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Strathclyde Partnership for Transport Financial Statements for the year ended 31 March 2012

Strathclyde Partnership for Transport Financial Statements 2012 3

Strathclyde Partnership for Transport Financial Statements for the year ended 31 March 2012

Contents

Members of Strathclyde Partnership for Transport 4

Financial Statement by the Assistant Chief Executive (Business Support) 5

Statement of Responsibilities 7

Annual Governance Statement and Statement of Financial Control 8

Accounting Policies 12

Comprehensive Income and Expenditure Statement 20

Balance Sheet 21

Cash Flow Statement 22

Movement in Reserves Statement 23

Notes to the Financial Statements 24

Remuneration Report 48

Independent auditor’s report to the members 53 of Strathclyde Partnership for Transport and the Accounts Commission for Scotland

Strathclyde Concessionary Travel Scheme Joint Committee 55-71 Financial Statements for the year ended 31 March 2012

Independent auditor’s report to the members of 72 Strathclyde Concessionary Travel Scheme Joint Committee and the Accounts Commission for Scotland

Members of Strathclyde Partnership for TransportMember RepresentingCouncillor Duncan MacIntyre Argyll & Bute CouncilCouncillor Bobby McDill East Ayrshire CouncilCouncillor Alan Moir East Dunbartonshire CouncilCouncillor Eddie Phillips East Renfrewshire CouncilCouncillor Archie Graham Glasgow City CouncilCouncillor Jonathan Findlay (Chair) Glasgow City CouncilCouncillor John McLaughlin Glasgow City CouncilCouncillor Gilbert Davidson Glasgow City CouncilCouncillor Jim McNally Glasgow City CouncilCouncillor David Wilson Inverclyde CouncilCouncillor John Reid North Ayrshire CouncilCouncillor Kaye Harmon North Lanarkshire CouncilCouncillor David Fagan (Vice Chair) North Lanarkshire CouncilCouncillor Harry Curran North Lanarkshire CouncilCouncillor Bill Perrie Renfrewshire CouncilCouncillor Bill Grant South Ayrshire CouncilCouncillor Ian Gray South Lanarkshire CouncilCouncillor Denis McKenna (Vice Chair) South Lanarkshire CouncilCouncillor Chris Thompson South Lanarkshire Council Councillor William Hendrie West Dunbartonshire CouncilJohn Boyle Appointed MemberTom Hart Appointed MemberAlan Malcolm Appointed MemberRonnie Mellis Appointed MemberNiall McGrogan Appointed MemberGavin Scott Appointed MemberBill Ure Appointed Member

The Partnership consists of 20 Elected Members representing the 12 constituent unitary authorities in the west of Scotland. The Partnership can have between 7 and 9 Appointed Members. There are currently 7 Appointed Members. The Partnership met on 7 occasions during 2011/12.

The directors of the organisation are defined as the Chief Executive, Assistant Chief Executive (Business Support) and Assistant Chief Executive (Operations).

Secretary / TreasurerValerie Davidson Assistant Chief Executive (Business Support) Strathclyde Partnership for Transport Consort House 12 West George Street Glasgow G2 1HN

Address for correspondenceNeil Wylie Director of Finance & HR Strathclyde Partnership for Transport Consort House 12 West George Street Glasgow G2 1HN

Members of the Partnership as at 31 March 2012

Strathclyde Partnership for Transport Financial Statements 20124

Financial Statement by the Assistant Chief Executive (Business Support)IntroductionStrathclyde Partnership for Transport (SPT) is the regional transport partnership (RTP) for the west of Scotland. It is one of seven RTPs covering Scotland established under the Transport (Scotland) Act 2005. SPT’s functions are determined by the Transport (Scotland) Act 2005, which effectively transferred the functions of Strathclyde Passenger Transport Authority (SPTA) and Executive (SPTE) to the regional transport partnership for the west of Scotland. This resulted in SPT assuming the majority of responsibilities and roles of the former SPTA and SPTE with effect from 1 April 2006.

Preparation of Financial StatementsThe financial statements demonstrate SPT’s sound stewardship of the public funds it controls and manages. The financial statements have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 which is based upon International Financial Reporting Standards (IFRS). Therefore the Code, which remains the authoritative accounting standard for local authorities (and related bodies) across the UK, is based upon internationally common accounting practices.

There remains an outstanding legal matter relating to the preparation of the financial statements. A technical bulletin, issued by Audit Scotland, in June 2007 suggests that the Transport (Scotland) Act 2005 does not permit RTP’s, including SPT, to generate a surplus or deficit on the general fund and hence to add to reserves. Reserves and fund balances are a critical tool in the financial plans of any organisation to ensure it is in a position to respond to unexpected events and circumstances. SPT is therefore relying on the former powers transferred under the Act to hold and utilise reserves. However according to the technical bulletin, SPT cannot contribute to reserves. SPT, having taken legal advice does not agree with the view suggested by Audit Scotland, given that the powers of SPTA and SPTE were transferred to SPT, but again in 2011/12 has prepared

the financial statements in accordance with the position expressed by Audit Scotland. SPT continues to press the Scottish Government for the legislative change which is deemed necessary to resolve the issue as a matter of urgency.

Pages 12 to 19 set out the accounting policies adopted by SPT in the preparation of the financial statements to ensure that the financial statements give a ‘true and fair view’ of SPT’s financial position.

Financial ReviewSPT’s income and expenditure account for the year to 31 March 2012 is shown on page 20. The current economic environment continues to put pressure on various elements of fare income and service costs. However, efficiency plans implemented in 2010/11 and 2011/12 ensured that SPT services were delivered within budget and available funding. SPT continues to make plans for responding to the ongoing impact of the recession and any further reductions in public sector funding.

SPT’s net revenue budget was set at £38.532 million, of which £37.381 million was financed by requisition from the 12 local authority partners in the SPT area, £0.933 million was financed by Scottish Government direct grant with the remaining £0.218 million drawn from reserves. Requisition and Scottish Government Grant was received as budgeted for and no draw on reserves was required within the year. As in 2010/11 a contribution to the Subway Modernisation fund was planned for 2011/12, in accordance with the Subway Modernisation Business Case submitted to the Scottish Government, and has been generated. However, until the matter relating to the holding of reserves is resolved this contribution is deemed to be a “receipt in advance”. A contribution of £14.042 million (£4.864 million, 2010/11) was made during the year resulting in a cumulative balance of £19.04 million.

Balance SheetSPT’s balance sheet is shown on page 21 and provides details of SPT’s assets and liabilities as at 31 March 2012. Explanatory notes are also provided.


Total Movement in ReservesThe note on Movement in Reserves on page 23 shows the movement in revenue and capital reserves held by SPT as at 31 March 2012. The major movement in reserves in the year is a £14.994 million decrease in the pension reserve, which is detailed in note 14 (page 31) and a £2.101 million decrease in the revaluation reserve.

Cash Flow Statement The Cash Flow Statement on page 22 summarises the inflows and outflows of cash arising from transactions with third parties for revenue and capital purposes during the year.

Capital ExpenditureSPT receives a specific grant from the Scottish Government to fund capital investment, although it does have the facility and powers to undertake prudential borrowing. SPT has not supplemented the direct government grant with borrowing during the financial year.

Details of capital expenditure are provided in note 23 (page 41). Total expenditure in support of the programme amounted to £25.778 million. The programme was funded by £25.511 million of Scottish Government general capital grant, £0.096 million European grant and a contribution from revenue to capital of £0.171 million.

Of the funding swap arrangement entered into with other Regional Transport Partnerships in 2007/08, £1.564 million remains outstanding. This will be returned at a time agreed between the respective bodies.

Valuation of Fixed AssetsIn 2011/12 investment properties were revalued in accordance with the Code, resulting in an adjustment of £2.101 million to the revaluation reserve.

As a result of the Subway Modernisation programme, a review was undertaken of all Subway assets to determine if any would be rendered obsolete ahead of their scheduled useful life by the planned investment in new assets. As a result, in 2011/12, asset impairment charges of £2.828 million in respect of rolling stock, £1.568 million in respect of electrical infrastructure and £1.456 million in respect of stations were incurred.

Pension Assets and LiabilitiesThe common position for employers participating in the Strathclyde Pension Fund is that the IAS19, ‘Retirement Benefits’ calculation (page 33) is based on a snapshot valuation as at 31 March 2012, which shows a deficit of £23.970 million (£8,976 million deficit, 2010/11).

Membership of the PartnershipDetails of the Membership of the Partnership at 31 March 2012 are shown on page 4.

Approved on behalf of Strathclyde Partnership for Transport and signed on their behalf.

Valerie Davidson Assistant Chief Executive (Business Support)

17 September 2012


Statement of Responsibilities

The Partnership’s responsibilitiesThe Partnership is required to:• Make arrangements for the proper administration of its

financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs. In this Partnership, that officer is the Assistant Chief Executive (Business Support).

• Manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets.

The Assistant Chief Executive’s (Business Support) responsibilitiesThe Assistant Chief Executive (Business Support) is responsible for the preparation of the Partnership’s statement of accounts in accordance with proper practice as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 (“the Code of Practice”).

In preparing this statement of accounts, the Assistant Chief Executive (Business Support) has:• selected suitable accounting policies

and applied them consistently;

• made judgements and estimates that were reasonable and prudent;

• complied with the Code of Practice on Local Authority Accounting in the UK, and has also;

• kept proper accounting records that were up to date; and

• taken reasonable steps for the prevention and detection of fraud and other irregularities.


Annual Governance Statement and Statement of Financial Control

SPT is responsible for ensuring that its business is conducted in accordance with the law and proper standards, that public money is safeguarded and properly accounted for, and used economically and efficiently. There is also a duty under the Local Government (Scotland) Act 2003 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

SPT is also responsible for establishing proper arrangements for the governance of its affairs, facilitating the effective exercise of its functions and is focused on meeting key strategic and business objectives to ensure that benefits are realised.

The Purpose of the Governance FrameworkThe governance framework comprises the behaviours and values, systems and processes, by which the Partnership is directed and controlled, and engages with the community. It enables the Partnership to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost effective services.

The quality of governance arrangements underpins the level of trust in public services and is therefore a fundamental building block upon which the organisation can build its promise to customers. Trust in public services is also influenced by the quality of services received, regardless of who is responsible for delivering them, and also by how open and honest an organisation is about its performance.

Good governance, and a framework for the implementation of good governance allows SPT to be clear about its approach to discharging its responsibilities as outlined above and to promote this widely both internally, to officers and members and externally to partners, stakeholders and most importantly the travelling public of the west of Scotland.

The arrangements required for gathering assurances for the preparation of the Annual Governance Statement provide an opportunity for SPT to consider the robustness of the governance arrangements and to consider this as a corporate issue that affects all parts of the organisation. It also helps to highlight those areas where improvement is required.

The Governance Framework Principle 1: Identifying and communicating the Partnership’s vision and purpose SPT is clear about the leadership responsibilities for services, whether provided directly, through partners or third parties. We will work closely with partners and stakeholders to make sure they deliver to agreed levels of quality and are accountable for what they do. SPT has a clear commitment to ensure services deliver the most appropriate combination of quality, value and choice to all. This principle is about developing and communicating SPT’s vision, purpose, and intended outcomes for service users.

SPT has a well established business planning process, with clear links between the corporate plans and operational priorities set out in service plans.

Service performance details continue to be made publicly available through the committee reporting mechanism.

Feedback from stakeholders on the delivery of services is sought through a variety of means, for example customer surveys and a formal complaints procedure.

Scope of the Governance FrameworkStrathclyde Partnership for Transport (SPT) has established governance arrangements that are consistent with the six (6) principles of the CIPFA/SOLACE Framework: Delivering Good Governance in Local Government.


Principle 2: Member and Officer – purpose, roles and responsibilities SPT has well established standing orders that regulate the operation of the Partnership board and committee meetings. These standing orders are supported by a scheme of delegation, contract standing orders, and financial regulations with clear delegation arrangements and protocols for decision making and communication, and codes of conduct defining the standards of behaviour for members and staff.

All levels of management within the organisation have a designated role profile and these profiles are easily accessible for staff via the intranet. The senior management of the organisation is structured to provide clear responsibility and accountability at both strategic and operational levels.

Ongoing restructuring of all SPT departments is currently underway. Working arrangements and job descriptions will be kept under review within the context of these changes.

Principle 3: Values of Good Governance and Standards of BehaviourAn anti-fraud and corruption policy and whistle blowing policy are in place and are promoted internally regularly via communication channels. This supplements the fraud hotline.

There is a clear and fully documented staff disciplinary process to deal with breaches in any code of conduct and staff are made aware, through induction and the performance management framework, of SPT’s expectations in terms of standards of behaviour and compliance with agreed policies and codes of conduct.

Staff are required to comply with the guidelines on registers of gifts and hospitality. Guidance on gifts and hospitality is included in the governance manual, available to all staff on the intranet and provided to staff as part of the induction process.

Principle 4: Decision Making, Scrutiny and Managing Risk The decision making and scrutiny framework within SPT encompasses self-evaluation as well as internal and external inspection.

The SPT strategy group also rely on advice and guidance from officer led groups responsible for the consideration of, for example, environmental sustainability, ICT strategy, and risk management, to drive and direct the decision making process.

Risk management arrangements were further developed during 2011/12. The strategy group continues to have responsibility for overseeing the implementation of the Partnership’s Risk Management Policy and Strategy. The Corporate Risk Register has six risk areas; Financial, Governance, Operational, Physical, Reputational and Technological. Each area includes specific risks with identified mitigation and continuity planning arrangements. The Corporate Risk Register is reviewed four weekly at strategy group meetings, with reporting lines to the Audit and Standards Committee.

The Audit and Standards Committee is well established, and a programme of training has been put in place to ensure that all members remain well versed in their role and the role of the Committee. All members and senior staff were invited to attend a training session, which covered matters of roles, responsibilities and good governance during 2011/12.

Principle 5: Developing Capacity and Capability of Officers and Members This principle is about ensuring that officers and members have the appropriate knowledge and skills to allow them to effectively fulfil their roles and responsibilities.

SPT has adopted a corporate induction process. All new employees are required to undertake this induction. Arrangements for local induction are put in place and delivered by HR.

SPT remains committed to developing its workforce through the provision of a development scheme for officers, to ensure that training and development needs are documented and managed in a structured and planned way.


Principle 6: Engaging with local communities and others to ensure public accountability SPT interacts and engages with stakeholders on a number of levels and publishes annual accounts, service performance information and the results of customer surveys.

In addition, communications are maintained through the local press, the publication of “SPT Express”, and through officer and/or member representation at public meetings.

SPT remains committed to developing systems to allow stakeholders to engage electronically. Contact can also be made through the internet site.

Meetings of SPT and its committees are open to the public, and agendas and papers are published on the internet site.

SPT continues to review its approach to community engagement. Robust community engagement is embedded practice, for example in relation to the Regional Transport Strategy (RTS) and the accessibility/content of the website.

Arrangements and protocols have been established to meet requests under the Freedom of Information (Scotland) Act within the required timescales.

Monitoring and Review of Governance Arrangements SPT’s governance arrangements are formally monitored via:• The Partnership’s established Committee framework,

including the Audit and Standards Committee;

• strategy group;

• internal and external audit work; and

• the annual review of governance arrangements used to inform this Statement.

This monitoring is done within the context of the Delivering Good Governance guidance, and the corporate plan and the RTS.

System of Internal Financial Control This section of the Annual Governance Statement relates to the systems of internal financial control of SPT. It incorporates assurance on the systems of internal financial controls in place within each of these entities.

Section 95 of the Local Government (Scotland) Act 1973 places responsibility for the proper administration of SPT‘s (SPT) financial affairs upon the proper officer of the Partnership. In SPT the Assistant Chief Executive (Business Support) is the responsible officer.

This statement applies to the 2011/12 financial statements for SPT. We acknowledge our responsibility for ensuring that an effective system of internal control is maintained and operated in connection with the resources concerned.

The system of internal financial control is based on a framework of guidance and regular management information, financial regulations, administrative and authorisation procedures, management supervision and a system of delegation and accountability.

Development and maintenance of the system is undertaken by officers of SPT. Key elements include:• comprehensive revenue and capital budgeting systems

integrated with service planning;

• a regime for regular reporting to the Partnership of periodic and annual financial reports which highlight financial performance against forecast;

• setting targets to measure financial and other performance;

• performance management information;

• project management disciplines; and

• guidance relating to financial processes, procedures and regulations.

Internal audit is an independent appraisal function for the review of the internal control systems as a service to the organisation. It objectively examines, evaluates and reports on the adequacy of internal control as a contribution to the proper, economic, efficient and effective use of resources.


The internal audit team operates in accordance with the Chartered Institute of Public Finance and Accountancy’s Code of Practice for Internal Audit in Local Government in the United Kingdom. The team undertakes an annual programme of work approved by the Partnership based on a three-year strategic audit plan. The plan is based on a formal audit needs assessment which is revised on an ongoing basis to reflect evolving risks and changes within the organisation.

All internal audit reports identifying system weaknesses and/or non-compliance with expected controls are brought to the attention of management and include appropriate recommendations and action plans. It is management’s responsibility to ensure that proper consideration is given to internal audit reports and that appropriate action is taken on audit recommendations. Reports are subsequently monitored by the Strategy Group, Section 95 officer and the Audit and Standards Committee, as well as other officers.

The effectiveness of internal financial controls is informed by officers throughout SPT and the Audit and Standards Committee as the scrutiny committee and by the work of internal and external audit. It is SPT’s view that the systems

for internal control were effective during 2011/12 with no identified material weaknesses, and will be improved through implementation of the recommended actions from internal and external audit reports, and continuous corporate business planning.

It should be noted that the system of internal financial control can provide only reasonable and not absolute assurance that all transactions are properly assessed or that errors have been prevented, and as such SPT is continually seeking to improve the effectiveness of its system of internal financial control.

SPT is committed to ensuring that governance and internal financial control arrangements are robust, proportionate, and in line with best practice. SPT has established a culture of improvement, and is thorough in addressing issues that emerge either through self-assessment or as part of the external scrutiny process. The process of preparing this Statement has highlighted areas where further work is required, all of which are reported to the Audit and Standards Committee and these will be addressed within the context of the continuous improvement agenda.

Gordon Maclennan Chief Executive

17 September 2012

Valerie Davidson Assistant Chief Executive Business Support)

17 September 2012


Accounting Policies

The accounting concepts of ‘materiality’, ‘accruals’, ‘going concern’ and ‘primacy of legislative requirements’ have been considered in the application of accounting policies. In this regard the materiality concept means that information is included where the information is of such significance as to justify its inclusion. The accruals concept requires the non-cash effects of transactions to be included in the financial statement for the year in which they occur, not in the period in which the cash is paid or received. The going concern concept assumes that SPT will not significantly curtail the scale of its operation. Wherever accounting principles and legislative requirements are in conflict the latter shall apply.

The accounting convention adopted in the financial statements is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments.

1. Basis of preparationThe accruals concept requires the non-cash effects of transactions to be reflected in the financial statements for the accounting period in which those effects are experienced and not in the period in which any cash is received or paid.

•Revenue income and debtorsAll transactions relating to the period to 31 March 2012 have been matched and accounted for in the period to which they relate. Government grants and other contributions are accounted for on an accruals basis and are recognised as income when the conditions of entitlement have been satisfied and there is reasonable assurance that the monies will be received.

•Revenue expenditure and creditorsSundry creditors are accrued on the basis of payments made following 31 March 2012 relating to goods or services received in the year together with specific accruals in respect of further material items.

• Capital transactionsAll capital transactions have been recorded on an accruals basis. All specific capital debtors and creditors have been accounted for.

2. Service Reporting Code of Practice (SeRCOP)The Comprehensive Income and Expenditure Statement (CIES) has been presented in accordance with the requirements of the SeRCOP. The CIES presents expenditure analysed to reflect the key operations of SPT, which is accordance with SeRCOP.

General PrinciplesThe financial statements for the year ended 31 March 2012 have been compiled on the basis of recommendations made by the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) and have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 (the Code) and the Service Reporting Code of Practice 2011/12 (SeRCOP). The Code is based on International Financial Reporting Standards (IFRS) with interpretation appropriate to the public sector. The statements are designed to give a ‘true and fair view’ of the financial performance and position of SPT for 2011/12.


3. Leases and Lease Type ArrangementsFinance LeasesLeases are accounted for as finance leases when substantially all the risks and rewards relating to the leased asset transfer to the lessee. Finance leases have a number of characteristics, however, SPT has determined the principle factor in defining a lease as a finance lease to be where the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset. At present SPT has no finance leases.

Operating LeasesLeases that do not meet the definition of finance leases are accounted for as operating leases. Rentals payable are charged to the CIES as an expense of the services benefitting from use of the leased property, plant and equipment. Charges are made on a straight-line basis over the term of the lease.

Where SPT grants an operating lease over a property or an item of plant or equipment, the asset is retained in the balance sheet. Rental income is credited to the Other Operating Expenditure line in the CIES. Credits are made on a straight-line basis over the life of the lease. Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income.

4. Employee BenefitsShort-term employee benefits (those that fall due wholly within 12 months of the year-end), such as, wages and salaries and paid annual leave for current employees, are recognised as an expense in the year in which the employee renders service to SPT. An accrual is made against services in the Surplus or Deficit on the Provision of Services for the cost of holiday entitlements earned by employees but not taken before the year end and which employees can carry forward to the next financial year. The accrual is made at the remuneration rates applicable in the following financial year. Any accrual made is required under statute to be reversed out of the General Fund Balance by a credit to the Accumulating Compensated Absences Adjustment Account in the Movement in Reserves Statement.

5. Termination BenefitsTermination benefits are amounts payable as a result of a decision by SPT to terminate an officer’s employment before the assumed normal retirement date or an officer’s decision to accept a voluntary termination package in exchange for those benefits. Termination benefits do not provide SPT with future economic benefits and consequently they are recognised on an accruals basis immediately in the Surplus or Deficit on the Provision of Services line in the CIES when the Partnership is demonstrably committed to provision of the termination benefits.

Where termination benefits involve the enhancement of pensions, they are treated as pension costs for the purposes of the statutory transfer between the Pension Reserve and the General Fund of the amount by which pension costs calculated in accordance with the Code are different from the contributions due under the pension scheme regulations. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for termination benefits related to pensions enhancements and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable, but unpaid at the year-end.

6. Retirement BenefitsSPT participates in the Strathclyde Pension Fund, which is a Local Government Pension Scheme.

The Local Government Scheme is accounted for as a defined benefits scheme as follows:(i) Attributable assets are measured at fair value at the balance sheet date after deducting accrued expenses. Liabilities of the Strathclyde Pension Fund attributable to SPT are included in the Balance Sheet on an actuarial basis using the projected unit method which assesses the future liabilities of the fund discounted to their present value. Net pension assets are recognised only to the extent that SPT is able to recover a surplus either through reduced contributions in the future or through refunds from the scheme. Unpaid contributions to the schemes are recorded as creditors due within one year.


(ii) For pension charges, the change in defined benefit asset or liability is analysed into seven components:

• current service cost – the increase in liabilities as a result of the year of service earned this year – allocated in the CIES to the services for which the employees worked

• past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Surplus/Deficit on the Provision of Services in the CIES as part of Non Distributed Costs

• Interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid – debited to the Financing and Investment Income and Expenditure line in the CIES

• expected return on assets – the annual investment return on the fund assets attributable to SPT, based on an average of the expected long-term return – credited to the Financing and Investment Income and Expenditure line in the CIES

• gains/losses on settlements and curtailments – the result of actions to relieve SPT of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited/credited to the Surplus/Deficit on the Provision of Services in the CIES as part of Non Distributed Costs

• actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – debited to the Pensions Reserve

• contributions paid to the Strathclyde Pension Fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by SPT to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact on the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees.

Further details of Pension Costs can be found in note 14 on pages 31 to 35.

7. Stocks for repair and maintenance Stocks are stated at the lower of cost or net realisable value.

8. Allocation of overheadsThe costs of overhead and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2011/12 (SeRCOP). Overheads are recharged to the service categories detailed in the CIES.

9. Debt redemption, interest charges and debt management expenses

In the event of SPT borrowing, repayment of debt is based on the annuity method of repayment. All loan charges are charged to the CIES.

10. InvestmentsSurplus cash balances are invested with major financial institutions as part of SPT’s treasury management function. In compliance with the ‘CIPFA Prudential Code for Capital Finance in Local Authorities (2010)’, SPT has adopted the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management in Public Services Code. All interest received is shown on the face of the CIES.

6. Retirement Benefits cont’d


11. Bank balancesBank balances are included in the balance sheet at the closing balance in the SPT ledger.

12. Cash and Cash EquivalentsCash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that mature in three months or less from the date of acquisition or balance sheet date and that are readily convertible to known amounts of cash with insignificant risk of change in value. Bank balances are included in the balance sheet at the closing balance in the SPT ledger.

13. Provisions and Contingent LiabilitiesProvisions are made where SPT has a present obligation, either legal or constructive, as a result of a past event that results in probable outflow of resources embodying economic benefits or service potential being required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Provisions are charged as an expense to the appropriate service line in the CIES Statement in the year that SPT becomes aware of the obligation, and measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. Where the effect of the time value of money is material, the amount of the provision recognised is the present value of the expenditure expected to be required to settle the obligation.

Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is improbable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.

14. Value Added Tax (VAT)Income and expenditure excludes any amounts related to VAT, as all VAT collected is payable to HM Revenue & Customs and all VAT paid is recoverable from them i.e. VAT has a neutral impact on SPT’s income and expenditure.

15. Usable and Unusable ReservesReserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to score against the Surplus/Deficit on the Provision of Services in the CIES. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement.

The General Fund, Capital Grants Unapplied and Capital Receipts Reserve represent funds that are available to SPT.

Unusable reserves represent non cash funds that are not available to SPT. These balances are recognised as part of the accounting arrangements for capital, pensions and employee benefits. The Capital Adjustment Account contains entries relating to the financing of capital expenditure and the Revaluation Reserve reflects movement in the value of assets. The Pension Reserve has been set up in accordance with the accounting requirements of International Accounting Standard, IAS 19 ‘Employee Benefits’. The Employee Statutory Adjustment Account has been created to negate the impact of the employee benefits accrual on the General Fund.

16. Capital GrantCapital grants or contributions are recognised immediately in the CIES, subject to the fulfilment of any grant conditions. Where grant conditions have not been met, the grant will be accounted for as capital grant receipts in advance on the balance sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line in the CIES.


Where capital grants are credited to the CIES, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is charged to the Capital Grants Unapplied Account. Where it has been applied, it is charged to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Account are transferred to the Capital Adjustment Account once they have been applied.

17. Intangible assetsExpenditure on non-monetary assets that do not have physical substance, but are identifiable and controlled by SPT are capitalised when they bring benefits to SPT for more than one financial year. The balance is amortised to the relevant service revenue account over the economic life of the asset to reflect the pattern of consumption of benefits.

18. Property Plant and EquipmentAssets that have physical substance and are held for use in the production or supply of goods or services, for rental to others for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment.

RecognitionExpenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to SPT and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred.

Measurement

Assets are initially measured at cost, comprising:

• the purchase price;

• any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and

• the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition will not increase the cash flows of SPT. In the latter case, the cost of the acquisition is the carrying amount of the asset given up by SPT.

Assets are then carried in the Balance Sheet using the following measurement bases:

•Rolling stock, infrastructure, plant and machinery and sundry assets - depreciated historical cost;

• Land and buildings – depreciated replacement cost or existing useful life; and

• all other assets – fair value, existing use value (EUV).

Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost is used as an estimate of fair value.

Assets included in the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year-end, but as a minimum every five years. Land and buildings were revalued by SPT’s valuer as at 31 March 2011 and will be revalued in accordance with the valuer’s 5 year programme. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains.

16. Capital Grant cont’d


Where decreases in value are identified, the revaluation loss is accounted as follows:

•where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains); or

•where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the CIES.

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account.

ImpairmentAssets are assessed at each year-end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall.

Where impairment losses are identified, they are accounted for as follows:

•where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains); or

•where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the CIES.

Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the CIES, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised.

DisposalsWhen it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less selling costs. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Surplus and Deficit on the Provision of Services in the CIES. Gains in fair value are recognised only up to the amount of any previously recognised losses. Depreciation is not charged on Assets Held for Sale.

Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale.

When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Surplus and Deficit on the Provision of Services in the CIES as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the CIES also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account.

Amounts received for a disposal in excess of £10,000 are categorised as capital receipts. The balance of receipts is required to be credited to the Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce SPT’s underlying need to borrow (the capital financing requirement). Receipts are appropriated to the Reserve from the General Fund Balance in the Movement in Reserves Statement.

The written-off value of disposals is not a charge against general funding, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

18. Property Plant and Equipment cont’d


18. Property Plant and Equipment cont’dDepreciationDepreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land) and assets that are not yet available for use (i.e. assets under construction).

Depreciation is calculated on the following bases:

Category Valuer Current Basis of Valuation

Date of Last Valuation

Useful Life

Land & Buildings External Valuer Lower of net current replacement cost or net realisable value in existing use

31/03/2011 Land - Not Applicable Buildings - 40 years

Plant & Machinery Not applicable Cost N/a 1-25 years

Rolling Stock and Vehicles

Not applicable Cost N/a 1-25 years

Infrastructure Not applicable Cost N/a 10–40 years

Sundry Assets Not applicable Cost N/a 1–40 years

Third Party Rolling Stock

Not applicable Cost N/a 20 years

Third Party Public Transport Assets

Not applicable Cost N/a Fully depreciated in year of acquisition.

Non – Operational Assets

Assets Under Construction

Not applicable Cost N/a N/a

Investment Properties Head of Property & Assets

Market Value 31/03/2012 N/a

Land (non-operational)

Head of Property & Assets

Market Value N/a N/a

Where an item of Property, Plant and Equipment asset has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately.

Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

Investment properties

Investment properties relate to retail outlets contained within assets owned by SPT. The assets are valued annually at Market Value (MV) in line with the guidance contained within the Code. Movements in valuations are initially recognised in the CIES, but are reversed through the movement in reserves statement before being posted to the capital adjustment account.


19. Related party transactionsRelated party transactions are identified, considered and disclosed in line with the requirements of International Accounting Standard 24 - Related Party Disclosures (IAS 24).

20. Financial instrumentsLoans and Receivables and Loans Payable are carried at amortised cost on the Balance Sheet. Available-for sale investments are carried at fair value based on quoted market price. Premiums and discounts arising from debt restructuring are written off through the Movement in Reserves Statement to the Financial Instruments Adjustment Account. Amortisation is undertaken of up to 5 or 20 years depending on the nature of the premium or discount and in line with statutory instruction.

The interest receivable or payable that is recognised within Financing and Investment Income and Expenditure is based on the effective interest rate chargeable to the carrying amount.

There are two accounting reserves arising from the re-measurement of financial instruments:

(i) The Available-for-sale Financial Instruments Reserve holds the gains or losses arising from the policy of carrying the available-for-sale investments at fair value;

(ii) The Financial Instruments Adjustment Account holds the accumulated difference between the financing costs included in the CIES and the accumulated financing costs required in accordance with the regulations to be charged to the General Fund Balance.

21. Revenue Expenditure Funded from Capital under Statute

Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of a non-current asset has been charged as expenditure to the relevant service in the CIES in the year. Where SPT has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the General Fund Balance to the Capital Adjustment Account then reverses out the amounts charged.

Revenue expenditure funded from capital is predominantly grants to other bodies to fund capital projects. The expenditure is recognised within the CIES, when the grant is approved by committee or in accordance with grant conditions.

22. Heritage Assets Heritage assets are held or maintained principally for their contribution to knowledge and culture. They are initially recognised at cost if this is available. If cost is not available, values are only included in the Balance Sheet where the cost of obtaining valuation is not disproportionate to the benefit derived. Where no market exists or the asset is deemed to be unique, and it is not practicable to obtain a valuation, the asset is not recognised in the Balance Sheet but disclosed in the notes to the accounts.

Heritage assets are depreciated over their useful life if this can be established. If an asset is considered to have an indefinite life, no depreciation is charged. Disposals, revaluation gains and losses and impairments of heritage assets are dealt with in accordance with the SPT’s policies relating to property, plant and equipment.

The cost of maintenance and repair of heritage assets is written off in the year incurred.

23. Carbon Reduction Commitment SchemeSPT is required to participate in the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. This scheme is currently in its introductory phase which will last until 31 March 2014. SPT is required to purchase and surrender allowances, currently retrospectively, on the basis of emissions i.e. carbon dioxide produced as energy is used. As carbon dioxide is emitted (i.e. as energy is used), a liability and an expense are recognised. The liability will be discharged by surrendering allowances. The liability is measured at the best estimate of the expenditure required to meet the obligation, normally at the current market price of the number of allowances required to meet the liability at the reporting date. The cost to SPT is recognised and reported in the costs of the SPT’s services and is apportioned to services on the basis of energy consumption.


Comprehensive Income and Expenditure Statement for the year ended 31 March 2012

2010/11 2011/12

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure/

(Income)£000

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure/

(Income)£000

27,254 (14,793) 12,461 Subway operations 27,735 (15,057) 12,678

21,355 (2,281) 19,074 Bus operations 21,970 (2,442) 19,528

1,360 0 1,360Policy, strategy and projects 1,030 0 1,030

19,295 (1,746) 17,549Corporate and democratic core 23,563 (1,541) 22,022

69,264 (18,820) 50,444 Cost Of Services 74,298 (19,040) 55,258

284 (3,944) (3,660) Financing and Investment Income and Expenditure (note 2)

2,101 (2,891) (790)

(59,335) Taxation and Non-Specific Grant Income (note 3)

(65,196)

(12,551) (Surplus) or Deficit on Provision of Services

(10,728)

24,253 Surplus or (deficit) on revaluation of fixed assets

0

(14,140) Actuarial (gains) / losses on pension assets / liabilities

17,073

441 Other Comprehensive Income and Expenditure

2,650

(1,997) Total Comprehensive Income and Expenditure

8,995


Balance Sheet as at 31 March 2012

The unaudited financial statements were issued on 22 June 2012 and the audited financial statements were authorised for issue on 17 September 2012.

Valerie Davidson Assistant Chief Executive Business Support) 17 September 2012

31 March 2011

£000

Note 31 March 2012

£000145,764 Property, Plant & Equipment 22 136,737

12,356 Investment Properties 19 11,934

269 Intangible Assets 20 199

0 Investments in Joint Ventures and Associates 35 5

158,389 Long Term Assets 148,875

4,000 Short Term Investments 14,000

447 Inventories 26 395

10,438 Short Term Debtors 27 27,320

29,918 Cash and Cash Equivalents 10 30,894

44,803 Current Assets 72,609

0 Short Term Borrowing 33 0

(31,520) Short Term Creditors 28 (23,721)

(121) Provisions 30 (1,135)

(31,641) Current Liabilities (24,856)

(65) Provisions 30 (103)

0 Long Term Borrowing 33 0

0 Long Term Creditors 29 (19,040)

(8,976) Other Long Term Liabilities (Pensions) 14 (23,970)

(9,041) Long Term Liabilities (43,113)

162,510 Net Assets 153,515

(20,848) Usable reserves 4 (36,392)

(141,662) Unusable Reserves 5 (117,123)

(162,510) Total Reserves (153,515)


Cash Flow Statement for the year ended 31 March 2012

2010/11£000

2011/12£000

(12,551) Net (surplus) or deficit on the provision of services (10,728)

(25,242) Adjust net surplus or deficit on the provision of services for non cash movements(note 6)

(25,482)

70Adjust for items included in the net surplus or deficit on the provision of services that are investing and financing activities 485

(70) Net cash flows from Operating Activities (note 7) (485)

18,819 Net cash flows from Investing Activities (note 8) 35,234

21,867 Net cash flows from Financing Activities (note 9) 0

2,893 Net (increase) or decrease in cash and cash equivalents (976)

32,811 Cash and cash equivalents at the beginning of the reporting period 29,918

29,918 Cash and cash equivalents at the end of the reporting period (note 10) 30,8942,893 (976)


Movement in Reserves Statement 2011/12

Gene

ral

Fund

Bala

nce

£000

Capi

tal

Rece

ipts

Rese

rve

£000

Capi

tal

Gran

ts

Unap

plie

d Ac

coun

t£0

00

Tota

lUs

able

Rese

rves

£000

Capi

tal

Adju

stm

ent

Acco

unt

£000

Reva

luat

ion

Rese

rve

£000

Pens

ion

Rese

rve

£000

STAC

A

Stat

utor

y M

itiga

tion

Acco

unt

£000

Tota

lUn

usab

leRe

serv

es£0

00

Tota

lPa

rtner

ship

Rese

rves

£000

Bala

nce a

t 1 A

pril 2

011

(12,5

26)

(2,4

30)

(5,8

92)

(20,

848)

(96,

011)

(54,

892)

8,97

626

5(14

1,662

)(16

2,51

0)

Mov

emen

t in

rese

rves

durin

g 201

1/12

Surp

lus o

r (de

ficit)

on

prov

ision

of s

ervic

es

(10,72

8)0

0(10

,728)

00

00

0(10

,728)

Othe

r com

preh

ensiv

e in

com

e an

d ex

pend

iture

0(5

3)(4

51)

(504

) 0

3,154

17,07

30

20,2

2719

,723

Tota

l Com

preh

ensiv

e I&E

(10,72

8)(5

3)

(451

)(11

,232

) 0

3,154

17,0

730

20,2

278,

995

Adju

stm

ents

bet

wee

n ac

coun

ting

basis

&

fund

ing

basis

und

er re

gula

tions

(not

e 1)

10,72

8(4

0)

(15,0

00)

(4,3

12)

6,36

00

(2,0

79)

314,

312

0

Net (

Incr

ease

)/De

crea

se be

fore

Tran

sfer

s to

Earm

arke

d Res

erve

s0

(93)

(15,4

51)

(15,5

44)

6,36

0 3,1

5414

,994

3124

,539

8,99

5

Tran

sfer

s to/

from

earm

arke

d re

serv

es (n

ote

1)0

00

00

00

00

0

(Incr

ease

)/De

crea

se in

2011

/12

0(9

3)(15

,451

)(15

,544

) 6,

360

3,154

14,9

9431

24,5

398,

995

Bala

nce a

t 31 M

arch

2012

carri

ed fo

rwar

d(12

,526

)(2

,523

)(2

1,343

)(3

6,39

2)(8

9,65

1)(5

1,738

)23

,970

296

(117,1

23)

(153,

515)


Notes to the Financial Statements

1. Movement in Reserves Statement (2011/12) – Adjustments between Accounting Basis and Funding Basis under Regulations

GeneralFund

Balance£000

CapitalReceiptsReserve

£000

Capital Grants Unapplied

Account£000

Movement in Unusable

Reserves£000

2011/12£000

Adjustments involving the Capital Adjustment Account:Reversal of items debited or credited to the CIES:Charges for depreciation (10,569) 0 0 10,569 0Revaluation reserve released 1,295 0 0 (1,295) 0Gain / (Loss) on revaluation of investment property (2,101) 0 0 2,101 0Impairment of Property, Plant & Equipment (5,399) 0 0 5,399 0Amortisation of intangible assets (183) 0 0 183 0Asset Disposal (45) 0 0 45 0Revaluation reserve adjustment 1,406 0 0 (1,406) 0Capital grants and contributions that have been applied to capital financing 25,607 0 0 (25,607) 0Revenue expenditure funded from capital under statute (16,542) 0 0 16,542 0

Insertion of items not debited or credited to the CIES:Capital expenditure charged against the General Fund balances 171 0 0 (171) 0Adjustments involving the Capital Receipts Reserve 40 (93) 0 0 (53)Adjustment involving the Capital Grants Unapplied Account 15,000 0 (15,451) 0 (451)

Adjustments involving the Pensions Reserve:Reversal of items relating to post employment benefits debited or credited to the Surplus or Deficit on the Provision of Services in the CIES (see note 14)

2,079 0 0 (2,079) 0

Adjustments involving the Accumulating Compensated Absences Adjustment Account:Amount by which officer remuneration charged to the CIES on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

(31) 0 0 31 0

Total Adjustments (1) 10,728 (93) (15,451) 4,312 (504)

Opening General Fund balance 1 April 2011 (12,526)Surplus on CIES (10,728)Total Adjustments as (1) above 10,728Closing General Fund balance 31 March 2012 (12,526)

This note details the adjustments that are made to the total comprehensive income and expenditure recognised by SPT in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to SPT to meet future capital and revenue expenditure.


2. Comprehensive Income and Expenditure Statement – Financing and Investment Income and Expenditure

2010/11£000

2011/12£000

284 Interest payable and similar charges 0

(938) Pensions interest cost and expected return on pensions assets (1,658)

(1,990) Revaluation of Investment Property 2,101

(662) Rental Income (748)

(354) Interest receivable and similar income (485)

(3,660) Total (790)

3. Comprehensive Income and Expenditure Statement – Taxation and Non Specific Grant Incomes

2010/11£000

2011/12£000

(33,593) Funding received as requisition from constituent local authorities (23,340)

(1,220) Scottish Government direct grant (1,037)

(28) European Revenue Grant (212)

(23,860) Scottish Government Capital Grant (40,511)

(571) Other Capital Grant 0

(63) European Capital Grant (96)

(59,335) Total (65,196)

4. Balance Sheet – Usable ReservesMovements in SPT’s usable reserves are detailed in the Movement in Reserves Statement.

5. Balance Sheet – Unusable Reserves

2010/11£000

2011/12£000

(54,892) Revaluation Reserve (51,738)

(96,011) Capital Adjustment Account (89,651)

8,976 Pensions Reserve 23,970

265 Accumulating Compensated Absences Adjustment Account 296

(141,662) Total Unusable Reserves (117,123)


2010/11£000

2011/12£000

79,318 Balance at 1 April 2011 54,8920 Upward revaluation of assets 0

0 Revaluation reserve written out with depreciation (1,295)(24,253) Downward revaluation of assets and impairment losses not

charged to the Surplus/Deficit on the Provision of Services(453)

(173) Transfer to capital adjustment account (1,406)

54,892 Balance at 31 March 2012 51,738

5. Balance Sheet – Unusable Reserves cont’dRevaluation Reserve The Revaluation Reserve contains the gains made by SPT arising from increases in the value of its Property, Plant and Equipment and Intangible Assets. The balance is reduced when assets with accumulated gains are:

• revalued downwards or impaired and the gains are lost

• used in the provision of services and the gains are consumed through depreciation, or

• disposed of and the gains are realised

The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account.

Capital Adjustment AccountThe Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the CIES (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by SPT as finance for the costs of acquisition, construction and enhancement.

The Account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by SPT.

The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains.


2010/11£000

2011/12£000

2011/12£000

98,449 Opening Balance 96,011Reversal of items relating to capital expenditure debited or credited to the CIES:

(14,389) Charges for depreciation (10,569)

1,990 Revaluation gains / (losses) on investment property (2,101)

(10,732) Impairment of Property, Plant & Equipment (5,399)(263) Amortisation of intangible assets (183)

0 Revaluation reserve released 1,2950 Asset disposal (45)

5,873 Capital financing applied in the year 0

23,221 Capital grants and contributions credited to the CIES that have been applied to capital financing

25,607

(11,468) Revenue expenditure funded from capital under statute (16,542)

1,272 Application of grants to capital financing from the Capital Grants Unapplied Account

0

1,885 Capital Financed from Revenue 171

173 Transfer from Revaluation Reserve 1,406

96,011 Closing Balance 89,651

5. Balance Sheet – Unusable Reserves cont’dNote 5 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.

Pensions ReserveThe Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post employment benefits and for funding benefits in accordance with statutory provisions. SPT accounts for post employment benefits in the CIES as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs.

2010/11£000

2011/12£000

(38,278) Opening Balance (8,976)14,140 Actuarial gains or losses on pensions assets and liabilities (17,073)

11,274 Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the CIES

(1,874)

3,888 Employer’s pensions contributions and direct payments to pensioners payable in the year

3,953

(8,976) Closing Balance (23,970)

However, statutory arrangements require benefits earned to be financed, as SPT makes employer’s contributions to pension funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources SPT has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.


2010/11£000

2011/12£000

265 Opening Balance 2650 Settlement or cancellation of accrual made at the end of the preceding year 0

0 Amounts accrued at the end of the current year 31

265 Closing Balance 296

5. Balance Sheet – Unusable Reserves cont’dAccumulating Compensated Absences Adjustment AccountThe Accumulating Compensated Absences Adjustment Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account.

6. Cash Flow Statement – Non Cash Movements

2010/11£000

2011/12£000

(14,389) Depreciation (note 1) (10,569)

0 Revaluation reserve released (note 1) 1,295(263) Amortisation of intangible fixed assets (note 1) (183)

15,162 Charges/(Credit) for retirement benefits (note 1) 2,079

0 Gain / (loss) on asset disposal (note 1) (5)0 Revaluation reserve adjustment (note 1) 1,406

(5) Increase in provisions for liabilities and charges (1,052)

(11,468) Revenue expenditure funded from capital (note 1) (16,542)

(10,732) Asset impairments (note 1) (5,399)

1,990 Revaluation of investment property (note 1) (2,101)

Accruals adjustments:

(76) Decrease in stocks (52)

(1,413) Increase / (decrease) in debtors 16,882

(4,048) Increase in creditors (11,241)

(25,242) Net cash inflow from revenue activities (25,482)

7. Cash Flow Statement – Operating ActivitiesThe cash flows for operating activities include the following items:

2010/11£000

2011/12£000

(354) Interest received (note 2) (485)

284 Interest paid (note 2) 0

(70) Net cash outflow (485)


2010/11£000

2011/12£000

26,378 Purchase of property, plant and equipment, investment property, intangible assets and grants

25,778

(8,000) Other payments for investing activities 10,000

0 Proceeds from the sale of property, plant and equipment, investment property and intangible assets

(93)

441 Other receipts from investing activities (451)

18,819 Net cash flows from investing activities 35,234

8. Cash Flow Statement – Investing Activities

9. Cash Flow Statement – Financing Activities

2010/11£000

2011/12£000

21,867 Repayments of short-term and long-term borrowing 0

0 Other payments for financing activities 0

21,867 Net cash flows from financing activities 0

10. Cash Flow Statement – Cash and Cash EquivalentsThe balance of Cash and Cash Equivalents is made up of the following elements:

2010/11£000

2011/12£000

29,918 Bank current accounts 30,894

0 Other 0

29,918 Total cash and cash equivalents 30,894


2010/11£000

2011/12£000

Expenditure10,995* Employee costs 24,920

5,610 Premises costs 5,064

1,171 Supplies and services 1,097

166 Transport and plant 212

14,468 Third party payments 13,429

37,139 Financing costs (including impairments) 31,677

(938) Pension interest (income) / cost and expected return on pension assets

(1,658)

68,611 Net Cost of Service 74,741

Income(25,080) Government grants (41,548)

(34,255) Other grants, reimbursements & contributions (23,648)

(18,821) Customer and client receipts (19,040)

(3,006) Financing and investment income (1,233)

(81,162) (85,469)

(12,551) (Surplus) for the Year (10,728)

11. Subjective Analysis of Comprehensive Income and Expenditure Statement

12. Members’ AllowancesSPT paid the following amounts to members of the Partnership during the year.

*Reduction in employee costs due to IAS 19 (pensions) credit adjustment for past service costs, as explained in note 14.

2010/11£000

2011/12£000

0 Salaries 0

43 Allowances 43

5 Expenses 5

48 Total 48


2010/11£000

2011/12£000

70 Fees payable with regard to external audit services carried out by the appointed auditor for the year

69

8 Fees payable for additional services 0

78 Total 69

13. External Audit CostsSPT has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections and to non-audit services provided by SPT’s external auditors.

14. Defined Benefit Pension SchemesParticipation in pension schemesDisclosure of information relating to Pensions is in accordance with the requirements of IAS19 ‘Employee Benefits’. The information requirements under IAS19 specific to SPT are detailed in this note below.

SPT participates in the Local Government Pension Scheme, which is administered by Strathclyde Pension Fund and which is a defined benefit pension scheme. The assets of the scheme are held separately from those of the entity in investments under the overall supervision of the Fund Trustees. The fund includes a funded and an unfunded portion. The unfunded element is in respect of additional pensions paid on retirement under the Discretionary Payment Regulations (“compensatory added years’ pensions”).

The last full valuation of the fund was carried out by an independent actuary on 31 March 2011. However, IAS19 requires that complying entities are required to take a valuation based on the bid value as at 31 March 2012 and consider the long term liabilities which may occur. The IAS19 valuation is an annual valuation and is not the same as the actuarial valuation undertaken every three years for the purposes of deciding the employer’s contribution. The valuations were made using the projected unit method.

There were no prepaid contributions or contributions payable at the current or preceding year end.


Local Government Pension Scheme

2010/11£000

2011/12£000

Comprehensive Income and Expenditure Statement Cost of Services:• current service cost 3,773 3,113

• past service costs (14,383) 0

Financing and Investment Income and Expenditure

• interest cost 9,474 8,892

• expected return on scheme assets (10,412) (10,550)

Total Post Employment Benefit Charged to the Surplus or Deficit on the Provision of Services (11,548) 1,455

Other Post Employment Benefit Charged to the CIES

• actuarial gains and losses 2,607 (14,466)

Total Post Employment Benefit Charged to the CIES (8,941) (13,011)

Movement in Reserves Statement • reversal of net charges made to the Surplus or Deficit for

the Provision of Services for post employment benefit in accordance with the Code

11,274 (1,874)

Actual amount charged against the General Fund Balance for pensions in the year:• employers’ contributions payable to scheme 3,888 3,953

The cumulative amount of actuarial gains and losses recognised in the CIES to the 31 March 2011 is a gain of £2.607 million.

Assets and liabilities in relation to post employment benefits Reconciliation of present value of the scheme liabilities (defined benefit obligation):

Funded liabilities: Local Government Pension Scheme2010/11

£0002011/12

£000Opening balance 184,483 163,381Current service cost 3,773 3,113

Interest cost 9,474 8,892

Contributions by scheme participants 1,120 1,051

Settlements and curtailments 274 419

Actuarial gains and losses (13,133) 3,724

Benefits paid (8,227) (8,059)

Past service costs (14,383) 0

Closing balance 163,381 172,521

14. Defined Benefit Pension Schemes cont’d


Local Government Pension Scheme

2010/11£000

2011/12£000

Opening balance 146,205 154,405Expected rate of return 10,412 10,550

Actuarial gains and losses 1,007 (13,349)

Settlements 0 0

Employer contributions 3,206 3,953

Contributions by scheme participants 1,802 1,051

Benefits paid (8,227) (8,059)

Closing balance 154,405 148,551

Reconciliation of fair value of the scheme (plan) assets:

The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date. Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets.

The actual return on scheme assets in the year was £1.637 million (2010/11: £11.437 million).

Scheme history 2007/08£000

2008/09£000

2009/10£000

2010/11£000

2011/12£000

Present value of scheme liabilities (132,032) (122,415) (184,483) (163,381) (172,521)

Fair value of scheme assets 138,843 107,793 146,205 154,405 148,551

Surplus / (Deficit) 6,811 (14,622) (38,278) (8,976) (23,970)

The total contributions expected to be made to the Local Government Pension Scheme by SPT in the year to 31 March 2013 is £2.848 million.



Local Government Pension Scheme2010/11 2011/12

Long-term expected rate of return on assets in the scheme:Equity investments 7.5% 6.3%

Bonds 4.9% 3.9%

Property 5.5% 4.4%

Cash 4.6% 3.5%

Mortality assumptions:Longevity at 65 for current pensioners:

Men 20.6 21.0

Women 23.9 23.4

Longevity at 65 for future pensioners: Men 22.6 23.3

Women 26.0 25.3

Rate of inflation 2.8% 2.5%

Rate of increase in salaries 5.1% 4.8%

Rate of increase in pensions 2.8% 2.5%

Rate for discounting scheme liabilities 5.5% 4.8%

Take-up of option to convert annual pension into retirement lump sum

50% 50%

The principal assumptions used by the actuary have been:

The Discretionary Benefits arrangements have no assets to cover its liabilities. The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:

31 March 2011 %

31 March 2012 %

Equities 77 77

Bonds 13 11

Property 6 7

Cash 4 5

100 100



2007/08 2008/09 2009/10 2010/11 2011/12% % % % %

Differences between the expected and actual return on assets 0.61 (0.77) (0.46) (1.4) (5.6)

Experience gains and losses on liabilities 0.18 (0.57) 0.17 0.65 (8.99)

History of experience gains and lossesThe actuarial gains identified as movements on the Pensions Reserve in 2011/12 can be analysed into the following categories, measured as a percentage of assets or liabilities at 31 March 2012:

15. Events after the Balance Sheet DateThe financial statements were authorised for issue by the Assistant Chief Executive (Business Support) on 17 September 2012. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2012, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information.

16. Related PartiesSPT is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence SPT. Disclosure of these transactions allows readers to assess the extent to which SPT might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely.

Scottish Government and its’ agenciesDuring 2011/12 Transport Scotland provided SPT with revenue grant funding of £1.037 million and capital grants totalling £40.511 million. Grant receipts outstanding at 31 March 2012 were £21.161 million and are included in Grant Claims (note 27 Debtors).

During 2011/12 SPT provided payments of £0.590 million to Transport Scotland (the delivery agent) in support of a transport improvement project. There were no payments outstanding at 31 March 2012.

Members and the 12 Local Authorities in StrathclydeNominated members from each of the 12 Local Authorities in Strathclyde have direct control over SPT’s financial and operating policies. The total of members’ allowances paid in 2011/12 is shown in note 12.

During 2011/12 the 12 Local Authorities in Strathclyde provided funding totalling £37.381 million in the form of requisition. Funding received in advance at 31 March 2012 was £19.04 million and is included in Receipts in Advance (note 29 Long Term Creditors).

During 2011/12 SPT provided capital grants totalling £15.679 million to Local Authorities within the SPT area in support of various transport improvement projects. Grant payments outstanding at 31 March 2012 was £13.503 million and are included in Trade Creditors (£1.843 million) and Other Creditors and Accruals (£11.660 million) (note 28 Creditors).

Strathclyde Concessionary Travel Scheme (SCTS)SPT provides SCTS with administrative and overhead support, as well as sharing a number of the same board members. During 2011/12 SPT charged £0.255 million to SCTS for the provision of these services. Charges outstanding at 31 March 2012 were £0.255 million and are included in Prepayments and Accrued Income (note 27 Debtors).

Nevis Technologies LimitedSPT owns 49% of the ordinary shares in Nevis Technologies Limited, a joint venture between SPT and Ecebs Limited for the provision of a smartcard ticketing and payment service. During 2011/12 SPT approved capital grants totalling £0.305 million to Nevis Technologies Limited in support of the development of a smartcard ticketing and payment service. Grant payments outstanding at 31 March 2012 were £0.305 million and are included in Trade Creditors (£0.115 million) and Other Creditors and Accruals (£0.190 million) (note 28 Creditors).



Total Costs 2010/11

£000

AdministrationRecharge

£000

Direct Service Payments

£000

Total Costs 2011/12

£000

27,570 School and Vocational Transport 1,215 26,160 27,375

1,027 Bus Shelter Maintenance 213 459 672

4,457 Strathclyde Concessionary Travel Scheme 264 4,050 4,314

Year to 31 March 2012 1,692 30,669 32,361 33,054 Year to 31 March 2011 1,957 31,097 33,054

17. Agency activitiesIn addition to its statutory duties, SPT acted as agents in respect of the following services:

The above agency activities are carried out on a no loss, no profit basis for third parties and therefore do not appear on SPT’s CIES.

18. LeasesSPT as LesseeFinance LeasesSPT does not currently have any leases that meet the definition of a finance lease.

Operating LeasesSPT has entered into a number of low value lease agreements.

The future minimum lease payments due under non-cancellable leases in future years are:

2010/11£000

2011/12£000

2 Not later than one year 0

156 Later than one year and not later than five years 98

62 Later than five years 61

220 159

19. Investment PropertiesThe following items of income and expense have been accounted for in the CIES:

2010/11£000

2011/12£000

(662) Rental income from investment property (748)

9 Direct operating expenses arising from investment property 20

(653) Net (gain) / loss (728)

There are no restrictions on SPT’s ability to realise the value inherent in its investment property or on SPT’s right to the remittance of income and the proceeds of disposal.


2010/11£000

2011/12£000

10,366 Balance at start of the year 12,356

0 Additions/Disposals 0

1,990 Net gains/(losses) from fair value adjustments (2,101)

0 Transfers to/from Property, Plant and Equipment 1,679

12,356 Balance at end of the year 11,934

The following table summarises the movement in the fair value of investment properties over the year:

19. Investment Properties cont’d


Software and other intangibles

£000Balance at 1 April 2011• Gross carrying amounts

• Accumulated amortisation

1,001

(732)

Net carrying amount at start of year 269

Additions 123

Disposals Cost 0

Transfers cost (15)

Amortisation for the period (183)Disposals amortisation 0Transfers amortisation 5

Net carrying amount at 31 March 2012 199

Comprising:• Gross carrying amounts

• Accumulated amortisation1,109

(910)

199

The movement on Intangible Asset balances during the year is as follows:

21. Impairment LossesDuring 2011/12, SPT has recognised an impairment loss of £5.852 million in relation to its Subway assets (£2.828 million in respect of rolling stock, £1.568 million in respect of electrical infrastructure and £1.456 million in respect of stations).

As a result of the progress made in the Subway Modernisation programme, a review was undertaken of all Subway assets to determine if any would be rendered obsolete ahead of their scheduled useful life

20. Intangible AssetsSPT accounts for its software as intangible assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item of Property, Plant and Equipment. The intangible assets include both purchased licenses and internally generated software.

All software is given a finite useful life, based on assessments of the period that the software is expected to be of use to SPT. The useful lives assigned to the major software suites used by SPT are 3 years.

The carrying amount of intangible assets is amortised on a straight-line basis.

by the planned investment in new assets. In addition costs incurred on the upgrade of Hillhead station and the preparatory work for other stations was reviewed to ascertain if the cost of work done to date would increase that asset value by a similar or lesser amount.

The useful life of all rolling stock and some electrical infrastructure, planned to be replaced in 5 years, has been reduced accordingly and the resulting impairment losses have been charged to the Subway Operations line in the CIES.


Movements in 2011/12:

Land

&

Build

ings

Plan

t &

Mac

hine

ry

Rollin

g St

ock &

Ve

hicle

s

Infra

-st

ruct

ure

Asse

tsSu

ndry

As

sets

3rd P

arty

Ro

lling

Stoc

k3rd

Par

ty

Asse

ts

Surp

lus

Asse

ts -

Land

Asse

ts U

nder

Co

nstru

ctio

nIn

vest

men

t Pr

oper

ties

Tota

l

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

Cost

or V

alua

tion

At 1

April

201

187

,623

2,82

133

,429

36,9

488,

397

27,3

430

02,

984

12,3

5621

1,901

Addi

tions

3,29

5(3

5)74

22,

609

442

00

02,

055

09,1

08Re

valu

atio

n In

crea

ses/

(dec

reas

es) r

ecog

nise

d in

th

e Su

rplu

s/De

ficit

on th

e Pr

ovisi

on o

f Ser

vices

00

00

00

00

0(2

,101)

(2,10

1)

Dere

cogn

ition

– D

ispos

als

00

(74)

00

0(7

40)

00

0(8

14)

Tran

sfer

s(1,

462)

010

40

440

740

0(1,

090)

1,679

15

At 31

Mar

ch 20

1289

,456

2,78

634

,201

39,5

578,

883

27,3

430

03,

949

11,9

3421

8,109

Accu

mul

ated

Dep

recia

tion

and I

mpa

irmen

t

At 1

April

201

10

1,396

21,5

5620

,154

2,92

67,7

490

00

053

,781

Depr

ecia

tion

char

ge2,

341

1102,

226

2,21

41,3

881,5

500

00

09,

829

Impa

irmen

t los

ses/

(reve

rsal

s) r

ecog

nise

d in

th

e Su

rplu

s/De

ficit

on th

e Pr

ovisi

on o

f Ser

vices

1,456

02,

828

1,568

00

00

00

5,85

2

Dere

cogn

ition

– D

ispos

als

00

(29)

00

00

00

0(2

9)Tr

ansf

ers

00

00

50

00

00

5

At 31

Mar

ch 20

123,

797

1,506

26,5

8123

,936

4,31

99,

299

00

00

69,4

38

Net B

ook V

alue

At 31

Mar

ch 20

1285

,659

1,280

7,620

15,6

214,

564

18,0

440

03,

949

11,9

3414

8,67

1At

31 M

arch

2011

87,6

231,4

2511

,873

16,79

45,4

7119

,594

00

2,98

412

,356

158,1

20

22. Property, Plant and Equipment


Service Outstanding Commitment as at

31 March 2012£000

Contract Completion Dates

Bus Operations 945 Various

Project / Subway 17,358 Various

Total 18,303

Capital CommitmentsSPT has entered into a number of contracts for the construction or enhancement of Property, Plant and Equipment. The major commitments are:

Revaluations – Land and BuildingsTo comply with the Code, SPT has completed a revaluation exercise on all land and buildings owned by SPT. The land and buildings were revalued at 31 March 2011 by external valuers, the District Valuer.

The valuation process was undertaken in accordance with the Statements of Asset Valuation Practice and Guidance Notes of the Royal Institution of Chartered Surveyors. Inspections were carried out at the end of the financial year. The District Valuer confirmed that the valuations were provided on the following basis:

“The valuations incorporated in these financial statements have been provided by District Valuer Services of the Valuation Office Agency in the capacity of External Valuer. The date of valuation is 31 March 2011 and in accordance with the requirements of the RICS Valuation Standards the valuation of each property was on the following bases and assumptions:

(a) For owner occupied property: valued to Fair Value (FV), Existing Use Value (EUV) assuming that the property would be sold as part of the continuing business

(b) For investment property: valued to Market Value assuming that the property would be subject to any existing leases.

District Valuer Services’ opinion of EUV and MV was primarily derived using:

(a) comparable recent market transactions on arm’s length terms

(b) the depreciated replacement cost approach because the specialised nature of the asset means that there are no market transactions of this type of asset except as part of the business or entity.

The sources of information and assumptions made in producing the various valuations are set out in the Valuation Report which is not published in the annual report and financial statements.

The valuation figures incorporated in the annual report and financial statements are the aggregate of separate valuations of parts of the portfolio, not a valuation or apportioned valuation of the portfolio valued as a whole.”

Management have considered the valuations performed in 2011. As they are not aware of any material change in value, these valuations have not been updated.

Revaluations – Non-operational investment and land propertiesAs required by the Code, an annual valuation of non-operational investment and land properties was conducted. This was undertaken by John D Wilson BSc MRICS, Head of Property as at 31 March 2012.

The approach taken is in line with the assumptions made above. Further detail is available in the specific valuation report.

22. Property, Plant and Equipment cont’d


2010/11 £000

2011/12 £000

26,378 Opening Capital Financing Requirement 25,778

Capital investment:14,881 Property, Plant and Equipment 9,108

11,468 Grant Fund to other Local Authorities and others 16,542

29 Intangible Assets 1230 Investments 5

Sources of finance:(24,493) Government grants and other contributions (25,607)

Sums set aside from revenue:(1,885) Direct revenue contributions (171)

0 Closing Capital Financing Requirement 0

23. Capital Expenditure and Capital FinancingThe total amount of capital expenditure incurred in the year is shown in the table below, together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by SPT, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by SPT that has yet to be financed. The CFR is analysed in the second part of this note.

24. Heritage AssetsSPT’s Heritage assets consist of low value pieces of artwork that are displayed at various locations throughout the SPT area. All of the art work has an individual value of less than £25,000 and therefore has not been separately identified within these accounts.

25. Assets Held for SaleAs at 31 March 2012, SPT had no Assets Held for Sale, consistent with the position at 31 March 2011.


31 March 2011

£000 Consumables and Maintenance Stock

31 March 2012

£000523 Balance outstanding at start of year 447

935 Purchases 1,005

(810) Recognised as an expense in the year (953)

(201) Written off balances (104)

447 Balance outstanding at year-end 395

31 March 2011

£000

31 March 2012

£0002,408 Trade Debtors 1,979

3,679 Grant Claims 21,257

1,267 Other Debtors 1,271

1,378 Amounts due from SCTS 255

1,706 Prepayments and Accrued Income 2,558

10,438 Total 27,320

31 March 2011

£000

31 March 2012

£00011,802 Trade Creditors 6,016

5,162 Receipts in advance 227

14,556 Other Creditors and Accruals 17,478

31,520 Total 23,721

26. Inventories

27. Debtors

31 March 2011

£000

31 March 2012

£0000 Receipts in advance 19,040

0 Total 19,040

29. Long Term Creditors

28. Creditors


Injury and Damage Compensation Claims

£000

Other Total£000

Total£000

Balance at 1 April 2011 186 0 186Additional provisions made in 2011/12 83 1,042 1,125

Amounts used in 2011/12 (56) 0 (56)

Unused amounts reversed in 2011/12 (17) 0 (17)

Balance at 31 March 2012 196 1,042 1,238

2010/11£000

2011/12£000

Grants received during 2011/12:Scottish Government - Revenue Grant 1,220 1,037

Council Requisition 33,593 23,340

European Grant - Revenue 28 212

Scottish Government - Capital Grant 23,860 40,511

Local Authority Capital Grant 571 0

European Grant - Capital 63 96

Total 59,335 65,196

How the grants were credited to ServicesSubway 8,483 6,014

Bus Operations 29,675 22,773

Projects 8,975 8,298

Corporate & Democratic Core 12,202 13,111

Unapplied Capital Grants 0 15,000

Total 59,335 65,196

30. Provisions

31. Contingent LiabilitiesAt 31 March 2012 SPT did not have any contingent liabilities.

32. Grant IncomeSPT credited the following grants, contributions and donations to the CIES in 2011/12:


33. Financial InstrumentsSPT is debt free with all historic debt being repaid to Glasgow City Council (GCC) during 2010/11. As a consequence, SPT currently has no debt related financial instruments disclosure requirements and the following disclosure covers all areas relevant to SPT’s activities.

Financial Instruments Gains / Losses / Expenses charged during 2011/12 (at amortised cost)The gain incurred by SPT in 2011/12 was an interest gain of £0.485 million. There was no expense as SPT is debt free at present.

Nature and extent of risks arising from financial instrumentsSPT has fully adopted CIPFA’s Code of Treasury Management Practices and has specific written risk management policies and procedures.

Credit RiskCredit risk arises from temporary deposits placed with banks and financial institutions, as well as credit exposure to SPT’s customers. SPT maintains a formally approved counterparty list for these deposits, and investments are restricted to a prudent maximum amount for each financial institution.

Amount as at 31 March 2011

£000

Amount as at 31 March 2012

£000

Historical Experience of Non-payment Adjusted

for Market Conditions %

Estimated Maximum Exposure to Default and

Uncollectability £000

34,503 Deposits with banks and other financial institutions

46,589 0.000 0

1,229 Customers 824 0.36 3

35,732 Total 47,413 3

31 March 2011 £000

Age 31 March 2012 £000

912 Less than 3 months 645

185 3 to 6 months 32

106 6 months to 1 year 124

26 More than 1 year 23

1,229 Total 824

The following analysis summarises SPT’s potential maximum exposure to credit risk, based on experience of default assessed by the credit rating agency.

SPT does not normally allow credit for customers, and therefore £0.505 million of the £0.824 million balance is past its due date for payment. The amount can be analysed as follows:

SPT held no bank overdraft facility as at 31 March 2012. Trade creditors amounted to £6.016 million.

The requirement that current liabilities are to be recognised even if refinanced post balance sheet, or if the original life deems the liability to be long term, has been complied with.


31 March 2011 £000 Estimated Financial Effect

31 March 2012 £000

64 Increase in the interest payable on variable rate borrowings (share of GCC debt)

0

(373) Increase in interest receivable on variable rate investments (410)

(309) Net theoretical impact on I&E Account (410)

Market Risk

Movements in market interest rates expose SPT to risk due to uncertainty in the interest receivable on investments. Higher interest rates would increase income received on variable rate lending, which would impact on the CIES.

SPT’s strategy for managing interest rate risk is covered in its Treasury Management Strategy. Taking cognisance of interest rate forecasts during the year, fixed rate investments may be taken for longer periods to secure better long term returns.

According to these investment strategies, as at 31 March 2012, if interest rates had been 1% higher with all other variables held constant, the financial effect would be:

The impact of a 1% decrease in interest rates would be as above but with the figures being reversed.

SPT has no exposure to any price risk as a result of equity share investments, or to any foreign exchange rate movements.

Further to the disclosures made in the preceding comments, a number of potential disclosures relating to Financial Instruments do not apply to SPT for this financial year due to the limited complexity and profile of loans (none) and investments included in SPT’s financial statements. These are summarised below:

•No reclassification of assets carrying value between fair value and amortised cost was made;

•No transfer of financial assets were made;

•No carrying value, or fair value of collateral was held;

•No credit losses on financial assets occurred;

•No defaults on loans payable occurred;

•No gain or loss on financial assets or liabilities at fair value were recorded in the CIES;

• There was no gain on loans and receivables;

• There was no gain or loss on financial liabilities at amortised cost;

• There was no gain or loss arising from impairment on any class of financial asset;

• SPT did not directly apply a fair value determination of financial instruments

•No carrying amount was estimated for short term receivables and payables;

•No offsetting of financial assets and liabilities occurred;

• There were no breaches of long term loan agreements that would have resulted in payment due in less than one year now being treated as current; and

•No current liabilities were rolled forward to a term longer than 12 months and treated as long term.

33. Financial Instruments cont’d


Board Report GrossExpenditure

£000

Gross Income

£000

Net Expenditure/ (Income)

£000Chief ExecutiveCabinet 522 0 522Chief Executive’s Unit 344 0 344

Total Chief Executive 866 0 866OperationsSubway 18,245 (15,147) 3,098Bus Operations 19,844 (2,977) 16,867Projects 1,031 0 1,031Health & Safety 275 0 275

Total Operations 39,395 (18,124) 21,271

Business SupportFinance & HR 1,296 0 1,296Communications 689 0 689Legal Services 268 0 268Information Technology 827 0 827Partnership Support 312 0 312Elected Members 71 0 71Corporate 0 (1,953) (1,953)

Total Business Support 3,463 (1,953) 1,510

Bus Residual 591 0 591Loan Charges/Subway Modernisation 14,042 0 14,042Capital Funded from Revenue 171 0 171

Net Total 58,528 (20,077) 38,451

IFRS Reconciliation

LessLoan Charges/Subway Modernisation (14,042)Capital Funded from Revenue (171)IAS19 Adjustment (421)Revaluation Reserve Adjustments (2,701)Capital Receipts Reserve (40)

AddInvestment Income 485Depreciation 27,293Impairment of plant, property and equipment 5,399Asset Disposal 45Rental Income 748European Grant 212

55,258

34. Segmental ReportingReconciliation between Board Report and Annual Accounts


35. Interests in companies and other entitiesDuring 2011/12 SPT acquired 49% of the ordinary shares in Nevis Technologies Limited, a company registered in Scotland, at a cost of £4,999. Nevis Technologies Limited is a joint venture between SPT and Ecebs Limited for the provision of a smartcard ticketing and payment service. This interest is recorded as a long-term investment at cost. Details on the transactions between SPT and Nevis Technologies can be found in Note 16, Related Party Transactions on page 35.

Group financial statements have not been prepared on the grounds of materiality.


Remuneration Report

Salary, Fees and

Allowances£

Bonuses£

Taxable Expenses

£

Compensation for Loss of

Employment£

Benefits other

than in Cash

£

Total Remuneration

2011-12 £

Total Remuneration

2010-11£

Gordon Maclennan: Chief Executive

135,686 0 0 0 0 135,686 * 134,481

Valerie Davidson: Assistant Chief Executive (Business Support)

115,335 0 0 0 0 115,335 * 114,953

Eric Stewart: Assistant Chief Executive (Operations)

108,549 0 34 0 0 108,583 * 107,759

TOTAL 359,570 0 34 0 0 359,604 357,193

The remuneration paid to SPT’s senior employees is as follows:

The salary of senior employees is set by reference to national local authority arrangements. The Scottish Joint Negotiating Committee for Local Authority Services sets the salaries for the Chief Executives of Scottish Local Authorities. SPT sets the salary of the Chief Executive with reference to this framework. The salaries of the Assistant Chief Executives and Directors are based on a percentage of the Chief Executive’s salary. Assistant Chief Executive’s receive approximately 80% of the Chief Executive’s salary and Directors receive approximately 80% of Assistant Chief Executive’s salary. These arrangements were approved by the Partnership on 24 March 2006.

* The variance between 2010/11 and 2011/12 remuneration is largely due to appointments into current posts not taking place until 18/04/2010.


Salary, Fees and Allowances

£

Taxable Expenses

£

Non-Cash Expenses and

Benefits in Kind£

Total Remuneration

2011-12 £

Total Remuneration

2010-11£

Jonathan Findlay, Chairman

20,239 0 0 20,239 20,239

David Fagan, Vice Chairman 11,132 0 0 11,132 11,132

Denis McKenna, Vice Chairman 11,132 0 0 11,132 11,132

TOTAL 42,503 0 0 42,503 42,503

The remuneration paid to SPT’s Senior Councillors is as follows:

The remuneration of councillors is regulated by the Local Governance (Scotland) Act 2004. However these regulations do not apply directly to Regional Transport Authorities including SPT. Remuneration of councillors, namely the Chair and Vice-Chairs, is made under the previous powers of Strathclyde Passenger Transport Authority which were transferred to SPT. SPT has however adopted the principles outlined in the legislation in so far as is practicable. The level of payment to the Chair and Vice Chair(s) was approved by the Partnership on 31 May 2007.

The pension entitlements of Senior Employees for the year to 31 March 2012 are shown in the table below together with the contribution made by SPT to each Senior Employee’s pension during the year:

In-year pension contributions Accrued pension benefitsYear to 31

March 2011£

Year to 31 March 2012

£


£


£Gordon Maclennan: Chief Executive (1)

24,476 26,187 Pension 8,715 10,999

Lump sum 12,539 12,539Valerie Davidson: Assistant Chief Executive (Business Support) (2)

20,914 22,260 Pension 34,966 36,899

Lump Sum 93,334 93,334

Eric Stewart: Assistant Chief Executive (Operations) (3)

19,565 20,950 Pension 10,167 11,986

Lump Sum 19,615 19,615

1 ) The pension figures shown relate to the benefits that the person has accrued from their current appointment only. 2) The pension figures shown relate to the benefits that the person has accrued as consequence of their total local government service, and not just their current appointment. 3) The pension figures shown relate to the benefits that the person has accrued from their current appointment only, but includes a transfer in from another scheme.

Remuneration of councillors in SPT is not pensionable.


EmployeesPension benefits for local government employees are provided through the Local Government Pension Scheme (LGPS).

For local government employees this is a final salary pension scheme. This means that pension benefits are based on the final year’s pay and the number of years that person has been a member of the scheme.

The scheme’s normal retirement age for employees is 65.

From 1 April 2009 a five tier contribution system was introduced with contributions from scheme members being based on how much pay falls into each tier. This is designed to give more equality between the cost and benefits of scheme membership. Prior to 2009 contributions rates were set at 6% for all non manual employees.

The tiers for 2011-12 have increased from 2010-11 rates and are as follows: Whole time pay

Contribution rate 2011-12 Contribution rate 2010-11

On earnings up to and including £18,000 5.5%

On earnings above £18,000 and up to £22,000 7.25%



On earnings above £40,000 12%

On earnings up to and including £18,500 5.5%




On earnings above £41,200 12%

If a person works part-time their contribution rate is worked out on the whole-time pay rate for the job, with actual contributions paid on actual pay earned.

There is no automatic entitlement to a lump sum. Members may opt to give up (commute) pension for a lump sum up to the limit set by the Finance Act 2004. The accrual rate guarantees a pension based on 1/60th of final pensionable salary and years of pensionable service, (prior to 2009 the accrual rate guaranteed a pension based on 1/80th and a lump sum based on 3/80th of final pensionable salary and years of pensionable service).

The value of the accrued benefits has been calculated on the basis of the age at which the person will first become entitled to receive a pension on retirement without reduction on account of its payment at that age; without exercising any option to commute pension entitlement into a lump sum; and without any adjustment for the effects of future inflation.


SPT’s employees receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions and including severance payments):

Remuneration band 2010/11 Number of employees

2011/12 Number of employees

£50,000 - £54,999 16 (2) 8 (2)

£55,000 - £59,999 6 (1) 13

£60,000 - £64,999 2 3

£65,000 - £69,999 1 1

£70,000 - £74,999 4 (3) 2 (1)

£75,000 - £79,999 1 0

£80,000 - £84,999 0 1 (1)

£85,000 - £89,999 3 2

£90,000 - £94,999 1 2 (1)

£95,000 - £99,999 0 0

£100,000 - £104,999 0 1 (1)

£105,000 - £109,999 1 1

£110,000 - £114,999 1 0

£115,000 - £119,999 0 1

£120,000 - £124,999 0 0

£125,000 - £129,999 0 0

£130,000 - £134,999 1 0

£135,000 - £139,999 0 1

Figures in brackets represent the number of employees in the year whose remuneration includes severance payments.


Gordon Maclennan Chief Executive

17 September 2011

Exit package cost band

2010/11 Number of departures

2011/12 Number of departures

2010/11 Cost of departures

(£000)

2011/12 Cost of departures

(£000)£0 - £20,000 19 17 210 179

£20,001 - £40,000 11 20 304 585

£40,001 - £60,000 7 1 343 52£60,001 - £80,000 3 4 192 283£80,001 - £100,000 1 0 80 0£100,001 - £150,000 0 1 0 106

TOTAL 41 43 1,129 1,205

The number of exit packages with total cost per band and total cost of all redundancies are set out in the table below:

Exit Packages

There were no compulsory redundancies in 2010/11 or 2011/12.


Independent auditor’s report to the members of Strathclyde Partnership for Transport and the Accounts Commission for ScotlandWe have audited the financial statements of Strathclyde Partnership for Transport for the year ended 31 March 2012 on pages 12 to 47. 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 Code of Practice on Local Authority Accounting in the United Kingdom 2011-12 (the 2011-12 Code).

This report is made solely to the members of Strathclyde Partnership for Transport and the Accounts Commission for Scotland, in accordance with Part VII of the Local Government (Scotland) Act 1973. Our audit work has been undertaken so that we might state to those two parties those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than Strathclyde Partnership for Transport and the Accounts Commission for Scotland, for this report, or the opinions we have formed.

Respective responsibilities of the Assistant Chief Executive (Business Support) and auditorAs explained more fully in the Statement of Responsibilities on page 7, the Assistant Chief Executive (Business Support) is responsible for the preparation of financial statements which give a true and fair view. Our 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 Accounts Commission for Scotland. Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn 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 Assistant Chief Executive (Business Support); and the overall presentation of the financial statements. In addition, we read all the financial and non- financial information in the Financial Statement by the Assistant Chief Executive (Business Support) to identify material misstatements or inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:

• give a true and fair view of the state of the affairs of the body as at 31 March 2012 and of its expenditure and income for the year then ended;

• have been properly prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011-12; and

• have been prepared in accordance with the requirements of the Local Government (Scotland) act 1973 and the Local Government Scotland Act 2003.


Opinion on other matters prescribed by the Local Government (Scotland) Act 1973In our opinion:

• the part of the Remuneration Report to be audited has been properly prepared in accordance with the Local Authority Accounts (Scotland) Regulations 1985; and

• the information given in the Financial Statement by the Assistant Chief Executive (Business Support) for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Local Government (Scotland) Act 1973 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept; or

• the financial statements and the part of the Remuneration Report to be audited are not in agreement with the accounting records; or

• we have not received all the information and explanations we require for our audit; or

• the Annual Governance Statement does not comply with Delivering Good Governance in Local Government; or

• there has been a failure to meet a prescribed financial objective.

S Reid for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 191 West George Street Glasgow G2 2LJ

19 September 2012

Independent auditor’s report to the members of Strathclyde Partnership for Transport and the Accounts Commission for Scotland

Strathclyde Concessionary Travel Scheme Financial Statements 201254

Strathclyde Concessionary Travel Scheme Joint Committee Financial Statements for the year ended 31 March 2012Contents

Members of the Joint Committee 56

Report of the Joint Committee 57

Statement of Responsibilities 59

Annual Governance Statement and Statement of Financial Control 60

Comprehensive Income and Expenditure Statement 64

Balance Sheet 65

Cash Flow Statement 66

Movement in Reserves Statement 67

Accounting Policies 68

Notes to the Financial Statements 69

Independent auditor’s report to the members of 72 Strathclyde Concessionary Travel Scheme Joint Committee and the Accounts Commission for Scotland

Members of the Joint Committee as at 31 March 2012


Members of the Joint Committee

Member RepresentingDuncan MacIntyre Argyll & Bute Council

John Campbell East Ayrshire Council

Alan Moir East Dunbartonshire Council

Eddie Phillips (Vice Chair) East Renfrewshire Council

Ellen Hurcombe Glasgow City Council

Ian McKenzie Inverclyde Council

John Reid North Ayrshire Council

Kaye Harmon (Chair) North Lanarkshire Council

Alan Noon Renfrewshire Council

Nan McFarlane South Ayrshire Council

Eileen Logan South Lanarkshire Council

Jim McElhill West Dunbartonshire Council

Jonathan Findlay Strathclyde Partnership for Transport

SecretaryValerie Davidson Strathclyde Partnership for Transport Consort House 12 West George Street Glasgow G2 1HN

Address for correspondenceValerie Davidson Assistant Chief Executive (Business Support) Strathclyde Partnership for Transport Consort House 12 West George Street Glasgow G2 1HN

Strathclyde Concessionary Travel Scheme Financial Statements 2012 57

Report of the Joint Commitee

IntroductionThe Strathclyde Concessionary Travel Scheme Joint Committee (“SCTS” or “the Joint Committee”) is pleased to present the report and financial statements of the Scheme for the year ended 31 March 2012.SCTS covers the 12 councils within the designated Strathclyde Partnership for Transport area, and all councils are represented on the Joint Committee plus the chair of Strathclyde Partnership for Transport. The cost of the Scheme is met by the 12 councils. Strathclyde Partnership for Transport administers the Scheme on behalf of the Joint Committee.

The Joint Committee was established on 22 October 1999, although as outlined below, significant changes have been made since then.

Preperation of Financial StatementsThe financial statements demonstrate SCTS sound stewardship of the public funds it controls and manages. The financial statements have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 which is based upon International Financial Reporting Standards (IFRS). Therefore the Code, which remains the authoritative source of accounting standards for local authorities (and related bodies) across the UK, is based upon internationally common accounting standards.

Scope of the SchemeThe Strathclyde Concessionary Travel Scheme (“The Scheme”) offers reduced fares on First ScotRail services, which start and finish within the Scheme’s boundaries, on Glasgow’s Subway and on local ferries for anyone who lives on an island or peninsula and meets the qualifying criteria.

The Scheme is open to people aged 60 years old and over plus many disabled people if they live permanently in the area covered by the Scheme. Strathclyde Concessionary Travel Cards with a named ferry route on them (Ferry Travel Cards), are also available to permanent residents of one of the islands covered by the Scheme or where residents live

on the Cowal or Rosneath peninsulas.

A National Concessionary Travel Scheme for Bus was introduced on 1 April 2006. As a result all bus concession travel became a matter for Transport Scotland with effect from that date with railway, subway and ferry within the designated Strathclyde Partnership for Transport area remaining a matter for the Joint Committee.

The Scheme was reviewed in 2009/10 with changes to fares being amongst a range of measures proposed to ensure the sustainability of the Scheme in the longer term. These measures were approved by the Joint Committee on 11 December 2009 and were implemented in 2010/11, with a further fare increase implemented in 2011/12.

Review of PerformanceSCTS’s comprehensive income and expenditure statement for the year ended 31 March 2012 is shown on page 64.

The agreed budget for 2011/12 was £4.388 million. Funding contributions from the 12 participating councils were agreed at £3.483 million with the balance of £0.905 million funded from reserves. This use of reserves reflects the agreed policy of the Joint Committee to reduce the level held in a sustainable and measured fashion.

Payments to operators in the year amounted to £4.050 million. The final outturn inclusive of all costs is £4.281 million which is £0.107 million less than the original 2011/12 budget. This reflects a continuing reduction in costs from 2009/10 which is primarily due to the successful implementation of the measures approved since 2010/11 which were aimed at protecting the long-term sustainability of the Scheme.

The success of these measures is despite the fact that the Joint Committee has no influence over either the number of journeys made by cardholders or the commercial fare levels set by operators. This means that the actual cost of running the Scheme can vary substantially from the budgeted figure.


Balance SheetThe Balance Sheet is shown on page 65 and provides details of SCTS’s assets and liabilities as at 31 March 2012. The major balance sheet movement in 2011/12 is in relation to the reduction in reserves based on the deficit for the year. As previously stated this use of reserves was in line with the agreed policy (actual draw on reserves of £0.798 million against budgeted draw on reserves of £0.905 million).

Cash Flow Statement The Cash Flow Statement and the accompanying notes on page 66 summarise the inflows and outflows of cash arising from transactions with third parties for revenue purposes during the year.

Movement in Reserves StatementThe Movement in Reserves Statement reported on page 67 shows the general reserves held by the SCTS as at 31 March 2012. The Joint Committee policy of reducing the level of balances held to a level more commensurate with the local Scheme costs has been implemented. Consequently, the overall level of reserves has reduced significantly and is now close to a level commensurate with the size and nature of the Scheme. This managed reduction in reserves is planned to continue for the next two financial years at which point the Scheme will require to be fully funded by the 12 councils in the SPT area. This action has been taken by the Joint Committee following consultation with the funding bodies.

Membership of the Joint CommitteeDetails of representation on the Joint Committee at 31 March 2012 are shown on page 56.

Approved on behalf of Strathclyde Concessionary Travel Scheme Joint Committee and signed on their behalf

Valerie Davidson Treasurer

17 September 2012


Statement of Responsibilities

The Joint Committee’s responsibilitiesThe Joint Committee is required to:• make arrangements for the proper administration of

the Scheme and its financial affairs. The responsibility for the administration of the Scheme on a day to day basis has been delegated to Strathclyde Partnership for Transport; and

• manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets.

The Treasurer’s responsibilitiesThe Treasurer is responsible for the preparation of the Scheme’s statement of accounts in accordance with proper practices as set out in CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 (“the Code of Practice”).

In preparing this statement of accounts, the Treasurer has:• selected suitable accounting policies and applied them

consistently including the transition to IFRS;

• made judgements and estimates that were reasonable and prudent;

• complied with the Code of Practice.

The Treasurer has also:• kept proper accounting records which were up to date

• taken reasonable steps for the prevention and detection of fraud and other irregularities.


Annual Governance Statement and Statement of Financial Control Scope of the Governance FrameworkAlthough SCTS is a separate legal entity, due to the administrative relationship between SCTS and Strathclyde Partnership for Transport (SPT), there are a number of shared systems between the two bodies. The corporate governance and financial control frameworks that govern SCTS are also that of SPT.Strathclyde Partnership for Transport (SPT) has established governance arrangements that are consistent with the six (6) principles of the CIPFA/SOLACE Framework: Delivering Good Governance in Local Government.

SPT is responsible for ensuring that its business is conducted in accordance with the law and proper standards, that public money is safeguarded and properly accounted for, and used economically and efficiently. There is also a duty under the Local Government (Scotland) Act 2003 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

SPT is also responsible for establishing proper arrangements for the governance of its affairs, facilitating the effective exercise of its functions and is focused on meeting key meeting key strategic and business objectives to ensure that benefits are realised.

The Purpose of the Governance FrameworkThe governance framework comprises the behaviours and values, systems and processes, by which the Partnership is directed and controlled, and engages with the community. It enables the Partnership to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost effective services.

The quality of governance arrangements underpins the level of trust in public services and is therefore a fundamental building block upon which the organisation can build its promise to customers. Trust in public services is also influenced by the quality of services received, regardless of who is responsible for delivering them, and also by how open and honest an organisation is about its performance.

Good governance, and a framework for the implementation of good governance allows SPT to be clear about its approach to discharging its responsibilities as outlined above and to promote this widely both internally, to officers and members and externally to partners, stakeholders and most importantly the travelling public of the west of Scotland.

The arrangements required for gathering assurances for the preparation of the Annual Governance Statement provide an opportunity for SPT to consider the robustness of the governance arrangements and to consider this as a corporate issue that affects all parts of the organisation. It also helps to highlight those areas where improvement is required.

The Governance Framework Principle 1: Identifying and communicating the Partnership’s vision and purpose SPT is clear about the leadership responsibilities for services, whether provided directly, through partners or third parties. We will work closely with partners and stakeholders to make sure they deliver to agreed levels of quality and are accountable for what they do. SPT has a clear commitment to ensure services deliver the most appropriate combination of quality, value and choice to all. This principle is about developing and communicating SPT’s vision, purpose, and intended outcomes for service users.

SPT has a well established business planning process, with clear links between the corporate plans and operational priorities set out in service plans.

Service performance details continue to be made publicly available through the committee reporting mechanism.

Feedback from stakeholders on the delivery of services is sought through a variety of means, for example customer surveys and a formal complaints procedure.


Principle 2: Member and Officer – purpose, roles and responsibilities SPT has well established standing orders that regulate the operation of the Partnership Committee and the Joint Committee. These standing orders are supported by a scheme of delegation, contract standing orders, and financial regulations with clear delegation arrangements and protocols for decision making and communication, and codes of conduct defining the standards of behaviour for members and staff.

All levels of management within the organisation have a designated role profile and these profiles are easily accessible for staff via the intranet. The senior management of the organisation is structured to provide clear responsibility and accountability at both strategic and operational levels.

Ongoing restructuring of all SPT departments is currently underway. Working arrangements and job descriptions will be kept under review within the context of these changes.

Principle 3: Values of Good Governance and Standards of BehaviourAn anti-fraud and corruption policy and whistle blowing policy are in place and are promoted internally regularly via communication channels. This supplements the fraud hotline.

There is a clear and fully documented staff disciplinary process to deal with breaches in any code of conduct and staff are made aware, through induction and the performance management framework, of SPT’s expectations in terms of standards of behaviour and compliance with agreed policies and codes of conduct.

Staff are required to comply with the guidelines on registers of gifts and hospitality. Guidance on gifts and hospitality is included in the governance manual, available to all staff on the intranet and provided to staff as part of the induction process.

Principle 4: Decision Making, Scrutiny and Managing Risk The decision making and scrutiny framework within SPT encompasses self-evaluation as well as internal and external inspection.

The SPT strategy group also rely on advice and guidance from officer led groups responsible for the consideration of, for example, environmental sustainability, ICT strategy, and risk management, to drive and direct the decision making process.

Risk management arrangements were further developed during 2011/12. The strategy group continues to have responsibility for overseeing the implementation of the Partnership’s Risk Management Policy and Strategy. The Corporate Risk Register has six risk areas; Financial, Governance, Operational, Physical, Reputational and Technological. Each area includes specific risks with identified mitigation and continuity planning arrangements. The Corporate Risk Register is reviewed four weekly at strategy group meetings, with reporting lines to the Audit and Standards Committee.

The Audit and Standards Committee is well established, and a programme of training has been put in place to ensure that all members remain well versed in their role and the role of the Committee.

Principle 5: Developing Capacity and Capability of Officers and Members This principle is about ensuring that officers and members have the appropriate knowledge and skills to allow them to effectively fulfil their roles and responsibilities.

SPT has adopted a corporate induction process. All new employees are required to undertake this induction. Arrangements for local induction are put in place and delivered by HR.

SPT remains committed to developing its workforce through the provision of a development scheme for officers, to ensure that training and development needs are documented and managed in a structured and planned way.


Principle 6: Engaging with local communities and others to ensure public accountability SPT interacts and engages with stakeholders on a number of levels and publishes annual accounts, service performance information and the results of customer surveys.

In addition, communications are maintained through the local press, the publication of “SPT Express”, and through officer and/or member representation at public meetings.

SPT remains committed to developing systems to allow stakeholders to engage electronically. Contact can also be made through the internet site.

Meetings of SPT and its committees are open to the public, and agendas and papers are published on the internet site.

SPT continues to review its approach to community engagement. Robust community engagement is embedded practice, for example in relation to the Regional Transport Strategy (RTS) and the accessibility/content of the website.

Arrangements and protocols have been established to meet requests under the Freedom of Information (Scotland) Act within the required timescales.

Monitoring and Review of Governance Arrangements SPT’s governance arrangements are formally monitored via:

• The Partnership’s established Committee framework, including the Audit and Standards Committee;

• strategy group;

• internal and external audit work; and

• the annual review of governance arrangements used to inform this Statement.

This monitoring is done within the context of the Delivering Good Governance guidance, and the corporate plan and the RTS.

System of Internal Financial ControlThis section of the Annual Governance Statement relates to the systems of internal financial control of SPT and therefore of the SCTS. It incorporates assurance on the systems of

internal financial controls in place within each of these entities.

Section 95 of the Local Government (Scotland) Act 1973 places responsibility for the proper administration of SPT‘s and SCTS’s financial affairs upon the proper officer of the Partnership. For SCTS, the Assistant Chief Executive (Business Support) / Secretary is the responsible officer.

This statement applies to the 2011/12 financial statements for SCTS. We acknowledge our responsibility for ensuring that an effective system of internal control is maintained and operated in connection with the resources concerned.

The system of internal financial control is based on a framework of guidance and regular management information, financial regulations, administrative and authorisation procedures, management supervision and a system of delegation and accountability.

Development and maintenance of the system is undertaken by officers of SPT. Key elements include:

• comprehensive revenue and capital budgeting systems integrated with service planning;

• a regime for regular reporting to the Joint Committee of periodic and annual financial reports; which highlight financial performance against forecast;

• setting targets to measure financial and other performance;

• performance management information;

• project management disciplines; and

• guidance relating to financial processes, procedures and regulations.

Internal audit is an independent appraisal function for the review of the internal control systems as a service to the organisation. It objectively examines, evaluates and reports on the adequacy of internal control as a contribution to the proper, economic, efficient and effective use of resources.

The internal audit team operates in accordance with the Chartered Institute of Public Finance and Accountancy’s Code of Practice for Internal Audit in Local Government in the United Kingdom. The team undertakes an annual programme of work approved by the Partnership based on a three-year strategic audit plan. The plan is based on


a formal audit needs assessment which is revised on an ongoing basis to reflect evolving risks and changes within the organisation.

All internal audit reports identifying system weaknesses and/or non-compliance with expected controls are brought to the attention of management and include appropriate recommendations and action plans. It is management’s responsibility to ensure that proper consideration is given to internal audit reports and that appropriate action is taken on audit recommendations. Reports are subsequently monitored by the strategy group, Section 95 officer and the Audit and Standards Committee, as well as other officers.

The effectiveness of internal financial controls is informed by officers throughout SPT and the Audit and Standards Committee as the scrutiny committee and by the work of internal and external audit. It is SPT’s view that the systems for internal control were effective during 2011/12 with no identified material weaknesses, and will be

improved through implementation of the recommended actions from internal and external audit reports, and continuous corporate business planning.

It should be noted that the system of internal financial control can provide only reasonable and not absolute assurance that all transactions are properly assessed or that errors have been prevented, and as such SPT is continually seeking to improve the effectiveness of its system of internal financial control.

SPT is committed to ensuring that governance and internal financial control arrangements are robust, proportionate, and in line with best practice. SPT has established a culture of improvement, and is thorough in addressing issues that emerge either through self-assessment or as part of the external scrutiny process. The process of preparing this statement has highlighted areas where further work is required, all of which are reported to the Audit and Standards Committee and these will be addressed within the context of the continuous improvement agenda.

Valerie Davidson Treasurer / Secretary

17 September 2012


Note 2010/11£000

2011/12£000

ExpenditurePayments to operators 3,992 4,050

Administration costs 1,2 390 264

Net cost of service 4,382 4,314

Interest received 3 (55) (33)

Net operating expenditure 4,327 4,281

Amounts to be met from external sources 4,327 4,281

Financed by: Funding received – Local Authorities 4 (2,526) (3,483)

Net deficit/(surplus) for the year transferred to general reserves 1,801 798

Surplus brought forward (4,213) (2,412)

Surplus carried forward to general reserves (2,412) (1,614)

Comprehensive Income and Expenditure Statement for the year ended 31 March 2012

The results for both years reflect trading from continuing activities. There are no recognised gains or losses in either year other than the results for the financial year. Accordingly no statement of total recognised gains and losses is given.


Balance Sheet as at 31 March 2012

The unaudited financial statements were issued on 29 June 2012 and the audited financial statements were authorised for issue on 17 September 2012.

Signed on behalf of the Joint Committee:

Valerie Davidson Treasurer / Secretary

17 September 2012

Note 2010/11£000

2011/12£000

Current AssetsShort term investments 5 0 0

Cash at Bank 4,534 2,595

Debtors 6 0 5

4,534 2,600

Current LiabilitiesBank Overdraft (292) 0

Amounts due to operators 7 (724)

Creditors 8 (1,491) (262)

(2,122) (986)

Net Current Assets 2,412 1,614

Provision for Liabilities and Charges 0 0

Net Assets 2,412 1,614

ReservesGeneral reserves 9 2,412 1,614

2,412 1,614

(339)


2010/11£000

2011/12£000

Revenue ActivitiesCash Outflows Cash paid to and on behalf of employees (184) (136) Other operating cash payments (4,109) (5,027)

(4,293) (5,163)Cash inflows Other operating cash receipts 2,526 3,483

Net cash inflow/ (outflow) from revenue activities – Note A (1,767) (1,680)

Returns on investments and servicing of finance

Cash inflows Interest received 55 33

Net cash inflow from servicing of finance 55 33

Management of liquid resources Net (increase)/decrease in short term deposits 0 0

Increase/(decrease) in cash – Note B (1,712) (1,647)

Notes to the Cashflow Statement

Note AReconciliation of net cash inflow/(outflow) from revenue activities to operating surplus

2010/11£000

2011/12£000

Operating deficit (1,801) (798)

Deduct interest received (55) (33)(1,856) (831)

Decrease in Debtors 0 (5)(Decrease)/Increase in Creditors 89 (844)Decrease in Provisions 0 0

(1,767) (1,680)

Note BAnalysis of movement in cash

At 1 April 2011

£000

Cashflows£000

At 31 March 2012

£000

Cash at bank 4,242 (1,647) 2,595

Cash Flow Statement for the year ended 31 March 2012

As at 31 March 2012, the Scheme had no short-term investments, consistent with the position at 31 March 2011.


General General Reserve Reserve2010/11 2011/12

£000 £000

Opening Balance 4,213 2,412

Net Deficit for year (1,801) (798)

Closing Balance 2,412 1,614

Movement in Reserves Statement 2011/12


Accounting Policies

The financial statements for the year ended 31 March 2012 have been compiled on the basis of recommendations made by the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) and have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 (the Code) and the Best Value Accounting Code of Practice 2011/12. The Code is based on International Financial Reporting Standards (IFRS) with interpretation appropriate to the public sector. The statements are designed to give a ‘true and fair view’ of the financial performance and position of SCTS for 2011/12.

1. Amounts due to operatorsAmounts due to operators are based on actual claims processed. Where claims have not been received the liability is estimated based on the historic level of payments and known passenger trends. Outstanding additional cost claims have been included at the cost shown in the operators claims or if under negotiation at the latest negotiated figure. The operators claim includes compensation to operators for lost fares as permitted under the current Strathclyde Concessionary Travel Scheme.

2. Administration costsStrathclyde Partnership for Transport provides the administrative support to the Scheme and also meets certain costs attributable solely to the administration of the Scheme.

The recharge includes:

• employees who are involved full time in administering the scheme, including employer on- costs such as National Insurance and employer pension contributions;

• general support staff who are charged on the basis of estimated time spent on the Scheme’s activities, including employer on-costs; and

• an allowance for the Partnership overheads. These overheads are allocated based on staff numbers and include property costs, printing and stationery, supplies and services and audit costs charged to the Partnership.

3. Retirement BenefitsIn accordance with IAS19, SCTS is required to disclose certain information concerning assets, liabilities, income and expenditure relating to pension schemes for its employees.

As SCTS does not have any direct employees, the standard does not apply and accounting requirements are contained with the financial statements of Strathclyde Partnership for Transport.

4. InvestmentsTemporary surplus cash balances are invested with UK banks. An investment return is earned on these investments and is shown in the Comprehensive Income and Expenditure Statement as interest received.

5. Bank balancesBank balances are included in the balance sheet at the closing balance in the SCTS ledger.


2010/11£000

2011/12£000

Staff costs 180 136

Auditor’s remuneration 5 5

Members allowances and expenses 4 4

Other costs 161 98

Payments to the Post Office 40 21

390 264

2010/11£000

2011/12£000

Members’ Allowances 4 4

Expenses 0 0

4 4

Notes to the Financial Statements

1. Administration costsThe administration costs are analysed below:

The average number of full time SPT staff dealing with the administration of the Scheme was 6.5 (2010/11:9), including the issue of the national entitlement card.

The 2011/12 fee in respect of external audit services undertaken in accordance with the Code of Audit Practice will be approximately £5,180. The fee is payable to Audit Scotland and to KPMG LLP, SCTS’s appointed auditors.

2. Members allowances and expensesThe total amount paid in respect of Members Allowances and Expenses incurred by the SCTS in respect of the Chair and Vice Chair of the Joint Committee was:

3. Interest receivedThis interest relates to interest received from the UK banks in respect of the SCTS’s temporary surplus funds that are invested during the year.


2010/11 £000

2011/12 £000

Argyll & Bute Council 104 144

East Ayrshire Council 144 198

East Dunbartonshire Council 130 179

East Renfrewshire Council 105 145

Glasgow City Council 624 860

Inverclyde Council 101 140

North Ayrshire Council 168 232

North Lanarkshire Council 341 470

Renfrewshire Council 198 273

South Ayrshire Council 157 216

South Lanarkshire Council 348 480

West Dunbartonshire Council 106 146

2,526 3,483

4. Funding receivedThe Scheme is funded by contributions received from the local authorities within the area served by the Scheme and from a draw on reserves. The funding is set as part of the budget process and takes account of expected participation, changes in fares and the level of reserves.

The funding received or due from local authorities is set out in the table below:

5. Short term investments As at 31 March 2012, the Scheme had no short-term investments, consistent with the position at 31 March 2011.

6. DebtorsAs at 31 March 2012, the Scheme had debtors of £4,801. This is in respect of bank interest outstanding from HBOS and Santander.

7. Amounts due to operators2010/11

£0002011/12

£000Outstanding Operator Payments 339 724

Operator payments are based on actual claims processed. Where claims have not been received the liability is estimated based on the historic level of payments and known passenger trends.

Related Party2011/12 Income

£0002011/12 Expenditure

£000 Transaction

Strathclyde Partnership for Transport 255 Administration and overhead costs

Local Authorities 3,483 Revenue funding to SCTS


2010/11£000

2011/12£000

Other Creditors 113 7

Amounts due to SPT 1,378 255

1,491 262

8. Creditors

Strathclyde Partnership for TransportSPT provides the administrative support to the Scheme and also meets certain costs attributable solely to the administration of the Scheme.

Local AuthoritiesThe cost of the SCTS is met by the 12 local authorities, who provide the funding to the scheme.

9. General reservesSee Movement in Reserves Statement on page 67 for a breakdown of the movement on the reserve balances.

10. Related party transactionsInternational Accounting Standard 24 (IAS24) requires disclosures to draw attention to the possibility that the reported financial position and results may have been affected by the existence of related parties and by material transactions with them. During the year, transactions with related parties arose as follows.

Independent auditor’s report to the members of Strathclyde Concessionary Travel Scheme Joint Committee and the Accounts Commission for ScotlandWe have audited the financial statements of Strathclyde Concessionary Travel Scheme Joint Committee for the year ended 31 March 2012 on pages 64 to 71. 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 Code of Practice on Local Authority Accounting in the United Kingdom 2011-12 (the 2011-12 Code).

This report is made solely to the members of Strathclyde Concessionary Travel Scheme Joint Committee and the Accounts Commission for Scotland, in accordance with Part VII of the Local Government (Scotland) Act 1973. Our audit work has been undertaken so that we might state to those two parties those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than Strathclyde Concessionary Travel Scheme Joint Committee and the Accounts Commission for Scotland, for this report, or the opinions we have formed.

Respective responsibilities of the Treasurer and auditorAs explained more fully in the Statement of Responsibilities on page 59, the Treasurer is responsible for the preparation of financial statements which give a true and fair view. Our 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 Accounts Commission for Scotland. Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn 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 Treasurer; and the overall presentation of the financial statements. In addition, we read all the financial and non- financial information in the Report of the Joint Committee to identify material misstatements or inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:

• give a true and fair view of the state of the affairs of the body as at 31 March 2012 and of its expenditure and income for the year then ended;

• have been properly prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011-12; and

• have been prepared in accordance with the requirements of the Local Government (Scotland) act 1973 and the Local Government Scotland Act 2003.

Opinion on other matters prescribed by the Local Government (Scotland) Act 1973In our opinion:

• the information given in the Report of the Joint Committee for the financial year for which the financial statements are prepared is consistent with the financial statements.


Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Local Government (Scotland) Act 1973 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept; or

• the financial statements are not in agreement with the accounting records; or

• we have not received all the information and explanations we require for our audit; or

• the Annual Governance Statement does not comply with Delivering Good Governance in Local Government; or

• there has been a failure to meet a prescribed financial objective.

S Reid for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 191 West George Street Glasgow G2 2LJ

19 September 2012

Independent auditor’s report to the members of Strathclyde Concessionary Travel Scheme Joint Committee and the Accounts Commission for Scotland


Strathclyde Partnership for Transport Consort House

12 West George Street Glasgow G2 1HNStrathclyde Partnership for Transport, Consort House, 12 West George Street , Glasgow G2 1HN

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