Scottish Government Consolidated Accounts 2015 to 2016

Performance Report

About the Scottish Government

The Scottish Government is the devolved government for Scotland and has a range of responsibilities that include: the economy, education, health, justice, rural affairs, housing, environment, equal opportunities, consumer advocacy and advice, transport and taxation.

Some powers are reserved to the UK Government. These include: immigration, the constitution, foreign policy and defence. Further changes to the responsibilities devolved to the Scottish Government and Scottish Parliament have resulted from the Scotland Act 2012 and the Scotland Act 2016. These accounts reflect for the first time the powers devolved through the Scotland Act 2012 to set the rates and bands for the Scottish Landfill Tax and Land and Buildings Transaction Tax and borrowing for capital investment.

After a Scottish Parliamentary election, the First Minister is formally nominated by the Scottish Parliament and appointed by Her Majesty the Queen. The First Minister then appoints the Scottish Ministers to make up the Cabinet with the agreement of the Scottish Parliament and the approval of The Queen.

Scottish Cabinet Ministers and their responsibilities

The First Minister appoints a Cabinet Secretary for each of the core portfolios described below, and a further 15 Ministers to support the work of the Scottish Cabinet, 13 of whom report to a Cabinet Secretary, and two Law Officers (Lord Advocate and Solicitor General for Scotland). Whilst ministerial portfolios were re-assigned after the May 2016 Scottish Parliament election, the Ministers serving in the Cabinet Team during financial year 2015-16 were:

Nicola Sturgeon - First Minister

The First Minister is head of the Scottish Government. Ultimately responsible for all policy and decisions. Nicola Sturgeon became First Minister on 20 November 2014.

John Swinney - Deputy First Minister and Cabinet Secretary for Finance, Constitution & Economy

Responsibilities included: Constitution, The National Performance Framework, government strategy, reform, delivery and outcomes across portfolios, cross government implementation of Scotland's Digital Future and relations with other UK administrations, Scottish Public Finances and their sustainability - the Scottish economy, fiscal policy, the Scottish Budget, public spending, taxation, budgetary monitoring and reporting, public service reform, public bodies' policy, efficient government, public sector pay and pensions.

Keith Brown - Cabinet Secretary for Infrastructure, Investment & Cities

Responsibilities included: European Structural Funds, government procurement, Scottish Futures Trust, Scottish Water, cities, transport policy, public transport, air, rail and ferry services, roads, veterans and cross-government co-ordination on Scotland's islands.

Roseanna Cunningham - Cabinet Secretary for Fair Work, Skills & Training

Responsibilities included: Employment policy, women's employment, youth employment, the living wage, skills and employment training, implementation of the Wood Commission's recommendations and Skills Development Scotland.

Angela Constance - Cabinet Secretary for Education & Lifelong Learning

Responsibilities included: Science, higher education and universities, further education and colleges, educational attainment, school standards, quality and improvement, the teaching profession, school infrastructure and staffing, behaviour, measures to combat bullying, qualifications, modern languages, Scottish studies, children's rights, children's services, early years, adoption and fostering, child protection, looked after children, children's hearings, protection of vulnerable groups, social services workforce, youth work, non-advanced vocational skills, the Gaelic and Scots languages.

Shona Robison - Cabinet Secretary for Health, Wellbeing & Sport

Responsibilities included: NHS, acute and primary services, patient services, patient safety, medical records, quality strategy, dentistry, allied healthcare services, national service planning, NHS performance, NHS staff and pay, public health, health protection, child and maternal health, health improvement, sexual health, problem alcohol use and recovery, healthy working lives, adult care and support & carers, sport, physical activity and securing the legacy of the 2014 Commonwealth Games.

Alex Neil Cabinet - Secretary for Social Justice, Communities & Pensioners' Rights

Responsibilities included: Democratic renewal, elections, community empowerment, community planning, local government, planning, building standards, business improvement districts, town centres, housing, welfare, measures against poverty and homelessness, the third sector and the social economy, equality, social and human rights, religious and faith organisations, cross-government co-ordination on pensioners' rights and welfare.

Michael Matheson - Cabinet Secretary for Justice

Responsibilities included: The Justice system, security, access to justice, criminal law and procedure, civil law, the police, the legal profession, courts, sentencing, prisons and prisoners, victims and witnesses, reducing reoffending, youth justice, criminal justice social work, community safety, fire and rescue services, anti-social behaviour, drugs policy, violence reduction, anti-sectarianism and liquor licensing.

Richard Lochhead - Cabinet Secretary for Rural Affairs, Food & Environment

Responsibilities included: Rural Scotland, land reform, the physical and marine environment, agriculture, forestry, fisheries, aquaculture, food and drink, crofting, sustainable development, biodiversity, natural heritage, environmental protection, flooding, water quality, national parks and environmental & climate justice.

Fiona Hyslop - Cabinet Secretary for Culture, Europe & External Affairs

Responsibilities included: Culture and the arts, national records, national identity, built heritage, architecture, broadcasting, cross-government co-ordination on European Union and international relations, international development, fair trade, the Scottish diaspora and cross government co-ordination on bringing major events to Scotland.

Additional Government Ministers during 2015-16

Fergus Ewing	Minister for Business, Energy and Tourism
Derek Mackay	Minister for Transport and Islands
Fiona McLeod	Minister for Children and Young People
Alasdair Allan	Minister for Learning, Science and Scotland's Languages
Joe Fitzpatrick	Minister for Parliamentary Business
Margaret Burgess	Minister for Housing and Welfare
Paul Wheelhouse	Minister for Community Safety and Legal Affairs
Aileen McLeod	Minister for Environment, Climate Change and Land Reform
Maureen Watt	Minister for Public Health
Humza Yousef	Minister for Europe and International Development
Annabelle Ewing	Minister for Youth and Women's Employment
Jamie Hepburn	Minister for Sport, Health Improvement and Mental Health
Marco Biagi	Minister for Local Government and Community Empowerment

Law Officers during 2015-16

Frank Mulholland QC	Lord Advocate
Lesley Thomson QC	Solicitor General

Parliament was dissolved on 24 March 2016, and following the Scottish Parliamentary election on 5 May 2016 a new Ministerial team was established. Details of the current cabinet secretaries and ministers can be found on the Scottish Parliament website www.parliament.scot

Further information on Ministerial responsibilities is available from the Scottish Parliament and Scottish Government websites: www.parliament.scot; www.gov.scot

The Civil Service and Government Officials

The First Minister leads the Scottish Government, with the support of the Scottish Cabinet and Ministers. The civil service helps the government of the day develop and implement its policies as well as deliver public services. Civil servants are accountable to Ministers, who in turn are accountable to Parliament.

The Permanent Secretary is the senior civil servant in Scotland and leads the 5,000 plus people working for the Scottish Government. The Permanent Secretary supports the government in developing, implementing and communicating its policies; and is the principal policy adviser to the First Minister and Secretary to the Scottish Cabinet. The Permanent Secretary is also the Principal Accountable Officer with responsibility to ensure that the government's money and resources are used effectively and properly. The government is structured into a number of directorates and their related public bodies. Directorates and agencies are managed by six Director Generals.

Scottish Government Senior Management Team (Strategic Board)

The Scottish Government Senior Management Team are responsible for ensuring that the Scottish Government is organised and managed in the most effective way to support Ministers in the implementation of their policies. Further information on the management structure of the Scottish Government is available on the Scottish Government website at www.gov.scot. The Non-Executive Directors bring an external perspective to the consideration of corporate management issues such as staffing, administration costs, monitoring of programme expenditure, training and development, accommodation strategy and relations with stakeholders. Janet Hamblin, non-executive director, is the Chair of the Scottish Government Audit and Risk Committee.

The members of the Strategic Board during 2015-16 are:

Sir Peter Housden	Permanent Secretary (until June 2015)
Leslie Evans	Permanent Secretary (from July 2015)
Sarah Davidson	DG Communities
Graeme Dickson	DG Enterprise, Environment & Innovation
Gary Gillespie	Chief Economic Adviser
Paul Gray	DG Health & Social Care
Paul Johnston	DG Learning & Justice
Alyson Stafford CBE	DG Finance
Ken Thomson	DG Strategy & External Affairs
Catherine Dyer CBE	Crown Agent and Chief Executive of the Crown Office and Procurator Fiscal Service
Prof Carol Tannahill	Chief Social Policy Adviser
Alex Smith	Non-executive director (until September 2015)
Janet Hamblin	Non-executive director (from September 2015)
Christina Allon	Non-executive director
Linda McKay	Non-executive director

How the Scottish Budget is funded

The size of the Scottish Budget is largely determined by the block grant from UK Government which is allocated to the Secretary of State for Scotland through the approval of the UK Parliament (accounted for by the Scotland Office), and forms part of the UK public expenditure control regime. This requires the Scottish Government to plan, monitor and report its spending against the control aggregates set by the UK Parliament and HM Treasury alongside those set by the Scottish Parliament.

The Scottish Consolidated Fund was set up following devolution in 1999 and received its statutory powers under the Scotland Act 1998. The Scottish Consolidated Fund receives, from the Scotland Office, sums which have been voted by the UK Parliament for the purpose of "grant payable to the Fund". Funding is drawn down by the Scottish Government from the Scottish Consolidated Fund to support the spending plans laid out in the draft budget.

Under devolved powers from the 2012 Scotland Act, 2015-16 was the first year in which devolved taxes in respect of Land and Buildings Transactions and Landfill Tax have been managed in Scotland. A total of £572.2 million has been collected, £74.2 million above the initial estimates. The additional income has been placed in the Scottish Cash Reserve facility that will be available to support any fluctuations in tax income in 2016-17. The block grant has been adjusted to take account of these locally raised tax receipts.

Revenue Scotland was established by the Revenue Scotland and Tax Powers Act 2014 to administer and collect both taxes. The taxes collected by Revenue Scotland are paid to the Scottish Consolidated Fund. The Devolved Taxes Account is prepared and published separately and can be accessed at www.gov.scot.

The Devolved Taxes Account, The Scottish Consolidated Fund Accounts, and these Scottish Government Consolidated Accounts together provide a suite of information describing the fiscal activity of the Scottish Government.

As further powers are devolved to Scotland, and the ability to use the fiscal levers available to influence the funds available is increasing, the impact of accurate tax forecasting becomes greater. As a consequence, the institutional landscape of Scotland required a new body to support this growing fiscal responsibility and The Scottish Fiscal Commission was established in June 2014 as a non-statutory body to provide independent scrutiny of Scottish Government forecasts of receipts from taxes devolved to Scotland. By March 2016 the Scotland Act 2016 devolving more fiscal powers to Scotland was passed, and associated Fiscal Framework was agreed between the Scottish Government and UK Government. The Fiscal Framework changed the remit of the Scottish Fiscal Commission as reflected in the Scottish Fiscal Commission Act 2016 which received Royal Assent on 14 April 2016. Further information about the Scottish Fiscal Commission can be found at www.fiscal.scot.

Accounting Boundary

These accounts reflect the consolidated assets and liabilities and the results of all entities within the Scottish Government consolidation accounting boundary as required by and defined in the Government Financial Reporting Manual ( FReM). This consists of nine internal Portfolios, supported by Administration, their Executive Agencies (each linked to a specific portfolio), the Crown Office and Procurator Fiscal Service and the NHS Bodies responsible for the planning, promotion, commissioning and the delivery of healthcare. The portfolio analysis in these accounts reflects the portfolios designated by the First Minister from 21 November 2014, which were in place throughout the accounting period. The consolidation boundary includes the following:

Finance, Constitution and Economy Portfolio
Executive Agencies:	Scottish Public Pensions Agency ( www.sppa.gov.uk)
	Accountant in Bankruptcy ( www.aib.gov.uk)
Health, Wellbeing and Sport Portfolio
Other Consolidated Bodies:	The NHS Bodies in Scotland
	Mental Welfare Commission ( www.mwcscot.org.uk)
Education and Lifelong Learning Portfolio
Executive Agencies:	Disclosure Scotland ( www.disclosurescotland.co.uk)
	Education Scotland ( www.educationscotland.gov.uk)
	Student Awards Agency for Scotland ( www.saas.gov.uk)
Fair Work, Skills and Training Portfolio
Justice Portfolio
Executive Agencies:	Scottish Prison Service ( www.sps.gov.uk)
Social Justice, Communities and Pensioners' Rights Portfolio
Rural Affairs, Food and the Environment Portfolio
Culture, Europe and External Affairs Portfolio
Executive Agencies:	Historic Scotland ( www.historic-scotland.gov.uk) (until 30 Sept 2015)
Infrastructure, Investment and Cities Portfolio
Executive Agencies:	Transport Scotland ( www.transportscotland.gov.uk)
Other Consolidated Bodies:	The Crown Office and Procurator Fiscal Service ( www.copfs.gov.uk)

In addition to inclusion within these consolidated accounts, the executive agencies and other bodies detailed above also publish separate accounts providing greater detail about their income and expenditure and assets and liabilities. The accounts can be accessed at the web-sites noted above.

The Scottish Government is also the sole shareholder of Caledonian Maritime Assets Ltd, David MacBrayne Ltd, Highland and Islands Airports Limited, Scottish Futures Trust and Prestwick Holdco Limited, and sponsor of a number of executive, advisory and tribunal Non-Departmental Public Bodies. These bodies are regarded as related parties with which the Scottish Government has had various transactions during the year, but do not fall within the Scottish Government consolidation accounting boundary. Further details of Scottish Public Bodies are available from the Scottish Government website at www.gov.scot/Topics/Government/public-bodies.

The financial statements of NHS Boards include NHS Endowment Funds. These Endowment Funds are Registered Charities with the Office of the Scottish Charity Regulator ( OSCR) and they are also required by OSCR to prepare audited financial statements. NHS Endowment Funds are not part of the Scottish Government accounting boundary, and therefore they have not been included in Scottish Government consolidated accounts. These accounts report actual outturn compared to the budget authorised by the Scottish Parliament. The Scottish Government also routinely reports to Parliament each year on the Final Outturn for the Scottish Administration in an additional statement, once all the audited information is available, usually in December. This brings together the audited information from the bodies within the Scottish Administration to show this against the Budget limit authorised by the Scottish Parliament.

Performance Overview

The Budget Framework

The Scottish Government set out its spending plans for 2015-16 in October 2014 in Scottish Budget: Draft Budget 2015-16. Approval for a detailed budget for 2015-16 was given by the Parliament in March 2015 in the Budget (Scotland) Act 2015. The annual Budget is refined through in-year budget revisions, Parliamentary approval for which is given by statutory instrument.

Scotland's Economic Strategy

The Scottish Government's Purpose is to focus government and public services on creating a more successful country with opportunities for all of Scotland to flourish, through increasing sustainable economic growth.

This remains the Government's ambition to which all our efforts and actions are directed and is at the core of Scotland's Economic Strategy ( SES), published in March 2015. The SES is built around two interdependent pillars: increasing competitiveness and tackling inequality . The Scottish Government's National Economic Strategy is available on the Scottish Government's website at http://www.gov.scot/Topics/Economy/EconomicStrategy.

National Performance Framework

Introduced in 2007 and refreshed in 2011 and 2016, the Scottish Government's National Performance Framework ( NPF) sets out in the Purpose and the National Outcomes, a clear, unified vision for Scotland and how our actions will improve the quality of life for the people of Scotland. The vision for a successful Scotland is described and measured in five parts which support and reinforce each other:

• The Scottish Government's Purpose sets out the direction and ambition for Scotland.
• Purpose Targets are high level targets that show progress towards the Purpose.
• Strategic Objectives describe where we will focus our actions.
• National Outcomes describe what the Scottish Government wants to achieve and the kind of Scotland we want to see.
• National Indicators enable us to track progress towards the Purpose and National Outcomes.

Strategic Objectives, National Outcomes and National Indicators

Five Strategic Objectives support delivery of the Government's overarching Purpose to focus government and public services on creating a more successful country, with opportunities for all Scotland to flourish, through increasing economic sustainable growth. These Objectives are supported by 16 National Outcomes which describe in more detail what the Scottish Government wants to achieve. The Five Strategic Objectives are:

Wealthier and Fairer
Enable businesses and people to increase their wealth and more people to share fairly in that wealth.

Smarter
Expand opportunities for Scots to succeed from nurture through to life-long learning ensuring higher and more widely shared achievements.

Healthier
Help people to sustain and improve their health, especially in disadvantaged communities, ensuring better, local and faster access to health care.

Safer and Stronger
Help local communities to flourish, becoming stronger, safer places to live, offering improved opportunities and a better quality of life.

Greener
Improve Scotland's natural and built environment and the sustainable use and enjoyment of it.

The sixteen National Outcomes describe what the Government wants to achieve over the next ten years, articulating more fully the Government's Purpose. They help to sharpen the focus of government, enable our priorities to be clearly understood and provide a clear structure for delivery. The sixteen national outcomes are:

• We live in a Scotland that is the most attractive place for doing business in Europe.
• We realise our full economic potential with more and better employment opportunities for our people.
• We are better educated, more skilled and more successful, renowned for our research and innovation.
• Our young people are successful learners, confident individuals, effective contributors and responsible citizens.
• Our children have the best start in life and are ready to succeed.
• We live longer, healthier lives.
• We have tackled the significant inequalities in Scottish society.
• We have improved the life chances for children, young people and families at risk.
• We live our lives safe from crime, disorder and danger.
• We live in well-designed, sustainable places where we are able to access the amenities and services we need.
• We have strong, resilient and supportive communities where people take responsibility for their own actions and how they affect others.
• We value and enjoy our built and natural environment and protect it and enhance it for future generations.
• We take pride in a strong, fair and inclusive national identity.
• We reduce the local and global environmental impact of our consumption and production.
• Our people are able to maintain their independence as they get older and are able to access appropriate support when they need it.
• Our public services are high quality, continually improving, efficient and responsive to local people's needs.

A wide range of indicators are used to assess progress towards the Purpose and National Outcomes. These provide a broad measure of national and societal wellbeing, incorporating a range of economic, social and environmental indicators and targets. Progress against the measures set out in the NPF and SES can be found on the Scotland Performs website ( www.scotlandperforms.com). The data is constantly updated, and provides a politically neutral "stocktake".

Infrastructure Investment

Infrastructure investment in support of better and modern public services and growth in the Scottish economy is a top priority for the Scottish Government.

The Scottish Government is taking forward a comprehensive infrastructure investment programme and further detail about the infrastructure investment plan can be found at http://www.gov.scot/Topics/Government/Finance/18232/IIP.

Performance Analysis

Outturn against Budget

These accounts report actual outturn compared to the budget authorised by the Scottish Parliament. The annual budget authorised by the Scottish Parliament is the budget for the wider Scottish Administration and includes the funding of activities which are not within the Scottish Government, and therefore outside the required accounting boundary of these accounts. There are also some differences between the HMT required budgeting rules and the government financial reporting accounting requirements that have to be accommodated in any comparison. These accounts therefore compare the actual outturn to the budget, both stated on the same accounting basis. There is a reconciliation and explanation of the budget reflected in the accounts with that shown in the annual budget documents provided in Note 21.

As described above, spending plans for financial year 2015-16 were set out in Scottish Budget: Draft Budget 2015-16 published in October 2014. After consideration by the Scottish Parliament Finance Committee and other Committees, these plans were presented in the Budget Bill introduced in January 2015 and received Royal Assent as the Budget (Scotland) Act 2015 in March 2015. Parliamentary approval for the in-year revisions to the plans set out in the Budget (Scotland) Act was granted in the Autumn Budget Revision ( SSI 2015 No. 434), made in December 2015 and Spring Budget Revision ( SSI 2016 No. 158), made in March 2016.

The budget reported in these accounts of £33,700 million is net of adjustments to reflect those activities not included in the accounting boundary as described above. This is made up of a resource budget of £31,756 million and a capital budget of £1,944 million.

The financial results for the year are reported in the attached accounts. They record a Net Resource Outturn of £31,399 million resulting in an underspend of £357 million. The Net Capital Outturn for the year was £1,909 million resulting in an underspend of £35 million. Total underspend of £392 million represents approximately one per cent of the total budget. An explanation of the major variances is included in these accounts immediately following the Statements of Net Outturn at page 67. Of the total resource outturn of £31,399 million, £7,854 million (25%) is funding to local government.

Under the current devolution settlement, the Scottish Parliament is not allowed to overspend its budget. As a consequence, the Scottish Government consistently adopted a position of controlling public expenditure to ensure we live within the budget caps that apply, but remain able to carry forward some spending power resources for use in a future year.

The provisional outturn announcement made by the Cabinet Secretary for Finance and the Constitution in June 2016 indicated that the cash fiscal DEL budget in 2015-16 would be underspent by £115 million and the total DEL budget (including non-cash and financial transaction facilities) would be underspent by £285 million. The announcement reported the position in terms of Scottish Government expenditure against total ( DEL) as set by HM Treasury. The two sets of outturn information are not strictly comparable. The scope of what is included in these accounts is determined by the requirements of the Government's Financial Reporting Manual ( FReM) and covers elements that are not included in the HM Treasury DEL figures.

Statement of Financial Position

The primary purpose of these accounts is to reflect the use of resources. The Statement of Financial position reflects the assets held and liabilities arising from the spending plans which support policy choices. Assets are held not for their income generation capability or their inherent value but for their service potential or as a direct consequence of particular policies, for example providing healthcare in hospitals and the provision of funding to students in the form of loans. Similarly, liabilities arise as a consequence of the timing of commitments relating to spending and policy choices.

The Consolidated Statement of Financial Position, known previously as the balance sheet, (page 75) is one of the primary financial statements in the Consolidated Accounts. It summarises what is owned and owed by the Scottish Government. This shows taxpayers' equity - an accounting measurement of the amount invested by taxpayers that has continuing public benefit. It shows how much of this has arisen from the application of revenues (including the Scottish Block Grant) and that which has resulted through changes over time in the value of physical assets.

It is important to note that the consolidated accounts bring together the "balance sheets" of bodies that are significant in their own right. Detailed financial and narrative information on the major items, for example the road network, is available in the accounts and related reports of the relevant body - Transport Scotland; similarly, information about NHS bodies is in the detailed accounts for each body; the Student Awards Agency also provides separate reporting around student loans i.e. the loans are not within SAAS' accounts but they do provide information about their administration, and the loans themselves are reported within these consolidated accounts.

The Statement of Financial Position includes:

• items which are owned, have already been funded from revenues and will provide continuing economic benefit in future periods. These increase taxpayers' equity.
• items which are owed and expected to require to be funded from future revenues. These decrease taxpayers' equity.
• items owed to the Scottish Government.
• an analysis between amounts that will release or require funding within a year and those which will be carried into future years.

Assets and liabilities

The value of the assets directly owned by the Scottish Government has been increasing over the last three years, largely as a result of capital investment. At the same time the value of liabilities directly owed by the Scottish Government has stayed broadly consistent.

Physical assets are the highest value group of assets in the Consolidated Accounts with a value of £27,317 million at 31 March 2016, of which 63 per cent ( £17,124 million) relates specifically to the road network. The Consolidated Accounts provide details of changes in the year. There were additions of £1,013 million that resulted from capital investment, offset by disposals and the net effect of depreciation and revaluations.

Most physical assets are valued by professional valuers in line with recognised methodologies. This provides an assessment of the continuing benefit they provide in financial terms. Where these assets have been funded by traditional means through capital then there are no continuing liabilities relating to them (maintenance and repair costs will arise). Those funded through other means (such as Public Finance Initiatives, Non Profit Distributing Projects and Scottish Government borrowed funds) also lead to liabilities representing the amounts that will require to be met from future budgets. Only physical assets that are deemed surplus and 'held for sale' (£29 million, page 97) will release resources previously invested for future use.

Financial assets include loans made directly to other organisations and individuals, investment funds used to deliver development programmes and investments in nationalised industries plus fully or part owned companies. These assets are of continuing benefit to the Scottish Government, and have the potential over time to release the resources currently invested for future use - including reinvestment, in accordance with the terms of the loan or other investment made.

The Consolidated Accounts show that the largest financial assets are loans of £2,784 million that have been made to Scottish Water, to finance its capital investment programmes (an increase of £89 million from 31 March 2015), and student loans valued at £2,908 million (an increase of £327 million from 31 March 2015). The latter are made under the terms of the student loans scheme, administered by the Student Loans Company Limited. Loans to Prestwick Airport, a wholly owned subsidiary of Transport Scotland, of £21 million are also included here.

The total value of taxpayers' equity, reported in the Statement of Financial Position, is £30,181 million at 31 March 2016, an increase of £1,497 million (5.2%) from 31 March 2015.

The elements of the statement of financial position are measured and disclosed in accordance with accounting standards and notes to the accounts provide analysis and explanation. More detailed information on the Statements of Financial Position of the individual entities included within these consolidated accounts can also be found in the entity's published accounts by following the links provided on page 9 above

Pensions

The SG consolidated accounts include as expenditure the employers' contributions payable for the financial year. Staff in the Core Scottish Government, Executive Agencies and Crown and Procurator Fiscal Service are members of the Principal Civil Service Pension Scheme ( PCSPS). There is no pension liability in respect of the PCSPS within the SG consolidated accounts, because it is a UK scheme, administered by the Cabinet Office and it is not possible to identify the "Scottish share" of the underlying assets and liabilities of the scheme. The Cabinet Office produces separate pension scheme accounts, covering all members across the UK.

Staff in the NHS consolidated bodies can choose between the PCSPS and the NHS Superannuation Scheme for Scotland, which is an unfunded statutory public service pension scheme with benefits underwritten by the UK Government. The NHS scheme is administered by the Scottish Public Pensions Agency and annual scheme accounts are produced.

The liabilities to be met over time are not met from investments but paid out each year from the funding of the relevant schemes. The NHS scheme is funded within the Scottish Administration in the Scottish Budget; the PCSPS is dealt with through the UK annual process.

National Accounts Classification

Changes in EU statistical accounts classification rules ( ESA 10) in September 2014 triggered a review of the classification of some Non Profit Distributing ( NPD) projects. There are no issues around the accounting entries, as infrastructure assets are recorded in the accounts in accordance with international accounting standards, which largely reflect the statistical national accounts rules. However the ESA10 rules have impacted on how public expenditure is measured against budgets.

The Office of National Statistics reclassification of some NPD projects has resulted in the initial capital value of some NPD projects during their construction period being charged against the capital outturn budget ( CDEL), rather than the associated revenue funding over the contractual period when cash payments are made.

Borrowing

The Scotland Act 2012 came in to force from April 2015, and gave the Scottish Ministers the power to borrow funds for the first time. For 2015-16 the Scottish budget included provision to borrow up to £306 million to support capital investment.

As a result of recognising the financial impact of reclassifying a number of NPD projects to the public sector, and in order to ensure sufficient budgetary cover for these non-cash capital outturn costs, the Scottish Government has agreed with HM Treasury for £283 million for these projects to be recorded against the Scotland Act 2012 borrowing limit for the year. This is for budgeting purposes only. No actual drawdown of borrowing from the National Loans Fund or other sources is therefore required for this amount in 2015-16. No other use of the facility was required in 2015-16 and the balance remains available to the Scottish Government against the statutory aggregate limit as set out in the Scotland Act 2012.

The EU Referendum

On 23 June 2016, after the end of the reporting period, a referendum was held on UK membership of the EU. The UK voted to leave the EU by 52% to 48%. Arrangements have not yet been made to remove the UK from the EU, and it is not possible to quantify the impact of this decision on Scotland.

The Scottish Government has a positive vision for the role Scotland can play as a constructive and engaged partner in the EU, and this vision recognises the vital role our EU membership plays in delivering the Scottish Government's objectives of increasing sustainable growth and addressing long-standing inequalities.

At present Scotland remains part of the EU and current EU-funding remains in place. All programmes that have been approved by the European Commission up to March 2018 will continue as they do now.

The First Minister has announced that a new Minister will lead the discussions with the UK Government on our future relationship with Europe. Subject to approval by the Scottish Parliament, Michael Russell will be appointed as Minister for UK Negotiations on Scotland's Place in Europe.

Further information can be found at http://www.gov.scot/Topics/International/Europe.

Payment Policy

The Scottish Government policy requires that all suppliers' invoices not in dispute are paid within the terms of the relevant contract. The Scottish Government aims to pay 100% of invoices, including disputed invoices once the dispute has been settled, on time in these terms.

As part of its plan for supporting economic recovery in Scotland, the First Minister announced on 9 October 2008 that the Scottish Government would aspire to a 10-day target for paying bills to businesses in Scotland. This aspiration is above and beyond our contractual commitment to pay suppliers within 30 days. Paying supplier bills within ten working days is seen as a key objective, and an important expression of the Scottish Government's commitment to supporting business through the current economic downturn. Improvements in methodology have been introduced and continue to be introduced to improve payment performance.

For financial year 2015-16, the Scottish Government, its Executive Agencies and the Crown Office and Procurator Fiscal Service made 98.4% of all payments within 10 days (2014-15: 98.5%). The specific payment performance of the individual bodies consolidated here will be reported separately within their individual accounts. The core Scottish Government made 98.8% of payments within 10 days (2014-15: 98.8%). The NHS bodies in Scotland made 84.2% of all payments within 10 days (2014-15: 84.2%).

The payment performance of the Scottish Government, its Executive Agencies and the Crown Office and Procurator Fiscal Service for 2015-16 was 99.7% (2014-15: 99.4%) of all transactions settled within the terms of its contractual 30 day payment policy. The specific payment performance of the individual bodies consolidated here will be reported separately within their individual accounts. The core Scottish Government made 99.7% (2014-15: 99.4%) of all payments within the terms of its contractual 30 day payment policy. The NHS bodies in Scotland made 93.6% (2014-15: 93.3%) of all payments within the terms of their contractual 30 day payment policy.

Sustainability and Environmental Reporting

The Scottish Government has developed guidance for central government and the wider public sector on the preparation of sustainability reports to complement Annual Reports and Accounts. The guidance is intended to form a key element of a sustainability reporting framework for the Scottish public sector (referred to as the Scottish Sustainability Reporting Framework). The Framework will aim to inform best-practice across the public sector and demonstrate a coherent approach which meets statutory and non-statutory sustainability reporting requirements in the most cost effective and least burdensome manner to help drive improvements in sustainability performance.

The guidance relates specifically to information to be included in Scottish Public Sector Sustainability Reports intended to complement Annual Reports and Accounts and expected to be consistent with the reporting requirements flowing from the Climate Change (Scotland) Act 2009 and the principles for sustainability reporting contained in HM Treasury guidance.

The Scottish Government's current reporting on sustainability is focused on the environmental aspects of sustainability; it currently publishes an annual report on environmental performance against a range of targets in respect of the core estate including emissions from energy use, waste arisings and recycling rates, transport & travel emissions, water consumption and biodiversity. The development of the Scottish Sustainability Reporting Framework includes consideration of how the current reporting format can be enhanced to embrace other aspects of sustainability performance.

Environmental reporting for the Scottish Government can be found on the Government On-Line Sustainable Performance Information Exchange ( GOLSPIE) portal. GOLSPIE is a dynamic platform which provides up-to-date access and reporting on the Scottish Government's environmental targets, indicators and performance.

The Scottish Government published a high level Carbon Assessment alongside the Scottish Government's Draft Budget 2015-16 published in October 2014: http://www.gov.scot/Publications/2014/10/8494

Principal Accountable Officer

22 September 2016