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Back to part one of the statement of accounts - Police and Crime Commissioner for Hertfordshire - 2020-2021

Back to part two of the statement of accounts - Police and Crime Commissioner for Hertfordshire - 2020-2021

Consolidated statement of accounts 2020/21

The Police and Crime Commissioner for Hertfordshire group

Note 33 - External audit costs 

In 2020/21 the PCC incurred the following fees, payable to the appointed external auditors BDO LLP under the Local Audit and Accountability Act 2014, relating to external audit and inspection.

External audit costs

 

2019/20*

£’000

2020/21

£’000

PCC

24

24

Chief Constable

12

12

Total (Group)

36

36

*2019/20 fees subject to finalisation

Note 34 - Grant and partner income – Government and non-Government grants 

Accounting policy 

All government grants are received in the name of the PCC.  However, where grants and contributions are specific to expenditure incurred by the Chief Constable, they are recorded as income within the Chief Constable’s Accounts.  Whether paid on account, by instalments or in arrears, government grants and third-party contributions and donations are recognised as due to the PCC when there is reasonable assurance that:

  • the PCC will comply with the conditions attached to the payments, and
  • the grants or contributions will be received.

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

Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line or Taxation and Non-Specific Grant Income (non-ring fenced revenue 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 Police Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied reserve.  Where it has been applied, 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 applied to fund capital expenditure. 

The PCC credited the following government grants, other grants, contributions and donations representing the receipts on an accruals basis to the Comprehensive Income and Expenditure Statement in 2020/21:

Grant and partner income – Government and non-Government grants

 

2019/20

£’000

2020/21

£’000

Credited to Cost of Service (PCC)

 

 

Victim Grants

-1,372

-1,797

Violence against Women and Girls

-169

-

Other Grants and Contributions

-110

-548

Credited to Other Operating Expenditure (PCC)

 

 

Police Pension Top Up

-15,972

-13,573

Credited to Taxation and Non-Specific Grant Income (PCC)

 

 

Capital Grants

-1,833

-199

Government Settlement Grants

-120,741

-128,861

Total Grants Credited (PCC)

-140,197

-144,978

Credited to Cost of Service (CC)

 

 

Police Community Support Officers Local Authorities

-658

-654

Police Uplift Programme

-425

-2,564

NATO Conference

-1,423

-

Covid Grants

-

-994

Other Grants and Contributions

-1,057

-1,462

Total Grants Credited (Group)

-143,760

-150,652

Note 35 - Related parties 

The PCC is required to disclose material transactions with related parties - bodies or individuals that have the potential to control or influence the PCC or to be controlled or influenced by the PCC.  Disclosure of these transactions allows interested parties to assess the extent to which the PCC might have been constrained in its ability to operate independently or might have secured the ability to limit another party's ability to bargain freely with the PCC.

The Chief Constable of Hertfordshire Constabulary 

The PCC sets the strategic direction of policing in Hertfordshire through the Police and Crime Plan and delegates funding to the Chief Constable.  This relationship is set out more fully in the Explanatory Forward. 

Central Government 

The UK government has effective control over the general operations of the PCC – it is responsible for providing the statutory framework within which the PCC operates, and provides the majority of its funding in the form of specific or non-specific grants. 

Chief Officersof the Office of the PCC and Chief Constable’s Executive Team (including their close family) 

No transactions were disclosed by this group. 

Other public bodies 

Transactions with the County Council, district and borough councils of Hertfordshire have been disclosed within the Income and Expenditure Account, Cash Flow Statement and notes to the accounts.

Note 36 - Long-term contracts – operating leases 

Accounting policy 

All leases are in the name of the PCC.  However, where leases are specific to the provision of policing services by the Chief Constable, substance over form requires that they are recorded within the Chief Constable’s accounts. 

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 to the lessee. All other leases are classified as operating leases. The PCC neither holds, nor has granted, any finance leases.

Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. 

Arrangements that do not have the 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.

The Group/PCC as lessee 

The PCC has no finance leases, but has entered into several operating lease agreements for the occupancy of premises for policing purposes.  The ownership of assets acquired under operating leases does not pass to the PCC and they are not included in the PCC’s asset valuations on the balance sheet. 

Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from use of the leased property, plant or 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 (e.g. if there were a rent-free period at the commencement of the lease). 

The future minimum payments due under these leases are shown in the following table and are analysed between the time periods in which the lease payments become due for payment. There are no future minimum sub-lease payments receivable by the PCC.

The Group/PCC as lessee

 

31 March 2020

£’000

31 March 2021

£’000

Not later than one year

581

500

Later than one year and not later than five years

2,145

1,820

Later than five years

9,562

9,600

Total Future Minimum Payments

12,288

11,920

The amount charged to the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Statement was £0.774m (2019/20 £0.567m). 

The Group/PCC as lessor

The PCC has not entered into any finance lease or operating lease arrangements as a lessor. 

IFRIC 12 

The PCC’s contractual arrangements with third parties are kept under continuous review and there are no service concessions under IFRIC 12.

Lease terms 

None of the PCC’s lease agreements have terms and conditions in respect of contingent rents, purchase options or escalation clauses.  It is considered that there are no restrictions other than those that are standard conditions in operating lease agreements such as the occupier’s responsibilities and changes of use. 

The property lease agreements include clauses in respect of the renewal of leases at specified points in the future.  The PCC will wish to discuss renewal terms with lessors at such future dates.

Note 37 - Capital expenditure and capital financing

Accounting policy 

Expenditure is charged to capital where it meets the definition of capital as set out in the Code of Practice on Local Authority Accounting in the United Kingdom and is greater than the PCC’s de minimis level of £5k. This includes internal staffing costs where they are directly attributable to a capital project.

The total amount of capital expenditure incurred in the year is shown in the table below, together with the resources that have been used to finance it.  Where capital expenditure is to be financed by charges to revenue as assets are used by the PCC, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the PCC that has yet to be financed.  The CFR is analysed in the following table:

Capital expenditure and capital financing

 

2019/20

£’000

2020/21

£’000

 Opening CFR

32,154

35,466

 Capital Investment

 

 

  -   Property, Plant and Equipment

10,139

8,514

  -   Intangible Assets

1,008

529

 Sources of Finance

 

 

  -   Capital Receipts

-4,964

-4,521

  -   Government Grants & Contributions

-1,833

-2,560

 Sums set aside from revenue

 

 

  -   Direct revenue Contributions

-134

-267

  -   Minimum Revenue Provision

-904

-931

 Closing CFR

35,466

36,230

 Explanation of Movement in The Year

 

 

 Increase / (Decrease) in the Underlying Need to Borrow

3,312

764

 Increase / (Decrease) in CFR

3,312

764

Note 38 - Defined benefit pension schemes

Accounting policy

Post-employment benefits 

The Group / PCC participates in four pension schemes.  Each scheme provides members with defined benefits related to pay and service.  The costs of providing pensions for employees are charged to the Police Fund in accordance with the statutory requirements governing each scheme.  The schemes are as follows: 

Police officer schemes 

There are three schemes for police officers; - The 1986 Police Pension scheme which closed to new members on the 31 March 2006, the 2006 Police Pension scheme which closed to new members on the 31 March 2015 and the 2015 Police Pension Scheme which was introduced from 1 April 2015.  These are unfunded defined benefit final salary schemes, charged to the Police Fund based upon an equivalent employer’s contribution rate of 31.0% of pensionable pay.

Unfunded means that 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.  The direct expenditure and income in respect of these schemes is accounted for in the Police Pension Fund Account.  Under the Police Pension Fund Regulations 2007, if the amount payable by the pension fund for the year is less than the amount receivable, the Group / PCC must annually transfer an amount required to meet the deficit to the pension fund.  Up to 100% of this cost is met by central government pension top up grant shown in the OPCC’s Accounts under Other Operating Expenditure.  If however the pension fund is in surplus for the year, the surplus is required to be transferred from the pension fund to the Group and the amount repaid to central government. 

Police staff 

All transactions and balances relating to the accounting for Post-Employment Benefits of Police Staff, other than the cost of employee contributions for staff employed by the PCC, are disclosed within the accounts of the Chief Constable on the basis of materiality. 

All police staff are eligible to join the Local Government Pension Scheme (LGPS), managed by Hertfordshire County Council.  The total pension cost that is charged to the Police Fund equals the contribution paid to the funded pension scheme for these employees. 

The LGPS Scheme is accounted for as a defined benefits scheme as follows: 

a) The liabilities of the fund attributable to the Group are 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. 

b) Liabilities are discounted to their value at current prices, using a discount rate based on the indicative rate of return on high quality corporate bonds.

c) The assets of the fund attributable to the Group are included in the Balance Sheet at their fair value: 

  • Quoted securities – current bid price
  • Unquoted securities – professional estimate
  • Unitised securities – current bid price
  • Property – market value

a) The change in the net pensions’ liability is analysed into seven components:

i. Current Service Cost - The increase in liabilities as a result of years of service earned this year is allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked.

ii. Past Service Cost - The increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years is debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non-Distributed Costs

iii. Interest Cost - The expected increase in the present value of liabilities during the year as they move one year closer to being paid is debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement

iv. Expected Return on assets - The annual investment return on the fund assets attributable to the Group, based on an average of the expected long-term return is credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement

v. Gains or Losses on settlements and curtailments - The result of actions to relieve the Group of liabilities or events that reduce the expected future service or accrual of benefits of employees is debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs 

vi. Re-measurements of the net defined liability.  This includes actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest on the net defined benefit liability. 

vii. Contributions Paid to the pension fund - 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 Police Fund balance to be charged with the amount payable by the Group to the pension fund or directly to pensioners 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 Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the Police Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees.

Discretionary benefits 

The Group / PCC also has restricted powers to make discretionary awards of retirement benefits to Police Officers in the event of early retirements.  Any liabilities estimated to arise as a result of an award to any member of staff are accrued in the year the award was made and accounted for using the same policies as are applied to the Local Government Pension Scheme or Police Pension Schemes. There are no investment assets built up to meet these pension liabilities, and cash has to be generated to meet actual pension payments as they eventually fall due.

Participation in pension schemes 

As part of the terms and conditions of employment of its officers and other employees the Chief Constable and PCC offer retirement benefits.  Although these will not actually be payable until employees retire, the Chief Constable and PCC have a commitment to make the payments that need to be disclosed at the time that employees earn their future entitlement. 

The Chief Constable and PCC participate in three pension schemes: 

  • The Local Government Pension Scheme for police staff.  Administrated by Hertfordshire County Council - this is a funded defined benefit final salary scheme, meaning that the Chief Constable, PCC and their employees, pay contributions into a fund, calculated at a level estimated to balance the pensions liabilities with investment assets.  On the basis of materiality transactions and balances for the PCC arising from the LGPS are shown combined with those of the Chief Constable.
  • The Police Pension Scheme 1987, the Police Pension Scheme 2006 and the Police Pension Scheme 2015 for police officers - these are unfunded defined benefit final salary schemes administrated by the Chief Constable.  Unfunded means that 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 amount payable by the pension fund for the year is less than the amount receivable, the PCC must annually transfer an amount required to meet the deficit to the pension fund.  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, the surplus is required to be transferred from the pension fund to the Chief Constable and must be repaid to central government.
  • Arrangements for the award of discretionary post-retirement benefits to Police Officers upon early retirement - this is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made.  However, there are no investment assets built up to meet these pension liabilities, and cash has to be generated to meet actual pension payments as they eventually fall due. 

Transactions relating to post-employment benefits 

The Chief Constable and PCC recognise the cost of retirement benefits for their staff and officers in the reported cost of services in their respective Comprehensive Income and Expenditure Statement when they are earned by employees, rather than when the benefits are eventually paid as pensions.  However, the charge the Chief Constable is required to make against council tax is based on the cash payable in the year, so the real cost of post-employment / retirement benefits is reversed out of the Police Fund within the accounts via the Movement in Reserves Statement.

The following transactions have been made in the Comprehensive Income and Expenditure Statement and the Police Fund Balance via the Movement in Reserves Statement during the year: 

Transactions relating to post-employment benefits

 

LGPS

Police Pension Scheme

Chief Constable

PCC

Total (Group)

Total (Group)

2019/20

£’000

2020/21

£’000

2019/20

£’000

2020/21

£’000

2019/20

£’000

2020/21

£’000

2019/20

£’000

2020/21

£’000

 

Cost of Service included in CIES Service

 

 

 

 

 

 

 

 

 

   Current Service Cost.

21,091

16,147

520

430

21,611

16,577

54,120

52,060

 

   Past Service Cost / Settlements and Curtailments

115

7

-

-

115

7

-11,080

-

 

Financing and Investing Income and Expenditure

 

 

 

 

 

 

 

 

 

   Net interest expense

2,645

1,328

27

35

2,672

1,363

43,410

43,310

 

Total Group Post-Employment Benefits charged to the Surplus or Deficit on the Provision of Service

23,851

17,482

547

465

24,398

17,947

86,450

95,370

 

Re-measurement of the net defined benefit liability comprising:

 

 

 

 

 

 

 

 

 

   Return on plan assets

(excluding amount included in net interest expense)

16,137

-55,124

-657

-538

15,480

-55,662

-

-

 

   Actuarial gains and Losses

 

 

 

 

 

 

 

 

 

-        Demographic Assumptions

-9,670

6,755

-122

83

-9,792

6,838

-61,220

-

 

-        Financial Assumptions

-48,021

123,449

-637

1,690

-48,658

125,139

-62,300

233,040

 

-        Other

-22,946

-3,518

1,504

-44

-21,442

-3,562

-32,280

-125,080

 

Total Group Post Employment Benefit Charged to the Comprehensive Income and Expenditure Statement

-40,649

89,044

635

1,656

-40,014

90,700

-69,350

203,330

 

Movement in Reserves Statement:

 

 

 

 

 

 

 

 

 

   Reversal of the net charges made to the (Surplus) or Deficit for the provision of services for post-employment benefits in accordance with the code

-23,851

-17,482

-547

-465

-24,398

-17,947

-86,450

-95,370

 

Actual Amount Charged Against the General Fund Balance for Pensions During the Year:

 

 

 

 

 

 

 

 

 

   Employer’s Contributions Payable to the Schemes

8,763

9,299

212

242

8,975

9,541

40,410

40,700

 

Claims arising from the transitional provisions in the Police Pensions Regulations 2015 

The Police and Crime Commissioner of Hertfordshire, along with other Chief Constables and the Home Office currently has a number of claims in respect of unlawful discrimination arising from transitional provisions in the Police Pension Regulations 2015. The claims against the Police pension scheme (the Aarons case) had previously been stayed behind the McCloud/Sargeant judgement, but a case management was held in Oct 2019, with the resulting Order including an interim declaration that the claimants are entitled to be treated as if they had been given full transitional protection and had remained in their existing scheme after 1 April 2015. Whilst the interim declaration applied only to claimants, the Government made clear through a Written Ministerial Statement on 25 March 2020 that non-claimants would be treated in the same way.

On 16 July 2020, HM Treasury issued a consultation regarding transitional arrangements for public sector pensions to eliminate discrimination as identified through the McCloud/Sargeant cases. This consultation introduced a requirement for members to have been members of the scheme on or before 31 March 2012 and on or after 1 April to be eligible for remedy. 

On 4 February 2021, HM Treasury issued their response to the consultation which confirmed the remedy arrangements set out in the consultation, and states that members would be given a choice as to whether to retain benefits from their legacy pension scheme, or their new scheme, during the remedy period (2015-2022). This choice will be deferred for members until retirement. As the findings of the original Employment Tribunal did not identify that the introduction of the new public sector pension schemes were discriminatory (rather it was the transitional provisions), the legacy schemes will be removed from April 2022 to be replaced by the new pension schemes originally introduced in 2015.

Impact on pension liability

Allowing for all eligible members to accrue benefits from their legacy scheme during the remedy period would lead to an increase in the Police Pension Scheme liabilities. 

The impact of an increase in scheme liabilities arising from McCloud/Sargeant judgement will be measured through the pension valuation process, which determines employer and employee contribution rates. The next Police Pension valuation is due to be reported in 2023/24, although this timetable is subject to change.

The impact of an increase in annual pension payments arising from McCloud/Sargeant is determined through the Police Pension Fund Regulations 2007. These require a police authority to maintain a pension fund into which officer and employer contributions are paid and out of which pension payments to retired officers are made. If the police pension fund does not have sufficient funds to meet the cost of pensions in year the amount required to meet the deficit is then paid by the Secretary of State to the police authority in the form of a central government top-up grant.

Compensation claims

Claimants have lodged claims for compensation. Test cases for these claims are due to be heard by the Employment Tribunal in December 2021. Further details can be found in Note 39 – Contingent Liabilities.

Pension assets and liabilities recognised in the balance sheet 

The amount included in the Balance Sheet arising from the Groups obligation in respect of its defined benefit plans is as follows:

Pension assets and liabilities recognised in the balance sheet

 

2019/20

£’000

2020/21

£’000

Present Value of Defined Benefit Obligations

 

 

      LGPS Chief Constable

-344,981

-493,223

      LGPS PCC

-4,130

-6,468

      Police Pension Scheme

-1,919,630

-2,082,250

Total Group Liabilities

-2,268,741

-2,581,941

 

 

 

Fair value of plan assets

 

 

      LGPS Chief Constable

290,616

359,113

      LGPS PCC

2,716

3,640

Total Group Assets

293,332

362,753

 

 

 

Net liability arising from defined benefit obligation:

 

 

      LGPS Chief Constable

-54,365

-134,110

      LGPS PCC

-1,414

-2,828

      Police Pension Scheme

-1,919,630

-2,082,260

Total Group Net Liability

-1,975,409

-2,219,198

The net liabilities show the underlying commitments that the Group has in the long run to pay retirement benefits.  The total liability of £2.219bn (£1.975bn in 2019/20) has a substantial impact on the net worth of the Group as recorded in the Balance Sheet, resulting in a negative overall balance of £2.096bn as at 31 March 2021 (£1,846bn as at 31st March 2020). 

However statutory arrangements for funding the deficit mean that the financial position of the Group remains healthy: 

  • The deficit on the local government scheme will be made good by increased contributions over the remaining working life of employees, as assessed by the scheme actuary.
  • Finance is only required to be raised to cover police pensions when the pensions are actually paid.  Following the introduction on the 1st April 2006 of the new scheme of finance for police officer pensions, the Chief Constable’s liability is in general limited to an equivalent contribution rate currently set at 31.0% of pensionable pay with the government meeting additional costs above this level. 

The contribution expected to be made to the Local Government Scheme by the Group in 2021/22 is £9.541m.  The expected contribution to the police pension schemes in 2021/22 is £25.020m.

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

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

LGPS

Chief Constable

PCC

Total Group

2019/20

£’000

 

2020/21

£’000

 

2019/20

£’000

2020/21

£’000

2019/20

£’000

2020/21

£’000

Opening fair value of scheme assets (Group)

293,949

290,616

1,707

2,716

295,656

293,332

       Interest Income

7,137

6,755

45

66

7,182

6,821

     Re-measurement gain(loss)

 

 

 

 

 

 

Return of plan assets excluding amount included in net interest expense.

-16,137

55,124

657

538

-15,480

55,662

     Employer Contributions

8,763

9,299

212

242

8,975

9,541

     Contribution by employees in the scheme

3,010

3,278

100

114

3,110

3,392

     Benefits paid

-6,106

-5,959

-5

-36

-6,111

-5,995

     Settlements and Curtailments

-

-

-

-

-

-

Closing fair value of scheme assets (Group)

290,616

359,113

2,716

3,640

293,332

362,753

Reconciliation of present value of the scheme liabilities’ (defined benefit obligation)

Reconciliation of present value of the scheme liabilities’ (defined benefit obligation)

 

LGPS

Police Pension Scheme

Chief Constable

PCC

Chief Constable

2019/20

£’000

2019/20

£’000

2019/20

£’000

2020/21

£’000

2019/20

£’000

2020/21

£’000

Opening Balance at 1 April

-397,726

-2,029,380

-2,698

-4,130

-400,424

-349,111

 

 

 

 

 

 

 

Current service cost

-21,091

-54,120

-520

-430

-21,611

-16,577

Interest cost

-9,782

-43,410

-72

-101

-9,854

-8,184

Contribution from scheme participants

-3,010

-10,190

-100

-114

-3,110

-3,392

 

 

 

 

 

 

 

Re-measurement of the net defined benefit liability comprising:

 

 

 

 

 

 

- Actuarial gains / (loss) Demographic Assumptions

9,670

61,220

122

-83

9,792

-6,838

- Actuarial gains / (loss) Financial Assumptions

48,021

62,300

637

-1,690

48,658

-125,139

- Actuarial gains / (loss) Other

22,946

32,280

-1,504

44

21,442

3,562

 

 

 

 

 

 

 

Past Service Cost / Settlements & Curtailments

-115

11,080

-

-

-115

-7

Benefits paid / Transfers

6,106

50,600

5

36

6,111

5,995

 

 

 

 

 

 

 

Liability at 31 March

-344,981

-1,919,620

-4,130

-6,468

-349,111

-499,691

Fair value of employers assets – LGPS only 

The Police Pension Schemes have no assets to cover their liabilities.  The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:

Fair value of employers assets – LGPS only

 

Period Ended 31 March 2020

Period Ended 31 March 2021

Quoted Prices in active markets

£’000

Quoted prices not in active markets

£’000

Total

£’000

% of Total Assets

Quoted Prices in active markets

£’000

Quoted prices not in active markets

£’000

Total

£’000

% of Total Assets

Equity Securities:

Consumer

5,610

-

5,610

1.9%

3,246

-

3,246

0.9%

Manufacturing

4,469

-

4,469

1.5%

2,863

-

2,863

0.8%

Energy and Utilities

4

-

4

0.0%

-

-

-

0.0%

Financial Institutions

4,307

-

4,307

1.5%

2,341

-

2,341

0.6%

Health and Care

2,636

-

2,636

0.9%

1,446

-

1,446

0.4%

Information Technology

   10,056

-

10,056

3.4%

8,329

-

8,329

2.3%

Other

482

-

482

0.2%

325

-

325

0.1%

Debt Securities:

Corporate Bonds (investment grade)

-

-

-

0.0%

-

-

-

0.0%

Corporate Bonds (non-investment grade)

-

-

-

0.0%

-

-

-

0.0%

UK Government

-

-

-

0.0%

18,717

-

18,717

5.2%

Other

-

7,584

7,584

2.6%

-

8,789

8,789

2.4%

Private Equity:

All

-

15,667

15,667

5.3%

-

18,962

18,962

5.2%

Real Estate:

UK Property

-

8,869

8,869

3.0%

-

20,214

20,214

5.6%

Overseas Property

-

17,438

17,438

5.9%

-

16,834

16,834

4.6%

Investment Funds and Unit Trusts:

Equities

91,357

-

91,357

31.1%

168,049

-

168,049

46.3%

Bonds

96,144

-

96,144

32.8%

59,072

-

59,072

16.3%

Hedge Funds

-

-

-

0.0%

-

-

-

0.0%

Commodities

-

-

-

0.0%

-

-

-

0.0%

Infrastructure

-

271

271

0.1%

-

152

152

0.0%

Other

2,477

19,916

22,392

7.6%

3,381

19,894

23,274

6.4%

Derivatives:

Inflation

-

-

-

0.0%

-

-

-

0.0%

Interest Rate

-

-

-

0.0%

-

-

-

0.0%

Foreign Exchange

-

-297

-297

-0.1%

-

-144

-144

0.0%

Other

-

-

-

0.0%

-

-

-

0.0%

Cash and Cash Equivalents:

All

6,344

-

6,344

2.2%

10,284

-

10,284

2.8%

Totals

223,884

69,448

293,332

100.0%

278,052

84,701

362,753

100.0%

Basis for estimating assets and liabilities

Liabilities have been assessed on an actuarial basis.  For both Schemes the projected unit credit method has been used to estimate the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. 

For the Police Pension Schemes a full actuarial valuation is required every four years under the Public Service Pensions Act 2013.  The Police Scheme has been assessed by the Government Actuary’s Department.  The most recent valuation was undertaken as at 31 March 2016, and the next scheduled valuation is as at 31 March 2020. The appointed actuaries produce pension disclosures by rolling forward data for years between full valuations.

For the Local Government Scheme a full actuarial review is undertaken every three years, with the latest valuation being as at 31 March 2019 from which the results are awaited.  The Local Government Pension Scheme Fund is assessed by Hymans Robertson, an independent firm of actuaries.

The value of scheme assets and liabilities are dependent upon financial market conditions as at 31 March.  Both GAD and Hymans Robertson have confirmed the use of data as at 31 March rather than estimated figures and as such, the effect of COVID-19 on market conditions and discount rates have been reflected in these valuations. 

The principal assumptions used by the actuaries have been:

Basis for estimating assets and liabilities

 

LGPS

Police Pension Schemes

2019/20

%

2020/21

%

2019/20

%

2020/21

%

Mortality Assumptions:

 

 

 

 

Longevity at 65 for current pensioners:

 

 

 

 

        Men

21.9

22.1

21.9

21.9

        Women

24.1

24.5

23.6

23.6

Longevity at 45 for future pensioners:

 

 

 

 

        Men

22.8

23.2

23.6

23.6

        Women

25.5

26.2

25.2

25.2

 

 

 

 

 

Rate of increase in salaries

2.2

2.2

4.00

4.00

Rate of increase in pensions

1.8

1.8

2.00

2.00

Rate for discounting scheme liabilities

2.3

2.3

2.25

2.25

Sensitivity of the defined benefit obligation in the significant actuarial assumptions

 

Approximate % increase to Employer Liability

Approximate monetary amount

(£’m)

LGPS

 

 

0.5% decrease in real discount rate

13

63

1-year increase in member life expectancy

3 to 5

15 to 25

0.5% increase in the Salary Increase Rate

1

7

0.5% increase in the Pension Increase Rate

11

55

Police Pension Schemes

 

 

0.5% increase in real discount rate

-10.0

-212

1-year increase in member life expectancy

3.5

71

0.5% increase in the Salary Increase Rate

1.5

27

0.5% increase in the Pension Increase Rate

9.5

198

Note 39 - Contingent liabilities

Accounting policy 

A contingent liability arises where an event has taken place that gives the Group 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 Group. 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 disclosed in a note to the accounts

The Chief Constable potentially has a liability in respect of historic overtime claims following a similar claim from another force which were upheld at the Court of Appeal. The claims relate to a cap being placed on overtime claims by the Chief Constable, which has historically been generally applied across the Police Service. At this point in time the Chief Constable has received 21 claims in respect of overtime claims. The final number and value of potential claims has yet to be quantified. Test claims are progressing through the courts and they will have a bearing on claims against the Force once the outcomes are known. 

Following the rulings in the McCloud and Sargeant cases in relation to unlawful discrimination, and associated remedial proposals as outlined in Note 38, 18 claims for compensation have been lodged against the Chief Constable of Hertfordshire. Test cases for these claims are due to be heard by the Employment Tribunal in December 2021. Claims for financial losses are currently stayed as consideration is given to the HM Treasury consultation response. As at 31 March 2021, it is not possible to reliably estimate the extent or likelihood of these claims being successful, and therefore no liability in respect of compensation claims is recognised in these accounts.

Note 40 - Nature and extent of risks arising from financial instruments

Key risks

The Group’s activities expose it to a variety of financial risks, the key risks are:

  • Credit risk – the possibility that other parties might fail to pay amounts due to the PCC;
  • Liquidity risk – the possibility that the PCC might not have funds available to meet its commitments to make payments;
  • Re-financing risk – the possibility that the PCC might be requiring to renew a financial instrument on maturity at disadvantageous interest rates or terms.
  • Market risk - the possibility that financial loss might arise for the PCC as a result of changes in such measures as interest rate movements.

Overall procedures for managing risk

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

  • by formally adopting the requirements of the Code of Practice within our Treasury Management Practices;
  • by approving annually in advance prudential indicators for the following three years limiting:
  • The PCC’s overall borrowing;
  • Its maximum and minimum exposures to fixed and variable rates;
  • Its maximum and minimum exposures to the maturity structure of its debt;
  • Its maximum annual exposures to investments maturing beyond a year.
  • by approving an investment strategy for the forthcoming year setting out its criteria for both investing and selecting investment counterparties in compliance with the Government Guidance; 

These are required to be reported and approved at or before the PCC’s annual Council Tax setting budget meeting.  These items are reported with the annual treasury management strategy which outlines the detailed approach to managing risk in relation to the PCC’s financial instrument exposure.  Actual performance is also reported annually to Members. 

These policies are implemented on behalf of the PCC by Hertfordshire County Council’s central treasury team.  The PCC maintains 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 through Treasury Management Practices (TMPs). These TMPs are a requirement of the Code of Practice and are reviewed regularly. 

Credit risk

Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Group’s customers.  Deposits are not made with banks and financial institutions unless they meet the minimum requirements of the investment criteria outlined in the Treasury Strategy. 

The Group’s maximum exposure to credit risk of £0.060m cannot be assessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual institution. 

The following analysis summarises the Group’s potential maximum exposure to credit risk. The risk of default by banks and financial institutions is based on historical experience of default data taken from Moody’s, a credit rating organisation used by the PCC.  The risk of default by trade debtors is based on the amount of impairment provision as a percentage of total debt outstanding as at 31 March 2020.

Credit risk

 

Amount at

31 March 2021

 

£’000

Historical experience of default

 

%

Estimated maximum exposure at

31 March 2021

£’000

A+ Rated Counter Parties

2,308

-

-

Fixed Loan < 1 year

-

-

-

Fixed Loan > 1 year

2,500

-

-

Other Counter Parties

6,948

-

-

Long Term Debtors

89

-

-

Trade debtors

990

6.36

63

Other receivables and advances

13,718

-

-

Total

26,553

 

63

No credit limits were exceeded during the reporting period and no losses are expected from non-performance of any of the counterparties in relation to the PCC’s deposits.

The PCC does not generally allow credit for its trade debtors, such that £0.187m of the £0.602m balance at 31 March is past its due date for payment.  The past due amount can be analysed by age as follows:

Credit limits

 

2019/20

£'000

2020/21

£'000

Less than three months

127

343

Three to six months

5

141

Six months to one year

0

1

More than one year

55

110

Balance as at 31 March

187

595

During the reporting period the PCC held no collateral as security

Liquidity risk

The PCC has a comprehensive cash flow management process that seeks to ensure that cash is available as necessary.  If unexpected movements happen, the PCC has ready access to borrowings from the money markets and the Public Works Loans Board.  There is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments.  Instead the risk is that the PCC may be bound to replenish a significant amount of its borrowings at a time of unfavourable interest rates.  The PCC sets limits on the proportion of its fixed rate borrowing during specified periods.

The maturity analysis of financial liabilities is as follows:

Liquidity risk

 

2019/20

£'000

2020/21

£'000

Less than one year

-17,955

-13,831

More than fifteen years

-17,998

-17,998

Balance as at 31 March

-35,953

-31,829

Market risk 

Interest rate risk - The Group is exposed to risk in terms of its exposure to interest rate movements on its borrowings and investments.  Movements in interest rates have a complex effect on the Group.  For instance, a rise in interest rates could have the following effects: 

  • borrowings at variable rates – the interest expense charged to the Surplus or Deficit on the Provision of Services will rise;
  • borrowings at fixed rates – the fair value of the liabilities borrowings will fall;
  • investments at variable rates – the interest income credited to the Surplus or Deficit on the Provision of Services will rise; and
  • investments at fixed rates – the fair value of the assets will fall. 

Borrowings are not carried at fair value on the balance sheet, so nominal gains and losses on fixed rate borrowings would not impact on the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Account.  However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services and effect the Police Fund Balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected on Other Comprehensive Income and Expenditure.

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

During 2020/21 the Group had no variable rate investments or liabilities and so was not exposed to interest rate risk. 

If interest rates had been 1% higher during 2020/21 with all other variables held constant, the financial effect would be:

Market risk

 

£'000

Increase in interest receivable on variable rate investments

209

Increase in interest payable on variable rate borrowing

-

Impact on Other Comprehensive Income and Expenditure

209

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

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

Note 41 - Termination benefits 

Accounting policy

Termination benefits are amounts payable as a result of a decision by the Group / PCC to terminate a member of police staff’s employment before the normal retirement date or a member of police staff’s decision to accept voluntary redundancy, and are charged on an accruals basis to the Non-Distributed Costs line in the Comprehensive Income and Expenditure Statement when the Group / PCC is demonstrably committed to the termination of the employment. 

Where termination benefits involve the enhancement of pensions, statutory provisions require the Police Fund Balance to be charged with the amount payable by the Group / PCC 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 debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. 

The Group terminated the contracts of a number of employees in 2020/21 incurring liabilities of £0.452m (£0.375m in 2019/20). See note 42 for the number of exit packages and total costs per band. There were no payments to Directors or equivalent in the form of compensation for loss of office or for enhanced pension benefits and all costs relate to police staff who were made redundant in a number of cost centres as part of the Group’s savings plan and financial strategy.

Note 42 - Exit packages 

All redundancies in 2019/20 and 2020/21 were compulsory redundancies.  The numbers of exit packages and total costs of the compulsory redundancies including pension strain costs paid to the Local Government Pension Scheme are set out in the table below.

Exit packages

Exit package cost band including special payments

Total number of exit packages

Herts Share of cost of exit packages

Total cost of exit packages

2019/20

2020/21

2019/20

£’000

2020/21

£’000

2019/20

£’000

2020/21

£’000

£0 - £20,000

8

14

47

54

89

123

£20,001 - £40,000

3

6

64

88

97

198

£40,001 - £60,000

1

4

22

87

50

197

£60,001 - £80,000

2

-

62

-

141

-

£80,001 - £100,000

1

1

36

39

82

88

£120,001 - £140,000

-

2

-

109

-

245

£140,001 - £160,000

1

-

66

-

149

-

£160,001 - £180,000

1

1

78

75

177

169

Total

17

28

375

452

785

1,020

Where an exit package was paid as part of the implementation of a BCH change programme, costs were pooled and shared between the three forces.  As a result, the total costs of exit package set-out in the above table include Hertfordshire’s share of such costs irrespective of the employing force.  In total 16 exit packages (10 in 2019/20) were paid to Hertfordshire employed staff during 2020/21 at a cost of £0.545m (£0.338m in 2019/20).

Fund account

Fund account

 

 

 

 Note

Police Pension
 Scheme 1987

Police Pension Scheme 2006

Police Pension Scheme 2015

Total
All Schemes

2019/20

£’000

2020/21

£’000

2019/20

£’000

2020/21

£’000

2019/20

£’000

2020/21

£’000

2019/20

£’000

2020/21

£’000

Contributions receivable

                 

From employer

                 

- normal 21.3%; 31.0%

P3

-3,477

-2,402

-300

-296

-18,454

-21,136

-22,231

-23,834

- early retirements

P3

-253

-148

0

-

-17

-23

-270

-171

- additional 2.9%

P3

-

-

0

-

-

-

-

-

                   

From members

P3

-1,608

-1,117

-117

-111

-7,827

-8,993

-9,552

-10,221

                   

Transfers in

                 

- individual transfers in from other schemes

P4

-139

-128

0

-8

-528

-686

-667

-822

                   

Other Income

 

-

-

-

-

-

-

-

-

                   

Benefits payable

                 

- pensions

 

38,940

40,165

24

38

76

109

39,040

40,312

- commutations and lump sum retirement benefits

 

9,207

7,759

116

110

36

29

9,359

7,898

- commutation top up payments

 

-

-

-

-

-

-

-

-

- lump sum death benefits

 

-

-

-

-

81

113

81

113

                   

Payments to and on account of leavers

                 

- refunds of contributions

 

-

-

-

-

77

49

77

49

- individual transfers out to other schemes

P4

-

204

31

-

103

46

134

250

                   

Net amount receivable for the year before top-up grant

 

42,670

44,333

-246

-267

-26,453

-30,492

15,971

13,574

                   

Transfer received from the Policing Body

P5

-42,670

-44,333

246

267

26,453

30,492

-15,971

-13,574

Balance as at 31 March

 

0

0

0

0

0

0

0

0

 

Net assets statement

Net assets statement
 

31 March 2020

£’000

31 March 2021

£’000

April pension paid in advance in March

3,312

3,418

Total Assets

3,312

3,418

     

Commutation Payments Owing

0

-59

Taxation Owing

-307

-359

Amount Owing to Police Fund

-3,005

-3,000

Total Liabilities

-3,312

-3,418

     

Net Assets

0

0

 

Note P1 - Summary of the Police Pension Scheme fund operations

Employee contributions and employer's contribution are paid into the Police Pension Scheme Fund from which pension payments are made.  The fund has no investments and is topped up by the PCC if the contributions are insufficient to meet the cost of pension payments.  The PCC is then reimbursed by the Home Office.  Any surplus in the fund is recouped by the PCC and paid to the Home Office.  The underlying principle is that employer and employee contributions together will meet the full costs of pension liabilities being accrued in respect of currently serving employees while the Home Office will meet the costs of retirement pensions in payment, net of employee and the new employer contributions. 

The financing of pension payments was taken out of the Formula Grant from April 2006 which instead takes into account the funding needed to support the cost of the employer contributions and lump sum payments, in respect of ill-health retirements. 

Note P2 - Accounting policies 

The accounts have been prepared in accordance with the 2020/21 Code of Practice on Local Authority Accounting in the United Kingdom, issued by the CIPFA. 

The accounts summarise the transactions and net assets of the Police Pension Scheme Fund.  They do not, however, take account of liabilities to pay pensions and other benefits after 31 March 2021. 

All amounts have been prepared on an accruals basis except pension transfers to and from the scheme. 

Note P3 - Contributions receivable 

Employer and employee contributions

The purpose of the employee and employer contribution rates under the new arrangements is to meet the accruing pension liabilities of currently serving police officers.  This means the PCC meets all the costs of employing police officers, including the cost of future pension liabilities, at the time of employing them.  From 1 April 2019, the employer’s contribution rate was increased to 31.0% (from 21.3%) following the latest scheme valuation.

Separate contribution rates, a percentage of pensionable pay as shown below, apply to the three Police Pension Schemes.

Contributions receivable

 

Employer Defined %

Employee %

Police Pension Scheme 1987

31.0

14.25 - 15.05

Police Pension Scheme 2005

31.0

11.00 - 12.75

Police Pension Scheme 2015

31.0

12.44 - 13.78

Early retirements 

Early retirements due to ill-health from 1 April 2006 require the PCC to make a lump sum payment into the pension fund of twice the average pensionable pay in respect of all ill-health retirements. 

Note P4 - Transfers to or from other schemes 

Where a police officer transfers to or from another police force there is no need for a cash transfer.  A police officer who transfers out of the Police Pension Scheme to another pension scheme is entitled to ask for a cash equivalent transfer value to be paid across, equivalent to the value of their pension rights on leaving the scheme. This is paid from the Police Pension Fund.  Similarly, an inward Transfer Value should be paid into the fund. 

Note P5 - Top-up grant 

Where employer and employee contributions paid into the Police Pension Scheme Fund are not sufficient to meet pension payments for that year, the deficit will be met by the PCC who is in turn reimbursed by a central government top-up grant paid by the Home Office.  Any surplus in the fund would be paid back to the PCC who would then reimburse the Home Office as the party that brings the account into balance. 

Note P6 - Liabilities after year end

The Fund’s financial statements do not take account of the liabilities to pay pensions and other benefits after 31March 2021. The details in respect of the PCC’s long-term police pension obligations are set out in the pensions-related disclosure note 38 that follows the main financial statements.

Note P7 - Claims arising from the transitional provisions in the Police Pension Regulations 2015 

The Chief Constable of Hertfordshire, along with other Chief Constables and the Home Office, currently has 50 claims lodged against them with the Central London Employment Tribunal. The claims are in respect of alleged unlawful discrimination arising from the Transitional Provisions in the Police Pension Regulations 2015.

Claims of unlawful discrimination have also been made in relation to the changes to the Judiciary and Firefighters Pension regulations and in December 2018 the Court of Appeal (McCloud/Sargeant) ruled that the ‘transitional protection’ offered to some members as part of the reform to public sector pensions amounts to unlawful discrimination. On 27 June 2019, the Supreme Court refused leave to appeal on the McCloud / Sargeant cases.  In response to this, the Treasury published a consultation on 16 July 2020 outlining the remedy for all Public Sector pension schemes, which includes the Police Pension Scheme. 

The impact of an increase in scheme liabilities arising from McCloud / Sargeant judgment will be measured through the pension valuation process, which determines employer and employee contribution rates. The next Police Pension valuation is currently in progress in 2020 with implementation of the results planned for 2023/24 and forces will need to plan for the impact of this on employer contribution rates alongside other changes identified through the valuation process. The impact has been included in both scheme’s IAS19 valuations for accounting purposes.

Police and Crime Commissioner for Hertfordshire

Annual governnance statement 2020/2021

1 Executive Summary 

Overview 

The Police and Crime Commissioner (PCC) for Hertfordshire is responsible for ensuring that the business of his office is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively.

In discharging this overall responsibility, the PCC is responsible for putting in place proper arrangements for the governance of his affairs and facilitating the effective exercise of functions, which includes ensuring a sound system of internal control is maintained through the year and that arrangements are in place for the management of risk. In exercising this responsibility, the PCC also relies on the Chief Constable (CC) to support the governance and risk management processes.

Therefore, in considering this Annual Governance Statement, in addition to considering his own arrangements, the PCC has also relied upon the governance processes within Hertfordshire Constabulary (HC) as reflected in the CC’s Annual Governance Statement. 

This is the Annual Governance statement produced by the PCC and reflects the governance arrangements that were in place for the year ended 31 March 2021 and is up to the date of signing this document.

The governance arrangements for the PCC’s office have been developed in line with the Police Reform and Social Responsibility Act 2011, The Policing Protocol Order 2011, the Home Office Financial Management Code of Practice (FMCP) and existing guidance on the financial and governance matters that continue to apply, such as the CIPFA/SOLACE framework and are as follows: 

A) Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law.

B) Ensuring openness and comprehensive stakeholder engagement.

C) Defining outcomes in terms of sustainable economic, social, and environmental benefits.

D) Determining the interventions necessary to optimise the achievement of the intended outcomes.

E) Developing the entity's capacity, including the capability of its leadership and the individuals within it.

F) Managing risks and performance through robust internal control and strong public financial management.

G) Implementing good practices in transparency, reporting and audit to deliver effective accountability. 

The Commissioner is committed to keep governance arrangements under review and address issues as they arise.

Opinion 

Based upon the opinion of Internal Auditor in their year-end report, the areas set-out in this statement and our on-going work, we are satisfied that our arrangements for governance, risk management and control are adequate and effective.

Summary of the significant governance issues identified 2020/21 

BCH Procurement follow up

Internal Audit reported that in their opinion the organisations had demonstrated poor progress in implementing the agreed management actions at the time of the audit. 

Signatures of the Commissioner and Chief Executive 

Signed:

David Lloyd
Police and Crime Commissioner  

Signed: 

Chris Brace
Chief Executive of the Office

2 Key governance arrangements 

CIPFA published their “Delivering Good Governance in Local Government: Framework” followed by specific guidance notes for Policing Bodies. The key elements of the systems and processes which the Chief Constable has in place are aligned to the seven principles are set out below:

A) Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law.

The OPCC has an approved policy on anti-fraud and anti-bribery which is included within the Financial Regulations. The policy is designed to encourage prevention, promote detection and identify a clear pathway for investigation of fraudulent and/or corrupt activities or behaviour.

The PCC has made a policy statement on decision making which is shared with Bedfordshire and Cambridgeshire. This explains the statutory framework for decision making by PCCs, aligned to the Nolan principles of good governance, it sets out the decision-making process including the recording, transparency and publication of those decisions. Under the policy, the Chief Executive/Chief of Staff and Chief Finance Officer are part of the legal framework to report contraventions of the law, financial requirements or maladministration.

The PCC’s Decision-Making Meeting is the decision-making forum for the PCC, particularly where decisions are not required to be taken in consultation with the Chief Constable, or where wider partnership issues or statutory duties are involved. Routine decisions or those in accordance with a previously approved policy or delegation need not be taken at the meeting but must be recorded fully for transparency purposes. Minutes of the meeting with background reports will be published on the website except where the decision is exempt from disclosure under the Freedom of Information Act 2000.

The PCC’s website explains the complaints process and where a complaint should be directed whether it is against the Constabulary, the PCC’s Office or the PCC. A complaint against the PCC can be raised with the Police and Crime Panel (PCP) and full details are provided on the PCP’s website, to which a link is provided from the PCC website (opens in a new window).

An enhanced complaints procedure has been established within the PCC’s Office and is managed by the Complaint Resolution Team (CRT).  The team have first sight and initial contact and handling of all complaints regarding Hertfordshire Constabulary. CRT assess and seek views from the complainant on whether a complaint is suitable for service recovery and then will manage the complaint accordingly outside of Schedule 3 of the Police reform Act 2002.  Some complaints, due to their nature, will need to be formally recorded within Schedule 3 of the Police Reform Act 2002 and therefore will be transferred to the Professional Standards Department in Hertfordshire Constabulary. 

The PCC signed an oath on election in May 2016, stating that he will act with integrity and diligence in his role. 

The register of interests of the PCC and of gifts and hospitality are published on the PCC’s website.

The PCC’s Office has established measures and procedures to demonstrate integrity and openness with regards to Gifts and Hospitality, expenses and business interests which are published on the PCCs website (opens in a new window)

The PCC has set four corporate values:

  • Transparency – openness, holding to account.
  • Collaborative with partners, police and public – engagement, working better together, agree how to achieve shared goals.
  • Integrity – code of ethics, setting standards; and,
  • Accountability – governance, justification.

The behaviours underpinning these were set as; clarity, professionalism, honesty, flexibility, adaptability, open to change, shared goals, team working, creative. These were adopted as part of the appraisal process discussed further in this statement.

The Chief Executive of the PCC’s office is the monitoring officer. He has delegated some of his work to the Deputy Chief Executive. Where necessary the Deputy Chief Executive can seek legal advice from the Legal Services Department at the Constabulary. The Deputy Chief Executive is a lawyer and formerly a Local Authority Monitoring Officer who can also seek external legal advice if specialist expertise of independence is required.

The PCC has a statutory duty under the Police Reform and Social Responsibility Act 2011 to hold the Chief Constable to account for the exercise of duties relating to equality and diversity. This was demonstrated in ‘Policing Hertfordshire for Everyone,’ a joint document with the Constabulary. This set out the responsibilities of both the PCC and CC in meeting their equality duty objectives. 

This has been followed up in the reporting of achievements of priorities in the Community Safety and Criminal Justice Plan: Everybody’s Business 2019 - 2024 where the PCC’s Strategic Executive Board receives each month thematic reports on achievement of the objectives within the plan. For example the September 2020 meeting received a report on diversity in the workforce.

B) Ensuring openness and comprehensive stakeholder engagement

A public engagement strategy has been established jointly with the Constabulary supporting the PCCs vision statement which requires transparency, openness and ethical behaviour to be the foundation of communication and engagement with the public. It also supports the CC’s commitment to achieving effective public engagement and communication to ensure that the Constabulary continually strive to increase confidence in policing and enhance the legitimacy of the service.

The PCC has published details of public meetings, contact details and methods to make contact, together with his Communications Officer.

The PCC engages with Community Safety Partnerships which are made up of representatives from the responsible authorities. These include; police, local authority, fire and rescue authorities, probation services and health. These partners work together to protect their local communities from crime and help people feel safer. They discuss how to deal with issues such as antisocial behaviour, substance misuse and reoffending. They annually discuss local crime priorities and consult partners and the local community about how to deal with them.

The PCC conducts public consultations. These were prior to presenting his precept report to the Police and Crime Panel, concluding in May 2020 on the improvement of sexual violence support services, on the Hertfordshire Hate Crime Strategy from January 2021 and the Volunteering Strategy in March 2021. 

Hertfordshire Criminal Justice Board is chaired by the PCC. It shares a vision of a criminal justice system which encourages joint agency cooperation to bring offenders to justice swiftly and to reduce re-offending. The Board works to ensure the public of Hertfordshire have confidence in the local criminal justice agencies and that those agencies meet the needs of victims and witnesses of crime.

C) Defining outcomes in terms of sustainable economic, social and environmental benefits.

BCH collaboration 

There is an overarching memorandum of association for the collaboration work stream with Bedfordshire and Cambridgeshire and a formal section 22 agreement for each collaborated area. The PCC together with his counterparts in Bedfordshire and Cambridgeshire and each of the Chief Constables are members of the Strategic Alliance Summit (SAS) which acts as the strategic lead for all shared service collaborations between the parties. 

The parties have agreed a Shared Services Model for collaboration.  This means that shared collaborated services are provided to the parties with shared resources being instructed through a single line management structure and those resources remaining under the legal direction and control of their respective Chief Constable although alternative ways of delivery are being trialled with transfer of staff to the lead force. 

The Chief Constable has ultimate responsibility for his officers and staff in a collaborated unit (BCH and Regional) and is ultimately vicariously liable for their actions. Officers and staff are subject to the command structure of each unit for daily Shared Service delivery. Each PCC retains their individual responsibility for the maintenance of efficient and effective policing in their county and each Chief Constable retains their operational independence. Each PCC retains responsibility for holding their Chief Constable to account for operational police services delivered through collaboration. 

BCH collaborated units have been established in three work streams, each led by one Force with a governance structure to allow each Chief Constable and PCC to have oversight and fulfil their responsibilities. This means that shared collaborated services are provided to the parties with shared resources being instructed through a single line management structure and those resources remaining under the legal direction and control of their respective Chief Constable. A lead Force have been established for all three work streams:

Joint Protective Services (Bedfordshire)

  • Armed Policing.
  • Dogs.
  • Major Crime.
  • Operational Planning Support.
  • Civil Contingencies.
  • Roads Policing.
  • Scientific Services (incl. Forensics); and,
  • Taser Training. 

Organisational support (Cambridgeshire)

  • Human Resources inc. Learning & Development.
  • Information Management.
  • Professional Standards.
  • Tri-Force Communications.
  • Payroll; and,
  • Stores. 

Operational support (Hertfordshire)

  • Custody (Bedfordshire and Hertfordshire Only).
  • Cameras, Tickets and Collisions.
  • Criminal Justice.
  • Firearms and Explosive Licensing.
  • Information and Communication Technology; and,
  • Mobile, Digital and Emergency Services Mobile Communication Programme.

The BCH Delivery Management Office continues to deliver projects across the three Forces within the existing workstreams in order to maximise efficiency and effectiveness of the teams.

In addition, collaboration across Bedfordshire, Cambridgeshire, Hertfordshire, Norfolk and Suffolk, Essex and Kent known as 7Force has established a programme to progress consideration of joint working. A collaborated procurement service across the 7Forces has been established with other projects in place and under development for example: 

Vetting

A cloud-based solution with a go-live in mid-February 2021. This includes the adoption of a shared set of webforms allowing the online submission of applications, a first nationally. Adopting the same cloud bases solution across the region has allowed for economies of scale.

Forensics

Working with the Forensic Teams has identified a share specification for a single cloud base Forensic Case Management System to replace numerous out dated and unstable forensics systems.

Digital Management System (DAMS) 

A solution for the storage, management and sharing of digital material.  Such a solution will help manage risk associated with the management, movement and deletion of evidential data.

A Memorandum of Understanding was agreed between the PCC and Hertfordshire County Council to deliver collaboration with Hertfordshire Fire and Rescue Service. Both the County Council and PCC have agreed to explore opportunities for further collaboration including those presented through the next iteration of Hertfordshire Fire and Rescue’s operational plan, known as the Integrated Risk Management Plan (IRMP).

These include better use of estates, including co-locating police and fire headquarters, a joint control room and training base, shared use of drones and a better response structure in cases where both services are needed.  An Emergency Services Collaboration Board has been established to deliver on the agreement.  Actual delivery is reported on the PCC’s website (opens in a new window).

D) Determining the interventions necessary to optimise the achievement of the intended outcomes

The PCC’s Community Safety and Criminal Justice Plan: Everybody’s Business 2019 -2024, is a key document in the role as PCC enabling greater oversight and accountability of other agencies and the police. This plan sets out the PCC’s ambition and vision for community safety and criminal justice across the county until to 2024.

The Plan reflects both the continuity in the principles and priorities outlined in the first two plans, and also the changes in the nature of crime, and the continued responsibilities of the OPCC in commissioning victims’ services – putting victims at the centre of all that is done

It sets out how the Constabulary will respond to their Strategic Policing Requirements and get the best from their collaborated units, with whom Hertfordshire share resources, to drive crime down and provide an efficient and effective service for the public.

There are four main strategic themes:

  • Putting Victims at the Centre.
  • Public Focus.
  • Building on Success; and,
  • Business Sense.

The PCC’s Strategic Executive Board is the forum for issues related to the legitimacy, effectiveness and efficiency of the policing service delivered in Hertfordshire and where decisions need to be taken that require both parties to discuss and agree in accordance with the Scheme of Governance. The Board has developed its methods of holding to account by adopting a process of receiving thematic reports each month covering achievement or otherwise of the priorities set out in the plan. This has proved a very effective method of ensuring progress on each of the plan priorities. The Policing Protocol Order 2011 outlines the respective duties of each holder of office. Its role includes:

  • Any matters relating to the legitimacy, effectiveness and efficiency of the policing service delivered in Hertfordshire.
  • The monitoring and management of delivery against the Police and Crime Plan and the Strategic Policing Requirements.
  • Consideration of HMICFRS, Joint Audit Committee reports and similar external inspections; and,
  • The review and monitoring of the management of the budget by the Chief Constable.

E) Developing the entity's capacity, including the capability of its leadership and the individuals within it.

The OPCC takes a pro-active approach to staff development.  OPCC staff complete a regular appraisal process with their named line manager. This process will continue to identify training requirements for individuals.

Each member of staff has a job description which sets out their individual roles and responsibilities (opens in a new window)

The PCC has responsibility for conducting at least annually, a review of the effectiveness of the governance framework, including the system of internal control. The review is informed by the work of the Chief Executive, the CFOs, internal auditors, the Head of Internal Audit report and also managers within the OPCC and Constabulary who have the responsibility for the development and maintenance of the governance environment.

The OPCC has adopted the Human Resources policies established by the Bedfordshire, Cambridgeshire and Hertfordshire collaborated HR department with some amendments where necessary to reflect the different roles required.   Regular conversations take place between individuals and managers to ensure oversight of wellbeing, to guide and support in the achievement of work-based objectives and to support personal and professional development.

F) Managing risks and performance through robust internal control and strong public financial management

The PCC makes his commitments and objectives for policing clear in his Police and Crime Plan which was informed by the views of the electorate. It is against this plan that the PCC is measured and monitoring of outcomes are assessed against, which is undertaken by both the Strategic Executive Board and the Police and Crime Panel. The outcomes are made visible to the public through the Annual Report last published in July 2020 (opens in a new window).

Risk management is embedded into the work of the OPCC on an ongoing and continuous basis. A strategic risk register is in place and endorsed by the Joint Audit Committee.

The OPCC has a Risk Management Strategy shared with the Constabulary, endorsed by the Joint Audit Committee, its purpose is to ensure that risk management is embedded into the governance structure and that it effectively underpins and enables the business. The strategy sets out the joint controls’ assurance mechanisms and responsibilities. The Joint Audit Committee oversees the risk management arrangements of the OPCC and the Constabulary and ensures that the processes are aligned. 

The PCC scrutinises the CC’s performance management processes to ensure that policing priorities are translated into specific objectives and then onto individual performance targets for officers. This applies equally to collaboration projects. 

The PCC attends the Strategic Performance Board (SPB) each quarter where the performance of the Constabulary is regularly reviewed.   A senior member of the PCC’s office attends the other monthly meetings.  The SPB is the Constabulary’s primary performance management meeting for monitoring and managing progress toward the Constabulary’s strategic targets and objectives. 

The PCC has a framework in place for holding the CC to account.  Together with attendance at the SPB, there are of weekly meetings with the CC and monthly minuted meetings which are published on the PCC’s website.

G) Implementing good practices in transparency, reporting and audit to deliver effective accountability

The Chief Executive of the PCC’s office has provided assurance that the Scheme of Governance works within these principles:

  • The PCC holds decision making meetings where he makes decisions particularly where decisions are not required to be taken in consultation with the CC, or where wider partnership issues or statutory duties are involved. Decisions are published on the PCC’s website.
  • There are alternating monthly Executive Management Team and Senior Management Team meetings to plan future work and decision-making schedules, and quarterly strategic planning meetings involving all staff.
  • The Strategic Executive Board is the forum for issues related to the effectiveness and efficiency of the policing service delivered in Hertfordshire and where decisions need to be taken that require both parties to agree in accordance with the Scheme of Governance and the respective duties of each holder of office.
  • There are Engagement and Advisory Forums and consultations – which allow the PCC to consult on planned actions.
  • The PCC’s Chief Executive also performs regular reviews of his staff structure to ensure that objective setting and tasking is coordinated across individual directorates
  • The PCC publishes his decisions and the minutes of strategic meetings (opens in a new window)
  • The Elected Local Policing Bodies (Specified Information Order) 2011 (as amended) (“SIO”) places a duty on the PCC to publish certain information within specified timescales, and for that information to be reviewed at prescribed frequencies. Compliance is also published on the PCC’s website (opens in a new window)

Hertfordshire’s Office of the Police and Crime Commissioner has again been nationally recognised for the clarity of information on its website. The office has been awarded the CoPaCC Open and Transparent Quality Mark for 2021 for the fourth year running.   CoPaCC conducted an assessment on all OPCCs in England and Wales. 

The assessment was carried out by judges from CoPaCC who use Home Office guidelines to check what information PCC offices should publish and how it is presented. This includes clarity over how public money is spent, policing and crime priorities and decision making processes.

3) Response to the COVID-19 pandemic 

Business Continuity Plans are in place, updated and kept under review, anticipating the effects on staff resilience (both officers and civilian staff), with the need to have flexible operational arrangements to deal with peak periods of demand, and adapt to a changing local and national situation.  Whilst a significant proportion of support staff are currently working remotely, the full system of internal control remains in place and staff have been reminded that they are still required to follow existing procedures. In 2020/21 remote working continued and the business continuity plan was developed to reflect actual issues. Business was maintained and effective methods to maintain and develop service took place. For example, a revised custody inspection regime was developed taking account of both the increased operational demands of maintaining an essential function in the face of the pandemic and keeping volunteers safe, with the statutory function of independent scrutiny of those held in custody. SEB received regular reports of the Chief Constable on police functions in the pandemic and their cost and effectiveness. 

4) Evaluation of the effectiveness of governance 

The PCC has the responsibility for conducting, at least annually, a review of the effectiveness of the governance framework for his office, including the system of internal control. The effectiveness of the governance arrangements as reported in the Annual Governance Statement is considered by the Joint Audit Committee. 

Police and Crime Panel 

The Police and Crime Panel (PCP) provides checks and balances on the work of the PCC. The Panel does not scrutinise Hertfordshire Constabulary; it scrutinises how the PCC carries out his statutory responsibilities. While the Panel is there to constructively challenge the PCC, it also has a key role in supporting the Commissioner in his role in enhancing public accountability of the police force. The PCC reports to the PCP to enable it to fulfil its responsibilities which include: 

  • Reviewing and making recommendations on the draft Police and Crime Plan.
  • Scrutinising the PCC, inviting the Chief Constable to attend before the PCP where appropriate.
  • Reviewing the PCC’s appointment of Chief Executive, Chief Financial Officer and Deputy PCC where one is appointed.
  • Making reports and recommendations on matters relating to the PCC.
  • Monitoring all complaints against the PCC and the informal resolution of such complaints where necessary.
  • Questioning the PCC on the annual report in a public meeting; and
  • Scrutiny of the PCC’s proposed annual council tax precept and appointment of Chief Constable (including a power of veto).

Joint Audit Committee 

The PCC and CC have a Joint Audit Committee (JAC) that provides independent scrutiny and assurance on the adequacy of the corporate governance and risk management frameworks and the associated control environments. In addition, the JAC gives advice according to good governance principles and proper practices and oversees the financial reporting processes. In particular the JAC sets out in its terms of reference: 

  • Supports the PCC, the CC and statutory officers in ensuring that effective governance is in place and functioning efficiently and effectively and making any recommendations for improvement.
  • Monitors the effective development and operation of the internal control environment and risk management processes and makes recommendations for improvement to the PCC and CC, as appropriate.
  • Reviews any issues referred to it by the statutory officers of the PCC and CC in relation to corporate governance, risk management or assurance and makes recommendations, as appropriate.
  • Reviews and endorses the PCC’s and the CC’s Annual Governance Statements and Statements of Accounts, including the PCC’s group accounts, bringing to the attention of the PCC and CC any omissions or any amendments proposed for consideration.
  • Receives and scrutinises performance reports on treasury management and ensures effective scrutiny of the treasury management strategies and policies.
  • Undertakes an annual review of the PCC’s and the CC’s system of internal audit.
  • Reviews and endorses the strategy and plans of internal and external audit, bringing to the attention of the PCC and CC any significant issues which the committee considers merit inclusion.
  • Reviews progress in delivering the work and reports of internal and external audit and provides an opinion to the PCC and CC on the quality and strength of investigations and findings.
  • Reviews matters arising from the work of internal and external audit, including the external auditor’s Annual Governance Report and Audit letters and advice the PCC and CC on the adequacy of response plans.
  • Monitors management actions in response to the work of internal and external audit and brings to the attention of the PCC and CC where further or timelier action is considered appropriate.
  • Produces an annual report which is subsequently published.

Internal audit 

Internal audit provided an independent opinion on the adequacy and effectiveness of the OPCC’s’ system of internal control, stating that the organisation has an adequate and effective framework for risk management, governance and internal control. However, Internal Audit identified further enhancements to the framework of risk management, governance and internal control to ensure that it remains adequate and effective.

RSM provides the Internal Audit service to the OPCC and Constabulary and also provides Internal Audit services to Bedfordshire and Cambridgeshire OPCCs and Constabularies. This results in joined up audit work to the benefit of all the organisations.

Internal Audit issued seven reports during 2020/21 for the OPCC and the Constabulary concluding that substantial assurance could be taken in five reports and partial assurance could be taken in two (Estates and Storage and disposal of Drugs).

Internal Audit also performs an annual follow up of agreed management actions, as part of that work Internal Audit confirmed that all the actions agreed within the two partial assurance reports had been completed. The Constabulary also tracks the completion of management actions.

Internal Audit also undertook audits in relation to BCH collaborated activity and issued one report with substantial assurance (Health and Safety), one report with reasonable assurance (Procurement – 7Force) and three advisory reports.  In addition, a follow up audit on BCH Procurement was undertaken and poor progress was identified.

Internal Audit has co-ordinated the first draft of this Annual Governance Statement, with assistance from senior officers and staff in the OPCC and Constabulary. 

External audit 

The external auditors issued the following reports during the year: 

  • Opinion on financial statements; and,
  • Annual audit letter.
  • The key matters that the Joint Audit Committee reported were that Hertfordshire had:
  • An unqualified opinion on their accounts and had prepared its financial statements well;
  • Had an adequate internal control environment; and,
  • Had an unqualified value for money conclusion.

Her Majesty’s Inspectorate of Constabularies and Fire & Rescue Service (HMICFRS) 

HMICFRS are commissioned by the Home Secretary to undertake inspections of police forces and fire and rescue services.

PEEL (Police Effectiveness, Efficiency and Legitimacy) is HMICFRS’s annual assessment of police forces in England and Wales. Forces are assessed on their effectiveness, efficiency and legitimacy. Until 2018/19 each was inspected separately each year. HMICFRS has now adopted an integrated approach to inspections. Integrated PEEL Assessment (IPA) combines the forces into a single inspection on the areas of PEEL.

Due to COVID-19, inspections were suspended in 2020/21, and therefore the latest inspection of Hertfordshire Constabulary by HMICFRS was in September 2019. However, areas for improvement highlighted within the previous inspection are monitored through to completion via the Constabulary’s Action Management System through to close by the HMICFRS.

5) A summary of significant issues identified in 2020/21

A summary of significant issues identified in 2020/21

Issue

Action

BCH Procurement follow up

Internal Audit reported that in their opinion the organisations had demonstrated poor progress in implementing the agreed management actions at the time of the audit.

 

Whilst some progress was noted within the new 7 Force service in implementing actions, Internal Audit we were not able to perform any sample testing of transactions below the £50k threshold which are the responsibility of local teams, as systems are not in place to enable the monitoring of these contracts and therefore compliance checks against the Financial Regulations could not be undertaken.

 

Accountability and action plans 

Account for actions taken in 2020/21 to address significant issues identified in previous year’s AGS:

Accountability and action plans

As stated in 2019/20

Current Position

Health and Safety

Internal Audit issued a report which concluded that no assurance could be taken following their review. In particular we found:

  • A H&S audit programme had not been developed. Following this audit recommendations from completed audits would be tracked formally in action trackers for each organisation. 
  • An action relating to an analysis on role specific training was agreed, however at the time of the review not all needs assessments had been returned.

A set of health and safety KPIs were in development, but had not yet been finalised. These would be reported consistently across the local Health and Safety Boards with summary reporting to the BCH Board.

This area will be subject to another audit in 2020/21 to ensure actions have been embedded within processes.

 

Internal Audit performed a follow up of actions agreed in 2019/20 and reported good progress.  A further audit of Health and Safety in November 2020 resulted in a substantial assurance opinion.

BCH Procurement

Internal Audit concluded that partial assurance could be taken following their review. This covered the BCH collaborated service, which was in transition to a new 7 Force arrangement, this transition has since been completed. Internal Audit will follow up the issues identified within their 2020/21 plan with reviews of the new service.

 

Issues identified in 2019/20 have been carried forward into 2020/21 and noted above.

Glossary of terms

The definitions within this glossary are designed to give the user an understanding of the technical terminology contained within the Statement of Accounts:

Accounting policies

Those principles, bases, conventions, rules and practices applied by the PCC, that specify how the effects of transactions and other events are to be reflected in its financial statements through: i) recognising, ii) selecting measurement bases for, and iii) presenting assets, liabilities, gains, losses and changes to reserves. 

Accrual

The recognition of income and expenditure as it is earned or incurred, rather than as cash is received or paid. 

Actuarial gains andlosses

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 (experience gains and losses), or b) the actuarial assumptions have changed.

Budget

A statement of the PCC’s financial plans for a specified period of time, usually one year. 

Capital programme

A statement of proposed capital projects for current and future years. 

Capital Financing Requirement

The Capital Financing Requirement (CFR) represents the level of capital investment not financed by grant, capital receipts or revenue contribution and which therefore needs to be financed either by external borrowing or internal borrowing through the use of cash balances.  The CFR attracts a statutory annual revenue charge known as Minimum Revenue Provision (MRP). 

Capital receipts

Proceeds of not less than £10,000 from the sale of fixed assets.  They may be used to finance new capital expenditure or repay debt.  They cannot be used to finance normal day to day revenue spending. 

Carry-forwards

These are underspends at the year-end which are carried forward into the next financial year to support that year’s expenditure plans. 

Creditors

Amounts owed by the PCC at the 31 March for goods received or services rendered but not yet paid for. 

Capital expenditure

Expenditure on the acquisition of a fixed asset or expenditure which adds to and not merely maintains the value of an existing fixed asset.

Current service cost (pensions)

The increase in the present value of a defined benefit scheme’s liabilities expected to arise from employee service in the current period.

Debtors

Amounts owed to the PCC which are collectable or outstanding at 31 March. 

Defined benefit scheme

A pension or other retirement benefit scheme where the scheme rules define the benefits independently of the contributions payable, and the benefits are not directly related to the investments of the scheme. The scheme may be funded as in the case of the LGPS or unfunded as in the case of the Police Pension Scheme. 

Depreciation

The measure of the cost or re-valued amount of the benefits of the fixed asset that have been consumed during the period. 

Consumption includes the wearing out, using up or other reduction in the useful life of a fixed asset whether arising from use, passing of time or obsolescence, through either changes in technology or demand for the goods and services produced by the asset. 

Emoluments

All sums paid to or receivable by an employee and sums due by way of expenses allowances (as far as those sums are chargeable to UK income tax) and the money value of any other benefits received other than in cash. Pension contributions payable by either employer or employee are excluded.

Expected rate of return on pensions assets

For a funded, defined benefit scheme, the average rate of return, including both income and changes in fair value but net of scheme expenses, expected over the remaining life of the related obligation on the actual assets held by the scheme. 

Fair value

The fair value of an asset is the price at which it could be exchanged in an arm’s-length transaction less, where applicable, any grants receivable towards the purchase or use of the asset. 

Finance lease

A finance lease is one that transfers substantially all of the risks and rewards of ownership of a fixed asset to the lessee.

Government grants

Assistance by government and inter-government agencies and similar bodies, whether local, national or international, in the form of cash or transfers of assets to a PCC in return for past or future compliance with certain conditions relating to the activities of the PCC.

Impairment

A reduction in the value of a fixed asset, reflecting a general fall in prices or losses due to physical damage or deterioration in an asset.

Intangible fixed assets

Non-financial fixed assets that do not have physical substance but are identified and controlled by the PCC through custody and legal rights.

Interest cost (pensions)

For a defined benefit scheme, the expected increase during the period in the present value of the scheme liabilities because the benefits are one period closer to settlement.

Inventories

The amount of unused or unconsumed stocks held in expectation of future use. When use will not arise until a later period, it is appropriate to carry forward the amount to be matched to the use or consumption when it arises. 

Investments

A long-term investment is an investment that is intended to be held for use on a continuing basis in the activities of the PCC. Investments should be so classified only where an intention to hold the investment for the long term can clearly be demonstrated or where there are restrictions as to the investor’s ability to dispose of the investment. 

Liquid resources

Current asset investments that are readily disposable by the PCC without disrupting its business and are either: readily convertible to known amounts of cash at or close to the carrying amount, or traded in an active market.

Minimum Revenue Provision (MRP)

The aim of the MRP charge is to set cash aside in order to ensure the PCC has the funds to repay outstanding principal or replenish internal cash balances.  Each year the PCC is required to set a policy as to the approach it will take in making MRP.

Net book value

The amount at which fixed assets are included in the balance sheet, i.e. their historical cost or current value less the cumulative amounts provided for depreciation. 

Net current replacement cost

The cost of replacing or recreating the particular asset in its existing condition and in its existing use, i.e. the cost of its replacement or of the nearest equivalent asset, adjusted to reflect the current condition of the existing asset. 

Net debt

The PCC’s borrowings less cash and liquid resources. Where cash and liquid resources exceed borrowings, reference should be to net funds rather than net debt. 

Net realisable value

The open market value of the asset in its existing use (or market value in the case of non-operational assets), less the expenses to be incurred in realising the asset. 

Non-distributed costs

These are overheads for which no user now benefits and should not be apportioned to services.

Operating lease

A lease other than a finance lease. 

Police grant

A specific grant paid by the Home Office to support the PCC’s revenue expenditure.  It is a fixed sum calculated by the government on an assumed needs basis.

Precept

A levy which the PCC makes through the council tax to pay for services. 

Past service cost

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.

Prior period adjustments

Those material adjustments applicable to prior years arising from changes in accounting policies or from the correction of fundamental errors. A fundamental error is one that is of such significance as to destroy the validity of the financial statements. They do not include normal recurring corrections or adjustments of accounting estimates made in prior years. 

Reserves

Amounts set aside to cover general expenditure needs in the future. 

Revenue Contributions to Capital Outlay (RCCO)

Contributions from revenue to finance capital expenditure and thus reduce the requirement to borrow.

Revenue expenditure

Spending on day to day items, including salaries, premises costs and supplies and services. 

Revenue support grant

A grant paid by central government towards the costs of the service. 

Specific reserves

Amounts set aside for a specific purpose to meet future commitments or liabilities.

Sponsorship

The voluntary provision of non-public funds, services or equipment which enables the police to enhance or extend the normal services provided.

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