The Planning Inspectorate- Wales

The Planning Inspectorate Annual Report and Accounts 2005/06

Section 11 - Financial Report and Information

Financial performance against budgets

The Inspectorate is funded through the Department for Communities and Local Government (formerly the Office of the Deputy Prime Minister) and in Wales by the National Assembly. Initial indicative, threeyear allocations are agreed as part of biennial Treasury Spending Review (SR) exercises and are then refined on an annual basis as necessary through the DCLG business planning round. The move to three-year funding, introduced following the Comprehensive Spending Review of 1998, is designed to permit greater certainty for organisations in the planning of expenditure programmes. As from 1 April 2005, the Inspectorate’s funding has not formed part of DCLG’s/ODPM’s administrative cost limit but is funded from the Department’s programme budget. This has proved to be an advantage in giving us greater flexibility in the manner in which we manage our financial affairs.

The detailed accounts for the 2005/06 Financial Year are included in Section 12. A brief summary of the Inspectorate’s performance against budgets is provided below:

	Budget – £k	Outturn – £k
Staff & related costs	32,471	32,102
Non pay running costs	16,174	15,048
Non cash costs	3,027	3,083
Total running costs	51,672	50,233

Capital expenditure	2,922	2,919
Receipts	(9,500)	(9,947)

Creditor payments

The Inspectorate observes the principles of the Better Payment Practice Code on prompt payments. Its policy is to pay all bills not in dispute within 30 days of receipt of a valid invoice or within the agreed contractual terms if otherwise specified. In 2005/06 the Inspectorate paid 98.3% of 4,845 invoices received in accordance with the above target.This compares with the previous year’s performance of 97.21%.

In November 1998, the Late Payment of Commercial Debts (Interest) Act came into force, providing small businesses with a statutory right to claim interest from large businesses (and all public sector bodies) on payments that are more than 30 days overdue. Amended legislation (the Late Payment of Commercial Debts Regulations 2002) came into force on 7 August 2002 providing all businesses, irrespective of size, with the right to claim statutory interest for the late payment of commercial debts. No such claims were received during the year.

Remuneration report

The remuneration report summarises the Inspectorate’s remuneration policy and disclosures on Directors’ remuneration as required by Section 234B and schedule 7A of the Companies Act 1985 and can be found at Annexe A.

Treasury direction

These accounts have been prepared in accordance with an accounts direction given on 13 January 2006 by the Treasury in pursuance of Section 7(2) of the Government Resources and Accounts Act 2000.

Audit information

The Chief Executive, as Accounting Officer, confirms that there is no relevant audit information of which the auditors are unaware and that she has taken all necessary steps to ensure they have been made aware of all relevant audit information throughout the business.

Statement of the Inspectorate’s and Chief Executive’s Responsibilities

Under Section 7 of the Government Resources and Accounts Act 2000 the Treasury have directed the Planning Inspectorate to prepare a statement of accounts for each financial year in the form and on the basis set out in the accounts direction.The accounts are prepared on an accruals basis and must give a true and fair view of the Inspectorate’s state of affairs at the year end, its net operating cost, and cash flows for the financial year.

In preparing the accounts the Inspectorate is required to:

observe the accounts direction issued by the Treasury, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis;
make judgements and estimates on a reasonable basis;• state whether applicable accounting standards have been followed, and disclose and explain any material departures in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Inspectorate will continue in operation.

The Departmental Accounting Officer has designated the Chief Executive as the Accounting Officer for the Inspectorate. Her relevant responsibilities as Accounting Officer, including her responsibility for the propriety and regularity of public finances for which she is answerable, for the keeping of proper records and for safeguarding the Inspectorate’s assets, are set out in the Accounting Officers’ Memorandum, issued by the Treasury and published in “Government Accounting” (The Stationery Office) and in the Inspectorate’s Financial Memorandum.

Katrine Sporle
Chief Executive
29 June 2006

Statement on Internal Control

For the year ended 31st March 2006

1. Scope of responsibility

As Accounting Officer, I have responsibility for maintaining a sound system of internal control that supports the achievement of the Inspectorate’s policies, aims and objectives, whilst safeguarding the public funds and assets for which I am personally responsible, in accordance with the responsibilities assigned to me in Government Accounting.

I have been designated as Accounting Officer for the Inspectorate by the Permanent Secretary and Accounting Officer of the Office of the Deputy Prime Minister. A detailed breakdown of our joint and shared responsibilities, including my own access to Ministers, is contained in the letter of designation.

2. The purpose of the system of internal control

The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; therefore it can provide only reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the Inspectorate’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. This system of internal control, which accords with Treasury guidance, was established in previous years and has continued in place for the year ended 31st March 2006.

3. Capacity to handle risk

Leadership is given to the risk management process through board level endorsement of the Inspectorate’s risk policy and risk management procedures and through the structural nature of the risk recording mechanisms.

On the recommendation of a previous internal audit review, executive responsibility for risk policy within the Inspectorate lies with the Chief Executive’s Support Unit – CXSU. Fundamentally though, responsibility for risk management is recognised as belonging with the Management Board and, through them, with executive managers throughout the organisation.

CXSU staff attendance at risk seminars and departmental risk groups has contributed to specialist knowledge and enabled the consideration of best practice techniques.

A formal programme of risk management training for managers was completed during 2004/05.

4. The risk and control framework

The Inspectorate’s risk management procedures provide for a minimum twice yearly review of the Strategic Risk Register aligned to the annual business planning round and to the conclusion of the financial accounts. Following approval by the Management Board the process and outcome is further reviewed by the Audit Committee ensuring input from both internal and external audit representatives.

The development of the Strategic Risk Register and the means by which it is monitored and updated is a continual process. During the year work has been undertaken to investigate more effective and targeted risk management arrangements, including work on risk appetite. Responsibility for the identification and evaluation of changes to existing risk is an agreed Management Board function. All Board and Management Team papers must include a specific assessment of risk. Each strategic or business critical risk is assigned to an individual Director who is required to implement and manage the appropriate counter measures. Major projects within the organisation maintain their own individual risk registers and review threats to successful completion as an integral part of programme management. Board level access for these projects is through the Senior Responsible Officer (SRO). Business Area Risk Registers have been introduced during 2005, with all senior staff having risk management incorporated into their objectives and being responsible for reporting on the management of operational level risk to Directors and the Chief Executive.

Prior to the year-end the Planning Inspectorate Programme Delivery Board was established. It comprises all the members of the existing Inspectorate Management Team with the Chief Executive in the Chair. The main role of the Board is to ensure that the Planning Inspectorate Delivery Programme focuses on desired business outcomes – i.e. achieving an overall 30% improvement in productivity over three years. It does this by establishing proper governance over an Inspectoratewide programme of more than 30 projects and initiatives, introducing sensible controls over resource allocation and centralising the decision-making on project startup. It ensures that all proposals for development projects and work initiatives are submitted to a Board Meeting for consideration against well-defined criteria.The Delivery Board has largely taken over the role of the Business Development Teams (BDTs), which will therefore be disbanded.To support the Delivery Board three User Groups will be set up.These will operate in a more flexible way than the BDTs, governed by clear terms of reference.

The Inspectorate’s risk policy recognises that organisational risk appetite will vary dependent on the circumstances of the case.The Inspectorate remains highly risk averse in areas of statutory performance and recognises that, in order to manage risk throughout the organisation, it must mitigate risk at the strategic level.This is reflected in both the Strategic Risk Register and the Business Area Risk Registers. Our risk policy does not override the need for a full investment evaluation, with due regard to regularity and propriety issues, for all projects and initiatives.

5. Review of effectiveness

As Accounting Officer, I have responsibility for reviewing the effectiveness of the system of internal control. My review of the effectiveness of the system of internal control is informed by the work of the internal auditors and the executive managers within the Inspectorate who have responsibility for the development and maintenance of the internal control framework, and by comments made by the external auditors in their management letter and other reports. I have been advised on the implications of the result of my review of the effectiveness of the system of internal control by the Board and the Audit Committee and a plan to address weaknesses and ensure continuous improvement of the system is in place.

Internal control within the Inspectorate continues to be based on a framework of regular management information, financial regulation, and administrative procedures including segregation of duties, management supervision and a system of delegation and accountability. In particular this includes:

An Audit Committee, with internal and external audit representation, meeting four times each year under the chairmanship of a Non- Executive Director;
An Annual report by the Head of Internal Audit with an opinion on internal control;
A detailed programme of internal audit work, including a review of Statement on Internal Control compliance;
Endorsement by the Management Board of a risk strategy statement and risk management procedures;
Maintenance of Strategic Risk Registers with regular monitoring and reporting to the Management Board;
Maintenance of Business Area Risk Registers with regular monitoring and reporting to individual Directors;
An annual business planning round that sets organisational targets and objectives for the year;
Financial management reviews which revisit planned outputs and the corresponding accuracy of the initial financial allocation;
A monthly internal reporting, and annual stewardship reporting, process which requires individual Directors to advise on any variances to approved allocations, and the reasons for those variances;
Strict control over the ability to commit expenditure on behalf of the Inspectorate, with a fully documented system of delegated authorities;
Output measurement through agreed performance targets and unit cost analysis;
Full control of fixed assets, with regular physical checks against accounting and inventory records;
Formal project management disciplines including the establishment of a Delivery Board;
Professional procurement staff and fully documented and managed procurement policies in line with OGC guidelines;
Publication of a fraud prevention and “whistle blowing” policy; and
Revised budget management arrangements introduced in March 2005 with increased specialisation reducing the potential for error and omission and eliminating duplication. The following planned enhancements to the control framework are ongoing:
Continued development of an organisational business information system improving internal management reporting standards;
Continued development of operational arrangements for a “Head of Profession Group”;
Continued development of the Delivery Board and User Groups.