STATEMENT ON INTERNAL CONTROL

As Principal Accountable Officer of the SPCB, I acknowledge my responsibility for ensuring that an effective system of internal control is maintained and operated to safeguard the public funds and assets for which I am personally responsible in accordance with the responsibilities assigned to me.

The system of internal control is designed to manage rather than eliminate the risk of failure to achieve the organisation’s policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness.

The system of internal control is based on an ongoing process designed to identify the principal risks to the achievement of the organisation’s policies, aims and objectives, to evaluate the nature and extent of those risks and to manage them efficiently, effectively and economically. This process has been in place for the year ended 31st March 2005 and has been in place up to the date of approval of the annual accounts and accords with guidance from the Scottish Public Finance Manual.

As Principal Accountable Officer, I also have responsibility for reviewing the effectiveness of the system of internal control. The following processes have been established:

• An Advisory Audit Board (AAB) has been established and met 5 times in the year ended 31/03/2005. In previous years the AAB was composed of two independent members and one member of the Corporate Body. An additional member of the Corporate Body joined the AAB in 2004-05 bringing the SPCB representation to two. The Board is chaired by one of the independent members. The AAB receives reports from both external and internal auditors and provides guidance to the Principal Accountable Officer on corporate governance issues.
• Directors meet fortnightly to consider the plans and strategic direction of the organisation.
• During 2004-05, a head of Internal Audit was appointed on a part-time basis to take the lead on audit matters and to direct the work of our internal auditors (Deloitte & Touche LLP).
• Regular reports by the internal auditors (Deloitte & Touche LLP) include their independent opinion on the adequacy and effectiveness of the system of internal control together with recommendations for improvement.
• The AAB approves the Internal Audit plan for the coming year.
• Regular reports from managers on the steps they are taking to manage risks in their areas of responsibility including progress reports on key projects.
• A regular programme of facilitated workshops to identify and keep up to date the record of risks facing the organisation.
• A programme of training for senior managers which includes corporate governance and risk management training.
• Establishment of key performance and risk indicators.
• Maintenance of an organisation-wide risk register.
• A policy on fraud prevention and fraud prevention guidance.
• The SPCB formally complies with the principles of the Scottish Public Finance Manual.
• The SPCB approves the accounts including the Statement on Internal Control.

The SPCB is responsible for funding a number of Commissioner and Ombudsman bodies. These bodies were created by acts of the Scottish Parliament and operate independently from the SPCB. I rely on the Accountable Officer for each of these bodies to be responsible for ensuring that an effective system of internal control is maintained and operated to safeguard the public funds and assets for which they are personally responsible.

We developed a dedicated set of Standing Financial Instructions based on the Scottish Public Finance Manual which contain financial policies and procedures that are specific to the SPCB. These were reviewed by Audit Scotland and were approved by the SPCB in June 2004.

My review of the effectiveness of the system of internal control is informed by the work of the internal auditors and the senior managers within the organisation who have responsibility for the development and maintenance of the internal control framework. I am also informed by our external auditors, Audit Scotland, on matters of internal control through their management letters and reports.

In my previous Statement on Internal Control, I highlighted the reconciliations between the Allowances system (CASE) and the general ledger. In 2004-05 we undertook a full monthly reconciliation of transactions between the two systems and will continue to undertake this on a monthly basis.

P E Grice
Clerk to the Parliament and Chief Executive Date: 14 November 2005