	2004/05	2005/06	2006/07	2007/08	2008/09
	£'000	£'000	£'000	£'000	£'000
Local Government Pension Scheme - funded	910	0	-20	-510	-50
Local Government Pension Scheme - unfunded	-	-	-	0	0
Firefighters' Pension Scheme	-140	16,200	-950	-1,000	-32,470
New Firefighters' Pension Scheme	-	-	0	0	-290
Injury Pensions	-	-	-	-90	-2,110

3.17 The following table sets out the history of experience gains and losses on assets:

	2004/05	2005/06	2006/07	2007/08	2008/09
	£'000	£'000	£'000	£'000	£'000
Local Government Pension Scheme - funded	450	1980	-20	-1,630	-5,010
Local Government Pension Scheme - unfunded	-	-	-	0	0

3.18 In accordance with paragraph 79 of FRS17 (as revised), unfunded liabilities are disclosed separately for periods beginning on or after 6 April 2007. The history of experience gain/(loss) on liabilities shown has not been re-stated for periods ending 2007, 2006 and 2005 and includes the experience relating to unfunded liabilities.

3.19 Actuarial gains and losses

3.20 The actuarial gains and losses identified as movements on the Pensions Reserve and recognised in the Statement of Recognised Gains and Losses were as follows:

	2004/05	2005/06	2006/07	2007/08	2008/09
	£'000	£'000	£'000	£'000	£'000
Local Government Pension Scheme - funded	-2,260	190	290	2,960	-6,740
Local Government Pension Scheme - unfunded	-	-	-	-10	0
Firefighters' Pension Scheme	-52,000	-16,750	2,180	54,760	-23,010
New Firefighters' Pension Scheme	-	-	9	410	-130
Injury Pensions	-	-	-	1,240	-1,780
Total	-54,260	-16,560	2,479	59,360	-31,660

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 2008/09 was £179,000 (£154,000 in 2007/08), of which £60,000 (£50,000 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 £132,000 (£327,000 in 2007/08) 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 2008/09 £127,000 was paid to Members under this scheme (£128,000 in 2007/08).

7 Officers remuneration

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

Total remuneration	Number of Employees
	2007/08	2008/09
£50,000 - £59,999	53	55
£60,000 - £69,999	7	10
£70,000 - £79,999	0	1
£80,000 - £89,999	2	3
£90,000 - £99,999	1	0
£100,000 - £109,999	4	3
£110,000 - £119,999	1	2
£120,000 - £129,999	0	1
£130,000 - £139,999	0	0
£140,000 - £149,999	1	1
Total	69	76

8 Related party transactions

8.1 The following Government grants were received during the year:

	2007/08	2008/09
	£'000	£'000
General government grants (RSG and NDR)	27,595	28,236
Other specific revenue grants	1,506	1,196
Capital grants	292	0
Total	29,393	29,432

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

	2007/08	2008/09
	£'000	£'000
Home Fire Safety Checks	292	0
New Dimensions accommodation	0	0
Urban Search and Rescue training	0	0
LPSA 1 reward grant	0	0
Total	292	0

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 £1,000 (nil in 2007/08) and there was no balance temporarily invested as at 31 March 2009 (nil on 31 March 2008). This is shown in the balance sheet under Temporary Lending.

8.4 The total interest paid was £74,000 (£76,000 in 2007/08) and the balance temporarily borrowed as at 31 March 2009 was £2,668,000 (£3,164,000 on 31 March 2008). 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. Insurance premiums totalling £29,000 were paid in 2008/09 (£290,000 in 2007/08).

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 2008/09 the Authority paid the following fees to the Audit Commission for external audit and inspection:

	2007/08	2008/09
	£'000	£'000
External audit services	66	81.5
Statutory inspection	0	0
Grant claims and returns	0	0
Other services	0	0
Total	66	81.5

10 Net surplus on disposal of assets

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

	2007/08	2008/09
	£000	£000
Sale proceeds	1,003	916
Less net book value of assets sold	-1,153	-689
Costs of sale	-12	-10
Surplus (+) / deficit (-) on sale charged to the Income and Expenditure Account	- 162	217

10.2 The sale proceeds in 2008/09 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. There was also one sale and the same discount in 2007/08.

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:

Capital expenditure	2007/08	2008/09
	£'000	£'000
Land	0	0
Construction work	4,039	1,234
Vehicles and equipment	2,052	1,628
Fees and salaries	544	162
Finance leases	193	0
Total	6,828	3,024

12.2 Capital spending was financed as follows:

Capital financing	2007/08	2008/09
	£'000	£'000
Capital receipts	1,002	613
Revenue Contributions - budgeted	826	980
Revenue contributions - capital payments reserve	111	0
Supported borrowing	3,612	1,396
Unsupported borrowing	922	0
Capital contributions	0	35
Capital grants	157	0
Finance lease	198	0
Total	6,828	3,024

13 Capital commitments

13.1 The Authority has authorised expenditure in future years under its capital programme of £5,631,000 of which £785,000 is contracted.

	Expenditure approved and contracted as at 31 March 09	Expenditure approved but not contracted at 31 March 09
	£'000	£'000
2008/09 vehicles	658	439
Winchester Fire Station	0	3,967
Other schemes	127	440
Total	785	4,846

14 Non-financial information on assets held

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

	2007/08	2008/09
Dwellings
Number of houses	19	14
Other land and buildings
Number of fire stations	53	52
Total floor area (sq M)	44,691	44,546
Vehicles
Number of vehicles owned	165	193

15 Assets held under finance leases

15.1 In 2007/08 the Authority acquired breathing apparatus and further vehicles through finance lease arrangements. No finance lease arrangements were entered into in 2008/09.

15.2 The rentals payable under these arrangements in 2008/09 were £59,000 (£33,000 in 2007/08), charged to the Income and Expenditure Account as £11,000 finance costs (debited as interest payable) and £48,000 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):

	£'000
Value as at 1 April 2008	214
Additions	0
Revaluations	0
Depreciation	-48
Disposals	0
Value as at 31 March 2009	166

15.4 Outstanding obligations to make payments under these finance leases (excluding finance costs) at 31 March 2009 are as follows:

	£'000
Obligations payable in 2009/10	45
Obligations payable between 2010/11 and 2013/14	99
Obligations payable after 2013/14	0
Total liabilities at 31 March 09	144

15.5 At 31 March 2009 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:

	2007/08	2008/09
	£'000	£'000
Vehicles	811	697
Employee leased cars	158	167
Photocopiers	21	12
Home Computers Initiative	20	0
Total	1,010	876

16.2 The Authority is committed to make payments totalling £790,000 in 2009/10 (£815,000 in 2008/09) for operational leases which expire over the following timescales:

	2008/09	209/10
	£'000	£'000
During 2009/10	125	96
Between 2010/11 - 2013/14	419	503
After 2013/14	271	191
Total	815	790

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.

	Dwellings	Other land and buildings	Vehicles, plant and equipment	Non-operational assets
	£'000	£'000	£'000	£'000
Valued at historic cost			7,836
Valued at current value in:
2004/05		5
2005/06	1,422	12,311		1,480
2006/07	532	11,155
2007/08	1,135	5,495
2008/09	0	58,137
Total	3,089	87,103	7,836	1,480

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:

	31 March 2008	31 March 2009
	£'000	£'000
Uniforms	328	246
Equipment	68	86
Workshops	153	118
Fuel	29	27
Hydrants	5	5
Memorabilia	2	5
Foam	21	37
Stationery	20	17
First Aid	2	3
HFSV Equipment	1	2
Business Forms	5	4
Leaflets	7	1
Total	641	551

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 represent the car loans to staff and repayments due from staff under the cyclescheme introduced in 2008/09 of £13,000 in 2008/09 (£6,000 in 2007/08). They attract a market rate of interest for a period of less than five years. The value 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 2008/09 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.

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

	2007/08	2008/09
	£'000	£'000
Government departments	6	102
Other local authorities	0	0
Sundry debtors	383	437
Total	389	539

22.3 The reason for the large increase in Government departments is that the interest provision of £95,000 will be funded by the Government.

23 Payments in advance

23.1 This balance mainly represents the proportion of operational leasing payments made that relate to 2009/10 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 2009/10.

24 Temporary lending and borrowing

24.1 This balance represents the money lent to/borrowed from Hampshire County Council.

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:

	2007/08	2008/09
	£'000	£'000
Government departments	1,000	990
Other local authorities	112	19
Sundry creditors	1,168	1,121
Total	2,280	2,130

25.3 The reason for the large decrease in other local authorities is that the 2007/08 accounts included a large creditor for professional fees for property services.

26 Receipts in advance

26.1 The balance shown mainly represents 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 16 fixed rate long-term loans all from the Public Works Loan Board (PWLB). The interest rates payable range from 3.97% to 5.875%.

27.2 The statement below sets out the maturity profile:

	31 March 08	31 March 09
	£'000	£'000
Between 1 and 10 years	0	0
Between 10 and 15 years	2,460	2,811
Between 15 and 20 years	803	452
Between 20 and 25 years	1,014	2,472
More than 25 years	1,715	857
Total	5,992	6,592

The figures above include accrued interest payable of £42,000 as at 31 March 2009 and £42,000 as at 31 March 2008.

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:

	As at 31 March 2008	As at 31 March 2009
	£'000	£'000
Carrying amount	5,992	6,592
Fair value	6,327	7,417

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:

	2007/08	2008/09
	£'000	£'000
Balance 1 April	-426	-421
Financing of expenditure in the year	-157	0
Less release of grants resulting from the depreciation and disposal of assets	+162	+9
Balance at 31 March	-421	-412

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 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:

	2007/08	2008/09
	£'000	£'000
Balance brought forward 1 April	96,682	-803
Balance to capital adjustment account	-96,682	-
Adjusted opening balance	0	-803
Gains on valuation of fixed assets in year	-803	-4,275
Disposed assets written out to Capital Adjustment Account	0	62
Excess of current value depreciation over historic cost depreciation	0	11
Balance carried forward 31 March	-803	-5,005

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:

	2007/08	2008/09
	£'000	£'000
Balance as at 1 April	2,493	-92,338
Add balance transferred from Fixed Asset Restatement Account/Revaluation Reserve	-96,682	-
Adjusted opening balance	-94,189	-92,338
Revenue contributions	-937	-980
Capital receipts applied	-1,002	-613
Minimum revenue provision	-338	-554
Depreciation	2,671	2,588
Adjustment to prior year depreciation	0	-356
Impairments	309	9,350
Asset disposals	1,153	689
Disposed deferred income asset	0	-5
Deferred charges	157	0
Loss on sale of assets	-150	-217
Reversal of loss on sale of assets	150	217
Deferred government grants and contributions released	-162	-9
Disposed assets written out from Revaluation Reserve	0	-62
Excess of current value depreciation over historic cost depreciation	0	-11
Balance as at 31 March	-92,338	-82,301

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:

	2007/08	2008/09
	£'000	£'000
Balance as at 1 April	0	0
Receipts in the year	-1,002	-916
Less used to finance expenditure	1,002	613
Balance 31 March	0	-303

Earmarked reserves

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

	Balance 1 April	In year movement	Balance 31 March
	£'000	£'000	£'000
Capital payments reserve	0	-750	-750
Modernisation/Improvement and sustainability reserve	-362	-168	-530
Equal pay reserve	-300	-300	-600
Total	-662	-1,218	-1,880

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:

Bedfordshire and Luton Combined Fire Authority

Cambridgeshire and Peterborough Fire Authority

Cheshire Fire Authority

Devon and Somerset Fire and Rescue Authority

Essex Fire Authority

Kent and Medway Fire Authority

Leicester, Leicestershire and Rutland Combined Fire Authority

Royal Berkshire Fire Authority

34.3 The Authority's paid up capital is £282,000 and is included within the FRAML cash balance 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:

	2007/08	2008/09
	£'000	£'000
Net assets:
Payments in advance	65	2
Debtors	3	2
FRAML's cash holding	476	289
Receipts in advance	-190	-7
Creditors	-72	-4
Initial cash investment	282	282

34.5 A recent decision announced by the Court of Appeal on 9 June 2009 concerning the mutual insurance company operated by a group of London boroughs (LAML) means that, as a consequence, FRAML will probably be wound up. An extraordinary meeting of FRAML will take place on 1 July. This would see the return of the capital contribution and a share of the operating surplus being returned to the Authority.

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:

	2007/08	2008/09
	£'000	£'000
Deficit on Income and Expenditure Account	22,805	28,744
Items on an accruals basis:
Increase/decrease (-) in stocks	25	-90
Increase/decrease (-) in debtors	-735	155
Increase/decrease (-) in payments in advance	266	-49
Increase/decrease (-) in FRAML cash holding	476	-187
Increase (-) /decrease in creditors	408	150
Increase (-) /decrease in receipts in advance	-688	401
	-248	380
Non-cash transactions:
Net additional amounts debited or credited to the General Fund Balance	-23,159	-28,230
Increase (-) /decrease in provisions	19	-110
Revenue contributions to capital	-937	-980
Statutory provision for repayment of debt	-338	-554
Increase (-) /decrease in reserves	546	-1,218
	-23,869	-31,092
Classified elsewhere in the cash flow statement:
Interest paid	-358	-373
Interest received	1	10
Net cash inflow/outflow from revenue activities	-1,669	-2,331

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:

		2007/08	2008/09
		£'000	£'000
Movement of net debt in the balance sheet:
· Long term loans	- 1 April	-5,450	-5,992
	- 31 March	-5,992	-6,592
	- Movement	-542	-600
· Short term loans	- 1 April	0	-3,164
	- 31 March	-3,164	-2,668
	- Movement	-3,164	496
· Deposits	- 1 April	517	0
	- 31 March	0	0
	- Movement	-517	0
Total movement in net debt		-4,223	-104
Net cash outflow before financing		4,222	105
Increase/Decrease in cash		-1	1

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:

	2007/08	2008/09
	£'000	£'000
Net increase/decrease (-) in short term deposits	-517	0
Repayments of amounts borrowed	0	0
New long term loans	-542	-600
New short term loans	-3,164	496
Total movement in net debt in the balance sheet	-4,223	-104

36 Contingent liabilities

36.1 There is a contingent liability in respect of current and former retained firefighters who may be eligible to join the Firefighters Pension Scheme with backdating to 2000. An Employment Tribunal has decided that retained firefighters were unfairly treated in relation to pension rights. An offer has been made to the FBU and the CLG are now preparing answers to questions that have been raised in response. It is hoped that the situation will be resolved towards the end of 2009/10.

36.2 It is currently impossible to assess what the Authority's liability may be however it is likely that any impact will be in the form of increased employer's contributions when they are next reviewed.

37 Authorisation of accounts for issue and post balance sheet events

37.1 The statement of accounts were authorised for issue on 24 June 2009 when they were presented by the Treasurer to the Authority. At this date there were no post balance sheet events that require disclosure.

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 or extraordinary items 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 The Authority has no interests that would require the production of Group Accounts.

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

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

38.9 The Authority does not administer any Trust Funds.

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

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

38.12 The Authority does not have any PFI schemes.