The financial statements cover the period from 1 April 2012 to 31 March 2013. They have been prepared in accordance with the Accounts Direction given by the Scottish Ministers in pursuance of the Public Finance and Accountability (Scotland) Act 2000, and in accordance with The HM 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.
The Accountable Officer authorised these financial statements for issue on 13 August 2013.
Transport Scotland's Annual Review and Accounts are 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 below:
- 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 (WS Atkins) and uses a series of standard costs to value the individual components of the network asset and indices to revalue these 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 required to be made relating to the estimated cost of land acquisition and compensation claims that are based on a variety of data sources and experience.
- Private Public Partnerships (PPP) - the balance of control
Transport Scotland has three Private Public Partnerships (PPP) agreements in the form of Private Finance Initiative (PFI) contracts (M77 - Connect, M74/M6 - Autolink and the M80 Highway Management). These arrangements meet the definition of Service Concession Arrangements in accordance with the disclosure requirements of SIC 29 Service Concession Arrangements. The private sector operators are contractually obliged to provide the services related to the infrastructure to the public on behalf of the public sector. Transport Scotland retains overall control of the related assets and these assets are accounted for on Transport Scotland's Statement of Financial Position (SFP). The PFI contracts are for fixed terms of thirty years and annual payments are made to the respective Service Concession Contractors in the form of a unitary charge payment stream
Rail infrastructure in Scotland
Transport Scotland has responsibility for specifying and funding rail infrastructure in Scotland. First ScotRail has been operating rail services under the Franchise Agreement since August 2004 and has been exceeding contract performance benchmarks. Scottish Ministers activated a provision under the terms of the original agreement to extend the First Scotrail Franchise to 31 March 2015. In extending the contract, 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 its 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 assets in question are accounted for on Network Rail's balance sheet/Statement of Financial Position.
Transport Scotland has paid a grant to the City of Edinburgh Council as agreed in respect of work done on the Edinburgh Trams project in accordance with the grant agreement. To the end of 2012-13, Transport Scotland has paid £465 million of the agreed funding. Transport Scotland continue to provide expertise to the City of Edinburgh Council (who retain contractual responsibility for the project) to assist them to bring the project to a satisfactory conclusion.
Resources to fund Transport Scotland's day-to-day costs and capital investment programme were allocated in accordance with the Scottish Government Spending Plans and Draft Budget 2012-13 which authorised both the Scottish Government's and Transport Scotland's spending plans for the financial year 2012-13.
Private sector funding under PFI and Public Private Partnership arrangements is also considered for major infrastructure schemes. The choice between public and private funding is governed by suitability for alternative forms of finance (including Value for money -VFM) as well as availability. The business cases will usually demonstrate the VFM of a scheme in its own right as opposed to the VFM of different potential funding routes. The policy decision by Ministers set out in the Draft Budget 2013-14 is to maximise investment by utilising all available forms of finance (whilst working within their 5% affordability envelope for revenue financed schemes) in light of significant capital constraints. However, alongside that, an assessment will be made as to what is suitable for other forms of investment. So, for example, we know that smaller road capital schemes are not suitable for NPD but we do not normally specifically state that in the business cases.
Rail major projects may also be funded by borrowing through Network Rail, through the Regulatory Asset Base (RAB). This is a recognised method for funding rail projects and it will play an increasing part in the rail programme for Transport Scotland during the contractual period ending in 2014. The ORR will make the final decision on whether rail investment can be added to the RAB or not, and it has rules it applies around that
Financial performance and use of resources
Transport Scotland was allocated resources by the Scottish Ministers, within the Spending Review 2011, of £2,060 million for 2012-13 (2011-12: £2,090 million). Of this, £1,916 million was funded from the Scottish Government Departmental Expenditure Limit (DEL)(2011-12: £1,916 million) ; £73 million represents Annually Managed Expenditure (AME) in respect of provisions released relating to land compensation and damage claims in respect of the road network (2011-12 £7 million); with the remaining £71 million (2011-12 £330 million) representing funding for expenditure charged outwith DEL in respect of PFI/PPP projects.
The final outturn for the year against the individual budget areas is shown below. These budgets formed part of the overall budget of the Scottish Government Infrastructure and Capital Investment portfolio. The outturn against DEL represents a break even position. The overall underspend of £14.18 million (2011-12: £35.68 million) represents approximately 0.7% (2011-12: 2%) of the overall budget.
|Transport Scotland 2012-13||Actual £000's||Budget £000's||Variance £000's|
|Resource - Operating Costs||982,803||951,480||31,323|
|Resource - Investment||478,895||473,891||5,004|
|Expenditure on PFI schemes (ODEL)||56,966||70,811||(13,845)|
Spending is categorised as either capital or resource with separate budgetary cover for each. Resource is further sub-divided into investment in infrastructure (which although it may be capital in nature cannot be accounted for as such within Transport Scotland's accounts) and resource for consumption (operating costs). Transport Scotland has a significant infrastructure investment programme which allocates funding to our major rail and road projects as well as ongoing maintenance costs in the existing road and rail infrastructure.
The figures represent Transport Scotland's out-turn against the Scottish Governments Budget for 2012-13. The Statement of Comprehensive Net Expenditure (SoCNE) on page 54, identifies net operating costs of £1,669 million. Capital expenditure is not recognised as in year expenditure within the SoCNE, but the table below provides a reconciliation of out turn to SoCNE..
Reconciliation of 2012-13 Out-turn with Statement of Comprehensive Net Expenditure
|Net Operating Costs per SoCNE||1,669,133|
|Add: Additions to Intangible Assets (Note 7)||Nil|
|Add: Additions to PPE (Note 6)||369,843|
|Add: Additions to Investments (Note 9)||10,600|
|Less : Disposals of Intangible Assets (Note 7)||Nil|
|Less: Disposals of PPE (Note 6)||(220)|
|Less: Disposals of Investments (Note 9)||(3,018)|
|Less : Disposals on Assets held for Sale (Note 8)||(65)|
|Out turn per Management Commentary||2,046,273|
A further analysis of actual expenditure in 2012-13, is analysed below by operational area within Transport Scotland.
The majority of Transport Scotland's budget is spent, either directly or indirectly, with private sector companies. Only 1% of the budget is utilised on the ongoing Agency running costs.
The total asset value of Transport Scotland is £18 billion, the majority of which relates to the trunk road network asset. Additions to the value of the asset in year reflect the completion of the Fife Intelligent Transport System and M9 Junction 1a schemes and the transfer in from Local Authorities in respect of the structures for the approach roads to the Forth Road Bridge.
Transport Scotland has a communications team which includes in-house and contracted staff. Expenditure in this area, including relevant staff costs, costs relating to external communication, marketing, PR campaigns, media relations, marketing research, branding, design, promotional events and corporate communications, and sponsorship totalled £554,000 for the year 2012-13 (2011-12: £665,000).
The total expenditure incurred in the year 2012-13 on overseas travel by staff in Transport Scotland, which covered travel to and from the United Kingdom, the cost of hotels, travel and subsistence and any other related expenditure was £29,000 (2011-12 £27,000)
Hospitality and Entertainment
The total expenditure on hospitality and entertainment incurred by Transport Scotland in the year 2012-13 was £42,000 (2011-12 £40,000). This included gifts, meals, receptions or invitations to public, sporting, cultural or other events or other similar benefits.
External consultancy services are used within Transport Scotland in some areas such as IT; specialised financial services; construction or infrastructure related services; research and evaluation and policy development services. The total expenditure incurred for the year 2012-13 was £3.835 million (2011-12 £1.629 million)
Payments with a value in excess of £25,000
Transport Scotland publishes a monthly report of payments with a value over £25,000. The reports are published on the Transport Scotland's website: http://www.transportscotland.gov.uk/about-us/expenditure/reports and cover the financial years 2012-13 and 2011-12.
Relationship with suppliers
Transport Scotland is committed to prompt payment of bills for goods and services received, and aims to settle all undisputed invoices within contract terms and also in line with the Scottish Government 10 day payment policy. In 2012-13 Transport Scotland settled an average of 88% of invoices within this timescale.
The aggregate amount owed to trade creditors at the year end as a proportion of the aggregate amount invoiced by suppliers during the year, represented 3.5 days in proportion to the total number of days in 2012-13 and 1.8 days in proportion to the total number of days in 2011-12.
In relation to financial instruments, an indication of the financial risk management objectives and policies and exposure to price, credit, liquidity and cash flow risks is provided in note 18 to the accounts. This information is not considered material for Transport Scotland.
Future Spending Plans
The Scottish Budget Spending Review 2012-13 to 2014-15 (SR 2011), provides detail of how our spending plans over the next three years will help deliver sustainable economic growth. Transport spending lies within the Government's Infrastructure, Investment and Cities portfolio. After the announcement of the Spending Review, the Westminster government set out movements in UK spending that generated Barnett consequentials for Scotland. As a result, Transport Scotland received additional capital allocations totalling around £85 million across the three spending review years, principally for roads projects such as A75 Dunragit Bypass, A77 Symington to Bogend Toll and A737 Dalry Bypass, but also including £13 million for Sustainable and Active travel. The additional budget for the year 2013-14 was £33.2 million. These additions are included in the table below for the coming financial year.
|Resource - Operating Costs||1,003,239|
|Resource - Investment||449,111|
Employment of Disabled Persons
Transport Scotland follows Civil Service good practice guidance on the employment of disabled people and is a Job Centre Plus Disability Symbol user. As such, Transport Scotland ensures that there is no discrimination on the grounds of disability and that access to employment and career advancement is based solely on merit, competence and suitability for the work.
The number of staff who had declared a disability employed by Transport Scotland as at 31 March 2013 was 19.
Staff Relations and Equal Opportunities
Transport Scotland is an equal opportunities employer. Policies are in place to guard against discrimination and to ensure that there is no unfair or illegal discriminatory treatment or any barriers to employment or advancement in Transport Scotland.
Transport Scotland gives a high priority to the development of all its staff. Training, development and learning in Transport Scotland is quality assured through its commitment to the Investor in People (IiP) Scheme as part of the Scottish Government. The latest review of the Scottish Government IiP status will conclude in the second half of 2013. Transport Scotland is committed to a programme of continuous improvement in relation to the Scottish Government implementation of the IiP standard.
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. Transport Scotland has access to the Scottish Government Equal Opportunities Officer who is responsible for developing and promulgating equal opportunities and diversity policies.
Transport Scotland recognises that the success of any organisation depends largely on the effective performance and full attendance of all its employees. People are a valued resource, as well as an expensive one. Therefore, as an employer Transport Scotland's 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 return to and stay in work; and
- explain employees' entitlements and the roles and responsibilities of HR.
In 2012-13 an average of 6.6 working days (2011-12: 5.6) were lost due to sickness absence per staff year for Transport Scotland.
Transport Scotland Equal Opportunities policy is that all staff should be treated equally irrespective of their sex, marital/civil partnership status, age, race, ethnic origin, sexual orientation, disability or religion or belief, work pattern, employment status, gender identity (transgender), caring responsibility or trade union membership. Employment and promotion are solely on merit. Staff who work full time and those who work an alternative pattern are assessed on exactly the same basis.
Transport Scotland follows the Scottish Government Diversity Delivery Plan, published in 2008, which supports the wider Civil Service Diversity Strategy in its drive to mainstream equality and diversity in every aspect of its business. This is further supported by our Fairness at Work Policy. This includes changing behaviours and culture to create a fully inclusive Civil Service, confident in its diversity; promoting strong leadership and clear accountability for delivering diversity; attracting, keeping and developing talent from all areas of society; and becoming representative of the society we serve, at all levels.
Employees and Social and Community Issues
Transport Scotland staff use the Scottish Government 'Skills for Success' framework which is a skills based approach to learning, development and career planning. All of which is designed to help staff manage their skills and career across the wider organisation.
We have embarked on a programme of education engagement, where staff use their skills and experience of work to help young people in the surrounding area prepare for employment.
In procuring major contracts, Transport Scotland is at the forefront of delivering community benefits beyond those of the normal contract requirements. An example of this is the benefits to the community being delivered through the Queensferry Crossing project.
The main contract will provide an average of 112 employment opportunities each year over the six year duration of the contract. This is broken down into 45 vocational training positions, 21 professional body training places and 46 positions for the long term unemployed. The contract also provides scope to maximise the number of Modern Apprenticeship opportunities and there is a contractual requirement that all job opportunities have to be advertised in local job centres. Key performance indicators have also been agreed with the Principal Contractor to ensure work experience placements for further education students, support for PhD students and educational visits to the works are undertaken.
Additionally, the FRC is the first contract in Scotland to include a requirement for subcontract tenders to be advertised on the Public Contracts Scotland website to ensure Scottish firms have a fair opportunity to register an interest in available work. This has led to a growing majority of supply and sub-contract orders associated with the biggest Scottish transport infrastructure project in a generation being won by Scottish firms.
Transport Scotland is also in the forefront of delivering community benefits for the Highlands and Islands (and Dundee) in the aviation sector. Through our sponsorship and support for Highlands and Islands Airports (HIAL), airport infrastructure is provided which supports essential air services and HIAL directly employs 578 staff in those communities. We also contract three lifeline air services serving Barra, Campbeltown and Tiree which cannot be provided commercially and in addition administer the Air Discount Scheme which provides discounted air fares for the residents of some of Scotland's most remote communities making fares more affordable. Through these interventions TS is helping to ensure the economic and social integrity of communities across the Highlands and Islands.
In 2012-13, Transport Scotland, on behalf of Scottish Ministers, awarded the contract for the provision of ferry services to the Northern Isles to Serco Limited. The contract replaces the service previously provided by Northlink Limited, with a total subsidy of £234 million. Bidders for the contract were specifically asked to actively identify opportunities for supported businesses in the area and Serco have committed to this principle. Their procurement manager will have a direct line to the wider Serco Group procurement team and this will provide opportunities for supported businesses to benefit from a much larger range of opportunities and become involved in Serco's supplier forum.
Transport makes a key contribution to Scotland's wellbeing: economically, environmentally and socially. An efficient transport system is essential for enhancing productivity and delivering faster, more sustainable growth in a low carbon economy. Ongoing investment in networks connects regions and individuals to economic opportunities, creating a more cohesive Scotland with increased social equity.
Transport Scotland invests almost all of its allocated resources in maintaining and improving Scotland's strategic transport networks, (96% of its £2 billion budget), supporting over 25% of civil engineering contracts in Scotland. Investment across all transport modes, in operation, maintenance and specific infrastructure construction supports over 12,000 jobs.
Transport Scotland is also seeking to embed sustainability in every aspect of construction works and is committed to recycling materials and works with contractors to identify opportunities to minimise materials imported/exported from construction sites. Transport Scotland plans and performance in terms of sustainability throughout the year are detailed in the report on pages 22-23.
Transport has a crucial role to play in contributing to the Scottish Government's Purpose of sustainable economic growth, by supporting the targets set out in the Climate Change (Scotland) Act and the aims of the Low Carbon Scotland suite of policy documents and the Report on Proposals and Policies (March 2011), and the second report published in draft in January 2013.
Investment is set within a hierarchy which also promotes sustainable growth by seeking to maintain and safely operate the assets we already have, then to make best use of those networks, and finally to target infrastructure improvements. Last year, there was over 83 million passenger journeys on Scotrail Services, a growth of over one third since the start of the Franchise in 2004. This was supported by a number of improvements to the network and services including electrification of the Paisley Canal line - delivered to record timescales and below cost estimates - the opening of Conon Bridge station and enhanced services on routes between Glasgow and Ayrshire.
In addition, we have continued to support the development of cycling and walking infrastructure, alongside promotion of active travel, working with partners (including Sustrans, Cycling Scotland and local authorities) to deliver the Cycling Action Plan for Scotland and enable progress towards its ambitious vision of 10% modal share for cycling by 2020.
We continue to promote alternatives to private car travel, e.g. through grant-funding to CarPlus to develop a network of car clubs across Scotland, and grant funding to the Energy Saving Trust to promote fuel efficient driving as well as work with organisations and businesses to encourage their transitions to low carbon travel and transport choices.
Our 'Smarter Choices Smarter Places' sustainable transport demonstration programme promotes greener, healthier, and smarter policy aims.
Concessionary Travel Scheme
Within the 2012-13 Concessionary Travel budget of £192 million, the statutory budget limit for the Scotland Wide Free Bus Concessionary Travel Scheme for Older and Disabled People, as negotiated with the Confederation of Passenger Transport, was set at £187 million. As bus operator claims within the free scheme in 2012-13 totalled approximately £200 million, bus operator payments for the final 2012-13 claim period were capped by approximately £13 million pro rata over all operators.
Directors and Non Executive / External Members Interests
Directors and Non-Executive / External 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 request. The 2012-13 assurance letters on internal control, which all Directors in post as at 31 March 2013 completed, also confirmed that no conflict of interest arose in the exercise of their duties.
The accounts for 2012-13 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 £180,000 which related solely to the provision of the statutory audit service.
Freedom of Information
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.
In 2008 Transport Scotland undertook a Strategic Transport Projects Review to set out investment priorities for the next 20 years. This is targeted at facilitating better movement of people and goods to increase wealth and enable more people to share fairly in that wealth. The priority projects i.e. the Queensferry Crossing, Highland Mainline, Edinburgh to Glasgow Improvements Programme and Aberdeen to Inverness Rail Line are progressing well. In addition, Transport Scotland are continuing to work with partners and stakeholders to take forward the development and design of other projects, such as the A96 Inveramsay Bridge Improvement Works, the A737 Dalry Bypass and the A77 Maybole Bypass.
The Scottish Government set annual targets of 3% Efficiency Savings which have to be achieved by Transport Scotland going forward.
Total efficiency savings achieved by Transport Scotland for each year are as follows:
|Efficiency Savings Target||60||51|
|Efficiency Savings Achieved||71||59|
|% of Transport Scotland DEL Budget||3%||3%|
The challenge is to use resources in a more efficient and effective way so that more can be delivered for the same or less cost. Transport Scotland had a target of £60 million for the year 2012-13 and it has again exceeded its target, this time by £11 million. The following are the key efficiency savings achieved:-
- streamlining and rationalisation of back office functions and management procedures in Highland and Islands Airport and British Waterways Scotland (trading as Scottish Canals);
- supporting Network Rail decentralisation and their Alliance with First ScotRail as a means of reducing costs and improving services for rail passengers;
- lower pricing negotiated with Network Rail on rail infrastructure projects to deliver the same output for lower costs;
- more economic pricing of road operating companies' contracts;
- use of improved technologies, sustainable reconstruction techniques and e-procurement for roads maintenance, which has also led to less waste being sent to landfill sites;
- re-tendering of ferry services that has produced significant financial savings from operating efficiencies realised;
- optimum maintenance treatments resulting in lower whole life, material, labour and traffic management costs following new guidance to Operating Companies on developing structural repair and network strengthening programmes; and
- the Scotland wide free concessionary bus travel scheme for older and disabled people was delivered at a reduced cost in a revised agreement with bus contractors.
Shared Services / Cluster Project working
This is a key element of Transport Scotland's efficiency agenda and we are committed to achieving quality public services that are valued by their customers and that realise efficiencies by employing best business practice and improved collaborative working.
Transport Scotland currently shares the following services and systems of the Scottish Government: Information and Communications, Human Resources, Estates services, Payments, Financial Reporting and Payroll. In addition Transport Scotland also shares services with other authorities, such as the Road Asset Valuation System.
It is the Agency's policy to use collaborative contracts, such as those awarded by Scottish Procurement wherever practicable. Cash savings of £559,967 were delivered in 2012-13 (2011-12 £539,104) were delivered through expenditure of just over £1.9 million (2011-12 £2 million) on Scottish Procurement-led collaborative contracts and frameworks, thereby contributing to the Scottish Government's efficiency savings targets.
Transport Scotland supports the drive for improved procurement capability by assisting and supporting other central government organisations through participation in the Clusters Project. This approach involves a lead organisation providing mutual support and mentoring to assist the other organisations to raise their procurement capability. Transport Scotland is participating in the Scottish Procurement and Commercial Directorate's Cluster Project which is aimed, in particular, at improving the procurement capability of those Scottish Government organisations which have little or no expertise in this specific field.
In addition, we procure our contracts in such a way that gives Scottish firms, particularly Small and Medium Enterprises (SMEs), a fair chance to compete, including the advertising of sub-contract opportunities on the Public Contracts Scotland website.
Transport Scotland made an advance payment of £100 million to the Queensferry Crossing contractor in respect of mobilisation and design work required in the early stages of the contract. This is covered by advance payment bonds and the value will reduce when Transport Scotland has paid 50% of the contract price to the contractor in respect of the value of work completed pursuant to the contract. This is expected to happen in April 2014.
Progress on delivering the Queensferry Crossing is crucial in maintaining capacity and capability of the national and regional road network. This strategic crossing is a vital economic link for Fife, Edinburgh and the Lothians, is the largest civil engineering project in a generation in Scotland and aims to secure over 3000 jobs and economic revenue of £1.3 billion, through the creation of direct jobs and sub-contracting opportunities for local firms, estimated to be worth £6 billion to Scotland's economy, with £242 million having been spent in 2012-13 alone.
Up until 31 December 2012, 334 Scottish firms have benefitted from subcontract and supply orders valued at about £130 million. The two early contracts to the north (Fife Intelligent Transport System) and to the south of the existing Forth Road Bridge (M9 Junction 1a) have been completed and opened to traffic. These provide southbound bus hard shoulder running capability and control traffic flows and reduce traffic congestion at peak traffic flow times through the use of variable mandatory speed limits and advance warning signs.
Risks and Uncertainties
The principal risks and uncertainties facing Transport Scotland relate to the major contracts that it has entered into in relation to the provision of rail, ferry, bus and air services, the maintenance of the road, rail and the Highlands and Islands air networks and the procurement of major infrastructure such as the Queensferry Crossing. The inherent risks relate to performance by contractors which can also be affected by outside factors such as adverse weather. Transport Scotland has focussed its efforts in particular on improving winter resilience on the trunk road network. Transport Scotland manages the related financial risks on these contracts by providing financial support, including monthly reporting to budget holders, directors and the Scottish Government.
Personal data related incidents
There were no personal data related incidents in the year within Transport Scotland.
Significant events since the end of the financial year
There have been no significant events since the end of the financial year.
7 August 2013