STATEMENT by wuzhenguang

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									                                                                  Agenda Item
                                                                      No:



                                                                     4

                         STATEMENT
                        OF ACCOUNTS
                          2008-2009




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                                              CONTENTS

                                                                   Page

Introduction                                                        3

Report by the Chief Financial Officer                               12

Statement of Accounting Policies                                    21

The Statement of Responsibilities                                   37

Income and Expenditure Account                                      39

Statement of the Movement on the General Fund Balance               41

Statement of Total Recognised Gains and Losses                      42

Balance Sheet                                                       43

Cash Flow Statement                                                 45

Notes to the Accounts                                               46

Annual Governance Statement                                        115

Local Government Pension Fund Accounts                             123

Local Government Pension Fund Accounting Policies                  124

Notes to the Local Government Pension Fund Accounts                131

Local Government Pension Fund Statement of Investment Principles   142

Firefighters’ Pension Fund Accounts                                154

Notes to the Firefighters’ Pension Fund Accounts                   156

Independent Auditor's Report                                       160

Glossary of Terms Used                                             161




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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 2009. This document has been prepared in
accordance with the Accounts and Audit Regulations 2003 and the 2008 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 2008-09 to provide services for a population of approximately
one million people.

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

Hertfordshire County Council

The county council is the only council with 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.

The council’s 2006-09 corporate plan focussed on the following challenges:

 Helping people feel safe and secure

 Maximising opportunities for all children and young people, particularly by:
  (a) improving vocational education and training
  (b) making sure that safeguarding children is everyone's business

 Supporting the independence of the growing number of older people

 Tackling the causes and impact of congestion

 Dealing with worn out roads and pavements

 Reducing the impact of new development on the environment

 Maximising efficiency savings




                                           3
                                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.




                                            4
                                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 work closely with health services, district councils, the voluntary
sector and other agencies to help Hertfordshire residents who are elderly and frail,
physically disabled, have learning disabilities or who have mental health problems,
and their carers, find ways of managing better.

We do this by:
      Assessing needs - asking about your circumstances and the things you are
       worried about.
      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.

Our efforts are focussed on helping to keep people as independent as possible. We
will arrange and fund support for adults when their independence is considered to be
of ‘critical’ or ‘substantial’ need. This is done after assessing a person and their
carer’s social care needs. Most people need more than one kind of help and a
‘package’ of care and support is usual. Any financial charge to the person will
depend on their income and benefits. Where appropriate, money (direct payments)
can be given to people who have been assessed so that they can arrange their own
care services, giving them more control over the support that they receive.

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.

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 and minimised.

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




                                           5
                                INTRODUCTION
Children, Schools and Families

Children, Schools and Families (CSF) 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

We co-ordinate the offer of school places for nursery, primary and secondary
schools across the county.

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.




                                           6
                                INTRODUCTION
Children, Schools and Families (continued)
Support for the family
If you are experiencing 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 nine residential units, five for adolescents, one for younger children aged 5-
11 years and three for disabled children, one long term and two respite. 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.
Child protection
CSF has a lead role in the Hertfordshire Safeguarding Children Board (HSCB). The
HSCB is responsible for co-ordinating local work to safeguard and promote the
welfare of children and ensure the effectiveness of that work.



                                            7
                               INTRODUCTION
Children, Schools and Families (continued)
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.
Schools in Hertfordshire
We have more than 8,000 teachers working with 176,000 pupils in over 500
Hertfordshire schools.

Schools are supported by a team of educational experts who provide training and
support linked to national initiatives. We also carry out a programme of school
monitoring, challenge, support and where necessary, intervention.

Libraries

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 2007/8 libraries issued 7.1 million books, videos and DVDs, and music
recordings and over 5.3 million visits were made to use libraries for study, reading
newspapers and journals or other library related activities. 514 free access public
computer terminals were available for using the Internet, the on-line catalogue and
other applications




                                          8
                               INTRODUCTION
Children, Schools and Families (continued)

The Schools Library Service (SLS) also plays an important role in delivering services
to children and young people, promoting the development of high quality libraries in
schools through a comprehensive advisory service, the loan of resources for pupil
use and a comprehensive training programme for school librarians and teachers.
The Schools Library Service (SLS) provides a traded service to schools; 51% of
primary schools and 35% of secondary schools bought into the service in 2008/09.

With 3 million records stored on 5 miles of shelving, Hertfordshire Archives Centre,
at County Hall, is the specialist resource for the study and enjoyment of
Hertfordshire’s history. Attracting researchers from across the globe it promotes
access to a range of documents, maps, illustrations, books and pamphlets, from
1060 to the present day. It is also an accredited place of deposit for public records,
acting as the ‘corporate memory’ of the County Council, with a vital role to preserve
archives for future generations.

Corporate Services

At the heart of the organisation are the county councillors who represent the views of
the public. Supporting the political processes and other areas of the county council's
activity is the job of Corporate Services.

These important services, often operating behind the scenes, make it possible for
Hertfordshire County Council to achieve quality services in the communities of
Hertfordshire, in our schools, our libraries and our day centres and fire stations.

Under the leadership of the Chief Executive, Corporate Services include:

      Herts HR - offering support on all Human Resource matters.
      Hertfordshire Property - managing the county council's buildings.
      Herts Finance - preparing the county council's budget, 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.
      Safety, Emergency and Risk Management - planning to protect and minimise
       damage to the health and safety of the county's communities, staff and
       buildings and to support operational effectiveness.
      Hertfordshire Business Services - managing the way the county council buys
       goods and services to ensure value for money.




                                           9
                               INTRODUCTION
Corporate Services (continued)
      Information Technology – planning and implementing the council’s IT and
       telecommunications infrastructure, managing the implementation of
       information systems.
      Trading Standards - enforcing legislation to safeguard the interests of the one
       million consumers and 30,000 businesses in Hertfordshire.
      County Secretary's - ensuring that the Council acts lawfully; advising the
       Council and its departments on legal and democratic services matters.
      Statutory Services - organising elections and managing the registration of
       births, marriages and deaths and the coroner service.
      Strategic Procurement – co-ordinating the council’s procurement of goods
       and services, and negotiation of major contracts.
      Hertfordshire Catering – providing school meals to the majority of schools in
       the county.

Environment

The Environment department works with local people and in partnership with other
organisations to create a better living, working and travelling environment in the
county and thereby improve the quality of life in Hertfordshire.

Our services include planning for transport, new housing and mineral extraction. We
also look after the road network and public rights of way, the disposal and recycling
of household waste and the conservation and enhancement of the countryside. In
addition we are responsible for the promotion of passenger transport, town centre
enhancements, cycling schemes, safety measures for roads and road safety
education.

Fire and Rescue

Hertfordshire Fire and Rescue Service operates with three strategic objectives that
underpin all activities. These are: To reduce deaths, accidents and injuries by
improving peoples awareness of safety through pro-active educational programmes.
To improve the design of buildings to secure the safety of people who use, live and
work in all buildings through consultation with owners and developers. To save life
and mitigate damage to property and the environment by responding effectively and
appropriately to emergency situations.




                                          10
                                INTRODUCTION
Fire and Rescue (continued)

Community Safety - Education

The Hertfordshire Fire and Rescue Service works hard to improve community
awareness of how people can help 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 all backgrounds to reduce the number
of people who suffer injury or death from fires and other accidents including on the
roads.

The Hertfordshire Fire and Rescue Service promotes improved community safety
and awareness by visiting people in their own homes and giving advice by holding
educational visits to schools, visiting places of work and recreational 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 services have increased their community fire safety activities.

Intervention - Operational 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. The 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 services.

The perception that firefighters only fire-fight is therefore misplaced and incidents
attended include hazardous materials, road and rail accidents and a wide range of
special service incidents.

Community Safety - Protection

There are more than 32,000 business properties in Hertfordshire and a large
number of other properties that include homes for the elderly, 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.

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 2008 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 2007, 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

     From 1 April 2008 the council has revised its de-minimus level for property
     assets from £50,000 to £10,000. This will reduce the maximum possible level
     of understatement of assets in the accounts while ensuring that the costs of
     carrying out valuations are not increased disproportionately. This change has
     added £5.4m to the overall value of fixed assets shown in the accounts.

5.   Restatement of Previous Year’s Accounts

     Three changes have been made to the 2007/08 balance sheet; one for the
     defined benefit pension liability and reserve, one for Adult Care Services
     debtors and a restatement of fixed assets. Further disclosures relating to
     each change in are shown below. The impact on the balance sheet
     comparative figures for 2007/08 compared with those published in the
     2007/08 Statement of Accounts is shown in Note 1 to the accounts.

     FRS17 Defined Benefit Pension Liability and Reserve

     A data cleansing exercise, which was undertaken to match the FRS17 data
     with the data that was submitted at the last formal valuation in 2007, identified
     that liabilities relating to compensatory added years were overstated as at 31
     March 2008. The results of the formal valuation are correct and this has no
     impact on future employer contribution rates.

     The overstatement of liabilities, amounting to £35.920 million as at 31 March
     2008, has resulted in the restatement of the FRS17 deficit and associated
     reserve in the balance sheet comparative figures. Due to how local authorities
     are required to account for pension liabilities there is no effect on the level of
     General Fund Balances.

     Debtors

     Income due from Adult Care Service residential clients as at 31 March 2008
     amounting to £5.555 million (net of a provision of £0.716 million) was
     classified within current assets and liabilities as at 31 March 2008. This debt
     is secured against clients’ assets and should be considered as amounts
     recoverable more than one year after the balance sheet date. Consequently
     comparative balance sheet figures for long term debtors, current asset
     debtors and current liability creditors have been restated.




                                         13
               REPORT BY THE CHIEF FINANCIAL OFFICER
5.   Restatement of Previous Year’s Accounts (continued)

     Fixed Asset Restatement

     In a previous review of the assets held by the council three properties were
     incorrectly excluded from the council’s balance sheet as at 31 March 2008.
     These assets, valued at £13.268 million, have been brought back on to the
     council’s balance sheet as a prior period adjustment with a corresponding
     change reflected within the capital adjustment account.




                                        14
               REPORT BY THE CHIEF FINANCIAL OFFICER
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.

     In developing the 2008/09 revenue and capital budgets the council set its own
     borrowing levels within limits identified by Prudential Code indicators. The
     borrowing limits for 2008/09 are shown in the following table. The council
     operated within these limits during 2008/09.

            Limit                       Description                    £000

      Authorised limit    This represents the limit beyond which     489,000
      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    438,000
      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.




                                        15
           REPORT BY THE CHIEF FINANCIAL OFFICER
7.   Financial Summary 2008/09

     Revenue

     In 2008/09 the council’s revenue spending was £10.276 million lower than its
     sources of income.

     The following summary of the council’s revenue monitor showing an
     underspend of £13.108 million against the latest approved budget, was
     presented to the Cabinet on 16 June 2009.

                                        Latest
                                       Approved                    Over/(under)
                                        Budget         Actual          spend
        Service/Budget Heading           £000           £000      £000       %
     Children, Schools & Families        194,834       194,286      (548)    (0.3)
     Adult Care                          255,300       254,264    (1,036)    (0.4)
     Environment                         116,766       119,407      2,641      2.3
     Community Safety                     46,077        46,648        571      1.2
     Resources (Corporate
     Services)                                4,947      6,308     1,361      27.5
     Central Capital Financing and
     Interest on Balances                    31,987     28,227    (3,760)    (11.8)
     Service Total                          649,911    649,140      (771)     (0.1)
     Other Budgets
     Contingency                                740          0    (740)     (100.0)
     Special Provision                       10,854          0 (10,854)     (100.0)
     Precepts                                 2,212      2,212        0         0.0
     Additional Capital Programme
     Support                                      0          0         0       0.0
     Office Rationalisation Project               0          0         0       0.0
     Non Distributed costs                      819        819         0       0.0
     Movements on General Fund
     Balances                                     0          0         0       0.0
     FRS17 - Pensions Interest Cost
     & Expected Return on Assets             22,723     22,723         0       0.0
     Local Authority Business
     Growth Incentive Scheme                 (1,788)    (2,531)    (743)     (41.6)
     Strategic Planning Reserve
     Appropriation                              655        655         0       0.0
     Capital Charges operational
     assets                                 (50,542)   (50,542)       0         0.0
     Pension Reserve Appropriation           (4,868)    (4,868)       0         0.0
     Funded from Reserves                    (2,765)    (2,765)       0         0.0
     Total                                  627,951    614,843 (13,108)       (2.1)



                                       16
            REPORT BY THE CHIEF FINANCIAL OFFICER
7.   Financial Summary 2008/09 (continued)

     Revenue

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

                                                                   £000          £000
     Revenue monitor underspend                                                 13,108
     Planned use of balances as per 2008/09 budget                              (2,765)
                                                                                10,343
     Adjustments post Cabinet report
     Premiums linked to borrowing repaid 2008-09                   (1,119)
     Value Added Tax payments recovered                               625
     Surplus bad debt provision released                              417
     Other                                                             10          (67)
     Increase in General Fund Balances                                          10,276
     General Fund Balances as at 1 April 2008                                   26,220
     General Fund Balances as at 31 March 2009                                  36,496


     Capital

     In 2008/09 the council spent £159.561 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 2008/09 there was a reduction in principal amounts of external
     borrowings owed to third parties of £37.6 million resulting in total external
     borrowing liabilities of £339.6 million as at 31 March 2009. Analysis of this
     reduction is shown below. Maturity analysis of this borrowing is shown in the
     notes to the accounts.



                                         17
           REPORT BY THE CHIEF FINANCIAL OFFICER
7.   Financial Summary 2008/09 (continued)


                                               New                        Increase /
                   Lender                     Loans        Repaid        (Decrease)
                                             £ million    £ million        £ million
      Public Works Loan Board                                (67.6)            (67.6)
      Other External Lenders                      30.0                           30.0
      Total                                       30.0        (67.6)           (37.6)

8.   Other Developments

     Icelandic Bank Deposits

     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.

     Following these events the council commissioned PricewaterhouseCoopers
     (PWC) to review the specific circumstances relating to the council’s Icelandic
     investments and to review the council’s treasury management procedures in
     general. In response to the recommendations from PWC an even more
     stringent treasury management policy than used in previous years was
     approved in March 2009, and an action plan put in place to implement
     recommended procedural changes.

     The potential impairment of these Icelandic deposits have 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
     2009. For the UK registered banks, Heritable and Kaupthing, Singer and
     Friedlander (KSF) the assumed return to creditors is based on the
     administrators’ progress reports issued in April 2009, namely 80p in the
     pound for Heritable and 50p in the pound for KSF. For the Iceland based
     banks the assumed return is based on the assumption that local authorities
     will achieve preferential creditor status, with the assumed return for
     Landsbanki being 83p in the pound, and for Glitnir 100% recovery. For all
     the banks it is assumed that repayments will flow to the council in instalments
     up until 2013, in some cases.

     On this basis the impairment loss recognised in the Income and Expenditure
     Account in 2008/09 is £7.8m. This 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.


                                        18
            REPORT BY THE CHIEF FINANCIAL OFFICER
8.   Other Developments (continued)

     It should be noted that the currently available information is not definitive as to
     the amounts and timings of payments so further adjustments to the accounts
     may be necessary in future years.

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

     Impairment of fixed assets

     With regard to the valuation of fixed assets the council’s policy is to revalue
     assets on a rolling 5 year programme, but to reflect material changes to asset
     valuations in the interim period as they occur. In most years these interim
     changes relate to specific assets whose value has fallen, for example,
     through fire or subsidence. However, the substantial general fall in land
     values during 2008/9 represents a material change in asset values since the
     previous 5 yearly valuation and so in accordance with the SORP the impact of
     this impairment has been reflected in these accounts resulting in an
     exceptional item shown on the face of the Income and Expenditure account of
     £415m. This impairment has no effect on the level of council tax as it is
     reversed out of the accounts through the Statement of Movement on the
     General Fund Balance. The impact of this impairment has not been shown on
     individual service lines within the Income and Expenditure account as to do so
     would distort usefulness of these accounts for year on year or inter authority
     comparison.

     Pension fund deficit

     The primary reason for the increase in the pension fund deficit in 2008/09 is
     the reduction in the market value of the fund’s assets, which reflect large falls
     seen on global stock markets during the year.




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

      Budget 2009/10

      On 24 February 2009 the council approved a revenue budget for 2009/10,
      after using £11.322 million of reserves, of £715.743 million plus a schools
      budget of £641.265 million. The meeting also approved a capital budget for
      2009/10 of £159.795 million. Budgeted sources of finance are shown in the
      following table.

                                                      Revenue          Capital
                                                        £000            £000
       Income from the Collection Fund                 499,728
       Government Grants                                75,062
       Distribution from non-domestic rate pool        140,953
       Capital Receipts                                                 12,000
       Capital Grants                                                   61,645
       Developers Contributions                                          2,761
       Revenue Contributions                                            10,827
       Reserves                                                          2,794
       Borrowing                                                        69,768
                                                       715,743         159,795

      The budget resolutions resulted in a council tax increase of 3.5% 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.

      Private Finance Initiative

      The County Council entered into a Private Finance Initiative contract in June
      2007 for the design, finance and maintenance of seven new Children’s’
      homes, a family assessment centre, a disability resource centre, a Children’s
      Centre and the refurbishment of five family support centres. The first two
      centres came into service in February and March 2008, a further eight during
      2008/09 and the rest will be in 2009/10. The contract ends in March 2033.
      The Private Finance Initiative accounting policy discloses the accounting
      treatment adopted by the council in respect of this contract with further
      disclosures in notes to the accounts.




S J Pickup
Chief Financial Officer




                                        20
             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 2008 (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.

Capital Accounting Accounts

These comprise:-

      the Revaluation Reserve 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.




                                          21
             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.




                                          22
             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 amortisations are therefore replaced by
revenue provision in the Statement of Movement on the General Fund Balance, by
way of an adjusting transaction with the Capital Adjustment Account for the
difference between the two.

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.

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




                                          23
             STATEMENT OF ACCOUNTING POLICIES
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.

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

                         Asset Type                    Years

        Buildings                                      10 – 60

        Vehicles, Plant and Equipment                   3 – 30

        Infrastructure                                  8 – 60

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 analysis. 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 in all cases. Prior period adjustments, if material, would be accounted for
by restating comparative figures for the preceding accounting period.



                                            24
             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.




                                           25
             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/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.




                                            26
             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 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.




                                           27
             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:

       apply unused allowances brought forward; or
       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.

Any unused allowances as at 31 March 2009 can be sold to another waste disposal
authority in respect of the scheme year 2008-09.

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.




                                           28
             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 2008-09, 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 2008-09 the council
       paid an employer contribution rate of 19.4% 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 projected earnings for current employees.

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




                                           29
             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 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 actuaries have updated their
     assumptions – debited or credited to the Statement of Total
     Recognised Gains and Losses.




                                          30
             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 FRS5 “Reporting the Substance of transactions and
Treasury Guidance” 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.

Following receipt of external advice the assets of this scheme are not included in the
council’s balance sheet. However, the interest that will revert to the council at the
end of the scheme is valued at the relevant balance sheet date and reflected as an
asset of the council. The entries for the accumulation of the reversionary interest
started in 2008-09 and will continue until the end of the contract.




                                           31
             STATEMENT OF ACCOUNTING POLICIES
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.

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 then reverses out the amounts charged in the Statement
of Movement on the General Fund Balance so there is no impact on the level
of council tax.




                                          32
              STATEMENT OF ACCOUNTING POLICIES
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.




                                         33
             STATEMENT OF ACCOUNTING POLICIES
Tangible Fixed Assets (continued)

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.




                                           34
             STATEMENT OF ACCOUNTING POLICIES
Tangible Fixed Assets (continued)

Revaluations (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.




                                         35
             STATEMENT OF ACCOUNTING POLICIES
Tangible Fixed Assets (continued)

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).

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.




                                          36
              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 2009.

I confirm that draft accounts were approved for submission to Audit by the Audit
Committee at the meeting held on 24 June 2009.

Signed on behalf of Hertfordshire County Council.




Seamus Quilty
Chairman
Audit Committee


Date: 24 June 2009




                                            37
             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 2009 and the income and expenditure for the year
then ended.




Sarah Pickup

Chief Finance Officer


24 June 2009




                                           38
              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.




                                           39
               INCOME AND EXPENDITURE ACCOUNT
                                                                   Gross       Gross
Net Cost                                                           Cost       Income      Net Cost
2007-08                                                           2008-09     2008-09     2008-09
 £000                                                    Note      £000         £000       £000

  235,561    Adult Social Care Services                             378,689    111,743     266,946
    1,394    Central Services to the Public                           4,466      2,364       2,102
  206,789    Children’s and Education Services                    1,140,537    910,991     229,546
    1,066    Court Services                                           1,195        179       1,016
             Cultural, Environmental, Regulatory and
   63,462    Planning Services                                       81,880      10,923     70,957
   44,211    Fire and Rescue Services                                42,997       1,898     41,099
   71,073    Highways and Transport Services                         95,162      15,045     80,117
       67    Other Housing Services                                  23,813      23,274        539
   23,041    Corporate and Democratic Core                           25,303      18,095      7,208
   11,180    Non Distributed Costs                                   21,191       2,787     18,404
  657,844    Net Cost of Services                          2      1,815,233   1,097,299    717,934
   20,799    Exceptional Item – Fixed Asset Impairment     4        415,394                415,394
             Exceptional Item – Icelandic Banks
        0    Investments                                 4 & 31      7,780                    7,780
   (2,288)   (Gain)/Loss on Disposal of Fixed Assets       5        74,493      15,060       59,433
    2,103    Precepts and Levies                                     2,212                    2,212
       12    (Surplus)/Deficit on Trading Undertakings     6                     1,189       (1,189)
   18,571    Interest Payable and Similar Charges          7        24,773                   24,773
  (21,056)   Interest and Investment Income                7                    23,640      (23,640)
   85,488    Pensions Interest Cost                       43        93,746                   93,746
  (70,612)   Expected Return on Pension Assets            43                    85,851      (85,851)
    3,423    Contribution in Lieu of Interest              8          2,623                   2,623
   (1,794)   Insurance Fund                                9         13,461      14,484      (1,023)
  692,490    Net Operating Expenditure                            2,449,715   1,237,523   1,212,192
 (453,656)   Income from the Collection Fund                                    479,140    (479,140)
  (23,892)   General Government Grants                    10                     67,194     (67,194)
 (128,818)   Distribution from Non-Domestic Rate Pool                           149,951    (149,951)
   86,124    (Surplus) / Deficit for the year                     2,449,715   1,933,808     515,907




                                               40
       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.

 2007-08                                                                                2008-09
  £000                                                                         Note      £000

   86,124     (Surplus) / deficit on the Income and Expenditure Account                  515,907

           Net additional amount required by statute or non-statutory
           proper practices to be debited or credited to the General
  (87,915) Fund for the year                                                     11     (526,183)

              Restatement as at 1 April 2007
        228   Remeasurement of Financial Instruments                                               0

    (1,563) (Surplus) / deficit for the year                                             (10,276)

  (24,657) General Fund Balance brought forward                                          (26,220)

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

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

           Amount of General Fund Balance generally available for
  (26,220) new expenditure                                                               (36,496)

  (26,220)                                                                               (36,496)




                                            41
       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.


 2007-08                                                                                2008-09
 Restated
   £000                                                                                     £000

       86,124    (Surplus) / deficit on the Income and Expenditure Account                  515,907

       (28,893) Surplus arising on revaluation of fixed assets                              (72,474)

   (175,728) Actuarial (gains)/ losses on pension assets and liabilities                    185,589

             Restatement at 1 April 2007 – Financial Instruments
      6,620 Financial Instruments Adjustment Account                                             0
        228 General Fund Balances                                                                0
   (111,649) Total recognised (gains)/losses for the year                                   629,022

                Restatement as at 1 April 2008
       (35,920) Actuarial (gains)/ losses on pension assets and liabilities
       (13,268) Surplus arising on revaluation of fixed assets

   (160,837) Total recognised (gains)/ losses since last financial statements               629,022

Further details of the nature and reason for the 1 April 2008 restatements can be found
within the Report by the Chief Financial Officer and note 1 to the accounts.




                                               42
                              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 2009.




                                         43
                                        BALANCE SHEET
                                                 2008 (Restated)              2009
                                         Note   £000         £000      £000          £000
Fixed Assets
Intangible Fixed Assets                   27                  4,604                    5,280
Tangible Fixed Assets                     28
Operational Assets
 Land and Buildings                                       2,639,688              2,188,039
 Vehicles, Plant & Equipment                                 61,982                 70,595
 Infrastructure Assets                                      377,614                419,626
Non-operational Assets
 Surplus Land and Buildings, held
 for disposal                                               114,797                128,572
 Vehicles, Plant & Equipment                                      0                      0
 Assets under construction                                    7,215                  8,474
                                                          3,205,900              2,820,586
Long-term Investments                     31                 40,575                 30,146
Long-term Debtors                         32                  8,346                 20,090
Total Long-term Assets                                    3,254,821              2,870,822
Current Assets
 Stocks and Work in Progress              33      3,550                  4,205
 Landfill Usage Allowances                34          0                      0
 Debtors                                  35     82,658                 83,490
 Short Term Investments                   31    273,697                214,561
 Cash and Bank                                   83,014     442,919     80,620       382,876

Total Assets                                              3,697,740              3,253,698
Current Liabilities
 Short-term Borrowing                     31        103                     83
 Creditors                                37    316,777                342,341
 Related Parties                          38      2,903                  2,704
 Bank Overdraft                           39     95,482     415,265     81,177       426,305

Total Assets less Current Liabilities                     3,282,475              2,827,393
Long-term Borrowing                       31    383,053                344,900
Provisions                                40     10,318                 17,556
Deferred Grants & Contributions           41    137,750                156,490
Deferred Credits                          42        283                    273
Liability related to defined benefit
pension schemes                           43    403,186     934,590    589,311   1,108,530

Total Assets Less Liabilities                             2,347,885              1,718,863
Financed by:
Capital Adjustment Account                45              2,609,163              2,087,612
Revaluation Reserve                       46                  8,018                 72,017
Financial Instruments Adjustment
Account                                   47                 (6,777)               (11,289)
Equal Pay Reserve                         48                      0                 (1,077)
Pensions Reserve                          49               (403,186)              (589,311)
Usable Capital Receipts Reserve           50                 16,839                 19,626
Specific Reserves                         51                 97,608                104,789
General Fund Balance                      52                 26,220                 36,496
Total Net Worth                                           2,347,885              1,718,863



Sarah Pickup
Chief Finance Officer


                                                44
                               CASH FLOW STATEMENT

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

                                                     31 March 2008         31 March 2009
                                                         £000                  £000

Net Cash Flow from revenue activities                         77,199                   65,284

Cash Outflows
Interest and premium on debt restructuring                   (16,192)              (17,877)

Cash Inflows
Interest received                                             20,323                   18,183

Capital Activities
Cash Outflows
Purchase of Fixed Assets (including revenue
expenditure funded from capital)                            (177,570)            (162,747)
Cash Inflows
Sale of Fixed Assets                                          30,608                   21,285
Capital grants received                                       81,737                   53,475
Contributions and other income                                14,856                    9,888

Net Cash (outflow) / inflow before financing                  30,961               (12,509)

Management of Liquid Resources
Net (increase)/decrease in short term
investments                                                  (52,807)                  54,069

Management of Long Term Resources
Increase in long term investments                            (19,000)                   8,000

Financing

Cash Outflows
Repayments of amounts borrowed                               (39,057)              (67,649)

Cash Inflows
New loans raised                                              71,000                   30,000

Net increase/(decrease) in cash                               (8,903)                  11,911




                                          45
                               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 balance sheet comparative figures for 2007-08 compared with those
published in the 2007-08 Statement of Accounts is shown below.




                                                2007-08 Statement
                                                 Balance Sheet in




                                                                                                                             comparatives in
                                                                               Reclassification




                                                                                                                              Balance Sheet
                                                                                                      Restatement
                                                   of Accounts




                                                                                                      Fixed Asset




                                                                                                                                 2007-08
                                                                                   Debtor
                                                                      FRS17
                                                  £000              £000       £000                           £000            £000
Fixed Assets
Intangible Fixed Assets                               4,604                                                                         4,604
Tangible Fixed Assets
Operational Assets
  Land and Buildings                           2,626,420                                                            13,268   2,639,688
  Vehicles, Plant & Equipment                     61,982                                                                        61,982
  Infrastructure Assets                          377,614                                                                       377,614
Non-operational Assets
  Surplus Land and Buildings, held
  for disposal                                   114,797                                                                       114,797
  Vehicles, Plant & Equipment                          0                                                                             0
  Assets under construction                        7,215                                                                         7,215
                                               3,192,632                                                            13,268   3,205,900
Long-term Investments                             40,575                                                                        40,575
Long-term Debtors                                  2,791                         5,555                                           8,346
Total Long-term Assets                         3,235,998                         5,555                              13,268   3,254,821
Current Assets
 Stocks and Work in Progress                       3,550                                                                         3,550
 Landfill Usage Allowances                             0                                                                             0
 Debtors                                          86,133                       (3,475)                                          82,658
 Short Term Investments                          273,697                                                                       273,697
 Cash and Bank                                    83,014                                                                        83,014
Total Assets                                   3,682,392                         2,080                              13,268   3,697,740
Current Liabilities
 Short-term Borrowing                                103                                                                           103
 Creditors                                       314,697                         2,080                                         316,777
 Related Parties                                   2,903                                                                         2,903
 Bank Overdraft                                   95,482                                                                        95,482
Total Assets less Current Liabilities          3,269,207                                          0                 13,268   3,282,475
Long-term Borrowing                              383,053                                                                       383,053
Provisions                                        10,318                                                                        10,318
Deferred Grants & Contributions                  137,750                                                                       137,750
Deferred Credits                                     283                                                                           283
Liability related to defined benefit pension
schemes                                          439,106            (35,920)                                                   403,186
Total Assets Less Liabilities                  2,298,697             35,920                       0                 13,268   2,347,885
Financed by:
Capital Adjustment Account                     2,595,895                                                            13,268   2,609,163
Revaluation Reserve                                8,018                                                                         8,018
Financial Instruments Adjustment Account          (6,777)                                                                       (6,777)
Equal Pay Reserve                                      0                                                                             0
Pensions Reserve                                (439,106)           35,920                                                    (403,186)
Usable Capital Receipts Reserve                   16,839                                                                        16,839
Specific Reserves                                 97,608                                                                        97,608
General Fund Balance                              26,220                                                                        26,220
Total Net Worth                                2,298,697            35,920                        0                 13,268   2,347,885


                                                46
                      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
 2007-08                                                        2008-09     2008-09   2008-09
  £000                                                           £000         £000     £000
           Adult Social Care Services
      367  Service Strategy                                          370                  370
           Older People (Aged 65 or Over) Including
  107,537 Mentally Ill                                           172,229     48,372    123,857
           Adults Aged Under 65 with a Physical Disability or
   27,711 Sensory Impairment                                      36,406      7,244     29,162
   74,704 Adults Aged under 65 with Learning Disabilities        141,480     55,140     86,340
   24,629 Adults Aged Under 65 with Mental Health Needs           27,403        802     26,601
      602 Other Adult Services                                       794        185        609
           Supported Employment (including sheltered
       11 employment)                                                  7          0          7
  235,561 Total Adult Social Care Services                       378,689    111,743    266,946
           Central Services to the Public
      929 Registration of Births, Deaths and Marriages             2,838      1,940        898
     (273) Conducting Elections                                      375                   375
      640 Emergency Planning                                         936        266        670
       (9) Local Land Charges                                        207        158         49
      107 General Grants, Bequests and Donations                     110                   110
    1,394 Total Central Services to the Public                     4,466      2,364      2,102
           Children’s and Education Services
           Education Services
      972 Nursery Schools                                         11,140     10,402        738
   49,270 Primary Schools                                        386,074    339,909     46,165
   47,413 Secondary Schools                                      500,286    446,611     53,675
   13,312 Special Schools                                         68,332     56,630     11,702
    1,465 Non-School Funding                                      42,732     32,760      9,972
           Children's Social Care
      146 Service Strategy                                           119          3       116
           Children's Services - Commissioning and Social
   31,972 Work                                                     29,479        78     29,401
   48,724 Children Looked After                                    44,771     1,689     43,082
    9,392 Family Support Services                                  38,421    19,487     18,934
    2,715 Youth Justice                                             3,777     1,281      2,496
       12 Asylum Seekers                                            1,268     1,186         82
    1,396 Other Children’s and Families' Services                  14,138       955     13,183
  206,789 Total Children’s and Education Services               1,140,537   910,991   229,546
           Court Services
    1,066 Coroners Courts                                          1,195        179      1,016
    1,066 Total Court Services                                     1,195        179      1,016




                                          47
                      NOTES TO THE ACCOUNTS
2. Net Cost of Services (continued)

                                                                 Gross     Gross
 Net Cost                                                        Cost     Income    Net Cost
 2007-08                                                        2008-09   2008-09   2008-09
  £000                                                           £000       £000     £000
            Cultural, Environmental, Regulatory and
            Planning Services
            Cultural and Related Services
    2,197   Culture and Heritage                                  2,691       270      2,421
       12   Recreation and Sport                                    222       163         59
      916   Open Spaces                                           1,897       361      1,536
      159   Tourism                                                 169         4        165
   19,133   Library Service                                      21,558     1,688     19,870
   22,417   Total Cultural and Related Services                  26,537     2,486     24,051
            Environmental and Regulatory Services
    2,486   Community Safety (Crime Reduction)                    3,475       280      3,195
      326   Agricultural and Fisheries                            1,538     1,313        225
    2,796   Trading Standards                                     3,232       295      2,937
       20   Street Cleansing (not chargeable to highways)            23         1         22
   24,481   Waste Disposal                                       32,531     2,827     29,704
    3,686   Recycling                                             2,769         6      2,763
      166   Waste Minimisation                                    1,149         3      1,146
   33,961   Total Environmental and Regulatory Services          44,717     4,725     39,992
            Planning and Development Services
    1,824   Development Control                                   1,351       118      1,233
    2,072   Planning Policy                                       4,499     2,121      2,378
      958   Environmental Initiatives                             2,522     1,229      1,293
      518   Economic Development                                    407       162        245
    1,712   Community Development                                 1,847        82      1,765
    7,084   Total Planning and Development Services              10,626     3,712      6,914
            Total Cultural, Environmental, Regulatory and
   63,462   Planning Services                                    81,880    10,923     70,957
            Fire and Rescue Services
    3,563   Community Safety                                      3,748       470      3,278
   40,648   Fire Fighting and Rescue Operations                  39,249     1,428     37,821
   44,211   Total Fire and Rescue Services                       42,997     1,898     41,099
            Highways and Transport Services
    4,965   Transport Planning, Policy and Strategy               6,019     1,250      4,769
    4,748   Structural Maintenance                                7,360     1,173      6,187
   12,599   Capital Charges Relating to Construction Projects    16,282     1,693     14,589
   21,347   Environment, Safety and Routine Maintenance          23,623     1,238     22,385
    7,047   Street Lighting (including energy costs)              9,046       110      8,936
    2,480   Winter Service                                        4,701         5      4,696
    5,107   Traffic Management and Road Safety                    7,611     2,163      5,448
   12,780   Public Transport                                     20,520     7,413     13,107
   71,073   Total Highways and Transport Services                95,162    15,045     80,117




                                          48
                     NOTES TO THE ACCOUNTS
2. Net Cost of Services (continued)

                                                         Gross       Gross
 Net Cost                                                Cost       Income        Net Cost
 2007-08                                                2008-09     2008-09       2008-09
  £000                                                   £000         £000         £000
           Other Housing Services
        0 Supporting People                               22,427      21,784          643
           Other Council Property
      396 Travellers’ Sites                                  988         923           65
     (329) Non HRA Council Property                          398         567         (169)
       67 Total Other Housing Services                    23,813      23,274          539
           Corporate and Democratic Core
   16,415 Democratic Representation and Management         7,634       3,154        4,480
    6,626 Corporate Management                            17,669      14,941        2,728
   23,041 Total Corporate and Democratic Core             25,303      18,095        7,208
           Non Distributed Costs
    1,197 Retirement Benefits                             11,828              0    11,828
           Costs of Unused Share of IT Facilities and
    9,983 Other Assets                                     9,363       2,787        6,576
   11,180 Total Non Distributed Costs                     21,191       2,787       18,404


  657,844   Total Net Cost of Services                  1,815,233   1,097,299     717,934




                                         49
                      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 2008-09 are as follows:


                                              Schools Budget Funded by Dedicated
                                                        Schools Grant

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

  Final DSG for 2008-09                                                    621,928

  Brought forward from 2007-08                                                3,434

  Carry forward to 2009-10 agreed in
  advance                                                                    (3,278)

  Agreed budgeted distribution in 2008-09          78,746      543,338     622,084

  Actual central expenditure                      (78,388)                  (78,388)

  Actual ISB deployed to schools                              (543,338)    (543,338)

  Local authority contribution for 2008-09                                           0

  Carry forward to 2009-10                            358            0          358




                                         50
                       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.

                                                           2007-08         2008-09
                                                            £000            £000

   Reduction in the carrying amount of assets
   transferred to the Private Finance Initiative
   Scheme. As these assets are financed as capital
   expenditure the effect on balances is negated by a
   transfer to the Capital Adjustment Account through
   the Statement of Movement on the General Fund
   Balance.                                                   20,799

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

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

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 2008-
   09 includes £54.935 million in respect of three schools that became foundation
   schools during the year. At the time the foundation school is established assets
   held for and used by the relevant school transfer from County Council ownership

                                                            2007-08           2008-09
                                                             £000              £000

    Capital Receipts                                         (39,062)          (15,060)

    Value of Fixed Assets Written Off                         36,774            74,493

    (Gain) / Loss on Disposal of Fixed Assets                 (2,288)           59,433


                                         51
                        NOTES TO THE ACCOUNTS
6. (Surplus) / deficit on trading undertakings

    During the financial year ended 31 March 2009, the council operated the
    following material trading accounts within a competitive environment.


(Surplus)                                                            Gross     Gross    (Surplus)/
 / Deficit                                                           Cost     Income      Deficit
 2007-08                                                            2008-09   2008-09    2008-09
   £000            Name and description of operations                £000       £000       £000

      (10) Hertfordshire Catering                                    20,375    20,639        (264)
           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.

     431     Hertfordshire Business Services (HBS)                   41,576    41,698        (122)
             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.

    (326) Hertfordshire Reprographics                                 2,210     2,807        (597)
          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.

         0 Childcare Litigation Unit                                  1,260     1,333         (73)
           The Childcare Litigation Unit provides legal support
           for the council's children's services.

       95    Total carried forward                                                         (1,056)




                                             52
                        NOTES TO THE ACCOUNTS
6. (Surplus) / deficit on trading undertakings (continued)


(Surplus)                                                         Gross      Gross     (Surplus)/
 / Deficit                                                        Cost      Income       Deficit
 2007-08                                                         2008-09    2008-09     2008-09
   £000            Name and description of operations             £000        £000        £000

       95    Total brought forward                                                         (1,056)

      (83) Financial Services for Schools (FSS)                     1,752      1,885        (133)
           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.

       12    Total Trading Services                                                        (1,189)


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.




                                            53
                        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




                                                    54
                       NOTES TO THE ACCOUNTS
7.   Interest Payable and similar charges and Interest and Investment
     Income (continued)

                                            2007-08

                         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              18,571                                                                       18,571
     Losses on
     derecognition                                                                                           0
     Impairment
     losses                                                                                                 0
                          18,571               0                                                       18,571

     Interest and
     investment
     income
     Interest
     income                                                (20,839)                                    (20,839)
     Gains on
     derecognition                                            (217)                                       (217)
                                                           (21,056)               0               0    (21,056)

     Net
     (gain)/loss for
     the year             18,571               0           (21,056)               0               0




                                                   55
                       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.

                                                              2007-08        2008-09
                                                               £000           £000
    Developer’s Contributions                                   2,323           1,769
    Insurance Fund                                                895             668
    Sickness Supply                                               181             159
    Other                                                          24              27
                                                                3,423           2,623

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 has been increased in 2008-09 to allow for the
   exposure to the Insurance Fund following a large school fire in December 2008.
   However, any loss over and above the £100,000 policy excess should be met by
   Zurich Municipal under the terms of our Fire Insurance Policy and this receivable
   amount has been accounted for as a long term debtor.

                                                             2007-08         2008-09
                                                              £000            £000
    Income
    Recharge of premiums                                      (10,004)         (8,982)
    Other                                                           0          (4,834)
    Contribution in lieu of interest                             (895)           (668)
                                                              (10,899)        (14,484)
    Expenditure
    Administration and premiums                                 4,308           4,384
    Contribution to insurance provision                         3,169           9,561
    Claims                                                      1,628            (484)
                                                               (1,794)         (1,023)

10. General Government Grants

                                                              2007-08        2008-09
                                                               £000            £000
    Area Based Grant                                                0         (40,946)
    Revenue Support Grant                                     (21,618)        (20,874)
    Fire Pension Top-Up Grant                                  (1,746)          (2,907)
    Local Authority Business Growth Incentives Scheme            (528)          (2,467)
                                                              (23,892)        (67,194)


                                          56
                      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.




                                         57
                          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.

     2007-08                                                                                      2008-09     2008-09
      £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
         (761)   Amortisation of intangible fixed assets                                   27       (1,002)
      (56,000)   Depreciation and impairment of fixed assets                               28     (472,845)
        5,104    Government Grants Deferred amortisation                                   41        5,922
      (15,048)   Write downs of revenue expenditure funded from capital                    45       (4,129)
                 Capital Expenditure, net of financing, that has not enhanced fixed       28 &
      (26,786)   asset carrying amounts                                                    45      (27,685)
      (20,799)   Assets transferred to PFI Scheme net of reversionary interest           4 & 28        590
        2,288    Net gain or (loss) on sale of fixed assets                                 5      (59,433)
                 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
         (336)   repayment of debt and financial guarantees                               47        (5,848)
                 Net charges made for retirement benefits in accordance with FRS
      (68,289)   17                                                                       43       (58,383)
            0    Provision for Equal Pay                                                  48        (1,077)   (623,890)
                 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 &
       15,627    Statutory provision for repayment of debt                                45       18,039

        8,979    Capital expenditure charged to the General Fund Balance                  45       13,304
                 Amortisation of overhanging premiums and discounts arising on
         179     debt restructuring                                                       47         1,336
                 Amounts debited to the statement of movements to the general
                 fund balance in recognition of the transitional arrangements for
        6,620    financial instruments                                                    47             0
                 Employer’s contributions payable to the Local Government and
                 Fire-fighters Pension Schemes Funds and retirement benefits
       52,943    payable direct to pensioners                                             43       57,847       90,526
                 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
                 Amounts appropriated to the financial instruments adjustment
                 account in recognition of the transitional arrangements for financial
       (6,620)   instruments                                                              47             0
       14,984    Net transfer to or from earmarked reserves                               51         7,181       7,181

                 Net additional amount required to be (credited) / charged to
      (87,915)   the General fund Balance for the year                                                        (526,183)




                                                    58
                      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 2008-09
   the amount provided was 4% of the Capital Financing Reserve as at the end of
   the preceding financial year.

                                                           2007-08         2008-09
                                                             £000            £000
    Minimum Revenue Provision                               15,627          18,039


13. Section 137 Local Government Act 1972

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

                                                           2007-08         2008-09
                                                            £000            £000
                                                             111             114

14. Publicity

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

                                                           2007-08       2008-09
                                                            £000          £000
    Recruitment advertising                                  1,617         2,795
    Other advertising                                          337           392
    Other publicity                                          1,079         1,506
                                                             3,033         4,693

   Public notices relating to highways works are included within the other advertising
   category.




                                          59
                      NOTES TO THE ACCOUNTS
15. Finance and operating leases (Restated)

   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:

                                                        2007-08       2008-09
                                                         £000          £000
    Land and Buildings                                     2,936        3,503
    Vehicles and equipment                                 1,749        1,159
                                                           4,685        4,662

   The council was committed at 31 March 2009 to making payments, analysed
   below by lease expiry date, of £5.184m under operating leases in 2009-10.

                                                       Vehicles
                                      Land and           and
          Lease Expiry Date           Buildings       Equipment         Total
                                        £000            £000            £000
    In 2009-10                               265             154           419
    Between 2010-11 and 2013-14              277             510           787
    After 2013-14                          3,848             130         3,978
                                           4,390             794         5,184

16. Local Authorities (Goods and Services) Act 1970

   The council is empowered by this Act to provide goods and services to other
   public bodies. The council, through Hertfordshire Business Services, provides
   such services primarily to a number of county councils and London boroughs.
   Income from this source which covered the costs involved is shown below.

                                                           2007-08        2008-09
                                                            £000           £000
    County councils                                           7,938         8,227
    London boroughs                                           1,707         1,665
    Other local authorities                                   1,297         1,402
                                                             10,942        11,294

17. 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.




                                        60
                       NOTES TO THE ACCOUNTS
18. Officers’ Remuneration

   The number of employees whose remuneration was £50,000 or more is shown
   below. 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.


                  Taxable Remuneration               2007-08             2008-09

                        50,000 -     59,999             552                669
                        60,000 -     69,999             130                195
                        70,000 -     79,999              62                 65
                        80,000 -     89,999              34                 33
                        90,000 -     99,999              20                 24
                       100,000 -    109,999               7                 13
                       110,000 -    119,999               1                  3
                       120,000 -    129,999               2                  3
                       130,000 -    139,999               2                  3
                       140,000 -    149,999               1                  0
                       150,000 -    159,999               2                  1
                       160,000 -    169,999               0                  2
                       170,000 -    179,999               0                  0
                       180,000 -    189,999               0                  0
                       190,000 -    199,999               0                  0
                       200,000 -    209,999               1                  0
                       210,000 -    219,999               0                  1




                                              61
                     NOTES TO THE ACCOUNTS
19.   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 (2007-08 £538,739, 2008-09 £536,979).
      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 £0.729m in 2008-09 (2007-08 -
      £1.260m).
      The Chief Finance Officer of the council acts as Treasurer for the HPA.

      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
      £2,205,757 (2007-08 - £1,636,599).




                                         62
                     NOTES TO THE ACCOUNTS
20.   Members Allowances

      The total of members’ allowances paid is shown below.

                                                          2007-08        2008-09
                                                           £000           £000
                                                           1,371          1,423


21.   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                      %

                 2008-09                                    14.10

                 2007-08                                    14.10


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

                                                          2007-08        2008-09
                                                            £000           £000
                                                           48,361         50,198


22.   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 2008-09.




                                          63
                     NOTES TO THE ACCOUNTS
23.   National Health Service Act 2006 Pooled Funds and Similar
      Arrangements

      Background

      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.

      Purpose

      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

      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.

      The Integrated Community Equipment Service

      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 parties.

      Westgate

      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.


                                         64
                     NOTES TO THE ACCOUNTS
23.   National Health Service Act 2006 Pooled Funds and Similar
      Arrangements (continued)

      The council acted with the following organisations in 2008-09.

                   East and North Herts Primary Care Trust
                   West Herts Primary Care Trust

      Summary information for 2008-09, for the pooled budgets that the council
      contributed to is shown below together with comparatives for 2007-08 shown
      in italics.

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

      Joint Commissioning     110,632    161,197     271,829       271,797        (32)
      Partnership Board
                               99,671    151,742     251,413      251,374         (39)


      Integrated                2,650        1,357     4,007           4,035       28
      Community
      Equipment Service
                                2,804         958      3,762           3,503     (259)

      Westgate – East and       2,410         723      3,133           2,986     (147)
      North Herts
                                2,340         779      3,119           3,087      (32)

24.   External Audit Costs

      In 2008-09 the council incurred the following fees, payable to the Audit
      Commission, relating to external audit and inspection. External Audit Services
      comparative figures have been restated, a reduction of £30,000, to exclude
      fees applicable to the Local Government Pension Fund.

                                                                  2007-08         2008-09
                                                                  Restated
                                                                    £000            £000
      External Audit Services under Section 5 Audit
      Commission Act 1998                                                220             313
      Statutory Inspection under s10 of the Local Government
      Act 1999                                                            93              16
      Certification of Grant Claims under Section 28 Audit
      Commission Act 1998                                                 62              41
                                                                         375             370


                                        65
                      NOTES TO THE ACCOUNTS
25.   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 2008-09 is estimated at £100.093
      million. Termination dates applicable to these contracts range from 2011 to
      2024.




                                          66
                  NOTES TO THE ACCOUNTS
26.   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, with the
      exception of those that form part of Area Based Grant (ABG). The more
      significant grants are shown below.
                                                                   2007-08       2008-09
                                                                    £000          £000
      Learning and Skills Council
      Grant for Sixth Formers                                        75,645            79,352
      Adult and Community Learning Grant                              2,662             3,334
      Post 16 Teachers Pay Grant                                      2,173             2,219
      16-19 Strategy                                                                    1,783
      Department for Children, Schools and Families
      Dedicated Schools Grant                                       597,715        621,928
      Standards Fund                                                 49,226         48,613
      School Standards Grant                                         33,226         34,130
      Sure Start                                                     14,163         17,520
      Children's Services Grant                                       3,156
      Teachers Pay Reform Grant
      Department of Health
      Supporting People – Services and Implementation                21,586            21,681
      Access and System Capacity                                     10,695
      Preserved Rights*                                               4,386             4,207
      Carers*                                                         3,662             3,042
      National Training Standards*                                    1,932             2,276
      Mental Health*                                                  2,220             1,997
      Delayed Discharges                                              1,924
      Children’s Fund                                                 1,673
      Children and Adolescents Mental Health Services                 1,255
      Young People Substance Misuse                                     840
      National Training Strategy
      Social Care Reform                                                                 782
      Learning Disability Development Fund                                               602
      Mental Care Advocacy                                                               460
      Youth Justice Board
      Youth Offending Team Grants                                       897             1,281
      Department for Communities and Local Government
      LPSA Performance Reward Grant                                                      856
      New Burdens                                                                        155
      Home Office
      Unaccompanied Asylum Seeking Children                                             1,486
      Drug Intervention Programme                                       787               787
      Department for Transport
      De trunking Grant*                                              3,264          3,346
      Road Safety Grant*                                              2,510          2,610
      Rural Transport Grant*                                            744            762
                                                                    836,341        855,209

      *These grants are included in the Area Based Grant total in note 10 (General
      Government Grants)

                                         67
                      NOTES TO THE ACCOUNTS
27.   Intangible Fixed Assets

      Expenditure incurred on intangible assets during 2008-09 amounted to
      £1.678 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 2008              4,423          1,822      6,245
      Additions                                1,678              0      1,678
      Balance as at 31 March 2009              6,101          1,822      7,923

      Depreciation
      Balance as at 31 March 2008              1,095            546      1,641
      Depreciation for the year                  819            183      1,002
      Balance as at 31 March 2009              1,914            729      2,643

      Net Book Value
      Balance as at 31 March 2008              3,328          1,276      4,604
      Balance as at 31 March 2009              4,187          1,093      5,280




                                          68
                            NOTES TO THE ACCOUNTS
28. 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 2008        2,692,853      117,359            463,554      117,801     27          7,215   3,398,809
Restatements at 31 March
2008                                 13,268                                                                             13,268
Balance at 31 March 2008
restated                        2,706,121      117,359            463,554      117,801     27       7,215      3,412,077
Additions                          12,481       16,197             57,076                          62,311        148,065
Disposals                         (68,495)         (12)                         (8,100)                          (76,607)
PFI Reversionary Interest                                                          590                               590
Impairment                       (483,850)                                      (4,787)                         (488,637)
Expenditure not adding to
value                                                                                             (59,781)       (59,781)
Restatements                      (15,759)          1,076                       16,015             (1,271)            61
Revaluations                       54,370                                        9,321                            63,691
Balance at 31 March 2009        2,204,868      134,620            520,630      130,840     27          8,474   2,999,459
Depreciation
Balance at 31 March 2008             66,433      55,377             85,940       3,004     27             0            210,781
Restatements at 31 March
2008                                                                                                                          0
Balance at 31 March 2008
restated                            66,433       55,377             85,940       3,004     27             0            210,781
Depreciation for the year           31,445        8,660             15,064         850                                  56,019
Impairment                         (70,896)                                       (915)                                (71,811)
Depreciation on Disposals           (1,989)                (12)                   (113)                                 (2,114)
Restatements                        (1,067)                                      1,128                                      61
Revaluations                        (7,097)                                     (1,686)                                 (8,783)
Balance at 31 March 2009            16,829       64,025           101,004        2,268     27             0            184,153
Net Book Value
Balance at 31 March 2008
restated                        2,639,688        61,982           377,614      114,797      0          7,215   3,201,296
Balance at 31 March 2009        2,188,039        70,595           419,626      128,572      0          8,474   2,815,306

    Properties used in service delivery include:

                391   Primary Schools (excluding 7 Foundation Schools)
                 15   Nursery Schools
                 57   Secondary Schools (excluding 19 Foundation Schools)
                  6   Middle Schools
                 25   Special Schools
                  9   Education Support Centres
                 30   Adult Care Services Day Centres
                 53   Adult Care Services Residential Units
                  5   Adult Care Services Team Offices
                 30   Fire Stations
                 49   Libraries and Archive and Local Studies Centres

    The council is also responsible for the following infrastructure
                   341 miles Principal Roads
                 2,717 miles Other Roads.




                                                            69
                      NOTES TO THE ACCOUNTS
28. 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. However, In order to reflect the
   impact of falling land values in 2008-09 on operational land and buildings that are
   valued on a depreciated replacement cost basis, these assets have been
   revalued as at the end of the 2008-09 financial year. These assets were
   previously valued as at 1st April 2006. On the advice of Lambert Smith Hampton,
   the council’s valuers, this revaluation has been conducted by applying a general
   indexation to reflect increases in build costs over the period, whilst land value
   elements were considered asset by asset based on land value trends in each
   town or area of the county. Values for operational assets and non operational
   assets that are not valued on a depreciated replacement cost basis have not
   been adjusted, as these assets were last valued in 2004-05 and 2005-06 and
   research conducted by the council’s valuers has concluded that there is no
   material change in the value of these assets.




                                          70
                      NOTES TO THE ACCOUNTS
29. Summary of capital expenditure and sources of finance

   Capital expenditure for the year, including that incurred on intangible assets and
   revenue expenditure funded from capital, amounted to £159.561 million and is
   analysed below.

                           Service                                                Total
                                                                                  £000

    Adult Social Care Services                                                     1,401
    Central Services                                                              20,228
    Children’s and Education Services                                             75,201
    Cultural, Environmental and Planning Services                                  2,096
    Fire Service                                                                   3,774
    Highways, Roads and Transport Services                                        56,861
                                                                                 159,561

    The effect of the above expenditure on the council’s capital financing requirement
    together with sources of finance is shown below.
                                                                                  2008-09
                                                                                   £000
    Opening Capital Financing Requirement                                         450,968

    Capital Investment
    Intangible assets                                                             1,678
    Operational assets                                                           85,754
    Non-operational assets (including assets under construction)                 62,311
    Revenue expenditure funded from capital                                       9,818
                                                                                159,561
    Sources of Finance
    Capital receipts                                                             (12,273)
    Grants and contributions                                                     (56,760)
    Grants and contributions financing revenue expenditure
    funded from capital                                                           (5,689)
    Revenue provision (including Minimum Revenue Provision)                      (31,343)

    Closing Capital Financing Requirement                                       504,464

    Explanation of movements in the year

    Increase in underlying need to borrow                                         71,535

    Minimum Revenue Provision                                                    (18,039)

    Increase in Capital Financing Requirement                                     53,496




                                            71
                           NOTES TO THE ACCOUNTS
29.   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                  Queens Sports Hall                               3,237
                                Roundwood Park - replace 8 mobiles               1,776
                                CSF Family Assessment Centre                     1,600
                                Rossgate, Hemel Hempstead Amalgamation           1,545
                                St Mary's High School                            1,439
                                Bellgate, Hemel Hempstead Amalgamation           1,344
                                Birchwood High Extension, Phase 3                1,216
                                Ley Park Expansion                               1,066
                                Eastbrook, Hemel Hempstead Amalgamation          1,049
                                Borehamwood South Children's/Family Centre       1,000
                                Hemel Hempstead School Drama Centre                827
                                Ashwell Extension                                  719
                                Turnford Extension                                 705
                                Cheshunt - Arlesdene Children's Centre             692
                                Graveley JMI                                       622
                                Birchwood High extension Phase 4                   619
                                St George's Classroom Block                        590
                                St Mary's JM                                       582
                                KS4 Centre, Watford                                574
                                Cuffley Camp (Herts. Outdoors)                     533
                                Sir Frederic Osbourne Refurbishment                526
                                Borehamwood North Children's Centre                500

      Corporate Services        Stevenage Ridgemond Park BSF                     3,900
                                County Hall New Block Refurbishment              2,520
                                Robertson House - Office Rationalisation         2,222
                                Land at Oaklands                                   920
                                Borehamwood All Saints - New Library/Youth
                                & Community Project                                606

      Environment               A10 Bridge Parapet Upgrading Scheme              1,650
                                Structural Maintenance of A602                   1,054
                                Structural Maintenance of A414/A405 North
                                Orbital                                            912
                                Accessibility Road Scheme, Shenley Road            686
                                Structural Maintenance of A414 Ware Road           677
                                Baldock By Pass                                    670

      Libraries, Heritage and
      Arts                      South Oxhey Community Library Project (BLF)        630




                                         72
                     NOTES TO THE ACCOUNTS
30.   Significant commitments under capital contracts

      The value of capital contracts to which the council is committed to as at 31
      March 2009 is estimated at £8.842 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

      Ware - Presdales School - Sports Hall                                  2,135
      Letchworth, The Highfield School - New Sports Hall                     1,955
      Watford, South Oxhey Library - Remodelling                               872
      Hemel Hempstead, Rossgate Amalgamation                                   342
      Hemel Hempstead, Bellgate Amalgamation                                   287
      Stevenage, Graveley Primary School, Replacement for Mobile
      Classroom                                                               262
      Hatfield, Howe Dell - New School                                        257
      Furneux Pelham C of E School - Replacement of Mobile
      Classroom                                                               248
      Hemel Hempstead, Eastbrook Amalgamation                                 230
      Baldock By-Pass                                                         213
      Harpenden, Roundwood Park School - Additional
      Accommodation                                                           203




                                        73
                        NOTES TO THE ACCOUNTS
31.   Financial Instruments

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

                                    Long-Term                    Current


                                  2008        2009        2008         2009

                                  £000        £000        £000         £000

      Loans and receivables at
      amortised cost              40,575       30,146    273,697       214,561

      Total investments           40,575       30,146    273,697       214,561


      Financial liabilities at
      amortised cost             383,053      344,900        103              83

      Total borrowings           383,053      344,900        103              83




                                         74
                         NOTES TO THE ACCOUNTS
31.   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 2008                                31 March 2009

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

      Current          270,949          2,748            273,697   216,880          (2,319)    214,561

      Long-Term         39,000          1,575             40,575    31,000            (854)     30,146
                                        4,323                                       (3,173)

      The adjustment to amortised cost comprises:-
      Interest accruals              4,323                                           4,607
      Icelandic Bank
      Investment Impairment              0                                          (7,780)
                                     4,323                                          (3,173)

      Financial liabilities at amortised cost

      Current
      Public Works
      Loan Board             45                 0            45          24              1          25
      Unredeemed
      Stock                  58                 0            58          58              0          58
                            103                 0           103          82              1          83
      Long-Term

      Public Works Loan Board repayable within years:
      One to two          24            3         27                 5,005              23       5,028
      Two to five     12,006           42     12,048                 7,002              72       7,074
      Five to ten          0            0          0                     0               0           0
      After ten      212,647       3,021 215,668                   145,042           2,106     147,148

      Other repayable:
      After ten      152,500             2,810           155,310   182,500           3,150     185,650

                       377,177           5,876           383,053   339,549           5,351     344,900




                                                    75
                       NOTES TO THE ACCOUNTS
31.   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 2009
                                                        Carrying
                                                        amount      Fair Value
                                                         £000         £000
       PWLB debt                                           159,275    180,600
       Non-PWLB debt                                       185,650    183,454
       Unredeemed Stock                                         58          58
       Total debt                                          344,983    364,112

       Trade creditors                                       10,949        10,949

       Total Financial liabilities                          355,932      375,061

       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.



                                          76
                       NOTES TO THE ACCOUNTS
31.   Financial Instruments (continued)

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

       Financial Assets                                      31 March 2009
                                                          Carrying
                                                          Amount      Fair Value
                                                           £000         £000
       Money market loans less than 1 year                   214,561    214,561
       Money market loans greater than 1 year                 30,146      32,299
       Bonds                                                       0           0

       Trade debtors                                           17,633        17,633
       Soft loans                                               1,603         1,603

       Total Loans and receivables                            263,943       266,096

       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 interest rates and this provides a sound
       approximation for fair value for these instruments.

       The fair values for loans and receivables have been determined by
       reference to the PWLB redemption rules which provide a good
       approximation for the fair value of a financial instrument, and includes
       accrued interest. The comparator market rates prevailing have been
       taken from indicative investment rates at each balance sheet date. In
       practice rates will be determined by the size of the transaction and the
       counterparty, but it is impractical to use these figures, and the difference
       is likely to be immaterial.




                                           77
                       NOTES TO THE ACCOUNTS
31.   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
          14th February 2002 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.




                                           78
                      NOTES TO THE ACCOUNTS
31.   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 2008-09 financial year the prudential indicators and treasury
      management strategy were reported and approved at the County Council’s
      meeting on the 26th February 2008. 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 2008-09 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 Fitch) 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).




                                         79
                       NOTES TO THE ACCOUNTS
31.   Financial Instruments (continued)

                                                       Adjustment
                             Amount                     for market     Estimated
                              at 31       Historical   conditions      maximum
                              March      experience    at 31 March    exposure to
                              2009        of default       2009         default
                              £000            %             %            £000
       Deposits       with
       banks and financial
       institutions             (a)           (b)           (c)          (a * c)
       AA rated
       counterparties         28,226          0.06%        0.06%             17
       A rated
       counterparties         16,514          0.65%        0.65%           107
       BBB rated
       counterparties          2,109          3.11%        3.11%             66
       Other
       counterparties         45,596      42.67%         42.67%         19,456

       Trade debtors          17,633          0.27%        0.27%            48
                             110,078                                    19,694

       Deposits with the
       DMADF*and local
       authorities
       DMADF                 142,241          0.00%        0.00%              0
       Local Authorities      10,021          0.00%        0.00%              0
                             152,262                                          0
      *DMADF – Debt Management Account Deposit Facility operated by the
      government

      In 2008/09 the Council also used non credit rated institutions (for instance
      smaller building societies or bank subsidiaries where the parent has a
      satisfactory rating). In these circumstances these investments have been
      classified as other counterparties. This amounted to £23.5m of the total under
      other counterparties in the table above.

      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).




                                         80
                         NOTES TO THE ACCOUNTS
31.   Financial Instruments (continued)
      Disclosure of Nature and Extent of Risk Arising from Financial
      Instruments (continued)

      Although the best objective evidence available has been applied, the Council
      remains exposed to a credit risk in respect of these investments as there are
      no guarantees. There is a particular risk in relation to Glitnir and Landsbanki
      because they have been treated as if they are priority creditors and this status
      has yet to be confirmed.

      Following these events and the continued volatility in financial markets, the
      Council has implemented even stricter criteria for investment counterparties in
      2009-10. At the balance sheet date, £83.9m out of a total of £244.7m was
      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 £4.410 million. The past
      due amount can be analysed by age as follows:

                                                          £000
      Less than three months                                736
      Three to six months                                   484
      Six months to one year                                665
      More than one year                                  2,525
                                                          4,410

      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.


                                         81
                       NOTES TO THE ACCOUNTS
31.   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                                        83
      Between one and two years                              5,028
      Between two and seven years                            7,074
      Between seven and fifteen years                      11,803
      More than fifteen years                             320,995
                                                          344,983




                                           82
                       NOTES TO THE ACCOUNTS
31.   Financial Instruments (continued)
      Disclosure of Nature and Extent of Risk Arising from Financial
      Instruments (continued)

      The maturity analysis of financial assets is as follows:

                                                Investments     Soft loans           Total
                                                       £000           £000           £000
      Less than one year                            214,561               0       214,561
      Between one and two years                       9,088               0         9,088
      Between two and three years                     9,413               0         9,413
      More than three years                          11,645          1,603         13,248
                                                    244,707          1,603        246,310

      All trade and other payables are due to be paid in less than one year and
      trade debtors of £17.632m 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.

      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.




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

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

      If all interest rates had been 1% higher (with all other variables held constant)
      the financial effect would be:

                                                                £000
      Increase in interest payable on variable rate
      borrowings                                                  62
      Increase in interest receivable on variable rate
      investments                                                (55)

      Impact on Income and Expenditure Account                     7


      The approximate impact of a 1% fall in interest rates would be as above but
      with the movements being reversed. These assumptions are based on the
      same methodology as used in the section – Fair value of Assets and
      Liabilities carried at Amortised Cost earlier in this note.

      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 exchange rates.




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

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 will be 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.

Heritable Bank
Heritable Bank is a UK registered bank under Scottish law. The company was
placed in administration on 7 October 2008. A letter from the administrators Ernst
and Young to all creditors, dated 17 April 2009, outlined that the return to creditors
was projected to be 80p in the £ by the end of 2012. The first interim payment was
made in July 2009 and was for 16.13% of the claim. The Council has therefore
decided to recognise an impairment based on it recovering 80p in the £. It is
anticipated that there will be some front loading of these repayments and that a final
sale of assets will take place after the books have been run down to the end of
2012. Therefore in calculating the impairment the Council has made the following
assumptions re timing of recoveries:

July 2009           16.13%        (already received)
December 2009       10.00%
July 2010           20.22%
July 2011           19.22%
July 2012            7.22%
July 2013            7.21%

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     Carrying
 Invested      Date       Invested      Rate       Amount        Impairment
 15/09/08    15/04/09       £2m        6.00%        £2.06m         £0.62m
 19/09/08    23/12/08       £5m        6.05%        £5.16m         £1.54m


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

Kaupthing Singer and Friedlander Ltd (KSF)
The creditor progress report issued by the administrators Ernst and Young, dated 17
April 2009, outlined that the return to creditors was projected to be a minimum of
50p in the £ but no timescale is indicated. The administrator indicated that the
estimate could be lower or higher if significant issues arose; the 50p in the £ stated
is therefore the best estimate within a range of possible amounts. The first dividend
payment of 20p in the £ was made in July 2009. The Council has decided to
recognise an impairment based on it recovering 50p in the £ up to October 2012 (the
date when the High Court has permitted the administration to be extended to).
In calculating the impairment the Council has therefore made the assumption that
the remaining 30p in the £ recovery will be split evenly, making the complete
estimated repayment schedule as shown below:

July 2009           20.00%        (already received)
December 2009        7.50%
December 2010        7.50%
December 2011        7.50%
October 2012         7.50%

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     Carrying
 Invested      Date      Invested       Rate       Amount        Impairment
 04/01/07    04/01/11      £2m         5.46%        £2.14m         £1.17m
 14/08/07    16/08/10      £2m         6.35%        £2.08m         £1.16m


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 Landsbanki
Resolution Committee has announced that its best estimate of the amount to be
repaid to preferential claimants is 83%.The Council has therefore decided to
recognise an impairment based on it recovering 83p in the £.




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

Recovery is subject to the following uncertainties and risks:
• Confirmation that deposits enjoy preferential creditor status which is likely to have
to be tested through the Icelandic courts.
• The impact of exchange rate fluctuations on the value of assets recovered by the
resolution committee and on the settlement of the Council’s claim, which may be
denominated wholly or partly in currencies other than sterling.
• Settlement of the terms of a ‘bond’ which will allow creditors of Old Landsbanki to
enjoy rights in New Landsbanki.
• The impact (if any) of the freezing order made by the UK Government over
Landsbanki’s London branch assets.

Failure to secure preferential creditor status would have a significant impact upon
the amount of the deposit that is recoverable. The total assets of the bank only
equate to one third of its liabilities, assuming that the Bond remains at its current
value. Therefore, if preferential creditor status is not achieved the recoverable
amount may only be 33p in the £.

No information has been provided by the resolution committee about the timing of
any payments to depositors. As it is anticipated that all the assets of Landsbanki
Islands will need to be realised to repay priority creditors, settlement in a single sum
is unlikely. Therefore, in calculating the impairment, the Council has used the
estimated repayment timetables for Heritable and KS&F as a basis for its
assumption about the timing of recoveries. This results in the following assumed
split:

March 2010           21.00%
December 2010        21.00%
December 2011        21.00%
December 2012        20.00%

A change in the law in Iceland (Act 44/2009) means that claims should include
interest up to 22 April 2009. Where the maturity date of the original investment is
before 22 April 2009, interest between the maturity date and 22 April 2009 will be
credited at a penalty rate. Local authorities’ legal advice is that the current penalty
rate of interest in Iceland is 22% and that claims should include calculations made
on this amount.

Recoveries are expressed as a percentage of the Council’s claim in the
administration, which includes interest up to 22 April 2009. Interest has been
calculated at the penalty rate of 22% where applicable. Details of the Council’s
deposits with Landsbanki Islands hf and the associated impairment are shown
overleaf:




                                           87
                           NOTES TO THE ACCOUNTS
   Date       Maturity     Amount       Interest     Carrying
 Invested       Date      Invested        Rate       Amount        Impairment
 11/07/08     15/10/08      £3m          5.90%        £3.35m         £0.89m
 05/08/08     31/10/08      £5m          5.85%        £5.52m         £1.46m
 29/08/08     28/11/08      £2m          5.83%        £2.18m         £0.58m

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. Old Glitnir’s latest public presentation of its
affairs was made to creditors on 6 February 2009 and can be viewed on its website.
This indicates that full recovery of the principal and interest is likely to be achieved.

Recovery is subject to the following uncertainties and risks:
 Confirmation that deposits enjoy preferential creditor status which is likely to have
  to be tested through the Icelandic courts.
 The impact of exchange rate fluctuations on the value of assets recovered by the
  resolution committee and on the settlement of the Council’s claim, which may be
  denominated wholly or partly in currencies other than sterling.
 Settlement of the terms of a ‘bond’ which will allow creditors of Old Glitnir to
  enjoy rights in New Glitnir.

A change in the law in Iceland (Act No 44/2009) means that claims should include
interest up to 22 April 2009. Where the maturity date of the original investment is
before 22 April 2009, interest between the maturity date and 22 April 2009 will be
credited at a penalty rate. Local authorities’ legal advice is that the current penalty
rate of interest in Iceland is 22% and that claims should include calculations made
on this amount.

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

Failure to secure preferential creditor status would have a significant impact upon
the amount of the deposit that is recoverable. The total assets of the bank only
equate to 40% of its liabilities, assuming that the Bond remains at its current
estimated value. Therefore, if preferential creditor status is not achieved the
recoverable amount may only be 40p in the £.




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

No information has been provided by the resolution committee about the timing of
any payments to depositors. Since the value of deposits is small compared to the
total asset value of the bank, in calculating the impairment the Council has therefore
made an assumption that the repayment of priority deposits will be made by 31
March 2010.

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
April 2009, calculated at the penalty rate of 22% where applicable. Details of the
Council’s deposits with Glitnir Bank hf and the associated impairment are shown
below:

   Date       Maturity      Amount     Interest     Carrying
 Invested       Date       Invested      Rate       Amount       Impairment
 18/04/07     20/04/09       £2m        6.00%        £2.11m        £0.11m
 15/05/07     17/05/10       £3m        6.00%        £3.16m        £0.17m
 15/02/08     16/02/09       £2m        5.42%        £2.16m        £0.09m

Accounting
The impairment loss recognised in the Income and Expenditure Account in 2008/09,
£7.780m, 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.
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
                2007-08      2007-08        2008-09         2008-09
     Bank        £000          £000          £000             £000
 Heritable             0             0           224.7                0
 KSF               189.9         109.2           236.2            127.3
 Landsbanki            0             0         1,050.7                0
 Glitnir           287.2             0           447.4            301.8
 Total             477.1         109.2         1,959.0            429.1

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 £5.858m has been
transferred to the Financial Instruments Adjustment Account (FIAA). The difference
between the £7.780m impairment and the £5.858m transferred to the FIAA is
£1.922m. This represents the interest element of what is owed to the Council at 31 st
March 2009. The amounts transferred to the Financial Instruments Adjustment
Account are made up as follows:


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

                           Amount transferred to Financial
                          Instruments Adjustment Account
         Bank                          £000
 Heritable                                          1,931.5
 KSF                                                2,112.8
 Landsbanki                                         1,868.9
 Glitnir                                              -55.6
 Total                                              5,857.6

The balance transferred to the Financial Instruments Adjustment Account in respect
of Glitnir is a credit balance because the value of the additional interest due as part
of the claim, including penalty interest at 22% where applicable, is greater than the
total value of the impairment.

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.
The Council estimates that the following credits will be made to the Financial
Instruments Adjustment Account (FIAA).

                  Balance on       Transfers      Transfers      Balance on
                    FIAA at          during         during         FIAA at
                  31 March 09       2009-10        2010-11       31 March 11
      Bank           £000             £000           £000           £000
 Heritable             1,931.5          -257.5       -1,674.0               0
 KSF                   2,112.8           -77.0       -2,035.8               0
 Landsbanki            1,868.9          -489.6       -1,379.3               0
 Glitnir                 -55.6            55.6              0               0
 Total                 5,857.6           768.5       -5,089.1               0




                                          90
                      NOTES TO THE ACCOUNTS
32.   Long Term Debtors                                          2008          2009
                                                               Restated
                                                                 £000           £000
      Residential Clients                                         6,271         9,857
      Fire Insurance Claim                                            0         4,834
      Rental Prepayments                                              0         2,920
      Housing Adaptations                                         1,061         1,490
      Advance Contractual Payments                                1,375         1,375
      Other                                                          87           354
      Keyworker Housing Advances                                    160           167
      Housing Advances and Mortgages                                 64            52
      Car Loans                                                      44            45
                                                                  9,062        21,094
      Provision – Residential Clients Debt                         (716)       (1,004)
                                                                  8,346        20,090

33.   Stocks and Work in Progress                                2008          2009
                                                                 £000          £000
      Trading Services                                            3,227         3,690
      Education                                                     211           331
      Fire Service                                                   55           127
      Cultural, Environmental and Planning Services                  48            46
      Social Services                                                 9            11
                                                                  3,550         4,205

34.   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
      2008-09 liability for waste disposed to landfill and the council’s surplus
      allowances as at 31 March 2009.
                                                                   2008          2009
                                                                   £000          £000
      Biodegradable Municipal Waste Allowances                             0          0




                                         91
                           NOTES TO THE ACCOUNTS
35.   Debtors                                                         2008           2009
                                                                    Restated
                                                                      £000           £000
      General and Trade Debtors                                       58,413        69,019
      Capital Receipts                                                13,563          5,038
      Payments in Advance                                               5,376         6,633
      H.M.R.C. - Value Added Tax                                        5,803         5,999
      Recoverable Fire Damage                                             302           558
      Grants recoverable                                                3,217           476
                                                                      86,674        87,723
      Less Provision for Doubtful Debts                                (4,016)      (4,233)
                                                                      82,658         83,490

36.   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 County Secretary, Hertfordshire County Council, County
      Hall, Hertford SG13 8DQ (Contact telephone: 01992 555535).

      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.



                                            92
                         NOTES TO THE ACCOUNTS
37.   Creditors                                                   2008           2009
                                                                Restated
                                                                  £000          £000
      Sundry Creditors and Receipts in Advance                   170,105       161,201
      Hertfordshire Local Government Pension Fund                  47,648       79,007
      Contractor Deposits                                          46,829       52,155
      Grants received in advance                                   52,195       49,978
                                                                 316,777       342,341

      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.


38.   Related Parties                                             2008           2009
                                                                  £000           £000
      Hertfordshire Police Authority (HPA)
      Temporary Borrowing                                           2,625         2,601
      Accrued Interest on managed cash balances                       278           103
                                                                    2,903         2,704
      The temporary borrowing position comprises:-
      Cash balances held on behalf of HPA                          11,473        6,601
      Less: Investments placed on behalf of HPA                    (8,848)      (4,000)
                                                                    2,625        2,601

39.   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.

                                                                     2008        2009
                                                                     £000        £000

      Schools Treasury Management account                             76,290     74,720




                                         93
                          NOTES TO THE ACCOUNTS
40. Provisions

   The following provisions have been set aside in the 2008-09 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.

   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.

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

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

   Landfill Usage - the estimated liability relating to biodegradable municipal waste
   landfilled for the year to 31 March 2009 has been valued at £0 due to there
   being no market value for landfill allowances.

                                                                  Increase/
                                                  2008           (Decrease)          2009
                                                  £000              £000             £000
   Insurance                                        9,436              5,194         14,630
   Equal Pay Claims                                     0              1,077          1,077
   Mental Health Act 1983                             850                (52)           798
   Teachers Pension Provision                           0                770            770
   MECSS Modernisation                                  0                281            281
   Home Care                                           21                (21)             0
   Learning Disability                                 11                (11)             0
   Landfill Usage                                       0                   0             0
                                                   10,318              7,238         17,556




                                           94
                         NOTES TO THE ACCOUNTS
41.   Deferred Grants and Contributions                  2008        2009
                                                         £000        £000
      Balance as at 1 April                             115,332     137,750
      Income Receivable                                  73,689      56,760
      Revaluations, Restatements and Disposals          (40,328)    (32,098)
      Revenue expenditure funded from capital             (5,839)         0
      Depreciation of Grants and Contributions            (5,104)    (5,922)
                                                        137,750     156,490


42.   Deferred Credits                                   2008        2009
                                                         £000        £000
      Keyworker Housing Advances                            210         210
      Future repayments due on Mortgages and Advances        73          63
                                                            283         273




                                      95
                          NOTES TO THE ACCOUNTS
43.   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.

      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.




                                          96
                                 NOTES TO THE ACCOUNTS
43.    Liability related to defined benefit pension schemes (continued)

       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
                                            2008       2009        2008        2009     2008       2009
                                            £000       £000        £000        £000     £000       £000
      Income and Expenditure Account
      Net Cost of Services:
      current service cost                  44,116        33,460       8,100      5,200     52,216     38,660
      past service costs                       305         9,891                               305      9,891
      impact of curtailments                   892           632                               892        632
      impact of settlements                                1,305                                 0      1,305
      Net Operating Expenditure:
      interest cost                         72,088        78,946     13,400     14,800      85,488     93,746
      expected return on assets in the
      scheme                                (70,612)      (85,851)                         (70,612 )   (85,851)
      Amounts to be met from
      Government Grants and Local
      Taxation:
      movement on pensions reserve           1,011        12,932     (16,357)   (13,468)   (15,346)      (536)
                                            47,800        51,315       5,143      6,532     52,943     57,847
      Actual amount charged against
      council tax for pensions in the
      year:
      employers’ contributions payable to
      scheme                                44,675        48,161       3,397      3,625     48,072     51,786
      top-up grant contribution                                        1,746      2,907      1,746      2,907
      retirement benefits payable to
      pensioners                             3,125         3,154                             3,125      3,154
                                            47,800        51,315       5,143      6,532     52,943     57,847




                                                     97
                               NOTES TO THE ACCOUNTS
43.    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
                                        2007-08     2008-09           2007-08     2008-09     2007-08       2008-09
                                        Restated                                              Restated
                                         £000        £000              £000        £000         £000         £000
       Opening Defined Benefit
       Obligation                       1,328,218        1,138,562    247,200     215,600     1,575,418    1,354,162
       Current service cost                44,116           33,460      8,100       5,200        52,216       38,660
       Interest cost                       72,088           78,946     13,400      14,800        85,488       93,746
       Contributions by Members            13,995           16,105      1,900       2,000        15,895       18,105
       Transfers in from other
       authorities                                                                    100            0          100
       Actuarial Losses / (Gains)       (278,203)          (99,024)   (47,957)    (14,068)    (326,160)    (113,092)
       Past Service Costs / (Gains)          305             9,891                                 305        9,891
       Losses / (Gains) on
       Curtailments                          892              632                                  892          632
       Liabilities Extinguished on
       Settlements                                          (7,587)                                   0       (7,587)
       Liabilities Assumed in a
       Business Combination                                                                           0            0
       Exchange Differences                                                                           0            0
       Estimated Unfunded Benefits
       paid                                (3,125)          (3,154)                              (3,125)      (3,154)
       Estimated Benefits paid            (39,724)         (38,413)    (7,043)     (8,632)      (46,767)     (47,045)
       Closing Defined Benefit
       Obligation                       1,138,562        1,129,418    215,600     215,000     1,354,162    1,344,418

      Reconciliation of fair value of the scheme assets:

                                         Local Government                Fire-fighters
                                          Pension Scheme               Pension Scheme                 Total
                                        2007-08     2008-09           2007-08     2008-09     2007-08       2008-09
                                        Restated                                              Restated
                                         £000        £000              £000        £000         £000         £000
       Opening Fair Value of Employer
       Assets                            975,930          950,976             0           0    975,930      950,976
       Expected Return on Assets          70,612           85,851                               70,612       85,851
       Contributions by Members           13,995           16,105       1,900       2,000       15,895       18,105
       Contributions by the Employer      44,675           48,161       5,143       6,532       49,818       54,693
       Transfers in from other
       authorities                                                                   100              0         100
       Contributions in respect of
       Unfunded Benefits                   3,125            3,154                                3,125        3,154
       Actuarial Gains / (Losses)       (114,512)        (298,681)                            (114,512)    (298,681)
       Assets Distributed on
       Settlements                                          (8,892)                                   0       (8,892)
       Pension and Lump Sum
       Expenditure                                                     (7,043)     (8,632)       (7,043)      (8,632)
       Unfunded Benefits Paid              (3,125)          (3,154)                              (3,125)      (3,154)
       Benefits Paid                      (39,724)         (38,413)                             (39,724)     (38,413)
       Opening Fair Value of Employer
       Assets                            950,976          755,107             0           0    950,976      755,107




                                                    98
                                NOTES TO THE ACCOUNTS
43.       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 2008).

          The actual (negative) return on the council's share of the scheme’s total
          assets in the year was - £231,399,000 (2007-08:- £43,629,000).

Scheme history
                                2004-05       2005-06       2006-07       2007-08       2008-09
                                                                          Restated
                                  £000          £000          £000          £000          £000
Present value of liabilities:
Local Government Pension
Scheme                          (1,111,955)   (1,312,799)   (1,328,218)   (1,138,562)   (1,129,418)
Fire-fighters Pension
Scheme                           (212,500)     (249,400)     (247,200)     (215,600)     (215,000)
Fair value of assets in the
Local
Government Pension
Scheme                            687,659       892,304       975,930       950,976       755,107
Surplus/(deficit) in the
scheme:                          (636,796)     (669,895)     (599,488)     (403,186)     (589,311)
Local Government Pension
Scheme                           (424,296)     (420,495)     (352,288)     (187,586)     (374,311)
Fire-fighters Pension
Scheme                           (212,500)     (249,400)     (247,200)     (215,600)     (215,000)
Total                            (636,796)     (669,895)     (599,488)     (403,186)     (589,311)

The 2007-08 deficit has been reduced by £35.920m from the value in the 2007-
08 accounts following the identification of balances relating to compensatory
added years that were overstated.

The above asset values as at 31 March 2009 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 mid-market
value at 31 March 2008 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 2009 of
£589.311 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




                                                 99
                              NOTES TO THE ACCOUNTS
43.   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 2010 is £53.256
      million. 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
                                           2007-08        2008-09     2007-08        2008-09
Long-term expected rate of return on
assets in the scheme:
Equity investments                          7.7%          7.0%          n/a           n/a
Bonds                                       5.7%          5.4%          n/a           n/a
Property                                    5.7%          4.9%          n/a           n/a
Cash                                        4.8%          4.0%          n/a           n/a
Mortality assumptions:
Longevity at 65 for current pensioners:
                   Men                    21.4 years    21.4 years   27.6 years    27.6 years
                  Women                   24.3 years    24.3 years   31.0 years    31.0 years
Longevity at 65 for future pensioners:
                   Men                    22.5 years    22.5 years   29.2 years    29.2 years
                  Women                   25.4 years    25.4 years   32.7 years    32.7 years
Rate of inflation                           3.6%          3.1%         3.6%          3.1%
Rate of increase in salaries                5.1%          4.6%         5.1%          4.6%
Rate of increase in pensions                3.6%          3.1%         3.6%          3.1%
Rate for discounting scheme liabilities     6.9%          6.9%         6.9%          6.9%

Take-up of option to convert annual          50%           50%          n/a           n/a
pension into retirement lump sum



                                            100
                          NOTES TO THE ACCOUNTS
43.   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:

                                               2007-08          2008-09
                                                  %                %
 Equity investments                                  73              67
 Bonds                                               13              19
 Property                                             5               4
 Cash                                                 9              10
                                                    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 2009:

                              2004-05    2005-06      2006-07       2007-08     2008-09
                                                                    Restated
                                %          %              %            %          %
 Local Government Pension
 Scheme
 Differences between the
 expected and actual return
 on assets                        2.9          14.4           0.2      (12.0)     (40.5)
 Experience gains and
 losses on liabilities           (2.7)          1.6           0.1         5.9      (0.6)

 Fire-fighters Pension
 Scheme
 Experience gains and
 losses on liabilities           (8.4)          0.6           0.9       (2.9)       3.5




                                         101
                             NOTES TO THE ACCOUNTS
43.     Liability related to defined benefit pension schemes (continued)

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

                                2004-05      2005-06     2006-07     2007-08     2008-09
                                                                     Restated
                                  £000        £000        £000         £000       £000

Actuarial (Gains) / Losses      227,175       13,470 (94,946)        (211,648)   185,589

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

Actuarial (Gains) / Losses
recognised in STRGL             227,175       13,470 (94,946)        (211,648)   185,589

Cumulative Actuarial
(Gains) / Losses                227,175      240,645     145,699      (65,949)   119,640

44. 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 2009, £6.273 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
      2008-09 the cost of these unfunded discretionary awards amounted to £3.154
      million (2007-08 - £3.125 million).




                                             102
                         NOTES TO THE ACCOUNTS
45. 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.

                                                             2008            2009
                                                             £000            £000

    Balance as at 1 April                                  2,671,762       2,595,895
    Restatement at 1 April                                         0          13,268
    Restated Balance as at 1 April                         2,671,762       2,609,163

    Capital financing
     capital receipts                                          29,716         12,273
     revenue contributions                                      8,979         13,304

    Minimum revenue provision                                  15,627         18,039

    Fixed Assets
    Depreciation                                              (53,326)       (57,021)
    Impairment                                                 (3,435)      (416,826)
    Disposals – net book value                                (36,774)       (74,493)
    Revaluation gains attributable to disposals                20,875          8,475
    Transferred to PFI Scheme                                 (20,799)             0
    PFI Scheme Reversionary Interest                                0            590
    Capital expenditure (net of financing) that has not
    increased balance sheet carrying amounts                  (26,786)       (27,685)

    Amounts treated as revenue expenditure in
    accordance with the SORP but which are classified
    as capital expenditure by statute                         (15,048)        (4,129)

    Amortisation of deferred grants and contributions          5,104           5,922
                                                           2,595,895       2,087,612




                                        103
                          NOTES TO THE ACCOUNTS
46.    Revaluation Reserve

      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 2009 therefore only shows revaluation gains
      accumulated since 1 April 2007.

                                                                2008            2009
                                                                £000            £000
       Balance as at 1 April                                           0         8,018

       Revaluation of Fixed Assets                               28,893         72,474

       Revaluation gains attributable to Fixed Asset
       Disposals                                                 (20,875)       (8,475)

                                                                   8,018        72,017




                                         104
                         NOTES TO THE ACCOUNTS
47.   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.

                                                              2008        2009
                                                              £000        £000
      Balance as at 1 April                                          0    (6,777)
      Restatement as at 1 April 2007
      Overhanging premiums and discounts on debt
      restructuring pre 1 April 2006                          (4,625)
      Stepped interest rate loan debt remeasured to
      amortised cost                                          (1,282)
      Soft loans remeasured at fair value                       (713)
      Restated balance as at 1 April 2007                     (6,620)     (6,777)

      Overhanging premiums and discounts written off            179        1,336

      Statement of Movement in General Fund Balance
      Interest on Financial Instruments restated to nominal
      / coupon rates                                           (377)          29
      Financial Instrument carried at amortised cost repaid     217            0
      Soft loans remeasured at fair value                      (246)        (122)
      Soft loans repaid – gain on derecognition                   0           25
      Soft loans interest reversal                               70           78
      Icelandic Bank Investment Impairment
      Principal Impairment                                         0      (7,780)
      Less: Interest Receivable                                    0       1,922
                                                              (6,777)    (11,289)

      Icelandic Bank Investment Impairment                           0    (5,858)
      Unamortised overhanging premiums and discounts
      on debt restructuring pre 1 April 2006                  (4,446)     (3,110)
      Borrowings remeasured at amortised cost                 (1,442)     (1,413)
      Soft loans remeasured at fair value                       (889)       (908)
                                                              (6,777)    (11,289)




                                        105
                          NOTES TO THE ACCOUNTS
48.   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. Given that there is a possibility of further
      claims forthcoming the council has applied to the Government (Department for
      Communities and Local Government) for a capitalisation direction in 2009-10 to
      cover this impact.

                                                                  2008            2009
                                                                  £000            £000
      Equal Pay Reserve                                                  0        (1,077)

49.   Pensions Reserve

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

                                                                  2008            2009
                                                                Restated
                                                                  £000           £000
      Balance as at 1 April                                     (599,488)      (403,186)

      Actuarial Gains and (Losses)
      Defined Benefit Obligations                                326,160        113,092
      Employer Assets                                           (114,512)      (298,681)

      General Fund Balance Appropriation                         (15,346)          (536)
                                                                (403,186)      (589,311)

50.   Usable Capital Receipts Reserve

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

                                                                  2008            2009
                                                                  £000            £000
      Balance as at 1 April                                        7,493          16,839
      Capital receipts received                                   25,499          10,808
      Capital receipts accrued                                    13,563           4,252
      Capital receipts used for financing                        (29,716)        (12,273)
                                                                  16,839          19,626


                                            106
                         NOTES TO THE ACCOUNTS
51. 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 that will be
   allowed against 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.




                                         107
                         NOTES TO THE ACCOUNTS

51. 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.

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

   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 2009-10.




                                         108
                           NOTES TO THE ACCOUNTS
51. Specific Reserves (continued)

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

   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
                                                    2008            (Decrease)            2009
                                                    £000               £000               £000
   School Revenue Reserves
   School Balances                                     39,920            (3,173)           36,747
   Strategic Area Partnership                           3,978             1,214             5,192
   Community Focused Extended School Activities           238               (82)              156
   Total School Revenue Reserves                       44,136            (2,041)           42,095
   Capital Payback                                      7,042             5,920            12,962
   Highways Maintenance                                12,000                 0            12,000
   Icelandic Bank Deposits                             10,000                 0            10,000
   Self Insurance                                       8,574             1,022             9,596
   Schools Budget Central Expenditure                   3,434               202             3,636
   NNDR Revaluation Reserve                             2,012               565             2,577
   Quantum Care Rent Abatement                          1,926               (47)            1,879
   Children Schools and Families Service Reserve        1,978              (297)            1,681
   PFI Equalisation Reserve                               548               919             1,467
   County Council Elections                               653               369             1,022
   Capital Reserve                                        974                 0               974
   Statutory Planning Authority Inquiries                 786               138               924
   Hermis Development                                     624                57               681
   Strategic Planning                                       0               655               655
   SHARP Reserve                                          500                 0               500
   New Roads & Street Works Act 1991                      460                 0               460
   HBS Repairs and Renewals                               149               294               443
   Hadham Towers Restoration                              458               (44)              414
   Leasehold Dilapidations                                304                 0               304
   Recruitment Advertisement Rebates                        0               152               152
   Energy and Water Conservation                          150                 0               150
   LPSA Performance Reward Grant                          724              (634)               90
   Herts Property Artwork                                   0                72                72
   Childcare Litigation Reserves                           23                (4)               19
   Local Standards Verification                            30               (12)               18
   Key Worker Housing Surplus                              15                 0                15
   Other minor balances                                     3                 0                 3
   Safe Staffing Project                                   53               (53)                0
   CAMHS                                                   52               (52)                0
                                                       97,608             7,181           104,789




                                            109
                         NOTES TO THE ACCOUNTS
52. General Fund Balance

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

                                                                            £000

    General Fund Balance at 31 March 2008                                   26,220
    Surplus for the year                                                    10,276
    General Fund Balance at 31 March 2009                                   36,496


53. Movements on Reserves

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



                                       Balance      Gains /
                                       Brought     (Losses)    Transfers   Balance
                                       Forward      For The    Between     Carried
                                      (Restated)     Year      Reserves    Forward
                                         £000        £000        £000       £000
    Reserves
    Capital Adjustment Account        2,609,163                (521,551)   2,087,612
    Revaluation Reserve                   8,018      72,474      (8,475)      72,017
    Financial Instruments
    Adjustment Account                   (6,777)                 (4,512)     (11,289)
    Equal Pay Reserve                         0                  (1,077)      (1,077)
    Pension Reserve                    (403,186)   (185,589)       (536)    (589,311)
    Usable Capital Receipts Reserve      16,839                   2,787       19,626
    Specific Reserves                    97,608                   7,181      104,789
    General Fund Balance                 26,220    (515,907)    526,183       36,496
    Total Reserves                    2,347,885    (629,022)          0    1,718,863




                                        110
                        NOTES TO THE ACCOUNTS
54. Contingent Liabilities

    At 31 March 2009 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 2009 indicates that the amount liable to clawback from the council,
    should the Company not remain solvent is estimated at a maximum amount of
    £4.263 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 40 (Provisions).

55. 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 26 Foundation
    schools.

56. 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.




                                             111
                      NOTES TO THE ACCOUNTS
57. 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 2009 the total value of educational endowments
   is £469,043 (31 March 2008 - £428,923).

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

                                                                  2008          2009
                                                                Restated
                                                                  £000           £000
    Income and Expenditure Account surplus / (deficit)           (86,124)      (515,907)
    Servicing of finance                                           (4,131)         (306)
    Capital accounting                                            93,491         83,755
    Exceptional Items                                             20,799        415,394
    (Gain)/loss on disposal of fixed assets                        (2,288)       59,433
    Financial Instruments                                             336         5,848
    FRS17 Retirement Benefits                                     15,346            536
    Decrease / (Increase) in stocks                                  (759)         (655)
    Landfill Allowances Trading Scheme                              6,158             0
    Decrease / (Increase) in revenue debtors                        1,508       (14,085)
    Increase in revenue creditors & deferred credits              37,795         24,033
    Increase / (decrease) in provisions                            (4,932)        7,238
    Net Cashflow from revenue activities                          77,199         65,284

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

                                                                   2008         2009
                                                                   £000         £000
    Increase in cash in the period                                  (8,903)      11,911
    Cash outflow from reduction in external borrowing             (31,943)       37,649
    Cash inflow from decrease in liquid resources                  52,807       (54,069)
    Cash inflow from decrease in long term investments             19,000        (8,000)
    Change in net debt                                             30,961       (12,509)
    Net debt at 31 March 2007 / 2008                             (110,760)      (79,799)
    Net debt at 31 March 2008 / 2009                              (79,799)      (92,308)




                                         112
                     NOTES TO THE ACCOUNTS
60. Reconciliation of the items shown within the financing of and management
    of liquid resources section of the Cash Flow Statement (analysis of net
    debt)

                                      As at 31                                    As at 31
                                       March         Cash         Other            March
                                       2008          flows       Changes           2009
                                       £000           £000        £000             £000

    Cash in hand and at bank            83,014        (2,394)                        80,620
    Bank overdraft                     (95,482)       14,305                        (81,177)
                                                      11,911

    Debt due within 1 year                (103)                            21           (82)
    Debt due after 1 year             (377,177)       37,649              (21)     (339,549)
                                                      37,649

    Current asset investments          270,949       (54,069)                      216,880

    Long Term investments               39,000        (8,000)                       31,000

    Net Debt                           (79,799)      (12,509)               0       (92,308)

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

61. Definition of Liquid Resources in the Cash Flow Statement

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

62. Analysis of Cash Flow Statement Revenue Grants

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

                                                                 2008             2009
    Council Service                                              £000             £000
    Children Schools and Families                               782,026          830,774
    Adult Care Services                                          49,935           23,744
    Environment                                                   9,864            7,030
    Other Services                                                  858              657
                                                                842,683          862,205




                                        113
                     NOTES TO THE ACCOUNTS
63. Post Balance Sheet Events

   Following an internal treasury management decision, £49.469m of the total
   £344.9m shown in the accounts as long term borrowing was repaid on 28 May
   2009.

64. 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.

   For this authority the date is 30 September 2009 and authority to issue the
   accounts was given by the Director of Resources and Performance and Section
   151 Officer for the authority. This represents the date when the Chief Finance
   Officer authorised the final paper copy of the Statement of Accounts.

   The statement of accounts has been authorised for issue, by M. Parsons,
   Director of Resources & Performance on 30 September 2009.




                                        114
               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.




                                          115
              ANNUAL GOVERNANCE STATEMENT

1.4   Every elected member has a copy of the Council’s Statement of Corporate
      Governance in their Member Information Folder and a copy can be obtained
      from the 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 (amended 2006)
      in relation to the publication of a statement on internal control.

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 2009 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. Revisions to this document
      during the year cover:-




                                        116
              ANNUAL GOVERNANCE STATEMENT
3.2   Corporate Plan
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 extends to 2012. It is reviewed and refreshed annually, 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, 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.

       The Council operates an Integrated Planning Process which uses national
      benchmarking of value for money and needs based evidence in the review
      and shaping of corporate priorities and supporting financial plans.


3.3   Constitution

      A review of Financial Regulations was undertaken to incorporate changes in
      responsibilities following the major review of the Finance function. The
      revised regulations were formally adopted in January 2009.

      All the annexes to the Constitution, with the exception of Annex 08A - Scrutiny
      of the Health Service were reviewed and updated during the year.

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 Council has recently identified a ‘Risk Champion’ in each main
      Department, usually the Assistant Director responsible for Resources and
      Business Support, whose objectives will specifically include risk management.




                                        117
              ANNUAL GOVERNANCE STATEMENT
3.5   Scrutiny and compliance

      Amendments to the Scrutiny arrangements were made during 2008; the
      Overview & Scrutiny Committee ("OSC") is the single Committee for all
      scrutiny purposes, except health scrutiny.
      Proportionality rules apply to the OSC; Executive Members and Deputy
      Executive Members are not able to sit on the OSC.
      The remit of the OSC is:
      (1)   to act as the County Council’s Overview & Scrutiny Committee for all
            purposes except health scrutiny
      (2)   to determine an annual work programme for scrutiny, keeping flexibility
            to deal with urgent issues
      (3)    to appoint time limited, task and finish Topic Groups to undertake
            detailed scrutiny work and make recommendations to the Executive;
            and to establish one-off scrutiny hearings where that is appropriate
      (4)   to appoint and manage a pool of Topic Group Chairmen and to ensure
            those members are trained. The pool is open to all Council members
            except Cabinet members, and to the 4 parent governor and 2 church
            representatives.
      (5)   to have a reserve power to scrutinise issues itself, when urgent or
            required by law.
      The OSC will be 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.




                                       118
               ANNUAL GOVERNANCE STATEMENT
3.7   Members and Staff

      The Members Development Charter requires the Council to assess the
      training needs of members and to meet those needs. The system of Deputy
      Cabinet members facilitates succession planning.

      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.

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.


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.


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.

      In response to the Audit Commission recommendation, that the authority
      considers clearer corporate ownership of this statement, Performance and
      Planning Group undertake the review of effectiveness of the governance
      arrangement and Resources Board 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.




                                        119
              ANNUAL GOVERNANCE STATEMENT
4.3   The review covered:-
           the review of Internal Audit
           arrangements for member scrutiny
           Corporate Performance Management Programme
           the Corporate Planning Process ‘Revenue Budget and Capital
            Programme Planning Framework & Corporate Planning Process’
           processes for aligning performance measures to the new Corporate
            Plan
           response to the unprecedented speed and probable impact of the
            economic downturn
           benchmarking
           The 2008 Hertfordshire Residents’ Survey results
           Risk management
           Partnerships – particularly the LSP governance review outcomes
           complaints report by the Local Government Ombudsman
           External Inspections:
            -      Direction of Travel inspection
            -      Annual Performance Assessment (APA) for Children’s services,
            -      Hertfordshire’s Fire and Rescue Service’s (HFRS) Use of
                   Resources judgement
            -      Supporting people re-inspection
            -      Tackling Health inequalities report
            -      Annual Governance report
            -      Review of Internal Audit Management arrangements
            -      Opinion on Financial Statements
            -      Value for Money conclusion
            -      Data Quality (draft) report
            -      Use of Resources judgement
            -      Annual audit and Inspection letter
            -      the last CPA -The Harder Test.


4.4   Review of internal control

      The review of internal control this year largely comprised the evidence
      provided by senior management for the Comprehensive Area Assessment
      (CAA) self-assessment to the Audit Commission.




                                      120
               ANNUAL GOVERNANCE STATEMENT
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.

4.6   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.

4.7   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 acknowledges the issues raised about the closure of the
      2007/2008 accounts in the recent Annual Audit and Inspection letter. Actions
      have been put in place to ensure these problems do not reoccur for the
      closure of the 2008/2009 accounts. A report detailing these went to the
      council’s Audit Committee on the 25th March where the Audit Commission
      was present.




                                         121
               ANNUAL GOVERNANCE STATEMENT
5.2   Action plans have been put in place to ensure that:-
            assets are properly recorded on an Integrated Asset Management
             System
            recommendations arising from the consultant’s report on the specific
             circumstances of the Icelandic investments and review of treasury
             management procedures in general are implemented.
            Issues raised by the District Auditor in her 2007/08 Annual
             Governance Report are addressed

5.3   A detailed action plan was put in place after the re-inspection of Supporting
      People services. A further re-inspection has now taken place and an
      improved judgement of “fair” and “promising” has now been achieved.

5.4   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:




Robert Gordon                                  Caroline Tapster
Leader                                         Chief Executive
on behalf of Hertfordshire County Council
Date                                           Date




                                        122
     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 2009 was as follows:

 Contributors                                    28,610
 Pensioners                                      19,224
 Former Contributors - deferred benefits         22,557


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.




                                           123
    LOCAL GOVERNMENT PENSION FUND 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 22-23 of the Pension Fund Annual Report 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 partnerships 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.


                                          124
    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.

The comparative figures for quoted securities are shown at their mid market value as
stated in the 2007/08 financial statements. In accordance with the transitional
provisions set out in the Statement of Recommended Practice Financial Reports of
Pension Schemes 2007, the comparative figures have not been stated at the bid
price on the grounds that the difference in the valuation overall is immaterial. If an
adjustment had been made the investments value and the change in market value
would have been adjusted.


Change in Accounting Policies
In order to comply with the Statement of Recommended Practice Financial Reports
of Pension Schemes 2007, the Pension Fund has adopted three new accounting
policies that impact on the comparative figures for 2007/08 in the Net Assets
Statement:

1. The total asset value and total liabilities are disclosed separately on the face
   of the Net Assets Statement where there is no legal right of offset. Debtor and
   creditor balances in respect of investment activities, for example, amounts due
   to and from brokers, previously shown net within cash and other investment
   balances, are disclosed separately under investment assets and investment
   liabilities. Current assets and liabilities, previously shown as a net position, are
   disclosed separately under current assets and current liabilities.

2. Derivatives are disclosed as a separate investment category. Futures
   contracts were previously accounted for on an economic exposure basis
   with the valuation attributable to the contracts disclosed within equities and the
   cash backing open futures disclosed within the cash balance at year end. For
   2008/09 and the 2007/08 comparatives, futures contracts are disclosed under
   derivatives on a fair value mark to market basis. The opening net value of these
   contracts is the same as on an economic exposure basis. Forward foreign
   exchange contracts (previously shown net within cash balances) are disclosed
   under derivatives as either an investment asset or investment liability depending
   on whether a gain or loss would arise from closing out the contract at the
   balance sheet date.

3. The classification of investments has been reviewed and led to some
   reclassifications of securities between investment types.



                                           125
  LOCAL GOVERNMENT PENSION FUND ACCOUNTING POLICIES
Comparative figures relating to the change of accounting policies have been
restated. These changes have not resulted in any change to the opening net assets
of the Pension Fund. The impact on the comparative figures for 2007/08 compared
with those published in the 2007/08 Pension Fund Annual Report and Accounts are
shown in the table below.




                                                    Separate disclosure




                                                                                                      exchange contracts
                              2007/08 Net Assets




                                                                                                                               Reclassification of




                                                                                                                                                           2008/09 accounts
                                                                               Futures contract
                                                    assets/liabilities




                                                                                                      Forward foreign




                                                                                                                                                           comparatives in
                                                                                                                               investments
                              Statement




                                                                                                                                                           2007/08
                              £’000                £’000                      £’000                   £’000                      £’000                      £’000
Investment Assets:
Fixed Interest Securities
    Public Sector            146,391                                                                                                 (260)                 146,131
    Other                      91,778                                                                                                                         91,778
Equities
    UK                       805,139                                           (457)                                                                       804,682
    Overseas                 576,887                                           (462)                                                                       576,425
Index Linked
    Public Sector              56,922                                                                                                                         56,922
    Other                           0                                                                                                      260                   260
Pooled Investment
Vehicles
    Property                 107,008                                                                                                                       107,008
    Unit trusts               30,854                                                                                                                        30,854
    Other managed funds       80,467                                                                                                                        80,467
Derivatives
    Forward foreign
    exchange                       0                                                                    1,107                                                1,107
Cash deposits                118,085                                                   919              5,156                                              124,160
Other investment balances      2,335                31,268                                                                                                  33,603

Investment Liabilities:
Derivatives
    Forward foreign
    exchange                        0                                                                 (6,263)                                               (6,263)
Other investment balances           0              (31,268)                                                                                                (31,268)
Total investment            2,015,866                     0                                       0                        0                         0   2,015,866
assets/liabilities

Net Current Assets             50,409              (50,409)
Current assets                      0                53,852                                                                                                  53,852
Current liabilities                 0               (3,443)                                                                                                  (3,443)
Total current                  50,409                     0                                       0                        0                         0       50,409
assets/liabilities

Net assets of the Scheme    2,066,275                                     0                       0                        0                         0   2,066,275
at 31 March




                                                           126
  LOCAL GOVERNMENT PENSION FUND ACCOUNTING POLICIES

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 2009.

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.

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 2008/09, £203,447 of fees were based on
such estimates.

Contributions
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 2008/09, £8,162 of contributions was 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.

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.




                                         127
  LOCAL GOVERNMENT PENSION FUND ACCOUNTING POLICIES

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 5(2)(c) of the Local Government Pension Scheme
(Management and Investment of Funds) Regulations 1998 (SI 1998 No 1831).


Security Lending
The Local Government Pension Scheme (Management and Investment of Funds)
Regulations, 1998 (as amended), 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.




                                          128
         LOCAL GOVERNMENT PENSION FUND ACCOUNTS

Fund Account
                                                      2007/08     2008/09
                                              Note
                                                       £’000       £’000
Dealings with members, employers and
others directly involved in the Scheme
Contributions receivable                       1
        Members                                        28,256      31,956
        Employers                                      95,297     107,148
Transfers in from other schemes                2       14,012      10,326
                                                      137,565     149,430
Benefits payable                               3
        Pensions                                      (70,024)    (74,826)
        Commutation of pensions and lump              (16,682)    (17,644)
        sum retirement benefits
        Lump sum death benefits                        (1,026)     (2,077)
                                                      (87,732)    (94,547)
Payments to and on account of leavers
      Refunds of contributions                            (24)        (25)
      State scheme premiums                                (8)         (8)
      Transfers out to other schemes           4      (12,799)     (6,044)
                                                      (12,831)     (6,077)
Administrative expenses and other payments
       Administrative expenses                 5       (1,854)     (1,793)
       Interest                                           (90)       (102)
       Bad debts                                           (4)         (0)
                                                       (1,948)     (1,895)
Net Additions (withdrawals) from                       35,054      46,911
dealing with Members
Returns on investments
Investment income                              6        83,045      69,017
Taxation                                               (4,817)     (3,410)
Investment management expenses                 7       (6,706)     (6,544)
Change in market value of investments          8     (186,143)   (532,683)
Net return on investments                            (114,621)   (473,620)
Net increase/(decrease) in the Fund                   (79,567)   (426,709)
during the year
Opening net assets of the Scheme                     2,145,842   2,066,275
Closing net assets of the Scheme                     2,066,275   1,639,566




                                        129
            LOCAL GOVERNMENT PENSION FUND ACCOUNTS

Net Assets Statement
                                                             2007/08       2008/09
                                                   Note
                                                               £’000        £’000
                                                             restated
Investment Assets                                    9
Fixed interest securities
         Public sector                                       146,131       124,835
         Other                                                91,778       115,321

Equities
           UK                                                804,682       407,893
           Overseas                                          576,425       562,026

Index linked securities
         Public sector                                        56,922        66,904
         Other                                                   260         5,643

Pooled investment vehicles
        Property                                             107,008        68,439
        Unit trusts                                           30,854        10,928
        Other managed funds                                   80,467        94,851

Derivatives
         Futures                                    10             0            54
         Forward foreign exchange contracts         10         1,107         2,213

Cash deposits                                                124,160        97,114

Other investment balances                                     33,603        33,226

Investment liabilities                               9
Derivative contracts
         Forward foreign exchange contracts         10        (6,263)       (2,691)

Other investment balances                                   (31,268)      (30,858)
Total investment asset/liabilities                         2,015,866     1,555,898

Current assets                                      11        53,852        86,393
Current liabilities                                 12        (3,443)       (2,725)
Total current assets/liabilities                              50,409        83,668

Net assets of the Scheme at 31 March                       2,066,275     1,639,566

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.

                                         130
  NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

Notes to the Accounts
1. Contributions Receivable

                                    2007/08              2008/09
                                      £’000               £’000
                                    restated
    Members
     Normal                          27,682               31,179
     Additional                         574                  777
                                     28,256               31,956
    Employers
      Normal                         59,674               62,236
      Augmentation                      522                  455
      Deficit funding                35,101               44,457
                                     95,297              107,148
    Total                           123,553              139,104

   The 2007/08 figures have been restated to reflect the change in disclosures
   required under the Statement of Recommended Practice Financial Reports of
   Pension Schemes 2007.

   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:

    £31,621,236 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 accessible from
     www.hertsdirect.org/pensions.

                                          131
   NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

      £6,359,605 paid by employers in excess of the minimum contribution levels
       required by the Actuary in the Rates and Adjustments Certificate,

      £5,804,891 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.

      £671,000 in respect of termination payments where employers have ceased
       to be a participating employer in the Pension Fund.


Contributions received are further analysed by type of employer:

                                        2007/08                2008/09
                                         £’000                  £’000
      Administering Authority            56,832                 64,968
      Other Scheduled Bodies             56,974                 62,794
      Admitted Bodies                     9,747                 11,342
      Total                             123,553                139,104


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
   (2007/08 £0).


3. Benefits Payable

                                          2007/08               2008/09
                                           £’000                 £’000
      Administering Authority              37,957               41,535
      Other scheduled bodies               44,117               46,843
      Admitted bodies                       5,658                6,169
      Total                                 87,732              94,547


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
   (2007/08 £0).




                                         132
  NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

5. Administrative Expenses
   The Local Government Pension Scheme (Management and Investment of
   Funds) Regulations, 1998 (as amended), 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.

                                              2007/08         2008/09
                                               £’000           £’000
    Administration and processing               1,695           1,665
    Actuarial fees                                102              49
    Audit Fees
           Statutory                              30               50
           Other                                   0                2
    Legal and other professional fees             27               27
    Total                                       1,854          1,793


6. Investment Income

a) Analysis of Investment Income

                                                 2007/08       2008/09
                                                  £’000         £’000
    Income from fixed interest securities
        Public Sector                               6,179        6,010
        Other                                       4,923        6,791
    Dividends from equities
        UK                                         40,939       24,380
        Overseas                                   14,980       19,402
    Income from index linked securities
        Public Sector                               1,556          869
    Income from pooled investment vehicles
        Property                                    4,780        4,587
        Unit trusts                                   195           70
        Other managed funds                           390          467
    Interest on cash deposits                       8,430        6,045
    Other investment income
        Securities lending                              407        266
        Commission recapture                             14          1
        Class action proceeds                           229        108
        Underwriting commission                          23          2
        Other                                             0         19
    Total                                          83,045       69,017


                                        133
  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 £265,638 for 2008/09 (£407,184
   for 2007/08). This is included within investment income in the Fund Account. At
   31 March 2009, £85.1million worth of stock (5.2% of the Pension Fund)
   was on loan, for which the Pension Fund was in receipt of collateral worth £90.0
   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 153.

   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 of the Pension Fund Annual
   Report.

                                                   2007/08        2008/09
                                                    £’000          £’000
    Administration and management                    8,624         6,016
    Refund of investment management fees           (2,348)             0
    Custody                                            402           496
    Performance measurement services                    28            32
    Total                                            6,706         6,544




                                       134
   NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

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




                                       at cost and
                                       Purchases




                                                                    Change in
                                        payments
                                        derivative




                                                     derivative
                                                     proceeds
                            31/03/08




                                                                                  31/03/09
                                                      receipts
                            Value at




                                                                                  Value at
                                                                     market
                                                                      value
                                                        Sale

                                                        and
                            £’000        £’000         £’000        £’000        £’000
                          restated
     Fixed Interest
        Public Sector      146,131      550,221       (593,946)       22,429     124,835
        Other               91,778       61,440        (23,052)     (14,845)     115,321
     Equities
        UK                 804,682       787,792     (1,009,495)   (175,086)     407,893
        Overseas           576,425     2,182,850     (1,942,087)   (255,162)     562,026
     Index linked
        Public Sector       56,922        68,989       (57,702)      (1,305)      66,904
        Other                  260         1,867           (85)        3,601       5,643
     Pooled vehicles
        Property           107,008             0              0     (38,569)      68,439
        Unit trusts         30,854            36       (15,030)      (4,932)      10,928
        Managed funds       80,467        37,893       (21,471)      (2,038)      94,851
     Derivatives
        Futures                  0         1,569          (673)        (842)           54
        Forward foreign     (5,156)       99,520       (24,864)     (69,978)        (478)
        exchange
     Cash deposits          124,160            0        (31,090)      4,044        97,114
     Subtotal             2,013,531    3,792,177     (3,719,495)   (532,683)    1,553,530

     Other investment         2,335                                                 2,368
     balances

     Total investment     2,015,866                                             1,555,898
     assets/liabilities
    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.

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 £5.5 million (£5.2 million in 2007/08). 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.

                                          135
  NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

9. Investment Analysis
a) Analysis of Investments at Market Value
                                                         2007/08     2008/09
                                                           £’000      £’000
                                                         restated
    Investment Assets:
    Fixed Interest Securities
        UK Public Sector                                   48,717       63,040
        Overseas Public Sector                             97,414       61,795
        UK other                                           65,753       83,286
        Overseas other                                     26,025       32,035
                                                          237,909      240,156
    Equities
         UK quoted                                         804,244     407,893
         UK unquoted                                           438           0
         Overseas quoted                                   576,425     558,592
         Overseas unquoted                                       0       3,434
                                                         1,381,107     969,919
    Index linked securities
        UK Public Sector                                   56,922       66,904
        UK other                                                0        3,245
        Overseas other                                        260        2,398
                                                           57,182       72,547
    Pooled investment vehicles
        Property
             UK                                           107,008       68,439
        Unit trusts
             UK                                            10,791        2,676
             Overseas                                      20,063        8,252
        Managed funds
             UK                                            13,435        9,702
             Overseas                                      67,032       85,149
                                                          218,329      174,218
    Derivatives
         Futures                                                0           54
         Forward foreign exchange contracts                 1,107        2,213
                                                            1,107        2,267

    Cash deposits                                         124,160       97,114

    Other investment balances
       Amounts receivable from the sale of investments     17,140       21,855
       Investment income due                               14,920        9,683
       UK and overseas recoverable tax due                  1,543        1,688
                                                           33,603       33,226
    Investment Liabilities:
    Derivative contracts
       Forward foreign exchange contracts                  (6,263)     (2,691)

    Other investment balances
       Amounts payable for the purchase of investments    (29,103)    (29,132)
       Non recoverable tax payable                         (2,165)     (1,726)
                                                          (31,268)    (30,858)

    Total                                                2,015,866   1,555,898




                                              136
   NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

b) Commitments
   As at 31 March 2009, the Pension Fund had a commitment of a further
   £80.5 million to private equity limited partnerships, based on exchange rates
   at the balance sheet date (£62.8 million at 31 March 2008).

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 2008          31 March 2009
                                        Market                 Market
         Investment Manager                           %                     %
                                        value                  value
                                        £’000                  £’000
     Alliance Bernstein                  384,096     19.0%     230,492    14.8%
     Baillie Gifford                     229,197     11.4%     168,590    10.8%
     Black Rock                          313,414     15.5%     315,329    20.3%
     Jupiter Asset Management            261,117     13.0%     182,022    11.7%
     In House Property Unit Trust
       Fund                              142,536      7.1%     109,423     7.0%
     Harbour Vest                         37,352      1.8%      47,870     3.1%
     Permira                               5,503      0.3%       4,996     0.3%
     Standard Life Investments            31,818      1.6%      40,489     2.6%
     TTP Ventures                          1,860      0.1%       1,613     0.1%
     Capital International               363,022     18.0%           0     0.0%
     Schroders                           245,951     12.2%           0     0.0%
     Deutsche                                  0      0.0%     145,086     9.3%
     JP Morgan                                 0      0.0%     152,428     9.8%
     RCM (UK) Ltd                              0      0.0%     156,128    10.1%
     Residual funds from previous
       portfolios                                0   0.0%         1,432    0.1%
     Subtotal: Funds externally
       managed                        2,015,866      100%    1,555,898    100%
     Funds held at Hertfordshire
      County Council                      50,409                83,676
     Total                             2,066,275             1,639,574

    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.




                                        137
   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 future contract and therefore the value subject to market
   movements.
                                              2007/08                2008/09
                                         Notional      Fair     Notional      Fair
         Contract       Duration
                                          value       value      value       value
                                          £’000       £’000      £’000       £’000
     FTSE 100         1-3 months            457             0          0           0
     S&P/TSE 60       1-3 months            462             0          0           0
     S&P 500 e mini   1-3 months              0             0        555          54
     Total                                  919             0        555          54

b) Forward Foreign Exchange Contracts
   Forward foreign exchange contracts are over the counter contracts with
   non-exchange counterparties. The counterparties at 31 March 2008 and
   31 March 2009 were UK and overseas investment banks. The contracts in the
   table below represent various forward contracts involving nine foreign currencies
   (11 at 31 March 2008). Forward foreign exchange contracts are used to hedge
   against foreign currency movements.

   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.
                                   2007/08                            2008/09
                      Notional           Fair value        Notional         Fair value
        Duration
                       value         Asset     Liability    value      Asset      Liability
                       £’000         £’000      £’000       £’000       £’000       £’000
     Within 1 month    101,722         936       (3,570)      2,777          0       (131)
     1-3 months        108,942         171       (2,693)    200,804      2,213     (2,560)
     Total             210,664       1,107        6,263     203,581      2,213     (2,691)



                                             138
   NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

11. Current Assets

                                                   2007/08          2008/09
                                                    £’000            £’000
     Contributions due from employers                5,476           6,454
     Cash with Hertfordshire County Council         47,648          79,007
     VAT due from HMRC                                 489             729
     Securities lending/commission                      55              20
     recapture
     Other debtors and prepayments                     184             183
     Total                                          53,852          86,393


12. Current Liabilities

                                                  2007/08          2008/09
                                                   £’000            £’000
     Tax payable to HMRC                              751             774
     Investment management fees                     2,408           1,019
     Other creditors                                  284             135
     Unpaid benefits                                    0             797
     Total                                           3,443           2,725

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 2009. These liabilities are
    valued as part of the triennial valuation process described on pages 22-23 of the
    Pension Fund Annual Report.

    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.

    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%


                                         139
   NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

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
         2009/10             1,787
         2010/11             1,099
         2011/12               522
         2012/13               295
         2013/14                36

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
                                                                  2007/08 Total




                                                                                                                    2008/09 Total
                                2007/08


                                                2007/08




                                                                                  2008/09


                                                                                                  2008/09
                                                                  AVCs




                                                                                                                    AVCs
                               £’000            £’000            £’000            £’000           £’000            £’000
     Value at 1 April          5,074             3,234            8,308           5,104           2,833             7,937

     Income
         Contributions
            received               352                   23           375            452                 18             470
         Transfer values
            received               135                    0           135             33                  0              33
                                   487                   23           510            485                 18             503
     Expenditure
        Retirement benefits     (509)            (409)   (918)                    (472)            (339)             (811)
        Transfer values paid     (17)             (67)    (84)                     (40)              (1)              (41)
        Refunds                     0                0       0                        0              (6)               (6)
                                (526)            (476) (1,002)                    (512)            (346)             (858)

     Change in market value           69                 52           121         (795)              (36)            (831)

     Value at 31 March         5,104             2,833            7,937           4,282           2,469             6,751



                                                140
   NOTES TO THE LOCAL GOVERNMENT PENSION FUND ACCOUNTS

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 £2,205,757 in interest during 2008/09
   (£1,636,599 in 2007/08).

   The amount of cash held by Hertfordshire County Council on behalf of the
   Pension Fund at 31 March 2009 was £79.0 million.

b) Investment Committee
   Ten members of the Hertfordshire County Council Investment Committee were
   councillor members of the Hertfordshire Local Government Pension Scheme
   during 2008/09. One member of the Investment Committee was in receipt of
   pension benefits from the Scheme during the year.


17. Statement of Investment Principles
    Regulation 9A of the Local Government Pension Scheme (Management and
    Investment of Funds) Regulations, 1998 (as amended), requires the Pension
    Fund to publish a Statement of Investment Principles. This is set out on the
    following pages.




                                        141
 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 are applied to the management of the Pension Fund investments.

In accordance with government guidelines, the extent to which the Pension
Fund complies with the ten principles set out in the Myners review of institutional
investment in the UK 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 pages 11-17 of the Pension Fund Annual
Report.

All investments, with the exception of property unit trusts are managed by external
investment management organisations (Investment Managers).

In-house staff in the Finance Service, reporting to the Chief Finance Officer, are
responsible for the management of property unit trusts.


What are the Investment Objectives of the Pension Fund?
1. To comply with the Local Government Pension Scheme (Management and
   Investment of Funds) Regulations 1998 (as amended), specifically to ensure that
   all:

       funds are suitably invested;
       investments are diversified;
       relevant investment limits are not exceeded;
       investments and investment arrangements are regularly monitored
        and reviewed.




                                          142
 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 at
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.




                                          143
 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”).

   Since November 2004 the Pension Fund has used “active, specialist”
   Investment Managers only. The Pension Fund’s investment management
   arrangements were restructured at that time, 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.



                                           144
 LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT PRINCIPLES

   Full details of the Investment Managers, their mandates and fee basis are
   shown at Appendix C to this Statement.

   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. 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.


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 1998, (as
      amended); 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 meeting of the Investment Committee.




                                        145
 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 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. Voting of Shares
   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.


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 approved by the Investment Committee
of Hertfordshire County Council on 17 June 2009 and will be published on the
Pension Fund website once approved. 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.




                                        146
LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT PRINCIPLES

                                                                                 Appendix A

               Compliance with 10 Myners Principles

                  Principle                                     Current Position
1. Effective Decision Making

  Decisions should be taken only by                 Day to day operational decisions are
  persons or organisations with the skills,         delegated to the County Council’s Chief
  information and resources necessary to            Finance Officer, who, with relevant
  take them effectively. Where trustees             members of his staff, regularly attends
  elect to take investment decisions they           seminars and briefing sessions to
  must have sufficient expertise and                maintain a high level of skills and
  appropriate training to be able to evaluate       knowledge in investment matters.
  critically any advice they take.

  Trustees should ensure that they have
  sufficient in-house staff to support them in      Members of the Investment Committee
  their investment responsibilities. Trustees       act in the role of trustees for the Pension
  should also be paid, unless there are             Fund. They attend training sessions
  specific reasons to the contrary.                 organised by the County Council. They
                                                    receive no specific payments in relation
                                                    to this work.
  It is good practice for trustee boards to
  have an investment sub-committee to               Both members and officers involved with
  provide the appropriate focus.                    making investment decisions take advice
                                                    from appropriately qualified professionals
                                                    where appropriate.

  Trustees should assess whether they
  have the right set of skills, both individually   Workshops are held for Investment
  and collectively, and the right structure         Committee members to consider issues
  and processes to carry out their role             in greater detail and to determine the
  effectively. They should draw up a                work programme for the year.
  forward-looking business plan.




                                              147
LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT PRINCIPLES

                  Principle                                     Current Position
2. Clear Objectives
  Trustees should set out an overall
  objective for the Fund that:
      Represents their best judgement of           The Pension Fund’s main investment
       what is necessary to meet the Fund’s         objective, as set out in this Statement of
       liabilities given their understanding of     Investment Principles, is to have
       the contributions likely to be received      sufficient assets to meet the liabilities by
       from employers and employees; and            achieving a long term rate of return on
      Takes account of their attitude to risk,     the investments at least equal to the rate
       especially their willingness to accept       used by the Actuary when setting the
       underperformance due to market               contribution rate every three years.
       conditions.
      Objectives for the overall Fund should       Development area
       not be expressed in terms which have
       no relationship to the fund’s liabilities,   To define acceptable risk levels for the
       such as performance relative to other        Pension Fund as a whole and for
       pension funds, or to market index.           individual Investment Managers.


3. Focus on Asset Allocation
  Strategic asset allocation decisions should       The use of a Pension Fund specific
  receive a level of attention (and where           benchmark requires Investment
  relevant, advisory or management fees)            Committee members, with professional
  that fully reflect the contribution they can      advice, to make high-level, asset
  make towards achieving the fund’s                 allocation decisions.
  investment objective. Decision-makers
  should consider a full range of investment        The specific benchmark gives substantial
  opportunities, not excluding from                 weighting to alternative investment
  consideration any major asset class,              opportunities in private equity and
  including private equity. Asset allocation        property, alongside the other major asset
  should reflect the fund’s own                     classes of equities and bonds.
  characteristics, not the average allocation
  of other funds.




                                              148
LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT PRINCIPLES

                   Principle                                     Current Position
4. Expert Advice
  Contracts for actuarial services and               There are separate contracts for
  Investment advice should be opened to              actuarial advice and investment
  separate competition. The Fund should              consultancy.
  be prepared to pay sufficient fees for each
  service to attract a broad range of kinds of
  potential providers.
5. Explicit Mandates
   Trustees should agree with both internal          Formal, written agreements are in place
   and external investment managers, an              with each Investment Manager which set
   explicit written mandate covering                 out the investment objective, the
   agreement between trustees and                    benchmark, any limits on investments
   managers on:                                      and the period over which performance
                                                     is to be measured.
     an objective, benchmark(s) and risk
      parameters that together with all the
      other mandates are coherent with the           An annual report is presented to the
      Fund’s aggregate objective and risk            Investment Committee detailing all the
      tolerances;                                    costs involved in managing the Pension
                                                     Fund’s investments, including direct and
     the manager’s approach in attempting           indirect costs.
      to achieve the objective; and
     clear timescale(s) of measurement              None of the Pension Fund’s external
      and evaluation, such that the                  Investment Managers use soft
      mandate will not be terminated before          commissions.
      the expiry of the evaluation timescale
      for underperformance alone.
  The mandate and trust deed and rules
  should not exclude the use of any set of
  financial instruments, without clear
  justification in the light of the specific
  circumstances of the Fund.
  Trustees, or those to whom they have               Development area
  delegated the task, should have a full             Management agreements are to be
  understanding of the transaction-related           reviewed to specify the risk tolerances to
  costs they incur; including commissions.           be applied by the Investment Managers.
  They should understand all the options
  open to them in respect of these costs,
  and should have an active strategy –
  whether through direct financial incentives
  or otherwise – for ensuring that these
  costs are properly controlled without
  jeopardising the Fund’s other objectives.
  Trustees should not without good reason
  permit soft commissions to be paid in
  respect of their Fund’s transactions.




                                               149
LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT PRINCIPLES

                   Principle                                   Current Position
6. Activism
    The mandate and trust deed should              At present there is no specific reference
    incorporate the principle of the US            to activism in the management
    Department of Labour Interpretative            agreements.
    Bulletin on activism. Trustees should also
    ensure that managers have an explicit          Development area
    strategy, elucidating the circumstances in     The issue will be reviewed by the
    which they will intervene in a company;        Investment Committee, following
    the approach they will use in doing so; and    discussions with Investment Managers
    how they measure the effectiveness of          and the investment Consultant, before a
    this strategy.                                 decision is made on how this should be
                                                   reflected in the management
                                                   agreements.
7. Appropriate Benchmarks
   Trustees should:

   explicitly consider, in consultation with      The index used was selected following
    their investment manager(s), whether the       consultation with an external investment
    index benchmarks they have selected are        advisor, as being appropriate for the
    appropriate; in particular, whether the        Pension Fund’s investment objectives.
    construction of the index creates
    incentives to follow sub-optimal               The index is reviewed regularly as part of
    investment strategies;                         the review of investment strategy.
   if setting limits on divergence from an
    index; ensure that they reflect the            All the current Investment Managers
    approximations involved in index               have an active investment mandate, and
    construction and selection;                    are given the freedom to operate active
   consider explicitly for each asset class       strategies within the broad asset
    invested, whether active or passive            allocation set by the benchmark.
    management would be more appropriate
    given the efficiency, liquidity and level of   Development area
    transaction costs in the market                Further consideration will be given to the
    concerned; and                                 risk controls to be applied by each
    where they believe active management           Investment Manager.
    has the potential to achieve higher
    returns, set both targets and risk controls
    that reflect this, giving the managers the
    freedom to pursue genuinely active
    strategies.




                                             150
LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT PRINCIPLES

                  Principle                                  Current Position
8. Performance Measurement
   Trustees should arrange for measurement        Pension Fund performance is measured
   of the performance of the Fund and make        quarterly by an independent company,
   formal assessment of their own                 both for the Pension Fund as a whole
   procedures and decisions as trustees.          and for individual Investment Managers.
   They should also arrange for a formal
   assessment for performance and decision-       Development area
   making delegated to advisers and               To formally document procedures for
   managers.                                      decision making, both for Investment
                                                  Committee members and Investment
                                                  Managers.
9. Transparency
  A strengthened Statement of Investment          The Statement of Investment Principles
  Principles should set out:                      covers all the areas set out in this
                                                  principle with the exception of the
      who is taking which decisions and
                                                  projected investment returns on each
       why this structure has been selected;
                                                  asset class.
      the Fund’s investment objective;
      the Fund’s planned asset allocation        Development area
       strategy, including projected              To determine, projected investment
       investment returns on each asset           returns on each asset class.
       class, and how the strategy has been
       arrived at;
      the mandates given to all advisers
       and managers; and
      the nature of the fee structures in
       place for all advisers and managers,
       and why this set of structures has
       been selected.
10. Regular Reporting
  Trustees should publish their Statement of      The Statement of Investment Principles
  Investment Principles and the results of        is included in the Pension Fund Annual
  their monitoring of advisers and                Report and Accounts, a copy of which is
  managers. They should send key                  sent to all employers within the Pension
  information from these annually to              Fund. It is published on the Pension
  members of these Funds, including an            Fund’s website
  explanation of why the Fund has chosen          www.hertsdirect.org/pensions
  to depart from any of these Principles.
                                                  Copies are provided to members of the
                                                  Pension Fund on request.




                                            151
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




                                152
 LOCAL GOVERNMENT PENSION FUND STATEMENT OF INVESTMENT PRINCIPLES

                                                                                Appendix C

                  Pension Fund Investment Managers
                         as at 31 March 2009

                                                               Performance
                           Value of
                                             Type of              Target
 Investment Manager       Portfolio at                                            Fee Type
                                             Mandate            (% above
                          31/03/2009
                                                               benchmark)
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
Alliance Bernstein Ltd.     230.5                                   2%
                                          Global Equities                          Related
Deutsche Asset                           Active, Specialist,
                            145.1                                   4%           As valorem
Management (UK) Ltd                       Global Equities
JP Morgan 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 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                                                                    Not
                            109.4           Unit Trusts        Not applicable
Unit 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




                                             153
             FIREFIGHTERS’ PENSION FUND ACCOUNTS

FUND ACCOUNT FOR YEAR ENDED 31 MARCH 2009

                                                             2008      2009
                                                      Note   £000      £000
Contributions receivable
From employer
- contributions in relation to pensionable pay         3     (3,618)   (3,631)
- ill health early retirements                         3        (38)      (38)
From members
- firefighters’ contributions                          3     (1,918)   (1,935)
Total - Contributions receivable                             (5,574)   (5,604)

Transfers in                                           4
- from other authorities                                        (18)      (71)
Total - Transfers in                                            (18)      (71)

Benefits payable
- pensions                                                   5,874     6,402
- commutations and lump sum retirement benefits              1,554     2,513
- lump sum death benefits                                      164         0
Total - Benefits payable                                     7,592     8,915

Payments to and on account of leavers
- refunds of contributions                                        1         0
- transfers out to other authorities                   4          0         4
Total - Payments to and on account of leavers                     1         4

Deficit for the year before top-up grant receivable
from central government – Communities and Local
Government                                                   2,001     3,244

Top-up grant payable by central government –
                                                       5
Communities and Local Government                             (2,001)   (3,244)

                                                                  0         0




                                          154
             FIREFIGHTERS’ PENSION FUND ACCOUNTS


NET ASSETS STATEMENT AS AT 31 MARCH 2009
                                                        £000     £000
Current assets
Top-up grant receivable from central government –
Communities and Local Government                         982     2,028

Current liabilities
Amount owing to the General Fund                         (727)   (1,691)
Unpaid pension benefits                             6    (255)     (337)
                                                         (982)   (2,028)

Net Assets                                                  0         0

Sarah Pickup

Chief Finance Officer




                                       155
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.




                                        156
 NOTES TO THE FIREFIGHTERS’ PENSION FUND ACCOUNTS

2.   Accounting Policies

     The accounts have been prepared in accordance with the 2008 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 2009.

     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




                                       157
 NOTES TO THE FIREFIGHTERS’ PENSION FUND ACCOUNTS

3.   Contributions Receivable (continued)

     Contributions received by the Fund are analysed below.

                                                    Employer               Employee

                                                 2008        2009         2008        2009

                                                 £000        £000         £000        £000

     1992 Firefighters’ Pension Scheme           3,490        3,408        1,819      1,763

     2006 Firefighters’ Pension Scheme             128          223           99          172

                                                 3,618        3,631        1,918      1,935

     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.



                                        158
 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

     Commutation factor rules were issued in May 2008 and are effective for all
     pensions commencing on 1 October 2007. New guidance was issued in
     September 2009, applicable to pensions commencing between 22 August
     2006 and 1 October 2007. The Fire Pension Fund has recognised the liability
     to meet additional pension payments together with associated interest
     following the application of the new factors. Top-up grant has been accrued to
     meet the cost of this liability.

                                                                  2008        2009
                                                                  £000        £000
     Pensions and lump sum benefits to Fire Pension
     Scheme pensioners                                              247          299

     Interest on backdated payments                                    8             38

                                                                    255          337

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 2009.




                                        159
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 2009 are
subject to audit by the District Auditor.




                                       160
                     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.




                                         161
                      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. This amount, as at
the end of the preceding financial year, is used to calculate the Minimum Revenue
Provision.

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.




                                           162
                      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.




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                     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.




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                      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.




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                      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.




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                      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.



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                      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’.




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                     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.




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                      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.




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                      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.




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                      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.




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