Chief Constable. of Durham Constabulary

Transcription

1 Chief Constable of Durham Constabulary Statement of Accounts for the year ended 31st March 2015 Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015

2 Contents Page Explanatory Foreword 1-4 Independent Auditor's Report 5-7 Statement of Responsibilities 8 Movement in Reserves Statement 9 Comprehensive Income and Expenditure Statement 10 Balance Sheet 11 Cashflow Statement 12 Notes to the Accounts Pension fund accounts Glossary Annual Governance Statement Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015

3 Explanatory foreword Introduction Following the Police Reform and Social Responsibility Act 2011, Durham Police Authority was abolished on 21 November 2012 and replaced with two corporation sole bodies, The Office of the Durham Police and Crime Commissioner (Police and Crime Commissioner, PCC) and the Chief Constable of Durham Constabulary (Chief Constable, CC). This set of accounts shows the financial position of the Chief Constable of Durham Constabulary. The financial position of the PCC and the consolidated Group of the PCC and CC are set out in the PCC and Group accounts which is a separate document. Statement of Accounts The purpose of this foreword is to provide a clear guide to the most significant matters reported in the Chief Constable s Accounts. It explains the purpose of the financial statements that follow and provides a summary of financial activities during 2014/15 and the financial position as at 31 March This Statement of Accounts has been prepared in accordance with the provisions of the Accounts and Audit Regulations 2011, in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2014/15 and the Service Reporting Code of Practice for Local Authorities 2014/15 (SeRCOP), supported by International Financial Reporting Standards (IFRS) and Local Authority Accounting Panel (LAAP) Bulletin 103. Information and Financial Statements The financial statements are as follows: Independent Auditor's Report to the Chief Constable (pages 5-7): The Report of the External Auditor on the Chief Constable's Accounts for the year ended 31 March Statement of Responsibilities for the Statement of Accounts (page 8): This sets out the responsibilities of the Chief Constable and their Chief Finance Officer and also includes the CC's certificate. Movement in Reserves Statement (page 9): This statement reconciles the Chief Constable's reserves with his net expenditure. Comprehensive Income and Expenditure Statement (page 10): This discloses the expenditure incurred in operating the Constabulary for the year. Balance Sheet (page 11): This shows the assets and liabilities that are the responsibility of the Chief Constable Cash Flow Statement (page 12): All payments were made and income received into the Police Fund which is held by the PCC so there are no cashflows in the Chief Constable's accounts Notes to the Core Financial Statements (pages 13-38): This shows the policies adopted in compiling the Statement of Accounts. Pension Fund Account (pages 39-41): This sets out the financial position of the Police Pension Fund as at 31 March Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 1

4 Review of the Financial Year 2014/15 On 1 April 2014, the stage 2 transfer occurred between the PCC and the CC where all the officers and the majority of police staff transferred their employment from the PCC to the CC. The PCC retained all long term assets,certain liabilities, all major revenue streams and useable reserves. The CC delivers day to day operations funded by the PCC and holds certain current assets and liabilities and unuseable reserves relating to pensions and staff absences. The Chief Constable's spending is planned and controlled by a rigorous budgeting and financial management process. The Chief Constable receives resources delegated from the PCC to deliver policing services to the force area of County Durham and Darlington. Revenue Spending A comparison of actual revenue expenditure and income compared with budget is shown below together with an explanation of the major variances. Original (Overspent) or Actual Budget Underspent '000 '000 '000 Employees Premises Transport Agency Services Supplies and Services Gross Expenditure Special Grants and other income 98,672 99,135 (463) 4,049 4,463 (414) 2,790 2, ,189 2, ,695 8,901 (1,206) 116, ,760 (1,365) (2,784) (5,569) 2,785 Net Expenditure 113, ,191 1,420 Explanation of major variances: Employee Related Costs The employee costs are over budget due to voluntary severance payments to police officers and voluntary redundancy payments to staff. While these have given overspends in the current year, the staff reductions will lead to lower expenditure in future years. Premises These costs are overspent due to the delay in vacating the old headquartes building leading to additional costs. Transport These costs were within budget as a result of effective fleet management and reduced fuel prices. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 2

5 Supplies and Services The main reasons for expenditure exceeding budget were related to the replacement of equipment and the purchasing of furniture and fittings for the new headquarters and the removal costs for the estate moves. Special Grants and Other Income The main reasons for the additional income related to mutual aid provided to support other police forces covering major incidents and an increase in the number of police officers seconded to other organisations. Looking Ahead to 2015/16 Looking ahead, the Chief Constable plans to consume resources of 111m in 2015/16. As a result of the current national public spending review, the PCC has faced severe reductions in Formula Grant during the period. The Spending Round announcement in June 2013 continues that trend of reductions in Formula Grant. Significant spend reductions and efficiencies were made to enable services to be delivered within the allocated budget. Further spend reductions and efficiencies are being planned to manage the further expected reductions in grant funding as part of the ongoing medium term financial planning process for 2015/16 and future years. The medium term financial planning process is considering the options required to manage further expected reductions in grant funding, balance spending and maintain a sustainable policing model for County Durham and Darlington in 2015/16, and future years. In June 2015 an additional voluntary pension contribution was made to the Local Government Pension Scheme administered by County Durham Pension Fund. This was to substantially reduce the Group's share of the Fund deficit, as measured by the Fund Actuary at the 2013 triannual valuation. The contribution was funded from the PCC's usable reserves and is expected to secure annual reductions in pension contributions following the next valuation. However this is not an adjusting post balance sheet event. International Accounting Standard 19 The Statement of Accounts also incorporates the effect of pensions liabilities accrued in order to comply with International Accounting Standard 19 (IAS 19). Rather than accounting for the actual expenditure on pensions, an assessment must be made by the Actuary of the costs accruing during the year and this is incorporated within the accounts. The effect of the standard is to account for the annual increase in pensions liability and total liability of both the unfunded and funded schemes as a result of pension benefits earned by employees at the end of the financial year, which the PCC Group is potentially committed to pay. Roundings The financial statements as detailed on pages 9 to 41 have been rounded to the nearest 1,000. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 3

6 Acknowledgements I would like to take this opportunity to thank the officers of the Chief Constable, who have produced this Statement of Accounts. I hope that this document proves to be both informative and of interest to readers. It is important to try and improve the quality and suitability of information provided and feedback is welcomed. If you have any suggestions or comments on both the format of the report and its contents, or if you would like any further information please contact my office. Gary Ridley Chief Constable's Chief Finance Officer Telephone: julie.diamond@durham.pnn.police.uk or write to: The Assistant Chief Officer Police HQ Aykley Heads Durham DH1 5TT Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 4

7 Independent Auditor's Report to the Chief Constable of Durham Constabulary Opinion on the Chief Constable financial statements We have audited the financial statements of the Chief Constable of Durham Constabulary for the year ended 31 March 2015 under the Audit Commission Act The financial statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement, the Pension Fund accounts and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2014/15 This report is made solely to the Chief Constable of Durham Constabulary in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 48 of the Statement of Responsibilities of Auditors and Audited Bodies published by the Audit Commission in March To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Chief Constable of Durham Constabulary for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Assistant Chief Officer and auditor As explained more fully in the Statement of the Assistant Chief Officer s Responsibilities, the Assistant Chief Officer is responsible for the preparation of the Statement of Accounts, which includes the financial statements, in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom, and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Chief Constable s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Assistant Chief Officer; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the explanatory foreword to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 5

8 Opinion on financial statements In our opinion the financial statements: give a true and fair view of the financial position of the Chief Constable of Durham Constabulary as at 31 March 2015 and of its expenditure and income for the year then ended; and have been prepared properly in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2014/15. Opinion on other matters In our opinion, the information given in the explanatory foreword for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we report by exception We report to you if: in our opinion the annual governance statement does not reflect compliance with Delivering Good Governance in Local Government: a Framework published by CIPFA/SOLACE in June 2007 and the December 2012 addendum; we issue a report in the public interest under section 8 of the Audit Commission Act 1998; we designate under section 11 of the Audit Commission Act 1998 any recommendation as one that requires the Chief Constable to consider it at a public meeting and to decide what action to take in response; or we exercise any other special powers of the auditor under the Audit Commission Act We have nothing to report in these respects. Conclusion on Chief Constable s arrangements for securing economy, efficiency and Respective responsibilities of the Chief Constable and the auditor The Chief Constable 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 to review regularly the adequacy and effectiveness of these arrangements. We are required under Section 5 of the Audit Commission Act 1998 to satisfy ourselves that the Chief Constable has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires us to report to you our conclusion relating to proper arrangements, having regard to relevant criteria specified by the Audit Commission. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 6

9 We report if significant matters have come to our attention which prevent us from concluding that the Chief Constable has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. We are not required to consider, nor have we considered, whether all aspects of the Chief Constable s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively. Scope of the review of arrangements for securing economy, efficiency and effectiveness in the use of resources We have undertaken our audit in accordance with the Code of Audit Practice, having regard to the guidance on the specified criteria, published by the Audit Commission, as to whether the Chief Constable has proper arrangements for: securing financial resilience; and challenging how it secures economy, efficiency and effectiveness. The Audit Commission has determined these two criteria as those necessary for us to consider under the Code of Audit Practice in satisfying ourselves whether the Chief Constable put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March We planned our work in accordance with the Code of Audit Practice. Based on our risk assessment, we undertook such work as we considered necessary to form a view on whether, in all significant respects, the Chief Constable had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. Conclusion On the basis of our work, having regard to the guidance on the specified criteria published by the Audit Commission, we are satisfied that, in all significant respects, the Chief Constable of Durham Constabulary put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March Certificate We certify that we have completed the audit in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission. Cameron Waddell Cameron Waddell For and on behalf of Mazars LLP The Rivergreen Centre Aykley Heads Durham, DH1 5TS 30 September 2015 Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 7

10 Statement of Responsibilities for the Statement of Accounts The Chief Constable's Responsibilities The Chief Constable is required to: Make arrangements for the proper administration of his financial affairs and to secure that one of his officers has the responsibility for the administration of those affairs. In this organisation, that officer is the Assistant Chief Officer. Manage his affairs to secure economic, efficient and effective use of resources and safeguard his assets. Approve the Statement of Accounts. The Assistant Chief Officer's Responsibilities The Assistant Chief Officer is responsible for the preparation of the Chief Constable's Statement of Accounts in accordance with proper practices as set out in the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom 2014/15. In preparing this Statement of Accounts, the Assistant Chief Officer has: selected suitable accounting policies and then applied them consistently made judgements and estimates that were reasonable and prudent complied with the Local Authority Code. The Assistant Chief Officer has also: kept proper accounting records which were up to date taken reasonable steps for the prevention and detection of fraud and other irregularities Assistant Chief Officer's Certificate I certify that the accounts present a true and fair view of the financial position of the Chief Constable of Durham Constabulary as at 31 March 2015 and of his income and expenditure for the year ended 31 March G Ridley 30 September 2015 G Ridley MBA CPFA Assistant Chief Officer Date Chief Constable's Certificate I confirm I have approved these accounts M Barton 30 September 2015 M Barton Q.P.M., LL.B. Date Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 8

11 Movement in Reserves Statement for the Chief Constable of Durham Constabulary Years ended Police Total Unusable Total 31 March 2014 & Fund Useable Reserves Reserves 31 March 2015 Balances Reserves '000 '000 '000 '000 Balance at 31 March (1,291,627) (1,291,627) Deficit on provision of services (70,799) (70,799) - (70,799) Other Comprehensive ,277 93,277 Income and Expenditure Total Comprehensive (70,799) (70,799) 93,277 22,478 Income and Expenditure - Adjustments between 70,799 70,799 (70,799) - accounting basis & funding basis under regulations (Note 10) Reserves Balance at 31 March (1,269,149) (1,269,149) Deficit on provision of services (65,184) (65,184) - (65,184) Other Comprehensive - - (115,925) (115,925) Income and Expenditure Total Comprehensive (65,184) (65,184) (115,925) (181,109) Income and Expenditure Adjustments between 65,184 65,184 (65,184) - accounting basis & funding basis under regulations (Note 10) Balance at 31 March (1,450,258) (1,450,258) This statement shows the movement in the year on the different reserves held by the Chief Constable, analysed into 'usable reserves' (ie those that can be applied to fund expenditure or reduce local taxation) and other reserves. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 9

12 Comprehensive Income and Expenditure Statement for the Chief Constable of Durham Constabulary for the Year Ended 31 March / / / / / /15 Restated Restated Restated Gross Income Net Gross Income Net Expenditure Expenditure Expenditure Expenditure '000 '000 '000 '000 '000 '000 53,516 (2,628) 50,888 Local Policing 50,645 (1,078) 49,567 12,332 (188) 12,144 Dealing with the Public 11,103 (77) 11,026 13,230 (665) 12,565 Criminal Justice Arrangements 11,977 (484) 11,493 7,414 (377) 7,037 Road Policing 6,286 (209) 6,077 5,852 (198) 5,654 Specialist Operations 4,785 (119) 4,666 9,611 (934) 8,677 Intelligence 8,707 (467) 8,240 28,433 (1,528) 26,905 Investigations 25,705 (1,513) 24,192 5,065 (449) 4,616 Investigative Support 4, ,466 3,565 (1,771) 1,794 National Policing 3,202 (1,657) 1,545 Non Distributed Costs Past Service Costs ,508 (8,738) 130,770 Net Cost of Services before Funding 127,106 (5,584) 121, Charge for use of assets 16,902 16,902 - (115,331) (115,331) PCC funding for resources consumed - (129,093) (129,093) 139,508 (124,069) 15,439 Net Cost of Services 144,008 (134,677) 9,331 Other Operationg Expenditure 18,334 (18,334) Police Pension Top Up Grant 22,963 (22,963) - - Levies 573 Financing and Investment Income and Expenditure 55,360 Net interest on defined benefit liability (Note 25) 55,280 70,799 Chief Constable deficit on Provision of Services 65,184 (93,277) Re-measurements of the defined benefit liability (Note 25) 115,925 (93,277) Other Comprehensive Income and Expenditure 115,925 (22,478) Total Comprehensive Income and Expenditure 181,109 This statement shows the accounting cost in the year for the Chief Constable of providing services at the request of the PCC in accordance with generally accepted accounting practices. The Chief Constable deploys assets, police officers and police staff to deliver the Police and Crime Plan. The restatement relates to the accounting of the stage 2 transfer as disclosed in note 8 Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 10

13 Balance Sheet for the Chief Constable of Durham Constabulary at 31 March April March March 2015 Restated Restated '000 '000 '000 '000 Notes '000 ' Property, Plant and Equipment Intangible Assets Total Long Term Assets Inventories ,656 11,218 Short Term Debtors 13 7, Cash and Cash Equivalents - 10,110 11,705 Total Current Assets 8,239 (9,060) (10,475) Short term Creditors 14 (11,253) (9,060) (10,475) Total Current Liabilities (11,253) (918) (840) Provisions 15 (1,004) - - Other Long Term Liabilities - (1,296,188) (1,273,968) Pensions Liability 16 (1,450,669) (1,297,106) (1,274,808) Total Long Term Liabilities (1,451,673) (1,296,056) (1,273,578) Net Assets (1,454,687) - - Useable Reserves - (1,296,056) (1,273,578) Unusable Reserves 17 (1,454,687) (1,296,056) (1,273,578) Total Reserves (1,454,687) The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Chief Constable. The net assets are matched by the reserves held by the Chief Constable. The restatement relates to the accounting of the stage 2 transfer as disclosed in note 8 Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 11

14 Cashflow Statement for the Chief Constable of Durham Constabulary for the Year Ended 31 March / /15 OPERATING ACTIVITIES '000 '000 Cash Inflow - Cash Inflows generated from operating activities - Cash Outflow - Cash outflows generated from operating activities - - Net cash flows from operating activities - INVESTING ACTIVITIES - Net cash flows from investing activities - FINANCING ACTIVITIES - Net cash flows from financing activities - - Net increase or decrease in cash and cash equivalent - - Cash and cash equivalents at the beginning of the reporting period - Less - Cash and cash equivalents at the end of the reporting period The Cashflow Statement shows the changes in cash and cash equivalents of the Chief Constable during the reporting period. All payments were made and income received into the Bank Account which is held by the PCC. The cashflow statements on operating activities for the CC is shown in note 18. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 12

15 Notes to the Financial Statements for the Chief Constable of Durham for the year to 31 March ACCOUNTING POLICIES 1.1 General Principles The Statement of Accounts summarises the Chief Constable of Durham's transactions for the 2014/15 financial year and the position at the year-end of 31 March The Chief Constable is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2011 which require accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2014/15 and the Service Reporting Code of Practice for Local Authorities 2014/15 (SeRCOP), supported by International Financial Reporting Standards (IFRS). The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments. On 22 November 2012, Durham Police Authority was replaced by two corporation sole bodies, the Office of the Durham Police and Crime Commissioner and the Chief Constable for Durham Constabulary. Both bodies are required to prepare separate Statements of Accounts. The financial statements cover the 12 months to 31 March Revenue and Expenditure Recognition Since 1 April 2014, the majority of staff and all officers are employed by the CC however all the major revenue streams are received by the PCC. The PCC funds the operations of the CC. 1.3 Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular: Supplies are recorded as expenditure when they are consumed where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet of the Chief Constable. Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made. 1.4 Cash and Cash Equivalents All cash is held by the Police and Crime Commissioner. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 13

16 1.5 Employee Benefits Benefits Payable During Employment Short-term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and nonmonetary benefits for current employees and are recognised as an expense for services in the year in which employees render service to the Group. An accrual is made by the CC for the cost of holiday entitlements (or any form of leave, eg time off in lieu) earned by employees but not taken before the year-end, which employees can carry forward into the next financial year. The accrual is charged to CC's Surplus or Deficit on the provision of Services, but then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs. Termination Benefits Termination benefits are amounts payable as a result of a decision by the CC to terminate an officer s employment before the normal retirement date or an officer s decision to accept voluntary redundancy and are charged on an accruals basis to the Net Cost of Services in the Comprehensive Income and Expenditure Statement when the Group is demonstrably committed to the termination of the employment of an officer or group of officers or making an offer to encourage voluntary redundancy. Post Employment Benefits Employees of the Group are members of two separate pension schemes: The Police Pension Scheme for Police Officers, which is unfunded The Local Government Pensions Scheme, administered by Durham County Council. Both schemes provide defined benefits to members (retirement lump sums and pensions), related to pay and service earned as employees working for the Group. The Police Pension Scheme for Police Officers This is an unfunded defined benefit final salary scheme meaning that there are no investment assets built up to meet the pensions liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due. If the amounts receivable by the pensions fund for the year are less than amounts payable, the Durham Police and Crime Commissioner must annually transfer an amount to meet the deficit to the pension fund. This cost is then met by central government. If however the pension fund is in surplus for the year, the surplus is required to be transferred from the pension fund to the Durham Police and Crime Commissioner who then must repay the amount to central government. Injury Awards IAS 19 requires that any obligation arising from other long-term employee benefits that depend on length of service need to be recognised when service is rendered. As injury awards under the Police Officer schemes are dependent on service, the liability expected to arise due to injury awards in respect of service prior to the valuation date requires valuation. The gratuity lump sum paid on injury is not dependent on service and so is not recognised as service is rendered. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 14

17 The Local Government Pension Scheme The Local Government Pension Scheme for support staff, administered by Durham County Council is a funded defined benefit final salary scheme, meaning that the Group and employees pay contributions into a fund, calculated at a level intended to balance the pension s liabilities with investment assets. Aspects of the schemes The main aspects of both these pension schemes are:- (i) The attributable assets of each scheme are included in the Balance Sheet at fair value. (ii) (iii) (iv) (v) The attributable liabilities of each scheme are measured on an actuarial basis using the projected unit credit method - i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc and projections of earnings for current employees. Scheme liabilities are discounted at a rate that is determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The surplus/deficit in each scheme is the excess/shortfall of the fair value of assets in the scheme over/below the present value of the scheme liabilities. The change in the net pensions liability for each scheme is analysed into seven components: Current service cost - the increase in liabilities as a result of years of service earned this year. The current service cost is stated net of employees contributions, so as to reflect the part of the total pensions liabilities that are to be funded by the Group - allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked. Past service costs - the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years - debited to the Surplus or Deficit on the Provision of Services in the comprehensive Income and Expenditure Statement as part of Non Distributed Costs. Interest cost - the expected increase in the present value of liabilities during the year as they move one year closer to being paid - debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. Expected return on assets - the annual investment return on the fund assets attributable to the Group, based on an average of the expected long-term return - credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. Gains or losses on settlements or curtailments - the result of actions to relieve the Group of liabilities or events that reduce the expected future service or accrual of benefits of employees - debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 15

18 Re-measurements of the defined benefit liability - changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions - debited to the Pensions Reserve Contributions paid to the fund - cash paid as employer s contributions to the pension fund in settlement of liabilities; not accounted for as an expense. Statutory provisions require the Police Fund Balance to be charged with the amount payable to the pension funds or directly to pensioners in the year, not the amount calculated in accordance with relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension funds and pensioners and any such amounts payable but unpaid at the year end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the Police Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. A separate statement of Police Pension Fund Accounts is prepared to reflect the transactions in respect of funding for the Police Pension Schemes. 1.6 Events after the Balance Sheet date Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified: those that provide evidence of conditions that existed at the end of the reporting period the Statement of Accounts is adjusted to reflect such events those that are indicative of conditions that arose after the reporting period the Statement of Accounts is not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect. Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts. 1.7 Financial Instruments Financial liabilities are recognised on the Balance Sheet when the Chief Constable becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Financial assets are classified into two types: loans and receivables assets that have fixed or determinable payments but are not quoted in an active market available for sale assets assets that have a quoted market price and/or do not have fixed or determinable payments Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 16

19 1.8 Overheads and Support Services The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2014/15 (SeRCOP). The total absorption costing principle is used the full cost of overheads and support services are shared between users in proportion to the benefits received. 1.9 Government Grants and Contributions Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the CC when there is reasonable assurance that: the CC will comply with the conditions attached to the payments, and the grants or contributions will be received. Amounts recognised as due to the Chief Constable are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution has been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired, using the grant or contribution, are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor. Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants and contributions) or Taxation and Non- Specific Grant Income (non-ring-fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement Inventories Stocks are held at the lower of cost and net realisable value and include uniforms, forensics dry goods, stationery, petrol, oil, diesel and ammunition VAT VAT payable is included as an expense only to the extent that it is not recoverable from Her Majesty s Revenue and Customs. VAT receivable is excluded from income. 2 ACCOUNTING STANDARDS ISSUED NOT ADOPTED In accordance with the Code, the Chief Constable shall disclose information relating to the the impact of an accounting change that will be required by a new standard that has been issued but not yet adopted. This requirement applies to accounting standards that come into effect for financial years commencing on or before 1 January Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 17

20 The following standards have been issued but have not yet been adopted at 31 March IFRS 13 Fair Value Measurements IFRIC 21 Levies The issues included in the annual improvements to IFRSs cycle are: IFRS 1 Meaning of effective IFRSs IFRS 3 Scope exceptions for joint ventures IFRS 13 Scope of potfolio exception IAS 40 Classification of property IFRS 13 sets out the requirements for surplus assets to be measured at fair value. It is not possible to disclose the effect on the non adoption of this standard with any certainty. IFRIC 21 provides guidance on when to recognise the liability for a levy. It is not anticipated that this amendment will have a material effect on the Financial Statements and require retrospective application. IFRS 1 relates to application of new IFRSs that are not mandatory but are allowed early adoption. It is not anticipated that this amendment will have a material effect on the Financial Statements and require retrospective application. IFRS 3 outlines the accounting when an acquirer obtains control of a business. It is not anticipated that this amendment will have a material effect on the Financial Statements and require retrospective application. IFRS 13 included the scope exemption for measuring the fair value of a group of financial assets and financial liabilities on a net basis. It is not anticipated that this amendment will have a material effect on the Financial Statements and require retrospective application. IAS 40 clarifies whether a property is owner occupied or investment. It is not anticipated that this amendment will have a material effect on the Financial Statements and require retrospective application. 3 CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES In applying the accounting policies set out in Note 1, the Chief Constable has had to make certain judgements about complex transactions or those involving uncertainty about future events. Statutory Accounts. Both the PCC and the CC are separate bodies listed under schedule 2 of the Audit Commission Act 1998 and so must produce statutory accounts. Both bodies comply with chapter 9 of the code and so group accounts must be produced also. The Police Reform and Social Responsibility Act 2011 (Transitional Provision) Order 2013 (SI 2013/2319) recognises that S21 and S22 of the LG Act 2003 apply to relevant transactions of the Chief Constable as if it were a local authority from 1 April On 1 April 2014, the stage 2 transfer occurred between the PCC and the CC where all the officers and the majority of police staff transferred their employment from the PCC to the CC. The PCC retained all long term assets, the major revenue streams and useable reserves. The CC delivers the day to day operations funded by the PCC and holds some current assets and liabilities and unuseable reserves relating to pensions and staff absences. Staff Costs. The staff costs have been split according to which organisation employs the individual. All the officer costs and liabilities rest with the CC. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 18

21 Pension Fund Liability. The pension fund liability for officers is held by the CC. The liability for staff has been split by the actuary based on the employer. A prior year adjustment has not been made as the amount relating to the PCC was not material. Milne Case. In May 2015, the Pensions Ombudsman Service delivered it's verdict on the Milne case and upheld Mr Milne's case that pension commutation factors should have been increased in the period from 2001 to This judgement also effects Police Pensions granted in that period. This has been treated as an adjusting post balance sheet event. Asset and Liability Recognition. Long term control and long term access to the economic benefits associated with assets such as buildings rests with the PCC. The CC deploys assets to deliver the Police and Crime Plan of the PCC and is funded by the PCC. The PCC retained all long term assets, the major revenue streams and useable reserves. The CC holds some current assets and liabilities and unuseable reserves relating to pensions and staff absences. Pension Fund Accounts. The CC is responsible for administering the Police Pension Fund in accordance with the Police Reform and Social Responsibility Act Therefore the Pension Fund Accounts have been included in financial statements of the CC and the Group. 4 ASSUMPTIONS MADE ABOUT THE FUTURE AND OTHER MAJOR SOURCES OF ESTIMATION UNCERTAINTY The Chief Constable of Durham Constabulary's Statement of Accounts contains estimated figures that are based on assumptions made by the CC about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, as balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The item in the CC's Balance Sheets at 31 March 2015 for which there is a significant risk of material adjustment in the forthcoming financial year is as follows: 4.1 Pensions Liability Uncertainty Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. Actuaries are engaged to provide the Chief Constable with expert advice about the assumptions to be applied. Effect if actual results differ from assumptions The effects of changes in individual assumptions on the total pension liability can be measured. Examples of how changes in assumptions would impact upon the Police Officer pension liability are shown in note 25. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 19

22 4.2 Stage 2 Transfer Uncertainty The allocation of some minor streams of income along with some asociated debtors and creditors have been alocated to the CC in accordance with the governance framework. Effect if actual results differ from assumptions There would be no effect on the Group accounts. However in the CC's accounts, if all the income was allocated to the PCC, the income would decrease by 5.6 million. 5 MATERIAL ITEMS OF INCOME AND EXPENSE There are no material items of income and expense which are not already disclosed on the face of the Comprehensive Income and Expenditure Statement or in the associated notes. 6 EVENTS AFTER THE BALANCE SHEET DATE The Chief Constable's Statement of Accounts was authorised for issue by the Assistant Chief Officer on 30 June Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2015, the figures in the financial statements have been adjusted in all material respects to reflect the impact of this information. In June 2015 a payment of 7 million was made to the Local Government Pension scheme. This was to substantially reduce the pension deficit and was funded by reserves. However this was not an adjusting post balance sheet event. In May 2015, the Pensions Ombudsman Service delivered it's verdict on the Milne case and upheld Mr Milne's case that pension commutation factors should have been increased in the period from 2001 to This judgement also effects Police Pensions granted in that period. This has been treated as an adjusting post balance sheet event. For Durham Constabulary the amount has been calulated as 4,429k due to be paid over to some officers who retired in the period 2001 to This liability has been disclosed as a long term liability in the balance sheets of 1 April 2013 and 31 March 2014 and a short term liability in the balance sheet of 31 March THE CREATION OF THE CHIEF CONSTABLE OF DURHAM CONSTABULARY 7.1 Introduction Following the Police Reform and Social Responsibility Act 2011 (The Act), The Durham Police Authority was replaced on 22 November 2012 with two corporation sole bodies, the Office of the Durham Police and Crime Commissioner and the Chief Constable of Durham Constabulary. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 20

23 7.2 Basis of Accounts Preparation Both the PCC and the CC are separate bodies listed under schedule 2 of the Audit Commission Act 1998 and so must produce statutory accounts. Both bodies comply with chapter 9 of the code and so group accounts must be produced also. The Police Reform and Social Responsibility Act 2011 (Transitional Provision) Order 2013 (SI 2013/2319) recognises that S21 and S22 of the LG Act 2003 apply to relevant transactions of the Chief Constable as if it were a local authority from 1 April On 1 April 2014, the stage 2 transfer occurred between the PCC and the CC where all the officers and the majority of police staff transferred their employment from the PCC to the CC. The PCC retained all long term assets, the major revenue streams and useable reserves. The CC delivers the day to day operations funded by the PCC and holds some current assets and liabilities and unusable reserves relating to pensions and staff absences. As the CC employs all oficers, the pension fund liability is recognised on the Balance Sheet of the CC. The pension fund liability for staff has been apportioned by the actuary based on their employment. The Comprehensive Income and Expenditure Statement of the PCC shows the accounting cost in the year for the CC of providing services at the request of the PCC to deliver the Police and Crime Plan. Pension Fund Accounts: The CC is responsible for administering the Police Pension Fund in accordance with the Police Reform and Social Responsibility Act Therefore the Pension Fund Accounts have been included in financial statements of the CC and the Group. The PCC makes charges to the CC for the use of long term assets equivalent to the charges made in the accounts of the PCC for depreciation, impairment and amortisation. The Statutory Accounts have been prepared on the above basis with the prior years being restated to allocate minor funding streams and associated current assets and liabilities to the CC. This is disclosed in note 8 below. 8 CHANGE IN ACCOUNTING POLICY & ESTIMATES The Police Reform and Social Responsibility Act 2011 (Transitional Provision) Order 2013 (SI 2013/2319) recognises that S21 and S22 of the LG Act 2003 apply to relevant transactions of the Chief Constable as if it were a local authority from 1 April On 1 April 2014, the stage 2 transfer occurred between the PCC and the CC where all the officers and the majority of police staff transferred their employment from the PCC to the CC. The PCC retained all long term assets, the major revenue streams and useable reserves. The CC delivers the day to day operations funded by the PCC and holds some current assets and liabilities and unuseable reserves relating to pensions and staff absences. The Accounts for the year to 31 March 2014 have been adjusted to reflect this change. The Group accounts remain unchanged but in the Comprehensive Income and Expenditure Account of the CC income has increased by 8.7 million and the PCC funding for resources consumed by the CC has decreased by the same amount. The following have increased for the CC, inventory by 487k, debtors by 6,789, creditors by 6436 and provisions by 840k. Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 21

24 In May 2015, the Pensions Ombudsman Service delivered it's verdict on the Milne case and upheld Mr Milne's case that pension commutation factors should have been increased in the period from 2001 to This judgement also effects Police Pensions granted in that period. This has been treated as an adjusting post balance sheet event. For Durham Constabulary the amount has been calculated as 4,429k due to be paid over to some officers who retired in the period 2001 to This liability has been disclosed as a long term liability in the balance sheets of 1 April 2013 and 31 March 2014 and a short term liability in the balance sheet of 31 March Additionally adjustments have also been made for 4,429k to the pension fund liability and the pension reserve in each of the three balance sheets. 9 COMPARISON AGAINST BUDGET The comparison against budget is included in the Explanatory Foreword. 10 ADJUSTMENTS BETWEEN ACCOUNTING BASIS AND FUNDING BASIS UNDER This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Chief Constable of Durham Constabulary in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the CC to meet future revenue expenditure. Year ended 31 March 2015 PENSION ADJUSTMENTS Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement Police Fund Balance USABLE RESERVES Capital Receipts Reserve Capital Grants Unapplied Capital Contribution Reserve Total Usable Reserves Movement in Unusable Reserves '000 '000 '000 '000 '000 '000 (82,070) (82,070) 82,070 Employer s pensions contributions and direct payments to pensioners payable in the year 16, ,865 (16,865) REMUNERATION ADJUSTMENT Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements TOTAL ADJUSTMENTS (21) (65,184) (65,184) 65,184 (Movement in Reserves Statement) Chief Constable of Durham Constabulary Statement of Accounts 31 March 2015 Page 22