SRU chief executive Gordon McKie is looking ahead with confidence

However, the cost of closing down the Border Reivers could amount to �1.76m, with the breaking of a rental agreement for Netherdale and staff redundancies.

The club was disbanded in May when the SRU decided it had little chance of becoming self-sufficient.

"Our finances are now well under control - allowing us to move forward with confidence," read a statement.

At the time of the Borders' closure, the SRU were five years into a 20-year rental agreement for the club's home stadium.

In a letter accompanying the annual report from SRU chairman Allan Munro and chief executive Gordon McKie, the pair explained: "Whilst the number is high it is, of course, a one-off event and less than the cost of running the Border Reivers for a single year.

"It is also possible that a significant part of the cost will never be called upon, as we work with Gala RFC to minimise the proportion of the provision relating to 15 years of maintenance costs for the Netherdale high performance pitch."

With Edinburgh now an independent franchise, Glasgow will benefit from increased SRU funding.

Munro and McKie wrote: "In order to compete, Scottish teams must be brought nearer to financial parity with their opponents and, in the absence of significant new funding, this effectively requires us to concentrate available funds.

"The inescapable conclusion, agreed unanimously by both your board and council, was that one of the existing teams would have to close.

"This was an extremely difficult decision to take - but one required for the future of our game."

Read the SRU letter in full

The national body handed Edinburgh over to brothers Alex and Bob Carruthers in July 2006.

But the relationship between Edinburgh and the SRU has deteriorated, with an ugly public squabble over finances.

Munro and McKie added: "As our president, George Jack, explained in his recent letter, considerable efforts have been made to assist Edinburgh to manage the challenges of professional rugby and it is regrettable that these efforts have not been successful.

"We remain committed to the principle of there being at least two strong Scottish professional teams and this will be an area for focus next season."