Transport Scotland was created in 2006 as an Agency of the Scottish Government, accountable to Parliament and the public through the Scottish Ministers.
Its role is to oversee the operation and improvement of the trunk road, ferry, inland waterway and railway networks in Scotland; the air passenger facilities and routes in the Highlands and Islands; the national concessionary travel schemes and for the provision of travel information services. It also supports Ministers in prioritising future transport policy and investments and promoting sustainable transport and road safety.
The Chief Executive is the Accountable Officer for the Agency. This role is supported by a senior management team of six Directors and an Audit and Risk Committee chaired by one Scottish Government non executive member and including two further external members.
The Audit and Risk Committee meets on a quarterly basis. In addition, the Senior Management Team within the Agency, comprising of the Chief Executive and all six executive directors, meet on a weekly basis to discuss and take forward operational and financial issues. The Chief Executive, as Accountable Officer, has responsibility for maintaining a robust 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 assets for which he is responsible. This is in accordance with the Scottish Public Finance Manual (SPFM) issued by Scottish Ministers to provide guidance on the handling of public funds.
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. Transport Scotland, in line with all public bodies, must have at their head, 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 who adhere closely to robust principles of Corporate Governance, namely:
All members of the Senior Management Team are subject to an annual objective setting exercise and year end performance appraisal, which are both formally recorded. The arrangements for governance and the prevention and detection of fraud are also assessed on an annual basis by Audit Scotland.
The Transport Scotland Senior Management Team ensures that the principles of best practice contained with the Scottish Public Finance Manual are closely adhered to in all areas and also ensures that appropriate arrangements are in place to ensure that the public funds they are responsible for are properly safeguarded and used economically, efficiently and effectively.
The Chief Executive, as Accountable Officer for Transport Scotland, formally delegates 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.
The Management Team reviews financial performance across the Agency on a monthly basis as well as overseeing the timely production, on an annual basis, of an Annual Report and Accounts, confirming that it has complied with relevant standards of Corporate Governance.
The duty of Best Value applies to all public bodies in Scotland, and is a formal duty on Accountable Officers. Achieving Best Value is about ensuring sound governance, good management, public reporting on performance and a focus on improvement. Transport Scotland's aim is to drive improved value for money, ensure tight management of funds and sound asset management. Subsequent efficiencies will assist with the support of the Investment Programme.
During the year 2011-12, Transport Scotland conducted two Best Value Service Reviews; one on Financial Management and one on Governance and Accountability. Both these reviews highlighted that Transport Scotland is operating efficiently in these areas and can demonstrate best practice. These areas will however be reviewed in the new financial year with a view to continuous improvement. In addition, it is the intention to conduct two further Best Value reviews within other areas of the business, again with a view to driving continuous improvement within the organisation.
Audit & Risk Committee
Transport Scotland also has an Audit and Risk Committee comprising three external members to bring independent judgement and challenge to the governance of the agency.
The system of internal control
The system of internal control is designed to manage rather than eliminate the risk of failure to achieve Transport Scotland's 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 the likelihood and impact of them being realised, and to manage them efficiently, economically and effectively. This system of internal control has been in place in Transport Scotland for the year ended 31 March 2012 and up to the date of approval of the Annual Report and Accounts. It is in accordance with the guidance from Scottish Ministers.
The risk and control framework
There is a robust framework of responsibility for risk management within Transport Scotland. This is in accordance with the SPFM, and has appropriate support, guidance and procedures from all parts of the Agency's business. The system for assessment and control of risk within the agency is as follows:
- the Chief Executive, in conjunction with the Directors, reviews 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 operation and control objectives when they prepare and monitor directorate and business management plans; and
- the Chief Executive holds regular meetings with Ministers where both strategic and operational risks are discussed.
A high level Risk Strategy is in place, which sets out a consistent approach to the implementation of risk management within Transport Scotland at strategic, programme and project levels. The Transport Scotland 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.
Review of effectiveness
The Accountable Officer has responsibility for reviewing the effectiveness of the system of internal control. This is informed by the work of the internal auditors, the managers within the Agency, the Audit and Risk Committee and the external auditors in their reports.
Assurance on the maintenance and review of internal control systems is provided by each of the Directors within Transport Scotland who submit an annual certificate of assurance covering their areas of responsibility to the Accountable Officer.
Risks to information are managed and controlled and the Agency is meeting the mandatory requirements set out in the Security Policy Framework developed by the Cabinet Office.
Transport Scotland's Internal Auditors (whose work is undertaken to Government Internal Audit Standards) submit regular reports to the Audit and Risk Committee which provide an independent opinion on the adequacy and effectiveness of the organisation's system of internal control, together with any recommendations for improvement. The three categories of assurance used in these reports are substantial, reasonable and limited assurance.
Follow up work is carried out to deal with the points raised in the audits where a rating of less than substantial assurance has been awarded.
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 2011-12
||Audit Area & Scope
||Assurance Provided: Reasonable In general, controls were adequate where applied. In addition, Transport Scotland had completed further work aimed at improving the Agency's achievement of payment targets. Internal Audit found that there was no single reason for delays in payment performance although it was advised that, in a number of cases, the main problem lay with certain disputed invoices. In a number of other cases, however, Business Units could give no particular reason for the delays.
||Scotrail Franchise Arrangements
||Assurance Provided: Substantial Controls were good. In particular, Internal Audit was impressed by a number of franchise management areas including the Service Quality Inspection Regime (SQUIRE), budgetary and payment processes and risk management procedures. It had, however, some concerns surrounding franchise performance incentive payments and in particular the issues which have arisen in respect of timetable changes and the allocation of delay minutes between Network Rail and ScotRail. Transport Scotland had, however, already identified these matters and had taken appropriate corrective action to address these.
||Sponsorship Arrangements across Transport Scotland
||Assurance Provided: Substantial Internal Audit's review covered all main Transport Scotland funded bodies including those bodies in receipt of Section 70 grants.
||Standing Financial Instructions
||Advisory Work At the request of Transport Scotland Internal Audit reviewed a range of revised financial instructions developed following an audit review of this area in 2010-11. It made some suggestions for a few revisions but in overall terms the revised instructions were found to be good.
||Assurance Mapping Exercise
||Advisory Work Internal Audit found no major gaps in the assurance map although it has included a cross Agency review of post project evaluation work in its proposed coverage for 2012-13. This was an area where audit considered further assurance work was needed.
In addition to the above reports, Internal Audit completed follow-up reviews on the following audits:
- Key Performance Targets - 2009-10 audit
- Forth Estuary Transport Authority (FETA) and Tay Road Bridge Joint Board (TRBJB) (Bridge Authorities) grants.- 2010-11 audit
- Edinburgh and Glasgow Improvement Programme - 2010-11 audit
- Land Valuations - 2010-11 audit
- Evaluation of Management of Minor Roads - 2010-11 audit
These follow-up reviews highlighted that all extant recommendations identified in the initial reviews had been implemented as agreed.
Programme and Project Management
Transport Scotland adopts a comprehensive approach to programme and project management. All projects are overseen by a Project Board, chaired by the Project Sponsor. This includes the Forth Replacement Crossing, the Borders Railway, the M8/M73/M74 Improvements Programme and the Edinburgh to Glasgow Improvements Programme. The Project Boards incorporate a range of expertise including procurement, legal, technical and financial at a senior level. Their role is to oversee the delivery of the projects, including associated risk management, to ensure completion on time and budget. This includes the development and approval of associated business cases in line with the requirements of the Scottish Financial Reporting 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, the Chief Executive is the Investment Decision Maker. He is 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.
The Chief Executive has set objectives for the Directors within Transport Scotland to undertake a regular review process to ensure that improvement to 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.
9 August 2012