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GREATER MANCHESTER FIRE AND RESCUE AUTHORITY
 

GREATER MANCHESTER FIRE AND RESCUE AUTHORITY

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    GREATER MANCHESTER FIRE AND RESCUE AUTHORITY GREATER MANCHESTER FIRE AND RESCUE AUTHORITY Document Transcript

    • GREATER MANCHESTER FIRE AND RESCUE AUTHORITY FINANCIAL STATEMENTS 2007/08 CONTENTS PAGE Introductory Statements Introduction to the Statement of Accounts by the Chairman 2 Explanatory Foreword by the Treasurer 3 Statement of Accounting Policies 8 Core Financial Statements Income and Expenditure Account 17 Statement of Movement on the General Fund Balance 18 Statement of Total Recognised Gains and Losses 18 Balance Sheet 19 Cash Flow Statement 20 Notes to the Core Financial Statements 21 Other Financial Statements Pension Fund Account 41 Notes to the Pension Fund Account 42 Governance and Audit Statement of Responsibilities for the Statement of Accounts 43 Annual Governance Statement 44 Audit Certificate and Opinion 62 Additional Information Glossary 65 Terms of Reference 68 1
    • Introduction to the Statement of Accounts Councillor Fred Walker, Chairman of Greater Manchester Fire and Rescue Authority I am pleased once again to comment on yet another successful financial year. The Accounts presented show an improvement in the financial position and this is the result of our commitment to the efficiency agenda, continuous improvement and value for money. Managing the finances of the Fire and Rescue Authority is a demanding and important activity because sound financial management is central to the success of any large organisation in that it provides stability. This stability means long term planning can take place with some confidence and investment be delivered in line with these plans. Sound financial management also helps to identify and free off resources and that maximises the opportunity to invest in new fire stations, technology and equipment. This investment in buildings and machines runs alongside the investment being made in our employees. It is critical to our success that firefighters are properly protected when tackling fires, hazardous substances and other life threatening emergency situations. The vision of the Greater Manchester Fire and Rescue Authority is to make Greater Manchester a safer place by being a modern community focused and influential Fire and Rescue Authority. It is about working in co-operation with local communities to identify and reduce risks from fires and other hazards and consulting and engaging with local communities in an inclusive and productive dialogue. At the same time there are the changes brought about by the modernisation of the fire and rescue service. These have required careful management and co-operation to implement. But the benefits of all this hard work are all too clear. The Service aims to reach fires where lives and property are at risk within seven minutes on at least 90% of occasions. When people are trapped in a road traffic collision the Service aims to reach them within eight minutes on 90% of occasions. The cost to the average band D council tax payer in 2007/08 was only £48 – less than a £1 per week. The Fire Service operates in a framework set by the Government. This means meeting the required efficiency targets and the national performance indicators. The Comprehensive Performance Assessment process and the Use of Resources element and Direction of Travel judgement are key independent measures of the Authority’s performance. And so it is pleasing to report that the auditors’ assessment of how well the Authority managed its finances under the Use of Resources continues to improve. The excellent scores achieved are independent testimony that across a range of financial criteria the Authority performs very strongly. The Accounts for 2007/08 show where the money has come from and what the money has been spent on and our accountability for the public funds provided to us by the taxpayers and government. We take our responsibilities for public funds very seriously and we make sure financial risks and implications are properly measured and fully considered before decisions are made. The Authority seeks to maintain enough revenue balances to ensure long term planning and stability and smooth out any year on year increases required from the taxpayers of Greater Manchester. As these Accounts help show these objectives have been achieved. Councillor Fred Walker 2
    • EXPLANATORY FOREWORD BY THE TREASURER 1. Introduction The Statement of Accounts is published to present fairly the financial position and transactions of the Authority. These accounts set out the financial results of the Authority’s activities for the year ended 31 March 2008 and have been prepared in accordance with the requirements of the Accounting Code of Practice published by the Chartered Institute of Public Finance and Accountancy (CIPFA). The purpose of the foreword is to offer interested parties an easily understandable guide to the most significant matters reported in the accounts. The inevitable use of technical language has been kept to a minimum. A glossary to help explain some of the technical terms can be found at the back of the publication. A Terms of Reference section has also been added to provide readers with information on various regulatory bodies/framework. The Authority's accounts for the year 2007/08 are set out on pages 8-61 and consist of:- • The Statement of Accounting Policies which explains the basis for the recognition, measurement and disclosure of transactions in the accounts. • The Income and Expenditure Account which summarises the Authority's revenue income and expenditure on all services during the financial year 2007/08. • The Statement of Movement on General Fund Balances which reconciles the Income and Expenditure Account with General Fund Balances. • The Statement of Total Recognised Gains and Losses which brings together all the recognised gains and losses of the Authority. • The Balance Sheet sets out the financial position of the Authority at 31 March 2008. • The Cash Flow Statement which summarises the total movement of cash and cash equivalents. • The Pension Fund Account which summarises the movements relating to the new firefighters’ pension scheme. • The Statement of Responsibilities for the Statement of Accounts which sets out the responsibilities of the Authority and the Treasurer for the accounts. • The Annual Governance Statement which reviews the effectiveness of the Authority’s system of Internal Control 2. Where the money came from: National Non Domestic Rates (Business Rate) 54% Precept Levied on the 10 Greater Manchester District Authorities 33% Government Grants 10% Rents, Charges, Interest Etc. 3% 3
    • 3. What the money was spent on: Salaries and Wages 70% Pensions - Employer Contributions 12% Running Expenses 12% Capital Financing Charges 6% The Authority receives Revenue Support Grant and an allocation of pooled National Non Domestic Rates directly from Central Government. It levies a precept on the ten Greater Manchester District Authorities for the balance of its expenditure requirements. The precept levied for 2007/08 was £37.508m which equated to a Council Tax Band D Equivalent of £48.00. 4. Comparison of Actual Expenditure in 2007/08 with the Budget. The main components of the 2007/08 budget and comparisons with actual income and expenditure are set out below. Original Actual Variation Budget Income and Expenditure £'m £'m £'m Budget Requirement 110.686 107.860 -2.826 External Financing -109.805 -109.805 - Surplus(-)/Deficit for the Year 0.881 -1.945 -2.826 General Fund Balances at 1 April 2007 -14.443 -17.113 -2.670 Surplus(-)/Deficit for the Year 0.881 -1.945 -2.826 General Fund Balances at 31 March 2008 -13.562 -19.058 -5.496 The Authority, by in year budget management has reduced the planned deficit from £0.881m to a surplus of £1.945m to give a net benefit to balances of £2.826m. This change is largely accounted for by service based changes due to lower than anticipated costs on: • budgeted numbers of ill health retirements £0.178m • pay costs, in part due to cessation of the Long Service Increments. £0.467m • delays in partnership initiatives £1.110m • minor increases in expenditure across all service heads £0.069m The Authority also benefited from additional interest earned on balances throughout the year of £0.259. An amount of £1.270m of the underspend has been earmarked to roll forward to fund initiatives in 2008/09, as follows: 4
    • • Partnership and Innovation: £1.110m • Internal Communication improvements – Press monitoring & Intranet: £0.040m • Consultancy fees: £0.120m 5. Capital Expenditure Capital expenditure and income was accrued in the accounts. In 2007/08 the Authority spent £8.101m on capital projects (£3.622m in 2006/07). Capital expenditure is analysed below. 2006/07 Project 2007/08 £’m £’m 1.933 Refurbishment, Adaptations and New Buildings 4.234 1.280 Operational, Communications and Computer Equipment 1.193 0.367 Vehicles: General Purpose Vehicles 0.137 0.042 Vehicles: Pumping and Special Appliances 2.537 3.622 Total Capital Expenditure 8.101 Capital expenditure has been incurred on the new fire station at Ashton under Lyne, which became operational during 2007/08. Expenditure has also been incurred on adaptations to buildings and ongoing refurbishments, including boiler replacements, which make buildings more efficient in the longer term. In view of the delays reported in 2006/07 we have accelerated spend in 2007/08 on operational vehicles. 6. Financing of Capital Expenditure The Authority has a rolling capital programme that is reviewed throughout the year. During recent years this programme has been financed mainly by borrowing from the internal resources of the Authority and by using Capital Reserve balances set aside for this purpose. The Supported Capital Expenditure (SCE) issued by Central Government did not increase in 2007/08 and remained at £3.703m. 7. Authority Balances and Reserves Balances at 1st April 2007 stood at £17.113m. The outturn would add £1.945m resulting in balances at 31 March 2008 of £19.058m. However currently £1.270m is earmarked for automatic carry forwards and £2.048m for the 2008/09 budget deficit leaving a remaining balance of £15.740m which in part is used to underpin the agreed three year Medium Term Financial Strategy. 8. Future Spending Plans The Authority has published a Medium Term Forecast for 2008/09 – 2010/11. This forecast sets out the overall shape of the Authority’s budget by establishing how available resources should be allocated to meet corporate objectives and provide the framework for the preparation of annual budgets. It is further developed to meet the corporate priorities of the Authority and to mitigate corporate risks identified in the Integrated Risk Management Plan (IRMP). 5
    • The Government also determines the resources which it will pass to Local Authorities on a three year planning cycle. Grant settlements for future years beyond 2008/09 have been provisionally set and the budget strategy has been aligned to best deliver the corporate objectives efficiently and within available resources. The Authority has traditionally operated with balances at or about 5% of net budget requirement for many years and this has proved to be appropriate in the light of the many challenges the Authority has faced. The intention is to release the higher level of balances in line with the medium term strategy to maintain the stability of precept levels and invest in one off capital projects with long term benefits. The Comprehensive Performance Assessment requires Fire and Rescue Authorities to make explicit the links between their spending plans, both revenue and capital, and their service delivery plans, which are underpinned by the IRMP. In addition under the Gershon efficiency review, the Authority needs to plan for business efficiencies and to report on how these have been achieved. Budgets are important in setting benchmarks and targets for the internal performance measurement framework, Best Value Performance Indicators and comparisons with other local authorities. In summary the Authority’s strategy remains to deliver low and affordable precept rises whilst seeking to deliver the aspirations contained within the IRMP for the benefit of the residents of Greater Manchester. This places greater emphasis on continuing to secure operational efficiencies inherent in the Integrated Risk Management approach. In addition, effective operational planning is now well aligned with the supporting financial framework, which is a strong requirement in the Audit Commission Use of Resources assessments and should ensure that the Authority’s strong position is maintained 9. Financial Reporting Standard 17 (FRS17) This financial reporting standard requires employers to report the full cost of pension benefits as they are earned, regardless of whether they have been paid for. The total liability is £925.7m. This is split between the Local Government Pension Scheme of £5.8m and the Fire Service Scheme of £919.9m. The Fire Service liability includes both the Firefighters’ Pension Scheme 1992 and the New Firefighters’ Scheme 2006. It should be noted that FRS17 does not impact upon the level of balances held by the Authority. 10. Pension Fund Account The Financial Statements now include a separate section for the Pension Fund Account in line with the Code of Practice on Local Authority Accounting 2007. Under the new pension funding arrangements each Authority in England is required by legislation to operate a Pension Fund and the amounts that must be paid into and out of the Fund are specified by regulation. 6
    • 11. Financial Instruments The 2007 Statement of Recommended Practice (SORP) introduced a significant amount of technical accounting guidance relating to Financial Instruments. A Financial Instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another, examples include trade payables, financial guarantees and bank deposits. Financial Instruments in so far as the Authority is concerned relate to loans receivable and borrowings. The Authority is required to disclose information that enables users of the financial statements to evaluate the nature and extent of any risks arising from Financial Instruments, for example credit risk, liquidity risk or market risk. Full details of the impact of these requirements can be seen in note 16 to the Accounts. 12. Other Matters The SORP introduced new arrangements for the Fire-fighters Pension Fund Account. In line with best practice and for comparison purposes the 2006/07 balance sheet figures have been amended to recognise this change. It should be noted that these figures are not material and do not impact on the bottom line. 13. Further Information The Statement of Accounts is intended to give electors, members, employees and other interested parties clear information about the Authority’s finances. I would welcome any constructive comments, which would help improve the information. To this end a questionnaire has been devised and included in the accounts. Further information about the Accounts is available from the Finance Division of the Business Support Services Department, Civic Centre, Millgate, Wigan. In addition, interested members of the public have a statutory right to inspect the accounts before the audit is completed. The availability of the Accounts for inspection is advertised in the local press throughout Greater Manchester. David J Smith MA PhD CPFA Treasurer to the Authority 25th June 2008 7
    • STATEMENT OF ACCOUNTING POLICIES General Principles The Statement of Accounts summarises the authority’s transactions for the 2007/08 financial year and its position at the year-end of 31 March 2008. It has been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom – A Statement of Recommended Practice 2007 (the SORP). The accounting convention adopted is historical cost, modified by the revaluation of certain categories of tangible fixed assets. The Statement of Accounts is prepared in accordance with the fundamental accounting principles relating to the qualitative characteristics of financial information as set out in the SORP; relevance, reliability, comparability, understandability and materiality. The accounts are also prepared in accordance with the three pervasive accounting concepts as defined by the SORP. Accruals The financial statements, other than cash flow information, are prepared on an accruals basis. The accruals basis of accounting requires the non-cash effects of transactions to be reflected in the financial statements for the accounting period in which those effects are experienced and not in the period in which any cash is received or paid. Going Concern The Statement of Accounts is prepared on a going concern basis, that is the accounts are prepared on the assumption that the authority will continue in operational existence for the foreseeable future. This means in particular that the income and expenditure accounts and balance sheet assume no intention to curtail significantly the scale of operation. Primacy of Legislative Requirements Local Authorities derive their powers from statute and their financial and accounting framework is closely controlled by primary and secondary legislation. To the extent that treatments are prescribed by law the accounting concepts outlined above may not apply in all cases. It is a fundamental principle of the CIPFA Code of Practice that, where specific legislative requirements and accounting principles conflict, legislative requirements shall apply. Accruals of Income and Expenditure The accounts of the Authority are maintained on an accruals basis in accordance with the CIPFA Code of Practice. Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular: • Fees, charges and rents due from customers are accounted for as income at the date the authority provides the relevant goods or services. • 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 stocks on the balance sheet. • Works are charged as expenditure when they are completed, before which they are carried as works in progress on the balance sheet. 8
    • Interest payable on borrowings and receivable on investments is accounted for in the year to which it relates, on a basis that reflects the overall effect of the loan or investment. Where income and expenditure has 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 it is doubtful that debts will be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected. Income and expenditure are credited and debited to the relevant service revenue account, unless they properly represent capital receipts or capital expenditure. Charges to Revenue for Fixed Assets Service revenue accounts, support services and trading accounts are debited with the following amounts to record the real cost of holding fixed assets during the year: • depreciation attributable to the assets used by the relevant service • impairment losses attributable to the clear consumption of economic benefits on tangible fixed assets used by the service and other losses where there are no accumulated gains in the Revaluation Reserve against which they can be written off • amortisation of intangible fixed assets attributable to the service. Redemption of Debt The Authority is not required to raise precept to cover depreciation, impairment losses or amortisations. However, it is required to make an annual provision from revenue to contribute towards the reduction in its overall borrowing requirement (equal to at least 4% of the underlying amount) measured by the adjusted Capital Financing Requirement. Depreciation, impairment losses and amortisations are therefore replaced by revenue provision in the Statement of Movement on the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account for the difference between the two. For the large proportion of assets, principally vehicles/equipment, voluntary additional contributions are made to ensure debt is repaid by the end of the expected life of the asset (3 to 15 years). Contingent Liabilities Contingent Liabilities are not accrued in the accounting statements. They are disclosed by way of the notes to the accounts if there is a possible obligation, which may require a payment or transfer of economic benefits. The Authority has no such liabilities. Cost of Support Services The Authority maintains an administrative centre at its Swinton Headquarters. In accordance with CIPFA Best Value Accounting Code of Practice 2007 (BVACOP), support services have been recharged across all service areas based upon net total cost. Any remaining balances are treated as trading and reported under the net cost of services. The cost of Corporate and Democratic and Non Distributed costs as defined by the BVACOP are allocated to separate objective expenditure heads and are not apportioned to other divisions of service. 9
    • Charges for Lead District Support Services The Chief Executive and the Executive Director - Business Support Services of Wigan Council are the Authority's Clerk and Treasurer respectively. Wigan Council provides support and expertise to the Authority in accordance with a Service Level Agreement. The services provided are as follows: • Computing Services (Restricted Services Only) • Internal Audit • Accounting and Other Financial Services • Property Related Services (Restricted Services Only) Legal Services are now provided within the Authority, however a small residual element is still undertaken by Wigan Council. Recharges for computer facilities are based on accepted practice in line with CIPFA guidelines. The remaining support service costs are based on staff time allocations and associated overheads. Deferred Charges Deferred charges represent expenditure that may be capitalised under statutory provisions but does not result in the creation of tangible assets. Deferred charges incurred during the year have been written off as expenditure to the relevant service revenue account. Where the authority has determined to meet the cost of the deferred charges from the existing capital resources or by borrowing, a transfer to the Capital Adjustment Account then reverses out the amounts charged in the Statement of Movement on the General Fund Balance so there is no impact on the level of precept. Discretionary Benefits The Authority 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. 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 that have a quoted market price and/or do not have fixed or determinable payments. Financial Liabilities Financial liabilities are initially measured at fair value and carried at their amortised cost. Annual charges to the Income and Expenditure Account for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. For most of the borrowings that the Authority has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable and interest charged to the Income and Expenditure Account is the amount payable for the year in the loan agreement. 10
    • Government Grants and Contributions Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as income at the date that the authority satisfies the conditions of entitlement to the grant / contribution, providing that there is reasonable assurance that the monies will be received and the expenditure for which the grant is given has been incurred. Revenue grants are matched in service revenue accounts with the service expenditure to which they relate. Grants to cover general expenditure (e.g. Revenue Support Grant) are credited to the foot of the Income and Expenditure Account after Net Operating Expenditure. Intangible Fixed Assets Expenditure on assets that do not have physical substance but are identifiable and controlled by the Authority (eg software licences) is capitalised when it will bring benefits for more that one financial year. The balance is amortised to the relevant service revenue account over the economic life of the investment to reflect the pattern of consumption of benefits. Investments Long-term investments are those which are not expected to be repaid until after 31 March 2009. They are shown in the Balance Sheet at cost less a provision for potential losses. Short-term investments are those which will be repaid on or before 31 March 2009 and are shown in the Balance Sheet at cost. Loans and Receivables Loans and receivables are initially measured at fair value and carried at their amortised cost. Annual credits to the Income and Expenditure Account for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans that the Authority has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable and interest credited to the Income and Expenditure Account is the amount receivable for the year in the loan agreement. Where, the Authority has made loans at less than market rates (soft loans) a loss is recorded in the Income and Expenditure Account for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal. Interest is credited at a marginally higher effective rate of interest than the rate receivable from the lender, with the difference serving to increase the amortised cost of the loan in the Balance Sheet. Statutory provisions require that the impact of soft loans on the General Fund Balance is the interest receivable for the financial year. Reconciliation of amounts debited and credited to the Income and Expenditure Account to the net gain required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Statement of Movement on the General Fund Balance. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the Income and Expenditure Account. Any gains and losses that arise on the derecognition of the asset are credited/debited to the Income and Expenditure Account. 11
    • Pensions Employees of the Authority are divided between two separate pension schemes. The Fire Service Pension Scheme for its uniformed firefighters and the Local Government Pension Scheme for civilian staff. In accordance with proper practices the Authority has within its Statement of Accounts for 2007/08 adopted in full the Financial Reporting Standard (FRS)17. Both Pension schemes are classified as ‘defined benefit’ schemes under FRS17 and the accounting principles and their effect on the Financial Statements are explained below. The Fire Service Pension Scheme This is an unfunded scheme, which is administered by the Authority in accordance with DCLG regulations. For such schemes as there are no investment assets, the FRS17 requires recognition of the liability and pension reserve in the Balance Sheet and transactions in the Income and Expenditure Account for movements in the liability and reserve. The Local Government Pension Scheme The Local Government Scheme is accounted for as a defined benefits scheme: The liabilities of the Greater Manchester pension scheme attributable to the authority are included in the balance sheet on an actuarial basis using the projected unit method – ie an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and forecast of projected earnings for current employees. Liabilities are discounted to their value at current prices, using a discount rate of 3.2% (based on the indicative rate of return on a high quality corporate bond). The assets of the Greater Manchester pension fund attributable to the authority are included in the balance sheet at their fair value: • quoted securities – mid-market value • unquoted securities – professional estimate • unlisted securities – average of the bid and offer rates • property – market value. The change in the net pensions liability is analysed into seven components: • current service cost – the increase in liabilities as result of years of service earned this year allocated in the Income and Expenditure Account to the revenue accounts of services for which the employees worked • past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Net Cost of Services in the Income and Expenditure Account as part of Non Distributed Costs • interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid – debited to Net Operating Expenditure in the Income and Expenditure Account • expected return on assets – the annual investment return on the fund assets attributable to the authority, based on an average of the expected long-term return – credited to Net Operating Expenditure in the Income and Expenditure Account 12
    • • gains/losses on settlements and curtailments – the result of actions to relieve the authority of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited to the Net Cost of Services in the Income and Expenditure Account as part of Non Distributed Costs • actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – debited to the Statement of Total Recognised Gains and Losses • contributions paid to the Tameside pension fund – cash paid as employer’s contributions to the pension fund. Statutory provisions limit the authority to raising Authority precept to cover the amounts payable by the Authority to the pension fund in the year. In the Statement of Movement on the General Fund Balance this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and any amounts payable to the fund but unpaid at the year-end. Private Finance Initiative (PFI) PFI contracts are agreements to receive services, where the responsibility for making available the fixed assets needed to provide the services passes to the PFI contractor. Payments made by the Authority under a contract are generally charged to revenue to reflect the value of services received in each financial year. The Authority has one project funded under the Private Finance Initiative – the provision of a fire station and borough command at Stretford. The contract began in December 1998. The PFI contract is for 25 years, with 16 years remaining, with all non-operational services being provided by PFF Stretford Limited, a special purpose company established for the scheme. The equity and debt funding is provided by Carden, Croft and Company Limited and the Bank of Scotland. In 1998/99 the Authority began to make payments under the contract. All costs will be charged to the Fire Service Revenue Account and the building will not be included within the value of fixed assets shown in the Authority’s Balance Sheet. During the life of the contract the Authority expects to make payments of an estimated £18.661m and receive Central Government subsidy of an estimated £12.402m. Provisions Provisions are made where an event has taken place that gives the Authority an obligation that probably requires settlement by a transfer of economic benefits, but where the timing of the transfer is uncertain. For instance, the Authority 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 to the appropriate service revenue account in the year that the Authority becomes aware of the obligation, based on the best estimate of the likely settlement. When payments are eventually made, they are charged to the provision set up in the balance sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes more likely than not that a transfer of economic benefits will not now be required (or a 13
    • lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service revenue account. Reserves The Authority sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts in the Statement of Movement on the General Fund Balance. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service revenue account in that year to score against the Net Cost of Services in the Income and Expenditure Account. The reserve is then appropriated back into the General Fund Balance statement so that there is no net charge against Authority precept for the expenditure. Certain reserves are kept to manage the accounting processes for tangible fixed assets and retirement benefits and they do not represent usable resources for the Authority. Stocks and Work in Progress Stocks are included in the balance sheet at average cost. This is the method adopted by the Corporate Financial System. Work In progress is subject to an interim valuation at the year-end and recorded in the balance sheet at cost plus any profit reasonably attributable to the works. Tangible Fixed Assets Tangible fixed assets are assets that have physical substance and are held for us in the provision of services or for administrative purposes on a continuing basis. Recognition: expenditure on the acquisition, creation or enhancement of tangible fixed assets is capitalised on an accruals basis, provided that it yields benefits to the Authority and the services that it provides for more that one financial year. A deminimis level of £5,000 is in place for the capitalisation of expenditure for repairs. Expenditure that secures but does not extend the previously assessed standards of performance of asset (eg repairs and maintenance) is charged to revenue as it is incurred. A rolling programme of revaluation of fixed assets is contained within the Authority’s Asset Management Plan. This rolling programme caters for the re-valuation of all fixed assets and is carried out over 5 years. The valuation of properties is undertaken by Matthews and Goodman Property advisors, 196 Deansgate, Manchester. The latest valuation was certified as at 7 December 2006. The basis for the valuation of fixed assets is given below: Land and buildings are valued at least once every five years in accordance with the five-year rolling programme Operational land and buildings are valued at open market value for existing use, or where no market exists at depreciated replacement cost. Land and properties valued at open market value have not been depreciated but other properties are shown net of depreciation. The fire station and divisional headquarters constructed at Stretford under PFI arrangements are off- balance sheet. Non-operational land and buildings are valued at market value for existing or alternative use as appropriate. Vehicles, plant, furniture and equipment are valued at historic cost less depreciation. Non- operational work in progress is not depreciated. 14
    • Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Income and Expenditure Account where they arise from the reversal of an impairment loss previously charged to a service revenue account. 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: the values of each category of assets and material individual assets that are not being depreciated, are reviewed at the end of each financial year for evidence of reductions in value. Where impairment is identified as part of this review, or as a result of a valuation exercise, this is accounted for by: • where attributable to the clear consumption of economic benefits – the loss is charged to the relevant service revenue account. • otherwise – written off against any revaluation gains attributable to the relevant asset in the Revaluation Reserve, with any excess charged to the relevant service revenue account. Where an impairment loss due to the consumption of economic benefits is charged directly to the Income and Expenditure Account but there were accumulated revaluation gains in the Revaluation Reserve for that asset, an amount up to the value of the loss is transferred from the Revaluation Reserve to the Capital Adjustment Account. Disposals: when an asset is disposed of or decommissioned, the value of the asset in the Balance Sheet is written off to the Income and Expenditure Account as part of the gain or loss on disposal. Receipts from disposals are credited to the Income and Expenditure Account as part of the gain or loss on disposal (ie netted off against the carrying value of the asset at the time of disposal). Any revaluation gains in the Revaluation Reserve are transferred to the Capital Adjustment Account. Amounts in excess of £10,000 are categorised as capital receipts. The capital receipts are required to be credited to the Usable Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce the authority’s underlying need to borrow (the Capital Financing Requirement). Receipts are appropriated to the Reserve from the statement of Movement on the General Fund Balance. The written-off value of disposals is not a charge against Authority precept, 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 statement of Movement on the General Fund Balance. Depreciation: depreciation is provided for on all assets with a determinable finite life (except for investment properties), by allocating the value of the asset in the Balance Sheet over the periods expected to benefit from their use according to the following policy: 15
    • • Newly acquired assets with the exception of vehicles, plant and equipment are depreciated in the year following acquisition and assets under construction are not depreciated until they are used. • Newly acquired vehicles, plant and equipment are depreciated in the year of acquisition on a pro-rata basis. Depreciation is calculated on the following bases: • Land – not depreciated • buildings – straight line allocation - 40 – 75 years • furniture and equipment – straight line allocation over a period of between 3 and 10 years • vehicles and IT equipment – straight line allocation over a period between 3 – 15 years The depreciation policies have been reviewed and updated to reflect current practices. There is no financial impact. Where an asset has major components with different estimated useful lives, these 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. VAT Income and expenditure excludes any amounts related to VAT, as all VAT is payable to HM Revenue & Customs and all VAT paid is recoverable from it 16
    • INCOME AND EXPENDITURE ACCOUNT This income and expenditure account summarised the resources that have been applied and generated in providing services and managing the Authority during the last year. It includes all the day-to-day expenses and related income on accruals basis, as well as transactions measuring the value of fixed assets actually consumed and the real projected value of retirement benefits earned by employees during the year. 2006/07 Note 2007/08 2007/08 2007/08 Net Gross Income Net Expenditure Expenditure Expenditure £'m £'m £'m £'m 16.148 Community Safety 18.094 2.188 15.906 94.779 Fire Fighting and Rescue Operations 95.249 0.942 94.307 0.323 Fire Service Emergency Planning and Civil 0.407 0.028 0.379 Defence 0.626 Corporate and Democratic Core 0.638 - 0.638 0.740 Non Distributed Cost 0.029 - 0.029 112.616 Net Cost of Services 114.417 3.158 111.259 0.121 Loss on disposal of fixed assets 1 0.437 Surpluses(-)/Deficits on trading undertakings not 0.055 2 - included under net cost of services -0.671 Interest and Investment Income 3 -0.694 1.331 Interest payable and similar charges 1.138 Pension Interest Cost and Expected Return on 53.960 26 56.520 Pension Assets 167.412 Net Operating Expenditure 168.660 Financed By -36.104 Precept Income 4 -37.785 -58.745 Non Domestic Rates -61.670 -11.340 Revenue Support Grant -10.350 61.223 Deficit for the Year 58.855 I certify that the Income and Expenditure Account presents fairly the financial position of Greater Manchester Fire and Rescue Authority at 31 March 2008. David J Smith MA PhD CPFA Treasurer to the Authority 25th June 2008 17
    • STATEMENT OF MOVEMENT ON THE GENERAL FUND BALANCE The Income and Expenditure Account shows the Authority’s financial performance for the year, measured in terms of the resources consumed and generated over the last twelve months. However, the Authority is required to raise precept on a different accounting basis, the main difference being: • Capital investment is accounted for as it is financed, rather than when assets are consumed • Retirement benefits are charged as amounts become payable to pension funds and pensioners rather than as future benefits are earned. The General Fund Balance compares the Authority’s spending against the Precept it raised for the year, taking into account the use of reserves built up in the past and contributions to reserves earmarked for future expenditure. The statement summarises the difference between the outturn on the Income and Expenditure Account and General Fund Balances. 2006/07 Note 2007/08 £'m £'m 61.223 Deficit for the year on the Income and Expenditure Account 58.855 Net Additional amount required by statute and non-statutory proper practices -62.332 13 -60.800 to be debited or credited to the General Fund Balance for the year -1.109 Increase in the General Fund Balance -1.945 -16.004 General Fund Balance Brought Forward -17.113 -17.113 General Fund Balance Carried Forward -19.058 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES This statement brings together all the gains and losses of the Authority for the year and shows the aggregate increase in its net worth. In addition to the surplus generated on the Income and Expenditure Account, it includes gains and losses relating to the revaluation of fixed assets and re-measurement of the net liability to cover the cost of retirement benefits. 2006/07 Note 2007/08 £'m £'m 61.223 Surplus or deficit on the Income and Expenditure Account for the year 58.855 -1.138 Surplus or deficit arising on the revaluation of fixed assets -1.503 -117.210 Actuarial gains and losses on pension fund assets and liabilities 26 -193.050 - Other gains and losses - -57.125 Total recognised gain for the year -135.698 BALANCE SHEET AT 31 MARCH 2008 18
    • At 31 March Note At 31 March 2007 2008 £’m £'m £'m Fixed Assets 3.420 Intangible Fixed Assets 14 2.716 Tangible Fixed Assets Operational Assets 48.954 Other Land and Buildings 52.739 9.170 Vehicles, Plant and Equipment 10.735 0.665 Non Operational Assets 0.075 14 63.549 62.209 Total Fixed Assets 66.265 - Long-Term Debtors 0.113 62.209 TOTAL LONG TERM ASSETS 66.378 Current Assets 0.558 Stocks & Work in Progress 0.570 1.469 Debtors & Payments in Advance 15 1.414 7.879 Investments 16 6.594 0.759 Amount due from Pension Fund 15 - 10.665 8.578 Current Liabilities 3.165 Cash Overdrawn 0.442 0.288 Short Term Borrowing 17 0.311 4.414 Creditors 18 5.936 - Amount due to Pension Fund 18 0.584 7.867 7.273 65.007 TOTAL ASSETS LESS CURRENT LIABILITIES 67.683 14.088 Long Term Borrowing 19 13.851 1,058.955 Liability related to defined benefit pension scheme 26 925.758 2.092 Provisions 20 2.504 1,075.135 942.113 -1,010.128 TOTAL ASSETS LESS LIABILITIES -874.430 Financed By 0.638 Usable Capital Receipts Reserve 22 - -1,058.955 Pension Reserve 26 -925.758 - Revaluation Reserve 21b 1.472 23.148 Capital Adjustment Account 21a 24.144 7.928 Earmarked Reserves 23 6.654 17.113 General Fund Balances 19.058 -1,010.128 TOTAL NET WORTH -874.430 I certify that the Balance Sheet and related accounts present fairly the financial position of Greater Manchester Fire and Rescue Authority at 31 March 2008. David J Smith MA PhD CPFA Treasurer to the Authority 25th June 2008 19
    • CASH FLOW STATEMENT 2006/07 Note 2007/08 £'m £'m £'m REVENUE ACTIVITIES Cash Outflows 108.046 Cash Paid to and on Behalf of Employees 109.630 15.084 Other Operating Cash Payments 12.491 123.130 122.121 Cash Inflows -36.104 Precepts Received -37.785 -58.745 National Non Domestic Rate Receipts from National Pool -61.670 -11.340 Revenue Support Grant 31 -10.350 -10.323 Other Government Grants 31 -12.546 -2.970 Cash Received for Goods and Services -2.265 -6.412 Pensions -6.391 -125.894 -131.007 -2.764 Net Cash Inflow from Revenue Activities 27 -8.886 SERVICING OF FINANCE Cash Outflows 1.144 Interest Paid 1.061 Cash Inflows -0.567 Interest Received -0.600 0.577 0.461 CAPITAL ACTIVITIES Cash Outflows 2.649 Purchase of Fixed Assets 6.906 -0.004 Deferred Charges 0.113 Cash Inflows -0.058 Sale of Fixed Assets -0.230 2.587 6.789 0.400 Net Cash Outflow Before Financing -1.636 MANAGEMENT OF LIQUID RESOURCES -0.471 Net decrease in short term deposits 30 -1.378 FINANCING Cash Outflows 0.289 Net Repayments of Amounts Borrowed - long term loans 0.315 1.980 Net Repayments of Amounts Borrowed - short term loans -0.024 Cash Inflows - New Loans Raised - 2.269 Net Cash Inflow/Outflow from Financing 28 0.291 2.198 Net Decrease/Increase (-) in Cash 29 -2.723 20
    • NOTES TO THE CORE FINANCIAL STATEMENTS 1. Gains and Losses on Disposals of Fixed Assets NBV Receipts Loss on disposal £’m £’m £’m Vehicles sold 0.038 0 0.038 Other Assets Disposed 0.629 -0.230 0.399 Loss on disposal of fixed assets 0.667 -0.230 0.437 A significant sum within the loss reported above relates to the disposal of the station site at Ashton. This asset has now been written out of the accounts in line with the SORP. 2. Trading operations Holding Account Balances The Authority operates support services which can, under the Best Value Accounting Code of Practice, be classified as trading activities. The net cost of these activities is allocated in line with recommended practice across the services on the face of the Income and Expenditure Account. The activities included under central support services are : Finance, Information Technology, Personnel, Facilities Management and Catering. Contained within these activities is income of £0.338m which is not recorded on the face of the Income and Expenditure Account as income but is contained within the support services allocated under expenditure in line with recommended practice. The balance of income in the table is recharge income from the allocation of support to service heads. The Authority also holds the costs and recovery of income relating to seconded officers under support services. This is shown separately in the table below. Surplus/Deficit on Trading Accounts Expenditure Income Surplus(-)/Deficit £’m £’m £’m Central Support 20.421 -20.418 0.003 Secondments 0.860 -0.863 -0.003 Total 21.281 -21.281 0 3. Interest and Investment Income This represents the amount of interest earned on the authority’s revenue balances for 2007/08. During 2007/08 the Authority received a payment from the Bank of Credit and Commerce International (BCCI) of £0.051m (nil in 2006/07). 21
    • 4. Precept Income The precept received from the ten District Authorities of Greater Manchester includes adjustments of £0.277m in respect of previous years. 5. Provision for the Repayment of External Loans The transactions which have taken place are as follows: 2006/07 Transaction 2007/08 £’m £’m 2.216 MRP and Voluntary Contribution 2.211 -2.935 Amount Charged as Depreciation -3.246 -0.719 -1.035 0.270 Principal Repayments of Transferred Debt 0.291 -0.449 Balance to Income and Expenditure Account -0.744 The Minimum Revenue Provision (MRP) is the statutory amount which must be set aside from revenue for the repayment of external loans. In addition the Authority made a voluntary revenue contribution. This voluntary payment recognises the shorter life of a large proportion of assets, namely vehicles and plant, which would become obsolete before the full revenue provision for debt repayment had been made. The MRP for 2007/08 was £1.282m (£1.222m in 2006/07). In addition the Authority made a voluntary revenue contribution of £0.929m (£0.994m in 2006/07). 6. Publicity Expenditure Set out below, in accordance with S.5(1) of the Local Government Act 1986 and the Local Authorities (Publicity Account) (Exemption) Order 1987, is the Authority's spending on publicity. 2006/07 2007/08 £'m £'m 0.045 Recruitment Advertising 0.035 0.377 Other Publicity 0.431 0.422 Total 0.466 7. Members’ Allowances The total paid to Members in respect of basic, special responsibility, travel and subsistence allowances is set out below. 2006/07 2007/08 £'m £'m 0.226 Members’ Allowances 0.244 22
    • 8. Officers’ Emoluments Set out below, in accordance with the Accounts and Audit Regulations 2003, are details of Officers’ emoluments. Number of Employees Remuneration Band Number of Employees 2006/07 2007/08 39 £50,000 - £59,999 47 7 £60,000 - £69,999 12 1 £70,000 - £79,999 3 - £80,000 - £89,999 1 2 £90,000 - £99,999 3 - £100,000 - £109,999 - 3 £110,000 - £119,999 - 1 £120,000 - £129,999 2 - £130,000 - £139,999 2 - £140,000 - £149,999 - - £150,000 - £159,999 - 1 £160,000 - £169,999 1 54 Total 71 9. Agency Arrangements Payments are made to Wigan Council under the Lead Authority arrangements for the provision of financial and administrative services to the value of £0.312m (£0.303m in 2006/07). 10. Income for the Supply of Goods and Services under the Local Authorities (Goods and Services) Act 1970 As Lead Authority for the Greater Manchester Fire and Rescue Authority (GMFRA), Wigan Council charged £0.135m (£0.132m in 2006/07) for the provision of legal, computer and construction related services in the 2007/08 financial year. 11. Related Party Transactions The related parties of the Authority have been identified as its Members and Chief Officers and their close relatives, Central Government, the ten Greater Manchester District Authorities and other Authorities administering pensions on behalf of the Authority. A process has been established to identify related party transactions. This process includes an examination of the Register of Members’ Disclosures, an annual circulation to all Members and Chief Officers, reference to relevant minutes of Committee Meetings and the Authority’s Financial Accounts. No related party transactions have been disclosed for the 2007/08 financial year. Information relating to Members’ Allowances is disclosed in the notes. The Authority receives grants from Central Government and precepts from the Greater Manchester District Authorities. These transactions are disclosed within the Income and Expenditure Account and the Cash Flow Statement and related notes. 23
    • Northwest Fire and Rescue Management Board The Government issued a White Paper ‘Our Fire and Rescue Service’ during 2003/04.This required Fire Authorities (FRAs) to establish before 1st April 2004 Regional Management Boards (RMBs), the intention being to increase efficiency and effectiveness for all Fire Authorities by delivering shared services and reducing duplication of effort. In particular, RMBs are expected to deliver: • Resilience to Emergencies - especially potential chemical, biological, radiological or nuclear attack • Specialist or Common Services where appropriate - Fire Investigation, Procurement, Training, Personnel Management and Human Resources Management. The five Fire Authorities in the North West (Cheshire, Cumbria, Greater Manchester, Lancashire and Merseyside) formed a joint committee (the North West Fire and Rescue Management Board) in February 2004. The Committee is comprised of Councillors from the five constituent Authorities. The region has conducted significant work in 2007/08 by working collaboratively. Significant work has taken place in support of the national Fire Control Project. This project is sponsored by the Department of Communities and Local Government and is a national project replacing 42 Control Rooms across England which will provide an integrated and modern network of nine Regional Control Centres (RCCs). They will be able to receive calls and mobilise resources across the country. The North West Regional Control Centre will be located at Warrington, Cheshire. Funding to support this project at a regional level has been provided to the North West Fire and Rescue Management Board in the form of New Burdens grants from Department of Communities and Local Government. A full set of the Regional Management Board accounts are available from Ged Murphy, Treasurer to the Board, Greater Manchester Fire and Rescue Authority, 146 Bolton Road, Swinton, Manchester, M27 8US: Tel 0161 608 4001. Local Authority Controlled Company North West Fire Control Company has been established to operate the new regional control facility which takes over responsibility for the Fire and Rescue Service mobilisation for Cheshire, Cumbria, Greater Manchester, Lancashire and Merseyside in 2010. The company comprises 5 members, namely each of the constituent FRAs and 10 Directors, 2 from each of the constituent FRAs. The company is limited by guarantee and the liability of the Authority is limited. The Authority is one of 5 members of the company and has the right to appoint 2 of the 10 directors. The Authority has a relationship with the North West Fire Control Company. In line with accounting requirements it has been assessed that Group Accounts are likely to be required. The Company will not undertake any regional control function until the constituent Fire and Rescue Authorities agree that it should commence such a function. The Company has not incurred any expenditure and is dormant and therefore no group accounts are required for 2007/08. Tameside MBC administers debt transferred from the former Greater Manchester Council and the Authority makes annual repayments of principal together with interest and debt management expenses. In 2007/08 the total payment was £0.813m (£0.821m in 2006/07). 24
    • 12. Audit Costs In 2007/08 the Authority incurred the following fees relating to external audit and inspections. 2006/07 2007/08 £'m £'m 0.072 Fees payable to the Audit Commission with regard to external audit 0.086 services carried out by the appointed auditor - Fees payable to the Audit Commission in respect of statutory inspection - - Fees payable in respect of other services provided by the appointed - auditor 0.072 Total 0.086 13. Note of reconciling items for the Statement of Movement on the General Fund Balance 2006/07 2007/08 £'m £'m -0.766 Amortisation of intangible fixed assets -0.838 -2.171 Depreciation and impairment of fixed assets -3.173 -0.217 Write downs of deferred charges to be financed from capital resources -0.183 -0.121 Net loss on sale of fixed assets -0.437 -92.377 Net charges made for retirement benefits in accordance with FRS17 -91.590 Amounts included in the Income and Expenditure Account but required -95.652 by statute to be excluded when determining the Movement on the -96.221 General Fund Balance for the year 1.491 Minimum revenue provision for capital financing 1.573 -0.281 Capital Expenditure charged in the year to the General Fund Balance 2.457 Employer’s contributions payable to the Pension Fund and Retirement benefits 30.436 31.736 payable direct to pensioners Amounts not included in the Income and Expenditure Account but 31.646 required to be included by statute when determining the Movement on 35.766 the General Fund Balance for the year 0.994 Voluntary revenue provision for repayment of debt 0.929 0.680 Net transfer to or from earmarked reserves -1.274 Transfers to or from the General Fund Balance that are required to be 1.674 taken into account when determining the movement on the General -0.345 Fund Balance for the year Net Additional amount required to be credited to the General Fund -62.332 -60.800 balance for the year 25
    • 14. Fixed Assets Intangible Assets In 2006/07 the useful life of the Command and Control project was reassessed in view of the National Fire Regional Control project. Further expenditure has been incurred during the year on the implementation of the Rostering system. Expenditure on the procurement of the Performance Management system in 2007/08 has been identified as an intangible asset. £’m Valuation as at 31st March 2007 4.185 Less accumulated depreciation -0.765 Net book value as at 31st March 2007 3.420 Expenditure in year 0.134 Depreciation charge for the year -0.838 Net Book Value of fixed assets as at 31st March 2008 2.716 a) The Balance Sheet value of fixed assets represents their gross current value less accumulated depreciation. b) An analysis of fixed assets and capital expenditure during the year is shown below. Analysis of Fixed Assets and Capital Expenditure for 2007/08 Operational Assets Non Operational Assets Vehicles, Vehicles, Total Land and Land and Plant, and Plant and Buildings Buildings Equipment Equipment £’m £’m £’m £’m £’m Certified valuation as at 31st March 2007 51.414 24.494 0.665 - 76.573 Less accumulated depreciation -2.460 -15.324 - - -17.784 Net book value of fixed assets 48.954 9.170 0.665 0 58.789 At 31st March 2007 Movement in Expenditure 2007/08 2.126 3.174 1.825 - 7.125 Transfers between Non-Operational 2.415 - -2.415 - 0 and Operational Disposal of assets -0.629 -0.038 - - -0.667 Revaluation of assets 0.996 - - - 0.996 Impairment -0.762 - -0.762 Write out depreciation on revaluation 0.476 - - - 0.476 Depreciation charge for the year -0.837 -1.571 - - -2.408 Net book value of fixed assets as at 52.739 10.735 0.075 0 63.549 31st March 2008 The movement in expenditure of £7.125m does not include an amount of £0.305m (£0.282m in 2006/07),in respect of furniture and equipment and redecoration of premises which was financed from capital resources but was below the Authority’s de-minimis level and therefore has been charged to the Income and Expenditure Account in line with the SORP. This is offset by a transfer from the capital adjustment account. 26
    • The valuation of the new building at Ashton-Under-Lyne has been undertaken on a consistent basis with other premises owned by the Authority by our valuers, Matthews and Goodman. The valuation is on a depreciated replacement cost basis and excludes items of plant and machinery used in production. The existing station site at Ashton has been disposed of during the year and the loss on disposal charged to the Income and Expenditure Account. Commitments under capital contracts The Authority has approved a Capital Programme for 2008/09 of £6.430m which includes contractually committed expenditure as at 31 March 2008 of £1.356m on capital projects (£2.676m at 31 March 2007). The committed projects are identified below. 2006/07 2007/08 £'m Projects £'m 1.576 Ashton Fire Station 0 1.100 Operational Appliances 1.356 2.676 Total Committed Projects 1.356 Capital Expenditure and Financing in year Capital expenditure and arrangements made to finance this outlay are as follows: 2006/07 2007/08 2007/08 £'m £’m £'m Expenditure - Intangible Fixed Assets 0.134 Tangible Fixed Assets:- 1.439 Land and Buildings 4.234 1.689 Vehicles and Equipment 2.996 0.494 Home Fire Risk Check Initiative (HFRCI) 0.737 7.967 3.622 8.101 Financing - Contribution from Capital Reserve -2.591 Surplus from previous year -0.385 - 0.276 Capital Grants -0.554 0.028 Capital Receipts -0.868 3.703 Support Capital Expenditure -3.703 -8.101 -0.385 Surplus (-)/Deficit in Capital Finance 0 27
    • Information on assets held A physical analysis of the major fixed assets included on the balance sheet at 31 March 2008 is shown below: Further Analysis of the Most Significant Fixed Assets on the Balance Sheet At 31 March 2007 At 31 March 2008 (Numbers) (Numbers) 40 Operational Fire Stations and Borough Command Premises 40 1 Fire Service Headquarters 1 2 Training Centres – Manchester and Leigh Driving School 2 1 Technical Services Centre 1 30 Houses and Flats 30 295 Vehicles 313 52 Computer Systems and Peripherals 62 15. Debtors and Payments in Advance Debtors and Payments in Advance are analysed below. 31 March 2007 31 March 2008 £'m £'m 0.209 Sundry Debtors 0.769 0.387 VAT 0.176 - Government Grants 0.172 0.093 Chief Fire Officers Association 0.083 0.037 DCLG 0.025 0.388 Pension Transfer Values - 0.104 Interest - 0.251 Other Miscellaneous Debtors 0.189 1.469 Total Debtors 1.414 New accounting treatment for the Firefighters Pension Fund has required the reclassification of the amount due from the Pension Fund. This was included under debtors in 2006/07 but is now shown on a separate line on the face of the Balance Sheet. 16. Financial Instruments A full assessment of the new requirements has been undertaken and the only items that fall under the new requirements are Public Works Loans Board (PWLB) loans, transferred debt and the Cycle to Work scheme. PWLB loans have been treated in line with the requirements as set out in the SORP (see note 19). Previously the SORP required authorities to show accrued interest on borrowing within the current liabilities section of the balance sheet. Authorities now need to show the accrued interest as part of the carrying value of the loan. The accrued amounts added to the PWLB loans is £0.077m. Financial Liabilities and assets represented by loans and receivables are carried in the balance sheet at amortised cost. Their fair value can be assessed by calculating the present value of the 28
    • cash flows that will take place over the remaining term of the instrument. For the Authority this specifically applies to PWLB loans. The Fair value has been calculated at £8.586m by Sector, however it should be noted that alternative fair values can be calculated if an early repayment basis is adopted. If this basis was used the fair value would be £8.710m as calculated by PWLB. Transferred debt is classed as a statutory provision and therefore is not covered within the definition of financial instruments. The Cycle to Work scheme has been subjected to the criteria but it has been determined that the scheme is an employee benefit scheme and as such is outside the scope of financial instruments. In terms of risk, the only element would be interest rate movements on the Authority’s borrowings and investments. For instance, a rise in interest rates would have the following effects: • borrowings at variable rates - the interest expense charged to the Income and Expenditure Account will rise • borrowings at fixed rates - the fair value of the liabilities borrowings will fall • investments at variable rates - the interest income credited to the Income and Expenditure Account will rise • investments at fixed rates - the fair value of the assets will fall. As PWLB loans are the only significant items and these are calculated on a fixed rate basis, then minimal risk is attached to the Authority. 16a. Investments During the year the Authority invested its General Fund balances, reserves, and capital receipts in short term deposits. At 31 March 2008 an amount of £6.500m was invested (£7.879m in 2006/07). Previously, the SORP required authorities to show accrued interest on short term investments within the current assets section of the balance sheet. This presentation was based on the optional treatment allowed under FRS 4. The 2007 SORP incorporated the requirements of FRS 25, FRS 26 and FRS 29. Under these standards, the optional treatment allowed under FRS 4 is no longer permitted. Authorities will therefore show the accrued interest associated as part of the carrying value of the investment, £0.094m for 2007/08. Sector have calculated the fair value of the investments at £6.597m. 17. Short Term Borrowing This item relates to that part of the outstanding debt transferred from the former Greater Manchester County (GMC) on its abolition in 1986, that is repayable within 12 months of the Balance Sheet date. Tameside Metropolitan Borough Council administers this debt. The balance of the debt is shown in the Balance Sheet as long-term borrowing. 18. Creditors Creditors are analysed below. 29
    • 31 March 2007 31 March 2008 £'m £'m 1.759 Inland Revenue 1.794 0.478 Capital Creditors 1.107 0.130 Sundry Creditors 0.457 0.288 Government Grants 0.727 0.066 Car Allowances 0.068 0.028 Cheshire Fire and Rescue Payroll 0.038 1.665 Other Creditors 1.745 4.414 Total Creditors 5.936 New accounting treatment for the Firefighters Pension Fund has required the reclassification of the amount due to the Pension Fund. This was included under creditors in 2006/07 but is now shown on a separate line on the face of the Balance Sheet. 19. Long-Term Borrowing In the past the Authority has borrowed externally to finance the major part of its capital spending. More recently it has borrowed internally from revenue resources for this purpose. External long-term borrowing is analysed by maturity date below: Analysis of Long-Term Debt Maturity in Years Total Source 1 to 2 2 to 5 5 to 10 Over 10 £'m £'m £'m £'m £'m Public Works Loan Board (PWLB) - 2.298 4.000 0.700 6.998 Debt Transferred from former GMC 0.334 1.150 2.534 2.758 6.776 Total 0.334 3.448 6.534 3.458 13.774 Accrued Interest Previously the SORP required authorities to show accrued interest on borrowing within the current liabilities section of the balance sheet. This presentation was based on the optional treatment allowed under FRS 4. The 2007 SORP incorporated the requirements of FRS 25, 26 and 29. Under these standards, the optional treatment allowed under FRS 4 is no longer permitted. Authorities now need to show the accrued interest as part of the carrying value of the loan. The accrued amount added to the PWLB loans is £0.077m. This is not included in the table above. This will be received in 2008/09. It is included on the face of the balance sheet. 30
    • Fair Value Financial Liabilities and assets represented by loans and receivables are carried in the balance sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that will take place over the remaining term of the instrument. For the Authority this specifically applies to PWLB loans. Sector is a leading Treasury Management and Capital Financing Advisor to the UK Public Service Organisations. They have calculated the fair value at £8.586m by using the new borrowing rate, as opposed to the premature repayment rate as the discount factor for all PWLB borrowing. This is because the premature repayment rate includes a margin which represents the lender’s profit as a result of rescheduling the loan, which is not included in the fair value calculation since any motivation other than securing a fair price should be ignored. However it should be noted that alternative fair values can be calculated if an early repayment basis is adopted. If this basis was used the fair value would be £8.710m. as calculated by PWLB. Transferred Debt Tameside Metropolitan Borough Council administers debt transferred to the Authority from the former Greater Manchester County (GMC). This transferred debt is a statutory provision and is therefore not covered within the definition of Financial Instruments. Debt repayable within 12 months of the Balance Sheet date is classified as short term borrowing. 20. Provisions Movements within the Authority’s provisions during 2007/08 and the balances at the start and end of the year are shown below. Balance at Increase Decrease Balance at Description 1 April In In 31 March 2007 Year Year 2008 £’m £’m £’m £’m CPD Scheme 0 1.190 - 1.190 Insurance Provision 1.782 1.246 1.714 1.314 Pre-CPD Transitional 0.310 - 0.310 - Arrangements Total 2.092 2.436 2.024 2.504 31
    • The purpose and operation of the provision are discussed in the following notes. a) Insurance In recent years, the Authority has carried excess clauses within its legal liability and vehicle insurance policies. Since claims may not be settled for some time after they arise, an Insurance Provision was established to meet the cost of such claims. An annual revenue contribution is made to the provision and claims settlements are charged to the provision. In compliance with FRS12 the provision has been reduced to the amount required to meet all known liabilities assessed on an actuarial basis. The surplus above the sum required to meet the scheme liabilities of £0.567m has been transferred to the Insurance Reserve. The Authority is not aware of any material unfunded risks other than any possible liability resulting from unpaid claims against its former insurer Municipal Mutual Insurance Limited (MMI). b) Municipal Mutual Insurance Limited (MMI) MMI are no longer trading as an insurance company but they continue to meet claims liabilities in full from remaining resources. A Scheme of Arrangement with major creditors has been agreed and became effective , but held in reserve , on the 21st January 1994.The main effect of the Scheme if triggered would be the imposition of a levy on all claims paid since 30th September 1993. As at the 31st March 2007 the unpaid claims submitted by the Authority were estimated by MMI to be valued at £2,000 and the amount liable to the levy if the Scheme is triggered is £1.159m. c) Pre-CPD Payment Provision for the payment to those in receipt of long service increment under the transitional arrangements relating to the Continual Professional Development Scheme. This provision has been fully utilised during 2007/08. An estimated provision was also made in 2006/07 relating to outstanding pay related payments and this item has now been written back to revenue. d) CPD payment The National negotiations around CPD payments have been resolved and payments are scheduled to be made in July 2008. At the time of producing the accounts the number of employees eligible to receive a payment had not been quantified therefore a provision was created to recognise the potential liability. 32
    • 21. a. Capital Adjustment Account Movements within the Capital Adjustment Account are analysed below. £’m Balance at 1 April 2007 0 Transfer of FARA/CFA balance -23.178 Repayment of external loans -0.290 Financing of fixed assets 1.219 De minimis 0.305 NBV of Disposals 0.667 Capital Expenditure financed from Revenue -2.761 Impairment 0.762 Usable capital receipts applied -0.868 Balance at 31 March 2008 -24.144 b. Revaluation Reserve Movements within the Revaluation Reserve are analysed below. £’m Balance at 1 April 2007 0 Revaluations -1.472 Balance at 31 March 2008 -1.472 The balance sheet figures have been adjusted from those included in the accounts for 2006/07 to accommodate the implementation of the Revaluation Reserve. This reserve replaces the Fixed Asset Restatement Account (FARA). The £14.922m balance on FARA as at 31st March 2007 has been written off to the Capital Financing Account to form the new Capital Adjustment Account. The closing position on the reserve at 31st March 2008 therefore only shows revaluation gains accumulated since 1st April 2007. 22. Useable Capital Receipts £’m £’m Balance at 1 April 2007 -0.638 Amount received in year -0.230 Usable Capital Receipts Applied 0.868 0.638 Balance at 31 March 2008 0 The Balance of the capital receipts as at 1st April 2007 together with the receipts received during the year have been utilised to fund capital expenditure incurred during the year. 33
    • 23. Earmarked Reserves Movements within the Authority’s earmarked reserves during 2007/08 and the balances at the start and end of the year are shown below. Balance at Increase Decrease Balance at Description 1 April In In 31 March 2007 Year Year 2008 £’m £’m £’m £’m Capital Reserve 5.397 0.750 2.591 3.556 Insurance Reserve 2.531 0.567 - 3.098 Total 7.928 1.317 2.591 6.654 The purpose and operation of the reserves are discussed in the following notes. a) Capital Reserve The Capital Reserve was built up from revenue contributions for the purpose of funding deficiencies in the resources available to finance the Authority’s capital programme. In 2007/08 £2.591m of expenditure was financed from the Capital Reserve (Nil in 2006/07). A contribution of £0.750m from the Authority’s revenue budget was also made in line with the 2007/08 budget strategy. b) Insurance Reserve This reserve has been established as a result of reducing the insurance provision in compliance with FRS12. The reserve provides a prudent contingency against unforeseen future claims, including the MMI Scheme of Arrangement referred to under provisions note. The reserve also provides a prudent hedge against changes in the insurance market which may require premium increases. The increase in the reserve represents the surplus funds transferred from the insurance provision. 24. PFI Payments made under the PFI contract up until 31 March 2008 amounted to £5.889m with £4.828m in Government subsidy. Future payments required under the PFI contract at 31 March 2008 are estimated to be £12.772m, of which it is anticipated that £7.573m will be financed by Central Government subsidy. The table below shows the expected timing of future PFI transactions. Analysis of PFI Future Expenditure and Grant Support Years Source 1 to 2 2 to 5 5 to 10 Over 10 Total £'m £'m £'m £'m £'m PFI Payments 1.367 2.125 3.748 5.532 12.772 Central Government Subsidy -0.904 -1.356 -2.261 -3.052 -7.573 Total 0.463 0.769 1.487 2.480 5.199 34
    • 25. Leasing There were no payments under leases in respect of vehicles, equipment and buildings in 2007/08 as the Authority currently has no leases (there were no payments in 2006/07). 26. Pension Related Notes As part of the terms and conditions of employment of its firefighters and other employees, the Authority offers retirement benefits. Although these benefits will not actually be payable until employees retire, the Authority’s commitment to make the payments must be disclosed at the time that employees earn their future entitlement. The Authority participates in two pension schemes: The Fire Service Pension Scheme for its uniformed firefighters - this is an unfunded scheme, meaning that there are no investment assets built up to meet the pensions liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due. The Local Government Pension Scheme for civilian employees - this is a funded scheme, meaning that the Authority and employees pay its contributions into a fund, calculated at a level intended to balance the pensions liabilities with investment assets. The cost of retirement benefits is recognised in the Net Cost of Services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge we are required to make against precept income is based on the cash payable in the year, so the real cost of retirement benefits is reversed out of the Income and Expenditure Account in the Statement of Movement on General Fund Balances. The following transactions have been made in the Income and Expenditure Account during the year: Local Government Fire Service Pension Pension Scheme Scheme 2006/07 2007/08 2006/07 2007/08 £’m £’m £’m £’m Net Cost of Services • Current service cost 1.990 1.860 35.690 33.110 • Past service costs 0.160 0.100 0.580 - Net Operating Expenditure • Interest cost 2.950 3.250 54.060 56.770 • Expected return on assets in the scheme -3.050 -3.500 - - Amounts to be met from Government Grants and Local Taxation • Movement on pensions reserve -0.514 -0.074 -61.430 -59.780 Actual amount charged against precept income for pensions in the year: • Employers’ contributions payable to scheme 1.467 1.636 - - • Retirement benefits payable to pensioners 0.069 - 28.900 30.100 The figures for the 2007/08 Firefighters Pensions Scheme have been supplied by the Government Actuary’s Department. The figures for 2007/08 for the Local Government Pension Scheme have been supplied by Barry McKay FFA of Hymans Robertson. The latest formal valuation of the Local Government Pension Fund was at 31st March 2007. a) Uniformed Fire-fighters 35
    • The Authority administers two defined benefit pension schemes for its uniformed firefighters in accordance with DCLG regulations. The schemes are unfunded, that is all pensions and other payments are charged to the Fire Service Pension Fund Account during the year, and employee contributions (New Scheme - 8.5% and Existing Scheme -11% of pensionable pay) and other income are credited to the same account. Any deficit is financed by DCLG top-up grant. b) Non-Uniformed Employees and Control Staff In respect of its non-uniformed employees and control staff, the Authority pays an employer’s contribution, based on employees’ superannuable pay, into the Greater Manchester County Superannuation Fund which is administered by Tameside Metropolitan Borough Council on behalf of all local authorities within Greater Manchester. In addition, that part of lump sums/pensions paid to pensioners of the Fund relating to added years granted by the Authority is paid directly to individuals or reimbursed to the Fund in accordance with the regulations of the scheme. The pension scheme is a funded defined benefit scheme and the funding contribution, determined by actuarial valuation, has been set to meet 100% of the liabilities of the fund. The most recent actuarial review set the employer’s contribution at 16.6% of superannuable pay for 2007/08 (16.4% in 2006/07) and this amounted to £1.636m (£1.467m in 2006/07). This sum was charged to the appropriate service revenue accounts. Pension Funds Liabilities As part of the terms and conditions of employment of its officers and other employees, the Authority offers retirement benefits. Although these will not actually be payable until employees retire, the Authority has a commitment to make the payments. FRS17 requires that this commitment be disclosed at the time that employees earn their future entitlement. The Authority participates in two pension schemes, the Fire Service Pension Scheme for fire- fighters and the Local Government Pension Scheme for civilian employees. It should be noted that FRS17 does not impact upon the level of balances held by the Authority. The underlying assets and liabilities for retirement benefits attributable to the Authority at 31 March are as follows: Local Government Fire Service Total Pension Scheme Pension Scheme 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar 2007 2008 2007 2008 2007 2008 £’m £’m £’m £’m £’m £’m Estimated liabilities in Scheme 59.785 54.139 1,049.560 919.929 1,109.345 974.068 Estimated assets in Scheme 50.390 48.310 - - 50.390 48.310 Net asset/ liability(-) -9.395 -5.829 -1,049.560 -919.929 -1,058.955 -925.758 36
    • The liabilities show the underlying commitments that the Authority has in the long-run to pay retirement benefits. The total liability of £925.758m has a substantial impact on the net worth of the Authority as recorded in the Balance Sheet. However, statutory arrangements for funding the deficit mean that the financial position of the Authority remains healthy: • the deficit on the local government scheme will be made good by increased contributions over the remaining working life of employees, as assessed by the scheme actuary • finance is only required to be raised to cover fire pensions when the pensions are actually paid. 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. An independent actuarial process has assessed both the Fire Scheme and the Local Government Scheme liabilities. The main assumptions used in their calculations have been: Local Government Fire Service Pension Scheme Pension Scheme 2006/07 2007/08 2006/07 2007/08 % % % % Rate of inflation 3.2 3.6 3.4 3.7 Rate of increase in salaries 4.7 5.1 4.9 5.2 Rate of increase in pensions 3.2 3.6 3.4 3.7 Rate for discounting scheme liabilities 5.4 6.9 5.4 6.9 The Fire Service Pension Scheme has no assets to cover its liabilities. Assets in the Local Government Pension Scheme are valued at fair value, principally market value for investments, and consist of the following categories, by proportion of the total assets held by the Fund: Assets (Employer) Long Term 31 March Long Term 31 March Return 2007 Return 2008 at 31 Mar 2007 at 31 Mar 2008 % £’m % £’m Equity investments 7.8 33.650 7.7 30.480 Bonds 4.9 8.030 5.7 9.030 Property 5.8 4.970 5.7 4.200 Cash 4.9 3.740 4.8 4.600 Total 6.9 50.390 6.9 48.310 The Auditors of the Greater Manchester Pension Fund have notified that the estimated assets in the Greater Manchester Local Government Pension Scheme were understated by an estimated 1.1% (estimated £0.5m) by the actuary. 37
    • Movements on Pensions Reserve The actuarial loss identified as movements on the pensions reserve in 2007/08 totalled £178.750m. The losses can be analysed into the following categories, measured as absolute amounts and a percentage of assets or liabilities at 31 March 2008. Local Government Pension Scheme 2003/04 2004/05 2005/06 2006/07 2007/08 £’m % £’m % £’m % £’m % £’m % Differences between the expected and 4.240 14.1 1.710 4.6 5.940 12.8 0.310 0.6 -5.370 -11.1 actual return on assets Differences between actuarial assumptions about -0.030 -0.1 2.300 4.7 0.120 0.2 0.030 0.1 -2.380 -4.4 liabilities and actual experience Changes in the demographic and financial - - -9.110 -18.6 -7.580 -12.7 3.980 6.6 11.390 21.0 assumptions used to estimate liabilities Total 4.210 -5.100 -1.520 4.320 3.640 Fire Service Pension Scheme 2003/04 2004/05 2005/06 2006/07 2007/08 £’m % £’m % £’m % £’m % £’m % Differences between actuarial assumptions about -13.660 -2.1 -18.360 -2.0 3.720 0.3 47.720 4.4 1.750 0.2 liabilities and actual experience Changes in the demographic and financial -94.070 -14.6 -197.170 -21.9 -157.010 -14.3 65.170 6.2 172.760 18.8 assumptions used to estimate liabilities Pension values transferred from -0.310 -0.710 - - other Fire Authorities Gain relating to new ill heath retirement - - - - 14.900 arrangements Total -107.73 -215.840 -154.000 189.410 112.890 0 Total -103.520 -220.940 -155.520 117.210 193.050 38
    • 27. Revenue Activities The net cash flow can be reconciled to the Income and Expenditure Account as follows: 2006/07 2007/08 £’m £'m -1.109 Deficit/Surplus (-) for the year -1.946 -2.485 Repayment of Debt -2.502 0.367 Use of Reserves and Provisions 0.862 0.216 Removal of Deferred Charges 0.183 - Direct Revenue Financing -2.762 -1.144 Interest Paid -1.061 0.567 Interest Received 0.600 Items on Accruals Basis 0.034 Stocks 0.013 0.897 Creditors -1.478 -0.107 Debtors -0.812 - Accrued Interest 0.017 -2.764 Revenue Activities Net Cash Flow -8.886 28. Reconciliation of the movement in cash to the movement in net debt. Loans Temporary Total Outstanding Loans £'m £'m £'m Net debt per balance sheet at 31 March 2008 13.851 0.311 14.162 Net debt per balance sheet at 1 April 2007 14.088 0.288 14.376 Movement in Year 0.237 -0.023 0.214 Accrued Interest on Long Term Borrowing 0.077 Total Financing per Cash Flow Statement 0.291 Add Net Cash Inflow before financing -1.636 Add Net decrease in short term deposits -1.378 Net Movement in Cash -2.723 29. Movement in Cash 39
    • This statement identifies the items making up the changes in cash shown on the Cash Flow Statement. 31 March 2007 31 March 2008 Movement £’m £’m £’m Cash Overdrawn -3.165 -0.442 -2.723 -3.165 -0.442 -2.723 30. Liquid Resources Short Term Investments have decreased by £1.285m from £7.879m at 31 March 2007 to £6.594m at 31 March 2008. 31. Analysis of Government Grants This statement analyses the other Government Grants, which are shown in the revenue activities section of the Cash Flow Statement. 2006/07 2007/08 £’m £’m -8.799 Pensions Top Up Grant -10.621 -11.340 Revenue Support Grant -10.350 -0.843 Community Safety -1.120 -0.452 Private Finance Initiative -0.452 -0.118 New Burdens -0.283 -0.071 New Dimensions - - Resilience Grant -0.070 -0.040 Other Grants - -21.663 -22.896 32. Pension Fund Account The CIPFA 2006 Statement of Recommended Practice SORP introduced a new requirement for the creation of a Pension Fund Account and Net Assets Statement in respect of the Fire-fighter’s Pension Scheme. This was subsequently updated by the 2007 SORP. The primary objective is to separate the cost of providing pensions from the cost of running a Fire and Rescue Service. Therefore, any accruals created relating to the Pension Fund are removed from the Balance Sheet and a corresponding entry created to recognise the relationship with the Pension Fund Account. 40
    • PENSION FUND ACCOUNT 2006/07 Note 2007/08 £'m Contributions Receivable -11.769 From Employer -11.983 -6.118 From Employee -6.278 -0.162 Ill Health Retirements -0.116 Transfers In - Individual Transfers in from other schemes - - Other - Benefits Payable 20.907 Pensions 22.376 6.099 Commutations and lump sum retirement benefits 5.717 Other 0.073 Widows Pensions 0.066 0.044 Dependant Children 0.060 0.063 Ill Health 0.099 Payments to and on account of leavers 0.001 Refunds of contributions - Individual Transfers out to other schemes 0.161 9.138 Sub Total: Net Amount Payable/Receivable for the year 10.102 before top-op grant receivable/payable to DCLG -9.138 Top-up grant receivable -10.102 0 Net amount payable/receivable for the year 0 NET ASSETS STATEMENT 2006/07 Note 2007/08 £'m 0.339 Pension Top-Up Grant Payable -0.179 0.420 Payments in Advance 0.077 - Lump Sum Commutation -0.600 - Unpaid Pensions Due 0.318 - Transfer Values into the scheme - - Transfers out of the scheme -0.200 -0.759 Amount due to/from General Fund 0.584 0 0 NOTES TO THE PENSION FUND ACCOUNT 41
    • Introduction The funding arrangements for the firefighters pension scheme in England changed on 1st April 2006. Before 1st April 2006 these schemes did not have a percentage of pensionable pay type of employer’s contribution - rather each authority was responsible for paying the pensions of its own former employees on a pay as you go basis. Under the new arrangements the schemes remain unfunded but Authorities will pay an employer’s pension contribution based on a percentage of pay into the Pension Fund. Each Authority in England is required by legislation to operate a Pension Fund and the amounts that must be paid into and out of the Fund are specified by regulation under the Firefighters’ Pension Scheme (Amendment) (England) Order 2006. Employees’ and employers’ contribution levels are based on percentages of pensionable pay set nationally by the Department of Communities and Local Government (DCLG) and subject to triennial revaluation by the Government Actuary’s Department. There are no investment assets and the fund is balanced to nil each year by receipt of pension top-up grant from DCLG or by paying over any surplus to DCLG. The fund’s financial statements do not take into account liabilities to pay pensions and other benefits after the period end. Accounting Policies The accounting policies adopted for the production of the pension fund account are in line with recommended practice and follow those that apply to the Authority’s primary statements. The Net Assets statement does not include liabilities to pay pensions and other benefits after the balance sheet date. Future liabilities are addressed under the application of FRS17 (See note 26). Contingent Asset When the Statement of Accounts was originally produced, the Pension Fund Account included a debtor of £1.224m. This represented a prudent estimate of the value of pensions receivable from other schemes as a consequence of the employment of new recruits. These employees are given the option to transfer any pension earned in their previous employment to the Firefighters’ Pension Scheme. Technical advice was provided by the Audit Commission during the course of the audit and it has been agreed that the estimated debtor be removed from the Pension Fund Account. The Statement has been adjusted accordingly. However it should be recognised that there is a contingent asset relating to these pension transfers of £1.224m and these will be recorded in the pension fund account as and when they arise. 42
    • STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS The Authority’s Responsibilities The Authority is required: • to make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this Authority, that officer is the Treasurer; • to manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets. I confirm that these accounts were approved by the Audit Committee at the meeting held on the 25th June 2008. Signed on behalf of the Greater Manchester Fire and Rescue Authority by the Chair of the Audit Committee approving the accounts: Signed________________________________________________ Councillor 25th June 2008 The Treasurer’s Responsibilities The Treasurer is responsible for the preparation of the Authority’s Statement of Accounts which, in terms of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in Great Britain (“the Code of Practice”), is required to present fairly the financial position of the Authority at the accounting date and its income and expenditure for the year ended 31 March 2008. In preparing this Statement of Accounts, the Treasurer has: • selected suitable accounting policies and then applied them consistently; • made judgements and estimates that were reasonable and prudent; • complied with the Code of Practice. The Treasurer has also: • 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 responsibilities for the Statement present fairly the financial position on the Greater Manchester Fire and Rescue Authority: Signed________________________________________________ D J Smith MA PhD CPFA Treasurer 25th June 2008 43
    • Annual Governance Statement for the year ended 31st March 2008 Corporate Governance is the system by which the Authority directs and controls its functions and relates to the community. A key aspect of corporate governance is the requirement to put into place “effective risk management systems, including systems of internal control”. Greater Manchester Fire and Rescue Authority is committed to the highest standards of corporate governance as outlined in this Annual Governance Statement. 1. Introduction/Background to the Annual Governance Statement The purpose of the Annual Governance Statement is to demonstrate and evidence that there is a continuous review of the effectiveness of the Authority’s internal control, performance, and risk management systems. This allows an assurance on their effectiveness to be provided and also the production of a corporate action plan to address any identified weaknesses. The Accounts and Audit Regulations 2003 introduced a new regulation in relation to bodies’ responsibility for financial management in that Authorities were required to conduct an annual review of the effectiveness of its system of internal control and publish a Statement on Internal Control with their Annual Statement of Accounts. In April 2006 amendment regulations to the Accounts and Audit Regulations 2003 revised the detail of the compilation of the Statement of Internal Control (from 2006/2007) to include additional Member approval of the review of the system of internal control and also the requirement for the body to conduct an annual review of the effectiveness of the system of internal audit. In August 2006 the Department of Communities and Local Government issued additional guidance to clarify “proper practice” in relation to internal control. The clarification refers to certain key CIPFA documents, viz.:-  Statement on Internal Control: meeting the requirements of the Accounts and Audit Regulations 2003 (CIPFA 2004).  Corporate Governance in Local Government: A Keystone for Community Governance (CIPFA/ SOLACE 2001). Updated by Delivering Good Governance in Local Government (CIPFA/SOLACE 2007) CIPFA have confirmed that from 1st April 2007 “proper practice” in relation to internal control is as detailed in the Delivering Good Governance in Local Government (CIPFA/SOLACE 2007) and this subsumes previous “proper practice” and therefore has statutory backing. The new “proper practice” builds on existing disclosure statement requirements by extending the existing legislative requirements, governance principles, and management processes relating to the whole organisation and the activities through which it accounts to, engages with and leads its community. 44
    • The Authority has always complied with the appropriate legislation and “proper practice” guidance resulting in a corporate disclosure statement that always met the current “proper practices” criteria and as such the format of this years statement is not significantly different to the wider governance statement produced in previous financial years. A description of the key elements of the Authority’s assurance and internal control environment is detailed at Appendix 2. 2. Vision Values and Aims The Authority’s vision has been communicated to all stakeholders. The Authority’s vision “To make Greater Manchester a safer place by being a modern, community focused, and influential Fire and Rescue Authority” is supported by transparent corporate objectives that are evidenced within its Integrated Risk Management Plan and Performance Plan, and associated plans including the Service Action Plan and departmental and Borough Command Action Plans. The Authority’s values and aims reflect legislative, national, regional, and local priorities. 3. Scope of Responsibility The Authority, through its elected Members and officers, is responsible for ensuring that its business is conducted in accordance with the law and proper standards, that public money is safeguarded and properly accounted for, and used economically, efficiently, and effectively. In discharging this accountability, members and senior officers are responsible for putting in place proper arrangements for the governance of the Authority’s affairs and the stewardship of the resources at its disposal. To this end the Authority has approved and adopted a Code of Corporate Governance, which is consistent with the principles and reflects the requirements of the CIPFA/SOLACE Framework Delivering Good Governance in Local Government. Copies of the policy documents are available on our website. 4. Purpose of the System of Internal Control The Authority sets the overall strategy and policy and has put in place a well-defined organisational structure, with clearly understood lines of responsibility and delegation of authority to help ensure that strategies and policies are effectively implemented and adhered to. Brigade Management Team are ultimately responsible to the Authority for the system of internal control and reviewing its effectiveness. Any system of internal control can only provide reasonable assurance and not absolute assurance that all significant risks will be mitigated. The key issue is that risks, their potential for occurring and possible impact are identified. A conscious decision can then be made on how to prioritise and deal with those risks. The system, therefore, is designed to effectively manage, rather than eliminate, the risks that are attached to the fulfilment of the Authority’s vision “To make Greater Manchester a safer place by being a modern, community focused, and influential Fire and Rescue Authority” The fundamental internal drivers supporting the Authority’s aims are effective community leadership, high standards of corporate governance, and excellent service performance. 45
    • 5. The Assurance Framework and Internal Control Environment The Authority’s system of internal control (see Appendix 2) is based on ongoing management and review processes introduced to minimise the impact of risks to the achievement of the Authority’s mission, aims and objectives. This system of internal control has been in operation in respect of the financial year ended 31st March 2008 and up to the date of approval of the annual report and accounts. In summary the Authority’s Internal Control Environment includes:-  A high level vision embedded in the service planning, delivery, risk management, and performance management frameworks.  A Monitoring Officer responsible for ensuring the legality of Authority actions and supporting the Standards Committee.  A Standards Committee to promote and maintain high standards of conduct by the Members of the Authority.  A Responsible Financial Officer supported by statute, to ensure the effective administration of the financial affairs of the Authority.  Comprehensive budget setting and monitoring framework with clearly defined guidelines and responsibilities with frequent reporting of performance to committee.  An Internal Audit function that consistently meets all professional standards (as assessed by the Authority’s external auditor) supports the Authority in the achievement of its improvement agenda and has responsibility for the continual review of major financial controls and the wider internal control environment.  A local Code of Corporate Governance that is reassessed annually by Internal Audit.  A Risk Management policy, framework and Corporate Risk Register approved and monitored by the Authority. The framework demonstrates that risk management arrangements are robust and embedded within the service planning and decision making processes of the Authority.  Published Anti-Fraud and Corruption Strategy, Whistleblowing Policy, and Fraud Prosecution Policy to ensure correct reporting and investigation of suspected fraudulent activities.  A comprehensive performance management framework with clearly defined performance management targets, that measures financial and other performance data linked to the Authority’s key objectives.  An ICT Strategy covering a defined time period and structured under the key areas of Infrastructure, Application systems, and Management systems. The Strategy contains a range of work plans that are reviewed in line with the requirements of the IRMP and Departmental Service Plans. Monitoring is via an ICT Strategy Working Group who meet periodically to consider existing projects and the requirement for new ICT systems.  A Best Value Improvement Programme and monitoring framework to reflect the Authority’s strategic priorities to ensure that proper arrangements operate to deliver agreed improvements within established timescales.  Personal Review Programme dovetailed with well publicised human resources policies, associated procedures, induction processes, and Codes of Conduct designed to ensure that staff are appropriately skilled to deliver the Authority’s aims and objectives and conduct themselves in a proper manner. 46
    •  An Audit Committee (including independent non-elected Members) to complement the existing Finance and General Purposes Committee responsibilities and oversee the work of the Internal and External Audit functions and provide independent assurance of the effectiveness of:- a. The governance arrangements of the Authority and its services. b. The Authority’s risk management framework and the associated control environment. c. The Authority’s financial management framework processes and the way this relates to the performance of individual services and the Authority as a whole.  A Strategic Group chaired by the DCFO and attended by key personnel to manage the Authority’s actions in respect of external inspection processes.  An Innovations and Partnerships Board, chaired by the Deputy County Fire Officer, for review and approval (if appropriate) of all partnership proposals. This board was established following a comprehensive review of partnerships by PWC. The Authority’s system of internal control is based on a framework, and supported by associated policy documentation, as outlined below :- Assignment of Responsibilities/Rules of Policy Documentation Procedures/Codes and Protocols  Terms of Reference of and Delegation of  Anti-Fraud and Corruption Policy Statement Powers to Committees and Strategy  Scheme of Functions Delegated to Chief  Whistleblowing Policy and Guidance for Officers Managers  Budget and Policy Framework Rules  Fraud Prosecution Policy  Financial Regulations  Risk Management Strategy  Standing Orders  Strategic Planning Protocol  Standing Orders with Respect to Contracts  IT Security Policy  Members and Officers Codes of Conduct  Misuse of the Internet Policy  Officer Employment Procedure Rules  Communications Strategy  Internal Audit Remit and Protocols  Corporate Governance Assurance Statement  Managed Audit Protocol  Statement on Internal Control  Brigade Management Team  Financial and Accounting Manual  Local Code of Corporate Governance  Revenue Budget Manual  Access to Information Statement  VAT Manual  Financial Management of Partnership Arrangements Policy Members of the Authority are regularly and fully briefed on all significant financial, operational, and strategic decisions. These include such matters as :- 47
    •  Fundamental budget reviews  Principles of budget preparation  Longer term budget forecasts  Revenue monitoring and revised forecasts  Growth proposals  Savings reports  RSG settlement implications  Treasury management reports  Impact and progress of major capital schemes  Capital forecasts and out-turn reports  Major system acquisitions  Revision of fees and charges  Use of delegated powers  Service Planning  Best Value Improvement and Performance  Internal Audit activities In addition, authors of reports to Members have been given advice on the assessment and management of risk. 6. Review of Effectiveness The effectiveness of the Authority’s system of internal control is demonstrated by a range of independent procedures and protocols, including:-  Brigade Management Team procedures and associated management action  Financial Management reporting  Performance Management reporting  Committee reporting  Monitoring Officer  Internal Audit Collectively these form the basis of the Authority’s governance arrangements and are further validated by independent assessments from various external agencies:-  External Inspectorate  External Audit  CPA refreshment Brigade Management Team The Authority is led at officer level by the County Fire Officer and Chief Executive with the support of nine senior managers with departmental or operational responsibilities who collectively form the Brigade Management Team. The Brigade Management Team, in conjunction with Members, is responsible for the development of the Authority’s vision – “To make Greater Manchester a safer place by being a modern, community 48
    • focused, and influential Fire and Rescue Authority” and the key priorities and supporting objectives to reflect community, regional, and national issues. Key objectives are consistently evidenced within planning documents including the Authority’s Performance Plan, Integrated Risk Management Plan, and associated plans including the Service Action Plan and departmental and Borough Command Action Plans. The success of the Authority’s management and internal control arrangements is demonstrated in the key messages within the current Annual Audit Letter viz.:-  “For the second successive year, the Audit Commission’s overall judgement is that Greater Manchester Fire and Rescue Authority (GMFRA) is improving well. In addition, GMFRA was assessed as good in the Fire and Rescue Comprehensive Performance Assessment carried out in 2005.”  “The main message for the Authority that further improvements have been made to already good performance.”  “Performance has improved in national and local priority areas. Partnership working is a strength. GMFRA works well with all ten Greater Manchester Councils and other partners undertaking local community projects. Community safety initiatives are having a measurable effect.”  “The most recent Department for Communities and Local Government’s (CLG) assessment of the Authority’s operations was of performing strongly (2006). GMFRA’s performance indicators for 2006/07 have improved by pro-active performance management and hard work to understand and improve the fire and rescue performance information.”  “Improvements in people management, training and an accelerated approach to diversity are addressing previously identified weaknesses. From a low base, recruitment is becoming representative of local communities.”  “The Authority’s use of resources judgement is improved and again results in an overall score of 4 out of 4, performing strongly and well above minimum requirements. Particularly notable were the integrated and embedded risk management practices, financial reporting, the approach to partnership working and financial standing.” The Authority’s governance arrangements are supported by the continuous review work performed by Internal Audit. The Internal Audit remit is under continual review to reflect and support the legislative requirements of the Section 73 (Local Government Act 1985) Officer, the required professional standards, the revisions to the responsibilities of external audit, and the key priorities of the Authority. The detailed remit of Internal Audit is revised as necessary through the Audit Committee (previously Finance and General Purposes Committee) who approve all Internal Audit Plans and receive reports on Internal Audit Activities (19th December 2007, 25th June 2008). The latter report is contained within the Annual Report for the Section which, in accord with the Accounts and Audit Regulations, provides an annual review of the Service and demonstrates that a high quality and effective Internal Audit service is provided. As previously reported to Members, the remit of Internal Audit is no longer restricted to financial systems and associated controls. A significant proportion of the Annual Audit Plan is focused on providing assurance that operational and strategic risks are effectively managed to ensure the Authority’s vision is achieved and quality services provided. During the last six financial years Internal Audit has continued to review appropriate management and reporting arrangements to satisfy itself that its approach to corporate governance and internal control is both adequate and effective in practice. 49
    • The County Fire Officer and Chief Executive and the Treasurer have been given the responsibility for overseeing the implementation and monitoring the operation of the Local Code of Corporate Governance, reviewing the operation of the local code in practice, and reporting annually to the Audit Committee on compliance with the local code and any changes that may be necessary to maintain it and ensure its effectiveness in practice. In addition, the Treasurer (or his nominated officer) has responsibility to review independently and report to Members annually, to provide assurance on the adequacy and effectiveness of the code in practice and the extent of management compliance with it. This report was delivered under separate cover to the Audit Committee on 25th June 2008. Significant Internal Audit reviews on governance arrangements, risk management, internal control validation, and system development/implementation have been completed during the financial year and reported accordingly. In all these areas the Authority has shown significant improvement in accordance with agreed action plans (Local Code of Corporate Governance, External Audit reports, CPA). Good working relations exist with Management. All Internal Audit reports are issued to the Deputy County Fire Officer and all recommendations are appropriately monitored by a quarterly working group meeting so that audit recommendations to improve control procedures are implemented promptly. The Audit Commission has completed reviews of Internal Audit work and although formal reports have not been issued to confirm that professional standards are maintained, they have continued to use and place reliance on Internal Audit work, providing implicit confirmation that it meets all the required standards. As reported to the Audit Committee on 25th June 2008, the Internal Audit assurance opinion on the Authority’s overall control environment is based on the reviews completed (and Management actions taken) as part of the Internal Audit Plan in respect of 2007-2008. Significant reviews covered key systems implementation, core financial systems, Best Value improvement and Best Value Performance Indicators verification, and a continuing assessment of key issues and corporate governance measures. Particular relevance is placed on an external assessment of this work as undertaken by the Audit Commission in support of their statutory reviews (see comments below). On the basis of the above, assurance can be gained that the Authority is committed not only to properly managing its affairs but also to striving to obtain an “excellent” CPA categorisation. This is particularly evident in the key areas of risk management, performance management, service planning, and corporate governance. In conclusion it is the opinion of the Treasurer that the Authority operates an effective overall internal control environment. This opinion is supported by the independent review work performed by external agencies as follows:- Audit Commission As previously reported to the Audit, and Policy Committees, from 2006 the Audit Commission introduced several key changes in the way in which they reported their work to the Authority, viz:-  The introduction of an annual governance report to present a draft audit opinion and also a VFM conclusion, and  A change in style of the Annual Audit Letter to present only the high level results of the audit and inspection programme and the associated direction of travel assessment. 50
    • Appropriate External Audit reports in respect of 2007/2008 were presented as follows:-  Annual Governance Report (September 2007)  Opinion on Financial Statements (November 2007)  Use of Resources Auditor Judgements (December 2007)  Annual Audit and Inspection Letter (including Direction of Travel) (February 2008). The reports continue previous years trends and again commented positively on the Authority’s internal control and performance frameworks as outlined below: - Opinion on Financial Statements The Audit Commission Act 1998 and the Code of Practice require the Authority’s external auditors to give an opinion as to whether the statement of accounts present fairly the financial position of the Authority. Key Positive Comments from the Audit Commission include :- “We issued an unqualified opinion on the 2006/07 statement of accounts and the fire fighter’s fund accounting statements on 27th September 2007.” “We are generally satisfied that the financial statements comply with good practice.” “No material weaknesses in accounting and internal control systems were identified from our final accounts testing.” Use of Resources (Auditors Judgements) The Authority’s internal control and performance management frameworks were assessed under the Use of Resources assessment which focuses on financial management and control but explores the key linkages with the Authority’s strategic management framework. The annual Use of Resources assessment evaluates how well Authorities manage and use their financial resources. The assessment focuses on the importance of having sound and strategic financial management to ensure that resources are available to support the Authority’s priorities and improve services covering five themes. The Authority retained its overall score of 4 (well above minimum requirements – performing strongly). This achievement needs to be considered in that the score was awarded against an updated, more difficult framework and the Authority also attained a higher individual component score. Key Positive Comments from the Audit Commission include :- “Financial Reporting (theme score 4) – Cumulative good practices and notable developments were found. For a number of years GMFRA has produced professional annual accounts, in accordance with relevant standards and timetables, supported by comprehensive working papers with only a small number of errors. The robust scrutiny of the accounts before approval by Members continues to demonstrate their good understanding of the accounts presented.” “The Authority has continued to actively promote external accountability. Notable practices have continued including the summary accounts booklet and web based version, consultation with stakeholders, which includes a readers’ panel and employees’ panel who feed back comments on both the draft summary and detailed statements to help make them more readable for the public.” “Financial Management (theme score 3) – The way the Authority prepares and manages the medium term financial strategy, budgets and capital programme is soundly based and designed to deliver its strategic priorities through completely embedded risk management processes and business planning. 51
    • Much other notable practice is identified including arrangements for governance and funding of partnerships and consultation with the Association of Greater Manchester Authorities (AGMA) Chief Executives, the AGMA financial challenge process.” “The Authority has continued to manage performance against budgets well. Good practices are in place. Ongoing improvements in 2006/07 developed the budget reporting format to cover specific initiatives.” “Estates and vehicle assets are well managed as detailed in the asset management plan and its annual update. The dedicated estates department has a local contractual partnering arrangement with a firm of property consultants allowing wider expertise. There is a sustained investment in programmed maintenance and a planned and controlled capital programme. The new environmentally sustained Ashton Fire Station opened under budget and to schedule.” “Financial Standing (theme score 4) – There is clear evidence that the Authority manages its spending within the available resources. Members have a keen understanding of key financial issues, risks and the modernisation agenda. Strong practices, embedded for a number of years, are in place:-  the budget and MTFS process linked to risks and business planning;  achievement of over £5 million annual cashable Gershon savings (2005/06 over £million) and  the AGMA financial challenge on reserve levels, the presentation to AGMA Chief Executives; and the challenge by GMFRA Members from ten different Authorities; “Internal Control (scheme score 4) – Risk management is embedded in all aspects of activity. There are many strengths, such as the annual updated risk management strategy, the corporate risk register linked with action planning and monitoring records, the IRMP (Integrated Risk Management Plan), the involvement of Members at all stages, and partnership working for the community risk register. Risk management processes are kept under review and updated and improved accordingly.” “Internal control processes are embedded and sustained and there are many strengths:-  The assurance framework is fully embedded in the Authority’s business processes and maps strategic objectives to risks, controls and assurances following the CIPFA SOLACE framework;  The high professional standards of the Internal Audit function were improved by the achievement of a programme of work based on risks, system controls and quality of delivery;  Partnership and governance arrangements have been reviewed and rationalised and made part of business responsibilities and priorities; and  The Audit Committee has become effective taking on a full role including the approval of accounts and adopting previous practices that had previously been undertaken in other Committees. “Arrangements are in place to promote probity and propriety in the conduct of the Authority’s business.” Annual Audit and Inspection Letter The current Annual Audit and Inspection letter presented to the Audit Committee and Policy Committee on 24th April and 8th May 2008 respectively, commented positively on the Authority’s internal control and performance frameworks as follows :- “The Audit Commission’s overall judgement is that GMFRA is improving well. GMFRA was assessed as good in the Fire and Rescue Comprehensive Performance Assessment carried out in 2005.” The main messages for the Authority included in this report outlining its direction of travel and therefore improvement are as follows:-  “Performance has improved in national and local priority areas. Accidental fire deaths and injuries, primary fires, deliberate primary fires and total fires have all reduced. Effective management of malicious and false alarm calls is reducing unnecessary call-outs”. 52
    •  “Additional funding targeted at community safety initiatives is having measurable effects.”  “Business processes have been streamlined. New initiatives are rigorously evaluated. The FRA leads a number of regional and national projects.”  “Partnership working is a strength. The FRA works well with all ten Greater Manchester councils and other partners undertaking local community projects.”  “Improvements in people management, training and an accelerated approach to diversity are addressing previously identified weaknesses.”  “DCLG’S 2006 operational assessment of service delivery assessed the planning and delivery of emergency response. The following text was provided by DCLG as part of their assessment of GMFRA in 2006 “Greater Manchester Fire and Rescue Services is performing well in all areas of service delivery, and particularly strongly in risk analysis and call management and incident support.””  “The Authority has continued to apply its strong operational and corporate capacity to understanding and improving their fire and rescue performance information.”  “The Authority has implemented opportunities to continue to improve reported performance.” Areas where the Authority recognises Audit Commission recommendations and is seeking to make improvements included:- Use of Resources (Auditors Judgements)  Continue to build on the exemplary accounts working paper practices developed for 2007 year end.  Continue to develop the arrangements for promoting external accountability.  Continue to develop the good financial planning practices in place to match developments.  Better demonstrate that there are project appraisals, business plans and affordability tests for new policy and capital developments.  Continue to develop and embed new budget frameworks so they are convenient form for all recipients.  Better demonstrate that investment and disposal decisions are based on a thorough option appraisal and whole life costing.  Make more use of performance indicators in respect of asset management.  Continue to apply and develop practices in place in respect of financial standing.  Complete the development of the corporate business continuity plan for its constituent sub plans for departments and activities.  Continue to develop existing strong internal control practices. 53
    • Annual Audit and Inspection Letter  “Continue to work on improving local performance and work with partners and the Audit Commission to achieve a common understanding and interpretation of performance information to help ensure that accurate comparisons of performance can be made.”.  “Evaluate the outcomes of various initiatives and developments. This will provide GMFRA with an improved process for assessing the benefits of any proposed projects and help prioritise scarce resources.”  “Continue to work with partners in preparation for the Comprehensive Area Assessment.”  “Continue to implement the plans for addressing equality and diversity issues.”  “Continue to support the action plans to strengthen human resources management and the implementation of updated policies and practices.  ”Have regard to the increasingly demanding requirements of the proposed Use of Resources for 2008/09.” Other Inspectors and Regulators Authorities generally receive assurance from other external inspectorates. In this respect the Authority underwent inspection activity by the Department of Communities and Local Government (CLG) as part of the CPA Inspection Process (2006), viz.:- The review focused on evidencing the current levels of Authority performance in accordance with the Operational Assessment of Service Delivery toolkit issued by the CLG. “The main messages for the Authority included in this report are as follows:-  The FRA is rated by this assessment as performing strongly.  Greater Manchester FRA is performing well in all areas of service delivery and particularly strongly in the areas of risk analysis and call management and incident support.  There is a strong risk management framework within the organisation and this is supported by accurate data analysis and an advanced suite of policies for the management of risk.  Policy across all areas of service delivery is effective with several pockets of notable practice.  The service demonstrates a resolute commitment to the modernisation agenda by creating and implementing innovative solutions to the challenges presented.  Overall Greater Manchester Fire and Rescue Services are performing strongly with a number of key areas of service delivery considered to be innovative or notable practice.” Areas where the Authority recognises CLG concerns (only 2 of the 5 review areas contained improvement requirements) and is seeking to make improvements included:-  Embedding policy arrangements for equality and diversity.  Improvements to the Personal Development Record process.  Crewing level maintenance. 7. Significant Partnership Assurances 54
    • The Statement of Recommended Practice (SORP) 2006 places an additional responsibility on Authorities in that their Statement on Internal Control should embrace controls over group activities where an Authority undertakes significant activities through a group. The “proper practices” guidance has extended this responsibility to controls over partnerships considered by the Authority to be significant i.e. have a detrimental effect on the Authority if the partnership failed. At this time the Authority is satisfied that it does not need to review assurance arrangements in its significant partnerships due to them either being public sector bodies with their own reported assurance/governance arrangements or the Authority’s financial commitment not being significant enough to justify such an assurance. 8 Significant Internal Control Issues No significant internal control issues have been identified, however, with the introduction of the Authority’s Local Code of Corporate Governance (Policy Committee 28th August 2003, updated 31st January 2008) it was recognised that certain issues would be introduced incrementally and this action was agreed with the Audit Commission. The recent review by Internal Audit re-assessed each component of the Local Code, and concluded “Greater Manchester Fire and Rescue Authority’s position against their local code of corporate governance remains excellent. The revised code has increased the focus in certain areas (consultation and staff developments). This review determined that appropriate work has been identified and is being carried out to address these areas and ensure further detailed compliance with the Authority’s Local Code of Corporate Governance.” A summary of progress and further agreed action is included at Appendix 1. It also highlights some sensitive areas within the public arena that the Authority is addressing and which provide practical illustrations of the Authority’s continued commitment to effective governance. On the basis of the opinion of the Treasurer as detailed above, we are satisfied that the Authority’s internal control/corporate governance arrangements are adequate and are operating effectively. We are satisfied that the enhancements identified will further improve our governance and internal control arrangements. We will assess their implementation and the effectiveness of dealing with the issues outlined as part of the formal risk management process. Signed: ………………………………………………………………………………… Councillor Fred Walker, Chairman of Greater Manchester Fire and Rescue Authority & Barry Dixon, County Fire Officer & Chief Executive on behalf of the Members and Senior Officers of Greater Manchester Fire and Rescue Authority. Date: …………………………………. 55
    • Appendix. 1 Corporate Governance Annual Statement of Assurance Areas where improvement work is ongoing include:- Principle 1 Focusing on the purpose of the Authority and on outcomes for the community and creating and implementing a vision for the local area.  The Innovation and Partnership Board held its last meeting in January 2008. A new Innovation and Partnerships Performance and Scrutiny Panel is in the process of being established. Terms of reference have been produced and member approval will be sought in May 2008. The first meeting is planned to be held in June 2008.  Due to the resignation of the Head of Corporate Communications and the resulting reprioritisation of workloads the progress of the review of the Consultation Strategy was disrupted. The review of the strategy has now been completed and is scheduled to be submitted to the BMT Meeting on 4 July 2008 for approval.  The Sustainability Policy and Strategy Action Plan was agreed by Policy Committee on 29th November 2007. A Project Plan has been developed to move to a fully accredited position under BS8555, and forms a framework for assessing all activities undertaken by the Authority with a view to ensuring GMFRS adopt a sustainable and pro-active way in which they deliver their services. This will be delivered over the next 18 months and will be carried forward into Service Action Plan 2008/2009. The Procurement Strategy will be updated to include a link to the Sustainability Strategy, however the detail to be included still needs to be agreed. Principle 2 Members and officers working together to achieve a common purpose with clearly defined functions and roles.  Work is still ongoing with the Business Continuity Plan. Departmental plans are in the process of being produced which will then be incorporated in a Brigade Plan. The GMFRS Pandemic Influenza Outbreak Strategic Continuity Plan was tested in April 2008 at the National Emergency Planning College and actions are to be taken to address issues raised during the test. The Brigade Management Team will be taking part in a BCM exercise in October 2008 which will scrutinize the Business Continuity Strategy and Process Document, the generic Brigade Management Emergency Response Plan and the Pandemic Influenza Outbreak Strategic Continuity Plan. Principle 3 Promoting values for the authority and demonstrating the values of good governance through upholding high standards of conduct and behaviour.  Corporate Governance policies are reviewed and updated on a regular basis. However a number of the policies on the Internet are not the current version. The current versions of policies are in the process of being updated on the Internet. 56
    • Principle 4 Taking informed and transparent decisions which are subject to effective scrutiny and managing risk.  Committee reports do not currently include as standard, a section for commenting on the risks and implications of the report’s contents together with an assessment of alternative options to that recommended. The Monitoring Officer has agreed that the standard format will be reviewed.  Partnership risks are not monitored as part of the corporate risk management arrangements. However, the majority of partnerships do have a risk assessment as part of the bid produced for the Innovations and Partnership Board. Consideration is being given to introducing a partnership assessment toolkit which has been developed by the CIPFA Finance Advisory Network. At the next review of corporate governance policies it will be ensured that partnership arrangements are mentioned in all relevant policies. Principle 5 Delivering the capacity and capability of officers and members to be effective.  Implementation of the HR Strategic Plan 2007-2010 is ongoing. Detailed action plans linked to the approved Human Resources Strategy have been developed and arrangements for monitoring progress at various levels introduced. Internal Audit are currently working with officers to ensure procedures are sufficient. Principle 6 Engaging with local people and other stakeholders to ensure robust public accountability.  The draft Corporate Communications Strategy & Departmental Action Plan for January 2008 - January 2011 was reported to BMT in February 2008. It is in the process of being amended and is due to be formalised at the end of June 2008. Other Significant Issues A range of issues, involving the Authority, has attracted significant public interest during the financial year. All the issues have been recognised as major risks to the Authority and are/will be included in the Strategic Risk Register which outlines the mitigating actions along with providing a high level mechanism to monitor the effectiveness of the actions being taken. A précis of the issues with the remedial action taken/scheduled is detailed below, viz.:- Rostering For Duty Implementation A collective agreement was reached between the Fire Authority and the Fire Brigades Union on 16th September 2005 covering changes to the way that wholetime operational shift personnel are rostered for duty. Following appropriate tendering procedures the Authority subsequently contracted with SMART Human Logistics to provide a fit for purpose rostering system to allow the Fie Authority to deliver the financial and modernisation efficiencies required. The implementation process is monitored through a series of Project Boards, (main Board chaired by the County Fire Officer and Chief Executive) and attended by key Authority officers, SMART directors/key staff, and Internal Audit representatives. 57
    • The Authority are still very much working with the contractor to bespoke the product to its particular, detailed requirements and the system is now generally operating as required. Relations with the contractor are appropriate and a revised system upgrade release is pending. Performance Data Locally the Authority has successfully refined its BVPI reporting process to reduce potential ambiguities and to ensure national data consistency. Both Internal Audit and the Audit Commission (locally) are continuing to support the process. FiReControl and FireLink The main purpose of the Firelink project is to provide FRS with the required communication facilities to mobilise resources in response to emergency calls and maintain communications between incident commanders and control rooms. Benefits of Firelink are expected to be achieved in the four distinct areas of resilience, modernisation, improved performance, and Command and Control effectiveness. FiReControl is a national project to create a national network of nine Regional Control Centres to replace the existing 46 separate control rooms throughout the country. The government has recently contracted to provide the necessary fire control network at the regional centres. Although essential modernisation elements both Firelink and FiReControl have increased the business risks of the Authority in respect of project costs (apportionment methodologies, etc) and staffing issues linked to the introduction of Regional Control rooms, etc., these issues are managed by appropriate Authority representation nationally and the Authority risk management process. Employment Matters Retirement Re-employment In November 2007 the local press reported that a “high ranking fire chief” had received a significant retirement payout and returned to duty in his same post and salary shortly afterwards. The Authority is satisfied that the actions taken were planned, appropriate, supported by legislation, and had the full backing of Members and as such were in the best interests of the Authority to provide stability to the senior management team whilst making positive changes and moving forward with succession planning. Officers’ Conduct – Rest Facilities Following the introduction of reclining chairs to replace beds in all Authority fire stations a number of press articles were published between May and November 2007 following disciplinary action taken by the Authority against officers who had not utilised the provided chairs and instead used unauthorised rest facilities. This issue escalated into a call for a vote of no confidence in Management and an allegation of corporate bullying. The Authority recognised that there were issues regarding the implementation and enforcement of the policy across the service and additional guidance was issued. 58
    • A further press article in November 2007 reported that two firelighters subsequently launched legal action claiming that the “chairs” had caused them back injuries. These claims are still pending and subject to ongoing legal process. Officers Conduct – Farnworth Station Following the sealing of an officer’s locker with bricks and mortar at Farnworth fire station 5 officers were charged with “professional misconduct” due to the serious nature of the allegations. All 5 officers were subject to formal disciplinary processes resulting in one officer being dismissed and a further officer demoted. Various local press articles reported the various stages of the investigations, linking the issue to the previous report on “rest facilities” and re-iterating the corporate bullying allegation. Officer Conduct – Drug Offences In February 2008 the local press reported that a fire-fighter had been found guilty of drug dealing and received a significant jail sentence. The fire-fighter was sacked by the Authority. The Authority is satisfied that all actions taken in respect of employment related issues were fully justified and accorded completely with employment legislation and Authority policies and associated procedures. Fire-Fighters Pension Scheme 1992 – Commutation On Retirement The Government Actuary’s Department, Communities and Local Government issued revised commutation factors applicable to the Fire-Fighters Pension Scheme 1992 (FPS), The effect of the new factors is backdated to 1st October 2007. This means that the new factors apply to any member of the FPS who retired on that date or later and all existing FPS members still in service. The authority has provided details to Fire-fighters who are members of the FPS and the Services Pensions Administrator is dealing with the pension’s issues for retiring personnel and is seeking further guidance. Flexible Operational Resource Deployment (FORD) On 1st January 2006 the Authority introduced a system of Flexible Operational Resource Deployment as part of its approach to Integrated Risk Management Planning. This involved the standing down of 4 fire appliances at night time based on a risk management and fire engine workload approach and balancing emergency fire cover in proportion to risk to life and property. In January 2008 a review of FORD was undertaken which confirmed that the Authority's stated IRMP attendance standards for fire engines attending life risk and property fires was being achieved. A proposal to extend the principles of FORD was being considered to include weekend and public holidays during the day time and following consultation with stakeholders was being planned for implementation in April 2008. 59
    • Attacks on Fire Crews Several items reported in the local press detail attacks of various severity of fire crews when answering emergency calls. The Authority has been proactive in addressing this issue by providing additional training for fire- fighters on how to deal with hostile situations via the Police, how to read body language, and full details on legal rights. In addition the Authority has fitted CCTV equipment on fire engines. The cumulative effect of these actions has seen a reduction in the number of incidents. This issue has been accepted as a national issue, however, the Fire Brigades Union have stated publicly that the Authority has well- developed policies for tackling violence. Training Issues A report in the local press in February 2008 alleged safety issues identified during a training exercise which had resulted from a lack of knowledge of current brigade policies and a lack of breathing apparatus training. The Authority is investing heavily in training and is satisfied that the issues identified have been remedied to allow fire fighters to operate safely and effectively at all times. The Authority’s governance and risk management arrangements enable it to deal openly and effectively with situations such as those highlighted above. The nature of the organisation means that there will always be difficult situations to deal with, but it’s internal control mechanisms ensure that actions are taken appropriately and promptly, and it is openly accountable for those actions. This is a major strength of the Authority and a significant factor in its continued CPA categorisation. 60
    • ANNUAL GOVERNANCE STATEMENT ANNUAL GOVERNANCE STATEMENT approved by Audit Committee, signed by County INTERNAL CONTROL FRAMEWORK Fire Officer and Chief Executive and Chairman Terms of Reference and Delegation of Powers to (published with the Statement of Accounts). Committees Standing Orders and Financial Regulations Local Code of Corporate Governance Statutory Officers Performance Plan and Fire and Rescue Performance Framework. Annual budget and budgetary control. Risk Management Strategy and Framework. Anti Fraud and Corruption Policy and Framework. Independent reviews by BMT and the Risk Management Strategy Codes of Conduct (Members/Officers). Audit Committee to examine draft AGS Whistle blowing policy. and supporting evidence and Group recommend approval via Authority.  Monitors residual risk and management  Monitors risk profiles  Considers risk relating to new projects and initiatives Authority Service Planning, IA Team with responsibility for  Receives risk monitoring reports BCM, and Risk reviewing controls, drafting Management AGS, evaluating assurances Frameworks. and supporting evidence. Per’mance Man’ment Internal External Assurance Risk Other Sources & Data Quality Audit Audit By Managers Management Of Assurance  Interim and Annual reports  IRMP  Embedded system to Audit Committee  Annual plan  Ongoing management  Embedded in policies  Fraud reports and throughout organisation  Head of Internal Audit  Annual Audit letter assurance (BMT) & planning investigations (Crystal) opinion expressed in  Audit opinion  Regular, scheduled  Corporate Planning  Reports by Inspectors  Internal & external annual reports to Audit (Governance Report) process reports to Audit  Post implementation reviews Committee  Risk Management  CPA/BVPI Committee on all reviews of projects  Action orientated  Operates under terms of Strategy  Nat/local KPI’s reference  Departmental aspects of governance  Working party reports governance  Cascaded through all  Corporate Risk  Ombudsman reports  Periodic progress  Strategic & annual plans, reports (BMT, Audit Audit Committee approved employees Manager  IIP Accreditation Committee, Policy  Risk-based plan  Corporate Risk Committee, Authority).  Managed audit process Register 61
    • Independent auditor’s report to the Members of Greater Manchester Fire and Rescue Authority Opinion on the financial statements I have audited the accounting statements, the firefighters’ pension fund accounting statements and related notes of Greater Manchester Fire and Rescue Authority for the year ended 31 March 2008 under the Audit Commission Act 1998. The accounting statements comprise the Income and Expenditure Account, the Statement of the Movement on the General Fund Balance, the Balance Sheet, the Statement of Total Recognised Gains and Losses, the Cash Flow Statement, and the related notes. The firefighters’ pension fund accounting statements comprise the Fund Account, the Net Assets Statement and the related notes. The financial statements and firefighters’ pension fund accounting statements have been prepared under the accounting policies set out within them. This report is made solely to the members of Greater Manchester Fire and Rescue Authority in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 36 of the Statement of Responsibilities of Auditors and of Audited Bodies prepared by the Audit Commission. Respective responsibilities of the Treasurer and auditor The Treasurer’s responsibilities for preparing the financial statements, including the firefighters’ pension fund accounting statements, in accordance with applicable laws and regulations and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2007 are set out in the Statement of Responsibilities. My responsibility is to audit the accounting statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). I report to you my opinion as to whether the accounting statements, the firefighters’ pension fund accounting statements and related notes present fairly, in accordance with applicable laws and regulations and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2007: - the financial position of the Authority and its income and expenditure for the year; and - the financial transactions of its firefighters’ pension fund during the year and the amount and disposition of the fund’s assets and liabilities, other than liabilities to pay pensions and other benefits after the end of the scheme year. I review whether the governance statement reflects compliance with ‘Delivering Good Governance in Local Government: A Framework’ published by CIPFA/SOLACE in June 2007. I report if it does not comply with proper practices specified by CIPFA/SOLACE or if the statement is misleading or inconsistent with other information I am aware of from my audit of the financial statements. I am not required to consider, nor have I considered, whether the governance statement covers all risks and controls. Neither am I required to form an opinion on the effectiveness of the Authority’s corporate governance procedures or its risk and control procedures. 62
    • I read other information published with the accounting statements, the firefighters' pension fund accounting statements and related notes and consider whether it is consistent with the audited accounting statements, the firefighters’ pension fund accounting statements and related notes. This other information comprises the Explanatory Foreword. I consider the implications for my report if I become aware of any apparent misstatements or material inconsistencies with the accounting statements, the firefighters’ pension fund accounting statements and related notes. My responsibilities do not extend to any other information. Basis of audit opinion I conducted my audit in accordance with the Audit Commission Act 1998, the Code of Audit Practice issued by the Audit Commission and International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounting statements, the firefighters' pension fund accounting statements and related notes. It also includes an assessment of the significant estimates and judgments made by the Authority in the preparation of the accounting statements, the firefighters' pension fund accounting statements and related notes, and of whether the accounting policies are appropriate to the Authority’s circumstances, consistently applied and adequately disclosed. I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the accounting statements, the firefighters' pension fund accounting statements and related notes are free from material misstatement, whether caused by fraud or other irregularity or error. In forming my opinion I also evaluated the overall adequacy of the presentation of information in the accounting statements, the firefighters' pension fund accounting statements and related notes. Opinion In my opinion: - The accounting statements and related notes present fairly, in accordance with applicable laws and regulations and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2007, the financial position of the Authority as at 31 March 2008 and its income and expenditure for the year then ended; and - The firefighters’ pension fund accounting statements present fairly, in accordance with the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2007, the financial transactions of the firefighters pension fund during the year ended 31 March 2008 and the amount and disposition of the fund’s assets and liabilities as at 31 March 2008, other than liabilities to pay pensions and other benefits after the end of the scheme year. 63
    • Conclusion on arrangements for securing economy, efficiency and effectiveness in the use of resources Authority’s Responsibilities The Authority 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 regularly to review the adequacy and effectiveness of these arrangements. Auditor’s Responsibilities I am required by the Audit Commission Act 1998 to be satisfied that proper arrangements have been made by the Authority for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires me to report to you my conclusion in relation to proper arrangements, having regard to relevant criteria specified by the Audit Commission for fire and rescue authorities. I report if significant matters have come to my attention which prevent me from concluding that the Authority has made such proper arrangements. I am not required to consider, nor have I considered, whether all aspects of the Authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively. Conclusion I have undertaken my audit in accordance with the Code of Audit Practice and having regard to the criteria for fire and rescue authorities specified by the Audit Commission and published in December 2006, I am satisfied that, in all significant respects, Greater Manchester Fire and Rescue Authority made proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ending 31 March 2008. Best value performance plan I issued my statutory report on the audit of the authority’s best value performance plan for the financial year 2007/08 on 17 December 2007. I did not identify any matters to be reported to the authority and did not make any recommendations on procedures in relation to the plan. Certificate I certify that I have completed the audit of the accounts in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission. Jackie Bellard 30 September 2008 District Auditor Audit Commission, 2nd Floor, Aspinall House, Aspinall Close, Middlebrook, Bolton BL6 6QQ 64
    • GLOSSARY ACCRUALS The concept that income and expenditure are recognised as they are earned or incurred, not as money is received or paid. BUDGET A statement defining in financial terms the Authority's plans over a specified period. The budget is prepared as part of the process of setting the precept. CAPITAL EXPENDITURE Expenditure on the acquisition of fixed assets such as land, buildings, vehicles and equipment which are of long term value, or expenditure which adds to and not merely maintains the value of existing fixed assets. CAPITAL FINANCING COSTS Each service is charged with an annual capital charge to reflect the cost of fixed assets used in the provision of services. CAPITAL RECEIPTS Money received from the sale of capital assets such as vehicles, which may be used to repay outstanding debt or to finance new assets. COMMUTATION This is where a member of the pension scheme gives up part of his/her pension in exchange for an immediate lump sum payment. CORPORATE AND DEMOCRATIC CORE The corporate and democratic core is concerned with the costs of corporate policy making and member based activities. Other costs relate to the general running of the Authority including corporate management, public accountability and treasury management. CORPORATE GOVERNANCE This is concerned with the authority’s accountability for the stewardship of resources, risk management, and relationship with the community. It also encompasses policies on whistle blowing, fraud and corruption. CREDITORS Amounts owed by the Authority for work done, goods received or services rendered but for which payment has not been made at the balance sheet date. DEBTORS Sums of money due to the Authority but unpaid at the balance sheet date. DEFINED BENEFIT PENSION SCHEME A defined benefit pension scheme is one where retirement benefits are determined independently of the investments of the scheme and employers have obligations to make contributions where assets are insufficient to meet employee benefits. The Local Government scheme is classified as a defined benefit scheme. For these schemes the FRS17 requires recognition of the net asset/liability and a pension reserve in the Balance sheet and transactions in the Income and Expenditure Account for movements in the asset/liability. DEPRECIATION The measure of the wearing out, consumption, or other reduction in the useful economic life of a fixed asset, whether arising from use, passage of time or obsolescence through technological or other changes. 65
    • FAIR VALUE This is the amount that an asset could be bought or sold for between parties; the current market value of an asset can be evidence that the assets have been valued fairly. FINANCIAL REPORTING STANDARDS A Document issued by the Accounting Standards Board, setting out approved accounting treatment. FINANCIAL INSTRUMENTS This is any contract that gives rise to a financial asset of one entity and a financial liability or equity of another. The term covers both financial assets (eg. loans receivable) and financial liabilities (eg. borrowings). FIXED ASSETS Tangible assets that yield benefits to the Authority and the services it provides for a period of more than one year. FUNDED PENSION SCHEME A funded pension scheme is one in which the future liabilities for pension benefits are provided for by the accumulation of assets held externally to the employer's business. The Authority's employees, with the exception of firefighters, are covered by such a scheme, which is managed on its behalf by Tameside Metropolitan Borough Council. The firefighters’ scheme on the other hand is unfunded. IMPAIRMENT A reduction in the value of a fixed asset below its carrying amount on the balance sheet. INTANGIBLE ASSETS These are assets that have no physical substance, for example, the purchase of computer software licences. MINIMUM REVENUE PROVISION (MRP) This is the minimum amount which must be set aside from revenue as provision for debt repayment. For this Authority it is currently 4% of the internal and external debt outstanding at the start of the year. NET-BOOK VALUE The amount at which fixed assets are included in the balance sheet, i.e. their historical cost or current cost less the cumulative depreciation. NET REALISABLE VALUE The market value of the asset in its existing use (or open market value in the case of a non-operational asset), less any expenses incurred in realising the asset. NON-OPERATIONAL ASSETS Fixed Assets held by the Authority but not directly occupied, used or consumed in the delivery of services. OPERATIONAL ASSETS Fixed Assets held and occupied, used or consumed by the Authority in the direct delivery of services for which it has either a statutory or discretionary responsibility. PENSION ACCOUNT The Fire and Rescue Authority is required to set up a separate fund from the rest of its operation for transactions relating to firefighters pension arrangements. The Authority has a formal responsibility for paying firefighters pensions. The fund is balanced to nil each year by the receipt of a pensions top-up grant from the Department for Communities and Local Government. PRECEPT 66
    • An amount of money levied by one authority (the precepting authority) which is collected by another authority (the collecting authority) as part of the council tax. The Fire Authority is the precepting authority and the Metropolitan District Authorities of Greater Manchester are the collecting authorities. PRIVATE FINANCE INITIATIVE (PFI) A partnership between the private and public sectors that uses private sector financing to provide public sector assets. The partnership has to meet certain criteria to qualify for Central Government subsidy. PROVISION An amount set aside to provide for a liability, which is likely to be incurred, but the exact amount and the date on which it will arise is uncertain. RESERVES A reserve is an amount set aside for a specific purpose in one financial year and carried forward to meet expenditure in future years. REVENUE EXPENDITURE The day to day running costs e.g. employees, buildings, debt charges, which are incurred in the provision of the Authority's services. TRANSFER VALUES Payment made by one pension scheme to another in respect of accrued pension rights when a member of a scheme changes pensionable employment UNFUNDED PENSION SCHEME An unfunded pension scheme is one in which liabilities for pension benefits are charged to the employer's revenue account in the year in which they arise and are not financed from investments held. The Authority operates such a scheme for its firefighters. VOLUNTARY REVENUE PROVISION (VRP) The VRP is a voluntary revenue contribution for the repayment of debt. It recognises the shorter life span of a number of assets i.e. vehicles, that would become obsolete before the original debt has been repaid. 67
    • TERMS OF REFERENCE REGULATORY BODIES, OTHER BODIES AND REGULATORY FRAMEWORK Association of Greater Manchester Authorities (AGMA) AGMA was formed after the abolition of the Greater Manchester Council in 1986. The 1985 Local Government Act devolved power to local areas but also recognised that there were some functions that needed to be co-ordinated at a metropolitan level. AGMA was formed to undertake these functions. http://www.agma.gov.uk/ Audit Commission Independent body with the responsibility of appointing external auditors to local authorities. The Audit Commission has a duty to ensure that local authorities make sufficient arrangements to secure economy, efficiency, and effectiveness in their use of resources and is able to subject a local authority to “Value for Money” studies http://www.audit-commission.gov.uk/ Best Value Accounting Code of Practice (BVACOP) Published by CIPFA (below) the BVACOP establishes “proper practice” with regard to consistent financial reporting to enhance the comparability of local authority financial information and is given statutory force in England by regulations under the Local Government Act 2003. CIPFA (Chartered Institute of Public Finance and Accountancy) The leading professional body for public sector accounting which sets accounting standards for the public sector. CIPFA advises central government and other bodies on local government and public sector finance matters http://www.cipfa.org.uk/ Code of Practice on Local Government Accounting in the United Kingdom 2006: A Statement of Recommended Practice (SORP) Detailed guidance on the proper accounting treatment to be used in the preparation of local authority statement of accounts. Comprehensive Performance Assessment (CPA) Undertaken by the Audit Commission, the CPA assesses the performance of local authorities and the services that they provide for local people. The assessment highlights areas of good practice and also areas where improvement is needed. Department for Communities and Local Government (DCLG) Government department formerly known as the Office of the Deputy Prime Minister (ODPM). DCLG issues government lead initiatives on issues such as fire prevention, emergency planning and training. DCLG is also a major funding source. http://www.communities.gov.uk/ Financial Reporting Standards (FRS’s) These statements prescribe the methods by which all published accounts should be prepared and presented and compliance is mandatory; any departure must be clearly disclosed within the published accounts. The SORP incorporates these accounting standards to the extent that they comply with specific legal requirements and are relevant to the activities of the local authority. 68
    • Government Actuary’s Department (GAD) The Government Actuary’s Department was appointed on behalf of Greater Manchester Fire & Rescue Service to assist with the assessment of accrued retirement benefit liabilities under the Firefighters’ Pension Scheme 1992, the Firefighters’ Compensation Scheme 2006 and the New Firefighters’ Pension Scheme 2006 for the year to 31 March 2007. Gershon Review This is a review that leads the way in enhancing efficiencies within the public service and allows for benchmarking comparisons to be made across authorities. GMC (Greater Manchester (County) Council) GMC was a strategic authority running regional services such as transport, strategic planning, emergency services and waste disposal. The GMC was abolished in 1986, with its responsibilities being transferred between this fire authority and other local authorities in Greater Manchester. Intgrated Risk Management Plan (IRMP) This document sets out the authorities plans to reduce the risks from fires and other emergencies. Local Authority (Scotland) Accounts Advisory Committee (LASAAC) Often working as a joint committee with CIPFA, LASAAC aims to develop and promote proper accounting practice for Local Government in Scotland and contributes to the formal approval process for the SORP and BVACOP. http://www.cipfa.org.uk/scotland/technical/lasaac.cfm Public Works Loan Board (PWLB) This is a government agency which provides long-term loans to public bodies at better rates than what would be obtained commercially. http://www.dmo.gov.uk/index.aspx?page=PWLB/Introduction Royal Institute of Chartered Surveyors (RICS) Accrediting body for the surveying profession. Surveyors who value our properties must be RICS accredited. http://www.rics.org/ Society of Local Authority Chief Executives and Senior Managers (SOLACE) SOLACE is the representative body for senior strategic managers working in the public sector. The society promotes effective local government and provides professional development for its members. http://www.solace.org.uk/index.htm Statements of Standard Accounting Practice (SSAP’s) These statements prescribe the methods by which all published accounts should be prepared and presented and compliance is mandatory; any departure must be clearly disclosed within the published accounts. SSAP’s are gradually being replaced by Financial Reporting Standards (see above). GOVERNMENT FUNDING Revenue Support Grant (RSG) A government grant to aid local authority services generally. It is based on the government’s assessment of how much an authority needs to spend in order to provide a standard level of service National Non Domestic Rate (NNDR) NNDR poundage is set annually by the government, collected by local authorities and paid into a national pool. The proceeds are then redistributed by central government as a grant to authorities in accordance with a government formula. New Burdens Grant 69
    • Government funding to ease the financial implications of new initiatives. New Dimensions Grant Government funding to provide resources that will support advanced training, emergency planning and the procurement of new equipment to enhance the fire service’s capability of responding to a wider range of incidents. Supported Capital Expenditure (Revenue) (SCE(R)) A source of funding from Central Government which is repaid to government from the revenue accounts. OTHER TERMS OF REFERENCE Comprehensive Spending Review (CSR) The review sets firm and fixed three-year Departmental Expenditure Limits and defines key improvements that the public can expect from these resources. The review is undertaken every two years by HM Treasury. Medium Term Financial Strategy (MTFS) A three year financial plan which demonstrates a sound basis for its budgets and capital programme which are designed to deliver its corporate strategic priorities. 70