FINANCIAL STATEMENTS

OPERATING COST STATEMENT FOR THE YEAR ENDED 31 MARCH 2009

	note	2	3&4	5	31 Mar 2009	31 Mar 2008
		Staff costs £000	Other £000	Income £000	Total £000	Total £000
Administration Costs
Staff Costs		10,402	0	0	10,402	10,752
Other Administration Costs		0	5,673	0	5,673	5,219
Total Administration Costs		10,402	5,673	0	16,075	15,971
Programme Costs
Motorways and Trunk Roads		1,665	854,648	(9,266)	847,047	765,518
Rail Services in Scotland		84	702,798	0	702,882	678,118
Concessionary Fares		357	193,010	0	193,367	174,274
Rail - Major Public Transport Projects		862	132,091	0	132,953	258,155
Total Programme Costs		2,968	1,882,547	(9,266)	1,876,249	1,876,065
Net Operating Costs		13,370	1,888,220	(9,266)	1,892,324	1,892,036

All income and expenditure is derived from continuing activities.

STATEMENT OF RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED
31 MARCH 2009

	note	2008/09	2007/08
		£000	£000
Net gain in revaluation of tangible fixed assets	13	218,449	1,083,669
Net gain relating to prior years	11	(16,669)	(28,169)
Recognised Gain/(Loss) for the Financial Year		201,780	1,055,500

The notes form part of these accounts

BALANCE SHEET AS AT 31 MARCH 2009

	note	31 Mar 2009	31 Mar 2008
		£000	£000
FIXED ASSETS
Tangible Assets	6	14,964,936	14,672,146
Intangible Assets	7	0	3
Debtors > 1 year	8	3,768	3,379
CURRENT ASSETS
Debtors	8	56,043	39,713
Cash		0	0
Creditors < 1 year	9	(76,359)	(142,785)
NET CURRENT LIABILITIES		(20,316)	(103,072)
TOTAL ASSETS LESS CURRENT LIABILITIES		14,948,388	14,572,456
Creditors > 1 year	9	(116,205)	(114,563)
Provisions for Liabilities and Charges	10	(68,520)	(66,900)
		14,763,663	14,390,993
TAX PAYERS EQUITY
General Fund	11	8,118,955	7,930,197
Donated Asset Reserve	12	967	1,045
Revaluation Reserve	13	6,643,741	6,459,751
		14,763,663	14,390,993
David Middleton Chief Executive 1 December 2009

The notes form part of these accounts

CASHFLOW FOR THE YEAR ENDED 31 MARCH 2009

	note	31 Mar 2009	31 Mar 2008
		£000	£000
Net Cash Outflow from Operating Activities	A	(1,390,194)	(1,391,658)
Capital Expenditure and Financial Investment	B	(162,566)	(136,376)
Financing	C	1,552,760	1,528,034
Net (Decrease)/Increase in Cash in year		0	0

The notes form part of these accounts

NOTES TO THE CASHFLOW STATEMENT

	note	31 Mar 2009	31 Mar 2008
		£000	£000
A) Cashflow from operating activities
Net operating cost	11	(1,892,324)	(1,892,036)
Adjustment for non-cash transactions	3/4	582,013	492,441
In year adjustment on IT hardware depreciation		0	(9)
(Increase)/Decrease in debtors	8	(16,719)	(3,493)
(Decrease)/Increase in creditors	9	(64,784)	(654)
(Decrease)/Increase in provisions	10	1,620	12,093
Net cash outflow from operating activities		(1,390,194)	(1,391,658)
Purchase of fixed assets	6	(162,566)	(136,376)
Net cash inflow/(outflow) from investing activities		(162,566)	(136,376)
C) Cashflow from financing activities
From the consolidated fund – current year	11	1,552,760	1,528,034
Net Financing		1,552,760	1,528,034

NOTES TO THE ACCOUNTS

1. STATEMENT OF ACCOUNTING POLICIES

The financial statements have been prepared in accordance with the accounting principles and disclosure requirements of the Government Financial Reporting Manual (FReM). The accounting policies contained in the FReM follow generally accepted accounting practice for companies (UK GAAP) to the extent that it is meaningful and appropriate to the public sector. The accounting policies adopted are described below and have been applied consistently in dealing with items considered material in relation to the accounts.

1.1 Accounting Convention

The accounts have been prepared under the historical cost convention, modified where appropriate for the revaluation of fixed assets.

1.2 Trunkings/Detrunkings

The trunking or detrunking of roads from or to local authorities is treated as a transfer from or to other government departments. Roads and structures detrunked are effectively dealt with as disposals in accounting terms at nil consideration. The associated profit or loss is processed through the general fund.

1.3 Prior Year Adjustments

Material adjustments relating to prior periods and arising from changes in accounting principles or from the correction of material errors are accounted for as prior year adjustments. Opening balances are adjusted for the cumulative effect of the prior year adjustment and comparative figures for the preceding period are restated.

1.4 Change of Accounting Policy

In 2008/09, Transport Scotland in line with the Scottish Government, implemented the three standards relating to financial instruments. These are Financial Reporting Standards 25, 26 and 29 as modified by the FReM.

1.5 Tangible Fixed Assets

Tangible fixed assets are categorised into infrastructure (including assets under construction) and non-infrastructure assets. Infrastructure assets consist of roads, land and building within the highway perimeter, bridges, other structures and roadside communications. Non-infrastructure assets include land and buildings, information and technology equipment, software licences and other specifically identified ring-fenced projects. Title to the freehold land and buildings shown in the accounts of Transport Scotland is held by the Scottish Ministers.

Capitalisation Policy

The road network is capitalised to the extent that it leads to an increase in the capacity of the network. Expenditure on road building schemes is capitalised when it is reasonably certain that the scheme will proceed. Where a scheme is subsequently withdrawn, all cumulative costs are written off to the Operating Cost Statement. Any retained land or buildings are transferred to land and building held for resale and valued at market rates.

All other categories of tangible fixed asset are capitalised if the expenditure is greater than:

Land and Buildings	£10,000
Information and Communications Technology (ICT)	£1,000
Plant and Machinery	£5,000

Items falling below these limits are charged as an expense and shown in the Operating Cost Statement. Furniture and fittings are not capitalised unless part of a specially identified ring-fenced project such as a major relocation project.

Major rail projects, which are capital in nature, are funded by Transport Scotland but as control of the economic benefit of the asset ultimately sits with Network Rail, the assets are not on the balance sheet of the agency.

Valuation

Infrastructure Assets – the road network

The road network is valued at depreciated replacement cost as it is deemed to be specialist in nature. It is valued using a standard costing system, uplifted annually for indexation and periodically updated when new schemes become available as comparators.

The indexation factors applied are:

Roads and structures	Price Adjusted Formulae Indices ("Baxter’s Index") published online by the Building Cost Information Service
Land	Land indices produced by the Valuation Office Agency (VOA)

The estimated unexpired life of all fixed assets is re-assessed annually and the valuation adjusted where necessary.

Assets Under Construction

Road building schemes in the course of construction are capitalised at actual cost with no indexation.

Land and Buildings

Land and property released from road schemes and now deemed surplus to requirements are re-valued at open market value for disposal purposes.

Information Technology

Information technology assets are stated at historical cost with no indexation applied.

1.6 Depreciation

Infrastructure Assets – the road network

Roads and associated street furniture have condition calculations done annually and the resultant increase or decrease in condition is reflected in the net asset value.

Structures and communications assets are depreciated on a straight line basis over the expected useful life of the asset, normally 20 to 120 years.

Land is considered to have an indefinite life and is not depreciated.

	Life in Years
Road surface, sub-pavement layer, fencing, drainage and lighting	20 to 50
Road bridges, tunnels and underpasses	20 to 120
Culverts, retaining walls and gantries	20 to 120
Road communications assets	15 to 50
Assets under construction	no depreciation

Non-Infrastructure Assets

With the exception of surplus land and properties awaiting resale, non-infrastructure assets are depreciated on a straight line basis over the expected life of the particular asset category as follows:

	Life in Years
Freehold buildings	5 to 100
Leasehold buildings	shorter of length of lease or specific asset life
Surplus property awaiting resale	no depreciation
IT Equipment	3 to 10

1.7 Donated Assets

Donated tangible fixed assets are capitalised at their valuation on receipt and this value is credited to the valuation reserve. Any subsequent revaluations are also accounted for through this reserve. Each year an amount equal to the depreciation charge on the asset is released from the donated asset reserve to the Operating Cost Statement.

1.8 Intangible Fixed Assets

Purchased computer software licences are capitalised as intangible fixed assets where expenditure of £1,000 or more is incurred. These are valued at historic cost and amortised on a straight line basis over the expected life of the asset.

1.9 Rail Infrastructure Expenditure

Rail infrastructure expenditure is split between capital and resource. The expenditure classified as capital relates to infrastructure expenditure that is capital in nature, but the asset created or enhanced is recorded on the balance sheet of Network Rail rather than the agency. The recorded capital expenditure reflects both direct activity in the year and the costs, in terms of capital and interest, for projects undertaken by Network Rail and recovered over a 30 year period.

1.10 Operating Income

Operating income relates directly to the operating activities of Transport Scotland. It principally comprises fees and charges for services provided on a full-cost basis to external customers in both the public and private sectors. It includes not only income appropriated in aid of the estimate but also income due to the Consolidated Fund, which in accordance with the FReM is treated as income. Operating income is stated net of VAT.

1.11 Administration and Programme Expenditure

The Operating Cost Statement is analysed between administration and programme income and expenditure. This classification of income and expenditure between administration and programme follows the definition of administration costs as defined by HM Treasury.

Administration costs reflect the costs of running the Agency and include administration staff costs as well as accommodation, communications and office supplies.

Programme costs reflect the costs of operating, maintaining, managing and improving the road and rail infrastructure in Scotland over which Transport Scotland has responsibility.

1.12 Capital Charge

A charge reflecting the cost of capital utilised by Transport Scotland is included in the Operating Cost Statement. The charge is calculated based on the average value over the year for all assets less liabilities at the real rate set by HM Treasury (currently 3.5%). Donated assets are excluded from this calculation.

1.13 Pensions

Past and present employees are covered by the provisions of the Principal Civil Service Pension Scheme (PCSPS), more details of which can be found in note 2. The PCSPS is an unfunded multi-employer defined benefit scheme. Transport Scotland’s contributions are recognised as a cost in the year. This complies with FRS 17.

1.14 Private Finance Initiative (PFI) Transactions

PFI transactions are accounted for in accordance with Technical Note No 1 (Revised), How to account for PFI Transactions, as required by FReM.

Transport Scotland currently has two existing PFI schemes (see note 16 for more details). In both cases the balance of risks and rewards has been found to rest with the PFI operator and consequently the PFI unitary charge payments are treated as an operating cost.

Where at the end of the PFI contract, all or part of the asset reverts back to Transport Scotland ownership, the expected fair value of the asset at the balance sheet date is reflected as an asset under construction. This allows the proper allocation of payments between the cost of services and the acquisition of the residual asset.

1.15 Grants Payable

Grants payable are recorded as expenditure in the period that the underlying activity giving entitlement to the grant occurs. Where necessary obligations in respect of grant schemes are recognised as liabilities.

1.16 Provisions

Transport Scotland provides for legal and constructive obligations that are of uncertain timing or amount at the balance sheet date on the basis of the best professional estimate available. Provisions are charged to the Operating Cost Statement unless they will be capitalised as part of additions to fixed assets.

Land and Property Acquisition

Land and property acquisition provision relates primarily to the estimates made at the point of taking entry to compulsory purchased land. A valuation provided by the Valuation Office Agency is charged to the project at the point of taking entry to the land.

Early Departure Costs

Transport Scotland is required to meet the additional cost of benefits for those employees who retire early until they reach the age of 60 at which point the liability is assumed by the PCSPS. The cost of these benefits are provided in full when the employee retires.

1.17 Contingent Liabilities and Contingent Assets

In accordance with FRS 12, where there is a risk of a liability arising as a result of a past event but the amount and/or timing of the event is uncertain, estimates are included in the provisions or contingent liabilities based on an assessment of risk. This holds true for contingent assets as well.

1.18 VAT

Most of the activities of Transport Scotland fall outside the scope of VAT and, in general, output tax does not apply and input tax on purchases is non-recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase cost of fixed assets. To avoid the distortion of competition, VAT can be recovered on certain categories of expenditure under s41 of the VAT Act 1994.

Transport Scotland is not separately registered for VAT. The quarterly VAT return is completed centrally by the Scottish Government.

From 2007/08, apart from any timing difference, any outstanding VAT balances have been transferred to the Scottish Government.

2. STAFF NUMBERS AND COSTS

Staff costs comprise:		2008/09		2007/08
	Permanent Staff £000	Others £000	Total £000	Permanent Staff £000	Others £000	Total £000
Wages & salaries costs	5,782	2,840	8,622	7,392	1,144	8,536
Social Security costs	500	0	500	598	0	598
Other pension costs	1,280	0	1,280	1,618	0	1,618
Total Cost	7,562	2,840	10,402	9,608	1,144	10,752
Staff costs in programme	2,968	0	2,968	526	0	526
Total net staff costs	10,530	2,840	13,370	10,134	1,144	11,278

Average numbers of persons employed
	Permanent Staff	Others	Total	Permanent Staff	Others	Total
Trunk Roads Major Projects	58	12	70	52	5	57
Trunk Road Maintenance	57	2	59	49	2	51
Rail	69	17	86	65	17	82
Strategy & Investments	32	5	37	30	6	36
Finance and Other	63	21	84	59	15	74
Total average staff numbers	279	57	336	255	45	300

Permanent staff are civil servants who have an employment contract with the agency.

Wages & Salaries include gross salaries, performance pay or bonuses received in year, overtime, London weighting or London allowances, recruitment and retention allowances, private office allowances, ex‑gratia payments and any other allowance to the extent that it is subject to UK taxation. The payment of legitimate expenses is not part of salary.

Transport Scotland had four staff granted early retirement in 2008/09, only one of whom was funded directly by the agency under flexible early retirement terms and no staff retired early on ill-health grounds.

The average annualised sick days for full time equivalent staff is 7.42 days.

In 2008/09 a further provision for migration costs of £197k was added to staff costs to cover the relocation of staff from Edinburgh to Glasgow in accordance with the Scottish Government’s relocation policy.

Pension Costs

The Principal Civil Service Pension Scheme (PCSPS) is an unfunded multi-employer defined benefit scheme but Transport Scotland is unable to identify its share of the underlying assets and liabilities. The scheme Actuary valued the scheme as at 31 March 2007. You can find details in the resource accounts of the Cabinet Office: Civil Superannuation www.civilservice-pensions.gov.uk .

From 30 July 2007, civil servants may be in one of four defined benefit schemes; either a ‘final salary’ scheme (classic, premium or classic plus); or a ‘whole career’ scheme (nuvos). These statutory arrangements are unfunded with the costs of benefits met by monies funded by Parliament each year. Pensions payable under classic, premium, classic plus and nuvos are increased annually in line with changes in the Retail Price Index. Members who joined from October 2002 could opt for either the defined benefit arrangement or a good quality ‘money purchase’ stakeholder pension with a significant employer contribution (partnership pension account). In 2008/09 no employees opted to open a partnership pension account.

For 2008/09, employers’ contributions of £1,805k were payable to the PCSPS at one of four rates in the range 17.1% to 25.5% of pensionable pay, based on salary bands (the rates in 2007/08 were between 17.1% and 25.5%). The scheme’s Actuary reviews employer contributions every four years following a full scheme valuation. The 2008/09 salary bands have been revised but the rates remain the same.

The contribution rates are set to meet the cost of the benefits accruing during 2008/09 to be paid when the member retires, and not the benefits paid during this period to existing pensioners.

(a) Classic Scheme

Benefits accrue at the rate of 1/80th of pensionable pay for each year of service. In addition, a lump sum equivalent to three years pension is payable on retirement. Members pay contributions of 1.5% of pensionable earnings.

(b) Premium Scheme

Benefits accrue at the rate of 1/60th of final pensionable earnings for each year of service. Unlike the Classic scheme, there is no automatic lump sum, but members can commute some of their pension to provide a lump sum. Members pay contributions of 3.5% of pensionable earnings.

(c) Classic Plus Pension Scheme

This is essentially a variation of Premium, but with benefits in respect of service before 1 October 2002 calculated broadly as per Classic.

(d) Nuvos Pension Account

Like the Premium Scheme there is no automatic lump sum, but members can commute some of their pension to provide a lump sum. Members pay contributions of 3.5% of pensionable earnings.

(e) Partnership Pension Account

The Partnership Pension Account is a stakeholder pension arrangement. The employer makes a basic contribution of between 3% and 12.5% (depending on the age of the member) into a stakeholder pension product chosen by the employee from a selection of approved products. The employee does not have to contribute but where they do make contributions, these will be matched by the employer up to a limit of 3% of pensionable salary (in addition to the employer’s basic contribution). Employers may also contribute a further 0.8% of pensionable salary to cover the cost of the future provision of lump sum.

3. OTHER ADMINISTRATION COSTS

	note	2008/09	2007/08
		£000	£000
Rent, rates & building costs		2,420	2,380
Office furniture		94	56
Communications		770	764
Travel		641	656
Consultancy		491	384
Audit fee		193	175
Training		210	111
Information Technology		331	115
Recruitment		75	138
Subscriptions		35	48
Other		413	392
Total administration costs		5,673	5,219
Non-cash items included in the above are:
Depreciation	6 & 7	524	535
Audit fee	11	193	175
Amortisation on donated assets reserve	12	(77)	(77)
Total non-cash administration costs		640	633

4. OTHER PROGRAMME COSTS

	note	2008/09	2007/08
		£000	£000
Roads
Capital Maintenance		88,434	116,804
Current Maintenance		158,034	132,056
Payment on PFI contracts	16	32,328	35,648
Roads Capital Charge		510,340	483,058
Roads Asset Valuation Adjustment		42,411	0
Forth Replacement Crossing		21,682	0
Other		1,419	496
Rail
ScotRail Franchise		322,110	294,333
Rail Infrastructure in Scotland Capital*		228,593	232,957
Rail Infrastructure in Scotland Resource**		138,030	132,075
Rail Small Projects		7,039	12,216
Scotland’s Railways		3,842	0
Other		3,184	6,537
Concessionary Travel
Smartcard Applications		11,369	9,433
Concessionary Travel Schemes		181,641	164,568
Other Public Transport
Major Public Transport Projects - Rail		128,250	250,640
Transport Information		1,805	1,026
Strategic Transport Projects Review		2,036	6,236
Total other programme costs		1,882,547	1,878,084

* The Rail Infrastructure in Scotland Capital figure of £228,593k was paid directly to Network Rail.
** The Rail Infrastructure in Scotland Resource figure of £138,030k was paid to Network Rail via DfT as part of a transitional arrangement until the end of the current Control Period on 31 March 2009.

	note	2008/09	2007/08
		£000	£000
Non-cash items included in the above are:
Roads
Capital charge	11	510,340	483,058
Depreciation	6	30,773	12,473
Road asset valuation adjustment – new schemes		42,411	0
Road asset valuation adjustment – existing schemes		(2,150)	(3,723)
Total other programme costs – non-cash		581,373	491,808

5. OPERATING INCOME

	2008/09	2007/08
	£000	£000
Programme income
Rental income - properties	397	1,058
Erskine Bridge	0	1,484
Sale of land and property	8,869	3
Total programme income	9,266	2,545

6. TANGIBLE FIXED ASSETS

	Road Network	Assets under Construction	Land & Buildings	IT	Leasehold Improvements	Total
	£000	£000	£000	£000	£000	£000
At replacement cost or valuation
At 1 April 2008	16,356,006	554,041	1,333	3,995	4,062	16,919,437
Detrunkings	(23,023)	0	0	0	0	(23,023)
Capital Additions	0	162,515	0	51	0	162,566
Disposals	0	0	0	0	0	0
Revaluation	295,354	15,371	0	0	0	310,725
Current valuation adjustments	(40,278)	0	0	0	0	(40,278)
Historic valuation adjustments	(5,992)	4,554	0	0	0	(1,438)
Transfers and reclassifications	204,299	(204,299)	0	0	0	0
Balances at 31 March 2009	16,786,366	532,182	1,333	4,046	4,062	17,327,989
Accumulated Depreciation
At 1 April 2008	2,245,368	0	0	1,261	662	2,247,291
Detrunkings	(4,748)	0	0	0	0	(4,748)
Charge for the year	30,197	0	0	682	415	31,294
Disposals	0	0	0	0	0	0
Revaluation	92,276	0	0	0	0	92,276
Current valuation adjustments	(17)	0	0	0	0	(17)
Historic valuation adjustments	(3,043)	0	0	0	0	(3,043)
Transfers and reclassifications	0	0	0	0	0	0
Balances at 31 March 2009	2,360,033	0	0	1,943	1,077	2,363,053
Net Book Value at 31 March 2009	14,426,333	532,182	1,333	2,103	2,985	14,964,936
Net Book Value at 31 March 2008	14,110,638	554,041	1,333	2,734	3,400	14,672,146
Asset Financing
Owned	14,426,333	351,202	1,333	2,103	2,985	14,783,956
PFI reversionary Interest*	0	180,980	0	0	0	180,980
Net Book Value at 31 March 2009	14,426,333	532,182	1,333	2,103	2,985	14,964,936

*Reversionary interest is based on the current net book value of the schemes with the balance being built up and indexed over the life of the contract until they revert back to Transport Scotland ownership.

Detrunkings are transfer of the asset to local authorities with the corresponding entry flowing through the General Fund (see note 11).

Revaluation is based on indexation for all road network assets apart from land. Land is valued at market rates based on information supplied by the Valuation Office Agency. All revaluation movement is reflected through the revaluation reserve (see note 13).

Adjustments arise in a number of situations, for example, on the completion of road schemes the transfer from Assets Under Construction which are recorded at cost to the Road Network which is valued at depreciated replacement cost, there will usually be an adjustment. Similarly, adjustments can arise through the more accurate measurement of the dimension of the assets and these will be reflected through the Operating Cost Statement, General Fund or Revaluation Reserve as appropriate to circumstance.

Transfers and reclassifications are the costs of completed assets being transferred out of Assets Under Construction.

7. INTANGIBLE FIXED ASSETS

	Software Licences
	£000
At replacement cost or valuation
At 1 April 2008	53
Capital additions	0
Disposals	0
Transfers and reclassifications	0
Balances at 31 March 2009	53
Accumulated Amortisation
At 1 April 2008	(50)
Charge for the year	(3)
Additions	0
Disposals	0
Transfers and reclassifications	0
Balances at 31 March 2009	(53)
Net Book Value at 31 March 2009	-
Net Book Value at 31 March 2008	3

8. DEBTORS

8a Analysis by type	as at 31 Mar 2009	as at 31 Mar 2008
	£000	£000
Amounts falling due after more than one year:
Other Debtors of which:
Damage Claims	2,372	2,532
Land for resale	425	853
Other	971	(6)
	3,768	3,379
Amounts falling due within one year:
Trade debtors	471	25
Prepayments & accrued income	55,552	39,603
Other	20	85
	56,043	39,713

8b Intra-Government Balances
	Amounts falling due within 1 year		Amounts falling due after more than 1 year
	as at 31 Mar 2009	as at 31 Mar 2008	as at 31 Mar 2009	as at 31 Mar 2008
	£000	£000	£000	£000
Other central government bodies	20	4	0	(155)
Local authorities	26,805	24,792	0	429
Public corporations and trading funds	390	0	0	0
Intra-Government Balances	27,215	24,796	0	274
Balances with bodies external to government	28,828	14,917	3,768	3,105
Total Debtors	56,043	39,713	3,768	3,379

9. CREDITORS

9a Analysis by type	as at 31 Mar 2009	as at 31 Mar 2008
	£000	£000
Amounts falling due after more than one year:
Other Creditors of which:
PFI – excess reversionary interest in year one of contract	104,939	109,546
Retentions on road schemes	9,259	2,915
Other	2,007	2,102
	116,205	114,563
Amounts falling due within one year:
Trade creditors	504	2,337
Accruals and deferred income	71,249	135,939
PFI – excess reversionary interest in year one of contract	4,607	4,509
	76,359	142,785

9b Intra-Government Balances
	Amounts falling due within 1 year		Amounts falling due after more than 1 year
	as at 31 Mar 2009	as at 31 Mar 2008	as at 31 Mar 2009	as at 31 Mar 2008
	£000	£000	£000	£000
Other central government bodies	78	(3)	0	0
Local authorities	9,658	11,765	26,146	21,441
Public corporations and trading funds	0	0	0	0
Intra-Government Balances	9,737	11,762	26,146	21,441
Balances with bodies external to government	66,622	131,023	90,058	93,122
Total Creditors	76,359	142,785	116,205	114,563

10. PROVISIONS FOR LIABILITIES AND CHARGES

	Land and Property Acquisition	Major Projects	Migration and Other	Damages	Total
	£000	£000	£000	£000	£000
Balance as at 1 April 2008	61,037	3,500	1,424	939	66,900
Provided in year	51,048	982	2,009	114	54,153
Provisions not required written back	(1,077)	0	0	0	(1,077)
Provisions utilised in year	(50,628)	0	(218)	(610)	(51,456)
Balance as at 31 March 2009	60,380	4,482	3,215	443	68,520

11. GENERAL FUND

The General Fund represents the total assets less total liabilities, to the extent that the total is not represented by other reserves and financing items.

	note	2008/09	2007/08
		£000	£000
Balance as at 1 April 2008		7,930,197	7,834,712
Net Parliamentary funding		1,552,760	1,528,034
Net operating cost for the year		(1,892,324)	(1,892,036)
Non cash charges:
Auditors remuneration	3	193	175
Cost of capital charge	4	510,340	483,058
In year adjustments relating to prior year transactions
Detrunkings	6	(18,275)	0
Adjustment to infrastructure fixed assets	6	(2,949)	(28,169)
Adjustment to PFI assets	6	4,554	0
Realised element of the revaluation reserve	13	34,459	4,422
Balance as at 31 March 2009		8,118,955	7,930,197

12. DONATED ASSET RESERVE

The donated asset reserve represents assets not paid for but owned by Transport Scotland.

	£000
Gross Value
Balance at 1 April 2008	1,161
Additions in year	0
Balance at 31 March 2009	1,161
Amortisation
Balance at 1 April 2008	116
Amortisation in year	78
Balance at 31 March 2009	194
Net Book Value at 31 March 2009	967
Net Book Value at 31 March 2008	1,045

13. REVALUATION RESERVE

The revaluation reserve reflects the unrealised element of the cumulative balance of indexation and revaluation adjustments.

		2008/09	2007/08
	note	£000	£000
Balance as at 1 April 2008		6,459,751	5,380,504
Net gain/(loss) on revaluation	6	218,449	1,083,669
Realised element of the revaluation reserve	11	(34,459)	(4,422)
Balance as at 31 March 2009		6,643,741	6,459,751

14. CAPITAL COMMITMENTS

As at 31 March 2009 Transport Scotland’s commitment to make future capital payments on major road schemes is set out below. The main works contract has been awarded and the commitment has not been reflected elsewhere in the accounts.

	2008/09	2007/08
	£000	£000
Total contracted capital commitments for which no provision has been made	441,956	539,418

15. COMMITMENTS UNDER OPERATING LEASES

As at 31 March 2009 Transport Scotland was committed to making the following future payments in respect of operating leases:

	2008/09	2007/08
	£000	£000
	Land & Buildings	Land & Buildings
Rentals due within 1 year	0	0
Rentals due within 2-5 years	0	0
Rentals due thereafter	1,422	1,444
Total	1,422	1,444

16. COMMITMENTS UNDER PFI INITIATIVES

Transport Scotland has entered into the following off-balance sheet PFI contracts:

a) M6 (M74) – the contract covers the design, construction, financing and operation of 28.3km of the new Scottish motorway as well as the operation and maintenance of 90km of new and existing Scottish motorway. Payments are made under a shadow toll regime. The toll period began in July 1997 and expires in July 2027. The estimated capital value of the asset is £251m. Included in assets under construction is an amount of £138m representing the reversionary interest of the asset.

b) M77 – this is a joint Public Private Partnership (PPP) entered into by the Scottish Government, East Renfrewshire and South Lanarkshire Councils. The project covers the design, construction, financing and operation of 15km of the new Scottish motorway and a new 9km local link road between the new motorway and the A726 trunk road. Payments are made under a shadow toll regime. The toll period began in April 2005 and expires in April 2035. The estimated current capital value of the asset is £106m. Included in assets under construction is an amount of £43m representing the reversionary interest of the asset.

The total amount charged to the Transport Scotland Operating Cost Statement in respect of these schemes is:

	2008/09	2007/08
	£000	£000
M6 (M74) Motorway	31,604	35,268
M77	8,613	8,060
Total	40,217	43,328
Less capital element of unitary charge:
	£000	£000
PFI capital repayment	(7,889)	(7,680)
Total	32,328	35,648

Imputed finance lease obligations under off-balance sheet PFI contracts due during the next year, analysed between those periods where the commitment expires:

	M6(M74)	M77	Total
	£000	£000	£000
Rentals due within 16 to 20 years	31,472	0	31,472
Rentals due within 21 to 25 years	0	0	0
Rentals due within 26 to 30 years	0	9,078	9,078
Total	31,472	9,078	40,550

The amount charged to the Operating Cost Statement excludes any adjustments for the capital element of the unitary charge.

17. OTHER FINANCIAL COMMITMENTS – RAIL

Transport Scotland is committed to pay an income stream to Network Rail in accordance with the Deed of Grant and to First ScotRail under the Franchise Agreement.

Network Rail - The current control period for Network Rail runs from April 2004 to March 2009. During 2008/09 the Office of the Rail Regulator published a new determination which governs the charges allowed by Network Rail for the period from April 2009 to March 2014.

First ScotRail - During 2008/09 Scottish Ministers extended the First ScotRail Franchise by three years to 2014.

The total amount charged to the Transport Scotland Operating Cost Statement in respect of these schemes is:

	2008/09	2007/08
	£000	£000
Network Rail	366,622	365,032
First ScotRail	322,110	294,333
Total	688,732	659,365

The amounts owing under these contracts in the following year, analysed between those periods where the comittment expires are:

	Network Rail	First ScotRail	Total
	£000	£000	£000
Expiry within 1 to 5 years	364,300	290,100	654,400
Total	364,300	290,100	654,400

18. FINANCIAL INSTRUMENTS

Prior to implementation of International Financial Reporting Standards in 2010/11, financial instruments have been reviewed and presented in line with FRS 25, 26 and 29 (as modified by the FReM).

Transport Scotland has not made any additional provisions after reviewing for these standards.

19. CONTINGENT LIABILITIES

Contingent Liabilities under FRS12 are defined as past events where it is possible that transfer of economic benefits will be required to settle but no reliable estimate can be made.

19a Contingent Liabilities disclosed under FRS12

Transport Scotland has the following guarantee in place:

funding received by tie Limited from the European Union for work on the Glasgow Airport Rail Link Project (850k euros / £787k)

19b Possible Contingent Liabilities not required under FRS12 but included for parliamentary and accountability purposes

Transport Scotland has provided the following:

Contracts including indemnity clauses where risk is either considered part of the normal course of business or is not quantifiable:

operating agreement (ScotRail Franchise Agreement) with indemnity dated 2004 to First ScotRail
indemnity clause in roads contracts to compensate Network Rail for any damage or loss of access operating agreement with indemnity dated 2005 to tie Ltd for the promotion of EARL project

Guarantees / Letters of Comfort:

S54 guarantees issued as part of rail rolling stock procurement process
Scottish Government underwriting First ScotRail pension fund in line with that provided to other train operators by DfT letter of underwriting to Edinburgh Airport Limited (subsidiary of BAA) dated 2006 for the Edinburgh Airport Rail Link Project promoted by tie Limited

Other contingent liabilities:

Monklands Canal - maintenance of pipes under trunk roads

20. RELATED PARTY TRANSACTIONS

Transport Scotland is an agency of the Scottish Government. The Scottish Government is regarded as a related party with which the agency had various material transactions during the year. Transport Scotland also had significant transactions with local authorities during the year.

All interests declared by members of the Transport Scotland Executive Board are of a minor nature and have no impact on the awarding of contracts and commissions.

21. NOTIONAL CHARGES

The following notional charges have been included in the accounts:

		2008/09	2007/08
	note	£000	£000
Cost of capital charges	4	510,340	483,058
Auditors remuneration	3	193	175
		510,533	483,233

The cost of capital is calculated as 3.5% of assets less liabilities over the year, excluding donated assets and any cash balances.

22. LOSSES AND SPECIAL PAYMENTS

	2008/09		2007/08
	No of cases	£000	£000
Total cash losses	13	631	0
Details of cases over £250,000	0	0	0
Including - Claims abandoned	5	9	0
- Active claims	8	622	0

All the active claims refer to the National Concessionary Travel Schemes where it is a legal requirement to make payments in advance. Normally any overpayments would be adjusted in the following months but the difficult trading conditions experienced during the year has resulted in several bus operators ceasing to trade and not allowing for the recovery of overpayments.