CONTENTS MESSAGE FROM THE LEADER OF THE - - PDF document

Hertsmere Borough Council CONTENTS Page 1 of 63

CONTENTS

MESSAGE FROM THE LEADER OF THE COUNCIL.........................................................................2 EXPLANATORY FORWARD ...................................................................................................................3 CORPORATE GOVERNANCE.................................................................................................................4 INTRODUCTION................................................................................................................................................4 THE EXECUTIVE..............................................................................................................................................4 OVERVIEW & SCRUTINY .................................................................................................................................4 THE STANDARDS COMMITTEE.........................................................................................................................5 CITIZENS RIGHTS.............................................................................................................................................5 OVERVIEW FROM THE HEAD OF FINANCE.....................................................................................6 INTRODUCTION................................................................................................................................................6 HOW WE HAVE MANAGED THE COUNCIL’S RESOURCES IN 2001/02.................................................................6 ILLUSTRATIVE REVIEW OF KEY COMPONENTS. ...............................................................................................8 STATEMENT OF RESPONSIBILITIES.................................................................................................................10 STATEMENT ON THE SYSTEM OF INTERNAL FINANCIAL CONTROL.................................................................11 AUDITORS’ REPORT TO HERTSMERE BOROUGH COUNCIL.............................................................................12 OUTLOOK STATEMENT .......................................................................................................................13 THE NEW DEMANDS ON THE COUNCIL’S FINANCES IN 2002/03......................................................................13 OUR SPENDING PLANS FOR 2002/03...............................................................................................................15 THE IMPLICATIONS OF THE 2002/03 SPENDING PLANS FOR TAX PAYERS. .......................................................17 STATEMENT OF ACCOUNTING POLICIES......................................................................................19 MAIN FINANCIAL STATEMENTS .......................................................................................................23 CONSOLIDATED REVENUE ACCOUNT ............................................................................................................23 CONSOLIDATED BALANCE SHEET..................................................................................................................25 STATEMENT OF MOVEMENT IN RESERVES.....................................................................................................26 CASH FLOW STATEMENT...............................................................................................................................27 NOTES TO THE MAIN FINANCIAL STATEMENTS.........................................................................28 CONSOLIDATED REVENUE ACCOUNT NOTES.................................................................................................28 CONSOLIDATED BALANCE SHEET NOTES ......................................................................................................35 STATEMENT OF MOVEMENT IN RESERVES NOTES.........................................................................................45 CASH FLOW STATEMENT NOTES ...................................................................................................................47 ADDITIONAL FINANCIAL STATEMENTS.........................................................................................49 HOUSING REVENUE ACCOUNT ......................................................................................................................49 THE COLLECTION FUND ................................................................................................................................52 GLOSSARY OF TERMS ..........................................................................................................................56

Hertsmere Borough Council LEADER’S MESSAGE Page 2 of 63

Message from the Leader of the Council

Since becoming the Leader of the Council in October 2001, I have been very keen to develop a clear sense

• f direction and purpose for the organisation. One of the key criteria in being able to create this clear

direction is establishing a sound financial position for the organisation. Therefore, I am pleased to contribute to the Statement of Accounts of the Council for the 2001/02 financial year. Achievements to celebrate in over the past year include: -

• Adoption of new cabinet style government and the efficiency savings realised as a result.
• The successful transfer of the Council’s leisure operations to a not-for-profit charitable trust.
• Implementation of a corporate plan for the organisation that brings together common aims and

priorities so that the Council will be able to provide a first-class range of services to the people of Hertsmere.

• Launch of a new, state-of-the-art leisure facility in Bushey.

We have been proactive in ascertaining the views of the local community on specific projects and

• initiatives. As a result, the following issues are considered to be of the highest importance and in most need
• f improvement according to the majority of our residents.
• Safety / Low Crime
• Facilities for Young People
• Good Schools
• Clean Environment
• Public Transport / Road Creation & Maintenance
• Affordable Housing

Having a clear picture as to what the residents want the Council to achieve for them requires the

• rganisation itself to have the capacity, skills and motivation necessary to perform the task. Some of these

issues are outside the direct responsibility of this Council. However, through such mechanisms as our Local Strategic Partnership, we are aiming to ensure that both our direct and indirect responsibilities are met so that our residents receive the seamless high quality service they expect. Clearly these issues will require quite a significant amount of investment and our financial resources are, as always, very constrained. In addition, the new planning process of the Council has identified a number of ambitious targets that will need to be met if the Council is to achieve its five new aims as set out within the corporate plan which places further pressure on our limited resources. For this reason the format of this document has changed from previous years to help identify and explain how the organisation is planning to meet these challenges from a financial perspective. The document no longer solely concentrates on the financial performance for the past financial year but also reports a more forward-looking approach so that our residents can clearly see how our investment is linked to their

• priorities. This has meant that many officers throughout the Council, particularly the Head of Finance and

her team, have completed a significant amount of work and I would therefore like to thank them sincerely for their time, effort and dedication to the process. Hertsmere is an attractive and diverse Borough with a thriving economy, and it is important that the Council plays a full and active role in protecting and enhancing that position. We have much to be proud of and with the assistance of the local community we will do our best to ensure that this trend continues into the future. Councillor Neil Payne Leader of Hertsmere Borough Council

Hertsmere Borough Council EXPLANATORY FORWARD Page 3 of 63

Explanatory Forward

The Council’s Accounts for the year ended 31 March 2002 are set out on the following pages 23-63 preceded by a Statement of Accounting Policies. Where appropriate, figures for 2000/01 are also shown to enable comparisons between the two years. Under provisions contained in the Audit Commission Act 1998 and the Accounts and Audit Regulations 1996, the Statement of Accounts for 2001/02 have been made available for inspection. The result of this inspection is contained in the Auditors’ report presented on page 12. In addition to this report, the Council is required to meet certain statutory requirements. Details of these responsibilities and the officer responsible for the task are disclosed on page 10 under the ‘Statement of Responsibilities’. The Statement of Accounts present on the following pages the major financial statements of the Council and consists of: - Statement of Accounting Policies Sets out the basis on which the accounts have been compiled. Consolidated Revenue Account Reports expenditure and income relating to all the services provided by the Council and demonstrates how the net cost of those services have been financed from Council Tax and Central Government Grants. This financial statement is on page 23. Housing Revenue Account Shows revenue expenditure and income on the Council’s housing functions for the year. It is a ring-fenced account within the general fund to prevent any cross-subsidy between general income and rents. This financial statement is on page 49. The Collection Fund Summarises the precepts requested by the main precepting bodies (Hertfordshire County Council, Hertfordshire Police Constabulary and Hertsmere Borough Council including Parishes) along with the amount

• f Business Rate income collected on behalf of the Government and paid over to them. In addition, residual

Community Charge adjustments are shown with all income from this source being transferred to Hertsmere's General Fund. This financial statement is on page 52. Consolidated Balance Sheet Sets out the Council's financial position at 31 March 2002 with the balances of reserves at the Council's disposal and the assets employed in its operations. The Council's Balance Sheet is on page 25. Total Movement in Reserves Brings together all the recognised gains and losses of the Council during the period and identifies those which have and those which have not been recognised in the consolidated revenue account. The statement separates the movements between revenue and capital reserves and can be found on page 26. Cash Flow Statement Summarises the inflows and outflows of cash made by the Council with third parties for both revenue & capital

• purposes. This financial statement is on page 27.

Glossary of Terms A glossary of the most commonly used terms is provided on page 56.

Hertsmere Borough Council CORPORATE GOVERNANCE Page 4 of 63

Corporate Governance

Introduction

On 1 January 2002 Hertsmere Borough Council moved to new executive arrangements, with transitional arrangements having been in place from 1 November 2001. This was as a result of the community consultation carried out into the new political structure for the Council. The results were received and analysed independently by MORI, who reported that:

• 81% of respondents chose the option of the Leader of the Council with a Cabinet
• 14% of respondents chose the Elected Mayor with a Cabinet option
• 5% of respondents chose the Elected Mayor and Council Manager option

The Executive

Most of the decisions previously taken by Committees are now taken by a Cabinet and a Leader, who together form the Executive. Meetings of the Executive take place monthly and are chaired by the Leader of the Council. The responsibilities of this Executive are as follows:

• To lead the preparation of the Council's policies
• To deliver and implement the budget and policies decided by the full Council
• To respond to any recommendations and reports from the Overview and Scrutiny Committees

unless the response falls within powers delegated to an individual member of the Executive

• To undertake all the powers and duties of the Council, with the exception of those reserved to the

Council itself or to committees or sub-committees

• To approve policy changes which do not fall within the policy framework
• To make appointments/nominations to outside bodies which arise between annual meetings of the

Council The Cabinet comprises five councillors, each of whom has their own portfolio of particular responsibilities in the following areas: - Leader of the Council Infrastructure & Transportation Portfolio Leisure & Environment Portfolio Finance & Property Portfolio Corporate Strategies Portfolio

Overview & Scrutiny

The Council has two Overview and Scrutiny Committees, whose role is to review and scrutinise the decisions and performance of the Executive, the Council and its Committees and undertake policy development and review work. The work of the Committees includes consideration of any matter affecting the area or its

• inhabitants. The Overview and Scrutiny Committees are made up of non-executive councillors.

Hertsmere Borough Council CORPORATE GOVERNANCE Page 5 of 63

The scope of the Environment, Transportation and Leisure Overview and Scrutiny Committee includes pollution and regulatory functions, infrastructure and transport, planning, building control, refuse management, recycling, personal health, food hygiene, leisure and grounds maintenance. The scope of the Community and Corporate Services Overview and Scrutiny Committee, includes community and corporate services, corporate strategies, finance, property, housing, community safety, e-government, emergency planning, housing benefits, social services and education issues.

The Regulatory Committee

The Council has also established a Regulatory Committee, which, from 1 January 2002, is responsible for all non-executive functions (primarily regulatory and licensing functions), which are not considered by the full

• Council. These include environmental issues. It also acts as a parent committee for the Council's three Planning

Sub-Committees (Bushey/Aldenham, Elstree & Borehamwood and Potters Bar/ Shenley) and also the Personnel Sub-Committee. It considers all planning applications referred to it by the Planning Sub-Committees and major applications that impact on more than one area of the Borough.

The Standards Committee

A Standards Committee, comprising three non-executive borough councillors (one nominated from of the three principal political parties on the Council), two independent members and one parish representative, has also been established. The Standards Committee exists to maintain high ethical standards and probity at all levels within the Council.

Citizens Rights

Residents or anyone who owns a property or business in the Borough may submit a question for consideration at a Council meeting. Questions must relate to a matter within the Council's remit but must not seek any information, which is about an individual, Data Act protected or about any organisation. Neither may questions relate to specific decisions taken as part of the Council's regulatory functions such as individual planning

• applications. Questions should be limited to one subject submitted in writing no later than ten working days

before a Council meeting. Please address your letter to Question Time and send it to the Council's Civic Offices in Borehamwood. When an individual or group of residents feels strongly about an issue in which the Council has an interest or involvement they may present a petition on the matter. This should include a clear statement of the petitioner's concerns and a list of supporting names and addresses. If you would like more information on any of the above items, please contact our main reception at the Civic Offices or staff at either of the two Area Offices in Bushey and Potters Bar. Members of the public can speak at a planning sub-committee for three minutes on any application being considered at that meeting. The procedure allows one person to speak in favour of the application and one

• against. Requests to speak are dealt with on a first come, first served basis. If you would like to speak you must

telephone 0500 400 160 between 10.00 am and 4.00 p.m. on the day of the meeting. Your councillors are elected to represent you and your community. They should be your first point of

• contact. If you want to comment or want to see some action on an issue or a service that concerns you,

please get in touch with one of your ward councillors. Whilst you are free to contact your councillor at any reasonable time, the council also hold 'surgeries'. These are an opportunity for residents to meet their council representatives face to face and discuss matters of

• concern. Surgeries are advertised in Hertsmere News. If you would like to discuss a matter with your local

councillor, please come along, no appointment is necessary. Your local County Councillors are usually present.

Hertsmere Borough Council HEAD OF FINANCE OVERVIEW Page 6 of 63

Overview from the Head of Finance

Introduction

I am pleased to introduce the Council’s Statement of Accounts for 2001/02. Compared to metropolitan boroughs, Hertsmere Council is a small but diverse organisation that has met many challenges during the year. This has meant that many customs and working practices that had been built up over a number of years have been reviewed in order to provide continuous improvement in performance and service delivery. This document, as well as incorporating all the financial statements and disclosures required by statute, now reflects a number of changes to help illustrate how the Council is planning to deliver this continuous improvement from a financial perspective. (Refer to the Outlook section) For the first time, these accounts have been prepared by the end of June 2002. This was a deliberate strategy of the Council given that the whole of Governments Accounts programme which aims to produce one set of consolidated government accounts will be implemented in the near future. As a forward thinking Council we wanted to ensure that our systems could produce this information within the required timeframe in advance of the implementation date. The contents of this document would not have been possible without the hard work of all the finance staff across the Council. I would like to take this opportunity therefore to formally thank all the finance staff and service managers for their assistance in preparation of these accounts and for their support throughout the year. If you would like any further information on the accounts you can forward details of your request to the Council by post using the following address: - Head of Finance Civic Offices, Elstree Way Borehamwood, Herts. WD6 1WA. Further details of the Council's activities for the year are given in the Annual Report, obtainable from Customer Services at the same address.

How we have managed the Council’s Resources in 2001/02.

For 2001/02 the overall budget for the cost of services was set at £15.6m. The net cost of services from the consolidated revenue account is £20m. Depreciation, housing revenue account movements and exceptional items must be adjusted against this total since they were not part of the original budget. Depreciation of (£2,892,879), housing revenue account transactions of (£450,838) and exceptional items of £259,077 result in an adjusted cost of services figure of £17m. The line marked with ** denotes total spending adjusted for the notional interest component that is included as part of the capital charge required by the accounting regulations. Budgeted Spending in 2001/02 £000s Actual Spending in 2001/02 £000s Difference (Under) or Overspend £000s Explanations for difference Central Services 3,568 3,410 158 ** 3,160 3,045 Democratic & corporate management, collection of local taxes, registration of electors, conducting elections, emergency planning, local land charges. (115) (4%) This overspend represents 4%

• f total budget due to the

restructuring that has taken place, the lower number of elections that occurred during the year and more than expected income from land charges.

Hertsmere Borough Council HEAD OF FINANCE OVERVIEW Page 7 of 63

Budgeted Spending in 2001/02 £000s Actual Spending in 2001/02 £000s Difference (Under) or Overspend £000s Explanations for difference Cultural, Environmental and Planning Services 9,392 11,217 1,825 ** 5,654 6,595 941 17% Museums, art galleries, theatres, recreation and sport, allotments, community centres, sports development & community recreation, indoor sports, parks and open spaces, food safety, pollution reduction, health & safety, public health, licencing, public conveniences, community safety, flood defence, waste collection, street cleansing, building control, planning, environmental initiatives, economic development. The approved overspend of £941,000 as shown was in the areas of :-

• Flood Defence initiatives.

– Repairs to Elstree Studios. – Leisure centre launch costs. – 7 Additional street cleaners. These amounts have been funded from reserves specifically earmarked for these items. Highways, Roads and Transport 1,482 968 (514) ** 948 620 Highways/Roads(Routine), traffic management and road safety, parking services, public transport. (328) (35%) The underspend was due to

• Residual monies from the

highways agency after closure of the partnership.

• Higher than expected

parking fines for the year. Housing Services 904 1,019 115 ** 766 884 Housing strategy, Housing renewal, homelessness, housing benefits, other housing property. 118 15% This overspend relates to the accommodation provision for homeless applicants. This is continually difficult to estimate due to the number of applicants and the current booming housing market. Social Services 261 368 Service strategy, elderly people. 107 41% This overspend includes an element of one-off costs associated with the set-up of the leisure not for profit

• rganisation. This additional

expenditure is funded from the investment reserve, which does not impact on the council tax calculation Net Cost of Services 15,607 16,982 1,375 ** This denotes the total expenditure adjusted for the notional interest component.

Hertsmere Borough Council ILLUSTRATIVE REVIEW Page 8 of 63

Illustrative Review of Key Components.

Revenue Funding The Council’s revenue spending is funded from various sources as illustrated below. Other income includes fees, charges for services, bank interest & recharges between Council services. Revenue Expenditure This chart shows the main categories of expenditure over all general fund services. Running expenses include maintenance of buildings, purchases of supplies and services and gross recharges between Council

• services. Employee costs account for 20% of total expenditure. Capital charges are notional charges made

to service departments for the capital employed in the delivery of services. Services Provided The first chart in this section shows the proportion of Council actual expenditure on the different service areas during the year. Please see the table on pages 6 and 7 for a description of the areas covered under each service. The second graph demonstrates the budgeted expenditure compared to actual expenditure for the financial year.

Other Income 26% Reserves & Balances 15% Non Cash Capital Charges & Depreciation 14% NNDR Grant 6% Rent Allowance & Council Tax Benefits 26% Revenue Support Grant 6% Council Tax Levies 7%

Employees 20% Capital Charges & Depreciation 14% Rent Allowance & Council Tax Benefit Payments 27% Running Expenses 39%

Hertsmere Borough Council ILLUSTRATIVE REVIEW Page 9 of 63

Council Tax – Where the money goes Hertsmere collects council tax on behalf of other precepting authorities. The chart below depicts how the amounts collected are split between these authorities.

Hertfordshire Police 9% Hertsmere Borough Council 11% Hertfordshire County Council 78% Town & Parish Councils 2% Planning & Development Services 10% Environmental Services 9% Highways, Roads & Transport Services 4% Cultural & Related Services 24% Exceptional Items 1% Central Services 17% Housing Services 34% Social Services 1%

1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 Central Services Cultural, Environmental & Planning Highways, Roads & Transport Social Services Housing Services Budget Actual

Hertsmere Borough Council STATEMENT OF RESPONSIBILITIES Page 10 of 63

Statement of Responsibilities

The Council’s Responsibilities The Council is required:

• to make arrangements for the proper administration of its financial affairs and to secure that one of its
• fficers has the responsibility for the administration of those affairs. In this Council, that officer is the

Head of Finance.

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

assets.

• to approve the Statement of Accounts

The Head of Finance’s Responsibilities The Head of Finance is responsible for the preparation of the Council's Statement of Accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Council

• Accounting. The code of practice requires that the Statement of Accounts present fairly the financial

position of the Council at 31 March 2002 and its income and expenditure for the year ended 31 March 2002. In preparing this Statement of Accounts, the Head of Finance has:

• selected suitable accounting policies and then applied them consistently;
• made judgement and estimates that were reasonable and prudent;
• complied with the Code.

The Head of Finance has also:

• kept proper accounting records which were up to date;
• taken reasonable steps for the prevention and detection of fraud and other irregularities.

Certificate of Head of Finance I certify that this Statement of Accounts present fairly the financial position of Hertsmere Borough Council at 31 March 2002 and its income and expenditure for the year then ended. SAJIDA BIJLE, Bsc Msc FCCA Head of Finance 31 July 2002

Hertsmere Borough Council STATEMENT ON INTERNAL FINANCIAL CONTROLS Page 11 of 63

Statement on the System of Internal Financial Control

This statement is given in respect of the Statement of Accounts for Hertsmere Borough Council. The Council acknowledges the responsibility of ensuring that an effective system of internal financial control is maintained and operated in connection with the resources concerned. The system of internal financial control can provide only reasonable and not absolute assurance that assets are safeguarded, that transactions are authorised and properly recorded, and that material errors or irregularities are either prevented or would be detected within a timely period. The system of internal financial control is based on a framework of: -

• Policies, objectives and plans – e.g. budget, risk management, revenue and capital strategies.
• Operational & reporting guidelines – e.g. accounting/auditing standards, financial procedure rules.
• Budgetary systems.
• Supervision.
• Management review and monitoring of financial and other performance.
• Reporting and communicating information to the appropriate level.
• Segregation of duties – e.g. clear lines of authority.
• Accounting procedures – e.g. timely reconciliation of balance sheet accounts.
• Information systems.

The responsibility for the establishment, maintenance and development of the system of internal financial control lies with the Council’s senior managers, who in turn seek to place reliance on assurances received from reviews undertaken by the Council’s Internal Audit team. The Council recently adopted a Risk Management Policy Statement detailing its intention to manage risks and officers are currently compiling a Risk Management Strategy. The Internal Audit team is committed to delivering a comprehensive and professional internal audit service across the Council. The team seeks to operate in accordance with the standards prescribed by the CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom. The team also aims to assist management in the effective discharge of their responsibilities by providing them with analysis, appraisals, opinions, recommendations, advice and information concerning the activities reviewed. The Internal Audit team’s annual report will provide an independent opinion on the adequacy and effectiveness

• f the system of internal financial control.

The Audit Manager reports directly to the Executive Director of internal services (the Council’s Monitoring Officer), has a reporting line to the Head of Finance (Section 151 Officer) and also has access to the Head

• f Paid Service.

The review of the effectiveness of the system of internal financial control is informed by: -

• The work of the Council’s senior managers
• The work of the Council’s Internal Audit team
• The work of the Council’s External Auditor – including the Annual Audit Letter and other

reports. The Head of Finance, Audit Manager and External Auditor report to the Audit Committee, which sat for the first time in July 2002. The committee will meet 3 times a year and has the authority to request the attendance of any Executive Member or Council Officer, which is similar to the powers of an Overview and Scrutiny Committee. At the conclusion of each audit review, recommendations are made by either the Internal Audit team or the External Auditor to strengthen any control weakness that may have been identified. All audit recommendations agreed by the relevant senior manager have set timeframes and responsibilities for

• implementation. These will be monitored by the Head of Finance and Audit Manager and reported to the

Audit Committee on a regular basis. SAJIDA BIJLE, Bsc Msc FCCA MICHAEL O’BRIEN Head of Finance Hertsmere Audit Committee Chairman

Hertsmere Borough Council AUDITORS’ REPORT Page 12 of 63

Auditors’ Report to Hertsmere Borough Council

We have audited the Statement of Accounts on pages 23 to 63, which have been prepared in accordance with the accounting policies applicable to local authorities as set out on pages 19 to 22. Respective Responsibilities of Head of Finance and Auditors As described on page 10 the Head of Finance is responsible for the preparation of the Statement of

• Accounts. Our responsibilities as independent auditors are established by statute, the Code of Audit

Practice issued by the Audit Commission and our profession’s ethical guidance. We report to you our opinion as to whether the Statement of Accounts presents fairly the financial position and results of operations of the Council. Basis of Opinion We carried out our audit in accordance with the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission, which requires compliance with relevant audit standards. Our audit included examination, on a test basis, of evidence relevant to the amounts and disclosures in the Statement of Accounts. It also included an assessment of the significant estimates and judgements made by the Council in the preparation of the Statement of Accounts and of whether the accounting policies are appropriate to the Council’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we consider necessary in order to provide us with sufficient evidence to give reasonable assurance that the Statement of Accounts is free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Statement of Accounts. Opinion In our opinion the Statement of Accounts presents fairly the financial position of Hertsmere Borough Council at 31 March 2002 and its income and expenditure for the year then ended. Certificate We certify that we have completed the audit of accounts in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission. RSM ROBSON RHODES Dated Hemel Hempstead

Hertsmere Borough Council OUTLOOK STATEMENT Page 13 of 63

Outlook Statement

The new demands on the Council’s finances in 2002/03.

In arriving at the budget for 2002/03 it was decided to:

• Update the three-year service plans for each Council service and review the financial strategy

in line with these plans.

• Review the efficiency savings that are possible to achieve.
• Match Council resources to the aims set out within the Corporate Plan.
• Consider the trends, policy decisions and options that help determine what the Council’s

spending plans should be. Forward spending plans The Council’s plans for spending on services look forward three years based on the strategic Corporate Plan, which are reflected in the finance strategy. These plans are dependent on the Government’s proposals for financial support to local government, as grants make up a large component of the Council’s income. Central Government has published plans for local government spending indicating an increase of year on year spend of approximately 5%. This does not necessarily mean that Hertsmere will receive the full 5% increase, but in principle there is an opportunity to use the extra funding to upgrade Council services. Efficiency savings In each forward plan the Council has schemes for freeing up resources by improving efficiency. This is done by:

• Challenging service departments to review how services were operated
• Partnerships with other local authorities and organisations
• Using Best Value reviews to set ambitious performance targets
• Maximising and managing cost saving opportunities
• Maximising income from all sources and securing any possible grants

Examples of significant efficiency initiatives:

• Outsourcing of leisure operations to a separate charitable trust. A number of efficiency

savings are anticipated from this initiative over the next three to five years.

• Restructuring of service departments to bring in line with the new cabinet style governance

adopted by the Council during the year. The use of efficiency savings Savings identified from efficiencies or Best Value reviews have been shared between the general and earmarked reserves. Services will be able to bid for extra money from the general reserve if they can show that it will improve the performance of their service.

Hertsmere Borough Council OUTLOOK STATEMENT Page 14 of 63

Determining Council spending plans The plans to spend Council funds are influenced by national and local priorities for the expansion and improvement of services, taking account of the following: -

• Trends – the following assumptions have been documented within the Corporate Plan and are

based upon previous experience, emerging legislation and professional assessment.

• Pressure for new development is likely to continue at present levels with fewer urban

area sites becoming available in the Borough to sustain it.

• There will be a continued growth in car ownership at around 5% per annum with

limited new road building or improvement in public transport.

• Climate change will result in increased risk from flooding and place more pressure
• n energy conservation and pollution control.
• The current mismatch between the level of affordable housing available and the

demand for it from young, single people and particularly key workers will continue, resulting in local employment difficulties.

• The local population will continue to age but remain relatively affluent, demanding

improvements in leisure, recreation, health and social services and the infrastructure needed to support it.

• The condition of the local environment, waste management and recycling will attract

higher public interest and demands for improvement.

• Financial pressure on all parts of the public sector will continue forcing those
• rganisations to be more active in forging strategic alliances, partnerships and other

innovative ways of delivering and procuring services.

• Policy – the following commitments to local taxpayers are examples:
• To grant loans to housing associations, to provide affordable housing within the

region, especially in regard to key workers.

• To assist local communities providing sustainable and economically viable

community projects.

• To provide a sustainable, financially viable and affordable range of leisure services

that are accessible to all community sectors in Hertsmere.

• To re-evaluate the Council’s land drainage works programme in order to ensure that

properties at risk are addressed as a priority.

• To conduct a rigorous enforcement service particularly in the areas of planning,

building control, health, pollution control and in the private housing sector.

• To provide a proactive planning service ensuring that local needs are met whilst

protecting and improving the local environment.

• To deliver the aspirations, aims and priorities set out in the corporate plan.
• Consultation – take account of the local opinion expressed by Council residents so that the

areas identified are addressed and implemented in the most appropriate manner.

Hertsmere Borough Council OUTLOOK STATEMENT Page 15 of 63

Our spending plans for 2002/03.

Having considered all the matters set out on the preceding pages, the Council has agreed the following budget for spending by services in 2002/03. Total spending on services will be approximately £17.1 million. The Explanations column is determined using the total spend adjusted for notional interest where applicable, i.e. the line marked as **. This notional interest charge is a non-cash adjustment included in the final accounts in accordance with accounting regulations but it doesn’t form part of the Council tax calculation. Budgeted spending in 2002/03 Explanations for Spending £’000 Income £’000 Net £’000 Actual Spend in 2001/02 £’000 Difference Increase or (decrease) £’000 difference Central Services 7,467 4,181 3,287 3,410 (123) Democratic & corporate management, collection of local taxes, registration of electors, conducting elections, emergency planning, local land charges. ** 7,059 4,181 2,878 3,045 (167) (6%) The main contributing reason for this difference is due to the amount included in 2001/02 for the pension deficit in conjunction with projected savings from the recent restructures incorporated into the 2002/03 budget. Cultural, Environmental and Planning Services 15,926 4,743 11,183 11,217 (34) ** 10,934 4,743 6,192 6,595 (403) (7%) Museums, art galleries, theatres, recreation and sport, allotments, community centres, sports development & community recreation, indoor sports, parks and open spaces, food safety, pollution reduction, health & safety, public health, licencing, public conveniences, community safety, flood defence, waste collection, street cleansing, building control, planning environmental initiatives, economic development. This decrease is due to savings that are budgeted due to the transfer of leisure services to a not for profit

• trust. It must also be noted that

additional funding has also been committed to waste collection and recycling to meet targets set by the Council

Hertsmere Borough Council OUTLOOK STATEMENT Page 16 of 63

Highways, Roads and Transport 2,198 819 1,380 968 412 Highways/Roads(Routine), traffic management and road safety, parking services, public transport. ** 1,633 819 814 620 194 24% The difference is mainly due to the actual spend in 2001/02 including residual income from the highways partnership that is not expected in 2002/03. Housing Services 14,375 13,351 1,024 1,019 5 Housing strategy, Housing renewal, homelessness, housing benefits, other housing property. ** 14,223 13,351 881 884 (3) (1%) Even fewer transactions for the “Tenants Move Incentive Scheme” for Registered Social Landlords are expected in 2002/03. Social Services Service strategy, elderly people. 351 82 269 368 (99) (37%) This is due to the inclusion of one-

• ff costs associated with the set-up
• f the leisure not for profit
• rganisation in 2001/02.

Net Cost of Services 40,318 23,175 17,142 16,982 160 ** This denotes the total expenditure adjusted for the capital charges component.

Hertsmere Borough Council OUTLOOK STATEMENT Page 17 of 63

The implications of the 2002/03 spending plans for tax payers.

In order to work out how much council tax is required to pay for the net cost of services, the following must be considered:

• Take into account other items of corporate expenditure, such as interest receipts & payments
• Adjust the figures for non-cash entries such as capital charges.
• Consider the amount Central Government is contributing to spending commitments.
• Add on the amount that will be required on behalf of town and parish councils.

£’s Budgeted net cost of services for 2002/03 17,142,363 Other items of corporate expenditure 593,000 Capital Charges component

• 6,117,860

Income from general Government grants

• 7,554,478

Funds required by Hertsmere Council 4,063,025 Funds required by town and parish councils 687,403 Amount to be raised from Council Tax 4,750,428 The average council tax levy for the prior year was £114.00. This is calculated by dividing the council tax requirement of £4,525,458 by the equivalent number of Band D households of 39,697. Using the new tax base of 39,876 and dividing it by the 2002/03 requirement of £4,750,428, the average levy for 2002/03 is £119.13. This means the Council has increased the Band D levy by an average 4.5%. The Council also incurs expenditure on services that are provided in only part of the Council’s area. These expenses are termed ‘special expenses’. An example is allotment maintenance costs. The following analysis looks at the increase on council tax within each parish including special expenses and parish council charges for a Band D property. This increase will apply on the same basis for properties within the other bands.

Hertsmere Borough Council OUTLOOK STATEMENT Page 18 of 63

Aldenham Elstree & Borehamwood Ridge Shenley Bushey & Potters Bar TOTAL Tax Base (households)

4,776 12,783 93 1,806 20,418 39,876 £ £ £ £ £ £

General Expenses (before government grants)

257.29 257.29 257.29 257.29 257.29

Special Expenses

0.16 14.97 15.13 14.97 15.66

Parish/Town Council Charge

83.16 18.38 4.30 30.37

• Gross Charge at Band D

340.60 290.64 276.72 302.63 272.95

Less: Revenue Support Grant (Excl. Flood Defence)

• 64.07
• 64.07
• 64.07
• 64.07
• 64.07

NNDR Grant

• 104.44
• 104.44 -104.44
• 104.44
• 104.44

Collection Fund Surplus

• 0.44
• 0.44
• 0.44
• 0.44
• 0.44
• 168.95
• 168.95 -168.95
• 168.95
• 168.95

Net Charge at Band D 171.65 121.70 107.77 133.69 104.00

Amount of Council Tax raised

819,800

1,555,690 10,023 241,443 2,123,472 4,750,428

Prior Year Charge (2001/02)

£166 £117 £102 £128 £99

% Increase

3.40% 4.02% 5.66% 4.45% 5.05%

Cash Increase for Year (£)

£5.65 £4.70 £5.77 £5.69 £5.00 Average Increase 4.5% Average £ Increase £5.36

Hertsmere Borough Council STATEMENT OF ACCOUNTING POLICIES Page 19 of 63

Statement of Accounting Policies

These accounts have been prepared in accordance with the 2000 Code of Practice on Local Authority Accounting, issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) and also with guidance notes issued by CIPFA on the application of accounting standards (SSAPs) and financial reporting standards (FRS’s). The Council’s accounting policies have been drawn up in line with recommended accounting principles as specified in the code. A major change to the Code of Practice is the adoption of FRS 17: Retirement Benefits. FRS 17 sets out the principles of accounting for employee retirement benefits. Its objectives are to ensure that financial statements reflect (at fair value) the assets and liabilities underlying the employers’ obligations under pension schemes, and the true cost of these obligations is recognised. These changes are aimed to take full account from 2003/04. However transitional disclosures are required within the accounts for the 2001/02 and 2002/03 financial years. Starting in 2002/03 there is a requirement for local authorities to produce a Statement on the System of Internal Financial Control. This statement sets out the framework within which financial control is managed and reviewed and the main components of the system, including the arrangements for internal audit. The statement reports on identified material weaknesses and the actions undertaken to rectify these. It was determined that it would be useful to include the statement in this financial year even though it is not yet required. The Government Resources and Accounts Act 2000 requires the Treasury to prepare accounts for the whole

• f Government. The Treasury has indicated that it anticipates the inclusion of local government figures into

the process by 2005/06 with two years of dry running before hand. Therefore the consolidated revenue account format has been changed to reflect the guidance of the Best Value Accounting code of practice. This should enable an easier transition into the information required by the whole of government accounts team in their consolidation process.

Fixed Assets

• Recognition

All expenditure on the acquisition, creation or enhancement of fixed assets is capitalised on an accruals

• basis. Expenditure on fixed assets is capitalised in the balance sheet, provided that the asset yields

benefits to the Council and the service it provides for a period of more than one year. However, due to the high administrative burden that would be required if all ‘fixed assets’ were included on the asset register, a de minimis level has been set to determine which assets will form part

• f the Council’s balance sheet. The de minimis level is applied against the collective total of project

costs except for items of Vehicles, Plant & Equipment which are measured on an individual item basis. Asset Category De Minimis Level Council Dwellings £5,000 Other Land & Buildings £5,000 Non-operational Assets £5,000 Vehicles, Plant, Furniture & Equipment £5,000 Infrastructure Assets £1,000 Community Assets £1,000

Hertsmere Borough Council STATEMENT OF ACCOUNTING POLICIES Page 20 of 63

• Measurement

Fixed assets are classified into the groupings required by the 2000 Code. Infrastructure and Community Assets are included in the balance sheet at historical cost, net of depreciation. Council Dwellings are valued on an existing use basis. Operational Land and Buildings & other operational assets are included at the lower of net current replacement cost or net realisable value, net of any depreciation calculated since that date. Non-operational assets are included at the lower of net current replacement cost or net realisable value net of any depreciation calculated since the last valuation date. Where an asset is included in the balance sheet at current value, the difference between that value and the amount at which that asset was included in the balance sheet immediately prior to the latest valuation or revaluation is credited or debited to the fixed asset restatement reserve. These assets are formally revalued every five years by a qualified internal valuer in accordance with the Royal Institution of Chartered Surveyors valuation manual. The current asset values used in the accounts are based upon a certificate issued by the Council's Estates Valuer (Neville Thompson M.R.I.C.S.) as at 31 March 2002.

• Impairment

Each category of asset included in the balance sheet is reviewed at the end of each reporting

• period. Where there is reason to believe that its value has changed materially in the period, the

valuation is adjusted accordingly. Events and changes in circumstances that indicate a reduction in value may have occurred include: a) A significant decline in a fixed asset’s market value during the period. b) Evidence of obsolescence or physical damage to the fixed asset. c) A significant adverse change in statutory or other regulatory environment in which the Council operates. d) A commitment by the Council to undertake a significant reorganisation. If the impairment is as a result of deterioration or physical damage the charge is recognised in the asset management revenue account and the service revenue account. Other impairments (reflecting a general fall in prices) are recognised in the fixed asset restatement reserve. Fixed assets, other than non-depreciable land, are reviewed for impairment at the end of each reporting period when either: a) no depreciation charge is made on the grounds of the amount being immaterial or b) the estimated remaining useful life of the asset exceeds 50 years.

• Disposals

Income from the disposal of fixed assets is accounted for on an accrual basis. Receipts which are not reserved for the repayment of external loans and which form part of the capital financing reserve are included in the balance sheet as usable capital receipts. These reserves can be used to fund new capital expenditure. Upon disposal, the net book value of the asset is written off against the Fixed Asset Restatement Reserve.

Hertsmere Borough Council STATEMENT OF ACCOUNTING POLICIES Page 21 of 63

• Depreciation

Assets, other than land and non-operational properties, are depreciated over their useful economic

• lives. However, they are both depreciated where their economic useful lives are significantly

reduced for any reason. Where depreciation is provided for, assets are being depreciated using the straight-line method over the following periods: Infrastructure Assets Up to 20 Years Leisure Centres Up to 30 Years Council Garages 20 Years Car Parks & Depots 20 Years Vehicles, Plant & Other Equipment 3 to 8 Years

Deferred Charges

A deferred charge arises where the Council incurs capital expenditure when no fixed asset is capitalised on the balance sheet. This expenditure is written off to services during the year of expenditure and an amount is transferred from the Capital Financing Reserve so that there is no impact on Council Tax.

Capital Charges

The capital charges made to service revenue accounts and central support services, equate to the sum of depreciation plus a notional interest charge. The amount is calculated using the net value at which the fixed asset is included in the balance sheet at 1 April 2001 adjusted for any additions and disposals during the

• year. The notional rate of interest used is 6.00%.

Government Grants

Income has been credited, in the case of revenue grants, to the appropriate revenue account or, in the case

• f capital grants, to a government grants-deferred account. Amounts are released from the government

grants-deferred account to offset any provision for depreciation charged to the revenue account in respect

• f assets to which the grants relate. In 2001/02 all expenditure relating to Improvement Grants was funded

from Government Grants (60%) and the Council’s General Fund (40%).

Stocks and Work in Progress

Stock and work in progress are shown at the lower of cost or net realisable value.

Cost of Support Services

All management, administration and central support services have been fully charged to services using appropriate apportionments. Costs of the corporate and democratic core are not re-allocated. These include all executive decision processes that determine Council policies and the cost of running various executive committees.

Provisions & Reserves

Provisions are included in the accounts where an obligation (legal or constructive) was likely to exist and that a transfer of economic benefits was likely to occur, but the timing and amount were not certain. Provisions are made for bad & doubtful debts and known uncollectable debts are written off against this

• provision. Details of these provisions are shown as a note to the consolidated balance sheet.

Earmarked Reserves are amounts set aside for specific purposes out of the balances of the Council’s funds. Details of these reserves are shown as a note to the consolidated balance sheet. General Reserves are amounts set aside for general purposes out of the balances of the Council’s funds. Details of these reserves are shown as a note to the consolidated balance sheet.

Hertsmere Borough Council STATEMENT OF ACCOUNTING POLICIES Page 22 of 63

Capital Reserves are not available for revenue purposes. The Fixed Asset Restatement Reserve, Usable Capital Receipts Reserve and Capital Financing Reserves can only be used for specific statutory purposes. The Fixed Asset Restatement Reserve represents principally the balance of surpluses or deficits arising on the periodic revaluation of assets. The Capital Financing Reserve represents the amounts set aside from revenue resources or capital receipts to finance expenditure on fixed assets or for the repayment of external loans.

Pensions

The pension costs that are charged to the Council’s accounts in respect of its employees are equal to the contributions paid to the funded pension scheme for these employees. Further costs arise in respect of certain pensions paid to retired employees on an unfunded basis. These contributions have been determined on the basis of contribution rates that are set to meet 100% of the liabilities of the Pension Fund, in accordance with relevant Government regulations. However, the large increase in contributions needed, compared to 1998/99, is being phased in over 6 years. As a result, the contributions being paid by the Council are less than its pension costs determined under the accounting requirements of SSAP24, ‘Accounting for Pension Costs’. The liabilities included in the balance sheet are therefore understated in respect of pension costs. In accordance with standard accounting practice for local authorities, the additional costs which would have arisen for the relevant period in order to comply with SSAP 24 are disclosed by way of a note to the accounts. As mentioned in the introduction to these policies FRS 17 ‘Retirement Benefits’, requires additional disclosures to be made in relation to the Council’s pension liabilities. The CIPFA joint committee has issued guidance that transitional disclosures required by FRS 17 should, as a rule, be additional to the disclosures currently required by the SORP. The disclosure requirements that are required under FRS 17 for 2001/02 relate only to the balance sheet at 31 March 2002. In particular, the Council is required to disclose the fair value of attributable scheme assets and liabilities and information about the actuarial assumptions underlying them. Once FRS 17 is fully operational its objectives are to ensure that: (a) financial statements reflect at fair value the assets and liabilities arising from an employer’s retirement benefit obligations and any related funding (b) the operating costs of providing retirement benefits to employers are recognised in the accounting period(s) in which the benefits are earned by the employees, and the related finance costs and any other changes in value of the assets and liabilities are recognised in the accounting periods in which they arise; and (c) the financial statements contain an adequate disclosure of the cost of providing retirement benefits and the related gains, losses, assets and liabilities.

Investments

The Council has both long and short-term investments with various financial institutions and these are shown at the lower of cost or net realisable value at balance sheet date. Further detail of these is given on Page 37.

Leases

Rentals paid under operating leases are charged to revenue on a straight-line basis over the term of the

• lease. All charges are made to the revenue account on an accrual basis.

Hertsmere Borough Council CONSOLIDATED REVENUE ACCOUNT Page 23 of 63

Main Financial Statements

Consolidated Revenue Account

2001/02 2001/02 2001/02 2000/01 Gross Expenditure £000s Gross Income £000s Net Expenditure £000s Net Expenditure £000s Central Services

Note

Democratic Representation & Management 1,946 700 1,246 761 Corporate Management 1,645

• 1,645

1,437 Local Tax Collection 4,215 3,231 984 717 Registration of Electors 84 1 83 81 Conducting Elections 85 79 6 40 Emergency Planning 4

• 4

3 Local Land Charges 137 452 (315) (303) 8,116 4,463 3,653 2,736 Cultural & Related Services Culture & Heritage 1,227 924 303 592 Elstree Film Studios 80 132 (52) 996 Recreation & Sport 10,759 3,300 7,459 10,045 12,066 4,356 7,710 11,633 Environmental Services Environmental Health 1,280 402 878 720 Flood Defence & Land Drainage 580 18 562 685 Street Cleansing (not chargeable to highways) 740 18 722 671 Waste Collection 1,611 184 1,427 1,315 4,211 622 3,589 3,391 Planning & Development Services Building Control 94 13 81 80 Development Control

• 26

Planning Policy 1,472 389 1,083 2,055 Environmental Initiatives 111 55 56 65 Economic Development 3,594 2,505 1,089 4,806 5,271 2,962 2,309 7,032 Highways, Roads & Transport Services Highways/Roads (Routine) 325

• 325

464 Traffic Management & Road Safety 1

• 1

1 Parking Services 723 696 27 1,776 Public Transport 978 124 854 1,039 2,027 820 1,207 3,280 Housing Services Housing Strategy 233 138 95 88 Registered Social Landlords 12

• 12

26 Private Sector Housing Renewal 26

• 26

20 Other Council Housing Property 655 685 (30) (116) Homelessness 291 10 281 268 Housing Benefits Payments 13,581 12,926 655 400 Housing Revenue Account 1,659 1,208 451 (95) 16,457 14,967 1,490 591 Social Services Service Strategy 101

• 101

13 Older People (aged 65 or over including mentally ill) 338 71 267 239 439 71 368 252 Other Service Costs Exceptional Items & Prior Year Adjustments

13

413 672 (259) 1,257 Net Cost of Services 49,000 28,933 20,067 30,172

Hertsmere Borough Council CONSOLIDATED REVENUE ACCOUNT Page 24 of 63

2001/02 2001/02 2001/02 2000/01 Gross Expenditure £000s Gross Income £000s Net Expenditure £000s Net Expenditure £000s

Note

Brought forward from last page 49,000 28,933 20,067 30,172 Precepts & Levies 669

• 669

623 Trading Account (Surpluses) & Deficits

4

1,316 1,437 (121) (47) Asset Management Revenue Account

7

2,909 8,363 (5,454) (6,138) Interest & Investment Income

• 1,166

(1,166) (1,878) Post Balance Sheet Adjustments

• 463

4,894 10,966 (6,072) (6,977) Net Operating Expenditure 53,894 39,899 13,995 23,195 Appropriations Surplus/(Deficit) transferred from HRA 1,208 1,659 (451) 95 Parish Precept Income

• 669

(669) (623) Revenue Contributions to Capital Outlay 661

• 661

1,515 Contributions to / (from) Earmarked Reserves

9

2,519 1,931 588 827 Contributions to / (from) General Reserves 728 1,694 (966) (1,542) Consolidated Revenue Appropriation Account 1,168 3,053 (1,885) (11,091) Amount met from Government Grants and Tax 60,178 48,905 11,273 12,376 Sources of Finance Revenue Support Grant (RSG) 3,696 3,392 NNDR Grant 3,684 3,706 Council Tax Levy 3,884 3,697 Collection Fund Surplus from Prior Year 27 23 Surplus / (Deficit) for the year 18 (1,558) Balance at 1 April 2001 6,021 7,579 Surplus / (Deficit) for the year

1

18 (1,558) Balance at 31 March 2002 6,039 6,021 For notes to the Consolidated Revenue Account, see pages 28 to 34.

Hertsmere Borough Council CONSOLIDATED BALANCE SHEET Page 25 of 63

Consolidated Balance Sheet

2001/02 2000/01 £000s £000s Fixed Assets

Note

Operational Assets Council Dwellings 353 463 Other Land & Buildings 61,685 57,722 Vehicles Plant & Equipment 1,463 1,332 Infrastructure Assets 3,714 4,579 Community Assets 3,000 3,092 Non-operational Assets Investment Properties 22,280 20,627 Total Fixed Assets

1

92,495 87,815 Council House Mortgages 588 727 Debtors

9

266 280 Long-Term Investments

4

5,500 2,600 Total Long Term Assets 98,849 91,422 Current Assets: Stock and Work in progress

8

16 57 Debtors

9

4,773 6,353 Short Term Investments

5

14,100 19,600 Cash & Bank 506 1,246 Total Current Assets 19,395 27,256 Total Assets 118,244 118,678 Current Liabilities: Cash Overdrawn 799 2,107 Creditors

10

5,395 9,131 Loans falling due within one year 3,000

• Total Current Liabilities

9,194 11,238 Total Assets less Current Liabilities 109,050 107,440 Long Term Loans Outstanding

11

50 1,650 Deferred Credits and Grants

13

588 727 Total Long Term Liabilities 638 2,377 Total Assets less Liabilities 108,412 105,063 Fixed Asset Restatement Reserve

14

5,735 1,636 Capital Financing Reserve

15

75,630 75,049 Usable Capital Receipts

17

13,916 15,418 Earmarked Reserves

19

6,743 6,155 General Fund Reserve

20

6,039 6,021 Housing Revenue Account

• 249

Collection Fund 349 535 Total Net Worth 108,412 105,063 For notes to the Consolidated Balance Sheet, see pages 35 to 44.

Hertsmere Borough Council MOVEMENT IN RESERVES Page 26 of 63

Statement of Movement in Reserves

CAPITAL RESERVES REVENUE RESERVES Fixed Asset Restatement Reserve Capital Financing Reserve Usable Capital Receipts General Fund Non-HRA Balance Earmarked Reserve HRA Collection Fund Total Equity £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Balance as at 1 April 2001 (1,636) (75,049) (15,418) (6,021) (47) (6,108) (249) (535) (105,063) Net (Surplus)/Deficit for Year 80 (18) 12 (600) 450 186 110 Unrealised (Gains)/Losses on Revaluation of Fixed Assets (4,182) (4,182) Disposal of Fixed Assets:- Cost /Value of Disposed Assets 83 83 Proceeds of Disposals (1,471) (1,471) Financing of Fixed Assets:- Usable Receipts 2,973 2,973 Revenue (661) (661) Other Adjustments (201) (201) Lottery Grant Balance as at 31 March 2002 (5,735) (75,630) (13,916) (6,039) (35) (6,708)

• (349)

(108,412) For notes to the Movement in Reserves Statement, see page 45.

Hertsmere Borough Council THE CASHFLOW STATEMENT Page 27 of 63 25/04/07 18:30

Cash Flow Statement

2001/02 £000s 2000/01 £000s REVENUE ACTIVITIES

Note

CASH OUTFLOW Cash paid to and on behalf of employees 12,124 11,397 Other operating costs 12,193 14,247 Housing benefit paid out 13,031 12,973 National Non-domestic Rate payments to National Pool 30,852 29,686 Precepts paid to Hertfordshire County Council 26,239 24,356 Precepts paid to Hertfordshire Police Constabulary 2,902 2,682 Precepts paid to Parishes 669 623 98,010 95,964 CASH INFLOW Rents (after rebates) (3) (6) Council tax receipts (31,039) (29,079) National Non-domestic rates from National Pool

1

(3,684) (3,706) Non-domestic rate receipts (30,351) (32,218) Revenue Support Grants

1

(3,696) (3,392) DSS grants for rebates

1

(16,499) (15,261) Cash received for goods and services (12,603) (12,860) (97,875) (96,522) Net Cash Outflow/(Inflow) from Revenue Activities

2

135 (558) RETURNS ON INVESTMENT AND SERVICING OF FINANCE CASH OUTFLOW Interest paid 11 65 CASH INFLOW Interest received (1,386) (2,115) (1,375) (2,050) CAPITAL ACTIVITIES CASH OUTFLOW Purchase of Fixed Assets 6,432 14,204 Deferred Charges 160 92 Loans and Grants of a Capital Nature 7,716 6,672 14,308 20,968 CASH INFLOW Sale of Fixed Assets (1,362) (3,829) Government Grants

1

(7,843) (8,312) (9,205) (12,141) Net Cash Outflow/(Inflow) on Capital Activities 5,103 8,827 Net Cash Outflow/(Inflow) before Financing 3,863 6,219 MANAGEMENT OF LIQUID RESOURCES CASH INFLOW Investments Redeemed

3

(2,600) (6,900) FINANCING CASH OUTFLOW Repayments of Amounts Borrowed

4

5,550 9,300 CASH INFLOW New Short Term Loans Raised

4

(6,950) (9,300) Hertsmere Leisure Deposit Accounts (431) Net (Increase) / Decrease in Cash

5

(568) (681) For notes to the Cash Flow Statement, see pages 47 and 48.

Hertsmere Borough Council NOTES TO THE CONSOLIDATED REVENUE ACCOUNT Page 28 of 63 25/04/07 18:30

Notes to the Main Financial Statements

Consolidated Revenue Account Notes

• 1. Transfer To/(From) Reserves

All surpluses/(deficits) are transferred at the end of each year to the General Fund Reserve. The surplus

• f £18K has been transferred to this reserve. This surplus is inclusive of £661K that has been spent on

capital projects from revenue. Therefore, the real revenue result for the year is a surplus of £679K.

• 2. Expenditure incurred on Publicity (as recorded under Section 5 of the Local Government Act 1986)

2001/02 2000/01 £ £ Hertsmere Magazine 21,187 23,503 Other 16,358 18,908 Annual Report 8,645 7,853 Best Value Plan-Publication

• 10,653

A – Z Guide to Hertsmere 12,075

• Staff time involved in the provision of publicity

20,517 16,700 78,782 77,617

• 3. Building Control Trading Account

The Local Authority Building Control Regulations require the disclosure of information regarding the setting of charges for the administration of the building control function, which are published in the Council’s budget book and other miscellaneous publications. Hertsmere has adopted the Local Government Association’s Advisory Charges. Certain activities performed by the building control unit cannot be charged for, such as providing general advice dealing with dangerous structures, demolitions and liasing with other statutory

• authorities. These are shown as non-chargeable. The statement below shows the total cost of operating

the Building Control Unit analysed between the chargeable and non-chargeable activities. The Regulations require local authorities to break even in their Building Regulation Fee Earning (BFRE) trading account over a continuous three-year rolling period. Building Regulations Chargeable Non Total Chargeable Charging Account 2001/02 2001/02 Chargeable Building 2000/01 2001/02 Control 2001/02 £ £ £ £ Expenditure Employees Expenses 235,338 61,680 297,018 286,669 Premises 12,282 11,851 24,133 16,099 Transport 9,074 1,852 10,926 9,793 Supplies and Services 29,535 2,894 32,429 40,217 Central and Support Service Charges 39,699 16,107 55,806 50,939 TOTAL EXPENDITURE 325,928 94,384 420,312 403,717 Income Building Regulation Charges 340,111

• 340,111

320,685 Miscellaneous Charges

• 8,807

8,807 6,413 TOTAL INCOME 340,111 8,807 348,918 329,627 Surplus / (Deficit) for Year 14,183 Balance at 31 March 2001 36,706 Balance at 31 March 2002 50,889

Hertsmere Borough Council NOTES TO THE CONSOLIDATED REVENUE ACCOUNT Page 29 of 63 25/04/07 18:30

• 4. Trading Operations

The Council has established 7 trading units where the service manager is required to operate in a commercial environment and balance the unit’s budget by generating income from other parts of the Council or other organisations. Details of those units with a turnover of greater than £50,000 or a deficit of £10,000 in 2001/02 are as follows: £’000 £’000 Building Control: The Regulations require Local Authorities to break -

Turnover

340 even in their BRFE trading account over a three year

Expenditure

326 rolling period. The cumulative surplus/(deficit) is transferred to a separate holding account. Surplus 14 Leisure Operations – Bars: The Council operates 6 bars within its leisure

Turnover

227 complexes throughout the Borough– the trading

Expenditure

200

• bjective is to achieve a gross profit margin of 60%.

The actual gross margin achieved was 55% Surplus 27 Leisure Operations – Catering: The Council operates 5 catering/café outlets within

Turnover

374 its leisure complexes throughout the Borough– the

Expenditure

395

• bjective is to achieve a gross profit margin of 55%.

The actual gross margin achieved was 51%. (Deficit) (21) Leisure Operations – Vending The Council operates a number of drinks and

Turnover

113 confectionery machines throughout its leisure centres.

Expenditure

72 There were no specific targets set for this operation. Surplus 41 Leisure Operations – General Trading Various items are sold throughout the leisure centres.

Turnover

66 Examples include swimming goggles and there was no

Expenditure

25 set trading objective for this operation. Surplus 41 Cemeteries / Burial Grounds: The Council maintains two closed cemeteries (not

Turnover

72 Available for burials) and one lawn cemetery that

Expenditure

99 incur expenditure – the trading objective is to Minimise the subsidy funded from Council Tax. (Deficit) (27) Trade Refuse: The trade refuse section is currently undergoing a

Turnover

246 Best Value review and as a consequence, a trading

Expenditure

175 Objective will be set for future year operations. Surplus 71 Less Depreciation & Capital Charges for Cemeteries (25) NET SURPLUS ON TRADING UNITS : 121

Hertsmere Borough Council NOTES TO THE CONSOLIDATED REVENUE ACCOUNT Page 30 of 63 25/04/07 18:30

• 5. Pensions

In 2001/02 the Council paid an employer's contribution of £1.193m representing 18.58% of employees’ pensionable pay into Hertfordshire County Council's Superannuation Fund, which provides members with defined benefits related to pay and service. The contribution rate is determined by the Fund's Actuary, based on triennial actuarial valuations, the last review being for the period ended 31 March 2001. This valuation determines the rates payable from 1 April 2002. The valuation as at 31 March 1998 set the contribution rates for 2001/02. Under Pension Regulations contribution rates are set to meet 100% of the overall liabilities of the Fund, but contribution increases are being phased in

• ver 6 years.

In addition, the Council is responsible for all pension payments relating to added year’s benefits it has awarded, together with the related increases. In 2001/02 these amounted to £93,529, representing 1.5%

• f pensionable pay.

The Fund's Actuary has advised that the pension costs that it would have been necessary to provide for in the year in accordance with SSAP 24, 'Accounting for Pension Costs' are £1.220m representing 19%

• f pensionable pay.

Local authorities are required to disclose the cost of any discretionary increases in pension payments (e.g. discretionary added years) agreed by the Council. In addition any payments towards these costs must be disclosed. This applies to in year payments and those in earlier years for which payments are still being made. For Hertsmere Borough Council the costs of discretionary increases awarded and payments made towards these costs is laid out in the table below: - Cost of Discretionary Increases Awarded Payments made during 1999/00 Payments made during 2000/01 Payments made during 2001/02 Retirements during 2000/01 £134,829 N/A £108,197 £26,632 Retirements during 2001/02 £93,529 N/A N/A £56,458 Further information can be found in Hertfordshire County Council's Superannuation Fund Annual report, which is available upon request from: Hertfordshire County Council Corporate Services County Hall Hertford Herts SG13 8DQ.

• 6. Leasing

The Council uses parks patrol vehicles, photocopiers, printing equipment, kitchen and fitness equipment financed under the terms of individual operating leases. This years note also includes amounts payable under fleet service contracts for refuse and street cleaning vehicles. The total amount paid under these arrangements in 2001/02 was £444,072. (2000/01 £414,304) The Council is committed to making payments of £1,006,648 under these lease contracts in the future, comprising the following elements: £ Rental in 2002/03 444,072 Rental between 2003/04 and 2006/07 562,576 Rental after 2006/07

• The Council had no finance leases outstanding in 2001/02.

Hertsmere Borough Council NOTES TO THE CONSOLIDATED REVENUE ACCOUNT Page 31 of 63 25/04/07 18:30

• 7. Asset Management Revenue Account (AMRA)

This account is required by regulation under the current capital accounting regime. The balance on the account has been credited to the Consolidated Revenue Account. Transactions on the Asset Management Revenue Account are as follows :- 2000/01 2001/02 £’000 Income £’000 (19,002) Capital Charges - General Fund (8,363) (3) Transfer from grants & contributions deferred account

• (19,005)

(8,363) Expenditure 2,051 Provision for Depreciation 2,893 10,542 Impairment

• 38

External Interest Charges 16 236 Abortive Cost

• (6,138)

Balance to Consolidated Revenue Account (5,454)

• 8. Member Allowances

The following allowances were paid to members during the year. 2001/02 2000/01 Basic Allowance 126,235 27,924 Special Responsibility Allowance 46,104 12,353 Attendance Allowance 12,002 32,309 Travel Allowance 7,486 10,705 £191,827 £83,291

• 9. Contribution to / (from) Earmarked Reserves

Earmarked reserves represent those revenue reserves set aside for specific future commitments. The balance is as follows: £’000 Opening balance as at 1 April 2001 6,155 Transfers in /(out) during the year 588 Closing balance as at 31 March 2002 6,743

Hertsmere Borough Council NOTES TO THE CONSOLIDATED REVENUE ACCOUNT Page 32 of 63 25/04/07 18:30

2001/02 2000/01 £'000 £'000 a) Non - HRA Reserve (12) (25) b) Other Earmarked Reserves Land Drainage 464 475 Information Technology Equipment (180)

• CPZ Repairs & Renewals Provision

9 8 Bushey Country Club Dwelling 5 (8) Bushey Country Club Reserve (35) 48 Council Contribution to Pension Fund (11) (169) Capital Interest Reserve

• (1)

Elstree Film Studios – Provision for Structural Repairs (136) 200 Building Regulations Fee Earning Account 14 8 Potters Bar Clock 2

• Shop Repairs

10 11 Transportation Development Reserve 30

• Public Building Works
• 1

97/98 Services Surplus 20 (14) Bonding Reserve (2)

• Brook House Park Seating

2

• Potters Bar Strategy
• Property Services Consultancy Fee Reserve
• (1)

Housing Needs Survey 7 19 Human Resources Strategy 64 50 Modernisation of Local Government

• 42

Information Communication Technology Replacement 177 50 S106 Spatz Academy Fitness Centre

• 11

S106 Day Nursery 1 7 Leisure Centre Repairs (29) (8) Uninsured Losses (2) 56 S106 Traffic Calming Tesco

• (35)

S106 Traffic Calming Costco

• (74)

S106 Arsenal Training Ground (30) (1) S106 Watling Chase Community Forest 21

• S106 Trim Track Aycliff

15

• Leisure Sinking Fund

210 189 Old Tesco Car Park Sinking Fund 2 3 Provision for Local Plan Inquiry (28) (15) TOTAL 600 827

Hertsmere Borough Council NOTES TO THE CONSOLIDATED REVENUE ACCOUNT Page 33 of 63 25/04/07 18:30

• 10. Minimum Revenue Provision

The Council is required by statute to set aside a minimum revenue provision (MRP) for the redemption

• f external debt.

The Statement of Recommended Practice requires that authorities regard their annual depreciation charge as if it were part of the MRP. The difference between the depreciation charge and the MRP should be charged to revenue and transferred to the Capital Financing Reserve. The Council has no need to make a charge for MRP as following the Large Scale Voluntary Transfer (LSVT) of Housing Stock the Council is debt free. 2001/02 2000/01 £'000 £'000 Minimum Revenue Provision

• Amount charged as depreciation

2,893 2,051 2,893 2,051 Excess transferred to Capital Financing Reserve 2,893 2,051

• 11. Employees Remuneration in Excess of £40,000

Under the Accounts and Audit Regulations 1996 Local Authorities are required to disclose the number

• f employees in the accounting period whose remuneration was £40,000 or more in bands of £10,000.

For this purpose, remuneration means all amounts paid to or receivable by an employee and includes sums due by way of taxable expenses and the estimated money value of any other benefits. Pension contributions payable by either employee or employer are excluded. Remuneration Band Number of Employees 2001/02 2000/01 £40,000 - £49,999 6 10 £50,000 - £59,999 1 1 £60,000 - £69,999

• 3

£70,000 + 2 1 TOTAL 9 15

• 12. Related Party Transactions

Material transactions with parties related to the Council have to be disclosed by a note if they are not disclosed elsewhere on the face of the accounts. Related parties of the Council will include:

• Central Government
• Other Local Authorities and other bodies precepting or levying demands on the council tax
• Subsidiary and associated companies
• Joint ventures and joint venture partners
• Its Members and Chief Officers

Information in relation to transactions with the Central Government, Other Local Authorities and Members is disclosed elsewhere in the accounts. This leaves amounts in relation to joint ventures and Council Members & Officers. Receipts Payments £ £ Bushey Country Club 200,000

• Chief Officer Car Loans

93,149 143,714

Hertsmere Borough Council NOTES TO THE CONSOLIDATED REVENUE ACCOUNT Page 34 of 63 25/04/07 18:30

• 13. Exceptional Items

Exceptional items are large in terms of the Council’s overall expenditure and are not expected to recur frequently or regularly. The total of these exceptional items for 2001/02 are (£259K) made up of the following: - £’000 Legal fees for contract dispute. 219 Leisure Transfer Consultant Fees 50 Net parking fines accrued before April 2001. (77) Housing revenue account closedown. (451) (259)

• 14. Discontinued Operations

During the financial year the Council agreed to transfer its leisure services to an independent not-for- profit trust. This transfer took place on 1 February 2002 and therefore impacted on the income and expenditure reported for Recreation & Sport in the consolidated revenue account. There was also an impact on the trading operations reported in the net operating expenditure figure since two budgeted months were lost. A submission was made to the Secretary of State during the year to close the housing revenue account of the Council. The submission was accepted which means the Council does not have to continue accounting for the properties named in the submission within the Housing Revenue Account from 1 April 2001.

• 15. Revenue Support Grant/National Non Domestic Rate Grant

Both the Revenue Support Grant (RSG) and the National Non Domestic Rate Grant (NNDR) have been credited to the Council's General Fund.

Hertsmere Borough Council NOTES TO THE CONSOLIDATED BALANCE SHEET Page 35 of 63 25/04/07 18:30

Consolidated Balance Sheet Notes

• 1. Movement of Fixed Assets 2001/02

Council Other Vehicles Infrastructure Community Non Total Dwellings Land & Plant & Assets Assets Operational Buildings Equipment Assets £'000 £'000 £'000 £'000 £'000 £'000 £'000

Certified Valuation at 01/04/01 463 65,694 1,766 6,096 3,092 23,618 100,729 Accumulated Depreciation

• (7,972)

(435) (1,517)

• (2,991) (12,915)

Net Book Value at 1 April 2001 463 57,722 1,331 4,579 3,092 20,627 87,814 Category Adjustments (34) 5,526

• (764)

(245) (4,483)

• Adjusted WDV 1 April 2001

429 63,248 1,331 3,815 2,847 16,144 87,814 Movement in 2001/02 Additions

• 2,711

384 89 142 148 3,474 Disposals

• (83)

(83) Revaluation (70) (2,256)

• 21

6,488 4,183 Depreciation (6) (2,018) (252) (190) (10) (417) (2,893) Impairments

• Sub-Total

(76) (1,563) 132 (101) 153 6,136 4,681 Net Book Value at 31 March 2002 353 61,685 1,463 3,714 3,000 22,280 92,495 Analysis of Fixed Assets Numbers at 31 March 2002 Numbers at 31 March 2001 Allotments 6 6 Car Parks 18 18 Caravan Site 1 1 Cemetery 1 1 Civic Offices 1 1 Council Dwellings 5 6 Depots 4 4 Film Studio 1 1 Garages 112 112 Golf & Country Club 1 1 Ground Rents 79 79 Industrial Estate Units 9 9 Investment Properties 9 8 Leisure Centres & Community Halls 12 12 Museum 1 1 Parks, Fields & Open Spaces 45 45 Pavilions 6 6 Playing Fields & Sports Fields 20 20 Public Conveniences 4 4 Shops & Flats 92 92 Surplus Land Sites 140 142

Hertsmere Borough Council NOTES TO THE CONSOLIDATED BALANCE SHEET Page 36 of 63 25/04/07 18:30

• 2. Capital Financing Statement

Expenditure in Year 31/03/02 31/03/01 Council Dwellings

• Other Land & Buildings

2,711 12,813 Vehicles Plant & Equipment 384 657 Roads & Infrastructure 89 430 Community Assets 142 545 Local Authority Social Housing 7,716 6,733 Investment & Non-operational Assets 148 833 11,190 22,011 Deferred Charges & Abortive Costs 160 324 Total Capital Expenditure 11,350 22,335 Financed as Follows Revenue Contribution 661 1,515 Capital Receipt Allocations 2,973 7,422 Local Authority Social Housing Grant 7,716 6,733 Lottery Grants

• 1,530

P.C.L

• 5,135

Total 11,350 22,335 Commitments under Capital Contracts Significant projects undertaken during 2001/02 £’000 Bushey Grove Fitness Works 384 Landscaping Improvements to Parks & Open Spaces 142 Furzefield Leisure Centre Astroturf 364 Furzefield Leisure Centre Works 414 Local Authority Social Housing Schemes 7,715 Elstree Studios Capital Refurbishments 404 Bushey Grove Leisure Centre Works 1,639 “The Venue” Leisure Centre Works 236 Significant schemes committed to in 2002/03 £’000 Bushey Grove Fitness Works 246 Day Care Facilities in Borehamwood 462 CCTV Control Room 579 Furzefield Leisure Centre Works 1,140 Local Authority Social Housing Schemes 8,217 Development of E-Government 200 Relocation of HCS Depot 200 Expansion of Recycling Services 168

• 3. Deferred Charges

Deferred charges are created when expenditure has been incurred on items that are not capitalised as fixed assets, but have been financed from capital resources. Deferred charges are written down to the revenue account over an appropriate period, usually in the same year in which the expenditure is incurred.

Hertsmere Borough Council NOTES TO THE CONSOLIDATED BALANCE SHEET Page 37 of 63 25/04/07 18:30

Improvement 31/03/02 31/03/01 Grants Other Total Total £'000 £’000 £’000 £’000 Value at 1/4/01

• Expenditure in Year

41 119 160 92 Transfer from Fixed Asset (41) (119) (160) (92) Write down in year Balance at 31/3/02

• 4. Long Term Investments

At 31 March 2002 Long Term Investments totalled £5.5m. This is analysed as follows: £’000 Banks & Building Societies 5,500 Foreign Banks

• Local Authorities
• 5,500
• 5. Short Term Investments

Investments are limited to those institutions appearing on the Council’s approved list, which is regularly reviewed and updated. This ensures that both the security of the Council’s investments are safeguarded and that a reasonable rate of return is received. The average interest rate received on investment during the year was 5.5% compared to 6.5% for 2001/02. At 31 March 2002 Short Term Investments totalled £14.1m which is invested with various financial institutions for periods of less than one year. The short term investment segmentation by financial institution is as follows: £’000 Building Societies 10,000 Banks

• Foreign Banks

3,500 Local Authorities 600 14,100

• 6. Contingent Assets

Within the Elstree Film Studios (“The Studios”) site, a large carpentry workshop was considered larger than was required. As a result, an alternative use for the building was agreed in the form of a new sound stage. The Council is committed to spending capital funds on the refit to an estimated value of £400,000. The agreement also stipulated that all letting income from this development will be paid to the Council until the costs incurred plus an interest component is fully repaid. At the start of the financial year the Studios still owed the Council £258,712 for these development costs. During the year £14,513 was calculated for the interest on the outstanding balance. The Studios paid £141,200 in relation to letting income during the year, leaving a balance of £132,025 to be received in future periods. There is also an amount of £22,725 being pursued from the lighting contractors of “The Venue” after the lights developed faults within a short time frame after installation.

Hertsmere Borough Council NOTES TO THE CONSOLIDATED BALANCE SHEET Page 38 of 63 25/04/07 18:30

• 7. Euro Preparation Costs

The Council does not expect to incur any significant direct costs in advance of the decision for the United Kingdom to join Stage 3 of economic monetary union. The Council’s strategy to implement future schemes will identify Euro preparations as a factor to be included in functional specifications. Risk assessment will then be undertaken before commitment is made, to ensure that the Council does not incur unnecessary expenditure if the outcome of the referendum results in the United Kingdom not joining the single currency.

• 8. Stocks

This consists of the following at 31 March 2002. 31/03/02 31/03/01 £'000 £'000 Office Stock 3 3 Leisure Centres Stock

• 39

Hertsmere Contract 12 15 Other Items 1

• 16

57 The reduction in leisure centres stock to nil is due to the sale of all stock owned by the Council to the new leisure trust when the transfer took place on 1 February 2002.

• 9. Debtors

31/03/02 31/03/01 Amounts due to the Council payable within one year. £'000 £'000 Mortgages 5 6 Government Departments

• 1,101

Loans to Voluntary Organisations 51 57 Sundry Debtors/Accruals 2,432 2,738 Employee Car Loans 46 47 Customs and Excise 193 367

• Comm. Charge/NNDR/Council Tax

1,711 1,761 Prepayments 334 211 Rechargeable 1 65 4,773 6,353 Amounts due to the Council payable after one year. Employee Car Loans 99 61 Loans to Voluntary Organisations 167 219 5,039 6,633 Sundry Debtors/Accruals are shown net of bad debts provision of £1.157m, which comprises the following: £,000 General Fund 404 Collection Fund 753 1,157

Hertsmere Borough Council NOTES TO THE CONSOLIDATED BALANCE SHEET Page 39 of 63 25/04/07 18:30

• 10. Creditors

31/03/02 31/03/01 £'000 £'000 Amounts owed by the Council payable within one year Mortgages 10 19 Inland Revenue

• 205

Ratepayers

• 32

Sundry Creditors 3,014 6,229 Receipts in Advance 222 338

• Govt. Departments

1,283 356 Council Tax/Comm. Charge 866 1,952 5,395 9,131

• 11. Loans falling due after one year

At 31/03/02 the Council had loans outstanding amounting to £50,000. The amount is owed to Bushey Country Club, which is a related party. Other than this amount the Council has been debt free since 1995/96.

• 12. Pensions

In accordance with the requirements of Financial Reporting Standard No 17 – Retirement Benefits (FRS 17) the Council has to disclose its share of assets and liabilities related to pension schemes for its

• employees. The Council participates in only one formal scheme, the Hertfordshire Local Government

Pension Scheme which is administered by the County Council. The following table discloses the Council’s share of assets and liabilities at 31 March 2002 in the pension fund: 31 March 2002 £’000 Share of assets in County Council Fund 40,725 Estimated liabilities in County Council Fund 49,345 Net assets/(liability) in County Council Fund (8,620) Estimated liabilities for discretionary pensions

• Net pension assets/(liabilities) and pension reserve

(8,620) Assets are valued at fair value, principally market value for investments, and consist of: £’000 Equity investments 29,513 Bonds 6,689 Other assets less liabilities 4,523 40,725

Hertsmere Borough Council NOTES TO THE CONSOLIDATED BALANCE SHEET Page 40 of 63 25/04/07 18:30

Liabilities are valued on an actuarial basis using the projected unit method, which assesses the future liabilities of the fund discounted to their present value. The valuations are based on a valuation as at 31 March 2001 and updated to the current year, by the independent Actuary to the pension fund. The main assumptions used in the calculations are: County Pension Fund % per annum Rate of Inflation 2.8 Rate of increase in salaries 4.3 Rate of increase in pensions 2.8 Rate for discounting scheme liabilities 6.4

• 13. Deferred Credits

Deferred Capital Receipts are amounts derived from sales of assets that will be received in instalments

• ver agreed periods of time. They arise principally from mortgages on sales of former council houses

which form part of the Council House Mortgages balance shown on the Balance Sheet.

• 14. Fixed Asset Restatement Reserve

£'000 Balance at 1 April 2001 1,636 Disposals (83) Re-valuations 4,182 Balance at 31 March 2002 5,735 Capital accounting requires the establishment of the Fixed Asset Restatement Reserve. The balance represents the difference between the valuation of assets under the previous system of capital accounting and the revaluation as at 31 March 2002. The reserve will be written down by the net book value of assets as they are disposed and debited or credited with the deficits or surpluses arising on future re-valuations.

• 15. Capital Financing Reserve

£'000 Balance at 1 April 2001 75,049 Capital receipts set aside 7,716 Capital financing

• capital receipts

2,973

• revenue

661 Depreciation (2,893) Write down of deferred charges (160) LASHG Reimbursement (7,716) Balance at 31 March 2002 75,630

Hertsmere Borough Council NOTES TO THE CONSOLIDATED BALANCE SHEET Page 41 of 63 25/04/07 18:30

The Capital Financing Reserve contains the amounts which are required by statute to be set aside from capital receipts for the repayment of external loans and the amount of expenditure financed from revenue and capital receipts. It also contains the difference between amounts provided for depreciation and that required to be charged to revenue to repay the principal element of external loans. The Council is debt free (provision for credit liabilities exceeds the outstanding external debt) and consequently makes no provision for set aside receipts or minimum revenue provision except for repayment of loans to Housing Associations.

• 16. Local Authority Social Housing Grant (LASHG)

Under current rules, Registered Social Landlords may apply for grants to provide new homes and to purchase or refurbish existing properties. These grants are funded initially either from usable capital receipts or revenue contributions and are then repaid by a grant from the Office of the Deputy Prime

• Minister. The scheme thus allows the use of all usable resources twice, once for housing investment

through LASHG then again for other schemes. In 2001/2002, the total LASHG funding was £7.716m, which was awarded as follows: Chiltern Ridgehill Paddington Aldwyck Metro Total £ £ £ £ £ £ 114,533 7,392,276 108,988 12,000 87,928 7,715,725

• 17. Usable Capital Receipts

2001/02 2000/01 £'000 £'000 Balance at 1 April 2001 15,418 19,241 Receipts in year from sales 1,471 3,619 General Adjustments

• (20)

Receipts applied in year (2,973) (7,422) Balance at 31 March 2002 13,916 15,418

• 18. Provision for Credit Liabilities (memorandum account)

From 1 April 1990 regulations came into force governing the use of Capital Receipts and how these should be treated. The balance of receipts in hand (unapplied) had to be split between those that had to be set aside to repay outstanding loan debt and those which could be used to finance capital

• expenditure. Receipts from the sale of Council Houses have to be set aside at a rate of 75% while

Other Receipts are set aside at 50%. Receipts generated during the year have to be set aside in the same proportions. As a debt-free Council, this does not apply to Hertsmere Borough Council other than to the extent of Local Authority Social Housing Grant. 2001/02 2000/01 £'000 £'000 Balance at 1 April 2001

• 5,135

Receipts in year from LASHG 7,716 6,733 Financing Capital Expenditure-LASHG (7,716) (6,733)

• Other
• (5,135)

Balance at 31 March 2002

Hertsmere Borough Council NOTES TO THE CONSOLIDATED BALANCE SHEET Page 42 of 63 25/04/07 18:30

• 19. Reserve Movements to/(from) Earmarked Reserves

Transfers during the Year (to) / from General Fund 1 April 2001 In (Out) Net Transfer 31 March 2002

£’000 £’000 £’000 £’000 £’000 Non HRA tenants 47

• (12)

(12) 35 Earmarked Reserve 6,108 2,519 (1,919) 600 6,708 Total Earmarked Reserves 6,155 2,539 (1,941) 588 6,743 * - These reserves are earmarked for specific projects or causes instead of general purposes, a list of which is provided on page 45.

• 20. General Fund Reserve Movement

This is the Council’s general purposes reserve. Any surplus or deficit, which has arisen by the end of the financial year is transferred to this reserve. This can be used for either capital or revenue purposes. £’000 Opening Balances at 1 April 2001 6,021 Surplus/(deficit) during the year 18 Closing balance at 31 March 2002 6,039

• 21. Fixed Asset Valuation

The freehold and leasehold properties which comprise the Council’s property portfolio have been valued as at 31 March 2002 by the Council's internal Estates Valuer (Neville Thomson M.R.I.C.S) in accordance with the Statements of Asset Valuation Practice and Guidance Notes of the Royal Institute

• f Chartered Surveyors. Only a selection of properties were re-valued per the rolling revaluation

programme agreed last year. Properties regarded by the Council as non-operational have been valued on the basis of open market value.

• 22. Accrued Interest

Included within the accounts is an accrual for interest receivable of £207,159 and interest owed of £8,730.

• 23. Contingent Liabilities

There are no contingent liabilities at 31 March 2002.

• 24. Related Businesses and Companies

Bushey Country Club Limited The legal arrangements surrounding the set-up and management of the Bushey Country Club Limited are currently under review. The Council is seeking external, independent and expert advice to resolve the matter. The entity is a wholly (100%) owned subsidiary of the Council, and is termed as a ‘Controlled Company’. The company manages the following activities on the site: - Golf (inc. Driving Range); Health & Fitness Suite; Bars; Banqueting & General Catering. The Council owns the two allocated shares that have been appropriated from the company’s authorised share capital and therefore, is committed to meet any future company deficits should they occur.

Hertsmere Borough Council NOTES TO THE CONSOLIDATED BALANCE SHEET Page 43 of 63 25/04/07 18:30

The unaudited profit of the company for the year is £270,193 after taking into account rental payments made to Hertsmere Borough Council of £200,000. Of this amount £48,000 is held under ‘Bushey Country Club’ earmarked reserve and an additional £8,000 is held in the Bushey Country Club Dwelling reserve for the purpose of funding strategic maintenance. There are a number of other tenants on the site and the Council directly received rental income of £41,658 from these tenants. The company’s accumulated trading surplus (subject to audit) at 31 March 2002 is £1,419. The company’s strategy was to make a profit for the financial year and as such, the amount achieved was

• ffset against prior year losses.

The Company’s net liabilities at 31 March 2002 were £1,421 (subject to audit). The company accounts are awaiting audit for 2001/02. Once this is completed, the documents will be filed with Companies House and a copy can be requested using the address shown on Page 6. Elstree Film & Television Studios Limited On 31 March 2000, a new company was incorporated to operate the infrastructure employed at Elstree Film and Television Studios in Borehamwood. The Council was issued a preference share in the company and allowed to appoint directors to the management board. The arrangement also consists of a 7-year lease agreement between the Studios and the Council. This lease agreement includes both a base rent and a turnover related component that is indexed in line with the Retail Price Index on an annual basis. As a consequence of this arrangement, the Council is not liable to meet any trading losses that may result from the operation of the company. The company provides the infrastructure for television and film productions with notable clients such as “Who wants to be a Millionaire” and “Big Brother”. In addition to the Lease Agreement and Articles of Association of the company, an additional agreement was made to refit the carpentry workshop into another sound stage (Sound Stage 6). This was agreed in order to increase the value of the asset to the Council. The costs of this were to be met by the Council but any income received from the completed development are to be remitted to the Council until the Capital costs are recovered plus an interest component. Since the regulations require disclosure of material transactions with related parties that can be controlled or influenced by the Council, it was determined that financial dealings with the studios should also be included within this note. The company shows a net loss (subject to audit) of £25,319 that has accrued after deductions of site rent and turnover related rent payable to the Council of £751K. Therefore, the company managed to achieve a £726K trading surplus before taking into account any rental payments made to the Council. An additional £132K is due from the studios for the reimbursement of costs incurred by the Council in its redevelopment of Sound Stage 6. The company’s net assets (subject to audit) at 31 March 2002 were £76,685. The company’s accounts are awaiting audit for 2001/02. Once this is completed, the documents will be filed with Companies House and a copy can be requested using the address shown on Page 6. Hertsmere Leisure On 1 February 2002, the Council exercised its powers under section 19(3) of the Local Government (Miscellaneous Provisions) Act 1976 and Section 145 Local Government Act 1972 to set up a charitable trust (“Hertsmere Leisure”) for the statutory provision of community arts and recreational services.

Hertsmere Borough Council NOTES TO THE CONSOLIDATED BALANCE SHEET Page 44 of 63 25/04/07 18:30

The trust is governed by a board of directors that are totally independent to any member involved with the Council. The trust has also gained charitable status, which means that it is operating as a not-for- profit distributing organisation (NPDO). In order to protect the interests of both parties to this arrangement, the following financial issues have been incorporated into the legal documents of the transfer: - (a) The Council will fund Hertsmere Leisure on the basis of one year’s budgeted funding. Further funding support will then be assessed annually during September on the basis of a rolling programme and the financial forecasts provided in the Business Plan of Hertsmere Leisure. Satisfactory performance during the year will also be considered when the funding level is set in September of each year. (b) The Council will lease Bushey Grove, Furzefield, The Venue, Wyllyots and Hawksmere to Hertsmere Leisure for ten years with a break provision on either side at the end of three years. The proposed notice period required to trigger this break clause is twelve months. (c) The building maintenance will be based on a landlord/tenant split, with the Council retaining the major structural responsibilities as the landlord, in accordance with a schedule, together with the items of equipment with a value which exceeds £1,000 and Information Technology equipment with a value that exceeds £100. Hertsmere Leisure as a tenant will be responsible for internal repairs and responsive maintenance, and replacing minor items of equipment. Since Hertsmere Leisure has only been operating since the start of February 2002 the financial results

• nly represent two months trading and it should be noted that results at this early stage cannot

necessarily be indicative of future results. The first annual reports to be submitted by Hertsmere Leisure will be done within a 14 month timeframe and will report on the financial year ending 31 March 2003.

• 25. Post Balance Sheet Event

These are events that occur between the Balance Sheet date and the date the accounts are signed by the Responsible Financial Officer which might have a bearing upon the financial results of the past year. There are two types of Post Balance Sheet events: -

• Adjusting Events – Require changes to the financial statements because the new information

provides evidence about conditions that existed at the Balance Sheet date.

• Non-Adjusting Events – require disclosure only (no adjustment to financial statements) because

the new information provides evidence on conditions that did not exist at the balance sheet date. These disclosures need to be made if the evidence is material enough to impact on the fair presentation of the accounts. The Council does not have any adjusting post balance sheet events between 31 March 2002 and 25 September 2002. However, the investment market movements within this timeframe and the impact it has on the pension disclosure is considered to be a relevant non-adjusting event. The investment market between 31 March and 25 September has suffered from further losses somewhere in the range of about 10 to 15%. This impacts on the assets employed in the Council’s pension fund and means that the shortfall has increased. The Council is receiving advice and regular updates from the pension fund actuaries on these market movements to ensure that appropriate action is taken in all circumstances.

Hertsmere Borough Council MOVEMENT IN RESERVES NOTES Page 45 of 63 25/04/07 18:30

Statement of Movement in Reserves Notes

• 1. Earmarked Reserves consist of the following balances:

31 March 2002 31 March 2001 £’000 £’000 Leased Equipment

• 180

Housing Needs Survey 26 19 Bushey Country Club Dwelling 13 8 Bushey Country Club 51 86 Bonding Reserve

• 2

Council Contribution to Pension Fund 488 500 Capital Interest Reserve (Leisure) 476 476 Potters Bar Clock 2

• Shop Repairs

79 69 Public Building Works 44 44 Land Drainage 3,579 3,116 97/98 Services Surplus 25 5 Building Control Reserve 51 37 Human Resources Strategy 114 50 Modernisation of Local Government 42 42 Information Communication Technology Replacement 227 50 Potters Bar Strategy 9 9 LAP Consultancy

• Leisure Centre Repairs

23 52 Uninsured Losses FL30 268 270 Brook House Park Seating 2

• S106 Spatz Academy–Fitness Centre

11 11 S106 Day Nursery 9 7 S106 Arsenal Training Ground 14 44 S106 Watling Chase Community Forest 21

• S106 Trim Track Aycliff

16

• Transportation Development

30

• CPZ Repairs & Renewals

22 13 Local Plan Enquiry 83 111 Elstree Film & TV Studios Repairs 264 400 Leisure Sinking Fund 672 462 Old Tesco Car Park Sinking Fund 47 45 Non-HRA Tenants Incentive 35 47 6,743 6,155

Hertsmere Borough Council MOVEMENT IN RESERVES NOTES Page 46 of 63 25/04/07 18:30

• 2. Financial Reserves

The ability to establish "funds" was changed under the Local Government and Housing Act 1989. The power to raise financial reserves replaces the former provisions on special funds. Financial reserves now fulfil the same function as revenue balances and special funds under the former legislation.

• 3. Use of Reserves

The Fixed Asset Restatement Reserve and Capital Financing Reserves cannot be called upon to support spending. However, the Useable Capital Receipts Reserve can be used to meet expenditure designated as expenditure for capital purposes and Revenue Reserves may be used to meet both capital and revenue expenditure.

Hertsmere Borough Council NOTES TO THE CASH FLOW STATEMENT Page 47 of 63 25/04/07 18:30

Cash Flow Statement Notes

• 1. Analysis of Government Grants

2001/02 2000/01 Revenue £’000 £’000 £’000 Revenue Support Grant 3,696 3,392 DSS Grants for Benefits Rent Allowances 13,341 12,888 Council Tax Benefit 2,820 2,128 Housing Benefit Administration Grant 233 192 Other 105 53 20,195 18,653 Other Government Grants NNDR Administration Grant 3,684 3,684 3,706 Capital Improvement Grants 65 49 LASHG 7,716 6,733 Housing Defect Grant 62

• Lottery Grant
• 1,530

7,843 8,312 31,722 30,671

• 2. Reconciliation of net surplus to cash inflow from revenue activities

2001/02 2000/01 £’000 £’000 £’000 (Surplus)/Deficit for year Consolidated Revenue Account (18) 1,558 Collection Fund 186 (132) 169 1,426 Adjustment for non-cash transactions Provisions contributed for Bad Debts (590) (469) Closure of HRA Account to General Fund (201) Contribution to/(from) Revenue Reserves 378 715 Other Non Cash Transactions (20) (94) (433) 152 Adjustment for items on an accruals basis Increase/(decrease) in Stock (42) (7) Increase/(decrease) in Revenue Debtors (1,912) 348 (Increase)/decrease in Revenue Creditors 1,368 (1,896) (586) (1,555) Adjustment for items in another classification in the Cash Flow Statement Interest Paid (11) (65) Interest Received 1,386 2,115 Revenue Contribution to Capital (660) (1,515) Servicing of Financing from Cash Flow Statement 715 535 Net Cash Inflow/(Outflow) from Revenue Activities (135) 558

Hertsmere Borough Council NOTES TO THE CASH FLOW STATEMENT Page 48 of 63 25/04/07 18:30

• 3. Movement in Liquid Resources

Balance at 01/04/01 Balance at 31/03/02 Movement in the Year Short Term Investments 19,600 14,100 (5,500) Long Term Investments 2,600 5,500 2,900 22,200 19,600 (2,600)

• 4. Analysis of Changes in Financing

Balance at 01/04/01 Balance at 31/03/02 Movement in the Year Short Term Borrowing

• Temporary Loans

1,650 3,050 (1,400) 1,650 3,050 (1,400)

• 5. Reconciliation of Movement in Cash

Balance at 01/04/01 Balance at 31/03/02 Movement in the Year Cash in Hand 9 3 (6) Hertsmere Leisure Bank Accounts 431 431 Cash at Bank/(Bank Overdraft) (870) (727) 143 (861) (724) 568

Hertsmere Borough Council THE HOUSING REVENUE ACCOUNT Page 49 of 63 25/04/07 18:30

Additional Financial Statements

Housing Revenue Account

2001/02 2000/01 £'000 £'000 Note Income Gross Rental Income Dwelling Rents (Gross) 2

• 26

Charges for Services & Facilities 3

• 14

HRA Subsidy Receivable (Including MRA) 4

• 62

Total Income

• 102

Expenditure Repairs, Maintenance and Management Repairs & Maintenance

• 7

Supervision & Management

• 18

Rent Rebates

• 1

Negative Subsidy Transfer to General Fund 4 1,865 1,976 Cost of Capital Charge 5 26

• Depreciation

5 6

• Total Expenditure

1,897 2,002 Net Cost of Services 1,897 1,900 Adjusting Transfer from AMRA 5 (32)

• Transfers from General Fund

6 (408)

• HRA Investment Income

7 (1,208) (1,995) Net Operating Expenditure/(Income) 249 (95) Housing Revenue Account Balance Balance at beginning of the year (249) (154) Surplus / deficit for year 249 (95) Surplus / deficit at end of year

• (249)

Hertsmere Borough Council THE HOUSING REVENUE ACCOUNT Page 50 of 63 25/04/07 18:30

NOTES TO THE HOUSING REVENUE ACCOUNT

• 1. General

The Council is required by law to maintain a separate Housing Revenue Account (HRA). The account’s transactions deal with all the expenditure and income arising from the provision of housing for letting. A large-scale voluntary transfer of the Council’s Housing stock took place in 1994 to Ridgehill and Aldwyck Housing Associations.

• 2. Gross Rent Income

This item comprises the income of the Council for the year from rents and charges in respect of houses and

• ther property within the account.
• 3. Charges for Services & Facilities

This represents the income of the Council for the year in respect of services or facilities provided in connection with the provision of houses and properties within the account. (e.g. furniture, board and laundry facilities).

• 4. H.R.A. Subsidy

Hertsmere received no subsidy during 2001/02 as the notional income exceeded notional expenditure. The negative subsidy has been transferred to the general fund. £'000 Subsidy on Eligible Rebates Granted

• Less Deficit on Housing Element

(1,865) Negative subsidy (1,865)

• 5. Capital Charges, Depreciation and the Asset Management Revenue Account (AMRA)

Capital charges are amounts charged to service accounts based on the fixed assets used in the provision of the housing service. This includes a notional interest calculation, which for 2001/02 was 6% of the written down value of the houses included within the account. Depreciation is also charged to service accounts to recognise the wearing out, consumption or reduction in useful life of the housing revenue account assets. The AMRA is a key part of the structure of accounting for capital assets. It is credited with the capital charges included within the net cost of services as mentioned above for notional interest and depreciation.

• 6. Transfers from General Fund

The Housing Revenue Account Direction 2001 had the effect of dis-applying from April 2001, the requirement for the Council to keep within its HRA the 7 properties named in the direction. Details of the numbers of properties owned and movements in stock during the year are shown in note 8.

• 7. HRA Investment Income

This item is mainly the HRA’s share of interest and other income received by the Council in respect of investments, loans and mortgages.

Hertsmere Borough Council THE HOUSING REVENUE ACCOUNT Page 51 of 63 25/04/07 18:30

• 8. Housing Stock

The Council was responsible for managing on average 7 dwellings. As stated in note 1 above, these no longer need to be kept within the HRA. Fixed Asset Numbers Houses Caravan Site Total Stock at 1 April 2001 6 1 7 Transfer of Dwellings to Investment Properties (1)

• (1)

Closure of Remaining HRA Properties (5) (1) (6) Stock at 31 March 2002

• Total Fixed Asset Values

Houses £ Caravan Site £ Total £ Stock at 1 April 2001 207,046 256,455 463,501 Transfer of Dwellings at 1 April 2001 (33,546)

• (33,546)

Closure of Remaining HRA Properties (173,500) (256,455) (429,955) Stock at 31 March 2002

• Land Values of HRA Assets

Houses £ Caravan Site £ Total £ Stock at 1 April 2001 82,818 230,810 313,628 Transfer of Dwellings to Investment Properties (13,418)

• (13,418)

Closure of Remaining HRA Properties (69,400) (230,810) (300,210) Stock at 31 March 2002

• Depreciation & Notional Interest

Houses £ Caravan Site £ Total £ Depreciation * 5,205 1,282 6,487 Notional Interest (6%) 10,410 15,387 25,797 Capital Charges for Housing Revenue Account 15,615 16,669 32,284 * The depreciation charge does not include the value of the land, it only includes the structures constructed upon it.

• 9. Rent Arrears

The Council retained responsibility for existing arrears due from tenants transferring to Aldwyck and Ridgehill (current tenants). During the year the Council has collected £2,684 from former tenants leaving £7,015 still outstanding at 31/03/02. During the year arrears of £1,802 were written off, as they were deemed irrecoverable.

Hertsmere Borough Council THE COLLECTION FUND Page 52 of 63 25/04/07 18:30

The Collection Fund

2001/02 2000/01 Income and Expenditure Account Note £'000 £'000 Income Council Tax 31,075 28,974 Council Tax Benefits 2,830 2,953 Contributions:

• Council Tax Clawback

208 172 Income from Business Ratepayers 31,045 28,797 Adjustment of Previous year’s Community Charge

• 4

65,158 60,900 Expenditure Precept and Demands 3 Herts County Council 26,055 24,390 Metropolitan Police 2,874 2,678 Hertsmere Borough Council 3,884 3,697 Local Parishes` 669 623 Prior year’s Surplus Distribution: Herts County Council 375 125 Metropolitan Police 46 17 Hertsmere Borough Council 27 23 Unmet Council Tax Benefits By DSS 5 187 164 Provision for Bad Debts 211 250 Adjustment of Previous year’s Community Charge 6

• 4

34,328 31,791 Non-Domestic Rates Payment to the Pool 2 30,895 28,646 Cost of collection 150 151 65,373 60,768 Surplus/(Deficit) for the Year (215) 132 Balance on Fund 1 April 2001 535 403 Plus: Prior Year’s Adjustment 29

• Fund Balance at 31March 2002

4 349 535

Hertsmere Borough Council THE COLLECTION FUND Page 53 of 63 25/04/07 18:30

NOTES TO THE COLLECTION FUND

1. General This account reflects the statutory requirement for billing authorities to maintain a separate Collection Fund. It shows the transactions of the Council in relation to non-domestic rates and the council tax. It illustrates the way in which these have been distributed to preceptors and the general fund. The collection fund is consolidated with other accounts of the Council and is prepared on an accruals basis. 2. Income from Business Rates The Council collects non-domestic rates for its area, which are based on local rateable values multiplied by a uniform rate, which for 2001/02 was 43.0 (2000/01 41.6). The total amount, less certain reliefs and other deductions, is paid to the central pool (the National Non Domestic Rate (NNDR) pool) managed by Central Government, which in turn pays back to authorities their share

• f the pool based on a standard amount per head of the local adult population. This contribution is

paid into the General Fund. £’000 Gross Rates payable in respect of 2001/02 31,360 Less allowances and other adjustments 465 Net Contribution to NNDR National Pool 30,895 3. Precepts & Demands The following authorities made precepts or demands on the collection fund of the Council. Authority Name £ Hertsmere Borough Council 3,883,643 Hertfordshire County Council 26,054,729 Hertfordshire Police Constabulary 2,873,666 Shenley Parish Council 52,500 Aldenham Parish Council 383,266 Elstree & Borehamwood Town Council 233,000 Ridge Parish Council 300 4. Contributions to Collection Fund Surpluses and Deficits The collection fund balance at 31 March 2002 is made up of three figures: Community Charge surplus

• Council Tax Surplus

312,791 Council Tax Subsidy limitation surplus 36,368 349,159 Similarly, in subsequent years, the council tax surplus of £312,791 at 31 March 2002 will be distributed to Hertfordshire County Council, the Hertfordshire Police and the Council in proportion to the value of their respective precepts and demand on the collection fund. The council tax subsidy limitation surplus is the excess of contributions over the actual required. The balance will be distributed as for the council tax surplus.

Hertsmere Borough Council THE COLLECTION FUND Page 54 of 63 25/04/07 18:30

5. Council Tax Benefit Subsidy Limitation In 1999/2000 Central Government introduced a scheme to limit council tax benefit subsidy. Billing and precepting authorities setting council taxes above Government guidelines are now required to meet a proportion of the increased benefits awarded arising from the higher tax level. In 2001/02 the Council’s General Fund was not required to make a contribution to the collection fund because its tax did not rise in excess of the guidelines. The two precepting authorities were both above the Government limit and made the following contributions: £ Hertfordshire County Council 191,176 Hertfordshire Police Constabulary 17,041 208,217 The Council received £2,830,320, (in subsidy from the DSS and the General Fund contribution of 5%). The total that was claimed at full rate for council tax benefit payments was £3,017,399 (which is a difference of £187,079). This has resulted in a surplus of £21,139, which will be retained by the Council in 2002/03. 6. Adjustments for Previous Years Community Charge Although Council Tax replaced Community Charge from 1 April 1993, the Council continues to account for residual adjustments in relation to the Community Charge raised in earlier years in the Collection Fund. During 2001/02 the provisions were adjusted to reflect the actual balance still

• utstanding and consequently the bad debt over provision resulting from previous years was

written back to the General Fund. 7. Provision for Irrecoverable Council Tax Debts Contributions are made to the Collection Fund Income & Expenditure Account to a provision for bad debts. During 2001/02 £211,500 was contributed to the Council Tax bad debt provision and £170,085 of irrecoverable debts were written off. 8. Council Tax This tax is a property based tax and assumes that two adults are resident in the property. Discounts are available where less than two adults reside. Properties are placed into one of eight valuation

• bands. The base upon which the council tax is calculated is the total number of dwellings in each

valuation band (adjusted for dwellings where discounts apply) and converted to an equivalent number of Band D dwellings. For 2001/02 the numbers as approved by full Council on 10 January 2001 (Ref:C/01/02) were:

Band Value £ Number of Dwellings Equivalent number of dwellings at Band D

A Up to 40,000 495 276 B 40,001 - 52,000 2,695 1,700 C 52,001 - 68,000 5,812 4,379 D 68,001 - 88,000 12,792 11,581 E 88,001 - 120,000 8,231 9,203 F 120,001 - 160,000 3,783 4,810 G 160,001 - 320,000 4,153 6,540 H Over 320,000 774 1,432 Number of Band D Equivalent 39,921 Assumption of 98.5% Collection 39,322 Number of Band D Equivalents of Cont. in Lieu 375 Taxbase 39,697

Hertsmere Borough Council THE COLLECTION FUND Page 55 of 63 25/04/07 18:30

The Council’s own tax charge was calculated as follows: 2001/02 2000/01 Number of Band D Equivalent Properties 39,697 39,390 £ £ Net Budget for the Year 15,606,807 14,730,075 Add : Earmarked Spending for Drainage Schemes 835,000 828,000 Less: Capital Charges (4,818,910) (4,257,750) Interest from Investments (360,000) (504,789) Revenue Support Grant (3,695,580) (3,392,323) Contribution from NNDR Pool (3,683,674) (3,706,123) Demand from the Collection Fund 3,883,643 3,697,090 Add Parish/Town Precepts 669,066 622,858 Collection Fund Adjustment (27,251) (22,893) 4,525,458 4,297,055 ‘Average’ Band D Council Tax Levy 114.00 109.09 The rates disclosed above are ‘average’ council tax levies across the entire taxbase. When the actual tax liabilities are calculated, the amount payable is adjusted for special expenses applicable to each area and then divided by the number of Band D equivalent properties in each parish/town district. The amounts charged for each band applicable to Hertsmere Borough Council is as follows:

Borough plus Parish Charges A B C D E F G H % Inc Aldenham 110.63 129.06 147.50 165.94 202.82 239.69 276.57 331.88 8.2 Elstree & Borehamwood 77.70 90.65 103.60 116.55 142.45 168.35 194.25 233.10 3.4 Ridge 67.69 78.97 90.25 101.53 124.09 146.65 169.21 203.06 3.9 Shenley 85.04 99.21 113.38 127.56 155.90 184.25 212.60 255.12 3.2 Bushey & Potters Bar 66.11 77.12 88.14 99.16 121.20 143.23 165.27 198.32 4.1

The total amount payable when combined with Hertfordshire Council & Hertfordshire Police Constabulary levies is as follows:

Borough plus Parish Charges A B C D E F G H % Inc Aldenham 596.45 695.85 795.26 894.67 1093.49 1292.30 1491.12 1789.34 6.4 Elstree & Borehamwood 563.52 657.44 751.36 845.28 1033.12 1220.96 1408.80 1690.56 5.7 Ridge 553.51 645.76 738.01 830.26 1014.76 1199.26 1383.76 1660.52 5.8 Shenley 570.86 666.00 761.14 856.29 1046.57 1236.86 1427.15 1712.58 5.6 Bushey & Potters Bar 551.93 643.91 735.90 827.89 1011.87 1195.84 1379.82 1655.78 5.8

Hertsmere Borough Council GLOSSARY OF TERMS Page 56 of 63 25/04/07 18:30

Glossary of Terms

Accruals The concept that income and expenditure are recognised as they are earned or incurred, not as money is received or paid. Actuarial Gains and Losses For a defined benefit pension scheme, the changes in actuarial deficits or surpluses that arise because: a) events have not coincided with the actuarial assumptions made for the last valuation (experience gains and losses) or b) the actuarial assumptions have changed Asset Anything which somebody owns which can be given a monetary value, for example buildings, land, vehicles, machinery, cash, investments etc. It is always considered in comparison with liabilities in an

• rganisation’s accounts.

Agency Arrangements Services which are performed by, or for, another Council or public body, where the agent is reimbursed for the cost of the work done. Balances The capital or revenue reserves of the Council made up of the accumulated surplus of income over expenditure on the General Fund, Housing Revenue Account etc. Business Rates These are rates charged on properties other than domestic property. The business rate poundage is set annually by Central Government and is a flat rate throughout the country. Capital Charge A charge to service revenue accounts to reflect the cost of fixed assets used in the provision of services. Capital Expenditure Expenditure on the acquisition of a fixed asset, or expenditure, that adds to the life, or value, of an existing fixed asset. Capital Receipts Monies received from the sale of assets, which may be used to finance capital expenditure or to repay

• utstanding loan debt as laid down within rules set by Central Government but they cannot be used to

finance day-to-day spending. Additionally, they can be used to repay debt. Collection Fund A fund administered by charging authorities into which council tax income and business rates collected locally are paid. Payments to, or receipts from, the non-domestic rates pool also go through the fund. Precepts are paid from the fund as is charging the Council’s own requirements

Hertsmere Borough Council GLOSSARY OF TERMS Page 57 of 63 25/04/07 18:30

Community Assets Assets that a local Council intends to hold in perpetuity, that have no determinable useful life, and that may have restrictions on their disposal. Examples of community assets are parks and historic buildings. Community Charge A uniform annual amount paid by all adults for the three financial years from 1990/91 to 1992/93 who were solely or mainly resident in the registration area of a charging Council. Replaced by Council Tax. Consistency The concept that the accounting treatment of like items within an accounting period and from one period to the next is the same. Contingency A condition which exists at the balance sheet date, where the outcome will be confirmed only on the

• ccurrence or non-occurrence of one or more uncertain future events.

Corporate & Democratic Core The corporate and non-corporate democratic core comprises all activities which local authorities engage in specifically because they are elected, multi-purpose authorities. The cost of these activities are thus over and above those which would be incurred by a series of independent, single purpose, nominated bodies managing the same services. There is therefore no logical basis for apportioning these costs to services. Activities include: Corporate policy making Representing local interests Support to elected bodies Duties arising from public accountability Council Tax This is a local tax set by local councils to help pay for local services. Council Tax Rebates A reduction in the liability to pay council tax granted in accordance with the nationally determined scale of needs and resources. Credit Approvals Central Government issues local authorities with credit approvals. These give the Council permission to finance capital expenditure by borrowing or other forms of credit, up to the amount issued each year. There are two types of credit approval A basic credit approval, which can be used to finance any type of capital expenditure. Supplementary credit approvals which may only be used for the purpose it is issued for. Credit Arrangements These are forms of credit entered into by the Council relating to leasing and contracts, which provide for extended credit.

Hertsmere Borough Council GLOSSARY OF TERMS Page 58 of 63 25/04/07 18:30

Credit Ceiling A measure of the difference between the Council’s total liabilities in respect of capital expenditure financed by credit and the provision that has been made to meet these liabilities. Credit Liabilities These relate to liabilities of the Council in respect of money borrowed (principal only), or in respect of credit arrangements. Creditor An amount owed by the Council for work done, goods received, or services rendered to the Council within the accounting period and for which payment has not been made at the balance sheet date. Current Service Cost (Pensions) The increase in the present value of a defined benefit scheme’s liabilities expected to arise from employee service in the current period. Curtailment For a defined benefit scheme, an event that reduces the expected years of future service of present employees or reduces for a number of employees the accrual of defined benefits for some or all of their future service. Curtailments include: a) termination of employees’ services earlier than expected, for example as a result of closing a factory or discontinuing a segment of a business, and b) termination of, or amendment to the terms of, a defined benefit scheme so that some or all future service by current employees will no longer qualify for benefits or will qualify only for reduced benefits. Debtor Sums of money due to the Council but not received at the balance sheet date. Deferred Charges Capital expenditure that does not create a tangible asset e.g. improvement grants. Defined Benefits Scheme A pension or other retirement benefit scheme other than a defined contribution scheme. Usually, the scheme rules define the benefits independently of the contributions payable, and the benefits are not directly related to the investments of the scheme. The scheme may be funded or unfunded (including notionally funded). Defined Contribution Scheme A pension or other retirement benefit scheme into which an employer pays regular contributions fixed as an amount or as a percentage of pay and will have no legal or constructive obligation to pay further contributions if the scheme does not have sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Depreciation The measure of the wearing out, consumption, or other reduction in the useful economic life of a fixed asset.

Hertsmere Borough Council GLOSSARY OF TERMS Page 59 of 63 25/04/07 18:30

Discretionary Benefits Retirement benefits which the employer has no legal, contractual or constructive obligation to award and which are awarded under the Council’s discretionary powers, such as The Local Government (Discretionary Payments) Regulations 1996. Exceptional Items Material items which derive from events or transactions that fall within the ordinary activities of the Council and which need to be disclosed separately by virtue of their size or incidence to give fair presentation of the accounts. Expected Rate of Return on Pension Assets For a funded defined benefit scheme, the average rate of return, including both income and changes in fair value but net of scheme expenses, expected over the remaining life of the related obligation on the actual assets held by the scheme. Extraordinary Items Material items, possessing a high degree of abnormality, which derive from events or transactions that fall

• utside the ordinary activities of the Council and which are not expected to recur. They do not include

exceptional items nor do they include prior period items merely because they relate to a prior period. Finance and Operating Lease A finance lease transfers all of the risks and rewards of ownership of a fixed asset to the lessee and such assets have been valued and included within Fixed Assets in the Balance Sheet. With an operating lease the

• wnership of the asset remains with the Leasing Company and the annual rent is charged to the relevant

service account. Fixed Assets Tangible assets that yield benefits to the Council for a period of more than one year. General Fund The main revenue account of the Council. Day to day spending on services is met from the fund. Government Grants Assistance by Central Government and inter-government agencies and similar bodies, whether local, national or international, towards either revenue or capital expenditure incurred in providing local Council services. Housing Advances Loans made by the Council to individuals towards the cost of acquiring or improving their homes. Housing Benefits A system of financial assistance to individuals towards certain housing costs, which is administered by Local Authorities. Assistance takes the form of rent rebates, rent allowances, and council tax rebates toward which central government pays a subsidy. Housing Revenue Account Local authorities are required to maintain a separate account – the Housing Revenue Account – which sets aside the expenditure and income arising from the provision of housing.

Hertsmere Borough Council GLOSSARY OF TERMS Page 60 of 63 25/04/07 18:30

Infrastructure Assets Expenditure on works of construction or improvement but which have no tangible value, such as construction or improvement to highways and footpaths. Interest Cost (Pensions) For a defined benefit scheme, the expected increase during the period in the present value of the scheme liabilities because the benefits are one period closer to settlement. Investments (Non-Pensions Fund) A long-term investment is an investment that is intended to be held for use on a continuing basis in the activities of the Council. Investments should be so classified only where an intention to hold the investment for the long term can clearly be demonstrated or where there are restrictions as to the investor’s ability to dispose of the investment. Investments, other than those in relation to the pension fund, that do not meet the above criteria should be classified as current assets. Investments (Pension Fund) The investments of the Pensions Fund will be accounted for in the statements of that fund. However, authorities (other than town parish and community councils) are required to disclose, as part of the transitional disclosures relating to retirement benefits, the attributable share of pension scheme assets associated with their underlying obligations. Liabilities Money owed to somebody else. Minimum Revenue Provision This is the minimum amount that must be charged to the Council’s revenue account each year should certain criteria be met. It is set aside as provision to repay debt. Net Book Value The amount at which fixed assets are included in the balance sheet, i.e. their historical or current value less the cumulative amounts provided for depreciation. Net Current Replacement Cost The cost of replacing or recreating the particular asset in its existing condition and in its existing use, i.e. the cost of its replacement or the nearest equivalent, adjusted to reflect the current condition of the existing asset. Net Realisable Value The open market value of the asset in its existing use (or open market value in the case of non-operational assets), less the expenses to be incurred in realising the asset. Non-Operational Assets Fixed assets held by a local Council but not directly occupied, used or consumed in the delivery of services. Examples of non-operational assets are commercial and industrial properties. Operating Lease See Finance Lease.

Hertsmere Borough Council GLOSSARY OF TERMS Page 61 of 63 25/04/07 18:30

Operational Assets Fixed assets held and occupied, used or consumed by the Council in the direct delivery of those services for which it has either a statutory or discretionary responsibility. Past Service Cost For a defined benefit scheme, the increase in the present value of the scheme liabilities related to employee service in prior periods arising in the current period as a result of the introduction of, or improvement to, retirement benefits. Post Balance Sheet Events Those events, both favourable and unfavourable, which occur between balance sheet date and the date on which the Statement of Accounts is signed by the responsible officer. Precepts The levy made by one Council on another. Hertfordshire County Council and Hertfordshire Police Constabulary who do not administer the council tax system, each levy an amount on the Borough of Hertsmere which collects the required income from local taxpayers on their behalf. Prior Year Adjustments Those material adjustments applicable to prior years arising from changes in accounting policies or from the correction of fundamental errors. They do not include normal recurring corrections or adjustments of accounting estimates made in prior years. Projected Unit Method An accrued benefits valuation method in which the scheme liabilities make allowance for projected

• earnings. An accrued benefits valuation method is a valuation method in which the scheme liabilities at the

valuation date relate to: a) the benefits for pensioners and deferred pensioners (i.e. individuals who have ceased to be active members but are entitled to benefits payable at a later date) and their dependants, allowing where appropriate for future increases, and b) the accrued benefits for members in service on the valuation date. The accrued benefits are the benefits for service up to a given point in time, whether vested rights or not. Guidance on the projected unit method is given in the Guidance Note GN26 issued by the Faculty and Institute of Actuaries. Provisions An amount set aside to provide for a liability that is likely to be incurred but the exact amount and the date

• n which it will arise is uncertain.

Prudence The concept that revenue is not anticipated but is recognised only when realised in the form either of cash

• r of other assets, the ultimate cash realisation of which can be assessed with reasonable certainty. The
• verall objective of this principle is not to overstate the net worth shown of the Statement of Accounts.

Hertsmere Borough Council GLOSSARY OF TERMS Page 62 of 63 25/04/07 18:30

Related Parties Two or more parties are related parties when at any time during the financial period: One party has direct or indirect control of the other party; or The parties are subject to common control from the same source; or One party has influence over the financial and operational policies of the other party to an extent that the other party might be inhibited from pursuing at all times its own separate interests; or The parties, in entering a transaction, are subject to influence from the same source to such an extent that one of the parties to the transaction has subordinated its own separate interests. Related Party Transaction A related party transaction is the transfer of assets or liabilities or the performance of services by, to, or for a related party irrespective of whether a charge is made. Examples of related party transactions include: The purchase, sale lease, rental or hire of assets or loans, irrespective of any direct economic benefit to the pension fund. The provision of a guarantee to a third party in relation to a liability or obligation of a related party. The provision of services to a related party, including the provision of pension fund administration services. Transactions with individuals who are related parties of the Council or a pension fund, except those applicable to other members of the community or pension fund, such as council tax, rents and payments of benefits. The materiality of related party transactions are judged not only in terms of their significance to the Council, but also in relation to its related party. Rent Allowances Subsidies payable by local authorities to tenants in private rented accommodation (either furnished or unfurnished) whose incomes fall below prescribed amounts. Rent Rebates Subsidies payable by local authorities to their own housing tenants whose incomes fall below prescribed amounts. 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. Retirement Benefits All forms of consideration given by an employer in exchange for services rendered by employees that are payable after completion of employment. Retirement benefits do not include termination benefits payable as a result of either (I) an employer’s decision to terminate an employee’s employment before the normal retirement date or (ii) an employee’s decision to accept voluntary redundancy in exchange for those benefits, because these are not given in exchange for services rendered by employees. Revenue Expenditure Day to day expenses, mainly salaries and wages, general running costs and debt charges. Revenue Support Grant Central Government Grant towards the cost of Local Council Services.

Hertsmere Borough Council GLOSSARY OF TERMS Page 63 of 63 25/04/07 18:30

Scheme Liabilities The liabilities of a defined benefit scheme for outgoings due after the valuation date. Scheme liabilities measured using the projected unit method reflect the benefits that the employer is committed to provide for service up to the valuation date. Settlement An irrevocable action that relieves the employer (or the defined benefit scheme) of the primary responsibility for a pension obligation and eliminates significant risks relating to the obligation and the assets used to effect the settlement. Settlements include: a) a lump-sum cash payment to scheme members in exchange for their rights to receive specified pension benefits; b) the purchase of an irrevocable annuity contract sufficient to cover vested benefits; and c) the transfer of scheme assets and liabilities relating to a group of employees leaving the scheme. Stocks The amounts of unused or unconsumed stocks held in expectation of future use. When use will not arise until a later period, it is appropriate to carry forward the amount to be matched to the use or consumption when it arises. Subsidiary Company A company is a subsidiary of a local Council if any of the following apply: The local Council holds a majority of the voting rights in the company. The local Council is a member of the company and has the right to appoint or remove directors holding a majority of the voting rights at meetings of the board on most matters. The local Council has the right to exercise a dominant influence over the company. The local Council is a member of the company and controls alone a majority of the voting rights in the company. The local Council has a participating interest in the company and it actually exercises a dominant influence of the company or it and the company are managed on a unified basis. Standard Spending Assessment An assessment by Central Government of how much a Local Council should spend in providing a common level of service, having regard to its individual circumstances and responsibilities. Usable Part of Capital Receipts This is generally the balance of any capital receipt after deducting the reserved part and any repayment to the Central Government of grants made to the Council on disposal of the asset. Vested Rights In relation to a defined benefit scheme, these are: a) for active members, benefits to which they would unconditionally be entitled on leaving the scheme; b) for deferred pensioners, their preserved benefits; c) for pensioners, pensions to which they are entitled. Vested rights include where appropriate the related benefits for spouses or other dependants.