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DVLA Annual Report & Accounts

2009-10

DVLA Annual Report & Accounts 2009-10

9 780102 966152

ISBN 978-0-10-296615-2

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Driver and Vehicle Licensing Agency

Annual Report and Accounts 2009-10

Presented to Parliament pursuant to section 4(6) of the Government Trading Funds Act 1973

as amended by the Government Trading Act 1990

Ordered by the House of Commons to be printed on 22 July 2010

HC178 London: The Stationery Office £18.50

■

The text in this document (excluding the Royal Arms and other departmental or agency logos) may be reproduced free of

charge in any format or medium providing it is reproduced accurately and not used in a misleading context. The material must

be acknowledged as Crown copyright and the title of the document specified.

Where we have identified any third party copyright material you will need to obtain permission from the copyright holders

concerned.

ISBN: 9780102966152

Printed in the UK for The Stationery Office Limited

on behalf of the Controller of Her Majesty’s Stationery Office

ID 2366898 07/10

Printed on paper containing 75% recycled fibre content minimum.

■

Foreword 2

Highlights for the Year 3

ANNUAL REPORT

01. Directors’ Report

Who we are 5

What we do 5

Governance 7

How we did against our Secretary of State Targets 9

How we did against our Operational Targets 10

Managing and Transforming the Agency 19

02. Management Commentary

Business Analysis 23

Finances and Efficiency 28

VED Collection and Enforcement 33

03. Remuneration Report

ACCOUNTS

04. Accounts for 2009-10

Summary of Accounts 2009-10 42

Statement on Internal Control 43

Statement of the Agency and Accounting Officer’s Responsibilities 52

Audit Certificate – Business Accounts 53

Business Accounts 55

Audit Certificate – VED Account 97

VED Account 99

Comptroller and Auditor General Report 108

Accounts Direction 111

Appendix

Commentary on Sustainability Performance 113

117

■

Foreword

This last year has seen DVLA responding to the challenge posed by the financial recession and the

£25.1m deficit from 2008-09 due to the sudden and dramatic fall in income. The Agency Business Plan

for 2009-10, agreed by our sponsors and former Ministers in the Department for Transport (DfT), forecast

a deficit of £29.7m. However, I resolved that the Agency should make every effort to break-even by

accelerating sustainable cost savings. The Management Commentary in this report shows not only how

we achieved a £32.7m efficiency gain in 2009-10 but, as a result of £32m above forecast income caused

by the vehicle scrappage scheme from May 2009, achieved a surplus of £35.1m for the year. This is a

fantastic outcome for us through the collective effort of my management team and the whole Agency

recognising our responsibility as a Trading Fund.

But the real achievement was to deliver this financial result alongside improved operational results:

- reducing vehicle excise duty (commonly called road tax) evasion by a third to 0.6%, now at its

lowest level

- meeting all 8 DfT Customer Promises underpinned by our long-standing 18 customer service

standards

- handling an increased transaction volume with on average 248 fewer staff engaged on DVLA

operations than during the previous year

- continuing the journey from paper to electronic transactions with our customers and

- delivering 80% of a previously planned operational development and systems up-date programme

for the year.

We face further challenges in 2010-11 as the new Government takes action to address the fiscal deficit

facing the UK. As a result of the significant strides taken over the past two years and a programme to

deliver a further shift to electronic transaction channels, the Agency continues its focus to be an efficient

front-line service.

Agency staff reacted very positively to the demands placed on them:

- improving productivity 7% over the year by absorbing growing transaction volumes

- sharing the load as some staff who left the Agency were not replaced and

- staying healthy and reducing the number of days lost through sick absence.

Colleagues understood our direction as an organisation and have shown that they are capable of rising to

every challenge.

We made progress over this last year in a number of areas, one of these, to remove duplication of effort

with other Agencies, with more joint operations, sharing of facilities and joint procurement with others in

the DfT family and more widely. These opportunities complement our internal focus on channel shift and

maximising the advantage and efficiency of e-transactions.

The pressure continues, indeed increases, on the whole of the public sector to achieve more output from

less input. Our Business Plan 2010-11 sets out a continuing programme building on the success and

capability honed over recent years, not least 2009-10 as reported here.

Noel Shanahan

Accounting Officer

24 June 2010

■

Highlights for the Year

Operational Results

We met or exceeded all our Secretary of State Targets (see page 9).

Success on a plate

The DVLA Sale of Personalised Registrations and Cherished Transfer scheme was 20 years old in 2009.

During that time, we have raised £1,470m for HM Treasury, selling over 3m registration numbers. Our

telesales and online sales generate an average of £4.5m per month. Over the last year, DVLA delivered

£108.1m to the Consolidated Fund through this activity. This has been the most successful wider-market

initiative across Government.

A first – between 10 February and 3 March 2010, DVLA launched its first online Personalised

Registration Auction raising £587,090 against a revenue target of £500,000.

Financial Results

We turned around the forecast in our Business Plan of a £29.7m deficit and achieved a £35.1m surplus.

We delivered an efficiency gain of £32.7m, exceeding our target of £25m for the year.

Vehicle Excise Duty (VED) Collection

The Agency collected over £5,742m in VED (commonly referred to as ‘road tax’) making £201m of

refunds for subsequently surrendered tax discs - and £41.7m in fines and penalties related to VED

evasion. This was all delivered to the Consolidated Fund.

VED evasion is now the lowest it has ever been – this was a third down on the levels seen in 2008-09,

with a current annual estimated loss to HM Treasury of £34m in Great Britain from the 0.6% evasion rate

observed in the annual Department for Transport (DfT) led roadside survey.

Customer Service

We met or exceeded all 8 DfT Customer Promises (see page 11).

Move to more efficient e-services

Electronic Vehicle Licensing take-up increased to 51% by March 2010 (up from 40% in 2009).

Driver Licensing Online take-up increased to 39% by March 2010 (up from 23% in 2009).

■

Awards and Accreditation

We have done it again! - following an annual review in November 2009, DVLA were re-accredited

with the Customer Service Excellence (CSE) standard awarded by the Cabinet Office for the fifth

time. The Government’s CSE standard was developed to ensure that public services are not only

efficient and effective but also excellent, equitable and empowering, with the citizen at the heart of

public service provision.

Making the grade - another success for DVLA’s Contact Centre staff when they achieved

re-certification to the Customer Contact Association (CCA) Global Standard for Customer Service. The

Standard was awarded for continued excellent performance, customer focus, employee learning and

development, compliance with legislation and technology.

Making a difference - DVLA received the Carbon Trust Standard for real action taken on climate

change. The Carbon Trust Standard recognises which organisations have genuinely acted on climate

change and are committed to ongoing emission reductions. The Agency is at the forefront when it comes

to tackling climate change and has taken action to reduce the carbon emissions we are directly responsible

for rather than just paying others to offset our emissions.

Setting the Green Standard - in 2009-10 we were awarded the Environmental Management System

(EMS) ISO14001 accreditation in a further six of our local offices. This brings the total offices with EMS

to 19.

DVLA’s European Success - The Agency was once again successful in winning the Bigmouthmedia

Best Marketing Award 2009, this time for our campaign to maximise road tax collection.

Fighting Fraud - DVLA Criminal Intelligence Officers have been honoured with a police commendation

for their assistance in tackling identity fraud. Because of their investigations a number of applicants were

charged with fraud, deception and possessing false documents. This award is for recognition of our

continued work to fight fraud.

Positive about Disability - DVLA is celebrating another success with the re-accreditation of the TWO

TICKS ‘Positive about Disabled People’ symbol. This award recognises our actions to support disabled

people in the workplace.

Thai Visit

Delegates from the Thailand Government attended DVLA’s Personalised Registration auction in

December 2009. The visit was part of a fact-finding trip to learn from the Agency’s business model of

selling personalised registrations. The Agency is seen as the benchmark for various countries around the

world, with the likes of the French, Canadian and American Governments making regular contact to

discover exactly how we operate.

■

01. Directors’ Report

Who we are

DVLA is a Trading Fund, sponsored by the Motor and Freight Services Group (MFSG) of the

Department for Transport (DfT)

The DfT goal is to deliver ‘transport that works for everyone’ and its objective is to oversee a reliable,

safe and secure transport system by setting strategy and policy whilst managing relationships with the

agencies that deliver front line services. The diagram on page 8 shows our relationship and contribution to

achieving shared strategic goals to deliver registration, testing and assessment of vehicles, drivers and

operators.

What we do

Our purpose is to - establish and maintain an accurate record of all those who are entitled to drive

various types of vehicles, together with a register of all vehicles entitled to travel on public roads.

These registers allow us, with the co-operation of our delivery partners, to ensure that only entitled

drivers and vehicles are on the road. The Agency collects Vehicle Excise Duty (VED), for the

Government and sells personalised registrations.

DVLA has a growing influence on Road Safety and plays a major role in Crime Prevention and

Reduction. We contribute significantly to Sustainable Development through the reduction of carbon

emissions, reducing our energy use, waste, and choices of service channels for our customers but also

support moves to reduce vehicle emissions through our vehicle register and tax collection.

We are leading the way in Government in providing Electronic Services to our customers. Over the last

ten years we have come through a massive period of change, we are now a dynamic organisation that is

continuing to evolve rapidly to meet the growing expectations of our customers and stakeholders.

Our vision is:

To be a modern, highly efficient organisation, which provides complete, accurate and up to date

information and services that fully meet customer and stakeholder requirements.

Our key purpose is:

To keep complete, accurate registers of drivers and vehicles, and make them accessible and as

flexible as possible to those who have the rights to use them.

These registers underpin action:

• by the Police to ensure that the law is respected and observed in order to keep road users safe;

• to allow us to collect VED effectively; and

• to deliver other Government initiatives such as traffic management and reducing carbon

emissions.

■

Our Strategic Objectives

We have seven Strategic Objectives agreed with DfT:

1. Ensure that the completeness, accuracy and accessibility of our records satisfies customers

and stakeholders in a way that maximises value for money.

2. Ensure customers receive a level of service and choice of channels that meets their

expectations and encourages them to comply with their legal obligations.

3. Become more productive by taking advantage of technological advances and improved

processes to drive out waste and delay.

4. Achieve the VED compliance levels target and generate ‘Personalised Registration’ income

to meet the target contribution to the public purse.

5. Ensure that legislation and processes work efficiently and effectively when enforced to obtain

compliance and to establish entitlements.

6. Work with other organisations across Government to share resources and capabilities, in order

to reduce the overall burden on the public purse and the environment.

7. Develop the flexibility and capabilities of our people and organisation so that it makes the

Agency more productive and quicker in responding to the changing needs of stakeholders.

Further information is available on www.dvla.gov.uk/publications

■

Governance

DVLA’s Chief Executive - appointed directly by HM Treasury as the Accounting Officer for the DVLA

Trading Fund. The Chief Executive is accountable to the Secretary of State for Transport for ensuring we

meet our obligations and deliver our targets and services.

The Executive Board - the Agency has five Executive Board (EB) members who support the Chief

Executive in managing the business.

Non-Executive Members - we have two non-executive directors with private sector experience who

comprise the Audit Committee along with a co-opted senior representative of the DfT. Since October

2009, the non-executive directors attend all Executive Board meetings.

The agreed EB terms of reference are to:

• Ensure compliance with the legislative and governance framework.

• Agree budgets for each new financial year, and make decisions on Agency-wide policies in

relation to budgets, ensuring we maximise value for money from procurement and use of

resources.

• Review and manage key issues and risks, performance against Secretary of State Targets, key

operational and financial measures.

• Communicate the Agency’s Strategic Agenda and ensure that future programmes of work are in

line with that agenda.

• Review our strategy direction and progress with transformation, including identifying cross-

agency impacts of changes proposed.

• Approve future programmes and delegate funding on an annual basis.

• Endorse business cases in advance of consideration by DfT where this is required under our

agreed procedures and approve business cases that fall within the Agency delegation.

• Ensure that HR, Finance, IT and Communications provide effective support for the delivery of the

Agency’s core services.

The EB are supported by the:

• Operational Delivery Board and Operational Management Board who are accountable to the

Chief Operating Officer for the day-to-day operational performance of the Agency.

• The Programmes Delivery Board, accountable to the Chief Information Officer for the day-to-

day delivery of the Agency transformation agenda.

• The Finance Committee who are responsible for managing urgent budget and funding requests,

accountable to the Director of Finance and Strategy.

Our Risk Management Approach

The DVLA Risk Management function is structured to take account of the internal governance structure

and external environment to ensure DVLA can deliver its primary purpose and Secretary of State Targets.

Risk Management helps protect DVLA’s reputation as a highly effective and efficient provider of

services to customers and stakeholders.

■

How DVLA fits within Government Funding and Functions

■

How we did against our Secretary of State Targets 2009-10

■

How we did against our Operational Targets

Accuracy

Strategic Objective 1 - Ensure that the completeness, accuracy and accessibility of our records satisfies

customers and stakeholders in a way that maximises value for money.

Our key purpose is to maintain complete and up to date registers of drivers and vehicles and make them

easily accessible to those who have the right to use them.

In 2009-10, the Agency exceeded its Accuracy targets:

• to trace the registered vehicle keeper from the record – 97.1% against a target of 95%

• to improve the accuracy of the driver record by developing robust methodology; and

processes by December 2009 – 87.3% against the previous year of 79.6%.

Throughout the year, the Agency has been driving and ensuring accuracy features in all decision-making

and activities within the business. The Agency has developed a single Accuracy Plan, which identifies

accuracy issues and opportunities to improve accuracy of the driver and vehicle records, this ensures

focus and identifies threats and opportunities from new projects and business activities.

We have been focusing on encouraging customers to comply with their legal obligations so that their

records are accurate and up to date.

Customer feedback

We carried out market research with customers to assess their views on the existing change of address

processes. Results confirmed the value of several existing initiatives to improve address accuracy. Further

analysis of customer feedback is ongoing with the aim of identifying additional accuracy improvements.

The cost of an inaccurate record

DVLA has commissioned DfT’s In House Analytical Consultancy (IHAC) to put a financial value to an

inaccurate Driver/Vehicle record. This work is ongoing and we will use the results to inform the value of

delivered from resources used to increase accuracy.

Pilot studies

Local Offices - a number of DVLA local offices have been checking customer details against our

database during routine transactions with minimal impact on both queuing and counter times. Where

inaccuracies were identified, customers have been prompted to change their details. This pilot provides an

increased opportunity to check the drivers’ record, as most customers who attend a Local Office have

come to do a vehicle transaction. The record is checked later to ensure the customer has complied.

Home movers - we have been working with private sector address matching companies to remind

customers who have recently moved house that they need to update DVLA with the new address details.

Paper Licence Holders - we have carried out work prompting paper licence holders who have not

contacted DVLA for over ten years to notify us of changes. Our data analysis suggests that remaining

paper licence holders are far more likely to have inaccurate records.

Cross-Referencing Driver and Vehicle Records – during the year, we continued to investigate options for

a single notification of change of address that will update both a Driver and Vehicle record. We will

continue to pursue this in 2010-11 in potential collaboration with cross Government initiatives such as

‘Tell us Once’

■

Customer Service and Satisfaction

Strategic Objective 2 - Ensure customers receive a level of service and choice of channels that meets

their expectations and encourages them to comply with their legal obligations.

Satisfaction guaranteed

The 2009-10 customer survey showed that 93% of our private motorists were satisfied with our service

with commercial customers coming in at 96% (a great improvement on the previous year when 84.7% of

commercial customers were satisfied).

We met or exceeded all 8 DfT Customer Promises listed below. These promises are underpinned by 18

customer service targets for us to be able to track quantitatively how we are performing against them.

We achieved or exceeded all service targets agreed with DfT in terms of assurance of meeting these

promises.

DfT Customer Promises

1. We will provide a full response to enquiries quickly.

2. We will provide a full response to complaints quickly.

3. We will respond to telephone calls promptly and endeavour to resolve all enquiries

at the first call.

4. We will use reliable and accurate methods to measure customer satisfaction on a regular

basis.

5. We will provide our customers with information that is clear, accurate and complete. 

If we do not have all the information required, we will advise customers when they will

receive the information they requested.

6. We will ensure that our staff are polite and friendly to customers at all times and

understand our customer needs.

7. We will make information about the full range of services we provide available to our

customers and potential customers, including how and when people can contact us, how our

services are run and who is in charge.

8. We will make particular efforts to identify hard-to-reach and disadvantaged groups and

individuals and have developed our services in response to their specific needs. We have

policies and procedures that support the right of all customers to expect excellent levels of

service.

Governments Service Transformation Targets

During 2009-10 we:

• reduced avoidable customer contact by 65.6%, exceeding the target of 50%

• migrated all of our e-services to Directgov/Businesslink.

Channel Shift and improvements to our Electronic Services

DVLA’s electronic services are leading the way in Government, providing 24/7 access to our customers

and major savings in our costs. In 2009-10, Electronic Vehicle Licensing (EVL) take-up increased to

51%, (up from 40% in 2009), representing use by 22 million customers and 90% of electronic payments

into Central Government.

■

In addition, as a result of a successful marketing campaign including direct marketing, online and radio

campaigns, our Driver Licensing Online take-up increased by 39% (up from 23% in 2009).

During the year, the Agency developed system improvements to make it easier for customers to use our

electronic services, assisted by customer usability testing and feedback.

In 2009-10, we completed a proof of concept exercise to provide a new service for drivers with a medical

restricted licence was completed. This service will enable drivers to apply for their Medical Driving

Licence Renewals online.

A give away

We continued with our incentive scheme to entice customers to use our EVL service (both online and

over the telephone). Customers are given the option to enter a prize draw to win a new car and the

exercise has won a number of marketing awards. In 2009-10, we gave away 36 SEAT Ibiza

cars to lucky customers, with the vehicles donated by the manufacturer after a

competitive engagement with all manufacturers.

Making it easier for our customers

In June 2009, we introduced a new service through which customers can change the address on their

driving licence over the telephone. One of the main objectives of this change was to answer an increased

number of customer enquiries at the initial point of contact, eliminating a postal application to decrease

costs, improving customer service and capturing more changes to data.

Before a customer can apply for a change of address by telephone, they must answer a number of security

questions. This is to ensure that the advisor handling the call is speaking with the licence holder and the

customer has both the photocard and counterpart of the Driving Licence. This improves privacy and

security. During 2009-10, the Contact Centre processed over 25,000 customers’ change of address. The

response from customers has been positive, with numerous thank you letters received. We are continuing

to take forward the necessary legislative and process changes to offer registered vehicle keepers the same

facility.

Understanding the customer journey - the Agency is continuing to look at the ‘Customer Journey’.

What is it really like for our customers? During the year we have been looking at a cross-section of

our customers to see how we can improve our processes to provide a more efficient and effective

service and reinforce the shift away from paper to electronic transactions.

Commercial customers - we have been working closely with our commercial customers to look at

ways to improve the services we provide. Extensive work has been carried out to extend the scope of

the fleet system and to include more fleet companies and more types of vehicles in the scheme.

Improvements to customer forms - with over 100 different DVLA transactions available, it is

important that we continue to make it easier for our customers to comply with the law. This reduces

customer enquiries, improves compliance and reduces our casework costs. With the help of our

customers, we are continuously making improvements to our paper and online application forms and

leaflets to make them easier to understand and complete.

Keeping track of your mail - we have been working with Royal Mail to pilot an innovative new mail

tracking service called RED TAG. This traces individual items through Royal Mail systems, identifying

where problems occur.

■

An initial trial between October 2008 and March 2009 gave the Agency some valuable data on the

customer experience. A further trial is due to begin in July 2010, which should help the Agency and

Royal Mail improve customer service and assist the drive to improve accuracy rates for our mailings.

Sold on success

DVLA Personalised Registrations’ first online auction went live on 10 February 2010. The online

auction included 1,000 registrations, with reserve prices starting from £130. Unlike our traditional

auctions, our customers were able to request the registration numbers sold online. The sale raised

£587,090 in revenue for the Treasury. Positive feedback from customers suggests the online auction

was a resounding success and it is our intention to continue making personalised registrations

available through this route.

A modern approach to face-to-face customer service

As part of our improvements to face-to-face customer service, a new customer management process has

been introduced in six of our local offices. In addition, all offices now have now have replacement queue

management systems installed. Feedback from customers shows an overall improvement in customer

service and a reduction in queuing times.

■

Improved Efficiency & Capability

Strategic Objective 3 - Become more productive by taking advantage of technological advances and

improved processes to drive out waste and delay.

Efficiency gains

During 2009-10 DVLA made efficiency gains of £32.7m, significantly exceeding its £25m target for

the year from a range of initiatives as follows:

Initiative Delivery Plan

2009-10

Outturn

2009-10

£m £m

Productivity 16.6 24.4

Service Transformation 4.7 5.1

Re-focussed Compliance 2.0 2.0

Estates Framework 1.7 1.2

Total Efficiency Gains 25.0 32.7

Sickness and Absence

Last year we continued to make improvement in our sickness and absence record, building on the

significant achievement of the previous two years. This is contributing to our productivity gain.

Changes to our operations

In January 2010, the Agency made a significant change to its Central Operations structure and set up a

Central Capture Unit (CCU) and Central Casework Group (CCG). This formation will allow the Agency

to modernise the management of work across its operations, which will lead to a multi-skilled and

flexible workforce and provide a more effective and efficient service to our customers.

Shared Services

During the year, the Agency has been working closely with DfT Shared Services to improve both the

processing and support functions provided. The new Flexi and Time Management system is now

rolling out across the Agency providing a more effective and efficient service and also significantly

improved management information and resource planning capability.

■

Compliance with the law

Strategic Objective 4 - Achieve the VED compliance levels target and generate ‘Personalised

Registration’ income to meet the target contribution to the public purse.

VED evasion is at an all time low

The findings of the most recent DfT roadside survey of traffic at 256 sampling points across the UK,

have confirmed that VED evasion has fallen to 0.6%. This is the lowest level of evasion on record and

the lowest evasion rate of any type of individually based tax. It also means the loss of revenue to the

Government has been cut to just £34m from £50m in Great Britain during 2008-09. This is good news

for the taxpayer in the current economic climate.

Identity Fraud

In January 2009, to help DVLA identify fraudulent attempts to exchange an invalid driver licence, the EU

Commission introduced a new requirement. A driving licence must not be exchanged for a UK licence if

it is invalid or subject to disqualification/withdrawal of the right to drive in the country it is issued. To

help Member States comply a European Driving Licence Network will be set up to exchange certain

driving licence information electronically before such exchange licences can be issued. The European

Commission has set up a working group to agree processes and specifications for implementation by

January 2013.

VED evasion in Northern Ireland

Historically VED evasion has always been higher in Northern Ireland (NI) than in GB. During 2009-10,

this decreased significantly to 0.8% from 2.3% in the previous year. The Agency continued to work with

the Driver and Vehicle Agency (DVA) in NI on their enforcement campaign. To help with DVA

enforcement, we have provided three Automated Number Plate Recognition vans detecting unlicensed

use on the road and wheelclamping activity that mirrors the mainland operation.

Insurance evaders

In response to the increasing problem of uninsured driving, the Government commissioned a review of

all areas relating to motor insurance, resulting in the ‘Greenaway Report into Uninsured Driving’. In

response to the report, the Government commissioned DVLA to introduce a record-based compliance

and enforcement regime – Continuous Insurance Enforcement (CIE).

During 2009-10, DVLA worked in partnership with the Motor Insurers Bureau (MIB), in preparation for

implementation of the first stages of CIE, and DVLA has made good progress on the systems changes

required. Insurance The MIB will start to issue Advisory letters to inform keepers that their vehicle

appears to be uninsured in 2011.

New service at the Post Office®

The Agency has introduced a new electronic service at the Post Office® where drivers’ photographs are

captured together with a signature, data changes recorded and the whole transaction data sent to the

Agency by a secure electronic link. The service will be available in 750 post office branches by

November 2010 and result in a fully automated transaction for DVLA.

■

Collection of VED

Strategic Objective 5 - Ensure that legislation and processes work efficiently and effectively when

enforced to obtain compliance and to establish entitlements.

In 2009-10, we collected £5,742m in VED and through enforcement action collected over £45m.

Evasion is now the lowest it has ever been (down by 0.6%) with an estimated loss to HM Treasury of

only £34m.

Enforcement activities 2009-10

• With the help of our partners NSL Services and those local authorities who have devolved powers,

we wheelclamped over 150,000 vehicles without tax.

• Reviewed our disposal procedures for seized vehicles - vehicles are auctioned/dismantled to raise

revenue (worth approximately £1m per year). In addition, the Fire Service, Police and Educational

establishments received over 100 vehicles last year for their training purposes and for covert

surveillance.

• We continued to issue Late Licensing Penalty letters to those who do not renew their vehicle

licence on time or declare Statutory Off Road Notification (SORN).

• Continuous Registration – we continued to enforce from the vehicle record.

See the Management Commentary pages 33-36 for further details and the Comptroller and Auditor

General Section 2 page 108 for the independent audit review findings.

■

Wider Government Objectives

Strategic Objective 6 - Work with other organisations across Government to share resources and

capabilities, in order to reduce the overall burden on the public purse and the environment.

Safeguarding Identity

During the year, we worked closely with DfT in developing a departmental response to the Government

Safeguarding Identity strategy. The web is increasingly becoming the service channel of choice for

customers and this helps save significant costs for DVLA. We have been working with the Cabinet Office

and Government Gateway to explore how the different organisations can work together to avoid the need

for separate login facilities to simplify the experience for customer, who all too often have many

passwords to remember, and ensure the access authentication checks are robust enough to safeguard

personal privacy and identity security.

Combined with this strategy work, we have developed closer practical links with the Passport Service

(PS), UK Border Agency (UKBA) and Department for Work and Pensions (DWP) to avoid duplicating

the same checks and data collection from customers. This was carried out partly through the Joint

Management Group chaired by the Cabinet Office. This not only saves the cost of duplication but also

means that the organisations cannot be picked off one at a time by fraudsters.

DVLA card production

We have continued to make use of the secure card production facilities we commissioned in 2008, by

providing the cards in respect of the Certificate of Professional Competence (CPC) for DSA and the

Identity Card for Foreign Nationals (ICFN) for UKBA. These are produced at marginal costs for

Government, with DSA and UKBA contributing to the fixed costs for DVLA helping contain fees for our

registration activities.

Towards the end of the year, we initiated a procurement exercise to replace the existing contract for the

supply of secure blank cards for DVLA. The Agency is the largest user of such cards in the UK, for the

production of its driving licences. The new contract will allow other Central Government organisations to

take advantage of the volumes that we procure to deliver cost savings for themselves.

Information and Data Security

Keeping information secure continues to be a central government priority, with all departments and

agencies keeping a clear focus on information and data security. Our primary concern is that we respect

the level of trust placed in the Agency by the public and our delivery partners, especially when submitting

personal, and often sensitive, information to our databases.

In 2009-10, DVLA continued to ensure that its data, information and systems meet business needs in a

secure and compliant environment, which is sufficiently flexible to meet our business objectives. We

continue to see an increasing number of covert attempts to breach our information systems security. The

Agency works to the standards set out in the ‘Data Handling Procedures in Government Report’ which is

published at www.cabinetoffice.gov.uk

to provide the appropriate levels of information and security.

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Activities 2009-10

• Leadership, governance and training: all staff in the Agency continued to receive specific,

detailed training in information handling and security.

• Information risk management: potential internal threats were regularly assessed with business

managers.

• Through life information assurance: independent reviews and updates of accreditation of our

systems and on-going IT health checks were carried out to ensure they met Government security

standardsAssured information sharing: work continued across the business to ensure that due

controls and governance frameworks were in place, and that all data partners and commercial

organisations had clear operating codes and conditions.

• Compliance with best practice and legislation: including the Data Protection Act, the Public

Records Act, Security Policy Framework compliance with Cabinet Office, Government

Communications Head Quarters and the Ministry of Justice guidance.

The DVLA Information Charter, published at www.dvla.gov.uk/publications sets out in summary

how the Agency’s information is managed and the responsibilities of all staff and partners.

Extension of requirement for Accredited Trade Association (ATA) membership

As from 23 November 2009, all car-parking operators who wish to use DVLA data must be a member of

the Accredited Trade Association and abide by their code of practice. The rule had previously only

applied to those requesting information from the vehicle record electronically. This will improve

safeguards around the release of information.

Sustainable Development

At the beginning of 2009-10 we produced our latest Sustainable Development Action Plan (SDAP)

focussing on changing the culture of the organisation by embedding sustainable development into our

thinking and decision-making processes.

The Agency was successful in completing 65% of the SDAP actions. Of those not completed, some have

been taken forward into 2010-11.

European week for waste reduction – to help the environment, DVLA took part in the European Week

for Waste Reduction. A series of events were organised to get staff thinking about the waste they create

and a local environmental organisation visited the Agency to raise awareness of support available locally.

The ‘More Green Project’ is a Swansea based organisation who work with and for the community,

providing household and office furniture along with other donated items for re-use. A number of staff

donated unwanted household items to the local community.

DVLA waste has significantly reduced over the years. In 2005 the Agency produced 2,900 tonnes of

waste and 71% of this was recycled. This has reduced each year to 1,700 tonnes in 2008, with 69% being

recycled. Recycling has increased, with 1,600 tonnes of waste being recycled, resulting in 72% of the

agency’s waste recycled in 2009 -2010.

For performance against our Sustainable Development Targets (see Appendix).

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Managing and Transforming the Agency

Staff Capability

Strategic Objective 7 - Develop the flexibility and capabilities of our people and organisation so that it

makes the Agency more productive and quicker in responding to the changing needs of stakeholders.

Time for a change

The DfT 2010 Change Programme is reviewing how HR functions are provided across the DfT ‘family’,

the aim is to centralise and standardise HR policies and processes. DVLA has been chosen to run the

resourcing function for the whole of DfT and is leading some of the policy reviews.

Lowering the cost of recruitment

DVLA’s in-sourced recruitment and assessment processes have saved the Agency £800,000. The process

is far quicker and the assessment exercises are more pertinent to Agency needs. A more robust process for

approving vacancy filling saved £444,000 as part of a wider workforce planning programme to manage

headcount and costs.

Class of 2009

The 2009 Graduate scheme provided seven recruits who are now building their skills and experience

through a range of placements over a two-year period. The scheme was designed and delivered internally,

helping to keep costs as low as possible.

Building our capability

In line with the Government’s Capability Review, the Agency continued to build on the development and

leadership of its staff. Training courses on performance management were introduced including a

National Vocational Qualification (NVQ) programme for administrative grades. We also delivered in-

house education events and ongoing support to up-skill managers on HR policies and procedures which

provided a saving of £18,000.

DVLA’s got talent

In February 2010, a new Talent Programme was launched for junior managers with the potential to

progress to a higher grade.

Health & Safety at work

The Agency continued to improve the health, safety and welfare of its staff including the improvement of

the environment due to office and site refurbishment. On site accidents were reduced by 33% during

2009-10. During the year, we delivered health and safety training including stress management, health

and safety management and risk assessments.

Have your say

In October 2009, the Agency staff took part in the first Civil Service Survey. We also carried out a

DVLA People Survey in June 2009. As a result of this, a new communication and performance

framework has been implemented and recommendations around roles and policies are under review.

Engagement Champions have been introduced to represent staff, and work closely with HR Business

Partners to develop and implement changes.

An Employee Representative Group was set up, chaired by the Chief Executive, which provides staff

with a direct opportunity to have influence internal work related issues that affect them.

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Happy at work healthy for life

In September 2009, staff successfully completed the Agency challenge ‘Around the world in 8 months’

clocking up a combined 459,169 miles through walking, running and cycling during their lunchtimes or at

home. Many achieved personal goals such as running the London marathon for the first time. This

initiative was very successful at motivating staff to become more active. We believe this is contributing

positively to our reduction in sickness and absence for the Agency, in which we have made significant

strides over the last three years.

Diversity

A Report on the Agency’s Diversity Action Plan 2009 –12 reflects the good progress we have made in

delivering on the commitments of that plan see www.dvla.gov.uk/publications. We collaborated on a

Diversity Conference in Swansea with the Welsh Assembly Government and continued to provide

education and information for staff through mandatory diversity training.

Financial Management

At the start of the year, our Business Plan forecast a £29.7m deficit. In view of this, we took immediate

and further cost reduction steps to extend the reductions already achieved during 2008-09 when the

recession hit our income badly. This is covered in the Management Commentary.

We continued with our robust and detailed monitoring of income and spend during the year, so that as the

improvements became apparent, we were in a position to recommission and restart some of the projects

that we had suspended at the start of the year. We prioritised these so that some of the time-critical

infrastructure projects were restarted first (see page 25 of the Management Commentary). We were able

to improve on the Income & Expenditure and DEL targets agreed with DfT, whilst still meeting over 80%

of our planned investment programme.

During the year we exceeded our targets for prompt payment of suppliers, achieving 99.6% for 30 days

(target 98%) and 94% for 10 days (target 90%).

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Contract & Programme Management

During the year, we completed the major refurbishment of the DVLA main site in Swansea, releasing

further space for estate consolidation and delivering a better and more secure working environment for

our registers and staff. At the same time, we avoided future costs through demolition of the vacated office

space, which had significant electrical and asbestos problems.

Our performance in respect of the ICT Change Programme for 2009-10 as set out in last year’s Business

Plan is summarised on page 22. Elements of this were delayed as we adjusted our available investment to

the forecast funds in the first six months of the year. DfT, however, provided interim support to keep

some of the essential infrastructure changes on track. The support was specifically directed towards the

Capital Payment Security Card compliance, Weblogic software update and preparation for CIE.

On the contractual side, we made significant strides during the year:

• The IBM contract for all our IT support services - we undertook a comprehensive and robust

review of options for the existing contract, which had an exit date possible at September 2012,

but an extension possible to 2015. After eight months of negotiations on implementation,

quality, finance and integration of the negotiation results into the options appraisal, we

extended the contract to 2015 at the end of November 2009. The new contractual terms apply

from April 2010, which deliver immediate benefits for DVLA and a 14.8% reduction in

baseline costs achieved from April 2010 onwards, amounting to an efficiency saving of around

£128m for the remainder of the contract.

This provides us with a secure foundation to complete our e-services development and better

define our cross-Government strategy before entering procurement for the entire contract

during 2012.

• Providing a photograph collection mechanism at Post Office® counters to replace the

administrative ‘Check and Send’ service made available in the past. This will provide a face-

to-face contact for the public, but is essentially an electronic transaction for DVLA, with

improved quality and security of photographs supplied and reduced costs of internal

processing.

• Initiating, during the last quarter of the year major procurements for blank cards, (e.g. driving

licences) wheelclamping, driver medical checks, DVLA Personalised Registrations support

and our credit card processing (merchant acquiring). These will be completed in 2010 and

should deliver cost savings from current levels. Those for blank cards and credit card

processing will support all organisations across Government.

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Performance against our ICT Change Programme 2009-10

MILESTONE

DATE

PERFORMANCE

2009-10

STRATEGY & FEASIBILITY PROGRAMME

Completion of full business case for Continuous Insurance Enforcement.

Commencement of IT design and build for Continuous Insurance

Enforcement.

Commence work on a public consultation document to take forward

legislation on the European Third Directive.

Work to ensure that our systems are compliant with the Payment Card

Industry Data Security Standards.

Pilot of a new smart card utilising Chip & PIN technology to provide access

to a new online Driver Entitlement Checking Service .(*)

October 2009

February 2010

June 2009

March 2010

Revised to 2011

Achieved

Ongoing – new date

June 2011

DELIVERY PROGRAMME

Budget Changes Phase 2.

Ten Year Renewal - work on technical solutions for Post Office® scanning

machines and electronic counter service.

Improve electronic links with the Department of Work & Pensions (*)

Replace the existing Customer Enquiries email system with a secure and

resilient email response solution.

April 2009

March 2010

October 2009

Revised to 2011

May 2009

Achieved

Ongoing – new date

October 2010

Achieved

INFRASTRUCTURE PROGRAMME

Technical Refresh – rolling programme ensuring that hardware, software and

applications remain security compliant and within technical support.

Local Office Upgrade – commence installation of Multi Protocol Label

Switching lines replacing the existing frame relay network.

Storage Migration – move off the current supplier (Legacy Storage Platform

which will become out of support) to new Storage Hardware (*).

March 2010

April 2009

March 2010

Revised to 2011

Achieved

Ongoing – new date

December 2011

NORTHERN IRELAND UPGRADE PROGRAMME

Procurement of new support and development contract for Northern Ireland

(NI) vehicle systems based in DVA – transfer into new contract

arrangements.

Specification, detailed design and agreement of upgrades needed to NI

vehicle systems for the interim period prior to transfer onto GB systems

based in DVLA.

Analysis and identification of actions needed to deliver NI driver register

capabilities for the future. Agreement of implementation approach and

supporting policy option selection. Critical dependency on Department of

Environment Northern Ireland (DoENI).

March 2010

Achieved

Migration activities to

be gradual

Achieved

It has been agreed that

NI will evaluate a

stand- alone solution.

(*) Delayed projects as part of cost containment at the start of 2009-10

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02. Management Commentary

Business Analysis

Impact of the recession and DVLA recovery from deficit

In common with the rest of the country and indeed all developed economies, DVLA started the financial

year responding to the worst recession in recent years. In August 2008, we had seen first vehicle

registration volumes and income drop suddenly by 29% compared to the previous year. This downturn

continued through autumn (39.4% down in November) and spring 2009 (36.9% down in February).

Income from first vehicle registration transactions is significant for the Agency and the initial transaction

is the largest automated transaction so marginal costs are small- which magnifies the net impact. The fee

covers vehicle lifetime costs. The cumulative loss of anticipated fee income from this one transaction was

£58m by the end of financial year 2008-09. By taking prompt and robust steps to mitigate this shortfall

the Agency reported an overall £25.1m (restated for adoption of IFRS) deficit for 2008-09.

As we developed our forecasts for 2009-10, we surveyed the customer base and held discussions with the

motor industry, corporate fleets and representative motoring organisations to assess demand and forecast

new vehicle sales as accurately as we could. At the point of formalising our Business Plan forecasts in

February 2009, we were deciding on which of three scenarios (30%, 37% or 45% reduction against 2007-

08 volumes) to base our plans around. At that time it was far from clear as to whether the recession had

bottomed, what sort of recovery would occur and at what pace this would manifest. Accordingly, we

budgeted for the middle course in terms of vehicle registrations, but adopted a more optimistic outlook

for driver transactions as we had seen volumes start to return late in the 2008 calendar year. In the event

actual volume transactions are shown in the diagram below.

On the cost side of our projections, we factored in reductions directly related to the key transaction

volumes, together with the cost reductions achieved during 2008-09 and efficiency savings already

planned through automation and various initiatives for 2009-10. This resulted in a Business Plan forecast

of a £29.7m deficit, essentially the impact of a whole year of reduced transactions over a full year rather

than the 8 months seen in the previous year, although significantly mitigated by the cost savings made

and planned. As a Trading Fund DVLA is set up to react to fluctuations in demand and our short lines of

decision-making and budgeting reallocation allow us to move swiftly whilst safeguarding customer facing

operations. As we entered the financial year the management team were continuing to re-plan efficiency

work, reprioritise projects and resolved to try to accelerate the shift from paper to online transactions.

Our aim was to finish as close to financial break-even as possible for the year as a whole.

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In May 2009, our financial prospects received an unexpected but welcome boost when the vehicle

scrappage scheme was announced by HM Treasury, although we did not see major financial benefits in

terms of additional income until mid-summer. Over the course of the financial year we estimate that the

scrappage scheme gave rise to £32m first registration income for DVLA, a major contribution to our

financial position. The other fee bearing vehicle and driver transactions recovered to deliver a net £5m

additional income over the business plan forecast over the year, although the Driver Licence renewals and

Tachograph income was around £9m less than predicted. For ten year renewal transactions, compliance

and volumes do appear to be around the numbers predicted, but there is a lag in the profile as not all

renew exactly on time - reducing the in-year figures as the profile builds to the expected stable level,

reflecting the photocard introduction profile 10 years ago.

In the meantime we cancelled a number of small lower priority projects (saving £3.9m) and delayed the

start of some larger ones (saving £10.1m) until the scale of the scrappage scheme impact became apparent

in September. Our acceleration of channel shift was successful; drivers e-transactions increased to over

39% during the course of the year (up from 23% in 2009). Early savings were made on the IBM IT

contract through extension negotiations, further efficiency and productivity gains were made from

automation as well as cuts in running costs. These steps reduced our costs in total by some £29.5m, so

that together with the movements in income against a business plan projected deficit of £29.7m we ended

the financial year with a surplus of £35.1m. This represents a turnaround between forecast and actual

result of nearly 8% of our turnover of £694.3m for the year.

We regard this result as a major success for the close financial monitoring in place, rigorous cost

reduction steps continuing from the previous year and the effort throughout the Agency to seek more cost

effective ways of working and contracting with our suppliers. At the same time, we managed to keep the

majority of our investment programme intact, so we can deliver greater efficiency and channel shift for

the future. The foundations have been laid and we need to capitalise on the significant opportunities

presented.

What the future holds

As noted earlier in this report, we continue to make progress with our headcount and absorb more

transactions with fewer staff (a productivity rise of 7% in 2009-10). We have projects in place to increase

the scope of our e-services, increase the contribution from our outsource partners (e.g. Post Office®) and

have, during 2009-10, renegotiated major contracts to reduce costs (e.g. ICT costs). This puts us in a

healthy position in terms of our costs.

The Driver transactions are predicted to be relatively stable, with ten year renewals continuing to increase

to ‘plateau’ levels. Previous recessions have seen permanent reductions in road haulage numbers so that

we do not anticipate increases in Tachograph take-up to the originally anticipated volumes. However, we

do, to meet new European legislation, need to extend the number of vocational driver licence issues and

have a major project to undertake to change our systems to meet these new requirements - and we do not

currently charge a fee for these transactions, although the power to do so already exists. The Agency is

currently considering its position on this issue. For first vehicle registrations, we have predicted a fall

from last year volumes (buoyed as they were by the scrappage scheme). Our predictions for the DVLA

bottom line for 2010-11 are a significant reduction from 2009-10. A small surplus of around £2m is

predicted and achievable by continuing with our cost reduction and productivity programme in the face of

fee-bearing transaction volumes still significantly below those of 2007-08. This will allow us to retain the

same fee levels as we have had in place for the last two years without any inflation increases for the

coming year.

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Operational Activity

Vehicle Transactions

2009-10 saw a significant recovery against initial forecast (see page 23) in first vehicle registration

volumes and fee income, critical for our overall income: 2.5m new vehicles registered. Our estimates

reveal that around 20% of 2009-10 transactions were underpinned by the vehicle scrappage scheme and

this undoubtedly boosted the purchase of new vehicles. At the same time, we noted a change in behaviour

by corporate fleet owners who held on to vehicles longer than usual. This gives us some concern for

2010-11 as the scrappage scheme finished in March 2010. The turnover of vehicles in terms of keeper

changes was 17.14m (2008-09 – 17.78m).

The nature and volume profiles of the different vehicle transactions present challenges for DVLA. The

numbers of first vehicle registrations, other vehicle transactions; fee-bearing and non fee-bearing are

shown graphically below. The primary fee-bearing transactions - first vehicle registrations and fee-

earning enquiry transactions - represent a small proportion of overall transactions and vehicle register cost

base. This means the income can be variable but our costs far less so, as first registrations are more

volatile than the number of vehicle keeper changes.

There are reasons that mean the majority of transactions are not charged at the point of fulfilment but are

covered from a vehicle perspective by the first registration fee and that the up-front fee covers the cost of

administering that record over the life-time of the vehicle. Over 85% of subsequent vehicle transactions

carry no fee at point of delivery - change of keeper, change of details (address, keeper name, vehicle

specification etc), end of life actions. This is the most administratively cost-efficient arrangement (for

DVLA and customers) and removes one potential disincentive to up-dating details. As can be seen from

the graph the non fee-bearing transactions have been remarkably stable in number. These transactions

remain paper-based whilst around 90% of first registrations are now electronic. The income/cost balance

becomes unstable with fluctuations in first registration volumes in this scenario.

Note: Left hand axis for First Registration & Fee Paying Enquires - Right hand axis for other transactions

DVLA Personalised Registrations and Cherished Transfers

Sales of personalised registration and transfers of marks between vehicles continue to provide a

significant transaction stream for the Agency and one that has been remarkably recession resistant,

(seeing only minor fluctuations from 2007-08). This may be a reflection of disposable income for those

not directly impacted by the recession. The total value of the ‘Wider Markets’ income collected through

these transaction streams since first initiated has now risen to £1,470m. Over £108.1m was transferred to

HM Treasury for use in the Consolidated Fund; the whole amount is surrendered after DVLA retention of

related costs of sale and administration.

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DVLA’s personalised registrations has been the most successful scheme of its type across Government. It

is an excellent example of delivering funds into the public sector through providing products or services

to the public/private sector. DVLA actively manages the registration marks that enter the market to ensure

sustainability.

Driver Transactions

Driver transactions have remained far more consistent throughout the recession than Vehicles, although

these too showed a decrease that has now almost recovered. The graph below shows the number of driver

licence issuing transactions (fee-bearing and non fee-bearing) and non-licence transactions (such as court

notifications, drivers medical etc).

A number of observations can be made on the above:

• The core transactions - first application for driving licences, duplicate issue, enforcement actions,

over-70s renewals - have remained relatively stable in terms of total volumes;

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• We have seen an increase in notifications of name and address changes to driver and vehicle

records, as our accuracy initiatives have taken hold, resulting in an increase in record accuracy

from an estimated 79.6% to 87.3% by March 2010. These services are free of charge to encourage

notification, so these volume increases do increase our costs - especially as we issue a new licence

bearing the new correct details. However, this is in line with commercial practice (e.g. insurance

companies, banks, retailers etc) and our key purpose encompasses the accuracy of our record, so

the core transactions continue to support these maintenance transactions as part of the fee levied

for the original transactions;

• The issuing of smart tachograph cards we undertake still runs significantly behind initial estimates

of profile, reflecting much slower than anticipated use of the new tachograph equipment in new

commercial vehicles;

• We have a more balanced ratio of fee-bearing to non fee-bearing transactions in Drivers, resulting

in a less volatile income/cost position.

During the year, the ten year renewal transactions that commenced in June 2008, have steadily increased

and represent most of the driver licence volume upturn seen in the graph above. The volume profile

follows the same pattern as the initial issue of photocard licences in 2008. There is, however, a delay in

renewal although the overall compliance rate is much as anticipated and most comply within three

months.

Finances and Efficiency

DVLA collected £5,742m of VED during the year, net of £201m refunds processed. This income is

delivered to HM Treasury and is accounted for in the VED accounts on pages 99 to107. In addition, the

Agency collected £41.7m of fine and penalty income through enforcement action and this is also

delivered into the Consolidated Fund net of the cost of the commercial debt collectors employed.

Together, these activities represented 52.5m transactions processed on behalf of HM Treasury. The costs

of undertaking these activities is reflected in the Trading Fund accounts on pages 55 to 96, covered by the

income derived through two related Service Level Agreements (SLAs) funded by DfT on behalf of HM

Treasury.

Income

The Trading Fund receives income from a number of sources:

• users of our Register services – vehicle-keepers for registration and drivers for licensing;

• the gross income generated from DVLA personalised registrations and cherished transfer

services, with the surplus subsequently passed to HM Treasury;

• two DfT SLAs – one each for VED collection and enforcement, based on the number of

transactions processed and the unit costs through the different channels used, together with

investment for development of related systems and restructuring costs;

• charges to other public sector organisations for use of our services and facilities;

• commercial income that not only fully covers the cost of the activity but also by paying a share of

system upkeep and replacement costs, helps to limit those costs picked up by statutory fee payers.

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The total gross income of £694.3m for the year was £42.7m above that for 2008-9 and £53.6m above the

forecasts in our Business Plan.

As noted in the initial paragraphs of this chapter, DVLA saw an unexpected increase above budget of

£32m in first vehicle registration income attributable to the establishment of the scrappage scheme. The

anticipated smart tachograph volumes have still not manifested so the income from these transactions

remains disappointingly low and below forecasts. In overall terms, the long-term trend for income can be

summarised in the following:

The above provides a summary only. In total, DVLA handles over 100 different transaction streams, with

most of the transaction volumes further split through four channels - paper, face2face (the majority

through intermediaries), phone and web. These are costed and measured separately, although we have

retained a simple fee structure for customer convenience.

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Expenditure

The total gross expenditure categories are summarised below:

The gross expenditure has dropped in total to £542.1m from £567.4m between 2008-09 and 2009-10, a

reduction of 4.5% in cash terms, but the lower costs for the last year also cater for increased transaction

volumes and costs in a number of areas (specifically the ten year renewal of driving licences and the

production of ICFN cards for UKBA). The proportion of the cost of work undertaken by others on our

behalf has decreased to 34%, but this is mainly the result of channel shift (from Post Office to web) and

contract renegotiations. The cash reduction of £2.5m in staff related costs reflects a genuine reduction of

an average of 248 FTE’s in headcount, but the £165.7m charge in 2009-10 also includes a £5.2m charge

for voluntary early retirements as part of managing the reduction in staff numbers.

The Internal Operations total can be further categorised as follows:

Printing, Stationery and Post shows the largest single increase, largely in terms of channel shift as we

move onto web-fulfilment but have to complete the transactions by post and last year Royal Mail handled

128m outgoing items for DVLA. However these additional costs are outweighed by the much larger

decreases seen in the contracted out services, as above. Similarly, for example, our costs for credit card

handling (£10.6m) rose by 14% as our web transactions rose significantly.

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Agency Capital and Reserves

The Agency is dependent on its ICT infrastructure to deliver its services and, as we introduce further

e-services, this dependence continues to grow. We have a major programme of ICT updates to ensure that

our software and hardware remain in support of business continuity and that we maintain the security

standards to safeguard our data and connections to the Government networks. By far the majority of cash

required to support the capital investment and maintenance programme comes from our fee income from

services as a Trading Fund, so we have had to return in-year surpluses as our capital reinvestment has

proceeded. Our future capital investment is funded from Retained Surplus. Our forecasts predicted that as

we reached 2010-11 we would be stabilising in terms of ongoing depreciation balancing against capital

expenditure and that our reserves position would likewise plateau.

The change to IFRS involved a technical accounting restatement upwards by some £27m of our Retained

Surplus position as we now recognise the value of ICT assets that are reversionary to DVLA through the

contract with IBM.

The Government Grant Reserve has stabilised as DfT/HMT continue investment through the VED SLAs

for the tax collection/enforcement-related expenditure on our ICT systems, matched now with

depreciation charges on the systems. The Revaluation Reserve reflects accounting adjustments on

revaluations of the estate and new IFRS requirements.

Asset Management Strategy

The major assets for DVLA are its ICT systems, with our maintenance of capital approach noted above

and its accommodation assets. The DVLA Strategic Agenda sets out the future intent for these assets in

terms of future support and business direction.

The core DVLA estate in Swansea is freehold, based on Crown land. This houses the core business,

refurbished over the last four years through a PFI contract with Trillium that covers also the facilities

management services throughout all our offices. The Local Office network is in leased accommodation or

in shared premises with other Government organisations occupied through memorandum of terms of

occupation (MOTO) agreements. There are no additional properties or surplus estates receipts envisaged,

although DVLA anticipates reducing its leased accommodation costs in future. We continue to explore

sharing arrangements with other Government agencies as our leases near expiry. Over the last two years,

DVLA has already vacated two leased buildings in Swansea through use of the PFI arrangements as a

result of staff reductions, non-territorial working and HQ refurbishment

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Workforce

For the period 2004-08, DVLA was set a target of 500 net reduction in Full Time Equivalents (FTE’s)

headcount, which was achieved. This was a significant target as, during the period, new legislation and

demand volumes meant that an addition 800 FTE equivalent of work was also absorbed whilst meeting

the target. We have continued this trajectory and have managed the impact on staff through natural

wastage and two schemes for voluntary early retirement during the period.

During 2009-10 we have also reduced our dependence on contract/agency staff from an average FTE

number of 295 in 2008-09 to 210 in 2009-10, so the reductions in staff numbers are through genuine

productivity gains and streamlining processes rather than substitution.

Efficiency

For the period 2004-08, DVLA achieved its £80m efficiency gain target. For the CSR 2007 period, it was

set a further target of £80.7m, split between the three years at £19.5m, £25m and £36.2m. DVLA

achieved its £19.5m target in 2008-09 with a ‘green rating’ from the National Audit Office (NAO)

indicating robust evidence of measurement. Our robust approach to cost reduction during 2009-10 has set

us in good shape and we have over-achieved on the target in delivering £32.7m.This puts us in a good

position for the final year as we seek further channel shift, process changes and policy changes that will

simplify our administration.

One key factor is that we continue to reduce our headcount whilst absorbing ever more transaction

volumes, partly arising because of legislation changes. The average FTE staff numbers working on

DVLA activities fell between 2008-09 and 2009-10 by a further 248 as disclosed in note 4 to the

accounts. We monitor operational productivity closely and this increased by 7% between March 2009 and

March 2010, a major achievement and a significant efficiency driver.

A key set of efficiency gains for DVLA is within the VED collection and enforcement areas. The impact

of cost reductions through e-service introduction (EVL) have been amplified by rebalancing our

enforcement activities, the use of incentives for debt collection and wheelclamping contractors, more

targeted publicity and ICT contract reductions. This has enabled DVLA to reduce the costs of the VED

SLAs that it has with DfT/HM Treasury by £15m (7.2%) from the originally budgeted levels for 2010-11.

We have done this whilst improving the outcomes themselves, reducing evasion by another third during

2009-10.

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VED Collection and Enforcement

Collection

VED receipts in 2009-10 amounted to £5,742m.

In terms of transaction numbers, there continues to be a shift to use of EVL, which in the final month of

the year was approaching 51% of eligible transactions. The Automated First Registration and Licensing

(AFRL) transaction continues to be undertaken substantially (88% of all new licensing) through the

e-channel.

The key transaction categories included in the VED SLA accumulate as follows to a total of 52.5m

transactions.

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Costs of Collection

There are direct costs of collection for the 52.5m transactions. However, the Office of National Statistics

have ruled that 50% of a specified range of registration costs should also be allocated to the tax collection

activities because tax collection depends fundamentally on the registration and accuracy of the vehicle

records held. HM Treasury regulations in respect of tax collection activities are that such costs cannot be

borne by those who pay the tax and have to be underwritten by the Consolidated Fund itself.

HM Treasury (through the DfT SLA) have to fund the related costs – including very specifically the costs

of changing the DVLA systems as a result of Budget changes to the VED legislation and associated tax

rates.

The cost of VED collection in total was £129.9m against a budget of £131.1m. This comprised direct

revenue expenditure of £123m, depreciation of £4.7m and capital contibution of £2.2m to the system

changes required. The capital contributions were credited against the Government Grant Reserve in the

accounts.

DVLA has delivered significant cost reductions through channel migration on the direct costs of VED

collection, especially when the public sector measure of inflation is taken into account. This has been

possible through channel shift to electronic services.

In terms of costs of collection – Pence per £1VED collected – bearing in mind that statutory off-road

notification (SORN) and refund costs are also included, as are costs of issuing ‘nil value’ tax disks for

exempted categories of vehicle keepers (mainly disabled keepers or cars initially registered before

1973 – see accounts for details). The profile in cash terms without adjusting for inflation is shown on

page 35.

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Enforcement

It is an unfortunate fact that not all Vehicle keepers are honest or compliant. Tax evasion remains a

problem, even though we have moved to a Continuous Registration (CR) regime. However, between the

introduction of CR, the move from County Court enforcement to debt collectors, more intelligence-led

enforcement and a combination of Automated Number Plate Readers (ANPR) and wheel clamping we

have succeeded in significantly reducing evasion rates from 1.5% in 2007 to 0. 6% achieved during

2009-10. This has meant a reduction in estimated loss (from £79m in 2007-08 and £49m in 2008-09) to

£34m for 2009-10. As we are declaring a £47m collection of penalty, fine income and court costs during

2009-10, we have now reached a position where these now exceed the VED foregone through evasion.

DVLA monitors VED evasion on a monthly basis through two proxy measures – the accumulated

statistics of its ANPR cameras and the number of exceptions produced through its scans of the vehicle

increasing credibility over the last five years.

DfT statisticians undertake an independent survey each June to estimate VED evasion rates in traffic.

Data is gathered across 256 sites across the UK, involving over 1.5m vehicles. The sighting data is then

compared with information on the DVLA registers to generate an estimate of VED foregone through

evasion. Difficulties in 2006-07 in respect of handling of exceptions resulted in a recasting of the

statistical model and a new series of annual results. The surveys are wholly independent of DVLA with

the results evaluated by the Government Statistical Service and released under the authority of the Office

of National Statistics (ONS).

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The enforcement income can be summarised as follows:

Whilst the VED Collection SLA is largely demand driven, the activities on Enforcement are very much a

decision for the VED Governance Board (see Statement of Internal Control for details) and depend on the

leverage between spending on enforcement and the impact on compliance (and concept of induced

relicensing) and the direct return from the activities in terms of fines and penalties. Over the last five

years, the activities have been rebalanced to reduce costs and increase the impact of DVLA activities.

The costs of enforcement for 2009-10 were £82.4m as against the budget of £84.2m. Compared to the

inflation adjusted costs in 2004-05 the actual costs each year are analysed as follows:

Policy Determination

During 2009-10, the VED Governance Board decided to discontinue the freestanding ‘VED Hotline’

which was the least cost-effective mechanism, although the public can continue to register individual

complaints or notifications of unlicensed vehicles through the main DVLA contact centre and online. A

continued shift towards external debt collectors was endorsed for unpaid penalties and contract terms

were agreed to extend wheel clamping at extremely cost-effective rates in respect of its positive impact on

compliance and VED collected.

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Response to NAO recommendations in previous years

To address recommendations made by the NAO in previous years, the Agency has introduced further late

reminder letters which are sent to vehicle keepers two weeks after the expiry of their tax, prior to

enforcement action. Extensive testing in 2009 confirmed that the letters increase compliance and reduce

the volume of cases needing to go forward for enforcement action. They also reduce short-term evasion

by providing a timely prompt to those keepers who have failed to re-license their vehicle and leading

them back into compliance. Following the success of the trials, this reminder has now been introduced as

part of DVLA’s routine interaction with customers.

The NAO also recommended that the annual DfT Roadside Survey methodology should be kept under

review. DVLA continues to offer its full support to DfT colleagues to help in this and ensure the survey

has continued effectiveness in estimating of VED evasion.

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03. Remuneration Report

Remuneration policy

The remuneration of Senior Civil Servants is set by the Prime Minister following independent advice

from the Review Body on Senior Salaries. The Review Body also advises the Prime Minister from time to

time on the pay and pensions of Members of Parliament and their allowances; on Peers' allowances; and

on the pay, pensions and allowances of Ministers and others whose pay is determined by the Ministerial

and Other Salaries Act 1975.

In reaching its recommendations, the Review Body has regard to the following considerations:

- the need to recruit, retain and motivate suitably able and qualified people to exercise their different

responsibilities

- regional/local variations in labour markets and their effects on the recruitment and retention of staff

- Government policies for improving the public services including the requirement on departments to

meet the output targets for the delivery of departmental services

- the funds available to departments as set out in the Government's departmental expenditure limits

- the Government's inflation target.

The review body takes account of the evidence it receives about wider economic considerations and the

affordability of its recommendations.

Service contracts

Civil service appointments are made in accordance with the Civil Service Commissioners' Recruitment

Code, which requires appointments to be based on fair and open competition but also includes the

circumstances when appointments may otherwise be made. Unless otherwise stated below, the officials

covered by this report hold appointments, which are open-ended until they reach the normal retiring age

of 60. Early termination, other than for misconduct, would result in the individual receiving compensation

as set out in the Civil Service Compensation Scheme.

Salary and pension entitlements

The remuneration and pension interests of the Chief Executive and Directors are set out on pages 40-41.

The Senior Civil Servants annual pay award is determined by performance, with no award made to

unsatisfactory performers. Bonuses are awarded to no more than 75% of staff. They are made to reward

in-year performances in relation to agreed objectives, or short-term personal contribution to wider

organisational objectives.

Salary

Salary includes gross salary; performance pay or bonuses; overtime; reserved rights to London weighting

or London allowances; recruitment and retention allowances and any other allowance to the extent that it

is subject to UK taxation. This report is based on payments made by the Agency and recorded in these

accounts.

Performance is assessed annually for Directors through the appraisal processes stipulated by DfT and

entitlement to performance enhancements or bonuses established in comparison across the DfT family

through the Departmental evaluation committee, chaired by the Permanent Secretary. The Directors did

not receive any non-cash benefits during the year. The standard period of notice to be given by Directors

is three months.

Civil Service pensions

Pension benefits are provided through the Civil Service pension arrangements. From 1 October 2002,

civil servants may be in one of three statutory based ‘final salary’ defined benefit schemes (classic,

premium and classic plus). The schemes are unfunded with the cost of benefits met by monies voted by

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Parliament each year. Pensions payable under classic, premium and classic plus are increased annually in

line with changes in the Retail Price Index. New entrants after 1 October 2002 may choose between

membership of premium or joining a good quality ‘money purchase’ stakeholder arrangement with a

significant employer contribution (partnership pension account).

Employee contributions are set at the rate of 1.5% of pensionable earnings for classic and 3.5% for

premium and classic plus. Benefits in classic accrue at the rate of 1/80th of pensionable salary for each

year of service. In addition, a lump sum equivalent to three years' pension is payable on retirement. For

premium, benefits accrue at the rate of 1/60th of final pensionable earnings for each year of service.

Unlike classic, there is no automatic lump sum (but members may give up (commute) some of their

pension to provide a lump sum). Classic plus is essentially a variation of premium, but with benefits in

respect of service before 1 October 2002 calculated broadly in the same way as in classic.

The partnership pension account is a stakeholder pension arrangement. The employer makes a basic

contribution of between 3% and 12.5% (depending on the age of the member) into a stakeholder pension

product chosen by the employee from a selection of approved products. The employee does not have to

contribute but where they do contribute, the employer will match these up to a limit of 3% of pensionable

salary (in addition to the employer's basic contribution). Employers also contribute a further 0.8% of

pensionable salary to cover the cost of centrally provided risk benefit cover (death in service and ill health

retirement).

Cash equivalent transfer values (CETV)

Cash Equivalent Transfer Value is the actuarially assessed capitalised value of the pension scheme

benefits accrued by a member at a particular point in time. The benefits valued are the member's accrued

benefits and any contingent spouse's pension payable from the scheme. A CETV is a payment made by a

pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement

when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme.

The pension figures shown relate to the benefits that the individual has accrued as a consequence of their

total membership of the pension scheme, not just their service in a senior capacity to which disclosure

applies. The CETV figures, and from 2003-04 the other pension details, include the value of any pension

benefit in another scheme or arrangement which the individual has transferred to the Civil Service

pension arrangements and for which the CS Vote has received a transfer payment commensurate with the

additional pension liabilities being assumed. They also include any additional pension benefit accrued to

the member as a result of their purchasing additional years of pension service in the scheme at their own

cost. CETVs are calculated within the guidelines and framework prescribed by the Institute and Faculty

of Actuaries.

Real increase in CETV

This reflects the increase in CETV effectively funded by the employer. It takes account of the increase in

accrued pension due to inflation, contributions paid by the employee (including the value of any benefits

transferred from another pension scheme or arrangement) and uses common market valuation factors for

the start and end of the period.

Remuneration of the Non-Executive Board Members - Audited

2009-10 2008-09

£000 £000

Michael Brookes 5-10 -

Jim Knox 10-15 -

John Burdett 20-25 10-15

Baljit Dhillon 5-10 5-10

Liz Bertoya - 5-10

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Remuneration of the Executive

Board Members - Audited

Salary including

performance bonus

(£000)

2009-10 2008-09

Chief Executive

Noel Shanahan 115-120 110-115

Executive Board Members

David Evans - Policy and External Communications

(2008-09 April to July, 2009-10 from August 2009)

50-55

(75-80

full year

equivalent)

15-20

(75-80

full year

equivalent)

Paul Evans - Chief Information Officer

(from March 2009)

90-95 5-10

(65-70

full year

equivalent)

Ieuan Griffiths - Finance & Strategy 95-100 100-105

Richard Kitchen - Policy & External Communications

(to August 2009)

35-40

(85-90

full year

equivalent)

75-80

Judith Smith - HR & Estates

(from June 2008)

85-90 60-65

(75-80

full year

equivalent)

Simon Tse - Chief Operating Officer 95-100 80-85

Chief Executive Remuneration

£000

Noel Shanahan

Salary 106 103

Bonus Payments 12 12

Pension Contributions 39 39

157 154

Bonuses relate to those paid in 2009-10. The bonus to be paid in 2010-11 is yet to be determined. There

were no benefits in kind.

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Pension

Benefits

Audited

Real increase

in pension

and related

lump sum at

age 60 during

year

Total accrued

pension at age 60

and lump sum

(LS)

Cash Equivalent

Transfer Values

(CETV)

Employee

contributions

and transfers

in during year

Real increase

in CETV as

funded by

employer in

year.

31/03/10 31/03/09 31/03/10

£000

£000 £000

(re-stated)

£000 £000 £000

Noel Shanahan 0 - 2.5 5 - 10 106 142 3.7 26

David Evans 0 - 2.5 plus 2.5

– 3.0 lump

sum

20 – 25 plus

60 – 65 lump sum

327 344 0.8 15

Paul Evans 0 - 2.5 0 - 2.5 2 29 3.3 24

Ieuan Griffiths 2.5 – 5.0 plus 0

– 2.5 lump

sum

35 – 40 plus

55 – 60 lump sum

631 717 13.8 37

Richard Kitchen 0 - 2.5 plus

50 – 55 lump

sum

35 – 40 plus 165 –

170 lump sum

862 906 0.4 29

Judith Smith (i) 32.5 – 35 30 - 35 14 28 290.5 12

Simon Tse (i) 2.5 - 5 15 - 20 148 180 24.9 24

The CETV figures at 31March 2009 are different from the closing figures reported in last year’s accounts.

This is due to CETV factors having been updated.

(i) Transfer in of pension benefits from another scheme during 2009-10.

Statement as to disclosure of information to auditors

In so far as the Accounting Office (AO) is aware, there is no relevant audit information of which the

auditors are unaware and the AO has taken all steps that he ought to have taken to make himself aware of

any relevant audit information and to establish that the Agency auditors are aware of that information.

Noel Shanahan

Accounting Officer

24 June 2010

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04. Accounts for 2009-10

Summary of Accounts

These are the first accounts produced under the new International Financial Reporting Standards (IFRS).

DVLA’s balance sheet as at 1 April 2008 has been restated as the starting point for incorporating the new

standards, as interpreted by FReM. The cumulative effect of transition to IFRS reporting is an upwards

adjustment of £29.9m to reserves at 31 March 2009.

As a result, the 2009-10 accounts include a number of additional disclosures in the notes to the accounts.

The significant changes are as follows:

1. Note 2 – First time adoption of IFRS. This note is required by IFRS 1 – First Time Adoption, to

illustrate the effect of IFRS on the UK GAAP Accounts;

2. Note 3 – Segmental Reporting. This note is required under IFRS 8 – Operating Segments, to

disclose income, expenditure and net assets by those segments reported internally within DVLA to

the Board of Directors;

3. Note 13 – Financial Instruments. IFRS 7 – Financial Instruments Disclosures requires more

detailed disclosure around Financial Instruments including fair value analysis;

4. Note 14 – Provisions for Liabilities and Charges. An analysis of expected timing of discounted

cash flows is included;

5. Note 15 – Commitments under Leases. Additional disclosures have been included for new finance

leases; and

6. Note 16 – Commitments under PFI Statement of Financial Performance on-balance sheet

contracts. More detailed disclosure has been required for capital liability, interest charge and

service element.

In this year also, the running costs of the Shared Service Centre have been excluded following the change

in governance arrangements during 2008-09. The assets were transferred to the DfT on 31 March 2009

and are now accounted for as part of the DfT Statement of Financial Position. The financial revenue

results are fully disclosed within the DfT accounts. For ease of comparison, the 2008-09 operating costs

comparative figures have been represented at Note 5 to disclose expenditure excluding the Shared Service

running costs, which have been disclosed separately at £12.9m for 2008-09.

In 2009-10 the Agency announced a Flexible Early Retirement (FER) scheme. The total cost of the

scheme was £5.2m and a Government Grant from DfT of £4m part funded this, with the balance provided

by the DVLA.

As it is an intervening year in the five year cycle of valuations by appointed Chartered Surveyors, Land

and Buildings have this year been index linked revalued. Following the introduction of IFRS, the Agency

now also revalues its intangible assets. The Vehicle Excise Duty (VED) accounts have also been

produced under IFRS but there were no significant changes.

Looking at the financial performance, the Agency produced a surplus of £35.1m for the year ending

31 March 2010. Total income from operations increased in year by £43m to £694m whilst total operating

expenditure reduced by £25m to £542m in 2009-10. The changes from Business Plan forecast to outturn

and between 2008-09 and 2009-10 have been discussed in the Management Commentary.

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Statement on Internal Control

Scope of Responsibilities

As Accounting Officer for DVLA, I have responsibility for maintaining a sound system of internal

control that supports the achievement of DVLA policies, aims and objectives, whilst safeguarding public

funds and assets for which I am personally responsible, in accordance with the responsibilities assigned to

me in Managing Public Money. As Accounting Officer of a Trading Fund, I am directly appointed by

HM Treasury, though ultimately responsible to the Secretary of State for Transport for Agency

performance.

DVLA is sponsored through the Motoring and Freight Services Group (MFSG), a directorate of the

Department for Transport (DfT). MFSG provides for co-ordinated strategies for the registration, testing

and assessment of vehicles, drivers and operators across the United Kingdom. MFSG is headed by a

Director General (DG), who has sponsorship responsibilities delegated from the DfT Permanent

Secretary. The DG is supported in terms of agency sponsorship advice and management communication

by the MFSG Board, upon which I sit together with four other Agency Chief Executives and MFSG

representatives.

DVLA is responsible for providing driver licensing services in Great Britain and the registration of

vehicles throughout the UK. The DG and I regularly meet Ministers to discuss progress, performance and

key risks.

Driver licensing in Northern Ireland is a devolved power and is undertaken by a separate executive

agency, the Driver and Vehicle Agency (DVA), sponsored by the Department of the Environment in

Northern Ireland. However, responsibility for licensing and registering of vehicles and collection of VED

in Northern Ireland lies directly with the DfT Secretary of State. These functions are discharged by DVA,

acting through Service Level Agreements managed by DVLA.

HM Treasury is responsible for setting VED policy and category ratios of tax. DVLA is accountable for

collecting VED, whilst enforcement policy is funded through the Single Enforcement Budget managed by

MFSG in DfT. DVLA’s performance and priority decisions are managed through the tripartite VED

Governance Board (HM Treasury, DfT and DVLA) that meets quarterly and is chaired by DfT.

Purpose of Internal Control Systems

The Agency’s 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 DVLA and DfT

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 Agency for the year ended 31 March 2010 and up

to the date of approval of the annual report and accounts, and accords with Treasury guidance relating to

corporate governance and management of risk.

Risk Management Approach and Capacity to Handle Risk

I have appointed the five Directors of the Agency functions to an Executive Board (EB) that I chair, to

assist with management of DVLA. The EB meets formally each month to review performance, including

the identification of management actions to address the key operational issues and the risks facing the

Agency. The EB regularly considers the strategic direction and plans of the Agency, including oversight

of the Agency’s change agenda. This includes identification and consideration of the strategic risks faced

by the Agency and the long-term structures and infrastructure changes needed to address them.

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I am supported by two Non–Executive Directors who bring ideas and advice from their different

experience to bear on Agency issues. The non-Executives changed between October and December 2009

when John Burdett and Baljit Dillon retired at the completion of their terms of office and were replaced

by Michael Brooks and Jim Knox. They exert their influence through attendance at Audit Committee

meetings and, since October, at all EB meetings. Lucy Chadwick retired as the additional DfT member of

the Audit Committee also in November, to be replaced by Kate Mingay.

The MFSG DG helps ensure that sufficient priority is afforded to risks impacting the overall DfT and

MFSG objectives through quarterly sponsorship meetings with myself, and my board members as

appropriate, as a part of the regular review of Agency performance and progress with the change agenda.

The DVLA capacity to handle the delivery and technology risks at the core of its business is greatly

enhanced by our strategic contract with IBM, supported by Fujitsu Services. This strategic contract is

based on risk sharing principles although with a very clear customer/supplier legal framework and

provides the Agency with a unique opportunity to use technology and innovation to deliver enhanced and

expanded services to the public. During the course of the year, agreement was reached, after long and

robust negotiations to a final three-year extension of this contract until September 2015. The contract

changes negotiated as part of the extension will see very significant cost savings for DVLA.

The Agency framework setting out our approach and guidance to staff on risk management is available on

the Intranet for staff comment, contribution and information. This includes a summary of the corporate

and directorate risk registers. The risk management policies and processes are supported and maintained

by Corporate Management Services. The Agency Corporate Risk Manager is responsible for advising on

corporate risk management and the escalation of risks from the risk and control framework to the EB.

Processes are being refined to ensure that the bottom-up and top-down risk assessments integrate fully

and make explicit the Agency’s definition of its risk appetite, linking these to the appetite expressed by

MFSG. Risk Officers and directors meet monthly to discuss their individual Directorate risks, together

with monitoring the actions on risks escalated to the DVLA corporate risk register for which the

individual members are responsible. The EB discuss high level corporate risks each month, concentrating

on progress with the actions to avoid and mitigate the key risks. Over the last year these have included:

• economic downturn impact and loss of income from fee-earning transactions;

• security concerns in relation to our core Vehicle and Driver systems;

• security of data transmissions to third parties and public enquiries; and

• compliance with credit/debit card data-handling standards to be delivered in 2010.

All risks have mitigating plans in place with responsibility for delivery assigned to individuals. All

corporate risks are allocated to specific EB members.

The Agency maintains risk registers at each level in the organisation, including:

Programmes and Projects - identified by Project teams using a PRINCE2 based methodology. These are

revised on a regular basis and are overseen by project and programme boards, with standards monitored

by our Centre of Programme and Project Excellence (COPPE). Project processes and registers conform to

HM Treasury Orange Book and Office of Government Commerce (OGC) guidelines on the Management

of Risk - all have regularly reviewed risk registers;

Operational Activities - identified and actively managed at a Directorate level via directorate risk

registers;

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Corporate - the top of the DVLA risk hierarchy contains escalated risks from both of the directorate and

programme registers. In addition, individual EB members can place risks directly onto the register for

areas of concern or any staff can raise issues for the Agency Risk Manager to raise with the EB Directors;

MFSG and DfT Group – major escalated risks having an impact across MFSG or potentially even the

wider DfT.

A formal self assessment process resulting in individual stewardship reports is required for all Directors

and Senior Managers in which they acknowledge their accountability and assess the quality of risk

management under their span of control. This is consolidated and provides input to the Management

Assurance provided to DfT from the Chief Executive at the year end.

All key delivery partner contracts – with IBM, Post Office®, NSL Services Group (wheel clamping),

dealers who use our Automated First Registration and Licensing systems and commercial companies that

access our data with formal customer consent – incorporate direct access provisions that our Internal

Audit team use to review controls in operation and for us to monitor compliance with control levels

specified in the access protocols.

Internal Audit review the Agency’s governance and risk management processes annually, drawing on

external practices to inform their assessment of their maturity and effectiveness.

Controls over Change Projects

Progress monitoring and risk identification are managed by our COPPE, accredited by an Office of

Government Commerce (OGC) approved assessor as meeting the requirements laid down by OGC. EB

members are appointed with sponsorship responsibility for programmes/critical projects and I hold them

personally responsible for delivery.

All proposed projects are subjected to initial review by the New Initiatives Panel and if successful are

allocated to an operational area or, if significant, passed to the Strategy & Feasibility Programme for

further study and exploration. Technical aspects are reviewed by the Technical Review Team, stakeholder

support sought, design principles established and outline business case developed if appropriate. If the

business case is approved and funding prioritised, this is handed over to the Delivery or Infrastructure

Programme as appropriate, the Change Release Board has to confirm a timetable for introduction and it

goes to the MFSG Investment Appraisal Board for approval if classification as a Strategic Project is

indicated.

All significant projects, in both DVLA and DVA (as DVLA's agents in delivering its Vehicle

responsibilities in Northern Ireland) are subject to the prescribed OGC and HMT risk assessment process

and scoring. They are subject to an appropriate level of independent OGC Gateway™ reviews by

high/medium risk reviewers appointed by the OGC at key decision points throughout their project

lifecycle. Smaller/low risk projects are peer reviewed by internal reviewers through a similar process.

Financial Control

The systems of management control established include the DVLA Finance Committee, which has

delegated expenditure responsibilities and provides advice on operational budgets and project

affordability to the EB. This is chaired by the Director of Finance and Strategy, and attended by a second

EB member.

The budgetary controls are supported by the Integrated Resource Management (IRM) monthly planning

cycle, which monitors volume and change demand, resource supply and a balancing process – the results

of which are reported monthly to the EB for action and forward decisions. The IRM process is also

fundamental as part of our efficiency and Value for Money (VfM) planning and monitoring.

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Proposed project based expenditures (both IT and non-IT) have their business cases assessed by the

Finance Committee, which either rejects/approves or makes recommendations to the EB depending on the

level of expenditure involved. Business cases comply with the DfT Investment Appraisal Framework,

through compliance with the ‘Green Book’ and use of the best practice 5-case business model advocated

by OGC and HM Treasury.

The COPPE then monitors and tracks programmes through to closure, providing Programme Delivery

Board, and EB if significant enough, with advice on project and business decisions, including potentially

the cancellation of individual projects if business case changes or risk appraisals (both updated regularly)

indicate this to be appropriate. If cancelled prior to successful completion, such projects are fully

disclosed in the annual accounts. The Tracking Vehicles Through the Trade (TV3T) project cancellation

has been so disclosed in the current year accounts. Tier 1 and 2 projects have their business cases

considered and budgets approved, together with monthly progress reporting and monitoring by DfT and

MFSG Boards.

Shared Services Arrangements

Since April 2007 the DVLA Finance, Payroll and HR transactional support functions have been provided

by the Shared Service Centre based in Swansea. Responsibility for the governance of the centre and line

responsibility for SSC management passed directly to the DfT Director General for Resources in October

2008. Each organisation has its own control responsibility and IA processes for those internal elements of

the transaction streams that remain outside the SSC and each Accounting Officer has individual

responsibility to ensure that the two sets of controls provide an environment of overall appropriate control

for their own organisation.

The DfT Shared Services Director has provided three Assurance Reports during the year on the internal

controls operating at the SSC. These present an improved position during the year and, at the year end, a

position has been achieved where the internal controls over transactions have reached acceptable levels.

Any control weaknesses within the SSC systems during the year were compensated for by additional

DVLA controls and have had no direct material impact on the financial transactions and the accuracy of

reporting for year-end accounts production. DVLA and DfT Internal Audit have undertaken assurance

work on the operation of business unit and SSC elements respectively of the controls in operation so that

DVLA has been able to form a view on the effectiveness of the control regime overall.

The action plan to improve SSC financial controls agreed in 2008 has now been substantially delivered.

It became apparent during the year that specific reconciliations (mainly in respect of payroll transactions)

were not being undertaken in a timely manner, but these were brought up to date by the year end,

although some earlier reconciling items have not been fully cleared. However, there were no significant

items emerging during the year and only non-material items remain unresolved from the earlier

reconciliations, so that we have adequate assurance that the accounts themselves can be robustly

constructed. We have agreement with the SSC that these will now be fully undertaken on a timely basis as

part of a routine schedule and, together with the other users, have agreed a more robust and stringent

reporting schedule.

The emphasis for business units and the SSC during 2009-10 has been on streamlining processes and

delivering transactions more efficiently to enable withdrawal of the ‘workarounds’ and achievement of

Service Level Agreement targets, such as prompt payment and purchase order compliance, together with

business case benefits. Whilst essential for SSC operational efficiency and delivery of business case

benefits, changes are only implemented after ensuring that they do not compromise the robustness of the

control environment.

The SSC provides monthly assessments of service levels and issues, discussed with DVLA at formal

monitoring meetings that I chair. In addition, there are monthly assessments of controls provided to

Information Asset Owners as part of the control processes. Work continues on refining the final elements

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of the Service Level Agreements and the new KPIs being agreed. Approval processes in place, supported

by the SSC Design Authority, for any changes proposed by individual Business Units or SSC ensure that

objectives are still delivered and the control implications assessed, agreed and managed.

Value for Money

Business changes proposed, especially but not exclusively through projects, are examined through

business case processes. There are benefits realisation plans and monitoring built in to all such

developments and direct periodic reporting to EB. In addition, all procurement and contract management

complies with European Commission procurement regulations to ensure full and robust competition for

services and products from suppliers. All contracts, including project delivery, have quality plans in place

to ensure that the quality aspects of VfM are fully considered and delivered in addition to cost

monitoring. The Agency is reinstating its rolling programme of reviews and benchmarking based on

Better Quality Services (BQS) principles during 2010 -11 to confirm that a range of the Agency activities

provide value for money to customers and are delivered cost effectively.

Data Handling, Security and Information Risk

DVLA core functions encompass the management and maintenance of its Driver and

Vehicle registers which means responsibility for secure handling and maintenance of two of the largest

databases in Government, including data transmission and access control. It undertakes over 120m

transactions each year in respect of these databases. The DVLA is critically concerned with data security

and complies strictly with legislative release provisions, Data Protection Act and Cabinet Office

guidelines.

DVLA has again been independently assessed by Communications and Electronic Security Group

(CESG) against the Information Assurance Maturity Model and Assessment Framework issued by the

Cabinet Office (September 2008). Their report documents significant progress in terms of security and

control of our data.

Findings from this review are driving the work of the Information Assurance Group (IAG), including the

quarterly assurance reports that are being issued to the Audit Committee as a regular agenda item.

I have recruited a Chief Information Officer (CIO) as one of my five EB members and the IAG group

reports directly to him and he does, temporarily, also hold the role of Security of Information Responsible

Officer (SIRO). The CESG report quite rightly recommends that I consider separation of the CIO and

SIRO responsibilities. However, I am content that the degree and detail of regular reporting to myself by

the CIO and (separately) IAG is sufficient to ensure that the lack of CIO/SIRO segregation does not

compromise the assurance I receive. There are practical benefits during the agreed and significant current

programme of technical security changes from close alignment of the two roles but when the agreed

changes have been implemented my intention is to separate the two functions to provide a cross-check for

me in terms of assurance.

The independent CESG review provided assurance that we have achieved a general Level 2 rating and

have made significant progress at Level 3, with some work at level 4 acknowledged. This tool will be

maintained and independently verified on a regular basis. Our aim is to move all of these indicators into

the level 3, 4 and 5 areas as this will provide enhanced security of our data - over and above best practice.

DVLA is compliant with the recommendations contained in the Data Handling Review and our IT

systems are accredited to UK Government standards, with regular independent IT health checks to

support accreditation.

The majority of our data transfers have now been migrated from physical media to secure

and encrypted electronic channels through our ELISE project and this channel migration will

continue until all transfers are electronic. Exchange of personal data by means of encrypted CDs remains

our only physical transfer media for a small number of external recipients, but we are working to move all

to electronic transfer as fast as feasible for all parties.

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A large proportion of our interaction with the public still involves paper notifications, reminders and

documents. We use a secure delivery hub and spoke arrangement to ensure that the risk of loss is

minimised when we transfer bulk data in this paper way. This is under regular review to ensure the

quality of the security arrangements is maintained.

The DVLA network is accredited to Government security standards and currently a rolling program of

work to maintain standards is in place. All new services go through a comprehensive risk assessment

before live operation. These assessments have to be approved by a Government Accreditor who is

independent of project delivery and has to formally sign off his approval prior to go live. The risks to the

data being processed are formally evaluated and recorded in a Risk Management Accredited Document

set and the risk assessment score has to meet pre-set criteria prior to going live.

IAG, set up in 2008, is now well established within DVLA and has a key role of ensuring Data Handling

Procedures in Government, defined by the Cabinet Office, are met. This group ensures compliance with

the report recommendations and looks to develop and further improve the governance frameworks that

cover the use, sharing and security of our data. Each data element now has a specific owner called an

Information Asset Owner (IAO), responsible for assessing risks to this information and giving permission

for its use. The training of IAOs and the central record of information is the responsibility of IAG.

All DVLA staff have completed an online training and assessment course relating to data handling and

had to pass the assessment with the pass mark set at 80%, with any failure entailing rework of the

training. In addition, all managers had to pass a ‘Stage 2’assessment. A changing version of this exercise

will be conducted annually.

For all staff, information can now only be downloaded onto approved removable storage devices that are

encrypted and strictly controlled. These devices are only issued on production of a business case

approved by the Head of Information Security or myself.

The completion of major site works at the Swansea HQ has provided layered security and improved

physical access control. The most important or sensitive areas of the organisation are well protected -

some having biometric access control, which is being widened in its application as this provides

significantly enhanced control. Further enhancements are planned for this coming year.

Review of Controls Effectiveness

As Accounting Officer for DVLA, I have responsibility for reviewing the effectiveness of the system of

internal control. My review is primarily informed by the work and stewardship reporting of the executive

managers within the Agency responsible for the development and maintenance of the internal control

framework. I also draw on and balance the evidence, positive and negative, provided by:

• the formal controls assessment completed by the DfT Shared Services Director on the

completeness and accuracy of processing in the SSC itself;

• the Information Asset Owner report issued by the SSC SIRO;

• the Information Asset Owner report issued by the DVLA SIRO;

• the review work undertaken by the Programme Project Assurance teams on programmes and

projects;

• reporting from the DVLA Fraud Forum chaired by an independent external member;

• reporting on progress with Health and Safety (HS) education, training and safety incidents through

the H&S trained team within Corporate Services;

• the work of the data security team within Policy Directorate on access and sensitive records;

• the accuracy team established to monitor and improve data accuracy within our core databases and

who undertake external surveys;

• the efficiency reviews by the team based in Corporate Assurance Services (CAS);

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• other reports commissioned as reviews of specific control issue areas, notably of process adequacy

within the IT security area by CESG;

• independent OGC Gateway reviews of programmes and projects;

• the first audit review of Data Protection Act compliance undertaken by the ICO;

• ISO certification reviews of DVLA functions (e.g. Output Services Group, Estates);

• independent DfT review of VED compliance rates through the annual survey, evaluated by the

Government Statistical Service;

• the annual review programme of work undertaken by Internal Audit;

• comments made by External Audit in their Management Letter and other reports.

Structure of Assurance

The EB and Audit Committee assist in these processes and the plans to address weaknesses, ensuring

continuous improvement of the systems remains a priority. These processes apply to all Agency activities

and transactions - both to Agency business and VED accounts.

Audit Committee. The DVLA Audit Committee contributes by advising me and my Executive Board,

together with guiding the Head of Internal Audit, on matters of governance arrangements, risk

management processes, internal control, and compliance of the Agency’s accounts with standards,

internal and external audit, and assurance. The Committee, which meets quarterly, is chaired by a Non-

Executive member and comprises in total the Agency’s two Non-Executive Directors and, an additional

Non-Executive member supplied by DfT. I and the Director of Finance & Strategy attend Audit

Committee meetings as observers.

A single integrated structure has been established as Corporate Assurance Services (CAS) to comprise

Internal Audit (IA), Programme and Project Assurance (PPA) and the CAS Review Team, working to

common standards and disciplines, providing an integrated model to provide me with the overall

assurance that I need.

Internal Audit. DVLA Internal Audit operates to prescribed Government Internal Audit Standards and

provides me with an independent opinion on the adequacy and effectiveness of the Agency’s system of

internal control, together with recommendations for improvement.

The Agency’s Head of Internal Audit has free access to the DVLA Audit Committee chair and to me as

Accounting Officer. IA also works collaboratively with other review bodies within the Agency and with

the Agency’s partners, IBM and Fujitsu. This includes regular consultation, co-ordination of plans and

selected reviews, and sharing of information. In response to the ongoing emphasis on information

handling risks and Ministerial commitments, IA has further increased its visiting programme to external

users of DVLA data during the year to provide additional assurance that DVLA data and information is

utilised and maintained in an appropriate manner.

Programme and Project Assurance. Programme and Project work is assured independently by the

Agency’s PPA team, a pool of skilled resources. These provide assurance to EB that Programmes and

Projects are being delivered to the highest standards and in accordance with Agency standards.

CAS Review Team. The cycle of efficiency reviews and benchmarking contributes to my assurance of

VfM delivery as a part of the Agency’s operational delivery. The team is accredited by the Institute of

Management Consultants.

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DVA Control Assurance and Vehicles Responsibilities

DVA is subject to internal audit review by the Department for Regional Development (DRD) in Northern

Ireland I draw assurance from the opinion the DRD Head of Internal Audit (HIA) provides to the DVA

Agency Accounting Officer. This is overseen by the DVA Audit Committee chaired by the former

Non-Executive chairman of the DVLA Audit Committee. DVA projects follow the same project lifecycle

arrangements and submit documents for funding approval via the DVLA EB. These are also subject to the

assurance oversight by PPA.

Head of Internal Audit Opinion

The overall opinion I have received from my HIA for 2009-10 is that she can provide adequate assurance

that DVLA’s governance, risk management and control arrangements are appropriately defined and found

to be working effectively.

In the cases that Internal Audit identified the need for control enhancements, these were not deemed

significant in the context of the overall control environment. Where enhancements were proposed,

corrective action has been agreed and subsequent delivery has contributed to the overall assurance

reported within the Statement on Internal Control.

A number of minor weakness were identified in 2009-10 in relation to controls operated on behalf of

DVLA by the DfT SSC but, as in 2008-09, there is no evidence that these weaknesses have been

exploited. Where compensating controls were needed, the Agency took timely actions to address these

SSC control gaps and limit the risk of material mis-statement of financial statements.

This current year we have also benefited from an independent KPMG review of the risk and control

profile within our VED systems and processes, commissioned by DWP as part of a wider Government

review. This has concluded that there are no material financial weaknesses emerging in addition to the

evasion losses that DVLA is aware of, is actively managing and has successfully reduced in recent years.

The review has made a number of recommendations for improvement, focused on the following areas:

• formalising review of access to the core systems, concentrating on the Database Administrators

and immediate review of the accuracy of key table amendments;

• sampling routine amendments of individual vehicle specifications held on record;

• higher profile performance management of debt collection agency activities and formal

documentation of action points and findings;

• periodic revalidation of extract parameters to ensure all relevant records remain under scrutiny for

enforcement activity – and review of overall statistics to monitor relevance and identify any

behavioural changes.

We are addressing these recommendations and will report progress to the VED Governance Board for

their assurance in addition to monitoring compliance internally

Specific Control Issues

Theft of Vehicle Registration Stationery (V5Cs). During 2006, DVLA rejected a batch of V5C forms due

to incorrect colour printing, returning these to our suppliers as they believed they could overprint and

deliver the correct colour specified. In the event they were unable to do this and sent the forms, as

specified in our contract, for secure destruction. Forms were stolen during either transit or destruction,

and some of the stolen forms were used to provide fraudulent documentation for criminals. The public

were made aware by DVLA of the serial numbers involved as soon as we began to receive fraudulent

documents. Enquiries continue with some progress. We regard the event as outside our direct control and

as a breach of the contractual conditions by our suppliers, but the contract has now been strengthened.

Discussions over the exact form of remedial actions continue with Police and Ministers. This is not a

control weakness in year but continues to be of public interest.

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Safeguards against supplier insolvency. We have had one instance, after the end of the year, of potential

loss from this cause, arising from an unusual combination of circumstances. In this case we appear to

have had an incident of non-compliance with DVLA process and procedures which resulted in a goods

receipting being undertaken without physical receipts of the goods themselves. We are tightening our

controls to avoid any similar impacts in future. We are minimising the impact and the final value is not

yet known, but a prudent accounting estimate has been adopted in the accounts for 2009-10.

During 2009-10, there was 1 reported breach of the Data Protection Act involving DVLA

data. The Information Commissioner’s Office (ICO) was notified of the breach and no further action was

required of us by the ICO. There is no suggestion that this information breach could have been used to

facilitate financial fraud against customers. There have been 10 other low level data breach incidents,

either involving non-personal data or very small numbers, so these did not require us to formally inform

the ICO. However, we meet ICO regularly and are open about such breaches although not requiring

formal notification.

Noel Shanahan

Accounting Officer

24 June 2010

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Statement of the Agency and Accounting Officer’s Responsibilities

Business Accounts

Under the Government Trading Funds Act 1973, HM Treasury has directed the Driver and Vehicle

Licensing Agency (DVLA) to prepare a statement of accounts for each financial year in the form and on

the basis set out in the Accounts Direction. The accounts are prepared on an accruals basis and must give

a true and fair view of the Agency’s state of affairs at the year-end and of its Statement of Comprehensive

Income, Statement of Cash Flows and Statement of Changes in Taxpayers’ Equity, for the financial year.

In preparing the Business Accounts, the Accounting Officer is required to comply with the requirements

of the Government Financial Reporting Manual (FReM) and in particular to:

• observe the Accounts Direction issued by HM Treasury, including the relevant accounting and

disclosure requirements, and apply suitable accounting policies on a consistent basis;

• make judgements and estimates on a reasonable basis;

• state whether applicable accounting standards as set out in the Government Financial Reporting

Manual have been followed; and

• disclose and explain any material departures in the financial statements and prepare the financial

statements on a going concern basis.

The Accounting Officer for the Agency as a Trading Fund is appointed by HM Treasury. The

responsibilities of an Accounting Officer, including responsibility for the propriety and regularity of the

public finances for which the Accounting Officer is answerable, for keeping proper records and for

safeguarding the DVLA’s assets, are set out in Managing Public Money.

VED Accounts

Under Section 2 of the Exchequer and Audit Departments Act 1921, HM Treasury has directed the Driver

and Vehicle Licensing Agency (DVLA) to prepare a Vehicle Excise Duty (VED) Account for each

financial year detailing the revenue and expenditure in respect of VED falling outside of the boundary of

the Agency’s Business Account. The VED Account is prepared on an accruals basis and must give a true

and fair view of the collection and allocation of VED, including a Statement of Revenue and Expenditure,

a Statement of Financial Position, and a Statement of Cash Flows. Whilst DVLA is concerned with

compliance, the VED Account does not estimate the duty foregone because of non-compliance with the

VED regime.

In preparing the VED Account, the Accounting Officer is required to comply with the requirements of the

Government Financial Reporting Manual (FReM) and in particular to:

• observe the Accounts Direction issued by HM Treasury, including the relevant accounting and

disclosure requirements, and apply suitable accounting policies on a consistent basis;

• make judgements and estimates on a reasonable basis;

• state whether applicable accounting standards have been followed; and

• disclose and explain any material departures in the VED Account.

The HM Treasury appointed Accounting Officer is also responsible for the fair and efficient

administration of the VED regime including the assessment, collection and proper allocation of VED

revenue.

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

Houses of Parliament

I certify that I have audited the financial statements of the Driver and Vehicle Licensing Agency (“the

Agency”) for the year ended 31 March 2010 under the Government Trading Funds Act 1973. These

comprise the Statement of Comprehensive Income and Statement of Changes in Taxpayers’ Equity, the

Statement of Financial Position, the Statement of Cash Flows and the related notes. These financial

statements have been prepared under the accounting policies set out within them. I have also audited the

information in the Remuneration Report that is described in that report as having been audited.

Respective responsibilities of the Driver and Vehicle Licensing Agency, Accounting Officer and

auditor

As explained more fully in the Statement of the Agency and Accounting Officer’s Responsibilities, the

Agency and Accounting Officer are responsible for the preparation of the financial statements and for

being satisfied that they give a true and fair view. My responsibility is to audit the financial statements in

accordance with applicable law and International Standards on Auditing (UK and Ireland). Those

standards require me and my staff to comply with the Auditing Practices Board’s Ethical Standards for

Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures 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 Driver and Vehicle Licensing Agency’s circumstances and have been consistently

applied and adequately disclosed; the reasonableness of significant accounting estimates made by the

Driver and Vehicle Licensing Agency; and the overall presentation of the financial statements.

In addition, I am required to obtain evidence sufficient to give reasonable assurance that the expenditure

and income reported in the financial statements have been applied to the purposes intended by Parliament

and the financial transactions conform to the authorities which govern them.

Opinion on Regularity

In my opinion, 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.

Opinion on Financial Statements

In my opinion:

• the financial statements give a true and fair view of the state of the Driver and Vehicle

Licensing Agency’s affairs as at 31 March 2010 and of its surplus, changes in taxpayers’

equity and cash flows for the year then ended; and

• the financial statements have been properly prepared in accordance with the Government

Trading Funds Act 1973 and HM Treasury directions issued thereunder.

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Opinion on other matters

In my opinion:

• the part of the Remuneration Report to be audited has been properly prepared in accordance

with HM Treasury directions made under the Government Trading Funds Act 1973; and

• the information given in the Directors’ Report and Management Commentary for the financial

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

Matters on which I report by exception

I have nothing to report in respect of the following matters which I report to you if, in my opinion:

• adequate accounting records have not been kept; or

• the financial statements are not in agreement with the accounting records or returns; or

• I have not received all of the information and explanations I require for my audit; or

• the Statement on Internal Control does not reflect compliance with HM Treasury’s guidance.

Report

I have no observations to make on these financial statements.

Amyas CE Morse

Comptroller and Auditor General

National Audit Office

157-197 Buckingham Palace Road

Victoria

London

SWIW 9SP

13 July 2010

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DVLA Business Accounts for 2009-10

Statement of Comprehensive Income for the year-ended 31 March 2010

Note

2009-10 2009-10

2008-09 2008-09

£000 £000

Income from operations

Income from activities

461,192

437,546

Other operating income

233,101

214,085

Total income from operations

694,293

651,631

Expenditure

Operating costs 5

(355,186)

(376,316)

Staff costs 4

(165,661)

(168,247)

Depreciation, amortisation & impairment 8

(26,702)

(29,033)

Less: Government grant release

5,490

6,210

Total operating expenditure

(542,059)

(567,386)

Operating surplus

152,234

84,245

Finance income 6

301

2,364

Finance costs 6

(3,403)

(2,236)

Net finance (costs)/income (3,102)

128

Surplus payable to Consolidated Fund

(108,157)

(105,043)

Dividend payable 7

(5,903)

(4,386)

Retained surplus/(deficit) for the year

35,072

(25,056)

Other comprehensive income

Net gain on revaluation of property, plant

and equipment

4,393

1,790

Net gain on revaluation of intangible

assets

1,775

3,720

Other comprehensive income for the year

6,168

5,510

Total comprehensive surplus/(deficit) for

the year

41,240

(19,546)

All income and expenditure are derived from continuing operations. Notes forming part of these accounts appear on

pages 60 to 96.

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Statement of Financial Position

as at 31 March 2010

Note 31 March 2010

31 March 2009

1 April 2008

£000

Non-current assets:

Property, plant and equipment 8

87,382

85,104

81,726

Intangible assets 9

95,203

87,149

86,693

Trade and other receivables due after more than one year 10

8,014

3,833

6,103

Total non-current assets 190,599

176,086

174,522

Current assets:

Trade and other receivables 10

67,559

58,838 83,961

Cash and cash equivalents 11

60,687

50,579

45,769

Total current assets 128,246

109,417

129,730

Total assets 318,845

285,503

304,252

Current Liabilities

Trade and other payables 12

(82,011)

(83,390)

(85,336)

Provisions for liabilities and charges 14

(3,223)

(3,141) (6,686)

Total current liabilities (85,234)

(86,531)

(92,022)

Non-current assets plus/less net

current assets/liabilities

233,611

198,972

212,230

Non-current liabilities

Trade and other payables due after more than one year 12

(33,793)

(39,938)

(26,215)

Provisions for liabilities and charges 14

(12,170)

(11,510)

(12,056)

Total non-current liabilities

(45,963)

(51,448) (38,271)

Assets less liabilities

187,648

147,524

173,959

Taxpayers’ equity:

General Fund

110,098

75,026 109,117

Revaluation reserve

33,313

27,145 21,635

Government grant reserve

25,189

26,305 24,159

Public dividend capital

19,048

19,048 19,048

Total taxpayers’ equity 187,648

147,524 173,959

Notes forming part of the accounts appear on pages 60 to 96.

Noel Shanahan

Accounting Officer

24 June 2010

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Statement of Cash Flows for the year ended 31 March 2010

2009-10

2008-09

£000

Note

Cash flows from operating activities

Retained surplus /(deficit) for the year 35,072

(25,056)

Adjustments for non cash items:

Loss on disposal, depreciation, amortisation & impairment 8&9

26,702

29,033

Government Grant release

(5,490)

(6,210)

Net financing costs/(income) 6

3,102

(128)

(Increase)/decrease in trade and other receivables 10

(12,902)

18,943

Increase/(decrease) in trade payables 12

499

(259)

Less movements relating to items not passing through the Statement

of Comprehensive Income

Use/(creation) of provisions 14

314

(4,133)

Net cash inflow from operating activities

47,297

12,190

Cash flows from investing activities

Purchase of property, plant and equipment 8

(5,660)

(8,019)

Purchase of intangible assets 9

(19,799)

(6,791)

Finance income 6

301

2,364

Net cash outflow from investing activities

(25,158)

(12,446)

Cash flows from financing activities

Government grant received in year

4,374

11,230

Finance costs 6

(2,975)

(2,194)

Capital element of payments in respect of finance leases and on-

balance sheet PFI contracts

(13,430)

(3,970)

Net cash used in financing activities

(12,031)

5,066

Net financing:

Net increase in cash and cash equivalents in the period

10,108

4,810

Cash and cash equivalents at the beginning of the period

50,579

45,769

Cash and cash equivalents at the end of the period

60,687

50,579

Notes forming part of these accounts appear on pages 60 to 96.

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Statement of Changes in Taxpayers’ Equity

for the year ended 31 March 2010

General

Fund

Revaluation

Reserve (iv)

Government

Grant

Reserve

Public

Dividend

Capital

Total

Reserves

£000 £000 £000 £000 £000

Balance at 31 March 2009 75,026 27,145 26,305 19,048 147,524

Surplus for the year 31 March 2010 35,072

- - - 35,072

Other Comprehensive Income

Net gain on revaluation of property, plant

and equipment

- 4,393 - - 4,393

Net gain on revaluation of intangible assets

- 1,775 - - 1,775

Government grant release

- - (5,490) - (5,490)

Government grant received in year

- - 4,374 - 4,374

Total Other Comprehensive Income

6,168 (1,116)

5,052

Total Comprehensive Income for 2009-10

35,072 6,168 (1,116) - 40,124

Balance at 31 March 2010 110,098 33,313 25,189 19,048 187,648

Statement of Changes in Taxpayers’ Equity

for the year ended 31 March 2009

Note General

Fund

Revaluation

Reserve(iv)

Government

Grant

Reserve

Public

Dividend

Capital

Total

Reserves

£000 £000 £000 £000 £000

Balance at 1 April 2008 109,117 21,635 24,159 19,048 173,959

Deficit for the year ended 31 March 2009 (25,056) - -

(25,056)

Other Comprehensive Income

Gain on revaluation of property, plant and

equipment

(ii) -

1,790 -

1,790

Net gain on revaluation of intangible assets - 3,720 - - 3,720

Government grant release (iii) - - (9,669) - (9,669)

Government grant received in year - - 2,780 - 2,780

Transfers between reserves (i) (9,035) - 9,035 - -

Total Other Comprehensive Income (9,035) 5,510 2,146 - (1,379)

Total Comprehensive Income for 2008-09 (34,091) 5,510 2,146 - (26,435)

Balance at 31 March 2009 75,026 27,145 26,305 19,048 147,524

(i) During 2008-09 the Agency re-classified that portion of SLA income (£9.035m) received between April 2004,

when DVLA became a Trading Fund, and March 2008 that related to projects in respect of vehicle licensing as

government grants. The result was to remove funding previously classified as income from the Retained Surplus

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Reserve and apply the funding as a Grant to the Government Grant Reserve. The transfer amount represented the

depreciated value of the assets funded and was apportioned as follows:

2004-05 £5.4m, 2005-06 £1.4m, 2006-07 £1.1m and 2007-08 £1.135m.The movement in the General Fund

reflects this reclassification of SLA income and the deficit for the year resulting from the downturn in the

volume of the Agency's fee-earning transactions.

(ii) The movement in the Revaluation Reserve takes into account the revaluation of the Agency's Land and

Buildings undertaken by external chartered surveyors in March 2009.

(iii) The Government Grant reserve movement during 2008-09 reflects the transfer of Shared Services

assets to DfT on 31 March 2009 accounting for £3.4m of the total release for the year £9.6m

(iv) The amount of the revaluation reserve that relates to intangible assets at 31 March 2010 is £8.3m

(31 March 2009: £6.5m, 1 April 2008; £2.8m).

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Notes to the accounts

Note 1. Statement of accounting policies

The financial statements have been prepared in accordance with the 2009-10 Government Financial

Reporting Manual (FReM) issued by HM Treasury. Prior years have been re-stated in accordance with

IFRS (see Note 2). The accounting policies contained in the FReM apply International Financial

Reporting Standards (IFRS) as adapted or interpreted for the public sector context. Where the FReM

permits a choice of accounting policy, the accounting policy which has been judged to be the most

appropriate to the particular circumstances of the Agency for the purpose of giving a true and fair view

has been selected. Except as noted below the particular policies adopted by the Agency have been applied

consistently in dealing with items that are considered material to the accounts.

New standards and interpretations adopted early

The entity has taken the option of adopting the amendment to IFRS 8 Operating Segments. The

amendment clarifies that segmental information for total assets is required only if such amounts are

regularly reported to the chief operating decision-maker. Application of the amendment is required for

reporting periods beginning on or after 31 January 2010 but early adoption is permitted.

New standards and interpretations not yet adopted

Other than those adopted early as explained above, a number of new standards, amendments to standards

and interpretations are not yet effective for the year ended 31 March 2010, and have not been applied in

preparing these financial statements. These include:

IFRS 9 Financial Instruments, which will replace IAS 39. IFRS 9 is expected to improve and simplify the

reporting of financial instruments. Application of this standard is required for reporting periods beginning

on or after 1 January 2013. Earlier application is permitted. It is planned that IFRS 9 will be applied

initially in 2013-2014. The impact of initial application of IFRS 9 is not expected to be significant.

IAS 7 Statement of Cash Flows, which has been amended. The amendment to IAS 7 clarifies that only

expenditure that results in the recognition of an asset (rather than simply to generate future income and

cash flows) can be classified as a cash flow from investing activities. Application of the amended IAS 7 is

required for reporting periods beginning on or after 1 January 2010. Earlier application is permitted. It is

planned that IAS 7 will be applied initially in 2010-2011. Initial application of the revised IAS 7 is

expected to have limited impact.

IAS 24 Related Party Disclosures has been revised. The revisions to IAS 24 simplify the disclosure

requirements for entities that are controlled, jointly controlled, or significantly influenced by a

government. Application of the revised IAS 24 is required for reporting periods beginning on or after 1

January 2011. Earlier application is permitted. It is planned that IAS 24 will be applied initially in 2011-

2012. Initial application of the revised IAS 24 will result in partial exemption from the disclosure

requirements of IAS 24, and the relevant disclosures may be reduced from those presented in 2009-10.

IAS 17 Leases has been amended. The revision clarifies that where a lease includes both land and

buildings elements, they are separately assessed in accordance with the general guidance on the

classification of leases in IAS 17, taking into account that land normally has an indefinite economic life.

Thus the land element may be classified as a finance lease, even if title is not expected to pass to the

lessee. Application of the amended IAS 17 is required for reporting periods beginning on or after 1

January 2010. Earlier application is permitted. It is planned that IAS 7 will be applied initially in 2010-11.

Initial application of the revised IAS 7 is expected to have limited impact.

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FreM

The Government Financial and Reporting Manual (FreM) includes the following accounting changes that

have been issued and will be effective in 2010-11:

Accounting for consolidated fund revenue: Introduction of Trust statements for revenue collected by

entities that is due to the Consolidated Fund. This will have an impact on the disclosures in the Agency’s

financial statements.

Accounting convention

These accounts have been prepared under the historical cost convention, modified to account for the

revaluation of property, plant and equipment and intangible assets. The financial statements have been

prepared in accordance with the revised accounting direction issued by HM Treasury on 25 April 2006.

They meet the requirements of the Companies Acts, and of the Statements of Accounting Standards

issued and approved by the International Accounting Standards Board. We are not aware of any

disclosures or circumstances where these are inappropriate.

Operating income

Income from the sale of registration marks is recognised on receipt of payment for fixed price sales and

on the fall of the auctioneer's hammer for sales at auction. Uncompleted sales are provided for after 90

days and are written out of sales after twelve months, with the related marks becoming available for

resale. Fee income from the assignment, transfer and retention of cherished registration marks is

recognised on receipt, when the transaction is processed, as is that from fee-bearing statutory services.

Funding for VED collection and enforcement activities is delivered by volume-related Service Level

Agreements (SLA’s) rather than grants - managed by DfT on behalf of HMT as the tax recipients.

The following major sources of income - Sale of Marks, Sale of Anonymised data (Vehicle and Driver)

and Tachograph fees - all attract output VAT. The majority of DVLA fee-earning transactions are not

subject to VAT.

Finance income and finance costs

Finance income comprises interest income on funds invested. Interest income is recognised as it is

received in profit or loss. Finance costs comprise interest expense on borrowings and unwinding of the

discount on provisions. Borrowing costs are recognised in profit or loss using the effective interest

method.

Taxation

The Agency is not liable to pay Corporation Tax. Expenditure is shown net of recoverable VAT.

Irrecoverable VAT is charged to the appropriate expenditure heading, or capitalised if it relates to an

asset.

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Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances in both interest and non-interest bearing accounts. The

Agency does not have any bank overdrafts.

Non-current assets: Property, plant and equipment

The Agency revalues its fixed asset portfolio annually at 31 March each financial year in accordance with

the requirements of the Financial Reporting Manual. Land and buildings are revalued every five years on

an existing use valuation by appointed chartered surveyors. In the intervening years between full

valuations of Land and Buildings an index-linked revaluation is performed.

Plant and machinery, fixtures and fittings, computer equipment and office equipment are revalued in

accordance with price indices published by the Office of National Statistics (MM17 - Price Index

Numbers for Current Cost Accounting). The exception to this is the revaluation of the specialised fit-out

of buildings, revalued using an index provided by the Investment Property Databank Capital Growth

Index for Office Properties (including PFI office property) as mentioned above.

Surpluses and deficits arising on revaluation are taken to the Revaluation Reserve. Where it is not

possible for any such deficit to be offset by previous surpluses in the Revaluation Reserve it is charged to

revenue as are permanent diminutions in the value of fixed assets. Ownership of the Agency's assets is

vested in the Secretary of State.

The majority of the Agency's assets are grouped together for the purposes of capitalisation. All additions

to grouped fixed assets are capitalised. The minimum level for capitalisation as an individual non-grouped

asset is £1,000.

Non-current assets: Intangible assets

The value of licences to operate the Driver and Vehicle systems is capitalised. Software development

costs are capitalised, excluding any costs incurred in the planning and design stages of the project, which

are clearly defined and separate from the build phase of a project. New expenditure on IT systems

development is written off in the period in which it is incurred, unless a beneficial relationship to a future

period can be established with reasonable certainty, in which case the charge is capitalised. The Agency

reviews its projects and operational software for impairment and revalues its intangible assets annually

based on Depreciated Replacement Cost (DRC).

The value of the Driver and Vehicle databases, including unallocated vehicle registration marks, cannot

be estimated. The Sale of Marks database is a very large store of possible combinations of alpha-numeric

digits and is affected by changes in opinion, taste and judgement. As a result, the potential future sales

value is not recognised in the Agency's Statement of Financial Position, as it cannot be reasonably

estimated.

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Depreciation and Amortisation

Depreciation is provided on intangible and tangible non-current assets from the date they are

commissioned into operational service, except for computer equipment, which is provided for at the date

of purchase. Depreciation is provided on any revaluation from the date of such revaluation, at rates

calculated to write off the cost or valuation (less any estimated residual value) of each asset evenly over

its expected useful life. The estimated useful lives of the main categories of non-current assets are:

Plant and machinery 3-10 years

IT equipment 3 years

Purchased software up to 10 years

Office equipment 5 -10 years

Software licences 3 -15 years

Fixtures and fittings 5 -10 years

The estimated remaining useful lives of buildings at Morriston on 31 March 2010 are 39 years (A Block)

and 24 years (all others) with those at Swansea Vale at 35 years.

The estimated useful lives of assets are reviewed regularly and, when necessary, revised. Land (freehold

and leasehold) is not depreciated.

Leases

The Agency incurs operating lease rentals which are charged to the Statement of Comprehensive Income

on a straight-line basis over the lease term.

Leases in terms of which the Agency assumes substantially all the risks and rewards of ownership are

classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to

the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial

recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance expense and the

reduction of the outstanding liability. The finance expense is allocated to each period during the lease

term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Early departure costs

The Agency provides for future annual compensation payments to former employees who have taken

early retirement. Compensation is payable from the date of retirement until age 60.

The Agency is responsible for 20% of the liability to former employees that took early retirement

between 1 October 1994 and 31 March 1996 and met certain criteria. This liability is provided for within

the early departure provision. The remaining liability is met centrally by the Civil Superannuation Vote.

For departures between April 1996 and March 1997, HM Treasury introduced capping arrangements that

limit the central contribution for these departures to a maximum of £99,000 per annum.

The Agency announced a Voluntary Early Retirement (VER) scheme in 2005-06 and in 2009-10 a

Flexible Early Retirement (FER) scheme.

The Agency is responsible in full for the liability to former employees who take early retirement under

the VER and FER schemes and provides for the liability within the VER and FER provision.

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Future payments to be made under the Early Departure and Voluntary Retirement schemes are discounted

at the HM Treasury advised rate of 1.8%, (2008-09: 3.2%).

Tax officers’ pensions and compensation payments

The Agency makes payments in relation to costs of former taxation officers employed by local authorities

prior to the creation of the Driver and Vehicle Licensing Centre in 1972. Certain individuals remained

within the Local Government Pension Scheme. The Agency contributes to the local authorities concerned

towards the annual cost of these pensions. The Agency makes compensation payments to 183 other

individuals in respect of loss of emoluments when the Local Taxation Offices closed. A provision has

been made for future costs. An actuarial valuation is carried out every three years to determine future

liabilities, with the latest valuation effective to 31 March 2010.

Pensions

Present and past employees are covered by the provisions of the Principal Civil Service Pension Scheme

(PCSPS). The defined benefit schemes are unfunded and are non-contributory except in respect of

dependants’ benefits. The Agency recognises the expected cost of providing pensions on a systematic and

rational basis over the period during which it benefits from employees' services by payment to the PCSPS

of amounts calculated on an accruing basis. Liability for payment of future benefits is a charge on the

PCSPS. In respect of the defined contribution schemes, the Agency recognises the contributions payable

for the year.

Accounting for Strategic IT partnership costs

The strategic IT partner (IBM) supplies an end-to-end IT service to DVLA, including the provision of IT

equipment. The risks and rewards of ownership of that equipment remain with the partner and are

therefore not capitalised on the DVLA's Balance Sheet. Strategic partnership costs are charged to the

Statement of Comprehensive Income in line with the delivery of the service. The financing arrangements

mean that a prepayment is set up and discounted over time by 3.5%.

Research and development

Expenditure incurred on pure and applied research is treated as an operating charge in the year in which it

is incurred. Development expenditure is for the development of specific business systems. Expenditure

which does not meet the criteria for capitalisation is treated as an operating cost in the year in which it is

incurred. Development costs meeting the criteria for capitalisation are treated as intangible fixed assets

and amortised as explained in the intangible non-current asset note. Non-current assets acquired for use in

development are depreciated over the expected useful life of the asset.

PFI Contract

On the 4 April 2005, DVLA entered into a 20-year service concession agreement with Telereal Trillium

(formerly Land Securities Trillium). This agreement falls within the scope of IFRIC 12 Service

Concession Arrangements and has been set up to provide the following property outsourcing solutions:-

- Cleaning - Building Maintenance

- Catering and Vending - Office Moves

- Furniture Repair - Furniture Replacement

- Grounds Maintenance - Waste Management and Pest Control

DVLA are invoiced on a monthly basis and this revenue expenditure is recorded as a service charge in the

Statement of Comprehensive Income.

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As part of the contract, Telereal Trillium are carrying out a refurbishment of the Swansea HQ site. This is

now substantially complete. Where the work is capital in nature (air conditioning, double-glazing, lifts

and specialist cabling), the costs are capitalised when Independent Assessors sign off each floor as

complete and ready for use. The air conditioning, double-glazing and lifts are depreciated over the length

of the PFI contract. The cabling is depreciated over its expected useful life of five years.

The construction and fit-out of the Felinfach premises at Fforestfach and the construction of the first

phase of A Block were added to the PFI contract in 2007-08 with the second phase of A Block completed

in September 2008. The above additions to the contract were capitalised and depreciated in line with the

Agency's depreciation policy. The title for A Block and the premises at Fforestfach rests with the Agency.

A PFI creditor has been created to reflect the work capitalised. This creditor is reduced over the life of the

contract as payments are made. In accordance with FReM requirements, the interest element of the

unitary charge relating to the assets capitalised has been calculated using the actuarial method.

Financial Instruments

Financial instruments are contractual arrangements that give rise to a financial asset of one entity and a

financial liability or equity instrument of another entity. Financial assets are typically cash or rights to

receive cash or equity instruments in another entity. Financial liabilities are typically obligations to

transfer cash. A contractual right to exchange financial assets or financial liabilities with other entities

will also be a financial asset or liability, depending on whether the conditions are potentially favourable

or adverse to the reporting entity.

Non-derivative financial assets comprise trade and other receivables and cash and cash equivalents. These

are classified as held-to-maturity. The Agency initially recognises these assets on the date that they are

originated, and derecognises when the contractual rights to the cashflows from the asset expire.

Trade and other receivables are recognised initially at fair value on the date that they originated. Fair

value is usually at the original invoiced amount. Subsequent to initial recognition they are measured at

amortised cost using the effective interest method, less any impairment losses.

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable

on demand and form an integral part of the Agency’s cash management are included as a component of

cash and cash equivalents for the purpose only of the cash flow statement.

Non-derivative financial liabilities comprise trade and other payables, obligations under finance leases

and obligations under on-balance sheet PFI contracts. These are classified as held-to-maturity. The

Agency recognises these liabilities initially on the trade date at which the Agency becomes a party to the

contractual provisions of the instrument, and derecognises when its contractual obligations are discharged

or cancelled or expired. Trade and other payables are recognised initially at fair value. Fair value is

usually at the original invoiced amount. Subsequent to initial recognition they are measured at amortised

cost.

Impairment of Financial Assets

The Agency assesses at each balance sheet date whether there is objective evidence that financial assets

are impaired as a result of one or more loss events that occurred after the initial recognition of the asset

and prior to the balance sheet date, and the loss event or events has had an impact on the estimated future

cash flows of the financial asset or the portfolio that can be reliably estimated.

The amount of the impairment loss is measured as the difference between the assets carrying amount and

the present value of estimated future cash flows.

■

The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce

any differences between loss estimates and actual loss experience.

The Agency does not hold any derivative financial instruments.

Contingent liabilities

In addition to contingent liabilities disclosed in accordance with IAS 37, the Agency discloses for

Parliamentary reporting and accountability purposes certain statutory and non-statutory contingent

liabilities where the likelihood of a transfer of economic benefit is remote, but which have been reported

to Parliament in accordance with the requirements of Managing Public Money.

Where the time value of money is material, contingent liabilities which are required to be disclosed under

IAS 37 are stated at discounted amounts and the amount reported to Parliament separately noted.

Contingent liabilities that are not required to be disclosed by IAS 37 are stated at the amounts reported to

Parliament.

Government grant reserve

Grants received for capital assets are credited to the Government Grant Reserve, which is released to the

Statement of Comprehensive Income over the expected useful lives of the relevant assets.

Use of estimates and judgements

The preparation of the financial statements in conformity with IFRS requires management to make

judgements, estimates and assumptions that affect the application of accounting policies and the reported

amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognised in the period in which the estimates are revised and in any future periods

affected.

Information about critical judgements in applying accounting policies that have the most significant effect

on the amounts recognised in the financial statements is included in the following notes;-

Note 15 – Commitments under leases (PCAPM lease)

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a

material adjustment within the next financial year are included in the following notes:-

Note 4 - Holiday Pay Accrual;

Note 8 - Property, Plant and Equipment (tangible useful life);

Note 9 - Intangible Assets (intangible carrying value);

Note 14 - Provisions for liabilities and charges.

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Shared Service Centre

The Department for Transport's Shared Service Centre (SSC) is based in one of DVLA’s leased buildings

at Swansea Vale. The centre provides a mix of human resources, finance, procurement and payroll

services to a number of Business Units within DfT and became operational in April 2007.

Prior to 31 March 2009 the assets relating to the Shared Service Centre were held by the DVLA and the

SSC income and costs were ring-fenced within the DVLA ledgers, with the financial results of the SSC

disclosed in full within a separate note within the DVLA accounts. This was the accounting treatment

adopted up to and including the accounts for the year ended 31 March 2009.

In October 2008 the governance arrangements surrounding the SSC changed, with the responsibility for

SSC management passing directly to the DfT Director General for Resources. Within the 2008-09

financial year the accounting processes and arrangements remained in place and a decision was taken, in

the interests of completeness and transparency to continue with an accounts disclosure for the whole year

on a consistent basis to allow comparison with prior years.

SSC assets recognised in the Agency's accounts were transferred to the Department on 31 March 2009

and are now accounted for as part of the DfT Statement of Financial Position. The financial revenue

results are also recognised within the DfT accounts for 2009-10. DVLA recharges DfT for the costs

incurred on its behalf in terms of staff on loan, IT services and accommodation, netting these costs in the

DVLA accounts to only show the DVLA operational expenditure and separately disclosing the full

recharge from the SSC for the services DVLA receives as a customer within operating costs. Staff

working at the SSC remain on DVLA contracts of employment and work on loan to DfT.

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Note 2: First-time adoption of IFRS - Reconciliation of Equity

31 March 2009

General

Fund

Revaluation

Reserve

Government

Grant

Reserve

Public

Dividend

Capital

Total

£000 £000 £000 £000 £000

Taxpayers’ equity at 31 March

2009 under UK GAAP

52,042 20,194 26,305 19,048 117,589

Cumulative impact on tax payers’

equity at 31 March 2009 for

IFRS

Adjustments for:

IFRIC 12 Service Concession

Arrangements

(1,022)

---

(1,022)

IAS 16 Property, plant &

equipment

(411) 411

IAS 17 Leases

25,705

---

25,705

IAS 19 Employee Benefits (1,225)

---

(1,225)

IAS 37 Provisions, Contingent

Liabilities and Contingent Assets

895

---

895

IAS 38 Intangible Assets (958) 6,540

5,582

Taxpayers’ equity at 31 March

2009 under IFRS

75,026 27,145 26,305 19,048 147,524

1 April 2008

General

Fund

Revaluation

Reserve

Government

Grant

Reserve

Public

Dividend

Capital

Total

£000 £000 £000 £000 £000

Taxpayers’ equity at 31 March

2008 under UK GAAP

82,684 6,477 24,159 19,048 132,368

Impact on tax payers’ equity at 31

March 2008 for IFRS

Adjustments for:

IFRIC 12 Service Concession

Arrangements

(317) - - - (317)

IAS 16 Property, plant &

equipment

12,338 - - 12,338

IAS 17 Leases 27,084 - - - 27,084

IAS 19 Employee Benefits (1,228) - - - (1,228)

IAS 37 Provisions, Contingent

Liabilities and Contingent Assets

894 - - - 894

IAS 38 Intangible Assets - 2,820 - - 2,820

Taxpayers’ equity at 1 April

2008 under IFRS

109,117 21,635 24,159 19,048 173,959

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Reconciliation of deficit for the year ended 31 March 2009

£000

Net (deficit) for the year ended 31 March 2009 under UK GAAP

(21,607)

Adjustments for:

IFRIC 12 Service Concession Arrangements

(705)

IAS 16 Property, plant & equipment

(411)

IAS 17 Leases

(1,379)

IAS 19 Employee Benefits

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

IAS 38 Intangible Assets

(958)

Net (deficit) for the year ended 31 March 2009 under IFRS

(25,056)

Explanation of material adjustments to statement of cash flows for the year ended 31 March 2009

The CFER surplus paid to the consolidated fund of £111.1m during 2008-09 is classed as operating cash

flows in accordance with IFRS, but were including in financing activities in accordance with UK GAAP.

The dividend paid of £4.7m during 2008-09 is also classed as operating cash flows in accordance with

IFRS but included as the Return on Investments and Servicing of Finance category in accordance with

UK GAAP. Interest received of £2.4m is included in investing activities in accordance with IFRS but

included in the Return on Investments and Servicing of Finance category under UK GAAP. Interest

payable of £2.2m is a new cash flow under IFRS due to the changes in accounting for the PFI agreement

and PCAPM finance lease. Previously these cash flows were included within operating cash flows. There

are no other material differences between the statement of cash flows presented in accordance with IFRS

and the statement of cash flows presented in accordance with UKGAAP.

Note 3. Segmental Reporting

2009-10

Operating Segments

Fees Sale of

Marks

VED

Collection

VED

Enforcement

Additional

Funding

Total

£000 £000 £000 £000 £000 £000

Revenue 379,161

82,031 127,680 82,436 22,985 694,293

Expenditure (293,265)

(15,000) (127,680) (82,436) (23,678) (542,059)

CFER payments to HM

Treasury

(41,126)

(67,031) - - - (108,157)

Segment surplus 44,770 - - - (693) 44,077

Reconciliation of reportable segment revenues & retained surplus

Finance income 301

Finance cost (3,403)

Dividend payable (5,903)

Retained surplus for year

35,072

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2008-09

Operating Segments

Fees Sale of

Marks

VED

Collection

VED

Enforcement

Additional

Funding (i)

2008-09

Total

£000 £000 £000 £000 £000 £000

Revenue 339,507 81,593 130,157 83,928 16,446 651,631

Expenditure (317,325) (15,000) (130,157) (83,928) (20,976) (567,386)

CFER payments to HM

Treasury

(38,450) (66,593) - - - (105,043)

Segment deficit (16,268) - - - (4,530) (20,798)

Reconciliation of reportable segment revenues & retained surplus

Finance income 2,364

Finance costs (2,236)

Dividend payable (4,386)

Retained deficit for year (25,056)

The Segments used reflect how management information is provided to the Executive Board.

An analysis of assets and liabilities by segment is not regularly provided to the Chief Executive or

Executive Board and therefore the Agency is early adopting the amendment to IFRS 8 paragraph 23 to

not report this information.

(i) Additional Funding in 2008-09 includes amounts received from DfT in reimbursement for expenditure

incurred by DVLA in running the Shared Service Centre.

Fine Income (see Note 24)

DVLA collected £41.7m in fine income in 2009-10 (2008-09: £49.1m). £41.7m (2008-09: £49.1m) was

surrendered directly to HM Treasury and does not form part of the Trading Fund income, with the third

party costs of collection £2.6m (2008-09: £2.2m) deducted at source.

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Note 4. Staff numbers and related costs

Staff costs comprise:

2009-10

Permanently

employed staff

Others -

Short-term

contract/agency

staff

Total

£000 £000 £000

Wages and salaries

126,139 5,170 131,309

Social security costs

8,263 205 8,468

Other pension costs

20,618 82 20,700

Voluntary early retirement costs

(note 14)

5,184 - 5,184

Total net costs 160,204 5,457 165,661

2008-09 Permanently

employed staff

Others -

Short-term

contract/agency

staff

Total

£000 £000 £000

Wages and salaries 126,674 8,070 134,744

Social security costs 8,504 457 8,961

Other pension costs 21,697 292 21,989

Voluntary early retirement costs

(note 14)

2,553 - 2,553

Total net costs

159,428 8,819 168,247

DVLA staff working at the SSC on loan to DfT are not included in the above costs for 2009-10 as the

recharges to DfT for their salaries are excluded from the DVLA Statement of Comprehensive Income.

Included within 2008-09 is £7.9m in respect of these employees on loan to SSC.

The Holiday Pay accrual (Employee Benefits IAS 19) at 31 March 2010 is £3,013,003 (31 March 2009:

£1,225,000).

The Principal Civil Service Pension Scheme (PCSPS) is an unfunded multi-employer defined benefit

scheme but DVLA is unable to identify its share of the underlying assets and liabilities. A full actuarial

valuation was carried out as at 31 March 2008. Details can be found in the resource accounts of the

Cabinet Office: Civil Superannuation (www.civilservice-pensions.gov.uk).

For 2009-10, employers’ contributions of £21,597,421 were payable to the PCSPS (2008-09:

£21,771,665) at one of four rates in the range 16.7% to 24.3% (2008-09: 17.1% to 25.5%) of pensionable

pay, based on salary bands. The scheme’s Actuary reviews employer contributions every four years

following a full scheme valuation. The salary bands and contribution rates were revised for 2009-10 and

will be reviewed in 2010-11. The contribution rates reflect benefits as they are accrued, not when the

costs are actually incurred, and reflect past experience of the scheme.

Employees can opt to open a partnership pension account, a stakeholder pension with an employer

contribution. Employers’ contributions of £213,452 (2008-09: £204,507) were paid to one or more of a

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panel of 3 appointed stakeholder pension providers. Employer contributions are age-related and range

from 3.0% to 12.5% (2008-09: 3.0% to 12.5%) of pensionable pay. Employers also match employee

contributions up to 3.0% of pensionable pay. In addition, employer contributions of £15,287 (0.8%; 2008-

09: £15,530, 0.8%) of pensionable pay, were payable to the PCSPS to cover the cost of the future

provision of lump sum benefits on death in service and ill health retirement of these employees.

Contributions due to the partnership pension providers at the reporting period date were £0. Contributions

prepaid at that date were £0.

Average number of persons employed

The average number of whole-time equivalent persons employed during the year was as follows:

2009-10 Permanent

staff

(FTEs)

Others -Short term

contract/agency staff

(FTEs)

Total

(FTEs)

Directly employed as reflected in the

costs above

5,556

163 5,719

Staff working on loan to the DfT SSC

249 47 296

Total 5,805 210 6,015

2008-09 Permanent

staff

(FTEs)

Others -Short term

contract/agency staff

(FTEs)

Total

(FTEs)

Directly employed as reflected in the

costs above

5,686 281 5,967

Staff working on loan to the DfT SSC 224 14 238

Total 5,910 295 6,205

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Note 5. Operating Costs

2009-10

2008-09

£000

Agent Costs

(re-stated iv)

Major contracted-out services

161,053

181,096

Northern Ireland agency costs (i)

13,181

13,591

PFI Estates unitary charge

17,860

19,304

Payments to medical practitioners

9,932

9,107

202,026

223,098

Other Direct Costs

Postal related expenses

30,488

24,055

Stationery and printing

12,897

13,444

Publicity and marketing costs

13,417

11,192

Maintenance

8,370

9,217

IT development support

19,034

15,378

Other IT expenditure

10,072

8,397

Cost of blank cards

10,409

9,402

Rates

9,583

7,993

Rentals under operating leases

5,080

4,464

Travel, subsistence and hospitality

2,767

4,449

Telecommunications

3,304

3,120

Recruitment

(309)

859

Management Consultancy

3,235

12,592

Credit Card Charges

10,616

9,334

Training

1,265

1,555

Other items

6,779

4,167

Department for Transport costs

1,625

469

Auditors' remuneration (ii)

136

135

Shared Services Recharge (iii)

4,392

Shared Service Costs (iv)

12,996

Total Operating Costs

355,186

376,316

(i) Note that these costs are provided in full detail in the DVA resource accounts, which can be obtained from

DVA Finance, County Hall, Castlerock Road, Coleraine BT51 3HS.

(ii)

Auditor's remuneration comprises a cash charge for the statutory audit of the DVLA business

accounts of £85,000 (2008-09: £85,000) and IFRS TP4 of £25,000 (2008-09: £25,000) exercise

along with a notional fee for the statutory audit of the VED account of £26,000 (2008-09: £25,000).

(iii)

From 2009-10 DfT accounts for all SSC income and costs. Accommodation and IT services remain

delivered through DVLA contracts, and staff working at the SSC on loan to DfT remain on DVLA

contracts of employment (see Note 4). DVLA nets off the recharges to DfT prior to disclosure in its

accounts so that it presents only its own operating expenditure, showing then the full cost of the

invoiced service it receives from the DfT SSC as part of its functional expenditure. The cost to

DVLA for the services it received from SSC during the 2009-10 year was £4.392m (2008-09:

£4.497m).

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(iv) The 2008-09 comparative figures have been represented to disclose expenditure excluding the

shared services costs, which have been disclosed separately.

2008-09

Total costs

Shared Service

Centre element

As restated

(DVLA

element

only)

£000 £000 £000

Agent Costs

Major contracted-out services

190,482 (9,386) 181,096

Other Direct Costs

Postal related expenses

24,093 (38) 24,055

Stationery and printing

13,552 (108) 13,444

Maintenance

9,234 (17) 9,217

IT development support

16,442 (1,064) 15,378

Other IT expenditure

8,692 (295) 8,397

Rates

8,260 (267) 7,993

Travel, subsistence and hospitality

4,622 (173) 4,449

Telecommunications

3,760 (640) 3,120

Recruitment

876 (17) 859

Management Consultancy

12,912 (320) 12,592

Training

1,615 (60) 1,555

Other items

81,776 (611) 81,165

Shared Service Centre costs

- 12,996 12,996

Total

376,316 -

376,316

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Note 6. Finance income/ (costs)

Finance Income

2009-10

2008-09

£000

Bank interest

301

2,364

Total finance income

301

2,364

Finance Costs

Interest on imputed finance lease element of on

balance sheet PFI contracts

(1,929)

(1,695)

Interest on finance lease liabilities

(1,046)

(499)

Unwinding of discount and impact of changes in

discount rate on provisions

(428)

(42)

Total finance cost

(3,403)

(2,236)

Net finance (costs)/income

(3,102)

128

Note 7. Dividends and Return on Capital Employed

2009-10 2008-09

£000 £000

3.5% Return on capital employed

5,903

4,386

Dividend Payable

5,903

4,386

The average return on net assets over the period 1 April 2009 to 31 March 2010 was 25% against the financial

target of an average 3.5%. This dividend is limited to the annual average target of 3.5%.

■

Note 8. Property, plant and equipment

2009-10

Land Buildings

(excl PFI fit

out)

Information

Technology

Plant &

Machinery

Furniture

& Fittings

( incl PFI

fit out)

Assets under

Construction

Total

£000 £000 £000 £000 £000 £000 £000

Cost or valuation

At 1 April 2009

4,080 53,927 42,273 8,002 44,747 17

153,046

Additions

- 2,636 1,041 2,775 - 780

7,232

Disposals

- - (401) (77) (25) -

(503)

Transfer

- - 7 2 (2) (7)

Revaluations

249 2,766 6,049 163

1,117 -

10,344

At 31 March 2010 4,329 59,329 48,969 10,865

45,837 790 170,119

Depreciation

At 1 April 2009

- 2,907 38,833 6,727 19,475 -

67,942

Charged in year

- 1,377 2,115 613 5,223 -

9,328

Disposals

- - (400) (62) (22) -

(484)

Revaluations

- (25)

5,554 139 283 -

5,951

At 31 March 2010 - 4,259 46,102 7,417

24,959 - 82,737

Net book value at

31 March 2009

4,080 51,020 3,440 1,275 25,272 17

85,104

Net book value at

31 March 2010

4,329 55,070 2,867 3,448

20,878 790 87,382

Asset financing

Owned 3,926 30,089 2,867 3,448 11,246 790

52,366

On-balance sheet

PFI contracts

403 24,981 - - 9,632 -

35,016

Net book value at

31 March 2010

4,329 55,070 2,867 3,448 20,878 790 87,382

Contractual commitments for Property Plant & Equipment are covered by the PFI contract and are included in Note

16. For 2009-10, these are

£989,271 (2008-09: £2,414,000).

■

2008-09

Land Buildings

(excl PFI fit

out)

Information

Technology

Plant &

Machinery

Furniture

& Fittings

( incl PFI

fit out)

Assets under

Construction

Total

£000 £000 £000 £000 £000 £000 £000

Cost or valuation

At 1 April 2008

4,080 41,441 50,145 7,661 42,132 2,125

147,584

Additions

- 14,507 1,773 3 2,170 -

18,453

Disposals

- (54) (9,987) (4) (806) -

(10,851)

Transfer

- - 1,585 - 523 (2,108)

Revaluations

- (1,967)

(1,243) 342 728

(2,140)

At 31 March 2009 4,080 53,927

42,273 8,002 44,747

17 153,046

Depreciation

At 1 April 2008

- 2,836 42,517 5,945 14,560 -

65,858

Charged in year

- 1,732 4,183 504 4,579 -

10,998

Disposals

- (16) (7,109) (2) (265) -

(7,392)

Impairments

- - 281 - - -

281

Revaluations

- (1,645) (1,039) 280 601 -

(1,803)

At 31 March 2009 - 2,907

38,833 6,727 19,475

- 67,942

Net book value at

31 March 2008

4,080 38,605

7,628 1,716 27,572

2,125

81,726

Net book value at

31 March 2009

4,080 51,020

3,440 1,275 25,272

17 85,104

Asset financing

Owned 3,700

25,622 3,440 1,275 14,889 17

48,943

On-balance sheet

PFI contracts

380 25,398

- - 10,383

36,161

Net book value at

31 March 2009

4,080 51,020

3,440 1,275 25,272

17 85,104

The Agency does not hold any Property, Plant and Equipment assets financed by finance lease other than PFI.

In 2008-09 depreciation charged included £932,000 in relation to SSC related assets. These assets were transferred

to the Department of Transport on 31 March 2009 at their net book value of £3,459,000.

Valuation of Assets

Land and buildings are revalued every five years on an existing use valuation by appointed Chartered Surveyors. It

was considered appropriate to undertake a full valuation of the Agency’s estates on 31 March 2009 after a four-year

interval, prior to the introduction of International Financial Reporting Standards from April 1 2009, to allow a

simple one-stage transition. This coincided with the substantial completion of the estates development and

refurbishment programme delivered through the Estates PFI contract with Telereal Trillium. The valuation of the

estates was undertaken principally on an existing use basis. An exception was the valuation by the external valuers

of the Felinfach premises at Fforestfach at 31 March 2009 which was undertaken on a Depreciated Replacement

Cost (DRC) basis whereby the component parts will be depreciated over their appropriate lives. This revaluation

was carried out by Joseph Funtek BSc (Hons) MRICS from Gerald Eve.

Freehold land was revalued as at 31 March 2010, using the Knight Frank Residential Development Land Index for

the fourth quarter of 2009. As end of March 2010 index not considered to be materially different. Office property

(including PFI office property) was revalued as at 31 March 2010 using data from the Investment Property

Databank Capital Growth Index for Office Properties. The index for office property (including PFI office property)

was used to revalue the PFI assets and also specific fixtures and fittings assets, which relate to the specialised fit-

out of the Richard Ley Development Centre and the contact centre. In selecting these indices, the DVLA took

advice from Drivers Jonas Deloitte.

■

The net book value of land includes freehold £3.7m (2008-09: £3.5m) and leasehold £0.6 (2008-09: £0.6m).

(Richard Ley Development Centre £0.2 (125 year lease) and Fforestfach £0.4 (999 year lease)). The net book

value of buildings relates to DVLA property with PFI buildings/refurbishment having a net book value of £25.0m

(2008-09: £25.4m).

Analysis of depreciation, amortisation and impairment line in Statement of Comprehensive Income

2009-10 Total Financed by Govt

Grant

£000 £000

Depreciation of tangible fixed assets (note 8) 9,328 -

Loss on disposals 19 -

Amortisation of intangible assets (note 9) 17,355 5,490

26,702 5,490

2008-09 Total Financed by Govt

Grant

£000 £000

Depreciation of tangible fixed assets (note 8) 10,998 -

Loss on revaluation of IT equipment 204 -

Loss on revaluation of land & buildings at Morriston/Fforestfach 1,923 -

Impairment of assets transferred to DfT 281 -

Amortisation of intangible assets (note 9) 15,627 6,210

29,033 6,210

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Note 9. Intangible assets

The Agency holds a perpetual software licence with Electronic Data Systems Ltd for the right to use the driver and

vehicle software. Development work undertaken by the Agency that adds value to this is capitalised. In addition,

purchased software licences are capitalised in this category.

2009-10 Software Assets Under

Construction

Total

£000 £000 £000

Cost or Valuation

At 1 April 2009 168,521 5,689 174,210

Additions 13,719 9,915 23,634

Transfer 2,864 (2,864) -

Revaluation 1,775 - 1,775

At 31 March 2010

186,879 12,740

199,619

Amortisation

At 1 April 2009 87,061 - 87,061

Charged in year 17,355 - 17,355

At 31 March 2010

104,416 -

104,416

Net book value at 31 March 2009

81,460 5,689 87,149

Net book value at 31 March 2010 82,463 12,740 95,203

2008-09 Software Assets Under

Construction

Total

£000 £000 £000

Cost or Valuation

At 1 April 2008 186,433 5,447 191,880

Additions 8,231 4,132 12,363

Disposals (33,753) - (33,753)

Transfer 3,890 (3,890) -

Revaluation 3,720 - 3,720

At 31 March 2009

168,521 5,689 174,210

Amortisation

At 1 April 2008 105,187 - 105,187

Charged in year 15,627 - 15,627

Disposals (33,753) - (33,753)

At 31 March 2009

87,061 - 87,061

Net book value at 31 March 2008

81,246 5,447 86,693

Net book value at 31 March 2009 81,460 5,689 87,149

■

The carrying amount that would have been recognised had the revalued class of intangible assets been measured

after recognition using the cost model would have been £89.4m (2008-09: £81.6m).

The £33.8m disposals in 2008-09 reflects the change in governance and related asset transfer to DfT in respect of

the Shared Services Centre. These assets were fully amortised following their impairment in 2007-08.

Intangible additions of £9.9m (2008-09: £4.1m) have been included in respect of software under development

which is due to be completed and brought into use in future years. Of the net book value at 31 March 2010

£38,510,100 (31 March 2009: £35,612,000) has been financed by finance lease.

Significant Intangible assets controlled by the Agency are detailed below:

31 March 2010 31 March 2009

Asset Remaining

Useful

economic life

Net Book Value Remaining

Useful

economic life

Net Book Value

(months) £000 £000 (months) £000 £000

Electronic Vehicle

Re- licensing

46 12,583

58 15,523

Sale of Marks 69 5,662

81 6,503

Vehicle System

Software

6 388

Re-platforming 59 7,445

71 8,766

9,154

Drivers

re-engineering

Phase 1 108 27,549

120 29,891

Phase 2 72 2,754

Phase 2.1 AUC 1,681

AUC 1,681

31,984

31,572

Ten Year Renewal

Phase 2 71 402

Phase 2 AUC 1,670

AUC 1,670

Enhancement AUC 6,123

AUC 781

8,195

2,451

AUC relates to Assets Under Construction

■

Note 10. Trade and other receivables

31 March

2010

£000

31 March

2009

£000

1 April

2008

£000

Amounts falling due within one year:

Trade receivables

5,162

5,815 1,485

Other receivables

211 221

Public sector debtors

16,092

9,841 17,431

VAT

9,161

3,968 10,623

Prepayments

24,886

19,301 24,341

Accrued income

2,538

12,811 22,465

PACT contract prepayment

7,771

5,208 5,928

PFI prepayment

1,886

1,683 1,467

67,559

58,838 83,961

Amounts falling due after more than one year:

PACT contract prepayment

8,014

3,833 6,103

Total 75,573

62,671 90,064

Trade receivables 2009-10 of £5.1m (2008-09 £5.8m) includes £3.6m (2008-09 £4.9m) in relation to Sale

of Marks auctions. This amount will, after deduction of costs, be paid over to HM Treasury during the

subsequent financial year.

Included within prepayments is £19.4m (2008-09 : £19.2 m) in respect of a payment to the Post Office®

for services to be provided in 2010-11 plus £15.8m (2008-09 : £9.0m which relates to a service charge

provided by IBM in relation to computer hardware utilised in providing services to DVLA. Both sets of

payments delivered improved terms of contract but are assessed on an annual basis to ensure value for

money before they are made.

■

Note 11. Cash and cash equivalents

31 March

2010

£000

31 March

2009

£000

1 April

2008

£000

Balance at 1 April

50,579

45,769 42,493

Net change in cash and cash equivalent balances

10,108

4,810 3,276

Balance at 31 March

60,687

50,579 45,769

The following balances at 31 March

were held at

Office of HM Paymaster General (OPG)

54,890

45,907 41,474

Commercial banks and cash in hand

5,797

4,672 4,295

Balance at 31 March

60,697

50,579 45,769

OPG provides a current account banking service and the balance held of £54.89m (2008-09: £45.91m)

includes £27,258m (2008-09: £24,756m) held on behalf of HM Treasury and £5.903m (2008-09:

£4.386m) due to DfT, both paid over soon after the year end (see Note 12).

■

Note 12. Trade and other payables

31 March

2010

£000

31 March

2009

£000

1 April

2008

£000

Amounts falling due within one year

Trade payables

18,248

15,391 14,937

Accruals and deferred income

27,828

34,135 37,093

Current part of finance leases

607

3,276 2,188

Current part of imputed finance lease element of

on balance sheet PFI contracts

1,570

1,446 942

Dividend Payable

5,903

4,386 5,242

Cash balance payable to the Consolidated Fund

27,258

24,756 21,657

Other - capital accrual

597

- 3,277

82,011

83,390

85,336

Amounts falling due after more than one

year:

Finance leases

5,537 2,933

Imputed finance lease element of on-balance

sheet PFI contracts

33,793

34,401 23,282

33,793

39,938 26,215

Total 115,804

123,328 111,551

The capital creditor figure includes work undertaken as part of the PFI contract as follows:

PFI Creditor

2009-10 2008-09

£000

1 April

35,847

24,224

Increase due to assets capitalised

976

12,797

Amount paid in relation to assets capitalised

(1,460)

(1,174)

31 March

35,363

35,847

■

Note 13. Financial Instruments

(i) Fair values

The fair values of the Agency's financial assets and liabilities as at 31 March 2010 are shown below. With the

exception of Finance Lease and PFI creditors, due to the short-term nature of the financial instruments held,

carrying value is considered to represent the fair values.

The Agency has examined its contracts to identify embedded derivatives and concluded that where identified these

are closely linked to the host contract and therefore need no adjustment.

2009-10 2009-10

2008-09 2008-09

Fair value Carrying

amount

Fair value Carrying

amount

£000 £000

Financial Assets

Cash and cash equivalents (note 11)

60,687 60,687

50,579 50,579

Loans and receivables (note 10)

- Trade receivables

5,162 5,162

5,815 5,815

- Other receivables

63 63

211 211

- Public sector receivables (N.B. includes VAT)

25,253 25,253

13,809 13,809

- Accrued income

2,538 2,538

12,811 12,811

Total loans and receivables

33,016 33,016

32,646 32,646

Total financial assets

93,703 93,703

83,225 83,225

Financial liabilities

Trade and other payables (note 12)

- Trade payables

18,248 18,248

15,391 15,391

- Accruals

27,828 27,828

34,135 34,135

- Dividend payable

5,903 5,903

4,386 4,386

- Cash balance payable to the Consolidated Fund

27,258 27,258

24,756 24,756

- Finance leases

623 607

9,020 8,813

- Imputed finance lease element of on-balance sheet

PFI contracts

34,468 35,363

35,013 35,847

Capital Accruals

597 597

- -

Total financial liabilities

114,925 115,804

122,701 123,328

The fair values above have been calculated using the discount rate implicit in the Finance leases

(ii) Financial risk management

The Agency’s activities expose it to the following financial risks:

Credit risk – the possibility that the other parties might fail to pay amounts due to the Agency;

Liquidity risk – the possibility that the Agency might not have funds available to meet its commitments to make

payments;

■

Market Risk – the possibility that financial loss might arise for the Agency as a result of changes in such measures

as interest rates movements or foreign exchange rate movements.

Overall Procedures for Managing Risk

The Agency’s overall risk management procedures focus on systems of control to manage risk to a reasonable

level rather than to attempt to eliminate all risk of failure to achieve policies, aims and objectives. (see Statement

on Internal Control page 43).

The financial systems of management control established include:

• Integrated Resource Management (IRM) – a monthly planning cycle, which supports budgetary controls,

monitoring volume and change demand, resource supply. The IRM process is also fundamental as part of our

efficiency and Value for Money (VFM) planning and monitoring, especially in respect of headcount.

• Finance Committee - delegated expenditure responsibilities, providing advice on operational budgets and

project affordability to the Executive Board (EB). Chaired by the Director of Finance, the EB meets on a

monthly basis.

• Monthly reporting (including KPIs, income and expenditure) to Executive Board and our Sponsor Directorate

at DfT: Motoring & Freight Services (MFS).

• Monthly programme expenditure reporting to Programme Delivery Board, EB and MFS.

• Quarterly review of budgets at Executive Board Financial Review (EBFR).

(iii) Credit Risk

Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Agency’s

customers and other parties. The Agency invests only with National Loans Fund (NLF), transferring funds from its

HM Office of Paymaster General (OPG) account. DVLA does not use any third party money markets thus avoiding

the risks associated with depositing surplus funds in such markets.

Exposure to credit risk

The carrying amount of financial assets £93,703,000 (31 March 2009: £83,225,000) represents the maximum credit

exposure.

The ageing of receivables at the reporting date was:

2010

Gross

2010

Impairment

2009

Gross

2009

Impairment

£000 £000

Not past due

32,003 -

31,245 -

Past due 0-30 days

176 -

600 -

Past due 31-120 days

830 -

523 -

More than 120 days

359 81

Total 33,016 -

32,727 81

There has been no impairment provision for 2009-10 (2008-09: £81,000 relating solely to Sale of Marks debtors).

As the majority of DVLA’s balances comprise other Government Departments and Agencies, the Agency believes

that no further impairment allowance is necessary in respect of any other trade receivables.

The movement in the allowance of impairment in respect of receivables during the year was as follows:

2010

2009

£000

Balance at 1 April

Impairment loss - payment received

(81)

Balance at 31 March

(iv) Liquidity Risk

■

The Agency’s exposure to liquidity risk is limited. The level of capital expenditure payments are managed to be

met from available cash balances. The contractual maturity of finance lease financial liabilities, including interest

payments is:

31 March 2010

Non-

derivative

financial

liabilities

Carrying

amount

£000

Future

Contractual

cash flows

£000

months

or less

£000

6-12

months

£000

1-2 years

£000

2-5 years

£000

5+ years

£000

Finance lease

liabilities

607 (647) (479) (168) - - -

Under PFI 35,363 (51,783) (1,726) (1,726) (3,452) (10,357) (34,522)

Total

35,970 (52,430) (2,205) (1,894) (3,452) (10,357) (34,522)

Non-

derivative

financial

liabilities

Fair

Value

£000

Fair Value of

Contractual

cash flows

£000

months

or less

£000

6-12

months

£000

1-2 years

£000

2-5 years

£000

5+ years

£000

Finance lease

liabilities

623 (623) (466) (157) - - -

Under PFI 34,468 (34,468) (1,680) (1,635) (3,096) (8,337) (19,720)

Total

35,091 (35,091) (2,146) (1,792) (3,096) (8,337) (19,720)

31 March 2009

Non-

derivative

financial

liabilities

Carrying

amount

£000

Future

Contractual

cash flows

£000

months

or less

£000

6-12

months

£000

1-2 years

£000

2-5 years

£000

5+ years

£000

Finance lease

liabilities

8,813 (9,821) (2,124) (1,700) (2,895) (3,102) -

Under PFI 35,847 (53,732) (1,679) (1,679) (3,358) (10,075) (36,941)

Total

44,660 (63,553)

(3,803) (3,379) (6,253) (13,177)

(36,941)

Non-

derivative

financial

liabilities

Fair

Value

£000

Fair Value of

Contractual

cash flows

£000

months

or less

£000

6-12

months

£000

1-2 years

£000

2-5 years

£000

5+ years

£000

Finance lease

liabilities

9,020 (9,020) (2,077) (1,626) (2,646) (2,671) -

Under PFI 35,013 (35,013) (1,634) (1,590) (3,012) (8,110) (20,667)

Total

44,033 (44,033) (3,711) (3,216) (5,658) (10,781) (20,667)

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at

significantly different amounts.

■

(v) Market Risk

Interest rates

The Agency has been exposed to interest rate movements on its cash balances only. The Agency does not have any

borrowings or investments. Cash balances are held in short term, floating interest-earning accounts and a

significant portion are held in HM Office of Paymaster General (OPG). Movements in interest rates will impact the

level of interest income credited to the Statement of Comprehensive Income. At the reporting date the fixed rate

interest-bearing financial instruments are shown below:

Carrying Amount

2010 2009

£000

Fixed Rate instruments

PCAPM Finance Leases

(607)

(8,813)

PFI

(35,363)

(35,847)

Financial Liabilities

(35,970)

(44,660)

Variable Rate instruments

Interest bearing bank accounts

49,498

36,428

Fair value sensitivity analysis for fixed rate instruments

The Agency does not account for any fixed rate financial assets and liabilities at fair value through profit and loss,

and the Agency does not designate derivatives as hedging instruments under a fair value hedge accounting model.

Therefore a change in interest rates at the reporting date would not affect the surplus/ (deficit) position.

Cash flow sensitivity analysis for variable rate instruments

A change of 0.5% in interest rates at the reporting date would have increased/ (decreased) the surplus or deficit for

the year by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis

is performed on the same basis as for 2008-09.

Surplus or Deficit:

0.5% increase/(decrease)

£'000 £'000

31 March 2009 182 (182)

31 March 2010

249 (249)

Foreign exchange rates

Financial assets and liabilities are generated by day-to-day operational activities and the Agency has limited

exposure to foreign exchange.

■

Note 14. Provisions for liabilities and charges

2009-10 Early departure costs Tax officers’ pension costs Total

£000 £000 £000

Balance at 1 April 2009

8,779 5,872 14,651

Provided in the year

5,201 (17) 5,184

Provisions utilised in the year

(4,105) (765) (4,870)

Unwinding of discount and

impact of changes in discount rate

428 - 428

Balance at 31 March 2010 10,303 5,090 15,393

Analysis of expected timing of discounted flows

2009-10 Early departure costs Tax officers’ pension costs Total

£000 £000 £000

In the remainder of the Spending

Review period (to 2011)

2,518 705 3,223

Between 2012 and 2016 6,872 2,405 9,277

Between 2017 and 2021 811 1,085 1,896

Thereafter 102 895 997

Balance at 31 March 2010 10,303 5,090 15,393

2008-09 Early departure costs Tax officers’ pension costs Total

£000 £000 £000

Balance at 1 April 2008 11,591 7,151 18,742

Provided in the year 2,553 - 2,553

Provisions utilised in the year (5,407) (1,279) (6,686)

Unwinding of discount and

impact of changes in discount

rate

42 - 42

Balance at 31 March 2009

8,779 5,872 14,651

Analysis of expected timing of discounted flows

2008-09 Early departure costs Tax officers’ pension costs Total

£000 £000 £000

In the remainder of the Spending

Review period (to 2010)

2,328 813 3,141

Between 2011 and 2015 6,001 2,774 8,775

Between 2016 and 2020 450 1,252 1,702

Thereafter

1,033 1,033

Balance at 31 March 2009 8,779 5,872 14,651

Early departure costs

The Agency meets the additional costs of benefits beyond the normal PCSPS/Stakeholder scheme

benefits in respect of employees who retire early by paying the required amounts annually to the

PCSPS/Stakeholder schemes over the period between early departure and normal retirement date of age

60. The Agency provides for this in full when the early retirement programme becomes binding by

establishing a provision for the estimated payments. Future payments to be made under the Early

Departure and Voluntary Retirement schemes are discounted at the HM Treasury advised rate of 1.8%,

(2008-09: 3.2%).

■

Tax officer pension costs

Under the Pension Increase Act 1971, the Agency has a liability to contribute to the pensions of ex local

taxation office staff who were employed on driver and vehicle licensing work before the creation of the

Driver and Vehicle Licensing Centre. Under the Vehicle and Driving Licence (Compensation to Officers)

Regulations 1977, the Agency makes compensation payments to local authority staff in respect of loss of

emoluments when the Local Taxation Offices closed. The provision is based on advice from the

Government Actuary Department, which is re-assessed normally every three years but due to adoption of

IFRS a re-assessment has taken place at 31 March 2010. Following the estimations of future cash flows

provided by the Government Actuary Department future payments to be made in relation to this provision

have been discounted at the HM Treasury advised rate of 1.8%.

■

Note 15. Commitments under leases

Operating leases

Obligations under operating leases comprise:

31 March

2010

£000

31 March

2009

£000

1 April 2008

£000

Buildings

Not later than one year

6,740

6,190 5,927

Later than one year and not later than five years

18,493

17,434 15,579

Later than five years

22,261

18,841 10,780

47,494

42,465 32,286

Other:

Not later than one year

137

117 179

Later than one year and not later than five years

159

71 231

Later than five years

- -

296

188 410

Finance leases

Obligations under finance leases comprise:

31 March

2010

£000

31 March

2009

£000

1 April 2008

£000

Other:

Not later than one year

648

3,824 2,500

Later than one year and not later than five years

5,997 3,216

Later than five years

- -

Less interest element

(41)

(1,008) (595)

607

8,813 5,121

Finance Leases are made up of software development expenditure. Expenditure is capitalised and depreciated over

the life of the associated asset and the finance lease creditor is released over the four year life of the agreement.

Finance lease interest is expensed at a constant periodic rate on the outstanding balance of the liability.

■

Note 16. Commitments under PFI on-balance sheet contracts

On-balance sheet

31 March

2010

31 March

2009

1 April 2008

£000

£000 £000

Total obligations under on-balance sheet PFI

contracts for the following periods comprises:

Not later than one year

3,452

3,358 2,186

Later than one year and not later than five years

13,809

13,433 8,743

Later than five years

34,522

36,941 26,230

51,783

53,732 37,159

Less interest element

(16,420)

(17,885) (12,935)

35,363

35,847 24,224

In addition to the above as at 31 March 2010, the Agency is committed to £989,271 (2008-09:

£2,414,000) of capital expenditure under the PFI contract. This work is planned for 2010-11.

Charge to the Statement of Comprehensive Income and future commitments

The total amount charged to the Statement of Comprehensive Income in respect of the service element of

on-balance sheet PFI transactions was £17,859,833 (2008-09: £19,304,000) and the payments to which

the Agency is committed during 2010-11, analysed by the period during which the commitment expires,

is as follows:

£000

£000 £000

Sixteen to twenty years

17,734

17,696 19,988

DVLA’s estates development and refurbishment programme is delivered through the Estates PFI contract with

Telereal Trillium

. Assets are capitalised in line with the Agency’s capitalisation policy and a corresponding

PFI liability recognised. The annual unitary charge is separated between capital repayments, finance

interest and a service charge element. PFI finance interest is expensed at a constant periodic rate on the

outstanding balance of the liability.

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Note 17. Other financial commitments

The Agency has entered into non-cancellable contracts (which are not leases or PFI contracts), for:

• Provision of end to end IT service including the provision of IT equipment

• Post Office services including vehicle licensing, driver licence application checking, renewal of

photo-licence.

• Wheelclamping services

The key payments to which the Agency is committed, analysed by the period during which the

commitment expires are as follows:

2009-10

2008-09 1 April 2008

£000

£000 £000

Not later than one year

17,307

- -

Later than one year and not later than five years

147,127

369,541 424,794

Later than five years

602,900

47,535 -

767,334

417,076 424,794

Note 18. Contingent Liabilities

At March 2009, there was one contingent liability disclosed: DVLA had agreements with IBM in terms of

future service payments for new systems developments that could crystallise if the contract were not to be

renewed in September 2012. During 2009-10 two actions have been taken – the IBM contract has been

renewed until September 2015, by which time liabilities would have been discharged, and the IFRS

compliant disclosure has now presented the full outstanding liabilities on the balance sheet. This is no

longer a contingent liability.

The Public and Commercial Services Union has lodged an equal pay claim on behalf of DVLA Executive

Officers using the DSA Driving Examiners and Senior Driving Examiners as comparators. The Agency

has obtained advice from Counsel and has provided evidence to the Employment Tribunal, the outcome

of which is not expected prior to the signing of the Accounts. The Agency considers it inappropriate to

provide any additional information on the risk and possible financial implication, as this could be seen as

pre-empting the Tribunal’s decision.

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Note 19. Losses and abandoned enforcement cases

2009-10

Number

of cases

2009-10

Value

2008-09

Number

of cases

2008-09

Value

Losses written off in year

These are cash losses due to

abandoned claims for payments

from customers.

619 £38,414

1,093

£63,000

Abandoned enforcement cases

These are mitigated penalties

offered in lieu of prosecution for

vehicle excise duty evasion that are

waived mainly owing to notices

unable to be served, out of time

court cases, liquidation and so on.

158,884 £5,571,060

126,769

£5,042,000

Special Payments

Ex-gratia payments

1,321 £139,000

1,351 £102,000

Losses

2009-10

One of our key suppliers for high-technology mailing equipment has a German parent company who have had to

undertake a financial restructuring in early 2010-11. The estimated exposure for DVLA has been included as a

provision within the Statement of Comprehensive Income, within the relevant expenditure categories (Printing &

Despatch and maintenance). We are optimistic that this loss may not actually crystallise, but are adopting a prudent

accounting approach and will update the estimates in our AR&A in 2010-11. We and the SSC have increased our

control for the future, though this will slow our payment processes for a restricted category of purchases.

Update on 2008-09 Accounts

During 2008-09 a review was undertaken of the VINI (Vehicle Integration Northern Ireland) project and it was

recognised that a proportion of the previous expenditure would no longer contribute to the solution to be delivered.

This had already been expensed through the I&E Account in years between 2003-04 and 2007-08 as incurred and

none had capitalised to be carried forward. During 2009-2010, the NI vehicles systems were updated and

physically relocated to DVLA data centres in Swansea, enabling support for DVA operations to be delivered via

DVLA's existing IT contract. This has been done to facilitate a future migration when the earlier design work will

provide a valuable start point from which to work to provide citizens in NI with similar facilities as those on the

mainland. The current value of the work undertaken previously remains difficult to quantify accurately.

DVLA established a project in 2005 to monitor vehicles as they pass from private ownership into the dealer

network and then through various transfers within the network until resold for use on the road – “Tracking Vehicles

Through the Trade (TV3T). Further consideration during 2008-09 indicated that the project objectives could be

better approached in a slightly different way - by working closely with manufacturers and dealers and using outputs

from their systems rather than through the original extensive development of the DVLA system.

The initial design and specification work, stakeholder consultation and feasibility studies cost some £7.9m

developing solution options between 2005 and 2008. More recent technical work and discussions with

manufacturers, together with policy issues arising from the questions of mandation and legislative cover raised a

number of detailed issues The development of new requirements, building on the designs

previously produced, re-

commenced in 2009-2010. A good proportion of the design and specification was re-usable, both for the

manufacturers / dealers and for DVLA to interface with its own systems, but there was a proportion of the initial

■

expenditure that was no longer directly utilised as a part of the solution. With the full solution yet to be detailed or

agreed, it is not possible to estimate how much of the initial work will be re-usable with any accuracy.

Note 20. Related parties

DVLA is sponsored by the Motoring & Freight Services Group (MFSG), a directorate of DfT that also

sponsors two other Trading Funds: Driving Standards Agency (DSA) and Vehicle & Operator Services

Agency (VOSA).

DfT is regarded as a related party and DVLA has a significant number of material transactions with DfT,

most notably in respect of the VED Service Level Agreement and Shared Services Centre. In addition,

the Agency has had a significant number of material transactions with other government departments and

central government bodies. Most of these transactions have been with Department of Work and Pensions,

Driving Standards Agency, UK Border Agency, Passport Service, and Post Office®.

None of the Executive Board members or key managerial staff or other related parties has undertaken any

material transactions with the Agency during the year.

Note 21. Intra-government balances

31 March

2010

31 March

2010

31 March

2009

31 March

2009

1 April

2008

1 April

2008

£000 £000

£000 £000 £000 £000

Receivables Payables

Receivables Payables Receivables Payables

Central Government

bodies

11,177 19,434

23,286 20,103 44,107 26,569

Trading Funds and

Public Corporations

33,627 1,500

19,282 - 22,153 -

Local Authorities

602 -

25 - 97 -

Total Intra-

government

balances

45,406 20,934

42,593 20,103 66,357 26,569

Note 22. Pension costs

Pension benefits are provided through the Principal Civil Service pension scheme (PCSPS). From 1

October 2002, civil servants may be in one of three statutory based final salary defined benefit schemes

(Classic, Premium and Classic Plus). New entrants after 1 October 2002 may choose between

membership of Premium or joining a good quality money purchase stakeholder based arrangement with a

significant employer contribution (Partnership Pension Account). Details of the standard PCPS are

available on www.civilservice-pensions.gov.uk

Further details are included in the Remuneration Report earlier and in Note 4 to the accounts.

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Note 23. Motor Vehicle Licence Savings Stamps

For a number of years DVLA ran a Motor Vehicle Licence (MVL) Savings Stamps scheme whereby

customers could purchase savings stamps at the Post Office® and use them to redeem against payment

for vehicle excise duty or for cash. The Post Office® held the cash funds representing unredeemed stamps

held by members of the public in a specially designated account. In 2004, the Post Office® announced the

introduction of its own wider savings stamps scheme. To coincide with this, DVLA announced that the

issue of MVL Savings Stamps would cease on 31 March 2005. During 2005-06, the Post Office®

continued to honour stamps presented for payment of VED and drew on the cash funds it held to settle the

amounts due. On 1 April 2006, the balance of cash held at the Post Office® (£38m) was transferred to

DVLA and from that date, holders of stamps could only redeem them or receive a refund directly from

DVLA.

Since becoming a Trading Fund on 1 April 2004, DVLA has funded the running of the scheme covering

both its own costs as well as those of the Post Office® during the transition year of 2005-06. From 1

April 2006 until 26 March 2008, the cash funds representing unredeemed stamps were held in an interest

earning account. At 31 March 2010 the balance of funds remaining, amounting to £4.7m was held in a

non-interest earning account with HM Office of Paymaster General. This cash balance and the associated

creditor balance representing amounts owed to stamp holders are excluded from the Statement of

Financial Position presented on page 56.

Note 24. Fine Income Remitted to HM Treasury

Source 2009-10

£000

2008-09

£000

CR Fine Income

14,927

22,967

Traditional Enforcement

12,142

11,049

Wheelclamping

7,897

7,879

Debt Collectors

6,724

7,203

Total 41,690

49,098

DVLA and HM Treasury have also agreed special payment arrangements for debt collectors. Their

commission is paid from the fine income that they collect and the net amount is remitted to HM Treasury.

Debt Collection 2009-10

£000

2008-09

£000

Total amount collected

9,338

9,357

Commission paid to Debt Collectors

(2,614)

(2,154)

Amount transferred to Treasury

6,724

7,203

As at of 31 March 2010, DVLA held cash totalling £18.6m (2008-09: £9.2m) in respect of fine income

collected on behalf of HM Treasury.

Note 25. Late Licence Penalties

DVLA does not account for late licensing penalties (LLP) in its records because they are considered to be

Treasury receipts and are transferred directly to the Consolidated Fund. The purpose of this note is to

provide an estimate of LLP fine income outstanding at the balance sheet date. This note therefore reflects

■

figures not displayed in DVLA’s accounts but provides information on the movement in late licence

penalty estimated debtor.

Late Licensing Penalty letters are issued to vehicle keepers who fail to relicense or declare Statutory Off

Road Notification (SORN) within two months of licence expiry. Fine payments are collected throughout

the Local Services Network (LSN), Continuous Registration Enforcement Centres and DVLA Contact

Centre. DVLA also employs debt collectors to recover fines not recovered directly.

Debt collection agents are issued cases monthly from DVLA to pursue further. Revenue is either

recovered by agents and paid over to DVLA gross or paid directly to DVLA from customers induced by

the debt collection agents. Commission earned by agents is invoiced to DVLA separately. The Agency

pays LLP income net of commission to HM Treasury as Consolidated Fund Extra Receipts under a

specific arrangement - thus eliminating LLP income from the business accounts. Fine income used to

cover agents' commission costs is transferred to offset the cost to DVLA.

2009-10

£000

2008-09

£000

Open LLP cases @ 1 April

9,222

11,122

LLP issues

55,581

73,300

LLP Collected – DVLA

(14,612)

(20,000)

LLP Collected - Agents (gross)

(10,168)

(9,300)

Cases Written Off

(30,891)

(45,900)

Open LLP cases @ 31 March

9,132

9,222

Note 26. Events after the Reporting Period

There have been no events since the balance sheet date that impact on the understanding of these financial

statements.

These financial statements are laid before the Houses of Parliament by the Comptroller & Auditor

General (C&AG). International Accounting Standards (IAS) 10 requires the Trading Fund to disclose the

date on which the accounts are authorised for issue. This is the date that the C&AG signs the certificate.

■

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

to the House of Commons

I certify that I have audited the Driver and Vehicle Agency’s Vehicle Excise Duty (VED) Account for the

year ended 31 March 2010 under the Exchequer and Audit Departments Act 1921, as amended by the

Government Resources and Accounts Act 2000. The account comprises the Statement of Revenue and

Expenditure, the Statement of Financial Position, the Statement of Cash Flows and the related notes.

These financial statements have been prepared under the accounting policies set out within the notes to

the Account.

Respective responsibilities of the Accounting Officer and auditor

As explained more fully in the Statement of the Agency and Accounting Officer’s Responsibilities, the

Accounting Officer is responsible for the preparation of the financial statements and for being satisfied

that they give a true and fair view. My responsibility is to audit the financial statements in accordance

with applicable law and International Standards on Auditing (UK and Ireland). Those standards require

me and my staff to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures 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 Vehicle Excise Duty Account and have been consistently applied and adequately

disclosed; the reasonableness of significant accounting estimates made by the Driver and Vehicle

Licensing Agency; and the overall presentation of the financial statements.

In addition, I am required to obtain evidence sufficient to give reasonable assurance that the receipts and

payments reported in the financial statements have been applied to the purposes intended by Parliament

and the financial transactions conform to the authorities which govern them.

Opinion on Regularity

In my opinion, in all material respects the revenue and expenditure have been applied to the purposes

intended by Parliament and the financial transactions conform to the authorities which govern them.

Opinion on financial statements

In my opinion:

• the Vehicle Excise Duty Account gives a true and fair view , in accordance with the

Exchequer and Audit Departments Act 1921, as amended by the Government Resources and

Accounts Act 2000 and directions made thereunder by HM Treasury, of the financial position

as at 31 March 2010 relating to the collection and allocation of Vehicle Excise Duty and of its

net revenue and cash flows for the year then ended; and

• the Vehicle Excise Duty Account has been properly prepared in accordance with the

Exchequer and Audit Departments Act 1921, as amended by the Government Resources and

Accounts Act 2000 and HM Treasury directions issued thereunder.

■

Opinion on other matters

In my opinion:

• the information given in the management commentary within the annual report for the

financial year for which the financial statements are prepared is consistent with the financial

statements.

Matters for which I report by exception

I have nothing to report in respect of the following matters which I report to you if, in my opinion:

• adequate accounting records have not been kept; or

• the financial statements are not in agreement with the accounting records or returns; or

• I have not received all of the information and explanations I require for my audit; or

• the Statement on Internal Control does not reflect compliance with HM Treasury’s guidance.

Report

My report on the Driver and Vehicle Licensing Agency’s arrangements for the assessment, collection,

and proper allocation of revenue is at pages 108 to 110.

Amyas CE Morse

Comptroller and Auditor General

National Audit Office

157-197 Buckingham Palace Road

Victoria

London

SWIW 9SP

13 July 2010

■

VED Account for the Year Ended 31 March 2010

Statement of Revenue and Expenditure

for the year ended 31 March 2010

Notes

2009-10

£m

2008-09

£m

Revenue

Vehicle Excise Duty raised 2

5,742

5,543

Total Revenue 5,742

5,543

Expenditure

Payments to HM Revenue and Customs 3

(1)

(3)

Amounts written off 4

(2)

Total Expenditure (3)

(5)

Net Revenue for the Consolidated Fund 5,739

5,538

Notes forming part of these accounts appear on pages 102 to 107.

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100

Statement of Financial Position

as at 31 March 2010

Notes

31 March

2010

£m

31 March

2009

£m

1 April

2008

£m

Current Assets

Trade and other receivables 5

110

2 2

Cash and cash equivalents 6

47 35

Total Current Assets 182

49 37

Current Liabilities

Deferred income 7

(2,523)

(2,509) (2,469)

Trade and other payables 7

(28)

(11) (12)

Total Current Liabilities (2,551)

(2,520) (2,481)

Total Net Liabilities (2,369)

(2,471) (2,444)

Represented by:

Balance on Consolidated Fund Account as

at 31 March 2010

(2,369)

(2,471) (2,444)

Notes forming part of these accounts appear on pages 102 to 107.

Noel Shanahan

Accounting Officer

24 June 2010

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101

Statement of Cash Flows

for the year ended 31 March 2010

2009-10

£m

2008-09

£m

Net Funds as at 1 April 47

Net revenue for the consolidated fund

(Increase) in non-cash assets

5,739

(108)

5,538

Decrease in liabilities

Net cash flow from revenue activities

5,662

5,577

Cash paid to consolidated fund

(5,637)

(5,565)

Increase in cash in this period

Net Funds as at 31 March 72

Notes forming part of these accounts appear on pages 102 to 107.

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102

Notes to the VED Account

Note 1. Statement of Accounting Policies

1.1 Basis of Accounting

The Vehicles Excise Duty (VED) Account is produced in accordance with the accounting policies detailed below.

Those policies relating to revenue were developed by the DVLA in consultation with HM Treasury and are based

on the International Accounting Standards Board’s Framework. Other accounting policies comply with

International Financial Reporting Standards (IFRS) to the extent that it is meaningful and appropriate. The

accounting policies have been applied consistently throughout.

1.2 Accounting Convention

These accounts have been prepared on an accruals basis and in accordance with the historical cost convention.

1.3 General Accounting Policies

1.3.1 Revenue

All Vehicle Excise Duty receivable is shown net of refunds in the Revenue and Expenditure Statement. Refunds are

accounted for on a cash basis and recognised in the year in which payment is made. The year-end balance also

reflects income deferred to future accounting periods and is broken down across each payment channel in note 2.

1.3.2 Business Accounts

The following transactions are accounted for in the preceding Business Accounts and are covered by its related

accounting policies:

a. Fines and Penalties (fines collected by the Civil Courts are paid to the Ministry of Justice)

b. Fixed Assets

c. Losses and abandoned enforcement cases

d. Cost of collection and enforcement of VED

1.3.3 Bad and Doubtful Debts

In order to give a true and fair view, it is necessary to make allowance for Vehicle Excise Duty revenue, which we

believe will be unlikely to be received in the future. A provision has been estimated using analysis of historic trends

in debt recovery and write offs and is supported by management judgement

1.3.4 Evasion

The costs of VED evasion are outside the scope of the Vehicle Excise Duty Account. Evasion is discussed more

fully in the Management Commentary.

1.3.5 VED Exemption

The VED financial implications of exemption have been estimated for the Vehicle Excise Duty Account and are

discussed in greater detail in note 8 Exemption is also outside the scope of the VED Account.

1.3.6 Related Party Disclosure

The Agency is part of DfT. It has a large number of Vehicle Excise Duty transactions with both Local and Central

Government bodies; at present these are not separately identifiable by DVLA.

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103

1.3.7 Deferred Income

Deferred income in respect of the Post Office®, AFRL, EVL and Fleets is based on the data collected at source

using the period of the Vehicle Excise Duty licence purchased. Deferred income in respect of Local Offices is

based on the licensing renewal pattern for the Post Office®. Management estimate the level of error arising from

this approximation to be de minimus. A proportion of the deferred income balance will be claimed as a refund of

duty during 2010-11. The value of refund for 2009-10 is set out in note 2.

Note 2. Analysis of gross Vehicle Excise Duty collected by Channel

2009-10

£m

2008-09

£m

Over the Counter

Post Office®

3,059

3,232

Local Offices

353

381

Sub Total 3,412

3,613

Electronically

Electronic Vehicle Licensing

2,148

1,752

Motor Manufacturing

251

305

Fleet Operators

128

120

Telephone Relicensing

Sub Total

2,531

2,178

Amounts refunded

(201)

(248)

Total 5,742

5,543

The way in which transactions are being processed is changing significantly, with a major shift from face to face to

electronic channels (please refer to the Management Commentary).

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104

Note 3. Payments to HM Revenue and Customs – Shipbuilders Relief

Shipbuilders’ relief is a payment to HM Revenue and Customs (HMRC) under the Finance Act 1966, to provide

assistance to the shipbuilding industry. It aims to relieve shipbuilders of Vehicle Excise Duty, the duty on

hydrocarbon oil and Value Added Tax incurred in the course of constructing a vessel.

On the 12 January 2004, the Economic Secretary to the Treasury confirmed the abolition, in full and with

immediate effect, of the Shipbuilders’ Relief. This announcement means that Shipbuilders’ Relief will not be paid

in respect of any contracts for vessels signed after 12 January 2004.

The DVLA has a contingent liability (which cannot be quantified at this time) with respect to contracts signed on or

before that date. The DVLA will honour all claims in respect of:

- contracts signed on or before 31 December 2000 in respect of classes of vessel explicitly covered by EC

Regulation 1540/98; and

- contracts signed on or before 12 January 2004 in respect of classes of vessel not explicitly covered by EC

Regulation 1540/98.

During 2009-10 DVLA made payments to HMRC of £1.320m (2008-09: £2.818m).

Note 4. Amounts Written Off

2009-10

£m

2008-09

£m

Amounts written off

Amounts written off include:

• £0.494m for cases where the Agency is unable to trace the offender (2008-09: £0.514m);

• £0.992m for cases of successful prosecutions in court where the revenues were collected by the Home Office

(2008-09: £0.986m); and

• £0.571m where the applicant returned the VED licence disc and this was voided (cancelled) (2008-9:

£0.674m).

A provision of 11% is made for doubtful dishonoured cheque cases resulting in a movement of £0.013m in 2009-10

(2008-09: £0.028m).

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105

Note 5. Trade and other receivables

31 March

2010

£m

31 March

2009

£m

1 April

2008

£m

Motor Trade receivables and Other receivables

110

Trade and other receivables include:

Motor trade receivables (Automated First Registration & Licensing (AFRL) dealers) for 2009-10 were £0.018m

(2008-09: nil);

Other receivables include dishonoured cheque debtors of £2.2m (2008-09: £2.0m), which are shown net of a

provision for doubtful debts; and

Other sundry receivables of £0.006m (2008-09: £0.072m).

VED income of £108.0m collected by the Post Office in 2009-10 but paid to DVLA in 2010-11

All debt will be due to the Consolidated Fund when realised.

Note 6. Cash and cash equivalents

31 March

2010

£m

31 March

2009

£m

1 April

2008

£m

Cash at bank, in hand and in transit

47 35

The cash at bank balances are held at HM Paymaster General and commercial banks.

Note 7. Trade and other payables

31 March

2010

£m

31 March

2009

£m

1 April

2008

£m

Deferred income

2,523

2,509 2,469

Motor trade payables

11 12

2,551

2,520 2,481

Motor trade payables are where customers hold pre-payment accounts, or payments have been made but the service

has not yet been provided. Also included in this figure is income received in advance from Fleet Operators (£8.9m).

Vehicle Excise Duty is paid in advance. The deferred income balance relates to income received in 2009-10 for

Vehicle Excise Duty which relates to 2010-11.

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106

Note 8. Exemptions

Some vehicles are exempt from Vehicle Excise Duty. These are categorised and are shown below at summary

level. An estimated value has been attributed to the average volumes of exempt vehicles held on the Vehicle

2009-10

Exempt Category

PLG HGV Others Total

£m £m £m £m

Vehicles exempt from holding a VED licence *

1559 29

Vehicles issued with a nil value licence **

238 11 17 266

Former Special Concessionary Group ***

19 50 4 73

Total 272 66 30 368

2008-09

Exempt Category

PLG HGV Others Total

£m £m £m £m

Vehicles exempt from holding a VED licence * 14 2 10 26

Vehicles issued with a nil value licence ** 218 8 10 236

Former Special Concessionary Group *** 19 49 4 72

Total

251 59 24 334

* - These include ambulances, fire engines and crown vehicles

** - These include disabled vehicles and historic vehicles, as detailed below:-

*** - These include agricultural vehicles

2009-10

Exempt disabled and historic vehicles

PLG HGV Others Total

£m £m £m £m

Disabled

189.9 0.4 6.7 197.0

Historic

36.6 6.4 4.2 47.2

2008-09

Exempt disabled and historic vehicles

PLG HGV Others

Total

£m £m £m £m

Disabled 186.6 0.4 4.8 191.8

Historic 36.4 6.3 4.1 46.8

In addition, it is estimated that some 5.7m vehicles pass through the trade each year.

The average number of vehicles registered as SORN during 2009-10 was 1.7m (2008-09: 1.6m).

Vehicles held in the trade and vehicles registered as SORN are not liable to VED.

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107

Note 9. Balance on Consolidated Fund Account

2009-10

£m

2008-09

£m

Balance as at 1 April

(2,471)

(2,444)

Net Revenue for the Consolidated Fund

5,739

5,538

Less amount paid to Consolidated Fund

(5,637)

(5,565)

Balance on the Consolidated Fund Account

as at 31 March

(2,369)

(2,471)

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108

Vehicle Excise Duty 2009-10 Accounts

The Comptroller and Auditor General’s Report to the House of Commons

Background

1 The Driver and Vehicle Licensing Agency (the Agency) is responsible for the collection of Vehicle Excise

Duty (VED) on behalf of the Secretary of State for Transport. In 2009-10, £5.7 billion (2008-09: £5.5 billion)

of revenue was collected by the Agency, as reported in the VED Account, and £5.6 billion was paid over to the

Exchequer.

2 The Exchequer and Audit Departments Act 1921 requires me to carry out a review of the systems in place to

collect revenue payable to the Exchequer and to report my findings to the House of Commons. This report

records the outcome of my review and my conclusions as to the adequacy of the systems in place during 2009-

10.

Conclusion

3 The work of my staff has confirmed that adequate regulations and procedures have been framed to secure an

effective check on the assessment, collection, and proper allocation of revenue and that these regulations and

procedures are being duly carried out.

Summary of key findings

4 In respect of 2009, the Department for Transport (the Department) has estimated that VED was evaded on 0.7

per cent of vehicles (2008: 1.0 per cent) with a loss of around £34 million¹ or 0.6 per cent by value (2008: £50

million; 0.9 per cent). This indicates that the Agency has a robust system for the collection of VED revenue.

5 The risk that compliance rates would fall as a result of the recession has not materialised. There are a number of

possible reasons for this including the Agency’s action to prevent evasion during the economic downturn.

6 In 2008-09, the Agency trialled Late Licensing Reminder letters targeting keepers who have failed to re-licence

their vehicle within two weeks of the licence expiring. The outcome of this trial was positive with 28.7% of

recipients returning to compliance. Additional trials supported these findings and the Agency has now

introduced this as a routine part of its compliance strategy.

Compliance with Vehicle Excise Duty

Measuring compliance

7 Each year, the Department for Transport carries out a Roadside Survey to estimate the level of compliance with

the requirement to pay VED. The Roadside Survey is the best available evidence of the effectiveness of the

Agency’s collection procedures and provides strong assurance that there are effective procedures in place.

8 My staff carried out a review of the 2009 Roadside Survey and concluded that it was sufficiently robust to

provide an accurate indication of the level of compliance. Notwithstanding this, in previous reports I and my

predecessors have made a number of recommendations regarding improvements that could be made to the

Roadside Survey.

9 The Department considers that the existing methodology is sufficiently robust and reliable and that further

major redesign would not offer value for money at this time. However, some work is planned to look at factors,

such as the distribution of the survey sites and how minor road sites are weighted to ensure that the sample

remains representative.

¹ The Transport Statistics Bulletin: Vehicle Excise Duty Evasion 2009 cited a loss of revenue of £34 million based on interrogation of the vehicles record in

June 2009. This figure does not include revenue lost due to evasion in Northern Ireland due to statistical uncertainty. Additional uncertainty

arises from the use of the June record for an estimate for the whole of 2009-10. This uncertainty does not, however, affect our overall

assessment of the effectiveness of the systems in place.

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109

10 I agree with the Department’s assessment that no significant changes should be undertaken at the present time.

Both the Department and the NAO will, however, continue to assess the appropriateness of the Roadside

Survey on an ongoing basis.

Estimated levels of compliance

11 In my 2008-09 Report, I discussed the possibility that the level of compliance would reduce as a result of the

economic downturn. The results of the Roadside Survey, supported by evidence from the Agency’s own

monitoring, have shown that this has not been the case.

12 The 2009 survey, carried out in June 2009, indicated that, if the results were typical of the level of compliance

throughout the 2009-10 financial year, VED was evaded on 0.7 per cent of vehicles (2008: 1.0 per cent) with a

loss of around £34 million

or 0.6 per cent by value (2008: £50 million 0.9 per cent). The Agency therefore

collected 99.4%

of VED payable in Great Britain. The chart below shows the reduction over time in the

estimated revenue lost through evasion of VED in Great Britain.

DfT estimates of VED revenue lost in Great Britain 2007-08 to 2009-10

100

2007-08 2008-09 2009-10

Error bars give 95% confidence intervals.

Revenue lost (£m)

Source: Transport Statistics Bulletins: Vehicle Excise Duty Evasion

13 These figures will be understated slightly due to the exclusion of VED lost through evasion in Northern

Ireland. Due to the small sample sizes, it is not possible to estimate reliably but the Department intends to carry

out further investigations to see if the statistics for Northern Ireland can be incorporated in future estimates.

Northern Ireland results would not, however, be expected to have a significant impact on the estimated evasion

rates because Northern Ireland VED accounted for only £166.9m of the £5.7bn collected in 2009-10: 2.9% of

the whole.

Processes that ensure compliance

14 My staff examined governance and transactional processes implemented by the Agency to ensure compliance

with the VED regime and found that these were adequate.

15 The VED Collection and Enforcement Governance Board, comprising members from the Department, the

Agency and HM Treasury, oversees the collection of VED. The Board meets quarterly and covers a range of

topics relevant to the collection of VED. The governance framework is robust and the Board, which represents

a range of relevant stakeholders, presents an effective challenge function helping to ensure the adequacy and

effectiveness of its governance framework.

16 The Agency’s Tactical Compliance Group (TCG), which was set up in the 2008-09 financial year, continues to

meet regularly to evaluate data on evasion trends and uses this information to improve compliance and

All estimates are subject to statistical uncertainty. The 95% confidence intervals for tax evaded are 0.5% to 0.8% equivalent to £28 million

to £42 million by value. This indicates a collection rate of between 99.2% and 99.5%.

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110

enforcement action. The Agency is developing a range of management information to support effective

targeting of resources for example in areas shown to have high levels of evasion. This work is supported by a

revised compliance strategy with a focus on encouraging compliance among soft evaders and continuing to

maintain the low evasion rate.

17 At a transactional level my staff have reviewed the processes and controls in place for ensuring the receipt of

VED by the Consolidated Fund. This work confirmed that the systems in place for collecting VED through a

range of channels, including Post Offices, Local Offices, Electronic Vehicle Licensing and Motor

Manufacturers

are robust and have operated effectively throughout the year. No major control weaknesses

were identified during the 2009-10 financial year.

Improving compliance

18 As discussed in my report last year my predecessor noted in his Report on the 2007–08 VED Account that,

under the policies operated by the Agency, people could renew their licences late to avoid paying a month’s

duty without the risk of penalty, known as ‘month skipping’. In response to this problem, the Agency carried

out a trial, in February 2009, in which it sent further reminders to the keepers of unlicensed vehicles, shortly

after the expiry of the licence but before generating a late licensing penalty.

19 Owing to the success of the trial, with 28.7% of recipients returning to compliance, reminder letters have now

been introduced as a permanent feature of the VED compliance strategy. The Agency is now also investigating

the use of reminder letters specifically for vehicles which are observed on the road while declared as off road

in order to improve compliance within this category of evasion.

Amyas CE Morse

Comptroller and Auditor General

National Audit Office

151 Buckingham Palace Road

Victoria

London

SWIW 9SS

13 July 2010

For full details of receipts by collecting channel see page 103 of the Annual Report and Accounts in this document.

Where an owner has declared a vehicle as being kept off the road, the vehicle must be subject to a statutory off road notification (SORN)

■

111

Accounts Direction given by HM Treasury in accordance with Section 4(6) (a) of the

Government Trading Funds Act 1973 and with Section 2(1) of the Exchequer and

Audit Departments Act 1921

1. The Driver and Vehicle Licensing Agency (DVLA) shall prepare a Business Account for the financial

year ended 31 March 2006 and subsequent financial years in compliance with the accounting principles

and disclosure requirements of the edition of the Government Financial Reporting Manual issued by HM

Treasury (FReM) which is in force for the relevant financial year.

2. The Business Account shall be prepared so as to give a true and fair view of the state of affairs as at 31

March 2006 and subsequent financial year-ends and of the income and expenditure, total recognised gains

and losses and cash flows for the financial year then ended. The Business Account shall also be prepared

so as to provide disclosure of any material income or expenditure that has not been applied to the

purposes intended by Parliament or material transactions that have not conformed to the authorities which

govern them.

3. Compliance with the requirements of the FReM will, in all but exceptional circumstances, be necessary

for the accounts to give a true and fair view. If, in these exceptional circumstances, compliance with the

requirements of the FReM is inconsistent with the requirement to give a true and fair view, the

requirements of the FReM should be departed from only to the extent necessary to give a true and fair

view. In such cases, informed and unbiased judgement should be used to devise an appropriate alternative

treatment, which should be consistent with both the economic characteristics of the circumstances

concerned and the spirit of the FReM. Any material departure from the FReM should be discussed in the

first instance with HM Treasury.

4. DVLA shall prepare a Vehicle Excise Duty Account for the financial year ended 31 March 2006 and

subsequent financial years which shall give a true and fair view of the state of affairs relating to the

collection and settlement of Vehicle Excise Duty at 31 March 2006 and subsequent financial year-ends

and of the revenue and expenditure and cash flows for the financial year then ended.

5. When preparing the Vehicle Excise Duty Account. DVLA shall have regard to the guidance given in

the attached Appendix to this Direction. DVLA shall also agree the format of the supporting notes

(including the accounting policies relating to revenue recognition, evasion and exemption) with HM

Treasury. Regard shall also be given to all relevant accounting and disclosure requirements given in

Government Accounting and other guidance as issued by HM Treasury, and the principles underlying UK

Generally Accepted Accounting Practice.

6. Evasion is outside the scope of the Vehicle Excise Duty Accounts and shall not be included in the

statement of revenue and expenditure, balance sheet, cash flow statement or notes. This fact should be

disclosed in an accounting policy note with reference to the Management Commentary for further

disclosure. The disclosures in the Management Commentary shall include discussion of the level of

evasion in year.

7. Exemption is also outside the scope of the Vehicle Excise Duty Account. This fact should be disclosed

in an accounting policy note, with reference to the notes to the Account for a discussion of the financial

implications.

8. The Business Account, together with the Vehicle Excise Duty Account, shall be transmitted to the

Comptroller and Auditor General for the purpose of his audit examination and report by a date agreed

with the Comptroller and Auditor General and HM Treasury to ensure compliance with the administrative

deadline for laying the audited accounts before Parliament set for the relevant year.

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112

9. The Business Account and Vehicle Excise Duty Account, together with this direction, (but with the

exception of the appendix), shall be laid before Parliament in one volume containing both financial

statements and the Report produced by the Comptroller and Auditor General under section 2(2) of the

Exchequer and Audit Departments Act 1921 as amended by the Government Resources and Accounts Act

2000.

10. This Direction supersedes the separate Directions for the Business Account issued under cover of

Dear Accounting Officer letter (DAO (GEN) 01/06) on 16 January 2006 in so far as it refers to DVLA,

and for the Vehicle Excise Duty Account issued on 23 February 2005.

Ian Carruthers

Director, Government Reporting, HM Treasury

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113

Appendix

Commentary on Sustainability Performance

Purpose

1. As part of its sustainable development strategy DVLA commenced disclosure of its environmental

sustainability performance via the Annual Report and Accounts in 2008-09 reporting year. This reports on

total finite resource consumption, green house gas emission and waste production and will provide a

clear, current baseline for DVLA to measure its performance against.

It is worth noting that other reporting mechanisms present similar data, but look at different sections of

the business. For example E-pims Property bench marking only looks at properties over 500m

Sustainable Development in Government reporting has previously shown office and non-office

environments separately and omitted properties where partial data is available for commercial landlord

properties. This report shows total available performance data for DVLA.

Summary of performance

These targets were our internal stretch targets, as opposed to externally set ones, we set them to try drive performance and achieve our

longer term goals.

This includes all administrative road travel and excludes operational travel such as ANPR Vehicles.

Waste includes refurbishment waste which was not available in 2008-09. Target performance was based on waste from offices.

Waste revenue is part of the Agency PFI unitary charge and was not available in the timescale for this report.

Area

Figure

2009-10

Target Performance

2009-10

Carbon dioxide emissions

from buildings

17,236 tonnes 15,500 tonnes

Carbon dioxide emissions

from administrative road

travel

579 tonnes 790 tonnes

Carbon saving expenditure

£487,345

Total waste 6333.8 tonnes

Refurbishment waste not available

2008-09

Office waste 2195.85 tonnes 1980 tonnes

Total general waste

management expenditure

N/A

Water consumption 54,967 m

55,000

Water & Sewerage

expenditure

£127,489

Buildings energy

consumption

51,964,145 KWh 49,000,000 KWh

Total energy expenditure £3,856,559

■

114

Industry/sector benchmarking

3. DVLA has participated in the OGC IPD property benchmarking schemes for the last four years.

During the 2008/09 review, overall DVLA environmental sustainability performance was reported as

96% of our occupied space ahead of benchmark. The statement reported that:

“.... the environmental sustainability of your occupied office space is ahead of benchmark performance.

The environmental sustainability score provides an objective indication of the performance and practices

characterising benchmarked office space. The score measures the main "impacts" on environment

(carbon dioxide, water and waste) as well as commitments shown to "better management".”

Whilst we have continued reducing our overall water consumption and carbon emissions from business

travel, the key area of environmental focus and development for DVLA, energy efficiency, did take a hit

last year as a result of delayed projects arising from the uncertain financial position.

The 2008/09 review found energy performance to have reduced at 11 of the benchmarked properties with

an overall 34% showing a reduction in energy consumption per m

. However, DVLA’s performance

continues to be skewed by the high energy consumption in the HQ buildings in Swansea housing its

industrial print and in-house data centre environments. Work to greater utilise a second on site CHP is

progressing alongside relocation of IT equipment into our new data centres.

Revised targets and the introduction of CRC, SOGEII and an in year reduction target for carbon of 10%

have refocused efforts to reduce carbon from the DVLA estate.

■

115

Disposal costs form part of the PFI contract so are not readily available.

Includes all official business road travel including ANPR vehicles.

DVLA does not currently carry out any carbon offsetting.

Waste

2007-08 2008-09 2009-10

Target

2009-10

Total waste (Minimum Requirement)

2444.6 2196.48 2195.85 1980

Hazardous

Waste

Total

0.00 0.07 0.00

Landfill

926.32 646.68

610.67 380

Reused/ Recycled

1518.28 1549.8

1585.18 1600

Non-

Financial

Indicators

(t)

Non

hazardous

waste

Incinerated /energy from

waste

0 0 0 0

Financial

Indicators

(£k)

Total disposal cost (Minimum Requirement)

Waste revenue Receipt 07/08 £54,000

Waste revenue Receipt 08/09 £39,724

Waste revenue Receipt 08/09 £38,694

135,919 168,327

N/A

Commentary

Cross Government targets to recycle waste arisings continue to be exceeded with

DVLA recycling approximately 84% of its overall waste. In office waste only terms the

recycling rate is currently at approximately 72%.

Hazardous waste arisings was asbestos removed from the HQ site which is now more

granularly recorded than in previous years.

Waste management is being fully transferred into the DVLA PFI agreement. In

addition DVLAs extension of its ISO14001 accreditation to its local office network has

provided an opportunity to look at recycling smaller local recycling schemes around the

country.

Greenhouse Gas Emissions 2007-08 2008-09 2009-10 Target

2009-10

Non-

Financial

Indicators

Gross emissions from buildings

14,576 17,019 17,236 15,500

(tCO

e) Gross emissions attributable to official

business travel - road miles only

750 840 579.45 790

CRC Gross Expenditure (2011-12 onwards)

Expenditure on accredited offsets (e.g.

GCOF)

£0.00 £0.00 £0.00 £0.00

Financial

Indicators

(£k)

Expenditure on official business travel (road

miles only)

£1,182,359 £955,498 £659,375 N/A

Commentary

Operation of DVLA’s on site CHP provides a continued contribution to the reduction of

carbon from DVLA’s activities. DVLA has introduced a second CHP engine, but due to

delays in projects and relocation of server capacity to DVLA data centres utilisation has

not increased as planned resulting in DVLA not achieving its target.

The emissions from official business travel (road miles only) figure has reduced during

2009/10 due to a number of reasons:

- We have focussed on reducing travel during the year

- We have reviewed the processes in collating data, and now have an automated

process which provides more accurate and granular data

- Because of this new methodology we are now able to calculate emissions at a

greater level of detail e.g. we are able to separate our road data into fuel type

and engine size this enables us to work out total Co2 using specific and

relevant emissions factors.

■

116

Finite Resource Consumption – Energy

2007-08 2008-09 2009-10

Target

2009-10

Electricity: Non-

Green

3,497,204 6,659,168 4,263,932 3,000,000

Electricity: Green

13,235,831 13,545,393 13,579,245 15,500,000

Gas

31,484,098 33,135,894 29,903,990 35,000,000

LPG

N/A N/A N/A N/A

Non-

Financia

Indicato

Energy

Consumption

(KWh)

Oil

N/A 121,890 120,627 120,000

Financia

Indicato

rs (£k)

Total Energy Expenditure

1,870,246 3,442,614 3,856,559 N/A

Commentary

DVLA currently sources 38.8% of its electrical energy from Good Quality combined heat and power

(CHP), with approximately 64% of this being self generated on its HQ on-site CHP system,

surpassing the current 15% target for 2010.

Finite Resource Consumption – Water

2007-08 2008-09 2009-10

Target

2009-10

Supplied

74,805 60,070 54,967 55,000

Non-

Financial

Indicators

Water

Consumption

)

Harvested

N/A 336 629.41 250

Financial

Indicators

(£k)

Water & Sewerage Costs

197,289

190,250

127,489

Commentary

Work in 2008-09 positioned DVLA well to achieve its stretch target Focus was shifted

to look at delivering a step change in energy performance over the next two years.

Harvested water has outperformed expectations in A Block and Fforestfach. Leeds

harvested water performance is not currently available.

Focus will need to be re-geared to deliver the SOGEII targets over the coming months.

■

117

All our services may be accessed through

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Telephone: 0300 790 6801 (national rate)

Fax: 0300 123 0784

Address: Drivers Customer Services (DCS)

Correspondence Team DVLA Swansea SA6 7JL

Textphone: for the deaf and hard of hearing

01792 766 366 (standard rate)

Vehicle enquiries

E-mail: www.direct.gov.uk/emaildvla

Telephone: 0300 790 6802 (national rate)

Fax: 0300 123 0798

Address: Vehicle Customer Services (VCS)

DVLA Swansea SA99 1AR

Textphone: for the deaf and hard of hearing

01792 766 366 (standard rate)

Premium Rate Services (Calls charged at 49 pence per minute)

Date Vehicle First Registered: 0906 185 8585

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To check on the availability of DVLA Personalised Registrations please visit our website

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Press enquiries Tel: 03001230791 or email press.office@dvla.gsi.gov.uk

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If you would like further information about this Annual Report & Accounts, please contact DVLA,

Corporate Management Services, Swansea, SA6 7JL. Tel: 01792 782620 or email

businessplanning@dvla.gsi.gov.uk.

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DVLA Annual Report & Accounts

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DVLA Annual Report & Accounts 2009-10

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