Notes to Financial Statements
1) Accounting Policies
a) Principal accounting policies
The accounts for the Health Protection Agency have been prepared under the historical cost convention, modified to include the revaluation of fixed assets, and comply with the provisions of the Health Protection Agency Act 2004 (Schedule 1).
Without limiting the information given, the accounts have been prepared in accordance with the Accounts Direction issued by the Secretary of State for Health with the approval of HM Treasury, and are in accordance with
(i) the Companies Act 1985;
(ii) generally accepted accounting principles in the United Kingdom (UK GAAP); and
(iii) the accounting and disclosure requirements of 'Government Accounting' and HM Treasury guidance 'The Government Financial Reporting Manual' insofar as these are appropriate to the Health Protection Agency.
The aforementioned direction and guidance requires the following departures from the Companies Act and accounting standard requirements:
(i) the note on historical cost profit and losses required under Financial Reporting Standard 3 'Reporting Financial Performance' has not been disclosed; and
(ii) the historical cost information regarding assets included at valuation as required by paragraph 33(3) of Schedule 4 to the Companies Act 1985 has not been disclosed.
b) Merger with the National Radiological Protection Board
On 1 April 2005 the National Radiological Protection Board (NRPB) merged with the Health Protection Agency, forming its new Radiation Protection Division (RPD). The RPD consists of its headquarters at Chilton in Oxfordshire, its Occupational Services Department at Leeds, and Radiation and Environmental Monitoring Scotland at Glasgow . The RPD, combined with the Chemical Hazards and Poisons Division of the Health Protection Agency, to form the Agency's Centre for Radiation, Chemical and Environmental Hazards (CRCEH). The Director of the Centre is Dr Roger Cox, the former Director of NRPB. The RPD carries out the Health Protection Agency's work on ionising and non-ionising radiations. It undertakes research to advance knowledge about protection from the risks of these radiations; provides laboratory and technical services; runs training courses; provides expert information and has a significant advisory role in the United Kingdom.
Prior year comparatives reflect the application of merger accounting principles under HM Treasury's Financial Reporting Manual, and the Accounting Standards Board's Financial Reporting Standard 6. Detailed disclosure information is provided at note 25.
c) Operating income
Operating income comprises amounts receivable, excluding Value Added Tax, for goods and services supplied. Income on long term contracts is recognised as the work progresses, in accordance with the contractual arrangements and the stage completion of the work.
d) Government grant in aid receivable
Government grant in aid which contributes to the general activities of the Health Protection Agency is credited to the income and expenditure account as received.
Government grant in aid that finances specific revenue activities is credited to the income and expenditure account so as to match the income with the related expenditure. Any such specific Government grant in aid received before the expenditure to which it relates is charged to the income and expenditure account, is held as deferred income.
Government grant in aid received as a contribution towards capital expenditure is credited to the Government grant reserve and is released to income to match the depreciation charged over the life of the capital asset.
e) Other grants receivable
Grants receivable other than Government grant in aid are accounted for in the same way as Government grant in aid except that any amounts receivable as contributions towards capital expenditure are credited to an other grants reserve. No such capital grants were received in respect of Agency owned assets in the year to 31 March 2006.
f) Intangible fixed assets
Intangible fixed assets comprise software licences purchased from third parties with a life of more than one year. Individual licences with a life of less than one year, or a value below £5,000, are not capitalised. Such software costs are charged to the income and expenditure account as they are incurred.
Where capitalised, software licences are valued at cost, net of amortisation and impairment, or depreciated replacement cost where materially different. The cost or valuation of software licences, less their estimated residual values, is amortised on a straight-line basis over the life of the licence or the life of the related asset where there is no licence expiry date.
For intangible fixed assets funded by grants, each year an amount equal to the amortisation is transferred from the Government grant reserve and/or the other grants reserve to the income and expenditure account. Currently, all intangible fixed assets have been funded by Government grant in aid.
g) Tangible fixed assets
Freehold land is valued on an existing use basis. Buildings with a specialised use are valued at depreciated replacement cost and non-specialised buildings are valued at their open market value for their existing use. Independent valuations will be carried out every five years in accordance with guidance issued by the Royal Institute of Chartered Surveyors. The freehold land and buildings were valued on 31 March 2005 by the Valuation Office Agency. In the years where no valuation occurs, land and buildings are revalued using appropriate indices.
Individual items with a value below £5,000 are not capitalised. Tangible fixed assets of the same or similar type acquired around the same time and scheduled for disposal about the same time, or assets which are purchased at the same time and are used, and subsequently disposed of, together are grouped and treated as if they were individual assets. For tangible fixed assets funded by grants, each year an amount equal to the depreciation is transferred from the Government grant reserve and/or the other grants reserve to the income and expenditure account. For tangible fixed assets not funded by grants, the only amount transferred from reserves relates to the excess of the actual depreciation over the historic cost depreciation which is transferred from the revaluation reserve to the income and expenditure account. Currently, all tangible fixed assets have been funded by Government grant in aid.
Other tangible fixed assets are valued at depreciated replacement cost. The depreciated replacement cost is calculated by applying, annually, appropriate indices to the cost.
h) Investments
Investments comprise the Agency's 24.41% holding of ordinary shares of £0.001 in the issued share capital of Syntaxin Limited, acquired for a cash consideration of £1,232.50 on 10 November 2005. There is no easily ascertainable market value for the shareholdings, so the Board has opted to disclose the holdings on a historic cost basis. Consideration of the market value, if readily ascertainable, will be part of an ongoing review process. It is expected that the Health Protection Agency's holding in Syntaxin relative to that of other shareholders will reduce with time as the investors commit further finance to the company, contingent on Syntaxin continuing to meet the objectives outlined in its business plan.
i) Depreciation
Depreciation is provided on all tangible fixed assets from the month of purchase, but not in the month of disposal, at rates calculated to write-off the cost of valuation of each asset evenly over its expected useful life as follows:
Asset Category |
Expected Useful Life |
|---|---|
Freehold buildings |
Up to 50 years as advised by the Valuation Office Agency |
Leasehold land and buildings |
Over the life of the lease |
Fixtures and fittings |
Up to 20 years as advised by the Valuation Office Agency |
Plant and equipment |
5 to 20 years |
Vehicles |
7 years |
Information technology equipment |
3 to 5 years |
Freehold land, investments and assets under construction are not depreciated.
j) Stock
Stocks are valued at the lower of cost, or net current replacement cost if materially different, and net realisable value. For stock held for resale, net realisable value is based on estimated selling price less further costs expected to be incurred to completion. Work in progress is valued at cost, less the cost of work invoiced on incomplete contracts and less foreseeable losses. Cost means direct cost plus production overheads. Where necessary, provision is made for obsolete, slow moving and defective stocks.
k) Research and development
Research and development expenditure is charged to the income and expenditure account as incurred.
l) Taxation
The Agency, as a body corporate, is subject to the provisions of the Income and Corporation Tax Act 1988. However, as the majority of income is derived from Government grant in aid, no provision has been made in these accounts for any corporation tax liability.
l) Value Added Tax
The Health Protection Agency is registered for Value Added Tax (VAT). VAT is charged on invoices for business contracts relating to products, services and research activities. The Health Protection Agency recovers part of its input VAT proportionate to its business activities in relation to total income. Expenditure is shown net of recoverable VAT. Irrecoverable VAT is charged to the most appropriate expenditure or capitalised if it relates to a fixed asset.
m) Operating leases
Operating lease costs are charged to the income and expenditure account on a straight line basis over the lease term.
n) Foreign currencies
Transactions denominated in foreign currencies are translated into sterling at the exchange rate ruling on the date the transaction takes place or at the contracted rate if the transaction is covered by a forward exchange contract. Balances denominated in foreign currencies are translated into sterling at the exchange rate ruling at the end of the year. Exchange gains and losses are dealt with in accordance with Statement of Standard Accounting Practice 20.
o) Pensions
The Health Protection Agency provides pension schemes for the benefit of the majority of its employees, and participates in three defined benefit schemes:
i) The National Health Service (NHS) pension scheme;
iii) The United Kingdom Atomic Energy Agency (UKAEA) Combined Pension Scheme; and
iii) The Principal Civil Service Pension Scheme.
Although each is an unfunded scheme, they each receive contributions, partly from participating employees and partly from the Agency. Details of each scheme are included in the notes to the financial statements (note 6). Each scheme is multi-employer, and the scheme administrators prepare separate accounts which are subject to audit and regular actuarial review. Because of this, HM Treasury's Financial Reporting Manual (paragraph 6.5.2) requires the pension schemes to be treated as defined contribution schemes within these financial statements. The amount charged to the income and expenditure Account is the contributions payable for the year.
In certain circumstances, employees taking early retirement are entitled to an enhanced lump sum and ongoing pension. The Health Protection Agency is responsible for meeting the additional cost of the lump sum, the full cost of the pension until normal retirement age and the enhanced element of the pension thereafter. A provision is made for the estimated future cost of early retirements at the time when the employee retires. Further details are provided within note 16.
p) Notional costs of capital
The income and expenditure account includes a notional charge for the cost of the Government funded capital employed during the year. The charge is calculated at 3½% of the average net assets for the year, excluding cash balances held with the Office of the Paymaster General which do not attract interest and fixed assets funded by grants other than the Government grant in aid. There are no other notional costs.
