The financial statements cover the period from 1 April 2008 to
31 March 2009. They have been prepared in accordance with a
Direction given by the Scottish Ministers in pursuance of the
Public Finance and Accountability (Scotland) Act 2000, and in
accordance with the Government Treasury Financial Reporting Manual
(FReM). As Transport Scotland is an executive agency of the
Scottish Government, the financial statements are consolidated
within the Scottish Government Consolidated Resource Accounts.
Transport Scotland’s annual report and accounts is
published on the Agency website at: www.transportscotland.gov.uk and the
Scottish Government Consolidated Resource Accounts at: www.scotland.gov.uk
Significant accounting policies
Those areas of Transport Scotland’s financial statements
where accounting judgements have significant impact are outlined
- Valuation of the Road Network
The road network is valued on the basis of current replacement
cost, adjusted to reflect the current condition of the road
component and the depreciation of structures and communications
assets. To produce this valuation requires the use of assumptions,
estimates and professional judgement. The model used to produce the
valuation is known as the UK Asset Valuation System (UK-AVS), run
by a firm of external consultants (EC Harris LLP) and uses a series
of standard costs to value the asset and indices to uplift land and
the cost of road construction on an annual basis.
- Recognition and the valuation of provisions
Due to the long term nature of Transport Scotland’s road
and rail improvement schemes certain assumptions and judgements are
made relating to land acquisition and compensation claims and are
based on a variety of data sources and experience.
- Private Finance Initiatives (PFI) – the balance of
Transport Scotland has two PFI agreements (M77 & M74/M6)
for the provision of new roads infrastructure and the ongoing
maintenance of this infrastructure. These contracts are for fixed
terms, typically thirty years, and the balance of risks and rewards
has been judged to lie with the PFI contractor. Correspondingly,
these assets are only present on Transport Scotland’s balance
sheet to the extent of the capital element included in the unitary
Rail infrastructure in Scotland
The Railways Act 2005 transferred the responsibility for
specifying and funding rail infrastructure in Scotland to the
Scottish Ministers from 1 April 2006. This was accompanied by a
budget transfer from the Department for Transport (DfT).
First ScotRail has been operating rail
services under the Franchise Agreement since August 2004 and has
been exceeding contract performance benchmarks. In April 2008,
Scottish Ministers activated a provision under the terms of the
original agreement to extend the First ScotRail Franchise by 3
years. In extending the contract to 2014, the Scottish Government
is providing continuity for the ongoing delivery and improvement of
rail services in Scotland.
In October 2008 the Office of the Rail Regulator (ORR) published
it’s final determination for the control period 1 April 2009
to 31 March 2014. This sets out what Network Rail will need to
deliver and the funding that it will receive for doing this.
Major rail projects, which are capital in nature, are funded by
Transport Scotland but as the control of the economic benefits
arising from the use of these assets does not ultimately lie with
Transport Scotland, the rail capital assets in question sit on
Network Rail’s balance sheet.
Resources to fund Transport Scotland’s
day-to-day costs and capital investment programme are obtained
through the Budget (Scotland) Act 2008 which authorised both the
Scottish Government’s and Transport Scotland’s spending
plans for the financial year 2008/09.
Private sector funding is also available under PFI and Public
Private Partnership arrangements for major road and rail capital
schemes. The choice between public and private funding is made on
an assessment of value for money on a scheme-by-scheme basis.
Rail major projects may also be funded by borrowing through
Network Rail. This is a recognised method for funding rail projects
and it will play an increasing part in the rail programme for
Transport Scotland as we enter into the new contractual period from
2009 to 2014.
Financial performance and
use of resources
Transport Scotland was allocated resources by
the Scottish Ministers for 2008/09 of £2,084m. Of this,
£569m represents a notional charge for cost of capital for
roads, with the remaining £1,515m representing the
Agency’s operating budget. The final outturn for the year was
within budget limits (1.4% variance).
Cost of Capital
* Spring Budget
categorised as either capital or resource with separate budgetary
cover for each. Resource is further sub-divided into investment in
infrastructure and resource for consumption (operating
Transport Scotland has a significant
infrastructure investment programme which allocates funding to our
major rail and major road projects as well as ongoing maintenance
costs in the existing road and rail infrastructure.
Actual expenditure in 2008/09, excluding cost of capital, is
analysed below by operational area within Transport Scotland.
Almost all of Transport Scotland’s budget is spent, either
directly or indirectly, with private sector companies. Less than 1%
of the budget is utilised on the ongoing Agency running costs
(contained within administration operating costs).
The total asset value of Transport Scotland is £15
billion, almost all of which relates to the trunk road network
The Scottish Budget Spending Review 2007
(SR07) has set annual spending plans from 2008/09 to 2010/11. The
plans are intended to give more focus on long-term outcomes for
Scotland and are reviewed annually to cope with changing conditions
over the 3 year period. The current annual spending plans for the
remaining 2 years of SR07 are:
Cost of Capital
* Source: Budget (Scotland) Bill
** Source: Scottish Budget Spending Review 2007
Reporting Standards (IFRS) implementation
In 2008/09 Transport Scotland, in line with
the Scottish Government, implemented three standards relating to
Financial Instruments. These are Financial Reporting Standards 25,
26 and 29 as modified by the FReM. From April 2009 the Agency will
move to full IFRS adoption and will be re-budgeting on this basis.
The main areas affected by IFRS adoption will be roads capital
schemes, roads maintenance expenditure and PFI schemes.
Transport Scotland is committed to prompt
payment of bills for goods and services received, and aims to
settle all undisputed invoices within contract terms. From April to
October 2008 an average of 98% of invoices were being paid within
30 days of receipt. From October 2008, in line with a UK wide
initiative, the Scottish Government set a 10 day payment policy and
between October and March 2009 Transport Scotland settled an
average of 64% of invoices within this timescale. In March, 97% of
all invoices were settled within the 10 day period.
The statutory budget limit for the Older
& Disabled Persons Concessionary Travel Scheme was set at
£180m for the financial year 2008/09 and actual costs have
been below this threshold, meaning that no adjustments of payments
to bus operators has been necessary.
Board members’ interests are recorded
in a "Register of Interests" maintained on the Scottish Government
electronic HR system. A copy of this Register is available on
The 2008/09 assurance letters on internal control, which all
directors in post as at 31 March 2009 completed, confirmed that no
conflict of interest arose in the exercise of their duties.
The Director of Finance and Corporate Services, due to his
former role as Finance Director of the UK Bus Division within First
Group plc, had both shares and share options in First Group plc.
This had previously been declared both in the Register of Interests
and in the Annual Accounts, and additional control practices had
been implemented in respect of contract negotiations. Since his
departure (resigned 28 November 2008) no other Board Director has
potentially conflicting interests.
The Statement of Internal Control revisits this subject
following the publication of a Parliamentary Audit Committee Report
(11 June 2009) on the First ScotRail Passenger Franchise
The accounts for 2008/09 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 £193k, which related solely to the provision of
the statutory audit service.
The Freedom of Information (Scotland) Act
2002 aims to make information held by public authorities more
accessible. The Agency acts in the spirit of openness, to provide
information (unless exempt) within 20 working days, to provide
advice and assistance to the applicants, and to proactively publish
information under its Publication Scheme.
Significant events since
the end of the financial year
To date there have been no significant events
since the end of the financial year.
1 December 2009