Cairngorms Nation­al Park Author­ity — Intern­al Audit Report: Fin­an­cial Plan­ning (Decem­ber 2018)

Cairngorms Nation­al Park Authority Intern­al Audit Report Fin­an­cial Planning Decem­ber 2018

Level of Assurance:

	Design	Oper­a­tion­al Effectiveness
Level of Assurance	Sub­stan­tial	Sub­stan­tial

CAIRNGORMS NATION­AL PARK AUTHORITY Audit & Risk Com­mit­tee Paper 2 Annex I 08/03/2019

BDO

Con­tents

• Exec­ut­ive Sum­mary (Page 3 – 6)
• Appen­dices:
  • I Staff Inter­viewed (Page 7)
  • II Defin­i­tions (Page 8)
  • III Terms of Ref­er­ence (Page 9 – 10)

Report Status

• Aud­it­ors: Gemma Macdonald
• Dates work per­formed: 10/12/18 — 14/12/18
• Draft report issued: 21/12/18
• Final report issued: 10/01/19

Dis­tri­bu­tion List

• Dav­id Camer­on — Dir­ect­or of Cor­por­ate Services
• Danie Ral­ph — Fin­ance Manager

Restric­tions of use: The mat­ters raised in this report are only those which came to our atten­tion dur­ing the course of our audit and are not neces­sar­ily a com­pre­hens­ive state­ment of all the weak­nesses that exist or all improve­ments that might be made. The report has been pre­pared solely for the man­age­ment of the organ­isa­tion and should not be quoted in whole or in part without our pri­or writ­ten con­sent. BDO LLP neither owes nor accepts any duty to any third party wheth­er in con­tract or in tort and shall not be liable, in respect of any loss, dam­age or expense which is caused by their reli­ance on this report.

Exec­ut­ive Summary

Level of Assurance:

• Design: There is a sound sys­tem of intern­al con­trol designed to achieve sys­tem objectives.
• Effect­ive­ness: The con­trols that are in place are being con­sist­ently applied.

Sum­mary of Recom­mend­a­tions: 0

Over­view:

Back­ground: Intern­al audit reviewed the fin­an­cial plan­ning pro­cess to provide assur­ance around cur­rent arrange­ments and offer recom­mend­a­tions for improve­ment. The Cairngorms Nation­al Park Author­ity (CNPA) com­pletes their budget­ing pro­cess annu­ally, receiv­ing an annu­al Grant in Aid set­tle­ment from the Scot­tish Gov­ern­ment (96% of total income). Costs are cat­egor­ized as core (fixed) and vari­able (activ­ity). Core costs are alloc­ated first based on full-time equi­val­ents, then remain­ing Grant in Aid funds are alloc­ated to oper­a­tion­al activities.

Depart­ment heads cre­ate aspir­a­tion­al budgets, which are dis­cussed and refined based on avail­able fund­ing. The oper­a­tion­al plan shows alloc­ated and com­mit­ted funds. Man­agers are encour­aged to com­mit funds early. The budget is refore­cast through­out the year, with vire­ments used to trans­fer funds between over- and under-budgeted activities.

Over the past three years, CNPA has con­duc­ted scen­ario plan­ning to assess the impact of budget changes, involving dis­cus­sions with the Scot­tish Gov­ern­ment. The most recent scen­ario test­ing con­sidered the peri­od 2019 – 21, test­ing vari­ous resource sav­ings per­cent­ages. The budget is reviewed monthly by the Fin­ance Man­ager, fort­nightly in Janu­ary, and daily from March.

The fin­an­cial plan­ning timetable has become more form­al­ized due to increas­ing com­plex­ity and polit­ic­al uncer­tainty. The draft budget is presen­ted to Man­age­ment by the end of Janu­ary, approved in early Feb­ru­ary, presen­ted to the Fin­ance & Deliv­ery Com­mit­tee in late Feb­ru­ary and finally to the Board in early March.

The build­ing phase of the CNPA head office exten­sion was delayed. Costs are estim­ated based on year-to-date fig­ures or last invoices, with adjust­ments made for factors like infla­tion and increased staff num­bers. The budget will be refore­cast as costs become clearer.

Scope and Approach: The review assessed wheth­er fin­an­cial plans were based on reas­on­able assump­tions and fore­casts and accur­ate, reli­able inform­a­tion; developed in a timely man­ner with appro­pri­ate con­sulta­tion, review, and approv­al; included scen­ario plan­ning and sens­it­iv­ity ana­lys­is; and involved reg­u­lar budget reforecasts.

Over­view (Con­tin­ued): The approach involved inter­views to estab­lish con­trols and pro­cesses, and review of doc­u­ment­ary evid­ence. The eval­u­ation determ­ined if con­trols adequately addressed risks.

Good Prac­tice: The plans were based on accur­ate, reli­able, and rel­ev­ant inform­a­tion; the plan­ning pro­cess was timely; and budget refore­casts reflec­ted changes to the plan or pre­dicted out­turn where expendit­ure differed from expectations.

Con­clu­sion: Sub­stan­tial assur­ance is provided over the design and oper­a­tion­al effect­ive­ness of con­trols related to CNPA’s fin­an­cial planning.

Risks Reviewed Giv­ing Rise to No Find­ings of a High or Medi­um Significance:

• Fin­an­cial plans may not be based on accur­ate, reli­able or rel­ev­ant information.
• The fin­an­cial plan­ning pro­cess may not be car­ried out in a timely man­ner in accord­ance with a clearly defined timetable.
• Fin­an­cial plans may be based on unreas­on­able assump­tions or forecasts.
• No, or lim­ited, scen­ario plan­ning or sens­it­iv­ity ana­lys­is has been undertaken.
• Budget refore­casts may not be car­ried out on a reg­u­lar basis to reflect changes which may occur to plans, or to pre­dict the out­turn where expendit­ure in some areas dif­fers from expectations.
• Fin­an­cial plans may not be sub­ject to effect­ive con­sulta­tion, review or approval.

Appendix I — Staff Interviewed

Name	Job Title
Danie Ral­ph	Fin­ance Manager

BDO LLP appre­ci­ates the time provided by all the indi­vidu­als involved in this review and would like to thank them for their assist­ance and cooperation.

Appendix II — Definitions

Level of Assurance

This sec­tion defines the mean­ing of Sub­stan­tial, Mod­er­ate, Lim­ited and No assur­ance levels as they relate to Design and Oper­a­tion­al Effect­ive­ness of the intern­al con­trols. The defin­i­tions high­light the rela­tion­ship between find­ings from review and the res­ult­ing opin­ion on the design and effect­ive­ness of the intern­al con­trol frame­work. Addi­tion­ally, the sec­tion describes the sig­ni­fic­ance of recom­mend­a­tions (High, Medi­um, Low).

Appendix III — Terms of Reference

Back­ground: This review was con­duc­ted in accord­ance with the 2018 – 19 Intern­al Audit Plan.

Pur­pose of Review: To provide man­age­ment and the Audit & Risk Com­mit­tee with assur­ance that CNPA has well-designed, effect­ive con­trols in place for fin­an­cial planning.

Key Risks: This sec­tion lists the key risks asso­ci­ated with fin­an­cial plan­ning, includ­ing those relat­ing to the accur­acy and timeli­ness of fin­an­cial plans, the use of reas­on­able assump­tions and fore­casts, the con­duct of scen­ario plan­ning and sens­it­iv­ity ana­lys­is, the reg­u­lar­ity of budget refore­casts and the effect­ive­ness of con­sulta­tion, review and approv­al processes.

Scope: This sec­tion describes the scope of the review, focus­ing on wheth­er fin­an­cial plans are based on reas­on­able assump­tions and fore­casts, developed in a timely man­ner with appro­pri­ate con­sulta­tion, review, and approv­al, include scen­ario plan­ning and sens­it­iv­ity ana­lys­is to ensure flex­ib­il­ity and robust­ness, and involve reg­u­lar budget refore­casts. The sec­tion also notes that Intern­al Audit will bring oth­er rel­ev­ant issues to the atten­tion of man­age­ment. The sec­tion notes that the estim­ate of audit days is based on the assump­tion of a single con­trol environment.

BDO LLP inform­a­tion is provided at the end of the document.