Opening balance sheet for the MPA

Report: 10
Date: 20 July 2000
By: Treasurer

Summary

To report progress in producing the opening balance sheet for the Authority.

A. Supporting information

Introduction

1. Until the creation of the Metropolitan Police Authority (MPA), the Metropolitan Police Service (MPS) accounting regime was that of the Receiver for the Metropolitan Police District that was predominantly based on Government Cash Accounting. There was no requirement to produce a balance sheet in the audited financial statements.

2. From 3 July the MPA will account for the Metropolitan Police income and expenditure on an accruals basis as laid down in the Local Authority Accounting Code of Practice (developed by CIPFA), in line with all other police authorities.

3. The MPS has been developing accrual accounting expertise over recent years and has recently completed the implementation of a corporate financial management information system (MetFIN) that fully supports accrual accounting in a local authority environment.

4. The first major deliverable under the new regime is an opening balance sheet for the MPA that satisfies the external auditors and provides the Treasurer with a robust view of the opening assets and liabilities of the newly created authority.

5. The purpose of this paper is to update Members as to the process being followed to produce this opening position and the associated timescale.

Process

6. During 1999/2000 the senior management of the MPS Finance Directorate initiated a project to address the implications of moving to the local authority financial regime and with some relevantly skilled consultancy support, started to review existing practices and policies with a view to the development of those required under the new regime.

7. A wide range of accounting issues around the local authority regime were explored, actions and treatments agreed and accounting practice notes drafted as a means of training MPS staff.

8. The project identified many weaknesses in the existing accrual accounts and highlighted control issues. It was also apparent that there was a shortage of in-house staff with experience of local authority accounting disciplines. These findings were also reflected in the review of the finance function initiated by the Treasurer. It had already been recognised that the challenge of drawing up a first balance sheet to a standard that would meet external audit scrutiny was a major exercise that would require additional specialist expertise.

9. Under the direction of the Director of Accounting and Systems in the MPS a team of experienced qualified local authority accounting staff have been retained. Their objective is to deliver the opening balance sheet for the authority working closely with existing MPS staff who retain responsibility for managing year end close down and producing the final statutory accounts under the ‘old’ regime.

10. The project plan and approach has been discussed and agreed with both the Treasurer and KPMG as the external auditor. As well as producing the formal accounting statements, the project will also demonstrate the relationship between the balances produced under the cash regime to equivalent figures in the opening balance sheet.

11. The intention has been to complete the project objective in two stages - firstly showing the position as at 31 March 2000, then “rolling” forward three months to 2 July 2000. At each stage reconciliations between the cash and accrual figures would be performed.

12. At the time of this report all balance sheet entries as at 31 March 2000 have been reviewed. The work has been detrimentally impacted by slippage of 31 March closedown exercise. Significant work is continuing in the areas of capital expenditure, stock and control accounts. Each of these issues could impact upon the balance sheet. If these issues can be resolved in time an indicative balance sheet as at 31 March 2000 will be brought to the Authority meeting on 28 July. Otherwise consideration will be deferred until the first available meeting in September.

13. The closedown exercise for the three months to 2 July is now in progress and the priority is to ensure that the timetable is adhered to and work programme targets met. The timely production of the opening balance sheet for the MPA will depend upon this and the reconciliation against the final cash regime position will only be possible when the cash closedown is complete.

14. Current progress suggests that KPMG will commence their review work in mid-August with a view to their signing off the opening balance sheet by the end of September.

B. Recommendations

That the Committee note the contents of this report.

C. Financial implications

There will be financial implications to consider when the opening balance sheet is produced.

D. Review arrangements

The opening balance sheet will be reviewed by the Authority and/or this Committee.

E. Background papers

The following is a statutory list of background papers (under the Local Government Act 1972 S.100 D) which disclose facts or matters on which the report is based and which have been relied on to a material extent in preparing this report. They are available on request to either the contact officer listed below or to the Clerk to the Police Authority at the address indicated on the agenda.

None.

F. Contact details

The author of this report is Bob Alexander.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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