STATEMENT ON INTERNAL CONTROL
SCOPE OF RESPONSIBILITY
As Accountable Officer, I have responsibility for maintaining a sound system of internal control that supports the achievement of Transport Scotland’s policies, aims and objectives set by Scottish Ministers, whilst safeguarding the public funds and assets for which I am personally responsible, in accordance with the responsibilities assigned. This is in accordance with the Scottish Public Finance Manual (SPFM) issued by Scottish Ministers to provide guidance on the handling of public funds.
THE PURPOSE OF THE SYSTEM OF INTERNAL CONTROL
The system of internal control is designed to manage rather than eliminate the risk of failure to achieve Transport Scotland’s policies, aims and objectives. I can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise these risks, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, economically and effectively. The system of internal control has been in place in Transport Scotland for the year ended 31 March 2008 and up to the date of approval of the annual report and accounts. It is in accordance with the guidance from Scottish Ministers.
THE RISK AND CONTROL FRAMEWORK
I have established a framework of responsibility for risk management, in accordance with the SPFM, with appropriate support, guidance and procedures from all parts of the Agency’s business:
- the Transport Scotland Corporate Board reviews strategic and operational risks to the Agency’s business and this is a regular agenda item at the monthly Corporate Board meeting.
- managers identify and evaluate risks to successfully deliver the Agency’s operation and control objectives when they prepare and monitor directorate and business management plans.
- I hold regular meetings with Ministers where both strategic and operational risks are discussed.
- my staff work closely with their counterparts in the Scottish Government’s Transport Directorate to ensure that risk management systems are compatible, there is clear accountability for managing risks, joint action is taken where appropriate to manage risks, and the Scottish Government is kept informed of risks as appropriate.
Transport Scotland has established an Audit Committee which is chaired by one of the non-executive Directors, Dr Jacqueline Redmond, and it is within the remit of the Transport Scotland Audit Committee to review the risk management and strategy adopted across the organisation.
REVIEW OF EFFECTIVENESS
As Accountable Officer, I have responsibility for reviewing the effectiveness of the system of internal control. This is informed by the work of the internal auditors, the executive managers within the Agency, the Audit Committee and the external auditors in their management letter and other reports.
Assurance on the maintenance and review of internal control systems is provided by each of the Directors within Transport Scotland who submit an annual certificate of assurance covering their areas of responsibility to myself as Accountable Officer.
Transport Scotland’s Internal Auditors (whose work is undertaken to Government Internal Audit Standards) submit regular reports to the Audit Committee which provide an independent opinion on the adequacy and effectiveness of the organisation’s system of internal control together with recommendations for improvement. The three categories of assurance used in these reports are substantial, reasonable and limited assurance.
On the basis of the Internal Audit activities for 2007/08 financial year, Internal Audit were able to provide substantial assurance in respect of the Agency’s risk management, control and governance arrangements.
The internal Audit Plan for 2007/08 consisted of six main audits and four follow-up reviews from 2006/07 plus one from 2005/06. One main audit, the Major Public Transport Projects Review, was postponed with the Audit Committee’s agreement due to Audit Scotland carrying out broadly similar work and will be taken forward in 2008/09. Details of the remaining five main audits are noted below:
Audit Area and Scope
Trunk Road Scheme Construction
Assurance Provided: Substantial
Risk management, control and governance arragements the directorate have in place to manage the construction of road schemes are, in general, robust.
Trunk Road Maintenance & Related Governance
Assurance Provided: Substantial in both areas.
The risk, control and governance arrangements in place to manage and maintain the trunk road network and the directorate running costs were good.
Minor Rail Infrastructure Projects
Assurance Provided: Substantial
Controls were sound with some scope to further develop risk management and project management processes.
Trunk Road Accident Investigation & Prevention
Assurance Provided: Substantial
Risk and control arrangements in place over the systems to manage accident investigation and prevention projects and the associated budget within the directorate were found to be good.
In particular, Internal Audit were impressed by the Strategic Road Safety Plan.
Follow-up reviews from 2006/07 were Network Rail Funding, Concessionary Fares, First Scotrail Franchise and Corporate Governance Arrangements with a follow-up from 2005/06 on the M74 completion.
The Performance Audit Group (Halcrow working in association with Pricewaterhouse Coopers and Scott Wilson Plc) perform an external assurance role for all trunk road maintenance work.
During the year we have worked to strengthen control processes across the delivery of the Older and Disabled Persons National Concessionary Fares Scheme. These actions are in line with the recommendations raised by the 2006/07 Internal Audit review and the subsequent work of a Control Review Project Team as identified in my 2007 statement. These actions have resulted in a demonstrable and clear improvement in control level by 31 March 2008. In particular we have:
- formalised risk profiling into a key process supporting survey and inspection.
- improved reporting on concessionary fares activity to senior management.
Quarterly updates are submitted to the Audit Committee.
I have also set objectives for the Executive Directors within Transport Scotland to undertake a regular review process to ensure that improvement to the assurance and control environment within Transport Scotland is monitored closely.
Malcolm Reed CBE
22 October 2008