THE SKILLS DEVELOPMENT SCOTLAND CO. LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS

Transcription

1 ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012 The financial statements were authorised for issue on 20 July 2012.

2 Contents Page Chair & Chief Executive Welcome 2 Directors' Report 3-11 Remuneration Report Statement of Accountable Officer s Responsibilities 15 Governance Statement Independent Auditor s Report Statement of Financial Position - Group 21 Statement of Financial Position - Company 22 Consolidated Statement of Comprehensive Income 23 Statement of Changes in Taxpayers Equity 24 Consolidated Statement of Cash Flows 25 Notes to the Financial Statements Accounts Direction - Appendix 1 48 Registered Office: Alhambra House, 45 Waterloo Street, Glasgow, G2 6HS Bankers: Bank of Scotland, Argyle Street, Glasgow, G2 8BU Auditors: KPMG LLP, 191 West George Street, Glasgow, G2 2LJ Lawyers: Shepherd & Wedderburn W.S. 155 St. Vincent Street, Glasgow G2 5NR 1

3 Chair & Chief Executive Welcome Welcome to our annual report and financial statements for The way people learn and get information is transforming, as is the world of work. Skills Development Scotland is responding to these changes - personalising services to equip individuals for rewarding careers and businesses for growth. Youth employment is our number one priority. Young people have so much potential and last year we were preparing the ground for a whole new approach to unlocking that potential for every individual. Through Service Delivery Agreements we agreed with local partners the best shape for employability programmes in each geographical area and got involved in creating 32 local youth employment action plans, engaging with community planning partnerships and local businesses to establish local solutions. In , through our face-to-face careers services we supported 165,578 young people aged 24 and under, of whom 38,259 were not in employment, education or training. This work prepares us for new approaches aimed at matching young people s ability to meet employers needs - measures like the forthcoming introduction of a new national certificate so young people can demonstrate their work-readiness to employers. To help ensure that the skills and learning system responds to industry needs we are working with employers and their representative bodies to develop Skills Investment Plans for sectors offering the highest growth potential. For instance, our plan for the energy sector last year supported the creation of an energy skills academy at Nigg providing thousands of opportunities for people in that sector. We also delivered funding initiatives, including 9,695 Flexible Training Opportunities, helping 2,614 small and medium sized businesses to up-skill and win orders through these increased capabilities. And this work will be complemented by the introduction of a new web service for employers, where they can find out about a range of programmes, financial support and resources available to help them plan for, recruit and develop a skilled workforce. Responding to the changing needs of our customers and the Scottish Government s framework for the service redesign and improvement of Career Information, Advice and Guidance (CIAG) in Scotland, we are modernising services so that people can take confident control of their career ambitions. This was supported by the launch last year of our new web service My World of Work, which has already attracted over 80,000 registered users. It expands our reach and will enable us to focus face-to-face professional expertise on those who need it most. Praised by the people it is designed to help, My World of Work supports the aims of the Curriculum for Excellence in providing individuals with the knowledge, skills and attributes they need to thrive in a modern society and economy. During resources had to be managed innovatively to support our ambitions. By focusing on working smarter, we achieved 21 million of efficiencies in our operating costs at the same time as expanding our range of services, developing a carbon management plan, conducting a review of our estates and rolling out a programme to strengthen our procurement resources and practices. We ve achieved a lot and we re excited about our plans to do even more. We would like to thank our people and partners for their commitment and hard work. Together there is so much more we can achieve and we look forward to working with you to make a real difference for the people and businesses in Scotland. John F McClelland CBE, Chairman Damien Yeates, Chief Executive 2

4 DIRECTORS REPORT FOR THE YEAR TO 31 MARCH 2012 Introduction Skills Development Scotland (SDS) is the national skills body supporting the people and businesses of Scotland. A non-departmental public body of the Scottish Government, SDS plays a key role in driving the success of Scotland s economic future through the delivery of the Scottish Government s Economic and Skills Strategies. Our services are shaped by the Scottish Government s Career Information, Advice and Guidance Strategy and its Youth Employment Strategy. We help the skills and learning system to better respond to the needs of the economy and help individuals and businesses to benefit from learning and skills development opportunities. Working in partnership at a national and local level, we: support individuals to reach their potential through developing the skills they need to progress effectively in their working and learning lives; help make skills work for employers, supporting businesses of all sizes to compete effectively by building, developing and getting the best from their workforce; and improve the skills and learning system by ensuring our combined services are aligned, integrated and meet the needs of our customers. For more information on Skills Development Scotland (SDS) visit our website Performance Overview The following reviews SDS activity against each of our three primary goals and our drive for organisational excellence, including case study examples to illustrate important features of our work. Goal 1 Enabling People to Meet their Potential We offer skills services to help individuals get a job, keep it and build a career. To ensure customers get the best possible service, in a rapidly changing world, we are modernising our services to empower those who can, to manage their own careers, while providing a targeted face-to-face service for those who need more help. In we introduced a new web service for individuals, My World of Work. And, to define the knowledge, skills and behaviours that help individuals manage and develop their careers, we launched a consultation on a new Framework for Career Management Skills. The year also saw us start developing a youth employability service to provide targeted support for all young people leaving school and at risk of not securing and sustaining a training place or employment. This work supports the Scottish Government s youth employment agenda, including its pledge to offer a place in learning or training to every 16 to 19 year old. Other activity included: supporting 194,583 people through career information, advice and guidance; conducting the School Leaver Destination Return which revealed that 88.9% of school leavers achieved positive destinations; handling 2,407 calls to the Exam Results Helpline, helping young people decide on their next steps; delivering 26,427 Modern Apprenticeship places, enabling people to work, earn and train at the same time; supporting 54,082 active learners through Individual Learning Accounts, helping people meet the cost of training and learning to increase their employment prospects; providing 16,424 new opportunities for people to prepare for, and improve their chances of, entering the labour market through employability programmes Get Ready for Work, Lifeskills, Training for Work and Targeted Pathways to Apprenticeships; and answering 1,979 telephone and online enquiries about the Big Plus, the national campaign to promote literacy and numeracy tuition in Scotland. Case Study: My World of Work SDS s new web service My World of Work is part of a new blended approach to career information, advice and guidance being adopted in Scotland. Customers can see jobs in action, build their CVs, search for vacancies and explore training opportunities in a way that s personal to them. My World of Work is complementary to our face-to-face and telephone services, as well as those provided by partners. 3

5 DIRECTORS REPORT FOR THE YEAR TO 31 MARCH 2012 (CONT D) Like a lot of subject teachers today, Pauline Bowie is not a specialist in employability, but is introducing a greater element of workplace relevance into the teaching of her discipline, which is design, graphics and technology. Pauline who has been teaching at St Peter the Apostle High School in Clydebank for 22 years was therefore delighted when Skills Development Scotland launched My World of Work. She said: I am not an expert on what employers are looking for, but feel that the new web service provides the tools I need to help pupils make informed decisions about their future careers. It was a great help in setting S4 pupil, Sinead Orr, on the right path. Sinead said: Before I went on My World of Work I was really panicking about what to do after school, but seeing a video about what it s like to be a chef helped me make up my mind. Now I m all set and have a place studying general catering at Clydebank College. Goal 2 Making Skills Work for Employers We support businesses of all sizes to compete effectively by helping them build and get the best from their workforce. Core to this is the Modern Apprenticeship programme, providing funding and support to help employers recruit and develop apprentices to meet their needs. By the end of the year the business community had supported 26,427 new start apprentices across over 80 different occupational frameworks. As the world changes so do employer needs and it s important that our services respond and adapt. We support sectors that offer high growth potential, working with partners to encourage investment in Scotland and to deliver initiatives that support sustainable economic growth. Underpinning this is work with employer bodies and sector skills councils to inform and shape our services. For example, we launched a web service re:think to encourage people to consider a career in financial services. This complements the launch of industry pages on My World of Work that help give people an understanding of the opportunities available and the skills requirements across a range of roles and industries. Other activity included: supporting 2,614 small and medium sized businesses to invest in training for existing employees through 9,695 Flexible Training Opportunities; providing financial support through Employer Recruitment Incentives to 3,888 businesses taking on a Modern Apprentice or employee; helping 375 Modern Apprentices continue with their training in a new workplace through the Adopt an Apprentice scheme; supporting 240 businesses working to adopt processes around carbon reduction, renewable energy and/or energy efficiency through 765 Low Carbon Fund opportunities; and leading and delivering the Scottish Government s Partnership Action for Continuing Employment (PACE) initiative to support 365 employers and 13,017 individuals dealing with redundancy. Case Study: Modern Apprenticeships Modern Apprenticeships offer individuals the chance to earn while they learn and businesses the opportunity to gain loyal, motivated and skilled members of staff. Scott MacLeod knows he is in a fortunate position. The 20 year-old from Inverness is one of two new trainee wind turbine technicians taken on by REpower, one of the UK s fastest growing wind turbine manufacturers. Scott said: Being able to do the Modern Apprenticeship at REpower is a great opportunity. I m in a very good job in a new industry and everyone has been very supportive. Rick Eggleston who is MD of the Edinburgh-based company firmly believes MAs are the future of this emerging sector. 4

6 DIRECTORS REPORT FOR THE YEAR TO 31 MARCH 2012 (CONT D) Rick comments: We are such a young industry that it s simply not possible to recruit the perfect candidate right off the shelf. That s why we ve worked with Carnegie College to develop a bespoke Modern Apprenticeship for wind turbine technicians. These roles combine mechanical and electrical engineering with other key skills, and by the end of the process we ll have a member of staff who meets REpower s precise requirements. Goal 3 Working Together with Partners to Improve the Skills and Learning System We work with national and local partners to improve, align and integrate our services for customers. In we focused on linking skills supply and demand through our representation on strategic bodies which influence the shape of the skills and learning system. For example our joint management of the Skills Committee with the Scottish Funding Council as well as our membership of the Strategic Forum, which is led by the Scottish Government and attended by other public sector organisations. We also work with schools, colleges (facilitated through our work with Scotland s Colleges), universities, the Scottish Credit and Qualifications Framework Partnership and Sector Skills Councils to help shape learning and training provision. At a local level, we continue our joint work with local authorities and Community Planning Partnerships (CPPs) to develop 32 Service Delivery Agreements (SDAs). The SDAs enable us to translate our national offers into a local context and show how our services combine with those of our partners to deliver local outcomes and support young people in their transition from full-time education into training, learning or employment. Other activity included: involving representatives from all 32 CPPs in the re-contracting process for employability programmes Get Ready for Work and Training for Work; creating the 16+ Learning Choices Data Hub to bring together information on young people and their learning choices so we can work more effectively with partners to tackle youth employment; developing Skills Investment Plans for sectors that offer high growth potential; and developing a national Service Delivery Agreement with Jobcentre Plus to ensure that customers are guided to the services they need whichever organisation they contact. Case Study: 16+ Learning Choices Data Hub Along with partners, we created the 16+ Learning Choices Data Hub to bring together information on young people and their learning choices. This will enable appropriate partners to track the progress of young people from S4 onwards. The Principal of Forth Valley College, Linda McKay, is among those who believe the creation of the Hub is a major development in the drive to keep young people engaged in achieving positive outcomes. She said: With young people particularly, we must make sure that none of them slip out of the system in a way that means they miss that very important early step towards something that might suit their needs. The Data Hub is a lot more than just information being transmitted. It s about matching the individual with good opportunity. Amanda Campbell, a Principal Teacher Pupil Support at Grangemouth High School is equally enthusiastic. Amanda who helped specify the Data Hub s requirements on behalf of Falkirk Council, comments: We come into contact with our young people on a daily basis, which makes us ideally placed to record their aspirations which can change week-to-week. The data hub allows us to identify any problems at an early stage and move quickly with partners to address these. Achieving Organisational Excellence To achieve our work for customers, we need an organisation ready for the challenge. This includes improving the efficiency of our organisation as well as modernising and better aligning our services with those of our partners. In we achieved 21 million of efficiencies in our operating costs and rolled out a programme to strengthen our procurement resources and practices. 5

7 DIRECTORS REPORT FOR THE YEAR TO 31 MARCH 2012 (CONT D) We have also been investing in our people, ensuring that they are equipped to support customers through the modernisation of our services. This included using a strengths-based approach to employee performance management and re-shaping our organisation to support delivery of our services online, face-to-face, by telephone and through partners. We trained colleagues on the online services provided through My World of Work and began preparing for an in-house Academy Programme, which will focus on the development of professional skills and training for staff to support the coaching approach to Career Information, Advice and Guidance. All of this builds on the existing skills of our people and demonstrates our commitment to the Continuous Professional Development of the careers community. Other activity included: ongoing work with our Equality Advisory Group of external representatives ensuring equality and diversity considerations are taken into account in our service delivery and in supporting our people; conducting a review of estates, including the procurement of a managed service provider for facilities management; running a public consultation, employee awareness sessions and an internal linguistic audit in support of our Gaelic Language Plan; committing to a reduction in our carbon footprint through a Carbon Management Plan, which details how we ll improve the way we manage our resources and activities sustainably across the organisation; and introducing updated Quality Assurance standards for National Training Programmes. Case Study: Labour Market Intelligence The availability of labour market information to SDS careers practitioners through published research, newsletters and employer events is a critical milestone in our commitment to organisational excellence. According to SDS adviser, Mhairi Galashan, the provision of comprehensive labour market information two years ago was a revelation. Mhairi comments: As a careers adviser it s just not possible to know every detail of every job in every sector - particularly with the pace of change in the 21 st century. So it s important to know where to find this sort of information. The analysis provided by our Labour Market Intelligence team is absolutely vital in helping us to provide career information, advice and guidance that is based in reality. When considering their options it s important that people know which jobs are declining and which are on the rise, and LMI provides those indications. LMI Development Manager Mark Steell supports this view. He said: The resources we provide help SDS advisers inject realism into their advice and can be used to expand the horizons of job seekers. Much of the information is available on our website and is also proving popular with our partners. Last year we involved 1,000 colleagues and partners through our sectoral events and our monthly newsletter Labour Market Focus had 1,500 subscribers. Commissioner for the UK Commission for Employment and Skills, Dr Deirdre Hughes OBE said: It s really important for careers practitioners to have access to up-to-date labour market information in fast changing economies. SDS has developed a truly innovative and interesting approach in response to this new challenge. Financial Management For the fourth successive year we have prudently managed our budget, realising a further 21 million reduction from our baseline costs. Our grant funding was fully expended in the year within the parameters set by the Scottish Government. We were able to provide additional stimulus to small and medium sized enterprises and the best credit terms to our suppliers to help with their flow of cash. Procurement In the current climate, procurement is seen as a key area in which public service improvements can be achieved. Following the roll out of a programme to strengthen our procurement resources and practices, we have been ranked in the superior performance category for procurement capability by the Scottish Procurement and Commercial Directorate. An example of our high quality practices is our procurement of a managed service provider to deliver a total facilities management solution. This followed our decision to harmonise and integrate property and facilities management services and was achieved using the Government Procurement Service Facilities Management framework. From the outset, we were determined to embed community benefit through job creation and training into the asks of the successful bidder. Through community benefits in procurement clauses we secured the employment of five members of the community four permanent employees and a Modern Apprentice. Other benefits include delivering consistent service provision and the opportunity for national cost saving efficiencies. 6

8 DIRECTORS REPORT FOR THE YEAR TO 31 MARCH 2012 (CONT D) Employees Our employees are dedicated to supporting the people and businesses of Scotland and are recruited based on their ability to do the job. We provide all employees with opportunities for advancement regardless of their age, sex, marital status, race, ethnic origin, sexual orientation, religion or belief. This includes disabled people and any employees who may become disabled. Sickness Absence We have appropriate processes in place to manage all aspects of absence. In the year to 31 March 2012, 3.9 % (2011: 4.4%) of working time was lost due to staff sickness absence. Employee Involvement and Communication SDS is committed to ensuring all its employees are engaged in the delivery of our organisational goals, priorities, achievements and successes. SDS supports its Chief Executive and Leadership Team to deliver timely, planned, co-ordinated communications that promote employee discussion and feedback. A comprehensive intranet is available for all employees to access at any time and a regular employee ezine is issued. During we introduced a bespoke framework to managing employees performance which is designed to link the day to day work of colleagues with the high level strategic direction of SDS. This will ensure employees are clear on the benefits of their individual contributions. Diversity and Equality In our Equality Advisory Group continued to support us in ensuring equality and diversity issues are identified and considered in relation to both service delivery and staffing. We were pleased to be able to widen the membership of the group to include the Scottish Transgender Alliance and the Scottish Interfaith Council, ensuring all protected characteristics are represented. We published the research we commissioned on the Impact of Sexual Orientation on career choice and progressions and shared the learning from this with partners and stakeholders. We also published a range of Equality Impact Assessments in the Equality and Diversity section of our website as well as publishing our Equality Toolkit, to enable partners and stakeholders to access this useful resource. In addition we completed an all staff equal opportunities culture survey. This provided us with very positive feedback as well as actions to ensure on-going improvements. Sustainability This year, SDS has made some fundamental investments in resources and time to develop an ambitious, far reaching and company wide 5-year Carbon Management Plan covering all aspects of carbon management reduction - a plan which the Carbon Trust believe is commendable and shows significant organisational commitment to carbon reduction progress on the path to a low carbon organisation. Moreover, SDS board and senior management have extensively reviewed the plan and its targets and have committed to a 30% reduction by April Classification Carbon Reduction Technological Changes 2.25% per year 0% 2% 5% 7% 9% Behavioural Changes 2.50% per year 0% 3% 5% 8% 10% Property Optimisation year-on-year 0% 2% 6% 14% 15% Cumulative 0% 7% 16% 29% 34% As the Carbon footprint and plan was only developed across the financial year , the in year target was 0%. However a reduction of 4% has been achieved by promoting best practice in energy, waste and travel, as well as installing low carbon technologies in suitable sites. Employee engagement has been key to this success, with the establishment of a cross functional Steering Group, including union representation and Site Level Green Champions, and the roll out and completion of SDS wide campaigns on energy, waste, printing and travel. The success in this first year of the plan needs to be built upon and sustained in order for SDS to continue to achieve the stated carbon reduction targets. Further information on our performance on sustainability can be found in the Skills Development Scotland Sustainability Report , which is available on our website 7

9 DIRECTORS REPORT FOR THE YEAR TO 31 MARCH 2012 (CONT D) Social and Community Relations Skills Development Scotland s services contribute in a number of ways to support the development of social and community relations. Primarily, our work to support the employability agenda, both through providing career information, advice and guidance, and delivery of the National Training Programmes (Get Ready for Work and Training for Work) support individuals in moving successfully between learning and work. Further to this, we provide targeted support in collaboration with other partners to those individuals most at risk of failing to secure employment or to continue in learning, for example, young offenders and those with other additional support needs, such as care leavers, young carers and the disabled. Our work with employers to encourage their participation in our employability programmes aims to secure training places for these young people - forging links between the business community and those individuals furthest from the labour market. During we launched a Corporate Social Responsibility strategy. This is focused on contributing to communities, the environment and the economy through our services, business support practices and the behaviours and participation of individual employees as they deliver their job roles. As part of this approach, we have built in community benefit clauses to our procurement arrangements to encourage investment in the employability and training of individuals by our suppliers. Further details on our services and the contribution of our business support services we committed to deliver in are provided in the Operating Plan for that year. Gaelic Language SDS has submitted its draft Gaelic Language Plan for consideration. Recommendations have been received from the Comataidh Cleachdadh Gàidhlig and these are being discussed with Bord na Gaidhlig representatives toward a final agreed plan for implementation. We proceed meantime with approved actions including the setting up of the SDS Gaelic Advisory Group, distribution of new bilingual materials and staff development activities. SDS also continues to support the development of language acquisition nationally via the Ulpan Project in partnership with Highlands and Islands Enterprise and Bord na Gaidhlig and plays a positive role in new developments such the Gaelic Employment and Skills Partnership endorsed by Scottish Government and in reviewing progress locally with key Local Authorities. Freedom of Information The Freedom of Information (Scotland) Act, which came into full force in January 2005, means members of the public can make a request to see information held by Skills Development Scotland. In we received and responded to 82 Freedom of Information requests. This represents 134% increase in volume compared to Data Loss There was one reported incident of unauthorised exposure or loss of personal data during the financial year. The theft of non-sensitive personal information from an operational member of staff was reported to the police. A review of the data by the Information Assurance Team concluded that there was no requirement to report the loss to the Information Commissioner s Office. Future Developments Through , Skills Development Scotland will continue to work with other organisations in the skills and learning system to improve Scotland s skills performance, particularly the employability and employment opportunities for Scotland s young people. Our Operating Plan for responds to the Scottish Government s Skills Strategy, refreshed Economic Strategy and Youth Employment Strategy along with the more detailed annual Letter of Guidance from Ministers. It is also shaped by the Scottish Government s strategy for Careers, Information, Advice and Guidance as well as our drive to respond to the evolving needs of our customers and our ongoing research and work with partners and customers to better align our services and jointly make best use of our resources. We remain committed to responding to the high demand for our services, helping individuals realise their full potential; supporting employers to access training opportunities and to shape our service and those of the skills system; and working meaningfully with partners to enhance Scotland's sustainable economic development. Central to our plans for this coming year are a range of interventions which target our priority groups, including a specific focus on the challenge of youth unemployment, and support skills development in the key economic sectors. 8

10 DIRECTORS REPORT FOR THE YEAR TO 31 MARCH 2012 (CONT D) Launching our Corporate Strategy for and our Annual Operating Plan , we enter a new chapter in our work for the people and businesses of Scotland. Our strategy outlines our vision and our goals over the next three years as well as our commitment to maximising the contribution of skills for jobs and growth. Financial Overview The results for the year to 31 March 2012 are contained in the attached financial statements, prepared in accordance with the Government Financial Reporting Manual (FReM) and in the form directed by the Scottish Ministers, taking cognisance of the Scottish Public Finance Manual. The FReM requires that the Company should comply with the Companies Act, but, as a non-departmental public body, also follow the principles in the FReM (for example, in preparing a remuneration report) where these go beyond the Companies Act. The accounting policies explain the basis on which the financial statements are prepared and transactions are recognised. The resource budget allocation for comprised a grant-in-aid provision of 197 million. Revenue for the year was supplemented with sales income of 9.8 million on a cost recovery basis and 18.3 million of European funding. Relevant Directors Interests Details of directors interests are given in Note 18 Related Parties. No board members held any significant interests that conflicted with their management responsibilities. Amounts Payable to Auditors for Non Audit Work Fees payable for non audit services provided by the appointed auditors for the year ended 31 March 2012 were 4,500 (2011: 2,000). Risk and Uncertainty During the year Skills Development Scotland has continued to develop its risk registers and has introduced business unit risk registers to support its corporate risk register in recording those risks that impact the business as whole. The year also saw the introduction of an approved risk management policy which is available to all staff on the Skills Development Scotland intranet. The policy sets out our attitude to risk and our approach to managing the potential barriers to achieving our objectives and highlights that risk management and internal control are firmly aligned to our ability to achieve key business objectives. SDS highlights its principal risks in its Corporate Risk Register. The Register was updated in May 2012 to acknowledge current economic and budgetary risks. Results and Dividends The accounts report a total comprehensive expense for the group for the year of 2.8 million (2011: comprehensive income of 19.7 million) which is influenced by IAS 19 pension adjustments. Removing the effects of actuarial activities the operating surplus is 10.6 million (2011: 2.6 million). The operating surplus from actual activities for the parent company is 10.6 million (2011: 2.6 million). This surplus reflects economic and operational factors in administering National Training Programmes, in particular. Target numbers for participation in the programmes were achieved in-year, although expenditure will be incurred over a longer timeline, and this must be factored into budget management for future years. The directors are satisfied with the results for the year. 9

11 DIRECTORS REPORT FOR THE YEAR TO 31 MARCH 2012 (CONT D) Company Status The Skills Development Scotland Co. Limited (Skills Development Scotland) is a company limited by guarantee and registered in Scotland. The sole members are the Scottish Ministers. Skills Development Scotland is an Executive Non-Departmental Public Body, operated through a limited company structure. Skills Development Scotland owns 100% of the issued share capital of Scottish UFI Limited. Skills Development Scotland has control of Careers Trust Scotland Ltd, which is a charitable company limited by guarantee with the object of improving the employability and enterprise skills of the people of Scotland and increasing participation in learning and employment. Scottish Ministers appoint the Chair, Chief Executive and non-executive directors of Skills Development Scotland, and the same directors have been appointed to the board of Scottish UFI Limited. Scottish UFI Limited is not used for operational activities. The board is responsible for the overall direction and strategy of Skills Development Scotland and for securing the optimum performance from company assets. There is a formal policy of delegated authority, which includes matters specifically reserved to the board for decisions. All non-executive directors are independent of the company. Going Concern As at 31 March 2012, the group s balance sheet had net assets of 5.4 million (2011: net assets of 8.2 million). The directors are confident that the relationship with the Scottish Government is such that the company will have sufficient funding for the foreseeable future. In particular, the directors have taken cognisance of the sole membership of Skills Development Scotland which Scottish Ministers assumed in September Accordingly, it is appropriate to prepare the financial statements on a going concern basis. Directors and Their Interests The directors of the company who held office during the period and to the date of signing of these financial statements were as follows: Name A Douglas * K Howell * J Lowe * J McClelland * (interim Chairman, appointed permanent Chairman 28 February 2012) A McGregor * (resigned 18 May 2012) P McKelvie * M Togneri * G Troup * (resigned 30 April 2012) D Yeates + (Chief Executive) + executive * non-executive W Roe, non-executive director, resigned on 29 June None of the directors held any interest in the company or its subsidiary companies at any time during the period. The board of Skills Development Scotland, chaired by John McClelland in the interim since 16 August 2010 and permanently from 28 February 2012, met seven times during the year. Conflicts of Interest Procedures Skills Development Scotland developed and implemented strict and comprehensive procedures to deal with potential conflicts of interest. These include holding, and updating at least annually, registers of interests covering not only board members but also members of staff. These registers are available to any member of the public who wishes to examine them. Interests which must be registered, in terms of the name and nature of the organisation in which the interest is held, include: remuneration, related undertakings, contracts, houses, land and buildings, shares and securities, non-financial interests, gifts and hospitality. Whenever a board member or member of staff has an interest in an application for assistance, they are required to declare the interest and thereafter to take no part in the investigation, processing or approval of the case. Such declarations by board members are recorded in the minutes of the appropriate board meetings. 10

12 DIRECTORS REPORT FOR THE YEAR TO 31 MARCH 2012 (CONT D) Audit and Risk Committee Following a strategic review, the audit and risk committee was enhanced by the addition of further finance experience to meet additional requirements of the Scottish Public Finance Manual. The resultant audit and risk committee oversees the strategic process for risk management, internal control, corporate governance and statutory financial obligations. The committee is chaired by an independent non-executive director and is comprised of at least two non-executive directors of Skills Development Scotland. The committee meets at least four times a year and has written terms of reference setting out its authority. Internal and external auditors attend the audit and risk committee. The strategic review provided for the establishment of the finance and operational performance committee to oversee the operating performance and financial management of the group. The finance and operational performance committee is chaired by an independent non-executive director and is comprised of up to four, and at least two, non-executive directors of Skills Development Scotland. The committee meets at least four times a year and has written terms of reference setting out its authority. The remuneration committee, with the same chair, met twice during the year and is comprised of the chair of the finance and operational performance committee with the addition of two relevantly experienced non-executive directors. Supplier Payment Policy It is our policy to agree terms of payment when orders for goods and services are placed and to adhere to these arrangements. In addition, due to the current economic conditions it is our policy, where possible, to comply with the Scottish Government s Prompt Payment Commitment (issued December 2009) of making payment of authorised invoices within 10 days. Average trade credit days as at 31 March 2012 were 9 days (2011: 12 days). Political and Charitable Donations The company made no charitable or political donations in the period. Accounting for Pension Scheme Liabilities Pension assets and liabilities are recognised in the financial statements in line with the accounting policy at Note 1. IAS 19 Employee Benefits requires that the assets and liabilities of the pension scheme are incorporated into the balance sheet. As more fully explained in Note 8 the group and company Statements of Financial Position report a net liability of 17,198,000 for the pension schemes at 31 March 2012 (2011: 3,723,000). Auditors As a non-profit making public sector company, which appears to the Scottish Ministers in terms of section 483(2) of that Act to carry out functions of a public nature, under The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2009, the Scottish Ministers have determined that the financial statements of the company shall be audited by the Auditor General for Scotland. The Auditor General for Scotland has appointed KPMG LLP to undertake the audit for the year ended 31 March The directors present their report and the audited financial statements for the year ended 31 March These financial statements have been prepared in accordance with a form directed by the Scottish Ministers. The directors who held office at the date of approval of this directors report confirm that, so far as they are each aware, there is no relevant audit information of which the company s auditors are unaware, and each director has taken all steps that he/she ought to have taken as a director to make himself/herself aware of any relevant audit information and to establish that the company s auditors are aware of that information. By order of the Board Damien Yeates Director and Accountable Officer 20 July

13 REMUNERATION REPORT FOR THE YEAR ENDED 31 MARCH 2012 Chair and Non-Executive Directors The Chair and non-executive directors are paid an annual amount, as salary, at a level agreed by Scottish Ministers. The salary rate is normally assessed on an annual basis. Appointments are made on a two and four year basis. Chief Executive The Chief Executive s pay is reviewed annually, and any pay award is dependent on performance, and must be approved in accordance with Scottish Government protocols. The Chief Executive s performance is assessed formally by the Chair using pre-determined criteria. Titular Directors The senior executive managers of the organisation are titled as directors. They are not registered as directors of the company under the Companies Act. Service Contracts Staff appointments are based on merit and are on the basis of fair and open competition. The Chief Executive and titular directors are permanent employees with up to 12 month notice periods. There are no early termination payment clauses within the contracts. Remuneration & Appointments Due to the company s NDPB status, remuneration is reviewed annually in accordance with Public Sector Pay Guidelines and approval is provided by the Scottish Government. No benefits in kind were paid to the Chair or non-executive directors. The Chief Executive and titular directors posts are pensionable. The Chair and non-executive director appointments are not pensionable. Appointments are carried out in line with employment legislation, with the exception of the Chief Executive and non executive directors positions which are carried out within the guidelines for senior public sector appointments. Salary and Allowances Salary includes gross salary but not employer s pension contributions. There were no payments in respect of performance pay or bonuses during the year. Allowances relate to designation as essential users within the Skills Development Scotland Car Scheme. Pensions Pension benefits are provided through one of two HM Revenue & Customs approved defined benefit schemes. Employee contributions are currently set at a tiered rate dependent on gross salary at 31 March Typically for a director this is c10%, excluding performance pay, bonus or ex-gratia payments. Employer contributions are c20%. Benefits accrue at the rate of 1/60 th for each year of service. Cash Equivalent Transfer Values The Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of pension scheme benefits accrued by a member at a particular point in time. The benefits valued are those of the member and any contingent spouse s pension payable from the scheme. A CETV would be the payment made from a scheme or an arrangement made to secure benefits in another pension scheme when the member leaves the current scheme and chooses to transfer benefits accrued. CETVs are calculated within the framework and guidelines prescribed by the Faculty of Actuaries. Information Subject to Audit Under paragraph of the FReM the following sections of this report are subject to audit: remuneration, pension, salary and allowance, benefits in kind, cash equivalent transfer values and compensation for loss of office and pension payment. 12

14 REMUNERATION REPORT FOR THE YEAR ENDED 31 MARCH 2012 (CONT D) Remuneration of the Chair and non-executive directors for the year to 31 March 2012 was as follows: Salary Band Bonus Payments Benefits in Kind Salary Band Bonus Payments Benefits in Kind W Roe (resigned 29/06/11) J McClelland (interim Chairman, appointed permanent Chairman 28/02/12) A Douglas K Howell (appointed 01/08/10) J Lowe A McGregor P McKelvie (appointed 01/08/10) M Togneri (appointed 01/08/10) G Troup (appointed 01/08/10) Remuneration of advisers to the board for the year to 31 March 2012 was as follows: Salary Band Bonus Payments Benefits in Kind Salary Band Bonus Payments Benefits in Kind R Crawford (appointed 01/02/11) R Crawford is an adviser to the Audit and Risk Committee as appointed by the board of Skills Development Scotland. The total emoluments of the Chair, non-executive directors and advisers for the year to 31 March 2012 were 88,544 (2011: 77,675). Remuneration of the Chief Executive and the titular directors for the year to 31 March 2012 was as follows: Salary Band Bonus Payments Car allowance and other benefits Salary Band Bonus Payments Car allowance and other benefits D Yeates , ,150 S Allbutt (resigned 26/05/11) ,000 A Clark , ,000 A Livingstone , ,000 D Logue , ,000 J McCormick , ,000 S Young (resigned 31/03/11) ,950 * Band of Highest Paid Director s Total Remuneration ( 000) Median Total Remuneration 29,091 28,009 Ratio * Includes voluntary severance payment, comprising compensation for loss of office and pay in lieu of notice. The total emoluments of all directors, including other titular directors, and advisers for the year to 31 March 2012 were 698,103 (2011: 1,096,926). 13

15 REMUNERATION REPORT FOR THE YEAR ENDED 31 MARCH 2012 (CONT D) Reporting bodies are required to disclose the relationship between the remuneration of the highest paid director in their organisation and the median remuneration of the organisation s workforce. The banded remuneration of the highest paid director in Skills Development Scotland for the year to 31 March 2012 was 122,500 (2011: 317,500). This was 4.2 times (2011: 11.3 times) the median remuneration of the workforce, which was 29,091 (2011: 28,009). In the year to 31 March 2012, six employees (2011: no employees) received remuneration in excess of the highest paid director. Actual remuneration ranged from 1,442 to 172,091 (2011: 192 to 318,929) as a consequence of voluntary severance payments. Total remuneration includes salary, non-consolidated performance related pay, benefits-in-kind as well as severance payments. It does not include employer pension contributions and the cash equivalent transfer value of pensions. The change in the band of the highest paid director is reflective of a titular director receiving compensation for loss of office through voluntary severance in Excluding this severance payment, the banded remuneration of the highest paid director for the year to 31 March 2011 would be 122,500, being 4.4 times the median remuneration of the workforce, as presented below; Band of Highest Paid Director s Total Remuneration ( 000) Median Total Remuneration ( ) 29,091 28,009 Ratio As part of an ongoing drive for efficiencies, Skills Development Scotland introduced a further voluntary severance scheme in which resulted in six employees receiving total remuneration in excess of the highest paid director, whose own banding remained unchanged from In the year to 31 March 2012, a total of 144 employees (2011: 144 employees) ceased employment with Skills Development Scotland through voluntary severance. This equated to full time equivalent employees (2011: full time equivalent employees). Further details are provided in note 15. Pension benefits of the Chief Executive and the titular directors for the year to 31 March 2012 were as follows:- Accrued Pension at age 60 as at 31 March 12 Increase in pension net of inflation at age 60 At 31 March 2012 Cash Equivalent Transfer Value At 31 March 2011 Real increase/ (decrease) in CETV D Yeates A Clark A Livingstone D Logue (47.1) J McCormick The accrued pension is inclusive of the lump sum payment that the member may elect to draw from their accrued pension entitlement. Members may elect to take a maximum of 25% of their accrued pension as a lump sum payment. This will subsequently reduce their future pension entitlement. At the direction of Government Actuaries, a market adjustment factor has not been applied in calculating the cash equivalent transfer values at 31 March 2012, consequently affecting the representation of the real increase or decrease in CETV. Damien Yeates Director and Accountable Officer 20 July

16 STATEMENT OF DIRECTORS' AND ACCOUNTABLE OFFICER S RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS The directors and accountable officer are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company financial statements for each financial year. As required by the Accounts Director applicable for the year issued by the Scottish Ministers they are required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their surplus or deficit for that period. In preparing each of the group and parent company financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether they have been prepared in accordance with IFRSs as adopted by the EU and the Accounts Direction applicable to the year issued by the Scottish Ministers; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006 and the Accounts Direction applicable to the year issued by the Scottish Ministers. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 15