Notes to Financial Statements
22) Financial instruments
Financial Reporting Standard 13, Derivatives and Other Financial Instruments, requires disclosure of the role which financial instruments have had during the year in creating or changing the risks an entity faces in undertaking its activities.
Due to the largely non-trading nature of its activities, and the way in which it is financed, the Health Protection Agency is not exposed to the degree of financial risk faced by other business entities. Moreover, financial instruments play a much more limited role in creating or changing risk than would be typical of the listed companies to which Financial Reporting Standard 13 mainly applies. The Health Protection Agency has no powers to borrow, invest surplus funds or purchase foreign currency with grant in aid from the Government. Generally, financial assets and liabilities are generated by day-to-day operational activities and are not held to change the risks facing the Health Protection Agency in undertaking its activities.
a) Liquidity risk
The Health Protection Agency has no borrowings and relies primarily on funding from the Department of Health for its own cash requirements, and is therefore not exposed to liquidity risks. It also has no material deposits, and all material assets and liabilities are denominated in sterling.
b) Interest rate risk
The Health Protection Agency is not exposed to significant interest rate risk.
c) Foreign currency risk
The Health Protection Agency has a limited amount of foreign currency expenditure, upon which the currency risk is deemed to be insignificant. The Agency has foreign currency income of approximately £5,000,000 per annum (2005: £5,000,000), upon which there is an element of currency risk. The only other currency risk is that of a Euro currency bank balance, valued at £179,800 on 31 March 2006 (2005: £129,458), and a US Dollar bank balance valued at £47,883 (2005: £nil). The Agency operates Euro and US Dollar bank accounts to handle transactions denominated in those currencies. This helps to manage potential exposure to exchange rate fluctuations. The fair value of cash is the same as the book value. For all other assets and liabilities book value represents fair value.
As allowed by Financial Reporting Standard 13, debtors and creditors that are due to mature or become payable within 12 months from the balance sheet date have not been disclosed as financial instruments.
23) Contingent liabilities
As at 31 March 2006, there were outstanding legal claims made against the Health Protection Agency by patients and others. Standard accounting practice requires that provision only be made in the accounts if it is probable that a claim will be successful. The Health Protection Agency's solicitors have estimated that the possible liability arising from those claims for which provision has not been made in the accounts is approximately £34,500 (2005: £11,000) including damages, claimants' costs and the Health Protection Agency's costs. The possibility of any reimbursement, for future payments made by the Agency, are remote.
24) Losses and special payments
There were no losses or special payments that require disclosure during the year ended 31 March 2006.
25) Merger with the national radiological protection board
a) Background information
On 1 April 2005 the National Radiological Protection Board (NRPB) merged with the Health Protection Agency, forming its new Radiation Protection Division (RPD). RPD consists of its headquarters at Chilton in Oxfordshire, its Occupational Services Department at Leeds, and Radiation and Environmental Monitoring Scotland at Glasgow . Together with the Chemical Hazards and Poisons Division of the Health Protection Agency it forms the Agency's Centre for Radiation, Chemical and Environmental Hazards.
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 to the merger, both entities had a financial reporting year which began on 1 April each year. No consideration was given for the combination of the two public organisations. This business combination has been accounted for using merger accounting principles in accordance with HM Treasury's Financial Reporting Manual, the Accounting Standards Board's Financial Reporting Standard 6. Accordingly, the financial information for the current period has been presented, and that for the prior periods restated, as if the NRPB had been part of the Health Protection Agency throughout the current and prior accounting periods.
b) Merger adjustments
The following merger adjustments have been made to reflect the alignment of accounting policies following the merger:
i) Tangible fixed assets:
NRPB land and buildings increased |
£5,360,000 |
NRPB IT equipment reduced |
£(353,000) |
NRPB merger adjustment |
£5,007,000 |
|---|
Land and buildings
The Health Protection Agency commissioned the Valuation Office Agency to complete revaluation of all land and buildings, including those of the NRPB, as at 31 March 2005. This work resulted in an increase in the value of NRPB land and buildings by £5,360,000.
IT equipment
The Health Protection Agency fixed asset accounting policies include a capitalisation threshold of £5,000 and limited scope for the grouping of assets. NRPB balances for IT equipment (£248,000) and assets under construction (£105,000) were reduced to comply with the Agency policy.
ii) Reserves:
A transfer of £771,000 from the income and expenditure account reserve to the government grant reserve was required in order that the government grant reserve equated to the fixed asset balance as all the fixed assets inherited from NRPB are deemed to be funded by Government grant in aid.
Government grant reserve:
Fixed asset grant release |
£771,000 |
Tangible fixed asset revaluation |
£5,007,000 |
NRPB merger adjustment |
£5,778,000 |
|---|
Income and expenditure account reserve:
Fixed asset grant release |
£771,000 |
NRPB merger adjustment |
£771,000 |
|---|
c) Principal components of the balance sheet for the prior period
An analysis of the principal components of the balance sheet, made by the combining entities for the prior accounting period is as follows:
|
NRPB pre-merger £'000 |
NRPB adjustments £'000 |
HPA pre-merger £'000 |
Combined Post-merger £'000 |
|---|---|---|---|---|
Fixed assets |
|
|
|
|
Intangible fixed assets |
- |
- |
1,184 |
1,184 |
Tangible fixed assets |
11,725 |
5,007 |
113,627 |
130,359 |
Investments |
- |
- |
- |
- |
Total fixed assets |
11,725 |
5,007 |
114,811 |
131,543 |
|
||||
Current assets |
|
|
|
|
Stock |
- |
- |
6,548 |
6,548 |
Debtors |
3,953 |
- |
31,041 |
34,994 |
Cash at bank and in hand |
495 |
- |
13,724 |
14,219 |
Total current assets |
4,448 |
- |
51,313 |
55,761 |
|
||||
Creditors: amounts falling due within one year |
(2,562) |
- |
(50,335) |
(52,897) |
Net current assets |
1,886 |
- |
978 |
2,864 |
Total assets less current liabilities |
13,611 |
5,007 |
115,789 |
134,407 |
Provisions |
(328) |
- |
(10,379) |
(10,707) |
Net assets |
13,283 |
5,007 |
105,410 |
123,700 |
Capital and reserves |
|
|
|
|
Government grant reserve |
10,954 |
5,778 |
114,811 |
131,543 |
Income and expenditure account |
2,329 |
(771) |
(9,401) |
(7,843) |
Total capital and reserves |
13,283 |
5,007 |
105,410 |
123,700 |
d) Principal components of the income and expenditure account for the prior period
An analysis of the principal components of the income and expenditure accounts, made by the combining entities for the prior accounting period is as follows:
|
NRPB pre-merger £'000 |
NRPB adjustments £'000 |
HPA pre-merger £'000 |
Combined Post-merger £'000 |
|---|---|---|---|---|
Income |
|
|
|
|
Government grant in aid |
7,221 |
- |
127,871 |
135,092 |
Operating income |
9,158 |
- |
75,317 |
84,475 |
Interest receivable |
2 |
- |
116 |
118 |
Total income |
16,381 |
- |
203,304 |
219,685 |
Expenditure |
|
|
|
|
Staff costs |
10,729 |
- |
116,954 |
127,683 |
Other operating charges |
4,842 |
- |
78,449 |
83,291 |
Amortisation and depreciation |
752 |
- |
8,852 |
9,604 |
Total expenditure |
16,323 |
- |
204,255 |
220,578 |
Operating surplus / (deficit) before the cost of capital charge |
58 |
- |
(951) |
(893) |
Cost of capital charge |
(444) |
- |
(3,308) |
(3,752) |
Operating surplus / (deficit) for the year |
(386) |
- |
(4, 259 ) |
(4,645) |
Reversal of cost of capital charge |
444 |
- |
3,308 |
3,752 |
Surplus / (deficit) for the year carried forward |
58 |
- |
(951) |
(893) |
e) Principal components of the statement of recognised gains and losses for the prior period
An analysis of the principal components of the statement of total recognised gains and losses, made by the combining entities for the prior accounting period is as follows:
|
NRPB pre-merger £'000 |
NRPB adjustments £'000 |
HPA pre-merger £'000 |
Combined Post-merger £'000 |
|---|---|---|---|---|
Surplus / (deficit) for the year |
58 |
- |
(951) |
(893) |
Unrealised surplus on revaluation of tangible fixed assets |
1,671 |
5,007 |
465 |
7,143 |
Total gains / (losses) recognised for the year |
1,729 |
5,007 |
(486) |
6,250 |
26) Post balance sheet events
The provision for the future costs of early retirement within the NHS Pension Scheme referred to in Note 16 has been cleared by a payment to the NHS Pensions Agency during May 2006 (£7,182,000).
