Cairngorms Nation­al Park Author­ity (The Authority)

Extern­al Audit Annu­al Report to the Board and the Aud­it­or Gen­er­al for Scot­land for the fin­an­cial year ended 31 March 2019 (DRAFT)

6 Septem­ber 2019

Joanne Brown Engage­ment Leader

John Boyd Seni­or Manager

Our audit at a glance

• We have ful­filled our respons­ib­il­it­ies per Inter­na­tion­al Stand­ards on Audit­ing (ISAs) (UK) and the Audit Scot­land Code of Audit Prac­tice through­out our work and this final report to the Board and the Aud­it­or Gen­er­al for Scot­land con­cludes our work.
• Mater­i­al­ity was set at 2% of gross expendit­ure with­in our plan, and was updated to reflect the unaudited ²⁰¹⁸⁄₁₉ fin­an­cial state­ments at £136,000. We iden­ti­fied one adjus­ted audit dif­fer­ence and one unad­jus­ted dif­fer­ence to the draft fin­an­cial state­ments as well as dis­clos­ure adjust­ments. These are detailed with­in Appendix 2.
• We have built on our rela­tion­ship with the Cairngorms Nation­al Park Author­ity (the Author­ity) man­age­ment dur­ing the year and thank them for sup­port­ing us dur­ing our audit process.
• Sig­ni­fic­ant audit risks were: man­age­ment over­ride of con­trols; and the risk of fraud in rev­en­ue; and expendit­ure recog­ni­tion as set out in the Fin­an­cial Report­ing Council’s prac­tice note 10. Our risk assess­ment remained unchanged and we did not identi­fy any adjust­ments in these areas in our work.
• Our work was under­taken in accord­ance with our agreed timetable. The draft fin­an­cial state­ments pro­duced by man­age­ment in line with agreed timetable. We thank man­age­ment for their sup­port and assist­ance dur­ing our work.
• A wider scope audit for the Author­ity, as set out in our plan, was con­sidered not appro­pri­ate. How­ever, we have con­sidered your fin­an­cial man­age­ment arrange­ments and annu­al gov­ernance state­ment in line with the Audit Scot­land Code.

Con­tents

Sec­tion	Page
1. Intro­duc­tion	4
2. The fin­an­cial state­ments audit	5
3. The Authority’s fin­an­cial sus­tain­ab­il­ity and gov­ernance arrangements	10
Appen­dices:
1. Audit plan and fol­low up of 2017⁄18 extern­al audit recommendations	13
2. Audit adjustments	14
3. Fees, inde­pend­ence and fraud arrangements	15
4. Com­mu­nic­a­tion of audit mat­ters to those charged with governance	16

Intro­duc­tion

This report is a sum­mary of our find­ings from our extern­al audit work for the fin­an­cial year ended 31 March 2019.

Our work has been under­taken in accord­ance with Inter­na­tion­al Stand­ards of Audit­ing (ISAs) (UK) and the Audit Scot­land Code of Audit Prac­tice 2016.

In accord­ance with our report­ing respons­ib­il­it­ies our report is jointly addressed to the Board and the Aud­it­or Gen­er­al for Scotland.

Once final­ised this report will be made pub­lic­ally avail­able on the Audit Scot­land web­site (www​.audit​-scot​land​.gov​.uk)

Our report is due to be presen­ted as a draft to the Audit and Risk Com­mit­tee on 6 Septem­ber 2019. Once all out­stand­ing mat­ters are com­plete the report will be updated and finalised.

We would like to thank the Authority’s man­age­ment and the fin­ance team for an effect­ive year-end audit pro­cess and all their sup­port and assist­ance in the audit process.

Struc­ture of this report

As set out in our Audit Plan (8 March 2019) we con­sider in accord­ance with the Audit Scot­land Code of Prac­tice that the Author­ity is a smal­ler body. There­fore full wider scope is not appro­pri­ate. Our report con­cludes on our fin­an­cial state­ments audit and cer­tain aspects of the Authority’s arrange­ments as follows:

• Fin­an­cial state­ments – Sec­tion 2 and Appendix 1
• Fin­an­cial and gov­ernance arrange­ments – Sec­tion 2

Our Opin­ion (sub­ject to final­isa­tion of the out­stand­ing information)

For the fin­an­cial year ended 31 March 2019 we [expect to] issue an unqual­i­fied 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)

Status of the audit as at 28 August 2019

Our audit is sub­stan­tially com­plete with the excep­tion of the following:

• Con­clu­sion and sub­sequent events procedures
• Engage­ment Lead­er review
• Final dis­clos­ure adjust­ments to the accounts
• Final copy of Headquar­ters lease agreement
• Let­ter of representation

The audit process

We received a com­plete set of fin­an­cial state­ments includ­ing the per­form­ance report, stra­tegic report and gov­ernance state­ment. This was in line with the timetable we agreed. The draft fin­an­cial state­ments were sup­por­ted by work­ing papers. How­ever, there was some inform­a­tion that was delayed in sup­port­ing the audit process.

We iden­ti­fied one audit adjust­ment to the draft fin­an­cial state­ments around recog­ni­tion of cut off pro­ced­ures and alloc­a­tion of bal­ances. We iden­ti­fied one unad­jus­ted dif­fer­ence. We iden­ti­fied cer­tain dis­clos­ure enhance­ments to the annu­al accounts and these have been reflec­ted in the fin­an­cial state­ments. These are detailed in appendix 2.

Our fin­an­cial state­ments audit

• Over­all mater­i­al­ity has been set at £136,000 (2% of gross expendit­ure) and per­form­ance mater­i­al­ity is set at £102,330. (75% of mater­i­al­ity). We report to man­age­ment any audit dif­fer­ence iden­ti­fied over £6,822 (trivi­al as 5% of materiality).
• The draft fin­an­cial state­ments were sup­por­ted through detailed work­ing papers. We raised one audit adjust­ment dur­ing our audit (appendix 2) and dis­clos­ure adjust­ments to the fin­an­cial state­ments to enhance users under­stand­ing of the accounts
• We [expect to] issue a true and fair audit opin­ion on the fin­an­cial state­ments, includ­ing the wider inform­a­tion con­tained in the fin­an­cial state­ments, and reg­u­lar­ity opin­ion. The audited parts of the Remu­ner­a­tion and Staff Report are free from mater­i­al misstatement.
• Test­ing provided assur­ance on iden­ti­fied areas of sig­ni­fic­ant risks that these were not mater­i­al mis­stated in the fin­an­cial statements.

Audit approach and materiality

Our audit approach was set out in our annu­al audit plan presen­ted to the Audit and Risk Com­mit­tee in March 2019. As set out in our plan, our mater­i­al­ity cal­cu­la­tions were based on the audited ²⁰¹⁷⁄₁₈ fin­an­cial state­ments. We sub­sequently updated our mater­i­al­ity cal­cu­la­tion to be based on the unaudited ²⁰¹⁸⁄₁₉ fin­an­cial state­ments. Over­all mater­i­al­ity has been set at £136,000 (2% of gross expendit­ure) and per­form­ance mater­i­al­ity is set at £102,330. (75% of mater­i­al­ity). We report to man­age­ment any audit dif­fer­ence iden­ti­fied over £6,822 (trivi­al as 5% of materiality).

We did not identi­fy any addi­tion­al sig­ni­fic­ant audit risks from those iden­ti­fied in our audit plan.

Intern­al Audit

As set out in our extern­al audit plan we have not placed form­al reli­ance on the work of the Authority’s intern­al audit pro­vider, BDO LLP. We reviewed the intern­al audit plan and indi­vidu­al reports issued to date, to con­sider if any impact on our audit approach, with none being noted and all reports receiv­ing sub­stant­ive assurance.

Audit opin­ion

Based on our audit pro­ced­ures per­formed [we expect to issue] an unqual­i­fied audit opin­ion on the fin­an­cial state­ments including:

• give a true and fair view in accord­ance with the Nation­al Parks (Scot­land) Act 2000 and dir­ec­tions made there­un­der by the Scot­tish Min­is­ters of the state of the body’s affairs as at 31 March 2019 and of its net expendit­ure for the year then ended;
• have been prop­erly pre­pared in accord­ance with IFRSs as adop­ted by the European Uni­on, as inter­preted and adap­ted by the ²⁰¹⁸⁄₁₉ FReM;
• have been pre­pared in accord­ance with the require­ments of the Nation­al Parks (Scot­land) Act 2000 and dir­ec­tions made there­un­der by the Scot­tish Ministers;
• the wider inform­a­tion con­tained in the fin­an­cial state­ments, e.g. Per­form­ance Report and Gov­ernance State­ment, is con­sist­ent with the fin­an­cial statements
• reg­u­lar­ity of expenditure
• audited parts of the remu­ner­a­tion and staff report have been pre­pared in accord­ance with applic­able guidance

Adding value through our extern­al audit work

Our over­all object­ive is to ensure we deliv­er a qual­ity extern­al audit which fully com­plies with Inter­na­tion­al Stand­ards of Audit­ing (ISAs) UK and the Audit Scot­land Code of Prac­tice (2016). By ensur­ing our audit is effi­cient and effect­ive, 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.

Key audit issues

Respond­ing to sig­ni­fic­ant risks

With­in our annu­al extern­al audit plan we iden­ti­fied sig­ni­fic­ant audit risks and our planned approach. We have set out below a sum­mary of the work under­taken over these risks and our audit conclusions

Risk of fraud in rev­en­ue	Risk of fraud in expendit­ure	Man­age­ment over­ride of controls
The Risk As set out in ISA 240, there is a pre­sumed risk that rev­en­ue may by mis­stated due to improp­er recog­ni­tion of rev­en­ue. Giv­en grant-in-aid income is well fore­cast and agreed to fund­ing let­ters we do not con­sider this to be of high­er risk. Our pre­sumed risk there­fore focuses on oper­a­tion­al plan and oth­er income. We con­sider the risk to be pre­val­ent around the year end and there­fore focus our audit work on trans­ac­tions around the year end.	The Risk 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. We con­sider the risk to be par­tic­u­larly pre­val­ent around the year end and there­fore focus our test­ing on cut-off of non-pay expenditure.	The Risk As set out in ISA 240, across all entit­ies there is a pre­sumed risk of fraud being per­pet­rated by man­age­ment through its abil­ity to manip­u­late account­ing records dir­ectly or indir­ectly and pre­pare fraud­u­lent fin­an­cial state­ments by over­rid­ing con­trols that oth­er­wise appear to be oper­at­ing effect­ively. Over­ride of con­trols is present in all entities.
Our planned response • Developed our under­stand­ing of the Authority’s mater­i­al rev­en­ue streams includ­ing walk­through of key trans­ac­tions. • Per­form­ing rev­en­ue cut off pro­ced­ures and sub­stant­ive test­ing over pre year end trans­ac­tions to gain reas­on­able assur­ance that these had been recog­nised in the cor­rect fin­an­cial year • Test­ing the exist­ence and recov­er­ab­il­ity of bal­ances at the year end through sample test­ing of debt­or bal­ances at the year end to gain assurance	Our planned response • Developed our under­stand­ing of the Authority’s mater­i­al expendit­ure streams includ­ing walk­through of key trans­ac­tions. • Per­form­ing tar­geted review and test­ing of key expendit­ure streams dur­ing the year, includ­ing ana­lyt­ic­al review of expendit­ure and tar­geted trans­ac­tion test­ing, includ­ing con­sid­er­a­tion of the reg­u­lar­ity of expendit­ure incurred. • Per­form­ing cut-off test­ing of expendit­ure trans­ac­tions around the year end to ensure these had been alloc­ated to the appro­pri­ate fin­an­cial year. We have a par­tic­u­lar focus on trans­ac­tions recor­ded in April 2019 to ensure these did not relate to 2018⁄19. Review­ing post year end pay­ments for any poten­tial unre­cor­ded liabilities.	Our planned response • Developed our under­stand­ing of the entity level con­trols in place at the Author­ity that reduce the risk of man­age­ment over­ride • Per­formed review of journ­al trans­ac­tions for unusu­al trans­ac­tions or bal­ances. • Eval­u­ated key areas of judge­ment with­in the Fin­an­cial state­ments and the basis for these judge­ments / applic­a­tion of account­ing policies includ­ing accru­als and provisions
Con­clu­sion Appro­pri­ate assur­ance gained, through audit pro­ced­ures per­formed, that rev­en­ue recog­nised by the Author­ity is free from mater­i­al mis­state­ments. (sub­ject to final Engage­ment lead­er review)	Con­clu­sion Based on our audit test­ing per­formed we are sat­is­fied that rev­en­ue and expendit­ure is free from mater­i­al mis­state­ment. We iden­ti­fied cut-off adjust­ments required to expendit­ure (Appendix 2) but are sat­is­fied these are not indic­at­ive of fraud or error. 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)	Con­clu­sion Based on our test­ing we are sat­is­fied that here was no evid­ence of man­age­ment over­ride or bias that would res­ult in a mater­i­al mis­state­ment with­in the fin­an­cial state­ments. (sub­ject to final Engage­ment lead­er review)

Nar­rat­ive ele­ments of your annu­al accounts

In accord­ance with our respons­ib­il­it­ies we have reviewed your nar­rat­ive aspects of the Annu­al Report and Accounts. 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.

Per­form­ance report

The per­form­ance report provides inform­a­tion on the Authority’s fin­an­cial and non-fin­an­cial per­form­ance dur­ing the year.

The Account­able Officer’s State­ment is clear and easy to read.

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. Action Plan Point 1

Over­all observations

The Authority’s fin­an­cial state­ments con­tin­ue to be developed to provide the read­er of the accounts with an under­stand­ing of the organisation’s fin­an­cial and non-fin­an­cial per­form­ance dur­ing the year. The ​‘front end’ of the accounts con­tin­ue to be refined to report on the key out­comes delivered dur­ing the year against the Nation­al Park Part­ner­ship Plan, the Cor­por­ate Plan and the Annu­al Oper­at­ing Plan as well as the risks and gov­ernance arrangements.

Remu­ner­a­tion and staff report

The Remu­ner­a­tion and Staff Report has been prop­erly pre­pared in accord­ance with the Pub­lic Fin­ance and Account­ab­il­ity (Scot­land) Act 2000 and dir­ec­tions thereunder.

The dis­clos­ures with­in the report are con­sist­ent with under­ly­ing payroll inform­a­tion and the require­ments of the FReM.

Gov­ernance statement

All key inform­a­tion required by the FReM has been included with­in the Gov­ernance Statement.

No mater­i­al issues of gov­ernance in the year have been required to be disclosed.

None of the inform­a­tion con­tin­ued with­in the state­ment is incon­sist­ent with our audit know­ledge and under­stand­ing of the Authority

Fraud and irregularity

In rela­tion to the audit risk of fraud in respect of expendit­ure we tested the Authority’s cut off arrange­ments in par­tic­u­lar (tim­ing). While one audit adjust­ment was iden­ti­fied (appendix) we are sat­is­fied that this was not indic­at­ive of poten­tial fraud. There are no post bal­ance sheet events or leg­al uncer­tain­ties at year-end. There were no frauds iden­ti­fied by man­age­ment dur­ing the year and no indic­a­tion of fraud through our audit work.

Key aspects of your fin­an­cial statements

As set out in our audit plan we con­sider par­tic­u­lar aspects of your fin­an­cial state­ments 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 where these apply, and our con­clu­sions below.

Com­ment­ary:

The Authority’s account­ing policies are in accord­ance with IFRS as inter­preted and adap­ted by the FReM and we con­sider these to be appro­pri­ate to the organ­isa­tion. These have been applied con­sist­ently to the pre­vi­ous year with the excep­tion of the adop­tion of two new account­ing stand­ards IFRS 9: Fin­an­cial Instru­ments and IFRS 15: Rev­en­ue from con­tracts with cus­tom­ers. While these res­ul­ted in minor dis­clos­ure changes to the accounts includ­ing account­ing policies and fin­an­cial instru­ments dis­clos­ures, there was no impact on the primary fin­an­cial statements.

Account­ing estim­ates and judgements

The Authority’s sig­ni­fic­ant account­ing estim­ates and judge­ment impact­ing on the annu­al accounts are the following:

• Invest­ment impair­ment review — The Author­ity made cap­it­al con­tri­bu­tions to the Nation­al Parks Part­ner­ship LLP. Due to sig­ni­fic­ant uncer­tainty around future recov­er­ab­il­ity of con­tri­bu­tions made, in line with pri­or years, the Author­ity has fully impaired out­stand­ing bal­ances. We have reviewed the basis of this impair­ment and con­sider it appropriate.
• LEAD­ER irreg­u­lar­it­ies — The Author­ity is the account­able body for the Cairngorms Loc­al Action Group, deliv­er­ing the Loc­al Devel­op­ment Strategy. As such, the author­ity is liable for any fund­ing advances that may not be recov­er­able due to irreg­u­lar­it­ies in expendit­ure claimed. Man­age­ment have con­sidered the his­tor­ic trend of pre­vi­ous LEAD­ER pro­grammes and have estim­ated the per­cent­age of costs that are likely to be irre­cov­er­able in the cur­rent 2014 – 2020 programme.

We have con­sidered the assump­tions made by man­age­ment when recog­nising the amounts recov­er­able on the LEAD­ER pro­gramme and con­sider these to be reas­on­able. There is no indic­a­tion of man­age­ment bias in assump­tions made and is sup­por­ted through cur­rent amounts recov­er­able. The Author­ity recog­nises a con­tin­gent liab­il­ity on the basis that there is a risk that the sums claimed on behalf of third parties may sub­sequently be found to be ineligible and there­fore a risk that the Author­ity may be required to make any sub­sequent repay­ment. We are sat­is­fied that as at 31 March 2019 there is no indic­a­tion of amounts being reclaimed by the LEAD­ER pro­gramme and no ineligible expendit­ure recognised.

Going con­cern

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 ²⁰¹⁹⁄₂₀ 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.

The Authority’s fin­an­cial sus­tain­ab­il­ity and gov­ernance statement

Fin­an­cial Management

For ²⁰¹⁸⁄₁₉, the Author­ity repor­ted net expendit­ure for the year of £4.704 mil­lion. This res­ul­ted in over­spend against its over­all Depart­ment­al Expendit­ure Lim­it (cash and non-cash) set by the Scot­tish Gov­ern­ment by £5,000. This included an break­even pos­i­tion against resource (rev­en­ue) Expendit­ure Lim­it, an over­spend against non-cash DEL of £3,000 and an over­spend of £2,000 against Cap­it­al Expendit­ure Lim­its. Per­form­ance in the year is in line with fin­an­cial plans and with the Scot­tish Gov­ern­ment who have agreed =1% to ‑2% of resource alloc­a­tions. Fin­an­cial per­form­ance is mon­itored dur­ing the year by seni­or man­age­ment and the Fin­ance and Deliv­ery Com­mit­tee provid­ing over­sight and scru­tiny of fin­an­cial performance.

Fin­an­cial Sustainability

The Authority’s ²⁰¹⁹⁄₂₀ budget pro­jects a small rev­en­ue over­spend of £33,000 which is in line with the Authority’s agreed tar­get of between +1% and ‑2% of resource alloc­a­tion. The Authority‘s primary source of rev­en­ue is core rev­en­ue fund­ing. For ²⁰¹⁹⁄₂₀, the Author­ity has budgeted for a sim­il­ar rev­en­ue alloc­a­tion as received in ²⁰¹⁸⁄₁₉ of £4.565 mil­lion and small uplift in cap­it­al fund­ing to take total fund­ing to £240,000 (2018÷19: £200,000). How­ever, the author­ity faces chal­lenges in meet­ing its fin­an­cial tar­gets. The lift­ing of the Scot­tish Pub­lic sec­tor pay cap will cre­ate addi­tion­al fin­an­cial pres­sures in ²⁰¹⁹⁄₂₀, as staff costs rep­res­ent the most sig­ni­fic­ant cost for the organ­isa­tion. In addi­tion the poten­tial impact of EU With­draw­al cre­ates addi­tion­al uncer­tainty and oppor­tun­ity to the Authority.

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 new Nation­al Park Part­ner­ship Plan as well as rel­ev­ant Scot­tish Gov­ern­ment pri­or­it­ies. The Cor­por­ate Plan includes fin­an­cial fore­casts over the next three 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.

Gov­ernance and transparency

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.

EU With­draw­al

There is con­sid­er­able uncer­tainty around the poten­tial impact of Brexit. We have used Audit Scotland’s plan­ning guid­ance to eval­u­ate the Board’s read­i­ness for EU with­draw­al across work­force (People and Skills); Fin­ance; and Regulations.

The Author­ity has recog­nised that impact of EU With­draw­al could have implic­a­tions for the organ­isa­tion. Man­age­ment, fol­low­ing Scot­tish Gov­ern­ment advice has reviewed staff­ing arrange­ments to con­sider poten­tial implic­a­tions on the organ­isa­tion as well as wider areas of con­sid­er­a­tion includ­ing impact on vis­it­ors and fund­ing. While there remains con­sid­er­able uncer­tainty sur­round­ing the medi­um to longer term implic­a­tions of the poten­tial EU with­draw­al, par­tic­u­larly around European Fund­ing such as the LEAD­ER pro­gramme and future levels of Scot­tish Gov­ern­ment fund­ing, the Author­ity does not con­sider any imme­di­ate sig­ni­fic­ant impact on the organisation.

We are sat­is­fied that the Author­ity is rel­at­ively well pre­pared for the poten­tial implic­a­tions and risks from EU with­draw­al and that arrange­ments are in place to con­tin­ue to mon­it­or these.

Chan­ging the land­scape for pub­lic fin­an­cial management

Recog­nising the chan­ging land­scape of Scot­tish pub­lic fin­ances, includ­ing sig­ni­fic­ant tax-rais­ing powers as well respons­ib­il­ity for 11 social secur­ity bene­fits provides the Scot­tish Par­lia­ment with more policy choices. Sub­sequently, there is poten­tially great­er volat­il­ity and com­plex­ity around Scot­tish budget and great­er focus on the use of Scot­tish funds. While the Author­ity gen­er­ates rev­en­ue through fees and charges, the organ­isa­tion is still sub­stan­tially fun­ded through Scot­tish Gov­ern­ment Grant in aid. As a res­ult, Man­age­ment use the fin­an­cial state­ments and annu­al report as a key doc­u­ment in demon­strat­ing the use of funds dur­ing the fin­an­cial year and how these have sup­por­ted the deliv­ery of the Nation­al Park Part­ner­ship Plan and the Nation­al Park Authority’s Cor­por­ate Plan.

Depend­ency on key suppliers

The col­lapse of Caril­lion and the sub­sequent impact across the pub­lic sec­tor, has brought into focus the risk of key sup­pli­er fail­ure and under­per­form­ance. We con­sidered the arrange­ments in place for identi­fy­ing key sup­pli­er and risks, if any asso­ci­ated with these and how effect­ively these are being managed.

While the Author­ity engage with a num­ber of sup­pli­ers, giv­en the nature and value of ser­vices provided, the Author­ity con­sider that the impact of a fail­ure of a sup­pli­er, while caus­ing some dis­rup­tion, would be min­im­al on the organisation.

Appen­dices

Action plan and fol­low up of ²⁰¹⁷⁄₁₈ recommendations

Recom­mend­a­tion

Agreed man­age­ment response

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.

Man­age­ment response: Accep­ted Own­er: Dir­ect­or of Cor­por­ate Ser­vices to take respons­ib­il­ity with action by May 2020. Imple­ment­a­tion date: May 2020

Fol­low up of ²⁰¹⁷⁄₁₈ recommendations

Recom­mend­a­tion

Update as at August 2019

LEAD­ER Pro­gramme The Author­ity is the account­able body for the Cairngorms Loc­al Action Group, deliv­er­ing the Loc­al Devel­op­ment Strategy. As such, the author­ity is liable for any fund­ing advances that may not be recov­er­able due to irreg­u­lar­it­ies in expendit­ure claimed. The Author­ity acknow­ledges that there is always a degree of risk asso­ci­ated with fund­ing of this nature. How­ever, the nature of the arrange­ments con­tin­ue to expose the Author­ity to be liable for irreg­u­lar­it­ies in expendit­ure claimed. It is crit­ic­al that the Author­ity con­tin­ue to engage with the Scot­tish Gov­ern­ment to ensure that mon­ies recog­nised are recoverable.

Issue closed The Author­ity has con­tin­ued to engage with the Scot­tish Gov­ern­ment and LEAD­ER part­ners to ensure that amounts claimed are recov­er­able. The Author­ity acknow­ledges that there is always a degree of risk asso­ci­ated with fund­ing of this nature. How­ever, there are no con­cerns around recov­er­ab­il­ity of funds to date.

Audit adjust­ments

Uncor­rec­ted and cor­rec­ted misstatements

The fol­low­ing adjust­ments were iden­ti­fied and adjus­ted by Man­age­ment dur­ing the course of the audit.

Item	Dr (£)	(Cr) (£)	Descrip­tion
1	32,750	(20,974)	Being adjust­ment to cor­rectly recog­nise rent­al trans­ac­tions at the year end.
		(11,776)

Sig­ni­fic­ant Dis­clos­ure recommendations

In accord­ance with audit­ing stand­ards we are required to high­light sig­ni­fic­ant dis­clos­ure mis­state­ments to allow the Audit and Risk Com­mit­tee to eval­u­ate the impact of these mat­ters on the fin­an­cial state­ments. These do not impact on the primary fin­an­cial statements.

Dis­clos­ure omis­sion	Detail	Adjus­ted
Updated dis­clos­ure notes to the accounts	We recom­men­ded dis­clos­ure adjust­ments to enhance dis­clos­ures around mater­i­al notes to the fin­an­cial state­ments to enhance the read­ers under­stand­ing of the accounts. This included fin­an­cial instru­ments note to meet the require­ments of IFRS 9.	✓
Lease dis­clos­ure	Changes required to appro­pri­ately dis­close oper­at­ing lease com­mit­ments with­in the fin­an­cial statements.	✓
Remu­ner­a­tion report	Minor changes required to the remu­ner­a­tion report dis­clos­ure to cor­rectly dis­close pen­sion bene­fits in line with the FReM	✓
Account­ing policies	Minor dis­clos­ure amend­ments to provide clear­er nar­rat­ive around account­ing policies and impact on the fin­an­cial statements	✓

The fol­low­ing mis­state­ments were iden­ti­fied dur­ing our audit but which have not been cor­rec­ted on the grounds of mater­i­al­ity. The Author­ity had deferred recog­nising HIE pro­ject income until cash receipt, how­ever fol­low­ing audit test­ing, under the require­ments of IFRS 15, per­form­ance con­di­tions had been sat­is­fied before the year end and there­fore income should be recog­nised. We are sat­is­fied this does not rep­res­ent a mater­i­al error to the accounts. Going for­ward, Man­age­ment will recog­nise the pro­ject income based on IFRS 15.

Fees, inde­pend­ence, fraud arrangements

Extern­al Audit Fee	Fees £
Extern­al Aud­it­or Remuneration	8,590
Pooled Costs	2,070
Con­tri­bu­tion to Audit Scot­land costs	510
Con­tri­bu­tion to Per­form­ance Audit and Best Value	0
2018 – 19 Fee	11,170

Fraud arrange­ments

In assess­ing our audit risks, the audit team was 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 rela­tion 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. We did this when present­ing our audit plan.
• 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. – None were iden­ti­fied in-year

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.

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 worked with the Author­ity to review spe­cif­ic areas of fraud risk, includ­ing the oper­a­tion of key fin­an­cial controls.

We also examined cer­tain policies in place, strategies, stand­ing orders and fin­an­cial instruc­tions, as rel­ev­ant to the fraud frame­work, to ensure that they provide a reas­on­able frame­work of intern­al control.

No sus­pec­ted frauds or irreg­u­lar­it­ies have been iden­ti­fied by Man­age­ment and repor­ted in-year.

Com­mu­nic­a­tion of audit mat­ters with the Authority

	Audit Plan	Audit Find­ings
Respect­ive respons­ib­il­it­ies of aud­it­or and management/​those charged with governance	●	●
Over­view of the planned scope and tim­ing of the audit, includ­ing plan­ning assess­ment of audit risks and wider scope risks	●	●
Con­firm­a­tion of inde­pend­ence and objectivity	●	●
Sig­ni­fic­ant mat­ters in rela­tion to going concern	●	●
Views about the qual­it­at­ive aspects of The Author­ity account­ing and fin­an­cial report­ing prac­tices, includ­ing account­ing policies, account­ing estim­ates and fin­an­cial state­ment disclosures	●	●
Sig­ni­fic­ant find­ings from the audit	●	●
Sig­ni­fic­ant mat­ters and issues arising dur­ing the audit and writ­ten rep­res­ent­a­tions that have been sought	●	●
Sig­ni­fic­ant dif­fi­culties encountered dur­ing the audit	●	●
Sig­ni­fic­ant defi­cien­cies in intern­al con­trol iden­ti­fied dur­ing the audit	●	●
Sig­ni­fic­ant mat­ters arising in con­nec­tion with related parties	●	●
Non-com­pli­ance with laws and regulations	●	●
Unad­jus­ted mis­state­ments and mater­i­al dis­clos­ure omissions	●	●
Expec­ted modi­fic­a­tions to the auditor’s report, or emphas­is of matter	●	●

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 above.

We com­mu­nic­ate any adverse or unex­pec­ted find­ings affect­ing the audit on a timely basis, either inform­ally or via a report to The Author­ity Man­age­ment and the Audit and Risk Committee.