MPA - statement of accounts

7Statement of Responsibilities for the AccountsStatement of ResponsibilitiesThe Authority’s ResponsibilitiesThe Authority is required to:• make arrangements for the proper administration of its financial affairs and to ensure that one of its officershas the responsibility for the administration of those affairs. The Authority has determined the Treasurer as thatofficer;• manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; and• approve the Statement of Accounts.I certify that the Metropolitan Police Authority approved this Statement of Accounts at its meeting.Len DuvallChair of the Metropolitan Police AuthorityThe Treasurer’s ResponsibilitiesThe Treasurer is responsible for the preparation of the Authority’s Statement of Accounts in accordance withproper practice as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the UnitedKingdom.In preparing the accounts, the Treasurer has:• selected suitable accounting policies and applied them consistently;• made judgments and estimates that were reasonable and prudent;• complied with the Code of Practice.The Treasurer has also:• kept proper records which were up to date;• taken reasonable steps for the prevention and detection of fraud and other irregularities.I certify that the Statement of Accounts presents fairly the financial position of the Metropolitan Police Authorityat 31 March 2008 and its income and expenditure for the period then ended.Ken HuntTreasurerSeptember 2008

Governance Statement8AnnualAnnual Governance StatementPosition as at 31 March 2008 including plans for the financial year 2008-09.1. Scope of ResponsibilityThe Metropolitan Police Authority (MPA) is responsible for ensuring its business is conducted in accordance withthe law and proper standards, and that public money is safeguarded, properly accounted for, and usedeconomically, efficiently and effectively. The Authority also has a duty under the Local Government Act 1999 tomake arrangements to secure continuous improvement in which its functions are exercised, having regard to acombination of economy, efficiency and effectiveness.In discharging this overall responsibility, the Authority is also responsible for putting in place proper arrangementsfor the governance of its affairs and facilitating the exercise of its functions, which includes ensuring a soundsystem of internal control is maintained through the year and that arrangements are in place for the managementof risk. In exercising this responsibility, the Authority places reliance on the Commissioner to support thegovernance and risk management processes.The Authority has approved and adopted a code of corporate governance, which is consistent with the principlesof the CIPFA/SOLACE Framework: Delivering Good Governance in Local Government. A copy is on our websiteat www.mpa.gov.uk or can be obtained from the Treasury Team, Metropolitan Police Authority, 10 Dean FarrarStreet, London, SW1H 0NY. This statement explains how the Authority has complied with the code and alsomeets the requirements of regulation 4(2) of the Accounts and Audit Regulations 2003 as amended by theAccounts and Audit (Amendments) (England) Regulations 2006 in relation to the publication of a statement oninternal control.A more detailed Statement of Assurance for the MPS signed by the Commissioner supports the Authority’soverarching Governance Statement.2. The Purpose of the Governance FrameworkThe governance framework comprises the systems and processes, and culture and values by which the Authorityis directed and controlled and its activities through which it accounts to and engages with the community. Itenables the Authority to monitor the achievement of its strategic objectives and to consider whether theseobjectives have led to the delivery of appropriate, cost effective services, including achieving value for money. Thesystem of internal control is a significant part of that framework and is designed to manage risk to a reasonableand foreseeable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives; it can thereforeonly provide reasonable and not absolute assurance of effectiveness. The system of internal control is based onan ongoing process designed to identify and prioritise the risks to the achievement of the Authority’s policies, aimsand objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised,and to manage them effectively, efficiently and economically.The governance framework has been in place at the Authority for the year ended 31 March 2008 and up to thedate of approval of the statement of accounts.3. The Governance FrameworkThe key elements of the systems and processes that compromise the governance arrangements that have beenput in place for the Authority and MPS include:Identifying and communicating the Authority’s vision of its purpose and intendedoutcomes for citizens and service usersAuthority members are responsible for the vision, strategic direction and priorities for the Authority, and areadvised by the senior management team who also advise and support members in influencing and shaping thestrategic direction and priorities for the policing of London.The Authority agreed a corporate strategy and priorities in 2004. These were reviewed and restated in June2007. A further review is currently being undertaken to coincide with the Authority’s new administration in Summer2008.

9Within the MPS the corporate strategic assessment (CSA), existing corporate strategies, corporate and territorialpolicing target setting processes are all used in identifying policing priorities outlined in the joint Policing LondonBusiness Plan. Public consultation forms an important part of the process. The plan covers a three-year periodand provides details of the MPS’s corporate objectives, outlining what the MPS intend to do to deliver theseobjectives. The plan also describes how the delivery of these objectives will be monitored through the use ofCritical Performance Areas and targets. Full Authority agrees the plan on an annual basis.Annual Governance StatementIn addition, both the Full Authority and Co-ordination and Policing Committee meet regularly to consider thestrategic direction, plans and progress of the Authority and MPS. A range of member committees regularlyreviews specific policy areas. These formal meetings are held in public and papers are available on the Internet.Reviewing the Authority’s vision and its implications for governance arrangementsA review of the Authority’s Corporate Strategy and its vision is currently being undertaken to coincide with theAuthority’s new administration. Governance arrangements to support the current corporate strategy weredeveloped in 2007-08 and implications for governance arrangements will be revisited once the review of thecorporate strategy is complete. Following the review, suggested changes to the local code of corporategovernance (if required) will be presented to Corporate Governance Committee for approval.Measuring the quality of services for users, ensuring they are delivered in accordancewith the Authority’s objectives and that they represent the best use of resourcesThe MPS Performance Board monitors key performance across the MPS, including recommendations from HerMajesty’s Inspectorate of Constabulary (HMIC) baseline assessment and the Police Performance AssessmentFramework and regularly reports to the Authority’s Planning, Performance and Review Committee. This is thecommittee responsible for monitoring the performance of the service against the policing plan targets and otherperformance indicators set locally or by external organisations. In addition, the full Authority receives performanceinformation on a monthly basis with members of the Authority using the information provided to hold theCommissioner to account.Within the MPS the Crime Recording Oversight group monitors implementation of the National Standards forincident recording and the national crime recording standards action plan.The Authority regularly scrutinises budgets throughout the financial year to ensure they represent best use ofresources, both as part of the business planning process, with all business group’s budgets being subject tomembers’ scrutiny of their savings and growth proposals and as partof budget monitoring with the Authority’s Finance Committee receivingregular monitoring reports.As part of the Policing London Business Plan the MPS is required todemonstrate cashable efficiency savings of 9.3% over 3 years from2008-09 approximately. Achievement in meeting these savings ismonitored by HMIC. In addition, Finance Committee monitors progressthrough quarterly update reports.Defining and documenting the roles and responsibilitiesof the Authority and MPS and the members and seniorofficers within each, setting out clear delegationarrangements and protocols for effectivecommunication, and arrangements for challenging andscrutinising the services’ activityThe Corporate Strategy clearly defines the complex role played by theAuthority, and the roles and responsibilities of each of the Authority’sCommittees are clearly defined in their individual terms of reference.These include arrangements for challenging and scrutinising the MPS’sactivity.

10Annual Governance StatementThe Authority’s Standing Orders provide for thedelegation of Authority functions and decision making tocommittees, sub committees, panels and senior officersand includes a scheme of delegation that sets out thosedecisions that the Authority has delegated to its officersand the Commissioner.Developing, communicating andembedding codes of conduct, defining thestandards of behaviour for members,officers and staffMembers are bound by the Members’ Code of Conductthat form part of Standing Orders, and StandardsCommittee is responsible for ensuring that membersare aware of their responsibilities under the code andreceive guidance on ethical standards and behaviour. Anew programme of ethical training is due to take placein the autumn of 2008 following the appointment of newindependent members. The Authority’s StandardsCommittee have developed key standard indicators thatare used to monitor ethical and good practice standardsin the Authority.As part of the Authority’s improvement programme,values and behaviours supporting the corporatestrategy have been put in place. Leadership and trainingprogrammes are currently being developed that areintended to ensure that those who lead or managewithin the Authority are equipped with the necessary skills. This will include a module to reinforce the values andbehaviours model.The Good Conduct and Anti Fraud Policy forms part of standing orders and is applicable to both members andemployees of the Authority and the MPS and also all external persons that the Authority does business with.Within the MPS the Professional Standards Directorate are the lead for this area, with the MPS ProfessionalStandards Strategic Committee overseeing strategy and policy. The Committee is supported by a professionalstandards support programme. The Directorate undertakes a Strategic Intelligence Assessment on an annualbasis (which is reviewed after 6 months). This covers professional standards issues; ranging from unethical andunprofessional behaviours, civil actions, employment tribunals and criminality by staff and serious corruption.Reviewing and updating standing orders and supporting documentation, which clearlydefine how decisions are taken and the processes and controls required to manage risksThe Authority’s standing orders and supporting financial instructions are reviewed on an annual basis to ensurethey are fit for purpose. A review of standing orders was last completed in 2007 with the Full Authority approvingthe revisions in June 2007 and included a thorough review of the contract regulations.Following approval of the revised standing orders the MPS undertook a major review of the MPS scheme ofdelegation. The revised scheme was launched in October 2007 to coincide with the revised standing orderscoming into effect. There are procedure notes and manuals in place for all key systems. These are regularlyreviewed and revised where appropriate to ensure they are fit for purpose.The Authority and MPS have aligned their approach to risk management, which is documented in the joint riskmanagement strategy. The strategy sets out the objectives, responsibilities, processes and support mechanismsfor risk management and was endorsed by the Authority in July 2004 with revisions approved by CorporateGovernance Committee in December 2005. The Corporate Governance Committee is responsible for ensuringthat risk management processes and programmes operate effectively in accordance with the risk managementstrategy.

11Within the MPS the risk management policy, standard operating procedures and risk registers are all keycomponents for managing risk. In addition, a number of other things are taking place to help maintain focusincluding a continual training and engagement programme, the establishment of the Corporate Risk ReviewGroup and all papers to Management Board and Investment Board requiring business risks to be considered.Annual Governance StatementThe Authority has developed a risk profile that is reviewed regularly by the Senior Management Team, actionsfrom which are embedded in corporate and teamwork plans.Undertaking the core functions of an Audit CommitteeCorporate Governance Committee provides the core functions of an Audit Committee and in line with CIPFAguidance considers issues relating to internal control, risk management and financial reporting, including theannual scrutiny of the statement of accounts. In addition, the Committee provides a forum to discuss areas ofconcern raised either by internal or external audit as well as Health and Safety scrutiny.In addition to the Authority members that sit on Corporate Governance Committee there are also two co-optees.These members bring additional expertise in their areas of competence i.e. health and safety and audit.Ensuring compliance with relevant laws and regulations, internal policies and proceduresand that expenditure is lawfulThe Authority has a duty to ensure that it acts in accordance with the law and various regulations. Standingorders and supporting policies and procedures have been produced to ensure officers, within the Authority andMPS understand their responsibilities. These, and compliance with them, are reviewed regularly both internallyand by the appropriate committees, and all Committee reports must consider the legal implications of theirproposals. Significant pieces of work are underway within the Authority and the MPS to further develop CorporateGovernance Frameworks and supporting controls to minimise the risk of governance failures.In addition, professionally qualified staff occupy key roles throughout both the MPS and the Authority. Regularreports are made to the Authority on compliance with current initiatives and external requirements, with InternalAudit reporting on the effectiveness of the organisation’s systems of internal controls and makingrecommendations for improvement. The Authority will delegate Monitoring Officer responsibilities to the Solicitorto the Authority, however as this post is currently vacant the responsibility has temporarily been delegated to theHead of the Corporate Secretariat.Within the MPS, all reports to Management Board and Investment Board must consider legal implications andthe scheme of delegation requires legal advice to be sought from the Directorate of Legal Services before theMPS enters into any form of commitment. The Policy Co-Ordination Unit is responsible for overseeing all keyaspects of policy, quality assuring all policies and overseeing the monitoring of corporate policies. The purchaseto pay programme currently underway within the MPS will improve compliance with policies and proceduresthrough the development of appropriate systems.The Solicitor to the Authority considers legal implications where appropriate.Whistleblowing, receiving complaints from the public and handling citizen and otherredressWithin the Authority the Corporate Secretariat provide the central point for receiving complaints sent to theAuthority. The standards and complaints sub-committee considers complaints made about police officers. TheCommittee will consider whether or not there is a matter to be investigated, arranging for an investigation if a needis identified.Complaints made about the Authority or a member of staff are initially dealt with by the relevant line manager,being referred on to the corporate complaints officer and the Local Government Ombudsman if need be.The Customer Services Team within the MPS provide the central point of contact for receiving complaints sentto the MPS. Complaints are investigated monitored and where applicable, escalated. Professional Standards andComplaints Committee is responsible for monitoring the MPS’s complaints procedures and monitoring reportson complaints on a quarterly basis. In addition, the Authority has direct access to the MPS’s Tribune complaintsdatabase.

12Annual Governance StatementArrangements are in place for members of the public to report internal fraud in the MPS or the Authority via itswebsite.The MPS have a “Reporting Wrongdoing Policy” which sets out the whistleblowing arrangements for the MPS,including compliance with the 1998 Public Interest Disclosure Act. Internal Audit is one of the contact points forreporting wrongdoing.Identifying the development needs of members and senior officers in relation to theirstrategic roles, supported by appropriate trainingThe Authority embarked on an improvement programme in 2006, one of the aims of which was to improve thecapacity of the organisation through a development programme for members and officers. The organisation iscurrently undergoing a training needs analysis that will be used to identify the training needs of officers, and aprogramme of training will begin June 2008. In addition the personal development review process identifies,manages and monitors the work related and personal development objectives of all staff both within the Authorityand MPS.Within the MPS the Leadership Academy trains and develops new and existing managers through values basedleadership development programmes and interventions. There are also structured induction/probationprogrammes and mandatory training for new supervisors and line managers. The human resources scorecardreports are discussed at monthly human resources board meetings, and training issues at training managementboard.The Authority is about to enter a new administration and in addition will have a number of new independentmembers join in the autumn. As previously all new members will receive a full induction together with skills basedtraining such as dealing with the media and chairing meetings. Other training will be offered during their term ofoffice to address any identified needs. In 2007-08 risk management training was provided to all members ofCorporate Governance Committee to address such an identified need.Establishing clear channels of communication with all sections of the community andother stakeholders, ensuring accountability and encouraging open consultationThe Authority undertakes community consultation in the development of its work through general and specialistactivities. The second of the Authority’s corporate priorities is ‘to transform community engagement to helpLondoners’ secure more responsive policing’ and to achieve this the Authority has developed its CommunityEngagement Strategy “…to increase and enhance Londoners’ say in how their city is policed”. In addition, SaferNeighbourhood Panels and the associated communication strategy are seen as key in engaging with thecommunity.

13The practical implementation of the community engagement is supported by the work of a broad section of theAuthority, through monitoring and scrutiny work and by the specialist support of its Engagement and PartnershipsUnit - using a specialist funding programme to support the systematic development and programmes of workof Community and Police Engagement Groups (CPEGs) in the 32 London Boroughs - and by the work of theMPS and their partners.Annual Governance StatementThere are key consultation duties that require the Authority and the MPS to undertake community consultationand include:• Understanding Community Views on Policing - making arrangements, in consultation with the Commissioner,for obtaining the views of people in the area about matters concerning their policing.• Consultation on Police Objectives – ensuring that in the development of annual policing objectives, theAuthority has regard to issues raised in local consultative arrangements; that separate consultativearrangements are put in place by the Authority for each London Borough in consultation with its respectivelocal authority.• Crime and Disorder Partnerships (CDRP) – to ensure that local people’s views on crime and disorder reductionpriorities are included in the development of local crime and disorder Strategic Assessment and in the planningand implementing the crime and disorder partnership plan.• Local Strategic Partnerships, and Local Area Agreements (LAA) – police authorities have a legal duty to cooperatein determining LAA targets and have regard to those targets linking LAA targets, Policing Plan targetsand CDRPs.The Authority and MPS work in partnership to consult on all relevant plans, policies and proposals such as thePolicing London Business Plan and Budget and take the results of the consultation into account prior to makingdecisions.Incorporating good governance arrangements in respect of partnershipsAs part of the improvement programme the Authority is strengthening current governance arrangements toensure that the CPEGs are properly held to account for the funding they receive from the Authority. TheCommunity Engagement and Citizen Focus oversight group have reviewed all bids for funding for 2008-09 priorto a report seeking approval being submitted to the Co-ordination and Policing Committee. In addition, theEngagement and Partnership Unit has been restructured to ensure it is better resourced to monitor and evaluatefunding provided to the CPEGs.As a responsible authority of each borough’s crime and disorder reduction partnership (CDRP), the Authorityundertakes its duty through the attachment of a link officer to each of the 32 CDRPs for the purposes of ensuringthe Authority’s views are represented in the general development of their work and in the development of boroughbased community safety priorities and their incorporation into the work of local strategic partnerships and theirLocal Area Agreement developments. The link officers also ensure there is two-way communication between theCDRPs and the Authority. These officers work with Authority members, supporting them when they are attachedto Boroughs as link members. The Community Engagement and Citizen Focus Oversight Group’s terms ofreference require oversight and guidance of the CDRP work and additionally the officers also report back throughthe internal management structure of the Authority. It is noted that CDRPs are not commissioning bodies in theirown right but rather are constituted as strategic bodies who may make recommendations to the accountablebody (the local authority through its strategic partnership) for the support of a programme of activity.Within the MPS, there are accounting arrangements in place for partnerships that are specified in the financemanual. Budgets and expenditure are accounted for separately in the finance system and there are specificgrant terms and conditions that need to be complied with. There is also risk management guidance available forpartnerships.

14Annual Governance Statement4. Review of effectivenessThe Authority has responsibility for conducting, at least annually, a review of the effectiveness of the governanceframework, including• The system of internal audit• The system of internal controlA group of senior officers within the Authority have undertaken a review of effectiveness of the governanceframework using as its basis the Authority’s self assessment framework and taking into account the work ofinternal auditors and also managers within the Authority who have responsibility for the development andmaintenance of the governance environment. In addition, comments made by the external auditors and otherreview agencies and inspectorates have informed this review. The roles and processes applied in maintaining andreviewing the effectiveness of the governance framework are outlined below: -• The AuthorityThe Authority has overall responsibility for the discharge of all the powers and duties placed on it and has astatutory duty to ‘maintain an efficient and effective police force’. The Authority will from time to time receivereports on governance issues and in 2007-08 approved a new local code of corporate governance. Howeveras detailed in standing orders, the Authority has delegated responsibility for the review and maintenance ofthe governance framework to Corporate Governance Committee and therefore that Committee discussesthe majority of governance issues, with reports being referred to the Authority as and when felt appropriate.In 2007-08, the Authority considered a report detailing actions being taken to enhance the management ofthe corporate charge card systems and identify and deal with significant issues identified.• The Metropolitan Police ServiceThe Commissioner has responsibility for conducting a review of the effectiveness of the governanceframework within the MPS at least annually. This review is informed by the work of the Director of Resources,Director of Internal Audit and managers within the MPS who have responsibility for the development andmaintenance of the governance environment. In preparing the Annual Governance Statement for 2007-08the officers of the Authority have placed reliance on this review and the MPS’s resulting Annual AssuranceStatement.• Corporate Governance CommitteeThe Authority has delegated responsibility for reviewing and maintaining the effectiveness of the governanceframework to Corporate Governance Committee, with the Committee receiving regular reports on governanceissues at its quarterly meetings. During 2007-08 in addition to the regular update reports on governance andrisk issues that the Committee receives as a matter of course the Committee also received a number ofreports on specific governance issues including the local code of governance for the Authority and a numberof reports on the MPS corporate governance framework including steps being taken to strengthen existinggovernance arrangements within the MPS.As with the Statement of Internal Control, the Committee will from now on review and approve the AnnualGovernance Statement for inclusion in the Annual Statement of Accounts and receive quarterly update reportson progress made in addressing significant governance issues included in it.• The Standards CommitteeStandards Committee is responsible for promoting and maintaining high standards of conduct by membersof the Authority. As part of reviewing and maintaining the effectiveness of the governance framework theCommittee monitors key standard indicators on a regular basis. During 2007-08 in addition to the regularreports the Committee received on standard indicators the Committee also received a report on the newmodel code of conduct for members, a report on the local code of corporate governance and a reportconsidering the impact on the ethical standards regime brought about by the Local Government and PublicInvolvement in Health Bill.

15• Internal AuditIn maintaining and reviewing the governance framework, the Treasurer places reliance on the work undertakenby Internal Audit and in particular Internal Audit reports to the Chief Executive and the Corporate GovernanceCommittee and the Director of Internal Audit’s independent opinion on the adequacy and effectiveness of thesystem of internal control. For 2007-08 the Director of Internal Audit is of the opinion and, taking into accountall available evidence, the adequacy and effectiveness of the control environment in the MPS still falls belowan acceptable standard despite recent improvements. In reaching this opinion, he acknowledges that internalaudit have generally found adequate and effective operating procedures within the MPS. However, their testsand investigations during the year showed that in high-risk systems a number of controls were not beingoperated effectively.Annual Governance Statement• External AuditExternal Audit are an essential element in ensuring public accountability and stewardship of public resourcesand the corporate governance of the Authority’s services, with their annual letter particularly providingcomment on financial aspects of corporate governance, performance management and other reports. In2007-08 the annual letter highlighted amongst other things the need to continue developing andstrengthening risk management, maintain the drive to improve value for money, to further strengthen financialmanagement arrangements and to continue to review and protect the Authority’s financial position. The letteralso made reference to the value for money conclusion issued in September 2007. This concluded that theAuthority had proper arrangements in place to secure economy, efficiency and effectiveness in its use ofresources, except for putting in place arrangements to maintain a sound system of internal control.• Her Majesty’s Inspectorate of ConstabularyHMIC are charged with promoting the effectiveness and efficiency of policing, improving performance andsharing good practice nationally. HMIC delivered several, generally positive inspections during 2007-08.Performance management in their view was good but requires further development so that it sets out the keyperformance accountabilities, systems and products across the force, taking into account the ten principlesoutlined in ‘Managing Police Performance’. They also indicated that the allocation of resources across theorganisation could be improved. The inspection of public protection found a number of weaknesses,particularly in the consistency of services delivered at a local level. Neighbourhood policing was found to beexcellent. Action plans aimed at addressing the identified weaknesses are in place.In addition to the above other review/assurance mechanisms such as the Health and Safety Inspectorate are alsorelied upon.We have been advised on the implications of the result of the review of the effectiveness of the governanceframework by Corporate Governance Committee and a plan to address weaknesses and ensure continuousimprovement of the system is in place.5. Significant internal control issuesGovernance issue1 The adequacy andeffectiveness of internalcontrol continues to fallbelow acceptable standardsas evidenced by the Directorof Internal Audit’s opinion ofthe adequacy andeffectiveness of the MPScontrol environment. Themain areas of concern areas follows: -ActionWork is underway to improve the corporate governance framework andto develop resource management within the MPS through projects suchas purchase to pay. Implementation of these will ensure controls arestrengthened, compliant contracts are in place and examples of noncompliancereduced to a minimum.Progress in implementation of these will be monitored by the regularcorporate framework update reports presented to corporategovernance committee. A set of 60 corporate health indictors has alsobeen developed to assist the MPS and Authority in measuringcompliance.

16Annual Governance StatementGovernance issue• Non compliance withregulations and internalpolicies for example inrelation to AmericanExpress and contractregulations• “Post event” and lateprocurement activitiesresulting in the need forcontract extensions orsingle tender actions• continued weaknesses infinancial and businesscontrols in local commandunits2 The Authority’s Local Codeof Corporate Governancerecognises the need for theAuthority to have effectiveHR policies in place toenable staff to be effective intheir role. Whilst theimprovement programmehas recognised this as beinga key objective, progress todate has been limitedActionFinance Services and Territorial Policing are working with InternalAudit to ensure that those business systems that have been identifiedfor improvement are adequately supported in 2008-09. The newlyconfigured Quality Assurance Team in Finance Services will be takingthe lead on this piece of work. The protocol being developedcovering the work of internal audit and the response of the service toaudit and review activity will ensure that audit recommendations aredealt with more promptly.A consultant has been appointed to revise the Authority’s HR policies.The expectation is that these will be drafted and in place within a tighttimescale. Once approved these will allow a consistent approachthroughout the Authority to a wide number of HR policies.Drafting and approval of the policies will be monitored by SMT on aregular basis.3 Governance arrangementsfor partnership workingneed to be reviewed andstrengthened to recognisetheir increasing importance4 Internal Audit hasundertaken a systemsreview of the corporate riskassessment andmanagement process thathas identified a number ofareas where the existingarrangements and approachcould be improved. Themain areas identified are asfollows: -• Although a framework is inplace for the assessmentand management of risk, itis not effective insupporting the integrationand embedding of riskTo improve governance and accountability around partnershiparrangements the Authority will be endorsing a new frameworkdeveloped by the MPS. New improved arrangements will include apartnership strategy and implementation plan, which have recentlybeen approved by the MPS and a toolkit for partnerships which theMPS are currently developing. This toolkit will include guidance tomembers of staff engaged in partnership working.Implementation of these will ensure that best practice is sharedacross the MPS and partnerships are supported by appropriategovernance arrangements and comply with the Authority’s and MPSdecision making processes.Since the original drafting of the report, steps have been taken toaddress a number of the issues and an action plan has been agreedwith the MPS as part of the report. Key actions include: -• reviewing the approach to business risk management toincorporate a process based on integrating all risk activitiesacross the organisation• clearly defining the strategy for implementing risk managementbased on a framework that is integrated within the planning,performance and day to day management of the MPS• setting clear accountabilities across the MPS• embedding risk management into the business planning andperformance management framework• applying a generic risk management cycle based around policingplan objectives and targets• designing and implementing a structure that acknowledges theneed to simplify reports and escalate significant risk through thecommand chain in quick time

17Governance issuemanagement across theMPS.• An up to date riskmanagement policy is notin place and the currentfocus on business riskdoes not encourage amore integrated approachacross the organisation.• The structures in placesupporting the riskmanagement process in theMPS are not fully effectiveand need to be reviewed toensure that risk managementis fully understood, valuedand supported.• Controls are not in place toensure that risk assessmentis adequately and effectivelyintegrated into the businessplanning and performancemanagement process.ActionInternal Audit will report progress in implementing recommendationsto Corporate Governance Committee during 2008-09.Annual Governance StatementWe propose over the coming year to take steps to address the above matters to further enhance our governancearrangements. We are satisfied that these steps will address the need for improvements that were identified inour review of effectiveness and will monitor their implementation and operation as part of our next annual review.Len DuvallChair of the Metropolitan Police AuthorityCatherine CrawfordChief Executive to the Metropolitan Police AuthorityKen HuntTreasurer to the Metropolitan Police AuthorityOn behalf of the members and senior officers of the Metropolitan Police Authority and Metropolitan Police Service

18Statement of Accounting PoliciesStatement of Accounting Policies1. General PrinciplesThe Statement of Accounts summarises theAuthority’s transactions for the 2007-08 financial yearand its position at the year-end of 31 March 2008. Ithas been prepared in accordance with the Code ofPractice on Local Authority Accounting in the UnitedKingdom - A Statement of Recommended Practice(SORP), issued by the Chartered Institute of PublicFinance and Accountancy (CIPFA), and recognised bystatute as representing proper accounting practice.The accounting convention adopted is historic cost,modified by the revaluation of certain categories oftangible fixed assets.2. Accruals of Income and ExpenditureActivity is accounted for in the year that it takes place,not simply when cash payments are made or received.In particular:• Fees, charges and rents due are accounted for asincome at the date the Authority provides therelevant goods or services.• Where income and expenditure has beenrecognised (using estimates when appropriate) butcash has not been received or paid, a debtor orcreditor for the relevant year is recorded in theBalance Sheet.• Where it is doubtful that debts will be settled, thebalance of debtors is written down and a chargemade to revenue for the income that might not becollected.the liability for which already exists at the date of thebalance sheet, insofar as they will not be met byexternal insurance. The figure shown on the balancesheet does not include any adjustment to discount thetotal liability to present day terms in line with FRS 12because the claims involved are deemed to beestimates based on present day values.General Provision including tax liabilities –• To make provision for the reimbursement to officersof tax deducted in respect of Compensatory Grant.The grant to which this tax relates is paid to allofficers who are in receipt of rent allowance andjoined before 1994.• To make provision for a repayment of tax andNational Insurance.• Rent on properties• OtherBad Debts – to make provision for general and specificdebts where there is significant doubt that paymentwill be received. The provision for bad debts isdeducted from current debtors in the balance sheet.4. ReservesThe Authority maintains reserves that are eitherearmarked for specific purposes or held to meetunforeseen or emergency expenditure. Earmarkedreserves will be established from time to time to meetspecific expected revenue or capital costs asdetermined by the Authority.3. ProvisionsProvisions are made where an event has taken placethat gives the Authority an obligation that probablyrequires settlement by a transfer of economic benefits,but where the timing of the transfer is uncertain.Provisions are charged to the appropriate servicerevenue account in the year the Authority becomesaware of the obligation, based on the best estimate ofthe likely settlement. When payments are eventuallymade, they are charged to the provision set up in theBalance Sheet. Estimated settlements are reviewed atthe end of each financial year – where it becomesmore likely than not that a transfer of economicbenefits will not now be required, the provision isreversed and credited back to the service account.Third Party Liabilities – to make provision for realisticestimates of the future settlement of third party claims,The Authority also maintains a general reserve to meetunforeseen or emergency expenditure which cannotbe contained within the approved budget and hasagreed that this reserve be established at a minimumof 2% of net budgeted expenditure, as and whenconditions permit, provided that there are adequateaccounting provisions and earmarked reserves,reasonable insurance arrangements, a well fundedbudget and effective budgetary control.Reserves are created by appropriating amounts in theStatement of Movement on the General FundBalance. When expenditure to be financed from areserve is incurred, it is charged to the appropriateservice revenue account in that year against the NetCost of Services in the Income and ExpenditureAccount. The reserve is then appropriated back intothe General Fund Balance Statement so that there isno net charge for the expenditure. Certain reserves are

19kept to manage the accounting processes for tangiblefixed assets and retirement benefits that do notrepresent usable resources for the Authority.The SORP requires the maintenance of a RevaluationReserve and a Capital Adjustment Account within theBalance Sheet. These accounts do not form part ofthe cash resources available to the Authority.5. Government Grants and Contributions(Revenue)Whether paid on account, by instalments or in arrears,Government Grants and third party contributions anddonations are recognised as income at the date thatthe Authority satisfies the conditions of entitlement tothe grant/contribution, there is reasonable assurancethat the monies will be received, and the expenditurefor which the grant is given has been incurred.Revenue grants are matched in service revenueaccounts with the service expenditure to which theyrelate. Grants to cover general expenditure (e.g.Revenue Support Grant) are credited to the Incomeand Expenditure Account after Net OperatingExpenditure.6. Retirement BenefitsThe Authority operates two pension schemes forpolice officers and a single scheme for police staff.Police Officers - The Police Pension Scheme (PPS) isa contributory occupational pension scheme(contracted out from the State Earnings RelatedPension Scheme), governed by the Police PensionRegulations 1987 (as amended) and relatedregulations that are made under the Police PensionsAct 1976. The 2006 Police Pension Scheme (NPPS),which started on 1 April 2006, is a contributoryoccupational pension scheme (contracted out fromthe State Earnings Related Pension Scheme),governed by the Police Pensions Act 1976 (asamended by the Police Pensions Regulations 2006).Officers make contributions of 11% of pensionablepay. A Pension Fund was set up on 1 April 2006 toadminister both schemes.The NPPS and PPS are defined benefit schemes paidfrom revenue (without managed pension assets).Accrued net pension liabilities have been assessed onan actuarial basis in accordance with FRS 17(Accounting for Pension Scheme Liabilities), the netliability and a pensions reserve of both PensionSchemes have been recognised on the BalanceSheet, as have entries in the Income and Expenditureaccount for movements in the asset/liability relating tothe defined benefit scheme. Transfers into and out ofthe Scheme representing joining and leaving policeofficers, are recorded on a cash basis in the PensionFund, as a result of the time taken to finalise the sumsinvolved.Following SORP requirements, FRS 17 has been fullyrecognised in the MPA accounts. Scheme liabilities asshown on the Balance Sheet are calculated bydetermining future liabilities for pension payments andapplying a discount rate to reduce them to presentday values. SORP specifies the use of a discount rateequal to the yield on an index of long-dated AA-ratedcorporate bonds as at 31 March 2008. The pensionliabilities in these accounts have been calculatedaccordingly at a discount rate of 6.9% (5.4% in 2006-07).Police Staff – The Authority joined the Principal CivilService Pension Scheme (PCSPS) in 2002-03. ThePCSPS is an unfunded multi-employer defined benefitscheme but employees may opt for a definedcontribution alternative. The Scheme trustees areunable to identify its share of the underlying assets andliabilities. In accordance with FRS 17 the PCSPS isdeemed to be multi-employer scheme and theappropriate level of disclosure has been followed.7. Overheads and Support ServicesThe costs of overheads and support services arecharged to those that benefit from the supply orservice in accordance with the costing principles ofthe CIPFA Best Value Code of Practice 2007(BVACOP). The total absorption costing principle isused – the full cost of overheads and support servicesare shared between users in proportion to the benefitsreceived, with the exception of:• Corporate and Democratic Core – costs relating tothe Authority’s status as a multi-functionaldemocratic organisation.• Non-Distributed Costs – the cost of discretionarybenefits awarded to employees retiring early andany depreciation and impairment losses chargeableto non-operational properties.These two cost categories are defined in BVACOPand accounted for as separate headings in the Incomeand Expenditure Account, as part of the Net Cost ofServices.8. Intangible Fixed AssetsExpenditure on assets that do not have physicalsubstance but are identifiable and controlled by theStatement of Accounting Policies

20Statement of Accounting PoliciesAuthority (e.g. software licences) are capitalised whenit will bring benefits to the MPA for more than onefinancial year. The balance is amortised to the relevantservice revenue account over the economic life of theinvestment to reflect the pattern of consumption ofbenefits. The de-minimus level policy is to capitalizeall expenditure over £5,000 on an individual assetbasis, and projects (or grouped assets) with a totalvalue in excess of £5,000: expenditure on partnershipassets is capitalised over £1,000.9. Tangible Fixed AssetsTangible fixed assets are assets that have physicalsubstance and are held for use in the provision ofservices or for administrative purposes on a continuingbasis. The de-minimus level policy is to capitalize allexpenditure over £5,000 on an individual asset basis,and projects (or grouped assets) with a total value inexcess of £5,000: expenditure on partnership assetsis capitalised over £1,000.Impairment: The values of each category of assetsand material individual assets that are not beingdepreciated are reviewed at the end of each financialyear for evidence of reductions in value. Whereimpairment is identified as part of this review, or as aresult of a valuation exercise, are accounted for by:• Where attributable to the clear consumption ofeconomic benefits – the loss is charged to therelevant service account.• Otherwise – written off against any revaluation gainsattributable to the relevant asset in the RevaluationReserve, with any excess charged to the relevantservice revenue account.Where an impairment loss is charged to the Incomeand Expenditure Account but there were accumulatedrevaluation gains in the Revaluation Reserve for thatasset, an amount up to the value of the loss istransferred from the Revaluation Reserve to theCapital Adjustment Account.Recognition: Expenditure on the acquisition,creation or enhancement of fixed assets is capitalisedon an accruals basis, provided that it yields benefitsto the Authority and the services it provides is for morethan one financial year. Expenditure that secures, butdoes not extend the previously assessed standardsof performance of an asset (e.g. repairs andmaintenance) is charged to revenue as they areincurred.Measurement: Assets are initially measured atcost, comprising all expenditure that is directlyattributable to bringing the asset into workingcondition for its intended use. Assets are carried in theBalance Sheet using the following measurementbases:• Specialised operational properties – depreciatedreplacement cost• Non-specialised operational properties – existinguse value• Dwellings and Surplus assets – market value• Vehicles, plant and equipment – lower of netcurrent replacement cost or net realisable value inexisting useAssets included in the Balance Sheet at current valueare revalued where there have been material changesin the value, as a minimum revaluations are carried outevery five years. Increases in valuations are matchedby credits to the Revaluation Reserve to recogniseunrealised gains.Disposals: When an asset is disposed of ordecommissioned, the value of the asset in the BalanceSheet is written off to the Income and ExpenditureAccount (the receipts are credited) as part of the gainor loss on disposal. Any revaluation gains in theRevaluation Reserve are transferred to the CapitalAdjustment Account. Proceeds in excess of £10,000are categorised as capital receipts, which are creditedto the Usable Capital Receipts Reserve, and can thenonly be used for new capital investment or set aside toreduce the MPA’s underlying need to borrow. Receiptsare appropriated to the Reserve from the Statementof Movement on the General Fund Balance.Grants and Contributions: Where grants andcontributions are received that are identifiable to fixedassets with a finite useful life, the amounts are creditedto the Government Grants Deferred Account. Thebalance is then written down to revenue to offsetdepreciation charges made for the related assets inthe relevant service account, in line with thedepreciation policy applied to them.Depreciation: This is provided for all assets with adeterminable finite life, by allocating the value of theasset in the Balance Sheet over the periods expectedto benefit from their use, on a straight-line basis. Theprincipal asset categories and their useful economiclives are:

21Land and BuildingsCategoryLandBuildings - Operational- ResidentialImprovements to leasehold propertiesYearsIndefinite, not depreciated.Useful economic life asassessed by valuers on anindividual property basis(10 – 50 years).50 years.Shorter of expected life andlease period.Statement of Accounting PoliciesVehicles, Plant andEquipmentInformation Technology andCommunications EquipmentSoftware DevelopmentPolicing Support Vehicles includingPatrol VehiclesAir Support Unit – Helicopters3 - 73 - 53 - 510Intangible Assets Software licences. 3Community AssetsNon OperationalAssetsPictures, Museum Contents andVintage Vehicles.Assets Under ConstructionSurplus Assets Awaiting DisposalDepreciation is only applicablewhen appropriate.Not depreciated until completed.Depreciation is charged not toServices but to Non DistributedCosts.10. Charges to Revenue for Fixed AssetsService revenue accounts are debited with thefollowing amounts, to record the real cost of holdingfixed assets during the year:• Depreciation attributable to the assets used by therelevant service;• Impairment losses attributable to the clearconsumption of economic benefits on tangible fixedassets used by the service and other losses wherethere are no accumulated gains in the RevaluationReserve against which they can be written off;• Amortisation of intangible fixed assets attributableto the service.The MPA is required to make an annual provision fromrevenue to contribute towards the reduction in itsoverall borrowing requirement. The above charges arereplaced by the revenue provision in the Statement ofMovement on the General Fund Balance, by way ofan adjusting transaction with the Capital AdjustmentAccount for the difference between the two.11. Deferred ChargesDeferred charges represent expenditure that has beencapitalised under statutory provisions but does notresult in the creation of tangible assets. Deferredcharges incurred during the year have been written offimmediately and financed from capital resources.12. LeasesFinance LeasesThe MPA accounts for leases as finance leases whensubstantially all the risks and rewards relating to theleased property transfer to the Authority.All ground rents are considered to be immaterial andcharged in full to the Income and ExpenditureAccount. No obligations for these finance leases arerecognised on the Balance Sheet.Operating LeasesLeases that do not meet the definition of financeleases are accounted for as operating leases. TheMPA has a very large number of operating leases,mainly in respect of property, but also include vehicles.Rentals payable are charged to the relevant servicerevenue account on a straight-line basis over the termof the lease.

22Statement of Accounting Policies13. VATIncome and expenditure excludes any amountsrelated to VAT, as all VAT collected is payable to HMRevenue & Customs and all VAT paid is recoveredfrom it.14. Financial LiabilitiesFinancial liabilities are initially measured at fair valueand carried at their amortised cost. Annual charges tothe Income and Expenditure Account for interestpayable are based on the carrying amount of theliability, multiplied by the effective rate of interest forthe instrument. For most of the borrowings that theMPA has, this means that the amount presented in theBalance Sheet is the outstanding principal repayable,interest is charged to the Income and ExpenditureAccount which is the amount payable for the yearcontained within the loan agreement.15. Financial AssetsFinancial assets are classified into two types:• Loans and receivables – assets that have fixed ordeterminable payments but are not quoted in anactive market.• Available for sale assets – assets that have aquoted market price and/or do not have fixed ordeterminable payments.Loans and receivables are initially measured at fairvalue and carried at their amortised cost. Annualcredits to the Income and Expenditure Account forinterest receivable are based on the carrying amountof the asset multiplied by the effective rate of interestfor the instrument. For most of the loans that the MPAhas made, this means that the amount presented inthe Balance Sheet is the outstanding principalreceivable, interest is credited to the Income andExpenditure Account with the amount receivable forthe year contained within the loan agreement.16. Contingent Assets and LiabilitiesThe MPA recognises material contingent assets andliabilities, which arise from past events, whoseexistence can only be confirmed by the occurrence ofone or more uncertain future events, which are notwholly within the MPA’s control. Details of the extent ofthe potential liabilities are described in the notes to theBalance Sheet.17. Stock and Assets Under ConstructionStock is shown in the Balance Sheet at the lower ofcost or net realisable value of the separate groups ofstock. Assets under construction are recorded in theBalance Sheet at cost.18. Private Finance InitiativePFI contracts are agreements to receive services,where the responsibility for making available the fixedassets needed to provide the service passes to thePFI contractor. Payments made by the MPA undercontract are charged to revenue to reflect the value ofservices received in each financial year. The MPA hasentered into two long term contractual agreementsunder PFI whereby the contractor is responsible forthe design, construction, finance and maintenance offour new police stations in South-East London and anew public order and firearms training centre. SuchPFI schemes meet the conditions set out in FRS 5Substance of Transactions and professional advicehas been provided which indicates there is no impacton the Balance Sheet of the Authority (other thanmentioned above). Details of the ongoing revenuecommitments are described on page 31.The loans made by the MPA are short-terminvestments consisting of fixed term deposits. TheMPA has no assets available for sale.

23Income and Expenditure AccountFinancial StatementsThis summary is presented in Best Value Accounting Code of Practice format as prescribed by CIPFA forthe year ended 31 March 2008. For a subjective analysis see Note 1.Year ending 31 Year ending 31 March 2008March 2007£’000 Notes £’000 £’000 £’000Service Expenditure Analysis Expenditure Income3,185,053 Policing Services 1, 2, 3 3,601,877 (319,162) 3,282,71514,884 Corporate and Democratic Core 14,5243,218 Non Distributed Cost – Pension 5 3,1713,203,155 Net Expenditure 4, 5, 6, 3,300,4107 & 83,452 Interest payable and similar charges 9 2,420727,200 Police Pensions interest cost 5 791,900(14,617) Interest and Investment Income (17,063)(3,536) Net gains on disposal of fixed assets 10 (1,616)712,499 775,6413,915,654 Net Operating Expenditure 4,076,051This was financed by:(1,424,427) S102 Greater London Authority 11 (1,505,988)Act 1999 Grant(1,499,820) Other Grants 12 (1,621,173)(2,924,247) (3,127,161)991,407 Deficit Transferred to General Fund 948,890(See Statement of Movement on the General Fund Balance on page 24)

24Financial StatementsStatement of Movement on the General FundBalanceThe Statement of Movements on the General Fund Balances shows how the balance of resources aregenerated and consumed for the year ended 31 March 2008.Year endingYear ending31 March 2007 31 March 2008£’000 Notes £’000991,407 Deficit/(Surplus) for the year on the Income 948,890and Expenditure Account(991,663) Net additional amount required by statute and non-statutory 17 (1,031,274)proper practices to be debited or credited to the General FundBalance for the year(256) Decrease/(Increase) in movement to the General Fund (82,384)(9,804) Net transfers to/(from) earmarked reserves N 74,502(28,840) General Fund Balance brought forward (38,900)(38,900) General Fund Balance carried forward (46,782)Statement of Total Recognised Gains and LossesThe Statement of Total Recognised Gains and Losses shows the total movement in the Authority’s net worthfor the year ended 31 March 2008.Year endingYear ending31 March 2007 31 March 2008£’000 Notes £’000991,407 Deficit/(Surplus) on the Income and 948,890Expenditure for the year(23,853) Surplus on revaluation of fixed assets A (66,191)(1,095,714) Actuarial gain on Police Officer Pension Scheme liabilities Q (3,106,927)(28,014) Other gains and losses (5,020)(156,174) Total recognised gains and losses since last year (2,229,248)

25Balance SheetThe Balance Sheet shows the financial position of the Metropolitan Police Authority as at 31 March 2008.Financial Statements31 March 2007 Notes 31 March 2008£’000 £’000 £’000Fixed Assets6,973 Intangible Fixed Assets A,B 8,245Tangible Fixed AssetsA1,586,234 Land and Buildings (L&B) 1,591,611192,512 Vehicles, Plant and Equipment (VPE) 228,2041,121 Community Assets A 1,121Non Operational Assets75,609 Assets under Construction 73,30814,563 Surplus Assets held for Disposal 2,0051,877,012 Total Fixed Assets 1,904,49417,949 Long Term Debtors D 17,0111,894,961 Total Long Term Assets 1,921,505Current Assets6,605 Stock C 6,580153,980 Debtors D 173,759139,000 Short Term Investments E 233,0001,571 Cash and Bank Balances 0301,156 413,3392,196,117 Total Assets 2,334,844Current Liabilities(337,609) Creditors F (357,767)(15,000) Loans Repayable in 12 months H (5,000)0 Cash and Bank Balances (4,847)(352,609) (367,614)1,843,508 Total Assets less Current Liabilities 1,967,230Long Term Liabilities(36,431) Provisions G (41,437)(42,337) Long Term Borrowing H (37,337)(92,459) Government Grant Deferred P (115,711)0 Unapplied Capital Grants P (11,316)(14,574,400) Police Officer Pension Liability L (12,434,300)(12,902,119) Total Assets less Liabilities (10,672,871)Financed by:Accounting Reserves0 Revaluation Reserve P 53,9101,443,667 Capital Adjustment Account P 1,380,2121,443,667 1,434,122Pension Reserve(14,574,400) Police Officer Pension Reserve Q (12,434,300)Usable Reserves71,256 Usable Capital Receipts Reserve O 81,7074,533 C3i/Airwave Capital Reserve O 0372 Earmarked Capital Reserves O 5,00018,256 Capital Grant Reserve O 24,01938,900 General Revenue Reserve N 46,78295,297 Earmarked Revenue Reserves N 169,799228,614 327,307(12,902,119) Total net worth (10,672,871)

26Financial StatementsCash FlowThe consolidated statement summarises the inflows and outflows of cash arising from transactions withthird parties for revenue and capital purposes for the year ended 31 March 2008.Year endingYear ending31 March 2007 31 March 2008£’000 Notes £’000Outflow2,100,088 Pay to officers and staff 2,199,2111,097,939 Other operating expenditure 1,089,127Inflows(15,693) Rent (19,751)(153,879) Sale of goods and services (156,888)(2,917,876) Revenue grants (see below) (3,080,105)(127,804) Other receipts (144,703)(17,225) Cash flow from Revenue Activities S (113,109)Returns on Investments and Servicing of Finance3,452 Interest paid 2,420(14,617) Interest received (15,039)(11,165) Net cash inflow from Investment Activity (12,619)Capital Activities158,472 Purchase of fixed assets 146,486(37,994) Sale of fixed assets (64,466)(74,463) Capital grants received (58,874)46,015 Net cash outflow from capital activities 23,146Management of Liquid Resources(33,500) Purchases/(sales) of short term investments 94,000Financing Activities13,500 Repayment of loans 15,000(2,375) (Increase)/Decrease in cash T 6,418An analysis of grants can be found in the notes to the revenue account.

27Notes to the Financial Statements of theMetropolitan Police AuthorityNotes to the Financial StatementsThis set of notes represents the consolidated notes for the statement of accounts for 2007-08 as presented inthe preceding pages 23 – 26.Notes to the Income and Expenditure Account1. Net ExpenditureOperating revenue income and expenditure for the year to 31 March 2008 is presented in subjective analysisformat below:2007-08 2006-07£’000 £’000ExpenditureEmployee CostsPolice Officer Salaries 1,458,335 1,412,453Police Staff Wages and Salaries 523,805 469,674Police Officer & Police Staff Allowances and Training Expenses 216,521 217,511Net Police Officer Pensions 500,075 520,084Net Police Staff Pensions 107,603 98,616Premises-related 205,822 194,418Transport-related 64,473 63,148Supplies and Services 438,524 437,797Capital Charges 104,388 96,846Total Gross Expenditure 3,619,546 3,510,547IncomeFees and Charges (155,005) (150,512)Other Income (164,131) (156,880)Net Expenditure 3,300,410 3,203,1552. The Service Expenditure Analysis (SEA)The category of service expenditure has beenproduced on a basis consistent with Activity BasedCosting methodology, which is used to produce areturn to the Home Office.3. National Police ServicesThe Policing Services includes an amount for NationalPolice Services of £590.3 million, which incorporatesthe costs of national, international, and capital cityfunctions, inclusive of an overhead allocation on aconsistent basis with other headings in the statement.The relevant grant received from central governmentfor these activities amounted to £397.5 million.The functions included are:• Support of policing activities that cross national andinternational borders;• Activities undertaken outside the MetropolitanPolice District;• Those functions undertaken nationally on behalf ofother Forces;• Support to other national government agencies;• Royal and Diplomatic Protection;• Activities associated with London being the seat ofNational Government and the primary residence ofthe Royal Family;• Responding to London being the national focus forcelebration, demonstration, national history,tourism and culture, entertainment and financialactivities.

28Notes to the Financial Statements4. Employment CostsThe Authority has disclosed below the number ofemployees whose taxable remuneration, excludingpension contributions, was £50,000 or more, in bandsof £10,000:5. Pension CostsAs part of the terms and conditions of employmentthe Authority offers retirement benefits for PoliceOfficers and Police Staff. A full description of bothschemes is at notes L and M to the Balance Sheet.Remuneration Number of Employeesband £ 2007-08 2006-0750,000-59,999 6,375 5,88960,000-69,999 1,866 1,59170,000-79,999 394 42480,000-89,999 126 11190,000-99,999 40 38100,000-109,999 21 14110,000-119,999 14 11120,000-129,999 5 1130,000-139,999 5 8140,000-149,999 3 1150,000-159,999 2 1160,000-169,999 2 3170,000-179,999 2 4180,000-189,999 1 1190,000-199,999 1 0200,000-209,999 1 1210,000-219,999 1 0220,000-229,999 0 0230,000-239,999 0 0240,000-249,999 0 1250,000-259,999 1 0Note: banding is based on all taxable remuneration,excluding pension costs, paid in the year rather thanthe annual salary. Taxable remuneration includesovertime and may also include back dated payawards, which relate to previous years but wereactually paid in the years in question.Employee NumbersActual full-time equivalent employee numbers arecategorised as follows:Number of Employees2007-08 2006-07Police Officers 31,398 31,074Police Staff 14,070 13,980PCSO 4,226 3,682Traffic Wardens 294 310Non distributed costs represents the additionalexpenditure borne by the Authority in respect of policeofficers’ past service costs (as required by FRS 17)and police staff early retirement cost.Police OfficersIn the year to 31 March 2008, the net costs ofpensions and other benefits amounted to £500.1million (£499.4 million notional pension costs and £0.7million other ancillary costs), representing 45.9% ofpensionable pay.A separate pension scheme, the 2006 Police OfficerPension Scheme (NPPS) has been created for policeofficers. This operates in parallel to the present PolicePensions Scheme (PPS). The accounts for both NPPSand PPS can be viewed on pages 47 and 48.In accordance with FRS 17 requirements, a reserveshowing the total liability of the Police Officer PensionFund is included in the MPA Balance Sheet. The MPApays employer contributions at a rate of 24.6% ofpensionable salary into the Fund. The charge in theIncome and Expenditure Account that the Authority isrequired to make is based on the actuarially calculatedcost.The following transactions have been made in theIncome and Expenditure Account during the year:2007-08£’000Current service cost 499,400Past service costs 700Interest cost 791,900Movement in pensions reserve (966,827)Contributions to pension fund 325,173• Current and past service costs have beenproduced by actuaries (see note L to the balancesheet).• Interest on pension liability represents the expectedincrease during the year in the present value of thescheme liabilities because the benefits are one yearcloser to settlement.

29• Pension reserve movement represents a netincrease in the pensions reserve as analysed in theStatement of Total Recognised Gains and Losses.• Contributions to pension fund is the actual amountpaid by the Authority on behalf of Officers duringthe year to the Pension Fund.Note L to the Balance Sheet contains details of theassumptions made in estimating the figures includedin this note. The notes to the Statement of TotalRecognised Gains and Losses on page 24 shows thereasons for the increase in the pension reserve.Police StaffIn the year to 31 March 2008, the net costs ofpensions (£104.7 million) and other benefits(£2.9million) amounted to £107.6 million, representing20.0% of pensionable pay.Using information provided by PCSPS, the pensionliabilities of the Scheme are described in detail in noteM to the balance sheet.6. LeasesLand and BuildingsFollowing a review of two property leases with originallease terms of 99 years, the MPA now recognises thatboth property leases are finance, not operating leases.The properties are Charing Cross Police Station andChalk Farm Estate and lease expiry dates are April2077 and March 2034 respectively. In previous years,the ground rents payable for these properties wereincorrectly classified as operating leases, but are nowdisclosed as finance leases on page 30. Bothproperties have always been capitalised in previousyears based on the valuations provided by the externalsurveyor for property held on long leases. The groundrents are considered immaterial, and as a result, theMPA has never recognised a long-term liability on theBalance Sheet for the obligation to pay ground rents.As a result of this change, no further accountingentries have been made; it is only a change indisclosure.office at the community centre at LoughboroughJunction in exchange for incurring refurbishment costsof £0.549 million to bring the property up to a properstandard of accommodation. Only a peppercornground rent is payable.The following values for land and buildings of theabove three assets held under finance leases by theMPA, are accounted for as part of Tangible FixedAssets.Land and Building£’000Value as at 1 April 2007 57,389Revaluations 1,000Impairment (250)Depreciation (900)Value as at 31 March 2008 57,239There are also a number of long-term ground leasesfor land, on which the MPA has constructed policestations or blocks of residential flats. No long-termliability for the obligation relating to these groundleases is recognised on the Balance Sheet as theamount is not material, and the lease payments arenot split between capital and interest elements. Theland (and building) values are accounted for asTangible Fixed Assets at current value.In the year to 31 March 2008, the Authority spent£43.6 million on operating leases for property (£26.7million in 2006-07) and £1.6 million on operatingleases for vehicles (£0.3 million in 2006-07). In thesame year the Authority received £17.3 million inrespect of operating leases where it is the lessor(£12.4 million in 2006-07).The Authority spent £0.02 million on finance leases forland and buildings (£0.02 million in 2006-07). Inpractice this expenditure is for ground leases only.Rental income was received for residential flats, whichwere constructed by the MPA on the leased land, andare considered to be not material.Notes to the Financial StatementsThe MPA recently entered into a lease agreement fora third property in June 2005 for a period of 125 years.This agreement enabled the MPA to establish a policeOutstanding commitments in respect of all leases at31 March 2008 are due to expire as follows:

30Notes to the Financial Statements31 March 2008 31 March 2007Future Periods Property Vehicles Property Vehicles£’000 £’000 £’000 £’000Finance LeasesIn year 1 0 0 0 0Between 2 and 5 years 0 0 0 0More than 5 years 20 0 20 0Operating LeasesIn year 1 2,000 312 2,080 0Between 2 and 5 years 5,284 1,579 3,234 1,053More than 5 years 36,978 0 36,343 07. Members’ Allowances and ExpensesA total of £281,214 was paid in 2007-08 (2006-07 £265,122) in respect of Members’ allowances and expenses.8. PublicityUnder the requirements of Section 5(1) of the Local Government Act 1986, the Authority is required to identifyexpenditure on publicity. This amounted to £5.5 million in the period and is analysed below:Staff recruitmentadvertising2007-08 2006-07£’000 £’0003,237 5,583Other publicity 2,259 3,051Total 5,496 8,634Other publicity costs relate to publications advertisingthe MPA and the MPS in local press, attendingcommunity events and monitoring press reports of theMPA and MPS.9. Interest payableThis represents the interest cost of loans taken out with the Public Works Loans Board. In 2007-08 this amountedto £2.4 million (2006-07 £3.5 million).10. Gains and Losses on disposalThe following gains and losses were made on disposal of fixed assets during the year:2007-08 2006-07Property VPE Total Property VPE Total£’000 £’000 £’000 £’000 £’000 £’000Gains 0 1,618 1,618 3,776 16 3,792Losses 0 (2) (2) (251) (5) (256)Net 0 1,616 1,616 3,525 11 3,536The gains and losses on disposal of assets, as disclosed above, excludes all minor proceeds below £10,000 fromthe sale of vehicles that have reached the end of their useful economic life.

3111. S102 Greater London Authority Act1999 GrantThe Greater London Authority precepts LondonBoroughs for Council Tax and receives RevenueSupport Grant (RSG) and Non Domestic Rates (NDR)directly from central government. The GLA providesfunding to the Authority in the form of instalmentsthrough a Section 102 Grant.There has been a change in the formula grant systemthat significantly changes the balance between RSGand NNDR.The central funding allocated and the police preceptfor 2007-08 were as follows:2007-08 2006-07£’000 £’000Revenue Support 123,100 684,827GrantNon-Domestic 733,888 132,200RatesPolice Precept 649,000 607,400Total 1,505,988 1,424,42712. Other GrantsOther revenue grants received during 2007-08 were:2007-08 2006-07£’000 £’000Police Revenue 1,026,712 1,005,194Grant (includingamendment grants)Crime Fighting Fund 72,980 72,981Counter-Terrorism/Special Operations 372,657 328,000Airwave Revenue 1,920 0PCSO &NeighborhoodPolicing Funding 97,608 54,117Loan Charges 2,125 1,216Local AuthorityPartnership Receipts 38,102 32,930Olympic andParalympic Games2012 Funding 4,012 0London SafetyCamera Partnership 5,057 4,989Other 0 393Total 1,621,173 1,499,82013. Private Finance Initiative (PFI)The Authority has entered into two long-termcontractual agreements under the PFI whereby thecontractor is responsible for design, construction,finance and maintenance of four new police stations insouth-east London and a new public order andfirearms training centre. The agreements impose 25-year commitments on the Authority fromoccupation/use of the new facilities. The unitarycharge for 2007-08 is £15.7 million (£15.3 million in2006-07) for the police stations and £8.4 million (£8.2million in 2006-07) for the training centre. Half of theunitary charge will be subject to annual adjustmentsin respect of inflation (RPI) and the remainder adjustedby a fixed percentage. The total unitary charge for theremainder of the lease agreements is £684.8 million.There are no assets included in the balance sheetrelated to these two agreements.An amount of £0.32 million is included in revenueappropriations, which represents the funding of anadditional charge to the unitary payment made to thecontractor. In accordance with FRS 5 the chargerepresents a notional increase in the unitary charge,which would have arisen, had the Authority not madea lump sum payment to the contractor in advance ofservices provided (see note D to the Balance Sheet,for net written down value of payment).14. Related Party TransactionsFRS 8 (Related Party Disclosures) requires theAuthority to disclose all material related partytransactions. During the year, transactions with relatedparties not disclosed elsewhere in these accountsamount to:2007-08 2006-07£’000 £’000ExpenditureForensic Science 35,383 40,584ServicesIncome (net)Immigration Services 4,039 2,908Special Service 58,442 59,141AgreementsNational Identification 5,019 6,106ServiceTransport for London 68,173 66,031City of London Police 325 213National Crime Squad 743 1,362National Criminal 23 178Intelligence ServiceSOCA 303 980ACPO TAM 18,113 16,148Seconded Officers 10,774 11,821Notes to the Financial Statements

32Notes to the Financial StatementsThe Authority is required to disclose any materialtransactions with related parties -bodies or individualsthat have the potential to control or influence theAuthority or to be controlled or influenced by theAuthority. Disclosure of these transactions allowsreaders to assess the extent to which the Authoritymight have been constrained in its ability to operateindependently or might have secured the ability to limitanother party’s ability to bargain freely with theAuthority. This disclosure note has been prepared onthe basis of specific declarations obtained in April2008, in respect of related party transactions.The Authority is one of the functional bodies of theGreater London Authority (GLA) group – the otherbodies being London Fire Brigade, Transport forLondon and the London Development Agency. TheAuthority is made up of 23 members, twelve of whoare appointed by the Mayor from the Greater LondonAssembly. In addition to appointing members to theAuthority, the Mayor sets the budget of the MPA,subject to the Home Secretary’s reserve power to seta minimum budget for the MPA. The LondonAssembly approves the Mayor’s budget for the policeand is able to summon members of the MPA toanswer questions at Assembly meetings. Moniesreceived from the GLA in the form of grants andprecepts are disclosed in note 11.Lord Toby Harris, MPA member and Paul Stephenson,the Deputy Commissioner, are both trustees of theSafer London Foundation. The Authority donated£400,000 to the Foundation in 2007-08.15. Auditors RemunerationThe audit fee payable to the Audit Commission duringthe year totalled £509,850 (2006-07 £537,800).16. Local Area AgreementsThere are 32 Local Area Agreements (LAA’s)representing all the London Boroughs. The amountsrelating to the LAA’s are included within the LocalAuthority Partnership Receipts on page 31. Not all ofthe amounts receipted can be attributed to LAA’s asother amounts are provided from sources not relatedto LAA’s.Notes to the Statement of Movementon the General Fund Balance17. General Fund BalanceThe general fund shows the level of resourcesavailable to the Authority after setting aside earmarkedreserves, to fund future unknown costs. The statementincludes all the items that are required by statute andnon-statutory proper practices to be adjusted againstthe deficit brought forward from the Income andExpenditure Account. After making these accountingadjustments the surplus for the year of £82.384million (2006-07 surplus of £0.256 million) was addedto the general fund after allocating part to earmarkedreserves. A schedule of these items is shown below:-Notes 2007-08 2006-07£’000 £’000Amounts to be excluded from theGeneral FundDepreciation and Impairment adjustment A (104,388) (96,846)Gains on disposals of assets 10 1,616 3,536Contributions to/(from) Pensions Reserve 5 (966,827) (926,127)Contribution to PFI unitary charge 13 (320) (320)Amounts previously not included inIncome and ExpenditureMinimum revenue provision adjustment 18 13,635 12,129Revenue Contributions to Capital A 25,010 15,965Total (1,031,274) (991,663)The accounting adjustments comprise amountsincluded in the Income and Expenditure Accountbut required by statute to be excluded whendetermining the movement on the general fundbalance for the year and amounts not included inthe Income and Expenditure Account butrequired to be included by statute whendetermining the movement on the general fundbalance for the year.

3318. Minimum Revenue ProvisionThe Local Authorities (Capital Finance and Accounting)(England) Regulations 2003, as amended by the LocalAuthorities (Capital Finance and Accounting) (England)(Amendment) Regulations 2008, require the Authorityto charge to the statement of movement in generalfund balance a prudent level of minimum revenueprovision (MRP) for the redemption of debt. Optionsare provided on how this prudent provision could becalculated. For 2007-08 the Authority has exercisedthe choice to apply the regulatory method for bothGovernment supported borrowing and self-financedborrowing. The minimum revenue provision thereforecontinues to be calculated as a percentage (presently4%) of the Authority’s capital financing requirement(CFR).The MRP amount for 2007-08 was £13.6million (2006-07 £12.1 million) with a correspondingcharge to the Capital Adjustment Account.Notes to the Financial StatementsNotes to the Balance SheetA. Fixed AssetsIntangible Tangible Fixed Assets Non Operational Comm- TotalFixed Assets unityAssetsAssetsLand and Land and Vehicles Assets SurplusBuildings Buildings Plant and under Assets– - Equipment Constru-Operational Residentialction£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000Gross book value 21,514 1,387,965 235,750 403,272 75,609 14,563 1,121 2,139,794as at 1 April 2007Transfers – 596 14,366 0 40,590 (55,552) 0 0 0(Reclassification)Surplus Assets 0 (2,100) 287 0 0 1,813 0 0Additions 3,608 23,191 361 67,379 53,251 0 0 147,790Additions (Financed 0 0 0 488 0 0 0 488by DGGA)Exp not increasing 0 0 0 (110) 0 0 0 ( 110)valueDisposals 0 (1,180) (43,735) (16,190) 0 (17,519) 0 (78,624)Deferred Charges 0 (2,548) 0 0 0 0 0 (2,548)Impairment 0 (8,508) (369) (1,295) 0 (65) 0 (10,237)Redundant 0 (28,141) (3,415) 0 0 0 0 (31,556)depreciationRevaluations 0 55,160 7,773 0 0 3,258 0 66,191Capital adjustment 0 92 0 125 0 0 0 217Gross book value 25,718 1,438,297 196,652 494,259 73,308 2,050 1,121 2,231,405at 31 March 2008Accumulated (14,541) (34,066) (3,415) (210,760) 0 0 0 (262,782)depreciation as at1 April 2007Depreciation for the (2,932) (35,427) (1,986) (71,110) 0 (45) 0 (111,500)yearRedundant 0 28,141 3,415 0 0 0 0 31,556depreciationDepreciation on 0 0 0 14,820 0 0 0 14,820assets soldDepreciation on 0 0 0 995 0 0 0 995impaired assetsTotal Depreciation (17,473) (41,352) (1,986) (266,055) 0 (45) 0 (326,911)Net book value at 8,245 1,396,945 194,666 228,204 73,308 2,005 1,121 1,904,49431 March 2008Net book value at 6,973 1,353,899 232,335 192,512 75,609 14,563 1,121 1,877,01231 March 2007The Authority’s property portfolio which is located throughout London’s 32 boroughs includes 139 police stations(2006-07 - 140), 715 residential properties (2006-07 - 931) and 373 other operational buildings (2006-07 - 395)including Safer Neighbourhood bases, patrol bases, headquarter buildings and offices.

34Notes to the Financial StatementsThe Authority also operates 4,764 patrol cars,motorbikes and other vehicles (2006-07 4,909), 25boats including inflatables and dinghies (2006-07 –28), a radio network with 30,351 radios (2006-0730,352), 51,343 airwave terminals (2006-07- 41,000)and 3 helicopters (2006-07 - 3).Basis of ValuationA revaluation has been performed on the entireoperational property portfolio as at 1 April 2007, with20% being physically inspected and 80% beingreviewed on a desktop basis. This approach is part ofa rolling programme of revaluations that is conductedby G. L. Hearn Ltd and Drivers Jonas (both membersof the Royal Institute of Chartered Surveyors) ensuringthat all operational land and buildings within the estateare subject to inspection and revaluation at least onceevery five years.The residential portfolio has been subject to arevaluation exercise and a value shown in theaccounts as at 31 March 2008 in line with accountingpolicies. In addition the asset lives of residentialproperties have been extended to 50 years (from 40years) on the advice of the external valuer. This hashad the effect of reducing the depreciation charge by£0.4 million for 2007-08.Buildings under construction are valued on the basisof the associated land value plus the cumulativeconstruction costs incurred at 31 March 2008.Financing Account (CFA). The credit balances of£1,381 million and £63 million on the FARA and CFArespectively at 31 March 2007 have been written off tothe Capital Adjustment Account with a resulting creditbalance of £1,444 million. The Revaluation Reservehas been included in the Balance Sheet with a zeroopening balance. The closing balance on theRevaluation Reserve of £53.9 million at 31 March 2008only shows revaluation gains accumulated since as at1 April 2007.Redundant DepreciationThe redundant depreciation figure totalling £31.6million in the above analysis of movements are equaland opposite amounts arising from the new valuationfor property, which gives a more accurate figure for thevalue of land and buildings. The balances foraccumulated depreciation for these buildings becomeredundant and should not be carried forward in theBalance Sheet, but are written out.Impairment ReviewFinal Impairment reviews were performed at the yearendon Land and Buildings and on Vehicles, Plant andEquipment. No further impairment of capitalexpenditure was identified beyond that which wasidentified during the year either as a result ofthe property revaluation process or as a result ofaccident damage and obsolescence.Short life assets such as vehicles, plant, furniture andequipment are included at depreciated historic cost.Community assets have been included in the balancesheet following valuations placed on them by internaland external valuers. These consist of pictures,vehicles, furniture and museum pieces, which are atpresent in long-term storage, which have been giftedover many years.During the year, transfers of £55.6 million were madefor those assets under construction, which werecompleted and became operating assets.Revaluation ReserveThe Balance Sheet figures for 31 March 2007 havebeen adjusted from those included in the Statement ofAccounts for 2006-07 to accommodate theimplementation of the Revaluation Reserve (seeaccounting policies, page 18). The RevaluationReserve and Capital Adjustment Account replace theFixed Asset Restatement Account (FARA) and CapitalCapital ExpenditureItems of capital expenditure for the year were:2007-08 2006-07£’000 £’000Intangible Assets 3,608 6,229Tangible AssetsLand and Buildings 23,213 44,734Plant and Equipment 184 245Information 51,962 53,214TechnologyVehicles 15,233 19,566Assets under 53,251 28,282constructionSub total 147,451 152,270Deferred Charge 339 2,209Total 147,790 154,479

35Sources of Capital Finance2007-08 2006-07£’000 £’000Capital paymentsto be financed 147,790 154,479Supported Borrowing 19,635 19,635UnsupportedBorrowing 7,464 29,858Other contributions 4,540 9,953Capital grants 37,126 66,236Capital receipts 54,015 12,832Revenue contribution 25,010 15,965Total financing 147,790 154,479All Prudential Code indicators are approved by the fullAuthority prior to the start of the financial year asrequired by statute and are monitored on a monthlybasis throughout the financial year.Future Capital Expenditure CommitmentsCapital expenditure to be incurred in later yearsincludes the following:2008-09 2007-08and later and lateryears years£’000 £’000IT various projects 25,874 8,345Building works 18,177 22,149Vehicles, Plant & 10,494 8,000EquipmentApplication of the Prudential CodeIn carrying out its duties under Part 1 of the LocalGovernment Act 2003 the Authority is required to haveregard to the Prudential Code. The Code wasdeveloped by CIPFA as a professional code of practiceto support local authorities in taking decisions forcapital investment in fixed assets. The key objectivesof the Prudential Code are to ensure, within a clearframework, that the capital investment plans of localauthorities are affordable, prudent and sustainable.The Authorised Limit for 2007-08 was £159.3 million.The Operational Boundary was £138.5 million.B. Intangible Fixed AssetsIntangible Assets consist of software licences andagreements, which have, on average, a usefuleconomic life of three years. During 2007-08 £3.61million was incurred on software licences.C. StocksAtAt31 March 31 March2008 2007£’000 £’000Uniforms 4,098 3,899Transport & Air 1,312 1,151Support UnitHeating Oil 779 1,222Catering goods 391 333Balance 6,580 6,605D. Amounts owed to the AuthorityAtAt31 March 31 March2008 2007£’000 £’000Long Term Debtors:HMCS/NPSrepayment of MPSdebt 10,511 11,129PFI Contribution 6,400 6,720Trade Debtor 100 100Balance 17,011 17,949Other Debtors:Staff Advances 2,475 2,273GovernmentDepartments 62,409 36,694General Debtors 4,100 6,482Other LocalAuthorities 18,514 17,381HMCS/NPS 2,740 6,127Payments in Advanceand Accrued income 72,667 70,400Customs and Excise 11,754 15,629174,659 154,986Less Bad DebtProvision 900 1,006Balance 173,759 153,980HMCS – Her Majesty’s Court Services, NPS - NationalProbation ServiceE. Short Term InvestmentsThis amount represents short term and overnightdeposits with banks and building societies. It includes£40 million of ‘cash on call’, which is not defined as aninvestment for FRS 1 (Cash Flow Statements)purposes.Notes to the Financial Statements

36Notes to the Financial StatementsF. Amounts owed by the Authority fallingdue within one yearAtAt31 March 31 March2008 2007£’000 £’000Receipts in advance (22,599) (31,234)GovernmentDepartments (72,058) (63,085)General Creditors (258,621) (234,253)HMCS/NPS (4,489) (9,037)Balance (357,767) (337,609)G. ProvisionsAtAt31 March 31 March2008 2007£’000 £’000Third party liabilities 34,444 33,606General Provisionsincluding tax liabilities 6,718 2,550Building Dilapidations 275 275Balance 41,437 36,431H. Long Term BorrowingThese are loans from the Public Works Loans Board(PWLB), raised to support capital expenditure on MPAassets, and are analysed below:AtAt31 March 31 March2008 2007£’000 £’000PWLB loans 37,337 42,337Analysis of loans bymaturity:Between 1 and 4,337 5,0002 yearsBetween 2 and 0 4,3375 yearsBetween 5 and 4,000 2,00010 yearsOver 10 years 29,000 31,000I. ReservesThe reserves of the Authority have been presented toshow a clear distinction between accounting reservesthat cannot be used to support expenditure andusable reserves.The Authority seeks to make provision for realisticestimates of the future settlement of known liabilities inrespect of legal compensation and accident claimsthat are not covered by insurance. Accordingly aprovision has been made at 31 March 2008 for £34.4million (2006-07 £33.6 million). Over the course of theyear agreed claims have been paid from this accountamounting to £13.5 million.General Provision including tax liabilities –• Provision for the reimbursement to officers of taxdeducted in respect of Compensatory Grant - £2.0million• Provision for a repayment of tax and NationalInsurance - £2.0 million• Rent on properties - £0.2 million• Other - £2.5 millionDetails of movements on these reserves are shown inthe notes on pages 40-43.J. Contingent LiabilitiesThe Authority will complete a lease on a property onthe Freshwharf Estate once it has been constructed,pursuant to a development agreement that has beenentered into. The term of the lease is 20 years, at anannual rent in the region of £0.45 million.

37K. Third Parties’ MoniesThe Authority administers funds on behalf of thirdparties. Money held by the funds is not owned by theAuthority and is not included in the Balance Sheet. Theprincipal funds are described below. Authority staffadminister the Metropolitan Police Authority PoliceProperty Act Fund and the Metropolitan PoliceDetained Monies Account on behalf of the Authorityand the remaining funds on behalf of their respectivegoverning bodies. Details of the principal funds,together with their income and expenditure for theirrespective financial years which ended during thetwelve months to 31 March 2008 and values at theirfinancial year-end dates are given below. Not all of thefigures have been audited:M.P.A.D.M.A. - Metropolitan Police AuthorityDetained Monies AccountAs stated above, until 31 March 2004 the MPAPPAFwas used to hold for the time being money that hadbeen detained from persons suspected of criminalactivity, such money being retained pending a decisionas to its disposal. Since 1 April 2004 detained moneyhas been paid into the MPADMA. Staff in FinanceServices are currently undertaking an exercise toidentify how much money paid into the MPAPPAF overthe years represents MPAPPAF money and how muchis detained money. Until that exercise is complete anda transfer has been made from one account to theother a proportion of the money in the MPADMA willrepresent MPAPPAF money.Notes to the Financial StatementsFund Name Income Expen- Assets Liabilditureities£’000 £’000 £’000 £’000M.P.A.P.P.A.F. 1,458 1,422 1,631 0M.P.A.D.M.A. 1,398 646 6,904 0M.P.C.B.F. 1,645 1,374 1,264 111M.C.P.R.F. 285 225 1,235 882M.P.W.W.F. 58 325 1,014 0M.P.C.H.F. 996 1,047 468 87M.P.C.F. 46 71 466 1M.P.S.F. 896 967 519 62M.P.C.S.W.F 38 20 241 1M.P.A.A. 584 511 2,620 25M.P.S.C 5,032 4,960 4,566 807COMETS 45 36 99 3Other Funds 3,898 3,845 1,517 711TOTAL 16,379 15,449 22,544 2,690M.P.A.P.P.A.F. - Metropolitan Police AuthorityPolice Property Act FundRegulations under the Police (Property) Act 1897 andits subsequent amending legislation permit police toretain the proceeds from the disposal of property thatcomes into police possession in connection with acriminal charge (or suspicion of a criminal offencebeing committed) where the owner has not beenascertained or no court order has been made. Thelegislation stipulates that the income is to be used tomeet the cost of the storage and sale of the propertywith any residual funds being used for charitablepurposes in accordance with directions of the force’spolice authority. The MPAPPAF is used for thispurpose. Until 31 March 2004 it was also used to holdfor the time being money that had been detained frompersons suspected of criminal activity. Since 1 April2004 such money has been paid into the MetropolitanPolice Detained Monies Account (see below).M.P.C.B.F. - Metropolitan Police CombinedBenevolent FundThis registered charity receives monthly contributionsfrom police officers and donations and bequests frommembers of the public. This income is distributed ona proportionate basis (decided annually by the fund’sTrustees who were previously The Board ofManagement prior to 25 October 2006) between thefollowing four registered charities:-• Metropolitan and City Police Relief Fund• Metropolitan Police Widows’ and Widowers’ Fund• Metropolitan Police Convalescent Home Fund• Metropolitan and City Police Orphans FundThe first three mentioned charities are administered byAuthority staff and are described below. The OrphansFund is a joint charity with the City of London Policeand is not administered by Authority staff.M.C.P.R.F. – Metropolitan and City Police ReliefFundThis registered charity may give financial assistanceby way of grant or interest-free loan to serving policeofficers considered to be deserving of assistance onaccount of sickness (whether of themselves or theirfamilies) or of injuries received in the discharge of theirduties or for other reasons. Former police officers arealso eligible for assistance (by grant only). (Despite theimplication in the title, City of London Police officersdo not contribute to the fund and do not benefit fromit.)

38Notes to the Financial StatementsM.P.W.W.F. - Metropolitan Police Widows’ andWidowers’ FundThis registered charity gives financial assistance byway of grants to deserving cases among widows andwidowers of former police officers. Grant towards thecost of a widow’s or widower’s funeral may also bemade if the deceased’s relatives are unable to afford it.The fund may also make grants and loans to servingofficers and grants to former officers.M.P.C.H.F. - Metropolitan Police ConvalescentHome FundThis registered charity channels police officers’contributions to The Police Rehabilitation Centre atGoring-on-Thames which provides residentialconvalescence facilities to Metropolitan Police officersand to officers from other police forces to helppromote a speedy recovery from illness or injury.M.P.C.F. - Metropolitan Police Commissioner’sFundThis registered charity was established to helppromote the efficiency and well-being of MetropolitanPolice officers and staff. Although this may beachieved in a variety of ways as defined in thegoverning document, assistance is invariably in theform of a monetary grant or loan to members of theMetropolitan Police or to Metropolitan Policeorganisations.M.P.S.F. - Metropolitan Police Sports FundThis registered charity receives monthly contributionsfrom police officers for sporting, athletic and otherrecreational activities. The major part of the income isdistributed to the four principal sports clubs (seebelow). Financial assistance is also given to five areasports and social clubs.M.P.A.A. - Metropolitan Police AthleticAssociationThe MPAA is the umbrella organisation for 50 sportingsections of the Metropolitan Police. Each section isindividually run but can receive assistance from theAssociation for its activities.M.P.S.C. – Metropolitan Police Sports ClubsThere are the four principal Metropolitan Police sportsclubs located at Bushey, Chigwell, Hayes and ImberCourt.M.P.C.S.W.F. – Metropolitan Police Civil StaffWelfare FundThis registered charity provides financial assistance tomembers and past members of police staff, theirfamilies and dependants who are in need.Metropolitan Police Sports and SocialAssociation COMETSThe aim of the COMETS is the promotion of sports,social and recreational activities for MPA staff, servingor retired. Whilst the MPAA is primarily for policeofficers, the COMETS is mainly for the benefit of policestaff.Other FundsA further 86 other funds administered by Authority staffhave submitted returns containing financial detailsrelating to their activities. These funds are mainly localsports and social clubs or savings clubs and servicewideorganisations or associations. The figures areonly in respect of 53 of these clubs etc. whose incomeor expenditure in their last financial year exceeded£10,000 or whose funds at their respective year-enddates exceeded £10,000.Operational ResponsibilitiesThe Authority also holds monies on behalf of thirdparties arising from its operational responsibilities. Thecash amounts, not included in the balance sheet, areas follows:£’000Proceeds of Crime Act monies 22,010Drug Trafficking Offences Act monies 2,222Prisoners’ property and lost cash 733Other 6,423Total 31,388In addition, the Authority also holds non cash assetswhich are not valued in the above table.The prisoners’ property and lost cash relates to thetotal amount held in property stores at 31 March 2008and has therefore been stated separately from thePolice Property Act Fund value.

39L. Police Pensions LiabilitiesAs part of the terms and conditions of employment ofits police officers, the Authority offers retirementbenefits. Although these will not actually be payableuntil employees retire, the Authority has a commitmentto make the payments that need to be disclosed atthe time that employees earn their future entitlement.There are two pension schemes, the Police PensionScheme and the New Police Pension Scheme forpolice officers. These are both unfunded definedbenefit schemes, meaning that there are noinvestment assets built up to meet the pensionsliabilities, and cash has to be generated from revenueto meet the actual pensions payments as they fall due.Police officers make contributions to both schemes;in 2007-08 this amounted to £117.0 million. In 2007-08, employer pension contributions have beencharged to the revenue account on the basis ofpensions payable in the year and totalled to £296.5million. Both schemes are accounted for in thestatement of accounts of the Police Pensions Fund onpage 47.The Authority had the following overall liabilities forpensions at 31 March 2008 that have been includedin the Balance Sheet:31 March 31 March2008 2007Estimated liabilities £ million £ millionin the schemeOfficer members 6,038 8,235Deferred Pensioners 323 339Pensioners 6,073 6,000Total value of 12,434 14,574scheme liabilitiesLiabilities have been assessed on an actuarial basisusing the projected unit method, an estimate of thepensions that will be payable in future yearsdependent on assumptions about mortality rates,salary levels, etc. Hymans Robertson, an independentfirm of actuaries, has assessed the scheme liabilitiesas at 31 March 2008.The main assumptions used in their calculations are:2007-08 2006-07Rate of inflation 3.6% 3.2%Rate of increase of 5.1% 4.7%salary (note i)Rate of increase in 3.6% 3.2%pensionsRate for discounting 6.9% 5.4%scheme liabilities(note ii)• Future salary increases are assumed to be withinan acceptable range.• The current discount rate is determined byreference to the market yield on high qualitycorporate bonds.The movement in the scheme liabilities for the year to31 March 2008 can be analysed as follows:2007-08 2006-07£ million £ million £ millionDeficit in scheme atbeginning of the year (14,574) (14,744)Movement in year:Current service costincluding HomeOffice contribution. (499) (518)Employercontributions 325 321Transfers from / toother authorities 0 (1)Past service cost(injury benefits) (1) (1)Interest cost onpension liabilities. (791) (727)Actuarial gain /(loss) 3,106 1,096Scheme liabilitiesat 31 March (12,434) (14,574)The actuarial gain can be further analysed as follows:2007-08 2006-07£ million £ million £ millionOther experience 204 106gains/(losses) onliabilitiesActuarial gain / (loss) 3,106 1,096Present value of 12,434 14,574liabilitiesM. Police Staff Pensions LiabilitiesThe PCSPS is an unfunded multi-employer definedbenefit scheme (see Statement of Accounting Policieson page 29 for details of membership) but theMetropolitan Police Service is unable to identify itsshare of the underlying assets and liabilities. A fullactuarial valuation as carried out as at 31 March 2008.Details can be found in the resource accounts of theCabinet Office, who administer the fund.For 2007-08, employers’ contributions of £104.7million were payable to the PCSPS at one of four ratesin the range 17.1 to 26.5 percent of pensionable pay,based on salary bands. The contribution rates reflectbenefits as they are accrued, not when the costs areactually incurred, and reflect past experience of theScheme.Notes to the Financial Statements

40Notes to the Financial StatementsN. Usable Revenue ReservesBalance as at Transfer Transfer Balance as at1 April 2007 To from 31 March 2008£’000 £’000 £’000 £’000Earmarked Revenue ReservesAccommodation strategy/Propertyrelated costsDilapidations (6,000) (3,000) 23 (8,977)Property Related Costs (15,228) (9,389) 0 (24,617)PFI Contract (486) 0 30 (456)Total of Accommodation strategy/ (21,714) (12,389) 53 (34,050)Property related costsOperational costsAirwave (1,100) 0 1,100 0Communications Project (20,027) 0 11,371 (8,656)Insurance Indemnity Fund (340) 0 0 (340)ICT contract issues 0 (1,895) 0 (1,895)Kickz (1,500) (1,500) 0 (3,000)Laming Enquiry (49) 0 34 (15)Legal Costs (1,491) 0 36 (1,455)Motor Insurance (365) (937) 0 (1,302)Operational Costs (10,925) (37,295) 990 (47,230)POCA (8,877) (3,794) 5,952 (6,719)Protective Clothing (354) (354) 354 (354)Publicity (200) 0 0 (200)Pump Priming Fund (2,000) 0 0 (2,000)Systems (392) 0 200 (192)Vehicle Recovery Services (3,200) 0 0 (3,200)Total of Operational costs (50,820) (45,775) 20,037 (76,558)Revenue support to capital rephasingCapital Programme Rephasing 0 (9,700) 0 (9,700)Total of Revenue support to capital 0 (9,700) 0 (9,700)rephasingBudget PressuresBudget Pressures (2,233) (7,500) 188 (9,545)Cost Recovery Fund (10) 0 10 0Total of Budget Pressures (2,243) (7,500) 198 (9,545)Major change programmesModernisation Programmes 0 (16,097) 0 (16,097)Total of Major change programmes 0 (16,097) 0 (16,097)MPA initiativesMPA (386) (396) 26 (756)Total of MPA initiatives (386) (396) 26 (756)Total Earmarked Revenue Reserves ( 75,163) (91,857) 20,314 (146,706)excl. Emergencies Contingency FundEmergencies Contingency FundEmergencies Contingency Fund (20,134) (2,959) 0 (23,093)Total Emergencies Contingency Fund (20,134) (2,959) 0 (23,093)Total Earmarked Revenue Reserves inc. ( 95,297) (94,816) 20,314 (169,799)Emergencies Contingency FundNet Movement in Earmarked Revenue (74,502)ReservesGeneral Revenue Reserve (38,900) (7,882) 0 (46,782)Net Movement in Revenue Reserves (82,384)

41Accommodation strategy/Propertyrelated costsDilapidationsThe reserve will be used to fund future expenditure onproperties, the leases for which have been terminatedand result in additional costs.Property Related CostsThis account reflects the requirement to provide forthe cost of various building related projects.PFI ContractsTo reserve part of the costs of a PFI propertydevelopment.Operational costsAirwaveReserve for connection fee for the provision of Airwaveat Heathrow Terminal 5. Now completed.Communications ProjectMonies set aside to provide for the development of anintegrated communications system for the MPS.Insurance Indemnity ReserveTo provide for the cost of a Personal InsuranceIndemnity Reserve for police officers and staff.ICT Contract issuesThis represents a reserve to cover delays in thedelivery of a standard operating environment as part ofthe ICT contract.KickzA reserve to provide for crime reduction projects,jointly funded with the Football Association, to berolled out over all London Boroughs.Laming EnquiryTo cover the likely cost of the impact of the Lamingreport into the murder of Victoria Climbie and itsrecommendations.Legal CostsTo provide for the cost of potential law suits.Motor InsuranceTo provide for MPA approved insurance strategy,which allows for savings on motor insurancepremiums.Operational CostsThe reserve provides for a number of operationalactivities that have been planned in 2007-08. Theexpectation is that the majority of the reserve will beused in 2008-09.POCAProceeds Of Crime Act - A reserve funded fromproceeds of crime to provide for certain categories ofoperational activities.Protective ClothingTo provide for the cost of protective clothing for officersincluding research and development costs.PublicityReserve to cover the implementation of the MPAScrutiny report regarding media handling.Pump Priming FundThis reserve has been set up to encouraging new,more efficient and/or effective ways of doing businesswhere there is a need for ‘priming’ monies. Anyproposals would need a clear business case andmember approval for any allocations from the reserve.SystemsThe reserve contributes to the cost of developingfinancial systems.Vehicle Recovery ServicesReserve allocated to fund operations targetingclamping of uninsured vehicles.Revenue support to capital rephasingCapital Programme RephasingMonies set aside as Revenue Support to agreedCapital Programme Re-phasing in the future years.Budget PressuresBudget PressuresThis reserve was to meet specific unbudgetedpressures.Cost Recovery FundThis is a reserve to provide for external assistance tosupport cost recovery.Emergencies Contingency FundAn earmarked reserve available to assist in exceptionalcircumstances to support operational requirements,which will normally not have been budgeted for.Major change programmesModernisation ProgrammeThis reserve is set aside to fund various modernisationprogrammes, including Transforming HumanResources.MPA initiativesMPAThe reserve will be used to support projects that theMetropolitan Police Authority expects to undertake in2008-09.General Revenue ReserveThis reserve was established to provide cover foremergencies and contingencies. The reserve, togetherwith the emergencies / contingencies fund is to bemaintained at 2% of the net revenue budget.Notes to the Financial Statements

42Notes to the Financial StatementsO. Usable Capital Receipts/ReservesUsable Capital Receipts/ReservesUsable C3i/Airwave Earmarked Capital TotalCapital Capital Capital GrantReceipts Reserves Reserve Reserve£’000 £’000 £’000 £’000 £’000Balance as at 1 April 2007 (71,256) (4,533) ( 372) (18,256) (94,417)Grants applied in year 0 0 (14,081) (44,759) (58,840)Proceeds of disposals (64,466) 0 0 0 (64,466)Unapplied Capital Grant 0 0 4,913 6,403 11,316Financing of Fixed Assets 54,015 4,533 4,540 32,593 95,681Balance as at 31 March 2008 (81,707) 0 (5,000) (24,019) (110,726)Net movement for year (16,309)Usable Capital ReceiptsThe use of capital receipts is regulated by Part 1 of theLocal Government Act 2003 and the Local Authorities(Capital Finance and Accounting) (England)Regulations 2003. The receipts can only be used tofinance capital expenditure or repay debt.C3i/Airwave Capital ReserveThis reserve has now been fully utilised.Earmarked Capital ReserveThis reserve deals with funds assigned for specificareas of expenditure that remain unspent at the end ofthe financial year. The monies are required to becarried forward through the reserve to be reassignedto named projects in future financial years. TheEarmarked Capital Reserve presently operates forMPA estate improvements, and third partycontributions to property refurbishment.P. Accounting Reserves and Long Term LiabilityCapital Grant ReserveCapital grant is credited to this account and used asappropriate to fund capital expenditure.Accounting Reserves Long Term Liability TotalRevaluation Capital Government UnappliedReserve Adjustment Grant Deferred CapitalAccount Account Grants£’000 £’000 £’000 £’000 £’000Balance as at 1 April 2007 0 (1,443,667) (92,459) 0 (1,536,126)Minimum Revenue Provision 0 (13,635) 0 0 (13,635)Transfers during year 11,361 (30,263) 18,902 0 0Transfer from Capital Reserves 0 0 0 (11,316) (11,316)Revaluation of Fixed Assets (66,191) 0 0 0 (66,191)Financing of Fixed Assets 0 (54,015) (41,666) 0 (95,681)Depreciation 0 120,742 0 0 120,742Revenue Contributions to Capital 0 (25,010) 0 0 (25,010)Capital expenditure adjustment 920 1,832 (488) 0 2,264Cost of assets disposed 0 63,804 0 0 63,804Balance as at 31 March 2008 (53,910) (1,380,212) (115,711) (11,316) (1,561,149)Accounting ReservesRevaluation ReserveThe Revaluation Reserve is a new reserve that wascreated on 1 April 2007 with a zero opening balance.The reserve records as credit entries the unrealisedrevaluation gains on land and buildings arising in2007-08. Debit adjustments are required to removeaccumulated gains when revalued assets are sold andalso to amortise the gains over the lives of the assetsheld at 31 March 2008.

43Capital Adjustment AccountThe Capital Adjustment Account provides a balancingmechanism between the different rates at whichassets are depreciated under the SORP and arefinanced through the capital controls system. A creditbalance on the account shows that capital finance hasbeen set aside at a faster rate than fixed assets havebeen consumed. However, this new account alsoconsolidates all previous revaluation gains up to 31stMarch 2007, and as a consequence, shows a largecredit opening balance on 1 April 2007. This willremain over the medium term, but gradually reduceover time as the assets held at 31st March 2007 aresold or decommissioned.Long Term LiabilityGovernment Grant Deferred AccountGovernment grants and third party contributions arereceived and applied to finance capital expenditure onfixed assets. The grants and contributions are writtenoff through the Capital Adjustment Account to matchthe depreciation levied against relevant fixed assets.SORP 2007 requires the Government Grant DeferredAccount to be shown as a Long Term Liability.Unapplied Capital GrantSpecific capital grants held at year-end to financeongoing capital investment schemes.Notes to the Financial StatementsQ. Police Officer Pension ReservePolice Officer Pension Reserve2007-08 2006-07 2005-06 2004-05£’000 £’000 £’000 £’000Balance as at 1 April 14,574,400 14,743,987 12,496,488 9,375,973percentage changeover previous year (1.15)% 17.99% 33.28% 6.37%Actuarial gain (3,106,927) (1,095,714) 1,412,100 2,461,502percentage changeover previous year 183.55% (177.59)% (42.63)% 18,588.80%Revenue Reserve movement 966,827 926,127 835,399 659,013percentage changeover previous year 4.39% 10.86% 26.77% 20.22%Balance as at 31 March 12,434,300 14,574,400 14,743,987 12,496,488percentage change over previous year (14.68)% (1.15)% 17.99%This reserve reflects the actuarially calculated future cost of providing pensions for both serving and non servingPolice Officers as well as those already in retirement as stipulated by FRS 17.R. Financial InstrumentsThe financial instruments recognised by the MPA include creditors and general debtors, borrowings, bankdeposits and loans and investments. The MPA has not given any soft loans or financial guarantees nor does ithold financial instruments, which are either ‘held for trading’ or any derivatives. The financial instrument balancesdisclosed in the Balance Sheet are made up of the following classes of financial instruments:Long TermCurrent (within 12 months)31 March 31 March 31 March 31 March2008 2007 2008 2007£’000 £’000 £’000 £’000Financial liabilities at amortised cost 37,337 42,337 354,573 352,609Financial liabilities at fair value through 0 0 0 0Income & ExpenditureTotal Borrowings & Payables 37,337 42,337 354,573 352,609Loans and receivables 6,500 6,820 396,725 287,859Available-for-sale financial assets 0 0 0 0Financial assets at fair value through 0 0 0 0Income & ExpenditureTotal Investments & Receivables 6,500 6,820 396,725 287,859

44Notes to the Financial StatementsThe gains and losses recognised in the Income and Expenditure Account and Statement of Total RecognisedGains and Losses in relation to financial instruments are made up as follows:Financial Financial AssetsLiabilitiesLiabilities Loans and Available for Totalmeasured at receivables Sale assetsamortisedcost£’000 £’000 £’000 £’000Interest expense (2,420) 0 0 (2,420)Losses on derecognition 0 0 0 0Interest payable and similar charges (2,420) 0 0 (2,420)Interest income 0 17,063 0 17,063Gains on derecognition 0 0 0 0Interest and investment income 0 17,063 0 17,063Net gain/(loss) for the year (2,420) 17,063 0 14,643Financial liabilities (fixed rate borrowings) and financialassets (represented by loans and receivables) arecarried in the Balance Sheet at amortised cost. Theirfair value can be assessed by calculating the presentvalue of the cash flows that will take place over theremaining term of the instruments, using the following:• The weighted average interest rate, which at 31March 2008 is calculated as 5.686% for fixed rateborrowings, all of which are from the Public WorksLoan Board (PWLB).• No early repayment or impairment is recognised.• Where an instrument will mature in the next 12months, the carrying amount is assumed toapproximate to fair value. The short term loansmade by the MPA fall into this category.• The fair value of trade and other receivables istaken to be the invoiced or billed amount as statedin the table above for current receivables.The fair values calculated for long-term liabilities areas follows:31 March 31 March 31 March 31 March2008 2008 2007 2007Carrying Fair Value Carrying Fair ValueAmountAmount£000’s £000’s £000’s £000’sFinancial Liabilities 42,337 48,427 57,337 61,736

45The fair value is more than the carrying amountbecause the Authority’s portfolio of loans includes anumber of fixed rate loans where the interest ratepayable is higher than the rates available for similarloans at the Balance Sheet date. This commitment topay interest above current market rates increases theamount that the authority would have to pay if eitherthe lender (PWLB) requested or agreed to earlyrepayment of the loans.Nature and extent of risks arising fromfinancial instrumentsThe Authority’s activities expose it to a variety offinancial risks:Credit risk – the possibility that other parties mightfail to pay amounts due to the Authority.Liquidity risk – the possibility that the authority mightnot have funds available to meet its commitments tomake payments.Market risk – the possibility that financial loss mightarise for the Authority as a result of changes in suchmeasures as interest rates.Risk management focuses on the unpredictability offinancial markets and seeks to minimise potentialadverse effects on the resources available to fundservices. Risk management is carried out by a centraltreasury team, under policy approved by the MPA andset out in the annual treasury management strategy.Credit riskCredit risk arises from deposits with banks andfinancial institutions, as well as credit exposures to theAuthority’s customers. Deposits are made with banksand financial institutions that have been rated by FitchRatings and have a minimum score of A (long term)and F1 (short term). Additionally deposits are madewith the top twenty (by asset size) UK BuildingSocieties. The Authority has a policy of lending itssurplus funds for no longer than one year and, inaddition, no more than £40m to any one institution.The following analysis summarises the Authority’spotential maximum exposure to credit risk, based onexperience of default and un-collectability overprevious financial years, adjusted to reflect currentmarket conditions.Amount at Historical Historical Estimated31 March experience experience Maximum2008 of default adjusted for exposure tomarket default andconditions uncollectabilityat 31 March 2008£000 % % £000A B C (A X C)Deposits with banks andFinancial institutions 233,000 0 0 0Customers (General Debtors) 163,725 0.65 0.55 900900Notes to the Financial StatementsNo credit limits were exceeded during the reportingperiod, and the Authority does not expect any lossesfrom non-performance by any of its counter parties inrelation to deposits.The Authority does not generally allow credit forgeneral debtors beyond 30 days, such that £2.051 mis past its due date for payment, and can be analysedby age as follows.£000’sLess than three months 1,668Three to six months 185Six months to one year 98More than one year 100Total 2,051Liquidity riskAs the MPA has ready access to borrowings from thePWLB, there is no significant risk that it will be unableto raise finance to meet its commitments underFinancial Instruments. Instead, the risk is that theAuthority will be bound to replenish a significantproportion of its borrowings at a time of unfavourableinterest rates. However, the Authority has notundertaken any borrowings in recent years and in cashflow terms the remaining debt has a manageablematurity profile. Future loans taken out will be plannedto complement the existing profile. The maturityanalysis of all the PWLB borrowings are as per Note H(Page 36).Additionally, to cover short-term commitments, theAuthority maintains two instant access accounts,reducing the requirement to realise an investmentbefore it reaches final maturity.All trade creditors and other payables are due to bepaid by the Authority in less than one year.

46Notes to the Financial StatementsMarket riskInterest rate riskThe Authority is exposed to risk in terms of itsexposure to interest rate movements on its borrowingsand investments. Movements in interest rates have acomplex effect on the Authority. For instance, a rise ininterest rates would have the following effects:• borrowings at fixed rates – the fair value of theliabilities will fall.• investments at variable rates - the interest incomecredited to the Income and Expenditure Accountwill rise.• investments at fixed rates - the fair value of theassets will fall.Borrowings are not carried at fair value, so nominalgains and losses on fixed rate borrowings would notimpact on the Income and Expenditure Account orSTRGL. However, changes in interest receivable onvariable rate investments will be posted to the Incomeand Expenditure Account and affect the General FundBalance pound for pound.If the MPA had made fixed rate investments for morethan 12 months, movements in their fair value wouldbe reflected in the STRGL.The Authority has set, for the net position ofborrowings and investments, upper limits on fixedinterest rate and variable interest rate exposures givingranges that will limit exposure to interest ratemovement. Fixed interest rate exposure is managedwithin a 70% to 95% range and variable interest rateexposures within a 5% to 30% range. Furthermore,upper limits for variable rate exposure are set for grossborrowings at 15% and for investments at 40%.Price riskThe Authority does not invest in equity shares or othersimilar financial instruments, and therefore has noexposure to losses arising from movements in theprice of shares.Foreign exchange riskThe Authority has no financial assets or liabilitiesdenominated in foreign currencies and therefore hasno exposure to loss arising from movements inexchange rates.Notes to the Cash Flow StatementS. Reconciliation of Surplus to revenue cash flow2006-07 Note 2007-08£’000’s£’000’s(10,060) (Surplus) N (7,882)Non-cash Transactions(18,290) net transfer from reserves (113,146)(1,701) net transfer from provisions (4,899)Items on an Accruals Basis(11,717) (increase) / decrease in revenue creditors (21,824)252 increase / (decrease) in stocks (23)13,126 increase / (decrease) in debtors 22,046Items shown later in the cash flow statement14,617 investment income 15,039(3,452) interest paid (2,420)(17,225) Net cash flow from revenue activities (113,109)T. Analysis of cash balancesCash balances include not only corporate and local bank balances but also imprest balances held acrossthe organisation.Balance 31 Balance 31 Movement inMarch 2007 March 2008 year£’000’s £’000’s £’000’sCash and bank 1,571 (4,847) (6,418)

47U. Analysis of Net Debt (liquid resources)Balance Cash Flow Balance31 March 2007 31 March 2008£’000 £’000 £’000Cash at bank and in hand 1,571 (6,418) (4,847)Debt due within 1 year (15,000) 10,000 ( 5,000)Debt due after 1 year (42,337) 5,000 (37,337)Short Term Investments 139,000 94,000 233,000Total 83,234 102,582 185,816Notes to the Financial StatementsPolice Officer Pension Fund Revenue Account(for the year to 31 March 2008)This statement shows income and expenditure for the Police Pension Scheme and the New Police PensionScheme which do not form part of the MPA Statement of Accounts.31 March 2007 Notes 31 March 2008£’000 £’000Contributions receivable(254,974) Employer contributions 1 (263,062)(113,892) Officer contributions 2 (117,018)(4,922) Additional income 3 (5,543)(38,410) Employer additional funding 4 (33,482)(412,198) Net income (419,105)Transfers 5(6,031) Transfers in from other schemes (15,983)1,790 Transfers out to other schemes 4,899(416,439) Net movement (430,189)Benefits payable322,755 Pensions paid 348,49993,493 Lump sum payments 81,520191 Other payments 6 170416,439 Net Expenditure 430,1890 Surplus on Fund 0Police Officer Pension Fund Asset Statement(for the year to 31 March 2008)This statement shows the assets and liabilities of the Police Pension Scheme and the New Police PensionScheme which does not form part of the MPA Statement of Accounts.31 March 2007 31 March 2008£’000 Notes £’0000 Net Current Assets a 8,1940 Net Current Liabilities a (8,194)0 Total 0

48Notes to the Financial StatementsNotes to the Police Officer Pension Fund AccountThe Police Officer Pension Fund combines theaccounting transactions of two pensions schemes forMetropolitan Police Officers. These are the PolicePension Scheme, which was set up in 1987 and theNew Police Pension Scheme, which was created bythe Home Office under the Police PensionsRegulations 2006.The Police Officer Pension Fund which is managed bythe Metropolitan Police Authority has been set up forthe specific purpose of administering the collection ofcontributions, the payment of pensions and paymentor refund to central government for the balanceoutstanding for each year. The Fund does not hold anyinvestment assets nor does it reflect the liabilities ofboth Schemes to pay present and future pensioners.The fund will be paid sufficient monies from the HomeOffice in 2008-09 to cover the deficit in year.These accounts have been prepared using CIPFA’sPension SORP and the SORP principles adopted forthe statements of the MPA. These financial statementsdo not take account of liabilities to pay pensions andother benefits after the period end. The principlescontained in the Police Pension Fund Regulations2007 have been adopted prior to theircommencement.Details of the accounting policies of the MPA can beseen on page 18 to 22. The MPA administers the Fundthrough its accounting and banking systems. Detailsof the two Schemes’ actuarial report can be seen onpage 43 in the notes to the balance sheet. The cost ofpensions can be seen on page 28 in note 5 to theincome and expenditure account.3. Additional incomeThese consist of MPA income for ill health retirements,30 plus scheme contributions and refund of formercommissioners and widows pensions.4. Employer additional fundingThis sum represents additional funding required toprovide for payment to pensioners. It representsadditional funding of £17.7 million received by theMPS in 2007-08 and a statutory transfer from thepolice fund in respect of a further sum of £15.7 millionto be received in 2008-09. Both sums being paid bythe Home Office.5. TransfersThese represent lumps sums transferred to and fromother pensions schemes depending on whether thepolice officer was joining or leaving the MPS.6 Other paymentsThese consist of contribution equivalent payments,superannuation refunds and lump sum death benefits.7. Related party transactionsAs previously stated the Fund is administered solelyby the MPS and as such this organisation is the onlyrelated party to the Fund, thus all the transactionsshown on the revenue statement having beenprocessed through the MPS.8. Additional Voluntary Pension ContributionsAdditional pension contributions (e.g. added years)made by Police Officers amounted to £50,901. (2006-07 £60,755).These accounts are audited by the Audit Commissionand their opinion is included in that of the MPA onpage 8.Revenue Account Notes1. Employer contributionsEmployer contributions are calculated at 24.6% ofpolice officer pensionable pay.2. Officer contributionsContributions by officers are deducted from officerwages at a rate of 11% of pensionable pay.9. Members of the SchemeThe Pension Fund also administers pensions on behalfof members of Her Majesty’s Inspectorate ofConstabulary. There are 4 HMIC staff who are workingmembers of the scheme and 20 HMIC pensioners and6 dependants pensioners.10. Asset Statement notesThe new Home Office circular issued in June 2008requires additional lump sums payable under the PPSto officers who retired after 30 September 2007 andchose to take a lump sum. The additional lump sum isshown as a current liability in the police pension fundasset statement, with a corresponding amount shownas a current asset.

49GlossaryGlossary of TermsBudgetA statement defining the Authority’s policy over aspecified period and expressed in financial or otherterms.Capital ExpenditureExpenditure on the acquisition, creation orenhancement of fixed assets.Capital ReceiptsMoney obtained on the sale of a capital asset. Theycan only be used for capital purposes, e.g. fundingcapital expenditure or repaying debt.Corporate Democratic Core CostsThis covers bank charges, auditors’ fees and the costof the Authority as well as the corporate activities ofHead Office departments.Credit ArrangementsAn arrangement other than borrowing where the useof a capital asset is acquired and paid for over a periodof more than one year. The main types of creditarrangements are leases of buildings, land andequipment.CreditorsIndividuals or organisations to which the Authorityowes money at the end of the financial year.DebtorsIndividuals or organisations that owe the Authoritymoney at the end of the financial year.Employee CostsThe salaries and wages of employees together withnational insurance, pension and all other pay-relatedallowances. Training expenses and professional feesare also included.Finance LeaseA finance lease normally involves payment by a lesseeto a lessor of the full cost of the asset, together with areturn on the finance provided by the lessor. Thelessee has substantially all the risks and rewardsassociated with ownership of an asset, other thanlegal title.Government GrantsPart of the cost of the service is paid for by centralgovernment from its own tax income. Grant income ispartly received through the s.102 payments made bythe GLA. In addition, the Home Office pays specificgrants direct to the Authority towards both revenueand capital expenditure.Long Term DebtorsAmounts due to the Authority where payment is to bemade by instalments over a pre-determined period oftime in excess of one year.Minimum Revenue ProvisionThe amount that the Authority is statutorily required toset aside from revenue each year as a provision tomeet credit liabilities. For the Authority this relates to aprincipal sum calculated by reference to the capitalfinancing requirement, which is used for theredemption of external debt.Non Distributed CostsThis consists of charges for police officers and policestaff early retirements.Operating LeaseAn operating lease involves the lessee paying a rentalfor the hire of an asset for a period of time that issubstantially less than its useful economic life. Thelessor retains most of the risks and rewards ofownership.PCSPSThe Principal Civil Service Pension Scheme is thescheme used to provide pension benefits to policestaff.ProvisionAn amount set aside to provide for a liability which islikely to be incurred but the exact amount and the dateon which it will arise is uncertain.Revenue ExpenditureExpenditure to meet the continuing cost of servicesincluding wages and salaries, purchase of materialsand capital financing charges.Revenue ReservesAccumulated sums that are maintained eitherearmarked for specific future costs (e.g. pensions) orgenerally held to meet unforeseen or emergencyexpenditure (e.g. General Reserve).Special Service AgreementsPolicing the Airports, House of Lords/Commons,Palace of Westminster are the main items includedunder this heading.For larger print, Braille and other formats as wellas other language versions of this document,please contact us at Publicity, New ScotlandYard, The Broadway, London SW1H OBJ. Tel 0207230 3644

Visit the MPA website:www.mpa.gov.ukContact the MPA:tel: 020 7202 0202fax: 020 7202 0200minicom: 020 7202 0173email: enquiries@mpa.gov.ukor write to:The Chief ExecutiveMetropolitan Police Authority10 Dean Farrar StreetLondonSW1H 0NY

MPA - statement of accounts

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