Cairngorms Nation­al Park Authority

Extern­al Audit Report to the Board, Account­able Officer and the Aud­it­or Gen­er­al for Scot­land for the fin­an­cial year ended 31 March 2020

DRAFT REPORT – 31 August 2020

John Boyd Engage­ment Leader

Jack McAr­thur Engage­ment In-Charge

Our audit at a glance

We received the com­plete draft fin­an­cial state­ments includ­ing the Per­form­ance Report, Account­ab­il­ity Report and Gov­ernance State­ment with­in the times­cales we agreed. Work­ing papers were provided to sup­port the audit pro­cess and our quer­ies were respon­ded to, to allow the timely com­ple­tion of audit work. This was greatly appre­ci­ated by the audit team as it allowed the audit to be delivered effi­ciently des­pite the chal­lenges Cov­id-19 cre­ated with the need for remote deliv­ery of the audit.

We have ful­filled our respons­ib­il­it­ies per Inter­na­tion­al Stand­ards on Audit­ing (ISAs) (UK) and the Audit Scot­land Code of Audit Prac­tice through­out our work. This final report to the Board, Account­able Officer and the Aud­it­or Gen­er­al for Scot­land con­cludes our work.

Sig­ni­fic­ant audit risks were: man­age­ment over­ride of con­trols; the risk of fraud in expendit­ure recog­ni­tion as set out in Fin­an­cial Report­ing Council’s (FRC) Prac­tice Note 10; and the risk of fraud in expendit­ure recog­ni­tion. An addi­tion­al sig­ni­fic­ant audit risk was iden­ti­fied in rela­tion to Cov­id-19 which caused sig­ni­fic­ant dis­rup­tion to all pub­lic sec­tor entit­ies in the later half of March 2020.

The Account­ab­il­ity Report is in line with our under­stand­ing of Cairngorms Nation­al Park Author­ity (“the Author­ity”) and in par­tic­u­lar their vis­ion and stra­tegic pri­or­it­ies. The Gov­ernance State­ment, included with­in the Account­ab­il­ity Report, out­lines the gov­ernance frame­work. The Remu­ner­a­tion and Staff report has been pre­pared in accord­ance with the Pub­lic Fin­ance and Account­ab­il­ity (Scot­land) Act 2000, and dir­ec­tions there­un­der. The dis­clos­ures in the Remu­ner­a­tion and Staff report are con­sist­ent with under­ly­ing payroll records.

Mater­i­al­ity was set at £165,920 for ²⁰¹⁹⁄₂₀. This was cal­cu­lated using the mater­i­al­ity bench­mark of 2% of gross expendit­ure as set out in our audit plan. We updated our mater­i­al­ity cal­cu­la­tion based on the unaudited fin­an­cial state­ments for ²⁰¹⁹⁄₂₀.

An audit under­pinned by qual­ity and adding value to you

We expect to issue an unmod­i­fied audit opin­ion on the annu­al report and accounts.

Adding value through our extern­al audit work

First and fore­most our object­ive is to ensure we deliv­er a qual­ity extern­al audit which fully com­plies with Inter­na­tion­al Stand­ards on Audit­ing (ISAs) UK and the Audit Scot­land Code of Prac­tice (2016). By ensur­ing our audit is effi­cient and effect­ive, under­pinned by our qual­ity arrange­ments, gives you assur­ance over our opinion.

Through this Annu­al Report we seek to provide insight and com­ment­ary over cer­tain aspects of the Authority’s arrange­ments, shar­ing rel­ev­ant prac­tices with the Audit and Risk Com­mit­tee and Management.

We have con­tin­ued to build on our work­ing rela­tion­ship with man­age­ment and our under­stand­ing of the Author­ity as an organ­isa­tion. Des­pite the chal­lenges of work­ing remotely dur­ing the Cov­id-19 pan­dem­ic the audit was under­taken with­in agreed timelines. We were able to get the assur­ances required and com­plete our test­ing to con­clude our audit.

Con­tents

Sec­tion	Page
1. Intro­duc­tion	5
2. Respond­ing to sig­ni­fic­ant risks	7
3. Nar­rat­ive ele­ments of your annu­al accounts	11
4. Key aspects of your fin­an­cial statements	12
5. The Authority’s fin­an­cial arrangements	13

Appen­dices:

Appendix	Page
1. Audit adjustments	16
2. Audit recommendations	18
3. Fol­low up of extern­al audit recommendations	19
4. Fees and independence	20
5. Fraud arrangements	21
6. Com­mu­nic­a­tion of Audit Matters	22

Intro­duc­tion

Report­ing

This report is a sum­mary of our find­ings from our extern­al audit work for the fin­an­cial year ended 31 March 2020. Our work has been under­taken in accord­ance with Inter­na­tion­al Stand­ards on Audit­ing (ISAs) (UK) and the Audit Scot­land Code of Audit Prac­tice 2016. Our report is addressed to the Account­able Officer for Cairngorms Nation­al Park (“the Author­ity”). In addi­tion, in accord­ance with our report­ing respons­ib­il­it­ies the report is jointly addressed to the Aud­it­or Gen­er­al for Scot­land. Once the accounts have been laid before par­lia­ment, the final­ised audit report will be made pub­licly avail­able on the Audit Scot­land web­site (www​.audit​-scot​land​.gov​.uk). We would like to thank the Authority’s fin­ance team for an effect­ive year-end audit pro­cess and all their sup­port and assist­ance through­out the audit process.

Struc­ture of this report

As set out in our Audit Plan presen­ted to the Audit and Risk Com­mit­tee in draft in Decem­ber 2019 and final­ised on 28 Feb­ru­ary 2020, we con­sider in accord­ance with the Audit Scot­land Code of Prac­tice that the Author­ity meets the smal­ler body defin­i­tion. There­fore full wider scope is not con­sidered rel­ev­ant. How­ever, as required in the Code of Audit Prac­tice our report con­cludes on our audit of the annu­al report and accounts and cer­tain aspects of the Authority’s arrange­ments as follows:

• Fin­an­cial state­ments includ­ing the Per­form­ance Report and Account­ab­il­ity Report (includ­ing gov­ernance state­ment) – Sec­tion 1
• Dis­clos­ures in the gov­ernance state­ment and fin­an­cial sus­tain­ab­il­ity of the Author­ity – Sec­tion 2 and 3

Our opin­ion

For the fin­an­cial year ended 31 March 2020 we [plan to] issue an unmod­i­fied audit opinion:

• True and fair view of the fin­an­cial statements
• Reg­u­lar­ity – expendit­ure has been incurred in accord­ance with the pur­pose of the Authority
• Oth­er pre­scribed mat­ters (which include the audited inform­a­tion in the remu­ner­a­tion report)

Cov­id-19

As a res­ult of the Cov­id-19 pan­dem­ic we con­sidered wheth­er an addi­tion­al fin­an­cial state­ment audit risk was required. We have recog­nised a fur­ther fin­an­cial state­ment risk in rela­tion to Cov­id-19. Fur­ther details on the risk iden­ti­fied and our response and con­clu­sion to the risks are included with­in the Respond­ing to Sig­ni­fic­ant Risks sec­tion of the report.

Audit status as at 26 August 2020

Our audit pro­ced­ures of the ²⁰¹⁹⁄₂₀ fin­an­cial state­ments are sub­stan­tially com­plete sub­ject to the fol­low­ing audit procedures:

• Final­isa­tion of non-grant in aid gov­ern­ment funding
• Com­ple­tion of final dis­clos­ure check of the fin­an­cial statements
• Sub­sequent events (up to the date of signing)
• Final engage­ment lead­er review
• Man­age­ment and those charged with gov­ernance representations

Mater­i­al­ity

Our audit approach was set out in our audit plan presen­ted to the Audit and Risk Com­mit­tee in Decem­ber 2019 and final­ised in Feb­ru­ary 2020. We updated our mater­i­al­ity cal­cu­la­tion based on the unaudited fin­an­cial state­ments for ²⁰¹⁹⁄₂₀. Over­all mater­i­al­ity has been set at £165,920 approx­im­ately 2% of gross expendit­ure and per­form­ance mater­i­al­ity is set at £124,400, 75% of mater­i­al­ity. Our planned approach has not changed from that set out in our plan. We report to man­age­ment any dif­fer­ence iden­ti­fied over £8,296 which has been set at 5% of over­all mater­i­al­ity. Below this threshold the adjust­ment is con­sidered trivi­al. Lastly we set a lower mater­i­al­ity level in respect of the remu­ner­a­tion report, giv­en the interest to the users of the accounts. This was set at £2,500, linked to the band­ings used.

Audit opin­ion

We are pleased to report that for the fin­an­cial year ended 31 March 2020 we [plan to] issue an unmod­i­fied audit opinion:

• That the fin­an­cial state­ments rep­res­ent a true and fair view of the organ­isa­tion for the year to 31 March 2020 and at the date of the state­ment of fin­an­cial position
• Reg­u­lar­ity – expendit­ure has been incurred in accord­ance with the pur­pose of the Authority
• Oth­er pre­scribed mat­ters (which include the audited inform­a­tion in the remu­ner­a­tion report)

Intern­al con­trol environment

Dur­ing the year we sought to under­stand the Authority’s over­all con­trol envir­on­ment (design) as related to the fin­an­cial state­ments. In par­tic­u­lar, we have:

• Con­sidered pro­ced­ures and con­trols around related parties, journ­al entries and oth­er key entity level controls.
• Per­formed walk­through pro­ced­ures of key fin­an­cial pro­cesses includ­ing income and expendit­ure recog­ni­tion, journ­al post­ings and payroll transactions.

Our work over con­trols is lim­ited to our ISA require­ments in under­stand­ing an entit­ies con­trol envir­on­ment. Our audit is not con­trols based and we do not place reli­ance on con­trols oper­at­ing effect­ively as our audit is fully sub­stant­ive in nature. We iden­ti­fied no mater­i­al weak­nesses or areas of con­cern from this work which would have caused us to alter the planned approach as doc­u­mented in our plan.

Intern­al Audit

As set out in our extern­al audit plan our audit approach is to com­ply with the ISA’s and we do not place form­al reli­ance on the work of BDO LLP, the Authority’s intern­al audit pro­vider dur­ing ²⁰¹⁹⁄₂₀. We have reviewed the intern­al audit plan and indi­vidu­al reports issued to date, to con­sider if any impact on our audit approach. Intern­al Audit con­cluded ​“Based on our veri­fic­a­tion reviews and sample test­ing, risk man­age­ment, con­trol and gov­ernance arrange­ments were oper­at­ing with suf­fi­cient effect­ive­ness to give reas­on­able, but not abso­lute assur­ance that the related risk man­age­ment, con­trol and gov­ernance object­ives were achieved for the peri­od under review”. The find­ings of intern­al audit are con­sist­ent with our know­ledge and exper­i­ence of the Author­ity. From our review we are sat­is­fied that there were no areas arising from the work of intern­al audit that would impact on our audit opin­ion or require spe­cif­ic dis­clos­ure in the annu­al gov­ernance state­ment. We have no con­cerns that Intern­al Audit did not have suf­fi­cient capa­city and cap­ab­il­ity to provide the intern­al audit ser­vice to the Author­ity. Going for­ward intern­al audit ser­vices will be provided by Scott-Mon­crieff who have been appoin­ted the Authority’s intern­al aud­it­ors from ²⁰²⁰⁄₂₁.

Respond­ing to sig­ni­fic­ant risks

Risk area

Iden­ti­fied audit risks at planning

Risk of fraud in expendit­ure recog­ni­tion (as set out in FRC Prac­tice Note 10)

Oper­at­ing expendit­ure is under­stated or not treated in the cor­rect peri­od (risk of fraud in expendit­ure). As payroll expendit­ure is well fore­cast and agree­able to under­ly­ing payroll sys­tems, there is less oppor­tun­ity for the risk of mis­state­ment in this expendit­ure stream. We there­fore focus on non-pay expendit­ure includ­ing oper­a­tion­al plan expendit­ure and oth­er oper­at­ing costs. We con­sider the risk to be par­tic­u­larly pre­val­ent around the year end and there­fore focus our test­ing on cut-off of non-pay expenditure.

Work com­pleted:

• Walk­throughs of the con­trols and pro­ced­ures over non-pay expendit­ure and oth­er oper­at­ing costs.
• Per­formed sub­stant­ive test­ing (at an elev­ated risk level) expendit­ure recog­nised post year end to identi­fy if there is any poten­tial understatement.
• Test­ing post year end bank state­ments and review of minutes to identi­fy any poten­tial unre­cor­ded liabilities.
• Review­ing any accru­als and deferred income around the year end to con­sider if there is any indic­a­tion of under­state­ment of bal­ances held through con­sid­er­a­tion of account­ing estimate.

Our con­clu­sion:

Based on our test­ing we conclude:

• We did not identi­fy any excep­tions in our cut-off test­ing of year end expenditure.
• We did not identi­fy any excep­tions in the com­plete­ness and accur­acy of accru­als, deferred income or pro­vi­sions bal­ances at the year end.
• Through our sub­stant­ive pro­ced­ures and sample test­ing we con­firmed expendit­ure test­ing was in accord­ance with the nature of the Author­ity (reg­u­lar­ity). [Sub­ject to final engage­ment lead­er review]

Man­age­ment over­ride of controls

Risk area

Iden­ti­fied audit risks at planning

Man­age­ment over­ride of controls

As set out in ISA 240 there is a pre­sumed risk that man­age­ment over­ride of con­trols is present in all entit­ies. This risk area includes the poten­tial for man­age­ment to use their judge­ment to influ­ence the fin­an­cial state­ments as well as the poten­tial to over­ride the Authority’s con­trols for spe­cif­ic trans­ac­tions. We con­sider those key judge­ments that are most sus­cept­ible to sig­ni­fic­ant audit risk of man­age­ment over­ride are those over expendit­ure recog­ni­tion. These are areas where man­age­ment has the poten­tial to influ­ence the fin­an­cial state­ment through estim­ate and judgement.

Work com­pleted:

• Con­sidered the design of con­trols in place over key account­ing estim­ates and judge­ments through per­form­ance of walk­through procedures.
• Reviewed account­ing estim­ates for man­age­ment bias / indic­a­tion of fraud that could res­ult in mater­i­al mis­state­ment. This included review of estim­ates as at 31 March 2020 and ret­ro­spect­ive review of those estim­ates as at 31 March 2019.
• Journ­als test­ing including:
  • Assess­ment of the design of con­trols in place over journ­al entries, includ­ing journ­al pre­par­a­tion, author­isa­tion and pro­cessing onto the fin­an­cial ledger;
  • Risk assess­ment of the journ­als pop­u­la­tion to identi­fy large or unusu­al journ­al entries, such as those that are not incurred in the nor­mal course of busi­ness, or those entries that may be indic­at­ive of fraud or error that could res­ult in mater­i­al mis­state­ment. We tested these journ­als to ensure they are appro­pri­ate and suit­ably recor­ded in the fin­an­cial ledger;
  • Con­sid­er­ing areas of sig­ni­fic­ant judge­ment or estim­a­tion for indic­a­tion of man­age­ment bias; and
  • Tar­get test­ing of trans­ac­tions around the fin­an­cial year end, review­ing large journ­als and those which appear unusu­al to under­stand the rationale for the transaction.

Our con­clu­sion:

Based on our test­ing we conclude:

• There was no evid­ence of man­age­ment over­ride in our test­ing of controls.
• The Authority’s fin­an­cial state­ments do not include crit­ic­al estim­ates and judgements;.
• We did not identi­fy any unusu­al or sig­ni­fic­ant trans­ac­tions through­out the fin­an­cial year or dur­ing the fin­an­cial close peri­od which were out with the ordin­ary oper­a­tions of the Author­ity. [sub­ject to final engage­ment lead­er review]

Risk of fraud in rev­en­ue recognition

Risk area

Iden­ti­fied audit risks at planning

Risk of fraud in rev­en­ue recognition

As set out in ISA 240 there is a pre­sumed risk that rev­en­ue may by mis­stated due to improp­er recog­ni­tion of rev­en­ue. In 2018⁄19, CNPA received £4 mil­lion in rev­en­ue fund­ing from the Scot­tish Gov­ern­ment. While mater­i­al, we con­sider this fund­ing to be well fore­cast and dir­ectly agreed to Scot­tish Gov­ern­ment fund­ing let­ter and draw down. We there­fore con­sider the oppor­tun­ity and incent­ive to manip­u­late this rev­en­ue stream as low and rebut the pre­sumed risk around rev­en­ue recog­ni­tion over rev­en­ue resource alloc­a­tion. We there­fore con­sider the risk of fraud in rev­en­ue recog­ni­tion to be present in mater­i­al rev­en­ue streams recog­nised with­in con­tract income, being pro­ject fund­ing income (2018÷19: £1.6 mil­lion) and oth­er income (2018÷19: £700,000). As fin­an­cial per­form­ance tar­gets are primar­ily set for year end out­turn pos­i­tion, includ­ing fin­an­cial per­form­ance against the Scot­tish Gov­ern­ment grant, we there­fore con­sider the risk is prom­in­ent around year end rev­en­ue trans­ac­tions and receiv­able bal­ances. In the con­text of medi­um term fin­an­cial pres­sures facing the organ­isa­tion, there is an incent­ive for both over and under­state­ment of rev­en­ue either to sup­port the deliv­ery of in year per­form­ance tar­gets or to sup­port next years. Con­sequently, at our plan­ning stage we attach the risk to both occur­rence and com­plete­ness of rev­en­ue. We will con­tin­ue to assess this through­out the year.

Work com­pleted:

• Walk­throughs of the con­trols and pro­ced­ures over pro­ject fund­ing income and oth­er income streams.
• Sub­stant­ive test­ing (at an elev­ated risk level) income recog­nised pre and post year end to identi­fy if there is any poten­tial misstatement
• Sub­stant­ive test­ing (at an elev­ated risk level) of income recog­nised in the final two months of the year to identi­fy if this has been poten­tially overstated
• Review and sample test­ing of accrued income, pre­pay­ments and debt­ors includ­ing chal­lenge of man­age­ment over amounts recog­nised in year to gain com­fort around the recov­er­ab­il­ity of bal­ances at the year end.

Our con­clu­sion:

Based on our test­ing we conclude:

• We did not identi­fy any excep­tions in our cut-off test­ing of year end income.
• We did not identi­fy any mater­i­al mis­state­ments arising from our test­ing of accrued income, pre­pay­ments and debt­ors at the year end or mater­i­al con­cerns around the recov­er­ab­il­ity of bal­ances. [sub­ject to final engage­ment lead­er review]

Cov­id-19

Risk area

Iden­ti­fied audit risks at planning

Cov­id-19

The glob­al out­break of the Cov­id-19 vir­us pan­dem­ic has led to unpre­ced­en­ted uncer­tainty for all organ­isa­tions, requir­ing urgent busi­ness con­tinu­ity arrange­ments to be imple­men­ted. We expec­ted cur­rent cir­cum­stances would have an impact on the pro­duc­tion and audit of the fin­an­cial state­ments for the year ended 31 March 2020, includ­ing and not lim­ited to; Remote work­ing arrange­ments and redeploy­ment of staff to crit­ic­al front line duties may impact on the qual­ity and tim­ing of the pro­duc­tion of the fin­an­cial state­ments, and restrict the evid­ence we can obtain through phys­ic­al obser­va­tion; Volat­il­ity of fin­an­cial and prop­erty mar­kets will increase the uncer­tainty of assump­tions applied by man­age­ment to receiv­able recov­ery estim­ates, and the reli­ab­il­ity of evid­ence we can obtain to cor­rob­or­ate man­age­ment estim­ates; Fin­an­cial uncer­tainty will require man­age­ment to recon­sider fin­an­cial fore­casts sup­port­ing their going con­cern assess­ment and wheth­er mater­i­al uncer­tain­ties for a peri­od of at least 12 months from the anti­cip­ated date of approv­al of the audited fin­an­cial state­ments have aris­en; and Dis­clos­ures with­in the fin­an­cial state­ments will require sig­ni­fic­ant revi­sion to reflect the unpre­ced­en­ted situ­ation and its impact on the pre­par­a­tion of the fin­an­cial state­ments as at 31 March 2020 in accord­ance with IAS1, par­tic­u­larly in rela­tion to mater­i­al uncer­tain­ties. We there­fore iden­ti­fied the glob­al out­break of the Cov­id-19 vir­us as a sig­ni­fic­ant risk, which was one of the most sig­ni­fic­ant assessed risks of mater­i­al misstatement.

Work com­pleted:

• Worked with man­age­ment to under­stand the implic­a­tions the response to the Cov­id-19 pan­dem­ic has had on the organisation’s abil­ity to pre­pare the fin­an­cial state­ments and update fin­an­cial fore­casts, and assessed the implic­a­tions for our mater­i­al­ity calculations;
• Eval­u­ated the adequacy of the dis­clos­ures in the fin­an­cial state­ments that arose in light of the Cov­id-19 pandemic;
• Eval­u­ated wheth­er suf­fi­cient audit evid­ence could be obtained through remote technology;
• Eval­u­ated wheth­er suf­fi­cient audit evid­ence could be obtained to cor­rob­or­ate sig­ni­fic­ant man­age­ment estim­ates such as recov­ery of receiv­able bal­ances; and
• Eval­u­ated management’s assump­tions that under­pin the revised fin­an­cial fore­casts and the impact on management’s going con­cern assessment.

Our con­clu­sion:

Based on our test­ing we conclude:

• Cov­id-19 and remote work­ing did not restrict the Authority’s abil­ity to pre­pare the fin­an­cial state­ments or restrict the audit evid­ence required to com­plete the audit.
• Management’s assump­tions under­pin­ning fin­an­cial fore­casts and the going con­cern assess­ment have adequately con­sidered the poten­tial impact of Covid-19.
• We have not iden­ti­fied any sig­ni­fic­ant impact on the Authority’s debt­or recov­ery, although acknow­ledge that the major­ity of these are with oth­er pub­lic bodies
• Dur­ing the audit we raised a dis­clos­ure adjust­ment for man­age­ment to recog­nise the impact of Cov­id-19 with­in the gov­ernance state­ment and oth­er sec­tions of the annu­al report and accounts com­ment­ary on Cov­id and the impact on the gov­ernance arrange­ments (appendix 1). [sub­ject to final engage­ment lead­er review]

Nar­rat­ive ele­ments of your annu­al accounts

In accord­ance with our respons­ib­il­it­ies we have reviewed the nar­rat­ive aspects of the annu­al accounts and report. We have con­sidered the con­sist­ency of this nar­rat­ive with our under­stand­ing of the Author­ity and the fin­an­cial state­ments and have set out our obser­va­tions below. We have also audited the required inform­a­tion in the remu­ner­a­tion report (marked audited) and have no mat­ters we wish to bring to your atten­tion. [sub­ject to final dis­clos­ure review of fin­an­cial statements]

Per­form­ance Report

The account­ab­il­ity report is in line with our under­stand­ing of the Author­ity, in par­tic­u­lar the vis­ion and stra­tegic pri­or­it­ies of the Author­ity. The Account­able Officer’s state­ment is clear and easy to read. Risks are artic­u­lated and aligned to the Authority’s risk register. There is an oppor­tun­ity to poten­tially provide the read­er great­er under­stand­ing of how these risks are being man­aged in the accounts.

Over­all Observations

The Author­ity provided the annu­al report and draft set of accounts in line with our audit timetable des­pite the increased chal­lenges presen­ted by the Cov­id-19 pan­dem­ic which required 100% remote work­ing. There is poten­tially an oppor­tun­ity for the Author­ity to use more infograph­ics and sup­port­ing nar­rat­ive, par­tic­u­larly around per­form­ance inform­a­tion, to help with focus per­form­ance to the read­er of the accounts.

Annu­al Report and Accounts

Include the per­form­ance report and account­ab­il­ity report (includ­ing remu­ner­a­tion and governance)

Remu­ner­a­tion and Staff Report

Has been pre­pared in accord­ance with the Pub­lic Fin­ance and Account­ab­il­ity (Scot­land) Act 2000 and dir­ec­tions there­un­der. The Exec­ut­ive and Non-Exec­ut­ive mem­bers reflec­ted in the report have been cor­rectly iden­ti­fied in accord­ance with the FReM. We raised some minor dis­clos­ure adjust­ments around the remu­ner­a­tion dis­clos­ures in year and these have been reflec­ted in the updated draft accounts.

Gov­ernance Statement

As required by the FReM the Gov­ernance State­ment is included in the Account­ab­il­ity Report and is in accord­ance with the FReM and SPFM. There are no sig­ni­fic­ant gov­ernance issues in the year which are required to be repor­ted. We raised a dis­clos­ure adjust­ment for the Author­ity to include some fur­ther nar­rat­ive on the impact of Cov­id-19 on gov­ernance arrange­ments in year (appendix 1). The state­ment is sup­por­ted by indi­vidu­al assur­ances to the Account­able Officer over key intern­al controls.

Key aspects of your fin­an­cial statements

We con­sider key aspects of your fin­an­cial state­ments in rela­tion to man­age­ment judge­ments in rela­tion to man­age­ment judge­ments includ­ing estim­ates and where man­age­ment may have par­tic­u­lar options or choices in what account­ing stand­ards or dis­clos­ure require­ments to apply. We have sum­mar­ised our con­clu­sions below.

Aspects of your fin­an­cial state­ments	Judge­ments	Estim­ates	Going Con­cern	Uncer­tain­ties	Tim­ing of trans­ac­tions	Account­ing Policies

No new Inter­na­tion­al Fin­an­cial Report­ing Stand­ards (IFRS) have been adop­ted in the year as the adop­tion of IFRS 16 for pub­lic bod­ies has been delayed by a year as a res­ult of the Cov­id 19 pan­dem­ic. The Account­ing Policies fol­lowed by the Author­ity are in accord­ance with the FReM.

In rela­tion to the audit risk of fraud in respect of income and expendit­ure recog­ni­tion we tested the Authority’s cut-off arrange­ments and iden­ti­fied no issues with the recog­ni­tion peri­od of trans­ac­tions or in accru­als which could indic­ate a high­er risk of poten­tial fraud. There are no post bal­ance sheet events or mater­i­al leg­al uncer­tain­ties at year-end.

The Authority’s accounts do not con­tain areas of sig­ni­fic­ant estim­a­tion and judge­ment. Giv­en the nature if the Authority’s fin­an­cial trans­ac­tions, bal­ances and oper­at­ing activ­it­ies we would not expect there to be areas of mater­i­al uncer­tainty or judgement.

The author­ity does not gen­er­ate a sig­ni­fic­ant level of rev­en­ue and there­fore is reli­ant on Scot­tish Gov­ern­ment grant in aid fund­ing to meet oper­at­ing costs. The Scot­tish Gov­ern­ment has con­firmed fund­ing for ²⁰²⁰⁄₂₁ and there is no indic­a­tion that the gov­ern­ment would not con­tin­ue to sup­port the organ­isa­tion con­tin­ue to deliv­er its stat­utory oblig­a­tions. Man­age­ment have con­sidered fore­casts for a peri­od of at least 12 months from the pro­posed date of sign­ing and are sat­is­fied that the organ­isa­tion con­tin­ues to rep­res­ent a going con­cern and based on our audit work per­formed we would agree this is a reas­on­able assess­ment at this point in time.

Recog­nising the Authority’s stat­utory respons­ib­il­it­ies and the rela­tion­ship with the Author­ity and Scot­tish Gov­ern­ment we agree with man­age­ment and the Account­able Officers assess­ment that the Author­ity meets the going con­cern criteria.

The authority’s fin­an­cial arrangements

Fin­an­cial Pos­i­tion ²⁰¹⁹⁄₂₀

Dur­ing the year the Author­ity repor­ted net oper­at­ing expendit­ure of £5.406 mil­lion (2018÷19: £4.704 mil­lion). This Against non-cash expendit­ure lim­its the Author­ity repor­ted an under­spend of £xxx depart­ment­al expendit­ure lim­its and £867,000 under­spend against annu­al man­aged expendit­ure lim­its. This was in line with fin­an­cial plan for the year. The out­turn pos­i­tion included the Author­ity deliv­er­ing effi­ciency sav­ings of approx­im­ately £xxx, primar­ily through vacancy man­age­ment and cost con­trol through budget monitoring.

Cov­id-19 response and gov­ernance arrangements

The Author­ity has estab­lished a gov­ernance frame­work to sup­port the over­sight and scru­tiny of the Authority’s deliv­ery of the Cor­por­ate Plan and stra­tegic object­ives. This includes del­eg­ated respons­ib­il­ity to four com­mit­tees: the Fin­ance and Deliv­ery Com­mit­tee; the Staff­ing and Recruit­ment Com­mit­tee and Plan­ning Com­mit­tee; and the Audit and Risk Com­mit­tee. The Audit and Risk Com­mit­tee leads the over­sight of the sys­tems of intern­al con­trol, risk man­age­ment and pre­par­a­tion of the fin­an­cial state­ments. There is a com­mit­ment to trans­par­ency and pub­lic account­ab­il­ity with minutes and most papers of both the Board and Audit and Risk Com­mit­tee meet­ings being pub­lished online as well as cor­por­ate doc­u­ment­a­tions such as busi­ness plans and per­form­ance reports.

The Cov­id-19 pan­dem­ic has had sub­stan­tial impact on the organisation’s oper­a­tions. The major­ity of the organisation’s front­line oper­a­tions with­in the Nation­al Park had to be tem­por­ar­ily closed and staff have been work­ing from home remotely. While this res­ul­ted in changes in ways of work­ing it did not have a mater­i­al impact on intern­al fin­an­cial con­trol pro­cesses in the year as the Authority’s core fin­an­cial sys­tems were able to sup­port remote working.

As travel and social dis­tan­cing meas­ures are relaxed the Author­ity is look­ing at ways in which to remo­bil­ise ser­vices safely. The Author­ity has been work­ing with key stra­tegic part­ners includ­ing com­munit­ies, busi­nesses, loc­al deliv­ery bod­ies, nation­al part­ners, and sec­tor­al and non-gov­ern­ment­al groups on the Authority’s response as well as our plans for reopen­ing and recovery.

Fin­an­cial plan­ning and sustainability

The Author­ity has been awar­ded Grant-in-aid fund­ing for ²⁰²⁰⁄₂₁ of £4.779 mil­lion, rep­res­ent­ing an increase of £52,000 from the pri­or year. The ori­gin­al agreed budget in March for ²⁰²⁰⁄₂₁ pro­jec­ted a small over­spend of £24,000 with a tar­geted break­even position.

The out­break of Cov­id-19 has had an adverse impact on the organ­isa­tion and its abil­ity to deliv­er ser­vices. While the major­ity of the Authority’s fund­ing is from grant-in-aid fund­ing, the organ­isa­tion gen­er­ates over £3.4 mil­lion in oper­at­ing income. The Author­ity has con­tin­ued to receive sup­port from a range of fund­ing includ­ing The Nation­al Lot­tery Her­it­age Fund and through oper­a­tion­al activ­it­ies under the LEAD­ER pro­gramme. How­ever, the impact of cov­id-19 is likely to have an impact adverse impact on the Authority’s rev­en­ue streams dur­ing ²⁰²⁰⁄₂₁. It will be import­ant that the Author­ity ensures that it main­tain close mon­it­or­ing of oper­at­ing expendit­ure to ensure that the organ­isa­tion con­tin­ues to oper­ate with­in avail­able resources.

Over the medi­um to longer term the Author­ity recog­nises the chan­ging stra­tegic con­text for the Nation­al Park Author­ity and in par­tic­u­lar the trans­ition to deliv­er­ing the pri­or­it­ies set out in the Nation­al Park Part­ner­ship Plan 2018 – 22 as well as rel­ev­ant Scot­tish Gov­ern­ment pri­or­it­ies. The Cor­por­ate Plan includes fin­an­cial fore­casts over the next two fin­an­cial years. This includes a pro­jec­ted flat cash grant in aid set­tle­ment over the peri­od of the plan and mod­er­ate oth­er sources of rev­en­ue. The fin­an­cial plan includes fore­cast uplifts in oper­at­ing costs how­ever suf­fi­cient resources to con­tin­ue to sus­tain oper­a­tion­al per­form­ance and the deliv­ery of the Authority’s stra­tegic object­ives. In the con­text of fin­an­cial chal­lenges faced par­tic­u­larly in respond­ing to the impact of Cov­id-19, CNPA should review fin­an­cial fore­casts to ensure the organ­isa­tion con­tin­ues to remain robust and sup­port the deliv­ery of the organisation’s stra­tegic objectives.

Appen­dices

Audit adjust­ments

We are pleased to report that there were no mater­i­al uncor­rec­ted mis­state­ments to the fin­an­cial state­ments arising dur­ing our audit. The fol­low­ing mis­state­ments were cor­rec­ted by Man­age­ment dur­ing the course of the audit and reflec­ted in the draft fin­an­cial state­ments [sub­ject to com­ple­tion of audit procedures]

Dur­ing the course of our audit work we iden­ti­fied a num­ber of dis­clos­ure adjust­ments required to the draft fin­an­cial state­ments. The fol­low­ing are those adjust­ments that have been adjus­ted for in the updated draft accounts. [sub­ject to com­ple­tion of audit procedures]

Item	Dr (£’000)	Cr (£’000)	Descrip­tion
1	70		Oper­at­ing expenditure
		70	Oper­at­ing income
			Being gross­ing up of pro­gramme income and expenditure

Item	Descrip­tion	Adjus­ted
1	Annu­al gov­ernance statement	Minor dis­clos­ure amend­ments includ­ing fur­ther nar­rat­ive on impact of Covid-19
2	Remu­ner­a­tion report	Minor changes to enhance dis­clos­ure inform­a­tion con­tained with­in the report
3	Per­form­ance report	Some changes arising dur­ing the course of the audit around cla­ri­fic­a­tion of per­form­ance information
4	Account­ing policies	Dis­clos­ures includ­ing enhan­cing income dis­clos­ures to ensure con­sist­ent with IFRS 15.
5	Sig­ni­fic­ant estim­ates and judgements	Remov­al of dis­clos­ures around sig­ni­fic­ant estim­ates and judge­ments where these were not mater­i­al to the fin­an­cial statements
6	Present­a­tion­al adjustments	Present­a­tion­al adjust­ments through Primary fin­an­cial statements
7	Invest­ments	Adjust­ments to enhance dis­clos­ures in rela­tion to his­tor­ic cap­it­al con­tri­bu­tions to the Nation­al Parks Part­ner­ship LLP.

Dis­clos­ure mis­state­ments – uncorrected

[sub­ject to com­ple­tion of audit procedures]

The fol­low­ing dis­clos­ure mis­state­ments have not been cor­rec­ted by man­age­ment. We do not con­sider these to be mater­i­al to the accounts and Man­age­ment have agreed to review dur­ing the pre­par­a­tion of next years fin­an­cial statements:

Sig­ni­fic­ant Judge­ments: The Author­ity cur­rently dis­close sig­ni­fic­ant estim­ates and judge­ments with­in Note 1 to the fin­an­cial state­ments. How­ever per IAS 1 these should be dis­tinc­tion between mater­i­al estim­a­tion and sig­ni­fic­ant judge­ments. Fur­ther­more, there is an oppor­tun­ity to enhance the dis­clos­ure in line with IAS 1. Where a judge­ment is to be dis­closed these should clearly define the judge­ment, how the judge­ment has been con­sidered by man­age­ment and the impact on the accounts. Where a estim­a­tion uncer­tainty is dis­closed, this should be areas where there is a sig­ni­fic­ant risk of a mater­i­al adjust­ment to the car­ry­ing amounts of assets and liab­il­it­ies in the next fin­an­cial year arising from the estim­a­tion. The board should dis­close inform­a­tion to allow the read­er to fully under­stand the nature of the estim­a­tion uncer­tainty and how assump­tions may impact on the value of the asset / liability.

Account­ing policies: Account­ing policies do not expli­citly refer to IFRS 15 and some of the descrip­tion of the defer­ral of income is incon­sist­ent with the require­ments of the stand­ard and out of date. In addi­tion, the account­ing policy for impair­ment does not define how impair­ment is con­sidered in accord­ance with the meth­od­o­logy out­lined with­in the FReM and IFRS 9. From our audit pro­ced­ures per­formed we are sat­is­fied that the recog­ni­tion of income and expendit­ure is not mater­i­al­ity mis­stated and there­fore do not con­sider the omis­sion in account­ing policies to be material.

Account­ing policies: Oppor­tun­ity to enhance account­ing policy dis­clos­ures around Grant income, pen­sion costs and trade pay­ables to provide the read­er great­er under­stand­ing of the account­ing treat­ment being adopted

We are sat­is­fied that these are not mater­i­al dis­clos­ure errors. Man­age­ment has pro­posed that recom­mend­a­tions will be taken for­ward to future years fin­an­cial statements.

Extern­al Audit Recommendations

Recom­mend­a­tion

Agreed man­age­ment response

1. Fin­an­cial plans Giv­en the sig­ni­fic­ant impact of Cov­id-19 on the Authority’s ser­vices, the Author­ity should review the assump­tions con­tained with­in the medi­um term fin­an­cial fore­casts under­pin­ning the Cor­por­ate Plan, to assess the extent fin­an­cial resources are in place to sup­port its deliv­ery. We under­stand that the Author­ity had been look­ing at oth­er oppor­tun­it­ies for gen­er­at­ing addi­tion­al rev­en­ue streams includ­ing provid­ing oppor­tun­it­ies to off­set their car­bon pro­duc­tion through use of the Nation­al Park and sup­port­ing regen­er­a­tion of the area. It will be import­ant that the Author­ity ensure that while future rev­en­ue oppor­tun­it­ies are explored these are aligned to the organisation’s stra­tegic object­ives and stra­tegic risk appetite.

Man­age­ment response: Action own­er: Times­cale for implementation:

Fol­low up of extern­al audit recommendations

Dur­ing our ²⁰¹⁹⁄₂₀ audit we did not identi­fy any recom­mend­a­tions for man­age­ment which would be of sig­ni­fic­ant risk to war­rant inclu­sion in this final report. Dur­ing the year we have fol­lowed up on pre­vi­ous extern­al audit recom­mend­a­tions. The res­ults of this work is sum­mar­ised below.

Per­form­ance report

The Per­form­ance report con­tin­ues to be developed includ­ing graph­ic­al present­a­tion of fin­an­cial per­form­ance dur­ing the year. The Author­ity reports per­form­ance high­lights and provided links to pub­licly repor­ted per­form­ance inform­a­tion. The Authority’s per­form­ance is built around the Cairngorms Nation­al Park Part­ner­ship Plan, the Cor­por­ate Plan and the Annu­al Oper­at­ing Plan. The author­ity should look to con­tin­ue to enhance the Per­form­ance Report to provide great­er vis­ib­il­ity of the Authority’s per­form­ance against Cor­por­ate Plan object­ives, identi­fy­ing those key tar­gets that it con­siders crit­ic­al to these.

Ongo­ing

The ²⁰¹⁹⁄₂₀ fin­an­cial report has been updated to include infograph­ics par­tic­u­larly around fin­an­cial per­form­ance. How­ever, there is an oppor­tun­ity to enhance the Per­form­ance Report to provide great­er sum­mary of fin­an­cial and non-fin­an­cial per­form­ance dur­ing the year to provide the read­er of the accounts a great­er under­stand­ing of the key activ­it­ies of the organ­isa­tion dur­ing the year.

Action own­er:

Times­cale for implementation:

Audit fees and independence

Ser­vice	Fees £
Extern­al Aud­it­or Remuneration	8,790
Pooled Costs	2,040
Con­tri­bu­tion to Audit Scot­land costs	490
Con­tri­bu­tion to Per­form­ance Audit and Best Value	-
2019⁄20 Fee	11,320

Inde­pend­ence and ethics

• We con­firm that there are no sig­ni­fic­ant facts or mat­ters that impact on our inde­pend­ence as aud­it­ors that we are required or wish to draw to your attention.
• We have com­plied with the Fin­an­cial Report­ing Council’s Eth­ic­al Stand­ards and there­fore we con­firm that we are inde­pend­ent and are able to express an object­ive opin­ion on the fin­an­cial statements.
• We con­firm that we have imple­men­ted policies and pro­ced­ures to meet the require­ments of the eth­ic­al standards.
• We are required by audit­ing and eth­ic­al stand­ards to com­mu­nic­ate any rela­tion­ships that may affect the inde­pend­ence and objectiv­ity of the audit team.
• We can con­firm no inde­pend­ence con­cerns have been identified.

Cli­ent service

We take our cli­ent ser­vice ser­i­ously and con­tinu­ously seek your feed­back on our extern­al audit ser­vice. Should you feel our ser­vice falls short of expec­ted stand­ards please con­tact Joanne Brown, Head of Pub­lic Sec­tor Assur­ance Scot­land in the first instance who over­sees our port­fo­lio of Audit Scot­land work (joanne.​e.​brown@​uk.​gt.​com). Altern­at­ively, should you wish to raise your con­cerns fur­ther please con­tact Jon Roberts, Part­ner and Head of Assur­ance, 30 Fins­bury Square, Lon­don, EC2A 1AG. If your feed­back relates to audit qual­ity and we have not suc­cess­fully resolved your con­cerns, your con­cerns should be repor­ted to Elaine Boyd, Assist­ant Dir­ect­or, Audit Scot­land Qual­ity and Appoint­ments in accord­ance with the Audit Scot­land audit qual­ity com­plaints process.

Fraud arrange­ments

The term fraud refers to inten­tion­al acts of one or more indi­vidu­als amongst man­age­ment, those charged with gov­ernance, employ­ees or third parties involving the use of decep­tion that res­ult in a mater­i­al mis­state­ment of the fin­an­cial state­ments. In assess­ing risks, the audit team is alert to the pos­sib­il­ity of fraud at the Authority.

As part of our audit work we are respons­ible for:

• identi­fy­ing and assess­ing the risks of mater­i­al mis­state­ment of the fin­an­cial state­ments due to fraud in par­tic­u­lar in rela­tions to man­age­ment over­ride of controls.
• Lead­ing a dis­cus­sion with those charged of gov­ernance (for the Author­ity this is assumed to be the Audit and Risk Com­mit­tee) on their view of fraud. Typ­ic­ally we do this when present­ing our audit plan and in the form of man­age­ment and those charged with gov­ernance questionnaires.
• design­ing and imple­ment­ing appro­pri­ate audit test­ing to gain assur­ance over our assessed risks of fraud
• respond­ing appro­pri­ately to any fraud or sus­pec­ted fraud iden­ti­fied dur­ing the audit.

As aud­it­ors we obtain reas­on­able but not abso­lute assur­ance the fin­an­cial state­ments as a whole are free from mater­i­al mis­state­ment, wheth­er due to fraud or error.

We will obtain annu­al rep­res­ent­a­tion from man­age­ment regard­ing man­age­ments assess­ment of fraud risk, includ­ing intern­al con­trols, and any known or sus­pec­ted fraud or misstatement.

The primary respons­ib­il­ity for the pre­ven­tion and detec­tion of fraud rests with man­age­ment and those charged with gov­ernance includ­ing estab­lish­ing and main­tain­ing intern­al con­trols over the reli­ab­il­ity of fin­an­cial report­ing effect­ive­ness and effi­ciency of oper­a­tions and com­pli­ance with applic­able laws and reg­u­la­tions. It is the Authority’s respons­ib­il­ity to estab­lish arrange­ments to pre­vent and detect fraud and oth­er irreg­u­lar­ity. This includes:

• devel­op­ing, pro­mot­ing and mon­it­or­ing com­pli­ance with stand­ing orders and fin­an­cial instructions
• devel­op­ing and imple­ment­ing strategies to pre­vent and detect fraud and oth­er irregularity
• receiv­ing and invest­ig­at­ing alleged breaches of prop­er stand­ards of fin­an­cial con­duct or fraud and irregularity.

Through­out the audit we work with the Author­ity to review spe­cif­ic areas of fraud risk, includ­ing the oper­a­tion of key fin­an­cial con­trols. We also exam­ine the policies in place, strategies, stand­ing orders and fin­an­cial instruc­tions to ensure that they provide a strong frame­work of intern­al control.

All sus­pec­ted frauds and/​or irreg­u­lar­it­ies over £5,000 are repor­ted to Audit Scot­land by us as your aud­it­ors on a quarterly basis.

Anti-Money Laun­der­ing Arrangements

As required under the Money Laun­der­ing, Ter­ror­ist Fin­an­cing and Trans­fer of Funds Reg­u­la­tions 2017 there is an oblig­a­tion on the Aud­it­or Gen­er­al (as set out in the plan­ning guid­ance) to inform the Nation­al Crime Agency if she knows or sus­pects that any per­son has engaged in money laun­der­ing or ter­ror­ist fin­an­cing. Should we be informed of any instances of money laun­der­ing at Loch Lomond and the Trossachs Nation­al Park Author­ity we will report to the Aud­it­or Gen­er­al as required by Audit Scotland.

Com­mu­nic­a­tion of audit matters

Inter­na­tion­al Stand­ards on Audit­ing (UK) (ISA) 260, as well as oth­er ISAs, pre­scribe mat­ters which we are required to com­mu­nic­ate with those charged with gov­ernance, and which we set out in the table below. This doc­u­ment, our Annu­al Report is issued pri­or to approv­al of the fin­an­cial state­ments and presents key issues and oth­er mat­ters arising from the audit, togeth­er with an explan­a­tion as to how these have been resolved.

Our com­mu­nic­a­tion plan	Audit Plan	Audit Find­ings
Respect­ive respons­ib­il­it­ies of aud­it­or and management/​those charged with governance
Over­view of the planned scope