SKILLS DEVELOPMENT SCOTLAND PARLIAMENTARY ACCOUNT€¦ · Over the last year we helped people move towards and get a job and take control of their work ambitions through our universal

Company Registration Number: SC202659

THE SKILLS DEVELOPMENT SCOTLAND CO. LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 The financial statements were authorised for issue on 25 July 2014.

THE SKILLS DEVELOPMENT SCOTLAND CO. LIMITED Company Registration Number: SC202659

1

Contents Page

Chair & Chief Executive Welcome 2

Strategic Report 3-10

Directors' Report 11-13

Remuneration Report 14-17

Statement of Directors’ and Accountable Officer’s Responsibilities 18 Governance Statement 19-21

Independent Auditor’s Report 22-23

Statement of Financial Position - Group 24

Statement of Financial Position - Company 25

Consolidated Statement of Comprehensive Income 26

Statement of Changes in Taxpayers’ Equity

27

Consolidated Statement of Cash Flows 28

Notes to the Financial Statements 29-49

Accounts Direction - Appendix 1 50

Registered Office: Monteith House, 11 George Square, Glasgow, G2 1DY

Bankers: Bank of Scotland, 167-201 Argyle Street, Glasgow, G2 8BU

Auditor: KPMG LLP, 191 West George Street, Glasgow, G2 2LJ

Lawyers: Shepherd & Wedderburn W.S., 155 St. Vincent Street, Glasgow, G2 5NR


2

Chair & Chief Executive Welcome Welcome to our annual report and financial Statements for 2013-14. During the second year of our three year corporate strategy we made significant progress towards achieving our ambitions. Our strategy is designed to ensure individuals have the support they need to progress in the labour market and businesses can get the skills they need to prosper. It enables our investments, services and people to be wholly focused on the needs of society and the economy. We are preparing people for success. Over the last year we helped people move towards and get a job and take control of their work ambitions through our universal careers service, while giving those who need it most, the focused support they need. Once again we exceeded our targets for new start Modern Apprenticeships and worked with our partners in creating the new flexible Employability Fund. We increased our support for businesses via an enhanced employer web service in Our Skillsforce and through the Industry and Enterprise Network teams. This included working directly with employers to address their skills needs, engaging with employer groups to support focused industry initiatives and drawing on businesses and partners to continue our development of sector investment plans. 2013-14 saw the launch of plans for financial services and ICT. Our priorities for 2014-15 are wholly aligned with the recommendations of the Commission for Developing Scotland’s Young Workforce. They continue to reflect our commitment to working with schools and other partners to transform the way people are able to manage their careers throughout their lives. We will continue to extend the reach of our Career Information, Advice and Guidance (CIAG) service through My World of Work web service, individual and group sessions and our targeted, intensive support for those who need it most. Delivering programmes and initiatives that support youth employment will continue to be a priority. We will further develop the Modern Apprenticeship Programme and welcome the addition of 5,000 more places by 2020. We will also focus on the development of the Employability Fund to ensure it is closely aligned with the needs of both individuals and employers. Working with employers is fundamental to the success of our ambitions. We will continue to engage with Scotland’s growth sectors, through Industry Leadership Groups, to create and implement Skills Investment Plans. At the same time we will lead and develop the creation of Regional Skills Assessments, supporting our partners to ensure we have the right skills, in the right place, at the right time. This activity supports our long term objective to build a clear and compelling picture of national and regional skills demand and the opportunities for sector growth that can be achieved through investment in skills development. Our ambitions can only be delivered through collaboration with partners, and through putting our customers at the centre of everything we do. Through our Business Excellence Approach we are committed to continually improving the service we offer ensuring that it meets the needs of our customers and stakeholders now and in the future. We look forward to making progress, together, in our drive to make real and positive change in the way our skills system supports individuals, business and economic growth. John F McClelland CBE, Chairman Damien Yeates, Chief Executive


3

STRATEGIC REPORT FOR THE YEAR TO 31 MARCH 2014

Introduction A non-departmental public body of the Scottish Government, SDS plays a key role in driving the success of Scotland’s economic future by contributing to the delivery of the Scottish Government’s Economic and Skills Strategies. We help the skills and learning system to better respond to the needs of the economy and help individuals and businesses to benefit from learning and skills development opportunities. Working in partnership at a national and local level, we:

support individuals to reach their potential through developing the skills they need to progress effectively in their working and learning lives;

help make skills work for employers, supporting businesses of all sizes to compete effectively by building, developing and getting the best from their workforce; and

improve the skills and learning system by ensuring our combined services are aligned, integrated and meet the needs of our customers.

For more information on Skills Development Scotland (SDS) visit our website www.skillsdevelopmentscotland.co.uk.

Performance Overview Our Operating Plan 2013-14 sets out what we planned to achieve during the second year of our Corporate Strategy 2012-15. An overview of progress towards our strategic goals in this second year is provided below. Goal 1 – Enabling people to meet their potential An important indicator of the impact of our work and that of our partners is the School Leaver Destination Return (SLDR), the annual survey of school leavers, and a six month follow up survey we undertake on behalf of Scottish Government. Amongst leavers in the academic year 2012/13, there was a 1.5% increase in pupils progressing to a positive destination, such as training, education or employment, since leaving school to 91.4%. There was a decrease of 0.8% in the rate of leavers going to university. The proportion of leavers who were unemployed and seeking work decreased by 1.3% to its lowest ever level at 7.1%. These results are important in the work we do with partners to shape our services and how they are delivered locally. This is particularly so with our work with young people in our joint delivery of Opportunities for All, the Scottish Government’s guaranteed offer of a place in education or training for all 16 to 19-year-olds. Our Corporate Strategy 2012-15 sets out our ambition to support customers to build the Career Management Skills (CMS) needed to progress in today’s more flexible labour market, through our Career Information, Advice and Guidance (CIAG) service. In 2013-14 we continued to embed developments in the way we deliver this service, and engaged with schools to jointly plan how we deliver CIAG in a mix of group and one to one coaching sessions. Customers of all ages can access our face-to-face services in schools, SDS centres and partner premises. In the last year, we delivered face-to-face engagements in a mix of group and one-to-one sessions for 185,299 individual people. This included 110,426 individual and 6,250 group engagements with school pupils and, in line with our new service offer, an increase in the intensity of support for pupils requiring assistance to make an effective transition into learning, training or work. In addition, we handled just over 160,000 calls from customers through our contact centre. Throughout the year, we also continued to improve and further develop the services available on My World of Work. The number of registered users increased significantly, reaching 386,151 by March 2014, with 1,778,755 users during 2013-14. As well as regularly providing new articles and updated content, a number of features and improvements were introduced to My World of Work in the past year. These include:

launching Partner Zone to support partners who work with young people to help them develop career management skills;

a Gaelic section to bring to life why and how Gaelic can help people find work and improve their career;

improved search functionality; and

new video hosting for improved accessibility to content in schools and partner organisations.

18%

35%

15%

30%

2%

0% 10% 20% 30% 40%

12-15

16-19

20-24

25+

Unknown

My World of Work registered users by age

http://www.skillsdevelopmentscotland.co.uk/


4

STRATEGIC REPORT FOR THE YEAR TO 31 MARCH 2014 (CONT’D)

Building on last year’s work, we continue to deliver interactive sessions to school pupils to build their awareness and understanding of the career planning resources available on My World of Work. The 16 to 19 year-old cohort has seen the biggest uptake in registrations on the web service with 136,481 registered users. Our CIAG service also includes the co-ordination of Partnership Action for Continuing Employment (PACE), the Scottish Government’s national strategic partnership framework for responding to redundancy situations. In 2013-14, 11,674 individuals facing redundancy were supported by PACE. As part of our service to individuals, and also supporting Scotland’s businesses, we provided funding for 25,284 Modern Apprentice starts, giving people the opportunity to work, train and earn an income all at the same time. The year 2013-14 saw the launch of the new Employability Fund by the Scottish Government. We were charged with working with partners to develop the Fund that saw the replacement of existing employability programmes (Get Ready for Work and Training for Work) with one flexible fund. The Fund was designed to ensure that local partners have a stronger role in commissioning the employability support for their customers taking into account the needs of individuals and local labour markets. Given the delivery of the Fund is still at an early stage, outcome or achievement results are not yet available but we can report that 17,370 training places were created across Scotland during 2013-14. Having launched the Certificate of Work Readiness in the first year of our strategy period, we have worked with colleges, training providers and employers across Scotland to raise awareness of the Certificate, and to build capacity for its delivery. Through this work and the enthusiasm of 1,500 employers to support the programme over 2,250 people have achieved or are working towards the Certificate of Work Readiness. Last year, just under 350 targeted young people aged between 16 and 24 took up employment opportunities through the Employer Recruitment Incentive. This incentive offers employers the opportunity to assist the transition of young people (who are care leavers, ex-offenders or carers) into sustainable employment, including undertaking a Modern Apprenticeship. To support the Commonwealth Games skills legacy, a dedicated recruitment incentive was also launched in 2012-13. This supported 591 young people aged 16 to 19 to become modern apprentices in 2013-14. SDS supported 34,133 learning opportunities through Individual Learning Accounts in 2013-14. These accounts help people meet the cost of learning and training with the objective of increasing their employment prospects. We also continued to support the implementation of the Adult Literacies in Scotland 2020 strategy through the provision of The Big Plus. 931 enquiries were made to the helpline in 2013-14.

Goal 2 – Making skills work for employers Our Corporate Strategy 2012-15 set out our commitment to deliver an integrated service for employers to improve access to the skills support they need to compete in the global marketplace. We launched Our Skillsforce, our employer facing website, in November 2012. Based on feedback from customers and partners we have continued to make improvements to improve the quality, relevance and accessibility of the information available. During the last year the site received more than 438,000 page views and 115,395 users. As well as this online presence, our Employer Engagement Team continue to work across Scotland, both with individual employers and with employer organisations and other partners with strong and established relationships with businesses. This team has facilitated engagement with employers in a range of SDS and partner skills development services, along with promoting the opportunities and benefits of bringing young people into business. Among the services that the team promote, is Flexible Training Opportunities (FTOs), where we have supported 2,601 small and medium sized businesses (with up to 100 employees) to invest in training for existing employees through 8,971 FTOs. In addition we assisted small to medium sized businesses working to support a low carbon economy to invest in training for 679 employees through the Low Carbon Skills Fund. We also helped 1,174 people to embark on transition training through the Energy Skills Challenge Fund. During 2013-14 the team engaged with 1,276 SMEs and over 1,500 businesses in total, extending our reach across Scotland. Through this engagement the team has delivered Skills for Growth with the support of Investors in People Scotland. This service provides skills diagnostic and action planning support for businesses, and, during 2013-14, 75 plans were delivered. More than 250 companies received in-depth skills support in partnership with Scotland's enterprise agencies. The Modern Apprenticeship programme, managed by SDS on behalf of the Scottish Government, provides funding and support to help employers develop their workforce to meet their needs. During 2013-14, there were 25,284 starts, with over 70 different occupational frameworks available. As shown in the table below, the largest proportion of new starts was in the 16-19 year old age group.


5


Modern Apprentice customer group

2013/14 starts

16 to 19-year-olds 13,107

20 to 24-year-olds 6,766

25+ years old 5,411

The achievement rate of Modern Apprentices (MAs) in the 25+ group rose by 3.6% last year and the overall achievement rate for all ages was 76.6%, demonstrating the commitment of employers, participants and learning providers to successful completion of the programme. As part of our drive to improve the way the skills and learning system responds to the needs of employers, we made further progress in developing Skills Investment Plans (SIPs) for the Government Economic Strategy growth sectors, outlining the priorities and actions needed to enhance skills within those sectors. During 2013-14, SIPs were developed for the finance and ICT sectors, adding to the food and drink, tourism and energy sectors already complete. The work has involved extensive engagement with Industry Leadership Groups, and creating a cohesive infrastructure for the ongoing interface between industry and the skills system, in particular through supporting the development of the Scottish Funding Council’s outcome agreements with regional colleges. Whilst our work for industry and employers focuses on supporting opportunities for growth as described earlier, in these challenging economic conditions we also engaged with 298 employers to support their redundancy process through the PACE programme. Goal 3 – Working together to improve the skills and learning system During 2013-14, we continued to work with national and local partners to improve, further integrate and make our services more accessible for our customers and respond to their needs. At a local level, SDS worked with local authorities and community planning partnerships (CPPs) to enable us to translate our national offer into a local context. Our contributions to local services are articulated through CPP Single Outcome Agreements and Youth Employment Activity Plans. We have continued to collaborate closely with school, college and other partners to further embed career management skills in their services. At a national level, we are engaging in the continuing development and implementation of the Curriculum for Excellence (CfE), Building the Curriculum 4, through the CfE Management Board. Our work during 2013-14 included engaging with partners across Scotland to identify good practice in education and employer engagement, the learning from this work is being built into our plans for the coming year and is particularly pertinent to the interests of the Wood Commission. We also introduced our Business Excellence Approach for Career Information, Advice and Guidance services - our bespoke framework for quality assuring our services - across 16 local authority areas. Further implementation across the remaining local authorities is planned for 2014-15. We have worked with schools, local authorities, libraries, colleges, amongst other partners, to support the development and use of My World of Work in schools and other settings. This engagement across Scotland has been delivered alongside the teams responsible for CIAG delivery in an effort to build strong and seamless links in our service to individuals. In respect of our employer services we continued to work closely with industry leadership groups, Sector Skills Councils and other employer representative bodies in developing Skills Investment Plans as described in more detail previously. Over the past year we have put significant effort behind the drive to improve the evidence base on skills, particularly at a regional level, through the development of Regional Skills Assessments. These are due for publication in the year ahead, and work during this period has included extensive engagement with partners across Scotland to gather the range of economic, labour market and education and training data available to help inform investment decisions, particularly those made through the college outcome agreement process, and SDS’ skills investments. At a national level, our administration of the Joint Skills Committee with the Scottish Funding Council and our membership of the Strategic Forum, led by the Scottish Government, provide opportunities to inform and shape the skills and learning system so that it effectively meets the needs of Scotland’s people and businesses. A matter of particular importance continues to be the employability of Scotland’s young people; our Chair represents SDS on the Scottish Employability Forum to support developments in this important area. We have worked with partners to embed and expand multi partner information sharing based on the 16+ Learning Choices Data Hub. This information gives partners a better understanding of young people’s progression after leaving school and enables more effective support for those who are not in learning, work or who are at risk of disengagement. During 2013-14, we have successfully combined data from local authorities, colleges, the Department for Work and Pensions and Student Awards Agency Scotland. We also began an extensive programme of communication and engagement activity with partners, to maximise the benefits of data sharing in supporting more young people into positive opportunities. During the course of the year we took a leading role in extensive marketing and communications campaigns to raise awareness of the benefits of employing young people, and Modern Apprenticeships through ‘Make Young People Your Business’ and ‘Scottish Apprenticeship Week’ respectively.


6


Goal 4 – Achieving organisational excellence As a public body, we are committed to high productivity and efficiency at the same time as delivering a high quality service. To this end, during 2013-14 we have continued to improve the efficiency of our organisation through both our internal processes and in the way we work with partners. In 2013-14, we achieved £16.4m of efficiency savings in our operating costs. At the same time, a number of achievements across the organisation contributed to improved efficiency and effectiveness, including:

implementation of our Business Excellence model across 16 local authorities to embed quality assurance and drive continuous improvement;

extensive customer and partner research to support continuous improvement, including service user surveys and a survey of parents and carers responsible for young people;

development and introduction of official statistics procedures, resulting in the publication of a new report on Modern Apprenticeships;

ensuring all SDS funded learning providers have undertaken assessments against SDS quality standards to ensure they are able to demonstrate that they meet the SDS Quality Framework;

publication of a mainstreaming report describing how our Equal Opportunities policy is embedded across the organisation, including details of our three evidence-based equality outcome measures;

launch of our Responsible and Sustainable Procurement Policy that highlights our approach to buying, which is not just about achieving value for money but also benefitting communities, the economy and minimising our impact on the environment;

exceeding our target for the reduction of our carbon footprint; and

in line with our youth employment strategy, providing 64 young people with the opportunity to work with us, through a mixture of modern apprenticeships and graduate interns.

Procurement Skills Development Scotland continues to lead and mentor a group of Executive Agencies and NDPBs in procurement best practice that includes Accountant in Bankruptcy, Creative Scotland, David MacBrayne, sportscotland, Education Scotland, Creative Scotland and Loch Lomond and Trossachs National Park. This group achieved the largest average increase in score for the independent Procurement Capability Assessment. The Scottish Qualifications Authority and Scottish Fire & Rescue have also recently joined the group. The Procurement team have received a number of awards this year. At the Chartered Institute of Purchasing and Supply’s Supply Management Awards, the team won the “Best Contribution to the Reputation of the Procurement Profession” category for its Procurement People of Tomorrow Initiative. This project was run in collaboration with the Scottish Government and City of Glasgow College. It was also recognised for public procurement at the National Government Opportunities (GO) Excellence in Public Procurement Awards. The team won the GO Procurement Innovation/Initiative of the Year Award and were highly commended for the GO Team of The Year Award again for their Procurement People of Tomorrow Programme. In light of the Procurement Reform Bill, we have now launched the Skills Development Scotland Responsible and Sustainable Procurement Policy and Strategy. We will now consider the triple bottom line of economy, environment and community when conducting procurements. Community Benefits Clauses will also be used where applicable and proportionate. The new SVQ 3 in Procurement and Supply Chain has now been accredited by the Scottish Qualification Agency (SQA). The Modern Apprenticeship Framework in Procurement and Supply Chain will be launched in June 2014 and there is already a commitment from both private and public sector organisations to start modern apprenticeships. This includes the NHS which has made a two hundred thousand pound commitment in this area. We awarded a new collaborative contract for Print Services in October 2013 to Capital Document Solutions Ltd. This will achieve cost savings of approximately £1.2 million over the 5 year contract term. Sustainability We are committed to reducing our environmental impact and carbon footprint. The main areas in which we create carbon emissions are related to Energy, Business Travel, Waste and Water. We are now three years into a four year Carbon Management Plan and have committed to a 30% reduction in carbon emissions by April 2015, against our 2010-11 baseline.

Carbon Emissions 2011-12 2012-13 2013-14 2014-15

Target 0% -7% -16% -30%

Actual -10% -18% -22%


7


By the end of 2013-14 we reduced our carbon footprint by 22%, exceeding our target by 6%. This was achieved by continuing to invest in technological changes, such as installing more efficient lighting, and encouraging behavioural changes through our organisational wide ‘We Can Make a Difference’ campaign. In 2013-14 we upgraded the lighting in six offices, which is predicted to result in a 17 tCO2e carbon footprint reduction. In addition, organic waste recycling was rolled out in our six largest offices, which has reduced the amount of waste sent to landfill. Further information on our sustainability performance can be found in the Skills Development Scotland Sustainability Report 2013-14, which is available on our website: www.skillsdevelopmentscotland.co.uk. Employees During 2013-14 we continued to progress plans under our three year People Strategy which aims to make the best use of the strengths of our people and ensures that our business practices are efficient, effective and sustainable. The Human Resources and Organisational Development team supports managers and employees throughout the employment and business lifecycle so that individuals across the organisation can maximise their own performance and the performance of others. During 2013-14 we also launched the initial phases of our HR Digitisation project. Our Skills Development Scotland Academy continues to grow and support learning which, in turn, supports business change and improvement. Various learning initiatives; vocational, technical and professional have been delivered which have developed both individuals and teams and has led to an improved service delivery. The Academy also works with partners to influence and promote professional development for the careers sector. In addition, we have made significant progress under our Youth Employment Agenda through our programme of Modern Apprentice and Intern Opportunities, and with the result that young people currently represent 4.2% of our workforce. Diversity and Equality Skills Development Scotland actively promotes equality of opportunity both as an employer and as a service provider. In 2013-14 our Equality Advisory Group continued to support us, ensuring equality and diversity is embedded in all service developments. In response to the Equality Act 2010 and Specific Duties (Scotland) Regulations 2012, we published our Equality Mainstreaming Report in April 2013. This included our Equality Outcomes along with a range of employee information, including equal pay. We continued to support employees by updating and re-launching our Equality Toolkit. This provides a range of equality and diversity information and best practice checklists. We also made this resource available for partners and stakeholders by publishing it on our corporate website as well as on Our Skillsforce website for employers and the Provider Central website for training providers. We also repeated our 2011 Equal Opportunities Culture Survey to gauge employee views in relation to equality and diversity and to identify any areas for development. As a “Two Ticks” Positive about Disabled People employer, SDS continues to encourage applications from disabled people. In addition our revised reasonable adjustment process is regularly monitored to ensure disabled staff are fully supported in the work environment. As at the 31 March 2014, the balance between male and female members of staff within Skills Development Scotland was as follows:

Male Female

Executive and non-executive directors 5 2

Senior managers 6 2

Employees 318 951

Employee Involvement and Communications SDS continues to be committed to ensuring all of its employees are engaged in the delivery of our organisational goals, priorities, achievements and successes. We continue to build our approach to managing and developing employees’ performance through our bespoke framework which links the contributions colleagues make in their day to day work, to the overall performance and high level strategic direction. This will ensure employees are clear on the benefits of their individual contributions.

http://www.skillsdevelopmentscotland.co.uk/


8


SDS supports its Chief Executive and Leadership Team to deliver timely, planned, co-ordinated communications that promote employee discussion and feedback. SDS employs various communications channels including a comprehensive intranet, and regular people manager led cascade briefs. During 2013-14, the Executive Leadership Group led a listening programme across the organisation actively involving colleagues in a series of Business Excellence pilots which helped shape the Business Excellence Framework. In addition, managers led a successful consultation exercise to support a programme of office relocations across the estate. Social and Community Relations Skills Development Scotland’s services contribute in a number of ways to support the development of social and community relations. With our partners we deliver on the employability agenda through our work to support individuals to successfully move between learning and work. This includes providing career information, advice and guidance, and delivery of employability programme funding. We provide targeted support in collaboration with other partners to individuals most at risk of failing to secure employment or to continue in learning, for example, young offenders and those with other additional support needs, such as care leavers, young carers and the disabled. Our work with employers to encourage their participation in our employability programmes aims to secure training places for these young people - forging links between the business community and those individuals furthest from the labour market. Our approach to contracting for employability programmes, in collaboration with Community Planning Partnerships, demonstrates our efforts to ensure investment meets local needs. Gaelic Language Following approval of the SDS Gaelic Language Plan, a Gaelic Development Officer was appointed during 2013-14. During the year, the post holder has been working on implementing the recommendations detailed in the Plan, building strong and effective collaborative working relationships with partners and stakeholders. Some key activities that took place during 2013-14 were a series of Gaelic Awareness sessions aimed at staff and a Gaelic careers page was launched on My World of Work. Working with our partners, we are in the process of developing Gaelic projects in the areas of Childcare and Social Care and developing a significant Gaelic Careers event to be held in 2014-15. SDS continued to support the Ulpan project during 2013-14. The profile of Gaelic within SDS has significantly increased as a result of the above developments.

Financial Overview

The results for the year to 31 March 2014 are contained in the attached financial statements, prepared in accordance with the 2013-14

Government Financial Reporting Manual (FReM) and in the form directed by the Scottish Ministers, taking cognisance of the Scottish

Public Finance Manual.

The FReM requires that the company should comply with the Companies Act, but, as a non-departmental public body, also follow the

principles in the FReM (for example, in preparing a remuneration report) where these go beyond the Companies Act. The accounting

policies explain the basis on which the financial statements are prepared and transactions are recognised.

The resource budget allocation for 2013-14 comprised a revised grant-in-aid provision of £190.1 million (2013: £178.1 million). Revenue for the year was supplemented with sales income of £9.9 million (2013: £12.8 million) on a cost recovery basis and £1.4 million (2013: £9.4 million) of European funding. Financial Management Prudent financial management throughout the year has ensured our financial outturn is within the Resource Budget allocated by Scottish Ministers for the year to 31 March 2014. In addition to contributing £1.5 million (2013: £nil) to Scottish Government Strategic Forum savings, we achieved £16.4 million (2013: £16.4 million) of efficiencies in our operating costs while ensuring our grant funding was fully expended within the parameters set by the Scottish Government. We were able to provide additional stimulus to small and medium sized enterprises and provide the best credit terms to our suppliers to help with their flow of cash.


9


During 2013-14 we implemented a new finance system which replaced the legacy system which was in place since the inception of Skills Development Scotland. The system has resulted in significant strides forward in automation, enhanced reporting and control environment improvements. Savings of approximately £0.3m have already been recorded and the system is in line to pay back within 18 months. Risk and Uncertainty During the year, Skills Development Scotland has continued to strengthen its structured approach to risk management by the increasing use of our Risk Information Management System (RIMS). We continue to adhere to a Board approved Risk Management Policy, which is available to all staff on the Skills Development Scotland intranet. The Policy sets out our attitude to risk, our approach to managing the potential barriers to achieving our objectives and highlights that risk management and internal control are firmly aligned to our ability to achieve key business objectives. SDS highlights its principal risks in its Corporate Risk Register. The Register, which was comprehensively reviewed at a Board workshop in May 2013, takes account of strategic and operational risks including those stemming from current economic and budgetary challenges. The Register is scrutinised monthly at our Executive Leadership Group meetings and quarterly, on behalf of the Board, at the Audit and Risk Committee. Key risks include:

Unable to align resources, including management information, to deliver our Career Management Service offer;

Unable to demonstrate the propriety, quality and efficacy of our NTP provision; and

ICT solutions introduced which are not aligned to business needs. All senior executive managers, through their Quarterly Risk Assurance Statements provide assurance that the SDS Risk Management Policy and Guidance is being followed in their areas, that internal controls are operating as intended and that actions are being taken to address Audit Scotland Performance Reports’ recommendations. Company Status The Skills Development Scotland Co. Limited (Skills Development Scotland) is a company limited by guarantee and registered in Scotland. The sole members are the Scottish Ministers. Skills Development Scotland is an Executive Non-Departmental Public Body, operated through a limited company structure. Skills Development Scotland owns 100% of the issued share capital of Scottish UFI Limited. Skills Development Scotland has control of Careers Trust Scotland Ltd, which is a charitable company limited by guarantee with the object of improving the employability and enterprise skills of the people of Scotland and increasing participation in learning and employment. Scottish Ministers appoint the Chair, Chief Executive and non-executive directors of Skills Development Scotland, and the same directors have been appointed to the board of Scottish UFI Limited. Scottish UFI Limited is not used for operational activities. The board is responsible for the overall direction and strategy of Skills Development Scotland and for securing the optimum performance from company assets. There is a formal policy of delegated authority, which includes matters specifically reserved to the board for decisions. All non-executive directors are independent of the company. Going Concern As at 31 March 2014, the group’s balance sheet had net liabilities of £15.0 million (2013: net assets of £1.3 million). The directors are confident that the relationship with the Scottish Government is such that the company will have sufficient funding for the foreseeable

future. In particular, the directors have taken cognisance of the sole membership of Skills Development Scotland which Scottish Ministers assumed in September 2004. Accordingly, it is appropriate to prepare the financial statements on a going concern basis.

Future Developments During 2014-15, Skills Development Scotland will continue to work with other organisations in the skills and learning system to improve Scotland’s skills performance, particularly employability development and employment opportunities for Scotland’s young people. Our Operating Plan for 2014-15 responds to the Scottish Government’s Skills Strategy, refreshed Economic Strategy and Youth Employment Strategy along with the more detailed annual Letter of Guidance from Ministers. It is also shaped by the Scottish Government’s strategy for Career Information, Advice and Guidance as well as our drive to respond to the evolving needs of our customers and our ongoing research and work with partners and customers to better align our services and jointly make best use of our resources.


10


We remain committed to responding to the demand for our services - helping individuals realise their full potential; supporting employers to access the right training opportunities and to shape our service and those of the skills system; and working meaningfully with partners to enhance Scotland's sustainable economic development. Central to our plans for this coming year is the further embedding our CMS approach, including the My World of Work web service, and the delivery of the Employability Fund. In a strategic sense, we look forward to building on the progress made in developing Regional Skills Assessments and embedding these in the regional college outcome agreement process, as well as working with partners across the system to deliver Skills Investment Plans and the actions from them. 2014-15 is the final year of our three year Corporate Strategy for the 2012-15 period. Our strategy outlines our vision and our goals over this period as well as our commitment to maximising the contribution of skills for jobs and growth. Our annual Operating Plan 2014-15 describes in further detail our plans for the year ahead. By order of the Board Damien Yeates Director and Accountable Officer

25 July 2014


11

DIRECTORS’ REPORT FOR THE YEAR TO 31 MARCH 2014 Principal Activities The principal activities of Skills Development Scotland are provided within the Strategic Report at pages 3-10. Directors and Their Interests The directors of the company who held office during the year and to the date of signing of these financial statements were as follows: Name R Crawford * A Douglas * (term ended 18 May 2014) K Howell * (resigned 6 March 2014) J Lowe * (term ended 18 May 2013) J McClelland * (Chairman) P McKelvie * M Morrison* (resigned 10 February 2014) C Stuart* M Togneri * (term ended 31 July 2013) G Waddell* D Yeates + (Chief Executive) + executive * non-executive Margaret Morrison, non executive director, resigned on 10 February 2014. Keith Howell, non-executive director, resigned on 6 March 2014.

Janet Lowe, non-executive director, term ended on 18 May 2013. Martin Togneri, non-executive director, term ended on 31 July 2013. Anne Douglas, non-executive director, term ended 18 May 2014. No board members held any significant interests in the company or its subsidiary companies at any time during the year that conflicted with their management responsibilities. Details of directors’ interests are given in Note 17 Related Parties. The board of Skills Development Scotland, chaired by John McClelland CBE, met nine times during the year. Conflicts of Interest Procedures

Skills Development Scotland developed and implemented strict and comprehensive procedures to deal with potential conflicts of interest. These include holding, and updating at least annually, registers of interests covering not only board members but also members of staff. These registers are available to any member of the public who wishes to examine them. Interests which must be registered, in terms of the name and nature of the organisation in which the interest is held, include: remuneration, related undertakings, contracts, houses, land and buildings, shares and securities, non-financial interests, gifts and hospitality. Whenever a board member or member of staff has an interest in an application for assistance, they are required to declare the interest and thereafter to take no part in the investigation, processing or approval of the case. Such declarations by board members are recorded in the minutes of the appropriate board meetings. Standing Committees

The Audit and Risk Committee oversees the strategic process for risk management, internal control, corporate governance and statutory financial obligations. The Committee is chaired by an independent non-executive director and is comprised of at least two non-executive directors of Skills Development Scotland. The Committee meets at least four times a year and has written terms of reference setting out its authority. Internal and external auditors attend the Audit and Risk Committee. The Finance and Operational Performance Committee continues to oversee the operating performance and financial management of SDS. The Finance and Operational Performance Committee is chaired by an independent non-executive director and is comprised of at least two, non-executive directors of Skills Development Scotland. The committee meets at least four times a year and has written terms of reference setting out its authority. The Remuneration and Human Resources Committee met twice during the year and is comprised of at least two non-executive directors of Skills Development Scotland.


12

DIRECTORS’ REPORT FOR THE YEAR TO 31 MARCH 2014 (CONT’D) The Service Development Committee meets every six weeks and oversees service redesign and implementation. The Committee is chaired by an independent non-executive director and is comprised of at least three non-executive directors of Skills Development Scotland. Results The financial statements report a total comprehensive expense for the group for the year of £16.3 million (2013: £4.0 million) which is influenced by IAS 19 pension adjustments. Removing the effects of actuarial activities the operating deficit is £6.4 million (2013: operating surplus of £3.4 million).

The operating deficit from actual activities for the parent company is £8.4 million (2013: operating surplus of £3.4 million). It was agreed with Scottish Government that £18 million of grant in aid would not be drawn down. This was to mitigate the effect of cash received in the year ended 31 March 2014 for income accrued in the year ended 31 March 2013. The directors recognise the significant impact of the actuarial valuation of pension assets and liabilities on the results for the year and are satisfied that the operating results are in accordance with management projections and within budgetary constraints and available reserves. Accounting for Pension Scheme Liabilities Pension assets and liabilities are recognised in the financial statements in line with the accounting policy at Note 1. IAS 19 Employee Benefits requires that the assets and liabilities of the pension scheme are incorporated into the balance sheet. As more fully explained in Note 7 the group and company Statements of Financial Position report a net liability of £34,541,000 for the pension schemes at 31 March 2014 (2013: £24,668,000). Supplier Payment Policy It is our policy to agree terms of payment when orders for goods and services are placed and to adhere to these arrangements. In addition, due to the current economic conditions it is our policy, where possible, to comply with the Scottish Government’s Prompt Payment Commitment (issued December 2009) of making payment of authorised invoices within 10 days. Average trade credit days as at 31 March 2014 were 13 days (2013: 8 days). Political and Charitable Donations The company made no charitable or political donations in the year. Amounts Payable to Auditors for Non Audit Work Fees payable for non audit services provided by the appointed auditors for the year ended 31 March 2014 were £2,460 (2013: £2,100). Freedom of Information The Freedom of Information (Scotland) Act, which came into full force in January 2005, means members of the public can make a request to see information held by Skills Development Scotland. In the year to 31 March 2014, we received and responded to 68 Freedom of Information requests (2013: 72). Data Loss There were no reported incidents of unauthorised exposure or loss of personal data during the financial year.

Sickness Absence We have appropriate processes in place to manage all aspects of absence. In the year to 31 March 2014, 3.5 % (2013: 3.4%) of working time was lost due to staff sickness absence.

Auditors As a non-profit making public sector company, which appears to the Scottish Ministers in terms of section 483(2) of that Act to carry out functions of a public nature, under The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2009, the Scottish Ministers have determined that the financial statements of the company shall be audited


13

DIRECTORS’ REPORT FOR THE YEAR TO 31 MARCH 2014 (CONT’D) by the Auditor General for Scotland. The Auditor General for Scotland has appointed KPMG LLP to undertake the audit for the year ended 31 March 2014. The directors present their report and the audited financial statements for the year ended 31 March 2014. These financial statements have been prepared in accordance with a form directed by the Scottish Ministers. The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the company’s auditors are unaware, and each director has taken all steps that he/she ought to have taken as a director to make himself/herself aware of any relevant audit information and to establish that the company’s auditors are aware of that information. By order of the Board Damien Yeates Director and Accountable Officer

25 July 2014


14

REMUNERATION REPORT FOR THE YEAR ENDED 31 MARCH 2014 Chair and Non-Executive Directors The Chair and non-executive directors are paid an annual amount, as salary, at a level agreed by Scottish Ministers. The salary rate is normally assessed on an annual basis. Appointments are made on a two and four year basis.

Chief Executive The Chief Executive’s pay is reviewed annually, and any pay award is dependent on performance, and must be approved in accordance with Scottish Government protocols. The Chief Executive’s performance is assessed formally by the Chair using pre-determined criteria.

Executive Leadership Group The Executive Leadership Group consists of the Chief Executive and senior executive managers of the organisation who are titled as either director or depute director. The senior executive managers are not registered as directors of the company under the Companies Act. Service Contracts Staff appointments are based on merit and are on the basis of fair and open competition. The Chief Executive and senior executive managers are permanent employees with up to 12 month notice periods. There are no early termination payment clauses within the contracts.

Remuneration & Appointments

Due to the company’s NDPB status, remuneration is reviewed annually in accordance with Public Sector Pay Guidelines and approval is provided by the Scottish Government. No benefits in kind were paid to the Chair or non-executive directors. The Chief Executive and senior executive managers’ posts are pensionable. The Chair and non-executive director appointments are not pensionable. Appointments are carried out in line with employment legislation, with the exception of the Chief Executive and non-executive directors’ positions which are carried out within the guidelines for senior public sector appointments.

Salary and Allowances Salary includes gross salary but not employer’s pension contributions. There were no payments in respect of performance pay or bonuses during the year. Allowances relate to designation as essential users within the Skills Development Scotland Car Scheme.

Pensions Pension benefits are provided through one of two HM Revenue & Customs approved defined benefit schemes. Employee contributions are currently set at a tiered rate dependent on gross salary at 31 March 2013. Typically this is c10% for a director and c9% for a depute director, excluding performance pay, bonus or ex-gratia payments. Employer contributions are c20%. Benefits accrue at the rate of 1/60th for each year of service. Cash Equivalent Transfer Values The Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of pension scheme benefits accrued by a member at a particular point in time. The benefits valued are those of the member and any contingent spouse’s pension payable from the scheme. A CETV would be the payment made from a scheme or an arrangement made to secure benefits in another pension scheme when the member leaves the current scheme and chooses to transfer benefits accrued. CETVs are calculated within the framework and guidelines prescribed by the Faculty of Actuaries.


15

REMUNERATION REPORT FOR THE YEAR ENDED 31 MARCH 2014 (CONT’D) Information Subject to Audit Under paragraph 5.2.21 of the FReM the following sections of this report are subject to audit: remuneration, pension, salary and allowance, benefits in kind, cash equivalent transfer values and compensation for loss of office and pension payment.

Remuneration of the Chair and non-executive directors for the year to 31 March 2014 was as follows:-

2013-14

2012-13

Salary

(banded) Taxable benefits

Pension benefits (banded)

Total (banded)

Salary (banded)

Taxable benefits


Total (banded)

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

J McClelland CBE (Chairman) 25 - 30 - - 25 - 30 25 - 30 - - 25 - 30

R Crawford 5 - 10 - - 5 - 10 10 - 15 - - 10 - 15

A Douglas (term ended 18/05/14) 5 - 10 - - 5 - 10 5 - 10 - - 5 - 10

K Howell (resigned 06/03/14) 5 - 10 - - 5 - 10 5 - 10 - - 5 - 10

J Lowe (term ended 18/05/13) 0 - 5 - - 0 - 5 5 - 10 - - 5 - 10

A McGregor (term ended 18/05/12) - - - - 0 - 5 - - 0 - 5

P McKelvie 5 - 10 - - 5 - 10 5 - 10 - - 5 - 10

M Morrison (resigned 10/02/14) 5 - 10 - - 5 - 10 0 - 5 - - 0 - 5

C Stuart 5 - 10 - - 5 - 10 0 - 5 - - 0 - 5

M Togneri (term ended 31/07/13) 0 - 5 - - 0 - 5 5 - 10 - - 5 - 10

G Troup (resigned 30/04/12) - - - - 0 - 5 - - 0 - 5

G Waddell 5 - 10 - - 5 - 10 0 - 5 - - 0 - 5

R Crawford was an adviser to the Audit and Risk Committee, as appointed by the board of Skills Development Scotland on 1 February 2011, until his appointment as non-executive director on 19 May 2013. Remuneration of advisers to the board for the year to 31 March 2014 was as follows:-

2013-14

2012-13

Salary



Total (banded)

Salary (banded)

Taxable benefits


Total (banded)

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

D Boyd (appointed 01/06/13) 0 - 5 - - 0 - 5 - - - -

The total emoluments of the Chair, non-executive directors and advisers for the year to 31 March 2014 were £76,657 (2013: £70,440).


16

REMUNERATION REPORT FOR THE YEAR ENDED 31 MARCH 2014 (CONT’D) Remuneration of the Executive Leadership Group for the year to 31 March 2014 was as follows:-

2013-14 2012-13

Salary



Total (banded)

Salary



Total (banded)

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

D Yeates (Chief Executive) 115 - 120 6.2 35 - 40 160 - 165 110 - 115 6.2 35 - 40 155 - 160

A Clark 90 - 95 5.0 30 - 35 130 - 135 90 - 95 5.0 30 - 35 125 - 130

A Livingstone 90 - 95 5.0 30 - 35 130 - 135 90 - 95 5.0 35 - 40 130 - 135

D Logue 90 - 95 5.0 40 - 45 140 - 145 90 - 95 5.0 50 - 55 145 - 150

J McCormick 95 - 100 5.0 35 - 40 140 - 145 90 - 95 5.0 30 - 35 125 - 130

K Campbell 70 - 75 - 25 - 30 95 - 100

C Hutton 70 - 75 3.0 55 - 60 130 - 135

G McGuinness 70 - 75 3.0 40 - 45 115 - 120

K Campbell, C Hutton and G McGuinness were appointed to the role of depute director on 1 August 2013. Their remuneration for the year to 31 March 2014 includes payments in respect of their employment with Skills Development Scotland in roles preceding their membership of the Executive Leadership Group. Reporting bodies are required to disclose the relationship between the remuneration of the highest paid director in their organisation and the median remuneration of the organisation’s workforce. The banded remuneration of the highest paid director in Skills Development Scotland for the year to 31 March 2014 was £120,000 to £125,000 (2013: £120,000 to £125,000). This was 3.9 times (2013: 4.0 times) the median remuneration of the workforce, which was £31,571 (2013: £30,380). In the year to 31 March 2014, no employees (2013: no employees) received remuneration in excess of the highest paid director. Actual remuneration ranged from £840 to £121,754 (2013: £480 to £120,940). Total remuneration includes salary, non-consolidated performance related pay, benefits-in-kind as well as severance payments. It does not include the cash equivalent transfer value of pensions.


17

REMUNERATION REPORT FOR THE YEAR ENDED 31 MARCH 2014 (CONT’D) Pension benefits of the Executive Leadership Group for the year to 31 March 2014 were as follows:-

Accrued Pension at age 60 as at 31 March 14

Increase in Accrued Pension net of inflation at

age 60

Cash Equivalent Transfer Value

At 31 March 2014

At 31 March 2013

Real increase in CETV

£’000 £’000 £’000 £’000 £’000

D Yeates 10 - 15 0 - 2.5 162 136 26

A Clark 5 - 10 0 - 2.5 106 85 21

A Livingstone 15 - 20 0 - 2.5 227 200 27

D Logue 40 - 45 0 - 2.5 584 541 43

J McCormick 5 - 10 0 - 2.5 119 89 30

K Campbell 0 - 5 51

C Hutton 25 - 30 353

G McGuinness 35 - 40 571

The accrued pension is inclusive of the lump sum payment that the member may elect to draw from their accrued pension entitlement. Members may elect to take a maximum of 25% of their accrued pension as a lump sum payment. This will subsequently reduce their future pension entitlement. Damien Yeates Director and Accountable Officer 25 July 2014


18

STATEMENT OF DIRECTORS' AND ACCOUNTABLE OFFICER’S RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS

The directors and accountable officer are responsible for preparing the annual report and the group and parent financial statements in

accordance with applicable law and regulations.

Company law requires the directors to prepare group and parent company financial statements for each financial year. As required by

the Accounts Direction applicable for the year issued by the Scottish Ministers they are required to prepare the group financial

statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company

financial statements on the same basis.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view

of the state of affairs of the group and parent company and of their surplus or deficit for that period. In preparing each of the group

and parent company financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether they have been prepared in accordance with IFRSs as adopted by the EU and the Accounts Direction applicable

to the year issued by the Scottish Ministers; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent

company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's

transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure

that its financial statements comply with the Companies Act 2006 and the Accounts Direction applicable to the year issued by the

Scottish Ministers. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the

group and to prevent and detect fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's

website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other

jurisdictions.


19

GOVERNANCE STATEMENT BY THE ACCOUNTABLE OFFICER Scope of Responsibility As Accountable Officer, I have responsibility for maintaining a sound system of governance that supports the achievement of the organisation’s policies, aims and objectives, set by Scottish Ministers, whilst safeguarding the public funds and assets for which I am personally responsible, in accordance with the responsibilities assigned to me. As the Accountable Officer for Skills Development Scotland, I am responsible for accounting for activities and I am required to:

sign a Governance Statement regarding Skills Development Scotland’s system of internal control and management of resources for inclusion in the annual report and accounts; and

obtain assurances from Skills Development Scotland’s directors on the maintenance and review of Skills Development Scotland’s internal control systems with particular reference to risk management, effectiveness of operations, economical and efficient use of resources, compliance with applicable policies, procedures, laws and regulations, safeguards against losses including those arising from fraud, irregularity or corruption and the integrity and reliability of information and data.

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. Governance Framework of Skills Development Scotland Skills Development Scotland has a Board in place to oversee the organisation's implementation of government policy. Amongst other things, the Board is responsible for the overall strategic direction of Skills Development Scotland within the policy, planning and resources framework determined by Scottish Ministers; for ensuring that the highest standards of governance are complied with; and that a prudent and effective framework of controls is in place to enable risks to be assessed and managed. The Board meets approximately every six weeks and is supported by four committees: the Audit and Risk Committee (quarterly meetings), the Finance and Operational Performance Committee (quarterly meetings), the Remuneration and Human Resources Committee (bi annual meetings) and the Service Development Committee (six weekly meetings). Skills Development Scotland is also an active participant on the Joint Skills Committee with the Scottish Funding Council (quarterly meetings). In August 2013, an independent review by Internal Audit of Skills Development Scotland’s governance arrangements against good practice found that Skill Development Scotland’s governance arrangements are robust. In particular, the organisation has clearly defined roles and responsibilities for its board, committees, board members and management to facilitate strong governance and accountability; arrangements have been put in place to ensure that there is clear accountability, scrutiny and challenge as part of the decision making process and there is effective communication with the Scottish Government’s sponsor department to ensure clear and transparent reporting of performance. Skills Development Scotland’s System of Internal Control 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. Skills Development Scotland undertakes a review of its internal controls at least annually and covers all key controls including financial, operational and compliance controls and risk management. The system of internal control is based on an ongoing 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 SPFM and has been in place for the year ended 31 March 2014 and up to the date of approval of the annual report and financial statements. Internal Audit Skills Development Scotland’s Internal Audit service is provided by Scott-Moncrieff, which operates in accordance with the Public Sector Internal Audit Standards. The internal audit programme for 2013-14 comprised a full programme of reviews targeted at our key risk areas, developed from a comprehensive audit needs assessment and delivered in accordance with the Government Internal Audit Manual.


20

GOVERNANCE STATEMENT BY THE ACCOUNTABLE OFFICER (CONT’D)

Internal Audit submitted regular reports to the organisation’s Audit and Risk Committee which included the Head of Internal Audit's independent and objective opinion on the adequacy and effectiveness of the organisation's systems of internal control together with recommendations for improvement.

The work of Internal Audit is informed by an analysis of the risk to which Skills Development Scotland is exposed, and annual Internal Audit Plans are based on this analysis. The Internal Audit Plans are endorsed and approved by the Audit and Risk Committee. The Committee meets at least four times each year at which the Head of Internal Audit provides the Audit and Risk Committee with a report on Internal Audit activity in Skills Development Scotland. The Internal Audit Annual Report 2013-14 is presented to the June meeting of the Audit and Risk Committee and includes an independent opinion on the adequacy and effectiveness of the systems of internal financial control, internal control and governance, and security control on computer network infrastructure.

The Head of Internal Audit has direct unimpeded access throughout the year to the Chair of the Audit and Risk Committee, the Chief Executive and the Finance and Audit Director.

Internal Financial Controls The system of internal financial control operates within a financial strategy and is based on a framework of delegation and accountability for officers, financial regulations, scheme of delegation, scheme of administration, committees and sub-committees, supported by a framework of administrative procedures including the segregation of duties and regular financial management information. In particular, this includes:

Financial systems which include: o comprehensive budgeting systems; o regular reviews by members of the Executive Leadership Group of revenue budgetary control reports which identify

actual income and expenditure to date and compare projected outturn with approved budgets; the appropriate committees also consider these reports;

o setting targets to measure financial and other performance; and o clearly defined control guidelines.

HR and Payroll system controls to make sure that staff remuneration and reimbursement payments are made correctly and on time.

Procurement system controls to make sure that orders for goods and services are properly authorised and creditor system controls to make sure that payments made to suppliers are correct.

Income and debtors controls to ensure they are correctly identified, collected and accounted for.

Controls over the operation of computer systems and administrative procedures to make sure that secure systems are developed to meet business and accounting needs.

Anti-fraud controls including the Whistle Blowing Policy which details how employees as well as agency workers or contractors can voice concerns in relation to suspected fraud, theft or corruption and the Fraud Policy and Fraud Response Plan which details how SDS minimises opportunities for fraud – internal and external - and arrangements for reporting and investigating any suspected fraud.

Risk Management Arrangements Skills Development Scotland’s risk management framework is designed to meet guidance issued by the Scottish Ministers. Its key components are:

a Risk Management Policy which sets out our attitude to risk and our approach to managing potential barriers to the achievement of our objectives. The Policy highlights that risk management and internal control are firmly aligned with the ability to achieve the key business objectives. The Policy is available to all staff on the Skills Development Scotland intranet;

a Risk Information Management System (RIMS) which is used to record, monitor and report on risk on a consistent basis across the organisation;

a Corporate Risk Register which records those risks that impact on the organisation as a whole and are likely to affect the organisation’s ability to achieve its strategic goals and objectives. The Register is linked to corporate objectives and all risks are assigned a quantitative value to measure their likelihood and impact, which enables them to be assessed in line with the organisation’s risk appetite. The Register is reviewed and discussed monthly by the Executive Leadership Group and on a quarterly basis by the Audit and Risk Committee, which includes consideration of progress on agreed actions to manage the risks. The Skills Development Scotland board also took part in a full risk workshop in May 2013;

directorate and Heads of Service Risk Registers which identify and document significant risks at directorate and service level and the actions in hand or planned to manage these. The content of these registers follows the guidance of HM Treasury’s Orange Book on Risk Management. Each directorate is responsible for using RIMS to maintain a system of risk management and internal control, consistent with corporate risk arrangements, and designed to enable it to deliver its business


21

GOVERNANCE STATEMENT BY THE ACCOUNTABLE OFFICER (CONT’D) objectives in an efficient and effective manner in accordance with our values and policies. directorate management teams review their Risk Registers and update them on a regular basis. Directors and depute directors also complete quarterly Risk Assurance Statements and an annual Internal Control Assessment to assure the Accountable Officer that arrangements in place with regards to risk management and internal controls within their directorate are operating effectively and are being monitored on an ongoing basis;

each identified risk, both at a corporate and local level, has a risk owner responsible for monitoring the risk and ensuring that any identified mitigating actions are implemented;

the Audit and Risk Committee is responsible for reviewing the effectiveness of the organisation’s risk management approach and receives Risk Management Reports on a quarterly basis or more frequently if either the Chair of the Audit and Risk Committee or the Board considers this necessary. The Board also receives regular updates from the Chair of the Audit and Risk Committee concerning internal control;

directorates are responsible for ensuring early and full reporting of critical business risks. Specialist functions (business continuity, health and safety and information security) are in place to manage specific types of risk, and these provide the Board and management with assurance in these areas;

risk assessment is also a key component of the organisation’s project planning and appraisal process, via project initiation documents and project briefs; and

awareness and training sessions are held as required and a risk management element has been incorporated into the Skills Development Scotland suite of online e-learning which is available to all staff on the Skills Development Scotland intranet.

The management of risk is the responsibility of all managers and staff throughout the organisation and they have a responsibility to be risk aware at all times. All employees have a personal responsibility to:

be aware of and comply with policies and procedures;

be aware of risks at all times and take reasonable action to identify, eliminate where possible, or control them;

notify line managers of risks they have identified which cannot be adequately managed; and

participate in risk management education and training. Details of significant risk-related matters during the period There have been no significant risk issues that have required additional action or indeed escalation out with our normal risk management process as described above. One matter has however required focussed management input to address and bring to a satisfactory conclusion. Significant lapses of data security There have been no significant lapses of data security. Conclusion Having reviewed the above, it is my opinion that reasonable assurance can be placed upon the adequacy and effectiveness of Skills Development Scotland’s governance arrangements, internal control and management of resources during the year ended 31 March 2014. My opinion is informed by:

the views of the Audit and Risk Committee on assurance arrangements;

the opinion of internal audit on the quality of the systems of governance, management and risk control;

assurances from directors provided in Statements of Assurance, in line with SPFM guidance;

feedback from the business on our use of resources, responses to risk and the extent to which in-year budgets and other targets have been met;

the work of the internal auditors; and

comments made by the external auditors in their management letters and other reports.

Damien Yeates Director and Accountable Officer 25 July 2014


22

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE SKILLS DEVELOPMENT SCOTLAND CO. LIMITED, THE AUDITOR GENERAL FOR SCOTLAND AND THE SCOTTISH PARLIAMENT

We have audited the financial statements of The Skills Development Scotland Co. Limited for the year ended 31 March 2013 set out on

pages 24 to 49. The financial reporting framework that has been applied in their preparation is applicable law and International

Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in

accordance with the provisions of the Companies Act 2006 and the Accounts Direction applicable to the year issued by the Scottish

Ministers.

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006

and to the Auditor General for Scotland in accordance with sections 21 and 22 of the Public Finance and Accountability (Scotland) Act

2000. Our audit work has been undertaken so that we might state to those two parties those matters we are required to state to them

in an auditor's report and for no other purpose. In accordance with the Code of Audit Practice approved by the Auditor General for

Scotland, this report is also made to the Scottish Parliament, as a body. To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the company, the company's members, as a body, and the Auditor General for Scotland, for

our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors, accountable officer and auditor

As explained more fully in the statement of directors' and accountable officer’s responsibilities set out on page 18, the directors are

responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility

is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on

Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for

Auditors.

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. In addition, we read all the financial and non-financial information in the annual report 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 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 of the state of the group's and of the parent company's affairs as at 31 March

2013 and of the group's surplus for the year then ended;

the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as

applied in accordance with the provisions of the Companies Act 2006; and

the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and the

Accounts Direction applicable for the year issued by the Scottish Ministers.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and Directors' Report for the financial year for which the financial

statements are prepared is consistent with the financial statements.

Opinion on regularity prescribed by the Public Finance and Accountability (Scotland) Act 2000

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.


23

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE SKILLS DEVELOPMENT SCOTLAND CO. LIMITED, THE AUDITOR GENERAL FOR SCOTLAND AND THE SCOTTISH PARLIAMENT (CONT’D)

Opinion on other matters prescribed by the Public Finance and Accountability (Scotland) Act 2000

In our opinion:

the part of the remuneration report to be audited has been properly prepared in accordance with the Accounts Direction

applicable to the year issued by the Scottish Ministers; and

the information given in the chair and chief executive welcome and the part of the remuneration that is not audited for the financial year for which the financial statements are prepared are consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our

opinion:

adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been

received from branches not visited by us; or

the parent company financial statements are not in agreement with the accounting records and returns; or

certain disclosures of directors' remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

Andrew Shaw (Senior Statutory Auditor)

For and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

191 West George Street

Glasgow

G2 2LJ

25 July 2014


24

STATEMENT OF FINANCIAL POSITION - GROUP AS AT 31 MARCH 2014 Group Group 2014 2013 Notes £’000 £’000 ASSETS NON-CURRENT ASSETS Intangible assets 4 444 974

444 974

CURRENT ASSETS Trade and other receivables 5 13,012 27,057 Cash and cash equivalents 16,627 5,963

29,639 33,020

TOTAL ASSETS 30,083 33,994

EQUITY CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Retained (losses)/earnings 6 (14,976) 1,341

TOTAL EQUITY (14,976) 1,341

LIABILITIES NON-CURRENT LIABILITIES Retirement benefit obligations 7 34,541 24,668

34,541 24,668

CURRENT LIABILITIES Trade and other payables 8 9,563 6,976 Current income tax liabilities 9 27 20 Provisions for other liabilities and charges 10 928 989

10,518 7,985

TOTAL LIABILITIES 45,059 32,653

TOTAL EQUITY AND LIABILITIES 30,083 33,994

The notes on pages 29 to 49 are an integral part of these consolidated financial statements. The financial statements on pages 24 to 49 were approved by the board of directors on 25 July 2014 and were signed on its behalf by:

Damien Yeates Director and Accountable Officer


25

STATEMENT OF FINANCIAL POSITION - COMPANY AS AT 31 MARCH 2014 Company Company 2014 2013 Notes £’000 £’000 ASSETS NON-CURRENT ASSETS Intangible assets 4 444 974

444 974

CURRENT ASSETS Trade and other receivables 5 13,025 27,068 Cash and cash equivalents 11,087 2,441

24,112 29,509

TOTAL ASSETS 24,556 30,483

EQUITY CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Retained losses 6 (20,501) (2,168)

TOTAL EQUITY (20,501) (2,168)

LIABILITIES NON-CURRENT LIABILITIES Retirement benefit obligations 7 34,541 24,668

34,541 24,668

CURRENT LIABILITIES Trade and other payables 8 9,561 6,974 Current income tax liabilities 9 27 20 Provisions for other liabilities and charges 10 928 989

10,516 7,983

TOTAL LIABILITIES 45,057 32,651

TOTAL EQUITY AND LIABILITIES 24,556 30,483

The notes on pages 29 to 49 are an integral part of these consolidated financial statements. The financial statements on pages 24 to 49 were approved by the board of directors on 25 July 2014 and were signed on its behalf by:

Damien Yeates Director and Accountable Officer


26

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2014 2014 2013 Notes £’000 £’000 Revenue 12 201,369 200,342 Cost of sales (9,742) (4,693)

Gross surplus 191,627 195,649 Operating expenditure 13 (173,114) (168,342) Administrative expenses 13 (27,412) (24,795)

Operating (deficit)/surplus (8,899) 2,512 Finance cost 15 (1,162) - Finance income 15 137 658

(Deficit)/Surplus on ordinary activities before tax (9,924) 3,170 Income tax expense 9 (27) (18)

(Deficit)/Surplus on ordinary activities after tax (9,951) 3,152

Other comprehensive expense Items that will not be reclassifed to profit or loss: Actuarial losses recognised in retirement benefit scheme 7 (6,366) (7,182)

Other comprehensive expense for the year (6,366) (7,182)

Total comprehensive expense for the year (16,317) (4,030)

All of the above results are derived from continuing operations and are due to the equity holders of the company. The notes on pages 29 to 49 are an integral part of these consolidated financial statements. The company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company statement of income. The total comprehensive expense for the parent company for the year is £18.3 million (2013: £4.0 million) and is influenced by IAS 19 pension adjustments. Removing the effects of actuarial activities the operating expense is £8.4 million (2013: surplus of £3.4 million).


27

STATEMENT OF CHANGES IN TAXPAYERS’ EQUITY FOR THE YEAR ENDED 31 MARCH 2014

Group Company £’000 £’000 Balance at 1 April 2012 5,371 1,879 Total comprehensive expense for the year (4,030) (4,047)

Balance at 31 March 2013 1,341 (2,168)

Balance at 1 April 2013 1,341 (2,168) Total comprehensive expense for the year (16,317) (18,333)

Balance at 31 March 2014 (14,976) (20,501)


28

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2014 Notes 2014 2013 £’000 £’000 Cash flows from operating activities Cash receipts: Grant-in-Aid 190,112 178,144 Cash receipts: Customers 15,694 27,264

Total cash received 205,806 205,408 Cash paid to suppliers and employees (194,866) (204,561)

Cash generated from operations 10,940 847 Interest received 15 137 104 Income tax paid (20) (23)

Net cash generated from operating activities 11,057 928

Cash flows from investing activities Development of intangible assets 4 (393) (402)

Net cash generated from investing activities (393) (402)

Net increase in cash and cash equivalents 10,664 526 Cash and cash equivalents at beginning of year 5,963 5,437

Cash and cash equivalents at end of year 16,627 5,963


29

NOTES TO FINANCIAL STATEMENTS Note 1

ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are prepared under the historical cost convention and in accordance with applicable accounting standards.

(a) Basis of Preparation

The financial statements are prepared in a form determined by the Scottish Ministers in accordance with the Management Statement

between the Company and the Scottish Ministers.

The financial statements have been prepared in accordance with the 2013-14 Government Financial Reporting Manual (FReM) issued

by HM Treasury, International Financial Reporting Standards as adopted by the European Union (IFRS) and IFRIC Interpretations.

The FReM requires that the group should comply with the Companies Act, but, as a non-departmental public body, also follow the

principles in the FReM (for example, in preparing a remuneration report) where these go beyond the Companies Act.

The FReM states that non-departmental public bodies should account for grant-in-aid as a movement in reserves rather than income.

However, the group has concluded that under the Companies Act it is appropriate to continue to account for grant-in-aid as income,

on the basis that grant-in-aid received by the group is required in order to carry out a function which its owners have asked it to

perform. On that basis, the group considers grant-in-aid to be an exchange transaction and, as such, requires to be accounted for in

the income statement.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 2.

Where the FReM permits a choice of accounting policy, the accounting policy which has been judged to be the most appropriate to the

particular circumstances of the group for the purpose of giving a true and fair view has been selected.

The financial statements have been prepared on a going concern basis, which assumes the continued support of the Scottish Government. Grant-in-aid for 2014-15 is £184.8 million and has already been included in the Scottish Government’s estimates for that year, which have been approved by Parliament, and there is no reason to believe that the Scottish Government’s full sponsorship and future Parliamentary approval will not be forthcoming.

(b) Basis of Consolidation

Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

(c) Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments,

has been identified as the steering committee that makes strategic decisions.

(d) Intangible assets

Recognition

Intangible assets are recognised where the costs can be measured reliably and there is a clear future economic benefit attributable from the asset that will flow through to the group.


30

NOTES TO FINANCIAL STATEMENTS Note 1 (cont’d)

Intangible assets are internally generated assets without physical substance. All intangible assets recognised have finite useful lives, and are measured at cost less accumulated amortisation. Cost is defined as the direct labour and other costs directly attributable to the development of the intangible asset.

Websites that deliver services are assumed to be website developments that provide a means of delivering specific services to customers in line with the company’s business objectives.

Amortisation

Amortisation is calculated over the life of the asset. Amortisation is recognised in the consolidated statement of comprehensive income on a straight-line basis over the useful life of the intangible assets from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The expected useful lives for the current and comparative periods are as follows:

Websites that deliver services - over 3 years

Amortisation methods, useful lives and residual values are reviewed at the end of each financial year and adjusted if appropriate.

Impairment

Intangible assets are reviewed for impairment at each balance sheet date and any impairment losses are recognised in the income statement.

(e) Financial Instruments

Financial assets

Classification

The group classifies its financial assets in the following categories: at fair value through income statement, loans and receivables, and

available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the

classification of its financial assets at initial recognition.

a) Financial assets at fair value through the income statement

Financial assets at fair value through the income statement comprise derivatives. Assets in this category are classified as current

assets. The group does not trade in derivatives and does not apply hedge accounting.

b) Loans and receivables

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, except for maturities greater than 12 months after the year end, which are classified as

non-current assets. Loans and receivables comprise trade and other receivables and cash at bank and in hand in the statement of

financial position.

c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other

categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of

the year end.

Recognition and measurement

Financial assets are recognised when the group becomes party to the contractual provisions of the financial instrument. Financial

assets are derecognised when the rights to receive cash flows from the asset have expired or have been transferred and the group has

transferred substantially all risks and rewards of ownership.

a) Financial assets at fair value through surplus or deficit

Financial assets carried at fair value are initially recognised at fair value, and transaction costs are expensed in the income

statement. Financial assets carried at fair value are subsequently measured at fair value. Gains or losses arising from changes in

the fair value are presented in the income statement.

b) Loans and receivables

Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest

method, less provision for impairment. A provision for impairment of loans and receivables is established when there is objective

evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant

financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or


31


delinquency in payments (more than 30 days overdue) are considered indicators that the loan and receivable is impaired. The

amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash

flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an

allowance account, and the amount of the loss is recognised in the income statement.

When a loan or receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts

previously written off are credited in the income statement.

Financial Liabilities

Classification

The group classifies its financial liabilities in the following categories: at fair value through surplus or deficit, and other financial

liabilities. The classification depends on the purpose for which the financial liabilities were issued. Management determines the

classification of its financial liabilities at initial recognition.

a) Financial liabilities at fair value

Financial liabilities at fair value comprise derivatives. Liabilities in this category are classified as current liabilities. The group does

not trade in derivatives and does not apply hedge accounting.

b) Other financial liabilities

Other financial liabilities are included in current liabilities, except for maturities greater than 12 months after the balance sheet

date. These are classified as non-current liabilities. The group’s other financial liabilities comprise trade and other payables in the

balance sheet.

Recognition and measurement

Financial liabilities are recognised when the group becomes party to the contractual provisions of the financial instrument. A financial

liability is removed from the balance sheet when it is extinguished, that is when the obligation is discharged, cancelled or expired.

a) Financial liabilities at fair value

Financial liabilities carried at fair value are initially recognised at fair value, and transaction costs are expensed in the income

statement. Financial liabilities carried at fair value are subsequently measured at fair value. Gains or losses arising from changes in

the fair value are presented in the income statement.

b) Other financial liabilities

Other financial liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective

interest method.

Additional information is provided in Note 19.

(f) Trade Receivables

Trade receivables are recognised at cost less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the value of estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within ‘administrative expenses’.

When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against ‘administrative expenses’ in the income statement.

(g) 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 balance sheet.

(h) Trade Payables

Trade payables are recognised at cost.


32


(i) Current and Deferred Income Tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent

that it relates to items recognised directly in reserves. In this case, the tax is also recognised in equity.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the

country where the group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with

respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the

basis of amounts expected to be paid to the tax authorities.

Deferred tax

In accordance with IAS 12 Income tax, full provision is made for tax assets and liabilities arising from timing differences between

recognition of gains and losses in the financial statements and their recognition in the tax computation.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which timing differences are expected to

reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is

measured on a non discounted basis.

Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities

and their carrying amounts in the consolidated financial statements. However, deferred tax is not accounted for if it arises from initial

recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither

accounting, nor taxable surplus or deficit. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially

enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred income tax

liability is settled. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except

where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference

will not reverse in the foreseeable future. Deferred tax assets are recognised only to the extent that it is probable that future taxable

surpluses will be available against which the temporary differences can be utilised.

Value Added Tax

Most of the activities of the group are outside the scope of Value Added Tax (VAT) and, in general, output tax does not apply and

input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the

capitalised purchase cost of fixed assets. Where output tax is charged or input VAT is recoverable, the amounts are stated net of VAT.


33


(j) Employee benefits

(a) Pension Obligations

Employees of the company are members of one of two pension schemes, highlighted below. Both schemes are defined benefit pension

schemes providing benefits based on final pensionable pay, which are contracted out of the State Earnings-Related Pension Fund:

Strathclyde Pension Fund

Highland Council Pension Fund

The Schemes are accounted for on a defined benefit basis under IAS 19 Employee Benefits. Assets and liabilities of the schemes are held separately from those of the group. The schemes’ assets are measured using market values and the schemes’ 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. Contributions to these schemes are calculated so as to spread the cost of pensions over employees’ working lives with the group. The contributions are determined by an actuary on the basis of triennial valuations using the Age Attained Method. The actuaries also review the progress of the schemes in each of the intervening years. Variations from regular cost are spread over the expected average remaining working lifetime of members of the schemes after making allowances for future withdrawals.

The expected cost of providing staff pensions to employees contributing to the schemes is recognised in the income statement on a systematic basis over the expected average remaining lives of members of the funds in accordance with IAS 19 Employee Benefits and recognises retirement benefits as the benefits are earned and not when they are due to be paid. The income statement also includes the net impact of returns on the schemes’ assets and interest on the schemes’ liabilities, which is disclosed as other finance income. A pension scheme asset is recognised on the balance sheet only to the extent the surplus may be recovered by reduced further contributions or to the extent that the trustees have agreed a refund from the scheme at the balance sheet date. A pension scheme liability is recognised to the extent that the group has a legal or constructive obligation to settle the liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in the statement of comprehensive income in the period in which they arise.

Past-service costs are recognised immediately in income and expenditure, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period.

(b) Termination benefits

Termination benefits are payable when employment is terminated by the group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after year end are discounted to their present value.

(k) Provisions

The group recognises provisions when: the group has a present legal or constructive obligation as a result of past events; it is probable

that an outflow of resource will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not

recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole.

A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations

may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using

the discount rate prescribed by HM Treasury.

(l) Dilapidations

Provision for the costs of dilapidations on the expiry of premises leases, which are of uncertain timing or amount at the balance sheet

date, are provided on the basis of the best estimate using independent professional assessments.


34


(m) Revenue

a) Grant-in-aid

Grant-in-aid from the Scottish Government is recognised on the basis of cash received during the year. This treatment is defined by

the funding agreement with the Scottish Government, which does not allow unused funding to be carried forward into future financial

years.

b) Sales of services

The group sells careers and learning provision services and IT services to other public sector organisations. These services are provided on a time and material basis. Contract terms are generally less than one year.

Revenue from time and material contracts is recognised on a cost recovery basis. For time contracts, the stage of completion is measured on the basis of labour hours delivered. For material contracts, the stage of completion is measured on the basis of direct expenses incurred.

If circumstances arise that may change the original estimates of revenues, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated revenues or costs and are reflected in income in the period in which the circumstances that give rise to the revision become known by management.

Sales of services are recognised as income in the period to which they relate.

Revenue is stated net of VAT where applicable.

c) Interest income

Interest income is recognised on an accruals basis.

d) Deferred capital grants

Funding from the Scottish Government used to fund the purchase of capital assets is deferred in the balance sheet, split between

amounts due within one year and amounts due in more than one year, and released to the income statement by equal instalments over

the expected useful economic life of the related asset on a basis consistent with the depreciation policy.

(n) Cost of Sales

Cost of sales represents the expenditure incurred in providing outsourced IT services and in providing specific education and lifelong

learning services as defined in the group’s objectives as set by the Scottish Ministers. These are the costs of generating invoiced

income. Cost of sales are reported in the period to which they relate and are stated net of recoverable VAT.

(o) Operating Expenditure

Operating expenditure represents the costs of national training programmes and the related staff costs of administering these

programmes. Operating expenditure is reported in the period to which it relates and is stated net of recoverable VAT.

(p) Administrative Expenses

Administrative expenses are the costs of running the group, rather than the provision of services. These costs include central support

functions, governance, administration costs and the related staff costs. Administrative expenses are reported in the period to which

they relate and are stated net of recoverable VAT.

(q) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

The group leases certain property, plant and equipment. Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.


35

NOTES TO FINANCIAL STATEMENTS

Note 1 (cont’d)

(r) Newly Adopted IFRS

The company has adopted the following IFRSs which are effective for the first time in these financial statements.

IAS 19 Revised “Employee Benefits”

The effect of the change to IAS 19 on the income statement for the year ended 31 March 2013 is an increase in costs of £1.4 million.

The impact on the financial statements is not considered to be material and there has therefore been no restatement of comparatives.

(s) Adopted IFRS not yet applied

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 10 “Consolidated Financial Statements” and IAS 27 (2011) “Separate Financial Statements”;

IFRS 11 “Joint Arrangements” and IAS 28 (2008) “Investments in Associates and Joint Ventures”,

IFRS 12 “Disclosure of Interests in Other Entities”;

IAS 32 “Offsetting Financial Assets and Financial Liabilities”; and

Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)

Note 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost/(income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations. The group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.

Other key assumptions for pension obligations are based in part on current market conditions. Additional information is disclosed in Note 7.

Note 3

SEGMENTAL REPORTING

Group Management has considered the operating segment of the group based on the reports reviewed by the Chief Executive and the Board that are used to make strategic decisions. Based on this information used internally, management believe the group has one operating segment. All income and expenditure is attributable to the principal activity of the group and relates to the provision of National Training Programmes, careers and learning provision services. The Chief Executive and the Board monitor expenditure by strategic theme. Revenue, Cost of Sales and finance income and expenditure are not monitored by strategic theme. An analysis of expenditure by strategic theme is given in Note 13.


36


INTANGIBLE ASSETS – GROUP AND COMPANY Websites £’000 Cost: At 1 April 2012 1,973 Additions 402

At 31 March 2013 2,375

At 1 April 2013 2,375 Additions 393

At 31 March 2014 2,768

Amortisation At 1 April 2012 657 Provided during the year 744

At 31 March 2013 1,401

At 1 April 2013 1,401 Provided during the year 923

At 31 March 2014 2,324

Net Book Value At 31 March 2014 444

At 31 March 2013 974

At 31 March 2012 1,316


37


Note 5 TRADE AND OTHER RECEIVABLES Group Group Company Company 2014 2013 2014 2013 £’000 £’000 £’000 £’000 Amounts falling due within one year Trade receivables 3,624 3,041 3,624 3,041 Provision for doubtful debts (21) (21) (21) (21)

3,603 3,020 3,603 3,020 Other receivables 529 4,330 542 4,341 Accrued income 4,049 9,473 4,049 9,473 Prepayments 4,831 10,234 4,831 10,234

13,012 27,057 13,025 27,068

Included within Trade and Other Receivables are balances due from other public sector organisations as follows: Group Group Company Company 2014 2013 2014 2013 £’000 £’000 £’000 £’000 Amounts falling due within one year Central government bodies 6,518 16,278 6,518 16,278 Local authorities 331 515 331 515 NHS bodies 1 - 1 - Public corporations 2 106 2 106 Bodies external to government 6,160 10,158 6,173 10,169

13,012 27,057 13,025 27,068

Trade receivables that are less than three months past their due date are not considered impaired. As at 31 March 2014 the group and company had trade receivables with a carrying value of £93,000 (2013: £1,960,000) that were past their due date but not impaired. The ageing of trade receivables which are past their due date but not impaired is as follows: GROUP AND COMPANY 2014 2013 £’000 £’000 Up to 3 months past due 63 1,960 3 to 6 months past due - - Over six months past due 30 -

93 1,960

The trade receivables assessed as past due but not impaired primarily relate to balances due from public sector organisations and there is no history of default from these customers recently. All receivables are denominated in GB pounds. The carrying amount of short term receivables approximates their fair value. The effective interest rate on non-current receivables is nil.


38

NOTES TO FINANCIAL STATEMENTS Note 6 RETAINED EARNINGS Group Group Company Company 2014 2013 2014 2013 £’000 £’000 £’000 £’000 At 1 April 2013 1,341 5,371 (2,168) 1,879 Total comprehensive expense for the year (16,317) (4,030) (18,333) (4,047)

At 31 March 2014 (14,976) 1,341 (20,501) (2,168)

Note 7 RETIREMENT BENEFITS OBLIGATIONS The company participated in the following two multi employer pension schemes in the year to 31 March 2014 - Strathclyde Pension Fund - Highland Council Pension Fund Both pension schemes operated as defined benefits schemes and provided benefits based on final pensionable salaries. The assets of the schemes are held separately from those of Skills Development Scotland. Total contributions paid by the group and company during the year were £7.3 million. At the end of the period no contributions were outstanding. In 2014-15 total contributions are expected to be £7.6 million. The disclosures below have been prepared on a consolidated basis for the schemes in which the company and group participate. Comparatives have been provided where these are available. 2014 2013 £’000 £’000 Present value of funded defined benefit obligations (234,058) (205,884) Fair value of plan assets 200,283 181,963

(33,775) (23,921) Present value of unfunded obligations (766) (747)

Net liability (34,541) (24,668)

Movement in present value of defined benefit and unfunded obligations 2014 2013

£’000 £’000

Opening defined benefit obligation 206,631 170,703 Current service cost 9,550 7,359 Past service cost, including loss on curtailment 90 58 Interest cost on defined benefit obligation 9,480 8,340 Actuarial loss arising from changes in financial assumptions 10,535 21,428 Contributions by plan participants 2,342 2,167 Benefits paid (3,804) (3,424)

At 31 March 234,824 206,631


39

NOTES TO FINANCIAL STATEMENTS Note 7 (cont’d) Movement in fair value of plan assets 2014 2013 £’000 £’000 Opening fair value of plan assets 181,963 153,505 Interest income on plan assets 8,318 8,894 Return on assets excluding amounts included in net interest 4,169 14,246 Assets distributed on settlements - (143) Contributions by employer 7,258 6,683 Contributions by plan participants 2,342 2,167 Contributions in respect of unfunded benefits 37 35 Benefits paid (3,804) (3,424)

At 31 March 200,283 181,963

Expense recognised in the statement of income 2014 2013 £’000 £’000 Current service cost 9,550 7,359 Loss on settlements - 143 Past service cost, including loss on curtailment 90 58 Interest cost on defined benefit obligation 9,480 8,340 Interest income on plan assets (8,318) (8,894)

Total 10,802 7,006

The net expense is recognised in the following line items in the consolidated statement of comprehensive income: 2014 2013 £’000 £’000 Operating expenditure 8,227 6,641 Administrative expenses 1,413 919 Finance cost/(income) 1,162 (554)

10,802 7,006

Amount recognised in the consolidated statement of comprehensive income 2014 2013 £’000 £’000 Return on assets excluding amounts included in net interest 4,169 14,246 Actuarial loss arising from changes in financial assumptions (10,535) (21,428)

Total remeasurement recognised in the consolidated statement of comprehensive income (6,366) (7,182)


40

NOTES TO FINANCIAL STATEMENTS Note 7 (cont’d) The fair value of the plan assets was as follows:

31 March 2014 31 March 2013

Quoted in active

market

Not quoted

in active market

Total value

Quoted

in active market

Not quoted

in active market

Total value

£’000 £’000 £’000 £’000 £’000 £’000 Equity securities 74,358 144 74,502 67,194 68 67,262 Debt securities 2,401 1 2,402 2,465 1 2,466 Private equity - 17,884 17,884 - 16,546 16,546 Real estate - 14,166 14,166 - 11,826 11,826 Investment funds and unit trusts 7,555 74,557 82,112 7,382 70,157 77,539 Derivatives 52 - 52 (25) - (25) Cash and cash equivalents 194 8,971 9,165 185 6,164 6,349

84,560 115,723 200,283 77,201 104,762 181,963

Principal actuarial assumptions (expressed as weighted averages) were applied on a consistent basis across the schemes and at the year end were as follows: 2014 2013 % % Discount rate 4.30 4.50 Future salary increases 5.10 5.10 Price inflation (RPI) 3.60 3.60 Future pension increases 2.80 2.80

The discount rate is based on a corporate bond yield curve and reflects the maturity profile of the plan liabilities. These liabilities are assessed as having a weighted average duration of between 17 years and 23 years at 31 March 2014. In valuing the liabilities arising from retirement benefit obligations at 31 March 2014, mortality assumptions have been made as indicated below. If life expectancy had been changed to assume that all the members of the fund lived for one year longer, the value of the reported liabilities at 31 March 2014 would have increased by £6.8 million. The assumptions relating to longevity underlying the retirement benefit obligations at the balance sheet date are based on standard actuarial mortality tables and include an allowance for future improvements in longevity. The assumptions are equivalent to expecting a 65-year old to live for a number of years as follows:

Current pensioner aged 65: 21.0 years (male), 23.4 years (female)

Future retiree upon reaching 65: 23.3 years (male), 25.3 years (female)


41

NOTES TO FINANCIAL STATEMENTS Note 7 (cont’d) History of plans. The history of the plans for the current and prior periods is as follows: 2014 2013 2012 2011 2010 Statement of Financial Position £’000 £’000 £’000 £’000 £’000

Present value of scheme liabilities (234,058) (205,884) (170,038) (167,888) (150,040) Fair value of scheme assets 200,283 181,963 153,505 164,808 129,210 Unfunded Liabilities (766) (747) (665) (643) -

Deficit (34,541) (24,668) (17,198) (3,723) (20,830)

2014 2013 2012 2011 2010 Experience adjustments £’000/% £’000/% £’000/% £’000/% £’000/%

Experience adjustments on scheme liabilities and as a percentage of scheme liabilities

37 0%

84 0%

20,296 12%

14,190 8%

2,089 1%

Experience adjustment on scheme assets and as a percentage of scheme assets

4,169 2%

14,246 8%

(29,552) (19%)

(464) 0%

28,283 22%

4,206 14,330 (9,256) 13,726 30,372

Sensitivity Analysis Change in assumptions at year ended 31 March 2014:

Approximate % increase to Employer Liability

Approximate monetary amount (£’000)

0.5% decrease in Real Discount Rate 12% 27,764 1 year increase in member life expectancy 3% 6,846 0.5% increase in the Salary Increase Rate 5% 10,387 0.5% increase in the Pension Increase Rate 7% 16,697

Note 8

TRADE AND OTHER PAYABLES Group Group Company Company 2014 2013 2014 2013 £’000 £’000 £’000 £’000 Amounts falling due within one year Trade payables 2,994 967 2,994 967 Social security and other taxes 6 42 6 42 Accruals and deferred income 6,563 5,967 6,561 5,965

9,563 6,976 9,561 6,974


42


Note 8 (cont’d) Included within trade and other payables are balances due to other public sector organisations as follows: Group Group Company Company 2014 2013 2014 2013 £’000 £’000 £’000 £’000 Amounts falling due within one year Central government bodies 2,664 1,573 2,664 1,573 Local authorities 273 134 273 134 NHS bodies 3 12 3 12 Public corporations 105 57 105 57 Bodies external to government 6,518 5,200 6,516 5,198

9,563 6,976 9,561 6,974

Note 9

INCOME TAXATION 2014 2013 £’000 £’000 Analysis of tax charge in the period:

UK Corporation Tax:

Current tax on income for the period 27 20 Adjustment in respect of prior periods - (2)

Total Current Tax 27 18

Deferred Tax: - -

Tax on Surplus on Ordinary Activities 27 18

The tax assessed for the period is the standard rate applying in the UK of 23% (2013: 24%). Factors affecting tax charge for the period: Current Tax Reconciliation (Deficit)/Surplus on ordinary activities before tax (9,924) 3,170

Current tax @ 23% (2013: 24%) (2,283) 761 Effects of: Non taxable income and disallowable expenditure 2,310 (741) Tax deducted at source (-) (-)

Current tax charge 27 20

Balance Sheet Note – Group and Company Corporation tax payable 27 20


43


Note 10

PROVISIONS FOR LIABILITIES AND CHARGES – GROUP AND COMPANY

At 1 Apr 2012

Increase

in year

Released to Income &

Expenditure

Utilised

At

31 Mar 2013 £’000 £’000 £’000 £’000 £’000 Equal pay 98 - (98) - - Dilapidations 996 41 (8) (40) 989

1,094 41 (106) (40) 989

At 1 Apr 2013

Increase in

year

Released to Income &

Expenditure

Utilised

At

31 Mar 2014 £’000 £’000 £’000 £’000 £’000 Equal pay - - - - - Dilapidations 989 210 (61) (210) 928

989 210 (61) (210) 928

The dilapidation provision relates to the costs, over the period of the lease, to return leased premises to their original condition, per the lease agreement.

Note 11 LEASE OBLIGATIONS Within Between the second After one year and fifth year five years £’000 £’000 £’000 Leasehold Property

31 March 2014 1,808 2,678 341 31 March 2013 1,667 2,685 134

The above relates to obligations in respect of leasehold property leased under operating lease agreements.

Note 12 REVENUE 2014 2013 £’000 £’000 Grant-in-Aid 190,112 178,144 European Income 1,393 9,366 IT Services 9,537 8,984 Careers Guidance and Support 308 719 Miscellaneous 19 3,129

201,369 200,342


44


EXPENDITURE

2014 2013

(a) Operating Expenditure £’000 £’000 National training programmes

Modern apprenticeships & Skillseekers 74,536 74,988

Get ready for work 5,565 21,262

Training for work 3,939 10,467

Employability fund (i) 25,688 -

Scotland’s best 741 -

Partnership action for continuing employment 49 -

Employer recruitment incentive 1,555 216

Adopt an apprentice 456 538

Innovate with an apprentice (12) 106

Flexible training opportunities 1,859 2,698

Low carbon fund 541 216

Targeted pathways - 114

College engagement 5,324 7,906

Challenge fund 239 2,659

120,480 121,170 Business enhancement projects 10,815 8,394 Individual Learning Accounts Scotland 973 949 Staff costs supporting operations (ii) 40,846 37,829

173,114 168,342

(b) Administrative Expenses Infrastructure, management & administration 12,918 11,683 Information, communication & technology/information systems 7,129 7,736 Staff costs supporting administration (ii) 7,365 5,376

27,412 24,795

(c) Included in the above are: Auditor’s remuneration:

Audit of these financial statements (iii) 79 79

Audit of financial statements of subsidiaries pursuant to legislation 2 2

Other services 11 2

Amortisation 923 744 Leasehold property rentals 2,265 2,305 Directors’ remuneration (Note 14) 966 675

(i) From 1 April 2013 the Employablity Fund brings together Scottish Government funding streams for the previous legacy programmes of; Training for Work, Get Ready for Work, Targeted Pathways, College Engagement and The Challenge Fund. (ii) Staff costs supporting operations and staff costs supporting administration for 2013 have been restated following a reclassification of staff activities. (iii)The auditor of Skills Development Scotland, appointed by the Auditor General for Scotland, is KPMG LLP. The fees for audit services are payable to Audit Scotland who are responsible for meeting the appointed auditor’s fee.


45


EMPLOYEE BENEFIT EXPENSE AND NUMBERS 2014 2013 £’000 £’000 Salaries 35,170 32,312 Severance costs 134 - Social security costs 2,877 2,630 Other pension costs (note 7) 9,550 7,359 Net assets distributed on settlement - 143 Past service cost, including curtailments (note 7) 90 58 Employee Benefits 1,120 1,060

48,941 43,562 Car allowances 262 268

49,203 43,830

Average number of full time equivalent employees 2014 2013 Non-executive directors and advisers 9 7 Executive Leadership Group 7 5 Operational 951 930 Administrative 161 126

1,128 1,068

Directors’ Remuneration Skills Development Scotland has one registered executive director in satisfaction of the requirements of The Companies Act 2006. The emoluments of this director amounted to £121,754 (2013: £120,940). The employer’s pension contributions in respect of this director amounted to £22,940 (2013: £22,770). Pension accrued up to 31 March 2014 for the director is £14,250 per annum. (2013: £12,311). There is no fixed cash benefit in this scheme. The emoluments of the non-executive directors amounted to £74,077 (2013: £60,360). The emoluments of the registered directors amounted to £195,831 (2013: £181,300). Emoluments, including employer’s pension contributions, of all directors, including titular directors and titular depute directors were as follows: 2014 2013 £’000 £’000 Salary 824 579 Pension 142 96

966 675


46

NOTES TO FINANCIAL STATEMENTS Note 14 (cont’d) Compensation Schemes – Exit Packages In the year to 31 March 2014, 4 employees, equating to 3.5 full time equivalent employees, (2013: no employees) left Skills Development Scotland under voluntary severance.

2013-14 2012-13

Exit package cost band

Number of compulsory

redundancies

Number of other

departures agreed

Total number of exit

packages by cost band

Number of compulsory

redundancies

Number of other

departures agreed

Total number of exit

packages by cost band

< £10,000 - 1 1 - - - £10,000 - £25,000 - 1 1 - - - £25,000 - £50,000 - - - - - - £50,000 - £75,000 - 2 2 - - - £75,000 - £100,000 - - - - - - £100,000 - £150,000 - - - - - - £150,000 - £200,000 - - - - - - £200,000 - £250,000 - - - - - - £250,000 - £300,000 - - - - - - Total number of exit packages by type

- 4 4 - - -

Total resource cost

- £144,144 £144,144 - - -

Note 15

FINANCE INCOME AND COSTS 2014 2013 Notes £’000 £’000 Finance costs:

Expected return on pension scheme assets 7 8,318 - Interest on pension scheme liabilities 7 (9,480) -

(1,162) -

Finance income: Interest income on bank deposits

137 104

Expected return on pension scheme assets 7 - 8,894 Interest on pension scheme liabilities 7 - (8,340)

- 554

137 658


47


ULTIMATE CONTROLLING PARTY The ultimate controlling party in The Skills Development Scotland Co. Limited is the Scottish Ministers.

Note 17

RELATED PARTIES Skills Development Scotland is an executive non-departmental public body, sponsored by the Scottish Government - Education and Lifelong Learning Department which is regarded as a related party. During the period, Skills Development Scotland has had various material transactions with the Scottish Government. Grant-in-aid recoverable from the Scottish Government during the year amounted to £190.1 million (2013: £178.1 million). Skills Development Scotland made payments of £76,852 (2013: £75,477) to University of Strathclyde, of which R Crawford is a Member of Court. Total outstanding at 31 March 2014 is £nil. All transactions are conducted at arms length. Skills Development Scotland received sales receipts of £1,921 (2013: £nil) from the Scottish Funding Council, of which J McClelland is the Chair and J Lowe, R Crawford and P McKelvie are board members. Total outstanding at 31 March 2014 is £nil (2013: £nil). All transactions are conducted at arms length. Skills Development Scotland made payments of £694,276 (2013: £1,409,444) to Scottish Enterprise, of which G Waddell is a non-executive director. The balance due at 31 March 2014 is £2,183,135 (2013: £nil). Sales receipts from Scottish Enterprise amounted to £7,133,859 (2013: £9,489,877) and the balance outstanding at 31 March 2014 is £2,046,488 (2013: £1,830,151). All transactions are conducted at arms length.

Note 18

SUBSIDIARY UNDERTAKINGS

The principal undertakings in which the parent company’s interest at the year end is more than 20% are as follows: Country of

incorporation

Principal activity Class and percentage of

shares held

Subsidiary undertakings

Scottish UfI Limited

Scotland

The stimulation of demand for, and simplification of access to, lifelong learning for individuals and businesses throughout Scotland.

100% of issued ordinary share capital

Careers Trust Scotland Limited

Scotland

Provision of careers guidance and information to the people of Scotland.

No share capital

The group financial statements consolidate the results of both organisations. The year end of both organisations is 31 March. Aggregate Results Result for year 2014 2013 2014 2013 £’000 £’000 £’000 £’000 Subsidiary undertakings Scottish UfI Limited - - - - Careers Trust Scotland Limited 5,525 3,509 2,017 17


48


FINANCIAL INSTRUMENTS

Skills Development Scotland has exposure to the following risks from the use of financial instruments:- Liquidity risk Credit risk Market risk Liquidity risk Liquidity risk is the risk that Skills Development Scotland 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. Skills Development Scotland’s primary source of funds is the Grant in Aid provision from the Scottish Government. Skills Development Scotland has no debt or borrowing facility with any external party. Liquidity is managed by the use of the annual operating plan process and the monitoring of actual performance against budgets and forecasts. The table below details the contractual maturities of financial liabilities. Carrying

Amount Contractual Cash flows Within one year

After more than one year

£’000 £’000 £’000 £’000 Financial liabilities Trade and other payables 3,955 3,955 3,027 928

3,955 3,955 3,027 928

Credit risk Credit risk is the risk of financial loss to Skills Development Scotland if a customer or counter party fails to meet its contractual obligations and arises from the trade receivables. Skills Development Scotland carries out appropriate credit checks on potential customers before significant sales transactions are entered into in order to mitigate the credit risk Skills Development Scotland will have from any single counterparty. The maximum exposure to credit risk is represented by the carrying value of each financial asset in the balance sheet. Skills Development Scotland operates a debt management process including monitoring, escalation procedures and recourse to court action to recover monies outstanding. Provision is made for doubtful receivables upon the age of the debt and experience of collecting overdue debts. Cash and cash equivalents are held with banks which are not expected to fail. The maximum exposure to credit risk at the reporting date was:-

2014

Carrying Amount 2013

Carrying Amount £’000 £’000 Financial assets Trade and other receivables 8,085 16,823 Cash and cash equivalents 16,627 5,963

24,712 22,786

There was a £21,000 impairment provision in respect of financial assets. 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. Currency risk Skills Development Scotland operates predominately in Scotland and the UK and is therefore considered not to be exposed to currency risks.


49


Note 19 (cont’d) Fair values The fair values, together with the carrying amounts of financial assets and liabilities in the balance sheet are as follows:-

2014


Fair Value 2013


Fair Value £'000 £'000 £'000 £'000 Trade and other receivables 8,085 8,085 16,823 16,823 Cash and cash equivalents 16,627 16,627 5,963 5,963 Trade and other payables (3,955) (3,955) (2,018) (2,018)

20,757 20,757 20,768 20,768


50

Appendix 1

Documents

SKILLS DEVELOPMENT SCOTLAND PARLIAMENTARY ACCOUNT€¦ · Over the last year we helped people move towards and get a job and take control of their work ambitions through our universal