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STATEMENT Hertfordshire County Council

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STATEMENT Hertfordshire County Council Powered By Docstoc
					                     STATEMENT
                    OF ACCOUNTS
                      2009-2010




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                                          CONTENTS

                                                                   Page

Introduction

Report by the Chief Financial Officer

Statement of Accounting Policies

The Statement of Responsibilities

Income and Expenditure Account

Statement of the Movement on the General Fund Balance

Statement of Total Recognised Gains and Losses

Balance Sheet

Cash Flow Statement

Notes to the Accounts

Annual Governance Statement

Local Government Pension Fund Accounts

Local Government Pension Fund Accounting Policies

Notes to the Local Government Pension Fund Accounts

Local Government Pension Fund Statement of Investment Principles

Firefighters’ Pension Fund Accounts

Notes to the Firefighters’ Pension Fund Accounts

Independent Auditor's Report

Glossary of Terms Used




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                                INTRODUCTION
Statement of Accounts

The Statement of Accounts provides financial details of the council’s activities for the
financial year ended 31 March 2010. This document has been prepared in accordance
with the Accounts and Audit Regulations 2003 and the 2009 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 2009/10 to provide services for a population of approximately 1.1
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

The county council has responsibility for services across the whole of the county. It
works with central government and other local organisations to help improve and deliver
a range of local services to more than a million people, who live, work and travel in the
county. Local schools, libraries, support for elderly and vulnerable people and the
maintenance of roads and pavements are all services provided by the county council.

A refreshed and strengthened Corporate Plan was confirmed by the County Council on
21 July 2009, with an extended planning horizon of 2009 to 2012. This set out the
following key priorities:

 Support economic well-being

 Maximise independent living

 Ensure a positive childhood

 Secure a good education for all

 Reduce carbon emissions

 Promote safe neighbourhoods

 Be a leading council




                                           1
                                 INTRODUCTION
The council is run by elected politicians and like the Members of Parliament at
Westminster, local councillors are voted in by residents to act on their behalf. Subject to
legislation enacted by Parliament, local councillors take the decisions on where money
will be spent, what council taxes will be charged and how local services will be
developed.

Other councils and organisations in Hertfordshire

There are three tiers of local government in Hertfordshire, the county council, district
and borough councils and finally town and parish councils. The county council works
closely with these councils and other organisations such as the National Health Service,
the Police, the business community and voluntary organisations. All these organisations
have a part to play in making Hertfordshire a good place to be. Only by working
together can they tackle the challenges that face Hertfordshire in the 21st century.

How the council operates

The council is made up of 77 councillors elected every four years. Each
councillor 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 out
their 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.

Policies and decisions are scrutinised by all-party Topic Groups guided by an Overview
and Scrutiny Committee.




                                            2
                                 INTRODUCTION
The services we provide

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

Adult Care Services
Adult Care Services works closely with health services, district councils, and the private
and voluntary sector, using its resources to arrange, develop and provide care and
support in the community for older people and adults who have learning disabilities,
sensory loss or physical disabilities. The council also funds adult mental health services
provided by Hertfordshire Partnership NHS Foundation Trust.

We do this by:

     Assessing needs - asking about people’s circumstances and the things they are
      worried about. Where applicable, this will include the needs of any famly carers.
     Giving information and advice about equipment and services that can make lives
      easier.
     Arranging care and support for those who would be at risk without it. Most people
      need more than one kind of help and a ‘package’ of care and support is usual.
      Where appropriate, money (direct payments) can be provided so that those who
      require care can arrange their own services, giving more control over the support
      that they receive.

Approximately 1 in 20 people generally, and 1 in 5 people aged 65 or more, ask for our
help each year. Our efforts are focuseed on helping to keep as independent as
possible.

We have to work within a set budget and cannot provide all the support we are asked
for, so we give priority to people with the greatest need. To make sure we do this in a
fair way, we use the national guidance called ‘Fair Access to Care Services’ from the
Department of Health.

If, after an initial assessment, it seems that there are only moderate or low risks to a
person’s independence, we will still provide information and advice on other possible
sources of help. Adult Care Services funds many local voluntary organisations to
provide services that can make a real difference to someone’s daily life. This funding to
voluntary organisations also means that those in need are not totally dependent on us.

Safeguarding vulnerable adults is a key responsibility of Adult Care Services and the
department co-ordinates a county-wide multi-agency approach. We work with the
police, health and other key partners to ensure risks are identified, managed and
minimised.

Adult Care Services is inspected and regulated by the Care Quality Commission from 1
April 2009.




                                            3
                                 INTRODUCTION
Children, Schools and Families (CSF)

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.

Here are a few examples of the services we provide:

School admissions

The offer of school places for nursery, primary and secondary schools across the
county is coordinated by a team within Children, Schools and Families.

Sure Start services (Young in Herts)

Sure Start aims to improve the quality of life for children, families and communities
through:
       Childcare – improving and increasing the levels of childcare provision across
        the county including childminders, preschools, day nurseries and out of school
        clubs

       Early education – all three and four year olds are entitled to free early education
        sessions. Research shows that children who receive a high quality education in
        their early years are more likely to make good progress at school, stay in
        education longer, gain qualifications and be successful in their working lives

       Parenting support – including courses, advice and support in local communities
        for parents to help them with the challenges of raising children

       Teenage pregnancy – including cutting teenage pregnancy levels and
        supporting young parents back into education

       Extended schools and children’s centres – offer community services delivered
        through children’s centres for under fives and extended schools for five to 19
        year olds including study support and out of school activities, family learning,
        adult education, childcare, health advice and parenting support.




                                            4
                                  INTRODUCTION
Children, Schools and Families (continued)

Support for the family

If you are experience difficulties in meeting your child’s emotional, social or physical
needs, contact CSF for help. If you have a disabled child, we may be able to provide
care in the home, short breaks (respite care), or help your child to join in local activities.

The department now has a direct payment scheme for parents of disabled children, to
give them more choice and control in getting the support they need for their family.

Children with special needs

Children develop differently and if you have any concerns about your child's progress,
there are people in CSF who can help. A child has special needs if he or she has
greater difficulty learning than most other children of the same age.

Family support services

Family support services across the county offer services to young children and families
helping them through difficult times, by offering time, practical advice and/or
counselling, either individually or in groups.

Fostering and adoption

Every month around 30 Hertfordshire children come into our care because they cannot
stay with their own families. There may be a number of reasons why - there may be a
crisis in the family, ill health, relationship difficulties, or bereavement. When this
happens, we make arrangements for the child to be fostered, sometimes with relatives
or family friends, or adopted.

Residential care for children and young people

CSF has eight residential units comprising of four for adolescents, one for younger
children aged 5-11 years, one long term and two respite units for disabled children. In
addition the new Adolescent Resource Centre was opened in October, which supports
four specialist foster carers. The young people in our care have a range of complex
needs and many need help in making sense of traumatic events, which have happened
to them in the past. We seek to provide them with good adult role models and help
them have happy and secure relationships, which will help guide them into a happier
adulthood.

Some children who are severely disabled may be placed in residential care because
their families cannot provide the specialist care or support they need.




                                              5
                                 INTRODUCTION
Children, Schools and Families (continued)

Child protection

CSF has a lead role in the Hertfordshire Safeguarding Children Board (HSCB). The
HSCB is a statutory Board with an independent Chair and is responsible for promoting
the welfare of children and ensures the effectiveness of the work delivered by those
agencies involved in Child Protection Services.

Services for young people

When a disabled young person needs continued care and support we work closely with
our colleagues in Adult Care Services and Youth Connexions Hertfordshire to ensure a
smooth transition.
Our Youth Teams within Education Support Centres provide alternative education for
young people who are not in school.

Youth Connexions Hertfordshire

Youth Connexions Hertfordshire is the name of the integrated youth support service for
all young people aged 13-19 within this county. It provides information, advice,
guidance and support on a number of issues for young people as well as access to
positive activities such as music, drama and sport in both building based and detached
youth work settings.

Young people engage with the service on a voluntary basis in both formal and informal
settings such as schools, colleges, work based learning provisions, youth centres,
mobile provision, and through detached work.

Education in Hertfordshire

Hertfordshire has 523 schools across a diverse range of organisations including:
nursery, infant, first, junior, primary, middle, secondary (11 to 19) special schools and
ESCs (education support centres). There are almost 180,000 children and young
people in our schools along with about 8,000 teachers and 17,000 support staff.

Hertfordshire has a learning partnership in place which sets out the way that schools
and the authority work together. It also details the arrangements for monitoring,
support, challenge and, when appropriate, intervention for schools. This work is
supported by a range of advisory services staffed by school improvement professionals
and educational experts. Training and consultancy is also provided against a number
of national initiatives alongside an extensive programme of traded support for school
improvement.




                                           6
                                  INTRODUCTION
Children, Schools and Families (continued)

Libraries, Culture and Learning

Libraries provide a service covering every settlement in the county through a network
of 48 libraries; 10 mobile vehicles (approx. 350 stops); 4 community service vehicles
delivering a service to more than 400 residential centres; and one prison library. In
year ending March 2009, libraries issued 7.2 million books, videos and DVDs, and
music recordings and over 5.5 million visits were made to use libraries for study,
reading newspapers and journals or other library related activities. There are currently
536 free access public computer terminals available for using the Internet, the on-line
catalogue and other applications.

The Schools Library Service provides a traded service to schools. In 2009/10, 59% of
primary schools and 61% of secondary schools have bought either an annual contract
or chosen from a menu of specific services. The SLS mobile visited 144 schools, 967
books were added to school libraries via the assisted purchase scheme. A further
39,480 books were issued to schools in Reading for Enjoyment packs. 211 advisory
sessions in schools were delivered and 47 training events arranged for teaching staff.

Hertfordshire Archives and Local Studies is the specialist centre for Hertfordshire's past
and its people. It aims to collect, preserve and promote original documents and printed
material covering every aspect of life in the county, including the environment,
businesses, institutions and societies. Herts Museums Partnership is supported through
subscriptions from HCC and the Districts, and the Museum Development Fund through
the Renaissance in the Region national initiative from the Museums, Libraries and
Archives Council (MLA). Its main aims are to improve and develop museum services
(independent charities and those run by the Districts), and raise awareness of the value
of museums to the wider community.

Hertfordshire Adult and Family Learning (HAFLS) is the HCC lead service which
specialises in adult and family learning programmes. Primarily funded by the Learning
and Skills Council it is one part of a group of adult learning services supported by the
authority which include Adult Care Services, Countryside Management Services,
Libraries, Culture and Learning. HAFLS also has lead responsibility for planning English
for Speakers and Other Languagues (ESOL) and Informal Adult Learning.


Resources and Performance

The Resources & Performance department provides for the strategic management of
the council. The service plays a vital role through support services and activities in
working towards the key priorities set out in the Corporate Plan.




                                            7
                                   INTRODUCTION
Resources and Performance (continued)

        Herts HR - Provides strategic direction, advice, policy guidance and operational
         and transactional support to the county council and its departments, to enable
         the organisation to maximise one of its major assets - its staff.

        Hertfordshire Property - Provides professional services in all aspects of property
         and accommodation services, including strategic asset management planning,
         estates and planning services, facilities management, and construction project
         and programme management services.

        Herts Finance - Gives strategic advice and support to key financial processes.
         This includes preparing the county council’s annual revenue and capital
         budgets and accounts, setting and monitoring financial standards, providing
         financial advice and support for all council departments and managing the
         Hertfordshire Local Government Pension Fund for the county council, district
         councils, Hertfordshire University and many other public bodies and
         organisations.

        Information Technology - Provides management of Information Technology,
         Corporate Information Systems and Performance Management solutions within
         the organisation

Strategy and Partnerships

The Strategy and Partnerships department brings together support services for both
external and internal customers, and work with partners. The department leads on the
work with members through its democratic core. It also provides efficient and effective
delivery of a group of frontline and support services.

       Strategic Partnerships - This team is responsible for ensuring Hertfordshire has a
        strong partnership network and culture, to ensure all partners work together to
        address the problems and challenges facing our communities.

       Communications - Is responsible for developing and implementing the council’s
        corporate and departmental communications strategies, delivering both strategic
        and day to day communications activity.

       Customer Service Centre - Deals with telephone calls, emails and post from the
        public on behalf of all service departments.

       Legal Services - Provides high quality legal and administrative services to enable
        the county council to carry out its policies and statutory obligations within the law
        and the council’s own procedures.




                                              8
                                 INTRODUCTION
Strategy and Partnerships (continued)

     Trading Standards - Protects consumers and businesses by investigating unfair
      and illegal business practice and helping to ensure Hertfordshire has safe, strong
      and healthy communities.

     Coroners Service - Provides administrative and investigatory services to Her
      Majesty’s Coroner for the district of Hertfordshire.

     Registration Service - Responsible for registering births, deaths, marriages and
      civil partnerships in Hertfordshire.

Environment and Commercial Services

The Environment and Commercial Services Department provides critical services that
enable people to go about their daily business.

Traffic in the county is nearly 50% higher than the national average, and we strive to
make sure that those undertaking any one of the county’s 4.5 million daily journeys can
be reasonably confident of an uneventful trip, whatever the time of day or night, and
whatever the weather. The advice and support our department provides on the county
council’s £750 million worth of contracts helps to ensure that our residents can expect
value for money from their public services. Our planning unit provides a strategic input
into plans for development in the county and deal with some difficult planning
applications for waste and minerals.

Every weekday, we take approximately 25,000 of the county’s children to school and
feed up to 55,000 of them. The county’s one million residents can say goodbye to their
household waste at the kerbside, confident that we will deal responsibly and efficiently
with the 540,000 tonnes per year that Hertfordshire’s district councils collect. A walk in
the country on any one of our 5,200 public rights of way is an easily accessible pleasure
for most of our residents. The work of our department is fundamental to meeting the
county council’s ambitious carbon reduction targets.

In such a diverse place, our job is anything but routine: the work of our department
makes sure that there are plans in place to help us support our residents and maintain
our services in times of emergency.

All the careful work we do behind the scenes – maintaining, measuring, monitoring,
checking, planning – is vital to the wellbeing of Hertfordshire’s residents and
businesses. Our work touches on the lives of just about everyone who lives, works or
travels in the county.




                                            9
                                INTRODUCTION
Fire and Rescue

Hertfordshire Fire and Rescue Service’s (HFRS) primary purpose is to;

       prevent fires and other emergencies from happening by improving safety
        awareness through pro-active educational programmes

       protect the pubic by securing the safety of people who use, live and work in all
        buildings in Hertfordshire, and

       respond to fires and other emergencies when they occur.

HFRS aims to reduce deaths, accidents and injuries and mitigate damage to property
and the environment by responding effectively and appropriately to emergency
situations.

Prevention

Hertfordshire Fire and Rescue Service work hard to improve community awareness of
how people can improve their own personal safety. These pro-active educational
programmes are targeted at areas that can make a real difference to peoples' lives. The
primary objective is to actively engage with all parts of the community, across all age
ranges and backgrounds, in order to reduce the number of people who suffer injury or
death from fires and other accidents including on the roads.
Hertfordshire Fire and Rescue Service promotes improved community safety and
awareness by visiting people in their own homes, educating children in schools,
meeting with businesses and working in partnership with the voluntary sector and other
partners in the public and private sectors. The importance of educational programmes
is recognised nationally and all fire and rescue services have increased their community
fire safety activities over recent years.

Protection

There are more than 32,000 business properties in Hertfordshire and a large number of
other properties including residential homes for older people, schools and multi-
occupancy premises for which there is a statutory requirement to consult the Fire and
Rescue Service. The consultation process provides the opportunity to give advice and
seeks to ensure that compliance with statutory requirements is maintained and that
large and complex developments are built using best practice principles. Much of this
work is with local authority building control departments but an increasing amount is
undertaken directly with approved inspectors who are commissioned directly by the
developers.




                                          10
                               INTRODUCTION
Fire and Rescue (continued)

Response

This is the part of the Service that is most recognisable to the wider community. The
Fire and Rescue Service provides a wide range of support to people who call for help
and assistance. Emergency calls received from the public range in size and complexity
and on occasions require assistance from surrounding Fire and Rescue Services. A
wide range of vehicles are used to respond efficiently to the needs of the community
and the increasing threat from climate change and wide area flooding increases the
roles and responsibilities of the Fire and Rescue Service.

Firefighters attend a wide range of incidents including fires, dealing with hazardous
materials, road traffic collisions, railway incidents and flooding.


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




                                         11
         REPORT BY THE CHIEF FINANCIAL OFFICER
1.   Introduction

     The accounts have been prepared in accordance with the 2009 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 core accounting statements comprise:

            Income and Expenditure Account

            Statement of Movement on the General Fund Balance

            Statement of Total Recognised Gains and Losses

            Balance Sheet

            Cash Flow Statement

            Notes to the core statements

            Pension Fund Accounts.

     A brief introduction precedes these core financial statements.


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 2009, 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.




                                        12
             REPORT BY THE CHIEF FINANCIAL OFFICER
4.   Change of Accounting Policies

     Council Tax (Collection Fund Income)

     The 2009 Accounting Code of Practice (ACOP) for Local Authorities introduced
     one significant change which has been reflected in the Statement of Accounting
     Policies. Up to 2008/09 the Council was required to include Council Tax income
     in the Income and Expenditure Account at the amount that under regulation was
     required to be transferred from the Collection Fund to the General Fund. From
     1st April 2009 the Council Tax income included in the Income and Expenditure
     Account for the year shall be the Council’s share of accrued income due for the
     year. As this is a material change in accounting policy, prior year adjustment has
     been made to the 2008/09 corresponding amounts.

     No prior year adjustment to the Income and Expenditure Account or Statement of
     Movement on the General Fund Balance has been made in respect of National
     Non-Domestic Rates (NNDR) income as the accounting policies followed by the
     Council are in accordance with those required by the SORP.

     Private Finance Initiative

     The accounting requirements for the Private Finance Initiative (PFI) and similar
     contracts are no longer based on the UK accounting standard FRS 5 but on
     International Financial Reporting Standards (IFRS).

     Private Finance Initiative (PFI) transactions
     Local Authorities have to account for infrastructure PFI schemes where
     the Local Authority controls the use of the infrastructure and the
     residual interest in the infrastructure at the end of the arrangement,
     following the principles of the requirements of IFRIC 12. The Council
     therefore recognises the PFI asset as an item of property, plant and
     equipment together with a liability to pay for it. The services received
     under the contract are recorded as operating expenses.

      The annual unitary payment is separated into the following component
      parts, using appropriate estimation techniques where necessary:
     a) Payment for the fair value of services received;
     b) Payment for the PFI asset, including finance costs; and
     c) Payment for the replacement of components of the asset during
           the contract (lifecycle replacement).

     Services received
     The fair value of services received in the year is recorded under the
     relevant expenditure headings within the Income and Expenditure
     Account.




                                         13
            REPORT BY THE CHIEF FINANCIAL OFFICER
4.   Change of Accounting Policies (continued)

     PFI Asset
     The PFI assets are recognised as property, plant and equipment, when
     they come into use. The assets are measured initially at fair value in
     accordance with the principles of IAS 17. Subsequently, the assets are
     measured at fair value, which is kept up to date in accordance with the
     Council’s approach for each relevant class of asset as set out in the
     statement of accounting policies (pages 36/37).

     PFI liability
     A PFI liability is recognised at the same time as the PFI assets are
     recognised. It is measured initially at the same amount as the fair value
     of the PFI assets (less any capital contributions) and is subsequently
     measured as a finance lease liability in accordance with IAS 17.

      An annual finance cost is calculated by applying the implicit interest rate
      in the lease to the opening lease liability for the period, and is charged
      to ‘Interest Payable’ within the Income and Expenditure Account.

      The element of the annual unitary payment that is allocated as a
      finance lease rental is applied to meet the annual finance cost and to
      repay the lease liability over the contract term.

      An element of the annual unitary payment increase due to cumulative
      indexation is allocated to the finance lease. In accordance with IAS 17,
      this amount is not included in the minimum lease payments, but is
      instead treated as contingent rent and is expensed as incurred. In
      substance, this amount is a finance cost in respect of the liability and
      the expense is presented as a contingent ‘Interest Payable’ within the
      Income and Expenditure Account.

     Lifecycle replacement
     Components of the asset replaced by the operator during the contract
     (lifecycle replacement) are capitalised where they meet the Council’s
     criteria for capital expenditure. They are capitalised at the time they are
     provided by the operator and are measured initially at their fair value.

      The element of the annual unitary payment allocated to lifecycle
      replacement is pre-determined for each year of the contract from the
      operator’s planned programme of lifecycle replacement. Where the
      lifecycle component is provided earlier or later than expected, a short-
      term finance lease liability or prepayment is recognised respectively.




                                         14
               REPORT BY THE CHIEF FINANCIAL OFFICER
4.    Change of Accounting Policies (continued)

        Where the fair value of the lifecycle component is less than the amount
        determined in the contract, the difference is recognised as an expense
        when the replacement is provided. If the fair value is greater than the
        amount determined in the contract, the difference is treated as a ‘free’
        asset and a deferred income balance is recognised. The deferred
        income is released to the operating income over the shorter of the
        remaining contract period or the useful economic life of the replacement
        component.

        Assets contributed by the Council to the operator for use in the
        scheme
        Assets contributed for use in the scheme are recognised as items of
        property, plant and equipment in the Council’s Balance Sheet.


5.    Restatement of Previous Year’s Accounts

In addition to the above changes in accounting policy the council has made the
following change to the 2008/09 balance sheet.

Interest Accruals

Accruals for interest payable and receivable as at 31 March 2009 were shown within the
carrying amount of the associated financial instrument. This resulted in such amounts
being shown within long term borrowing and long term investments whereas the SORP
requires these amounts to be separated from the relevant financial instrument and
shown within current liabilities – short term borrowing and current assets – short term
investments.

The impact of the above and the changes in accounting policy on the Income and
Expenditure Account, Statement of Movement on General Fund Balance, Statement of
Total Recognised Gains and Losses and Balance Sheet comparative figures for
2008/09 compared with those published in the 2008/09 Statement of Accounts is shown
in Note 1 to the accounts.

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 prudently.

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.

                                           15
              REPORT BY THE CHIEF FINANCIAL OFFICER
6.    The Prudential Code for Capital Finance in Local Authorities (continued)

In developing the 2009/10 revenue and capital budgets the council set its own
borrowing levels within limits identified by Prudential Code indicators. The borrowing
limits for 2009/10 are shown in the following table. The council operated within these
limits during 2009/10.

             Limit                      Description                  £000

       Authorised limit    This represents the limit beyond which    407,000
       for external debt   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.

       Operational         This indicator is based on the probable   390,000
       boundary for        external debt during the course of the
       external debt       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.




                                         16
           REPORT BY THE CHIEF FINANCIAL OFFICER
7.   Financial Summary 2009/10

     Revenue

     In 2009/10 the council’s revenue spending was £16.277 million lower than its
     sources of income.

     The following summary of the council’s revenue monitor showing an underspend
     of £6.686 milion against the latest approved budget, was presented to the
     Cabinet on 21 June 2010.

                                       Latest
                                      Approved                 Over/(under)
                                       Budget      Actual         spend
        Service/Budget Heading          £000        £000      £000      %
     Children, Schools & Families       216,651    222,570     5,919      2.7
     Adult Care Services                288,564    289,386       822      0.3
     Environment & Commercial
     Services                           125,594    122,429    (3,165)      (2.5)
     Fire & Rescue Service               40,356     40,276        (80)     (0.2)
     Strategy & Partnerships             11,334     10,431      (903)      (8.0)
     Resources & Performance              3,865      5,266      1,401      36.2
     Central Capital Financing and
     Interest on Balances                39,885     33,148    (6,737)     (16.9)
     Service Total                      726,249    723,506    (2,743)      (0.4)
     Other Budgets
     Contingency/Special Provision         6,434      5,511     (923)     (14.3)
     Review of Balance Sheet                   0    (2,327)   (2,327)    (100.0)
     Precepts                              2,232      2,237         5        0.2
     Non Distributed costs                   931        931         0        0.0
     Capital Charges                    (68,629)   (68,629)         0        0.0
     FRS17 - Pensions Interest Cost
     & Expected Return on Assets          28,250     28,250         0        0.0
     Pension Reserve Appropriation      (13,443)   (13,443)         0        0.0
     Central Unallocated Grants                0      (698)     (698)    (100.0)
     Funded from Reserves               (11,322)   (11,322)         0        0.0
     Total                              670,702    664,016    (6,686)      (1.0)




                                       17
           REPORT BY THE CHIEF FINANCIAL OFFICER
7.   Financial Summary 2009/10 (continued)

     Revenue

     The movement from the revenue monitor underspend to the position reported in
     these accounts is shown in the following table.


                                                                      £’000
     Planned Use of Reserves as per 2009/10 budget                    6,686
     Less Specific Reserves applied to 2099/10 budget               (11,322)
     Less carry forward requests                                        (468)
     Adjustments relating to Collection Fund restatement             21,318
     Other minor adjustments                                              63
                                                                     16,277
     General Fund Balances as at 1 April 2009                        36,496
     General Fund Balances as at 31 March 2010                       52,773



     Capital

     In 2009/10 the council spent £192.769 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 council regularly
     reviews its property portfolio to identify opportunities for recycling and disposal to
     assist the achievement of its capital programme.

     Balance Sheet

     Material liabilities incurred outside the normal course of business relating to the
     increase in the pension fund deficit and the impairment of fixed assets are
     explained in detail in note 8 (Other Developments).

     External Borrowing

     During 2009/10 there was a reduction in principal amounts of external
     borrowings owed to third parties of £48.8 million resulting in total external
     borrowing liabilities of £290.8 million as at 31 March 2010. Analysis of this
     reduction is shown below. Maturity analysis of this borrowing is shown in the
     notes to the accounts, at carry value.



                                           18
              REPORT BY THE CHIEF FINANCIAL OFFICER
7.    Financial Summary 2009/10 (continued)


                                             New                         Increase /
                    Lender                  Loans          Repaid       (Decrease)
                                           £ million      £ million       £ million
       Public Works Loan Board                     0         (48.8)           (48.8)
       Other External Lenders                      0              0                 0
       Total                                       0         (48.8)           (48.8)


8.   Other Developments

      Icelandic Bank Deposits

      Early in October 2008, the Icelandic banks Landsbanki, Glitnir, and Kaupthing
      collapsed and the UK subsidiaries of the banks, Heritable and Kaupthing Singer
      and Friedlander (KSF) went into administration. The Council had £28m
      deposited across these institutions, with varying maturity dates and interest
      rates.

      Following these events the Council commissioned a review by of treasury
      management procedures by PricewaterhouseCoopers (PWC). In response to
      PWC’s report, a more stringent treasury management policy was adopted from
      March 2009 and the recommended procedural changes have been implemented.

      The potential impairment of the Icelandic deposits has been accounted for in
      accordance with guidance issued by the Local Authority Accounting Panel of the
      Chartered Institute of Public Finance and Accountancy (CIPFA) in May 2010.

      For UK registered banks, Heritable and Kaupthing, Singer and Friedlander (KSF)
      the assumed return to creditors is based on the administrators’ latest progress
      report. For Heritable, a report was issued in January 2010 estimating a total
      distribution in the range of 79p to 85p in the pound. For KSF, the administrators’
      April 2010 report estimated a total distribution in the range of 65p to 78p in the
      pound. The administrators for the two UK administered banks paid out dividends
      to the Council totalling £3.7m in 2009/10.




                                          19
             REPORT BY THE CHIEF FINANCIAL OFFICER
8.   Other Developments (continued)

     For Iceland based banks the assumed return is based on the assumption that
     local authorities will achieve preferential creditor status. This will be determined
     by the Icelandic Courts and it is unlikely that a decision will be reached until the
     second quarter of 2011. Should the Council obtain preferred creditor status
     then the anticipated rates of return have been based on the latest information
     available. For Landsbanki, this is based on the latest creditors’ report issued on
     March 26, 2010 where the projected return for priority status creditors is 94.86p
     in the pound.     For Glitnir, the projected return for priority status creditors has
     been based on information contained in the 2009/10 Accounts at 100% recovery.

     For 2009/10, impairment loss recognised in the Income and Expenditure Account
     is £0.539m, (£8.319m cumulative to 31 March 2010). This has bee calculated by
     discounting the assumed cash flows at the effective interest rate of the original
     deposits in order to recognise the anticipated loss of interest to the Council until
     monies are recovered.

     It should be noted that the currently available information is not definitive. The
     amounts and timings of payments may require further adjustments to the
     accounts in future years. Given the remaining risks the authority has set aside a
     further £5.511 million to increase the special provision for Icelandic deposits at
     risk.

     To assist local authorities to manage the impact of the Icelandic banking collapse
     the government issued regulations permitting local authorities to defer
     recognising any loss on bank deposits for two years until the financial year
     2010/11. In accordance with these regulations, the Council will defer the impact
     of the impairment until 2010/11.

     Pension fund deficit

     The primary reasons for the increase in the Pension Fund deficit in 2009/10
     relates to adverse changes in financial assumptions and mortality assumptions
     used in the actuarial valuation of the Pension Fund. The real discount rate used
     to value the Pension Fund liabilities has decreased significantly from 3.7% p.a.
     as at 31 March 2009 to 1.6% p.a. as at 31 March 2010. This is due to a fall in
     corporate bond yields over the year combined with an increase in the level of
     inflation expectations. Mortality assumptions have also been adjusted to reflect
     improved life expectancy. These factors have outweighed the positive return on
     assets of the Pension Fund for 2009/10.




                                          20
             REPORT BY THE CHIEF FINANCIAL OFFICER
8.    Other Developments (continued)

      Budget 2010/11

      On 23 February 2010 the council approved a revenue budget of £738.205 million
      for 2010/11, after using £14.294 million of reserves, plus a schools budget of
      £667.497 milion. The meeting also approved a capital budget for 2010/11 of
      £175.527 million. Budgeted sources of finance are shown in the following table.

                                                    Revenue          Capital
                                                      £000            £000
       Income from the Collection Fund               499,215
       General Government Grants                      85,337
       Redistributed National Non-Domestic Rates     153,653
       Capital Receipts                                                5,000
       Capital Grants                                                 70,023
       Developers Contributions                                        7,243
       Revenue Contributions                                          17,704
       Reserves                                                        6,300
       Borrowing                                                      69,257
                                                      738,205        175,527

     The budget resolutions resulted in a council tax increase of 0% producing a
     charge of £1,118.83 for a band D property. Further information on the council’s
     budget can be found on its website www.hertsdirect.org.




      M Parsons
      Chief Financial Officer




                                         21
              STATEMENT OF ACCOUNTING POLICIES
This section explains the accounting policies that the council has applied in preparing
these accounts.

General Principles

The accounts have been prepared in accordance with the Code of Practice on Local
Authority Accounting in the United Kingdom – A Statement of Recommended
Practice 2009 (the SORP), the Best Value Accounting Code of Practice (BVACOP)
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.

Back Pay Arising From Unequal Pay Claims

Provision in accordance with the SORP has been made for back pay relating to
unequal pay arising from the implementation of the single status agreement. In some
cases these claims can take several years to settle. Central government regulations
providing discretion to authorities to defer charging unequal pay back pay
expenditure, or social security costs or other costs incurred by the council in relation
to that back payment to General Fund Balances, until the date on which the authority
must pay the back payment have been applied. The difference between the amount
of expenditure included in the Income and Expenditure Account in each year for
unequal pay back pay claims and the amount under the regulations charged to the
General Fund is included as a reconciling item in the Statement of Movement on the
General Fund Balance and is the balance on the Equal Pay Reserve.


Capital Accounting Accounts

These comprise:-

      the Revaluation Reserve which represents the balance of the surpluses or
       deficits arising on the periodic revaluation of fixed assets analysed on an
       individual asset basis. Generally an individual asset should not have a
       negative revaluation balance no matter how much the Reserve overall might
       be in surplus, and

      the Capital Adjustment Account represents an initial transfer from the Fixed
       Asset Restatement Account and Capital Financing Account, amounts set
       aside from revenue resources or capital receipts to finance expenditure on
       fixed assets, provision 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.



                                           22
              STATEMENT OF ACCOUNTING POLICIES
Capital Receipts

When an asset is disposed of the value of the asset in the balance sheet is written
off to the Income and Expenditure Account as part of the gain or loss on disposal.
Any revaluation gains in the Revaluation Reserve applicable to the asset disposed of
are transferred to the Capital Adjustment Account. Receipts from disposals are
credited to the Income and Expenditure Account. The gain 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 at current value. Following the decision
to dispose such current valued assets are revalued. In accordance with the SORP
and FRS3 Reporting Financial Performance, gains or losses on disposal of fixed
assets are included within the Statement of Total Recognised Gains and Losses.

Capital receipts are required to be credited to the Usable Capital Receipts reserve
and 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 separate
arrangements for capital financing. Amounts are appropriated to the Capital
Adjustment Account from the Statement of Movement on the General Fund Balance.

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 as
usable capital receipts.

Charges to Revenue for Fixed Assets

Service revenue accounts, support services and trading accounts are charged with
the following amounts to record the real cost of holding fixed assets during the year:

      depreciation attributable to tangible fixed assets used in service delivery
      amortisation of intangible fixed assets used in service delivery
      impairment losses due to consumption of economic benefits on intangible
       and tangible fixed assets used in service delivery and other losses where
       there are no accumulated gains in the Revaluation Reserve against which
       they can be written off.

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




                                           23
              STATEMENT OF ACCOUNTING POLICIES
Charges to Revenue for Fixed Assets (continued)

The council is not required to raise council tax 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 either an amount calculated on a prudent basis determined by the council
in accordance with statutory guidance, or loans fund principal charges).
Depreciation, impairment losses and amortisation charges are therefore reversed
and replaced by a revenue provision for debt repayment in the Statement of
Movement on the General Fund Balance. These adjusting entries are reflected in
the Capital Adjustment Account.

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 of
notes to the accounts.

Council Tax (Collection Fund Income)

Up to 2008/09 the SORP required the Council Tax income included in the Income
and Expenditure Account to be the amount that under regulation was paid from the
Collection Fund to the council, a major preceptor. From the year commencing 1 April
2009 the Council Tax income included in the Income and Expenditure Account for
the year shall be the accrued income for the year. The difference between the
income included in the Income and Expenditure Account and the amount required
by regulation to be credited to the General Fund is taken to the Collection Fund
Adjustment Account and included as a reconciling item in the Statement of
Movement on the General Fund Balance. The council will recognise debtors in the
Balance Sheet for its attributable share of net cash collected from Council Tax by
billing authorities but not paid over to it at the Balance Sheet date or creditors for
cash received from billing authorities in advance of the billing authority receiving the
cash from Council Tax payees.




                                            24
               STATEMENT OF ACCOUNTING POLICIES
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
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 council provides for known and uncollectable debts on the basis shown
below. 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



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 not provided for in the year in which assets are acquired. The depreciation
charge is abated where assets are disposed of during the financial year.

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

Revaluation gains are also depreciated, with an amount equal to the difference
between current value depreciation charged on assets and the depreciation that
would have been chargeable based on their historical cost being transferred each
year from the Revaluation Reserve to the Capital Adjustment Account.




                                            25
              STATEMENT OF ACCOUNTING POLICIES
The periods over which the various types of asset are depreciated are:

Depreciation (continued)

                        Asset Type                 Years

       Buildings                                   10 – 100

       Vehicles, Plant and Equipment                 3 – 30

       Infrastructure                                8 – 60

Building lives have now been extended to 100 years (from 60 years) to reflect the life of
listed properties.


Estimation Techniques

Estimation techniques, the steps taken to arrive at monetary values for transactions and
balances, together with the exercise of professional judgement are used in producing
the statement of accounts in compliance with the SORP and within statutory deadlines.
The main areas where such techniques are applied relate to:

      the estimation of, mainly primary school’s debtor, creditor and cash positions as
       at 31 March. This process has been adopted due to earlier statutory closure
       deadlines and the devolved nature of Hertfordshire schools.


Exceptional items, extraordinary items and prior period adjustments

Exceptional items are included in the cost of the service to which they relate when to do
so would not distort the service expenditure. Otherwise they would be disclosed on the
face of the Income and Expenditure Account after ordinary activities of the council.
Extraordinary items would be disclosed on the face of the Income and Expenditure
Account after ordinary activities of the council. Prior period adjustments, if material,
would be accounted for by restating comparative figures for the preceding accounting
period.




                                           26
               STATEMENT OF ACCOUNTING POLICIES
Financial Instruments - Assets

Financial assets are classified into two types:

      loans and receivables – assets that have fixed or determinable payments but are
       not quoted in an active market

      available-for-sale assets – all financial assets not classified as loans and
       receivables. This includes equity investments other than those for which a
       reliable fair value cannot be determined and other investments traded in an
       active market.

The council has not invested in available-for-sale assets.


Loans and Receivables

Loans and receivables are initially measured at fair value and carried at their amortised
cost. Annual credits to the Income and Expenditure Account for interest receivable are
based on the carrying amount of the asset multiplied by the effective rate of interest for
the instrument. For most of the loans that the council has made, this means that the
amount presented in the Balance Sheet is the outstanding principal receivable and
interest credited to the Income and Expenditure Account is the amount receivable for
the year in the loan agreement.

The council has made a number of loans to third parties at less than market rates (soft
loans). Where a soft loan is made, a loss is recorded in the Income and Expenditure
Account for the present value of the interest that will be foregone over the life of the
instrument, resulting in a lower amortised cost than the outstanding principal. Interest is
credited at a marginally higher effective rate of interest than the rate receivable from the
third party, with the difference serving to increase the amortised cost of the loan in the
Balance Sheet. Statutory provisions require that the impact of soft loans on the General
Fund Balance is the interest receivable for the financial year – the reconciliation of
amounts debited and credited to the Income and Expenditure Account to the net gain
required against the General Fund Balance is managed by a transfer to or from the
Financial Instruments Adjustment Account in the Statement of Movement on the
General Fund Balance.

Where assets are identified as impaired because of a likelihood arising from a past
event that payments due under the contract will not be made, the asset is written down
and a charge made to the Income and Expenditure Account.




                                            27
               STATEMENT OF ACCOUNTING POLICIES
Financial Instruments – Liabilities

Financial liabilities are initially measured at fair value and carried at their amortised cost.
Annual charges to the Income and Expenditure Account for interest payable are based
on the carrying amount of the liability, multiplied by the effective rate of interest for the
instrument. For most of the borrowings that the council has, this means that the amount
presented in the Balance Sheet is the outstanding principal repayable and interest
charged to the Income and Expenditure Account is the amount payable for the year in
the loan agreement.

Gains and losses on the repurchase or early settlement of borrowing are credited and
debited to Net Operating Expenditure in the Income and Expenditure Account in the
year of repurchase or settlement. However, where repurchase has taken place as part
of a restructuring of the loan portfolio that involves the modification or exchange of
existing instruments, the premium or discount is respectively deducted from or added to
the amortised cost of the new or modified loan and the write-down to the Income and
Expenditure Account is spread over the life of the loan by an adjustment to the effective
interest rate.

Where premiums and discounts have been charged to the Income and Expenditure
Account, regulations allow the impact on the General Fund Balance to be spread over
future years. The reconciliation of amounts charged to the Income and Expenditure
Account to the net charge required against the General Fund Balance is managed by a
transfer to or from the Financial Instruments Adjustment Account in the Statement of
Movement on the General Fund Balance.

The council is not aware of any position where it has acted as guarantor in relation to
the issue of a financial instrument. If the council were to issue any such guarantee in
the future it would be required to recognise such a liability at fair value. Fair value would
be estimated by considering the probability of the guarantee being called and the likely
amount payable under the guarantee. Such recognition at fair value would impact on
the council’s general fund balances.




                                              28
               STATEMENT OF ACCOUNTING POLICIES
Government Grants and Contributions

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

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

Grants to cover general expenditure such as Revenue Support Grant and Area
Based Grant are shown at 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 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 (e.g. software licences). Intangible assets are
recorded at cost and amortised to the relevant service revenue account on a
systematic basis over their estimated useful economic lives which range from five to
ten years.




                                            29
               STATEMENT OF ACCOUNTING POLICIES
Landfill Allowance Trading Scheme

The Landfill Allowance Trading Scheme began on 1 April 2005 and will operate for a 15
year period to 31 March 2020. The Department for Environment, Food and Rural Affairs
(DEFRA) has allocated tradable landfill allowances to each waste disposal authority in
England.

If the council were to landfill waste in excess of its allowance it would need to:


       buy the additional allowances required from another waste disposal
        authority; or
       with agreement, bring forward allowances from the following year; or
       pay a financial penalty to DEFRA.


Allocated landfill allowances are shown as current assets. The liability for the current
financial year in respect of waste disposed to landfill is reflected in provisions. Surplus
allocated allowances, should they have a market value, are shown within specific
reserves.

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

The costs of overheads and support services are charged to those that benefit from the
supply or service with the exception of costs relating to the Corporate and Democratic
Core and Non Distributed Costs which have been identified in accordance with the Best
Value Accounting Code of Practice and are shown as separate headings in the Income
and Expenditure Account, as part of the Net Cost of Services.




                                             30
              STATEMENT OF ACCOUNTING POLICIES
Pensions

The council participates in three different pension schemes that meet the
needs of employees in particular services. All the schemes provide members with
defined 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 of 14.1% for 2009-10, 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 2009-10 the council paid an
       employer contribution rate of 20.6% of pensionable pay.

The Uniformed Fire fighters and Local Government Pension Schemes are both
accounted for, under FRS17 Retirement Benefits, as defined benefit 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 future 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).




                                           31
              STATEMENT OF ACCOUNTING POLICIES
Pensions (continued)

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

      quoted securities – current bid price
      unquoted securities – professional estimate
      unitised securities – current bid price
      property – market value

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

      current service cost – the increase in liabilities as a 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

    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 actuary has updated previous
     assumptions – debited or credited to the Statement of Total Recognised
     Gains and Losses.




                                           32
              STATEMENT OF ACCOUNTING POLICIES
Pensions (continued)

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

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.

Private Finance Initiative

The council fully complies with International Reporting Standards (IFRS) in accounting
for its Private Finance Initiative contract.

The council currently has one Private Finance Initiative scheme and accounts for
unitary payments in respect of this scheme, net of any performance deductions as a
revenue cost on an accruals basis. The council also accounts for Private Finance
Initiative grant on an accruals basis, with amounts not yet required to fund the capital
related element of the accrued unitary payments placed in an earmarked reserve.

Accounting treatment for the PFI scheme is set out on page 13 to 15 of the Statement
of Accounts. This represents a change in accounting policy in 2009/10.

Provisions

Provisions are made where an event has taken place that gives the council an
obligation that probably requires settlement by a transfer of economic benefits,
but where the timing of the transfer is uncertain.

Provisions are charged to the appropriate service revenue account in the year
that they are recognised and are detailed in the notes to the accounts.
Expenditure incurred on items for which the provision was originally set up is
charged directly to the provision. 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.




                                           33
            STATEMENT OF ACCOUNTING POLICIES
Revenue Expenditure Funded from Capital under Statute

Expenditure incurred during the year that may be capitalised under statutory
provisions but does not result in the creation of fixed assets has been charged
as expenditure to the relevant service revenue account in the year. Where the
council has determined to meet the cost of this expenditure from existing capital
resources or by borrowing, a transfer to the Capital Adjustment Account via the
Statement of Movement on the General Fund Balance then reverses out the
amounts charged in the Income and Expenditure Account thereby ensuring
there is no impact on the level of General Fund Balances.

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.

Certain reserves are kept to manage the accounting processes for tangible fixed
assets and retirement benefits and do not represent usable resources for the council
– these reserves are explained in the relevant accounting policy.

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 at the lower of cost and net realisable value.

Tangible Fixed Assets

Tangible fixed assets are assets that have physical substance and are held for use in
the provision of services or for administrative purposes on a continuing basis.

Recognition

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




                                           34
           STATEMENT OF ACCOUNTING POLICIES
Tangible Fixed Assets (continued)

De-minimis limits

The Council operates a number of de-minimis limits; this means that, whilst expenditure
may meet the definition of capital expenditure, it will nevertheless be treated as revenue
expenditure if the amount concerned is below a specified level. The de-minimis limits
are defined within Hertfordshire County Council’s (HCC) Accounting Policies, and may
be subject to amendment from time to time, following consultation with departments, to
ensure that they remain relevant and appropriate for services.

Measurement

Tangible fixed assets are valued on the basis recommended by CIPFA and in
accordance 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.

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

Infrastructure                         Depreciated historic cost.

Surplus land & buildings, held for     Market value.
disposal

Non Operational vehicles, plant        Depreciated historic cost.
and equipment

Assets under construction              Historic cost.


Revaluations

During 2004/05 a 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, other
permanent and material changes to asset valuations, as advised by the council’s
valuers will be accounted for in the interim period, as they occur.



                                             35
              STATEMENT OF ACCOUNTING POLICIES
Tangible Fixed Assets (continued)

Where a fixed asset is included in the Balance Sheet at current value, the increase over
the previous carrying amount at which that asset was included in the Balance Sheet
immediately prior to the latest (re-)valuation is credited to the Statement of Total
Recognised Gains and Losses and taken to the Revaluation Reserve except to the
extent it reverses revaluation losses (after adjusting for depreciation) on the same
assets that were previously recognised in the Income and Expenditure Account (or
Consolidated Revenue Account - Net Operating Expenditure) when it is recognised in
the Income and Expenditure Account.

Where on revaluation there has been a decrease from the previous carrying amount an
impairment loss has occurred. If the loss has been caused by the consumption of
economic benefits any such loss is recognised in the Income and Expenditure Account.
The amount of the decrease in value not associated with a consumption of economic
benefit is recognised in the Statement of Total Recognised Gains and Losses until the
asset’s carrying amount reaches its depreciated historical cost and taken to the
Revaluation Reserve; and thereafter in the Income and Expenditure Account.

Gains and losses resulting from revaluations are accounted for as follows.
The Statement of Total Recognised Gains and Losses (and therefore
Revaluation Reserve) is:

      credited with revaluation gains, except to the extent that they reverse
       previous revaluation losses (after allowing for depreciation) on the same
       asset that were charged to the Income and Expenditure Account

      debited with revaluation losses not associated with an impairment related
       to a clear consumption of economic benefit up to the balance on the
       Revaluation Reserve in respect of that asset.


The Income and Expenditure Account is:

      credited with any revaluation gains that reverse revaluation losses (after allowing
       for depreciation) on the same asset that were charged to services

      debited with revaluation losses associated with an impairment related to a clear
       consumption of economic benefit

      debited with revaluation losses not associated with a clear consumption of
       economic benefit in excess of the balance on the Revaluation Reserve in respect
       of that asset (i.e. in excess of the amount allowed to be debited to the Statement
       of Total Recognised Gains and Losses).




                                           36
           STATEMENT OF ACCOUNTING POLICIES
Tangible Fixed Assets (continued)

Impairment

The 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 balance sheet date. Accounting
for impairment of revalued tangible fixed assets is covered in the revaluation section of
this policy. Where an impairment loss on a tangible fixed asset carried at historical cost
caused by a clear consumption of economic benefit occurs, it is written down for the
impairment and the impairment loss is recognised in the Income and Expenditure
Account.

Land and Building Capital Expenditure

Land and building capital expenditure not considered to have added to the value of
fixed assets is treated as an impairment and written off to the Income and Expenditure
Account. To ensure a neutral effect this charge is reversed through the Statement of
Movement on General Fund Balance to the Capital Adjustment Account.

Value Added Tax

Value Added Tax (VAT) is included within either the revenue or capital accounts only
to the extent that it is irrecoverable. 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 be shown in either current assets or current liabilities on the balance
sheet.




                                            37
               THE STATEMENT OF RESPONSIBILITIES
This statement sets out the respective responsibilities of the council and the Chief
Finance Officer 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 Chief Finance Officer;

   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 2010.

I confirm that draft accounts were approved for submission to Audit by the Audit
Committee at the meeting held on 30 June 2010.

Signed on behalf of Hertfordshire County Council.




Seamus Quilty
Chairman
Audit Committee


Date: 30 June 2010




                                            38
               THE STATEMENT OF RESPONSIBILITIES
The Chief Finance Officer’s responsibilities

The Chief Finance Officer 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 Chief Finance Officer 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 Chief Finance Officer has also:

   kept proper accounting records which were up to date;

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

Chief Finance Officer's Certificate

I certify that the Statement of Accounts presents fairly the financial position of the
council, the Hertfordshire County Council Pension Fund and the Firefighters’ Pension
Fund as at 31 March 2010 and the income and expenditure for the year then ended.




M Parsons

Chief Finance Officer

30 June 2010




                                           39
               INCOME AND EXPENDITURE ACCOUNT
This statement is fundamental to the understanding of a local authority’s activities in
that it reports the net cost for the year of all the functions for which the authority is
responsible, and demonstrates how that cost has been financed from general
government grants and income from local taxpayers. It brings together expenditure and
income, on an accruals basis, relating to all of the local authority’s functions, in three
distinct sections, each divided by a sub-total. In addition to day-to-day expenses and
related income the statement includes transactions measuring the value of fixed assets
actually consumed and the real projected value of retirement benefits earned by
employees in the year.

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

       depreciation

       impairment losses identified on assets used to provide services, including
        capital expenditure, net of financing, not adding to fixed asset carrying amounts


       amortised revenue expenditure funded from capital and intangible assets

       support service overheads

       current and past service costs of pensions and gains and losses on settlements
        and curtailment of pensions

       losses recorded on making a soft loan

       gains recognised on receiving a loan at less than prevailing interest rates

       charges for the fair value of any financial guarantees given.


Contributions to or from specific reserves and revenue financing of capital expenditure
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 local
authority’s net operating expenditure.

The third section shows the income from local taxation and general, not attributable to
specific services, government grants in the period, to give the net deficit or surplus for
the year.




                                            40
                  INCOME AND EXPENDITURE ACCOUNT
                                                                 Gross         Gross
Net Cost                                                         Cost         Income        Net Cost
2008/09                                                         2009/10       2009/10       2009/10
 £000                                                  Note      £000           £000         £000

 266,946     Adult Social Care Services                           409,903      108,942        300,961
   2,102     Central Services to the Public                         4,610        2,546          2,064
 225,545     Children’s and Education Services                  1,230,187      963,565        266,622
   1,016     Court Services                                         1,081          183            898
             Cultural, Environmental, Regulatory and
  70,957     Planning Services                                    102,846        12,658        90,188
  41,099     Fire and Rescue Services                              44,357         1,646        42,711
  80,117     Highways and Transport Services                      104,447        16,710        87,737
     539     Other Housing Services                                24,265        23,357           907
   7,208     Corporate and Democratic Core                         27,410        15,075        12,335
  18,404     Non Distributed Costs                                 46,481         5,167        41,314
 713,933     Net Cost of Services                        2      1,995,587     1,149,849       845,737
             Exceptional Item – Fixed Asset              4
 429,344     Impairment                                                   -             -              -
             Exceptional Item – Icelandic Banks
   7,780     Investments                               4 & 28        539             -            539
  59,437     (Gain)/Loss on Disposal of Fixed Assets     5        35,053          2544         32,509
   2,212     Precepts and Levies                                   2,237             -          2,237
             (Surplus)/Deficit on Trading
   (1,189)   Undertakings                                6              -         2,390        (2,390)
    26,055   Interest Payable and Similar Charges        7         17,261             -        17,261
  (23,640)   Interest and Investment Income              7              -         5,698        (5,698)
   93,746    Pensions Interest Cost                     40         92,725             -        92,725
  (85,851)   Expected Return on Pension Assets          40              -        47,359      (47,359)
     2,623   Contribution in Lieu of Interest            8            412             -            412
   (1,023)   Insurance Fund                              9          9,566         6,465          3,101
1,223,427    Net Operating Expenditure                          2,153,380     1,214,305       939,075
 (479,140)   Income from the Collection Fund                            -       499,780     (499,780)
  (67,194)   General Government Grants                  10              -        80,591      (80,591)
             Distribution from Non-Domestic Rate
(149,951)          Pool                                                 -       140,953     (140,953)
 527,142     (Surplus) / Deficit for the year                   2,153,380     1,935,629       217,751




                                                  41
       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 council 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.

2008/09                                                                    2009/10
 £000                                                             Note      £000

            (Surplus) / deficit on the Income and Expenditure
 527,142    Account                                                         217,751

          Net additional amount required by statute or non-
          statutory proper practices to be debited or credited
(537,418) to the General Fund for the year                         11      (234,027)

 (10,276) (Surplus) / deficit for the year                                  (16,277)

 (26,220) General Fund Balance brought forward                              (36,496)

 (36,496) General Fund Balance carried forward                              (52,773)

            Amounts held within the General Fund Balance
            carried forward that are held by governors under
        0   schemes to finance schools                                               0

          Amount of General Fund Balance generally
 (36,496) available for new expenditure                                     (52,773)

 (36,496)                                                                   (52,773)




                                             42
       STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

Not all the gains and losses experienced by the council are reflected in the Income
and Expenditure Account. For example, gains on revaluations of fixed assets and
pension actuarial gains and losses are excluded as they are treated under UK GAAP
as arising from asset and liability valuation changes rather than from the council’s
operating performance. It is necessary to consider all gains and losses recognised in a
period when assessing the financial result for the period. FRS 3 Reporting Financial
Performance requires all gains and losses to be included in a Statement of Total
Recognised Gains and Losses (STRGL) to be shown with the same prominence as the
other primary statements.

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:

      the revaluation of fixed assets

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


  2008/09                                                                        2009/10
   £000                                                                           £000

   527,142    (Surplus) / deficit on the Income and Expenditure Account           217,751

   (72,474) Surplus arising on revaluation of fixed assets                       (101,326)

   185,589    Actuarial (gains)/ losses on pension assets and liabilities         584,146

    640,257 Total recognised (gains)/losses for the year                          700,571




                                               43
                               BALANCE SHEET
The balance sheet is fundamental to the understanding of an authority’s financial
position at the year-end. It shows the balances and reserves at the 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 council as a whole as at 31
March 2010.




                                          44
                                        BALANCE SHEET
                                                2009 (restated)               2010
                                        Note   £000         £000       £000           £000
Fixed Assets
Intangible Fixed Assets                  24                  5,280                      5,230
Tangible Fixed Assets                    25
Operational Assets
 Land and Buildings                                      2,193,094                   2,211,467
 Vehicles, Plant & Equipment                                69,700                      80,477
 Infrastructure Assets                                     419,884                     463,633
Non-operational Assets
 Surplus Land and Buildings, held
 for disposal                                              128,809                     104,213
 Vehicles, Plant & Equipment                                      0                          0
 Assets under construction                                   8,474                       6,983
                                                         2,825,241                   2,872,002
Long-term Investments                    28                 30,146                      28,646
Long-term Debtors                        29                 20,090                      18,576
PFI Debtor                                                    6,713                          -
Total Long-term Assets                                   2,882,190                   2,919,224
Current Assets
 Stocks and Work in Progress             30      4,205                   3,770
 Landfill Usage Allowances               31          0                       0
 Debtors                                 32     81,077                 112,368
 Short Term Investments                  28    214,561                  17,642
 Cash and Bank                                  80,620     380,463      93,496        227,277

Total Assets                                              3,262,653                  3,146,501
Current Liabilities
 Short-term Borrowing                    28      4,261                   8,073
 Creditors                               34    342,341                 331,310
 Related Parties                         35      2,704                   2,014
 Bank Overdraft                          36     81,177     430,483      87,520        428,917

Total Assets less Current Liabilities                    2,832,170                   2,717,538
Long-term Borrowing                      28    341,190                 287,453
Long-term PFI Liabilities                       18,504                  18,909
Provisions                               37     17,556                  16,445
Deferred Grants & Contributions          38    156,490                 197,625
Deferred Credits                         39        273                     242
Liability related to defined benefit
pension schemes                          40    571,511   1,105,524    1,170,833      1,691,507

Total Assets Less Liabilities                            1,726,646                   1,026,076
Financed by:
Capital Adjustment Account               42              2,079,583                   1,857,371
Revaluation Reserve                      43                 72,442                     173,067
Financial Instruments Adjustment
Account                                  44                (11,289)                  (10,186)
Equal Pay Reserve                        45                 (1,077)                   (1,077)
Pensions Reserve                         46               (571,511)               (1,170,833)
Collection Fund Adjustment               49                 (2,413)                   (1,959)
Account
Usable Capital Receipts Reserve          47                  19,626                     15,550
Specific Reserves                        48                104,789                     105,371
General Fund Balance                     50                  36,496                     52,773
Total Net Worth                                           1,726,647                  1,026,076




                                               45
                          CASH FLOW STATEMENT

Cash flow statement and associated notes to follow.

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 2009         31 March 2010
                                                       £000                  £000

Net Cash Flow from revenue activities                       65,284

Cash Outflows
Interest and premium on debt restructuring                 (17,877)

Cash Inflows
Interest received                                           18,183

Capital Activities
Cash Outflows
Purchase of Fixed Assets (including revenue
expenditure funded from capital)                          (162,747)
Cash Inflows
Sale of Fixed Assets                                        21,285
Capital grants received                                     53,475
Contributions and other income                               9,888

Net Cash (outflow) / inflow before financing               (12,509)

Management of Liquid Resources
Net (increase)/decrease in short term
investments                                                 54,069

Management of Long Term Resources
Increase in long term investments                            8,000

Financing

Cash Outflows
Repayments of amounts borrowed                             (67,649)

Cash Inflows
New loans raised                                            30,000

Net increase/(decrease) in cash                             11,911




                                           46
                             NOTES TO THE ACCOUNTS
 1. Restatement of Previous Year’s Accounts

 The impact of the above adjustments, referred to in the Chief Finance Officer’s report,
 on the core statements of account comparative figures for 2008/09 compared with
 those published in the 2008/09 Statement of Accounts is shown below.



                                                                              2008/09
                                                  Net Cost in              comparatives
                                                   2008/09                in Income and
                                                 Statement of               Expenditure
                                                  Accounts      PFI           Account
                                                    £000        £000          £000

Adult Social Care Services                          266,946           0         266,946
Central Services to the Public                        2,102           0           2,102
Children’s and Education Services                   229,546     (4,001)         225,545
Court Services                                        1,016           0           1,016
Cultural, Environmental, Regulatory and
Planning Services                                    70,957           0          70,957
Fire and Rescue Services                             41,099           0          41,099
Highways and Transport Services                      80,117           0          80,117
Other Housing Services                                  539           0             539
Corporate and Democratic Core                         7,208           0           7,208
Non Distributed Costs                                18,404           0          18,404
Net Cost of Services                                717,934     (4,001)         713,933
Exceptional Item – Fixed Asset Impairment           415,394     13,950          429,344

Exceptional Item – Icelandic Banks Investments         7,780         0             7,780
(Gain)/Loss on Disposal of Fixed Assets               59,433         4            59,437
Precepts and Levies                                    2,212         0             2,212
(Surplus)/Deficit on Trading Undertakings             (1,189)        0           (1,189)
Interest Payable and Similar Charges                  24,773     1,282            26,055
Interest and Investment Income                       (23,640)        0            23,640
Pensions Interest Cost                                93,746         0            93,746
Expected Return on Pension Assets                    (85,851)        0          (85,851)
Contribution in Lieu of Interest                       2,623         0             2,623
Insurance Fund                                        (1,023)        0           (1,023)
Net Operating Expenditure                          1,212,192    11,235        1,223,427
Income from the Collection Fund                     (479,140)        0        (479,140)
General Government Grants                            (67,194)        0          (67,194)
Distribution from Non-Domestic Rate Pool            (149,951)        0        (149,951)
(Surplus) / Deficit for the year                     515,907    11,235          527,142




                                                   47
                                   NOTES TO THE ACCOUNTS
1. Restatement of Previous Year’s Accounts (continued)


                                          Comparatives in
                                             2008/09                     Restated
                                           Statement of                comparatives
                                            Accounts        PFI          2008/09
                                               £000         £000          £000
(Surplus) / deficit on the Income and
Expenditure Account                              515,907     11,235          527,142

Net additional amount required by
statute or non-statutory proper
practices to be debited or credited to
the General Fund for the year                   (526,183)   (11,235)       (537,418)

(Surplus) / deficit for the year                 (10,276)          0         (10,276)


General Fund Balance brought forward             (26,220)          0         (26,220)


General Fund Balance carried forward             (36,496)          0         (36,496)

Amounts held within the General Fund
Balance carried forward that are held
by governors under schemes to finance
schools                                                0           0                  0

Amount of General Fund Balance
generally available for new expenditure
                                                 (36,496)          0         (36,496)




                                                  48
                              NOTES TO THE ACCOUNTS
1. Restatement of Previous Year’s Accounts (continued)


                                          Comparatives in
                                             2008/09                     Restated
                                           Statement of                comparatives
                                            Accounts        PFI          2008/09
                                               £000         £000          £000
(Surplus) / deficit on the Income and
Expenditure Account                              515,907    11,235          527,142

Surplus arising on revaluation of fixed
assets                                           (72,474)          0        (72,474)

Actuarial (gains)/ losses on pension
assets and liabilities                           185,589           0       185,589

Total recognised (gains)/losses for the
year                                             629,022    11,235          640,257




                                                  49
                                     NOTES TO THE ACCOUNTS
         1. Restatement of Previous Year’s Accounts (continued)

                                  Balance
                                  Sheet in                                                                       2008/09
                                  2008/09                                Collection                           comparatives
                                Statement of              Fixed Asset      Fund                   Interest     in Balance
                                 Accounts       PFI       Verification    Income      Pension     Accruals        Sheet
                                    £000       £000          £000           £000       £000         £000          £000
Fixed Assets
Intangible Fixed Assets               5,280           0              0            0          0           0           5,280
Tangible Fixed Assets
Operational Assets
Land and Buildings                2,188,039    17,793         (12,738)            0          0           0        2,193,094
Vehicles, Plant & Equipment          70,595         0            (895)            0          0           0           69,700
 Infrastructure Assets              419,626         0              258            0          0           0          419,884
Non-operational Assets
Surplus Land and Buildings,
held for disposal                   128,572     (250)              487            0          0           0          128,809
Vehicles, Plant & Equipment                0        0                0            0          0           0                0
Assets under construction             8,474         0                0            0          0           0            8,474
                                  2,820,586    17,543         (12,888)            0          0           0        2,825,241
Long-term Investments                30,146         0                0            0          0           0           30,146
Long-term Debtors                    20,090         0                0            0          0           0           20,090
Total Long-term Assets            2,870,822    24,256         (12,888)            0          0           0        2,882,190
Current Assets
Stocks and Work in Progress
                                      4,205         0                0            0          0           0            4,205
Landfill Usage Allowances                 0         0                0            0          0           0                0
Debtors                              83,490         0                0      (2,413)          0           0           81,077
Short Term Investments              214,561         0                0            0          0           0          214,561
Cash and Bank                        80,620         0                0            0          0           0           80,620
Total Assets                      3,253,698    24,256         (12,888)      (2,413)          0           0        3,262,653
Current Liabilities
Short-term Borrowing                     83      468                 0            0          0       3,710           4,261
Creditors                           342,341        0                 0            0          0           0         342,341
Related Parties                       2,704        0                 0            0          0           0           2,704
Bank Overdraft                       81,177        0                 0            0          0           0          81,177
Total Assets less Current
Liabilities                       2,827,393    23,788         (12,888)      (2,413)          0      (3,710)       2,832,170
Long-term Borrowing                 344,900         0                0            0          0      (3,710)         341,190
Long-term PFI Liabilities                  0   18,504                0            0          0            0          18,504
Provisions                           17,556         0                0            0          0            0          17,556
Deferred Grants &
Contributions                       156,490           0              0            0          0           0         156,490
Deferred Credits                        273           0              0            0          0           0             273
Liability related to defined
benefit pension schemes             589,311         0                0            0    (17,800)          0          571,511
Total Assets Less Liabilities     1,718,863     5,284         (12,888)      (2,413)      17,800          0        1,726,646
Financed by:
Capital Adjustment Account        2,087,612     4,859         (12,888)            0          0           0        2,079,583
Revaluation Reserve                  72,017       425                0            0          0           0           72,442
Financial Instruments
Adjustment Account                  (11,289)          0              0            0          0           0         (11,289)
Collection Fund Adjustment
Account                                    0          0              0      (2,413)          0           0          (2,413)
Equal Pay Reserve                    (1,077)          0              0            0          0           0          (1,077)
Pensions Reserve                   (589,311)          0              0            0     17,800           0        (571,511)
Usable Capital Receipts
Reserve                               19,626        0                0            0          0           0           19,626
Specific Reserves                   104,789         0                0            0          0           0          104,789
General Fund Balance                 36,496         0                0            0          0           0           36,496
Total Net Worth                   1,718,863     5,284         (12,888)      (2,413)     17,800           0        1,726,646



                                                             50
                       NOTES TO THE ACCOUNTS
2. 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.

                                                         Gross       Gross
Net Cost                                                 Cost       Income      Net
                                                                               Cost
 2008/09                                                 2009/10    2009/10   2009/10
  £000                                                    £000       £000      £000
          Adult Social Care Services
      370 Service Strategy                                   411          8      403
          Older People (Aged 65 or Over) Including
  123,857 Mentally Ill                                   195,764     53,446   142,318
          Adults Aged Under 65 with a Physical
   29,162 Disability or Sensory Impairment                38,137      4,953    33,184
          Adults Aged under 65 with Learning
   86,340 Disabilities                                   146,091     48,980    97,111
          Adults Aged Under 65 with Mental Health
   26,601 Needs                                           27,119       682     26,436
      609 Other Adult Services                             2,377       872      1,505
          Supported Employment (including sheltered
        7 employment)                                          5          1         4
  266,946 Total Adult Social Care Services               409,903    108,942   300,961
          Central Services to the Public
      898 Registration of Births, Deaths and Marriages     3,109      2,080     1,029
      375 Conducting Elections                                 0          0         0
      670 Emergency Planning                               1,169        254       915
       49 Local Land Charges                                   0          0         0
      110 General Grants, Bequests and Donations             332        212       120
    2,102 Total Central Services to the Public             4,610      2,546     2,064
          Children’s and Education Services
          Education Services
      738 Nursery Schools                                 15,937     13,598     2,339
   46,165 Primary Schools                                411,231    354,977    56,254
   53,675 Secondary Schools                              513,108    452,056    61,052
   11,702 Special Schools                                 76,870     64,569    12,301
    9,972 Non-School Funding                              43,061     35,840     7,221
          Children's Social Care
      116 Service Strategy                                   111          0      111
          Children's Services - Commissioning and
   29,401 Social Work                                      31,067       512    30,555
   43,082 Children Looked After                            60,536     1,987    58,548
   18,934 Family Support Services                          43,507    23,132    20,375
    2,496 Youth Justice                                     3,992     1,667     2,325
       82 Asylum Seekers                                    2,583     2,250       333
   13,183 Other Children’s and Families' Services          28,183    12,976    15,207
          Total Children’s and Education Services        1,230,18
 229,546                                                        7   963,565   266,622
          Court Services
    1,016 Coroners Courts                                  1,081       183       898
    1,016 Total Court Services                             1,081       183       898

                                           51
                        NOTES TO THE ACCOUNTS
2. Net Cost of Services (continued)

                                                             Gross      Gross
Net Cost                                                     Cost      Income      Net
                                                                                  Cost
 2008/09                                                     2009/10   2009/10   2009/10
  £000                                                        £000      £000      £000
             Cultural, Environmental, Regulatory and
             Planning Services
             Cultural and Related Services
    2,421    Culture and Heritage                              2,635       367     2,268
       59    Recreation and Sport                                182        95        87
    1,536    Open Spaces                                       1,602       350     1,252
      165    Tourism                                             114         4       110
   19,870    Library Service                                  22,482     1,566    20,916
   24,051    Total Cultural and Related Services              27,015     2,382    24,633
             Environmental and Regulatory Services
    3,195    Community Safety (Crime Reduction)                4,238     1,577     2,661
      225    Agricultural and Fisheries                       11,880     1,415    10,465
    2,937    Trading Standards                                 3,504       357     3,147
       22    Street Cleansing (not chargeable to highways)        23         1        22
   29,704    Waste Disposal                                   40,570     3,309    37,261
    2,763    Recycling                                         2,895         0     2,895
    1,146    Waste Minimisation                                2,033         0     2,033
   39,992    Total Environmental and Regulatory Services      65,143     6,659    58,484
             Planning and Development Services
     1,233   Development Control                               1,707       514     1,193
     2,378   Planning Policy                                   3,885     1,291     2,594
     1,293   Environmental Initiatives                         1,667       417     1,250
       245   Economic Development                              1,272       923       349
     1,765   Community Development                             2,157       427     1,685
     6,914   Total Planning and Development Services          10,688     3,617     7,071
             Total Cultural, Environmental, Regulatory and
   70,957    Planning Services                               102,846    12,658    90,188
             Fire and Rescue Services
    3,278    Community Safety                                  3,818       258     3,560
   37,821    Fire Fighting and Rescue Operations              40,539     1,388    39,151
   41,099    Total Fire and Rescue Services                   44,357     1,646    42,711
             Highways and Transport Services
     4,769   Transport Planning, Policy and Strategy           6,750     1,583     5,167
     6,187   Structural Maintenance                            6,748     1,216     5,532
             Capital Charges Relating to Construction
   14,589    Projects                                         23,092     2,954    20,138
   22,385    Environment, Safety and Routine Maintenance      20,450       717    19,733
    8,936    Street Lighting (including energy costs)          9,948       139     9,809
    4,696    Winter Service                                    4,437         9     4,428
    5,448    Traffic Management and Road Safety                7,811     1,357     6,454
   13,107    Public Transport                                 25,211     8,735    16,476
   80,117    Total Highways and Transport Services           104,447    16,710    87,737




                                           52
                       NOTES TO THE ACCOUNTS
2. Net Cost of Services (continued)

                                                         Gross        Gross
Net Cost                                                 Cost        Income        Net
                                                                                  Cost
 2008/09                                                2009/10      2009/10     2009/10
  £000                                                   £000         £000        £000
           Other Housing Services
      643  Supporting People                              22,581       21,966        616
           Other Council Property
       65 Travellers’ Sites                                  852          841         11
     (169) Non HRA Council Property                          831          551        280
      539 Total Other Housing Services                    24,265       23,357        907
           Corporate and Democratic Core
    4,480 Democratic Representation and Management         5,284        1,205      4,079
    2,728 Corporate Management                            22,126       13,870      8,256
    7,208 Total Corporate and Democratic Core             27,410       15,075     12,335
           Non Distributed Costs
   11,828 Retirement Benefits                                    0          0          0
           Costs of Unused Share of IT Facilities and
    6,576 Other Assets                                    46,481        5,167     41,314
   18,404 Total Non Distributed Costs                     46,481        5,167     41,314


  717,934   Total Net Cost of Services                  1,995,587    1,149,849   845,737




                                         53
                        NOTES TO THE ACCOUNTS
3. Deployment of Dedicated Schools Grant

 The council’s expenditure on schools is funded primarily by grant monies provided by
 the Department for Children, Schools and Families, the Dedicated Schools Grant
 (DSG). DSG is ring-fenced and can only be applied to meet expenditure properly
 included in the Schools Budget, as defined in the School Finance (England)
 Regulations 2008. The Schools Budget includes elements for a range of educational
 services provided on an authority-wide basis and for the Individual Schools Budget,
 which is divided into a budget share for each maintained school.

 Details of the deployment of DSG receivable for 2009/10 are as follows:


                                                  Schools Budget Funded by Dedicated
                                                            Schools Grant

                                                                 Individual
                                                    Central       Schools
                                                  Expenditure      Budget     Total
                                                     £000           £000      £000


  Final DSG for 2009/10                                                       642,065

  Brought forward from 2008/09                                                  3,636

  Agreed budgeted distribution in 2009/10              85,609      557,999    643,608

  Actual central expenditure                           86,332                  86,332

  Actual ISB deployed to schools                                   557,999    557,999

  Local authority contribution for 2009/10                                            0

  2009/10 in year balance carried forward
  to 2010/11                                             (723)            0     (723)

  Carry forward to 2010/11 agreed in
  advance                                                                       2,093


  Total carry forward to 2010/11                                               1,370




                                             54
                       NOTES TO THE ACCOUNTS
4. Exceptional Items

   These items have been separately disclosed due to being of a higher materiality
   level and to avoid distorting the usefulness of these accounts for year on year or
   inter authority comparison.

                                                           2008/09         2009/10
                                                            £000            £000

   Fixed asset impairment due to the substantial
   general fall in land values during 2008-09.              415,394                  0

   Icelandic Banks Investments reflecting the
   impairment of principal amounts recoverable. Note
   28 provides further analysis.                               7,780             539

5. (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 Adjustment Account
   when applied to finance new capital expenditure or set aside to reduce net
   indebtedness. In order to comply with statutory/proper practice 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. The value of assets written off in 2009/10 includes £31.767
   million in respect of two schools that became academy schools during the year. At
   the time the academy school is established assets held for and used by the relevant
   school transfer from County Council ownership.

                                                          2008/09           2009/10
                                                           £000              £000

   Capital Receipts                                        (15,060)            (2,904)

   Value of Fixed Assets Written Off                        74,493             35,053

   (Gain) / Loss on Disposal of Fixed Assets                59,433             32,509




                                          55
                        NOTES TO THE ACCOUNTS
6. (Surplus) / deficit on trading undertakings

    During the financial year ended 31 March 2010, the council operated the following
    material trading accounts within a competitive environment.


(Surplus)/                                                  Gross     Gross    (Surplus)
  Deficit                                                   Cost     Income     / Deficit
 2008/09                                                   2009/10   2009/10    2009/10
  £000         Name and description of operations           £000       £000       £000

   (264) Hertfordshire Catering                             20,436    20,925       (489)
         Hertfordshire Catering is the 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.

   (122) Hertfordshire Business Services (HBS)              30,147    30,989       (842)
         HBS offers a professional purchasing, supply
         and contract management service to the
         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 council specific
         contracts.

   (597) Hertfordshire Reprographics                         2,479     3,327       (848)
         Hertfordshire Reprographics are the council’s
         in-house print unit. It provides a range of
         reprographic services including printing, fast
         print, plan print and photocopying.

     (73) Childcare Litigation Unit                          1,472     1,547        (75)
          The Childcare Litigation Unit provides legal
          support for the council's children's services.

  (1,056) Total carried forward                                                  (2,254)




                                           56
                         NOTES TO THE ACCOUNTS
6. (Surplus) / deficit on trading undertakings (continued)


(Surplus)                                                      Gross     Gross    (Surplus)
 / Deficit                                                     Cost     Income     / Deficit
 2008/09                                                      2009/10   2009/10    2009/10
   £000         Name and description of operations             £000       £000       £000

   (1,056) Total brought forward                                                     (2,254)

     (133) Financial Services for Schools (FSS)                 1,827     1,963       (136)
           FSS provides quality, value for money financial
           services to Hertfordshire schools, working
           closely with school staff, head teachers and
           governors, operating a financial systems help
           line, visiting schools on a regular or ad-hoc
           basis to provide financial support and training,
           and running group training courses for school
           staff and governors. FSS also provides support
           for local and central government initiatives,
           (such as the Financial Management Standard in
           Schools), as well as support to schools causing
           concern and school reorganisations under a
           service level agreement with the authority.

   (1,189) Total Trading Services                                                    (2,390)


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.


7. Interest Payable and similar charges and Interest and Investment Income

   With effect from 1 April 2007 the basis of calculating the interest expense or income
   to be accounted for in the Income and Expenditure Account changed. As from 2007-
   08 such amounts are calculated using the effective interest rate method. The
   disclosure notes for gains and losses applicable to financial instruments are shown
   in the following tables.




                                             57
                         NOTES TO THE ACCOUNTS
7.   Interest Payable and similar charges and Interest and Investment Income
     (continued)

                                               2009/10

                          Financial Liabilities                    Financial Assets
                        Liabilities                                                    Fair value
                        measured                                                      through the
                            at        Liabilities                     Available-      Income and
                        amortised       at fair       Loans and        for-sale       expenditure
                           cost         value        receivables        assets          Account     Total
                          £000          £000            £000             £000            £000       £000
     Interest
     payable and
     similar charges
     Interest expense       15,789                                                                  15,789
     Losses on
     derecognition           1,472                                                                   1,472
     Gains on
     derecognition
     Impairment
     losses
                            17,261                                                                  17,261

     Interest and
     investment
     income
     Interest income                                     (4,226)                                    (4,226)
     Impairment
     losses
     Losses on
     recognition
     Gains on
     derecognition –
     soft loans
     Gains on
     recognition –
     discounts on
     redemption of
     loans                                               (1,472)                                    (1,472)
                                                         (5,698)                                    (5,698)

     Net (gain)/loss
     for the year           17,261                       (5,698)




                                                    58
                         NOTES TO THE ACCOUNTS
7.   Interest Payable and similar charges and Interest and Investment Income
     (continued)

                                               2008/09

                          Financial Liabilities                     Financial Assets
                        Liabilities                                                     Fair value
                        measured                                                       through the
                            at        Liabilities                      Available-      Income and
                        amortised       at fair       Loans and         for-sale       expenditure
                           cost         value        receivables         assets          Account     Total
                          £000          £000            £000              £000            £000       £000
     Interest
     payable and
     similar charges
     Interest expense      19,576                                                                    19,576
     Losses on
     derecognition          5,197                                                                      5,197
     Gains on
     derecognition
     Impairment
     losses
                           24,773                                                                    24,773

     Interest and
     investment
     income
     Interest income                                     (18,541)                                    (18,541)
     Impairment
     losses
     Losses on
     recognition                                            123                                         123
     Gains on
     derecognition –
     soft loans                                              (25)                                        (25)
     Gains on
     recognition –
     discounts on
     redemption of
     loans                                                (5,197)                                     (5,197)
                                                         (23,640)                                    (23,640)

     Net (gain)/loss
     for the year          24,773               0        (23,640)               0                0




                                                    59
                         NOTES TO THE ACCOUNTS
8. Contribution in Lieu of Interest

   The following balance sheet positions receive a contribution in lieu of interest as
   such balances earn interest when invested. Actual interest received on such
   balances when deposited is reflected in the Income and Expenditure Account as
   Interest and Investment Income.

                                                           2008/09        2009/10
                                                            £000           £000
    Developer’s Contributions                                1,769            284
    Insurance Fund                                             668            102
    Sickness Supply                                            159              25
    Other                                                       27               1
                                                             2,623            412

9. Insurance Fund

   The council operates insurance provisions and reserves to meet self-insured
   liabilities in respect of fire damage, employers and third party liability and storm
   damage. The Insurance Provision reduced in 2009/10 following confirmation that
   Zurich Municipal under the terms of our Fire Insurance Policy will indeminify the
   council in respect of a large school fire in December 2008.

                                                           2008/09        2009/10
                                                            £000           £000
    Income
    Recharge of premiums                                    (8,982)         (8,663)
    Other                                                   (4,834)           2300
    Contribution in lieu of interest                          (668)           (102)
                                                           (14,484)         (6,465)
    Expenditure
    Administration and premiums                              4,384           4,635
    Contribution to insurance provision                      9,561           4,693
    Claims                                                    (484)            238
                                                            (1,023)          3,101

10. General Government Grants

                                                           2008/09       2009/10
                                                            £000           £000
    Area Based Grant                                       (40,946)       (42,859)
    Revenue Support Grant                                  (20,874)       (32,534)
    Fire Pension Top-Up Grant                               (2,907)         (4,500)
    Local Authority Business Growth Incentives Scheme       (2,467)           (698)
                                                           (67,194)       (80,591)




                                          60
                       NOTES TO THE ACCOUNTS
11. 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.




                                         61
                             NOTES TO THE ACCOUNTS
11. 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.

     2008/09                                                                              2009/10     2009/10
      £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
       (1,002)   Amortisation of intangible fixed assets                            24      (1,337)
     (472,845)   Depreciation and impairment of fixed assets                        25    (222,048)
        5,922    Government Grants Deferred amortisation                            38       10,333
       (4,129)   Write downs of revenue expenditure funded from capital             42      (5,555)
                 Capital Expenditure, net of financing, that has not enhanced      25 &
      (27,685)   fixed asset carrying amounts                                       42      (5,459)
                                                                                   4&
          590    Assets transferred to PFI Scheme net of reversionary interest      25            0
      (11,235)   PFI Assets                                                                       0
      (59,433)   Net gain or (loss) on sale of fixed assets                         5      (32,509)
                 Differences between amounts debited/credited to the Income
                 and Expenditure Account and amounts payable/ receivable to
                 be recognised under statutory provisions relating to
                 investments, stepped loans, soft loans, premiums and
                 discounts on the early repayment of debt and financial
       (5,848)   guarantees                                                        44          787
                 Net charges made for retirement benefits in accordance with
      (58,383)   FRS 17                                                            40      (81,246)
                 Amount by which Council Tax income and residual community
                 charge adjustment included in the Income and Expenditure
                 Account is different to the amount taken to the General Fund in
             0   accordance with regulation                                                    453
       (1,077)   Provision for Equal Pay                                           45            0    (336,580)
                 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 &
      18,039     Statutory provision for repayment of debt                          42      20,384

      13,304     Capital expenditure charged to the General Fund Balance           42       15,201
                 Amortisation of overhanging premiums and discounts arising
        1,336    on debt restructuring                                             44          316
                 Employer’s contributions payable to the Local Government and
                 Fire-fighters Pension Schemes Funds and retirement benefits
      57,847     payable direct to pensioners                                      40       66,070     101,971
                 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
        7,181    Net transfer to or from earmarked reserves                        48          582         582

                 Net additional amount required to be (credited) / charged
     (537,418)   to the General fund Balance for the year                                             (234,027)




                                                      62
                        NOTES TO THE ACCOUNTS
12. Statutory provision for repayment of debt

   The Local Authorities (Capital Finance and Accounting) Regulations 2008 require
   the council to charge an amount to the revenue account as a minimum provision for
   the repayment of external debt that it considers to be prudent. For 2009/10 MRP has
   been calculated on the basis of the estimated life of the asset for which borrowing is
   undertaken at the end of the preceding financial year.

                                                           2008/09        2009/10
                                                             £000          £000
    Minimum Revenue Provision                               18,039        20,384



13. Finance and operating leases

   The value of assets acquired under finance lease arrangements is considered to be
   immaterial. The council finances a range of assets by means of operating leases.
   The amounts paid under these arrangements were:

                                                         2008/09        2009/10
                                                          £000           £000
    Land and Buildings                                      3,503         6,123
    Vehicles and equipment                                  1,159           820
                                                            4,662         6,943

   The council was committed at 31 March 2010 to making payments, analysed below
   by lease expiry date, of £6,123m under operating leases in 2010/11.

                                                        Vehicles
                                       Land and           and
          Lease Expiry Date            Buildings       Equipment         Total
                                         £000            £000            £000
    In 2010/11                            138             153             291
    Between 2011/12 and 2014/15           395             329             724
    After 2014/15                        5,342            102            5,447
                                         5,875            584            6,462


   Private Finance Initiative Scheme

   The accounting requirements for Private Finance Initiative (PFI) and similar
   schemes are no longer based on the UK accounting standard FRS 5 but on
   International Financial Reporting Standards (IFRS). The new requirements are
   based on IFRIC 12 (Service Concession Arrangements) and apply




                                          63
                       NOTES TO THE ACCOUNTS

retrospectively to PFI schemes existing at 31 March 2010. Adjustments for prior
periods are therefore necessary. The PFI buildings used for the delivery the PFI
services which are currently ‘off-balance sheet’ are now recognised ‘on-balance
sheet’ along with a finance lease liability for the financing provided by the PFI
operator.

To be within the scope of IFRIC 12, the PFI scheme must contractually oblige the
private sector operator to deliver, on behalf of the council, public services related to
infrastructure. In addition, IFRIC 12 requires the council to:
a) control or regulate what services the operator must provide with the
    infrastructure, to whom it must provide them and at what price; and to
b) control, through beneficial entitlement or otherwise, any significant residual
    interest in the infrastructure at the end of the term of the scheme.

The council entered into a PFI scheme in June 2007 for the design, finance and
maintenance of seven new childrens' homes, a family assessment centre, a
disability resource centre, a childrens' centre and the refurbishment of five family
support centres, through a private sector operator, with a facility for 25 years. The
PFI scheme involves rebuilding/refurbishing existing council buildings and the
operation of those centres. The centres became operational at various times from
2007/08 to 2009/10.

The private sector operator is paid for its services over the period of the scheme by
means of an annual unitary charge which is allocated between capital and service
elements.

The council’s total obligation for the capital (finance lease) element is:

                                                             2008/09    2009/10
                                                                £000       £000
 Not later than one year                                       1,792      1,844
 Later than one year but not later than five years             8,802      8,633
 Later than five years                                        28,593     26,918
                                                              39,187     37,395
 Less: Interest element                                       20,215     17,933
 Total                                                        18,972     19,462

The council’s total obligation for the service element is:

                                                             2008/09    2009/10
                                                                £000       £000
 Not later than one year                                         719        824
 Later than one year but not later than five years             4,915      5,276
 Later than five years                                        30,778     29,593
 Total                                                        36,412     35,693




                                         64
                            NOTES TO THE ACCOUNTS

14. Agency Work

   With the cessation of the agency arrangement relating to the provision, improvement
   and maintenance of Motorways and Trunk Roads on behalf of the Department of
   Transport, the council has no material agency arrangements.

15. Officers’ Remuneration

   The Accounts and Audit Regulations 2009 extended the disclosure requirements for
   Officers’ remuneration. The new requirements provide greater transparency in
   respect of the total remuneration package for the senior team charged with
   stewardship of the organisation.

   For senior members of the organisation disclosure is also made under the following
   categories:

       salary, fees and allowances
       bonuses
       expenses allowances
       compensation for loss of employment
       employer’s pension contribution
       any other emoluments

   The number of employees whose remuneration, excluding employer’s pension
   contribution, was £50,000 or more is shown overleaf. Remuneration is defined in the
   Accounts and Audit Regulations 2003 as including:

       Sums paid to or         Remuneration is usually taken to comprise gross
       receivable by an        pay (i.e. before the deduction of employee’s
       employee                pension contributions), compensation for loss of
                               office and any other payments receivable on the
                               termination of employment, even where these are
                               not taxable and any ex gratia payments other than
                               those for direct reimbursement of costs.
                               Remuneration does not include employer’s
                               pension contributions.

       Expense allowances      For example the profit element of car allowances.
       chargeable to tax

       The money value of      Other benefits, such as car loans, leased cars,
       benefits                travel cards and mobile phones.




                                         65
                        NOTES TO THE ACCOUNTS
15. Officers’ Remuneration (continued)

                                        2008/09                     2009/10
                                       Restated                   Foundation
                          2008/09     Foundation     2009/10     and Voluntary
                          Restated        and         HCC        Aided School
  Remuneration band         HCC        Voluntary    Employees     Employees
                         Employees       Aided
                                        School
                                      Employees
     50,000 - 54,999        344            67          394            87
     55,000 - 59,999        213            42          222            46
     60,000 - 64,999        114            24          137            29
     65,000 - 69,999         47             9           54            16
     70,000 - 74,999         25             6           26             7
     75,000 - 79,999         24            10           33             2
     80,000 - 84,999         15             3           23             7
     85,000 - 89,999         8              7           8              6
     90,000 - 94,999         9              5           14             7
     95,000 - 99,999         6              3           10             4
    100,000 -104,999         4              3           5              3
    105,000 - 109,999        6              0           1              2
    110,000 - 114,999        1              1           2              1
    115,000 - 119,999        0              1           1              3
    120,000 -124,999         0              0           0              1
    125,000 -129,999         2              1           1              0
    130,000 -134,999         0              0           0              0
    135,000 -139,999         2              1           1              0
    140,000 -144,999         0              0           1              0
    145,000 -149,999         0              0           0              0
    150,000 -154,999         1              0           0              0
    155,000 -159,999         0              0           0              0
    160,000 -164,999         0              0           1              0
    165,000 -169,999         2              0           1              0
    170,000 -174,999         0              0           0              0
    175,000 -179,999         0              0           0              0
    180,000 -184,999         0              0           0              0
    185,000 -189,999         0              0           0              0
    190,000 -194,999         0              0           0              0
    195,000 -199,999         0              0           0              0
    200,000 -204,999         0              0           0              0
    205,000 -209,999         0              0           1              0
    210,000 -214,999         1              0           0              0
    215,000 -219,999         0              0           1              0

Employees of Foundation and Voluntary Aided Schools are shown separately as the
Governing Body, rather than the County Council, is the employer.
                                         66
                                                         NOTES TO THE ACCOUNTS
15. Officers’ Remuneration (continued)

The following table sets out the remuneration disclosures for Senior Officers whose salary is £150,000 or more per year.

a) 2009/10
                                                                                                                        Total
                                                                                                                    Remuneration                      Remuneration
                                                                                                   Benefits in        excluding        Pension          including
                            Position                                  Notes          Salary          Kind              pension       Contributions       Pension
                                                                                                                    contributions                     Contributions
                                                                                       £                £                 £                £                £
 Chief Executive - C Tapster                                                           203,427              5,857          209,284          41,906           251,190
 Director of Environment and Commercial Services - J Wood                              168,201                  -          168,201          33,990           202,191
 Director of Children, Schools & Families - J Harris                                   160,004                  -          160,004          32,301           192,305
 Director of People & Property - A Warner until 31 May 2009          Note 1             25,148                442           25,590           5,180            30,770


b) 2008/09

 Chief Executive - C Tapster                                                           203,427              6,868         210,295           39,465            249,760
 Director of Environment and Comm. Services - J Wood                                   168,201                  -         168,201           32,010            200,211
 Director of Children, Schools & Families - J Harris                                   166,189                  -         166,189           30,420            196,609
 Director of People & Property - A Warner                                              150,852              2,999         153,851           29,265            183,116


 Note 1 - The Director of People & Property left the organisation on 31 May 2009. His annualised salary ws £150,852. This post no longer exists following a
          restructure of senior management in 2009/10.




                                                                               67
                                                         NOTES TO THE ACCOUNTS
15. Officers’ Remuneration (continued)

The following table sets out the remuneration disclosures for Senior Officers whose salary is less than £150,000 but equal to, or more than, £50,000
per year. For the purposes of this disclosure Senior Officers have been defined as the Chief Executive, her direct reports and the Monitoring Officer.
The total number of employees whose remuneration is between £50,000 and £150,000 is shown within £5,000 bands in the earlier table within this
Note.

a) 2009/10
                                                                                                                Total
                                                                                                            Remuneration                      Remuneration
                                                                                 Expense      Benefits in     excluding         Pension         including
                         Position                            Notes    Salary    Allowances      Kind           pension        Contributions      Pension
                                                                                                            contributions                     Contributions
                                                                        £           £             £               £                £                £
 Director of Adult Care Services                                      134,959             -        4,026            138,985         27,802           166,787
 County Secretary - until 1 November 2009                    Note 2    72,989             -        3,226             76,215         15,036            91,251
 Chief Fire Officer                                          Note 3   125,124           523        3,201            128,848         26,651           155,499
 Director of Strategy & Partnerships - from 1 October 2009   Note 4    62,500             -        2,132             64,632         12,875            77,507
 Director of Resources & Performance - from 1 July 2009      Note 5   102,482             -            -            102,482         20,683           123,165
 Chief Legal Officer - from 1 October 2009                   Note 6    51,674             -            -             51,674         10,233            61,907
 Finance, Information and Commercial Services Director -
 until 19 April 2009                                         Note 7     6,870             -           33              6,903           1,415              8,318

 b) 2008/09
 Director of Adult Care Services                                      132,459             -        4,026           136,485           25,697         162,182
 County Secretary                                                     125,124             -        4,702           129,826           24,274         154,100
 Chief Fire Officer                                          Note 3   125,124           437        2,487           128,048           26,651         154,699
 Finance, Information & Commercial Services Director                  130,164             -        5,229           135,393           25,252         160,645




                                                                           68
                                                           NOTES TO THE ACCOUNTS
 15. Officers’ Remuneration (continued)

Note 2: The County Secretary left the organisation on 30 October 2009. The annualised salary was £125,124. This post no longer exists following a restructure of senior
        management in 2009/10.
Note 3: The expense allowances relate to taxable mileage payments.
Note 4: The Director of Strategy & Partnerships started on 1 October 2009. The annualised salary was £125,000. This is a new post following a restructure of senior
        management in 2009/10.
Note 5: The Director of Resources & Performance started on 1 July 2009. The annualised salary was £147,500. This is a new post following a restructure of senior
        Management in 2009/10.
Note 6: The Chief Legal Officer started on 1 October 2009. The annualised salary was £101,290. This is a new post following a restructure of senior management in
        2009/10.
Note 7: The Finance, Information and Commercial Services Director left the organisation on 19 April 2009. The annualised salary was £130,164. This post no longer
        exists following a restructure of senior management in 2009/10.




                                                                                 69
                     NOTES TO THE ACCOUNTS
16.   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 Government
      Central 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 Officers
      Members 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 council performs a number of corporate support functions on behalf of
      the HPA for which a charge is raised (2008/09 £536,979, 2009/10 £551,998).
      The most significant of these functions involves the council investing surplus
      cash balances on behalf of the HPA. These amounts are invested in the
      name of the 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 £0.067m in 2009/10 (2008/09 -
      £0.729m).
      The Director of Adult Care Services of the council acted as Treasurer for the
      HPA during 2009/10.

      Hertfordshire County Council Pension Fund
      The 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 council cash balances
      for which the Pension Fund received a contribution in lieu of interest of
      £472,036 (£2,205,757 in 2008/09).




                                         70
                     NOTES TO THE ACCOUNTS
17.   Members Allowances

      The total of members’ allowances paid is shown below.

                                                  2008/09       2009/10
                                                   £000          £000
                                                   1,423         1,414


18.   Teachers Pension Scheme

      Teachers employed by the 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 council
      contributes towards the costs by making contributions based on a
      percentage of members’ pensionable salaries. The employer contribution
      rate is shown below.

                                Period                      %

                 2009/10                                  14.10

                 2008/09                                  14.10


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

                                                         2008/09          2009/10
                                                           £000            £000
                                                          50,198          52,536


19.   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 2009/10.




                                         71
                  NOTES TO THE ACCOUNTS
20.   National Health Service Act 2006 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.

      The Joint Commissioning Partnership Board was established in 2002 by the
      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 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 council. The service is managed by a Management
      Board which includes representatives from all contributing partners.

      In March 2006 a partnership agreement and a pooled budget were set up
      between South East Herts PCT (now East and North 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 council.




                                        72
                   NOTES TO THE ACCOUNTS
20. National Health Service Act 2006 Pooled Funds and Similar
    Arrangements (continued)


    The council acted with the following organisations in 2009/10


             East and North Herts Primary Care Trust

             West Herts Primary Care Trust


    Summary information for 2009-10, for the pooled budgets that the council
    contributed to is shown below together with comparatives for 2008-09 shown
    in italics.

                                                                             Over /
                                         Funding                            (under)
                              HCC         PCTs         Total     Expendit    spend
                                                                    ure
                              £000           £000      £000        £000      £000

     Joint Commissioning    117,465      170,010      287,475    287,391     (84)
     Partnership Board

                           110,632       161,197      271,829    271,797      (32)



     Integrated                 2,836         1,474      4,310      4,660      350
     Community
     Equipment Service
                                2,650         1,358      4,007      4,035       28


     Westgate – East and
     North Herts                2,508          610        3118       3098      (20)
                                2,410          723       3,133      2,986     (147)




                                        73
                     NOTES TO THE ACCOUNTS
21.   External Audit Costs

      In 2009/10 the council incurred the following fees, payable to the Audit
      Commission, relating to external audit and inspection.

                                                                 2008/09       2009/10
                                                                  £000          £000
      External Audit Services under Section 5 Audit
      Commission Act 1998                                              313          320
      Statutory Inspection under s10 of the Local
      Government Act 1999                                               16              18
      Certification of Grant Claims under Section 28 Audit
      Commission Act 1998                                               41           41
                                                                       370          379

22.   Long Term Contracts

      Private Finance Initiative Scheme

      The council entered into a Private Finance Initiative Scheme contract in June
      2007 for the design, finance and maintenance of seven new childrens’
      homes, a family assessment centre, a disability resource centre, a childrens’
      centre and the refurbishment of five family support centres. The first two
      centres came into service in February and March 2008. The contract ends in
      March 2033.

      The Income and Expenditure Account unitary charge in 2008/09 was £1.135
      million. Private Finance Initiative grant of £1.871 million has been accrued in
      2008/09, with £0.919 million of this being appropriated to the Private Finance
      Initiative Equalisation Reserve.

      Payments made under the contract are performance related, so deductions
      are made if any of the facilities are not available or if service performance
      falls below an agreed standard. The future commitment under this contract is
      estimated at £61.301 million.

      Other

      The council has a number of other long-term contracts that commit the
      council to payments after 31 March 2009. Higher value contracts disclosed
      provide a range of services that include care for the elderly, highway
      maintenance and design, waste disposal, supply of books and audio visual
      materials and provision of internet access facilities. Gross revenue
      expenditure under these contracts for 2009/10 is estimated at £100.093
      million. Termination dates applicable to these contracts range from 2011 to
      2024.



                                          74
                    NOTES TO THE ACCOUNTS
23.   Specific Government Grants

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

                                                               2008/09          2009/10
                                                                £000             £000
      Learning and Skills Council
      Grant for Sixth Formers                                    79,352           83,222
      Adult and Community Learning Grant                          3,334                0
      Post 16 Teachers Pay Grant                                  2,219            2,265
      16-19 Strategy                                              1,783                0
      Department for Children, Schools and Families
      Dedicated Schools Grant                                   621,928          642,065
      Standards Fund                                             48,613           54,248
      School Standards Fund                                      34,130           34,561
      Sure Start                                                 17,520           22,528
      Department of Health
      Supporting People – Services and Implementation            21,681           21,001
      Preserved Rights                                            4,207               0*
      Carers                                                      3,042               0*
      National Training Standards                                 2,276               0*
      Mental Health                                               1,997               0*
      Social Care Reform                                            782              360
      Learning Disability Development Fund                          602               0*
      Mental Care Advocacy                                          460               0*
      Youth Justice Board
      Youth Offending Team Grants                                 1,281            1,341
      Department for Communities and Local Government
      LPSA Performance Reward Grant                                 856               0
      New Burdens                                                   155             151
      Home Office
      Unaccompanied Asylum Seeking Children                       1,486            2,249
      Drug Intervention Programme                                   787              782
      Department for Transport
      De trunking Grant                                           3,346               0*
      Road Safety Grant                                           2,610               0*
      Rural Transport Grant                                         762               0*
                                                                855,209          864,773

      *These grants have been transferred to Area Based Grant (general grant)
      from 1 April 2009.




                                      75
                     NOTES TO THE ACCOUNTS
24.   Intangible Fixed Assets

      Expenditure incurred on intangible assets during 2009-10 amounted to
      £1.287 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     Portal and
                                          and         Web
                                       Licences      Design        Total
                                         £000         £000         £000
      Gross Book Value
      Balance as at 31 March 2009           6,101         1,822     7,923
      Additions                             1,287             -     1,287
      Balance as at 31 March 2010           7,388         1,822     9,210

      Depreciation
      Balance as at 31 March 2009           1,914           729     2,643
      Depreciation for the year             1,154           183     1,337
      Balance as at 31 March 2010           3,068           912     3,980

      Net Book Value
      Balance as at 31 March 2009           4,187         1,093     5,280
      Balance as at 31 March 2010           4,320           910     5,230




                                       76
                            NOTES TO THE ACCOUNTS
25. Tangible Fixed Assets (Restated)

                                              - Operational -                            - Non-Operational -




                                                                                      Buildings,
                               Buildings
                               Land and




                                                                                      Land and
                                                   Vehicles,




                                                                                      Vehicles,
                                                                    structure




                                                                                       disposal
                                                                                       held for
                                                                                       Surplus




                                                                                                                        TOTAL
                                                                      Infra-




                                                                                                          AUC
                                                     P&E




                                                                                         P&E
                                   £000               £000             £000            £000       £000      £000                £000
Gross Book Value
Balance at 31 March 2009       2,204,868            134,620          520,630          130,840       27          8,474    2,999,459
Restatements at 31 March
2009                                       3,525   (16,878)                     258        710                                  (12,385)
Balance at 31 March 2009
restated                       2,208,393            117,742          520,888           131,550       27      8,474       2,987,074
Additions                          91,520            18,858           60,726              3,498       -     12,442         187,044
Disposals                        (32,745)             (141)                -            (3,402)    (27)          -         (36,314)
Impairment                     (108,558)                  -                -           (52,587)       -          -       (161,145)
Expenditure not adding to
value                                                                                                       (5,459)         (5,459)
Transfers                          8,997              2,071                             (2,594)             (8,474)               0
Restatements                           -                  -                -                  -      -            -               -
Revaluations                      93,263                  -                -            29,064       -            -        122,327
Balance at 31 March 20010      2,260,870            138,531          581,614           105,529       0        6,983      3,093,526
Depreciation
Balance at 31 March 2009            16,829           64,025         101,004              2,268     27              0        184,153
Restatements at 31 March
2009                                 (1,530)       (15,983)                       -        473        -             -           (17,040)
Balance at 31 March 2009
restated                             15,299           48,042         101,004             2,741       27            0            167,113
Depreciation for the year            39,509           10,098          16,977                  -       -            -             66,585
Impairment                           (4,841)                -              -             (841)        -            -             (5,682)
Depreciation on Disposals            (1,094)             (86)              -               (54)    (27)            -             (1,261)
Transfers                                530                -              -             (530)        -            -                   0
Restatements                               -                -              -                  -       -            -                   -
Balance at 31 March 2010             49,403           58,054         117,981             1,316        0            0            226,754
Net Book Value
Balance at 31 March 2009       2,193,094              69,700         419,884           128,809       0          8,474    2,819,961
Balance at 31 March 2010       2,211,467              80,477         463,633           104,213       0          6,983    2,866,772

    Properties used in service delivery include:

               389    Primary Schools (excluding 7 Foundation Schools)
                15    Nursery Schools
                54    Secondary Schools (excluding 20 Foundation Schools & 2 Academies)
                25    Special Schools
                 8    Education Support Centres
                27    Adult Care Services Day Centres
               109    Adult Care Services Residential Units
                30    Fire Stations
                49    Libraries and Archive and Local Studies Centres

    The council is also responsible for the following infrastructure
                   339 miles Principal Roads
                 2,725 miles Other Roads.




                                                               77
                      NOTES TO THE ACCOUNTS
25. Tangible Fixed Assets ((Restated) (continued)

   Fixed Asset Valuation

   Land and Buildings

   The council's policy with regard to the valuation of land and buildings assets is to
   revalue assets on a rolling five year programme. This programme which started
   in 2004/05 will ensure compliance with the SORP requirement that all land and
   building assets are revalued within a five-year period. However, other permanent
   and material changes to asset valuations, as advised by the council’s valuers
   are accounted for in the interim period. In most years these interim changes
   relate to specific assets whose value has risen or fallen as a result, for example,
   of substantial refurbishment or fire or subsidence.




                                         78
                      NOTES TO THE ACCOUNTS
26. Summary of capital expenditure and sources of finance (restated)

   Capital expenditure for the year, including that incurred on intangible assets and
   revenue expenditure funded from capital, amounted to £192.769 million and is
   analysed below.

                           Service                                                Total
                                                                                  £000

    Adult Social Care Services                                                     4,340
    Central Services                                                              52,718
    Children’s and Education Services                                             69,198
    Cultural, Environmental and Planning Services                                  3,263
    Fire Service                                                                   1,373
    Highways, Roads and Transport Services                                        61,876
                                                                                 192,769

    The effect of the above expenditure on the council’s capital financing requirement
    together with sources of finance is shown below.
                                                                                  2009/10
                                                                                   £000
    Opening Capital Financing Requirement                                          516,726

    Capital Investment
    Intangible assets                                                              1,287
    Operational assets                                                           162,630
    Non-operational assets (including assets under construction)                  15,940
    Revenue expenditure funded from capital                                       12,912
                                                                                 192,769
    Sources of Finance
    Capital receipts                                                              (6,620)
    Grants and contributions                                                     (58,825)
    Grants and contributions financing revenue expenditure                        (7,357)
    funded from capital
    Revenue provision (including Minimum Revenue Provision)                      (29,585)

    Closing Capital Financing Requirement                                        607,107

    Explanation of movements in the year

    Increase in underlying need to borrow                                        110,766

    Minimum Revenue Provision                                                    (20,384)

    Increase in Capital Financing Requirement                                      90,382




                                            79
                           NOTES TO THE ACCOUNTS
26.   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

      Children Schools and
      Families                  Hillmead JMI School                             2,685
                                Presdales Secondary School                      2,227
                                Highfield School Sports Hall                    2,115
                                Sir John Lawes School                           1,636
                                Cavendish School Science Lab                      914
                                Kings Langley School                              857
                                Woolenwick Junior School                          696
                                Ralph Sadlier School                              679
                                Aycliffe Drivve Primary School                    630
                                Broadfield Junior School expansion                591
                                Priory School Science Block                       527
                                Possgate JMI School                               513

      Corporate Services        Farnham & Robertson House, Stevenage           44,514

      Environment               Croxley Rail Link                               1,671
                                A10 Turnford                                    1,286
                                Royston & Hitchin Railway Crossing                860
                                North Orbital Road                                759
                                Cock lane                                         633
                                Baldock Bypass                                    602
                                A10(S) Hertford Resurfacing                       578

      Libraries, Heritage and
      Arts                      Oxhey Library works                               770




                                         80
                     NOTES TO THE ACCOUNTS
27.   Significant commitments under capital contracts

      The value of capital contracts to which the council is committed to as at 31
      March 2010 is estimated at £13.3 million. For the purposes of this note a
      commitment is considered material if it exceeds a value of £50,000. The more
      significant items included in this amount are shown below.
                                                                          £000
      Bishops Stortford, Hillmead School                                  1,360
      Watford, Holywell School                                            1,055
      Abbotts Langley, Breakspears – Early Years                           682
      programme
      Wheathamstead Beech Hyde – Early Years                               601
      programme
      Stevenage, Broom Barns – Early Years programme                       566
      WGC Creswick Primary & Nursery School – Early                        491
      Years
      Borehamwood, Hertswood School – New MUGA &                           491
      Changing Accommodation
      Berkhamstead, Greenway First & Nursery School                        364
      Ovaltine Safety and Traffic                                          330
      Sacombe Arches Strengthening                                         319
      Hemel Hempstead - Aycliffe Drive Primary                             269
      Welwyn, Rowans Primary Sch (Children Centre)                         261
      Royston Roman Way First (Children Centre)                            253
      Hoddesdon S Catherines Primary (Children Centre)                     245
      Hitchin Highbury Infants (Children Centre)                           244
      Ware St Catherines Primary (Children Centre)                         243
      SA3 Batford Nursery School (Southdown) (Children                     220
      Centre)
      D9 Pre-school Learning Alliance Bovingdon (Children                  218
      Centre)
      Wymondley Bypass                                                     216
      Hemel Child Safety – Phase 2                                         214
      Hoddesdon, Rye Park Childrens Centre
                                                                           212
      North and East Herts Jet Patching                                    200




                                          81
                        NOTES TO THE ACCOUNTS
28.   Financial Instruments

      The borrowings and investments disclosed in the balance sheet are made
      up of the following categories of financial instruments:

                                    Long-Term                   Current


                                  2009     2010          2009         2010

                                  £000     £000          £000         £000

      Loans and receivables at
      amortised cost              30,146    28,646      214,561           17,642

      Total investments           30,146    28,646      214,561           17,642


      Financial liabilities at
      amortised cost             341,190   287,453        4,261            8,073

      Total borrowings           341,190   287,453        4,261            8,073




                                      82
                         NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)
      Balance sheet carrying amounts of Financial Instruments are analysed by
      maturity date in the following table. The carrying amount is analysed between
      principal amounts and the adjustment to amortised cost.

                                  31 March 2009                            31 March 2010

                                   Adjustment     Balance                   Adjustment     Balance
                                       to          Sheet                        to          Sheet
                                   Amortised      Carrying                  Amortised      Carrying
                      Principle       Cost        amount       Principle       Cost        amount
                        £000          £000         £000          £000          £000         £000
      Loans and receivables

      Current          216,880         (2,319)       214,561    18,314            (672)     17,642

      Long-Term         31,000           (854)        30,146    32,199          (3,553)     28,646
                                       (3,173)                                  (4,225)

      The adjustment to amortised cost comprises:-
      Interest accruals             4,607                                        4,094
      Icelandic Bank
      Investment Impairment        (7,780)                                      (8,319)
                                   (3,173)                                      (4,225)

      Financial liabilities at amortised cost

      Current
      Public Works
      Loan Board             24         3,711          3,735      5,005          3,010       8,015
      PFI                   468              0           468          0              0           0
      Unredeemed
      Stock                  58             0             58         58              0          58
                            550         3,711          4,261      5,063          3,010       8,073
      Long-Term

      Public Works Loan Board repayable within years:
      One to two       5,005            0      5,005                 1               0           1
      Two to five      7,002            0      7,002                 0               0           0
      Five to ten          0            0          0               249               0         249
      After ten      145,042         226 145,268               103,030             226     103,256

      Other repayable within years:
      After ten      182,500             1,415       183,915   182,500           1,447     183,947

                       339,549           1,641       341,190   285,780           1,673     287,453




                                                83
                       NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

Fair value of Assets and Liabilities carried at Amortised Cost
       Financial liabilities and financial assets represented by loans and receivables
       are carried on the balance sheet at amortised cost. Their fair value can be
       assessed by calculating the present value of the cash flows that take place
       over the remaining life of the instruments, using the following assumptions:

        For loans from the Public Works Loans Board (PWLB) and other loans
         payable, premature repayment rates from the PWLB have been applied
         to provide the fair value under PWLB debt redemption procedures;
       For loans receivable prevailing benchmark market rates have been used
         to provide the fair value;
       No early repayment is recognised;
       Financial assets in the Icelandic banking sector have been impaired in
         accordance with accounting practice – see the impairment disclosure
         note for further details;
       Where an instrument has a maturity of less than 12 months or is a trade
         or other receivable the fair value is taken to be the principal outstanding
         or the billed amount;
       The fair value of trade and other receivables is taken to be the invoiced or
         billed amount.
      The fair values calculated are as follows:

       Financial Liabilities                                  31 March 2010
                                                          Carrying
                                                          amount       Fair Value
                                                           £000          £000
       PWLB debt                                             111,521       122,655
       Non-PWLB debt                                         183,947       218,519
       Unredeemed Stock                                            58           58
       Total debt                                            295,526       341,232

       Trade creditors                                         11,094         11,094

       Total Financial liabilities                           306,620         352,326

       The fair value is greater than the carrying amount because the Council’s
       portfolio of loans includes a number of fixed rate loans where the interest
       rate payable is higher than the rates available for similar loans in the market
       at the balance sheet date.




                                         84
                       NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)


Fair value of Assets and Liabilities carried at Amortised Cost (continued)

       Financial Assets                                   31 March 2010
                                                       Carrying
                                                       Amount      Fair Value
                                                        £000         £000
       Money market loans less than 1 year                 17,642      17,529
       Money market loans greater than 1 year              28,646      30,172
       Bonds                                                    0           0

       Trade debtors                                        20,007        20,007

       Total Loans and receivables                          66,295        67,708

       The differences shown above are attributable to fixed interest instruments
       payable being held by the Council whose interest rate is higher than the
       prevailing rate estimated to be available at 31 March. This increases the
       fair value of financial liabilities and raises the value of loans and
       receivables.

       The fair values for financial liabilities have been determined by reference to
       the PWLB redemption rules and prevailing PWLB redemption rates as at
       the balance sheet date and include accrued interest. The fair values
       for non-PWLB debt have also been calculated using the same procedures
       and redemption rates adjusted for the value of embedded options. This
       provides a sound approximation for fair value for these instruments.

       The fair values for loans and receivables have been determined by
       discounting contracted cash flows at a suitable market comparator rate on
       31st March.




                                        85
                      NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

      Disclosure of Nature and Extent of Risk Arising from Financial
      Instruments

      Key Risks

      The Council’s activities expose it to a variety of financial risks, the key risks
      are:
       Credit risk – the possibility that other parties might fail to pay amounts
         due to the Council;
       Liquidity risk – the possibility that the Council might not have funds
         available to meet its commitments to make payments;
       Re-financing risk – the possibility that the Council might need to renew a
         financial instrument on maturity at disadvantageous interest rates or
         terms.
       Market risk - the possibility that financial loss might arise for the Council
         as a result of changes in such measures as interest rate movements.

      Overall Procedures for Managing Risk

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

         By formally adopting the requirements of the Code of Practice (adopted
          on 23rd February 2010 by the members of the County Council)

         By approving annually in advance prudential indicators for the following
          three years limiting:

          The Council’s overall borrowing;
           - Its maximum and minimum exposures to fixed and variable rates;
           - Its maximum and minimum exposures to the maturity structure of its
              debt;
           - Its maximum annual exposures to investments maturing beyond a
              year.




                                         86
                      NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

      Disclosure of Nature and Extent of Risk Arising from Financial
      Instruments (continued)

         By approving an investment strategy for the forthcoming year setting out
          its criteria for both investing and selecting investment counterparties in
          compliance with the government guidance.

      For the 2009/10 financial year the prudential indicators and treasury
      management strategy were reported and approved at the County Council’s
                          st
      meeting on the 31 March 2009. The annual treasury management strategy
      outlines the detailed approach to managing risk in relation to the Council’s
      financial instrument exposure. Actual performance is reported annually to
      the Council’s Audit Committee. These policies are implemented by a central
      treasury team. The Council maintains written principles for overall risk
      management, as well as written policies covering specific areas, such as
      interest rate risk, credit risk, and the investment of surplus cash through
      Treasury Management Practices (TMPs). These TMPs are a requirement of
      the Code of Practice and are reviewed regularly.

      Credit risk

      Credit risk arises from deposits with banks and financial institutions, as well
      as credit exposures to the Council’s customers. The Council’s treasury
      management strategy for 2009-10 set out the minimum acceptable criteria
      for investments by reference to credit ratings from Fitch, Moody’s and
      Standard and Poor’s.

      The following analysis summarises the Council’s potential maximum
      exposure to credit risk. The table (from an average of the default rates from
      Fitch, Moody’s and Standard and Poor’s) gives details of corporate finance
      average cumulative default rates (including financial organisations) for the
      period 1990 – 2007 on investments out to five years. The risk of default by
      trade debtors is based on the average amount of debt written off as a
      percentage of total debt over the last three financial years (2006/07 to
      2008/09).

      .




                                        87
                       NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

                                                     Adjustment
                             Amount                   for market    Estimated
                              at 31     Historical   conditions     maximum
                              March    experience    at 31 March   exposure to
                              2010      of default       2010        default
                              £000          %             %           £000
       Deposits       with
       banks and financial
       institutions            (a)          (b)           (c)         (a * c)
       AAA rated
       counterparties         2,103   0.01%          0.03%                 1
       AA rated
       counterparties        11,737   0.07%          0.16%                19
       BBB rated
       counterparties         2,090   1.17%          2.80%                59

       Trade debtors         20,007   0.27%          0.27%                54
                             35,937                                      133

       Deposits with the
       DMADF*and local
       authorities
       DMADF                 11,200   0.00%          0.00%                 0
       Local Authorities          0   0.00%          0.00%                 0
                             11,200                                        0

      *DMADF – Debt Management Account Deposit Facility operated by the
      government.

      In October 2008 the Icelandic banking sector defaulted on its obligations.
      The Council had £28m invested in this sector at that time, £10m of which
      was in breach of the Council’s criteria. In accordance with accounting
      practice the Council has been notified of objective evidence that impairment
      has occurred and the investments have been impaired according to
      accounting requirements. The impact on the principal invested and interest
      income has been mitigated in the accounts according to government
      regulations (see the impairment disclosure note for details). These
      outstanding Icelandic Investments have been excluded from the exposure to
      credit risk table above




                                       88
                       NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

      Disclosure of Nature and Extent of Risk Arising from Financial
      Instruments (continued)

      Following these events and the continued volatility in financial markets, the
      Council implemented even stricter criteria for investment counterparties in
      2009/10. At the balance sheet date, £4m out of a total of £35.2m (excluding
      the Icelandic Investments), remained invested with counterparties no longer
      meeting the minimum investment criteria.

      Financial Assets that are past due

      The Council does not generally allow credit for its trade debtors. The amount
      of debt past its due date for payment amounted to £5.2 million. The past due
      amount can be analysed by age as follows:
                                                           £000
      Less than three months                             1,340
      Three to nine months                               1,450
      More than nine months                              2,400
                                                         5,191


      Liquidity risk

      The Council has ready access to borrowings from the Money Markets to
      cover any day to day cash flow need, and whilst the PWLB provides access
      to longer term funds, it also acts as a lender of last resort to Councils
      (although it will not provide funding to a Council whose actions are unlawful).
      The Council is also required to provide a balanced budget through the Local
      Government Finance Act 1992, which ensures sufficient monies are raised to
      cover annual expenditure. There is therefore no significant risk that it will be
      unable to raise finance to meet its commitments under financial instruments.

      The Council manages its liquidity position through the risk management
      procedures above (the setting and approval of prudential indicators and the
      approval of the treasury and investment strategy reports), as well through
      cash flow management procedures required by the Code of Practice.




                                         89
                      NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

      Disclosure of Nature and Extent of Risk Arising from Financial
      Instruments (continued)

      Refinancing and Maturity Risk

      The Council maintains a significant debt and investment portfolio. Whilst the
      cash flow procedures above are considered against the refinancing risk
      procedures, longer term risk to the Council relates to managing the exposure
      to replacing financial instruments as they mature. This risk relates to both
      the maturing of longer term financial liabilities and longer term financial
      assets.

      The approved prudential indicator limits for the maturity structure of debt and
      the limits placed on investments placed for greater than one year in duration
      are the key parameters used to address this risk. The Council approved
      treasury and investment strategies address the main risks and the central
      treasury team address the operational risks within the approved parameters.

       This includes:
       monitoring the maturity profile of financial liabilities and amending the
         profile through either new borrowing or the rescheduling of the existing
         debt; and
       monitoring the maturity profile of investments to ensure sufficient liquidity
         is available for the Council’s day to day cash flow needs, and the spread
         of longer term investments provide stability of maturities and returns in
         relation to the longer term cash flow needs.

      The maturity analysis of financial liabilities is as follows:
                                                               £000
      Less than one year                                    8,073
      Between one and two years                                  1
      Between two and seven years                                0
      Between seven and fifteen years                       8,645
      More than fifteen years                             278,807
                                                          295,526




                                           90
                      NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

      Disclosure of Nature and Extent of Risk Arising from Financial
      Instruments (continued)

      The maturity analysis of financial assets is as follows:
                                                           £000
      Less than one year                                17,642
      Between one and two years                         15,725
      Between two and three years                        6,091
      More than three years                              6,830
                                                        46,288

      The Icelandic investments are included in the table above on the basis of the
      anticipated recoveries over future years.

      All trade and other payables are due to be paid in less than one year and
      trade debtors of £20 million are not shown in the table above.

      Market risk

      Interest rate risk - The Council is exposed to interest rate movements on its
      borrowings and investments. Movements in interest rates have a complex
      impact on the Council, depending on how variable and fixed interest rates
      move across differing financial instrument periods. For instance, a rise in
      variable and fixed interest rates could have the following effects:

         borrowings at variable rates – the interest expense charged to the Income
          and Expenditure Account could rise;
         borrowings at fixed rates – the fair value of the borrowing liability could
          fall;
         investments at variable rates – the interest income credited to the Income
          and Expenditure Account could rise; and
         investments at fixed rates – the fair value of the assets could fall.




                                         91
                      NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

      Disclosure of Nature and Extent of Risk Arising from Financial
      Instruments (continued)

      Borrowings are not carried at fair value on the balance sheet, so nominal
      gains and losses on fixed rate borrowings would not impact on the Income
      and Expenditure Account or STRGL. However, changes in interest payable
      and receivable on variable rate borrowings and investments will be posted to
      the Income and Expenditure Account and effect the General Fund Balance,
      subject to influences from Government grants. Movements in the fair value
      of fixed rate investments will be reflected in the STRGL, unless the
      investments have been designated as Fair Value through the Income and
      Expenditure Account.

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

      The financial effect in 2010/11 financial year of a 1% change in interest rates
      on 31st March 2010 would be:
                                                               1%                1%
                                                          Increase        Decrease
                                                   Cost / (Saving)   Cost / (Saving)

                                                             £000              £000

      Interest payable on variable rate and
      maturing borrowings                                     302                (6)

      Interest receivable on variable rate
      and maturing investments                              (302)               206

      Impact on Income and Expenditure
      Account                                                   0               200


      The impact of a 1% decrease in interest rates is not equivalent to a 1%
      increase in rates because, with bank base rate at only 0.5% on 31 st March
      2010, the rate of interest on a number of investments is below 1% and could
      not, therefore, effectively fall by a further 1%. In addition, the borrowing
      figures contain a number of Lender’s Option Loans which are only likely to be
      exercised if interest rates increase.

                                              92
                      NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

      Disclosure of Nature and Extent of Risk Arising from Financial
      Instruments (continued)

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

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

Impairment Disclosure Note

Early in October 2008, the Icelandic banks Landsbanki, Kaupthing and Glitnir
collapsed and the UK subsidiaries of the banks, Heritable and Kaupthing Singer
and Friedlander went into administration. The Council had £28m deposited across
these institutions, with varying maturity dates and interest rates.

All monies within these institutions are currently subject to the respective
administration and receivership processes. The amounts and timing of payments to
depositors such as the Council are being determined by the administrators /
receivers.

The current situation with regards to recovery of the sums deposited varies between
each institution. Based on the latest information available the Council considers that
it is appropriate to consider an impairment adjustment for the deposits, and has
taken the action outlined below. As the available information is not definitive as to
the amounts and timings of payments to be made by the administrators / receivers,
it is likely that further adjustments will be made to the accounts in future years.
Given the remaining risks the authority has set aside a further £5.511 million to
increase the special provision for Icelandic deposits at risk.




                                         93
                      NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

Heritable Bank

Heritable bank is a UK registered bank under English law. The company was placed
in administration on 7th October 2008. A latest creditor progress report issued by the
administrators Ernst and Young, in dated January 2010, outlined that the return to
creditors was currently projected to be 79p to 85p in the £ by the end of 2012. The
Council has therefore decided to recognise an impairment based on it recovering
84.98% of its claim. The strategy of winding up the bank by 2012 is expected to
produce a return at the top end of the range quoted by the adminstrators. Therefore
in calculating the impairment the Council has made the following assumptions re
timing of recoveries:

July 2009 16.13% }
Dec 2009 12.66% } Received
March 2010 6.19% }

June 2010      5.0%
Sept 2010      5.0%
Dec 2010       5.0%
March 2011     5.0%
June 2011      5.0%
Sept 2011      5.0%
Dec 2011       5.0%
March 2012     5.0%
June 2012      5.0%
Sept 2012      5.0%



Recoveries are expressed as a percentage of the Council’s claim in the
administration, which includes interest accrued up to 6 October 2008. Details of the
Council’s deposits with Heritable Bank and the associated impairment are shown
below:

   Date       Maturity      Amount     Interest   Recovered      Carrying
 Invested       Date       Invested      Rate     by 31/3/10     Amount      Impairment
 15/09/08     15/04/09       £2m        6.00%      £0.702m       £1.435m       £0.510m
 19/09/08     23/12/08       £5m        6.05%      £1.754m       £3.588m       £1.278m




                                         94
                         NOTES TO THE ACCOUNTS
28.     Financial Instruments (continued)

Kaupthing Singer and Friedlander Ltd (KSF)

The latest creditor report issued by the adminstrators Ernest and Young, im April
2010, outlined that the return to creditors was projected to be in the range of 65p to
78p in thr £. The council has recognised an impairment based on it recovering 71%
of its claim, (the mid point of the range estimated by the adminstrators).
In calculating the impairment the council has therefore made the assumption that
the total recovery will be split as set out below:

July    2009 20% }
Dec     2009 10% } Received
April   2010 5% }
July    2010 6%
Jan     2011 6%
July    2011 6%
Jan     2012 6%
July    2012 6%
Jan     2013 6%


Recoveries are expressed as a percentage of the Council’s claim in the
administration, which includes interest accrued up to 7 October 2008. Details of the
Council’s deposits with Kaupthing, Singer & Friedlander Ltd. and the associated
impairment are shown below:



   Date       Maturity     Amount     Interest   Recovered Carrying
 Invested       Date      Invested      Rate     By 31/3/10 Amount Impairment
 04/01/07     04/01/11      £2m        5.46%      £0.625m   £1.546m  £0.754m
 14/08/07     16/08/10      £2m        6.35%      £0.606m   £1.514m  £0.755m


Landsbanki Islands hf

Landsbanki Islands hf is an Icelandic entity. Following steps taken by the Icelandic
Government in early October 2008, its domestic assets and liabilities were
transferred to a new bank (New Landsbanki) with the management of the affairs of
Old Landsbanki being placed in the hands of a resolution committee. Old
Landsbanki’s affairs are being administered under Icelandic law. The latest
creditors’ report was issued on 26th March 2010. The projected return to Local
Authority creditors in respect og Landsbanki Islands will depend upon wheter the
Ocelandic Courts grant piority status to Local Authority deposits. It is unlikely that
this decision will be made before the second quarter of 2011. It is projected that
recovery could be 94.86% if piority status is granted, but only 38% if it is not. On the
basis of legal advice obtained by local authoritues it is considered that it remains the
most likely outcome that Local Authorities will enjoy priority status.

                                          95
                        NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

Landsbanki Islands hf (continued)

The council has, therefore, recognised impairment based on it recovering 94.86% of
its claim. In calculating the impairment the Council has and assumption that the
total recovery will be split as set out below:

Oct 2011      22.17%
Oct 2012      8.87%
Oct 2013      8.87%
Oct 2014      8.87%
Oct 2015      8.87%
Oct 2016      8.87%
Oct 2017      8.87%
Oct 2017      19.47%


Recoveries are expressed as a percentage of the Council’s claim in the
administration, which it is expected may validly include interest accrued up to 22nd
April 2009. Details of the Council’s deposits with Landsbanki Islands hf and the
associated impairment are shown below:

   Date      Maturity     Amount     Interest   Recovered       Carrying
 Invested      Date      Invested      Rate     By 31/3/10      Amount      Impairment
 11/07/08    15/10/08      £3m        5.90%        £0m          £3.498m       £1.251m
 05/08/08    31/10/08      £5m        5.85%        £0m          £5.769m       £2.032m
 29/08/08    28/11/08      £2m        5.83%        £0m          £2.273m       £0.783m

Glitnir Bank hf

Glitnir Bank hf is an Icelandic entity. Following steps taken by the Icelandic
Government in early October 2008, its domestic assets and liabilities were
transferred to a new bank (New Glitnir) with the management of the affairs of Old
Glitnir being placed in the hands of a resolution committee. Old Glitnir’s affairs are
being administered under Icelandic law. The latest information available regarding
Glitnir is contained in the 2009 Accounts. Based on this information, it remains the
case that if local authority deposits retain priority status, 100% of claims will be
repaid. As with Landsbanki Islands the likely recovery will depend upon whether the
Icelandic Courts grant priority status to Local Authority deposits. If priority status is
not granted expected recovery is approximately 29%. However, on the basis of legal
advice obtained by local authorities it is considered that it remains the most likely
outcome that Local Authorities will enjoy priority status in respect of Glitnir deposits.

The Council has therefore decided to recognise an impairment based on it
recovering the full amount of principal and interest up to 22 nd April 2009 in the
future. The impairment therefore reflects the loss of interest to the Council until the
funds are repaid.

                                           96
                          NOTES TO THE ACCOUNTS
28.      Financial Instruments (continued)

Glitnir Bank hf (continued)

It is estimated that the earliest date by which payment could be made is the end of
June 2011 and in calculating the impairment the Council has made an assumption
that the repayment of priority deposits will be made in June 2011.

Recoveries are expressed as a percentage of the Council’s claim in the
administration, which it is expected may validly include interest accrued up to 22 nd
April 2009. Details of the Council’s deposits with Glitnir Bank hf and the associated
impairment are shown below:


   Date        Maturity      Amount    Interest   Recovered      Carrying
 Invested        Date       Invested     Rate     by 31/3/10     Amount       Impairment
 18/04/07      20/04/09       £2m       6.00%        £0m         £2.236m        £0.269m
 15/05/07      17/05/10       £3m       6.00%        £0m         £3.342m        £0.402m
 15/02/08      16/02/09       £2m       5.42%        £0m         £2.276m        £0.287m


Accounting

The impairment loss recognised in the Income and Expenditure Account in 2009/10,
£0.539m, (£8.319m cumulative to 31st March 2010) has been calculated by
discounting the assumed cash flows at the effective interest rate of the original
deposits in order to recognise the anticipated loss of interest to the Council until
monies are recovered.
Further adjustments to the assumptions will be made in future accounts as more
information becomes available.

Interest credited to the Income and Expenditure account in respect of the
investments is as follows:

                Credited Received Credited Received Received
                2007-08  2007-08   2008-09 2008-09  2009-10
     Bank        £000      £000     £000     £000     £000
 Heritable             0         0    224.7       0      75.4
 KSF               189.9     109.2    214.9   127.3     422.5
 Landsbanki            0         0  1,050.7       0     489.6
 Glitnir           287.2         0    431.7   301.8     254.7
 Total              477.1         109.2    1,922.0       429.1      1,242.2




                                            97
                     NOTES TO THE ACCOUNTS
28.   Financial Instruments (continued)

Accounting (continued)

The Council has taken advantage of the Capital Finance Regulations to defer the
impact of the impairment on the General Fund, and a sum of (£0.703m) has been
transferred to the Financial Instruments Adjustment Account (FIAA) in 2009-10
(£5.155m cumulative to 31st March 2010). The difference between the £0.539m
impairment and the (£0.703m) transferred to the FIAA is £1.242m. This represents
the interest element of what is owed to the Council in 2009-10. The amounts
transferred to the Financial Instruments Adjustment Account during 2009-10 and
the Balance at 31st March 2010, are made up as follows:

                         2009-10 Amount transferred to       Balance on
                             Financial Instruments             FIAA at
                              Adjustment Account            31st March 10
        Bank                         £000                        £000
Heritable                           (894.9)                        1,218.0
KSF                                  158.7                           103.1
Landsbanki                           656.3                         2,525.1
Glitnir                             (622.9)                              -
Total                               (702.8)                        3,846.2


Under the regulations, the Council must transfer the balance on the Financial
Instruments Adjustment Account to the General Fund no later than 31 st March 2011
and must also credit the Financial Instruments Adjustment Account with interest
earned until such time as the balance has been transferred to the General Fund.


29.   Long Term Debtors                                       2009           2010
                                                              £000           £000
      Residential Clients                                      9,857         10,332
      Fire Insurance Claim                                     4,834          2,534
      Rental Prepayments                                       2,920          1,926
      Housing Adaptations                                      1,490            548
      Advance Contractual Payments                             1,375          1,327
      Quantum Care                                                  -         1,200
      Other                                                      354            445
      Keyworker Housing Advances                                 167            168
      Housing Advances and Mortgages                              52             32
      Car Loans                                                   45             65
                                                              21,094         18,576
      Provision – Residential Clients Debt                    (1,004)             -
                                                              20,090         18,576




                                        98
                     NOTES TO THE ACCOUNTS
30.   Stocks and Work in Progress                               2009          2010
                                                                £000          £000
      Trading Services                                           3,690         3,320
      Education                                                    331           280
      Fire Service                                                 127           113
      Cultural, Environmental and Planning Services                 46            57
      Social Services                                               11             0
                                                                 4,205         3,770

31.   Landfill Usage Allowances

      Landfill allowances issued by the Department for the Environment, Food and
      Rural Affairs have been valued at £0 per tonne as they are considered to
      have no marketable value. This basis of valuation has also been applied to
      the 2009-10 liability for waste disposed to landfill and the council’s surplus
      allowances as at 31 March 2010.
                                                               2009          2010
                                                               £000          £000
      Biodegradable Municipal Waste Allowances                        0             0



32.   Debtors                                                  2009           2010
                                                               £000           £000
      General and Trade Debtors                                 66,606       97,772
      Capital Receipts                                           5,038            55
      Payments in Advance                                        6,633         6,693
      H.M.R.C. - Value Added Tax                                 5,999         5,124
      Recoverable Fire Damage                                      558         2,609
      Grants recoverable                                           476         2,477
                                                               85,310       114,729
      Less Provision for Doubtful Debts                         (4,233)      (2,361)
                                                                81,077      112,368




                                          99
                        NOTES TO THE ACCOUNTS
33.   Investments in Companies

      The 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 Chief Legal Officer, Hertfordshire County Council,
      County Hall, Hertford SG13 8DQ (Contact telephone: 01992 555527).

      Investments in Companies
                                                                                 Nominal
            Name                  Nature of Business                Owned         Value
                                                                      %             £
      Exemplas Holdings    Business advice and support services
      Ltd                                                              33            33

      Hertfordshire        Provision of                                Not       A company
      Careers Services     careers guidance, information and        applicable    limited by
      Ltd                  employment services                                   guarantee

      Hertfordshire        To preserve buildings of special            Not       A company
      Building             historic or architectural interest       applicable    limited by
      Preservation Trust                                                         guarantee


      The Hertfordshire    A registered charity which carries out      Not       A company
      Groundwork Trust     environmental improvement in             applicable    limited by
      Limited              Hertfordshire                                         guarantee

      SmartE East Ltd      A jointly owned and managed not for         Not       A company
                           profit limited liability company         applicable    limited by
                           established to develop a plan for a                   guarantee
                           regional joint procurement
                           consortium, including constructors
                           and materials suppliers, for the
                           procurement of capital works.




                                           100
                         NOTES TO THE ACCOUNTS
34.   Creditors                                                   2009          2010
                                                                  £000          £000
      Sundry Creditors and Receipts in Advance                    161,201      243,439
      Hertfordshire Local Government Pension Fund                  79,007       15,201
      Contractor Deposits                                          52,155       52,317
      Grants received in advance                                   49,978       20,353
                                                                  342,341      331,310

      Contractor deposits represent funds received to finance both revenue and capital
      projects undertaken by the council. Latest forecasts estimate that £36.672 (2008 -
      £35.742) million will be applied to projects more than one year after the balance
      sheet date.


35.   Related Parties                                             2009           2010
                                                                  £000           £000
      Hertfordshire Police Authority (HPA)
      Temporary Borrowing                                           2,601         2,015
      Accrued Interest on managed cash balances                       103             0
                                                                    2,704         2,015
      The temporary borrowing position comprises:-
      Cash balances held on behalf of HPA                           6,601         8,465
      Less: Investments placed on behalf of HPA                    (4,000)      (6,450)
                                                                    2,601         2,015

36.   Bank Overdraft

      The bank position is managed on a daily basis as part of the Treasury
      Management function. The overdrawn position reflects:

            unpresented cheques drawn before the end of the financial year and

            a central Schools Treasury Management account overdrawn position not
             offset against positive balances within the schools pooled banking account
             arrangements.

      To aid analysis of the balance sheet overdrawn position the amounts relating to
      the Schools Treasury Management account is shown below.

                                                                     2009        2010
                                                                     £000        £000

      Schools Treasury Management account                             74,720     75,842




                                       101
                         NOTES TO THE ACCOUNTS
37. Provisions

   The following provisions have been set aside in the 2009/10 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.

   Equal Pay Claims - the County Council has made a provision pending the
   resolution of ongoing litigation. In addition to this, there are claims still to be
   determined whether there is a case as described in note 54 (Contingent
   Liabilities).

   Mental Health Act 1983 (Section 117) – to meet the reimbursement to Social
   Services clients of costs associated with aftercare services. This provision is no
   longer required and has been released in 2009/10.

   Teachers Pension Provision – relating to the backdated costs for pension
   liabilities following changes to the pension provisions for part-time staff.

   MECSS (Minority Ethnic Curriculum Support Service) Modernisation - this
   provision is to support the transitional costs in 2009/10 following transformation
   of the service.


                                                              Increase/
                                                2009         (Decrease)         2010
                                                £000            £000            £000
   Insurance                                     14,630              (32)       14,598
   Equal Pay Claims                               1,077                 0        1,077
   Mental Health Act 1983                           798             (798)            0
   Teachers Pension Provision                       770                 0          770
   MECSS Modernisation                              281             (281)            0
                                                 17,556           (1,111)       16,445




                                        102
                         NOTES TO THE ACCOUNTS
38.   Deferred Grants and Contributions                        2009          2010
                                                               £000          £000
      Balance as at 1 April                                   137,750       156,490
      Income Receivable                                        56,760         58,825
      Revaluations, Restatements and Disposals                (32,098)             0
      Revenue expenditure funded from capital                         0      (7,357)
      Depreciation of Grants and Contributions                  (5,922)     (10,333)
                                                              156,490       197,625


39.   Deferred Credits                                         2009          2010
                                                               £000          £000
      Keyworker Housing Advances                                  210           210
      Future repayments due on Mortgages and Advances              63            32
                                                                  273           242

40.   Liability related to defined benefit pension schemes

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

      The council participates in three pension schemes:

            The Local Government Pension Scheme for employees other than
             teachers and fire-fighters. This scheme is administered by Hertfordshire
             County Council and is a funded scheme, meaning that the 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 council’s contribution to
             this pension scheme.




                                       103
                                NOTES TO THE ACCOUNTS
40.    Liability related to defined benefit pension schemes (continued)

       Hymans Robertson, an independent firm of actuaries, has valued the council’s
       fund asset share and liabilities for both the Local Government Pension
       Scheme and Fire-fighters Pension Scheme.

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

       Transactions relating to retirement benefits

       We recognise the cost of retirement benefits in the Net Cost of Services when
       they are earned by employees, rather than when the benefits are eventually
       paid as pensions. However, the charge we are required to make against
       council tax is based on the cash payable in the year, so the real cost of
       retirement benefits is reversed out in the Statement of Movement in the
       General Fund Balance. The following transactions have been made in the
       Income and Expenditure Account and Statement of Movement in the General
       Fund Balance during the year:
                                            Local Government         Fire-fighters
                                             Pension Scheme        Pension Scheme            Total
                                                            for the year ended 31 March
                                            2009       2010        2009        2010     2009       2010
                                            £000       £000        £000        £000     £000       £000
      Income and Expenditure Account
      Net Cost of Services:
      current service cost                  33,460       29,567      5,200      4,700    38,660      34,267
      past service costs                     9,891          742           0         0     9,891         742
      impact of curtailments                   632          871           0         0       632         871
      impact of settlements                  1,305            0           0         0     1,305           0
      Net Operating Expenditure:
      interest cost                         78,946       78,025    14,800      14,700    93,746      92,725
      expected return on assets in the
      scheme                                (85,851)    (47,359)         0          0    (85,851)   (47,359)
      Amounts to be met from
      Government Grants and Local
      Taxation:
      movement on pensions reserve          12,932       (3,891)   (13,468)   (11,285)     (536)    (15,176)
                                            51,315       57,955      6,532       8,115   57,847       66,070
      Actual amount charged against
      council tax for pensions in the
      year:
      employers’ contributions payable to
      scheme                                48,161       54,243      3,625      3,564    51,786      57,807
      top-up grant contribution                   0           0      2,907      4,551     2,907       4,551
      retirement benefits payable to
      pensioners                             3,154        3,712           0         0     3,154       3,712
                                            51,315       57,955      6,532      8,115    57,847      66,070




                                                  104
                               NOTES TO THE ACCOUNTS
40.   Liability related to defined benefit pension schemes (continued)

       Assets and liabilities in relation to retirement benefits

       Reconciliation of present value of the scheme liabilities:

                                         Local Government             Fire-fighters
                                          Pension Scheme           Pension Scheme             Total
                                                             for the year ended 31 March
                                          2009          2010       2009         2010     2009       2010
                                          £000          £000       £000         £000     £000       £000
       Opening Defined Benefit
       Obligation                       1,138,562      1,129,418   215,600    215,000    1,354,162    1,344,418
       Current service cost                33,460         29,567     5,200      4,700       38,660       34,267
       Interest cost                       78,946         78,025    14,800     14,700       93,746       92,725
       Contributions by Members            16,105         16,682     2,000      1,900       18,105       18,582
       Transfers in from other
       authorities                               0            0        100          0         100            0
       Actuarial Losses / (Gains)         (99,024)      659,033    (14,068)    87,815    (113,092)     746,848
       Past Service Costs / (Gains)         9,891           742           0         0       9,891          742
       Losses / (Gains) on
       Curtailments                          632            871          0          0         632          871
       Liabilities Extinguished on
       Settlements                         (7,587)            0          0          0       (7,587)          0
       Liabilities Assumed in a
       Business Combination                      0            0          0          0            0           0
       Exchange Differences                      0            0          0          0            0           0
       Estimated Unfunded Benefits
       paid                                (3,154)       (3,712)          0          0      (3,154)     (3,712)
       Estimated Benefits paid            (38,413)      (41,763)    (8,632)   (10,015)     (47,045)    (51,778)
       Closing Defined Benefit
       Obligation                       1,129,418      1,868,863   215,000    314,100    1,344,418    2,182,963

      Reconciliation of fair value of the scheme assets:

                                         Local Government             Fire-fighters
                                          Pension Scheme           Pension Scheme             Total
                                                             for the year ended 31 March
                                          2009          2010       2009         2010     2009       2010
                                          £000          £000       £000         £000     £000       £000
       Opening Fair Value of Employer
       Assets                            950,976        772,907          0          0     950,976      772,907
       Expected Return on Assets          85,851         47,359           0         0      85,851       47,359
       Contributions by Members           16,105         16,682      2,000      1,900      18,105       18,582
       Contributions by the Employer      48,161         54,243      6,532      8,115      54,693       62,358
       Transfers in from other
       authorities                               0            0       100           0         100            0
       Contributions in respect of
       Unfunded Benefits                   3,154          3,712          0          0       3,154        3,712
       Actuarial Gains / (Losses)       (280,881)       162,702          0          0    (280,881)     162,702
       Assets Distributed on
       Settlements                         (8,892)            0          0          0       (8,892)          0
       Pension and Lump Sum
       Expenditure                               0             0    (8,632)   (10,015)      (8,632)    (10,015)
       Unfunded Benefits Paid              (3,154)       (3,712)          0          0      (3,154)     (3,712)
       Benefits Paid                      (38,413)      (41,763)          0          0     (38,413)    (41,763)
       Opening Fair Value of Employer
       Assets                            772,907       1,012,130         0          0     772,907     1,012,130




                                                 105
                                NOTES TO THE ACCOUNTS
40.       Liability related to defined benefit pension schemes (continued)


        The expected return on assets is based on the long-term future expected
        investment return for each asset class as at the beginning of the period (i.e. as
        at 31 March 2009).

        The actual return on the council's share of the scheme’s total assets in the
        year was - £245,542,000 (2008-09:- negative £231,399,000).

Scheme history
                                 2005/06       2006/07       2007/08       2008/09       2009/10
                                                             Restated
                                  £000           £000          £000         £000          £000
Present value of liabilities:
Local Government Pension
Scheme                           (1,312,799)   (1,328,218)   (1,138,562)   (1,129,418)   (1,868,863)
Fire-fighters Pension Scheme
                                  (249,400)     (247,200)     (215,600)     (215,000)     (314,100)
Fair value of assets in the
Local
Government Pension Scheme
                                   892,304       975,930       950,976       772,907      1,012,130
Surplus/(deficit) in the
scheme:                           (669,895)     (599,488)     (403,186)     (571,511)    (1,170,833)
Local Government Pension
Scheme                            (420,495)     (352,288)     (187,586)     (356,511)     (856,733)
Fire-fighters Pension Scheme
                                  (249,400)     (247,200)     (215,600)     (215,000)      (314,100)
Total                             (669,895)     (599,488)     (403,186)     (571,511)    (1,170,833)



The above asset values as at 31 March 2010 are at bid value as required under
FRS17. For previous accounting periods the value of assets may have been reported
at mid-market value. The fair value of assets was taken as at bid value at 31 March
2009 and, on the grounds of materiality, figures for previous accounting periods have
not been restated.

The liabilities show the underlying commitments that the council has in the long-term
to pay retirement benefits. The total liability as at 31 March 2010 of £1,170.833
million has a substantial impact on the net worth of the 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




                                               106
                              NOTES TO THE ACCOUNTS
40.    Liability related to defined benefit pension schemes (continued)
        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.

      The total contributions estimated to be made to the Local Government
      Pension Scheme by the council in the year to 31 March 2011 is £53,574,200.
      Expected contributions for the Fire- fighters Pension Scheme in the year to 31
      March 2010 have not been estimated as being an unfunded scheme, the
      employer contribution depends on the benefits that will be paid in the year, the
      employee contributions and transferred in amounts received.

      Basis for estimating assets and liabilities

      Liabilities have been assessed on an actuarial basis using the projected unit
      method, an estimate of the pensions that will be payable in future years
      dependent on assumptions about mortality rates, salary levels, etc. Both the
      Fire-fighters Scheme and the Local Government Pension Fund liabilities have
      been assessed by Hymans Robertson, an independent firm of actuaries,
      estimates for the County Council Fund being based on the latest full valuation
      of the scheme as at 31 March 2007. The principal assumptions used by the
      actuary have been:
                                          Local Government Pension    Fire-fighters Pension
                                                   Scheme                    Scheme
                                           2008/09        2009/10     2008/09        2009/10
Long-term expected rate of return on
assets in the scheme:
Equity investments                          7.0%          7.8%          n/a           n/a
Bonds                                       5.4%          5.0%          n/a           n/a
Property                                    4.9%          5.8%          n/a           n/a
Cash                                        4.0%          4.8%          n/a           n/a
Mortality assumptions:
Longevity at 65 for current pensioners:
                   Men                    21.4 years    22.7 years   27.6 years    27.6 years
                  Women                   24.3 years    26.1 years   31.0 years    31.0 years
Longevity at 65 for future pensioners:
                   Men                    22.5 years    24.8 years   29.2 years    29.2 years
                  Women                   25.4 years    28.3 years   32.7 years    32.7 years
Rate of inflation                           3.1%          3.8%         3.1%          3.8%
Rate of increase in salaries                4.6%          5.3%         4.6%          5.3%
Rate of increase in pensions                3.1%          3.8%         3.1%          3.5%
Rate for discounting scheme liabilities     6.9%          5.5%         6.9%          5.5%

Take-up of option to convert annual          50%           50%          n/a           n/a
pension into retirement lump sum (pre
April 2008)
Take-up of option to convert annual          n/a           75%          n/a           n/a
pension into retirement lump sum (post
April 2008)


                                            107
                         NOTES TO THE ACCOUNTS
40.   Liability related to defined benefit pension schemes (continued)

The Firefighters’ Pension Scheme has no assets to cover its liabilities. The Local
Government Pension Scheme’s assets consist of the following categories, by
proportion of the total assets held:

                                               2008/09         2009/10
                                                 %               %
Equity investments                                   67             71
Bonds                                                19             19
Property                                              4              3
Cash                                                 10              7
                                                   100             100

History of experience gains and losses

The actuarial experience gains or (losses) identified as movements on the Pensions
Reserve in 2008-09 can be analysed into the following categories, measured as a
percentage of assets or liabilities at 31 March 2010:

                             2005/06     2006/07     2007/08        2008/09    2009/10
                                                     Restated
                               %           %              %           %          %
Local Government Pension
Scheme
Differences between the
expected and actual return
on assets                        14.4          0.2        (12.0)      (40.5)      19.6
Experience gains and
losses on liabilities              1.6         0.1            5.9      (0.6)         0.2

Fire-fighters Pension
Scheme
Experience gains and
losses on liabilities              0.6         0.9         (2.9)         3.5         1.4




                                         108
                            NOTES TO THE ACCOUNTS
40.   Liability related to defined benefit pension schemes (continued)

 Amount Recognised in Statement of Total Recognised Gains and Losses (STRGL)

                              2005/06     2006/07     2007/08     2008/09     2009/10
                                                      Restated
                               £000        £000         £000       £000        £000

 Actuarial (Gains) / Losses    13,470 (94,946)        (211,648)   185,589     584,146

 Increase / (decrease) in
 Irrecoverable Surplus
 from Membership                      0           0          0            0           0

 Actuarial (Gains) / Losses
 recognised in STRGL           13,470 (94,946)        (211,648)   185,589     584,146

 Cumulative Actuarial
 (Gains) / Losses             240,645     145,699      (65,949)   119,640     703,786


41. 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 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 2010, £6.567 million,
including employee contributions was due to the TPA.

The 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 2009/10
the cost of these unfunded discretionary awards amounted to £3.712 million
(2008/09 - £3.154 million).




                                          109
                     NOTES TO THE ACCOUNTS
42. Capital Adjustment Account (Restated)

The opening balance on the Capital Adjustment Account at 1 April 2007 is the
combined total of the Fixed Asset Restatement Account and Capital Financing
Account, the previous capital accounting reserves. The account provides a
balancing mechanism between the different rates at which assets are depreciated
under the SORP and are financed through the capital controls system and includes
the amount of capital expenditure financed from revenue and capital receipts 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.

                                                           2009            2010
                                                           £000            £000

    Balance as at 1 April                                 2,595,895      2,092,472
    Restatement at 1 April                                   13,268        (12,889)
    Restated Balance as at 1 April                        2,609,163      2,079,583

    Capital financing
     capital receipts used for financing                     12,273            620
     revenue contributions                                   13,304         15,201

    Minimum revenue provision                                18,039         20,384

    Fixed Assets
    Depreciation                                           (57,021)       (67,922)
    Impairment                                            (416,826)      (155,463)
    Disposals – net book value                             (74,493)       (35,053)
    Revaluation gains attributable to disposals               8,475            701
    Transferred to PFI Scheme                                 4,860              0
    PFI Scheme Reversionary Interest                            590              0
    Capital expenditure (net of financing) that has not
    increased balance sheet carrying amounts                (27,685)        (5,459)

    Amounts treated as revenue expenditure in
    accordance with the SORP but which are classified
    as capital expenditure by statute                        (4,129)        (5,555)

    Amortisation of deferred grants and contributions         5,922         10,333
                                                          2,092,472      1,857,371




                                           110
                          NOTES TO THE ACCOUNTS
43.    Revaluation Reserve (Restated)

      With effect from 1 April 2007 the Revaluation Reserve replaced the Fixed Asset
      Restatement Account. Due to lack of historic information it was, at that date,
      included in the Balance Sheet with a zero opening balance. The closing position
      on the Reserve at 31 March 2010 therefore only shows revaluation gains
      accumulated since 1 April 2007.

                                                              2009            2010
                                                              £000            £000
       Balance as at 1 April                                    8,018         72,442

       Revaluation of Fixed Assets                             72,899        122,327

       Revaluation gains attributable to Fixed Asset
       Impairments                                                    0      (21,001)

       Revaluation gains attributable to Fixed Asset
       Disposals                                                (8,475)         (701)

                                                                72,442       173,067




                                         111
                         NOTES TO THE ACCOUNTS
44.   Financial Instruments Adjustment Account

      The Financial Instruments Adjustment Account provides a balancing
      mechanism between the different rates at which gains and losses (such as
      premiums on the early repayment of debt) are recognised under the SORP
      and are required by statute to be met from the General Fund. These
      adjustments are effected in the Statement of Movement on the General Fund
      Balance, after debits and credits have been made to the Income and
      Expenditure Account in line with the SORP’s requirements. The Financial
      Instruments Adjustment Account therefore records the timing differences
      between the rate at which gains and losses are recognised under the SORP
      and the rate at which debits and credits are required to be made against
      council tax.

                                                              2009         2010
                                                              £000         £000
      Balance as at 1 April                                   (6,777)    (11,289)

      Overhanging premiums and discounts written off            1,336        316

      Statement of Movement in General Fund Balance
      Interest on Financial Instruments restated to nominal
      / coupon rates                                              29            0
      Financial Instrument carried at amortised cost repaid        0            0
      Soft loans remeasured at fair value                       (122)        (29)
      Soft loans repaid – gain on derecognition                   25           33
      Soft loans interest reversal                                78           80
      Icelandic Bank Investment Impairment
      Principal Impairment                                     (7,780)      (539)
      Less: Interest Receivable                                 1,922       1,242
                                                              (11,289)   (10,186)

      Icelandic Bank Investment Impairment                     (5,858)    (5,155)
      Unamortised overhanging premiums and discounts
      on debt restructuring pre 1 April 2006                   (3,110)    (2,794)
      Borrowings remeasured at amortised cost                  (1,413)    (1,413)
      Soft loans remeasured at fair value                        (908)      (824)
                                                              (11,289)   (10,186)




                                        112
                          NOTES TO THE ACCOUNTS
45.   Equal Pay Reserve

      In accordance with regulation 30A of the Local Authorities Capital Finance and
      Accounting Regulations 2007 the council has, under the Statement of
      Movement on the General Fund Balance, removed the cost of establishing a
      provision for equal pay and transferred this amount to an Equal Pay Reserve
      until such claims become payable.

                                                                  2009            2010
                                                                  £000            £000
      Equal Pay Reserve                                           (1,077)         (1,077)

46.   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 council’s
      balances or reserves.

                                                               2009             2010
                                                               £000             £000
      Balance as at 1 April                                  (403,186)         (571,511)

      Actuarial Gains and (Losses)
      Defined Benefit Obligations                             113,092          (746,848)
      Employer Assets                                        (280,881)           162,702

      General Fund Balance Appropriation                         (536)          (15,176)
                                                             (571,511)       (1,170,833)

47.   Usable Capital Receipts Reserve

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

                                                                  2009            2010
                                                                  £000            £000
      Balance as at 1 April                                       16,839          19,626
      Capital receipts received                                   10,808           2,489
      Capital receipts accrued                                     4,252               55
      Capital receipts used for financing                        (12,273)           (620)
                                                                  19,626          21,550




                                         113
                         NOTES TO THE ACCOUNTS
48. Specific Reserves

   The following reserves are either designated as “earmarked funds” within the
   total 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.

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

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

   Icelandic Bank Deposits – a reserve to provide for potential impairment of these
   deposits.

   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.

   Schools Budget Central Expenditure - the underspend against the 2008-09
   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.

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

   Quantum Care Rent Abatement - represents the estimated rents received from
   Quantum Care to be used to support the cost of the abatement. This is no
   longer required for future rents.

   Children Schools and Families Service Reserve - surpluses within the education
   trading units of the Children, Schools & Families service.

   Private Finance Initiative (PFI) Equalisation Reserve – the excess of PFI credits
   over current expenditure levels carried forward to fund future obligations.




                                        114
                        NOTES TO THE ACCOUNTS

48. Specific Reserves (continued)

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

   Capital Reserve – a reserve which is available to finance capital expenditure.

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

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

   Strategic Planning - a reserve to deal with issues relating to strategic planning
   questions that will enable the council to continue to fight to protect
   Hertfordshire’s environment.

   Shared Managed Services (SMS) Reserve – a reserve to meet the costs of
   implementations to the SMS procurement.

   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.

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

   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.

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

   Recruitment Advertisement Rebates – to be applied in part to finance the
   coordinated recruitment marketing work for all departments to improve the
   councils standing as an employer of choice

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

   LPSA Performance Reward Grant – balance of grant carried forward to finance
   expenditure in 2010/11.

   Herts Property Artwork - a reserve created from the sale of works of art that has
   been ring fenced to finance future council Artwork.


                                       115
                            NOTES TO THE ACCOUNTS
48.     Specific Reserves (continued)


       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.

       Key Worker Housing Surplus – the council’s share of realised gains on the
       disposal of properties under the Key Worker Housing Scheme.

                                                      Balance      Increase/      Balance
                                                       2009       (Decrease)       2010
                                                       £000          £000          £000
      School Revenue Reserves
      School Balances                                    36,747          (488)      36,259
      Strategic Area Partnership                          5,192        (2,323)       2,869
      Community Focused Extended School Activities          156              59        215
      Total School Revenue Reserves                      42,095        (2,752)      39,343
      Capital Payback                                    12,962          7,442      20,404
      Highways Maintenance                               12,000        (6,000)       6,000
      Icelandic Bank Deposits                            10,000          5,511      15,511
      Self Insurance                                      9,596        (3,101)       6,495
      Schools Budget Central Expenditure                  3,636        (2,266)       1,370
      NNDR Revaluation Reserve                            2,577            563       3,140
      Quantum Care Rent Abatement                         1,879        (1,879)           0
      Children Schools and Families Service Reserve       1,681        (1,294)         387
      PFI Equalisation Reserve                            1,467            132       1,599
      County Council Elections                            1,022          (427)         595
      Capital Reserve                                       974          (974)           0
      Statutory Planning Authority Inquiries                924              78      1,002
      Hermis Development                                    681            270         951
      Strategic Planning                                    655               0        655
      Shared Managed Services (SMS) Reserve                 500               0        500
      New Roads & Street Works Act 1991                     460            561       1,021
      HBS Repairs and Renewals                              443            187         630
      Hadham Towers Restoration                             414            (26)        388
      Leasehold Dilapidations                               304               0        304
      Recruitment Advertisement Rebates                     152          (122)          30
      Energy and Water Conservation                         150               0        150
      LPSA Performance Reward Grant                          90          3,885       3,975
      Herts Property Artwork                                 72            (20)         52
      Childcare Litigation Reserves                          19               0         19
      Local Standards Verification                           18             (3)         15
      Key Worker Housing Surplus                             15            (15)          0
      Other minor balances                                    3            831         834
                                                        104,789            582     105,371




                                              116
                          NOTES TO THE ACCOUNTS
49.    Collection Fund Adjustment Account

                                                                           £000

      Collection Fund Adjustment Account Balance at 31 March 2009          (2,413)
      Movement in the year                                                     453
      Collection Fund Adjustment Account Balance at 31 March 2010           (1,959)


50. General Fund Balance

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

                                                                           £000

      General Fund Balance at 31 March 2009                                 36,496
      Surplus for the year                                                  16,277
      General Fund Balance at 31 March 2010                                 52,773


51. Movements on Reserves (Restated)

      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.


                                                   Gains /
                                     Balance      (Losses)    Transfers   Balance
                                     Brought       For The    Between     Carried
                                     Forward        Year      Reserves    Forward
                                      £000          £000        £000       £000
      Reserves
      Capital Adjustment Account     2,079,583           0    (222,213)   1,857,371
      Revaluation Reserve               72,442     101,326        (701)     173,067
      Financial Instruments
      Adjustment Account              (11,289)            0       1,103    (10,186)
      Equal Pay Reserve                (1,077)            0           0     (1,077)
      Pension Reserve                (571,511)    (584,146)    (15,176) (1,170,833)
      Usable Capital Receipts
      Reserve                          19,626            0        1,924     21,550
      Specific Reserves               104,789            0          582    105,371
      Collection Fund Adjustment
      Account                           (2,413)           0         453      (1,959)
      General Fund Balance             36,496     (217,751)     234,027      52,773
      Total Reserves                 1,726,647    (700,571)           0   1,026,076


                                       117
                       NOTES TO THE ACCOUNTS
52. Contingent Liabilities

   At 31 March 2010 the 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 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 31
   March 2010 indicates that the amount liable to clawback from the council,
   should the Company not remain solvent is estimated at a maximum amount of
   £4.427 million.

    Equal Pay Claims

   The County Council has received a number of claims under the Equal Pay
   Legislation. These are currently going through the legal process but there is a
   possibility that additional claims may be forthcoming. We are not able to
   quantify the value of such claims at this stage. Where a probability of settlement
   is likely and a reliable estimate can be obtained, this has been calculated and
   disclosed in note 45 (Provisions).

53. Foundation Schools

   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 27
   Foundation schools.

54. The Euro

   The council introduced new financial systems in April 2004 that are fully Euro
   compliant. To date the 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.




                                             118
                     NOTES TO THE ACCOUNTS
55. Trust Funds

    The 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 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 2010 the total value of
    educational endowments is £474,300 (31 March 2009 - £469,043).

56. 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

                                                                  2009          2010
                                                                  £000          £000
    Income and Expenditure Account surplus / (deficit)          (515,907)
    Servicing of finance                                            (306)
    Capital accounting                                            83,755
    Exceptional Items                                            415,394
    (Gain)/loss on disposal of fixed assets                       59,433
    Financial Instruments                                          5,848
    FRS17 Retirement Benefits                                        536
    Decrease / (Increase) in stocks                                 (655)
    Landfill Allowances Trading Scheme                                 0
    Decrease / (Increase) in revenue debtors                     (14,085)
    Increase in revenue creditors & deferred credits              24,033
    Increase / (decrease) in provisions                            7,238
    Net Cashflow from revenue activities                          65,284

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

                                                                  2009          2010
                                                                  £000          £000
    Increase in cash in the period                                 11,911
    Cash outflow from reduction in external borrowing              37,649
    Cash inflow from decrease in liquid resources                 (54,069)
    Cash inflow from decrease in long term investments             (8,000)
    Change in net debt                                            (12,509)
    Net debt at 31 March 2008 / 2009                              (79,799)
    Net debt at 31 March 2009 / 2010                              (92,308)




                                        119
                     NOTES TO THE ACCOUNTS
58. 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                                  As at 31
                                      March         Cash         Other          March
                                      2009          flows       Changes         2010
                                      £000           £000        £000           £000

    Cash in hand and at bank            80,620
    Bank overdraft                     (81,177)


    Debt due within 1 year                (82)
    Debt due after 1 year            (339,549)


    Current asset investments         216,880

    Long Term investments               31,000

    Net Debt                           (92,308)

    Amounts within the above statement have been shown at principal amounts owed to
    or by third parties.

59. 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.

60. Analysis of Cash Flow Statement Revenue Grants

    Income used in deriving the net cash flow from revenue activities includes the
    following amounts.

                                                               2009           2010
    Council Service                                            £000           £000
    Children Schools and Families                             830,774
    Adult Care Services                                        23,744
    Environment                                                 7,030
    Other Services                                                657
                                                              862,205




                                       120
                      NOTES TO THE ACCOUNTS
61. Authorisation of the Statement of Accounts

This is a requirement to disclose the date that the financial statements are
authorised for issue. This establishes the date after which events will not have been
recognised in the Statement of Accounts.

To be completed following audit of the accounts.




                                        121
                ANNUAL GOVERNANCE STATEMENT
 This is the Council’s Statement on Internal Control for the purpose of the Accounts
 and Audit Regulations.

 ANNUAL GOVERNANCE STATEMENT

 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 and 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 responsible for putting
     in place proper arrangements for the governance of its affairs, and facilitating
     the effective exercise of its functions, which includes arrangements for the
     management of risk.

 1.3 Hertfordshire County Council’s Corporate Governance framework and
     processes are consistent with the principles of the CIPFA/ SoLACE
     Framework Delivering Good Governance in Local Government:

          Focusing on the purpose of the authority and on outcomes for the
           community and creating and implementing a vision for the local area

          Members and officers working together to achieve a common purpose
           with clearly defined functions and roles

          Promoting values for the authority and demonstrating the values of good
           governance through upholding high standards of conduct and behaviour

          Taking informed transparent decisions which are subject to effective
           scrutiny and managing risk

          Developing the capacity and capability of members and officers to be
           effective

          Engaging with local people and other stakeholders to ensure robust
           public accountability.

1.4   Every elected member has a copy of the Council’s Statement of Corporate
      Governance in their Member Information Folder and a copy of the revised
      Statement can be obtained from the www.hertsdirect.org website. That
      statement explains how Hertfordshire County Council has complied with the
      code and this statement meets the requirements of regulation 4(2) of the
      Accounts and Audit Regulations 2003 as amended by the Accounts and Audit
      (Amendment) (England) Regulations 2006 in relation to the publication of a
      statement on internal control.
                                          122
              ANNUAL GOVERNANCE STATEMENT
2. The purpose of the governance framework

2.1 The governance framework comprises the systems and processes, and
    culture and values, by which the authority is directed and controlled, and its
    activities through which it accounts to, engages with and leads the community.
    It enables the authority to monitor the achievement of its strategic objectives
    and to consider whether those objectives have led to the delivery of
    appropriate, cost-effective services.

2.2 The system of internal control is a significant part of that framework and is
    designed to manage risk to a reasonable level. It cannot eliminate all risk of
    failure to achieve policies, aims and objectives and can therefore only provide
    reasonable and not absolute assurance of effectiveness. The system of
    internal control is based on an ongoing process designed to identify and
    prioritise the risks to the achievement of the council’s policies, aims and
    objectives, to evaluate the likelihood of those risks being realised and the
    impact should they be realised, and to manage them efficiently, effectively and
    economically.

2.3 The governance framework has been in place at Hertfordshire County Council
    for the year ended 31 March 2010 and up to the date of approval of this
    annual Statement within the statement of accounts.

3.   Key elements of the governance framework

3.1 The key elements of Hertfordshire County Council’s systems and processes
    which facilitate compliance with the six principles of good governance are set
    out in the Statement of Corporate Governance.

3.2 Communicating and reviewing the authority’s vision
T
    The Council’s purpose and vision is set out in its Corporate Plan,
    ‘Hertfordshire – County of Opportunity'. The current Plan was adopted in April
    2009 and confirmed by the Council at its meeting on 21 July 2009. The
    Corporate Plan extends to 2012. It is reviewed and refreshed annually, as
    part of the Integrated Planning Process, a process which allows any necessary
    changes to governance arrangements.

     The heart of the Plan is the vision and priorities which the Council,
     independently and with its partners, has for delivering improved outcomes for
     Hertfordshire communities. It sets out 3-year objectives to assess whether
     these improvements have been made. The Plan informs the Integrated
     Planning Process, so that resources are aligned to priorities and sets out the
     issues the Council are confronting and taking assertive action, wherever
     possible, within our resources over the three year period in order to improve
     the quality of life in the County.




                                       123
              ANNUAL GOVERNANCE STATEMENT
    The Integrated Planning Process uses national benchmarking of value for
    money and needs based evidence in the review and shaping of corporate
    priorities and supporting financial plans.

    Cabinet launched a comprehensive business transformation programme
    (‘Council for the Future’) at its meeting on 21 December 2009 to ensure that
    the Council can sustain good quality public services, within a balanced budget
    at an affordable price for residents into the medium term. The purpose of the
    programme is to reduce costs whilst maintain performance and quality of the
    Council's services. The programme is broad and ambitious, with a scope
    covering:

             simplifying the customer journey
             personalised services
             early intervention
             promoting independence
             empowering citizens and communities
             enhanced commissioning and procurement
             making the best use of assets
             people, performance and productivity
             right level of publicly financed services
             partnership and place.

3.3 Constitution

    All the annexes to the Constitution, with the exception of Annex 08A - Scrutiny
    of the Health Service (May 2005) and Annex 12 Financial Regulations (Jan
    2009) were reviewed and updated during the year.

    The Council’s Financial Regulations are kept under continuous review to
    ensure that they comply with changing statutory requirements and continue to
    provide a secure framework for the developing business needs of the
    authority. A review of Financial Regulations was undertaken to incorporate
    changes to responsibilities; the revised regulations were formally adopted in
    May 2010.

    They clarify responsibilities and provide a framework for decision making.
    Where there are specific statutory powers and duties, financial regulations
    seek to ensure these are duly complied with, as well as reflecting best
    professional practices and decisions of the County Council and Cabinet.

    The Regulations also form part of the framework in order that the County
    Council can demonstrate its compliance with the principles of good
    governance, which is essential in maintaining public confidence in elected
    members and officials.




                                      124
              ANNUAL GOVERNANCE STATEMENT
    The Council’s Constitution sets out in detail the Council’s arrangements for
    each of the following:

        defining and documenting the roles and responsibilities of the executive,
         non-executive, scrutiny and officer functions, with clear delegation
         arrangements and protocols for effective communication

        developing, communicating and embedding codes of conduct, defining
         the standards of behaviour for members and staff

        reviewing and updating standing orders, standing financial instructions, a
         scheme of delegation and supporting procedure notes/manuals, which
         clearly define how decisions are taken and the processes and controls
         required to manage risks

        ensuring the authority’s financial management arrangements conform
         with the governance requirements of the CIPFA Statement on The Role
         of the Chief Financial Officer in Local Government (2010)

        undertaking the core functions of an audit committee

        ensuring compliance with relevant laws and regulations, internal policies
         and procedures, and that expenditure is lawful

        whistle blowing and for receiving and investigating complaints from the
         public.

3.4 Risk Management

    The Council has a well developed Risk Management Strategy and has
    transferred its risk register management processes onto a web based software
    package. Key Service Risks are reported regularly to Executive Members, and
    a corporate report goes annually to the Audit Committee and to Cabinet
    showing the steps which are being taken to minimise the impact of each risk.
    The Risk Champions group consists of assistant directors and senior
    departmental managers. Each Risk Champion represents their individual
    service area, endeavouring to ensure risks are managed in accordance to the
    agreed corporate strategy.

3.5 Scrutiny and compliance

    Under the proposals brought in to modernise the way local government works,
    Hertfordshire County Council decided to opt for a style of Cabinet
    Government. This means that when all County Councillors meet at a full
    Council Meeting their role is to set the strategic direction for Council Services,
    receive petitions from the public and reports from the various committees.
    Working within this policy framework a Cabinet made up of 10 senior
    politicians from the ruling party form The Executive and takes the major policy
    and operational decisions.

                                        125
              ANNUAL GOVERNANCE STATEMENT
    The role of the Overview and Scrutiny Committee (OSC) is to hold The
    Executive to account by scrutinising:-decisions made by, or on behalf of the
    Council or Cabinet, any operational or policy aspect of the Council’s business
    They are also able to scrutinise any issue which affects the County and its
    residents which may be outside the Council’s control. Like the Full Council,
    meetings of scrutiny committees and their topic groups are open to members
    of the public. There is also a Health Scrutiny Committee which is independent
    of the County Council, but is run by the County Council.

    The OSC is responsible for ensuring that the Cabinet’s budget proposals are
    scrutinised appropriately; and that there is regular scrutiny of the Hertfordshire
    Children’s Trust Partnership and the Hertfordshire Safeguarding Children
    Board.

3.6 Performance Management

    The Council has strengthened its strategic and service level performance
    management processes to facilitate continuous improvement and identify and
    deal with failure in service delivery. The Strategic Management Board review
    performance monitor reports quarterly including key Performance Indicators,
    projects, inspections, customer care, risks etc.

    Service Boards review performance through monthly monitors and report to
    Cabinet Panel quarterly, in addition service specific reports on projects, key
    strategies and service areas are subject to review by the Overview and
    Scrutiny Panel.

    Performance information is reported to central government on various
    statutory returns.

3.7 Members and Staff

    The Council has a good reputation for its Member development work. This
    has been externally accredited and the Council has secured the IDeA Member
    Development Charter Mark. It has also detailed a programme of training
    events for the coming year which respond to the training needs analysis which
    has been completed by Members in recent months.

    A recent decision was taken to retain the high level of commitment to Member
    development provided by the charter, but by endorsing a local ‘Hertfordshire
    Member Development Pledge’.

    The system of Deputy Cabinet members facilitates succession planning.




                                        126
              ANNUAL GOVERNANCE STATEMENT
     The Council has Investors in People accreditation for all Departments in
     relation to staff. The Staff Development Charter requires the Council to
     assess the learning and development needs of officers and to meet those
     needs.

     The Performance Management and Development Scheme has been
     developed by Herts HR for use by all services and staff, except those at Watch
     Commander Level and below (Fire and Rescue) and those in professional
     teacher roles (includes centrally employed teachers). The scheme consists of
     a Performance Agreement (Part 1) which sets out the member of staff’s
     performance objectives and a Personal Development Plan (Part 2) which
     focuses on the skills, knowledge and behaviours required to achieve their
     performance objectives. A standard set of ‘outcomes’ has also been
     introduced to enable managers and staff to summarise the performance over
     the year and will help when assessed externally.

3.8 The community of Hertfordshire

     The Council works together with its partners through Hertfordshire Forward,
     the countywide Local Strategic Partnership (LSP), under the County Council’s
     leadership.    All agenda papers and decisions are published on
     www.hertslink.org.

     The Statement of Corporate Governance sets out the Council’s arrangements
     for:
         establishing clear channels of communication with all sections of the
          community and other stakeholders, ensuring accountability and
          encouraging open consultation
         incorporating good governance arrangements in respect of partnerships
          and other group working as identified by the Audit Commission’s report
          on the governance of partnerships, and reflecting these in the authority’s
          overall governance arrangements

4.   Review of effectiveness

4.1 Hertfordshire County Council has responsibility for conducting, at least
    annually, a review of the effectiveness of its governance framework including
    the system of internal control, but in practice this is a continuous process of
    review and improvement. The review of effectiveness is informed by the
    annual service assurances and checklist of key controls and corporate
    responsibilities which are signed by the service department Directors,
    assurances from the senior managers who have responsibility for the
    development and maintenance of the governance environment, including
    those working with our strategic partners and risk management, the head of
    Internal Audit’s annual report, and also by comments made by the external
    auditors and other review agencies and inspectorates.




                                       127
               ANNUAL GOVERNANCE STATEMENT
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.
    Corporate ownership of this statement is achieved through the Performance
    and Resources Officer Group, chaired by the Chief Financial Officer. They
    undertake the review of effectiveness of the governance arrangements and
    are responsible for approving the statement prior to signing by the Chief
    Executive and Leader. The Audit Committee scrutinises the review at its June
    meeting.

4.3 The authority’s financial management arrangements conform with the
    governance requirements of the CIPFA Statement on the Role of the Chief
    Financial Officer in Local Government (2010)

4.4 A full review of the effectiveness of the Statement of Corporate Governance
    and the governance framework was undertaken. The revised Statement of
    Corporate Governance was endorsed by the Performance and Resources
    Officer Group.

4.5 The Service Chief Officers each 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.

     Actions have been identified to improve controls in relation to exceptions
     identified in the Chief Officer assurance assessments.

4.6 The action plans arising from the 2008/9 Annual Governance Statement have
    been reviewed; all such actions have been implemented.

4.7 Internal Audit also provided an independent opinion on the adequacy and
    effectiveness of the Council’s system of financial control in the Internal Audit
    Annual Report which is reviewed by the Audit Committee in June.




                                        128
              ANNUAL GOVERNANCE STATEMENT
4.8 We have been advised on the implications of the result of the review of the
    effectiveness of the governance framework by the Audit Committee, and a
    plan to address weaknesses and ensure continuous improvement of the
    system of internal control is in place.

5.   Significant governance issues

5.1 The Council has been preparing for the rapidly changing financial climate in
    which local government services are funded.

     Implementation of the Integrated Plan and the Council for the Future
     programme will reduce costs whilst maintaining performance and quality of the
     Council's services.

5.2 The council acknowledges the issues raised about the closure of the 2008/9
    accounts in the Audit Commission Annual Governance Report. Actions have
    been put in place to cleanse the Corporate Property database and Fixed
    Assets Register and combine all the information on a single database, and to
    correctly identify items of capital expenditure and comply with capital
    accounting requirements. An update on the progress of the Valuation and
    Asset Accounting project went to the council’s Audit Committee on the 25 th
    March 2010 where the Audit Commission was present.

5.3 A detailed action plan has been put in place to ensure that the 2010/11
    accounts are IFRS compliant.

5.4 Improvements in controls to address weaknesses in budget management in
    Children’s Services and Property Services are being implemented. These
    were the only significant matters identified in Chief Officer assurance
    assessments.

5.5 We propose over the coming year to take steps to address the above matters
    to further enhance our governance arrangements. We are satisfied that these
    steps will address the need for improvements that were identified in our review
    of effectiveness and will monitor their implementation and operation as part of
    our next annual review.

     Signed on behalf of Hertfordshire County Council:




     Robert Gordon                                   Caroline Tapster
     Leader                                          Chief Executive
     Date: 30 June 2010                              Date: 30 June 2010




                                       129
    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 council administers a Pension Fund covering staff employed by the council, the
ten district councils in Hertfordshire and 184 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 (Benefits,
Membership and Contributions) Regulations 2007 (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 2010 was as follows:

 Contributors                                    28,485
 Pensioners                                      19,987
 Former Contributors - deferred benefits         24,103
 Total                                           72,575

MANAGEMENT
The management of investments is undertaken by firms of Fund Managers.

FURTHER INFORMATION
The council publish a separate Annual Report on the Pension Fund which gives
more detailed information.




                                        130
LOCAL GOVERNMENT PENSION FUND ACCOUNTING POLICIES

Statement of Accounting Policies

General Principles
The accounts have been prepared in accordance with the provisions of Chapter 2
of the Statement of Recommended Practice Financial Reports of Pension Schemes
2007, the Code of Practice on Local Authority Accounting in the United Kingdom
2008 and the Local Government Pension Scheme (Administration) Regulations
2008 (as amended).

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 pages 23-24 which takes account of such liabilities.

Basis of Preparation
The accounts have been prepared on an accruals basis, with the exception of
transfer values which have been treated on a cash basis as the amount payable or
receivable by the Pension Fund is not determined until payment is actually made
and accepted by the recipient.

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

   Quoted securities are valued at bid price at the close of business on the
    balance sheet date.
   Unit Trust and managed fund investments (including property) are valued
    at the closing bid price if both bid and offer prices are quoted by the respective
    Investment Managers. If only a single price is quoted, investments are valued
    at the closing single price.
   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 partnership’s estimate of fair value. For private equity limited
    partnerships there is usually a time delay in receiving information from the
    private equity Investment Managers. The valuations shown in the Net Assets
    Statement for these investments are the latest valuations provided to the
    Pension Fund, adjusted for cash movements between the valuation date and
    the balance sheet date.
   Futures contracts are valued at the exchange price for closing out the contract
    at the balance sheet date. This represents the unrealised profit or loss on the
    contract.
   Forward foreign exchange contracts are stated at fair value which is determined
    as the gain or loss that would arise from closing out the contract at the balance
    sheet date by entering into an equal and opposite contract.




                                         131
    LOCAL GOVERNMENT PENSION FUND ACCOUNTING POLICIES

    Investment assets and liabilities include cash balances held by the Investment
     Managers and debtor and creditor balances in respect of investment activities
     as these form part of the net assets available for investment.
    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.

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 2010.

Gains and losses on exchange arising from foreign currency investment and cash
balances are included within the Fund Account for the year.

Investment Management and Administrative Expenses
The external Investment Managers’ fees are agreed in the respective mandates
governing their appointment. Fees are based on the market value of the portfolio
under management.

In previous years where an Investment Manager’s fee note has not been received
for the final period, an estimate based on the market value of their mandate as at
the end of the year is used for inclusion in the Fund Account. In 2009/10, no fees
were based on such estimates.

Contributions
In previous years where participating employers have not submitted certified returns
of contributions payable by the due date for preparation of these Accounts, an
estimate of these contributions has been made. In 2009/10, no contributions were
based on such estimates.

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

The Pension Fund is exempt from UK income tax on interest received and from
capital gains tax on the proceeds of investments sold. Tax is deducted from
dividends paid on UK equities. This is not recoverable. Income from overseas
investments suffers a withholding tax in the country of origin, unless exemption is
permitted. The Pension Fund has been granted exemption from US taxation and in
some instances partial recovery of other withholding tax is possible. Provision is
made for the estimated sums to be recovered and income grossed up accordingly.




                                         132
 LOCAL GOVERNMENT PENSION FUND ACCOUNTING POLICIES

VAT
The Pension Fund is exempt from VAT and is therefore able to recover such
deductions. Investment management and administrative expenses are therefore
recognised net of any recoverable VAT.

Acquisition Costs
Acquisition costs of investments are included in the purchase price.

Additional Voluntary Contribution Investments
The County Council has arrangements with the Standard Life Assurance Company
and the Equitable Life Assurance Society to enable employees to make Additional
Voluntary Contributions (AVCs) to enhance their pension benefits. AVCs are
invested separately from the Pension Fund’s main assets and the assets purchased
are specifically allocated to provide additional benefits for members making AVCs.
As these contributions do not form part of the Pension Fund’s investments, the
value of AVC investments are excluded from the Pension Fund’s Net Assets
Statement in accordance with regulation 4(2)(c) of the Local Government Pension
Scheme (Management and Investment of Funds) Regulations 2009 (SI 2009 No
3093).

Security Lending
The Local Government Pension Scheme (Management and Investment of Funds)
Regulations 2009 permit the Pension Fund to lend up to 35% of its securities from
its portfolio of stocks to third parties in return for collateral. The Pension Fund has
set a limit of 20% of the total Fund value. The securities on loan are included in the
Net Assets Statement to reflect the Pension Fund’s continuing economic interest of
a proprietorial nature in these securities.




                                         133
    LOCAL GOVERNMENT PENSION FUND ACCOUNTS

Fund Account
                                                     2008/09      2009/10
                                              Note
                                                      £’000        £’000
Dealings with members, employers and
others directly involved in the Scheme
Contributions receivable                       1
        Members                                        31,956      32,935
        Employers                                     107,148     110,143
Transfers in from other schemes                2       10,326      11,428
                                                      149,430     154,506
Benefits payable                               3
        Pensions                                      (74,826)    (81,120)
        Commutation of pensions and lump              (17,644)    (20,633)
        sum retirement benefits
        Lump sum death benefits                        (2,077)     (2,187)
                                                      (94,547)   (103,940)
Payments to and on account of leavers
      Refunds of contributions                            (25)        (24)
      State scheme premiums                                (8)        (12)
      Transfers out to other schemes           4       (6,044)    (16,537)
                                                       (6,077)    (16,573)
Administrative expenses and other payments
       Administrative expenses                 5       (1,793)     (1,914)
       Interest                                          (102)        (51)
       Bad debts                                           (0)         (0)
                                                       (1,895)     (1,965)
Net Additions (withdrawals) from                       46,911      32,028
dealing with Members
Returns on investments
Investment income                              6        69,017     61,555
Taxation                                               (3,410)     (3,133)
Investment management expenses                 7       (6,544)     (7,997)
Change in market value of investments          8     (532,683)    466,637
Net return on investments                            (473,620)    517,062
Net increase/(decrease) in the Fund                  (426,709)    549,091
during the year
Opening net assets of the Scheme                     2,066,275   1,639,566

Closing net assets of the Scheme                     1,639,566   2,188,657




                                        134
       LOCAL GOVERNMENT PENSION FUND ACCOUNTS

Net Assets Statement
                                                            2008/09        2009/10
                                                  Note
                                                             £’000          £’000

Investment Assets                                   9
Fixed interest securities
         Public sector                                      124,835        134,511
         Other                                              115,321        192,418
Equities
           UK                                               407,893        620,423
           Overseas                                         562,026        835,592
Index linked securities
         Public sector                                       66,904         74,009
         Other                                                5,643          8,251
Pooled investment vehicles
        Property                                             68,439         74,556
        Unit trusts                                          10,928         18,160
        Other managed funds                                  94,851         94,524
Derivatives
         Futures                                    10           54             39
         Forward foreign exchange contracts         10        2,213          3,063
Cash deposits                                                97,114        106,441
Other investment balances                                    33,226         32,172

Investment liabilities                              9
Derivative contracts
         Forward foreign exchange contracts         10       (2,691)        (3,800)
Other investment balances                                  (30,858)        (25,751)
Total investment asset/liabilities                        1,555,898      2,164,608

Current assets                                      11       86,393         27,692
Current liabilities                                 12       (2,725)        (3,644)
Total current assets/liabilities                             83,668         24,048

Net assets of the Scheme at 31 March                      1,639,566      2,188,657

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.


M Parsons, Chief Finance Officer
30 September 2010

                                         135
         NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                          ACCOUNTS

Notes to the Accounts
1. Contributions Receivable

                                        2008/09             2009/10
                                         £’000               £’000

       Members
        Normal                          31,179               32,194
        Additional                         777                  742
                                        31,956               32,935
       Employers
         Normal                         62,236               79,727
         Augmentation                      455                  623
         Deficit funding                44,457               29,793
                                       107,148              110,143
       Total                           139,104              143,078

      Members’ additional contributions represent contributions from members to
      purchase additional years of membership or pension in the Scheme.

      Employers’ normal contributions represent the ongoing contributions paid into
      the Pension Fund by employers in accordance with the Rates and Adjustments
      Certificate, issued by the Pension Fund’s Actuary. These reflect the cost of
      benefits accrued by current members over the year.

      Employers’ augmentation represents additional contributions from employers
      towards the cost of enhancing members’ benefits.

      Employers’ deficit funding includes:

       £23,419,782 past service adjustment which represents the additional
        contributions required from employers towards the deficit where an
        employer’s funding level is less than 100%, as per the Rates and
        Adjustments Certificate. The deficit recovery period varies depending on the
        individual circumstances of each employer. For statutory bodies, the
        Pension Fund normally targets the recovery of any deficit over a period not
        exceeding 20 years. For transferee Admission Bodies the deficit recovery
        period would be the shorter of the end of the employer’s contract or the
        expected future working lifetime of the remaining Scheme members. Further
        information can be found in the Pension Fund’s Funding Strategy Statement
        on page 72 and accessible from www.hertsdirect.org/pensions.

       £1,122,813 paid by employers in excess of the minimum contribution levels
        required by the Actuary in the Rates and Adjustments Certificate.

                                             136
        NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                         ACCOUNTS

      £5,250,347 towards early retirements representing the actuarial strain on the
       Pension Fund where a member retires early and is entitled to immediate
       access to their benefits.

Contributions received are further analysed by type of employer:

                                        2008/09                2009/10
                                         £’000                  £’000
      Administering Authority            64,968                 70,525
      Other Scheduled Bodies             62,794                 61,175
      Admitted Bodies                    11,342                 11,378
      Total                             139,104               143,078


2. Transfers In From Other Schemes
   The transfers in figure represent the payments received by the Pension Fund in
   relation to individual members’ transfers of benefits into the Pension Fund. No
   amounts were received during the year for group transfers from other schemes.


3. Benefits Payable

                                          2008/09               2009/10
                                           £’000                 £’000
      Administering Authority             41,535                 44,623
      Other scheduled bodies              46,843                 51,413
      Admitted bodies                      6,169                  7,904
      Total                                94,547               103,940


4. Transfers Out to Other Schemes
   The transfers out figure represents the payments made by the Pension Fund
   in relation to individual members’ transfers of benefits out of the Pension Fund.
   No amounts were paid during the year for group transfers to other schemes.




                                        137
      NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                       ACCOUNTS

5. Administrative Expenses
   The Local Government Pension Scheme (Management and Investment of
   Funds) Regulations 2009, allow the Administering Authority to charge pension
   administration expenses direct to the Pension Fund. The expenses listed below
   include a charge made for the work carried out on the Pension Fund by
   Hertfordshire County Council’s Finance Service on pension administration and
   investment matters. Expenses incurred by the Pension Fund’s Investment
   Managers are listed in note 7.

                                                2008/09        2009/10
                                                 £’000          £’000
    Administration and processing                  1,665         1,736
    Actuarial fees                                    49           123
    Audit Fees
        Statutory                                       50          43
        Other                                            2           2
    Legal and other professional fees                   27          10
    Total                                         1,793          1,914

6. Investment Income

a) Analysis of Investment Income

                                              2008/09         2009/10
                                               £’000           £’000
    Income from fixed interest securities
        Public Sector                           6,010           4,732
        Other                                   6,791          10,345
    Dividends from equities
        UK                                    24,380           22,277
        Overseas                              19,402           15,346
    Income from index linked securities
        Public Sector                            869            2,667
    Income from pooled investment
    vehicles
        Property                                4,587           4,212
        Unit trusts                                70               0
        Other managed funds                       467             443
    Interest on cash deposits                   6,045             779
    Other investment income
        Securities lending                       266              394
        Commission recapture                       1                0
        Class action proceeds                    108              280
        Underwriting commission                    2               76
        Other                                     19                4
    Total                                     69,017           61,555

                                        138
139
       NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                        ACCOUNTS

b) Securities Lending
   The Pension Fund has an arrangement with its Custodian to lend securities
   from within its portfolio of stocks to third parties in return for collateral.

    Collateralised lending generated income of £393,514 for 2009/10 (£265,638
    for 2008/09). This is included within investment income in the Fund Account.
    At 31 March 2010, £55.8 million worth of stock (2.56% of the Pension Fund)
    was on loan, for which the Pension Fund was in receipt of collateral worth £59.3
    million.


7. Investment Management Expenses
   The Pension Fund’s Investment Managers are remunerated on the basis of
   fees calculated as a percentage of total assets under management. Some
   Investment 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 on page 60.

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

    The Pension Fund subscribes to the performance measurement service of
    The WM Company. An analysis of the Pension Fund’s performance is shown in
    the Investment Performance section on pages 65-66.

                                                     2008/09        2009/10
                                                      £’000          £’000
     Administration and management                    6,016         7,487
     Refund of investment management fees                 0             0
     Custody                                            496           480
     Performance measurement services                    32            30
     Total                                             6,544        7,997




                                         140
      NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                       ACCOUNTS

8. Change in Market Value of Investments
a) Analysis of Change in Market Value of Investments




                           Purchase




                           in market
                           proceeds
                            payment
                            derivativ




                            derivativ
                            s at cost




                                                                         31/03/10
                            31/03/09
                            Value at




                                                                         Value at
                            receipts
                            Change

                              value
                              Sale
                               and




                               and
                                e

                                s


                                e
                          £’000      £’000       £’000       £’000       £’000

    Fixed Interest
       Public Sector      124,835    370,436    (357,654)    (3,105)    134,511
       Other              115,321     94,945     (44,827)    26,979     192,419
    Equities
       UK                 407,893    353,851    (308,400)    167,078    620,423
       Overseas           562,026    849,385    (831,764)    255,944    835,592
    Index linked
       Public Sector       66,903     24,195     (21,895)      4,806     74,009
       Other                5,643      4,737      (3,258)      1,128      8,251
    Pooled vehicles
       Property            68,439          0            0      6,117     74,556
       Unit trusts         10,928      1,220      (2,080)      8,091     18,160
       Managed funds       94,851      9,847      (8,071)    (2,103)     94,524
    Derivatives
       Futures                  54       436        (430)        (21)         39
       Forward foreign       (478)    42,723     (47,802)      4,820       (737)
       exchange
    Cash deposits           97,114    32,144      (19,719)    (3,098)    106,441
    Subtotal             1,553,530 1,783,920   (1,645,899    466,637    2,158,18
                                                    )                      7
    Other investment        2,368                                          6,421
    balances
    Total investment     1,555,89                                       2,164,60
    assets/liabilities      8                                              8


   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 sale of investments during the year.
   Derivative receipts and payments represent the realised gains and losses on
   futures contracts and forward foreign exchange contracts during the year. The
   sale proceeds and derivative receipts for cash deposits represent the net
   movement in cash held by the Investment Managers during the year. The
   change in market value of cash results from gains and losses on foreign
   currency cash transactions.




                                       141
       NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                        ACCOUNTS

b) Transaction Costs
   Transaction costs are included in the cost of purchases and sale proceeds.
   Transaction costs include costs charged directly to the Pension Fund such
   as fees, commissions, stamp duty and other fees. Transaction costs incurred
   during the year amounted to £4.8 million (£5.5 million in 2008/09). In addition
   to these costs, indirect costs are incurred through the bid-offer spread on
   investments within pooled investment vehicles. The amount of indirect costs
   is not separately provided to the Pension Fund.




                                        142
      NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                       ACCOUNTS

9. Investment Analysis
a) Analysis of Investments at Market Value
                                                        2008/09     2009/10
                                                         £’000       £’000
    Investment Assets:
    Fixed Interest Securities
        UK Public Sector                                   63,040     86,854
        Overseas Public Sector                             61,795     47,657
        UK other                                           83,286    154,398
        Overseas other                                     32,035     38,021
                                                          240,156    326,930
    Equities
        UK quoted                                         407,893     620,305
        UK unquoted                                             0         117
        Overseas quoted                                   558,592     835,592
        Overseas unquoted                                   3,434           0
                                                          969,919   1,456,014
    Index linked securities
        UK Public Sector                                   66,904     74,009
        UK other                                            3,245      2,748
        Overseas other                                      2,398      5,503
                                                           72,547     82,260
    Pooled investment vehicles
        Property
            UK                                             68,439     74,556
        Unit trusts
            UK                                              2,676      3,953
            Overseas                                        8,252     14,207
        Managed funds
            UK                                              9,702     13,958
            Overseas                                       85,149     80,565
                                                          174,218    187,239
    Derivatives
        Futures                                                54         39
        Forward foreign exchange contracts                  2,213      3,063
                                                            2,267      3,102
    Cash deposits                                          97,114    106,411
    Other investment balances
      Amounts receivable from the sale of investments      21,855     19,104
      Investment income due                                 9,683     11,521
      UK and overseas recoverable tax due                   1,688      1,548
                                                           33,226     32,172
    Investment Liabilities:
    Derivative contracts
       Forward foreign exchange contracts                 (2,691)     (3,800)
    Other investment balances
      Amounts payable for the purchase of investments    (29,132)    (24,147)
      Non recoverable tax payable                         (1,726)     (1,604)
                                                         (30,858)    (25,751)
    Total                                               1,555,898   2,164,608

                                        143
       NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                        ACCOUNTS

b) Commitments
   As at 31 March 2010, the Pension Fund had a commitment of a further
   £68.2 million to private equity limited partnerships, based on exchange rates
   at the balance sheet date (£80.5 million at 31 March 2009).

c) Analysis by Investment Manager
   The value of investments held by each Investment Manager together with
   investments in private equity limited partnerships on 31 March were as follows:

                                         31 March 2009          31 March 2010
                                        Market                  Market
         Investment Manager                           %                       %
                                        value                   value
                                        £’000                   £’000
     AllianceBernstein Ltd.            230,492       14.8%     338,940      15.7%
     Baillie Gifford & Co.             168,590       10.8%     258,142      11.9%
     BlackRock Investment              315,329       20.3%     425,246      19.6%
     Management (UK) Ltd.
     Jupiter Asset Management          182,022       11.7%     273,824      12.7%
     Ltd.
     In House Property Unit Trust      109,423        7.0%     119,425       5.5%
       Fund
     Harbour Vest                       47,870        3.1%      52,012       2.4%
     Permira                             4,996        0.3%       5,404       0.2%
     Standard Life Investments          40,489        2.6%      29,832       1.4%
     TTP Venture Managers Ltd.           1,613        0.1%       1,598       0.1%
     Deutsche Asset Management         145,086        9.3%     220,458      10.2%
     (UK) Ltd.
     JPMorgan Asset Management         152,428        9.8%     226,559      10.5%
     (UK) Ltd.
     RCM (UK) Ltd.                     156,128       10.1%     211,739       9.8%
     Residual funds from previous
       portfolios                         1,432       0.1%        1,430      0.1%
     Subtotal: Funds externally
       managed                        1,555,898       100%    2,164,608     100%
     Funds held at Hertfordshire
      County Council                    83,676                  24,048
     Total                            1,639,574               2,188,657

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

    Residual funds from previous portfolios represent residual cash and investment
    income still due to the portfolios previously run by the outgoing Investment
    Managers following the restructure of the Pension Fund during the year.


                                        144
       NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                        ACCOUNTS

d) Encumbrance of Assets
   The Custodian has a lien over the Pension Fund’s assets in order to recover
   any outstanding debts. This is held for the protection of the Custodian and has
   never been invoked.

10. Derivatives

a) Futures
   Futures contracts are exchange traded. They are standardised contracts,
   traded on a futures exchange. Futures are held for the purpose of equitising
   cash; taking a given amount of cash, turning it into an equity position whilst still
   retaining cash like liquidity.

    Futures are disclosed in the accounts at fair value which is the exchange
    price for closing out of the contract at the balance sheet date. This represents
    the unrealised profit or loss on the contract. The notional value represents
    the Pension Fund’s economic exposure which is the value of the securities
    purchased under the futures contract and therefore the value subject to market
    movements.
                                            2008/09                 2009/10
                                      Notional                Notional
        Contract        Duration                 Fair value             Fair value
                                       value                   value
                                       £’000       £’000       £’000      £’000
     FTSE 100          1-3                  0           0         281           2
                       months
     S&P 500 e         1-3                555          54       1,421         17
     mini              months

     DJ EURO           1-3                  0           0       1,297           9
     STOXX 50          months
     TOPIX INDEX       1-3                  0           0         276         11
     FUTURE            months
     (TSE)

     Total                                555          54       3,274         39

b) Forward Foreign Exchange Contracts
   Forward foreign exchange contracts are over the counter contracts with
   non-exchange counterparties. The counterparties at 31 March 2009 and
   31 March 2010 were UK and overseas investment banks. The contracts in the
   table below represent various forward contracts involving ten foreign currencies
   (nine at 31 March 2009). Forward foreign exchange contracts are used to
   hedge against foreign currency movements.




                                          145
       NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                        ACCOUNTS

    Forward foreign exchange contracts are disclosed in the accounts at fair value
    which is the gain or loss that would arise from closing out the contract at the
    balance sheet date by entering into an equal and opposite contract at that date.
    The notional value of the contract reflects the current value of the currency
    purchased under the contract.


                                   2008/09                                2009/10
                      Notional    Fair value                   Notional        Fair value
       Duration
                        value       Asset        Liability      value      Asset     Liability
                        £’000       £’000          £’000        £’000      £’000      £’000
     Within 1 month       2,777         0           (131)      248,255      2,966     (3,665)
     1-3 months        200,804     2,213          (2,560)       30,062         97       (134)

     Total            203,581      2,213         (2,691)       278,318      3,063     (3,800)


11. Current Assets

                                                      2008/09             2009/10
                                                       £’000               £’000
     Contributions due from employers                  6,454               11,643
     Cash with Hertfordshire County Council           79,007               15,201
     VAT due from HMRC                                   729                  531
     Securities lending/commission                        20                   13
     recapture
     Other debtors and prepayments                           183             304

     Total                                            86,393               27,692


12. Current Liabilities

                                                      2008/09             2009/10
                                                       £’000               £’000
     Tax payable to HMRC                                  774                 788
     Investment management fees                         1,019               1,743
     Other creditors                                      135                 295
     Unpaid benefits                                      797                 818

     Total                                              2,725               3,644


13. Liabilities After Year End
    The Pension Fund’s financial statements do not take account of the liabilities
    to pay pensions and other benefits after 31 March 2010. These liabilities are
    valued as part of the triennial valuation process described on pages 23-24.


                                           146
       NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                        ACCOUNTS

   The last actuarial valuation of the Pension Fund was carried out as at
   31 March 2007 to determine contribution rates for the financial years 2008/09 to
   2010/11. The market value of the Pension Fund’s assets at the valuation date
   was £2,152.2m and represented 84.7% of the Pension Fund’s accrued
   liabilities, allowing for future pay increases.

   In accordance with the Scheme regulations, employer contribution rates were
   set to meet 100% of the Pension Fund’s existing and prospective liabilities as
   detailed in the Funding Strategy Statement on page 72.

   The contribution rates were calculated using the projected unit actuarial method
   (or the attained age method for employers closed to new entrants)
   and the main actuarial assumptions were as follows:

                 Rate of return on investments     5.9%
                 Rate of general pay increases     4.7%
                 Rate of price inflation           3.2%


14. Early Retirement Funding
    The Local Government Pension Scheme (Administration) Regulations 2008
    (as amended) give the Administering Authority the right to request employers to
    make additional payments to the Pension Fund towards the cost of early
    retirements. The expected income from this in future years is, as follows:

       Deferred income related to early
              retirement costs
          Year               £’000
         2010/11              1,715
         2011/12              1,224
         2012/13                888
         2013/14                654
         2014/15                204




                                       147
       NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                        ACCOUNTS

15. Additional Voluntary Contributions (AVCs)
    Scheme members have the option to make AVCs to enhance their pension
    benefits. These contributions are invested separately from the Pension Fund,
    with either the Standard Life Assurance Company or the Equitable Life
    Assurance Society.




                                               Equitable Life




                                                                                              Equitable Life
                               Standard Life




                                                                              Standard Life




                                                                                                               Total AVCs
                                                                 Total AVCs
                               2008/09


                                               2008/09


                                                                 2008/09


                                                                              2009/10


                                                                                              2009/10


                                                                                                               2009/10
                              £’000            £’000            £’000         £’000           £’000            £’000
    Value at 1 April           5,104           2,833            7,937         4,282            2,469           6,751

    Income
        Contributions
           received               452                 18            470             426                15           441
        Transfer values
           received                33                  0             33               0                  0            0
                                  485                 18            503             426                 15          441
    Expenditure
       Retirement benefits     (472)            (339)            (811)           (466)           (304)           (770)
       Transfer values paid     (40)              (1)             (40)             (5)               0             (5)
       Lump Sum Death
       Benefit                      0               0                0            (10)               0            (10)
       Refunds                     0              (6)              (6)               0               0               0
                               (512)            (346)            (857)           (481)           (304)           (786)

    Change in market value     (795)              (36)           (831)             968              214        1,182

    Value at 31 March          4,282           2,469            6,751         5,194            2,394           7,589


16. Related parties

a) Hertfordshire County Council
   The majority of the Pension Fund’s cash is invested with Investment Managers.
   However, an 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 £472,036 in interest during 2009/10
   (£2,205,757 in 2008/09).

   The amount of cash held by Hertfordshire County Council on behalf of the
   Pension Fund at 31 March 2010 was £15.2 million.



                                               148
       NOTES TO THE LOCAL GOVERNMENT PENSION FUND
                        ACCOUNTS

b) Investment Committee
   Five members of the Hertfordshire County Council Investment Committee were
   councillor members of the Hertfordshire Local Government Pension Scheme
   during 2009/10. One member of the Investment Committee was in receipt of
   pension benefits from the Scheme during the year.


17. Statement of Investment Principles
    Regulation 12.1 of the Local Government Pension Scheme (Management and
    Investment of Funds) Regulations 2009 requires the Pension Fund to publish a
    Statement of Investment Principles. This is set out on pages 52-60 of the
    Pension Fund Annual Report.




                                      149
    LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT
                         PRINCIPLES

Introduction
The County Council is responsible for the administration of the Pension Fund. The
County Council has a statutory duty to ensure that any funds, not immediately
required to pay pension benefits, are suitably invested.

As required by statute, the County Council has approved a Statement of Investment
Principles which is applied to the management of the Pension Fund investments.

In accordance with government guidelines, the extent to which the Pension Fund
complies with the statutory guidance “Investment Decision making and disclosure in
the Local Government Pension Scheme: A Guide to the Application of the Myners
Principles” is set out at Appendix A to this Statement.


Who Makes the Investment Decisions?
The Investment Committee of the County Council, advised by the Chief Finance
Officer, is responsible for setting the overall investment strategy, monitoring
investment performance and then implementing relevant policies. The Investment
Committee consists of eight County Council members, three (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 Chief
Finance Officer.

The Pension Fund’s governance arrangements are set out in full in the
Governance Policy and Compliance Statement on the Pension Fund website
www.hertsdirect.org/pensions

From 1st April 2010 all investments, will be managed by external investment
management organisations (Investment Managers).


What are the Investment Objectives of the Pension Fund?
1. To comply with the Local Government Pension Scheme (Management and
   Investment of Funds) Regulations 2009, 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.




                                       150
    LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT
                         PRINCIPLES

2. To ensure that the Pension Fund has sufficient assets to pay Scheme benefits.

3. To achieve a long term rate of return on the invested funds (both capital gains
   and income) which assists in controlling the level of employers’ contributions to
   the Pension Fund and also the cost of the pensions to the local taxpayers
   where appropriate by:

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

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


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

The two strategies set out the common objective of the Pension 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
www.hertsdirect.org/pensions.


Achieving the Investment Objectives
The County 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 Pension Fund are not achieved over the long term.

1. Suitable Investments
   The Investment Committee considers that the following types of investments,
   within specific limits, are suitable for the purposes of a pension fund:

     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.




                                        151
    LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT
                         PRINCIPLES

2. Fund Benchmark and Asset Allocation
   The Pension Fund has adopted a specific benchmark which has been approved
   by the Investment Committee, following appropriate professional advice from
   the Investment Consultant, Investment Managers and the performance
   measurement consultant. The composition of the Pension Fund benchmark,
   implemented in May 2008, is set out at Appendix B to this Statement.

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

3. 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”).

   The Pension Fund currently uses “active, specialist” Investment Managers only
   on the advice of the Investment Consultant to increase the potential return of
   the Pension Fund.

   The number of Investment Managers and the share of the Pension Fund by
   type as at 31 March 2009 are shown in the table below, along with comparative
   figures for March 2008.

                                            Share of total Pension Fund at
                                                Number of               Number of
                                   31 March                 31 March
                                               Investment              Investment
                                     2009                     2008
                                                Managers                Managers
    External, active, specialist    86.9%           7        89.1%          6
    Private equity                   6.1%           4         3.8%          4
    In-house, active, specialist
                                    7.0%                      7.1%
    (property unit trusts)

   The percentages in the table above are calculated using the value of
   investments, cash and net current assets held by each Investment Manager at
   31 March.

   Full details of the Investment Managers, their mandates and fee basis are
   shown at Appendix C to this Statement.
                                        152
    LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT
                         PRINCIPLES

   All the Investment Managers need the approval of the Chief Finance Officer to
   acquire shares in any securities that are not listed on a recognised stock
   exchange.

4. Responsible Ownership including Social, Environmental and Ethical
   Considerations
   The Investment Managers are expected to apply their professional expertise
   to maintain suitably diversified portfolios for a pension fund. When making
   investment decisions the Investment Managers are expected to take account of
   what they reasonably believe are all relevant considerations.

   The Pension Fund routinely votes on all matters raised by the largest 350 listed
   UK companies where it owns shares. The Pension 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, except when the advice of the Investment Managers indicates such
   action would not be in the best financial interests of the Pension Fund.

5. Investment Restrictions
   The following investment restrictions apply to the funds under management:

   i) all limits determined under the Local Government Pension Scheme
       Investment and Management of Funds) Regulations 2009; and
   ii) additional limits which have been determined by the County Council:

       Private Equity         -   Total investments are not to exceed a
                                  maximum of 7.5% of the value of the
                                  Pension Fund. In general the
                                  Committee expects private equity to be
                                  no more than 5%. The 2.5% headroom
                                  allows for fluctuations in the value of
                                  other assets.

       Options, futures       -   A maximum of 25% of UK equity
       and contracts for          portfolio. Only to be used to protect
       differences                against possible adverse fluctuations in
                                  the values of other investments or cash
                                  in the portfolio.

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


   There are no other restrictions placed on Investment Managers’ investment
   decision making. Any breaches of the restrictions above are reported to the
   next available meeting of the Investment Committee.

                                       153
    LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT
                         PRINCIPLES

6. Investment Performance Management
   The investment performance of Investments Managers is measured by an
   independent organisation, the WM Company, which reports quarterly to the
   Chief Finance Officer and at least annually to the Investment Committee.

7. Monitoring of Investment Managers
   The Investment Committee meets quarterly to consider reports from each
   Investment Manager. Each Investment Manager makes a presentation in
   person to the Investment Committee on an annual basis and to the Chief
   Finance Officer (or his/her representative) on a more regular basis.

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

9. Stock Lending
   The Pension Fund operates a stock lending programme through its custodian
   bank. The Fund limits the lending to 20% of the total of its portfolios and
   ensures that the collateral is in cash or bonds and is valued on a daily basis to
   be on average 105% of the value of the stock which has been lent.

10. Custody Arrangements
    The Pension 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 presented for approval by the
Investment Committee of Hertfordshire County Council on 10 March 2010 and is
published on the Pension Fund website. Copies are available on request for
participating Scheme employers, Scheme members, pensioners and deferred
beneficiaries. The Statement is reviewed on an annual basis by the Investment
Committee.




                                         154
    LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT
                         PRINCIPLES

                                                                     Appendix A
               Compliance with Myners Principles

Principle                                   Current Position
1. Effective Decision Making
Administering authorities should ensure     Day to day operational decisions are
that:                                       delegated to the County Council’s
                                            Chief Finance Officer, who, with
   decisions are taken by persons or       relevant members of his staff,
    organisations with the skills,          regularly attends seminars and
    knowledge, advice and resources         briefing sessions to maintain a high
    necessary to make them effectively      level of skills and knowledge in
    and monitor their implementation;       investment matters.

and                                         Members of the Investment
                                            Committee act in the role of trustees
   those persons or organisations have     for the Pension Fund. They attend
    sufficient expertise to be able to      training sessions organised by the
    evaluate and challenge the advice       County Council.
    they receive, and manage conflicts of
    interest.                               Both members and officers involved
                                            with making investment decisions
                                            take advice from appropriately
                                            qualified professionals where
                                            appropriate.

                                            Development Areas
                                             Use the CIPFA Knowledge and
                                               Skills framework to assess
                                               members and officers to develop
                                               a training plan.
                                               Develop a medium term business
                                                plan for the Pension Fund.




                                      155
   LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT
                        PRINCIPLES

Principle                                      Current Position
2. Clear Objectives
An overall investment objective(s) should      The Pension Fund’s main investment
be set out for the fund that takes account     objective, as set out in this Statement
of the scheme’s liabilities, the potential     of Investment Principles,
impact on local tax payers, the strength of    acknowledges the need to meet the
the covenant for non-local authority           Pensions Fund’s liabilities and states
employers, and the attitude to risk of both    that the aim is to ensure the impact
the administering authority and scheme         on local tax payers is minimised.
employers, and these should be clearly
communicated to advisors and                   The Statement of Investment
investment managers.                           Principles is circulated to the Pension
                                               Fund’s advisors and investment
                                               managers and is published on the
                                               Pension Fund’s website.

                                               Development Area
                                                Clearly define in the Statement of
                                                  Investment Principles the
                                                  Pension Fund’s attitude to risk
                                                  and how it feeds into the
                                                  objectives.

3. Risk and Liabilities
In setting and reviewing their investment      The Pension Fund’s main investment
strategy, administering authorities should     objective, as set out in this Statement
take account of the form and structure of      of Investment Principles,
liabilities. These include the implications    acknowledges the need to meet the
for local tax payers, the strength of the      Pension Fund’s liabilities and states
covenant for participating employers, the      that the aim is to ensure the impact
risk of their default and longevity risk.      on local tax payers is minimised.

                                               Development Areas
                                                Consider the form and structure
                                                  of liabilities as well as non
                                                  investment risks more explicitly in
                                                  the next review of strategy.
                                                Develop a pension fund specific
                                                  risk management framework.




                                         156
    LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT
                         PRINCIPLES

Principle                                      Current Position
4. Performance Assessment
Arrangements should be in place for the        The Investment Committee formally
formal measurement of performance of           measures performance of investment
the investments, investment managers           managers and investments on a
and advisors.                                  quarterly basis.
Administering authorities should also
                                               Development Areas
periodically make a formal assessment of
                                                Develop a framework to formally
their own effectiveness as a decision
                                                  measure the performance of the
making body and report on this to
                                                  Pension Fund’s advisors.
scheme members.
                                                Develop a framework to enable the
                                                  Investment Committee to make an
                                                  assessment of their effectiveness.
5. Responsible ownership
Administering authorities should:              The Pension Fund’s investment
                                               managers have adopted the
   adopt or ensure their investment           Institutional Shareholders’ Committee
    managers adopt, the Institutional          Statement of Principles.
    Shareholders’ Committee Statement
    of Principles on the responsibilities of   A statement regarding responsible
    shareholders and agents                    ownership is included in the Statement
                                               of Investment Principles, which is part
   include a statement of their policy on     of the Annual Report published on the
    responsible ownership in the               Pension Fund website for all scheme
    statement of investment principles         members to access.

   report periodically to scheme
    members on the discharge of such
    responsibilities.
6.Transparency and reporting                   The Pension Fund communicates with
Administering authorities should:              its stakeholders through the publication
                                               of the following documents, in addition
   act in a transparent manner,               to this one, on the Pension Fund’s
    communicating with stakeholders on         website
    issues relating to their management
    of investment, its governance and             Governance Statement
    risks, including performance against          Annual report
    stated objectives                             Communication Statement

   provide regular communication to           In addition a meeting is held for all
    scheme members in the form they            employers on an annual basis.
    consider most appropriate.
                                               Communication with scheme members
                                               is through the website and through the
                                               Pension Fund’s employers.



                                         157
 LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT
                      PRINCIPLES

                                                             Appendix B


             Composition of Total Benchmark
30%   UK Equities       FTSE All Share (including Private Equity)
45%   Global Equities   MSCI AC World Index
4%    UK Gilts          FT-A Conventional Gilts All Stocks
4%    Corporate Bonds   Merrill Lynch Sterling non-gilts, all stocks index
4%    UK Index Linked   FT-A Over 5 Year Index Linked Gilt
4%    Overseas          Lehman Global Aggregates ex UK
1%    Cash              GBP 7 Day LIBID
8%    UK Property       IPD All Properties Index




                              158
   LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT
                        PRINCIPLES
                                                                            Appendix C

                 Pension Fund Investment Managers
                        as at 31 March 2009
                         Value of
                                                           Performance
                         Portfolio
                                         Type of              Target
 Investment Manager          at                                               Fee Type
                                         Mandate            (% above
                         31/03/200
                                                           benchmark)
                             9

Jupiter Asset                        Active, Specialist,                     Performance
                          182.0                                 2%
Management Ltd.                        UK Equities                             Related

                                     Active, Specialist,
Baillie Gifford & Co.     168.6                               1.25%           Ad valorem
                                       UK Equities

                                     Active, Specialist,                     Performance
AllianceBernstein Ltd.    230.5                                 2%
                                      Global Equities                          Related

Deutsche Asset                       Active, Specialist,
                          145.1                                 4%            Ad valorem
Management (UK) Ltd                   Global Equities

JPMorgan Asset                       Active, Specialist,
                          152.4                                 4%            Ad valorem
Management (UK) Ltd                   Global Equities

                                     Active, Specialist,
RCM (UK) Ltd              156.1                                 3%            Ad valorem
                                      Global Equities

BlackRock Investment                 Active, Specialist,
                          315.3                                0.5%           Ad valorem
Management (UK) Ltd.                       Bonds

                                     Active, Specialist,                     Performance
Permira                     5.0                            Not applicable
                                      Private Equity                           Related

                                     Active, Specialist,                     Performance
Harbour Vest               47.9                            Not applicable
                                      Private Equity                           Related

Standard Life                        Active, Specialist,                     Performance
                           40.5                            Not applicable
Investments                           Private Equity                           Related

                                     Active, Specialist                      Performance
TTP Ventures                1.6                            Not applicable
                                      Private Equity                           Related

In-House Property Unit                                                           Not
                          109.4         Unit Trusts        Not applicable
Trust Fund                                                                    applicable


Fee types
Ad valorem          -     based only on the value of the portfolio
Performance Related -     additional fees payable where performance exceeds
                          the target


                                        159
              FIREFIGHTERS’ PENSION FUND ACCOUNTS

FUND ACCOUNT FOR YEAR ENDED 31 MARCH 2010

                                                             2009      2010
                                                      Note   £000      £000
Contributions receivable
From employer
- contributions in relation to pensionable pay         3     (3,631)   (3,573)
- ill health early retirements                         3        (38)      (62)
From members
- firefighters’ contributions                          3     (1,935)   (1,926)
Total - Contributions receivable                             (5,604)   (5,561)

Transfers in                                           4
- from other authorities                                        (71)      (34)
Total - Transfers in                                            (71)      (34)

Benefits payable
- pensions                                                   6,402      6,966
- commutations and lump sum retirement benefits              2,513      3,138
- lump sum death benefits                                        0          0
Total - Benefits payable                                     8,915     10,104

Payments to and on account of leavers
- refunds of contributions                                        0         1
- transfers out to other authorities                   4          4        35
Total - Payments to and on account of leavers                     4        36

Deficit for the year before top-up grant receivable
from central government – Communities and Local
Government                                                   3,244      4,545

Top-up grant payable by central government –
                                                       5
Communities and Local Government                             (3,244)   (4,545)

                                                                  0         0




                                         160
             FIREFIGHTERS’ PENSION FUND ACCOUNTS


NET ASSETS STATEMENT AS AT 31 MARCH 2010
                                                    2009      2010
                                                    £000      £000
Current assets
Top-up grant receivable from central government –
Communities and Local Government                    2,028      2,440

Current liabilities
Amount owing to the General Fund                    (1,691)   (2,185)
Unpaid pension benefits                               (337)         0
Top-up grant payable to central government               0)     (255)
                                                    (2,028)   (2,440)

Net Assets                                               0         0




M Parsons

Chief Finance Officer




                                      161
NOTES TO THE FIREFIGHTERS’ PENSION FUND ACCOUNTS

1.   Summary of the Firefighters’ Pension Fund Operations

     The firefighters’ pension fund was established under the Firefighters’
     Pension Scheme (Amendment) Order 2006.

     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.

     The firefighters’ pension fund is an unfunded defined benefits scheme
     meaning that there are no investment assets available to meet pension
     liabilities. 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.




                                       162
 NOTES TO THE FIREFIGHTERS’ PENSION FUND ACCOUNTS

2.   Accounting Policies

     The accounts have been prepared in accordance with the 2009 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 2010.

     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

     Employees’ and employer’s contribution levels are set nationally by central
     government and are subject to triennial revaluation by the Government
     Actuary’s Department.

     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




                                      163
 NOTES TO THE FIREFIGHTERS’ PENSION FUND ACCOUNTS

3.   Contributions Receivable (continued)

     Contributions received by the Fund are analysed below.

                                                     Employer               Employee

                                                 2009         2010        2009        2010

                                                 £000         £000        £000        £000

     1992 Firefighters’ Pension Scheme            3,408       3,275        1,763      1,695

     2006 Firefighters’ Pension Scheme              223         298          172          231

                                                  3,631       3,573        1,935      1,926

     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.




                                        164
 NOTES TO THE FIREFIGHTERS’ PENSION FUND ACCOUNTS
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 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.   Unpaid Pension Benefits

     There is no unpaid Pension Beneifts in 2009/10 it was a one off adjustment
     in 2008/09.
     Unpaid Pension Benefits, there were no such payments in 2009/10 it was a
     one off adjustment made in 2008/09.

7.   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 2010.




                                      165
INDEPENDENT AUDITOR’S REPORT TO HERTFORDSHIRE COUNTY COUNCIL

The council’s Statement of Accounts, Local Government Pension Fund Accounts
and the Firefighters’ Pension Fund Account for the year ended 31 March 2010 are
subject to audit by the District Auditor.




                                     166
                     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 Policies
Those 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 Accounting
The 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 losses
For 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 Services
Services 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.

Amortised Cost Using the Effective Interest Rate Method
The amortised cost using the effective interest rate method applies to both financial
assets and liabilities carried at amortised cost. It is a method of determining, from
the expected cash flows, the balance sheet carrying amount of such assets and
liabilities and the periodic charges or credits to the Income and Expenditure Account
of a financial instrument.

Asset
An item that has value owned by the council. Examples would be land, buildings
and stocks.

Balance Sheet
This represents a summary of all the assets and liabilities of the 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 Practice
The code that establishes ‘proper practices’ with regard to consistent financial
reporting for services.




                                        167
                     GLOSSARY OF TERMS USED
Billing Authority
The local authority responsible for collecting the council tax from residential
properties in their area. In Hertfordshire this is the responsibility of the borough and
district councils.

Budget
A statement of the council’s policy expressed in financial terms. This includes both
revenue and capital expenditure.

Capital Adjustment Account
The opening balance on this account represents the combined total of the Fixed
Asset Restatement Account and the Capital Financing Account which were
replaced at 1 April 2007. From 2007/08 the movements on the Capital Adjustment
Account 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 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 Reserve
The amount of debt outstanding relating to capital expenditure. The minimum
Revenue Provision in relation to this debt is calculated with reference to estimated
life of the asset for which borrowing is undertaken at the end of the preceding
financial year.

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

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

Carry-forwards
These 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 Services
Services organised on a corporate basis that support the delivery of services to the
public.




                                          168
GLOSSARY OF TERMS USED
Collection Fund
A fund administered by each billing authority. Council tax monies are paid into the
fund whilst part of the net revenue expenditure of the council is met from the
Collection Fund.

Consistency
The principle that the accounting treatment of like items within an accounting period
and from one period to the next is the same.

Constructive Obligation
An obligation that derives from an authority’s actions where by an established
pattern of past practice, published policies or a sufficiently specific current
statement, the authority has indicated to other parties that it will accept certain
responsibilities, and as a result, the authority has created a valid expectation on the
part of those other parties that it will discharge those responsibilities.

Contingent Liability
A potential liability at the balance sheet date, the outcome of which is uncertain, as
it is dependent on a future event.

Corporate and Democratic Core
Comprises 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 Tax
A property based tax that is administered by district, borough and unitary councils.

Creditors
Amounts 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 Asset
An asset that is realisable or disposable within one year.

Current Liability
Amounts 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.




                                         169
                     GLOSSARY OF TERMS USED
Curtailment
For a defined benefit scheme, an event that reduces the expected years of future
service of present employees or reduces for a number of employees the accrual of
defined benefits for some or all of their future service. Curtailments include:
 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.

Debtors
Amounts due to the council at the balance sheet date.

Deferred Credits
Capital income potentially due to be received in future periods.

Deferred Grants and Contributions
Amounts 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 Scheme
A pension or other retirement benefit scheme other than a defined contribution
scheme. Usually, the scheme rules define the benefits independently of the
contributions payable, and the benefits are not directly related to the investments of
the scheme. The scheme may be funded or un-funded (including notionally funded).

Defined Contribution Scheme
A pension or other retirement benefit scheme into which an employer pays regular
contributions fixed as an amount or as a percentage of pay and will have no legal or
constructive obligation to pay further contributions if the scheme does not have
sufficient assets to pay all employee benefits relating to employee service in the
current or prior periods.

Depreciated Replacement Cost
The method employed in valuing land and buildings where a market value basis is
not readily available.

Depreciation
The 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.




                                         170
                     GLOSSARY OF TERMS USED
Discretionary Benefits
Retirement 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 2006.

Doubtful Debts
A provision made by the council based on age and particular circumstances relating
to amounts owed to the council.

Emoluments
Amounts paid to employees, including expenses or non-monetary benefits that are
taxable.

Estimation Techniques
The methods adopted to arrive at estimated monetary amounts, corresponding to
the measurement bases selected, for assets, liabilities, gains, losses and changes
to reserves.

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

Extraordinary Items
Material abnormal items which derive from events or transactions that fall outside
the ordinary activities of the authority and which are not expected to recur.

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

Fees and Charges
Income raised by charging users of services for the facilities. For example, the
supply of school meals and home helps.

Finance Lease
Arrangements 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.




                                        171
GLOSSARY OF TERMS USED
Financial Reporting Standard
A statement of accounting practice issued by the Accounting Standards Board.

Formula Grant
Central Government provides funding to local authorities through a general grant
known as Formula Grant, made up of Revenue Support Grant and Re-distributed
Business Rates, in support of its general revenue expenditure.

Foundation School
A school that receives funding from the council but owns its land and buildings.

General Fund Balance
The excess to date of income over expenditure in the Income and Expenditure
Account.

Going Concern
The 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 Grants
Assistance 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 Cost
Capital expenditure originally incurred.

Impairment
A 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 Assets
Expenditure 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.




                                           172
                      GLOSSARY OF TERMS USED
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 Resources
Current asset investments that are readily disposable by the authority without
disrupting its business and are readily convertible to known amounts of cash.

Long Term Borrowing
Loans repayable more than one year after the balance sheet date.

Long Term Contracts
A 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 Debtors
Amounts due to the council more than one year after the balance sheet date.

Minimum Revenue Provision
An amount that the council considers prudent which must be charged to the
statement of movement on the general fund balance to provide for the repayment of
debt related to capital expenditure.

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 Value
The 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 Cost
The cost of replacing an asset in its existing condition and its existing use.

Net Debt
For 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.


                                          173
                      GLOSSARY OF TERMS USED
Non Distributed Costs
Costs that cannot be directly attributed to services.

Non Operational Asset
Fixed 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 Lease
An arrangement whereby the risks and rewards of ownership of the leased asset
remain with the lessor.

Operational Asset
Fixed 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.

Overhanging Discounts and Premiums
Discounts or premiums occurring as a result of debt restructuring that cannot be
linked with the replacement loan.

Past Service Cost
For a defined benefit scheme, the increase in the present value of the scheme
liabilities related to employee service in prior periods arising in the current period as
a result of the introduction of, or improvement to, retirement benefits.

Pension Fund
An 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 Events
Events 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.

Precept
The levy made by precepting authorities on billing authorities, requiring the latter to
collect income from council taxpayers on their behalf.

Precepting Authorities
Those authorities which are not billing authorities (i.e. 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’.




                                          174
                     GLOSSARY OF TERMS USED
Prior Period Adjustments
Those material adjustments applicable to prior years arising from changes in
accounting policies or from the correction of fundamental errors.

Private Finance Initiative
The private finance initiative provides a way of funding major capital investments,
without immediate recourse to the public purse. Private consortia, usually involving
large construction firms, are contracted to design, build, and in some cases manage
new projects. In return the private sector receives payment linked to performance in
meeting agreed standards of provision.

Projected Unit Method
An accrued benefits valuation method in which the scheme liabilities make
allowance for projected earnings. An accrued benefits valuation method is a
valuation method in which the scheme liabilities at the valuation date relate to:
 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.

Provisions
Sums set aside to meet future expenditure where a specific liability is known to exist
but that cannot be measured accurately.

Prudence
The 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 Value
Rateable 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 Parties
For 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.




                                         175
                     GLOSSARY OF TERMS USED
Related Party Transaction
A related party transaction is the transfer of assets or liabilities or the performance
of services by, to or for a related party irrespective of whether a charge is made.

Retirement Benefits
All 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.

Revaluation Reserve
Gains and losses, with losses being limited to previously recognised gains, on an
individual asset basis arising from revaluations are reflected within the Revaluation
Reserve.

Revenue Contingency
A sum set-aside for future pay and price increases.

Revenue Contributions to Capital Outlay
Contributions from revenue to finance capital expenditure.

Revenue Expenditure and Income
This 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 Expenditure Funded from Capital under Statute
Expenditure which may properly be deferred, but which does not result in, or remain
matched with, assets controlled by the authority.

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 Liabilities
The 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.




                                         176
                     GLOSSARY OF TERMS USED
Settlement
An irrevocable action that relieves the employer (or the defined benefit scheme) of
the primary responsibility for a pension obligation and eliminates significant risks
relating to the obligation and the assets used to effect the settlement. Settlements
include:
 a 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 Borrowing
Loans repayable within one year of the balance sheet date.

Short Term Investments
Deposits with approved financial institutions which, when placed, had a maturity
date of less than one year.

Soft Loans
Loans that local authorities may make for policy reasons that are interest free or at
rates below prevailing market rates.

Specific Grants
Government grants to local authorities in aid of particular projects or services.

Statement of Total Recognised Gains and Losses (STRGL)
The accounting statement that enables all the council’s gains and losses for the
accounting period to be shown with the same prominence as the other primary
accounting statements.

Specific Reserves
Sums 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 Practice
A statement of accounting practice issued by the Accounting Standards Board.

Stocks
The 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.




                                          177
                     GLOSSARY OF TERMS USED
Tangible Fixed Assets
Tangible assets that yield benefits to the council and the services it provides for a
period of more than one year. Classification of such assets in the accounting
statements is prescribed by the Statement of Recommended Practice.

Total Cost
The total cost of providing a service reflects all costs including an appropriate share
of all support services and overheads.

Transfer Value
The value of an employee’s pension rights when transferring from one pension
scheme to another.

Usable Capital Receipts
Income from the sale of capital assets. These receipts are available to either
finance capital expenditure or repay debt.

Useful Life
The period over which the authority will derive benefits from the use of a fixed asset.

Vested Rights
In 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 Provision
Any additional provision over and above the minimum revenue provision required.




                                         178

				
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