Notes to the consolidated financial statements

• « 10 Insurance claims
• 11 Operating expenses
• 12 Impairment »

11 Operating expenses

	2008 £m		2007 £m
Salaries	2,183		2,127
Social security costs	176		167
Pensions and other post-retirement benefit schemes (note 37)	235		238
Other staff costs	337		372
Staff costs	2,931		2,904
Other administrative expenses:
Operating lease rentals	265		250
Repairs and maintenance	151		154
Communications and data processing	455		462
Advertising	194		192
Professional fees	229		279
Provision in respect of certain historic US dollar payments (note 48)	180		–
Provision for Financial Services Compensation Scheme levy (note 48)	122		–
Settlement of overdraft claims	–		76
Other	740		620
	2,336		2,033
Depreciation of tangible fixed assets (note 26)	648		594
Amortisation of other intangible assets (note 25)	38		36
Goodwill impairment charge (note 23)	100		–
Total operating expenses	6,053		5,567

The average number of persons on a headcount basis employed by the Group during the year was as follows:

	2008		2007
UK	64,355		67,616
Overseas	2,118		1,937
	66,473		69,553

	2008 £m		2007 £m
Fees payable for the audit of the Company's current year annual report	7.1		6.8
Fees payable for other services:
Audit of the Company's subsidiaries pursuant to legislation	2.5		2.5
Other services supplied pursuant to legislation	3.0		2.7
Total audit fees	12.6		12.0
Other services – audit related fees	5.3		1.1
Total audit and audit related fees	17.9		13.1
Services relating to taxation	0.5		0.7
Other non-audit fees:
Services relating to corporate finance transactions	0.4		0.7
Other services	0.7		0.1
Total other non-audit fees	1.1		0.8
Total fees payable to the Company's auditors by the Group	19.5		14.6

During the year, the auditors also earned fees payable by entities outside the consolidated Lloyds Banking Group in respect of the following:

	2008 £m		2007 £m
Audits of Group pension schemes	0.2		0.2
Audits of the unconsolidated Open Ended Investment Companies managed by the Group	0.5		0.4
Reviews of the financial position of corporate and other borrowers	1.4		2.8
Acquisition due diligence and other work performed in respect of potential venture capital investments	1.0		0.6

The following types of services are included in the categories listed above:

Audit fees: This category includes fees in respect of the audit of the Group's annual financial statements and other services in connection with regulatory filings. Other services supplied pursuant to legislation relate primarily to the costs associated with the Sarbanes-Oxley Act audit requirements together with the cost of the audit of the Group's Form 20-F filing.

Audit related fees: This category includes fees in respect of services for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements, for example acting as reporting accountants in respect of prospectuses and circulars required by the UKLA listing rules.

Services relating to taxation: This category includes tax compliance and tax advisory services.

Other non-audit fees: This category includes due diligence relating to corporate finance, including venture capital transactions and other assurance and advisory services.

It is the Group's policy to use the auditors on assignments in cases where their knowledge of the Group means that it is neither efficient nor cost effective to employ another firm of accountants. Such assignments typically relate to the provision of advice on tax issues, assistance in transactions involving the acquisition and disposal of businesses and accounting advice. The auditors are not permitted to provide management consultancy services to the Group.

The Group has procedures that are designed to ensure auditor independence, including that fees for audit and non-audit services are approved in advance. This approval can be obtained either on an individual engagement basis or, for certain types of non-audit services, particularly those of a recurring nature, through the approval of a fee cap covering all engagements of that type provided the fee is below that cap. All statutory audit work as well as non-audit assignments where the fee is expected to exceed the relevant fee cap must be pre-approved by the audit committee on an individual engagement basis. On a quarterly basis, the audit committee receives a report detailing all pre-approved services and amounts paid to the auditors for such pre-approved services.