STATEMENT - Home | Hertfordshire County Council ... · Web viewPage Introduction Report by the Chief Financial Officer Statement of Accounting Policies The Statement of Responsibilities

STATEMENT OF ACCOUNTS

2009-2010

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CONTENTS

Page

Introduction

Report by the Chief Financial Officer

Statement of Accounting Policies

The Statement of Responsibilities

Income and Expenditure Account

Statement of the Movement on the General Fund Balance

Statement of Total Recognised Gains and Losses

Balance Sheet

Cash Flow Statement

Notes to the Accounts

Annual Governance Statement

Local Government Pension Fund Accounts

Local Government Pension Fund Accounting Policies

Notes to the Local Government Pension Fund Accounts

Local Government Pension Fund Statement of Investment Principles

Firefighters’ Pension Fund Accounts

Notes to the Firefighters’ Pension Fund Accounts

Independent Auditor's Report

Glossary of Terms Used

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INTRODUCTION

Statement of Accounts

The Statement of Accounts provides financial details of the council’s activities for the financial year ended 31 March 2010. This document has been prepared in accordance with the Accounts and Audit Regulations 2003 and the 2009 Code of Practice on Local Authority Accounting a Statement of Recommended Practice (SORP) issued by the Chartered Institute of Public Finance and Accountancy.

The statement shows how Hertfordshire County Council applied both revenue and capital resources in 2009/10 to provide services for a population of approximately 1.1 million people.

This information is given both in general terms for the council as a whole, and at a more detailed level for individual services which is presented on a Best Value basis as required by the Best Value Accounting Code of Practice.

Hertfordshire County Council

The county council has responsibility for services across the whole of the county. It works with central government and other local organisations to help improve and deliver a range of local services to more than a million people, who live, work and travel in the county. Local schools, libraries, support for elderly and vulnerable people and the maintenance of roads and pavements are all services provided by the county council.

A refreshed and strengthened Corporate Plan was confirmed by the County Council on 21 July 2009, with an extended planning horizon of 2009 to 2012. This set out the following key priorities:

Support economic well-being

Maximise independent living

Ensure a positive childhood

Secure a good education for all

Reduce carbon emissions

Promote safe neighbourhoods

Be a leading council

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INTRODUCTION

The council is run by elected politicians and like the Members of Parliament at Westminster, local councillors are voted in by residents to act on their behalf. Subject to legislation enacted by Parliament, local councillors take the decisions on where money will be spent, what council taxes will be charged and how local services will be developed.

Other councils and organisations in Hertfordshire

There are three tiers of local government in Hertfordshire, the county council, district and borough councils and finally town and parish councils. The county council works closely with these councils and other organisations such as the National Health Service, the Police, the business community and voluntary organisations. All these organisations have a part to play in making Hertfordshire a good place to be. Only by working together can they tackle the challenges that face Hertfordshire in the 21st century.

How the council operates

The council is made up of 77 councillors elected every four years. Eachcouncillor represents an area of the county, called an electoral division, and has a special duty to represent the interests of people in that division. The overriding duty of councillors however is owed to the whole county.

Councillors must agree to follow a code of conduct in the way they carry outtheir duties. A standards committee trains and advises them on the code.

All councillors meet together at full council meetings when decisions are taken on our overall policies and the budget. Meetings are open to the public.

How decisions are made

The Cabinet is responsible for most decisions on how our services are run. It delegates responsibility for many day-to-day decisions to officers, but still retains overall responsibility for them. The Cabinet cannot take decisions which are out of line with the overall policies or budget agreed by the full council. It can however set up Cabinet Panels which help develop policy.

Meetings of the Cabinet are open to the public, unless personal or confidential matters are being discussed.

Policies and decisions are scrutinised by all-party Topic Groups guided by an Overview and Scrutiny Committee.

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INTRODUCTION

The services we provide

Brief summaries relating to the main front line services provided by the council are listed below.

Adult Care Services Adult Care Services works closely with health services, district councils, and the private and voluntary sector, using its resources to arrange, develop and provide care and support in the community for older people and adults who have learning disabilities, sensory loss or physical disabilities. The council also funds adult mental health services provided by Hertfordshire Partnership NHS Foundation Trust.

We do this by:

Assessing needs - asking about people’s circumstances and the things they are worried about. Where applicable, this will include the needs of any famly carers.

Giving information and advice about equipment and services that can make lives easier.

Arranging care and support for those who would be at risk without it. Most people need more than one kind of help and a ‘package’ of care and support is usual. Where appropriate, money (direct payments) can be provided so that those who require care can arrange their own services, giving more control over the support that they receive.

Approximately 1 in 20 people generally, and 1 in 5 people aged 65 or more, ask for our help each year. Our efforts are focuseed on helping to keep as independent as possible.

We have to work within a set budget and cannot provide all the support we are asked for, so we give priority to people with the greatest need. To make sure we do this in a fair way, we use the national guidance called ‘Fair Access to Care Services’ from the Department of Health.

If, after an initial assessment, it seems that there are only moderate or low risks to a person’s independence, we will still provide information and advice on other possible sources of help. Adult Care Services funds many local voluntary organisations to provide services that can make a real difference to someone’s daily life. This funding to voluntary organisations also means that those in need are not totally dependent on us.

Safeguarding vulnerable adults is a key responsibility of Adult Care Services and the department co-ordinates a county-wide multi-agency approach. We work with the police, health and other key partners to ensure risks are identified, managed and minimised.

Adult Care Services is inspected and regulated by the Care Quality Commission from 1 April 2009.

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INTRODUCTION

Children, Schools and Families (CSF)

Children, Schools and Families aim to achieve better outcomes for all children and young people and develop accessible services that meet the needs of children, young people, parents and the wider community.

Placing Hertfordshire’s children at the centre of the department’s work, it provides an extensive range of services to support every stage of development - from the birth of a child to life long learning for adults.

The service brings together professionals from a range of disciplines, working together to deliver excellent services. It works closely with many local and national organisations including voluntary groups, the police, health services, district councils and the private sector.

Here are a few examples of the services we provide:

School admissions

The offer of school places for nursery, primary and secondary schools across the county is coordinated by a team within Children, Schools and Families. Sure Start services (Young in Herts)

Sure Start aims to improve the quality of life for children, families and communities through: Childcare – improving and increasing the levels of childcare provision across the

county including childminders, preschools, day nurseries and out of school clubs

Early education – all three and four year olds are entitled to free early education sessions. Research shows that children who receive a high quality education in their early years are more likely to make good progress at school, stay in education longer, gain qualifications and be successful in their working lives

Parenting support – including courses, advice and support in local communities for parents to help them with the challenges of raising children

Teenage pregnancy – including cutting teenage pregnancy levels and supporting young parents back into education

Extended schools and children’s centres – offer community services delivered through children’s centres for under fives and extended schools for five to 19 year olds including study support and out of school activities, family learning, adult education, childcare, health advice and parenting support.

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INTRODUCTION

Children, Schools and Families (continued)

Support for the family

If you are experience difficulties in meeting your child’s emotional, social or physical needs, contact CSF for help. If you have a disabled child, we may be able to provide care in the home, short breaks (respite care), or help your child to join in local activities.

The department now has a direct payment scheme for parents of disabled children, to give them more choice and control in getting the support they need for their family.

Children with special needs

Children develop differently and if you have any concerns about your child's progress, there are people in CSF who can help. A child has special needs if he or she has greater difficulty learning than most other children of the same age.

Family support services

Family support services across the county offer services to young children and families helping them through difficult times, by offering time, practical advice and/or counselling, either individually or in groups.

Fostering and adoption

Every month around 30 Hertfordshire children come into our care because they cannot stay with their own families. There may be a number of reasons why - there may be a crisis in the family, ill health, relationship difficulties, or bereavement. When this happens, we make arrangements for the child to be fostered, sometimes with relatives or family friends, or adopted.

Residential care for children and young people

CSF has eight residential units comprising of four for adolescents, one for younger children aged 5-11 years, one long term and two respite units for disabled children. In addition the new Adolescent Resource Centre was opened in October, which supports four specialist foster carers. The young people in our care have a range of complex needs and many need help in making sense of traumatic events, which have happened to them in the past. We seek to provide them with good adult role models and help them have happy and secure relationships, which will help guide them into a happier adulthood. Some children who are severely disabled may be placed in residential care because their families cannot provide the specialist care or support they need.

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INTRODUCTION


Child protection

CSF has a lead role in the Hertfordshire Safeguarding Children Board (HSCB). The HSCB is a statutory Board with an independent Chair and is responsible for promoting the welfare of children and ensures the effectiveness of the work delivered by those agencies involved in Child Protection Services.

Services for young people

When a disabled young person needs continued care and support we work closely with our colleagues in Adult Care Services and Youth Connexions Hertfordshire to ensure a smooth transition. Our Youth Teams within Education Support Centres provide alternative education for young people who are not in school.

Youth Connexions Hertfordshire

Youth Connexions Hertfordshire is the name of the integrated youth support service for all young people aged 13-19 within this county. It provides information, advice, guidance and support on a number of issues for young people as well as access to positive activities such as music, drama and sport in both building based and detached youth work settings.

Young people engage with the service on a voluntary basis in both formal and informal settings such as schools, colleges, work based learning provisions, youth centres, mobile provision, and through detached work.

Education in Hertfordshire

Hertfordshire has 523 schools across a diverse range of organisations including: nursery, infant, first, junior, primary, middle, secondary (11 to 19) special schools and ESCs (education support centres). There are almost 180,000 children and young people in our schools along with about 8,000 teachers and 17,000 support staff.

Hertfordshire has a learning partnership in place which sets out the way that schools and the authority work together. It also details the arrangements for monitoring, support, challenge and, when appropriate, intervention for schools. This work is supported by a range of advisory services staffed by school improvement professionals and educational experts. Training and consultancy is also provided against a number of national initiatives alongside an extensive programme of traded support for school improvement.

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INTRODUCTION


Libraries, Culture and Learning

Libraries provide a service covering every settlement in the county through a network of 48 libraries; 10 mobile vehicles (approx. 350 stops); 4 community service vehicles delivering a service to more than 400 residential centres; and one prison library. In year ending March 2009, libraries issued 7.2 million books, videos and DVDs, and music recordings and over 5.5 million visits were made to use libraries for study, reading newspapers and journals or other library related activities. There are currently 536 free access public computer terminals available for using the Internet, the on-line catalogue and other applications.

The Schools Library Service provides a traded service to schools. In 2009/10, 59% of primary schools and 61% of secondary schools have bought either an annual contract or chosen from a menu of specific services. The SLS mobile visited 144 schools, 967 books were added to school libraries via the assisted purchase scheme. A further 39,480 books were issued to schools in Reading for Enjoyment packs. 211 advisory sessions in schools were delivered and 47 training events arranged for teaching staff.

Hertfordshire Archives and Local Studies is the specialist centre for Hertfordshire's past and its people. It aims to collect, preserve and promote original documents and printed material covering every aspect of life in the county, including the environment, businesses, institutions and societies. Herts Museums Partnership is supported through subscriptions from HCC and the Districts, and the Museum Development Fund through the Renaissance in the Region national initiative from the Museums, Libraries and Archives Council (MLA). Its main aims are to improve and develop museum services (independent charities and those run by the Districts), and raise awareness of the value of museums to the wider community.

Hertfordshire Adult and Family Learning (HAFLS) is the HCC lead service which specialises in adult and family learning programmes. Primarily funded by the Learning and Skills Council it is one part of a group of adult learning services supported by the authority which include Adult Care Services, Countryside Management Services, Libraries, Culture and Learning. HAFLS also has lead responsibility for planning English for Speakers and Other Languagues (ESOL) and Informal Adult Learning.

Resources and Performance

The Resources & Performance department provides for the strategic management of the council. The service plays a vital role through support services and activities in working towards the key priorities set out in the Corporate Plan.

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INTRODUCTION

Resources and Performance (continued)

Herts HR - Provides strategic direction, advice, policy guidance and operational and transactional support to the county council and its departments, to enable the organisation to maximise one of its major assets - its staff.

Hertfordshire Property - Provides professional services in all aspects of property and accommodation services, including strategic asset management planning, estates and planning services, facilities management, and construction project and programme management services.

Herts Finance - Gives strategic advice and support to key financial processes. This includes preparing the county council’s annual revenue and capital budgets and accounts, setting and monitoring financial standards, providing financial advice and support for all council departments and managing the Hertfordshire Local Government Pension Fund for the county council, district councils, Hertfordshire University and many other public bodies and organisations.

Information Technology - Provides management of Information Technology, Corporate Information Systems and Performance Management solutions within the organisation

Strategy and Partnerships

The Strategy and Partnerships department brings together support services for both external and internal customers, and work with partners. The department leads on the work with members through its democratic core. It also provides efficient and effective delivery of a group of frontline and support services.

Strategic Partnerships - This team is responsible for ensuring Hertfordshire has a strong partnership network and culture, to ensure all partners work together to address the problems and challenges facing our communities.

Communications - Is responsible for developing and implementing the council’s corporate and departmental communications strategies, delivering both strategic and day to day communications activity.

Customer Service Centre - Deals with telephone calls, emails and post from the public on behalf of all service departments.

Legal Services - Provides high quality legal and administrative services to enable the county council to carry out its policies and statutory obligations within the law and the council’s own procedures.

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INTRODUCTION

Strategy and Partnerships (continued)

Trading Standards - Protects consumers and businesses by investigating unfair and illegal business practice and helping to ensure Hertfordshire has safe, strong and healthy communities.

Coroners Service - Provides administrative and investigatory services to Her Majesty’s Coroner for the district of Hertfordshire.

Registration Service - Responsible for registering births, deaths, marriages and civil partnerships in Hertfordshire.

Environment and Commercial Services

The Environment and Commercial Services Department provides critical services that enable people to go about their daily business.

Traffic in the county is nearly 50% higher than the national average, and we strive to make sure that those undertaking any one of the county’s 4.5 million daily journeys can be reasonably confident of an uneventful trip, whatever the time of day or night, and whatever the weather. The advice and support our department provides on the county council’s £750 million worth of contracts helps to ensure that our residents can expect value for money from their public services. Our planning unit provides a strategic input into plans for development in the county and deal with some difficult planning applications for waste and minerals.

Every weekday, we take approximately 25,000 of the county’s children to school and feed up to 55,000 of them. The county’s one million residents can say goodbye to their household waste at the kerbside, confident that we will deal responsibly and efficiently with the 540,000 tonnes per year that Hertfordshire’s district councils collect. A walk in the country on any one of our 5,200 public rights of way is an easily accessible pleasure for most of our residents. The work of our department is fundamental to meeting the county council’s ambitious carbon reduction targets.

In such a diverse place, our job is anything but routine: the work of our department makes sure that there are plans in place to help us support our residents and maintain our services in times of emergency.

All the careful work we do behind the scenes – maintaining, measuring, monitoring, checking, planning – is vital to the wellbeing of Hertfordshire’s residents and businesses. Our work touches on the lives of just about everyone who lives, works or travels in the county.

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INTRODUCTION

Fire and Rescue

Hertfordshire Fire and Rescue Service’s (HFRS) primary purpose is to;

prevent fires and other emergencies from happening by improving safety awareness through pro-active educational programmes

protect the pubic by securing the safety of people who use, live and work in all buildings in Hertfordshire, and

respond to fires and other emergencies when they occur.

HFRS aims to reduce deaths, accidents and injuries and mitigate damage to property and the environment by responding effectively and appropriately to emergency situations.

Prevention

Hertfordshire Fire and Rescue Service work hard to improve community awareness of how people can improve their own personal safety. These pro-active educational programmes are targeted at areas that can make a real difference to peoples' lives. The primary objective is to actively engage with all parts of the community, across all age ranges and backgrounds, in order to reduce the number of people who suffer injury or death from fires and other accidents including on the roads.Hertfordshire Fire and Rescue Service promotes improved community safety and awareness by visiting people in their own homes, educating children in schools, meeting with businesses and working in partnership with the voluntary sector and other partners in the public and private sectors. The importance of educational programmes is recognised nationally and all fire and rescue services have increased their community fire safety activities over recent years. Protection

There are more than 32,000 business properties in Hertfordshire and a large number of other properties including residential homes for older people, schools and multi-occupancy premises for which there is a statutory requirement to consult the Fire and Rescue Service. The consultation process provides the opportunity to give advice and seeks to ensure that compliance with statutory requirements is maintained and that large and complex developments are built using best practice principles. Much of this work is with local authority building control departments but an increasing amount is undertaken directly with approved inspectors who are commissioned directly by the developers.

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INTRODUCTION

Fire and Rescue (continued)

Response

This is the part of the Service that is most recognisable to the wider community. The Fire and Rescue Service provides a wide range of support to people who call for help and assistance. Emergency calls received from the public range in size and complexity and on occasions require assistance from surrounding Fire and Rescue Services. A wide range of vehicles are used to respond efficiently to the needs of the community and the increasing threat from climate change and wide area flooding increases the roles and responsibilities of the Fire and Rescue Service.

Firefighters attend a wide range of incidents including fires, dealing with hazardous materials, road traffic collisions, railway incidents and flooding.

To find out more about the services provided by each department please visit www.hertsdirect.org.

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REPORT BY THE CHIEF FINANCIAL OFFICER

1. Introduction

The accounts have been prepared in accordance with the 2009 Code of Practice on Local Authority Accounting in the United Kingdom, a Statement of Recommended Practice (SORP) issued by the Chartered Institute of Public Finance and Accountancy (CIPFA), which incorporates the application of accounting standards to local authorities.

2. The Statement of Accounts

The core accounting statements comprise:

Income and Expenditure Account

Statement of Movement on the General Fund Balance

Statement of Total Recognised Gains and Losses

Balance Sheet

Cash Flow Statement

Notes to the core statements

Pension Fund Accounts.

A brief introduction precedes these core financial statements.

3. Accounting Policies

Responsibility for defining how local authorities comply with accounting standards lies with CIPFA. The Code of Practice sets out best practice with which local authorities are expected to comply. The SORP is based on approved accounting standards as at 30 September 2009, except where these conflict with specific statutory accounting requirements, so that an authority’s accounts ‘present fairly’ the financial position and transactions of the authority.

The policies applied in producing the council’s statement of accounts are disclosed in the Statement of Accounting Policies section.

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4. Change of Accounting Policies

Council Tax (Collection Fund Income)

The 2009 Accounting Code of Practice (ACOP) for Local Authorities introduced one significant change which has been reflected in the Statement of Accounting Policies. Up to 2008/09 the Council was required to include Council Tax income in the Income and Expenditure Account at the amount that under regulation was required to be transferred from the Collection Fund to the General Fund. From 1st April 2009 the Council Tax income included in the Income and Expenditure Account for the year shall be the Council’s share of accrued income due for the year. As this is a material change in accounting policy, prior year adjustment has been made to the 2008/09 corresponding amounts.

No prior year adjustment to the Income and Expenditure Account or Statement of Movement on the General Fund Balance has been made in respect of National Non-Domestic Rates (NNDR) income as the accounting policies followed by the Council are in accordance with those required by the SORP.

Private Finance Initiative

The accounting requirements for the Private Finance Initiative (PFI) and similar contracts are no longer based on the UK accounting standard FRS 5 but on International Financial Reporting Standards (IFRS).

Private Finance Initiative (PFI) transactions Local Authorities have to account for infrastructure PFI schemes where the Local Authority controls the use of the infrastructure and the residual interest in the infrastructure at the end of the arrangement, following the principles of the requirements of IFRIC 12. The Council therefore recognises the PFI asset as an item of property, plant and equipment together with a liability to pay for it. The services received under the contract are recorded as operating expenses.

The annual unitary payment is separated into the following component parts, using appropriate estimation techniques where necessary:

a) Payment for the fair value of services received;b) Payment for the PFI asset, including finance costs; andc) Payment for the replacement of components of the asset during

the contract (lifecycle replacement). Services received The fair value of services received in the year is recorded under the relevant expenditure headings within the Income and Expenditure Account.

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4. Change of Accounting Policies (continued) PFI Asset The PFI assets are recognised as property, plant and equipment, when they come into use. The assets are measured initially at fair value in accordance with the principles of IAS 17. Subsequently, the assets are measured at fair value, which is kept up to date in accordance with the Council’s approach for each relevant class of asset as set out in the statement of accounting policies (pages 36/37).

PFI liability A PFI liability is recognised at the same time as the PFI assets are recognised. It is measured initially at the same amount as the fair value of the PFI assets (less any capital contributions) and is subsequently measured as a finance lease liability in accordance with IAS 17.

An annual finance cost is calculated by applying the implicit interest rate in the lease to the opening lease liability for the period, and is charged to ‘Interest Payable’ within the Income and Expenditure Account.

The element of the annual unitary payment that is allocated as a finance lease rental is applied to meet the annual finance cost and to repay the lease liability over the contract term.

An element of the annual unitary payment increase due to cumulative indexation is allocated to the finance lease. In accordance with IAS 17, this amount is not included in the minimum lease payments, but is instead treated as contingent rent and is expensed as incurred. In substance, this amount is a finance cost in respect of the liability and the expense is presented as a contingent ‘Interest Payable’ within the Income and Expenditure Account.

Lifecycle replacement Components of the asset replaced by the operator during the contract (lifecycle replacement) are capitalised where they meet the Council’s criteria for capital expenditure. They are capitalised at the time they are provided by the operator and are measured initially at their fair value.

The element of the annual unitary payment allocated to lifecycle replacement is pre-determined for each year of the contract from the operator’s planned programme of lifecycle replacement. Where the lifecycle component is provided earlier or later than expected, a short-term finance lease liability or prepayment is recognised respectively.

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4. Change of Accounting Policies (continued) Where the fair value of the lifecycle component is less than the amount determined in the contract, the difference is recognised as an expense when the replacement is provided. If the fair value is greater than the amount determined in the contract, the difference is treated as a ‘free’ asset and a deferred income balance is recognised. The deferred income is released to the operating income over the shorter of the remaining contract period or the useful economic life of the replacement component.

Assets contributed by the Council to the operator for use in the scheme

Assets contributed for use in the scheme are recognised as items of property, plant and equipment in the Council’s Balance Sheet.

5. Restatement of Previous Year’s Accounts

In addition to the above changes in accounting policy the council has made the following change to the 2008/09 balance sheet.

Interest Accruals

Accruals for interest payable and receivable as at 31 March 2009 were shown within the carrying amount of the associated financial instrument. This resulted in such amounts being shown within long term borrowing and long term investments whereas the SORP requires these amounts to be separated from the relevant financial instrument and shown within current liabilities – short term borrowing and current assets – short term investments.

The impact of the above and the changes in accounting policy on the Income and Expenditure Account, Statement of Movement on General Fund Balance, Statement of Total Recognised Gains and Losses and Balance Sheet comparative figures for 2008/09 compared with those published in the 2008/09 Statement of Accounts is shown in Note 1 to the accounts.

6. The Prudential Code for Capital Finance in Local Authorities

Under the Prudential Code individual authorities are responsible for deciding the level of their affordable borrowing, having regard to the requirements of the Code. Prudential limits apply to all borrowing, qualifying credit arrangements and other long-term liabilities. The system is designed to encourage authorities that need, and can afford to, to borrow for capital investment to do so prudently.

Under the Prudential Code for capital, local authorities have the option to consider additional borrowing, above the level supported by government, taking into account council investment priorities, the impact of additional borrowing on council tax, and on the level of the council’s external debt.

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6. The Prudential Code for Capital Finance in Local Authorities (continued)

In developing the 2009/10 revenue and capital budgets the council set its own borrowing levels within limits identified by Prudential Code indicators. The borrowing limits for 2009/10 are shown in the following table. The council operated within these limits during 2009/10.

Limit Description £000

Authorised limit for external debt

This represents the limit beyond which borrowing is prohibited, and needs to be set and revised by members. It reflects the level of borrowing which, while not desired, could be afforded in the short term, but is not sustainable. It is the expected maximum borrowing need with some headroom for unexpected movements. This is the statutory limit determined under section 3 (1) of the Local Government Act 2003.

407,000

Operational boundary for external debt

This indicator is based on the probable external debt during the course of the year; it is not a limit and actual borrowing could vary around this boundary for short times during the year. It should act as an indicator to ensure the authorised limit is not breached.

390,000

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7. Financial Summary 2009/10

Revenue

In 2009/10 the council’s revenue spending was £16.277 million lower than its sources of income.

The following summary of the council’s revenue monitor showing an underspend of £6.686 milion against the latest approved budget, was presented to the Cabinet on 21 June 2010.

Latest Approved

Budget ActualOver/(under)

spendService/Budget Heading £000 £000 £000 %

Children, Schools & Families 216,651 222,570 5,919 2.7Adult Care Services 288,564 289,386 822 0.3Environment & Commercial Services 125,594 122,429 (3,165) (2.5)Fire & Rescue Service 40,356 40,276 (80) (0.2)Strategy & Partnerships 11,334 10,431 (903) (8.0)Resources & Performance 3,865 5,266 1,401 36.2Central Capital Financing and Interest on Balances 39,885 33,148 (6,737) (16.9)Service Total 726,249 723,506 (2,743) (0.4)Other BudgetsContingency/Special Provision 6,434 5,511 (923) (14.3)Review of Balance Sheet 0 (2,327) (2,327) (100.0)Precepts 2,232 2,237 5 0.2Non Distributed costs 931 931 0 0.0Capital Charges (68,629) (68,629) 0 0.0FRS17 - Pensions Interest Cost & Expected Return on Assets 28,250 28,250 0 0.0Pension Reserve Appropriation (13,443) (13,443) 0 0.0Central Unallocated Grants 0 (698) (698) (100.0)Funded from Reserves (11,322) (11,322) 0 0.0Total 670,702 664,016 (6,686) (1.0)

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7. Financial Summary 2009/10 (continued)

Revenue

The movement from the revenue monitor underspend to the position reported in these accounts is shown in the following table.

£’000Planned Use of Reserves as per 2009/10 budget 6,686

Less Specific Reserves applied to 2099/10 budget (11,322)

Less carry forward requests (468)

Adjustments relating to Collection Fund restatement 21,318

Other minor adjustments 63

16,277

General Fund Balances as at 1 April 2009 36,496

General Fund Balances as at 31 March 2010 52,773

Capital

In 2009/10 the council spent £192.769 million on capital schemes, including buildings, adaptations, roads, equipment and intangible assets with a life of more than one year. A summary of the expenditure and how it has been financed is shown in the notes to the accounts together with details of material projects and their associated gross capital expenditure in the year. The council regularly reviews its property portfolio to identify opportunities for recycling and disposal to assist the achievement of its capital programme.

Balance Sheet

Material liabilities incurred outside the normal course of business relating to the increase in the pension fund deficit and the impairment of fixed assets are explained in detail in note 8 (Other Developments).

External Borrowing

During 2009/10 there was a reduction in principal amounts of external borrowings owed to third parties of £48.8 million resulting in total external borrowing liabilities of £290.8 million as at 31 March 2010. Analysis of this reduction is shown below. Maturity analysis of this borrowing is shown in the notes to the accounts, at carry value.

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7. Financial Summary 2009/10 (continued)

LenderNew

Loans RepaidIncrease / (Decrease)

£ million £ million £ millionPublic Works Loan Board 0 (48.8) (48.8)Other External Lenders 0 0 0Total 0 (48.8) (48.8)

8. Other Developments

Icelandic Bank Deposits

Early in October 2008, the Icelandic banks Landsbanki, Glitnir, and Kaupthing collapsed and the UK subsidiaries of the banks, Heritable and Kaupthing Singer and Friedlander (KSF) went into administration. The Council had £28m deposited across these institutions, with varying maturity dates and interest rates.

Following these events the Council commissioned a review by of treasury management procedures by PricewaterhouseCoopers (PWC). In response to PWC’s report, a more stringent treasury management policy was adopted from March 2009 and the recommended procedural changes have been implemented.

The potential impairment of the Icelandic deposits has been accounted for in accordance with guidance issued by the Local Authority Accounting Panel of the Chartered Institute of Public Finance and Accountancy (CIPFA) in May 2010.

For UK registered banks, Heritable and Kaupthing, Singer and Friedlander (KSF) the assumed return to creditors is based on the administrators’ latest progress report. For Heritable, a report was issued in January 2010 estimating a total distribution in the range of 79p to 85p in the pound. For KSF, the administrators’ April 2010 report estimated a total distribution in the range of 65p to 78p in the pound. The administrators for the two UK administered banks paid out dividends to the Council totalling £3.7m in 2009/10.

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8. Other Developments (continued)

For Iceland based banks the assumed return is based on the assumption that local authorities will achieve preferential creditor status. This will be determined by the Icelandic Courts and it is unlikely that a decision will be reached until the second quarter of 2011. Should the Council obtain preferred creditor status then the anticipated rates of return have been based on the latest information available. For Landsbanki, this is based on the latest creditors’ report issued on March 26, 2010 where the projected return for priority status creditors is 94.86p in the pound. For Glitnir, the projected return for priority status creditors has been based on information contained in the 2009/10 Accounts at 100% recovery.

For 2009/10, impairment loss recognised in the Income and Expenditure Account is £0.539m, (£8.319m cumulative to 31 March 2010). This has bee calculated by discounting the assumed cash flows at the effective interest rate of the original deposits in order to recognise the anticipated loss of interest to the Council until monies are recovered.

It should be noted that the currently available information is not definitive. The amounts and timings of payments may require further adjustments to the accounts in future years. Given the remaining risks the authority has set aside a further £5.511 million to increase the special provision for Icelandic deposits at risk.

To assist local authorities to manage the impact of the Icelandic banking collapse the government issued regulations permitting local authorities to defer recognising any loss on bank deposits for two years until the financial year 2010/11. In accordance with these regulations, the Council will defer the impact of the impairment until 2010/11.

Pension fund deficit

The primary reasons for the increase in the Pension Fund deficit in 2009/10 relates to adverse changes in financial assumptions and mortality assumptions used in the actuarial valuation of the Pension Fund. The real discount rate used to value the Pension Fund liabilities has decreased significantly from 3.7% p.a. as at 31 March 2009 to 1.6% p.a. as at 31 March 2010. This is due to a fall in corporate bond yields over the year combined with an increase in the level of inflation expectations. Mortality assumptions have also been adjusted to reflect improved life expectancy. These factors have outweighed the positive return on assets of the Pension Fund for 2009/10.

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8. Other Developments (continued)

Budget 2010/11

On 23 February 2010 the council approved a revenue budget of £738.205 million for 2010/11, after using £14.294 million of reserves, plus a schools budget of £667.497 milion. The meeting also approved a capital budget for 2010/11 of £175.527 million. Budgeted sources of finance are shown in the following table.

Revenue Capital£000 £000

Income from the Collection Fund 499,215General Government Grants 85,337Redistributed National Non-Domestic Rates 153,653Capital Receipts 5,000Capital Grants 70,023Developers Contributions 7,243Revenue Contributions 17,704Reserves 6,300Borrowing 69,257

738,205 175,527

The budget resolutions resulted in a council tax increase of 0% producing a charge of £1,118.83 for a band D property. Further information on the council’s budget can be found on its website www.hertsdirect.org.

M ParsonsChief Financial Officer

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STATEMENT OF ACCOUNTING POLICIES

This section explains the accounting policies that the council has applied in preparing these accounts.

General Principles

The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom – A Statement of Recommended Practice 2009 (the SORP), the Best Value Accounting Code of Practice (BVACOP) and guidance notes issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) which ensures compliance with Statements of Standard Accounting Practice and Financial Reporting Standards applicable to local authorities.

Back Pay Arising From Unequal Pay Claims

Provision in accordance with the SORP has been made for back pay relating to unequal pay arising from the implementation of the single status agreement. In some cases these claims can take several years to settle. Central government regulations providing discretion to authorities to defer charging unequal pay back pay expenditure, or social security costs or other costs incurred by the council in relation to that back payment to General Fund Balances, until the date on which the authority must pay the back payment have been applied. The difference between the amount of expenditure included in the Income and Expenditure Account in each year for unequal pay back pay claims and the amount under the regulations charged to the General Fund is included as a reconciling item in the Statement of Movement on the General Fund Balance and is the balance on the Equal Pay Reserve.

Capital Accounting Accounts

These comprise:-

the Revaluation Reserve which represents the balance of the surpluses or deficits arising on the periodic revaluation of fixed assets analysed on an individual asset basis. Generally an individual asset should not have a negative revaluation balance no matter how much the Reserve overall might be in surplus, and

the Capital Adjustment Account represents an initial transfer from the Fixed Asset Restatement Account and Capital Financing Account, amounts set aside from revenue resources or capital receipts to finance expenditure on fixed assets, provision for the repayment of external loans and the reversal of amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the movement on the General Fund Balance for the year.

The above accounts are not available to fund future expenditure.

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Capital Receipts

When an asset is disposed of the value of the asset in the balance sheet is written off to the Income and Expenditure Account as part of the gain or loss on disposal. Any revaluation gains in the Revaluation Reserve applicable to the asset disposed of are transferred to the Capital Adjustment Account. Receipts from disposals are credited to the Income and Expenditure Account. The gain or loss on the disposal of a fixed asset is the amount by which the disposal proceeds are more (gain) or less (loss) than the carrying amount of the fixed asset. The SORP requires some tangible fixed assets to be held on the balance sheet at current value. Following the decision to dispose such current valued assets are revalued. In accordance with the SORP and FRS3 Reporting Financial Performance, gains or losses on disposal of fixed assets are included within the Statement of Total Recognised Gains and Losses.

Capital receipts are required to be credited to the Usable Capital Receipts reserve and can then only be used to finance capital expenditure or to repay debt. Receipts are appropriated to the reserve from the Statement of Movement on the General Fund Balance.

The written-off value of assets disposed of is not a charge to the General Fund Balance as the cost of fixed assets is fully provided for under separatearrangements for capital financing. Amounts are appropriated to the CapitalAdjustment Account from the Statement of Movement on the General Fund Balance.

Such income that is not reserved for the repayment of external loans and has not been applied in financing capital expenditure is shown on the balance sheet as usable capital receipts. Charges to Revenue for Fixed Assets

Service revenue accounts, support services and trading accounts are charged with the following amounts to record the real cost of holding fixed assets during the year:

depreciation attributable to tangible fixed assets used in service delivery amortisation of intangible fixed assets used in service delivery impairment losses due to consumption of economic benefits on intangible

and tangible fixed assets used in service delivery and other losses where there are no accumulated gains in the Revaluation Reserve against which they can be written off.

Depreciation provided on surplus assets held for disposal is charged to Non Distributed Costs.

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Charges to Revenue for Fixed Assets (continued)

The council is not required to raise council tax to cover depreciation, impairment losses or amortisations. However, it is required to make an annual provision from revenue to contribute towards the reduction in its overall borrowing requirement (equal to either an amount calculated on a prudent basis determined by the council in accordance with statutory guidance, or loans fund principal charges). Depreciation, impairment losses and amortisation charges are therefore reversed and replaced by a revenue provision for debt repayment in the Statement of Movement on the General Fund Balance. These adjusting entries are reflected in the Capital Adjustment Account.

Contingent Assets and Contingent Liabilities

Contingent assets and contingent liabilities are not provided for within the statement of accounts whilst uncertainty remains over the final outcome or if it is not practicable to estimate the amount involved. These items are disclosed by way of notes to the accounts.

Council Tax (Collection Fund Income)

Up to 2008/09 the SORP required the Council Tax income included in the Income and Expenditure Account to be the amount that under regulation was paid from the Collection Fund to the council, a major preceptor. From the year commencing 1 April 2009 the Council Tax income included in the Income and Expenditure Account for the year shall be the accrued income for the year. The difference between the income included in the Income and Expenditure Account and the amount required by regulation to be credited to the General Fund is taken to the Collection Fund Adjustment Account and included as a reconciling item in the Statement of Movement on the General Fund Balance. The council will recognise debtors in the Balance Sheet for its attributable share of net cash collected from Council Tax by billing authorities but not paid over to it at the Balance Sheet date or creditors for cash received from billing authorities in advance of the billing authority receiving the cash from Council Tax payees.

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Debtors and Creditors

The accounts are maintained on an accruals basis in accordance with the SORP. The accounts are prepared on the basis of income being due and expenditure becoming payable in the financial year. This means that sums due to or from the council during the year are included in the accounts whether or not the cash has actually been received or paid in the year. Any differences between the actual and accrued amounts will be reflected in the accounts of the following year.

The council provides for known and uncollectable debts on the basis shownbelow. These general rates are subject to review where special circumstances may apply.

Provision

Age of debt (months) %

10 to 15 35

16 to 21 50

Over 21 100

Depreciation

Depreciation, with the exception of land which is not depreciated, is provided for on a straight line basis on those fixed assets with a finite useful life. Depreciation is not provided for in the year in which assets are acquired. The depreciation charge is abated where assets are disposed of during the financial year.

The SORP requires that upon a review of asset lives, depreciation would becalculated over the revised remaining useful life of the asset.

Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

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The periods over which the various types of asset are depreciated are:

Depreciation (continued)

Asset Type Years

Buildings 10 – 100

Vehicles, Plant and Equipment 3 – 30

Infrastructure 8 – 60

Building lives have now been extended to 100 years (from 60 years) to reflect the life of listed properties.

Estimation Techniques

Estimation techniques, the steps taken to arrive at monetary values for transactions and balances, together with the exercise of professional judgement are used in producing the statement of accounts in compliance with the SORP and within statutory deadlines. The main areas where such techniques are applied relate to:

the estimation of, mainly primary school’s debtor, creditor and cash positions as at 31 March. This process has been adopted due to earlier statutory closure deadlines and the devolved nature of Hertfordshire schools.

Exceptional items, extraordinary items and prior period adjustments

Exceptional items are included in the cost of the service to which they relate when to do so would not distort the service expenditure. Otherwise they would be disclosed on the face of the Income and Expenditure Account after ordinary activities of the council. Extraordinary items would be disclosed on the face of the Income and Expenditure Account after ordinary activities of the council. Prior period adjustments, if material, would be accounted for by restating comparative figures for the preceding accounting period.

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Financial Instruments - Assets

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 – all financial assets not classified as loans and receivables. This includes equity investments other than those for which a reliable fair value cannot be determined and other investments traded in an active market.

The council has not invested in available-for-sale assets.

Loans and Receivables

Loans and receivables are initially measured at fair value and carried at their amortised cost. Annual credits to the Income and Expenditure Account for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans that the council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable and interest credited to the Income and Expenditure Account is the amount receivable for the year in the loan agreement.

The council has made a number of loans to third parties at less than market rates (soft loans). Where a soft loan is made, a loss is recorded in the Income and Expenditure Account for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal. Interest is credited at a marginally higher effective rate of interest than the rate receivable from the third party, with the difference serving to increase the amortised cost of the loan in the Balance Sheet. Statutory provisions require that the impact of soft loans on the General Fund Balance is the interest receivable for the financial year – the reconciliation of amounts debited and credited to the Income and Expenditure Account to the net gain required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Statement of Movement on the General Fund Balance.

Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the Income and Expenditure Account.

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Financial Instruments – Liabilities

Financial liabilities are initially measured at fair value and carried at their amortised cost. Annual charges to the Income and Expenditure Account for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. For most of the borrowings that the council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable and interest charged to the Income and Expenditure Account is the amount payable for the year in the loan agreement.

Gains and losses on the repurchase or early settlement of borrowing are credited and debited to Net Operating Expenditure in the Income and Expenditure Account in the year of repurchase or settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the Income and Expenditure Account is spread over the life of the loan by an adjustment to the effective interest rate.

Where premiums and discounts have been charged to the Income and Expenditure Account, regulations allow the impact on the General Fund Balance to be spread over future years. The reconciliation of amounts charged to the Income and Expenditure Account to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Statement of Movement on the General Fund Balance.

The council is not aware of any position where it has acted as guarantor in relation to the issue of a financial instrument. If the council were to issue any such guarantee in the future it would be required to recognise such a liability at fair value. Fair value would be estimated by considering the probability of the guarantee being called and the likely amount payable under the guarantee. Such recognition at fair value would impact on the council’s general fund balances.

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Government Grants and Contributions

Government grants and other contributions are accounted for on an accruals basis and are recognised in the accounting statements when the conditions for their receipt have been complied with and there is reasonable assurance that the grant or contribution will be received.

In the case of service related revenue grants, the grant is credited to the appropriate revenue account where it is matched against the expenditure to which it relates.

Grants to cover general expenditure such as Revenue Support Grant and Area Based Grant are shown at the foot of the Income and Expenditure Account after Net Operating Expenditure.

Capital grants are applied as sources of finance to the specific capital project. Capital accounting conventions require that where acquisition of a fixed asset is financed either wholly or in part by a government grant or other contribution, the amount of the grant or contribution is credited initially to the deferred grants and contributions account. Accounting treatment of the grant or contribution mirrors that applied to the expenditure it has financed and the write down of such grants are credited to the same service revenue account that has borne the asset depreciation charge.

Group Accounts

The SORP requires a local authority to prepare Group Accounts where it has material interests in subsidiaries, associates or joint ventures. The council, following SORP guidance, has considered its relationships with and interests in other entities and either has no group relationship with or does not exercise significant control or influence over those entities. Therefore the council has not prepared Group Accounts for itself and those entities in which it has an interest.

Intangible Fixed Assets

This represents expenditure which may properly be capitalised but which is not represented by physical fixed assets (e.g. software licences). Intangible assets are recorded at cost and amortised to the relevant service revenue account on a systematic basis over their estimated useful economic lives which range from five to ten years.

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Landfill Allowance Trading Scheme

The Landfill Allowance Trading Scheme began on 1 April 2005 and will operate for a 15 year period to 31 March 2020. The Department for Environment, Food and Rural Affairs (DEFRA) has allocated tradable landfill allowances to each waste disposal authority in England.

If the council were to landfill waste in excess of its allowance it would need to:

buy the additional allowances required from another waste disposal authority; or

with agreement, bring forward allowances from the following year; or pay a financial penalty to DEFRA.

Allocated landfill allowances are shown as current assets. The liability for the current financial year in respect of waste disposed to landfill is reflected in provisions. Surplus allocated allowances, should they have a market value, are shown within specific reserves.

Long Term Contracts

Long term contracts are accounted for on the basis of the Income and Expenditure Account being charged in the year during which the cost of goods or services were received or provided.

Operating Leases

Rentals payable under operating leases are charged to the relevant service revenue account on a straight line basis over the term of the lease.

Overheads

The costs of overheads and support services are charged to those that benefit from the supply or service with the exception of costs relating to the Corporate and Democratic Core and Non Distributed Costs which have been identified in accordance with the Best Value Accounting Code of Practice and are shown as separate headings in the Income and Expenditure Account, as part of the Net Cost of Services.

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Pensions

The council participates in three different pension schemes that meet theneeds of employees in particular services. All the schemes provide members with defined benefits related to pay and service. The schemes are as follows:

Teachers - this is an unfunded scheme administered by the Teachers Pension Agency (TPA). The pension cost charged to the accounts is the contribution rate of 14.1% for 2009-10, set by the TPA on the basis of a notional fund. However, the arrangements for the Teachers’ scheme mean that liabilities for these benefits cannot be identified to the council. The scheme is therefore accounted for as if it were a defined contributions scheme – no liability for future payments of benefits is recognised in the balance sheet and the Education service revenue account is charged with the employer’s contributions payable to the TPA for the year.

Uniformed Fire fighters - this scheme is unfunded. With effect from 1 April 2006 the council pay an employer’s pension contribution based on a percentage of pay into the Firefighters’ Pension Fund. The Pension Fund will be balanced to nil at the end of the year through a cash settlement with central government.

Other employees - subject to certain qualifying criteria, are eligible to join the Local Government Pension Scheme. For 2009-10 the council paid an employer contribution rate of 20.6% of pensionable pay.

The Uniformed Fire fighters and Local Government Pension Schemes are both accounted for, under FRS17 Retirement Benefits, as defined benefit schemes.

The liabilities of these pension schemes attributable to the council are included in the balance sheet on an actuarial basis using the projected unit 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 future earnings for current employees.

Liabilities are discounted to their value at current prices, using a discount rate based on the yield of a basket of AA-rated bonds (Iboxx Sterling Corporates Index, AA over 15 Years).

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Pensions (continued)

The assets of the Local Government Pension Fund attributable to the council are included in the balance sheet at their fair value:

quoted securities – current bid price unquoted securities – professional estimate unitised securities – current bid price property – market value

The change in the net pensions liability is analysed into the following components:

current service cost – the increase in liabilities as a result of years of service earned this year – allocated in the Income and Expenditure Account to the revenue accounts of services for which the employees worked

employer contributions paid to the pension funds

past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Net Cost of Services in the Income and Expenditure Account as part of Non Distributed Costs

settlements and curtailments – the result of actions to relieve the council of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited to the Net Cost of Services in the Income and Expenditure Account 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 Net Operating Expenditure in the Income and Expenditure Account

expected return on assets – the annual investment return on the fund assets attributable to the council, based on an average of the expected long-term return – credited to Net Operating Expenditure in the Income and Expenditure Account

actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuary has updated previous assumptions – debited or credited to the Statement of Total Recognised Gains and Losses.

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Pensions (continued)

Statutory provisions limit the council to raising council tax to cover the amounts payable by the council to the pension fund in the year. In the Statement of Movement on the General Fund Balance 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 fund and any amounts payable to the fund but unpaid at the year-end.

Post Balance Sheet Events

Where material, events that occur after the balance sheet date that provide additional evidence relating to conditions existing at that date are reflected within the accounting statements. Material post balance sheet events that relate to conditions that did not exist at the balance sheet date are disclosed by way of a note to the accounts.

Private Finance Initiative

The council fully complies with International Reporting Standards (IFRS) in accounting for its Private Finance Initiative contract.

The council currently has one Private Finance Initiative scheme and accounts for unitary payments in respect of this scheme, net of any performance deductions as a revenue cost on an accruals basis. The council also accounts for Private Finance Initiative grant on an accruals basis, with amounts not yet required to fund the capital related element of the accrued unitary payments placed in an earmarked reserve.

Accounting treatment for the PFI scheme is set out on page 13 to 15 of the Statement of Accounts. This represents a change in accounting policy in 2009/10.

Provisions

Provisions are made where an event has taken place that gives the council an obligation that probably requires settlement by a transfer of economic benefits, but where the timing of the transfer is uncertain.

Provisions are charged to the appropriate service revenue account in the yearthat they are recognised and are detailed in the notes to the accounts. Expenditure incurred on items for which the provision was originally set up ischarged directly to the provision. The level of each provision is reviewed at the balance sheet date. Provisions that are no longer required will be credited back to the original service revenue account from where the provision was created.

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Revenue Expenditure Funded from Capital under Statute

Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of fixed assets has been charged as expenditure to the relevant service revenue account in the year. Where the council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer to the Capital Adjustment Account via the Statement of Movement on the General Fund Balance then reverses out the amounts charged in the Income and Expenditure Account thereby ensuring there is no impact on the level of General Fund Balances.

Specific Reserves

Specific Reserves are sums of money earmarked to provide, in the main, flexibility in funding between years. A detailed make up of specific reserves is given in the notes to the accounts. Reserves are created by appropriating amounts in the Statement of Movement on the General Fund Balance. Expenditure incurred on items for which the reserve was originally established is shown as service expenditure offset by a contribution from the reserve to the Statement of Movement on the General Fund Balance.

Certain reserves are kept to manage the accounting processes for tangible fixed assets and retirement benefits and do not represent usable resources for the council – these reserves are explained in the relevant accounting policy.

Stocks

Stocks and stores cover such items as vehicle spares, uniforms, stationery, equipment, other materials and some canteen stocks. All consumable and non-durable stocks and stores are charged to the revenue account in the year of purchase. The basis of valuation is dependent on the nature of the stock with most stocks being valued at the lower of cost and net realisable value.

Tangible Fixed Assets

Tangible fixed assets are assets that have physical substance and are held for use in the provision of services or for administrative purposes on a continuing basis.

Recognition

Expenditure on the acquisition, creation or enhancement of tangible fixed assets is capitalised, provided that the fixed asset yields benefits to the council and the services it provides, for a period of more than one year. This excludes expenditure on routine repairs and maintenance of fixed assets, which is charged direct to service revenue accounts.

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Tangible Fixed Assets (continued)

De-minimis limits

The Council operates a number of de-minimis limits; this means that, whilst expenditure may meet the definition of capital expenditure, it will nevertheless be treated as revenue expenditure if the amount concerned is below a specified level. The de-minimis limits are defined within Hertfordshire County Council’s (HCC) Accounting Policies, and may be subject to amendment from time to time, following consultation with departments, to ensure that they remain relevant and appropriate for services.

Measurement

Tangible fixed assets are valued on the basis recommended by CIPFA and in accordance with guidelines issued by the Royal Institution of Chartered Surveyors. Fixed assets are classified into the groupings required by the SORP.

Fixed assets are valued as follows:-

Type of Asset Basis of Valuation

Operational land & buildings Open market value for existing use, or where this could not be assessed because there was no market for the subject asset, the depreciated replacement cost.

Operational vehicles, plant and equipment

Depreciated historic cost as a proxy for current replacement cost.

Infrastructure Depreciated historic cost.

Surplus land & buildings, held for disposal

Market value.

Non Operational vehicles, plant and equipment

Depreciated historic cost.

Assets under construction Historic cost.

Revaluations

During 2004/05 a rolling programme of land and building asset revaluations commenced. This programme will ensure compliance with the SORP requirement that all land and building assets are revalued within a five-year period. However, other permanent and material changes to asset valuations, as advised by the council’s valuers will be accounted for in the interim period, as they occur.

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Where a fixed asset is included in the Balance Sheet at current value, the increase over the previous carrying amount at which that asset was included in the Balance Sheet immediately prior to the latest (re-)valuation is credited to the Statement of Total Recognised Gains and Losses and taken to the Revaluation Reserve except to the extent it reverses revaluation losses (after adjusting for depreciation) on the same assets that were previously recognised in the Income and Expenditure Account (or Consolidated Revenue Account - Net Operating Expenditure) when it is recognised in the Income and Expenditure Account.

Where on revaluation there has been a decrease from the previous carrying amount an impairment loss has occurred. If the loss has been caused by the consumption of economic benefits any such loss is recognised in the Income and Expenditure Account. The amount of the decrease in value not associated with a consumption of economic benefit is recognised in the Statement of Total Recognised Gains and Losses until the asset’s carrying amount reaches its depreciated historical cost and taken to the Revaluation Reserve; and thereafter in the Income and Expenditure Account.

Gains and losses resulting from revaluations are accounted for as follows. The Statement of Total Recognised Gains and Losses (and therefore Revaluation Reserve) is:

credited with revaluation gains, except to the extent that they reverse previous revaluation losses (after allowing for depreciation) on the same asset that were charged to the Income and Expenditure Account

debited with revaluation losses not associated with an impairment related to a clear consumption of economic benefit up to the balance on the Revaluation Reserve in respect of that asset.

The Income and Expenditure Account is:

credited with any revaluation gains that reverse revaluation losses (after allowing for depreciation) on the same asset that were charged to services

debited with revaluation losses associated with an impairment related to a clear consumption of economic benefit

debited with revaluation losses not associated with a clear consumption of economic benefit in excess of the balance on the Revaluation Reserve in respect of that asset (i.e. in excess of the amount allowed to be debited to the Statement of Total Recognised Gains and Losses).

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Impairment

The council’s valuers perform an impairment review on the value of buildings that have a remaining minimum useful life of 50 years as at the balance sheet date. Accounting for impairment of revalued tangible fixed assets is covered in the revaluation section of this policy. Where an impairment loss on a tangible fixed asset carried at historical cost caused by a clear consumption of economic benefit occurs, it is written down for the impairment and the impairment loss is recognised in the Income and Expenditure Account.

Land and Building Capital Expenditure

Land and building capital expenditure not considered to have added to the value of fixed assets is treated as an impairment and written off to the Income and Expenditure Account. To ensure a neutral effect this charge is reversed through the Statement of Movement on General Fund Balance to the Capital Adjustment Account. Value Added Tax

Value Added Tax (VAT) is included within either the revenue or capital accounts only to the extent that it is irrecoverable. The council is able to recover VAT on nearly all its expenditure (input tax) and in addition, accounts for VAT on its income (output tax) where applicable. The balance owing as at 31 March, from or to HM Revenue & Customs, will be shown in either current assets or current liabilities on the balance sheet.

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THE STATEMENT OF RESPONSIBILITIES

This statement sets out the respective responsibilities of the council and the Chief Finance Officer for the accounts.

The County Council’s responsibilities

The council is required:

to make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this authority, that officer is the Chief Finance Officer;

to manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets;

approve the Statement of Accounts before 30 June 2010.

I confirm that draft accounts were approved for submission to Audit by the Audit Committee at the meeting held on 30 June 2010.

Signed on behalf of Hertfordshire County Council.

Seamus QuiltyChairmanAudit Committee

Date: 30 June 2010

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THE STATEMENT OF RESPONSIBILITIES

The Chief Finance Officer’s responsibilities

The Chief Finance Officer is responsible for the preparation of the council’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 (the SORP).

In preparing this Statement of Accounts, the Chief Finance 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 SORP.

The Chief Finance 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.

Chief Finance Officer's Certificate

I certify that the Statement of Accounts presents fairly the financial position of the council, the Hertfordshire County Council Pension Fund and the Firefighters’ Pension Fund as at 31 March 2010 and the income and expenditure for the year then ended.

M Parsons

Chief Finance Officer

30 June 2010

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INCOME AND EXPENDITURE ACCOUNT

This statement is fundamental to the understanding of a local authority’s activities in that it reports the net cost for the year of all the functions for which the authority is responsible, and demonstrates how that cost has been financed from general government grants and income from local taxpayers. It brings together expenditure and income, on an accruals basis, relating to all of the local authority’s functions, in three distinct sections, each divided by a sub-total. In addition to day-to-day expenses and related income the statement includes transactions measuring the value of fixed assets actually consumed and the real projected value of retirement benefits earned by employees in the year.

The first section provides segmental accounting information on the costs of the local authority’s different continuing operations, net of specific grants and income from fees and charges, to give the net cost of services. The total cost principle applies to each item at this mandatory level of service division. This means that, in addition to direct costs, each division of service must include an appropriate share of:

depreciation

impairment losses identified on assets used to provide services, including capital expenditure, net of financing, not adding to fixed asset carrying amounts

amortised revenue expenditure funded from capital and intangible assets

support service overheads

current and past service costs of pensions and gains and losses on settlements and curtailment of pensions

losses recorded on making a soft loan

gains recognised on receiving a loan at less than prevailing interest rates

charges for the fair value of any financial guarantees given.

Contributions to or from specific reserves and revenue financing of capital expenditure are shown within the movement on the general fund balance.

The second section comprises items of income and expenditure relating to the local authority as a whole. When added to the net cost of services this gives the local authority’s net operating expenditure.

The third section shows the income from local taxation and general, not attributable to specific services, government grants in the period, to give the net deficit or surplus for the year.

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INCOME AND EXPENDITURE ACCOUNT

Net CostGross Cost

Gross Income Net Cost

2008/09 2009/10 2009/10 2009/10£000 Note £000 £000 £000

266,946 Adult Social Care Services 409,903 108,942 300,9612,102 Central Services to the Public 4,610 2,546 2,064

225,545 Children’s and Education Services 1,230,187 963,565 266,6221,016 Court Services 1,081 183 898

70,957 Cultural, Environmental, Regulatory and Planning Services 102,846 12,658 90,188

41,099 Fire and Rescue Services 44,357 1,646 42,71180,117 Highways and Transport Services 104,447 16,710 87,737

539 Other Housing Services 24,265 23,357 9077,208 Corporate and Democratic Core 27,410 15,075 12,335

18,404 Non Distributed Costs 46,481 5,167 41,314713,933 Net Cost of Services 2 1,995,587 1,149,849 845,737

429,344 Exceptional Item – Fixed Asset Impairment

4- - -

7,780 Exceptional Item – Icelandic Banks Investments 4 & 28 539 - 539

59,437 (Gain)/Loss on Disposal of Fixed Assets 5 35,053 2544 32,5092,212 Precepts and Levies 2,237 - 2,237

(1,189)(Surplus)/Deficit on Trading Undertakings 6 - 2,390 (2,390)

26,055 Interest Payable and Similar Charges 7 17,261 - 17,261(23,640) Interest and Investment Income 7 - 5,698 (5,698)93,746 Pensions Interest Cost 40 92,725 - 92,725

(85,851) Expected Return on Pension Assets 40 - 47,359 (47,359)2,623 Contribution in Lieu of Interest 8 412 - 412

(1,023) Insurance Fund 9 9,566 6,465 3,1011,223,427 Net Operating Expenditure 2,153,380 1,214,305 939,075(479,140) Income from the Collection Fund - 499,780 (499,780)(67,194) General Government Grants 10 - 80,591 (80,591)

(149,951)Distribution from Non-Domestic Rate

Pool - 140,953 (140,953)527,142 (Surplus) / Deficit for the year 2,153,380 1,935,629 217,751

41

STATEMENT OF THE MOVEMENT ON THE GENERAL FUND BALANCE

The Income and Expenditure Account shows the council’s actual financial performance for the year, measured in terms of the resources consumed and generated during the year. However, the council is required to raise council tax on a different accounting basis, the main differences being:

Capital investment is accounted for as it is financed, rather than when the fixed assets are consumed.

Retirement benefits are charged as amounts become payable to pension funds and pensioners, rather than as future benefits are earned.

The General Fund Balance shows whether the council has over or underspent against the council tax that it raised for the year, taking into account the use of reserves built up in the past and contributions to reserves earmarked for future expenditure.

This reconciliation statement summarises the differences between the outturn on the Income and Expenditure Account and the General Fund Balance.

2008/09 2009/10£000 Note £000

527,142 (Surplus) / deficit on the Income and Expenditure Account 217,751

(537,418)

Net additional amount required by statute or non-statutory proper practices to be debited or credited to the General Fund for the year 11 (234,027)

(10,276) (Surplus) / deficit for the year (16,277)

(26,220) General Fund Balance brought forward (36,496)

(36,496) General Fund Balance carried forward (52,773)

0

Amounts held within the General Fund Balance carried forward that are held by governors under schemes to finance schools 0

(36,496)Amount of General Fund Balance generally available for new expenditure (52,773)

(36,496) (52,773)

42

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

Not all the gains and losses experienced by the council are reflected in the Incomeand Expenditure Account. For example, gains on revaluations of fixed assets and pension actuarial gains and losses are excluded as they are treated under UK GAAP as arising from asset and liability valuation changes rather than from the council’s operating performance. It is necessary to consider all gains and losses recognised in a period when assessing the financial result for the period. FRS 3 Reporting Financial Performance requires all gains and losses to be included in a Statement of Total Recognised Gains and Losses (STRGL) to be shown with the same prominence as the other primary statements.

This statement brings together all the gains and losses of the council for the year and shows the aggregate increase in its net worth. In addition to the surplus or deficit on the Income and Expenditure Account, it includes gains and losses on:

the revaluation of fixed assets

the remeasurement of the net liability to cover the cost of retirement benefits.

2008/09 2009/10£000 £000

527,142 (Surplus) / deficit on the Income and Expenditure Account 217,751

(72,474) Surplus arising on revaluation of fixed assets (101,326)

185,589 Actuarial (gains)/ losses on pension assets and liabilities 584,146

640,257 Total recognised (gains)/losses for the year 700,571

43

BALANCE SHEET

The balance sheet is fundamental to the understanding of an authority’s financial position at the year-end. It shows the balances and reserves at the council’s disposal, its long-term indebtedness and the fixed and net current assets employed in its operations, together with summarised information on the fixed assets held.

The balance sheet excludes the pension fund and various trust funds, whose assets are not at the disposal of the council, and are administered for third parties.

The balance sheet represents the financial position of the council as a whole as at 31 March 2010.

44

BALANCE SHEET

2009 (restated) 2010Note £000 £000 £000 £000

Fixed AssetsIntangible Fixed Assets 24 5,280 5,230Tangible Fixed Assets 25Operational Assets Land and Buildings 2,193,094 2,211,467 Vehicles, Plant & Equipment 69,700 80,477 Infrastructure Assets 419,884 463,633Non-operational Assets Surplus Land and Buildings, held for disposal 128,809 104,213 Vehicles, Plant & Equipment 0 0 Assets under construction 8,474 6,983

2,825,241 2,872,002Long-term Investments 28 30,146 28,646Long-term Debtors 29 20,090 18,576PFI Debtor 6,713 -Total Long-term Assets 2,882,190 2,919,224Current Assets Stocks and Work in Progress 30 4,205 3,770 Landfill Usage Allowances 31 0 0 Debtors 32 81,077 112,368 Short Term Investments 28 214,561 17,642 Cash and Bank 80,620 380,463 93,496 227,277

Total Assets 3,262,653 3,146,501Current Liabilities Short-term Borrowing 28 4,261 8,073 Creditors 34 342,341 331,310 Related Parties 35 2,704 2,014 Bank Overdraft 36 81,177 430,483 87,520 428,917

Total Assets less Current Liabilities 2,832,170 2,717,538Long-term Borrowing 28 341,190 287,453Long-term PFI Liabilities 18,504 18,909Provisions 37 17,556 16,445Deferred Grants & Contributions 38 156,490 197,625Deferred Credits 39 273 242Liability related to defined benefit pension schemes 40 571,511 1,105,524 1,170,833 1,691,507

Total Assets Less Liabilities 1,726,646 1,026,076Financed by:Capital Adjustment Account 42 2,079,583 1,857,371Revaluation Reserve 43 72,442 173,067Financial Instruments Adjustment Account 44 (11,289) (10,186)Equal Pay Reserve 45 (1,077) (1,077)Pensions Reserve 46 (571,511) (1,170,833)Collection Fund Adjustment Account

49 (2,413) (1,959)

Usable Capital Receipts Reserve 47 19,626 15,550Specific Reserves 48 104,789 105,371General Fund Balance 50 36,496 52,773Total Net Worth 1,726,647 1,026,076

45

CASH FLOW STATEMENT

Cash flow statement and associated notes to follow.

This statement summarises the inflows and outflows of cash arising from transactions with third parties for revenue and capital purposes. Reconciliations to the deficit on the Income and Expenditure Account and to the council’s net debt position together with an analysis of net debt are shown as notes to the accounts.

31 March 2009 31 March 2010£000 £000

Net Cash Flow from revenue activities 65,284

Cash OutflowsInterest and premium on debt restructuring (17,877)

Cash InflowsInterest received 18,183

Capital ActivitiesCash OutflowsPurchase of Fixed Assets (including revenue expenditure funded from capital) (162,747)Cash InflowsSale of Fixed Assets 21,285 Capital grants received 53,475 Contributions and other income 9,888

Net Cash (outflow) / inflow before financing (12,509)

Management of Liquid ResourcesNet (increase)/decrease in short term investments 54,069

Management of Long Term ResourcesIncrease in long term investments 8,000

Financing

Cash OutflowsRepayments of amounts borrowed (67,649)

Cash InflowsNew loans raised 30,000

Net increase/(decrease) in cash 11,911

46

NOTES TO THE ACCOUNTS

1. Restatement of Previous Year’s Accounts

The impact of the above adjustments, referred to in the Chief Finance Officer’s report, on the core statements of account comparative figures for 2008/09 compared with those published in the 2008/09 Statement of Accounts is shown below.

Net Cost in 2008/09

Statement of Accounts PFI

2008/09 comparatives in Income and Expenditure

Account£000 £000 £000

Adult Social Care Services 266,946 0 266,946Central Services to the Public 2,102 0 2,102Children’s and Education Services 229,546 (4,001) 225,545Court Services 1,016 0 1,016Cultural, Environmental, Regulatory and Planning Services 70,957 0 70,957Fire and Rescue Services 41,099 0 41,099Highways and Transport Services 80,117 0 80,117Other Housing Services 539 0 539Corporate and Democratic Core 7,208 0 7,208Non Distributed Costs 18,404 0 18,404Net Cost of Services 717,934 (4,001) 713,933Exceptional Item – Fixed Asset Impairment 415,394 13,950 429,344Exceptional Item – Icelandic Banks Investments 7,780 0 7,780(Gain)/Loss on Disposal of Fixed Assets 59,433 4 59,437Precepts and Levies 2,212 0 2,212(Surplus)/Deficit on Trading Undertakings (1,189) 0 (1,189)Interest Payable and Similar Charges 24,773 1,282 26,055Interest and Investment Income (23,640) 0 23,640Pensions Interest Cost 93,746 0 93,746Expected Return on Pension Assets (85,851) 0 (85,851)Contribution in Lieu of Interest 2,623 0 2,623Insurance Fund (1,023) 0 (1,023)Net Operating Expenditure 1,212,192 11,235 1,223,427Income from the Collection Fund (479,140) 0 (479,140)General Government Grants (67,194) 0 (67,194)Distribution from Non-Domestic Rate Pool (149,951) 0 (149,951)(Surplus) / Deficit for the year 515,907 11,235 527,142

47


1. Restatement of Previous Year’s Accounts (continued)

Comparatives in 2008/09


Restated comparatives

2008/09 £000 £000 £000

(Surplus) / deficit on the Income and Expenditure Account 515,907 11,235 527,142

Net additional amount required by statute or non-statutory proper practices to be debited or credited to the General Fund for the year (526,183) (11,235) (537,418)

(Surplus) / deficit for the year (10,276) 0 (10,276)

General Fund Balance brought forward (26,220) 0 (26,220)

General Fund Balance carried forward (36,496) 0 (36,496)

Amounts held within the General Fund Balance carried forward that are held by governors under schemes to finance schools 0 0 0

Amount of General Fund Balance generally available for new expenditure

(36,496) 0 (36,496)

48



Comparatives in 2008/09


Restated comparatives

2008/09 £000 £000 £000

(Surplus) / deficit on the Income and Expenditure Account 515,907 11,235 527,142

Surplus arising on revaluation of fixed assets (72,474) 0 (72,474)

Actuarial (gains)/ losses on pension assets and liabilities 185,589 0 185,589

Total recognised (gains)/losses for the year 629,022 11,235 640,257

49



Balance Sheet in 2008/09


Fixed Asset Verification

Collection Fund

Income PensionInterest

Accruals

2008/09 comparatives

in Balance Sheet

£000 £000 £000 £000 £000 £000 £000Fixed AssetsIntangible Fixed Assets 5,280 0 0 0 0 0 5,280Tangible Fixed AssetsOperational AssetsLand and Buildings 2,188,039 17,793 (12,738) 0 0 0 2,193,094Vehicles, Plant & Equipment 70,595 0 (895) 0 0 0 69,700 Infrastructure Assets 419,626 0 258 0 0 0 419,884Non-operational AssetsSurplus Land and Buildings, held for disposal 128,572 (250) 487 0 0 0 128,809Vehicles, Plant & Equipment 0 0 0 0 0 0 0Assets under construction 8,474 0 0 0 0 0 8,474

2,820,586 17,543 (12,888) 0 0 0 2,825,241Long-term Investments 30,146 0 0 0 0 0 30,146Long-term Debtors 20,090 0 0 0 0 0 20,090Total Long-term Assets 2,870,822 24,256 (12,888) 0 0 0 2,882,190Current AssetsStocks and Work in Progress

4,205 0 0 0 0 0 4,205Landfill Usage Allowances 0 0 0 0 0 0 0Debtors 83,490 0 0 (2,413) 0 0 81,077Short Term Investments 214,561 0 0 0 0 0 214,561Cash and Bank 80,620 0 0 0 0 0 80,620Total Assets 3,253,698 24,256 (12,888) (2,413) 0 0 3,262,653Current LiabilitiesShort-term Borrowing 83 468 0 0 0 3,710 4,261Creditors 342,341 0 0 0 0 0 342,341Related Parties 2,704 0 0 0 0 0 2,704Bank Overdraft 81,177 0 0 0 0 0 81,177Total Assets less Current Liabilities 2,827,393 23,788 (12,888) (2,413) 0 (3,710) 2,832,170Long-term Borrowing 344,900 0 0 0 0 (3,710) 341,190Long-term PFI Liabilities 0 18,504 0 0 0 0 18,504Provisions 17,556 0 0 0 0 0 17,556Deferred Grants & Contributions 156,490 0 0 0 0 0 156,490Deferred Credits 273 0 0 0 0 0 273Liability related to defined benefit pension schemes 589,311 0 0 0 (17,800) 0 571,511Total Assets Less Liabilities 1,718,863 5,284 (12,888) (2,413) 17,800 0 1,726,646Financed by:Capital Adjustment Account 2,087,612 4,859 (12,888) 0 0 0 2,079,583Revaluation Reserve 72,017 425 0 0 0 0 72,442Financial Instruments Adjustment Account (11,289) 0 0 0 0 0 (11,289)Collection Fund Adjustment Account 0 0 0 (2,413) 0 0 (2,413)Equal Pay Reserve (1,077) 0 0 0 0 0 (1,077)Pensions Reserve (589,311) 0 0 0 17,800 0 (571,511)Usable Capital Receipts Reserve 19,626 0 0 0 0 0 19,626Specific Reserves 104,789 0 0 0 0 0 104,789General Fund Balance 36,496 0 0 0 0 0 36,496Total Net Worth 1,718,863 5,284 (12,888) (2,413) 17,800 0 1,726,646

50


2. Net Cost of Services

The net cost of services is shown below at the mandatory level of service as required by the best value accounting code of practice.

Net CostGross Cost

Gross Income Net

Cost2008/09 2009/10 2009/10 2009/10

£000 £000 £000 £000Adult Social Care Services

370 Service Strategy 411 8 403

123,857 Older People (Aged 65 or Over) Including Mentally Ill 195,764 53,446 142,318

29,162 Adults Aged Under 65 with a Physical Disability or Sensory Impairment 38,137 4,953 33,184

86,340 Adults Aged under 65 with Learning Disabilities 146,091 48,980 97,111

26,601 Adults Aged Under 65 with Mental Health Needs 27,119 682 26,436

609 Other Adult Services 2,377 872 1,505

7 Supported Employment (including sheltered employment) 5 1 4

266,946 Total Adult Social Care Services 409,903 108,942 300,961Central Services to the Public

898 Registration of Births, Deaths and Marriages 3,109 2,080 1,029375 Conducting Elections 0 0 0670 Emergency Planning 1,169 254 915

49 Local Land Charges 0 0 0110 General Grants, Bequests and Donations 332 212 120

2,102 Total Central Services to the Public 4,610 2,546 2,064Children’s and Education ServicesEducation Services

738 Nursery Schools 15,937 13,598 2,33946,165 Primary Schools 411,231 354,977 56,25453,675 Secondary Schools 513,108 452,056 61,05211,702 Special Schools 76,870 64,569 12,301

9,972 Non-School Funding 43,061 35,840 7,221Children's Social Care

116 Service Strategy 111 0 111

29,401 Children's Services - Commissioning and Social Work 31,067 512 30,555

43,082 Children Looked After 60,536 1,987 58,54818,934 Family Support Services 43,507 23,132 20,375

2,496 Youth Justice 3,992 1,667 2,32582 Asylum Seekers 2,583 2,250 333

13,183 Other Children’s and Families' Services 28,183 12,976 15,207

229,546 Total Children’s and Education Services 1,230,18

7 963,565 266,622Court Services

1,016 Coroners Courts 1,081 183 898

51

1,016 Total Court Services 1,081 183 898

52


2. Net Cost of Services (continued)

Net CostGross Cost

Gross Income Net

Cost2008/09 2009/10 2009/10 2009/10

£000 £000 £000 £000Cultural, Environmental, Regulatory and Planning Services Cultural and Related Services

2,421 Culture and Heritage 2,635 367 2,26859 Recreation and Sport 182 95 87

1,536 Open Spaces 1,602 350 1,252165 Tourism 114 4 110

19,870 Library Service 22,482 1,566 20,91624,051 Total Cultural and Related Services 27,015 2,382 24,633

Environmental and Regulatory Services3,195 Community Safety (Crime Reduction) 4,238 1,577 2,661

225 Agricultural and Fisheries 11,880 1,415 10,4652,937 Trading Standards 3,504 357 3,147

22 Street Cleansing (not chargeable to highways) 23 1 2229,704 Waste Disposal 40,570 3,309 37,261

2,763 Recycling 2,895 0 2,8951,146 Waste Minimisation 2,033 0 2,033

39,992 Total Environmental and Regulatory Services 65,143 6,659 58,484Planning and Development Services

1,233 Development Control 1,707 514 1,1932,378 Planning Policy 3,885 1,291 2,5941,293 Environmental Initiatives 1,667 417 1,250

245 Economic Development 1,272 923 3491,765 Community Development 2,157 427 1,6856,914 Total Planning and Development Services 10,688 3,617 7,071

70,957 Total Cultural, Environmental, Regulatory and Planning Services 102,846 12,658 90,188Fire and Rescue Services

3,278 Community Safety 3,818 258 3,56037,821 Fire Fighting and Rescue Operations 40,539 1,388 39,15141,099 Total Fire and Rescue Services 44,357 1,646 42,711

Highways and Transport Services4,769 Transport Planning, Policy and Strategy 6,750 1,583 5,1676,187 Structural Maintenance 6,748 1,216 5,532

14,589 Capital Charges Relating to Construction Projects 23,092 2,954 20,138

22,385 Environment, Safety and Routine Maintenance 20,450 717 19,7338,936 Street Lighting (including energy costs) 9,948 139 9,8094,696 Winter Service 4,437 9 4,4285,448 Traffic Management and Road Safety 7,811 1,357 6,454

13,107 Public Transport 25,211 8,735 16,47680,117 Total Highways and Transport Services 104,447 16,710 87,737

53


2. Net Cost of Services (continued)

Net CostGross Cost

Gross Income Net

Cost2008/09 2009/10 2009/10 2009/10

£000 £000 £000 £000Other Housing Services

643 Supporting People 22,581 21,966 616Other Council Property

65 Travellers’ Sites 852 841 11(169) Non HRA Council Property 831 551 280539 Total Other Housing Services 24,265 23,357 907

Corporate and Democratic Core4,480 Democratic Representation and Management 5,284 1,205 4,0792,728 Corporate Management 22,126 13,870 8,2567,208 Total Corporate and Democratic Core 27,410 15,075 12,335

Non Distributed Costs11,828 Retirement Benefits 0 0 0

6,576 Costs of Unused Share of IT Facilities and Other Assets 46,481 5,167 41,314

18,404 Total Non Distributed Costs 46,481 5,167 41,314

717,934 Total Net Cost of Services 1,995,587 1,149,849 845,737

54


3. Deployment of Dedicated Schools Grant

The council’s expenditure on schools is funded primarily by grant monies provided by the Department for Children, Schools and Families, the Dedicated Schools Grant (DSG). DSG is ring-fenced and can only be applied to meet expenditure properly included in the Schools Budget, as defined in the School Finance (England) Regulations 2008. The Schools Budget includes elements for a range of educational services provided on an authority-wide basis and for the Individual Schools Budget, which is divided into a budget share for each maintained school.

Details of the deployment of DSG receivable for 2009/10 are as follows:

Schools Budget Funded by Dedicated Schools Grant

CentralExpenditure

Individual SchoolsBudget Total

£000 £000 £000

Final DSG for 2009/10 642,065

Brought forward from 2008/09 3,636

Agreed budgeted distribution in 2009/10 85,609 557,999 643,608

Actual central expenditure 86,332 86,332

Actual ISB deployed to schools 557,999 557,999

Local authority contribution for 2009/10 0

2009/10 in year balance carried forward to 2010/11 (723) 0 (723)

Carry forward to 2010/11 agreed in advance 2,093

Total carry forward to 2010/11 1,370

55


4. Exceptional Items

These items have been separately disclosed due to being of a higher materiality level and to avoid distorting the usefulness of these accounts for year on year or inter authority comparison.

2008/09 2009/10£000 £000

Fixed asset impairment due to the substantial general fall in land values during 2008-09. 415,394 0

Icelandic Banks Investments reflecting the impairment of principal amounts recoverable. Note 28 provides further analysis. 7,780 539

5. (Gain) / Loss on Disposal of Fixed Assets

With effect from 2006/07 gains and losses on the disposal of fixed assets are required to be calculated for disclosure in the Income and Expenditure Account, but ultimately income received from disposals will be credited to a Usable Capital Receipts Reserve – amounts will then be credited to the Capital Adjustment Account when applied to finance new capital expenditure or set aside to reduce net indebtedness. In order to comply with statutory/proper practice restrictions on the use of capital receipts the gain or loss as disclosed in the Income and Expenditure Account is reversed by a reconciling item in the Statement of Movement on the General Fund Balance. The value of assets written off in 2009/10 includes £31.767 million in respect of two schools that became academy schools during the year. At the time the academy school is established assets held for and used by the relevant school transfer from County Council ownership.

2008/09 2009/10£000 £000

Capital Receipts (15,060) (2,904)

Value of Fixed Assets Written Off 74,493 35,053

(Gain) / Loss on Disposal of Fixed Assets 59,433 32,509

56


6. (Surplus) / deficit on trading undertakings

During the financial year ended 31 March 2010, the council operated the following material trading accounts within a competitive environment.

(Surplus)/ Deficit

Gross Cost

Gross Income

(Surplus)/ Deficit

2008/09 2009/10 2009/10 2009/10£000 Name and description of operations £000 £000 £000

(264) Hertfordshire CateringHertfordshire Catering is the council's education caterer, who provides a quality catering service to over 500 primary, middle and secondary schools in Hertfordshire, as well as to other organisations.

20,436 20,925 (489)

(122) Hertfordshire Business Services (HBS)HBS offers a professional purchasing, supply and contract management service to the council. HBS acts as client manager for the school meals service and vehicle maintenance. HBS is a leading member of the Central Buying Consortium consisting of 17 local authorities and negotiates both joint and council specific contracts.

30,147 30,989 (842)

(597) Hertfordshire ReprographicsHertfordshire Reprographics are the council’s in-house print unit. It provides a range of reprographic services including printing, fast print, plan print and photocopying.

2,479 3,327 (848)

(73) Childcare Litigation UnitThe Childcare Litigation Unit provides legal support for the council's children's services.

1,472 1,547 (75)

(1,056) Total carried forward (2,254)

57


6. (Surplus) / deficit on trading undertakings (continued)

(Surplus)/ Deficit

Gross Cost

Gross Income

(Surplus)/ Deficit

2008/09 2009/10 2009/10 2009/10£000 Name and description of operations £000 £000 £000

(1,056) Total brought forward (2,254)

(133) Financial Services for Schools (FSS) FSS provides quality, value for money financial services to Hertfordshire schools, working closely with school staff, head teachers and governors, operating a financial systems help line, visiting schools on a regular or ad-hoc basis to provide financial support and training, and running group training courses for school staff and governors. FSS also provides support for local and central government initiatives, (such as the Financial Management Standard in Schools), as well as support to schools causing concern and school reorganisations under a service level agreement with the authority.

1,827 1,963 (136)

(1,189) Total Trading Services (2,390)

The above results are based on the Best Value Accounting Code of Practice. They include the effect of depreciation, defined benefit pension scheme and discretionary pension costs shown on an FRS17 basis and reserve movements shown as appropriations in the Statement of Movement on the General Fund Balance.

7. Interest Payable and similar charges and Interest and Investment Income

With effect from 1 April 2007 the basis of calculating the interest expense or income to be accounted for in the Income and Expenditure Account changed. As from 2007-08 such amounts are calculated using the effective interest rate method. The disclosure notes for gains and losses applicable to financial instruments are shown in the following tables.

58


7. Interest Payable and similar charges and Interest and Investment Income (continued)

2009/10

Financial Liabilities Financial AssetsLiabilities measured

at amortised

cost

Liabilities at fair value

Loans and receivables

Available-for-sale assets

Fair value through the Income and expenditure

Account Total£000 £000 £000 £000 £000 £000

Interest payable and similar chargesInterest expense 15,789 15,789Losses on derecognition 1,472 1,472Gains on derecognitionImpairment losses

17,261 17,261

Interest and investment incomeInterest income (4,226) (4,226)Impairment lossesLosses on recognitionGains on derecognition – soft loansGains on recognition – discounts on redemption of loans (1,472) (1,472)

(5,698) (5,698)

Net (gain)/loss for the year 17,261 (5,698)

59


7. Interest Payable and similar charges and Interest and Investment Income (continued)

2008/09

Financial Liabilities Financial AssetsLiabilities measured

at amortised

cost

Liabilities at fair value

Loans and receivables

Available-for-sale assets

Fair value through the Income and expenditure

Account Total£000 £000 £000 £000 £000 £000

Interest payable and similar chargesInterest expense 19,576 19,576 Losses on derecognition 5,197 5,197 Gains on derecognitionImpairment losses

24,773 24,773

Interest and investment incomeInterest income (18,541) (18,541)Impairment lossesLosses on recognition 123 123 Gains on derecognition – soft loans (25) (25)Gains on recognition – discounts on redemption of loans (5,197) (5,197)

(23,640) (23,640)

Net (gain)/loss for the year 24,773 0 (23,640) 0 0

60


8. Contribution in Lieu of Interest

The following balance sheet positions receive a contribution in lieu of interest as such balances earn interest when invested. Actual interest received on such balances when deposited is reflected in the Income and Expenditure Account as Interest and Investment Income.

2008/09 2009/10£000 £000

Developer’s Contributions 1,769 284Insurance Fund 668 102Sickness Supply 159 25Other 27 1

2,623 412

9. Insurance Fund

The council operates insurance provisions and reserves to meet self-insured liabilities in respect of fire damage, employers and third party liability and storm damage. The Insurance Provision reduced in 2009/10 following confirmation that Zurich Municipal under the terms of our Fire Insurance Policy will indeminify the council in respect of a large school fire in December 2008.

2008/09 2009/10£000 £000

IncomeRecharge of premiums (8,982) (8,663)Other (4,834) 2300Contribution in lieu of interest (668) (102)

(14,484) (6,465)ExpenditureAdministration and premiums 4,384 4,635Contribution to insurance provision 9,561 4,693Claims (484) 238

(1,023) 3,101

10. General Government Grants

2008/09 2009/10£000 £000

Area Based Grant (40,946) (42,859)Revenue Support Grant (20,874) (32,534)Fire Pension Top-Up Grant (2,907) (4,500)Local Authority Business Growth Incentives Scheme (2,467) (698)

(67,194) (80,591)

61


11. Statement of the Movement on the General Fund Balance

The Income and Expenditure Account discloses the income receivable and expenditure incurred in operating the council for the year. The surplus or deficit achieved on the Income and Expenditure Account represents the amount by which income is greater than or less than expenditure. Both income and expenditure are measured using UK Generally Accepted Accounting Practice (UK GAAP).

However, the items of ‘income’ and ‘expenditure’ that are required to be credited or charged to the General Fund and which therefore must be taken into account in determining a local authority’s budget requirement and in turn its council tax demand is determined by statute and non-statutory proper practices rather than being in accordance with UK GAAP. While the amounts that the SORP requires to be included in the Income and Expenditure Account and statute and non-statutory proper practices requires to be included in the General Fund are largely the same, there are a number of differences. For example depreciation of fixed assets is charged to the Income and Expenditure Account but cannot be charged to the General Fund.

While the surplus or deficit on the Income and Expenditure Account is the best measure of the council’s financial result for the year in accordance with Generally Accepted Accounting Practice, the movement on the General Fund Balance is also an important aspect of the council’s stewardship.

62


11. Statement of the Movement on the General Fund Balance (continued)

The amounts in addition to the Income and Expenditure Account surplus or deficit for the year that are required by statute and non-statutory proper practices to be charged or credited to the General Fund in determining the movement on the General Fund Balance for the year are shown in following table.

2008/09 2009/10 2009/10£000 Note £000 £000

Amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the Movement on the General Fund Balance for the year

(1,002) Amortisation of intangible fixed assets 24 (1,337)(472,845) Depreciation and impairment of fixed assets 25 (222,048)

5,922 Government Grants Deferred amortisation 38 10,333(4,129) Write downs of revenue expenditure funded from capital 42 (5,555)

(27,685)Capital Expenditure, net of financing, that has not enhanced fixed asset carrying amounts

25 & 42 (5,459)

590 Assets transferred to PFI Scheme net of reversionary interest4 & 25 0

(11,235) PFI Assets 0(59,433) Net gain or (loss) on sale of fixed assets 5 (32,509)

(5,848)

Differences between amounts debited/credited to the Income and Expenditure Account and amounts payable/ receivable to be recognised under statutory provisions relating to investments, stepped loans, soft loans, premiums and discounts on the early repayment of debt and financial guarantees 44 787

(58,383)Net charges made for retirement benefits in accordance with FRS 17 40 (81,246)

0

Amount by which Council Tax income and residual community charge adjustment included in the Income and Expenditure Account is different to the amount taken to the General Fund in accordance with regulation 453

(1,077) Provision for Equal Pay 45 0 (336,580)Amounts not included in the Income and Expenditure Account but required to be included by statute when determining the Movement on the General Fund Balance for the year

18,039 Statutory provision for repayment of debt 12 & 42 20,384

13,304 Capital expenditure charged to the General Fund Balance 42 15,201

1,336 Amortisation of overhanging premiums and discounts arising on debt restructuring 44 316

57,847

Employer’s contributions payable to the Local Government and Fire-fighters Pension Schemes Funds and retirement benefits payable direct to pensioners 40 66,070 101,971Transfers to or from the General Fund Balance that are required to be taken into account when determining the Movement on the General Fund Balance for the year

7,181 Net transfer to or from earmarked reserves 48 582 582

(537,418)Net additional amount required to be (credited) / charged to the General fund Balance for the year (234,027)

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12.Statutory provision for repayment of debt

The Local Authorities (Capital Finance and Accounting) Regulations 2008 require the council to charge an amount to the revenue account as a minimum provision for the repayment of external debt that it considers to be prudent. For 2009/10 MRP has been calculated on the basis of the estimated life of the asset for which borrowing is undertaken at the end of the preceding financial year.

2008/09 2009/10£000 £000

Minimum Revenue Provision 18,039 20,384

13.Finance and operating leases

The value of assets acquired under finance lease arrangements is considered to be immaterial. The council finances a range of assets by means of operating leases. The amounts paid under these arrangements were:

2008/09 2009/10£000 £000

Land and Buildings 3,503 6,123Vehicles and equipment 1,159 820

4,662 6,943

The council was committed at 31 March 2010 to making payments, analysed below by lease expiry date, of £6,123m under operating leases in 2010/11.

Lease Expiry DateLand and Buildings

Vehicles and

Equipment Total£000 £000 £000

In 2010/11 138 153 291Between 2011/12 and 2014/15 395 329 724After 2014/15 5,342 102 5,447

5,875 584 6,462

Private Finance Initiative Scheme

The accounting requirements for Private Finance Initiative (PFI) and similar schemes are no longer based on the UK accounting standard FRS 5 but on International Financial Reporting Standards (IFRS). The new requirements are based on IFRIC 12 (Service Concession Arrangements) and apply

64


retrospectively to PFI schemes existing at 31 March 2010. Adjustments for prior periods are therefore necessary. The PFI buildings used for the delivery the PFI services which are currently ‘off-balance sheet’ are now recognised ‘on-balance sheet’ along with a finance lease liability for the financing provided by the PFI operator.

To be within the scope of IFRIC 12, the PFI scheme must contractually oblige the private sector operator to deliver, on behalf of the council, public services related to infrastructure. In addition, IFRIC 12 requires the council to:a) control or regulate what services the operator must provide with the

infrastructure, to whom it must provide them and at what price; and tob) control, through beneficial entitlement or otherwise, any significant residual

interest in the infrastructure at the end of the term of the scheme.

The council entered into a PFI scheme in June 2007 for the design, finance and maintenance of seven new childrens' homes, a family assessment centre, a disability resource centre, a childrens' centre and the refurbishment of five family support centres, through a private sector operator, with a facility for 25 years. The PFI scheme involves rebuilding/refurbishing existing council buildings and the operation of those centres. The centres became operational at various times from 2007/08 to 2009/10.

The private sector operator is paid for its services over the period of the scheme by means of an annual unitary charge which is allocated between capital and service elements.

The council’s total obligation for the capital (finance lease) element is:

2008/09 2009/10£000 £000

Not later than one year 1,792 1,844Later than one year but not later than five years 8,802 8,633Later than five years 28,593 26,918

39,187 37,395Less: Interest element 20,215 17,933Total 18,972 19,462

The council’s total obligation for the service element is:

2008/09 2009/10£000 £000

Not later than one year 719 824Later than one year but not later than five years 4,915 5,276Later than five years 30,778 29,593Total 36,412 35,693

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14. Agency Work

With the cessation of the agency arrangement relating to the provision, improvement and maintenance of Motorways and Trunk Roads on behalf of the Department of Transport, the council has no material agency arrangements.

15.Officers’ Remuneration

The Accounts and Audit Regulations 2009 extended the disclosure requirements for Officers’ remuneration. The new requirements provide greater transparency in respect of the total remuneration package for the senior team charged with stewardship of the organisation.

For senior members of the organisation disclosure is also made under the following categories:

salary, fees and allowances bonuses expenses allowances compensation for loss of employment employer’s pension contribution any other emoluments

The number of employees whose remuneration, excluding employer’s pension contribution, was £50,000 or more is shown overleaf. Remuneration is defined in the Accounts and Audit Regulations 2003 as including:

Sums paid to or receivable by an employee

Remuneration is usually taken to comprise gross pay (i.e. before the deduction of employee’s pension contributions), compensation for loss of office and any other payments receivable on the termination of employment, even where these are not taxable and any ex gratia payments other than those for direct reimbursement of costs. Remuneration does not include employer’s pension contributions.

Expense allowances chargeable to tax

For example the profit element of car allowances.

The money value of benefits

Other benefits, such as car loans, leased cars, travel cards and mobile phones.

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15.Officers’ Remuneration (continued)

Remuneration band

2008/09 Restated

HCC Employees

2008/09 Restated

Foundation and

Voluntary Aided

School Employees

2009/10 HCC

Employees

2009/10 Foundation

and Voluntary Aided School Employees

50,000 - 54,999 344 67 394 87 55,000 - 59,999 213 42 222 46 60,000 - 64,999 114 24 137 29 65,000 - 69,999 47 9 54 16 70,000 - 74,999 25 6 26 7 75,000 - 79,999 24 10 33 2 80,000 - 84,999 15 3 23 7 85,000 - 89,999 8 7 8 6 90,000 - 94,999 9 5 14 7 95,000 - 99,999 6 3 10 4

100,000 -104,999 4 3 5 3105,000 - 109,999 6 0 1 2110,000 - 114,999 1 1 2 1115,000 - 119,999 0 1 1 3120,000 -124,999 0 0 0 1125,000 -129,999 2 1 1 0130,000 -134,999 0 0 0 0135,000 -139,999 2 1 1 0140,000 -144,999 0 0 1 0145,000 -149,999 0 0 0 0150,000 -154,999 1 0 0 0155,000 -159,999 0 0 0 0160,000 -164,999 0 0 1 0165,000 -169,999 2 0 1 0170,000 -174,999 0 0 0 0175,000 -179,999 0 0 0 0180,000 -184,999 0 0 0 0185,000 -189,999 0 0 0 0190,000 -194,999 0 0 0 0195,000 -199,999 0 0 0 0200,000 -204,999 0 0 0 0205,000 -209,999 0 0 1 0210,000 -214,999 1 0 0 0215,000 -219,999 0 0 1 0

67

Employees of Foundation and Voluntary Aided Schools are shown separately as the Governing Body, rather than the County Council, is the employer.

68


15.Officers’ Remuneration (continued)

The following table sets out the remuneration disclosures for Senior Officers whose salary is £150,000 or more per year.

a) 2009/10

Position

Notes Salary

£

Benefits in Kind

£

Total Remuneration

excluding pension

contributions£

Pension Contribution

s

£

Remuneration including Pension

Contributions£

Chief Executive - C Tapster 203,427 5,857 209,284 41,906 251,190Director of Environment and Commercial Services - J Wood 168,201 - 168,201 33,990 202,191Director of Children, Schools & Families - J Harris 160,004 - 160,004 32,301 192,305Director of People & Property - A Warner until 31 May 2009 Note 1 25,148 442 25,590 5,180 30,770

b) 2008/09

Chief Executive - C Tapster 203,427 6,868 210,295 39,465 249,760Director of Environment and Comm. Services - J Wood 168,201 - 168,201 32,010 200,211Director of Children, Schools & Families - J Harris 166,189 - 166,189 30,420 196,609Director of People & Property - A Warner 150,852 2,999 153,851 29,265 183,116

Note 1 - The Director of People & Property left the organisation on 31 May 2009. His annualised salary ws £150,852. This post no longer exists following a restructure of senior management in 2009/10.

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15. Officers’ Remuneration (continued)

The following table sets out the remuneration disclosures for Senior Officers whose salary is less than £150,000 but equal to, or more than, £50,000 per year. For the purposes of this disclosure Senior Officers have been defined as the Chief Executive, her direct reports and the Monitoring Officer. The total number of employees whose remuneration is between £50,000 and £150,000 is shown within £5,000 bands in the earlier table within this Note.

a) 2009/10

Position

Notes Salary

£

Expense Allowances

£

Benefits in Kind

£

Total Remuneration

excluding pension

contributions£

Pension Contribution

s

£

Remuneration including Pension

Contributions£

Director of Adult Care Services 134,959 - 4,026 138,985 27,802 166,787County Secretary - until 1 November 2009 Note 2 72,989 - 3,226 76,215 15,036 91,251Chief Fire Officer Note 3 125,124 523 3,201 128,848 26,651 155,499Director of Strategy & Partnerships - from 1 October 2009 Note 4 62,500 - 2,132 64,632 12,875 77,507Director of Resources & Performance - from 1 July 2009 Note 5 102,482 - - 102,482 20,683 123,165Chief Legal Officer - from 1 October 2009 Note 6 51,674 - - 51,674 10,233 61,907Finance, Information and Commercial Services Director - until 19 April 2009 Note 7 6,870 - 33 6,903 1,415 8,318

b) 2008/09Director of Adult Care Services 132,459 - 4,026 136,485 25,697 162,182County Secretary 125,124 - 4,702 129,826 24,274 154,100Chief Fire Officer Note 3 125,124 437 2,487 128,048 26,651 154,699Finance, Information & Commercial Services Director 130,164 - 5,229 135,393 25,252 160,645

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15. Officers’ Remuneration (continued)

Note 2: The County Secretary left the organisation on 30 October 2009. The annualised salary was £125,124. This post no longer exists following a restructure of senior management in 2009/10.

Note 3: The expense allowances relate to taxable mileage payments.Note 4: The Director of Strategy & Partnerships started on 1 October 2009. The annualised salary was £125,000. This is a new post following a restructure of senior

management in 2009/10.Note 5: The Director of Resources & Performance started on 1 July 2009. The annualised salary was £147,500. This is a new post following a restructure of senior

Management in 2009/10.Note 6: The Chief Legal Officer started on 1 October 2009. The annualised salary was £101,290. This is a new post following a restructure of senior management in

2009/10.Note 7: The Finance, Information and Commercial Services Director left the organisation on 19 April 2009. The annualised salary was £130,164. This post no longer

exists following a restructure of senior management in 2009/10.

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16. Related Party Transactions

The council is required to disclose material transactions with related parties. This would include bodies or individuals that have the potential to control or influence the council or to be controlled or influenced by the council. Disclosure of these transactions allows an assessment to be made as to the extent to which the council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the council.

Central GovernmentCentral government has effective control over the general operations of the council. It is responsible for providing the statutory framework within which the council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the council has with third parties. Details of significant revenue grants received from Government departments are shown in the notes to the accounts. These grants are in addition to the council’s share of the revenue support grant and redistributed business rates income as calculated by central government.

Members and Chief OfficersMembers of the council have direct control over the council’s financial and operating policies. Members and Chief Officers have been advised of the requirements and the need for disclosure. From the information received no material transactions involving Members and Chief Officers during the year have been identified.

Hertfordshire Police Authority (HPA)The council performs a number of corporate support functions on behalf of the HPA for which a charge is raised (2008/09 £536,979, 2009/10 £551,998). The most significant of these functions involves the council investing surplus cash balances on behalf of the HPA. These amounts are invested in the name of the council with approved financial institutions with any other balances earning interest at overnight rates. Interest earned on these balances on behalf of the HPA amounted to £0.067m in 2009/10 (2008/09 - £0.729m).The Director of Adult Care Services of the council acted as Treasurer for the HPA during 2009/10.

Hertfordshire County Council Pension Fund The council administers the Pension Fund on behalf of its employees and those of district councils within the county and other admitted bodies. Cash balances are mainly invested by investment managers appointed by the Pension Fund with smaller amounts being pooled with council cash balances for which the Pension Fund received a contribution in lieu of interest of £472,036 (£2,205,757 in 2008/09).

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17. Members Allowances

The total of members’ allowances paid is shown below.

2008/09 2009/10£000 £0001,423 1,414

18. Teachers Pension Scheme

Teachers employed by the council are members of the Teachers’ Pension Scheme, administered by the Teachers’ Pension Agency. It provides teachers with defined benefits upon their retirement, and the council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The employer contribution rate is shown below.

Period %

2009/10 14.10

2008/09 14.10

Council contributions to the Teacher’s Pensions Agency in respect of teachers’ retirement benefits have amounted to:

2008/09 2009/10£000 £000

50,198 52,536

19. Transport Act 2000

Schedule 12 of the Transport Act 2000 contains provisions for authorities to operate road user charging and workplace parking levy schemes. No such schemes have been in operation during 2009/10.

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20. National Health Service Act 2006 Pooled Funds and Similar Arrangements

Partnership arrangements were established in December 2001 between Hertfordshire County Council and the Hertfordshire Partnership (NHS) Trust for the provision of services to the following client groups, Mental Health, Learning Disability, Drug and Alcohol Services and Children and Adolescent Mental Health Services. Mental Health Services for Older People were added to the agreement in 2005-06.

The purpose of the partnership is to provide integrated health and social care services with a single management structure. Social care staff have transferred from Hertfordshire County Council to Hertfordshire Partnership (NHS) Trust for Mental Health, Drug and Alcohol and Children and Adolescent Mental Health services. Learning Disability Nurses have transferred from Hertfordshire Partnership (NHS) Trust to Hertfordshire County Council. Social care staff for mental health services for older people were seconded to Hertfordshire Partnership (NHS) Trust from 1 April 2005.

The Joint Commissioning Partnership Board was established in 2002 by the Primary Care Trusts (PCTs) in Hertfordshire and Hertfordshire County Council in order to implement and direct joint commissioning for Health and Social Care services. A pooled budget funded by PCTs and Hertfordshire County Council has been set up to fund services for all the client groups plus the Joint Commissioning Team.

In April 2004 the Hertfordshire PCTs and Hertfordshire County Council set up an Integrated Community Equipment Service. The service provides both health and social care equipment which enables service users to maintain their independence within their own home. A pooled budget was also set up which is hosted by the council. The service is managed by a Management Board which includes representatives from all contributing partners.

In March 2006 a partnership agreement and a pooled budget were set up between South East Herts PCT (now East and North Herts PCT) and Hertfordshire County Council to provide care services for older people at Westgate Nursing home, Emmanuel Lodge and Kingfisher Nursing Home. The pooled budget is hosted by the council.

74


20. National Health Service Act 2006 Pooled Funds and Similar Arrangements (continued)

The council acted with the following organisations in 2009/10

East and North Herts Primary Care Trust

West Herts Primary Care Trust

Summary information for 2009-10, for the pooled budgets that the council contributed to is shown below together with comparatives for 2008-09 shown in italics.

HCCFunding

PCTs Total Expenditure

Over / (under) spend

£000 £000 £000 £000 £000

Joint Commissioning Partnership Board

117,465 170,010 287,475 287,391 (84)

110,632

161,197 271,829 271,797 (32)

Integrated Community Equipment Service

2,836 1,474 4,310 4,660 350

2,650 1,358 4,007 4,035 28

Westgate – East and North Herts 2,508 610 3118 3098 (20)

2,410 723 3,133 2,986 (147)

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21. External Audit Costs

In 2009/10 the council incurred the following fees, payable to the Audit Commission, relating to external audit and inspection.

2008/09 2009/10£000 £000

External Audit Services under Section 5 Audit Commission Act 1998 313 320Statutory Inspection under s10 of the Local Government Act 1999 16 18Certification of Grant Claims under Section 28 Audit Commission Act 1998 41 41

370 379

22. Long Term Contracts

Private Finance Initiative Scheme

The council entered into a Private Finance Initiative Scheme contract in June 2007 for the design, finance and maintenance of seven new childrens’ homes, a family assessment centre, a disability resource centre, a childrens’ centre and the refurbishment of five family support centres. The first two centres came into service in February and March 2008. The contract ends in March 2033.

The Income and Expenditure Account unitary charge in 2008/09 was £1.135 million. Private Finance Initiative grant of £1.871 million has been accrued in 2008/09, with £0.919 million of this being appropriated to the Private Finance Initiative Equalisation Reserve.

Payments made under the contract are performance related, so deductions are made if any of the facilities are not available or if service performance falls below an agreed standard. The future commitment under this contract is estimated at £61.301 million.

Other

The council has a number of other long-term contracts that commit the council to payments after 31 March 2009. Higher value contracts disclosed provide a range of services that include care for the elderly, highway maintenance and design, waste disposal, supply of books and audio visual materials and provision of internet access facilities. Gross revenue expenditure under these contracts for 2009/10 is estimated at £100.093 million. Termination dates applicable to these contracts range from 2011 to 2024.

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23. Specific Government Grants

Revenue grants that are specific to a service are accounted for on an accruals basis within income of the relevant Best Value service line. The more significant grants are shown below.

2008/09 2009/10£000 £000

Learning and Skills CouncilGrant for Sixth Formers 79,352 83,222Adult and Community Learning Grant 3,334 0Post 16 Teachers Pay Grant 2,219 2,26516-19 Strategy 1,783 0Department for Children, Schools and FamiliesDedicated Schools Grant 621,928 642,065Standards Fund 48,613 54,248School Standards Fund 34,130 34,561Sure Start

17,520 22,52

8Department of HealthSupporting People – Services and Implementation 21,681 21,001Preserved Rights 4,207 0*Carers 3,042 0*National Training Standards 2,276 0*Mental Health 1,997 0*Social Care Reform 782 360Learning Disability Development Fund 602 0*Mental Care Advocacy 460 0*Youth Justice BoardYouth Offending Team Grants 1,281 1,341Department for Communities and Local GovernmentLPSA Performance Reward Grant 856 0New Burdens 155 151Home OfficeUnaccompanied Asylum Seeking Children 1,486 2,249Drug Intervention Programme 787 782Department for TransportDe trunking Grant 3,346 0*Road Safety Grant 2,610 0*Rural Transport Grant 762 0*

855,209 864,773

*These grants have been transferred to Area Based Grant (general grant) from 1 April 2009.

77


24. Intangible Fixed Assets

Expenditure incurred on intangible assets during 2009-10 amounted to £1.287 million. Capital expenditure shown as intangible assets includes purchased software, including upgrades, software licences and costs associated with internet portal and web design. The value of intangible assets will be written off over the appropriate useful life of such types of expenditure.

Software and

Licences

Portal and Web

Design Total£000 £000 £000

Gross Book ValueBalance as at 31 March 2009 6,101 1,822 7,923Additions 1,287 - 1,287Balance as at 31 March 2010 7,388 1,822 9,210

DepreciationBalance as at 31 March 2009 1,914 729 2,643Depreciation for the year 1,154 183 1,337Balance as at 31 March 2010 3,068 912 3,980

Net Book ValueBalance as at 31 March 2009 4,187 1,093 5,280Balance as at 31 March 2010 4,320 910 5,230

78


25.Tangible Fixed Assets (Restated)

- Operational - - Non-Operational -

Land

and

B

uild

ings

Vehi

cles

, P&

E

Infr

a-st

ruct

ure

Surp

lus

Land

and

B

uild

ings

, he

ld f

or

disp

osal

Vehi

cles

, P&

E

AU

C

TOTA

L

£000 £000 £000 £000 £000 £000 £000Gross Book ValueBalance at 31 March 2009 2,204,868 134,620 520,630 130,840 27 8,474 2,999,459Restatements at 31 March 2009 3,525 (16,878) 258 710 (12,385)Balance at 31 March 2009 restated 2,208,393 117,742 520,888 131,550 27 8,474 2,987,074Additions 91,520 18,858 60,726 3,498 - 12,442 187,044Disposals (32,745) (141) - (3,402) (27) - (36,314)Impairment (108,558) - - (52,587) - - (161,145)Expenditure not adding to value (5,459) (5,459)Transfers 8,997 2,071 (2,594) (8,474) 0Restatements - - - - - - -Revaluations 93,263 - - 29,064 - - 122,327Balance at 31 March 20010 2,260,870 138,531 581,614 105,529 0 6,983 3,093,526DepreciationBalance at 31 March 2009 16,829 64,025 101,004 2,268 27 0 184,153 Restatements at 31 March 2009 (1,530) (15,983) - 473 - - (17,040)Balance at 31 March 2009 restated 15,299 48,042 101,004 2,741 27 0 167,113Depreciation for the year 39,509 10,098 16,977 - - - 66,585Impairment (4,841) - - (841) - - (5,682)Depreciation on Disposals (1,094) (86) - (54) (27) - (1,261)Transfers 530 - - (530) - - 0Restatements - - - - - - -Balance at 31 March 2010 49,403 58,054 117,981 1,316 0 0 226,754Net Book ValueBalance at 31 March 2009 2,193,094 69,700 419,884 128,809 0 8,474 2,819,961 Balance at 31 March 2010 2,211,467 80,477 463,633 104,213 0 6,983 2,866,772

Properties used in service delivery include:

389 Primary Schools (excluding 7 Foundation Schools)15 Nursery Schools54 Secondary Schools (excluding 20 Foundation Schools & 2 Academies)25 Special Schools8 Education Support Centres

27 Adult Care Services Day Centres109 Adult Care Services Residential Units30 Fire Stations49 Libraries and Archive and Local Studies Centres

The council is also responsible for the following infrastructure 339 miles Principal Roads

2,725 miles Other Roads.

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25. Tangible Fixed Assets ((Restated) (continued)

Fixed Asset Valuation

Land and Buildings

The council's policy with regard to the valuation of land and buildings assets is to revalue assets on a rolling five year programme. This programme which started in 2004/05 will ensure compliance with the SORP requirement that all land and building assets are revalued within a five-year period. However, other permanent and material changes to asset valuations, as advised by the council’s valuers are accounted for in the interim period. In most years these interim changes relate to specific assets whose value has risen or fallen as a result, for example, of substantial refurbishment or fire or subsidence.

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26. Summary of capital expenditure and sources of finance (restated)

Capital expenditure for the year, including that incurred on intangible assets and revenue expenditure funded from capital, amounted to £192.769 million and is analysed below.

Service Total£000

Adult Social Care Services 4,340Central Services 52,718Children’s and Education Services 69,198Cultural, Environmental and Planning Services 3,263Fire Service 1,373Highways, Roads and Transport Services 61,876

192,769

The effect of the above expenditure on the council’s capital financing requirement together with sources of finance is shown below.

2009/10£000

Opening Capital Financing Requirement 516,726

Capital InvestmentIntangible assets 1,287Operational assets 162,630Non-operational assets (including assets under construction) 15,940Revenue expenditure funded from capital 12,912

192,769Sources of FinanceCapital receipts (6,620)Grants and contributions (58,825)Grants and contributions financing revenue expenditure funded from capital

(7,357)

Revenue provision (including Minimum Revenue Provision) (29,585)

Closing Capital Financing Requirement 607,107

Explanation of movements in the year

Increase in underlying need to borrow 110,766

Minimum Revenue Provision (20,384)

Increase in Capital Financing Requirement 90,382

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26. Summary of capital expenditure and sources of finance (continued)

Material capital projects and their associated gross capital expenditure in the year include:

Service Project £000

Children Schools and Families Hillmead JMI School 2,685

Presdales Secondary School 2,227Highfield School Sports Hall 2,115Sir John Lawes School 1,636Cavendish School Science Lab 914Kings Langley School 857Woolenwick Junior School 696Ralph Sadlier School 679Aycliffe Drivve Primary School 630Broadfield Junior School expansion 591Priory School Science Block 527Possgate JMI School 513

Corporate Services Farnham & Robertson House, Stevenage 44,514

Environment Croxley Rail Link 1,671A10 Turnford 1,286Royston & Hitchin Railway Crossing 860North Orbital Road 759Cock lane 633Baldock Bypass 602A10(S) Hertford Resurfacing 578

Libraries, Heritage and Arts Oxhey Library works 770

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27. Significant commitments under capital contracts

The value of capital contracts to which the council is committed to as at 31 March 2010 is estimated at £13.3 million. For the purposes of this note a commitment is considered material if it exceeds a value of £50,000. The more significant items included in this amount are shown below.

£000Bishops Stortford, Hillmead School 1,360Watford, Holywell School 1,055Abbotts Langley, Breakspears – Early Years programme

682

Wheathamstead Beech Hyde – Early Years programme

601

Stevenage, Broom Barns – Early Years programme 566WGC Creswick Primary & Nursery School – Early Years

491

Borehamwood, Hertswood School – New MUGA & Changing Accommodation

491

Berkhamstead, Greenway First & Nursery School 364Ovaltine Safety and Traffic 330Sacombe Arches Strengthening 319Hemel Hempstead - Aycliffe Drive Primary 269Welwyn, Rowans Primary Sch (Children Centre) 261Royston Roman Way First (Children Centre) 253Hoddesdon S Catherines Primary (Children Centre) 245Hitchin Highbury Infants (Children Centre) 244Ware St Catherines Primary (Children Centre) 243SA3 Batford Nursery School (Southdown) (Children Centre)

220

D9 Pre-school Learning Alliance Bovingdon (Children Centre)

218

Wymondley Bypass 216Hemel Child Safety – Phase 2 214Hoddesdon, Rye Park Childrens Centre

212North and East Herts Jet Patching 200

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28. Financial Instruments

The borrowings and investments disclosed in the balance sheet are made up of the following categories of financial instruments:

Long-Term Current

2009 2010 2009 2010

£000 £000 £000 £000

Loans and receivables at amortised cost 30,146 28,646 214,561 17,642

Total investments 30,146 28,646 214,561 17,642

Financial liabilities at amortised cost 341,190 287,453 4,261 8,073

Total borrowings 341,190 287,453 4,261 8,073

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28. Financial Instruments (continued)Balance sheet carrying amounts of Financial Instruments are analysed by maturity date in the following table. The carrying amount is analysed between principal amounts and the adjustment to amortised cost.

31 March 2009 31 March 2010

Principle

Adjustment to

Amortised Cost

Balance Sheet

Carrying amount Principle

Adjustment to

Amortised Cost

Balance Sheet

Carrying amount

£000 £000 £000 £000 £000 £000Loans and receivables

Current 216,880 (2,319) 214,561 18,314 (672) 17,642

Long-Term 31,000 (854) 30,146 32,199 (3,553) 28,646(3,173) (4,225)

The adjustment to amortised cost comprises:-Interest accruals 4,607 4,094Icelandic Bank Investment Impairment (7,780) (8,319)

(3,173) (4,225)

Financial liabilities at amortised cost

CurrentPublic Works Loan Board 24 3,711 3,735 5,005 3,010 8,015PFI 468 0 468 0 0 0Unredeemed Stock 58 0 58 58 0 58

550 3,711 4,261 5,063 3,010 8,073Long-Term

Public Works Loan Board repayable within years:One to two 5,005 0 5,005 1 0 1Two to five 7,002 0 7,002 0 0 0Five to ten 0 0 0 249 0 249After ten 145,042 226 145,268 103,030 226 103,256

Other repayable within years:After ten 182,500 1,415 183,915 182,500 1,447 183,947

339,549 1,641 341,190 285,780 1,673 287,453

85


28. Financial Instruments (continued)

Fair value of Assets and Liabilities carried at Amortised CostFinancial liabilities and financial assets represented by loans and receivables are carried on the balance sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that take place over the remaining life of the instruments, using the following assumptions:

For loans from the Public Works Loans Board (PWLB) and other loans payable, premature repayment rates from the PWLB have been applied to provide the fair value under PWLB debt redemption procedures;

For loans receivable prevailing benchmark market rates have been used to provide the fair value;

No early repayment is recognised; Financial assets in the Icelandic banking sector have been impaired in

accordance with accounting practice – see the impairment disclosure note for further details;

Where an instrument has a maturity of less than 12 months or is a trade or other receivable the fair value is taken to be the principal outstanding or the billed amount;

The fair value of trade and other receivables is taken to be the invoiced or billed amount.

The fair values calculated are as follows:

Financial Liabilities 31 March 2010Carrying amount Fair Value

£000 £000PWLB debt 111,521 122,655Non-PWLB debt 183,947 218,519Unredeemed Stock 58 58Total debt 295,526 341,232

Trade creditors 11,094 11,094

Total Financial liabilities 306,620 352,326

The fair value is greater than the carrying amount because the Council’s portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the rates available for similar loans in the market at the balance sheet date.

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Fair value of Assets and Liabilities carried at Amortised Cost (continued)

Financial Assets 31 March 2010Carrying Amount Fair Value

£000 £000Money market loans less than 1 year 17,642 17,529Money market loans greater than 1 year 28,646 30,172Bonds 0 0

Trade debtors 20,007 20,007

Total Loans and receivables 66,295 67,708

The differences shown above are attributable to fixed interest instruments payable being held by the Council whose interest rate is higher than the prevailing rate estimated to be available at 31 March. This increases the fair value of financial liabilities and raises the value of loans and receivables.

The fair values for financial liabilities have been determined by reference to the PWLB redemption rules and prevailing PWLB redemption rates as at the balance sheet date and include accrued interest. The fair values for non-PWLB debt have also been calculated using the same procedures and redemption rates adjusted for the value of embedded options. This provides a sound approximation for fair value for these instruments.

The fair values for loans and receivables have been determined by discounting contracted cash flows at a suitable market comparator rate on 31st March.

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Disclosure of Nature and Extent of Risk Arising from Financial Instruments

Key Risks

The Council’s activities expose it to a variety of financial risks, the key risks are: Credit risk – the possibility that other parties might fail to pay amounts

due to the Council; Liquidity risk – the possibility that the Council might not have funds avail-

able to meet its commitments to make payments; Re-financing risk – the possibility that the Council might need to renew a

financial instrument on maturity at disadvantageous interest rates or terms.

Market risk - the possibility that financial loss might arise for the Council as a result of changes in such measures as interest rate movements.

Overall Procedures for Managing Risk

The Council’s overall risk management procedures focus on the unpre-dictability of financial markets, and implementing restrictions to minimise these risks. The procedures for risk management are set out through a legal framework set out in the Local Government Act 2003 and the associated reg-ulations. These require the Council to comply with the CIPFA Prudential Code, the CIPFA Treasury Management in the Public Services Code of Practice and Investment Guidance issued through the Act. Overall these procedures require the Council to manage risk in the following ways:

By formally adopting the requirements of the Code of Practice (adopted on 23rd February 2010 by the members of the County Council)

By approving annually in advance prudential indicators for the following three years limiting:

The Council’s overall borrowing;- Its maximum and minimum exposures to fixed and variable rates;- Its maximum and minimum exposures to the maturity structure of its

debt;- Its maximum annual exposures to investments maturing beyond a

year.

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Disclosure of Nature and Extent of Risk Arising from Financial Instru-ments (continued)

By approving an investment strategy for the forthcoming year setting out its criteria for both investing and selecting investment counterparties in compliance with the government guidance.

For the 2009/10 financial year the prudential indicators and treasury man-agement strategy were reported and approved at the County Council’s meet-ing on the 31st March 2009. The annual treasury management strategy out-lines the detailed approach to managing risk in relation to the Council’s finan-cial instrument exposure. Actual performance is reported annually to the Council’s Audit Committee. These policies are implemented by a central treasury team. The Council maintains written principles for overall risk man-agement, as well as written policies covering specific areas, such as interest rate risk, credit risk, and the investment of surplus cash through Treasury Management Practices (TMPs). These TMPs are a requirement of the Code of Practice and are reviewed regularly.

Credit risk

Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Council’s customers. The Council’s treasury man-agement strategy for 2009-10 set out the minimum acceptable criteria for in-vestments by reference to credit ratings from Fitch, Moody’s and Standard and Poor’s.

The following analysis summarises the Council’s potential maximum expo-sure to credit risk. The table (from an average of the default rates from Fitch, Moody’s and Standard and Poor’s) gives details of corporate finance aver-age cumulative default rates (including financial organisations) for the period 1990 – 2007 on investments out to five years. The risk of default by trade debtors is based on the average amount of debt written off as a percentage of total debt over the last three financial years (2006/07 to 2008/09).

.

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Amount at 31

March 2010£000

Historical experience of default

%

Adjustment for market conditions at 31 March

2010%

Estimated maximum

exposure to default £000

Deposits with banks and financial institutions (a) (b) (c) (a * c)AAA rated counterparties 2,103 0.01% 0.03% 1AA rated counterparties 11,737 0.07% 0.16% 19BBB rated counterparties 2,090 1.17% 2.80% 59

Trade debtors 20,007 0.27% 0.27% 5435,937 133

Deposits with the DMADF*and local authoritiesDMADF 11,200 0.00% 0.00% 0Local Authorities 0 0.00% 0.00% 0

11,200 0

*DMADF – Debt Management Account Deposit Facility operated by the government.

In October 2008 the Icelandic banking sector defaulted on its obligations. The Council had £28m invested in this sector at that time, £10m of which was in breach of the Council’s criteria. In accordance with accounting prac-tice the Council has been notified of objective evidence that impairment has occurred and the investments have been impaired according to accounting requirements. The impact on the principal invested and interest income has been mitigated in the accounts according to government regulations (see the impairment disclosure note for details). These outstanding Icelandic Invest-ments have been excluded from the exposure to credit risk table above

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Following these events and the continued volatility in financial markets, the Council implemented even stricter criteria for investment counterparties in 2009/10. At the balance sheet date, £4m out of a total of £35.2m (excluding the Icelandic Investments), remained invested with counterparties no longer meeting the minimum investment criteria.

Financial Assets that are past due

The Council does not generally allow credit for its trade debtors. The amount of debt past its due date for payment amounted to £5.2 million. The past due amount can be analysed by age as follows:

£000 Less than three months 1,340

Three to nine months 1,450

More than nine months 2,400

5,191

Liquidity risk

The Council has ready access to borrowings from the Money Markets to cover any day to day cash flow need, and whilst the PWLB provides access to longer term funds, it also acts as a lender of last resort to Councils (al-though it will not provide funding to a Council whose actions are unlawful). The Council is also required to provide a balanced budget through the Local Government Finance Act 1992, which ensures sufficient monies are raised to cover annual expenditure. There is therefore no significant risk that it will be unable to raise finance to meet its commitments under financial instruments.

The Council manages its liquidity position through the risk management pro-cedures above (the setting and approval of prudential indicators and the ap-proval of the treasury and investment strategy reports), as well through cash flow management procedures required by the Code of Practice.

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Refinancing and Maturity Risk

The Council maintains a significant debt and investment portfolio. Whilst the cash flow procedures above are considered against the refinancing risk pro-cedures, longer term risk to the Council relates to managing the exposure to replacing financial instruments as they mature. This risk relates to both the maturing of longer term financial liabilities and longer term financial assets.

The approved prudential indicator limits for the maturity structure of debt and the limits placed on investments placed for greater than one year in duration are the key parameters used to address this risk. The Council approved treasury and investment strategies address the main risks and the central treasury team address the operational risks within the approved parameters.

This includes: monitoring the maturity profile of financial liabilities and amending the

profile through either new borrowing or the rescheduling of the existing debt; and

monitoring the maturity profile of investments to ensure sufficient liquidity is available for the Council’s day to day cash flow needs, and the spread of longer term investments provide stability of maturities and returns in re-lation to the longer term cash flow needs.

The maturity analysis of financial liabilities is as follows:£000

Less than one year 8,073

Between one and two years 1

Between two and seven years 0

Between seven and fifteen years 8,645

More than fifteen years 278,807

295,526

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The maturity analysis of financial assets is as follows:£000

Less than one year 17,642Between one and two years 15,725Between two and three years 6,091More than three years 6,830

46,288

The Icelandic investments are included in the table above on the basis of the anticipated recoveries over future years.

All trade and other payables are due to be paid in less than one year and trade debtors of £20 million are not shown in the table above.

Market risk

Interest rate risk - The Council is exposed to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the Council, depending on how variable and fixed interest rates move across differing financial instrument periods. For instance, a rise in variable and fixed interest rates could have the following effects:

borrowings at variable rates – the interest expense charged to the In-come and Expenditure Account could rise;

borrowings at fixed rates – the fair value of the borrowing liability could fall;

investments at variable rates – the interest income credited to the Income and Expenditure Account could rise; and

investments at fixed rates – the fair value of the assets could fall.

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Disclosure of Nature and Extent of Risk Arising from Financial Instruments (continued)

Borrowings are not carried at fair value on the balance sheet, so nominal gains and losses on fixed rate borrowings would not impact on the Income and Expenditure Account or STRGL. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Income and Expenditure Account and effect the General Fund Balance, subject to influences from Government grants. Movements in the fair value of fixed rate investments will be reflected in the STRGL, unless the invest-ments have been designated as Fair Value through the Income and Expendi-ture Account.

The Council has a number of strategies for managing interest rate risk. The Annual Treasury Management Strategy draws together Council’s prudential indicators and its expected treasury operations, including an expectation of interest rate movements. From this strategy a prudential indicator is set which provides maximum and minimum limits for fixed and variable interest rate exposure. The central treasury team will monitor market and forecast interest rates within the year to adjust exposures appropriately. For instance during periods of falling interest rates, and where economic circumstances make it favourable, fixed rate investments may be taken for longer periods to secure better long term returns.

The financial effect in 2010/11 financial year of a 1% change in interest rates on 31st March 2010 would be:

1% Increase

Cost / (Saving)

1% Decrease

Cost / (Saving)

£000 £000

Interest payable on variable rate and maturing borrowings 302 (6)

Interest receivable on variable rate and maturing investments (302) 206

Impact on Income and Expenditure Account 0 200

The impact of a 1% decrease in interest rates is not equivalent to a 1% increase in rates because, with bank base rate at only 0.5% on 31 st March 2010, the rate of interest on a number of investments is below 1% and could not, therefore, effectively fall by a further 1%. In addition, the borrowing

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figures contain a number of Lender’s Option Loans which are only likely to be exercised if interest rates increase.

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Price risk - The Council, excluding the pension fund, has no investments in equity shares and so is not subject to any form of price risk currently.

Foreign exchange risk - The Council has no financial assets or liabilities denominated in foreign currencies. It therefore has no exposure to loss arising from movements in

Impairment Disclosure Note

Early in October 2008, the Icelandic banks Landsbanki, Kaupthing and Glitnir collapsed and the UK subsidiaries of the banks, Heritable and Kaupthing Singer and Friedlander went into administration. The Council had £28m deposited across these institutions, with varying maturity dates and interest rates.

All monies within these institutions are currently subject to the respective administration and receivership processes. The amounts and timing of payments to depositors such as the Council are being determined by the administrators / receivers.

The current situation with regards to recovery of the sums deposited varies between each institution. Based on the latest information available the Council considers that it is appropriate to consider an impairment adjustment for the deposits, and has taken the action outlined below. As the available information is not definitive as to the amounts and timings of payments to be made by the administrators / receivers, it is likely that further adjustments will be made to the accounts in future years. Given the remaining risks the authority has set aside a further £5.511 million to increase the special provision for Icelandic deposits at risk.

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Heritable Bank

Heritable bank is a UK registered bank under English law. The company was placed in administration on 7th October 2008. A latest creditor progress report issued by the administrators Ernst and Young, in dated January 2010, outlined that the return to creditors was currently projected to be 79p to 85p in the £ by the end of 2012. The Council has therefore decided to recognise an impairment based on it recovering 84.98% of its claim. The strategy of winding up the bank by 2012 is expected to produce a return at the top end of the range quoted by the adminstrators. Therefore in calculating the impairment the Council has made the following assumptions re timing of recoveries:

July 2009 16.13% }Dec 2009 12.66% } ReceivedMarch 2010 6.19% }

June 2010 5.0%Sept 2010 5.0%Dec 2010 5.0%March 2011 5.0%June 2011 5.0%Sept 2011 5.0%Dec 2011 5.0%March 2012 5.0%June 2012 5.0%Sept 2012 5.0%

Recoveries are expressed as a percentage of the Council’s claim in the administration, which includes interest accrued up to 6 October 2008. Details of the Council’s deposits with Heritable Bank and the associated impairment are shown below:

Date Invested

Maturity Date

Amount Invested

Interest Rate

Recovered by 31/3/10

Carrying Amount Impairment

15/09/08 15/04/09 £2m 6.00% £0.702m £1.435m £0.510m19/09/08 23/12/08 £5m 6.05% £1.754m £3.588m £1.278m

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Kaupthing Singer and Friedlander Ltd (KSF)

The latest creditor report issued by the adminstrators Ernest and Young, im April 2010, outlined that the return to creditors was projected to be in the range of 65p to 78p in thr £. The council has recognised an impairment based on it recovering 71% of its claim, (the mid point of the range estimated by the adminstrators). In calculating the impairment the council has therefore made the assumption that the total recovery will be split as set out below:

July 2009 20% }Dec 2009 10% } ReceivedApril 2010 5% }July 2010 6%Jan 2011 6%July 2011 6% Jan 2012 6% July 2012 6%Jan 2013 6%

Recoveries are expressed as a percentage of the Council’s claim in the administration, which includes interest accrued up to 7 October 2008. Details of the Council’s deposits with Kaupthing, Singer & Friedlander Ltd. and the associated impairment are shown below:

Date Invested

Maturity Date

Amount Invested

Interest Rate

RecoveredBy 31/3/10

Carrying

Amount Impairment04/01/07 04/01/11 £2m 5.46% £0.625m £1.546m £0.754m14/08/07 16/08/10 £2m 6.35% £0.606m £1.514m £0.755m

Landsbanki Islands hf

Landsbanki Islands hf is an Icelandic entity. Following steps taken by the Icelandic Government in early October 2008, its domestic assets and liabilities were transferred to a new bank (New Landsbanki) with the management of the affairs of Old Landsbanki being placed in the hands of a resolution committee. Old Landsbanki’s affairs are being administered under Icelandic law. The latest creditors’ report was issued on 26th March 2010. The projected return to Local Authority creditors in respect og Landsbanki Islands will depend upon wheter the Ocelandic Courts grant piority status to Local Authority deposits. It is unlikely that this decision will be made before the second quarter of 2011. It is projected that recovery could be 94.86% if piority status is granted, but only 38% if it is not. On the

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basis of legal advice obtained by local authoritues it is considered that it remains the most likely outcome that Local Authorities will enjoy priority status.

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Landsbanki Islands hf (continued)

The council has, therefore, recognised impairment based on it recovering 94.86% of its claim. In calculating the impairment the Council has and assumption that the total recovery will be split as set out below:

Oct 2011 22.17%Oct 2012 8.87%Oct 2013 8.87%Oct 2014 8.87%Oct 2015 8.87%Oct 2016 8.87%Oct 2017 8.87%Oct 2017 19.47%

Recoveries are expressed as a percentage of the Council’s claim in the administration, which it is expected may validly include interest accrued up to 22nd

April 2009. Details of the Council’s deposits with Landsbanki Islands hf and the associated impairment are shown below:

Date Invested

Maturity Date

Amount Invested

Interest Rate

Recovered

By 31/3/10Carrying Amount Impairment

11/07/08 15/10/08 £3m 5.90% £0m £3.498m £1.251m05/08/08 31/10/08 £5m 5.85% £0m £5.769m £2.032m29/08/08 28/11/08 £2m 5.83% £0m £2.273m £0.783m

Glitnir Bank hf

Glitnir Bank hf is an Icelandic entity. Following steps taken by the Icelandic Government in early October 2008, its domestic assets and liabilities were transferred to a new bank (New Glitnir) with the management of the affairs of Old Glitnir being placed in the hands of a resolution committee. Old Glitnir’s affairs are being administered under Icelandic law. The latest information available regarding Glitnir is contained in the 2009 Accounts. Based on this information, it remains the case that if local authority deposits retain priority status, 100% of claims will be repaid. As with Landsbanki Islands the likely recovery will depend upon whether the Icelandic Courts grant priority status to Local Authority deposits. If priority status is not granted expected recovery is approximately 29%. However, on the basis of legal advice obtained by local authorities it is considered that it remains the most likely outcome that Local Authorities will enjoy priority status in respect of Glitnir deposits.

The Council has therefore decided to recognise an impairment based on it recovering the full amount of principal and interest up to 22nd April 2009 in the

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future. The impairment therefore reflects the loss of interest to the Council until the funds are repaid.

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Glitnir Bank hf (continued)

It is estimated that the earliest date by which payment could be made is the end of June 2011 and in calculating the impairment the Council has made an assumption that the repayment of priority deposits will be made in June 2011.

Recoveries are expressed as a percentage of the Council’s claim in the administration, which it is expected may validly include interest accrued up to 22nd

April 2009. Details of the Council’s deposits with Glitnir Bank hf and the associated impairment are shown below:

Date Invested

Maturity Date

Amount Invested

Interest Rate

Recovered by

31/3/10Carrying Amount Impairment

18/04/07 20/04/09 £2m 6.00% £0m £2.236m £0.269m15/05/07 17/05/10 £3m 6.00% £0m £3.342m £0.402m15/02/08 16/02/09 £2m 5.42% £0m £2.276m £0.287m

Accounting

The impairment loss recognised in the Income and Expenditure Account in 2009/10, £0.539m, (£8.319m cumulative to 31st March 2010) has been calculated by discounting the assumed cash flows at the effective interest rate of the original deposits in order to recognise the anticipated loss of interest to the Council until monies are recovered. Further adjustments to the assumptions will be made in future accounts as more information becomes available.

Interest credited to the Income and Expenditure account in respect of the investments is as follows:

Bank

Credited 2007-08

£000

Received 2007-08

£000

Credited 2008-

09£000

Received 2008-

09£000

Received 2009-10

£000Heritable 0 0 224.7 0 75.4KSF 189.9 109.2 214.9 127.3 422.5Landsbanki 0 0 1,050.7 0 489.6Glitnir 287.2 0 431.7 301.8 254.7

Total 477.1 109.2 1,922.0 429.1 1,242.2

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Accounting (continued)

The Council has taken advantage of the Capital Finance Regulations to defer the impact of the impairment on the General Fund, and a sum of (£0.703m) has been transferred to the Financial Instruments Adjustment Account (FIAA) in 2009-10 (£5.155m cumulative to 31st March 2010). The difference between the £0.539m impairment and the (£0.703m) transferred to the FIAA is £1.242m. This represents the interest element of what is owed to the Council in 2009-10. The amounts transferred to the Financial Instruments Adjustment Account during 2009-10 and the Balance at 31st March 2010, are made up as follows:

Bank

2009-10 Amount transferred to Financial Instruments Adjustment Account

£000

Balance on FIAA at

31st March 10 £000

Heritable (894.9) 1,218.0KSF 158.7 103.1Landsbanki 656.3 2,525.1Glitnir (622.9) -Total (702.8) 3,846.2

Under the regulations, the Council must transfer the balance on the Financial Instruments Adjustment Account to the General Fund no later than 31st March 2011 and must also credit the Financial Instruments Adjustment Account with interest earned until such time as the balance has been transferred to the General Fund.

29. Long Term Debtors 2009 2010£000 £000

Residential Clients 9,857 10,332Fire Insurance Claim 4,834 2,534Rental Prepayments 2,920 1,926Housing Adaptations 1,490 548Advance Contractual Payments 1,375 1,327Quantum Care - 1,200Other 354 445Keyworker Housing Advances 167 168Housing Advances and Mortgages 52 32Car Loans 45 65

21,094 18,576Provision – Residential Clients Debt (1,004) -

20,090 18,576

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30. Stocks and Work in Progress 2009 2010£000 £000

Trading Services 3,690 3,320Education 331 280Fire Service 127 113Cultural, Environmental and Planning Services 46 57Social Services 11 0

4,205 3,770

31. Landfill Usage Allowances

Landfill allowances issued by the Department for the Environment, Food and Rural Affairs have been valued at £0 per tonne as they are considered to have no marketable value. This basis of valuation has also been applied to the 2009-10 liability for waste disposed to landfill and the council’s surplus allowances as at 31 March 2010.

2009 2010£000 £000

Biodegradable Municipal Waste Allowances 0 0

32. Debtors 2009 2010£000 £000

General and Trade Debtors 66,606 97,772Capital Receipts 5,038 55Payments in Advance 6,633 6,693H.M.R.C. - Value Added Tax 5,999 5,124Recoverable Fire Damage 558 2,609Grants recoverable 476 2,477

85,310 114,729Less Provision for Doubtful Debts (4,233) (2,361)

81,077 112,368

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33. Investments in Companies

The council holds the following investments in companies. The accounting treatment in respect of the following investments is explained in the accounting policy applicable to group accounts. Copies of the accounts for these companies can be obtained from the Chief Legal Officer, Hertfordshire County Council, County Hall, Hertford SG13 8DQ (Contact telephone: 01992 555527).

Investments in Companies

Name Nature of Business OwnedNominal

Value% £

Exemplas Holdings Ltd

Business advice and support services 33 33

Hertfordshire Careers Services Ltd

Provision of careers guidance, information and employment services

Not applicable

A company limited by guarantee

Hertfordshire Building Preservation Trust

To preserve buildings of special historic or architectural interest

Not applicable


The Hertfordshire Groundwork Trust Limited

A registered charity which carries out environmental improvement in Hertfordshire

Not applicable


SmartE East Ltd A jointly owned and managed not for profit limited liability company established to develop a plan for a regional joint procurement consortium, including constructors and materials suppliers, for the procurement of capital works.

Not applicable


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34. Creditors 2009 2010£000 £000

Sundry Creditors and Receipts in Advance 161,201 243,439Hertfordshire Local Government Pension Fund 79,007 15,201Contractor Deposits 52,155 52,317Grants received in advance 49,978 20,353

342,341 331,310

Contractor deposits represent funds received to finance both revenue and capital projects undertaken by the council. Latest forecasts estimate that £36.672 (2008 - £35.742) million will be applied to projects more than one year after the balance sheet date.

35. Related Parties 2009 2010£000 £000

Hertfordshire Police Authority (HPA)Temporary Borrowing 2,601 2,015Accrued Interest on managed cash balances 103 0

2,704 2,015The temporary borrowing position comprises:-Cash balances held on behalf of HPA 6,601 8,465Less: Investments placed on behalf of HPA (4,000) (6,450)

2,601 2,015

36. Bank Overdraft

The bank position is managed on a daily basis as part of the Treasury Management function. The overdrawn position reflects:

unpresented cheques drawn before the end of the financial year and

a central Schools Treasury Management account overdrawn position not offset against positive balances within the schools pooled banking account arrangements.

To aid analysis of the balance sheet overdrawn position the amounts relating to the Schools Treasury Management account is shown below.

2009 2010£000 £000

Schools Treasury Management account 74,720 75,842

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37. Provisions

The following provisions have been set aside in the 2009/10 accounts to meet future expenditure where liabilities are known or expected.

Insurance - to meet known claims for which it is anticipated the council may be liable.

Equal Pay Claims - the County Council has made a provision pending the resolution of ongoing litigation. In addition to this, there are claims still to be determined whether there is a case as described in note 54 (Contingent Liabilities).

Mental Health Act 1983 (Section 117) – to meet the reimbursement to Social Services clients of costs associated with aftercare services. This provision is no longer required and has been released in 2009/10.

Teachers Pension Provision – relating to the backdated costs for pension liabilities following changes to the pension provisions for part-time staff.

MECSS (Minority Ethnic Curriculum Support Service) Modernisation - this provision is to support the transitional costs in 2009/10 following transformation of the service.

2009Increase/

(Decrease) 2010£000 £000 £000

Insurance 14,630 (32) 14,598Equal Pay Claims 1,077 0 1,077Mental Health Act 1983 798 (798) 0Teachers Pension Provision 770 0 770MECSS Modernisation 281 (281) 0

17,556 (1,111) 16,445

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38. Deferred Grants and Contributions 2009 2010£000 £000

Balance as at 1 April 137,750 156,490Income Receivable 56,760 58,825Revaluations, Restatements and Disposals (32,098) 0Revenue expenditure funded from capital 0 (7,357)Depreciation of Grants and Contributions (5,922) (10,333)

156,490 197,625

39. Deferred Credits 2009 2010£000 £000

Keyworker Housing Advances 210 210Future repayments due on Mortgages and Advances 63 32

273 242

40. Liability related to defined benefit pension schemes

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

The council participates in three pension schemes:

The Local Government Pension Scheme for employees other than teachers and fire-fighters. This scheme is administered by Hertfordshire County Council and is a funded scheme, meaning that the council and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets.

The Fire-fighters pension scheme – this is an unfunded scheme, meaning that there are no investment assets built up to meet the pension liability. Employer and employee contributions together will meet the full costs of pension liabilities being accrued in respect of currently serving employees while central Government will meet the costs of retirement pensions in payment, net of employee and the new employer contributions.

The Teachers pension scheme – further information relating to this scheme which provides retirement benefits for teaching staff is shown in the note to the accounts “Defined Contribution Scheme – Teachers’ Pension Scheme”. FRS17 does not apply to the council’s contribution to this pension scheme.

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40. Liability related to defined benefit pension schemes (continued)

Hymans Robertson, an independent firm of actuaries, has valued the council’s fund asset share and liabilities for both the Local Government Pension Scheme and Fire-fighters Pension Scheme.

The underlying assets and liabilities for retirement benefits attributable to the council as at 31 March together with the movement from the previous year are shown below.

Transactions relating to retirement benefits

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

Local Government Pension Scheme

Fire-fighters Pension Scheme Total

for the year ended 31 March2009 2010 2009 2010 2009 2010£000 £000 £000 £000 £000 £000

Income and Expenditure AccountNet Cost of Services:current service cost 33,460 29,567 5,200 4,700 38,660 34,267past service costs 9,891 742 0 0 9,891 742impact of curtailments 632 871 0 0 632 871impact of settlements 1,305 0 0 0 1,305 0Net Operating Expenditure:interest cost 78,946 78,025 14,800 14,700 93,746 92,725expected return on assets in the scheme (85,851) (47,359) 0 0 (85,851) (47,359)Amounts to be met from Government Grants and Local Taxation:movement on pensions reserve 12,932 (3,891) (13,468) (11,285) (536) (15,176)

51,315 57,955 6,532 8,115 57,847 66,070Actual amount charged against council tax for pensions in the year:employers’ contributions payable to scheme 48,161 54,243 3,625 3,564 51,786 57,807top-up grant contribution 0 0 2,907 4,551 2,907 4,551retirement benefits payable to pensioners 3,154 3,712 0 0 3,154 3,712

51,315 57,955 6,532 8,115 57,847 66,070

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Assets and liabilities in relation to retirement benefits

Reconciliation of present value of the scheme liabilities:




Opening Defined Benefit Obligation 1,138,562 1,129,418 215,600 215,000 1,354,162 1,344,418Current service cost 33,460 29,567 5,200 4,700 38,660 34,267Interest cost 78,946 78,025 14,800 14,700 93,746 92,725Contributions by Members 16,105 16,682 2,000 1,900 18,105 18,582Transfers in from other authorities 0 0 100 0 100 0Actuarial Losses / (Gains) (99,024) 659,033 (14,068) 87,815 (113,092) 746,848Past Service Costs / (Gains) 9,891 742 0 0 9,891 742Losses / (Gains) on Curtailments 632 871 0 0 632 871Liabilities Extinguished on Settlements (7,587) 0 0 0 (7,587) 0Liabilities Assumed in a Business Combination 0 0 0 0 0 0Exchange Differences 0 0 0 0 0 0Estimated Unfunded Benefits paid (3,154) (3,712) 0 0 (3,154) (3,712)Estimated Benefits paid (38,413) (41,763) (8,632) (10,015) (47,045) (51,778)Closing Defined Benefit Obligation 1,129,418 1,868,863 215,000 314,100 1,344,418 2,182,963

Reconciliation of fair value of the scheme assets:




Opening Fair Value of Employer Assets 950,976 772,907 0 0 950,976 772,907Expected Return on Assets 85,851 47,359 0 0 85,851 47,359Contributions by Members 16,105 16,682 2,000 1,900 18,105 18,582Contributions by the Employer 48,161 54,243 6,532 8,115 54,693 62,358Transfers in from other authorities 0 0 100 0 100 0Contributions in respect of Unfunded Benefits 3,154 3,712 0 0 3,154 3,712Actuarial Gains / (Losses) (280,881) 162,702 0 0 (280,881) 162,702Assets Distributed on Settlements (8,892) 0 0 0 (8,892) 0Pension and Lump Sum Expenditure 0 0 (8,632) (10,015) (8,632) (10,015)Unfunded Benefits Paid (3,154) (3,712) 0 0 (3,154) (3,712)Benefits Paid (38,413) (41,763) 0 0 (38,413) (41,763)Opening Fair Value of Employer Assets 772,907 1,012,130 0 0 772,907 1,012,130

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The expected return on assets is based on the long-term future expected investment return for each asset class as at the beginning of the period (i.e. as at 31 March 2009).

The actual return on the council's share of the scheme’s total assets in the year was - £245,542,000 (2008-09:- negative £231,399,000).

Scheme history2005/06 2006/07 2007/08 2008/09 2009/10

Restated£000 £000 £000 £000 £000

Present value of liabilities:Local Government PensionScheme (1,312,799) (1,328,218) (1,138,562) (1,129,418) (1,868,863)Fire-fighters Pension Scheme

(249,400) (247,200) (215,600) (215,000) (314,100)Fair value of assets in the LocalGovernment Pension Scheme

892,304 975,930 950,976 772,907 1,012,130Surplus/(deficit) in the scheme: (669,895) (599,488) (403,186) (571,511) (1,170,833)Local Government PensionScheme (420,495) (352,288) (187,586) (356,511) (856,733)Fire-fighters Pension Scheme

(249,400) (247,200) (215,600) (215,000) (314,100)Total (669,895) (599,488) (403,186) (571,511) (1,170,833)

The above asset values as at 31 March 2010 are at bid value as required under FRS17. For previous accounting periods the value of assets may have been reported at mid-market value. The fair value of assets was taken as at bid value at 31 March 2009 and, on the grounds of materiality, figures for previous accounting periods have not been restated.

The liabilities show the underlying commitments that the council has in the long-term to pay retirement benefits. The total liability as at 31 March 2010 of £1,170.833 million has a substantial impact on the net worth of the council as recorded on the balance sheet. However, statutory arrangements for funding the deficit mean:-

the deficit on the Local Government Pension Scheme will be made good by increased contributions over the remaining working life of employees, as assessed by the scheme actuary, and

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40. Liability related to defined benefit pension schemes (continued) in the case of Fire-fighters pensions the underlying principle is that

employer and employee contributions together will meet the full costs of pension liabilities being accrued in respect of currently serving employees while central Government will meet the costs of retirement pensions in payment, net of employee and the new employer contributions.

The total contributions estimated to be made to the Local Government Pension Scheme by the council in the year to 31 March 2011 is £53,574,200. Expected contributions for the Fire- fighters Pension Scheme in the year to 31 March 2010 have not been estimated as being an unfunded scheme, the employer contribution depends on the benefits that will be paid in the year, the employee contributions and transferred in amounts received.

Basis for estimating assets and liabilities

Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. Both the Fire-fighters Scheme and the Local Government Pension Fund liabilities have been assessed by Hymans Robertson, an independent firm of actuaries, estimates for the County Council Fund being based on the latest full valuation of the scheme as at 31 March 2007. The principal assumptions used by the actuary have been:


Fire-fighters Pension Scheme

2008/09 2009/10 2008/09 2009/10Long-term expected rate of return on assets in the scheme:Equity investments 7.0% 7.8% n/a n/aBonds 5.4% 5.0% n/a n/aProperty 4.9% 5.8% n/a n/aCash 4.0% 4.8% n/a n/aMortality assumptions:Longevity at 65 for current pensioners:

Men 21.4 years 22.7 years 27.6 years 27.6 yearsWomen 24.3 years 26.1 years 31.0 years 31.0 years

Longevity at 65 for future pensioners:Men 22.5 years 24.8 years 29.2 years 29.2 years

Women 25.4 years 28.3 years 32.7 years 32.7 yearsRate of inflation 3.1% 3.8% 3.1% 3.8%Rate of increase in salaries 4.6% 5.3% 4.6% 5.3%Rate of increase in pensions 3.1% 3.8% 3.1% 3.5%Rate for discounting scheme liabilities 6.9% 5.5% 6.9% 5.5%

Take-up of option to convert annual pension into retirement lump sum (pre April 2008)

50% 50% n/a n/a

Take-up of option to convert annual pension into retirement lump sum (post April 2008)

n/a 75% n/a n/a

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The Firefighters’ Pension Scheme has no assets to cover its liabilities. The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:

2008/09 2009/10% %

Equity investments 67 71Bonds 19 19Property 4 3Cash 10 7

100 100

History of experience gains and losses

The actuarial experience gains or (losses) identified as movements on the Pensions Reserve in 2008-09 can be analysed into the following categories, measured as a percentage of assets or liabilities at 31 March 2010:

2005/06 2006/07 2007/08 2008/09 2009/10Restated

% % % % %Local Government PensionSchemeDifferences between the expected and actual return on assets 14.4 0.2 (12.0) (40.5) 19.6Experience gains and losses on liabilities 1.6 0.1 5.9 (0.6) 0.2

Fire-fighters Pension SchemeExperience gains and losses on liabilities 0.6 0.9 (2.9) 3.5 1.4

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Amount Recognised in Statement of Total Recognised Gains and Losses (STRGL)

2005/06 2006/07 2007/08 2008/09 2009/10Restated

£000 £000 £000 £000 £000

Actuarial (Gains) / Losses 13,470 (94,946) (211,648) 185,589 584,146

Increase / (decrease) in Irrecoverable Surplus from Membership 0 0 0 0 0

Actuarial (Gains) / Losses recognised in STRGL 13,470 (94,946) (211,648) 185,589 584,146

Cumulative Actuarial (Gains) / Losses 240,645 145,699 (65,949) 119,640 703,786

41. Defined Contribution Scheme – Teachers’ Pension Scheme

The scheme is a defined benefit scheme, administered by the Teacher’s Pension Agency (TPA). Although the scheme is unfunded, the TPA uses a notional fund as a basis for calculating the employers’ contribution rate paid by local education authorities. However, it is not possible for the council to identify a share of the underlying liabilities in the scheme attributable to its own employees. For the purposes of this statement of accounts it is therefore accounted for on the same basis as a defined contribution scheme. As at 31 March 2010, £6.567 million, including employee contributions was due to the TPA.

The council is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the Teachers’ scheme. These benefits are fully accrued in the pension liability shown in the preceding note. During 2009/10 the cost of these unfunded discretionary awards amounted to £3.712 million (2008/09 - £3.154 million).

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42. Capital Adjustment Account (Restated)

The opening balance on the Capital Adjustment Account at 1 April 2007 is the combined total of the Fixed Asset Restatement Account and Capital Financing Account, the previous capital accounting reserves. The account provides a balancing mechanism between the different rates at which assets are depreciated under the SORP and are financed through the capital controls system and includes the amount of capital expenditure financed from revenue and capital receipts and the reversal of amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the Movement on the General Fund Balance for the year.

2009 2010£000 £000

Balance as at 1 April 2,595,895 2,092,472Restatement at 1 April 13,268 (12,889)Restated Balance as at 1 April 2,609,163 2,079,583

Capital financing capital receipts used for financing 12,273 620 revenue contributions 13,304 15,201

Minimum revenue provision 18,039 20,384

Fixed AssetsDepreciation (57,021) (67,922)Impairment (416,826) (155,463)Disposals – net book value (74,493) (35,053)Revaluation gains attributable to disposals 8,475 701Transferred to PFI Scheme 4,860 0PFI Scheme Reversionary Interest 590 0Capital expenditure (net of financing) that has not increased balance sheet carrying amounts (27,685) (5,459)

Amounts treated as revenue expenditure in accordance with the SORP but which are classified as capital expenditure by statute (4,129) (5,555)

Amortisation of deferred grants and contributions 5,922 10,3332,092,472 1,857,371

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43. Revaluation Reserve (Restated)

With effect from 1 April 2007 the Revaluation Reserve replaced the Fixed Asset Restatement Account. Due to lack of historic information it was, at that date, included in the Balance Sheet with a zero opening balance. The closing position on the Reserve at 31 March 2010 therefore only shows revaluation gains accumulated since 1 April 2007.

2009 2010£000 £000

Balance as at 1 April 8,018 72,442

Revaluation of Fixed Assets 72,899 122,327

Revaluation gains attributable to Fixed Asset Impairments 0 (21,001)

Revaluation gains attributable to Fixed Asset Disposals (8,475) (701)

72,442 173,067

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44. Financial Instruments Adjustment Account

The Financial Instruments Adjustment Account provides a balancing mechanism between the different rates at which gains and losses (such as premiums on the early repayment of debt) are recognised under the SORP and are required by statute to be met from the General Fund. These adjustments are effected in the Statement of Movement on the General Fund Balance, after debits and credits have been made to the Income and Expenditure Account in line with the SORP’s requirements. The Financial Instruments Adjustment Account therefore records the timing differences between the rate at which gains and losses are recognised under the SORP and the rate at which debits and credits are required to be made against council tax.

2009 2010£000 £000

Balance as at 1 April (6,777) (11,289)

Overhanging premiums and discounts written off 1,336 316

Statement of Movement in General Fund BalanceInterest on Financial Instruments restated to nominal / coupon rates 29 0Financial Instrument carried at amortised cost repaid 0 0Soft loans remeasured at fair value (122) (29)Soft loans repaid – gain on derecognition 25 33Soft loans interest reversal 78 80Icelandic Bank Investment ImpairmentPrincipal Impairment (7,780) (539)Less: Interest Receivable 1,922 1,242

(11,289) (10,186)

Icelandic Bank Investment Impairment (5,858) (5,155)Unamortised overhanging premiums and discounts on debt restructuring pre 1 April 2006 (3,110) (2,794)Borrowings remeasured at amortised cost (1,413) (1,413)Soft loans remeasured at fair value (908) (824)

(11,289) (10,186)

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45. Equal Pay Reserve

In accordance with regulation 30A of the Local Authorities Capital Finance and Accounting Regulations 2007 the council has, under the Statement of Movement on the General Fund Balance, removed the cost of establishing a provision for equal pay and transferred this amount to an Equal Pay Reserve until such claims become payable.

2009 2010£000 £000

Equal Pay Reserve (1,077) (1,077)

46. Pensions Reserve

Adoption of FRS17 Retirement Benefits requires the establishment of a pension reserve. It enables the authority to show the pension fund liability on the face of the balance sheet whilst also ensuring a neutral effect on local taxation. The deficit reflected by this reserve is not an immediate claim on the council’s balances or reserves.

2009 2010£000 £000

Balance as at 1 April (403,186) (571,511)

Actuarial Gains and (Losses)Defined Benefit Obligations 113,092 (746,848)Employer Assets (280,881) 162,702

General Fund Balance Appropriation (536) (15,176)(571,511) (1,170,833)

47. Usable Capital Receipts Reserve

The usable capital receipts reserve represents the capital receipts available toeither repay external debt or finance capital expenditure.

2009 2010£000 £000

Balance as at 1 April 16,839 19,626Capital receipts received 10,808 2,489Capital receipts accrued 4,252 55Capital receipts used for financing (12,273) (620)

19,626 21,550

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48. Specific Reserves

The following reserves are either designated as “earmarked funds” within the total council funds or established under specific legislation.

School Balances - reserves carried forward from schools delegated underspendings.

Strategic Area Partnership - to finance the provision of new learning opportunities to deliver the learner entitlement for 14 to 19 year olds.

Community Focused Extended School Activities - balances carried forward by schools relating to community focused activities.

Capital Payback - contributions from services in respect of approved capital programme projects in order to finance future capital expenditure.

Highways Maintenance - a reserve established to ensure funding is available to support additional investment in highways maintenance.

Icelandic Bank Deposits – a reserve to provide for potential impairment of these deposits.

Self Insurance - a reserve to cover for uninsured liabilities in respect of employers liability, third party insurance and potential costs incurred as a result of storm damage.

Schools Budget Central Expenditure - the underspend against the 2008-09 central expenditure budgets within the Schools Budget. This will be used to finance the authority's Schools Budget in future years, in line with the requirements of the Dedicated Schools Grant.

NNDR Revaluation Reserve – to manage fluctuations associated with rateable values of the council’s properties.

Quantum Care Rent Abatement - represents the estimated rents received from Quantum Care to be used to support the cost of the abatement. This is no longer required for future rents.

Children Schools and Families Service Reserve - surpluses within the education trading units of the Children, Schools & Families service.

Private Finance Initiative (PFI) Equalisation Reserve – the excess of PFI credits over current expenditure levels carried forward to fund future obligations.

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48. Specific Reserves (continued)

County Council Elections – to meet the cost of elections to be held in June 2009.

Capital Reserve – a reserve which is available to finance capital expenditure.

Statutory Planning Authority Inquiries – to meet costs associated with attending public meetings as the statutory planning authority.

Hermis Development - to meet future expenditure incurred in the development of the Hermis software.

Strategic Planning - a reserve to deal with issues relating to strategic planning questions that will enable the council to continue to fight to protect Hertfordshire’s environment.

Shared Managed Services (SMS) Reserve – a reserve to meet the costs of implementations to the SMS procurement.

New Roads & Street Works Act 1991 - income received from public utilities under Section 74 of the Act that must be spent on specific transport related activities.

Hertfordshire Business Services (HBS) Repairs and Renewals – a reserve to cover the replacement and maintenance of equipment and the refurbishment of buildings.

Hadham Towers Restoration - to provide for essential restoration work to return the Hadham Towers Waste Disposal site to its original use as agricultural land when the tip is full.

Leasehold Dilapidations – a reserve to meet any potential costs relating to repairs and maintenance occurring at leasehold premises under “The Way We Work” project.

Recruitment Advertisement Rebates – to be applied in part to finance the coordinated recruitment marketing work for all departments to improve the councils standing as an employer of choice

Energy and Water Conservation – to be applied to investment in energy and water saving measures.

LPSA Performance Reward Grant – balance of grant carried forward to finance expenditure in 2010/11.

Herts Property Artwork - a reserve created from the sale of works of art that has been ring fenced to finance future council Artwork.

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48. Specific Reserves (continued)

Childcare Litigation Reserves - reserves relating to the Childcare Litigation Unit.

Local Standards Verification – a reserve to cover the costs associated with the testing of Trading Standards Instruments.

Key Worker Housing Surplus – the council’s share of realised gains on the disposal of properties under the Key Worker Housing Scheme.

Balance2009£000

Increase/(Decrease)

£000

Balance2010£000

School Revenue ReservesSchool Balances 36,747 (488) 36,259Strategic Area Partnership 5,192 (2,323) 2,869Community Focused Extended School Activities 156 59 215Total School Revenue Reserves 42,095 (2,752) 39,343Capital Payback 12,962 7,442 20,404Highways Maintenance 12,000 (6,000) 6,000Icelandic Bank Deposits 10,000 5,511 15,511Self Insurance 9,596 (3,101) 6,495Schools Budget Central Expenditure 3,636 (2,266) 1,370NNDR Revaluation Reserve 2,577 563 3,140Quantum Care Rent Abatement 1,879 (1,879) 0Children Schools and Families Service Reserve 1,681 (1,294) 387PFI Equalisation Reserve 1,467 132 1,599County Council Elections 1,022 (427) 595Capital Reserve 974 (974) 0Statutory Planning Authority Inquiries 924 78 1,002Hermis Development 681 270 951Strategic Planning 655 0 655Shared Managed Services (SMS) Reserve 500 0 500New Roads & Street Works Act 1991 460 561 1,021HBS Repairs and Renewals 443 187 630Hadham Towers Restoration 414 (26) 388Leasehold Dilapidations 304 0 304Recruitment Advertisement Rebates 152 (122) 30Energy and Water Conservation 150 0 150LPSA Performance Reward Grant 90 3,885 3,975Herts Property Artwork 72 (20) 52Childcare Litigation Reserves 19 0 19Local Standards Verification 18 (3) 15Key Worker Housing Surplus 15 (15) 0Other minor balances 3 831 834

104,789 582 105,371

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49. Collection Fund Adjustment Account

£000

Collection Fund Adjustment Account Balance at 31 March 2009 (2,413) Movement in the year 453 Collection Fund Adjustment Account Balance at 31 March 2010 (1,959)

50. General Fund Balance

General Fund Balances are an available resource to finance future revenue and capital expenditure.

£000

General Fund Balance at 31 March 2009 36,496Surplus for the year 16,277General Fund Balance at 31 March 2010 52,773

51. Movements on Reserves (Restated)

This note shows the movements on the council’s reserves. The note distinguishes between movements resulting from the gains and losses for the year and movements resulting from transfers between reserves, most of which the council is required to make in accordance with statute or non-statutory proper practice.

Balance Brought Forward

Gains / (Losses) For The

Year

Transfers Between Reserves

Balance Carried Forward

£000 £000 £000 £000ReservesCapital Adjustment Account 2,079,583 0 (222,213) 1,857,371Revaluation Reserve 72,442 101,326 (701) 173,067Financial Instruments Adjustment Account (11,289) 0 1,103 (10,186)Equal Pay Reserve (1,077) 0 0 (1,077)

Pension Reserve(571,511)

(584,146) (15,176)(1,170,833

)Usable Capital Receipts Reserve 19,626 0 1,924 21,550Specific Reserves 104,789 0 582 105,371Collection Fund Adjustment Account (2,413) 0 453 (1,959)General Fund Balance 36,496 (217,751) 234,027 52,773Total Reserves 1,726,647 (700,571) 0 1,026,076

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52. Contingent Liabilities

At 31 March 2010 the council was aware of the following potential liabilities it may face in the future. These items have not been reflected in the accounts as there is no certainty that an actual liability may arise, or because there is uncertainty as to the amount of liability or when it will arise.

Contingent liabilities identified are:

Municipal Mutual Insurance

In common with many other local authorities, the council insured with the Municipal Mutual Insurance (MMI) Company until 31 March 1993 and continues to be dependent on its continued solvency for the payment of a significant number of claims. The latest Scheme of Arrangement issued by MMI as at 31 March 2010 indicates that the amount liable to clawback from the council, should the Company not remain solvent is estimated at a maximum amount of £4.427 million.

Equal Pay Claims

The County Council has received a number of claims under the Equal Pay Legislation. These are currently going through the legal process but there is a possibility that additional claims may be forthcoming. We are not able to quantify the value of such claims at this stage. Where a probability of settlement is likely and a reliable estimate can be obtained, this has been calculated and disclosed in note 45 (Provisions).

53. Foundation Schools

Fixed assets and long term liabilities remain vested in the Governing Bodies of individual Foundation schools and therefore values and amounts have not been consolidated in this balance sheet. In this authority area there are 27 Foundation schools.

54. The Euro

The council introduced new financial systems in April 2004 that are fully Euro compliant. To date the council has incurred no direct costs relating to the introduction of the Euro and no provisions have been established at this stage for possible future costs as uncertainty continues over the entry of the United Kingdom into the European Monetary Union.

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55. Trust Funds

The council acts as Treasurer and Financial Adviser primarily to a number of educational prize funds, endowments, scholarships and bequests that generally have specific trustees to manage them. Capital is invested in accordance with the trustee’s instructions in a range of external investments or, if held as cash by the council, such balances will earn interest at the market seven-day rate. These funds do not represent assets of the council and have not been included in the balance sheet. As at 31 March 2010 the total value of educational endowments is £474,300 (31 March 2009 - £469,043).

56. Reconciliation of the net surplus or deficit on the Income and Expenditure Account to the revenue activities net cash flow shown in the Cash Flow Statement

2009 2010£000 £000

Income and Expenditure Account surplus / (deficit) (515,907)Servicing of finance (306)Capital accounting 83,755 Exceptional Items 415,394 (Gain)/loss on disposal of fixed assets 59,433 Financial Instruments 5,848 FRS17 Retirement Benefits 536 Decrease / (Increase) in stocks (655)Landfill Allowances Trading Scheme 0 Decrease / (Increase) in revenue debtors (14,085)Increase in revenue creditors & deferred credits 24,033 Increase / (decrease) in provisions 7,238 Net Cashflow from revenue activities 65,284

57. Reconciliation of the movement in cash as shown in the Cash Flow Statement to the movement in net debt

2009 2010£000 £000

Increase in cash in the period 11,911 Cash outflow from reduction in external borrowing 37,649 Cash inflow from decrease in liquid resources (54,069)Cash inflow from decrease in long term investments (8,000)Change in net debt (12,509)Net debt at 31 March 2008 / 2009 (79,799)Net debt at 31 March 2009 / 2010 (92,308)

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58. Reconciliation of the items shown within the financing of and management of liquid resources section of the Cash Flow Statement (analysis of net debt)

As at 31 March 2009

Cash flows

Other Changes

As at 31 March 2010

£000 £000 £000 £000

Cash in hand and at bank 80,620 Bank overdraft (81,177)

Debt due within 1 year (82)Debt due after 1 year (339,549)

Current asset investments 216,880

Long Term investments 31,000

Net Debt (92,308)

Amounts within the above statement have been shown at principal amounts owed to or by third parties.

59. Definition of Liquid Resources in the Cash Flow Statement

Liquid resources have been defined as short term (less than one year) investments, with approved financial institutions, that are disclosed on the face of the balance sheet.

60. Analysis of Cash Flow Statement Revenue Grants

Income used in deriving the net cash flow from revenue activities includes the following amounts.

2009 2010Council Service £000 £000Children Schools and Families 830,774Adult Care Services 23,744Environment 7,030Other Services 657

862,205

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61. Authorisation of the Statement of Accounts

This is a requirement to disclose the date that the financial statements are authorised for issue. This establishes the date after which events will not have been recognised in the Statement of Accounts.

To be completed following audit of the accounts.

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ANNUAL GOVERNANCE STATEMENT

This is the Council’s Statement on Internal Control for the purpose of the Accounts and Audit Regulations.


1. Scope of responsibility

1.1 Hertfordshire County Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. The Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

1.2 In discharging this overall responsibility, the Council is responsible for putting in place proper arrangements for the governance of its affairs, and facilitating the effective exercise of its functions, which includes arrangements for the management of risk.

1.3 Hertfordshire County Council’s Corporate Governance framework and processes are consistent with the principles of the CIPFA/ SoLACE Framework Delivering Good Governance in Local Government:

Focusing on the purpose of the authority and on outcomes for the community and creating and implementing a vision for the local area

Members and officers working together to achieve a common purpose with clearly defined functions and roles

Promoting values for the authority and demonstrating the values of good governance through upholding high standards of conduct and behaviour

Taking informed transparent decisions which are subject to effective scrutiny and managing risk

Developing the capacity and capability of members and officers to be effective

Engaging with local people and other stakeholders to ensure robust public accountability.

1.4 Every elected member has a copy of the Council’s Statement of Corporate Governance in their Member Information Folder and a copy of the revised Statement can be obtained from the www.hertsdirect.org website. That statement explains how Hertfordshire County Council has complied with the code and this statement meets the requirements of regulation 4(2) of the Accounts and Audit Regulations 2003 as amended by the Accounts and Audit

128

(Amendment) (England) Regulations 2006 in relation to the publication of a statement on internal control.

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2. The purpose of the governance framework

2.1 The governance framework comprises the systems and processes, and culture and values, by which the authority is directed and controlled, and its activities through which it accounts to, engages with and leads the community. It enables the authority to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost-effective services.

2.2 The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the council’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically.

2.3 The governance framework has been in place at Hertfordshire County Council for the year ended 31 March 2010 and up to the date of approval of this annual Statement within the statement of accounts.

3. Key elements of the governance framework

3.1 The key elements of Hertfordshire County Council’s systems and processes which facilitate compliance with the six principles of good governance are set out in the Statement of Corporate Governance.

3.2 Communicating and reviewing the authority’s visionT

The Council’s purpose and vision is set out in its Corporate Plan, ‘Hertfordshire – County of Opportunity'. The current Plan was adopted in April 2009 and confirmed by the Council at its meeting on 21 July 2009. The Corporate Plan extends to 2012. It is reviewed and refreshed annually, as part of the Integrated Planning Process, a process which allows any necessary changes to governance arrangements.

The heart of the Plan is the vision and priorities which the Council, independently and with its partners, has for delivering improved outcomes for Hertfordshire communities. It sets out 3-year objectives to assess whether these improvements have been made. The Plan informs the Integrated Planning Process, so that resources are aligned to priorities and sets out the issues the Council are confronting and taking assertive action, wherever possible, within our resources over the three year period in order to improve the quality of life in the County.

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The Integrated Planning Process uses national benchmarking of value for money and needs based evidence in the review and shaping of corporate priorities and supporting financial plans.

Cabinet launched a comprehensive business transformation programme (‘Council for the Future’) at its meeting on 21 December 2009 to ensure that the Council can sustain good quality public services, within a balanced budget at an affordable price for residents into the medium term. The purpose of the programme is to reduce costs whilst maintain performance and quality of the Council's services. The programme is broad and ambitious, with a scope covering:

simplifying the customer journey personalised services early intervention promoting independence empowering citizens and communities enhanced commissioning and procurement making the best use of assets people, performance and productivity right level of publicly financed services partnership and place.

3.3 Constitution

All the annexes to the Constitution, with the exception of Annex 08A - Scrutiny of the Health Service (May 2005) and Annex 12 Financial Regulations (Jan 2009) were reviewed and updated during the year.

The Council’s Financial Regulations are kept under continuous review to ensure that they comply with changing statutory requirements and continue to provide a secure framework for the developing business needs of the authority. A review of Financial Regulations was undertaken to incorporate changes to responsibilities; the revised regulations were formally adopted in May 2010.

They clarify responsibilities and provide a framework for decision making. Where there are specific statutory powers and duties, financial regulations seek to ensure these are duly complied with, as well as reflecting best professional practices and decisions of the County Council and Cabinet.

The Regulations also form part of the framework in order that the County Council can demonstrate its compliance with the principles of good governance, which is essential in maintaining public confidence in elected members and officials.

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The Council’s Constitution sets out in detail the Council’s arrangements for each of the following:

defining and documenting the roles and responsibilities of the executive, non-executive, scrutiny and officer functions, with clear delegation arrangements and protocols for effective communication

developing, communicating and embedding codes of conduct, defining the standards of behaviour for members and staff

reviewing and updating standing orders, standing financial instructions, a scheme of delegation and supporting procedure notes/manuals, which clearly define how decisions are taken and the processes and controls required to manage risks

ensuring the authority’s financial management arrangements conform with the governance requirements of the CIPFA Statement on The Role of the Chief Financial Officer in Local Government (2010)

undertaking the core functions of an audit committee

ensuring compliance with relevant laws and regulations, internal policies and procedures, and that expenditure is lawful

whistle blowing and for receiving and investigating complaints from the public.

3.4 Risk Management

The Council has a well developed Risk Management Strategy and has transferred its risk register management processes onto a web based software package. Key Service Risks are reported regularly to Executive Members, and a corporate report goes annually to the Audit Committee and to Cabinet showing the steps which are being taken to minimise the impact of each risk. The Risk Champions group consists of assistant directors and senior departmental managers. Each Risk Champion represents their individual service area, endeavouring to ensure risks are managed in accordance to the agreed corporate strategy.

3.5 Scrutiny and compliance

Under the proposals brought in to modernise the way local government works, Hertfordshire County Council decided to opt for a style of Cabinet Government. This means that when all County Councillors meet at a full Council Meeting their role is to set the strategic direction for Council Services, receive petitions from the public and reports from the various committees. Working within this policy framework a Cabinet made up of 10 senior

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politicians from the ruling party form The Executive and takes the major policy and operational decisions.

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The role of the Overview and Scrutiny Committee (OSC) is to hold The Executive to account by scrutinising:-decisions made by, or on behalf of the Council or Cabinet, any operational or policy aspect of the Council’s businessThey are also able to scrutinise any issue which affects the County and its residents which may be outside the Council’s control. Like the Full Council, meetings of scrutiny committees and their topic groups are open to members of the public. There is also a Health Scrutiny Committee which is independent of the County Council, but is run by the County Council.

The OSC is responsible for ensuring that the Cabinet’s budget proposals are scrutinised appropriately; and that there is regular scrutiny of the Hertfordshire Children’s Trust Partnership and the Hertfordshire Safeguarding Children Board.

3.6 Performance Management

The Council has strengthened its strategic and service level performance management processes to facilitate continuous improvement and identify and deal with failure in service delivery. The Strategic Management Board review performance monitor reports quarterly including key Performance Indicators, projects, inspections, customer care, risks etc.

Service Boards review performance through monthly monitors and report to Cabinet Panel quarterly, in addition service specific reports on projects, key strategies and service areas are subject to review by the Overview and Scrutiny Panel.

Performance information is reported to central government on various statutory returns.

3.7 Members and Staff

The Council has a good reputation for its Member development work. This has been externally accredited and the Council has secured the IDeA Member Development Charter Mark. It has also detailed a programme of training events for the coming year which respond to the training needs analysis which has been completed by Members in recent months.

A recent decision was taken to retain the high level of commitment to Member development provided by the charter, but by endorsing a local ‘Hertfordshire Member Development Pledge’.

The system of Deputy Cabinet members facilitates succession planning.

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The Council has Investors in People accreditation for all Departments in relation to staff. The Staff Development Charter requires the Council to assess the learning and development needs of officers and to meet those needs.

The Performance Management and Development Scheme has been developed by Herts HR for use by all services and staff, except those at Watch Commander Level and below (Fire and Rescue) and those in professional teacher roles (includes centrally employed teachers). The scheme consists of a Performance Agreement (Part 1) which sets out the member of staff’s performance objectives and a Personal Development Plan (Part 2) which focuses on the skills, knowledge and behaviours required to achieve their performance objectives. A standard set of ‘outcomes’ has also been introduced to enable managers and staff to summarise the performance over the year and will help when assessed externally.

3.8 The community of Hertfordshire

The Council works together with its partners through Hertfordshire Forward, the countywide Local Strategic Partnership (LSP), under the County Council’s leadership. All agenda papers and decisions are published on www.hertslink.org.

The Statement of Corporate Governance sets out the Council’s arrangements for: establishing clear channels of communication with all sections of the

community and other stakeholders, ensuring accountability and encouraging open consultation

incorporating good governance arrangements in respect of partnerships and other group working as identified by the Audit Commission’s report on the governance of partnerships, and reflecting these in the authority’s overall governance arrangements

4. Review of effectiveness

4.1 Hertfordshire County Council has responsibility for conducting, at least annually, a review of the effectiveness of its governance framework including the system of internal control, but in practice this is a continuous process of review and improvement. The review of effectiveness is informed by the annual service assurances and checklist of key controls and corporate responsibilities which are signed by the service department Directors, assurances from the senior managers who have responsibility for the development and maintenance of the governance environment, including those working with our strategic partners and risk management, the head of Internal Audit’s annual report, and also by comments made by the external auditors and other review agencies and inspectorates.

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http://www.hertslink.org/


4.2 The Executive, on behalf of the authority, charges the Audit Committee with keeping the effectiveness of the Council’s systems for internal control under review and reporting any recommendations for improvement to the Executive. Corporate ownership of this statement is achieved through the Performance and Resources Officer Group, chaired by the Chief Financial Officer. They undertake the review of effectiveness of the governance arrangements and are responsible for approving the statement prior to signing by the Chief Executive and Leader. The Audit Committee scrutinises the review at its June meeting.

4.3 The authority’s financial management arrangements conform with the governance requirements of the CIPFA Statement on the Role of the Chief Financial Officer in Local Government (2010)

4.4 A full review of the effectiveness of the Statement of Corporate Governance and the governance framework was undertaken. The revised Statement of Corporate Governance was endorsed by the Performance and Resources Officer Group.

4.5 The Service Chief Officers each signed a Service Assurance Assessment, covering the following functions in operation in their service during the year:

service plans preparation and agreement performance against the indicators in the plans performance reporting staff resources and responsibilities

value for money partnership arrangements risk management robust processes for service developments consideration of safety and environmental impacts financial probity actions taken in response to external inspectorate reviews information and communication systems.

Actions have been identified to improve controls in relation to exceptions identified in the Chief Officer assurance assessments.

4.6 The action plans arising from the 2008/9 Annual Governance Statement have been reviewed; all such actions have been implemented.

4.7 Internal Audit also provided an independent opinion on the adequacy and effectiveness of the Council’s system of financial control in the Internal Audit Annual Report which is reviewed by the Audit Committee in June.

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4.8 We have been advised on the implications of the result of the review of the effectiveness of the governance framework by the Audit Committee, and a plan to address weaknesses and ensure continuous improvement of the system of internal control is in place.

5. Significant governance issues

5.1 The Council has been preparing for the rapidly changing financial climate in which local government services are funded.

Implementation of the Integrated Plan and the Council for the Future programme will reduce costs whilst maintaining performance and quality of the Council's services.

5.2 The council acknowledges the issues raised about the closure of the 2008/9 accounts in the Audit Commission Annual Governance Report. Actions have been put in place to cleanse the Corporate Property database and Fixed Assets Register and combine all the information on a single database, and to correctly identify items of capital expenditure and comply with capital accounting requirements. An update on the progress of the Valuation and Asset Accounting project went to the council’s Audit Committee on the 25 th

March 2010 where the Audit Commission was present.

5.3 A detailed action plan has been put in place to ensure that the 2010/11 accounts are IFRS compliant.

5.4 Improvements in controls to address weaknesses in budget management in Children’s Services and Property Services are being implemented. These were the only significant matters identified in Chief Officer assurance assessments.

5.5 We propose over the coming year to take steps to address the above matters to further enhance our governance arrangements. We are satisfied that these steps will address the need for improvements that were identified in our review of effectiveness and will monitor their implementation and operation as part of our next annual review.

Signed on behalf of Hertfordshire County Council:

Robert Gordon Caroline TapsterLeader Chief ExecutiveDate: 30 June 2010 Date: 30 June 2010

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LOCAL GOVERNMENT PENSION FUND ACCOUNTS

These accounts give a stewardship report of the financial transactions of the fund during the year, and of the deposition of its assets at the year-end.

The council administers a Pension Fund covering staff employed by the council, the ten district councils in Hertfordshire and 184 other bodies. The Fund includes local authority employees within Hertfordshire, except teachers and fire personnel for whom separate pension arrangements apply. The Fund exists to provide pensions and other benefits for employees, their spouses, civil partners or dependants in accordance with the Local Government Pension Scheme Regulations (Benefits, Membership and Contributions) Regulations 2007 (as amended). The income of the Fund arises from contributions by the employees and by their employing authorities and from dividends and interest on investments. The membership of the Fund at 31 March 2010 was as follows:

Contributors 28,485Pensioners 19,987Former Contributors - deferred benefits 24,103Total 72,575

MANAGEMENTThe management of investments is undertaken by firms of Fund Managers.

FURTHER INFORMATIONThe council publish a separate Annual Report on the Pension Fund which gives more detailed information.

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LOCAL GOVERNMENT PENSION FUND ACCOUNTING POLICIES

Statement of Accounting Policies

General PrinciplesThe accounts have been prepared in accordance with the provisions of Chapter 2 of the Statement of Recommended Practice Financial Reports of Pension Schemes 2007, the Code of Practice on Local Authority Accounting in the United Kingdom 2008 and the Local Government Pension Scheme (Administration) Regulations 2008 (as amended).

The accounts summarise the transactions and net assets of the Pension Fund. They do not take account of liabilities to pay pensions and other benefits in the future. The accounts should therefore be read in conjunction with the Actuarial Valuation Report on pages 23-24 which takes account of such liabilities.

Basis of PreparationThe accounts have been prepared on an accruals basis, with the exception of transfer values which have been treated on a cash basis as the amount payable or receivable by the Pension Fund is not determined until payment is actually made and accepted by the recipient.

Valuation of AssetsInvestments, including foreign currencies, are shown in the accounts at market value, determined as follows:

Quoted securities are valued at bid price at the close of business on the balance sheet date.

Unit Trust and managed fund investments (including property) are valued at the closing bid price if both bid and offer prices are quoted by the respective Investment Managers. If only a single price is quoted, investments are valued at the closing single price.

Unquoted securities are valued having regard to the latest dealings, professional valuations, the advice of directors, asset values and other appropriate financial information.

Indirect private equity investments are interests in limited partnerships and are stated at the partnership’s estimate of fair value. For private equity limited partnerships there is usually a time delay in receiving information from the private equity Investment Managers. The valuations shown in the Net Assets Statement for these investments are the latest valuations provided to the Pension Fund, adjusted for cash movements between the valuation date and the balance sheet date.

Futures contracts are valued at the exchange price for closing out the contract at the balance sheet date. This represents the unrealised profit or loss on the contract.

Forward foreign exchange contracts are stated at fair value which is determined as the gain or loss that would arise from closing out the contract at the balance sheet date by entering into an equal and opposite contract.

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Investment assets and liabilities include cash balances held by the Investment Managers and debtor and creditor balances in respect of investment activities as these form part of the net assets available for investment.

Rights issues are processed on ex-date. If the value of the rights on ex date is 15% or more of the value of the underlying security, cost is allocated from the parent to the rights. If the value is less than 15%, the rights are allocated at zero cost.

Foreign Currency TranslationAll investments are shown in sterling. The market value of overseas securities and cash is shown in sterling based on exchange rates applicable at 31 March 2010.

Gains and losses on exchange arising from foreign currency investment and cash balances are included within the Fund Account for the year.

Investment Management and Administrative ExpensesThe external Investment Managers’ fees are agreed in the respective mandates governing their appointment. Fees are based on the market value of the portfolio under management.

In previous years where an Investment Manager’s fee note has not been received for the final period, an estimate based on the market value of their mandate as at the end of the year is used for inclusion in the Fund Account. In 2009/10, no fees were based on such estimates.

ContributionsIn previous years where participating employers have not submitted certified returns of contributions payable by the due date for preparation of these Accounts, an estimate of these contributions has been made. In 2009/10, no contributions were based on such estimates.

Investment IncomeInvestment income in the form of interest on fixed interest stocks and cash deposits and announced dividends on equity securities is accrued as at the financial year end.

The Pension Fund is exempt from UK income tax on interest received and from capital gains tax on the proceeds of investments sold. Tax is deducted from dividends paid on UK equities. This is not recoverable. Income from overseas investments suffers a withholding tax in the country of origin, unless exemption is permitted. The Pension Fund has been granted exemption from US taxation and in some instances partial recovery of other withholding tax is possible. Provision is made for the estimated sums to be recovered and income grossed up accordingly.

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VATThe Pension Fund is exempt from VAT and is therefore able to recover such deductions. Investment management and administrative expenses are therefore recognised net of any recoverable VAT.

Acquisition CostsAcquisition costs of investments are included in the purchase price.

Additional Voluntary Contribution InvestmentsThe County Council has arrangements with the Standard Life Assurance Company and the Equitable Life Assurance Society to enable employees to make Additional Voluntary Contributions (AVCs) to enhance their pension benefits. AVCs are invested separately from the Pension Fund’s main assets and the assets purchased are specifically allocated to provide additional benefits for members making AVCs. As these contributions do not form part of the Pension Fund’s investments, the value of AVC investments are excluded from the Pension Fund’s Net Assets Statement in accordance with regulation 4(2)(c) of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 (SI 2009 No 3093).

Security LendingThe Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 permit the Pension Fund to lend up to 35% of its securities from its portfolio of stocks to third parties in return for collateral. The Pension Fund has set a limit of 20% of the total Fund value. The securities on loan are included in the Net Assets Statement to reflect the Pension Fund’s continuing economic interest of a proprietorial nature in these securities.

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Fund Account

Note 2008/09£’000

2009/10£’000

Dealings with members, employers and others directly involved in the SchemeContributions receivable 1

Members 31,956 32,935Employers 107,148 110,143

Transfers in from other schemes 2 10,326 11,428 149,430 154,506

Benefits payable 3Pensions (74,826) (81,120)Commutation of pensions and lump sum retirement benefits

(17,644) (20,633)

Lump sum death benefits (2,077) (2,187) (94,547) (103,940)

Payments to and on account of leaversRefunds of contributions (25) (24)State scheme premiums (8) (12)Transfers out to other schemes 4 (6,044) (16,537)

(6,077) (16,573)Administrative expenses and other payments

Administrative expenses 5 (1,793) (1,914)Interest (102) (51)Bad debts (0) (0)

(1,895) (1,965)

Net Additions (withdrawals) from 46,911 32,028dealing with Members

Returns on investmentsInvestment income 6 69,017 61,555Taxation (3,410) (3,133)Investment management expenses 7 (6,544) (7,997)Change in market value of investments 8 (532,683) 466,637

Net return on investments (473,620) 517,062

Net increase/(decrease) in the Fund (426,709) 549,091during the year

Opening net assets of the Scheme 2,066,275 1,639,566

Closing net assets of the Scheme 1,639,566 2,188,657

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Net Assets Statement

Note 2008/09£’000

2009/10£’000

Investment Assets 9Fixed interest securities

Public sector 124,835 134,511Other 115,321 192,418

EquitiesUK 407,893 620,423Overseas 562,026 835,592

Index linked securitiesPublic sector 66,904 74,009Other 5,643 8,251

Pooled investment vehiclesProperty 68,439 74,556Unit trusts 10,928 18,160Other managed funds 94,851 94,524

DerivativesFutures 10 54 39Forward foreign exchange contracts 10 2,213 3,063

Cash deposits 97,114 106,441

Other investment balances 33,226 32,172

Investment liabilities 9Derivative contracts

Forward foreign exchange contracts 10 (2,691) (3,800)

Other investment balances (30,858) (25,751) Total investment asset/liabilities 1,555,898 2,164,608

Current assets 11 86,393 27,692Current liabilities 12 (2,725) (3,644) Total current assets/liabilities 83,668 24,048

Net assets of the Scheme at 31 March 1,639,566 2,188,657

The accounts summarise the transactions and net assets of the Pension Fund. They do not take account of liabilities to pay pensions and other benefits in the future.

M Parsons, Chief Finance Officer

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30 September 2010

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NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

Notes to the Accounts

1. Contributions Receivable

2008/09 2009/10£’000 £’000

MembersNormal 31,179 32,194Additional 777 742

31,956 32,935

EmployersNormal 62,236 79,727Augmentation 455 623Deficit funding 44,457 29,793

107,148 110,143

Total 139,104 143,078

Members’ additional contributions represent contributions from members to purchase additional years of membership or pension in the Scheme.

Employers’ normal contributions represent the ongoing contributions paid into the Pension Fund by employers in accordance with the Rates and Adjustments Certificate, issued by the Pension Fund’s Actuary. These reflect the cost of benefits accrued by current members over the year.

Employers’ augmentation represents additional contributions from employers towards the cost of enhancing members’ benefits.

Employers’ deficit funding includes:

£23,419,782 past service adjustment which represents the additional contributions required from employers towards the deficit where an employer’s funding level is less than 100%, as per the Rates and Adjustments Certificate. The deficit recovery period varies depending on the individual circumstances of each employer. For statutory bodies, the Pension Fund normally targets the recovery of any deficit over a period not exceeding 20 years. For transferee Admission Bodies the deficit recovery period would be the shorter of the end of the employer’s contract or the expected future working lifetime of the remaining Scheme members. Further information can be found in the Pension Fund’s Funding Strategy Statement on page 72 and accessible from www.hertsdirect.org/pensions.

£1,122,813 paid by employers in excess of the minimum contribution levels required by the Actuary in the Rates and Adjustments Certificate.

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£5,250,347 towards early retirements representing the actuarial strain on the Pension Fund where a member retires early and is entitled to immediate access to their benefits.

Contributions received are further analysed by type of employer:

2008/09 2009/10£’000 £’000

Administering Authority 64,968 70,525Other Scheduled Bodies 62,794 61,175Admitted Bodies 11,342 11,378

Total 139,104 143,078

2. Transfers In From Other SchemesThe transfers in figure represent the payments received by the Pension Fund in relation to individual members’ transfers of benefits into the Pension Fund. No amounts were received during the year for group transfers from other schemes.

3. Benefits Payable

2008/09 2009/10£’000 £’000

Administering Authority 41,535 44,623Other scheduled bodies 46,843 51,413Admitted bodies 6,169 7,904

Total 94,547 103,940

4. Transfers Out to Other SchemesThe transfers out figure represents the payments made by the Pension Fund in relation to individual members’ transfers of benefits out of the Pension Fund. No amounts were paid during the year for group transfers to other schemes.

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5. Administrative ExpensesThe Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009, allow the Administering Authority to charge pension administration expenses direct to the Pension Fund. The expenses listed below include a charge made for the work carried out on the Pension Fund by Hertfordshire County Council’s Finance Service on pension administration and investment matters. Expenses incurred by the Pension Fund’s Investment Managers are listed in note 7.

2008/09 2009/10£’000 £’000

Administration and processing 1,665 1,736Actuarial fees 49 123Audit Fees

Statutory 50 43Other 2 2

Legal and other professional fees 27 10

Total 1,793 1,914

6. Investment Income

a) Analysis of Investment Income

2008/09 2009/10£’000 £’000

Income from fixed interest securitiesPublic Sector 6,010 4,732Other 6,791 10,345

Dividends from equitiesUK 24,380 22,277Overseas 19,402 15,346

Income from index linked securitiesPublic Sector 869 2,667

Income from pooled investment vehiclesProperty 4,587 4,212Unit trusts 70 0Other managed funds 467 443

Interest on cash deposits 6,045 779Other investment income

Securities lending 266 394Commission recapture 1 0Class action proceeds 108 280Underwriting commission 2 76Other 19 4

Total 69,017 61,555

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b) Securities LendingThe Pension Fund has an arrangement with its Custodian to lend securities from within its portfolio of stocks to third parties in return for collateral.

Collateralised lending generated income of £393,514 for 2009/10 (£265,638 for 2008/09). This is included within investment income in the Fund Account. At 31 March 2010, £55.8 million worth of stock (2.56% of the Pension Fund) was on loan, for which the Pension Fund was in receipt of collateral worth £59.3 million.

7. Investment Management ExpensesThe Pension Fund’s Investment Managers are remunerated on the basis of fees calculated as a percentage of total assets under management. Some Investment Managers also have a performance related fee, payable where performance exceeds the performance target, as set out in Appendix C to the Statement of Investment Principles on page 60.

The Pension Fund’s assets are held in custody by an independent custodian. The Custodian is responsible for the safekeeping of the Pension Fund’s financial assets, the settlement of transactions, income collection, tax reclamation and other administrative actions in relation to the Pension Fund’s investments.

The Pension Fund subscribes to the performance measurement service of The WM Company. An analysis of the Pension Fund’s performance is shown in the Investment Performance section on pages 65-66.

2008/09 2009/10£’000 £’000

Administration and management 6,016 7,487Refund of investment management fees 0 0Custody 496 480Performance measurement services 32 30

Total 6,544 7,997

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8. Change in Market Value of Investmentsa) Analysis of Change in Market Value of Investments

Valu

e at

31

/03/

09

Purc

hase

s at

cos

t an

d de

rivat

ivSa

le

proc

eeds

an

d de

rivat

ive

Cha

nge

in m

arke

t va

lue

Valu

e at

31

/03/

10

£’000 £’000 £’000 £’000 £’000

Fixed InterestPublic Sector 124,835 370,436 (357,654) (3,105) 134,511Other 115,321 94,945 (44,827) 26,979 192,419

EquitiesUK 407,893 353,851 (308,400) 167,078 620,423Overseas 562,026 849,385 (831,764) 255,944 835,592

Index linkedPublic Sector 66,903 24,195 (21,895) 4,806 74,009Other 5,643 4,737 (3,258) 1,128 8,251

Pooled vehiclesProperty 68,439 0 0 6,117 74,556Unit trusts 10,928 1,220 (2,080) 8,091 18,160Managed funds 94,851 9,847 (8,071) (2,103) 94,524

DerivativesFutures 54 436 (430) (21) 39Forward foreign exchange

(478) 42,723 (47,802) 4,820 (737)

Cash deposits 97,114 32,144 (19,719) (3,098) 106,441 Subtotal

1,553,530

1,783,920

(1,645,899)

466,637 2,158,187

Other investment balances

2,368 6,421

Total investment assets/liabilities

1,555,898

2,164,608

The change in market value of investments during the year comprises all increases and decreases in the market value of investments held at year end and profits and losses realised on the sale of investments during the year. Derivative receipts and payments represent the realised gains and losses on futures contracts and forward foreign exchange contracts during the year. The sale proceeds and derivative receipts for cash deposits represent the net movement in cash held by the Investment Managers during the year. The change in market value of cash results from gains and losses on foreign currency cash transactions.

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b) Transaction CostsTransaction costs are included in the cost of purchases and sale proceeds. Transaction costs include costs charged directly to the Pension Fund such as fees, commissions, stamp duty and other fees. Transaction costs incurred during the year amounted to £4.8 million (£5.5 million in 2008/09). In addition to these costs, indirect costs are incurred through the bid-offer spread on investments within pooled investment vehicles. The amount of indirect costs is not separately provided to the Pension Fund.

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9. Investment Analysisa) Analysis of Investments at Market Value

2008/09 2009/10£’000 £’000

Investment Assets:Fixed Interest Securities

UK Public Sector 63,040 86,854Overseas Public Sector 61,795 47,657UK other 83,286 154,398Overseas other 32,035 38,021

240,156 326,930Equities

UK quoted 407,893 620,305UK unquoted 0 117Overseas quoted 558,592 835,592Overseas unquoted 3,434 0

969,919 1,456,014Index linked securities

UK Public Sector 66,904 74,009UK other 3,245 2,748Overseas other 2,398 5,503

72,547 82,260Pooled investment vehicles

PropertyUK 68,439 74,556

Unit trustsUK 2,676 3,953Overseas 8,252 14,207

Managed fundsUK 9,702 13,958Overseas 85,149 80,565

174,218 187,239Derivatives

Futures 54 39Forward foreign exchange contracts 2,213 3,063

2,267 3,102

Cash deposits 97,114 106,411

Other investment balancesAmounts receivable from the sale of investments 21,855 19,104Investment income due 9,683 11,521UK and overseas recoverable tax due 1,688 1,548

33,226 32,172Investment Liabilities:Derivative contracts

Forward foreign exchange contracts (2,691) (3,800)

Other investment balancesAmounts payable for the purchase of investments

(29,132) (24,147)

Non recoverable tax payable (1,726) (1,604)

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(30,858) (25,751)

Total 1,555,898 2,164,608

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b) CommitmentsAs at 31 March 2010, the Pension Fund had a commitment of a further £68.2 million to private equity limited partnerships, based on exchange rates at the balance sheet date (£80.5 million at 31 March 2009).

c) Analysis by Investment ManagerThe value of investments held by each Investment Manager together with investments in private equity limited partnerships on 31 March were as follows:

31 March 2009 31 March 2010Investment Manager Market

value % Market value %

£’000 £’000AllianceBernstein Ltd. 230,492 14.8% 338,940 15.7%Baillie Gifford & Co. 168,590 10.8% 258,142 11.9%BlackRock Investment Management (UK) Ltd.

315,329 20.3% 425,246 19.6%

Jupiter Asset Management Ltd.

182,022 11.7% 273,824 12.7%

In House Property Unit Trust Fund

109,423 7.0% 119,425 5.5%

Harbour Vest 47,870 3.1% 52,012 2.4%Permira 4,996 0.3% 5,404 0.2%Standard Life Investments 40,489 2.6% 29,832 1.4%TTP Venture Managers Ltd. 1,613 0.1% 1,598 0.1%Deutsche Asset Management (UK) Ltd.

145,086 9.3% 220,458 10.2%

JPMorgan Asset Management (UK) Ltd.

152,428 9.8% 226,559 10.5%

RCM (UK) Ltd. 156,128 10.1% 211,739 9.8%Residual funds from previous

portfolios 1,432 0 .1% 1,430 0 .1% Subtotal: Funds externally

managed 1,555,898 100% 2,164,608 100%

Funds held at Hertfordshire County Council 83,676 24,048

Total 1,639,574 2,188,657

The market values in the table above include the value of investments, cash and net current assets held by each Investment Manager at 31 March. The funds held by Hertfordshire County Council include net current assets and cash required to manage the payment of benefits and collection of contributions.

Residual funds from previous portfolios represent residual cash and investment income still due to the portfolios previously run by the outgoing Investment Managers following the restructure of the Pension Fund during the year.

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d) Encumbrance of AssetsThe Custodian has a lien over the Pension Fund’s assets in order to recover any outstanding debts. This is held for the protection of the Custodian and has never been invoked.

10. Derivatives

a) FuturesFutures contracts are exchange traded. They are standardised contracts, traded on a futures exchange. Futures are held for the purpose of equitising cash; taking a given amount of cash, turning it into an equity position whilst still retaining cash like liquidity.

Futures are disclosed in the accounts at fair value which is the exchange price for closing out of the contract at the balance sheet date. This represents the unrealised profit or loss on the contract. The notional value represents the Pension Fund’s economic exposure which is the value of the securities purchased under the futures contract and therefore the value subject to market movements.

Contract Duration

2008/09 2009/10Notional

value Fair value Notional value Fair value

£’000 £’000 £’000 £’000FTSE 100 1-3

months0 0 281 2

S&P 500 e mini

1-3 months

555 54 1,421 17

DJ EURO STOXX 50

1-3 months

0 0 1,297 9

TOPIX INDEX FUTURE (TSE)

1-3 months

0 0 276 11

Total 555 54 3,274 39

b) Forward Foreign Exchange ContractsForward foreign exchange contracts are over the counter contracts with non-exchange counterparties. The counterparties at 31 March 2009 and 31 March 2010 were UK and overseas investment banks. The contracts in the table below represent various forward contracts involving ten foreign currencies (nine at 31 March 2009). Forward foreign exchange contracts are used to hedge against foreign currency movements.

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Forward foreign exchange contracts are disclosed in the accounts at fair value which is the gain or loss that would arise from closing out the contract at the balance sheet date by entering into an equal and opposite contract at that date. The notional value of the contract reflects the current value of the currency purchased under the contract.

Duration

2008/09 2009/10Notional Fair value Notional Fair value

value Asset Liability value Asset Liability£’000 £’000 £’000 £’000 £’000 £’000

Within 1 month 2,777 0 (131) 248,255 2,966 (3,665)1-3 months 200,804 2,213 (2,560) 30,062 97 (134)

Total 203,581 2,213 (2,691) 278,318 3,063 (3,800)

11. Current Assets

2008/09 2009/10£’000 £’000

Contributions due from employers 6,454 11,643Cash with Hertfordshire County Council 79,007 15,201VAT due from HMRC 729 531Securities lending/commission recapture

20 13

Other debtors and prepayments 183 304

Total 86,393 27,692

12. Current Liabilities

2008/09 2009/10£’000 £’000

Tax payable to HMRC 774 788Investment management fees 1,019 1,743Other creditors 135 295Unpaid benefits 797 818

Total 2,725 3,644

13. Liabilities After Year EndThe Pension Fund’s financial statements do not take account of the liabilities to pay pensions and other benefits after 31 March 2010. These liabilities are valued as part of the triennial valuation process described on pages 23-24.

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The last actuarial valuation of the Pension Fund was carried out as at 31 March 2007 to determine contribution rates for the financial years 2008/09 to 2010/11. The market value of the Pension Fund’s assets at the valuation date was £2,152.2m and represented 84.7% of the Pension Fund’s accrued liabilities, allowing for future pay increases.

In accordance with the Scheme regulations, employer contribution rates were set to meet 100% of the Pension Fund’s existing and prospective liabilities as detailed in the Funding Strategy Statement on page 72.

The contribution rates were calculated using the projected unit actuarial method (or the attained age method for employers closed to new entrants) and the main actuarial assumptions were as follows:

Rate of return on investments 5.9%Rate of general pay increases 4.7%Rate of price inflation 3.2%

14. Early Retirement FundingThe Local Government Pension Scheme (Administration) Regulations 2008 (as amended) give the Administering Authority the right to request employers to make additional payments to the Pension Fund towards the cost of early retirements. The expected income from this in future years is, as follows:

Deferred income related to early retirement costs

Year £’0002010/11 1,7152011/12 1,2242012/13 8882013/14 6542014/15 204

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15. Additional Voluntary Contributions (AVCs)Scheme members have the option to make AVCs to enhance their pension benefits. These contributions are invested separately from the Pension Fund, with either the Standard Life Assurance Company or the Equitable Life Assurance Society.

2008

/09

Stan

dard

Life

2008

/09

Equi

tabl

e Li

fe

2008

/09

Tota

l AVC

s

2009

/10

Stan

dard

Life

2009

/10

Equi

tabl

e Li

fe

2009

/10

Tota

l AVC

s

£’000 £’000 £’000 £’000 £’000 £’000Value at 1 April 5,104 2,833 7,937 4,282 2,469 6,751

IncomeContributions

received 452 18 470 426 15 441Transfer values

received 33 0 33 0 0 0 485 18 503 426 15 441

ExpenditureRetirement benefits (472) (339) (811) (466) (304) (770)Transfer values paid (40) (1) (40) (5) 0 (5)Lump Sum Death Benefit 0 0 0 (10) 0 (10)Refunds 0 (6) (6) 0 0 0

(512) (346) (857) (481) (304) (786)

Change in market value (795) (36) (831) 968 214 1,182

Value at 31 March 4,282 2,469 6,751 5,194 2,394 7,589

16. Related parties

a) Hertfordshire County CouncilThe majority of the Pension Fund’s cash is invested with Investment Managers. However, an amount is invested with Hertfordshire County Council in order to manage the payment of pensions and collection of contributions. Hertfordshire County Council paid the Pension Fund £472,036 in interest during 2009/10 (£2,205,757 in 2008/09).

The amount of cash held by Hertfordshire County Council on behalf of the Pension Fund at 31 March 2010 was £15.2 million.

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b) Investment CommitteeFive members of the Hertfordshire County Council Investment Committee were councillor members of the Hertfordshire Local Government Pension Scheme during 2009/10. One member of the Investment Committee was in receipt of pension benefits from the Scheme during the year.

17. Statement of Investment PrinciplesRegulation 12.1 of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 requires the Pension Fund to publish a Statement of Investment Principles. This is set out on pages 52-60 of the Pension Fund Annual Report.

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LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT PRINCIPLES

IntroductionThe County Council is responsible for the administration of the Pension Fund. The County Council has a statutory duty to ensure that any funds, not immediately required to pay pension benefits, are suitably invested.

As required by statute, the County Council has approved a Statement of Investment Principles which is applied to the management of the Pension Fund investments.

In accordance with government guidelines, the extent to which the Pension Fund complies with the statutory guidance “Investment Decision making and disclosure in the Local Government Pension Scheme: A Guide to the Application of the Myners Principles” is set out at Appendix A to this Statement.

Who Makes the Investment Decisions?The Investment Committee of the County Council, advised by the Chief Finance Officer, is responsible for setting the overall investment strategy, monitoring investment performance and then implementing relevant policies. The Investment Committee consists of eight County Council members, three (non-voting) District Council members elected by the Hertfordshire Local Government Association and a non-voting UNISON representative.

Day to day operational decisions are delegated to the County Council’s Chief Finance Officer.

The Pension Fund’s governance arrangements are set out in full in the Governance Policy and Compliance Statement on the Pension Fund website www.hertsdirect.org/pensions

From 1st April 2010 all investments, will be managed by external investment management organisations (Investment Managers).

What are the Investment Objectives of the Pension Fund?1. To comply with the Local Government Pension Scheme (Management and

Investment of Funds) Regulations 2009, specifically to ensure that all:

funds are suitably invested; investments are diversified; relevant investment limits are not exceeded; investments and investment arrangements are regularly monitored and

reviewed.

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2. To ensure that the Pension Fund has sufficient assets to pay Scheme benefits.

3. To achieve a long term rate of return on the invested funds (both capital gains and income) which assists in controlling the level of employers’ contributions to the Pension Fund and also the cost of the pensions to the local taxpayers where appropriate by:

i) as a minimum, matching the Actuary’s rate of return assumptions made when assessing the Pension Fund’s level of funding; and

ii) exceeding the Pension Fund benchmark by 1% measured over three year rolling periods.

Link to Funding Strategy StatementThis Statement of Investment Principles is linked to the Funding Strategy Statement, which sets out the Pension Fund’s strategy for meeting employers’ pension liabilities. The aim of the funding strategy is to ensure the long-term solvency of the Pension Fund while not unnecessarily restraining the investment strategy set out in this document.

The two strategies set out the common objective of the Pension Fund to maximise returns on investments to control the level of employers’ contributions.

The Funding Strategy Statement can be found on the Pension Fund’s website www.hertsdirect.org/pensions.

Achieving the Investment ObjectivesThe County Council, having taken appropriate professional advice, has made the arrangements set out below to reduce the risk that one or more of the investment objectives for the Pension Fund are not achieved over the long term.

1. Suitable InvestmentsThe Investment Committee considers that the following types of investments, within specific limits, are suitable for the purposes of a pension fund:

cash, bank deposits and other short term money market investments; quoted fixed interest securities, individual securities and pooled investment

vehicles; quoted equity investments, individual securities and pooled investment

vehicles; property unit trusts; derivative instruments, but not to be used for speculative purposes; unquoted equity investments and private equity pooled vehicles.

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2. Fund Benchmark and Asset AllocationThe Pension Fund has adopted a specific benchmark which has been approved by the Investment Committee, following appropriate professional advice from the Investment Consultant, Investment Managers and the performance measurement consultant. The composition of the Pension Fund benchmark, implemented in May 2008, is set out at Appendix B to this Statement.

The weightings of the various asset classes within the benchmark form the basis for asset allocation within the Pension Fund.

The asset allocation set out in the benchmark is designed to spread the risk and minimise the impact of poor performance in a particular asset class. It seeks to achieve a spread of investments across both the main asset classes (quoted equities, bonds, private equity and property) and geographic regions within each class.

3. Management of InvestmentsThe main choices when selecting a fund management style are:

Active or passive – making independent decisions when buying or selling investments (“active”) or buying stocks to replicate a specific index (“passive”).

Balanced or specialist – investing across a broad range of asset classes (“balanced”) or in a narrow, specific asset class (“specialist”).

The Pension Fund currently uses “active, specialist” Investment Managers only on the advice of the Investment Consultant to increase the potential return of the Pension Fund.

The number of Investment Managers and the share of the Pension Fund by type as at 31 March 2009 are shown in the table below, along with comparative figures for March 2008.

Share of total Pension Fund at31 March

2009

Number of Investment Managers

31 March 2008

Number of Investment Managers

External, active, specialist 86.9% 7 89.1% 6

Private equity 6.1% 4 3.8% 4In-house, active, specialist (property unit trusts) 7.0% 7.1%

7.1%

The percentages in the table above are calculated using the value of investments, cash and net current assets held by each Investment Manager at 31 March.

161

Full details of the Investment Managers, their mandates and fee basis are shown at Appendix C to this Statement.

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All the Investment Managers need the approval of the Chief Finance Officer to acquire shares in any securities that are not listed on a recognised stock exchange.

4. Responsible Ownership including Social, Environmental and Ethical ConsiderationsThe Investment Managers are expected to apply their professional expertise to maintain suitably diversified portfolios for a pension fund. When making investment decisions the Investment Managers are expected to take account of what they reasonably believe are all relevant considerations.

The Pension Fund routinely votes on all matters raised by the largest 350 listed UK companies where it owns shares. The Pension Fund’s voting policy is to vote in accordance with the current principles of corporate governance best practice, as advised by the RREV (Research, Recommendations and Electronic Voting) Service, except when the advice of the Investment Managers indicates such action would not be in the best financial interests of the Pension Fund.

5. Investment RestrictionsThe following investment restrictions apply to the funds under management:

i) all limits determined under the Local Government Pension Scheme Investment and Management of Funds) Regulations 2009; and

ii) additional limits which have been determined by the County Council:

Private Equity - Total investments are not to exceed a maximum of 7.5% of the value of the Pension Fund. In general the Committee expects private equity to be no more than 5%. The 2.5% headroom allows for fluctuations in the value of other assets.

Options, futures and contracts for differences

- A maximum of 25% of UK equity portfolio. Only to be used to protect against possible adverse fluctuations in the values of other investments or cash in the portfolio.

Individual equity holdings

- The total holding in a single company is not to exceed 5% of the issued share capital.

There are no other restrictions placed on Investment Managers’ investment decision making. Any breaches of the restrictions above are reported to the next available meeting of the Investment Committee.

163

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6. Investment Performance ManagementThe investment performance of Investments Managers is measured by an independent organisation, the WM Company, which reports quarterly to the Chief Finance Officer and at least annually to the Investment Committee.

7. Monitoring of Investment ManagersThe Investment Committee meets quarterly to consider reports from each Investment Manager. Each Investment Manager makes a presentation in person to the Investment Committee on an annual basis and to the Chief Finance Officer (or his/her representative) on a more regular basis.

8. Actuarial ValuationThe Pension Fund is subject to triennial valuations by an independent actuary. Employers’ contributions are determined by the Actuary to ensure that in the long term the Pension Fund’s assets will match its liabilities. The framework for this is set out in the Funding Strategy Statement.

9. Stock LendingThe Pension Fund operates a stock lending programme through its custodian bank. The Fund limits the lending to 20% of the total of its portfolios and ensures that the collateral is in cash or bonds and is valued on a daily basis to be on average 105% of the value of the stock which has been lent.

10. Custody ArrangementsThe Pension Fund’s assets are held in custody by an independent custodian, where reasonable controls have been certified by an appropriate auditor.

This Statement of Investment Principles was presented for approval by the Investment Committee of Hertfordshire County Council on 10 March 2010 and is published on the Pension Fund website. Copies are available on request for participating Scheme employers, Scheme members, pensioners and deferred beneficiaries. The Statement is reviewed on an annual basis by the Investment Committee.

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Appendix A

Compliance with Myners Principles

Principle Current Position1. Effective Decision MakingAdministering authorities should ensure that:

decisions are taken by persons or organisations with the skills, knowledge, advice and resources necessary to make them effectively and monitor their implementation;

and

those persons or organisations have sufficient expertise to be able to evaluate and challenge the advice they receive, and manage conflicts of interest.

Day to day operational decisions are delegated to the County Council’s Chief Finance Officer, who, with relevant members of his staff, regularly attends seminars and briefing sessions to maintain a high level of skills and knowledge in investment matters.

Members of the Investment Committee act in the role of trustees for the Pension Fund. They attend training sessions organised by the County Council.

Both members and officers involved with making investment decisions take advice from appropriately qualified professionals where appropriate.

Development Areas Use the CIPFA Knowledge and

Skills framework to assess members and officers to develop a training plan.

Develop a medium term business plan for the Pension Fund.

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Principle Current Position2. Clear ObjectivesAn overall investment objective(s) should be set out for the fund that takes account of the scheme’s liabilities, the potential impact on local tax payers, the strength of the covenant for non-local authority employers, and the attitude to risk of both the administering authority and scheme employers, and these should be clearly communicated to advisors and investment managers.

The Pension Fund’s main investment objective, as set out in this Statement of Investment Principles, acknowledges the need to meet the Pensions Fund’s liabilities and states that the aim is to ensure the impact on local tax payers is minimised.

The Statement of Investment Principles is circulated to the Pension Fund’s advisors and investment managers and is published on the Pension Fund’s website.

Development Area Clearly define in the Statement of

Investment Principles the Pension Fund’s attitude to risk and how it feeds into the objectives.

3. Risk and LiabilitiesIn setting and reviewing their investment strategy, administering authorities should take account of the form and structure of liabilities. These include the implications for local tax payers, the strength of the covenant for participating employers, the risk of their default and longevity risk.

The Pension Fund’s main investment objective, as set out in this Statement of Investment Principles, acknowledges the need to meet the Pension Fund’s liabilities and states that the aim is to ensure the impact on local tax payers is minimised.

Development Areas Consider the form and structure

of liabilities as well as non investment risks more explicitly in the next review of strategy.

Develop a pension fund specific risk management framework.

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Principle Current Position4. Performance AssessmentArrangements should be in place for the formal measurement of performance of the investments, investment managers and advisors.Administering authorities should also periodically make a formal assessment of their own effectiveness as a decision making body and report on this to scheme members.

The Investment Committee formally measures performance of investment managers and investments on a quarterly basis.

Development Areas Develop a framework to formally

measure the performance of the Pension Fund’s advisors.

Develop a framework to enable the Investment Committee to make an assessment of their effectiveness.

5. Responsible ownershipAdministering authorities should:

adopt or ensure their investment managers adopt, the Institutional Shareholders’ Committee Statement of Principles on the responsibilities of shareholders and agents

include a statement of their policy on responsible ownership in the statement of investment principles

report periodically to scheme members on the discharge of such responsibilities.

The Pension Fund’s investment managers have adopted the Institutional Shareholders’ Committee Statement of Principles.

A statement regarding responsible ownership is included in the Statement of Investment Principles, which is part of the Annual Report published on the Pension Fund website for all scheme members to access.

6.Transparency and reporting Administering authorities should:

act in a transparent manner, communicating with stakeholders on issues relating to their management of investment, its governance and risks, including performance against stated objectives

provide regular communication to scheme members in the form they consider most appropriate.

The Pension Fund communicates with its stakeholders through the publication of the following documents, in addition to this one, on the Pension Fund’s website Governance Statement Annual report Communication Statement

In addition a meeting is held for all employers on an annual basis.

Communication with scheme members is through the website and through the Pension Fund’s employers.

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Appendix B

Composition of Total Benchmark30% UK Equities FTSE All Share (including Private Equity)

45% Global Equities MSCI AC World Index

4% UK Gilts FT-A Conventional Gilts All Stocks

4% Corporate Bonds Merrill Lynch Sterling non-gilts, all stocks index

4% UK Index Linked FT-A Over 5 Year Index Linked Gilt

4% Overseas Lehman Global Aggregates ex UK

1% Cash GBP 7 Day LIBID

8% UK Property IPD All Properties Index

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Appendix C

Pension Fund Investment Managersas at 31 March 2009

Investment Manager

Value of Portfolio

at 31/03/200

9

Type of Mandate

Performance Target

(% above benchmark)

Fee Type

Jupiter Asset Management Ltd. 182.0

Active, Specialist, UK

Equities2% Performance

Related

Baillie Gifford & Co. 168.6Active,

Specialist, UK Equities

1.25% Ad valorem

AllianceBernstein Ltd. 230.5Active,

Specialist, Global Equities

2% Performance Related

Deutsche Asset Management (UK) Ltd 145.1

Active, Specialist, Global

Equities4% Ad valorem

JPMorgan Asset Management (UK) Ltd 152.4

Active, Specialist, Global

Equities4% Ad valorem

RCM (UK) Ltd 156.1Active,

Specialist, Global Equities

3% Ad valorem

BlackRock Investment Management (UK) Ltd. 315.3

Active, Specialist,

Bonds0.5% Ad valorem

Permira 5.0Active,

Specialist, Private Equity

Not applicable Performance Related

Harbour Vest 47.9Active,

Specialist,Private Equity

Not applicable Performance Related

Standard Life Investments 40.5

Active, Specialist,

Private EquityNot applicable Performance

Related

TTP Ventures 1.6 Active, Specialist Not applicable Performance

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Private Equity Related

In-House Property Unit Trust Fund 109.4 Unit Trusts Not applicable Not

applicable

Fee typesAd valorem - based only on the value of the portfolioPerformance Related - additional fees payable where performance exceeds

the target

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FIREFIGHTERS’ PENSION FUND ACCOUNTS

FUND ACCOUNT FOR YEAR ENDED 31 MARCH 2010

2009 2010Note £000 £000

Contributions receivableFrom employer- contributions in relation to pensionable pay 3 (3,631) (3,573)- ill health early retirements 3 (38) (62)From members- firefighters’ contributions 3 (1,935) (1,926)Total - Contributions receivable (5,604) (5,561)

Transfers in 4- from other authorities (71) (34)Total - Transfers in (71) (34)

Benefits payable- pensions 6,402 6,966- commutations and lump sum retirement benefits 2,513 3,138- lump sum death benefits 0 0Total - Benefits payable 8,915 10,104

Payments to and on account of leaversrefunds of contributions 0 1- transfers out to other authorities 4 4 35Total - Payments to and on account of leavers 4 36

Deficit for the year before top-up grant receivable from central government – Communities and Local Government 3,244 4,545

Top-up grant payable by central government – Communities and Local Government 5 (3,244) (4,545)

0 0

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FIREFIGHTERS’ PENSION FUND ACCOUNTS

NET ASSETS STATEMENT AS AT 31 MARCH 20102009 2010£000 £000

Current assets Top-up grant receivable from central government – Communities and Local Government 2,028 2,440

Current liabilitiesAmount owing to the General Fund (1,691) (2,185)Unpaid pension benefits (337) 0Top-up grant payable to central government 0) (255)

(2,028) (2,440)

Net Assets 0 0

M Parsons

Chief Finance Officer

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NOTES TO THE FIREFIGHTERS’ PENSION FUND ACCOUNTS

1. Summary of the Firefighters’ Pension Fund Operations

The firefighters’ pension fund was established under the Firefighters’ Pension Scheme (Amendment) Order 2006.

Until the end of March 2006 the council was responsible for paying the pensions of its former firefighting employees on a ‘pay-as-you-go’ basis. This meant that employees’ contributions were paid into the council’s accounts from which pensions awards were made. The council received funding from Central Government as part of general Formula Grant to support payments of pensions.

From 1 April 2006 the council will continue through its scheme administrator, Serco Solutions Ltd, to administer and discharge its responsibility for paying the pensions of retired officers, their survivors and others who are eligible for benefits under the new and existing pension schemes.

Regular firefighters employed before 6 April 2006 were eligible for membership of the 1992 Firefighters' Pension Scheme. The scheme is now closed. A new 2006 Firefighters’ Pension Scheme has been introduced for regular and retained firefighters employed since 6 April 2006.

The new financial arrangements are for both the 1992 and 2006 Firefighters’ Pension Schemes. The new financial arrangements have no impact on the terms and conditions of either scheme.

The firefighters’ pension fund is an unfunded defined benefits scheme meaning that there are no investment assets available to meet pension liabilities. Employee contributions and a new employer's contribution are paid into the pension fund from which pension payments are made. The fund is topped up by Government grant if the contributions are insufficient to meet the cost of pension payments. Any surplus in the fund is recouped by Government. The underlying principle is that employer and employee contributions together will meet the full costs of pension liabilities being accrued in respect of currently serving employees while central Government will meet the costs of retirement pensions in payment, net of employee and the new employer contributions.

The financing of pension payments is taken out of the Formula Grant from April 2006 which instead takes into account the funding needed to support the cost of the employer contributions and lump sum payments, in respect of ill-health retirements.

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2. Accounting Policies

The accounts have been prepared in accordance with the 2009 Code of Practice on Local Authority Accounting in the United Kingdom, a Statement of Recommended Practice issued by the Chartered Institute of Public Finance and Accountancy.

The accounts summarise the transactions and net assets of the Firefighters’ Pension Fund. They do not, however, take account of liabilities to pay pensions and other benefits after 31 March 2010.

Transfer values have been treated on a cash basis. All other amounts have been prepared on an accruals basis.

3. Contributions Receivable

Employer and Employee Contributions

Employees’ and employer’s contribution levels are set nationally by central government and are subject to triennial revaluation by the Government Actuary’s Department.

The purpose of the employee and employer contribution rates under the new arrangements is to meet the accruing pension liabilities of currently serving firefighters. This means the council meet all the costs of employing firefighters, including the cost of future pension liabilities, at the time of employing them.

Separate contribution rates, a percentage of pensionable pay as shown below, apply to the 1992 Firefighters’ Pension Scheme and the new 2006 Firefighters’ Pension Scheme.

Employer Employee

% %

1992 Firefighters’ Pension Scheme 21.3 11.0

2006 Firefighters’ Pension Scheme 11.0 8.5

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3. Contributions Receivable (continued)

Contributions received by the Fund are analysed below.

Employer Employee

2009 2010 2009 2010

£000 £000 £000 £000

1992 Firefighters’ Pension Scheme 3,408 3,275 1,763 1,695

2006 Firefighters’ Pension Scheme 223 298 172 231

3,631 3,573 1,935 1,926

Early Retirements

Early retirements due to ill-health would, with effect from 1 April 2006, require the council to make a lump sum payment into the pension fund of 4× average pensionable pay in respect of all higher tier ill-health retirements and 2× average pensionable pay in respect of all lower tier ill-health retirements. These ill-health retirement charges could reintroduce some in-year financial volatility, as the number of firefighters who retire on grounds of ill-health will vary from year to year. To deal with this volatility authorities are required to spread the charges credited to the pension fund equally over a period of three years. The initial tranche of the payment is to be made at the time of retirement. Later tranches are to be made, without the addition of interest, on 1 April of each financial year until all the payments have been made.

Other approved early retirements have a real cost, which must be covered by employers. These costs will be actuarially calculated for each individual, using a table of factors, and the council will be required to make a payment into the pension fund.

4. Transfers to or from other schemes

Where a firefighter transfers to or from another Fire and Rescue Authority within England there is no need for a cash transfer. A firefighter, who transfers out of the Firefighters’ Pension Scheme to another pension scheme, or to the Firefighters’ Pension Scheme in Scotland, Wales or Northern Ireland, is entitled to ask for a Cash Equivalent Transfer Value to be paid across, equivalent to the value of their pension rights on leaving the Firefighters’ Pension Scheme. This would be paid from the Firefighters’ Pension Fund. Similarly an inward Transfer Value should be paid into the fund.

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5. Top-up Grant

From 1 April 2006 where employer and employee contributions paid into the Firefighters’ Pension Fund are not sufficient to meet pension payments for that year, the deficit will be met by a Central Government top-up grant paid by the Department for Communities and Local Government. Any surplus in the fund is paid back to Central Government as the party that brings the account into balance.

6. Unpaid Pension Benefits

There is no unpaid Pension Beneifts in 2009/10 it was a one off adjustment in 2008/09.Unpaid Pension Benefits, there were no such payments in 2009/10 it was a one off adjustment made in 2008/09.

7. Liabilities after year end

The Fund’s financial statements do not take account of the liabilities to pay pensions and other benefits after 31 March 2010.

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INDEPENDENT AUDITOR’S REPORT TO HERTFORDSHIRE COUNTY COUNCIL

The council’s Statement of Accounts, Local Government Pension Fund Accounts and the Firefighters’ Pension Fund Account for the year ended 31 March 2010 are subject to audit by the District Auditor.

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GLOSSARY OF TERMS USED

The glossary’s definitions are intended to provide the reader with a clear and concise explanation of the technical terms used in this report.

Accounting PoliciesThose principles, bases, conventions, rules and practices applied by an entity that specify how the effects of transactions and other events are to be reflected in its financial statements.

Accrual AccountingThe inclusion of income and expenditure within the accounts for the financial year in which they are earned or incurred, not when the money is received or paid.

Actuarial Gains and lossesFor defined benefit pension schemes, the changes in actuarial deficits or surpluses that arise because: events have not coincided with the actuarial assumptions made for the last

valuation (experience gains and losses); or the actuarial assumptions have changed.

Agency ServicesServices that are performed by or for another Authority or Public Body, where the principal, the authority responsible for the service, reimburses the agent, the authority carrying out the work, for the cost of the work carried out.

Amortised Cost Using the Effective Interest Rate MethodThe amortised cost using the effective interest rate method applies to both financial assets and liabilities carried at amortised cost. It is a method of determining, from the expected cash flows, the balance sheet carrying amount of such assets and liabilities and the periodic charges or credits to the Income and Expenditure Account of a financial instrument.

AssetAn item that has value owned by the council. Examples would be land, buildings and stocks.

Balance SheetThis represents a summary of all the assets and liabilities of the council, bringing together all the accounts of the council except the Pension Fund and various Trust Funds whose assets are not at the disposal of the council.

Best Value Accounting Code of PracticeThe code that establishes ‘proper practices’ with regard to consistent financial reporting for services.

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Billing AuthorityThe local authority responsible for collecting the council tax from residential properties in their area. In Hertfordshire this is the responsibility of the borough and district councils.

BudgetA statement of the council’s policy expressed in financial terms. This includes both revenue and capital expenditure.

Capital Adjustment AccountThe opening balance on this account represents the combined total of the Fixed Asset Restatement Account and the Capital Financing Account which were replaced at 1 April 2007. From 2007/08 the movements on the Capital Adjustment Account reflects financing of capital expenditure from revenue and capital resources together with the reversal of amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the Movement on the General Fund Balance for the year.

Capital Expenditure Expenditure on the acquisition of a fixed asset or expenditure which adds to and not merely maintains the value of an existing fixed asset.

Capital Financing ReserveThe amount of debt outstanding relating to capital expenditure. The minimum Revenue Provision in relation to this debt is calculated with reference to estimated life of the asset for which borrowing is undertaken at the end of the preceding financial year.

Capital ReceiptsThe proceeds from the sale of fixed assets such as land and buildings. Capital receipts can be used to repay outstanding debt on fixed assets or finance capital expenditure within rules set down by government. Capital receipts however cannot be used to finance revenue expenditure.

Capital ReserveA reserve that is available to be applied in financing future capital expenditure.

Carry-forwardsThese are underspends at the year-end which Members and officers, under delegated powers, have agreed to carry forward to the next year to support that year’s expenditure plans.

Central Support ServicesServices organised on a corporate basis that support the delivery of services to the public.

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Collection FundA fund administered by each billing authority. Council tax monies are paid into the fund whilst part of the net revenue expenditure of the council is met from the Collection Fund.

ConsistencyThe principle that the accounting treatment of like items within an accounting period and from one period to the next is the same.

Constructive ObligationAn obligation that derives from an authority’s actions where by an established pattern of past practice, published policies or a sufficiently specific current statement, the authority has indicated to other parties that it will accept certain responsibilities, and as a result, the authority has created a valid expectation on the part of those other parties that it will discharge those responsibilities.

Contingent LiabilityA potential liability at the balance sheet date, the outcome of which is uncertain, as it is dependent on a future event.

Corporate and Democratic CoreComprises all activities which local authorities engage in specifically because they are elected, multi-purpose authorities. The costs of these activities are thus over and above those that would be incurred by a series of independent, single purpose, nominated bodies managing the same services. There is therefore no logical basis for apportioning these costs to services.

Council TaxA property based tax that is administered by district, borough and unitary councils.

CreditorsAmounts owed by the council at the balance sheet date for goods and services supplied. This will include receipts in advance that have not been applied at the balance sheet date.

Current AssetAn asset that is realisable or disposable within one year.

Current LiabilityAmounts that are due to be settled within one year.

Current Service Cost (Pensions)The increase in the present value of a defined benefit scheme’s liability expected to arise from employee service in the current period.

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CurtailmentFor a defined benefit scheme, an event that reduces the expected years of future service of present employees or reduces for a number of employees the accrual of defined benefits for some or all of their future service. Curtailments include: termination of employee’s services earlier than expected; and termination of, or amendment to the terms of, a defined benefit scheme so that

some or all future service by current employees will no longer qualify for benefits or will qualify only for reduced benefits.

DebtorsAmounts due to the council at the balance sheet date.

Deferred CreditsCapital income potentially due to be received in future periods.

Deferred Grants and ContributionsAmounts received or receivable which have been used to finance capital expenditure. In accordance with capital accounting regulations these amounts will be written off over the same period as the assets to which they relate.

Defined Benefit SchemeA pension or other retirement benefit scheme other than a defined contribution scheme. Usually, the scheme rules define the benefits independently of the contributions payable, and the benefits are not directly related to the investments of the scheme. The scheme may be funded or un-funded (including notionally funded).

Defined Contribution SchemeA pension or other retirement benefit scheme into which an employer pays regular contributions fixed as an amount or as a percentage of pay and will have no legal or constructive obligation to pay further contributions if the scheme does not have sufficient assets to pay all employee benefits relating to employee service in the current or prior periods.

Depreciated Replacement CostThe method employed in valuing land and buildings where a market value basis is not readily available.

DepreciationThe measure of the cost or revalued amount of the benefits of the fixed asset that have been consumed during the period. Consumption includes the wearing out, using up or other reduction in the useful life of a fixed asset whether arising from use, effluxion of time or obsolescence through either changes in technology or demand for the goods and services produced by the asset.

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Discretionary BenefitsRetirement benefits which the employer has no legal, contractual or constructive obligation to award and are awarded under the authority’s discretionary powers such as The Local Government (Discretionary Payments) Regulations 2006.

Doubtful DebtsA provision made by the council based on age and particular circumstances relating to amounts owed to the council.

EmolumentsAmounts paid to employees, including expenses or non-monetary benefits that are taxable.

Estimation TechniquesThe methods adopted to arrive at estimated monetary amounts, corresponding to the measurement bases selected, for assets, liabilities, gains, losses and changes to reserves.

Exceptional ItemsMaterial items which derive from events or transactions that fall within the ordinary activities of the authority and which need to be disclosed separately by virtue of their size or incidence in order to give fair presentation of the accounts.

Expected Rate of Return on Pension Fund AssetsFor a funded defined benefit scheme, the average rate of return, including both income and changes in fair value but net of scheme expenses, expected over the remaining life of the related obligation on the actual assets held by the scheme.

Extraordinary ItemsMaterial abnormal items which derive from events or transactions that fall outside the ordinary activities of the authority and which are not expected to recur.

Fair ValueThe fair value of an asset is the price at which it could be exchanged in an arm’s length transaction less, where applicable, any grants receivable towards the purchase or use of the asset.

Fees and ChargesIncome raised by charging users of services for the facilities. For example, the supply of school meals and home helps.

Finance LeaseArrangements whereby the lessee is treated as owner of the leased asset and is required to include such assets within fixed assets on the balance sheet.

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Financial Reporting StandardA statement of accounting practice issued by the Accounting Standards Board.

Formula GrantCentral Government provides funding to local authorities through a general grant known as Formula Grant, made up of Revenue Support Grant and Re-distributed Business Rates, in support of its general revenue expenditure.

Foundation SchoolA school that receives funding from the council but owns its land and buildings.

General Fund BalanceThe excess to date of income over expenditure in the Income and Expenditure Account.

Going ConcernThe concept that the authority will remain in operational existence for the foreseeable future. Income and expenditure accounts and the balance sheet are produced on the basis that there is no intention to curtail significantly the scale of operations.

Government GrantsAssistance by government and inter-government agencies and similar bodies. When applied, revenue grants are credited to the appropriate service revenue account whilst capital grants are credited to the Deferred Grants and Contributions Account.

Historical CostCapital expenditure originally incurred.

ImpairmentA reduction in the value of a fixed asset below its carrying amount on the balance sheet. Examples would include loss in value due to physical damage or decline in market value due to a general fall in prices.

Infrastructure AssetsExpenditure on works of construction or improvement but which have no tangible value, such as construction of, or improvement to highways.

Interest Cost (Pensions)For a defined benefit scheme, the expected increase during the period in the present value of the scheme liabilities because the benefits are one period closer to settlement.

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Investments (Non-Pensions Fund)A long-term investment is an investment that is intended to be held for use on a continuing basis in the activities of the authority. Investments, other than those in relation to the Pension Fund, that do not meet this criteria are classified as current assets.

Investments (Pensions Fund)The investments of the Pension Fund will be accounted for in the statements of that Fund. FRS17 Retirement Benefits requires authorities to disclose their attributable share of pension scheme assets.

Liquid ResourcesCurrent asset investments that are readily disposable by the authority without disrupting its business and are readily convertible to known amounts of cash.

Long Term BorrowingLoans repayable more than one year after the balance sheet date.

Long Term ContractsA contract entered into for the provision of a service where the time taken to complete the contract is such that the contract falls into different accounting periods.

Long Term DebtorsAmounts due to the council more than one year after the balance sheet date.

Minimum Revenue ProvisionAn amount that the council considers prudent which must be charged to the statement of movement on the general fund balance to provide for the repayment of debt related to capital expenditure.

National Non-Domestic Rates A rate in the pound, set by Central Government at a standard countrywide rate, applied to the rateable value of each premise not being used for domestic purposes.

Net Book ValueThe amount at which fixed assets are included in the balance sheet. This would be either the asset’s historic cost or current value less the cumulative amounts provided for depreciation.

Net Current Replacement CostThe cost of replacing an asset in its existing condition and its existing use.

Net DebtFor cash flow statement presentation purposes, net debt comprises the authority’s borrowings plus bank overdrawn positions less positive bank and cash balances, short and long term investments.

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Non Distributed CostsCosts that cannot be directly attributed to services.

Non Operational AssetFixed assets held by the council but not directly used or consumed in the delivery of its services. This would include surplus properties awaiting disposal.

Operating LeaseAn arrangement whereby the risks and rewards of ownership of the leased asset remain with the lessor.

Operational AssetFixed assets held by the council and used or consumed in the delivery of its services for which it has either a statutory or discretionary responsibility.

Overhanging Discounts and PremiumsDiscounts or premiums occurring as a result of debt restructuring that cannot be linked with the replacement loan.

Past Service CostFor a defined benefit scheme, the increase in the present value of the scheme liabilities related to employee service in prior periods arising in the current period as a result of the introduction of, or improvement to, retirement benefits.

Pension FundAn employees’ pension fund maintained by an authority, or a group of authorities, in order primarily to make pension payments on retirement of participants. It is financed from contributions from the employing authority, the employee and investment income.

Post Balance Sheet EventsEvents both favourable and unfavourable that occur between the balance sheet date and the date on which the responsible financial officer signs the Statement of Accounts.

PreceptThe levy made by precepting authorities on billing authorities, requiring the latter to collect income from council taxpayers on their behalf.

Precepting AuthoritiesThose authorities which are not billing authorities (i.e. do not collect council tax). County councils, police authorities and joint authorities are ‘major precepting authorities’ and parish, community and town councils are ‘local precepting authorities’.

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Prior Period AdjustmentsThose material adjustments applicable to prior years arising from changes in accounting policies or from the correction of fundamental errors.

Private Finance InitiativeThe private finance initiative provides a way of funding major capital investments, without immediate recourse to the public purse. Private consortia, usually involving large construction firms, are contracted to design, build, and in some cases manage new projects. In return the private sector receives payment linked to performance in meeting agreed standards of provision.

Projected Unit MethodAn accrued benefits valuation method in which the scheme liabilities make allowance for projected earnings. An accrued benefits valuation method is a valuation method in which the scheme liabilities at the valuation date relate to: the benefits for pensioners and deferred pensioners (i.e. individuals who have

ceased to be active members but are entitled to benefits payable at a later date) and their dependants, allowing where appropriate for future increases; and

the accrued benefits for members in service on the valuation date.The accrued benefits are the benefits for service up to a given point in time, whether vested rights or not. Guidance on the projected unit method is given in the Guidance Note GN26 issued by the Faculty and Institute of Actuaries.

ProvisionsSums set aside to meet future expenditure where a specific liability is known to exist but that cannot be measured accurately.

PrudenceThe concept that revenue is not anticipated but is recognised only when realised in the form either of cash or of other assets the ultimate realisation of which can be assessed with reasonable certainty.

Public Works Loan Board A government agency established to provide long-term loans to local authorities to finance part of their capital expenditure.

Rateable ValueRateable value of a property is based on an assessment of the annual rental value for non-domestic property. Rateable value multiplied by the rate in the £ levied equals the rate payments for the year.

Related PartiesFor a relationship to be treated as a related party relationship there has to be some element of control or influence by one party over another, or by a third party over the two parties.

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Related Party TransactionA related party transaction is the transfer of assets or liabilities or the performance of services by, to or for a related party irrespective of whether a charge is made.

Retirement BenefitsAll forms of consideration given by an employer in exchange for services rendered by employees that are payable after the completion of employment. Retirement benefits do not include termination benefits payable as a result of either an employer’s decision to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept voluntary redundancy in exchange for those benefits, because these are not given in exchange for services rendered by employees.

Revaluation ReserveGains and losses, with losses being limited to previously recognised gains, on an individual asset basis arising from revaluations are reflected within the Revaluation Reserve.

Revenue ContingencyA sum set-aside for future pay and price increases.

Revenue Contributions to Capital Outlay Contributions from revenue to finance capital expenditure.

Revenue Expenditure and IncomeThis is expenditure on day-to-day running costs and consists primarily of salaries and wages, premises related costs and supplies and services. Revenue income will include fees and charges and service specific grants.

Revenue Expenditure Funded from Capital under StatuteExpenditure which may properly be deferred, but which does not result in, or remain matched with, assets controlled by the authority.

Revenue Support Grant A grant paid by central government in aid of local authority services in general, as opposed to specific grants, which may only be used for a specified purpose.

Scheme LiabilitiesThe liabilities of a defined benefit scheme for outgoings due after the valuation date. Scheme liabilities measured using the projected unit method reflects the benefits that the employer is committed to provide for service up to the valuation date.

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SettlementAn irrevocable action that relieves the employer (or the defined benefit scheme) of the primary responsibility for a pension obligation and eliminates significant risks relating to the obligation and the assets used to effect the settlement. Settlements include: a lump-sum cash payment to scheme members in exchange for their rights to

receive specified pension benefits; the purchase of an irrevocable annuity contract sufficient to cover vested

benefits; and the transfer of scheme assets and liabilities relating to a group of employees

leaving the scheme.

Short Term BorrowingLoans repayable within one year of the balance sheet date.

Short Term InvestmentsDeposits with approved financial institutions which, when placed, had a maturity date of less than one year.

Soft LoansLoans that local authorities may make for policy reasons that are interest free or at rates below prevailing market rates.

Specific GrantsGovernment grants to local authorities in aid of particular projects or services.

Statement of Total Recognised Gains and Losses (STRGL)The accounting statement that enables all the council’s gains and losses for the accounting period to be shown with the same prominence as the other primary accounting statements.

Specific ReservesSums set aside to meet revenue or capital expenditure needs in the future. Reserves offer the scope for greater flexibility in financing future expenditure.

Statement of Standard Accounting PracticeA statement of accounting practice issued by the Accounting Standards Board.

StocksThe amount of unused or unconsumed stocks held in expectation of future use. When use will not occur until a later period, it is appropriate to carry forward the amount to be matched to the use or consumption when it arises.

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Tangible Fixed AssetsTangible assets that yield benefits to the council and the services it provides for a period of more than one year. Classification of such assets in the accounting statements is prescribed by the Statement of Recommended Practice.

Total CostThe total cost of providing a service reflects all costs including an appropriate share of all support services and overheads.

Transfer ValueThe value of an employee’s pension rights when transferring from one pension scheme to another.

Usable Capital ReceiptsIncome from the sale of capital assets. These receipts are available to either finance capital expenditure or repay debt.

Useful LifeThe period over which the authority will derive benefits from the use of a fixed asset.

Vested RightsIn relation to a defined benefit scheme, these are: for active members, benefits to which they would unconditionally be entitled on

leaving the scheme; for deferred pensioners, their preserved benefits; for pensioners, pensions to which they are entitled.Vested rights include where appropriate the related benefits for spouses, civil partners or other dependants.

Voluntary ProvisionAny additional provision over and above the minimum revenue provision required.

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Documents

STATEMENT - Home | Hertfordshire County Council ... · Web viewPage Introduction Report by the Chief Financial Officer Statement of Accounting Policies The Statement of Responsibilities