For the year ended 31 March 2016
Contents Performance Report... 3 Overview... 3 Chair s Report... 3 Chief Executive s Report... 5 Performance Analysis... 11 Accountability Report... 13 Corporate Governance Report... 13 Director s Report... 13 Statement of Accountable Officer s responsibilities... 15 Governance Statement... 16 Remuneration and staff report... 19 Independent auditor s report to the members of, the Auditor General for Scotland and the Scottish Parliament... 24 Statement of Comprehensive Net Expenditure... 26 Other comprehensive expenditure... 26 Statement of Financial Position... 27 Statement of Cash Flows... 28 Statement of Changes in Taxpayers Equity... 29 Notes to the financial statements... 30 Accounts Direction... 49 2
Performance Report Overview Chair s Report It is a great honour and at times a humbling experience to serve as Chair of. 2015/16 marks my first full financial year with the organisation and while much remains to be done I am pleased with the organisation s progress to date. Our focus on continuous improvement, commitment and care in support of the arts, screen and creative industries lies at the heart of our thinking alongside our various roles as a funder, advocate, influencer and a development agency. The Board of welcomes the Scottish Government s continued recognition of the value of the arts, screen and the wider creative industries. Creativity lies at the heart of every successful nation and is something to be both cherished and properly underpinned. Our Grant in Aid allocation is some 0.2% of total Scottish Government expenditure but is supplemented by National Lottery money. Despite a small reduction in our Grant in Aid budget announced in December 2015 we were able to contain this and avoid passing on any reductions to the creative organisations and people we fund. My thanks go to our CEO and Senior Leadership Team for their hard work in achieving this but of course we acknowledge that there are tough financial times ahead in terms of the public finances that will test us further. We will, of course, continue to make the case for public and private sector support at a local, national and international level and seek to demonstrate the important role that culture and our creative industries play in the educational lives of our young people, the community as a whole and, not least, the economy. Our simplified approach to funding, which we announced and activated in 2014/15, appears to have bedded in well with 118 organisations receiving more than 33 million ongoing support through Regular Funding in 2015/16 and 569 awards of almost 12 million being made to organisations and individuals through Open Project Funding. Both I and all the Board continue to be conscious of the fact that we are only able to fund around 30% of the applications that we receive something that we know often results in real hardship and stress. Our own staff are not shielded from this and have to make difficult choices. It is to their credit that they do so with tact and sensitivity and I thank them for that. I m pleased that 2015/16 saw the publication of our Creative Industries Strategy, complementing our strategy for screen, published in 2014/15, and our strategy for the arts, published in the early part of 2016/17. These cohesive and ambitious strategies set out both the priorities and challenges for our work to support each sector and for how we will work in partnership with others to deliver our ambitions. In terms of screen, we have seen a continuation of the highest ever levels of film and TV production in Scotland in 2015/16. The Scottish Government supported Production Growth Fund, which was launched in September 2015, has helped ensure that some large scale and high profile productions have come to Scotland, with all the associated benefits for those working in Scotland s screen sector. We continue to support Scottish Enterprise and others to deliver permanent, sustainable studio spaces for Scotland and were delighted to welcome the increased investment in the facility at Wardpark in Cumbernauld, currently being used to shoot the major TV series, Outlander. Other studio proposals are also being proposed and there is certainly a need to move swiftly to attract the considerable film activity pressurising for studio facilities here. 3
During the year John McCormick agreed to chair a Screen Leadership Team comprising representatives of the sector to look at what is required from a practitioner s viewpoint and we look forward to their findings and recommendations while we work with the Government on their Manifesto commitment as regards the screen sector. There is, of course, always much still to do and both myself as Chair and my Board colleagues will continue to help, guide, encourage and advise the Senior Leadership Team, and the staff of Creative Scotland to deliver their work to a high and well informed standard. I would also like to thank them all for their diligence, dedication and hard work, often under severe pressure, over the last twelve months. I'd also like to thank my board members for their support and valuable input during the course of the year. Our Cabinet Secretary for Culture, Europe and External Affairs, Fiona Hyslop MSP, deserves very special thanks for her constant encouragement, vision and enthusiasm. Her recent re-appointment following the Scottish Parliamentary elections was most welcomed by our Board, staff and by those working throughout the cultural and creative sector. I continue to be enthralled and stimulated by what is being achieved here in Scotland and the beacon that that sends out to the rest of the world about our country in the 21st century. We are extremely rich in our talent...let s ensure we continue to preserve, nurture and grow it. Richard Findlay CBE Chair of the Board 7 October 2016 4
Chief Executive s Report 2015/16 has been another important year for the arts, screen and creative industries in Scotland and our work to support the artists, individual creative practitioners and organisations working in these sectors. s work is framed by our 10-year plan, Unlocking Potential, Embracing Ambition, which was published in April 2014. I am pleased to report that we have now also honoured our commitment to deliver individual strategies for Screen, the Creative Industries and the Arts through extensive collaboration, consultation and dialogue with sectors and with industry. These plans are important as they set out clear ambitions and priorities for the arts, screen and creative industries in Scotland and provide a framework for, not only the work of, but also the work of the people and organisations that we support and those we work in partnership with. We hope they comprise a useful toolkit to inform policy and planning for everyone working with the arts, screen and creative industries across Scotland. The 10-year plan is supported by our Annual Plan for 2015/16, which is available to read on our website, and sets out our budgets and priority areas of work for the year and how we will measure successful delivery of this work. All of these plans reflect the major achievements delivered by arts and creative professionals on many different scales across Scotland. The quality and impact of creative work produced in today s Scotland is a magnificent driving force for all of us working at in our role as a funder, development agency, advocate and influencer. Our Chair s introduction accounts for the breadth and scale of funding we have been able to deliver this year. Overall we have received positive feedback on our refined funding processes, although we continued to be challenged by sustained pressure on funds, and we continue to get more fundable applications than we can fund due to budget constraints. Because we know how onerous making funding applications can be, we continue to strive to improve our funding processes. We reviewed and simplified further our guidance and application process for Open Project Funding this year, in response to feedback from applicants. 2015/16 saw the development of a new Artistic and Creative Review Framework and the recruitment of 45 peer reviewers, all experts in their respective fields. This work is aimed at stimulating meaningful, objective, and transparent dialogue between Regularly Funded Organisations and on artistic and creative quality. It s not about measuring quality in a singular way, its focus is on opening up appetite for confident discussion about what quality means in different types of arts and creative contexts. Since the publication of the screen strategy in 2014 we have implemented a series of measures to grow and support Scotland s screen sector and in 2015/16 we have seen record levels of film and TV production in Scotland be maintained. We introduced almost 5 million of new funds for film and TV production, and skills development. In total, we invested more than 13 million for the year 2015/16 through a combination our 4 million UK National Lottery Film Fund, strategic targeted funding and other funding for exhibition, distribution and audience development, mainly routed through our Regularly Funded Organisations. This constitutes a greater level of investment into Screen than in the past. We have continue to focus on delivering Time to Shine, Scotland s National Youth Arts Strategy, Through partnerships developed across the creative, social and voluntary sectors, Time to Shine has supported nine hubs to improve youth arts provision and infrastructure in ten regions of Scotland (in Aberdeen and the North East, Argyle and Bute, Ayrshire, Edinburgh and the Lothians, Fife, Glasgow, Highlands, Moray, 5
and West Dunbartonshire). We have also completed the first phase of TTS.Digital designed to inspire digital creativity in young people. The TTS.Digital phase two projects will complete in November 2016 with developments being showcased at the Time to Shine conference in October 2016. Alongside this we have also continued to develop and deliver our approach to Place Partnerships. Over the course of this year we have progressed Place Partnerships in 12 Local Authority areas. The Creative Place Awards saw Stornaway, Forres and Moniaive and Glencairn win awards. 2015/16 saw the continued roll-out of our major capital programme for projects selected in previous years. Awards were made to Edinburgh Printmakers, Aberdeen Performing Arts, the Artists Collective Gallery, WASPS (Workshop and Artists Studio Provision Scotland) and NVA over the course of the year, strengthening Scotland s creative infrastructure for future generations to enjoy. I am pleased to say we have also continued to strengthen our organisation through the on-going delivery of our people strategy which continues to see significant investment in staff through focused learning and development. We have refreshed our staffing structure and job descriptions to make sure we use our specialist expertise appropriately and effectively and continue to make key appointments to fulfil our staffing structure. Scotland s cultural landscape is extraordinary, woven with talent and passion in every corner of this land. I am proud and honoured to be able to both experience and represent the marvellous things that people create, make and produce across every aspect of the arts, screen and creative industries everywhere. Janet Archer Chief Executive and Accountable Officer 7 October 2016 6
Structure, Governance and Management was established on the 1st July 2010 through enactment of the Public Services Reform (Scotland) Act 2010. It has the status of a Non Departmental Public Body (NDPB) and has a Board, appointed by the Scottish Ministers. is the public body that supports the arts, screen and creative industries across all parts of Scotland on behalf of everyone who lives, works or visits here. It enables people and organisations to work in and experience the arts and creative sectors in Scotland by helping others to create culture through developing great ideas and bringing them to life. s role as a development agency is to be an intelligent funder of the arts, screen and creative industries, to be a national and international advocate on their behalf and to positively influence attitudes, behaviours and policies. Funding is received from both the Scottish Government and the National Lottery. A separate National Lottery Distribution Fund is produced for the activities undertaken as a Lottery Distributor under the National Lottery etc Act 1993. These accounts have been prepared under an Accounts Direction issued by the Scottish Government on page 49. Unlocking Potential, Embracing Ambition In 2013/14 published its 10 Year Plan, Unlocking Potential, Embracing Ambition. The Plan sets out a clear set of longer term ambitions, underpinned by shorter term priorities, to ensure that the arts, screen and creative industries in Scotland continue to thrive. Complementary annual plans provide detail on delivery of this long term plan. All plans are available at creativescotland.com. The five ambitions for the arts, screen and creative industries over the next ten years are: Excellence and experimentation across the arts, screen and creative industries is recognised and valued Everyone can access and enjoy artistic and creative experiences Places and quality of life are transformed through imagination, ambition and an understanding of the potential of creativity Ideas are brought to life by a diverse, skilled and connected leadership and workforce Scotland is a distinctive creative nation connected to the world As well as the ambitions there are four connecting themes that run through all aspects of Creative Scotland s work, these are: Creative learning- increasing the quantity and quality of opportunity for people of all ages to learn through engagement with the arts, screen and creative industries Equalities and diversity- we are committed to putting equalities and diversity at the heart of all our activity, enabling people from different backgrounds, from diverse communities and of all ages to access increased opportunity through access to the arts and culture Digital- supporting the arts and creative sectors to fully utilise all the benefits that new digital tools can bring Environment- We are committed to operating in an environmentally sustainable manner and will work to ensure that the individuals and organisations that we support do the same 7
Going concern At 31 March 2016, had net liabilities of 5.3 million (2015: net assets of 1.2 million). This is due to the fact that although there was recorded net expenditure of 50.8 million in the Statement of Comprehensive Net Expenditure, we were required to draw down only 43.4 million from the Scottish Government in grant-in-aid. The balance of 7.4 million of cash grant-in-aid will be drawn down in the 2016-17 financial year to meet these liabilities as they fall due. As sufficient cash grant-in-aid is available to meet the outstanding liabilities of, the Accountable Officer believes it is appropriate to prepare the accounts on a going concern basis. Risk management The risks faced by are reflected within the Business Risk Assessment Register. The register is reviewed regularly at management meetings, with additional substantive periodic reviews also undertaken during the year. The register is also a standing item at each Audit and Risk Committee meeting, and the register is also presented annually in full to the Board. The main risks identified for are: 1. Financial position with regards to future funding allocations for the arts, screen and creative industries arising from budget plans at a national and local government level and potential impact on our 10 year plan 2. Ensuring delivery of key strategic plans for the arts, screen and creative industries in line with our 10 year plan and aligned with government cultural policies 3. Funding decisions and communications are able to support experimental or controversial work in order to deliver strategic ambitions Performance summary- review of the year In 2015/16 committed 76.6 million of funding to the arts, screen and creative industries in Scotland arising from 46.6 million of Scottish Government Grant In Aid funding and 30 million of National Lottery funds. The annual levels of grant commitments are shown below for the five year period. Grant Commitments- five year view 2011/12 2012/13 2013/14 2014/15 2015/16 m m m m m Grant in Aid 44.4 45.9 48.1 46.0 46.6 Lottery 20.2 40.8 41.4 30.5 30.0 Total 64.6 86.7 89.5 76.5 76.6 In 2014-15, changed the way it distributes funding, with the aim of simplifying the process for individuals and organisations. Funding programmes are now split into three categories: regular funding, open project funding and targeted funding for specific purposes. Regular funding. Regular Funding seeks to ensure Scotland has a wide range of arts and creative organisations through which artists and creative people can deepen and deliver their work, their engagement with the public, and their professional networks. Regular funding is one of the key means by which the ambitions, priorities and connecting themes highlighted in the 10 year plan will be addressed. 8
2015/16 was the first year of regular funding for the three year period from April 2015 to March 2018. There were 119 organisations receiving regular funding in 2015/16, and 27.7 million was allocated from grant-inaid to the portfolio from the 2015-16 budget. Overall the budget required to sustain this portfolio is 100m over three years. Open Project Funding Open project funding aims to support the arts, screen and creative industries, with projects that explore, realise and develop creative potential, widen access to their work, and enrich Scotland s reputation as a distinctive creative nation connected to the world. The fund is open to both individuals and organisations for awards up to 150,000 and the fund awarded 569 grants consisting of 1 million of grant-in-aid and 10.7 million of National Lottery funding during 2015/16. Targeted Funding Targeted funding is used to address specific activities and development needs in a sector, specialism, or geographic area. In 2015/16, total targeted grant funding was 31.2 million of which 17.9 million was funded from grant-in-aid and 13.3 million was from National Lottery. The 17.9 million of grant-in-aid funded targeted includes 16.2 million of grants relating to restricted funding for specific Scottish Government sponsored projects. Key examples of targeted funding during 15/16 include: The Youth Music Initiative (YMI) continued to create access to high quality music making opportunities for young people, offering them the chance to achieve their potential through music making, and supporting the development of the youth music sector. distributed 9.8 million in funding from the Scottish Government in support of YMI Funding of 2 million was received from the Scottish Government for the National Youth Arts Strategy (Time to Shine). This supported the nine youth arts hubs across the country, which were established in 2013/14. Phase 3 of a three year programme for the Cashback for Communities initiative with a total budget of 3 million commenced in 2014/15. This initiative sees funds recovered through the Proceeds of Crime Act, reinvested back into communities to benefit Scotland s young people. Funding of 1 million was received from the Scottish Government for the Screen Sector Skills Fund. Applications to the fund were encouraged to address career development, business development, trainees and apprenticeships, and talent development. A total of 12 successful applications were awarded to address these areas. also funds projects with an international ambition in order to support the promotion of Scotland s arts, screen and creative industries across the world. Key projects supported in 2015/16, included Scotland + Venice, Scotland s presentation as part of the Venice Biennale; and Made in Scotland, a curated showcase promoting high quality music, theatre and dance to international promoters and audiences at the Edinburgh Festival Fringe. These are just some examples of the range of work supported by in 2015/16 in our role as funder, advocate, influencer and development body on behalf of the arts, screen and creative industries in Scotland. Operations During the year, continued to review funding streams, with a post implementation review of the Open Project Fund taking place. This review gave insight into how the Fund was working one year after its launch, and a number of changes to processes and guidance for applicants were made to improve the operation of the Fund. 9
The People Strategy continued to be rolled out across the organisation, with a refreshed structure introduced in June 2016. A staff survey was completed and several focus groups were established to look at issues arising from the survey results. Planning took place during 2015/16 for a new office in Glasgow, as the lease for the office at 249 West George Street approached expiry. Following an estates review, The Lighthouse, a Grade A listed building designed by Charles Rennie Mackintosh, was selected as the new Glasgow office location, with the relocation taking place in May 2016. Future developments In April 2014, published its 10 Year Plan: Unlocking Potential Embracing Ambition: a shared plan for the arts, screen and creative industries 2014-2024. The Plan highlighted Creative Scotland s five ambitions and the priorities over the next 3 years to help achieve these ambitions. An annual plan for 2016/17 was published in April 2016. will continue to develop strategies for its three key areas of responsibility; the Arts, Screen and Creative Industries during 2016/17. In 2016/17 will further develop its Arts Strategy, and this will lay out the future ambition for the arts in Scotland. Key tasks for 2016/17 include: Working with Literature Alliance to develop a series of collaborative knowledge exchange and skill sharing events Support the development of Dancing Scotland as a network for those involved in participatory dance practice Develop plans for Scotland + Venice 2017 to ensure Scotland s visual arts are represented at the Venice Biennale Building on work carried out in 2015/16, a number of sector reviews and plans will be finalised and published: o Visual Arts Sector Review o Equalities, Diversity and Inclusion Review o Creative Learning Review o Touring and Theatre provision s Film Strategy 2014-17, On Screen, was published in January 2015 and identifies priorities for the film sector over the following three years, working with industry and public partners to generate the conditions necessary to position the film sector at the heart of Scotland s economic and cultural life. Key tasks for 2016/17 include: Continuing to support the creation of a viable and sustainable film studio, which is a priority in order for Scotland to accommodate high-profile international projects Undertake a review of the animation sector in Scotland as an action arising from the Scottish Parliament s Economy, Energy and Tourism Committee Report Publish a report on Screen Equalities, Diversity and Inclusion to better understand issues of under representation across the screen sector in order to address these issues through positive action going forward. In 2016/17, the Creative Industries strategy was published and this forms the basis of s work in this area. The strategy makes a number of commitments, including working with our partners such as Scottish Enterprise, the Scottish Funding Council and Scotland s Creative Industries Partnership (SCIP) to help creative businesses find the best route to support and investment, as well as offering support and information on how to access creative and business skills development and stimulating sector development initiatives. 10
will continue to emphasise the value that public funding of the arts, screen and creative industries delivers and will further enhance its communications approach to ensure that this is better understood. Performance Analysis Performance overview Under each of our five ambitions we have identified priorities to inform our work over a three year period. These priorities inform our funding guidelines and decisions, as well as our own development, advocacy and influencing activity. Each year we publish an Annual Plan which sets out how we will achieve our ambitions and priorities for that year and summarises our planned income and expenditure. Our Annual Plans include a detailed performance management framework comprising 24 performance indicators which we report against in the Annual Review of Performance, which is published separately. Performance is measured with regards to statistical information from our grants management system, funding data supplied by regularly funded organisations and other applicants, third party data and from stakeholder surveys. Financial performance The financial statements for 2015/16 have been prepared under an Accounts Direction, on page 49, issued by the Scottish Ministers to meet the accounting and disclosure requirements of applicable accounting standards so far as these requirements are appropriate and comply with the Government Financial Reporting Manual (FReM). The budget is approved by the Board and actual out-turn is shown below. - Results for the year ending 31 March 2016 versus Budget Actual Budget Variance m m m Income Project (0.1) (0.2) - Other (2.8) (2.9) 0.1 Expenditure Grants awards and investments 46.6 Project Expenditure 0.4 Less de-committed awards (0.9) Total net grants and project expenses 46.1 46.8 (0.7) Staff costs 4.7 4.9 (0.2) Other operating expenditure/income 2.8 2.6 0.2 Net expenditure 50.7 51.2 (0.5) Total net grants and project expenditure for the year to 31 March 2016 was 0.7 million below budget, and overall expenditure was 0.5 million lower than budget. This was due to an in-year reduction of restricted grant in aid of 0.5 million relating to capital funding was deferred from into 2016/17, to better fit with the 11
timing of expenditure for these projects. Small underspends identified in operating costs were reallocated to grants funding during the year. Environmental Sustainability is committed to reducing the environmental impact of its operations, as well as promoting carbon efficiency and sustainable behaviours across the arts, screen and creative industries. An environment policy sets out s statutory requirements under the Climate Change (Scotland) Act 2009 and to assist the Scottish Government s target of cutting CO2 emissions by 42% by 2020. Our work in this area includes: Working in conjunction with Creative Carbon Scotland in promoting the environment to support funded organisations, enabling them to report on their sustainable behaviour and contribution to CO2 emission reduction. Environmental sustainability is a criterion in the assessment of applications from organisations for regular funding and carbon reporting will be mandatory for these organisations during the period of funding. Ensuring environmental sustainability is a key criterion in the assessment of tenders during the procurement processes. Establishing an environmental working group to co-ordinate and lead on environmental sustainability issues During 2015/16, plans were being drafted to improve carbon measurement and reduction through direct operations. Monitoring of GHG emissions in tonnes of CO 2 for 2 key areas for our operations for 2014/15 and 2015/16 were undertaken, with key results shown in the table below: 2015-16 2014-15 % change GHG (tco 2 e) GHG (tco 2 e) Energy 85.8 90.9-6% Business Travel 87 123.3-29% Energy relates to electricity consumption in our Glasgow and Edinburgh offices. Business travel relates to foreign and domestic air travel, rail, taxi and mileage. We achieved a significant reduction in business travel emissions, mostly due to a large reduction in long haul air travel. More information on our environment policy can be found at creativescotland.com Payment of creditors The Scottish Public Finance Manual requires that invoices be paid within ten days of a valid invoice. During the year ended 31 March 2016, 74% of invoices were paid within ten days (2015: 68%), with an average payment date of 10.2 days (2015: 11.7). Janet Archer Chief Executive and Accountable Officer 7 October 2016 12
Accountability Report Corporate Governance Report Director s Report Board Members Senior Leadership Team Richard Findlay (Chair) David Brew (from 1/8/15) Erin Forster (from 1/8/15) Professor Maggie Kinloch (from 1/8/15) Sheila Murray (from 1/8/15) Barclay Price Ruth Wishart Iain Aitchison (from 01/08/16) Karen Forbes (from 01/08/16) Karthik Subramanya (from 01/08/16) Cate Nelson-Shaw (from 01/08/16) Janet Archer, Chief Executive Iain Munro, Deputy Chief Executive Leonie Bell, Director, Arts and Engagement Natalie Usher, Director, Screen Kenneth Fowler, Director, Communications Karen Lannigan, Director, HR & Office Services Ian Stevenson, Director, Finance Philip Deverell, Director, Strategy Clive Gilman, Director, Creative Industries (from 15/06/15) Offices: Waverley Gate The Lighthouse 2-4 Waterloo Place Mitchell Lane Edinburgh Glasgow EH1 3EG G1 3NU External Auditors: Internal Auditors: KPMG LLP 191 West George Street Glasgow G2 2LJ Scott Moncrieff 25 Bothwell Street Glasgow G2 6NL Bankers: Royal Bank of Scotland National Westminster Bank 36 St Andrew Square Government Banking Service Edinburgh 2nd Floor, 280 Bishopgate EH2 2AD London EC2M 4RB 13
Board The Public Services Reform (Scotland) Act 2010 allows for up to a maximum of fourteen members, in addition to the Chair, all to be appointed by Scottish Ministers. The membership of the Board during the year was as follows: Date of appointment Term End of current term Richard Findlay (Chair) 1 January 2015 1 st 31 December 2018 Steve Grimmond 1 July 2010 2 nd 30 June 2016 Sandra Gunn 1 July 2012 1 st 30 June 2016 May Miller 1 July 2012 1 st 30 June 2016 Fergus Muir 1 July 2012 1 st 30 June 2016 Richard Scott 1 July 2012 1st 30 June 2016 Barclay Price 1 July 2010 2 nd 30 June 2017 Ruth Wishart 1 July 2010 2 nd 30 June 2017 David Brew 1 August 2015 1 st 31 July 2019 Erin Foster 1 August 2015 1 st 31 July 2019 Professor Maggie Kinloch 1 August 2015 1 st 31 July 2019 Shelia Murray 1 August 2015 1 st 31 July 2019 The Board has ultimate decision making responsibility, but to facilitate effective management, appropriate levels of delegated authority have been approved by the Board for the Accountable Officer. The Board is supported by an Audit and Risk Committee, a Financial and General Purposes Committee and a Chairs Committee. Members of these committees are appointed by the Board from their membership. A register of interests for Board members is maintained and is available on the website. Neither the Chair, nor any of the Board are remunerated for their roles. The Board has corporate responsibility for ensuring that fulfils the aims and objectives set by the Scottish Ministers; for promoting the efficient use of staff and other resources, in accordance with the principles of Best Value and for establishing the overall strategic direction for. Further details on the responsibilities of the Board are reflected within the Management Statement and Financial Memorandum available at creativescotland.com. Political and Charitable Donations There have been no political or charitable donations during the year or in the prior year. Grants and Awards have been made to charitable organisations but these are not classed as donations. Data loss There were no reported incidents of unauthorised exposure or loss of personal data during the financial year. Janet Archer Chief Executive and Accountable Officer 7 October 2016 14
Statement of Accountable Officer s responsibilities Under the Public Services Reform (Scotland) Act 2010, the Scottish Government has directed Creative Scotland to prepare for each financial year a statement of accounts in the form and on the basis set out in the Accounts Direction. The accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of and of its income and expenditure, changes in taxpayers equity and cash flows for the financial year. In preparing the accounts, the Accounting Officer is required to comply with the requirements of the Government Financial Reporting Manual and in particular to: observe the Accounts Direction issued by the Scottish Government, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis; make judgements and estimates on a reasonable basis; state whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the financial statements; and prepare the financial statements on a going concern basis. The Accountable Officer of the Scottish Government s Governance and Communities Directorate has designated the Chief Executive as Accountable Officer of. The responsibilities of an Accountable Officer, including responsibility for the propriety and regularity of the public finances for which the Accountable Officer is answerable, for keeping proper records and for safeguarding Creative Scotland s assets, are set out in the Accountable Officer s Memorandum issued by Scottish Ministers. s external auditor is appointed by the Auditor General for Scotland, and for the year ended 31 March 2016, KPMG LLP is the appointed auditor. So far as the Accountable Officer is aware, there is no relevant audit information of which the auditor is unaware and the Accountable Officer has taken all the steps that she ought to have taken in order to make herself aware of any relevant audit information and to establish that the auditor is aware of that information. Janet Archer Chief Executive and Accountable Officer 7 October 2016 15
Governance Statement Scope of Responsibility As Accountable Officer, I have responsibility for maintaining a sound system of internal control that supports the achievement of the organisation's policies, aims and objectives set by the Scottish Ministers, whilst safeguarding the public funds and assets for which I am personally responsible, in accordance with the responsibilities assigned to me. Governance framework s governance framework is based on the legislative powers of the organisation as stated in the Public Services Reform (Scotland) Act 2010 and the Financial Memorandum with the Scottish Government. The Scottish Public Finance Manual (SPFM) is issued by the Scottish Ministers to provide guidance to the Scottish Government and other relevant bodies on the proper handling and reporting of public funds. It sets out the relevant statutory, parliamentary and administrative requirements, emphasises the need for economy, efficiency and effectiveness, and promotes good practice and high standards of propriety. applies relevant sections of the SPFM to its governance framework arrangements. The Board has corporate responsibility for ensuring that fulfils the aims and objectives set by the Scottish Ministers. The Board is supported in its activities by three standing committees: the Audit and Risk Committee; the Finance and General Purposes Committee (previously known as the Remuneration and Governance Committee); and the Chairs Committee. The purpose of the Chairs Committee is to give the Board the flexibility to deal with matters out with the programmed Board meeting schedule. As is good practice, terms of reference are in place for the Board and its standing committees. These pull together the Board s statutory and regulatory responsibilities, as detailed within key governance documentation including the Public Services Reform (Scotland) Act 2010 and s Management Statement and Financial Memorandum. Operation of the Board During 2015-16, the Board met on 6 occasions in line with its agreed schedule of meetings. During the year the Board approved the 2016/17 annual plan and budget, approved large scale capital applications, approved the Glasgow Office move and reviewed and contributed to the Arts and Creative Industries Strategies. The Audit and Risk Committee met four times during the year and is responsible for reviewing and monitoring all aspects of and issues relating to the preparation and production of all annual financial statements for, including consideration of accounting policies, levels of disclosure, risk management policies, internal control systems, compliance with applicable corporate governance requirements and reviewing any relevant matters relating to financial statements and reports raised by external or internal auditors as a result of their audit work. The Finance and General Purposes Committee met 4 times during the year to review financial performance, the performance against objectives and set remuneration for the Chief Executive; consider and approve proposals on remuneration for staff, via review of pay remit submissions and consider and scrutinise budgets at a detailed level. The Chairs Committee met once in the period. The Committee continued to support the Board by allowing flexibility to deal with significant matters arising throughout the year in a timely manner. All findings are reported to the Board at the next scheduled meeting. 16
All activities undertaken by committees are reported to the Board through presentation and discussion of committee minutes, with matters escalated as required. Assessment of corporate governance in the period The system of internal control is designed to manage rather than eliminate the risk of failure to achieve the organisation's policies, aims and objectives. It can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an on-going process designed to identify the principal risks to the achievement of the organisation's policies, aims and objectives; to evaluate the nature and extent of those risks and to manage them efficiently, effectively and economically. The process within the organisation accords with guidance from the Scottish Ministers provided in the Scottish Public Finance Manual and has been in place for the year ended 31 March 2016 and up to the date of approval of the annual report and financial statements. The Accountable Officer is responsible for reviewing the effectiveness of the system of internal control and is informed by: the executive managers who have responsibility for the development and maintenance of the internal control framework; the work of the internal auditors, who submit to the organisation's Audit and Risk Committee regular reports which include an independent and objective opinion on the adequacy and effectiveness of the organisation's systems of internal control together with recommendations for improvement; comments made by the external auditors in their management letters and other reports. All recommendations from Internal and External audit are responded to by management and both the recommendations and responses for implementation are reviewed by the Audit and Risk Committee before being either approved or amended, for implementation. The findings from the Audit and Risk Committee are reported to the Board by way of submission of minutes of each meeting and an annual report on the committee s work. The independent Internal Auditor s Annual Report found that has a framework of governance, risk management and control, including operational, financial and ICT controls, which provide reasonable assurance regarding the effective and efficient achievement of the organisation s objectives. More generally, the organisation is committed to a process of continuous development and improvement: developing systems in response to any relevant reviews and developments in best practice in this area. In particular, in the period covering the year to 31 March 2016 and up to the signing of the financial statements, the organisation has continued progressing through transition, in the development and establishment of effective and appropriate systems, processes and controls. Risk management The Accountable Officer and Board have ultimate responsibility for the control of all identified organisational risks. s Risk Management Strategy outlines the key activities undertaken to manage risk. The Board approves the strategic plan and risks which may impact its delivery are identified through senior leadership team, Board and sub-committee discussions. These are recorded in a risk register which is reviewed regularly by the Senior Leadership team, at each Audit and Risk Committee and at least annually by the Board. 17
Internal Audit Reviews are undertaken by a third party organisation. These Reviews are focussed on key risks identified in the risk register In addition, professional advisors are used as appropriate to ensure legal compliance and minimisation of risk. The Business Risk Assessment Register identifies the organisation s risks and relevant the control strategy for each. The Business Risk Assessment Register has been developed in line with relevant guidance issued by the Scottish Ministers and with clearly defined processes and specific areas of responsibility. There is an established process for the register to be reviewed and updated to reflect any changes in potential risks and or developments of the controls in place. Risk management is a regular agenda item at senior management meetings and risk management is fully incorporated into the corporate planning and decision making processes of the organisation. The Register is a standing item at each Audit and Risk Committee meeting and in addition to ongoing reporting through the Audit and Risk Committee minutes the Register is also presented annually in full to the Board. To ensure effective daily control, each identified risk is allocated to one or more members of the senior management team, based on their appropriate skills/knowledge within the area concerned and they have responsibility to ensure that current controls are maintained. Initiatives for improvement are undertaken and that any new risks identified within their areas or within the wider organisation are immediately highlighted to the Accountable Officer/Chief Executive. To fully support the senior management in this process, any newly identified risks; decisions on controls, new initiatives, reviews of risks and reassessment controls etc. are discussed at the management team meetings and further guidance is given before any action is taken. Janet Archer Chief Executive and Accountable Officer 7 October 2016 18
Remuneration and staff report The Chair, Board and Chief Executive are appointed by the Scottish Ministers. The Chair and Board receive no remuneration, the Chair having declined the offer of a remuneration package linked to the role. Incidental travel and subsistence expenditure are reimbursed to Board members in accordance with established expenses policies. Board expenses for the year to 31 March 2016 were 1,453 (2014/15: 2,325). The Chief Executive s remuneration arrangements comply with the Scottish Government Public Sector Pay Policy for Senior Management. Senior management s remuneration falls within the organisations pay grades. Individual objectives are set for all senior management, by the Chief Executive. The Chief Executive s objectives are set by the Chair, and ratified by the Finance and General Purposes Committee. Satisfactory performance by attainment of set objectives is decided at the end of the objective period, in one to one meetings with the Chief Executive for the senior manager and by the Chair and Finance and General Purposes Committee for the Chief Executive. Proposed remuneration increases are submitted to the Finance and General Purposes Committee through the pay remit process before formal submission to the Scottish Government for approval. Under 5.3.21 of the FReM the following sections of this report are subject to audit: remuneration, pension, salary and allowances, benefits in kind, CETV and Pension payment. Salary entitlements of the Senior Leadership Team Name Janet Archer Chief Executive 2015/16 2014/15 Salary/ Benefit Pension Total Salary/ (Bonus) in kind Benefits (Bonus) 000 000 000 000 115-120 (0) - 30-35 145-150 110-115 (0) Benefit in kind 000 Pension Benefits 000 Total - 25-30 140-145 Iain Munro Deputy Chief Executive 85-90 (0) - 25-30 110-115 85-90 (0) - 80-85 165-170 Kenneth Fowler Director of Communications 70-75 (0) - 15-20 85-90 70-75 (0) - 20-25 90-95 Karen Lannigan Director of HR & Office Services Ian Stevenson Director of Finance 60-65 (0) 60-65 (0) - 25-30 80-85 - 15-20 80-85 60-65 (0) 55-60 (0) - 25-30 85-90 - 15-20 70-75 Leonie Bell Director of Arts & Engagement Phillip Deverell Director of Strategy Gerard Kelly 1 Director of Funding Operations (to 19/02/2016) Natalie Usher Director of Screen Clive Gillman 2 Director of Creative Industries (from 15/06/2015) 55-60 (0) 55-60 (0) 45-50 (0) 55-60 (0) 45-50 (0) - 15-20 75-80 - 15-20 70-75 - 10-15 55-60 - 10-15 70-75 55-60 (0) 55-60 (0) 55-60 (0) 40-45 (0) - 25-30 85-90 - 10-15 70-75 - 10-15 70-75 0-5 10-15 50-55 - 10-15 55-60 - - - - 1- Full year FTE salary is in the range 55,000 to 60,000 2- Full year FTE salary was in the range 55,000 to 60,000. Mr Gillman is employed by and the post is part funded (50%) by the Scottish Funding Council 19
Salary Salary includes gross salary; overtime; recruitment and retention allowances; private office allowances and any other allowance to the extent that it is subject to UK taxation. This report is based on accrued payments made by to the individuals. Benefits in kind The monetary value of benefits in kind covers any benefits provided by and treated by HM Revenue and Customs as a taxable emolument, as well as any non-taxable emoluments not subject to taxation. During the year, paid benefits in kind for re-location expenses for the Director of Screen, who re-located to Edinburgh for their role. Bonus Bonuses are based on performance levels attained and are made as part of the appraisal process. Bonuses are recorded according to the year in which they are paid. No bonuses were paid during the period (2014/15- Nil). Pension benefits Pension benefits are calculated as the real increase in pension multiplied by 20, plus the real increase in any lump sum, less contributions made by the member. Senior staff pension accrued as at 31 March 2016 and 31 March 2015: Name Accrued pension (lump sum) 31 March 2016 '000 Janet Archer 0-5 (10-15) Iain Munro 21-25 (60-65) Kenneth Fowler 0-5 (10-15) Karen Lannigan 5-10 (5-10) Ian Stevenson 0-5 (10-15) Leonie Bell 0-5 (10-15) Philip Deverell 0-5 (0-5) Gerard Kelly 0-5 (0-5) Natalie Usher 0-5 (0-5) Clive Gilman 0-5 (0-5) Accrued pension (lump sum) 31 March 2015 '000 0-5 (5-10) 15-20 (55-60) 0-5 (5-10) 5-10 (5-10) 0-5 (5-10) 0-5 (10-15) 0-5 (0-5) 0-5 (0-5) 0-5 (0-5) N/A Real increase in pension (lump sum) '000 0-2.5 (2.5-5) 0-2.5 (2.5-5) 0-2.5 (2.5-5) 0-2.5 (0-2.5) 0-2.5 (2.5-5) 0-2.5 (0-2.5) 0-2.5 (0-2.5) 0-2.5 (0-2.5) 0-2.5 (0-2.5) 0-2.5 (0-2.5) CETV 31 March 2016 000 CETV 31 March 2015 000 Real increase in CETV 000 76 46 25 348 315 19 69 52 12 85 80 11 55 31 9 74 59 12 30 15 12 28 16 10 21 8 10 11 N/A 9 Pension scheme Pension benefits are provided through the Arts Council Retirement Plan (1994) for and legacy Scottish Arts Council staff. Legacy Scottish Screen staff are members of the Strathclyde Pension Fund. The members of the Senior Management Team are members of the two schemes on the same basis as other employees. Cash Equivalent Transfer Values A Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member s accrued benefits and any contingent spouse s pension payable from the scheme. 20
A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies. The figures include the value of a pension benefit in another scheme or arrangement which the individual has transferred to s pension arrangements. They also include any additional pension benefit accrued to the member as a result of their purchasing additional pension benefits at their own cost. CETVs are worked out within the guidelines and framework prescribed by the Institute and Faculty of Actuaries and do not take into account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken. Real increase in CETV This reflects the increase in CETV that is funded by the employer. It does not include the increase in accrued pension due to inflation, contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period. Exit packages There were no exit packages in 2015/16 or 2014/15. Median pay multiples 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. Banded remuneration of the highest paid director in Creative Scotland Median Remuneration of Creative Scotland staff 2015/16 2014/15 115,000 to 120,000 110,000 to 115,000 29,163 31,324 Ratio 3.96 3.6 Range of staff remuneration below highest paid director (bands of 5,000) Employees receiving remuneration in excess of the highest-paid director 17,000-90,000 15,000-85,000 0 0 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. 21
Staff numbers During the year, undertook a structure refresh, which led to the creation of new staff directorates. Staff number figures are shown for 2015/16 under the new structure. 2015/16 Number Average number of persons employed (FTE) Arts & Engagement 29.3 Creative Industries 6.1 Screen 12.5 Strategy 10.4 Executive Office 6.4 Communications 11.9 Finance and Funding Operations 21.2 HR & Office Services 7.9 105.7 2014/15 Number Average number of persons employed (FTE) Creative Directorates 51.8 Finance & Operations 22.7 HR and Office Services 9.7 Communications 16.2 Executive Office 6.0 106.4 Breakdown of employee groups by gender At 31 March 2016, employed 114 members of staff, and the table below shows the breakdown by employment grade across the two genders. Grade Males Females A 1 7 B 6 17 C 12 37 D 13 11 F (Director) 4 4 Deputy Chief Executive 1 - Chief Executive - 1 Total 37 77 Sickness absence In the year to 31 March 2016, an average of 4 working days (2015: 6.0 days) was lost per staff member working in the year. Disabled people is a Disability Two Ticks organisation. This means that guarantees that all disabled applicants who meet the minimum criteria for a job vacancy will be interviewed. 22
is committed to ensuring equality of opportunity for those members of staff who are disabled or become disabled for the purposes of the Equality Act 2010 during their employment with. Consultancy In the year to 31 March 2016, incurred expenditure of 90,000 on consultancy, which is made up of: 000 External assessors 15 Artistic and Creative Review Framework 15 Contractors 60 90 All contractors and external assessors are employed in line with s procurement policy. Janet Archer Chief Executive and Accountable Officer 7 October 2016 23
Independent auditor s report to the members of, the Auditor General for Scotland and the Scottish Parliament We have audited the financial statements of for the year ended 31 March 2016 under the Public Services Reform (Scotland) Act 2010. The financial statements comprise the Statement of Comprehensive Net Expenditure, the Statement of Financial Position, the Statement of Cash Flows, the Statement of Changes in Taxpayers Equity and the related notes. 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 2015/16 Government Financial Reporting Manual (the 2015/16 FReM). This report is made solely to the parties to whom it is addressed in accordance with the Public Finance and Accountability (Scotland) Act 2000 and for no other purpose. In accordance with paragraph 125 of the Code of Audit Practice approved by the Auditor General for Scotland, we do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties. Respective responsibilities of directors, Accountable Officer and auditor As explained more fully in the Statement of the Accountable Officer s Responsibilities the Accountable Officer is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and is also responsible for ensuring the regularity of expenditure and income. 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 Auditor General for Scotland. Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. We are also responsible for giving an opinion on the regularity of expenditure and income in accordance with the Public Finance and Accountability (Scotland) Act 2000. Scope of the audit of the financial statements An 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 Accountable Officer; and the overall presentation of the financial statements. It also involves obtaining evidence about the regularity of expenditure and income. In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements, irregularities, or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: give a true and fair view in accordance with the Public Services Reform (Scotland) Act 2010 and directions made thereunder by the Scottish Ministers of the state of the body s affairs as at 31 March 2016 and of its net expenditure for the year then ended; have been properly prepared in accordance with IFRSs as adopted by the European Union, as interpreted and adapted by the 2015/16 FReM; and 24
have been prepared in accordance with the requirements of the Public Services Reform (Scotland) Act 2010 and directions made thereunder by the Scottish Ministers. Opinion on regularity In our opinion in all material respects the expenditure and income in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers. Opinion on other prescribed matters In our opinion: the part of the Remuneration and Staff Report to be audited has been properly prepared in accordance with the Public Services Reform (Scotland) Act 2010 and directions made thereunder by the Scottish Ministers; and the information given in the Performance Report and the Accountability Report 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 are required 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 and Staff 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 Governance Statement does not comply with guidance from the Scottish Ministers. We have nothing to report in respect of these matters. Hugh Harvie, (for and on behalf of KPMG LLP) 191 West George Street Glasgow G2 2LJ 25
Statement of Comprehensive Net Expenditure For the year ending 31 March 2016 Notes 2015/16 2014/15 000s 000s Income Project income 4 42 105 Other operating income 5 2,795 2,610 2,837 2,715 Expenditure Staff costs 6 4,721 4,668 Grant commitments 7 46,551 46,028 Less: de-commitment of prior year grants (880) (141) Project expenditure 8 430 629 Other operating expenditure 9 2,521 2,500 Depreciation 247 246 53,590 53,930 Net operating costs for the year (50,753) (51,215) Other finance (costs)/ income 17 (33) (23) (33) (23) Net expenditure (50,786) (51,238) Other comprehensive expenditure 2015/16 2014/15 000s 000s Retained deficit for the financial year (50,786) (51,238) Actuarial gain/(loss) on the Strathclyde Pension Fund 865 (425) Capital grant net income (29) (29) Net gain/(loss) on revaluation of property 96 - Total comprehensive expenditure (49,854) (51,692) The notes on pages 30 to 48 form part of these accounts. 26
Statement of Financial Position As at 31 March 2016 Notes 2015/16 2014/15 000s 000s Non-current assets Property, plant and equipment 11 1,714 1,704 Intangible assets 12 73 226 Total non-current assets 1,787 1,930 Current assets Trade and other receivables 13 1,389 458 Cash and cash equivalents 14 2,740 15,407 Total current assets 4,129 15,865 Total assets 5,916 17,795 Current liabilities Trade and other payables 15 (9,949) (14,465) Provisions 18 (282) (282) Total current liabilities (10,231) (14,747) Non-current assets plus net current assets (4,315) 3,048 Non-current liabilities Provisions 18 (721) (820) Pension liabilities 17 (216) (983) Total non-current liabilities (937) (1,803) Assets less liabilities (5,252) 1,245 Reserves General fund (5,366) 1,227 Revaluation reserve 114 18 Total reserves (5,252) 1,245 The Accountable Officer authorised these financial statements for issue on 7 October. Janet Archer Chief Executive and Accountable Officer 7 October 2016 The notes on pages 30 to 48 form part of these accounts. 27
Statement of Cash Flows Notes 2015/16 2014/15 000s 000s Cash flows from operating activities Net expenditure (50,786) (51,238) Adjustments for non-cash items Adjustments for IAS 19 98 58 Impairment on property, plant and equipment - - Depreciation on property, plant and equipment 94 93 Amortisation of intangible fixed assets 153 153 Capital grants released (30) (29) Movements in working capital (Increase)/decrease in trade and other receivables (931) 124 Decrease in trade and other payables (4,516) (1,901) Movements in provisions Decrease in provisions (99) (53) Net cash outflow from operating activities (56,017) (52,793) Cash flows from investing activities Purchase of property, plant and equipment (7) (21) Purchase of intangible assets - (22) Net cash outflow from investing activities (7) (43) Cash flows from financing activities Scottish Government funding for the year 43,357 51,159 Net decrease in cash and cash equivalents (12,667) (1,677) Net cash and cash equivalents as at 1 April 15,407 17,084 Net cash and cash equivalents as at 31 March 2,740 15,407 Cash at bank and in hand Net cash and cash equivalents 000 000 1 April 2015 15,407 15,407 Cash flows (12,667) (12,667) 31 March 2016 2,740 2,740 The notes on pages 30 to 48 form part of these accounts. 28
Statement of Changes in Taxpayers Equity General Fund Revaluation Reserve Total 000s 000s 000s Balance as at 31 March 2014 1,760 18 1,778 Changes in taxpayers equity 2014/15 Actuarial loss (425) - (425) Retained deficit (51,238) - (51,238) Grant in Aid transfer 51,159-51,159 Revaluation of property - - - Movement in capital grant (29) - (29) Balance as at 31 March 2015 1,227 18 1,245 Changes in taxpayers equity 2015/16 Actuarial loss 865-865 Retained deficit (50,786) - (50,786) Grant in Aid transfer 43,357-43,357 Revaluation of property - 96 96 Movement in capital grant (29) - (29) Balance as at 31 March 2016 (5,366) 114 (5,252) The notes on pages 30 to 48 form part of these accounts. 29
Notes to the financial statements (Forming part of the financial statements) 1 Accounting policies 1.1 Basis of accounting and preparation In accordance with the accounts direction issued by Scottish Ministers under section 13(1) of Schedule 9 of the Public Services Reform (Scotland) Act 2010, these financial statements have been prepared in accordance with the 2015/16 Government Financial Reporting Manual (FReM) issued by HM Treasury. The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) and IFRIC Interpretations as adapted or interpreted for the public sector context. The financial statements are prepared using accounting policies, and, where necessary, estimation techniques, which are selected as the most appropriate for the purpose of giving a true and fair view in accordance with the principles, set out in International Accounting Standard 8: Accounting Policies, Changes in Accounting Estimates and Errors. Changes in accounting policies which do not give rise to a prior year adjustment are reported in the relevant note. The particular policies adopted by are described below. They have been applied consistently in dealing with items that are considered material to the accounts. 1.2 Accounting Convention These accounts have been prepared under the historical cost convention modified to account for the revaluation of property, plant and equipment, intangible assets, and, where material, financial asset investments and inventories to fair value as determined by reference to their current costs. 1.3 Going Concern These accounts have been prepared on the going concern basis. The Accountable Officer is of the view that the going concern basis remains appropriate. In common with similar public bodies, the future financing of s liabilities will be met by future grants in aid approved by the Scottish Parliament. Net liabilities as at 31 March 2016 will be met from cash grant-in-aid from the Scottish Government for 2016-17. 1.4 Property, Plant & Equipment (PPE) Recognition All Property Plant and Equipment (PPE) assets will be accounted for as non-current assets, subject to the capitalisation limits noted below. Assets classified as under construction are recognised in the statement of financial position to the extent that money has been paid or a liability has been incurred. Capitalisation The minimum levels for capitalisation of PPE assets per individual item or group of related items are as follows: Land, dwellings and other buildings 10,000 Leasehold improvements 10,000 Plant and machinery 5,000 Furniture, fixtures and fittings 5,000 ICT systems 5,000 30
Measurement Valuation All property, plant and equipment assets are measured initially at cost, representing the costs directly attributable to acquiring or constructing the asset and bringing it to the location and condition necessary for it to be capable of operating in the manner intended by management. All assets are measured subsequently at fair value as follows: Land and buildings have been stated at fair value using open market value for existing use, under a 3-year programme of professional valuations and appropriate indices in intervening years. All other property, plant and equipment assets are valued at fair value using the most appropriate valuation methodology available (for example, appropriate indices). A depreciated historical cost basis is used as a proxy for fair value in respect of such assets which have short useful lives or low values (or both). Subsequent expenditure: Subsequent expenditure is capitalised into an asset s carrying value when it is probable the future economic benefits associated with the item will flow to and the cost can be measured reliably. Where subsequent expenditure does not meet these criteria the expenditure is charged to the Statement of Comprehensive Net Expenditure. If part of an asset is replaced, then the part it replaces is de-recognised, regardless of whether or not it has been depreciated separately. Revaluations and Impairment: Increases in asset values arising from revaluations are recognised in the revaluation reserve, except where, and to the extent that, they reverse an impairment previously recognised in the Statement of Comprehensive Net Expenditure, in which case they are recognised as income. Movements on revaluation are considered for individual assets rather than groups or land/buildings together. Decreases in asset values and impairments that are the result of a loss of economic value or service potential are taken to the Statement of Comprehensive Income with any balance on the revaluation reserve to which the impairment would have been charged under International Accounting Standard 36, Impairment of Assets, being transferred to the general fund. Other impairments are charged to the revaluation reserve to the extent that there is an available balance for the asset concerned, and thereafter are charged to the Statement of Comprehensive Net Expenditure. Depreciation Land is considered to have an indefinite life and is not depreciated. Depreciation is provided at rates calculated to write off the valuation of buildings and other PPE assets on a straight line basis, by equal annual instalments, over their estimated useful lives which are normally in the following ranges: Dwellings and other buildings - 35 years Leasehold improvements - life of the lease Plant and machinery - 5 years Furniture, fixtures and fittings - 5-10 years ICT systems - 3 years Motor vehicles - 4 years 1.5 Intangible Assets Intangible assets are recognised where the costs can be measured reliably and there is a clear future economic benefit attributable from the asset. Intangible assets are valued initially at cost and subsequently at fair value. 31
Non income generating assets are carried at depreciated replacement cost. These valuation methods are considered to be a proxy for fair value. Future economic benefit has been used as the criteria in assessing whether an intangible asset meets the definition and recognition criteria of International Accounting Standard 38, Intangible Assets where assets do not generate income. IAS 38 defines future economic benefit as, revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the entity. Intangible assets are amortised to their estimated residual value over their remaining useful economic lives in a manner consistent with the consumption of economic or service delivery benefits. Amortisation is provided at rates calculated to write off the valuation of intangible assets on a straight line basis, by equal annual instalments, over their estimated useful lives which are normally in the following ranges: Software -4 years Website development -3 years Intangible assets under development are not amortised. 1.6 Financial instruments measures and presents financial instruments in accordance with International Accounting Standards 32 and 39 and International Financial Reporting Standard 7 as interpreted by the Government Financial Reporting Manual (FReM). IFRS 7 requires the classification of financial instruments into separate categories for which the accounting treatment is different. has classified its financial instruments as follows: Financial Assets Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets. Receivables comprise cash and cash equivalents, trade and other receivables and loans to creative organisations. Receivables are recognised at cost. A provision for impairment of loans and receivables is established when there is objective evidence that the Board will not be able to collect all amounts due according to the original terms of the receivables. Other financial liabilities Other financial liabilities are included in current liabilities or non-current liabilities as appropriate. Creative Scotland s other financial liabilities comprise trade and other payables. Other financial liabilities are recognised at cost. Recognition and measurement Financial liabilities are recognised when becomes party to the contractual provisions of the financial instrument. A financial liability is removed from the statement of financial position when it is extinguished, that is when the obligation is discharged, transferred, cancelled or expired. Cash and Cash Equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. 32
1.7 Recognition of income Incoming resources are recognised when the organisation is entitled to the income, is reasonably certain of the receipt and can measure the income with reasonable accuracy. Where the income relates to the performance of a service over a defined period any amount relating to future periods would be included as deferred income at the end of the financial year. Grant-in-aid from the Scottish Ministers is classified as funding and is credited to the general fund when drawn down from the Scottish Government. Any element of the grant-in-aid funding that relates to capital expenditure is recognised in restricted funds. Other incoming resources are included within the category in the Statement of Comprehensive Net Expenditure most appropriate to the nature of the activity. 1.8 Resources Expended Resources expended are included in the financial statements on an accruals basis. The expenditure is included in the category most appropriate to the nature of the expenditure. Grants are recognised when these are approved unless there are conditions which may reasonably stop the payment of future instalments of the grant. Projects awarded over a multi-year basis are accounted for on an annualised basis whereby awards are spread across the financial years of the project. 1.9 Pensions participates in two pension schemes providing benefits based on final pensionable pay, the Strathclyde Pension Fund (SPF) and Arts Council Retirement Plan 1994. Both schemes are available to staff of more than one employer, are contracted out of the State Earnings-Related Pension Scheme, and the assets of the schemes are held separately from those of. The Funds are valued by actuaries, the rates of contributions being determined by the trustees on the advice of the actuaries. Strathclyde Pension Scheme is an admitted body of the Strathclyde Pension Fund which is a pension scheme providing benefits based on final pensionable pay. The scheme is no longer open to new employees of. Pension scheme assets are measured using market values. For quoted securities the current bid price is taken as market value. Pension scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The pension scheme surplus (to the extent that it is recoverable) or deficit is recognised in full. The movement in the scheme surplus/deficit is split between the income and expenditure account and, in the statement of total recognised gains and losses, actuarial gains and losses. Arts Council Retirement Plan 1994 The Arts Council Retirement Plan 1994 provides defined benefits based on final pensionable pay and covers a number of UK arts organisations. is unable to identify its share of the underlying notional assets and liabilities of the scheme on a consistent and reasonable basis and therefore accounts for the scheme as if it were a defined contribution scheme, as required by IAS 19, Employee Benefits (revised). As a result, the amount charged to the Statement of Comprehensive Net Expenditure represents the employer contributions payable to the scheme in respect of the year. The pension cost is assessed every five years by an Actuary who determines the rate of contributions required. The most recent actuarial valuation took place in the year to 31 March 2013. 1.10 Leases Where substantially all the risks and rewards of ownership of a leased property are borne by the entity, it should be recorded as a non-current asset and a corresponding obligation recorded in respect of the debt due to the lessor, with the interest element of the finance lease payment charged to the Statement of Comprehensive Net Expenditure. Rentals payable in respect of operating leases are charged to the Statement of Comprehensive Net Expenditure on a straight line basis over the term of the lease. 33
1.11 Provisions Provisions are made for legal or constructive obligations which are of uncertain timing or amount at the statement of financial position date on the basis of the best estimate of the expenditure required to settle the obligation. Where material they have been discounted using the appropriate discount rate as prescribed by HM Treasury. 1.12 Taxation and VAT is not registered for VAT as its activities fall outside the scope of VAT and therefore does not charge VAT on supplies or reclaim VAT on eligible expenditure. is liable for corporation tax on its taxable activities. Corporation tax figures for charges and liabilities have been based on the advice of our tax advisors and correspondence with Her Majesty s Revenue and Customs. 1.13 Short Term Employee Benefits A liability and an expense is recognised for holiday days, holiday pay, non-consolidated performance related pay and other short-term benefits when the employees render service that increases their entitlement to these benefits. As a result an accrual has been made for holidays earned but not taken. 1.14 IFRSs not applied in Financial Statements The following Adopted IFRSs have been issued but have not been applied in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated: IFRS 9 Financial Instruments 34
2 Reconciliation of net expenditure to grant-in-aid 000s Net expenditure per SoCNE (50,786) Grant-in-aid for 2015/16 50,730 Net deficit for the year to 31 March 2016 (56) Grant-in-aid allocated to for the year to 31 March 2016 was 50,730,000. Cash drawn down to meet outstanding liabilities was 43,357,000. The remainder of the 2015-16 grant-inaid allocation has been made available to in 2016-17 to meet grant liabilities as they fall due. 3 External auditor s remuneration 2015/16 2014/15 000s 000s Audit of these financial statements 36 36 Amounts receivable by auditors and associates in respect of: Media Antenna audit - 2 Total external auditor s remuneration 36 38 The above audit fee amounts represent amounts paid to Audit Scotland for the provision of external audit during the year. 4 Project income 2015/16 2014/15 000s 000s Creative Europe 42 30 Baring Foundation - 75 42 105 Project income for the Creative Europe programme is received from the European Commission via the British Film Institute. 5 Other operating income 2015/16 2014/15 000s 000s Recharges to NLDF 2,413 2,452 Amortisation of capital grant 30 30 Events income 179 35 Rental income 131 92 Miscellaneous 42 1 2,795 2,610 35
6 Staff costs 2015/16 2014/15 000s 000s Staff costs during the year Wages and salaries 3,595 3,497 Social security costs 258 268 Pension costs 788 724 Movement in holiday pay accrual (4) 33 Other staff related costs: temporary staff 67 84 Deficit contribution to Arts Council Retirement Plan (1994) 17 62 4,721 4,668 In 2010/11, provided for additional contributions to fund the deficit in the Arts Council Retirement Plan (1994) (ACRP) based on a valuation provided by the Scheme s actuaries, Hymans Robertson LLP. A revaluation of the liabilities was carried out as at 31 March 2016, resulting in a charge of 17,000 to the Statement of Comprehensive Net Expenditure. The amount recharged in respect of the National Lottery Distribution Fund s share of s payroll costs was 1.8 million (40%) (2014-15: 1.8 million, 40%), which comprise of staff salaries, social security costs, pension contributions and project staff costs less contributions to the ACRP provision 7 Grant commitments 2015/16 2014/15 000s 000s Regular Funded Regular Funded Organisations 27,645 - Foundation Organisations - 18,770 Annual Clients - 7,415 Open Funds Transition Programmes International - 383 New Programmes 1,043 498 Restricted- Scottish Government funded Youth Music Initiative 9,734 9,746 Expo Fund 1,996 1,991 Innovation Fund - 504 Festivals Edinburgh 250 250 National Youth Arts 712 1,702 Cashback for Communities 1,064 959 Demarco Archive 50 14 ASPIRE Dundee - 75 National Youth Arts 2 250 - Sistema 300 - Screen Skills Fund 1,021 - World War I Commemorations 70 - Production Growth Fund 750 - Restricted Capital - 1,000 Targeted 1,666 2,679 Legacy Scottish Screen - 42 Total grant commitments 46,551 46,028 2015-16 was the first year of the three year Regular Funding Programme which runs from 1 April 2015 to 31 March 2017. This programme replaced previous regular funding programmes (Foundation Organisations and Annual Clients). 36
8 Project expenditure 2015/16 2014/15 000s 000s Regular Funded Annual Clients Luminate (Baring Foundation) - 75 Open Funds Transition Programmes International - 1 Restricted Youth Music Initiative 59 54 Innovation Fund - (1) National Youth Arts 5 131 Cashback for Communities 33 20 Demarco Archive - 36 Screen Skills Fund 6 - Targeted Creative Europe 23 17 Cross Border Touring 175 175 Own Art 23 44 Scotland in Venice 79 27 International Strategy 22 44 Momentum 3 6 Strategic Fund for Excellence 2 - Total project expenditure 430 629 9 Other operating expenditure 2015/16 2014/15 000s 000s HR 103 163 Office Services 68 100 Estates 1,037 1,027 Finance 83 46 Legal and contracts 24 23 ICT 128 152 Communications 70 71 Executive Office 4 3 Central Services 494 510 Locations 235 201 Marketing 120 81 Knowledge and Research 137 83 External Assessors 3 40 Artistic and Creative Review Framework 15 - Total other operating expenditure 2,521 2,500 10 Corporation Tax Corporation tax is due on the bank interest received in the year based on the standard rate of corporation tax for the year. For the year ending 31 March 2016, corporation tax of 17 was payable to HMRC. 37
11 Property, plant and equipment Land Buildings Buildings Leasehold Fixtures and Fittings Leased equipment IT equipment Total 000s 000s 000s 000s 000s 000s 000s Cost 1 April 2015 508 610 846 56-71 2,091 Revaluation (8) 50 - - - - 42 Additions - - - - - 7 7 Disposals - - - - - - - 31 March 2016 500 660 846 56-78 2,140 Depreciation 1 April 2015-35 271 37-44 387 Revaluation - (54) - - - - (54) Charge for the year - 19 53 4-18 94 Disposals - - (1) - - - (1) 31 March 2016 - - 323 41-62 426 NBV 31 March 2016 500 660 523 15-16 1,714 Land Buildings Buildings Leasehold Fixtures and Fittings Leased equipment IT equipment Total 000s 000s 000s 000s 000s 000s 000s Cost 1 April 2014 508 610 859 124 59 99 2,259 Revaluation - - - - - - - Additions - - - - - 21 21 Disposals - - (13) (68) (59) (49) (189) 31 March 2015 508 610 846 56-71 2,091 Depreciation 1 April 2014-18 229 100 59 77 483 Revaluation - - - - - - - Charge for the year - 17 55 5-16 93 Disposals - - (13) (68) (59) (49) (189) 31 March 2015-35 271 37-44 387 NBV 31 March 2015 508 575 575 19-27 1,704 Land and buildings were revalued at 31 March 2016, by J&E Shepherd, Chartered Surveyors, on the basis of open market value for existing use. 38
12 Intangible assets Computer software Website 000s Total 000s 000s Cost 1 April 2015 398 162 560 Revaluation - - - Additions - - - Disposals - - - 31 March 2016 398 162 560 Depreciation 1 April 2015 280 54 334 Revaluation - - - Charge for the year 99 54 153 Disposals - - - 31 March 2016 379 108 487 NBV 31 March 2016 19 54 73 Computer software Website 000s Total 000s 000s Cost 1 April 2014 398 140 538 Revaluation - - - Additions - 22 22 Disposals - - - 31 March 2015 398 162 560 Depreciation 1 April 2014 181-181 Revaluation - - - Charge for the year 99 54 153 Disposals - - - 31 March 2015 280 54 334 NBV 31 March 2015 118 108 226 39
13 Trade receivables and other current assets 31 March 2016 31 March 2015 000s 000s Trade receivables 3 1 Due from NLDF 563 98 Prepayments and accrued income 204 345 Business Development Loans - 14 Loans 25 - Tax Credit Advance Facility 594-1,389 458 Trade receivables and other current assets can be analysed as: 31 March 2016 31 March 2015 000s 000s Balances with other Central Government bodies 594 66 Balances with Local Authorities - - Total intra Government balances 594 66 Balances with bodies external to Government 795 392 1,389 458 14 Cash and cash equivalents The following balances were held at: 31 March 2016 31 March 2015 000s 000s Commercial banks 2,739 15,407 Cash in hand 1 - Balance at 31 March 2,740 15,407 15a Trade payables and other current liabilities 31 March 2016 31 March 2015 000s 000s Trade payables 75 245 Grants outstanding 7,841 12,873 Accruals 1,320 1,303 Deferred income 58 44 Other taxes and social security 85 - Tax Credit Advance Facility 570-9,949 14,465 40
Trade payables and other current liabilities can be analysed as: 31 March 2016 31 March 2015 000s 000s Balances with other Central Government bodies 338 448 Balances with Local Authorities 523 2,455 Total intra Government balances 861 2,903 Balances with bodies external to Government 9,088 11,562 9,949 14,465 16 Commitments under operating leases At 31 March 2016, had future minimum lease payments under non-cancellable operating leases relating to annual rent for premises at 249 West George Street, Glasgow; Waverley Gate, 2-4 Waterloo Place, Edinburgh; and The Lighthouse, 11 Mitchell Lane, Glasgow. The lease at 249 West George Street, Glasgow expired on 27 May 2016. There are two leases at Waverley Gate: one is for a period of 15 years from the date of entry of 20 October 2010 with no break option; the other is for a period of 15 years from 18 July 2002 with no break option. The lease at The Lighthouse, Glasgow is for a period of 5 years from 1 April 2016. 31 March 2016 31 March 2015 000s 000s Operating leases commitments Not later than 1 year 527 544 Later than 1 year and not later than 5 years 2,100 1,950 Later than 5 years 2,334 2,846 17 Pension schemes participates in two defined benefit schemes: the Strathclyde Pension Fund and the Arts Council Retirement Plan (1994). Past employees of Scottish Screen are covered by the provisions of the Strathclyde Pension Scheme. On 1 July 2010, the Strathclyde Pension scheme was closed to new members and all new starts of are admitted to the Arts Council Retirement Plan (1994). The schemes are funded by payments from and its employees to the trust administered funds, independent of s finances. Contributions to the scheme are charged to the Statement of Comprehensive Net Expenditure so as to spread the cost of pensions over employees working lives with the company. Strathclyde Pension Fund These figures are prepared by the Actuaries in accordance with IAS 19. As required under IAS 19, the actuaries have used the projected unit credit method of valuation to measure the pension obligations at 31 March 2016. The last full actuarial valuation of the Strathclyde Pension Fund was carried out on 31 March 2014. 41
Assets 000s Obligations 000s Net (liability)/ asset 000s Fair value of employee assets 6,223-6,223 Present value of funded liabilities - 7,183 (7,183) Present value of unfunded liabilities - 23 (23) Opening Position as at 31 March 2015 6,223 7,206 (983) Service cost - Current service cost - 178 (178) - Past service cost - - - - Effect of settlements - - - Total service costs - 178 (178) Net interest - Interest income on plan assets 199-199 - Interest cost on defined benefit obligation - 232 (232) - Impact of asset ceiling on net interest - - - Total net interest 199 232 (33) Total defined benefit cost recognised 199 410 (211) Cashflows - Planned participant s contributions 40 40 - - Employer contributions 113-113 - Contributions in respect of unfunded benefits - - - - Benefits paid (133) (133) - - Unfunded benefits paid - - - Expected closing position 6,442 7,523 (1,081) Remeasurements - Change in demographic assumptions - - - - Change in financial assumptions - (777) 777 - Other experience - (125) 125 - Return on assets excluding amounts included in net interest (37) - (37) - Changes in asset ceiling - - - Total remeasurements recognised (37) (902) 865 Fair value of employer assets 6,405 6,405 Present value of funded liabilities - 6,621 (6,621) Present value of unfunded liabilities - - - Closing Position as at 31 March 2016 6,405 6,621 (216) 42
Assets 000s Obligations 000s Net (liability)/ asset 000s Fair value of employee assets 5,560-5,560 Present value of funded liabilities - 6,038 (6,038) Present value of unfunded liabilities - 22 (22) Opening Position as at 31 March 2014 5,560 6,060 (500) Service cost - Current service cost - 152 (152) - Past service cost - - - - Effect of settlements - - - Total service costs - 152 (152) Net interest - Interest income on plan assets 239-239 - Interest cost on defined benefit obligation - 262 (262) - Impact of asset ceiling on net interest - - - Total net interest 239 262 (23) Total defined benefit cost recognised 239 414 (175) Cash flows - Planned participant s contributions 41 41 - - Employer contributions 116-116 - Contributions in respect of unfunded benefits 1-1 - Benefits paid (135) (135) - - Unfunded benefits paid (1) (1) - Expected closing position 5,821 6,379 (558) Remeasurements - Change in demographic assumptions - 164 (164) - Change in financial assumptions - 880 (880) - Other experience - (217) 217 - Return on assets excluding amounts included in net interest 402-402 - Changes in asset ceiling - - - Total remeasurements recognised 402 827 (425) Fair value of employer assets 6,223 6,223 Present value of funded liabilities - 7,183 (7,183) Present value of unfunded liabilities - 23 (23) Closing Position as at 31 March 2015 6,223 7,206 (983) Assumptions 31 March 2016 31 March 2015 % % Financial assumptions Pension rate increase 2.2 2.4 Salary increase rate* 4.2 4.3 Expected return on assets 3.5 3.2 Males Mortality Females Current pensioners 22.1 23.6 Future pensioners 24.8 26.2 43
Historic Mortality Life expectancies for the prior period end are based on the Fund's VitaCurves with allowance for future improvements are shown below: Prospective pensioners- year of birth, Medium Cohort lagged for 10 years and minimum improvements from 2011 of 1% p.a. for males and 0.75% p.a. for females. Pensioners- year of birth, Medium Cohort lagged for 10 years and minimum improvements from 2011 of 1% p.a. for males and 0.75% p.a. for females. Assets Asset Category Quoted in active markets Not Quoted in active markets Total 000s % 000s 000s Equity Securities Consumer 600.6 0.1 600.7 9 Manufacturing 475.7 4.2 479.9 7 Energy and Utilities 188.7-188.7 3 Financial Institutions 441.9-441.9 7 Health and Care 258.2 0.1 258.3 4 Information technology 365.1 0.6 365.7 6 Private Equity - 623.0 623.0 10 Real Estate UK Property - 688.1 688.1 11 Investment funds and unit trusts Equities 55.7 1,606.9 1,662.6 26 Bonds - 781.7 781.7 12 Commodities 2.2-2.2 0 Infrastructure - - - 0 Other - 89.9 89.9 1 Derivatives 1.6-1.6 0 Cash and Cash Equivalents 213.9 6.8 220.7 3 Total 2,604 3,801 6,405 100 Projected defined benefit cost for the period to 31 March 2017 Assets 000s Obligations 000s Net (liability)/ asset 000s Service cost - 147 (147) Interest income on plan assets 224-224 Interest cost on defined benefit obligation - 233 (233) Total included in the SoCNE 224 380 (156) 44
The calculation of the defined benefit obligation is sensitive to the assumptions set out above. The following table summarises how the impact on the defined benefit obligation at the end of the reporting period would have increased/ (decreased) as a result of a change in the respective assumptions by 0.5% percent. In valuing the liabilities of the pension fund at 31 March 2016, mortality assumptions have been made as indicated below. The table below also shows the effect of changing life expectancy to assume that all members of the fund lived for one year longer. Sensitivity analysis Approximate increase to Employer Obligation Approximate monetary amount ( 000) 0.5 % decrease in Real Discount Rate 13% 830 1 year increase in member life expectancy 3% 199 0.5% increase in Salary Increase Rate 4% 262 0.5% increase in Pension Increase Rate 8% 554 The above sensitivities are based on the average duration of the benefit obligation determined at the date of the last full actuarial valuation at 31 March 2016 and are applied to adjust the defined benefit obligation at the end of the reporting period for the assumptions concerned. Whilst the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation to the sensitivity of the assumptions shown. Arts Council Retirement Plan (1994) The Arts Council Retirement Plan (1994) is a multi-employer defined benefit scheme of which the following bodies are members: Arts Council England; Arts Council of Wales;, Creative, Culture and Education; the Crafts Council; and Tŷ Cerdd. Although it is a defined benefit scheme, has received advice from advisors, Hymans Robertson LLP that the share of assets and liabilities applicable to each employer could not be separately identified. The Arts Council Retirement Plan (1994) pension costs are therefore accounted for on a defined contribution basis as permitted by International Accounting Standard 19, Employee Benefits (IAS 19). Contributions by each employer to the Plan are set out in a schedule of contributions which is agreed between the members of the Plan and the actuaries, which took effect on 1 April 2014. The contributions are set on recommendation from the actuary to meet the expected costs of benefits payable from the plan. is not generally liable for the other member s liabilities under the scheme, although there is no split of assets or liabilities under the current scheme rules. If any member were to leave the scheme, then they would need to cover any payments to the Plan relating to the liabilities for their members. The pension liabilities relating to a member s service with the Scottish Arts Council are guaranteed by the Scottish Ministers. s participation in the plan at the latest available date (31 March 2014) is shown below. Arts Council Retirement Plan members- (1994)- Total total (% of Plan) Total members 2118 256 (12%) 45
18 Provisions Dilapidations 000s Unfunded pension deficit Total 000s 000s 1 April 2015 272 830 1,102 Arising in the year - 16 16 Utilised in the year - (115) (115) Reversal - - - 31 March 2016 272 731 1,003 Of which: Due within one year 167 115 282 Due great than one year 105 616 721 272 731 1,003 The Dilapidation provision relates to the costs of reinstatement under the leases for our former Glasgow office and current Edinburgh office, and is based on externally commissioned reports. A provision has been recognised for the liability on the additional contributions to fund the deficit in the Arts Council Retirement Plan (1994) as at 31 March 2016. 19 Financial instruments has exposure to the following risks from the use of financial instruments: Liquidity risk Credit risk Market risk This note presents information about s exposure to each of the above risks. Further quantitative disclosures are included throughout these accounts. The Board has overall responsibility for the establishment and oversight of the organisation s risk management framework. The Audit and Risk committee oversees how management monitors compliance with s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to risks faced by. does not utilise complex derivative financial assets or liabilities. Fair values There is no difference between the carrying value and fair value of s financial instruments. Liquidity risk Liquidity risk is the risk that will not be able to meet its financial obligations as they fall due. The organisation s approach to managing liquidity is to ensure that it will have sufficient liquid funds to meet its liabilities as they fall due. s primary source of liquidity is the Grant in Aid provision from the Scottish Government. 46
Liquidity is managed by the use of the annual corporate and operational plan process and the monitoring of actual performance against budgets and forecasts. Credit risk Credit risk is the risk of financial loss to if a customer or counter party fails to meet its contractual obligations. Trade receivables are not a significant balance for. Outstanding balances are reviewed regularly and subject to established credit control procedures. Cash and cash equivalents are held with the Royal Bank of Scotland plc. The credit risk for these deposits is considered to be low as the bank is majority owned by the UK government. Although s exposure to credit risk is likely to have increased in the current economic climate, management do not consider this to have had a significant impact. The maximum exposure to credit risk is represented by the carrying value of each financial asset in the balance sheet. All trade receivables were either not past due or were within 30 days at the year end. No impairment of trade and other receivables has been made. Management consider all receivables to be fully recoverable. Market risk Market risk is the risk that market prices such as interest rates, foreign exchange rates and equity prices will affect income or the value of holdings in financial instruments. s exposure to market risk is low as we do not depend on income from financial instruments. Foreign exchange risk is exposed to currency risk on transactions and balances that are denominated in currencies other than sterling. is exposed to currency risks from its activities conducted overseas, but does not enter into any hedge arrangements and does not consider currency risk to be material. Tax Credit Advance Facility s Tax Credit Advance Facility operated during 2015-16 and offered loans against the proceeds of the UK Film, High-End TV and Animation Tax Credits available from HMRC. The facility was funded from financial transactions funding from the Scottish Government. advances the tax credit to the producer, and incurs a liability for the repayment back to the Scottish Government. At 31 March 2016, had a debtor balance of 594,000 and a creditor balance of 570,000 relating to the scheme. There was not judged to be any credit or liquidity risk arising from the operation of the facility. 20 Related party transactions All transactions with related parties are completed at arm s length and the relevant party does not take part in the decision. Related party transactions in respect of s Lottery Distribution Fund are detailed in the Fund s Financial Statements for the year ended 31 March 2016. During the year, invoiced 47
the Lottery Distribution Fund for 2.4 million in respect of recharges for the year for staff, overhead and related costs. The Scottish Government s Directorate of Culture, External Affairs and Tourism is regarded as a related party. During the year had various material transactions with the Scottish Government Directorate of Culture, External Affairs and Tourism. 48
Accounts Direction CREATIVE SCOTLAND DIRECTION BY THE SCOTTISH MINISTERS The Scottish Ministers, in pursuance of section 13(1) of Schedule 9 of the Public Services Reform (Scotland) Act 2010 hereby give the following direction. The statement of accounts for the financial year ended 31 March 2012, and subsequent years, shall comply with the accounting principles and disclosure requirements of the edition of the Government Financial Reporting Manual (FReM) which is in force for the year for which the statement of accounts are prepared. The accounts shall be prepared so as to give a true and fair view of the income and expenditure and cash flows for the financial year, and of the state of affairs as at the end of the financial year. This direction shall be reproduced as an appendix to the statement of accounts. Signed by the authority of the Scottish Ministers Dated 49