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DVLA Annual Report & Accounts
2009-10
DVLA Annual Report & Accounts 2009-10
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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
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1
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
38
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
Contact us
117
2
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
3
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 beenthis 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).
4
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.
5
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.
6
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
7
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.
8
How DVLA fits within Government Funding and Functions
9
How we did against our Secretary of State Targets 2009-10
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’
11
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.
12
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.
13
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.
14
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.
15
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 theGreenaway 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.
16
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.
17
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.
18
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).
19
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.
20
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%).
21
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.
22
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
March 2010
Revised to 2011
Achieved
Achieved
Achieved
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
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
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
March 2010
March 2010
Achieved
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
23
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.
24
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.
25
26
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.
27
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;
28
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.
29
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.
30
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.
31
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
32
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.
33
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.
34
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.
35
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
register that reveal potentially unlicensed vehicles that have not declared SORN. These have developed
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).
36
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.
37
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.
38
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
39
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
40
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
£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.
41
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
42
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.
43
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.
44
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;
45
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.
46
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
47
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.
48
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);
49
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.
50
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.
51
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
52
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.
53
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.
54
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
55
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
£000 £000
Income from operations
Income from activities
461,192
437,546
Other operating income
233,101
214,085
Total income from operations
3
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
3
35,072
(25,056)
Other comprehensive income
Net gain on revaluation of property, plant
and equipment
8
4,393
1,790
Net gain on revaluation of intangible
assets
9
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.
56
Statement of Financial Position
as at 31 March 2010
Note 31 March 2010
31 March 2009
1 April 2008
£000
£000
£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
57
Statement of Cash Flows for the year ended 31 March 2010
2009-10
2008-09
£000
£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
11
50,579
45,769
Cash and cash equivalents at the end of the period
11
60,687
50,579
Notes forming part of these accounts appear on pages 60 to 96.
58
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
59
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).
60
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.
61
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.
62
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.
63
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.
64
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.
65
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.
66
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.
67
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.
68
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
69
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
3
IAS 37 Provisions, Contingent Liabilities and Contingent Assets
1
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
70
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.
71
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
72
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
73
Note 5. Operating Costs
2009-10
2008-09
£000
£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).
74
(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
75
Note 6. Finance income/ (costs)
Finance Income
2009-10
2008-09
£000
£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%.
76
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).
77
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.
78
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
79
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
80
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
81
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
63
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.
82
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).
83
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
£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
84
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
£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;
85
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
£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
7-
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
£000
Balance at 1 April
81
57
Impairment loss - payment received
(81)
24
Balance at 31 March
-
81
(iv) Liquidity Risk
86
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
6
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
6
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
6
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
6
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.
87
(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
£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.
88
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%).
89
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%.
90
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.
91
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.
92
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.
93
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
94
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.
95
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
96
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.
97
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.
98
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
99
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)
(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.
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
72
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
9
(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
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
35
Net revenue for the consolidated fund
(Increase) in non-cash assets
5,739
(108)
5,538
-
Decrease in liabilities
31
39
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
25
12
Net Funds as at 31 March 72
47
Notes forming part of these accounts appear on pages 102 to 107.
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.
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
4
1
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).
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
2
2
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).
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
22
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
72
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
28
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.
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
Register during 2009-10.
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