1 July 2015 Item: Annual Report and Statement of Accounts for the Year
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Board Date: 1 July 2015 Item: Annual Report and Statement of Accounts for the Year Ended 31 March 2015 This paper will be considered in public 1 Summary 1.1 The purpose of this report is to present TfL’s Annual Report and Accounts for the year ended 31 March 2015, to request the Board’s approval of the Statement of Accounts included in the Annual Report and seek the Board’s approval for the publication of TfL’s 2014/15 Annual Report. 1.2 On 16 June 2015, the Audit and Assurance Committee considered the Annual Report and the Statement of Accounts for the year ended 31 March 2015 and endorsed the recommendations in this paper. 2 Recommendations 2.1 The Board is asked to: (a) approve the 2014/15 Annual Report, subject to any comments it might have; (b) authorise the Managing Director, Customer Experience, Marketing and Communications, to make any further design or editorial changes to the Annual Report as may be required; (c) approve the Statement of Accounts and to agree that the Interim Chief Finance Officer will make any adjustments arising from the work prior to the auditors signing their opinion. Should any changes be required to the Statement of Accounts which, in the opinion of the Interim Chief Finance Officer, are material, he will seek the approval of the Board to these changes; and (d) approve the extension, for the year ended 31 March 2015 and all subsequent years and in respect of all subsidiary companies of Transport Trading Limited, of the approval given by the Finance and Policy Committee (acting under delegated authority from the Board) on 5 June 2014 in relation to the giving of parent company guarantees in respect of the liabilities of any of its subsidiary companies as provided for in section 479A of the Companies Act 2006 (which approval may be withdrawn by the Board). 3 Background 3.1 TfL is legally required under section 161 of the Greater London Authority Act 1999 (the GLA Act) to produce a report on its achievements and the performance of its functions during the year. Approval of the Annual Report is a matter reserved to the Board under TfL’s Standing Orders. The Annual Report includes the information that is required under the GLA Act. TfL is also required, under the Accounts and Audit (England) Regulations 2011, to prepare a Statement of Accounts each year. 3.2 The 2014/15 Annual Report will include TfL’s Statement of Accounts for the year ended 31 March 2015. While this is not a legal requirement, it is regarded as good practice and will assist key audiences in understanding TfL’s financial and operational performance over the year. 4 Statement of Accounts 4.1 The Statement of Accounts has been prepared in accordance with the provisions of the Audit Commission Act 1998 and the Accounts and Audit (England) Regulations 2011 (the Regulations). The form, content and accounting policies followed in preparing the Statement are as prescribed in the Regulations and by the Code of Practice on Local Authority Accounting developed and published by the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) joint committee (the Code). The Code is based on International Financial Reporting Standards and is updated at least annually. 4.2 The Regulations require that the responsible financial officer, namely the Chief Finance Officer, sign and date the Statement of Accounts by 30 June at the latest, and certify that it presents a true and fair view of the financial position of TfL at the end of the year to which it relates and of TfL’s income and expenditure for that year. The Interim Chief Finance Officer is expected to sign the Statement of Accounts on 26 June 2015, and will also re-certify the presentation of the Statement of Accounts before approval is sought of the Board. 4.3 The Regulations further require that the Statement of Accounts is approved by a resolution of a Committee of the Board, or otherwise by a resolution of the members of TfL, meeting as a whole. 4.4 In addition, the accounts and accounting records must be made available for public inspection for a period of four weeks following advertisement of the inspection period. The inspection period began on 9 June and finishes on 6 July. Immediately following the inspection period, the auditors may receive questions or objections to the accounts from local government electors in London. Should any such questions or objections be raised, these will be reported to the Audit and Assurance Committee at its next meeting. Should any matters arise from questions or objections which require, in the opinion of the interim Chief Finance Officer, a material change to the Statement of Accounts, he will seek the approval of the Board to these changes. 5 Annual Report 5.1 The narrative reflects Mayoral and TfL’s business priorities. It highlights key achievements and progress against the Mayor’s Transport Strategy in the financial year (a requirement of the GLA Act). 6 Views of the Audit and Assurance Committee 6.1 On 16 June 2015, the Audit and Assurance Committee noted both the draft Annual Report and the draft Statement of Accounts. 6.2 The Group Comprehensive Income Statement shows a surplus on the provision of services of £2.3bn, as a result of the requirement to include all grants, including capital grants, in income. Capital grant income of £3.5bn is included in this surplus. 6.3 At 31 March 2015, the Group has usable reserves of £4.7bn, the majority of which represents funding for the Crossrail project which has been received but not yet spent. Similarly, the majority of remaining usable reserves are ‘earmarked reserves’, and will be spent on delivering investment projects to improve transport in London, including the Circle, District, Metropolitan, and Hammersmith & City lines upgrade; redevelopment at key stations to increase capacity and accessibility; the Roads Modernisation Plan; cycling programmes such as Cycle Superhighways; and further New Routemasters. Since these sums are fully allocated to transport improvements as part of the Investment Programme, they are not available to spend on additional projects or fare reductions. 6.4 The requirements for remuneration disclosures are unchanged from earlier years. 6.5 The Committee noted the pensions deficit, calculated under International Financial Reporting Standards, was highly volatile due to the variation in the market value of the scheme’s assets from year to year and the sensitivity of the liabilities to the market yield on AA rated corporate bonds at the balance sheet date. It also noted that results of the triennial funding valuation due later this year are more significant than the accounting deficit, as it is this valuation that determines future employer pension contributions. 6.6 The Committee congratulated those officers involved in the year end process, and noted that for the second year running there were no audit adjustments and no control issues raised by the external auditors. 6.7 KPMG commented positively, and thanked TfL finance staff for the excellent quality of the information provided throughout the audit. They confirmed that they expect to issue an unqualified audit opinion in due course. 6.8 The Committee noted the draft Annual Report and some minor changes were requested. Members were very complimentary and praised the clear layout of the document. 7 Subsidiary companies audit exemption 7.1 For the year ended 31 March 2014, the majority of the companies within the Group were able to take advantage of changes under section 479A of the Companies Act 2006 that enable certain UK subsidiary companies to claim exemption from audit of their accounts, saving around £190,000 per annum in audit fees and a significant amount of staff time. 7.2 That exemption is conditional on a parent company guarantee being given in respect of all liabilities of the relevant subsidiary outstanding at the balance sheet date. On 5 June 2014, under authority delegated by the Board on 26 March 2014, the Finance and Policy Committee gave approval for the necessary guarantees for the year ended 31 March 2014. Having discussed the matter with the Audit and Assurance Committee at its meeting on 16 June, it is proposed that those guarantee arrangements and exemption from audit should continue. 8 Information 8.1 The Annual Report may need minor editorial changes. However, these changes are not expected to be substantive. 8.2 The Annual Report and Statement of Accounts will be available electronically and also in audio, Braille and a range of other languages. List of appendices to this report: Appendix 1: Draft TfL Annual Report and Statement of Accounts 2014/15 List of Background Papers: Audit Exemption for Subsidiary Companies – Finance and Policy Committee paper June 2014. Contact: Vernon Everitt, Managing Director, Customer Experience, Marketing and Communications Number: 020 3054 7167 Email: [email protected] Contact; Andrew Pollins, Interim Chief Finance Officer Number: 020 3054 8941 Email: [email protected] DRAFT Annual Report and Statement of Accounts 2014/15 Contents About Transport for London 4 Mayor’s foreword 58 Value: delivering more with less We are the integrated transport authority 60 – Clicks, bricks and pop-ups for London. Our purpose is to keep London 6 Message from the Commissioner 62 – The future’s red for cycle hire working and growing and to make life in the 64 – Hens, hippos and nightclubs Capital better. We reinvest all of our income to 10 Year at a glance 66 – Continuing efficient run and improve London’s transport services. operational activities 12 Delivering for London Our operational responsibilities include 68 Planning for the future London Underground, London Buses, 14 Operational performance 70 – Here comes the Night Tube Docklands Light Railway, London Overground, 72 – A route to the future TfL Rail, London Trams, London River Services, 16 Keeping London working and growing 74 – Green light for future streets projects London Dial-a-Ride, Victoria Coach Station, Santander Cycles and the Emirates Air Line.