POLICE & CRIME COMMISSIONER FOR CHESHIRE … & CRIME COMMISSIONER FOR CHESHIRE AND GROUP ... Comprehensive Income and Expenditure ... victims at the centre of everything he does and

POLICE & CRIME COMMISSIONER FOR CHESHIRE AND GROUP STATEMENT OF ACCOUNTS

2014/15

Group Statement of Accounts 2014/15

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STATEMENT OF ACCOUNTS 2014/15

CONTENTS

Pages

Explanatory Foreword 3-9

Statement of Responsibilities 10

Auditor ’s Report 11

Group Statement of Accounts

Movement in Reserves Statement 14

Comprehensive Income and Expenditure Statement 16

Balance Sheet 17

Cash Flow Statement 18

Police Pension Fund 19

Police & Crime Commissioner Statement of Accounts

Movement in Reserves Statement 20

Comprehensive Income and Expenditure Statement 22

Balance Sheet 23

Cash Flow Statement 24

Police Pension Fund 25

Notes to the Accounts 26-93

Annual Governance Statement 94

Glossary of Terms 102


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THE EXPLANATORY FOREWORD

Introduction

The role of the Police & Crime Commissioner (the Commissioner) is to act on behalf of the people of Cheshire and hold the Chief Constable to account for the delivery of efficient and effective policing in Cheshire. As the elected representative, the Commissioner represents the public when it comes to the police services they need.

The Chief Constable is responsible for operational policing and the Commissioner works closely with him to ensure that he understands the public’s needs. The Commissioner has put victims at the centre of everything he does and sets the strategic direction and objectives for the Chief Constable to deliver through the Police & Crime Plan. The Commissioner is also responsible for setting the police budget and for scrutinising performance. The role of Commissioners nationally has been expanding and covers elements of the whole criminal justice process. The Commissioner works closely with the Crown Prosecution Service, Courts, Prisons and Probation services and partners such as the borough councils and the Fire & Rescue Service to ensure that Cheshire is a safer place in which to live and work.

Each year three sets of accounts are produced, the Commissioner’s Statement of Accounts, the Chief Constable’s Statement of Accounts and a Group Statement of Accounts which combines the previous two and reflects the complete financial picture of Cheshire Police.

These published Group Accounts together with the attached Commissioner’s Accounts are a vital aspect in demonstrating the Commissioner’s stewardship of public money in the policing services delivered to the communities of Cheshire and provide information about the Commissioner’s finances including:

the cost of services provided in 2014/15; how those services were paid for; and what the Commissioner owned and owed at the end of the financial year.

The Commissioner sets a budget and levies a council tax precept to finance expenditure that is not met by either Government grants or other income; details of the funding are shown on page 5.

Responsibility for day to day financial management is undertaken by the Chief Constable within a framework and the annual budget set by the Commissioner.

This explanatory foreword summarises the most significant matters reported in these accounts and provides an introduction to the detailed accounts that follow. The pages that follow include:

Statement of Responsibilities – sets out who is responsible for the various aspects of producing and approving these accounts.

Auditor’s Report – the report from the Commissioner’s External Auditor giving his opinion on the accounts and whether they have been prepared in accordance with proper practices.

Movement in Reserves Statement – this Statement shows the movement in year on the different reserves held by the Commissioner, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local council tax) and other reserves. The Surplus or (Deficit) on the Provision of Services line shows the real economic cost of providing policing in Cheshire.


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More details are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance for council tax setting purposes. The net increase/decrease before transfers to earmarked reserves line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves made by the Commissioner.

Comprehensive Income and Expenditure Statement – this Statement shows the accounting cost in the year of providing policing in Cheshire in accordance with accounting practices rather than the amount funded from taxation. The Commissioner raises council tax to cover expenditure in accordance with regulations which may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

Balance Sheet – shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Commissioner. The net assets of the Commissioner (assets less liabilities) are matched by the reserves held by the Commissioner. Reserves are reported in two categories. The first category of reserves are usable reserves which are those reserves that the Commissioner may use for the provision of services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use. An example of a statutory limitation is the capital receipts reserve that may only be used to fund capital expenditure or repay debt. The second category of reserves is those that the Commissioner is not able to use for the provision of services. This category of reserves includes reserves that hold unrealised gains and losses (for example the revaluation reserve), where amounts would only become available to provide services if the assets are sold; and reserves comprising of accounting entries such as the capital adjustment account which represents the difference between the current valuation and the historic costs of assets. These accounting entries are shown in the Movement in Reserves Statement line ’Adjustment between accounting basis and funding basis under regulations’.

Cashflow Statement – shows the changes in cash and cash equivalents of the Commissioner during the reporting period. The Statement shows how the Commissioner generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. Cash equivalents are highly liquid investments that mature in no more than three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Commissioner are funded by way of taxation and grant income or from the recipients of services provided by the Commissioner. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Commissioner.

Police Pension Fund – shows the details of the police officers’ pension fund. The expenditure is met from three main sources; employees’ contributions, employer’s contributions and any surplus or deficit paid to or by the Home Office. The only element funded by council tax is the employer’s contribution which is included in the Comprehensive Income and Expenditure Statement.

Notes to the Accounts – provide additional information concerning items included within the core financial statements.


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Annual Governance Statement – provides assurance that the policies, procedures and controls to ensure corporate governance and internal control are working and highlights any areas requiring further action.

Summary of 2014/15 year

Cheshire Police spends its funding in two ways; revenue which pays for day to day expenses such as pay, building and vehicle running costs and capital which pays for the purchase of assets such as vehicles.

Revenue Expenditure and Income

The Comprehensive Income and Expenditure Statement on page 16 shows Cheshire Police spent £186m in 2014/15 in providing the following police services.

Police Services: Expenditure

£000

Local Policing 83,438 44.5%

Dealing with the Public 15,255 8.2%

Criminal Justice Arrangements 15,897 8.5%

Roads Policing 10,599 5.7%

Specialist Operations 13,781 7.4%

Intelligence 15,200 8.1%

Specialist Investigations 24,877 13.3%

Investigative Support 6,175 3.3%

National Policing 1,765 1.0%

186,987 100.0%

Corporate Costs & Accounting Adjustments * 6,673

Transfers to/(from) Reserves 2,882

196,542

* Accounting adjustments are for the non-cash expenditure such as depreciation, actuarial pension costs together with the cash expenditure not allocated to a service, for example the minimum revenue provision for capital financing.

This expenditure was funded from a number of sources including Government Grants (Police Grant and Formula Funding) and Council Tax as shown in the following table.

Funding

£000

Government Grants (116,957) 60.0%

Council Tax - Precept (52,721) 26.3%

Interest on Balances (157) 0.1%

Specific Grants (16,881) 9.5%

Service Income (9,826) 4.1%

(196,542) 100.0%

Police Services

Funding


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Comparison of the accounts with the budget

On the 29 January 2014, the Commissioner set a net budget of £165.2m, a reduction of 3.36% compared to 2013/14, together with a nil increase in the council tax. At the end of the financial year the actual net expenditure was £162.8m giving an overall saving of £2.6m based on the revised year end budget as summarised in the table below. A reconciliation of this to the Comprehensive Income and Expenditure Statement is shown on pages 66 and 67.

Budget Information Revised Budget

2014/15 Outturn

Variance £000 £000 £000

Areas 12,525 11,884 (641) Force Operations 19,351 18,592 (759) Police Officer Pay 91,893 91,367 (526) Central Delivered Services 6,061 5,498 (563) Business Services 26,327 26,424 97 Collaborations 7,765 7,662 (103) Contingency (118) 0 118 Commissioning 1,520 1,468 (52) Office of the PCC 907 847 (60) Corporate Costs (898) (965) (67)

Total Revenue Budget 165,333 162,777 (2,556) Contributions to/(from): (at Outturn) General & Earmarked Reserves 0 (2,556) (2,556)

Externally funded 165,333 165,333 0 Government Grants (112,612) (112,612) 0 Council Tax Precept (52,721) (52,721) 0

Outturn Position 0 0 0

Performance Data

While the above data shows how the money has been spent the following graph shows the Constabulary’s performance for all recorded crime - a decrease of 4.7% over 2014/15.

Total Number of Recorded Crime

April to March Last Year This Year

% change from last year to this year

55,956 53,335 -4.7%


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Capital Expenditure and Financing

The following tables show how much the Commissioner invested in assets during 2014/15 and how this expenditure was financed.

Capital Expenditure £000 %

Property 664 16.7%

Vehicles 1,353 34.1%

Equipment 1,584 39.9%

Intangibles 369 9.3%

3,970 100.0%

Capital Financing £000 %

Grants 1,712 43.1%

Capital Receipts 0 0.0%

Earmarked Reserves 2,087 52.6%

Other Contributions 171 4.3%

3,970 100.0%

Balance Sheet

The Balance Sheet shows the assets and liabilities of the Commissioner on the 31 March 2015. To help explain this, the key sections are described in more detail below and notes to the main items are included on pages 49, 54-64.

Long Term Assets

There are three items included in long term assets on the Balance Sheet. Firstly, Property, Plant & Equipment which includes all the main assets held by the Commissioner. Capital expenditure as explained above is added to these assets. In line with the accounting policies, the land and buildings are valued and where there are significant changes in value the increases or decreases are included in the accounts. The next full valuation is 31 March 2016.

The second item is Intangible Assets which represents the software and licences held by the Commissioner. The cost of using the property, plant & equipment and intangibles is represented by the depreciation charged to the Comprehensive Income & Expenditure Statement.

Finally, the long term debtor relates to a lease for land which was paid in advance and is being written off over the life of the lease.

Working Capital

Working capital in the total of current assets less current liabilities, for 2014/15 this shows an increase of £6.4m. The main reasons for the increase is due to higher short-term debtors

Capital Expenditure

Property VehiclesEquipment Intangibles

Capital Financing

Grants Earmarked Reserves

Other Contributions


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reflecting the year end grant claim from the Home Office for pensions at £9.4m and an increase in cash held of £5m. This is countered by an increase in short-term creditors of £8m. Details of these are provided in the Notes to the Accounts.

Long Term Liabilities

Along with borrowing and finance leases, the main item within long term liabilities is the actuarial pension liability. This reflects the calculated value of pensions payable to both current pensioners and future pensioners. It is based on predicted salaries, inflation and life expectancies together with discount rates applied to forecast future values. The change in market conditions since 31 March 2014 has lowered the discount rate applied and increasing the value placed on the pension liability which is shown as an increase of £207.6m in the Comprehensive Income & Expenditure Statement, see Note 35 on page 83.

Reserves

There are two types of reserves shown on the Balance Sheet as follows:

Usable Reserves – these reserves are an important means of providing working capital to finance spending while waiting for income or grants to be received – a timing issue. Equally, they represent funding set aside for known expenditure planned for in the future, for example a capital scheme spent over a number of years. These are called earmarked reserves and are explained in Note 9.

The Commissioner also holds a general reserve for the purpose of providing funding to cover specific and general risks identified in setting the budget and also any unforeseen risks and expenditure which may arise. In the case of emergency services such as the police, reserves are particularly helpful in funding any necessary unbudgeted operational activity. The Government will only consider reimbursing Commissioners for unforeseen operational expenditure in excess of £2m. At the end of 2014/15 general reserves are £5.9m which is in line with the agreed policy of keeping general reserves at approximately 3% of net budget.

All reserves are reviewed regularly to ensure the levels held are proportionate, appropriate and within the approved Reserves Strategy.

Unusable Reserves – these reflect the accounting entries for the non-cash backed reserves. For example, when the property is re-valued any changes are reflected in the long term assets and balanced by an entry into the Revaluation Reserve. There is no cash involved and any additional value of an asset will only be realised when that asset is sold. Any reduction in value is written off against this reserve only to the extent a previous gain exists. Any remaining loss is charged to the Comprehensive Income and Expenditure Statement. These reserves demonstrate the future liabilities of the organisation that have yet to be funded, i.e. commitments to fund expenditure in future years. Therefore a consistent year on year increase of these reserves would indicate a growing burden on future funding.

Overall the Balance Sheet shows a deficit position of £1.9bn which includes £2bn for pension liabilities. This liability represents the potential future cost of pensions for both current pensioners and those currently working who are members of the pension schemes. The liability is calculated by actuarial valuers based on current membership, life expectancy, market and financial factors. The actual amount paid will vary and is payable over many years.

Without the pension liability, the Commissioner holds net assets of £68m compared to £66m in 2013/14.


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Group Accounts

Under the Police Reform and Social Responsibility Act 2011 both the Commissioner and the Chief Constable roles were created as separate corporations sole. This means each is a separate legal entity and required to produce their own set of accounts. This Statement of Accounts (Group Accounts) is the amalgamation of their Statements of Accounts recognising that the Chief Constable is a wholly owned subsidiary of the Commissioner. Also included in this document is the Commissioner’s Statement of Accounts.

Where there have been inter-organisation transactions between the Commissioner and the Chief Constable, these have been removed from the Group Accounts as detailed in Note 3.

Future Developments

In July 2015 Cheshire Constabulary will be restructuring and implementing a new policing model which will replace the existing nineteen Neighbourhood Policing Units and three police areas with eight Local Policing Units each overseen by a Chief Inspector. This follows a comprehensive root and branch review of services, structures and practices and recognises the investment in frontline policing and the ‘We’re here’ ethos.

Investment in new technology will see the introduction of the new Emergency Service Network and the updating of the Command and Control system. These key systems will enable the Constabulary to receive critical voice and mobile broadband as part of the national Emergency Service Network and for Command and Control, to receive calls from the public, allocate appropriate resources and monitor progress.

2015/16 will be the fifth consecutive year where the budget has been prepared with real term reductions in Government funding and the financial challenge is set to continue over the medium term. Current data indicates between 2015 and 2020 a further £36.4m savings will need to be found, but we recognise that predictions beyond 2016/17 have a high degree of uncertainty and are dependent on Government policies and allocations. The assumptions used in these forecasts are regularly reviewed and updated for inclusion in the Medium Term Financial Strategy which informs the budget setting process.

Further Information

Every effort has been made to ensure that the information provided in this Group Statement of Accounts is clear and informative. Should you require any further information or if you have any comments, please contact the Chief Finance Officer, Office of the Police & Crime Commissioner, Liz Lunn on telephone number 01606 364109 or the Constabulary’s Head of Finance, Wendy Bebbington on telephone number 01606 362035 or via the Office of the Commissioner, Clemonds Hey, Oakmere Road, Winsford, Cheshire, CW7 2UA. Liz Lunn, BA (Hons) CPFA Chief Finance Officer, Office of the Police & Crime Commissioner


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STATEMENT OF RESPONSIBILITIES Responsibilities of the Commissioner for Cheshire

The Commissioner 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. For the Office of the Commissioner, that officer is the Chief Finance Officer.

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

approve the Statement of Accounts.

I approve this Statement of Accounts. John Dwyer Police & Crime Commissioner for Cheshire 23 September 2015 Responsibilities of the Chief Finance Officer, Office of Commissioner

The Chief Finance Officer is responsible for the preparation of the Statement of Accounts for the Commissioner and the Group Accounts incorporating the Chief Constable’s Statement of Accounts, in accordance with the proper practices set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (‘the Code’).

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 Code

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 a true and fair view of the financial position of the Commissioner as at 31 March 2015 and of the expenditure and income for the year ended 31 March 2015.

Liz Lunn, BA CPFA Chief Finance Officer, Office of the Police & Crime Commissioner 23 September 2015


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INDEPENDENT AUDITOR’S REPORT TO THE POLICE AND CRIME COMMISSIONER FOR CHESHIRE

To follow – page 1


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Page 13




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MOVEMENT IN RESERVES STATEMENT 2014/15 (Group)

General Earmarked Capital Total Unusable Fund Reserves Receipts Usable Reserves Total Balance Reserve Reserves Reserves £000 £000 £000 £000 £000 £000

Balance at 1 April 2014 5,875 17,691 7,577 31,143 (1,685,227) (1,654,084)

Surplus or (deficit) on provision of services (accounting basis) (70,436) (70,436) (70,436)

Other Comprehensive Expenditure and Income 0 (207,570) (207,570)

Total Comprehensive Expenditure and Income (70,436) 0 0 (70,436) (207,570) (278,006)

Adjustments between accounting basis & funding basis under regulations – see Note 8 73,407 1,774 613 75,794 (75,794) 0

Net Increase/(Decrease) before transfers to Earmarked Reserves 2,971 1,774 613 5,358 (283,364) (278,006)

Transfers to/(from) Earmarked Reserves (2,910) 2,910 0 0 0 0

Increase/(Decrease) in year 61 4,684 613 5,358 (283,364) (278,006)

Balances at 31 March 2015 5,936 22,375 8,190 36,501 (1,968,591) (1,932,090)

Details of the above reserves are in Notes 20 and 21


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MOVEMENT IN RESERVES STATEMENT 2013/14 (Group)


Balance at 1 April 2013 5,287 8,412 6,700 20,399 (1,704,845) (1,684,446)

Surplus or (deficit) on provision of services (accounting basis) (70,081) (70,081) (70,081)

Other Comprehensive Expenditure and Income 0 100,443 100,443

Total Comprehensive Expenditure and Income (70,081) 0 0 (70,081) 100,443 30,362

Adjustments between accounting basis & funding basis under regulations – see Note 8

81,769 (1,821) 877 80,825 (80,825) 0

Net Increase/(Decrease) before transfers to Earmarked Reserves 11,688 (1,821) 877 10,744 19,618 30,362

Transfers to/(from) Earmarked Reserves (11,100) 11,100 0 0

Increase/(Decrease) in year 588 9,279 877 10,744 19,618 30,362

Balances at 31 March 2014 5,875 17,691 7,577 31,143 (1,685,227) (1,654,084)

Details of the above reserves are in Notes 20 and 21.


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COMPREHENSIVE INCOME & EXPENDITURE STATEMENT

(Group)

2013/14 2014/15 Notes

£000 £000 £000 £000

Net Expenditure Income Net

Police Services:

84,528 Local Policing 83,438 (9,272) 74,166

13,483 Dealing with the Public 15,255 (1,333) 13,922

12,322 Criminal Justice Arrangements 15,897 (2,533) 13,364

3,343 Roads Policing 10,599 (4,184) 6,415

10,089 Specialist Operations 13,781 (2,477) 11,304

12,680 Intelligence 15,200 (1,708) 13,492

22,874 Specialist Investigations 24,877 (3,092) 21,785

5,795 Investigative Support 6,175 (578) 5,597

852 National Policing 1,765 (1,531) 234

165,966 186,987 (26,708) 160,279

931 Corporate and Democratic Core 1,014

199 Non Distributed Cost 145

0 Exceptional Items 0

167,096 Cost of Services 161,438

(168) Other Operating Expenditure & Income 85 10

78,176 Financing & Investment Income & Expenditure 78,590 10

(175,023) Taxation & Non-Specific Grant Income (169,678) 10

70,081 Deficit / (Surplus) on Provision of Services 70,435 23

(1,142) Surplus/(Deficit) on revaluation of fixed assets 0

0 Surplus/(Deficit) on revaluation of "available for sale" assets 0

(99,301) Actuarial (gains)/losses on pension assets/ liabilities 207,570 35

(100,443) Other Comprehensive Income and Expenditure 207,570

(30,362) Total Comprehensive Income and Expenditure 278,005


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BALANCE SHEET AS AT 31 MARCH 2015 (Group)

31 March 2014

31 March

2015 Notes

£000 £000 £000

79,679 Property, Plant & Equipment 75,354 11

5,409 Intangible Assets 4,392 12

2,651 Long Term Debtors 2,441 13

87,739 Long Term Assets 82,187

348 Stock 467 14

19,047 Short Term Debtors 23,373 15

18,462 Cash and Cash Equivalents 23,615 16

360 Assets (held for sale) 1,338 17

38,217 Current Assets 48,793

(200) Short Term Borrowing (100) 13

(15,897) Short Term Creditors (20,132) 18

(16,097) Current Liabilities (20,232)

(25,436) Long Term Creditors (23,911)

(936) Provisions (1,495) 19

(16,876) Long Term Borrowing (16,778) 13

(1,720,695) Other Long Term Liabilities (2,000,653)

(1,763,943) Long Term Liabilities (2,042,837)

(1,654,084) Net Assets (1,932,089)

Represented By:

31,143 Usable Reserves 36,501 9

(1,685,227) Unusable Reserves (1,968,590) 21

(1,654,084) Total Reserves (1,932,089)

These accounts were issued for audit purposes on 25 June 2015 Liz Lunn, BA CPFA – Chief Finance Officer, Office of the Police & Crime Commissioner Date: 25 June 2015


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CASHFLOW STATEMENT (Group)

31 March 2014

31 March

2015

Notes £000 £000

70,081 Net (surplus) or deficit on the provision of services 70,435

Adjust net (surplus) or deficit on the provision of services for non-cash movement:

(6,379) Depreciation (7,637)

(81,084) Pensions - actuarial movement (72,433)

6,380 Movement in Creditors (1,972)

(4,587) Movement in Debtors 1,967

(20) Movement of Stock (17)

867 Other non-cash items (315)

203 Adjust for items included in the net (surplus) or deficit on the provision of services that are investing and financing activities

203

(14,539) Net cashflow from operating activities (9,769)

1,344 Investing Activities 1,061

3,714 Financing Activities 3,555

(9,481) Net (increase) or decrease in cash and cash equivalents (5,153)

(8,981) Cash and cash equivalents at the beginning of the reporting period

(18,462) 22

(18,462) Cash and cash equivalents at the end of the reporting period

(23,615) 22


Details of the above are included in Note 22


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POLICE PENSION FUND (Group)

The Government introduced new arrangements for the funding of Police Officers’ Pensions with effect from 1 April 2006. Under these arrangements income and expenditure on Police Pensions is charged to a separate fund account. The overall net cost of the fund is met by specific grant from Government; see Notes 35 and 36 for further details.

Note

1: the ‘additional contribution from the Commissioner’ is reimbursed by specific grant from the Home Office.

2013/14 £000

FUND ACCOUNT 2014/15

£000

Contributions Receivable from:

(17,148) Employer at 24.2% of pensionable pay (16,709)

(627) Early Retirements (1,108)

(9,388) From current employees (9,627)

(27,163) (27,444)

(6) Transfers in from other Police & Crime Commissioners 0

(411) Transfers in from other pension schemes (323)

(27,580) (27,767)

Benefits Payable:

37,344 Pensions 39,322

8,276 Commutations and lump sum retirement benefits 9,117

73 Lump sum death benefits 168

Payments to and on account of leavers

622 Transfers out to other schemes 697

0 Refunds of contributions 174

46,315 49,478

18,735 Net amount payable for the year 21,711

(18,735) Additional contribution from the Commissioner 1 (21,711)

Nil Net balance on fund in year Nil

NET ASSET STATEMENT

- Unpaid Pensions Due -

- Amount Owing to General Fund -

- -

Police & Crime Commissioner for Cheshire Statement of Accounts 2014/15

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MOVEMENT IN RESERVES STATEMENT 2014/15 (Police & Crime Commissioner for Cheshire)


Balance at 1 April 2014 5,875 17,691 7,577 31,143 35,488 66,631

Surplus or (deficit) on provision of services (accounting basis) 3,330 3,330 3,330

Other Comprehensive Expenditure and Income (210) (210)

Total Comprehensive Expenditure and Income 3,330 3,330 (210) 3,120


(358) 1,774 613 2,029 (2,029) 0

Net Increase/(Decrease) before transfers to Earmarked Reserves 2,972 1,774 613 5,359 (2,239) 3,120


Increase/(Decrease) in year 62 4,684 613 5,359 (2,239) 3,120

Balances at 31 March 2015 5,937 22,375 8,190 36,502 33,249 69,751



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MOVEMENT IN RESERVES STATEMENT 2013/14 (Police & Crime Commissioner for Cheshire)


Balance at 1 April 2013 5,287 8,412 6,700 20,399 35,602 56,001

Surplus or (deficit) on provision of services (accounting basis) 9,349 9,349 9,349

Other Comprehensive Expenditure and Income 1,281 1,281

Total Comprehensive Expenditure and Income 9,349 9,349 1,281 10,630


2,339 (1,821) 877 1,395 (1,395) 0

Net Increase/(Decrease) before transfers to Earmarked Reserves 11,688 (1,821) 877 10,744 (114) 10,630


Increase/(Decrease) in year 588 9,279 877 10,744 (114) 10,630

Balances at 31 March 2014 5,875 17,691 7,577 31,143 35,488 66,631



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COMPREHENSIVE INCOME & EXPENDITURE STATEMENT

(Police & Crime Commissioner for Cheshire)

2013/14 2014/15 Notes

£000 £000 £000 £000

Net Expenditure Income Net

Police Services:

(5,429) Local Policing 3,512 (9,272) (5,760)

(264) Dealing with the Public 671 (1,333) (662)

(3,579) Criminal Justice Arrangements 644 (2,533) (1,889)

(3,154) Roads Policing 309 (4,184) (3,875)

(1,622) Specialist Operations 545 (2,477) (1,932)

(767) Intelligence 650 (1,708) (1,058)

(1,377) Specialist Investigations 1,050 (3,092) (2,042)

(212) Investigative Support 270 (578) (308)

(2,168) National Policing 11 (1,531) (1,520)

(18,572) 7,661 (26,708) (19,047)

186,526 Funding to Cheshire Constabulary 188,987

898 Corporate and Democratic Core 860

169 Non Distributed Cost 85

0 Exceptional Items 0

169,021 Cost of Services 170,886

(6,547) Other Operating Expenditure & Income (7,552) 10

3,200 Financing & Investment Income & Expenditure 3,014 10

(175,023) Taxation & Non-Specific Grant Income (169,678) 10

(9,349) Deficit / (Surplus) on Provision of Services (3,330)

(1,142) Surplus/(Deficit) on revaluation of fixed assets 0

0 Surplus/(Deficit) on revaluation of "available for sale" assets 0

(139) Actuarial (gains)/losses on pension assets/ liabilities 210

(1,281) Other Comprehensive Income and Expenditure 210

(10,630) Total Comprehensive Income and Expenditure (3,120)


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BALANCE SHEET AS AT 31 MARCH 2015 (Police & Crime Commissioner for Cheshire)

31 March 2014

31 March

2015 Notes

£000 £000 £000

79,679 Property, Plant & Equipment 75,354 11

5,409 Intangible Assets 4,392 12

2,651 Long Term Debtors 2,441 13

87,739 Long Term Assets 82,187

348 Stock 467 14

19,047 Short Term Debtors 23,373 15

18,462 Cash and Cash Equivalents 23,615 16

360 Assets (held for sale) 1,338 17

38,217 Current Assets 48,793

(200) Short Term Borrowing (100)

(15,224) Short Term Creditors (18,000)

(15,424) Current Liabilities (18,100)

(25,436) Long Term Creditors (23,911) 13

(936) Provisions (1,495) 19

(16,876) Long Term Borrowing (16,778)

(654) Other Long Term Liabilities (945)

(43,902) Long Term Liabilities (43,129)

66,630 Net Assets 69,751

Represented By:

31,142 Usable Reserves 36,500 9

35,488 Unusable Reserves 33,251 21

66,630 Total Reserves 69,751

These accounts were issued for audit purposes on 25 June 2015 Liz Lunn, BA CPFA – Chief Finance Officer, Office of the Police & Crime Commissioner Date: 25 June 2015


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CASHFLOW STATEMENT (Police & Crime Commissioner for Cheshire)

31 March 2014

31 March

2015

Notes £000 £000

(9,349) Net (surplus) or deficit on the provision of services (3,330)

Adjust net (surplus) or deficit on the provision of services for non-cash movement:

(6,379) Depreciation (7,637)

(213) Pensions - actuarial movement (127)

4,939 Movement in Creditors (513)

(4,587) Movement in Debtors 1,967

(20) Movement of Stock (17)

867 Other non-cash items (315)

203 Adjust for items included in the net (surplus) or deficit on the provision of services that are investing and financing activities

203

(14,539) Net cashflow from operating activities (9,769)

1,344 Investing Activities 1,061 22

3,714 Financing Activities 3,555 22


(8,981) Cash and cash equivalents at the beginning of the reporting period

(18,462)

(18,462) Cash and cash equivalents at the end of the reporting period (23,615)


Note: cash and cash equivalents above include the bank overdraft shown on the Balance Sheet under Current Liabilities.


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POLICE PENSION FUND (Police & Crime Commissioner for Cheshire)

The Government introduced new arrangements for the funding of Police Officers’ Pensions with effect from 1 April 2006. Under these arrangements income and expenditure on Police Pensions is charged to a separate fund account. The overall net cost of the fund is met by specific grant from Government; see Note 36 for further details.

Note

1 the ‘additional contribution from the Commissioner’ is reimbursed by specific grant from the Home Office.

2013/14 £000

FUND ACCOUNT 2014/15

£000

Contributions Receivable from:

(17,148) Employer at 24.2% of pensionable pay (16,709)

(627) Early Retirements (1,108)

(9,388) From current employees (9,627)

(27,163) (27,444)

(6) Transfers in from other police authorities 0

(411) Transfers in from other pension schemes (323)

(27,580) (27,767)

Benefits Payable:

37,344 Pensions 39,322

8,276 Commutations and lump sum retirement benefits 9,117

73 Lump sum death benefits 168

Payments to and on account of leavers

622 Transfers out to other schemes 697

0 Refunds of contributions 174

46,315 49,478

18,735 Net amount payable for the year 21,711

(18,735) Additional contribution from the Commissioner 1 (21,711)

Nil Net balance on fund in year Nil

NET ASSET STATEMENT

- Unpaid Pensions Due -

- Amount Owing to General Fund -

- -


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NOTES TO THE ACCOUNTS – INDEX

Note Description Page

1 Accounting Policies and Principles 27

2 Accounting Standards issued, not yet adopted 42

3 Group Accounts 42

4 Critical Judgements in applying Accounting Policies 42

5 Assumptions made about the future & other major sources of estimation 43

6 Material Items of Income and Expenditure 44

7 Post Balance Sheet events 44

8 Adjustments between accounting basis and funding basis under regulations 44

9 Transfers to/from Earmarked and General Reserves 49

10 Notes to the Comprehensive Income & Expenditure Statement 52

11 Property, Plant & Equipment 54

12 Intangible Assets 55

13 Financial Instruments (including Borrowing) 56

14 Stock 60

15 Analysis of Debtors (including Prepayments etc.) 60

16 Cash and Cash Equivalents 61

17 Assets Held for Sale 61

18 Analysis of Creditors 62

19 Provisions 62

20 Usable Reserves 62

21 Unusable Reserves 63

22 Notes to the Cashflow Statement 64

23 Reports for Decision-Making Purposes 65

24 Partnerships & Collaborations 70

25 Members’ Allowances & Expenses 73

26 Officer Remuneration 73

27 External Audit Fees 78

28 Grant Income 78

29 Related Parties 79

30 Capital Expenditure & Financing 80

31 Leases: Finance and Operating 81

32 Private Finance Initiative 82

33 Impairment Losses 83

34 Capitalisation of Borrowing Costs 83

35 Employee Benefits 83

36 Notes relating to the Police Pension Fund 91

37 Contingent Assets & Liabilities 93

38 Authorisation of Accounts 93


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NOTES TO THE ACCOUNTS

1. Accounting Policies and Principles 1.1 General Principles (IAS8) This Statement of Accounts summarises the Police and Crime Commissioner’s (the Commissioner) transactions for the 2014/15 financial year and the position at 31 March 2015. The Commissioner is required to prepare an Annual Statement of Accounts by the Accounts and Audit (England) Regulations 2011 which require such accounts to be prepared in accordance with proper accounting practices. These practices comprise the Code of Practice of Local Authority Accounting in the United Kingdom 2014/15 and the Service Reporting Code of Practice 2014/15, supported by International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS). 1.1.1 Accounting Conventions These financial statements have been prepared under the historical cost convention, modified by the revaluation of certain categories of non-current assets and where material, financial instruments as determined by the relevant accounting standard. Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular: Revenue from sale of goods is recognised when the Commissioner transfers the significant risks

and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the Commissioner.

Revenue from the provision of services is recognised when the Commissioner can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the Commissioner.

Supplies are recorded as expenditure when they are consumed. Where there is a gap between the date supplies are received and their consumption they are carried as stock on the Balance Sheet.

Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made.

Interest receivable on investments and payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cashflows fixed or determined by the contract.

Where revenue and expenditure have been included in the Comprehensive Income & Expenditure Statement but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.

All sums due to the Commissioner are recorded at the time they become payable and any outstanding items at the end of the year are shown on the Balance Sheet as debtors. The only significant change to this relates to Government Grants where estimates are made at the end of year for any further amounts due to the Commissioner and then recorded as debtors.


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Creditors are accrued for on an actual basis where invoices have been received, on a purchase order basis where goods have been received but not invoiced or on an estimated basis where neither the invoice or purchase order is available (e.g., utility charges).

In addition, this Statement of Accounts assumes the Commissioner will continue in operational existence for the foreseeable future under the ‘Going Concern’ concept as a statutory Corporation Sole. 1.2 Cash and Cash Equivalents Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value. In both the Balance Sheet and Cashflow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Commissioner’s cash management. 1.3 Exceptional Items When items of income and expenditure are material and exceptional, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the Notes to the Accounts, depending on how significant the items are to the understanding of the Commissioner’s financial performance. 1.4 Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment. Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Commissioner’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless otherwise stated) by adjusting opening balances and comparative amounts for the prior period as if the new policy has always been applied. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period. Items are material if they could, individually or collectively, influence the decisions or assessments of users made on the basis of the financial statements. Materiality depends on the nature and/or size of the omission or misstatement judged in the surrounding circumstances.

1.5 Charges to Revenue for Non-Current Assets Services, support services and trading accounts are debited with the following amounts to record the cost of holding non-current assets during the year:


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Depreciation attributable to the assets used by the relevant service

Revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off

Amortisation of intangible assets attributable to the service The Commissioner is not required to raise council tax (via his precept) to fund depreciation, revaluation and impairment losses or amortisation. However he is required to make an annual contribution from revenue towards the reduction in its overall borrowing requirement in accordance with the Local Authorities (Capital Finance & Accounting) (England) Regulations 2003, as amended, known as the Minimum Revenue Provision. Depreciation, revaluation and impairment losses and amortisation are therefore replaced by the Minimum Revenue Provision contribution in the General Fund Balance by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

1.6 Employee Benefits

Benefits payable during employment Under IAS19 short term employee benefits are those to be settled within 12 months of the year end. They include such benefits as salaries and wages, paid annual leave, paid sick leave, bonuses and non-monetary benefits (for example cars) for current employees and are recognised as an expense for the service in the year in which employees render service to the Commissioner. An accrual is made for the cost of holiday entitlements, flexi leave and time off in lieu earned by employees but not taken before the year end, which employees can carry forward into the next financial year. The accrual is made at the salary rates applicable at year end. The accrual is charged to the Surplus or Deficit on the Provision of Services but then reversed out through the Movement in Reserves Statement so that such benefits are charged to revenue in the financial year in which the benefit occurs. Termination benefits Termination benefits are amounts payable as a result of a decision by the Commissioner to terminate employment before the normal retirement date or an employee’s decision to accept voluntary redundancy. These are charged on an accruals basis to the Comprehensive Income and Expenditure Statement when the Commissioner is demonstrably committed to the termination of the employment or making an offer to encourage voluntary redundancy. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund Balance to be charged with the amount payable by the Commissioner to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with the debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year end. Post-employment benefits The Commissioner’s employees may be members of one of two separate pension schemes:


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Police Staff - the Local Government Pension Scheme administered by Cheshire West and Chester

Council; or

Police Officers - the Police Pension Scheme for Police Officers; the Police Pension Scheme is an unfunded scheme (Police Pension Fund Regulations 2007 (SI2007/1932)), meaning there are no investment assets built up to meet the pensions’ liabilities and cash has to be generated to meet actual pensions payments as they eventually fall due. The costs of the scheme are supported by an employer’s contribution based on the costs of serving officers and central government grant.

Both schemes provide defined benefits to members (retirement lump sums and pensions) earned as employees of the Commissioner. The impact of these two pension schemes is identified separately in the Comprehensive Income and Expenditure Statement and Balance Sheet and in the Notes to the Accounts. The Local Government Pension Scheme

The Local Government Pension Scheme is accounted for as a defined benefits scheme with the liabilities attributable to the Commissioner included in the Balance Sheet on an actuarial basis using the projected unit method. This is 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 projected earnings for current employees.

Liabilities are discounted to their value at current prices in line with the actuaries’ agreed discount rate as stated in the relevant Note to the Accounts. The assets attributable to the Commissioner are also included in the Balance Sheet at fair value:

- Quoted securities – current bid price - Unquoted securities – professional valuation - Utilised securities – current bid price - Property – market value

The change in the net pensions’ liability is analysed as follows:

Current service cost – the increase in liabilities as a result of years of service earned this year. This is charged to the Comprehensive Income and Expenditure Statement and is apportioned across service headings according to numbers of employees.

Past service cost – the increase in liabilities as a result of a scheme amendment or curtailment

whose effect relates to years of service earned in earlier years and charged to the Comprehensive Income and Expenditure Statement as part of the Non-Distributed Costs.

Net Interest – on the net defined benefit liability (asset), i.e. the net interest expense for the Commissioner – the change during the period in the net defined benefit liability (asset) that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement. This is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability (asset) at the beginning of the period – taking into account any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payments.

The re-measurements comprise of:


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º The return on plan assets – excluding amounts included in net interest on the net defined benefit liability (asset) – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure.

º 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 actuaries have updated their assumptions – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure.

Contributions paid the pension funds – cash paid as employer’s contributions to the pension fund in settlement of liabilities, not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the General Fund Balance to be charged with the amount payable by the Commissioner to the pension fund or directly to pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the IAS19 Pension Reserve to remove the notional debits and credits for the retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the IAS19 Pension Reserve thereby measure the beneficial impact to the General Fund of being required to account for the retirement benefits on the basis of cashflows rather than as benefits are earned by employees.

Discretionary benefits – Local Government Pension Scheme The Commissioner also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of such an award are accrued in the year in which the decision was taken and accounted for using the same policies as applied to the Local Government Pension Scheme. Injury awards – The Police Pension Scheme Injury awards under The Police (Injury Benefits) Regulations 2006 are not part of the Police Pensions Scheme and are funded direct from the Comprehensive Income and Expenditure Statement. However, liabilities in respect of injury awards are disclosed in the Statement of Accounts as part of the Commissioner’s overall liability and are measured on an actuarial basis, using the projected unit method.

1.7 Events after the Balance Sheet Date (IAS10)

Events after the Balance Sheet date are those events both favourable and unfavourable that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified: Those that provide evidence of conditions that existed at the end of the reporting period – the

Statement of Accounts is adjusted to reflect such events

Those that are indicative of conditions that arose after the reporting period – the Statement of Accounts is not adjusted to reflect such events but, where a category of events would have a material effect, disclosure is made in the Notes of the nature of the events and their estimated financial effect.

Events taking place after the date of authorisation of issue are not reflected in the Statement of Accounts.


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1.8 Financial Instruments (IAS32/39 & IFRS7) Financial liabilities Financial liabilities are recognised on the Balance Sheet when the Commissioner becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised. For most of the borrowings that the Commissioner has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest); and interest charged to the Comprehensive Income and Expenditure Statement in the amount payable for the year according to the loan agreement. Gain and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repurchase or settlement. However, where repurchase has taken place as part of 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 Comprehensive Income and Expenditure Statement is spread over the life of the loan by adjustment to the effective interest rate. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Commissioner has a policy of charging the full effect of premiums and discounts to the Comprehensive Income and Expenditure Statement in the year in which they are incurred. Financial 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 – assets that have a quoted market price and/or do not have fixed or determinable payments

Loans and receivables are recognised on the Balance Sheet when the Commissioner becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement 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 the Commissioner has made this means that the amount presented in the Balance Sheet is the outstanding principal receivable plus accrued interest, and the interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement.


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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 in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cashflows discounted at the asset’s original effective interest rate.

Any gains and losses that arise on the de-recognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

‘Available for sale’ assets are recognised on the Balance Sheet when the Commissioner becomes a party to a contractual provision of a financial instrument and is initially measured and carried at fair value.

When the asset has fixed or determinable payments, annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the Comprehensive Income and Expenditure Statement when it becomes receivable by the Commissioner.

Assets are maintained in the Balance Sheet at fair value. Values are based on the following principles:

Instruments with quoted market prices – the market price

Other instruments with fixed and determinable payments – discounted cash flow analysis

Equity shares with no quoted market prices – independent appraisal of company valuations

Changes in fair value are balanced by an entry in the ‘Available for sale’ Reserve and the gain/loss is recognised in the Surplus or Deficit on Revaluation of ‘Available for sale’ Financial Assets. The exception is where impairment losses have been incurred and are debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any net gain or loss for the asset accumulated in the ‘Available for sale’ Reserve.

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 (fixed or determinable payments) or fair value falls below cost, the asset is written down and a charge made to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. If the asset has fixed or determinable payments, the impairment loss is measured as the difference between the carrying amount and the present value of the revised future cashflows discounted at the asset’s original effective interest rate. Otherwise the impairment loss is measured as any shortfall of fair value against the acquisition cost of the instrument (net of any principal repayment and amortisation).

Any gain and losses that arise on the de-recognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement along with any accumulated gains or losses previously recognised in the ‘Available for sale’ Reserve.

Where fair value cannot be measured reliably, the instrument is carried at cost less any impairment losses.


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1.9 Government Grants and Contributions (IAS20)

Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Commissioner when there is reasonable assurances that:

The Commissioner will comply with the conditions attached to the payments, and

The grants or contributions will be received. Amounts recognised as due to the Commissioner are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution, have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset in the form of the grant or contribution are required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor.

Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the appropriate service line or Taxation and Non-specific Grant Income (for non ring-fenced grants and all capital grants) in the Comprehensive Income and Expenditure Statement.

Where capital grants are credited to the Comprehensive Income and Expenditure Statement they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has not been used to finance capital expenditure it is posted to the Capital Grants Unapplied Reserve. Where it has been used to finance capital expenditure it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Reserve are transferred to the Capital Adjustment Account once they have been used to finance capital expenditure.

1.10 Heritage Assets

A tangible heritage asset is a tangible asset with historical, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture. An intangible heritage asset is an intangible asset with cultural, environmental or historical significance. Examples of intangible heritage assets include recordings of significant historical events.

Such assets identified are to be carried separately on the balance sheet at valuation. The Commissioner sets a de-minimis value for such assets at £0.5m.

1.11 Intangible Assets (IAS38)

Expenditure on non-monetary assets that do not have physical substance but are controlled by the Commissioner as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Commissioner.

Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Commissioner will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase. Research expenditure cannot be capitalised.


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Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Commissioner’s services.

Intangible assets are measured initially at cost. Amounts are only re-valued where the fair value of the assets held can be determined by reference to an active market. In practice no intangible asset held by the Commissioner meets this criterion and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service lines in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement.

Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and transferred to the Capital Adjustment Account or for any sale proceeds over £10,000, the Capital Receipts Reserve.

1.12 Stock (IAS2)

Stock is valued at the lower of cost or current replacement cost where it is held for distribution at no charge. The stock reflected in the Balance Sheet relates predominantly to uniforms and equipment which is distributed to officers as appropriate.

1.13 Jointly Controlled Operations (IAS31)

Jointly controlled operations are activities undertaken by the Commissioner or Chief Constable in conjunction with other organisations that involve the use of assets and resources of those organisations rather than the establishment of a separate entity. The Commissioner or Chief Constable recognises on their respective Balance Sheets the assets the operation controls and the liabilities it incurs and debits and credits the Comprehensive Income and Expenditure Statement with the expenditure incurred and the share of income earned.

1.14 Leases (IAS17)

Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and building elements are considered separately for classification.

Arrangements that do not have legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.

Finance Leases (taken out by the Commissioner)

Property, plant and equipment held under finance leases are recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception or the present value of the minimum lease payments if this is lower. The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Commissioner are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred.


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Lease payments are apportioned between:

A charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability, and

A finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

Property, plant and equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where the ownership of the asset does not transfer to the Commissioner at the end of the lease period). Operating Leases

Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefiting from use of the lease property, plant and equipment. Charges are made on a straight line basis over the life of the lease, even if this does not match the pattern of payments (for example if there is a rent free period at the start or end of the lease). 1.15 Overheads and support services

The costs of overheads and support services are charged to the service expenditure headings as defined in CIPFA Service Reporting Code of Practice (SeRCOP). The total absorption costing principle is used – the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of:

Corporate and Democratic Core – costs relating to the Commissioner’s status as a democratic organisation

Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring early and impairment losses chargeable on Assets Held for Sale

These two categories are defined in SeRCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement as part of the Net Expenditure on Services. 1.16 Property, Plant and Equipment

Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administration purposes and that are expected to be used during more than one financial year are classified as property, plant and equipment in line with International Accounting Standard (IAS) 16 and International Public Sector Accounting Standard (IPSAS) 17. Recognition of the asset

Expenditure on the acquisition, creation or enhancement of property, plant and equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the asset will flow to the Commissioner and the cost of the asset can be measured reliably. Expenditure that maintains but does not add to the asset’s potential to deliver economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred. The Commissioner’s policy is also to capitalise only those assets which have a material value where the cost is £10,000 or more (de-minimis level).


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Measurement of the asset Assets are initially measured at cost, comprising: the purchase price;

any costs directly attributable to bringing the asset to the location and condition for it to be capable of operating in the manner intended by the Commissioner, including any directly attributable salary costs of the Commissioner’s employees; and

the initial estimate of the costs of dismantling and removing the items and restoring the site on which it is located.

The Commissioner does not capitalise borrowing costs incurred whilst assets are under construction. The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cashflows of the Commissioner). In the latter case where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Commissioner. Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-specific Grant Income line in the Comprehensive Income and Expenditure Statement unless the donation has been made conditionally. In such cases until the conditions are satisfied the gain is held in the Donated Assets Account. Where gains are credited to the Comprehensive Income and Expenditure Statement they are reversed out of the General Fund Balance to the Capital Adjustment Account in the Movement in Reserves Statement. Assets are carried in the Balance Sheet using the following measurement bases: Assets under construction – actual expenditure incurred (historical cost) until operational and

then at fair value

All other assets – fair value, determined as the amount that would be paid for the asset in its existing use

Where market based evidence of fair value is not available because of the specialist nature of an asset, Depreciated Replacement Cost (DRC) will be used as a proxy for fair value. For non-property assets which have short useful lives, low value or both, depreciated historical cost will be used as a proxy for fair value. Assets included in the Balance Sheet at fair value are re-valued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at year end, but at a minimum of every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally gains might be credited to the Surplus or Deficit on the Provision of Services where they arise from the reversal of a loss previously charged to a service. Where decreases in value are identified, they are accounted for as follows:


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where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance up to the amount of the accumulated gains.

where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service lines in the Comprehensive Income and Expenditure Statement.

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. Componentisation The Commissioner identifies any properties where it is considered that componentisation is appropriate and provides separate valuation of such components. Componentisation is only applied routinely to new buildings or refurbishments completed after 1 April 2010 onwards and will not apply to historical assets that have not been refurbished. Specifically, componentisation is considered for:

all properties over £1m

those which have been the subject of significant refurbishment or improvement during the year

those properties which are expected to be the subject of significant refurbishment or improvement during the next two years

In this context significant expenditure is defined as ‘greater than 25% of the total cost of the asset; and greater than £100,000’. Impairment Assets are assessed at each year end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall.

Where impairment losses are identified, they are accounted for as follows:

where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance up to the amount of the accumulated gains.

where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service lines in the Comprehensive Income and Expenditure Statement.

Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service lines in the Comprehensive Income and Expenditure Statement up to the amount of the original loss and adjusted for depreciation that would have been charged if the loss has not been recognised.


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Depreciation

Depreciation is provided for on all property, plant and equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land) and assets that are not yet available for operational use (i.e. assets under construction).

Depreciation is calculated on the following bases:

Land – no depreciation applied

Property (not land) – straight-line allocation over the life of the property as estimated by the valuer

Plant and Equipment – straight-line allocation over the life of the asset as advised by a suitably qualified officer

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item will be depreciated separately. Where there is more than one significant part of the same asset which has the same useful life and depreciation method, such parts may be grouped in determining the depreciation charge.

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 the their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

Disposals and non-current Assets held for Sale

When it becomes probable that an asset will be sold it is reclassified as an Asset held for Sale. The asset is re-valued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on Assets held for Sale.

If assets no longer meet the criteria to be classified as Assets held for Sale, they are reclassified back to non current assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as held for sale and their recoverable amount at the date of the decision not to sell.

Assets that are to be abandoned or scrapped are not reclassified as Assets held for Sale.

When as asset is disposed of or decommissioned the carrying amount of the asset in the Balance Sheet (whether property, plant and equipment or assets held for sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the disposed asset in the Revaluation Reserve are transferred to the Capital Adjustment Account.


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Amounts received for a disposal in excess of £10,000 are categorised as capital receipts and are required to be credited to the Capital Receipts Reserve. These can then only be used to fund new capital expenditure or set aside to reduce the Commissioner’s underlying need to borrow. Receipts are appropriated to the Reserve from the General Fund Balance via the Movement in Reserves Statement.

The written off value of disposals is not a charge against the council tax as the cost of non current assets is fully provided for under separate arrangement for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. 1.17 Private Finance Initiative (PFI)

PFI and similar contracts are agreements to receive services where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor. As the Commissioner is deemed to control the services that are provided under its PFI scheme and as ownership of the property, plant and equipment will pass to the Commissioner at the end of the contract, the Commissioner carries the assets used under the contract on its Balance Sheet as part of property, plant and equipment.

The original recognition of these assets at fair value (based on the cost to purchase) was balanced by the recognition of a liability for the amounts due to the scheme operator to pay for the capital investment. Non-current assets recognised on the Balance Sheet are re-valued and depreciated in the same way as property, plant and equipment owned by the Commissioner.

The amounts payable to the PFI operator each year are analysed as follows:

fair value of the services received during the year – charged to the Comprehensive Income and Expenditure Statement

finance cost – an interest charge on the outstanding Balance Sheet liability charged to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement

contingent rent – increases in the amount to be paid for the property arising during the contract and charged to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement

payment towards liability – applied to write down the Balance Sheet liability towards the PFI operator (the profile of write downs is calculated using the same principles as for a finance lease)

lifecycle replacement costs – a proportion of the amounts payable is posted to the Balance Sheet as a prepayment and then recognised as additions to property, plant and equipment when the relevant works are eventually carried out.

1.18 Provisions, Contingent Assets and Liabilities (IAS37) Provisions Provisions are made when an event has taken place that gives the Commissioner a legal or constructive obligation that probably requires settlement of that obligation and a reasonable estimate of the amount can be made. For example, the Commissioner may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation.


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Provisions are charged to the Comprehensive Income and Expenditure Statement in the year in which the Commissioner becomes aware of the obligation, based on the best estimate of the likely settlement taking into account relevant risks and uncertainties. When payments are eventually made they are charged to that provision in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year and where it becomes more likely than not that a settlement is no longer required (or a lower settlement than anticipated is made), the provision is adjusted and credited back to the Comprehensive Income and Expenditure Statement.

Where some or all of the payment required to settle an obligation is expected to be met by another party (e.g. from an insurance claim) it is only recognised as income in the Comprehensive Income and Expenditure Statement when it is virtually certain that reimbursement will be received.

Contingent Assets

A contingent asset arises where an event has taken place that gives the Commissioner a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Commissioner. Contingent assets are not recognised in the Balance Sheet but are disclosed in a Note to the Accounts where it is probable that there will be an inflow of economic benefits or service potential.

Contingent Liability

A contingent liability arises where an event has taken place that gives the Commissioner a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Commissioner. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably. Contingent liabilities are not recognised in the Balance Sheet but are disclosed in a Note to the Accounts.

1.19 Reserves

The Commissioner sets aside amounts as reserves for specific policy purposes through appropriations in the Movement of Reserves Statement. Expenditure funded by such reserves is charged directly to the Comprehensive Income and Expenditure Statement with the transfer from the reserve shown separately and accounted for in the Movement of Reserves Statement.

Certain reserves are held to manage the accounting processes of assets and retirement benefits and do not represent usable resources for the Commissioner – these reserves are explained in the relevant policies.

1.20 Value Added Tax (VAT)

VAT payable is included as an expense only to the extent that it is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is excluded from income.

2. Accounting Standards issued, not yet adopted

IFRS 13 Fair Value Measurement (May 2011) (implementation has been deferred until 2015/16);

Annual Improvements to International Financial Reporting Standards (2011-2013 cycle): - IFRS 1 Meaning of effective IFRSs; - IFRS 3 Scope exceptions for joint ventures; - IFRS 13 Scope of paragraph 52 (portfolio exception); - IAS40 Clarifying the interrelationship of IFRS 3 Business Combinations and IAS40

Investment property when classifying property as investment property or owner/occupied property;


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The above change has no impact on these accounts but will be reviewed during 2015/16 and any amendments required will be clearly shown in the 2015/16 Statement of Accounts.

3. Group Accounts

Under the Police Reform and Social Responsibility Act 2011, the roles of Commissioner and Chief Constable became Corporations Sole (separate legal entities) and required individual Statement of Accounts. However, the Act also recognises that the Chief Constable is a wholly owned subsidiary of the Commissioner and proper accounting practices require group accounts to be produced.

Basis of Consolidation

The group accounts comprise of those of the Commissioner and his wholly own subsidiary the Chief Constable as at 31 March 2015.

The financial statements of the subsidiary are prepared for the same reporting period as the parent company, using consistent accounting policies. They are fully consolidated from the date that the Commissioner obtains control until the date that such control ceases. These accounts are prepared in accordance with the Accounts and Audit Regulations with subsidiary companies being consolidated on a line-by-line basis.

All intra-group trading, balances and unrealised gains and losses as at the end of each period, are eliminated in full as part of the consolidation process. The main intra-group transactions are the Commissioner fully funding the net expenditure of the Chief Constable and the recognition in the two Balance Sheets of the relevant pension liability in the Chief Constable’s accounts matched by an agreement to fund by the Commissioner in the form of a long term debtor. There are no significant restrictions on the ability of the subsidiary to transfer funds to the parent company in any form.

4. Critical Judgements in applying Accounting Policies

In applying the accounting policies set out in Note 1 the Commissioner has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the Statement of Accounts are:

There is a high degree of uncertainty about future levels of Central Government funding. However, the Commissioner has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Commissioner might be impaired as a result of a need to close facilities and/or reduce levels of service provision.

The Private Finance Initiative (PFI) accounting models used to calculate future liabilities for interest and capital repayments are based on the current Retail Price Index (RPI) and Utilities Price Index (UPI) as listed by the Office of National Statistics. These are reviewed annually with any change affecting the current and future years’ charges.

The Commissioner and Constabulary are involved in various ways of delivering policing services and it has therefore been necessary to consider carefully the accounting implications of collaboration covering all circumstance where working co-operatively with other police forces and Chief Constables. The Commissioner has carefully considered all collaborative activity. The judgements and accounting treatment of collaborative activity can be found in Note 24.

On the 13 May 2015 the Pensions Ombudsman upheld a claim in the case of Milne v GAD which will result in additional payments due to police officers who retired between 1 December 2001 and 30 November 2006 inclusive and this is recognised as a contingent liability in Note 37. Under IAS 37 where a reliable estimate cannot be produced, a provision is not required. At the time of publishing these accounts a judgement has been made that given the number of officers involved; the individual impact on their pension; and the associated costs are not yet clear mean that the


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level of uncertainties prohibits a realistic estimate being calculated and therefore no provision has been made.

5. Assumptions made about the future & other major sources of estimation uncertainty

The Statement of Accounts contains estimated figures that are based on assumptions made by the Commissioner about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates.

The items in the Commissioner’s Balance Sheet at 31 March 2015, for which there is a significant risk of material adjustment in the forthcoming financial year, are as follows:

Item Uncertainties Effect if actual results differ from assumptions

Property, Plant and Equipment

Assets are depreciated over useful lives and are dependent on assumptions about the level of repairs & maintenance that will be incurred. The current economic climate makes it uncertain that the Commissioner will be able to sustain current spending on repairs & maintenance, bringing into doubt the useful lives assigned to assets.

If the useful life of assets is reduced, depreciation increases and the carrying amount of the assets falls.

It is estimated that the annual depreciation charge would increase by £1.5m for every year that useful lives have to be reduced.

Pensions Liability

Estimation of net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets (where applicable).

The Government’s Actuary Department is engaged to provide the Commissioner with expert advice about the assumptions to be applied for Police Pensions and Cheshire West & Chester Council provide information on the Local Government Pension Scheme.

The effects on the net pension liability of changes in individual assumptions can be measured. For instance a 0.5% increase in the discount rate assumption would result in a decrease in the pension liability of £32m for the Local Government Pension Scheme.

However, the assumptions interact in complex ways. Where assumptions do change these are reported as actuarial gains and losses within the ‘Other Income and Expenditure’ line in the Comprehensive Income & Expenditure Statement. These changes only impact on the Pension Reserve & Liability & have no impact on general reserve.

Provisions Provisions are based on best estimates and professional judgements. The Commissioner has made provision of £0.764m for the settlement of civil and motor claims.

An increase over the forthcoming year of 10% in either the total number of claims or the estimated average settlement would each have the effect of adding £0.08m to the provision needed.


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Item Uncertainties Effect if actual results differ from assumptions

Arrears At 31 March 2015 the Commissioner had a balance of sundry debtors for £2.4m. A review of significant balances suggested that an impairment of doubtful debts over six months old was appropriate.

If collection rates were to deteriorate, further impairment would be required. An average monthly debt in 2014/15 is £1.38m (£1.7m 2013/14)

This list does not include assets and liabilities that are carried at fair value based on a recently observed market price.

6. Material Items of Income and Expense

There are no material items of income and expense for 2014/15.

7. Post Balance Sheet events

At the Management Board meeting on the 2 June 2015, the Commissioner agreed the allocation of revenue outturn funding to specific projects and reserves. The impact of this decision has been reflected in these accounts. In addition, a Pension Ombudsman ruling on 13 May 2015 has an impact on these accounts, details of which are shown in Note 37 Contingent Assets & Liabilities.

8. Adjustments between Accounting Basis and Funding Basis under Regulations

This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Commissioner in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Commissioner to meet future capital and revenue expenditure.

The following sets out a description of the reserves that the adjustments are made against:

General Fund

The General Fund is the statutory fund into which all the receipts of the Commissioner are required to be paid and out of which all liabilities of the Commissioner are to be met, except to the extent that statutory rules provide otherwise. These rules can also specify the financial year in which liabilities and payments should impact on the General Fund balance, which is not necessarily in accordance with proper accounting practice. The General Fund balance therefore summarises the resources that the Commissioner is statutorily empowered to spend on police services or on capital investment.

Capital Receipts Reserve

The Capital Receipts Reserve holds the proceeds from the disposal of land or other assets which are restricted by statute from being used other than to fund new capital expenditure or to be set aside to finance historical capital expenditure. The balance on the reserve shows the resources that have yet to be applied for these purposes at year end.

Unapplied Capital Grants Reserve

The Unapplied Capital Grants Reserve hold the grant and contributions received towards capital projects for which the Commissioner has met the conditions that would otherwise require repayment of the money but which has yet to be applied to meet expenditure. The balance is restricted by grant terms as to the capital expenditure against which it can be applied and/or the financial year in which this can take place.


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8. Adjustments between Accounting Basis and Funding Basis under Regulations (Group)

General Earmarked Capital Total Unusable 2014/15 Fund Reserves Receipts Usable Reserves Total Balance Reserve Reserves Reserves £000 £000 £000 £000 £000 £000 Reversal of items debited or credited to the CI&E Statement Other Comprehensive Expenditure and Income:

Revaluation of Property Plant & Equipment 0 0 Pensions: Actuarial Gains and Losses 207,570 207,570

Sub-total 207,570 207,570

Adjustments between accounting basis & funding basis under regulations:

Pensions Current Service Costs (42,618) (42,618) 42,618 0 Employers Contributions under IAS19 45,923 45,923 (45,923) 0 Past Service Costs (145) (145) 145 0 Curtailments 0 0 0 0 Pensions – Net Interest (75,593) (75,593) 75,593 0 Depreciation (7,637) (7,637) 7,637 0

(Gain)/Loss on Sale of Assets (85) (613) (698) 698 0

Capital Grants/Contributions General Capital Grant 1,541 (1,541) 0 0 Specific Capital Grants/Contribution 357 (357) 0 0

Insertion of items not debited or credited to the CI&E Statement


Capital Financing Statutory Provision for repayment of debt 1,928 1,928 (1,928) 0 Capital Grant Applied 1,712 1,712 (1,712) 0 Revenue Contribution to Capital 3,845 (3,845) 0 0 Capital Receipts applied 0 0 Earmarked Reserves applied 2,257 2,257 (2,257) 0

Other Adjustments Collection Fund Adjustment Account 535 535 (535) 0 Accumulated Absences Account (1,458) (1,458) 1,458 0

Sub-total (73,407) (1,774) (613) (75,793) 75,793 0

Total (73,407) (1,774) (613) (75,793) 283,363 207,570


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Comparative figures for 2013/14 are shown below:


Revaluation of Property Plant & Equipment (1,142) (1,142) Pensions: Actuarial Gains and Losses (99,301) (99,301)

Sub-total (100,443) (100,443)


Pensions Current Service Costs (48,971) (48,971) 48,971 0 Employers Contributions under IAS19 43,081 43,081 (43,081) 0 Past Service Costs (199) (199) 199 0 Curtailments 0 0 0 0 Pensions – Net Interest (74,995) (74,995) 74,995 0 Depreciation (6,378) (6,378) 6,378 0

(Gain)/Loss on Sale of Assets 124 (975) (851) 851 0

Capital Grants/Contributions General Capital Grant 1,495 (1,495) 0 0 0 Specific Capital Grants/Contribution 126 (126) 0 0 0



Capital Financing Statutory Provision for repayment of debt 1,892 1,892 (1,892) 0 Capital Grant Applied 1,620 1,620 (1,620) 0 Capital Receipts applied 98 98 (98) 0 Earmarked Reserves applied 1,822 1,822 (1,822) 0

Other Adjustments Collection Fund Adjustment Account 615 615 (615) 0 Accumulated Absences Account 1,441 1,441 (1,441) 0

Sub-total (81,769) 1,821 (877) (80,825) 80,825 0

Total (81,769) 1,821 (877) (80,825) (19,618) (100,443)


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Adjustments between Accounting Basis and Funding Basis under Regulations (PCC)


Revaluation of Property Plant & Equipment 0 0 Pensions: Actuarial Gains and Losses 210 210

Sub-total 210 210


Pensions Current Service Costs (25) (25) 25 0 Past Service Costs (85) (85) 85 0 Curtailments 0 0 0 0 Pensions – Net Interest (17) (17) 17 0 Depreciation (7,637) (7,637) 7,637 0

(Gain)/Loss on Sale of Assets (85) (613) (698) 698 0

Capital Grants/Contributions General Capital Grant 1,541 (1,541) 0 0 Specific Capital Grants/Contribution 357 (357) 0 0



Capital Financing Statutory Provision for repayment of debt 1,928 1,928 (1,928) 0 Capital Grant Applied 1,712 1,712 (1,712) 0 Revenue Contribution to Capital 3,845 (3,845) 0 0 Capital Receipts applied 0 0 Earmarked Reserves applied 2,257 2,257 (2,257) 0

Other Adjustments Collection Fund Adjustment Account 535 535 (535) 0

Sub-total 358 (1,774) (613) (2,029) 2,029 0

Total 358 (1,774) (613) (2,029) 2,239 210


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Comparative figures for 2013/14 are shown below:


Revaluation of Property Plant & Equipment (139) (139) Pensions: Actuarial Gains and Losses (1,142) (1,142)

Sub-total (1,281) (1,281)


Pensions Current Service Costs (25) (25) 25 0 Employers Contributions under IAS19 (169) (169) 169 0 Past Service Costs (19) (19) 19 0 Curtailments 0 Pensions – Net Interest 0 Depreciation (6,378) (6,378) 6,378 0

(Gain)/Loss on Sale of Assets 124 (975) (851) 851 0

Capital Grants/Contributions General Capital Grant 1,495 (1,495) 0 0 0 Specific Capital Grants/Contribution 126 (126) 0 0 0



Capital Financing Statutory Provision for repayment of debt 1,892 1,892 (1,892) 0 Capital Grant Applied 1,620 1,620 (1,620) 0 Capital Receipts applied 98 98 (98) 0 Earmarked Reserves applied 1,822 1,822 (1,822) 0

Other Adjustments Collection Fund Adjustment Account 615 615 (615) 0

Sub-total (2,339) 1,821 (877) (1,395) 1,395 0

Total (2,339) 1,821 (877) (1,395) 114 (1,281)


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9. Transfers to / from Earmarked & General Reserves

The Commissioner holds a number of reserves that are classified as usable (can be used to fund the Commissioner’s future activities). This note sets out the amounts set aside from the general fund in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund expenditure 2014/15.

General Fund (Usable) The General Fund is available to support general revenue expenditure.

2014/15

£000 2013/14

£000 2012/13

£000

Balance at 1 April (5,875) (5,287) (5,176)

Transfers to General Fund (89) (588) (111)

Transfers from General Fund 28 - -

Balance at 31 March (5,936) (5,875) (5,287)

Revenue Reserve for Capital Expenditure (Earmarked) This is used to finance capital expenditure in future years. The Commissioner’s budget includes a revenue contribution to this reserve each year to support capital expenditure without further borrowing. For 2014/15 this amounted to £1m.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (105) (696) (3,331)

Transfers to Earmarked Reserve (4,249) (2,205) (2,468)

Transfers from Earmarked Reserve 1,886 2,796 5,103

Balance at 31 March (2,468) (105) (696)

Medium Term Financial Strategy Reserve (Earmarked) This reserve was created to support the Medium Term Financial Strategy in recognition of the challenging financial scenario. This will be used to support transition projects, including a major estate’s refinancing scheme and necessary organisational changes to meet the required savings.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (9,205) (2,367) -


Transfers from Earmarked Reserve 324 21 -

Balance at 31 March (13,973) (9,205) (2,367)

Carry Forward Reserve (Earmarked) Management Board approval at outturn places funding temporarily in this reserve for use in the following year together with the impact of changes in establishment since the budget was set.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (1,166) - -

Transfers to Earmarked Reserve (586) (1,166) -

Transfers from Earmarked Reserve 1,181 - -

Balance at 31 March (571) (1,166) -


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Underwater Search Unit Reserve (Earmarked) The Commissioner acts as the lead body for the regional underwater search unit. The reserve holds resources that the unit can use to support its operations.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (649) (565) (256)

Transfers to Earmarked Reserve (110) (131) (309)

Transfers from Earmarked Reserve 219 47 -

Balance at 31 March (540) (649) (565)

Local Resilience Forum Reserve (Earmarked) This represents the contributions from the collaboration of agencies representing the Local Resilience Forum. The reserve is held on behalf of the forum.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (80) - -

Transfers to Earmarked Reserve (1) (80) -

Balance at 31 March (81) (80) -

IT Reimbursement Reserve (Earmarked) This represents resources that can be used for the replacement of computer equipment.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (88) (22) (208)

Transfers to Earmarked Reserve (197) (208) (171)

Transfers from Earmarked Reserve 199 142 357

Balance at 31 March (86) (88) (22)

Localisation of Council Tax Reserve (Earmarked) As part of the budget report it was agreed to remove this earmarked reserve.

2014/15 £000

2013/14 £000

2012/13 £000


Transfers to Earmarked Reserve 1,109 (1,109) -

Balance at 31 March - (1,109) -

Redundancy Reserve (Earmarked) This reserve is to fund the cost of redundancies resulting from the savings required.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (2,265) (2,811) (3,109)

Transfers to Earmarked Reserve (592) - (901)

Transfers from Earmarked Reserve 627 546 1,199

Balance at 31 March (2,230) (2,265) (2,811)


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Actuarial Valuation Deficit Reserve (Earmarked) This reserve is to fund the actuarial valuation pension deficit costs over the period 2014-17.

2014/15 £000

2013/14 £000

2012/13 £000


Transfers to Earmarked Reserve - (2,965) -

Transfers from Earmarked Reserve 776 - -

Balance at 31 March (2,189) (2,965) -

Unapplied Capital Grants Reserve (Earmarked) This is specific capital grants received but not yet applied to finance capital expenditure.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (31) (36) (231)


Transfers from Earmarked Reserve 1,712 2,741 1,861

Balance at 31 March (27) (31) (36)

Capital Receipts Reserve (Usable) This contains the proceeds of asset sales and can be used to finance new investment.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (7,577) (6,700) (4,355)

Transfers to Earmarked Reserve (613) (1,192) (2,345)

Transfers from Earmarked Reserve - 316 -

Balance at 31 March (8,189) (7,577) (6,700)

Multi Force Shared Service Development Fund Reserve (Earmarked) It was agreed to create a MFSS development earmarked reserve which Cheshire would hold on behalf of the collaboration. The reserve of £0.06m comprises of £0.03m for Nottinghamshire Police on-boarding and £0.03m realised from Intellectual Property Rights income. Under the initial agreement a development fund would be created as and when the Multi Force Shared Service expanded. This will be used to develop the services offered.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (30) - -

Transfers to Earmarked Reserve (30) (30) -

Balance at 31 March (60) (30) -

Armed Police Alliance Reserve (Earmarked) This reserve is held on behalf of the Alliance which is a collaboration between Cheshire Constabulary and North Wales Police.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April - - - Transfers to Earmarked Reserve (150) - -

Balance at 31 March (150) - -


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10. Notes to the Comprehensive Income and Expenditure Statement The Comprehensive Income and Expenditure Statement shows expenditure and income under the mandatory headings required by the CIPFA Service Reporting Code of Practice. To understand further the following table shows the type of expenditure and income incurred.

Subjective Analysis of Expenditure 2014/15 2013/14

£000 £000

Employees - Police Pay and Allowances 98,949 103,152

- Civilian Pay and Allowances 42,690 44,393

- Other Pay and Allowances 3,635 2,011

Premises 8,410 8,055

Transport 3,806 3,853

Supplies & Services 16,555 13,996

Third Party Payments 8,166 5,591

IAS19 Pension costs (3,160) 6,089

Depreciation and Amortisation of Assets 7,637 6,379

Movement in Accumulated Absences Reserve 1,458 (1,441)

Total Service Expenditure 188,146 192,078

Service Income (see below) (26,708) (25,025)

Net Cost of Service 161,437 167,053

(Profit)/Loss on Disposal of Assets 85 (125)

Interest Payable and Similar Charges 3,154 3,286

Interest and Investment Income (157) (105)

IAS19 Pension Net Interest Cost 75,593 74,995

Net Operating Expenditure 240,112 245,104

Police Grant (65,865) (68,420)

Formula Funding (46,747) (50,407)

Precept on Council Tax Collection Funds (52,487) (52,037)

Movement on Collection Fund Debtors/Creditors (234) (49)

PFI Grant - interest element (2,446) (2,489)

Capital Grants (1,709) (1,621)

Capital Contributions (190) 0

Deficit / (Surplus) on Provision of Services 70,434 70,081

Subjective Analysis of Service income £000 £000

Fees & Charges 4,585 4,639

Sales 113 96

Reimbursements:

Casualty Reduction Partnership, Hypothecated Fines 1,084 678

Secondments 1,770 1,772

Private Finance Initiative reimbursements 197 213

Asset Recovery 186 185

Other Reimbursements 336 503

Grants:

Private Finance Initiative 4,783 4,740

Localisation of Council Tax Grant 7,671 6,289

Counter Terrorism 933 1,011

Community Safety Grant & Victims Commissioning 439 1,159

Other Grants 636 868


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Other Income:

Mutual Aid 838 167

External Agency Funding 2,600 2,124

Proceeds of Crime Act 537 581

Total Service Income 26,708 25,025

Within the Comprehensive Income and Expenditure Statements there are three summary lines which are explained in more detail within the next five tables (split where appropriate between those for the Group Accounts and those for the Police & Crime Commissioner).

Other Operating Expenditure (Group) 2014/15

£000 2013/14

£000

(Profit)/Loss on Sale of Fixed Assets 85 (125)

Balance of provision returned to revenue account - (43)

Home Office Top Up Grant – Police Pensions (21,711) (18,734)

Police & Crime Commissioner contribution to Pension Account 21,711 18,734

Total 85 (168)

Other Operating Expenditure (Police & Crime Commissioner) 2014/15

£000 2013/14

£000

(Profit)/Loss on Sale of Fixed Assets 85 (125)

Balance of provision returned to revenue account - (43)

Income for fair use of assets (7,637) (6,379)

Funding to the Chief Constable for Cheshire Constabulary 188,987 186,526

Home Office Top Up Grant – Police Pensions (21,711) (18,734)

Police & Crime Commissioner contribution to Pension Account 21,711 18,734

Total (7,551) (6,547)

Financing and Investment Income and Expenditure (Group) 2014/15

£000 2013/14

£000



Pension Net Interest 75,593 74,995

Total 78,590 78,176

Financing and Investment Income and Expenditure (PCC) 2014/15

£000 2013/14

£000



Pension Net Interest 16 19

Total 3,013 3,200


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Taxation and Non-Specific Grant Income (Group & PCC) 2014/15

£000 2013/14

£000

Police Grant (65,865) (68,420)

DCLG Funding (46,747) (50,407)

Precept on Council Tax Collection Funds (52,487) (52,037)

Movement on Collection Fund Debtors/Creditors (234) (49)

PFI Grant – Interest Element (2,446) (2,489)

Capital Grants and Contributions (1,899) (1,621)

Total (169,678) (175,023)

11. Property, Plant & Equipment The following table shows the movement of assets classified as property, plant & equipment including work in progress (WIP).

2014/15 Property Vehicles Equipment WIP Total

Cost or Valuation £000 £000 £000 £000 £000

At 1 April 2014 74,858 12,079 25,282 0 112,219

Additions 533 1,353 1,584 39 3,509

Revaluations 0 0 0 0 0

Disposals (178) (1,651) 0 0 (1,829)

Reclassifications (1,438) 0 0 0 (1,438)

At 31 March 2015 73,775 11,781 26,866 39 112,461 Depreciation

At 1 April 2014 (2,397) (9,061) (21,082) 0 (32,540)

Charge in year (2,320) (1,907) (1,932) 0 (6,159)

Disposals 2 1,490 0 0 1,492

Revaluations 0 0 0 0 0

Reclassifications 100 0 0 0 100

At 31 March 2015 (4,615) (9,478) (23,014) 0 (37,107)

Net Book Value at 1 April 2014 72,461 3,018 4,200 0 79,679

Net Book Value at 31 March 2015 69,160 2,303 3,852 39 75,354

Included in the above assets are £146k (NBV) of vehicles and £28k (NBV) of equipment held by Cheshire Constabulary on behalf of the Underwater Search Unit collaboration, together with £72k (NBV) of equipment for the Firearms Alliance collaboration. Details of these two collaborations can be found in Note 24.

2013/14 Property Vehicles Equipment Total

Cost or Valuation £000 £000 £000 £000

At 1 April 2013 76,712 11,374 23,907 111,993

Additions 179 1,389 1,380 2,948

Revaluations (1,229) 0 0 (1,229)

Disposals (585) (760) (5) (1,350)

Reclassifications (219) 76 0 (143)

At 31 March 2014 74,858 12,079 25,282 112,219


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Depreciation

At 1 April 2013 (2,421) (8,942) (19,330) (30,693)

Charge in year (2,352) (731) (1,757) (4,840)

Disposals 8 647 5 660

Revaluations 2,368 0 0 2,368

Reclassifications 0 (36) 0 (36)

At 31 March 2014 (2,397) (9,062) (21,082) (32,541)

Net Book Value at 1 April 2013 74,291 2,432 4,577 81,300

Net Book Value at 31 March 2014 72,461 3,017 4,200 79,678

Depreciation

In line with IAS16, depreciation is defined as the systematic allocation of the depreciable amount of an asset over its useful life. Land and buildings are separable assets and are accounted for separately, even when they are acquired together. Land has an unlimited useful life and therefore is not depreciated. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. As stated in the accounting policies on page 35, depreciation is charged as follows:

Land – no depreciation applied

Property (not land) – straight-line allocation over 30 to 50 years

Plant and Equipment – straight-line allocation over 3 to 20 years

Significant commitments under capital contracts

There are no significant commitments under capital contracts. Revaluation

Property (land and buildings) are revalued in detail every five years in accordance with the relevant standards and guidance issued by the Royal Institute of Chartered Surveyors. The last full valuation was carried out in 2010/11 with the next valuation due at the end of the financial year 2015/16. As part of the general review of property assets a desktop exercise was under taken by Graham J Cooke BSc (Hons) FRICS of Matthew & Goodman, Property Advisors, Manchester dated 31 March 2015. This showed no material change to the value of these assets since the valuation review last year and therefore no changes have been made to the asset values. The desktop exercise predominately uses the depreciated replacement cost methodology which is a method of valuation that provides the current cost of replacing an asset with its modern equivalent asset, less deductions for all physical deterioration and all relevant forms of obsolescence and optimisation, e.g. its wear and tear from usage. 12. Intangible Assets

The Commissioner accounts for software as intangible assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item or property, plant and equipment. The intangible assets reflect the purchased software licences.


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All software is given a finite useful life, based on assessments of the period that the software is expected to be of use to the Commissioner. The useful lives generally assigned to the major software suites used by the Commissioner are: Non-police operational systems (e.g. finance system) – 4 years

Operational police systems (e.g. Airwave) – 3 years The carrying amount of intangible assets is amortised on a straight line basis. The amortisation of £1.4m charged to revenue in 2014/15 was allocated to the IT department and then absorbed as an overhead across the service heading in the Net Expenditure of Services. Therefore, it is not possible to quantify exactly how much of the amortisation is attributable to each service heading.

The movement on intangible assets during the year is as follows:

2014/15 £000

2013/14 £000

Carrying Amount Balance at start of year 13,744 13,156 Additions 369 609 Disposals 0 (21)

Balance at end of year 14,113 13,744

Amortisation Balance at start of year (8,335) (6,806) Charge for the year (1,386) (1,550) Disposals 0 21

Balance at end of year (9,721) (8,335)

Net Book Value at 1 April 5,410 6,350

Net Book Value at 31 March 4,393 5,409

The value of these intangible assets is based on cost less depreciation. Depreciation is calculated in accordance with the accounting polices set out in Note 1.

13. Financial Instruments (including Borrowing)

The definition of a financial instrument is “any contract that gives rise to a financial asset of one entity and a financial liability, or equity instrument of another entity”.

The term ‘financial instrument’ covers both financial assets and liabilities. These range from straight forward debtors and creditors to more complex investments and borrowings. The following categories of financial instruments are carried in the Balance Sheet; current is deemed to be under one year and long-term over one year. Long-term Current

31 March

2015 £000

31 March 2014 £000

31 March 2015 £000

31 March 2014 £000

Debtors Loans and receivables 2,441 2,651 23,373 19,047

Total Debtors 2,441 2,651 23,737 19,047


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Borrowings Financial Liabilities 16,778 16,876 100 200

Total included in borrowings 16,778 16,876 100 200

Other Long-term Liabilities PFI & Finance Leases 22,962 23,939 927 812

Total other long term liabilities 22,962 23,939 927 812

Creditors Financial Liabilities 172 185 20,132 15,897

Total Creditors 172 185 20,132 15,897

Fair Values of Assets and Liabilities

Financial liabilities, financial assets represented by loans and receivables and long-term debtors and creditors are carried in the Balance Sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that will take place over their remaining life as follows:

Financial liabilities relate to the outstanding borrowing with the fair value being calculated by Capita Asset Services (the Commissioner’s advisors). Capita use the Net Present Value (NPV) approach, which provides an estimate of the value of future payments in today’s terms. The discount rate used in the NPV calculation is be equal to the current rate in relation to the same instrument from a comparable lender. This will be the rate applicable in the market on the date of valuation, for an instrument with the same duration i.e. equal to the outstanding period from valuation date to maturity. The structure and terms of the comparable instrument should be the same, although for complex structures it is sometimes difficult to obtain the rate for an instrument with identical features in an active market. In such cases, the prevailing rate of a similar instrument with a published market rate is used as the discount factor. The rates quoted in this valuation were obtained by Capita from the market on 30 March 2015, using bid prices where applicable. Assumptions: It is noted that the following assumptions do not have a material effect on the fair value of the instrument:

Interest is calculated using the most common market convention

Interest is not paid/received on the start date of an instrument, but is paid/received on the maturity date

No adjustment made where a relevant date occurs on a non-working day

31 March 2015 31 March 2014

Carrying Amount

£000

Fair Value £000

Carrying Amount

£000

Fair Value £000

Financial Liabilities 16,878 22,612 17,078 18,680

Long-term Creditors 23,134 23,134 25,437 25,437

40,012 45,746 42,515 44,117

Loans and Receivables 6,907 6,908 5,141 5,141

Long-term Debtors 2,441 2,441 2,652 2,652

9,349 9,349 7,793 7,793


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The differences between carrying and fair value amounts are not material. No gains or losses have been recognised in the year.

Short-term debtors and creditors are carried at cost as this is a fair approximation of their value.

The Commissioner’s activities in relation to financial instruments expose it to a variety of financial risks:

Credit Risk – the possibility that other parties might fail to pay amounts due to the Commissioner.

Liquidity Risk – the possibility that the Commissioner might not have funds available to meet its commitments and payments.

Market Risk – the possibility that financial loss might arise for the Commissioner as a result of changes in measures such as interest rates, foreign exchange rates or stock market movements.

The overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to fund police services. Risk management is carried out under policies approved by the Commissioner in the annual Treasury Management Strategy which was approved on 29 January 2014 (Ref: 2014/107) and is published each year. The Strategy provides written principles for overall risk management as well as written policies covering specific areas such as interest rate risk, credit risk and the investment of surplus cash.

Credit Risk

Credit risk relates to deposits with banks/financial institutions and the Commissioner’s debtors.

This risk is minimised by treasury management that meets best practices, guidance and regulations. For example, with investments there are restrictions in both amounts and counterparties using recognised credit ratings. The credit criteria as set out in the 2014/15 Treasury Management Strategy in respect of financial assets held by the Commissioner are detailed below:

Financial Asset Category Minimum Criteria Maximum Investment

Deposits with major UK and non UK Banks and Building Societies

Long Term: A- Short Term: F1 Support: 1

£10m per institution or group.

Deposits with Money Market Funds Long Term: A- Short Term: F1 Support: 1

£10m per fund.

Deposits with Other Local Authorities Not credit-rated but are legally required to set a balanced budget.

£10m per Local Authority.

Deposits with Debt Management Agency Deposit Facility

Not credit-rated but deposits have the best possible credit through the HM Government guarantee.

£10m total.

In respect of debtors, action is taken when payments become overdue and may lead to legal action to recover the debt. The Commissioner provides for bad debts each year based on agreed debt management policy (non-statutory debt only). The amount provided for in 2014/15 was £0.43m (£0.45m in 2013/14).


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Invoiced Debt held by the Commissioner at the end of the financial year, analysed by age is as follows:

31 March 2015 £000

31 March 2014 £000

Current (0-30 days) 7 50 1 Month 2,218 960 2 Months + 147 144

Total 2,372 1,154

Liquidity Risk

Liquidity risk is that the Commissioner will be unable to meet his commitments and payments and this is mitigated in several ways. Firstly, by producing cashflow projections which allow for cash management including the repayment profile of borrowing, also by securing access to overdraft facilities and by utilising short-term borrowing through money markets if necessary.

As such there is no significant risk that the Commissioner will be unable to raise finance to meet its commitments under financial instruments. Instead, the risk is that the Commissioner will be bound to replenish a significant proportion of its borrowings at a time of unfavourable interest rates. The Commissioner sets a limit on the proportion of its fixed rate borrowing during specified periods as set out in the Commissioner’s Treasury Management Strategy prudential indicators.

The following table shows the long-term borrowing outstanding at 31 March 2015.

31 March

2015 £000

31 March 2014 £000

Analysis of loans by type

Public Works Loans Board 10,778 10,878

Money Market 6,000 6,000

Total Outstanding 16,778 16,878

Analysis of loans by maturity

Between 1 and 2 years 0 100

Between 2 and 5 years 0 -

Between 5 and 10 years 1,004 1,004

More than 10 years 15,774 15,774

Total Outstanding 16,778 16,878

Market Risk

Interest Rates

The Commissioner is exposed to risk in terms of movement in interest rates on its borrowings and investments. Movements in interest rates have a complex impact on the Commissioner. For instance, a rise in interest rates would have the following effects:

Borrowing at variable rates – the interest charged to the Comprehensive Income and Expenditure Statement will rise

Borrowing at fixed rates – the fair value of the borrowings will fall


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Investments at variable rates – the income credited to the Comprehensive Income and Expenditure Statement will rise

Investments at fixed rates – the fair value of the investments will fall

Borrowings are not carried at fair value so nominal gains and losses on fixed rate borrowings would not impact the Comprehensive Income and Expenditure Statement. However, changes in interest rates on variable borrowings and investments will have a direct impact on the Comprehensive Income and Expenditure Statement and affect the General Fund balance.

The Commissioner takes into account interest rates as part of his investment strategy but recognises the need for security above return. Given the overall impact of the banking crisis of 2008, security has become an increasing area of risk and investments are only made with organisations with highest security ratings. To ensure the maximum security, the current strategy favours short-term or instant access deposits. Interest rates on borrowing remained unchanged during 2014/15.

Premiums and Discounts on Early Repayment of Debt

The Commissioner did not make any early repayment of debt in 2014/15.

Foreign Exchange Rates / Stock Markets

The Commissioner has no material exposure to foreign exchange rates or stock market movements (price risk).

14. Stock

The value of stocks held is as follows: 31 March

2015 £000

31 March 2014 £000

31 March 2013 £000

Distribution and Logistics – Uniforms 238 250 290

Ammunition 1 136 0 0

Other Items 93 98 78

Total 467 348 368 1 Ammunition is now held in stock on behalf of both the Constabulary and the Armed Police Alliance which is a collaboration between Cheshire Constabulary and North Wales Police, please see Note 24.

15. Analysis of Debtors (including Prepayments etc.)

Analysis of debtors and prepayments are shown below.

31 March 2015 £000

31 March 2014 £000

31 March 2013 £000

Central Government Bodies 11,305 10,215 5,934 Other Local Authorities 10,623 7,945 5,188 NHS Bodies 20 1 65 Other entities and individuals 1,468 931 4,785 LESS: Provision for Bad Debts (43) (45) (86)

Total 23,373 19,047 15,886


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16. Cash and Cash Equivalents

The balance of Cash and Cash Equivalents is made up of the following elements:

31 March

2015 £000

31 March 2014 £000

31 March 2013 £000

Cash held 33 44 44 Bank Current Accounts (751) (740) (1,199) Short-term deposits 24,333 19,158 10,136

Total 23,615 18,462 8,981

In addition to the above, the Commissioner held £762k (£736k 2013/14) of funds as follows:

Police Property Act – At the 31 March 2015, the Commissioner held £179k under the Police Property Act 1997. The Act applies to property that is in the possession of police where the owner of the property cannot be identified and where no order of a competent court has been made. The proceeds, after defraying the costs of handling the property, are available for distribution each year to local charities as directed by the Chief Constable.

Proceeds of Crime Act – At the 31 March 2015, the Commissioner held £583k under the Proceeds of Crime Act 2002. This is money seized in connection with possible criminal activity and held pending a decision, by the courts, on the lawful owner, or distribution if no legal owner is identified.

These funds are not under the ownership of the Constabulary who acts as steward on behalf of various parties, and as such, does not form part of the Commissioner’s accounts.

17. Assets Held for Sale

The Commissioner’s Estates Strategy is to review all property held and when advantageous to do so place surplus property for sale. The following table shows the property for sale at the Balance Sheet dates. When classified as “for sale” the asset is no longer subject to depreciation.

31 March

2015 £000

31 March 2014 £000

31 March 2013 £000

Balance at the start of year 360 345 0

Assets newly classified as held for sale

Property, Plant & Equipment 1,338 219 345

Other Assets - - -

Revaluations gains / (losses) - - -

Impairment losses - (4)

Assets sold (360) (200) (0)

Balance at the end of year 1,338 360 345


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18. Analysis of Creditors

Analysis of short-term creditors is shown below.

31 March 2015 £000

31 March 2014 £000

31 March 2013 £000

Central Government Bodies (4,279) (3,346) (4,237) Other Local Authorities (7,489) (3,108) (1,273) NHS Bodies (11) - (20) Public Corporations & Trading Boards - - Other entities and individuals (8,353) (9,443) (8,711)

Total (20,132) (15,897) (14,241)

19. Provisions

The Commissioner has an insurance provision to meet the cost of known quantifiable liabilities arising from claims in respect of fire and consequential loss, public and employer liability and vehicle losses not covered by external insurance. When claims are settled the cost is met from the provision. Details of the provision are shown below.

Insurance Provision 2014/15

£000 2013/14

£000 2012/13

£000 Balance at 1 April 936 1,158 964 Use of provision in the year (339) (333) (493) Charge to/(from) CI&E Statement 143 111 687

Balance at 31 March 740 936 1,158

Due to the nature of the claims covered by the above provision, a clear projection of when the actual payments will be made is not available. However, based on past experience it is estimated that the current provision will be spent £0.1m within next financial year, £0.3m within 1-5 years and the remainder between 5 and 10 years. On 29 January 2015, the Commissioner set the 2015/16 budget including savings from the implementation of a new policing model. Collective consultation on the changes commenced on 12 February 2015 concluding on the 30 March 2015. The outcome of the consultation was reported to Management Board on 31 March 2015 with the Commissioner approving the proposed voluntary redundancies. Consequentially a provision has been created to cover the specific costs of these redundancies as follows:

Voluntary Redundancy Provision 2014/15

£000 Balance at 1 April - Use of provision in the year - Charge to/(from) CI&E Statement 731

Balance at 31 March 731

20. Usable Reserves

Movement in the Commissioner’s Usable Reserves are detailed in the Movement in Reserves Statement and Note 9.


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21. Unusable Reserves

The Commissioner also holds unusable reserves (technical accounting adjustment accounts reflecting the difference between the outcome of applying proper accounting practices and the statutory requirements for funding expenditure within the public sector). This note shows the movements in year.

Revaluation Reserve (Unusable)

The Revaluation Reserve contains the gains arising from increases in the value of Property, Plant and Equipment. The balance is reduced when assets with accumulated gains are:

revalued downwards or impaired and the gains are lost; used in the provision of services and the gains are consumed through depreciation; or disposed of and the gains realised

The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated in the balance on the Capital Adjustment Account.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (10,829) (8,454) (8,914)

Movement in year 325 (2,375) 460

Balance at 31 March (10,504) (10,829) (8,454)

Capital Adjustment Account (Unusable)

The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement and depreciation, impairment losses and amortisations are charged to the Comprehensive Income & Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value into historical cost). The Account is credited with the amounts set aside to finance the cost of acquisition, construction or enhancement.

The Account also contains revaluation gains accumulated on Property, Plant & Equipment before 1 April 2007 and the date that the Revaluation Reserve was created to hold such gains. Note 30 provides details of the source of all the transactions posted to the Account apart from those involving the Revaluation Reserve.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (24,284) (27,314) (30,310)

Depreciation & Amortisation 7,636 6,379 7,324

Revaluation losses and write down (231) 1,374 1,446

Impact of disposals/sale of assets 604 749 3,861

Capital Financing – see Note 30 (3,969) (3,580) (7,772)

Minimum Revenue Provision/Debt Repayment (1,928) (1,892) (1,863)

Balance at 31 March (22,172) (24,284) (27,314)


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IAS19 Pension Reserve (Unusable) The Pension Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding those benefits in accordance with statutory provisions. Post-employment benefits are accounted for in the Comprehensive Income & Expenditure Statement as the benefits earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. Statutory arrangements however require benefits earned to be financed as the Commissioner makes employer’s contributions to pension funds or eventually pays any pensions for which he is directly responsible. The debt balance on the Pension Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April 1,720,500 1,738,717 1,459,721

Movement in year 280,003 (18,217) 278,996

Balance at 31 March 2,000,503 1,720,500 1,738,717

Collection Fund Adjustment Account (Unusable)

The Collection Fund Adjustment Account is the difference between the precept income included in the accounts and the amount required by statute to be credited to the General Fund. The balance relates to the net creditor/debtor from billing authorities when accounting for collection fund balances on an accruals basis at the year end.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April (833) (218) (112)

Movement in year (535) (615) (106)

Balance at 31 March (1,368) (833) (218)

Accumulated Absences Reserve (Unusable)

As part of working terms and conditions employees at any given time can hold entitlement to leave, time off in lieu or flexi leave for additional hours worked. This reserve shows the financial impact of such untaken leave at the balance sheet date.

2014/15 £000

2013/14 £000

2012/13 £000

Balance at 1 April 673 2,114 1,884

Movement in year 1,458 (1,441) 230

Balance at 31 March 2,131 673 2,114

22. Notes to the Cashflow Statement The cashflow include the following items:


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Other Operating Expenditure 2014/15

£000 2013/14

£000

Interest received (157) (105)

Interest paid 3,154 3,286

Total 2,997 3,181

Investing Activities 2014/15

£000 2013/14

£000

Purchase of Property, Plant & Equipment & Intangible Assets 4,168 2,072

Proceeds from sale of assets (613) (728)

Total 3,555 1,344

Financing Activities 2014/15

£000 2013/14

£000 Cash payments for the reduction of outstanding liabilities relating to finance leases and on-balance sheet PFI contracts

863 812

Repayment of short and long-term borrowing 198 2,902

Total 1,061 3,714

23. Reports for Decision-Making Purposes

The analysis of income and expenditure shown in the CI&E Statement is that specified by the CIPFA Service Reporting Code of Practice. However, decisions about resource allocation are taken on the basis of budget reports analysed across various departments and Areas. These reports are prepared on a different basis from the accounting policies used in these financial statements. In particular:

no charges are made for capital expenditure (whereas depreciation, revaluation & impairment losses in excess of the balance on the Revaluation Reserve & amortisations are charged to services in the Comprehensive Income & Expenditure Statement)

the cost of retirement benefits is based on cashflows (payment of employer’s contributions) rather than current service cost of benefits accrued in the year

expenditure on some support services is budgeted for centrally and not charged directly to services

The following table shows the details reported to the Management Board on 2 June 2015 reconciled to the Comprehensive income and Expenditure Statement.


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Outturn Report 2014/15 reconciled to the Comprehensive Income and Expenditure Statement

Service Analysis

Police Officer Pay &

Allowances Neighbourhood

Policing Specialist

Policing

Force Operations

Collaborations Central

Services Business Services

Multi Force Shared Service

Office of the Police & Crime Commissioner

Corporate Costs Total

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Fees, Charges & Other Service Income

0 (412) (6,145) (186) (1,133) 0 (3) 0 (157) (8,036)

Government Grants (302) (1,635) (4,385) (102) (4,031) 0 0 (582) (8,256) (19,293)

Total Income (302) (2,047) (10,530) (288) (5,164) 0 (3) (582) (8,413) (27,329)

Employee Expenses 91,669 12,240 21,343 3,770 12,226 700 49 776 142,773

Other Operating Expenses 0 1,691 7,778 2,016 19,362 7,662 149 2,001 6,672 47,331

Total Operating Expenses 91,669 13,931 29,121 5,786 31,588 7,662 849 2,050 7,448 190,104

Cost of Services 91,367 11,884 18,591 5,498 26,424 7,662 846 1,468 (965) 162,775

Reconciliation to Net Cost of Services in Comprehensive Income and Expenditure Statement

£000 £000

Cost of Services in Service Analysis 162,775

Add: Services not included in the main analysis 0

Add: Amounts not reported to management (85,638)

Less: Amounts reported to management and not included in Comprehensive Income & Expenditure Statement

6,702

(92,340)

Deficit / (Surplus) on Provision of Services as shown in the Comprehensive Income and Expenditure Statement

70,435

The above adjustments are detailed on the following page.


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Reconciliation to Subjective Analysis 2014/15

Reconciliation to Outturn Report Service

Analysis

Services not

Included

Amounts not

Reported

Not included

in CI&E Total £000 £000 £000 £000 £000 Fees, Charges & Other Service Income (8,036) 0 0 0 (8,036)

Income from Council Tax 0 0 (52,721) 0 (52,721)

Government Grants (19,293) 0 (114,511) 0 (133,804)

Total Income (27,329) 0 (167,232) 0 (194,561)

Employee Expenses 142,773 0 0 0 142,773

Movement in Accumulated Absences 0 0 1,458 0 1,458

IAS19 Actuarial Pension Entries 0 0 72,433 0 72,433

Other Operating Expenses 47,331 0 (533) 203 46,595

Depreciation and Amortisation 0 0 7,637 0 7,637

Minimum Revenue Provision & Capital Contributions 0 0 0 5,570 (5,570)

Gains and Losses on Disposal of Assets 0 0 85 0 85

Transfers to/from Reserves 0 0 (217) 929 (1,146)

Transfers to/from Provisions 0 731 0 731

Total Operating Expenses 190,104 0 81,594 6,702 264,996

Deficit / (Surplus) on Provision of Services 162,775 0 (85,638) 6,702 70,435


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Outturn Report 2013/14 reconciled to the Comprehensive Income and Expenditure Statement

Service Analysis

Police Officer Pay and

Allowances

Force Operations Directorate Collaborations

Area Command

Units

Centrally Delivered

Services Business Services

Office of the Police & Crime Commissioner Commissioning

Corporate Costs Total

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Fees, Charges & Other Service Income

0 (4,715) 0 (522) (187) (955) (5) 0 (105) (6,489)

Government Grants (207) (5,126) 0 (1,689) (69) (4,082) 0 (1,424) (6,289) (18,886)

Total Income (207) (9,841) 0 (2,211) (256) (5,037) (5) (1,424) (6,394) (25,375)

Employee Expenses 95,747 20,468 0 14,246 3,558 12,815 676 0 2,551 150,061

Other Operating Expenses

0 7,905 3,959 2,184 1,172 18,632 115 1,292 3,785 39,044

Total Operating Expenses

95,747 28,373 3,959 16,430 4,730 31,447 791 1,292 6,336 189,105

Cost of Services 95,540 18,532 3,959 14,219 4,474 26,410 786 (132) (58) 163,730

Reconciliation to Net Cost of Services in Comprehensive Income and Expenditure Statement

£000 £000

Cost of Services in Service Analysis 163,730

Add: Services not included in the main analysis 0

Add: Amounts not reported to management (90,804)

Less: Amounts reported to management and not included in Comprehensive Income & Expenditure Statement

2,845 (93,649)

Deficit / (Surplus) on Provision of Services as shown in the Comprehensive Income and Expenditure Statement

70,081

Corporate Costs include debt management costs and interest on balances. The above adjustments are detailed on the following page.


Page 69

Reconciliation to Subjective Analysis 2013/14

Reconciliation to Outturn Report Service

Analysis

Services not

Included

Amounts not

Reported

Not included

in CI&E Total £000 £000 £000 £000 £000 Fees, Charges & Other Service Income (6,489) 0 (497) 0 (6,986) Income from Council Tax 0 0 (52,085) 0 (52,085) Government Grants (18,886) 0 (120,498) 0 (139,384)

Total Income (25,375) 0 (173,080) 0 (198,455)

Employee Expenses 150,061 0 (2,965) 0 147,096 Movement in Accumulated Absences 0 0 (1,441) 0 (1,441) IAS19 Actuarial Pension Entries 0 0 81,084 0 81,084 Other Operating Expenses 37,169 0 (656) 203 36,310 Depreciation and Amortisation 0 0 6,379 0 6,379 Minimum Revenue Provision & Capital Contributions 0 0 0 2,642 (2,642) Gains and Losses on Disposal of Assets 0 0 (125) 0 (125) Transfers to/from Reserves 0 0 0 0 0 Support Service Recharges 1,875 0 0 0 1,875

Total Operating Expenses 189,105 0 82,276 2,845 268,536

Deficit / (Surplus) on Provision of Services 163,730 0 (90,804) 2,845 70,081


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24. Partnerships & Collaborations

The Commissioner worked with a number of partners during 2014/15. Service level agreements exist to define the role of each of the bodies involved. In all of these agreements each party is responsible for their own liabilities and these cannot be passed or transferred to the other parties involved. They operate as jointly controlled operations in accordance with International Accounting Standard IAS31.

TITAN TITAN consists of the Regional Organised Crime Team (ROCT), Regional Intelligence Unit (RIU), Regional Asset Recovery team (RART), Cyber Crime (RCCU), Protective Persons Unit (PPU), Regional Fraud Team (RFT), Government Agencies Intelligence Network (GAIN), Operational Security (OPSY), Regional Confidential Unit – RCU (New July 2014), Regional Technical Surveillance Unit – RTSU (New July 2014) and Regional Prison Intelligence Unit – RPIU (New July 2014). The combined unit serves the areas of Cheshire, Greater Manchester, Merseyside, Lancashire, Cumbria and North Wales. It is staffed by police officers and support staff from the six constituent forces with the overall expenditure being met partly by HO Grant and from the six forces above. The total revenue costs of TITAN was (£13.6m) (£7.1m in 13/14), however after reducing this by Home Office funding of (£4.3m) (£1.9m in 13/14), the net cost of the collaboration was (£9.3m) (£5.2m in 13/14). Cheshire’s contribution amounted to £1.0m (£0.6m in 13/14).

North West Police Underwater Search and Marine Unit The North West Police Underwater Search and Marine Unit (UWSU) serves the areas of Cheshire, Greater Manchester, Merseyside, Lancashire, Cumbria and North Wales and is staffed by police officers and one part-time support staff from the six constituent police authorities with the overall expenditure being met by those authorities. For 2014/15 the Police and Crime Commissioner for Cheshire charged expenditure on the provision of police officers, police staff, equipment, vehicles and transport to the collaboration. This amounted to £0.3m (£0.3m in 2013/14). The total cost of the UWSU collaboration was £0.9m and apportioned based on each Commissioner’s police grant allocation. Cheshire’s contribution amounted to £0.1m (£0.1m in 2013/14)

North West Motorway Policing Group The North West Motorway Policing Group (NWMPG) serves the areas of Cheshire, Merseyside, Lancashire and Greater Manchester. It is currently staffed by Cheshire police officers and staff with the overall expenditure being met by the four constituent police forces. The staffing expenditure is apportioned based on a specific agreement made in the Service Level Agreement. All other costs are apportioned based on the geographic “share” of the motorways being policed, population and the number of incidents occurring. For 2014/15 Cheshire charged expenditure of £1.0m (£1.0m in 2013/14) to the collaboration. Cheshire’s contribution amounted to £0.2m (£0.2m in 2013/14).

North West (NW) Regional Firearms Policy Collaboration In April 2012, an agreement was reached by the NW Region for the creation of a Regional Firearms Collaboration to initially deliver in 4 key areas of business:

1. NW Firearms Policy and Compliance Unit (PCU) 2. NW Collaborative Firearms Training Structure 3. Fully interoperable “soft border” Armed Response Vehicles (ARV) capability. 4. Specialist Firearms Capability

The collaboration has further been instrumental in undertaking a review of specialist firearms tactics resulting in sharing of such resources (reduction from 6 to 3 forces training and equipping such officers). The collaboration team, comprise of 3 Police Officers and 2 support staff who deliver the regional firearms function. The collaboration commenced its work from a position whereby all 6


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partner forces currently hold full College of Policing Firearms Training Licences. All training is now managed under one regional training licence. The Firearms Collaboration continues to develop in the four key areas described. All this work is aimed to deliver standardised joint training and methods of working between the six NW regional forces along with the financial benefits that collaboration brings in terms of resources. For 2014/15, the Police and Crime Commissioner for Cheshire charged £0.2m (£0.2m in 2013/14) to the collaboration for the provision of police officers, support staff and expenses. The total cost of the NW Regional Firearms Policy Collaboration was £0.3m (£0.3m in 2013/14) and is apportioned based on each Commissioner’s police grant allocation. Cheshire’s contribution amounted to £0.03m (£0.03m in 2013/14).

Cheshire and North Wales Police Armed Policing Alliance The Cheshire and NWP Armed Policing Alliance provide armed officers to both Cheshire and North Wales in a fully integrated joint force team. It went live operationally in June 2014. The funding model took effect from April 2014. It is an armed policing alliance that serves the areas of Cheshire and North Wales and is staffed by police officers and support staff from the two constituent police forces with the overall expenditure being met by those forces. For 2014/15 the Police and Crime Commissioner for Cheshire charged expenditure on the provision of police officers, police staff, equipment, vehicles and transport to the collaboration amounting to £3.5m. The total cost of the Cheshire and North Wales Armed Policing Alliance was £6.3m and apportioned based on each Commissioner’s police grant allocation. Cheshire’s contribution amounted to £3.4m. Cheshire saving of £0.1m was made prior to go live and with £0.1m in 2014/15 and full effect of £0.2m reduction reported in 2015/16 budget.

Cheshire Road Safety Group The Cheshire Road Safety Group which commenced in April 2011 succeeded the former Cheshire Safer Roads Partnership. Financially contributing parties are Cheshire East Borough Council, Cheshire West & Chester Borough Council, Warrington Borough Council and the Police and Crime Commissioner for Cheshire. Non-financially contributing parties are Cheshire Fire and Rescue Service and Halton Borough Council. The aim of the partnership is to reduce the number of people seriously injured or killed on the roads through the operation and maintenance of speed and red light safety cameras on roads with a history of vehicle collisions. The Commissioner provides accommodation and management of the resources and staff of the partnership, employing all but one member of staff. In 2014/15 costs of £0.41m were incurred which were fully reimbursed by the partnership.

North West Strategic Roads Automatic Number Plate Recognition This collaboration commenced in April 2011 with collaborative forces of Greater Manchester, Lancashire, Merseyside and Cumbria. North Wales joined the collaboration in January 2012. The collaboration has strong links to the North West Motorway Policing Group as Automatic Number Plate Recognition (ANPR) is identified as an effective method of providing protective services across the region’s strategic road network. Bids secured funding amounting to £1.8m which has enabled the ANPR infrastructure to be built over the last 4 years. The total cost of the collaboration in 2014/15 was £0.07m (£0.07m in 2013/14) with Cheshire’s share of costs amounting to £0.01m (£0.01m in 2013/14).

North West Regional Chronicle Collaboration Chronicle is a computer system that manages training and operations for specialist functions (armed policing, public order, search, dogs and armoury). The main purpose of the collaboration is to standardise and merge 6 regional systems into 1. The North West Regional Chronicle Collaboration serves the areas of Cheshire, Greater Manchester, Merseyside, Lancashire, Cumbria and North Wales. It is currently staffed by 1 police sergeant from Cheshire and the overall expenditure being met by those authorities. The Police and Crime Commissioner for Lancashire is the lead force. For 2014/15 the total cost of NW Regional Chronicle Collaboration was £0.05m with Cheshire’s share of costs amounting to £0.005m.


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Multi-Force Shared Services (MFSS) This collaboration commenced in April 2012 between Northamptonshire Police and Cheshire Constabulary. The areas of business included human resources; accounts; purchasing; payroll and service delivery. The costs are based on head count and charged out on a 60:40 split with Cheshire paying the higher percentage. This apportionment (as used in the project phase) was agreed at the MFSS Board for all technology and MFSS costs. In addition, Cheshire pays the costs for a travel desk service and Northamptonshire Police pay for a HR post to recruit their higher demand in Specials, both do not form part of the 60:40 apportionment. Nottinghamshire Police joined the collaboration with a go-live date of 27 April 2015. The MFSS on-boarding team has worked with Nottinghamshire Police during 2014/15 to join this collaboration smoothly. There have been costs around IT contracts (e.g. Oracle, Capgemini, CGI UK, Crown DMS), consultancy fees and staff costs totalling £2.2m of which £0.03m has been transferred to the MFSS development earmarked reserve to fund costs early April 2015 before the go-live date. For 2014/15 the total cost of MFSS was £3.1m (£3.4m in 2013/14) with Cheshire’s share of costs amounting to £1.8m (£2.1m in 2013/14).

COLLABORATION/PARTNERSHIP Total Spend

Direct HO

Funding

NW Regional Funding

Cheshire’s Contribution

%

TITAN – Regional Organised Crime Team Regional Intelligence Unit Regional Asset Recovery Team Cyber Crime Protective Persons Unit Regional Fraud Team Government Agencies Intelligence Network (GAIN) Operational Security (OPSY) Regional Confidential Unit Regional Technical Surveillance Regional Prison Intelligence Unit Additional TITAN costs relating to Phase 2 capabilities, pilot ACE team & excess premises costs due to overlap of leases, equipment etc.

£3.9m £0.9m £1.1m £0.3m £1.6m £0.3m £0.1m

£0.1m £1.6m £1.8m £0.8m £1.1m

0

£0.5m £1.1m £0.3m

0 £0.3m £0.1m

£0.1m £0.1m £0.4m £0.3m £1.1m

£3.9m £0.4m

0 0

£1.6m 0 0

0

£1.5m £1.4m £0.5m

0

£0.4m

£0.04m 0 0

£0.2m 0 0

0

£0.2m £0.1m £0.1m

0

10.52% 10.52%

11.99%

10.37% 9.02%

15.07%

TOTAL TITAN 14/15 £13.6m £4.3m £9.3m £1.04m

NW Regional Underwater Search Unit £1.0m 0 £1.0m £0.1m 10.63%

NW Regional Motorway Policing Group £1.0m 0 £1.0m £0.2m 21.78%

NW Regional Firearms Policy £0.3m 0 £0.3m £0.03m 10.63%

Cheshire and North Wales Armed Policing Alliance

£6.3m 0 £6.3m £3.4m 54.60%

Cheshire Road Safety Group £0.41m 0 £0.41m 0 0

NW Strategic Roads ANPR £0.07m 0 £0.07m £0.01m

16.67%/ 20%

(Oracle)

NW Regional Chronicle Collaboration £0.05m 0 £0.05m £0.005m 10.52%

Multi Force Shared Services £3.1m 0 £3.1m £1.8m 60%

TOTAL £25.95m £4.4m £21.55 £6.585m

Cheshire Constabulary acts as a lead force for a number of these collaborations and at year-end held


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both assets and liabilities within the Group Balance Sheet on their behalf. Details of the reserves held for the collaborations are shown in Note 9. The balances are not considered to be individually material to any of the participating forces and are therefore accounted for within these Accounts. 25. Members’ Allowances & Expenses

The amounts shown below relate to the Audit & Ethics Committee Members only.

2014/15

£000 2013/14

£000 Basic Allowances 10 3 Expenses 4 1

Total 14 4

26. Officer Remuneration

The Commissioner is required to detail the remuneration received by senior officers of the Constabulary and Commissioner which are shown in the following tables. The regulations require detailed disclosure for officers who comprise the Strategic Management Team of the Constabulary whose total remuneration excluding the employer’s pension contribution exceeds £50,000. The following definitions apply:

Salary including fees and allowances: the amount received under a contract of employment, including any allowances such as housing allowance before the deduction of employees’ pension contributions, but excluding payments such as bonuses and benefits in kind. The figures shown separately in the Pensions Contributions column refer to the employer’s pension contributions.

Bonuses: payments made under Police Reform Pay and Conditions Agreement 2002 & 2004 and payments for exceptional work.

Benefits in kind: the estimated value of benefits received other than in cash, for example, use of a fleet vehicle.

Compensation for loss of office: includes payments made to or receivable by the person as a result of their termination of employment such as voluntary/compulsory redundancy, voluntary early retirement, pay in lieu of notice, accrued salary or holiday pay etc.

The number of employees whose remuneration, excluding employer's pension contribution exceeding £50,000 or more in bands of £5,000 (including those shown on the next table Senior Officers and Relevant Police Officers emoluments) is set out below:

For the Office of the Police & Crime Commissioner:

Remuneration Band Number of Employees

2014/15 2013/14

£50,000 - £54,999 1 0

£75,000 - £79,999 1 1

£95,000 - £99,999 0 1

£100,000 - £104,999 1 0


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Senior Officers and Relevant Police Officers emoluments exceeding £50,000 to £150,000

2014/15 Post title

Salary Inc Fees &

Allowances £

Benefits in Kind

£

Total Remuneration

excl. Pension Contributions

2013/14 £

Pension Contributions

£

Total Remuneration

incl. Pension contributions

2014/15 £

Police & Crime Commissioner 75,138 2,616 77,754 11,195 88,949

Chief Executive 1 96,389 5,357 101,746 14,362 116,108

Chief Finance Officer 2 40,021 0 40,021 5,963 45,984

1 Chief Executive salary SM9 £91,032, currently on pay protection;

2 The CFO is part-time.


2013/14 Post title

Salary Inc Fees &

Allowances £

Benefits in Kind

£

Total Remuneration


2013/14 £


£

Total Remuneration


2013/14 £

Police & Crime Commissioner 75,000 176 75,176 11,175 86,351

Chief Executive 1 96,212 2,759 98,971 14,336 113,307

Chief Finance Officer 2 39,783 0 39,783 5,928 45,711

1 Chief Executive salary SM9 £91,032, currently on pay protection;

2 The CFO is part-time.

For the Group Accounts:

Remuneration band Number of Employees

2014/15 2013/14 2012/13

£50,000 - £54,999 76 85 63

£55,000 - £59,999 70 54 58

£60,000 - £64,999 7 8 4

£65,000 - £69,999 8 9 4

£70,000 - £74,999 3 2 3

£75,000 - £79,999 3 5 6

£80,000 - £84,999 6 6 3

£85,000 - £89,999 3 0 5

£90,000 - £94,999 0 1 3

£95,000 - £99,999 0 1 0

£100,000 - £104,999 2 1 1

£105,000 - £109,999 0 2 1

£110,000 - £114,999 0 1 0

£115,000 - £119,999 0 0 0

£120,000 - £124,999 1 1 1

£125,000 - £129,999 1 0 0

£130,000 - £134,999 0 0 0

£135,000 - £139,999 1 0 0

£140,000 - £144,999 0 0 0

£145,000 - £149,999 0 0 0

£150,000 - £154,999 0 0 0

£155,000 - £159,999 0 1 1

£160,000 - £164,999 0 0 0

Total 181 177 153


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Senior Officers and Relevant Police Officers emoluments >£150,000

2014/15 Post title

Salary Inc Fees & Allowances

£ Bonuses

£ Benefits in Kind

£

Total Remuneration


£


£

Total Remuneration


£

Chief Constable - D Whatton 1

33,840 0 2,220 36,060 0 36,060

Chief Constable – S Byrne 2

124,233 0 4,599 128,832 0 128,832


2014/15 Post title

Salary Inc Fees & Allowances

£ Bonuses

£ Benefits in Kind

£

Total Remuneration


£


£

Total Remuneration


£

Deputy Chief Constable 3

117,054 0 5,340 122,394 27,665 150,060

Deputy Chief Constable 4

22,651 0 897 23,549 5,299 28,848

Assistant Chief Constable 5 97,894 0 4,933 102,828 22,859 125,687

Assistant Chief Constable 6 65,780 0 3,602 69,382 15,411 84,793

Assistant Chief Officer 7

56,191 0 0 56,191 8,112 64,303

Assistant Chief Officer 8 17,818 0 0 17,818 4,312 22,130

Chief Executive 96,389 0 5,357 101,746 14,362 116,108

Police and Crime Commissioner 75,138 0 2,616 77,754 11,195 88,949

Chief Finance Officer 40,021 0 0 40,021 5,963 45,984

Director of Finance 84,038 0 0 84,037 11,926 95,963

Chief Superintendent 89,160 0 0 89,160 0 89,160

Chief Superintendent 84,534 0 0 84,534 19,626 104,160





Chief Superintendent 9 23,730 0 0 23,730 5,637 29,367

Chief Superintendent 10

6,352 0 0 6,352 0 6,352

Force Solicitor 73,771 0 0 73,771 10,445 84,216

Head of Multi Force Shared Service 65,119 0 0 65,119 9,703 74,822

Head of Planning and Performance 56,368 0 0 56,368 8,933 65,301 1 Chief Constable retired June 2014

2 Chief Constable joined June 2014;

3 Deputy Chief Constable promoted July 2014;

4 Deputy Chief Constable left June 2014 ;

5 Asst Chief Constable promoted July

2014; 6

Asst Chief Constable joined May 2014; 7 Asst Chief Officer joined Sept 2014;

8 Asst Chief Officer left May 2014;

9 Chief Supt joined Dec 2014;

10

Chief Supt joined March 2015


Page 76

Senior Officers and Relevant Police Officers emoluments >£150,000

2013/14 Post title

Salary Inc Fees &

Allowances £

Bonuses £

Benefits in Kind

£

Compensation for loss of

office £

Total Remuneration excl. Pension

Contributions £


£

Total Remuneration incl. Pension

contributions £

Chief Constable - D Whatton 146,253 0 11,431 0 157,684 14,028 171,712

Senior Officers and Relevant Police Officers emoluments exceeding £50,000 to £150,000 2013/14 Post title

Salary Inc Fees &

Allowances £

Police Reform

Bonuses £

Benefits in Kind

£

Compensation for loss of

office £

Total Remuneration excl. Pension

Contributions £


£

Total Remuneration incl. Pension

contributions £

Deputy Chief Constable 119,440 0 4,572 124,012 27,937 151,949

Assistant Chief Constable 103,116 0 5,604 108,720 24,292 133,012

Assistant Chief Constable 104,925 0 4,232 109,157 22,821 131,978

Assistant Chief Officer 104,875 0 0 104,875 15,626 120,501

Chief Executive 1 96,212 0 2,759 98,971 14,336 113,307

Chief Superintendent 82,530 2,115 0 84,645 19,141 103,786


Chief Superintendent 78,673 2,115 0 80,788 18,623 99,411



Chief Superintendent 90,503 0 0 90,503 0 90,503


Chief Superintendent 2 41,101 0 0 41,101 9,531 50,632

Director of Finance & Procurement 77,849 0 0 77,849 11,599 89,448

Police and Crime Commissioner 75,000 0 176 75,176 11,175 86,351

Head of Multi-Force Shared Service 62,828 0 0 62,828 8,878 71,706

Chief Finance Officer, OPCC (0.5 FTE part time)

39,783 0 0 39,783 5,928 45,711

Director of Performance Development 3 19,776 0 0 92,036 111,812 2,947 114,759

Note: 1 Chief Executive salary SM9 £91,032, currently on pay protection; Chief Superintendent retired Sept 13; Director of Performance Development left June 13.


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The number of termination benefits with total cost per band and total cost of the compulsory and other redundancies are set out in the table below:

Exit package cost band (including special

payments)

Number of compulsory

redundancies

Number of other agreed departures

Total number of exit packages by

cost band

Total cost of exit packages in each band

2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14

£nil - £20,000 8 2 3 14 11 16 £129,865 £173,330

£20,001 - £50,000 0 0 11 11 11 11 £317,561 £379,744

£50,001 - £150,000 0 2 3 1 3 3 £281,552 £207,978

Total 8 4 17 26 25 30 £728,978 £761,052

Further information on the above is included in Note 35.


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27. External Audit Fees

Grant Thornton LLP, the external auditors received the following fees.

2014/15 £000

2013/14 £000

Fees payable to the Grant Thornton LLP with regard to external audit services carried out by the appointed Auditor

65 63

28. Grant Income

The Commissioner credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement.

2014/15 £000

2013/14 £000

Credited to Taxation & Non-Specific Grant Income

Police Grant (Home Office) 65,865 68,420

DCLG Funding 46,747 50,407

PFI Grant – Interest Element 2,446 2,489

Capital Grants

General Capital Grant (Home Office) 1,709 1,495

Total 116,767 122,811

Credited to Other Operating Expenditure

Police Pension Grant (Home Office) 21,711 16,441

Total 21,711 16,441

Credited to Services

Local Council Tax Freeze Grant 7,671 6,289

Private Finance Initiative 4,693 4,740

Counter Terrorism 933 1,011

Community Safety & Commissioning 0 1,159

Other Grants 1,103 520

Total 14,400 13,719

The Commissioner has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the giver. The balances at the year-end are as follows:

Grants Received in Advance (Revenue Grants) 2014/15 £000

2013/14 £000

Automatic Number Plate Recognition Phase 1&2 (150) (185)

Total (150) (185)


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29. Related Parties

The Commissioner is required to disclose material transactions with related parties (i.e. bodies or individuals that have the potential to control or influence the Commissioner or be controlled or influenced by the Commissioner). Disclosure of these transactions allows readers to assess the extent to which the Commissioner might have been constrained in his ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Commissioner.

Central Government

Central Government has effective control over the general operations of the Commissioner – it is responsible for providing the statutory framework within which the Commissioner operates, provides the majority of the Commissioner’s funding in the form of grants and prescribes the terms of many of the transactions that the Commissioner has with other parties (e.g. council tax bills). Grants received from Government departments are set out in Note 28.

The Police Reform & Social Responsibility Act 2011

The above Act created two new corporations sole, the Police & Crime Commissioner and the Chief Constable. Each organisation is required to produce a Statement of Accounts which are subject to external audit under the Audit Commission Act 1998. The Chief Constable for Cheshire is a wholly owned subsidiary of the Commissioner for Cheshire.

Office of the Police & Crime Commissioner

Since November 2012 the Office of the Police and Crime Commissioner has maintained a Register of Interests for the Commissioner, Deputy Commissioner, Chief Executive, Chief Finance Officer and members of the Audit & Ethics Committee. It has also maintained a Register of Business Interests covering the staff employed therein.

Officers and Staff

The Constabulary maintains a Register of the Business Interests of Officers and Staff.

These four registers of business interests were compared to a full supplier listing for 2014/15 and in the Chief Finance Officer’s opinion there are no material transactions recorded between the Office of the Police & Crime Commissioner or the Constabulary and any related parties.

Other Public Bodies (subject to common control by Central Government)

Since the creation of the Multi-Force Shared Service on 1 April 2012, there have been significant transactions with Northamptonshire Police as the partner force. The governance arrangements assure transparency over these transactions and are recorded in the Comprehensive Income & Expenditure Statement or as assets and contributions in the Balance Sheet.

Material transactions with other public bodies such as the Borough Councils and the Cheshire Pension Fund have been disclosed within the Comprehensive Income and Expenditure Account and the Cashflow Statement. Separate specific disclosures have also been made in relation to partnerships and collaborations in Note 24.

There are no other related party transactions to report.


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30. Capital Expenditure & Financing

The total amount of capital expenditure incurred in the year is shown in the table below including the value of assets acquired under finance leases and PFI contracts, together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used, the expenditure results in an increase in the capital financing requirement (CFR), a measure of the capital expenditure incurred historically that has yet to be financed. The Capital Financing Requirement is analysed in the second part of this note.

2014/15

£000 2013/14

£000

Opening capital financing requirement 50,336 52,227

Capital Expenditure in year:

Property 664 163

Plant (e.g. vehicles) 1,353 1,415

Equipment 1,584 1,354

Intangibles 369 609

3,970 3,541

Less: Capital Financing:

Capital Grants 1,712 1,620

Borrowing 0 -

Capital Receipts 0 98

Contribution from reserves 1,839 1,639

Revenue and Other contributions 418 183

Revenue Provision for Repayment of Debt 1,928 1,892

Early Repayment of Debt 0 -

5,897 5,432

Closing capital financing requirement 48,409 50,336

Explanation of movement in year: 2014/15

£000 2013/14

£000

Decrease in underlying need to borrow (supported by Government direct funding)

(203) (203)

Decrease in underlying need to borrow (not supported by Government direct funding)

(1,725) (1,689)

Decrease in Capital Financing Requirement (1,928) (1,892)


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31. Leases: Finance and Operating

Finance Leases

The Commissioner accounts for two finance leases, the Private Finance Initiative (PFI) scheme at Headquarters and Charles Stewart House an operational building located in Warrington. The lease for Charles Stewart House expires in 2021/22. Details of the PFI Scheme are shown in Note 32. Charles Stewart House is accounted for as part of the Commissioner’s property, plant and equipment and is contractually subject to a full revaluation on a five year cycle. The last revaluation was in December 2011 with the next due in December 2016. The rentals payable in 2014/15 were £356,909 (2013/14 £356,619). The fair value at 31 March 2015 is £0.8m (2013/14 £0.8m)

Outstanding obligations to make payments under these finance leases at 31 March 2014 accounted for as part of long term liabilities are as follows:

Property

£000

Not later than one year 203

Later than one year, not later than five years 813

Later than five years 203

Total 1,219

IAS 17 requires the minimum lease payments to be reported. The following table shows the minimum lease payments relating to Charles Stewart House and PFI.

2014/15

£000 2013/14

£000 Not later than one year 3,499 3,490 Later than one year, not later than five years 13,950 13,950 Later than five years 43,095 46,594

Total 60,544 64,034

Operating Leases

The Commissioner rents properties and equipment, mostly on short term leases, which are accounted for as operating leases. The rentals payable in 2014/15 and 2013/14 were £124,380 and £156,802 respectively. The Commissioner was committed at 31 March 2015 to making payments of £137,151 under operating leases as follows:

Property £

Equipment £

Total £

Not later than one year 87,605 87,605

Later than one year, not later than five years 3,933 39,024 42,957

Later than five years 6,589 6,589

Total 98,127 39,024 137,151


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32. Private Finance Initiative In 2002 the former Authority entered into a long term contractual agreement under a Private Finance Initiative (PFI) for its headquarters facilities. Under the agreement the contractor is responsible for providing the buildings and facilities at Headquarters in Winsford for a period of 30 years. The annual unitary charge is £5.2m and is subject to annual increases using indexation data agreed within the contract. The services provided under the contract are subject to periodic market testing. The contract provides the Commissioner with fully serviced headquarters accommodation throughout the contract period. These services include building & grounds maintenance, security, receptions, cleaning and catering. At the end of the 30 year contract the Commissioner has the right to purchase the Headquarters for a nominal sum. The contract transfers much of the operational risk to our private sector partner (Cheshire SPV Ltd.) supported by an agreed performance regime. The Commissioner retains the ‘demand risk’ whereby the Commissioner will be required to make payments for the facilities irrespective of the number of staff working from the site. Assets The land and buildings at Headquarters, together with the associated equipment are included in property, plant and equipment shown on the Balance Sheet and Note 11. The costs, depreciation and valuations undertaken during 2014/15 are detailed below:

Land £000

Property £000

Equipment £000

Total £000

Gross Book Value on 1 April 2014 3,150 27,500 403 31,053

Revaluations - - - -

Gross Book Value on 31 March 2015 3,150 27,500 403 31,053

Depreciation on 1 April 2014 - (671) (229) (900)

Charge for the year - (671) (22) (693)

Revaluation - - - -

Depreciation on 31 March 2015 - (1,342) (251) (1,593)

Net Book Value on 1 April 2014 3,150 26,829 174 30,153

Net Book Value on 31 March 2015 3,150 26,158 152 29,460

Liabilities At the start of the PFI contract the former Authority’s liability was equal to the cost of the assets now recognised on the Balance Sheet. This was initially reduced by the Commissioner making a prepayment of £6.49m and further reduced each year by the element of the unitary payment attributable to the capital expenditure. This is shown in the accounts under the Minimum Revenue Provision and for 2014/15 equated to £0.66m. The current liability at 31 March 2015 is £22.7m.


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PFI Liability

31 March 2015 £000

31 March 2014 £000

31 March 2013 £000

Balance at 1 April 23,329 23,938 24,500

Movement in year (660) (609) (562)

Balance at 31 March 22,669 23,329 23,938

Payments due As stated above the Commissioner has an obligation to make the annual payments for this contract until it ends in 2033. Details of the profiling of these payments split into their constituent parts are shown below and are based on the contractual figures before market testing and indexation:

Analysis of payments due within:

Service Charges

£000

Finance Charges

£000

Reduction to Liability

£000

Total

£000

1 year 1,871 2,436 724 5,030

2 to 5 years 7,469 9,094 3,499 20,061

6 to 10 years 9,334 9,451 6,274 25,059

11 to 15 years 9,334 6,360 9,331 25,026

16 to 19 years 6,692 8,360 2,842 17,894

Total due 34,700 35,701 22,669 93,070

33. Impairment Losses An impairment review was undertaken by the Commissioner’s Estates Department. The outcome of the review showed no impairments during 2014/15. 34. Capitalisation of Borrowing Costs In line with the accounting policies, borrowing costs can be capitalised. During 2014/15 no additional borrowing was undertaken and therefore, no costs incurred. 35. Employee Benefits Termination Benefits The Commissioner and Chief Constable terminated the contracts of a number of employees in 2014/15 incurring liabilities of £0.7m (£0.8m In 2013/14). 25 employees were made redundant, took voluntary severance or early retirement as part of the Commissioner's rationalisation of the service to maintain services and meet financial constraints. There are more redundancies expected to be made in 2015/16 as part of the continuing rationalisation of the service, but it is not possible to quantify numbers and costs at this time.


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Participation in Pensions Schemes As part of the terms and conditions of employment of his officers and staff, the Commissioner offers retirement benefits. Although these benefits will not actually be payable until employees retire, the Commissioner has a commitment to make the payments (for those benefits) and to disclose them at the time when employees earn their future entitlement. The Commissioner’s and Chief Constable’s officers and staff participates in two pension schemes: The Police Pension Scheme for police officers is an unfunded, technically defined benefit scheme,

meaning there are no investment assets built up to meet the pension liabilities and cash has to be generated to meet actual pension payments as they eventually fall due. Under the Police Pension Fund Regulations 2007, if the amounts receivable by the pensions fund for the year are less than amounts payable, the Commissioner must transfer annually an amount required to meet the deficit to the pension fund. Subject to parliamentary scrutiny and approval, up to 100% of this cost is met by central government pension top-up grant. If however the pension fund is in surplus for the year, this must be repaid to central government. Details of this scheme are shown in the Pension Account on page 19.

The Local Government Pension Scheme (LGPS) for Police Staff is administered by Cheshire West and

Chester Council. This is a funded defined benefit scheme, meaning that the scheme’s liabilities are backed by investment assets. The Commissioner and its employees pay contributions into the fund, calculated at a level intended to balance the pension liabilities with investment assets.

Transactions relating to retirement benefits The Commissioner recognises 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 made against council tax is based on the cash payable in the year, so the real cost of retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement. The transactions on the next few pages have been charged to the Comprehensive Income & Expenditure Statement and General Fund Balance via the Movement in Reserves Statement during the year.


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Local Government Pension Scheme

Police Pension Scheme (1987)


Police Injury Awards Scheme

TOTAL

2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14

Comprehensive Income & Expenditure Statement

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Cost of Services:

Current Service Costs (7,428) (8,261) (29,060) (34,050) (5,180) (5,630) (950) (1,030) (42,618) (48,971)

Past Service Costs (85) (169) 0 0 0 0 (60) (30) (145) (199)

Settlements & Curtailments 0 0 0 0 0 0 0 0 0

Financing and Investment Income & Expenditure:

Net Interest Expense (1,583) (2,165) (69,300) (68,330) (1,870) (1,650) (2,840) (2,850) (75,593) (74,995)

Total Post Employment Benefit Charged to the Surplus or Deficit on the Provision of Services

(9,096) (10,595) (98,360) (102,380) (7,050) (7,280) (3,850) (3,910) (118,356) (124,165)

Other Post Employment Benefit Charged to the Comprehensive Income & Expenditure Statement

Return on plan assets (not included in net interest expense)

19,020 1,281 0 0 0 0 0 0 19,020 1,281

Actuarial Gains and Losses arising from changes in demographic assumptions

0

3,458 56,390 25,670 1,140 1,100 (1,640) 2,650 55,890 32,878

Actuarial Gains and Losses arising from changes in financial assumptions

Other

(40,444)

1,294

18,072

(6,540)

(254,840) 48,680

(7,100) 3,350

18,610 1,580

(283,774)

1,294

71,682

(6,540)

Total Post Employment Benefit Charged to the Comprehensive Income & Expenditure Statement

(20,130) 16,271 (198,450) 74,350 (5,960) 4,450 16,970 4,230 (207,570) 99,301


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TOTAL

Movement in Reserves Statement 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Reversal of net charges made to the Surplus and Deficit for the Provision of Services for post-employment benefits in accordance with the Code

9,096 10,595 98,360 102,380 7,050 7,280 3,850 3,910 118,356 124,165

Actual expenditure met from council tax through the General Fund

Employer’s contributions payable to the scheme

5,043 5,301 15,096 15,163 2,720 2,612 0 0 22,859 23,076

Retirement benefits payable to pensioners

3,984 3,877 49,380 46,310 40 0 1,350 1,230 54,754 51,417

Pension Assets and Liabilities Recognised in the Balance Sheet





TOTAL

2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Present value of defined benefit obligation

(249,935) (196,513) (1,836,730) (1,580,920) (53,640) (39,160) (50,330) (64,800) (2,190,635) (1,881,393)

Fair value of plan assets 190,133 160,894 0 0 0 0 0 0 190,133 160,894

Sub-total (59,802) (35,619) (1,836,730) (1,580,920) (53,640) (39,160) (50,330) (64,800) (2,000,502) (1,720,499)

Other movements in the liability

0 0 0 0 0 0 0 0 0 0

Net liability arising from defined benefit obligation

(59,802) (35,619) (1,836,730) (1,580,920) (53,640) (39,160) (50,330) (64,800) (2,000,502) (1,720,499)


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Reconciliation of the movements in the fair value of scheme (plan) assets


2014/15 2013/14 £000

Opening fair value of scheme assets 160,894 149,202

Interest income 6,982 6,790

Re-measurement gain/(loss)

The return on plan assets, excluding the amount included in the net interest expense

19,020 1,281

Other 0 0

The effect of changes in foreign exchange rates 0 0

Contributions from employer 5,043 5,301

Contributions from employees 2,178 2,197

Benefits paid (3,984) (3,877)

Other 0 0

Closing fair value of scheme assets 190,133 160,894


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Reconciliation of present value of scheme liabilities

Funded liabilities Unfunded liabilities

TOTAL Local Government Pension Scheme




2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Opening balance at 1 April (196,513) (195,798) (1,580,920) (1,590,990) (39,160) (34,780) (64,800) (66,350) (1,881,393) (1,887,918)

Current service cost (7,428) (8,261) (29,060) (34,050) (5,180) (5,630) (950) (1,030) (42,618) (48,971)

Interest cost (8,565) (8,955) (69,300) (68,330) (1,870) (1,650) (2,840) (2,850) (82,575) (81,785)

Contribution from scheme participants

(2,178) (2,197) (8,380) (8,210) (1,510) (1,550) 0 0 (12,068) (11,957)

Re-measurement gains/(losses)

Actuarial gains/losses arising from changes in demographic assumptions

3,458 83,220 25,670 1,140 1,100 (1,640) 2,650 82,720 32,878

Actuarial gains/losses arising from changes in financial assumptions

(40,444) 18,072 (281,670) 48,680 (7,100) 3,350 18,610 1,580 (310,604) 71,682

Other 1,294 (6,540) 0 0 0 0 0 0 1,294 (6,540)

Past service costs (85) (169) 0 0 0 0 (60) (30) (145) (199)

Losses/(gains) on curtailment 0 0 0 0 0 0 0 0 0 0

Liabilities assumed on entity combinations

0 0 0 0 0 0 0 0 0 0

Benefits paid 3,984 3,877 49,380 46,310 40 0 1,350 1,230 54,754 51,417

Liabilities extinguished on settlements

0 0 0 0 0 0 0 0 0

Closing balance at 31 March (249,935) (196,513) (1,836,730) (1,580,920) (53,640) (39,160) (50,330) (64,800) (2,190,635) (1,881,393)


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Local Government Pensions Scheme assets comprised:

Fair value of scheme

assets

2014/15 2013/14 £000 £000 Cash and cash equivalents 4,542 636 Equity instruments: by industry type

Consumer 18,469 21,174

Manufacturing 5,308 7,350

Energy and utilities 833 4,408

Financial institutions 5,608 8,058

Health and care 1,778 1,960

Information technology 5,530 6,285

Other 1,797 4,970

Sub-total equity 39,324 54,205

Bonds: by sector

Corporate 0 0

Government 0 0

Other 0 9,587

Sub-total bonds 0 9,587

Property: by type

United Kingdom 14,903 10,152

Overseas 446 554

Sub-total property 15,350 10,706

Private equity:

All 9,038 8,748

Sub-total private equity 9,038 8,748

Other investment funds:

Equities 18,534 26,340

Bonds 66,492 28,090

Hedge Fund

Other

26,149 10,704

22,582 0

Sub-total other investment funds 121,879 77,012

Derivatives:

All 0 0

Total Assets 190,133 160,894

Basis for Estimating Assets and Liabilities

Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels etc.


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The Police Pension Scheme has been assessed by the Government Actuary’s Department and the Cheshire Pension Fund liabilities has been assessed by Hymans Robertson and Co, an independent firm of actuaries, estimates for the Cheshire Pension Fund being based on the latest full valuation of the scheme as at 31 March 2013.

The principal assumptions used in their calculations have been as follows:


Police Pension Schemes

2014/15

% 2013/14

% 2014/15

% 2013/14

%

Mortality assumptions:

Longevity at 65 (police), 65 (LGPS) for current pensioners:

Men 22.3 22.3 23.3 23.4

Women 24.4 24.4 25.7 25.9

Longevity at 65 (police), 65 (LGPS) for future pensioners:

Men 24.1 24.1 25.4 25.6

Women 26.7 26.7 27.9 28.0

Other assumptions:

Rate of Inflation – RPI / CPI 3.2/2.3 3.6 / 2.8 3.35 / 2.2 3.65 / 2.5

Rate of increase in salaries 3.3 3.6 2.0 (0.1)

Rate of increase in pensions 2.4 2.8 1.15 1.85

Percentage of employees opting to convert annual pension to retirement lump sum: Pre April 2008 Service

Post April 2008 Service 50 75

50 75

- -

- -

Rate for discounting scheme liabilities 3.2 4.3 3.3 4.4

The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analyses below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period and assumes for each change that the assumption analysed changes while all the assumptions remain constant. The assumptions in longevity, for example, assume that life expectancy increases or decreases for men and women. In practice, this is unlikely to occur and changes in some assumptions may be interrelated. The estimations in the sensitivity analysis have followed the accounting policies for the scheme i.e. on an actuarial basis using the projected unit credit method. The methods and types of assumptions used in preparing the sensitivity analysis below did not change from those used in the previous period.

The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analysis below shows the potential impact should the above assumptions change. Local Govt

Pension Scheme Police Pension Scheme (1987)


% £000 % £000 % £000 0.5% decrease in Real Discount Rate 13 32,393 12 215,000 18 9,500 0.5% increase in salary increase 5 13,267 2 32,000 8 4,000 0.5% increase in pension increase 7 18,302 9 171,000 8 4,400 1 year increase in life expectancy 3 7,498 2 45,000 2 1,000


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Impact on the Commissioner’s cashflow

The objectives of the scheme are to keep employers’ contributions at as constant a rate as possible. The Local Government Pension Scheme run by Cheshire West and Chester Council has agreed a strategy with the scheme’s actuary to achieve a funding level of 100% over the next few years. Funding levels are monitored on an annual basis. The next triennial valuation is due to be completed on 31 March 2017.

The scheme will need to take account of the national changes to the scheme under the Public Pensions Services Act 2013. Under the Act, the Local Government Pension Scheme in England and Wales and the other main existing public service schemes may not provide benefits in relation to service after 31 March 2014 (or service after 31 March 2015 for other main existing public service pension schemes in England and Wales). The Act provides for scheme regulations to be made within a common framework, to establish new career average revalued earning schemes to pay pensions and other benefits to certain public servants.

For 2014/15, the weighted average duration of the defined benefit obligation for scheme members is 23 years (Police Pension 1987); 34 years (Police Pension 2006) & 22.8 years (LGPS).

36. Notes Relating to the Police Pension Fund

36.1 Basis of Fund

The Police Pension Fund Regulations which came into force on 1 August 2007, with backdated effect from 1 April 2006, put on a statutory footing the requirement that police authorities:

set up a pension fund; pay the employer contributions and officer contributions into the pension fund; make other specified payments into and from the pension fund; and transfer funds between the police fund and the pension fund as necessary to balance any audited

deficit or surplus in the pension fund

and for the Secretary of State to:

adjust grant funding to police authorities upwards to match the amounts transferred by them out of their police fund to balance their pension fund; and

require police authorities to pay to the Secretary of State an amount to match the sums transferred from the pension fund to the police fund to balance their pension fund account

The financial arrangements introduced in 2007 apply to both the old & new police pension schemes – i.e. the Police Pension Scheme 1987 (PPS 1987) & the New Police Pension Scheme 2006 (NPPS 2006).

36.2 Accounting policies

The Police Pension Fund’s accounting policies are set out in the main Statement of Accounting Policies as set out in page 29.

The Police Pension Fund account on page 19 summarises the transactions of the Fund. It does not take account of obligations to pay pensions and benefits which fall due after the end of the Scheme year. The actuarial position of the Scheme, which does take account of such obligations, is dealt with in Note 35 and the Police Pension Fund account should be read in conjunction with that note.

36.3 Status of the pension fund

The regulations refer to the new account as a “pension fund” since its legal status is that of a fund for the purposes of Section 30 of the Local Government Finance Act. The pension fund accounts, which must be included in the Commissioner’s statement of accounts as separate statements, comprise a


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fund account and net assets statement. The fund account must be ring-fenced to prevent unauthorised transfers taking place. It is through the fund account that each Commissioner discharges their responsibility for paying the pensions of retired officers and their survivors.

36.4 Administration of the Fund

The fund is administered by the Commissioner within the management and operation requirements established under the Police Pension Fund Regulations 2007 (SI 2007 No 1932).

The police pension schemes operates as unfunded schemes and that consequently the fund has no investment assets, benefits payable are funded by contributions from employers and employees, with any difference between benefits payable and contributions receivable met by top-up grant from the Home Office. The Fund is balanced to nil each year by a transfer to or from the General Fund.

Employees’ and employer’s contribution levels are based on percentages of pensionable pay set nationally by the Home Office and subject to triennial revaluation by the Government Actuary’s Department.

36.5 Benefits payable to and from the Fund

Under the financial arrangements the funds payable into and out of the Commissioner’s pension fund account will be:

Income

Officer contributions, including those of officers seconded elsewhere. Employer contributions, including those for officers seconded elsewhere. Incoming transfers from other pension schemes. Inter-Commissioner adjustments for 1966 and 1974 reorganisations. Re-instatement of pensions – mis-selling charges. Capital-equivalent charge payments for ill-health early retirements. Reimbursements of pension payments which could have been withheld under regulation K4 of

the Police Pension Regulations 1987 and regulation 52 of the Police Pension Regulations 2006. Payments by an officer under regulation 84(3) of the Police Pension Regulations 2006. Other authorised income – to be specified by the Commissioner in the accounts. Top-up from the police fund (operating account) to meet any deficit.

Expenditure

Pension payments to retired police officers and other beneficiaries. Inter-Commissioner adjustments for 1966 and 1974 reorganisations. Refund of pension contributions. Outgoing transfers to other pension schemes. Payments by the Commissioner to HMRC on behalf of an officer under regulation 84 or regulation

85 of the Police Pension Regulations 2006. Other authorised expenditure – to be specified by the Commissioner in the accounts. Payments to the police fund (operating account) to clear a surplus at the end of the accounting

year.

Injury awards, including awards payable on death attributable to a qualifying injury, are not part of either Police Pension Scheme 1987 or New Police Pension Scheme 2006 and are payable irrespective of whether an officer is a member of the pension scheme. Tax rules from April 2006 prevent injury awards from being part of the regulations for either scheme. In order to comply with this requirement injury awards have, with effect from April 2006, been set out in the Police (Injury


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Benefit) Regulations 2006 which are entirely separate from the Police Pension Regulations 1987 and the Police Pension Regulations 2006. Injury awards are not pension scheme payments and therefore are not chargeable to the fund.

37. Contingent Assets & Liabilities

Assets The Commissioner is party to a group action against Her Majesty’s Revenue and Custom (HMRC) in respect of a compound interest claim on catering Value Added Tax (VAT) going back into the 1990s. There are a range of potential calculations the court could apply and so the value cannot be assessed.

Liabilities During the initial building work on Tactical Training Centre, the main contractor went into administration. A new contractor was appointed and the building was subsequently completed and became operational in 2010. There are potential claims relating to the changes but the full impact cannot yet be assessed and no provision has been made in the accounts.

The Home Office has instructed all forces to review their Injury Award cases; this is now subject to a legal challenge and therefore the Commissioner has placed the review on hold. Should the review take place, there will be costs involved in both the review and appeal process.

A review of rental income has highlighted a potential liability relating to the letting of surplus space on a radio mast which may lead to a claim for an account of profits from a third party. The legal issues are being worked through by the Force Solicitor and the timing is not clear.

The Pensions Ombudsman published on 13 May 2015 his determination in the case of Milne v GAD, the case will have relevance to police officers who retired between 1 December 2001 and 30 November 2006 inclusive. The commutation factors under the Fire and Police Schemes are reviewed from time to time in accordance with their governing legislation. These reviews take account of factors affecting the actuarial equivalent value, such as changes in the discount rate used to value the benefits and the future life expectancy of retirees. At the 1998 review, the Government Actuaries Department (GAD) had recommended that the commutation factors should be reviewed in three years’ time. However, no review took place in 2001. The focus of the complaint was that GAD ought to have reviewed the commutation factors earlier than 2006 and that, had it done so, more beneficial terms would have applied giving him a higher cash sum on retirement or a higher residual pension for the same amount of lump sum. The determination found that “an opportunity to review the commutation factors was lost in 2001/2 and then again between 2002 and 2004”.

The impact of this ruling is still being assessed to determine the number of officers affected; the individual impact on their pension; and any associated costs. It is understood that the costs will be reimbursed by the pension grant from the Home Office.

A recent Employment Appeal Tribunal case (Bear Scotland v Fulton and others UKEATS/0047/13) has taken place regarding the recognition of regular voluntary overtime and allowances as a part of holiday pay. This could have a financial effect as overtime is a substantial element of the budgets and is currently not incorporated into paid holiday as stated in the outcome of the case. At this stage the impact of the decision is unclear and police forces will be working together, through the CIPD network, to ensure that any approach that may be taken is consistent. Further guidance from the Home Office is expected and currently it is not possible to accurately quantify any potential liability.

38. Authorisation of Accounts Under the new Accounts and Audit (England) Regulations 2011 the pre-audited Statement of Accounts was signed by the Chief Finance Officer as the responsible financial officer of the Commissioner on 25 June 2015. On the 23 September 2015 the audited accounts were signed and released for publication.


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ANNUAL GOVERNANCE STATEMENT

1. INTRODUCTION

1.1 Governance is about how the Commissioner and the Chief Constable ensure they are doing the right things in the right way for the right people in a timely, inclusive, open and accountable manner that is built on a foundation of integrity. It comprises the systems, processes, culture and values by which the Commissioner and the Chief Constable direct and manage together with the activity through which they account to and engage with the people of Cheshire.

1.2 The Commissioner’s role is to act on behalf of the Cheshire public and hold the Chief

Constable to account for the delivery of efficient and effective policing in Cheshire. He is accountable to the electorate who elected him to represent their views on policing services.

1.3 The Chief Constable is responsible for operational policing and the Commissioner works

closely with him to ensure that he understands the public needs. The Commissioner has put victims at the centre of everything he does. The Commissioner sets the strategic direction for the Constabulary through his Police and Crime Plan and is responsible for setting the police budget and for scrutinising performance. The role of Police and Crime Commissioners nationally has been expanding and covers elements of the criminal justice process and an extended role in commissioning services. The Commissioner works closely with the Crown Prosecution Service, Courts, Prisons and Probation services as well as the police and other partners such as the borough councils and the Fire and Rescue Service to ensure that Cheshire is a safer place in which to live and work.

1.4 This Statement also demonstrates the assurances the Commissioner relies upon to hold the

Chief Constable to account for the delivery of efficient and effective policing in Cheshire and the sound governance of the Constabulary.

2 SCOPE OF FRAMEWORK 2.1 The Commissioner is responsible for ensuring that business is conducted in accordance with

the law that proper standards are maintained and public money is safeguarded, properly accounted for and used effectively, efficiently and economically.

2.2 In discharging this overall responsibility, the Commissioner is also responsible for ensuring

that proper arrangements are in place for the governance of the organisation’s affairs and facilitating the exercise of functions, including a sound system of internal control and effective arrangements for the management of risk.

2.3 The Commissioner has approved a Scheme of Corporate Governance which is consistent

with the principles of the CIPFA/SOLACE Framework: Delivering Good Governance in Local Government. The Scheme is reviewed annually to ensure it remains valid and reflects the most up to date information and delegations. The scheme can be found on the Commissioner’s website at www.cheshire-pcc.gov.uk. The Annual Governance Statement explains how the Commissioner complies with the governance framework and also meets the requirements of Regulation 4(2) of the Accounts and Audit (England) Regulations 2011.

http://www.cheshire-pcc.gov.uk/


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3 THE PURPOSE OF THE GOVERNANCE FRAMEWORK 3.1 The governance framework enables the Commissioner to monitor the achievement of his

strategic priorities and objectives and to consider whether those objectives have led to the delivery of appropriate, cost effective policing and victim support and the achievement of value for money.

4 THE GOVERNANCE FRAMEWORK 4.1 Although the Chief Constable is responsible for the operational policing, the direction and

control of police officers and the police staff and the overall governance of the Constabulary, the Commissioner is required to hold him to account for the exercise of those functions and for delivering an efficient and effective policing service to the public. It therefore follows that the Commissioner must satisfy himself that both his own office and the Constabulary have appropriate mechanisms in place for the maintenance of good governance and that these operate effectively in practice.

4.2 A framework of governance has been developed which pulls together all the processes that

form both the governance arrangements and the key internal controls. Within this framework are a number of sources of assurance available to the Commissioner that ensure the arrangements and controls operate efficiently and effectively.

4.3 The system of internal control is a significant part of that framework and is designed to

manage risk to a level that is considered reasonable. It does not seek to eliminate all risk to the achievement of policies, priorities and objectives; it can only provide reasonable assurance but not absolute assurance of effectiveness. The system of internal control is designed to be dynamic in identifying risks and putting in place controls in order to manage such risk in an effective, efficient and economic manner.

4.4 In addition to internal controls, external controls exist in the form of External Audit and Her

Majesty’s Inspectorate of Constabulary (HMIC). The External Auditor reviews and reports on the financial statements of the Commissioner and the Chief Constable and the achievement of value for money. He independently reports regularly to the Commissioner, Chief Constable and the Joint Audit and Ethics Committee. HMIC evaluates all aspects of policing activity from performance to integrity. In addition since 2010, HMIC has inspected forces’ responses to reduction in police grants as part of its remit to report on the efficiency and effectiveness of policing in England and Wales. The outcomes of HMIC reviews are reported to the Commissioner, Chief Constable and the Home Office. Details of such inspections are available on their website www.hmic.gov.uk.

4.5 The following sections set out the main processes within the assurance framework. 4.6 Establish, communicate and monitor the achievement of the Commissioner’s Police and

Crime Plan. 4.6.1 The Commissioner has a statutory duty to produce and publish a Police and Crime Plan

which sets the strategic direction and policing objectives. In developing the Police and Crime Plan for 2014-16, the Commissioner took into account a wide range of information including: the policing priorities of the people of Cheshire collected via extensive consultation with the

http://www.hmic.gov.uk/


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public and the victims of crime; the Chief Constable’s strategic assessment of the key opportunities and challenges to policing, an analysis of the priorities of local partners and relevant Government policies and strategies. The Police and Crime Plan was published on the Commissioner’s website, distributed to partner agencies with the Annual Report delivered to every household in Cheshire.

4.6.2 The Commissioner and the Chief Constable also have a national responsibility to have regard

to the Strategic Policing Requirement as set by the Home Secretary. This has been reflected in the Police and Crime Plan’s objectives and the way the Constabulary plans and exercises its policing functions.

4.6.3 The Commissioner holds a bi-monthly Scrutiny meeting with the Chief Constable to monitor

delivery and performance against the Police and Crime Plan objectives and the Police and Crime Plan Action Plan. This meeting considers a range of performance indicators against the objectives and also receives regular reports on progress against key strategies and plans. The Scrutiny meetings are open to members of the public on an alternate meeting basis. These arrangements are supported by more detailed scrutiny by the Deputy Commissioner of a range of areas including Specialist Policing functions involved in supporting the delivery of the Strategic Policing Requirement.

4.6.4 The Chief Constable holds a monthly Force Performance meeting to monitor performance

against the Police and Crime Plan and to review delivery against specific strategies agreed with the Commissioner. These are supported by Area & Department quarterly Performance Reviews undertaken by the Assistant Chief Constables with the Area Commanders and Department Heads. The Change Management Board considers progress in delivering business change or project initiatives in support of the Police and Crime Plan objectives.

4.6.5 The Commissioner and Chief Constable hold monthly Management Board meeting which

enable them to make strategic and significant decisions relating to the discharge of their role and functions in each other’s presence. The Constabulary holds a monthly Chief Officer Group meeting which considers key strategies, plans and business cases for change. This meeting comprises of senior leaders and provides a key consultation forum for significant organisational decisions. Also held are quarterly Joint Strategic Development Sessions for both the Commissioner and Chief Constables’ management teams to consider progress versus plan and the development of future strategies and plans.

4.6.6 The Police and Crime Panel is the body responsible for scrutinising the Commissioner in the

exercise of his functions. While the Panel is there to challenge it must also support the Commissioner in the effective exercise of his functions. The Panel currently comprises ten Councillors from the borough councils and three independent members.

4.7 Ensure compliance with established policies, procedures, laws and regulations. 4.7.1 The business of the Commissioner and the Chief Constable is conducted in accordance with

legislation and the defined processes and responsibilities as set out in the approved Scheme of Corporate Governance.

4.7.2 Officers and staff use their professional knowledge to ensure that decisions taken comply

with the Schemes of Corporate Governance and with the relevant laws, standards and regulations. Key officers and staff include the Chief Executive (the Commissioner’s


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Monitoring Officer under Section 5 of the Local Government and the Housing Act 1989); the Commissioner’s Chief Finance Officer and the Assistant Chief Officer both act as Section 151 Officers (Local Government Act 1972) and the Force Solicitor who acts as the Chief Constable’s Monitoring Officer, together with the Chief Constable and his senior officers and staff, including the Professional Standards Department.

4.7.3 There are a number of internal processes to ensure compliance including Internal Audit who

conduct an agreed program of reviews to assess compliance with financial controls, established policies, procedures, laws and regulations. At the end of each year the Director of Internal Audit produces his opinion which is reported to the Audit & Ethics Committee and provides significant assurance on the system of internal control. This is supported by the Constabulary’s in house assurance plan which outlines reviews and audits undertaken by Constabulary staff in a range of areas including compliance with National Crime Recording Standards and Data Protection legislation.

4.7.4 In addition to the above internal reviews External Audit, HMIC (Constabulary only) and

where appropriate the Independent Police Complaints Commission provide scrutiny and report on the Commissioner’s and Constabulary’s activities.

4.7.5 The Code of Ethics for all police officers, staff, volunteers and contractors has recently been

issued and a plan for implementation is being prepared. A Joint Audit & Ethics Committee was established in September 2014 to assist in overseeing the ethical agenda and integrity issues. Prior to this a joint Audit Committee supported the Commissioner and Chief Constable.

4.8 Ensure the Commissioner’s financial management arrangements conform with the

governance requirements of the Home Office’s Financial Management Code of Practice for Police Services of England and Wales.

4.8.1 The Financial Management Code of Practice came into effect on 16 January 2012 under

Section 17 of the Police Reform and Social Responsibility Act 2011. An updated version was issued in October 2013. The Code requires both the Commissioner and the Chief Constable to appoint a person responsible for the administration of financial affairs. For the Office of the Police and Crime Commissioner this was undertaken by the Chief Finance Officer; for the Chief Constable this role was undertaken by the Assistant Chief Officer, both of whom are professionally qualified accountants and the designated officers under the above Act, Section 151 of the Local Government Act 1972 and Section 114 of the Local Government Act 1988.

4.8.2 During 2014/15 the Chief Finance Officer reported to the Commissioner and the Assistant

Chief Officer reported to the Chief Constable and were both integral members of their respective decision making meetings. Both officers worked closely together to ensure financial probity is embedded in both organisations.

4.8.3 Both officers attended the formal decision and scrutiny meetings as appropriate together

with the Audit & Ethics Committee to provide direct input on all key decisions and were consulted on financial data included in all reports.

4.8.4 The Chief Finance Officer played a key role in the planning process, providing regular

updates to the Commissioner on the financial scenario and budgetary position including the


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capital programme and treasury management strategy. This role was supported by the Assistant Chief Officer.

4.9 Ensure the effective, efficient and economical use of resources. 4.9.1 The Commissioner receives reports on performance against strategic objectives in the Police

and Crime Plan at the bi-monthly Scrutiny Meetings. The Audit & Ethics Committee meets on a quarterly basis to advise, as appropriate, the Commissioner and the Chief Constable in taking decisions. The Committee receives reports from the Constabulary, the Office of the Police and Crime Commissioner, Internal and External Auditors and Her Majesty’s Inspectorate of Constabulary.

4.9.2 Monthly reports are also presented to the Commissioner as part of the scrutiny process

detailing budgetary performance and progress against budgeted savings. Reports are also presented on how value for money is being improved taking into account the HMIC Value for Money profiles and taken into account as part of the budgetary process.

4.10 Ensure appropriate financial and performance management and reporting. 4.10.1 The Scheme of Corporate Governance, including the financial regulations, defines the

respective roles and responsibilities on financial matters of the Commissioner, the key officers and staff. Collectively this provides a framework of rules and procedures within which the Commissioner conducts all his financial affairs. It embodies relevant legislation and national standards of best practice in a public body’s financial management. The financial regulations together with the Constabulary’s Scheme of Financial Delegation were approved by the Commissioner and the Chief Constable.

4.10.2 Budgets are monitored by the Commissioner and the Chief Constable as part of the Scrutiny

Meetings as well as by the Constabulary’s Chief Officer Group. Both the Chief Finance Officer and the Head of Finance continually monitor the financial position and work closely together to ensure financial management reflects best practice and achieves value for money.

4.10.3 Statutory accounts are prepared annually in accordance with the Accounts and Audit

(England) Regulations 2011, professional guidance, accounting standards and the statutory timetable for publication. The accounts are scrutinised by the Audit & Ethics Committee prior to approval by the Commissioner and the Chief Constable at the end of September taking into account the opinion of the External Auditors.

4.10.4 A performance management framework exists within the Constabulary for the operational

policing and is monitored daily by Area Commanders and Managers via the Constabulary’s intranet. The outputs from this framework are reported to and questioned by the Commissioner as part of his bi-monthly Scrutiny Meetings.

5 REVIEW OF EFFECTIVENESS 5.1 The Commissioner and the Chief Constable are responsible for conducting, at least annually,

a review of the effectiveness of the governance framework which culminates in the production of the Annual Governance Statement. It includes:


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The systems of internal audit The systems of external audit

5.2 These reviews are undertaken by staff from both the Office of the Police and Crime

Commissioner and the Constabulary. The outcome in terms of issues identified is scrutinised by the Chairman of the Audit & Ethics Committee as part of the process and presented to the Audit & Ethics Committee and External Audit. These reviews are supported by comments, reports and responses made during the year by internal and external audit together with Her Majesty’s Inspectorate of Constabulary.

5.3 The Chief Finance Officer has maintained and reviewed the effectiveness of the governance

framework through close working with the Constabulary’s finance staff, Internal and External Auditors and other inspection agencies. Reports from these sources together with any action plans are monitored and regular updates are presented to the Commissioner. One of the key roles for the Chief Finance Officer as set out in legislation is to support and advise the Commissioner on financial matters including governance.

5.4 The reviews involve gathering and testing examples of controls, ascertaining risks and

assessing effectiveness. This evidence was then presented to the Chief Finance Officer and Chairman of the Audit & Ethics Committee and the resulting Annual Governance Statement (this statement) will be reported to the Audit & Ethics Committee in June 2015 and then to the Commissioner for approval. A final version will be signed and published with the statutory accounts in September 2015.

5.5 For 2014/15 the system of internal control was considered satisfactory and effective. 6 SIGNIFICANT GOVERNANCE ISSUES 6.1 Issues previously identified by both the Commissioner and Chief Constable together with the

actions taken during 2014/15 are shown below. 6.1.1 Medium Term Financial Strategy / On-going financial constraints – the 2014-18 MTFS was

approved by the Commissioner on November 2013 requiring a further £34m savings.

Update: to meet the savings identified in the MTFS, a priority based budgeting exercise took place to review the organisation in detail to enable a new Constabulary Operating Model to be created allowing investment in front-line policing and delivery of the required savings as part of the 2015/16 budget.

6.1.2 Change to Command Team – At the end of the 2013/14 financial year significant changes

occurred in the Constabulary’s Command Team with three of the five officers retiring or leaving. A new Chief Constable was appointed in June 2014 and interim arrangements put in place to cover the Deputy Chief Constable, Assistant Chief Constable and Assistant Chief Officer roles. There was a risk that this would lead to the short term loss of corporate and operational knowledge at a strategic level.

Update: The interim process included a handover period for the new Chief Constable and the promotion of two internal officers which enabled continuity of corporate and operational knowledge. The new Constabulary’s Command Team was finalised in September 2014 with the appointment of the Assistant Chief Officer.


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6.1.3 Pension Reconciliation – Reconciliation between the pension administration and payroll records highlighted a number of imbalances. The consequences were a number of pensioners receiving either over or underpayments. This highlighted a need to review the governance framework.

Update – the initial work dealing with the over and underpayments was managed through the Constabulary’s Gold Group and reported to Management Board. On-going work is taking place to document and review the pensions’ control framework. The outcome of the review is being reported to Management Board together with any recommended improvements to the Pensions Control Framework.

6.2 The following are the key risk governance issues identified for further work in 2015/16: 6.2.1 On-going financial constraints – the on-going austerity measures require further savings

over the short to medium term planning cycle. Currently the funding settlement has been on an annual basis which brings challenges to planning and relies on assumptions. In addition a review of the formula allocating government funding could have material impact on the amount of grant allocated to Commissioner.

Action – the medium term financial strategy for 2015-20 was approved on 7 January 2015 requiring a further £34m savings of which the 2015/16 budget represents the first year. The strategy will be updated for 2016-21 in September 2015 to take account of the Government’s budget on 8 July 2015; the Government’s spending review process and any other changes. It will be updated on a regular basis as information and intelligence is received. The strategy and the financial assumptions used will be reported to the Commissioner on at least a quarterly basis. The 2016/17 budget setting process will again be supported by a priority based budget review. Options for collaborative working will also be considered as part of the Medium Term Financial Strategy.

6.2.2 Implementation of new policing model – In July 2015 Cheshire Constabulary will be

restructuring and implementing a new policing model, which will replace the existing 19 Neighbourhood Policing Units and three Police Areas with eight Local Policing Units, each overseen by a Chief Inspector. This follows a comprehensive root and branch review of services, structures and practices. The evidence base for the new policing model includes a pilot project conducted in 2014 that applied the model in Ellesmere Port, together with sophisticated data analysis around workload and resourcing and learning from other developments across the police service and other public sector organisations.

Action – the Constabulary instigated an Operating Model Programme Board chaired by the Deputy Chief Constable to ensure the implementation is monitored and delivered. An operational working group is also in place attended by both frontline and support departments to ensure smooth transition to the new operating model.

6.2.3 Introduction of new major Information Technology Systems – the Emergency Services Mobile Communication Programme (ESMCP) is a nationally coordinated programme which will see a fundamental change to how each force and emergency service partner receives critical voice and mobile broadband as part of a national Emergency Service Network (ESN) for the UK. The scope and complexity of the ESN roll out will have a significant impact on all the emergency services and particularly on police forces. In addition a new command and control system will be implemented.


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Action – Each project will be managed by a Programme Board which will report through to the Change Development Board chaired by the Deputy Chief Constable. A clear project plan will be developed showing key resources, milestones and outcomes.

7 SUMMARY 7.1 We have been advised on the implications of the result of the review of the effectiveness of

the governance framework by the Audit & Ethics Committee.

7.2 We propose over the coming year to take steps to address the issues identified above to further enhance the governance arrangements. We are satisfied that these steps will address the need for improvement as identified in the review of effectiveness and will monitor their implementations and operation as part of the next annual review.

Signed

John Dwyer Simon Byrne Police & Crime Commissioner Chief Constable

Mark Sellwood Chief Executive On behalf of the staff and senior officers of the Office of the Police & Crime Commissioner for Cheshire and Cheshire Constabulary.


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GLOSSARY OF TERMS Accruals - The concept that income and expenditure are recognised as they are earned or incurred, not as cash is received or paid.

Actuarial Gains and Losses - For a defined benefit pension scheme, the changes in actuarial deficits or surpluses that arise because (a) events have not coincided with the actuarial assumptions made for the last valuation; or (b) the actuarial assumptions have changed.

Appropriations - Amounts transferred to or from revenue or capital reserves.

Budget - A statement of the Commissioner's expected level of service and spending over a set period, usually one year.

Capital Expenditure - Expenditure on the acquisition of a fixed asset or expenditure which adds value to the life or value of an existing fixed asset.

Capital Adjustment Account - This account (formerly reserve) contains the amounts which are required by statute to be set aside from capital receipts for the repayment of external loans, and the amount of capital expenditure financed from revenue and capital receipts. It also contains the difference between the amounts provided for depreciation and that required to be charged to revenue to repay the principal elements of external loans. The balance on this account cannot be used to finance future capital expenditure.

Capital Receipts - These are proceeds from the sale of capital assets.

Capital Reserve - Created to provide an alternative source of financing for capital expenditure, and to ensure some stability in the level of capital programmes that can be financed.

Contribution to Capital Expenditure - The financing of capital expenditure by a direct contribution from revenue account, rather than by means of a loan or other forms of finance (sometimes referred to as revenue contribution to capital outlay).

Council Tax - The means of raising money locally to pay for the Commissioner’s services. This is a property based tax where the amount levied depends on the valuation of each dwelling.

Creditors - Amounts owed by the Commissioner for goods and services received by 31 March, but for which payment has not yet been made.

Current Assets and Liabilities - Current assets are items which can be readily converted into cash. Current liabilities are items which are due immediately or in the short-term. By convention these items are ordered by reference to the ease that assets can be converted into cash, and the timescale in which the liability falls due.

Debtors - Amounts owed to the Commissioner for goods and services provided by 31 March, but for which payments have not yet been received.

Deferred Capital Receipts - Amounts representing capital receipts still to be received when disposals have taken place and deferred payments have been agreed.

Unitary Council’s Collection Fund - A collection fund is maintained by each unitary council to receive all income raised through the Council Tax. The funds then pay precepts to the Commissioner, Fire Authority and parish councils to meet the cost of services. Central government support (Revenue Support Grant and National Non-domestic Rate) is no longer distributed via the collection fund, but is received by each Commissioner direct.

Earmarked Reserves - These reserves represent monies set aside that can only be used for a specific purpose.


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Fair Value - The amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length transaction with no other motive than to secure a fair price.

Financial Instrument - A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity of another.

General Reserve - This is the Commissioner’s main revenue reserve to which all revenue receipts are credited and from which all revenue liabilities are discharged. The movement shown in the fund represents the excess of expenditure over revenue within the 2012/13 revenue account.

Income - Amounts which the Commissioner receives, or expects to receive, from any source. Income includes fees, charges, sales, capital receipts, government grants, the precept on Council Tax collection funds, Revenue Support Grant and National Non-Domestic Rate.

Long-Term Borrowing - Long-term borrowing relates to loans taken out by the Commissioner from the Public Works Loan Board and commercial banks.

National Non-Domestic Rate - The government levies a standard rate on all properties and cannot increase it by more than the Retail Price Index. The rates are collected on behalf of the government by district councils and are then redistributed nationally.

Net Debt - This comprises cash in hand, cash overdrawn, short term investments and long term borrowing.

Pension – Defined Benefit Scheme - A pension or other retirement benefit scheme other than a defined contribution scheme. The scheme rules define the benefits independently of the contribution payable, and the benefits are not directly related to the investments of the scheme. The scheme may be funded or unfunded.

Pension Assets – Expected Rate of Return - For a funded defined benefits 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.

Pension – Interest Costs - 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.

Pension – Past Service Costs - For 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.

Police Services – these are services as set out in the CIPFA Service Reporting Code of Practice.

Precept - The amount of money the Commissioner has to raise from Council Tax payers (via unitary collection funds) to pay for police services. Each collection fund pays a standard amount per Band D equivalent property.

Provisions – Provisions represent sums set aside for liabilities or losses which are certain to arise but owing to their inherent nature cannot be quantified with any certainty. The Commissioner's main provisions relate to insurances and pensions.

Public Works Loan Board (PWLB) - A government agency which provides longer term loans to Local Authorities at interest rates only slightly higher than those at which the government itself can borrow.

Reserves - There are two types of reserve; those which are available to meet revenue or, in some cases, capital expenditure and those which are not available to finance revenue or capital expenditure. Most revenue reserves are capable of being used to finance revenue or capital expenditure.

Revenue Expenditure - Amounts which the Commissioner pays or expects to pay to any source -


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includes the cost of employees, premises, transport, supplies and services.

Revenue Support Grant - General government grant support towards the Commissioner’s expenditure.

Temporary Investments - This comprises of cash in hand, cash overdrawn and short-term investments which are readily convertible into known amounts of cash. These are deposited with banks or similar institutions under the Treasury Management Strategy. Unapplied Capital Grants - Capital Grants received, but not yet used to finance capital expenditure

Documents

POLICE & CRIME COMMISSIONER FOR CHESHIRE … & CRIME COMMISSIONER FOR CHESHIRE AND GROUP ... Comprehensive Income and Expenditure ... victims at the centre of everything he does and