Item 11 Group Accounts for the Police and Crime Commissioner for Kent and the Chief Constable for Kent Police Audited Statement of Accounts 2015 - 2016 1 Page Item 11 Contents Page no. Narrative Statement 3 Statement of Responsibilities for the Statement of Accounts 6 Annual Governance Statement 7 Independent Audit Report to the Police and Crime Commissioner for Kent 12 Comprehensive Income and Expenditure Statements 16 The Balance Sheets 19 The Cash Flow Statement 21 The Movement in Reserves Statement 22 Notes to the Accounts 25 Police Pension Fund Account 95 Glossary of Accounting Terms 97 2 Page Item 11 Narrative Report 2015/16 This narrative report is deemed to have the same meaning as the “narrative Statement” in the accounts and audit regulation 2015. The Police Reform and Social Responsibility Act 2011 (the Act) replaced Police Authorities with elected Police and Crime Commissioners and created two corporations sole, the Office of the Commissioner and the corporation sole in the Chief Constable. In line with the Act and the related Policing Protocol, The Police and Crime Commissioner is ultimately responsible for the combined group account; both income and expenditure. Accordingly, this Statement of Accounts records the expenditure and income of the Group for the financial year 2015/16 for the Police and Crime Commissioner for Kent and the combined accounts for the Police and Crime Commissioner for Kent and the Chief Constable for Kent and its financial position at the 31 March 2016. The accounts have been prepared in accordance with the appropriate Codes of Practice published by the Chartered Institute of Public Finance and Accountancy (CIPFA). The accounts have also been produced in accordance with International Financial Reporting Standards (IFRS) and the latest CIPFA LAAP Bulletins. All assets, liabilities, non-staff contracts, property, plant and equipment are under the ownership of the Police and Crime Commissioner for Kent (PCC for Kent). In relation to employment, from April 2014, all Police Officers and the vast majority of police staff, formerly under the direction of the Chief Constable, had their employment contracts formally transferred to the Chief Constable. Conversely pre-existing staff serving the Commissioner have been retained under the formal employ of the Commissioner. All these employment arrangements have been approved by the Home Secretary. Structure of the accounts The Accounts begin with this Narrative Report followed by a statement of the responsibilities of the PCC for Kent and her Chief Finance Officer in relation to the management and reporting arrangements for the PCC for Kent’s resources (page 6). The PCC for Kent and Chief Constable for Kent have a combined ‘Annual Governance Statement’, which broadens the coverage of the previous Statement of Internal Control to embrace all of the organisation’s key governance processes and safeguards. This is shown starting on page 7. The Auditor’s Report appears at page 12 and the Summary of Accounting Policies as note 1 on page 25. The main financial statements comprise: • The Comprehensive Income and Expenditure Statement - This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. This distinction is very important in interpreting the overall position. Authorities raise taxation to cover expenditure classified in accordance with regulations; this will be very different to the accounting cost. • The Movement in Reserves Statement - shows the movement in the year of the different reserves held by the Police and Crime Commissioner for Kent, analysed into 'useable' (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The surplus or deficit on the Provision of Services line shows the true economic cost of providing the PCC’s services for Kent, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance for council tax setting purposes. The Net Increase / Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Police and Crime Commissioner for Kent. • The Balance Sheet - shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Police and Crime Commissioner for Kent. The net assets of the Police and Crime Commissioner for Kent (assets less liabilities) are matched by the reserves held by her. Reserves are reported in two categories: The first category of reserves are usable reserves, i.e. those reserves that the Police and Crime Commissioner for Kent may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves is that which the Police and Crime Commissioner for Kent are not able to use to provide services. This category includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line 'Adjustments between accounting basis and funding basis under regulations'. 3 Page Item 11 • The Cash flow Statement - shows the changes in cash and cash equivalents of the Police and Crime Commissioner for Kent during the reporting period. The statement shows how the Police and Crime Commissioner for Kent generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which operations of the Police and Crime Commissioner for Kent are funded by way of taxation and grant income or from the recipients of the services provided by the Police and Crime Commissioner for Kent. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Police and Crime Commissioner for Kent's future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowings) to the Police and Crime Commissioner for Kent. • The Police Officer Pension Fund Account – This statement was established under the Police Pension Fund Regulations 2007 (SI 2007 No. 1932) and is administrated on behalf of the Chief Constable by Kent County Council. The Statement identifies the benefits payable in the financial year which has been offset against the contributions taking the account balance to nil. The Fund is topped up by the Group if contributions are insufficient to meet the cost of pension payments. The statement also includes the benefits payable and contributions in respect of the Milne v Gad case. In addition to these primary statements there are a number of notes which help explain the figures, including a set of accounting policies showing the approach the Police and Crime Commissioner for Kent has taken in compiling the accounts. Other than the new ‘Narrative Statement’, there have been no significant changes in accounting policy or disclosure requirement. General Context and Medium Term Challenge In the Spending Review on the 25 November 2015 the Chancellor announced that the total budget for policing would be protected in real terms and that local force budgets would be protected in cash terms. Both assertions require each Police and Crime Commissioner (PCC) to set the maximum precept increase allowed in each of the next four years. On the 17 December, the Policing Minister announced the general grant allocation for each force area for 2016/17. In 2016/17, no PCC will face a cash reduction in “direct resource funding” assuming precept income is increased to the maximum available. For policing, direct resource funding is deemed by Government to be the sum of formula funding plus legacy council tax grants plus precept. The actual cash cut to formula grant funding for 2016/17 was 0.6% for all PCCs. The PCC for Kent introduced a precept increase to £5 for Band D properties. Despite the precept increase, the combination of grant reductions and spending pressures means a savings gap in 2016/17 of £8.7m but with a delivery plan identified and implemented by the Chief Constable by the beginning of the year. The Home Office has yet to issue specific local allocations for future years. For the purpose of current planning, it is assumed Kent loses an additional £1m in grant each year from 2017/18 onwards. In addition, it is assumed the cost of the new “Apprenticeship Levy” will be £1.3m for Kent Police. If these grants (and special levy) assumptions are combined with a roll forward of normal wage and price assumptions and an assumption of 2% precept increases from 2017/18 onwards, the savings gap over the 4 years to 2019/20 is £30m. However further top slicing of grant and/or increased cost pressures would add to the £30m gap. For that reason a 10% contingency has been added, in the latter two years, to make a total savings challenge of £33m over the four years to 2019/20. Furthermore, this gap does not take into account the possible impact of the Formula Review. Clearly, the position locally is crucially dependent on the public sector spend and deficit targets and there must be a risk that economic conditions could put pressure on the current CSR settlement through to 2020. The national funding challenge and uncertainty applies to all Forces. Building on the effective and timely response to previous CSR challenges leaves Kent Police well placed to deliver the future savings requirement but this will be on top of approximately £62m of savings delivered since 2011. Inevitably, such continuing savings as a result will impact on service delivery but the Chief Constable is committed to minimising the front line impact of future savings requirements as far as possible. Ensuring visible, local and cost effective policing remains at the core of how Kent Police will respond to the further challenges arising from future further savings requirements. The response will involve more continuing investment innovation and demand management, alongside efficiency, to identify options to deliver necessary savings in a way that both minimises front line policing impacts as far as possible but ensures that any such impacts are implemented last in any savings package and only after the level and timing of key funding changes have been confirmed. 4 Page Item 11 Performance and value for Money As dealt with below the underspend against the original budget for the year is £5.5m. More broadly, Kent Police are subject to a formal inspection regime undertaken by Her Majesty’s Inspector of Constabulary (HMIC). This regime is a vital part of the assurance that the PCC seeks in holding the force to account for VFM. As well as specific national studies, the HMIC regime covers an annual assessment of three main themes for each Force (referred to as the PEEL inspection) as follows: efficiency, effectiveness and legitimacy of the force. The efficiency element includes an assessment of the financial sustainability of the Force over the short and medium term. The review in 2015, Kent Police were graded as ‘good’, good’ and ‘outstanding’ respectively. Kent was the only force in the country to secure ‘outstanding’ for legitimacy and within the efficiency element secured an ‘outstanding’ grade for financial management and sustainability. In addition, the HMIC also publish key VFM statistics for all police forces annually. This is another key source of assurance. Kent is shown to be relatively very efficient compared to other Forces on most measures, especially as regards net cost per head and policing precept per average property. As referred to earlier, the Force have shown a consistent pattern of sensible forward planning and disciplined accelerated delivery of savings requirements but within a framework of clear service vision and use of technology and innovation to minimise front line impact. The Comprehensive Income and Expenditure Statement International Financial Reporting Standards require that the total future liabilities for the cost of pension payments to past and present employees are fully reflected in the Balance Sheet, and that their change during the year is reflected in the Comprehensive Income and Expenditure Statement. Excluding notional costs shown in the accounts to comply with international accounting standards, primarily for pensions and depreciation, the Kent Police revenue budget for 2015/16 as calculated to reflect the impact on the local council tax payer shows an underspend of £5.5m. This underspend will be mainly utilised to augment capacity for future capital and investment reserves. On a fully IFRS compliant basis, the CIES show the net cost of services at £300m, some £67m less than the previous year. However the two primary reasons for this are, first, impairments totalling £55m were charged in 2014/15 reflecting changes in valuation approach. Second, the net IAS19 adjustment in 2015/16 is some £18m less than the equivalent adjustment in 2014/15 due to a reduction in the externally assessed long term liability compared to the previous year. The overall operating deficit for the year is £97.8m compared to £176.6m in the previous year, explained mainly by the two key variations already mentioned. The total CIES is a surplus of £467.7m due to £1,031.8m change in the re-measurement of the net defined benefit liability as per the independent actuarial assessment. The Balance Sheet. st Total long term assets as at 31 March 2016 stand at £207.4m, an increase of £19.5m on the previous year. The bulk of this is explained by revaluation increases on those properties valued at depreciated replacement cost which have increased by an average of 9% in the year, as assessed by the external valuation. Net current assets (i.e. net of current liabilities) stand at £64.3million, compared to £63.1million the previous year. However, net worth / assets stands at a deficit of £2.8 billion primarily because of the actuarial assessment of long term pension st liabilities as at 31 March 2016 of £3 billion. This is some £0.5 billion more than the previous years and means that net assets overall are some £0.5 billion less than the previous year. Usable reserves stand at £62.5m, an increase of £2.4m on the previous year. A number of variations explain this but the most significant is the underlying under-spend on normal operations of £5.5m for the year. The Future th The new Police and Crime Commissioner for Kent officially took up office on 11 May. Alongside coping with the medium term financial challenge, he will be developing his interim Police and Crime Plan for the remainder of 2016/17 and for the medium term. His manifesto details the following six key plan priorities:       Cutting crime and reducing re-offending Delivering Value For Money Visible, effective and dedicated policing Putting the victim at the heart of the justice system Tackling the misery cause by abuse, substance misuse and antisocial behaviour Revolutionising how people with mental illness interact with the Police in Kent 5 Page Item 11 Statement of Responsibilities for the Statement of Accounts The Police and Crime Commissioner for Kent and the Chief Constable are required to:  Make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs. That officer is the Chief Finance Officer for the Police and Crime Commissioner for Kent and the Chief Finance Officer of the Chief Constable for Kent;  Manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets;  Ensure that the statement of accounts is prepared in accordance with the Accounts and Audit Regulations 2011 and to approve the accounts within three months of the end of the period to which they relate. Police and Crime Commissioner for Kent th 12 August 2016 The Chief Finance Officer’s Responsibilities: The Chief Finance Officer is responsible for the preparation of the Kent Police Group statement of accounts which, in terms of the CIPFA Code of Practice on Local Authority Accounting in Great Britain (‘the Code’), is required to present a true and fair view of the financial position of the Kent Police Group at the accounting date and its income and expenditure for the year ended 31 March 2016. The Chief Finance Officer is also responsible for certifying the accounts as correct with the Chief Finance Officer for the Chief Constable before their being presented for approval by the Police and Crime Commissioner for Kent. In preparing this statement of accounts, I have:  Selected suitable accounting policies and then applied them consistently;  Made judgements and estimates that were reasonable and prudent;  Complied with the Code;  Kept proper accounting records which were up to date;  Taken reasonable steps for the prevention and detection of fraud and other irregularities. I certify that the Statement of Accounts presents a true and fair view of the financial position of the Kent Police Group at 31st March 2016 and its income and expenditure for that period then ended. Chief Finance Officer for the Police and Crime Commissioner of Kent th 12 August 2016 6 Page Item 11 Annual Governance Statement 2015/16 Scope of responsibility 1. This statement is expressed in the name of the Police and Crime Commissioner (subsequently to be referred to in this document as the PCC) but also covers the accounts of the Chief Constable. The PCC and the Chief Constable are responsible for ensuring that business is conducted in accordance with the law and proper standards and that public money is safeguarded and properly accounted for, and is used efficiently and effectively. More specifically, there are a number of statutory responsibilities that flow from the Police Reform and Social Responsibility Act 2011. (The PRSR Act 2011.) 2. In discharging these various responsibilities both are responsible for putting in place proper arrangements for the governance of their affairs including the management of risk. 3. The PCC and Chief Constable endorse the code of governance consistent with the principles of the Chartered Institute of Public Finance and Accountancy (CIPFA)/Society of Local Authority Chief Executives (SOLACE) Framework, “Delivering Good Governance in Local Government”. This statement explains how the PCC and Chief Constable comply with that Code and also meet the statutory requirement to prepare an annual governance statement. The PCC and Chief Constable endorse and comply with the CIPFA statement on the role of the Chief Finance Officer (CFO) in local government 2010 as set out in the application note, delivering good governance in local government. Both also endorse and comply with the relevant specific codes produced by both CIPFA and the Home Office arising out of, or related to the PRSR Act 2011. This includes the March 2014 CIPFA Statement on the role of the CFO and relevant parts of the Account and Audit Regulations 2015 and the Home Office Financial Management Code of Practice. Purpose of the Governance Framework 4. The governance framework is interpreted to comprise the systems, processes, culture and values by which the work of the PCC and their office is directed and controlled and how it accounts to, engages with, and provides leadership to the communities they serve. The framework enables the PCC to monitor the achievement of objectives including value for money. The system of internal control plays a significant part in the overall framework. It cannot eliminate all risk of failure to deliver such objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal controls is on-going and dynamic and designed to identify and prioritise key risks and to manage them as effectively as possible. The current governance framework covering the period up 31 March 2016 has been put in place since late 2012 and early 2013. This Annual Governance Statement reflects the arrangements in place for the year ending 31 March 2016 and also considers any significant changes up to the date of approval of the statement of accounts. It also covers the Chief Constable’s operations. The Framework The principal elements of the Framework currently in place are as follows: Identifying and Communicating the Vision, Purposes and Outcomes. 5. For the year 2015/16, under the stewardship of the Commissioner in place, the key strands have been carried forward from the 2012 election manifesto, crafted after extensive consultation with Kent’s residents at the time and subsequently reflected in the published Police and Crime Plan. As in previous years, these key strands were refreshed, following an extensive consultation with stakeholders for the 2015/16 Police and Crime Plan. It was similarly refreshed in producing the 2016/17 Police and crime Plan, published March 2016. For 2015/16, consultation and communication is conducted on a dynamic basis including , regular visits to different local areas, active Twitter and web / communication interaction, special forums and other events (e.g., regular meetings with business community leaders, Parish Councils. Feedback and queries are collated and shared with Kent Police if required. All correspondence is responded to and as far as possible key themes emerging are identified and shared with the PCC who decides if they warrant a more formal explanation from the Force or other agencies. 7 Page Item 11 6. Objectives for Partners and partnership working are primarily set out in the published Police and Crime Plan but reflect on-going dialogue with key partners during the course of the year. There is a regular cycle of visits to local Community Safety Partnerships, and the PCC and their senior officers attend the Kent Criminal Justice Board. Office of the PCC senior staff attend the Kent County wide Community Safety Partnership and engage with other key partners such as the Health and Probation services. 7. As well as direct engagements, web, social media and correspondence accountability to stakeholders in the widest sense, the PCC produces an Annual Report on performance against the Police and Crime Plan. That was done by the previous PCC in respect of 2015/16 and endorsed by the Police and Crime Panel in April 2016. By statute the PCC appears regularly before the local Police and Crime Panel. Measuring and Controlling Risk 8. The Force and the Commissioner have risk registers, both at a strategic and operational level. These are reviewed and challenged by the Joint Audit Committee. The Force strategic risk register is managed by a senior member of the Chief Constable’s team and operational risks are managed at all levels throughout the organisation. The Office of The Kent Police and Crime Commissioner’s (OKPCC) risk register process is led by the PCC’s CFO and features as part of routine discussion on overall delivery in both the Commissioner’s weekly meetings with his senior team, and senior officers’ management meetings. Both registers form part of established management processes within respective operations and are reviewed periodically by Internal Audit on behalf of the Joint Audit Committee. Understandably, the Force’s risk management needs to be much more complex given the size of the organisation and the inherent risks in operational policing. The risk management process within the OPCC contains documented sources of risk assurances. A number of key force personnel have formal accreditation in the management of risk. Fulfilling Statutory Responsibilities to ‘Hold the Force to Account’ 9. Although the Chief Constable is responsible for operational policing matters, the PCC is required to hold him to account for the exercise of those functions and those of the persons under his direction and control. The PCC must be satisfied that the Chief Constable has appropriate mechanisms in place and that these operate in practice. Core arrangements have been put in place since November 2012 that involve senior OKPCC staff attending key Force performance meetings and carrying out further checks such as sampling complaints. In addition, a PCC Governance Board meets bi-monthly with a published agenda and papers to hold the Chief Constable and the Force to account in public for performance. There is a weekly one to one meeting between the Commissioner and the Chief Constable. All of this is complemented by regular liaison between senior OKPCC staff and senior Officers within the force including Chief Constable and Chief Officers on general matters but including finance, estates, procurement and IT matters. This includes OPCC membership e.g. IT Governance Board, Estates Strategy Board and Capital Management Board. There is also a Joint Collaboration Governance Board in place to reflect the extensive collaboration arrangements with Essex Police. The above is supported by the agreed provision of crime and other performance data on a regular basis, normally monthly, to the PCC’s office. 10. In addition, for 2015/16, the Commissioner had in place additional arrangements to augment the ‘holding the force to account’ function. This involved People Board reviews of organisational health, looking at ethics, morale and integrity, and also equality and diversity. Representatives from across the Force, support groups and individual officers attended with a focus on a supportive approach. For 2015/16, there was an External Ethics Committee, intended to complement the Force’s Internal Ethics Committee, reviewing the topics and actions that result. 11. In addition, where a PCC judges it necessary, the PCC can commission HMIC to conduct surveys or investigations into any aspect of Force performance that may cause concern from time to time. This has happened with regards to Kent’s crime reporting and recording practices in the past. 8 Page Item 11 Transparent Decision Making, Governance and Clarity of Roles 12. The PCC has a comprehensive framework for decision making, including specifically a scheme of consent to operate between the PCC and the Chief Constable supported by financial regulations and standing orders for contract arrangements. It also includes key roles and responsibilities and is the essential framework for decision making. It is published on the website. 13. In conjunction with the Chief Constable, the PCC established a new independent Joint Audit Committee which has been in operation since March 2013. The Committee provides independent assurance on the adequacy of the corporate governance and risk management arrangements in place and the associated control environment; advising according to good governance principles and proper practice. The Joint Audit Committee has five independent members and is attended by External Audit, Internal Audit and both Chief Finance Officers and Director of Support Services; it meets four times a year. 14. All key decisions made by the PCC are published monthly, as well as all other transparency requirements, and are provided to the Police and Crime Panel for information. The normal OKPCC provides for both Monitoring Officer and Chief Financial Officer advice in all key decision making processes and external legal advisors have also been retained. All meetings of the Governance, Audit and Collaboration Board/Committees are public with agendas published in advance and minutes published after each meeting. The Chief Constable meets with Chief Officer Colleagues at least weekly to discuss strategic and operational matters. These meetings are further supported by the monthly Strategic Change Board, chaired by the Deputy Chief Constable, at which staff associations are represented and which reviews all proposals for organisational savings and growth. The only avenues to approve changes to the establishment are now through this board or the weekly Chief Officer Strategic Meeting, chaired by the Chief Constable. The force has a well-established with a broad representation, Ethics Committee, chaired by the Head of Professional Standards, ‘Ask the Chief’ web-pages and has recently introduced a web-portal to share ideas and comments around the force’s governance, each of which actively encourages staff to raise questions around the running of the force and provide answers to them 15. The Policing Protocol defines the role of both the Commissioner and Chief Constable. At its heart is operational independence for the Chief Constable but the setting of the strategic framework by the PCC for policy and the allocation of resources within which the Chief Constable operates and then holding the Chief Constable to account. In addition the Commissioner has broader partnership and criminal justice responsibility and powers. 16. The Commissioner has also agreed a Code of Conduct, based on the Nolan Principles, which will guide his actions and decision making. Similarly, the Chief Constable has accepted and rolled out the Code of Ethics, based on the Nolan Principles, throughout the Force. Effectiveness of the Governance Environment 17. The PCC and the Chief Constable have a shared responsibility to ensure an annual review of the overall effectiveness of the governance system. The review is informed by the work of the internal auditors and key managers within the OKPCC and the Chief Constable team (with collaboration benefits from sharing the same external and internal auditors with Essex Police). It is also informed by the comments of external agencies as they apply to Governance. As a result, the following key points can be made to evidence ongoing reviews of effectiveness: • All reports from the internal and external auditor were considered by the Joint Audit Committee. All findings were accepted and new arrangements put in place to monitor implementation. • • The outcome of HMIC inspections during the year have been shared with the Commissioner and Chief Constable, and reported to the Governance Board as a matter of course. The Force continues its strong record of delivery of savings plans in year. Over the medium term the PCC had set the overall financial framework in consultation with the Chief Constable, and the Chief had 9 Page Item 11 developed an effective response to the CSR challenges through to 2019/20. These are considerably less than originally feared but still significant. • HMIC inspections confirm considerable confidence in delivering savings and the processes underpinning medium-term planning. More significantly the HMIC PEEL inspections rate the Force as the only outstanding force for the legitimacy of its operations. However, some areas of operational business were assessed as requiring improvement. • The risk based work of internal audit during the year reveals a generally positive view of the control environment. • The independent Joint Audit Committee in exercising the core functions of an audit committee, have maintained a focus on testing and monitoring Force and PCC approaches to risk management. To date the Committee are very satisfied with the general management of these arrangements but recognise it is an on-going process. • The Joint Audit Committee have undertaken an annual review of their own operations and effectiveness in line with national audit office best practice guidelines. • On-going and dynamic reviews of crime performance data. • A new quality performance framework has been introduced by the Chief Constable throughout the Force. It focuses on the quality of service. • Independent review of key processes occasionally commissioned by management. Significant Governance and Control Issues Arising 18. The view of the PCC, supported by his statutory officers, and the Chief Constable supported by his Chief Officers is that overall the effectiveness of governance, risk management and controls remain generally sound. In the 2014/15 Annual Governance Statement a number of actions were listed as required to enhance the control environment. Where appropriate these are repeated below but with the action, programme or result set out in bold: a. Closure of account procedures While there have been considerable improvements on the previous year, not least in ensuring satisfactory closure within expected timeframes, the emergence of historic coding errors which came to light during the closing process in 2014/15, implies the process stills requires further improvement. This has continued to be a point of focus for 2015/16 and this will continue during 2016/17. b. Impact of major ICT changes This remains a continuing challenge in respect of major and complex system developments, and thus a continuing point of focus into next year. However, new and much more effective governance arrangements, involving the OPCC, have been put in place. More specifically, Athena remains a key issue given its complexity both in terms of service and governance. Considerable additional focus has been applied in the year but this carries forward into the next year. c. Responding to statutory changes in function or responsibility - e.g. potential transfer of most complaints to the PCC. The Police and Crime Bill has yet to pass into law. This risk area is therefore carried forward into 2016/17 d. Audit and succession planning for the Committee – including internal and external audit and accelerated closure. A degree of accelerated closure has been piloted for 2015/16 closure. This has proved a relative success. This will need to be continuing areas of focus next year. The Joint Audit committee has identified a sensible working solution to succession planning. Internal Audit was successfully retendered and the current incumbent was successful. In respect of external audit, like virtually all other local public bodies, the Joint Audit Committee is advocating a sector led approach if possible to the appointment of External Auditors for 2018/19 onwards. This will be a continuing task into next year 19. The following additional actions or areas of focus relating to overall governance have been identified for 2016/17: 10 P a g e Item 11 a. On-going from the previous year: Closure of account procedures; Impact of all major ICT changes but particularly Athena, responding to the Police and Crime bill including in respect of Fire and Rescue services, appointment of external auditor for 2018/19, delivery of major change programmes and associated investment over the short and medium term b. Further refinement to the pay budget setting process around vacancy rates in terms of the revenue budget and forecasting/planning of capital expenditure c. Development of a new Police and Crime Plan, and related governance, under the newly elected Commissioner d. Additional devolution of victim responsibilities to PCCs generally e. Responding to the consequences of the EU Referendum result Opinion of the Internal Auditors 20. The following is the opinion of Baker Tilly: Kent Police and Crime Commissioner In our opinion, based upon the work we have undertaken, for the 12 months ended 31 March 2016, the organisation has an adequate and effective framework for risk management, governance and internal control. However, our work has identified further enhancements to the framework of risk management, governance and internal control to ensure that it remains adequate and effective. Chief Constable for Kent In our opinion, based upon the work we have undertaken, for the 12 months ended 31 March 2016, the organisation has an adequate and effective framework for risk management, governance and internal control. However, our work has identified further enhancements to the framework of risk management, governance and internal control to ensure that it remains adequate and effective. Significant Changes in Governance after 31 March 2016. 21. The newly elected PCC, Matthew Scott, took up office on the 11 May 2016. On an interim basis, pending further reflections during coming months alongside the necessary review of governance that will be needed on the launch of the new CIPFA/SOLACE requirements for next year, the PCC is satisfied with current arrangements. Furthermore the new PCC has confirmed the key commissioning priorities and allocations set out in his predecessor’s Police and Crime Plan. The new Commissioner will be producing his new interim Police and Crime Plan for the remainder of 2016/17 based on his manifesto promises and intends to publish his medium term commissioning priorities in autumn 2016. Police and Crime Commissioner for Kent Chief Constable for Kent 11 P a g e Item 11 INDEPENDENT AUDITOR’S REPORT TO THE POLICE AND CRIME COMMISSIONER FOR KENT Opinion on the Police and Crime Commissioner for Kent financial statements We have audited the financial statements of the Police and Crime Commissioner for Kent for the year ended 31 March 2016 under the Local Audit and Accountability Act 2014. The financial statements comprise the:  Police and Crime Commissioner for Kent and Group Comprehensive Income and Expenditure Statement;  Police and Crime Commissioner for Kent and Group Balance Sheet;  Police and Crime Commissioner for Kent and Group Cash Flow Statement;  Police and Crime Commissioner for Kent and Group Movement in Reserves Statement;  Police and Crime Commissioner for Kent Pension Fund Account Statements; and  related notes 1 to 41. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16. This report is made solely to the Police and Crime Commissioner for Kent in accordance with Part 5 of the Local Audit and Accountability Act 2014 and for no other purpose, as set out in paragraph 43 of the Statement of Responsibilities of Auditors and Audited Bodies published by Public Sector Audit Appointments Limited. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Police and Crime Commissioner for Kent, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Chief Finance Officer and auditor As explained more fully in the Statement of Responsibilities for the Statement Accounts set out on page 6, the Chief Finance Officer is responsible for the preparation of the Statement of Accounts, which includes the financial statements, in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16, and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Police and Crime Commissioner for Kent and Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Chief Finance Officer; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Group Accounts for the Police and Crime Commissioner for Kent and the Chief Constable for Kent Police Audited Statement of Accounts 2015-16 to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. 12 P a g e Item 11 Opinion on financial statements In our opinion the financial statements:  give a true and fair view of the financial position of the Police and Crime Commissioner for Kent and Group as at 31 March 2016 and of its expenditure and income for the year then ended; and  have been prepared properly in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16. Opinion on other matters In our opinion, the information given in the Group Accounts for the Police and Crime Commissioner for Kent and the Chief Constable for Kent Police Audited Statement of Accounts 2015-16 for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we report by exception We report to you if:  in our opinion the annual governance statement is misleading or inconsistent with other information forthcoming from the audit or our knowledge of the Council;  we issue a report in the public interest under section 24 of the Local Audit and Accountability Act 2014;  we make written recommendations to the audited body under Section 24 of the Local Audit and Accountability Act 2014;  we make an application to the court for a declaration that an item of account is contrary to law under Section 28 of the Local Audit and Accountability Act 2014;  we issue an advisory notice under Section 29 of the Local Audit and Accountability Act 2014; or  we make an application for judicial review under Section 31 of the Local Audit and Accountability Act 2014. We have nothing to report in these respects Conclusion on the Police and Crime Commissioner’s arrangements for securing economy, efficiency and effectiveness in the use of resources Police and Crime Commissioner’s responsibilities The Police and Crime Commissioner is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance, and to review regularly the adequacy and effectiveness of these arrangements. 13 P a g e Item 11 Auditor’s responsibilities We are required under Section 20(1)(c) of the Local Audit and Accountability Act 2014 to satisfy ourselves that the Police and Crime Commissioner has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the National Audit Office (NAO) requires us to report to you our conclusion relating to proper arrangements. We report if significant matters have come to our attention which prevent us from concluding that the Police and Crime Commissioner has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. We are not required to consider, nor have we considered, whether all aspects of the Authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively. Scope of the review of arrangements for securing economy, efficiency and effectiveness in the use of resources We have undertaken our review in accordance with the Code of Audit Practice, having regard to the guidance on the specified criterion issued by the Comptroller and Auditor General (C&AG) in November 2015, as to whether the PCC had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people. The Comptroller and Auditor General determined this criterion as that necessary for us to consider under the Code of Audit Practice in satisfying ourselves whether the Police and Crime Commissioner for Kent put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2016. We planned our work in accordance with the Code of Audit Practice. Based on our risk assessment, we undertook such work as we considered necessary to form a view on whether, in all significant respects, the Police and Crime Commissioner for Kent had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. Conclusion On the basis of our work, having regard to the guidance issued by the C&AG in November 2015, we are satisfied that, in all significant respects, Police and Crime Commissioner for Kent put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2016. Delay in certification of completion of the audit We cannot formally conclude the audit and issue an audit certificate until we have completed the work necessary to issue our assurance statement in respect of the Police and Crime Commissioner’s Whole of Government Accounts consolidation pack. We are satisfied that this work does not have a material effect on the financial statements or on our value for money conclusion. Debbie Hanson, Executive Director for and on behalf of Ernst & Young LLP, Appointed Auditor Luton 12 August 2016 14 P a g e Item 11 This page has been left blank deliberately 15 Page Item 11 Comprehensive Income and Expenditure Statements (for the year ended 31st March 2016) The Comprehensive Income and Expenditure Statement - This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different to the accounting cost. The taxation position is shown in the Movement in Reserves Statement. Kent Police Group Notes 2014/15 2015/16 Gross Expenditure Gross Income Group Net Expenditure Gross Expenditure Gross Income Group Net Expenditure £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s Local Policing Dealing with the Public Criminal Justice Arrangements Roads Policing Specialist Operations Intelligence Investigations Investigative Support 177,462 33,799 31,014 15,509 21,118 21,120 72,105 11,484 (6,112) (1,334) (3,447) (3,138) (4,331) (808) (5,086) (315) 171,350 32,465 27,567 12,371 16,787 20,312 67,019 11,169 151,342 27,283 25,869 10,776 15,727 18,290 60,990 10,462 (7,423) (1,759) (3,961) (2,318) (3,805) (1,818) (5,677) (1,324) 143,919 25,524 21,908 8,458 11,922 16,472 55,313 9,138 Sub-total 383,611 (24,571) (28,085) (14,428) (70) 0 359,041 6,005 2,480 (162) 320,739 20,433 2,550 (162) 18,247 2,019 892 (13,743) (73) 0 292,654 4,504 1,946 892 406,432 (39,069) 367,364 341,897 (41,901) 299,996 National Policing Corporate & Democratic Core Non-Distributed Costs Net Cost of Policing Services Other Operating Expenditure Net (Gains) / Losses on disposal of fixed assets Total Other Operating Expenditure Financing & Investment Income & Expenditure Interest Element of Finance Leases Interest Payable on PFI Unitary Payments Pensions Interest Cost Investment Interest Income Income & expenditure in relation to investment properties & changes in their fair value Total Financing & Investment Income & Expenditure Taxation & Non Specific Grant Income Capital Grants Precept Income Non-service related Government Grants Home Office Pension Grant Total Taxation & Non Specific Grant Income Deficit for the year (Surplus) on Revaluation of Non-Current Assets Remeasurement of the net defined benefit liability Total Comprehensive Income and Expenditure 5 170 (595) 170 (595) 104 104 3,944 121,066 (136) 4,161 109,813 (587) 99 (688) 125,077 112,803 (2,572) (84,323) (2,317) (87,744) (196,534) (32,558) (187,172) (37,128) (315,987) (314,361) 176,626 97,843 (35,942) (15,665) 481,936 (549,849) 622,620 (467,671) 16 P a g e Item 11 Reconciliation to the budget outturn and management reports for the year 2015/16 Net Cost of Services Depreciation and AUC not adding value Donated Assets Impairments of non-current assets Loss/gain on revaluation of non-current assets Interest of finance lease Interest payable on PFIs Short term compensated absences Transfers to / from reserves Pensions adjustment – IAS 19 Investment income - interest Police Officer Superannuation Police Staff Superannuation Total for the year 2015/16 Budget Under Spend for 2015/16 Actual £000’s 299,996 (6,981) 304 2,851 805 104 4,161 64 76 (79,938) (587) 40,882 7,159 268,896 274,364 (5,468) The Kent Police revenue budget for the year 2015/16 provided for net expenditure of £274.4m. In the event, actual net expenditure was £268.9m, representing an underspend of £5.5m. Much of this is attributable to proactive cost reduction initiatives across the Force. The level of underspend is slightly higher than anticipated at the time of setting the Revenue Budget for 2015/16, and will be utilised on a planned basis to maintain the redundancy, relocation and regulation A20 reserve, to fund future change programmes and capital expenditure to improve efficiency and effectiveness over the medium term. Note 24 to these accounts provide information in a similar format to that received regularly by the Chief Officer team and used to make resourcing decisions. This provides meaningful information to readers of the accounts on where expenditure is incurred and on what. The final position on Revenue Spending against Budget for the year was, therefore, a satisfactory and favourable one. It has permitted the General Fund Reserve for the time being to remain just under £6m. This is over 2% of net revenue expenditure, which is in line with previous policies. Identified future liabilities (except pensions) are fully covered by separate earmarked Reserves. 17 P a g e Item 11 2015/16 Police and Crime Commissioner for Kent Notes 2014/15 A Local Policing Dealing with the Public Criminal Justice Arrangements Roads Policing Specialist Operations Intelligence Investigations Investigative Support Sub-total National Policing Corporate & Democratic Core Non-Distributed Costs Net Cost of Policing Services Impairment Intra Group Funding For Chief Constable's Net Service Cost Net Cost of Services 5 Gross Expenditure Gross Income Group Net Expenditure Gross Expenditure Gross Income Group Net Expenditure £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s 44,321 10,400 9,976 4,928 5,584 5,847 21,072 4,689 (6,112) (1,334) (3,447) (3,138) (4,331) (808) (5,086) (315) 38,209 9,066 6,529 1,790 1,253 5,039 15,986 4,374 21,248 4,865 5,470 2,093 3,143 3,495 11,967 3,154 (7,423) (1,759) (3,961) (2,318) (3,805) (1,818) (5,677) (1,324) 13,825 3,106 1,509 (225) (662) 1,677 6,290 1,830 106,817 (24,571) (28,085) (14,428) (70) 0 82,246 (9,696) 2,016 (462) 55,435 4,732 2,086 (462) 2,517 1,661 (127) (13,743) (73) 0 27,350 (11,226) 1,588 (127) 113,173 (39,069) 74,107 59,486 (41,901) 17,585 283,504 287,704 357,611 305,289 Net (Gains) / Losses on disposal of fixed assets 170 (595) Total Other Operating Expenditure 170 (595) 104 3,944 0 (136) 104 4,161 0 (587) 99 (688) 4,011 2,990 Capital Grants Precept Income Non-service related Government Grants Home Office Pension Grant (2,572) (84,323) (196,534) (32,558) (2,317) (87,744) (187,172) (37,128) Total Taxation & Non Specific Grant Income (315,987) (314,361) Other Operating Expenditure Financing & Investment Income & Expenditure Interest Element of Finance Leases Interest Payable on PFI Unitary Payments Pensions Interest Cost Investment Interest Income Income & expenditure in relation to investment properties & changes in their fair value Total Financing & Investment Income & Expenditure Taxation & Non Specific Grant Income Deficit / (Surplus) for the year (Surplus) on Revaluation of Non-Current Assets Remeasurement of the net defined benefit liability Total Comprehensive Income and Expenditure 45,807 (6,677) (35,942) (15,665) 0 0 9,865 (22,342) 18 P a g e Item 11 The Balance Sheet The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Kent Police Group. The net assets of Kent Police (assets less liabilities) are matched by the reserves held by the Kent Police. Reserves are reported in two categories: The first category of reserves are usable reserves, i.e. those reserves that the Police and Crime Commissioner for Kent may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves is those that the Police and Crime Commissioner for Kent is not able to use to provide services. This category includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line 'Adjustments between accounting basis and funding basis under regulations. Group PCC 31 March 2015 31 March 2015 £000 £000 Notes 156,423 15,712 2,773 3,449 43 156,423 15,712 2,773 3,449 43 9 9 9 9 Property, Plant & Equipment Land and Buildings Vehicles, Plant & Equipment Assets under Construction Surplus Assets Heritage Assets 6,720 6,720 10 Investment Properties 1,871 0 186,991 1,871 0 186,991 11 11 Intangible Assets Software Assets under Development 425 425 505 505 187,921 187,921 46,290 335 24,018 23,218 2,081 46,290 335 24,018 23,218 2,081 95,942 95,942 (21,728) (11,088) (19,145) (11,088) (32,816) (30,233) (45,507) (1,805) (45,507) (1,805) 17 18 (3,424,802) 0 35 (3,472,114) (3,221,067) Group PCC 31 March 2016 31 March 2016 £000 £000 171,090 15,952 445 3,315 37 171,090 15,952 445 3,315 37 6,823 6,823 3,123 5,746 206,531 3,123 5,746 206,531 Long Term Investments Non Property Investments 425 425 Long Term Debtors 438 438 Total Long Term Assets 207,394 207,394 Short Term Investments Inventories Short Term Debtors Cash & Cash Equivalents Assets Held for Sale 63,988 317 31,289 6,848 833 63,988 317 31,289 6,848 833 Total Current Assets 103,275 103,275 Short Term Creditors Provisions falling due within one year (37,315) (1,665) (34,795) (1,665) Total Current Liabilities (38,980) (36,460) Long Term Creditors Provisions falling due after one year Other Long Term Liabilities Police Officer & Police Staff Pension Liability (44,140) (1,407) (44,140) (1,407) (2,979,534) 0 (47,312) Total Long term Liabilities (3,025,081) (45,547) 206,318 Net Assets (2,753,392) 228,662 13 14 15 16 18 19 P a g e Item 11 Balance Sheet continued. 31 March 2015 31 March 2015 31 March 2016 31 March 2016 £000 £000 £000 £000 Restated Restated 5,640 25,623 25,649 119 3,098 5,640 25,623 25,649 119 3,098 19 Usable Reserves General Fund Earmarked Revenue Reserves Capital Reserve Capital Contributions Unapplied Reserve Insurance Fund 5,640 22,187 31,347 247 3,098 5,640 22,187 31,347 247 3,098 60,129 60,129 Total Usable Reserves 62,519 62,519 20 Unusable Reserves 35,495 (3,424,802) 108,634 (12) 2,073 (2,583) 35,495 0 108,634 (12) 2,073 0 Revaluation Reserve Pensions Reserve Capital Adjustment Account Financial Instruments Adjustment Account Collection Fund Adjustment Account Short Term Accumulated Compensated Absences Account 49,956 (2,979,534) 113,573 (12) 2,626 (2,520) 49,956 0 113,573 (12) 2,626 0 (3,281,196) 146,189 Total Unusable Reserves (2,815,911) 166,143 (3,221,067) 206,318 Total Reserves (2,753,392) 228,662 These financial statements replace the unaudited financial statements certified by Sean Nolan, Chief Finance th Officer for the Police and Crime Commissioner for Kent on 10 June 2016. Balance Sheet for the Police and Crime Commissioner for Kent The Police and Crime Commissioner for Kent owns all of the assets and bank accounts of the Group and therefore the Group Balance sheet is in many respects identical to that of the PCC. The only differences are that the Group Balance sheet includes the net pension liability and the provision for compensated absences, both of which sit with the accounts of the Chief Constable of Kent Police. I confirm that the Police and Crime Commissioner for Kent approved these accounts. . Sean Nolan, Chief Finance Officer for the Police And Crime Commissioner for Kent th 12 August 2016 20 P a g e Item 11 The Cash Flow Statement The Cash flow Statement shows the changes in cash and cash equivalents of the Kent Police Group during the reporting period. The statement shows how Kent Police generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which operations of Kent Police are funded by way of taxation and grant income or from the recipients of the services provided by Kent Police. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to Kent Police’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowings) to Kent Police. 2014/15 2015/16 £’000’s £’000’s Cash Flow Statement for Kent Police Group Net (surplus) or deficit on the provision of services 176,626 97,843 Adjustments to net surplus or deficit on the provision of services for non-cash movements (Note 21) (186,075) (110,123) Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities (Note 21) 4,787 7,322 Net Cash flows from Operating Activities (4,662) (4,958) Investing Activities (Note 22) 11,591 20,519 Financing Activities (Note 23) 1,892 809 Net increase or decrease in cash and cash equivalents 8,821 16,370 Cash and cash equivalents at the beginning of the reporting period 32,039 23,218 Cash and cash equivalents at the end of the reporting period (Note 14) 23,218 6,848 All bank accounts are held in the name of the Police and Crime Commissioner for Kent and all cash flows are therefore attributable to the Office of the PCC. 2014/15 2015/16 £’000’s £’000’s Cash Flow Statement for Kent Police & Crime Commissioner for Kent Net (surplus) or deficit on the provision of services 45,807 (6,677) Adjustments to net surplus or deficit on the provision of services for non-cash movements (Note 21) (55,256) (5,603) Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities (Note 21) 4,787 7,322 Net Cash flows from Operating Activities (4,662) (4,958) Investing Activities (Note 22) 11,591 20,519 Financing Activities (Note 23) 1,892 809 Net increase or decrease in cash and cash equivalents 8,821 16,370 Cash and cash equivalents at the beginning of the reporting period 32,039 23,218 Cash and cash equivalents at the end of the reporting period (Note 14) 23,218 6,848 21 P a g e Item 11 The Movement in Reserves Statement This statement shows the movement in year on the different reserves held by Kent Police, analysed into 'useable' (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The surplus or (Deficit) on the Provision of Services line shows the true economic cost of providing the policing services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance for council tax setting purposes. The Net Increase / Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Police and Crime Commissioner for Kent. Group Statement 2015/16 BALANCE AS AT 1st APRIL 2015 Surplus / (Deficit) on the Provision of Services on an accounting basis Other Comprehensive Income & Expenditure TOTAL COMPREHENSIVE INCOME & EXPENDITURE Adjustments between accounting basis and funding basis under regulations (Note 7) Net increase / decrease before transfers to Earmarked Reserves Transfer to / from Earmarked Reserves Increase / (Decrease) in the year BALANCE AS AT 31ST MARCH 2016 General Fund Capital Receipts & Contributions Reserves Earmarked Reserves TOTAL USEABLE RESERVES TOTAL UNUSABLE RESERVES TOTAL RESERVES £'000's £'000's £'000's £'000's £'000's £'000's 5,640 25,768 28,721 60,129 (3,281,195) (3,221,066) (97,843) 0 0 (97,843) 0 (97,843) 0 0 0 0 565,514 565,514 (97,843) 0 0 (97,843) 565,514 467,671 103,582 (3,348) 0 100,234 (100,234) 0 5,739 (3,348) 0 2,391 465,284 467,675 (5,739) 9,174 (3,435) 0 0 0 (0) 5,826 (3,435) 2,391 465,284 467,675 5,640 31,594 25,285 62,519 (2,815,911) (2,753,392) * The Capital Receipts reserve in the table above incorporates the Capital Contributions Unapplied Reserve for clarity. Note 19 includes additional information on the Capital Contributions Unapplied Reserve. 22 P a g e Item 11 PCC Statement 2015/16 BALANCE AS AT 1st APRIL 2015 Surplus / (Deficit) on the Provision of Services on an accounting basis Other Comprehensive Income & Expenditure TOTAL COMPREHENSIVE INCOME & EXPENDITURE Adjustments between accounting basis and funding basis under regulations (Note 7) Net increase / decrease before transfers to Earmarked Reserves Transfer to / from Earmarked Reserves Increase / (Decrease) in the year BALANCE AS AT 31ST MARCH 2016 Group Statement 2014/15 BALANCE AS AT 1st APRIL 2014 Surplus / (Deficit) on the Provision of Services on an accounting basis Other Comprehensive Income & Expenditure TOTAL COMPREHENSIVE INCOME & EXPENDITURE Adjustments between accounting basis and funding basis under regulations (Note 7) Net increase / decrease before transfers to Earmarked Reserves Transfer to / from Earmarked Reserves Increase / (Decrease) in the year BALANCE AS AT 31ST MARCH 2015 General Fund Capital Receipts & Contributions Reserves Earmarked Reserves TOTAL USEABLE RESERVES TOTAL UNUSABLE RESERVES TOTAL RESERVES £'000's £'000's £'000's £'000's £'000's £'000's 5,640 25,768 28,721 60,129 146,190 206,319 6,677 0 0 6,677 0 6,677 0 0 0 0 15,665 15,665 6,677 0 0 6,677 15,665 22,342 (938) (3,348) 0 (4,286) 4,286 0 5,739 (3,348) 0 2,391 19,952 22,343 (5,739) 9,174 (3,435) 0 0 0 (0) 5,826 (3,435) 2,390 19,952 22,342 5,640 31,594 25,285 62,519 166,143 228,662 General Fund Capital Receipts & Contributions Reserves Earmarked Reserves TOTAL USEABLE RESERVES TOTAL UNUSABLE RESERVES TOTAL RESERVES £'000's £'000's £'000's £'000's £'000's £'000's 5,640 20,475 25,524 51,639 (2,650,085) (2,598,446) (176,626) 0 0 (176,626) 0 (176,626) 0 0 0 0 (445,994) (445,994) (176,626) 0 0 (176,626) (445,994) (622,620) 179,823 5,293 0 185,116 (185,116) 0 3,197 5,293 0 8,490 (631,110) (622,620) (3,196) 0 3,196 0 0 0 0 5,293 3,196 8,490 (631,110) (622,620) 5,640 25,768 28,721 60,129 (3,281,196) (3,221,067) 23 P a g e Item 11 PCC Statement 2014/15 BALANCE AS AT 1st APRIL 2014 Surplus / (Deficit) on the Provision of Services on an accounting basis Other Comprehensive Income & Expenditure TOTAL COMPREHENSIVE INCOME & EXPENDITURE Adjustments between accounting basis and funding basis under regulations (Note 7) Net increase / decrease before transfers to Earmarked Reserves Transfer to / from Earmarked Reserves Increase / (Decrease) in the year BALANCE AS AT 31ST MARCH 2015 General Fund Capital Receipts & Contributions Reserves Earmarked Reserves TOTAL USEABLE RESERVES TOTAL UNUSABLE RESERVES TOTAL RESERVES £'000's £'000's £'000's £'000's £'000's £'000's 5,640 20,475 25,524 51,639 164,545 216,184 (45,807) 0 0 (45,807) 0 (45,807) 0 0 0 0 35,942 35,942 (45,807) 0 0 (45,807) 35,942 (9,865) 49,003 5,293 0 54,297 (54,297) 0 3,197 5,293 0 8,490 (18,355) (9,865) (3,196) 0 3,196 0 0 0 0 5,293 3,196 8,490 (18,355) (9,865) 5,640 25,768 28,721 60,129 146,189 206,319 24 P a g e Item 11 Notes to the Accounts The following policies apply to the Kent Police Group Accounts and also apply to the Single Entity of the Police and Crime Commissioner for Kent unless otherwise stated. Note 1 – Accounting Policies i. General Principles The Statement of Accounts summarises the Police and Crime Commissioner for Kent’s (PCC for Kent) transactions for the 2015/16 financial year and its position at the year-end of 31 March 2016 and also those of the Kent Police Group. The Accounts and Audit Regulations 2011 require the Police and Crime Commissioner for Kent to prepare an annual Statement of Accounts in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2015/16 and the Service Reporting Code of Practice (SERCOP) 2015/16, supported by International Financial Reporting Standards (IFRS). The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments. The Going Concern basis is also assumed. Any reference to the Police and Crime Commissioner for Kent hereafter in the Accounting Policies also includes the Kent Police Group unless expressly stated otherwise. st At midnight on the 21 November 2012 all property, rights, assets and liabilities which previously belonged to the Kent Police Authority were transferred to the Police and Crime Commissioner for Kent (PCC). This includes all property, plant and equipment and income. The Chief Constable’s Accounts show all expenditure related to the delivery of policing services for the year including staff costs, pension costs and the provision for short term compensated absences whilst the PCC’s Single Entity Accounts only show those costs directly related to the Office of the Police and Crime Commissioner. ii. Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular:  Revenue from the sale of goods is recognised when the Police and Crime Commissioner for Kent transfers the significant risks and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the organisation.  Revenue from the provision of services is recognised when the organisation can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the organisation.  Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet.  Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made.  Interest receivable on investments and interest payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract. Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected. iii. Acquisitions and Discontinued Operations The Police and Crime Commissioner for Kent did not acquire or discontinue any operations in the year 2015/16. 25 P a g e Item 11 iv. Cash and Cash Equivalents Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that mature within three months, ninety days, from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Police and Crime Commissioner for Kent’s cash management. v. Exceptional Items When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Police and Crime Commissioner for Kent’s financial performance. vi. Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment. Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Police and Crime Commissioner for Kent’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period. vii. Charges to Revenue for Non-Current Assets Services, support services and trading accounts are debited with the following amounts to record the cost of holding non-current assets during the year:  depreciation attributable to the assets used by the relevant service;  revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off;  amortisation of intangible fixed assets attributable to the service. The Police and Crime Commissioner for Kent is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisations. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by the contribution in the General Fund Balance by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. viii. Employee Benefits Benefits Payable During Employment The majority of staff costs are accounted for within the Chief Constable’s Statement of Accounts as it is he who has direction and control over them. The Police and Crime Commissioner for Kent’s Accounts only reflect those staff directly employed in the Office of the Police and Crime Commissioner for Kent. All staff costs are shown in the Kent Police Group statements. Short-term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees and are recognised as an expense for services in the year in which employees render service to the Police and Crime Commissioner for Kent or Kent Police Group. An accrual is made for the cost of holiday entitlements (or any form of leave, e.g. time off in lieu) earned by employees but not taken before the year-end which employees can carry forward into the next financial year. The accrual is made at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. 26 P a g e Item 11 The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs. Short-term compensated absences are those periods in which an employee does not provide services to the employer but continues to be paid. Compensated absences may be accumulating or non-accumulating. Accumulating absences are those that are carried forward and can be used in future periods if the current entitlement is not used in full. For Kent Police this includes annual leave, flexi-leave and time off in lieu. Accumulating absences may be vesting or non-vesting. Where vesting, employees who leave are entitled to a cash payment in respect of any unused entitlement; where non-vesting, benefits lapse if an employee leaves before the vesting date. For Kent Police vesting accumulated short term compensated absences are annual leave and time off in lieu only. Flexi-time is non-vesting. Short term accumulating compensated absences shall be:  Recognised when employees render services that increases their entitlement to future compensated absences.  Measured as the additional amount that Kent Police expects to pay as a result of unused entitlement that has accumulated at the Balance Sheet date including associated employer’s national insurance contributions. Termination Benefits Termination benefits are amounts payable as a result of a decision by the Police and Crime Commissioner for Kent or the Chief Constable for Kent to terminate an employee’s contract before the normal retirement date or an officer’s decision to accept voluntary redundancy and are charged on an accruals basis to overheads in the Comprehensive Income and Expenditure Statement. Termination benefits are recorded in the accounts when Kent Police have confirmed and communicated their decision to the termination of the employment of an individual or group of individuals or making an offer to encourage voluntary redundancy. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by Kent Police 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. Post-Employment Benefits Kent Police participates in three different types of pension schemes for police officers and a single scheme for police staff. Post employee benefits are associated with the Kent Police Group and Chief Constable’s Accounts, they do not materially affect the accounts of the Single Entity for the Police and Crime Commissioner for Kent.     The Police Pension Scheme (PPS), governed by the Police Pensions Regulations 1987 (as amended). The New Police Pension Scheme (NPPS), regulated under the Police Pension Regulations 2006. The 2015 Scheme, regulated under the Police Pension Regulations 2015 The Local Government Pensions Scheme, administered by Kent County Council. As a results of changes in requirements under International Accounting Standard 19 (IAS19) the net pensions liability is analysed into several components:  Service cost – comprising: o current service cost being the increase in liabilities as a result of years of service earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked; o past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs; o gains or losses on settlements and curtailments – the result of actions to relieve Kent Police of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs;  Interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid – debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement; 27 P a g e Item 11  Re-measurement of the net defined benefit liability – comprising: o expected return on assets – the annual investment return on the fund assets attributable to Kent Police, based on an average of the expected long-term return – credited to the Pension Reserve; o actuarial gains and losses arising on changes in demographic assumptions– changes in the net pensions liability that arise because experience has not reflected the demographic assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – debited to the Pensions Reserve; o actuarial gains and losses arising on changes in financial assumptions– changes in the net pensions liability that arise because experience has not reflected the financial assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – debited to the Pensions Reserve;  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 General Fund balance to be charged with the amount payable by Kent Police 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 impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. Police Pension Schemes All police schemes are contributory occupational pension schemes with officers making varying levels of contributions dependent on their salary level. Contributions to both the old and new police pension schemes have three tiers as follows: 1987 Scheme 2006 Scheme CARE 2015 Scheme (wef 1st April 2015) 2015/2016 (2014/2015) % Contribution Rate 2015/2016 (2014/2015) % Contribution Rate 2015/2016 (2014/2015) % Contribution Rate £0 to £27,000 pa 14.25% (14.25%) 11.00% (11.00%) 12.44% (n/a) £27,000 to £59,999 pa 14.25% (14.25%) 12.05% (12.05%) 13.44% (n/a) £60,000 pa or more 15.05% (15.05%) 12.75% (12.75%) 13.78% (n/a) Salary Level st The Police Pension Account was set up on 1 April 2006 to administer all police pension schemes. The police pension schemes are defined benefit schemes (without managed pension assets). The employer’s contribution for each serving officer is common to all schemes at 21.3% of pensionable pay. This is set nationally and is subject to a three yearly review. Accrued net pension liabilities have been assessed on an actuarial basis in accordance with IAS 19. The net liability and a pensions reserve incorporating all pension schemes have been recognised in the Balance Sheet, as have entries in the Comprehensive Income and Expenditure Account for movements in the asset / liability relating to the defined benefit schemes. Transfers into and out of the schemes representing joining and leaving the police are recorded on a cash basis in the Pension Account as a result of the time taken to finalise the sums involved. The liabilities of the police pension schemes attributable to Kent Police are included in the Balance Sheet on an actuarial basis using the projected unit method i.e. and 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 and projections of earnings for current employees. Liabilities as well as anticipated gains and losses are discounted to their value at current prices using a discount rate prescribed by the Funds’ Actuaries. The Local Government Pension Scheme 28 P a g e Item 11 The Local Government Pension Scheme is a contributory occupational pension scheme with police staff making contributions in accordance with the table below dependent on their salary level. Salary Level LGPS Rate up to 31st March 2016 % Up to £13,600 pa 5.5 £13,601 to £21,200 pa 5.8 £21,201 to £34,400 pa 6.5 £34,401 to £43,500 pa 6.8 £43,501 to £60,700 pa 8.5 £60,701 to £86,000 pa 9.9 £86,001 to £101,200 pa 10.5 £101,201 to £151,800 pa 11.4 More than £151,801 pa 12.5 The Local Government Scheme is accounted for as a defined benefits scheme. The liabilities of the pension fund attributable to Kent Police are included in the Balance Sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, and projections of projected earnings for current employees. Liabilities are discounted to their value at current prices. The assets of the pension fund attributable to Kent Police 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. Discretionary Benefits Kent Police also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme. ix. Events After the Balance Sheet Date Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified:  those that provide evidence of conditions that existed at the end of the reporting period – the Statement of Accounts is adjusted to reflect such events;  those that are indicative of conditions that arose after the reporting period – the Statement of Accounts is not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect. Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts. x. Financial Instruments 29 P a g e Item 11 Financial Liabilities Financial liabilities, which includes trade payables (creditors) are recognised on the Balance Sheet when the Police and Crime Commissioner for Kent becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Financial Assets Financial assets are classified into two types:  loans and receivables – assets that have fixed or determinable payments but are not quoted in an active market;  available-for-sale assets – assets that have a quoted market price and/or do not have fixed or determinable payments. The Police and Crime Commissioner for Kent’s financial assets include bank deposits, trade receivables (debtors), and cash investments which are all classified as loans and receivables, also assets that have fixed or determinable payments but are not quoted in an active market. Loans and Receivables Loans and receivables are recognised on the Balance Sheet when the Police and Crime Commissioner for Kent becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. xi. Foreign Currency Translation Where the Police and Crime Commissioner for Kent has entered into a transaction denominated in a foreign currency, the transaction is converted into sterling at the exchange rate applicable on the date the transaction was effective. Where amounts in foreign currency are outstanding at the year-end, they are reconverted at the spot exchange rate at 31 March. Resulting gains or losses are recognised in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. xii. Government Grants and Contributions Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Police and Crime Commissioner for Kent when there is reasonable assurance that:  the Police and Crime Commissioner for Kent will comply with the conditions attached to the payments, and  the grants or contributions will be received. Amounts recognised as due to the Police and Crime Commissioner for Kent are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution has been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor. Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants and contributions) or Taxation and Non-Specific Grant Income (non-ring fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement. Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has 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. xiii. Intangible Assets 30 P a g e Item 11 Expenditure on non-monetary assets that do not have physical substance but are controlled by the Police and Crime Commissioner for Kent as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Police and Crime Commissioner for Kent. Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Police and Crime Commissioner for Kent will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase (research expenditure cannot be capitalised). Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Police and Crime Commissioner for Kent can be determined by reference to an active market. In practice, no intangible asset held by the Police and Crime Commissioner for Kent meets this criterion, and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and for any sale proceeds, the Capital Receipts Reserve. xiv. Interests in Companies and Other Entities The Police and Crime Commissioner for Kent has a contractual relationship with Kent County Council for some services including Treasury Management and Pensions administration. Collaborative work is on-going with Essex Police aimed at increasing service provision and quality whilst reducing costs wherever possible. Examples of this include a joint Serious Crime Directorate as well as a number of support services functions. These are accounted for under IFRS 10, Consolidated Financial Statements; IFRS 11, Joint Arrangements & IFRS 12, Disclosure of Interests in Other Entities rules. The Police and Crime Commissioner for Kent does not however, have any interests in companies or other entities that have the nature of subsidiaries, associates or joint ventures except for the relationship between the Police and Crime Commissioner for Kent and the Chief Constable for Kent and is therefore only required to prepare group accounts on this basis. xv. Inventories Inventories are included in the Balance Sheet at the lower of cost and net realisable value. For Kent Police this includes specialist equipment such as speed cuffs and ASPs, as well as vehicles parts and fuel held at the Transport Services workshops. Uniform stores are contracted out to an external supplier with only sizing samples being retained centrally. xvi. Investment Property Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale. The Police and Crime Commissioner for Kent also have several former police houses which it rents to private individuals on short term agreements. These assets are therefore classified as investment properties. Investment properties are measured initially at cost and subsequently at fair value, based on the amount at which the asset could be exchanged between knowledgeable parties at arm’s-length. Properties are not depreciated but are revalued annually according to market conditions at the year-end. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal. Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are 31 P a g e Item 11 therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and for any sale proceeds, the Capital Receipts Reserve. xvii. Jointly Controlled Operations Jointly controlled operations are activities undertaken by the Police and Crime Commissioner for Kent in conjunction with other partners that involve the use of the assets and resources of the partners rather than the establishment of a separate entity. The Police and Crime Commissioner for Kent recognises on its Balance Sheet the assets that it controls and the liabilities that it incurs and debits and credits the Comprehensive Income and Expenditure Statement with the expenditure it incurs and the share of income it earns from the activity of the operation. The Police and Crime Commissioner for Kent has two such agreements:  The Joint Serious Crime Directorate;  The Joint Support Services Department which includes HR, Learning & Development, Information Services, Procurement, Transport, Business Services and Estate Department. Each of these is jointly controlled between the Police Forces of Kent and Essex. xviii. Heritage Assets Accounting for Heritage Assets is in line with FRS30 and Code of Practice section 4.10. No single item held by the Kent Police Museum is considered to be above the Police and Crime Commissioner for Kent’s de-minimis limit for capitalisation. In order to meet the requirements of the Code of Practice and FRS 30 (Heritage Assets) the estimated total value of the assets has been pooled and is shown as a single item. Individual item values have been ascertained by the museum curator and force insurance team. xix. Leases Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. The Police and Crime Commissioner for Kent as Lessee Finance Leases Property, plant and equipment held under finance leases are recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Police and Crime Commissioner for Kent are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred. Lease payments are apportioned between:  a charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability, and  a finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement). Property, Plant and Equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the Police and Crime Commissioner for Kent at the end of the lease period). The Police and Crime Commissioner for Kent is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund 32 P a g e Item 11 Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. Operating Leases 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. there is a rent-free period at the commencement of the lease). The Police and Crime Commissioner for Kent as Lessor Operating Leases Where the Police and Crime Commissioner for Kent grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits 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. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income. xx. Overheads and Support Services The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2015/16 (SERCOP). The total absorption costing principle is used – the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of: Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring early and impairment losses chargeable on Assets Held for Sale. These two cost categories are defined in SERCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement, as part of Net Expenditure on Continuing Services. xxi. Property, Plant and Equipment Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as non-current assets. Spending on these assets is capitalised if the asset will bring benefits to the Police and Crime Commissioner for Kent for more than one year and was in excess of the Police and Crime Commissioner for Kent’s agreed de-minimis level for capital expenditure of £12,000. All motorised vehicles are also classified as non-current assets regardless of their cost or value at acquisition. Recognition Expenditure on the acquisition, creation or enhancement of non-current assets is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Police and Crime Commissioner for Kent and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense to the Comprehensive Income & Expenditure Statement when it is incurred. Measurement Assets are initially measured at cost, comprising:  the purchase price  any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management  the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. 33 P a g e Item 11 The Police and Crime Commissioner for Kent does not capitalise borrowing costs incurred whilst assets are under construction. The cost of assets acquired other than by purchase is deemed to be its fair value. Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-Specific Grant Income line of the Comprehensive Income and Expenditure Statement, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in the Donated Assets Account. Where gains are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance to the Capital Adjustment Account in the Movement in Reserves Statement. Assets are then carried in the Balance Sheet using the following measurement bases:  assets under construction – depreciated historical cost  all other assets – fair value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV). Prior to 2015/16 –no consistent definition in IFRS In general: “the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.” IFRS 13 defines Fair value (FV) as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Therefore, the asset classes are measured as follows:  OP Buildings and non-specialised – Measured at Existing Use Value  Surplus Assets – Measured at Fair Value in accordance with section 2.10 (IFRS 13)  Non active market / specialised – Measured at Depreciated Replacement Cost (RICS UKGN2). For example Custody Buildings. IFRS 13 – Code impact     Operational PPE measured at service potential (current value) –no change in measurement requirements. Surplus assets measured for their economic benefits at FV under IFRS 13 from 2015/16. Investment properties –highest and best use. Liabilities –best transfer price. Where there is no market-based evidence of fair value because of the specialist nature of an asset, such as a custody suite or police station with an integral custody suite, depreciated replacement cost (DRC) is used as an estimate of fair value. Where non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value. Assets included in the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year-end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to a service. Where decreases in value are identified, they are accounted for by:  where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains)  where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement. The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. Impairment 34 P a g e Item 11 Assets are assessed at each year-end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for by:  where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains).  where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised. Depreciation Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land) and assets that are not yet available for use (ie assets under construction). Depreciation is calculated on the following bases:  buildings – straight-line allocation over the useful life of the property as estimated by the valuer.  vehicles, plant, furniture and equipment – straight-line allocation over the useful life of each asset, as advised by a suitably qualified officer Where an item of Property, Plant and Equipment asset has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately. Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account. Disposals and Non-current Assets Held for Sale When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on Assets Held for Sale. If assets no longer meet the criteria to be classified as Assets Held for Sale, they are reclassified back to noncurrent assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as Held for Sale, and their recoverable amount at the date of the decision not to sell. Assets classified as held for sale on the balance sheet satisfy the following criteria laid down by the International Accounting Standards Board:  The asset must be available for immediate sale in its present condition subject to terms that are usual and customary for sales of such assets.  The sale must be highly probable, senior management must be committed to the plan to sell the asset and an active programme to locate a buyer and complete the plan must have been initiated.  The asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value.  The sale should be expected to be completed within one year of the date of classification. Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale. 35 P a g e Item 11 When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account. The balance of receipts is required to be credited to the Capital Receipts Reserve, and can then only be used for new capital investment. Receipts are appropriated to the Reserve from the General Fund Balance in the Movement in Reserves Statement. The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. xxii. Private Finance Initiative (PFI) and Similar Contracts PFI and similar contracts are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor. As the Police and Crime Commissioner for Kent is deemed to control the services that are provided under its PFI schemes, and as ownership of the property, plant and equipment will pass to the Police and Crime Commissioner for Kent at the end of the contracts for no additional charge, the Police and Crime Commissioner for Kent carries the assets used under the contracts on its Balance Sheet as part of Non-current assets. The original recognition of these assets at fair value (based on the cost to purchase the property, plant and equipment) was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment. Non-current assets recognised on the Balance Sheet are revalued and depreciated in the same way as property, plant and equipment owned by the Police and Crime Commissioner for Kent. The amounts payable to the PFI operators each year are analysed into five elements:  fair value of the services received during the year – debited to the relevant service in the Comprehensive Income and Expenditure Statement  finance cost – an interest charge on the outstanding Balance Sheet liability, debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement  contingent rent – increases in the amount to be paid for the property arising during the contract, debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement  payment towards liability – applied to write down the Balance Sheet liability towards the PFI operator (the profile of write-downs is calculated using the same principles as for a finance lease)  lifecycle replacement costs – proportion of the amounts payable is posted to the Balance Sheet as a prepayment and then recognised as additions to Property, Plant and Equipment when the relevant works are eventually carried out. xxiii. Provisions, Contingent Liabilities and Contingent Assets Provisions Provisions are made where an event has taken place that gives the Police and Crime Commissioner for Kent a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. For instance, the Police and Crime Commissioner for Kent may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation. Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the Police and Crime Commissioner for Kent becomes aware of the 36 P a g e Item 11 obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Police and Crime Commissioner for Kent settles the obligation. Contingent Liabilities A contingent liability arises where an event has taken place that gives the Police and Crime Commissioner for Kent 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 Police and Crime Commissioner for Kent. 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. Contingent Assets A contingent asset arises where an event has taken place that gives the Police and Crime Commissioner for Kent a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Police and Crime Commissioner for Kent. Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential. xxiv. Reserves The Police and Crime Commissioner for Kent sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to score against the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against council tax for the expenditure. Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments, retirement and employee benefits and do not represent usable resources for the Police and Crime Commissioner for Kent – these reserves are explained in the relevant policies. xxv. VAT VAT payable is included as an expense only to the extent that it is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is excluded from income. Note 2 - Accounting Standards Issued, Not Adopted There are a number of accounting standards that have been issued but not yet adopted: Paragraph 3.3.2.13 of the 2015/16 Code requires changes in accounting policy to be applied retrospectively unless alternative transitional arrangements are specified in the Code. Paragraph 3.3.4.3 requires an authority to disclose information relating to the impact of an accounting change that will be required by a new standard that has been issued but not yet adopted by the Code for the relevant financial year. The standards introduced in the 2016/17 Code that are relevant to the requirements of paragraph 3.3.4.3 are:  Amendments to IAS19 Employee Benefits (Defined Benefits Plans: Employee Contributions)  Annual Improvements to IFRSs 2010-2012 Cycle (see Appendix A of the Invitation to Comment (ITC) on the 2016/17 Code for further details – see link below at the end of these bullets) 37 P a g e Item 11  Amendment to IFRS 11 Joint Arrangements (Accounting for Acquisitions of Interests in Joint Operations)  Amendment to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets (Clarification of Acceptable Methods of Depreciation and Amortisation)  Annual Improvements to IFRSs 2012-2014 Cycle (see Appendix B of the ITC on the 2016/17 Code for further details – see link below at the end of these bullets)  Amendment to IAS 1 Presentation of Financial Statements (Disclosure Initiative)  The changes to the format of the Comprehensive Income and Expenditure Statement, the Movement in Reserves Statement and the introduction of the new Expenditure and Funding Analysis  The changes to the format of the Pension Fund Account and the Net Assets Statement Appendix A (ie the Annual Improvements to IFRSs 2010-2012 Cycle) and Appendix B (ie the Annual Improvements to IFRSs 2012-2014 Cycle) can be found at: http://www.cipfa.org/policy-and-guidance/consultations-archive/201617-code-of-practice-on-local-authorityaccounting-in-the-united-kingdom-invitation-to-comment Note 3 - Critical Judgements in Applying Accounting Policies In applying the accounting policies set out in Note 1, the Police and Crime Commissioner for Kent has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the Statement of Accounts are:  There remains some uncertainty about future levels of funding for forces in England and Wales due to the proposed changes to the way the Police Grant is allocated. However, the Police and Crime Commissioner for Kent has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Police and Crime Commissioner for Kent might be impaired as a result of a need to close facilities and reduce levels of service provision.  The PFI accounting models which calculate the future liabilities for interest and capital repayments are based on the current retail price index (RPIx, which excludes mortgage interest) as listed by the Office of National Statistics. This is reviewed annually, with any change affecting the current year and future years’ charges.  The Pensions liability relating to both Police Officers and staff has been valued in line with the Consumer Price Index as opposed to the Retail Price Index. This change was introduced by the Chancellor of the Exchequer in his Emergency Budget in June 2010.  The Head of Kent and Essex Estates Services, The Head of Transport Services and The Head of Information Services were consulted with regard to any impairment of assets under their jurisdiction in the financial year. Other than the changes to the Estate valuation as part of the annual revaluation process, no other impairment of assets were declared. Please refer to Notes 9, 10 and 33. Note 4 - Assumptions Made about the Future and Other Major Sources of Estimation Uncertainty The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However the nature of estimation means that actual outcomes could differ from those estimates. The key judgements and estimation uncertainty that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities in the next financial year are listed below: Police Pension Schemes (Group Accounts Only) The range of sensitivities regarding the principal assumptions used to measure the combined Police Pension Schemes’ liabilities are set out below: Police Pension Scheme (Schemes Combined) 38 P a g e Item 11 Sensitivity analysis Adjustment to discount rate Present value of total obligation Projected service cost £’000’s £’000’s £’000’s 0.50% 0.00% -0.50% 2,572,200 2,846,900 3,121,600 51,610 56,300 60,990 Adjustment to member life expectancy +1 year None -1 Year Present value of total obligation 2,931,400 2,846,900 2,762,400 57,350 56,300 55,250 Projected service cost Adjustment to salary increase rate Present value of total obligation Projected service cost Adjustment to pension increases and deferred revaluation Present value of total obligation Projected service cost 0.50% 0.00% -0.50% 2,890,300 2,846,900 2,803,500 56,890 56,300 55,710 0.50% 0.0% -0.50% 3,074,000 2,846,900 2,619,800 60,350 56,300 52,250 Local Government Pension Scheme The sensitivities regarding the principal assumptions used to measure the Local Government Pension Scheme are set out below: Sensitivity analysis £’000’s £’000’s £’000’s Adjustment to discount rate 0.10% 0.00% -0.10% Present value of total obligation 442,619 452,226 462,048 Projected service cost 14,531 14,923 15,326 Adjustment to member life expectancy +1 year None -1 Year Present value of total obligation 465,397 452,226 439,437 Projected service cost 15,304 14,923 14,552 0.10% 0.00% -0.10% Present value of total obligation 453,641 452,226 450,820 Projected service cost 14,930 14,923 14,916 0.10% 0.00% -0.10% Present value of total obligation 460,749 452,226 443,895 Projected service cost 15,324 14,923 14,533 Adjustment to salary increase rate Adjustment to pension increases and deferred revaluation Insurance Provisions The insurance provision is based on information received from the Police and Crime Commissioner for Kent’s insurers and represents claims against which Kent Police reasonably expects to pay out. Many of these potential claims are estimates based on the opinions of experienced professionals within the industry. Property Plant and Equipment Assets are depreciated over useful lives that are dependent on assumptions about the level of repairs and maintenance that will be incurred in relation to individual assets. The current economic climate makes it uncertain that the Police and Crime Commissioner for Kent will be able to sustain its current spending on repairs and maintenance, bringing into doubt the useful lives assigned to assets. If the useful lives are reduced, depreciation increases and the carrying amount of each asset falls. 39 P a g e Item 11 Note 5 - Material Items of Income and Expense As part of the 5 year rolling programme of revaluations Kent Police carried out a revaluation of more than 20% of st st its’ properties on 1 April 2015. On 31 March 2016 an impairment and market review confirmed those properties st valued using Depreciated Replacement Cost showed an average movement of more than 9.4% since 1 April 2015, it was recommended that a revaluation was needed on all properties applying the DRC method. So one was undertaken, which resulted in a £13.8m revaluation gain during the financial period 2015/16. th The valuations have been made in accordance with the RICS Valuation Standards 6 Edition (the Red Book) as published by the Royal Institution of Chartered Surveyors, so far as these are consistent with Kent Police accounting policy. The valuation was prepared by Guy Habord FRICS partner in Wilks Head Eve who are an external organisation and have no ties to Kent Police. Non-Distributed Costs & Exceptional Items in the Net Cost of Services section of the Comprehensive Income and Expenditure Statement are comprised of costs which arise for the Police and Crime Commissioner for Kent but are not attributable to individual service segments. This includes Past Service Costs relating to retirement benefits (decisions made in year whose effects are influenced by employee’s service earned in preceding financial years). Non-Distributed Costs Past Service Costs relating to retirement benefits Curtailments and settlements relating to retirement benefits Impairment on Icelandic Bank investments Total Non-Distributed Costs Group 2014/15 PCC 2014/15 Group 2015/16 PCC 2015/16 £’000’s £’000’s £’000’s £’000’s 300 0 1,019 0 Inc Above 0 Inc Above 0 (462) (462) (462) (127) 892 (127) (127) (162) The Comprehensive Income and Expenditure Statement for the year ended 31st March 2016 does not include capital expenditure or show any detail around the income received from disposal of surplus non-current assets. The following table provides analysis of both expenditure and income for the year. The Police and Crime Commissioner for Kent have a 5-year medium term capital programme that is supported by the Estate and Information Systems Strategies and a vehicle renewal programme. The 5-year programme is funded from capital grants, capital receipts and contributions from the revenue account. Capital expenditure during 2015/16 was £10.1m as follows: Nature of expenditure Estates £’000’’s 773 IT 5,513 Vehicles and equipment 3,861 Total Major acquisitions and disposals in 2015/16 10,147 Group £’000’s Acquisitions 40 P a g e Item 11 Project Athena 1,772 Vehicle replacement programme 1,677 SAP Licences & Upgrades 1,078 Body Worn Video - Stage 2 710 Disposals Invicta House Northfleet 950 190 Shepherds Lane, Dartford 535 Chestnuts, Shorne 483 Note 6 - Events After the Balance Sheet Date No events to report after the balance sheet date. Note 7 - Adjustments between Accounting Basis and Funding Basis under Regulations This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Police and Crime Commissioner for Kent in the year in accordance with proper accounting practice to the 41 P a g e Item 11 resources that are specified by statutory provisions as being available to the Police and Crime Commissioner for Kent to meet future capital and revenue expenditure. GROUP 2015/16 Included in the Comprehensive Income & Expenditure Account Capital grants & contributions applied Reversal of amortisation of tangible and intangible assets Reversal of charges for depreciation & impairment Revenue contribution towards Capital Reserves Reversal of gains or losses on revaluation charged / credited to the Comprehensive Income and Expenditure Account. Revaluation Gains on PPE Amount of Non-current assets written off on disposal Capital Expenditure financed from capital receipts Capital grants credited to the Comprehensive Income & Expenditure Account MRP Charged to Comprehensive Income & Expenditure Account Donated Assets Usable Capital Receipts Reserve Transfer cash proceeds on asset disposals to capital receipts reserve Transfer To / From Reserves Transfers to Capital Financing requirement Pensions Reserve Reversal of pension charges made during the year Pension payments appropriated to the pension reserve Collection Fund Adjustment Account Reversal of Collection Fund Adjustments Accumulated Compensated Absences Account Reversal of leave accrual Financial Instruments Adjustment Account Impairments Total General Fund Useable Capital Receipts Reserve Earmarked Reserves Total Useable Reserves Total Unusable Reserves £’000’s £’000’s £’000’s £’000’s £’000’s (2,317) 2,317 0 0 0 627 0 0 627 (627) 6,283 0 0 6,283 (6,283) 0 0 0 0 0 70 0 0 70 (70) (3,410) 0 0 (3,410) 3,410 3,954 0 0 3,954 (3,954) 0 (10,148) 0 (10,148) 10,148 0 0 0 0 0 (805) 0 0 (805) 805 (304) 0 0 (304) 304 (4,469) 4,469 0 0 0 0 (14) 0 14 0 0 0 0 0 0 (85,169) 0 0 (85,169) 85,169 189,750 0 (553) 0 0 0 0 0 0 189,750 0 (553) (189,750) 0 553 (63) 0 0 (63) 63 0 0 0 0 0 103,582 (3,348) 0 100,234 (100,234) This shows that due to prudent management of the Police and Crime Commissioner for Kent’s financial resources there is no impact on the General Fund balance for the year. Net expenditure for the year is therefore covered by non-specific grants and taxation. 42 P a g e Item 11 2014/15 Included in the Comprehensive Income & Expenditure Account Capital grants & contributions applied Reversal of amortisation of intangible assets Reversal of charges for depreciation & impairment Revenue contribution towards Capital Reserves Reversal of gains or losses on revaluation charged / credited to the Comprehensive Income and Expenditure Account. Revaluation Gains on PPE Amount of Non-current assets written off on disposal General Fund Useable Capital Receipts Reserve Earmarked Reserves Total Useable Reserves Total Unusable Reserves £’000’s £’000’s £’000’s £’000’s £’000’s 0 699 5,994 0 0 (699) (5,994) 0 54,912 54,912 (54,912) 0 2,248 0 2,248 0 (2,248) (7,087) 7,087 0 0 (1,363) (1,363) 1,363 0 0 0 (2,572) 699 5,994 (31) Capital Expenditure financed from capital receipts Capital grants credited to the Comprehensive Income & Expenditure Account MRP Charged to Comprehensive Income & Expenditure Account Donated Assets Usable Capital Receipts Reserve Transfer cash proceeds on asset disposals to capital receipts reserve Transfer To / From Reserves Transfers to Capital Financing requirement Pensions Reserve Reversal of pension charges made during the year Pension payments appropriated to the pension reserve Collection Fund Adjustment Account Reversal of Collection Fund Adjustments Accumulated Compensated Absences Account Reversal of leave accrual Financial Instruments Adjustment Account Impairments Total 2,572 31 (7,087) (2,050) 2,050 0 0 (7,726) 0 7,726 0 0 0 0 0 (72,550) (72,550) 72,550 203,585 203,585 (203,585) (947) (947) 947 (216) (216) 216 (160) 179,823 5,293 0 (160) 160 185,116 (185,116) 43 P a g e Item 11 Police & Crime Commissioner 2015/16 Included in the Comprehensive Income & Expenditure Account Capital grants & contributions applied Reversal of amortisation of intangible assets Reversal of charges for depreciation & impairment Revenue contribution towards Capital Reserves Reversal of gains or losses on revaluation charged / credited to the Comprehensive Income and Expenditure Account. Revaluation Gains on PPE Amount of Non-current assets written off on disposal Capital Expenditure financed from capital receipts Capital grants credited to the Comprehensive Income & Expenditure Account MRP Charged to Comprehensive Income & Expenditure Account Donated Assets Usable Capital Receipts Reserve Transfer cash proceeds on asset disposals to capital receipts reserve Transfer To / From Reserves Transfers to Capital Financing requirement Collection Fund Adjustment Account Reversal of Collection Fund Adjustments Financial Instruments Adjustment Account Impairments Total General Fund Useable Capital Receipts Reserve Earmarked Reserves Total Useable Reserves Total Unusable Reserves £’000’s £’000’s £’000’s £’000’s £’000’s (2,317) 2,317 0 0 0 627 0 0 627 (627) 6,283 0 0 6,283 (6,283) 0 0 0 0 0 70 0 0 70 (70) (3,410) 0 0 (3,410) 3,410 3,954 0 0 (10,148) 0 0 3,954 (10,148) (3,954) 10,148 0 0 0 0 0 (805) 0 0 (805) 805 (304) 0 0 (304) 304 (4,469) 4,469 0 0 0 0 (14) 0 14 0 0 0 0 0 0 (553) 0 0 (553) 553 0 0 0 0 0 (938) (3,348) 0 (4,286) 4,286 44 P a g e Item 11 2014/15 Included in the Comprehensive Income & Expenditure Account Capital grants & contributions applied Reversal of amortisation of intangible assets Reversal of charges for depreciation & impairment Revenue contribution towards Capital Reserves Reversal of gains or losses on revaluation charged / credited to the Comprehensive Income and Expenditure Account. Revaluation Gains on PPE Amount of Non-current assets written off on disposal General Fund Useable Capital Receipts Reserve Earmarked Reserves Total Useable Reserves Total Unusable Reserves £’000’s £’000’s £’000’s £’000’s £’000’s 0 699 5,994 0 (699) (5,994) 54,912 54,912 (54,912) 0 2,248 0 2,248 0 (2,248) (7,087) 7,087 0 0 (1,363) (1,363) 1,363 0 0 0 (2,572) 699 5,994 (31) Capital Expenditure financed from capital receipts Capital grants credited to the Comprehensive Income & Expenditure Account MRP Charged to Comprehensive Income & Expenditure Account Donated Assets Usable Capital Receipts Reserve Transfer cash proceeds on asset disposals to capital receipts reserve Transfer To / From Reserves Collection Fund Adjustment Account Reversal of Collection Fund Adjustments 2,572 31 (7,087) (2,050) 2,050 0 0 (7,726) 7,726 0 0 (947) (947) 947 (160) (160) 160 54,297 (54,297) Financial Instruments Adjustment Account Impairments Total 49,003 5,293 0 45 P a g e Item 11 Note 8 - Transfers to/from Earmarked Reserves This note sets out the amounts set aside from earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund expenditure in 2015/16. General Fund As at 31st March 2014 Transfers in Transfers out As at 31st March 2015 Transfers in Transfers out As at 31st March 2016 £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s 5,640 0 0 5,640 0 0 5,640 900 0 0 900 0 (200) 700 0 2,000 0 2,000 0 0 2,000 4,259 8,155 (5,453) 6,962 1,652 (4,614) 4,000 3,098 0 0 3,098 0 0 3,098 200 0 200 Risk Localisation of Council Tax Benefit Reserve Public Order & Major Investigation Reserve Grant Cut Volatility Reserve Insurance Compass House Renewals Fund Change Invest to save Redundancy, Relocation & Regulation A20 1,919 0 0 1,919 0 0 1,919 6,000 2,637 (2,637) 6,000 0 0 6,000 5,200 0 (117) 5,083 800 0 5,883 601 200 (216) 586 997 (802) 781 1,020 0 (931) 89 1,235 (710) 614 1,800 0 0 1,800 0 (1,800) 0 90 0 0 90 0 0 90 0 194 0 194 2 (196) (0) 0 0 0 4,886 (8,322) 30,924 Policing Opportunity Policy Opportunities POCA Incentivisation Policing Opportunity Other: Budget Roll Forward / PSA1 Custody Review Op Morris - Vehicle Seizure KIRAT Grant Ministry of Justice Total 636 0 (636) 0 31,163 13,186 (9,990) 34,360 Note 9 - Property, Plant and Equipment 46 P a g e Item 11 Vehicles, Plant & Equipment £’000’s Land & Buildings £’000’s Surplus Assets Assets under Construction Total £’000’s £’000’s £’000’s Cost or Valuation 158,874 46,510 3,502 2,773 211,657 (620) 0 0 0 (620) 0 0 0 0 0 325 4 0 (3,101) (2,772) (400) 0 (315) 0 (715) 0 4,517 0 773 5,290 (295) (2,589) 0 0 (2,884) 13,807 0 164 0 13,971 2,377 0 15 0 2,390 (259) 0 0 0 (259) (66) (4) 0 0 (70) 173,743 48,438 3,366 445 225,989 At 1st April 2015 (2,450) (30,797) (53) 0 (33,301) Depreciation for the year (2,475) (3,753) (56) 0 (6,284) 9 2,065 0 0 2,074 1,900 0 53 0 1,953 332 0 0 0 332 0 0 0 0 0 20 0 0 0 20 13 0 5 0 18 (2,651) (32,485) (51) 0 (35,188) At 31st March 2016 171,090 15,952 3,315 445 190,802 At 31st March 2015 156,423 15,712 3,449 2,773 178,357 At 1st April 2015 Reclassifications of Investment Properties Reclassifications of Surplus Assets Reclassifications of AUC Reclassifications of Held for Sale Additions De-recognition - disposals Revaluation increases / (decreases) recognised in the Revaluation Reserve Revaluation increases / (deceases) recognised in the Surplus / Deficit on the Provision of Services Assets Not adding value recognised in RR Assets Not adding value recognised in I&E As at 31st March 2016 Accumulated Depreciation & Impairment Depreciation on disposals DPN written out to the Revaluation Reserve DPN written out to the I&E Depreciation on reclassification of surplus assets Depreciation on reclassification of Investment properties Depreciation on reclassification of asset held for sale At 31st March 2016 Net Book Value Comparative Movements in 2014/15 47 P a g e Item 11 Vehicles, Plant & Equipment £’000’s Land & Buildings £’000’s Surplus Assets Assets under Construction Total £’000’s £’000’s £’000’s Cost or Valuation At 1st April 2014 Reclassifications of Investment Properties Reclassifications of Surplus Assets 194,321 49,165 5,921 0 249,407 0 0 0 0 0 0 170 (1,819) 1,649 0 338 0 0 (338) 0 (730) 0 0 0 5,162 (7,987) (1,245) 0 (788) 0 1,462 0 (1,975) 6,624 (8,775) 23,619 0 1,606 0 25,225 (58,339) 0 (173) 0 (58,512) 0 0 0 0 0 (335) 0 0 0 (335) 158,874 46,510 3,502 2,773 211,657 (14,582) (34,451) (234) 0 (49,267) (2,458) (3,450) (86) 0 (5,994) 0 7,139 39 0 7,177 10,547 0 171 0 10,717 4,035 0 0 0 4,035 Depreciation on reclassification of surplus assets 0 (35) 35 0 0 Depreciation on reclassification of Investment properties 0 0 0 0 0 8 0 22 0 30 (2,450) (30,797) (53) 0 (33,301) At 31st March 2015 156,423 15,712 3,449 2,773 178,357 At 31st March 2014 179,739 14,714 5,687 0 200,140 Reclassifications of AUC Reclassifications of Held for Sale Additions De-recognition - disposals Revaluation increases / (decreases) recognised in the Revaluation Reserve Revaluation increases / (deceases) recognised in the Surplus / Deficit on the Provision of Services Assets Not adding value recognised in RR Assets Not adding value recognised in I&E As at 31st March 2015 Accumulated Depreciation & Impairment At 1st April 2014 Depreciation for the year Depreciation on disposals DPN written out to the Revaluation Reserve DPN written out to the I&E Depreciation on reclassification of asset held for sale At 31st March 2015 Net Book Value st The entire Kent Police estate was revalued for the 2014/15 Statement of Accounts on 1 April 2014 and more st than 20% revalued for the 2015/16 accounts on 1 April 2015 as part of the 5 year rolling programme of st revaluations as specified by CIPFA. Following an impairment and market review on 31 March 2016 an st additional revaluation on all Depreciated Replacement Cost Assets was carried out on 31 March 2016. 48 P a g e Item 11 th The valuations have been made in accordance with the RICS Valuation Standards 6 Edition (the Red Book) as published by the Royal Institution of Chartered Surveyors, so far as these are consistent with Kent Police accounting policy. The valuation was prepared by Guy Habord FRICS partner in Wilks Head Eve who are an external organisation and have no ties to Kent Police. Useful lives vary between classes of asset but are summarised in the table below. Asset Class Useful life Land unlimited Buildings 8 – 60 years Plant & Equipment 1 – 40 years 3 – 5 years Vehicles Van trailers 10 years Note 10 - Investment Properties The following items of income and expense have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement: 2014/15 2015/16 £’000’s £’000’s Rental income from investment properties Net gain / (loss) from fair value adjustments 35 35 (36) 688 The Police and Crime Commissioner for Kent has no contractual obligations to purchase, construct or develop investment property or repairs, maintenance or enhancement. The following table summarises the movement in the fair value of investment properties over the year: At 1st April 2014/15 2015/16 £’000’s £’000’s 6,756 6,720 - Purchases 0 0 - Subsequent expenditure 0 0 Disposals 0 (1,185) (36) 688 - to / from inventories 0 0 - to / from Property, Plant & Equipment 0 600 - to / from Assets held for sale 0 0 Other Changes – sale of properties 0 0 6,720 6,823 Additions: Net gain / loss from fair value adjustments Transfers: At 31st March 49 P a g e Item 11 Note 11 - Intangible Assets The Police and Crime Commissioner for Kent accounts for its software as intangible assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item of Property, Plant and Equipment. The intangible assets include both purchased licenses and internally generally software. All software is given a finite useful life, based on assessments of the period that the software is expected to be of use to the Police and Crime Commissioner for Kent. The useful lives assigned to the major software suites used by the Police and Crime Commissioner for Kent are: Internally Generated Assets 0-3 years None 4-6 years None 7 - 10 years Locard (the PCC for Kent’s forensic management system); Disaster Recovery 11 – 15 years None Other Assets BES12 Licences for mobile policing, Consultancy for Special Branch project Data SAP Licences & Upgrade, Analytics Software, Public Service Network (PSN) Consultancy, Single Desktop Programme (Microsoft Office upgrade), Joint Network Replacement, Mobile Data Terminal Licences Covert Communications Data Capture, Smartcall (Force Control Room software) , ANPR (Automatic Number Plate Recognition) Software Upgrade, Socrates (Forensic Case Management System) and Oracle Licences Data Software Application for Project Platinum The carrying amount of intangible assets is amortised on a straight-line basis. The amortisation of £627k was charged to revenue in 2015/16, charged to the IT cost centres and then absorbed as an overhead across all the service headings in the Net Expenditure of Services. IT costs are apportioned according to the number of staff in each segment of service so the proportions are as follows: Percentage Amount £’000’s Local Policing 45% 282 Dealing with the public 11% 69 Criminal Justice 9% 57 Roads Policing 3% 19 Specialist Operations 4% 25 Intelligence 5% 31 15% 94 Investigative Support 2% 13 National Policing 5% 31 Corporate & Democratic Core 1% 6 Non-distributed costs 0% 0 100% 627 Specialist Investigations Total 50 P a g e Item 11 The movement on Intangible Asset balances during the year is as follows: 2014/15 Internally generated assets Other Assets Total Internally generated assets £’000’s £’000’s £’000’s £’000’s 2015/16 Intangible assets Other under Assets developm ent £’000’s £’000’s Total £’000’s st At 1 April Gross carrying amounts Accumulated amortisation Net carrying amount at the start of year Additions: Reclassifications of Assets under Development Internal development Purchases Assets reclassified as held for sale Other disposals Revaluation increases or decreases Impairment losses recognised or reversed directly in the Revaluation Reserve Impairment losses recognised in the Surplus / Deficit on the Provision of Services Reversals of past impairment losses written back to the Surplus / Deficit on the Provision of Services Amortisation for the period Other changes Net carrying amount at the end of the year 796 5,604 6,400 796 6,067 0 6,863 (770) (3,523) (4,293) (778) (4,214) 0 (4,992) 27 2,080 2,107 18 1,853 0 1,871 0 0 0 0 0 2,773 2,773 0 0 0 0 0 0 0 0 463 463 0 1,884 2,973 4,857 0 0 0 0 0 0 0 0 0 0 0 (83) 0 (83) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (8) (690) (699) (8) (619) 0 (627) 0 0 0 0 79 0 79 18 1,853 1,871 10 3,113 5,746 8,869 796 6,067 6,863 796 7,867 5,746 14,409 (778) (4,214) (4,992) (786) (4,754) 0 (5,540) 18 1,853 1,871 10 3,113 5,746 8,869 Comprising Gross carrying amounts Accumulated amortisation Total Note 12 - Financial Instruments The term financial instrument refers to any contract that gives rise to a financial asset or liability with the Police and Crime Commissioner for Kent. For Kent Police this includes temporary investments, trade debtors and creditors as well as the Insurance Provision and Finance Leases. Financial Instruments Balances The following categories of financial instruments are carried in the Balance Sheet. 51 P a g e Item 11 Loans and Receivables Loans and Receivables 31st March 2015 (£000's) Long term Short term 31st March 2016 (£000's) Long term Short term Investments Cash (3,732) 0 (5,389) 425 73,239 425 76,225 Debtor 505 12,127 439 6,734 Total 930 81,634 864 77,570 Other Financial Liabilities at amortised costs Financial Liabilities at amortised costs PFI Liability 31st March 2015 (£000's) Long term (45,040) Creditors (45,040) Short term 31st March 2016 (£000's) Long term Short term (727) (43,751) (1,289) (16,613) 0 (17,340) (17,340) (43,751) (18,629) Fair value The carrying amount of the short term loans and receivables are a reasonable approximation of their fair values and the decision for not disclosing their fair value for the short term loans and receivables complies with the Code. The disclosure of the fair values of the PFI liability and long term loans and receivables can be seen below: Financial Instruments 31st March 2015 (£000's) Carrying Fair value amount 31st March 2016 (£000's) Carrying Fair value amount Financial Liabilities: PFI Long Liability (45,040) (70,245) (43,751) (67,318) PFI Short Liability (727) (727) (1,289) (1,289) Police Loan 505 505 439 439 Investment at cost 425 425 425 425 52 P a g e Item 11 Financial Instruments Gains / Losses The gains and losses recognised in the Comprehensive Income and Expenditure Statement in relation to financial instruments are made up as follows: Financial Liabilities Financial Assets Liabilities measured at amortised cost Loans and receivables Available-for-sale assets Total £’000 £’000 £’000 £’000 Interest expense Loss on de-recognition Impairment losses Interest payable and similar charges 6 0 0 6 104 0 0 104 0 0 0 0 110 0 0 110 0 0 587 587 0 0 0 0 (3,342) (3,342) 0 0 (2,755) (2,755) Interest income Discounting of financial assets Impairment of assets (see below) Interest and investment income 0 Icelandic Investments In 2008, the Kent Police Authority (now the Police and Crime Commissioner for Kent) invested £11.1m in Icelandic bank deposits. In October that year, the Icelandic banks Landsbanki, Kaupthing and Glitnir collapsed and the UK subsidiaries of the banks, Heritable and Kaupthing Singer and Friedlander went into administration. Over recent years a significant amount of the initial investment has been repaid, and the Police and Crime Commissioner now only holds a small investment in Glitnir of £419k, representing funds transferred by the Glitnir Winding Up board to a specific Escrow account. A summary of the initial investments, showing amounts deposited, repayments to date and amounts written off is shown below: Bank Date Invested Original Interest Rate Amount Invested Amount Repaid Impairment (written off) Current Investment (£’000's) (£’000's) (£’000's) (£’000's) Glitnir 28/08/2008 6.84% 2,000 1,581 0 419 Heritable 30/09/2008 6.15% 2,000 1,960 40 0 Heritable 25/09/2008 6.18% 1,200 1,176 24 0 Landsbanki 30/09/2008 6.15% 2,000 1,853 147 0 Landsbanki 18/09/2008 6.00% 1,000 926 74 0 Landsbanki 08/02/2008 5.40% 2,900 2,687 213 0 11,100 10,183 498 419 Total 53 P a g e Item 11 Glitnir Bank hf The remaining balance of £419k is now held in the Glitnir Winding Up Board escrow account which is accruing interest for the benefit of local authorities at a rate of 3.4% up to June 2012 and 4.2% thereafter. Advice from the latest CIPFA Local Authority Accounting Bulletin specifies that this deposit should be considered a new investment in its own right. The current value of this separate investment is £416k – however, as this change in value is not material, no adjustments have been made to the carrying value for interest accrued or exchange rate differences. Heritable Bank rd On the 3 September 2015, Heritable bank paid a further dividend of £127.4k, which has reduced the overall write off to only £64k – 2% of the original debt. LBI formerly Landsbanki The Landsbanki debt was sold in November 2014 realising a loss of £434k – 7.36% on the initial in investment. Note 13 – Short Term Debtors Central Government bodies 31st March 2015 31st March 2016 £’000’s £’000’s 12,913 16,767 Other Local Authorities 6,045 2,980 Payments in Advance 1,560 2,516 151 130 3,349 8,896 24,018 31,289 Staff Advance Other Entities and Individuals Total Note 14 - Cash and Cash Equivalents The balance of cash and cash equivalents is made up of the following elements: 31st March 2015 31st March 2016 £’000’s £’000’s Cash held by the PCC for Kent and Bank current accounts (3,732) (5,389) Short term deposits held by banks, local authorities and Building Societies 26,950 12,237 Total Cash & Cash Equivalents 23,218 6,848 The Police and Crime Commissioner for Kent also hold monies on behalf of third parties arising from its operational responsibilities. The cash amounts, not included in the above Balance Sheet totals, are as follows: See Note 16. 54 P a g e Item 11 31st March 2015 31st March 2016 £’000’s 2,786 £’000’s 1,947 Prisoners' property and lost cash 456 532 Other 176 155 Total 3,418 2,634 Proceeds of Crime Act monies (POCA) Note 15 - Assets Held for Sale Current 2014/15 2015/16 £’000’s £’000’s As at 1st April 850 2,081 1,945 0 (64) 0 Revaluation gains 0 0 Impairment losses 0 0 Assets declassified as held for sale 0 0 0 0 (650) (1,945) Transfers from non-current to current 0 697 Other movements 0 0 As at 31st March 2,081 833 Assets newly classified as held for sale - Property, Plant & Equipment Revaluation losses - Property, Plant & Equipment Assets sold Note 16 – Short Term Creditors Note Short-term accumulating compensated absences 31st March 2016 £’000’s £’000’s 2,583 2,520 Central Government bodies 4,629 14,440 Other local authorities 2,812 6,342 43 1 Receipts in advance 2,775 1,886 Other entities and individuals 8,159 10,837 21,001 36,026 727 1,289 21,728 37,315 NHS Bodies Group Sub-total Repayments due on PFIs within 1 year (see note 32) Group Total (i) 31st March 2015 (i) Short term accumulating absences are part of the Chief Constable's accounts only. All other creditors form part of the PCC single entity accounts and those of the Group. The Police and Crime Commissioner for Kent held £1.9m of monies in trust under the proceeds of Crime Act 2002 (2014/15 - £2.8m). This money was seized and banked under powers granted by the act and will be paid 55 P a g e Item 11 over to the Government on the conclusions each successful prosecution. If defendants are found not guilty or no charges are made, the money is returned to the person(s) it was seized from. In addition to this a further £0.7m was held in trust in relation to prisoners property and deceased persons (2014/15 - £0.6m). The above amounts have been excluded from the Balance Sheet as both Assets (Cash and Cash equivalents) and also Liabilities (Creditors). Note 17 – Long Term Creditors PFI Long Term Liability Capital Finance Lease Total 31st March 2015 31st March 2016 £’000’s £’000’s 45,040 43,751 467 389 45,507 44,140 Note 18 – Provisions A provision is a liability representing an amount set aside by the Police and Crime Commissioner for Kent for specific events or known costs which can be quantified with a degree of accuracy and which the Police and Crime Commissioner for Kent is reasonably certain it will have to pay. Specific provisions have been made for insurance claims plus reversal of the provision made for the pension top up grant in 2014/15 as this is no longer a provision: Provisions include: Outstanding legal cases, injury & damage compensation claims Balance as at 1st April 2015 Additional provisions made in 2015/16 Claims paid in 2015/16 Closing balance as at 31st March 2016 2014/15 2015/16 £’000’s £’000’s 12,946 12,892 771 698 (825) (10,518) 12,892 3,072 The insurance provision is split between amounts expected to be paid within one year 2015/16 - £1.210m (2014/15 - £1.225m) and those expected to be payable after one year 2015/16 £1.407m (2014/15 - £1.805m). The pension top up grant provision in 2014/15 relates to the repayment of top up grant incorrectly claimed from the Home Office between 2006/07 and 2013/14. This amount has been confirmed and is recorded as a creditor in 2015/16. 56 P a g e Item 11 Note 19 - Usable Reserves Movements in the Police and Crime Commissioner for Kent’s usable reserves are detailed in the Movement in Reserves Statement and note 7. 31st March 2015 £’000’s General Fund 31st March 2016 £’000’s 5,640 5,640 Localisation of Council Tax Benefit Reserve 900 700 Public Order & Major Investigation Reserve 2,000 2,000 Grant Cut Volatility Reserve 6,962 4,000 Insurance 3,098 3,098 0 200 1,919 1,919 6,000 6,000 5,083 5,883 25,768 31,594 586 781 2,173 704 60,129 62,519 Risk Compass House Renewals Fund Change Invest to save Redundancy, Relocation & Regulation A20 Policing Opportunity Policy Opportunities Capital Reserve Capital Contributions Unapplied Reserves POCA Incentivisation Other Total Capital Contributions Unapplied Reserve 31st March 2015 £’000’s st Balance at 1 April Receipts and transfers during the year Financing of non-current assets st Balance at 31 March Capital Reserve 31st March 2016 £’000’s 119 119 24 230 (24) (102) 119 247 31st March 2015 £’000’s 31st March 2016 £’000’s Balance at 1st April 30,219 25,649 Transfer from Earmarked Reserves (1,631) 9,174 Transfer from Revenue (475) 293 Proceeds of disposals 2,620 6,277 (6,722) (10,046) 25,649 31,347 Financing of non-current assets st Balance at 31 March General Fund The General Fund Reserve is set at a minimum of 2% of net revenue expenditure. 57 P a g e Item 11 Localisation of Council Tax Benefit Reserve It is anticipated that Kent Police will incur additional cost from changes to council tax benefits. A reserve has been created to mitigate these costs. Public Order and Major Investigation Reserve The Commissioner agreed for this reserve to be created to mitigate any possible future costs of significant public order events and major investigations in the county. Grant Cut Volatility Reserve The Police and Crime Commissioner for Kent has transferred a proportion of the previous years’ underspend to this reserve in order to provide for anticipated budget shortfalls over the medium term given the volatile nature of public grant funding. Insurance This reserve has been set up to provide for any additional insurance costs falling on the Police and Crime Commissioner for Kent over and above those already specifically provided for. See note 18. Compass House Renewals Fund Compass house is a facility in Kent opened in April 2015 to provide and co-ordinate services for victims and witnesses of crime. This reserve is intended to ensure the longevity of the facility without impacting on the maintenance and repair revenue budgets of Kent Police. Invest to Save This reserve will be used to fund projects or schemes which yield savings for the Police and Crime Commissioner for Kent in excess of the cash outlay required to deliver the savings. These projects are agreed at a strategic level and deliver on-going cashable savings. The Commissioner invites the Chief Constable to make bids against this in the year 2016/17. Redundancy, Relocation and Regulation A20 The Police and Crime Commissioner for Kent have agreed to create a reserve to off-set potential costs relating to the re-structuring of the Service following significant budget reductions over the medium term. Policy Opportunities The Police and Crime Commissioner for Kent has agreed to use a proportion of previous years underspends to provide a reserve which they intend to use to support visible policing and related initiatives. Capital Reserves This reserve is built up from contributions from revenue, the sale of surplus non-current assets and assets held for sale. The funds received from disposal of non-current assets can only be used for capital expenditure, whereas transfer from revenue can be used for either capital or revenue. Proceeds of Crime Act Incentivisation This reserve shows the amount the Police and Crime Commissioner for Kent has received from the Government as a proportion of the assets seized under the Proceeds of Crime Act 2002. It has been agreed that this money will be used to fund additional resources to increase asset seizures. Other Includes the following:  Budget Roll Forward – The Police and Crime Commissioner for Kent has held a proportion of a previous year’s underspend in this reserve in order to fund projects that either straddle financial years or did not start until 2016/17.  Proceeds of Crime Act Incentivisation – This reserve shows the amount the Police and Crime Commissioner for Kent has received from the Government as a proportion of the assets seized under the Proceeds of Crime 58 P a g e Item 11 Act 2002. It has been agreed that this money will be used to fund additional resources to increase asset seizures.  Police and Crime Commissioner Change Capacity Reserve – This reserve was created to provide one off resources to assist the Force in transformational processes such as digitalisation and demand reduction.  Op Morris – A self-funding operation across Kent Police and Essex Police designed to disrupt offending behaviour by depriving offenders of their vehicle. Note 20 - Unusable Reserves Movements in the Police and Crime Commissioner for Kent’s unusable reserves are detailed in the Movement in Reserves Statement on page 22. Unusable Reserves Revaluation Reserve Pensions Reserve (Group only) Capital Adjustment Account 31st March 2015 31st March 2016 £’000’s £’000’s 35,495 49,956 (3,424,802) (2,979,534) 108,634 113,573 (12) (12) 2,073 2,626 (2,583) (2,520) (3,281,196) (2,815,911) Financial Instruments Adjustment Account Collection Fund Adjustment Account Short term accumulated compensated absences account (Group only) Total Revaluation Reserve The Revaluation Reserve contains the gains made by the Police and Crime Commissioner for Kent arising from increases in the value of its Property, Plant and Equipment [and Intangible Assets]. The balance is reduced when assets with accumulated gains are:  revalued downwards or impaired and the gains are lost  used in the provision of services and the gains are consumed through depreciation, or  disposed of and the gains are realised. Revaluation Reserve At 1st April 2014/15 2015/16 £’000’s £’000’s 45,385 35,495 (45,385) 0 35,942 15,665 0 0 (447) (692) Accumulated gains on assets sold or scrapped 0 0 Amount written off to the Capital Adjustment Account 0 (512) Transfer to Capital Adjustment Account (CAA) 0 0 Additional adjustments - Gravesend 0 0 35,495 49,956 Restatement to CAA Upward revaluation of assets Downward revaluation of assets and impairment losses not charged to the Surplus / Deficit on the Provision of Services Difference between fair value of depreciation and historical cost depreciation At 31st March Pensions Reserve (Group Accounts Only) 59 P a g e Item 11 The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. The Police and Crime Commissioner for Kent accounts for post-employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Police and Crime Commissioner for Kent makes employer’s contributions to pension funds or eventually pays any pensions for which it is directly responsible. The balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the Police and Crime Commissioner for Kent has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid. Pensions Reserve At 1st April Actuarial gains or losses on pensions assets and liabilities Reversal of items relating to retirement benefits debited or credited to the surplus or deficit on the Provision of Services in the Comprehensive Income & Expenditure Account Employer’s pension contributions and direct payments to pensioners payable in the year At 31st March 2014/15 2015/16 £’000’s £’000’s (2,811,831) (3,424,802) (481,936) 549,849 (203,585) (189,750) 72,550 85,169 (3,424,802) (2,979,534) Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Police and Crime Commissioner for Kent as finance for the costs of acquisition, construction and enhancement. The Account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the Police and Crime Commissioner for Kent. The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2014, the date that the Revaluation Reserve was reset to hold such gains. Note 7 provide details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve. 60 P a g e Item 11 Capital Adjustment Account At 1st April Revaluation Reserve reset to zero at 1 April 2014 following full revaluation of all properties - prior year balance transferred to CAA Additional adjustments for IFRS 2014/15 2015/16 £’000’s £’000’s 118,205 108,634 45,385 0 (5,994) (6,284) (54,912) (70) 0 3,412 (699) (627) (2,248) (3,952) 0 304 447 1,204 4,514 7,959 2,572 1,363 2,188 805 Reversal of items of capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement: · Charges for depreciation and impairment of non-current assets · Charges for Impairment / rev loss · Revaluation Gains/(Losses) on Property, Plant & Equipment · Amortisation of intangible assets · Amount of non-current assets written off on disposal or sale as part of the gain / loss on disposal to the Comprehensive Income and Expenditure Statement · Donated Assets Adjusting amounts written out of the Revaluation Reserve: · Net written out amount of the cost of non-current assets consumed in the year Capital financing applied in the year: · Use of Capital Reserve to finance new capital expenditure · Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement that have been applied to capital financing · Capital repayment on PFI Movements in the market value of debited or credited to the Comprehensive Income & Expenditure Statement: · Investment Properties 0 0 · Assets Held for Sale 0 0 · Transfer from Revaluation Reserve Movement in the Donated Assets Account credited to the Comprehensive Income & Expenditure Statement: · Recognition of Heritage Assets 0 0 At 31st March 0 0 0 108,634 113,573 61 P a g e Item 11 Financial Instruments Adjustment Account The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. Financial Instruments Adjustment Account At 1st April 2014/15 2015/16 £’000’s (172) £’000’s (12) Reversal of prior year entries · Discounting Police Pay Loan · Interest accrual on frozen Icelandic bank deposits · Impairment in frozen Icelandic bank deposits 12 12 (301) 0 461 0 (12) (12) Current year entries · Discounting Police Pay Loan · Interest accrual on frozen Icelandic bank deposits 0 0 · Impairment in frozen Icelandic bank deposits 0 0 · Actual Impairment written out 0 0 (12) (12) At 31st March Collection Fund Adjustment Account The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund. This reflects the Police and Crime Commissioner for Kent’s share of the any under or over payments and potential bad debts relating to non-payment of Council Tax to Local Authorities. Collection Fund Adjustment Account At 1st April Amount by which Council Tax Income credited to the Comprehensive Income & Expenditure Statement are different from the cost of settlements chargeable in the year in accordance with statutory requirements. At 31st March 2014/15 2015/16 £’000’s £’000’s 1,126 2,073 947 553 2,073 2,626 Short-term Accumulated Absences Account (Group Accounts Only) The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement and time off in lieu of payment carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account. 62 P a g e Item 11 Short-term Accumulated Absences Account At 1st April 2014/15 2015/16 £’000’s £’000’s (2,799) (2,583) 2,799 2,583 Additional liability calculated in year (2,583) (2,520) At 31st March (2,583) (2,520) Unused amounts reversed in year Note 21 – Cash Flow Statement Adjustments to net surplus / deficit on the provision for non-cash movements Depreciation on non-current assets Amortisation of intangible assets Reversals of previous impairments and upwards revaluations of investment properties Increase / (decrease) in long term debtors 2014/15 2015/16 2015/16 Group Group PCC £’000’s £’000’s £’000’s (5,994) 699 (6,284) (627) (6,284) (627) (54,912) 3,341 3,341 (72) (67) (67) 6,481 (15,025) (15,086) (1,640) 7,271 7,271 (144) (18) (18) 54 9,821 9,821 (131,035) (104,581) 0 (2,229) (3,954) (3,954) 0 0 0 (1,934) 0 0 Reversal of proceeds of sales of non-current assets 2,078 0 0 Reversal of capital grants and contributions (see note 30) 2,572 0 0 (186,075) (110,123) (5,603) (Increase) / decrease in creditors Increase / (decrease) in debtors Increase / (decrease) in stock (Increase) / decrease in provisions Pensions liability Carrying amount of non-current assets sold Material impairment losses on investments debited to CI&E in year Other non-cash items to be charged to the net surplus on the provision of services Total Adjustments for items in the net surplus or deficit on the provision of services that are investing or financing activities Proceeds from the sale of property, plant and equipment, investment property and intangible assets 2014/15 2015/16 2015/16 Group Group PCC £’000’s £'000 £’000’s 1,997 4,469 4,469 Insurance Refund 81 78 78 Interest Received 441 591 591 Interest Paid (304) (4) (4) Capital Grants applied 2,572 2,188 2,188 Total 4,787 7,322 7,322 63 P a g e Item 11 Note 22 – Cash Flow Statement - Investing Activities Investing Activities Purchase of property, plant & equipment, investment assets and intangible assets Purchase of short-term and long-term investments Other payments for investing activities Proceeds from the sale of property, plant & equipment, investment property and intangible assets. Insurance Refund Proceeds from short-term and long-term investments Other receipts from investing activities Capital grant received (Government) Capital grant received (non-Government) Net cash flows from investing activities 2014/15 2015/16 2015/16 Group Group PCC £’000’s £’000’s £’000’s 7,087 10,148 10,148 433,062 502,864 502,864 0 0 0 (1,997) (4,469) (4,469) (81) (78) (78) (423,467) (485,166) (485,166) (441) (592) (592) (2,549) (2,087) (2,087) (24) (101) (101) 11,591 20,519 20,519 Note 23 – Cash Flow Statement - Financing Activities 2014/15 2015/16 2015/16 Group £’000’s Group £’000’s PCC £’000’s Financing Activities Cash payments for the reduction of outstanding liabilities relating to finance leases and PFI contracts Interest Paid Net cash flows from financing activities 1,588 805 805 304 4 4 1,892 809 809 Note 24 - Amounts Reported for Resource Allocation Decisions (Group Accounts Only as PCC costs are not reported in this format) The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the Service Reporting Code of Practice. However, decisions about resource allocation are taken by the Kent Chief Officer Team on the basis of budget reports analysed across directorates, with the exception of the Police & Crime Commissioners budget which is managed entirely within the Office of the PCC. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular:  no charges are made in relation to capital expenditure (whereas depreciation, revaluation and impairment losses in excess of the balance on the Revaluation Reserve and amortisations are charged to services in the Comprehensive Income and Expenditure Statement).  the cost of retirement benefits is based on cash flows (payment of employer’s pensions contributions) rather than current service cost of benefits accrued in the year.  expenditure on some support services is budgeted for centrally and not charged to directorates. 64 P a g e Item 11 The following tables show expenditure for Kent Police for the financial years 2015/16 and 2014/15, analysed subjectively and grouped based on operational policing units or directorates. This information is reported to the Chief Officer team on a month by month basis and used to inform resource allocation and other strategic decisions. The Force is organised into three geographical areas, North, West and East Divisions which undertake Neighbourhood Policing functions whilst incident management functions is centralised. The Police and Crime Commissioner for Kent is the statutory body appointed to hold the Chief Constable to account, set its budget and ensure the views of communities in Kent determine the priorities for the policing service in the county. Although the Office of Police and Crime Commissioner for Kent represents less than one percent of the total expenditure of the Force including it with the segmental reports is felt to be useful and informative. Specific Grant income is also included within this group. This can be seen within the Reimbursements, Grants and Contributions line of the following reports. 65 P a g e st st Income & Expenditure as reported to senior management for the period 1 April 2015 to 31 March 2016 Police Officer Pay Police Officer Overtime PCSO Pay Other Staff Costs Other Staff Overtime Temporary or Agency Staff Police Officer Injury/Ill health/Death Pensions Other Employee Expenses Restructure, Training & Conference Costs Premises Related Expenditure Transport Related Expenditure Supplies & Services Third Party Payments Capital financing and contributions Transfers to Revenue and Capital Reserves Reconciling item Pension Fund Movement Total Expenditure Government Grants Local Government Precept Government & Overseas Funding Sales, Fees, Charges & Rents Special Police Services Reimbursed Services - Inter Force Reimbursed Services - Other Public Bodies Reimbursed Services - Other Interest / Investment Income Reimb Services - Income from other forces Local Gov. Specific / Partnership Funding Total Income Overall Position Budget (Over) / underspend for 2015/16 Central Ops Chief's Office DCC Portfolio Divisions Joint SCD Joint Support Services (1) Support Services Local P&P Corporate Charges PCC Force Total £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s 39,085 4,343 0 11,928 548 11 0 0 71 166 351 3,108 489 0 (93) 0 0 60,007 0 0 (3,488) (1,824) (25) (77) (2,656) (19) 0 0 (8) (8,097) 51,910 52,518 (608) 1,829 5 0 555 0 0 0 0 0 3 25 (24) 45 0 100 0 0 2,538 0 0 0 0 0 0 0 (1) 0 0 0 (1) 2,537 1,811 726 1,079 2 0 5,206 59 13 0 0 3 6 59 863 0 0 0 0 0 7,290 0 0 (6) (9) 0 0 (946) 0 0 0 0 (961) 6,329 6,526 (197) 95,875 1,170 0 12,808 32 9 0 3 11 12 342 1,552 7 0 0 0 0 111,821 0 0 (650) (22) (1) 0 (240) (172) 0 0 0 (1,085) 110,736 121,759 (11,023) 12,077 117 0 8,759 140 0 0 1 8 35 196 2,934 1,151 0 409 0 0 25,827 0 0 (3) (39) 0 (255) (29) (1,001) 0 0 0 (1,327) 24,500 26,867 (2,367) 9,462 34 0 13,742 106 252 0 160 410 10,374 3,865 11,873 1,345 182 (518) 0 0 51,287 0 0 (489) (931) 0 (539) (89) (886) 0 (1,363) 0 (4,297) 46,990 45,810 1,180 0 0 0 1,136 0 0 0 0 25 8,353 9 56 18 727 0 0 0 10,324 0 0 0 (138) 0 0 (5,724) (12) 0 0 0 (5,874) 4,450 5,150 (700) 3,754 6 0 14,300 165 0 0 0 4 10 612 755 42 0 (98) 0 0 19,550 0 0 (58) (351) 0 (77) (220) (2) 0 0 (80) (788) 18,762 19,523 (761) 200 3 0 59 2 0 5,898 287 1,373 1,067 921 1,560 (581) 5 (325) 1 208 10,678 0 0 (13,092) (16) 0 (90) (2) (40) (592) 0 0 (13,832) (3,154) (11,436) 8,282 84 0 0 915 2 18 0 0 21 45 22 1,496 2,634 0 601 0 0 5,838 0 0 0 (2) 0 0 0 0 0 0 0 (2) 5,836 5,836 0 163,445 5,680 0 69,408 1,054 303 5,898 451 1,926 20,071 6,402 24,173 5,150 914 76 1 208 305,160 0 0 (17,786) (3,332) (26) (1,038) (9,906) (2,133) (592) (1,363) (88) (36,264) 268,896 274,364 (5,468) (1) Support services include Finance and PFI the only two departments not collaborated with Essex. 66 P a g e Reconciliation to Net Cost of Services Total expenditure from reports to Chief Officers for the year 2015/16 £(000's) 268,896 Depreciation & Amortisation 6,981 Donated Assets (304) Impairments of non-current assets (2,851) Impairments of financial assets (805) Interest Element of Finance Leases (104) Interest Element on Finance Lease and PFI Short term compensated absences Transfers to Reserves Pensions adjustment – IAS 19 Investment Interest income Police Officer Superannuation Police Staff Superannuation Net Cost of Policing Services Gain/loss on disposal of non-current assets Interest Element of Finance Leases Interest payable on PFI unitary payments Expected return on pensions assets (4,161) (64) (76) 79,938 587 (40,882) (7,159) 299,996 (595) 104 4,161 109,813 Investment interest income (1,275) Recognised capital grants & contributions (2,317) Precept Income Non-service related Government Grants Home Office Pension Grant (Surplus) / deficit for the year (87,744) (187,172) (37,128) 97,843 67 P a g e st st Income & Expenditure as reported to senior management for the period 1 April 2014 to 31 March 2015 Police Officer Pay Police Officer Overtime PCSO Pay Other Staff Costs Other Staff Overtime Temporary or Agency Staff Police Officer Injury/Ill health/Death Pensions Other Employee Expenses Restructure, Training & Conference Costs Premises Related Expenditure Transport Related Expenditure Supplies & Services Third Party Payments Capital financing and contributions Transfers to Revenue and Capital Reserves Reconciling item Pension Fund Movement Total Expenditure Government Grants Local Government Precept Government & Overseas Funding Sales, Fees, Charges & Rents Special Police Services Reimbursed Services - Inter Force Reimbursed Services - Other Public Bodies Reimbursed Services - Other Interest / Investment Income Reimb Services - Income from other forces Local Gov. Specific / Partnership Funding Total Income Overall Position Budget (Over) / underspend for 2014/15 Central Ops Chief's Office DCC Portfolio Divisions Joint SCD Joint Support Services Support Services Local P&P Corporate Charges PCC Force Total £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s £’000’s 45,699 3,932 0 13,104 317 0 0 52 0 209 422 4,153 317 0 287 0 0 68,491 0 0 (4,289) (2,292) (156) (147) (2,818) (8) 0 0 0 (9,709) 58,782 64,534 (5,752) 1,865 6 0 729 1 0 0 0 0 2 33 64 63 0 0 0 0 2,763 0 0 0 (2) 0 (177) 0 (8) 0 0 0 (187) 2,576 1,929 647 938 4 0 5,262 53 0 0 43 0 4 64 285 4 0 0 0 0 6,656 0 0 (69) (6) (0) (0) (724) (1) 0 0 0 (800) 5,856 5,955 (99) 91,042 1,246 0 12,756 53 0 0 24 0 23 355 1,595 10 0 16 0 0 107,121 0 0 (703) (48) 0 (0) (58) (185) 0 0 0 (995) 106,127 109,638 (3,512) 12,278 149 0 9,903 136 0 0 9 0 14 228 3,510 923 0 (140) 0 0 27,012 0 0 (5) (20) 0 (235) (127) (588) 0 0 0 (976) 26,036 27,592 (1,556) 9,956 46 0 14,470 140 0 0 652 0 10,507 4,661 10,163 1,742 182 2 9 0 52,529 0 0 (537) (266) 0 (1,683) (250) (1,150) 0 (1,968) 0 (5,855) 46,675 47,801 (1,126) 0 0 0 1,017 2 0 0 15 0 7,562 9 82 69 1,285 0 0 0 10,040 0 0 (0) (103) 0 (46) (5,724) (36) 0 0 0 (5,910) 4,130 4,839 (709) 4,011 28 0 13,940 369 0 0 7 0 13 622 468 14 0 (66) 0 0 19,407 0 0 (13) (305) 0 35 (89) (2) 0 0 (10) (384) 19,022 19,746 (724) 19 5 0 141 68 0 0 6,943 0 773 953 (1,153) 1,326 3 8,209 (126) 343 17,503 0 0 (11,356) (19) 0 (1,738) 0 (315) (441) 0 0 (13,869) 3,634 (5,660) 9,294 81 41 0 857 11 0 0 42 0 432 30 1,342 2,482 0 (1,162) 0 0 4,156 0 0 (754) (2) 0 0 0 (68) 0 0 0 (824) 3,332 3,538 (206) 165,890 5,458 0 72,179 1,150 0 0 7,788 0 19,538 7,376 20,508 6,949 1,469 7,147 (117) 343 315,679 0 0 (17,726) (3,065) (156) (3,991) (9,791) (2,361) (441) (1,968) (10) (39,509) 276,170 279,913 (3,743) 68 P a g e Reconciliation to Net Cost of Services Total expenditure from reports to Chief Officers for the year 2014/15 Depreciation & Amortisation Impairments of non-current assets Impairments of financial assets Interest Element of Finance Leases Interest Element on Finance Lease and PFI Short term compensated absences Transfers to Reserves Pensions adjustment – IAS 19 Investment Interest income Capitalised value of ill health retirements Police Officer Superannuation Police Officer Injury Pensions Police Staff Superannuation Net Cost of Policing Services Gain/loss on disposal of non-current assets Interest Element of Finance Leases Interest payable on PFI unitary payments Expected return on pensions assets Investment interest income Recognised capital grants & contributions Precept Income Non-service related Government Grants Home Office Pension Grant (Surplus) / deficit for the year (Restated) £(000's) 276,170 6,693 (462) 53,449 (104) (3,944) (216) (7,187) 82,519 438 (2,637) (26,443) (4,139) (6,774) 367,363 170 104 3,944 121,066 (37) (2,572) (84,323) (196,534) (32,558) 176,623 69 P a g e Note 25 - Members’ Allowances Police Reform and Social Responsibility Act 2011 dissolved the Police authority in November 2011 therefore there were no members allowances. The Police and Crime Commissioner for Kent are paid a salary according to a nationally set pay scale and this is shown in the following note. Note 26 - Officers’ Remuneration In accordance with Regulation 4 of the Accounts and Audit Regulations 2009 the Authority has a specific requirement to disclose the number of employees whose taxable remuneration falls within certain brackets. Accordingly the number of employees whose remuneration, excluding pension contributions was £50,000 or more in bands of £5,000 was: Number of Employees Remuneration Band (£) 50,000 – 54,999 55,000 – 59,999 60,000 – 64,999 65,000 – 69,999 70,000 – 74,999 75,000 – 79,999 80,000 – 84,999 85,000 – 89,999 90,000 – 94,999 95,000 – 99,999 100,000 – 104,999 105,000 – 109,999 110,000 – 114,999 115,000 – 119,999 125,000 – 129,999 135,000 – 139,999 140,000 – 144,999 145,000 – 149,999 150,000 – 154,999 195,000 - 199,000 200,000 - 204,999 2014/15 2015/16 GROUP PCC GROUP PCC 164 115 34 12 4 10 11 3 3 2 0 0 1 0 1 0 1 0 1 1 0 0 1 0 0 0 1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 186 121 27 14 10 6 6 6 1 1 1 1 0 2 0 1 0 1 0 0 1 0 0 0 1 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 The amended Regulations introduce a requirement to disclose individual remuneration details for senior employees whose salary is £50,000 or more per year. For these employees their salaries are listed individually by way of job title. Additionally persons whose salary is £150,000 or more per year must be identified by name. 70 P a g e A senior employee is considered one whose salary is greater than £50,000 per year (calculated pro rata for part time employees) and who is responsible for the management of Kent Police to the extent that the person has power to control the major activities of the service, in particular activities involving the expenditure of money, whether solely or collectively with other persons. This includes the Police and Crime Commissioner, her Chief of Staff and Chief Finance Officer, all Association of Chief Police Officer (ACPO) ranking police officers, the Director of Essex and Kent Support Services, the Director of Human Resources and the Force Chief Finance Officer. These amounts have also been accounted for under the remuneration band table on the previous page. 71 P a g e Benefits in kind Other Payments (Police Officers only) Total remuneration (excl pension contributions) 0 0 0 85,000 9,860 94,860 0 0 0 0 17,199 1,805 19,004 0 0 0 0 0 76,252 3,520 79,772 69,370 0 0 0 0 0 69,370 0 69,370 196,089 0 0 0 0 5,090 201,179 0 201,179 147,936 0 0 0 0 0 147,936 0 147,936 0 0 0 0 0 0 0 0 0 119,392 0 0 0 0 0 119,392 22,706 142,098 Expenses Allowances Other Payments (Police Staff) 0 0 17,199 0 2 76,252 3 Salary including allowances Perf’nce. Related Pay 85,000 1 Police and Crime Commissioner Chief of staff Police and Crime Commissioner Chief Finance Officer Post Title Note Pension contributions Total remuneration (including pension contributions) Group and PCC The Kent Police and Crime Commissioner Police and Crime Commissioner Chief of staff CC and Group Chief Constable, Mr Alan Pughsley Deputy Chief Constable Assistant Chief Constable (Serious Crime Directorate) 4 Assistant Chief Constable (Central Operations) Assistant Chief Constable (Local Policing & Partnerships) 5 119,230 0 0 0 0 0 119,230 21,197 140,427 Assistant Chief Constable (Local Policing & Partnerships) 6 7,622 0 0 0 0 0 7,622 1,541 9,163 84,861 0 0 0 0 0 84,861 9,217 94,078 Chief Finance Officer to the Chief Constable Director of Human Resources 7 30,879 0 0 0 0 0 30,879 3,582 34,461 Director of Corporate Services 7 85,829 0 0 0 0 0 85,829 9,956 95,785 145,225 0 0 0 0 0 145,225 16,846 162,071 19,532 0 0 0 0 0 19,532 2,266 21,798 Director of Essex & Kent Support Services Director of Corporate Communications 8 72 P a g e Notes 1. 2. 3. 4. 5. 6. 7. 8. Police and Crime Commissioner Chief of Staff left the OPCC on 2nd June 2015. Started in the post of Police and Crime Commissioner Chief of Staff on 2nd June 2015, opted out of pension scheme on 30th September 2015. Chief Finance Officer to the Police and Crime Commissioner is 0.8 FTE. st Assistant Chief Constable (Serious Crime Directorate) is employed by Essex Police and is in a 50:50 role. 1 Assistant Chief Constable th th left the post on 30 October 2015, followed by the current Assistant Chief Constable starting the post from 30 October 2015. Assistant Chief Constable (Local Policing & Partnership Directorate) retired on 1st March 2016. Started in the post of Assistant Chief Constable (Local Policing & Partnership Directorate) on 29th February 2016. Director of Human Resources transferred in the new post as Director of Corporate Services on 6th July 2015 following restructure of Human Resources department. Started in the post of Director of Corporate Communications on 1st February 2016. 73 P a g e 2014/15 Benefits in kind Other Payments (Police Officers only) Total remuneration (excl pension contributions) Pension contributions 0 0 0 78,810 9,142 87,952 0 0 0 0 91,430 10,606 102,036 0 0 0 0 0 57,943 0 57,943 194,215 0 0 0 0 4,508 198,723 37,175 235,898 150,473 0 0 0 0 0 150,473 31,649 182,122 2 0 0 0 0 0 0 0 0 0 3 19,070 0 0 0 0 2,257 21,328 4,456 25,783 4 89,992 0 0 0 0 0 89,992 19,600 109,592 123,311 0 0 0 0 0 123,311 25,530 148,841 82,964 0 0 0 0 0 82,964 9,170 92,134 Director of Human Resources 115,550 0 0 0 0 0 115,550 13,404 128,954 Director of Essex & Kent Support Services 143,786 0 0 0 0 0 143,786 16,679 160,465 Post Title Note Other Payments (Police Staff) 0 0 57,943 Salary including allowances Perf’nce. Related Pay 78,810 0 91,430 Expenses Allowances Total remuneration (including pension contributions) Group and PCC The Kent Police and Crime Commissioner Police and Crime Commissioner Chief of staff 1 Police and Crime Commissioner Chief Finance Officer CC and Group Chief Constable, Mr Alan Pughsley Deputy Chief Constable, Mr Paul Brandon Assistant Chief Constable (Serious Crime Directorate) T/Assistant Chief Constable (Central Operations) Assistant Chief Constable (Central Operations) Assistant Chief Constable (Local Policing & Partnerships) Chief Finance Officer to the Chief Constable Notes 1. 2. 3. 4. The Police and Crime Commissioner for Kent's salary is set by the Home Office at £85,000. However, the PCC for Kent has chosen to make a contribution from her salary to part-fund the Youth Commissioner's salary costs. Assistant Chief Constable (SCD) is employed by Essex Police but works across both Kent and Essex. th Temporary Assistant Chief Constable (Central Operations) retired from Kent Police on 10 June 2014. th Assistant Chief Constable (Central Operations) joined Kent Police on 26 May 2014. 74 P a g e Note 27 - External Audit Costs In 2015/16 the following fees were incurred relating to external audit and inspection, carried out by our appointed external auditors, Ernst & Young. 2014/15 2015/16 £’000’s £’000’s PCC Fees payable in respect to External Audit Fees Fees payable to the Audit Commission in respect of other Services Total Group PCC Group 64 95 49 68 1 1 0 0 65 96 49 68 The Police and Crime Commissioner for Kent Single Entity incurred additional costs of £8,714 in 2014/15 (£10,552 for the Group) relating to additional audit work. Note 28 - Grant Income The Police and Crime Commissioner for Kent credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement in 2015/16. 2014/15 2015/16 £’000’s £’000’s Credited to Taxation and Non-specific Grant Income · Non-service related Government Grant 183,236 173,874 13,298 13,298 196,534 187,172 32,558 37,128 2,572 2,317 231,664 226,617 11,349 11,146 37 34 · Designated Security Post Grant 294 294 · Competed Fund 150 0 · Ministry of Justice 604 1,951 · FIIP EU Grant 330 77 0 250 12,764 13,752 · Council Tax Freeze Grant Total non-service related grants · Home Office Pension Grant · Capital Grant & Contributions Total Credited to Net Cost of Services · Counter Terrorism · National Security Grants · Innovation Fund Grant Total All grants are analysed for outstanding conditions which would require any unspent amounts to be repaid. There are no repayments due as for 2015/16 as all grant conditions have been met. 75 P a g e Note 29 - Related Parties The Police and Crime Commissioner for Kent is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the authority or to be controlled or influenced by Kent Police. Disclosure of these transactions allows readers to assess the extent to which the Police and Crime Commissioner for Kent might have been constrained in their ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Police and Crime Commissioner for Kent. Central Government Central government has effective control over the general operations of the Police and Crime Commissioner for Kent – it is responsible for providing the statutory framework within which the Police and Crime Commissioner for Kent operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Police and Crime Commissioner for Kent has with other parties (e.g. council tax bills). Officers The Kent Police Chief Officer team led by the Chief Constable has direct control over all operational decisions and the day-to-day running of the service as well strategic decision making in conjunction with the Commissioner. All Chief Officers have been contacted and there are no related party transactions to disclose for 2015/16. The Police and Crime Commissioner, Chief of Staff, and Chief Finance Officer for the Police and Crime Commissioner for Kent were also contacted as they have influence over strategic decisions of Kent Police. There are no related party transactions to disclose for 2015/16. Other Public Bodies The Police and Crime Commissioner for Kent has a number of business relationships with public organisations such as local authorities in Kent and other Police Forces in England and Wales mainly Kent County Council, Essex Police and West Yorkshire Police for the National Police Air Service (NPAS). Kent County Council provides Treasury Management and Pensions services to Kent Police and also provides a range of supplies and services through their commercial services departments. These include provision of utilities such as gas and electricity as well as photocopier agreements and printing. The total paid to Kent County Council in 2015/16 was £14.85m – comprising £10.4m for pension contributions, £2.95m for gas and electricity, £1.2m for the provision of pension services, Treasury Management, contributions to partnership programmes for crime reduction and £0.3m for printing services and photocopying. Kent Police has two main collaborative agreements with Essex Police covering Serious Crime and Support Services. Each of these are categorised as jointly controlled operations as each Force uses and retains its own assets in the provision of the joint service rather than creating a legal entity separate to Kent Police and Essex Police. The amount paid to Essex Police for the year 2015/16 as contributions to joint heads of department and towards the Athena computer system was £7.0m. Jointly Controlled Operations are further explained in note 39. Kent Police paid £520,000 in 2015/16 (£512,000 2014/15) to the National Police Air Service for air support as part of a national framework. 76 P a g e Note 30 - Capital Expenditure and Capital Financing 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 in future years by charges to revenue, as assets are used by the Police and Crime Commissioner for Kent, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Police and Crime Commissioner for Kent that has yet to be financed. The CFR is analysed in the second part of this note. Opening Capital Financing Requirement 2014/15 2015/16 £’000’s £’000’s 46,228 44,866 6,624 8,264 0 0 463 1,884 Capital Receipts (2,191) (4,200) Government Grants and other contributions (2,572) (2,188) Direct Revenue contributions (2,323) (3,759) Repayment of PFI (1,285) (727) (78) (78) 44,866 44,062 Capital Investment Property, Plant and Equipment Investment Properties Intangible Assets Source of Finance Lease Closing Capital Financing Requirement Note 31 – Leases Police and Crime Commissioner for Kent as Lessee Finance Leases Kent Police has one building subject to a finance lease and that is the Transport Workshops at Quarry Wood, Aylesford. This contract was entered into in June 2000 for a period of 21 years. Historic costs for the building were £1.6m. The asset acquired under this lease is carried as Property, Plant and Equipment in the Balance Sheet at the following net amount: Property, Plant & Equipment 2014/15 2015/16 £’000’s £’000’s 2,001 1,981 The Police and Crime Commissioner for Kent is committed to making annual repayments consisting of interest and repayment of capital, as the asset is classified as a Finance Lease only the interest of £103,983 per annum is charged to the Comprehensive Income and Expenditure Statement. As the Transport Department is a support service this cost is apportioned across the objective analysis categories according to the number of staff in each segment of service. 77 P a g e The future minimum lease payments due under the contract in future years are: 2014/15 2015/16 £’000’s £’000’s Not later than one year 182 182 Later than one year and not later than five years 727 727 Later than five years 182 0 1,091 909 Total Operating Leases The Police and Crime Commissioner for Kent have contractual arrangements in place for the following:  Vehicles for Chief Inspectors and Superintendents.  a number of premises across the county where it has either been impossible or impracticable to purchase operational property  photocopiers and multi-function devices (printing, photocopying, faxing and scanning) These are classified as operating leases with the full lease amount being charged to the Net Cost of Services in the Comprehensive Income and Expenditure Statement as follows: 2014/15 2015/16 £’000’s s £’000’s Vehicle leases 306 232 Premises 510 425 Photocopiers 285 292 1,101 949 Total The future minimum lease payments due under the contracts in future years are: 2014/15 2015/16 £’000’s £’000’s Premises · Not later than one year 521 511 · Later than one year and not later than five years 1,191 931 · Later than five years 1,908 1,845 2014/15 2015/16 £’000’s £’000’s Vehicles · Not later than one year 216 117 · Later than one year and not later than five years 104 53 0 0 · Later than five years The pattern for lease payments decreasing as time progresses in the above table does not allow for the renewal of leases or for taking on new agreements as existing ones come to an end. For example new vehicle leases will be entered into as new staffs become eligible or an existing contract expires. 78 P a g e All values relating to leases on the Balance Sheet are at present value and not discounted due to the relative short term duration of the lease agreements and the materiality of the amounts involved. Police and Crime Commissioner for Kent as Lessor The Police and Crime Commissioner for Kent leases out property under operating leases for the following purposes: Housing – the Police and Crime Commissioner for Kent has a number of houses that it lets to individuals. These were returned to us by Kent County Council in 1995 complete with sitting tenants. The terms of each agreement is such that either party can terminate the agreement with a months’ notice. Telecoms masts – The Police and Crime Commissioner for Kent rents space on either buildings or its own masts to telecommunications providers such as mobile phone companies. These are long contracts but can be terminated at short notice by either party. There is a drive within the mobile telecommunications industry to collaborate / merge so it is possible or indeed likely that some of this revenue may be withdrawn in future as companies merge. Premises – There are currently three instances where Kent Police leases out part of its premises to partners such as the Crown Prosecution Service or highways Agency for a commercial rent. Such agreements are only undertaken where space is available, such an undertaking is mutually beneficial and would not compromise Kent Police’s impartiality or provision of service. The future minimum lease payments receivable under leasing agreements are cancellable by either party at short notice. 79 P a g e Note 32 – Private Finance Initiative (PFI) funded schemes Kent Police has two properties funded through PFI arrangements: North Kent Police station and Medway Police station, brought into service in May 2008 and December 2006 respectively. The Police and Crime Commissioner for Kent show these assets on its Balance Sheet and that they are depreciated and otherwise accounted for in line with other building assets in line with accounting regulations. Asset value recognized in the Balance Sheet. Depreciation charges North Kent Medway Total £’000’s £’000’s £’000’s 32,365 21,053 53,418 0 (234) (234) 2007/08 0 (702) (702) 2008/09 (989) (702) (1,691) 2009/10 (1,079) (702) (1,781) Impairment following revaluation in 2010/11 Revised Net Book Value following revaluation Depreciation charges for 2010/11 (8,311) 0 (8,311) 21,986 18,713 40,699 (436) (702) (1,138) 0 1,509 1,509 21,550 19,520 41,070 (436) (349) (785) Depreciation charges for 2012/13 (436) (349) (785) Revaluation in 2013/14 3,492 2,102 5,594 24,170 20,924 45,094 Depreciation charges for 2013/14 (501) (374) (875) Depreciation charges for 2014/15 (331) (225) (556) (5,803) (8,396) (14,199) 17,535 (331) 11,929 (225) 29,464 (556) 3,424 1,358 4,782 20,628 13,062 33,690 2006/07 Revaluation in 2011/12 Revised Net Book Value following revaluation Depreciation charges for 2011/12 Total Impairment following revaluation in 2014/15 Revised Net Book Value following revaluation Depreciation charges for 2015/16 Custody Revaluation in 2015/16 Revised Net Book Value following revaluation 80 P a g e Balance Sheet liability resulting from PFI arrangements on recognition Capital Repayment North Kent Medway Total £’000’s £’000’s £’000’s 32,365 21,053 53,418 2006/07 0 (730) (730) 2007/08 0 (296) (296) 2008/09 (478) (323) (801) 2009/10 (564) (296) (860) 2010/11 (464) (341) (805) 2011/12 (558) (406) (964) 2012/13 (324) (442) (766) 2013/14 (428) (480) (908) 2014/15 (763) (759) (1,522) 2015/16 (350) (377) (727) 28,437 16,604 45,041 Net Balance Sheet liability resulting from PFI arrangements as at 31st March 2016 Note 9, Property, Plant & Equipment includes the asset values for both North Kent and Medway police stations along with depreciation charges and where these are included on the Police and Crime Commissioner for Kent’s Balance Sheet on page 19. The following tables show the value of the assets held under PFI schemes, the liabilities arising from these schemes along with depreciation charges for the assets. Although the payments made to the contractors are described as unitary payments, they have been calculated to compensate the contractors for the fair value of the services they provide over the life of the contracts, the capital expenditure incurred and interest payable whilst the capital expenditure remains to be reimbursed. The amounts due for the remainder of the contracts are shown in the table below. £’000’s 11 to 15 years £’000’s 16 to 20 years £’000’s 21 to 25 years £’000’s 25 to 30 years £’000’s Within one year Within 2 to 5 years 6 to 10 years £’000’s £’000’s North Kent Repayments of liability 834 2,314 5,153 6,815 12,300 1,021 0 Interest 2,624 9,803 10,663 8,160 4,174 94 0 Service Charges 1,920 8,171 11,417 12,917 14,615 988 0 Total 5,378 20,288 27,233 27,892 31,089 2,103 0 455 1,211 3,923 5,694 5,321 0 0 Interest 1,472 5,594 5,895 3,893 1,052 0 0 Service Charges 1,269 5,402 7,547 8,539 6,148 0 0 Total 3,196 12,207 17,365 18,126 12,521 0 0 Medway Repayments of liability Rights to receive specified assets at the end of the concession period Both PFI contracts are for 30 years and neither Party has the right or ability to extend this. The Medway contract expires in July 2034 and North Kent in July 2036 at which time the contractors are contractually required to hand the facilities and all furniture, fixtures and fittings provided under the Contract, over to the ‘Authority’ in good condition. 81 P a g e Renewal and termination options There are no options to renew the contracts. Termination is possible in accordance with the terms and conditions of the respective contract. Other rights and obligations The PFI contractors are contractually required to maintain the assets and deliver facilities management services in accordance with the contracts on a ‘full risk transfer’ basis to the contractors. Note 33 – Impairment losses and changes in estimation basis None this year. Note 34 - Termination Benefits At 31st March 2016 the Police and Crime Commissioner for Kent is one year into a four year restructure affecting both Police Officers and Staff across the organisation. This follows Government announcements in the Budget of significant funding reductions to the Police Service over a four years period, ending in March 2020. In order to meet the challenge of a reduced budget the Police and Crime Commissioner and Chief Officer team agreed to embark on a rigorous review of all services. This review recommended a reduction in staff numbers over the four years whilst maintaining front-line services where possible. Despite the stated objective of managing these reductions through natural wastage as people voluntarily leave the organisation there has been redundancy amongst police staff. Kent Police terminated the contracts of some employees in 2015/16, incurring costs of £1.352m (£0.162m in 2014/15). These payments were made to staff made redundant mostly on a voluntary basis, as part of the Kent Police rationalisation of the service. Payments were made to staff in accordance with Kent Police policy L1280, available on the Kent Police website, https://www.kent.police.uk/policy/human-resourcespolicies/l1280-employment-security-and-redeployment/ and are calculated on a combination of age, length of service and pay scale of the employee at the time of their leaving the organisation. The following table shows the number of people leaving the organisation through redundancy in bands of £20,000. Cost to Kent Police £’000’s 2014/15 Number of people 2015/16 Redundancy Cost Pension Cost Total £’000’s £’000’s £’000’s Number of people Redundancy Cost Pension Cost Total £’000’s £’000’s £’000’s 0 – 20 8 62 0 62 52 460 46 506 20 – 40 4 100 0 100 17 334 129 463 40 – 60 0 0 0 0 4 113 56 169 60 – 80 0 0 0 0 2 55 77 132 80 – 100 0 0 0 0 1 54 27 81 82 P a g e Note 35 - Defined Benefit Pension Schemes (Group Accounts Only) Transactions Relating to Retirement Benefits The Police and Crime Commissioner recognise the cost of retirement benefits in the Net Cost of Services when they are earned by employees, rather than when the benefits are eventually paid as pensions. The charge the Police and Crime Commissioner is required to make against the Council Tax however, is based on the cash payable in the year and therefore the real cost of retirement benefits is reversed out of the Comprehensive Income and Expenditure Statement. The following transactions have been made in the Police and Crime Commissioner’s accounts during the year. Police Pension Scheme (Combined) Police Officer Pension Schemes 2014/15 2015/16 £’000’s £’000’s Comprehensive Income & Expenditure Statement Cost of Services: Current service cost Past service cost / (gain) Effect of settlements 68,400 61,700 300 400 0 0 0 0 117,000 104,800 0 0 185,700 166,900 0 (9,100) 431,100 (337,500) 4,700 (169,500) 621,500 (349,200) (185,700) (166,900) 65,300 78,000 Financing & investment Income & Expenditure: Interest income on plan assets Interest costs on defined benefit obligations Impact of Asset Ceiling on net interest Total post employment benefit charged to the (surplus) / deficit on the Provision of Services Other post employment benefit charged to the Comprehensive Income & Expenditure Statement: Actuarial losses (gains) arising from change in demographic assumptions Actuarial losses (gains) arising from change in financial assumptions Other experience Total post employment benefit charged to the Comprehensive Income & Expenditure Statement Movement in Reserves Statement Reversal of net charges made to the (surplus) / deficit on the Provision of Services for post employment benefits Actual amount charged to against the General Fund for Pensions in the year Actuarial Contributions to Fund 83 P a g e Assets and Liabilities in Relation to Retirement Benefits The following table reconciles the present values of the liabilities of the police pension schemes: Reconciliation of Present Value of the Scheme Liabilities (Defined Benefit Obligation) Police Pension Scheme (Combined) Benefit obligation at start of year 2014/15 2015/16 £’000’s £’000’s 2,717,900 Current Service Cost 3,274,100 68,400 61,700 Interest on Pension Liabilities 117,000 104,800 Actuarial losses/ (gains) 435,800 (516,100) 15,400 14,900 Contributions by scheme participants Past Service Gains 300 400 (80,400) (91,500) (300) (1,400) 3,274,100 2,846,900 Benefits paid / (received) Transfers in from / (out to) other authorities Benefit obligation at end of year Reconciliation of Movements in the Fair value of the Scheme (Plan) Police Pension Scheme (Combined) 2014/15 2015/16 £’000’s £’000’s Opening Fair Value of Assets 0 0 Expected return on assets 0 0 Actuarial gains (losses) on assets 0 0 Contributions by employer 65,300 78,000 Contributions by participants 15,400 14,900 (300) (1,400) (80,400) (91,500) 0 0 Transfers in from / (out to) other authorities Net benefits paid out Closing Fair Value of Assets 84 P a g e Pensions Assets and Liabilities Recognised in the Balance Sheet Police Pension Scheme (Combined) 2014/15 2015/16 £’000’s Present value of Police Pension Scheme defined benefit obligation £’000’s 3,274,100 2,846,900 0 0 3,274,100 3,274,100 2,846,900 2,846,900 Fair value of assets in the Police Pension Scheme Net Liability arising from the defined benefit obligation Basis for Estimating Assets and Liabilities (PPS) Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. The Police Pension Schemes has been assessed by Hymans Robertson LLP, an independent firm of actuaries. The principal assumptions used in their calculations have been: Mortality assumptions: Police Pension Scheme (Combined) 2014/15 2015/16 Longevity at 65 (60 for Police Officers) for current pensioners: Men 29.5 29.7 Women Longevity at 65 (60 for Police Officers) for future pensioners: 31.7 31.6 Men 31.1 31.2 Women 33.2 33.2 Rate of inflation (RPI) 3.20% Rate of increase in salaries 3.20% Rate of increase on pensions Rate of discounting for scheme liabilities Take up of option to convert annual pension into retirement lump sum Not available 2.20% 3.50% 90.00% The Police Pension scheme has no assets to cover its liabilities. The liabilities show the underlying commitments that the Police and Crime Commissioner has in the long term to pay retirement benefits. The total liability of £2.847m (£3.274m – 2014/15) has a substantial impact on the net worth of the Police and Crime Commissioner as recorded in the Balance Sheet. Statutory arrangements for funding the deficit however, mean that the financial position of the Police and Crime Commissioner remains healthy. Police Pensions are charged to the Police Pension Fund Account and any shortfall between the value of pensions paid in the year and the receipts into the Account from the employer and employee contributions is funded from the General Fund. A top-up grant from the Government is then claimed to cover the deficit or, in the event of a surplus, repaid to the Government. 85 P a g e Local Government Pension Scheme Local Government Pension Scheme 2014/15 2015/16 £’000’s £’000’s Comprehensive Income & Expenditure Statement Service Cost Current service cost 13,609 17,001 Past service cost / (gain) 0 619 (Gain) / Loss on curtailments & settlements 0 0 16,720 15,725 (12,654) (10,712) 210 217 17,885 22,850 18,731 (7,290) 0 0 (64,851) 41,010 (16) 29 0 0 (28,251) 56,599 (17,885) (22,850) 7,251 7,169 Financing & investment Income & Expenditure: Interest costs Expected return on assets in the scheme Administration Expenses Total post employment benefit charged to the (surplus) / deficit on the Provision of Services Other Post -employment Benefits charged to the Comprehensive Income and Expenditure Statement Return on plan assets (excluding amount included in net interest expense) Actuarial (losses) gains arising from demographic assumptions Actuarial (losses) gains arising from financial assumptions Experience (losses) gains Other Total post employment benefit charged to the Comprehensive Income & Expenditure Statement Movement in Reserves Statement Reversal of net charges made to the (surplus) / deficit on the Provision of Services for post employment benefits Actual amount charged to against the General Fund for Pensions in the year Employers contribution payable to the scheme The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed asset investments are based on gross redemption yields at the Balance Sheet date. Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets. The actual return on scheme assets in the year was £3.422m (£31.385m - 2014/15). 86 P a g e Pensions Assets and Liabilities Recognised in the Balance Sheet Local Government Pension Scheme 2014/15 2015/16 £’000’s £’000’s Present value of liabilities Local Government Pension Scheme Fair value of assets in the Local Government Pension Scheme S/T (462,313) (450,224) 313,801 319,592 (148,512) (130,632) 0 0 (2,190) (2,002) (150,702) (132,634) Other movements in the liability /(asset) Net liability arising from defined benefit obligation Local Government Pension Scheme Total Reconciliation of Present Value of the Scheme Liabilities The following tables reconcile the present value of liabilities and assets of the Local Government Pension Scheme attributable to the Police and Crime Commissioner: Local Government Pension Scheme Balance bought forward 2014/15 2015/16 £’000’s £’000’s 373,731 464,503 Current service cost 13,609 17,001 Interest cost 16,720 15,725 3,771 3,720 0 0 64,851 (41,010) 16 (29) Past service costs 0 619 Losses/(Gains) on curtailments 0 0 (8,027) (8,141) (168) (162) 464,503 452,226 Contributions by scheme participants Remeasurement (Gains) and Losses Actuarial Gains / Losses arising from changes in demographic assumptions Actuarial Gains / Losses arising from changes in financial assumptions Experience (Gains)/Losses on defined benefit obligation Liabilities assumed on entity combinations Benefits paid / transfers paid Liabilities extinguished on settlements Unfunded pensions payments Balance carried forward 87 P a g e Local Government Pension Scheme Assets The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held: 31st March 2015 £’000’s Equities % 31st March 2016 £’000’s % 214,447 68 213,128 66 3,282 1 2,831 1 Other Bonds 34,905 11 35,091 11 Property 38,980 12 46,425 15 8,581 3 8,229 3 13,606 4 13,888 4 313,801 100 319,592 100 Gilts Cash Target Return Portfolio Total Reconciliation of the Movements in Fair Value of Scheme Assets Local Government Pension Scheme Opening fair value of the scheme assets Interest Income 2014/15 2015/16 £’000’s £’000’s 279,799 313,801 12,654 10,712 18,731 (7,290) 0 0 Remeasurement gain / (loss) Expected return on assets Other The effect of changes in foreign exchange rates 0 0 Employer contributions 7,251 7,169 Contributions by employees into the scheme 3,771 3,720 (8,195) (8,303) (210) (217) 313,801 319,592 Benefits paid Other Closing fair value of scheme assets Basis for Estimating Assets and Liabilities (LGPS) Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. The Local Government Pension Scheme (LGPS) liabilities have been assessed by Barnett Waddingham, an independent firm of actuaries. Estimates for the LGPS scheme are based on the latest full valuation of the scheme as at 31 March 2016. 88 P a g e The principal assumptions used in their calculations have been: Local Government Pension Scheme 2014/15 2015/16 £’000’s £’000’s Years Years Men 22.8 22.9 Women Longevity at 65 (60 for Police Officers) for future pensioners: 25.2 25.3 Men 25.1 25.2 Women 27.6 27.7 % % Rate of inflation (RPI) 3.30% 3.40% Rate of inflation (CPI) on which Pensions are based 2.50% 2.50% Rate of increase in salaries 4.30% 4.30% Rate of increase on pensions 2.50% 2.50% Rate of discounting for scheme liabilities 3.40% 3.80% Take up of option to convert annual pension into retirement lump sum 50.00% 50.00% Mortality assumptions: Longevity at 65 (60 for Police Officers) for current pensioners: Local Government Pension Scheme The liabilities show the underlying commitments that the Police and Crime Commissioner has in the long term to pay retirement benefits. The total liability of £132.634m has a substantial impact on the net worth of the Police and Crime Commissioner as recorded in the Balance Sheet. Statutory arrangements for funding the deficit however, mean that the financial position of the Police and Crime Commissioner 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. Note 36 - Contingent Liabilities The Chief Constable of Kent along with other Chief Constables and the Home Office, currently have various 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. The exact number of current claims is a moot point as any success would inevitably apply to all similarly affected officers who have filed a claim or not. The Tribunal is unlikely to consider the substance of the claims until 2017. Legal advice suggests that there is a strong defence against these claims. The quantum and who will bear the cost is also uncertain if the claims are partially or fully successful and therefore at this stage it is not practicable to estimate the financial impact. For these reasons, no provision has been made in the 2015/16 Accounting Statements. Note 37 - Contingent Assets There were no contingent assets at the balance sheet date. 89 P a g e Note 38 - Nature and Extent of Risks Arising from Financial Instruments The Police and Crime Commissioner for Kent’s activities expose it to a variety of financial risks: Credit risk – the possibility that other parties might fail to pay amounts due to the Police and Crime Commissioner for Kent. Liquidity risk – the possibility that the Police and Crime Commissioner for Kent might not have funds available to meet its commitments to make payments to its suppliers and creditors. Market risk – there are three types of market risk: price risk, foreign exchange risk, and interest rate risk.  Foreign exchange risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.  Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Police and Crime Commissioner for Kent has fixed rate, fixed term investments so is not impacted by this risk for assets but could be for liabilities as follows:  Price risk - the possibility that financial loss might arise for the Police and Crime Commissioner for Kent as a result of changes in such measures as interest rates. Risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to fund services. This service is undertaken by Kent County Council Treasury Management Department on behalf of the Police and Crime Commissioner for Kent. The Police and Crime Commissioner for Kent does not generally allow credit for general debtors beyond 30 st days, such that of the £5.7m of trade debtors (invoices raised) at 31 March 2016, £0.2m is past its due date for payment, and can be analysed by age as follows. Less than three months Three to six months Six months to one year More than one year Total 2014/15 2015/16 £000's £000's 282 183 0 29 0 2 54 29 336 243 A total of £12,128 incorporating many of the older debts, has been included in the 2015/16 accounts as a provision for debt impairment effectively reducing the value of debtors on the Balance Sheet. Following the economic downturn and events in the financial markets, the requirement for Governments to guarantee support for their banks and the performance of rating agencies particularly concerning Icelandic Banks, the Treasury Management Strategy was revised in November 2008 and is continually reviewed by the Chief Finance Officer of the Police and Crime Commissioner and Audit Committee. Credit risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Police and Crime Commissioner for Kent’s customers. Deposits are made with banks and financial institutions by the Treasury Management department of Kent County Council in accordance with their risk based investment strategy and on advice from ratings companies who specialise in analysing financial institutions for investment purposes. 90 P a g e Liquidity risk Except for Private Finance Initiatives (see note 32) Kent Police is debt free and is predominately funded through grants and income from the precept to local authorities due to this there is no significant risk that it will not be able to meet its commitments under financial instruments. The PFI liability is also supported by a Home Office grant which further reduces the potential liquidity risk. The Police and Crime Commissioner for Kent has a comprehensive cash flow management system that seeks to ensure that cash is available as needed. If unexpected movements happen, Kent Police has sufficient reserves to cover any payment required. 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 Kent Police would lose interest on its investments through the early repayment clauses. To cover short-term commitments, the Police and Crime Commissioner for Kent maintains an instant access account and on call deposit accounts in line with a detailed cash management plan, minimising the requirement to realise an investment before it reaches final maturity. All trade creditors and other payables are due to be paid by the Police and Crime Commissioner for Kent in less than one year. The repayments on the two Private Finance Initiatives (PFI) buildings are tabulated in note 32 of this statement. Market risk Foreign exchange risk All Euro bank account balances have been transferred into sterling therefore reducing any foreign exchange risk to nil. Although Kent Police holds only minimal foreign exchange floats. Interest rate risk The Police and Crime Commissioner for Kent is exposed to risk in terms of its exposure to interest rate movements on its borrowings (under the PFI contracts) and investments although changes in interest rates on Kent Police’s investments are not significant. Repayments against the PFI for the interest element of the charge will increase the amounts payable and have a corresponding increase in the amounts paid through the Comprehensive Income and Expenditure Statement. The PFI contracts held by the Police and Crime Commissioner for Kent are comprised of two elements, capital repayment which is fixed and the service charge and interest which is variable based on the retail price index (RPI). If this index were to increase by 1% the net effect would be an increase in cost to the Comprehensive Income and Expenditure Account of £0.46m. A 1% decrease in the value of RPI would see a corresponding decrease. Price risk The Police and Crime Commissioner for Kent do not invest in equity shares or other similar financial instruments and therefore has no exposure to losses arising from movements in the price of shares. Note 39 – Jointly Controlled Operations (Group Accounts Only) Jointly controlled operations are explained in Note 1 of the Accounting Policies on page 25. The following table illustrates the net expenditure relating to each of the five operations Kent Police is involved with in partnership with Essex Police. 91 P a g e The joint Serious Crime Directorate The joint Procurement Unit 2014/15 2015/16 £’000’s £’000’s 26,180 24,746 375 396 The joint Information Services Directorate 15,346 16,407 The joint Transport Services Department 7,033 6,237 The joint Human Resources Department 2,460 2,921 The joint Business Services Department 6,463 6,437 The joint Estate Department 2,490 2,283 60,346 59,427 Total The above amounts do not necessarily illustrate the amounts spent on fully collaborated functions however, only the total expenditure on jointly managed departments. The Serious Crime Directorate SCD is working across Kent and Essex to provide intelligence and support to target and tackle anyone involved in serious criminality in our neighbourhoods, from home grown criminal networks within our own communities, to criminals who travel into Kent and Essex to commit offences. The Directorate is one of the largest in UK policing dedicated to tackling serious and organised crime, with over 1,000 officers and staff working together across both counties. The Directorate includes the following departments:     Major Crime; Forensics; Serious and Organised Crime; and Intelligence. The Support Services Directorate The Support Services Directorate (SSD) provides specialist services to Kent Police and Essex Police and includes the following departments: Procurement Procurement Services aim to deliver world-class procurement to all our customers while ensuring that both forces obtain value for money. We make sure contracts are in place to deliver a range of services for both Kent Police and Essex Police, from uniforms to printing. IT Services IT Services provide the two organisations of Essex Police and Kent Police with a comprehensive range of technology services and functions, including day to day support of over 500 business applications that enable police officers and staff to carry out their operational roles, integration and development of new products, a joined up network and communications structure across both forces, data storage, and the supply of a variety of user devices, including desktops, laptops, and telecoms equipment. Our priority is to provide a first class service to our customer base, enabling better policing decisions and flow of information to the public of Kent and Essex through efficient, effective IT solutions. We are continuously looking to evolve the services we deliver in a world of fast-changing technology refresh, whilst ensuring we provide value for money in supporting front-line policing. 92 P a g e Transport Services Transport Services supports cost efficient policing in Kent and Essex through the provision of vehicles and services, delivered to high standards, ensuring the operational effectiveness and safety of officers, staff and the public. The Transport Management team costs are shared between Kent Police and Essex Police. Human Resources The joint HR structure provides efficiency of resources and resilience enabling greater harmonisation of systems and processes across all services provided. HR delivers a comprehensive, professional and business focussed service across both Kent and Essex. The department covers Diversity and HR Strategy; Resourcing; Learning and Development; Health Services and Performance Improvement. Business Services Business Services carry out a range of high volume transactions and provides first level advice from two Business Centres (at Northfleet in Kent and Great Dunmow in Essex). The department also manages local facilities and administration services delivery teams at both HQ’s and other operational bases across both forces. The department also supports users accessing self-services and administers processes across a wide range of support services functions for all officers and staff as well as for and on behalf of other Departments in the Support Services Directorate The Head of Business Services and three deputies, one each for HR, Finance and Facilities are jointly funded between Essex Police and Kent Police. Estate Services Estate Services provides an in-house professional property service to the organisations of Kent and Essex Police and also to the public who visit our buildings. Kent Police has a 120,000m2 property portfolio with some 80 operational properties ranging from offices, custody suites and workshops through to highly specialised training facilities and telecommunications masts. The Estates’ department are 50:50 shared costs between Kent Police and Essex Police. Note 40 – Jointly Controlled Assets The Police and Crime Commissioner for Kent and the Police and Crime Commissioner for Essex have jointly purchased assets on a 50:50 ratio for the Serious Crime Directorate and Information Services Directorate in 2015/16. The Police and Crime Commissioner of Kent accounts for this purchase in accordance with IFRS 11 and IFRS 12. Jointly controlled assets involve the joint control, and often the joint ownership, of assets dedicated to the joint venture. Each partner may take a share of the output from the assets and each bears a share of the expenses incurred. IAS 31 requires that the partner should recognise in its financial statements its share of the joint assets, any liabilities that it has incurred directly and its share of any liabilities incurred jointly with the other partners, income from the sale or use of its share of the output of the joint venture, its share of expenses incurred by the joint venture and expenses incurred directly in respect of its interest in the joint venture. [IAS 31.21]. 93 P a g e The joint Serious Crime Directorate and Information Services Directorate have jointly purchased the following in 2015/16: Jointly Controlled Assets - 50% contribution Total value of the Joint Asset as of 31 March 2016 £’000’s % Contributed IT Department Network Infrastructure Upgrade 565 50% Single Desktop Programme 14 50% IT Service Management Tool 53 50% Mobile Data Terminals 120 50% Video Conferencing 133 50% Visual Media Project 230 50% Dyslexia Licence 23 50% Siraview Licence 50 50% Soceasi perpetual licence for Mobile Data 22 50% Deskalerts Licence 32 50% Website Kentico Licence 41 50% Laser for Forensics 18 50% DNA Clean Room 90 50% SCD - Superglue cabinet 14 50% 232 50% Serious Crime Department Covert Equipment Total 1,637 Note 41 - Date of Authorisation of the Statement of Accounts for Issue th The Statement of Accounts was authorised for issue on 12 August 2016 by Mr Sean Nolan, Chief Finance Officer to the Police and Crime Commissioner. 94 P a g e Police Officer Pension Fund Account (Group Accounts Only) Introduction The Police Officer Pension Fund Account was established under the Police Pension fund Regulations 2007 (SI 2007 No 1932). It is administered on behalf of the Chief Constable by Kent County Council. The Fund receives income each year from:  Employer’s contributions from the Police and Crime Commissioner, based on a percentage of pay  Contributions from serving police officers  Other receipts Pensions to retired officers, lump sum payments and other benefits are paid from the Fund. The Account is balanced to nil at the end of the year by a contribution from or to the General Fund. The Account is not backed by any investment assets and its outgoings are funded entirely from the receipts identified above. The Fund accounts solely for the benefits payable in the financial year, and does not account for benefits payable after the period end. The following table identifies the movements on the Police Officer Pension Fund Account for the year. 2014/15 2015/16 £’000’s £’000’s Contributions receivable Police and Crime Commissioner for Kent (27,215) (23,344) Serving Police Officers (15,388) (14,947) (2,637) (1,754) (684) (590) (45,924) (40,634) Pensions 59,634 62,406 Commutations and lump sum payments 17,808 16,549 0 1,040 17 2,067 Capital equivalent payment for ill-health Transfers In Individual transfers in from other schemes Total Receipts Benefits payable Lump sum death benefits Payments to and on account of leavers Refund of contributions Individual transfers out to other schemes Benefits payable - backdated in respect of Milne v Gad Commutations and lump sum payments Interest on commutations and lump sum payments Total Payments Sub-total for the year before transfer from Police and Crime Commissioner for Kent of amount equal to the deficit Transfer of amount from the PCC of amount equal to the deficit - 2015/16 benefits (21.3%) Transfer of amount from the PCC of amount equal to the deficit - 2015/16 benefits (2.9%) Transfer of amount from the PCC of amount equal to the deficit - Milne v Gad Transfer of amount from the Police and Crime Commissioner for Kent of amount equal to the deficit Net amount payable for the year 7,326 1,663 78,482 90,028 32,558 49,393 (37,128) (3,277) (8,989) (32,558) (49,393) 0 0 95 P a g e The above statement does not include liabilities to pay pensions and other benefits after the Balance Sheet date. The liabilities for future retirement benefits are disclosed in Note 35 of these Accounts. The employer rate is 21.3% (with an additional 2.9% top up contribution payable by the PCC, directly to the Home Office). In May 2015, the Pensions Ombudsman (Ombudsman) published their Final Determination in the case of Milne v Government Actuaries Department (GAD). This case centred on whether GAD had a proactive responsibility to review the commutation factors used in the calculation of the lump sum payments made to pensioners when they opt to take an increased amount of their pension benefit in that form. The Ombudsman found in favour of the plaintiff, which meant that for all Police Pension Scheme 1987 cases where pension entitlements were drawn between 1 December 2001 and 1 December 2006 recalculation of lump sum payments should take place based upon revised commutation factors to be issued by GAD, including adjustment for interest. The 2015/16 financial statements include benefits payable totalling £7.326m in respect of this matter, with all of this cost fully refundable from the Home Office. Pension Fund Net Asset Statement 2014/15 2015/16 £’000’s £’000’s Unpaid pension benefits 0 0 Amount owing from the general fund 0 0 Net Current Assets and Liabilities 0 0 96 P a g e Glossary of Accounting Terms Accruals - The concept that income and expenditure are recognised as they are earned or incurred not as money is paid or received. Actuarial gains and losses - Actuarial gains and losses arise where actual events have not coincided with the actuarial assumptions made for the last valuation (known as experience gains and losses) or the actuarial assumptions have been changed. AGS - Annual governance statement Amortisation - The gradual elimination of a liability, such as a loan, in regular payments over a specified period of time Appropriations - Transfer of monies between the revenue account and the balance sheet. Budget - A statement of the PCC’s plans in financial terms. A budget is prepared and approved by the PCC before the start of each financial year and is used to monitor actual expenditure throughout the year. Capital Charge - A charge to the revenue account to reflect the cost of using fixed assets. Capital Expenditure - As defined in the Local Government and Housing Act 1989, but broadly expenditure on the acquisition of a fixed asset or expenditure which extends the life or value of an existing fixed asset. Capital Financing Requirement - The capital financing requirement (CFR) measures the Group’s underlying need to borrow or finance by other long-term liabilities for a capital purpose. Capital Receipts - Proceeds from the sale of capital assets. They may be used to finance new capital expenditure or repay existing loan debt. Receipts available to finance capital expenditure in future years are held in the usable capital receipts reserve. CARE Scheme – Career average revalued earnings (CARE) schemes are a type of defined pension benefit scheme that are offered by employers. The benefits at retirement are based on your earnings and length of membership of the scheme. Carrying value - An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance sheet. For assets, the value is based on the original cost of the asset less any depreciation, amortization or impairment costs made against the asset. For a company, carrying value is a company's total assets minus intangible assets and liabilities such as debt. Also known as "book value". Cash equivalent - A financial deposit placed with either a bank, building society, other local Police and Crime Commissioner for Kent or the Bank of England for a term of no longer than three months. Central Ops – Stands for Central Operations, this includes: Central Investigation Command; Strategic Partnerships and Tactical Operations Command. Chief Officers – Include the Chief Officers and Directors in the senior management team. CIES - Comprehensive Income and Expenditure Statement CIPFA - Chartered Institute of Public Finance and Accountancy, the main professional body for accountants working in the public services Contingency - An event that may occur but that is not likely or intended Corporate and Democratic Core - All aspects of the PCC’s activities in the capacity of a democratic representative, including corporate, programme and service policy making and more general activities relating to governance and the representation of local interests. It also includes the costs of the infrastructure that allows services to be provided and the information that is required for public accountability. Corporate Changes – includes general charges such as pension charges, Federation costs, Insurance; banking and treasury etc. 97 P a g e Creditors - Amounts owed by the group at the Balance Sheet date for goods received or work done. Criminal justice arrangements - Includes custody and prisoner handling, criminal justice, the criminal records bureau, Central Ticket Office for fixed penalty notices and property offices. Current service (pensions) cost - An estimate of the true economic cost of employing people in a financial year, earning years of service that will eventually entitle them to the receipt of a lump sum and pension when they retire. It measures the full liability estimated to have been generated in the year and is thus unaffected by whether any fund established to meet liabilities is in surplus or deficit. Curtailment & settlements - Curtailment arises as a result of the early payment of accrued pensions on retirement on the grounds of efficiency, redundancy or where the employer has allowed employees to retire on unreduced benefits before they would otherwise have been able to do so. DCC Portfolio – DCC stands for Deputy Chief Constable. The portfolio includes the following: Corporate Services; Corporate Communications; Professional Standards and Legal Services. Dealing with the public - Includes public enquiry officers (front counters), central communications and contact management units. Debtors - Amounts due to the Group but unpaid at the Balance Sheet date. De minimus - An amount so small that it will not have a significant impact on the accounts Depreciation - A charge calculated either on a straight line or reducing balance basis, to reflect the diminishing value of an asset over its useful economic life. Direct Revenue Financing - The amount of capital expenditure to be financed by a contribution from the revenue account in a single year. Division - The Force is organised into three geographical areas, North, West and East Divisions. Expected return on assets - The expected return on assets is a measure of the return (income from dividends, interest etc, and gains on invested sums) on the investment assets held by the pension scheme for the year. It is not intended to reflect the actual realised rate by the scheme, but a longer-term measure, based on the value of assets at the start of the year (taking into account movements in assets during the year) and an expected return factor. Fair Value - Fair value is the value of an asset or liability in an arm’s length transaction between unrelated willing and knowledgeable parties. Fixed Assets - Tangible assets which yield benefits to the Group for periods of more than one year ICT - Information, Communications & Technology IFRS - International Financial Reporting Standards Impairment - This only relates to fixed assets, including cash investments. Impairment is caused either by a consumption of economic benefits or by a general fall in prices. Intangible Fixed Assets - Assets that do not have a physical substance, but provide a benefit over a period of time, e.g. computer software. Intelligence - Includes the Central intelligence unit command team and associated support overheads, intelligence gathering and analysis. Investigations - Includes the crime support command team and associated support overheads, major investigation teams, economic crime, serious & organised crime unit, public protection units, local investigations and prisoner processing. 98 P a g e Investigative Support - Includes scenes of crime officers; forensic costs paid to external providers such as Cellmark and the Forensic Science Service; fingerprint / DNA bureau, photographics and all associated local command and support costs. Joint Support Services - The Joint Support Services Department includes: HR; Learning & Development; Information Services; Procurement; Transport, Business Services and Estate Department. Leasing - A method of financing expenditure over a period of time. There are two main types of lease: a) Finance lease - where the risks of ownership are transferred to the lessee and where the assets are recorded in the Group’s balance sheet at a current valuation. b) Operating Lease - where the risks of ownership stay with the leasing company and the annual rental charges are made via the Revenue Account. LGPS - Local Government Pension Scheme Liability - An obligation that legally binds an individual or company to settle a debt Local policing - Includes Neighbourhood Policing teams, incident response and management, specialist community liaison and local command teams and local support overheads. Minimum Revenue Provision (MRP) - The minimum amount of the Group’s outstanding debt which must be repaid by the revenue account in the year MIRS - Movement in reserves statement National Policing - Including Counter Terrorism and Special Branch duties Non Distributed Costs - Past Service Pension Costs (IAS19), redundancy costs and non-service specific impairments. 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. Outturn - The actual level of spending and income in a particular year Past service (pension) costs - These are non-periodic costs – they arise from decisions taken in the current year, but whose financial effect is derived from years of service earned in earlier years. PCC - Police and Crime Commissioner PCSO - Police Community Support Officer. PFI - Private Finance Initiative Police Grant - Police grant is allocated by the Home Office using a highly complex needs based formula. PPE - Property, Plant and Equipment Provision - An amount set aside to provide for a liability which is likely to be incurred, although the amount and date of that liability are uncertain. PSE - Police Staff Employee, an employee of Kent Police who is not a Police Officer. Police Community Support Officers (PCSOs) are PSEs. Remuneration - All amounts paid to or receivable by a person. It includes taxable expenses and the estimated money value of any other benefits received by an employee other than in cash (e.g. benefits in kind). Reserves - An amount set aside for a specific purpose and carried forward to meet expenditure in future years. General reserves represent accumulated balances which may be used to support future spending. Revenue Expenditure - Spending on day to day running expenses of the PCC and Force. 99 P a g e Road Policing - Includes traffic policing, vehicle recovery and casualty reduction partnerships RPI - Retail Price Index, a measure of inflation which includes housing costs. Specific Grants - Government grants to aid certain services, usually paid at a fixed proportion of spending actually incurred. Specialist operations - Includes the command team and support overheads, air support, underwater / search / marine support units, dogs sections, public order teams, ports policing units, firearms units and civil contingencies Usable Capital Receipts - Capital receipts available to finance capital expenditure in future years. 100 P a g e