BBC Full Financial Statements 2013/14 01 Review of the Managing Director, BBC Finance & Operations
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BBC Full Financial St atement s 2013/14 BBC Full Financial St atement s 2013/14 Presented to Parliament by the Secretary of State for Culture, Media and Sport by command of Her Majesty July 2014 The BBC’s Annual Report and Accounts 2013/14, giving narrative context to the numbers contained in this document, were also laid before Parliament on 21 July 2014 and are available online at bbc.co.uk/annualreport © BBC Copyright 2014 The text of this document (this excludes, where present, the Royal Arms and all departmental or agency logos) may be reproduced free of charge in any format or medium provided that it is reproduced accurately and not in a misleading context. The material must be acknowledged as BBC copyright and the document title specified. Photographs are used ©BBC or used under the terms of the PACT agreement except where otherwise identified. Permission from copyright holders must be sought before any photographs are reproduced. You can download this publication from bbc.co.uk/fullfinancialstatements Designed by Fishburn™ thisisfishburn.com Prepared pursuant to the BBC Royal Charter 2006 (Art.45) Contents 02 Review of the Managing Director BBC Finance & Operations 04 Financial overview 13 Looking forward 14 Statement of Executive Board responsibilities 15 Independent Auditor’s report 19 Group financial statements and notes 88 Glossary BBC Full Financial Statements 2013/14 01 Review of the Managing Director, BBC Finance & Operations ‘‘This year we have built on Delivering efficiencies whilst prioritising our most valued output our impressive track record The BBC has just completed its fourth year with the colour of delivering efficiencies whilst licence fee at £145.50 and is in the middle of delivering a major efficiency project, Delivering Quality First (DQF), which is on maintaining the production of track to deliver an annual total of £700million in annual recurrent outstanding programmes and savings. Staff across the BBC continue to work hard to deliver services. The BBC is currently these efficiencies, which allows the BBC to fund a range of new well placed to meet its targets obligations. This year has been one of a continued focus on as well as to continue to invest successfully delivering efficiencies whilst ensuring our most in its future.’’ creative outputs are prioritised. In 2013/14, the BBC started to fund a number of new obligations Anne Bulford from the licence fee, specifically Broadband rollout, S4C, Local TV and BBC Monitoring, at a combined cost of £250million. The delivery of the first £374million of the £700million DQF savings target has meant that these costs have been absorbed without the need to utilise the BBC’s cash balances. As a result we start 2014/15 in a strong position with sufficient cash reserves to fund the World Service (at an annual incremental funding requirement of £245million from 1 April 2014) without compromising the quality or range of our output. The delivery of these savings has also given the BBC the foundation from which to make a number of key strategic decisions this year for our licence fee funded activities, targeting increased investment in the strategic priorities announced by the Director-General in October 2014. A track record of delivering efficiencies DQF builds on the BBC’s long track record of successfully delivering savings and meeting efficiency targets. Across our Value For Money (2005-2008) and Continuous Improvement (CI) (2008-2013) programmes, we delivered nearly £1billion of real terms recurring savings, and these have already been reinvested in our content and essential infrastructure. This has been achieved whilst maintaining focus on the quality of services provided, optimising value for money rather than simply maximising savings in order to become the cheapest provider. CBeebies presenter Cat Carey Cast of Ambassadors 02 BBC Full Financial Statements 2013/14 2012/13 was the first year of our DQF programme, which has an Breakdown of UK PSB Group expenditure 2013/14 annual savings target of £700million by 2016/17. We planned to 2013/14 2012/13 achieve a significant proportion of the savings by this year and £m % £m % progress has been made with audited savings of £374million Service licences – delivered. We are on track to achieve the full £700million direct content spend 2,315 61 2,443 64 by 2016/17. Other direct content spend 91 3 87 2 We are doing this by taking advantage of new technologies and Property and technology 271 7 357 9 ways of working to reduce costs, increasing commercial income, Distribution 217 6 222 6 and addressing concerns around talent costs and top management Other infrastructure pay and expenses. and support 325 9 318 9 In delivering our savings we have sought to protect our LF collection costs 102 3 111 3 production activities as much as we can. We have found Digital Switchover 7 – 57 1 productivity savings through the reprocurement of key supplier Broadband rollout / S4C / deals, by improving our asset utilisation and by controlling talent Local TV 242 6 – – spend. We have exited both Television Centre and our White Costs to fund other income 230 6 232 6 City building. We have streamlined our facilities management workflows and invested in new systems and processes to deliver Lease cost reclassified (81) (2) (82) (2) savings in our Finance division. Restructuring costs 10 – 23 1 Pension deficit payments 49 1 49 1 Enhancing and simplifying our governance structure Total 3,778 100 3,817 100 As an organisation, we have demonstrated that we are able to optimise our cost base and deliver against efficiency targets set, Future challenges however, we need to go further in order to be confident that the The delivery of efficiencies, both through the ongoing DQF BBC is a well-run organisation. We recognise that there have programme and the historical CI programme, means we start been failures in the past, such as the Digital Media Initiative (DMI) 2014/15 in a strong position with sufficient cash reserves to meet and in the level of some individual severance payments made to our immediate obligations. As an organisation however, we face former executives and senior managers. new competitive pressures in an evolving media landscape and We have learned lessons from these and made changes to our structural change in audience behaviour, and this means the BBC’s governance structures and processes to deliver a simpler, more strategic context is changing. We have set ourselves three overall creative BBC. Since April, we have implemented a new way of goals to address these challenges and stay ahead of the trend: working with the BBC Trust with a clearer definition of individual innovating online responsibilities. The Trust is now focussed on challenging the strategy for the BBC and making sure we are answerable to making the most creative content and licence fee payers whilst the Executive takes full responsibility serving all our audience for the running of the BBC. This means a reduction in meetings with fewer, but more effective updates to the Trust and ensuring This will enable us to continue to build on our track record of the Executive Board are the key decision makers. delivering savings pushing both efficiency and creativity as hard as we can. We must, however, be mindful that given our constraints In addition, we have simplified our meeting structures to and financial risks, these savings alone cannot fully fund the streamline decision making and reduce bureaucracy. As an investments needed and consequently, difficult decisions in organisation, we will be much clearer on how decisions are relation to scope reductions have to be made. The most made and who in the organisation is accountable for them. significant of these is the proposed move of the BBC Three linear We now have in place a cap of £150,000 on all severance channel to an online platform only, which will be subject to a payments and have also removed pay in lieu of notice in all but public consultation in 2014, as part of a public value test the most exceptional of circumstances. Dame Fiona Reynolds, undertaken by the BBC Trust. our Senior Independent Director, has reviewed our severance deals and her findings have been published online: bbc.co.uk/ aboutthebbc/insidethebbc/howwework/reports/bbc_review_ severance_payments_2013_14.html. BBC Full Financial Statements 2013/14 03 Financial overview How we use the licence fee The way in which the BBC is funded places significant responsibilities Adjustment to last years published results on the BBC as an organisation. Specifically, it has to: Changes in accounting standards for pension costs mean our comparative figures have been restated this year. The change provide value for money by focusing expenditure on predominantly impacts the interest calculation on our plan assets the programmes and services the public most wants from and means that our previously reported surplus before taxation the BBC; of £367million has reduced to £196million and the previously ensure that its output is then delivered as cost efficiently reported net liabilities position of £60million has improved to as possible; a net assets position of £40million. ensure effective and efficient collection of the licence fee; Results for the year and Our results this year once again show that we have successfully maximise funding from other sources, most significantly managed the financial challenges facing us so as to ensure a sound BBC Worldwide, the BBC’s commercial trading operation, base for meeting our future commitments and delivering our in a manner consistent with the terms of its Charter and strategic ambitions. Disposal of commercial businesses including other obligations. Lonely Planet mean total income for the year has fallen from £5,102million to £5,066million, but this was offset by lower overall operating costs resulting in group surplus of £154million for the year (2012/13 restated: £157million).