Directors’ report

Directors’ report

Directors

Mr Bernard McLeary , (Chief Executive)

Mr Graeme Ogilvy ( Deputy Chair )

(3), (4)

(2), (3), (4)

Prof. James Conroy (1), (3)

Prof. Paul Harris (appointed 1 June 2010) (2), (3)

Dr Ken Thomson (appointed 1 June 2010) (1), (3)

Prof. Louise Hayward

Ms Jacqueline Hepburn

(2), (4)

(1), (2), (4)

Mr Iain Nisbet

Mrs Carole Ford

(1) Member of the Audit Committee during the year

(1), (4)

-

(2)

(3)

Member of the Remuneration Committee during the year

Member of the Chair’s Committee during the year.

(4) Member of the Organisation Development Committee during the year

Corporate Management Team at 31 March 2011

Appointed Until

30 June 2014

30 June 2014

31 May 2014

31 May 2014

31 August 2011

31 August 2011

31 July 2011

End of Office, 31

August 2010

Mr Bernard McLeary

Mr Alan Armstrong

Mrs Anne Jardine

Professor Kay Livingston

Mr Alistair Gordon

Chief Executive

Director of Curriculum and Assessment

Director of Learning and Community

Director of International, Research and Innovation

Director of Corporate Services

Report and financial statements 2011 1

D irectors’ report (continued)

Company Secretary

Mr Alistair Gordon

Headquarters and Registered Office

Optima Building, 58 Robertson Street, Glasgow, G2 8DU

Offices also at City House, Dundee, DD1 1UF with our Distribution Centre at 7 Tom Johnston

Road, Dundee, DD4 8XD.

Auditors

Scott Moncrieff Chartered Accountants, Exchange Place 3, Semple Street, Edinburgh, EH3 8BL

(on behalf of the Auditor General for Scotland).

Bankers

Royal Bank of Scotland PLC, 23 Sauchiehall Street, Glasgow G2 3AD

Solicitors

MacRoberts, 152 Bath Street, Glasgow G2 4TB

The Directors submit their report and the audited financial statements for the year ended 31

March 2011.

1. Brief history, organisational background, objectives and principal activities

Learning and Teaching Scotland (LTS) was formed on 1 July 2000 as the result of a merger between the Scottish Consultative Council on the Curriculum (SCCC) and the

Scottish Council for Educational Technology (SCET



).

LTS is a recognised charity (see also Note 18 to the accounts), involved in the advancement of education for the public benefit, with its governing document being its

Memorandum and Articles of Association.

LTS is managed by a board of up to ten directors, who are appointed for their individual expertise. The Memorandum and Articles provide that all directors are appointed by

Scottish Ministers and that the Chief Executive is, by virtue of that position, a Director of

LTS.

LTS is an Executive Non-Departmental Public Body. Its principal objectives and activities are to:



actively promote a climate of innovation, ambition and excellence throughout the

Scottish education system.



support teachers, schools and local authorities in improving the quality of education and raising levels of achievement of all learners.



2.

3.



ensure that the curriculum and approaches to learning and teaching, including the use of ICT, assist children and young people in Scotland to develop their full potential.



work in close partnership with the Scottish Government and other key stakeholders to build capacity and support the delivery of a first class education that is recognised as such nationally and internationally.

LTS achieves these objectives by delivering the educational programmes detailed at section 4 below.

LTS is funded in part by core grant-in-aid from the Scottish Government. LTS also receives funding for specific education programmes from a variety of sources and generates income from the sale of products and services to a wide range of stakeholders in education and life-long learning.

Basis of Financial Statements

The financial statements have been prepared in a form directed by the Scottish Ministers in accordance with the Educational Development, Research and Services (Scotland) Grant

Regulations, 1999. This direction is shown as an Appendix to these financial statements.

Statement of Directors’ responsibilities

The directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United

Kingdom Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

 select suitable accounting policies and then apply them consistently;

 make judgements and accounting estimates that are reasonable and prudent;

 prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.



4. Operating and Financial Review

Our Role in Scottish Education

Working closely with the Scottish Government, we have a unique role in supporting and delivering education priorities which contribute to the objective of creating a

Smarter Scotland. LTS provides advice, support, resources and staff development to the education community, creating a culture of innovation, ambition and excellence throughout

Scottish education.

The Scottish Government confirmed in October 2009 that L TS’s core remit was:



Curriculum – to keep the curriculum 3-18 under review and provide advice and support, including quality assured resources, on the curriculum 3-18 to Ministers and the education system.



Assessment – to provide advice and support to Ministers and the education system on assessment to support learning, with support from SQA as appropriate, and to work with SQA to ensure the availability of quality assured resources to support assessment.



Glow and ICT in schools – to provide advice and support to Ministers and the education system on the use of ICT to support education, to establish and maintain technology standards for education, to ensure practitioners have easy online access to advice and support, including digital resources and to manage the provision of the national ICT infrastructure to support education, currently

Glow, the LTS Online Service and the local authority Interconnect .

Additionally, as a public body, LTS has a number of generic core responsibilities (in addition to its various legal duties), including:



Ensuring the services it provides are high quality, continually improving, efficient and responsive to need (National Outcome 15 in the National Performance

Framework).



Ensuring that everything it does contributes to creating a more successful country with opportunities for all of Scotland to flourish through sustainable economic growth (the National Purpose in the Government ’s Economic

Strategy).



Ensuring it works with other public bodies to make a planned contribution to the achievement of the National Outcomes that maximises outcomes and minimises net public sector costs.

What we accomplished in the year

Our main focus has been supporting the implementation of Curriculum for Excellence and leading and supporting other key national developments, including GLOW and

International Education, in partnership with local authorities, SQA, HMIE and other stakeholders across the education sector.



High levels of engagement and consultation by our teams across education, business and voluntary sectors have been key in ensuring that there is awareness and involvement in the transformational change occurring in Scotland’s education system.

Our five specific educational programmes in the year, together with associated

Scottish Government financing, were:

Curriculum and Assessment, including Curriculum for Excellence

Targeted Support for Education

Technology for Learning

£2,451,450

£2,828,531

£6,460,438

Developing Global Citizens

Communities

Total Scottish Government Programme Funding

£1,734,053

£1,913,902

£15,388,374

The key achievements in the year are noted below:

 Improved understanding of the requirements for future development of community learning and development ( CLD ) , built partnerships, by mapping delivery of community capacity building and family learning and clarifying practice framework for community-based adult learning



Achieved the milestone of having every defined user group signing the customer agreement to make use of Glow services

 Published more than 40 examples of approaches to learning and teaching to support practitioners implement the Curriculum for Excellence experiences and outcomes.

 Successfully secured funding from Creative Scotland to further develop the existing Creative Learning Networks and to develop networks in the remaining local authorities.

 Published more than 30 examples of emerging curriculum plans across all settings. Secondary plans were refreshed and reduced to 12 broad general education plans, augmented by nine fully fleshed out models of the Senior

Phase.

 Working with schools and local authorities, over 100 examples of approaches to assessment exemplars published on the National Assessment Resource

(NAR ).

 Publication of Curriculum for Excellence through Outdoor Learning



The main programmes operated by LTS are summarised below.

Curriculum Review aims to achieve a transformation in education in Scotland by providing a coherent, enriched and more flexible curriculum from 3 to 18, firmly focused on the needs of the child and young person. During the year LTS worked with partners to develop and publish a wide range of materials to support the ongoing implementation of CfE. These were made available on the Learning, Teaching and

Assessment areas of the LTS website. Various aspects of the Science and

Engineering Action Plan have been implemented, including the development of STEM

Central (a science, technologies and engineering resource). LTS is a key partner in the Education and the Arts, Culture and Creativity action plan and our input is ongoing and on schedule. The Marks on the Landscape resource has been developed and both this and STEM Central will be launched in 2011/12. LTS successfully secured funding from Creative Scotland to further develop the existing Creative Learning

Networks and to develop networks in the remaining local authorities. A new area of work for LTS is the development of Support for New National Qualifications. The planning for this project began during the year and the scoping paper has now been approved by the Project Board.

Assessment, Achievement and NQ: Assessment aims to support the national system of assessment within the context of CfE, and encourage intelligent use of data to inform planning for improvement. The National Qualifications project aims to support the development of the next generation of National Qualifications and ensure consistency with CfE.

Targeted Support for Education provides guidance, leadership and support to local authorities, further education, schools and pre-school settings in improving the quality of education and raising levels of achievement, participation and involvement of all learners. This includes work around: the early years; health and wellbeing, support for children and young people, literacy and numeracy, Scots language and the Gaelic

Plan. Targeted Support delivered an extremely well received series of events for the education community; published high quality support for staff; developed advice and information for the teaching profession, for example, the Supporting Learners framework and Curriculum for Excellence through Outdoor Learning and delivered

CPD in authorities and universities across the country.

Emerging Technologies: 2010 saw the final local authorities sign up to make use of

Glow, and begin to rollout accounts to staff, pupils and parents. The usage of Glow rose considerably – passing the milestone of the 20 millionth login, and regularly having more than 140,000 users per month. LTS has led in the delivery of partnership opportunities for learning through the technology of Glow, and have seen significant growth in the use of Glow as a tool to track pupil progress and achievements. 2010 saw the completion of Glow Refresh, with a new Glow Meet, Glow Blogs and Glow

Wikis being added to the suite of tools available. LTS has managed the delivery of high speed broadband to all 32 local authorities through the interconnect, and commenced a programme of improvements to increase capacity. LTS continued to


D irectors’ report (continued) lead in the field of game based learning, providing advice and guidance to practitioners on adopting new practices in the classroom relating to emerging technology and internet safety

Technologies for Learning supports LTS’s commitment to providing a world class online service which fully supports learning, teaching and continuing professional development. The LTS Online Service – with approximately 30,000 web pages of resources and more than 4.5 million visits each year - engages, inspires and informs practitioners by providing websites that offer resources, guidance and support. The

LTS Online Service targets all those involved in the education of children and young people and lifelong learning.

Developing Global Citizens brings together international education, sustainable development education and education for citizenship in relation to Curriculum for

Excellence and gives us the opportunity to prepare our young people for life and work in the 21st century. Throughout the year, LTS has worked with stakeholders to develop resources and case studies to help embed Developing Global Citizens within the curriculum. LTS worked with local authorities to encourage a better understanding of the concept of Developing Global Citizens and provided a range of support including the Developing Global Citizens Curriculum for Excellence resource and extensive use of Glow. In addition the Standards Council for Community Learning and

Development, based at LTS, is now raising the standards of support and development of the CLD practitioner base and workforce across Scotland

Communities leads on policy implementation and practice development across the broad field of CLD in Scotland, adult learning, work with young people, children and families and community capacity building. The role of the Communities Team is to work with all these sectors to enable individuals to achieve improved outcomes, in particular literacy, numeracy, health and wellbeing and to build strong, resilient, supportive communities. The broad CLD field (voluntary and statutory sectors) has a key role to play in the delivery of Curriculum for Excellence.

Creation of a new Education Agency

The Cabinet Secretary announced in October 2010 that a new Education Agency would be created as from 1st July 2011 to lead support for education in Scotland and, specifically to:



Lead and drive forward Curriculum for Excellence;



Encourage and support effective innovation;



Inspire practitioners and managers to meet new challenges and to be comfortable about doing so;



Ensure that quality, standards and outcomes for learners are continually driven upwards to deliver educational excellence;



Provide the necessary assurance to parents and others that Scottish education really is playing the key role it needs to in facing the challenges of the 21st century.



This new agency, to be called Education Scotland, will be an executive agency of the

Scottish Government and will bring together the activities of LTS and Her Majesty’s

Inspectorate of Education ( HMIe ) together with certain, smaller, areas currently within the Scottish Government.

The Board of LTS has agreed that this initiative is in the best interests of LTS and the furtherance of its objectives and, accordingly, the LTS staff, assets and liabilities will transfer to the new agency as from 1st July 2011. All of the current LTS activities will then be carried out by the new agency from that dat e with the exception of LTS’s role in developing its Confucius Institute. LTS entered into a five year agreement in

October 2010 with the Confucius Institute Headquarters ( ‘the Hanban’ ) to strengthen educational cooperation between China and Scotland and to promote the development of Chinese language education in Scotland. LTS will continue to cooperate with the Hanban after June 2011, in furtherance of the terms of the agreement and will therefore continue to trade and carry out educational activities, albeit on a significantly reduced scale compared to its current range of work.

Our Plans for Next Year

We are taking our 2010/11 core program of work forward into 2011/12 but will be operating from a reduced activity base. LTS has agreed funding of £17.3m from the

Scottish Government covering the year ending 31st March 2012 which is significantly reduced from the £24m in direct Scottish Government funding received in 2010/11.

We have factored this reduced funding into our operational planning and we are therefore starting the year with a reduction in staff numbers caused by the non renewal of fixed term contracts and seconded staff agreements and also the departure of a number of permanent staff under a voluntary severance scheme.

An LTS annual plan for 2011/12 has been agreed with the Scottish Government which, along with unused funding, will, on 1st July 2011, be combined with the HMIe annual plan to form the basis for the deliverables from Education Scotland for the rest of the year.

Scottish Government Funding and Financial Results

LTS received Core Grant in aid in the year of £7,818,000 (2010: £7,505,000) and, in addition, received government funding for specific educational programmes and projects amounting to £15,388,374 (2010: £15,702,261). Under the provisions of the

Government Financial Reporting Manual ( ‘FReM’) these receipts are treated as movements on reserves rather than as income as more fully explained in the financial statements. Accordingly LTS’s income and expenditure account shows a deficit for the year of £20,253,009 (2010: deficit of £23,080,718). This has been transferred to the

General Reserve.



Reserves

It is LTS’s policy to hold reserves not exceeding three months activity. Based on

2010/11 expenditure of £23M, this equates to £5.75M, before taking into account the pension deficit, to ensure the organisation has sufficient funds to meet operational requirements.

Grant Making

LTS makes grants, generally to Local Authorities, to facilitate the educational objectives as outlined at section 1 above.

Operational Issues

Our fit for purpose Headquarters in Glasgow provides excellent working conditions and visibility of LTS. We have a Distribution Centre and also office accommodation in

Dundee.

Accounting for Pension Scheme Liabilities

Under the provisions of Financial Reporting Standard 17 (FRS17) we show our net pension scheme assets/liabilities on our balance sheet. As more fully explained in

Note 19 to the accounts, the balance sheet showed a Strathclyde Pension Fund deficit of £8,318,000 at 31 March 2010. The equivalent figures at 31 March 2011 show the deficit decreased to £1,999,000. The market improvements in the year just ended have improved the value of our share of the Fund assets which now stand at £28.8M.

In addition the present value of scheme liabilities has decreased by 12.6% ( £4.4M ), primarily due to the rebasing of future pension increases from RPI to CPI as shown in

Note 3. This again demonstrates the volatility of our reported results to external factors.

5. Payment of suppliers

LTS has generally paid suppliers within 30 days or on otherwise specially agreed terms. We are now moving to paying suppliers more promptly, in line with the Scottish

Government’s prompt payment initiative which aspires to payment of suppliers within

10 days.

It took us an average 20 days from invoice date to pay each supplier invoice in the year (2010: 22 days). At 31 March 2011 trade creditors, excluding accrued invoices, represented 13 days of purchases (2010: 15 days).

6. Disabled employees

LTS has a positive attitude towards the employment of disabled persons, both in recruitment and in provision of suitable working conditions. Our fit for purpose

Headquarters building is of significant benefit in this area.



7. Employee involvement/consultation and wellbeing

The Management of LTS communicates with staff and consults with the representatives of the three recognised Trade Unions. Open meetings were held to discuss major items of general importance and staff information was distributed by way of notices and structured meetings. We have also had significant engagement with our staff in relation to the creation of Education Scotland.

Staff absence through sickness is closely monitored by the Company so that support can be offered to affected staff. The average number of working days of absence through sickness was 4.2 days in the year per employee (2010: 4.3 days).

8. Environmental Responsibilities - Sustainable Development and Data Handling

The Company takes its environmental responsibilities seriously. The move to the

Glasgow headquarters in 2006 was in itself a significant step forward in improving our performance and environmental impact and, for example, virtually all Glasgow based staff use public transport rather than commute by car. We monitor key resource usage and action plans have been put in place to reduce usage now and in the coming year.

We also keep our working practices under review, including out of office/home working where appropriate.

The Company takes part in the Information Assurance initiatives being led by the

United Kingdom and Scottish Governments. The Company has had no reported personal data losses/personal data related incidents in the year (2010: nil).

9. Corporate Governance

Board members are appointed by Scottish Ministers, normally for a period of three years. The Board has corporate responsibility for ensuring that LTS fulfils the aims and objectives set in agreement with the Scottish Ministers and has also agreed a

Management Statement & Financial Memorandum with the Scottish Government. This was last updated in March 2006.

The Management Statement sets out the broad framework within which LTS should operate and the associated Financial Memorandum sets out in greater detail key aspects of the required financial arrangements.

The Board is committed to maintaining high standards of corporate governance throughout LTS in line with guidance provided by the Scottish Government and the

United Kingdom Treasury. The Board comprises the Chair (currently a Deputy Chair) , up to eight other Non-Executive Directors and the Chief Executive.

The Non-Executive Directors are considered to be independent of management and have no business or other relationships which could materially influence the exercise of their independent judgement.

Formal induction is carried out for new Board members, involving the Chair, Chief

Executive and Company Secretary. Development opportunities are also available to


D irectors’ report (continued) all Board members to ensure that they remain up to date with best practice in corporate governance and other relevant areas.

The Board regularly reviews the major risks to which the company is exposed, in particular those relating to the operations and finances of LTS. The Board is satisfied that appropriate systems are in place to mitigate exposure to these major risks.

The Board critically examines the organisation’s strategy, budget and business plan each year and meets at least four times a year to review performance, key business issues and initiatives, including the requirement to maintain reserves sufficient, but not excessive, to allow organisational continuity and flexibility . It also meets residentially each year to discuss strategy and on an ad hoc basis as required. The Chief

Executive is responsible for developing and implementing business strategy and processes and for the day-to-day management of the organisation.

The Board believes that, together, the Directors possess the breadth of business, financial and educational experience and advice necessary to manage effectively an organisation of the size and complexity of LTS. The Board has delegated certain matters to sub-committees as set out below:

Audit Committee

This committee, with Iain Nisbet as acting chair during the year, normally meets at least four times per year. It monitors and reviews accounting policies, financial reporting, the systems of internal control, and reviews the annual financial statements before they are presented to the Board.

It also considers the organisation’s compliance with Scottish Government and

Treasury guidance and oversees the objectivity and effectiveness of internal audit.

The Audit Committee can request both auditors and any officers to attend its meetings. Internal and external auditors have direct access to the Audit Committee to raise any matters of concern.

Remuneration Committee

This committee, chaired during the year by Graeme Ogilvy, meets as required to consider the Chief Executive’s remuneration and related matters.

Chair’s Committee

This committee, chaired during the year by Graeme Ogilvy, meets on an ad-hoc basis between Board meetings in the event that urgent consideration is required on a particular issue. No Chair’s Committee meetings were held during the year.

Organisational Development Committee

The committee, chaired by Graeme Ogilvy, looks at organisational development initiatives undertaken by the Company, reporting to the full Board, and, more recently,


D irectors’ report (continued) issues resulting from the establishment of the new educational agency, Education

Scotland.

10. Annual Accounts

In relation to these financial statements, and as far as the Accountable Officer is aware, there is no relevant audit information of which the company’s auditors are unaware.

The Accountable Officer has taken all the steps that he ought to have taken to make himself aware of any relevant audit information and to establish that the company’s auditors are aware of that information.

11. Auditors

The Auditor General for Scotland is responsible, as from 6 April 2008, for the appointment o f the Company’s auditors and has appointed Scott-Moncrieff to carry out our audit until the establishment during 2011/12 of Education Scotland.

During the year the auditors received £18,540 in respect of non audit work.

Approved by the Board of Directors, and signed by

A Gordon

Secretary

24 June 2011

B McLeary

Chief Executive


Remuneration report

As noted in the Directors’ Report, the Remuneration Committee meets as required to consider the

Chief Executive’s remuneration and related matters. The members of this committee during the year are shown in the

Directors’ Report. Details of the remuneration of the directors and senior management in the organisation are given below.

The remuneration for the Chief Executive and senior managers is set such that they are paid a competitive salary in relation to the market, taking into account the responsibilities of their position and Scottish Government pay policy.

The term of office of our previous Chair expired on 31 March 2010 and he was replaced by our

Deputy Chair as from 1 April 2010. In the year ended 31 March 2011 our Deputy Chair received

£nil remuneration (2010: Chair £10,200). With the exception of the Chief Executive (see below), no other Directors received remuneration in the year to 31 March 2011 (2010: £nil).

During the year the Chief Executive’s total emoluments were as follows:

2011

£

2010

£

Salary for the year 104,611 104,057

Bonus (in respect of 2008/09)

Bonus (in respect of 2007/08)

Employer’s Contributions to company’s pension schemes

Total emoluments

Employer’s pension contribution - % of basic salary

- 9,001

-

19,039

123,650

18.2%

7,309

18,002

138,369

17.3%

A bonus award of £9,018 was approved in February 2011 in respect of the Chief Executive ’s

2009/10 performance and was provided for in the year. This bonus is being paid to the Chief

Executive in June 2011 and is not reflected in the above figures.

In line with the Scottish Government ’s pay policy, no bonus payment will be made in respect of the Chief Executive

’s performance in the year ended 31 March 2011.

Additional details of the emoluments of the company’s Senior Managers are required by the

Government Financial Reporting Manual ( ‘FReM’). The following information is disclosed.

Name

B McLeary

A Armstrong

A Gordon

A Jardine

M Dougan (up to 11 Oct 2010)

Salary in the Year

£’000

102.5

– 105.0

67.5

– 70.0

67.5 – 70.0

67.5

– 70.0

37.5

– 40.0

Bonus

£’000

-

0.8

0.4

0.4

0.4

Benefits in kind

£’000

-

-

-

-

-


Remuneration report

The above figures exclude pension contributions. M Dougan and A Jardine were members of the

Scottish Teachers’ Superannuation Scheme, paying 6.4% employee contributions, with the company paying 14.9%. The three other individuals named above were members of the

Strathclyde Pension Fund during the year, with the company paying 18.2% and employee contributions varying between 9.1% and 10.2%.

The above individuals do not wish details disclosed regarding the real increase in their pension earned in the year or the value of their accrued pension as at 31 March 2011.

Professor Kay Livingston is seconded from the University of Glasgow. Her salary is not included in the above figures. The University invoiced LTS £86,552 plus VAT for Professor Livingston’s services for the year to 31 March 2011.

The Chief Executive’s contract sets out that six months notice of termination must be given either by the individual or the company. For the other senior managers above the equivalent notice of termination is twelve weeks.

Voluntary Severance Departures

Note 3 to the financial statements shows a cost of £1,026,206 ( 2010: £nil ) in respect of 27 staff leaving the company in March 2011 or shortly thereafter under the terms of a voluntary severance/ early retirement scheme. The cost of these exit packages can be analysed as follows:

Exit Package Cost Band by individual Number of Leavers

£10,001 to £25,000

£25,001 to £50,000

£50,001 to £100,000

£100,001 to £125,000

9

13

3

2

Total 27

The voluntary severance scheme allowed for a payment of up to a year’s salary, with, for a number of individuals, an alternative being early retirement with a strain on the fund payment made by the company to either the Strathclyde Pension Fund or the Sc ottish Teachers’

Superannuation Scheme.

Senior Management Departures

B McLeary, Chief Executive and A Gordon, Director of Corporate Services, are leaving the company on 30 June 2011 and are shown within the leavers table above. They will receive an immediate pension and lump sum payment from the Strathclyde Pension Fund based on their prior service with the Fund, with no added years service. In addition, Mr McLeary will receive a lump sum from the company of approximately £91,000, in line with the standard terms of the company’s recent voluntary severance/early retirement scheme.

It should be noted that all salary related figures shown above have been subject to external audit.

Approved by the Board of Directors, and signed by : B McLeary, C hief Executive

24 June 2011


Statement of Accountable Officer’s

Responsibilities

The direction from Scottish Ministers requires the Board to prepare financial statements for each financial year which comply with the accounting principles and disclosure requirements of the edition of the Government Fi nancial Reporting Manual (‘FReM’) which is in force for the year for which the financial statements are prepared. The financial statements should give a true and fair view of the state of affairs of the company as at the end of the financial year and of the surplus or deficit and cash flow of the company for that period.

The Chief Executive is the appointed Accountable Officer responsible for preparing the financial statements and transmitting them to the Auditor of Learning and Teaching Scotland.

In preparing those financial statements, the Accountable Officer is required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the organisation will continue in business.

The Accountable Officer has the responsibility for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and comply with the direction from Scottish Ministers. The Accountable Officer also has the responsibility for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

B McLeary

Chief Executive

24 June 2011


Statement on the System of Internal

Control

Scope of responsibility

As Accountable Officer, I have responsibility for maintaining a sound system of internal con trol that supports the achievement of the organisation’s policies, aims and objectives, set by Scottish Ministers, whilst safeguarding the public funds and assets for which I am personally responsible, in accordance with the responsibilities assigned to me.

The Purpose of the system of internal control

The system of internal control is designed to manage rather than eliminate the risk of failure to achieve the organisation’s strategic aims and objectives, to evaluate the nature and extent of those risks and to manage them efficiently, effectively and economically. It aims to provide as much assurance as is reasonably possible (but not absolute assurance) that assets are safeguarded, transactions are properly authorised and recorded and that material errors or irregularities are either prevented or can be detected promptly

Our risk and control framework

The LTS risk management policy is summarised as follows:

LTS has a Risk Management Policy, approved by the Board of Directors, which sets out our attitude to risk and our approach to managing the potential barriers to the achievement of our objectives. The risk and internal control processes are integrated with our performance management framework highlighting the alignment to achieving the key business objectives.

The policy and associated procedural guidance are available to all staff on the LTS intranet and are included in the staff induction process.

A Corporate Risk Register has been established to consider those risks that impact the organisation as a whole, and which are likely to affect the organisation’s ability to achieve its strategic goals and objectives. The register is a key mechanism to managing political, reputational, operational, financial and information risks. The register is reviewed and discussed by the Corporate Management Team on a quarterly basis, including consideration of progress on agreed actions to manage the risks.

LTS delivers its objectives through five key programmes of work – Curriculum &

Assessment; Targeted Support; Developing Global Citizens; Communities and Technologies for Learning. Each programme maintains a system of risk management consistent with corporate risk arrangements, and designed to enable it to deliver its business objectives in an efficient and effective manner in accordance with our operating environment.

Programme management teams review their Risk Registers and update them for changes on a monthly basis.

The Board of Directors and Audit Committee consider risk regularly throughout the year and there has been a full risk and control assessment before reporting on the year ended 31

March 2011.

The organisation’s internal auditors submit regular reports which include their independent opinion on the adequacy and effectiveness of our system of internal control together with recommendations for improvement.


Statement on the System of Internal

Control

In their 2010/11 Annual Report our internal auditors, PricewaterhouseCoopers (PWC), reported that for the year ended 31 March 2011 ‘Our work did not identify any critical control weaknesses that we consider to be pervasive in their effects on the organisation’s overall system of internal control. Furthermore, we have not identified any weaknesses from our audit work during the year that we consider should be included as ‘Significant Internal

Control Issues’ i n your Statement on Internal Control’.

The Board of Directors receives regular reports from the chair of the Audit Committee concerning internal control and we require regular reports from managers on the steps they are taking to manage risks in their areas of responsibility including progress reports from the

Programme Review Board which assures the collective programmes of work.

Review of Effectiveness

As Accountable Officer, I have responsibility for reviewing the effectiveness of the system of internal control. My review is informed by:

 the executive managers within the organisation who have responsibility for the development and maintenance of the internal control framework

 the work of the internal auditors, who submit regular reports to our Audit Committee which include the independent and objective opinion on the adequacy and effectiveness of the organisation's systems of internal control together with recommendations for improvement

 comments made by the external auditors in their management letters and other reports

Procedures are in place to implement guidance from Scottish Ministers; however we have identified some potential improvements through our internal control assessments which we intend to undertake prior to the organisation moving to a newly formed Government Agency

(to be implemented by 1st July 2011) which will further enhance our control environment. I am also of the opinion that whilst the embedding of the risk management process is complete, ongoing training and education will be required to sustain the effectiveness of the policy and procedures.

Taking into account the steps noted above that we will take as we transition to the new agency, I am of the view that the systems of internal control can continue to be improved for effectiveness. My view is informed by the work of the internal auditors and the executive managers within the organisation who have responsibility for the development and maintenance of the internal control framework, and comments made by the external auditors in their management letters and other reports.

B McLeary

Accountable Officer

24 June 2011


Independent auditors report to the members of Learning and Teaching

Scotland, the Auditor General for Scotland and the Scottish Parliament

We have audited the financial statements of Learning and Teaching Scotland for the year ended 31 March 2011 under The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2008 and section 44(1)(c) of the

Charities and Trustee Investment (Scotland) Act 2005. The financial statements comprise the Statement of Financial Activities, the Income and Expenditure Account and Statement of

Recognised Gains and Losses, the Balance Sheet, the Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally

Accepted Accounting Practice).

This report is made solely to the parties to whom it is addressed in accordance with the

Public Finance and Accountability (Scotland) Act 2000 and for no other purpose. In accordance with paragraph 123 of the Code of Audit Practice approved by the Auditor

General for Scotland, we do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties.

Respective responsibilities of Accountable Officer and auditor

As explained more fully in the Statement of the Accountable Officer’s Responsibilities set out on page 15, the Accountable Officer is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and is also responsible for ensuring the regularity of expenditure and receipts. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and

International Standards on Auditing (UK and Ireland) as required by the Code of Audit

Practice approved by the Auditor General for Scotland. Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. We are also responsible for giving an opinion on the regularity of expenditure and receipts.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts, disclosures, and regularity of expenditure and receipts in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the body’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Accountable Officer; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Report and Financial Statements to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.




Opinion on financial statements

In our opinion the financial statements:

 give a true and fair view of the state of the company ’s affairs as at 31 March 2011 and of its incoming resources and application of resources, including its income and expenditure, for the year then ended;

 have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice; and

 have been prepared in accordance with the requirements of the Companies Act 2006, directions made by the Scottish Ministers, the Charities and Trustee Investment

(Scotland) Act 2005 and regulation 8 of the Charities Accounts (Scotland) Regulations

2006.

Emphasis of matter – pension disclosure

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1 and note 20 to the financial statements concerning Learning and Teaching Scotland’s potential pension fund deficit figure. A new body, Education Scotland, will take over substantially all of the company’s activities from 1 July 2011. It is expected that the company’s pension deficit will have to be recalculated as at 30 June 2011 on a cessation/transfer basis. This is not the basis used in calculating the pension deficit as at 31 March 2011. The deficit is likely to be significantly different to the FRS 17 pension deficit included within these financial statements. It is not however possible, prior to 30 June 2011, to calculate an accurate figure on a cessation/transfer basis.

Opinion on regularity

In our opinion in all material respects the expenditure and receipts in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers.

Opinion on matters prescribed by the Companies Act 2006

In our opinion:

 the part of the Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006 and directions made by the Scottish Ministers; and

 the information given in the Directors Report, included in the Report and Financial

Statements, for the financial year for which the financial statements are prepared is consistent with the financial statements.




Matters on which we are required to report by exception

We are required to report to you if, in our opinion:

 adequate accounting records have not been kept; or

 the financial statements and the part of the Remuneration Report to be audited are not in agreement with the accounting records; or



We have not received all the information and explanations we require for our audit; or

 the Statement on Internal Control does not comply with Scottish Government guidance.

We have nothing to report in respect of these matters.

Nick Bennett

Senior Statutory Auditor

For and on behalf of Scott-Moncrieff, Statutory Auditor

Chartered Accountants

Eligible to act as an auditor in terms of Section 1212 of the Companies Act 2006

Exchange Place 3

Semple Street

Edinburgh

EH3 8BL

24 June 2011


Statement of Financial Activities

Year ended 31 March 2011

Incoming resources

Incoming resources from generated funds

Other incoming Resources

Incoming resources from charitable activities

Scottish Government general activities grant

Other government funding

Voluntary Severance Funding received

Local Authority and Other grants

Total incoming resources

Resources Expended

Cost of generating funds

Cost of sales

Charitable Activities

Publication, contractors and consultancy

Grants payable

Irrecoverable VAT and other costs

Interconnect Infrastructure Costs

Staff costs

Voluntary severance costs

Staff travel and development

Conferences and seminars

Administration and building expenses

Promotional expenses

Other professional fees

Loss/ (Gain) on Disposal of Assets

Depreciation

– Owned / Funded Assets

Other finance costs

Governance costs

External Auditors’ remuneration

Board and internal audit costs

Total resources expended

Net incoming/(outgoing) resources

Actuarial gain/ (loss) on net pension liability

Reconciliation of funds

Net movement in funds

Fund balances brought forward at 1 April 2010

Fund balances at 31 March 2011

All disclosures relate to continuing operations

Unrestricted

Funds

£

969,916

7,818,000

15,388,374

500,000

1,010,947

25,687,237

628,204

3,374,980

1,146,874

1,727,147

2,179,385

8,661,734

1,026,206

822,779

861,331

1,362,448

137,492

242,380

(255)

117,775

(126,000)

22,632

48,760

22,233,872

3,453,365

2,513,000

5,966,365

(3,059,987)

2,906,378

The statement of accounting policies and notes on pages 27 to 45 form part of these financial statements.

Restricted

Funds

Totals

31 March

2011

£

-

7,344

-

-

-

£

969,916

7,818,000

15,395,718

500,000

1,010,947

7,344 25,694,581

343,709

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

343,709 22,577,581

628,204

3,374,980

1,146,874

1,727,147

2,179,385

8,661,734

1,026,206

822,779

861,331

1,362,448

137,492

242,380

(255)

461,484

(126,000)

22,632

48,760

(336,365)

-

(336,365)

3,117,000

2,513,000

5,630,000

1,573,812 (1,486,175)

1,237,447 4,143,825

Totals

31 March

2010

£

1,231,528

7,505,000

15,896,974

-

805,851

25,439,353

899,620

5,224,810

696,859

2,479,497

845,336

10,540,181

-

1,010,569

1,128,181

1,613,986

169,322

151,150

-

400,351

263,000

20,300

7,281

25,450,443

(11,090)

(5,489,000)

(5,500,090)

4,013,915

(1,486,175)


Income and Expenditure Account


Operating Income

Local Authority and Other Grants

Software Sales

Royalty and Publications Income

Note

Other project income

Skills Development income

Reserves release to match depreciation charge

Miscellaneous income

Total operating income

Operating Expenditure

Cost of Sales

Own and Third Party Software

Total cost of sales

Staff costs

Voluntary severance costs

Publication, contractors and consultancy

Grants payable

Irrecoverable VAT and other costs

Interconnect Infrastructure Costs

Staff travel and development

Administration and building expenses

Promotional expenses

Conferences and seminars

Depreciation - owned assets

Depreciation - project funded assets

Loss on disposal of assets

– owned assets

External auditors’ remuneration

Board and internal audit costs

Other professional fees

Total operating expenditure

Operating deficit

Bank interest received

Other finance income/ (costs)

3

3

4

5

19

2011

£

1,010,947

682,434

-

4,559

-

343,709

207,234

2,248,883

628,204

£

805,851

972,070

16,240

5,730

36,466

332,346

132,296

2,300,999

899,620

628,204 899,620

8,661,734 10,540,181

1,026,206

3,374,980

-

5,224,810

1,146,874

1,727,147

2,179,385

822,779

1,362,448

137,492

696,859

2,479,497

845,336

1,010,569

1,613,986

169,322

861,331

117,775

343,709

(255)

22,632

48,760

1,128,181

68,005

332,346

-

20,300

7,281

242,380

22,703,581

(20,454,698)

75,689

126,000

2010

151,150

25,187,443

(22,886,444)

68,726

(263,000)

Deficit transferred to reserves

All disclosures relate to continuing operations.

(20,253,009) (23,080,718)



Statement of recognised gains and losses


Unrestricted

Funds

Deficit of income versus expenditure

Scottish Government Grant in Aid received

Scottish Government Programme Funding received

Voluntary Severance Funding received

Actuarial gains / (losses) on net pension liability

Net additions in respect of project funded assets

Transferred (from) restricted reserves in respect of project funded assets

Total recognised gains and losses relating to the year

Opening capital and reserves

Closing capital and reserves

£

(20,253,009)

7,818,000

15,388,374

500,000

2,513,000

-

-

5,966,365

(3,059,987)

2,906,378

Restricted

Funds

Total

2011

Total

2010

£ £ £

- (20,253,009) (23,080,718)

-

(343,709)

(336,365)

1,573,812

1,237,447

-

-

7,344

7,818,000

500,000

2,513,000

(343,709)

5,630,000

7,344

7,505,000

- 15,388,374 15,702,261

-

(5,489,000)

194,713

(332,346)

(5,500,090)

(1,486,175) 4,013,915

4,143,825 (1,486,175)

The statement of accounting policies and notes on pages 27 to 45 form part of these financial statements.


Balance sheet

31 March 2011

Fixed assets

Owned Tangible Assets

Project Funded Tangible Assets

Current assets

Stocks

Debtors

Cash at bank and in hand

Creditors: amounts falling due within one year

Provisions: amounts falling due within one year

Net current assets

Total assets less current liabilities

NET ASSETS excluding pensions (liability)

Creditors: amounts falling due after more than one year

Provisions for liabilities and charges:

Pensions (liability)

NET ASSETS including pensions (liability)

Represented by:

RESERVES

Restricted reserve for project funded assets

Unrestricted general reserve

Unrestricted pension reserves

Note

8

8

6

7

4

5

19

10

11

11

31 March

2011

31 March

2010

295,361

1,237,447

1,532,808

16,436

356,248

8,805,527

9,178,211

(3,793,610)

(774,584)

4,610,017

6,142,825

6,142,825

(1,999,000)

4,143,825

1,237,447

4,905,378

(1,999,000)

4,143,825

£

168,728

1,573,811

1,742,539

23,862

428,653

9,567,330

10,019,845

(4,930,559)

-

5,089,286

6,831,825

6,831,825

(8,318,000)

(1,486,175)

1,573,812

5,258,013

(8,318,000)

(1,486,175)

£

These financial statements were approved by the Board on 24 June 2011 and the Accountable

Officer has authorised them for issue on 24 June 2011.

G Ogilvy

Director

B McLeary

Chief Executive



Cash flow statement


Net cash (outflow)/inflow from operating activities

Returns on investment and servicing of finance

Capital expenditure and financial investment

Net cash ( outflow)/ inflow

Net funds brought forward at 1 April 2010

Notes to cash flow statement

1

2.1

2.2

2011

£

(585,739)

2010

£

384,771

75,689 68,726

(251,753) (343,336)

(761,803)

9,567,330

110,161

9,457,169

Net funds at 31 March 2011


8,805,527 9,567,330


Cash flow statement

Year ended 31 March 2011 (continued)

1

Reconciliation of operating deficit to net cash

(outflow)/inflow from operating activities

Net Incoming / (Outgoing) Resources

Interest Received

Depreciation – owned assets

Depreciation – project funded assets

Decrease in stock

Decrease in debtors

(Decrease) in creditors / provisions

FRS 17 Pension adjustments

Net cash (outflow) from operating activities

2 Gross cash flow

2.1 Returns on investment and servicing of finance

Interest received

2.2 Capital expenditure and financial investment

Payments to acquire owned fixed assets (note 4)

Payments to acquire project funded fixed assets

(note 5)

2011

£

3,117,000

(75,689)

117,775

343,709

7,426

72,405

(362,365)

(3,806,000)

(585,739)

75,689

75,689

(244,409)

(7,344)

(251,753)

68,726

68,726

(148,623)

(194,713)

(343,336)

2010

£

(11,091)

(68,726)

68,005

332,346

3,835

93,456

(105,054)

72,000

384,771


Notes to the financial statements


1. Accounting Policies

Basis of Preparation

The financial statements are prepared in accordance with the financial statements direction issued by Scottish Ministers ( in accordance with paragraph 4 of the Educational

Development, Research & Services (Scotland) Grant Regulations 1999 ), the Government

Financial Reporting Manual ( ‘FReM’ ), and with generally accepted accounting practice in the UK, including United Kingdom accounting standards and the Charities SORP, to the extent that it is meaningful and appropriate in the public sector context.

The particular accounting policies adopted are described below.

Accounting Convention

The financial statements have been prepared under the historical cost convention, modified to include revaluations to certain fixed assets.

Going Concern

In common with similar public bodies, the future financing of Learning and Teaching

Scotland’s liabilities will be met by future grants of Supply and the application of future income, both to be approved annually by the Scottish Parliament. The approval of amounts for 2011/12 has already been given and there is no reason to believe that future approvals will not be forthcoming. It is considered appropriate to adopt a going concern basis for the preparation of these financial statements. The Directors Report at section 4 notes however that a new body, Education Scotland, will take over substantially all of the company’s activities from 1 July 2011. As part of this transaction it is expected that the co mpany’s pension deficit - £2M at 31 March 2011 as shown in Note 19 – will have to be recalculated as at 30 June 2011 on a cessation/ transfer basis. Any change in the reported deficit will be the responsibility of Education Scotland and the Scottish Ministers. Note 20 to the accounts shows, for information purposes, an adjusted pension deficit of £4.6M, being an estimate of the cessation/ transfer deficit at the time of transfer to Education Scotland.

Grants

Grants received relating to tangible fixed assets are treated as deferred income and released to the income and expenditure account over the expected useful lives of the assets concerned. As required under the provisions of the Government Financial Reporting Manual

(‘FReM’), other grant in aid and educational programme and project funding received from government is treated as a financing flow instead of income. These funds are credited to the income and expenditure reserve as the related expenditure is incurred.

Other grants are credited to the income and expenditure account as the related expenditure is incurred.

Stocks

Stocks are stated at the lower of cost and net realisable value.




Tangible fixed assets

Depreciation is provided on all fixed assets at rates calculated to write off their cost or valuation in annual instalments over their effective lives as follows:

Leasehold improvements Over life of lease

Fixtures and fittings

Office equipment

10 years

5 years

Computer equipment 3 years

The company also uses assets funded by external bodies, generally the Scottish

Government. These assets, used for specific projects, are classed as Project funded assets. As shown in Note 10, a restricted reserve is designated and amortised to the income and expenditure account over the effective lives of these assets in accordance with their write-off policy.

It should be noted that the Scottish Government reserves the right to retain capital proceeds on any sale of the company’s fixed assets.

Lease commitments

Operating lease rentals are charged to the income and expenditure account in equal annual amounts over the lease term.

Pensions

The majority of employees of LTS participate in the Strathclyde Pension Fund, part of the

Local Government Pension Scheme, a defined benefit statutory scheme. The Fund operates in accordance with the Local Government Pension Scheme (Scotland)

Regulations 1998 as amended.

The company accounts for defined benefit pensions in accordance with the requirements of FRS17.

The company also has a number of employees, formerly teachers, participating in the

Scottish Teachers’ Superannuation Scheme. This is a notionally funded defined benefit scheme and, as such, is accounted for under defined contribution rules.

Income

Operating income represents the amounts derived from the provision of services that fall within the company’s ordinary activities, stated net of VAT.

As required under the provisions of the FReM, grant in aid and educational programme and project funding received from government is treated as a financing flow instead of income. These funds are credited to the income and expenditure reserve.




Allocation of Expenditure

Expenditure is allocated to the various cost headings set out in the Statement of Financial

Activities and the Income and Expenditure Account, with this allocation consistent between accounting periods.

Irrecoverable VAT

The company is unable to recover most of the input VAT suffered on external purchases.

This cost is expensed and charged separately to the income and expenditure account.

Prior Year Adjustment

HM Treasury, under the Clear Line of Sight (Alignment Project) removed the cost of capital charge from budgets and accounts from 1 April 2010. The cost of capital charge is therefore no longer applicable.

In the previous year’s accounts for the year ended 31

March 2010 we had reported an equal and offsetting notional cost of capital in the Income and Expenditure Account of £44,235. The removal of the cost of capital charge is a change in accounting policy. The removal of the cost of capital charge has no effect on the balance sheets. The impact on the results for the preceding period is nil. The effect of this change in accounting policy on the result for the current period is nil.

2. Directors and their interests

Due to the nature of the company’s operations and the composition of its Board of

Directors it is inevitable that transactions will take place with companies or organisations in which a Director will have an interest. All transactions involving organisations in which a

Director may have an interest are con ducted at arm’s length. Directors are not permitted to participate in discussions or decisions on transactions involving their organisations.

There were no material, unusual or exceptional transactions in the year with any of the organisations, listed below, in which our Directors have an interest.

The organisations in which Directors have an interest are noted below:

Name

Bernard McLeary

Graeme Ogilvy

James Conroy

Louise Hayward

Company

BBC Educational Broadcasting Council

Glasgow Science Centre Advisory Group

Construction Skills Scotland

Scottish Construction Forum

People Group

Learn Direct & Build

Cross Party Group for Skills

Position Held

Board Member

Member

Director

Executive Member

Chair

Deputy Chair

Member

University of Glasgow

University of Warsaw

General Teaching Council for Scotland

Professor

Visiting Professor

Member

Glasgow University Educational Consultancy Chair

University of Glasgow

International Forum on Assessment

Professor

Member




Paul Harris Gray’s School of Art Head

Scottish Enterprise Tayside Advisory Board Member

LTS Advisory Board Member

Jacqueline Hepburn Alliance of Sector Skills Councils UK

Iain Nisbet Govan Law Centre (Education Law Unit)

Torrance Primary School Parent Council

Ken Thomson Forth Valley College

Director

Partner

Chair

Deputy Principal

Raploch Urban Regeneration Company Member

3. Staff costs

The average weekly number of persons employed by the company during the year was 202 (2010: 171).

Staff costs comprised:

Wages and salaries

Social security costs

Pension and early retirement costs ( see below )

Staff on secondment and temporary or contract personnel

2011

£

2010

£

6,248,340 5,159,367

538,308 450,905

(2,704,247) 598,556

4,579,333 4,331,353

8,661,734 10,540,181

Pension and early retirement costs can be analysed as follows:

Regular Pension Costs

– Teachers pension fund

Regular Pension Costs

– Other

FRS17 Current Service Cost

FRS17 Past Service ( Gain ) / Cost

Past Service Gain

167,621

(1,868)

742,000

(3,612,000)

(2,704,247)

180,778

14,778

315,000

88,000

598,556

In the UK budget statement on 22 June 2010 the Chancellor announced that with effect from 1 April 2011 public service pensions would be up-rated in line with the Consumer

Prices Index (CPI) rather than the Retail Prices Index (RPI).

This has had the effect of reducing Learning and Teaching Scotland's liabilities in the

Strathclyde Pension Fund by £3,612,000 and has been recognised as a past service gain in accordance with guidance set down in UITF Abstract 48, since the change is considered to be a change in benefit entitlement.




Voluntary Severance Costs

Charge for staff taking voluntary severance in the year

2011

£

1,026,206

The above charge (2010: £nil) relates to the cost of 27 staff (2010: nil) leaving the company in March 2011 or shortly thereafter under the terms of a voluntary severance/early retirement scheme.

2010

£

-

The company has received £500k in grant funding to cover the above charge and will receive a further £500k from the Scottish Government in the 2011/12 financial year against the severance payments to be made between April 2011 and June 2011. The second tranche of £500k grant funding to be received has not been recognised in these accounts .

Seconded Staff

In addition to the staff employed noted above, the company makes use of the services of a number of education professionals seconded from external bodies, generally Education

Authorities. 85 individuals were working for LTS under these secondment arrangements at

31 March 2011 (2010: 79)

Pension scheme members

Within the 198 employees as at 31 March 2011 (2010: 180), 132 (2010: 107) employees were members of the Strathclyde Pension Fund with a further 24 (2010: 28) being me mbers of the Scottish Teachers’ Superannuation Scheme.

4. Tangible fixed assets - owned

Cost

As at 1 April 2010

Additions

Disposals

As at 31 March 2011

Leasehold

Improvements

£

0

25,675

0

25,675

Computer

Equipment

Office

Equipment &

Fixtures

£ £

311,140 55,166

203,867

(96,183)

418,824

14,867

0

70,033

Total

£

366,306

244,409

(96,183)

514,532




5.

Depreciation

As at 1 April 2010

Charge for year

Disposals

As at 31 March 2011

Net book value

As at 31 March 2011

As at 31 March 2010

Tangible fixed assets – project funded

0

7,481

0

7,481

18,194

0

Cost

As at 1 April 2010

Additions

Disposals

As at 31 March 2011

Depreciation

As at 1 April 2010

Charge for year

Disposals

As at 31 March 2011

Net book value

As at 31 March 2011

As at 31 March 2010

184,364

98,002

(96,183)

186,183

232,641

126,775

13,215

12,292

0

25,507

44,526

41,953

Leasehold

Improvements

£

1,365,301

0

0

1,365,301

389,606

91,020

0

480,626

884,675

975,695

Computer

Equipment

Office

Equipment &

Fixtures

£

1,795,421

5,979

£

Total

£

761,661 3,922,383

1,365 7,344

(401,450)

1,399,950

0

763,026

(401,450)

3,528,277

1,497,272

149,901

(401,450)

1,245,723

461,693

102,788

0

564,481

2,348,571

343,709

(401,450)

2,290,830

154,227

298,149

198,544

299,967

1,237,447

1,573,811

197,579

117,775

(96,183)

219,171

295,361

168,728

The balances noted above relate principally to the investment in the Company’s Glasgow

Headquarters over which a 15 year lease was entered into in September 2005, as also disclosed in Note 12.




6. Stocks

General stocks

7.

8.

Debtors

Trade Debtors

Prepayments and Accrued Income

Other Debtors

Owed from Central Government

Owed from Local Government, including Schools

Owed from Other bodies

Creditors: Amounts falling due within one year

Trade Creditors

Other taxation & social security

Accruals

Other Creditors

Deferred Project Income (note 9)

Owed to Central Government

Owed to Local Government, including Schools

Owed to Other bodies

2010

£

23,862

2010

£

183,935

59,607

185,111

428,653

29,910

74,898

323,845

428,653

2010

£

1,293,845

176,471

1,480,944

84,166

1,895,133

4,930,559

1,487,716

457,026

2,985,817

4,930,559

2011

£

16,436

2011

£

289,953

38,678

27,617

356,248

33,520

182,954

139,774

356,248

2011

£

895,620

221,691

1,506,230

80,828

1,089,241

3,793,610

575,831

174,987

3,042,792

3,793,610




8. Provisions: Amounts falling due within one year (continued)

Provisions: Amounts falling due within one year 2011 2010

£

774,584

£

-

Provision in respect of Voluntary Severance Scheme

The provision for voluntary severance relates to amounts payable in respect of staff leaving the company on or shortly after the year end under the terms of a voluntary severance/early retirement scheme.

9. Deferred Project Income

At 1 April 2010

Utilised in the Year

Project Funded Income Received not Utilised by 31 March

2011

At 31 March 2011

2011

£

1,895,133

(1,676,634)

870,742

1,089,241

Deferred income is not recognised as income until we are entitled to match the income resource against associated expenditure. The deferred sum is instead disclosed as a liability in the balance sheet as, in principle, the monies would have to be refunded to the external partner if the work did not proceed after the year end.

2010

£

1,662,573

(1,513,570)

1,746,130

1,895,133

10. Restricted reserve for project funded assets

At 1 April 2010

Additions for the year

2011

£

1,573,812

7,344

2010

£

1,711,445

194,713

Released to match depreciation charge

At 31 March 2011

(343,709)

1,237,447

(332,346)

1,573,812




11.

Reserves

( i) Unrestricted Reserves

As at 1 April 2010

Movement on pension reserve

(note 19, section 4)

Deficit for the year

Transfer between General and

Pension Reserves

Government Funding Received

As at 31 March 2011

General Pension

Reserve Reserve

£ £

5,258,013 (8,318,000)

- 2,513,000

(20,253,009)

(3,806,000) 3,806,000

2,513,000

- (20,253,009) (23,080,718)

-

(5,489,000)

-

23,706,374

4,905,378 (1,999,000)

- 23,706,374

2,906,378

23,207,261

(3,059,987)

4

Totals

2011

£

(3,059,987)

12. Financial Commitments

LTS has entered into a five year lease, as from January 2008, in respect of its Distribution

Centre in Dundee. This agreement provides for annual lease payments to the landlord of

£22,000.

LTS also entered into a nine month short term lease in January 2008 in respect of its new offices at City House, Dundee. This was a temporary measure pending the intended relocation to permanent offices in Dundee. With the delays in this relocation, the City

House lease has now been extended up to June 2011. The lease is on the basis of an annualised rental of £46,000 plus associated management charges.

Totals

2010

£

2,302,470

The Scottish Government entered into a 15 year lease in September 2005 with the owners of the Optima Building in Glasgow and has sub leased part of that accommodation to LTS.

The Scottish Government pay s the Optima rent and landlord’s management charges for the Optima without recourse to LTS. LTS is however responsible for the Optima rates and utility costs.

The costs paid directly by the Scottish Government to the Optima landlord in the year to 31

March 2011 totalled £941,653 (2010: £900,584). These costs are not included in these reported results as the Directors believe this would distort comparison of the company’s operational ratios.




13. Related Party Transactions

LTS is an executive non-departmental public body, sponsored by the Scottish Government

Learning Directorate (SGLD) which is regarded as a related party. During the period, LTS has had various material transactions with SGLD.

Funding received from SGLD during the year amounted to £23,137,267 (2010:

£22,937,968). The amount included in trade debtors at 31 March 2011 was £10,524 (2010:

£29,910).

Note 8 to the financial statements, regarding creditors payable within one year, includes a figure of £1,089,241 (2009: £1,895,133) relating to deferred project income. Of this figure

£336,405 (2010: £1,032,748) related to SGSD at 31 March 2011.

14. Disclosure of Grants Received

LTS received various cash grants during the year to 31 March 2011 as contributions towards the cost of activities.

Annual grant in aid received from the Scottish Government of £7,818,000 (2010:

£7,505,000) is in respect of current revenue expenditure and the amount carried forward at the year end is £Nil (2010: £Nil).

15. Share capital

The company is limited by guarantee and therefore has no share capital.

16. Subsidiary Company

Macrocom (968 ) Limited, was formed at the company’s request and was incorporated on 9 March 2007. LTS formally acquired its 100% controlling interest in this company on 8 May 2007. The company has 100 £1 ordinary shares, all held by LTS.

This company was formed with a view to pursue commercial educational activities in the future. The company, which has been dormant since incorporation, is now no longer required and, accordingly, application was made on 18 April 2011 to have this company struck off.

The certificate of dissolution is expected in August 2011 from Companies House.




17. Contingent Liabilities

With the creation of LTS in 2000, the company inherited different pay and grading structures from its two predecessor bodies. Since then the company has restructured to realign with the changes in organisational remit. Previous pay arrangements, influenced by public sector pay constraints, did not fully bridge the gap between practices in the two predecessor organisations and had not fully addressed differences including lack of progression, below market salaries in some areas and differences between posts of equal value. The company has now implemented a three year pay & grading settlement, with effect from 1 st

April 2008 which, by 31 st

March

2011, has resulted in no significant differences in average base salary between male and female employees. An external Equal Pay Review was carried out in 2007 and showed that LTS had a potentially significant exposure to equal pay claims from staff on the basis of the then pay and grading structures. No equal pay claims have been received from staff by LTS. The company is confident that its position is defensible before an Employment Tribunal and that it has now taken the appropriate steps. No provision for equal pay exposure has therefore been made in these accounts.

LTS is involved in two employee injury claim actions relating to incidents in 2008. The cases are ongoing and discussions are being held to bring these matters to a satisfactory conclusion. The information usually required by FRS 12 is not disclosed on the grounds that it can be expected to prejudice seriously the outcome of the case.

The directors believe that any costs incurred on these matters will not be material.

18. Charitable Status

LTS has been a registered charity since its formation in 2000 and HMRC confirmed in

2007 that they continue to regard LTS as a charity from the viewpoint of UK taxation.

The Company has therefore maintained its charitable corporation tax and VAT position.

The Company had been in discussion with the Office of the Scottish Charity Regulator

( ‘OSCR’) since 2006 as OSCR had been of the view that the Company’s then

Memorandum and Articles of Association gave influence to Scottish Ministers that would be inappropriate for a charitable body. The Company adopted updated

Memorandum and Articles in August 2008 and OSCR then confirmed that they were satisfied that LTS could retain its Scottish charitable status.

19. Pension Scheme – FRS 17 Disclosures

As detailed in Note 1, the company participates in the Strathclyde Pension Fund, part of the Local Government Pension Scheme, a defined benefit scheme.

The levels of contribution paid to the Fund by LTS have increased annually in recent years.

The 12.0% of salary costs contributions made by LTS in the years up to 31 st

March 2001 has therefore increased steadily, rising to employer contributions of 18.2% of salary cost in the year to 31 st

March 2011 and increasing further to 19.3% as from 1 st

April 2011.

Employee pension contributions have remained unchanged at 6% in this period except



Year ended 31 March 2011 from April 2009 where employees now pay incremental salary related contributions ranging from 5.5% to 12%.

The balance sheet position for th e company’s share of the scheme as calculated by an independent actuary under the provisions of FRS 17 as at 31 March 2011 was as follows:

Fair value of assets

Present value of scheme liabilities

Present value of unfunded liabilities

Net Pension Liability

2011

£’000

2010

£’000

2009

£’000

2008

£’000

2007

£’000

28,832 26,962 19,833 25,327 25,921

(29,397) (33,702) (21,252) (23,951) (27,250)

(1,434) (1,578) (1,338) (1,388) (1,530)

(1,999) (8,318) (2,757) (12) (2,859)

The following information is extracted from the FRS17 Report prepared for LTS by Hymans

Robertson, an independent actuary:

Section 1 - Data

Employer membership statistics

2011

Number

31 Mar 31 Mar

2008

Total Salaries/Pensions

31 Mar

2011

£(000)

31 Mar

2008

Actives

Deferred

Pensioners

Pensioners

119

159

98

157

3,567

*

2,761

490

102 92 * 646

The actuary did not have current figures for the amount of pensions in payment and

Average

Age

31 Mar

2008

50

51

66 deferred pensions. His calculations are based on estimates from the latest formal valuation.

Deferred pensioners include undecided leavers and frozen refunds.

Salaries are actual, not full-time equivalent.

Payroll

Period

1 April 2010 to 31 March 2011


Assumed Total Pensionable Payroll based on Contribution Information Provided

£3,511,000

£3,567,000




LGPS early retirements

New Early Retirements


Redundancy

Efficiency

Other

Investment returns

Number

-

-

-

Total Pension

Accrued (£)

-

-

-

Total Pension

Actual (£)

-

-

-

The return on the Fund in market value terms for the year to 31 March 2011 is estimated based on actual Fund returns as provided by the Administering Authority and index returns where necessary. Details are given below:

Actual Return for Period from 1 April 2010 to 31 December 2010 6.5%

7.9% Estimated Return for Period from 1 April 2010 to 31 March 2011

The major categories of plan assets as a percentage of total plan assets

The actuary has been provided with the split of investments by category as at 31

December 2010. Using this information and allowing for index returns on each asset category between 1 January 2011 and 31 March 2011, the estimated split of assets as at 31 March 2011 is as shown below:

Year Ended:

Equities

Bonds

Property

31 March 2011 31 March 2010

77%

13%

6%

77%

13%

7%

Cash 4% 3%

The actuary estimated the bid value of the Fund's assets as at 31 March 2011 to be

£11,078,000,000 based on information provided by the Administering Authority, index returns where necessary and estimated adjustments for the difference between the mid market (as supplied) and bid (as required) value of assets.

Unfunded benefits

A summary of the membership data in respect of unfunded benefits is shown below.

LGPS Unfunded

Pensions

Number at

31 March 2011

Annual Unfunded

Pension £(000)

Male

Female

Dependants

Total

17

12

7

36

75

16

9

100

The annual unfunded pensions include the 2011 pension increase.

Bulk transfers

No allowance has been made for any bulk transfer in this accounting period.




Section 2 - Assumptions

Financial assumptions

The actuary’s recommended financial assumptions are summarised below:

Year Ended: 31 Mar 2011

% p.a.

31 Mar 2010

% p.a.

Pension Increase Rate

Salary Increase Rate

2.8%

5.1%*

3.8%

5.3%

Expected Return on Assets 6.9% 7.2%

Discount Rate 5.5% 5.5%

*Salary increases are 1.0% p.a. nominal for the years to 31 March 2012 and 31 March 2013, reverting to

5.1% p.a. thereafter.

Breakdown of the expected return on assets by category


% p.a.

Equities

Bonds

Property

Cash

7.5%

4.9%

5.5%

4.6%

31 Mar 2010

% p.a.

7.8%

5.0%

5.8%

4.8%

Mortality

Life expectancies are based on the PMA92 and PFA92 year of birth tables, with future improvements in line with CMIB's medium cohort and a 1% p.a. underpin from 2008.

Based on these assumptions, the average future life expectancies at age 65 are summarised below:

Current Pensioners

Future Pensioners

Males

20.6 years

22.6 years

Females

23.9 years

26.0 years

Historic mortality

Life expectancies for all of the below year ends are based on the PFA92 and PMA92 tables. The allowance for future life expectancies is shown in the following table:

Year Ended Prospective Pensioners Pensioners

31 March 2010 year of birth, medium cohort and 1% p.a. minimum improvements from 2008 year of birth, medium cohort and 1% p.a. minimum improvements from 2008

31 March 2009

31 March 2008

31 March 2007

31 March 2006 year of birth calendar year 2015 calendar year 2015 calendar year 2015 year of birth calendar year 2005 calendar year 2005 calendar year 2005

Age ratings and loadings on the rates of mortality are applied to the above tables based on membership profile.

The allowance for future life expectancy has not changed at this year end.




Commutation

An allowance is included for future retirements to elect to take 50% of the maximum additional tax-free cash up to HMRC limits for pre-April 2009 service and 75% of the maximum tax-free cash for post-April 2009 service.

Section 3 - Balance sheet disclosures as at 31 March 2011

Fair value of employer assets

Year Ended:

Equities

Bonds

Property

Cash

31 Mar 2011

£(000)

22,201

3,748

1,730

1,153

31 Mar 2010

£(000)

20,761

3,505

Total 28,832 26,962

The above asset values are at bid value as required under FRS17.

The actuary was not provided with details of the difference between mid market and bid value of assets for the Fund as a whole by the Administering Authority. Accordingly, he estimated the bid value of assets by applying an adjustment of -0.4% to the Employer's mid market value asset share as at 31 March 2011.

Balance sheet

1,887

809

Fair Value of Employer Assets

Present Value of Funded Liabilities

1

Net (Under) / Overfunding in Funded Plans

Present Value of Unfunded Liabilities

Unrecognised Past Service Cost

Net Asset / (Liability)

Amount in the Balance Sheet

Liabilities

31 Mar 2011

£(000)

28,832

(29,397)

(565)

(1,434)

-

(1,999)

1,999

31 Mar 2010

£(000)

26,962

(33,702)

(6,740)

(1,578)

-

(8,318)

8,318

Assets

Net Asset / (Liability) (1,999) (8,318)

¹ The actuary estimates that this liability comprises of approximately £10,803,000, £9,334,000 and

£9,260,000 in respect of employee members, deferred pensioners and pensioners respectively as at 31

March 2011

Section 4 - Revenue account costs for the year to 31 March 2011

Recognition in the profit or loss

Year Ended:

Current Service Cost

31 Mar 2011

£(000) % of pay

31 Mar 2010

£(000) % of pay

Interest Cost

Expected Return on Employer Assets

Past Service Cost / (Gain)**

Losses / (Gains) on Curtailments and

Settlements

742

1,806

(1,932)

(3,612)

-

21.1%

51.4%

(55.0%)

(102.9%)

-

315

1,543

(1,280)

88

-

10.8%

52.6%

(43.6%)

3.0%

-

Total

Actual Return on Plan Assets

(2,996)

2,122

(85.4%) 666

7,415

22.8%




** The Past Service Cost figure for this year includes £0 in respect of efficiency and other early retirements and -£3,612,000 in respect of the changes to pension increases introduced in the Chancellor's budget as referred to in Note 3 to these financial statements.

Reconciliation of defined benefit obligation

Year Ended:

Opening Defined Benefit Obligation

Current Service Cost

Interest Cost

Contributions by Members

Actuarial Losses / (Gains)

Past Service Costs / (Gains)

Losses / (Gains) on Curtailments

Liabilities Extinguished on Settlements

Liabilities Assumed in a Business Combination

Exchange Differences

Estimated Unfunded Benefits Paid

Estimated Benefits Paid

Closing Defined Benefit Obligation

31 Mar 2011

£(000)

35,280

742

1,806

242

(2,327)

(3,612)

-

-

-

-

(100)

(1,200)

30,831

31 Mar 2010

£(000)

22,590

315

1,543

202

11,621

88

-

-

-

-

(100)

(979)

35,280

Reconciliation of fair value of employer assets

Year Ended:

Opening Fair Value of Employer Assets

Expected Return on Assets

Contributions by Members

Contributions by the Employer

Contributions in respect of Unfunded Benefits

Actuarial Gains / (Losses)

Assets Distributed on Settlements

Assets Acquired in a Business Combination

Exchange Differences

Unfunded Benefits Paid

Benefits Paid

Closing Fair Value of Employer Assets

Amounts for the current and previous accounting periods

Year Ended:

31 Mar 2011

£(000)

26,962

1,932

242

710

100

186

-

-

-

(100)

(1,200)

28,832

31 Mar 2011

£(000)


Present Value of Defined Benefit Obligation

Surplus / (Deficit)

Experience Gains / (Losses) on Assets

Experience Gains / (Losses) on Liabilities

28,832

(30,831)

(1,999)

186

52

31 Mar 2010

£(000)

19,833

1,280

202

494

100

6,132

-

-

-

(100)

(979)

26,962

31 Mar 2010

£(000)

26,962

(35,280)

(8,318)

6,132

(26)




Year Ended:


Present Value of Defined Benefit Obligation

Surplus / (Deficit)

Experience Gains / (Losses) on Assets

Experience Gains / (Losses) on Liabilities

31 Mar 2009

£(000)

19,833

(22,590)

(2,757)

(7,022)

2,609

31 Mar 2008

£(000)

25,327

(25,339)

(12)

(2,638)

(35)

31 Mar 2007

£(000)

25,921

(28,780)

(2,859)

20

146

Amount Recognised in Statement of Total Recognised Gains and Losses (STRGL)


£(000)

Actuarial Gains/(Losses)

Increase/(Decrease) in Irrecoverable Surplus from

Membership fall and other factors

2,513

-

Actuarial Gains/(Losses) recognised in STRGL

Cumulative Actuarial Gains and Losses

2,513

(1,266)

Year Ended:

Actuarial Gains and Losses

Increase/(Decrease) in Irrecoverable Surplus from Membership fall and other factors

Actuarial Gains/(Losses) recognised in STRGL

Cumulative Actuarial Gains and Losses

31 Mar 2009

£(000)

(2,995)

-

(2,995)

1,710

31 Mar 2008

£(000)

2,523

-

2,523

4,705

31 Mar 2010

£(000)

(5,489)

-

(5,489)

(3,779)

31 Mar 2007

£(000)

2,193

-

2,193

2,182

Section 5 - Projected pension expense for the year to 31 March 2012

Analysis of projected amount to be charged to operating profit for the year to 31

March 2012

Year Ended:

Projected Current Service Cost

Interest Cost

Expected Return on Employer Assets

Past Service Cost

Losses / (Gains) on Curtailments and Settlements

Total

653

-

-

357

31 March 2012

£(000)

1,687

(1,983)

% of pay

18.3%

47.3%

(55.6%)

-

-

10.0%

The actuary estimated the Employer's contributions for the year to 31 March 2012 will be approximately £688,000.

The actuary has noted that the above figures should be treated as estimates and may need to be adjusted to take account of:

• any material events, such as curtailments, settlements or the discontinuance of the Employer's participation in the Fund;

• any changes to accounting practices;

• any changes to the Scheme benefits; and/or

• the 2011 formal funding valuation.




The monetary amount of the projected service cost for 2011/12 may be adjusted to take account of actual pensionable payroll for the year and the projected service cost will not necessarily be appropriate for

Employers who are no longer admitting new employees to the Fund.

The estimated current service cost includes an allowance for administration expenses of 0.2% of pay.

20. Pension Scheme

– Additional FRS 17 Disclosures

Further to the Going Concern section in Note 1, the transfer of LTS staff to Education

Scotland on 1 July 2011 will require that the pension fund position is recalculated as at 30

June 2011. This calculation will be on a cessation/ transfer basis which is likely to give rise to a deficit, as at June 2011, higher than that reported in these accounts as at 31 March

2011. For information purposes the Fund ’s actuary was asked to carry out calculations, as described below, to give an indication of the potential cessation deficit that may arise following this transfer of staff. The method used below by the actuary is approximate and the actual cessation deficit may be materially different (for a number of reasons) when a full cessation valuation is carried out.

The actuary’s calculations were based on his FRS17 report as at 31 March 2011, issued on 27 May 2011 but made the following adjustments to reflect the anticipated transfer. To give an approximation of the cessation deficit, the actuary has assumed that all the active members transferred to the Civil Service Pension Scheme on 31 March 2011. The actuary therefore deducted an estimate of the transfer amount on that date from the LTS FRS17 assets shown in the original report and set the active liabilities on the balance sheet to be zero. The actuary has then taken the value of the deferred and pensioner liabilities calculated for FRS17 purposes and made an adjustment to allow for the different financial assumptions used for a cessation basis. The financial assumptions underlying the cessation basis are shown below.

Financial Assumptions for Cessation Valuation of Deferred and Pensioner Members

Year

Ended:

Pension Increase Rate

Discount Rate Cessation Basis

31 Mar 2011

% p.a.

3.1%

4.3%

For cessation/funding purposes, Pension Increases are assumed to be 0.5% below RPI.

No allowance has been made for unfunded liabilities in calculating the cessation deficit.




The adjusted Balance Sheet is shown below.

Balance Sheet

Year Ended:


Present Value of Funded Liabilities1

Net (Under) / Overfunding in Funded Plans

Present Value of Unfunded Liabilities2

Unrecognised Past Service Cost

Net Asset / (Liability)

Amount in the Balance Sheet

Liabilities

Assets

Net Asset / (Liability)

1 it is estimated that this liability comprises of approximately £0, £12,864,000 and

£10,661,000 in respect of employee members, deferred pensioners and pensioners respectively as at 31 March 2011.

2 No allowance has been made for unfunded liabilities in calculating the cessation deficit.

31 Mar 2011

£(000)

18,944

(23,525)

(4,581)

-

-

(4,581)

4,581

(4,581)

The actuary believes that this is a reasonable method of estimating the cessation deficit at this time for the purpose stated above only but the final cessation deficit will be based on up to date membership records and on market conditions at the date of actual transfer of actives and on the date of cessation. The final cessation position may be materially different from the position shown above.


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