Cairngorms Nation­al Park Author­ity Intern­al Audit Report ²⁰²¹⁄₂₂

Fin­an­cial Man­age­ment and Reporting

Janu­ary 2022

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A AZETS

CAIRNGORMS NATION­AL PARK AUTHORITY

Audit & Risk Com­mit­tee Paper 2 Annex 1 11/02/2022

Cairngorms Nation­al Park Authority

Intern­al Audit Report ²⁰²¹⁄₂₂

Fin­an­cial Man­age­ment and Reporting

Janu­ary 2022

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Cairngorms Nation­al Park Authority Intern­al Audit Report ²⁰²¹⁄₂₂ Fin­an­cial Man­age­ment and Reporting

Exec­ut­ive Summary	1
Man­age­ment Action Plan	4
Appendix A – Definitions	9

Audit Spon­sor

Dav­id Camer­on, Dir­ect­or of Cor­por­ate Ser­vices and Deputy Chief Executive

Key Con­tacts

• Danie Ral­ph, Fin­ance Manager
• Wil­li­am Mun­ro, Board Member
• Car­o­lyn Cad­dick, Board Member

Audit team

• Eliza­beth Young, Engage­ment Lead
• Stephanie Hume, Seni­or Manager

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Lor­na Mun­ro, Intern­al Auditor

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Exec­ut­ive Summary

Con­clu­sion

We have con­firmed that The Cairngorms Nation­al Park Author­ity (CNPA) has achieved budgeted out­turns, with­in a very low tol­er­ance in pre­vi­ous years and are fore­cast­ing to do so again in 2022. We have also iden­ti­fied that there is a clear budget setting/​business plan­ning sched­ule in place, which is being adhered to, and a range of fin­an­cial reports are being provided and scru­tin­ised with­in the organisation.

How­ever, we have iden­ti­fied some areas for improve­ment with­in the fin­an­cial man­age­ment frame­work. CNPA has not yet doc­u­mented the cur­rent budget management/​forecasting approach. Fur­ther, we have iden­ti­fied that COV­ID-19 has impacted on the com­mu­nic­a­tion of budget hold­ers’ fin­an­cial respons­ib­il­it­ies, includ­ing the mon­it­or­ing of budget reports.

Back­ground and scope

The main sources of fund­ing for Cairngorms Nation­al Park Author­ity is grant-in-aid fund­ing. In order to ensure that Cairngorms Nation­al Park Author­ity achieves a bal­anced budget pos­i­tion, max­im­ises the eco­nom­ic, effi­cient and effect­ive use of resources and secures long term fin­an­cial sus­tain­ab­il­ity, robust fin­an­cial budget­ing, man­age­ment and report­ing pro­cesses and pro­ced­ures must be in place.

In accord­ance with the ²⁰²¹⁄₂₂ Intern­al Audit Plan, we reviewed the fin­an­cial man­age­ment and report­ing with­in Cairngorms Nation­al Park Authority.

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Con­trol assessment

1. There is an appro­pri­ate fin­an­cial man­age­ment and report­ing frame­work that reflects and sup­ports the struc­ture and oper­a­tions of the organ­isa­tion and allows the use of resources to be planned and monitored.
2. Accur­ate and achiev­able budget fore­casts are pre­pared and approved before the start of the peri­od to which they relate.
3. Fin­an­cial per­form­ance is mon­itored against tar­gets with vari­ations promptly iden­ti­fied and investigated.
4. Fin­an­cial reports are cir­cu­lated to all rel­ev­ant parties in a timely man­ner and are suf­fi­ciently clear, detailed and under­stand­able to sup­port effect­ive decision mak­ing and scrutiny.

Improve­ment actions by type and priority

(Dia­gram show­ing improve­ment actions by type and priority)

Three improve­ment actions have been iden­ti­fied from this review, two of which relate to com­pli­ance with exist­ing pro­ced­ures, rather than the design of con­trols them­selves. See Appendix A for defin­i­tions of col­our coding.

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Key find­ings

Good prac­tice

CNPA pro­ced­ures reflect good prac­tice in a num­ber of areas:

• The ²⁰²¹⁄₂₂ budget man­age­ment timeline was com­mu­nic­ated to the Board and was adhered to, des­pite the Scot­tish Gov­ern­ment not provid­ing inform­a­tion with­in the expec­ted timeframe.
• The Dir­ect­or of Cor­por­ate Ser­vices and the Fin­ance Man­ager provide a range of detailed inform­a­tion to man­agers and Board mem­bers on the organisation’s fin­an­cial performance.
• There is clear evid­ence that Board mem­bers are scru­tin­ising the fin­an­cial reports, with evid­ence of addi­tion­al inform­a­tion being reques­ted where required.
• Board mem­bers spoken to have a high level of con­fid­ence in the fin­an­cial inform­a­tion presen­ted and the qual­ity of responses to queries.

Areas for improvement

We have iden­ti­fied a small num­ber of areas for improve­ment which, if addressed, would strengthen CNPA con­trol frame­work. These include:

• Cla­ri­fy­ing and com­mu­nic­at­ing the roles and respons­ib­il­it­ies for those with Del­eg­ated Fin­an­cial Authority.
• Doc­u­ment­ing the fin­an­cial frame­work through a Budget Man­age­ment Policy and updat­ing the Fin­ance Manual.
• Rein­for­cing the need for budget hold­ers to review budget reports and doc­u­ment­ing the key actions to be taken.

These are fur­ther dis­cussed in the Man­age­ment Action Plan below.

Impact on risk register

The CNPA cor­por­ate risk register included the fol­low­ing risks rel­ev­ant to this review:

• Risk A1: Resources: pub­lic sec­tor fin­ances con­strain capa­city to alloc­ate suf­fi­cient resources to deliv­er cor­por­ate plan.
• A11.1: Resourcing: Role as Lead / Account­able body for major pro­grammes (e.g. LEAD­ER, Land­scape Part­ner­ship) has risk of sig­ni­fic­ant fin­an­cial claw­back should expendit­ure prove to be not eli­gible for fund­ing, while CNPA car­ries respons­ib­il­it­ies as employ­er for pro­gramme staff.

The res­ults of our review will not affect the impact or like­li­hood of either of these risks.

Acknow­ledge­ments

We would like to thank all staff con­sul­ted dur­ing this review for their assist­ance and co-operation.

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Man­age­ment Action Plan

Con­trol Object­ive 1: There is an appro­pri­ate fin­an­cial man­age­ment and report­ing frame­work that reflects and sup­ports the struc­ture and oper­a­tions of the organ­isa­tion and allows the use of resources to be planned and monitored.

1.1 Del­eg­ated fin­an­cial authority

Del­eg­ated fin­an­cial author­ity is provided to rel­ev­ant staff on appoint­ment at CNPA. How­ever there is no doc­u­mented guid­ance provided to staff on their fin­an­cial respons­ib­il­it­ies nor are they required to form­ally sign any doc­u­ment­a­tion acknow­ledging this responsibility.

Pri­or to 2020, we under­stand that new starts were intro­duced in per­son to the fin­ance team and taken through their respons­ib­il­it­ies, how­ever since COV­ID-19 this has not taken place.

Risk

There is a risk that staff do not fully under­stand and are not held to account for their role in fin­an­cial man­age­ment, as their respons­ib­il­it­ies are not com­mu­nic­ated or doc­u­mented, res­ult­ing in poor fin­an­cial management.

Recom­mend­a­tion

Man­age­ment should doc­u­ment and com­mu­nic­ate the fin­an­cial respons­ib­il­it­ies of staff with fin­an­cial author­ity, ensur­ing that all staff form­ally acknow­ledge their responsibilities.

Man­age­ment Action: Recom­mend­a­tion agreed. We will design and imple­ment doc­u­mented com­mu­nic­a­tion on the fin­an­cial respons­ib­il­it­ies and author­ity of staff and hold writ­ten acknow­ledge­ment of their recog­ni­tion and under­stand­ing of their responsibilities.

• Grade 2 (Oper­a­tion)
• Action own­er: Fin­ance Man­ager and Man­age­ment Accountant
• Due date: 30 June 2022

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1.2 Budget man­age­ment policy

The Fin­ance Manu­al is out of date and focussed on the roles and respons­ib­il­it­ies of the fin­ance team, provid­ing detailed desk instruc­tions for vari­ous fin­an­cial activ­it­ies, and although the cor­por­ate plan timetable out­lines the budget plan­ning times­cale for the forth­com­ing year, an over­arch­ing Budget Man­age­ment Policy is not cur­rently in place.

It is good prac­tice to clearly doc­u­ment the budget set­ting pro­cess (includ­ing the approach to fore­cast­ing), provide inform­a­tion on roles and respons­ib­il­it­ies, budget­ary con­trols, approvals, escal­a­tion, tol­er­ances, report­ing and provide links to the stra­tegic and long-term plan­ning processes.

Risk

There is a risk that the roles, respons­ib­il­it­ies and budget man­age­ment approach are unclear, lead­ing to con­fu­sion for staff and affect­ing the over­all fin­an­cial out­turn and asso­ci­ated decision-mak­ing process.

Recom­mend­a­tion

The fin­ance team should pre­pare a Budget Man­age­ment Policy, have this approved at an appro­pri­ate level and cir­cu­late it to rel­ev­ant staff. The fin­ance team should also ensure that the fin­ance manu­al is up to date.

Man­age­ment Action: Recom­mend­a­tion agreed. Budget Man­age­ment Policy will be developed, approved and cir­cu­lated to rel­ev­ant staff.

• Grade 2 (Design)
• Action own­er: Fin­ance Man­ager and Man­age­ment Accountant
• Due date: 30 Septem­ber 2022

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Con­trol Object­ive 2: Accur­ate and achiev­able budget fore­casts are pre­pared and approved before the start of the peri­od to which they relate.

No report­able weak­nesses identified.

CNPA has a clearly defined Budget Setting/​Business Plan­ning sched­ule to ensure that fund­ing and budgets are appro­pri­ately con­sidered., and we con­firmed the sched­ule has key dates when activ­ity and/​or decisions are expected.

In addi­tion we noted that while there were some delays in the Scot­tish Gov­ern­ment com­mu­nic­at­ing the budget for ²⁰²¹⁄₂₂ the budget was approved by the Board in March 2021 as planned.

Fur­ther, we con­firmed the Resources Com­mit­tee receive reg­u­lar report­ing on per­form­ance against budget with detailed sup­port­ing nar­rat­ive provided on the budget position.

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Con­trol Object­ive 3: Fin­an­cial per­form­ance is mon­itored against tar­gets with vari­ations promptly iden­ti­fied and investigated.

3.1 Budget hold­er reviews

Accord­ing to the Fin­an­cial Manu­al, budget reports should be sent to budget hold­ers on a fort­nightly basis (in addi­tion to ad hoc requests), with weekly reports issued in the last month of the fin­an­cial year.

Dur­ing the audit we found that these were not issued in ²⁰²¹⁄₂₂ until early Decem­ber, cov­er­ing the month of Novem­ber. In addi­tion, the Fin­ance Man­ager noted that pre­vi­ously reports issued had gone unread by budget holders.

We are also advised that although the Fin­ance Man­ager and Man­age­ment Account­ant reg­u­larly liaise with budget hold­ers to dis­cuss the fin­an­cial pos­i­tion, there is no audit trail to provide assur­ance that there is act­ive engage­ment by budget hold­ers or that any neces­sary actions agreed have been implemented.

Risk

There is a risk that staff are not held to account for their role in fin­an­cial man­age­ment incor­rect fin­an­cial inform­a­tion remain­ing uniden­ti­fied and impact­ing CNPAs abil­ity to achieve its objectives.

Recom­mend­a­tion

Man­age­ment should ensure that budget hold­ers are reminded of their respons­ib­il­it­ies in rela­tion to reg­u­larly review­ing the budget reports. Fin­ance staff should doc­u­ment key fin­an­cial discussions/​actions as a res­ult of budget dis­cus­sions with budget hold­ers and ensure that actions are fol­lowed up timeously.

Man­age­ment Action: Recom­mend­a­tion Agreed. We will seek to incor­por­ate these ele­ments of our budget man­age­ment policy referred to at 1.2 and imple­ment appro­pri­ate actions with­in the Fin­ance Team.

• Grade 2 (Oper­a­tion)
• Action own­er: Fin­ance Man­ager and Man­age­ment Accountant
• Due date: 30 Septem­ber 2022

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Con­trol Object­ive 4: Fin­an­cial reports are cir­cu­lated to all rel­ev­ant parties in a timely man­ner and are suf­fi­ciently clear, detailed and under­stand­able to sup­port effect­ive decision mak­ing and scrutiny.

No report­able weak­nesses identified.

We con­firmed that fin­an­cial reports are presen­ted to each meet­ing of the Resources Com­mit­tee (and pre­vi­ously the Fin­ance and Deliv­ery Com­mit­tee). CNPA aim for a break­even pos­i­tion each year, with the tar­get reflec­ted in their cor­por­ate plan, and pro­gress mon­itored through the fin­an­cial reports.

We spoke to a num­ber of Board mem­bers through­out field­work who con­firmed that they have a high level of con­fid­ence in the inform­a­tion presented.

Fur­ther, we con­firmed reg­u­lar report­ing is being provided to the SMT on the budget position.

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Appendix A – Definitions

Con­trol assessments

Grade	Descrip­tion
R	Fun­da­ment­al absence or fail­ure of key controls.
A	Con­trol object­ive not achieved — con­trols are inad­equate or ineffective.
Y	Con­trol object­ive achieved — no major weak­nesses but scope for improvement.
G	Con­trol object­ive achieved — con­trols are adequate, effect­ive and efficient.

Man­age­ment action grades

Grade	Descrip­tion
4	Very high risk expos­ure — major con­cerns requir­ing imme­di­ate seni­or atten­tion that cre­ate fun­da­ment­al risks with­in the organisation.
3	High risk expos­ure — absence / fail­ure of key con­trols that cre­ate sig­ni­fic­ant risks with­in the organisation.
2	Mod­er­ate risk expos­ure — con­trols are not work­ing effect­ively and effi­ciently and may cre­ate mod­er­ate risks with­in the organisation.
1	Lim­ited risk expos­ure — con­trols are work­ing effect­ively, but could be strengthened to pre­vent the cre­ation of minor risks or address gen­er­al house-keep­ing issues.

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