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Consolidated Resource Accounts For the year ended 31 March 2004

THE SCOTTISH EXECUTIVE
FOREWORD TO THE CONSOLIDATED ACCOUNTS

For the year ended 31 March 2004

INTRODUCTION/BACKGROUND

Basis of Accounts

2. These accounts have been prepared in accordance with the accounts direction issued by the Scottish Ministers under section 19(4) of the Public Finance and Accountability (Scotland) Act 2000. The accounts direction is reproduced here.

3. Departmental Accounting Boundary

4. These accounts reflect the consolidated assets and liabilities and the results of all entities within the Scottish Executive departmental accounting boundary as defined in the Resource Accounting Manual (RAM). This consists of the seven internal Departments, supported by Administration, their Executive Agencies (each linked to a specific department), the Crown Office and Procurator Fiscal Service and the NHS Bodies responsible for the planning, promotion and commissioning of health care. For those NHS Bodies where Trusts have been dissolved, their responsibilities also include delivery of healthcare. The bodies within the boundary are as follows:

Core Departments:

• Environment and Rural Affairs Department
• Development Department
• Education Department
• Enterprise, Transport and Lifelong Learning Department
• Finance and Central Services Department
• Health Department
• Justice Department

Executive Agencies:

• Environment and Rural Affairs:
• • Scottish Agricultural Science Agency
  • Scottish Fisheries Protection Agency
  • Fisheries Research Services
• Development Department:
• • Communities Scotland
  • Office of the Scottish Charity Regulator (from 16 December 2003)
• Education Department:
• • Her Majesty's Inspectorate of Education
  • Historic Scotland
• Enterprise, Transport and Lifelong Learning Department:
• • Student Awards Agency for Scotland
• Finance and Central Services:
• • Scottish Public Pensions Agency
• Justice Department:
• • Scottish Prison Service
  • Scottish Court Service
  • Accountant in Bankruptcy

The Crown Office and Procurator Fiscal Service

The NHS Bodies in Scotland responsible for the planning, promotion and commissioning of health care. For those NHS Bodies where Trusts have been dissolved, their responsibilities also include delivery of healthcare.

Hereafter in the accounts, the Core Departments will be referred to as 'Core' while the other consolidated bodies including the Executive Agencies, Crown Office and Procurator Fiscal Service and the Health Bodies will be referred to as 'Other'.

4. The Crown Office, Executive Agencies and the individual Health Bodies also produce and publish their own annual accounts. These accounts can be accessed via the Scottish Executive website at www.scotland.gov.uk . Up to the year ended 31 March 2003, the Scottish Executive published separate Core Departments' accounts along with the Consolidated accounts. Following a proposal in 2004, supported by the Scottish Executive Audit Committee and approved by the Audit Committee of the Scottish Parliament, separate accounts for the Core Departments will no longer be published. Useful information on the Core Departments is however provided in a separate balance sheet and accompanying notes as well as in a detailed staff note.

5. Comparison of Budget to Outturn

6. These accounts seek to report actual outturn compared to the budget authorised by the Scottish Parliament. The annual budget authorised by the Scottish Parliament, however, is the budget for the wider Scottish Administration. It therefore includes the funding of activities which are not within the Scottish Executive, and not therefore dealt with in these accounts. There are also some differences between the budgeting rules and the accounting requirements that have to be accommodated in any comparison. These accounts therefore seek to compare the actual outturn to the budget stated on the same basis, with a reconciliation and explanation of the budget shown in the accounts with the budget as shown in the annual budget documents provided in a separate note to the accounts.

7. Brief History

8. The Scottish Executive is the devolved administration in Scotland and inherited the vast majority of the policy and administrative responsibilities of its predecessor, The Scottish Office. The Executive was established at devolution in 1999. From 1 July 1999 the Scottish Executive and Scottish Parliament assumed legislative responsibility for a wide range of devolved matters, including agriculture, economic development, education, environment, fisheries, food standards, forestry, health, housing, local government, planning, social work, some aspects of transport, and tourism. Matters such as the constitution, defence, foreign policy, national taxation and social security are reserved to the UK Parliament.

9. Principal activities and key aims

10. The principal activities and key aims of the Scottish Executive are set out by Ministerial portfolio. The operating Departments and Ministerial portfolios are aligned in broad terms, although in some cases a Department will support more than one portfolio. The aims and objectives of all operating departments are provided in the Statements of Resources by Departmental Aims of these accounts. Key priorities for 2003-04 are outlined in the Operating and Financial Review.

11. MINISTERS AND SENIOR OFFICERS

12. The responsibilities of Scottish Ministers during the financial year were:

13. First Minister

    Head of the Scottish Executive, responsible for the development, implementation and presentation of Executive policies. Also responsible for the strategic relationship with the UK government, the European Union and other external relations.

    Deputy First Minister and Minister for Enterprise, Transport and Lifelong Learning

    With the First Minister, responsible for the development, implementation and presentation of Executive policies. As Enterprise Minister responsible for the economy, business and industry including Scottish Enterprise, Highlands and

    Islands Enterprise, European Structural Funds, trade and inward investment, energy (including renewable energy), further and higher education, lifelong learning and training and science.

    Minister for Communities

    Responsible for tackling anti-social behaviour, poverty, housing and area regeneration, the land use planning system and building standards, equality issues, voluntary sector, religious and faith organisations and charity law.

    Minister for Education and Young People

    Responsible for school education, nurseries and childcare, Gaelic, children's services, social work, Her Majesty's Inspectorate of Education, Her Majesty's Social Work Inspectorate and the Scottish Qualifications Authority.

    Minister for Environment and Rural Development

    Responsible for environment and natural heritage, land reform, water, sustainable development, agriculture, fisheries and rural development including aquaculture and forestry.

    Minister for Finance and Public Services

    Responsible for the Scottish Budget, public service delivery, modernising government including civil service reform, local government, cities and community planning, and external relations issues.

    Minister for Health and Community Care

    Responsible for NHS, community care, health service reform, health improvement, health promotion, public health, allied healthcare services, acute, primary and mental health services, addiction services, pharmaceutical services, performance, quality and improvement framework and food safety.

    Minister for Justice

    Responsible for criminal justice, youth justice, victims support, criminal justice social work, police, prisons and sentencing policy, courts, law reform including civil law and fire services.

    Minister for Parliamentary Business

    Responsible for Parliamentary affairs and the management of Executive business in the Parliament.

    Minister for Transport

    Responsible for transport policy and delivery, public transport, road, rail services, air and ferry services.

    Minister for Tourism, Culture and Sport

    Responsible for tourism, culture and the arts, sport, major events strategy, built heritage, architecture, Historic Scotland and lottery funding.

14. The second election to the Scottish Parliament took place on 1 May 2003. The Scottish Ministers and their Deputies during the financial year were:

15. 	Pre Election	Post Election
    First Minister	Jack McConnell MSP	Jack McConnell MSP
    Deputy First Minister	Jim Wallace MSP	Jim Wallace MSP
    Minister for
    Enterprise, Transport & Lifelong Learning	Iain Gray MSP	Jim Wallace MSP
    Deputy	Lewis Macdonald MSP	Lewis Macdonald MSP
    Communities	Margaret Curran MSP	Margaret Curran MSP
    Deputy	Des McNulty MSP	Mary Mulligan MSP
    Education & Young People	Cathy Jamieson MSP	Peter Peacock MSP
    Deputy	Nicol Stephen MSP	Euan Robson MSP
    Environment & Rural Development	Ross Finnie MSP	Ross Finnie MSP
    Deputy	Allan Wilson MSP	Allan Wilson MSP
    Finance & Public Services	Andy Kerr MSP	Andy Kerr MSP
    Deputy	Peter Peacock MSP	Tavish Scott MSP
    Health & Community Care	Malcolm Chisholm MSP	Malcolm Chisholm MSP
    Deputy	Mary Mulligan MSP	Tom McCabe MSP
    Justice	Jim Wallace MSP	Cathy Jamieson MSP
    Deputy	Hugh Henry MSP	Hugh Henry MSP
    Parliamentary Business	Patricia Ferguson MSP	Patricia Ferguson MSP
    Deputy	Euan Robson MSP	Tavish Scott MSP
    Transport	Iain Gray MSP	Nicol Stephen MSP
    Tourism, Culture & Sport	Mike Watson MSP	Frank McAveety MSP
    Law Officers
    Lord Advocate	Colin Boyd QC	Colin Boyd QC
    Solicitor General	Elish Angiolini QC	Elish Angiolini QC

16. The composition of the Scottish Executive Management Group during the year was as follows:

17. John Elvidge	Permanent Secretary (from 7 July 2003)
    Sir Muir Russell	Permanent Secretary (until 6 July 2003)
    John Graham	Head of Environment and Rural Affairs Department
    Nicola Munro	Head of Development Department
    Jim Gallagher	Head of Justice Department
    Trevor Jones	Head of Health Department
    Mike Ewart	Head of Education Department
    Eddie Frizzell CB	Head of Enterprise, Transport and Lifelong Learning Department
    Robert Gordon CB	Chief Executive of the Crown Office and Procurator Fiscal Service and Head of Legal and Parliamentary Services
    Andrew Goudie	Acting Head of Finance and Central Services Department (from 7 July 2003)
    John Elvidge	Head of Finance and Central Services Department (until 6 July 2003)
    John Aldridge	Finance Director (from 16 September 2003)
    Peter Collings	Principal Finance Officer (until 15 September 2003)
    Agnes Robson	Principal Establishment Officer
    Michael Watts	Non-executive member
    Shonaig Macpherson	Non-executive member

    The non-executive members bring an external perspective to the consideration of corporate management issues such as staffing, administration costs, monitoring of programme expenditure, training and development, accommodation strategy and relations with stakeholders.

    Senior official appointments

18. John Elvidge is Permanent Secretary at the Scottish Executive. He was appointed by the Prime Minister on the recommendation of the Head of the Home Civil Service following an open competition. The appointment was for an indefinite term under the terms of the Senior Civil Service contract. The rules for appointment were set out in Chapter 5 and Chapter 11 of the Civil Service Management Code .
20. Others who held membership of the Management Group, with the exception of the Finance Director (formerly Principal Finance Officer) and Principal Establishment Officer for whom there are separate appointment arrangements, were appointed following approval by the Prime Minister on the recommendation of the Head of the Home Civil Service. Appointments made from May 1999 onwards were also made with the agreement of the First Minister.

21. Remuneration of Ministers and members of the Management Group

22. The salaries of the Scottish Executive ministers (including junior ministers) were established under section 81(1) and (2) of the Scotland Act 1998.
24. The Permanent Secretary's remuneration was set individually by the Government on the recommendation of the Permanent Secretaries Remuneration Committee. Paragraph 7.1.11 and Annex A to paragraph 7.1 of the Civil Service Management Code provides the details.
26. For other members of the Management Group remuneration was determined by the Scottish Executive Top Level Pay Committee, chaired by the Permanent Secretary. Paragraphs 7.1.12-7.1.14 and Annex A to paragraph 7.1 of the Civil Service Management Code provides the details.
28. Further details on remuneration are set out in Note 2 to these accounts.

29. Pensions and Early Departure costs

30. Details about the Scottish Executive's Pensions and Early Departure Costs policies are included in Notes 1.17 and 1.19 to these accounts.

31. OPERATING AND FINANCIAL REVIEW

32. The Scottish Executive publishes an annual report setting out its spending plans over a three year period. The spending plans for 2003-04, as approved by the Scottish Parliament, are set out in the 'Scottish Budget 2003-04 Annual Expenditure Report of the Scottish Executive' summary and detailed documents published in April 2002. The document provides an overview of the main areas of spending, the main drivers for spending and what the spending will achieve. See Note 24 for further information on the resource budget.
34. The Executive's priorities for spending in 2003-04 were described as follows:

35. The budget reflects our commitment to invest to secure a better life for us all. We must invest to provide effective public services and to build on infrastructure suitable for Scotland in the 21 ^st century.

    Scotland's priorities mean investing in health, jobs, education, crime and transport. We will focus on closing the opportunity gap by providing equal life chances for everyone, and making sure that what we do is financially and environmentally sustainable.

36. Objectives and targets for all services are also set out in the Annual Expenditure Report of the Scottish Executive: Detail Document. This indicates targets for future years and reports actual performance in previous years. Agencies within the Scottish Executive also publish annual reports and accounts, and corporate plans. Key priorities for 2003-04 included:

Environment

Rural Affairs

Social Justice

Education and Young People

Tourism, Culture and Sport

Enterprise, Transport and Lifelong Learning

Transport

European Structural Funds

Local Government

Health and Community Care

Justice

21. Following the elections to the Scottish Parliament in May 2003 the newly formed coalition government published its 'Partnership Agreement', which set out its vision for Scotland and commitment to encourage and stimulate economic growth, tackle poverty and disadvantage, improve and sustain the environment and help all communities to live in peace and safety.
23. The financial results for the year are reported in the attached accounts. They record a Net Resource Outturn of 19,916m, compared to the Resource Budget of 20,324m. The underspend of 408m represents 2% of the resource budget and an explanation of the major variances is included within the accounts.
25. The key aggregate for control of expenditure is the Departmental Expenditure Limit (DEL). This covers the great majority of the consolidated Scottish Executive spend, which is planned and controlled on a three-year basis in biennial spending reviews. Annually Managed Expenditure (AME) is other expenditure, such as payments under the Common Agricultural Policy, which cannot be reasonably subject to firm multi-year limits.
27. End Year Flexibility (EYF) is the mechanism by which the underspends can be carried forward from year to year and so avoid potentially wasteful year end spending sprees. The Scottish Executive's entitlement to EYF is determined by its total DEL underspending on operating costs and net capital expenditure as recorded in the Consolidated Accounts.
29. Additions to tangible and intangible fixed assets in the financial year were 224m consisting of 132m of assets under construction, primarily roads, 23m of land and buildings, 19m of equipment, 7m of dwellings, 8m of vessels and vehicles, 3m of fixtures & fittings and 32m of ICT systems and software. There was expenditure of 70.3m relating to 7 road schemes which were completed or under construction during 2003-04.

30. Post-Balance Sheet events

31. There are no post balance sheet events to report.

32. PUBLIC INTEREST REPORTING

    Employment of people with disabilities

33. The Scottish Executive follows Cabinet Office good practice guidance on the employment of people with disabilities and is a Job Centre Plus Disability Symbol user. As such, the Scottish Executive ensures that there is no discrimination on the grounds of disability and that access to employment and career advancement is based solely on ability, competence and suitability for the work.

34. Staff Relations and Equal Opportunities

35. The Scottish Executive is an equal opportunities employer. Policies are in place to guard against discrimination and to ensure that there is no unfair or illegal discriminatory treatment or any barriers to employment or advancement in the Scottish Executive.
37. The Scottish Executive gives a high priority to the development of all its staff. Training, development and learning in the Executive is quality assured through our commitment to the Investor in People (IiP) Scheme. The Scottish Office was first recognised as an Investor in People in 1997 and since then has gone through four re-recognition assessments. We are committed to a programme of continuous improvement in relation to our implementation of the IiP standard.
39. The Cabinet Office is responsible for developing, formulating and promulgating equal opportunities guidance for the Civil Service as a whole, but operational responsibility rests with individual Departments. The Scottish Executive has an Equal Opportunities Officer who is responsible for developing and promulgating equal opportunities and diversity policies and acting as an inter-departmental liaison officer with the Cabinet Office.
41. The Scottish Executive Equal Opportunities policy states that all staff should be treated equally irrespective of their sex, marital status, age, race, ethnic origin, sexual orientation, disability or religion. Employment and promotion are solely on merit. Staff who work an alternative pattern are assessed on exactly the same basis as those working full time.
43. The Scottish Executive adopted a Diversity Strategy, which was launched by the Permanent Secretary, in November 2000. The strategy commits the Scottish Executive to increasing the diversity of staff within the organisation, to develop them regardless of irrelevant differences and to valuing the contribution of each individual.

44. Payment Policy

45. The Scottish Executive policy requires that all suppliers' invoices not in dispute are paid within the terms of the relevant contract. The Scottish Executive aims to pay 100% of invoices, including disputed invoices once the dispute has been settled on time in these terms. During the year ended 31 March 2004, the Scottish Executive, its Executive Agencies and the Crown Office and Procurator Fiscal Service paid 91.3% of all invoices within the terms of its payment policy. The specific payment performance of the individual bodies consolidated here will be reported separately within their individual accounts. The Scottish Executive's Core Departments' paid 77.5% (2002-03: 68.5%) of all invoices within the terms of its payment policy.

46. Auditors

47. The accounts of the Scottish Executive are audited by the Auditor General for Scotland.

Accountable Officer

Date: 29 November 2004

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