Scottish Government

Notes to the Accounts

1. Accounting Policies

In accordance with the Accounts Direction issued by Scottish Ministers under section 19(4) of the Public Finance and Accountability (Scotland) Act 2000 these accounts have been prepared in compliance with the Financial Reporting Manual, which follows generally accepted accounting policies in the UK to the extent that it is meaningful and appropriate in the public sector context. The particular accounting policies adopted by SWIA are described below. They have been applied consistently in dealing with items considered material in relation to the accounts.

1.1 Accounting Convention

The accounts have been prepared under the historic cost convention modified to account for the revaluation of fixed assets, at their value to SWIA by reference to their current costs, where such re-valuation is considered material.

1.2 Continuing Activities

The results of the SWIA Operating Cost Statement derive from operating activities, all of which are continuing.

1.3 Fixed Assets

Fixed assets comprise office and IT equipment. These are capitalised at their cost of acquisition and installation. Office and IT equipment are not revalued on the grounds that their value is not material.

The threshold for capitalising tangible fixed assets is £1,000. Office and IT equipment include individual assets whose costs fall below the threshold, but as they are of a similar nature they are grouped together and capitalised.

1.4 Depreciation

Provision for depreciation is made to write off the cost of fixed assets on a straight-line basis over the expected useful lives of the assets concerned. The expected useful lives are as follows:

1.5 Capital Charge

A charge reflecting the cost of capital utilised by SWIA is included in the operating statement. The charge is calculated on the average value of fixed assets and working capital held during the year at the real rate set by HM Treasury (currently 3.5% per annum).

1.6 Value Added Tax

SWIA accounts for VAT in line with normal practice as amended by contracted out rules applicable to government departments. Operating Costs are stated net of VAT where VAT is recoverable by SWIA.

SWIA is registered for VAT as part of the Scottish Executive, which is responsible for recovering VAT from HM Revenue and Customs on behalf of SWIA.

1.7 Pensions

Past and present employees are covered by the provisions of the Principal Civil Service Pension Scheme ( PCSPS) which is a defined benefit scheme and is unfunded and non-contributory. SWIA recognises the expected cost of providing pensions on a systematic and rational basis over the period during which it benefits from employees' services by payment to the PCSPS of amounts calculated on an accruing basis. Relevant disclosures are reported in the Senior Staff Remuneration Report and in Note 2. Liability for payment of future benefits is a charge on the PCSPS.

1.8 Operating Income

Operating income is credited to the Operating Cost Statement on an accruals basis.

1.9 Leases

From the 2005-06 financial year, SWIA lease buildings in Edinburgh and Glasgow. These leases are operating leases and the rentals are charged to the Operating Cost Statement on a straight-line basis over the term of the lease.

2. Staff Costs and Numbers

2.1 Staff costs during the year were:

2.2 The average number of persons employed during the year was:

2.3 Pensions

The staff of SWIA are civil servants and the pension benefits accrue under Principal Civil Service Pension Scheme ( PCSPS) is an unfunded multi-employer defined benefit scheme but SWIA is unable to identify its share of the underlying assets and liabilities. A full actuarial valuation was carried out at 31 March 2003. Details can be found in the separate scheme statement of the PCSPS Cabinet Office: Civil Superannuation ( www.civilservice-pensions.gov.uk ).

For 2005/06, employer's contributions of £217,270 were payable to the PCSPS at one of four rates in the range 16.2 to 24.6 per cent of pensionable pay, based on salary bands. Employer contributions are to be reviewed every four years following a full scheme valuation by the Government Actuary, rates will increase from 2006-07. The contribution rates reflect benefits as they are accrued, not when the costs are actually incurred, and they reflect past experience of the scheme.

Pension benefits are provided through the Civil Service pension arrangements. From 1 October 2002, civil servants may be in one of three statutory based "final salary" defined benefit schemes (classic, premium, and classic plus). The Schemes are unfunded with the cost of benefits met by monies voted by Parliament each year. Pensions payable under classic, premium, and classic plus are increased annually in line with changes in the Retail Prices Index. New entrants after 1 October 2002 may choose between membership of premium or joining a good quality "money purchase" stakeholder arrangement with a significant employer contribution ( partnership pension account).

Employees get tax relief on their contributions. These are set at the rate of 1.5% of pensionable earnings for classic and 3.5% for premium and classic plus. Benefits in classic accrue at the rate of 1/80th of pensionable salary for each year of service. In addition, a lump sum equivalent to three years' pension is payable on retirement. For premium, benefits accrue at the rate of 1/60th of final pensionable earnings for each year of service. Unlike classic, there is no automatic lump sum, but members may commute some of their pension to provide a lump sum up to a maximum of 3/80ths of final pensionable earnings for each year of service or 2.25 times pension if greater. Classic plus is essentially a variation of premium, but with benefits in respect of service before 1 October 2002 calculated broadly as per classic. The Partnership Pension Account is a stakeholder pension arrangement. The employer makes a basic contribution of between 3% and 12.5% (depending on the age of the member) into a stakeholder pension product. The employee does not have to contribute but where they do make contributions, these are matched by the employer up to a limit of 3% (in addition to the employer's basic contribution). Employers also contribute a further 0.8% of pensionable salary to cover the cost of risk benefit cover (death in service and ill health retirement).

Further details about the Civil Service pension arrangements can be found at the website: www.civilservice-pensions.gov.uk .

3. Other Administration Costs

3.1 Costs

* SWIA set-up costs were incurred by the sponsor branch
as part of the establishment of SWIA and have not been
analysed across expenditure heads.

3.2 Notional Costs

Auditors' remuneration is a notional charge, as notified to us by our auditor Audit Scotland, in respect of audit work carried out during 2005/06.

No other services were supplied by Audit Scotland during the period ended 31 March 2006.

4. Income

5. Fixed Assets

6. Debtors

7. Creditors

8. Leasing commitments

At 31 March 2006, SWIA was committed to making the following payments during the next year in respect of operating leases:

9. Movements in General Fund

10. Related Party Transactions

The SWIA is an Executive Agency of the Scottish Executive Education Department, which is therefore regarded as a related party. During the year SWIA had a number of material transactions with the Scottish Executive. In addition SWIA has had a number of other material transactions with other Government Departments and other central Government bodies. During the year the managerial staff and board members have not undertaken any material transactions with SWIA.

11. Capital Commitments and Contingent Liabilities

There were no capital commitments or contingent liabilities existing at the year end.