Contents

Key messages 4

Next steps 5

Financial statements 6

Value for money 9

Appendix 1 - Independent auditor's report to Members of Hampshire Fire and Rescue Authority 10

Appendix 2 - Unadjusted misstatements in the accounts 14

Appendix 3 - Draft letter of representation 15

Appendix 4 - Value for money criteria 18

Ladies and Gentlemen

2008/09 Annual Governance Report

I am pleased to present the final version of my report on the results of my audit work for 2008/09.

A draft of the report was discussed and agreed with the Treasurer and Director of Corporate Services on 2 September 2009.

The report sets out the key issues that you need to consider before I complete the audit.

It asks you to:

· consider the matters raised in the report before approving the financial statements;

· agree to adjust the errors in the financial statements I have identified, which management has declined to amend or set out the reasons for not amending the errors; (Appendix 2); and

· approve the letter of representation on behalf of the Fire Authority before I issue my opinion and vfm conclusion (Appendix 3).

Yours faithfully

Kate Handy

District Auditor

2 September 2009

Key messages

This report summarises the findings from the 2008/09 audit which is substantially complete. It outlines the key issues arising from my audit of your financial statements and the results of the work I have undertaken to assess your arrangements to secure value for money in your use of resources.

Audit opinion

1 Based on our work and findings to date, we expect to issue an unqualified opinion on the financial statements.

Financial statements

2 The financial statements submitted for audit contained no material errors but one non-trivial error was noted. We have not detailed here other minor errors and presentational issues that were adjusted during the audit.

Value for money

3 Based on our work to date we expect to issue an unqualified VFM Conclusion on the Authority's arrangements for securing economy, efficiency, and effectiveness in the use of its resources.

Next steps

This report identifies the key messages that you should consider before I issue my financial statements opinion, value for money conclusion, and audit closure certificate. It includes only matters of governance interest that have come to my attention in performing my audit. My audit is not designed to identify all matters that might be relevant to you.

4 I ask the Governance Committee to:

· consider the matters raised in the report before approving the financial statements;

· agree to adjust the errors in the financial statements I have identified which management has declined to amend or set out the reasons for not amending the errors (Appendix 2); and

· approve the letter of representation on behalf of the Fire Authority before I issue my opinion and vfm conclusion (Appendix 3).

Financial statements

The Fire Authority's financial statements and annual governance statement are important means by which the Authority accounts for its stewardship of public funds. As Fire Authority members you have final responsibility for these statements. It is important that you consider my findings before you adopt the financial statements and the annual governance statement.

Opinion on the financial statements

5 Subject to satisfactory clearance of outstanding matters, I plan to issue an audit report including an unqualified opinion on the financial statements. Appendix 1 contains a copy of my draft audit report.

6 Our overall materiality level for the opinion audit at Hampshire Fire and Rescue Authority was set at £1, 468K in line with guidance issued by the Audit Commission and International Auditing Standards. With this overall level of materiality, the level of error that was considered non-trivial for reporting to those changed with governance is £14.6K.

Unadjusted misstatements in the accounts.

7 Unadjusted misstatements are detailed in Appendix 2. There is only one unadjusted misstatement noted which relates to the accounting treatment of the FRAML. This has effectively been treated as an Investment within the accounts rather than a JANE (a joint working arrangement but not a separate accounting entity).

8 The effect of the current accounting treatment is that through the creation of a FRAML reserve, Income is understated by £70K in this year's account and was understated by £27K last year. The other side of these entries is that Cash relating to the FRAML is understated by £97K.

9 We understand that following relevant decisions made by the High Court and subsequently the Court of Appeal, it is likely that FRAML will be wound up in 2009/10. As such officers are not minded to amend the accounts due to the immaterial nature of the error.

10 Whilst we are required under auditing standards to report all errors noted above our trivial threshold we have not commented on trivial or purely presentation errors that have been corrected during the course of the audit.

Internal control environment

11 In addition to our testing of the final entries in the financial statements we also review the key financial systems that produce material entries in the accounts for the effective operation of key controls. This supports the assurance we gain for our audit opinion. From the work completed this year we concluded that there was an adequate control environment in place and there are no matters to bring to your attention.

Letter of representation

12 Before I issue my opinion, auditing standards require me to obtain appropriate written representations from you and management about your financial statements and governance arrangements. Appendix 3 contains the draft letter of representation I seek to obtain from you.

Key areas of judgement and audit risk

13 In planning my audit I identified specific risks and areas of judgement that I have considered as part of my audit. My findings are set out in Table 1.

Table 1 Key areas of judgement and audit risk

Accounting practice and financial reporting

14 I consider the qualitative aspects of your financial reporting. The Financial Statements were produced in line with agreed timetables and approved by the Authority prior to the 30 June statutory deadline. Working papers were once again produced on time and were of a good standard to support the entries and disclosures in the accounts. There are no other matters I need to bring to your attention.

Value for money

I am required to conclude whether the Fire Authority put in place adequate corporate arrangements for securing economy, efficiency, and effectiveness in its use of resources. This is known as the value for money conclusion. My conclusion is informed by my work on the scored use of resources judgement.

Value for money conclusion

15 I assess your arrangements to secure economy, efficiency, and effectiveness in your use of resources against eight criteria specified by the Audit Commission. My conclusions on each of the areas are set out in Appendix 4. My conclusion is informed by our work on Use of Resources, a scored judgement reported to the Audit Commission.

16 We have assessed the arrangements of the Authority as they relate to our value for money conclusion as meeting the criteria in all areas and as such I intend to issue an unqualified conclusion stating that in all significant respects, the Authority made proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ending 31 March 2009. Appendix 1 contains the wording of my draft report.

17 Our use of resources scored judgement will be reported separately, together with recommendations for improvement once final scores have been subjected to the national quality control process and agreed by the Audit Commission.

Appendix 1 - Independent auditor's report to Members of Hampshire Fire and Rescue Authority

Opinion on the financial statements

I have audited the accounting statements, the firefighters' pension fund accounting statements and related notes of Hampshire Fire and Authority for the year ended 31 March 2009 under the Audit Commission Act 1998. The accounting statements comprise the Income and Expenditure Account, Statement of Movement on the General Fund Balance, Balance Sheet, Statement of Total Recognised Gains and Losses, Cash Flow Statement, and the related notes. The firefighters' pension fund accounting statements comprise the Fund Account, the Net Assets Statement and the related notes. The financial statements and firefighters' pension fund accounting statements have been prepared under the accounting policies set out within them.

This report is made solely to the members of the Authority in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 49 of the Statement of Responsibilities of Auditors and of Audited Bodies prepared by the Audit Commission.

Respective responsibilities of the Treasurer^I and auditor

The Treasurer's responsibilities for preparing the financial statements, including the firefighters' pension fund accounting statements, in accordance with applicable laws and regulations and the Code of Practice on Local Authority Accounting in the United Kingdom 2008 are set out in the Statement of Responsibilities.

My responsibility is to audit the accounting statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

I report to you my opinion as to whether the accounting statements, the firefighters pension fund accounting statements and related notes present fairly, in accordance with applicable laws and regulations and the Code of Practice on Local Authority Accounting in the United Kingdom 2008:the financial position of the Authority and its income and expenditure for the year; and the financial transactions of its firefighters' pension fund during the year and the amount and disposition of the fund's assets and liabilities, other than liabilities to pay pensions and other benefits after the end of the scheme year.

I review whether the governance statement reflects compliance with `Delivering Good Governance in Local Government: A Framework' published by CIPFA/SOLACE in June 2007. I report if it does not comply with proper practices specified by CIPFA/SOLACE or if the statement is misleading or inconsistent with other information I am aware of from my audit of the financial statements. I am not required to consider, nor have I considered, whether the governance statement covers all risks and controls. Neither am I required to form an opinion on the effectiveness of the Authority's corporate governance procedures or its risk and control procedures.

I read other information published with the accounting statements, the firefighter's pension fund accounting statements and related notes and consider whether it is consistent with the audited accounting statements, the firefighter's pension fund accounting statements and related notes. This other information comprises the Explanatory Foreword. I consider the implications for my report if I become aware of any apparent misstatements or material inconsistencies with the accounting statements, the firefighters pension fund accounting statements and related notes. My responsibilities do not extend to any other information.

Basis of audit opinion

I conducted my audit in accordance with the Audit Commission Act 1998, the Code of Audit Practice issued by the Audit Commission and International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounting statements, the firefighter's pension fund accounting statements and related notes. It also includes an assessment of the significant estimates and judgments made by the Authority in the preparation of the accounting statements, the firefighter's pension fund accounting statements and related notes, and of whether the accounting policies are appropriate to the Authority's circumstances, consistently applied, and adequately disclosed.

I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the accounting statements, the firefighter's pension fund accounting statements and related notes are free from material misstatement, whether caused by fraud or other irregularity or error. In forming my opinion I also evaluated the overall adequacy of the presentation of information in the accounting statements, the firefighter's pension fund accounting statements and related notes.

Opinion

In my opinion:

The accounting statements and related notes present fairly, in accordance with applicable laws and regulations and the Code of Practice on Local Authority Accounting in the United Kingdom 2008, the financial position of the Authority as at 31 March 2009 and its income and expenditure for the year then ended; and

The firefighters pension fund accounting statements present fairly, in accordance with the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2007, the financial transactions of the firefighters pension fund during the year ended 31 March 2009 and the amount and disposition of the fund's assets and liabilities as at 31 March 2009, other than liabilities to pay pensions and other benefits after the end of the scheme year.

Conclusion on arrangements for securing economy, efficiency, and effectiveness in the use of resources

Authority's Responsibilities

The Authority is responsible for putting in place proper arrangements to secure economy, efficiency, and effectiveness in its use of resources, to ensure proper stewardship and governance and regularly to review the adequacy and effectiveness of these arrangements.

Auditor's Responsibilities

I am required by the Audit Commission Act 1998 to be satisfied that proper arrangements have been made by the Authority for securing economy, efficiency, and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires me to report to you my conclusion in relation to proper arrangements, having regard to relevant criteria specified by the Audit Commission for fire and rescue authorities. I report if significant matters have come to my attention which prevent me from concluding that the Authority has made such proper arrangements. I am not required to consider, nor have I considered, whether all aspects of the Authority's arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively.

Conclusion

I have undertaken my audit in accordance with the Code of Audit Practice and having regard to the criteria for fire and rescue authorities specified by the Audit Commission and published in May 2008 and updated in February 2009, and the supporting guidance, I am satisfied that, in all significant respects, the Authority made proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ending 31 March 2009.

Certificate

I certify that I have completed the audit of the accounts in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission.

Kate Handy
District Auditor

24 September 2009

Appendix 2 - Unadjusted misstatements in the accounts

18 The following misstatement was identified during the course of my audit and the financial statements have not been adjusted by management. I bring them to your attention to assist you in fulfilling your governance responsibilities. If you decide not to amend, please confirm the reasons for not adjusting in the representation letter. If you believe the effect of the uncorrected error is immaterial please reflect this.

Appendix 3 - Draft letter of representation

Kate Handy

District Auditor
Audit Commission
Collins House
Bishopstoke Road
Eastleigh
Hampshire SO50 6AD

Hampshire Fire and Rescue Authority - Audit for the year-ended 31 March 2009

Management Representations

I confirm to the best of my knowledge and belief, having made appropriate enquiries of other officers of Hampshire Fire and Rescue Authority, the following representations given to you in connection with your audit of the Authority financial statements for the year ended 31 March 2009. All representations cover the Authority's accounts and the Pension Fund accounts included within the financial statements.

Compliance with the statutory authorities

I acknowledge my responsibility under the relevant statutory authorities for preparing the financial statements in accordance with the Code of Practice for Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice, which present fairly the financial position and financial performance of the Authority and for making accurate representations to you.

Uncorrected misstatements

I confirm that I believe that the effects of the uncorrected financial statements misstatement concerning the understatement of cash relating to the Fire and Rescue Authorities Mutual Limited (FRAML) are not material to the financial statements. This misstatement has been discussed with those charged with governance within the Authority and the reasons for not correcting these items are as follows;

The maximum understatement is £97K which is not material. Furthermore it is the view of the Authority that it is prudent to treat this amount as an effective provision against legal costs that might be incurred in recovering this amount on dissolution of the FRAML.

Supporting records

All the accounting records have been made available to you for the purpose of your audit and all the transactions undertaken by the Authority have been properly reflected and recorded in the accounting records. All other records and related information, including minutes of all relevant meetings, have been made available to you.

Irregularities

I acknowledge my responsibility for the design and implementation of internal control systems to prevent and detect fraud or error.

There have been no:

· irregularities involving management or employees who have significant roles in the system of internal accounting control;

· irregularities involving other employees that could have a material effect on the financial statements; or

· communications from regulatory agencies concerning non-compliance with, or deficiencies on, financial reporting practices which could have a material effect on the financial statements.

· I also confirm that I have disclosed:

- my knowledge of fraud, or suspected fraud, involving either management, employees who have significant roles in internal control or others where fraud could have a material effect on the financial statements; and

- my knowledge of any allegations of fraud, or suspected fraud, affecting the entity's financial statements communicated by employees, former employees, analysts, regulators or others.

Law, regulations, contractual arrangements and codes of practice

There are no instances of non-compliance with laws, regulations and codes of practice, likely to have a significant effect on the finances or operations of the Authority

The Authority has complied with all aspects of contractual arrangements that could have a material effect on the financial statements in the event of non-compliance. There has been no non-compliance with requirements of regulatory authorities that could have a material effect on the financial statements in the event of non-compliance.

Fair Values

I confirm the reasonableness of the significant assumptions within the financial statements relating to fair values.

Compensating arrangements

There are no formal or informal compensating balancing arrangements with any of our cash and investment accounts

Contingent liabilities

There are no other contingent liabilities, other than those that have been properly recorded and disclosed in the financial statements. In particular:

· there is no significant pending or threatened litigation, other than those already disclosed in the financial statements;

· there are no material commitments or contractual issues, other than those already disclosed in the financial statements and

· no financial guarantees have been given to third parties.

Related party transactions

I confirm the completeness of the information disclosed regarding the identification of related parties.

The identity of, and balances and transactions with, related parties have been properly recorded and where appropriate, adequately disclosed in the financial statements

Post balance sheet events

Since the date of approval of the financial statements by The Authority no additional significant post balance sheet events that have occurred which would require additional adjustment or disclosure in the financial statements.

The Authority has no plans or intentions that may materially alter the carrying value or classification of assets and liabilities reflected in the financial statements.

Specific representations:

We consider that the asset shown in the Statements as cash held by the Fire and Rescue Authorities Mutual Limited will be recovered in full should that body be wound up.

I confirm that the this letter has been discussed and agreed on behalf of the Authority at a meeting of its Governance Committee held on 24 September 2009.

Signed on behalf of Hampshire Fire and Rescue Authority.

Treasurer

Appendix 4 - Value for money criteria