The Crown Prosecution Service
Annual Report and Accounts 2023–2024

Notes to Departmental Accounts

1. Statement of accounting policies

Basis of preparation

The financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (IFRS) as adapted and interpreted by the Financial Reporting Manual (FReM) issued by HM Treasury. Where the FReM permits a choice of accounting policy, the accounting policy which is judged to be the most appropriate to the particular circumstances of the Crown Prosecution Service for the purpose of giving a true and fair view has been selected. The particular policies adopted by the Crown Prosecution Service are described below. They have been applied consistently in dealing with items that are considered material to the accounts.

1.1. Accounting Convention

These accounts have been prepared under the historical cost convention modified to account for the revaluation of non-current assets.

1.2. Going concern

The CPS’ Statement of Financial Position shows a net liability as at 31 March 2024. However, these accounts are produced on a going concern basis in accordance with the FReM, as the CPS is a non-ministerial government department providing services that are anticipated to continue, as evidenced by the provision of future supply funding voted by Parliament.

1.3. Non-current Assets

Property, plant and equipment

Property, plant and equipment that are capable of being used for a period exceeding one year and that have a cost equal to or greater than £2,000 are capitalised, including leasehold improvements. Where significant purchases of individual assets that are separately beneath the capitalisation threshold arise in connection with a single project, they are treated as a grouped asset. On initial recognition, assets are measured at cost, including any costs such as installation directly attributable to bringing them into working condition. Subsequently, assets that are held for their service potential and are in use are measured at current value in existing use, which is interpreted as market value for existing use.

Costs of bought-in services incurred in preparation for the implementation of ICT projects are capitalised. Internal costs incurred on the same projects are not capitalised where the work can only be carried out by in-house staff.

Property, plant and equipment is revalued at current value in existing use each year by indexation up to the year end using Producer Price Indices, published by the Office for National Statistics. The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

Intangible non-current assets

On initial recognition, intangible non-current assets are measured at cost including any costs such as installation directly attributable to bringing them into working condition. Subsequently, intangible non-current assets are measured at current value in existing use where an active market exists, otherwise at the lower of amortised replacement cost and value in use. All expenditure on intangible non-current assets that are capable of being used for a period that exceeds one year and individually have a cost equal to or greater than £2,000 is capitalised.

1.4. Depreciation, Amortisation and Impairment

Property, plant and equipment

Property, plant and equipment are depreciated at rates calculated to write them down to estimated residual value on a straight line basis over their estimated useful lives. Asset lives are normally in the following ranges:

Furniture and fittings 4 to 10 years Information technology 3 to 4 years

Leasehold improvements are written off over the shortest of:

1. the remaining life of the property lease;
2. 10 years; or
3. where it has been established that a break clause in the lease is likely to be exercised by the CPS, the period to the first possible date of exercise of the relevant break clause.

Impairment losses that arise from a consumption of economic benefit are taken to the Statement of Comprehensive Net Expenditure, the balance on any revaluation reserve (up to the level of the impairment) being transferred to the general fund. Impairment losses that do not result from a loss of economic benefit are taken to the revaluation reserve, to the extent that the impairment does not exceed the amount in the revaluation surplus for the same asset.

Intangible non-current assets

Intangible assets are amortised on a straight line basis over their estimated useful lives. Impairment losses are charged in the same way as those arising on property, plant and equipment.

Right-of-use assets

Right-of-use assets are depreciated on a straight line basis over the associated lease term, or estimated useful life where this is shorter. Impairment losses are charged in the same way as those arising on property, plant and equipment.

As permitted by the FReM, right-of-use assets are subsequently measured using the cost model as a proxy for the measurement of the cost of value in use. This is because lease terms require lease payments to be updated for market conditions, for example, rent reviews for leased properties, which will be captured in the IFRS 16 cost measurement provisions. Right-of-use assets also have shorter useful lives than their respective underlying assets and, as such, cost can be used as a proxy for assets with shorter economic lives or lower values in accordance with the FReM.

1.5. Leases

In accordance with the FReM, intra-UK government agreements, including Terms of Occupancy Agreements (TOA) with GPA, are treated as contracts and therefore within the scope of IFRS 16 where they convey the right to use an asset.

Where a lease has been identified, the CPS recognises a right-of-use asset and a corresponding lease liability, except for short term leases and leases for which the underlying asset is of low value. For such leases, the lease payments are recognised as an expense on a straight line basis over the lease term.

The CPS determines the term of a lease as the non-cancellable period of a lease combined with periods covered by an option to either:

1. extend the lease where the CPS is reasonably certain to exercise that option
2. terminate the lease where the CPS is reasonably certain not to exercise that option

In assessing whether an option is reasonably certain to be exercised or not exercise, judgement is applied in consultation with future property strategy.

The CPS has not set a specific threshold for identifying assets that are of low value, and applies the guidance in IFRS 16 on a case by case basis.

Where the interest rate implicit in a lease cannot be readily determined, the CPS calculates the lease liability using the HM Treasury discount rates promulgated in PES papers as the incremental borrowing rate. For leases that commence or are remeasured in the 2024 calendar year, this rate is 4.72% (2023: 3.51%).

The CPS does not apply IFRS 16 to leases of intangible assets and recognises these in accordance with IAS 38 where appropriate.

1.6. Cash

For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash at bank and cash in hand.

1.7. Financial Assets and Liabilities

Financial assets consist of trade receivables and other current assets such as cash at bank and in hand. Financial liabilities consist of trade payables and other current liabilities. In accordance with IFRS 9 – Financial Instruments, financial assets and liabilities are initially recognised at fair value, which is determined by reference to the underlying contract giving rise to the debt or liability. Subsequently, they are measured at amortised cost using the effective interest method, less any impairment.

1.8. Allowance for Impairment of Receivables

The CPS receives the bulk of its income from costs awarded against convicted defendants. His Majesty’s Courts and Tribunals Service (HMCTS) is responsible for the collection of costs awarded to the CPS. The CPS writes off specific costs awards when HMCTS considers the debts will not be collected. A proportion of the remaining income will not be collected and the CPS recognises a loss allowance equal to lifetime expected credit losses. The allowance provided against costs awards receivable is based on a financial model utilising historical data relating to the total costs awarded in court and the amount of cash actually received with further adjustments to collection rates for estimated costs collected by the Department for Work and Pensions (DWP) on behalf of the CPS as well as the recent change in Victim Surcharge rates.

As a result of a court case and subsequent legislation enacted, the collection of costs awarded to the CPS by DWP are expected to be collected at a slower rate than that previously experienced. Therefore, in calculating the allowance, the CPS has estimated the impact of the change in collection rates with a lower rate of collection in the periods immediately following the costs being awarded but a marginally higher rate of collection after this.

There is a legal hierarchy for recovery, in which cash collected from offenders is used to pay compensation and the Victim Surcharge before the CPS receives the costs it has been awarded. During the 2022-23 financial year, there was an increase to rates for the Victim Surcharge and consequentially more cash is required to be collected from offenders to pay off the Victim Surcharge before CPS will receive the cash for costs awarded. As a result an adjustment was made to historic collection rates to account for the impact of this change.

In accordance with IFRS 9 – Financial Instruments, the CPS assesses expected credit losses on its financial assets. If material, the CPS recognises a loss allowance for impairment of trade and other receivables. Assessment of expected credit losses includes an analysis of historic rates of default and amounts lost in the event of default, which are used to estimate the likelihood of such losses occurring in future.

As required by the FReM, the CPS adopts the simplified approach for impairment of trade receivables, contract assets and lease receivables and does not recognise loss allowances for stage 1 and stage 2 impairments of receivables with other central government departments (including their executive agencies).

1.9. Operating Income

Operating income is income that relates directly to the operating activities of the CPS. Operating income is stated net of VAT.

The CPS receives awards of costs made against convicted defendants at the discretion of the judge or magistrates. In order to account for costs awards, the CPS uses returns submitted quarterly by the magistrates’ courts, which are responsible for the collection of these costs. Income is recognised based on the date when the court awards costs.

Under the Proceeds of Crime Act’s ‘Asset Recovery Incentivisation Scheme’, which is managed by the Home Office, the CPS is allocated a proportion of the total value of assets recovered in the year. For confiscation orders, receipts are shared between the Home Office and investigation, prosecution and enforcement agencies, with the CPS being entitled to an 18.75% share of total receipts. Income is recognised when the Home Office receives recovered amounts and confirms how these will be allocated to eligible bodies, which is the point at which it becomes probable that economic benefits will flow to the CPS and at which these can be measured reliably.

Where relevant, the CPS recognises revenue from contracts with customers. This includes income in respect of seconded staff and provision of legal and other services.

1.10. Government Grants

The CPS benefits from government funding for apprenticeship training, financed by the Apprenticeship Levy. Under the terms of the Government’s apprenticeship arrangements, the CPS has an account holding funds based on its levy payments, which it can access to pay for apprenticeship training. When these funds are drawn down, the CPS recognises government grant income along with a corresponding training expense. As payments are made directly from the apprenticeship account to approved training providers, the income and expense recognised are non-cash in nature.

The CPS may also be eligible to receive cash incentive payments where it employs apprentices aged between 16 and 18 years. Such payments are recognised as government grant income.

Other amounts that the CPS receives from government bodies, where these are not in payment for services delivered, are recognised as government grant income in the same periods as the related expenses.

Government grant income is presented on a gross basis, separate from related expenses.

1.11. Expenditure

Expenditure is recognised on an accruals basis. Accrued expenditure is recognised when there is an unconditional obligation to pay. Very High Cost Cases (VHCC) are expected to last in excess of 40 days (or have three or more trial counsel instructed). Counsel are required to submit invoices covering work done when pre-determined stages in the case are reached and expenditure is recognised on an accruals basis at the completion of each stage.

Counsel fees in the majority of Crown Court cases which are those expected to last for 40 days or less are paid through the CPS ‘Graduated Fee Scheme’. The scheme calculates fees taking into account a range of set cost factors including the number of defendants, type of counsel, volume of evidence, number of witnesses and length of trial. Where actual counsel fees for trials completed at the financial year end can be ascertained, they have been accrued for on this basis; in all other cases the CPS accrues an estimate of such counsel fees outstanding. For trials partially completed at the financial year end, it is not possible to ascertain the precise value owed for counsel fees until some considerable time later.

The CPS therefore accrues an estimate of the fees likely to have been incurred.

1.12. Short Term Employee Benefits

Salaries, wages and employment related benefits are recognised in the period in which the service is received from employees. Annual leave earned but not taken by the year end is recognised on an accruals basis in the financial statements. Non-consolidated performance pay is recognised when it becomes payable to the individual.

1.13. Pensions

Past and present employees are covered by the provisions of the Principal Civil Service Pension Scheme (PCSPS) and the Civil Servant and Other Pension Scheme (CSOPS).

These schemes are unfunded, defined benefit schemes covering all civil servants. The schemes are not designed in a way that would enable employers to identify their share of the underlying scheme assets and liabilities, and they are therefore accounted for as though they were defined contribution schemes.

The CPS recognises the expected cost of providing pensions on a systematic and rational basis over the period during which it benefits from employees’ services by payment to the Civil Service Pensions schemes of amounts calculated on an accruing basis. Liability for payment of future benefits is a charge on the Civil Service Pensions schemes. For Civil Service defined contribution schemes, the CPS recognises the contributions payable for the year.

1.14. Provisions

The CPS provides for legal or constructive obligations, which are of uncertain timing or amount, at the date of the Statement of Financial Position, on the basis of the best estimate of the expenditure required to settle the obligation.

In accordance with IFRS 16, the CPS capitalises provisions for dilapidations on leased assets as part of the right-of-use asset. Capitalised amounts are depreciated over the life of the right-of- use asset. Movements in other provisions are recognised as an expense.

Where the effect of the time value of money is significant, the estimated risk-adjusted cash flows are discounted using the nominal rates set by HM Treasury. As at 31 March 2024, the discount rates for general provisions were 4.26% (2022-23: 3.27%) for cash flows between 0 and 5 years, 4.03% (2022-23: 3.20%) for cash flows between 5 and 10 years, 4.72% (2022-23: 3.51%) for cash flows between 10 and 40 years, and 4.40% (2022-23: 3.00%) for cash flows exceeding 40 years. The estimated cash flows are adjusted for inflation using OBR CPI.

1.15. Contingent Liabilities and Contingent Assets

A contingent liability is disclosed in the financial statements unless the possibility of a payment is remote. Where the time value of money is material, contingent liabilities are stated at discounted amounts. Where remote liabilities are required to be reported to Parliament, these are noted separately in the Parliamentary accountability and audit report.

A contingent asset is only disclosed if an inflow of economic benefits is considered probable.

1.16. Value Added Tax

Most of the activities of the CPS are outside the scope of VAT and, in general, output tax does not apply and input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase cost of assets. Where output tax is charged or input tax is recoverable, the amounts are stated net of VAT.

1.17. New or amended standards issued but not yet effective and not adopted early

IFRS 17 Insurance Contracts

IFRS 17 sets out requirements for the recognition and measurement of contracts and associated revenue where an entity accepts insurance risk from another party. The CPS has not entered into insurance contracts and does not currently expect to be affected by the new standard.

IFRS 17 is currently applicable for reporting periods beginning from 1 January 2023. The standard, including the date from which it is expected to be applicable in the public sector, is subject to further review by HM Treasury.

1.18. Areas of judgement and key sources of estimation uncertainty

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of income and expense during the period. Actual results could differ from these estimates. Information about these judgements and estimations is detailed below.

Graduated Fees Scheme (GFS) accruals

The system for managing and paying counsel fees in Areas and Casework Divisions is complex and there is a lengthy chain between case initiation and payment of fees at the conclusion of the case, which involves many individuals. This means that generating an accurate counsel fee accrual relies on data sent from a number of financial and non-financial sources.

The overall GFS accruals figure is informed by trend analysis of expenditure from prior periods, caseload volumes and a detailed assessment of a number of variables that tend to increase or decrease total expenditure on fees. An assessment of the volume of caseloads in the current year compared to the prior year is used to inform what the GFS accrual is required to be at an organisational level. This is then compared to the total accrual position from Areas and Central Casework Divisions, resulting in an adjustment to provide the appropriate overall Departmental accrual.

Additionally, the CPS estimates an accrual for trials that are not completed at the financial year end. Since the data required to accurately assess counsel fees for these trials is not available until some considerable time after the year end, the CPS uses data from the previous financial year end to estimate the amount of fees likely to have been incurred. This estimate is based on the assumption that allotted trial days occur immediately before the final hearing date, and that the level of activity is consistent from one year to the next.

Allowance for impairment of receivables – Costs Awards

The CPS receives awards of costs made against convicted defendants at the discretion of the judge or magistrates. The CPS is informed of the level of costs awarded in court by HMCTS and accounts for the corresponding receivables. HMCTS then pays over the cash collected, which reduces the receivable balance.

A number of these costs awarded may never be collected, for example when the individual has left the country or has died. HMCTS writes off irrecoverable debts as and when they become apparent and informs the CPS of the amounts written off. Additionally, the CPS recognises an allowance for impairment of the outstanding receivables to reflect the fact that a proportion of these will not be recovered. Previously, this impairment was based on historical information on rates of collection and relies on the assumption that similar rates will apply in future but adjustments have been made in 2023-24 to account for recent pertinent changes. See Note 1.8 for further details.

The impairment methodology assumes that all receivable amounts that are not forecast to be received in the future based on historical rates of collection will ultimately be irrecoverable. The forecast cash flows are discounted using the HM Treasury rate for financial instruments of 2.05% (2022-23: 1.9%).

Dilapidations

The CPS has entered into a number of rental agreements for the properties it occupies. Most of these agreements include clauses requiring the CPS, at the end of the rental period, to return the property to the landlord in its original state or to pay the landlord the cost of any necessary work to achieve this (“dilapidations”). The CPS therefore provides for the cost of removing any modifications it makes and repairing any damage or wear occurring during its tenancy.

On 29 May 2020, the CPS transferred responsibility for its property portfolio to the Government Property Agency (GPA). Under this arrangement, GPA assumes responsibility for the head lease for each property occupied by the CPS and sub-leases these properties to the CPS under Terms of Occupancy Agreements (TOA). GPA is responsible for estimating the dilapidations liabilities it incurs under the head leases and recognises corresponding assets reflecting that it passes these liabilities on to the CPS. GPA has appointed a professional surveyor to provide these estimates, which are prepared separately for each property based on information taken from previous settlements and claims for similar buildings, tenders received for projects involving similar types of building work, and cost information from industry standard sources such as the Building Cost Information Service (BCIS) and other well-known price books. The CPS then assesses the appropriateness of the judgments made in arriving at the estimates.

Where CPS has entered into a new lease agreement and GPA has not provided an estimate of the dilapidation the CPS uses a rate per square meter, provided by the GPA, to calculate the dilapidation estimate based on the area CPS occupies at that property.

2. Statement of Operating Costs by Operating Segment

CPS is organised for management purposes into operational Areas and a number of corporate units. For financial reporting purposes, the segment reporting format is determined based on the way in which financial information is presented to the senior decision makers (the Chief Executive and the Board) for monitoring performance and allocating resources.

The following table presents the operating expenditure by reportable operating segment. Income is primarily managed centrally so is reported as a single segment. Although many of the operating units are regionally defined, this does not represent a geographical analysis of expenditure because some regional expenditure is managed and reported by centralised units which operate on a national basis.

3. Expenditure

1. Further analysis of staff costs is located in the Staff Report on page 105.
2. There has been no auditor’s remuneration for non-audit work. The audit fee comprises of £130k for the audit of the Department’s 2023-24 Annual Report and Accounts and £12,000 for the audit of the Trust Statement. The audit fee for 2022-23 comprised £120k for the audit of the 2022-23 accounts.

4. Income

5. Property, plant and equipment

5.1. Reconciliation of additions and disposals to cash flows from investing activities shown in the Statement of Cash Flows

5.2. Impairments

6. Right of use assets

6.1. Amounts recognised in statement of comprehensive net expenditure in respect of leases

7. Intangible assets

8. Financial Instruments

As the cash requirements of the CPS are met through the Estimates process, financial instruments play a more limited role in creating and managing risk than would apply to a non-public sector body of a similar size. The majority of financial instruments relate to contracts for non-financial items in line with the CPS’s expected purchase and usage requirements and the CPS is therefore exposed to little credit, liquidity or market risk.

8.1. Fair value and carrying amount of cost awards receivable

The CPS recognises a receivable for awards of costs made in court against convicted defendants. Due to the nature of this recoverable, it is expected that full recovery will not be made in all cases, and the CPS recognises an allowance for impairment of the receivable to the net present value of the estimated future flow of repayments, discounted at the Treasury rate of 2.05% (2022‑23: 1.9%). This impaired carrying amount represents fair value. In 2023-24 the value of the net receivable was £25.105 million.

The impairment is calculated on the assumption that future recovery rates will reflect historic experience, with an estimate as to the impact of the change in collection rates of those costs collected by DWP as well as the impact of changes in the Victim Surcharge rates. (see Note 1.8 for further details). As a result, there is inherent uncertainty in the estimation of the provision.

The following sensitivity analysis demonstrates the potential impact on the receivable balance of changes in the assumption of recovery rates by 5% and 10% in either direction.

9. Trade and other receivables

9.1. Reconciliation of movement in cost awards net receivable

The allowance for impairment is based on a forecast of future cash flows, using historic receipts data, discounted at the HM Treasury rate of 2.05% for financial instruments.

10. Cash and cash equivalents

10.1. Reconciliation of liabilities arising from financing activities

11. Trade and other payables

12. Provisions for liabilities and charges

Analysis of expected timing of discounted flows 2023-24

Analysis of expected timing of discounted flows 2022-23

Dilapidations

The dilapidations provision relates to dilapidation claims served by landlords at the expiry of a lease on a property occupied by CPS. A provision is made against all anticipated dilapidation claims at a rate per square metre which reflects actual dilapidations discounted to reflect the time value of money.

Other provisions

Other provisions comprise outstanding compensation claims for personal injury, employment tribunal and civil legal claims. In respect of compensation claims, provision has been made for the litigation against the Department. The provision reflects all known legal claims where legal advice indicates that it is more than 50 per cent probable that the claim will be successful and the amount of the claim can be reliably estimated.

Legal claims which may succeed but are less likely to do so or cannot be estimated are disclosed as contingent liabilities in Note 13.

13. Contingent assets and liabilities

As at 31 March 2024, the CPS was involved in five employment tribunal cases in addition to those for which a provision has been made (note 12). These may result in settlements totalling £173,000.

As at 31 March 2024, the CPS was also involved in 2 civil cases which may result in settlements totalling £65,000.

As at 31 March 2024, the CPS was also involved in additional legal cases where it is not possible to estimate the value of the liability.

14. Other financial commitments

The CPS has entered into non-cancellable contracts (which are not leases, PFI contracts or other service concession arrangements), predominantly for ICT services and software.

The payments to which the CPS are committed are as follows:

Figures for 2022-23 have been restated to allow for direct comparison with 2023-24 and exclude commitments under a lease recognised under IFRS 16.

15. Related-party transactions

The CPS has close working relationships with all agencies within the criminal justice system and particularly with HM Courts and Tribunals Service (HMCTS), their ultimate controlling party being the Ministry of Justice. HMCTS is regarded as a related party with which the CPS has had material transactions, being mainly cost awards collected by HMCTS acting as an agent for the CPS (see Note 4) less amounts written off (or written back) (see Note 3).

In addition the CPS has had material transactions with a number of other government departments. These include the Home Office for Asset Recovery Incentivisation Scheme income (see Note 4), Government Property Agency for accommodation related costs, HMRC for taxation including VAT paid and recoverable under Contracted Out Services and Government Legal Department in respect advice on litigation cases. 

The CPS also has material transactions with the Foreign, Commonwealth and Development Office in respect of its work in developing cooperation with international partners.

No Board Member, key manager or other related party has undertaken any material transactions with the CPS during the year. Remuneration paid to Board Members is disclosed in the Remuneration and staff report.

16. Events after the reporting period

In accordance with the requirements of IAS 10, events after the reporting period are considered up to the date on which the accounts are authorised for issue. This is interpreted as the date of the Certificate and Report of the Comptroller and Auditor General.

There have been no events after the reporting period requiring disclosure.