Highways Agency

Notes to the 1999/2000 Agency accounts

These financial statements have been prepared in accordance with the Resource Accounting Manual issued by HM Treasury. 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. 

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 of the Environment, Transport and the Regions

(b) property held by the Department of the Environment,Transport and the Regions in the name of the Secretary of State.

Freehold land and buildings have been restated at current cost . They are valued on the basis of open market value for existing use. Valuations are undertaken by professional surveyors at intervals not exceeding five years and are adjusted using appropriate indices in the intervening years. Assets held for resale, being land and property released from road schemes, are valued at open market value, less a provision for selling costs.

The motorway and trunk road network is valued at depreciated replacement cost . The network assets comprise carriageways, including earthworks, tunnelling and road pavements; roadside communications; bridges and other structures; and land and buildings within the highways perimeter. Together these assets form a network infrastructure that is intended to be maintained at a specific level of service potential by continuing replacement and refurbishment.

The road network assets are valued by reference to internal costing and physical asset records. A full revaluation is undertaken by professional surveyors at intervals not exceeding five years. In intervening years these valuations are adjusted using appropriate indices and adjusted for any additions or disposals. The estimated un-expired life of the network is reassessed annually and the valuation adjusted as required. Other tangible assets with the exception of IT hardware and office equipment have been stated at current cost using appropriate indices.

Expenditure on road building schemes in the course of design or construction is capitalised as part of the network valuation and indexed in the same way as the valuation of completed roads. Schemes in the course of design are only capitalised where management consider it is probable that the scheme will proceed to construction.

Where management consider it is probable that a scheme will not proceed to construction or where a scheme has been formally withdrawn from the Secretary of State's road programme, cumulative expenditure is written-off to the Operating Cost Statement and any retained land is valued and reclassified as a surplus asset .

The minimum level for capitalisation of tangible assets are:

 

Asset	Minimum
(a) For infrastructure assets	£100,000
(b) For other assets (excluding land)	£2,000
(c) For Land	no minimum

There are no grouped assets. 

1.3 Depreciation

No depreciation is provided on freehold land.

Expenditure on renewals, repair and replacement of the existing road network is charged to the Operating Cost Statement as a proxy for depreciation. Any impairment or conversely improvement, revealed by condition surveys carried out as part of the Agency's asset management programme is charged or credited as further depreciation. These surveys are carried out by external consultants on a rolling basis.

This methodology reinforces the treatment of the road network as an infrastructure asset that is intended to be maintained at a specific level of service potential by continuing replacement and refurbishment.

Impairments in the value of the trunk road network resulting from changes in replacement cost are reflected in the asset valuation and charged against the revaluation reserve. Any impairment which reduces the value below the original 1995 valuation is charged to the Operating Cost Statement . Reversals of impairment are credited to the Operating Cost Statement until the cumulative impairment charge is reversed, and thereafter to the revaluation reserve.

Depreciation of assets is provided at rates calculated to write off the valuation of freehold buildings and other tangible fixed assets on a straight-line depreciation method. Lives are normally in the following ranges:

(a) freehold or leasehold buildings	50 years or length of lease
(b) plant, equipment and computers	3 to 10 years
(c) fixtures and fittings	10 years
(d) vehicles	4 years
(e) Assets in storage	no depreciation

Assets in storage are assets held in Yate stores. They are kept in controlled conditions and do not deteriorate. They have a design life of 60 years. Whilst not depreciated, they are subject to an annual impairment review. 

1.4 DBFO schemes

The accounting treatment of these contracts is based on an analysis of the degree to which contract risk is transferred to the DBFO operator. This analysis has been carried out independently using KPMG in accordance with the instructions and guidance set out in HM Treasury Technical Note No.1 ( revised). Where the balance of risk has been transferred to the operator, the contract has not been recorded on Agency's balance sheet . Where these off balance sheet contracts revert to the Agency at the end of the contract (normally after 30 years) an intangible fixed asset has been recognised. This "reversionary interest" is valued at the net present value of the depreciated replacement cost of the asset at the end of the contract (see 1.5). When ownership reverts back to the Agency it will be recognised as a tangible fixed asset in line with the Agency's standard accounting policy.

Where the balance of the risk has not been sufficiently transferred to the operator the value of the contract is recorded as a tangible fixed asset on the Agency's balance sheet at fair value and a corresponding liability will be set up to record the payments due to the operator for that contract . The liability is reduced over the term of the contract in accordance with FRS5 guidance. 

1.5 Intangible Fixed Assets

These comprise:

(a) the net present value of the residual value of concessions granted in respect of Design Build, Finance and Operate road projects and estuarial crossings where the scheme assets are classified as off-balance sheet (see note 1.4)

(b) software licenses which are valued at historical cost, depreciated over three to ten years 

1.6 Stocks

Stocks are valued at cost, or replacement cost where materially different . Long-term stock holdings for special structures (such as tunnels and bridges) where there are no recent purchases are valued at estimated replacement cost . Where excess or obsolete stock holdings have been identified, a provision has been made to reduce the carrying value to estimated net realisable value. 

1.7 Research and Development

Expenditure on research and development is treated as an operating cost in the year in which it is incurred. Fixed assets acquired for use in research and development are depreciated in accordance with the fixed asset category. 

1.8 Capital Charge

A charge reflecting the cost of capital utilised by the Agency is included in operating costs. The current rate of charge, set by H M Treasury, is 6% of average capital employed during the year. 

1.9 VAT

Input VAT on certain contracted-out services is recovered through the Department of the Environment, Transport and the Regions' registration, under annual Treasury Direction. Irrecoverable VAT is charged to the relevant expenditure category or, if appropriate, capitalised with additions to fixed assets. Income and expenditure is otherwise shown net of VAT. 

1.10 Pensions

Present and past employees are covered by the provisions of the Principal Civil Service Pension Scheme (PCSPS), which is mostly, non-contributory. Although the Scheme is a defined benefit scheme, liability for payments of future benefits is a charge to the PCSPS. Departments, agencies and other bodies covered by the PCSPS meet the cost of pension cover provided for the staff they employ by payment of charges calculated on an accruing basis. There is a separate scheme statement for the PCSPS as a whole. 

1.11 Early Departure Costs

The Agency is required to meet the additional cost of benefits beyond the normal PCSPS benefits in respect of employees who retire early. The Agency provides in full for this cost when the early retirement programme has been announced and is binding on the Agency. The Agency has settled most of its liability in advance by making a payment to the Paymasters account for the credit of the Civil Superannuation Vote. The amount provided is shown net of any such payment

 

2. STAFF NUMBERS AND COSTS
	1999/2000
	No.
The average number of whole time equivalent persons employed
(including senior management) during the year was as follows:	1,624
The aggregate payroll costs of these persons were as follows:	£000
Wages and salaries	40,537
Social Security costs	3,235
Other pension costs	7,054
Total	50,826

For 1999/2000 contributions of £5,788,000 (1998-99 £5,509,000) were paid to the Principal Civil Service Pension Scheme (PCSPS) at rates determined by the Government Actuary and advised by the Treasury. These rates were in the range 12%-18.5% (1998-99 12%-18.5%) of pensionable pay.

 

THE EMOLUMENTS OF LAWRIE HAYNES,AS CHIEF EXECUTIVE, UP TO 31 OCTOBER 99 WERE AS FOLLOWS:
	1999/2000
	£
Salary	70,137
Performance bonus (for	1998/99) 17,335
Taxable benefits	-
Total	87,472

 

THE WHOLE YEAR EMOLUMENTS OF THE ACTING CHIEF EXECUTIVE, PETER NUTT, WERE AS FOLLOWS:
	1999/2000
	£
Salary	82,387
Performance bonus	-
Taxable benefits	-
Total	82,387

The Chief Executive is an ordinary member of the PCSPS.

 

THE SALARIES OF THE OTHER MEMBERS OF THE BOARD WERE IN THE FOLLOWING BANDS:
	1999/2000
	No.
<£40,000	1
£50,000 - £54,999	1
£55,000 - £59,999	-
£60,000 - £64,999	-
£65,000 - £69,999	1
£70,000 - £74,999	2
£75,000 - £79,999	-
£80,000 - £84,999	1
Total	6

 

THE NUMBER AND SALARIES OF OTHER STAFF EARNING ABOVE £40,000 ARE AS FOLLOWS:
	1999/2000
	No.
£40,000 - £44,999	70
£45,000 - £49,999	39
£50,000 - £54,999	12
£55,000 - £59,999	7
£60,000 - £64,999	1
£65,000 - £69,999	1
£70,000 - £74,999	1
£75,000 - £79,999	-
Total	131

Salaries include gross salaries, performance bonuses payable, reserved rights to London weighting or London allowances, recruitment and retention allowances, private office allowances, and long-term detached duty allowances. Bonuses paid in respect of the year are also included.

 

PENSION ENTITLEMENTS FOR SENIOR PERSONNEL:
Name	Age	Salary	Real increase in pension at age 60	Total accrued pension at age 60-31 Mar 00
		£000	£000	£000
Mr Lawrie Haynes*	47	85-90	0.0-2.5	5-10
Mr Peter Nutt	51	80-85	2.5-5.0	25-30
Mr Jon Seddon	43	80-85	0.0-2.5	5-10
Mr John Kerman	53	70-75	0.0-2.5	20-25
Mr Richard Thorndike	55	65-70	2.5-5.0	20-25
Mr David York	49	65-70	0.0-2.5	25-30
Ms Ginny Clarke	45	50-55	0.0-2.5	5-10
Mrs Hazel Parker-Brown**	47	0-40	0.0-2.5	15-20

* to 31 October 1999

** to 3 September 1999

Pension benefits are provided through the Principal Civil Service Pension Scheme (PCSPS).This is a statutory scheme, which provides benefits on a "final salary" basis at a normal retirement age of 60. Benefits accrue at the rate of 1/80th of pensionable salary for each year of service. In addition, a lump sum equivalent to 3 years pension is payable on retirement . Members pay contributions of 1.5 per cent of pensionable earnings. Pensions increase in payment in line with the Retail Prices Index . On death, pensions are payable to the surviving spouse at a rate of half the member's pension. On death in service the scheme pays a lump sum benefits of twice-pensionable pay and also provides a service enhancement on computing the spouse's pension. The enhancement depends on length of service and cannot exceed 10 years. Medical retirement is possible in the event of serious ill health . In this case, pensions are brought into payment immediately without actuarial reduction and with service enhanced as for widow(er) pensions.

 

3A. OTHER ADMINISTRATION COSTS
	1999/2000
	£000
Rentals under operating leases:
Hire of plant and machinery	101
Other operating leases	3,840
Non-cash items:
Depreciation	1,490
Amortisation	548
Provision for doubtful debts	(347)
Other expenditure	28,402
Total	34,034

 

3B. NET PROGRAMME COSTS
	1999/2000
	£000
Research and development expenditure	13,575
Capital maintenance (Note 1.3)	501,112
Current maintenance	238,849
Non-cash items:
Depreciation	412,448
Impairment	(2,696,128)
Gain on disposal of fixed assets	(6,434)
Provision for land & property acquisition (Note 13)	1,448
Other expenditure	112,887
Total	(1,422,243)

Administration costs reflect the costs of running the Agency as defined under the Administration cost-control regime. Programme costs reflect non-administration costs, including any payments of grants and other disbursements by the Agency.

Depreciation includes a charge of £405,663,000 to reflect changes in the condition of the networks identified by condition surveys. The impairment credit is in respect of a reversal of impairment in value previously charged to the operating cost statement in previous unpublished dry run accounts.

 

4. OPERATING INCOME
		1999/2000
	£000	£000	£000
Operating income analysed by classification and activity, is as follows:	Appropriated in aid	Not Appropriated in aid	Total
Administration Income
Fees	693	-	693
Recoveries	14	-	14
Other	652	-	652
	1,359	-	1,359
Programme Income
Rent - external tenants	5,014	-	5,014
Claims against third parties	7,556	-	7,556
Interest earned	-	4,361	4,361
Other CFER	-	6,621	6,621
Other	455	-	455
	13,025	10,982	24,007

Operating income relates directly to the operating activities of the Agency. It principally comprises rent from properties acquired for road schemes which have yet to be disposed, recoveries from third parties for damage to the network, interest for the Severn Bridge subordinated loan (see note 7) and other fees and charges provided on a full-cost basis to external customers, as well as public repayment work . It includes both income appropriated-in-aid of the Agency's Vote and income to the Consolidated Fund, which HM Treasury had agreed should be treated as operating income.

 

5.TANGIBLE FIXED ASSETS
	Trunk road network	Assets under construction	Land & Buildings	Plant & equipment	Total
	£000	£000	£000	£000	£000
At Replacement Cost or Valuation
At 1 April 1999	57,766,118	1,494,638	177,154	76,029	59,513,939
Capital expenditure	122,671	163,154	22,958	6,859	315,642
Disposals / de-trunkings	(81,014)	-	(56,889)	(1,155)	(139,058)
Revaluation	12,006,619	62,001	23,095	2,239	12,093,954
Transfers & reclassifications	581,699	(581,699)	-	-	-
At 31 March 2000	70,396,093	1,138,094	166,318	83,972	71,784,477
Accumulated Depreciation
At 1 April 1999	10,412,897	46,926	3,821	51,395	10,515,039
Charge for the year-dep'n	(2,243,539)	(46,926)	1,188	5,697	(2,283,580)
Disposals /de-trunkings	(8,516)	-	-	(458)	(8,974)
Revaluation	1,105,821	-	40	1,139	1,107,000
Transfers & reclassifications	-	-	-	-	-
At 31 March 2000	9,266,663	-	5,049	57,773	9,329,485
Net Book Value	£000	£000	£000	£000	£000
At 31 March 2000	61,129,430	1,138,094	161,269	26,199	62,454,992
At 31 March 1999	47,353,221	1,447,712	173,333	24,634	48,998,900

An external valuation of the network, as it existed at 31 March 1995, was undertaken during the year by EC Harris - Professional Surveyors. This was based on internal costing and physical asset records provided by the Agency. The valuation has been adjusted for subsequent road pavement additions and network disposals. Bridges and other structures and roadside communications added to the network since 31 March 1995 have been valued using historical records. These will be independently valued during 2000/2001.

An external valuation of the Agency's assets held for resale, being the land and buildings released from the road schemes, was undertaken during the year by the Valuation Office Agency. The valuation was carried out in conjunction with Chartered Surveyors. A valuation of the Agency's interest in its motorway service area leaseholds was also undertaken by the Valuation Office Agency.

In accordance with HM Treasury's Resource Accounting Manual, the balance sheet valuation date for fixed assets is 30 September 1999. However the trunk road network and assets under construction have been indexed to 31 March 2000 to account for the material increase in the Road Construction Tender Price Index (issued by DETR) between September 1999 and March 2000.

 

6. INTANGIBLE FIXED ASSETS
	Reversionary interest in DBFO schemes	Software licenses	Total
	£000	£000	£000
At Replacement Cost or Valuation
At 1 April 1999	157,897	2,986	160,883
Capital expenditure	38,105	1,638	39,743
Disposals	-	-	-
Revaluation	-	-	-
Transfers & reclassifications	-	-	-
At 31 March 2000	196,002	4,624	200,626
Accumulated Depreciation
At 1 April 1999	-	1,418	1,418
Charge for the year	1,391	548	1,939
Disposals	-	-	-
Revaluation	-	-	-
Transfers & revaluations	-	-	-
At 31 March 2000	1,391	1,966	3,357
Net Book Value	£000	£000	£000
At 31 March 2000	194,611	2,658	197,269
At 31 March 1999	157,897	1,568	159,465

The reversionary interest is based on the Public Sector Comparator, (an estimate of what the project would cost if traditional Agency procurement methods were used).The Net Present Value (NPV) of the seven DBFO schemes not accounted for in the Agency's balance sheet is £983.7m . The valuation is based on the RCTPI index as at the 30 September 1999.

 

THE SCHEMES ARE:
		Contract start date	Contract end date	£m NPV
M1-A1	(Yorkshire) link	26 Mar 1996	25 Mar 2026	395.4
A1(M)	Alconbury - Peterborough	8 Feb 1996	7 Feb 2026	192.3
A419 /A417	Swindon - Gloucester	8 Feb 1996	7 Feb 2026	104.6
A50 /A564	Stoke - Derby link	6 May 1996	5 May 2026	37.3
M40	Junctions 1-15	8 Oct 1996	7 Oct 2026	71.2
A19	Dishforth to Tyne Tunnel	15 Oct 1996	14 Oct 2026	47.8
A30 /A35	Exeter to Bere Regis	24 Jul 1996	23 Jul 2026	135.1
				983.7

 

7. DEBTORS:AMOUNTS DUE AFTER MORE THAN ONE YEAR
	1999/2000	1998/99
	£000	£000
Severn River Crossing plc subordinated loan	73,870	72,931
Other	379	473
Total	74,249	73,404

The Subordinated debt loan represents a £60 million index-linked subordinated loan to Severn River Crossing plc, which was advanced on 26 April 1992. It carries an interest rate of 6% and is repayable by the year 2022 or earlier. The increase in the year reflects the current year indexation by means of the RPI, as required in the concession agreement .

Other represents staff relocation housing loans. The number of staff members who currently have loans are 70.

 

8. MOVEMENTS IN WORKING CAPITAL OTHER THAN CASH
	1999/2000
	£000
Increase in stocks	3,597
Increase in debtors: amounts due within one year (excluding financing debtor)	23,058
Increase in creditors - amounts due within one year (excluding capital expenditure and financing creditors)	(55,000)
Total decrease in working capital other than cash	(28,345)

 

9. STOCKS
	31 March 2000	31 March 1999
	£000	£000
Stocks	15,328	11,731

Stocks comprise communication and traffic control equipment spares, highway damage repair items (for example barriers), salt, and parts for the repair of bridges, tunnels and special structures.

 

10. DEBTORS:AMOUNTS DUE WITHIN ONE YEAR
	31 March 2000	31 March 1999
	£000	£000
Trade debtors	11,347	7,620
Deposits and advances	19,021	9,157
VAT	73,736	50,198
Prepayments and accrued income	40,662	49,913
	144,766	116,888

Prepayments include capital prepayments of £20.9m (1998-99 £18.6m), which relate to DBFO shadow tolls in respect of schemes now opened to traffic.

 

11. CREDITORS:AMOUNTS FALLING DUE WITHIN ONE YEAR
	31 March 2000	31 March 1999
	£000	£000
Cash balance held by the Consolidated Fund	-	3,849
Cash balance payable to Consolidated Fund Extra Receipts	3,099	1,019
Accruals and deferred income	190,951	215,254
Other creditors	31,214	9,154
	225,264	229,276
Accruals and deferred income is in respect of the following:
Engineering and construction services	23,196	59,648
Other, including maintenance and shadow tolls	167,755	155,606
	190,951	215,254

 

12. CREDITORS:AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
	31 March 2000	31 March 1999
	£000	£000
Amount payable in respect of Severn Bridge loan	73,870	72,931
Amounts payable under DBFO contract	18,690	19,011
Accruals and deferred income	12,886	4,076
	105,446	96,018

The amount payable under DBFO contract represents payments due in respect of the A69, which is accounted for "on" balance sheet .

The subordinated loan represents a £60 million index-linked loan to the Severn River Crossing plc. It was advanced on 26 April 1992. It carries an interest rate of 6% and is repayable by the year 2022 or earlier. The increase in the year reflects the current year indexation by means of the RPI, as required in the concession agreement. On repayment of the loan by Severn River Crossing plc, the amount is payable to the HM Treasury Consolidated Fund.

 

13. PROVISIONS FOR LIABILITIES AND CHARGES
	Land and property acquisition	Engineering and construction services	Bridge strengthening	Early retirement and pension commitments	Total
	£000	£000	£000	£000	£000
Balance at 1 April 1999	614,486	166,347	177,004	272	958,109
Increase in provision and new provisions	1,448	67,266	7,989	1,251	77,954
Decrease in provision	-	(29,151)	(4,589)	-	(33,740)
Utilised in year	(118,295)	(90,470)	(55,088)	(604)	(264,457)
Unwinding of discount	31,689	-	-	-	31,689
Discounted Balance at 31 March 2000	529,328	113,992	125,316	919	769,555
Reconciliation to gross liabilities:
Gross Balance at 31 March 2000	599,037	113,992	125,316	919	839,264
Discount at 31 March 2000	69,709	-	-	-	69,709
Discounted Balance at 31 March 2000	529,328	113,992	125,316	919	769,555

In accordance with the criteria set out in Financial Reporting Standard 12, Provisions, Contingent Liabilities and Contingent Assets, the Agency has made provision for the following and major types of contractual or constructive obligations:

(a) the effect of planning blight resulting from the announcement of its plan to enhance the road network

(b) the discretionary and compulsory acquisition of property required for road schemes

(c) compensation for property owners arising from physical construction of a road scheme

(d) disputed contractual claims and the cost of work to meet generally accepted highways standards after a road has been opened for traffic

(e) to strengthen bridges and other structures to comply with legal minimum requirements (currently 40 tonnes), as established by European Economic Community legislation and authoritative statements by Ministers in Parliament

(f) commitments for early retirement and pensions

All provisions are based on the management's assessments of the amount to be paid and, where appropriate, this assessment is supported by independent professional advice. The Secretary of State's Roads Programme is a long-term programme. The overall process from the initial announcement of a major road scheme until it is open for traffic can take several years. The provisions have been discounted to reflect the present value of the expenditure required to settle the obligations, where the effect of the time value of money is material, using the Treasury rate of 6%.

Where appropriate, liabilities that do not meet the provisions criteria of FR 12 have been classified as contingent liabilities (note 16)

It is anticipated that a proportion, estimated at £106,336,000, of the provision for land and property acquisition and compensation, will be utilised within the next 12 months. However, the amounts already agreed for settlement at the balance sheet date are not considered to be material and therefore all such liabilities are included as provisions and not current liabilities. Actual utilisation in the year ended 31 March 2000 was £118,295,000 as disclosed in the above table.

Similarly it is anticipated that the utilisation of the provisions for engineering and construction services and bridge strengthening work will be £78,232,000 and £57,343,000 respectively in the next 12 months. Actual utilisation in 1999/2000 was £90,470,000 and £55,088,000 as disclosed in the above table.

 

14. CAPITAL COMMITMENTS
	31 March 2000
	£000
Total capital commitments	155,839

The amount stated relates to the Agency's commitment to make future capital payments on major road network schemes, where the main works contract has been awarded, to the extent that this commitment has not been provided for in the accounts.

 

15. COMMITMENTS UNDER DBFO SCHEMES AND OPERATING LEASES
	31 March 2000	31 March 1999
	£000	£000
At 31 March the Agency was committed to making the following payments during the next year in respect of DBFO contracts which expire:
Between 25 to 30 years	184,405	179,605
The commitment represents amounts payable in respect of shadow tolls under Design, Build, Finance and Operate (DBFO) contracts.
	31 March 2000 Land & Buildings	31 March 1999 Land & Buildings
	£000	£000
At 31 March the Agency was committed to making the following payments during the next year in respect of operating leases which expire:
Within one year	793	188
Between two and five years	1,602	1,701
After five years	1,476	2,027
	3,871	3,916

 

16. CONTINGENT LIABILITIES
	Land and Property acquisition	Engineering & construction services	Total
	£000	£000	£000
Gross Balance at 31 March 2000	170,468	50,196	220,664
Discount at 31 March 2000	(21,324)	-	(21,324)
Discounted Balance at 31 March 2000	149,144	50,196	199,340

Contingent liabilities for land and property arise from two main sources:

Compensation for loss after construction

Home owners can apply for compensation for lost value ('injurious affection') under Part 1 of the Land Compensation Act 1973, where property, which was not acquired for a road scheme, has lost value because of physical factors, including noise, light, dirt, smell and vibration, associated with the new or improved roads.

Claims become inevitable once the construction phase is started and the Agency accounts for the constructive obligation as a provision. A legal obligation crystallises one year after the road has opened for traffic when home owners are entitled to lodge claims that are normally settled in less than a year.

Such obligations are treated as contingent liabilities until the start of construction work; such liabilities could amount to £36,183,000.

Claims in dispute

As at the balance sheet date, the Agency is involved in a number of property cases that have been referred to the Lands Tribune for resolution or are otherwise in dispute. The Agency has provided for in its accounts managements best estimate of the outcome of these cases. The excess of the maximum liability over the best estimate of these cases is £112,961,000.

As at the balance sheet date, the Agency is involved in a number of arbitration cases in respect of contractual claims for engineering and construction services. The Agency, in its management accounts, has provided for the best estimates of the outcome of these cases. In the event that the third parties are successful in pursuing the full amount of their claims, a further liability of £50,196,000 could be incurred by the Agency.

 

17. ANALYSIS OF MOVEMENTS IN TAXPAYERS' EQUITY
	General Fund	Revaluation Reserve	Taxpayers' Equity
	£000	£000	£000
At 1 April 1999	48,074,849	2,136	48,076,985
Net operating cost	(1,933,339)
Income not appropriated in aid paid to the Consolidated Fund	(10,982)
Notional Audit fee	265
Cost of capital charge	3,295,823
Net resource outturn before cost of capital charge	1,351,767		1,351,767
Gain on revaluation of assets		10,986,954	10,986,954
Network detrunkings	(72,498)		(72,498)
Parliamentary funding net of amount surrendered to Consolidated Fund	1,467,374		1,467,374
At 31 March 2000	50,821,492	10,989,090	61,810,582

 

18. RECONCILIATION OF THE AGENCY ACCOUNT WITH,AND DISCLOSURE OF AN EXTRACT FROM,THE CLASS III VOTE 8 APPROPRIATION ACCOUNT
	Note	31 March 2000
		£000
Net cash outflow from operating activities		887,752
Net Capital Expenditure		568,514
Consolidated Fund Extra Receipts		10,982
Movements in suspense account balances		126
Net Vote Expenditure	17	*1,467,374

(Class III Vote 8 Appropriation Account 1999/2000)  

* The Vote expenditure of £1,465,446,000 differs from the Parliamentary funding referred to in Note 17 of £1,467,374,000 by £1,928,000. This represents the difference between Appropriations-in-Aid realised and those authorised to be applied.

19. RELATED PARTY TRANSACTIONS

The Highways Agency is an Executive Agency of the Department of the Environment,Transport and the Regions (DETR). DETR is regarded as a related party. The Agency also had a number of transactions with other government departments and agencies, principally Treasury Solicitors and the Valuation Office Agency; and a number of Local Authorities.

The Agency requires all staff, including senior staff, to declare financial interests and the Cabinet Office has issued rules governing senior staff taking employment with contractors. No such declarations were made during the year.

20. PRIOR YEAR ADJUSTMENTS

The opening balances for tangible fixed assets, stock, reserves and provisions for the liabilities and charges have been derived from exercises to establish the position as at 31 March 2000, as comparable data was not available as at 31 March 1999. As a result, the opening balances reflect estimates and data, which would not have been available at the time of preparing the previous set of accounts. This set of circumstances will not be repeated in future periods.