Highways Agency

Safe roads, Reliable journeys, Informed travellers

Annual Report & Accounts 2001/02

Contents

• Chief Executive's foreword
• Map of Agency offices
• Highlights of 2001-02
• Agency network map
• Chapter 1 Introduction
• Chapter 2 Customer focus
• Chapter 3 Effective maintenance
• Chapter 4 Easing congestion
• Chapter 5 Safety
• Chapter 6 Better information
• Chapter 7 Environment
• Chapter 8 Modernising the Agency

Appendices

• Appendix 1 The Agency's structure
• Appendix 2 The Agency's Aims and Objectives
• Appendix 3 Comparison of Ministerial Targets, Outputs and Achievements 1999-00 to 2002-03
• Appendix 4 Performance against Road User's Charter Targets
• Appendix 5 Whitehall Standards
• Appendix 6 Internal Audit Certificate
• Appendix 7 HA recruitment policy
• Appendix 8 Highways Agency 2001-02 Accounts

The report is available in the downloadable below.

Annual Report & Accounts (1MB PDF)

Hard copies are available from: The Stationery Office, tel: 0870 600 55 22, price: £20.10, quote: ISBN 0102920435

Chief Executive's foreword

I am delighted to present the achievements and performance of the Highways Agency in 2001-02. As the first year of the Government's ten year investment strategy for transport, this was an important year for the Agency. We have a major contribution to make towards the targets set out in that plan. In 2001-02 we made good progress on delivering our contribution to these targets.

As demand for our network grows, it will become increasingly important for us to manage traffic to tackle congestion. In 2001-02 we exceeded targets set for achieving measures designed to assist in reducing congestion, ranging from the number of lanes kept free of road works to the delivery of Early Action Schemes. Equally important are the advances we have made in extending our traffic management capabilities. Actions in 2001-02 include: delivering more electronic Variable Message Signs; automatic hold up warning systems; website and public information improvements; and the first stages of a new national Traffic Control Centre, due to begin operating in 2004. These initiatives will give us more influence on the driver behaviours that create congestion and enable us to offer road users more predictable journeys.

We contract out most of our services. The quality of our own procurement methods and the standards of service we secure from our suppliers are, therefore, of vital importance. Our procurement strategy, which has already won industry awards is built on working in partnership with our supply chain to secure best value.

None of the achievements recorded in this report would have been possible without the continued professionalism and enthusiasm for good service that are the hallmarks of our staff. I would like to express my appreciation for their contribution to our success.

We are building on our success in 2001-02 as we continue to implement the 10-Year Plan, providing a better service for our customers.

Tim Matthews
Chief Executive

Map of Agency offices

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Highlights of 2001-02

During 2001-02 we:

• Delivered all but one of our Ministerial Targets, including completion of 30 Early Action Schemes¹.
• Published our Procurement Strategy in November 2001.
• Achieved 10-Year Plan targets for the implementation of new electronic systems to monitor the state of the Strategic Road Network.
• Our response to the Government's 10-Year Plan for Transport 'Strategic Roads 2010' recommended by the parliamentary Transport Committee as a model for forward planning on how to deliver the 10-Year Plan.
• Launched the Video Information Highway (VIH) trial on our website using images from CCTV cameras in Avon and the South West.
• Carried out 99.6% of maintenance work outside of peak hours.
• Equipped an extra 243km of motorway with the Motorway Incident Detection and Automatic Signalling (MIDAS) congestion early warning system.
• Published our Biodiversity Action Plan in March 2002.
• Were nominated for the 2002 Computing Industry Awards for our M25 CCTV enhancement project.

 

¹ 17 congestion schemes and 13 safety schemes.

Chapter 1 Introduction

Introduction

The Highways Agency is an Executive Agency of the Department for Transport. We operate from 11 regional offices in nine locations across the country with our headquarters based in London. A map showing the location of our offices is shown on the inside front cover of this Annual Report. Our organisational structure is set out in Appendix 1 and our aims and objectives in Appendix 2.

Our role

Our main role is as a network operator, managing, maintaining and improving a strategic network of 9,380km (5,863 miles)² of trunk roads and motorways in England on behalf of the Secretary of State. Our network is the single largest government asset³, currently valued at over £62bn⁴. A map showing the network is shown below.

Traffic Manager

Key to being a Network Operator is managing the large volumes of traffic that use our roads every day. The network carries a third of all road traffic in England and two thirds of all freight traffic. Our responsibilities as Traffic Manager include tackling congestion, improving safety and making the best use of the available road space.

The 10-Year Plan

Under the Government's 10-Year Plan for Transport, our remit widened from delivering outputs such as road schemes to delivering outcomes such as safer, more effective road journeys. Our 10-Year Plan outcomes were published in the response document 'Strategic Roads 2010'. 2001-02 was the first year of the 10-Year Plan period and saw us make significant progress towards these outcomes.

Business Plan 2001-02 targets

Each year Ministers set us specific targets. These are published annually in our Business Plan, along with government wide targets and our own Road Users' Charter targets. Our performance against the 2001-02 targets is reported in Appendices 3 to 5. During 2002 we undertook a detailed examination of our processes for measuring performance. This highlighted some areas where our methods for monitoring and recording performance against our targets needs to be strengthened, particularly on the Road Users' Charter. Improvements are being made to address these areas.

2001-02 Accounts

There is a statutory requirement⁵ for us to present our accounts to Parliament each year. These set out our statement on corporate governance and accounting practices and detail how we have spent our budget over the year. They can be found at Appendix 8. Our accounts are audited by the National Audit Office (NAO).

Agency network map

Click to enlarge map

Our network is divided into ‘core’ roads that carry longer distance traffic (linking the major centres of population and commerce, ports and transport terminals) and ‘non-core’ roads which carry predominantly local traffic on shorter journeys. Transfer of these roads is being phased over a number of years, with 445km of non-core routes transferred in 2001-02.

² As at 31 March 2002. [back to 2]

³ Source: HM Treasury National Asset Register, July 2001. [back to 3]

⁴ Source: 2001-02 Highways Agency Audited Accounts (Appendix 8). [back to 4]

⁵ Section 7 of the Government Resources and Accounts Act 2000. [back to 5]

Chapter 2 Customer focus

Putting customers first

Our customers include businesses, road users and those who live alongside the network or are affected by it. As a customer focussed organisation, we are committed to improving the service we provide to our customers. We value our customers' views and consult with them at a national and local level through:

• Road user and environment committees.
• Regular road users' satisfaction surveys.
• Consultation on schemes, including public inquiries.
• Feedback through the HA Information Line, website and correspondence.

The Highway Agency Information Line offers up-to-the minute information direct to our customers.

These help us to identify their priorities and areas of concern showing us where we need to improve.

We consult regularly with local authorities and Regional Planning Bodies as part of the planning process to co-ordinate road works and promote integrated transport.

As part of our commitment to better services, we produce a leaflet outlining our complaints procedure, publish a Road Users' Charter which sets out standards of service and adhere to strict government targets for replying to correspondence, consulting with road users and responding to customers.

Regional focus

The 1998 Integrated Transport White Paper brought in significant changes to all regional planning systems. The regional planning process now allows Regional Planning Bodies to make recommendations to Ministers on transport/planning with Regional Development Agencies also developing individual Economic Strategies in their areas. We are a major contributor to this process and are committed to working closely with these bodies.

Our website helps road users check conditions before they set off.

2001-02 Performance

In 2001-02 we continued to deliver a high standard of customer service through:

• Improving our website to offer more up-to-date information on road works to help travellers make better informed decisions on their journey before they leave home. This included the launch of a Video Information Highway trial in the South West to provide live traffic pictures to the public through the website, to help them judge the best times to travel.
• Providing information on delays, incidents or upcoming road works to road users, through our network of electronic Variable Message Signs (VMS). We delivered 280 VMS in 2001-02 giving a total of 878 operational signs on the network.
• Providing information on the Agency or individual schemes through exhibitions, leaflets and meetings with local residents. We were also represented at national events such as the 'Tomorrows World' exhibition held at Earls Court in June 2001. These gave the public the opportunity to ask questions and find out more about who we are and what we do.

We were also praised by a number of key stakeholders in the regional planning process, for our willingness to make changes to our working practices in order to contribute effectively.

Chapter 3 Effective maintenance

The Agency's top priority

Our top priority is to maintain the network in a safe and serviceable (available for use) condition whilst minimising costs, disruption to road users and others affected by our network, and adverse impact on the environment.

We carry out an extensive programme
of small maintenance schemes.

Maintenance activities on the network include:

• Gritting and salting roads during winter.
• Clearing litter and debris.
• Painting lighting columns and other street furniture.
• Carrying out regular inspections and surveys to identify where work is most needed.
• Resurfacing with lower noise surfacing wherever possible.

Whilst this work is going on we have a duty to minimise its impact on traffic and ensure the safety of our work force. We deliver this by ensuring our contractors apply strict safety standards, through mobile lane closures, and the Road Users' Charter target to keep 97% of lanes free of road works during peak times over the year.

Lower noise surfaces are used wherever possible.

2001-02 performance

In 2001-02 we were set a target by Ministers to maintain the network so that the proportion needing treatment within the following year is held to between 7 and 8%. We met this target in 2001-02 by achieving 7.5%.

Much of our routine maintenance is carried out at night to reduce disruption.

We met the target to upgrade our Pavement Management System (see case study) and made our Structures Management Information System fully operational. These upgrades will enable us to deliver better and more cost effective management of the network through targeting maintenance where it is most needed on a national basis.

We also exceeded the target in our Road Users' Charter by carrying out 99.6% of our work outside of peak travelling hours⁶. This helped to keep traffic moving and reduce the impact of our works.

Chapter 4 Easing congestion

From A to B with less stress

One of the most frustrating things for road users is to be caught up in congestion. With car use set to rise in future years, this means working in partnership with public transport operators and in conjunction with other Government measures to tackle congestion, discourage car use and promote alternatives.

We are working towards this by delivering schemes aimed at easing congestion. We also plan our road works to minimise disruption and co-ordinate with work on local roads wherever possible.

Electronic message signs keep road users informed.

We are developing innovative Active Traffic Management (ATM) techniques to help ease congestion by making better use of existing road space. This will be supported by an enhanced Motorway Incident Detection and Automatic Signalling system (MIDAS) under which wire loops will be placed in the road surface every 100 metres instead of the current arrangement of every 500m. The MIDAS system tells road users of queues ahead using electronic message and Variable Speed Limit signs.

The new national Traffic Control Centre (TCC) will require us to work closely with others to manage the traffic on the network. During the year National Guidance Frameworks for operating agreements with the Police and local highway authorities have been signed and progress has been made on the Detailed Local Operating Agreements with the forces and authorities involved. In January 2002 the TCC company, Traffic Information Services (TiS) Limited, took over the operation of the Midland Driver Information Service (MDIS) from the Police.

Artists impression of the Agency's new Traffic Control Office.

2001-02 performance

• We exceeded our target by completing 17 Early Action Schemes at congestion black spots against a target of at least 11 schemes.
• We installed extra 91 CCTV cameras against a target of at least 68 to monitor incidents on the network. These cameras will enable the Police to respond more quickly to accidents and other incidents, by setting electronic message signs to divert road users from problem areas, minimising congestion caused.
• An extra 243km of motorway was equipped with MIDAS in 2001-02. This system automatically detects significant slowing in traffic speed and sets electronic message signs to warn other road users of trouble ahead. This will allow road users to take avoiding action and ease congestion.
• We met our target of delivering 13 of the 15 major scheme milestones in the Targeted Programme of Improvements (TPI) set out in our 2001-02 Business Plan.
• As part of our Road Users' Charter the Agency has a target to plan and co-ordinate our road works so that 97% of traffic lanes on the network are kept free of them during the year. During 2001-02 we achieved this with 98.6 % remaining free of road works.
• In November 2001 we published a new Procurement Strategy setting out how we will reduce the time between planning major schemes and cutting the ribbon on completed schemes. Currently these schemes take anything up to 12 years to open to traffic, but by developing new systems to speed up procurement we expect to reduce this to approximately seven and nine years for non-controversial schemes. New forms of contract enable us to develop closer relationships with our suppliers to ensure the delivery of a high quality and cost effective service, encourage best practice and achieve value for money.

The first four of the Government's Multi-Modal Studies (MMS) presented their recommendations to the Regional Planning Bodies and the Secretary of State announced his decision on three of them ­ Access to Hastings, Cambridge to Huntingdon and South East Manchester. This has resulted in two additions to the Targeted Programme of Improvements (TPI). On 10 December 2002 the Secretary of State, Alistair Darling announced the results of a further five MMS resulting in schemes to deliver improvements to the A1, M1, M6 and A453.

Chapter 5 Safety

Saving lives on the network

Introduction

Our road network is already one of the safest in Europe, but we are continually looking at ways to improve this record. During 2001-02, some £47m was invested in this area under the Local Network Management Schemes (LNMS) programme. This included schemes to improve lighting, install anti-skid road surfaces, add cycle routes, improve road layouts and deliver speed reduction measures such as rumble strips and speed cameras where appropriate.

Enforcement cameras help reduce speeding.

The 10-Year Plan for Transport sets us a target of delivering a 33% reduction in the number of people killed or seriously injured, based on the 1994-98 average, by 2010. Although this is a challenging target, we are on track to achieve it.

Cycle route on the A45 near Coventry.

2001-02 performance

• In 2001-02 we met all of our safety targets, including a significant reduction in casualties on the network (a 496 reduction against the 1994-98 average figure of 4,991) and delivery of 13 safety Early Action Schemes against a target of at least 10. Examples of Early Action Schemes designed to reduce accidents include the grade separated junction on the A1 at Langford and new signs and layout at a junction on the A66 at Long Newton.
• To help people to cross our network safely, crossing surveys have been carried out on 99% of our network. A programme for improving crossing points is being developed.
• After the tragic incident at Selby, we were involved in two working groups looking at the provision of nearside safety fencing. The two groups produced reports containing 19 recommendations, all of which are being taken forward as part of a post Selby Action Plan agreed by Ministers.
• We introduced a management and monitoring regime in 2001-02, which will enable us to improve the way we report on casualty reduction. This will take into account the safety of the contractors who work on our roads.
• We supported the initiative to develop a national database on safety schemes by passing information on these schemes to the Transport Research Laboratory. Analysis of this information will enable us to report on the value for money of our safety activities.
• We have regular contact with schools across the country and give road safety talks to pupils. An example of this is the road safety talk one of our project managers gave local children in West Winch, Norfolk following the installation of a new puffin crossing near their school in April 2001.

We are developing a programme to improve crossing facilities on our network.

Case study : Emergency procedures ­ scenario planning

To prepare for incidents on our roads, we carry out scenario planning in partnership with the emergency services. An example of this is the exercise carried out in the Hatfield Tunnel on the A1(M) in consultation with HESMIC (Hertfordshire Emergency Services Major Incident Committee). This involved a simulated incident involving a school minibus that had crashed into a milk tanker. Several other vehicles were involved in the incident including a police prison vehicle. A small media team were able to observe the clearing of the incident, including Linda O'Brien of Anglia Television. She said: "In these situations the media are usually kept clear of such incidents for safety reasons. We were able to see the care taken in dealing with an accident and how the emergency services work together. It was so amazingly calm and well organised."

We carry out a live exercise of this type every six years and a tabletop exercise every three years to test tunnel emergency procedures for dealing with incidents on the network.

Chapter 6 Better information

Better information for better journeys

Introduction

To help our customers plan their journeys, from selecting the best mode of transport to choosing when to set off and keeping them informed of incidents while they are travelling, we are committed to providing high quality, up-to-date information about conditions on our network. A variety of methods are used to communicate this information, from electronic message signs by the side of the road to Lane Closure Bulletins and the Video Information Highway trial on our website (see case study). Customers can also contact us directly through the Highways Agency Information Line (HAIL).

The Agency's website helps road users to plan ahead.

We also issue leaflets to local residents about work we are doing in their area and safety advice to drivers. An example of this is the Winter Driving leaflet, which offers advice on driving in adverse winter conditions and gives information on major networks.

Customers can speak direct to the Agency through our information line.

Holidays and major events are busy times for England's motorways and trunk roads. Each bank holiday, including Easter and the Christmas break, we run a media campaign to let people know where road works are being lifted and where they are staying in place, so that road users' can plan their journeys effectively.

The Highways Agency Information Line (HAIL) ­ 08457 50 40 30

The Highways Agency Information Line offers up-to-date information on conditions on our network and road schemes direct to the public. It is open between 8am and 8pm on weekdays and 9am to 5pm at weekends and public holidays, with a recorded information service available at other times.

2001-02 performance

Advanced warning about road works helps to cut delays on the network. During the busy holiday season we provided additional information including:

• Some 250,000 summer travel leaflets distributed to motorway service areas, ports, tourist information centres, petrol stations, campsites and other public information points during 2001-02. All 250,000 leaflets were taken within two weeks of customers receiving letters alerting them to the campaign.

A road users' satisfaction survey carried out in August and September 2001 found that:

• Fifty per cent of respondents who had seen the leaflet thought that it provided useful information on road works and delays. Eighty two per cent of respondents found the leaflet useful, with most citing information on road works and delays and better journey planning as the reason.

We also kept routes clear for major events. Successes in 2001-02 included the FA Cup Final, which saw football fans travelling from London and Liverpool to Cardiff and the Royal Lytham Open Golf Championship, which drew fans from all over the country and abroad to the North West.

Case study : Video Information Highway (VIH) trial

Transport Minister David Jamieson launched the Video Information Highway (VIH) trial in November 2001. This system taps into the CCTV cameras from motorways in Avon and the South West (M4/M5/M48/M49 and both Severn crossings) and displays images from them on the Agency's website. These images are also transmitted to the AA, RAC and several local radio stations from the Avon and Somerset Constabulary control room at Portishead. This enables road users to view road conditions before they set off, helping them to plan their journeys and avoid congestion.

Brian Taylor from Manchester had first-hand experience of the value of our Video Information trial in Bristol when he went on his annual holiday to Cornwall. Brian said

"Each year we holiday in Cornwall. During the run-up to our holiday I followed the trial around the congested M5 for the busiest time at each junction. We managed to drive from Manchester to Cornwall in record time by staggering our journey."

Brian Taylor checks out the Agency's Video Information Highway.

Chapter 7 Environment

Striking a balance

Introduction

One of our key objectives is to minimise the impact of the trunk road network on the natural and built environment. As manager of an estate approximately the size of the Isle of Wight, we carry out many projects to safeguard or improve the environment.

For example, we recognise that roadside verges provide a major habitat for wildlife, including endangered species, that need to be protected. An example of this is the roadside conservation project on the verge of the A27 near Pagham Harbour where protective measures were put in place to protect a colony of rare striped Lychnis moths discovered there.

We plant up to a million trees every year.

From March 2004, our contractors will have to operate an accredited Environmental Management System, where appropriate, to secure future work. This will enable standard environmental techniques, developed by the Agency, to be integrated into environmental work taking place across our network.

In March 2002 we published our Biodiversity Action Plan. This sets out how we will protect and encourage wildlife on our land. Activities in the plan include building tunnels for badgers and creating new habitats for rare plants and insects. The plan contains targets for the next decade, including creating both new habitats and improving existing ones. Individual action plans for 25 species and habitats cover a range of measures that will protect and enhance biodiversity on our estate across the motorway and trunk road network.

In recent years, we have carried out a number of research projects on the use of recycled materials in road-related construction. These include re-using existing road materials, and the use of secondary aggregates or by-products such as colliery shales, in new road construction. We also use shredded tyres as a topping for some of our roadside drains. A current research project is looking into using recycled aggregates in reinforced concrete structures. Other examples include research into the use of cement or lime to stabilise our roads. This reduces the amount of material that needs to be excavated, taken to landfill tips and replaced, saving time and money and reducing environmental damage. Rehabilitation of old concrete carriageways is also providing an economic and sustainable alternative to full reconstruction.

2001-02 performance

Biodiversity Management: During 2001-02 we increased the amount of the network under biodiversity management and landscape management. For example, whilst dualling the A43 between Towcester and the M40 on the Northamptonshire/ Oxfordshire border, we carried out a phased removal of woodland over a two year period to encourage the resident population of dormice to move further back into the wood where a new habitat had been developed (see case study).

Noise Mitigation: We treated 13 sites from a list requiring noise mitigation presented to Parliament, known as 'Hansard' sites. An example of this was where we installed 2.5km of noise fencing between Junctions 33 and 34 of the M1, benefiting some 250 properties. This used a novel design with a colour scheme agreed with local residents.

Noise fences installed on the M1.

Air Quality: We responded to three consultations from local authorities on Air Quality Plans.

Recycling Materials: Examples include the use of recycled materials for a major resurfacing project on the A30. This cost 20% less than conventional repair methods, took 50% less time and reduced the number of lorry journeys moving materials by about 700. On the A63 Selby Bypass, waste materials from local coalfields and power plants were used for embankments.

 We work with local authorities to improve air quality.

Rescue Archaeology: Work on the A46 Newark to Lincoln Improvement unearthed a substantial section of the original Fosse Way (an ancient Roman road). We carried out extensive survey and research work which added significantly to knowledge in this area.

Case study: Moving the mice

A rare protected species of dormouse was found in an area of woodland scheduled for felling as part of the A43 Towcester to M40 dualling project. In consultation with the Forestry Commission, English Nature and the Northamptonshire Dormice Group, it was decided to attempt to encourage the dormice to move further back into the wood away from the area that needed to be felled.

The surrounding woodland was improved to make it into an appropriate dormouse habitat and a phased felling of woodland took place over two years. The disturbance from the work gradually moved the dormice into their newly prepared habitat. English Nature has recommended this strategy for potential use in similar situations.

Chapter 8 Modernising the Agency

Modernising the Agency

Introduction

An old adage states: "If you always do what you always did, you'll always get what you always got." We are continually looking at new and better ways of doing business to deliver a better service to our customers.

2001-02 performance

Processing our suppliers' invoices: During 2001-02, we processed 97.6% of invoices within the terms agreed with our suppliers or 30 days where no specific terms are agreed, against an annual target of 98%. Although we narrowly missed the target, it is a significant improvement on the 2000-01 performance of 95.6%.

Modernising to deliver a better service: We are making good progress in developing our customer focus, improving our internal processes and key activities. We have improved our delivery and working processes to meet the requirements of the International Standard (ISO 9000/2000). By ensuring consistency and encouraging excellence and best practice, we are avoiding duplication and improving value for money. We are committed to further improving our service to customers, partners and stakeholders.

Managing change: In any organisation there has to be leadership, and in change management this is a key factor. In our Corporate Plan we say that we intend to plan, prioritise and manage change to meet the Agency's business needs, with the plan itself providing the framework for that programme. In November 2001 we set up a group to prioritise and champion the delivery of change in the Agency. This group looked carefully at change initiatives that we were committed to and decided on the main priorities for 2001-02. Other initiatives were re-timetabled to ensure sufficient staff resources to deliver those priorities. This also resulted in some additional benefits. For example, delaying the introduction of the Agency's Intranet project encouraged project owners to introduce this new IT tool in a more flexible way to suit the business.

Research and development: In 2001-02 our programme of Research and Development identified alternative materials for use in the building and repair of structures on the network and introduced new construction techniques with greater use of recycled materials. In February 2002, we received an award from the AA for encouraging and developing the use of quieter road surfaces in the UK.

Better Quality Service Reviews (BQSRs): In 2001 we developed a programme to meet the mandatory requirements of Better Quality Service Reviews (BQSRs). These reviews look at how we operate Agency processes and functions and identify improvements. The reviews require us to consider outsourcing where we cannot meet comparable private sector standards in value for money. BQSRs are no longer a mandatory requirement but we are continuing to make good progress towards reviewing all of our activities by April 2004 in line with Modernising Government principles.

To deliver better service to our customers we make use of the latest technology.

Improved Information Technology: To deliver the best service possible to our customers we have continued to use the latest technology and systems. Examples include the new Highways Agency Pavement Management System, the System for Managing (SfM) and the Structures Management Information System. We have been nominated for the 'Best Public Sector IT Project' in the 2002 Computing Industry Awards for the M25 CCTV Enhancement Project. This project equipped the M25 with digitally networked CCTV to improve safety, tackle congestion and equip emergency services with more accurate information.

Agency organisation: The structure of any organisation needs to be dedicated to delivering its core business. To this end our Network and Customer Services and Project Services Directorates were re-focused into two new Directorates; Network Strategy, and Operations Directorate. A new Corporate Directorate was also set up to deliver our corporate and strategic functions. The responsibilities of the new directorates are summarised in Appendix 1. To improve the service to our regional customers we will move the majority of our staff based in London to our regional offices. In consultation with the Unions, an estates strategy has been developed to carry out this migration.

Modernising our administrative systems: Considerable progress was made during the year on implementing System for Managing (SfM), a resource accounting and management information system. This will help to improve our business performance through better management information and improved business processes. Work on developing SfM continued beyond 2001-02 with Phase 1 of the project implemented as planned on 7 May 2002. Full implementation of this system will greatly simplify comprehensive resource accounting and aid forward planning.

Corporate governance: HM Treasury defines Corporate Governance as 'The system by which Accounting Officers carry out their responsibilities for ensuring that effective management systems, including financial monitoring and control systems, have been put in place'. We have a robust system for ensuring that all these controls are in place, details of which can be found in the 'Statement on the System of Internal Control' (SSIC) on page 51. However, the SSIC is qualified to reflect that Agency-wide risk management arrangements were not embedded from the outset. These arrangements are expected to be fully in place by March 2003.

E-business: To improve efficiency, both internally and with customers, we must develop an electronic business capability. In October 2001, our Board approved an E-business Strategy. Since then progress has been made in implementing some major E-business projects. For example, our intranet portal started to roll out in June 2002. This enables real time exchange of information and improves collaboration between different teams across the business.

Electronic procurement: Procurement for low value goods electronically has already begun, using the Government Procurement Card, and this is has led to savings. The first phase of the System for Managing (SfM) was rolled out in May 2002, providing us with a desktop system for managing almost all of our purchasing activity electronically.

IT system development: Projects developing new systems are working to the E-GIF (Electronic Government Information Framework) standard. Pilots have begun on Electronic Document and Records Management (EDRM) with teams in Leeds, London and Bristol.

 The Agency's intranet portal helps teams to share information.

Staff management: We are committed to providing our staff with the skills to do their jobs and the opportunity to develop their potential. During the year, our training strategy was revised to gear up for delivery of the 10-Year Plan for Transport. We achieved Investors in People (IiP) accreditation in 2000 and work continued throughout the year to further embed IiP principles. In December 2001, we also conducted our first staff attitude survey and are acting on its findings.

Civil service reform: In 2001-02 we continued to support the objectives of Civil Service Reform. Particular emphasis has been placed on the development of managers' leadership skills. All managers are regularly assessed on their people management skills and encouraged to take part in 360-degree feedback as part of a structured coaching programme. The internal leadership development programme has been expanded to attract high-calibre graduates with the first batch selected at the close of the year ready to begin work in September 2002. General management training has been reviewed comprehensively and a new modular-based programme introduced. A wider range of technical training courses was also introduced and we supported 95 staff in studying for professional qualifications.

Home working pilot study.

Flexible working: We are exploring how our flexible working policies might be enhanced to improve the work-life balance for staff and boost service delivery. Flexible working arrangements such as flexi-time, part-time working, job sharing, secondments and career breaks have been in place for some time. We are also flexible about where many Agency staff carry out their work. A project was set up to develop HA policy on a wider range of flexible working practices and the systems needed to support them. The work will continue into 2002-03 and, as part of this exercise, a pilot study in home working was started in January 2002.

Estate strategy: We are currently developing an estate strategy which seeks to deliver improved working conditions for our staff and more efficient, effective and economic use of office space to meet long term business needs. This includes planning and implementing the moving of staff to a new London office during 2002 and the migration of others to our regional offices.

Appendix 1

The Agency's structure

The Highways Agency employs around 1,700 staff and is managed by a board comprising the Chief Executive and seven Executive Directors, each responsible for the following eight business areas.

Corporate Directorate (CD)

Responsible for strategic planning, managing organisational change, acting as a customer champion, provision of information, internal and external communications (including the HA Information Line), policy on Public Private Partnerships and international liaison. It is also responsible for the day to day running of the Chief Executive's office.

Network Strategy (NS)

The focal point in the Agency for developing a forward looking strategy for the network and defining the required outcomes for it. It is responsible for liasing with DfT and Ministers on network strategy issues and liasing with key regional stakeholders (Government Offices/Regional Planning Bodies and Regional Development Agencies) contributing to the plan-led system. It also acts as a high level client for the Trunk Road Network within the Agency.

Operations Directorate (OD)

OD is our delivery arm and provides frontline customer service on the strategic road network. It manages the maintenance, improvement and operation of our road network, including our land holdings. OD develops and implements programmes to deliver the outcomes anticipated by the strategy for the network and exercises control on development proposals which could affect the network.

Procurement Directorate

Responsible for developing our procurement strategies to deliver best value. It identifies the best suppliers to meet our needs and maintains supplier performance records. Regional procurement teams provide a procurement service in support of Project Sponsors and their teams.

Safety Standards and Research (SSR)

Responsible for maintaining a best practice approach to trunk road management, operation and design. Manages our research and development strategy, commissions research into innovative techniques and works with partners to pool knowledge and best practice, and develops internationally recognised standards.

Finance Services (FS)

Responsible for business and financial control, complying with the Government's requirements for resource accounting and budgeting, and for ensuring propriety and value for money in our work. FS also provides our computing systems.

Human Resource Services (HRS)

Responsible for recruitment and retention of a motivated, skilled, workforce, providing an efficient, effective service to its customers. It is also responsible for managing our estate and office services to meet our business needs.

Audit Inspection and Consultancy Division (AICD)

Reporting directly to the Chief Executive, this division is responsible for ensuring the effectiveness of risk management arrangements across the Agency. The division also evaluates and reports on our internal control system and provides an internal consultancy service.

Appendix 2

The Agency's Aims and Objectives

In its White Paper 'A New Deal for Transport: Better for Everyone', published in July 1998, the Government gave the Highways Agency a new role as a network operator. Ministers set the Agency a strategic aim and objectives:

Strategic aim

To contribute to sustainable development by maintaining, operating and improving the trunk road network in support of the Government's integrated transport and land use policies.

Objectives

• To give priority to the maintenance of trunk roads and bridges with the broad objective of minimising whole life costs.
• To develop the Agency's role as a network operator by implementing traffic management, network communications and other measures aimed at making best use of the existing infrastructure and facilitating integration with other transport modes.
• To take action to reduce congestion and increase the reliability of journey times.
• To carry out the Government's targeted programme of investment in trunk road improvements.
• To minimise the impact of the trunk road network on both the natural and built environment.
• To improve safety for all road users and contribute to the Government's new safety strategy and targets for 2010.
• To work in partnership with road users, transport providers and operators, local authorities and others affected by our operations, to promote choice and information for travellers, monitoring and publishing information about the performance and reliability of the network.
• To be a good employer, managing the Agency's business efficiently and effectively, seeking continuous improvement.

Appendix 3

Click to view Comparison of Ministerial Target Outputs & Achievements 1999-00 to 2002-03

Appendix 4

Performance against Road Users' Charter Targets

Performance	Target Outturn	2001-02	2000-01	Comments
1. Reduce the number of people killed or seriously injured (KSI) on the Strategic Road Network by one third, and the rate of slight casualties by 10%, by 31 March 2011 against a baseline of the 1994-98 average. This being monitored and reported annually.	Target (KSI)	No in-year target set	4713
	Outturn (KSI)	4495	4549
	Target (slights)	No in-year target set	21.13
	Outturn (slights)	19.44	20.82
2. Emergency roadside telephones will be maintained so that 99.5% of them are operating at all times.	Target	99.5%	Target revised April 2001 (Business Plan 2001-02 Annex 5)	Unable to validate the achievement of this target - new procedures implemented to address this issue
	Outturn	See comments
3. Plan and co-ordinate major road works so that a minimum of 90% during the year are no more than 2.5 miles long and are at least 6 miles apart.	Target	90%	Target revised April 2001 (Business Plan 2001-02 Annex 5)
	Outturn	96%
4. Road works will be managed so that an average of 97% of traffic lanes on the network will be kept free of them during the year.	Target	97%	95%
	Outturn	98.6%	98.7%
5. Ensure that 60% of the core trunk network, including all concrete sections, has a quieter noise surface by 31 March 2011. This is being monitored annually.	No in-year target set	1611km of quiet surfacing laid including 287km over concrete roads	Target revised April 2001 (Business Plan 2001-02 Annex 5)
6. Survey all non-motorised crossing points on the core network and trunk road network for access, safety and convenience. All the surveys will be completed by 31 March. A five-year programme of improvements based on the survey will be developed by 31 March 2003. The improvement programme will be completed by 31 March 2008. To be monitored through the Highways Agency work programme.	Target	Complete survey of crossing points
	Outturn	Survey 99% complete
7. Routine maintenance works carried out during the year will be undertaken off-peak in conformity with working time restrictions defined in contracts.	Target	99.5%
	Outturn	99.6%
8. Salt the road network ahead of the forecast formation of ice and snow. To be completed within three hours of the instruction to salt, in accordance with the Highways Agency Trunk Road Maintenance Manual (TRMM) Volume 2 Part 3.3.3.	Target	99%	Target revised April 2001 (Business Plan 2001-02 Annex 5)	Unable to validate the achievement of this target - new procedures implemented to address this issue
	Outturn	see comments
9. Carry out regular inspections of motorways to search for and remove debris and litter, in accordance with the Environmental Protection Act 1990, as specified in the Highways Agency Trunk Road Maintenance Manual (TRMM) Volume 2 Part 1.12, and the DfT Code of Practice on Litter and Refuse. Debris constituting an immediate hazard will be removed on a variable timescale based on lane use and traffic volume.	Target	100%	Target revised April 2001 (Business Plan 2001-02 Annex 5)	Unable to validate the achievement of this target - new procedures implemented to address this issue
	Outturn	see comments
10. Reply to all letters, E-mails, faxes and telephone calls to the Highways Agency Information Line which need a written response, within 15 days of being received.	Target	85%	Improve on previous years performance	Please note that this is also a Whitehall Standard (see Appendix 4)
	Outturn	93.4%	87.4%
11. Re-open traffic lanes where completion dates have been advertised by the expected completion date in at least 90% of cases.	Target	90%		New target for 2001 -02
	Outturn	86%
12. Re-open traffic lanes on motorways and trunk roads closed by the police due to accidents as soon as possible, and in any case not more than one hour after the Agent has received notification of release from the Police, in 90% of incidents, during the year.	Target	90%		New target for 2001 -02
	Outturn	99%
13. Where it is likely that works may lead to delays of more than 10 minutes, road users will be informed of this two weeks in advance of the planned start date. Information via the Highways Agency's web site and Information Line and to the local press and radio will include the advertised completion date and brief objectives of the scheme.	Target	95% of occasions		New target for 2001 -02
	Outturn	98%
14. Increase the number of Variable Message Signs (VMSs) brought into operation on the network to improve safety and congestion from 500 to 1,400 by 31 March 2005. This will be monitored and reported annually.	Target	No in-year target set
	Outturn	280
15. At any major road works sites where lanes are coned off and there is a suspension of work for more than one day, a sign bearing a short explanation for this will be displayed.	Target	95% of occasions		New target for 2001 -02
	Outturn	93.8%
16. Maintain road signs so that they are clear and visible, in accordance with the standards laid down in the Highways Agency Trunk Road Maintenance Manual (TRMM) Volume 2 Part 1.17.	Target	100%		Unable to validate the achivement of this target - new procedures implemented to address this issue
	Outturn	see comments

Appendix 5

Whitehall Standards

Performance	2001-02	2000-01	Comments
To achieve six out of six of the targets, set out in accordance with Whitehall Standards:
1. Answer your letters (including letters, faxes and e-mails) quickly and clearly. We aim to reply to all letters within 15 working days of receiving them, meeting this standard in at least 85% of cases.	93.4%	87.5%
2. See people within 10 minutes of pre-arranged time for an appointment. We aim to meet this standard in 99% of cases.	See comments	99.8%	Unable to validate the achievement of this target ­ new procedures implemented to address this issue
3. Answer telephone calls quickly and helpfully. Our switchboard aims to respond to calls within eight rings.	Not achieved	Not achieved ­ 13% of calls took in excess of one minute to be answered in an independent survey.	Unable to validate performance against this target ­ new procedures implemented to address this issue
4. Provide clear and straightforward information about services and those of related providers and a public enquiry point for telephone callers.
i) We aim to provide the Information Line service with a satisfaction rating of 75%, as measured by the 1998 Road Users Satisfaction Survey. This figure will combine the percentage of callers completely satisfied and percentage of caller partially satisfied with the service they receive.	Not achieved	Achieved
ii) We aim to regularly publish a 'Road Users' Charter' outlining the Agency's work, its service standards and contact points.	Partially achieved ­ Charter available but out of date	New Charter published in November 2000
5. Have a complaints procedure available on request. We aim to provide on request a leaflet detailing our complaints procedure. This is available in 12 languages, in braille and in large print.	See comments	Achieved	The leaflet was available but we were unable to verify number of requests received from our customers.
6. Take all reasonable steps to make services accessible to everyone and consult users regularly. All our offices are accessible to people with disabilities. The Agency undertakes regular surveys of its customers to obtain their opinion of its services.

Appendix 6

Internal Audit Certificate

Agency Performance against the Key Ministerial Targets, Road Users' Charter Targets and Whitehall Standards shown in the Business Plan for 2001-02 has been subject to independent audit by the Agency's Audit, Inspection and Consultancy Division (AICD).

I am satisfied that reported achievement against these targets ­ where it has been possible to fully validate data ­ and which is reflected in pages 31-40 of the Agency Annual Report, is a true and fair view of Agency performance in those areas.

Bob Parsons
Head of Audit, Inspection and Consultancy Division
December 2002

Appendix 7

HA recruitment policy

Introduction

1 The Civil Service Order in Council 1995 authorises the Civil Service Commissioners to require departments and agencies to publish summary information about their recruitment policy and annual statistics showing the number of appointments made and the use of permitted exceptions.

Principles for recruitment

2 The Agency is bound by the principles for recruitment set out in the Civil Service Commissioners' Recruitment Code, 4th Edition, April 1999.

1. Individuals will be selected on merit on the basis of fair and open competition.
2. Prospective applicants will be given equal and reasonable access to adequate information about the job and its requirements, and about the selection process.
3. Applicants will be considered equally on merit at each stage of the selection process. That process will be based on criteria relevant to the job and applied consistently to all candidates. Selection methods will be reliable, objective and guard against bias.

3 In compliance with Civil Service policy, equal opportunity will apply throughout the recruitment process. Applications will therefore be encouraged regardless of age, gender, race, colour, nationality, ethnic or national origins, disability, religion, sexual orientation, marital status or working patterns.

Exceptions to the recruitment principles

4 The Highways Agency will only permit those categories of exceptions allowed by the Civil Service Order in Council 1995, i.e.:

1. Short term appointments
2. Secondments
3. Re-appointment or re-instatement of former civil servants
4. Transfers into the Civil Service
5. Surplus acceptable candidates for shortage posts; and
6. Disabled candidates.

5 Any cases (at whatever level) within these categories, but which do not fall within the provisions of the code, will be referred to the Civil Service Commissioners to consider. In relation to the Senior Civil Service, the approval of the Civil Service Commissioners will be sought before appointments are made using the exceptions, apart from appointments of less than 12 months.

6 As permitted by the Order in Council, the Highways Agency may offer encouragement or assistance in the process of selection to disabled applicants which may not be available to other candidates (category 4(f) above). In this context a disabled person is someone who declares that they have a physical or mental impairment which is expected to last for at least 12 months and which has an adverse effect on their ability to carry out normal day to day activities. Any disabled applicant who meets the minimum criteria specified for a post will be guaranteed an interview for that post.

Audit

7 There will be two levels of audit for the Highways Agency's recruitment policy and procedures:

1. By independent consultants appointed by the Office of the Civil Service Commissioners to verify the adequacy and compliance of our systems in fully meeting the requirements of the Code; and
2. By HA internal auditors to reassure the Chief Executive about the adequacy and use of management controls to ensure that delegated recruitment complies with the requirements of the Code.

Click to view Recruitment Statistics: 2001-02

Appendix 8

HIGHWAYS AGENCY 2001- 02 ACCOUNTS

Foreword

All references to DTLR include reference to the Department for Transport, as appropriate, following the machinery of government changes earlier in 2002.

History and background

The Highways Agency was created in 1994 as an Executive Agency of what was, at the 31 March 2002, the Department for Transport, Local Government and the Regions (DTLR).

These accounts are prepared according to an Accounts Direction issued under Section 7 of the Government Resources and Accounts Act 2000. This account has been consolidated within the DTLR Resource Account published by DTLR.

Principal activities

The aim of the Agency is to contribute to sustainable development by maintaining, operating and improving the motorway and trunk road network in support of the Government's integrated transport and land use planning policies. As network operator, it manages some 5,863 miles (9,380 km) of trunk roads and motorways and delivers the Secretary of State's programme of motorway and trunk road improvement schemes.

Funding

For the 2001-02 financial year, the Agency was funded on a gross running cost basis from within Request for Resource 2, subheads F, AA & AG of the DTLR Resource Account. The Agency was allocated a resource based operating budget of £4,640,716,000 against which it utilised £5,096,322,000. The Agency was also allocated a resource based capital budget of £666,994,000 of which it utilised £487,292,000.

This was the first year, and the Agency's first experience of full resource accounting and budgeting. The Agency is implementing a new resource based accounting system, the first phase of which went live on 7 May 2002. Interim forecasting and monitoring measures were introduced to control expenditure in 2001-02. These were successful in limiting cash spend but the Agency underestimated certain non-cash items (mainly network depreciation and write-downs and bridge strengthening provisions). The Agency also under estimated the amount of spend that, though capital in nature, did not meet the strict definition of capital as required by the Treasury Resource Accounting Manual.

The Agency is examining the lessons from 2001-02 and how they can be used to improve our resource based monitoring and forecasting in 2002-03.

Review of the year

The review of the year is given in the body of the Annual Report accompanying this set of accounts.

Significant events since the end of the financial year

The Prime Minister announced on 29 May 2002, a number of machinery of government changes affecting our parent department, and from that date the Highways Agency became an Executive Agency of a new Department for Transport.

Future developments

The Agency, in consultation with the central department and appropriate local authorities, will continue with Government policy to transfer the responsibility for the non-core network to local authorities. Some 278 miles (445km) of network was transferred in 2001-02. The Agency anticipates transferring a further 691miles (1,105km) of network during 2002-03.

The Dartford Crossing concession ended on 31 March 2002. A one year toll extension period came into force on 1 April 2002 during which Dartford River Crossing Limited will continue to operate and maintain the crossing. Tolls collected during this period will be used to build up a maintenance fund for the Crossing, allowable under the provisions of the Dartford ­ Thurrock Crossing Act 1988. A Charging Scheme Order, under the Transport Act 2000, to introduce road user charges at the Crossing when the powers to levy tolls comes to an end was approved by the Secretary of State on 4 April 2002. The Agency, with our parent department, are considering future management, operation and accounting arrangements for the Crossing following the end of the toll extension period.

Board

The composition of the management board of the Agency during the year was:

Tim Matthews	Chief Executive
Ginny Clarke	Corporate Director to 15 August 2001 Safety, Standards and Research Director from 16 August 2001
Hilary Chipping	Network Services Director from 16 August 2001
John Kerman	Quality Services Director to 31 July 2001, when he retired
Mel Quinn	Finance Services Director
Steve Rowsell	Procurement Director
Richard Thorndike	Acting Network and Customer Services Director to 15 August 2001, Corporate Director from 16 August 2001
Steve Williams	Human Resource Services Director
David York	Operations Director

Tim Matthews joined the Agency as Chief Executive on 25 September 2000 having been appointed through open competition. Appointment of members to the Board is undertaken in accordance with the Civil Service Management Code and their remuneration is determined in accordance with Cabinet Office Guidelines, which take into account the recommendations of the Senior Salaries Review Body.

The remuneration of the members of the management board is based on senior civil service salary reviews. The remuneration details of the board are set out in Note 2 to the Accounts.

Advisory Board

Responsibility for advising the Secretary of State on the performance of the Agency lies with the DTLR Permanent Secretary assisted by an Advisory Board. Members during 2001-02 were:

Sir Richard Mottram KCB	Chairman, Permanent Secretary, DTLR
Tim Matthews	Chief Executive, HA
David York	Operations Director, HA
Hilary Chipping	Divisional Manager, Roads Policy Division, DTLR to 15 August 2001
Willy Rickett	Director General, Transport, Strategy & Planning, DTLR
Dennis Roberts	Director, Roads and Traffic, DTLR
Alan Pickett	Divisional Manager, Roads Policy Division, DTLR (seconded from HA) 17 September 2001 to 25 January 2002
Margaret Clare	Divisional Manager, Roads Policy Division, DTLR from 28 January 2002
Linda Phipps	External Member
Geoff Beaven	External Member
Richard Hunt	External Member
Dennis Morrison	External Member

Equal opportunities

There is a well-established equal opportunities action plan that is reviewed, updated and published each year. Through this, the Agency is committed to helping all staff, regardless of gender, ethnicity, disability, age, religion, sexual orientation, marital status, care responsibilities or working patterns, to make the most of their opportunities for selection, promotion and development. We believe that all staff are entitled to be treated fairly and with respect.

Disabled persons policy

The Agency is committed to helping disabled staff make the most of their opportunities for selection, promotion and development. As a demonstration of this commitment, the Agency has been awarded, and this year has retained, the two tick Disability Symbol by the Employment Service, which enables staff with disabilities to be guaranteed an interview for a post provided they meet the minimum criteria specified.

Employee involvement

The Agency obtained Investors in People accreditation on 13 October 2000. In line with the spirit of the initiative, the Agency seeks to maximise every communication channel to employees in order to involve them in the running of the organisation. This is done through a variety of methods, including regular in-house newsletters and bulletins, management briefings, trade union consultation and widespread training programmes.

Policy on payment of suppliers and payment performance

The Agency aims to settle all valid invoices within contract terms, which are usually 30 days. During 2001-02, the Agency paid 97.6% (2000-01 95.6%) of invoices within terms.

Introduction of the euro

The expenditure incurred in the year in connection with preparing for the Euro was £6,200. The Agency is still exploring the impact of the Euro on its business activities.

Auditors

The accounts have been audited by the Comptroller and Auditor General (C&AG) whose opinion is expressed at pages 58 to 63.

Tim Matthews
Accounting Officer

10 January 2003

Statement of Highways Agency and Chief Executive's responsibilities

The Accounts have been prepared on an accruals basis and must give a true and fair view of the Agency's state of affairs at the year-end of its income, expenditure and cash flows for the financial year.

The Chief Executive of the Agency has been appointed as Accounting Officer of the Agency, with responsibility for preparing the Agency's accounts and for transmitting them to the Comptroller and Auditor General.

In preparing the Accounts the Agency is required to:

1. comply with the HM Treasury Resource Accounting Manual, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis;
2. make judgements and estimates on a reasonable basis;
3. state whether applicable accounting standards have been followed and disclose and explain any material departures in the financial statements;
4. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Agency will continue in operation.

The responsibilities of the Accounting Officer, including his responsibility for the propriety of the public finances for which he is answerable and for the keeping of proper records, are set out in the Accounting Officers' Memorandum, issued by the Treasury and published in Government Accounting.

Tim Matthews
Accounting Officer

10 January 2003

Statement on the system of internal control

Accounting Officer's responsibilities

As Accounting Officer for the Highways Agency, I am responsible for maintaining a sound system of internal control that supports the achievement of the Agency's aims and objectives, whilst safeguarding the public funds and Agency assets for which I am personally responsible. Such a system is designed to manage rather than eliminate the risk of failure to achieve the Agency's aims and objectives and can only provide reasonable and not absolute assurance of effectiveness.

System of internal control

Risk management

The system of internal control is based on an ongoing process that identifies the risks to the achievement of Agency polices, aims and objectives, evaluates the nature and extent of those risks and manages them efficiently, effectively and economically. I expect to have the procedures in place by March 2003 necessary to implement the guidance set out in DAO (GEN) letter 13/00. This takes account of the need to fully embed the processes, which the Agency has agreed should be established and improve their robustness.

The principle features of the Agency's arrangements for risk management are described below:

Risk management framework document

The Highways Agency Board (HAB) has established a risk management framework that sets out its attitude to risk and to the achievement of the Agency's aims and objectives.

The document:

• explains the Agency's underlying approach to risk management
• documents the roles and responsibilities of HAB and the Sub Boards
• outlines key aspects of the risk management process
• identifies the main reporting procedures.

This document has been communicated to key employees and has been published on the Agency's website.

Risk management advisor & co-ordinators

The above functions have recently been established to help develop and maintain the Agency's arrangements for risk management. Whilst designated risk 'owners' are responsible for the day to day management of risks, these functions play a key advisory and support service for colleagues in the performance of their risk management duties.

Specific duties include:

• The promotion of risk management procedures;
• Setting up and facilitating risk management training; and
• Reporting on any risk management strategies.

Risk registers

Risk registers are being developed within all Agency directorates.

The directorate risk registers incorporate all risks assessed as representing a critical ('extreme') exposure to meeting objectives and response plans are being prepared setting out new measures for reducing risk exposures (where appropriate).

In addition, the HAB risk register incorporates those risks considered 'corporate' in nature.

Risk reporting

Procedures are being established whereby the status of risk is discussed at directorate (and divisional) management meetings. This includes the review of risk information and risk indicators, any early warning signs of risks materialising and any significant control failings or weakness.

Directorate risk 'update' reports, presented to the Audit Committee, will cover all critical risks including those related to strategy, significant projects and operations.

Regular reports are also received and reviewed from other risk management functions in the Agency, particularly regulatory, propriety, physical security and health and safety.

Risk management training

Implementation of an Agency wide risk management-training programme began during the year.

The objectives of the training are to:

• ensure that participants are aware of the need for modern risk management;
• ensure that participants can identify the Agency risk management framework, processes and applications;
• introduce participants to a range of models that will allow them to take a whole systems approach to identifying risk and alleviating crises;
• explore the part that creativity has in risk management, and to introduce participants to a range of creative thinking tools and techniques; and
• give all participants the opportunity to practice these techniques within a work related context.

At year-end thirteen risk management training events had taken place. The training will continue during 2002-03.

Risk management performance indicators

Risk management performance indicators and targets are being developed for the Agency.

Internal Audit

Internal Audit carry out an annual programme of audits covering the management of the significant Agency risks as well as initial reviews of the risk registers. Where appropriate, actions are agreed with management to help improve the management of specific risks.

Results of the audits are reported to the management and also, in summary, to HAB and the Audit Committee. Internal audit also carries out follow up reviews to determine the extent of implementation of agreed actions.

The Audit Committee

Composition

The Audit Committee is a Committee of HAB.

The Agency Chief Executive appoints members to the Committee. Three HAB Directors sit as members on the Audit Committee, together with two non-executive members. One of the non-executive members also chairs the Committee, with the Chief Executive attending as an observer.

A representative, or representatives, from the National Audit Office are invited to attend as observer(s). The Head of Audit, Inspection and Consultancy Division (AICD) will usually attend meetings and other Agency staff are called to attend as necessary.

Frequency of meetings

The Audit Committee meets at least four times a year, with additional ad-hoc meetings convened as necessary.

Scope

The Audit Committee:

• reviews the effectiveness of the risk management process;
• receives and reviews the internal and external audit work plans;
• considers reports from management, internal and external audit on the system of internal control and any material control weaknesses; and
• discusses with management the actions taken on problem areas identified by Board members or in the internal/external audit reports.

Other key management controls

In addition to the above, other key management controls are:

A strategic planning process

This includes the production of a strategic (or corporate) plan, which sets out how the agency needs to change and develop over the next three to five years, to deliver its role as the operator of England's network of motorway and trunk roads. Implementation of the longer-term strategic plan is supported by the production of associated annual management plans.

An appropriate organisational structure to support business processes.

To help improve Agency performance and efficiency, the Agency's organisational structure has been subject to major review and change in recent years i.e.

• Reflecting its central role in meeting Agency objectives, Procurement has been established as a separate directorate with a seat on HAB;
• A new Corporate Directorate has also been established bringing together existing central functions such as the Corporate Services Division, the Chief Executive's Office, Public Relations and Communications;
• The restructuring and subsequent re-allocation of associated responsibilities for the Agency's Operations and Network Strategy Directorates; and
• The commissioning of a comprehensive organisational review of the Agency's Safety Standards and Research Directorate.

Comprehensive budgeting systems

An annual budget is approved by me as Chief Executive and the Agency Board, in consultation with our sponsoring department DTLR.

A formal process for reviewing investment proposals

The capital investment committee (CIC) is a Committee set up by HAB in order to safeguard the position of the Highways Agency's Chief Executive Officer as Accounting Officer in relation to non-roads projects (roads projects are subject to a separate appraisal regime). It does this by ensuring that a clear and auditable system of appraisal, recommendation, monitoring and control exists for all major non-roads expenditure, both capital and resource (revenue).

Financial reporting

Regular financial reports are prepared, which indicate actual expenditure against forecasts. Notwithstanding this control, I acknowledge that the Agency's financial systems were insufficient to recognise at an early stage the non-cash excess spend the Agency was contributing to our parent department's Request for Resources. In conjunction with our parent department, the Agency is urgently considering how to improve its monitoring and forecasting under the new resource accounting and budgeting regime.

System for Managing (SfM) project

The SfM project is underway to implement the Agency's financial strategy. The project has a number of objectives, which focus on both improvements to systems and processes within the finance function and the provision of improved management information to enable the Agency to meet its objectives to manage England's trunk road network.

The Performance Management Action Group (PMAG)

PMAG is a sub-committee of HAB, whose primary purpose is to support delivery of the agreed objectives of the annual Management Plan. It seeks to achieve this aim by monitoring actual expenditure and achievement against budgets and plans, identifying and ensuring corrective action as necessary. The Group provides a forum through which the Agency considers strategic issues, promotes all-round excellence and demonstrates its continuing commitment to the principles of Best Value for Money (BVFM).

More, specifically PMAG monitors:

• The Agency's performance in managing its resources as a business (input monitoring);
• The Agency's performance in producing its outputs and operating its highway network (output monitoring); and
• The Agency's planning framework (Corporate, Business and Management Plans, etc.), against framework criteria before submission to the HAB for final approval (strategic monitoring).

A robust procurement policy and process

The recently published Agency Procurement Strategy provides the procurement framework to deliver the spending plans and the outcomes in Transport 2010; the 10-year plan, which was published by the government in 2000. It applies to all areas of procurement carried out by the Agency, but it focuses mainly on the purchase of roads related activities as this covers the bulk of Agency expenditure.

A staff handbook containing HR policies

The handbook contains guidance on a wide range of topics under the general headings of: terms and conditions; equal opportunities; flexible working and travel/transfer expenses. The handbook is supplemented by regular communication, via the Agency IT network, of Agency notices, bulletins and updates.

Formal project management disciplines

MAP (Managing Agency Projects) guidance starts by explaining the Agency 'ethos'; the different stages of projects; rules for project delivery and finishes with specific advice on what to do if things change. Our ethos defines three elements that should be used together during project delivery i.e. process (how we deliver a project); practical (the things to consider to plan and to deliver a project) and people (the way we behave towards each other).

Public accountability and corporate governance training

This training has been aimed at Agency Divisional Directors and Heads of Division, although current proposals are for it to be rolled out more widely. The training covers topics such as:

• propriety and regularity (including Accounting Officer responsibilities);
• corporate governance and risk management developments (both externally and within the Agency); and
• implications of the Turnbull report and the Modernising Government agenda.

Process for reviewing the effectiveness of the system of internal control

The HAB review of internal control is informed by the work of the internal auditors and by the executive directors who have responsibility for the development and maintenance of the internal control framework.

Internal audit undertakes a year-end assessment, which reviews:

• Progress towards the implementation of the risk management process, in particular compliance with risk management policy and directives; and
• The Agency's control environment.

The external auditors in their management letters and other reports also inform the review of internal control.

HAB, through the Audit Committee, consider the following on an ongoing basis:

• Internal audit's annual report and opinion;
• the Agency's over arching arrangements for risk management and internal control;
• any reported instances of fraud, malpractice or significant losses;
• whether employees are aware of their responsibilities in respect of propriety and regularity and whether any known breaches have been rectified;
• arrangements to ensure the existence and appropriateness of business continuity plans;
• arrangements to ensure Agency compliance with all relevant laws and regulations or that any breaches have been or are being rectified;
• the scope of work, authority, resourcing and effectiveness of internal audit; and
• internal audit assignment reports and any other reports that relate to issues which impact upon the Agency's system of internal control.

Conclusion

I anticipate procedures necessary to implement the guidance set out in DAO (GEN) letter 13/00 to be in place by March 2003. The processes are largely established but need to be embedded before an unqualified SIC can be made.

Given the level of investment, the portfolio of assets and the degree of change that took place in the business activities of the Agency, I consider that the risks to the delivery of Agency objectives were appropriately managed.

Tim Matthews
Accounting Officer

10 January 2003

The Certificate and Report of the Comptroller and Auditor General to the House of Commons

I certify that I have audited the financial statements on pages 64 to 95 under the Government Resources and Accounts Act 2000. These financial statements have been prepared under the historical cost convention as modified by the revaluation of certain fixed assets and the accounting policies set out on pages 68 to 72.

Respective responsibilities of the Agency, the Chief Executive and Auditor

As described on page 50 the Agency and Chief Executive are responsible for the preparation of the financial statements in accordance with the Government Resources and Accounts Act 2000 and Treasury directions made thereunder and for ensuring the regularity of financial transactions. The Agency and Chief Executive are also responsible for the preparation of the other contents of the Annual Report. My responsibilities, as independent auditor, are established by statute and guided by the Auditing Practices Board and the auditing profession's ethical guidance.

I report my opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Government Resources and Accounts Act 2000 and Treasury directions made thereunder, and whether in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. I also report if, in my opinion, the Foreword is not consistent with the financial statements, if the Agency has not kept proper accounting records, or if I have not received all the information and explanations I require for my audit.

I read the other information contained in the Annual Report, and consider whether it is consistent with the audited financial statements. I consider the implications for my certificate if I become aware of any apparent misstatements or material inconsistencies with the financial statements.

I review whether the statement on pages 51 to 57 reflects the Agency's compliance with Treasury's guidance "Corporate governance: statement on the system of internal financial control". I report if it does not meet the requirements specified by the Treasury, or if the statement is misleading or inconsistent with other information I am aware of from my audit of the financial statements.

Basis of audit opinion

I conducted my audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts, disclosures and regularity of financial transactions included in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Agency and Chief Executive in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Agency's circumstances, consistently applied and adequately disclosed.

I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by error, or by fraud or other irregularity and that, in all material respects, the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. In forming my opinion I have also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In my opinion:

• the financial statements give a true and fair view of the state of affairs of the Highways Agency at 31 March 2002 and of the net operating cost, recognised gains and losses and cash flows for the year then ended and have been properly prepared in accordance with the Government Resources and Accounts Act 2000 and the directions made thereunder by Treasury; and
• in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities that govern them.

Please see my report on pages 60 to 63 of these financial statements.

The Report of the Comptroller and Auditor General to the House of Commons Highways Agency: 2001-02

Introduction

1 The overall aim of the Highways Agency ("the Agency") is to contribute to sustainable development by maintaining, operating and improving the motorway and trunk road network in support of the Government's integrated transport and land use policies. As network operator the Agency manages some 5,863 miles of trunk roads and motorways and delivers the Secretary of State's programme of motorway and trunk road improvements.

2 For the 2001-02 financial year, the Agency was funded from within Request for Resources 2 of the resource accounts of the Department for Transport, Local Government and the Regions ("the Department")⁷. The Agency was allocated a net resource based budget for the year of £4,640,716,000 against which it incurred net expenditure of £5,096,322,000, an excess of £455,606,000 (£455,606,142.99). The Agency's excess on its net resources budget was a significant contributory factor towards the Department's excess on Request for Resources 2, disclosed in its resource accounts for 2001-02.

3 The Agency was also allocated a capital expenditure budget for 2001-02 of £666,994,000 against which it incurred expenditure of £487,292,000, an underspend of £179,702,000 (£179,701,974.57). Taking net resources and capital expenditure together, along with other adjustments, the Agency exceeded its allocation from the Department's Request for Resources by £313,932,000.

4 Under the Government Resources and Accounts Act 2000, the Agency were required to submit their signed financial statements for 2001-02 to me by 30 November 2002. This statutory requirement is to allow time for the audited accounts to be laid before Parliament by 31 January 2003. The Agency provided initial signed accounts for my staff on 10 December but these required revisions for errors identified during my audit. The Agency therefore provided me with final signed financial statements on 10 January 2003.

5 I have completed my audit of these accounts and have certified them with an unqualified audit opinion. The purpose of this report is to summarise the reasons for the significant overspending by the Agency against its allocated resources for 2001-02. I have also commented on the reasons for the Agency's delay in providing their signed accounts to me.

The Agency's excess against its allocated budgets

6 The Foreword to the accounts discloses that the Agency exceeded its net resource budget of £4,640,716,000 for 2001-02 by some £455,606,000. This was the most significant contributory factor, but not the only factor, towards the Department for Transport, Local Government and the Regions exceeding its net resources limit for Request for Resources 2 for the year, breaching Parliamentary control of expenditure and incurring what is commonly referred to as an "excess". An excess means that the Department has incurred expenditure that is irregular (i.e. not authorised by Parliament). This has led me to qualify my audit opinion, and report separately on the main reasons for the excess, on the Department's 2001-02 resource accounts.

7 The reasons for the Agency exceeding its allocations for the year can be summarised as follows:

• Expenditure budgeted as capital in the Agency's Business Plan had to be accounted for as resource expenditure as it did not meet the criteria for capital expenditure set out in the Resource Accounting Manual.
• The Agency did not budget with sufficient accuracy for its non-cash costs, such as depreciation and the movement in its provisions.

8 The Agency's capital expenditure allocation for 2001-02 of £667 million has been underspent by £179.7 million (26.9 per cent) as a result of the reclassifications from capital to current expenditure.

9 My separate report on the Department's resource accounts explains in more detail the reasons for the Agency's overspending and its impact on the Department's outturn.

Financial management within the Highways Agency

10 The Agency's financial and budgeting systems did not identify at an early stage that it had exceeded its allocated budgets for expenditure. The 2001-02 accounts were prepared using fundamentally cash-based accounting systems. This necessitated a significant effort at the year-end to prepare figures for inclusion in the Agency's accounts.

11 As the Agency does not prepare financial statements on an accruals basis during the course of the financial year, it is not well placed to secure the benefits of managing its financial resources in line with resource budgeting principles. During 2001-02 this also meant that the Agency was not able to identify potential overspending to the Department during the course of the financial year.

12 The extent of the excess noted above crystallised only after the Agency had provided its resource accounting consolidation schedules to the Department in November 2002. This was too late to request Parliamentary approval to reallocate the Agency's financial resources for the period.

13 In conjunction with the Department, the Agency is considering how to improve its monitoring and forecasting under the resource accounting and budgeting regime.

Reasons for the delay in submission of the Agency's signed accounts

14 My staff agreed a timetable for the preparation of the Agency's 2001-02 accounts and the audit in May 2002. The Agency planned to submit its signed accounts to me on 21 October 2002 ­ in advance of the statutory deadline of 30 November 2002 set out in the Government Resources and Accounts Act 2000.

15 The Agency's draft unsigned accounts for 2001-02 were provided to my staff on 28 June 2002, in line with the agreed timetable. Shortly afterwards the Agency indicated that, in the light of better information, it wished to review the methodology it had employed in accounting for the trunk road network in particular:

• the procedures used to assess the condition of the road network (as explained in Note 1.3 to the accounts, any material variation in the operating capacity of the network indicated by these procedures is taken to the Operating Cost Statement as an impairment charge or conversely an improvement credit); and
• the indices used to revalue the motorway and trunk road network in the periods between full professional valuations.

16 In order to estimate a materially correct valuation for the trunk road network, the Agency has to assess the condition of the network each year. The Agency's methodology had been to use individual asset condition data, obtained by taking physical condition readings across sampled stretches of road. However, during 2001-02 the Agency changed its road pavement management system ("pavement" being the engineering term for the road surface, and sub-strata) which cast doubt on the reliability of the existing methodology. The Agency also considered that the existing sampled data did not provide a sufficiently sophisticated picture of the condition variation across the whole network.

17 The Agency proposed a new methodology, comprising a professional engineering assessment of the condition of the road network pavement, utilising all relevant condition survey data. Following consideration of the Agency's proposals and discussion with its engineering team, my staff were satisfied that the revised methodology was appropriate. The new methodology led to an increase of £685 million in the road network valuation in later versions of the Agency's draft accounts for 2001-02.

18 The Resource Accounting Manual requires the Agency to obtain an independent professional valuation of the trunk road network every fifth year. In the intervening years, the Agency is required to consider whether the last professional revaluation of the road network correctly states, to a material extent, its current value. In order to ensure that the network valuation is materially correct, the Agency applies a relevant index to the professional valuation each year.

19 The Agency had applied the Road Construction Tender Price Index. The Agency, however, believed that this index misrepresented the true movements in the costs of replacing the road network, because it was influenced excessively by short-term trends in road construction supply and demand, and was now less reflective of the Agency's construction projects. This index was also considered too volatile to be credible and to be incompatible with the requirements for resource based budgeting.

20 The Agency proposed an alternative index, the Resource Cost Index of Road Construction, which they believed to be a better indicator of cost inflation in the road building sector, as it was not influenced excessively by short-term trends in road construction supply and demand. After detailed discussions of this proposal with staff at both the Agency and the Department, my staff were satisfied that this proposed change in methodology was appropriate. The valuation of the road network at 31 March 2002 increased by £3,880 million between the first draft accounts and subsequent versions due to the application of the new index.

21 My audit and the Agency's own checks identified incorrect categorisation of other costs, the correction of which required significant extra work at a late stage in the accounts preparation process. These errors contributed towards the Agency's exceeding its allocated resources for 2001-02. Once the Department had identified the Agency's contribution towards an excess on its Request for Resource 2 in mid-November 2002, the Agency revisited its account figures. As a result of these delays, the Agency's Accounting Officer did not sign the accounts until 10 December 2002, after the statutory deadline of 30 November. The need for further adjustments led the Accounting Officer to submit a revised set of signed accounts to me on 10 January 2003.

22 The Agency is committed to meeting the statutory deadline for submitting its signed accounts to me in future years. This commitment should be assisted by the introduction of an accruals based accounting and financial management system at the Agency, although this will not be fully implemented until April 2003 at the earliest. The Agency is also committed to improving communications between its financial accounting and budgeting teams to better manage its allocated resources throughout future financial years.

John Bourn
Comptroller and Auditor General
National Audit Office
157-197 Buckingham Palace Road
Victoria
London SW1W 9SP

27 January 2003

Operating cost statement for the year ended 31 March 2002

	Note	2001-02 £000	restarted 2000-01 £000
Administration costs
Staff Costs	2	51,272	50,458
Cost of capital charge		1,382	1,047
Audit fee		400	318
Other administration costs	3	38,466	35,650
Gross administration costs		91,520	87,473
Operating income
appropriated in aid of the vote	4	(1,624)	(1,527)
not appropriated in aid of the vote	4	(2,145)	-
Net administration costs		87,751	85,946
Programme costs
Cost of capital charge		3,583,887	3,426,272
Programme expenditure	3	1,450,613	1,009,490
Gross programme costs		5,034,500	4,435,762
Operating income
appropriated in aid of the vote	4	(28,074)	(9,206)
not appropriated in aid of the vote	4	(12,148)	(8,643)
Net programme costs		4,994,278	4,417,913
Net operating costs		5,082,029	4,503,859
Statement of recognised gains and losses for the year ended 31 March 2002	Note	2001-02 £000	2000-01 £000
Gain on the revaluation of tangible fixed assets	18	3,231,460	3,522,546
Loss on network detrunkings	18	0	(248,546)
Recognised gains & losses for the financial year		3,231,460	3,274,000

Balance sheet as at 31 March 2002

	Note	31st March 2002 £000	restarted 31st March 2001 £000
Fixed assets
Tangible assets	5	63,449,569	59,217,880
Intangible assets	6	47,746	2,106
		63,497,315	59,219,986
Debtors: amount due after more than one year	7	79,334	76,642
Current assets
Stocks	9	10,602	12,439
Debtors: amounts due within one year	10	95,489	102,798
Cash at bank and in hand	11	41,825	4,084
		147,916	119,321
Creditors: amounts falling due within one year	12	(414,702)	(190,188)
Net current assets/liabilities		(266,786)	(70,867)
Total assets less current liabilities		63,309,863	59,225,761
Creditors: amounts falling due after more than one year	13	(1,016,635)	(1,036,226)
Provisions for liabilities and charges	14	(465,091)	(510,534)
		61,828,137	57,679,001
Taxpayers equity
General fund	18	45,504,058	44,547,169
Revaluation reserve	18	16,324,079	13,131,832
		61,828,137	57,679,001

Tim Matthews
Accounting Officer

10 January 2003

Cash flow statement for the year ended 31 March 2002

	Note	2001-02 £000	restarted 2000-01 £000
Net cash outflow from operating activities		(1,070,050)	(1,150,275)
Capital expenditure and financial investment		(465,977)	(293,626)
Net cash outflow before financing		(1,536,027)	(1,443,901)
Payments to the consolidated fund		(9,232)	(26,659)
Financing from the consolidated fund		1,583,000	1,450,401
(Decrease)/increase in cash in the period		37,741	(20,159)
Reconciliation of operating cost to operating cash flows
Net operating cost	OCS	(5,082,029)	(4,503,859)
Adjustments for non-cash transactions:
Depreciation/impairment/amortisation	3	188,043	(143,487)
Deficit on fixed asset revaluation	5	114,312	73,073
(Profit)/loss on disposal of fixed assets	3a & 4	(1,254)	5,251
Cost of capital charge	OCS	3,585,269	3,427,319
Notional audit fee	OCS	400	318
Movements in working capital other than cash	8	192,935	32,847
Increase in debtors due after one year	7	(2,692)	(2,396)
Decrease in creditors due after one year	13	(19,591)	(13,678)
Decrease in provisions for liabilities and charges	14	(45,443)	(25,663)
Net cash outflow from operating activities		(1,070,050)	(1,150,275)
Analysis of capital expenditure and financial investment
Investments in the road network		(457,371)	(290,292)
Other fixed asset purchases		(21,108)	(31,091)
Additions to intangibles		(1,441)	(421)
Proceeds from sale of fixed assets		13,943	28,178
Net cash outflow from investing activities		(465,977)	(293,626)
		2001-02 £000	2000-01 £000
Analysis of financing
Payments to consolidated fund
Amounts received in prior year and paid over		(797)	(16,809)
CFER receipts received in prior period paid over		(905)	(3,099)
CFER receipts paid over		(7,689)	(8,453)
Amounts due to the consolidated fund and not paid over		(6,363)	797
Amounts received and not paid over		6,522	905
		(9,232)	(26,659)
Funding from consolidated fund
Supply estimate granted RfR2		1,584,801	1,498,809
Monies not drawn down relating to prior year		(1,801)	-
Less TfL related spend & loss on disposal		-	(35,948)
Less detrunking related spend		-	(12,460)
		1,583,000	1,450,401
Decrease/(increase) in cash		(37,741)	20,159
Net cash requirement		1,536,027	1,443,901

Notes to the 2001-02 Agency Accounts

1 Statement of accounting policies

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These financial statements have been prepared in accordance with the Resource Accounting Manual issued by HM Treasury and prepared according to an Accounts Direction issued under Section 7 of the Government Resources and Accounts Act 2000. The particular accounting policies adopted by the Agency are described below. They have been applied consistently in dealing with items considered material in relation to the accounts.

1.1 Accounting Convention

These accounts have been prepared under the historical cost convention modified to account for the revaluation of fixed assets, and stocks where material, at their value to the business by reference to their current costs.

The detrunkings of non-core roads to local authorities are treated as a transfer of function. Merger accounting principles have been applied and comparatives have been restated in accordance with FRS6: Acquisitions and Mergers.

1.2 Tangible Fixed Assets

Title to the freehold land and buildings shown in the accounts is held as follows:

(a) property on the departmental estate, title to which is held by the Department for Transpo