Highways Agency

Contents

Contents

• Foreword
• Statement of Secretary of State and Accounting Officer responsibilities
• Statement on Internal Control
• The Certificate of the Comptroller and Auditor General
• Income and Expenditure Account
• Statement of Assets and Liabilities
• Notes to the Account

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Foreword

The Thames crossing between Dartford and Thurrock consists of two tunnels and the Queen Elizabeth II Bridge. The first tunnel was built in 1963, the second in 1980 and the bridge was opened in 1991.

An early Private Finance Initiative (PFI) concession, enacted by the Dartford-Thurrock Crossing Act 1988, transferred the existing debt from the tunnels to the private sector who would retain toll revenue to pay off the existing debt and the debt incurred by building the new bridge. Tolls were set by the Department of Transport (and its forerunners) in conjunction with the Concessionaire. The concession was for a period of 20 years from 31 July 1988, but could be ended as soon as the debt was repaid. The Secretary of State determined that all financial commitments had been met by 31 March 2002.

The Dartford-Thurrock Act 1988, Schedule 6, Section 16, (4) (1) contains the provision for a Toll Extension Period for the collection of tolls to provide a fund for future maintenance of the crossing. An Extension Agreement between the Concessionaire and the Secretary of State was in place from 4 March 1999 and allowed the Toll Extension Period to run from 1 April 2002 to 31 March 2003. All Toll Revenue during this period was passed over gross to the Department for Transport.

A charging scheme was introduced at the crossing from 1 April 2003. The powers to introduce a charging scheme on a trunk road bridge and tunnel of at least 600m are set out in Part III Chapter I of the Transport Act 2000 (Road User Charging). Sections 163 (Preliminary) and 167 (Trunk road charging schemes) and Schedule 12 (Road User Charging and Workplace Parking Levy: Financial Provisions) apply to charging schemes introduced on trunk roads.

• Schedule 12 paragraph 13 to the Act requires that the net proceeds of such a charging scheme should be applied for the purposes of directly or indirectly facilitating the achievement of any policies or proposals relating to transport but makes no prescription for how that will be achieved.
• Schedule 12 paragraph 2(2) allows the Secretary of State to make regulations determining how the net proceeds are to be calculated.
• Schedule 12 paragraph 5 allows regulations to be made for the keeping of accounts and the preparation and publication of statements of such accounts.

The effect of the regulations made under these provisions is to require an account to be produced to demonstrate the amount of the net proceeds.

The introduction of a charging scheme at the Dartford-Thurrock Crossing is enabled by the following secondary legislation:

• procedural regulations for the making of an order ¹;
• regulations covering accounting arrangements ²; and
• the making of a Dartford-Thurrock charging scheme order ³.

Cumulatively these enable the requirements of the Act to be translated into a charging scheme at the Dartford-Thurrock Crossing.

A contract with Le Crossing Company Limited is in place to manage the crossing and collect charges on behalf of the Secretary of State since 1 April 2003. All actual monies received from Le Crossing are passed over gross to the Department for Transport. For the year ended 31 March 2004, this amounted to £66,087,514.

The utilisation of the income for transport purposes is fulfilled through the Parliamentary Supply procedures: these ensure that the whole of the income is received and appropriated in aid and set against the Department's total transport expenditure. Apart from that income which is passed back to the Highways Agency to fund the maintenance of the crossings and the operations of the charging regime, all the other income offsets the generality of transport expenditure and is not hypothecated to particular programmes or projects.

Accounts of the Secretary of State

Section 3(1) (b) of the Trunk Road Charging Schemes (Bridges and Tunnels (Keeping of Accounts) (England) Regulation 2003 requires the production of accounts for the year to 31 March 2004.

These accounts have been prepared in accordance with a Direction given by HM Treasury in pursuance of the above regulation. The Direction is reproduced as an Appendix to the Accounts.

The accounts have been audited by the Comptroller and Auditor General (C&AG). His opinion is expressed on pages.

Archie Robertson
Accounting Officer
7th February 2005

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1. Statutory Instrument 2001 No. 2303 The Trunk Road Charging Schemes (Bridges and Tunnels) (England) Procedure Regulations 2001 back [1]
2. Statutory Instrument 2003 No. 298 The Trunk Road Charging Schemes (Bridges and Tunnels) (Keeping of Accounts) (England) Procedure Regulations 2003 back [2]
3. Statutory Instrument 2002 No. 1040 The A282 Trunk Road (Dartford-Thurrock Crossing Charging Scheme) Order 2002. back [3]

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Statement of Secretary of State and Accounting Officer Responsibilities

Under Section 3 (1) (b) of the Trunk Road Charging Schemes (Bridges and Tunnels) (Keeping of Accounts) (England) Regulations 2003, the Secretary of State is required to prepare a statement of accounts for each financial year in the form and on the basis directed by the Treasury. The accounts are prepared on an accruals basis and must present fairly the income and expenditure for the financial year and the assets and liabilities at year-end.

The Treasury have appointed an Accounting Officer for the account. His relevant responsibilities as Accounting Officer, including his responsibility for the propriety and regularity 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" (TSO).

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Statement on Internal Control

1. Scope of responsibility

1.1 As Accounting Officer, I have responsibility for maintaining a sound system of internal control that supports the achievement of the Highways Agency's policies, aims and objectives, whilst safeguarding the public funds and departmental assets for which I am personally responsible, in accordance with the responsibilities assigned to me in Government Accounting. This includes responsibility for transactions in respect of the Dartford-Thurrock Crossing.

1.2 Ministers receive direct reports on risks to key initiatives, the outcome of key Gateway Reviews and other key risk areas as necessary. They receive reports on risks to delivery of Public Service Agreement Targets through the Department for Transport reporting system.

1.3 My staff work closely with their counterparts in the Department for Transport to ensure that risk management, planning and performance measurement systems are compatible, clear accountability for risk management is agreed, joint action is taken where appropriate to manage, transfer or tolerate risks, and the Department is kept informed of risks as appropriate.

2. The purpose of the system of internal control

The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of departmental policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. The system of internal control has been in place in the Highways Agency for the year ended 31 March 2004 and up to the date of approval of the annual report and accounts, and accords with Treasury guidance.

3. Capacity to handle risk

3.1 The Highways Agency Board, Directors, and other senior managers lead risk management in their commands, supported by a team of risk management co-ordinators led by a risk management adviser. This team develops and maintains procedures for risk management, and identifies and spreads good practice internally. Additionally the risk management adviser participates in benchmarking and information exchange with a wide range of public and private sector bodies.

3.2 Risk management guidance is available to all staff. The guidance explains the Agency's underlying approach to risk management, documents the roles and responsibilities of the Highways Agency Board (HAB), managers and staff, outlines key aspects of the risk management process and identifi es the main reporting procedures.

3.3 Training in governance, internal control and risk management has been delivered to senior managers, and some operational staff have attended risk management awareness seminars.

4. The risk and control framework

4.1 The Highways Agency Board sets the Agency's risk appetite in line with that of the DfT Board. The risk appetite is set to ensure that all risks with high residual impact on the Agency's performance or stewardship of public funds or on the Agency's or the wider Government's reputation receive focussed management attention, that decisions to tolerate or treat risks are made on cost-justified grounds, and that where appropriate action is escalated through the line management chain to DfT and Ministers.

Priority is given to risks to achievement of the DfT's targets of reducing congestion and improving safety, and those to stewardship of public resources and assets.

4.2 Risk management is an integral part of the Agency's management and project planning procedures. Risks to successful delivery of the Agency's operational and control objectives are identifi ed and evaluated by managers when formulating directorate and divisional management plans, by project sponsors when formulating project plans, and at strategic level by the Board.

4.3 As part of the routine risk reporting process, staff and managers are required to identify new or increased risks and opportunities, for discussion and reporting to senior management and the Board. Risk is a standard agenda item in team meetings in many areas of the Agency. Key risks and their handling are included in Directorates' performance reporting arrangements.

4.4 Risks are reviewed, the effectiveness of risk treatments and their impact on residual risk are monitored, and changes identifi ed and evaluated throughout the year, as part of routine management activity. Risk owners make quarterly stewardship reports on their handling of operational risk as part of the cycle of performance management and reporting. The Board allocates the management of strategic risks to nominated directors who report back as appropriate through the year.

4.5 Risks to public stakeholders arise from many aspects of the development and operation of the strategic highways network.

In developing new works, the public are involved in risk management through the statutory consultation process.

In operations, I and my senior staff regularly meet with stakeholder groups and consider their views on risks to their interests in these meetings.

4.6 Risk management informs a number of internal control processes designed to fulfi l the following control objectives:

• to ensure that the Agency has established (agreed) clear strategic direction, objectives and key targets in support of Government policies;
• to ensure regularity and propriety in the Agency's stewardship of public funds and other assets with due regard to accountability, probity and integrity;
• to ensure that the Agency delivers its services safely to time/ cost / quality;
• to ensure that the quality of Agency projects and advice are effective, accurate and timely; and
• to ensure that HA people and procedures comply with relevant legal, government, departmental and technical standards and requirements.

5. Review of effectiveness

5.1 As Accounting Officer, I have responsibility for reviewing the effectiveness of the system of internal control. My review of the effectiveness of the system of internal control is informed by the work of the internal auditors and the executive managers within the Agency who have responsibility for the development and maintenance of the internal control framework, and comments made by the external auditors in their management letter and other reports.

I have been advised on the implications of the result of my review of the effectiveness of the system of internal control by the Board and the Audit Committee. A plan to address weaknesses and ensure continuous improvement of the system is in place.

5.2 The Highways Agency Board (which comprises the senior members of the Agency and two independent non-executive directors) meets frequently to consider the plans, performance and strategic direction of the Agency, the most important risks to successful delivery of those plans and the Agency's stewardship of public assets.

5.3 The Audit Committee is made up of the two non-executive directors, one of whom chairs it, and three Highways Agency Board members. I, together with my Head of Internal Audit, and representatives from the DfT and National Audit Office attend as observers. The independent chairman of the Audit Committee advises as appropriate on key risk and control issues.

5.4 My Head of Internal Audit provides regular reports on key risk and control issues, to standards defined in the Government Internal Audit Manual, and provides an annual independent opinion on the adequacy and effectiveness of the Agency's system of internal control together with recommendations for improvement. The Head of Internal Audit's opinion for the year 2003-04 is that on the basis of the evidence obtained during the year he can provide an overall assurance level as follows:

• Risk Management - MEDIUM to HIGH;
• Risk Handling / Internal Control - MEDIUM to LOW; and
• Governance - MEDIUM.

This means that our governance and risk management arrangements, whilst open to some improvement, are broadly satisfactory, but significant work (some of which is outlined below) is necessary to bring risk handling and internal control up to a satisfactory standard.

5.5 Managers make regular reports on the steps they are taking to manage risks in their areas of responsibility including progress reports on key projects.

5.6 The following actions are in hand to accelerate improvements in areas where the control environment gives Medium to Low assurance:

• Monthly Management Accounts have been developed;
• A monthly financial risk monitoring tool has been developed;
• The structure of the finance function is under review, with the aim of embedding financial control into the business;
• A system of top down monthly business reviews is being developed;
• A System of Stewardship reporting by senior managers is being introduced; and
• Improvements in the definition of our processes and internal controls and the guidance on how they are to be operated are being introduced.

Archie Robertson
Accounting Officer
7th February 2005

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The Certificate of the Comptroller and Auditor General to the Houses of Parliament

I certify that I have audited the financial statements on pages 13 to 17. These financial statements have been prepared under the historical cost convention and the accounting policies set out on page 15.

Respective responsibilities of the Secretary of State and Accounting Officer and Auditors

As described on page 6, the Secretary of State and Accounting Officer are responsible for the preparation of the financial statements and for ensuring the regularity of financial transactions. These financial statements must be prepared in the form directed by the Trunk Road Charging Schemes (Bridges and Tunnels) (Keeping of Accounts) (England) Regulations 2003 and approved by the Treasury. The Secretary of State and Accounting Officer are also responsible for the preparation of the Foreword. In discharging my responsibilities, as independent auditor, I have regard to the standards and guidance issued by the Auditing Practices Board and the ethical guidance applicable to the auditing profession. I have been appointed as auditor by the Secretary of State, under Section 3(1)(c) of the Trunk Road Charging Schemes (Bridges and Tunnels) (Keeping of Accounts) (England) Regulations 2003.

I report my opinion as to whether the statement of income and expenditure, statement of capital expenditure and statement of assets and liabilities are presented fairly and are properly prepared in accordance with the Trunk Road Charging Schemes (Bridges and Tunnels) (Keeping of Accounts) (England) Regulations 2003 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 Highways 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 Foreword, 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 reflects the Highways Agency's compliance with Treasury's guidance on the Statement on Internal 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. I am not required to consider, nor have I considered whether the Accounting Officer's Statement on Internal Control covers all risks and controls. I am also not required to form an opinion on the effectiveness of the Department's corporate governance procedures or its risk and control procedures.

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 Secretary of State and Accounting Officer in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Dartford-Thurrock Crossing'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 present fairly the assets and liabilities in relation to functions exercised under the Transport Act 2000 as at 31 March 2004 and the income and expenditure and capital expenditure for the year then ended and have been properly prepared in accordance with the Trunk Road Charging Schemes (Bridges and Tunnels) (Keeping of Accounts) (England) Regulations 2003 and directions made thereunder by the 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 which govern them.

John Bourn
Comptroller and Auditor General
National Audit Office
157-197 Buckingham Palace Road
Victoria SW1W 9SP
14th February 2005

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Income and Expenditure Account for the year ended 31 March 2004

Download: Income and Expenditure Account for the year ended 31 March 2004 (25KB PDF)

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Statement of Assets and Liabilities as at 31 March 2004

Download: Statement of Assets and Liabilities as at 31 March 2004 (25KB PDF)

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Notes to the Account

Download: Notes to the Account (25KB PDF)

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For further information about this account please contact:

The Highways Agency
Hempstead House
2 Selden Hill
Hemel Hempstead
HP2 4XW
tel: 01442 346 140

Highways Agency Publications Group. S040550 HA69/05