JOINT AUDIT COMMITTEE 09.30am – 21 March 2019 Conference ... · 3/21/2019 · Joint Audit Members/Management need to ensure the even distribution of audits thought the year. Joint

JOINT AUDIT COMMITTEE

09.30am – 21 March 2019

Conference Room 1, Force Headquarters, Colwyn Bay

AGENDA Membership: Jim Illidge (Chair) Rachel Barber John Cunliffe Claire Hodson Dianne Walker

Agenda Item 34 APOLOGIES AND DECLARATIONS OF INTEREST 35 MINUTES AND ACTIONS LOG (Page 3 - 17) The Chair shall propose that the minutes of the meeting held on 21 November 2018

be signed as a true record 36 MATTERS ARISING 37 HMIC UPDATES (Oral) To receive oral update from Head of Corporate Services 38 INTERNAL AUDIT REPORT AND PROGRESS REPORT a. Summary Internal Controls Assurance(SICA) Review (Page 18 - 27) b. Assurance Review of Treasury Management (Page 28 - 39) c. Compliance Review of Counter Fraud – Procurement (Page 40 - 52) d. Assurance Review – General Ledger (Page 53 - 61) e. Assurance Review - Pensions (Page 62 - 72) f. Assurance Review – Capital Programme (Page 73 - 83) g. Comparison of Welsh Language Standards Review Findings (Page 84 - 87) h. Assurance Review – Expenses and Additional Payments (Page 88 - 101) i. Report on outstanding and overdue actions (DofFR) – verbal update (Oral) 39 DRAFT INTERNAL AUDIT ANNUAL PLAN To receive a report by Internal Audit

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40 INTERNAL AUDIT – AUDIT CHARTER 2018-19 (Page 121 - 128) To receive a report by Internal Audit 41 WALES AUDIT OFFICE ANNUAL PLAN (Page 129 - 144) To receive a report by the Wales Audit Office 42 WALES AUDIT OFFICE – FRAUD ENQUIRY LETTERS (Page 145 - 192) To receive a report by the Wales Audit Office 43 DRAFT CAPITAL STRATEGY (Page 193 - 229) To receive a report by the Director of Finance and Resources and Chief Finance Officer 44 JOINT GOVERNANCE BOARD & DRAFT ANNUAL GOVERNANCE STATEMENT (Page 230 - 244) To receive a report by the Chief Finance Officer 45 GOVERNANCE OF RESERVES (Page 245 - 253) To receive a paper by the Head of Finance on the governance of the reserves

46 DISCUSSION OF THE WORK PROGRAMME FOR 2019/20 (Page 254 - 258) To receive a paper by the Director of Finance and Resources and Chief Finance Officer 47 RISK MANAGEMENT REPORT (Page 259 - 260) To receive update from Head of Corporate Services 48 REGISTER OF TENDERS, CONTRACTS AND WAIVERS (Page 261 - 264) To receive a copy of the register of tenders, contracts and waivers 49 HEALTH AND SAFETY (Page 265 - 266) To receive a progress report from the Head of Facilities and Logistics 50 ANY OTHER BUSINESS

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21 NOVEMBER 2018

PRESENT JOINT AUDIT COMMITTEE: Jim Illidge (Chair) Rachel Barber John Cunliffe Claire Hodson FORCE OFFICERS: Richard Muirhead, Interim Director of Finance and Resources Guto Edwards, Head of Finance Helen Williams, Financial Control Accountant Supt Sharon McCairn, Corporate Services Chief Inspector Andrew Griffiths, Audit & Inspection Team Kathryn Jones, Risk and Business Continuity Coordinator Anne Matthews, Finance and Budgets Officer OFFICE OF THE POLICE AND CRIME COMMISSIONER: Stephen Hughes, Chief Executive Officer Kate Jackson, Chief Finance Officer Angharad Jones, PA to the Chief Executive OTHER: Derwyn Owen, Wales Audit Office Helen Cargill, TIAA 23. APOLOGIES AND DECLARATIONS OF INTEREST Dianne Walker, JAC Elan Dafydd, TIAA Michelle Phoenix, Wales Audit Office

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24. MINUTES AND ACTION LOG

The minutes of the meeting held on 20 September 2018 were agreed as a true record once the two amendments highlighted in the meeting were incorporated.

Action Log was updated and will be circulated with the minutes. 25. MATTERS ARISING There were no matters arising. 26. WALES AUDIT OFFICE – ANNUAL AUDIT REPORT

Derwyn Owen from the Wales Audit Office reported that he would be taking over from Anne Marie Harkin as the Wales Audit Office Director for North Wales Police. ACTION 26 Derwyn Owen to share his contact details with the Chair. The Annual Audit Letter formally closes the audit for 2017/18 and summarises the work of the Wales Audit Office over the last year and highlights within the key areas of responsibilities. A key consideration moving forward is the earlier closure of the accounts in 2018/19 Wales Audit Director is aware that conversations between the Wales Audit Office and North Wales Police are ongoing. Wales Audit Office has no significant issues regarding the reserves held by North Wales Police and note that the Office of the Police and Crime Commissioner/North Wales Police has a good track record of making the savings needed. The medium term financial plan in place appears to place the organisations in a good position to realise the savings needed.

27. INTERNAL AUDIT CHARTER

The Public Sector Internal Audit Standards (PSIAS) require internal audit providers to have in place an agreed Internal Audit Charter with their clients. This is to provide a formal document that defines the purpose of internal audit activity, its authority and its responsibility. This document also assists the Joint Governance Board and senior management in fulfilling their oversight responsibilities in ensuring that the purpose, authority and responsibility of internal audit activity is consistent with that set out in the standards.

It was reported that this is a draft paper and is a standard document and if changes are needed these can be incorporated before the document is finalised.

Director of Finance and Resources stated that one area required amendment. It was stated that the charter seemed quite light on performance standards and in particular measures of quality. Discussion needs to take place on the appropriate

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measures which can be placed in the document to address this shartfall. Once these changes are made the document can be finalised. ACTION 27 TIAA and Director of Finance and Resources to discuss appropriate

ways of incorporating measures of quality into the Internal Audit Charter.

Subject to the Director of Finance and Resources comments being incorporated into the document the Joint Audit Committee are content with the paper.

28. INTERNAL AUDIT REPORT AND PROGRESS REPORT

a. Summary Internal Controls Assurance (SICA) Report

The Joint Audit Committee notes the Summary Internal Controls Assurance Report which provides an update of internal audit work up to 8th November 2018. All planned audits will be completed by end of the financial year. Joint Audit Members stated that they had not received the briefing notes issued by TIAA. TIAA to investigate and re-send documents to members and ensure that contact details are correct to ensure that future briefings are received. ACTION 28a TIAA to re-send briefing documents to Audit Members and

ensure that all contact details are up-to-date to ensure that all future briefings are received.

Joint Audit Members stated that at the beginning of the next financial year they/management needs to ensure that TIAA reports are spread throughout the year to ensure that not all reports are loaded into one of their meetings. ACTION 28b Joint Audit Members/Management need to ensure the even

distribution of audits thought the year.

Joint Audit members noted that realistic, achievable dates need to be placed against actions arising from audit reports. There was concern amongst members that too many deadlines were stretched/extended. Need to ensure that managers set realistic deadlines for completion of actions. Head of Finance stated that good closing meetings need to be held and that realistic deadlines need to be placed on actions at these meetings.

ACTION 28c Management to ensure that realistic deadlines are placed on

action arising from audit reports at closing meetings.

TIAA report that they review all recommendations picked-up during the year at the end of the financial year and review, but that if a recommendation was a priority 1, this would be done at the next catch-up meeting between TIAA and Management.

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b. Assurance Review – Budgetary Controls

Joint Audit Members notes the review into the budgetary controls where substantial assurance was given with no action points arising from this review. It was noted that the Force has robust arrangements in place for the monitoring and controlling of budgets incorporating the production and reporting of detailed financial and management accounting information to all key stakeholders. A newly prepared and approved Value for Money Framework has also been put in place which the Audit Committee has not yet seen. ACTION 28d Head of Finance to send copy of the Value for Money Framework

to Joint Audit Committee members.

29. HMIC UPDATES

The Chief Inspector within the Audit and Inspection Team reported that much work is being undertaken ready for the next PEEL (Police, Effectiveness, Efficiency & Legitimacy) and inspection in April. Two Thematic Inspections will start imminently within North Wales Police and run until July 2019. These are the Older People and Child Protection Thematic Inspections. The HMIC don’t necessarily come into Force when undertaking Thematic Inspections but these inspections result in national actions. All Chief Officers have a specific portfolio each to which the Chief Inspector can escalate any issues arise. The Joint Governance Board and Strategic Executive Board also have oversight into the detail of recommendations arising out of the HMIC inspections. It was reported that the work undertaken by the Demand and Capability Manager in creating the Force Management Statement had not decreased the work needed before an inspection and that the work needed may have increased. Joint Audit Committee expressed concern and will discuss with the Chief Executive Officer outside of the meeting. Joint Audit Committee members will also rise at the Wales Joint Audit Committee meeting their concerns regarding the amount of work which needs to be undertaken in preparation for the HMIC inspections. Chief Finance Officer will place this item on the agenda for the Wales meeting.

ACTION 29 Chief Finance Officer to place workload for HMIC inspections on the

Wales Joint Audit Committee meeting agenda.

30. RISK REGISTER

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The Joint Audit Committee noted the high level summary of changes to risk recorded within the Force Risk Register. The Risk Lead from within the Joint Audit Committee had met with the Risk team before the meeting to discuss matters and ways of moving risk forward. It was suggested that a session is held at the March 2019 meeting to try and find a way of taking risk recording forward.

31. RISK MANAGEMENT IMPROVEMENT PLAN

The Joint Audit Committee noted the risk processes action plan received and recommended a few amendments.

It was decided that this would be discussed in greater detail within the session planned for the March 2019 Joint Audit Committee meeting.

ACTION 31 Personal Assistant to place on the closed session agenda for March.

32. REGISTER OF LEGAL TRANSACTIONS Joint Audit Committee noted the content of the Register of Legal Transactions. 33. ANY OTHER BUSINESS Potential Changes to Police Pensions

Chief Finance Officer reported that the discount rate has been reduced and this tends to happen when there is economic uncertainty and because the effect of the change in rate falls 100% on employers, this means that police forces are being asked to pay-in £417m per annum for this change. This amount will be discounted in 2019/20 and the effect is that North Wales Police would have to pay £1.98m in 2019/20, but in years thereafter the amount owing will be an extra £5.3m per year. This sum amounts to 7.5% of the grant received every year and the Police and Crime Commissioner and North Wales Police have voiced their concern. When discount rate has been higher police forces did not receive the benefits but now lower Government are passing the cost to forces. The only way that the Commissioner/North Wales Police can cover this deficit is to increase the Council tax or make cuts to front line services. The Council tax increase seems to be the only realistic option and the Commissioner/Chief Constable have already written to all Welsh Assembly Members and Members of Parliament asking for their support in questioning this rise. This matter will also be discussed at the briefing session arranged for Members in early January 2019. Education and Health are not subjected to these increases as they are bailed out by Government, Policing is not. Forces are already seeing the impact of this increase and are still trying to negotiate with the Treasury but are not hopeful.

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Joint Audit Committee asked that they be kept informed of any significant developments/outcomes and ask that their concerns are noted.

ACTION 33 CFO to keep Joint Audit members informed of any significant

developments/responses received. BRIEFING ON ETHICS Chief Inspector Audit and Inspection team presented a short synopsis of the work being undertaken around ethics. It was reported that a new Ethics Committee is being established. The new Chief Constable is very interested in this subject and is keen that an appropriate Chair is selected to take this matter forward. It is important that staff from across the organisation and from a variety of department and rank get involved and best that practice developed within other forces is adopted. Joint Audit Committee agreed that this was a good idea and asked that they be kept informed of any developments.

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JOINT AUDIT COMMITTEE ACTION LOG from 01.04.2017

New/Open actions from April 2018

MEETING DATE

MINUTE NO.

ACTION DESCRIPTION REQUIRED BY (DATE)

PERSON RESPONSIBLE

UPDATE OUTCOME

18.07.18 5a Draft Accounts - Chief Finance Officer to circulate Force Management Statement to Joint Audit Members.

Immediate CFO The Force Management Statement has been circulated by PA.

Closed.

5b Draft Accounts - Matt Sherrington to be invited to next Joint Audit Committee to update members on the Force Management Statement project.

Next Meeting

PA PA has invited Matthew Sherrington to September meeting. Matthew Sherrington providing briefing in the closed session of the meeting.

Closed.

6 Internal Audit Annual Report – Personal Assistant to share with Finance and Budgets Officer the e-mail sent by Joint Audit Member which highlight her concerns re overdue actions. Overdue actions to be identified in future reports.

Immediate PA PA has forwarded e-mail to Finance and Budgets Officer. Closed.

7a Terms of Reference – Personal Assistant to send the Treasury Management Strategy to Joint Audit Committee Members

Immediate PA PA has sent Treasury Management Statement to members. Closed.

7b Terms of Reference – frequency of assurance reviews on the Treasury Management system to be reviewed by the JACC with TIAA.

Immediate JAC/TIAA Arlingclose give independent treasury management advice/assurance to North Wales Police. TIAA to prepare for next JAC meeting proposal to help address JAC concerns. Internal Audit have scheduled audit on Treasury Management in this Financial Year

Closed

9a Internal Audit – Chief Finance Immediate CFO CFO will distribute these as they are received. Closed Page 9 of 266

MEETING DATE

MINUTE NO.


PERSON RESPONSIBLE

UPDATE OUTCOME

Officer to send all client briefing notes to the Joint Audit Committee.

9b Internal Audit - Finance and Budgets Officer to contact the Head of the Welsh Language Department to ascertain whether standards due for compliance on 30 March 2018 had been achieved and report back to the Joint Audit Committee.

Immediate Finance and Budgets Officer

The Force Welsh Language Group as the strategic Board in NWP continues to monitor compliance with the Welsh Language Standards. This is a standing item on the agenda of this meeting. It includes undertaking its own dip sampling and testing work of compliance with the standards. In the Management comments / implementation timetable sections of the ‘Report on the Compliance Review of the Welsh Language Standards – Chief Constable’ it was noted that the Force had challenged 7 standards in accordance with the processes and procedures established by the Commissioner. These were standards 21, 98, 99,100, 101, 119 and 125. The Welsh Language Commissioner (WLC) then postponed the imposition day for standards 21, 98, 99, 100 and 101 until 30 March 2018. This work has been completed and processes and procedures have been put in place by the relevant departments to ensure compliance with these standards. The WLC agreed to extend the imposition date for standards 119 and 125 until 30 September 2018. Work continues to take place by the relevant departments to ensure compliance by this date.

Closed

9c Internal Audit – Personal Assistant to send Purchasing Policy to members.

Immediate PA PA has circulated Purchasing Policy to members. Closed.

9d Internal Audit – Personal Assistant to send Final Internal Audit reports to members when issued by TIAA and to ensure that all are individually listed on the next meeting’s agenda

Immediate & future meetings

PA PA has circulated received TIAA audit reports to members and all listed on agenda.

Closed.

10 Review of Work Programme - Chief Finance Officer to include Force

Immediate CFO CFO has scheduled for future meetings. Closed

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MEETING DATE

MINUTE NO.


PERSON RESPONSIBLE

UPDATE OUTCOME

Management Statement and Business Continuity within Members development activities/briefing sessions.

11 Joint Governance Board – Agenda and minutes of the Joint Governance Board to be circulated to members and published on the Commissioner’s website.

Immediate PA Joint Governance Board minutes have been circulated and will be placed on website when minutes approved.

Closed

12 Register of Tenders, Contracts and Waivers - Chief Finance Officer to invite Head of Facilities to next Joint Audit Committee to provide briefing on the Estate Strategy and Implementation Plan.

November JAC meeting

CFO CFO will invite Head of Facilities to November Joint Audit Committee meeting to ensure that the Estate Strategy and Implementation Plan has been finalised.

Closed

13 Any other business – Interim DFR to ensure that Joint Audit Committee to receive any new/major changes to policies which have a financial implication.

Immediate DFR JAC receiving policies which are new/had major changes to polices and have a financial implication.

Closed.

20/09/2018 16a Final Statement of Accounts – Chief Constable and Police and Crime Commissioner to send letter of representation to the Wales Audit Office during week commencing 24th October 2018

Immediate PCC & CC Letter sent to Wales Audit Office from both parties. Closed

16b Final Statement of Accounts – Interim Director of Finance and Resources to raise the importance of providing timely information with the Payroll Department

Immediate DFR To be discussed with the new head of POD and early sight of audit plan to be shared with Payroll to ensure that they have sight of when information will be needed. This action to stay open until we come to prepare the final statement of accounts next year. Payroll have been advised and procedures changed to permit this.

16c Final Statement of Accounts - Wales Audit Office to send draft

Immediate and July 2019

WAO Place on July 2019 agenda. Ongoing.

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MEETING DATE

MINUTE NO.


PERSON RESPONSIBLE

UPDATE OUTCOME

Financial Statement Report and give presentation at July 2019 Joint Audit Committee detailing any changes

17a Treasury Management Outturn Report – Personal Assistant to send copy of the Medium Term Financial Plan to JAC members

Immediate PA Document sent to JAC members on 25th September. Closed.

17b Treasury Management Outturn Report - Chief Finance Officer to organise meeting for members of JAC to gain better understanding of the PFI contract

Before next meeting

CFO To be discussed at next JAC meeting. Closed

18a Internal Audit Report and Progress Report – Interim Director of Finance and Resources to make staff aware of recommendation to break down actions to enable better prioritisation of work

Immediate DFR Work ongoing and Finance and Budgets Officer overseeing actions arising from reports and breaking down if needed.

Closed.

18b Interim Audit Report and Progress Report – Chief Executive Officer to ascertain what the working “substantial change” meant.

Immediate CEO Joint Audit Committee members expressed that they would like to know what changes had been happening. CEO to take away and update JAC outside of the meeting. CEO sent e-mail explaining the “substantial change” within the POD structure to JAC 06.12.2018.

Closed

19a Risk Register – Risk and Business Continuity Officer to forward Risk Management Strategy and Draft Policy to JAC Members

Immediate Risk and Business Continuity Officer

Draft Risk Management Policy sent to all JAC members on 9th October 2018. Need to ensure that this is taken to final position and re-sent to members.

19b Risk Register – JAC members to send any templates that they have which they believe would be useful in updating the Risk Register to the Risk and Business Continuity Officer

ASAP JAC members JAC members have ideas they would like to share with staff and will discuss at closed session. Workshop to be convened at the end of March 2019 JAC meeting to discuss the Risk Register.

Closed

20a Joint Governance Board – Personal Assistant to circulate Governance Spreadsheet to Joint Audit Member

Immediate PA Document sent to JAC members on 28th September 2018. Closed

20b Joint Governance Board – Interim Immediate DFR Work ongoing. Head of ICT have sent JAC member various Closed

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MEETING DATE

MINUTE NO.


PERSON RESPONSIBLE

UPDATE OUTCOME

Director of Finance and Resources will investigate the use of a secure web-based system to save documents.

options. Both are to meet within the next few weeks to discuss way forward. Head of ICT and JAC member met on 10/12/18 to review the IT Strategy

22a AOB – GDPR – Chief Executive Officer to look into the sharing of information between North Wales Police and the Office of the Police and Crime Commissioner under the new GDPR.

Immediate CFO Information Sharing Agreement required between the Office of the Police and Crime Commissioner and North Wales Police. Head of Information Standards & Compliance was working on this. ISA/MOU is being drafted for the sharing of information between OPCC and NWP. It is proposed to have one document to complement the Policing Protocol. CEO does not believe that this is needed as sharing if information is covered by the Policing Protocol and legislation that covered the work of the Commissioner but Work is still progressing between both organisations. This work is being progressed.

22b AONB – Joint Audit Committee Attendees – Personal Assistant to Inform Joint Audit Committee Members of who will be attending the Joint Audit Committee meeting.

Ongoing PA Personal Assistant informed JAC members of attendees before meeting.

Closed

21/11/2018 26 Wales Audit Office – Annual Audit Report – Derwyn Owen to share his contact details with the Chair.

Immediate DO Contact details exchanged within the meeting. Closed

27 Internal Audit Charter – TIAA and Director of Finance and Resources to discuss appropriate ways of incorporating measures of quality into the Internal Audit Charter

Immediate DoFR TIAA have agreed to undertake a survey. Closed

28a Internal Audit – Summary Internal Controls Assurance (SICA) Report – TIAA to re-send briefing documents to Audit Members and ensure that all contact details are up-to-date to ensure that all future briefings are received

Immediate Internal Auditors

DoFR to check this has been done.

28b Internal Audit - Summary Internal Immediate Internal Audit plan for forthcoming year spread over the year, but Closed.

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MEETING DATE

MINUTE NO.


PERSON RESPONSIBLE

UPDATE OUTCOME

Controls Assurance (SICA) Report – Joint Audit Members/Management need to ensure the even distribution of audits through the year

Auditors/ CFO/ DoFR

also takes into account operational issues.

28c Internal Audit – Summary Internal Controls Assurance (SICA) Report – Management to ensure that realistic deadlines are placed on action arising from audit reports at closing meetings.

Immediate Internal Auditors/ CFO/ DoFR

Finance and Budgets Officer liaising with action owners to ensure reasonable timelines set. DoFR also informed of all overdue actions.

Closed

28d Assurance Review – Budgetary Controls – Head of Finance to send copy of the Value for Money Framework to JAC members

Immediate Head of Finance

Distributed to CFO to JAC Members Closed.

29 HMIC Updates - Chief Finance Officer to place workload for HMIC inspections on the Wales Joint Audit Committee meeting agenda.

Immediate CFO CFO has placed on the Wales Joint Audit Committee agenda. Closed

31 Risk Management Improvement Plan - Personal Assistant to place on the closed session agenda for March.

Next meeting PA On March 2019 Agenda. Closed

33 Any Other Business – Potential Changes to Police Pensions – CFO to keep Joint Audit members informed of any significant developments/responses received.

Ongoing CFO DoFR circulated to JAC members statement received from The Chief Secretary to the Treasury outlining an associated issue regarding legal challenges to the transitional arrangements for the new scheme. Implications are not yet fully clear and members will be updated at the next meeting.

Closed since April 2018

MEETING DATE

MINUTE NO.


PERSON RESPONSIBLE

UPDATE OUTCOME

20.09.17 183a & 194a

Final Statement of Accounts, ISA 260 - Joint Audit Committee meeting to be held in July instead of September

Meeting schedule for 2019

PA Noted and will be incorporated into the timetable of meetings for 2019. Noted and will timetable into next year’s meeting dates.

Schedule produced and included at end of minutes for information.

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MEETING DATE

MINUTE NO.


PERSON RESPONSIBLE

UPDATE OUTCOME

in 2019. 2019 meeting schedule and work programme on the agenda July 2018 JAC meeting.

ACTION CLOSED.

186 Risk Management Report – report by Risk and Business Continuity Co-ordinator. Director Finance and Resources to organise a demonstration of the risk management software to the Joint Audit Committee once purchased.

Once software purchased

Super Corporate Services

Update provided on 22 November 2017 that the software had not yet been purchased. New software has not been purchased and have gone back to the drawing-board to see if what they require can be achieved through SharePoint. Some of the software packages being investigated were cost prohibitive and a very complex piece of software.

Software no longer being pursued because of cost. SharePoint now to be used. Need to redefine requirement which will be action for Head of Change. ACTION CLOSED.

187b Internal Audit Report and Progress Report - Compliance Review of Eastern Area – Command Unit. Chief Finance Officer to distribute internal audit reports to Joint Audit Committee Members as soon as they are received.

Immediate CFO Reports distributed as soon as completed reports received. Reports being distributed immediately. JAC members state that they have not been receiving any of these reports as they are published. TIAA will update their distribution list to include JAC members once the reports have been finalised. Check if new JAC members are happy to receive in the same format.

Included within the papers for JAC meeting. ACTION CLOSED.

20.11.17

195 Internal Audit – Compliance Review of Counter Fraud – Head of Procurement to contact the web team to produce a splash page for the intranet to highlight the Anti-Fraud and Corruption and Whistleblowing policies and where they are kept.

Immediate Head of Procurement

Request has been sent to the web team and this is on their list of things to do. Attached e-mail sent to all staff for information.

Operation Shield - If you see something sa

ACTION CLOSED

20.03.2018 204a Internal Audit Report and Progress Report – Summary Internal Controls Assurance (SICA) Report – TIAA to include table within the report showing progress in releasing finalised reports.

Ongoing TIAA Details included within the SICA table in Appendix A.

ACTION CLOSED.

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MEETING DATE

MINUTE NO.


PERSON RESPONSIBLE

UPDATE OUTCOME

204b Internal Audit Report and Progress Report – Assurance Review of the General Ledger Arrangements – TIAA to clarify whether the control account or the suspense account was examined; this will determine whether the account needs to be regularly reconciled or cleared.

Next Meeting (18.07.18)

TIAA Followed-up and was a sales ledger code. On Agenda. ACTION CLOSED.

204c Internal Audit Report and Progress Report – Compliance Review of Welsh Language Standards – Police and Crime Commissioner – JAC member to send examples of inconsistences between the use of the Welsh and English language on social media to the CEO.

Immediate Eira Bedford E-mail sent to remind member of action. E-mail received from JAC member with example of inconsistences between the use of English and Welsh on social media. Response from Welsh Language.

Received. ACTION CLOSED.

204d Internal Audit Report and Progress Report – Assurance Review of ICT Cyber Security – TIAA to ask Auditor responsible for the review that “reasonable” assurance was the correct level of assurance for this review.

Immediate TIAA Professional judgement of auditor who carried out the audit is that assurance level is correct.

ACTION CLOSED.

204e Internal Audit Report and Progress Report – Assurance Review of Contract Management – Building Service Project (Llandudno Police Station) – Post Project appraisal meetings need to be undertaken and presented to the Transformation and Corporate Improvement Board

Immediate Stephen Roberts, Head of Facilities

These meetings are now being undertaken. ACTION CLOSED.

204f Internal Audit Report and Progress Report – Assurance Review of Contract Management – Building Service Project (Llandudno Police Station) – TIAA to ask TIAA Director

Immediate TIAA Professional judgement of auditor who carried out the audit is that assurance level is correct.

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MEETING DATE

MINUTE NO.


PERSON RESPONSIBLE

UPDATE OUTCOME

responsible for the review if reasonable assurance was the correct level of assurance

205 Draft Internal Audit Annual Plan – Chief Finance Officer to arrange meeting with Chair of JAC to discuss handover of duties to new JAC

Immediate Chief Finance Officer

Included within the Internal Audit papers ACTION CLOSED.

208 Joint Governance Board and Draft Annual Governance Statement – Chief Finance Officer to change working under 3.5 of the Annual Governance Statement

Immediate CFO Completed. On Agenda. ACTION CLOSED.

Abbreviation Key CC Chief Constable CEO Chief Executive Officer (OPCC) CFO Chief Finance Officer (OPCC) DFR Director of Finance and Resources (NWP) Head of Finance Guto Edwards Head of Procurement Patricia Strong HMICFRS Her Majesty's Inspectorate of Constabulary and Fire & Rescue Services JAC Joint Audit Committee NWP North Wales Police OPCC Office of the Police and Crime Commissioner PA Personal Assistant to CEO and CFO PCC Police and Crime Commissioner PSD Professional Standards Department (NWP) TIAA Internal Audit WAO Wales Audit Office

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2018/19

The Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police

Summary Internal Controls Assurance (SICA) Report

March 2019

FINAL

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Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police Summary Internal Controls Assurance (SICA) Page 1

INTRODUCTION

1. This summary report provides the Joint Audit Committee with an update on the progress of our work as at 11th March 2019

PROGRESS AGAINST THE 2018/19 ANNUAL PLAN

2. Our progress against the Annual Plan for 2018-19 is set out in Appendix A

INTERNAL CONTROL FRAMEWORK

3. The key strategic governance, risk management and control matters identified from the six reviews completed since the previous Joint Audit Committee in November 2018 from the 2018-19 annual plan are summarised below. There are no issues arising from these findings which would require the annual Head of Audit Opinion to be qualified, although it should be noted that the draft Payroll report is currently providing a limited assurance opinion.

Key Strategic Governance, Risk Management and Control Matters

Review High Level

Counter-Fraud Procurement The required checks on suppliers in relation to the IR35 legislation have not been routinely undertaken and recorded.

• Procedures need to be put in place to check suppliers as they are set up and for the results be consistently recorded to maintain a robust audit trail.

• The Criminal Finances Act 2017 is not referenced within relevant policies.

• Although no irregularities were sighted, the audit trail for the changing of suppliers’ bank details remains weak as highlighted in TIAA’s Creditors review in 2017/18.

• Sample testing identified no issues in relation to duplicate payments.

Treasury Management Treasury Management processes and actions were operating in accordance with the approved Treasury Management Strategy.

• Appropriate arrangements are in place for controlling the investment and borrowing arrangements.

• The Treasury Management Strategy for 2018/19 was not approved by the Strategic Executive Board until the 17th April 2018.

General Ledger Robust processes and controls are in place for data entered and transferred onto the general ledger including defined segregation of duties and reconciliation procedures.

• Control and suspense accounts are monitored and cleared by the Finance Team on a timely basis.

• Virements and Journals are appropriately authorised and justified.

• The Force opted to prepare its Statement of Accounts for 2017/18 a month earlier than previous years in preparation for the early closure requirement for 2018/19 onwards.

Pensions The Force has appropriate pension arrangements in place, and is providing information to the pension provider, XPS, in a timely manner.

• The Pensions Payroll HR Service Manual need to be updated and finalised.

• There were anomalies with the pension payments of one member of staff, as a result of a transfer in post within the Force.

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Review High Level

Capital Programme The Force has comprehensive arrangements in place for the monitoring of the Capital Programme 2018/19 with governance and reporting arrangements involving all key stakeholders which are robust.

• The Capital Programme is developed through informed projections and forecasting.

• Regular monitoring and reporting of the Capital Programme is evident.

Expenses and Additional Payments

There are generally sound arrangements in place for authorisation and payment of allowances and expenses.

• Expenses are often authorised with no receipts attached.

• A control needs to be put in place to avoid employees holding on to claims for several months before submitting.

• No evidence was available that the Force holds details of individuals’ car insurance documents.

• Guidance needs to be provided to staff on extracting data from the expenses system.

EMERGING GOVERNANCE, RISK AND INTERNAL CONTROL RELATED ISSUES

4. We have identified no emerging risks which could impact on the overall effectiveness of the governance, risk and internal control framework of the organisation.

AUDITS COMPLETED SINCE THE LAST REPORT TO COMMITTEE

5. The table below sets out details of audits finalised since the previous meeting of the Joint Audit Committee in November 2018.

Key Dates Number of Recommendations

Review Evaluation Draft issued Responses Received Final issued 1 2 3 OE

Counter-Fraud Procurement Limited 23 & 30/10/2018 15/11/2018 19/11/2018 2 2 2 0

Treasury Management Substantial 22 and 30/11/2018 30/11/2018 05/12/2018 0 0 1 1

General Ledger Substantial 14 & 17/11/2018 11/01/2019 14/01/2019 0 0 0 0

Pensions Reasonable 14/12/2019 24/01/2019 29/01/2019 0 2 2 0

Capital Programme Substantial 14/02/2019 15/02/2019 19/02/2019 0 0 0 0

Expenses and Additional Payments Reasonable 12/02/2019 28/02/2019 05/03/2019 0 5 2 0

We have issued two further documents:

• Internal Audit Charter 2018/19; and

• Welsh Language Standards Comparison for the Welsh Forces. Page 20 of 266


CHANGES TO THE ANNUAL PLAN 2018/19

6. As agreed we used four days from contingency for the review of Treasury Management. Other operational changes to dates are noted in Appendix A.

CHANGES TO THE INTERNAL AUDIT STRATEGY

7. The Annual Plan contains the following changes to the plan set out in the Internal Audit Strategy for 2018/19.

Review In strategic plan for 2018/19 Change made Rationale for the change

Treasury Management Not included Four days allocated to the review from the contingency budget.

The Joint Audit Committee requested that an annual review of Treasury Management be included within the plan.

Rapid Access Prescribing Not included 5 days A scope has been issued to the Chief Executive of the Office of the Police and Crime Commissioner for approval. The work is planned to take place in March 2019 subject to approval and third party availability.

FRAUDS/IRREGULARITIES

8. We have not been advised of any frauds or irregularities in the period since the last summary report was issued. A summary of recent briefings on developments on which TIAA have issued client briefing notes in risk or governance is given at Appendix C.

LIAISON

9. Liaison with external audit: We maintain ongoing communication with the Wales Audit Office.

PROGRESS ACTIONING PRIORITY 1 RECOMMENDATIONS

10. We have made two Priority 1 recommendations (i.e. fundamental control issue on which action should be taken immediately) in respect of the Counter Fraud Procurement review since the previous JAC. Our follow up work has confirmed that the agreed actions have been taken (See Appendix B)

OTHER MATTERS

11. We have issued the following briefing updates and fraud digests since the last audit committee:

• Data Protection Newsletter – Issue 1 (December 2018)

• Audit Committee Newsletter (January 2019)

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RESPONSIBILITY/DISCLAIMER 12. This report has been prepared solely for management's use and must not be recited or referred to in whole or in part to third parties without our prior written

consent. The matters raised in this report not necessarily a comprehensive statement of all the weaknesses that exist or all the improvements that might be made. No responsibility to any third party is accepted as the report has not been prepared, and is not intended, for any other purpose. TIAA neither owes nor accepts any duty of care to any other party who may receive this report and specifically disclaims any liability for loss, damage or expense of whatsoever nature, which is caused by their reliance on our report.

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Appendix A

Progress against the Annual Plan for 2018/19

System Planned Quarter Days Revised

Quarter Current Status Comments

Governance – Performance Management 1 10 1 Final report issued 4th June 2018 Reported to July JAC

Risk Management – Mitigating Controls 1 4 1 Final report issued 4th June 2018 Reported to July JAC

Fleet Management - Fuel 1 6 1 Final report issued 11th June 2018 Reported to July JAC

Western Command Unit 1 8 1 Final report issued 28th June 2018 Reported to September JAC

Commissioner’s Grants 1 6 1 Final report issued 28th June 2018 Reported to September JAC

Vetting 2 6 1 Final report issued 9th July 2018 Reported to September JAC

Governance – Health and Safety Management 1 10 1 Final report issued 20th July 2018 Reported to September JAC

Estate Management - Strategy 2 6 2 Final report issued 7th August 2018 Reported to September JAC

HR Management Strategy 1 7 2 Final report issued 14th August 2018 Reported to September JAC

Collaborative Project – Force Management Statements 1 4 2 Final report issued 21st August 2018 Reported to September JAC

Budgetary Control 2 6 3 Final report issued 9th October 2018 Reported to November JAC

Counter Fraud - Procurement 3 6 3 Final report issued 19th November 2018 For presentation to March JAC

Treasury Management - 4 3 Final report issued 5th December 2018 For presentation to March JAC - Additional audit using contingency days.

General Ledger 3 6 3 Final report issued 14th January 2019 For presentation to March JAC

Pensions 3 8 3 Final report issued 29th January 2019 For presentation to March JAC

Capital Programme 3 8 3 Final report issued 19th February 2019 For presentation to March JAC

Expenses and Additional Payments 3 8 3 Final report issued 5th March 2019 For presentation to March JAC

Payroll 3 10 3 Draft report issued 12th December 2018 Additional work undertaken and a revised draft

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System Planned Quarter Days Revised

Quarter Current Status Comments

report issued w/c 11th March 2019

Follow Up 4 6 4 Planned for March 2019 APM issued

GDPR Compliance Audit 2 6 3 Fieldwork completed

Contract Management 2 6 3 Fieldwork completed

ICT Network Security 2 8 2 Fieldwork in progress Audit has commenced and arrangements are being agreed to complete the review

ICT Security – Internet/Email/Social Media 2 8 2 Fieldwork in progress Audit has commenced and arrangements are

being agreed to complete the review

Rapid Access Prescribing - 5 4 Additional audit requested by OPCC Scope has been drafted and is awaiting final confirmation.

Contingency - 2 - 4 days of the original 6 have been allocated to the Treasury Management Audit

Liaison with WAO 1 - 4 3 n/a

2018/19 Annual Plan 1 6 Final plan issued

2018/19 Annual Report 4 4

Audit Management & Planning 1 - 4 18 Ongoing

KEY: = To be commenced

= Site work commenced

= Draft report issued

= Final report issued

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Appendix B

Recommendations – Priority 1 Only

Audit Report: Counter Fraud – Procurement - Report Issued: 19th November 2018

Rec. Risk Area Finding Recommendation Priority Management Comments

Implementation Timetable

(dd/mm/yy)

Responsible Officer

(Job Title)

5 Compliance Detailed guidance was circulated to the Purchasing & Creditors Team in March 2017 on how to implement the arrangements to satisfy the requirements of IR35. The Team was required to check the status of over 700 suppliers. A check of the documentation maintained in relation to this work identified that the evidence to support the process undertaken by staff in following the guidance needs to be more robust.

A robust audit trail be maintained of the process followed in relation to the Off-Payroll Working in the Public Sector - IR35 arrangements to demonstrate that appropriate checks have been made.

1 Work has commenced to complete the original status checks; furthermore all new suppliers that were set up after March 2017 will also undergo the same checks. A dedicated resource is in place to action these status checks. It is important to note that checks have been carried out on new suppliers since March 2017, however, they have not been recorded correctly and as such will be the subject of spot checks. The original database held on the G drive in SSF will be refined and updated. The filing system for completed IR35 checks is already in place and will be updated every time a response/completed IR35 is received. Update as at 11th March 2019 Action taken has been confirmed through internal audit follow up review. The recommendation has been implemented.

Immediate SSF Manager

6 Compliance Since the initial check of suppliers in March 2017, the Purchasing & Creditors Team is required to perform the same check on each potential IR35 supplier which has been set up since. This has not been routinely happening.

Spot checks be introduced to ensure staff are following the IR35 checks which they were instructed to undertake, with duties allocated accordingly.

1 Spot checks are carried out by the SSF team leader and Supervisor to ensure that all checks are carried out accurately in a timely manner. Update as at 11th March 2019 Action taken has been confirmed through internal audit follow up review. The recommendation has been implemented


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Appendix C

Briefings on Developments in Governance, Risk and Control Summary of Recent Client Briefing Notes (CBNs)

TIAA produce regular briefing notes to summarise new developments in Governance, Risk, Control and Counter Fraud which may have an impact on our clients. These are shared with clients and made available through our Online Client Portal. A summary list of those CBNs issued since the last Joint Audit Committee which may be of relevance to North Wales Police is given below. Copies of any CBNs are available on request from your local TIAA team.

Date Issued CBN Ref Subject Status TIAA Comments

21/12/2018 CBN - 18048 All – Breach Reporting – Lessons Learned For Possible Action Audit Committees and Boards/Governing Bodies are advised to review their breach reporting arrangements to ensure that they fully comply with the requirements of the GDPR.

20/12/2018 CBN – 18047 All - Confirmation of Payee Names against Bank Account Details to be Introduced

For Possible Action Audit Committees and Boards/Governing Bodies are advised to note this new control measure to help protect against the risk of fraud. Assurance should be sought from finance teams that controls surrounding this fraud risk are operating effectively.

20/12/2018 CBN - 18046 All - ‘Public Concern at Work’ changes name to ‘Protect’

For Information Audit Committees and Boards/Governing Bodies are advised to note the new name. Organisations which include reference to the charity within their whistleblowing policies and procedures should update their documentation to reflect the change.

17/12/2018 CBN - 18045 All – Government Counter Fraud Profession Launched

For Information Audit Committees and Boards/Governing Bodies are advised to note the government’s increased efforts to tackle fraud risks.

17/12/2018 CBN - 18044 All - Embedding National Fraud Initiative (NFI) into your Fraud Risk Management Framework

For Information Audit Committees and Boards/Governing Bodies are advised to note the NFI’s scope and how to maximise the benefits it offers.

10/12/2018 CBN - 18043 All – Free Cartel Screening Tool from CMA For Possible Action Clients are advised to consider implementing the free screening tool within their tender process to reduce the risk of illegal cartel behaviour.

22/11/2108 CBN_18041 All – Payslip Law Changes April 2019 For Possible Action Audit Committees and Boards/Governing Bodies are advised to obtain assurance that their payroll functions have made appropriate preparations ready for changes to Payslip Law in April 2019.

21/11/2018 CBN_18039 All – ICO Good Practice and Areas of Concern For Possible Action Boards and Governing Bodies are advised to note the ICO guidance, and seek assurance that the organisation’s GDPR practices incorporate its findings.

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Date Issued CBN Ref Subject Status TIAA Comments

21/11/2018 CBN_18038 All – ICO Guidance on Encryption and Passwords For Possible Action Audit Committees and Boards/Governing Bodies are advised to take note of the encryption and password guidance and ensure systems and devices suitably reflect the guidance. Organisations providing secure web based services for their staff and customers may be particularly interested. TIAA’s specialist ICT audit team can provide a comprehensive security assessment of key ICT operations and systems that may require review.

21/11/2018 CBN_18037 All – Considerations for Outsourcing to the Cloud For Possible Action Audit Committees and Boards/Governing Bodies are advised to ensure that any existing or planned cloud or third party ICT service procurement considers the FCA guidance and adequately addresses any apparent risks. Where organisations have concerns that their processes may not be compliant, they may wish to seek professional assistance. TIAA’s specialist ICT data security auditors have appropriate skills and experience in these areas, and can undertake detailed assessments of relevant processes to help reduce the risks of project / procurement management, data security incidents and service continuity.

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2018/19

Police and Crime Commissioner North Wales and Chief Constable North Wales Police

Assurance Review of Treasury Management

December 2018

FINAL

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Police and Crime Commissioner North Wales and Chief Constable North Wales Police Assurance Review of Treasury Management Page 1

Executive Summary

OVERALL ASSURANCE ASSESSMENT OVERALL CONCLUSION

Treasury Management processes and actions were operating in accordance with the approved Treasury Management Strategy.

Appropriate arrangements are in place for controlling the investment and borrowing arrangements.

The Treasury Management Strategy for 2018/19 was not approved by the Strategic Executive Board until the 17th April 2018.

SCOPE ACTION POINTS

The review considered the arrangements for controlling the investment and borrowing arrangements; compliance with the organisation’s overall policy; banking arrangements; reconciliations and the reporting to committee.

The scope of the review did not include consideration of the appropriateness of any individual financial institution or broker or of individual investment decisions made by the organisation.

Urgent Important Routine Operational

0 0 1 1

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PRIORITY GRADINGS

1 URGENT Fundamental control issue on which action should be taken immediately. 2 IMPORTANT

Control issue on which action should be taken at the earliest opportunity.

3 ROUTINE Control issue on which action should be taken.


Management Action Plan – Priority 1, 2 and 3 Recommendations

Rec. Risk Area Finding Recommendation Priority Management Comments Implementation

Timetable (dd/mm/yy)

Responsible Officer

(Job Title)

1 Directed The Treasury Management Strategy for 2018/19 was presented to the Police and Crime Commissioner’s Strategic Executive Board (SEB) for approval on the 17th April 2018. It had previously been presented to the Joint Audit Committee as a draft document on the 20th March 2018. Approval of the Treasury Management Strategy is a statutory responsibility and is required prior to setting the budget and council tax precept for the year. The Head of Finance advised that no SEB meetings were held between January and March 2018.

Arrangements be made for the Treasury Management Strategy to be approved by the Police and Crime Commissioner (PCC) outside of the Strategic Executive Board (SEB) meeting if the timings of meetings do not coincide, so that approval occurs prior to the setting of the budget and council tax precept.

3 The Treasury Management Strategy will be presented to JAC as part of the Capital Strategy on the 21/03/2019. Once agreed it will need a decision notice from the PCC before the end of March to formalise agreement.

31/03/19 Head of Finance /PCC’s CFO

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ADVISORY NOTE

Operational Effectiveness Matters need to be considered as part of management review of procedures.


Operational Effectiveness Action Plan

Ref Risk Area Item Management Comments

1 Directed The Joint Audit Committee (JAC) and Strategic Executive Board (SEB) work programmes be reviewed for giving consideration to the practicality of reviewing and approving the Treasury Management Strategy earlier in the year.

This will not be possible as the Capital Strategy, incorporating the Treasury Management Strategy and Capital programme need to be drafted following the budget setting process which ends in January.

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Police and Crime Commissioner North Wales and Chief Constable North Wales Police Assurance Review of Treasury Management

Page 4

Detailed Findings

Introduction

1. This review was carried out in October and November 2018, in addition to the annual plan at the request of the Joint Audit Committee. Four days were allocated to the review from the contingency budget. Based on the work carried out an overall assessment of the overall adequacy of the arrangements to mitigate the key control risk areas is provided in the Executive Summary.

Background

2. Robust Treasury Management controls ensure that all borrowings and investments are appropriately managed, including the use of investment and lending organisations that meet the required financial risk assessment ratings to ensure that all funds are appropriately managed and to ensure that sufficient cash is available to meet all expenditure commitments. North Wales Police presents its ‘Treasury Management Strategy Statement, Investment Strategy and Prudential Indicators’ to the Strategic Executive Board (SEB) on an annual basis for approval by the Police and Crime Commissioner as required by the Chartered Institute of Public Finance and Accountancy’s Code of Practice on Treasury Management (The Code).

Materiality

3. As at the 31st March 2018 the investment and debt portfolio for the Office of the Police and Crime Commissioner North Wales and Chief Constable North Wales Police consisted of £20,976,316 total investments and total gross external debt of £11,314,286.

Key Findings & Action Points

4. The key control and operational practice findings that need to be addressed in order to strengthen the control environment are set out in the Management and Operational Effectiveness Action Plans. Recommendations for improvements should be assessed for their full impact before they are implemented.

Scope and Limitations of the Review

5. The review considered the arrangements for controlling the investment and borrowing arrangements; compliance with the organisation’s overall policy; banking arrangements; reconciliations and the reporting to committee. The scope of the review did not include consideration of the appropriateness of any individual financial institution or broker or of individual investment decisions made by the organisation.

6. The definition of the type of review, the limitations and the responsibilities of in regard to this review are set out in the Annual Plan.

Disclaimer

7. The matters raised in this report are only those that came to the attention of the auditor during the course of the internal audit review and are not necessarily a comprehensive statement of all the weaknesses that exist or all the improvements that might be made. This report has been prepared solely for management's use and must not be recited or referred to in whole or in part to third parties without our prior written consent. No responsibility to any third party is accepted as the report has not been prepared, and is not intended, for any other purpose. TIAA neither owes nor accepts any duty of care to any other party who may receive this report and specifically disclaims any liability for loss, damage or expense of whatsoever nature, which is caused by their reliance on our report.

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Page 5

Risk Area Assurance Assessments

8. The definitions of the assurance assessments are:

Substantial Assurance There is a robust system of internal controls operating effectively to ensure that risks are managed and process objectives achieved.

Reasonable Assurance The system of internal controls is generally adequate and operating effectively but some improvements are required to ensure that risks are managed and process objectives achieved.

Limited Assurance The system of internal controls is generally inadequate or not operating effectively and significant improvements are required to ensure that risks are managed and process objectives achieved.

No Assurance There is a fundamental breakdown or absence of core internal controls requiring immediate action.

Acknowledgement

9. We would like to thank staff for their co-operation and assistance during the course of our work.

Release of Report

10. The table below sets out the history of this report.

Date draft report issued: 22nd November 2018

Date revised draft issued: 30th November 2018

Date management responses rec’d: 30th November 2018

Date final report issued: 5th December 2018

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Page 6

11. The following matters were identified in reviewing the Key Risk Control Objective:

Directed Risk: Failure to direct the process through approved policy & procedures.

11.1 TIAA’s previous review of Treasury Management at North Wales Police was undertaken in October 2017 and provided an overall grading of Substantial Assurance with no recommendations.

11.2 The Police and Crime Commissioner (PCC) is required to comply with the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Code of Practice on Treasury Management in Public Services (the Code) and the CIPFA Prudential Code for Capital Finance in Local Authorities (the Prudential Code). Both codes form part of the Regulations which have been issued under the Local Government Act 2003, and require local authorities to determine the Treasury Management Strategy Statement (TMSS) and Prudential Indicators (PIs) on an annual basis. North Wales Police's TMSS also includes the Annual Investment Strategy (AIS) which is a requirement of the Welsh Government’s Investment Guidance.

11.3 CIPFA published updated versions of its Codes in late December 2017. Until then it was a requirement to formally adopt the Code, however PCCs are now required by law to have regard to the Code.

11.4 The main change to the Prudential Code is to include the ‘Capital Strategy’ covering capital expenditure and financing and treasury management within one document. This is an arrangement which was already in place at North Wales Police.

11.5 The Head of Finance and the Finance Control Accountant will be attending a seminar with Arlingclose – the Force’s Treasury Management advisors – on the 8th November 2018. This is a seminar which Arlingclose will hold in Conwy for its clients in order to discuss the new requirements of the Codes and to receive guidance in their regard.

11.6 The joint Financial Regulations for the Police and Crime Commissioner and the Chief Constable (reviewed in and approved in July 2018) include a section on Treasury Management and Banking Arrangements (section 3.6) which states that it is important that the PCCs money is handled properly, in a way that balances risk with return, but with prime consideration being given to the security of the capital sum.

11.7 As stated in the Financial Regulations, the responsibilities of the PCC and Chief Financial Officer (CFO) include the following in relation to Treasury Management:

• PCC: To adopt the CIPFA Treasury Management in the Public Services Code of Practice and cross-Sectorial guidance (the TM Code); To approve the annual Treasury Management Strategy and Investment Strategy; To receive reports on treasury management policies, practices and activities, including as a minimum an annual strategy and plan in advance of the year - a mid-year review and an annual report after the year-end, in the form prescribed in the Treasury Management Practices (TMPs).

• CFO: To implement and monitor treasury management policies and practices in line with the CIPFA Code and other professional guidance; To ensure treasury management is executed and administered in accordance with the CIPFA code and the approved Treasury Management Strategy and Investment Strategy; To prepare reports on the PCC’s treasury management policies, practices and activities, including as a minimum an annual strategy, performance monitoring reports and an annual report; To arrange borrowing and investments in compliance with the CIPFA Code and to ensure that all investments and borrowings are made in the name of the PCC.

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Page 7

11.8 The Treasury Management Strategy is reviewed on an annual basis, and has to be agreed each year by the PCC. As the Joint Audit Committee has responsibility for the scrutiny of treasury management policies and activity, the Strategy is shared with the Joint Audit Committee each year for discussion and comment before approval is sought by the PCC.

11.9 The Treasury Management Strategy for North Wales Police was presented as a document titled the ‘Joint Report of the Chief Financial Officers of the Police Crime Commissioner and Chief Constable for North Wales - Treasury Management Strategy Statement and Investment Strategy and Prudential Indicators 2018-19 to 2022-23’ to the PCC’s Strategic Executive Board for approval on the 17th April 2018. It had previously been presented as a draft document on the 20th March 2018 to the Joint Audit Committee. Approval of the Treasury Management Strategy is a statutory responsibility and is required prior to setting the budget and council tax precept for the year. The Head of Finance advised that no SEB meetings were held between January and March 2018.

Recommendation: 1 Arrangements be made for the Treasury Management Strategy be approved by the Police and Crime Commissioner (PCC) outside of the Strategic Executive Board (SEB) meeting if the timings of meetings do not coincide, so that approval occurs prior to the setting of the budget and council tax precept. Priority 3

11.10 Treasury Management reviews at TIAA’s other Police clients have identified that the review and approval process of the Treasury Management Strategy is often undertaken earlier in the year, for example at the December / winter meetings.

Operational Effectiveness Matter: 1

The Joint Audit Committee (JAC) and Strategic Executive Board (SEB) work programmes be reviewed for giving consideration to the practicality of reviewing and approving the Treasury Management Strategy earlier in the year.

11.11 As stated in the current Treasury Management Strategy, there were no fundamental changes to the strategy for 2018/19 and treasury activities are still prioritised in terms of security, liquidity and yield in that order.

11.12 The Prudential Indicators for the North Wales Police and Crime Commissioner, noted in the Treasury Management Strategy, are as follows:

• Gross Debt and the Capital Financing Requirement: Gross external borrowing must not (except in short term) exceed the total of capital financing requirement in the preceding year plus the estimates of any additional increases to the capital financing requirement for the current and next two financial years.

• Estimates of Capital Expenditure: Ensuring that the level of proposed capital expenditure remains within affordable limits – the Force’s Capital Programme.

• Ratio of Financing Costs to Net Revenue Stream: An indicator of affordability and highlights the revenue implications of existing and proposed capital expenditure by identifying the proportion of the revenue budget required to meet financing costs.

• Capital Financing Requirement (CFR): Measures the underlying need to borrow for a capital purpose. The calculation of CFR is taken from the amounts held in the Balance Sheet relating to capital expenditure and how it is financed.

• Actual External Debt: Obtained directly from the balance sheet. It is the closing balance for actual gross borrowing plus other long term liabilities. It is measured in a manner consistent for comparison with the Operational Boundary and Authorised Limit. As at 31/03/2017 Actual External Debt was £13.943m.

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Page 8

• Authorised Limit and Operational Boundary for External Debt: The Authorised Limit sets the maximum level of external borrowing on a gross basis for the Commissioner. Measured on a daily basis against all external borrowing items on the Balance Sheet. The Operational Boundary links directly to the estimates of the CFR and estimates of other cash flow requirements. Based on the same estimates as the Authorised Limit reflecting the most likely, prudent but not worst case scenario but without the additional headroom for unusual cash movements included within the Authorised Limit.

• Upper Limits for Fixed Interest Rate Exposure: Allow the extent of exposure to changes in interest rates to be managed. Calculated based on limits of the net principal outstanding sums. The upper limit for variable rate exposure has been set to ensure that there is no exposure to interest rate rises which could adversely impact on the revenue budget.

• Maturity Structure of Fixed Rate borrowing: Highlights the existence of any large concentrations of fixed rate debt needing to be replaced at times of uncertainty over interest rates and is designed to protect against excessive exposures to interest rate changes in any one period, in particular in the course of the next 10 years. Calculated as the amount of projected borrowing that is fixed rate maturing in each period as a percentage of total projected borrowing that is fixed rate.

• Credit Risk: Security, liquidity and yield in that order, are the primary considerations when making investment decisions.

• Upper Limit for total principal sums invested over 364 days: To contain exposure to the possibility of loss that may arise as a result of having to seek earl repayment of the sums invested.

11.13 A risk has been identified in the Force’s corporate risk register which relates to Treasury Management and remains in the risk register since the previous Treasury Management review:

Risk Title Risk Description Risk Type

The risk of loss of money invested on the money market.

The risk of loss of large sums of money invested on the money market, this is a risk due to the large size of the transactions and the risk of any financial institution failing. Static; three-monthly review

11.14 The target end date for the risk is the 31st March 2019, revised from the 31st March 2018. The risk was last reviewed on the 5th September 2018 and is due the next review on the 5th December 2018.

11.15 The Head of Finance, reporting to the Director of Finance and Resources, has day-to-day responsibility for the treasury management arrangements, supported by a Finance Control Accountant and a Treasury & Finance Officer. Two other members of staff, another Treasury and Finance Officer and a Finance & Budget Officer, fulfil the duties of the Treasury & Finance Officer in their absence.

Compliance Risk: Failure to comply with approved policy and procedure leads to potential losses.

11.16 The Code requires an organisation to report on the following:

• an annual treasury strategy and investment strategy before the commencement of the new financial year;

• an annual treasury management activity report before the 30th September after the year end to which it relates; and

• a mid-year monitoring report.

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Page 9

11.17 The Treasury Management Outturn Report 2017-18 was presented to the Joint Audit Committee at its meeting on the 20th September 2018, for information and comments. The report was further submitted to the Strategic Executive Board on the 17th October 2018 with the recommendation for the Police and Crime Commissioner to note the contents of the report and the treasury management activity in 2017-2018, and note that no limits or indicators were breached. The Operational Effectiveness Matter presented within the Directed Risk section of this report refers to the reconsideration of the work programme to reflect the reporting requirements of the Code.

11.18 The mid-year monitoring report for 2018/19 is currently being prepared.

11.19 The Treasury & Finance Officer maintains a spreadsheet which details forecast cash in-flows and out-flows. Those are entered in the first instance as estimates and are overwritten by actual values once they become known. Actuals are identified by logging onto the online banking system each morning to determine the projected end of day bank balance for the previous day. This, totalled with the On Call account balance, gives the funds available for investment. A recommended investment profile (each bank, sum and supporting comments) is then completed to be authorised by two of the signatories. All in and out-flows are recorded in Logotech.

11.20 The authorised signatories list available from Finance includes a copy of each signatory along with each’s printed name and job title. The list was current at the time of review.

11.21 A targeted level of £10m accessible investment has been set and included within the Treasury Management Strategy to manage liquidity, borrowing and investments in a planned approach. This is incorporated into the Treasury & Finance Officer’s cash flow forecast. An audit trail of all decisions made in relation to investments is maintained via a spreadsheet which is attached to the cash flow forecast’s spreadsheet.

11.22 The Treasury Management Strategy sets out a list of approved investment counterparties and their credit rating, along with monetary limits for investment with each. A sample of 10 investments was tested and all were found to be in accordance with the Strategy and had been appropriately authorised by two signatories. Confirmation had been received by the counterparty for each of the 10 investments sampled which had been verified by the Treasury & Finance Officer. A check of the funding account bank statements and consequently the general ledger identified that in each case the interest and principal payments had been correctly received and accurately and timely recorded in the finance system. Interest is received on maturity.

11.23 The Treasury Management Strategy specifies the monetary limits that may be invested with each type of organisation, dependent on the credit rating of the counterparty. In terms of the length of time of investments, the cash flow forecast is used to determine the maximum period for which funds may be prudently committed and this is stated in the Force’s Annual Investment Strategy. The forecast is compiled on a prudent basis to minimise the risk to the Commissioner of being forced to borrow on unfavourable terms to meet financial commitments. Limits on long term investments are set by reference to the Commissioner’s medium term financial plan and cash flow forecast.

11.24 At the time of review North Wales Police had two loans with the Public Works Loan Board (PWLB). The total amount outstanding on the loans was £985,714.29. The table below sets out the individual loan values and the rates:

Loan Number Final Payment Date Balance Outstanding (£) Loan Rate (%)

496640 10th February 2020 685,714.29 3.04

496799 10th February 2020 300,000.00 2.94

11.25 The information is consistent with what was reported in last year’s review; the loans have been in place since February and March 2010. Repayments for both loans are made in February and August of each year, with the next repayments due in February 2019.

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11.26 The only new borrowing undertaken since the last review is a short term loan from Coventry University, which started on the 23rd October 2018 the details as follows:

Loan Number Final Payment Date Balance Outstanding (£) Loan Rate (%)

800011 23rd January 2019 5,000,000.00 0.85

11.27 A couple of days before the monies are required the brokers are contacted to enquire what monies are available to borrow and to give notice of the intention to borrow or they run the risk of not being able to secure the monies needed.

11.28 This particular temporary loan became available through King & Shaxson. The Treasury Advisors, are comfortable with borrowing short term from Universities and these are included in their Treasury Strategy.

11.29 This and every short term loan is discussed and agreed the Head of Finance before confirmation is given to the broker to agree the deal.

11.30 This is the only short term loan held by the North Wales Police and the decision was made to take out this loan, as reported to the Joint Audit Committee in March 2018, following the use of reserves as planned. This was mainly in the financing of the new facilities in Llandudno and Wrexham and meant that there was a reduction in cash balances. As the grant income profile is not ‘flat’ there was a need for short term borrowing. This was already covered in the Strategy but had not been used in recent years.

11.31 The Force uses the Logotech system for undertaking their treasury management duties. The system is provided by an external supplier and acts as a register of loans and investments held by the Force. Logotech provides details on new deals available for investing and borrowing and includes details on counterparties and brokers. The transfers are administered by the Treasury & Finance Officer who decides how much to invest where and for how long according to the information available in Logotech and the conditions set out in the Treasury Management Strategy. Those decisions are recorded in Logotech.

11.32 The Finance Team currently consists of eight members of staff, five of whom are authorised signatories (the Head of Finance, a Finance Control Accountant, a Financial Accountant and two Management Accountants). A signature and verification is required from two of those members of staff for each transfer administered by the Treasury & Finance Officer to be actioned upon.

11.33 Logotech is controlled by CGI – the Force’s their outsourced IT provider – for which the Finance and Budget Officer and both Treasury and Finance Officers have access. The Financial Accountant also has access for ‘emergencies’; the last login details show that the Financial Accountant has not logged in since August 2017 and is one of the signatories who does not undertake the day-to-day responsibilities in relation to Treasury Management.

11.34 The Treasury & Finance Officer completes investment reconciliations each month end. The reconciliations are reviewed and countersigned by the Financial Accountant. This exercise ensures the value of investments in the loans register reconciles to the value recorded in the general ledger. A sample of five reconciliations was selected – for the periods May 2018 to September 2018 – and all had been performed on a timely basis and countersigned accordingly.

11.35 Reconciliations are also performed on the interest received by the Force, by comparison of the confirmations received from bank and the sums which are recorded in the general ledger on a monthly basis for those investments that have matured in that particular month. These reconciliations are undertaken by the Treasury & Finance Manager who maintains a spreadsheet for the purpose and are not required to be countersigned.

11.36 Monthly bank reconciliations for both the Funding and Payments account are undertaken by both Treasury & Finance Officers (each with a responsibility for one account). These are countersigned by the Financial Accountant. The most recent five reconciliations were verified (May to September 2018) and were found to have been completed and countersigned promptly. There were no standing nor unusual reconciling items identified.

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Page 11

Operational Risk: Failure to identify opportunities to operate more efficiently or to be prepared for forthcoming changes.

11.37 The Force receives advice on treasury management from Arlingclose Limited, an independent treasury advisory company, who provide financial advice and capital financing expertise for the public, private and the third sectors. Arlingclose attend quarterly meetings to consider the treasury management performance and strategy, as well as providing regular bulletins on key economic indicators and trends. Up to date information on counterparty risk and credit ratings are also provided.

11.38 In order to demonstrate value for money, the Force tendered for a three year contract with the option for two 1-year extensions for treasury management consultancy, with Arlingclose being the successful candidate. The contract commenced on the 1st April 2017.

Reputational Risk: Failure to deliver in a manner that meets the expectations of the organisation.

11.39 The Code requires that all members tasked with treasury management responsibilities, including scrutiny of the treasury management function, receive appropriate training relevant to their needs. Arlingclose, the Force’s Treasury Management advisors provided a presentation to the previous Joint Audit Committee members on treasury management and are attending regular meetings with those staff involved in treasury management. It is the intention for similar training to be provided, if required, to the current Joint Audit Committee members also.

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2018/19


Compliance Review of Counter Fraud – Procurement

November 2018

FINAL

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Police and Crime Commissioner North Wales and Chief Constable North Wales Police Compliance Review of Counter Fraud – Procurement

Page 1

Executive Summary


The required checks on suppliers in relation to the IR35 legislation have not been routinely undertaken and recorded. Procedures need to be put in place to check suppliers as they are set

up and for the results be consistently recorded to maintain a robust audit trail.

The Criminal Finances Act 2017 is not referenced within relevant policies.

Although no irregularities were sighted, the audit trail for the changing of suppliers’ bank details remains weak as highlighted in TIAA’s Creditors review in 2017/18.

Sample testing identified no issues in relation to duplicate payments.

SCOPE ACTION POINTS

The review covered legislative and regulatory requirements including a check on duplicate payments utilising TIAA’s Data Analytics team. The Criminal Finances Act suggests that organisations should design or upgrade its procedures to include making clear to employees that the firm is committed to preventing the facilitation of tax evasion, including clauses in contracts with employees and external contractors requiring them not to engage in facilitating tax evasion, and to report their concerns straightaway, providing staff training, providing a safe whistle-blowing procedure, monitoring and enforcing prevention procedures and regular reviews of procedures and changing them where required. Other areas covered were:

• IR 35; • Duplicate payments.


2 2 2 0

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PRIORITY GRADINGS




Police and Crime Commissioner North Wales and Chief Constable North Wales Police Compliance Review of Counter Fraud – Procurement Page 2

Management Action Plan - Priority 1, 2 and 3 Recommendations



(dd/mm/yy)

Responsible Officer

(Job Title)

5 Compliance Detailed guidance was circulated to the Purchasing & Creditors Team in March 2017 on how to implement the arrangements to satisfy the requirements of IR35. The Team was required to check the status of over 700 suppliers. A check of the documentation maintained in relation to this work identified that the evidence to support the process undertaken by staff in following the guidance needs to be more robust.

A robust audit trail be maintained of the process followed in relation to the Off-Payroll Working in the Public Sector - IR35 arrangements to demonstrate that appropriate checks have been made.

1 Work has commenced to complete the original status checks; furthermore all new suppliers that were set up after March 2017 will also undergo the same checks. A dedicated resource is in place to action these status checks. It is important to note that checks have been carried out on new suppliers since March 2017, however, they have not been recorded correctly and as such will be the subject of spot checks. The original database held on the G drive in SSF will be refined and updated. The filing system for completed IR35 checks is already in place and will be updated every time a response/completed IR35 is received.


6 Compliance Since the initial check of suppliers in March 2017, the Purchasing & Creditors Team is required to perform the same check on each potential IR35 supplier which has been set up since. This has not been routinely happening.

Spot checks be introduced to ensure staff are following the IR35 checks which they were instructed to undertake, with duties allocated accordingly.

1 Spot checks are carried out by the SSF team leader and Supervisor to ensure that all checks are carried out accurately in a timely manner.


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PRIORITY GRADINGS







(dd/mm/yy)

Responsible Officer

(Job Title)

2 Compliance The Purchasing Policy at North Wales Police does not reference the requirements of the Criminal Finances Act 2017 which gives law enforcement agencies and partners, further capabilities and powers to recover the proceeds of crime, tackle money laundering, tax evasion and corruption, and combat the financing of terrorism

The Purchasing Policy be reviewed and updated to reflect any changes in response to the requirements of the Criminal Finances Act 2017.

2 The Criminal Finances Act 2017 will be added to Section 6.4 of the policy.

30/11/18 Head of Procurement

4 Compliance Sample testing of changes made to supplier’s bank details since April 2018 identified that the audit trail is inadequate to confirm the checks undertaken. A priority three recommendation was made during TIAA’s review of Creditors in 2017/18 to address this issue.

Staff be reminded that details of the actions undertaken to confirm that all requested supplier account changes are genuine, be documented to provide a comprehensive audit trail to support the changes made.

2 Staff currently undertake the necessary checks prior to amending supplier bank details. Staff also carry out the following checks prior to every creditor pay run – AUDR11 – Bank details check, AUDR12 – Supplier details check and AP Forensics which detects duplicate payments, The change of bank details correspondence is currently attached to the supplier record in efin, this process will continue, however staff to be reminded to attach all correspondence to the supplier record.

15/11/18 SSF Manager

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PRIORITY GRADINGS







(dd/mm/yy)

Responsible Officer

(Job Title)

1 Compliance In addition to a Purchasing Policy, North Wales Police has a Procurement Strategy 2014/2017, with both documents applying to the Force and the Office of the Police and Crime Commissioner (OPCC). Both documents are available to staff via the Force Policy Library on the intranet. It was advised that the Procurement Strategy is no longer relevant and that all the required information is captured within the Purchasing Policy.

The Procurement Strategy 2014/2017 be removed from the Force Policy Library or archived.

3 Removal requested 23/10/2018 30/11/18 Head of Procurement

3 Compliance From a sample of 10 paid invoices selected it was identified that one for the value of £95,364.44 (gross) relating to the purchase of software / license maintenance, had no purchase order raised. The raising of an official purchase order for goods and services is a requirement of the Force and OPCC’s joint Financial Regulations

Staff be reminded of the requirement to issue an official purchase order for each purchase of goods / services in compliance with the Financial Regulations.

3 The invoice identified within this recommendation had a contract behind it and was subject to disputes. A reminder to all budget holders of the requirement to use POs will be sent.


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ADVISORY NOTE



Page 5

Operational Effectiveness Matters


No Operational Effectiveness Matters have been identified.

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Page 6

Detailed Findings

Introduction

1. This review was carried out in October 2018 as part of the planned internal audit work for 2018/19. Based on the work carried out an overall assessment of the overall adequacy of the arrangements to mitigate the key control risk areas is provided in the Executive Summary.

Background

2. The Shared Service Facility (SSF) Manager is responsible for the overall management of the processes in relation to IR35 compliance and payments to suppliers. Under the SSF Manager's direction is the Purchasing and Creditors Team which consists of a full time Finance Officer, a full time Purchasing and Creditors Supervisor and nine Finance and Creditors Administrators (total of 7.32 full time equivalent). All members of staff are in permanent posts.

Materiality

3. The Purchasing and Creditors Team is responsible for administering all invoice payments across the Force and Office of the Police and Crime Commissioner (OPCC) whereby 15,859 invoices (totalling £65,710,039.12) were paid in 2017/18 and 5,862 (totalling £21,518,045.80) in 2018/19 to date of review (2nd October 2018). These figures do not include credit notes.




5. The review covered legislative and regulatory requirements including a check on duplicate payments utilising TIAA’s Data Analytics team. The Criminal Finances Act suggests that organisations should design or upgrade its procedures to include making clear to employees that the firm is committed to preventing the facilitation of tax evasion, including clauses in contracts with employees and external contractors requiring them not to engage in facilitating tax evasion, and to report their concerns straightaway, providing staff training, providing a safe whistle-blowing procedure, monitoring and enforcing prevention procedures and regular reviews of procedures and changing them where required. Other areas covered were:

• IR 35;

• Duplicate payments.

6. The definition of the type of review, the limitations and the responsibilities of management in regard to this review are set out in the Annual Plan.

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Page 7

Disclaimer




Substantial Assurance From a review of a sample of transactions the approved policy and procedure is complied with.

Reasonable Assurance From a review of a sample of transactions the approved policy and procedure is complied with, although the evidence to support the processing of the transactions could be more robust.

Limited Assurance From a review of a sample of transactions the approved policy and procedure is not being continuously complied with. Significant improvements in the processing of transactions are required.

No Assurance From a review of a sample of transactions there is a fundamental breakdown or absence of compliance with the approved policy and procedure. Immediate action is required to improve the adequacy and effectiveness of controls.

Acknowledgement


Release of Report


Date draft report issued: 23rd October 2018

Copy of draft report issued: 30th October 2018

Date management responses received: 15th November 2018

Date final report issued: 19th November 2018

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Page 8



11.1 North Wales Police has a current Purchasing Policy and a Procurement Strategy 2014/2017 which apply to both the Force and the Office of the Police and Crime Commissioner (OPCC). Both documents are available to staff via the Force Policy Library on the intranet. The Head of Procurement stated that the Procurement Strategy is no longer relevant and that all the required information is captured within the Purchasing Policy.

Recommendation: 1 The Procurement Strategy 2014/2017 be removed from the Force Policy Library or archived.

Priority 3

11.2 The Purchasing Policy at North Wales Police does not reference the requirements of the Criminal Finances Act 2017 which gives law enforcement agencies and partners, further capabilities and powers to recover the proceeds of crime, tackle money laundering, tax evasion and corruption, and combat the financing of terrorism. The Policy should be reviewed to ensure it reflects any additional tasks required in response to the Act.

Recommendation: 2 The Purchasing Policy be reviewed and updated to reflect any changes in response to the requirements of the Criminal Finances Act 2017.

Priority: 2

Authorisation of Payments

11.3 A report of all invoices paid during 2017/18 and 2018/19 to date was received and a sample of 10 selected, five from each financial year. It was identified that one invoice for the value of £95,364.44 (gross) had no purchase order raised. The invoice related to support and maintenance for software / licences. Evidence was provided of the invoice being checked against the billing schedule to ensure that it covered the correct period and confirmation that it was correctly authorised for payment. The Financial Regulations state that North Wales Police should “issue official purchase orders for all work, goods or services to be supplied to the OPCC and the Force, except for supplies of utilities; periodic payments such as rent or rates; petty cash purchases; and other exceptions approved by the CFO.”

Recommendation: 3 Staff be reminded of the requirement to issue an official purchase order for each purchase of goods / services in compliance with the Financial Regulations.

Priority 3

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Page 9

11.4 The Force monitors the volume of invoices that have been paid with and without an official purchase order on a monthly basis and reports are generated from the Business Objects system, providing the percentage of invoices paid which were not supported by an official purchase order. The current percentage of invoices not supported by a purchase order is 29.29%. The aim of the review is to reduce the number of invoices without purchase orders by identifying why no purchase order has been raised and liaising with the staff / departments involved to determine whether they can raise purchase orders going forward or to determine whether the expenditure is recurring and a ‘contract order’ (order number CP* as opposed to a regular FN*) is required. As noted above, the raising of an official purchase order for goods and services is a requirement of the Force and OPCC’s joint Financial Regulations.

11.5 The system allows invoices received to be matched to the corresponding purchase order and if the goods or services have been marked as received (“goods receipted”) on the system, the invoice will be automatically approved for payment by the system. A tolerance limit is in place, with the tolerance being the lowest of £2 for under tolerance and lowest £1 for over, which allows invoices within the stated parameters to be automatically approved for payment where the amounts are not exactly the same. The authorisation is considered to be the approved purchase order and the ‘goods receipt’.

11.6 If the tolerances are exceeded, the invoice needs to be manually checked before payment is made. In this case the system sends a daily e-mail alert to the approver of the purchase order as an indication that a check and manual authorisation is required. A common explanation for the difference in price may be a delivery charge which was not taken into account when the goods were purchased. Once confirmation has been received by the Purchasing & Creditors Team that the invoice can be paid, arrangements will be made to amend the value of the purchase order on the system and pay the invoice. The Purchasing & Creditors team may amend the purchase order up to a maximum of £500 without further approval, above this limit the Business Managers or their support team have to approve the amendment to the purchase order.

11.7 Of the nine invoices sampled which had an official purchase order attached, the only differences in price identified between the purchase order and the invoice were due to the invoice being a part payment for a large contract, for example the works on the Wrexham new development.

Amendment to Supplier Records

11.8 TIAA’s Creditors review at North Wales Police in 2017/18 identified that, although changes to supplier records were made by authorised members of staff, the audit trail maintained on e-Financials should be improved to include what triggered the changes, what corroborating documents were sighted and who any required changes were confirmed with at the supplier to ensure that all change requests have been initiated by the supplier. A priority three recommendation was made to address this which was not assessed as part of the 2017/18 Follow-up review due to the timing of the implementation timetable for the recommendation and will therefore be captured within the Follow-up review of 2018/19.

11.9 Sample testing of five changes to the bank details of suppliers made since April 2018 identified that the audit trail remains inadequate to evidence the checks performed. Only one of the five cases sampled included a robust audit trail which included the details which were used to contact the supplier and who was contacted and when in order to confirm the changes requested. For the other four, no audit trail was included to evidence that the supplier had been contacted directly using the standing data held on e-Financials. Fraudulent attempts to change supplier bank details have been observed across the public sector and it is important that such requests are not accepted at face value and that appropriate checks are made directly with the supplier using information already available to the Force on the financial system prior to any changes being made.

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Page 10

11.10 The Finance Officer stated that report AUDR11 (Supplier Contact Details Audit Report) and AUDR12 (Supplier Bank Details Audit Report) are run every Wednesday prior to the weekly payments run; AUD11 being a report which is being run since the Creditors review of 2017/18, and AUD12 a historical arrangement. These reports are reviewed by the Finance and Creditors Administrators and all changes verified to supporting documentation to ensure validity, however it was advised that staff need to be reminded of the requirement to ensure that the checks undertaken are documented to evidence that the supplier information has been subject to review and challenge prior to the payment run.

Recommendation: 4 Staff be reminded that details of the actions undertaken to confirm that all requested supplier account changes are genuine be documented to provide a comprehensive audit trail supporting all supplier account changes.

Priority: 2

11.11 From a list of all invoices paid during 2018/19 to the date of our review in October 2018, a check was made for duplicated supplier records. Nine pairs of transactions were identified as being potential duplications – 18 payments in total – which were queried with the Purchasing & Creditors Team. Following receipt of confirmation of validity from the Team, further information was requested for the following:

• Supplier records A030 and A900 were for the same supplier, but had different addresses and bank details recorded. This was queried with the Finance Officer and record A900 was deemed to have been set up in error. Following our identification of the two accounts the Finance Officer has put a ‘stop’ on the account so it can no longer been used. It was confirmed that the payment made via account A900 had been credited to the Force’s bank account and the supplier had notified the Force that the details attached to A030 were to be used. The goods ordered were received and the payment reissued on A030.

• Supplier records 1664 and W1049 were for the same supplier, however it was advised that account 1664 was created in order to repay an incorrect payment for a debtor invoice to the customer by cheque. It was advised that W1049 is the account to be used going forward and a ‘stop’ has been put on 1664. This had also been identified and actioned prior to our review.

11.12 A review of the privileges set within e-financials identified that only the Corporate Finance, Payroll and five of the Purchasing & Creditors staff have access to the Supplier Entry screen on the system and therefore able to create new supplier records.

11.13 A check of the Supplier Masterfile (a list of active suppliers as of the 1st April 2017 to date) identified that there were 34 suppliers with non UK addresses. All were confirmed as valid by the Finance Officer.

The Working through an Intermediary Regulation (IR35)

11.14 IR35 is a tax legislation that is designed to combat tax avoidance by workers supplying their services to public sector organisations (PSOs) via an intermediary, such as their own limited company, but who would be an employee if the intermediary was not used. Such self-employed workers are called ‘disguised employees’ by Her Majesty’s Revenue and Customs (HMRC). PSOs don’t have to offer employment rights and benefits, for example payment of National Insurance Contributions (NICs), to off-payroll employees. Conversely, there is an opportunity for an off-payroll employee to be involved in tax evasion, as those workers are paid through their own intermediary, which IR35 seeks to address. The off-payroll working rules are in place to make sure that where an individual would have been an employee if they were providing their services directly, they pay broadly the same tax and NICs as an employee.

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Page 11

11.15 With effect from the 6th April 2017 all public authorities are required to consider whether the ‘Off-payroll working in the Public Sector’ Rules apply to all contractors working for them through an intermediary. The determination of whether a contractor / temporary worker is "inside IR35" (the tax deduction rules apply) or "outside IR35" (no tax deducted from payment) depends upon responses to a number of questions / principles to determine employment status. These are known as the "off-payroll working in the public sector rules" and are accessed via the HMRC website. As stated on the Government’s website, the rules do not apply where a public authority has fully contracted out services to a third party (like an outsourcing company) and the workers do not personally provide their services to the public authority.

11.16 All public sector bodies are obliged to use the HMRC "off-payroll working in the public sector rules" tool for each public sector engagement to determine the status of the contractor / service provider. The output from this tool is not stored by the HMRC and it is recommended that the result should be printed, retained and stored locally. HMRC state that they will stand by the result given unless a compliance check finds the information provided is not accurate.

11.17 Detailed guidance was circulated by the Continuous Improvement Officer to the Purchasing & Creditors Team in March 2017 on how to implement the arrangements in relation to the requirements of IR35. A check of the documentation maintained in relation to this work identified that the evidence of the process undertaken by staff in following the guidance needs to be more robust. Between the 23rd and 31st of March 2017 the Team was requested to dedicate part of its resources to assessing over 700 suppliers which had been identified by the Continuous Improvement Officer as potential off-payroll workers. The electronic working paper maintained by staff was supported by reports from HMIC’s online tool for around 40 suppliers, however for those suppliers noted in the working paper which were not supported by a report, many were accompanied by notes such as “no answer – emailed” and “emailed” with no indication of what happened thereafter. These suppliers therefore appear to have not been subject to a completed check by North Wales Police. Consequently, there is no evidence to confirm the classification of the suppliers adopted is correct.

Recommendation: 5 A robust audit trail be maintained of the process followed in relation to the Off-Payroll Working in the Public Sector - IR35 arrangements.

Priority: 1

11.18 The Finance Officer states that as a result of the recent turnover in staff within the SSF, responsibilities in relation to IR35 need to be clearly allocated among staff members as there is currently a lack of clarity in terms of who is responsible for undertaking which tasks.

11.19 A list of 19 suppliers deemed by Internal Audit to potentially fall within IR35 criteria and paid through accounts payable sometime during 2018/19 to date was sent to the Purchasing & Creditors Team’s Finance Officer. The Finance Officer confirmed that checks are not necessarily being done on new suppliers set up since the initial check of the 700 suppliers during March 2017. Checks have now been performed on those 19 to determine whether the rules apply in response to the queries raised by Internal Audit. Staff are aware of the requirements to check new suppliers but are not consistently applying them as required.

Recommendation: 6 Spot checks be introduced to ensure staff are following the IR35 checks which they were instructed to undertake, with duties allocated accordingly.

Priority: 1

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Page 12

11.20 The Head of Procurement at North Wales Police received confirmation from Adecco during this review that no agency staff are currently employed outside of IR35 (“not using IR35 self-employed status”) at North Wales Police. Adecco undertake these checks on individuals on behalf of North Wales Police who has instructed that it will not take on staff who are not compliant with IR35. Adecco is North Wales Police’s main agency and any contractors working through Adecco are paid by Adecco and not the Force.

Duplicate Payments

11.21 North Wales Police use the AP Forensics software on a daily basis to identify any potential duplicate invoices. A Business Objects report is run of all invoices recorded in the register and paid between specified time periods, which is then imported into AP Forensics. Any potential duplicates are investigated.

11.22 From a check of invoices paid during 2017/18 and 2018/19 to date of review, two were queried with the Finance Manager as potential duplicate payments. It was confirmed that both had already been identified by the Force and the monies had been credited.

Training

11.23 As previously stated within this report, the Purchasing & Creditors staff have received comprehensive documented guidance in March 2017 on how to implement the arrangements for the requirements of IR35 (Off-Payroll Working Guidance).

11.24 In terms of training on Counter Fraud in general, this is included in the newly re-established induction training for staff whereby the Superintendent of the Professional Standards Department (PSD) has a slot in which information is presented on matters including the role of the Anti-Corruption Unit, Corruption Risks, Measures to Counter Corruption Risks and Business Interests.

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2018/19


Assurance Review of the General Ledger

January 2019

FINAL

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Police and Crime Commissioner North Wales and Chief Constable North Wales Police Assurance Review of the General Ledger Page 1

Executive Summary


Robust processes and controls are in place for data entered and transferred onto the general ledger including defined segregation of duties and reconciliation procedures. Control and suspense accounts are monitored and cleared by the

Finance Team on a timely basis. Virements and Journals are appropriately authorised and justified.

The Force opted to prepare its Statement of Accounts for 2017/18 a month earlier than previous years in preparation for the early closure requirement for 2018/19 onwards.

SCOPE ACTION POINTS

The review considered the arrangements for providing an effective audit trail for data entered onto the general ledger and the appropriateness of the reports generated. The scope of the review did not extend to the budgetary control arrangements and bank reconciliations.


0 0 0 0

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PRIORITY GRADINGS








(dd/mm/yy)

Responsible Officer

(Job Title)

No recommendations were made.

Page 55 of 266

ADVISORY NOTE





No Operational Effectiveness Matters were identified.

Page 56 of 266


Detailed Findings

Introduction

1. This review was carried out in November 2018 as part of the planned internal audit work for 2018/19. Based on the work carried out an overall assessment of the overall adequacy of the arrangements to mitigate the key control risk areas is provided in the Executive Summary.

Background

2. General ledger is considered a key financial risk area and an internal audit is completed annually.

Materiality

3. Failures in controls within the general ledger arrangements could lead to North Wales Police being unaware of its true financial position, which may lead to inappropriate decisions being taken.




5. The review considered the arrangements for providing an effective audit trail for data entered onto the general ledger and the appropriateness of the reports generated. The scope of the review did not extend to the budgetary control arrangements and bank reconciliations.


Disclaimer


Page 57 of 266








Acknowledgement


Release of Report


Date draft report issued: 14th December 2018

Date revised draft report issued: 17th December 2018

Date management responses rec’d: 11th January 2019

Date final report issued: 14th January 2019

Page 58 of 266




11.1 The 2017/18 assurance review of the general ledger arrangements was carried out in November and December 2017 providing a ‘Substantial Assurance’ opinion rating. One Routine (priority 3) recommendation was made which was not assessed during the 2017/18 Follow-up review due to the timing of the date assigned for its implementation. The current status of the recommendation provided by North Wales Police is ‘Implemented’, which will be closed by the auditor during the Follow-up review of 2018/19.

11.2 The recommendation required that privileges and roles within eFinancials be reviewed to ensure consistency with individuals’ job descriptions. A meeting was held on the 7th September 2018 and the authorisation levels discussed and agreed. Confirmation was received by Corporate Finance from the Business Systems Unit (BSU) on the 7th September 2018 that levels had been amended.

11.3 The joint Financial Regulations for the Police and Crime Commissioner (PCC) and the Chief Constable recognise that maintaining proper accounting records is one of the ways in which the PCC and Chief Constable discharge their responsibility for the stewardship of public resources. The responsibilities of the Chief Constable and the Director of Finance and Resources (DFR) are also stated within the Regulations which include the following:

• To ensure that all transactions, material commitments, contracts and other essential accounting information are recorded completely, accurately and in a timely manner.

• To maintain adequate records to provide a management trail leading from the sources of income and expenditure through to the Statements of Accounts.


Virements and Journals

11.4 The Financial Regulations state that the scheme of virement is intended to enable chief officers to manage their budget with a degree of flexibility within the overall policy framework determined by the PCC and therefore, provides the opportunity to optimise the use of resources to meet emerging needs. It was identified that only a small number of budget virements are made at North Wales Police. It was advised by the Head of Finance that the Finance Department’s Support Accountants have the authority to initiate a budget virement. It is also possible for a budget holder to request a virement via their respective Business Manager however the final approval of the Support Accountants is required in these instances.

11.5 Two virements have been made during 2018/19 to date, as follows:

Amount (£) Budget Headings Approval

£132,653.97 Staff Development Budget, from Police Surgeons – Retainer to Force Medical Support Services

Management Accountant

£30,000 Crime Services Budget, Casual Lettings – Hire of Management

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Rooms to Subscriptions / Associations Accountant

11.6 A discussion with the Head of Finance identified that Corporate Finance staff are authorised to both prepare and post journals and are expected to provide a clear audit trail for each within the general ledger. This involves including their initials and details of the journal in the Journal Name field and attaching relevant documentation to the journal which can be viewed by selecting ‘Document Image’ on eFinancials. Members of the Shared Service Facility’s (SSF’s) Purchasing and Creditors Team may prepare journals as part of their routine duties but they must be authorised by an independent member of the Team.

11.7 A sample of five journals was verified and all were authorised as applicable and provided a clear audit trail as required.

Cost Centres an Account Codes

11.8 Only the Finance Team staff are authorised to create new cost centres and account codes within the general ledger and discussions with the Team identified that the responsibility is assigned to three designated members of staff – the Finance Control Accountant and both Management Accountants. A review of system users and profiles identified that only the Finance Team members have the privileges to set up such codes.

11.9 As for journals and virements, only a few additions are made to codes within the general ledger. A sample of three codes set up since January 2018 was verified and all were set up by an authorised person following receipt of an email request from the requisitioner.

11.10 Miscodings are monitored by the Accountants continuously throughout the year as part of the monthly budget monitoring process. A spot check of account codes identified no material miscodings.

Period End Checking and Reconciliation Procedures

11.11 Twenty-four suspense and control accounts were identified within the general ledger and selected for verifying. Nine are accounts for which the balances must be nil at year end and three were no longer used. Of those twelve the following had balances above nil at the time of our review:

Code Balance (£) Comments

Gas Billing Suspense Account -646.04 Over-accrual for 2017/18, due to be cleared during 2018/19.

Ministry of Justice (MOJ) Victims Support Services

-404,365.50 One grant payment received during 2018/19.

Capital Receipts to be Coded -110,000.00 Sale of a police station, entered on eFinancials during 2018/19.


11.12 As part of the planning process for the closedown of 2017/18 the Head of Finance communicated with relevant members of staff, asking for the message to be cascaded to all staff involved in the finance function, to ensure that the deadlines were met in the preparation of the Statement of Accounts. The message explained that the time available for producing the Statement of Accounts was being reduced by a month and had to be ready and signed by the Chief Financial Officers by the end of May 2018 with the external auditors due to be commencing their work at the beginning of June 2018. A final accounts letter was sent with the email which addressed the critical elements of ensuring goods and services received or supplied were accounted for in

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the year they were received or given. The message asked for the staff’s support with the matter and provided a template of reserve sheets for revenue creditors, capital creditors and debtors.


11.13 As part of a trial year, the Force prepared its Statements of Accounts for 2017/18 a month earlier than previous years. The Welsh Audit Office’s external audit was also completed a month earlier and The Auditor General issued an unqualified audit report on the financial statements of both the Police and Crime Commissioner and the Chief Constable. This was part of the Welsh Government’s Accounts and Audit (Wales) Regulations which will become a statutory arrangement for 2018/19 onwards.

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2018/19


Assurance Review of Pensions

January 2019

FINAL

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Police and Crime Commissioner North Wales and Chief Constable North Wales Police Assurance Review of Pensions Page 1

Executive Summary


The Force has appropriate pension arrangements in place, and is providing information to the pension provider, XPS, in a timely manner.

The Pensions Payroll HR Service Manual need to be updated and finalised.

There were anomalies with the pension payments of one member of staff, as a result of a transfer in post within the Force.

SCOPE ACTION POINTS

The review considered the arrangements for: the management and control of the administration of police officer pensions.


0 2 2 0

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PRIORITY GRADINGS








Responsible Officer

(Job Title)

2 Compliance It was identified that one individual from the sample of 10 (details of which have been provided) had been paying pension contributions during 2018/19 from April to October 2018 inclusive with no payment in November 2018 and payments resuming in December. The Payroll Manager advised that the individual is part of the pension scheme and that arrangements need to be made with the individual to collect the missing contributions. A further check of the Payroll system identified that the individual had moved posts in October and that this was what triggered the changes in pension payments.

The pension issue for the individual (as notified during audit testing) be rectified and repayments scheduled.

2 The payroll system was updated to ensure deductions were present on the December payslip and thereafter. Arrears remain outstanding for the period mid-October to the end of November. One of the Payroll Supervisors will contact the Officer in January to arrange repayment of the arrears.

31/01/19 Payroll Supervisor

3 Compliance Currently there is no control in place to confirm that changes to an individual’s pension payments are implemented on a timely basis to ensure continuity in the collection of contributions

A monthly check be undertaken to any changes to individuals’ pension payments and any changes investigated.

2 In order to run a monthly check an EIS report will be built to extract data from ResourceLink which will be downloaded to excel. Once in excel this report will be interrogated.

31/03/19 Payroll & Pensions Manager

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PRIORITY GRADINGS







Responsible Officer

(Job Title)

1 Directed A Human Resources (HR) Service Manual has been prepared for Pensions Payroll, which is dated 19th October 2017. The document remains in draft format and it was advised by the Payroll Manager that it needs to be updated. The Service Manual details the process map and steps within the Pensions Payroll function.

The Pensions Payroll HR Service Manual be updated and finalised.

3 The draft manual will be reviewed, updated and finalised.


4 Operational No Quarterly Service Delivery reports have been provided by XPS in 2018/19. These include performance data compared to the tender specification in addition to updates and urgent matters.

XPS be reminded of the requirement to provide quarterly performance reports in accordance with the tender specification.

3 XPS were contacted on 31/12/2018. Confirmation received from Service Delivery Manager on 07/01/2019 that quarterly KPR reports will be uploaded to the portal.

Completed Payroll & Pensions Manager

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ADVISORY NOTE






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Detailed Findings

Introduction

1. This review was carried out in December 2018 as part of the planned internal audit work for 2018/19. Based on the work carried out an overall assessment of the overall adequacy of the arrangements to mitigate the key control risk areas is provided in the Executive Summary.

Background

2. This is the first review of the Pensions arrangements undertaken by TIAA at North Wales Police. The Pension service at the Force is currently outsourced to XPS Pension Group (previously known as Kier) and is a key financial risk area completed by internal audit bi-annually. The day-to-day responsibility of administering the information required by XPS lies with the Payroll Manager.

Materiality

3. As at December 2018 there were 1,943 pensioners on the pension payroll.




5. The review considered the arrangements for: the management and control of the administration of police officer pensions.


Disclaimer


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Acknowledgement


Release of Report


Date draft report issued: 14th December 2018

Date management responses rec’d: 24th January 2019

Date final report issued: 29th January 2019

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11.1 Section 4.4 of the Financial Regulations - titled Payments to Officers, Staff, Volunteers and Members - states that among the responsibilities of the Director of Finance and Resources is the responsibility to ensure, in conjunction with the Chief Financial Officer, the secure and reliable payment of salaries, overtime, pensions, compensation and other emoluments to existing and former officers, staff, volunteers and members.

11.2 A HR Service Manual has been prepared for Pensions Payroll, which is dated 19th October 2017. The document remains in draft format and it was advised by the Payroll Manager that it needs to be updated. The Service Manual details the process map and steps within the Pensions Payroll function.

Recommendation: 1 The Pensions Payroll HR Service Manual be updated and finalised.

Priority 3

11.3 The Police Officers’ pension scheme is supported by XPS and Police Staff have the option of contributing to the local government pension scheme (LGPS), administered by Gwynedd Council. It is the responsibility of both the Payroll Department and scheme members to support the pension administrators in providing up to date information to ensure the accuracy of information held.

11.4 XPS was awarded the contract for the Provision of a Police Pensions Administration Service on 1st October 2014, for three years with the opportunity for two extensions of 12 months. Prior to awarding the contract to XPS the service was provided in-house. The current contract is due to expire on the 30th September 2019 to bring it in line with the other Welsh Forces. Discussions have been ongoing for the Welsh Forces to be collaboratively procuring for the service in future to enhance the opportunities for efficiencies and value for money.


11.5 A leaver checklist is completed by the Human Resources (HR) Employment Service for all Police Officers and Police Staff who leave the Force, this includes Officers who retire. The checklist for retirees includes the tasks and actions that need to be undertaken by the Force upon receipt of a notification by an individual to retire, which includes the following:

• Professional Standards Check (complaints or disciplinary issues outstanding for the leaver);

• Confirmation with the Field HR & Training Support Officer that the resignation can be accepted.

• Request from Duties the annual leave / TOIL / Flexi final balance and send a Payroll Notification to the Payroll Team.

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11.6 The checklist must be signed off by the individual’s line manager. A sample of 10 retired Police Officers was selected and a complete checklist was sighted for all, with retirement date corresponding to both the report provided by Payroll and to the individual’s Notification of Intention to Retire from North Wales Police form. The leaving dates also corresponded the documentation received by XPS as confirmation of the individuals’ details. One form had not been signed by the respective line manager, however it was noted that the individual in question had no line manager at North Wales Police as they were on secondment out of force at the time of retirement. It was confirmed that the line manager was at another Force who had been made aware of the individual’s intention to retire.

11.7 As soon as an end date is entered into the system by Human Resources (HR) an email notification is sent to Payroll to inform them of the leaver. For each retiree, the Payroll Team complete a Leaver Form which includes Identification Details, Leaving Details and details of the pensionable pay for the last three years, and are shared with XPS. The calculations of pensionable pay are also appended to the Leaver Form. Once a confirmation of the actuals has been received from Kier, the details are sent to Corporate Finance for cash-flow purposes.

11.8 The lump sum to be received by each of the 10 individuals as per the documentation received by XPS corresponded to the amount paid to the individual as per the BACS file creation and the payment was posted to the general ledger in a timely manner. Each lump sum was paid to the individual on the next working day following the retirement date. The pay date for the pension payroll is the 1st of each month, unless the 1st is a non-working day when the payment will be done on the previous working day. The first monthly pension payment for each individual was received on the 1st pay day following retirement.

11.9 For the 10 individuals, the standard Leaver Form had been completed and shared with XPS in a timely manner.

11.10 The Human Resources (HR) Employment Services are responsible for informing the Payroll Team of any changes of circumstances in relation to salary data. XPS calculate the lump sum commutation and send an email to the Payroll Team informing them of the 'Tax Free Lump Sum' figure with the name of the Pensioner, NI number and date payable.

11.11 A sample of 10 individuals who have opted out of the pension fund was selected and the relevant form was sighted which was signed by the individual in nine of those cases, to support the decision. A further check was made on their payslips to confirm that pension payments had ceased in the month following the date of opting out, which was as expected for the nine.

11.12 It was identified that one individual from the sample of 10 (details of which have been provided) had been paying pension contributions during 2018/19 from April to October 2018 inclusive with no payment in November 2018 and payments resuming in December. The Payroll Manager advised that the individual is part of the pension scheme and that arrangements need to be made with the individual to collect the contributions for part of October and November that were missed. A further check of the Payroll system identified that the individual had moved posts in October and that this was what had triggered the changes in pension payments.

Recommendation: 2 The pension issue for individual (as notified during audit testing) be rectified and repayments scheduled.

Priority 2

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11.13 It was discussed with the Payroll Manager that a control needs to be put in place to reduce the risk of this happening again going forward in view of the frequency of changes in police officer roles.

Recommendation: 3 A monthly check be undertaken to any changes to individuals’ pension payments and any changes investigated.

Priority 2

11.14 North Wales Police has a single bank account for payments for which Corporate Finance undertakes the bank reconciliations. Bank reconciliations were verified within the Treasury Management review undertaken in October and November 2018 with no issues identified. Some un-reconciled pension payments were highlighted however, it was advised that Finance had been given a point of contact at XPS to investigate these. Since the Treasury Management review a further bank reconciliation has been undertaken (for November 2018) whereby nearly all of the unreconciled pension payments had been dealt with. There were no old unreconciled balances.

11.15 The Payroll Manager receives monthly Reconciliation Reports from XPS which are checked, signed and returned to XPS; XPS will not send the monthly BACS file for payment until the report has been signed. The report is then saved on the Payroll Team’s network drive and used to make queries with XPS if the monthly Payroll to ledger journal does not balance.

11.16 The Payroll Manager sends annual submissions to XPS which provides information on those individuals who are part of the pension scheme, for example if anyone has had any career breaks or any other reduced pay indicators. The Payroll Manager uses the software Business Objects to extract such data from the Payroll and HR software Resource Link.


11.17 XPS sends the Payroll Manager at North Wales Police quarterly Service Delivery reports which provides an overview of Urgent Matters, Regulations and Guidance updates by month. Performance charts and tables are also included showing performance against individual service level requirements as noted within the Specification at the Procurement stage. It was noted that no reports have been received from XPS so far during 2018/19 despite the Payroll Manager chasing XPS to provide them. The final report for 2017/18 showed no issues in relation to XPS’s performance.

Recommendation: 4 XPS be reminded of the requirement to provide quarterly service delivery reports in accordance with the tender specification.

Priority 3

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11.18 As a more secure solution of transferring individuals’ personal information than the use of email, XPS’s secure web portal is used to upload files by both parties. North Wales Police’s Payroll Team have a general account on the portal and three members of staff also have individual accounts.

11.19 A Data Processing Agreement was made on the 25th October 2018 between NWP and Kier and covers matters including the provision or collection of Police data, access to police data, data protection and human rights, retention, review and deletion and security. It was signed by the Force’s Chief Information Officer and a Director at Kier.

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2018/19


Assurance Review of the Capital Programme

February 2019

FINAL

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Police and Crime Commissioner North Wales and Chief Constable North Wales Police Assurance Review of the Capital Programme Page 1

Executive Summary


The Force has comprehensive arrangements in place for the monitoring of the Capital Programme 2018/19 with governance and reporting arrangements involving all key stakeholders which are robust. The Capital Programme is developed through informed projections and

forecasting. Regular monitoring and reporting of the Capital Programme is evident.

SCOPE ACTION POINTS

The review considered the arrangements for accounting for the capital programme. The scope of the review did not include consideration of the funding arrangements or the specification of the projects.


0 0 0 0

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PRIORITY GRADINGS








(dd/mm/yy)

Responsible Officer

(Job Title)

No recommendations were made.

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ADVISORY NOTE






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Detailed Findings

Introduction

1. This review was carried out in December 2018 as part of the planned internal audit work for 2018/19. Based on the work carried out an overall assessment of the overall adequacy of the arrangements to mitigate the key control risk areas is provided in the Executive Summary.

Background

2. The overall preparation and reporting of the Capital Programme is undertaken by the Head of Finance on a Corporate Level with the three main areas of the Force which hold and maintain capital assets (Facilities, Fleet and Information and Communication Technology (ICT)) having their own operational monitoring arrangements which inform the corporate reports. The Capital Programme is a key financial risk area and is reviewed bi-annually.

Materiality

3. As at June 2018, North Wales Police’s draft revised Capital Programme budget for 2018/19 shows a total budget of £13.369m broken down into £7.914m (Estates Programme), £2.337m (Vehicles and Other Equipment) and £3.118m (Information Technology and Communication Equipment). The figures include the amounts carried forward from 2017/18. The value of the Capital Programme is significantly less for 2018/19 than for 2017/18 due to the near-completion of the new Custody and Divisional Headquarters developments at Wrexham.




5. The review considered the arrangements for accounting for the capital programme. The scope of the review did not include consideration of the funding arrangements or the specification of the projects.


Disclaimer


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Acknowledgement


Release of Report


Date draft report issued: 14th February 2019

Date management responses rec’d: 15th February 2019

Date final report issued: 19th February 2019

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11.1 Areas of the Capital Programme have been covered in past TIAA reviews as follows:

• Fixed Assets, November 2017, providing Substantial Assurance and one ‘Routine’ (Priority 3) recommendation. The recommendation has been marked as being ‘Implemented’ by North Wales Police and will be assessed as part of TIAA’s 2018/19 Follow-up review in February 2019;

• Fleet Management – Strategy, January 2018, providing Substantial Assurance and no recommendations;

• Estates Management – Strategy, July 2018, providing Substantial Assurance and no recommendations.

11.2 Section 2.3: Capital Programme of the Chief Constable and the Police and Crime Commissioner’s (PCC’s) Financial Regulations recognises that capital expenditure involves acquiring or enhancing fixed assets with a long-term value to the PCC and Chief Constable, such as land, buildings and major items of plant, equipment or vehicles. Capital assets shape the way that services are delivered in the long term, and may create financial commitments in the form of financing costs and revenue running costs.

11.3 It is further stated that the PCC is able to undertake capital investment provided the spending plans are affordable, prudent, sustainable and demonstrate value for money. Spending plans are evaluated under CIPFA’s Prudential Code. All capital assets are owned by the PCC, but the day-to-day management of the majority of the assets is the responsibility of the Chief Constable. The Chief Constable may acquire capital assets only with the permission of the PCC. The Chief Constable is not allowed to own land and buildings.

11.4 The Financial Regulations comprehensively set out the responsibilities of the Chief Constable, Director of Finance and Resources (DFR), the PCC and the PCC’s Chief Finance Office in relation to the Capital Programme which includes the following:

• The Chief Constable and DFR: To prepare a rolling programme of proposed capital expenditure for consideration by the PCC. Each scheme shall identify the total cost of the project and any additional revenue commitments and to monitor expenditure throughout the year against the approved programme;

• The PCC: To approve a fully funded medium term capital programme which is sustainable and in accordance with the Prudential Code and to agree the annual capital programme, including how it is to be financed;

• The Chief Finance Officer and DFR: to report on the outturn of capital expenditure as part of the annual report and statutory accounts.

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Approval of the Capital Programme

11.5 The Capital Programme 2017-18 to 2022-23 is appended to the Treasury Management Strategy Statement and Investment Strategy and Prudential Indicators 2018-19 to 2022-23 which was presented as a Joint Report of the Chief Financial Officers of the Police Crime Commissioner and Chief Constable for North Wales for approval to the PCC’s Strategic Executive Board (SEB) on 17th April 2018.

Monitoring and Reporting

11.6 The Head of Finance provides a Finance Update at each meeting of the Chief Constable’s Strategic Planning Board (SPB) and the PCC’s SEB. The reports are similar in nature and report on the latest position as at each meeting on areas including the revenue budget, the capital budget and other highlights as relevant for example the budget outturn in July 2018 and the schedule for the following year’s Medium Term Financial Plan in October 2017.

11.7 The reporting on the capital budget includes Estates, Vehicles and Equipment and Information Technology (IT) and Communications Equipment, the areas within the Force which hold capital assets.

11.8 As at the Finance Report to SEB in July 2018, the 2017/18 Capital Programme was 90% completed with remaining balances to be carried forward to 2018/19 together with the funding. The report also provided an update on 2018/19 Capital Programme and the major projects to be completed in year and the proposed principles were set out for the budget planning cycle.

11.9 A further report on Revenue and Capital Outturn 2017/18 was presented to the Chief Officers’ meeting on 8th May 2018. The aim of this report was to provide the final position on the 2017-18 Revenue and Capital Budget, detail any significant variations from the previous budget report (Period 9) and summarise the overall movement in reserves for 2017-18. The report stated that the revised capital budget set in the Medium Term Financial Plan (MTFP) for 2017-18 was £20.341m and that the actual expenditure was £18.422m (90% as noted in paragraph 11.9). The difference (underspend) was reported as being mainly due to the timing of delivery of Vehicles and IT projects. Furthermore the budgeted use of reserves to fund capital was £12.433m with the actual expenditure being reported as £10.583m.

11.10 The rationale for carrying forward unspent budgets from previous years is reported by the Head of Finance to the SPB and SEB for the ultimate approval of the PCC. A review of reports during 2018/19 identified that appropriate reporting had been undertaken in respect of the amounts carried forward to 2018/19.

11.11 Financial monitoring of individual projects is undertaken by the individual Project Teams within the Departments of Estates, Fleet and Information Technology with oversight being provided from Finance, details of which will be provided for a sample of capital expenditure projects in the following sections.

Estates

11.12 The Head of Facilities has overall responsibility for all estates spending for which an Estates Strategy is in place for 2018/28. This is supported by an Implementation Plan that will be reviewed on an annual basis. The objective of the Strategy is to establish a 10 year framework to consolidate and provide an agile and flexible estate designed for normality rather than exceptions and to further reduce annual estate revenue costs. The Strategy was prepared by external property consultants Bruton Knowles and to inform its development, Bruton Knowles were provided with details of ongoing Force-wide change programmes and key corporate documents including the PCC’s Police and Crime Plan, the Force's 10 year Corporate Strategy and the Information and

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Communication Technology (ICT) Strategy. Extensive consultation with key internal and external stakeholders was undertaken in the preparation of the Estates Strategy.

11.13 The main elements of the Estate Programme for 2018/19, as detailed within the Force’s Capital Programme, are provisions for the completion of both the Wrexham new Custody and Divisional Headquarters at £2.649m and the in-town facility at £1.622m and the purchase of the Joint Communications Centre in St Asaph at £2,739m.

11.14 Decision making and strategic direction relating to any estates related matters are reviewed and assessed by the Estates and Facilities Board (EFB) who monitor the implementation of the Estates Strategy, with updates presented to the Strategic Planning Board (SPB) and the Strategic Executive Board (SEB) where necessary as the steering groups of the EFB. The EFB reports directly to the DFR's People and Resources Committee and among its objectives are:

• To oversee the current Estates Strategy;

• To provide strategic direction on the estate capital programme;

• To identify opportunities for estate collaboration and rationalisation;

• To assess the estate value for money (VFM) data and identify corporate opportunities for annual estate revenue costs reduction to meet the estate savings plan.

11.15 TIAA's review of the Estates Strategy in July 2018 identified that following recent changes to staffing within the Force affecting the core membership of the EFB, the Terms of Reference have been included on the Agenda for the next EFB meeting as an item to be reviewed. It was confirmed during this review that the Terms of Reference have now been updated.

11.16 An estates project was selected from the Capital Programme to assess whether adequate monitoring arrangements were in place. The project selected was the development of the Wrexham Divisional Headquarters in Llay. The Estates Project Manager responsible for the project maintains a spreadsheet that records all the orders raised against the cost code and retains a copy of the invoices that have been paid against them. Monthly highlight reports are prepared for the Project Board and provide information on the latest costs and raised orders and invoices received are put in as commitments. Monthly meetings were held on site to monitor construction progress in addition to the monthly Project Board and other corporate boards such as the Estates and Facilities Board (EFB). The Estates Project Manager is a standing member of the EFB. A regular review of general ledger expenditure items is undertaken by the Finance Control Accountant and shared with the Estates Project Manager to ensure that they have been correctly coded

Vehicles

11.17 The Fleet Manager prepared North Wales Police’s three year Fleet Management Strategy effective from 1st April 2018, which was approved by the Finance and Resources Senior Management Team (SMT) on 15th January 2018. The Strategy aims to provide safe, appropriate and reliable vehicles which meet the operational policing requirements and to enable North Wales Police to deliver its services and identifies seven strategic objectives which are the key focus of the Strategy. They are noted as follows:

• To support operational policing;

• To develop and supply fit for purpose vehicles;

• To improve Performance/Efficiency;

• To deliver value for money;

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• To strive for a ‘Greener Fleet’;

• To provide a fit for purpose Workshop facility;

• To develop and retain quality people

11.18 There are 10 Guiding Principles within the Strategy which support these seven strategic objectives.

11.19 A total capital expenditure of £2.337m has been included in the Capital Programme for the 2018/19 Vehicle Purchase Replacement Programme. A base budget of 1.3m is being allocated each year for the Vehicle Replacement Programme with the amounts unspent carried forward to the following year once reported to SEB. The Fleet Manager maintains an excel spreadsheet extracted from the Tranman system to determine the proposed replacement year for each vehicle. As at the time of the review the replacement programme of vehicles was confirmed by the Fleet Manager as being near completion with the remaining six vehicles, out of around 75, being ordered in the next fortnight and a total expenditure amounting to £929,729 to date of review (December 2018). It was noted that the Management Information Department is currently rewriting the report so data is extracted into Business Objects.

11.20 The Tranman fleet management software supports the effective management of fleet to inform and plan vehicle acquisitions and disposals.

Information Technology and Communication (ICT)

11.21 The Capital Programme for 2018/19 includes the full cost implications for planned Information Technology and Communications equipment amounting to £3.118m. The Programme includes provisions for Control Room Technology Replacement at £1.281k and the Mobile Responder App at £268k. The replacement programme for other ICT equipment is also forms part of the Capital Programme which includes desktop and mobile data replacement at £588k and £231k respectively for 2018/19.

11.22 The shelf life of ICT assets is monitored via the use of asset management systems including System Centre Configuration Manager (SCCM) and the EOL / RiskIT system with CGI, who provide the management of the IT service for the Force. SCCM may be used as a basis to determine the replacement requirements of ICT assets for the Capital Programme.

11.23 An ICT project was selected from the Capital Programme to assess whether there were adequate monitoring and reporting arrangements in place. The project selected was the Control Room Technology Replacement for which the Call Routing and Resolution Project Manager was responsible for monitoring. The project commenced in May 2016 as the Call Routing and Resolution project which had its own project board and was reported on also to the Force’s Transformation and Corporate Improvement Board (TCIB). The Project Manager submitted update reports to the TCIB on behalf of the Chief Superintendent of which a sample were sighted during this review. Financial support was provided by the Finance Department’s Management Accountant. It was confirmed that regular meetings took place to discuss the budget position and a monthly budget report was produced to coincide with highlight reports to the various boards. As the majority of expenditure has been committed due to the project reaching its conclusion these meetings have become less frequent. The position of the Control Room project was confirmed as follows following the meeting with the Management Accountant on 4th February 2019 :

Revised Budget Actual to Date Forecast Income / Expenditure Forecasted Variance

£2,630,127 £1,872,115 £2,765,231 (£135,104)

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11.24 The Force’s Medium Term Financial Plan (MTFP) 2018/19-2022/13 states that the Capital Grant was cut from £0.541m to £0.462m in 2017-18, a reduction of £0.079m, following a reduction of £0.360m in the previous year. It is now expected that the figure will be frozen at £0.462m for 2018/19 and this is the figure included within the Capital Programme 2017/18-2022/23 for 2018/19 and the years beyond.

11.25 Reserves are maintained and utilised as planned with the level of reserves reducing as per the MTFP hence ensuring sufficient balances to minimise the need for external long term borrowing.


11.26 Assets are vital to the delivery of efficient services and they should be well managed and maintained. The Force has recognised the importance of effective management and delivery of the Capital Programme and the MTFP for 2018/19-2022/23 which links the Police and Crime Plan 2017-2021. The Policing Priorities have been documented setting out the principles that underpin the delivery of the Capital Programme and how it will contribute to the delivery of the Police and Crime Plan.

11.27 Ineffective management of the costs and delivery of the Capital Programme could result in financial loss and reputational damage to the Force and as such close monitoring of capital projects is evident throughout North Wales Police from operational through to corporate level.

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2018/19

The Police and Crime Commissioners for South Wales, Gwent, Dyfed Powys and North Wales and the Chief Constables South Wales, Gwent, Dyfed Powys and North Wales Police

Comparison of Welsh Language Standards Review Findings

February 2019

FINAL

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The Police and Crime Commissioners for South Wales, Gwent, Dyfed Powys and North Wales and the Chief Constables South Wales, Gwent, Dyfed Powys and North Wales Police Comparison of Welsh Language Standards Review Findings Page 1

Welsh Language Standards Review

INTRODUCTION

This document is the collation of the findings of the Welsh Language Standards reviews for the 4 Welsh Police and Crime Commissioners and Chief Constables and is provided for information only.

BACKGROUD

The Welsh Language Standards (No.5) Regulations 2016, in accordance with the Measure and approved by the Welsh Assembly Ministers in March 2016, authorise the Welsh Language Commissioner to present a compliance notice to those organisations operating within the policing and fire and rescue sector. Following the issue of the Welsh Language Commissioner’s final compliance notice to each Police and Crime Commissioner and Chief Constable in Wales on 30th September 2016 under Section 45 Welsh Language (Wales) Measure 2011 (‘the Measure’), all eight corporate soles are required to be compliant with a number of Welsh Language Standards. The notices set an imposition date for each standard to be complied with and the Welsh Language Commissioner’s enforcement powers means that failure to do so could result in a civil penalty of up to £5,000 or the issue of a court order to ensure compliance. All reviews were undertaken by TIAA at the Offices of the Police and Crime Commissioner and the Forces during 2017/18.

Please contact Clive or Vicky for further information as required.

KEY CONTACT INFORMATION

Name Contact Details

Vicky Davies Director

[email protected] 07980 787924

Clive FitzGerald Director of Audit

[email protected] 07977 447191

RELEASE OF REPORT

The table below sets out the history of this plan.

Date issued: 6th February 2019

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Welsh Language Standards Reviews’ Recommendations by Priority

Priority

Corporate Sole Recommendation 1 2 3 OEM

Police and Crime Commissioner South Wales

Work be continued on ensuring compliance with all 149 of the statutory Welsh Language Standards.

X

Publications be reviewed to confirm that where the telephone number is published, the publication also states that calls are welcome in Welsh.

X

Terms of reference be established for future working groups setting out membership, purpose, frequency of meetings, required outcomes and reporting lines.

X

Chief Constable South Wales Police

Webpages be reviewed to confirm that where the telephone number is published, the publication also states that calls are welcome in Welsh.

X

Police and Crime Commissioner Gwent

No review included as part of the internal audit annual plan for 2016/17, 2017/18 nor 2018/19.

- - - -

Chief Constable Gwent Police

No review included as part of the internal audit annual plan for2016/17, 2017/18 nor 2018/19.

- - - -

Police and Crime Commissioner Dyfed Powys*


X

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Chief Constable Dyfed Powys Police*


X

Police and Crime Commissioner North Wales

Work be continued on ensuring continued compliance with all 147 of the statutory Welsh Language Standards.

X

Chief Constable North Wales Police


X

*Both reviews were reported on within a single report for the Police and Crime Commissioner Dyfed Powys and the Chief Constable Dyfed Powys Police. Both corporate soles for the regions of South Wales and North Wales requested a separate report for each organisations.

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2018/19


Assurance Review of Expenses and Additional Payments

March 2019

FINAL

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Police and Crime Commissioner North Wales and Chief Constable North Wales Police Assurance Review of Expenses and Additional Payments Page 1

Executive Summary


There are generally sound arrangements in place for authorisation and payment of allowances and expenses.

Expenses are often authorised with no receipts attached. A control needs to be put in place to avoid employees holding on to

claims for several months before submitting.

No evidence was available that the Force holds details of individuals’ car insurance documents.

Guidance needs to be provided to staff on extracting data from the expenses system.

SCOPE ACTION POINTS

The review checked compliance with the expenses and additional payments policy and procedure. The scope of the review did not include any other aspect of the Payroll arrangements.


0 5 2 0

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PRIORITY GRADINGS








Responsible Officer

(Job Title)

1 Compliance Sample testing of 25 expense items identified a number of items which had been claimed via the expenses system which did not have a supporting receipt attached to the system.

A reminder be sent to staff and line managers that a receipt is required to be submitted with expense claims and that claims are not to be approved in the absence of a receipt to support the expenditure.

2 A communication shall be drafted by the Payroll department reminding staff that a receipt must be submitted with expense claims. This will then be communicated by the DFR. Those which do not have a receipt, line managers will be required to challenge and to provide mitigation as to why a receipt was not included.


3 Compliance North Wales Police has not stipulated a time limit in relation to the timeliness of claims in its Policy. It is however advised that managers are reminded of the best practice that claims should be submitted and authorised within three months.

A reminder be sent to managers to in relation to their responsibility to ensure timely submission and authorisation of expense claims.

2 Reminder to be included in communication proposed in 1.


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PRIORITY GRADINGS







Responsible Officer

(Job Title)

4 Compliance In order to claim mileage expenses, employees must have a car set up on the system by the Payroll Team. A sample of four individuals who have claimed mileage was sampled for which the Payroll Team was able to locate a copy of the insurance certificate (with business use) for only one.

An arrangement be established for the secure storage of copies of individuals’ car insurance documents ensuring a robust audit trail.

2 This is generating additional work for the payroll department and the force should now revert to a generic car model on the payroll system that will allow calculation of expenses claimed. Payroll to not hold copies of individual insurance documentation. Reminder to be sent to staff and staff made aware of commencement of employment the need for business insurance. When submitting expenses claims officers and staff will be asked to confirm that they have business insurance. Force policy to be updated and the work force will be updated regarding this change.


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PRIORITY GRADINGS







Responsible Officer

(Job Title)

5 Operational During the review a number of issues were encountered with the reporting tools within the new Expenses 2 module. The Payroll Manager advised that the reporting functionality of the system was not being used to full effect and that staff would benefit from further training in this area. This was evidenced during the audit by the delays in provision of information from the system.

Further training or guidance be provided in writing reports and extracting data from the system.

2 Our recommendation is for Payroll to be upskilled in running reports and ensuring all reports are written by the appropriate trained person. In this case the HR Analyst or support from the MI team. Report requirements to be created and then work to be completed with the appropriate team.


7 Reputational The Expenses & Allowances Policy states that the Shared Service Facility (SSF) Payroll will undertake audit checks on a monthly basis to ensure expense claims comply with the Policy. The Payroll Manager advised that no dip-sampling has been undertaken to date, since the new expenses system was implemented, due to resource constraints

Monthly dip-sampling of expenses be undertaken as required by the Expenses and Allowances Policy.

2 Payroll shall undertake a dip sample of 5% per month and also those of high volume. Those which are inaccurate or generate concern, communication to be made with the claimant and the line manager for clarification.


2 Compliance Although North Wales Police has not stipulated a time limit in relation to the timeliness of claims in its Policy, the Payroll Manager advised that the system presents a warning if claims are being submitted which are dated back further than three months.

A best practice point be incorporated within the Expenses and Allowances Policy to encourage staff to submit expense claims within three months.

3 The policy will be updated to incorporate a best practice point to encourage officers and staff to submit expense claims within three months.


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PRIORITY GRADINGS







Responsible Officer

(Job Title)

6 Operational Consideration should be given to the identification of the monthly reports that will be required for monitoring and control purposes and arrangements made for these to be set up as part of the standard suite of reports available from the system.

A suite of often used reports be developed to reduce the need for creating reports.

3 Report types to be identified, created and to be made available.


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ADVISORY NOTE






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Detailed Findings

Introduction

1. This review was carried out over the period November 2018 to January 2019 as part of the planned internal audit work for 2018/19. Based on the work carried out an overall assessment of the overall adequacy of the arrangements to mitigate the key control risk areas is provided in the Executive Summary.

Background

2. The process for Expenses and Additional Payments is overseen by the Payroll Manager and the Payroll Team. The Payroll Manager reports to the Shared Service Facility (SSF) Manager. Ultimate responsibility for expenses and additional payments lies with the line managers and claimants themselves. Line managers are expected to authorise overtime and expenses bearing in mind best use of public money principles thus ensuring value for money. Expenses and Additional Payments is a key financial risk area completed every two years.

Materiality

3. Employee costs are the largest item of expenditure for police forces. It is therefore important that there are controls in place to ensure accurate, timely and valid payments are made in accordance with individuals’ conditions of employment. The Payroll record shows that £1,250,994.90 has been paid in expenses and additional payments from the 1st April 2018 to date of review (November 2018). This figure does not include elements of pay that are considered to be fixed, for example weekend-working allowance and shift allowance which are not claimed on a monthly basis and are included within an employee’s terms and conditions of employment.




5. The review checked compliance with the expenses and additional payments policy and procedure. The scope of the review did not include any other aspect of the Payroll arrangements.


Disclaimer


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Risk Area Assurance Assessments 8. The definitions of the assurance assessments are:





Acknowledgement


Release of Report


Date draft report issued: 12th February 2018

Date management responses rec’d: 28th February 2019

Date final report issued: 5th March 2019

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11.1 This is TIAA’s first full review of Expenses and Additional Payments at North Wales Police. The area has been covered in past thematic reviews, the main one being the review of the Eastern Area – Command Unit in May 2017.

11.2 The Eastern Area – Command Unit review presented two recommendations in relation to expenses, as follows:

Recommendation Priority Latest Update

Dip-sampling of expense claims for accuracy and checking to receipts be re-instated in accordance with procedures and to ensure internal control is evident.

1 North Wales Police undertook retrospective check of all individuals who had a claim paid during the period September 2016 to July 2017, which totalled 1,639 claims. The recommendation is currently marked as being implemented by North Wales Police noting that an Expenses Audit Position statement was finalised in September 2018 and discussed with the Director of Finance and Resources, Head of Finance and the Chief Finance Officer (Office of the Police and Crime Commissioner). The statement outlines the findings of the retrospective check and proposes recommendations for the future.

The process for dip-sampling expenses claims be formally documented with the number or percentage to be selected and to include a cross section of divisional and senior management.

3 This recommendation was marked as being implemented and closed by TIAA during the 2017/18 Follow-up review due to North Wales Police advising that the new Expenses 2 module went live on the 3rd April 2018 whereby all staff are now able to attach receipts to all claims and submit to their line manager for full authorisation prior to submission to the Shared Service Facility (SSF) for processing. Line managers are now authorising all claims prior to final submission.

11.3 Prior to April 2018, expense claims were submitted by employees using the HR Self Service Portal and claims were not subject to line manager authorisation. North Wales Police has upgraded the ResourceLink software and now supervisor authorisation is required before a claim is submitted. The system also enables claimants to attach documents, such as receipts, to claims.

11.4 With the implementation of the new system, North Wales Police has developed a HR Self Service Expenses Input User Guide (dated July 2018) which is available to staff via the HR Self-Service Portal. There is also a corresponding Expenses & Allowances Policy (effective from the 12th July 2018 and due to be reviewed on the 31st January 2019) which the User Guide supports. The Continuous Improvement Officer, who was the Policy writer, advised that as the system was new and the subject matter was one of great interest and debate, a review date close to the launch date was reflected.

11.5 The Expenses & Allowances Policy states that its purpose is to provide clarity for all concerned around the provision of cash advances, claiming and audit of expenses for any associated business journey whether inside or outside the Force area. The Policy states that it is essential that arrangements for claiming and reimbursing properly incurred expenses are internally and externally transparent.

11.6 North Wales Police will reimburse expenditure incurred by Police Officers and Police Staff in the course of duty provided it is necessary, reasonable, in addition to what the employee would have otherwise incurred and backed by a receipt (a VAT receipt where applicable).

11.7 North Wales Police’s Expenses and Allowances Policy has been prepared in accordance with the Police Regulations 2003 which are the terms and conditions set out in law by Parliament in order to govern and protect police officers.

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11.8 The Expenses and Allowances Policy states that claimants should ensure all VAT receipts, if applicable, are retained for a period of 7 years and that where possible VAT receipts should be obtained with itemised amounts. This enables the Force to reclaim VAT and hence reduce the cost to the Force.

11.9 The HR Self Service Expenses Input User Guide states that receipts can be attached electronically to all expenses claims being submitted where a receipt is required as proof of purchase. Where no receipt has been obtained, a file note should be attached providing a full explanation. Once claims have been authorised and the receipts attached, the originals can be destroyed. Retaining electronic copies of theses receipts will satisfy HMRC guidelines.

11.10 Sample testing of 25 expense items identified a number of items which had been claimed via the expenses system which did not have a supporting receipt attached to the system, including:

• Books, two transactions, however explanatory notes were included to detailed what was purchased;

• Hotel bills;

• Subsistence Away From Normal Place of Work, however included a detailed explanation of what was purchased;

• Public Transport (two transactions for train tickets).

Recommendation: 1 A reminder be sent to staff and line managers that a receipt is required to be submitted with expense claims and that claims are not to be approved in the absence of a receipt to support the expenditure.

Priority 2

11.11 The attachment of receipts to the system will also facilitate the Payroll Team in their monthly dip-sampling of expenses as they will otherwise be required to request a copy of the receipts from individuals. Dip-sampling of claims will be discussed further in the Reputational Risk section of this report.

11.12 It was noted during the sample testing that the narrative included within the description field of claims was detailed, providing a clear explanation of what was being claimed for and when.

11.13 Further testing of 30 additional payment elements was tested which included Acting Up, Housing Allowance, Overnight Allowance, Weekend Working, Overtime, Unsocial Hours and Stand By payments. This identified that all were appropriately authorised however, some had not been claimed and reimbursed in a timely manner with, on occasions, claims relating to a period of 18 months being paid at the same time, spanning two financial years. This poses a risks in relation to budget management and also the validity of each claim as the time between incurring the expense and authorisation is significant.

11.14 North Wales Police has not stipulated a time limit in relation to the timeliness of claims in its Policy. The Payroll Manager however advised that the system presents a warning if claims are being submitted which are dated back further than three months. It was noted however, that there is no time limit on paying expenses and therefore all expenses and additional payments will be paid regardless of which period they were incurred.

Recommendation: 2 A best practice point be incorporated within the Expenses and Allowances Policy to encourage staff to submit expense claims within three months.

Priority 3

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11.15 It is also advised that managers are reminded of the best practice that claims should be submitted and authorised within three months.

Recommendation: 3 A reminder be sent to managers to in relation to their responsibility to ensure timely authorisation of expense claims.

Priority 2

11.16 For the authorisation of claims, the claimant keys in the payroll number of another member of staff for the claim to be sent to them for authorisation. The authorisation function on the expenses forms is only provided to line managers and it is advised that staff/officers only send claims to the manager who has given them the initial authorisation for the expense. When the member of staff is inputting the payroll number of the authoriser the application checks to ensure that the authoriser is a current member of staff; if they are not, the system shows an error message that the pay number is incorrect. Should the member of staff input a payroll number of someone who is not an authoriser, the recipient cannot access the form to authorise it and the sender will have to withdraw the claim and re-send to an authoriser. The Payroll Manager advised that Police Officers should be selecting their line manager for the particular operation that relates to the claim, with Police Staff selecting their usual line manager as per the reporting structure. Should the usual line manager be absent, it is possible to re-assign the responsibility within the system to a second line manager and the claim will be resubmitted to the other manager. The Payroll Team’s staff advised that the onus is on the claimant to rearrange this in a timely manner. When an expense claim has been submitted to the nominated Authoriser, an automated email notification is sent to their mailbox informing them of the requirement to log into the HR Self Service and review the submitted expense.

11.17 Sample testing identified no issues in relation to the hierarchical authorisation of claims, with the role of the authoriser being more senior to the claimant in each case.

11.18 Claims may be rejected at line manager level and it was advised by the Payroll Team’s staff that these rejections are not visible to the Payroll Team in the system. In those cases the claimant is informed that the claim has been rejected and must submit another claim in its place.

11.19 The HR Self Service Expenses Input User Guide states that prior to making any expense claim for car mileage, the following supporting information is required:

• The vehicle registration details;

• Valid motor vehicle insurance certificate(s) which provides confirmation of business use / cover.

11.20 The Payroll Manager further advised that it is not possible to claim mileage costs without first having a car set up on the system and for the Payroll Team to do that the above information must have been received. Employees are able to have more than one car registered, provided they have shown evidence of having business insurance cover on all vehicles.

11.21 A sample of four individuals who have claimed mileage was sampled for which the Payroll Team were able to locate a copy of the insurance certificate (with business use) for only one.

Recommendation: 4 An arrangement be established for the secure storage of copies of individuals’ car insurance documents ensuring a robust audit trail.

Priority 2

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11.22 All personal expenses (for example mileage, subsistence and professional fees), overtime, acting up claims, excess travel and unsocial hours are now claimed electronically at North Wales Police, with no exceptions other than those who do not have access to a computer during the course of their work (for example Cleaners or seconded staff). This significantly reduces the administrative duties of line managers and the Payroll Team and also reduces cost.

11.23 The Portal requires that all individuals include the following when submitting a claim:

• the date;

• a Group (selected from a drop down list, for example car mileage, medical or other expenses/subsistence);

• a Type (selected from a drop down list, for example hotel bill, overnight allowance or public transport);

• a Description (free text);

• the value;

• whether a receipt is attached (Y/N).

11.24 All the above are mandatory fields whereby a claim will not be submitted without their completion. This strengthens the audit trail for claims whereby manual omission is avoided in comparison with paper-based claims.

11.25 All expenses must be authorised by a line manager. The electronic system allows for a second line manager to be specified in the absence of the usual line manager. When an expense claim has been submitted to the nominated Authoriser, an automated email notification is sent to their mailbox requesting them to log into HR Self Service and review the submitted expense claim in full. The Authoriser may accept or reject a claim; if rejecting, the system requests that the Authoriser provides a summary in relation to the reason why as this will be informative for the claimant. Before the implementation of Expenses 2 in April, there was no line manager authorisation for expenses and the process for checking accuracy was dependent on dip sampling undertaken by the Payroll Team.

11.26 Petty Cash must now only be used for emergency operational reasons and must not be used to reimburse expenses.

11.27 During the review a number of issues were encountered with the reporting tools within the new Expenses 2 module. The Payroll Manager advised that the reporting functionality of the system was not being used to full effect and that staff would benefit from further training in this area. This was evidenced during the audit by the delays in provision of information from the system.

Recommendation: 5 Further training or guidance be provided in writing reports and extracting data from the system.

Priority 2

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11.28 Further consideration should also be given to the identification of the monthly reports that will be required for monitoring and control purposes and arrangements made for these to be set up as part of the standard suite of reports available from the system.

Recommendation: 6 A suite of often used reports be developed to reduce the need for creating reports.

Priority 3


11.29 North Wales Police recognises that the Competency and Values Framework for Policing should be adhered to when claiming expenses, requesting cash advances or claiming for an entitled allowance and this is stated within its Expenses and Allowances Policy. All claims should be submitted with honesty, integrity and accountability.

11.30 The Policy further states that SSF Payroll will undertake audit checks on a monthly basis to ensure expense claims comply with the Policy and that all anomalies / non-compliance will be investigated with the claimant concerned referred to senior management as appropriate and will be reported to the Professional Standards Department. If an expense claim is found not to comply with the Policy it will be recovered from the claimant via payroll with no repayment programme permitted.

11.31 The Payroll Manager advised that no dip-sampling has been undertaken to date, since the new expenses system was implemented, due to resource constraints.

Recommendation: 7 Monthly dip-sampling of expenses be undertaken as required by the Expenses and Allowances Policy.

Priority 2

11.32 North Wales Police is committed to reducing the environmental, financial and social impacts of its business travel and therefore the Expenses and Allowances Policy states that prior to commencing any travel, staff should refer to the Fleet – Transport Decision Tree to determine if there are any alternative options such as conducting a meeting through the use of audio of video conferencing facilities, using public transport or making use of a pool vehicle.

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Internal Audit

DRAFT

March 2019


Audit Strategy and Annual Internal Audit Plan

2019/20

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Annual Internal Audit Plan 2019/20 Page 1

Overview

Introduction

The Audit Plan for 2019/20 has been developed by carrying out an update audit risk assessment to ensure that the planned coverage for the year is focussed on the key audit risk areas and that the coverage will enable an annual Head of Audit Opinion to be provided in the Annual Report.

Key Emerging Themes

This year will be another challenging year for Police organisations in terms of funding and also the pressures on service delivery. We have identified a number of key areas which require consideration when planning internal audit coverage.

Adequacy of the planned audit coverage

The Fundamental reviews identified in the audit plan for 2019/20 support the Head of Audit’s annual opinion on the overall adequacy and effectiveness of the organisation’s framework of governance, risk management and control as required by the Public Sector Internal Audit Standards (PSIAS). The organisational reviews have been identified from your risk registers, discussions with senior management and key emerging themes.

2019/20 Audit planning process

• Brexit – The Business Plan and Risk Register need to be stress-tested against continuing uncertainty, which may have knock-on impacts on recruitment and retention of staff and on procurement and suppliers.

• Data Protection Act 2018 – this has a significant impact on how data is held and protected and could lead to an increase in access requests.

• Cybercrime – all the indications are that there will be continued and more sophisticated attempts to disrupt and deny services often for no clear motive.

• Collaboration - continuing collaboration across the Police and other public sector bodies.

• Joint working – closer working ties with other Police and Crime Commissioners and Forces.

• Strategic reviews – The ongoing changes in operational delivery models across the organisation.

• Financial pressures – ongoing funding pressures. • Training – HR issues such as wellbeing and mental health. • Transformation – Digitalisation Mobile and agile working

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Internal Audit Plan

Audit Strategy Methodology

We adopt a proprietary risk based approach (GUARD) to determining your audit needs each year which includes reviewing your risk register and risk management framework, previous internal audit work for the organisation, the Regulatory Framework and assessment of the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police, external audit recommendations together with key corporate documentation such as your Police and Crime Plan, , the Chief Constable’s Delivery Plan and financial regulations. The Audit Strategy is based predominantly on our understanding of the inherent risks facing the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police and those within the sector and has been developed with senior management.

Risk Prioritisation

Each year an updated risk assessment is carried out to ensure the Audit Strategy remains fully aligned with the key risks facing the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police. The resultant changes for 2019/20 which underpin your Audit Plan is set out at Annex A.

Audit Strategy and Annual Plan

Following the risk prioritisation review, the Audit Strategy has been updated (Annex B) and the Annual Plan (Annex C) sets out the reviews that will be carried out, the planned times and the scopes for each of these reviews.

The Annual Plan will be subject to ongoing review and could change as the risks change for the organisation and will be formally reviewed with senior management and the Joint Audit Committee mid-way through the financial year or should a significant issue arise.

The overall agreed time for the delivery of the Annual Plan includes: research, preparation and issue of terms of reference, production and review of working papers and reports and site work. The Annual Plan has been prepared on the assumption that the expected controls will be in place.

The total number of days required to deliver the Audit Plan is as agreed in the contract between TIAA and the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police. This number of days is fixed and it is

TIAA’s responsibility to deliver the Audit Plan for this number of days. Where The Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police agrees additional work the required number of days and the aggregate day rate will be agreed in advance with the Director of Finance and / or the Chief Finance Officer and will be clearly set out in the terms of reference for the additional review(s).

Audit Remit

The Audit Remit (Annex D) formally defines internal audit’s purpose, authority and responsibility. It establishes internal audit’s position within the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police and defines the scope of internal audit activities.

Reporting

Assignment Reports: A separate report will be prepared for each review carried out. Each report will be prepared in accordance with the arrangements contained in the Terms of Reference agreed with TIAA and which accord with the requirements of TIAA’s audit charter and the Public Sector Internal Audit Standards.

Progress Reports: Progress reports will be prepared for each Joint Audit Committee meeting. Each report will detail progress achieved to date against the agreed annual plan.

Annual Report: An Annual Report will be prepared for each year in accordance with the requirements set out in TIAA’s audit charter and the Public Sector Internal Audit Standards. The Annual Report will include our opinion of the overall adequacy and effectiveness of the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police’s governance, risk management and operational control processes.

Other Briefings: During the year Client Briefing Notes, Benchmarking and lessons learned digests will be provided. These are designed to keep the organisation abreast of in-year developments which may impact on the governance, risk and control assurance framework.

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Assurance Mapping

For each assurance review an assessment of the combined effectiveness of the controls in mitigating the key control risks will be provided. The assurance mapping process is set out in Annex E.

Liaison with the External Auditor

We will liaise with the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police’s External Auditor. Any matters in the areas included in the Annual Plan that are identified by the external auditor in their audit management letters will be included in the scope of the appropriate review.

Performance

The following Performance Targets will be used to measure the performance of internal audit in delivering the Annual Plan:

Area Performance Measure Target

Achievement of the plan

Completion of planned audits. 100%

Audits completed in time allocation. 100%

Reports Issued

Draft report issued within 10 working days of exit meeting.

95%

Final report issued within 10 working days of receipt of responses.

95%

Professional Standards Compliance with TIAA’s audit charter and the Public Sector Internal Audit Standards

100%

Quality Percentage of draft report recommendations accepted

100%

Positive responses to satisfaction survey 100%

Conflict of Interest

We are not aware of any conflicts of interest and should any arise we will manage them in line with TIAA’s audit charter and the Public Sector Internal Audit Standards, the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police’s requirements and TIAA’s internal policies.

Limitations and Responsibility

Substantive testing will only be carried out where a review assesses the internal controls to be providing ‘limited’ or ‘no’ assurance with the prior approval of the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police and additional time will be required to carry out such testing. The Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police is responsible for taking appropriate action to establish whether any loss or impropriety has arisen as a result of the control weaknesses.

Internal controls can only provide reasonable and not absolute assurance against misstatement or loss. The limitations on assurance include the possibility of one or more of the following situations, control activities being circumvented by the collusion of two or more persons, human error, or the overriding of controls by management. Additionally, no assurance can be provided that the internal controls will continue to operate effectively in future periods or that the controls will be adequate to mitigate all significant risks that may arise in future.

The responsibility for a sound system of internal controls rests with management and work performed by internal audit should not be relied upon to identify all strengths and weaknesses that may exist. Neither should internal audit work be relied upon to identify all circumstances of fraud or irregularity, should there be any, although the audit procedures have been designed so that any material irregularity has a reasonable probability of discovery. Even sound systems of internal control may not be proof against collusive fraud.

Reliance will be placed on management to provide internal audit with full access to staff and to accounting records and transactions and to ensure the authenticity of these documents.

The matters raised in the audit reports will be only those that come to the attention of the auditor during the course of the internal audit reviews and are not necessarily a comprehensive statement of all the weaknesses that exist or all the improvements that might be made. The audit reports are prepared solely for management's use and are not prepared for any other purpose.

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Joint Audit Committee Responsibility

It is the responsibility of the Joint Audit Committee to determine that the number of audit days to be provided and the planned audit coverage are sufficient to meet the Committee’s requirements and the areas selected for review are appropriate to provide assurance against the key risks within the organisation.

Release of Report

The table below sets out the history of this plan.

Date plan issued: 12th March 2019

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Annex A: GUARD Risk Analysis Changes for 2019/20

In addition to the core audit work required to underpin the Head of Audit Annual Opinion (governance, risk management, core financial systems, network controls, follow up etc.) a GUARD assessment of key risks has been completed, to identify those that are most relevant to the organisation and where internal audit assurance would be best focussed. These are summarised below.

GUARD Risk Analysis

Risk Areas Registered

Provider Specific

TIAA National

Intelligence Assessment

Updated Guard Assessment

Cross Ref to Annual &

Strategic Plan (Annex B, C)

Brexit – There is likely to be significant uncertainty and potential fast-emerging risks developing as a result of the UK leaving the EU in March 2019, which will not be fully understood until after the departure date. How we intend to review this risk: We will assess the extent that the Business Plan and Risk Register have been stress-tested against the continued uncertainty. We will consider the actions taken by the organisation to prepare for Brexit and to mitigate the impact of known Brexit issues such as the availability of labour, procurement, and the increased cost of materials and the supply of materials.

No – contingency

days are available

Data Protection Act 2018 – This will be an ongoing issue and source of risk for all organisations given the regulatory and public expectation about how data is held and protected, together with a likely increase in access requests. How we intend to review this risk: We will assess the organisation’s arrangements for storing hardcopy and electronic information that is covered under the Act and how it is managed to ensure its accuracy and completeness. We will consider responsibilities for managing data including awareness among the wider staff base on processing and providing data. Our approach also includes the arrangements in place for effectively dealing with access requests within the prescribed timeframe.

No – reviewed in 2018/19

Cybersecurity – All the indications are that there will continue to be more sophisticated hacking attempts designed to disrupt or deny services, often for no clear motive. How we intend to review this risk: We will consider the practical and technical security measures that the organisation has deployed to minimise the risk of succumbing to a cyber incident. We will also consider the extent to which staff awareness has been addressed to minimise the risk of behaviours giving rise to a cyber incident.

Yes included in 2019/20

Funding pressure – despite improvements in the funding for Police services this will remain a high risk for some time. How we intend to review this risk: We will consider the extent to which funding pressures impact upon the governance, risk and control framework for the organisation.

Yes included in 2019/20

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GUARD Risk Analysis

Risk Areas Registered

Provider Specific

TIAA National

Intelligence Assessment

Updated Guard Assessment

Cross Ref to Annual &

Strategic Plan (Annex B, C)

Government consultation “Policing for the Future” (October 2018) – This wide-ranging report examines changing demands on policing, and considers the extent to which the service is able to meet the challenges that these create. How we intend to review this risk – This is potentially an emerging risk on which TIAA will provide client briefing notes at key points during implementation, if appropriate.

No – through client briefings

Client Specific Risks

Collaboration – increased continuing collaboration across the Police and other public sector bodies and greater joint working with other Forces and the Office of the Police and Crime Commissioner. How we intend to review this risk – We will look at the governance arrangements underpinning the relationships with partners and other forces ensuring clarity of roles, objectives, outcomes and reporting and costs.

Yes - 2019/20

Strategic reviews – The ongoing changes in operational delivery models across the organisation. How we intend to review this risk – We will review change management arrangements and the project management of the proposed changes.

Yes – 2019/20

Staff Wellbeing -There is increasing focus and drive on workplace health, which is becoming a more prominent area for review. How we intend to review this risk – we will consider the Force’s wellbeing strategy, its implementation and the assessment of its impact on staff and officer absence

Yes – 2019/20

Limited or no assurance in previous year – A compliance review of the processes will be carried to ensure the recommendations have been fully implemented following a limited assessment in 2018/19, with identified areas that may require a full audit in 2019/20.

Yes – 2019/20

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Key to Risk Assessment Grades:

High Medium Low

RP Specific The control framework relating to the specific area has been identified as ‘High’ risk as per Assurance Framework, senior management, internal and external audit. ‘Medium’ priority determines that the control framework has been identified as reasonably vulnerable to control weaknesses based on discussions with management, internal and external audit. ‘Low’ priority means that review of the control framework has not revealed any significant issue.

TIAA portfolio Across our client portfolio of similar types of housing providers, our intelligence has tracked a large or growing (‘High’ priority); mid-range or flat line (‘Medium’ priority); or relatively low or decreasing (‘Low’ priority) number of control issues in this specific area for this type of organisation.

National Policy/Issue

National bodies ((including the Her Majesty’s Inspectorate of Constabularies and Fire and Rescue Services (HMICFRS)) have identified a growing or high level of control weaknesses (‘High’ priority); mid-range or flat line (‘Medium’ priority); or relatively low or decreasing (‘Low’ priority) in this specific area. There may also be a national policy emphasis on a specific area which will be reflected in this priority rating.

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Annex B: Rolling Strategic Plan Fundamental Review Areas To support the Head of Internal Audit opinion

Risk Ref. Type 2019/20 2020/21 2021/22

Governance

Key governance areas will be reviewed on a rotational basis each year such as strategic planning, strategic control, regulatory compliance, performance management, board assurance framework, partnership working, management of conflicts, health and safety, subsidiary governance and third party assurances.

• Yr 1: Corporate Communications Assurance

• Yr 1: Community Engagement Assurance

• Yr 2:Strategic Planning Assurance

• Yr 2: Collaborations Assurance

• Yr 3: Performance Management Assurance

• Yr 3: Health and Safety Management Assurance

Risk

A robust risk management framework is critical to all organisations to ensure risks are effectively management and emerging risks identified our cyclical annual reviews will cover embedding risk, risk identification, risk mitigation and risk workshops. A Risk Management – Mitigating Controls audit will be undertaken each year.

Compliance

Year 1 will also include a review of Board Assurance Appraisal

Financial systems - Cost Control and Income Maximisation

Cost control, income maximisation and robust financial systems are essential to financial well-being of any organisation. Our reviews of key financial systems are designed to ensure compliance with Public Sector Internal Audit Standards and help protect against potential frauds. We will carry out a high level review of key financial systems each year supported by a rolling programme of financial system reviews. such as

• Budgetary Control Assurance

• Treasury Management Assurance

• General Ledger Assurance

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Fundamental Review Areas To support the Head of Internal Audit opinion

Risk Ref. Type 2019/20 2020/21 2021/22

• Payroll Assurance

• Creditors Assurance

• Debtors Assurance

• Fixed Assets Assurance

• Pensions Assurance

• Expenses and Additional Payments Compliance

• Capital Programme Assurance

• Counter Fraud Compliance

Workforce Management

The largest area of expenditure of the Force responsible for the delivery of the Police and Crime Plan and the Chief Constable’s delivery plan. Audit work will consider the HR Strategy; Organisational Development and the Wellbeing Strategy.

• Year 1 will focus on Wellbeing and Strategy Assurance

• Year 2 will focus on Organisational Development Assurance

• Year 3 will consider HR Strategy Assurance

Estates and Fleet

Estates and the Fleet will receive audit coverage as key areas of expenditure for the Force.

• Estates Management – Delivery Compliance

• Fleet Management - Strategy Appraisal

• Fleet Management - Repairs Compliance

• Fleet Management - Fuel Compliance

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Fundamental Review Areas To support the Head of Internal Audit opinion

Risk Ref. Type 2019/20 2020/21 2021/22

ICT

We will use our GUARD risk assessment to continue to review ICT risks and controls in place within the organisation. The rolling programme of reviews will include data protection, ICT governance, ICT management and business support, application reviews, network security, data quality and cyber security.

• Cyber Security Assurance

• Change Management Assurance

• Infrastructure Review Appraisal

• Data Assurance Assurance

• Network Security Assurance

• EUGDPR Compliance

Follow Up

We will carry out a continuous follow up of internal audit recommendations utilising TIAA’s client portal and recommendation tracker. Updates will be provided to each Committee.

Follow Up

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Organisational Review Areas BAF / Risk Ref. Type 2019/20 2020/21 2021/22

Collaborative projects Assurance

Central Area – Command Unit Compliance -

Eastern Area – Command Unit Compliance - -

Property Subject to Charge Compliance - -

Commissioner’s Grants Appraisal - -

Vetting Appraisal - -

Western Area – Command Unit Compliance - -

Contract Management Assurance

Management and Planning

Briefings -

Planning -

Annual Report -

Management -

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Annex C: Annual Plan – 2019/20

Quarter Audits Type Days Rationale and Scope

1 Governance – Community Engagement Assurance 10 Rationale Key area of Governance, part of a rolling programme of Governance reviews. Scope The review will consider the effectiveness of the Community Engagement strategies for the Force and the Police and Crime Commissioner.

1 Fixed Assets Assurance 6 Rationale Key financial risk area completed bi-annually. The focus for 2019/20 will be on IT equipment Scope The review considers arrangements in place for the management of the laptops/desktops replacement programme including purchasing, allocation to staff/officers licensing and disposal. The review will also consider the arrangements in place to ensure that the equipment has been effectively cleansed of data prior to disposal. The scope of the review does not include consideration of the, depreciation policies or insurance arrangements.

1 HR Management – Wellbeing Strategy Assurance 7 Rationale Workforce risk area. Scope The review will appraise the arrangements for ensuring staff wellbeing.

1 Central Command Unit Compliance 8 Rationale Key risk area, included in the plan on an annual basis. Scope The review will assess compliance with the key corporate procedures for Financial, HR, Duty of Care and Service Delivery.

2 Contract Management (Building/ICT/Services/Operational Project)

Assurance 6 Rationale Key risk area, a contract management review is included in each year of the plan. Scope The review will consider the effectiveness of an operational project to be agreed.

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2 Collaborations Assurance 8 Rationale An important area for the Force that receives periodic audit coverage Scope The review considers the structure and agreements that are in place to include:

• the business planning of the collaborative working arrangements

• the roles and responsibilities

• the decision making processes and

• the performance measurement and monitoring of the partners.

2 Creditors Assurance 8 Rationale Key financial risk area completed annually Scope The review considers the arrangements for authorising and paying costs incurred by the organisation and the arrangement for control of the organisation’s cheques and automated payments. The scope does not include providing an assurance that the expenditure was necessary or that value for money was achieved from the expenditure committed.

2 Estates Management - Delivery Appraisal 6 Rationale The Estates Management Strategy was subject to review in 2018/19. Scope The review appraises: the adequacy of the arrangements for managing the Estate. The review considers the arrangements for the stock and asset condition survey, identification of need for work and replacement, scheduling the work, monitoring, and authorising payments for planned and cyclical works.

3 Governance – Corporate Communications

Assurance 10 Rationale Key area of Governance, part of a rolling programme of Governance reviews. Scope The review will consider the effectiveness of the Internal and External Communications strategies for the Force and the Police and Crime Commissioner.

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3 Debtors Assurance 6 Rationale Key financial risk area completed annually Scope The review considers the raising of debtor accounts, collection of income, receipting, storage and banking of income received by the organisation. The scope of the review does not include identification of the activities giving rise to income for the organisation, the basis of calculating the rates to be charged or that all income receivable has been identified.

3 ICT Change Management Assurance 8 Rationale ICT Risk underpins all business systems. Scope The scope of the review will include detailed testing of the documented arrangements to ensure that changes to IT systems and services are defined, risk assessed, authorised, tested, implemented and fully documented to ensure service delivery and security are not compromised.

3 Uncertainty Management – Mitigating Controls

Compliance 4 Rationale Included in each year of the Strategic Plan to ensure that there are effective controls in place for the most significant risks. The audit will consider two risks Scope Two risks currently included in the organisation’s risk map will be selected and the effectiveness of the identified controls will be reviewed. The scope of the review does not include consideration of all potential mitigating arrangements or their effectiveness in minimising the opportunities for the identified risks to occur.

3 Budgetary Control Assurance 6 Rationale Key Audit risk area completed annually. Particularly important due to the continued cuts in funding. Scope The review considers the budget preparation process, the monitoring arrangements, and reporting to the Strategy and Performance Board. The scope of the review does not include consideration of the assumptions used in preparing the budgets; depreciation policies; apportionment of central costs; or financial information included in tenders prepared by the organisation.

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3 Treasury Management Assurance 6 Rationale Joint Audit Committee requested annual coverage of this area. Scope The review considers the arrangements for controlling the investment and borrowing arrangements; compliance with the organisation’s overall policy; banking arrangements; reconciliations and the reporting to committee. The scope of the review does not include consideration of the appropriateness of any individual financial institution or broker or of individual investment decisions made by the organisation.

3 General Ledger Assurance 6 Rationale Key financial risk area completed annually Scope The review considers the arrangements for providing an effective audit trail for data entered onto the general ledger and the appropriateness of the reports generated. The scope of the review does not extend to the budgetary control arrangements and bank reconciliations.

4 Payroll Assurance 10 Rationale Key financial risk area completed annually Scope The review considers the arrangements for: the creation, amendment and deletion of payroll records; payment of allowances and pay awards; and payment of salaries. The scope of the review does not include determination of salary scales, appointment and removal of staff, severance payments or reimbursement of travel and subsistence expenses, or pension arrangements.

4 Risk Management – Board Assurance Appraisal 8 Rationale Requested by Joint Audit Committee. Key area of Governance and Risk Management. Scope Provides the Police and Crime Commissioner and Chief Constable with confidence that systems underpinning risk management are effective and can be relied upon to provide assurance that key objectives are being achieved and that the main risks to their achievement are being effectively managed. The Assurance Framework informs the completion of the annual Governance Statement and is a fundamental area for consideration for the annual Head of Internal Audit Opinion.

4 Capital Programme Assurance 8 Rationale Key financial risk area. Brought forward from 2020/21 at management’s request Scope The review considers the arrangements for accounting for the capital programme. The scope of the review does not include consideration of the funding arrangements or the specification of the projects.

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4 Cyber Security Assurance 8 Rationale Cybercrime is on the increase. Scope The review considers the arrangements for the pro-active identification, prioritising and mitigating against cyber-crime. The scope of the review does not include detailed testing to assess whether there is evidence of possible fraudulent actions.

4 Follow-up Follow up 6 Follow-up of implementation of agreed priorities one and two actions from audit reports, ensuring the Organisation is implementing recommendations, and providing reports to the Joint Audit Committee.

1-4 Contingency TBC 12

1-4 Liaison with Wales Audit Office Management 3

1 Annual Planning Management 4 Assessing the Organisation’s annual audit needs – requirement of Internal Audit Standards.

4 Annual Report Management 4 Reporting on the overall conclusions and opinion based on the year’s audits and other information and providing input to the Annual Governance Statement.

1-4 Client Portal Management The client portal provides a one stop shop of internal audit reports, progress and recommendation tracker as well as briefings, fraud alerts, fraud updates and committee briefings.

1-4 Management, Planning & Joint Audit Committee Reporting/Support

Management 22 This time includes: meeting client management, overseeing the audit plan, reporting and supporting the Joint Audit Committee liaising with External Audit and Client briefings (including fraud alerts, fraud digests and committee briefings).

Total days 190

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Role The main objective of the internal audit activity carried out by TIAA is to provide, in an economical, efficient and timely manner, an objective evaluation of, and opinion on, the overall adequacy and effectiveness of the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police framework of governance, risk management and control. TIAA is responsible for giving assurance to the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police “Governing Body” (being the body with overall responsibility for the organisation) on the adequacy and effectiveness of the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police risk management, control and governance processes.

Scope All the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police activities fall within the remit of TIAA. TIAA may consider the adequacy of controls necessary to secure propriety, economy, efficiency and effectiveness in all areas. It will seek to confirm that the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police management has taken the necessary steps to achieve these objectives and manage the associated risks. It is not within the remit of TIAA to question the appropriateness of policy decisions. However, TIAA is required to examine the arrangements by which such decisions are made, monitored and reviewed.

TIAA may also conduct any special reviews requested by the board, Joint Audit Committee or the nominated officer (being the post responsible for the day to day liaison with the TIAA), provided such reviews do not compromise the audit service’s objectivity or independence, or the achievement of the approved audit plan.

Access TIAA has unrestricted access to all documents, records, assets, personnel and premises of the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police and is authorised to obtain such information and explanations as they consider necessary to form their opinion. The collection of data for this purpose will be carried out in a manner prescribed by TIAA’s professional standards, Information Security and Information Governance policies.

Annex D: Audit Remit

Standards and Approach TIAA's work will be performed with due professional care, in accordance with the requirements of the Public Sector Internal Audit Standards.

Independence TIAA has no executive role, nor does it have any responsibility for the development, implementation or operation of systems. However, it may provide independent and objective advice on risk management, control, governance processes and related matters, subject to resource constraints. For day to day administrative purposes only, TIAA reports to a nominated officer within North Wales Police and the reporting arrangements must take account of the nature of audit work undertaken. TIAA has a right of direct access to the chair of the board, the chair of the Joint Audit Committee and the responsible accounting officer (being the post charged with financial responsibility).

To preserve the objectivity and impartiality of TIAA’s professional judgement, responsibility for implementing audit recommendations rests with the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police management.

Consultancy activities are only undertaken with distinct regard for potential conflict of interest. In this role we will act in an advisory capacity and the nature and scope of the work will be agreed in advance and strictly adhered to.

Irregularities, Including Fraud and Corruption TIAA will without delay report to the appropriate regulator, serious weaknesses, significant fraud, major accounting and other breakdowns subject to the requirements of the Proceeds of Crime Act 2003.

TIAA will be informed when evidence of potential irregularity, including fraud, corruption or any impropriety, is discovered so that TIAA can consider the adequacy of the relevant controls, evaluate the implication of the fraud on the risk management, control and governance processes and consider making recommendations as appropriate. The role of TIAA is not to investigate the irregularity unless commissioned to do so.

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Corporate Assurance Risks

We consider four corporate assurance risks; directed; compliance; operational and reputational, and tailor the type of audit accordingly. For all types of audit we also taken into account value for money considerations and any linkages to the organisational Assurance Framework. The outcomes of our work on these corporate assurance risks informs both the individual assignment assurance assessment and also the annual assurance opinion statement. Detailed explanations of these assurance assessments are set out in full in each audit report.

Assurance Assessment Gradings

We use four levels of assurance assessment: substantial; reasonable, limited and no. Detailed explanations of these assurance assessments are set out in full in each audit report.

Benchmarking

Where a similar review is carried out at a number of our clients we will subsequent to the completion of the review at each of the clients we will where relevant provide a benchmarking and lessons learned digest. This digest will include Operational Effectiveness Matters for the Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police to consider.

Annex E: Assurance Mapping

Types of Audit Review

The Annual Plan includes a range of types of audit review. The different types of review focus on one or more of the corporate assurance risks. This approach enables more in-depth work to be carried out in the individual assignments than would be possible if all four assurance risks were considered in every review. The suite of audit reviews and how they individually and collectively enable us to inform our overall opinion on the adequacy and effectiveness of the governance, risk and control arrangements is set out in the assurance mapping diagram.

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2018/19

Police and Crime Commissioner for North Wales and the Chief Constable North Wales Police

Internal Audit Charter

February 2019

FINAL

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Police and Crime Commissioner for North Wales and Chief Constable North Wales Police Internal Audit Charter Page 1

Contents

Page No.

Introduction 2

Definition of Internal Audit 2

Code of Ethics 2

Internal Audit Delivery 3

Compliance with Standards 5

Resourcing 5

Performance Management 6

Authority 6

Contacts 7

Approval 7

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Introduction The Public Sector Internal Audit Standards (PSIAS) require internal audit providers to have in place an agreed Internal Audit Charter.

The purpose of the Internal Audit Charter is to provide a formal document that defines the purpose of internal audit activity, its authority and its responsibility. It also assists the Joint Governance Board and senior management in fulfilling their oversight responsibilities in ensuring that the purpose, authority and responsibility of internal audit activity is consistent with that set out in the standards.

The Joint Audit Committee has established that TIAA is a key component of North Wales Police and the Office of the Police and Crime Commissioner’s internal assurance arrangements. This charter sets out the framework for the conduct and delivery of internal audit services provided by TIAA, and is being presented to the Joint Audit Committee for approval.

Definition of Internal Audit The PSIAS defines internal auditing as an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

PSIAS defines the mission of internal audit as being to enhance and protect organisational value by providing risk-based and objective assurance, advice and insight. The main objective of the internal audit activity carried out by TIAA is to provide, in an economical, efficient and timely manner, an objective evaluation of, and opinion on, the overall adequacy and effectiveness of the North Wales Police and the Office of the Police and Crime Commissioner’s framework of governance, risk management and control. PSIAS define the following core principles as necessary to ensure the effective professional practice of internal auditing:

• Demonstrates integrity.

• Demonstrates competence and due professional care.

• Is objective and free from undue influence (independent).

• Aligns with the strategies, objectives, and risks of the organisation.

• Is appropriately positioned and adequately resourced.

• Demonstrates quality and continuous improvement.

• Communicates effectively.

• Provides risk-based assurance.

• Is insightful, proactive, and future-focused.

• Promotes organisational improvement.

Code of Ethics TIAA’s provision of internal audit to the North Wales Police and the Office of the Police and Crime Commissioner will follow the principles set out in the Code of Ethics contained in the PSIAS, which include integrity, objectivity, confidentiality and competency.

TIAA’s internal auditors are required to follow the rules of conduct laid down in the Code of Ethics as well as related TIAA guidance and professional requirements of any professional body to which the auditor belongs.

TIAA applies on-going processes to prevent and detect breaches of the Code of Ethics; any identified breaches will be referred by the Head of Internal Audit to the North Wales Police and the Office of the Police and Crime Commissioner’s Joint Audit Committee.

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Internal Audit Delivery The internal audit function and its responsibilities are defined by the Police and Crime Commissioner and the Chief Constable (as Accountable Officer) and the Joint Audit Committee as part of their oversight and scrutiny function on behalf of North Wales Police and the Office of the Police and Crime Commissioner.

In line with PSIAS best practice, internal audit will report to the Joint Audit Committee, and will provide an overall annual opinion on the adequacy and effectiveness of the systems of risk management and internal control based on the work completed during the year to the Chief Constable and the Police and Crime Commissioner.

Consultancy activities are only undertaken with distinct regard for potential conflict of interest. In this role we will act in an advisory capacity and the nature and scope of the work will be agreed in advance and strictly adhered to. The objective of any consultancy work is to add value and improve governance, risk management and control processes. Internal audit will never take or assume management responsibility.

Where the activities of internal audit identify the potential for fraudulent activity, or there is a suspicion that a fraud has taken place, we will pass all necessary information to your counter fraud providers for advice. Where appropriate and requested to do so, we can assist in further testing to support your counter fraud service.

Internal audit must be independent of the activities that it audits so that it can give an unbiased opinion on controls. All TIAA audit staff are required to sign an annual Declaration of Independence where they are required to disclose any potential conflicts of interest. Any potential conflicts declared by staff will be reviewed by our Managing Director to ensure your service is independent.

Head of Internal Audit

The internal audit service is provided externally by TIAA. The internal audit service is headed up by a designated Head of Internal Audit and this duty will be discharged by an Audit Director from TIAA.

The Head of Internal Audit has operational responsibility for providing the function which requires independence in the planning and reporting processes and does not have responsibility for providing or managing non-audit services.

Audit Planning

The Head of Internal Audit shall submit to senior management and the Joint Audit Committee an annual internal audit plan for review and approval, including risk assessment criteria, budget and timings. The audit plan is developed based on a prioritisation of the audit universe using a risk-based methodology, and input from senior management and the Joint Audit Committee. Any significant deviation from the formally approved audit plan shall be communicated to senior management and the Joint Audit Committee for approval prior to commencement. Activity that falls outside the scope of the plan will not be undertaken without express authorisation from the Director of Finance and Resources, Chief Finance Officer (CFO) and Chair of the Joint Audit Committee. The planning process will take account of other assurance sources and co-ordinate relative audits as appropriate, including external audit and counter fraud.

The Head of Internal Audit will assess whether the resources available are sufficient to produce a robust opinion on the internal control environment. If the resources are insufficient, this will be reported to senior management and the Joint Audit Committee.

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Audit Scope

The scope of internal audit encompasses the examination and evaluation of the adequacy and effectiveness of the organisation's governance, risk management process, system of internal control, and the quality of performance in carrying out assigned responsibilities to achieve the organisation's stated goals and objectives. There are inherent limitations in any system of internal control and thus errors or irregularities may occur and not be detected by internal audit work. The following limitations apply:

• Internal controls can only provide reasonable and not absolute assurance against misstatement or loss. The limitations on assurance include the possibility of one or more of the following situations, control activities being circumvented by the collusion of two or more persons, human error, or the overriding of controls by management. Additionally, no assurance can be provided that the internal controls will continue to operate effectively in future periods or that the controls will be adequate to mitigate all significant risks that may arise in future.

• The responsibility for a sound system of internal controls rests with management and work performed by internal audit should not be relied upon to identify all strengths and weaknesses that may exist. Neither should internal audit work be relied upon to identify all circumstances of fraud or irregularity, should there be any, although the audit procedures have been designed so that any material irregularity has a reasonable probability of discovery. Even sound systems of internal control may not be proof against collusive fraud.

• Managing the risk of fraud is the responsibility of management. Management is responsible for instituting appropriate measures to ensure that an adequate system of control has been designed and is operational over all activities.

• Management is responsible for informing of the Head of Internal Audit all instances of suspected or detected fraud in order that internal audit can evaluate the impact of the fraud to inform the opinion on risk management, control and governance.

• Reliance will be placed on management to provide internal audit with full access to staff and to accounting records and transactions and to ensure the authenticity of these documents.

• The matters raised in the audit reports will be only those that come to the attention of the auditor during the course of the internal audit reviews and are not necessarily a comprehensive statement of all the weaknesses that exist or all the improvements that might be made. The audit reports are prepared solely for management's use and are not prepared for any other purpose.

Audit Reporting

Following the conclusion of each audit a written report will be prepared. Management have an opportunity to formally respond to each report and detail the corrective action taken or to be taken in regard to the specific findings and recommendations raised; response should include allocated responsibility and timeframes for anticipated completion of each action and an explanation for any recommendations not addressed.

Individual assurance assignments are assigned audit opinions based upon a sound methodology and using accepted best practice. The opinions include:

Substantial Assurance Reasonable Assurance Limited Assurance No Assurance

There is a robust system of internal controls operating effectively to ensure that risks are managed and process objectives achieved.

The system of internal controls is generally adequate and operating effectively but some improvements are required to ensure that risks are managed and process objectives achieved..

The system of internal controls is generally inadequate or not operating effectively and significant improvements are required to ensure that risks are managed and process objectives achieved

There is a fundamental breakdown or absence of core internal controls requiring immediate action.

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Follow up

Follow up arrangements are in place to ensure that management implement corrective actions within specified timeframes. Internal audit shall be responsible for providing assurance over the appropriateness of management’s monitoring of actions to address recommendations.

Escalation

Where, in the opinion of TIAA, an issue arises which requires the urgent attention of the client, the matter will be reported to the Director of Finance and CFO without delay.

Where an audit of a high priority area is unduly delayed by the Force or Office of the Police and Crime Commissioner or by TIAA, this will be escalated to the Director of Finance, CFO and the Chair of the Joint Audit Committee.

External Audit Liaison

Effective working between internal and external auditors will help ensure effective and efficient audit coverage, resolution of mutual concerns and minimise duplication of efforts. Internal and external audit will meet periodically to plan the respective internal and external audits, discuss potential issues arising from external audit work and share the results of significant issues identified during audit work.

Compliance with Standards Public Sector Internal Audit Standards require that the Audit Function is subject to a quality assurance and improvement programme that must include both internal and external assessments.

TIAA confirms that its processes, procedures and staff comply with the professional requirements set out in the PSIAS for all work undertaken. As well as a rigorous internal review process undertaken on all work TIAA conducts, we also obtain the following external assessments:

• External independent review every five years to access our compliance with the professional standards.

• Our audit process has been assessed and accredited by CQS, and is regularly assessed for compliance by ISO accredited inspectors to maintain our ISO 9001 accreditation.

Resourcing TIAA has a sufficiently large resource pool to ensure we can deliver the agreed audit plan, cover periods of absence and bring in additional specialist skills or expertise as and when required to address critical issues in a timely way.

The Head of Internal Audit will be suitably qualified and experienced. Any change of Head of Internal Audit will be discussed with the Audit Committee. Your Head of Internal Audit is responsible for ensuring that suitably qualified and/or experienced staff and other resources are applied to all work undertaken.

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Performance Management TIAA embraces continuous monitoring of our internal audit services to drive continuous improvement. As part of this we:

• Carry out a client perception survey at least once a year; and

• Maintain a robust complaints and compliments process, embedded in our quality system.

The following Performance Targets will be used to measure the performance of internal audit in delivering the Annual Plan.

Area Performance Measure Target

Achievement of the plan Completion of Planned Audits 100%

Audits Completed in Time Allocation 100%

Reports Issued Draft report issued within 10 working days of exit meeting 95%

Final report issued within 10 working days of receipt of responses 95%

Professional Standards Compliance with PSIAS 100%

Quality Percentage of draft report recommendations accepted 100%

Positive responses to satisfaction survey 100%

Authority Subject to compliance with your security policies, TIAA internal audit staff are authorised to have full, free and unrestricted access to all functions, premises, assets, personnel, records, and other documentation and information that the Head of Internal Audit considers necessary to enable internal audit to meet its responsibilities. All employees are requested to assist internal audit in fulfilling its function in a timely manner. Internal audit shall also have free and unrestricted access to the Police and Crime Commissioner, Chief Constable, Chair of the Joint Governance Committee and Chair of the Joint Audit Committee.

Documents and information given to internal audit during a periodic review will be handled in the same prudent and confidential manner as by those employees normally accountable for them.

Requirements for detailed information needed on each assignment will be agreed with relevant senior management as part of our engagement planning process.

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Contacts Vicky Davies Helen Cargill

Director and Head of Internal Audit Director of Audit

07980 787924 07580 164851

[email protected] [email protected]

Approval

Approved this XXXXX day of XXXXX, 2018

Head of Internal Audit ________________________________________________

Chair of the Joint Audit Committee ______________________________________

Director of Finance and Resources______________________________________________

Chief Finance Officer______________________________________________

This Internal Audit Charter will be reviewed on a regular basis by the Joint Audit Committee. Any substantive changes will be formally approved by the Joint Audit Committee.

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2019 Audit Plan – North Wales Police & Crime Commissioner and Chief Constable, North Wales Police Audit year: 2018-19

Date issued: March 2019

Document reference: 1123A2019-20

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This document has been prepared for the internal use of North Wales Police & Crime Commissioner and Chief Constable, North Wales Police as part of work performed/to be performed in accordance

with statutory functions.

No responsibility is taken by the Auditor General, the staff of the Wales Audit Office or, where applicable, the appointed auditor in relation to any member, director, officer or other employee in their

individual capacity, or to any third party.

In the event of receiving a request for information to which this document may be relevant, attention is drawn to the Code of Practice issued under section 45 of the Freedom of Information Act 2000. The

section 45 Code sets out the practice in the handling of requests that is expected of public authorities, including consultation with relevant third parties. In relation to this document, the Auditor General for Wales, the Wales Audit Office and, where applicable, the appointed auditor are relevant third parties.

Any enquiries regarding disclosure or re-use of this document should be sent to the Wales Audit Office at [email protected].

We welcome correspondence and telephone calls in Welsh and English. Corresponding in Welsh will not lead to delay. Rydym yn croesawu gohebiaeth a galwadau ffôn yn Gymraeg a Saesneg. Ni fydd

gohebu yn Gymraeg yn arwain at oedi.

Mae’r ddogfen hon hefyd ar gael yn Gymraeg. This document is also available in Welsh.

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mailto:[email protected]

Contents

Page 3 of 16 - 2019 Audit Plan – North Wales Police & Crime Commissioner and Chief Constable, North Wales Police

2019 Audit Plan

Summary 4

Audit of accounts 4

Use of Resources 7

Fee, audit team and timetable 7

Appendices

Appendix 1 – Respective responsibilities 10

Appendix 2 – Criteria to assess arrangements for securing economy, efficiency and effectiveness in the use of resources 12

Appendix 3 – Other future developments 14

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2019 Audit Plan


Summary 1 As your external auditor, my objective is to carry out an audit which

discharges my statutory duties as Auditor General and fulfils my obligations under the Public Audit (Wales) Act 2004 and the Code of Audit Practice, namely to:

• examine and certify whether your financial statements are ‘true and fair’; and

• assess whether you have made proper arrangements for securing economy, efficiency and effectiveness in the use of resources.

2 The purpose of this plan is to set out my proposed work, when it will be undertaken, how much it will cost and who will undertake it.

3 There have been no limitations imposed on me in planning the scope of this audit.

4 My responsibilities, along with those of management and those charged with governance, are set out in Appendix 1.

Audit of accounts 5 It is my responsibility to issue a certificate and report on the financial statements of

both the North Wales Police & Crime Commissioner (the Commissioner) and Chief Constable, North Wales Police (the Chief Constable) which includes an opinion on their ‘truth and fairness’. This provides assurance that the accounts:

• are free from material misstatement, whether caused by fraud or error;

• comply with statutory and other applicable requirements; and

• comply with all relevant requirements for accounting presentation and disclosure.

6 I also consider whether or not the Commissioner and the Chief Constable have made proper arrangements for securing economy, efficiency and effectiveness in their use of resources and report by exception if the Annual Governance Statements do not comply with requirements.

7 Appendix 1 sets out my responsibilities in full.

8 The audit work I undertake to fulfil my responsibilities responds to my assessment of risks. This understanding allows me to develop an audit approach which focuses on addressing specific risks whilst providing assurance for the financial statements as a whole. My audit approach consists of three phases as set out in Exhibit 1.

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Exhibit 1: My audit approach

9 The risks identified from my initial audit planning work that will impact on my financial statements audit, are set out in Exhibit 2, along with the work I intend to undertake to address them. Exhibit 2 identifies risks common to both the Commissioner and the Chief Constable and, where appropriate, risks that are specific to either the Commissioner or to the Chief Constable.

Exhibit 2: financial statements audit risks

Financial statements audit risk Proposed audit response Significant risks

Management override The risk of management override of controls is present in all entities. Due to the unpredictable way in which such override could occur, it is viewed as a significant risk {ISA 240.31-33].

My audit team will: • test the appropriateness of journal

entries and other adjustments made in preparing the financial statements;

• review accounting estimates for biases;

• evaluate the rationale for any significant transactions outside the normal course of business.

10 Under the Accounts and Audit (Wales) (Amendments) Regulations 2018, the Commissioner and Chief Constable are required to produce their 2018-19 financial statements by the end of May, one month earlier than previous years. The Auditor General is also required to certify the financial statements by the end of July, two months earlier than previous years, posing a significant challenge to the Commissioner, Chief Constable and the audit team. We have worked closely with officers to further improve the arrangements for preparing and auditing the financial statements and we will continue to maintain close dialogue throughout the closedown process.

11 I do not seek to obtain absolute assurance on the truth and fairness of the financial statements and related notes but adopt a concept of materiality. My aim is to

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identify material misstatements, that is, those that might result in a reader of the accounts being misled. The levels at which I judge such misstatements to be material will be reported to the Commissioner and the Chief Constable prior to completion of the audit.

12 For reporting purposes, I will treat any misstatements below a ‘trivial’ level (five per cent of materiality) as not requiring consideration by those charged with governance and therefore I will not report them.

13 My fees and planned timescales for completion of the audit are based on the following assumptions:

• the financial statements are provided in accordance with the agreed timescales, to the quality expected and have been subject to a robust quality assurance review;

• information provided to support the financial statements is in accordance with the agreed audit deliverables document1;

• appropriate accommodation and manner;

• all appropriate officials will be available during the audit;

• you have all the necessary controls and checks in place to enable the Responsible Financial Officer to provide all the assurances that I require in the Letter of Representation addressed to me; and

• Internal Audit’s planned programme of work is complete, and management has responded to issues that may have affected the financial statements.

14 In addition to my responsibilities in respect of the audit of the Commissioner and the Chief Constable’s statutory financial statements set out above, I am also required to certify a return to the Welsh Government which provides information about the Commissioner and the Chief Constable to support preparation of Whole of Government Accounts.

Statutory audit functions 15 In addition to the audit of the accounts, I have statutory responsibilities to receive

questions and objections to the accounts from local electors. These responsibilities are set out in the Public Audit (Wales) Act 2004:

• Section 30 Inspection of documents and questions at audit; and

• Section 31 Right to make objections at audit.

16 Audit fees will be chargeable for work undertaken in dealing with electors’ questions and objections. Because audit work will depend upon the number and

1 The agreed audit deliverables document sets out the expected working paper requirements to support the financial statements and include timescales and responsibilities.

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nature of any questions and objections, it is not possible to estimate an audit fee for this work.

17 If I do receive questions or objections, I will discuss potential audit fees at the time.

Use of Resources 18 It is my responsibility to satisfy myself that the audited body has made proper

arrangements for securing economy, efficiency and effectiveness in its use of resources. Appendix 2 shows the criteria we need to assess in coming to our conclusion on your arrangements.

19 In considering these criteria I shall place reliance upon:

• the results of the audit work undertaken on the financial statements;

• the results of the work of other external review bodies, eg HMIC and the National Audit Office, where relevant to my responsibilities;

• the Commissioner and the Chief Constable’s systems of internal control, as reported in the Annual Governance Statements and my report thereon; and

• the results of other work carried out by the Auditor General and data-matching exercises.

20 We will identify audit areas where we need to supplement the audit assurance from the reliance obtained from the audit work outlined in paragraph 14. This work will relate to specific elements of the corporate governance and financial management processes in place for the Commissioner and Chief Constable and will include a focus on the financial pressures faced, the monitoring arrangements in place and the financial resilience of the Offices of the Commissioner and Chief Constable.

Fee, audit team and timetable

Fee 21 Your estimated fee for 2019 is set out in Exhibit 3.

Exhibit 3: Audit fee

Audit area Proposed fee (£)2 Actual fee last year (£) Audit of accounts 82,166 82,166 Use of Resources 4,700 4,700 Total fee 86,866 86,866

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Notes: 2 The fees shown in this document are exclusive of VAT, which is no longer charged to you. Fees are payable November 2019 to October 2020.

22 Planning will be ongoing, and changes to my programme of audit work and therefore my fee, may be required if any key new risks emerge. I shall make no changes without first discussing them with the Commissioner and Chief Constable.

23 Further information on my fee scales and fee setting can be found on our website.

Audit team 24 The main members of my team, together with their contact details, are summarised

in Exhibit 4.

Exhibit 4: My team

Name Role Contact number

E-mail address

Derwyn Owen Engagement Lead

02920 320651 [email protected]

Michelle Phoenix

Audit Manager 02920 320660 [email protected]

Dave Catherall Team Leader 02920 829339 [email protected]

25 I can confirm that my team members are all independent of the Commissioner, the Chief Constable and your officers. In addition, I am not aware of any potential conflicts of interest that I need to bring to your attention.

Timetable 26 I will provide reports, or other outputs as agreed, to the Commissioner and Chief

Constable covering the areas of work identified in this document. My key milestones are set out in Exhibit 5.

Exhibit 5: timetable

Planned output Work undertaken Report finalised 2019 Audit Plan December 2018 –

February 2019 March 2019

• Audit of Financial Statements Report • Opinion on Financial Statements • Financial Accounts Memorandum

February – July 2019 July 2019 July 2019 July 2019

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http://www.audit.wales/about-us/fee-scales-and-fee-setting


Planned output Work undertaken Report finalised Annual Audit Report for 2019 October – November

2019 November 2019

2020 Audit Plan November – December 2019

January 2020

Future developments to my audit work 27 Details of other future developments including forthcoming changes to key

International Financial Reporting Standards, the Wales Audit Office’s Good Practice Exchange (GPX) seminars and my planned work on the readiness of the Welsh public sector for Brexit, are set out in Appendix 3.

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Appendix 1


Respective responsibilities As amended by the Public Audit (Wales) Act 2013, the Public Audit (Wales) Act 2004 sets out my powers and duties to undertake your financial audit. It is my responsibility to issue a certificate and report on the financial statements which includes an opinion on:

• Their ‘truth and fairness’, providing assurance that they:

‒ are free from material misstatement, whether caused by fraud or error;

‒ comply with the statutory and other applicable requirements; and

‒ comply with all relevant requirements for accounting presentation and disclosure.

• The consistency of information in the Annual Report with the financial statements.

I must also state by exception if the Annual Governance Statement does not comply with requirements, if proper accounting records have not been kept, if disclosures required for remuneration and other transactions have not been made or if I have not received all the information and explanations I require.

The Public Audit (Wales) Act 2004 requires me to assess whether the Commissioner and the Chief Constable have made proper arrangements for securing economy, efficiency and effectiveness in the use of resources. To achieve this, I consider:

• the results of the audit work undertaken on the financial statements;

• the Commissioner and the Chief Constable systems of internal control, as reported in the Annual Governance Statements and my report thereon;

• the results of other work carried out including performance audit work and data-matching exercises;

• the results of the work of other external review bodies where relevant to my responsibilities; and

• any other work that addresses matters not covered by the above, and which I consider necessary to discharge my responsibilities.

The Public Audit (Wales) Act 2004 sets out the rights of the public and electors to inspect the Commissioner’s and the Chief Constable’s financial statements and related documents, to ask me, as the auditor questions about the accounts and, where appropriate, to challenge items in the accounts. I must also consider whether in the public interest, I should make a report on any matter which comes to my notice in the course of the audit.

My audit work does not relieve management and those charged with governance of their responsibilities which include:

• the preparation of the financial statements and Annual Report in accordance with applicable accounting standards and guidance;

• the keeping of proper accounting records;

• ensuring the regularity of financial transactions; and

• securing value for money in the use of resources.

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Management agrees to provide me with:

• access to all information of which management is aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;

• additional information that I may request from management for the purpose of the audit; and

• unrestricted access to persons within the authority from whom I determine it necessary to obtain audit evidence.

Management will need to provide me with written representations to confirm:

• that it has fulfilled its responsibilities for the preparation of the financial statements;

• that all transactions have been recorded and are reflected in the financial statements;

• the completeness of the information provided to me for the purposes of the audit; and

• to support other audit evidence relevant to the financial statements or specific assertions in the financial statements if I deem it necessary or if required by ISAs.

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Appendix 2


Criteria to assess arrangements for securing economy, efficiency and effectiveness in the use of resources

Exhibit 6: corporate arrangements

Corporate arrangements Questions on arrangements Establishing objectives determining policy and decision making

Has the Commissioner/Chief Constable put in place arrangements for setting, reviewing and implementing his strategic and operational objectives?

Meeting the needs of users, stakeholders and the local population

Has the Commissioner/Chief Constable put in place channels of communication with the local population, users of the service, and other stakeholders including partners, and are there monitoring arrangements to ensure that key messages about services are taken into account?

Monitoring and reviewing performance

Has the Commissioner/Chief Constable put in place arrangements for monitoring and scrutiny of performance, to identify potential variances against strategic objectives, standards and targets, for taking action where necessary and reporting to the Commissioner/Chief Constable?

Compliance with established policies

Has the Commissioner/Chief Constable put in place arrangements to maintain a sound system of internal control, including those for ensuring compliance with laws and regulations, and internal policies and procedures?

Operational and financial risks

Has the Commissioner/Chief Constable put in place arrangements to manage his significant business risks?

Managing financial and other resources

Has the Commissioner/Chief Constable put in place arrangements to evaluate and improve the value for money he achieves in his use of resources?

Has the Commissioner/Chief Constable put in place arrangements to ensure that his spending matches his available resources?

Has the Commissioner/Chief Constable put in place arrangements for managing and monitoring performance against budgets, taking corrective action where appropriate, and reporting the results to senior management and the Commissioner/Chief Constable?

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Corporate arrangements Questions on arrangements Proper standards of conduct etc

Has the Commissioner/Chief Constable put in place arrangements for monitoring and scrutinising performance, to identify potential variances against strategic objectives, standards and targets for taking action?

Has the Commissioner/Chief Constable put in place arrangements that are designed to promote and ensure probity and propriety in the conduct of his business?

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Appendix 3


Other future developments

A. Forthcoming key IFRS changes

Exhibit 7: changes to IFRS standards

Standard Effective date Further details

IFRS 16 leases Expected in 2020-21

IFRS 16 will replace the current leases standard IAS 17. The key change is that it largely removes the distinction between operating and finance leases for lessees by introducing a single lessee accounting model that requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. It will lead to all leases being recognised on balance sheet as an asset based on a right of use principle with a corresponding liability for future rentals. This is a significant change in lessee accounting.

B. Good Practice Exchange The Wales Audit Office’s GPX helps public services improve by sharing knowledge and practices that work. Events are held where knowledge can be exchanged face to face and resources shared on line. The main areas of work are regarding financial management, public-sector staff and governance.

Further information, including details of forthcoming GPX events and outputs from past seminars.

C. Brexit: preparations for the United Kingdom’s departure from membership of the European Union

In accordance with Article 50 of the Treaty of Rome, on 29 March 2019 the United Kingdom will cease to be a member of the European Union. Negotiations are continuing, and it currently remains unclear whether agreement will be reached on a transition period to 31 December 2020, or whether a ‘no deal’ immediate exit will take place next March.

The Auditor General has commenced a programme of work looking at the arrangements that the devolved public sector in Wales, including all NHS bodies, is putting in place to prepare for, and respond to, Britain’s exit from the European Union. This will take the form of a high-level overview to establish what is being put in place across the Welsh

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http://www.audit.wales/good-practice

http://www.audit.wales/good-practice


public sector, and what the key issues are from the perspectives of different parts of the Welsh public service.

The Auditor General intends to carry out this initial work in two tranches. In autumn 2018, he issued a call for evidence to compile a baseline summary of arrangements being put in place. This will be followed up by further audit fieldwork in spring 2019.

The aim is to produce a report in summer 2019. The report’s key messages and recommendations will be framed in the context of the UK moving to a new relationship with the European Union by the end of the planned transition period.

However, if it becomes clear that the UK is likely to leave the European Union without a Withdrawal Agreement (the ‘no deal’ scenario), we will publish a report as early as possible in 2019, ahead of the UK leaving the European Union on 29 March.

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Wales Audit Office 24 Cathedral Road Cardiff CF11 9LJ

Tel: 029 2032 0500 Fax: 029 2032 0600

Textphone.: 029 2032 0660

E-mail: [email protected] Website: www.audit.wales

Swyddfa Archwilio Cymru 24 Heol y Gadeirlan Caerdydd CF11 9LJ

Ffôn: 029 2032 0500 Ffacs: 029 2032 0600

Ffôn testun: 029 2032 0660

E-bost: [email protected] Gwefan: www.archwilio.cymru

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http://www.audit.wales/


http://www.archwilio.cymru/

Richard Muirhead Director of Finance and Resources North Wales Chief Constable North Wales Police Headquarters Glan – y - Don Abergele Road Reference NWPCC1819 Colwyn Bay Date 12 February 19 LL29 8AW Pages 1 of 18

Dear Richard, North Wales Chief Constable 2018-19 - Audit enquiries to those charged with governance and management In my 2019 Audit Plan I have noted that we are responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. It also sets out the respective responsibilities of auditors, management and those charged with governance. This letter formally seeks documented consideration and understanding on a number of governance areas that impact on my audit of your financial statements. These considerations are relevant to the management and ‘those charged with governance’. I have set out below the areas of governance on which I am seeking views. 1. Management processes in relation to:

• undertaking an assessment of the risk that the financial statements may be materially misstated due to fraud;

• identifying and responding to risks of fraud in the organisation;

• communication to employees of views on business practice and ethical behaviour; and

• communication to those charged with governance the processes for identifying and responding to fraud.

2. Management’s awareness of any actual or alleged instances of fraud. 3. How management gain assurance that all relevant laws and regulations have been complied with.

4. Whether there is any potential litigation or claims that would affect the financial statements.

5. Management processes to identify, authorise, approve, account for and disclose related party transactions and relationships. The information you provide will inform our understanding of the audited body and its business processes and support our work in providing an audit opinion on your 2018-19 financial statements.

24 Cathedral Road / 24 Heol y Gadeirlan Cardiff / Caerdydd

CF11 9LJ Tel / Ffôn: 029 2032 0500

Fax / Ffacs: 029 2032 0600 Textphone / Ffôn testun: 029 2032 0660

[email protected] / [email protected] www.audit.wales / www.archwilio.cymru

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Please contact us in Welsh or English / Cysylltwch â ni’n Gymraeg neu’n Saesneg.

I would be grateful if you could complete the attached tables in Appendices 1-3. I have included the responses you provided in 2017-18 in the attached tables for ease of reference. Your responses should be formally considered and communicated to us on behalf of both management and those charged with governance by 31 May 2018. In the meantime, if you have queries, please contact me on 07966073281 or by e-mail [email protected]. Yours sincerely

Michelle Phoenix Audit Manager

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Appendix 1 Matters in relation to fraud International Standard for Auditing (UK and Ireland) 240 covers auditors responsibilities relating to fraud in an audit of financial statements.

The primary responsibility to prevent and detect fraud rests with both management and ‘those charged with governance’. Management, with the oversight of those charged with governance, should ensure there is a strong emphasis on fraud prevention and deterrence and create a culture of honest and ethical behaviour, reinforced by active oversight by those charged with governance.

As external auditors, we are responsible for obtaining reasonable assurance that the financial statements are free from material misstatement due to fraud or error. We are required to maintain professional scepticism throughout the audit, considering the potential for management override of controls.

What are we required to do? As part of our risk assessment procedures we are required to consider the risks of material misstatement due to fraud. This includes understanding the arrangements management has put in place in respect of fraud risks. The ISA views fraud as either:

• the intentional misappropriation of assets (cash, property, etc); or

• the intentional manipulation or misstatement of the financial statements.

We also need to understand how those charged with governance (The Chief Constable) exercises oversight of management’s processes. We are also required to make enquiries of both management and those charged with governance as to their knowledge of any actual, suspected or alleged fraud, for identifying and responding to the risks of fraud and the internal controls established to mitigate them.

Enquiries of management – in relation to fraud

Question 2017-18 Response 2018-19 Response

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1. What is management’s assessment of the risk that the financial statements may be materially misstated due to fraud and what are the principal reasons?

The Police and Crime Commissioner and Chief Constable have an Anti-Fraud and Corruption policy and whistleblowing arrangements in place which manage effectively the risk of fraud and corruption. Processes for declaring interest and registers for gifts and hospitalities are maintained and updated as required.

Both the Joint Audit Committee and the Police and Crime Panel discharged fully all the functions as identified in the relevant CIPFA publication for Audit Committees

2. What processes are employed to identify and respond to the risks of fraud more generally and specific risks of misstatement in the financial statements?

From our Governance framework:

Measure: anti-fraud and corruption policies which are up to date and working effectively

Controls: LESSON LEARNED, MOU BETWEEN IA, CFO's AND PSD COMPLETED IN 15-16,safecall, PSD / etc. IPCC/ PCP, Internal Audit review of fraud and corruption arrangements - positive outcome

Measure: co-operation with the National Fraud Initiative

Controls: we participate in the NFI exercises and these are externally validated by WAO; effective anti-fraud and corruption policies and procedures; Procedures devised to minimise risk of fraud and error and/or to

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assist detection; IA, PSD

Measure: compliance with the Code of Practice on Managing the Risk of Fraud and Corruption (CIPFA, 2014)

3. What arrangements are in place to report fraud issues and risks to the Chief Constable?




4. How has management communicated expectations of ethical governance and standards of conduct and behaviour to all relevant parties, and when?

From governance framework:

Measure: Ensuring that the PCC, chief officers and staff behave with integrity and lead a culture where acting in the public interest is visibly and consistently demonstrated thereby promoting and upholding the reputation of the organisation among its stakeholders.

Controls: Ethics, Leadership & Culture Committee..Strategy MATS. Staff support networks. CC held leadership seminar, CC roadshows, Senior Management NPCC meetings and SMT's; Bend the bosses ear campaign. Occy health, health & wellbeing agenda, PSD Strategy MATS PCC – Panel Staff surveys Force – PCC Fed, Unison

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Measure: Ensuring the PCC and chief officers lead in establishing specific standard operating principles or values for their organisations and staff and that they are communicated and understood. The values should build on the Nolan Principles and the Code of Ethics.

Controls: PSD (ACU) part of induction process / enhanced vetting programme. Mandatory training such as data protection carried out annually Codes of Conduct (OPCC); Code of Ethics, Published Values (Force) Information standards & compliance carry out audits on data protection, information security and monitoring (systems and information) Joint Audit Committee to abide by Nolan Principles Internal Audit Publication schemes;

FOI; HMIC (Integrity Report) (Force); Surveillance Commissioner (Force); Biometric Commissioner (Force) APP Measures: Leading by example and using above standard operating principles or values as a framework for decision making and other actions. Manual of governance Decision making policy Measure: Demonstrating, communicating and embedding the standard operating principles or values through appropriate policies and processes which are reviews on a regular basis to ensure they are operating effectively.

APPs Policy library National decision making protocol

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Measure: The Code of Ethics' expressed purpose in underpinning organisational culture

Controls: code of conduct staff and elected members; code of ethics, misconduct regs for force and pasr of the appraisal priocess in place

Measure: Standards of professional behaviour

Controls: Code of ethics (CC) Professional ethics (DFR/CFO)

5. Are you aware of any instances of actual, suspected or alleged fraud within the audited body since 1 April 2018?

No.

CFO, DFR, Internal Audit and PSD have contacted each other at regular intervals to confirm whether they have had any such instances. None were reported in 2017/18.

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Enquiries of those charged with governance – in relation to fraud


1. How does the Chief Constable, exercise oversight of management's processes for identifying and responding to the risks of fraud within the Organisation and the internal control that management has established to mitigate those risks?


Controls as detailed in the governance framework. This is overseen by the Joint Governance Board.


No.

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Appendix 2 Matters in relation to laws and regulations International Standard for Auditing (UK and Ireland) 250 covers auditors responsibilities to consider the impact of laws and regulations in an audit of financial statements.

Management, with the oversight of those charged with governance, is responsible for ensuring that the Organisation’s operations are conducted in accordance with laws and regulations, including compliance with those that determine the reported amounts and disclosures in the financial statements.

As external auditors, we are responsible for obtaining reasonable assurance that the financial statements are free from material misstatement due to fraud or error, taking into account the appropriate legal and regulatory framework. The ISA distinguishes two different categories of laws and regulations:

• laws and regulations that have a direct effect on determining material amounts and disclosures in the financial statements;

• other laws and regulations where compliance may be fundamental to the continuance of operations, or to avoid material penalties.

What are we required to do? As part of our risk assessment procedures we are required to make inquiries of management as to whether the Organisation is in compliance with relevant laws and regulations. Where we become aware of information of non-compliance or suspected non-compliance we need to gain an understanding of the non-compliance and the possible effect on the financial statements.

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Enquiries of management – in relation to laws and regulations


1. How have you gained assurance that all relevant laws and regulations have been complied with?

Joint Governance Board meets quarterly to record and raise all governance issues. Attendees include: DFR (Force) CFO (OPCC) CEO (OPCC) TIAA (internal audit) CIO, representative of the JAC, and others as required.

2. Are there any potential litigations or claims that would affect the financial statements?

The Police and Crime Commissioner has the sum of £1.173 million reserved for insurance. £0.649 million relates to the potential additional liabilities in relation to the Scheme of Arrangement for Municipal Mutual Assurance and £0.524 million for additional areas of insurance in relation to current emerging claims not currently recognised.

The Chief Constable of North Wales, along with other Chief Constables and the Home Office, currently has 49 claims lodged against them with the Central London Employment Tribunal. The claims are in respect of alleged unlawful discrimination arising from the Transitional Provisions in the Police Pension Regulations 2015.

Claims of unlawful discrimination have also been made in relation to the changes to the Judiciary and Firefighters Pension regulations and in 2016-2017 these claims were heard in the Employment Tribunal.

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In 2017-2018 the Judiciary and Firefighter claims were heard in the Appeal Tribunal. Subsequent to this the respondents are appealing against the Appeal Tribunal judgements. In the case of the Firefighters the claimants are also appealing against aspects of the judgement. The outcome of these further appeals may influence the outcome of the Police claims. The Tribunal has agreed to stay the Police hearing and the Home Office has requested that the stay is extended in light of the further appeals. In the event that the Police claims are successful it is unclear what remedy would be applied, whether this would require further legislation and who it would impact.

Given the fact that the Judiciary and Firefighter claims are subject to further appeal and the Police claims are yet to be heard, and the uncertainty regarding remedy and quantum at this point in time it is not possible to provide an estimate of the financial effect in the event that the claims are partially or fully successful. Therefore it has been assessed that the Chief Constable has no liability at the Balance Sheet date.

Following successful claims in Allard v Devon and Cornwall Police for unpaid overtime following recalls to duty of informants’ handlers, in excess of 1,500 claims have been made nationally, three of which relate to North Wales Police. As of the 27th April, it is intended that they be co-ordinated

Page 155 of 266


through one County Court and that test cases are litigated to establish principles of remuneration. All other cases will be stayed pending the outcome of the test cases. The total cost of the claims will be dependent upon the principles established in the test cases, but a number go back over a six year period. There is no insurance indemnity for these claims.

3. Have there been any instances of non-compliance or suspected non-compliance with relevant laws and regulations since 1 April 2018, or earlier with an ongoing impact on the 2018-19 financial statements?

No.

4. Have there been any reports from other regulatory bodies, such as HM Revenues and Customs which indicate non-compliance?

No.

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Enquiries of those charged with governance – in relation to laws and regulations

Question 2017-18 2018-19 Response

1. How does the Chief Constable in its role as those charged with governance, obtain assurance that all relevant laws and regulations have been complied with?


2. Are the you aware of any instances of non-compliance with relevant laws and regulations?

No.

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Appendix 3 Matters in relation to related parties International Standard for Auditing (UK and Ireland) 550 covers auditors responsibilities relating to related party relationships and transactions.

The nature of related party relationships and transactions may, in some circumstances, give rise to higher risks of material misstatement of the financial statements than transactions with unrelated parties.

Because related parties are not independent of each other, many financial reporting frameworks establish specific accounting and disclosure requirements for related party relationships, transactions and balances to enable users of the financial statements to understand their nature and actual or potential effects on the financial statements. An understanding of the entity's related party relationships and transactions is relevant to the auditor's evaluation of whether one or more fraud risk factors are present as required by ISA (UK and Ireland) 240, because fraud may be more easily committed through related parties.

What are we required to do? As part of our risk assessment procedures, we are required to perform audit procedures to identify, assess and respond to the risks of material misstatement arising from the entity's failure to appropriately account for or disclose related party relationships, transactions or balances in accordance with the requirements of the framework.

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Enquiries of management – in relation to related parties


1. Confirm that you have disclosed to the auditor:

• the identity of any related parties, including changes from the prior period;

• the nature of the relationships with these related parties;

• details of any transactions with these related parties entered into during the period, including the type and purpose of the transactions.

Yes

1. Members of the Joint Audit Committee declared all their financial interests relating to contracts and businesses on appointment and signed an agreement to abide by the Seven Nolan Principles of Life and declare any revised interests to the Chief Executive. Joint Audit Committee members declarations of interests can be found on the Office of the Police and Crime Commissioner’s website www.northwales-pcc.gov.uk

There are also no material interests or relationships of the Chief Officers or their direct families, which could influence or control the decision making, policies or financial transactions of North Wales Police/Police and Crime Commissioner. A robust process is also in place to approve and register the business interests of both police staff and officers.

The Police and Crime Commissioner charges Denbighshire County Council, Abergele Town Council, North Wales Joint Branch Board, Tunnel and Network Services and Victim Support in

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respect of joint occupancy of buildings.

The Chief Constable is a trustee of PACT (North Wales Police and Community Trust). The Force allocates funding from income received via the Police Property Fund Account in support of PACT projects whose objectives are to raise the profile of community safety, significantly minimise the fear of crime and thus enhance the quality of life throughout North Wales. For 2017-2018 this equated to £55,000 donated from the fund to PACT and support in meeting the costs of the Fund administration of £42,947.

The Police and Crime Commissioner and Chief Constable participate in a Drug Intervention Programme which is a grant funded partnership with responsibility to reduce drug related offending and deaths through provision of support and services. The Partnership consists of officers from the Force, Community Safety Partnerships, Local Health Boards, North Wales Probation Service, North Wales Magistrates' Court, HM Prison Service, Jobcentre Plus and the Welsh Government.

2. What controls are in place to identify, authorise, approve, account for and

Declaration of interests at meetings

Register of interests

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disclose related party transactions and relationships?

Register of gifts and hospitality

List of current and former partnerships is maintained by CIO

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Enquiries of those charged with governance – in relation to related parties


1. How does the Chief Constable, in his role as those charged with governance, exercise oversight of management's processes to identify, authorise, approve, account for and disclose related party transactions and relationships?





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Kate Jackson Chief Finance Officer North Wales Police and Crime Commissioner North Wales Police Headquarters Glan – y - Don Abergele Road Reference NWPCC1819 Colwyn Bay Date 12 February 19 LL29 8AW Pages 1 of 18

Dear Kate, North Wales Police and Crime Commissioner 2018-19 - Audit enquiries to those charged with governance and management In my 2019 Audit Plan I have noted that we are responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. It also sets out the respective responsibilities of auditors, management and those charged with governance. This letter formally seeks documented consideration and understanding on a number of governance areas that impact on my audit of your financial statements. These considerations are relevant to the management and ‘those charged with governance’. I have set out below the areas of governance on which I am seeking views. 1. Management processes in relation to:

• undertaking an assessment of the risk that the financial statements may be materially misstated due to fraud;

• identifying and responding to risks of fraud in the organisation;

• communication to employees of views on business practice and ethical behaviour; and

• communication to those charged with governance the processes for identifying and responding to fraud.

2. Management’s awareness of any actual or alleged instances of fraud. 3. How management gain assurance that all relevant laws and regulations have been complied with.

4. Whether there is any potential litigation or claims that would affect the financial statements.

5. Management processes to identify, authorise, approve, account for and disclose related party transactions and relationships. The information you provide will inform our understanding of the audited body and its business processes and support our work in providing an audit opinion on your 2018-19 financial statements.

24 Cathedral Road / 24 Heol y Gadeirlan Cardiff / Caerdydd

CF11 9LJ Tel / Ffôn: 029 2032 0500

Fax / Ffacs: 029 2032 0600 Textphone / Ffôn testun: 029 2032 0660

[email protected] / [email protected] www.audit.wales / www.archwilio.cymru

Page 163 of 266





I would be grateful if you could complete the attached tables in Appendices 1-3. I have included the responses you provided in 2017-18 in the attached tables for ease of reference. Your responses should be formally considered and communicated to us on behalf of both management and those charged with governance by 31 May 19. In the meantime, if you have queries, please contact me on 07966073281 or by e-mail [email protected]. Yours sincerely

Michelle Phoenix Audit Manager

Page 164 of 266








We also need to understand how those charged with governance (The Police and Crime Commissioner - PCC) exercises oversight of management’s processes. We are also required to make enquiries of both management and those charged with governance as to their knowledge of any actual, suspected or alleged fraud, for identifying and responding to the risks of fraud and the internal controls established to mitigate them.



Page 165 of 266





The Police and Crime Commissioner and Chief Constable have an Anti-Fraud and Corruption policy and whistleblowing arrangements in place which manage effectively the risk of fraud and corruption. Processes for declaring interest and registers for gifts and hospitalities are maintained and updated as required. Both the Joint Audit Committee and the Police and Crime Panel discharged fully all the functions as identified in the relevant CIPFA publication for Audit Committees.






Controls: we participate in the NFI exercises and these are externally validated by WAO; effective anti-fraud and corruption policies and procedures; Procedures devised to minimise risk of fraud and error and/or to

.

Page 166 of 266




assist detection; IA, PSD


3. What arrangements are in place to report fraud issues and risks to the PCC?



Controls: LESSON LEARNED, MOU BETWEEN IA, CFO's AND PSD COMPLETED IN 15-16,safecall, PSD / etc. IPCC/ PCP, Internal Audit review of fraud and corruption arrangements - positive outcome.




Controls: Ethics, Leadership & Culture Committee..Strategy MATS. Staff support networks. CC held leadership seminar, CC roadshows, Senior Management NPCC meetings and SMT's; Bend the bosses ear campaign. Occy health, health & wellbeing agenda, PSD Strategy MATS PCC – Panel Staff

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surveys Force – PCC Fed, Unison



FOI; HMIC (Integrity Report) (Force); Surveillance Commissioner (Force); Biometric Commissioner (Force) APP Measures: Leading by example and using above standard operating principles or values as a framework for decision making and other actions. Manual of governance Decision making policy Measure: Demonstrating, communicating and embedding the standard operating principles or values through appropriate policies and processes which are reviews on a regular basis to ensure they are

Page 168 of 266




operating effectively.


Measure: The Code of Ethics' expressed purpose in underpinning organisational culture

Controls: code of conduct staff and elected members; code of ethics, misconduct regs for force and pasr of the appraisal priocess in place


Controls: Code of ethics (CC) Professional ethics (DFR/CFO).


No.


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Question 2017-18 Reponse 2018-19 Response

1. How does the PCC, exercise oversight of management's processes for identifying and responding to the risks of fraud within the Organisation and the internal control that management has established to mitigate those risks?




No.

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Question 2017-18 Reponse 2018-19 Response




The Police and Crime Commissioner has the sum of £1.173 million reserved for insurance. £0.649 million relates to the potential additional liabilities in relation to the Scheme of Arrangement for Municipal Mutual Assurance and £0.524 million for additional areas of insurance in relation to current emerging claims not currently recognised.

The Chief Constable of North Wales, along with other Chief Constables and the Home Office, currently has 49 claims lodged against them with the Central London Employment Tribunal. The claims are in respect of alleged unlawful discrimination arising from the Transitional Provisions in the Police Pension Regulations 2015.

Claims of unlawful discrimination have also been made in relation to the changes to the Judiciary and Firefighters Pension regulations and in 2016-2017 these claims were heard in the Employment Tribunal.

In 2017-2018 the Judiciary and Firefighter claims were heard in the Appeal Tribunal. Subsequent to

Page 172 of 266


this the respondents are appealing against the Appeal Tribunal judgements. In the case of the Firefighters the claimants are also appealing against aspects of the judgement. The outcome of these further appeals may influence the outcome of the Police claims. The Tribunal has agreed to stay the Police hearing and the Home Office has requested that the stay is extended in light of the further appeals. In the event that the Police claims are successful it is unclear what remedy would be applied, whether this would require further legislation and who it would impact.

Given the fact that the Judiciary and Firefighter claims are subject to further appeal and the Police claims are yet to be heard, and the uncertainty regarding remedy and quantum at this point in time it is not possible to provide an estimate of the financial effect in the event that the claims are partially or fully successful. Therefore it has been assessed that the Chief Constable has no liability at the Balance Sheet date.

Following successful claims in Allard v Devon and Cornwall Police for unpaid overtime following recalls to duty of informants’ handlers, in excess of 1,500 claims have been made nationally, three of which relate to North Wales Police. As of the 27th April, it is intended that they be co-ordinated through one County Court and that test cases are litigated to establish principles of remuneration. All other cases

Page 173 of 266


will be stayed pending the outcome of the test cases. The total cost of the claims will be dependent upon the principles established in the test cases, but a number go back over a six year period. There is no insurance indemnity for these claims.


No.


No.

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1. How does the PCC in his role as those charged with governance, obtain assurance that all relevant laws and regulations have been complied with?



No.

Page 175 of 266






Page 176 of 266








Yes



The Police and Crime Commissioner charges Denbighshire County Council, Abergele Town Council, North Wales Joint Branch Board, Tunnel and Network Services and Victim

Page 177 of 266


Support in respect of joint occupancy of buildings.

The Chief Constable is a trustee of PACT (North Wales Police and Community Trust). The Force allocates funding from income received via the Police Property Fund Account in support of PACT projects whose objectives are to raise the profile of community safety, significantly minimise the fear of crime and thus enhance the quality of life throughout North Wales. For 2017-2018 this equated to £55,000 donated from the fund to PACT and support in meeting the costs of the Fund administration of £42,947.

The Police and Crime Commissioner and Chief Constable participate in a Drug Intervention Programme which is a grant funded partnership with responsibility to reduce drug related offending and deaths through provision of support and services. The Partnership consists of officers from the Force, Community Safety Partnerships, Local Health Boards, North Wales Probation Service, North Wales Magistrates' Court, HM Prison Service, Jobcentre Plus and the Welsh Government.

2. What controls are in place to identify, Declaration of interests at meetings

Page 178 of 266


authorise, approve, account for and disclose related party transactions and relationships?




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1. How does the PCC, in his role as those charged with governance, exercise oversight of management's processes to identify, authorise, approve, account for and disclose related party transactions and relationships?





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We also need to understand how those charged with governance (The Police and Crime Commissioner - PCC) exercises oversight of management’s processes. We are also required to make enquiries of both management and those charged with governance as to their knowledge of any actual, suspected or alleged fraud, for identifying and responding to the risks of fraud and the internal controls established to mitigate them.


Question 2018-19 Response

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The Police and Crime Commissioner and Chief Constable have an Anti-Fraud and Corruption policy and whistleblowing arrangements in place which manage effectively the risk of fraud and corruption. Processes for declaring interest and registers for gifts and hospitalities are maintained and updated as required. Both the Joint Audit Committee and the Police and Crime Panel discharged fully all the functions as identified in the relevant CIPFA publication for Audit Committees.




Controls: LESSON LEARNED, MOU BETWEEN IA, CFO's AND PSD updated in 2018-19,safecall, PSD / etc. IPCC/ PCP, Internal Audit review of counter fraud arrangements 2018-19 identified areas for improvement; all of the actions have been completed and signed off by TIAA.


Controls: we participate in the NFI exercises and these are externally validated by WAO; effective anti-f Procedures devised to minimise risk of fraud and error and/or to assist detection; IA, PSD


.

3. What arrangements are in place to report fraud issues and risks to the PCC?



Controls: LESSON LEARNED, MOU BETWEEN IA, CFO's AND PSD updated in 2018-19,safecall, PSD / etc. IPCC/ PCP, Internal Audit review of counter fraud arrangements 2018-19 identified areas for improvement; all of the actions have been completed and signed off by TIAA.

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Controls: Ethics Committee,.Strategy MATS. Staff support networks. CC held leadership seminar, CC roadshows, Senior Management NPCC meetings and SMT's; Bend the bosses ear campaign. Occy health, health & wellbeing agenda, PSD Strategy MATS PCC – Panel Staff surveys Force – PCC Fed, Unison



FOI; HMICFRS (Force); APP Measures: Leading by example and using above standard operating principles or values as a framework for decision making and other actions. Manual of governance – updated 2018-19; Decision making policy Measure: Demonstrating, communicating and embedding the standard operating principles or values through appropriate policies and processes which are reviewed on a regular basis to ensure they are operating effectively.


Measure: The Code of Ethics expressed purpose in underpinning organisational culture

Controls: code of conduct staff and elected members; code of ethics, misconduct regs for force and awareness of the appraisal process in place

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Controls: Code of ethics (CC) Professional ethics (DFR/CFO).


No.


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1. How does the PCC, exercise oversight of management's processes for identifying and responding to the risks of fraud within the Organisation and the internal control that management has established to mitigate those risks?




No.

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The Police and Crime Commissioner has the sum of £xxx* million reserved for insurance. £xxx* million relates to the potential additional liabilities in relation to the Scheme of Arrangement for Municipal Mutual Assurance and £xxx* million for additional areas of insurance in relation to current emerging claims not currently recognised.

Contingent liabilities are reviewed as part of the year-end processes, and will be reported in the statements of accounts.

* to be confirmed after closure of 2018/19 accounts


No.


No.

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1. How does the PCC in his role as those charged with governance, obtain assurance that all relevant laws and regulations have been complied with?



No.

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Yes



The Police and Crime Commissioner charges Denbighshire County Council, Abergele Town Council, North Wales Joint Branch Board, Tunnel and Network Services and Victim Support in respect of joint occupancy of buildings.

The Chief Constable is a trustee of PACT (North Wales Police and Community Trust). The Force allocates funding from income received via the Police Property Fund Account in support of PACT projects whose objectives are to raise the profile of community safety, significantly minimise the fear of crime and thus enhance the quality of life throughout North Wales. For 2018-19 this equated to £60,000 donated from the fund to PACT and support in meeting the costs of the Fund administration.

The Police and Crime Commissioner and Chief Constable participate in a Drug

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Intervention Programme which is a grant funded partnership with responsibility to reduce drug related offending and deaths through provision of support and services. The Partnership consists of officers from the Force, Community Safety Partnerships, Local Health Boards, North Wales Probation Service, North Wales Magistrates' Court, HM Prison Service, Jobcentre Plus and the Welsh Government.

2. What controls are in place to identify, authorise, approve, account for and disclose related party transactions and relationships?





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1. How does the PCC, in his role as those charged with governance, exercise oversight of management's processes to identify, authorise, approve, account for and disclose related party transactions and relationships?





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21 March 2019

Draft Capital Strategy and draft Treasury Management Strategy Statement and Investment Strategy 2018-19 to 2024-25

Report by the Chief Constable’s and Police and Crime Commissioner’s Chief Finance Officers

1. This capital strategy is a new report for 2019/20, giving a high-level overview of how capital expenditure, capital financing and treasury management activity contribute to the provision of police services along with an overview of how associated risk is managed and the implications for future financial sustainability. The new format stems from the Treasury Management in the Public Service: Code of Practice and Cross sectorial Guidance Note (TM Code) which was updated by CIPFA in 2017. There is a legal requirement to abide by the Code.

2. There are no fundamental changes to the strategy this year. Treasury activities are still prioritised in terms of security, liquidity and yield in that order.

3. The overall purpose of the report is for the Joint Audit Committee to review the draft Capital Strategy, in order to enable the Police and Crime Commissioner to: • Formally agree the Capital Programme as part of the Capital Strategy; this is

supported by the detail in the Capital Programme Report which was presented to SEB on 31 January 2019 (Appendix A).

• Provide the strategy framework for Treasury Management i.e. borrowing for capital expenditure and investing balances.

• Agree the treasury management and prudential indicators that set limits on the level of borrowing as well as the type and counterparties for investments.

• Agree which method is adopted for the repayment of debt (Minimum Revenue Provision – Appendix B).

Report Author Kate Jackson, Chief Finance Officer, OPCC Richard Muirhead, Director of Finance and Resources, North Wales Police

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Draft Capital Strategy 2019/20

1. Introduction

1.1 This Capital Strategy is a new report for 2019/20, giving a high-level overview of how capital expenditure, capital financing and treasury management activity contribute to the provision of police services along with an overview of how associated risk is managed and the implications for future financial sustainability. The new format stems from the Treasury Management in the Public Service: Code of Practice and Cross sectorial Guidance Note (TM Code) which was updated by CIPFA in 2017. There is a legal requirement to abide by the Code.

1.2 The new format includes this overriding Capital Strategy which can be thought of as an executive summary of the elements listed above. North Wales Police have historically included the elements listed within the previous Treasury Management Strategy and there is no fundamental change to the overall strategy from last years. A number of the elements are technical in nature; the intention is for this overriding Capital Strategy to be written in an accessible style to enhance understanding of these areas. Details of the Capital Programme, Revenue Provision for Borrowing and the Treasury Management and Investment Strategy 2019/20 to 2024/25 are attached in the appendices.

2. Capital Expenditure and Financing

2.1 Capital expenditure is where the Police and Crime Commissioner spends money on assets, such as property or vehicles, that will be used for more than one year.

2.2 The draft Capital Programme was presented to the Strategic Executive Board (SEB) on the 31 January 2019 and agreed subject to the final ratification of this Capital Strategy. The Police and Crime Commissioner is planning capital expenditure as summarised below, with the details as presented to SEB shown in Appendix A:

Table 1: Prudential Indicator: Estimates of Capital Expenditure in £ millions

2017/18 actual

2018/19 forecast

2019/20 budget

2020/21 budget

2021/22 budget

2022/23 budget

2023/24 budget

2024/25 budget

£m £m £m £m £m £m £m £m

Total Capital Expenditure

18.4 12.9 6.7 6.6 7.9 5.1 6.6 3.0

2.3 Governance: The Capital Programme has been fully revised as part of the 2019/20

planning cycle. The previous Capital Programme was coming to an end in 2018/19

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with the completion of major schemes such as the new facilities in Wrexham and the upgrade and replacement of the Control Room IT system. Over the period 2011 to 2018 £70m will have been invested in new and replacement infrastructure as highlighted below:

• Estates - 4 Major new builds in Llangefni, Llandudno, Llay and Wrexham town centre plus 20+ other refurbs and relocations (£41m)

• Fleet - Vehicle Replacement Programme continued and reduced from £1.5m to £1.3m from 2019-20 from Fleet reductions (£15m)

• IT - Network upgraded, Servers Replaces, Control Room Technology Replacement, Desk top replacement and mobile units replacements (£14m)

2.4 The Capital Programme 2019-20 to 2024-25 is as a result of the new Estates Strategy, Digital Transformation Strategy, fleet replacement strategy and the conclusion of the planning cycle. A review was also conducted at the end of the cycle to ensure that end of life equipment were being replaced if required. As a number of the Estates and IT schemes are in their infancy detailed budget cases will need to be agreed for individual projects before they are commissioned. The Capital Programme is reported to the Strategic Planning Board (SPB) and the SEB as a whole. Specific areas of work are managed through the Digital Transformation Board and the Estates Board.

2.5 The main capital projects for 2019/20 include the refurbishment of Pwllheli Police Station £0.98m, Digital Transformation £3.5m and annual vehicle replacement £1.3m.

2.6 All capital expenditure must be financed, either from the Police and Crime Commissioner’s own resources (revenue, reserves and capital receipts), from external sources (government grants and other contributions) or debt (borrowing, leasing and Private Finance Initiative). Government Capital Grants fund just over 1/3 of the Vehicle Replacement Programme (£0.462m), requiring the majority of the Programme to be funded from PCC’s funds. The planned financing of the above expenditure is as follows:

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Table 2: Capital financing in £ millions

2017/18 actual

2018/19 forecast

2019/20 budget

2020/21 budget

2021/22 budget

2022/23 budget

2023/24 budget

2024/25 budget

£m £m £m £m £m £m £m £m

External sources

0.5 0.5 0.6 0.5 0.5 0.5 0.5 0.5

Own resources

15.2 6.6 4.9 2.2 1.5 0.9 2.3 1.3

Debt 2.7 5.8 1.1 3.9 5.9 3.7 3.9 1.3

TOTAL 18.4 12.9 6.7 6.6 7.9 5.1 6.7 3.1

2.7 Debt is only a temporary source of finance, since loans and leases must be repaid, and this is therefore replaced over time by other financing, usually from revenue which is known as minimum revenue provision (MRP). Alternatively, proceeds from selling capital assets (known as capital receipts) may be used to replace debt finance. Planned MRP is as follows:

Table 3: Replacement of debt finance in £ millions

2017/18 actual

2018/19 forecast

2019/20 forecast

2020/21 forecast

2021/22 forecast

2022/23 budget

2023/24 budget

2024/25 budget

£m £m £m £m £m £m £m £m

Own resources

2.2 2.1 2.3 2.2 2.4 2.6 2.6 3.0

The Police and Crime Commissioner’s full minimum revenue provision statement is

shown in Appendix B to this report.

2.8 The Police and Crime Commissioner’s cumulative outstanding amount of debt finance is measured by the capital financing requirement (CFR). This increases with new debt-financed capital expenditure and reduces with MRP and capital receipts used to replace debt. The CFR is expected to decrease by £1.2m during 2019/20, and then increase £5.9m over the following 5 years. Based on the above figures for expenditure and financing, the Police and Crime Commissioner’s estimated CFR is as follows:

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Table 4: Prudential Indicator: Estimates of Capital Financing Requirement in £ millions

31.3.18 actual

31.3.19 forecast

31.3.20 forecast

31.3.21 forecast

31.3.22 forecast

31.3.23 forecast

31.3.24 forecast

31.3.25 forecast

£m £m £m £m £m £m £m £m

Total CFR

27.2 31.0 29.8 31.5 35.0 36.1 37.4 35.7

2.9 Asset management: To ensure that capital assets continue to be of long-term use, the Police and Crime Commissioner has an asset management strategy in place. This is detailed in the Estates Strategy and the Digital Transformation Strategy.

2.10 Asset disposals: When a capital asset is no longer needed, it may be sold so that the proceeds, known as capital receipts, can be spent on new assets or to repay debt. The Police and Crime Commissioner is not anticipating to receive any significant capital receipts in the coming financial years.

Table 5: Capital receipts in £ millions

17/18 actual

18/19 forecast

19/20 forecast

20/21 forecast

21/22 forecast

22/23 forecast

23/24 forecast

24/25 forecast

£m £m £m £m £m £m £m £m

Opening balance

3.7 1.5 0.0 2.0 2.0 1.6 1.7 0.8

Receipts 0.8 0.5 2.7 0.2 0.0 0.2 0.5 0.4

Budgeted use

3.0 2.0 0.7 0.2 0.4 0.1 1.4 0.5

Balance 1.5 0.0 2.0 2.0 1.6 1.7 0.8 0.7

3. Treasury Management

3.1 Treasury management is concerned with keeping sufficient but not excessive cash available to meet the Police and Crime Commissioner’s spending needs, while managing the risks involved. Surplus cash is invested until required, while a shortage of cash will be met by borrowing, to avoid excessive credit balances or overdrafts in the bank current account. The Police and Crime Commissioner is typically cash rich in the short-term as revenue income is received before it is spent, but cash poor in the long-term as capital expenditure is incurred before being financed. The revenue cash surpluses are offset against capital cash shortfalls to reduce overall borrowing.

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3.2 The Treasury Management Strategy (Appendix C) and the set out the parameters

under which the Treasury Management activities are governed and monitored. These are bases on prioritising security first, liquidity second and yield last. This does reduce potential investment income but minimises the risk of losing money though riskier investments. The below summarises the main points of the Treasury Management Strategy.

3.3 Borrowing strategy: The Police and Crime Commissioner’s main objectives when borrowing are to achieve a low but certain cost of finance while retaining flexibility should plans change in future. These objectives are often conflicting, and the Police and Crime Commissioner therefore seeks to strike a balance between cheap short-term loans (currently available at around 0.95%) and long-term fixed rate loans where the future cost is known but higher (currently 2.0 to 3.0%).

3.4 The Borrowing Strategy is also balanced by the use of revenue cash available (reducing investments) being used rather than borrowing, known as internal borrowing. Internal borrowing has been used extensively over recent years saving around £0.250m in interest charges per year and reducing risk by not investing cash. However, use of reserves to fund Capital has reduced the available amounts to internally borrow. Another factor to consider is that the Police and Crime Commissioner’s income is not constant during the year; this is due to a Pension Grant of around £20m being paid in one lump sum each July. This has resulted in short term borrowing being required for 6 to 8 months of the year. At some point longer term borrowing will need to be secured, this is being monitored and discussed with our Treasury Management consultants on a regular basis.

3.5 Projected levels of the Police and Crime Commissioner’s total outstanding debt (which comprises borrowing and PFI liabilities) are shown below, compared with the capital financing requirement (see above). These are based on the current position to inform future decisions, which is the timing of longer term borrowing.

Table 6: Prudential Indicator: Gross Debt and the Capital Financing Requirement in £ millions

31.3.18 actual

31.3.19 forecast

31.3.20 forecast

31.3.21 forecast

31.3.22 forecast

31.3.23 forecast

31.3.24 forecast

31.3.25 forecast

£m £m £m £m £m £m £m £m PFI 11.4 10.7 9.9 9.1 8.2 7.3 6.2 5.1 Long Term Loans 1.4 0.7 0.0 0.0 0.0 0.0 0.0 0.0 Short Term loans 10.0 16.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt (incl. PFI & leases) 22.7 27.3 9.9 9.1 8.2 7.3 6.2 5.1

Capital Financing Requirement 27.2 31.0 29.8 31.5 35.0 36.1 37.4 35.7

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3.6 Statutory guidance is that debt should remain below the capital financing

requirement, except in the short-term. As can be seen from table 6, the Police and Crime Commissioner expects to comply with this in the medium term, but this will need to be part of the assessment when new borrowing is taken on.

3.7 Affordable borrowing limit: The Police and Crime Commissioner is legally obliged to set an affordable borrowing limit (also termed the authorised limit for external debt) each year and to keep it under review. In line with statutory guidance, a lower “operational boundary” is also set as a warning level should debt approach the limit.

Table 7: Prudential Indicators: Authorised limit and operational boundary for external debt in £m 2018/19

limit 2019/20 limit

2020/21 limit

2021/22 limit

2022/23 limit

2023/24 limit

£m £m £m £m £m £m Authorised limit – borrowing

19.8 22.4 26.8 28.8 31.2 30.6

Authorised limit – PFI and leases

10.7 9.9 9.1 8.2 7.3 6.2

Authorised limit – total external debt

30.5 32.3 35.9 37.1 38.4 36.8

Operational boundary – borrowing

19.8 20.4 24.8 26.8 29.2 28.6

Operational boundary – PFI and leases

10.7 9.9 9.1 8.2 7.3 6.2

Operational boundary – total external debt

30.5 30.3 33.9 35.1 36.4 34.8

3.8 Investment strategy: Treasury investments arise from receiving cash before it is paid out again. Investments made for service reasons or for pure financial gain are not generally considered to be part of treasury management.

3.9 The Police and Crime Commissioner’s policy on treasury investments is to prioritise security and liquidity over yield that is to focus on minimising risk rather than maximising returns. Cash that is likely to be spent in the near term is invested securely, for example with the government, other local authorities or selected high-quality banks, to minimise the risk of loss. Money that will be held for longer terms is invested more widely, including in bonds, shares and property, to balance the risk of loss against the risk of receiving returns below inflation. Both near-term and longer-

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term investments may be held in pooled funds, where an external fund manager makes decisions on which particular investments to buy and the Police and Crime Commissioner may request its money back at short notice.

Table 8: Treasury management investments in £millions

31.3.2018

actual 31.3.2019 forecast

31.3.2020 forecast

31.3.2021 forecast

31.3.2022 forecast

£m £m £m £m £m

Near-term investments 21.1 15.0 15.0 15.0 15.0

Longer-term investments

0 0 0 0 0

TOTAL 21.1 15.0 15.0 15.0 15.0

3.10 Governance: Decisions on treasury management investment and borrowing are made daily and are therefore delegated to the Head of Finance and staff, who must act in line with the treasury management strategy approved by the Police and Crime Commissioner and Joint Audit Committee. End of year and half year reports on treasury management activity are presented to SEB and the Joint Audit Committee. Any additional reporting required will be reported through the quarterly Finance reports to SEB and SPB, or directly between the Head of Finance and DFR and CFO as required. The Joint Audit Committee is responsible for scrutinising treasury management decisions.

3.11 Liabilities: In addition to debt detailed above, the Police and Crime Commissioner is committed to making future payments to cover its pension funds costs. Police Officers pension scheme is an unfunded scheme which is underwritten by the Government, liabilities stands at £1,645m as at 31.3.18. The cost to the Police and Crime Commissioner is the employer contribution rate, this has been increased from 24.2% to 31% from 1 April 2019 and has had to be funded from the revenue budget. The deficit on the Staff Pension fund stood at £60m as at 31.3.18, this is also managed through the contribution rate which is currently set at 16.3%. The Police and Crime Commissioner has also set aside £1.2m as a provision to cover risks of insurance claims and employment cases. The Police and Crime Commissioner is also at risk of having to pay for claims lodged with the Central London Employment Tribunal. These risks have been recognised as Contingent Liabilities in the Statement of Accounts, but The Police and Crime Commissioner has not put aside any money because the claims are subject to appeal, and there is uncertainty regarding remedy and quantum.

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3.12 Governance: Decisions on incurring new discretional liabilities are taken by the Chief Officer Team in consultation with the Police and Crime Commissioner and his Chief Finance Officer. The risk of liabilities crystallising and requiring payment is monitored by Corporate Finance and reported to SPB and SEB as necessary. Details of contingent liabilities as at the 31 March will be included in the Statement of Accounts.

3.13 Revenue Budget Implications - Although capital expenditure is not charged directly to the revenue budget, interest payable on loans, Minimum Revenue Provision (MRP) for reducing the CFR and direct revenue contribution to capital are charged to revenue, offset by any investment income receivable. The net annual charge is known as financing costs; this is compared to the net revenue stream i.e. the amount funded from Police and Crime Commissioners’ Council Tax and general government grants.

Table 9: Prudential Indicator: Proportion of financing costs to net revenue stream 2017/18

actual 2018/19 forecast

2019/20 budget

2020/21 budget

2021/22 budget

2022/23 budget

2023/24 budget

Financing costs (£m)

4.9 4.1 4.1 4.2 4.2 4.3 4.3

Proportion of net revenue stream

3.42% 2.90% 2.68% 2.65% 2.61% 2.58% 2.55%

3.14 Sustainability: Due to the very long-term nature of capital expenditure and financing, the revenue budget implications of expenditure incurred in the next few years will extend for up to 40 years into the future. The Police and Crime Commissioner’s Chief Finance Officer and the Director of Finance and Resources are satisfied that the proposed capital programme is prudent, affordable and sustainable as there are revenue streams or reserves in place to fund the Programme as set out. It is likely that additional resources will need to be budgeted for future investments beyond the current Programme.

3.15 Knowledge and Skills - The Police and Crime Commissioner employs professionally qualified and experienced staff in senior positions with responsibility for making capital expenditure, borrowing and investment decisions. Training is provided to all staff involved in making capital expenditure, borrowing and investment decisions.

3.16 Where Police and Crime Commissioner staff do not have the knowledge and skills required, use is made of external advisers and consultants that are specialists in their field. The Police and Crime Commissioner currently employs Arlingclose Limited as treasury management advisers, Wilks Head and Eve as property consultants and BDO as tax consultants. This approach is more cost effective than employing such staff

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directly, and ensures that the Police and Crime Commissioner has access to knowledge and skills commensurate with its risk appetite.

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Appendix A Extract from SEB report 31.1.2019

5. DRAFT CAPITAL BUDGET 2018-19 to 2024-25

5.1 The first draft of the Capital Programme 2018-19 to 2024-25 was discussed during the budgets meetings and included as a draft in the MTFP. However, further work was required to confirm funding available, confirm final additions to the programme (from the additionality), update phasing and check final requirements. This work has been done as far as possible now and the details are shown below. There is likely to be further re profiling of specific schemes. The individual projects are subject to business cases to be presented to the relevant Boards. It is recommended that the below be included in the ‘Capital Strategy’ which will formally ratify the Programme for 2018-19 and 2019-20 and the draft for future years (as well as the Treasury Management Strategy). The Capital Strategy is due be scrutinised by the Joint Audit Committee on 21 March 2019. Details of what’s covered in the Capital Strategy are given in the first table, followed by the Capital Programme. Details of the projects are covered in the following sections.

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Capital Programme 2018-19 to 2024-25

2019-20 2020-21 2021-22 2022-23 2023-24 2024-25Total

Ref Description Actual to Orig Est Revised Actual Est Est Est Est Est Est Projectto with c/f Est to Date Costs31.3.18 Jan 19 Pd 9

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Estate Programme

1 Retentions, Consultancy and QS 7 25 25 0 0 322 Sustainability Improvements 573 155 155 0 100 100 100 100 100 100 1,3283 Wrexham new Custody and DHQ 18,651 2,649 2,649 2,253 21,3004 Wrexham in town facility 246 1,622 1,622 926 170 2,0385 Rhuddlan/Prestatyn works 0 80 80 58 806 Buckley Relocation 41 0 0 0 417 LlandudnoNew Build 2,742 63 63 4 2,8058 Holyhead Port 190 30 30 0 2209 OHU Relocation 215 0 0 0 215

10 Estate Review 2 0 499 0 0 0 0 0 0 0 0 011 Pwllheli PS 0 0 0 980 98012 Conwy PS * 0 0 0 0 013 Holyhead PS 0 0 0 772 2,570 3,34214 FHQ Complex + Canteen 0 0 0 257 25715 Western Estate Area 0 0 0 515 51516 VCC / Vehicle Workshop 0 0 0 1,545 1,325 2,87017 Dolgellau PS 0 0 0 545 2,391 2,93618 Abergele PS 0 0 0 391 39119 Llanrwst PS 0 0 0 178 17820 Deeside PS 0 0 0 1,400 575 1,97521 Mold PS 0 0 0 2,834 2,83422 Rhosllanerchrugog PS 0 0 0 189 18923 Re locate/ co locate/ vacate 0 0 0 185 127 31224 Custody CCTV 23 52 52 0 7525 Purchase of JCC 0 2,739 2,739 2,806 2,739

Total Building Works 22,688 7,914 7,415 6,047 1,435 3,316 3,995 3,479 3,891 1,433 47,652

Vehicles and Other Equipment

26 Vehicle Purchase Replacement Programme 7,481 2,233 2,233 971 1,405 1,300 1,300 1,300 1,300 1,300 17,61927 PSU Vehilces (Revenue Stream replacemnt programme) 555 0 0 0 555 1,11028 Ports CCTV and ANPR and equipment (Check KN) 125 104 150 0 27529 Dexun System (SCC) 0 78 7830 Intoxilators x 3 0 30 3031 ANPR replacement 0 470 47032 Fingerprint Capture and Enhancement Equipment 0 62 6233 Collision Surveying Equipment 0 131 131

Total Vehicles and Other Equipment 8,161 0 2,337 2,383 971 1,676 1,800 1,855 1,300 1,300 1,300 19,775

2018-19

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5.2 Estates

5.2.1 2018-19 – Draft revised budget £7.415, Expenditure to Pd 9 £6.047m.

• Sustainability budget, this budget will be used to fund sustainability elements of the Llay project.

• Wrexham DHQ is now operational. The project is on budget but there is no headroom for additional requirements within the Capital Budget. An additional amount of £0.096m for Airwave connectivity has been funded from the Airwave/ESN Capital Budget. Any additional furniture and equipment not covered by the project budget will need to be funded from other existing budgets where possible, with £0.2m being earmarked in contingency as stated in the revenue section.

2019-20 2020-21 2021-22 2022-23 2023-24 2024-25Total

Ref Description Actual to Orig Est Revised Actual Est Est Est Est Est Est Projectto with c/f Est to Date Costs31.3.18 Jan 19 Pd 9

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000Information Technology and Communication Equipment

34 Desk Top Replacement (Replacement Programme) 963 588 588 528 462 707 200 300 300 300 3,82035 Control Room Technology Replacemnt 1,650 1,281 1,281 871 2,93136 Server Replacement 672 0 0 0 700 1,37237 Business Systems Servers (Replacement Programme) 162 14 1 1 145 30838 Criminal Justice Digital Project 613 227 0 0 61339 Mobile data devices 825 231 231 70 0 460 0 460 1,976

40a Airwave (replacement units) 62 96 596 0 65840b Airwave replacement ESN 0 0 0 0 1,000 1,000

41 Wrexham Prison IT and Connection 86 0 0 0 8642 DFU Server replacement 149 119 119 109 20 270 55843 Intranet/Social Media 0 55 55 2 5544 Cloud Storage 0 79 79 0 7945 Mobile Responder App 0 268 0 0 268 26846 EIS Replacement 263 130 130 117 39347 CHORUS Upgrade 0 30 30 30 3048 NEP Infrastructure/Sail Point/Internet Links 0 0 0 0 471 47149 Connectivity Software 0 0 0 0 85 8550 Wifi 0 0 0 0 250 250 50051 Digital Workplace audio visiual 0 0 0 0 200 20052 Single on line Home 0 0 0 0 40 4053 EOL (End of Life - various systems) 0 0 0 0 0 054 CISCO Telephony 0 0 0 0 250 25055 Email (then re-used for NEP) 0 0 0 0 220 22056 Nexus Memory Upgrade 0 0 0 0 50 5057 Backup 0 0 0 0 130 13058 LAN 0 0 0 0 80 8059 Thin Clients 0 0 0 0 50 5060 Risk Register 0 0 0 0 100 10061 ICAD Upgrade 0 0 0 0 500 50062 Body Worn Video 0 400 400 800

Total Information Technology and Communication 5,445 3,118 3,110 1,728 3,556 1,437 2,045 300 1,430 300 17,623

Total Capital Expenditure 36,294 13,369 12,908 8,746 6,667 6,553 7,895 5,079 6,621 3,033 85,050

2018-19

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• Wrexham Town Centre – delays due to finding asbestos on the site has put pressure on the budget. The costs are being reviewed and are currently projected to be £0.170m over the original budget, this amount has now been added to the current draft budget. There are likely to be further costs relating to the temporary Town Centre Station, these are being funded through revenue contingency.

• An additional £0.080m has been included for works at Rhuddlan and Prestatyn following the loss of the rented Prestatyn base. This has been funded from within the Capital Programme.

• The Joint Control Room in Prestatyn has been purchased. This will result in revenue savings of £0.1m per year compared to the current rental costs. The rules around Land Tax changed from the original business case with the Welsh Government setting these rates from 1.4.2018; this has resulted in £0.063m additional one off costs which will be funded from the 2018-19 rental saving.

5.2.2 Estates 2019-20 to 2024-25 – The proposals shown are based on the conclusion of

the Estates Review. The Schemes put forward have been prioritised using the matrix set out as part of the review. The individual schemes will need to be further developed and agreed scheme by scheme. The most mature scheme is the refurbishment of Pwllheli, this proposal has previously been discussed in detail and agreed at the Estates Board and a final updated version is being progressed to be formally agreed.

5.3 Vehicles and Equipment

5.3.1 2018-19 - Draft revised budget £2.383m, expenditure to date £0.971m. The budget

includes £0.660m carried forward from 2017-18. There may some slippage into 2019-20 depending on delivery dates which are currently being reviewed. Additional grant of £0.115m has been secured towards the upgrading of the Ports ANPR system.

5.3.2 2019-20 to 2024-25 – This includes the replacement Programme for Vehicles at £1.3m per annum, the PSU replacement programme and an additional amount from the 2019-20 additionality. Once the Telematics system has been implemented the level of Fleet replacement can be reviewed. Amounts for the replacement of the Dexun system (SCC), Intoxilators in Custody, Fingerprint Equipment and Collision Investigation Equipment have been included as these have been identified as equipment reaching their end of life and critical for operational delivery. Replacement of all ANPR cameras has been included, although this needs to be

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detailed and scrutinised as the Welsh Government funded around half of the original instalment.

5.4 IT and Communications Equipment,

5.4.1 2018-19 - Draft revised budget £3.110m, Expenditure to date £1.728m.

• Desk Top replacement, budget includes £0.172m carry forward for planned

upgrades as part of the moves in Wrexham. • Payments for the Control Room upgrade are made on milestones being met,

as these have not been satisfactorily met payments have been held back. Revised milestone payments have been made, with a 20% retention being held currently. There may be additional costs resulting from the issue following going live, discussions are on-going as to whether any of these are recoverable, or otherwise they will need to be funded.

• Airwave Units – Airwave Units need to be replaced due to the national delay in implementing ESN. A total of 1,056 units need replacing as their GPS chip will become defunct at the end of March 2019. It is intended to fund this from the revenue underspend. The cost of these replacements is £0.501m a further £0.096m was required to improve Airwave reception in Llay.

5.4.2 2019-20 to 2024-25 – This section includes the replacement programme, the ‘Desk Top’ replacement includes desk tops, laptops and the ‘two in ones’ personal issue devices. Additional funding of £0.4m to pump prime the two in ones and £0.062m additional for the growth posts has been included. Lines 48 to 61 reflect the Digital investment and end of life equipment detailed during the budget cycle. This includes the capital element of the National Enablement Programme. These investments are managed through the Digital Transformation Programme Board. An amount of £0.4m is included in 2019-20 for the replacement of Body Worn Video equipment, for which a business case is currently being drafted.

5.5 Funding – based on the current revenue budget, estimated grants, and reserves available the Programme is affordable and funded as shown below.

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5.6 The funding includes an additional £25.7m ‘borrowing’ (this may be ‘internal’ or external borrowing), the majority of this is to fund the Estates Programme. Over the same period the borrowing total (known as the Capital Financing Requirement (CFR)) is budgeted to be reduced by £12.3m through repayment of loans, a net increase of £13.4m over 7 years. (Updated: Reduction of £17.3m including PFI payments, net movement of £8.4m). The revenue contribution amount is reduced to the minimum required to fund the Vehicles replacement programme of £0.838m, this amount plus the Capital grant of £0.462m is required to fund vehicle replacements. Earmarked reserves are being used to fund £5.8m of the Programme, the vast majority of this is being used to fund digital investment. Capital receipts have been profiled towards the end of the programme to manage the risk of the receipts not materialising.

2019-20 2020-21 2021-22 2022-23 2023-24 2024-25Total

Ref Description Orig Est Revised Est Est Est Est Est Est Fundinmgwith c/f Est 18-19

Jan 19 to24-25

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Funding

Home Office Grant 462 462 567 462 462 462 462 462 3,339Revenue Contribution 1,432 2,047 1,712 1,243 1,116 838 838 838 8,632Earmarked Reserves 2,947 2,558 2,549 770 0 0 0 0 5,877Capital Recipts 2,851 2,008 674 155 377 100 1,420 475 5,209Borrowing for Estates 5,124 5,294 1,165 3,216 3,895 3,379 3,141 958 21,048Borrowing for replacement programme 553 539 0 707 2,045 300 760 300 4,651

Total Funding 13,369 12,908 6,667 6,553 7,895 5,079 6,621 3,033 48,756

2018-19

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APPENDIX B

Minimum Revenue Provision (for debt re payment) Annual Statement

The Local Authorities (Capital Finance and Accounting)(Wales)(Amendment) Regulations 2008 (SI 2008/588 (W.59)) place a duty on local authorities to make a prudent provision for debt redemption. Guidance on Minimum Revenue Provision has been issued by the Secretary of State and local authorities are required to “have regard” to such Guidance under section 21(1B) of the Local Government Act 2003, the guidance were last updated by Ministers in 2018.

The four MRP options available are:

- Option 1: Regulatory Method - Option 2: CFR Method - Option 3: Asset Life Method - Option 4: Depreciation Method

NB This does not preclude other prudent methods.

Capital expenditure incurred during 2018-19 will not be subject to a MRP charge until the year following the asset becoming operational.

MRP in 2019-20: Options 1 and 2 may be used only for capital expenditure incurred before 1 April 2008 and any supported (i.e. financing costs deemed to be supported through Revenue Support Grant from Central Government) capital expenditure funded from borrowing. Methods of making prudent provision for unsupported capital expenditure include Options 3 and 4 (which may also be used for supported capital expenditure if the Commissioner chooses).

The Police and Crime Commissioner will apply Option 2 in respect of historical supported capital expenditure, applying a 4% charge of the balance at the end of the proceeding year.

The Police and Crime Commissioner Option 3 in respect of unsupported capital expenditure which is calculated on a straight line basis resulting in annual equal instalments as set out below. Equal instalment method MRP is the amount given by the following formula: A – B C Where-

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A is the amount of the capital expenditure in respect of the asset financed by borrowing or credit arrangements B is the total provision made before the current financial year in respect of that expenditure C is the inclusive number of financial years from the current year to that in which the estimated life of the asset expires.

The life of the asset is provided by Wilks Head and Eve as property consultants in

relation to estate assets and professional judgement in the case of shorter life assets.

If it is ever proposed to vary the terms of the original MRP Statement during the year, a revised statement will be brought to Joint Audit Committee and Strategic Executive Board.

MRP in respect of leases brought on to the Balance Sheet under the IFRS-based Code of Practice will match the annual principal repayment for the associated deferred liability.

The above complies with the guidance on Minimum Revenue Provision as set out by the Welsh Government.

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Appendix C

Draft Treasury Management Strategy Statement and Investment Strategy 2018-19 to 2022-23

1. Introduction

1.1 Treasury management is the management of the organisation’s cash flows, borrowing and investments, and the associated risks. The Police and Crime Commissioner has invested substantial sums of money and is therefore exposed to financial risks including the loss of invested funds and the revenue effect of changing interest rates. The successful identification, monitoring and control of financial risk are therefore central to the organisation’s prudent financial management.

1.2 Treasury risk management at the organisation is conducted within the framework of the Chartered Institute of Public Finance and Accountancy’s Treasury Management in the Public Services: Code of Practice 2017 Edition (the CIPFA Code) which requires the Police and Crime Commissioner to approve a treasury management strategy before the start of each financial year. In addition, the Welsh Government (WG) issued revised Guidance on Local Authority Investments in March 2010 that requires the Police and Crime Commissioner to approve an investment strategy before the start of each financial year. This report fulfils the Police and Crime Commissioner’s legal obligation under the Local Government Act 2003 to have regard to both the CIPFA Code and the WG Guidance.

1.3 Revised strategy: In accordance with the WG Guidance, the Police and Crime Commissioner will be asked to approve a revised Treasury Management Strategy Statement should the assumptions on which this report is based change significantly. Such circumstances would include, for example, a large unexpected change in interest rates, in the Police and Crime Commissioner’s capital programme or in the level of its investment balance.

2. External Context

2.1 Economic background: The UK’s progress negotiating its exit from the European Union, together with its future trading arrangements, will continue to be a major influence on the Police and Crime Commissioner’s treasury management strategy for 2019/20.

2.2 UK Consumer Price Inflation (CPI) for October was up 2.4% year/year, slightly below the consensus forecast and broadly in line with the Bank of England’s November Inflation Report. The most recent labour market data for October 2018 showed the unemployment rate edged up slightly to 4.1% while the employment rate of 75.7% was the joint highest on record. The 3-month average annual growth rate for pay excluding bonuses was 3.3% as wages continue to rise steadily and provide some pull

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on general inflation. Adjusted for inflation, real wages grew by 1.0%, a level still likely to have little effect on consumer spending.

2.3 The rise in quarterly GDP growth to 0.6% in Q3 from 0.4% in the previous quarter was due to weather-related factors boosting overall household consumption and construction activity over the summer following the weather-related weakness in Q1. At 1.5%, annual GDP growth continues to remain below trend. Looking ahead, the BoE, in its November Inflation Report, expects GDP growth to average around 1.75% over the forecast horizon, providing the UK’s exit from the EU is relatively smooth.

2.4 Following the Bank of England’s decision to increase Bank Rate to 0.75% in August, no changes to monetary policy has been made since. However, the Bank expects that should the economy continue to evolve in line with its November forecast, further increases in Bank Rate will be required to return inflation to the 2% target. The Monetary Policy Committee continues to reiterate that any further increases will be at a gradual pace and limited in extent.

2.5 While US growth has slowed over 2018, the economy continues to perform robustly. The US Federal Reserve continued its tightening bias throughout 2018, pushing rates to the current 2%-2.25% in September. Markets continue to expect one more rate rise in December, but expectations are fading that the further hikes previously expected in 2019 will materialise as concerns over trade wars drag on economic activity.

2.6 Credit outlook: The big four UK banking groups have now divided their retail and investment banking divisions into separate legal entities under ringfencing legislation. Bank of Scotland, Barclays Bank UK, HSBC UK Bank, Lloyds Bank, National Westminster Bank, Royal Bank of Scotland and Ulster Bank are the ringfenced banks that now only conduct lower risk retail banking activities. Barclays Bank, HSBC Bank, Lloyds Bank Corporate Markets and NatWest Markets are the investment banks. Credit rating agencies have adjusted the ratings of some of these banks with the ringfenced banks generally being better rated than their non-ringfenced counterparts.

2.7 The Bank of England released its latest report on bank stress testing, illustrating that all entities included in the analysis were deemed to have passed the test once the levels of capital and potential mitigating actions presumed to be taken by management were factored in. The BoE did not require any bank to raise additional capital.

2.8 European banks are considering their approach to Brexit, with some looking to create new UK subsidiaries to ensure they can continue trading here. The credit strength of these new banks remains unknown, although the chance of parental support is assumed to be very high if ever needed. The uncertainty caused by protracted negotiations between the UK and EU is weighing on the creditworthiness of both UK and European banks with substantial operations in both jurisdictions.

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2.9 Interest rate forecast: Following the increase in Bank Rate to 0.75% in August 2018, the Police and Crime Commissioner’s treasury management adviser Arlingclose is forecasting two more 0.25% hikes during 2019 to take official UK interest rates to 1.25%. The Bank of England’s MPC has maintained expectations for slow and steady rate rises over the forecast horizon. The MPC continues to have a bias towards tighter monetary policy but is reluctant to push interest rate expectations too strongly. Arlingclose believes that MPC members consider both that ultra-low interest rates result in other economic problems, and that higher Bank Rate will be a more effective policy weapon should downside Brexit risks crystallise when rate cuts will be required.

2.10 The UK economic environment remains relatively soft, despite seemingly strong labour market data. Arlingclose’s view is that the economy still faces a challenging outlook as it exits the European Union and Eurozone growth softens. Whilst assumptions are that a Brexit deal is struck and some agreement reached on transition and future trading arrangements before the UK leaves the EU, the possibility of a “no deal” Brexit still hangs over economic activity. As such, the risks to the interest rate forecast are considered firmly to the downside.

2.11 Gilt yields and hence long-term borrowing rates have remained at low levels but some upward movement from current levels is expected based on Arlingclose’s interest rate projections, due to the strength of the US economy and the ECB’s forward guidance on higher rates. 10-year and 20-year gilt yields are forecast to remain around 1.7% and 2.2% respectively over the interest rate forecast horizon, however volatility arising from both economic and political events are likely to continue to offer borrowing opportunities.

2.12 A more detailed economic and interest rate forecast provided by Arlingclose is attached at Appendix C.1.

3. Local Context

3.1 On 31 March 2019, the Police and Crime Commissioner is expected to hold £16.7m of borrowing and £15m of investments. This is set out in further detail at Appendix C.2. Forecast changes in these sums are shown in the balance sheet analysis in table 1 below.

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Table 1: Balance sheet summary and forecast

* finance leases, PFI liabilities and transferred debt that form part of the Police and Crime Commissioner’s total debt ** shows only loans to which the Police and Crime Commissioner is committed and excludes optional refinancing

3.2 The underlying need to borrow for capital purposes is measured by the Capital Financing Requirement (CFR), while usable reserves and working capital are the underlying resources available for investment. The Police and Crime Commissioner’s current strategy is to maintain borrowing and investments below their underlying levels, sometimes known as internal borrowing.

3.3 The Police and Crime Commissioner has an increasing CFR due to the capital programme, and to keep liquidity at the targeted £10m, borrowing of up to £25.7m will be required over the forecast period. This is currently achieved through short term borrowing. The decision to borrow on a longer term basis is being reviewed with the treasury management consultants.

3.4 CIPFA’s Prudential Code for Capital Finance in Local Authorities recommends that the Police and Crime Commissioner’s total debt should be lower than its highest forecast CFR over the next three years. Table 1 shows that the Police and Crime Commissioner expects to comply with this recommendation during 2019/20.

3.5 Liability benchmark: To compare the Police and Crime Commissioner’s actual borrowing against an alternative strategy, a liability benchmark has been calculated showing the lowest risk level of borrowing. This assumes the same forecasts as table 1 above, but that cash and investment balances are kept to a minimum level of £10m at each year-end to maintain sufficient liquidity but minimise credit risk.

31.3.18 Actual

£m

31.3.19 Estimate

£m

31.3.20 Forecast

£m

31.3.21 Forecast

£m

31.3.22 Forecast

£m

31.3.23 Forecast

£m

31.3.24 Forecast

£m

31.3.25 Forecast

£m General Fund CFR 27.2 31.1 29.8 31.5 35.0 36.1 37.4 35.7 Less: Other debt liabilities *

(11.3) (10.6) (9.9) (9.1) (8.2) (7.3) (6.2) (5.1)

Loans CFR 15.9 20.5 19.9 22.4 26.8 28.8 31.2 30.6 Less: External borrowing (long term)**

(1.3) (0.7) 0.0 0.0 0.0 0.0 0.0 0.0

Less: External borrowing (short term)**

(10.0) (16.0) 0.0 0.0 0.0 0.0 0.0 0.0

Internal borrowing 4.6 3.8 19.9 22.4 26.8 28.8 31.2 30.6 Less: Usable reserves (25.3) (20.4) (18.8) (17.9) (17.3) (17.1) (15.7) (15.1) Less: Working capital 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 New borrowing / (Investments)

(20.5) (16.4) 1.3 4.7 9.7 11.9 15.7 15.7

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Table 2: Liability benchmark

3.6 Statutory guidance is that debt should remain below the capital financing requirement, except in the short-term. As can be seen from table 6, the Police and Crime Commissioner expects to comply with this in the medium term, but this will need to be part of the assessment when new borrowing is taken on.

3.7 Borrowing strategy: The Police and Crime Commissioner’s main objectives when borrowing are to achieve a low but certain cost of finance while retaining flexibility should plans change in future. These objectives are often conflicting, and the Police and Crime Commissioner therefore seeks to strike a balance between cheap short-term loans (currently available at around 0.95%) and long-term fixed rate loans where the future cost is known but higher (currently 2.0 to 3.0%).

3.8 The Borrowing Strategy is also balanced by the use of revenue cash available (reducing investments) being used rather than borrowing, known as internal borrowing. Internal borrowing has been used extensively over recent years saving around £0.250m in interest charges per year and reducing risk by not investing cash. However, use of reserves to fund Capital has reduced the available amounts to internally borrow. A second issue is that the Police and Crime Commissioner’s income is not constant during the year; this is due to a Pension Grant of around £20m being paid in one lump sum each July. This has resulted in short term borrowing being required for 6 to 8 months of the year and a no additional borrowing required for the remaining months. At some point longer term borrowing will need to be secured, this is being monitored and discussed with our Treasury Management consultants on a regular basis.

3.9 Objectives: The Police and Crime Commissioner’s chief objective when borrowing money is to strike an appropriately low risk balance between securing low interest

31.3.18 Actual

£m

31.3.19 Estimate

£m

31.3.20 Forecast

£m

31.3.21 Forecast

£m

31.3.22 Forecast

£m

31.3.22 Forecast

£m

31.3.22 Forecast

£m

31.3.22 Forecast

£m Loans CFR 15.9 20.5 19.9 22.4 26.8 28.8 31.2 30.6 Less: Usable reserves

(25.3) (20.4) (18.8) (17.9) (17.3) (17.1) (15.7) (15.1)

Plus: Working capital

0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2

Plus: Minimum investments

0.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0

Liability Benchmark

9.8 10.3 11.3 14.7 19.7 21.9 25.7 25.7

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costs and achieving certainty of those costs over the period for which funds are required. The flexibility to renegotiate loans should the Police and Crime Commissioner’s long-term plans change is a secondary objective.

3.10 Strategy: Given the significant cuts to public expenditure and in particular to local government funding, the Police and Crime Commissioner’s borrowing strategy continues to address the key issue of affordability without compromising the longer-term stability of the debt portfolio. With short-term interest rates currently much lower than long-term rates, it is likely to be more cost effective in the short-term to either use internal resources, or to borrow short-term loans instead.

3.11 By doing so, the Police and Crime Commissioner is able to reduce net borrowing costs (despite foregone investment income) and reduce overall treasury risk. The benefits of internal / short-term borrowing will be monitored regularly against the potential for incurring additional costs by deferring borrowing into future years when long-term borrowing rates are forecast to rise modestly. Arlingclose will assist the Police and Crime Commissioner with this ‘cost of carry’ and breakeven analysis. Its output may determine whether the Police and Crime Commissioner borrows additional sums at long-term fixed rates in 2019/20 with a view to keeping future interest costs low, even if this causes additional cost in the short-term.

3.12 Alternatively, the Police and Crime Commissioner may arrange forward starting loans during 2019/20, where the interest rate is fixed in advance, but the cash is received in later years. This would enable certainty of cost to be achieved without suffering a cost of carry in the intervening period.

3.13 In addition, the Police and Crime Commissioner may borrow further short-term loans to cover unplanned cash flow shortages.

3.14 Projected levels of the Police and Crime Commissioner’s total outstanding debt (which comprises borrowing and PFI liabilities) are shown below, compared with the capital financing requirement (see above). These are based on the current position to inform future decisions, which is the timing of longer term borrowing.

Table 3: Prudential Indicator: Gross Debt and the Capital Financing Requirement in £ millions

31.3.18 actual

31.3.19 forecast

31.3.20 forecast

31.3.21 forecast

31.3.22 forecast

31.3.23 forecast

31.3.24 forecast

31.3.25 forecast

£m £m £m £m £m £m £m £m PFI 11.4 10.7 9.9 9.1 8.2 7.3 6.2 5.1 Long Term Loans 1.4 0.7 0.0 0.0 0.0 0.0 0.0 0.0 Short Term loans 10.0 16.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt (incl. PFI & leases) 22.7 27.3 9.9 9.1 8.2 7.3 6.2 5.1

Capital Financing Requirement 27.2 31.0 29.8 31.5 35.0 36.1 37.4 35.7

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3.15 Sources of borrowing: The approved sources of long-term and short-term borrowing are:

• Internal • UK Debt Management Office (previously PWLB) and any successor body • UK Local authorities and bodies defined to be local authorities • Social housing and registered social landlords, formerly known as housing

associations as regulated by the Regulator of Social Housing (in England), the Scottish Housing Regulator, the Welsh Government and the Department for Communities (in Northern Ireland)

• Other UK Government Agencies • Universities • UK public and private sector pension funds (except Gwynedd Pension Fund) • Commercial banks and building societies authorised to operate in the UK and

included on the lending list • European Investment Bank • Capital markets (stock issues, commercial paper and bills) • Structured finance

3.16 Other sources of debt finance: In addition, capital finance may be raised by the following methods that are not borrowing, but may be classed as other debt liabilities:

• leasing • hire purchase • Private Finance Initiative • sale and leaseback

3.17 The Police and Crime Commissioner has previously raised all of its long-term borrowing from the UK Debt Management Office but it continues to investigate other sources of finance, such as local Authority loans and bank loans, that may be available at more favourable rates.

3.18 Short-term and variable rate loans: These loans leave the Police and Crime Commissioner exposed to the risk of short-term interest rate rises and are therefore subject to the interest rate exposure limits in the treasury management indicators below.

3.19 Debt rescheduling: The PWLB allows authorities to repay loans before maturity and either pay a premium or receive a discount according to a set formula based on current interest rates. Other lenders may also be prepared to negotiate premature redemption terms. The Police and Crime Commissioner may take advantage of this and replace some loans with new loans, or repay loans without replacement, where this is expected to lead to an overall cost saving or a reduction in risk.

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4. Investment Strategy

4.1 The Police and Crime Commissioner holds significant invested funds, representing income received in advance of expenditure plus balances and reserves held. In the past 12 months, the Police and Crime Commissioner’s investment balance has ranged between £28 and £10 million, and similar levels are expected to be maintained in the forthcoming year.

4.2 Objectives: Both the CIPFA Code and the WG Guidance require the Police and Crime Commissioner to invest its funds prudently, and to have regard to the security and liquidity of its investments before seeking the highest rate of return, or yield. The Police and Crime Commissioner’s objective when investing money is to strike an appropriate balance between risk and return, minimising the risk of incurring losses from defaults and the risk of receiving unsuitably low investment income. Where balances are expected to be invested for more than one year, the Police and Crime Commissioner will aim to achieve a total return that is equal or higher than the prevailing rate of inflation, in order to maintain the spending power of the sum invested.

4.3 Negative interest rates: If the UK enters into a recession in 2019/20, there is a small chance that the Bank of England could set its Bank Rate at or below zero, which is likely to feed through to negative interest rates on all low risk, short-term investment options. This situation already exists in many other European countries. In this event, security will be measured as receiving the contractually agreed amount at maturity, even though this may be less than the amount originally invested.

4.4 Strategy: Although there the increasing risk and very low returns from short-term unsecured bank investments, the Police and Crime Commissioner aims to continue to invest in short term bank investments during 2019/20. This in concurrence with the internal borrowing strategy, minimising the amounts invested (and associated risk) and maximising yield (by reducing interest payments).

4.5 Business models: Under the new IFRS 9 standard, the accounting for certain investments depends on the Police and Crime Commissioner’s “business model” for managing them. The Police and Crime Commissioner aims to achieve value from its internally managed treasury investments by a business model of collecting the contractual cash flows and therefore, where other criteria are also met, these investments will continue to be accounted for at amortised cost.

4.6 Approved counterparties: The Police and Crime Commissioner may invest its surplus funds with any of the counterparty types in table 3 below, subject to the cash limits (per counterparty) and the time limits shown. The minimum credit investment was been raised from BBB+ to A- in 2018/19.

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Table 4: Approved investment counterparties and limits

Credit Rating Banks

Unsecured Banks

Secured Government Corporates

UK Govt n/a n/a £ Unlimited n/a

AAA £4m

£7m

£7m

£7m

AA+ £4m

£7m

£7m

£7m

AA £4m

£7m

£7m

£7m

AA- £4m

£7m

£7m

£7m

A+ £4m

£7m

£7m

£7m

A £4m £7m

£7m

£7m

A- £4m

£7m

£7m

£7m

HSBC1 £10m £10m n/a n/a

Unrated Local Authorities

n/a n/a £7m n/a

Pooled Funds £4m per fund

1 These are the Commissioner’s bankers and are currently rated AA- by the credit rating agencies and are currently the highest rated UK banking institution.

This table must be read in conjunction with the notes below

4.7 Credit rating: Investment limits are set by reference to the lowest published long-term credit rating from a selection of external rating agencies. Where available, the credit rating relevant to the specific investment or class of investment is used, otherwise the counterparty credit rating is used. However, investment decisions are never made solely based on credit ratings, and all other relevant factors including external advice will be taken into account.

4.8 Banks unsecured: Accounts, deposits, certificates of deposit and senior unsecured bonds with banks and building societies, other than multilateral development banks. These investments are subject to the risk of credit loss via a bail-in should the regulator determine that the bank is failing or likely to fail. See below for arrangements relating to operational bank accounts.

4.9 Banks secured: Covered bonds, reverse repurchase agreements and other collateralised arrangements with banks and building societies. These investments are secured on the bank’s assets, which limits the potential losses in the unlikely event of insolvency, and means that they are exempt from bail-in. Where there is no investment specific credit rating, but the collateral upon which the investment is secured has a credit rating, the higher of the collateral credit rating and the counterparty credit rating will be used to determine cash and time limits. The

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combined secured and unsecured investments in any one bank will not exceed the cash limit for secured investments.

4.10 Government: Loans, bonds and bills issued or guaranteed by national governments, regional and local authorities and multilateral development banks. These investments are not subject to bail-in, and there is generally a lower risk of insolvency, although they are not zero risk. Investments with the UK Central Government may be made in unlimited amounts for up to 50 years.

4.11 Corporates: Loans, bonds and commercial paper issued by companies other than banks and registered providers. These investments are not subject to bail-in, but are exposed to the risk of the company going insolvent. Loans to unrated companies will only be made as part of a diversified pool in order to spread the risk widely.

4.12 Pooled funds: Shares or units in diversified investment vehicles consisting of the any of the above investment types, plus equity shares and property. These funds have the advantage of providing wide diversification of investment risks, coupled with the services of a professional fund manager in return for a fee. Short-term Money Market Funds that offer same-day liquidity and very low or no volatility will be used as an alternative to instant access bank accounts, while pooled funds whose value changes with market prices and/or have a notice period will be used for longer investment periods.

4.13 Bond, equity and property funds offer enhanced returns over the longer term, but are more volatile in the short term. These allow the Police and Crime Commissioner to diversify into asset classes other than cash without the need to own and manage the underlying investments. Because these funds have no defined maturity date, but are available for withdrawal after a notice period, their performance and continued suitability in meeting the Police and Crime Commissioner’s investment objectives will be monitored regularly.

4.14 Operational bank account: The Police and Crime Commissioner uses the HSBC as his operational bank account. HSBC rating is within the minimum credit rating set, in the event that the rating falls below the minimum rating HSBC will still be used as the operational bank account until alternative arrangements are made.

4.15 Risk assessment and credit ratings: Credit ratings are obtained and monitored by the Police and Crime Commissioner’s treasury advisers, who will notify changes in ratings as they occur. Where an entity has its credit rating downgraded so that it fails to meet the approved investment criteria then:

• no new investments will be made, • any existing investments that can be recalled or sold at no cost will be, and • full consideration will be given to the recall or sale of all other existing investments

with the affected counterparty.

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4.16 Where a credit rating agency announces that a credit rating is on review for possible downgrade (also known as “rating watch negative” or “credit watch negative”) so that it may fall below the approved rating criteria, then only investments that can be withdrawn [on the next working day] will be made with that organisation until the outcome of the review is announced. This policy will not apply to negative outlooks, which indicate a long-term direction of travel rather than an imminent change of rating.

4.17 Other information on the security of investments: The Police and Crime Commissioner understands that credit ratings are good, but not perfect, predictors of investment default. Full regard will therefore be given to other available information on the credit quality of the organisations in which it invests, including credit default swap prices, financial statements, information on potential government support, reports in the quality financial press and analysis and advice from the Police and Crime Commissioner’s treasury management adviser. No investments will be made with an organisation if there are substantive doubts about its credit quality, even though it may otherwise meet the above criteria.

4.18 When deteriorating financial market conditions affect the creditworthiness of all organisations, as happened in 2008 and 2011, this is not generally reflected in credit ratings, but can be seen in other market measures. In these circumstances, the Police and Crime Commissioner will restrict its investments to those organisations of higher credit quality and reduce the maximum duration of its investments to maintain the required level of security. The extent of these restrictions will be in line with prevailing financial market conditions. If these restrictions mean that insufficient commercial organisations of high credit quality are available to invest the Police and Crime Commissioner’s cash balances, then the surplus will be deposited with the UK Government via the Debt Management Office or invested in government treasury bills for example, or with other local authorities. This will cause a reduction in the level of investment income earned, but will protect the principal sum invested.

4.19 Investment limits: The Police and Crime Commissioner’s revenue reserves available to cover investment losses are forecast to be £20m million on 31 March 2019. In order to manage this risk limits have been set as per table 3. A group of banks under the same ownership will be treated as a single organisation for limit purposes.

4.20 Liquidity management: The Police and Crime Commissioner uses purpose-built cash flow forecasting model to determine the maximum period for which funds may prudently be committed. The forecast is compiled on a prudent basis to minimise the risk of the Police and Crime Commissioner being forced to borrow on unfavourable terms to meet its financial commitments. Limits on long-term investments are set by reference to the Police and Crime Commissioner’s medium-term financial plan and cash flow forecast.

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5 Treasury Management Indicators

5.1 The Police and Crime Commissioner measures and manages its exposures to treasury management risks using the following indicators.

5.2 Security: The Police and Crime Commissioner has set a minimum credit rating of A- for investments.

Credit risk indicator Target Minimum credit rating for investment A-

5.3 Liquidity: The Police and Crime Commissioner has adopted a voluntary measure of its exposure to liquidity risk by monitoring the amount of cash available to meet unexpected payments within a rolling twelve month period, without additional borrowing.

Liquidity risk indicator Target Total cash available within 12 months £10m

5.4 Interest rate exposures: This indicator is set to control the Police and Crime

Commissioner’s exposure to interest rate risk. The upper limit for variable rate exposure has been set to ensure that there is no exposure to interest rate rises which could adversely impact on the revenue budget. The limit allows for the use of variable rate debt to offset exposure to changes in short-term rates on investments

2018-19

%

2019-20

%

2020-21

%

2021-22

%

2022-23

%

2023-24

%

Upper Limit for Fixed Interest Rate Exposure

100 100 100 100 100 100

Upper Limit for Variable Interest Rate Exposure

50 50 50 50 50 50

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5.5 Maturity structure of borrowing: This indicator is set to control the Police and Crime Commissioner’s exposure to refinancing risk. The upper and lower limits on the maturity structure of borrowing will be:

Refinancing rate risk indicator Upper limit Lower limit Under 12 months 100% 0% 12 months and within 24 months 100% 0% 24 months and within 5 years 100% 0% 5 years and within 10 years 100% 0% 10 years and above Use additional periods above 10 years if

there is a large amount of debt in this period

100% 0%

5.6 Principal sums invested for periods longer than a year: The purpose of this indicator is to control the Police and Crime Commissioner’s exposure to the risk of incurring losses by seeking early repayment of its investments. The limits on the long-term principal sum invested to final maturities beyond the period end will be:

Price risk indicator 2019/20 2020/21 2021/22 Limit on principal invested beyond year end £5m £5m £5m

6 Related Matters

6.1 The CIPFA Code requires the Police and Crime Commissioner to include the following in its treasury management strategy.

6.2 Financial Derivatives: In the absence of any explicit legal power to do so, the Police and Crime Commissioner will not use standalone financial derivatives (such as swaps, forwards, futures and options). Derivatives embedded into loans and investments, including pooled funds and forward starting transactions, may be used, and the risks that they present will be managed in line with the overall treasury risk management strategy.

6.3 Markets in Financial Instruments Directive: The Police and Crime Commissioner has opted up to professional client status with its providers of financial services, including advisers, banks, brokers and fund managers, allowing it access to a greater range of services but without the greater regulatory protections afforded to individuals and small companies. Given the size and range of the Authority’s treasury management activities, the Chief Financial Officer believes this to be the most appropriate status.

6.4 Government Guidance: Further matters required by the WG Guidance are included in Appendix C.3

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7 Financial Implications

7.1 The budget for investment income in 2019/20 is £0.1m million, based on an average investment portfolio of £10 million at an interest rate of 1%. The budget for debt interest paid in 2019/20 is £0.6 million, based on an average debt portfolio of approximately £17m million at an average interest rate of 3.8%. If actual levels of investments and borrowing, or actual interest rates, differ from those forecast, performance against budget will be correspondingly different. As a strategy of internal borrowing is being followed the actual interest payments are projected to be significantly lower than the budget, the balance available will be used to finance capital expenditure directly thus reducing future borrowing requirements.

8 Other Options Considered

8.1 The WG Guidance and the CIPFA Code do not prescribe any particular treasury management strategy for local authorities to adopt. The Chief Financial Officer, having consulted the Joint Audit Committee, believes that the above strategy represents an appropriate balance between risk management and cost effectiveness. Some alternative strategies, with their financial and risk management implications, are listed below.

Alternative Impact on income and expenditure

Impact on risk management

Invest in a narrower range of counterparties and/or for shorter times

Interest income will be lower Lower chance of losses from credit related defaults, but any such losses may be greater

Invest in a wider range of counterparties and/or for longer times

Interest income will be higher

Increased risk of losses from credit related defaults, but any such losses may be smaller

Borrow additional sums at long-term fixed interest rates

Debt interest costs will rise; this is unlikely to be offset by higher investment income

Higher investment balance leading to a higher impact in the event of a default; however long-term interest costs may be more certain

Borrow short-term or variable loans instead of long-term fixed rates

Debt interest costs will initially be lower

Increases in debt interest costs will be broadly offset by rising investment income in the medium term, but long-term costs may be less certain

Reduce level of borrowing Saving on debt interest is likely to exceed lost investment income

Reduced investment balance leading to a lower impact in the event of a default; however long-term interest costs may be less certain

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Appendix C.1

Arlingclose Economic & Interest Rate Forecast December 2018

Underlying assumptions: • Our central interest rate forecasts are predicated on there being a transitionary

period following the UK’s official exit from the EU.

• The MPC has a bias towards tighter monetary policy but is reluctant to push interest rate expectations too strongly. We believe that MPC members consider that: 1) tight labour markets will prompt inflationary pressure in the future, 2) ultra-low interest rates result in other economic problems, and 3) higher Bank Rate will be a more effective policy weapon if downside risks to growth crystallise.

• Both our projected outlook and the increase in the magnitude of political and economic risks facing the UK economy means we maintain the significant downside risks to our forecasts, despite the potential for slightly stronger growth next year as business investment rebounds should the EU Withdrawal Agreement be approved. The potential for severe economic outcomes has increased following the poor reception of the Withdrawal Agreement by MPs. We expect the Bank of England to hold at or reduce interest rates from current levels if Brexit risks materialise.

• The UK economic environment is relatively soft, despite seemingly strong labour market data. GDP growth recovered somewhat in the middle quarters of 2018, but more recent data suggests the economy slowed markedly in Q4. Our view is that the UK economy still faces a challenging outlook as the country exits the European Union and Eurozone economic growth softens.

• Cost pressures are easing but inflation is forecast to remain above the Bank’s 2% target through most of the forecast period. Lower oil prices have reduced inflationary pressure, but the tight labour market and decline in the value of sterling means inflation may remain above target for longer than expected.

• Global economic growth is slowing. Despite slower growth, the European Central Bank is conditioning markets for the end of QE, the timing of the first rate hike (2019) and their path thereafter. More recent US data has placed pressure on the Federal Reserve to reduce the pace of monetary tightening – previous hikes and heightened expectations will, however, slow economic growth.

• Central bank actions and geopolitical risks have and will continue to produce significant volatility in financial markets, including bond markets.

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Forecast:

• The MPC has maintained expectations of a slow rise in interest rates over the forecast horizon, but recent events around Brexit have dampened interest rate expectations. Our central case is for Bank Rate to rise twice in 2019, after the UK exits the EU. The risks are weighted to the downside.

• Gilt yields have remained at low levels. We expect some upward movement from current levels based on our central case that the UK will enter a transitionary period following its EU exit in March 2019. However, our projected weak economic outlook and volatility arising from both economic and political events will continue to offer borrowing opportunities.

Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 AverageOfficial Bank RateUpside risk 0.00 0.00 0.00 0.00 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.17Arlingclose Central Case 0.75 0.75 1.00 1.00 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.13Downside risk 0.00 -0.50 -0.75 -0.75 -1.00 -1.00 -1.00 -1.00 -1.00 -1.00 -1.00 -1.00 -1.00 -0.85

3-mth money market rateUpside risk 0.10 0.10 0.10 0.10 0.15 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.17Arlingclose Central Case 0.90 0.95 1.10 1.30 1.40 1.40 1.40 1.35 1.35 1.35 1.35 1.35 1.35 1.27Downside risk -0.20 -0.45 -0.60 -0.80 -0.90 -0.90 -0.90 -0.85 -0.85 -0.85 -0.85 -0.85 -0.85 -0.76

1-yr money market rateUpside risk 0.20 0.30 0.30 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.33Arlingclose Central Case 1.15 1.25 1.35 1.50 1.70 1.60 1.50 1.40 1.35 1.35 1.35 1.35 1.35 1.40Downside risk -0.35 -0.50 -0.60 -0.80 -0.90 -0.90 -0.90 -0.85 -0.85 -0.85 -0.85 -0.85 -0.85 -0.77

5-yr gilt yieldUpside risk 0.25 0.30 0.30 0.35 0.35 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.37Arlingclose Central Case 1.15 1.25 1.35 1.50 1.50 1.40 1.35 1.35 1.30 1.30 1.30 1.30 1.30 1.33Downside risk -0.50 -0.60 -0.65 -0.80 -0.80 -0.70 -0.65 -0.65 -0.65 -0.65 -0.65 -0.65 -0.65 -0.66




PWLB Certainty Rate (Maturity Loans) = Gilt yield + 0.80%PWLB Infrastructure Rate (Maturity Loans) = Gilt yield + 0.60%

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Appendix C.2

Existing Investment & Debt Portfolio Position

31/03/19

Actual Portfolio (with estimated movements up to the end of year and subject to end of year checks)

£m

External Borrowing:

Fixed Rate – Debt Office

Fixed Rate – Local Government

Total External Borrowing

0.655

16.000

16.655

Other Long Term Liabilities:

- PFI

- Finance Leases

10.660

0.00

Total Gross External Debt 27.315

Investments:

Managed in-house

- Short-term monies (Deposits/ monies on call /MMFs)

- Long-term investments

Managed externally

- By Fund Managers

- Pooled Funds (please list)

-15.040

0.00

0.00

Total Investments -15.040

Net Debt 12.275

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Appendix C.3

Additional requirements of Welsh Government Guidance

Specified investments: The WG Guidance defines specified investments as those:

• denominated in pound sterling, • due to be repaid within 12 months of arrangement, • not defined as capital expenditure by legislation, and • invested with one of:

o the UK Government, o a UK local Police and Crime Commissioner, parish Police and Crime

Commissioner or community Police and Crime Commissioner, or o a body or investment scheme of “high credit quality”.

The Police and Crime Commissioner defines “high credit quality” organisations and securities as those having a credit rating of A- or higher that are domiciled in the UK or a foreign country with a sovereign rating of AA+ or higher. For money market funds and other pooled funds “high credit quality” is defined as those having a credit rating of A- or higher.

Non-specified investments: Any investment not meeting the definition of a specified investment is classed as non-specified. The Police and Crime Commissioner does not intend to make any investments denominated in foreign currencies nor any defined as capital expenditure. Non-specified investments will therefore be limited to long-term investments, i.e. those that are due to mature 12 months or longer from the date of arrangement and limited to no more than £5m.

Investment training: The needs of the Police and Crime Commissioner’s treasury management staff for training in investment management are assessed on a regular basis and additionally when the responsibilities of individual members of staff change.

Staff regularly attend training courses, seminars and conferences provided by Arlingclose and CIPFA. Relevant staff are also encouraged to study professional qualifications from CIPFA, the Association of Corporate Treasurers and other appropriate organisations.

Investment advisers: The Police and Crime Commissioner has appointed Arlingclose Limited as treasury management advisers and receives specific advice on investment, debt and capital finance issues. The quality of this service is controlled by regular strategy meetings, review of data provided and professional judgement.

Investment of money borrowed in advance of need: The Police and Crime Commissioner may, from time to time, borrow in advance of need, where this is expected to provide the best long-term value for money. Since amounts borrowed will be invested until spent, the Police and Crime Commissioner is aware that it will be exposed to the risk of loss of the borrowed sums, and the risk that investment and borrowing interest rates may change in the intervening period. These risks will be managed as part of the Police and Crime Commissioner’s overall management of its treasury risks.

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The total amount borrowed will not exceed the authorised borrowing limit of £35m million. The maximum period between borrowing and expenditure is expected to be two years, although the Police and Crime Commissioner is not required to link particular loans with particular items of expenditure.

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21 March 2019

Joint Governance Board

Report by the Police and Crime Commissioner’s Chief Finance Officer

1. Background 1.1 A Joint Governance Board was formed in 2014 to document the governance

arrangements in both the Office of the Police and Crime Commissioner and North Wales Police Force.

1.2 Previously, the Annual Governance Statement was created by the Chief Finance Officer and the Director of Finance and Resources after the end of each financial year for publication with the Statement of Accounts.

1.3 However, in order to be effective, governance must be in place throughout the year, and governance responsibility must extend beyond the Chief Finance Officer and the Director of Finance and Resources.

1.4 Meeting regularly throughout the year means that:

• any changes to governance arrangements can be noted during the course of the year;

• any gaps can be identified and action taken to address them;

• all with governance responsibility are able to contribute towards the production of the Annual Governance Statement.

1.5 A member of the Joint Audit Committee attended the meeting on 4 March 2019, and a standing invitation to attend the meeting is extended to members of the Joint Audit Committee.

1.6 The purpose of the Joint Governance Board is not to fulfil the governance function - rather it is to ensure appropriate arrangements are in place by identifying: management controls; other control and compliance processes; and independent assurance. This will then form the basis for the Annual Governance Statements, and a draft of this is attached for review by the Joint Audit Committee.

2. Recommendations 2.1 For members of the Joint Audit Committee to note the work of the Joint Governance

Board.

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2.2 For members of the Joint Audit Committee to be aware that they have a standing invitation to attend Joint Governance Board, and that meeting papers and minutes will be provided to them on request.

2.3 For members to review the draft Annual Governance Statement 3. Work of the Joint Governance Board 3.1 The Governance Framework is considered at every meeting. In order to ensure that

the entire framework can be considered over the course of a year, the themes are divided among three meetings, with the fourth meeting used to pull everything together in order to prepare the Annual Governance Statements.

3.2 At the meeting held on 4 March 2019, the entire framework was reviewed, to

identify any gaps in the information, and to update the RAG-rating. The Head of Finance will update the framework outside of the meeting. In addition, actions for 2019/20 arising from the governance framework were discussed and agreed.

3.3 A summary of HMICFRS Inspections and Reports, including PEEL and National

Thematic reports, was presented to the meeting. This included a summary of progress made in respect of recommendations.

3.4 The next meeting will take place on 11 June 2019. 4. IMPLICATIONS 4.1 Equality

The Police and Crime Commissioner and Chief Constable operate with regard to the principles established within the Joint Equality Plan. Equality is considered within the Governance Framework.

4.2 Financial

The way finances are managed is integral to good governance. The financial policies and the monitoring of financial systems and performance are considered within the Governance Framework.

4.3 Legal

It is a legal requirement to publish Annual Governance Statements for the Police and Crime Commissioner and Chief Constable alongside the Statements of Accounts each year. One purpose of the Joint Governance Board is to record the governance activities for both corporations sole (and ensure any concerns are addressed) in order that the Annual Governance Statements can be prepared accurately and in a timely manner.

4.4 Community and Social Value

Environmental policies, outcomes and engagement (and the monitoring of these) are considered within the Governance Framework. This includes the Wellbeing of Future Generations

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(Wales) Act 2017.

4.5 Risk The way risk is managed is integral to good governance and is considered within the Governance Framework.

4.6 Police and Crime Plan

The objectives within the Police and Crime Plan are fundamental to both corporations sole. The way this is monitored is considered within the Governance Framework.

Report Author

Kate Jackson, Chief Finance Officer, OPCC

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Annual Governance Statement 2018-2019

1. Introduction and Background

1.1. The Police and Crime Commissioner and the Chief Constable have joint governance arrangements. Therefore, many of the controls are common to both corporations sole. The Police and Crime Commissioner and Chief Constable have a Joint Governance Board to ensure that they fulfil their corporate governance responsibilities. The Board is chaired by the Police and Crime Commissioner’s Chief Finance Officer and attended by senior officers of both Police and Crime Commissioner and Chief Constable. The Board collates and documents the evidence to produce this Annual Governance Statement.

1.2. The Police and Crime Commissioner and the Chief Constable have a Scheme of Consent, which has been in place since 1 April 2014 and was reviewed and revised in July 2018. The aim of this Scheme is to provide for proper arrangements for the management of activities on behalf of the Commissioner and the Chief Constable. The Commissioner has a statutory duty and electoral mandate to ensure an efficient and effective police service and to hold the North Wales Police Force to account on behalf of the public. The Commissioner is responsible for the totality of policing. The Chief Constable is charged with the impartial direction and control of all police officers and staff within the police force that they lead and is responsible for maintaining the Queen’s Peace. The Chief Constable holds office under the Crown, but is appointed by the Commissioner. This Scheme was in effect throughout the financial year and has been agreed by all the named Senior Officers within the Scheme and the Chief Constable and Police and Crime Commissioner for North Wales.

1.3. Both the Police and Crime Commissioner and the Chief Constable are required to have a Chief Financial Officer to undertake the statutory section 151 responsibilities. There is an established Joint Audit Committee; the purpose of the Committee is to provide independent advice and recommendation to the Police and Crime Commissioner and the Chief Constable regarding the adequacy of the risk management framework, the internal control environment and financial reporting.

1.4. Each force area has a Police and Crime Panel to maintain a regular check and balance on the performance of the Commissioner. The Commissioner will also be required to consult with the Panel on his plans and budget for policing, as well as the level of council tax and the appointment of a Chief Constable. The panel is made up of ten local councillors and two co-opted independent members, however in September 2016 the Panel appointed a third co-opted independent member following a recruitment campaign. The increase was sanctioned by the Home Secretary. Conwy County Borough Council is the ‘Host Authority’ for the North Wales Police and Crime Panel and provides the required support services for the effective operation and discharge of duties of the Police and Crime Panel

1.5. Governance is about how the Police and Crime Commissioner and the Chief Constable ensure they are doing the right things, in the right way for the right people, in a timely, inclusive, open and accountable manner. It comprises the systems, processes, culture,

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behaviour and values, by which the organisation is directed and controlled and also the activities by which it is held to account and engages with the community it serves. This Annual Governance Statement (AGS) for the Police and Crime Commissioner and the Chief Constable describes how the organisation can show it has discharged its two overarching statutory duties during 2018-2019:

- To secure an effective and efficient police service and - To be accountable for the exercise of their functions and those of people under their

direction and control.

2. Purpose and scope of responsibility for the Governance Framework 2.1. The Police and Crime Commissioner and the Chief Constable are responsible for ensuring

their business is conducted in accordance with the law and proper standards and that public money is safeguarded, properly accounted for and used effectively, efficiently and economically. They also have a duty to make arrangements to secure continuous improvement in the way in which their functions are exercised.

2.2. In discharging their overall responsibility, the Police and Crime Commissioner and the Chief Constable are also responsible for putting in place proper arrangements for the governance of their affairs and facilitating the exercise of their functions, which includes ensuring a sound system of internal control is maintained throughout the year and that arrangements are in place for the management of risk. The financial management arrangements conform principally with the governance requirements of the CIPFA Statement on the Role of the Chief Financial Officer of the Police and Crime Commissioner and Chief Finance Officer of the Chief Constable and the Home Office Financial Management Code of Practice for the Police Forces of England and Wales and Fire and Rescue Authorities created under section 4A of the Fire and Rescue Services Act 2001 (2018).

2.3. This statement explains how the Police and Crime Commissioner and the Chief Constable have complied with the Code of Corporate Governance, which is consistent with the principles of the CIPFA/SOLACE Framework: Delivering Good Governance in Local Government updated in 2016 and also meets the requirements of the Accounts and Audit (Wales) Regulations 2014 as amended, in relation to the statement of internal control and the publication of the annual governance statement.

2.4. The governance framework comprises the systems and processes, culture and values by which the Police and Crime Commissioner and the Chief Constable are directed and controlled and its activities through which it accounts to, engages with and leads its communities. The framework enables the Police and Crime Commissioner and the Chief Constable to monitor the achievement of their strategic objectives and consider whether those objectives have led to the delivery of appropriate, cost effective services and the achievement of value for money.

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2.5. The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable and foreseeable level. It cannot prevent all risk of failure to achieve policies, aims and objectives; it can provide only reasonable rather than absolute assurance of effectiveness. The system of internal control is based on an on-going process designed to identify and prioritise the risks to the achievement of the organisation’s aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, to manage them efficiently, effectively and economically.

2.6. The governance framework has been in place throughout the year ended the 31 March 2019 and up to the approval of the Statement of Accounts.

3. Principles of good governance

The CIPFA/SOLACE Framework: Delivering Good Governance in Local Government sets out seven principles of good governance which underpin effective governance arrangements to ensure that the intended outcomes for stakeholders are defined and achieved. The arrangements specific to the Police and Crime Commissioner and Chief Constable are detailed within the seven principles below. 3.1. Ethics and Integrity

There are corporate processes in place to support the core principle of ethics and integrity such as the Policing protocol 2011 which requires everyone in the organisation to abide by the seven principles of public life (the Nolan principles). Additionally, the Home office Financial Management Code of Practice requires the Police and Crime Commissioner and Chief Constable to ensure that good governance is embedded within the organisations and the College of Policing Code of Ethics sets out the standards of behaviour expected for all people working in policing. The Police and Crime Commissioner’s code of conduct and Chief Constable’s Code of Ethics underpin the standards of expected conduct and behaviour. The Police and Crime Commissioner and Chief Constable have policies and procedures and regulations in place that comply with law and conform to appropriate ethical standards and standards of professional behaviour. Ethical considerations are part of any business decisions taken and are set out within policies in operation within both organisations. The Police and Crime Commissioner and Chief Constable have an Anti-Fraud and Corruption policy and whistleblowing arrangements in place which manage effectively the risk of fraud and corruption. Processes for declaring interest and registers for gifts and hospitalities are maintained and updated as required. Both the Joint Audit Committee and the Police and Crime Panel discharged fully all the functions as identified in the relevant CIPFA publication for Audit Committees. The Joint

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Audit Committee’s Terms of Reference may be found on the Police and Crime Commissioner’s website.

The Police and Crime Commissioner has in place procedures for receiving feedback about policing in North Wales, and decisions made by or on behalf of the Police and Crime Commissioner and his officers. He also has procedures in place for the handling of complaints about the Chief Constable. Additionally, the Police and Crime Panel fulfil their responsibilities in relation to complaints made about the Police and Crime Commissioner as set out within the Police Reform and Social Responsibility Act.

3.2. Openness and Stakeholder Engagement The Police and Crime Commissioner and the Chief Constable promote an open and transparent culture throughout the organisations to ensure that services meet people’s needs. All public meeting papers and minutes are published on the website along with any decisions taken by the Police and Crime Commissioner. The Police and Crime Commissioner is accountable to the people of North Wales to deliver an efficient and effective police service to the people of North Wales and the Chief Constable is accountable to the Police and Crime Commissioner to ensure that an effective police service is provided to the people of North Wales. The Police and Crime Commissioner and the Chief Constable regularly publish information on the Commissioner’s and Chief Constable’s work and achievements and satisfaction of users, including the publication of a Police and Crime Plan and an Annual Report. There is a consultation and engagement strategy in place to ensure that our services are responsive to issues raised. We regularly conduct surveys to inform our service delivery and assist in developing our priorities and objectives. Both the Police and Crime Commissioner and Chief Constable have internal and external consultation mechanisms in place which are used to inform and improve services. The Police and crime Commissioner and Chief Constable work in partnership and collaboration with other organisations to achieve shared objectives and to ensure effective delivery of services which meet the needs of the organisations. Partnership and collaboration arrangements that are in place are monitored and kept under review to ensure that performance is achieved and objectives are met. We have an effective scrutiny function, supported by evidence & data analysis, to challenge decision makers constructively, including those who work in partnership with the Commissioner and Chief Constable. All key decisions taken include a financial impact, legal impact, equality impact and risk assessment.

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The post of Chief Executive to the Police and Crime Commissioner is the designated post of Monitoring Officer and there are arrangements to record any professional advice that is required for specialist areas. Furthermore, the Chief Financial Officers for the Police and Crime Commissioner and the Chief Constable complied with the CIPFA statement ‘the Role of the Chief Financial Officer of the Police and Crime Commissioner and of the Chief Constable’.

3.3. Defining Outcomes The Police and Crime Commissioner and Chief Constable will, as part of the strategic planning process, develop informed strategies and plans which are outcome focused, sustainable and take into account the level of resources required to adequately deliver them. The Police and Crime Commissioner sets the police and crime objectives and these are contained in the Police and Crime Plan. The Police and Crime Plan has been communicated to the public through the website and by various engagement activities and a brief summary of performance is included on the council tax leaflet sent to every household, either electronically or by post. The police and crime objectives, priorities and financial options were developed from the Police and Crime Commissioner’s vision and a joint analysis of: - Assessment of crime and the required level of service - Consultation with local people - Consultation with partners - Consultation between the Police and Crime Commissioner and the Chief Constable - The findings of external audit and reviews by Wales Audit Office and HMIC - Risk assessment The Police and Crime Commissioner’s police and crime objectives are directed and delivered by the Chief Constable and, in turn, by the Strategic Planning Board (SPB) during the year. Our performance is monitored and reported within the Annual Report, Statement of Accounts and the Medium Term Financial plan. The Strategic Executive Board (SEB) is the forum for scrutiny of the Chief Constable by the Police and Crime Commissioner. The additional functions of the Board include:

- to take such decisions as are required by the Scheme of Governance to be taken jointly by the Commissioner and the Chief Constable; and

- to develop proposals for the delivery of the Commissioner’s police and crime objectives as set out in the Plan

The Strategic Executive Board (SEB) and Strategic Planning Board (SPB) scrutinise operational and financial performance, service delivery and the achievement of the police and crime

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objectives. A programmed approach to delivery of plans is in place via the Strategic Planning Board (SPB).

3.4. Determining interventions In order to optimise the achievement of our intended outcomes the Police and Crime Commissioner and Chief Constable will ensure that there are adequate arrangements in place to deliver services which demonstrate efficiency and value for money. Detailed resource planning is carried out annually and published within the Medium Term Financial Plan. This risk assesses resource requirements based on appropriate assumptions to enable the Police and Crime Commissioner to prioritise competing demands for services. The annual strategic and operational planning cycle takes into account the expected level of resources required and identifies where savings and reductions are required. These are risk assessed and achievement of all plans and work streams is monitored through the Strategic Planning Board which is chaired by the Chief Constable. Project boards are in place which monitors the implementation and achievement of agreed initiatives and plans. These are established to support robust decision making in order to achieve the required outcomes. Decision making is devolved to enable flexible and responsive action and better outcomes. Accountability is measured through the governance structure and processes in place.

3.5. Developing Leadership The Police and Crime Commissioner and Chief Constable have defined structures and roles within the organisations to enable effective leadership. This is supported by the Manual of Governance which sets out the roles and responsibilities and is critical to enable delivery of the strategies and plans in place. The governance arrangements have been developed in line with the Police Reform and Social Responsibility Act 2011, statutory Policing Protocol Order 2012, Home Office Financial Management Code of Practice (FMCP) and existing guidance on financial and governance matters which continue to apply. There is an approved scheme of consent in place which formalises the functions and delegation between the Commissioner and Chief Constable. The governance structure supports the implementation of planned activities and outcomes and there is a defined meeting structure in place to ensure that planned outputs are achieved in a timely manner. Our people are our key investment and we ensure that there are member and officer training and development programmes in place so that knowledge is kept up to date, including any professional development requirements. Our recruitment and succession planning processes are designed in order that we appoint the right people with the right skills into roles within the organisation.

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Nationally set terms and conditions exist for officers and staff with agreed pay scales and job evaluation system and we have a performance management framework which the Commissioner and Chief Constable use to assess performance and address any improvements required. Additionally, there are annual assessments of effectiveness for the Police and Crime Panel and the Joint Audit Committee.

3.6. Managing risks and monitoring performance Risk management and internal control is an integral part of the performance management system within both organisations. The risk management process underpins the financial management arrangements and governance processes and is fundamental to achieving our intended outcomes and supports our vision for a safer North Wales. There is an embedded risk management culture across the organisation and at all levels. There are corporate and individual area risk registers which conform to approved national methodology and are regularly reviewed and updated and reported to committees and boards across the organisation. Risk management is a standing agenda item on all boards across the force. Our plans, processes and policies are drawn up having due regard to the risks identified. A partnership framework is in place to ensure that any partnerships are managed appropriately including risk management. Strategic risks and the risk management process are overseen and monitored at the Joint Audit Committee. Members of the Joint Audit Committee are able to review all risks for transparency. Internal Audit assess the adequacy of our internal controls and report fully to the independent Joint Audit Committee. Internal and external audit have examined and reported on compliance with applicable regulations and internal controls. The Strategic Executive Board (SEB) and Strategic Planning Board (SPB) scrutinise operational and financial performance, service delivery and the achievement of the police and crime objectives. A programmed approach to delivery of plans is in place via the Strategic Planning Board (SPB). All Joint Audit Committee and Police and Crime Panel papers and minutes are available through the website of the Police and Crime Commissioner. Effective arrangements are in place to ensure that data is safeguarded and appropriately collected, used, stored and shared. All data is subject to agreed retention policies and the

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security classification scheme in operation throughout the force. There is an established Information Security board in place to monitor arrangements and effectiveness. The Commissioner and Chief Constable have data protection and information security policies in place which are regularly tested. Internal Audit has also reviewed our data protection and management of Information arrangements following the recent HMIC review. There are information sharing protocols between the Commissioner and Chief Constable and also with our partners.

3.7. Demonstrating effective accountability The Police and Crime Commissioner and Chief Constable ensure that decision makers involved in service delivery are accountable to them through the processes in place in both organisations.

Standardised reporting templates are used to ensure that information in a sufficient manner and to enable effective decision making and an annual report is prepared and published which assesses the performance against the Police and Crime Plan.

The Police and Crime Commissioner and Chief Constable’s websites publish information which is pertinent to the public and stakeholders. The Commissioner has been awarded the transparency quality mark by the Comparing Police and Crime Commissioner’s organisation (CoPaCC) for the third consecutive year (to be confirmed) in recognition of the level and breadth of information contained on the website.

The internal audit service reports to the Joint Audit Committee and has direct access to the Police and Crime Commissioner, Chief Constable and members. Recommendation for service improvements are acted upon and reported to the committee.

Independent and external reviews and inspections are routinely carried out by regulatory bodies and the reports are published and any recommendations made are acted upon.

4. Review of Effectiveness 4.1. The Police and Crime Commissioner and the Chief Constable have responsibility for

conducting, at least annually, a review of the effectiveness of its governance framework including the system of internal control. The review of effectiveness is informed by the work of the executive managers who have responsibility for the development and maintenance of the governance environment, the head of internal audit’s annual report and also by comments made by the external auditors, the Police and Crime Panel, Joint Audit Committee and other review agencies and inspectorates.

4.2. In accordance with regulations, the Police and Crime Commissioner and Chief Constable have reviewed the effectiveness of its internal audit service. In conclusion, the service has complied fully with all public sector internal auditing standards (PSIAS).

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4.3. As part of our governance framework and to ensure that we review our arrangements for effectiveness, we have established a Governance Board which is charged with monitoring the arrangements for compliance and to make recommendations for the development of the governance arrangements as may be required. A review of the effectiveness of the governance framework is also informed by the activity and learning from the preceding year.

4.4. Internal Audit carried out their annual service review of our key financial systems in 2018-2019 and provided positive reports during the year. The annual report concluded:

The Internal Auditors (TIAA) are satisfied that for the areas reviewed during the year that the Police and Crime Commissioner for North Wales and Chief Constable North Wales Police has reasonable and effective risk management, control and governance processes in place. Also, there was evidence to support the achievement of value for money with regard to economy, efficiency or effectiveness of the systems reviewed. This opinion is based solely on the matters that came to the attention of TIAA during the course of the internal audit reviews carried out during the year and is not an opinion on all elements of the risk management, control and governance processes or the ongoing financial viability which must be obtained by the Police and Crime Commissioner and the Chief Constable from the various sources of assurance. (wording to be provided by TIAA)

4.5. The Wales Audit Office annual audit letter for 2017-2018 gave an unqualified opinion on the

accounts for the Police and Crime Commissioner and the Chief Constable and recorded that they had not identified any significant weaknesses in the overall framework. It also concluded that the Police and Crime Commissioner and Chief Constable had appropriate arrangements in place to secure economy, efficiency and effectiveness in the use of their resources.

5. Governance Action Plan and progress

5.1. In assessing the governance arrangements that are in place, the Governance Board will

also develop and monitor any action plans to address any governance issues identified or where improvement to current arrangements is required. The areas to be covered in the 2018-2020 plan can be seen in the Appendix below .

5.2. The action plan for 2017-2018 contained areas for improvement. These are detailed below with their progress and current status. Recommendation Action Current Status -

complete Y/N? Ethics and Integrity

The Police and Crime Commissioner is committed to ensuring that external providers of services on behalf of the organisation are required to act with integrity and in compliance with ethical

Yes - discharged

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standards expected by the organisation. Although it is not a legal requirement for the Police and Crime Commissioner to comply with the Public Services (Social Value) Act 2012 or the Wellbeing of Future Generations (Wales) Act 2015, most public sector partners must comply with one or the other, and it is a matter of best practice that the Office of the Police and Crime Commissioner and the Police Force behave in accordance with these acts, as a minimum standard. Accordingly, a Social Value Policy was developed in 2017/18 and procedures to support it have been written. All new contracts will need to comply with this policy from 2018/19, and this will be monitored closely.

6. Conclusion 6.1. No statement of internal control can provide absolute assurance against material loss; this

statement is intended to provide reasonable assurance.

6.2. However, on the basis of the review of the sources of assurance set out in this statement, we are satisfied that the North Wales Police and Crime Commissioner had in place satisfactory governance arrangements, including appropriate systems of internal control and risk management which facilitate the effective exercise of his functions. Signed:

Arfon Jones Stephen Hughes Police and Crime Commissioner Chief Executive Officer to the Police

and Crime Commissioner

Kate Jackson Chief Finance Officer to the Police and Crime Commissioner

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APPENDIX ANNUAL GOVERNANCE STATEMENT - PLAN

The following areas are to be addressed in 2019-2020:- Action plan is yet to be developed. However, it will incorporate the following:

• The new Chief Officers are to review business arrangements to ensure that delivery of the force’s new vision is reflected in the force’s governance processes.

• Risk management arrangements are to be reviewed. Any changes would need to be assessed by the Joint Governance Board.

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21 March 2019

Governance and level of reserves

Report by the Head of Finance

1. Introduction

1.1 This report sets out the governance of the Police and Crime Commissioners Reserves and

the current and planned/estimated level of reserves going forward.

2. Governance

2.1 The Commissioner statutorily holds the reserves and has a duty to ensure that he holds adequate financial reserves to manage risks. In addition to the funding and forecasting risks, the Commissioner needs to cater for expenditure risk (spending over budget), and costly major incidents, natural disasters or other unforeseen events. An element of this risk has been managed through the in-year budgets through the contingency budgets. These have been reduced over the austerity period and a greater proportion of that risk being transferred to Reserves.

2.2 The reserve position is formally set once a year as part of the Statement of Accounts, technically the balances at the end of year could be added or taken out of one reserve. However, this would not provide the best form of financial management and the reserves are earmarked for specific requirements. Depending on circumstance the earmarked reserves may be re allocated at this point. This is a critical part of producing the end of year position, and is agreed and signed off by the PCC, Chief Constable and both statutory Finance Officers. The position is reviewed and checked by Wales Audit Office as part of their audit process.

2.3 Reserves are also reviewed as part of the planning cycle and production of the Medium Term Financial Plan (MTFP). The plan is agreed by the PCC, CC and the two CFOs and reported to the Police and Crime Panel as part of the budget setting process and published as part of the MTFP. For the financial years 2019-20 to 2024-25 the reserves plan was updated following the final proposed capital proposal (as included in the Capital Strategy) and agreed at the Strategic Executive Board (SEB) on the 31 January 2019.

2.4 Once the plan is agreed the reserves are then subject to normal budgetary controls. These will depend on the reserve and are detailed below. Any firm commitments to be made are reported to the Strategic Planning Board (SPB) and the Strategic Executive Board (SEB) as part of the Finance Report.

2.4.1 Capital Investment Fund (Capital) – To be used to invest in the assets and infrastructure of the Force to improve service provision and reduce revenue expenditure. The amount to be committed will agreed as part of the Capital

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Programme funding, however each project will be subject to a Business Case and a governance process before the amounts are formally committed.

2.4.2 Major Incident Reserve (Risk) – To be used in the event of a Major Incident requiring additional resources beyond those available within the annual budget. This reserve has enabled the Major Incident Contingency budget to be reduced by £0.450m. Major Incidents will initially be funded from in year budgets where possible. In the early stages of a major incident operational decisions to commit resources need to made quickly, following this initial period an assessment can be made of resources required. Expenditure of £1.4m would normally have to be incurred before additional Home Office support can be requested. Any requirements would be discussed as the operation develops and later reported at SPB and SEB.

2.4.3 Pension Ill Health Reserve (Risk) – The Force has to pay a one off sum equivalent to two years’ of an officer’s pay for each Ill Health Retirement. The number retiring due to Ill Health can vary from year to year; the revenue budget caters for 6 to 7 retirements (including any death grant payable) and holding the reserve has enabled the budget to be set at an average position rather than a worst case position. The average for the last 10 years has been 6.9 Ill health retirements, but the number has increased in recent years and is an area that needs to be reviewed as part of the next budget cycle.

2.4.4 Insurance (Risk)- This relates to the Municipal Mutual Insurance Limited scheme of Arrangement, which could result in a final payment of an estimated £0.432m; for unknown emerging claims, and unknown future claims highlighted by the Insurance Broker.

2.4.5 PFI Reserve (Earmarked Revenue) – This is required as the funding for PFI from the Government reduces annually, the fund will eventually reduce over the life of the PFI contract.

2.4.6 Estates Security and Maintenance (Earmarked Revenue) – This is to fund larger maintenance and additional security requirements not covered in the revenue or capital budgets. This is subject to a detailed request from the Head of Facilities and Logistics, which is initially agreed at the Estates Board before being formally agreed at SPB and SEB.

2.4.7 Management of Change (Earmarked Revenue) - Investment required facilitating change and reducing cost in the longer term. The cost of change is significant, commitments from this reserve are agreed as part of the budget cycle, this could be for specific items or to fund change teams over a short period which prevents pay increases in the revenue budget.

2.4.8 Partnerships Reserve (Earmarked Revenue) – Balances held for specific Partnerships which will either be used or are held in the event of funding being withdrawn resulting in additional costs.

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2.4.9 Community Safety Fund (Earmarked Revenue) - To provide additional resources to the Community Safety Fund (CSF). The PCC has an annual budget for the Community Safety Fund; in the event that additional one off funding is required it would be agreed form this reserve as a part of that process. All commitments from the CSF (Budget or reserves) are published.

2.4.10 Office of the PCC Reserves (Earmarked Revenue) – OPCC reserve; legal reserve and participatory budget to manage any additional requirements beyond the PCC’s annual budget.

2.4.11 Capital Receipts Reserve – These are the proceeds from the sale of assets and can only be used for capital investments. Decisions are made in the same way as the Capital Investment Reserve above.

2.4.12 General Reserve – This is to manage anything not covered above such as funding or forecasting risk. It has been set within a range of 3% to 5% of net revenue budget and is currently 3.4% of the net revenue budget for 2019-20. This is reviewed as part of the Statement of Accounts and MTFP taking into account the level of risk and level of other risk reserves such as the Major Incident and Insurance Reserve. This is managed as part of the normal financial reporting to SPB and SEB.

3. Current and Planned Position

3.1 There is a planned reduction in reserves from £25.3m to £15.1m over from 31.3.18 to 31.3.25. This follows a planned use of £12.226m reserves in 2017-18; the majority of this investment was used to fund the Wrexham and Llandudno estates developments. These are two major investments in the Forces estates infrastructure which will be more economical to run, more efficient and effective for operational requirements. Both were subject to detailed Business Plans.

3.2 As of the 2019-20 planning cycle £2.5m of investments from the Management of Change reserve in were agreed to invest in the IT infrastructure, with a further £0.5m being agreed to fund temporary posts. The movements in the earmarked reserves are summarised in the table at the end of the report.

3.2 The Policing Minister has published new guidelines transparency of reserves. The details contained in the MTFP, and which has always been included in the MTFP and the Statement of Accounts, will meet these requirements with the addition of one table to set out the reserves under Home Office defined headings, this is reproduced below. The Joint Audit Committee, at their meeting on the 20 November 2017, agreed that the reserves are an integral part of the financial planning and management process and that the reserves held appear to be appropriate.

3.3 The table below shows the current plan on how the earmarked reserves may be best used to support service provision and reduce the pressure on the revenue budget, as per the MTFP. Where the use of the Reserve is not known (such as the Major Incident Reserve) no changes are shown. Details of the projected Reserve position at the end of each year are

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given below the table. Actual commitments against the reserves are monitored as part of the budget process, the position as at 31.3.19 will be formally re set once the final position is known for revenue and capital expenditure in May 2019.

Reserve Position

Usable Reserves at 31.3.18 31.3.19 31.3.20 31.3.21 31.3.22 31.3.23 31.3.24 31.3.25Balance Plan Balance Plan Balance Plan Balance Plan Balance Plan Balance Plan Balance Plan Balance£m £m £m £m £m £m £m £m £m £m £m £m £m £m £m

Capital Receipts Reserve 1.487 -1.483 0.004 1.976 1.980 0.045 2.025 -0.377 1.648 0.050 1.698 -0.920 0.778 -0.100 0.678General Fund Balance 5.189 0.000 5.189 0.000 5.189 0.000 5.189 0.000 5.189 0.000 5.189 0.000 5.189 0.000 5.189Earmarked General Fund Reserves 18.664 -3.415 15.249 -3.612 11.637 -0.939 10.698 -0.188 10.510 -0.305 10.205 -0.425 9.780 -0.545 9.235

Total Usable Reserves 25.340 -4.898 20.442 -1.636 18.806 -0.894 17.912 -0.565 17.347 -0.255 17.092 -1.345 15.747 -0.645 15.102

Earmarked General Fund Reserves

Description 31.3.18 31.3.19 31.3.20 31.3.21 31.3.22 31.3.23 31.3.24 31.3.25

£m £m £m £m £m £m £m £m £m £m £m £m £m £m £mCapital Investment 2.341 -1.687 0.654 0.000 0.654 -0.561 0.093 0.000 0.093 0.000 0.093 0.000 0.093 0.000 0.093Major Incident 2.435 -0.238 2.197 0.000 2.197 0.000 2.197 0.000 2.197 0.000 2.197 0.000 2.197 0.000 2.197Pension Ill Health Reserve 0.915 0.000 0.915 0.000 0.915 0.000 0.915 0.000 0.915 0.000 0.915 0.000 0.915 0.000 0.915Insurance Reserve 1.173 0.000 1.173 0.000 1.173 0.000 1.173 0.000 1.173 0.000 1.173 0.000 1.173 0.000 1.173PFI Reserve 4.212 0.121 4.333 0.044 4.377 -0.071 4.306 -0.188 4.118 -0.305 3.813 -0.425 3.388 -0.545 2.843Estates Security and Maintenance 1.237 -0.403 0.834 0.000 0.834 0.000 0.834 0.000 0.834 0.000 0.834 0.000 0.834 0.000 0.834Management of Change 5.340 -1.208 4.132 -3.656 0.476 -0.307 0.169 0.000 0.169 0.000 0.169 0.000 0.169 0.000 0.169Partnerships Reserve 0.553 0.000 0.553 0.000 0.553 0.000 0.553 0.000 0.553 0.000 0.553 0.000 0.553 0.000 0.553Commissioner Community Safety Fund 0.226 0.000 0.226 0.000 0.226 0.000 0.226 0.000 0.226 0.000 0.226 0.000 0.226 0.000 0.226OPCC Legal Reserve 0.051 0.000 0.051 0.000 0.051 0.000 0.051 0.000 0.051 0.000 0.051 0.000 0.051 0.000 0.051OPCC Reserve 0.181 0.000 0.181 0.000 0.181 0.000 0.181 0.000 0.181 0.000 0.181 0.000 0.181 0.000 0.181Total 18.664 -3.415 15.249 -3.612 11.637 -0.939 10.698 -0.188 10.510 -0.305 10.205 -0.425 9.780 -0.545 9.235

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4 IMPLICATIONS

Diversity No separate diversity implications Financial The highest risk for both the Police and Crime

Commissioner and the Force concerns the adequacy of financial resources. The report sets out how reserves are used to manage this risk.

Legal There is a statutory requirement to ensure adequate reserves are held.

Risk There is a suggestion that central government is considering taking levels of reserves into account when deciding grant allocations, with a view to reducing excessive levels of reserves. If the Police and Crime Commissioner’s reserves were considered by central government to be excessive, this could lead to a lower grant amount than assumed in current financial plans.

Police and Crime Plan If it were to become necessary to borrow to fund existing capital commitments, this would involve increased revenue costs for the repayment of capital and interest on the loan. This would necessitate either increasing council tax, or reducing expenditure on other services, which may impact negatively on the ability to deliver the objectives in the police and crime plan.

Reservse based on Home Office headings

Reserves as at 31.3.18 31.3.19 31.3.20 31.3.21 31.3.22 31.3.23 31.3.24 31.3.25

Reserves at Year End 23.853 20.438 16.826 15.887 15.699 15.394 14.969 14.424General Reserves 5.189 5.189 5.189 5.189 5.189 5.189 5.189 5.189Earmarked Revenue Reserves

of which held to meet budgetary risks 4.755 4.517 4.517 4.517 4.517 4.517 4.517 4.517of which held to support the medium term budget 0.226 0.226 0.226 0.226 0.226 0.226 0.226 0.226of which held to facilitate change programmes 6.577 4.966 1.310 1.003 1.003 1.003 1.003 1.003of which held pending future deficits on PFI contracts 4.212 4.333 4.377 4.306 4.118 3.813 3.388 2.843of which committed to future year capital programmes 2.341 0.654 0.654 0.093 0.093 0.093 0.093 0.093of which Other Earmarked Reservesof which Reserves held on behalf of other organisations 0.553 0.553 0.553 0.553 0.553 0.553 0.553 0.553

Total Revenue Reserves 23.853 20.438 16.826 15.887 15.699 15.394 14.969 14.424

Capital Grants and Reservesof which capital grants unapplied 0 0 0 0 0 0 0 0of which capital receipts reserve 1.487 0.004 1.980 2.025 1.648 1.698 0.778 0.678of which other 0 0 0 0 0 0 0 0

TOTAL Reserves 25.340 20.442 18.806 17.912 17.347 17.092 15.747 15.102

Total Revenue Reserves Broken down as follows:Funding for projects & programmes over the period of the current MTFP 9.697 6.399 2.743 1.875 1.875 1.875 1.875 1.875Funding for projects & programmes beyond the current MTFP 8.967 8.850 8.894 8.823 8.635 8.330 7.905 7.360General Contingency 5.189 5.189 5.189 5.189 5.189 5.189 5.189 5.189

TOTAL REVENUE RESERVES 23.853 20.438 16.826 15.887 15.699 15.394 14.969 14.424

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Reserve Position

Usable Reserves at 31.3.18 31.3.19 31.3.20Balance Plan Balance Plan Balance Plan£m £m £m £m £m £m

Capital Receipts Reserve 1.487 -1.483 0.004 1.976 1.980 0.045General Fund Balance 5.189 0.000 5.189 0.000 5.189 0.000Earmarked General Fund Reserves 18.664 -3.415 15.249 -3.612 11.637 -0.939

Total Usable Reserves 25.340 -4.898 20.442 -1.636 18.806 -0.894

Earmarked General Fund Reserves

Description 31.3.18 31.3.19 31.3.20

£m £m £m £m £m £mCapital Investment 2.341 -1.687 0.654 0.000 0.654 -0.561Major Incident 2.435 -0.238 2.197 0.000 2.197 0.000Pension Ill Health Reserve 0.915 0.000 0.915 0.000 0.915 0.000Insurance Reserve 1.173 0.000 1.173 0.000 1.173 0.000PFI Reserve 4.212 0.121 4.333 0.044 4.377 -0.071Estates Security and Maintenance 1.237 -0.403 0.834 0.000 0.834 0.000Management of Change 5.340 -1.208 4.132 -3.656 0.476 -0.307Partnerships Reserve 0.553 0.000 0.553 0.000 0.553 0.000Commissioner Community Safety Fund 0.226 0.000 0.226 0.000 0.226 0.000OPCC Legal Reserve 0.051 0.000 0.051 0.000 0.051 0.000OPCC Reserve 0.181 0.000 0.181 0.000 0.181 0.000Total 18.664 -3.415 15.249 -3.612 11.637 -0.939

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31.3.21 31.3.22 31.3.23 31.3.24 31.3.25Balance Plan Balance Plan Balance Plan Balance Plan Balance£m £m £m £m £m £m £m £m £m

2.025 -0.377 1.648 0.050 1.698 -0.920 0.778 -0.100 0.6785.189 0.000 5.189 0.000 5.189 0.000 5.189 0.000 5.189

10.698 -0.188 10.510 -0.305 10.205 -0.425 9.780 -0.545 9.235

17.912 -0.565 17.347 -0.255 17.092 -1.345 15.747 -0.645 15.102

31.3.21 31.3.22 31.3.23 31.3.24 31.3.25

£m £m £m £m £m £m £m £m £m0.093 0.000 0.093 0.000 0.093 0.000 0.093 0.000 0.0932.197 0.000 2.197 0.000 2.197 0.000 2.197 0.000 2.1970.915 0.000 0.915 0.000 0.915 0.000 0.915 0.000 0.9151.173 0.000 1.173 0.000 1.173 0.000 1.173 0.000 1.1734.306 -0.188 4.118 -0.305 3.813 -0.425 3.388 -0.545 2.8430.834 0.000 0.834 0.000 0.834 0.000 0.834 0.000 0.8340.169 0.000 0.169 0.000 0.169 0.000 0.169 0.000 0.1690.553 0.000 0.553 0.000 0.553 0.000 0.553 0.000 0.5530.226 0.000 0.226 0.000 0.226 0.000 0.226 0.000 0.2260.051 0.000 0.051 0.000 0.051 0.000 0.051 0.000 0.0510.181 0.000 0.181 0.000 0.181 0.000 0.181 0.000 0.181

10.698 -0.188 10.510 -0.305 10.205 -0.425 9.780 -0.545 9.235

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Reservse based on Home Office headings

Reserves as at 31.3.18 31.3.19 31.3.20

Reserves at Year End 23.853 20.438 16.826General Reserves 5.189 5.189 5.189Earmarked Revenue Reserves

of which held to meet budgetary risks 4.755 4.517 4.517of which held to support the medium term budget 0.226 0.226 0.226of which held to facilitate change programmes 6.577 4.966 1.310of which held pending future deficits on PFI contracts 4.212 4.333 4.377of which committed to future year capital programmes 2.341 0.654 0.654of which Other Earmarked Reservesof which Reserves held on behalf of other organisations 0.553 0.553 0.553

Total Revenue Reserves 23.853 20.438 16.826

Capital Grants and Reservesof which capital grants unapplied 0 0 0of which capital receipts reserve 1.487 0.004 1.980of which other 0 0 0

TOTAL Reserves 25.340 20.442 18.806

Total Revenue Reserves Broken down as follows:Funding for projects & programmes over the period of the current MTFP 9.697 6.399 2.743Funding for projects & programmes beyond the current MTFP 8.967 8.850 8.894General Contingency 5.189 5.189 5.189

TOTAL REVENUE RESERVES 23.853 20.438 16.826

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31.3.21 31.3.22 31.3.23 31.3.24 31.3.25

15.887 15.699 15.394 14.969 14.4245.189 5.189 5.189 5.189 5.189

4.517 4.517 4.517 4.517 4.5170.226 0.226 0.226 0.226 0.2261.003 1.003 1.003 1.003 1.0034.306 4.118 3.813 3.388 2.8430.093 0.093 0.093 0.093 0.093

0.553 0.553 0.553 0.553 0.55315.887 15.699 15.394 14.969 14.424

0 0 0 0 02.025 1.648 1.698 0.778 0.678

0 0 0 0 0

17.912 17.347 17.092 15.747 15.102

1.875 1.875 1.875 1.875 1.8758.823 8.635 8.330 7.905 7.3605.189 5.189 5.189 5.189 5.189

15.887 15.699 15.394 14.969 14.424

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21 March 2019

WORK PROGRAMME AND DEVELOPMENT PLAN

Report by the Chief Finance Officer

1. INTRODUCTION

1.1 The purpose of this report is to provide information for the Joint Audit Committee, in order that they can devise a work programme for 2019/20.

2. RECOMMENDATIONS

2.1 For members of the Committee to note which items are subject to a statutory deadline, and therefore to be allocated to specific meetings.

2.2 For members of the Committee to discuss other items to be included, in accordance with the terms of reference and CIPFA guidance.

2.3 For members of the Committee to consider their development needs.

2.4 For members of the Committee to prepare a forward work programme and development plan to be approved at the next meeting (30 July 2019).

3. WORK PROGRAMME

3.1 The Joint Audit Committee has a minimum of four meetings each year. The following items have statutory deadlines, and therefore should be considered at specific meetings:

• Capital Strategy (formerly known as the Treasury Management Strategy) – to be considered in March, in advance of the beginning of the financial year on 1 April;

• Draft Annual Governance Statement – to be considered in March, in order to include the final version in the Statement of Accounts (which is presented to the July meeting);

• Final Statement of Accounts and ISA 260 – to be considered in July, in order to sign the accounts by the statutory deadline of 31 July.

3.2 In addition, the following items are timed to coincide with Wales Audit Office’s timetables:

• Value for Money – September meeting • Annual Audit Report – November meeting

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https://www.northwales-pcc.gov.uk/Document-Library/Accountability/Audit/Terms-of-Reference-Joint-Audit-Committee-V6.0.pdf

3.3 In accordance with the terms of reference, the following areas are to be considered by the Joint Audit Committee, and are usually discussed at each meeting:

• Governance, risk and control (including ethics) • Internal audit • External audit • Financial reporting • Accountability arrangements

4. DEVELOPMENT PLAN

4.1 To support the members of the Audit Committee in undertaking their duties

effectively, members are invited to attend a number of sessions throughout the year. These include an annual seminar with the members of other Joint Audit Committees in Wales; briefing sessions (many of which are held after formal meetings) and other training and briefing as needed. The briefing sessions provide an opportunity for members to have an insight into the challenges faced by the Office of the Police and Crime Commissioner and North Wales Police; this insight is intended to assist members of the Joint Audit Committee in providing assurances to the Police and Crime Commissioner and Chief Constable.

4.2 The list below comprises some of the planned sessions. More will be added as they are identified: • Joint seminar with members of joint audit committees within Wales (Winter

2019/20 – in North Wales) • Estates Implementation Plan (July 2019)

4.3 Once the Committee has approved the draft programme, the activities will be

scheduled into the Committee’s work programme. Additional meeting dates may be added to enable the Committee to undertake development activities.

5. Current work programme

5.1 The work programme and meeting schedule as agreed in July 2018 is shown for information. With the exception of those items to which a statutory deadline applies, this work programme can be varied to what suits best.

5.2 Additional or urgent matters may be requested to be included throughout the year; these requests can be made either through the Chair of the Committee or scheduled following on from actions agreed at a meeting of the Committee. For example, a briefing session regarding the Estates Strategy Implementation Plan has been provisionally arranged to follow the meeting on 30 July.

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https://www.northwales-pcc.gov.uk/Document-Library/Accountability/Audit/Terms-of-Reference-Joint-Audit-Committee-V6.0.pdf

Date of Meeting Work Programme 2018/19 19 September 2018 Final Statement of Accounts, ISA 260

Committee to recommend approval of the annual accounts to the Police and Crime Commissioner and the Chief Constable (statutory deadline 30th September) Value for Money

21 November 2018 Internal Audit Charter Wales Audit Office – Annual Audit Report

19 21 March 2019 Treasury Management Strategy Capital Strategy Internal Audit Annual Plan Wales Audit Office Annual Plan Internal/External Audit Protocol Closed session with Internal Audit (no officers present)

30 July 2019 Final Statement of Accounts, ISA 260 Committee to recommend approval of the annual accounts to the Police and Crime Commissioner and the Chief Constable (statutory deadline 31st July) Annual report of the Joint Audit Committee Internal Audit Annual Report Review of work programme

23 September 2019 Wales Audit Office – Value for Money HMICFRS

28 November 2019 Wales Audit Office – Annual Audit Report Internal Audit Charter

6. Next Steps

6.1 A draft work programme for 2019/20 is shown in the table below:

Date of Meeting Work Programme 2019/20 11 June 2019 2018/19 Accounts – Technical Briefing 30 July 2019 Final Statement of Accounts, ISA 260

Committee to recommend approval of the annual accounts to the Police and Crime Commissioner and the Chief Constable (statutory deadline 31st July) Annual report of the Joint Audit Committee Internal Audit Annual Report Review of work programme CIPFA statement on the role of Head of Internal Audit Internal Audit External Quality Assessment

23 September 2019 Wales Audit Office – Value for Money HMICFRS

28 November 2019 Wales Audit Office – Annual Audit Report Internal Audit Charter Risk Strategy

Winter 2019/20 (tba) Welsh JACs’ annual meeting (North Wales)

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9 March 2020 (tbc) Capital Strategy Internal Audit Annual Plan Wales Audit Office Annual Plan Internal/External Audit Protocol Closed session with Internal Audit (no officers present)

8 June 2020 (tbc) 2019/20 Accounts – Technical Briefing 30 July 2020 (tbc) Final Statement of Accounts, ISA 260

Committee to recommend approval of the annual accounts to the Police and Crime Commissioner and the Chief Constable (statutory deadline 31st July) Annual report of the Joint Audit Committee Internal Audit Annual Report Review of work programme CIPFA statement on the role of Head of Internal Audit Internal Audit External Quality Assessment

14 September 2020 (tbc) Wales Audit Office – Value for Money HMICFRS

9 November 2020 (tbc) Wales Audit Office – Annual Audit Report Internal Audit Charter Risk Strategy

6.2 Following this meeting, the Chair of the Joint Audit Committee, the Chief Finance Officer and the Director of Finance and Resources will finalise the work programme for the period September 2019 to December 2020, taking into account statutory requirements and the views of Committee members. This will be brought to the meeting on 30 July 2019 for ratification.

6.3 Additional items which are identified after the work programme has been ratified may be added as needed.

7. IMPLICATIONS

7.1 Equality

Equalities legislation was taken into account when recruiting the independent members of the Joint Audit Committee. There is a Joint Equalities’ Scheme in place.

7.2 Financial

Planning the work for the forthcoming year reduces the need for ad-hoc meetings.

7.3 Legal

Legislation requires that a Joint Audit Committee be established. The functions of the Joint Audit Committee are summarised within its Terms of Reference, which has been prepared in accordance with Audit Committees\Practical Guidance for local Authorities and Police - 2018 Edition (CIPFA). This work programme takes account of the statutory and practical requirements to fulfil these obligations.

7.4 Community Meeting papers and minutes are published, and the meetings are

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http://www.north-wales.police.uk/about_us/equality__diversity.aspx

http://www.northwales-pcc.gov.uk/Document-Library/Accountability/Audit/Terms-of-Reference.pdf

open for the public to attend. 7.5 Risk One of the purposes of the Committee is to provide assurance to

the Police and Crime Commissioner and the Chief Constable that financial and non-financial risks are being managed effectively.


The role of the Joint Audit Committee is part of the overall Police and Crime Plan.

Report Author:

Kate Jackson Chief Finance Officer, Office of the Police and Crime Commissioner

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Page 1 of 2


21st March 2019

Risk Management Report Report of the Police and Crime Commissioner and Chief Constable

1. INTRODUCTION

The purposes of this report are 1) To provide a high level summary of changes to risks recorded on the Force Risk Register;

and 2) To update JAC members in relation to significant issues, change or planned change related

to risk management processes.

2. RECOMMENDATIONS

2.1 That the Committee endorses the approach set out in the report.

2.2 That the Audit Committee notes the progress described in this report. 3. SUMMARY

3.1 This report is based on the reporting period from 6th November 2018 to 26th February

2019. Information is derived from Force Risk Register version 4.33.

3.2 Table 1: NWP risks 6th November 2018 to 26th February 2019

Previous total (Corrected)*

Closed in this period

New in this period

Changed Risk Level

Current NWP Risks Total

Critical 2 0 1 0 3 High 8 2 3 0 9 Medium 3 0 0 0 3 Low 0 0 0 0 0 Negligible 0 0 0 0 0 Total 13 2 4 0 15

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3.3 Table 2: OPCC risks 6th November 2018 to 26th February 2019

Previous total

Closed in this period

New in this period

Current OPCC Risks Total

Critical 1 0 0 1 High 0 0 0 0 Medium 0 0 0 0 Low 0 0 0 0 Negligible 0 0 0 0 Total 1 0 0 1

3.4 Table 3: Project* risks 6th November 2018 to 26th February 2019

previous

total Closed in this period

New in this period

Current Project Risks Total

Critical 1 0 0 1 High 1 1 0 0 Medium 7 0 0 7 Low 1 0 0 1 Negligible 0 0 0 0 Total 10 1 0 9

* These figures relate to those NWP projects that are managed within the Portfolio Management Office

IMPLICATIONS OF THE REPORT

5.1 Equality

There are no equality implications in this report

5.2 Financial

Financial risks are highlighted within the report. There are no separate financial implications

5.3 Legal

There are no legal implications in this report

5.4 Community

Any community implications have been highlighted in the key high strategic risks

5.5 Risk

This report provides risk management information


Risk management is directly linked into the Police and Crime Plan and the delivery of the Police and Crime Objectives.

Report Author: Kathryn Jones, Risk and Business Continuity Co-ordinator

01492 805196 [email protected]

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LEGAL AND PROCUREMENT DOCUMENT OFFICE OF THE POLICE AND CRIME COMMISSIONER NORTH WALES

Date December 2018

ITEMS FOR INFORMATION 1. SEALING OF DOCUMENTS The following documents have been sealed since those reported on in the last report dated 10th September 2018

No of Seal Nature of Document

216, 217 Lease and two plans in duplicate re: Office at Joint Fire and Police Station, Brunswick Road, Buckley between 218, 219, (1) North Wales Fire Authority (2) the PCC for North Wales 220, 221

2. PROPERTY TRANSACTIONS

Since those reported in the last report dated 10th September the following property transactions have been completed:

3. TENDER DOCUMENTS The following Tenders with a value over £10,000 which the PCC for North Wales or Chief Constable of NWP is party to are as follows: No Subject Tenderers 96 Building Surveying Consultancy 1 AECOM Infrastructure, Environment UK Ltd 2 Bruton Knowles 3 CIPFA Business Ltd 4 Faithful & Gould 5 GVA Grimley Ltd 6 The Oakleaf Group 97 Toilet/Locker Room Refurbishment at 1 NWP Construction Ltd

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Holyhead Police Station 2 R. Roberts & Son 98 Victim Help Centre 1 Victim Support 99 Mini Competition of CCS Lot 5 Postal 1 FP Mailing t/a Francotyp Postalia and Services (Franking machines) 2 Nationwide Franking Service Ltd 3 Neopost Ltd 4 Pitney Bowes Ltd 100 Vehicle Hire 1 Aberconwy Car & Hire Ltd 2 Car Hire (Days of Swansea) Ltd 3 Enterprise Rent-a-car UK Ltd 4. CONTRACTS Over £10,000 The following Contracts with a value over £10,000 which the PCC or Chief Constable is party to: No

Date Subject Matter Parties Cost (exclusive of VAT)

832 Not used (duplicated Contract packet) n/a n/a

833 26/10/2018 JCT Refurbishment at Force HQ Reception (1) PCC for North Wales (2) Anthony Dever

Construction Ltd

Works commencement date 15/09/2018. Completion date 01/11/2018. Cost £51,191.54

834 1/10/2018 VIPER – Contract for the VIPER Service (1) PCC for North Wales (2) PCC for West

Yorkshire

Commencement date 01/10/2018 5 year term. Aggregate value of £176,191.00 with reduction of £13,500.00 in year one of the service

730

30/10/2018 Contract for provision of PCSO’s in Wrexham (1) PCC for North Wales (2) Wrexham County

Borough Council

Commencement date 01/11/2018. Expires 31/03/2021. Provides funding for four PCSO’s in Wrexham County Borough Council area

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835 7/11/2018 Contract – Supply of Surveying Services (1) PCC for North Wales (2) Oakleaf Services

Limited

Commencement date 25/10/2018. Expiry date– 31/01/2018. Cost £27,595.00

836 5/11/2018 JCT Contract – Renewal of mantels at Rhewl Firing Range

(1) PCC for North Wales (2) Elate Construction Ltd

Commencement date 05/11/2018. 5 weeks term Value - £55,761.95

837 14/09/2018 Contract for provision of Police Education Qualifications Framework (PEQF)

(1) PCC for North Wales (2) Bangor University

Commencement date 14/09/2018 4 year term. Aggregate value £1,405,000.00

5. CONTRACTS Under £10,000 The following Contracts with a value under £10,000 which the PCC or Chief Constable is party to: No

Date Subject Matter Parties Cost (exclusive of VAT)

838 27/11/2018 Contract for Uninsured Loss Recovery Services

(1) PCC for North Wales

(2) Opus Claim Solutions

Commencement date 01/12/2018. Term – 3 years with the option to extend for a further 2 years. Estimated value £3,000 per annum

6. TENDERS IN PROGRESS The following procurements are in progress and have a value over £20,000 which the PCC or Chief Constable is party to:

Subject Matter Current position Cost (exclusive of VAT)

Mechanical Engineering Delay due to finalising documents prior to issue £250,000.00

Mold Re-Surfacing Documents passed to FM for contract preparation £21,684.00

Holyhead Toilet re-furb Documents passed to FM for contract preparation £40,817.00

Benllech (SIKA) Documents passed to FM for contract preparation £56,690.00

Llanberis Re-Surfacing Documents passed to FM for contract preparation £16,403.00

Fire Alarm Maintenance Specification being prepared £40,000

Caernarfon Re-Surfacing Documents passed to FM for contract preparation £85,438.00

Rhyl Re-Surfacing Documents sent to FM for contract preparation £52,674.00

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Franking Machine Mini Competition Contract being drafted £30,000

Vehicle Hire Mini Competition Contract with Legal for Signature £350,000 ( 5 years ) £70K per annum

Victim Help Centre Contract with Legal of Signature £807,211

Monitoring Officer Services Information now received from NWFRS, likely to be issued straight after Christmas £10,000

Abergele PS Heating replacement Specification being prepared £60,000

Crud-y-Dderyn Refurbishment Specification being prepared £40,000

CCTV Upgrade Holyhead Port Contract being drafted £120,000

Cycle to Work Scheme Contract being drafted £00,00

Vehicle Telematics Contract being drafted £326,000

Internal Audit (All Wales) Tender issues by SWP £135,512

7. SEALED BIDS

Nil

8. WAIVERS OF STANDING ORDERS

Since those reported in the last report dated 10th September 2018. No Waiver of Standing Orders have been granted:- It should be noted that this report is complete as 17th December 2018 the date it was completed.

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North Wales Police

H&S Report

Subject Title: Health & Safety Training and Engagement with Officers and Staff Contact: Emyr Evans / Vincent Toms Ext: 88715 / 04644 Date: 5th March 2019 Purpose of the report

To provide feedback and assurance to the Joint Audit Committee that the concerns encompassing Health & Safety training and lack of engagement by Force employees are being addressed and actioned.

Health and Safety Training

The Health and Safety Manager collaborated with the Training Department on H&S training needs for North Wales Police and produced a “Health and Safety Training Course Prospectus – Rev 6” in May 2018. This document details the generic list of health & safety training courses required to ensure officers and staff are competent to perform their routine tasks. It contains 15 courses to be delivered in-house by the Training Department.

Each course contains a brief summary of the course, target audience, duration of the course and when the initial course and refresher courses should be delivered. It was deemed appropriate by the Training Department that some of the courses could be provided on-line using the NCALT process. The Prospectus was ratified by the Force Health & Safety Management Group (HSMG) and made available to Line Managers and Supervisors on the H&S Think Right web-page.

A product was delivered which: - • Enables the Training Department to develop and resource H&S training courses which can be

delivered in class format or on-line using NCALT and to manage the gaps in future training needs. • Empowers managers to identify H&S training needs for their reporting staff and to ensure that

arrangements are made with the Training Department to deliver the required H&S training courses.

In order for HSMG to have an overview of H&S training needs being identified and delivered across the Force HSMG requested that appropriate data be provided to the Group to enable them to monitor the process, identify any training gaps and ensure that training and targets were put in place to fill and manage any gaps.

The Training Team Leader has provided the H&S Manager with a spreadsheet to be tabled at the 25th March 2019 HSMG meeting which lists numbers of Officers and Police Staff who have received H&S training and planned refresher dates. This data will provide the basis from hereon for HSMG to monitor compliance with H&S training and identify any shortfalls.

H&S Awareness Engagement with Senior Management Teams, Line Managers, Supervisors, Officers and Staff

The ‘Force Health and Safety Policy’ and the ‘Managers Health and Safety Toolkit’ (available on Think Right – H&S Website) states that Managers and Supervisors are responsible for ensuring that staff within their remit are trained for the task in hand, identify training needs for their staff, arrange for training and regularly review any refresher training requirements.

The Director of Finance and Resource (DFR) met with the H&S Manager in November 2018 to discuss raising H&S awareness and responsibilities of the Chief Officers and Senior Management Teams. The DFR advocated the support of Chief Officers and reported that Senior Management Teams would be asked to review major Health & Safety concerns (including H&S Training) on a “by exception basis” based on trends or significant events at their Local Staff Consultation meetings. For this to happen, appropriate data needs to be collected and provided to the SMTs for review on a monthly / quarterly basis. The H&S Manager contacted the four SMT ‘Chairpersons’ of the Local Staff Consultation meetings to review what information / details / data was required to prepare for the Local SMT Consultation meetings to ensure an appropriate and consistent approach across the four areas.

Summary of current status and work in progress: • Business Managers for each area have the facility to provide each SMT team with a report which

contains a section on accident / injury rates and basic status of near-misses

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Z:\Meetings Committees and Panels\Commissioners Meetings\Audit Committee\Agendas Minutes Reports\2019\2019.03.19\OPEN\51 Health Safety Report - Joint Audit Committee - March 2019.docx

• Operational Support Services (OSS) SMT have requested that the H&S Management Group should provide written guidance on what H&S measures they should be reporting on to ensure they comply with legislative requirements and Force H&S policy

• Force-wide all SMT members need to review: o The most recent Force H&S training prospectus and its content. o Their most recent H&S Risk Assessments in order to mitigate or eliminate the hazards that

employees are exposed to when performing daily tasks. Next Steps:

1. Monitoring by the Health and Safety Management Group to ensure that the Training Department delivers a sustainable H&S training regime and submission of monthly H&S training statistics to enable SMT’s to manage any gaps in H&S training.

2. The Training Department to utilise the SharePoint Data Observatory – Business Intelligence system to provide both real-time data on H&S training needs.

3. H&S Manager to draft a standard template of H&S statistics and guidance for accessing Think Right H&S information and ensuring that it is communicated to all SMTs.

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