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Appendix A

STATEMENT OF ACCOUNTS

2006-2007

CONTENTS

Page

Introduction 1

Report by the Finance Director 5

Statement of Accounting Policies 15

The Statement of Responsibilities 26

Income and Expenditure Account 28

Statement of the Movement on the General Fund Balance 30

Statement of Total Recognised Gains and Losses 31

Balance Sheet 32

Cash Flow Statement 34

Notes to the Accounts 36

Statement of Internal Control 81

Local Government Pension Fund Accounts 95

Local Government Pension Fund Accounting Policies 98

Notes to the Local Government Pension Fund Accounts 100

Local Government Pension Fund Statement of Investment Principles 109

Firefighters’ Pension Fund Accounts 114

Notes to the Firefighters’ Pension Fund Accounts 115

Independent Auditor's Report 118

Glossary of Terms Used 119

INTRODUCTION

Statement of Accounts

The Statement of Accounts provides financial details of the County Council’s activities for the financial year ended 31 March 2007. This document has been prepared in accordance with the Accounts and Audit Regulations 2003 and the 2006 Code of Practice on Local Authority Accounting a Statement of Recommended Practice (SORP) issued by the Chartered Institute of Public Finance and Accountancy.

The statement shows how Hertfordshire County Council applied both revenue and capital resources in 2006-07 to provide services for a population of approximately one million people.

This information is given both in general terms for the Council as a whole, and at a more detailed level for individual services which is presented on a Best Value basis as required by the Best Value Accounting Code of Practice.

Hertfordshire County Council

Hertfordshire County Council has responsibility for providing services across the whole of the county. We work with central and local government and other local organisations to help improve and provide local services for people who live, work and travel in Hertfordshire.

In 2006-07 our resources were focussed on the following challenges:

Helping people feel safe and secure Tackling the causes and impact of congestion Dealing with worn out roads and pavements Reducing the impact of new development on the environment Maximising opportunities for all children and young people Supporting the independence of the growing number of older people Maximising efficiency savings and helping keep council tax at an acceptable level

The council is run by elected politicians that are voted in by residents to act on their behalf. Local councillors take the decisions on where money is spent, what council taxes will be charged and how local services will be developed.

We also work closely with the two other tiers of local government in Hertfordshire. There are ten district or borough councils (dealing with services such as leisure, refuse collection and planning applications) and town and parish councils who deal with local issues. In addition, we also work with other partners including the health service and Hertfordshire Police Authority.

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INTRODUCTION

How the council operates

The council is made up of 77 councillors elected every four years. Eachcouncillor represents an area of the county, called an electoral division, and has a special duty to represent the interests of people in that division. The overriding duty of councillors however is owed to the whole county.

Councillors must agree to follow a code of conduct in the way they carry outtheir duties. A standards committee trains and advises them on the code.

All councillors meet together at full council meetings when decisions are taken on our overall policies and the budget. Meetings are open to the public.

How decisions are made

The Cabinet is responsible for most decisions on how our services are run. It delegates responsibility for many day-to-day decisions to officers, but still retains overall responsibility for them. The Cabinet cannot take decisions which are out of line with the overall policies or budget agreed by the full council. It can however set up Cabinet Panels which help develop policy.

Meetings of the Cabinet are open to the public, unless personal or confidential matters are being discussed.

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INTRODUCTION

The services we provide

Brief summaries relating to the main front line services provided by the County Council are listed below.

Adult Care Services

Adult Care Services work closely with health services, district councils and other agencies to plan, commission and deliver prompt, effective social care services. We aim to help residents who are elderly and frail, physically disabled or have learning disabilities, and their carers, to find ways of managing better.

The department provides and arranges support, care and protection for adults who cannot manage without help, putting the users of our services and their carers at the centre of all that they do.

Adult Care Services’ belief is that everyone has a right to live as independently as possible, and our efforts are focused on helping people to gain and maintain control over their own lives wherever possible.

Children, Schools and Families

Children, Schools and Families aim to achieve better outcomes for all children and young people and develop accessible services that meet the needs of children, young people, parents and the wider community.

Placing Hertfordshire’s children at the centre of the department’s work, it provides an extensive range of services to support every stage of development - from the birth of a child to life long learning for adults.

The service brings together professionals from a range of disciplines, working together to deliver excellent services. It works closely with many local and national organisations including voluntary groups, the police, health services, district councils and the private sector.

Corporate Services

Corporate Services provides leadership and support to enable the organisation to meet its objectives and deliver its promises to Hertfordshire.

The department supports Members (of the council) and other departments while leading and developing the strategic direction of the council. It challenges, monitors and regulates policy and service delivery to ensure that the organisation is managed efficiently and that services meet the needs of users.

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INTRODUCTION Environment

Environment is responsible for a wide range of services that affect many aspects of life in Hertfordshire, including roads and rights of way, public transport, strategic planning, waste planning and disposal, and conserving and enhancing the natural and built environment.

The department works with local people to create a better living, working and travelling environment and improve the quality of life in Hertfordshire, now and in the future.

We aim to maintain and, where possible, improve the environment and infrastructure of Hertfordshire.

Fire and Rescue

The Fire and Rescue Service is dedicated to saving life and property from fires and other emergencies – such as road traffic accidents, chemical spillages, domestic flooding and trapped livestock.

The service’s key responsibilities are to prevent fires occurring and to respond if they or other emergencies occur to minimise their impact on life and property. Fire safety officers and operational crews target local communities to ensure that people are aware of the risks of fire and take appropriate action to minimise those risks in homes.

It also seeks to ensure that all homes in the county are fitted with working smoke alarms which detect fires early. Firefighters offer free home safety checks to all Hertfordshire residents and fit smoke alarms where necessary. Fire Service personnel also inspect commercial and public buildings to ensure that they comply with the requirements of various pieces of fire safety legislation.

To find out more about the services provided by each department please visit www.hertsdirect.org

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REPORT BY THE FINANCE DIRECTOR

1. Introduction

The accounts have been prepared in accordance with the 2006 Code of Practice on Local Authority Accounting in the United Kingdom, a Statement of Recommended Practice (SORP) issued by the Chartered Institute of Public Finance and Accountancy (CIPFA), which incorporates the application of accounting standards to local authorities.

2. The Statement of Accounts

The 2006 SORP introduced changes to the layout and presentation within the statement of accounts. The substantive changes introduced are:

Changes to the single entity statement of accounts comprising the replacement of the Consolidated Revenue Account and Statement of Total Movement on Reserves with an Income and Expenditure Account, Statement of Movement on the General Fund Balance and Statement of Total Recognised Gains and Losses (STRGL). A brief introduction precedes these ‘core’ single entity financial statements.

A requirement to group the ‘core’ single entity financial statements together (i.e. Income and Expenditure Account, Statement of Movement on the General Fund Balance, STRGL, Balance Sheet and Cash Flow Statement) followed by the notes to the core statements.

The Pension Fund Accounts section reflects changes in funding arrangements for firefighters’ pensions in England.

3. Accounting Policies

Responsibility for defining how local authorities comply with accounting standards lies with CIPFA. The Code of Practice sets out best practice with which local authorities are expected to comply. The SORP is based on approved accounting standards as at 30 September 2005, except where these conflict with specific statutory accounting requirements, so that an authority’s accounts ‘present fairly’ the financial position and transactions of the authority.

The policies applied in producing the Council’s statement of accounts are disclosed in the Statement of Accounting Policies section.

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4. Change of Accounting Policies

In the 2006-07 Statement of Accounts, the Council has adopted three significant new accounting policies that impact on the comparative figures for 2005-06 in the Income and Expenditure Account:

removal of the requirement to make a capital financing charge to service revenue accounts, support services and trading accounts. This allows depreciation to be charged direct to services and results in the associated removal of the Asset Management Revenue Account

credits for government grants deferred are now posted to service revenue accounts, support services and trading accounts rather than credited as a corporate income item

gains and losses on the disposal of fixed assets are recognised in the Income and Expenditure Account.

5. Prior Period Adjustments

The SORP requires that material adjustments applicable to prior years arising from changes in accounting policies should be accounted for by restating the comparative figures for the preceding period in the statement of accounts and notes and adjusting the opening balance of General Fund Balances for the cumulative effect. Comparative figures relating to the change of accounting policies and the replacement of the previous statements of performance have been restated. These changes have not resulted in any change to the opening balance of General Fund Balances. The impact on the comparative figures for 2005-06 compared with those published in the 2005-06 Statement of Accounts is shown in the following table.

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Consolidated Revenue

Account in 2005-06


Removal of capital financing charges

Relocation of

government grants

deferred credits

Recognition of gains

and losses on disposal

of fixed assets

Depreciation of non

operational assets

External Interest

Relocation of Consolidated

Revenue Account

Appropriation Items

2005-06 comparatives

in Income and

Expenditure Account

£000 £000 £000 £000 £000 £000 £000 £000Central Services to the public 1,930 (65) 1,865 Court Services 925 925 Cultural, Environmental and Planning Services 56,725 (2,208) (241) 54,276 Education Services 665,565 (51,258) (806) 613,501 Fire Service 41,458 (1,471) (6) 39,981 Highways, Roads and Transport Services 79,263 (11,795) (1,385) 66,083 Other Housing Services 148 (293) (9) (154)Social Services 288,827 (3,418) (251) 285,158 Corporate and Democratic Core 10,124 (440) (480) 9,204 Non Distributed Costs 5,233 (15) 1,542 6,760 Impact on Net cost of services 1,150,198 (70,948) (3,193) 0 1,542 0 0 1,077,599

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Consolidated Revenue

Account in 2005-06


Removal of capital financing charges

Relocation of

government grants

deferred credits

Recognition of gains

and losses on disposal

of fixed assets

Depreciation of non

operational assets

External Interest

Relocation of Consolidated

Revenue Account

Appropriation Items

2005-06 comparatives

in Income and

Expenditure Account

£000 £000 £000 £000 £000 £000 £000 £000Impact on Net cost of services brought forward 1,150,198 (70,948) (3,193) 0 1,542 0 0 1,077,599

Contribution from deferred income – third party debt repayment 0 (429) (429)Net (gain)/loss on disposal of fixed assets 0 (997) (997)Precepts and levies 2,013 2,013 (Surplus)/deficit on trading undertakings 560 (43) 517 Interest payable 229 14,702 14,931 Interest and investment income (6,458) 1,910 (4,548)Pensions interest cost 71,116 71,116 Expected return on pension assets (49,201) (49,201)Insurance Fund (1,063) (1,063)Capital Charges - non operational assets 7,616 (6,074) (1,542) 0 Asset Management Revenue Account (65,556) 77,065 3,193 (14,702) 0 Impact on Net Operating Expenditure 1,109,454 0 0

(997)0 0 1,481 1,109,938

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6. The Prudential Code for Capital Finance in Local Authorities

Under the Prudential Code individual authorities are responsible for deciding the level of their affordable borrowing, having regard to the requirements of the Code. Prudential limits apply to all borrowing, qualifying credit arrangements and other long-term liabilities. The system is designed to encourage authorities that need, and can afford to, to borrow for capital investment to do so.

Under the Prudential Code for capital, local authorities have the option to consider additional borrowing, above the level supported by government, taking into account council investment priorities, the impact of additional borrowing on council tax, and on the level of the council’s external debt.

In developing the 2006-07 revenue and capital budgets the Council set its own borrowing levels within limits identified by Prudential Code indicators. The borrowing limits for 2006-07 are shown in the following table. The Council operated within these limits during 2006-07.

Limit Description £000

Authorised limit for external debt

This represents the limit beyond which borrowing is prohibited, and needs to be set and revised by members. It reflects the level of borrowing which, while not desired, could be afforded in the short term, but is not sustainable. It is the expected maximum borrowing need with some headroom for unexpected movements. This is the statutory limit determined under section 3 (1) of the Local Government Act 2003.

482,000

Operational boundary for external debt

This indicator is based on the probable external debt during the course of the year; it is not a limit and actual borrowing could vary around this boundary for short times during the year. It should act as an indicator to ensure the authorised limit is not breached.

448,000

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7. Financial Reporting Standard 17 – Retirement Benefits

Full implementation of FRS17 was reflected for the first time in the 2003-04 accounts. Under this accounting standard the cost of pensions on an actuarial basis is reflected within best value service revenue accounts. FRS17 applies to the Local Government Pension Scheme, the Firefighters Pension Scheme and any discretionary pension awards. The estimated pension liability as at 31 March is shown on the face of the balance sheet. There is a neutral impact on the general fund balance reported for the year as the effect of FRS17 is reversed through the use of a pension reserve. Further information explaining the effect of this is disclosed in the accounting policy applicable to pensions.

The change has had the following effects on the results of the current and prior periods:

although the overall bottom line to be met from council tax and government grants is unchanged, the costs disclosed for individual services are 1.7% higher (2005-06 – 0.2% lower) after these adjustments and net operating expenditure is 4.4% higher (2005-06 – 1.8% higher) than it would otherwise have been. Comparatives have been stated on the previous basis of reporting school spending.

the requirement to recognise the net pensions liability in the balance sheet has reduced the reported net worth of the County Council by 20.8% (2005-06 – 36.5%).

The balance sheet position includes assets and liabilities in respect of the Hertfordshire Magistrates Court Committee, rolled forward from the 2004 valuation. With effect from 1 April 2005, employees of this body transferred to the Department for Constitutional Affairs and were offered membership of the Principal Civil Service Pension Scheme. A bulk transfer of past service may take place. The basis has been agreed but the actuary does not yet know the final amount, nor how many members will transfer. The effect of the bulk transfer has therefore not been taken into account in the FRS17 Local Government report supplied by the actuary, Hymans Robertson.

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8. Financial Summary 2006-07

Revenue

In 2006-07 the County Council’s revenue spending exceeded its sources of income by £8.241 million with a corresponding reduction in the level of general fund balances. This position includes a reclassification from general fund balances to specific reserves of £0.973 million.

The following summary of the Council’s revenue monitor showing an underspend of £5.421 million against the latest approved budget, was presented to the Cabinet on 18 June 2007.

Latest Approved

Budget ActualOver/(under)

spendService/Budget Heading £000 £000 £000 %

Children, Schools & Families 211,310 213,104 1,794 0.8 Adult Care 224,289 224,089 (200) (0.1)Environment 108,036 107,274 (762) (0.7)Community Safety 48,147 47,884 (263) (0.5)Corporate Services 11,803 11,714 (89) (0.8)Capital Financing and Interest on Balances 28,745 26,295 (2,450) (8.5)Service Total 632,330 630,360 (1,970) (0.3)Other BudgetsContingency 581 0 (581) (100.0)Special Provision 780 0 (780) (100.0)Precepts 1,789 1,789 0 0.0 Additional Capital Programme Support 5,673 5,673 0 0.0 Non Distributed costs 261 (50) (311) (119.2)Movements on General Fund Balances (53,218) (53,218) 0 0.0 FRS17 - Pensions Interest Cost & Expected Return on Assets 15,981 15,981 0 0.0 Pension Reserve Appropriation (25,831) (25,831) 0 0.0 Appropriation to Highways Maintenance Reserve 10,000 10,000 0 0.0 Local Authority Business Growth Incentive Scheme Grant 0 (1,779) (1,779)Total 588,346 582,925 (5,421) (0.9)

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The movements from the revenue monitor underspend to the position reported in these accounts are shown in the following table and reconciles the planned reduction in balances to that as disclosed in these accounts.

£ million £ million

Revenue monitor underspend (5.421)

Planned use of balances as per 2006-07 budget 9.000 Additional 2006-07 expenditure to be financed from balances 3.684 12.684

Reclassification of balances 0.973

Other minor variances 0.005 Actual reduction in general fund balances 8.241 General Fund Balances as at 1 April 2006 32.898 General Fund Balances as at 31 March 2007 24.657

During the year the Council made a voluntary provision for repayment of debt of £1.099 million. This charge to the General Fund Balance was made in order to correct Adjustment A which is the difference in outstanding debt relating to capital expenditure as calculated under the Prudential Code of Practice (Capital Financing Requirement) when compared with the previous system of measuring such debt (credit ceiling).

Exceptional Item – Third Party Transferred Debt Repayment

During the year the Council accounted for the repayment of all outstanding debt received from the University of Hertfordshire. This credit has been matched by a voluntary provision for repayment of debt which has been credited to the Capital Financing Account thereby reducing the amount of indebtedness relating to capital expenditure. There is therefore a neutral effect on the General Fund Balance as at 31 March 2007.

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Capital

In 2006-07 the County Council spent £154.410 million on capital schemes, including buildings, adaptations, roads, equipment and intangible assets with a life of more than one year. A summary of the expenditure and how it has been financed is shown in the notes to the accounts together with details of material projects and their associated gross capital expenditure in the year.

The County Council regularly reviews its property portfolio to identify opportunities for recycling and disposal to assist the achievement of its capital programme.

These accounts reflect the revaluation, as at 1 April 2006, of the Council’s specialised assets. The unrealised gain on revaluation has been taken to the Fixed Asset Restatement Account. Further details are disclosed in the note to the accounts relating to tangible fixed assets.

External Borrowing

During 2006-07 there was an increase of £0.006 million in external borrowing resulting in total external borrowing of £345.337 million as at 31 March 2007. Maturity analysis of this borrowing as required by the SORP is shown in the notes to the accounts.

During the year £0.039 million of Public Works Loan Board debt was repaid. In addition £90.499 million of debt was restructured and replaced with £90.544 million of new loans. The net effect of debt repayment and restructuring has been to reduce Public Works Loan Board borrowings by £15.094 million and increase long term borrowings from other external lenders by £15.100 million.

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REPORT BY THE FINANCE DIRECTOR 9. Other Developments

Budget 2007-08

On 27 February 2007 the County Council approved, after use of the specific highways maintenance reserve of £10.0 million, a revenue budget for 2007-08 of £603.326 million. The meeting also approved a capital budget for 2007-08 of £163.855 million. Budgeted sources of finance are shown in the following table.

Revenue Capital£000 £000

Income from the Collection Fund 452,890 0Government Grants 21,618 0Distribution from non-domestic rate pool 128,818 0Capital Receipts 0 27,915Capital Grants 0 66,248Developers Contributions 0 4,116Revenue Contributions 0 27,432Reserves 0 4,144Borrowing 0 34,000

603,326 163,855

The budget resolutions resulted in a Council Tax increase of 5% producing a charge of £1,034.13 for a band D property. Further information on the Council’s budget can be found on its website www.hertsdirect.org.

Dedicated Schools Grant

From 1 April 2006, school spending is no longer financed through general grant but through a new specific grant known as the Dedicated Schools Grant. This means the reporting of school spending has also changed, and no longer forms part of the Budget Requirement calculation. For 2007-08 the Schools budget was agreed at the level of the total resource available to Hertfordshire in 2007-08 from the Dedicated Schools Grant, this resource being initially estimated at £597.226 million.

Private Finance Initiative

In June 2007 the Council signed its first Private Finance Initiative contract for the provision of children's homes and other facilities for children's services. Expenditure under this 25 year contract is estimated at £75 million.

C J SweeneyFinance Director

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STATEMENT OF ACCOUNTING POLICIES

This section explains the accounting policies that the County Council has applied in preparing these accounts.

General Principles

The accounts have been prepared in accordance with the Code of Practice on LocalAuthority Accounting in the United Kingdom – A Statement of RecommendedPractice 2006 (the SORP), the Best Value Accounting Code of Practice and guidance notes issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) which ensures compliance with Statements of Standard Accounting Practice and Financial Reporting Standards applicable to local authorities.

Capital Accounting Accounts

The current system of capital accounting has required the establishment of two accounts in the County Council’s balance sheet.

the fixed asset restatement account, which represents principally the balance of the surpluses or deficits arising on the periodic revaluation of fixed assets together with the net book value of assets disposed of and any related grants or contributions, and

the capital financing account, which represents amounts set aside from revenue resources or capital receipts to finance expenditure on fixed assets or for the repayment of external loans and the reversal of amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the movement on the General Fund Balance for the year.

The above accounts are not available to fund future expenditure.

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Capital Receipts

When an asset is disposed of the value of the asset in the balance sheet is writtenoff to the Income and Expenditure Account as part of the gain or loss on disposal. Receipts from disposals are credited to the Income and Expenditure Account. Thegain or loss on the disposal of a fixed asset is the amount by which the disposal proceeds are more (gain) or less (loss) than the carrying amount of the fixed asset.The SORP requires some tangible fixed assets to be held on the balance sheet atcurrent value. Upon disposal such current valued assets are revalued to the market valuation at the date of disposal. On the basis that the capital receipt is the same asthe market valuation at disposal there will be no gains or losses to report for assetsdisposed of that were held at current value.

Capital receipts are required to be credited to the Usable Capital Receipts reserveand can then only be used to finance capital expenditure or to repay debt. Receipts are appropriated to the reserve from the Statement of Movement on the General Fund Balance.

The written-off value of assets disposed of is not a charge to the General Fund Balance as the cost of fixed assets is fully provided for under separatearrangements for capital financing. Amounts are appropriated to the Fixed AssetRestatement Account from the Statement of Movement on the General FundBalance.

Such income that is not reserved for the repayment of external loans and has not been applied in financing capital expenditure is shown on the balance sheet asusable capital receipts. Charges to Revenue for Fixed Assets

General Fund service revenue accounts, as defined in CIPFA’s Best ValueAccounting Code of Practice, central support services and trading accounts arecharged with:

depreciation attributable to tangible fixed assets used in service delivery

impairment losses due to consumption of economic benefits on tangible fixed assets used in service delivery

amortisation of intangible fixed assets used in service delivery.

Depreciation provided on surplus assets held for disposal is charged to Non Distributed Costs.

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Charges to Revenue for Fixed Assets (continued)

The County Council is not required to precept to cover depreciation, impairment losses or amortisations. However, it is required to make an annual provision from revenue to contribute towards the reduction in its overall borrowing requirement (equal to at least 4% of the underlying amount measured by the Capital Financing Requirement as at the end of the preceding financial year). Depreciation, impairment losses and amortisations are therefore replaced by revenue provision in the Statement of Movement on the General Fund Balance, by way of an adjusting transaction with the Capital Financing Account for the difference between the two.

Contingent Assets and Contingent Liabilities

Contingent assets and contingent liabilities are not provided for within the statement of accounts whilst uncertainty remains over the final outcome or if it is not practicable to estimate the amount involved. These items are disclosed by way ofnotes to the accounts.

Debtors and Creditors

The accounts are maintained on an accruals basis in accordance with the SORP. The accounts are prepared on the basis of income being due and expenditure becoming payable in the financial year. This means that sums due to or from the County Council during the year are included in the accounts whether or not the cash has actually been received or paid in the year. Any differences between the actual and accrued amounts will be reflected in the accounts of the following year

The County Council provides for known and uncollectable debts on the basis shownbelow. These general rates are subject to review where special circumstances may apply.

Provision

Age of debt (months) %

10 to 15 35

16 to 21 50

Over 21 100

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Deferred Charges

Deferred charges represent expenditure which may be capitalised under statutory provisions. However, the SORP requires that unless the authority controls the economic benefits resulting from such expenditure it should be written off to the Income and Expenditure Account in the year the expenditure is incurred. As the cost of deferred charges is being financed from capital resources or by borrowing a transfer to the Capital Financing Account through the Statement of Movement on the General Fund Balance ensures there is no impact on the Council’s revenue expenditure for the year.

Depreciation

Depreciation, with the exception of land which is not depreciated, is provided for on a straight line basis on those fixed assets with a finite useful life. Depreciation is notprovided for in the year in which assets are acquired. The depreciation charge isabated where assets are disposed of during the financial year.

The SORP requires that upon a review of asset lives, depreciation would becalculated over the revised remaining useful life of the asset.

The periods over which the various types of asset are depreciated are:

Buildings 10 – 60 years

Vehicles, Plant and Equipment 2 – 30 years

Infrastructure 8 – 60 years

Exceptional items, extraordinary items and prior period adjustments

Where applicable, exceptional items are included in the cost of the service to whichthey relate whilst extraordinary items would be disclosed on the face of the Income and Expenditure Account after ordinary activities of the County Council. Prior period adjustments, if material, would be accounted for by restating comparative figures forthe preceding accounting period.

External Interest

Interest on external borrowing is fully accrued resulting in each financial year bearing the cost of interest related to its actual external borrowing. External investment income is credited to revenue over the period to which it relates.

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Government Grants and Contributions

Government grants and other contributions are accounted for on an accruals basisand are recognised in the accounting statements when the conditions for their receipt have been complied with and there is reasonable assurance that the grant orcontribution will be received.

In the case of service related revenue grants, the grant is credited to the appropriaterevenue account where it is matched against the expenditure to which it relates.

Grants to cover general expenditure such as Revenue Support Grant are shownat the foot of the Income and Expenditure Account after Net Operating Expenditure.

Capital grants are applied as sources of finance to the specific capital project. Capital accounting conventions require that where acquisition of a fixed asset is financed either wholly or in part by a government grant or other contribution, the amount of the grant or contribution is credited initially to the deferred grants and contributions account. Accounting treatment of the grant or contribution mirrors that applied to the expenditure it has financed and the write down of such grants are credited to the same service revenue account that has borne the asset depreciation charge.

Group Accounts

The SORP requires a local authority to prepare Group Accounts where it has material interests in subsidiaries, associates or joint ventures. The County Council, following SORP guidance, has considered its relationships with and interests in other entities and either has no group relationship with or does not exercise significant control or influence over those entities. Therefore the Council has not prepared Group Accounts for itself and those entities in which it has an interest.

Intangible Fixed Assets

This represents expenditure which may properly be capitalised but which is not represented by physical fixed assets. Intangible assets are recorded at cost and amortised to revenue on a systematic basis over their estimated useful economic lives which range from five to ten years.

Investments

Investments are carried at cost.

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Long Term Contracts

Long term contracts are accounted for on the basis of the Income and Expenditure Account being charged in the year during which the cost of goods or services were received or provided.

Operating Leases

Rentals payable under operating leases are charged to the relevant service revenue account on a straight line basis over the term of the lease.

Overheads

Service revenue accounts include a charge for both service and central management and administration overheads. Costs relating to the Corporate and Democratic Core and Non Distributed Costs have been identified in accordance withthe Best Value Accounting Code of Practice and are shown as separate headings in the Income and Expenditure Account, as part of Net Cost of Services. Pensions

The County Council participates in three different pension schemes that meet theneeds of employees in particular services. All the schemes provide members withdefined benefits related to pay and service. The schemes are as follows:

Teachers - this is an unfunded scheme administered by the Teachers Pension Agency (TPA). The pension cost charged to the accounts is the contribution rate, 13.5% from April 2006 and 14.1% from January 2007, for 2006-07, set by the TPA on the basis of a notional fund. However, the arrangements for the Teachers’ scheme mean that liabilities for these benefits cannot be identified to the Council. The scheme is therefore accounted for as if it were a defined contributions scheme – no liability for future payments of benefits is recognised in the balance sheet and the Education service revenue account is charged with the employer’s contributions payable to the TPA for the year.

Uniformed Fire fighters - this scheme is unfunded. With effect from 1 April 2006 the Council pay an employer’s pension contribution based on a percentage of pay into the Firefighters’ Pension Fund. The Pension Fund will be balanced to nil at the end of the year through a cash settlement with central government.

Other employees - subject to certain qualifying criteria, are eligible to join the Local Government Pension Scheme. For 2006-07 the County Council paid an employer contribution rate of 17.9% of pensionable pay.

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Pensions (continued)

The Uniformed Fire fighters and Local Government Pension Schemes are bothaccounted for, under FRS17 – Retirement Benefits, as defined benefits schemes.

The liabilities of these pension schemes attributable to the Council are included in the balance sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and projections of projected earnings for current employees.

Liabilities are discounted to their value at current prices, using a discount rate based on the yield of a basket of AA-rated bonds (Iboxx Sterling Corporates Index, AA over 15 Years).

The assets of the Local Government Pension Fund attributable to the Council are included in the balance sheet at their fair value:

quoted securities – mid-market value

unquoted securities – professional estimate

unitised securities (including Property) – average of the bid and offer rates

The change in the net pensions liability is analysed into the following components:

current service cost – the increase in liabilities as result of years of service earned this year – allocated in the Income and Expenditure Account to the revenue accounts of services for which the employees worked

employer contributions paid to the pension funds

past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Net Cost of Services in the Income and Expenditure Account as part of Non Distributed Costs

settlements and curtailments – the result of actions to relieve the Council of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited to the Net Cost of Services in the Income and Expenditure Account as part of Non Distributed Costs

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Pensions (continued)

interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid – debited to Net Operating Expenditure in the Income and Expenditure Account

expected return on assets – the annual investment return on the fund assets attributable to the Council, based on an average of the expected long-term return – credited to Net Operating Expenditure in the Income and Expenditure Account

actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – debited to the Statement of Total Recognised Gains and Losses.

Statutory provisions limit the Council to precept to cover the amountspayable by the Council to the pension fund in the year. In the Statement ofMovement on the General Fund Balance this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pensionfund and any amounts payable to the fund but unpaid at the year-end.

Post Balance Sheet Events

Where material, events that occur after the balance sheet date that provide additional evidence relating to conditions existing at that date are reflected within the accounting statements. Material post balance sheet events that relate to conditions that did not exist at the balance sheet date are disclosed by way of a note to the accounts.

22


Provisions

Provisions are made for known liabilities that are likely or certain to be incurred butwhere the amount or date on which they might arise is uncertain. Provisions arecharged to the appropriate service revenue account in the year that they arerecognised and are detailed in the notes to the accounts. Expenditure incurred onitems for which the provision was originally set up is charged directly to theprovision. The level of each provision is reviewed at the balance sheet date.Provisions that are no longer required will be credited back to the original service revenue account from where the provision was created.

Repurchase of Borrowing

The SORP requires gains or losses on the repurchase of borrowing to be recognised in the Income and Expenditure Account in the year in which the repurchase occurs. However, if the repurchase is linked with a refinancing or restructuring of borrowing with substantially the same overall economic effect, gains or losses can berecognised in the Income and Expenditure Account over the life of the replacement borrowing and it is this policy that the County Council has adopted. The amount of deferred premiums not charged to revenue is shown on the face of the balance sheet.

Specific Reserves

Specific Reserves are sums of money earmarked to provide, in the main, flexibility in funding between years. A detailed make up of specific reserves is given in the notes to the accounts. Reserves are created by appropriating amounts in the Statement of Movement on the General Fund Balance. Expenditure incurred on items for which the reserve was originally established is shown as service expenditure offset by a contribution from the reserve to the Statement of Movement on the General Fund Balance.

Stocks

Stocks and stores cover such items as vehicle spares, uniforms, stationery, equipment, other materials and some canteen stocks. All consumable and non-durable stocks and stores are charged to the revenue account in the year of purchase. The basis of valuation is dependent on the nature of the stock with most stocks being valued on an historic cost basis.

23


Tangible Fixed Assets

Expenditure on the acquisition, creation or enhancement of tangible fixed assets iscapitalised, provided that the fixed asset yields benefits to the authority and the services it provides, for a period of more than one year. This excludes expenditureon routine repairs and maintenance of fixed assets, which is charged direct toservice revenue accounts.

Tangible fixed assets are valued on the basis recommended by CIPFA and inaccordance with guidelines issued by the Royal Institution of Chartered Surveyors. Fixed assets are classified into the groupings required by the SORP.

Fixed assets are valued as follows:-

Type of Asset Basis of Valuation

Operational land & buildings Open market value for existing use, or where this could not be assessed because there was no market for the subject asset, the depreciated replacement cost.

Vehicles, plant and equipment Depreciated historic cost as a proxy for current replacement cost.

Infrastructure Depreciated historic cost.

Non operational land & buildings Market value.

Assets under construction Historic cost.

The surplus or deficit arising on the revaluation of fixed assets have been creditedor charged to the Fixed Asset Restatement Account. During 2004-05a rolling programme of land and building asset revaluations commenced.This programme will ensure compliance with the SORP requirement that all land and building assets are revalued within a five-year period. However, otherpermanent and material changes to asset valuations, as advised by the County Council’s valuers will be accounted for in the interim period, as they occur.

The County Council’s valuers perform an impairment review on the value of buildings that have a remaining minimum useful life of 50 years as at the balancesheet date. An impairment loss caused by a consumption of economic benefits would be recognised through service revenue accounts within the Income and Expenditure Account. Other impairment losses due to a general fall in prices wouldbe accounted for in the Fixed Asset Restatement Account.

24


Tangible Fixed Assets (continued)

Land and building capital expenditure not considered to have added to the value of fixed assets is written off to the Fixed Asset Restatement Account. The amountwritten off is initially estimated based on experience in previous years. This is thencompared with information subsequently advised by the Council’s valuers and wherethere is a material difference between the estimated amount written off and thatadvised by valuers the accounts will be adjusted in the year the capital expenditure was incurred. If considered not to be material in relation to the Council’s accounts,such a difference will be accounted for in the subsequent accounting period. Value Added Tax

Value added tax (VAT) is included within the accounts only to the extent that it isirrecoverable. The Council is able to recover VAT on nearly all its expenditure (input tax) and in addition, accounts for VAT on its income (output tax) where applicable. The balance owing as at 31 March, from or to HM Revenue & Customs, will beshown in either current assets or current liabilities on the balance sheet.

25

THE STATEMENT OF RESPONSIBILITIES

This statement sets out the respective responsibilities of the County Council and the Finance Director for the accounts.

The County 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 officers has the responsibility for the administration of those affairs. In this authority, that officer is the Finance Director;

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

approve the Statement of Accounts before 30 June 2007.

I confirm that these accounts were approved for submission to Audit by the Audit Committee at the meeting held on 27 June 2007.

Signed on behalf of Hertfordshire County Council.

S QuiltyChairmanAudit Committee

Date: 27 June 2007

26

THE STATEMENT OF RESPONSIBILITIES

The Finance Director’s responsibilities

The Finance Director is responsible for the preparation of the Council’s Statement of Accounts in accordance with proper practices as set out in the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom (the SORP).

In preparing this Statement of Accounts, the Finance Director has:

selected suitable accounting policies and then applied them consistently;

made judgements and estimates that were reasonable and prudent;

complied with the local authority SORP.

The Finance Director has also:

kept proper accounting records which were up to date;

taken reasonable steps for the prevention and detection of fraud and other irregularities.

Finance Director's Certificate

I certify that the Statement of Accounts presents fairly the financial position of the County Council, the Hertfordshire County Council Pension Fund and the Firefighters’ Pension Fund as at 31 March 2007 and the income and expenditure for the year then ended.


27 June 2007

27

INCOME AND EXPENDITURE ACCOUNT

This statement is fundamental to the understanding of a local authority’s activities, inthat it reports the net cost for the year of all the functions for which the authority isresponsible, and demonstrates how that cost has been financed from general government grants and income from local taxpayers. It brings together expenditureand income, on an accruals basis, relating to all of the local authority’s functions, inthree distinct sections, each divided by a sub-total. In addition to day-to-dayexpenses and related income the statement includes transactions measuring thevalue of fixed assets actually consumed and the real projected value of retirementbenefits earned by employees in the year.

The first section provides segmental accounting information on the costs of the localauthority’s different continuing operations, net of specific grants and income fromfees and charges, to give the net cost of services. The total cost principle appliesto each item at this mandatory level of service division. This means that, in additionto direct costs, each division of service must include an appropriate share of:

depreciation

impairment loss identified on assets used to provide services

amortised deferred charges and intangible assets

support service overheads

current service (pensions) costs on an FRS17 Retirements Benefits basis.

Contributions to or from specific reserves and revenue financing of capitalexpenditure are shown within the movement on the general fund balance.

The second section comprises items of income and expenditure relating to the local authority as a whole. When added to the net cost of services this gives the localauthority’s net operating expenditure.

The third section shows the income from local taxation and general governmentgrants in the period, to give the net deficit or surplus for the year.

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INCOME AND EXPENDITURE ACCOUNT

Net CostGross Cost

Gross Income Net Cost

2005-06 2006-07 2006-07 2006-07£000 Note £000 £000 £000

1,865 Central Services to the public 4,435 2,484 1,951 925 Court Services 1,170 171 999

54,276 Cultural, Environmental and Planning Services 73,434 14,935 58,499 613,501 Education Services 885,480 790,976 94,504

39,981 Fire Service 43,678 1,880 41,798 66,083 Highways, Roads and Transport Services 88,735 19,163 69,572

(154) Other Housing Services 21,974 22,344 (370) 285,158 Social Services 443,877 134,078 309,799

9,204 Corporate and Democratic Core 25,533 17,244 8,289 6,760 Non Distributed Costs 11,011 2,721 8,290

1,077,599 Net cost of services 1 1,599,327 1,005,996 593,331 (429) Exceptional Item – third party debt repayment 3 3,057 (3,057)(997) Net (gain)/loss on disposal of fixed assets 4 25,025 27,432 (2,407)

2,013 Precepts and levies 1,790 1,790 517 (Surplus)/deficit on trading undertakings 5 387 387

14,931 Interest payable 17,210 17,210 (4,548) Interest and investment income 6 7,451 (7,451)71,116 Pensions interest cost 7 77,192 77,192

(49,201) Expected return on pension assets 7 61,211 (61,211)(1,063) Insurance Fund 8 9,388 10,565 (1,177)

1,109,938 Net operating expenditure 1,730,319 1,115,712 614,607 (402,772) Income from the Collection Fund 427,940 (427,940)(342,067) Government Grants 9 29,146 (29,146)(328,840) Distribution from non-domestic rate pool 123,622 (123,622)

36,259 (Surplus) / deficit for the year 1,730,319 1,696,420 33,899

Change in the basis of government support for schools

For 2006-07, the arrangements for government support for the funding of schools changed. Previously funds were provided as part of the council’s overall Revenue Support Grant. In 2006-07, the council has received a specific grant – the Dedicated Schools Grant. £565.275 million has therefore been credited against the Education service outturn in the Income and Expenditure Account that would previously have been treated as part of Revenue Support Grant. The difference between 2006-07 figures and comparative figures for 2005-06 for these two lines is substantially explained by this change.

29

STATEMENT OF THE MOVEMENT ON THE GENERAL FUND BALANCE

The Income and Expenditure Account shows the Council’s actual financial performance for the year, measured in terms of the resources consumed and generated during the year. However, the authority is required to raise council tax on a different accounting basis, the main differences being:

Capital investment is accounted for as it is financed, rather than when the fixed assets are consumed.

Retirement benefits are charged as amounts become payable to pension funds and pensioners, rather than as future benefits are earned.

The General Fund Balance shows whether the Council has over or underspent against the council tax that it raised for the year, taking into account the use of reserves built up in the past and contributions to reserves earmarked for future expenditure.

This reconciliation statement summarises the differences between the outturn on the Income and Expenditure Account and the General Fund Balance.

2005-06 2006-07£000 Note £000

36,259 (Surplus) / deficit on the Income and Expenditure Account 33,899

(31,721)

Net additional amount required by statute or non-statutory proper practices to be debited or credited to the General Fund for the year 10 (25,658)

4,538 (Increase) / reduction in the General Fund for the year 8,241

37,436 General Fund Balance brought forward 32,898

32,898 General Fund Balance carried forward 24,657

43,971 Balances held by schools under local management schemes 51 40,545

30

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

This statement brings together all the gains and losses of the Council for the year and shows the aggregate increase in its net worth. In addition to the surplus or deficit on the Income and Expenditure Account, it includes gains and losses on

revenue account and capital receipt financing applicable to deferred charges

the revaluation of fixed assets

the remeasurement of deferred grants matched to fixed assets

the remeasurement of the net liability to cover the cost of retirement benefits.

2005-06 2006-07£000 £000

36,259 (Surplus) / deficit on the Income and Expenditure Account 33,899

0 Revenue account and capital receipt financing applicable to deferred charges – credit taken to Income and Expenditure Account 6,518

(41,331) Surplus arising on revaluation of fixed assets (1,035,937)

(31,643)Deferred grants transferred to the Fixed Asset Restatement Account arising on revaluation of fixed assets (26,813)

13,470 Actuarial (gains)/ losses on pension assets and liabilities (94,946)

(23,245) Total recognised (gains)/ losses for the year (1,117,279)

31

BALANCE SHEET

This statement shows the balances and reserves at the County Council’s disposal, its long-term indebtedness and the fixed and net current assets employed in its operations, together with summarised information on the fixed assets held.

The Balance Sheet excludes the Pension Fund and various trust funds, whose assets are not at the disposal of the Council, and are administered for third parties.

The Balance Sheet represents the financial position of the County Council as a whole as at 31 March 2007.

32

BALANCE SHEET

2006 2007Note £000 £000 £000 £000

Fixed AssetsIntangible Fixed Assets 26 3,490 4,162

Tangible Fixed Assets 27Operational Assets Land and Buildings 1,658,635 2,704,873 Vehicles, Plant & Equipment 41,310 50,582 Infrastructure Assets 293,307 336,772 Non-operational Assets Land and Buildings 170,869 159,733 Vehicles, Plant & Equipment 0 0 Assets under construction 10,788 21,046

2,178,399 3,277,168 Long-term Investments 30 6,000 20,000 Long-term Debtors 31 2,766 3,333 Deferred Premiums 32 4,854 4,625 Total Long-term Assets 2,192,019 3,305,126

Current Assets Stocks and Work in Progress 33 3,307 2,791 Landfill Usage Allowances 34 5,868 6,158 Debtors 35 69,852 77,320 Short Term Investments 36 259,750 218,142 Cash and Bank 68,227 407,004 75,899 380,310

Total Assets 2,599,023 3,685,436

Current Liabilities Short-term Borrowing 37 108 115 Creditors 38 209,675 230,575 Related Parties 39 78 583 Bank Overdraft 40 88,001 297,862 97,352 328,625

Total Assets less Current Liabilities 2,301,161 3,356,811

Long-term Borrowing 41 345,223 345,222Provisions 42 15,716 15,250Deferred Grants & Contributions 43 100,600 113,022Deferred Credits 44 3,617 440Liability related to defined benefit pension schemes 45 669,895 1,135,051 599,488 1,073,422

Total Assets Less Liabilities 1,166,110 2,283,389

Financed by:Capital Financing Account 47 105,591 108,780 Fixed Asset Restatement Account 48 1,624,533 2,662,258 Pensions Reserve 49 (669,895) (599,488)Usable Capital Receipts Reserve 50 8,803 7,493 Specific Reserves 51 64,180 79,689 General Fund Balance 52 32,898 24,657

Total Net Worth 1,166,110 2,283,389


33

CASH FLOW STATEMENT

This statement summarises the inflows and outflows of cash arising from transactions with third parties for revenue and capital purposes. Reconciliations to the deficit on the Income and Expenditure Account and to the Council’s net debt position together with an analysis of net debt are shown as notes to the accounts.

31 March 2006 31 March 2007£000 £000

REVENUE ACTIVITIESCash outflowsCash paid to and on behalf of employees 805,050 834,086 Precepts paid 2,013 1,790 Other operating costs 656,982 686,809

1,464,045 1,522,685

Cash inflowsDisbursements from the Collection Fund 402,772 427,940 Government and other Grants 226,025 797,471 Revenue Support Grant 342,067 22,981 Non Domestic Rate Income 328,840 123,622 Cash received for goods and services and other income 232,267 200,903

1,531,971 1,572,917

Net Cashflow from revenue activities 67,926 50,232

Returns on Investments and Servicing of Finance

Cash OutflowsInterest and premium on debt restructuring (13,609) (17,529)

Cash InflowsInterest received 9,106 13,730

Capital ActivitiesCash OutflowsPurchase of Fixed Assets (including deferred charges) (147,530) (150,028)Cash InflowsSale of Fixed Assets 26,077 23,865 Capital grants received 43,888 41,044 Contributions and other income 19,291 9,393

Net Cash (outflow) / inflow before financing 5,149 (29,293)

34

CASH FLOW STATEMENT

31 March 2006 31 March 2007£000 £000

Management of Liquid ResourcesNet (increase)/decrease in short term investments (101,415) 41,608

Management of Long Term ResourcesIncrease in long term investments (6,000) (14,000)

Financing

Cash OutflowsRepayments of amounts borrowed (9,750) (90,538)

Cash InflowsNew loans raised 122,000 90,544

Net increase/(decrease) in cash 9,984 (1,679)

Comparative figures for both other operating costs and other income have been increased by £10.560 million to reflect trading service external income.

35

NOTES TO THE ACCOUNTS

1. Net Cost of Services

The net cost of services is shown below at the mandatory level of service as required by the best value accounting code of practice.

Net CostGross Cost


2005-06 2006-07 2006-07 2006-07£000 £000 £000 £000

Central Services to the Public 762 Registration of Births, Deaths and Marriages 2,837 1,889 948 383 Conducting Elections 240 0 240 621 Emergency Planning 911 267 644 (54) Local Land Charges 291 328 (37)153 General Grants, Bequests and Donations 156 0 156

1,865 Total Central Services to the Public 4,435 2,484 1,951 Court Services

925 Coroners Courts 1,170 171 999 925 Total Court Services 1,170 171 999

Cultural, Environmental and Planning Services Cultural and Related Services

1,326 Culture and Heritage 1,778 289 1,489 0 Recreation and Sport 144 113 31

1,912 Open Spaces 1,198 355 843 168 Tourism 256 36 220

17,618 Library Service 20,409 1,655 18,754 21,024 Total Cultural and Related Services 23,785 2,448 21,337

Environmental Services2,591 Community Safety (Crime Reduction) 4,060 1,430 2,630 (123) Agricultural and Fisheries 1,231 1,205 26

2,503 Trading Standards 2,859 299 2,560 20 Street Cleansing (not chargeable to highways) 19 0 19

2,827 Waste Collection 0 19,413 Waste Disposal 32,979 8,044 24,935 27,231 Total Environmental Services 41,148 10,978 30,170

Planning and Development Services1,441 Development Control 2,015 127 1,888 1,541 Planning Policy 2,241 198 2,043 1,044 Environmental Initiatives 1,303 281 1,022 1,229 Economic Development 928 485 443

766 Community Development 2,014 418 1,596 6,021 Total Planning and Development Services 8,501 1,509 6,992

54,276 Total Cultural, Environmental and Planning 73,434 14,935 58,499 Education Services

5,205 Nursery Schools 6,861 6,382 479 274,395 Primary Schools 351,794 312,484 39,310 266,275 Secondary Schools 432,957 392,509 40,448

49,619 Special Schools 63,006 51,687 11,319 18,007 Non-School Funding 30,862 27,914 2,948

613,501 Total Education Services 885,480 790,976 94,504

36


1. Net Cost of Services (continued)

Net CostGross Cost


2005-06 2006-07 2006-07 2006-07£000 £000 £000 £000

Fire Service2,507 Community Fire Safety 3,206 342 2,864

37,474 Fire Fighting and Rescue Services 40,472 1,538 38,934 39,981 Total Fire Service 43,678 1,880 41,798

Highways, Roads and Transport Services4,733 Transport Planning, Policy and Strategy 6,383 2,377 4,006 7,703 Highways / Roads (Structural) 7,445 2,311 5,134

10,532 Construction 13,302 1,763 11,539 17,313 Highways / Roads (Routine) 23,273 2,128 21,145

6,342 Street Lighting 7,900 646 7,254 2,531 Winter Maintenance 2,772 190 2,582 5,679 Traffic Management and Road Safety 7,747 2,117 5,630

11,250 Public Transport 19,913 7,631 12,282 66,083 Total Highways, Roads and Transport Services 88,735 19,163 69,572

Other Housing Services0 Supporting People 20,985 20,985 0

Other Council Property92 Travellers’ Sites 758 822 (64)

(246) Non HRA Council Property 231 537 (306)(154) Total Other Housing Services 21,974 22,344 (370)

Social ServicesChildren’s Social Services

65 Service Strategy 72 0 72 25,880 Commissioning and Social Work 31,783 1,850 29,933 37,376 Children Looked After 43,439 321 43,118

8,906 Family Support Services 9,682 217 9,465 2,518 Youth Justice 4,085 1,367 2,718

250 Asylum Seekers 242 0 242 5,836 Other Children’s and Families’ Services 16,229 12,890 3,339

Adult Social Services180 Service Strategy 215 2 213

91,842 Older People 150,576 53,507 97,069 29,285 Adults with Physical Disabilities 34,377 4,423 29,954 61,611 Adults with Learning Disabilities 110,809 43,163 67,646 21,087 Adults with Mental Health Needs 41,690 16,125 25,565

0 Asylum Seekers 16 16 0 322 Other Adult Services 662 197 465

285,158 Total Social Services 443,877 134,078 309,799

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1. Net Cost of Services (continued)

Net CostGross Cost


2005-06 2006-07 2006-07 2006-07£000 £000 £000 £000

Corporate and Democratic Core6,544 Democratic Representation and Management 12,986 7,914 5,072 2,660 Corporate Management 12,547 9,330 3,217 9,204 Total Corporate and Democratic Core 25,533 17,244 8,289

Non Distributed Costs786 Retirement Benefits 1,797 0 1,797

5,974 Unused Share of IT Facilities and Other Assets 9,214 2,721 6,493 6,760 Total Non Distributed Costs 11,011 2,721 8,290

1,077,599 Total Net Cost of Services 1,599,327 1,005,996 593,331

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2. Deployment of Dedicated Schools Grant

The council’s expenditure on schools is funded by grant monies provided by the Department for Education and Skills, the Dedicated Schools Grant (DSG). DSG is ring-fenced and can only be applied to meet expenditure properly included in the Schools Budget. The Schools Budget includes elements for a restricted range of services provided on an authority-wide basis and for the Individual Schools Budget, which is divided into a budget share for each school. Over- and underspends on the two elements are required to be accounted for separately The council is able to supplement the Schools Budget from its own resource and this year programmed an additional £247,000 spending by schools.

Details of the deployment of DSG receivable for 2006-07 are as follows:

Schools Budget Funded by Dedicated Schools Grant

CentralExpenditure

Individual SchoolsBudget Total

£000 £000 £000Original grant allocation to Schools Budget for the current year in the authority’s budget 76,286 488,796 565,082

Adjustment to finalised grant allocation 193 193 DSG receivable for the year 76,479 488,796 565,275

Actual expenditure for the year (73,879) (490,632) (564,511)(Over)/underspend for the year 2,600 (1,836) 764

Planned top-up funding of ISB from Council resources 247 247

Use of schools balances brought forward 43,971 43,971

(Over)/underspend from prior year 0

(Over)/underspend carried forward to 2007-08 2,600 42,382 44,982

39


3. Exceptional Item – Third Party Debt Repayment

The County Council has, upon settlement of transferred debt due from the University of Hertfordshire, released the related deferred income account to the Income and Expenditure Account. This item, not being of a service specific nature, has been shown below the net cost of services. The Council has made an equivalent Voluntary Revenue Provision to the Capital Financing Account thereby reducing its indebtedness as measured by the Capital Financing Requirement.

4. (Gain) / Loss on Disposal of Fixed Assets

With effect from 2006-07 gains and losses on the disposal of fixed assets are required to be calculated for disclosure in the Income and Expenditure Account,

but ultimately income received from disposals will be credited to a Usable Capital Receipts Reserve – amounts will then be credited to the Capital Financing Account when applied to new capital expenditure or set aside to reduce net indebtedness. In order to comply with statutory/proper practices restrictions on the use of capital receipts the gain or loss as disclosed in the Income and Expenditure Account is reversed by a reconciling item in the Statement of Movement on the General Fund Balance. Upon disposal, assets that are required to be carried on the balance sheet at current value, are revalued to the market valuation at the date of disposal.

2005-06 2006-07£000 £000

Capital Receipts (25,627) (27,432)

Value of Fixed Assets Written Off 24,630 25,025

(Gain) / Loss on Disposal of Fixed Assets (997) (2,407)

40


5. (Surplus) / deficit on trading undertakings

During the financial year ended 31 March 2007, the County Council operated the following material trading accounts within a competitive environment.

(Surplus)/ Deficit

Gross Cost

Gross Income

(Surplus)/ Deficit

2005-06 2006-07 2006-07 2006-07£000 Name and description of operations £000 £000 £000

(63) Hertfordshire CateringHertfordshire Catering is the County Council's education caterer, who provides a quality catering service to over 500 primary, middle and secondary schools in Hertfordshire, as well as to other organisations.

16,920 16,831 89

659 Hertfordshire Business Services (HBS)HBS offers a professional purchasing, supply and contract management service to the County Council. HBS acts as client manager for the school meals service and vehicle maintenance. HBS is a leading member of the Central Buying Consortium consisting of 17 local authorities and negotiates both joint and County Council specific contracts.

41,578 40,890 688

(66) Hertfordshire ReprographicsHertfordshire Reprographics are the County Council’s in-house print unit. It provides a range of reprographic services including printing, fast print, plan print and photocopying.

1,863 2,190 (327)

(13) Childcare Litigation UnitThe Childcare Litigation Unit provides legal support for the County Council's children's services.

1,195 1,258 (63)

517 Total Trading Services 387

The above results are based on the Best Value Accounting Code of Practice. They include the effect of depreciation, defined benefit pension scheme and discretionary pension costs shown on an FRS17 basis and reserve movements shown as appropriations in the Statement of Movement on the General Fund Balance.

41


6. Interest and Investment Income

Amounts earned on investing cash surpluses as stated in the Income and Expenditure Account are after allocating interest to the Children, Schools and Families (CSF) service in respect of school bank accounts operated on a decentralised basis and to other internal interest earning balances .

2005-06 2006-07£000 £000

Gross interest and investment income (10,203) (15,202)Allocated to CSF service 3,745 5,046 Internal interest allocations 1,910 2,705

(4,548) (7,451)

7. FRS17 Retirement Benefits

As part of the terms and conditions of employment of its officers and other employees, the County Council offers retirement benefits. Although these benefits will not actually be payable until employees retire, the County Council has a commitment to make the payments that needs to be disclosed at the time the employees earn their future entitlement.

The County Council participates in three pension schemes:

The Local Government Pension Scheme for civilian employees. This scheme is administered by Hertfordshire County Council and is a funded scheme, meaning that the County Council and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets.

The Fire-fighters pension scheme – this is an unfunded scheme, meaning that there are no investment assets built up to meet the pension liability. Employer and employee contributions together will meet the full costs of pension liabilities being accrued in respect of currently serving employees while central Government will meet the costs of retirement pensions in payment, net of employee and the new employer contributions.

The Teachers pension scheme – further information relating to this scheme which provides retirement benefits for teaching staff is shown in the note to the accounts “Defined Contribution Scheme – Teachers’ Pension Scheme”. FRS17 does not apply to the County Council’s contribution to this pension scheme.

42


7. FRS17 Retirement Benefits (continued)

The cost of retirement benefits is recognised in the net cost of services section of the Income and Expenditure Account when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge the County Council is required to make against council tax is based on the cash payable in the year. This results in the real cost of retirement benefits being reversed out as appropriations in the Statement of Movement on the General Fund Balance.

Local Government Pension Scheme

Fire-fighters Pension Scheme Total

for the year ended 31 March2006 2007 2006 2007 2006 2007£000 £000 £000 £000 £000 £000

Income and Expenditure AccountNet Cost of Services:current service cost 33,732 45,840 7,200 8,600 40,932 54,440 past service costs 302 534 300 302 834 impact of settlements and curtailments 484 962 484 962

Net Operating Expenditure:interest cost 59,616 64,892 11,500 12,300 71,116 77,192 expected return on assets in the scheme (49,201) (61,211) (49,201) (61,211)

Statement of Movement on the General Fund BalanceAmounts to be met from Government Grants and Local Taxation:movement on pensions reserve (6,415) (8,120) (13,215) (16,419) (19,630) (24,539)

38,518 42,897 5,485 4,781 44,003 47,678

Actual amount charged against council tax for pensions in the year:employers’ contributions payable to scheme 35,093 39,286 3,489 35,093 42,775 top-up grant contribution 1,292 1,292 retirement benefits payable to pensioners 3,425 3,611 5,485 8,910 3,611

38,518 42,897 5,485 4,781 44,003 47,678

The note to the accounts analysing the liability related to defined benefit pension schemes lists the assumptions made in estimating the figures included in this note and in addition details the amounts that have arisen in the year because estimates made in preparing figures for previous years have had to be revised (e.g. the expected return on investments).

43


8. Insurance Fund

The County Council operates insurance provisions and reserves to meet self-insured liabilities in respect of fire damage, employers and third party liability and storm damage.

2005-06 2006-07£000 £000

IncomeRecharge of premiums (10,596) (9,832)Contribution in lieu of interest (590) (733)

(11,186) (10,565)ExpenditureAdministration and premiums 5,354 5,647 Contribution to insurance provision 3,887 2,678 Claims 882 1,063

(1,063) (1,177)

9. Government Grants

2005-06 2006-07£000 £000

Revenue Support Grant (342,067) (22,981)Local Public Service Agreement 0 (3,040)Fire Pension Top-Up Grant 0 (1,292)Local Authority Business Growth Incentives Scheme 0 (1,779)Bellwin Scheme 0 (54)

(342,067) (29,146)

For 2006-07, the arrangements for government support for the funding of schools changed. Previously funds were provided as part of the council’s overall Revenue Support Grant.

44


10. Statement of the Movement on the General Fund Balance

The Income and Expenditure Account discloses the income receivable and expenditure incurred in operating the Council for the year. The surplus or deficit achieved on the Income and Expenditure Account represents the amount by which income is greater than or less than expenditure. Both income and expenditure are measured using UK Generally Accepted Accounting Practice (UK GAAP).

However, the items of ‘income’ and ‘expenditure’ that are required to be credited or charged to the General Fund and which therefore must be taken into account in determining a local authority’s budget requirement and in turn its Council Tax demand is determined by statute and non-statutory proper practices rather than being in accordance with UK GAAP. While the amounts that the SORP requires to be included in the Income and Expenditure Account and statute and non-statutory proper practices requires to be included in the General Fund are largely the same, there are a number of differences. For example depreciation of fixed assets is charged to the Income and Expenditure Account but cannot be charged to the General Fund.

While the surplus or deficit on the Income and Expenditure Account is the best measure of the Council’s financial result for the year in accordance with Generally Accepted Accounting Practice, the movement on the General Fund Balance is also an important aspect of the Council’s stewardship. Up to 2005-06 the local authority statement of performance was the Consolidated Revenue Account and the surplus or deficit on this account was the movement for the year on the General Fund Balance.

45


10. Statement of the Movement on the General Fund Balance (continued)

The amounts in addition to the Income and Expenditure Account surplus or deficit for the year that are required by statute and non-statutory proper practices to be charged or credited to the General Fund in determining the movement on the General Fund Balance for the year are shown in following table.

2005-06 2006-07 2006-07£000 Note £000 £000

Amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the Movement on the General Fund Balance for the year

(44,698) Depreciation and impairment of fixed assets 26/27 (52,278)

3,193 Government Grants Deferred amortisation matching depreciation and impairments 43 4,267

(7,457)

Amounts treated as revenue expenditure in accordance with the SORP but which are classified as capital expenditure by statute 47 (5,207)

997 Net gain or loss on sale of fixed assets 4 2,407

(19,630)

Amount by which pension costs calculated in accordance with the SORP (i.e. in accordance with FRS 17) are different from the contributions due under the pension scheme regulations 7 (24,539) (75,350)Amounts not included in the Income and Expenditure Account but required to be included by statute when determining the Movement on the General Fund Balance for the year

12,509 Statutory provision for repayment of debt 11 13,740

21,748 Capital expenditure charged to the General Fund Balance 47 16,287 30,027 Transfers to or from the General Fund Balance that are required to be taken into account when determining the Movement on the General Fund Balance for the year

0 Voluntary provision for repayment of debt 47 4,156 1,617 Net transfer to or from earmarked reserves 51 15,509 19,665

(31,721)Net additional amount required to be (credited) / charged to the General fund Balance for the year (25,658)

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11.Statutory provision for repayment of debt

The Local Authorities (Capital Finance and Accounting) Regulations 2003 require the County Council to charge an amount to the revenue account as a minimum provision for the repayment of external debt. The County Council is currently required to provide a minimum of 4% of the Capital Financing Reserve as at the end of the preceding financial year.

2005-06 2006-07£000 £000

Minimum Revenue Provision 12,509 13,740

12. Section 137 Local Government Act 1972

Section 137 (3) of the Local Government Act 1972 permits local authorities to contribute to charitable bodies for their work, to any non-profit making bodies providing public services and to any public appeals made by a principal authority in connection with a particular event. Amounts the County Council incurred primarily on voluntary bodies working in the local area were:

2005-06 2006-07£000 £000155 157

13.Publicity

Under Section 5 (1) of the Local Government Act 1986, all local authorities are required to identify expenditure on publicity. This is given the broad definition of “any communication addressed to the public at large or any section of the public”. The Council’s spending on publicity was:

2005-06 2006-07£000 £000

Recruitment advertising 1,413 2,418Other advertising 379 341Other publicity 1,253 1,276

3,045 4,035

The increase in recruitment advertising expenditure is due the lifting of a freeze on staff recruitment that applied during 2005-06 within the Children Schools and Families Service pending service re-organisation, increased use of agency staff to cover vacancies short term and higher levels of staff turnover within the Adult Care Service. Expenditure of £114,000 incurred in 2005-06 originally shown as other advertising has been reclassified as recruitment advertising. Public notices relating to highways works are included within the other advertising category.

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14.Finance and operating leases

The value of assets acquired under finance lease arrangements is considered to be immaterial. The County Council finances a range of assets, primarily vehicles and IT equipment, by means of operating leases. The amounts paid under these arrangements were:

2005-06 2006-07£000 £0003,313 2,521

Outstanding obligations, analysed by lease expiry date, under all such operating lease agreements are:

£0002007-08 3092008 onwards 4,696

15.Local Authorities (Goods and Services) Act 1970

The Council is empowered by this Act to provide goods and services to other public bodies. The County Council, via Hertfordshire Business Services provides such services primarily to a number of County Councils and London Boroughs. Income from this source which covered the costs involved is shown below.

2005-06 2006-07£000 £000

County Councils 7,549 7,725 London Boroughs 1,875 1,701 Other Local Authorities 1,136 1,188

10,560 10,614

16.Agency Work

With the cessation, with effect from April 1997, of the agency arrangement relating to the provision, improvement and maintenance of Motorways and Trunk Roads on behalf of the Department of Transport, the County Council has no material agency arrangements.

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17.Taxable Remuneration

The number of employees whose taxable remuneration was £50,000 or more is shown below. The basis of calculation for 2006-07 has changed. Employee pension contributions are no longer deducted when determining the amount to be disclosed. Comparative figures have not been amended and reflect taxable remuneration after deducting employee pension contributions.

Taxable Remuneration 2005-06 2006-07

50,000 - 59,999 202 459 60,000 - 69,999 65 82 70,000 - 79,999 32 54 80,000 - 89,999 14 24 90,000 - 99,999 3 15100,000 - 109,999 2 4110,000 - 119,999 2 1120,000 - 129,999 1 3130,000 - 139,999 2 1140,000 - 149,999 0 2150,000 - 159,999 0 1160,000 - 169,999 0 0170,000 - 179,999 1 0180,000 - 189,999 0 0190,000 - 199,999 0 0200,000 - 209,999 0 1

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18. Related Party Transactions

The Council is required to disclose material transactions with related parties. This would include bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows an assessment to be made as to the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council.

Central GovernmentCentral government has effective control over the general operations of the Council. It is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with third parties. Details of significant revenue grants received from Government departments are shown in the notes to the accounts. These grants are in addition to the Council’s share of the revenue support grant and redistributed business rates income as calculated by Central Government.

Members and Chief OfficersMembers of the Council have direct control over the Council’s financial and operating policies. Members and Chief Officers have been advised of the requirements and the need for disclosure. From the information received no material transactions involving Members and Chief Officers during the year have been identified.

Hertfordshire Police Authority (HPA)The County Council performs a number of corporate support functions on behalf of the HPA for which a charge is raised (2005-06 £474,079, 2006-07 £493,764). The most significant of these functions involves the County Council investing surplus cash balances on behalf of the HPA. These amounts are invested in the name of the County Council with approved financial institutions with any other balances earning interest at overnight rates. Interest earned on these balances on behalf of the HPA amounted to £1.564m in 2006-07 (2005-06 - £1.519m).The Finance Director of the County Council acts as Treasurer for the HPA.

Hertfordshire County Council Pension Fund The County Council administers the Pension Fund on behalf of its employees and those of District Councils within the County and other admitted bodies. Cash balances are mainly invested by investment managers appointed by the Pension Fund with smaller amounts being pooled with County Council cash balances for which the Pension Fund received a contribution in lieu of interest of £1,032,526 (2005-06 - £1,100,499).

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19. Members Allowances

The total of members’ allowances paid is shown below.

2005-06 2006-07£000 £0001,215 1,312

20. Teachers Pension Scheme

Teachers employed by the County Council are members of the Teachers’ Pension Scheme, administered by the Teachers’ Pension Agency. It provides teachers with defined benefits upon their retirement, and the County Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The employer contribution rate is shown below.

Period %

From April 2006 13.50From January 2007 14.10

2005-06 13.50

County Council contributions to the Teacher’s Pensions Agency in respect of teachers’ retirement benefits have amounted to:

2005-06 2006-07£000 £000

42,517 44,731

21. Transport Act 2000

Schedule 12 of the Transport Act 2000 contains provisions for authorities to operate road user charging and workplace parking levy schemes. No such schemes have been in operation during 2006-07.

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22. Health Act 1999 Pooled Funds and Similar Arrangements

Partnership arrangements were established in December 2001 between Hertfordshire County Council and the Hertfordshire Partnership (NHS) Trust for the provision of services to the following client groups, Mental Health, Learning Disability, Drug and Alcohol Services and Children and Adolescent Mental Health Services. Mental Health Services for Older People were added to the agreement in 2005-06.

The purpose of the partnership is to provide integrated health and social care services with a single management structure. Social care staff have transferred from Hertfordshire County Council to Hertfordshire Partnership (NHS) Trust for Mental Health, Drug and Alcohol and Children and Adolescent Mental Health services. Learning Disability Nurses have transferred from Hertfordshire Partnership (NHS) Trust to Hertfordshire County Council. Social care staff for mental health services for older people were seconded to Hertfordshire Partnership (NHS) Trust from 1 April 2005.

In addition, the Joint Commissioning Partnership Board was established by the 8 Primary Care Trusts (PCTs) in Hertfordshire and Hertfordshire County Council in order to implement and direct joint commissioning for Health and Social Care services. A pooled budget funded by PCTs and Hertfordshire County Council has been set up to fund services for all the client groups plus the Joint Commissioning Team.

In April 2004 the 8 Hertfordshire PCTs and Hertfordshire County Council set up an Integrated Community Equipment Service. The service provides both health and social care equipment which enables service users to maintain their independence within their own home. A pooled budget was also set up which is hosted by the County Council. The service is managed by a Management Board which includes representatives from all contributing parties.

In March 2006 a partnership agreement and a pooled budget were set up between South East Herts PCT and Hertfordshire County Council to provide care services for older people at Westgate Nursing home, Emmanuel Lodge and Kingfisher Nursing Home. The pooled budget is hosted by the County Council.

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22. Health Act 1999 Pooled Funds and Similar Arrangements (continued)

The County Council acted with the following partners until 30 September 2006.

Primary Care TrustDacorumSouth East HertsWelwyn HatfieldSt Albans and HarpendenRoyston, Buntingford and Bishops StortfordWatford and Three RiversNorth Herts and StevenageHertsmere

With effect from 1 October 2006, following the reconfiguration of the PCTs, the County Council acted with the following organisations.

Primary Care TrustEast and North HertsWest Herts

Summary information for 2006-07, for the pooled budgets that the County Council contributed to is shown below together with comparatives for 2005-06 shown in italics.

HCCFunding

PCTs Total Expenditure

Over / (under) spend

£000 £000 £000 £000 £000

Joint Commissioning Partnership Board 94,798 144,694 239,492 239,439 (53)

90,018 135,353 225,371 225,269 (102)

Integrated Community Equipment Service 2,781 912 3,693 3,480 (213)

2,712 890 3,602 3,838 236

Westgate – SE Herts 1,799 812 2,611 2,600 (11)119 55 174 174 0

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23. Long Term Contracts

The County Council has a number of long-term contracts that commit the Council to payments after 31 March 2008. Higher value contracts disclosed provide a range of services that include care for the elderly, highway maintenance and design, waste disposal and provision of internet access facilities. Revenue expenditure under these contracts for 2007-08 is estimated at £59.457 million. Termination dates applicable to these contracts range from 2008 to 2018.

24. External Audit Costs

In 2006-07 the Council incurred the following fees, payable to the Audit Commission, relating to external audit and inspection.

2005-06 2006-07£000 £000

External Audit Services – Section 5 Audit Commission Act 1998 221 246Certification of Grant Claims – Section 28 Audit Commission Act 1998 56 71Other Audit Commission Services 3 0

280 317

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25. Government Grants

Revenue grants that are specific to a service will be accounted for on an accruals basis within income of the relevant Best Value service line. The more significant grants are shown below.

2005-06 2006-07£000 £000

Learning and Skills CouncilGrant for Sixth Formers 66,787 70,533Adult and Community Learning Grant 2,893 2,629Post 16 Teachers Pay Grant 2,070

Department for Education and SkillsDedicated Schools Grant 565,275Standards Fund 39,046 46,762School Standards Grant 21,313 26,977Sure Start 5,619 8,910Children's Services Grant 2,493Teachers Pay Reform Grant 16,841 383Targeted Transitional Support Grant 3,928Choice Protects 801

Department of HealthSupporting People – Services and Implementation 21,749 21,727Access and system capacity 11,757 10,992Preserved Rights 5,403 4,672Residential Care Allowance 3,554Carers 3,391 3,363Mental Health 2,350 2,287National Training Standards 2,032 1,973Delayed Discharges 2,013 1,958Children’s Fund 1,355 1,692Safeguarding Children 1,280Children and Adolescents Mental Health Services 1,207 1,231Young People Substance Misuse 701 966National Training Strategy 508 568

Home OfficeDrug Intervention Programme 894 881

Department for TransportDe trunking Grant 1,970 2,607Rural Transport Grant 709 726Travel Plan Bursaries 161 102

218,262 781,777

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26. Intangible Fixed Assets

Expenditure incurred on intangible assets during 2006-07 amounted to £1.194 million. Capital expenditure shown as intangible assets includes purchased software, including upgrades, software licences and costs associated with internet portal and web design. The value of intangible assets will be written off over the appropriate useful life of such types of expenditure.

Software and

Licences

Portal and Web

Design Total£000 £000 £000

Gross Book ValueBalance as at 31 March 2006 2,026 1,822 3,848Additions 1,194 0 1,194Balance as at 31 March 2007 3,220 1,822 5,042

DepreciationBalance as at 31 March 2006 176 182 358Depreciation for the year 340 182 522Balance as at 31 March 2007 516 364 880

Net Book ValueBalance as at 31 March 2006 1,850 1,640 3,490Balance as at 31 March 2007 2,704 1,458 4,162

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27.Tangible Fixed Assets

- Operational - - Non-Operational -

Land

and

B

uild

ings

Vehi

cles

, P&

E

Infr

a-st

ruct

ure

Land &

Bui

ldin

gs

Vehi

cles

, P&

E

AU

C

TOTA

L

£000 £000 £000 £000 £000 £000 £000Gross Book ValueBalance at 31 March 2006 1,830,387 82,760 342,372 173,642 27 10,788 2,439,976 Additions 15,340 55,031 68,570 138,941 Disposals and transfers (9,157) (16,067) (25,224)Restatements 440 12,088 (440) 12,088 Revaluations 931,410 6,231 (57,872) 879,769 Balance at 31 March 2007 2,752,640 98,540 409,491 163,806 27 21,046 3,445,550

DepreciationBalance at 31 March 2006 171,752 41,450 49,065 2,773 27 0 265,067 Depreciation for the year 32,053 6,508 11,566 1,504 51,631 Impairment loss for the year 125 125 Depreciation on Disposals (152) (47) (199)Restatements 12,088 12,088 Revaluations (156,011) (157) (156,168)Balance at 31 March 2007 47,767 47,958 72,719 4,073 27 0 172,544

Net Book ValueBalance at 31 March 2006 1,658,635 41,310 293,307 170,869 0 10,788 2,174,909 Balance at 31 March 2007 2,704,873 50,582 336,772 159,733 0 21,046 3,273,006

Properties used in service delivery include:

400 Primary Schools (excluding 7 Foundation Schools)15 Nursery Schools60 Secondary Schools (excluding 16 Foundation Schools)

6 Middle Schools 25 Special Schools

9 Education Support Centres32 Adult Care Services Day Centres67 Adult Care Services Residential Units

7 Adult Care Services Team Offices30 Fire Stations49 Libraries and Archive and Local Studies Centres

The County Council is also responsible for the following infrastructure 347 miles Principal Roads

2,723 miles Other Roads

57


27. Tangible Fixed Assets (continued)

Fixed Asset Valuation

Land and Buildings

As at 1 April 2006 in accordance with instructions received from Hertfordshire County Council, Lambert Smith Hampton, the Council’s external valuers, provided as part of its rolling programme of asset revaluations, valuations for specialised assets across all the ten districts of Hertfordshire.

These assets, primarily schools, have been valued on the depreciated replacement cost basis as there is no available market for assets of this type. Properties have been valued in accordance with the Royal Institution of Chartered Surveyors’ Valuation and Appraisal Standards. However, whilst these Standards require that inspections ordinarily take place as part of the valuation exercise, in accordance with the instructions provided by Hertfordshire County Council, Lambert Smith Hampton have not routinely inspected the specialised assets.

In general the values that have been produced for the specialised assets reflect increases in value from the levels produced when the same assets were last valued in 2001. Whilst the increases are in small part attributable to a rise in building costs which has occurred between the two valuation dates, it is mainly due to the sharp rise in residential land values which has occurred over the same period. The net effect of this revaluation is to increase the net book value of land and building assets by £1,095.450 million with this unrealised gain being credited to the Fixed Asset Restatement Account. Other revaluations, primarily the estimated value of land and building capital expenditure that has not increased the carrying value of fixed assets, amounted to an unrealised loss, charged to the Fixed Asset Restatement Account, of £59.513 million

Infrastructure Assets A restatement adjustment of £12.088 million has been made in these accountsincreasing both gross book value and accumulated depreciation relating toinfrastructure assets. There is a net nil effect on the balance sheet carrying valueof these assets. This adjustment has been made in order to correct thepresentation of backlog depreciation provided in 2001-02.

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28. Summary of capital expenditure and sources of finance

Capital expenditure for the year, including that incurred on intangible assets and deferred charges, amounted to £154.410 million and is analysed on a County Council service basis below.

Service Total£000

Adult Care Services 5,737Children Schools and Families 68,963Corporate Services 21,052Environment 55,970Fire 1,104Libraries, Heritage and Archives 1,584Total 154,410

The effect of the above expenditure on the Council’s capital financing requirement together with sources of finance is shown below.

2006-07£000

Opening Capital Financing Requirement 347,675

Capital InvestmentIntangible assets 1,194 Operational assets 70,371 Non-operational assets (including assets under construction) 68,570 Deferred Charges 14,275

154,410 Sources of FinanceCapital receipts (28,742)Grants and contributions (46,053)Revenue provision (including MRP and VRP) (34,183)

Closing Capital Financing Requirement 393,107

Explanation of movements in the year

Increase in underlying need to borrow 63,328

Minimum Revenue Provision (13,740)

Voluntary Revenue Provision (4,156)

Increase in Capital Financing Requirement 45,432

59


28. Summary of capital expenditure and sources of finance (continued)

Material capital projects and their associated gross capital expenditure in the year include:

Service Project £000

Adult Care Services Marsh Lane Day Centre Replacement 1,107E Government in ACS 807Hornbeams Day Centre 778Balmoral Day Centre 664

Children Schools and Families Turnford - School Expansion 4,516

Howe Dell 3,622St Clement Danes 3,474Birchwood High School Sports Hall 2,856Shephalbury Meadow Federation 1,836Verulam Secondary Sports Hall 1,315St Albans Girls' School Sports Hall 906Key Stage 4 Learning Centre Potters Bar 875IRIS Systems Development 686Birchwood High - Extension, Phase 3 640Breakspeare School Sports Hall 564

Corporate Services The Way We Work Project Network House, Apsley 7,168Robertson House, Stevenage 601

Borehamwood Surplus School SiteHillside Sports Hall 1,177Borehamwood, Lyndhurst Pavilion 577

Land Purchase – New Watford Fire Station 1,059

Environment Baldock By Pass 4,948A412 Uxbridge Road Rickmansworth 717Signal Improvement at Junction 20, M25 622St Albans City Centre Enhancement 617St Albans Road, Watford 553

60


29. Significant commitments under capital contracts

The value of material commitments for capital contracts as at 31 March 2007 is estimated at £20.932 million. The more significant items included in this amount are shown below.

£000Schemes under constructionHowe Dell School 7,519Marsh Lane Day Centre Replacement 2,910Shephalbury Meadow Federation 1,185Turnford Secondary School 985Three Cherry Trees Gypsy Site 839

Schemes with Letter of Intent or Contract LetBirchwood High School – New Block Phase 3 3,928

2006 2007£000 £000

30. Long Term Investments

Deposits with approved financial institutions 6,000 20,000

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2006 2007£000 £000

31. Long Term Debtors

Housing Adaptations 1,140 1,471Advance Contractual Payments 1,000 1,375Keyworker Housing Advances 460 350Housing Advances and Mortgages 89 79Car Loans 77 58

2,766 3,33332. Deferred Premiums

Premium on debt restructuringBalance as at 1 April 5,083 4,854 Written off to income and expenditure account (229) (229)

4,854 4,625

This balance represents the premiums paid and discounts received on the repurchase of borrowing not yet written off to the income and expenditure account.

33. Stocks and Work in Progress

Trading Services 2,898 2,495Education 243 146Fire Service 103 99Cultural, Environmental and Planning Services 49 41Social Services 14 10

3,307 2,791

34. Landfill Usage Allowances

Biodegradable Municipal Waste Allowances 5,868 6,158

Landfill allowances issued by the Department for the Environment, Food and Rural Affairs valued at the lower of notional cost and the weighted average price at which landfill allowances have been traded during 2006-07. These allowances will be used to meet the 2006-07 landfill liability with any excess allowances either being carried forward to meet future landfill liabilities or traded with other waste disposal authorities.

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2006 2007£000 £000

35. Debtors

Other 65,039 70,277 Payments in Advance 5,142 6,227 H.M.R.C. - Value Added Tax 0 3,191 Grants recoverable 3,097 628 Recoverable Fire Damage 166 385

73,444 80,708 Less Provision for Doubtful Debts (3,592) (3,388)

69,852 77,320

36. Short Term Investments

Deposits with approved financial institutions 259,750 218,142

The County Council holds the following investments in companies. The accounting treatment in respect of the following investments is explained in the accounting policy applicable to group accounts. Copies of the accounts for these companies can be obtained from the County Secretary, Hertfordshire County Council, County Hall, Hertford SG13 8DQ (Contact telephone: 01992 555535).

Investments in Companies

Name Nature of Business OwnedNominal

Value% £

Exemplas Holdings Ltd

Business advice and support services 33 33

Hertfordshire Careers Services Ltd

Provision of careers guidance, information and employment services

Not applicable

A company limited by guarantee

Hertfordshire Building Preservation Trust

To preserve buildings of special historic or architectural interest

Not applicable


The Hertfordshire Groundwork Trust Limited

A registered charity which carries out environmental improvement in Hertfordshire

Not applicable


63


2006 2007£000 £000

37. Short Term Borrowing

Public Works Loan Board 50 57 Unredeemed Stock 58 58

108 115

38. Creditors

Sundry Creditors and Receipts in Advance 151,739 160,105Contractor Deposits 33,146 36,760Grants received in advance 24,790 33,710

209,675 230,575

Contractor deposits represent funds received to finance both revenue and capital projects undertaken by the County Council. Latest forecasts estimate that £27.841 million will be applied to projects more than one year after the balance sheet date.

39. Related Parties

Hertfordshire Police AuthorityAccrued Interest on managed cash balances 78 583

40. Bank Overdraft

The overdrawn position reflects both unpresented cheques drawn before the end of the financial year and a central Schools Treasury Management account position that has not been offset against positive balances within the schools pooled banking account arrangements which are shown within cash and bank balances on the balance sheet. The bank position is managed on a daily basis as part of the Treasury Management function.

41. Long Term Borrowing

Public Works Loan Board repayable: One to two years 46 45 Two to five years 74 30 Five to ten years 724 0 After ten years 227,979 213,647Other repayable: After ten years 116,400 131,500

345,223 345,222

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42. Provisions

The following provisions have been set aside in the 2006-07 accounts to meet future expenditure where liabilities are known or expected.

Insurance - to meet known claims for which it is anticipated the Council may be liable.

Landfill Usage - the estimated liability of biodegradable municipal waste landfilled calculated at the weighted average price at which landfill allowances have been traded during 2006-07.

Mental Health Act 1983 (Section 117) – to meet the reimbursement to Social Services clients of costs associated with aftercare services.

New Roads & Street Works Act 1991 - income received from public utilities under Section 74 of the Act that must be spent on specific transport related activities.

County Council Elections – used to meet the cost of elections to be held in May 2009.

Learning Disability – to meet extra care costs for learning disability clients.

Home Care – payments to staff in respect of annual leave, sickness, gratuities and non contractual overtime due to changes in service conditions.

2006Increase/

(Decrease) 2007£000 £000 £000

Insurance 9,509 (254) 9,255Landfill Usage 4,521 (435) 4,086Mental Health Act 1983 737 315 1,052New Roads & Street Works Act 1991 425 34 459County Council Elections 0 295 295Learning Disability 0 82 82Home Care 124 (103) 21Legal Charges 400 (400) 0

15,716 (466) 15,250

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2006 2007£000 £000

43. Deferred Grants and Contributions

Balance as at 1 April 76,978 100,600 Income Receivable 64,354 46,053 Revaluations, Restatements and Disposals (31,643) (26,813)Deferred Charges (5,896) (2,551)Depreciation of Grants and Contributions (3,193) (4,267)

100,600 113,022

44. Deferred Credits

University of Hertfordshire re transferred debt 3,057 0Keyworker Housing Advances 460 350 Future repayments due on Mortgages and Advances 100 90

3,617 440

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45. Liability related to defined benefit pension schemes

Details of the County Council’s participation in the Local Government Pension Scheme and the Fire-fighters Pension Schemes in providing civilian and uniformed officers with retirement benefits are disclosed in the accounting policy relating to pensions.

Hymans Robertson, an independent firm of actuaries, has valued the County Council Fund asset share and liabilities for both the County Council Fund and Fire-fighters Pension Schemes.

The underlying assets and liabilities for retirement benefits attributable to the County Council as at 31 March together with the movement from the previous year are shown below.

Local Government Pension Scheme

Fire-fighters Pension Scheme Total

2005-06 2006-07 2005-06 2006-07 2005-06 2006-07£000 £000 £000 £000 £000 £000

Estimated liabilities in scheme 1,312,799 1,328,218 249,400 247,200 1,562,199 1,575,418 Estimated assets in scheme 892,304 975,930 0 0 892,304 975,930 Net (asset)/liability 420,495 352,288 249,400 247,200 669,895 599,488

Liability at 1 April 424,295 420,495 212,500 249,400 636,795 669,895 Current service cost 33,732 45,840 7,200 8,600 40,932 54,440 Employer contributions (35,093) (39,286) (4,937) (3,489) (40,030) (42,775)Top-up grant (1,292) (1,292)Contribution in respect of unfunded benefits (3,425) (3,611) (3,425) (3,611)Transfers in from other authorities 267 267 0 Transfers out to other authorities (815) (815) 0 Past service cost 302 534 300 302 834 Impact of settlements and curtailments 484 962 484 962 Interest cost 59,616 64,892 11,500 12,300 71,116 77,192 Expected return on assets in the scheme (49,201) (61,211) (49,201) (61,211)Difference between the expected and actual return on assets (128,832) (1,959) (128,832) (1,959)Experience gains and losses arising on scheme liabilities (21,323) (1,593) (1,415) (2,219) (22,738) (3,812)Changes in financial assumptions underlying the present value of scheme liabilities 139,940 (72,775) 25,100 (16,400) 165,040 (89,175)Liability at 31 March 420,495 352,288 249,400 247,200 669,895 599,488

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45. Liability related to defined benefit pension schemes (continued)

The liabilities show the underlying commitments that the County Council has in the long-term to pay retirement benefits. The total liability as at 31 March 2007 of £599.488 million has a substantial impact on the net worth of the County Council as recorded on the balance sheet. However, statutory arrangements for funding the deficit mean:-

the deficit on the Local Government Pension Scheme will be made good by increased contributions over the remaining working life of employees, as assessed by the scheme actuary, and

in the case of Fire-fighters pensions the underlying principle is that employer and employee contributions together will meet the full costs of pension liabilities being accrued in respect of currently serving employees while central Government will meet the costs of retirement pensions in payment, net of employee and the new employer contributions.

Liabilities have been valued on an actuarial basis using the projected unit method that assesses the future liabilities of the fund dependent on assumptions about mortality rates, salary levels and other items discounted to their present value.

In order to assess the value of the Hertfordshire County Council Pension Fund’s liabilities the actuary has rolled forward the value of the employer’s liabilities calculated as at the latest formal funding valuation of 31 March 2004, revised in November 2005 following a data cleaning exercise, allowing for the different financial assumptions required under FRS 17. The actuary reviewed the allowance for life expectancy and also investigated the effect of pension fund members being able to exchange part of their pension for additional tax-free cash amounts at retirement. As a result, the following changes to the demographic assumptions compared to those adopted for the 2004 funding valuation have been adopted:-

life expectancy for non-pensioners is based on the PMA/PFA92 table, projected to calendar year 2017; and

allowance has been made for 25% of future retirements to elect additional tax-free cash amounts up to HMRC limits.

These changes have been reflected in the 2006-07 disclosures within the changes in financial assumptions underlying the present value of scheme liabilities amounting to a net increase, as shown below, in the liability as at 31 March 2007 of £19.446 million.

£000Life Expectancy 34,584 Commutation (15,138)Increase in liability 19,446

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The actuary, in assessing the value of the employer liabilities in respect of the Fire-fighters Schemes, has rolled forward the value of the liabilities reported in the latest full actuarial valuation of employer liabilities as at 31 December 2004, allowing for actual pay and pension increases on an aggregate basis. The actuary has also allowed for the effect of benefits paid from the Fire-fighters Schemes.

The main assumptions used in the calculations for both the Local Government and Fire-fighters Pension Schemes are:

31 March 2006 31 March 2007

% per annum

Real % per annum

% per annum

Real % per annum

rate of inflation 3.1 3.2

rate of increase in salaries 4.6 1.5 4.7 1.5

rate of increase in pensions 3.1 3.2

rate for discounting scheme liabilities 4.9 1.7 5.4 2.1

The Fire-fighters Pension Scheme has no assets to cover its liabilities. In calculating the asset share applicable to the County Council Fund, the actuary has rolled forward the employer’s share of the assets allocated as at the latest formal funding valuation as at 31 March 2004, allowing for investment returns (estimated where necessary), the effect of contributions paid into, and estimated benefits paid from, the Fund by the employer and its employees. Assets in the Local Government Pension Fund are valued at fair value, principally market value for investments, and consist of the following categories, by proportion of the total assets held by the Fund:

31 March 2006 31 March 2007

£000

Expected Return

%

Asset Distribution

% £000

Expected Return

%

Asset Distribution

%Equity investments 679,684 7.4 76.2 744,585 7.8 76.3Bonds 115,067 4.6 12.9 111,561 4.9 11.4Property 50,121 5.5 5.6 57,147 5.8 5.9Cash 47,432 4.6 5.3 62,637 4.9 6.4 Total 892,304 6.8 100.0 975,930 7.2 100.0

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Actuarial Gains and Losses

The actuarial gains and losses identified as movements on the Pensions Reserve in 2006-07 can be analysed into the following categories, measured as absolute amounts and as a percentage of assets or liabilities at 31 March 2007:

Local Government Pension Scheme2002-03 2003-04 2004-05 2005-06 2006-07

£000 % £000 % £000 % £000 % £000 %Difference between the expected and actual return on assets in the scheme as a percentage of scheme assets (141,208) (29.5) 67,337 11.1 20,040 2.9 128,832 14.4 1,959 0.2

Experience gains and losses arising on scheme liabilities as a percentage of scheme liabilities (57,200) (7.4) 412 0.0 (29,995) (2.7) 21,323 1.6 1,593 0.1

Effect of changes in the demographic and financial assumptions underlying the present value of scheme liabilities as a percentage of scheme liabilities 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0

Changes in financial assumptions underlying the present value of scheme liabilities 0 0.0 0 0.0 (167,659) (15.1) (139,940) (10.7) 72,775 5.5

Total (198,408) 67,749 (177,614) 10,215 76,327

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Actuarial Gains and Losses (continued)

Fire-fighters Pension Scheme2002-03 2003-04 2004-05 2005-06 2006-07

£000 % £000 % £000 % £000 % £000 %Difference between the expected and actual return on assets in the scheme as a percentage of scheme assets 0 0.0 0 0.0 0 0.0 0

0.0 0

0.0

Experience gains and losses arising on scheme liabilities as a percentage of scheme liabilities (67) (0.0) (735) (0.5) (17,763) (8.4) 1,415

0.6 2,219 0.9

Effect of changes in the demographic and financial assumptions underlying the present value of scheme liabilities as a percentage of scheme liabilities 0 0.0 0 0.0 0 0.0 0

0.0 0

0.0

Changes in financial assumptions underlying the present value of scheme liabilities 0 0.0 0 0.0 (31,798) (14.9) (25,100) (10.1) 16,400 6.6

Total (67) (735) (49,561) (23,685) 18,619

Total Actuarial Gains/(Losses) (198,475) 67,014 (227,175) (13,470) 94,946

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46. Defined Contribution Scheme – Teachers’ Pension Scheme

The scheme is a defined benefit scheme, administered by the Teacher’s Pension Agency (TPA). Although the scheme is unfunded, the TPA uses a notional fund as a basis for calculating the employers’ contribution rate paid by local education authorities. However, it is not possible for the County Council to identify a share of the underlying liabilities in the scheme attributable to its own employees. For the purposes of this statement of accounts it is therefore accounted for on the same basis as a defined contribution scheme. As at 31 March 2007, £5.763 million, including employee contributions was due to the TPA.

The County Council is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the Teachers’ scheme. These benefits are fully accrued in the pension liability shown in the preceding note. During 2006-07 the cost of these unfunded discretionary awards amounted to £3.611 million (2005-06 - £3.425 million).

47. Capital Financing Account

2006 2007£000 £000

Balance as at 1 April 101,241 105,591

Capital financing capital receipts 19,055 28,742 revenue contributions 21,748 16,287 financing deferred charges 0 (6,518)

Minimum revenue provision 12,509 13,740 Depreciation and impairment of fixed assets (44,698) (52,278)Amounts treated as revenue expenditure in accordance with the SORP but which are classified as capital expenditure by statute (7,457) (5,207)

Voluntary Revenue Provision 0 4,156

Amortisation of deferred grants and contributions 3,193 4,267 105,591 108,780

The capital financing account contains the amounts which are required by statute to be set aside from capital receipts for the repayment of external loans and the amount of capital expenditure financed from revenue and capital receipts. It also contains the reversal of amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the Movement on the General Fund Balance for the year.

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2006 2007£000 £000

48. Fixed Asset Restatement Account

Balance as at 1 April 1,576,189 1,624,533

Net book value of assets disposed (24,630) (25,025)

Revaluations and restatements Fixed Assets 41,331 1,035,937 Deferred grants and contributions 31,643 26,813

1,624,533 2,662,258

The capital accounting conventions for local authorities require the establishment of a fixed asset restatement account. The balance represents the difference between the valuation of assets under the previous system of capital accounting, subsequent revaluations and the net book value of assets disposed of.

49. Pensions Reserve

Adoption of FRS17 Retirement Benefits requires the establishment of a pension reserve. It enables the authority to show the pension fund liability on the face of the balance sheet whilst also ensuring a neutral effect on local taxation. The deficit reflected by this reserve is not an immediate claim on the County Council’s balances or reserves.

Balance as at 1 April (636,795) (669,895)

Actuarial Gains and LossesDifference between the expected and actual return on assets 128,832 1,959 Experience gains and losses arising on scheme liabilities 22,738 3,812 Changes in financial assumptions underlying the present value of scheme liabilities (165,040) 89,175

General Fund Balance Appropriation (19,630) (24,539) (669,895) (599,488)

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2006 2007£000 £000

50. Usable Capital Receipts Reserve

Balance as at 1 April 2,231 8,803 Capital receipts received 25,627 27,432 Capital receipts used for financing (19,055) (28,742)

8,803 7,493

The usable capital receipts reserve represents the capital receipts available toeither repay external debt or finance capital expenditure.

51. Specific Reserves

The following reserves are either designated as “earmarked funds” within the total County Council Funds or established under specific legislation.

School Balances - reserves carried forward from schools delegated underspendings.

Strategic Area Partnership - to finance the provision of new learning opportunities to deliver the learner entitlement for 14 to 19 year olds.

Community Focused Extended School Activities - balances carried forward by schools relating to community focused activities.

Highways Maintenance - a reserve established to ensure funding is available to support additional investment in highways maintenance.

Self Insurance - a reserve to cover for uninsured liabilities in respect of employers liability, third party insurance and potential costs incurred as a result of storm damage.

Capital Payback - contributions from services in respect of approved capital programme projects in order to finance future capital expenditure.

Schools Budget Central Expenditure - the underspend against the 2006-07 central expenditure budgets within the Schools Budget. This will be used to finance the authority's Schools Budget in future years, in line with the requirements of the Dedicated Schools Grant.

Quantum Care Rent Abatement - represents the estimated rents received from Quantum Care to be used to support the cost of the abatement that will be allowed against future rents.

Landfill Allowances Trading Scheme – a surplus due to usage of biodegradable municipal waste (BMW) allowances below the Council’s cap. This reserve can

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either be used to meet future BMW liabilities or traded with other waste disposal authorities.


51. Specific Reserves (continued)

NNDR Revaluation Reserve – to manage fluctuations associated with rateable values of the County Council’s properties.

Children Schools and Families Trading Services Reserves - surpluses within the education trading units of the Children, Schools & Families service.

Capital Reserve – a reserve, previously disclosed within the general fund balance, which is available to finance capital expenditure.

Statutory Planning Authority Inquiries – to meet costs associated with attending public meetings as the statutory planning authority.

Fire Service Pay Awards – a reserve to cover potential back dated liabilities arising from the Fire Service national pay settlement.

SHARP Reserve – a reserve to cover a range of potential one-off investments to support the delivery of improved business processes.

Fire Service Pensions - a reserve to cover potential costs that may arise as a result of retirement dates occurring earlier than previously anticipated.

Hadham Towers Restoration - to provide for essential restoration work to return the Hadham Towers Waste Disposal site to its original use as agricultural land when the tip is full.

Hermis Development - to meet future expenditure incurred in the development of the Hermis software.

Hertfordshire Business Services (HBS) Repairs and Renewals – a reserve to cover the replacement and maintenance of equipment and the refurbishment of buildings.

Energy and Water Conservation – to be applied to investment in energy and water saving measures.

Leasehold Dilapidations – a reserve to meet any potential costs relating to repairs and maintenance occurring at leasehold premises under “The Way We Work” project.

Childcare Litigation Reserves - reserves relating to the Childcare Litigation Unit.

Local Standards Verification – a reserve to cover the costs associated with the testing of Trading Standards Instruments.

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51. Specific Reserves (continued)

Balance2006£000

Increase/(Decrease)

£000

Balance2007£000

School Revenue ReservesSchool Balances 43,971 (3,426) 40,545Strategic Area Partnership 0 1,712 1,712Community Focused Extended School Activities 0 125 125Total School Revenue Reserves 43,971 (1,589) 42,382Highways Maintenance 0 10,000 10,000Self Insurance 5,604 1,176 6,780Capital Payback 4,371 1,280 5,651Schools Budget Central Expenditure 0 2,600 2,600Quantum Care Rent Abatement 2,147 115 2,262Landfill Allowances Trading Scheme 1,346 726 2,072NNDR Revaluation Reserve 1,421 412 1,833Children Schools and Families Trading Services Reserves 1,028 338 1,366Capital Reserve 0 974 974Statutory Planning Authority Inquiries 563 128 691Fire Service Pay Awards 0 630 630SHARP Reserve 0 500 500Fire Service Pensions 489 0 489 Hadham Towers Restoration 496 (38) 458Hermis Development 136 274 410HBS Repairs and Renewals 109 64 173Energy and Water Conservation 150 0 150 Leasehold Dilapidations 0 127 127Childcare Litigation Reserves 124 (13) 111Local Standards Verification 0 30 30Underspends Carried Forward 2,117 (2,117) 0Fire Cover Review 41 (41) 0Education School Building Reserve 36 (36) 0Central Services Repairs & Renewals 31 (31) 0

64,180 15,509 79,689

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52. General Fund Balance

General Fund Balances are an available resource to finance future revenue and capital expenditure.

Balance2006

Increase/ (Decrease)

Balance2007

£000 £000 £000

Revenue Reserve 31,925 (7,268) 24,657Capital Reserve 973 (973) 0

32,898 (8,241) 24,657

53. Movements on Reserves

This note shows the movements on the Council’s reserves. The note distinguishes between movements resulting from the gains and losses for the year and movements resulting from transfers between reserves, most of which the Council is required to make in accordance with statute or non-statutory proper practice.

Balance Brought Forward

Gains / (Losses) For The

Year

Transfers Between Reserves

Balance Carried Forward

£000 £000 £000 £000ReservesCapital Financing Account 105,591 (6,518) 9,707 108,780 Fixed Asset Restatement Account 1,624,533 1,062,750 (25,025) 2,662,258 Pension Reserve (669,895) 94,946 (24,539) (599,488)Usable Capital Receipts Reserve 8,803 (1,310) 7,493 Specific Reserves 64,180 15,509 79,689 General Fund Balance 32,898 (33,899) 25,658 24,657 Total Reserves 1,166,110 1,117,279 0 2,283,389

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54. Contingent Liabilities

At 31 March 2007 the County Council was aware of the following potential liabilities it may face in the future. These items have not been reflected in the accounts as there is no certainty that an actual liability may arise, or because there is uncertainty as to the amount of liability or when it will arise.

Contingent liabilities identified are:

Municipal Mutual Insurance

In common with many other local authorities, the County Council insured with the Municipal Mutual Insurance (MMI) Company until 31 March 1993 and continues to be dependent on its continued solvency for the payment of a significant number of claims. The latest Scheme of Arrangement issued by MMI as at 30 September 2006 indicates that the amount liable to clawback from the County Council, should the Company not remain solvent is estimated at a maximum amount of £4.254 million.

55. Foundation Schools

The School Standards and Framework Act 1998 changed the status of Grant Maintained schools to Foundation schools maintained by the local education authority. The change for funding purposes took effect from 1 April 1999. Fixed assets and long term liabilities remain vested in the Governing Bodies of individual Foundation schools and therefore values and amounts have not been consolidated in this balance sheet. In this authority area there are 23 Foundation schools.

56. The Euro

The County Council introduced new financial systems in April 2004 that are fully Euro compliant. To date the County Council has incurred no direct costs relating to the introduction of the Euro and no provisions have been established at this stage for possible future costs as uncertainty continues over the entry of the United Kingdom into the European Monetary Union.

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57. Trust Funds

The County Council acts as Treasurer and Financial Adviser primarily to a number of educational prize funds, endowments, scholarships and bequests that generally have specific trustees to manage them. Capital is invested in accordance with the trustee’s instructions in a range of external investments or, if held as cash by the County Council, such balances will earn interest at the market seven-day rate. These funds do not represent assets of the Council and have not been included in the balance sheet. As at 31 March 2007 the total value of educational endowments is £441,543 (31 March 2006 - £536,490).

58. Reconciliation of the net surplus or deficit on the Income and Expenditure Account to the revenue activities net cash flow shown in the Cash Flow Statement

2006 2007£000 £000

Income and Expenditure Account surplus / (deficit) (36,259) (33,899)Servicing of finance 4,503 3,799 Third party debt repayment (429) (3,057)(Gain)/loss on disposal of fixed assets (997) (2,407)Capital accounting 48,962 53,218 FRS17 Retirement Benefits 19,630 24,539 Decrease in deferred premiums 229 228 Decrease / (Increase) in stocks 565 516 Landfill Allowances Trading Scheme (1,346) (291)Decrease / (Increase) in revenue debtors 24,185 (2,655)Increase in revenue creditors & deferred credits 8,237 10,707 Increase / (decrease) in provisions 646 (466)Net Cashflow from revenue activities 67,926 50,232

59. Reconciliation of the movement in cash as shown in the Cash Flow Statement to the movement in net debt

Increase/(decrease) in cash in the period 9,984 (1,679)Cash inflow from increase in external borrowing (112,250) (6)Cash outflow/(inflow) from increase/(decrease) in liquid resources 101,415 (41,608)Cash outflow from increase in long term investments 6,000 14,000 Change in net debt 5,149 (29,293)Net debt at 31 March 2005/2006 (104,504) (99,355)Net debt at 31 March 2006/2007 (99,355) (128,648)

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60. Reconciliation of the items shown within the financing of and management of liquid resources section of the Cash Flow Statement (analysis of net debt)

As at 31 March 2006

Cash flows

Other Changes

As at 31 March 2007

£000 £000 £000 £000

Cash in hand and at bank 68,227 7,672 75,899 Bank overdraft (88,001) (9,351) (97,352)

(1,679)

Debt due within 1 year (108) 39 (46) (115)Debt due after 1 year (345,223) (45) 46 (345,222)

(6)

Current asset investments 259,750 (41,608) 218,142

Long Term investments 6,000 14,000 20,000

Net Debt (99,355) (29,293) 0 (128,648)

61. Definition of Liquid Resources in the Cash Flow Statement

Liquid resources have been defined as short term (less than one year) investments, with approved financial institutions, that are disclosed on the face of the balance sheet.

62. Analysis of Cash Flow Statement Revenue Grants

2006 2007County Council Service £000 £000Children Schools and Families 164,081 732,713Adult Care Services 58,090 54,055Environment 3,041 4,090Other Services 813 6,613

226,025 797,471

63. Authorisation of the Statement of Accounts

The Statement of Accounts was authorised for issue on September 2007 by Mr. C.J.Sweeney, Finance Director for Hertfordshire County Council.

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STATEMENT OF INTERNAL CONTROL

1. Scope of responsibility

1.1 Hertfordshire County Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded, properly accounted for, and used economically, efficiently and effectively. The Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

1.2 In discharging this overall responsibility, the Council is also responsible for ensuring that there is a sound system of internal control which facilitates the effective exercise of the Council’s functions and which includes arrangements for the management of risk.

2. The purpose of the system of internal control

2.1 The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. A key part of the system of internal control is an ongoing process designed to identify and prioritise the risks to the achievement of the Council’s policies, aims and objectives. Through this process, the Council evaluates the likelihood of those risks being realised and the impact should they be realised, and manages them efficiently, effectively and economically.

2.2 The system of internal control has been in place at Hertfordshire County Council for the year ended 31 March 2007 and up to the date of this statement.

3. The internal control environment

3.1 The key elements of the internal control environment within Hertfordshire County Council are:

Objectives

3.2 The Cabinet approves, and the full Council adopts, the policy framework for the Authority. The authority agreed and published the Corporate Plan for 2006-09 in June 2006.

3.3 Our ambition is “to make Hertfordshire an even better place to live and work”. Everything we do should contribute to achieving this ambition. However, we have identified seven specific things which residents opinions, national priorities or the need to improve opinions, national priorities or the need to improve our own performance mean that we need to focus on; these are our Challenges:

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Helping people feel safe and secure Maximising opportunities for all children and young people, particularly by:

a. improving vocational education and training; b. making sure that safeguarding children is everyone’s business

Supporting the independence of the growing number of older people Tackling the causes and impact of congestion Dealing with worn out roads and pavements Reducing the impact of new development on the environment Maximising efficiency savings.

3.4 Some key outcomes and robust targets are set out within the Local Area Agreement 2006-09. The Council was instrumental in driving this forward and securing agreement of partners and stakeholders to over 200 targets (including 32 stretch targets) that will potentially attract £30m of reward funding back into partnership working in the County.

3.5 In January 2007 the local authorities in Hertfordshire submitted an application to become a pathfinder area for enhanced two-tier working, in response to the Invitation to Councils published with Strong and Prosperous Communities – The Local Government White Paper on October 26, 2006.

3.6 In essence, our bid is about:

Customer focused services Sustainable service provision Effective and efficient local government.

3.7 To shape the contents of Hertfordshire’s Pathfinder bid, evidence from research projects on public opinion were an important source of ideas. That evidence has clearly suggested that the most important issues for Hertfordshire’s citizens, and therefore imperative for improving public satisfaction with local authorities, are the issues of quality of service delivery, avoiding duplication, streamlining back office tasks, efficiency and value for money.

Policy and decision making

3.8 The Council has a Constitution, which sets out, in full, the processes by which its policies are made and its decisions taken; the Constitution was adopted by the full Council at their May 2005 meeting. Amendments to the Scrutiny and Audit arrangements were approved at the June 2006 full Council meeting and the Code of Practice for Planning Procedures was adopted and included in the Constitution as Annex 21 following the Council meeting in November 2006. In summary, it aims to:

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enable the Council to provide clear leadership to the community in partnership with the public, businesses and other organisations

support the active involvement of members of the public in decision-making

help Councillors represent their constituents enable decisions to be taken efficiently and effectively enable decision-makers to be held to account ensure that decision-makers are identifiable and that reasons

are given for decisions.

3.9 The full Council is responsible for the adoption of the budget and policy framework. It is the responsibility of the Executive to implement it. There is an extensive scheme of delegation to officers, who are bound by Council policy, budget limits, and the requirements of the law in taking decisions.

Compliance

3.10 The Constitution sets out how members and officers work to ensure compliance with established policies, procedures, laws and regulations. In conformity with the CIPFA / SOLACE framework for Corporate Governance (2001), a Risk Management Policy was agreed by the Safety, Emergency and Risk Management (SERM) Board and adopted by members and management. The Council’s definition of risk, for this process is, “the chance of something happening that will impact upon the organisation's objectives”.

3.11 The Key Risk process, which is overseen by the Finance Board, includes consultation with Executive members and an annual report to Cabinet. The Finance Board and its members (the Finance Director, the Assistant Directors of Resources for Adult Care, Children Schools & Families and Environment, the Assistant Finance Director (Corporate Services), the Head of Financial Management (HBS) and the Chief Internal Auditor) have responsibility for the management of the Key Risk process.

3.12 This role covers:-

a. Developing and updating the process with the support and advice of the Head of Health, Safety and Risk Management

b. Co-ordinating the process of developing the key risk register within each department, ensuring full involvement of departmental management teams and ensuring consultation with executive members

c. Quarterly monitoring and review of the key risk register.

3.13 The Annual Report on the key risk management process was made to the Audit Committee on 4 April 2007. The 2006-07 risk register currently consists of a total of 115 risks (35 Red, 62 Amber and 18 Green). Only the red risks (i.e. those risks requiring immediate management and monitoring) are reported to the Audit Committee; 11 of the red risks were financial, 7 were service based and 4 were staffing risks.

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3.14 In the CPA Use of Resources Auditor judgement 2006 the Audit Commission has identified that “The risk management strategy and risk register are well embedded within Council processes and improvements identified to the Council’s risk management approach continue to be implemented”.

3.15 The Audit Commission have identified a number of “improvement opportunities” which will help the County Council achieve the highest level “Use of Resources assessment; these improvements include continuing to provide risk management training to all relevant staff and to integrate risk management more fully into its corporate business processes such as strategic planning, policy making and review and performance management.

Value for money

3.16 The search for efficiency is an integral part of the council’s annual budget and medium term financial strategy cycle and services are given targets for cost efficiencies early in the process. Savings in particular areas of activity have also been identified as part of the council’s Efficiencies Programme and will continue to be sought.

3.17 We are committed to sustaining high quality services while retaining value for money. By the end of 2006-07 the council expects to deliver cumulative savings that will exceed its Gershon target. Cumulative Gershon savings of £36.2 million are forecast by the end of 2006-07, against a Gershon target of £26.5 million over the period. Of these savings, over 75 per cent are cashable compared to the Gershon target of 50 per cent.

3.18 The County Council’s Resources Cabinet Panel contribute ideas for improving efficiency within the organisation and provide challenge to the authority’s efficiencies programme. They also act as a sounding board for efficiency proposals, help maintain focus and momentum and monitor the achievement of the council’s efficiency targets.

3.19 The Finance Board and Performance and Planning Group undertook a joint review of the key issues within services alongside the budget discussions which included the further development of the ‘Strategic Compass’ corporate planning model. The Compass management tool aims to achieve a transparent alignment between budget and service priorities.

3.20 A key element was the use of available evidence, including relative performance and cost information to develop service profiles. The Council joined the Price Waterhouse Cooper Performance Information counties benchmarking club to provide more timely comparisons to other county’s most recently published results and track relative performance year on year.

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3.21 Officers analysed the strategic compasses as a context for revenue and budget proposals. This enabled officers to assess how best to manage resources to achieve the key outcomes. Councillors then considered this evidence through a similar series of meetings with Chief Officers to determine budgetary decisions based on the challenges and service priorities.

3.22 The Audit Commission Use of Resources judgement was that ‘the Council achieves good value for money with generally above average costs and well performing services, central service costs are low. There continue to be some services where performance is high and costs are comparatively low’.

3.23 The Audit Commission acknowledge that the Council is building more effective corporate and departmental monitoring of value for money, with increasing use of unit cost information and better analysis of comparative data to inform performance management.

3.24 The Council is improving its approach to developing and monitoring its efficiencies plan as part of its Medium Term Financial Strategy. This year it has supplemented monitoring by Cabinet with the introduction of quarterly monitoring by the cross party Resources Panel from September 2006.

3.25 The SAP system was accompanied by considerable changes in procurement, accounting and HR processes. There was major commitment from the dedicated SHARP team and from many other staff, and the project continues to be managed in a highly professional and effective way. Business Process Review a key element in the Team’s current work.

Financial Management

3.26 The Comprehensive Performance Assessment included a compulsory ‘Use of Resources’ assessment during 2006 which replaced the optional self-assessment in 2005. The Use of Resources score is derived from the assessments made by the auditor in the following areas.

Financial reporting (including the preparation of the accounts of the Council and the way these are presented to the public).

Financial management (including how the financial management is integrated with strategy to support council priorities).

Financial Standing (including the strength of the Council's financial position). Internal Control (including how effectively the Council maintains proper

stewardship and control of its finances). Value for money (including an assessment of how well the Council balances

the costs and quality of its services).

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3.27 HCC achieved an overall score of three out of four for the use of resources, showing improvement in 4 key lines of enquiry and a reduced score in 1, the latter because not all working papers were clearly referenced or provided within the agreed timescales and in particular the lack of analytical review information resulting in increased audit testing. This issue has been raised in the Audit Commission’s Annual Governance Report, and the Council are working to ensure that the requirements are met in future years..

3.28 Progress has been made on the areas to be improved upon, as identified by the IPF Consultants who conducted a review of HCC’s Financial Management using the CIPFA Financial Management Model “Improving financial management and effectiveness in the public service”. Training sessions have been held to develop financial management competencies particularly for non-finance staff. The BPR and Finance Transformation project will help address the other issues raised.

3.29 The Administration’s 2007-08 Revenue and Capital budget planning framework and corporate planning process set out the work required from services to submit both revenue and capital budget information, and to do this alongside the development of their strategic compass. Services identify and collect evidence of all Gershon savings and key actions taken for each service area, together with quality cross checks to demonstrate maintenance of service quality, review the pressures for change and identify uncertainties which impact on years two to four of the Medium Term Financial Forecast in preparation for officer and member budget review meetings.

3.30 Financial Regulations set out the rules for the control and management of the council’s finances and assets. They were revised and updated in May 2005. Throughout 2006-07 monthly financial management reports were produced and published on Connect, the Council’s intranet. The Quarterly Monitor to Cabinet, and the associated controls which operated throughout 2006-07, were sound. The Audit Committee included an exception report derived from the budget monitor report, which identifies systemic issues giving rise to significant financial issues and budget variances, as a standing item on their quarterly cycle.

3.31 The tighter deadlines for the closure of the 2006-07 accounts have been addressed, and weekly updates are sent to Finance Managers setting out key tasks and deadlines. Guidance is published on Connect to ensure all services have access to up to date regulations.

3.32 Internal Audit undertook a review of the overall financial management controls for each Department. There were systemic control weaknesses in two budget areas of Children Schools and Families Department; these issues were promptly addressed and action reported to the Audit Committee. Departments’ controls were sound in all other key respects, and improvements had been made to the control environment largely due to improvements in financial reporting from SAP. The key actions recommended relate to the need to update financial procedures on Connect.

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3.33 Demand-led volatile budgets continue to be of concern, particularly where the Council has a statutory duty to provide a service. The quarterly budget monitor report to members includes a particular focus on such areas of uncertainty and necessary management action.

Performance Management

3.34 Adequate performance management arrangements existed:

Key performance indicators (PI’s) are established and monitored by officers and members through both the Challenges monitor and ‘balanced scorecards’

Comparative performance data is used as part of the strategic compass reviews, for target setting purposes, and to support decisions that drive improvements

The authority continuously improves its performance management and the technology by which it makes the data available to members, officers and the public. The “balanced scorecard” is used as a key management tool.

The large majority of staff in corporate and service departments operated a comprehensive and effective performance and development scheme and a standard PMDS scheme has been launched

The Investors in People standards have been adopted and all departments except Adult Care Services have sought and achieved accreditation.

3.35 Individual and corporate objectives are linked:-

Members set the county council Challenges Each department develops its Strategic Compass and PI’s to monitor

Service Outcomes in the Department Business Plan and Balanced Scorecard

Units then identify how their work supports the Service Outcomes Staff identify, through the linking of the tasks and objectives in their

performance and development plans, how their job helps the department and the county council to achieve its objectives.

3.36 The Audit Commission’s audit of the Council’s arrangements for ensuring data

quality, which fed into the value for money conclusion, concluded that the arrangements were consistently above minimum requirements.

3.37 The Deputy Leader has taken responsibility for a new Executive Portfolio of Performance and Resources, and a new Performance Cabinet Panel has been established to sharpen our focus on performance issues.

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3.38 Scrutiny of decisions by members is rigorous, challenging and has driven service improvement. Scrutiny of the St. Albans City Centre Safety Scheme recommended a number of changes including an improved risk management system for high risk road schemes. The work of the members’ Children’s Act Topic Group in identifying areas for improvement in children’s social care performance was considered “timely and effective” by Ofsted and CSCI.

3.39 The Spring 2007 edition of Hertfordshire Horizons, which is delivered to all households in Hertfordshire, contained a report of what the county has achieved during the year, and what improvements are planned in the future.

3.40 We have developed a new approach to the improvement plan i.e. having two levels; a high level plan reflecting key strategic improvement activity and a lower level checklist of other recommendations as per the current improvement plan.

3.41 Service Planning Guidance is available on our intranet, Connect, which states that there should be a clear cascading of information and objectives from national and local priorities, through corporate and community plans, service plans and on to team and individual objectives.

3.42 The guidance outlines the different elements of the planning framework within HCC, how they complement each other and how they help to determine the content of the service plans. It serves as a reminder to ensure that priorities identified during different parts of the planning process do not conflict and that all plans are working to achieve complementary outcomes.

3.43 The Audit Commission Direction of Travel Assessment Performance Information Pack to help assess ‘progress in achievement of improvement’ indicates that 61% of the selected performance indicators have improved since the base year with 31% of indicators in the ‘Best’ quartile.

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4. Review of Effectiveness

4.1 Hertfordshire County Council has responsibility for conducting, at least annually, a review of the effectiveness of the system of internal control. The 2006-07 review of the effectiveness of the system of internal control was informed by the work of the internal auditors, who led the review, and by managers within the authority who had responsibility for the development and maintenance of the internal control environment. It was also informed by comments made by the external auditors and other review agencies and inspectorates.

4.2 The Executive, on behalf of the authority, charges the Audit Committee with keeping the effectiveness of the Council’s systems for internal control under review and reporting any recommendations for improvement to the Executive. At their April 2007 meeting the Committee undertook a review of Internal Audit, which concluded that the Council’s system of internal audit complies with relevant professional standards, and specifically with the CIPFA Code of Practice for Internal Audit in Local Government.

4.3 The plans and work of Internal Audit and of the external auditors were regularly reported to the Audit Committee, which scrutinised the auditors’ work, and management’s actions in response to their recommendations.

4.4 The Council has 6 member Scrutiny Committees, covering:

Adult Care and Community Safety Children Schools and Families Environment Health Overview and Scrutiny Resources.

4.5 The County Council has adopted a policy of a general presumption in favour of scrutinising any issue. Each committee establishes its own work programme taking into account the value to be gained from any scrutiny activity.

4.6 The Overview and Scrutiny Committee also has the power to set up all-party Topic Groups to undertake in-depth studies.

4.7 In 2006-07 Scrutiny Committees’ reviews included consideration of:

Value for money, with topic groups scrutinising individual schemes and issues (such as Fire and Rescue Community Safety Plan and Residential Highways ‘dropped kerbs’) and securing appropriate Executive member and officer responses

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http://www.hertsdirect.org/portal/eDemocracy/Overview_Detail/hcc/Committees%20and%20Panels/Scrutiny/accsscrutiny

http://www.hertsdirect.org/portal/eDemocracy/Overview_Detail/hcc/Committees%20and%20Panels/Scrutiny/resourcescrutiny

http://www.hertsdirect.org/portal/eDemocracy/Overview_Detail/hcc/Committees%20and%20Panels/Scrutiny/overviewscrutiny

http://www.hertsdirect.org/portal/eDemocracy/Overview_Detail/hcc/Committees%20and%20Panels/Scrutiny/healthscrutiny

http://www.hertsdirect.org/portal/eDemocracy/Overview_Detail/hcc/Committees%20and%20Panels/Scrutiny/envscrutiny

http://www.hertsdirect.org/portal/eDemocracy/Overview_Detail/hcc/Committees%20and%20Panels/Scrutiny/csfscrutiny


Financial management, with consideration of the budget monitor on the agenda for each meeting of the individual scrutiny committees as well as the Overview and Scrutiny Committee

Performance management, with topic groups exploring issues in greater depth (such as Performance of the Highway Grass Cutting Service, EDF Energy Performance, Support for Families of those with Physical Disabilities and Users of Sensory Services, Safety Cameras, Road Safety & Traffic Calming, enabling members to drill down and give sufficient time to addressing concerns.

4.8 Recommendations from scrutiny committees are monitored by the Overview and Scrutiny Committee, quarterly. As many of the reviews are in-depth studies the recommendations are extensive and they continue to be reviewed often into a second financial year. The actions to implement recommendations are discussed at the Overview and Scrutiny Committee and with the Executive Member and Senior Officer responsible.

4.9 The Annual Performance Assessment of services for children and young people in 2006 identified that, while the Council provided good services overall, children’s social care services were only adequate and needed to improve. This has become a key corporate priority, prominent not only in the Council’s corporate plan, but also in Hertfordshire’s Local Area Agreement and Children and Young People’s Plan. Using its Strategic Compass process, the Council has identified additional resources to support a thorough and detailed programme of improvement activity, which has been put quickly into action.

4.10 The use of the Strategic Compass within the corporate planning and budget setting process has made clear the relationship between costs and priorities in decision making.

4.11 The Audit Commission issued a draft report providing an overall summary of the Audit Commission's assessment of the Council to the April 2007 Audit Committee. The key messages were:-

The Council is improving well and demonstrating a four-star overall performance.

The Council has made improvements in most key services including adult care and children and young people.

4.12 Actions needed by the Council were identified as:-

ensure a consistent level of performance and improvement in key services; continue to improving processes to review value for money in order to move

towards lower cost and high performance for all services; further develop performance management by setting smarter targets to

support delivery against the corporate challenges;

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develop an action plan to address the areas for attention identified in our Supporting People inspection and monitor the implementation of the plan; and

develop an action plan to address the areas for improvement in our use of resources assessment, particularly in relation to the arrangements for the production of the working papers to support the financial statements.

4.13 Internal Audit also provided an independent opinion on the adequacy and effectiveness of the Council’s system of financial control, including in particular:

the key controls operating within and around the core financial systems high level financial management in each Department and corporately arrangements for the letting and monitoring of contracts controls over information management and security.

In the Chief Internal Auditor’s opinion, the above arrangements were adequate and effective in 2006-07, with sound controls in all key areas.

4.14 The Service Chief Officers signed a Service Assurance Assessment, covering the following functions in operation in their service during the year:

service plans preparation and agreement performance against the indicators in the plans performance reporting staff resources and responsibilities value for money partnership arrangements risk management robust processes for service developments consideration of safety and environmental impacts financial probity actions taken in response to external inspectorate reviews information and communication systems.

4.15 We have simplified our complaints system following scrutiny by members and to ensure complaints inform service improvements. Our Adult Care Service proactively seeks feedback through its ‘Have Your Say’ post-paid forms given to users and carers. This has been very effective in encouraging people to express views who might not have done so otherwise: over 2000 forms were returned last year.

4.16 Chief Officers maintain records of complaints, including those referred to the Local Ombudsman, and keep Executive Members and Scrutiny Committee spokesmen informed of complaints related to their services.

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In October 2005 the Resources Scrutiny Committee established a Topic Group to consider the handling of complaints and they have continued to monitor the implementation of the 16 recommendations made.

4.17 In June 2006 the Local Government Ombudsman issued his annual letter and noted that he had received 65 complaints against the Council during 2005-06, a slight decrease from the 69 received during the previous year. Once again, the service areas receiving the most complaints were education (29), highways (12) and social services (17). The majority (19) of the education complaints were about school admissions, the same number as in the previous year. Given the apparent high number of complaints received about education, it is worthy of note that of the 31 decisions made on such cases, he found fault in only three instances. These were settled by the Council taking action. The average time the Council took to respond to his enquiries was longer than expected so, this is an area where performance could be improved.

4.18 Adult Care Services undertook a Business Process Review of Finance, and a corporate review is in progress to explore the possible centralisation of transaction-based finance tasks.

4.19 The Council’s Internal Audit section has recently conducted an audit of risk management (March 2007) and concluded that the service was satisfactory and made some recommendations for improvements on similar lines to that of the Audit Commission. In addition, Internal Audit recommended reviewing the existing risk management policy, producing an annual risk improvement plan, measures to embed risk management further into departments and partnerships.

4.20 Internal Audit has undertaken the review which has led to this Statement of Internal Control, with the involvement of the Monitoring Officer, Finance Director and other senior officers. The Finance Director and the County Secretary as Monitoring Officer have advised us, as signatories to this statement, on the implications of the review, and actions proposed to address weaknesses and ensure continuous improvement of the system is in place are set out below.

5. Significant Internal Control Issues

5.1 While there were no major control weaknesses in 2006-07, the Council took or proposed to take a number of actions to further improve its system of internal control, including its performance management and risk management arrangements. These were as follows:

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5.2 Actions Taken

The Corporate Plan was published by 30 June 2006, with a full description of the policy implications, key actions and performance measures

Further efficiency savings resulting from the rationalisation of office accommodation through the Way We Work project continue

An HR Transformation programme has been completed which has led to the centralisation of HR services. This will deliver more efficient and business focused HR services and will bring a need to re-skill some HR staff

ICT support centralisation programme has commenced A Finance Business Process Review process has commenced and

workshops have been held with relevant system users to re-examine transaction procedures and accounting practices

Corporate Finance Schemes of sub-delegation and authorised signatories have been revised

CSF management addressed systemic issues arising from the 2006-07 budget monitor; these concerned projected overspends of the budgets for children with disabilities, and for the out-county placement of children

The Review of Internal Audit has been completed A Peer review in preparation for 2007 CPA Corporate Assessment has been

undertaken Customer service/response standards have been adopted following on from

last year’s action the ‘Customer Care – Good Practice guide was issued in March 2007

Revisions to the Constitution have been implemented Central monitoring of all inspection report recommendations has been

undertaken through the Improvement Plan A new approach to the Improvement Plan has been introduced The performance management balanced scorecard approach continues to

become embedded within service departments Various arrangements have been made to support the delivery of the LAA,

including the building of the LAA scorecard, which is undergoing user acceptance testing. The scorecard should be finalised and start to be reported on at the beginning of June

The challenges scorecard data was taken to the Cabinet Performance Panel in November and March. It was agreed at the meeting that the scorecard would be reported to the panel on a quarterly basis, with the working party members meeting to discuss the scorecard in more detail prior to the panel

The improvements to controls, identified by service departments during the Service Assurance Assessment of performance management processes have been actioned or are ongoing improvements.

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5.3 Actions Proposed

The annual performance report with the Corporate Plan will be published by 30 June 2007

The improvements to controls, identified by service departments during the Service Assurance Assessment of performance management processes, will be actioned

Further efficiency savings resulting from the rationalisation of office accommodation through the Way We Work project will continue

Finance transformation incorporating improvements identified in the course of the CIPFA Financial Management review will be progressed

Central monitoring of all inspection report recommendations will be undertaken

The performance management balanced scorecard approach will continue to become embedded within service departments

Arrangements for annual LAA refresh will be actioned An action plan to improve the risk management processes will be developed

and reported back to the Audit Committee in June 2007. The recommendations arising from the Audit Commission assessment of

the Supporting People service will be implemented by September 2007 The actions set out in the Improvement Plan list of Current Strategic Areas

for Improvement will be implemented.

We are satisfied that the above represents a fair view of the authority’s existing internal control system and planned improvements.

Caroline Tapster David BeattyChief Executive Leader

Date: 27 June 2007 Date: 27 June 2007

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LOCAL GOVERNMENT PENSION FUND ACCOUNTS

These accounts give a stewardship report of the financial transactions of the fund during the year, and of the deposition of its assets at the year-end.

The County Council administers a Pension Fund covering staff employed by the County Council, the ten District Councils in Hertfordshire and 164 other bodies. The Fund includes local authority employees within Hertfordshire, except teachers and fire personnel for whom separate pension arrangements apply. The Fund exists to provide pensions and other benefits for employees, their spouses, civil partners or dependants in accordance with the Local Government Pension Scheme Regulations 1997 (as amended). The income of the Fund arises from contributions by the employees and by their employing authorities and from dividends and interest on investments. The membership of the Fund at 31 March 2007 was as follows:

Contributors 27,958Pensioners 17,833Former Contributors - deferred benefits 19,325

MANAGEMENTThe management of investments is undertaken by firms of Fund Managers.

FURTHER INFORMATIONThe County Council publish a separate Annual Report on the Pension Fund which gives more detailed information.

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FUND ACCOUNT FOR YEAR ENDED 31 MARCH 2007

Note 2005/06£’000

2006/07£’000

Dealings with members, employers and others directly involved in the schemeContributions receivable 1

Members 24,642 26,428Employers 77,873 87,859

Transfers in Individual transfers in from other schemes 14,474 14,202Group transfers in from other schemes 392 9

117,381 128,498Benefits payable 2

Pensions and pensions increase (61,991) (65,410)Commutation of pensions and lump sum retirement benefits (9,988) (12,511)Lump sum death benefits (852) (1,520)

Payment to and on account of leaversIndividual transfers out to other schemes (21,543) (9,183)Group transfers out to other schemes 0 (856)Refunds of contributions (141) (31)Contributions Equivalent Premium (225) (19)

Administrative and other expensesAdministrative expenses 3 (1,862) (1,749)Interest (50) (71)Bad debts (21) (1)

(96,673) (91,351)

Net Additions (withdrawals) from dealing with Members 20,708 37,147

Returns on investmentsInvestment income 4 53,732 71,042Taxation 4 (3,198) (4,327)Change in market value of investments 6 366,335 86,909Investment management expenses 7 (7,509) (7,251)

______ 409,360 146,373

Net increase in fund during the year 430,068 183,520

Opening net assets of the scheme 1,532,254 1,962,322 Closing net assets of the scheme 1,962,322 2,145,842

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NET ASSETS STATEMENT

Note 2005/06£’000

2006/07£’000

Investment assets 5Fixed interest securities

Public sector 132,317 116,278Other 75,934 79,151

EquitiesUK 825,613 913,666Overseas 575,612 605,242

Index-linked securities 47,943 54,381

Pooled Investment vehiclesProperty 108,493 125,138Unit trusts 44,412 37,751Other managed funds 33,624 61,730

Cash deposits and other investment balances 102,720 136,015 1,946,668 2,129,352

Net current assets and liabilities 9 15,654 16,490

Net assets of the scheme at 31 March 1,962,322 2,145,842


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LOCAL GOVERNMENT PENSION FUND ACCOUNTING POLICIES

1. General Principles

The accounts have been prepared in accordance with the provisions of chapter 2 of the Statement of Recommended Practice on Financial Reports of Pension Schemes (revised November 2002), issued by the Accounting Standards Board, with reference to the Code of Practice on Local Authority Accounting 2006.

The accounts summarise the transactions and net assets of the Pension Fund. They do not take account of liabilities to pay pensions and other benefits in the future. The accounts should therefore be read in conjunction with the Actuarial Valuation Report on page 16 of the Pension Fund Annual Report which takes account of such liabilities.

2. Basis of preparation

The accounts have been prepared on an accruals basis, with the exception of benefits payable and transfer values to and from other schemes which have been treated on a cash basis.

Where member employing organisations have not submitted certified returns of contributions payable by the due date for preparation of these accounts, an estimate has been made based on the monthly returns of these employers. The amounts involved are immaterial.

3. Valuation of assets

Investments, including foreign currencies, are shown in the accounts at market value, determined as follows:

Quoted securities are shown at market value, based where available on mid-market prices at the close of business on the Balance Sheet date or the nearest preceding business day.

Managed and unitised funds (including Property) are as quoted by the trusts and managers on an offer basis on the nearest issue date to 31 March.

Unquoted securities are valued having regard to the latest dealings, professional valuations, the advice of directors, asset values and other appropriate financial information.

Indirect private equity investments are interests in limited partnerships and are stated at the partnerships estimate of fair value.

Equity Futures are valued by reference to their quoted price at the balance sheet date.

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LOCAL GOVERNMENT PENSION FUND ACCOUNTING POLICIES

Rights issues are processed on ex-date. If the value of the rights on ex date is 15% or more of the value of the underlying security, cost is allocated from the parent to the rights. If the value is less than 15%, the rights are allocated at zero cost.

4. Foreign currency translation

All investments are shown in sterling. The market value of overseas securities and cash is shown in sterling based on exchange rates applicable at 31 March 2007.

Gains and losses on exchange arising from movements in current assets and liabilities are included in the Fund Account for the year.

5. Investment management and administrative expenses

Fees of the external investment managers are agreed in the respective mandates governing their appointment. Fees are based on the market value of the portfolio under management.

The administration of the fund is undertaken by Hertfordshire County Council, in its role as administering authority for the fund. The Council’s cost of administering the scheme is charged to the fund.

6. Acquisition costs

Acquisition costs of investments are included in the purchase price.

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NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

1. Contributions

The contribution rate for most employees is 6% of their pensionable remuneration. Manual workers who joined the scheme prior to 1 April 1998 contribute 5% into the scheme. ‘Members’ additional contributions’ represent the purchase of added membership or additional benefits in the Pension Scheme.

Employers’ contributions are set by the Funds Actuary and are formally reviewed every three years on the basis of the actuarial valuation. Employer contribution rates vary for each employer to reflect their particular individual circumstances. The County Council's contribution rate for 2006/07 was 17.9% of pensionable payroll.

From 1 April 1984, pensions’ increases and compensatory pensions in relation to the major employing authorities have been charged through the Pension Fund and financed by increased levels of employers’ contributions. The level of such contributions is assessed by the Fund's Actuary. Payments made in respect of other employers are recovered directly from those bodies and are included within ‘Employers’ normal contributions’ in the table below.

During 2006/07 a total of £3,188,510 was paid into the Fund by employing bodies towards the cost of early retirements from their organisations during 2002/03, 2003/04, 2004/05, 2005/06 and 2006/07. This is included in ‘Employers’ special contributions’. In previous years, these contributions were included in ‘Other contributory income’. Comparative figures for 2005/06 have been restated accordingly.

Contributions Receivable:

2005/06 2006/07£’000 £’000

restatedMembers

Normal 24,275 26,157Additional 367 271

24,642 26,428Employers

Normal 70,547 80,671Special 7,326 7,188

77,873 87,859

Total 102,515 114,287

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Contributions received are further analysed by type of member body:

2005/06 2006/07£’000 £’000

restated

Administering authority 44,954 49,867Scheduled bodies 49,141 54,972Admitted bodies 7,556 8,501Resolution bodies 864 947 Total 102,515 114,287

The 2005/06 contributions have been restated in the table above due to the inclusion of early retirement contributions within employer contributions.

2. Benefits payable

The total benefits payable can be analysed by type of member body. Interest paid to members, previously shown under benefits payable, is now shown as a separate item under ‘Administrative and other expenses’. 2005/06 figures have been restated accordingly.

2005/06 2006/07£’000 £’000

restated

Administering authority 31,111 34,191Admitted bodies 3,972 4,619Scheduled bodies 37,516 40,281Resolution bodies 232 350 Total 72,831 79,441

Commuted pensions and ill health grants have been re-categorised and are now shown under ‘Commutation of pensions and lump sum retirement benefits’ in the Fund Account. 2005/06 figures have been restated to reflect these changes.

3. Administrative expenses

The Local Government Pension Scheme (Management and Investment of Funds) Regulations, 1998, allows the administering authority to charge pension administration expenses direct to the Fund. The expenses listed below include a charge made for the work carried out on the Pension Fund by the County Council’s Corporate Finance Department. Expenses incurred by the Fund’s investment managers are listed in Note 7. The Fund is exempt from VAT and is therefore able to recover such deductions.


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Administrative expenses:

2005/06 2006/07£’000 £’000

Administration and processing 1,609 1,603Actuarial fees 214 87Audit fees 29 30Legal and other professional fees 10 29 Total 1,862 1,749

4. Investment income

Investment income in the form of both interest on fixed interest stocks and cash deposits and announced dividends on equity securities is accrued as at the financial year end.

Investment income:

2005/06 2006/07£’000 £’000

Income from fixed interest securitiesPublic sectorOther

4,483 4,8643,373 4,022

Dividends from equitiesUKOverseas

24,513 37,9399,926 11,876

Income from index-linked securities 1,190 1,328Pooled Investment vehicles

Property 4,490 4,701Unit trusts 219 106Other managed funds 218 216

Interest on cash deposits 5,182 5,708

Securities lending 96 218Commission recapture 42 29Class action proceeds 0 33Underwriting commission 0 2

______ Gross investment income 53,732 71,042

Irrecoverable taxation (3,198) (4,327)

Net investment income 50,534 66,715

Tax is deducted from dividends paid on UK equities. This is not recoverable.

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The Fund suffers with-holding tax on most overseas investment income. The Fund has been granted exemption from US taxation and in some instances partial recovery of other with-holding tax is possible. Provision is made for the estimated sums to be recovered and income grossed up accordingly.

5. Investment Analysis

a) Analysis of investments at market value

2005/06 2006/07£’000 £’000

Fixed interest securitiesUK public sector 45,541 32,910Overseas public sector 86,776 83,368UK quoted and unit trusts 54,298 55,215Overseas quoted and unit trusts 21,636 23,936

208,251 195,429Equities

UK quoted 825,442 913,666UK unquoted 171 0Overseas quoted 574,659 603,624Overseas unquoted 0 0Overseas equity futures 953 1,618

1,401,225 1,518,908

Index linked securitiesUK 47,943 53,537Overseas 0 844

47,943 54,381

Pooled Investment VehiclesProperty

UK 108,493 125,138Overseas 0 0

Unit trusts UK unit trusts 15,357 13,402Overseas unit trusts 29,055 24,349

Other managed fundsUK 12,106 15,363Overseas 21,518 46,367

186,529 224,619

Cash deposits and other investment balancesCash deposits 130,207 144,763Net amounts receivable/(payable) for the purchase and sale of investments (26,534) (7,130)Cash backing open futures (953) (1,618)

102,720 136,015

Total 1,946,668 2,129,352

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b) Analysis by Fund Manager

Manager Market value£000

% of Fund

Alliance Bernstein 414,208 19.5%Baillie Gifford 250,894 11.8%BlackRock (formerly Merrill Lynch) 297,074 14.0%Capital International 384,502 18.1%Jupiter Asset Management 297,128 14.0%Schroder Investment Management 269,152 12.7%In - House Property Trust Fund 154,765 7.3%Private equityTTP Ventures 1,668 0.1%Standard Life Investments 23,979 1.1%Harbour Vest 25,967 1.2%Permira 4,300 0.2%Subtotal: Funds externally managed 2,123,637 100%Funds held at Hertfordshire County Council 22,205Total 2,145,842

The market values in the table above include the value of investments, cash and net current assets held by each manager at 31 March 2007. The funds held by Hertfordshire County Council include net current assets and cash required to manage the payment of benefits and collection of contributions.

6. Analysis of changes in market value of investments

Valu

e at

31/0

3/06

Purc

hase

sat

cos

t

Sale

spr

ocee

ds

Cha

nge

inm

arke

t va

lue

Valu

e a

t31

/03/

07

£’000 £’000 £’000 £’000 £’000Fixed interest

Public sector 132,317 770,710 (778,616) (8,133) 116,278Other 75,934 66,363 (59,423) (3,723) 79,151

EquitiesUK 825,613 570,665 (536,299) 53,687 913,666Overseas 575,612 362,499 (337,911) 5,042 605,242

Index-linked 47,943 37,994 (31,337) (219) 54,381

Pooled investment vehicles

Property 108,493 0 0 16,645 125,138Unit trusts 44,412 10,908 (19,806) 2,237 37,751Other managed funds 33,624 25,314 (11,262) 14,054 61,730

Cash deposits/other investment balances

102,720_______

36,999

(11,023)

7,319

136,015

Total 1,946,668 1,881,452 (1,785,677) 86,909 2,129,352 NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

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The change in market value of investments during the year comprises all increases and decreases in the market value of investments held at year end and profits and losses realised on the sales of investments during the year.

7. Investment management expenses

The Fund’s Investment Managers are remunerated on the basis of fees calculated as a percentage of total assets under management. Some managers also have a performance related fee, payable where performance exceeds the performance target, as set out in Appendix C to the Statement of Investment Principles in the Pension Fund Annual Report.

The Fund’s assets are held in custody by an independent custodian. The custodian is responsible for the safekeeping of the Fund’s financial assets, the settlement of transaction, income collection and other administrative actions in relation to the Fund’s investments.

The Fund subscribes to the measurement service of The WM Company. An analysis of the fund’s performance is shown in the pension Fund Annual Report.

Investment Management Expenses:

2005/06 2006/07£’000 £’000

Administration, management and custody 7,482 7,223Performance Measurement Services 27 28 Total 7,509 7,251

8. Early retirement funding

The Administering Authority has the right to invoice employing bodies for the cost of early retirements under the Local Government Pension Scheme Regulations, over a selected period of time. The expected income from this in future years is as follows:

Deferred income related to early retirement costs

£’000

2007/08 7372008/09 6172009/10 5462010/11 4392011/12 153


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9. Current assets and liabilities

Further analysis of net current assets as set out in the Net Assets Statement is shown below.

2005/06 2006/07£’000 £’000

Current assets - debtorsSums due from admitted, scheduled &

resolution bodies 5,038 5,226Investment income due 12,740 12,919UK and Overseas recoverable tax 1,046 928VAT due from HMRC 637 742Miscellaneous 18 81

19,479 19,896

Current liabilities - creditorsTax payable to HMRC (51) (10)UK and Overseas tax (1,822) (1,676)Investment management fees (1,638) (1,575)Miscellaneous (314) (145)

(3,825) (3,406)

Net current assets 15,654 16,490

10. Liabilities after year end

The Fund’s financial statements do not take account of the liabilities to pay pensions and other benefits after 31 March 2007. These liabilities are valued as part of the triennial valuation process described on page 16 of the pension fund Annual Report.

The last actuarial valuation of the fund was carried out as at 31 March 2004 to determine contribution rates for the financial years 2005/06 – 2007/08. The market value of the funds asset at the valuation date was £1,360 million and represented 76% of the funds accrued liabilities, allowing for future pay increases.

In accordance with the Local Government Pension Scheme regulations, employer contribution rates were set to meet 100% of the Funds existing and prospective liabilities as detailed in the Funding Strategy Statement.

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11. Additional voluntary contributions

Scheme members have the option to make additional voluntary contributions to enhance their pension benefits. These contributions are invested separately from the Fund, with either the Standard Life Assurance Company or the Equitable Life Assurance Society.

Analysis of changes in additional voluntary contributions:

2005

/06

Stan

dard

Life

2005

/06

Equi

tabl

e Li

fe

2005

/06

Tota

l AVC

s

2006

/07

Stan

dard

Life

2006

/07

Equi

tabl

e Li

fe

2006

/07

Tota

l AVC

s

£’000 £’000 £’000 £’000 £’000 £’000

Value at 1 April 3,429 3,368 6,797 4,325 3,3343,334

7,659

IncomeContributions received 385 49 434 380* 25 405Transfer values received 53 0 53 160 0 160

438 49 487 540 25 565 Expenditure

Retirement Benefits (129) (295) (424) (167) (145) (312)Transfer Values paid (70) (14) (84) (57) (109) (166)Refunds of Contributions 0 (1) (1) 0 0 0

(199) (310) (509) (224) (254) (478)

Change in market value 657 227 884 433 129 562

_____

Value at 31 March 4,325 3,334 7,659 5,074 3,234 8,308

*Includes payment for demutualisation entitlement of £25,084.32

In accordance with regulation 5(2) (c) of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 1998 (as amended), additional voluntary contributions have been excluded from the Fund Account and Net Assets Statement. These contributions are held by the providers and therefore do not form part of the fund’s investments.

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12. Related parties

Hertfordshire County Council

The majority of the pension fund’s cash is invested with fund managers, however a small amount is invested with Hertfordshire County Council in order to manage the payment of pensions and collection of contributions. Hertfordshire County Council paid the pension fund £1,032,526 in interest during 2006/07.

Investment Committee

Seven members of the Hertfordshire County Council Investment Committee were councillor members of the Hertfordshire Local Government Pension Scheme during 2006/07. One member of the committee was in receipt of pension benefits from the scheme during the year.

13. Securities Lending

The fund has an arrangement with its custodian to lend securities from within its portfolio of stocks to third parties in return for collateral. Lending is limited to a maximum of 20% of the total Fund value.

Collateralised lending generated income of £218,172 for 2006/07 (£95,741 for 2005/06). This is included within investment income in the Fund Account. At 31 March 2007 £197m worth of stock (9.2% of the Fund) was on loan, for which the Fund was in receipt of £208m worth of collateral.

14. Statement of Investment Principles

Under the Local Government Pension Scheme Regulations 1997 (as amended) the Fund is required to publish a Statement of Investment Principles (SIP). This statement follows the notes to the Local Government Pension Fund Accounts.

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LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT PRINCIPLES

IntroductionThe County Council (‘the Council’) is responsible for the administration of the Hertfordshire Local Government Pension Scheme (LGPS). The Council has a statutory duty to ensure that any Local Government Pension Scheme funds, not immediately required to pay pension benefits, are suitably invested.

As required by statute the Council has approved a statement of investment principles which are applied to the management of the LGPS investments (‘the Fund’).

In accordance with Government guidelines, the extent to which the Hertfordshire scheme complies with the 10 Principles set out in the Myners’ review of Institutional Investment in the U.K. is set out at Appendix A to the Pension Fund Annual Report.

Who makes the investment decisions?The Investment Committee of the County Council (“the Committee”), advised by the Finance Director, is responsible for setting the overall investment strategy, monitoring investment performance and then implementing relevant policies. The Committee consists of 8 County Council members; 3 (non-voting) district council members elected by the Hertfordshire Local Government Association and a non-voting Unison representative.

Day to day operational decisions are delegated to the County Council’s Finance Director.

The fund’s governance arrangements are set out in full in the Governance Statement on pages 10-12 of the Pension Fund Annual Report.

All investments, with the exception of property unit trusts (“PUTs”), are managed by external investment management organisations (‘the managers’).

From 1 July 2002, in-house staff in Corporate Finance, reporting to the Finance Director, have been responsible for the management of PUTs.

What are the investment objectives of the Fund?a) To comply with the Local Government Pension Scheme (Management and

Investment of Funds) Regulations 1998 (as amended), specifically to ensure that all:-

- funds are suitably invested,- investments are diversified,- relevant investment limits are not exceeded,- investments and investment arrangements are regularly monitored and

reviewed.

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b) To ensure that the Fund has sufficient assets to pay scheme benefits.

c) To achieve a long term rate of return on the invested funds (both capital gains and income) which assists in controlling the level of employer’s contributions to the Fund and also the cost of the pensions to the local tax payers where appropriate by;

i) as a minimum matching the actuary’s rate of return assumptions made when assessing the Fund’s level of funding, and

ii) exceeding the fund benchmark by 1% measured over three year rolling periods.

Link to Funding Strategy StatementThis Statement of Investment Principles is linked to the Funding Strategy Statement, which sets out the Fund’s strategy for meeting employers’ pension liabilities. The aim of the Funding strategy is to ensure the long-term solvency of the Fund while not unnecessarily restraining the investment strategy set out in this document.

The two strategies set out the common objective of the Fund to maximise returns on investments to control the level of employers’ contributions.

The Funding Strategy Statement can be found on the Pension Fund’s website at www.hertsdirect.org/pensions.

Achieving the investment objectives The Council, having taken appropriate professional advice, has made the arrangements set out below to reduce the risk that one or more of the investment objectives for the Fund are not achieved over the long term.

a) Suitable Investments

The Committee considers that the following types of investments, within specific limits, are suitable for the purposes of a pension scheme:

cash, bank deposits and other short term money market investments; quoted fixed interest securities; individual securities and pooled

investment vehicles; quoted equity investments; individual securities and pooled investment

vehicles; property unit trusts; derivative instruments, but not to be used for speculative purposes; unquoted equity investments and private equity pooled vehicles.

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b) Fund benchmark and asset allocation

From 1 July 2002 the Fund has adopted a specific benchmark which has been approved by the Committee, following appropriate professional advice from the investment consultant, fund managers and the performance measurement consultant. The composition of the Fund benchmark is set out at Appendix B to the Pension Fund Annual Report.

The weightings of the various asset classes within the benchmark form the basis for asset allocation within the Fund.

The asset allocation set out in the benchmark is designed to spread the risk and minimise the impact of poor performance in a particular asset class. It seeks to achieve a spread of investments across both the main asset classes (quoted equities, bonds, private equity and property) and geographic regions within each class.

The Investment Committee’s review of investment strategy is continuing. There are likely to be changes in the coming year and this document will be updated at that time.

c) Management of Investments

The main choices when selecting a fund management style are:

Active or passive – making independent decisions when buying or selling investments (active) or buying stocks to replicate a specific index (passive);

Balanced or specialist – investing across a broad range of asset classes (balanced) or in a narrow, specific asset class (specialist).

Since November 2004 the Fund has used “active, specialist” managers only. The Fund’s investment management arrangements were restructured at that time, on the advice of the investment consultant to increase the potential return of the Fund.

The number of managers and the share of the Fund by type as at 31 March 2007 is shown in table 1 below, along with the comparative figures for March 2006.

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Table 1

Share of total Fund at31 March

2007No of

Managers31 March

2006No of

Managers

External, active, specialist 90.1% 6 91.4% 6

Private equity 2.6% 4 1.3% 4

In-house, active, specialist(property unit trusts)

7.3% 7.3%

Full details of the managers, their mandates and fee basis are shown at Appendix C to the Pension fund Annual Report.

All the managers need the approval of the Finance Director to acquire shares in any securities that are not listed on a recognised stock exchange.

d) Social, environmental and ethical considerations

The Council retains external investment management organisations to select, monitor and realise the Fund’s investments. The investment managers are expected to apply their professional expertise to maintain suitably diversified portfolios for a Local Government Pension Scheme. When making investment decisions the managers are expected to take account of what they reasonably believe are all relevant considerations.

e) Investment Restrictions

The following investment restrictions apply to the funds under management:

i) all limits determined under the LGPS (Investment and Management of Funds) Regulations 1998, (as amended)

ii) additional limits which have been determined by the Council:

Private Equity - total investments are not to exceed 5% of the value of the Fund.

Options, futures & contracts for differences

- maximum 25% of UK equity portfolio. Only to be used to protect against possible adverse fluctuations in the values of other investments or cash in the portfolio.

Individual equity holdings

- the total holding in a single company is not to exceed 5% of the issued share capital.

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There are no other restrictions placed on the managers’ investment decision making.

f) Investment Performance Measurement

The investment performance of the Fund’s managers is measured by an independent organisation, the WM Company, which reports quarterly to the Finance Director and at least annually to the Committee.

g) Monitoring of Investment Managers

The Committee meets quarterly to consider reports from each investment manager. Each manager makes a presentation in person to the Committee on an annual basis and to the Finance Director (or his representative) on a more regular basis.

h) Actuarial Valuation

The LGPS is subject to triennial valuations by an independent actuary. Employers’ contributions are determined by the actuary to ensure that in the long term the fund’s assets will match its liabilities. The framework for this is set out in the Funding Strategy Statement.

i) Voting of Shares

The Fund routinely votes on all matters raised by the largest 350 listed UK companies where it owns shares. The Fund’s voting policy is to vote in accordance with the current principles of corporate governance best practice, as advised by the RREV (Research Recommendations and Electronic Voting) Service, provided by NAPF and ISS, except when the advice of the Fund’s managers indicates such action would not be in the best financial interests of the Fund.

j) Custody Arrangements

The Fund’s assets are held in custody by an independent custodian, where reasonable controls have been certified by an appropriate auditor.

This Statement of Investment Principles was approved by the Investment Committee of Hertfordshire County Council on 21 June 2007. Copies are available on request for participating scheme employers, scheme members, pensioners and deferred beneficiaries. The statement will be reviewed on an annual basis by the Council’s Investment Committee.

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FIREFIGHTERS’ PENSION FUND ACCOUNTS

FUND ACCOUNT FOR YEAR ENDED 31 MARCH 2007Note £000

Contributions receivableFrom employer- normal 3 3,504 - early retirements 0 - other 108

From members 3 1,818

Transfers in 4- individual transfers in from other schemes 13 - other 0

Benefits payable- pensions (5,425)- commutations and lump sum retirement benefits (1,286)- lump sum death benefits 0 - other (20)

Payments to and on account of leavers- refunds of contributions (4)- individual transfers out to other schemes 4 0 - other 0

Net amount receivable for the year before top-up grant (1,292)

Top-up grant received 5 985

Top-up grant receivable 307

NET ASSETS STATEMENT AS AT 31 MARCH 2007£000

Net current assets and liabilities

Pension top-up grant receivable 307

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NOTES TO THE FIREFIGHTERS’ PENSION FUND ACCOUNTS

1. Summary of the Firefighters’ Pension Fund Operations

Until the end of March 2006 the Council was responsible for paying the pensions of its former firefighting employees on a ‘pay-as-you-go’ basis. This meant that employees’ contributions were paid into the Council’s accounts from which pensions awards were made. The Council received funding from Central Government as part of general Formula Grant to support payments of pensions.

From 1 April 2006 the Council will continue through its scheme administrator, Serco Solutions Ltd, to administer and discharge its responsibility for paying the pensions of retired officers, their survivors and others who are eligible for benefits under the new and existing pension schemes.

Regular firefighters employed before 6 April 2006 were eligible for membership of the 1992 Firefighters' Pension Scheme. The scheme is now closed. A new 2006 Firefighters’ Pension Scheme has been introduced for regular and retained firefighters employed since 6 April 2006.

The new financial arrangements are for both the 1992 and 2006 Firefighters’ Pension Schemes. The new financial arrangements have no impact on the terms and conditions of either scheme.

Employee contributions and a new employer's contribution are paid into the pension fund from which pension payments are made. The fund is topped up by Government grant if the contributions are insufficient to meet the cost of pension payments. Any surplus in the fund is recouped by Government. The underlying principle is that employer and employee contributions together will meet the full costs of pension liabilities being accrued in respect of currently serving employees while central Government will meet the costs of retirement pensions in payment, net of employee and the new employer contributions.

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

2. Accounting Policies

The accounts have been prepared in accordance with the 2006 Code of Practice on Local Authority Accounting in the United Kingdom, a Statement of Recommended Practice issued by the Chartered Institute of Public Finance and Accountancy.

The accounts summarise the transactions and net assets of the Firefighters’ Pension Fund. They do not, however, take account of liabilities to pay pensions and other benefits after 31 March 2007.

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2. Accounting Policies (continued)

Transfer values have been treated on a cash basis. All other amounts have been prepared on an accruals basis.

3. Contributions Receivable

Employer and Employee Contributions

The purpose of the employee and employer contribution rates under the new arrangements is to meet the accruing pension liabilities of currently serving firefighters. This means the Council meet all the costs of employing firefighters, including the cost of future pension liabilities, at the time of employing them.

Separate contribution rates, a percentage of pensionable pay as shown below, apply to the 1992 Firefighters’ Pension Scheme and the new 2006 Firefighters’ Pension Scheme.

Employer Employee

% %

1992 Firefighters’ Pension Scheme 21.3 11.0

2006 Firefighters’ Pension Scheme 11.0 8.5

Contributions received by the Fund for the year are analysed in the following table.

Employer Employee

£000 £000

1992 Firefighters’ Pension Scheme 3,488 1,806

2006 Firefighters’ Pension Scheme 16 12

3,504 1,818

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3. Contributions Receivable (continued)

Early Retirements

Early retirements due to ill-health would, with effect from 1 April 2006, require the Council to make a lump sum payment into the pension fund of 4× average pensionable pay in respect of all higher tier ill-health retirements and 2× average pensionable pay in respect of all lower tier ill-health retirements. These ill-health retirement charges could reintroduce some in-year financial volatility, as the number of firefighters who retire on grounds of ill-health will vary from year to year. To deal with this volatility authorities are required to spread the charges credited to the pension fund equally over a period of three years. The initial tranche of the payment is to be made at the time of retirement. Later tranches are to be made, without the addition of interest, on 1 April of each financial year until all the payments have been made.

Other approved early retirements have a real cost, which must be covered by employers. These costs will be actuarially calculated for each individual, using a table of factors, and the Council will be required to make a payment into the pension fund.

4. Transfers to or from other schemes

Where a firefighter transfers to or from another Fire and Rescue Authority within England there is no need for a cash transfer. A firefighter, who transfers out of the Firefighters’ Pension Scheme to another pension scheme, or to the Firefighters’ Pension Scheme in Scotland, Wales or Northern Ireland, is entitled to ask for a Cash Equivalent Transfer Value to be paid across, equivalent to the value of their pension rights on leaving the Firefighters’ Pension Scheme. This would be paid from the Firefighters’ Pension Fund. Similarly an inward Transfer Value should be paid into the fund.

5. Top-up Grant

From 1 April 2006 where employer and employee contributions paid into the Firefighters’ Pension Fund are not sufficient to meet pension payments for that year, the deficit will be met by a new Central Government top-up grant paid by the Department for Communities and Local Government. Any surplus in the fund is paid back to Central Government as the party that brings the account into balance.

6. Liabilities after year end

The Fund’s financial statements do not take account of the liabilities to pay pensions and other benefits after 31 March 2007.

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INDEPENDENT AUDITOR’S REPORT TO HERTFORDSHIRE COUNTY COUNCIL

The County Council’s Statement of Accounts, Local Government Pension Fund Accounts and the Firefighters’ Pension Fund Account for the year ended 31 March 2007 are subject to audit by the District Auditor.

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GLOSSARY OF TERMS USED

The glossary’s definitions are intended to provide the reader with a clear and concise explanation of the technical terms used in this report.

Accounting PoliciesThose principles, bases, conventions, rules and practices applied by an entity that specify how the effects of transactions and other events are to be reflected in its financial statements.

Accrual AccountingThe inclusion of income and expenditure within the accounts for the financial year in which they are earned or incurred, not when the money is received or paid.

Actuarial Gains and lossesFor defined benefit pension schemes, the changes in actuarial deficits or surpluses that arise because: events have not coincided with the actuarial assumptions made for the last

valuation (experience gains and losses); or the actuarial assumptions have changed.

Agency ServicesServices that are performed by or for another Authority or Public Body, where the principal, the authority responsible for the service, reimburses the agent, the authority carrying out the work, for the cost of the work carried out.

AssetAn item that has value owned by the County Council. Examples would be land, buildings and stocks.

Balance SheetThis represents a summary of all the assets and liabilities of the County Council, bringing together all the accounts of the Council except the Pension Fund and various Trust Funds whose assets are not at the disposal of the Council.

Best Value Accounting Code of PracticeThe code that establishes ‘proper practices’ with regard to consistent financial reporting for services.

Billing AuthorityThe local authority responsible for collecting the Council Tax from residential properties in their area. In Hertfordshire this is the responsibility of the District Councils.

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BudgetA statement of the Council’s policy stated in financial terms. This includes both revenue and capital expenditure.

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

Capital Financing AccountAn account that reflects financing of capital expenditure from revenue and capital resources together with the reversal of amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the Movement on the General Fund Balance for the year.

Capital Financing ReserveThe amount of debt outstanding relating to capital expenditure. This amount, as at the end of the preceding financial year, is used to calculate the Minimum Revenue Provision.

Capital ReceiptsThe proceeds from the sale of fixed assets such as land and buildings. Capital receipts can be used to repay any outstanding debt on fixed assets or, to finance capital expenditure, within rules set down by government. Capital receipts however cannot be used to finance revenue expenditure.

Capital ReserveA reserve that is available to be applied in financing future capital expenditure.

Carry-forwardsThese are underspends at the year-end which Members and officers, under delegated powers, have agreed to carry forward to the next year to support that year’s expenditure plans.

Central Support ServicesServices organised on a corporate basis that support the delivery of services to the public.

Collection FundA fund administered by each billing authority. Council Tax monies are paid into the fund whilst part of the net revenue expenditure of the County Council is met from the Collection Fund.

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ConsistencyThe principle that the accounting treatment of like items within an accounting period and from one period to the next is the same.

Contingent LiabilityA potential liability at the balance sheet date, the outcome of which is uncertain, as it is dependent on a future event.

Corporate and Democratic CoreComprises all activities which local authorities engage in specifically because they are elected, multi-purpose authorities. The costs of these activities are thus over and above those that 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.

Council TaxA property based tax that is administered by District, Borough and Unitary Councils.

CreditorsAmounts owed by the Council at the balance sheet date for goods and services supplied. This will include receipts in advance that have not been applied at the balance sheet date.

Current AssetAn asset that is realisable or disposable within one year.

Current LiabilityAmounts that are due to be settled within one year.

Current Service Cost (Pensions)The increase in the present value of a defined benefit scheme’s liability expected to arise from employee service in the current period.

CurtailmentFor 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: termination of employee’s services earlier than expected; and 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.

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DebtorsAmounts due to the Council at the balance sheet date.

Deferred ChargesExpenditure which may properly be deferred, but which does not result in, or remain matched with, assets controlled by the authority.

Deferred CreditsCapital income potentially due to be received in future periods.

Deferred Grants and ContributionsAmounts received or receivable which have been used to finance capital expenditure. In accordance with capital accounting regulations these amounts will be written off over the same period as the assets to which they relate.

Defined Benefit SchemeA 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 un-funded (including notionally funded).

Defined Contribution SchemeA 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 or prior periods.

Depreciated Replacement CostThe method employed in valuing land and buildings where a market value basis is not readily available.

DepreciationThe measure of the cost or revalued amount of the benefits of the fixed asset that have been consumed during the period. Consumption includes the wearing out, using up or other reduction in the useful life of a fixed asset whether arising from use, effluxion of time or obsolescence through either changes in technology or demand for the goods and services produced by the asset.

Discretionary BenefitsRetirement benefits which the employer has no legal, contractual or constructive obligation to award and are awarded under the authority’s discretionary powers such as The Local Government (Discretionary Payments) Regulations 1996.

Doubtful DebtsA provision made by the Council based on age and particular circumstances relating to amounts owed to the County Council.

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EmolumentsAmounts paid to employees, including expenses or non-monetary benefits that are taxable.

Estimation TechniquesThe methods adopted to arrive at estimated monetary amounts, corresponding to the measurement bases selected, for assets, liabilities, gains, losses and changes to reserves.

Exceptional ItemsMaterial items which derive from events or transactions that fall within the ordinary activities of the authority and which need to be disclosed separately by virtue of their size or incidence in order to give fair presentation of the accounts.

Expected Rate of Return on Pension Fund AssetsFor 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 ItemsMaterial abnormal items which derive from events or transactions that fall outside the ordinary activities of the authority and which are not expected to recur.

Fees and ChargesIncome raised by charging users of services for the facilities. For example, the supply of school meals and home helps.

Finance LeaseArrangements whereby the lessee is treated as owner of the leased asset and is required to include such assets within fixed assets on the balance sheet.

Financial Reporting Standard (FRS)A statement of accounting practice issued by the Accounting Standards Board.

Fixed Asset Restatement AccountAn account created as a result of the current capital accounting regulations that enables assets to be shown in the balance sheet at current values.

Formula GrantCentral Government provides funding to local authorities through a grant known as Formula Grant, which is made up of Revenue Support and Re-distributed Business Rates, in support of its general revenue expenditure.

Foundation SchoolA school that receives funding from the Council but owns its land and buildings.

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General Fund BalanceThe excess to date of income over expenditure in the Income and Expenditure Account.

Going ConcernThe concept that the authority will remain in operational existence for the foreseeable future. Income and expenditure accounts and the balance sheet are produced on the basis that there is no intention to curtail significantly the scale of operations.

Government GrantsAssistance by government and inter-government agencies and similar bodies. When applied, revenue grants are credited to the appropriate service revenue account whilst capital grants are credited to the Deferred Grants and Contributions Account.

Historical CostCapital expenditure originally incurred.

ImpairmentA reduction in the value of a fixed asset below its carrying amount on the balance sheet. Examples would include loss in value due to physical damage or decline in market value due to a general fall in prices.

Infrastructure AssetsExpenditure on works of construction or improvement but which have no tangible value, such as construction of, or improvement to highways.

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 authority. Investments, other than those in relation to the Pension Fund, that do not meet this criteria are classified as current assets.

Investments (Pensions Fund)The investments of the Pension Fund will be accounted for in the statements of that Fund. FRS17 Retirement Benefits requires authorities to disclose their attributable share of pension scheme assets.

Liquid ResourcesCurrent asset investments that are readily disposable by the authority without disrupting its business and are readily convertible to known amounts of cash.

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Long Term BorrowingLoans repayable more than one year after the balance sheet date.

Long Term ContractsA contract entered into for the provision of a service where the time taken to complete the contract is such that the contract falls into different accounting periods.

Long Term DebtorsAmounts due to the Council more than one year after the balance sheet date.

Minimum Revenue ProvisionA specific percentage, currently 4% of the Council’s capital financing requirement at the end of the previous financial year, which must be set aside from the statement of movement on the general fund balance to provide for the repayment of loans.

National Non-Domestic Rates A rate in the pound, set by Central Government at a standard countrywide rate, applied to the rateable value of each premise not being used for domestic purposes.

Net Book ValueThe amount at which fixed assets are included in the balance sheet. This would be either the asset’s historic cost or current value less the cumulative amounts provided for depreciation.

Net Current Replacement CostThe cost of replacing an asset in its existing condition and its existing use.

Net DebtFor cash flow statement presentation purposes, net debt comprises the authority’s borrowings plus bank overdrawn positions less positive bank and cash balances, short and long term investments.

Non Distributed CostsCosts that cannot be directly attributed to services.

Non Operational AssetFixed assets held by the Council but not directly used or consumed in the delivery of its services. This would include surplus properties awaiting disposal.

Operating LeaseAn arrangement whereby the risks and rewards of ownership of the leased asset remain with the lessor.

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Operational AssetFixed assets held by the Council and used or consumed in the delivery of its services for which it has either a statutory or discretionary responsibility.

Past Service CostFor 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.

Pension FundAn employees’ pension fund maintained by an authority, or a group of authorities, in order primarily to make pension payments on retirement of participants. It is financed from contributions from the employing authority, the employee and investment income.

Post Balance Sheet EventsEvents both favourable and unfavourable that occur between the balance sheet date and the date on which the responsible financial officer signs the Statement of Accounts.

PreceptThe levy made by precepting authorities on billing authorities, requiring the latter to collect income from council taxpayers on their behalf.

Precepting AuthoritiesThose authorities which are not billing authorities (e.g. do not collect Council tax). County Councils, Police Authorities and joint authorities are ‘major precepting authorities’ and parish, community and town councils are ‘local precepting authorities’.

Prior Period AdjustmentsThose material adjustments applicable to prior years arising from changes in accounting policies or from the correction of fundamental errors.

Projected Unit MethodAn 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: 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

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.

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ProvisionsSums set aside to meet future expenditure where a specific liability is known to exist but that cannot be measured accurately.

PrudenceThe concept that revenue is not anticipated but is recognised only when realised in the form either of cash or of other assets the ultimate realisation of which can be assessed with reasonable certainty.

Public Works Loan Board A government agency established to provide long-term loans to local authorities to finance part of their capital expenditure.

Rateable ValueRateable value of a property is based on an assessment of the annual rental value for non-domestic property. Rateable value multiplied by the rate in the £ levied equals the rate payments for the year.

Related PartiesFor a relationship to be treated as a related party relationship there has to be some element of control or influence by one party over another, or by a third party over the two parties.

Related Party TransactionA 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.

Retirement BenefitsAll forms of consideration given by an employer in exchange for services rendered by employees that are payable after the completion of employment. Retirement benefits do not include termination benefits payable as a result of either an employer’s decision to terminate an employee’s employment before the normal retirement date or 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 ContingencyA sum set-aside for future pay and price increases.

Revenue Contributions to Capital Outlay Contributions from revenue to finance capital expenditure.

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Revenue Expenditure and IncomeThis is expenditure on day-to-day running costs and consists primarily of salaries and wages, premises related costs and supplies and services. Revenue income will include fees and charges and service specific grants

Revenue Support Grant A grant paid by central government in aid of local authority services in general, as opposed to specific grants, which may only be used for a specified purpose.

Scheme LiabilitiesThe liabilities of a defined benefit scheme for outgoings due after the valuation date. Scheme liabilities measured using the projected unit method reflects the benefits that the employer is committed to provide for service up to the valuation date.

SettlementAn 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 lump-sum cash payment to scheme members in exchange for their rights to

receive specified pension benefits; the purchase of an irrevocable annuity contract sufficient to cover vested

benefits; and the transfer of scheme assets and liabilities relating to a group of employees

leaving the scheme.

Short Term BorrowingLoans repayable within one year of the balance sheet date.

Short Term InvestmentsDeposits with approved financial institutions which, when placed, had a maturity date of less than one year.

Specific GrantsGovernment grants to local authorities in aid of particular projects or services.

Specific ReservesSums set aside to meet revenue or capital expenditure needs in the future. Reserves offer the scope for greater flexibility in financing future expenditure.

Statement of Standard Accounting PracticeA statement of accounting practice issued by the Accounting Standards Board.

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

Tangible Fixed AssetsTangible assets that yield benefits to the Council and the services it provides for a period of more than one year.

Total CostThe total cost of providing a service includes all costs including an appropriate share of all support services and overheads.

Transfer ValueThe value of an employee’s pension rights when transferring from one pension scheme to another.

Transferred DebtDebt met by third party bodies following the statutory transfer of services previously provided by the County Council.

Usable Capital ReceiptsIncome from the sale of capital assets. These receipts are available to either finance capital expenditure or repay debt.

Useful LifeThe period over which the authority will derive benefits from the use of a fixed asset.

Vested RightsIn relation to a defined benefit scheme, these are: for active members, benefits to which they would unconditionally be entitled on

leaving the scheme; for deferred pensioners, their preserved benefits; for pensioners, pensions to which they are entitled.Vested rights include where appropriate the related benefits for spouses, civil partners or other dependants.

Voluntary ProvisionAny additional provision over and above the minimum revenue provision required.

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