Annual Report and Accounts for the Year Ended 31 March 2016
Accountability Report
Corporate Governance Report
Statement by Chief Executive
Directors Report
The Chief Executive is the Accountable Officer for the Agency. This role is supported by a Senior Management Team comprising the Chief Executive and six Executive Directors as shown below. The Accountable Officer is also supported by an Audit and Risk Committee, chaired by a non-executive member Alex Smith, and including two further external members.
Susan Dunn and Pamela Mclauchlan served as external members during 2015-16.
Current Directors:
- David Middleton; Chief Executive until 5 November 2015, replaced by Roy Brannen
- Roy Brannen; Trunk Road & Bus Operations until 5 November 2015, replaced by Hugh Gillies on 1 March 2016
- Donald Carmichael; Transport Policy
- Aidan Grisewood; Rail
- Michael Baxter; Finance, Corporate & Analytical Services
- Michelle Rennie; Major Transport Infrastructure Projects (from 27 April 2015)
- John Nicholls; Aviation, Maritime, Freight and Canals
Directors and Non-Executive/ External Members Interests
Directors' and Audit & Risk Committee External Members' interests are recorded on the electronic HR system. The 2015-16 statements of assurance completed by Directors in post as at 31 March 2016 also confirmed that no conflict of interest arose in the exercise of their duties.
Appointed Auditors
The financial statements for 2015-16 are audited by auditors appointed by the Auditor General for Scotland. Audit Scotland carried out this audit and the notional fee for this service was £182,000 which related solely to the provision of the statutory audit service. There were no payments made for non-audit work in the year.
Personal Data Related Incidents
There were no personal data related incidents in the year (14-15: none).
Statement of Chief Executive's Responsibilities
In accordance with section 19(4) of the Public Finance and Accountability (Scotland) Act 2000, the Scottish Ministers have directed Transport Scotland to prepare a statement of accounts for each financial year in the form and on the basis set out in the Accounts Direction. The Accounts Direction is reproduced at Annex A to these financial statements.
The accounts are prepared on an accruals basis and must show a true and fair view of the Agency's state of affairs at the year end and of its income and expenditure, changes in taxpayers' equity and cash flows for the financial year.
In preparing the accounts, the Agency is required to:
- observe the accounts direction issued by the Scottish Ministers, including the relevant accounting and disclosure requirements and apply suitable accounting policies on a consistent basis;
- make judgements and estimates on a reasonable basis;
- state where applicable accounting standards have been followed and disclose and explain any material departures in the financial statements; and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that Transport Scotland will continue in operation.
The Principal Accountable Officer for the Scottish Administration has designated the Chief Executive of Transport Scotland as the Accountable Officer for the Agency. The Accountable Officer's relevant responsibilities include the propriety and regularity of the public finances for which he is accountable, keeping proper records and safeguarding the Agency's assets, as set out in the Memorandum to Accountable Officers issued by the Scottish Government.
The Accountable Officer has taken all the necessary steps to make himself aware of any relevant audit information and to establish that the body's auditors are aware of that information. There is no relevant audit information of which the body's auditors are unaware.
The annual report and accounts as a whole are fair, balanced and understandable and the Accountable Officer takes personal responsibility for the annual report and accounts and the judgements required for determining that it is fair, balanced and understandable.
Governance Statement
The Governance Statement explains our approach to corporate governance, which is vital to effective financial and risk management.
The Scottish Public Finance Manual (SPFM) summarises the purpose of the Governance Statement as being to provide a clear understanding of the organisation's internal control structure and its management of resources. The Statement should provide a sense of how successfully the organisation has coped with challenge and risk.
This Governance Statement describes how our governance structures work, how they have performed, and provides an assessment of how the Agency has been managed, including the effectiveness of the systems of internal control, risk management and accountability.
Accountable Officer's scope of responsibilities
Our role is to oversee the operation and improvement of the trunk road, ferry, inland waterway and railway networks in Scotland; the air facilities and routes in the Highlands and Islands; the air passenger facilities at Prestwick; the national concessionary travel schemes and the provision of travel information services. It also supports Scottish Ministers in prioritising future transport policy and investments and promoting sustainable transport and road safety.
As Accountable Officer for the Agency, I have responsibility for maintaining a sound system of internal control that supports the achievement of Transport Scotland's policies, aims and objectives set by Scottish Ministers, whilst safeguarding the public funds and departmental assets for which I am responsible, in accordance with the SPFM. I am supported in that role by a senior management team of six Directors and an Audit and Risk Committee, chaired by an external member and including two further external members.
Transport Scotland Audit and Risk Committee
The Audit and Risk Committee external members bring independent judgement and challenge to the governance of the Agency. The Committee meets four times a year, although the Chair may convene additional meetings and regularly meets myself and the Director of Finance, Corporate & Analytical Services to keep abreast of developments. Audit and Risk Committee meetings will normally be attended by myself as Accountable Officer, the Director of Finance, Corporate & Analytical Services, a representative of Internal Audit and a representative of external audit (Audit Scotland). In addition, the Audit and Risk Committee asks other Transport Scotland officials to attend to assist it with its discussions where specific input or expertise is required.
The Audit and Risk Committee advises on strategic processes for risk, control and governance; the accounts of the organisation, including the process for review of the accounts post audit and prior to sign off by myself as Accountable Officer; and assurances relating to the corporate governance requirements.
The Audit and Risk Committee receives copies of minutes of the monthly Directors meetings, as well as monthly finance reports, and also meets directors individually every 6 months. In addition, the Committee meets with Internal Audit and External Audit separately twice a year.
The Audit and Risk Committee also produces an Annual Report, which supports this Governance Statement. The report summarises the committee's work over the past year and assesses:
- the reliability and comprehensiveness of assurances received;
- issues pertinent to this governance statement;
- financial reporting;
- the quality of both internal and external audit; and
- its view of its own effectiveness.
Principles of Corporate Governance in Transport Scotland
Corporate governance is the system by which organisations are directed and controlled and is concerned with the structures and processes for decision-making and accountability. All public bodies must have a group which is responsible for:
- giving leadership and strategic direction;
- defining control mechanisms to safeguard public resources;
- supervising the overall management of the body's activities; and
- reporting on stewardship and performance.
Within Transport Scotland, that group is the Senior Management Team which adheres closely to robust principles of Corporate Governance, as follows.
Performance Review
All members of the Senior Management Team are subject to annual objectives and year end performance appraisal, which are both formally recorded. These are focussed on Transport Scotland's delivery priorities, which are closely linked to the Governments National Outcomes.
Performance against our objectives within the Corporate Business Plan is monitored throughout the year and measured against targets at year end. Progress on key achievements is highlighted. In addition, every Directorate within the Agency sets key performance indicators for the service it provides and progress against these is reviewed at Senior Management level. We have an annual target to achieve overall efficiency savings as a percentage of our budget and progress is reported to the Scottish Government on a quarterly basis.
Accountability
The Senior Management Team ensures that the Scottish Public Finance Manual is applied, with appropriate arrangements in place to ensure that the public funds they are accountable for are properly safeguarded and used economically, efficiently and effectively.
Delegated Authority
I, as Chief Executive and Accountable Officer for Transport Scotland, formally delegate financial management responsibilities to each Director for the propriety, regularity and good financial management of expenditure within their Directorate. This delegation is formally recorded and reviewed each year and is subject to audit scrutiny.
Financial Management
The Management Team reviews financial performance monthly as well as ensuring the timely production of Annual Report and Accounts, in compliance with relevant standards of Corporate Governance. Our budgets are set in the context of the Scottish Government's annual budget process, and forecast expenditure is continuously monitored with Scottish Government Finance Directorate.
Programme and Project Management
All investment projects are overseen by a Project Board, chaired by the Project Sponsor, incorporating appropriate procurement, legal, technical and financial expertise. In addition, non-executive members of the Audit and Risk Committee are included on the Boards of the most significant projects. The Project Board's role is to oversee the delivery of the projects, including associated risk management. This includes the development and approval of associated business cases in line with the requirements of the Scottish Public Finance Manual. Gateway Reviews and other appropriate external reviews are undertaken at relevant stages to ensure that projects are capable of delivering their stated objectives.
As Accountable Officer, I am the nominated Investment Decision Maker. I am supported by an Investment Decision Making Board, made up of senior managers, in reviewing and approving the key stages in all of Transport Scotland's major projects and procurements.
I have set objectives for the Directors within Transport Scotland to undertake a regular review process to ensure that improvement in the assurance and control environment within Transport Scotland is monitored closely and, where appropriate, actions are in place to address any weaknesses identified to ensure the continuous improvement of the system.
The System of Internal Control
The system of internal control is designed to manage rather than eliminate the risk of failure to achieve our policies, aims and objectives. Consequently, reasonable and not absolute assurance of its effectiveness can be provided. The system of internal control is based on an ongoing process designed to identify and prioritise risks, to evaluate their likelihood and impact and to manage them efficiently, economically and effectively. This system of internal control has been in place for the year ended 31 March 2016 and up to the date of approval of the Annual Report and Accounts. It is in accordance with the guidance from Scottish Ministers.
Review of effectiveness
I, as the Accountable Officer, have responsibility for reviewing the effectiveness of the system of internal control. This is informed by the work of Internal Audit, the managers within the Agency, the Audit and Risk Committee and the external auditors in their reports.
Assurance is provided by Directors' annual certificates of assurance covering their areas of responsibility. This is underpinned by an internal control checklist, covering all areas of corporate governance, which is subject to audit. The content of this checklist is reviewed each year.
In addition we maintain an assurance map, which sets out both corporate and directorate processes that provide assurance on achievement of our objectives and identifies officers responsible for ensuring these are accurate and up to date. This document is shared with internal and external audit, and reviewed by the Audit and Risk Committee.
Our internal auditor is provided by the Scottish Government Internal Audit Directorate and they submit regular reports to the Audit and Risk Committee on the adequacy and effectiveness of the organisation's system of internal control, together with any recommendations for improvement. Follow up work is carried out to confirm the effective implementation of recommendations agreed as a result of the audits.
The Performance Audit Group (Halcrow working in association with Pricewaterhouse Coopers and Scott Wilson Plc) perform an external assurance role for all trunk road maintenance work.
Internal Audit Reports 2015-16
| Audit Area & Scope | Outcome |
|---|---|
| 1. Accounts Payable and Receivable | Assurance Provided: Substantial |
| 2. Project Bank Account | Assurance Provided: Substantial |
| 3. Scottish Roadworks Commissioner | Assurance Provided: Reasonable |
| 4. Clyde and Hebrides Ferry Procurement | Assurance Provided: Substantial |
| 5. Management and Operation of PFI/PPP projects | Assurance Provided: Substantial |
On the basis of the work undertaken and recommendations implemented in their annual report to the Transport Scotland Audit and Risk Committee, Internal Audit was able to provide Substantial Assurance in respect of Transport Scotland's risk management, control and governance arrangements.
Best Value
All public bodies in Scotland are responsible for achieving Best Value through ensuring sound governance, good management, public reporting on performance and a focus on improvement. Best Value provides a common framework for continuous improvement in public services in Scotland, and is a key foundation of the Scottish Government's Public Service Reform agenda. We demonstrate achievement of best value through undertaking reviews of our achievement or specific areas of it each year, using the Audit Scotland self-assessment toolkit.
A Best Value review on People Management was undertaken in 2015-16, which demonstrated a robust and forward looking approach to the area and made a number of key recommendations for further improvement relating to learning and development, flexibility of resources and the use of benchmarking which will be progressed in 2016-17.
Follow up reviews and reassessments were also conducted on financial management, and governance. Significant progress has been made across all areas of the business and actions from these reviews have been taken forward. We continue to demonstrate Best Value in all of these areas.
In 2016-17, it is the intention to conduct a further Best Value review on Procurement.
Risk Management
Risks are managed at the level most able to deal with them, with the most serious risks being escalated to the Senior Management Team. The Director of Finance, Corporate & Analytical Services was nominated as the Transport Scotland Risk Champion in November 2015 (following the appointment of the Director of Trunk Roads & Bus Operations as Chief Executive who held the Risk Champion role until that point). Each Directorate has a designated risk co-ordinator who is responsible for facilitating an effective and regular review of risks to the delivery of objectives.
- There is a robust framework of responsibility for risk management in accordance with the SPFM. The system for assessment and control of risk is as follows:
- I, as Chief Executive, in conjunction with the Directors, review the strategic and operational risks to the Agency's business throughout the year, and this is a regular item at the monthly Management Team meetings;
- the Audit and Risk Committee has provided oversight of the Agency's risk management processes and strategy and Corporate Risk Register throughout the year;
- managers identify and evaluate risks to successfully deliver the Agency's objectives when they prepare and monitor directorate and business management plans; and
- I, as Chief Executive, hold regular meetings with Ministers where both strategic and operational risks are discussed.
Our overall Risk Strategy sets out a consistent approach to the implementation of risk management at strategic, programme and project levels. The Risk Management Group is responsible for developing and maintaining the Corporate Risk Register and for facilitating the ongoing production and management of risk registers within project teams and Directorates and for enhancing the management of risk across all areas of the business. The group comprises representatives from each directorate and meets quarterly with appropriate communication between meetings. Minutes of the meetings are shared with Directors and the Audit and Risk Committee.
The most significant highest scoring risks currently identified by the Agency include the management of the condition of the trunk road network and delivering the Edinburgh Glasgow Improvement Programme on budget and with minimum disruption to passengers.
In the previous financial year our Risk Management Framework was subject to a detailed review by the senior management team and Audit & Risk Committee and a number of enhancements were taken forward, including revision of risk registers. As a consequence of this, all directorate risk registers have now been reviewed and a number of bespoke training sessions run since March 2015. A further review of the framework will be undertaken in 2016-17.
Managing information and information security
We are committed to ensuring information is managed and valued, with appropriate protection and use of our information assets. The handling of data and information carries significant risks and we take information security very seriously, in compliance with the ISIS (Information Security Information Systems) Security Frameworks and Data Handling policies.
We follow the Scottish Government key principles for good information management that:
- We treat information as a Scottish Government resource
- We are all responsible for our information
- We make information accessible to others who have a need to use it
- We keep records of what we do
- Our information is accurate and fit for purpose
- Our information complies with regulations and legal requirements
- All our users of information technology must comply with the IT Code of Conduct and be familiar with its contents.
Counter Fraud/Review of risk of financial loss
All cases of actual or suspected fraud are investigated promptly and appropriate action is taken, in accordance with our fraud, bribery and whistleblowing procedures which specify how cases will be dealt with and how staff can report suspicions or concerns.
We also have a designated Fraud Officer and a Fraud Response Plan in place to ensure that timely and effective action is taken in the event of a fraud. We also have a dedicated fraud hotline for the national concessionary fares scheme and are using more integrated fraud alert systems.
The Agency has also continued to increase the level and profile of training in this area, and has encouraged all staff to undertake training and review regular updates and staff notices distributed by the Fraud Officer to raise awareness of fraud identification and prevention.
Details of cases of actual or attempted fraud that come to light during the financial year are reported within the Fraud Log shared with the Audit and Risk Committee. Details are also shared with Police Scotland where this is deemed appropriate. We actively participate in the fraud alerts system run by the National Fraud Authority, which seeks to share intelligence about specific fraud risks encountered across Government.
There is a separate Concessionary Fares Fraud Team due to its unique operating environment. We participate in the National Fraud Initiative (NFI) in Scotland, led by Audit Scotland. This is a data matching process to help public sector bodies to prevent and detect fraud and error in their financial systems, using computerised techniques to compare information about individuals held by different public bodies on different systems. This will now include payments and a sample of those for the Agency has been selected for inclusion.
Business Continuity
Our Business Continuity Plan has been reviewed and updated during 2015-16. The objectives of the plan are:
- to identify risks;
- to establish clear areas of responsibility;
- to ensure Transport Scotland continues to provide essential functions and services;
- to identify measures to recover/repair assets damaged or lost; and
- to identify a medium and long term recovery strategy.
Staff and Remuneration Report
Staff Report
Equal opportunities
We are an equal opportunities employer with policies in place to guard against discrimination and to ensure no unfair or illegal discriminatory treatment or barriers to employment or advancement. We are also committed to meeting our duties under the Equality Act 2010. All staff should be treated equally irrespective of their sex, marital/civil partnership status, maternity/paternity status, age, race, ethnic origin, sexual orientation, disability, religion or belief, working pattern, employment status, gender identity (transgender), caring responsibility, or trade union membership.
The Scottish Government (Transport Scotland) is committed to increasing the diversity of staff within the organisation. We will develop all our staff, ignoring all irrelevant differences in their management and development. Furthermore we will positively value the different perspectives and skills of all staff and make full use of these in our work.
The breakdown for the financial year, of the number of persons of each gender employed within the agency is as follows:
| Gender | Chief Executive and Directors | Employees | Total |
|---|---|---|---|
| Female | 1 | 173 | 174 |
| Male | 7 | 283 | 290 |
Figures based on Agency numbers at the end of March 2016
The Department for Work and Pensions is responsible for developing, formulating and promulgating equal opportunities guidance for the Civil Service as a whole, but operational responsibility rests with individual departments.
Staff relations
We give a high priority to the development of all our staff. Training, development and learning is quality assured through our commitment to the Investor in People (IiP) Scheme.
We recognise that the success of any organisation depends largely on the effective performance and full attendance of all its employees. People are a valued resource, and as an employer our attendance management procedures are designed to maintain a happy, well-motivated and healthy workforce.
The procedures are aimed to:
- be supportive and positive;
- promote fair and consistent treatment for everyone;
- encourage, assist and make it easy for people to stay in work; and
- explain employees' entitlements and roles and responsibilities
In 2015-16 an average of 6.3 working days (14-15: 5.7) were lost due to sickness absence per staff year for Transport Scotland.
Employment of disabled persons
We are a "Disability Symbol" user, which recognises our commitment to both the letter and the spirit of the law and lets us demonstrate our positive attitude towards our disabled staff.
We meet our requirements as a symbol user by guaranteeing interviews to all disabled staff who meet the minimum criteria for any post; reminding line managers of their management responsibilities; helping staff balance their work and their disability; and offering advice and training to staff and managers about issues related to disability.
The number of staff as at 31 March 2016 who had declared a disability employed by Transport Scotland was 26.
Staff Costs
Details of staff numbers and costs for the year for the Agency are contained within Note 2 to the Accounts.
Pension liabilities
The pension entitlements of the Executive Directors of Transport Scotland are contained within the remuneration report. An indication of how pension liabilities are treated in the accounts and references to relevant pension schemes are also contained within the Remuneration Report and Note 2 to the Accounts.
Remuneration Report
Remuneration Policy
The remuneration of senior civil servants is set in accordance with the rules set out in chapter 7.1, Annex A of the Civil Service Management Code and in conjunction with independent advice from the Senior Salaries Review Body (SSRB). In reaching its recommendations, the SSRB is to have regard to the following considerations:
- the need to recruit, retain and motivate suitably able and qualified people to exercise their different responsibilities;
- regional/local variations in labour markets and their effects on the recruitment and retention of staff;
- government policies for improving the public services including the requirement on departments to meet the output targets for the delivery of departmental services;
- the funds available to departments as set out in the Government's departmental expenditure limits; and
- The Government's inflation target.
Performance based pay awards are based on an assessment of performance against objectives agreed between the individual and line manager at the start of the reporting year. Performance will also have an effect on any bonus element awarded.
Further information about the work of the SSRB can be found at: www.ome.uk.com/Senior_Salaries_Review_Body
The remuneration of staff below senior civil service level is determined by the Scottish Government. In determining policy, account is taken of the need for pay to be set at a level which will ensure the recruitment, retention and motivation of staff. Also taken into account is the Government's policy on the Civil Service and public sector pay and the need to observe public spending controls.
Service Contracts
The Constitutional Reform and Governance Act 2010 requires Civil Service appointments to be made on merit on the basis of fair and open competition but also includes the circumstances when appointments may otherwise be made.
Unless otherwise stated below, the officials covered by this report hold appointments which are open-ended. Early termination, other than for misconduct, would result in the individual receiving compensation as set out in the Civil Service Compensation Scheme.
Further information about the work of the Civil Service Commissioners can be found at www.civilservicecommission.org.uk
Whilst Transport Scotland does not have a Board with non-executive directors, the Audit and Risk Committee has three external members to ensure independent oversight and challenge: Alex Smith – appointed March 2011; Susan Dunn – appointed December 2014; and Pamela Mclauchlan – appointed May 2015.
Remuneration Group
Remuneration for Transport Scotland's senior civil servants is considered by the Scottish Government's Remuneration Group. This Remuneration Group has six members, two of whom are non-executive Directors. Their remit is to consider:
- annual pay proposals for chief executives and board members and make recommendations to Ministers;
- annual guidelines for flat rate increases for chief executives and senior civil servants and consider the Public Sector Pay policies which will apply for the annual pay round and make recommendations to Ministers; and
- pay remits which look at pay proposals for public bodies in Scotland.
- The Remuneration Group will, as a minimum, report annually to the Scottish Government Strategic Board.
The following section of the Remuneration Report pertaining to salaries and pensions is subject to audit.
Directors Remuneration (Salary, benefits in kind and pensions)
The single total figure of remuneration, comprising the salary, the value of any bonuses or taxable benefits in kind and the pension benefits of the directors for the year 2015-16, along with comparative figures are shown in the table below.
Single total figure of remuneration
| Directors | Salary | Bonus Payments | Benefits In Kind (To Nearest £100) |
Pension Benefits (To Nearest £1,000) |
Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2015-16 | 2014-15 | 2015-16 | 2014-15 | 2015-16 | 2014-15 | 2015-16 | 2014-15 | 2015-16 | 2014-15 | |
| David Middleton (4) | 60 – 65 | 100 – 105 | - | - | - | - | 21,000 | 21,000 | 80 – 85 | 125 – 130 |
| Mike Baxter | 70 – 75 | 5 – 10 | - | - | - | - | 48,000 | 4,000 | 120 – 125 | 10 – 15 |
| Roy Brannen (1) | 85 – 90 | 70 – 75 | - | - | - | - | 129,000 | 14,000 | 210 – 215 | 85 – 90 |
| Donald Carmichael | 65 – 70 | 65 – 70 | - | - | - | - | 32,000 | 14,000 | 100 – 105 | 80 – 85 |
| Hugh Gillies (2) | 5 – 10 | Nil | - | - | - | - | 3,000 | Nil | 5 – 10 | 85 – 90 |
| Aidan Grisewood | 70 – 75 | 70 – 75 | - | - | - | - | 30,000 | 21,000 | 100 – 105 | 90 – 95 |
| John Nicholls | 65 – 70 | 65 – 70 | - | - | - | - | 21,000 | 14,000 | 85 – 90 | 80 – 85 |
| Michelle Rennie (3) | 60 – 65 | Nil | 35,000 | Nil | 95 – 100 | Nil | ||||
The value of pension benefits accrued during the year is calculated as the real increase in pension multiplied by 20, less the contributions made by the individual. The real increase excludes increases due to inflation or any increase or decrease due to a transfer of pension rights.
(1) Roy Brannen was Director of TRBO until 5 November 2015 (full year banding, £70k- £75k). He was appointed, through formal competition, as Chief Executive as of 5 November 2015. Full year equivalent banding, £90k – £95k
(2) Hugh Gillies took up post on 1 March 2016. Full year equivalent banding, £70k – £75k
(3) Michelle Rennie took up post on 27 April 2015. Full year equivalent banding, £65k – £70k
(4) David Middleton left post on 5 November 2015. The £60k – £65k banding represents his salary to that date
Salary
Salary and allowances cover both pensionable and non-pensionable amounts and include: gross salaries; overtime; recruitment and retention allowances; private-office allowances or other allowances to the extent that they are subject to UK taxation. This total remuneration is shown in the figures above. It does not include employers' pension contributions or amounts which are a reimbursement of expenses directly incurred in the performance of an individual's duties or employers' national insurance.
Where a Director has joined or left Transport Scotland during the year, their salary reflects only that which they received whilst a member of the senior management team. Where an individual has been a member of the senior management team for only part of the year but they have been employed by the Agency throughout the year, their annual salary has been reported on a "days served" basis as well as the full year equivalent salary.
Any amounts payable on early termination of a contract will be in accordance with the individual's circumstances.
Fees
External members of the Audit and Risk Committee are entitled to receive fees for regular attendance at Audit and Risk Committee meetings. External members' expenses incurred in attending these meetings are also reimbursed.
The fees which the external members of the Audit and Risk Committee were entitled to for 2015-16 are as follows:
| Alex Smith | £232 daily rate |
| Pamela Mclauchlan | £232 daily rate |
| Susan Dunn | £232 daily rate |
This is in line with core Scottish Government remuneration of external members.
Pay multiples
Reporting bodies are required to disclose the relationship between the remuneration of the highest paid director in the organisation and the median remuneration of the organisation's workforce.
The full year equivalent banded remuneration of the highest paid director was £90k – £95k (14-15: £100k – £105k). This was 2.4 times (14-15: 2.7 times) the median remuneration of the workforce, which was £38,960 (14-15: £37,072).
In 2015-16, one (14-15: one) employee received remuneration in excess of the highest paid director. Remuneration across Transport Scotland ranged from £16k – £118k (14-15: £16k – £118k).
Total remuneration includes salary, non-consolidated performance related pay and benefits in kind. It does not include employer pension contributions and the cash equivalent transfer value of pensions.
Civil Service and other Compensation Scheme – exit packages
Within Transport Scotland, no members of staff agreed departures under the Civil Service Compensation Scheme rules in 2015-16. There were eight members of staff who agreed departures under the scheme in 2014-15. No members of staff retired on ill health grounds in 2015-16, with one in 2014-15.
Reporting of Civil Service and other compensation scheme – exit packages
| 2015-16 | 2014-15 | |||||
|---|---|---|---|---|---|---|
| Exit package cost band | Number of compulsory redundancies | Number of other departures agreed | Total number of exit packages by cost band | Number of compulsory redundancies | Number of other departures agreed | Total number of exit packages by cost band |
| less than £10,000 | 0 | 0 | 0 | 0 | 0 | 0 |
| £10,000 to £25,000 | 0 | 0 | 0 | 0 | 0 | 0 |
| £25,000 to £50,000 | 0 | 0 | 0 | 0 | 3 | 3 |
| £50,000 to £100,000 | 0 | 0 | 0 | 0 | 2 | 2 |
| £100,000 to £150,000 | 0 | 0 | 0 | 0 | 3 | 3 |
| £150,000 to £200,000 | 0 | 0 | 0 | 0 | 0 | 0 |
| over £200,000 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total Number of exit packages | 0 | 0 | 0 | 0 | 8 | 8 |
| Total Resource cost (£'000) | £0 | £0 | £0 | £0 | £545 | £0 |
Early Retiral costs include the elements actually paid in year.
Pensions
Accrued pension represents the director's total future entitlement to benefits payable from the Civil Service pension schemes based on reckonable service at 31 March 2015. The accrued pension includes service previous to becoming a Director and/or service in other departments.
The cash equivalent transfer value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member's accrued benefits and any contingent spouse's pension payable from the scheme. A CETV payment is made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves the scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies.
The CETV figures and the other pension details, include the value of any pension benefit in another scheme or arrangement which the individual has transferred to the Civil Service pension arrangements and for which the Civil Service Vote has received a transfer payment commensurate to the additional pension liabilities being assumed. They also include any additional pension benefit accrued to the member as a result of their purchasing additional years of pension service in the scheme at their own cost.
CETVs are worked out in accordance with The Occupational Pension Schemes (Transfer Values ) (Amendment ) Regulations 2008 and do not take into account any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.
The real increase in CETV quoted in the table below represents the increase that is funded by the employer. It does not include the increase in accrued pension due to inflation, or contributions paid by employees (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period.
Transport Scotland's contributions to the scheme in respect of the Senior Management Team amounted to £147,795 for the year to 31 March 2016. The external members of the Audit and Risk Committee do not participate in the Civil Service pension scheme.
Further details on the different schemes available to employees can be found in Note 2 to the accounts.
The pension entitlements of the Executive Directors of Transport Scotland are shown in the following table:
| Lump Sum at NRA as at 31 March 2016 |
Real Increase in Lump Sum at age NRA |
Accrued Pension at age NRA as at 31 March 2016 | Real Increase in Pension at age NRA |
CETV as at 31 March 2016 |
CETV as at 31 March 2015 |
Real Increase in CETV in 2015-16 | |
|---|---|---|---|---|---|---|---|
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| David Middleton | 155 – 160 | 2.5 – 5 | 50 – 55 | 0 – 2.5 | 1,176 | 1,103 | 21 |
| Roy Brannen | 75 – 80 | 10 – 15 | 25 – 30 | 2.5 – 5 | 483 | 354 | 92 |
| Mike Baxter | 5 – 10 | 0 – 2.5 | 25 – 30 | 0 – 2.5 | 452 | 384 | 28 |
| Donald Carmichael | 80 – 85 | 2.5 – 5 | 25 – 30 | 0 – 2.5 | 675 | 597 | 32 |
| Michelle Rennie | 0 | 0 | 5 – 10 | 0 – 2.5 | 136 | 107 | 16 |
| Aidan Grisewood | 0 | 0 | 10 – 15 | 0 – 2.5 | 152 | 123 | 11 |
| Hugh Gillies | 0 | 0 | 15 – 20 | 0 – 2.5 | 274 | 262 | 1 |
| John Nicholls | 80 – 85 | 2.5 – 5 | 25 – 30 | 0 – 2.5 | 512 | 454 | 16 |
Calculated on normal retirement age (NRA) where pension entitlement due at that age or current age if over NRA.
The above pension data was supplied to Transport Scotland by MyCSP for all of the Directors.
During the course of 2015-16, the majority of staff within the civil service pension scheme changed from the PCSP to the Alpha scheme. Consequently, the figures included above, provided by MyCSP, contain figures for both schemes for directors – Michelle Rennie, Hugh Gillies, Mike Baxter, Aidan Grisewood and Roy Brannen.
Further details about the Civil Service pension arrangements can be found at the website www.civilservice.gov.uk/pensions.
Parliamentary Accountability Report
Regularity of Expenditure
The expenditure and income in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers, the Budget (Scotland) Act covering the financial year and sections 4 to 7 of the Public Finance and Accountability (Scotland) Act 2000; and the sums paid out of the Scottish Consolidated Fund for the purpose of meeting the expenditure shown in the financial statements were applied in accordance with section 65 of the Scotland Act 1998.
Fees and Charges
Transport Scotland does not raise any significant income through fees and charges.
Remote Contingent Liabilities
The Financial Reporting Manual states that where information about contingent liabilities is not required to be disclosed because the likelihood of a transfer of economic benefits is considered too remote, they should be disclosed separately for parliamentary reporting and accountability purposes. Transport Scotland has a number of these liabilities and they are disclosed in Note 19 (c) to the Annual Accounts.
Roy Brannen
Chief Executive
12 September 2016
Independent Auditors' Report
Independent auditor's report to Transport Scotland, the Auditor General for Scotland and the Scottish Parliament
I have audited the financial statements of Transport Scotland for the year ended 31 March 2016 under the Public Finance and Accountability (Scotland) Act 2000. The financial statements comprise the Statement of Comprehensive Net Expenditure, the Statement of Financial Position, the Cash Flow Statement, the Statement of Changes in Taxpayers' Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and as interpreted and adapted by the 2015/16 Government Financial Reporting Manual (the 2015/16 FReM).
This report is made solely to the parties to whom it is addressed in accordance with the Public Finance and Accountability (Scotland) Act 2000 and for no other purpose. In accordance with paragraph 125 of the Code of Audit Practice approved by the Auditor General for Scotland, I do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties.
Respective responsibilities of Accountable Officer and auditor
As explained more fully in the Statement of Chief Executive's Responsibilities, the Accountable Officer is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and is also responsible for ensuring the regularity of expenditure and income. My responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) as required by the Code of Audit Practice approved by the Auditor General for Scotland. Those standards require me to comply with the Auditing Practices Board's Ethical Standards for Auditors. I am also responsible for giving an opinion on the regularity of expenditure and income in accordance with the Public Finance and Accountability (Scotland) Act 2000.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the body's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Accountable Officer; and the overall presentation of the financial statements. It also involves obtaining evidence about the regularity of expenditure and income. In addition, I read all the financial and non-financial information in the annual report and accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by me in the course of performing the audit. If I become aware of any apparent material misstatements, irregularities, or inconsistencies I consider the implications for my report.
Opinion on financial statements
In my opinion the financial statements:
- give a true and fair view in accordance with the Public Finance and Accountability (Scotland) Act 2000 and directions made thereunder by the Scottish Ministers of the state of the body's affairs as at 31 March 2016 and of its net operating costs for the year then ended;
- have been properly prepared in accordance with IFRSs as adopted by the European Union, as interpreted and adapted by the 2015/16 FReM; and
- have been prepared in accordance with the requirements of the Public Finance and Accountability (Scotland) Act 2000 and directions made thereunder by the Scottish Ministers.
Opinion on regularity
In my opinion in all material respects:
- the expenditure and income in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers, the Budget (Scotland) Act covering the financial year and sections 4 to 7 of the Public Finance and Accountability (Scotland) Act 2000; and
- the sums paid out of the Scottish Consolidated Fund for the purpose of meeting the expenditure shown in the financial statements were applied in accordance with section 65 of the Scotland Act 1998.
Opinion on other prescribed matters
In my opinion:
- the part of the Remuneration and Staff Report to be audited has been properly prepared in accordance with the Public Finance and Accountability (Scotland) Act 2000 and directions made thereunder by the Scottish Ministers; and
- the information given in the Performance Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on which I am required to report by exception
I am required to report to you if, in my opinion:
- adequate accounting records have not been kept; or
- the financial statements and the part of the Remuneration and Staff Report to be audited are not in agreement with the accounting records; or
- I have not received all the information and explanations I require for my audit; or
- the Governance Statement does not comply with guidance from the Scottish Ministers.
I have nothing to report in respect of these matters.
Brian Howarth ACMA CGMA
Assistant Director
Audit Scotland
The Athenaeum Building
8 Nelson Mandela Place
GLASGOW
G2 1BT
13 September 2016