Annual Report 07 · 2012. 2. 9. · Minimised,recoveredandwell-managedwaste 10 Goodwaterenvironments 14 Goodairquality 18 Goodlandquality 22 ... priorityand,aswellasworkingjointlyonwaste,emergencyplanning,marineandfloodingmatters,

An

nualRep

ortand

Accounts

2007-2008

The paper used in this publication contains 75% post consumer recycled material08/08 500

Annual Report and Accounts2007-2008

Our aim

To provide and an efficient and integrated environmental protection systemfor Scotland which will both improve the environment and contribute to theScottish Ministers' goals of sustainable economic growth and a greener andhealthier Scotland.

SG/2008/150 Laid before the Scottish Parliament by the Cabinet Secretary for Rural Affairs and theEnvironment in pursuance of Section 46 of the Environment Act 1995.

The Annual Accounts are being laid before the Scottish parliament by the Cabinet Secretary forRural Affairs and the Environment in pursuance of Section 22(5) of the Public Finance andAccountability (Scotland) Act 2000.

Annual Report and Accounts 2007-2008 1

Scottish Environment Protection Agency:Annual report and accounts 2007–2008

Contents

About this report 2

Foreword by SEPA’s Chairman 3

Introduction by the Chief Executive 4

Main aim 5

Highlights of the year 6

Performance in detail 8

Minimised, recovered and well-managed waste 10

Good water environments 14

Good air quality 18

Good land quality 22

A respected environment: protected, informed and engaged communities 26

Economic well-being 30

Performance against key targets 34

Our corporate structure 40

How SEPA delivers 41

Organisational structure 42

SEPA office locations 43

Corporate support 44

Enforcement actions 47

Report and accounts 48

Contents

Annual Report and Accounts 2007-20082

About this report

About this report

This report provides information on our performance against the targets we agreed with the (then) Scottish Executive inour Corporate Plan for the three years 2005-2006 to 2007-2008. The report is organised as follows.

Foreword from SEPA’s Chairman and Introduction from the Chief Executive

These sections provide brief descriptions of the year, focusing on the most important aspects of our performance.

Main aim

A summary of the organisation including an outline of our purpose.

Highlights of the year

This gives the highlights from each month during the financial period from April 2007 to March 2008.

Performance in detail

Six sections that state our targets, summarise our performance and discuss our achievements. The sections relate to eachof our outcomes:

• minimised, recovered and well-managed waste;

• good water environments;

• good air quality;

• good land quality;

• a respected environment: protected, informed and engaged communities;

• economic well-being.

Performance against key targets

This section gives a summary of our performance through the year from 1st April 2007 to 31st March 2008, highlightingour successes and explaining our failures.

Our corporate structure

This outlines SEPA’s high level structure.

How SEPA delivers

This diagram illustrates what we do using ‘a day in the life of’ SEPA staff. It is followed by our organisational structurechart and a map showing our office locations.

Corporate support

Details of activities that help us function more efficiently, such as structure changes and developments in informationmanagement. This also includes a financial summary.

Enforcement actions

A list of the enforcement actions used by SEPA in 2007-2008.

Annual accounts

Report and accounts for the year ended 31 March 2008.


Foreword by the Chairman

Foreword by the Chairman

I am delighted to have been appointed as Chairman of SEPA at such an interesting andchallenging time in its development. Since joining SEPA in January 2008 I have been struckby the dedication and commitment of staff at all levels to delivering an improving environmentin Scotland.

The Scottish Government’s direction provides SEPA with some considerable opportunities toimprove levels of service while delivering further efficiency savings. But it will also drive clearerprioritisation and alignment of effort across the public sector in supporting Scotland’sdevelopment.

In its sustainable economic growth strategy the Government has set out its plans to expandhouse building and accelerate the economy while also reducing landfilling, increasingrenewable power production and reducing greenhouse gas emissions.

To enable this, while maintaining our high standards of environmental protection, SEPA will beworking even more closely with its customers to ensure that the economic benefits of goodenvironmental practice are recognised and realised. A key part of Scotland’s competitiveadvantage comes from the environment we are here to protect.

I am particularly keen that SEPA focuses on the most efficient and effective relationship withits customers and I am keen to lead our emerging work on customer focus.

I have only been in place for a few months but I am encouraged and impressed that SEPA isclearly focussed on developing good relationships with businesses and communities in order todeliver better partnership working overall. Our role in the Scotland’s Environmental and RuralServices project is testament to our commitment to working more closely and effectively withthe Government, local authorities, other agencies and non-departmental public bodies.

SEPA has been successful and will continue to deliver improved service. But, together withothers, we can and will produce a better, more joined-up, effective and efficient environmentalservice for Scotland.

David SigsworthChairman


Introduction by the Chief Executive

Introduction by the Chief Executive

SEPA set itself exacting performance standards for 2007-2008 and, as this report shows, we met18 of our 23 key targets. Of those targets we and those we regulate failed, two of these were ‘nearmisses’. We also recorded some other significant environmental successes.

The EU Integrated Pollution Prevention and Control Directive is the framework for regulating majorindustrial activities that may cause pollution. Applications from industry for Pollution Prevention andControl permits are necessarily complex and challenging, but SEPA had issued over 500 permits byOctober 2007. This made Scotland the first in the EU successfully to permit all its Pollution Preventionand Control sites.

Scotland’s water quality continues to improve overall although there were some mixed results duringthe year. Despite the wettest summer for over 30 years, 48% of Scotland’s designated bathing watersachieved the highest, ‘excellent’ water quality status. However, seven bathing waters failed for the2007 season. SEPA achieved its targets to reduce the amount of poor quality rivers and pollutedcoastal waters, but we did not achieve our reduction target for polluted estuaries.

SEPA collates data about waste management in Scotland and we are pleased to report significantprogress in recycling and waste management. The recycling and composting rate has risen from amere 3.1% in 1997 to 31.2% in 2007, and the amount of biodegradable municipal waste being sentto landfill sites fell from a peak of 1.90 million tonnes in 1999 to 1.39 million tonnes in 2007.

This reporting year, April 2007 to March 2008, saw some major developments within SEPA itself, mostparticularly with the introduction of a new pay and grading system. The process of migrating stafffrom the old into the new system was complex, challenging and difficult for both management andstaff, and unfortunately at the end of this reporting year the union was moving into a period ofindustrial dispute. However, we have made positive progress since then which will be reported on inour next annual report.

There were also major changes in Government during the course of the year. In May 2007, theScottish Parliamentary elections brought a new Government into power. New Ministers took up theRural Affairs and Environment portfolio, with Richard Lochhead MSP as Cabinet Secretary andMichael Russell MSP as Minister for the Environment. The Government’s strategic objectives andeconomic strategy were published over the course of the year and SEPA has developed its newcorporate plan within this context. Delivery of more joined-up public services has been a particularpriority and, as well as working jointly on waste, emergency planning, marine and flooding matters,SEPA was very active in helping develop the new ‘Scotland’s Environmental and Rural Services’(SEARS) initiative launched by the Ministers in June 2008.

Finally I would like to highlight some major changes to our Agency Board. At the end of December2007, our Chairman Sir Ken Collins, Deputy Chairman Nick Kuenssberg and North Regional BoardChairman Professor Brian Clark all retired. Their individual and combined contributions to SEPA andScotland’s environment over the past eight years and more were immensely valuable and I would liketo take this opportunity to record our thanks to them. On 1st January 2008 our new Chairman DavidSigsworth took up his post and shortly afterwards we welcomed the Government’s announcementthat Bob Downes and Julia Sturrock had been appointed to fill the remaining places on the Board.We look forward to working with them in the years to come.

Dr Campbell GemmellChief Executive


Main aim

Main aim

The Scottish Environment Protection Agency (SEPA) protects and improves the environment in a number of ways. This includeshelping customers to understand and comply with environmental regulations and to realise the many economic benefits ofgood environmental practice. This approach benefits the environment and the economy, and means we can focus our resources(including our enforcement powers) on tackling the greatest environmental threats. We also provide expert advice on theScottish environment and deliver a wide range of information, guidance and public information services.

Described in broad terms, our responsibilities include regulating:

• activities that may pollute water;

• activities that may pollute air;

• waste storage, transport, treatment and disposal;

• the keeping and disposal of radioactive materials;

• activities that may contaminate land.

Some of our other principal responsibilities include:

• monitoring, analysis and reporting on the state of Scotland’s environment;

• running Scotland’s flood warning systems;

• helping implement the National Waste Strategy;

• controlling, with the Health and Safety Executive, the risk of major accidents at industrial sites;

• operating the Scottish part of the Radioactive Incident Monitoring Network.

To deliver an efficient environmental protection system we must be able to plan, monitor and report on our work and wegroup our responsibilities into six high-level outcomes:

• minimised, recovered and well-managed waste;

• good water environments;

• good air quality;

• good land quality;

• a respected environment: protected, informed and engaged communities;

• economic well-being.

The breadth of our responsibilities – and our outcomes – is reflected in the organisation’s 1,300 staff who cover a wide rangeof occupations and specialisms across our 22 local offices.


Highlights of the year April 2007 to March 2008

April 2007SEPA announces it will work in partnership with farmers,the Macaulay Institute, National Farmers’ Union Scotland,the Scottish Agricultural College, Scottish NaturalHeritage and the (then) Scottish Executive to study theeffects of pollution in two water catchments – Cessnock(Ayrshire) and Lunan Water (Angus) – and share bestpractice on how to reduce it.

May 2007The Scottish Parliamentary elections bring a newGovernment into power at Holyrood. New Ministers withresponsibilities for environmental issues and SEPA areappointed including Richard Lochhead MSP as CabinetSecretary for Rural Affairs and the Environment andMichael Russell MSP as Minister for the Environment.

June 2007The Minister for the Environment asks a number of publicsector bodies, including SEPA, to work together todevelop proposals for a single delivery service for ruralcustomers. SEPA subsequently plays a major role indeveloping Scotland’s Environmental and RuralServices (SEARS).www.sepa.org.uk/sears.html

July 2007Householders can now return end-of-life electronicequipment purchased after August 2005 to the distributorafter new regulations that form part of the WasteElectrical and Electronic Equipment Directive comeinto force.www.sepa.org.uk/producer/weee.htm

August 2007SEPA publishes the National Water Quality Classificationreport for 2006. This shows further improvements withfewer water bodies classed as unsatisfactory.www.sepa.org.uk/pdf/data/classification/water_qual_class_2006.pdf

September 2007The Scottish Government announces funding of£1 million to develop flood warning schemes in theNorth East of Scotland. These will be developed by SEPAin partnership with Aberdeenshire, Aberdeen City andAngus Councils.www.sepa.org.uk/flooding

JulyJune

August

September

May

April


October 2007SEPA successfully completes the process of issuingpermits to all sites that fall under the IntegratedPollution Prevention and Control Directive. Scotlandbecomes one of the first countries in Europe to meet theOctober deadline set by the directive. During thetransitional period SEPA had received over 500applications for permits.www.sepa.org.uk/news/releases/view.asp?id=605&y=2007

November 2007The EC Flood Directive passes into European law. SEPAis playing a major role in supporting the ScottishGovernment to transpose the directive into Scots law andto develop its approach to sustainable flood management.This will recognise the significance of climate changeimpacts in Scotland.

December 2007SEPA announces the top three environmentally friendlybusinesses in Scotland at the annual VIBES Vision inBusiness for the Environment of Scotland awards. Theseawards recognise and reward the efforts of Scottishbusinesses to become more efficient by improving theirenvironmental performance.www.vibes.org.uk

January 2008SEPA welcomes its new Chairman, David Sigsworth andnew Board members - Bob Downes (standing, fourthfrom left) and Julia Sturrock (standing, first on left).www.sepa.org.uk/board/agency/members.htm

February 2008Cabinet Secretary Richard Lochhead launches a ‘ZeroWaste Think Tank’ tasked with defining what ‘zero waste’means for Scotland. SEPA, along with partners from thewaste and sustainable development community, iscontributing to this group.www.scotland.gov.uk/News/Releases/2008/03/25124743

March 2008SEPA launches a new enforcement policy that outlineshow SEPA will respond to environmental crime andfailures to comply with licences.www.sepa.org.uk/pdf/policies/5.pdf

November

October

January

February March

December


Performance in detail

Minimised, recovered andwell-managed waste

10

14Goodland quality

22Good water

environments


A respectedenvironment:protected,informed andengagedcommunities

Goodair quality

18 26

30Economicwell-being


Minimised, recovered and well-managed waste


Introduction

In support of Scotland’s National Waste Plan, SEPA regulates and advises on waste prevention, re-use, recycling, recoveryand disposal. Where the production of waste cannot be avoided, we aim to regulate the disposal, recycling and recoveryindustries in a way that is proportionate to the risks to human health and the environment.

Key achievements

• We have progressed all the objectives withinthe Scottish Household Waste PreventionPlan throughout the year.

• The six-monthly review of progress inimplementing the Business Waste ActionPlan was completed in December 2007. Ofthe 13 SEPA actions in the Business WasteAction Plan, nine are complete, two areprogressing well and two actions have beenre-scheduled.www.sepa.org.uk/pdf/nws/business/Trade_Waste_Survey.pdf

The quantity of biodegradable municipal solid waste goingto landfill in Scotland has fallen from 1.90 million tonnes in1990 to 1.39 million tonnes in 2007.

Community composting initiative, Glencoe

We are pleased to reportsignificant progress inrecycling and wastemanagement.

Campbell Gemmell,SEPA Chief Executive


Minimised and recovered municipal solid waste

Complete the Scottish Household Waste Prevention Action Plan

Work on all the objectives in the Scottish Household Waste Prevention Plan hasprogressed steadily throughout the year. Waste prevention will continue to be ahigh priority national policy objective in the new financial year, as the ScottishGovernment renews its commitment to halt the growth in municipal wastearisings by 2010. www.scotland.gov.uk/Resource/Doc/166848/0045564.pdf

Produce quarterly data reports showing local authority progress towardsmeeting the landfill allowance target

Quarterly data reports showing the quantity of biodegradable municipal wastelandfilled by each local authority are available on our website. These quantitiesare calculated from returns provided by local authorities. As well as the quarterlyreport, we publish rolling year reports. www.sepa.org.uk/nws/data/lawas.htm

Reduce biodegradable municipal solid waste going to landfill to 1.5 milliontonnes

Data show that the quantity of biodegradable municipal waste being sent tolandfill sites in Scotland fell from a peak of 1.90 million tonnes in 1999 to1.39 million tonnes in the period January 2007 to December 2007 (see Figure 1).www.sepa.org.uk/nws/data/returns.htm

Figure 1: Weight of biodegradable municipal solid waste going to landfill


Waste incineration:challenges andsolutions

The Waste Incineration Directive

helps improve standards for

protecting the environment and

human health. The directive was

implemented in Scotland

through the Waste Incineration

(Scotland) Regulations 2003.

Like many regulations, their

implementation can be

challenging in practice and lead

to unintended problems, eg

what materials can be used as

fuels. The directive applies to

most activities that involve

burning waste, including

burning waste for fuel. Its highly

prescriptive nature provides us

with a regulatory challenge and

we have been working closely

with the Scottish Government

on managing its

implementation.

We have provided advice and

guidance to industry on actions

they can take to show that a

waste is fully recovered and can

be used as a normal fuel. We

have had discussions with a

number of operators since the

introduction of the directive. For

example, we have advised

whisky distilleries wanting to use

the vegetable by-products of the

production process to fuel

biomass boilers. And we have

advised major waste

management companies

seeking to build large-scale

energy-from-waste plants.

www.sepa.org.uk/pdf/guidance/waste/is_it_waste_v2.pdf

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YearWeight of biodegradable MSW going to land!ll Target

CASE STUDY

Recycling point, Fife



Well-managed waste and compliance

All landfills to be compliant with the Landfill Regulations

Under the Landfill (Scotland) Regulations 2003, existing landfill sites thatcontinue to accept waste for disposal had to apply for a new permit by 31stMarch 2007.

We issued one permit for a hazardous waste landfill site and 44 permits for non-hazardous waste landfills during 2007-2008. We also issued 15 permits for inertlandfill sites and seven inert applications are still to be determined.

All hazardous and non-hazardous landfills in Scotland have permits, except thosewhich are closing and currently under restoration.

Maintain and improve compliance by all activities subject to wastemanagement licensing

We set a target to ensure at least 90% of waste management licensed activitiesoperated to a satisfactory level during 2007. This target was narrowly failed with88% of the sites assessed demonstrating satisfactory operator performance (seeFigure 2). In total 840 sites out of 960 sites assessed achieved satisfactoryperformance.

SEPA is concerned that operators continue to fail to comply with the conditionsof their environmental licences. We are giving increased priority to tackling thisissue over the coming year.

Figure 2: Satisfactory operator performance: waste management licensing

Waste Electrical and Electronic Equipment Directive

The Waste Electrical and Electronic Equipment Directive requires producers tofund the treatment, recycling and recovery of waste electrical and electronicequipment, with targets ranging from 50% to 80%. The UK regulationsimplementing the directive came into force on 2nd January 2007, with full effectfrom 1st July 2007.

Our role in implementing the producer responsibility regime for the directivewithin Scotland involved granting approval to 27 companies involved in the issueof tradable evidence notes of recycling and the approval of five producercompliance schemes. www.sepa.org.uk/producer/weee.htm

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YearTarget Actual

Recycling facility, Highlands

Waste electronic equipment for recycling



Packaging waste

The Packaging Waste Regulations aim to ensure that at least 50% of UKpackaging waste is recovered and recycled. The amount of packaging wasterecovered has increased steadily from 39% in 1999 to approximately 62% in2006. We met, and in some cases exceeded, our monitoring targets under thepackaging waste regime. www.sepa.org.uk/producer/packaging/monitoring.htm

Companies obligated under the packaging regime and those involved in the issueof the tradable evidence notes can now apply for registration online.www.sepa.org.uk/producer/packaging/npwdatabase.html

Minimised and recovered business waste

Achieve SEPA's objectives in the national framework for dealing withcommercial and industrial waste

The six-monthly review of progress in implementing the Business Waste ActionPlan was completed in December 2007. Of the 13 SEPA actions in the plan, nineare complete, two are progressing well and two actions have been re-scheduledfor completion during 2008-2009.www.sepa.org.uk/pdf/nws/business/Trade_Waste_Survey.pdf

Together with the Scottish Government, SEPA is to co-chair a group made up ofrepresentatives from a number of partners, who will provide support to thebusiness waste element of the National Waste Plan Review.

Complete a general review of the National Best Practice Project Programme

Our general review of the National Best Practice Programme found that this workhas effectively been overtaken by a combination of progressive regulation andprojects which are now being carried out by a range of business supportorganisations. As a result, no new projects have been initiated.

Better WasteRegulation

The Better Waste Regulation

initiative aims to see a

proportionate, efficient and

risk- based approach to waste

management regulation.

A consultation carried out

during 2007 revealed many

positive aspects to the existing

regime in Scotland, but also

highlighted concerns that

elements of it are over-

complicated, costly and

bureaucratic.

The Scottish Government and

SEPA jointly published the ‘Better

Waste Regulation Consultation

Report’ on 24th January 2008.

This report summarises the

responses received to the

consultation, which pointed to

clear areas of action that will be

of benefit to the industry and

regulators. We have made

progress on a number of the

issues raised including:

• an online registration facility

for waste exemptions;

• guidance on road planings;

• a new compliance assessment

scheme.

www.sepa.org.uk/consultation/closed/2007/bwr/index.htm

CASE STUDY

White goods recycling initiative


Good water environments


Introduction

SEPA works to protect and enhance groundwaters, rivers, lochs, estuaries and coastal waters. It does this under theWater Environment (Controlled Activities) (Scotland) Regulations 2005 and in partnership with other organisations inorder to ensure sustainable benefits for the economy and the people of Scotland.

Key achievements

• In 2007 we published the significant watermanagement issues reports for the Scotlandriver basin district and - together with theEnvironment Agency - the Solway Tweedriver basin district.

• We have substantially revised the Scottishmonitoring network. Fewer sites are nowsubject to routine monitoring, but new siteshave been added to assess the impact ofnewly regulated and diffuse pressures.

Headline figures from Scotland’s Water Environment Review2000-2006 show that SEPA achieved its target to reduce theamount of poor or seriously polluted rivers by at least 30%.

Scotland’s waterquality continues toimprove overall.


Water sampling, South Lanarkshire



Surface water quality

Assess 1,000 licences for activities in water bodies not achieving goodstatus and review, where appropriate, to drive environmentalimprovements

We have made progress towards delivering this target. We completed impactassessments of nearly 6,000 licences and identified 986 licences as priorities forreview. This was followed up by site inspections to validate the information in thelicences. Detailed reviews are underway covering over 400 licences, but the targetof reviewing 1,000 has not been achieved. This work proved more demandingthan originally expected.

River, estuarine and coastal water quality

Headline figures from Scotland’s Water Environment Review 2000-2006 show weachieved our target to reduce the amount of poor or seriously polluted rivers by atleast 30%. The target to reduce the length of unsatisfactory and seriously pollutedcoastal waters by at least 45% was also comfortably met. But though there wereimprovements to Scotland’s estuaries, we did not achieve the target of reducingthe area of unsatisfactory or seriously polluted estuaries by at least 20%.

Maintain and improve levels of operator compliance

Our target was to improve the level of licence compliance for all discharges to95%. We assessed 12-month rolling compliance in 2007 to be 90% (see Figure 3).

SEPA is concerned that operators continue to fail to comply with the conditionsof their environmental licences. We are giving increased priority to tackling thisissue over the coming year.

Figure 3: Compliance with discharge consents to controlled waters

Scotland’s WaterEnvironmentReview 2000-2006

In March 2008 we published a

review of the trends in our

classification of Scotland's water

environment covering the period

from 2000–2006. The review

completed a series of reports

started by the (then) Scottish

Executive in 1986. The

information in the report is

based on sampling and analysis

results from over 4,000 riverine

sites, approximately 1,500 coastal

and estuarine sites, 200 loch sites

and over 250 groundwater sites

across Scotland.

The report concluded that

overall water quality in Scotland

is generally good and continues

to improve. In recent years there

have been major investments in

sewage treatment and greater

control of other sources of

pollution from individual sites.

Although diffuse pollution

originating from farmland and

urban areas is being reduced, it

remains a significant issue and is

now the largest source of

pollution to Scotland’s water

environment. Other pressures

include urban sewage pollution,

fish farming, acidification,

forestry and agricultural point

sources. The increasing

environmental awareness shown

by the public and greater ease of

reporting incidents has also

helped tackle local

environmental issues.

www.sepa.org.uk/publications/waterenv/index.htm

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YearTarget Combined compliance 12 month rolling compliance

CASE STUDY

River Tweed



Develop compliance measures for water resources and engineering licences

We are developing compliance for water resource activities as part of a wider SEPA compliance project. This work iscurrently on target for implementation in 2011. Staff involved in the regulation of engineering activities have beenissued with guidance explaining how they should judge the compliance of engineering activities against licenceconditions.

Prevent deterioration in the water environment

Progress was maintained and improvements made as a result of our application of our regulatory powers to pollutinginputs, enforcement and licensing controls. In some cases, specific pollution reduction plans and environmentalimprovement action plans were put in place to target improvement and prevent deterioration.

Undertake further assessment of the pressures and impacts upon the water environment

Our understanding of the pressures and resulting impacts has improved. This is mainly as a result of improved monitoringand the introduction of the Water Environment (Controlled Activities) (Scotland) Regulations 2005.

In addition, standards and classification schemes developed by the UK Technical Advisory Group1, have given us a cleareridea of those water bodies unlikely to achieve good status. This has enabled us to refine our assessment of which waterbodies are at risk. Updated results have been reported in the significant water management issues consultation.www.sepa.org.uk/publications/wfd/index.htm

Produce Significant Water Management Issues Report

The Water Framework Directive requires the production of an interim overview of significant water management issueswithin each river basin district. In 2007 we consulted on the significant water management issues reports for theScotland river basin district and - jointly with the Environment Agency - the Solway Tweed river basin district. Thesereports describe the significant issues impacting on Scotland’s water environment and assess the risk to the waterenvironment. www.sepa.org.uk/publications/wfd/index.htm

Meet Water Framework Directive environmental monitoring network requirements. Apply the ScottishMonitoring Programme to allow the Water Framework Directive status of waters to be classified by 2008

We reviewed our water monitoring programme at the end of 2006 and, in January 2007, began monitoring workthroughout Scotland to meet the requirements of the Water Framework Directive. Encouragingly this new programme ison target to complete within the timescales set by the directive.

1This is a group of environment and countryside agencies set up by the UK Administrations to plan the technical implementation of the Water Framework Directive.

Construction of the new road bridge over the Forth, Kincardine



Further develop the Scottish Monitoring Strategy and produce the firstWater Framework Directive classification report during 2008

The Water Environment and Water Services Act gives SEPA overall responsibilityfor monitoring the status of the water environment and for preparing themonitoring programme.

To develop the programme we have substantially revised our previous monitoringnetwork. Fewer sites are now subject to routine monitoring and new sites havebeen added to assess the impact of newly regulated and diffuse pressures. We areworking with partner organisations (the Fisheries Research Service and theEnvironment Agency) to share monitoring data and increase cost-effectiveness.

The new monitoring network will provide the information to produce the firstWater Framework Directive classification during 2008. Draft classification resultswere produced in early 2008 and will be finalised during 2008.www.sepa.org.uk/wfd/monitoring/index.htm

Develop a programme of measures and provisional water data objectivesfor draft River Basin Management Plans, including Controlled ActivitiesReviews

We have worked with river basin planning Area Advisory Groups to assess theenvironmental, social and economic impacts caused by the most important issuesaffecting our water environment. Measures to address these issues have beenidentified and problems that could constrain delivery of environmentalimprovements discussed.

A detailed programme of measures for individual water bodies is being developedin conjunction with the Area Advisory Groups. These measures will be taken intoaccount during the objective setting process which began recently and which willbe finalised later in 2008-2009.

Produce River Basin Management Plans for Scottish river basin districts

We are the lead organisation for the delivery of the River Basin ManagementPlans for the Scotland and the Solway Tweed river basin districts. The work planfor producing the draft River Basin Management Plans for both Scotland and theSolway Tweed river basin districts was approved in 2007. The draft River BasinManagement Plans are due to be published towards the end of 2008.www.sepa.org.uk/wfd/rbmp/index.htm

Complete biodiversity actions

Working with our partners we have made considerable progress in introducingactions to promote biodiversity in Scotland.

As the UK lead partner for mesotrophic lakes, we pursue practical measures toprotect and restore mesotrophic lochs through our regulatory and advisoryfunctions.

Our ecologists have provided advice in support of regulation and in response to arange of planning consultations, including:

• wind farms;

• open cast mining extensions;

• forest planting schemes;

• Food and Environmental Protection Act applications.

Aboard SEPA’s vessel the Sir John Murray

Sampling of minewater, Fife


Good air quality

Good air quality

Introduction

Good air quality is essential to human health, the natural environment and the built environment. SEPA regulates over500 industrial sites with the potential to adversely affect air quality and ensures that emissions from these sites areprevented, minimised or made harmless. It also works closely with other organisations, such as local authorities, toprotect and improve air quality at a local and national level.

Key achievements

• There were improved levels of operatorcompliance for Pollution Prevention andControl Part B activities with 96%complying, meaning that more operators aremeeting conditions set to protect andimprove air quality.

• All transition Pollution Prevention andControl permits were issued by 31st October2007. A total of 455 applications werereceived from transitional installations.

SEPA met its deadline successfully to permit all sites as required bythe Integrated Pollution Prevention and Control Directive.

A key part of Scotland’scompetitive advantagecomes from theenvironment we arehere to protect.

David Sigsworth,SEPA Chairman

Longannet Power Station


Good air quality

Local, national and international air quality and globalclimate change

Improve effectiveness of liaison with local authorities

We continued to work closely with all 32 local authorities to provide technicalguidance and advice on local air quality management.

Reduce emissions of airborne pollutants from SEPA-regulated processes

We achieved our target for implementing the Integrated Pollution Prevention andControl Directive. The directive enables us to drive reductions in emissions frominstallations to levels consistent with the use of Best Available Techniques whichare agreed EU-wide standards. The UK has reported to the European Commissionon the directive’s implementation.

We are working on a mechanism to assess compliance of permits with therequirements of the Solvent Emissions Directive. The compliance date was 31stOctober 2007 and the European Commission requires data from Member Stateson compliance by 30th September 2008.

Between 1996 and 2007, emissions of sulphur dioxide from Scottish plantsgoverned by the Large Combustion Plant Directive fell by 45% and emissions ofnitrogen oxides fell by 19% (see Figure 4).

Emissions of nitrogen oxides fell by 27% between 1996 and 2005 but rosesharply by 40% in 2006 compared with 2005. This large increase was due mainlyto the high price of gas, coupled with the closure of two of the UK’s nuclearpower stations during 2006 resulting in greater use of coal-fired power stations.Nitrogen oxides emissions in 2007 were 22% lower than in 2006 but were still upfrom 2005 figures by 23%. The overall reduction in sulphur dioxide emissionsbetween 1996 and 2007 is due to the introduction of desulphurisation equipmentat many nuclear power stations since 1996.

The price of gas is expected to remain high for the next couple of years so it islikely that nitrogen oxide and sulphur dioxide emissions will remain at currentlevels for the next couple of years. Given recent trends in oil and gas prices it ispossible that emissions may even rise over the next couple of years. Theintroduction of desulphurisation equipment may result in further reductions insulphur dioxide from 2009.

Figure 4: Annual emissions of nitrogen oxides (NOx) and sulphur dioxide(SO2) from large combustion plants

Working with localauthorities

Throughout 2007 we worked

closely with Falkirk Council to

draw up an effective action plan

that will help to reduce localised

concentrations of sulphur

dioxide to a level below the UK

air quality standard of 100 parts

per billion.

The plan contains a number of

measures that will help us to

investigate why air quality

objectives are exceeded. For

example, an automated service

sends a text message to

nominated individuals as soon

as the 15-minute threshold value

is close to being exceeded. This

enables SEPA, industry and the

local authority to respond

rapidly to examine the operating

and environmental conditions in

the area at the time, investigate

likely causes and put any

remedial actions in place.0

20,000

40,000

60,000

80,000

100,000

120,000

Tonn

espe

ryea

r

19961997

19981999

20002001

20022003

20042005

20062007

YearSO2 NOx

CASE STUDY

Grangemouth


Good air quality

Compliance

Maintain and improve levels of operator compliance and performance

We set a target to ensure operator performance was satisfactory for at least 92%of Pollution Prevention and Control Part A and Part B processes.

The target for PPC Part A processes was achieved with 92% of processesdemonstrating satisfactory performance. In total, 288 sites out of 313 achievedsatisfactory operator compliance (see Figure 5).

The target for PPC Part B processes was exceeded with 96% of processesdemonstrating satisfactory operator performance. In total, 1,047 sites out of1,087 achieved satisfactory operator compliance (see Figure 6).

Figure 5: Satisfactory operator performance: Pollution Prevention andControl Part A

Figure 6: Satisfactory operator performance: Pollution Prevention andControl Part B

0

10

20

30

40

50

60

70

80

90

100

Proc

esse

s(%

)

Goa

l

1998/1999

1999/2000

2000/2001

2001/2002

2002/2003

2003/2004

2004/20052005

20062007

YearTarget Actual

0

10

20

30

40

50

60

70

80

90

100

Proc

esse

s(%

)

Goa

l

1998/1999

1999/2000

2000/2001

2001/2002

2002/2003

2003/2004

2004/20052005

20062007

YearTarget Actual

Grangemouth


Good air quality

Achieve Best Available Techniques for all installations permitted under Pollution Prevention and Control

We have only issued permits where Best Available Techniques are being employed. A number of applications wererefused on the basis that the operator would not be able to meet all their duties, including the use of Best AvailableTechniques.

We received a total of 455 applications relating to transitional Integrated Pollution Prevention and Control Directiveinstallations and have determined 454 (including appeals cases). Because of enforcement action by another regulator,one application has yet to be determined.

Between April 2007 and March 2008 we issued 168 permits.

Report trends (and sources) in priority particulate and ozone precursor pollutants (sulphur dioxide, nitrogendioxide, nitrate and non-methane volatile compounds) to establish appropriate (reduction) targets

We have completed and validated Solvent Emissions Directive data for 2005-2006. Data collection for 2006–2007 isunderway and almost complete.

We are developing a new mechanism for collecting these data which will be used to assess compliance with the directivein future years. Where possible, we use data collected through annual Scottish Pollutant Release Inventory returns toanalyse trends. www.sepa.org.uk/spri/index.htm

EU Emissions Trading Scheme

SEPA is the competent authority for the EU Emissions Trading Scheme in Scotland. Just under 100 installations acrossScotland affected by the scheme were permitted and regulated by us in 2007. All Scottish installations covered by thescheme complied fully with it, adhering to the monitoring and reporting requirements agreed with us.www.sepa.org.uk/air/index.htm

Over and above our normal Emissions Trading Scheme regulatory work, we have issued 96 variations and 14 surrenders.We have also provided policy input.

Initial scoping work for a full electronic application, licence and administration system is underway in partnership withthe Environment Agency.

Cockenzie Cement works, East Lothian

Good land quality

Introduction

Scotland has a land area of around 78,000 km2. A large proportion is of good environmental quality and is highly valuedfor its landscape, natural heritage, food production, recreation and tourism. How land is used and managed is crucial tothe protection of wider environmental quality as activities taking place on land can have chemical, physical andecological impacts. There are many ways in which SEPA contributes to the protection, maintenance and restoration ofland quality through enforcing laws and regulations, and promoting good environmental practice.

Key achievements

• We have been a key partner in thedevelopment of Scotland’s Environmentaland Rural Services project (launched inJune 2008).

• We have developed our own monitoringstrategy and quality indicators for ourregulatory activities that impact on soil.


Good land quality

SEPA was very active in helpingdevelop the new Scotland’sEnvironmental and Rural Services(SEARS) initiative launched by theMinisters in June 2008.


New measures available in Scotland, including the Diffuse PollutionRegulations, now provide a major opportunity to address diffusepressures at a national scale for the first time.

Crop spraying, Borders


Good land quality

Quality and monitoring

Use UK soil indicators to assess impacts on soil when land is treated withwaste. 95% of all soil samples taken by SEPA to be compliant withPotentially Toxic Elements limits and all data reported on SEPA's website

We have developed a national risk-based soil monitoring strategy and soil qualityindicators for SEPA-regulated activities that impact on soil.

In 2007, soil sampling was carried out in 60 fields at 15 farms where exemptorganic materials or sewage sludge had been applied and, where possible, inadjacent reference fields subject to the same agricultural management but withno materials applied. Soils were analysed for acidity, nutrients, Potentially ToxicElements and soil biological indicators. Of the 60 fields sampled, 97% were foundto comply with the Sludge Regulations.www.sepa.org.uk/pdf/publications/soil/soil_report.pdf

Implement soil monitoring strategy and report data

A report on our soil indicators and soil monitoring strategy is available on ourwebsite. www.sepa.org.uk/pdf/publications/soil/soil_report.pdf

Diffuse water pollution

Promote good practice - diffuse pollution

The mitigation of diffuse pollution requires a package of regulatory, economicand voluntary measures. New measures available in Scotland provide a majoropportunity to address diffuse pressures at a national scale for the first time.

The new Water Environment (Diffuse Pollution) (Scotland) Regulations 2008 willprovide a statutory baseline of good practice and, as such, are expected tocontribute significantly to improvements in water quality. Key to the success ofthe proposed measures will be education, training and awareness-raisinginitiatives.

Establish two Monitored Priority Catchments and assess compliance inthese catchments with General Binding Rules and report the findings tofarmers. Use the river basin management planning Area Advisory Groupsand the Rural Management Contracts system to address diffuse pollutionimpacts

Two catchments representative of typical land uses in Scotland - the Lunan Waterin Angus and the Cessnock in Ayrshire - were identified as Monitored PriorityCatchments. We are now collaborating with a range of organisations, includingthe Macaulay Institute, the National Farmers’ Union Scotland and the ScottishAgricultural College to identify diffuse sources of pollution and suggest cost-effective measures that will benefit both water quality and biodiversity.

A significant amount of work has gone into the ‘characterisation’ of these twocatchments to identify pollutant sources and pathways accurately. Intensivemonitoring is underway in both catchments to assess the effectiveness of variousmeasures. The results are being presented to farmers in the catchments via theScottish Agricultural College’s newsletters. www.sepa.org.uk/mpcwww.sac.ac.uk/consultancy/newsandevents/news/envirofocusfarmnewsletter/

The ScottishSoil Framework

During 2007-2008 we supported

the Scottish Government in

developing Scotland’s soils

policy, including a position on

the proposed EU Soil Framework

Directive.

With support from SEPA and

Scottish Natural Heritage, the

Scottish Government’s work to

develop the Scottish Soil

Strategy and National Soil

Monitoring Programme has

brought together policy-makers,

regulators, scientists and land

managers such that there is now

considerable consensus and

extensive partnership working in

Scotland on soil issues. A

consultation on the Scottish

Soil Framework was issued in

June 2008.

The proposed EU Soil

Framework Directive presents

opportunities to ensure soils and

their functions are given -

through explicit legislation - the

same level of environmental

protection as the water and air

environment.

The need for sound scientific

evidence when developing a

more strategic approach to soil

protection policy remains

essential.

www.scotland.gov.uk/publications/2008/06/27092711/0

CASE STUDY


Good land quality

Atmospheric deposition and compliance

Assess contribution to critical levels from SEPA regulated processes

Our activities have focused in two areas: (i) assessment of the likely effects onprotected habitats and species of activities covered by applications for PollutionPrevention and Control permits and (ii) on the development and testing of field-based biological monitoring methods to allow us to monitor the effects ofregulated processes on terrestrial habitats.

We have also contributed to a partnership project (Air Pollution InformationSystem) to make available information on the relative importance of different airpollution sources causing acid and nutrient deposition on European ProtectedAreas (Special Areas of Conservation and Special Protection Areas).www.apis.ac.uk

Land treatment using waste and compliance

Promote good practice during inspections

We recognise the importance of promoting good agricultural practice to farmersand land managers and the benefits this can have for both the environment andthe farm business. We take all appropriate opportunities to raise awareness ofguidance documents and best management practices aimed at reducing diffusepollution. www.sepa.org.uk/dpi/

Maintain and improve operator compliance

Details of our performance against our target for operator compliance with thewaste management licensing regime are given in the section Minimised,recovered and well-managed waste (page 10).

Slurry spreading, Cumbrae

Longannet Power Station


Good land quality

Land contamination and compliance

Address all special sites in accordance with regulatory standards

Our contaminated land specialists continue to progress work in relation to thetwo special sites identified in Scotland. We continue to support local authoritieswith requests for information regarding potential special sites and to work inpartnership with other contaminated land stakeholders.www.sepa.org.uk/contaminated-land/index.htm

Provide expert advice and support local authorities

We provide expert advice to local authorities on contaminated land andassociated planning applications under Part IIA of the Environment ProtectionAct 1990. We continue to liaise with the Scottish Government and othercontaminated land stakeholders to influence and develop contaminated land andassociated land development policy and guidance.www.sepa.org.uk/contaminated-land/index.htm

Produce a State of Contaminated Land Report

We will produce Scotland's first State of Contaminated Land Report by the end ofMarch 2009. This report is required under the Environmental Protection Act 1990.A draft scoping report has been circulated to stakeholders and we have invitedlocal authorities to send their contaminated land data to us for analysis.

Scotland’sEnvironmental andRural Services

Scotland’s Environmental and

Rural Services (SEARS) project is

a major initiative from the

Scottish Government to improve

the delivery of rural services to

land managers in Scotland.

SEPA has had considerable input

into the design and delivery of

the project from its inception in

June 2007. Our staff continue to

be heavily involved in providing

training to partner organisations

in the project.

Launched in June 2008, SEARS

will allow some functions

currently undertaken by SEPA to

be transferred to staff from other

organisations, mainly from

Scottish Government Rural

Payments and Inspections

Directorate, Forestry

Commission Scotland and

Scottish Natural Heritage. This

will result in fewer separate visits

to land managers without

compromising protection of the

environment.

www.sepa.org.uk/sears.html

CASE STUDY

Contaminated land site, Glasgow

A respected environment: protected, informedand engaged communities

Introduction

SEPA’s work to protect Scottish communities is visible in a number of areas including flood warnings, a 24/7 pollutionand incident reporting hotline and monitoring and reporting on the quality of Scottish bathing waters. We also workwith other organisations to promote environmental issues.

Key achievements

• During 2007-2008 we launched our CoastalFlood Watch service. The service covers ninecoastal areas and indicates where localflooding may occur within 12-24 hours.

• Together with partners, we have madesignificant progress in tackling fly tipping inScotland. We have helped reduce the numberof illegally dumped tyres to a moremanageable level.


A respected environment: protected, informed and engaged communities

During the year, SEPA investigated over 6,000 environmentalincidents, mostly reported by the public. The pollution hotlinenumber is 0800 80 70 60.

Delivery of more joined-up publicservices has been a particularpriority, as well as working jointlyon waste, emergency planning,marine and flooding matters.


Investigating fly tipping, East Kilbride



Protected communities

No member of the public receives radiation doses above dose limits

SEPA must ensure that public exposure levels do not exceed the dose limit of1 millisieverts. Monitoring results show that no member of the public in Scotlandreceived doses above this limit. The results of our dose assessments are publishedannually in the Radioactivity in Food and the Environment Report. Results for2006 monitoring were published in October 2007.www.sepa.org.uk/publications/rife

100% readiness of Radioactive Incident Monitoring Network

Full readiness of the network was achieved. SEPA is also responsible for operatingthe Scottish section of the UK Radioactive Incident Monitoring Network.www.sepa.org.uk/radioactivity/emergency.htm

Strive, with responsible parties, to maintain 100% compliance fordesignated bathing waters. Seek, with responsible parties, to improveguideline compliance to 60% (36 waters). Investigate all failuresimmediately

Despite coastal areas experiencing the wettest summer for over 30 years, almosthalf of Scotland’s bathing waters achieved the stringent ’excellent‘ water qualitystatus in 2007. Unfortunately seven bathing waters failed for the 2007 season(89% compliance) and the number achieving excellent status was below target at48%. There was particularly adverse weather during most of the summer -notably the high rainfall and torrential downpours at a number of sitesthroughout Scotland.

We responded immediately to all failures and we will continue to take steps toreduce risks and the impact of these events.www.sepa.org.uk/publications/bathingwaters/index.htm

Reduce pollution incidents

During 2007-2008 we investigated 6,765 environmental events, most of whichwere reported to us by the public. Of these events, 14 were classed as 'major',111 as 'significant' and 1,560 as 'other'. The number of environmental events wasup from a total of 5,734 in 2006-2007.

CommunityLiasion Groupsuccess

Throughout 2006 and over the

summer of 2007, we received a

large number of public

complaints regarding odour

from an animal rendering and

incineration plant. As a result of

these complaints we set up a

community liaison group made

up of members of the public, a

representative of the

Community Council, SEPA staff

and plant managers. The group

allows local residents to ask

questions about matters of

environmental regulation and to

discuss any concerns they may

have regarding the operation of

the plant. In addition, SEPA and

the plant provide updates on

progress in reducing the odours.

We also instigated weekly

meetings with the company to

provide a focus on the

improvements required. This has

led to a significant reduction in

the release of odours from the

site and the development of

plans for better management of

the company’s environmental

impact.

CASE STUDY

Aerial shot of an oil spill in the Forth, North Queensferry

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Informed communities

Deliver an effective Floodline service

The Floodline service ran at 100% availability throughout 2007-2008. Hydrology flood warning schemes met their targetof 95% and the Floodline website was available for 99.9% of the time during the year. Our annual flood awarenesscampaign resulted in up to 70% of people in flood risk areas being aware of the Floodline service. During the year SEPAissued 72 severe flood warnings, 198 flood warnings and 965 flood watch messages. The Floodline service received over790,000 customer contacts during this report period. www.sepa.org.uk/flooding/warnings/index.aspx

In 2006 we began work on a Coastal Flood Warning Strategy to address Scotland’s flood warning requirements. Potentialcustomers of this service include the public, businesses, local authorities, Scottish Government, emergency services,utilities and the media. The Flood Watch service was successfully launched in 2007. The next stage of its development isto provide local flood warning services for a number of specific ’at risk‘ communities.www.sepa.org.uk/flooding/coastal/index.htm

Achieve access to information requirements

During 2007-2008 we received 381 information requests which were handled under the Freedom of Information(Scotland) Act 2002 and the Environmental Information (Scotland) Regulations 2004. We responded to 97.6% ofenquiries within 20 working days, exceeding the 95% target. The subject matter of the requests was predominantlyenvironmental in nature and 85% of enquiries were handled under the information regulations. Approximately half ofall enquiries (48%) were submitted by members of the public, with a further 23% received from solicitors andconsultants. www.sepa.org.uk/access

Torness, East Lothian

Flooding at Bankfoot, Perth

Flooding at Bridge of Allan, Stirling



Engaged communities

Increase recycling and composting

Data show that local authorities are recycling an increasing proportion of thewaste they collect. There has been a steady increase in the recycling andcomposting rate from 3.1% in 1997 to 31.2% in the period covering January2007 to December 2007. This tenfold increase in 10 years is a significantachievement for Scotland.

Continue to work closely with stakeholders to reduce fly tipping

The efforts of SEPA and partner organisations to tackle illegal tyre disposal hasresulted in the reduction in the number of illegally dumped tyres to a moremanageable level. Collectively known as the West of Scotland Waste EnforcementGroup, these organisations received a special commendation for their work at theannual Scottish People and Places conference and awards ceremony in February2008. www.keepscotlandbeautiful.org/awards2008.asp

SEPA is also a member of the Scottish Fly Tipping Forum. The forum is made up oforganisations responsible for the investigation and disposal of any fly tippingincidents. www.sepa.org.uk/flytipping

Promote the NetRegs website

The NetRegs website provides online environmental advice and guidance to smalland medium sized businesses. The NetRegs team continues to raise awareness ofthe website and is promoting new features through events, advertising andpartnership working. The new features include e-alerts, a subscription service,e-learning and tools, training tools for businesses, ‘find your nearest waste site’,and a guide to site waste management plans. www.netregs.gov.uk

Promote awareness of the individual impact of climate change

During 2007-2008 we consulted on our five-year Climate Change Strategy, whichincludes an objective to develop our role as an information provider and as aprominent public voice on climate change issues. We also launched our climatechange website, which includes tips and advice for communities and individualson what they can do to adapt to climate change and to minimise their carbonfootprint and greenhouse gas emissions. And we have also produced a leaflet onclimate change. Throughout the year SEPA continued to raise awareness ofclimate change in many of our campaigns, materials and events.www.sepa.org.uk/climate/index.htmwww.sepa.org.uk/pdf/publications/corp_leaflets/climate%20change.pdf

Complete biodiversity actions

Please see the Good water quality section of the report (page 14) for an updatein this area.

SEPA’s internal environmental performance

We retained our certification to international standards ISO14001, ISO9001 andextended the scope of the ISO17025 standard for laboratories. We alsoparticipated in the Local Authority Carbon Management Programme. Our eighthGreening SEPA report (2006-2007) provides full details of our performance.www.sepa.org.uk/publications/annual_env_report/index.htm

Fly tipping

Glasgow City Centre


Economic well-being

Economic well-being

Introduction

The environment is the powerhouse for sustainable economic growth. SEPA enables this by protecting the environmenton which the economy depends, providing fair and effective regulation consistently across the country. SEPA is also anactive partner with other organisations including Scottish Natural Heritage, the Enterprise Networks and CommunitiesScotland, ensuring that the links between environmental, economic and social issues are used to maximum benefit.

Key achievements

• We published an assessment of the costs ofcompliance with environmental regulation inScotland, comparing the results with thosefrom other countries. Scotland was found tohave a high quality regulatory regime, lowcosts of compliance for industry, and amixture of moderate to high environmentalquality.

• We have set up a Better Regulation Unit toensure regulation does not burden industryunnecessarily.

SEPA will be working even moreclosely with its customers toensure that the economic benefitsof good environmental practiceare recognised and realised.

David Sigsworth,SEPA Chairman

SEPA is committed to the Scottish Government’s objective ofsustainable economic growth, ensuring there is no adverse impacton the environment.

New housing development along the River Clyde, Glasgow


Economic well-being

Sustainability of industry

Benchmark the cost of compliance

A paper by a SEPA economist and academics at Stirling University that assessedthe costs of compliance with environmental regulation was published in thejournal European Environment. Comparing Scotland with its Europeancounterparts, the paper shows that (relative to the countries studied):

• Scotland has low costs of compliance with environmental regulation forindustry;

• Scotland has a high quality regulatory regime;

• the quality of its environment is a mixture of moderate to excellent quality.

Sustainable material usage

The Pollution Prevention and Control regulations aim to reduce environmentalimpacts by setting requirements within permits that will minimise the amount ofwaste produced. We also look for improvements in the use of raw materials(including feedstocks, cooling water, etc.) and in energy efficiency. We only issuepermits where Best Available Techniques are being employed.

Waste minimisation

Eight businesses ranging from boat builders to tourist attractions areparticipating in the second phase of the Highland Business Waste Minimisation inthe North of Scotland (WINS) programme. This is the sixth Business WINSprogramme to run in the north of Scotland following previous successes inOrkney, Shetland, North East Scotland, Western Isles and the Highlands.www.sepa.org.uk/wastemin/initiatives/index.htm

Businesses savemoney by reducingwaste

Highland Business Waste

Minimisation in the North of

Scotland (WINS) was originally

set up by SEPA - with support

from a number of partners -

as a three-year project to

promote waste minimisation

and resource efficiency across a

variety of business sectors. Such

was its success that it

was replicated five times over.

To date, total savings achieved

from these five successful

programmes are:

• £2.9 million;

• 7,800 tonnes of waste diverted

from landfill;

• water consumption

reduced by 86,100m3;

• energy consumption

reduced by 7.4 million kWh;

• carbon dioxide emissions

reduced by 2,878 tonnes.

CASE STUDY

Grangemouth


Economic well-being

Sustainability of plans and programmes

Respond to local authority development plans and control consultationsand economic development strategies

We achieved our target to respond to 100% of structure and local planconsultations within the statutory period for all 137 consultations receivedduring 2007-2008. Another target is to respond to 80% of level threedevelopment control planning applications within the statutory period. Weachieved this target in 2007-2008 with 87% responded to on time; 1,775 of the2,035 applications received were responded to within the statutory period.

Respond to Strategic Environmental Assessment consultations

A total of 179 different plans, programmes and strategies were subject toStrategic Environmental Assessment in 2007. From these we received 224 formalconsultations - an increase in casework of 35% compared with 2006. Allresponses were completed either within the statutory timescale or to an extendedtimescale agreed with the responsible authorities.

SEPA’s efficiency

Meet the annual efficiency savings targets identified by the ScottishGovernment

We exceeded the three-year efficiency target set by the (then) Scottish Executiveone year ahead of schedule and continue to seek efficiencies. For the year ending2007-2008, the target was £2.1 million cash-releasing and £2.1 million time-releasing savings. The actual efficiency achieved was £2.8 million ofcash-releasing and £2.3 million of time-releasing savings. We have begun BestValue Reviews for Finance, Communications and Analytical Services as part of ourstrategy to develop major long-term efficiency and improvement projects.

Move towards full cost recovery – achieve 98%

This target was narrowly missed. In the year to 31st March 2008 we achieved96% cost recovery across all charging schemes. The under recovery is mainly dueto the considerable time spent by our staff processing an unusually high level ofPollution Prevention and Control applications to meet the directive requirementto process all applications by October 2007.

Develop the application tracking system so that in future the target andperformance excludes the periods when the determination clock is stoppedand outwith SEPA control

This target has been met. SEPA has four months to determine an application foran environmental licence or permit. However the determination clock can ’stop’for those issues outwith SEPA’s control, eg if more information is needed fromthe applicant. We have developed an application tracking system that takesaccount of this period.

Housing estate, Paisley

Wind farm, Borders


Economic well-being

Review the existing compliance assessment scheme to streamline andimprove the way companies are judged on complying with their licences.Build on existing international research to design a new approach andpresent proposals for public consultation by 31st March 2008

We have set up a project to achieve this target and it is progressing well.However, the initial timescale envisaged was insufficient to allow stakeholderconsultation and testing. A revised timetable has been agreed with the ScottishGovernment and the public consultation will begin in July 2008. Theimplementation date is scheduled for January 2009.

During 2007-2008 we developed a draft compliance assessment framework andmatrix. Tests confirmed that the new scheme will ensure a consistent approach tocompliance assessment across all our major licensing regimes.

Determine 90% of applications (registrations, permits, authorisations andlicences) within statutory timescales, excluding Pollution Prevention andControl Part A transitional and Radioactive Substances Act Band A nuclearsite applications

During 2007–2008 we determined 95% of total licence applications within thestatutory period. This is a more stringent target than the last few years. Previouslyperformance was monitored against licence applications only. The target has nowbeen widened to include registration, permits and authorisations which havevarying timescales ranging from 21 days to four months.

By October 2007, determine all Pollution Prevention and Control Part Aapplications submitted under the transitional provisions, where theinformation is complete as required under the Integrated PollutionPrevention and Control Directive

This target was achieved. A total of 455 applications were received fromtransitional installations, of which 359 (79%) were issued as permits during2006-2007. This is a significant achievement as most of the applications weremade within the last two year period and can take several months to processdepending on the complexity of the installation.

Each permit sets out site-specific requirements, although most state the need toperiodically assess what the site could do to improve its resource utilisation viawaste minimisation and the introduction of new technologies.

Effective regulation

The main activities during 2007-2008 include:

• promoting the concept of General Binding Rules to address low risk activities;

• completing our revised enforcement policy and carrying out further work onour new compliance assessment method (both are founded on the principlesof Better Regulation);

• ensuring that opportunities for influencing policy were identified at an earlystage and resources suitably deployed at both a Scottish and European level;

• contributing to European networks by participating in a number of projectsrun by the European Union Network for Implementation and Enforcement ofEnvironmental Law (IMPEL) and the Network of Heads of (European)Environment Protection Agencies.

We also continued to participate in the London-based Aldersgate Group, whichproduced Green Foundations: Better Regulation and a Healthy Environment forGrowth and Job in May 2006 and Carbon Costs: Corporate Carbon Accountingand Reporting in 2007. www.aldersgategroup.org.uk

SEPA sets up newBetter RegulationUnit

A Better Regulation Unit was set

up in SEPA during 2007 to work

across SEPA and in partnership

with others to ensure that

regulation does not

unnecessarily burden industry.

The team is currently looking at

improved ways of regulating

businesses - such as more

simplified licensing/permitting -

to provide an easier and more

efficient way for businesses to

comply with the regulations. The

unit also works to increase SEPA’s

influence in the development of

national and international

environmental policies and

legislation at Scottish, UK and

European levels.

The unit has helped to

implement our revised

enforcement policy. The

supports working with industry

to stop harmful pollution

happening in the first place, but

also provides details of the range

of regulatory tools we will use to

bring about compliance and

tackle environmental crime.

www.sepa.org.uk/pdf/policies/5.pdf

CASE STUDY




Overall performance

The table summarises our performance against key targets in 2007-2008. This is the final year of our three yearCorporate Plan (2005-2008), so we have included a summary of performance for the two preceding financial years.We achieved 18 out of 23 of our targets in 2007-2008 with two being classed as ‘near misses’.

Key targets 2007-2008 Achievement and commentary 2006 - 2007 2005 - 2006

Minimised and recovered business waste

Achieve SEPA's objectivesin the national frameworkfor dealing withcommercial and industrialwaste.

Of the 13 SEPA actions in the Business WasteAction Plan, nine are complete, two areprogressing well and two actions have beenre-scheduled for completion during 2008-2009. www.sepa.org.uk/pdf/nws/business/Trade_Waste_Survey.pdf

The businesswaste frameworkwas publishedin 2007.

This target wasnot met in 2006and so was carriedforward to 2007.

Minimised and recovered municipal solid waste

(i) Produce quarterly datareports showing localauthority progress towardsmeeting the landfillallowance target.

(ii) Reduce biodegradablemunicipal solid wastegoing to landfill to 1.44million tonnes.

(i) Quarterly data reports were published onour website showing the quantity ofbiodegradable municipal waste landfilled byeach local authority. These quantities arecalculated from returns provided by localauthorities. We also published a rollingyear report.

(ii) Steady progress continues to be madetowards this target following the achievementof the 2006-2007 target of 1.5 million tonnes.The quantity of biodegradable municipalwaste being sent to landfill sites in Scotlandfell from a peak of 1.90 million tonnes in1999 to 1.39 million tonnes in the periodJanuary 2007 to December 2007.

The quantity ofbiodegradablemunicipal solidwaste fell from1.90 million tonnesto 1.52 milliontonnes.

Monitoring andaudit schemes forlocal authoritylandfill diversiontargets wereimplemented.Reducing thequantity ofbiodegradablemunicipal solidwaste was not akey target forthis year.

Symbol Meaning

Target has been met

Target has not been met

We achieved a ‘near miss’ on the target





Key targets 2007–2008 Achievement and commentary 2006 - 2007 2005 - 2006

Surface water quality

Assess 1,000 licences foractivities in waterbodiesnot achieving good status,and review, whereappropriate, to driveenvironmentalimprovements.

We have made progress towards deliveringthis target. We completed impact assessmentsof nearly 6,000 licences and identified 986licences as priorities for review. This wasfollowed up by site inspections to validate theinformation in the licences. Detailed reviewsare underway covering over 400 licences, butthe target of reviewing 1,000 has not beenachieved. This work proved more demandingthan originally expected.

We used to have a seven year target toimprove water quality. Results in previousAnnual Reports showed water qualityimproving according to our former methodof classifying water bodies. We have justintroduced new monitoring methods and anew classification scheme which assesses amuch wider range of impacts upon the waterenvironment. Our old classification schemedescribed only the effects of pollution andthis indicated that about 85% of the waterin Scotland was good or better quality. Thenew classification scheme introduced by theEuropean Water Framework Directive has ledto a fall in the proportion described as goodor better to about 60%.

(i) Meet Water FrameworkDirective environmentalmonitoring networkrequirements.

(ii) Apply the ScottishMonitoring Programme toallow the status of watersto be classified by 2008.

We reviewed our water monitoringprogramme at the end of 2006 and, inJanuary 2007, began monitoring throughoutScotland to meet the requirements of theWater Framework Directive. Encouragingly,this new programme is on target to becompleted within the timescales set.

(ii) The Scottish Monitoring Programme hasbeen applied to water bodies and will berevised again in June 2008.


Local, national and international air quality, and global climate change

Reduce airborneemissions from SEPA-regulated processes.

Between 1996 and 2007, emissions of sulphurdioxide from Scottish plants governed by theLarge Combustion Plant Directive fell by 45%and emissions of nitrogen oxides fell by 19%.Nitrogen oxides emissions in 2007 were 22%lower than in 2006 but were still up from2005 figures by 23%.

We met thistarget in2006-2007.

We met thistarget in2005-2006.

Report trends (and sources)in priority particulate andozone precursor pollutants(sulphur dioxide, nitrogendioxide, nitrate and nonmethane volatilecompounds) to establishappropriate (reduction)targets.

We have completed and validated the datasetfor 2005-2006 particulate and ozoneprecursor pollutants covered by the SolventEmissions Directive. Data collection for 2006–2007 is almost complete. A new mechanismfor collecting solvent emissions data is beingdeveloped and will be used to assesscompliance with the directive in future years.We are using data for particulate and ozoneprecursor pollutants collected through annualScottish Pollutant Release Inventory returnsto analyse trends (where possible). Reductiontargets may be set where this is found to benecessary. www.sepa.org.uk/spri/index.htm

The target for thisyear was toestablish abaseline forpollutantsinclusing volatileorganicscompounds. Weused datacollected onemissions ofairbornepollutants toestablish baselinesand determine thepotential forreductions.

The target thisyear was the sameas 2006-2007.

A baseline nowexists for volatileorganiccompounds for2002-2004.

Good air quality




Quality and monitoring

(i) Use UK soil indicators toassess impacts on soil whenland is treated with waste.

(ii) 95% of all soil samplestaken by SEPA to becompliant with PotentiallyToxic Elements limits.

(iii) All data reported onSEPA's website.

(i) We have developed soil quality indicatorsand a risk-based national soil monitoringstrategy for our regulated activities thatimpact on soil. We carried out soil sampling in2007 in 60 fields at 15 farms where exemptorganic materials or sewage sludge had beenapplied.

(ii) Soils were analysed for acidity, nutrients,Potentially Toxic Elements and soil biologicalindicators. Of the 60 fields, 97% of thosesampled were found to comply with theSludge Regulations.

(iii) Data is now reported on SEPA’s website.www.sepa.org.uk/pdf/publications/soil/soil_report.pdf

Participation inthe UK SoilMonitoringConsortiumallowed SEPA toidentify landquality indicators.The SoilmonitoringStrategy wasimplmeneted.

SEPA worked inpartnership toagree a datasetfor land qualityindicators. The SoilmonitoringStrategy wasdrafted.

Diffuse agricultural pollution

(i) Establish two MonitoredPriority Catchments.

(ii) Assess compliance inthese catchments withnational General BindingRules and report thefindings to farmers.

(iii) Use the River BasinManagement PlanningArea Advisory Groups andthe Rural ManagementContracts system to addressdiffuse pollution impacts.

(i) We met this target. We identified twocatchments as Monitored Priority Catchments- the Lunan Water in Angus and the Cessnockin Ayrshire. www.sepa.org.uk/mpc

(ii) General Binding Rules were introduced inthe Diffuse Pollution Regulations made inFebruary 2008, so we have not yet been ableto assess compliance in these catchments.www.sac.ac.uk/consultancy/newsandevents/news/envirofocusfarmnewsletter(iii) We have begun discussions with the AreaAdvisory Groups to address diffuse pollutionwithin the Lunan Water catchment. We havenot yet used this mechanism for the Cessnockcatchment.

The target thisyear was toprepare andimplementenvironmentimprovementplans to improvecatchments. Weestablished amonitoredprioritycatchmentproject to explorehow best toaddress diffuseagriculturalpollution.

The target thisyear the same asin 2006-2007. Ashortlist of prioritycatchments wasdeveloped andprioritycatchmentsselected, but theimprovementplans were notimplemented.

Good land quality



2The dose limits are set out in Article 13 of Council Directive 96/29/Euratom on basic safety standards (subject to the exclusions set out in Article 6[4]).

3Effective service is deemed as: 95% readiness of hydrology flood warning infrastructure with no scheme falling below 90%; 95% SEPA CommunicationsCentre readiness (increasing to 97% by 2008-2009); increase awareness of Floodline by people living in flood risk areas; and 95% availability of SEPAFloodline website.



Protected communities

Respond to 95% ofenvironmental complaintswithin 24 hours.

We achieved this target. In 2007-2008 wereceived 7,786 environmental complaints andresponded to 7,463 (96%) within 24 hours.

This target was met in previous years. It wasnot a key target previously however we havemonitored and reported against it internally.

Exposures from radioactivewaste disposal to be keptas low as reasonablyachievable and no memberof the public to be exposedabove dose limits.2

No member of the public in Scotland receiveddoses in excess of the limit. SEPA must ensurethat the exposure to members of the publicdoes not exceed the dose limit of1 millisieverts. The results of our doseassessments are published annually in theRadioactivity in Food and the Environmentreport. www.sepa.org.uk/publications/rife

This target wasmet.No memberof the public inScotland receiveddoses in excess ofthe limit.

This target wasmet.No memberof the public inScotland receiveddoses in excess ofthe limit.

Strive, with responsibleparties, to maintain 100%compliance for designatedbathing waters.Seek, with responsibleparties, to improveguideline compliance to60% (36 waters).

Investigate all failuresimmediately.

In 2007, almost half of Scotland’s bathingwaters achieved the highest ‘excellent’ waterquality status despite coastal areasexperiencing the wettest summer for over 30years. Unfortunately seven bathing watersfailed for the 2007 season (89% compliance)and the number achieving excellent statuswas below target at 48%.

We responded immediately to all failures andwe will continue to take steps to reduce risksand impact of these events.

This target wasmet. For the firsttime this year, wereported 100%compliance withthe EuropeanBathing WatersDirective.

This target wasmet. 95% (57 of60) of Scottishbathing watersmet Europeanstandards. For thefirst time ever, allrecognisedbathing waters onthe west coastmet the requiredstandards.

Informed communities

Deliver effective Floodlineservice3:

- increase awareness ofFloodline in relevantareas to 65%

- 95% availability of theSEPA Floodline website.

Our annual flood awareness campaignresulted in up to 70% of people in flood riskareas being aware of the Floodline service.

The Floodline service ran at 100% availabilitythroughout 2007-2008. Hydrology floodwarning schemes met their target of 95% andthe website was available for 99.9% of thetime during the year.www.sepa.org.uk/flooding/warnings/index.aspx

The target thisyear for awarenessof the Floodlineservice was 51%.Awareness duringthe year was 50%overall, and ashigh as 68% insome areas. TheFloodline serviceran at 100%availabilitythroughout theyear.

The target thisyear for awarenessof the Floodlineservice was 48%.Awareness duringthe year was 61%.The Floodlineservice ran at100% availabilitythroughout theyear.

Achieve access toinformation requirements:

- 95% of all enquiriesresponded to withinstatutory deadline.

We exceeded this target – responding to97.6% of enquiries within 20 working days.During 2007-2008 we received 381information requests under the Freedom ofInformation (Scotland) Act 2002 and theEnvironmental Information (Scotland)Regulations 2004. www.sepa.org.uk/access

96.6% of allenquiries wereresponded tothroughout theyear.

98% of allenquiries wereresponded tothroughout theyear.




SEPA’s operational efficiency

Review existing complianceassessment scheme tostreamline and improve theway companies are judgedon how they comply withtheir licences.Build on existinginternational research todesign a new approach andpresent proposals forpublic consultation by 31stMarch 2008.

We have established a project to achieve thistarget and it is progressing well. However, theinitial timescale envisaged was insufficient toallow stakeholder consultation and testing.We have now agreed a revised timetable withthe Scottish Government. The publicconsultation will commence in July and theimplementation date is scheduled for January2009. During 2007-2008 we developed a draftcompliance assessment framework andmatrix. Tests confirmed that the new schemewill ensure a consistent approach tocompliance assessment across all of oursubsistence licensing.

This was not a key target in previous years.

Develop the applicationtracking system so that infuture the target andperformance excludes theperiods when thedetermination clock isstopped and outwithSEPA control.

We have met this target. We have four monthsto determine a licence application, although,the determination clock can ‘stop’ for thoseissues outwith our control eg if moreinformation is needed from the applicant. Wehave developed an application tracking systemthat takes account of this period.


Determine 90% ofapplications (registrations,permits, authorisations andlicences) within statutorytimescales, excludingPollution Prevention andControl Part A transitionaland Radioactive SubstancesAct Band A nuclear siteapplications.

We achieved this target. During 2007–2008,we determined 95% of total applicationswithin the statutory period.

We have continuously met this target.For the past two years, however thetarget was lower at 72%. We set a muchmore stringent target in 2007-2008because we were either meeting orexceeding the target.

Economic well-being

SEPA’s efficiency

Achieve efficiency savingsunder the (then) ScottishExecutive's EfficientGovernment initiative asa minimum.

We exceeded the three-year efficiency targetone year ahead of schedule and continue toseek efficiencies. For the year ending2007-2008, the target was £2.1 millioncash-releasing and £2.1 million time-releasingsavings. The actual efficiency achieved was£2.8 million of cash-releasing and £2.3 millionof time-releasing savings.

We have exceeded this target for the pasttwo years.

Achieve 98% cost recoveryand continue movingtowards full cost recoveryas soon as practicable.

We achieved a ‘near miss’ on this target. In theyear to 31st March 2008, we achieved 96%cost recovery across all charging schemes. Theunder recovery is mainly due to staff timespent processing an unusually high level ofPollution Prevention and Control applicationsto meet the Integrated Pollution Preventionand Control Directive requirement ofprocessing all applications by October 2007.

We achieved a‘near miss’ on thistarget. Weachieved 97% costrecovery overall.

The target thisyear was toachieve 92% costrecovery. Weachieved 99% costrecovery overall.




Water: 95% Licencecompliance with Control ofPollution Act/ControlledActivities Regulations.

We did not achieve this target. In 2007, the12 month rolling compliance was 90%.

92% 91%

Waste: 90% Satisfactoryoperator performance forWaste ManagementLicences.

We achieved a ‘near miss’ on this target with88% of assessed sites demonstratingsatisfactory operator performance. In total,840 sites out of a total of 960 achievedsatisfactory operator performance.

89% 89%

Air: 92% Satisfactoryoperator performance forIntegrated PollutionControl/PollutionPrevention and ControlPart A Air PollutionControl.

We achieved this target. During 2007, 92%of assessed sites demonstrated satisfactoryoperator performance. In total, 288 sites outof a total of 313 sites achieved satisfactoryoperator performance.

94% 94%

Air: 92% Satisfactoryoperator performance forAir PollutionControl/PollutionPrevention and ControlPart B.

We exceeded this target with 96% of sitesdemonstrating satisfactory operatorperformance. In total, 1,047 sites out of1,087 sites assessed achieved satisfactoryoperator performance.

96% 95%

Air: By October 2007,determine all PollutionPrevention and ControlPart A applicationssubmitted under thetransitional provisions,where the information iscomplete, as requiredunder the IntegratedPollution Prevention andControl Directive.

We met our deadline to permit all sites asrequired by the Integrated PollutionPrevention and Control Directive, which setsthe framework for regulating industrialactivities and installations that may causepollution. During the transitional period wereceived over 500 applications and issuedpermits by the October 2007 deadline set bythe directive.


Compliance


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14charging

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Organisational structure

Organisational structure

Head ofEnvironmental

Protection &Improvement

National

DirectorEnvironmentalProtection andImprovement

DirectorEnvironmental

Science

Chief Executive

DirectorEnvironmental and

Organisational Strategy

DirectorFinance and Corporate

Services

Head of HumanResources andLearning andDevelopment

Head ofCommunications

DirectorateLegal

Manager

ProgrammeO!ce

Manager

Chairmanand

Agency Board


Policy


Protection(North)

Head ofOrganisational

Planning


Protection(South-East)

Head ofChemistry

Head ofEcology

Head ofHydrology

HumanResourcesManager

Head ofOrganisationalImprovement


Protection(South-West)


Quality

Health andSafety

Manager

CommunicatonsProgrammes

Manager


Strategy

BusinessSupportManager


Learning andDevelopment

Manager

CorporateSolicitor

Head ofAdministration

Head ofInformation

Systems

Head ofInformation

Head ofProcurement,Facilities and

Estates

FinancialController

Emergency PlanningManager

Head ofMarine

Business SupportManager

Secretariat


Protection &Improvement

Legal



CommunicatonsServicesManager


SEPA office locations

SEPA office locations

SEPA is co-located, or in the process of co-locating, with other public bodies in a number of places in Scotland,including Perth (where SEPA is co-located with the Scottish Government and the Animal Health Agency), Aberdeen(a new building is being developed for SEPA, Scottish Natural Heritage and the Joint Nature Conservation Committee),and Galashiels (a new office for SEPA, Scottish Natural Heritage, Forestry Commission and the Animal Health Agency).We are also actively seeking opportunities to share services and premises at other locations across Scotland.

Lerwick

Thurso

Dingwall

Elgin

Fraserburgh

Aberdeen

Arbroath

Fort William

Stirling

East Kilbride Galashiels

Dumfries

Ayr

NewtonStewart

Western Isles

Orkney

Shetland

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10 to 50 sta!

50 to 100 sta!

100 to 200 sta!

200 to 300 sta!

Up to 10 sta!

LochgilpheadGlasgow Edinburgh

Kirkwall

Stornoway

Perth

Glenrothes


Corporate support

Corporate support

Organisational development

We are seeking to improve customer services as well as make significant cost savings as a result of implementing theoutcomes from the best value reviews.

We continue to work towards the implementation of a new pay and grading system during the year. Although we havebeen working in partnership with the trade union on developing a new job evaluation scheme for almost three years andtried to get a collective agreement on a pay offer, regrettably it was not possible to come to a collective agreement.Consequently the new system has been implemented through individual consultation with staff. Nearly 60% of staffsigned up to a voluntary offer. All remaining staff were issued with a dismissal and immediate re-employment letter. Thishas been a very challenging project for us, tackling a legacy pay system which was not fit for purpose. Migrating stafffrom the old to the new pay system has inevitably resulted in some staff suffering a negative impact on their pay. So,while we have successfully delivered a better pay system which benefits many staff, there has been a real impact onmorale for many of our more experienced officers.

The core modules of a new Human Resources information management system were implemented during the year. Thenew system, called Agresso Business World, now allows us to store and provide information and reports on humanresources matters more accurately and efficiently than previously. The new system offers greater flexibility of reporting,improved integration with financial and payroll as well as offering a self service to users in the future and the prospectof increasingly more efficient processes.

We reviewed the organisation of the Environmental Science directorate and the Secretariat.

Structure, staffing and recruitment

As of 31st March 2008, SEPA employed 1,286 people (FTE) and 1,396 (headcount)4. During the year 236 permanent staffjoined the organisation and 287 left (headcount).

FTE Headcount

Human Resources, Organisational Development and Health and Safety 21 21

Environmental Protection and Improvement 538 569

Finance and Corporate Services 226 244

Environmental Science 383 395

Environmental and Organisational Strategy 90 93

SEPA Boards, Chairman, Chief Executive and Communications 28 74

Health and safety

During 2007-2008 reviews were undertaken in the following areas:

• lone working;

• muscoloskeletal - including repetitive strain injuries, lower back pain and joint injuries;

• working on or near water;

• occupational road risks.

Policies and procedures were either provided or improved in each of these areas and staff training given.

Reviews for slips/trips and falls, lone working and excessive work pressure will continue into 2008-2009.

4Headcount as at 31st March 2008.


Corporate support

In 2007-2008, 256 incidents were reported via the internal reporting system in 2007-2008 compared with 257 in 2006-2007. This included seven incidents subsequently reported to the Health and Safety Executive. These were made up oftwo dangerous occurrences and five reportable injuries.

Information management

We continued to improve both our information management systems and the quality of the information used by thesesystems. Efforts concentrated on:

• improving core information systems as part of our integrated Information Strategy;

• implementing new systems to support the Information Strategy;

• collating information on environmental trends to support reporting on the state of Scotland’s environment.

Risk management

SEPA has a robust and effective risk management framework which aims to minimise the likelihood and effect of risks toSEPA. All operational and organisational risks are identified, assessed, managed and reviewed regularly by our CorporateManagement Team, Audit Committee and Board.

Financial Summary

During the year SEPA had income of £73.58m (2007 £64.7m).

Income 2005/6 2006/7 2007/8£'000 £'000 £'000

Grant-In-Aid 34,147 33,566 38,345Charging Schemes 26,505 30,152 32,787Other income 785 993 2,450

61,437 64,711 73,582

Figure 7: Where the money came from in 2007/08

Grant-In-Aid

45%

3%

52%

Charging schemes

Other income


Corporate support

Figure 8: Where the money went in 2007/08

SEPA had a surplus of £3.13m for the year (£0.63m – 2007). This is the difference between the deficit for the year of£35.21m (£32.93m - 2007) as shown in the Income and Expenditure Account and the funding received from the ScottishGovernment of £38.34m (£33.56m - 2006). This surplus was used to fund SEPA’s capital expenditure programme.

Expenditure 2005/6 2006/7 2007/8£'000 £'000 £'000

Staff costs 39,762 42,658 46,450Supplies and service costs 9,688 12,542 12,724Property costs 5,446 4,993 6,745Other administrative costs 2,256 2,351 2,529Depreciation and interest on capital 1,923 2,119 2,661Capital Expenditure 2,799 3,070 3,652

61,874 67,733 74,761

Capital Expenditure 2005/6 2006/7 2007/8£'000 £'000 £'000

Water Framework Directive information system 747 859 796Flood warning 153 474 50Environmental monitoring system 280 53 427Replacement finance, HR, procurement system 144 425 200Hydrology management information system 470 311Replacement scientific equipment 775 269 624Upgrades to SEPA buildings/new build 210 1032Other 700 310 212

2,799 3,070 3,652

The charging schemes were 96% self financing in 2007-2008. The balance of 1.4m was funded from SEPA’s otherresources, which will continue until such time as the charging schemes breakeven.

SEPA continues to exceed its efficiency savings targets.

The balance sheet shows net capital employed £14.95m of (2007 deficit £8.27m). The decrease in the pension schemedeficit is the main reason for this movement. The discount rate applied to scheme liabilities changed from 2.1% (2007)to 3.2% (2008).

SEPA was set a budget target by the Scottish Government of £40.61m, for capital and operating costs. SEPA spent£40.58m in the year.

For the full accounts please refer to page 48.

17%

9%

3%4%

5%

62%

Sta costs

Supplies and service costs

Property costs

Other administrative costs

Depreiciation and interest on capital

Capital expenditure


Enforcement actions

Enforcement actions

The enforcement actions available under SEPA’s various regulatory regimes range from warning letters to referrals to theProcurator Fiscal for prosecution.

During 2007–2008, SEPA used the following enforcement actions:

ControlledActivities

Regulations

PollutionPreventionand Control

RadioactiveSubstances Waste

ProducerResponsibility Other

Final warning letters 42 22 5 65 0 1

Convictions secured5 12 1 0 16 0 1

Referrals to theProcurator Fiscal5

19 6 0 16 0 1

Enforcement Notice 49 16 2 66 0 1

5Convictions and referrals are not always in the same year, and therefore are not comparable.



Scottish Environment Protection Agency:Report and accountsYear Ended 31 March 2008

Contents

Directors Report 50

Statutory Background 50

Principal Activities 50

Financial Performance 50

Sponsor Department Targets 51

Capital Investments in Year 53

Gifts and Charitable Donations 54

Losses, Special Payments and Write Offs 54

Supplier Payments Policy 54

European Monetary Union 54

Auditors and Professional Advisors 54

Corporate Governance 54

Board Members 55

SEPA Management Team 2007-2008 59

Board Committees 60

Remuneration Report 61

Statement of Accountable Officer’s Responsibilities 64

Statement on Internal Control 65

Independent Auditor’s Report 67

Income and Expenditure Account 69

Balance Sheet 70

Cash Flow Statement 71

Statement of Total Recognised Gains and Losses 72

Notes to the Accounts 73

Appendix - Direction by the Scottish Ministers 88


Report and accounts

Directors ReportThe Board of the Scottish Environment Protection Agency presents its annual report and accounts for the year from1 April 2007 to 31 March 2008. The accounts have been prepared in a form directed by the Scottish Ministers inaccordance with Section 45(2) of the Environment Act 1995.

SEPA has had another good year meeting 18 out of 23 key targets for 2007/08. SEPA missed 2 compliance targets (waterand waste), the bathing waters target, narrowly missed the cost recovery target and one of our water targets. Last yearSEPA met 19 out of 22 key targets. For more detailed information please refer to the annual report.

Statutory BackgroundThe Scottish Environment Protection Agency (“SEPA”) was established and is regulated primarily by the relevant sectionsof the Environment Act 1995.

Principal ActivitiesSEPA’s principal activities are environmental regulation, enforcement and monitoring encompassing water, waste, landand air.

Financial Performance

Overview of the Year

SEPA had a surplus of £3,134,000 for the year (2007 £630,000). This is the difference between the deficit for the year of£35,211,000 (2007 £32,936,000) as shown in the Income and Expenditure Account and the funding received fromScottish Government (SG) £38,345,000 (2007 £33,566,000) which has been taken directly to the Income and ExpenditureReserve. This surplus was used to fund SEPA’s capital expenditure programme.

SEPA had a net cash outflow of £32,000 (2007 - in flow of £187,000) during the year.

Financial Reporting Manual (FReM 2007/8) issued by Treasury sets out the format of our annual accounts. Grant-In-Aid(GIA) is included in the Income and Expenditure Reserve in the balance sheet rather than included in the Income andExpenditure Account for the year. All other income and all expenditure is included in the Income and ExpenditureAccount. The impact of this is the Income and Expenditure Account shows a deficit which is transferred to the Incomeand Expenditure Reserve and is funded by GIA held there.

Total income received by SEPA increased by £8,722,000 (13.6%) compared to 2007. £4,779,000 of additional GIA isreflected in the Income and Expenditure Reserve and £3,943,000 in the Income and Expenditure Account for the year.£2,635,000 of the increase in income shown in the Income and Expenditure Account for the year has arisen fromcharging schemes. The increase in charging scheme income relates to increased levels of applications for licences,resultant increases in subsistence fees and uplift in charges. There was an increase of £1,308,000 in other income due tothe level of work done on behalf of other government bodies.

Offsetting this increase in income were increases in costs of £6,367,000 (9.6%) consisting of an increase in staff costs of£3,792,000, increases in other operating costs of £2,183,000 and an increase in depreciation and impairment of tangibleasset costs of £392,000. The continued achievement of cash releasing efficiency savings in excess of target ensured thatcost increases were minimised.

The main increase in staff costs has arisen from the cost of introducing a new pay scheme, effective from 1 April 2006and the full year cost of the additional staff recruited to meet SEPA’s responsibilities under the Water FrameworkDirective. Property costs increased by £1,752,000; supplies and service costs increased by £183,000 and otheradministration costs increased by £181,000. During the year SEPA undertook a number of accommodationrefurbishments, introduced energy saving and other measures to reduce its impact on the environment through betterbuildings management system.

As a result of new environmental legislation, SEPA required to increase its staff numbers which resulted in the need foradditional accommodation. Accommodation was acquired at Orbital House East Kilbride on a leasehold basis and somestaff were located in shared offices with Scottish Government Rural Payments and Inspections Directorate, in Perth.


Report and accounts

Under the Scottish Government's On the Ground Initiative SEPA started the development of new build shared officeaccommodation in Aberdeen, which will accommodate SEPA staff and laboratories, Scottish Natural Heritage and theJoint Nature Conservation Committee. This development involved a land exchange with Grampian Housing Association,to accommodate the footprint of the new Aberdeen building. Some of SEPA’s existing buildings on this land werevacated prior to 31 March, ready to be demolished in 2008/9. This has resulted in a net loss on disposal of land (£70,701)and impairment in value of buildings (£204,000).

SEPA’s target for the Efficient Government Plan (Building a Better Scotland: Efficient Government – Securing Efficiency,Effectiveness and Productivity) set by Scottish Government for 3 years to 2008/09 is £2.0m of cash–releasing efficienciesand £2.1m of time–releasing efficiencies. The actual efficiency savings achieved to 31 March 2008 was £2.8m of cash–releasing and £2.2m of time–releasing efficiencies.

The balance sheet shows net capital employed of £14,955,000 (2007 deficit of £8,274,000). This movement is mainlycaused by the decrease in the deficit on the pension scheme, now stated as £6,348,000 (2007 £24,774,000). The decreaseof £18,426,000 (2007 increase of £17,304,000) in liability is due to an increase in the discount rate used from 2.1%(2007) to 3.2% (2008).

SEPA aims to achieve full cost recovery when setting charging scheme fees. In 2007/8 the charging schemes achieved96% cost recovery against a target of 97% for the year. The reason for this was the greater number than expected ofPollution Prevention and Control (PPC) applications and a lower level of income received from Water Environment andWater Services scheme. Scottish Government instructed SEPA not to issue the second half year subsistence charge forthe disposals to land charging scheme.

The accounts have been prepared on a going concern basis as the Board believes that the pension scheme liabilities willbe met through future grants or GIA from the Scottish Government and future income from charging schemes.

During the year negotiations with the Trade Union failed to reach agreement on the new pay scheme proposed for1 April 2006 onward. Management imposed the deal in 2007/8. The majority of staff voluntarily accepted the new termsand conditions: the staff who did not voluntarily accept the new terms were formally dismissed and re-engaged.

An update on SEPA’s policies and achievements in respect of the sustainability and the environment, disabled employees,equal opportunities and employee consultation is contained in the preceding performance report.

Funding

The GIA allocated for the year was £38,345,000 which was £4,779,000 greater than the previous year’s figure(£33,566,000). £2,700,000 of this increase was cash carried forward from 2006/7 to meet the estimated cost of the2006/7 pay award which was paid in 2007/8. £2,529,000 was provided for the operating costs of delivering specificprojects agreed in previous years, the main projects were: - Water Frame Work Directive: Flood Warning/Dissemination:Bathing Water Monitoring and Ground Water Network. The only new project undertaken in 2007/8 funded by GIA wasE-planning.

Sponsor Department TargetsSEPA is expected to manage its budget, including GIA and charging income, in accordance with the FinancialMemorandum and Scottish Public Finance Manual. SEPA is expected to ensure that, taking one year with another,income from GIA and charging schemes equals expenditure. SEPA is expected to achieve full cost recovery on chargeableservices. SEPA regularly reviews and updates charging schemes to ensure that income reflects regulatory effort andcosts. SEPA ensures that the basis for, and structure of, its charging schemes are transparent and incorporateindependent external scrutiny where appropriate. SEPA proposes amendments to charging schemes for Ministerialapproval following consultation with charge payers and trade bodies.

The Scottish Government provides a budget and cash allocation for the year, which originates from the Spending ReviewSettlement and is subsequently approved in the Budget Bill. During the year there are revisions approved in Spring andAutumn budget revision as agreed with the Scottish Government.

SEPA has some discretion in how it uses its revenue resource and in 2007/8 it transferred £1,064,000 from its revenuebudget to capital budget, taking the capital budget to £3,651,000: £1,064,000 more than Scottish Governmentallocation of £2,587,000. There was an off setting reduction in the cash operating budget from £35,758,000 to£34,694,000: which when added to the non cash budget of £2,267,000 equals the operating budget for the year of£36,961,000 reported in the following table.


Report and accounts

In resource terms SEPA achieved the following for the year:

Performance against Corporate Plan 2007/8

SEPA issued a provisional Corporate Plan for April 2005 to March 2008. This provided broad forecasts of income andexpenditure, for each year of the plan. An annual budget is then agreed with Scottish Government for each year of theplan at the beginning of the financial year.

2007/8 income was £3,400,000 greater than the forecast in the Corporate Plan of £70,442,000. GIA was £746,000 greaterthan plan: charging scheme income was £354,000 greater than plan and other income was £2,300,000, greater thanplan. When preparing the forecast for the Corporate Plan a conservative view of the work likely to be undertaken at costfor other public sector bodies was made, this level of work proved to be considerably higher in 2007/8 than expected.The most significant elements of this were Radioactive Substances Act surplus sources disposal programme and theTransfrontier Shipment of Waste project generating income of £760,000, from Department of Environment, Food andRural Affairs.

The annual expenditure on operating activities was £609,000 greater than plan. Pay and other staff costs were £253,000,greater than plan: other operating costs were £312,000 greater than plan, of which £295,000 related to research anddevelopment: and capital charges were £44,000 greater than plan.

Trends

SEPA has experienced growth in its activities over the last five year period as a result of implementing legislativerequirements to meet European Union Directives. The growing nature of SEPA’s environmental monitoringresponsibilities, has led to GIA Income increasing by 58% over the level of GIA received in 2003/4 to the £38,345,000received in 2007/8.

Income from the charging schemes has grown by 77% over the five year period as new charging schemes have beenintroduced in support of new legislation. Water Environment Water Services, Pollution Prevention and Control and othercharging schemes have moved towards full cost recovery. It is expected that the level of income from charging schemeswill grow at a rate 1% less than the rate of inflation in the coming three year period, as SEPA continues to makeefficiencies in service delivery which will enable cost increases to be kept at a level lower than inflation.

The trend in income is matched by increasing costs and continued investment in SEPA’s assets to meet the requirementsof new legislation. There has been an increase in the average number of staff employees by 290, over the five yearperiod, to cover SEPA’s extended duties under environmental legislation. The pay bill has increased by 62% over the fiveyear period. Property costs have increased due to inflationary pressures and the accommodation required for additionalstaff and activities. SEPA has worked to mitigate these costs by increasing the occupancy of current buildings and wherepossible, sharing accommodation with other government bodies. SEPA has continued to invest in fixed assets at anaverage of £3,012,000 per annum over the last five years, mainly to support the introduction of new legislation.

Future

As a Non-Departmental Public Body SEPA expects, the Scottish Government to continue its current level of support, andthat future Ministerial approval will be forthcoming for proposed changes to charging schemes.

SEPA has been funded for additional services by Scottish Government in the next three years, the major new servicesthat are being developed are:

• Flood Warning Dissemination

• Diffuse Pollution Regulations

• Restoration of Good Water Environments

Limits Budget Outturn Variance

£000 £000 £000

Capital Expenditure 3,651 3,652 1 over spent

Operating Expenditure 36,961 36,931 30 under spent


Report and accounts

SEPA has set its charging scheme fees at RPI less 1% for the three years of the draft corporate plans: the 1% reductionrepresents an element of the efficiency savings it expects to make being passed on to charge payers. SEPA will aim toachieve at least 97% cost recovery across charging schemes each year. SEPA will continue its cycle of reviewing chargingschemes in consultation with stakeholders.

Following the implementation of the new pay scheme in 2007/8, SEPA expects to maintain the basic structure of thenew pay scheme for the foreseeable future. There have been a number of Local Authority Pension scheme consultationsin 2007/8 and subsequent amendments to the structure of the pension scheme proposed which will be effective from1 April 2009. There will potentially be a significant change in employee contributions. The next full actuarial review ofFalkirk pension scheme will be done on data as at 31 March 2008. The results are not expected until late Autumn 2008:when the actuaries will make recommendations regarding the employer’s contribution rates for the three years 2009to 2012.

FRS17 will continue to cause unpredictable movements on SEPA’s net assets employed through fluctuations in thediscount rates applied.

SEPA, like every other government body, is expected to deliver best value and contribute to the efficient governmenttargets. The Agency has been set an efficiency target for each of the next three years of: 2008/9 £727,000: 2009/10£1,455,000 (cumulative) and 2010/11 £2,182,000 (cumulative). There are a number of actions underway to identifyefficiency savings.

As part of Scotland’s Environmental and Rural Services (SEARS) on the Ground Initiative, SEPA is working in partnershipwith other government bodies to provide joint accommodation solutions and share support services. It has been agreedto share office accommodation with Lomond and Trossachs National Park from 2008/9 onward and provide facilities andprocurement services to them. The business case for the development of the Galashiels shared office accommodation isexpected to be approved in 2008/9.

SEPA is one of several organisations working together to deliver a single environmental and rural service in Scotland,making it easier for customers to access information and guidance and providing co-ordinated services to thesecustomers. The other organisations involved are: Animal Health, Cairngorms National Park Authority, CroftersCommission, Deer Commission, Forestry Commission Scotland, Loch Lomond and the Trossachs National Park Authority,Scottish Government Rural Payments and Inspections Directorate and Scottish Natural Heritage. There will be risks andopportunities arising for SEPA in the provision of frontline services to customers, as other organisations do work for usthere may be consequential effects on the income SEPA receives from its charging schemes and the costs it incurs.

SEPA expects to receive continuing support for capital investment from the Scottish Government where it provides arobust business case, particularly in respect of its shared office accommodation proposals. It has received approval fortwo major schemes in the next three year period:

• Aberdeen Office Development

• Flood Warning Dissemination Scheme

Capital Investments in YearSEPA invested £3,626,000 in fixed assets during the year. The main additions in year were:

• Water Framework Directive Information System £796,000

• Environmental Reporting System £427,000

• Replacement of Resource and Management System £200,000

• Corporate Licensing Administration System £311,000

• Replacement of various items of scientific equipment £624,000

• Aberdeen Office Development £1,026,000

• Replacement Boat £120,000

• Other items of equipment £147,000


Report and accounts

Gifts and Charitable DonationsThere have been no gifts or charitable donations made by SEPA for the year.

Losses, Special Payments and Write OffsIn this financial year SEPA provided for £390,745 (2007 £451,083) of bad debts, 1.2% of charging scheme income.Additionally SEPA suffered £14,438.37 (2007 £7,886) worth of losses due to theft, employee injury, loss of equipmentand damages to items. £328,000 (2007 £147,660) of bad debts were written off in year.

Supplier Payments PolicySEPA meets the requirements laid down by Government in respect of payments to small companies. Based on the yearend trade creditors balance, the average time taken to pay all suppliers was 30 working days (2007 - 27 working days). Itis SEPA policy to pay all suppliers no later than 30 working days from receipt of invoice in accordance with its servicecharter. The policy is made known to the staff that handle payments to suppliers and is made known to suppliers onrequest.

European Monetary UnionSEPA’s financial system currently has the capability to function with any standard currency which may be introduced asa requirement of European Monetary Union legislation.

Auditors and Professional Advisors

Bankers Auditors

Royal Bank of Scotland Audit ScotlandSt. Andrew Square 1- 5 Osborne TerraceEdinburgh EdinburghEH2 2YB EH12 5HG

Under the Public Finance and Accountability (Scotland) Act 2000, SEPA’s auditors are appointed by the Auditor Generaland Audit Scotland was appointed as SEPA’s auditor for the financial years ending 2007 - 2008.

The auditors were remunerated in the sum of £51,000 in respect of statutory audit services for the financial year2007/08.

All relevant audit information has been made available to the Agency’s auditors and the accountable officer has takensteps to ensure that the auditors are aware of any relevant audit information.

Corporate GovernanceSEPA aims for the highest standards in corporate governance and the Cabinet Office Guidance on Codes of Practice forPublic Bodies has been adopted. The Agency’s Corporate Office is at, Erskine Court, Castle Business Park, Stirling, FK9 4TR.


Report and accounts

Board Members

Agency Board

David Sigsworth David Sigsworth is a Chartered Electrical Engineer, a Fellow of The Royal Society(Chairman from 1 January 2008) of Arts, and an Honorary Professor at the University of Dundee. He retired from

the board of Scottish and Southern Energy plc in March 2005, after a career of43 years in the utilities sector. David is Chief Executive of Kirklands ConsultingLimited. He is Chairman and Non-Executive Director of Martin Energy Limited,Nitol Solar Limited and St Andrews Fuel Cells Limited. He is a Non ExecutiveChairman of Sigma Capital Group plc and Non – Executive Director of SolentSustainable Energy Limited and he is a member of NaREC advisory board. He isChairman of the Dundee Science Centre, Vice President of the Combined Heatand Power Association (CHPA), a Board Member of Energy Action Scotland, amember of the Advisory Board of ITI Energy and a trustee of the think tankSustainability First.

Campbell Gemmell Campbell Gemmell has a first class honours degree in Geography and a PhD in(Chief Executive) Glaciology from Aberdeen University. In his early career he was a glaciologist with

the British Antarctic Survey and a research lecturer at Christ Church CollegeOxford. Subsequently he was an Executive with the Scottish DevelopmentAgency’s Policy Unit, then a Senior Consultant with ECOTEC Research andConsulting, working on a range of economic and environmental issues for theEuropean Commission and others. He spent 3 years working on policy andstrategy development for Scottish Enterprise, including leading the developmentof its Business and the Environment Programme, before joining the CentralScotland Countryside Trust as Chief Executive in 1994.

Lesley Bloomer Lesley Bloomer has a BSc (Hons) in Zoology from Glasgow University, a PhD inMarine Physiology and Genetics from University College London and a MBA fromStrathclyde University. She worked at the Scottish Development Agency onagribusiness, and on education and training. After a spell in consultancy dealingwith major Non-Department Public Bodies (NDPBs), Lesley joined Audit Scotland,becoming Director, Performance Audit for Education, Enterprise and Justicepolicy areas. She also carried lead responsibility for performance audit work withScotland’s local authorities. Lesley left Audit Scotland in 2003 to work as aConsultant. She is a Board Member of the Care Commission.

R J Fred Dinning Fred Dinning is a Fellow of the Institute of Engineering and Technology and ofthe Energy Institute. He was the Energy and Environment Director with theScottish Power Group prior to retiring. He chairs the Carbon Trust's ConsultantAccreditation Board and the Edinburgh Research Programme's Energy AdvisoryGroup. He also serves on the WWF Scotland's Advisory Board and is convenor ofthe Church of Scotland Church and Society Council's groups examining energyand environmental issues.

Ian Doig Ian Doig is a qualified Accountant, member of both CIPFA and ACCA. He waspreviously CIPFA Director for Scotland. He has experience of a wide range ofpublic services and of building partnership working between organisations toachieve mutual objectives. Ian is an independent consultant. Ian is also aCommunity Councillor in Merchiston, Edinburgh, and Council Member of theScottish Social Services Council.

Bob Downes Bob Downes is Director Scotland, Openreach, part of BT Group. Bob has been withBT Group since 1999 where he has had a range of leadership roles in strategy andretail. Bob is a member of the Glasgow University Business School Advisory Board.He is also a member of the Scotrail Advisory Board and an Ambassador for thePrince and Princess of Wales Hospice in Glasgow.


Report and accounts

Drew Edward Drew Edward is a Chartered Engineer and Member of the Institution ofMechanical Engineers. He spent his early working life in power generation andsubsequently in fertiliser manufacturing and agricultural merchanting. From1992 to 1999 he worked as a safety, health and environment adviser with W LGore and Associates.

As a Councillor on Fife Council 1997 to 2007 he was heavily involved inenvironmental issues including development of the Fife Area Waste Plan.

Alison Hay Councillor Alison Hay is a member of Argyll and Bute Council. She was Leader ofthe Council from 1999-2001 and is a member of the Group for Recycling inArgyll and Bute. She is also a member of the Scottish Low Pay Unit. She isCOSLA’s Spokesperson for the Regeneration and Sustainable Development.

Russell Imrie Russell Imrie is a Councillor on Midlothian Council. During most of his workinglife, from 1965 to 1999, he was a Telecom Engineer with British Telecom. As alocal councillor he has become heavily involved in environmental issues and iscurrently COSLA spokesperson on waste management and Chair of REMADE (notremunerated), a partnership of public bodies and the private sector set up toencourage and generate markets for recycled goods. Russell is also Chairman ofSESTRAN South East Scotland Transportation Partnership made up of the tenLocal Authorities.

Julia Sturrock OBE Julia Sturrock was a Councillor in Dundee from 1988 to 2007. She heldconvenerships from 1990 onwards and was Leader of the Council (1999-2003)and Convener of Environmental Services and Sustainability (1996-1999; 2003-2007). She was Convener of the Protective Services Forum at COSLA for fouryears and for nine years was a member of both SEPA East Board and ForwardScotland. She was Chair of Sustain Dundee Environmental Trust and Vice Chair ofthe Dundee Solar City Project and is now a Board Member of Scottish NaturalHeritage, Keep Scotland Beautiful, Socialist Environment and ResourcesAssociation (SERA) and the International Resources and Recycling Institute. Shewas awarded an OBE in 2007 for services to the environment and sustainabledevelopment in Scotland.

Susan Walker Susan Walker has a Geography and Civil Engineering background. From 1980 to1999 she held a number of posts in the National Rivers Authority andsubsequently in the Environment Agency. She retired as Regional Water Managerof the Agency’s North West Region in 1999 to form her own consultancycompany which specialises in sustainable and integrated river basin management.She was a member of the North of Scotland Water Authority from 1999 to 2002.Susan is currently a Board Member of Scottish Natural Heritage, DeerCommission for Scotland and the Cairngorms National Park Authority.

Dr Helen Zealley Helen Zealley retired as Director of Public Health with NHS Lothian in 2000having spent her professional career in public health medicine. She is currently amember of Friends of the Earth Scotland and a Trustee for Waverley Care.


Report and accounts

Sir Ken Collins Fellow of the Royal Scottish Geographical Society, an Honorary Fellow of the(Retired 31 December 2007) Chartered Institution of Water and Environmental Management, and the

Chartered Institution of Wastes Management. Honorary Vice-President of theNational Society for Clean Air, and the Royal Environmental Health Institute ofScotland, and Vice President of the Town and Country Planning Association, theTrading Standards Institute and the Association of Drainage Authorities. BoardMember of the Institute of European Environmental Policy and an Ambassadorfor Asthma UK. Chairman of Health Equality Europe, a member of the AdvisoryBoard of the ESRC Genomics Policy and Research Forum, a member of theEuropean Public Affairs Consultancies’ Association (EPACA) Professional PracticesPanel, and a member of the European Commission’s High Level Group onCompetitiveness, Energy and the Environment. Former Member of theManagement Board of the European Environment Agency (nominated by theEuropean Parliament), a former Board Member of Central Scotland Forest Trust,and a former Board Member of Forward Scotland.

In 2003 Sir Ken received a Knighthood for his services to environmentalprotection and in 2004 he was awarded an Honorary Doctorate from theUniversity of Paisley.

Nick Kuenssberg OBE Chairman of Iomart Group plc, Keronite Plc, Canmore Partnership Limited and(Deputy Chairman and South eTourism Ltd, Glasgow School of Art and Scottish Network International.West Region Board Chairman) Previously main Board Director of Coats Viyella plc, Managing Director DawsonRetired 31 December 2007 International plc, Chairman Stoddard International plc, GAP Group Ltd and other

companies and non-executive Director of Scottish Power plc, Standard LifeAssurance Company and other companies, visiting professor at the University ofStrathclyde and member of the Scottish Legal Aid Board.

Brian Clark MBE Professor of Environmental Management and Planning at Aberdeen University(Also North Region with thirty-two years’ experience of environmental management and impactBoard Chairman) assessment in Scotland and worldwide. Founder and former director of CentreRetired 31 December 2007 for Environmental Management and Planning providing consultancy, research

and training in Environmental Impact Assessment and Strategic EnvironmentalAssessment and capacity building.


Report and accounts

Non Executive Members of Agency Committees in 2007/8

Audit Committee Human Resources and Planning and Finance CommitteeRemuneration Committee

Lesley Bloomer (Chair) Drew Edward (Chair) Brian Clark (Chair – rtd 31 Dec 2007)

Nick Kuenssberg (rtd 31 Dec 2007) Sir Ken Collins (rtd 31 Dec 2007) Sue Walker (Chair)

Russell Imrie Fred Dinning Lesley BloomerFred Dinning Alison Hay Ian DoigIan Doig David Sigsworth Bob DownesBob Downes Julia Sturrock Ken Collins (rtd 31 Dec 2007)

Sue Walker (left cttee 31 Dec 2007) Campbell GemmellHelen Zealley Nick Kuenssberg (rtd 31 Dec 2007)

Russell Imrie (left cttee 31 Dec 2007)

David SigsworthJulia SturrockHelen ZealleyGeorge McNeillMike O’Leary (rtd 30 June 2007)

Ian FernieBill Jamieson

Regional Non Executive Board Members

East Region Board South West Region Board North Region Board

Drew Edward (Chair) Nick Kuenssberg (Chair – rtd 31 Dec 2007) Professor Brian Clark (Chair – rtd 31 Dec 2007)

Bill Howatson Fred Dinning (Chair – Appointed 26 Feb 2008) Sue Walker (Chair – Appointed 26 Feb 2008)

Victoria Abernethy David Balmer Richard BalharryHenry Adomako (Appointed 30 June 2007) Derek Bain Elaine BoothMarion Anderson Gerry Convery Kathryn ConlonJohn Bathgate Douglas Connell (Appointed 30 June 2007) Caroline Davies (rtd 21 Sept 2007)

David Berry Ian Fernie Andrew DytchChristopher Brittain (rtd 30 June 2007) Eric Gotts Helen GeddesRobert Cairns Mykela Heath Stuart GibbFranklyn Crawford Alan Hendry Alison HayAlistair Lamont (Appointed 30 June 2007) Richard Jardine William JamiesonJohn McManus (rtd 30 June 2007) Michael O’Leary (rtd 30 June 2007) Bruce LuffmanGeorge McNeill Earl of Stair David MackayStuart Nickerson Sheena Wurthmann Ian RossAlison Searl Ian Young David Sandison


Report and accounts

SEPA Management Team 2007-2008

Campbell Gemmell BSc (Hons), PhD, FRSA

Dr Campbell Gemmell joined SEPA in 2001 as Director of Strategic Planning, and became Chief Executive in April 2003.He was Chief Executive of the Central Scotland Countryside Trust from 1994, Policy Manager then Strategist withScottish Enterprise from 1991 and Senior Consultant with ECOTEC Research and Consulting from 1990.

His career has included posts as Research Lecturer at Christ Church, Oxford and research work in glaciology with theBritish Antarctic Survey. He also took part in various international scientific expeditions and field studies, including as aPrincipal Investigator with the U.S. Earthwatch Programme. Campbell received an Honorary Professorship at theUniversity of Glasgow in January 2007.

Colin Bayes BSc, MSc, FCIWEM, Dip IWPC

Director of Environmental Protection and Improvement since 2004. Previously acting Director of Operations from July2003. Formerly SEPA’s Head of Water Policy and Environmental Regulation and Improvement Manager for the east ofScotland. Previous experience includes Divisional Pollution Prevention Officer with the Forth River Purification Board,Scientist with the Water Research Council and Pollution Prevention Officer with Yorkshire Water.

John Ford BA Econ (Hons), FCCA, CPFA

Director of Finance and Corporate Services since 1998. Formerly Director of Finance, Information and Contracts atStobhill NHS Trust. Previous experience includes Senior Financial and Information Management posts within AEATechnology and Post Office Counters Ltd.

Calum MacDonald DipEH, MREHIS

Director of Environmental and Organisational Strategy since July 2004. Previously acting Director of Strategic Planningfrom April 2003. Formerly SEPA’s Environmental Regulation and Improvement Manager for Highlands Islands andGrampian, then Environmental Development Manager in Strategic Planning Directorate. Previous experience includesvarious posts with City of Glasgow Council in environmental health and pollution control. Chairman of Council ofNational Society for Clean Air and Environmental Protection.

Chris Spray MBE, MA, PhD, MIEEM

Director of Environmental Science since July 2004. Formerly Environmental Director of Northumbrian Water Group plc,Environmental Manager of Northumbrian Water and Regional Conservation Officer for the National Rivers Authority.Previous experience includes posts with the Anglian Water Authority and Aberdeen University. Awarded an MBE forservices to environmental improvement and conservation in the water industry. President of the Institute of Ecology andEnvironmental Management.

Richard Claughton BA, CIPD

Head of Human Resources and Organisational Development. Formerly HR Manager with the Environment Agency'sThames Region and HR Manager, then Director, with the Economist Intelligence Unit. Previous experience includesvarious posts with the BBC in London and Glasgow, in personnel management.

Monica Straughan MA (Hons), MCIPR

Head of Communications. Formerly Public Relations Manager. Her career has included posts in Scottish Natural Heritageand both its predecessor bodies, the Nature Conservancy Council for Scotland and the Countryside Commission forScotland. She originally trained as a journalist with DC Thomson and Co, Dundee.


Report and accounts

Board CommitteesThe Board meets regularly throughout the year and comprises the Chairman, Deputy Chair, nine further non-executivemembers, and the Chief Executive. Members of the Board are appointed by the Scottish Ministers. The normal term ofoffice for a Non-Executive Board Member is four years, although lengths of appointments may be varied to ensurecontinuity of Board Membership. David Sigsworth was appointed as Chairman from1 January 2008, following theretirement of Sir Ken Collins on 31 December 2007.

The Board has agreed a policy of requiring matters to be reported to the Board for decision unless specifically within thedelegated powers given to the Chief Executive.

The Board has an Audit Committee, which comprises of four non-executive members, and has been chaired by LesleyBloomer since November 2004. It meets four times a year. The external and internal auditors attend all meetings. Theexternal and internal auditors are given the opportunity to speak confidentially to the Committee members. The purposeof the Audit Committee is to monitor and review risk, control and corporate governance. It operates independently andreports to the Board.

The Board has a Planning and Finance Committee, which comprises seven non-executive members, the Chairman of theBoard and SEPA’s Chief Executive and is chaired by Susan Walker from 1 January 2008. It meets as determined by itsChairman and meetings are set so as to compliment the budgetary and corporate planning timetables of SEPA. Directorsand members of SEPA staff are asked to attend meetings when subjects of particular relevance are discussed. Thepurpose of the Planning and Finance Committee is to provide analysis and advice to the Board on issues relating toSEPA’s annual budget and budgetary planning, on corporate planning, forward strategy and prioritisation, on thedevelopment of corporate communications and on annual performance and measurement.

The Board has a Human Resources and Remuneration Committee which comprises five non-executive members and theChairman of the Board and is chaired by Drew Edward. It meets as determined by its Chairman but not less than twice ayear and meetings are set so as to compliment the remuneration and appointments timetable of SEPA in any one year.Directors and members of SEPA staff are asked to attend meetings when subjects of particular relevance are discussed.The purpose of the Human Resources and Remuneration Committee is to consider, advise the Board on, and approvematters delegated to it by the Board in respect of Human Resources and Remuneration.

Information on membership of the Board, their company directorships and other significant interests, the composition ofthe Audit, Planning and Finance and Human Resources and Remuneration Committees is provided on pages 55-59 of theReport and Accounts.


Report and accounts

Remuneration Report

Part 1 Unaudited

Drew Edward chairs the Human Resources and Remuneration Committee. The committee members are David Sigsworth,Fred Dinning, Alison Hay, Julia Sturrock and Helen Zealley.

The Human Resources and Remuneration Committee approves the salary increases of the Chief Executive in line with theSenior Salaries Review Body and of the Directors. It further determines the performance pay of the Chief Executive andratifies the Chief Executive’s recommendations for the corporate management team.

Performance Pay is calculated by reference to the extent to which predetermined objectives have been achieved, with amaximum value of 10% of basic pay for the Chief Executive and 5% for the corporate management team.

Part 2 Audited

2008 2008 2008 2008 2008 2007Main East South West NorthBoard Region Region Region Total Total£000 £000 £000 £000 £000 £000

Remuneration of Board MembersRemuneration/Fees:Chairman and Chief Executive 171 171 168Other members 87 23 22 21 153 152

258 23 22 21 324 320

In the table below Chairmen of the Regional Boards have been allocated to the Main Board, although they serve onboth Boards.

Board Members whoseemoluments were withinthe scales indicated were: 2008 2008 2008 2008 2008 2008

Main Board East Region SW Region North Region Total TotalNumber Number Number Number Number

£0 - £5,000 B Downes V Abernethy D Bain R BalharryJ Sturrock H Adomako D Balmer E Booth

M Anderson D Connell K ConlonJ Bathgate G Convery C DaviesD Berry I Fernie A DytchC Brittain1 E Gotts H GeddesR Cairns M Heath S GibbF Crawford A Hendry W JamiesonB Howatson R Jardine B LuffmanA Lamont M O’Leary1 D MackayJ McManus1 Earl of Stair I RossG McNeill S WurthmannD SandisonS Nickerson I YoungA Searl

£5,001 - £10,000 L BloomerF DinningI DoigA HayR ImrieS WalkerH Zealley

1Retired during year to 31 March 2008.


Report and accounts

Board Members whoseemoluments were withinthe scales indicated were: 2008 2008 2008 2008 2008 2008

Main Board East Region SW Region North Region Total TotalNumber Number Number Number Number

£10,001 - £15,000 B Clark2

D EdwardN Kuenssberg2

D Sigsworth£35,000 - £40,000 K Collins2

Number of membersat 31 March 2008 12 12 12 11 47 49

2Retired during year to 31 March 2008.

Remuneration of Chairman, Chief Executive and Directors

Salary Band Bonuses Benefits in Kind£000 £000 £000

Chairman

K Collins (retired 31/12/07) 35-40

D Sigsworth (appointed 1/1/08) 10-15

Chief Executive

C Gemmell 100-105

Directors

C Bayes 90-95 63 24

J Ford 90-95 63

C MacDonald 90-95 63

C Spray 90-95 33 24

3This is bonus payments for the years 2005/6 and 2006/7, these are included in the salary bands.4This represents SEPA’s contribution towards a lease car.

The Chief Executive and Directors are ordinary members of the Falkirk Pension scheme and SEPA pays the employer’spension contribution at the same rate that it does for other participating members.

K Collins retired on 31 December 2007 and D Sigsworth was appointed on 1 January 2008. Their equivalent annualsalaries for the year to 31 March 2008 were both in Salary Band £45,000 to £50,000.


Report and accounts

Pension entitlements of Chief Executive and Directors

Approved by the Board and signed on behalf of the Board on 5 August 2008.

Campbell Gemmell

Chief Executive and Accountable Officer

Real increase/(decrease) inpension and

related lump sumat age 60

Total accruedpension at age 60and related lumpsum at 31 March

2008

CashEquivalent

Transfer Valueat 31 March

2008

CashEquivalent

Transfer Valueat 31 March

2007

Real Increase/(reduction) in

CashEquivalent

Transfer Value

£000 £000 £000 £000 £000

Chief Executive

C Gemmell 0-2.5: 2.5-5 5-10: 25-30 106 88 14

Directors

C Bayes 0-2.5: 2.5-5 35-40: 105-110 641 589 29

J Ford 0-2.5: 2.5-5 20-25: 60-65 360 324 23

C MacDonald 0-2.5: 2.5-5 35-40: 110-115 624 566 37

C Spray 0-2.5: 2.5-5 15-20: 55-60 307 275 22


Report and accounts

Statement of Accountable Officer’s ResponsibilitiesUnder Section 45(2) of the Environment Act 1995, the Scottish Environment Protection Agency is required to preparefinancial statements for each financial year in the form and on the basis determined by the Scottish Ministers. Thefinancial statements are prepared on an accruals basis and must give a true and fair view of the state of affairs of theScottish Environment Protection Agency as at the end of the financial year and of the income and expenditure, totalrecognised gains and losses and cash flows for the financial year.

In preparing the financial statements, the Accountable Officer is required to comply with the requirements of theGovernment Financial Reporting Manual and in particular to:

• Observe the financial statements direction issued by the Scottish Ministers, including the relevant accounting anddisclosure requirements, and apply suitable accounting policies on a consistent basis;

• Make judgments and estimates on a reasonable basis;

• State whether applicable accounting standards as set out in the Government Financial Reporting Manual have beenfollowed, and disclose and explain any material departures in the financial statements; and

• Prepare the financial statements on a going concern basis.

In addition, the Agency has general responsibility for taking such steps as are reasonably open to it to safeguard theassets of the Agency and to prevent and detect fraud and other irregularities.

The Accountable Officer of the Scottish Executive Environment and Rural Affairs Department designated the ChiefExecutive of the Scottish Environment Protection Agency as Accountable Officer for the Agency.

The Chief Executive’s relevant responsibilities as Accountable Officer for the Agency are set out in the FinancialMemorandum 2005, published by the Scottish Executive and subsequent letter of February 2007. The AccountableOfficer has responsibility for the propriety and regularity of the public finances for which they are answerable, forkeeping proper records and for safeguarding the Agency’s assets.

Campbell Gemmell



Report and accounts

Statement on Internal Control

Scope of responsibility

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

The Scottish Public Finance Manual (SPFM) is issued by the Scottish Ministers to provide guidance to the ScottishExecutive and other relevant bodies on the proper handling of public funds. It is mainly designed to ensure compliancewith statutory and parliamentary requirements, promote value for money and high standards of propriety, and secureeffective accountability and good systems of internal control.

The purpose of the system of internal control

The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failureto achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance ofeffectiveness.

The system of internal control is based on an ongoing process designed to identify and prioritise the risks to theachievement of the organisation’s policies, aims and objectives; to evaluate the likelihood of those risks being realisedand the impact should they be realised; and to manage them efficiently, effectively and economically. The system ofinternal control has been in place for the year ended 31 March 2008, and up to the date of approval of the annualreport, and accounts.

The risk and control framework

All bodies subject to the requirements of the SPFM must operate a risk management strategy in accordance withrelevant guidance issued by the Scottish Ministers. At SEPA the following processes have been established:

• Consideration and approval by SEPA’s Main Board of the organisation’s risk strategy and implementation plan;

• A Management Board which during the year held a number of meetings to consider the plans and strategic directionof the organisation (the Board comprises the management team of the organisation);

• A risk management group which is responsible for the efficient and effective management of risk, includingassurance that SEPA complies with all relevant legislation and the responsibilities of corporate governance. The groupprovides quarterly updates to the Corporate Management Team, and the Audit Committee, and an Annual Report toSEPA’s Board;

• Maintenance of an internal risk register which is reviewed on a regular basis;

• Regular reports from managers on the steps they are taking to manage risks in their areas of responsibility, includingprogress reports on key projects;

• A regular programme of facilitated workshops to identify and keep up to date the record of risks facing theorganisation;

• A programme of risk awareness training;

• Regular reporting on key performance indicators and risk measures;

• Periodic reports from the chairman of the organisation’s Audit Committee, to the Board, concerning internal control;

• Regular reports by SEPA’s internal auditors, KPMG, provided under contract and which operates to standards definedin the Government Internal Audit Manual. These reports include opinion on the adequacy and effectiveness of thesystem of internal control together with recommendations for improvements and the work of the internal auditors isinformed by an analysis of the risk to which SEPA is exposed, and annual internal audit plans are based on thisanalysis. The analysis of risk and the internal audit plans are approved by me and following discussion endorsed bythe body’s Audit Committee.


Report and accounts

Review of effectiveness

As Accountable Officer, I also have responsibility for reviewing the effectiveness of the system of internal control. Myreview of the effectiveness of the system of internal control is informed by the work of the internal auditors and theexecutive managers within the organisation, who have responsibility for the development and maintenance of theinternal control framework, and comments made by the external auditors in their management letter and other reports.I have been advised on the implications of the result of my review of the effectiveness of the system of internal controlby the Board and the Audit Committee, and a plan to address weaknesses and ensure continuous improvement of thesystem is in place.

The most significant issue that arose in year through SEPA’s internal control checks, were licence data inconsistencies,revealed through a data cleansing exercise. A number of under charges and over charges were made during the year as aconsequence. SEPA management has thoroughly investigated the situation and taken remedial action to rectify charges.

Campbell Gemmell



Report and accounts

Independent Auditor’s ReportIndependent auditor’s report to the members of Scottish Environment Protection Agency, the Auditor General forScotland and the Scottish Parliament.

I have audited the financial statements of Scottish Environment Protection Agency for the year ended 31 March 2008under the Environment Act 1995. These comprise the Income and Expenditure Account and Statement of TotalRecognised Gains and Losses, the Balance Sheet, the Cash Flow Statement and the related notes. These financialstatements have been prepared under the accounting policies set out within them. I have also audited the informationin the Remuneration Report that is described in that report as having been audited.

This report is made solely to the parties to whom it is addressed in accordance with the Public Finance andAccountability (Scotland) Act 2000 and for no other purpose. In accordance with paragraph 123 of the Code of AuditPractice approved by the Auditor General for Scotland, I do not undertake to have responsibilities to members orofficers, in their individual capacities, or to third parties.

Respective responsibilities of the Board, Accountable Officer and Auditor

The Board and Accountable Officer are responsible for preparing the Annual Report, which includes the RemunerationReport, and the financial statements in accordance with the Environment Act 1995 and directions made thereunder bythe Scottish Ministers. The Accountable Officer is also responsible for ensuring the regularity of expenditure andreceipts. These responsibilities are set out in the Statement of Accountable Officer’s Responsibilities.

My responsibility is to audit the financial statements and the part of the Remuneration Report to be audited inaccordance with relevant legal and regulatory requirements and with International Standards on Auditing (UK andIreland) as required by the Code of Audit Practice approved by the Auditor General for Scotland.

I report to you my opinion as to whether the financial statements give a true and fair view and whether the financialstatements and the part of the Remuneration Report to be audited have been properly prepared in accordance with theEnvironment Act 1995 and directions made thereunder by the Scottish Ministers. I report to you whether, in my opinion,the information which comprises the Directors Report, Statutory Background, Principal Activities, Financial Performance,Capital Investments in Year, Gifts and Charitable Donations, Losses, Special Payments and Write Offs, Supplier PaymentsPolicy, European Monetary Union, Auditors and Professional Advisors included in the Annual Report, is consistent withthe financial statements. I also report whether in all material respects the expenditure and receipts shown in thefinancial statements were incurred or applied in accordance with any applicable enactments and guidance issued by theScottish Ministers.

In addition, I report to you if, in my opinion, the body has not kept proper accounting records, if I have not received allthe information and explanations I require for my audit, or if information specified by relevant authorities regardingremuneration and other transactions is not disclosed.

I review whether the Statement on Internal Control reflects the body’s compliance with the Scottish Government’sguidance, and I report if, in my opinion, it does not. I am not required to consider whether this statement covers all risksand controls, or form an opinion on the effectiveness of the body’s corporate governance procedures or its risk andcontrol procedures.

I read the other information contained in the Annual Report and consider whether it is consistent with the auditedfinancial statements. This other information comprises only Corporate Governance Matters, SEPA Management Team2007-2008, Board Committees and the unaudited part of the Remuneration Report. I consider the implications for myreport if I become aware of any apparent misstatements or material inconsistencies with the financial statements. Myresponsibilities do not extend to any other information.

Basis of audit opinion

I conducted my audit in accordance with the Public Finance and Accountability (Scotland) Act 2000 and InternationalStandards on Auditing (UK and Ireland) issued by the Auditing Practices Board as required by the Code of Audit Practiceapproved by the Auditor General for Scotland. An audit includes examination, on a test basis, of evidence relevant to theamounts, disclosures and regularity of expenditure and receipts included in the financial statements and the part of theRemuneration Report to be audited. It also includes an assessment of the significant estimates and judgements made bythe Board and Accountable Officer in the preparation of the financial statements, and of whether the accountingpolicies are appropriate to the body’s circumstances, consistently applied and adequately disclosed.


Report and accounts

I planned and performed my audit so as to obtain all the information and explanations which I considered necessary inorder to provide me with sufficient evidence to give reasonable assurance that the financial statements and the part ofthe Remuneration Report to be audited are free from material misstatement, whether caused by fraud or error, and thatin all material respects the expenditure and receipts shown in the financial statements were incurred or applied inaccordance with any applicable enactments and guidance issued by the Scottish Ministers. In forming my opinion I alsoevaluated the overall adequacy of the presentation of information in the financial statements and the part of theRemuneration Report to be audited.

Opinion

Financial statementsIn my opinion

• the financial statements give a true and fair view, in accordance with Environment Act 1995 and directions madethereunder by the Scottish Ministers, of the state of affairs of Scottish Environment Protection Agency as at31 March 2008 and of the excess of expenditure over income, total recognised gains and losses and cash flows forthe year then ended;

• the financial statements and the part of the Remuneration Report to be audited have been properly prepared inaccordance with the Environment Act 1995 and directions made thereunder by the Scottish Ministers; and

• information which comprises only the Directors Report, Statutory Background, Principal Activities, FinancialPerformance, Capital Investments in Year, Gifts and Charitable Donations, Losses, Special Payments and Write Offs,Supplier Payments Policy, European Monetary Union, Auditors and Professional Advisors included in the AnnualReport is consistent with the financial statements.

RegularityIn my opinion, in all material respects the expenditure and receipts shown in the financial statements were incurred orapplied in accordance with any applicable enactments and guidance issued by the Scottish Ministers.

Signature Lorna Meahan CA

Assistant DirectorAudit Scotland1-5 Osborne TerraceEdinburgh EH12 5HG

Date


Report and accounts

Income and Expenditure Account

Year to 31 March 2008

Notes Year to Year to31 March 31 March

2008 2007£000 £000

IncomeIncome from charging schemes 3 32,787 30,152Other Income 4 1,972 664

34,759 30,816

ExpenditureStaff costs 5 (46,450) (42,658)Depreciation and impairment of tangible assets 10 (1,929) (1,537)Other operating charges 6 (22,069) (19,886)

(70,448) (64,081)

Excess of expenditure over income (35,689) (33,265)

Notional cost of capital 7 (661) (582)Interest receivable and similar income 8 478 329

Excess of expenditure over income for the (35,872) (33,518)year after charging notional cost of capital

Reversal of notional cost of capital 7 661 582

Taxation 9 — —

Excess of expenditure over incomefor the year funded by GIA 15 (35,211) (32,936)

All income and expenditure relates to continuing activities.

The excess expenditure over income represents the cost of Scottish Government funded activities; the cash to fund theseactivities has been taken directly to the Income and Expenditure Reserve.

The note numbers referred to above are incorporated within the Notes to the Accounts contained on pages 73-88.


Report and accounts

Balance Sheet

As at 31 March 2008

Notes Year to Year to31 March 31 March

2008 2007£000 £000

Fixed AssetsTangible assets 10 15,105 13,439Intangible assets 10 5,626 5,253

20,731 18,692

Current AssetsDebtors 11 5,214 5,592Cash at bank and in hand 12, 21 (iii) 5,796 1,228

11,010 6,820

CREDITORS: amounts falling due within one year 12 (9,160) (7,532)

Net Current Assets/(Liabilities) 1,850 (712)

Total Assets Less Current Liabilities 22,581 17,980

Provisions For Liabilities and Charges 14 (1,278) (1,480)

FRS17 Pension Liability 18 (6,348) (24,774)

Total Assets Less All Liabilities 14,955 (8,274)

Financed by:Capital and ReservesIncome and Expenditure Reserve 15 10,131 (12,571)Revaluation Reserve 15 3,237 2,650Deferred Grant 15 1,587 1,647

14,955 (8,274)

The note numbers referred to above are incorporated within the Notes to the Accounts contained on pages 73-88.

There are no post balance sheet events which require additional disclosure in the financial statement.

These financial statements were approved by the Board on 5 August 2008.

Signed on behalf of the Board

Campbell Gemmell


Authorised for issue date 5 August 2008


Report and accounts

Cash Flow Statement


Year to Year to31 March 31 March

Note 2008 2007£000 £000

Net cash flow from operating activities 21 (i) 2,942 2,928

Returns on investments and servicing of financeInterest received 8 478 329

Capital expenditurePayments to acquire tangible fixed assets 10 (3,652) (3,070)Receipts from disposal of tangible fixed assets 200 -

(3,452) (3,070)

(Decrease)/increase in cash for the year 21 (ii) (iii) (32) 187


Report and accounts

Statement of Total Recognised Gains and Losses



2008 2007£000 £000

(Deficit) for the financial year (35,211) (32,936)

Actuarial gain recognised - (notes 17,18 and 19 refer)Difference between the expected and actual return on scheme assets (9,949) (784)Experience losses on scheme liabilities 27 (45)Change in assumptions underlying the present value of scheme liabilities 29,490 (17,607)

Actuarial gain/(loss) recognised in statement of total recognised gains and losses 19,568 (18,436)

Unrealised surplus on revaluation/indexation of assets 587 315

Total recognised (loss) relating to the year (15,056) (51,057)


Report and accounts

Notes to the Accounts


1. Accounting policiesThe accounts are prepared in accordance with the Format of Accounts (Scottish Environment Protection Agency)Direction by the Scottish Ministers. This accounts direction requires compliance with HM Treasury’s Finance ReportingManual (FReM). Without limiting the information given, the accounts meet the accounting and disclosure requirementsof the Companies Act 1985 and accounting standards issued or adopted by the Accounting Standards Board in so far asthese requirements are appropriate, applied on a consistent basis. Under the terms of the Notice, SEPA is not required toprovide the additional information required by paragraph 33(3) of Schedule 4 to the Companies Act, or to include a noteshowing historical cost profits and losses as described in FRS 3.

The particular accounting policies adopted are described below and, are applied consistently within the accounts fromone financial year to another.

Accounting Convention

The accounts are prepared under the historical cost convention, modified by the inclusion of fixed assets at their valueto the business by reference to current costs.

Accounting Period

The accounting period commenced on 1 April 2007 and ended on 31 March 2008.

Provision for Liabilities and Charges

Provision for liabilities and charges are established under the criteria of FRS 12 and are based on realistic and prudentestimates of the expenditure required to settle future legal or constructive obligations that exist at the Balance Sheetdate. Provisions are charged to the Income and Expenditure Account unless they have been capitalised as part of thecost of an asset where the expenditure provides access to current and future economic benefits. In such cases, thecapitalised provision will be depreciated as a charge to the Operating Cost Statement over the remaining estimateduseful economic life of the underlying asset.

Reserves

The Income and Expenditure Reserve represents the excess of expenditure over income on GIA funded activities. TheRevaluation Reserve reflects the unrealised element of the cumulative balance of revaluation and indexationadjustments on fixed assets. The deferred grant held at 31 March 2008 represents the balance of grant paid in respect offixed assets by the Scottish Government being released over the estimated economic life of the asset.

Tangible Fixed Assets

(i) Valuation of fixed assets are recognised in the accounts as follows:

• Operational land, buildings and their installations and fittings and external works are assessed within existing use onthe basis that the occupation will continue for the foreseeable future, unless otherwise stated. For non-specialisedproperties where there is direct market evidence, the value is assessed at open market value for existing use. Forspecialised properties, where there is no market evidence in respect of existing use, the value is assessed by using adepreciated replacement cost approach.

• Land and buildings have been stated at valuation in existing use or depreciated replacement cost for specialisedbuildings under a rolling 5 year programme of professional valuations and appropriate indices in intervening years.Surplus land and buildings are stated at open market value. Depreciated historic cost has been used as a proxy forthe current value of fixtures and fittings, vessels, motor vehicles, plant and machinery, computer equipment andsoftware. All of the assets in these categories have (a) low values and short useful economic lives which realisticallyreflect the life of the asset and (b) a depreciation charge which provides a realistic reflection of consumption.

(ii) Depreciation

Depreciation is provided on all tangible fixed assets, other than freehold land.


Report and accounts

Asset lives were reviewed during the year ensuring that they continue to represent a reasonable estimate of usefuleconomic life.

Asset Category Asset Lives

Buildings 60Leasehold buildings Over the remaining period of the leaseGauging stations 10 to 20Plant and equipment - other 8Science equipment - short life 3 to 5

- medium life 10- long life 15

Fixtures and fittings 5Vessels 30Computer hardware 5 to 155

Computer software 5 to 155

Motor vehicles 4Software 3 to 15

5SEPA categorises the expenditure on IT and IT systems based on the period expected usage of the system and its component parts.

(iii) Title Operational and no-operational land and properties are included in the Agency’s accounts on the basis of theactual ownership and management of the assets concerned.

(iv) Capitalisation of Salary Costs. The actual salary costs including National Insurance and Superannuation of SEPA staffwho are involved in the creation of tangible and intangible fixed assets are capitalised against the relevant assets.

Assets in Course of Completion

Assets in course of completion are valued at cost and are not subject to indexation. On completion they are transferredfrom the project account into the appropriate asset category. No depreciation is charged until the asset is operational.

Intangible Fixed Assets

There are licences to use software purchased from third parties or developed in-house with a life of more than one yearand a cost of more than £5,875. These licences are written off over the period they are operable for.

Corporate Tax

The Income from GIA and charging schemes is not chargeable to tax. Surpluses from income generated by contract workundertaken by the Agency will be chargeable to tax. This has been agreed with HM Revenue and Customs.

Value Added Tax

Irrecoverable VAT is charged to the Income and Expenditure Account or the cost of assets purchased in the period inwhich it incurred.

Leases

Operating lease rentals are charged to expenditure in equal amounts over the lease.

Government Grant-in-Aid (GIA)

Following recent financial reporting guidance, GIA received to cover general operating activities and capital projects isshown as financing income and credited directly to the Income and Expenditure Reserve.

Income

Income represents the total value excluding VAT of income received from charging schemes and income invoiced forgoods and services supplied.

Pension Costs

The Agency participates in the Local Government Superannuation Scheme which is a defined benefit scheme. Theexpected cost of providing staff pensions is recognised on a systematic basis over the expected average remaining livesof members of the pension fund in accordance with Financial Reporting Standard (FRS) 17 Retirement Benefits, andrecognises retirement benefits as the benefits are earned and not when they are due to be paid. The actuary reviews the


Report and accounts

scheme on a triennial basis and SEPA has always implemented the contributions recommended (Note 17 refers). Thecontribution charges are recognised in the accounting periods in which they arise.

SEPA provides in full for the cost of meeting pensions up to normal retirement age in respect of staff taking earlyretirement programmes and voluntary severances in the current and previous years. Most pensions payable after normalretirement age are met by the pension scheme; although there are some pension liabilities inherited from predecessorbodies, which are met directly by SEPA.

Research and Development Expenditure

Research and development expenditure is written off to the Income and Expenditure Account as it is incurred.

Notional costs

The Income and Expenditure Account includes a notional charge for the cost of Government funded capital employedduring the year. The charge is calculated at 3.5% to total assets less liabilities.

Financial instruments

SEPA is mainly funded by income from Scottish Executive. Therefore it is not subject to significant liquidity riskexposure. SEPA’s financial instruments comprise cash and liquid resources. Any cash held on deposit is with highly ratedbanks and there is no significant interest rate risk.

Foreign Exchange

Transactions that are denominated in a foreign currency are translated into Sterling using the exchange rate applied bythe bank when making payment.

Going Concern

The accounts have been prepared incorporating the requirements of the accounting standard FRS17 and include anactuarial valuation of the pension scheme liability as explained in Note 18 to the accounts. This reflects the inclusion ofliabilities falling due in future years in respect of pension liabilities arising from the application of FRS17 to SEPA.Hymans Robertson, the actuary to the pension scheme, has calculated the liability arising under FRS17. The actuaryconducts a triennial review of the funding basis of the pension scheme, along with yearly reviews when appropriate. Thelast formal valuation of the fund was conducted as at 31 March 2005 and the next formal valuation is due at 31 March2008. In preparing the projected pension expense for the year to 31 March 2008, the actuary has assumed employeescontinue to earn new benefits in line with the regulations as they currently stand and that the pensionable payrollremains stable with new entrants replacing leavers. The other main financial assumptions are set out in Notes 17 and 18.

SEPA’s liabilities falling due in future years are in part met from income derived from charging schemes, and chargingscheme prices have been increased to meet the expected costs attributable to them in 2007/8 including pension costs.The Board has no reason to expect this process to change in the future.

To the extent that the pension deficit is not met from SEPA’s other sources of income it may only be met by futuregrants or GIA from SEPA’s sponsoring department, the Scottish Government Environment and Rural Affairs Department.This is because, under the normal conventions applying to parliamentary control over income and expenditure, suchgrants may not be paid in advance of need.

The Board of SEPA has no reason to believe that the department’s future sponsorship and future Ministerial approval willnot be forthcoming or will only provide a reduced support to SEPA. Given the above it has accordingly been consideredappropriate to adopt a going concern basis for the preparation of these financial statements.

Review of Accounting Policies

In accordance with Financial Reporting Standard 18, Review of Accounting Policies, SEPA undertook a review of all itsaccounting policies to ensure their continued relevance.

Changes in Estimation Techniques

There has been one material change in estimating techniques introduced in 2007/8 accounts. For 2007/8 actuariesrevised the discount rate to be applied to discount the schemes liabilities inline with Treasury guidance, this resulted inan increase in discount rate from 2.1% to 3.2%, see note 18.

Post Balance Sheet Events

There have been no events subsequent to the date of the Balance Sheet which would materially affect the SEPA’s assets,liabilities or commitments.


Report and accounts

2. Grant-In-Aid (GIA)


2008 2007£000 £000

Grant-In-Aid received to meet operational expenditure 35,758 30,529Grant-In-Aid received to fund capital expenditure 2,587 3,037

Total Grant-In-Aid cash received credited to the Income andExpenditure Reserve in the balance sheet 38,345 33,566

The amount of GIA provided to SEPA is initially agreed by Ministers, as part of the Scottish Budget process. This figure isthen subject to adjustments as agreed with the sponsor department to reflect SEPA’s programme of work.

During the year ending 31 March 2007, the Government Financial Reporting Manual introduced changes in the way thatGIA is reflected. GIA income no longer goes into the Income and Expenditure Account for the year; it now goes directlyto the Income and Expenditure Reserve, as financing. For years ended 31 March 2007 and 31 March 2008 GIA receivedwas credited to Income and Expenditure Reserves as financing.

3. Income from charging schemes


2008 2007£000 £000

Integrated Pollution Control authorisation charges 5,254 5,011Waste Management Licensing fees 3,541 4,082Special Waste 1,402 1,001Radioactive Substances Act 2,380 2,012Producer Responsibility 992 825Control of Major Accident Hazards Regulations 52 30Emissions Trading 299 237Water Environment Water Services (Water Framework Directive) 18,867 16,954

32,787 30,152

The financial objective for the charging schemes is full cost recovery, based on all costs including the cost of capital andother notional costs (see Note 22). SEPA achieved a 96% cost recovery across all schemes in 2008 (97% in 2007).

Integrated Pollution Control authorisation charges also incorporate income in respect of Local Air Pollution Control andPollution, Prevention and Control charging schemes.

4. Other income


2008 2007£000 £000

Income from contracts 439 348Other income 1,473 256Transfer from deferred grant account (Note 15 refers) 60 60

1,972 664


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5. Information regarding employees and board members


2008 2007£000 £000

Staff costs during the yearWages and salaries 33,606 34,438Social security costs 2,833 2,445Pension costs 4,671 3,878

Sub Total of Payroll Costs 41,110 40,761Other staff related costs (principally recruitment fees, staff subsistence,training costs and hiring agency and temporary staff) 3,842 2,776FRS17 pension charge 1,498 (879)

46,450 42,658

Salary costs capitalised

Actual salary costs of £382,298 (2007 - £361,464) were incurred in respect of SEPA staff who were involved in thecreation of tangible and intangible fixed assets and have been capitalised accordingly.

Average number of persons employed Year to Year to31 March 31 March

2008 2007Number Number

Environmental Protection and Improvement 537 511Environmental Science 360 319Environmental and Organisational Strategy 91 88Corporate Services6 160 155Area Office Support7 105 105

1,253 1,178

The above numbers are an average based on the number of staff on SEPA Payroll during the year and do not includeAgency staff.

6Corporate Services includes Human Resources and Organisational Development, Health and Safety, Communications, Secretariat, Procurement,Corporate Legal Services, Finance, Information Technology, Project management and the administration support associated with thosefunctions at Corporate Office.

7Area Office Support is the administrative support provided to specialist teams through the area office network across Scotland and thePerth call centre.

Head count Year to Year to31 March 31 March

2008 2007Number Number

As at 31 March 1350 1298

These numbers exclude the Chairman and Board Members, and include the Chief Executive and the CorporateManagement Team.


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6. Other operating charges


2008 2007£000 £000

Supplies and services 12,724 12,542Property costs 6,745 4,993Other administrative costs 2,462 2,281Loss on Disposal of Tangible Assets 71 -Board expenses 16 16External Auditor’s remuneration – Audit Services 51 54

22,069 19,886

7. Notional cost of capital


2008 2007£000 £000

Average Capital Employed 31 March 2008 18,910 16,624

Less: Value of average capital employed applicable to charging schemes (8,698) (7,929)

Average capital employed as at 31 March 2008 on Scottish Governmentfunded activities 10,212 8,695

Notional Cost of capital is £10,212,000 x 3.5 % charged to ScottishGovernment funded activities 357 304

Cost of Capital charged to Charging schemes £8,698,000 x 3.5% 304 278

8. Interest receivable and similar income


2008 2007£000 £000

Bank Interest received 122 76FRS17 net return on pension scheme assets and liabilities (Note 20 refers) 356 253

478 329

9. TaxationA taxable loss amounting to £5,242 was incurred on taxable activities in the year. This amount has been added to tradinglosses brought forward and accordingly no provision has been made for corporate tax. The Agency has £191,367 oftrading losses available to carry forward.


Report and accounts10

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267

267

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1,481

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996

37(2,681)

-Disposals

(83)

(69)

(152)

31March2008

731

5,534

709

10,769

2,492

1,512

8,778

882,041

1,161

33,815

Dep

reci

atio

n

At1April2007

106

216

5,378

640

724

2,529

561,707

11,356

Recategorised

10(10)

(67)

67-

Backlogdepn.

55

Chargeforyear

109

56659

71178

556

492

1,725

Disposals

(2)

(2)

31March2008

-218

272

6,047

701

835

3,152

601,799

-13,084

Net

boo

kva

lue

At31

March2008

731

5,316

437

4,722

1,791

677

5,626

28242

1,161

20,731

Net

boo

kva

lue

At31

March2007

814

5,230

493

3,889

1,800

694

5,253

32297

190

18,692

Theland

andbuildingswereindependentlyvaluedbyCushman

andWakefieldHealeyandBakerasat31

March2006

onthebasisofexisting

useinaccordancewithRCIS

guidance.

Land

andbuildingshavebeen

statedatvaluationinexisting

useordepreciatedreplacementcostforspecialisedbuildingsunderarolling

5yearprogrammeofprofessional

valuationsandappropriateindicesininterveningyears.Surplusland

andbuildingsarestatedatopen

marketvalue.Depreciatedhistoriccosthasbeen

usedasaproxyfor

thecurrentvalueoffixturesandfittings,vessels,motorvehicles,plantandmachinery,com

puterequipm

entandsoftware.Alloftheassetsinthesecategorieshave(a)low

valuesandshortusefuleconom

icliveswhichrealisticallyreflectthelifeoftheassetand(b)a

depreciation

chargewhichprovidesarealisticreflection

ofconsum

ption.


Report and accounts

11. Debtors


2008 2007£000 £000

Trade debtors 2,913 4,316Prepayments and accrued income 2,301 1,276

5,214 5,592

At the year end, the total bad debt provided for was £390,745, 1.2% of charging scheme income (2007: £451,083, 1.5%).

Included within the trade debtors there is £173,591 (2007: £59,846) owing from central government bodies, £NIL (2007:£23,406) owing from local authority bodies, £90,223 (2007: £90,194) owing from NHS Bodies and £39,958 (2007:£387,988) owing from other public bodies.

12. Creditors: amounts falling due within one year


2008 2007£000 £000

Bank overdraft 5,376 776Trade creditors 1,582 2,751Other taxes and social security 163 899Accruals and deferred income 2,039 3,106

9,160 7,532

For cash monitoring purposes the bank overdraft figure is set off against the bank balance held in current asset sectionof the balance sheet. SEPA’s net bank position is a current asset of £420,013. Bank interest of £NIL (2007: £286) wasincurred by SEPA during the financial year.

Included within the trade creditors there is £500 (2007: £6,841) owing to local authority bodies, £NIL (2007: £4,302)owing to central government bodies, £NIL (2007: £1,066) owing to NHS bodies and £NIL (2007: £71,931 owing to otherpublic bodies.

13. Contingent liabilitiesThe Agency has no contingent liabilities at 31 March 2008 (2007 – nil).


Report and accounts

14. Provision for liabilities and charges

Unfunded Pension Insurance Total Provision forLiabilities Provision Liabilities and Charges

Year to 31 March Year to 31 March2008 2007

£000 £000 £000 £000

Balance at 31 March 2007 1,360 120 1,480 1,280Arising during year (78) - (78) 321Utilised (124) - (124) (121)

As at 31 March 2008 1,158 120 1,278 1,480

This represents unfunded liabilities in respect of pension commitments inherited by SEPA from predecessor bodies andpast chairman which are payable to other authorities and pensions for employees who have retired. This is a provisionout with the defined benefit pension scheme administered by Falkirk Council.

Provision for insurance claims represents an estimate of the third party claims.

15. Capital and reserves

Income and Revaluation Deferred Total year to Total year toExpenditure Reserve Grant 31 March 31 March

Account 2008 2007£000 £000 £000 £000 £000

Balance at 1 April (12,571) 2,650 1,647 (8,274) 9,277Actuarial gain/loss recognisedin the statement of totalrecognised gains and losses(Note 19 refers) 19,568 - - 19,568 (18,436)Annual Indexation - 262 - 262 324Fixed asset write offs in year - 325 - 325 (9)Released to Income andExpenditure Account - - (60) (60) (60)Income and Expendituredeficit for year (35,211) - - (35,211) (32,936)Grant-In-Aid 38,345 - - 38,345 33,566

As at 31 March 10,131 3,237 1,587 14,955 (8,274)

Income and Expenditure Reserve consists of:

£000

Pensions Deficit (6,348)Surplus arising fromoperating activities 16,479

Balance as at 31 March 2008 10,131


Report and accounts

16. Financial commitmentsThe table below provides information regarding expenditure committed to in the next financial year. The analysis of landand buildings, lease and rental costs are subdivided to show the annual costs related to the length of lease left to run.


2008 2007£000 £000

Capital commitmentsContracted for but not provided 149 -

We have a commitment in respect of the construction of new office premises in Aberdeen. The contract was not signedat 31 March 2008. The value of this contract is currently under negotiation.

Annual commitments under operating leases which expire:

Land and Buildings Other2008 2007 2008 2007£000 £000 £000 £000

Within one year 37 36 150 112Within 2 to 5 years 21 25 579 675After 5 years 1,324 1,273 - -

1,382 1,334 729 787

17. Pension costsThe Agency contributes to the Local Government Superannuation Scheme which is a defined benefit scheme and isadministered by Falkirk Council. This Scheme is a multi employer scheme. Employee contributions are fixed by statutecurrently at 6%. In order to address the pension deficit and in accordance with the actuarial recommendation SEPA hasincreased its employer’s contribution to the fund from 7.8% in 2002/03 to 12.9% in 2006/07 and to 13.8% in 2007/08.The employer’s contribution rates for 2008/09 are 14.7%. The pension charge for the period represents long termcontributions payable by the Agency to the scheme of £4,495,147 (2007: £3,978,002). Amounts outstanding at 31 March2008 in relation to pension contributions were £957,863 (2007: £484,279).

The latest formal valuation of the Fund for the purpose of setting employers’ actual contributions was at 31 March 2005,with the next full formal valuation as at 31 March 2008. The Scheme actuaries have undertaken a pension expensecalculation for SEPA as at 31 March 2008, these figures form the basis of the balance sheet and funding disclosuresmade in these accounts.

18. FRS17 – Pension asset and liabilities disclosureIn accordance with Financial Reporting Standard No 17 – Retirement Benefits (FRS17) SEPA is required to account forthe net pension liability of £6,348,000 (2007 - £24,774,000) for the financial year ended 31 March 2008 as valued byHymans Robertson the actuaries to the Falkirk Council Pension Fund. Their calculations have been carried out inaccordance with Guidance Note 36: Accounting for Retirement Benefits under FRS17 issued by the Institute and theFaculty of Actuaries.

The significant volatility of the pension deficits reported; a decrease of £18,426,000 in 2007/8 (2007 an increase of£17,304,000) is due to an increase in the discount rate used from 2.1% (2007) to 3.2% (2008).

In order to assess the value of the Fund’s liabilities as at 31 March 2008, the actuary has rolled forward the value ofSEPA’s liabilities reported in the latest formal valuation as at 31 March 2005, allowing for the different financialassumptions required under FRS17. The actuary has allowed for the changes in pensionable payroll when calculatingservice cost. In calculating the asset share the actuaries have similarly rolled forward SEPA’s share of the assets allocatedas at the latest formal funding valuation as at 31 March 2005, allowing for investment returns (estimated wherenecessary), the effects of contributions paid into, and estimated benefits paid from, the Fund by SEPA and its employees.


Report and accounts

In the opinion of the actuary the approach of rolling forward the previous valuation data to 31 March 2008 should notintroduce any material distortions in the results provided that the actual experience of SEPA and the Fund has beenbroadly in line with the actuarial assumptions and that the structure of the liabilities is substantially the same as at thelatest formal valuation as at 31 March 2005 with the exceptions of the following:

(a) No allowance has been made for the removal of the entitlement for new members to retire under the "Rule of 85".The principal reason for this is that insufficient information is available to allow the actuaries to make any suchadjustment. Furthermore any adjustment is likely to be immaterial in actuarial terms.

(b) Members retiring are now able to elect an additional tax-free lump sum in lieu of part of their pension. The actuarieshave included an allowance for 25% of future retirees to take additional cash up to HM Revenue and Customs limitsin the 2008 balance sheet liabilities.

The net pension liability was represented as follows:

Year to Year to Year to31 March 31 March 31 March

2008 2007 2006£000 £000 £000

Share of assets in Falkirk Council Pension Fund 101,335 98,317 87,860Present value of Scheme Liabilities (106,993) (122,295) (94,610)Present value of Unfunded Liabilities (690) (796) (720)

Net Pension Liability at 31 March (6,348) (24,774) (7,470)

The assets in the whole Fund are valued at fair value, principally market value for investments and the expected returnon assets is based on the long term future expected investment return for each asset class as at the beginning of theperiod and were:

Long term Value at Long term Value at Long term Value atrate of return 31 March rate of return 31 March rate of return 31 March

expected at 2008 expected at 2007 expected at 200631 March 2008 31 March 2007 31 March 2006(% per annum) £000 (% per annum) £000 (% per annum) £000

Equities 7.7 678,411 7.8 689,900 7.4 639,110Bonds 5.7 134,779 4.9 129,200 4.6 114,060Property 5.7 96,800 5.8 101,800 5.5 90,210

Cash 4.8 31,598 4.9 23,600 4.6 27,990

Total market valueof assets in Fund 941,588 944,500 871,370

SEPA’s share of assets in Falkirk Council Pension Fund is £101,335,000 (2007: £98,317,000).

The financial assumptions utilised by the actuary to calculate liabilities under FRS17 were:

31 March 31 March 31 March2008 2007 2006

(% per annum) (% per annum) (% per annum)

Price increases 3.6 3.2 3.1Salary increases 5.1 4.7 4.6Pension increases 3.6 3.2 3.1Nominal Discount rate 6.9 5.4 6Real Discount rate 3.2 2.1 2.8


Report and accounts

In accordance with FReM (Government Financial Reporting Manual) the discount rate used to value liabilities should bethe real discount rate. The real discount rate is net of inflation, it is used to calculate the overall liabilities of the fund atthe year end. For Non-Departmental Public Bodies this is taken to be the return on a “high quality corporate bond ofequivalent term and currency to the liability” as required under FRS17. The discount rate applied is equal to the grossredemption yield on iboxx Sterling Corporate Index, AA over 15 years, at the FRS17 valuation date. This produces a realdiscount rate of 3.2% (2007: 2.1%).

Movement in Deficit during the Year


2008 2007£000 £000

Deficit at 1 April (24,774) (7,470)Current Service Cost (6,033) (4,537)Employer Contribution 4,495 3,986Contributions in respect of unfunded benefits 40 38Past Service Costs 0 1,392Net Return on assets 356 253Actuarial Gains/(Losses) 19,568 (18,436)

Deficit at 31 March (6,348) (24,774)

Past service costs have arisen due to changes in the schemes benefits which came into effect from 6 October 2006.Retiring members are now able to elect for an additional tax free lump sum in lieu of part of their pension(commutation). The Actuary has assumed 25% of future retirees will exercise this option.

19. FRS17 – Income and expenditure accounts/statement of total recognised gainsand losses

FRS17 requires SEPA to analyse and disclose its pension liabilities as at 31 March 2008. There is a decrease in forecast netliabilities as calculated by Hymans Robertson in their capacity as actuaries to the Falkirk Council Pension Fund. Thisamount has been reflected in the financial statements. FRS17 also requires SEPA to analyse and disclose the amountsincluded within the Statement of Total Recognised Gains and Losses and these are detailed below.

Extract from Hymans Robertson’s April 2008 Report

INCOME AND EXPENDITURE ACCOUNT 2008 2007Charge to operating surplus £000 £000

Current Service cost 6,033 4,537Past Service Cost 0 (1,392)

6,033 3,145

Projected amount credited to other finance income (7,197) (6,098)Expected return on employer assets 6,841 5,845

Net return (356) (253)

Net Income and Expenditure Account Cost 5,677 2,892

Past service costs have arisen due to changes in the schemes benefits which came into effect from 6 October 2006.Retiring members are now able to elect for an additional tax free lump sum in lieu of part of their pension(commutation) the Actuary has assumed 25% of future retirees will exercise this option.


Report and accounts

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

2008 % of scheme 2007 % of scheme 2006 % of scheme£000 assets £000 assets £000 assets

Difference between the expectedand actual return on scheme assets (9,949) (9.8) (784) (0.8) 11,700 13.4

% of the total % of the total % of the totalpresent value of present value of present value of

scheme liabilities scheme liabilities scheme liabilitiesExperience gains and losses onscheme liabilities 27 0.0 (45) (0.0) (4,989) (5.2)

Change in assumptions underlying thepresent value of scheme liabilities 29,490 (17,607) 0

Actuarial gain/loss recognised instatement of total recognised gainsand losses 19,568 18.2 (18,436) (15.0) 6,711 7.0

20. Related party transactionsSEPA is a Non-Departmental Public Body sponsored by the Scottish Government Environment and Rural AffairsDepartment. The Scottish Government is regarded as a related party. During the year, the Agency has had variousmaterial transactions with the Scottish Government and with other entities for which the Scottish Government isregarded as a parent body (Note 2 refers).

The Agency has had no other material transactions with other government departments and other central governmentbodies, local government and non-departmental public bodies.

During the year, apart from their service contracts no Board Member, key manager or other related parties haveundertaken any material transactions with the Agency.

21. Cash flow statement

i) Reconciliation of operating surplus to Net Cash Inflow from operating activities


2008 2007£000 £000

Net Cash outflow from operating activities (35,689) (33,265)Depreciation and impairment of tangible assets 1,929 1,537Deferred grant (60) (60)Loss on disposal of tangible assets 71 0Actuarial gain/(loss) recognised 19,568 (18,436)Decrease/(Increase) in debtors 378 (1,201)(Decrease)/Increase in creditors (21,600) 20,787

Net cash outflow from operating activities (35,403) (30,638)FinancingGIA funding received in year 38,345 33,566

Total cash inflow 2,942 2,928


Report and accounts

(ii) Reconciliation of Net Cash Flow to Movement


2008 2007£000 £000

(Decrease)/Increase in cash in the period (32) 187

Movement in net debt (32) 187

(iii) Analysis of Net Cash

Year to Cash Flow Year to31 March 31 March

2008 2007£000 £000 £000

Cash at bank and in hand 5,796 4,568 1,228Bank overdraft (included within creditors due within one year) (5,376) (4,600) (776)Net Bank Balance 420 (32) 452

For bank reconciliation purposes the bank overdraft figure is set off against the bank balance held in current assetsection of the balance sheet of £5,796,334. SEPA’s net bank position is a current asset of £420,013.


Report and accounts22

.Fee

san

dch

arg

es

Thetablebelowhighlightstherelatedactivitycostsagainstincomereceivedbycharging

schemes.

Year

to31

Mar

chSc

hem

esCO

MA

HPP

C/I

PCA

PCRS

AW

ML

SPW

ETS

WEW

S20

08£0

00£0

00£0

00£0

00£0

00£0

00£0

00£0

00£0

00

Inco

me

(52)

(3,8

82)

(1,3

72)

(2,3

80)

(4,5

33)

(1,4

02)

(299

)(1

8,86

7)(3

2,78

7)

Exp

end

itur

e

StaffCosts

109

3,399

813

1,401

3,129

945

184

11,918

21,898

Depreciation/CostofCapital

5166

4068

153

469

581

1,068

BadDebts

02

473

105

00

32189

OtherOperating

Charges

461,615

342

998

1,496

411

184

5,989

11,081

Tota

lExp

end

itur

e16

05,

182

1,24

22,

470

4,88

31,

402

377

18,5

2034

,236

Un

der

/(O

ver)

Reco

very

108

1,30

0(1

30)

9035

00

78(3

47)

1,44

9

%C

ostR

ecov

ery

33%

75%

110%

96%

93%

100%

79%

102%

96%

Key

:COMAH

ControlofMajorAccidentHazardsRegulations

WML

WasteManagementLicensing&ProducerResponsibility

IPC/PPC

Pollution

Prevention

Control

SPW

SpecialW

aste

APC

AirPollution

Control

ETS

GreenhouseGasEmissionsTrading

RSA

RadioactiveSubstancesAct

WEW

SWaterEnvironm

entandWaterServicesAct

Theunderrecoveryon

thecharging

schemesrepresentscostsincurredbySEPA.SEPA’saimistoachievefullcostrecoveryacrossallchargingschemes.Intheyear

to31

March2008

SEPA

achieved96%(2007–97%)costrecoveryacrossallthe

charging

schemes.The

underrecoveryismainlyduetotheman

hoursspent

processing

anabnormallyhigh

levelofPPCapplicationstomeetthePPCdirectiverequirementofprocessing

allapplicationsbyOctober2007.Removalofthenon

recurrentexpenditureassociatedwiththiswouldhaveresultedinacostrecoverylevelof99.8%in2007-08comparedtothe96%reported.

Underrecoveryon

thecharging

schemesismetbyGIA,thisamountedto£1,449,000

in2007/8(£1,075,000-2007)Thispracticewillcontinue

untilSEPAachieves

fullcostrecoveryacrossthecharging

schemesinyear.

Appendix - Direction by the Scottish Ministers

Report and accounts

88 Annual Report and Accounts 2007-2008

An

nualRep

ortand

Accounts

2007-2008

The paper used in this publication contains 75% post consumer recycled material08/08 500

Annual Report and Accounts2007-2008

Documents

Annual Report 07 · 2012. 2. 9. · Minimised,recoveredandwell-managedwaste 10 Goodwaterenvironments 14 Goodairquality 18 Goodlandquality 22 ... priorityand,aswellasworkingjointlyonwaste,emergencyplanning,marineandfloodingmatters,