annual report 2006
the co-operative party
The Co-operative Party ANNUAL REPORT 2006 has been produced in August 2007 by Peter Hunt, General Secretary. This report can be downloaded from the Co-operative Party’s website, www.party.coop. If you do not have access to the internet and would like to receive a copy of this report, please contact Dorota Kseba, at d.kseba@party.coop or 020 7367 4155.
annual report 2005 Chairman’s report 2006 has been another year of growth and achievement for the Co-operative Party. Our efforts have again borne fruit in a number of key areas of work with Government, advancing the political agenda of the co-operative and mutual sector through our partnership with Labour. The Party is committed to the progress of the co-operative and mutual sector. We can demonstrate that our efforts have yielded real, sometimes remarkable, progress in complex areas requiring real expertise. We have continued to build on the recent national successes of the Party: • We have achieved 3 Acts of Parliament from Private Members’ Bills, updating co-operative legislation and promoting employee ownership. • A comprehensive review of co-operative and credit union legislation is underway. • We have seen the creation of more than 120 football supporter trusts, with more that 120,000 members, from a Party initiative to create Supporters Direct. • In health, more than 50 NHS Foundation Trusts have been established, with many more in the pipeline – already with memberships exceeding 600,000. • Public sector professionals are also establishing their own employee mutuals, with new Primary Care mutuals adding their number to the established local government leisure service mutuals. • In housing, tenants are participating in the control of their homes, with many adopting the mutual option for housing stock transfer. • Internationally, Government support for co-operative development has been enhanced. In all, there are approaching a million more members of mutuals today as a result of our work. We will continue to push the barriers of knowledge and understanding of mutuality, in order to ensure that the voices of citizens and employees are properly heard. 1
At the same time, we have re-organised our staffing resources to meet a reduced income base. This has involved the closure of two regional offices and the establishment in 2006 of the Party Support Unit. The Party Support Unit has made a great start. After nearly a year in place, the Unit proves to be working. Regular briefings are produced for Party Councils, events are being held, and discussions are taking place. The Party is talking, which is good. Our next step should no doubt be to talk to others. 2007 marks the 90th anniversary of the Party, and it is appropriate that this report is presented to an annual conference held in the same venue in which our Party was founded in 1917. The National Executive Committee has approached this anniversary in an ambitious manner, with the results starting to show. I am proud of what has been achieved so far. Fresh policies based on co-operative values and principles are being published; co-operatives are being presented as genuine alternatives to the public and private sectors everywhere; stakeholder involvement can and is making a difference. More importantly, the policy themes selected to be our focus on this anniversary year have been an inspiration to many Party Councils and Branches across the country and the foundation for member activity. We are surrounded by opportunities to advance our co-operative cause, which may not be repeated for many years. After 10 years in power, Labour is refreshed. It is essential that we move forward together to ensure the best result for the co-operative movement and citizens of our country. Gareth Thomas MP, Chair of the Co-operative Party
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administrative information National Executive Committee The Party is directed by its National Executive Committee, which meets four times per year. Its members in 2006 were: Eastern Graeme Watkins East Midlands Roy Mayhew London Gareth Thomas MP (Chair) North Brenda Forster North West Dave Pownall Scotland Margaret Smyth South Bob Harber South West Geraint Day West Midlands John Kennedy Wales Alun Michael MP Yorks & Humber George Richardson Youth James Flinders OMOV (M) Dan Crowe* OMOV (F) Jeanette Timmins (Vice Chair) Co-operatives UK John Anderson The Co-operative Group Len Wardle The Westminster Parliamentary Group: Mark Hendrick MP, Andy Reed MP
P S,P P P A,P A A,P P
A,S,P A,S
Key to Sub Committee memberships: A S P
Audit Sub Committee Staffing and Remuneration Sub Committee Policy Sub Committee
*Resigned January 2006, replaced by Michael McGowan
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The Staff of the Party in 2006 were:
Head Office: General Secretary
Peter Hunt
Parliamentary Officer
Matthew Ball
Political Assistant
Helen Pyper
Administrative Assistant
Campaigns & Communications Consultant
Debi Jones Hilda Carr
Party Support Unit: Assistant General Secretary Administrator, Wales and Midlands
Karen Wilkie Cheryl Andrews
Secretary, Scottish Co-operative Party Administrator, Scotland
Jim Lee Linda Mylet
Political Development Officer (from September 2006)
Alexandra Baker
Political Development Officer (from September 2006)
Martin Tiedemann
Administrator, Membership
Sylvia Hanlon
(National Organisers Tim Pearce to June 2006 and Paul Tinnion to May 2006 Administrator South West Anne Clarke to June 2006)
Party Membership
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Region
2005
2006
East Midlands Eastern Head Office London North North West Scotland South East South West Wales West Midlands Yorkshire & Humberside Brussels
566 864 24 1443 386 785 969 543 748 587 434 593 14
517 786 16 1506 343 752 906 476 643 502 379 552 15
Total
7956
7393
National Politics Our close relationship with Labour continues to deliver on our co-operative agenda. Our representation at Westminster, Holyrood and Cardiff remains at an all-time high-with Co-operative politicians in senior Government positions.
Parliamentary Groups Westminster Labour/Co-operative Members of the House of Commons Adrian Bailey - West Bromwich West (PPS Defence) Alan Keen - Feltham and Heston Alun Michael - Cardiff South and Penarth (Privy Counsellor) Andy Love - Edmonton Andy Reed - Loughborough (PPS Treasury) Angela Smith - Basildon (Minister, Communities) Barry Sheerman - Huddersfield (Chairman, Education Select Committee) David Drew - Stroud David Lepper - Brighton Pavillion David Taylor - Leicestershire North West Don Touhig - Islwyn (Privy Counsellor) Doug Naysmith - Bristol North West Ed Balls - Normanton (Minister, Economic Secretary to the Treasury) Gareth Thomas - Harrow West (Minister, International Development) Ian Davidson - Glasgow South West Jim Dobbin - Heywood and Middleton John McFall – W. Dunbartonshire (Chairman, Treasury Select Committee) Ken Purchase - Wolverhampton North East Linda Gilroy - Plymouth Sutton Linda Riordan - Halifax Louise Ellman - Liverpool Riverside
Mark Hendrick - Preston (PPS Foreign Secretary) Mark Lazarowicz - Edinburgh North and Leith Meg Hillier - Hackney South and Shoreditch (PPS Communities) Meg Munn - Sheffield Heeley (Minister, Women and Equalities) Mike Gapes - Ilford South (Chairman, Home Affairs Select Committee) Phil Hope - Corby (Minister, Education and Skills) Sarah McCarthy-Fry - Portsmouth North (PPS Treasury) Thomas McAvoy - Rutherglen and Hamilton West (Privy Counsellor & Whip)
Labour/Co-operative Members of the House of Lords Baroness Nicol Baroness Thornton Lord Bassam of Brighton (Whip) Lord Bilston Lord Davies of Coity Lord Foulkes of Cumnock (Privy Counsellor) Lord Fyfe of Fairfield Lord Graham of Edmonton (Privy Counsellor) Lord Moonie Lord Morris of Manchester (Privy Counsellor) Lord Thomas of Macclesfield Lord Tomlinson
Monthly meetings continue to co-ordinate work between our representatives in Westminster, Wales and Scotland.
The Westminster, Scottish and Welsh Groups work to an agreed joint Parliamentary strategy, with defined priorities for implementing the Co-operative political agenda. For example, in Westminster, current priorities are: Health policy (in particular primary care),Education (including trust Schools), Royal Mail employee ownership, Third Sector Review and Party Funding issues. 5
Legislation Our efforts to boost Co-operative legislation have again been successful, with HM Treasury implementing the asset lock for IPS bodies as established in the Co-operatives and Community Benefit Societies Act 2003. In November, the Economic Secretary, Labour/Co-op MP Ed Balls, announced that he would consult on a number of changes to update the building societies legislation, relating to offshore deposits and the contents of summary financial statements, directors’ reports and annual business statements – as well as certain financial amounts specified in the 1986 Building Society Act. At the same time, he announced that he is to undertake a review of Co-operative legislation – the Industrial and Provident Societies Acts and the Credit Unions Act. This comprehensive review will identify the strengths and weakness of the current framework and produce recommendations for improvement and reform. This is the culmination of our many years’ work to ensure a level legal playing field for co-operatives and will benefit the entire sector.
Westminster Parliamentary Panel In 2006, we also completed recruitment to our new Parliamentary Panel. With selections for prospective Parliamentary candidates now underway, we hope to continue the tradition of assisting the selection and election of highly qualified and experienced co-operators.
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Scotland Labour/Co-operative Members of the Scottish Parliament Bill Butler - Glasgow Anniesland Cathy Jamieson - Carrick, Cumnock and Doon Valley Frank McAveety - Glasgow Shettleston Helen Eadie - Dunfermline East Johann Lamont - Glasgow Pollock Marilyn Livingstone - Kirkcaldy Rhona Brankin - Midlothian Christine May - Central Fife The Co-op MSP Group has pursued a strategy of supporting objectives arising from the Co-op Party’s manifesto, “Politics for People” and the Scottish Co-op Party’s policymaking process, “Agenda 2007”. The key elements in the strategy have been: Promoting Social and Responsible Enterprise; Developing People-Based Public Services; and Empowering Communities. On Scottish Water, Christine May MSP asked the First Minister if he will guarantee that resources will be made available to ensure that the feasibility of a range of common-ownership models, including the mutual option, is fully explored and understood. The First Minister replied that he certainly hoped that, should anybody undertake a review, they would consider the mutual option as well as all the others. Marilyn Livingstone MSP moved a motion in Parliament noting the launch of Co-operative Education Trust Scotland. Twenty Labour MSPs attended a meeting of the Co-op MSP Group, which was addressed by Cathy Jamieson MSP, Deputy Leader of Labour in the Scottish Parliament and Jim Lee outlining the Scottish Co-op Party’s Agenda 2007 and how it fits in with Scottish Labour’s policies.
The Scottish Parliament debated a motion from Frank McAveety MSP highlighting the work of football supporters trusts in Scotland. The MSP Group organised a meeting between backbench MSPs and representatives of the credit union movement to allow them to outline their concerns over proposals on trust deeds. The Scottish Parliament debated a motion from Christine May MSP on credit unions. Christine May MSP submitted a motion congratulating the Co-operative Group on its new membership proposition. The MSP Group supported the ‘Making a Stand Awards’. Christine May MSP lodged a motion welcoming research into the Co-operative and Mutual Sector carried out by Heriot Watt University on behalf of CDS. The Group met with Lewis Macdonald MSP, Deputy Minister for Health and Community Care. Sarah Boyack MSP was invited to a Group meeting and outlined her Energy Efficiency and Micro-Generation Bill Proposal and explained how it relates to Mark Lazarowicz’s Bill. A Fairtrade Coffee Morning was held in the Scottish Parliament during Fairtrade Fortnight. Christine May MSP made an intervention in the debate on the Food Supply Chain to raise co-op issues.
Wales Labour/Co-operative Members of the National Assembly for Wales Christine Chapman - Cynon Valley Huw Lewis Mertyr - Tydfil and Rhymney John Griffiths - Newport East Lorraine Barrett - Cardiff South and Penarth Throughout 2006, the Co-operative Assembly Group worked to ensure that co-operation was central to the all areas of the Assembly’s work. A Co-operative Agenda for Wales In July, a Members’ Forum in the National Assembly began the process of drafting a new manifesto for the National Assembly. This was completed with the launch of A Co-operative Agenda for Wales 2007 at a fringe meeting during Wales Labour Party Conference in February 2007. A full copy is available on the website www.party.coop. Community Food Co-operatives have been running in North and South-East Wales since April 2004. There are now over 100 registered community food co-operatives in Wales serving nearly 5000 families. The Assembly Government has given substantial funding for credit unions in Wales. In its third term, the Labour Assembly Government promised to ensure that every secondary school has access to a credit union. The Co-operative Assembly Group secured Assembly Government support for the Community Housing Mutual model for stock transfer. In November 2006, tenants in Rhondda Cynon Taf voted to transfer their homes to a CHM, and others have followed. 7
In 2006, the Community Mutuals Housing Group – a partnership of organisations including the Wales Co-op Centre and the Tenants Participation Advisory Service - was set up to improve understanding of what it means to be a mutual organisation, and to provide advice and support to council staff, councillors, shadow board members and tenants.
Wales Labour Party We worked closely with the Wales Labour Party to influence Labour’s policy documents for the next Assembly. At the Policy Forum in October and the Special Conference the following month, all of the Co-operative Party’s amendments to the final policy documents were accepted. Consequently, Labour’s manifesto for 2007 includes support to establish Supporters Direct Wales; improved access to support for co-operative businesses; new not for profit nursing homes; ‘mobile mammas’ childcare co-operatives; taking the lead towards a Carbon Neutral Wales; planning guidance to protect town centres, and a commitment to examine how co-operatives and mutuals can improve primary health care provision.
Policy Public Services – Health & Education Our policy focus on public services has again concentrated on health and education. Our support for citizen and employee engagement in health has continued, and we have engaged closely with the Department of Health to ensure that NHS Foundation Trusts and new social enterprises live up to their billing as progressive mutual organisations. In Education, and building on the success of the Co-operative Group’s network of specialist schools, the Party successfully negotiated with Education Secretary Alan Johnson MP, for DFES support for the establishment of a Co-operative Trust School Pathfinder project, with Andrew Marvell School, Hull. This project is now ongoing. The Party also joined the debate around the potential for employee ownership in Royal Mail. A fringe meeting was held at the Labour Party Conference to discuss the merits of employee engagement in this public service, and will continue into the future.
Climate Change
Our 2006 climate change campaign ‘Carbon Neutral Communities,’ mirrored the award winning Co-operative Bank campaign, and resulted in a new Climate Change Act (a private members Bill from Labour/Co-op MP Mark Lazarowicz) and a ‘Green’ Queen’s Speech from the Government.
Third sector review
Alun Michael MP has led an effort to engage the co-operative and mutual sector with both the Cabinet Office and HM Treasury as they review the Government’s understanding of and approach to the Third Sector. This effort has been enhanced by a number of policy papers produce by Mutuo. 8
PiggyBankKids Charity Cup With the kind help of Manchester City Football Club, the Co-operative Party organised the fourth PiggyBankKids Charity Cup Competition at the Labour Party Conference. The event was held at Manchester City’s superb training facility, Platt Road, and was followed by a drinks reception and presentation ceremony. Altogether, the day raised £20,000 for the Jennifer Brown Research Laboratory, at Edinburgh Royal Infirmary, where groundbreaking research to save newborn lives and solve pregnancy problems is taking place.
Party Organisation and Grass Roots Communications with Members The Party website, www.party.coop is now an interactive tool, with huge resources available for all members to access. Statistics from the website show that the number of visitors to site per month has doubled since January 2006, and the total number of pages hit per month has tripled. The peaks in April/May, and then June/ July coincide with the publication of NM, and the email out of electronic communication material. The electronic communication system has been upgraded to a series of web-based newsletters, sent to several lists of subscribers, including individual members. The generic newsletter [Enews] is also available on the website.
Party Support Unit The Party Support Unit was established in 2006 to: • • • •
make better use of reduced resources drive the recruitment strategy provide focussed, equitable, and co-ordinated support to local parties ensure at least one quality event is held in each region annually as well as in Scotland and Wales
Alex Baker & Martin Tiedemann were appointed in September to join Jim Lee (Scotland) and Sylvia Hanlon (membership) under the leadership of Karen Wilkie, Assistant General Secretary. The team supports the NEC’s national campaigns and objectives by building and retaining a large, diverse, enthused & informed membership and providing local Parties with a one-stop shop for support that is co-ordinated, focussed and targeted. One of the Unit’s first jobs has been to produce a new Party Handbook a ‘how to guide’ for everything that local Party and branch officers need to know. The contents so far are: • • • • • • • • • • • •
The Rule Book Officers’ Toolkit Recruitment & membership guide Annual Conference Local Government Finance Model job descriptions How to…write a development plan How to…produce a newsletter How to…issue a press release How to…update your local web page How to…reinvigorate your local branch (the 5 minute questionnaire)
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Party Support Mailings are now regularly sent out, consolidating all the information we send to Parties into a summary of: • • • • •
National news and campaign updates This month’s campaign priorities Handbook additions & updates Model branch agenda Forthcoming events and deadlines
Looking Forward to 2007 90 Years Of The Co-operative Party 2007 is the year of the Party’s 90th anniversary. The National Executive Committee has approached this in a positive and ambitious manner. We will use the occasion of our 90th anniversary to bring our message to a wider audience in order to show how politics can be made accessible to ordinary people; how they can take political action to improve their lives; how together, we can develop politics for people. Each month in 2007 will see the Party highlight a particular aspect of co-operative political action that can be taken to deal with the major issues of the day. The following themes have been selected: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
The role of the Third Sector in our society Fair and ethical trade Community based sports Consumer and employee involvement in healthcare Renewable energy and carbon reduction Community owned public housing The value of employee ownership Access to finance Mutuality in education Co-operatives in the Information Age Land reform in the UK Co-operation, new democracy and empowerment
We will show for each of these twelve policy areas that co-operative action offers an alternative to traditional state or private sector approaches, and how individuals can participate in them. 10
financial accounts
Co-operative Party Fund Financial Review The year has been another year of growth and achievement for the Co-operative Party. Its efforts have again borne fruit in a number of key areas of work with Government, advancing the political agenda of the co-operative and mutual sector through our partnership with Labour. The key influence on Party finances in the year has been the need to re-cast the Party budget in the light of a reduction in subscription income from the Co-operative Group that will be applied from January 2007. As a consequence, the Party has re-organised its staffing resources to meet these cuts. In 2006, this has led to the closure of two regional offices: in Newcastle and Bath and the deletion of a number of posts. Two staff members were made redundant in this process at a one-off cost of circa £64,000. A further one-off expense in 2006 was £43,000 for a Mutuo project to develop primary care mutuals. The reported deficit also includes a net additional charge of £26,000 in relation to the reporting requirements of FRS 17 for ‘retirement benefits’, which increased personnel costs by £39,000 whilst generating finance income of £13,000. In operational terms, after excluding these exceptional items, the year-end results show a small deficit of circa £18,000 over the budgeted figure. Statement of Responsibilities of the Registered Treasurer The Registered Treasurer is required by the Political Parties, Elections and Referendums Act 2000 to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Party and of its surplus or deficit for that period. In preparing those financial statements, the Registered Treasurer is required to:
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• • • •
select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed subject to any material departures disclosed and explained in the financial statements and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Party will continue in existence.
Under section 41 of the Political Parties, Elections and Referendums Act 2000 the Registered Treasurer is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Party and to enable him to ensure that the financial statements comply with this Act. He is also responsible for safeguarding the assets of the Party and hence taking reasonable steps for the prevention and detection of fraud and other irregularities. Corporate Governance The NEC is ultimately responsible for the Party’s system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss. The Party has established procedures necessary to comply with the provisions of the Turnbull guidance, insofar as applicable to the Co-operative Party, as at the year-end. The review process will continue throughout future years and will be considered regularly by the NEC and its audit sub-committee. The Party has continued to review and report on internal financial controls in accordance with the Co-operatives UK’s Corporate Governance Code of Best Practice pre May 2005. The process used by the NEC to review the effectiveness of the system of internal control includes the following:
• • • • • •
A full risk assessment has been carried out to identify and evaluate the risks faced by the Party. Procedures have been established to regularly identify, evaluate and to manage significant risk. The Audit Committee reviews the effectiveness of the risk management process. A part-time Internal Auditor appointed by Co-operatives UK to report direct to the Party Audit Committee. Considering reports from management and external audit on the system of internal control and any material control weaknesses. To embed the process within the culture of the Party, all staff have been consulted and engaged in the risk management process. The Chair of the Audit Committee reports on all audit committee meetings to the NEC.
The Party has adopted an internal control framework that contains the following key elements: Internal Control The NEC is ultimately responsible for the Party’s system of internal control and for monitoring its effectiveness. The NEC through its Audit Committee monitors these systems through a review of: • • •
Monthly and annual accounts Reports of Internal Auditor Reports of External Auditors
The Audit Committee also reviews steps taken in response to significant findings or identified risks. The system of internal financial controls are designed to provide reasonable but not absolute assurances regarding: • • • •
The safeguarding of assets The maintenance of proper accounting records The reliability of financial information General responsibility for taking such steps as are reasonably open to prevent and detect fraud and other irregularities
However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss. Key procedures that have been established and are designed to provide effective internal financial control are: Control Environment An organisational structure is in place with clearly defined lines of responsibility for planning, executing, controlling and monitoring business operations. The NEC approves the Party’s annual budgets. The Party has a policy of communicating its management accounts on a monthly basis to each member of the Audit Committee. Results are reported against budgets with any significant variances considered by the NEC and remedial action taken where appropriate. Risk Identification The NEC and Party management have the primary responsibility for identifying the key risks to the business. The Party operates a risk management process identifying key risks facing the Party. Each risk is assessed for probability and likelihood of occurrence with the existing controls in place or controls required necessary to manage the risk. All risks are logged and categorised with the key risks reported to the Audit Committee and NEC. Control Procedures The Party have implemented control procedures designed to ensure complete and accurate accounting for financial transactions and to limit the potential exposure to loss of assets or fraud. Measures taken include physical controls, segregation of duties, reviews by management and external audit to the extent necessary to arrive at their audit opinions. Information and Communication The Party operates a comprehensive membership database and communication takes place through Party newsletters.
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Monitoring There are clear and consistent procedures in place for monitoring the system of internal financial controls. The Audit Committee meets at least twice a year and, within its remit, reviews the effectiveness of the Party’s internal financial controls. The Party utilises the services of an Internal Auditor who carries out a review of control procedures on a regular basis having due regard to the key risks identified. Audit reports will be issued to the appropriate level of management, containing recommendations to improve controls where weaknesses are found, together with management’s response. Auditors KPMG LLP were re-appointed as auditors on 21 May 2006. Going Concern After making all enquiries, the NEC has a reasonable expectation that the Party has adequate resources to continue in operational existence for the foreseeable future. For this reason, it continues to adopt the going concern basis in preparing the Party’s accounts. National Executive Committee Certification The accounts and notes on pages 16 to 26 are hereby signed on behalf of the National Executive Committee.
GARETH THOMAS MP Chairperson
PETER HUNT General Secretary
05 March 2007
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Independent Report of the Auditors, KPMG LLP, to the National Executive Committee of the Co-operative Party We have audited the financial statements of the Co-operative Party for the year ended 31 December 2006 which comprise the Income and Expenditure Account, the Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised Gains and Losses and the related notes. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the National Executive Committee of the Co-operative Party, as a body, in accordance with section 43 of the Political Parties, Elections and Referendums Act 2000. Our audit work has been undertaken so that we might state to the National Executive Committee those matters we are required to state to it in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the National Executive Committee, as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of the National Executive Committee and Auditors As described in the Statement of Registered Treasurer’ Responsibilities on page 1, the Registered Treasurer is responsible for the preparation of financial statements in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and have been properly prepared in accordance with the accounting policies set out on page 7 and the requirements of the Political Parties, Elections and Referendums Act 2000. We also report to you if, in our opinion, the Report of the Party Officers is not consistent with the financial statements, if the Party has not kept proper accounting records or if we have not received all the information and explanations we require for our audit.
We read the other information contained in the financial statements and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the National Executive Committee in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Party’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements whether covered by fraud or other irregularity of error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of affairs of the Party as at 31 December 2006 and of the income and expenditure for the year then ended and has been properly prepared in accordance with the accounting policies set out on page 7 and the requirements of the Political Parties, Elections and Referendums Act 2000. KPMG LLP Chartered Accountants Registered Auditor Manchester 05 March 2007
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CO-OPERATIVE PARTY FUND
INCOME AND EXPENDITURE ACCOUNT Year ended 31 December 2006 Note 2006 £ £ Income Subscriptions - Co-operative Societies 2 551,781 - Service Agreements 153,000 - Individual Members 56,702 761,483 Chargeable Services 180,000 Annual Conference 10,904 Grants and Donations 3 1,300 Constituency Plan Agreements 5 15,210 General Election appeal - Other Income 2,137 Total Income 971,034
£
2005
£
546,197 169,650 68,346
784,193 210,000 11,108 3,200 14,196 64,060 23,080 1,109,837
Expenditure Salaries and wages 338,479 402,274 Social security costs 36,766 43,554 Other employment costs 131,659 63,185 Pension - current service cost 68,000 74,000 Personnel costs 4 574,904 583,013 Rent,Rates,Insurance 8,412 61,114 Light,Heat,Cleaning 5,089 5,087 Postage,Telephone 21,526 15,055 Repairs & Renewals 2,275 2,204 Printing & Administration 60,068 77,964 Committees 28,545 22,466 Staff Travel 36,041 35,783 Annual Conference - 13,377 Schools,Conferences 9,587 34,619 Professional Fees 7,997 21,935 Auditor’s Fees - for audit 9,400 8,460 “ “ - for other work - 340 Grants to Party Councils 153,000 169,650 Constituency Plan Agreements 5 45,600 39,520 Election Campaign expenses (554) 69,569 Depreciation 19,428 17,838 Miscellaneous 50,068 4,662 Total Expenditure 1,081,386 1,182,656 Deficit from Party activities before interest (110,352) (72,819) Interest 11 3,605 6,087 Other finance income 13,000 16,000 Deficit from Party activities before taxation (93,747) (50,732) Corporation Tax 6 (705) (1,917) Deficit for the year 10 (94,452) (52,649) The above relates entirely to continuing operations.
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The notes on pages 19 to 26 form part of these financial statements
BALANCE SHEET as at 31 December 2006 Note 2006 £ £ Fixed Assets Tangible Fixed Assets 7 31,804
2005 £
37,631
Current Assets Stocks - 2,928 Debtors 8 297,976 184,092 Investments 50,000 - Co-operatives UK current account - 156,240 Cash in hand 35,580 3,512 383,556 346,772 Creditors Amounts falling due within one year 9 (194,593) (95,184) Net Current Assets 188,963 Net Assets excluding pension asset 220,767 Pension Asset 11 129,000 Net assets including pension asset 349,767 Financed by Reserves Revenue 10 349,767 349,767
The notes on pages 19 to 26 form part of these financial statements
£
251,588 289,219 164,000 453,219
453,219 453,219
17
CASH FLOW STATEMENT Year ended 31 December 2006
Note
Net cash inflow/(outflow) from operating activities
15
Returns on investments and servicing of finance
16
Taxation Corporation tax Capital expenditure and financial investment 17 Decrease in cash
2006 £ (63,471)
2005 £ 16,317
3,605
6,087
(705)
(1,917)
(63,601)
(21,249)
(124,172)
(762)
Reconciliation of net cash flow to movement in net fund Net fund at 1 January
18
159,752
160,513
Decrease in cash 18 (124,172) (762) Net fund at 31 December 18 35,580 159,752 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR YEAR ENDED 31 DECEMBER 2005 2006 2005 £ £ Deficit before taxation Taxation
(93,747)
(50,732)
(705) ------------------- (94,452)
(1,917) ------------------- (52,650)
Actuarial loss 11 (9,000) Total recognised gains and losses relating to the ------------------- financial year (103,452) Prior year adjustment - ------------------- Total gains and losses recognised since last annual report (103,452) -------------------
(17,000) ------------------- (69,650) 209,000 ------------------- 139,350 -------------------
The notes on pages 19 to 26 form part of these financial statements
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Notes to the Accounts
1. STATEMENT OF ACCOUNTING POLICIES
Basis of Accounting The financial statements reflect the transactions of the national organisation of the Co-operative Party, including its regional officers. The transactions of local Party organisations and of the political activities of individual Co-operative Societies, which are not under the control of the National Executive Committee, are not included. Grants to local Party organisations are shown as expenditure in the financial statements when they are made.
The Party has adopted Financial Reporting Standard 17 ‘Retirement Benefits’ in these financial statements. The comparative figures have been restated accordingly.
The financial statements are prepared on the historical cost accounting basis and in accordance with regulations made by the Electoral Commission.
Income Recognition Income is recognised when all of the following conditions have been met; - the Party is entitled to the asset; - there is reasonable certainty that the asset will be received; and - the value of the asset can be measured with reasonable certainty.
Depreciation Fixed assets are depreciated by equal annual instalments over their expected useful economic lives at the following minimum rates:
Fixtures, Fittings and equipment - 20% to 50% per annum. Motor Vehicles - 25% per annum.
The foregoing rates are used to write off the cost of the various assets over their expected useful life.
Stocks Stocks are valued at the lower of cost and net realisable value.
Corporation and Deferred Taxation The Party is liable to tax on investment income. No deferred tax is recognised in the Party’s accounts as investment income is taxed on the same basis as it is recognised in the income and expenditure account.
Applying these criteria to specific types of income results in the following treatment: Subscription income is recognised on an accruals basis and includes all amounts receivable for the year. Grants and donations are recognised in the income and expenditure account when the conditions for receipt have been met. Investment income is accounted for on an accruals basis.
Pensions Staff are eligible to join a pension scheme operated by Co-operatives UK Limited, which provides benefits based on final pensionable pay. The assets of the scheme are held separately from those of Co-operatives UK, being invested with the Co-operative Insurance Society. Pension scheme assets are measured using market values. Pension scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability.
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1. STATEMENT OF ACCOUNTING POLICIES (continued) Operating Leases Rental payable under operating leases are charged to the Income and Expenditure account as they arise. 2. INCOME Subscriptions from Co-operative Societies are collected with the Societies’ subscriptions to Co-operatives UK. Service agreement subscriptions represent management fees for managing the political services of the Co-operative Group Limited. Society £ Society £ Anglia Regional 20,119 Midlands 53,292 Bath Housing Co-operative 51 Plymouth & South West 15,528 Chelmsford Star 2,892 Radstock 1,125 Co-operative Forum (NI) 111 Raunds 315 Co-operative Press 103 Scottish Midland 10,543 East of England 18,464 Southern 15,983 Gilsland Spa 299 Co-operative Group 311,900 Leeds 6,321 United Co-op 70,735 Midcounties 24,000 Total Subscriptions 551,781 3. GRANTS & DONATIONS 2006 2005 £ £ Donations 1,300 3,200 4.
EMPLOYEES
The average number of staff, who are employed by the Co-operative Party was as follows: 2006 2005 Full time Part time Full time Part time 10 2 13 2 The costs incurred in respect of these employees were: 2006 2005 £ £ Wages and salaries 338,479 402,274 Social security costs 36,766 43,554 Pension - current service cost (note 11) 68,000 74,000 Others 131,659 63,185 574,904 583,013 Others include an amount for consultancy of £ 59,587 (2005 - £34,961) and £ 64,463 (2005 - £25,000) for redundancy and compensation payments.
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Senior Management remuneration
The total remuneration of the members of the management team was as follows: Salaries Pension Contributions Taxable Benefits
2006 £ 232,519 23,949 5,507
261,975
2005 £ 281,304 26,102 5,270 312,676
The remuneration of the General Secretary (who is also the highest paid employee) included above was as follows: 2006 2005 £ £ Salary 70,469 68,352 Pension Contributions 7,258 6,822 Taxable Benefits 5,507 5,270 83,234 80,444 The taxable benefits stated at £ 5,507 (2005 - £5,270) is for the provision of a company vehicle provided for the General Secretary. The number of staff whose total emoluments paid or receivable was over £50,000 fell within the following bands: 2006 2005 Number Number £70,001 - £75,000 - 1 £75,001 - £80,000 1 - The total remuneration paid to the above employee for the year was £ 83,234 (2005 - £80,444) The most recent actuarial valuation of the pension scheme was at 30 September 2004. The Co-operative Party is required to comply with the reporting requirements relating to Financial Reporting Standard 17. 5.
CONSTITUENCY PLAN AGREEMENTS
These are agreements entered into between the Co-operative National Executive Committee and the Labour Party Constituencies to which partner Societies Co-operative Parties contribute one third of the cost. Payments are made direct to the Constituency Labour Parties. 6. TAXATION 2006 £ Taxation on the Party’s investment income
705
2005 £ 1,917
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7. TANGIBLE FIXED ASSETS
Motor Vehicle Fixtures, Fittings & Equipment Total £ £ £ COST 1 January 2006 22,548 159,574 182,122 Additions - 13,601 13,601 31 December 2006 22,548 173,175 195,723 DEPRECIATION 1 January 2006 12,898 131,593 144,491 Charge for year 5,637 13,791 19,428 31 December 2006 18,535 145,384 163,919 NET BOOK VALUE 1 January 2006 9,650 27,981 37,631 31 December 2006 4,013 27,791 31,804 Capital Commitments As at 31 December 2005 there were no capital commitments (2005 - £nil). Capital expenditure authorised but not committed amounts to £nil (2005 - £nil). 8. DEBTORS 2006 2005 £ £ Trade Debtors 183,016 167,600 Prepayments 17,020 12,104 Other Debtors 97,940 4,388 297,976 184,092 Trade Debtors are shown after making a provision for bad debts of £ nil (2005 - £ Nil) . 9. CREDITORS 2006 £ Trade Creditors 10,588 Taxation and Social security 42,131 Accrued charges 141,874 194,593 10. RESERVES 2006 Revenue reserve £ At beginning of the year as previously reported 453,219 Prior year adjustment - Balance at 1 January 2006 453,219 Deficit for the year (94,452)
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2005 £ 7,473 16,038 71,673 95,184
2005 £ 313,868 209,000 522,868 (52,649)
Actuarial loss recognised in the pension scheme (9,000) (17,000) Balance at 31 December 2006 349,767 453,219
10. RESERVES (continued) 2006 £ Profit and loss reserve excluding pension asset 220,767 Net pension asset 129,000 Profit and loss reserve including pension asset 349,767 11.
2005 £ 289,219 164,000 453,219
PENSION SCHEME
The Co-operative Party (the employer) along with other employers participates in a defined benefit pension scheme (The Co-operatives UK Limited Staff Pension Scheme), the assets of which are held in a separate fund administered by trustees. A full actuarial valuation of the scheme was carried out as at 30 September 2004, and updated to 31 December 2005, by a qualified independent actuary. The service cost has been calculated using the Projected Unit method. The major assumptions used by the actuary were (in nominal terms): 2006 2005 2004 Rate of increase in salaries 5.00% 4.80% 4.70% Rate of increase in pensions in payment 3.00% 2.70% 2.70% Rate of increase of pensions in deferment 3.00% 2.80% 2.70% Discount rate 5.10% 4.70% 5.20% Inflation assumption 3.00% 2.80% 2.70% The Employer contributed to the Scheme at the rate of 10.3% of pensionable salaries during the period The assets in the scheme and the expected rates of return (*) were: Year ended 31/12/2006 Year ended 31/12/2005 Year ended 31/12/2004 £000’s £000’s £000’s Equities 7.0% 286 6.6% 491 7.1% 1,107 Bonds 4.5% 300 4.1% 598 4.6% 1,376 Property 7.0% 112 6.6% 210 7.1% 501 Total market value of assets 698 1,299 2,984 Actuarial value of liability (569) (1,135) (2,775) Surplus in the scheme 129 164 209 Effect of surplus cap - - Recoverable surplus in the scheme 129 164 209 Net pension asset 129 164 209 Note: The market value of the assets and the actuarial value of the liabilities for the year ended 31 December 2006 do not make any allowance for the liabilities in respect of members entitled to deferred pensions and members in receipt of pension as these liabilities have been secured with CIS Limited and the corresponding assets offset one another. This approach is the same as that used for the year ended 31 December 2005. It differs from previous years but it should be noted that this change does not affect the balance sheet surplus or any of the profit and loss and STRGL figures.
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* The rates quoted on page 11 are the expected net rates of return after allowance for expenses Analysis of amount charged to operating profit 2006 £000’s Current service cost 68 Past service cost - Total operating charge 68 Analysis of net return on Scheme 2006 £000’s Expected return on scheme assets 49 Interest on pension liabilities (36) Other finance income 13
2005 £000’s 74 74
2005 £000’s 64 (48) 16
Analysis of amount recognised in Statement of Total Recognised Gains and Losses (STRGL) 2006 2005 £000’s £000’s Actual return less expected return on assets 124 87 Experience gain on liabilities (123) 32 Changes in assumptions (10) (136) Net loss recognised (9) (17) Movement in surplus during the year 2006 2005 £000’s £000’s Surplus in scheme at beginning of the year 164 209 Movement in year: Current service cost (68) (74) Contributions 29 30 Net return on assets 13 16 Actuarial loss (9) (17) Surplus in scheme at end of year 129 164
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History of experience gains and losses 2006 2005 2004 2003 2002 Difference between the expected and actual return on scheme assets: amount (£000’s) 124 87 167 (266) (71) % of scheme assets 17.8% 6.7% 5.6% (10.0%) 2.7% Experience gains and losses on scheme liabilities: amount (£000’s) (123) 32 (264) 232 135 % of the present value of the scheme liabilities (21.6%) 2.8% (9.5%) 10.4% 6.7% Total amount recognised in statement of total recognised gains and losses: amount (£000’s) (9) (17) (206) (213) 8 % of the present value of the (1.6%) (1.5%) (7.4%) (9.5%) 0.4% scheme liabilities 12.
OPERATING LEASE COMMITMENTS
At 31 December 2005 the Party had annual commitments under non-cancellable operating leases as follows: Land and Land and Buildings Buildings 2006 2005 Operating leases expiring: £ £ Within one year - 37,750 in the second to fifth year inclusive 31,000 13. NATIONAL EXECUTIVE COMMITTEE
The members of the National Executive Committee (NEC) receive no remuneration for their services as members. They do receive reimbursement for expenses incurred in discharging their responsibilities in accordance with the scales set by the Co-operatives UK. Expenses reimbursed for 2006 were £ 28,501 (2005 - £22,466). Certain members of the NEC are also members of the boards or governing committees of other bodies in the Co-operative Movement (see note14). Information regarding transactions between the Party and such bodies is given in note 2. 14.
RELATED PARTIES Communicate Mutuality Limited As the General Secretary of the Co-operative Party is the Chief Executive of Communicate Mutuality Limited (CM) and the Party also has Len Wardle as a member of the NEC on the board of CM, CM constitutes a related party. In accordance with the disclosure requirements of Financial Reporting Standard 8 ‘Related Party Disclosure’ the following transactions took place during 2006 The Co-operative Party provided services to Communicate Mutuality Limited totalling £ 180,000 (2005:£ 210,000). Amounts remaining outstanding at the year end total £ 121,354 (2005:£102,813).
Co-operatives UK Limited Co-operatives UK maintained a fund on behalf of the Party up to 31 December 2005 which amounted to £156,240. The Party, as from 1st January 2006, registered as a separately registered I&P society and as a result all funds were paid over from Co-operatives UK during 2006.
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15. RECONCILIATION OF DEFICIT TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 2006 £ Deficit for the year before interest (110,352) Depreciation charge 19,428 Decrease/(Increase) in stocks 2,928 (Increase)/Decrease in debtors (113,884) Increase/(Decrease) in creditors 99,409 Movement in pension for employer liabilities 39,000 Net cash inflow/(outflow) from operating activities (63,471)
2005 £ (72,819) 17,838 13,273 (20,395) 34,420 44,000 16,317
16. RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 2006 2005 £ £ Interest received 3,605 6,087 17. CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of tangible fixed assets Purchase of investments
2006 £ (13,601) (50,000)
2005 £ (21,249) -
(63,601)
(21,249)
18. ANALYSIS OF NET FUND 1 January Cash Flows 1 December 2006 2006 £ £ £ Cash in hand 3,512 2,068 35,580 Co-operatives UK current a/c 156,240 (156,240) Total 159,752 (124,172) 35,580
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