Governance
Statement on internal control
The أغر؟´«أ½ has an obligation under its Charter to apply the highest standards of corporate governance. أغر؟´«أ½ World Service recognises the importance of, and is committed to, applying these standards and voluntarily complies with the 2006 Financial Reporting Council Combined Code (2006 FRC Code) to the extent that it is applicable.
أغر؟´«أ½ World Service has complied throughout the year ended 31 March 2009 with the 2006 FRC Code except as noted below:
i) those requirements relating to non-executive directors, remuneration and audit committees The أغر؟´«أ½ Executive Board considers that أغر؟´«أ½ World Service should comply with the 2006 FRC Code in a manner which is common practice for an entity whose parent is complying with it. Hence the أغر؟´«أ½ Executive Board does not require أغر؟´«أ½ World Service to have separate non-executive directors or remuneration and audit committees from those established by the أغر؟´«أ½, or to disclose the remuneration of the individual members of the أغر؟´«أ½ World Service Board, except to the extent that this is required by the Companies Act 1985. Although not a requirement under the 2006 FRC Code, أغر؟´«أ½ World Service does have its own audit committee which forms part of its risk management process.
ii) those requirements relating to shareholders أغر؟´«أ½ World Service is not accountable to external shareholders. Rather, through the stewardship of the أغر؟´«أ½ Trust, it is accountable to the Foreign and Commonwealth Office, to Parliament and to taxpayers.
This page covers:
Our structure:
clickInternal controls and audit
click
- click Control environment
- click Internal audit
- click أغر؟´«أ½ Executive audit committee
- click Independence of external auditors
- click Fair trading
Our structure
أغر؟´«أ½ World Service Board
The structure of the أغر؟´«أ½ World Service Board is shown . As explained above, أغر؟´«أ½ World Service does not have non-executive directors. The أغر؟´«أ½ World Service Board meets every month. Other members of management attend as required. A formal schedule of matters is reserved for Board decisions.
This includes:
• considering management structure and senior management responsibilities;
• agreeing membership and terms of reference of Board committees and task forces and receiving minutes, reviewing decisions taken and deciding action on recommendations;
• agreeing contracts with major suppliers;
• deciding significant staff and industrial relations issues;
• agreeing business strategy;
• approving the financial statements; and,
• approving annual budgets, subject to final approval by the أغر؟´«أ½ Executive Board.
أغر؟´«أ½ World Service Board members have access to the advice and services of the أغر؟´«أ½ World Service's Head of Governance and Public Affairs, who is responsible for ensuring that Board procedures are followed.
أغر؟´«أ½ Executive Board
The operations of the أغر؟´«أ½ are managed by the أغر؟´«أ½ Executive Board, made up of أغر؟´«أ½ executive directors and chaired by the Director-General. The Board also contains a significant minority of non-executive directors, nominated by the Board and approved by the أغر؟´«أ½ Trust. The interests of أغر؟´«أ½ World Service are represented on the أغر؟´«أ½'s Executive Board by the Deputy Director-General.
The functions of the أغر؟´«أ½ Executive Board and the أغر؟´«أ½ Trust are clearly defined. Operational responsibility rests with the أغر؟´«أ½ Executive Board, and the أغر؟´«أ½ Trust, as the body responsible for the strategic direction of the أغر؟´«أ½, scrutinises the performance of the Board in delivering the أغر؟´«أ½'s services and activities. The أغر؟´«أ½ Trust's oversight of أغر؟´«أ½ World Service is represented by its general duty to act in the public interest and to exercise rigorous stewardship of public money. More information on how the أغر؟´«أ½ Executive Board is run can be found in the أغر؟´«أ½ Annual Report and Accounts.
In practice, the أغر؟´«أ½ Executive Board delegates some of its responsibility to other managerial groups. Any delegation from the أغر؟´«أ½ Executive Board is stated in the relevant standing orders for each group and a framework for reporting and review is established.
In accordance with the requirements and provisions of the Charter, the following committees continued to operate in the year:
• Executive Fair Trading Committee;
• Executive Audit Committee;
• Remuneration Committee; and,
• Nomination Committee.
The main responsibilities of these committees are explained in the أغر؟´«أ½ Annual Report and Accounts as is the attendance record of أغر؟´«أ½ Executive Board members.
Internal controls and audit
The responsibilities in relation to internal control are clearly defined. The أغر؟´«أ½ Trust is ultimately responsible for the proper use of public money whilst the أغر؟´«أ½ Executive Board and أغر؟´«أ½ World Service Board are responsible for executing this requirement.
The أغر؟´«أ½ Executive Board is responsible for ensuring there is a process for managing significant risks to the أغر؟´«أ½, and for maintaining an adequate system of internal control and reviewing its effectiveness. The processes for reviewing, managing and reporting on risks within أغر؟´«أ½ World Service are set out below:
Control environment
The key aspects of the control environment operating throughout the year are described below:
i) risk identification and management
An ongoing process for identifying, evaluating, managing, monitoring and reporting significant risks to the أغر؟´«أ½, which accords with the Turnbull guidance, has been in place for the year ended 31 March 2009 and up to the date of approval of this Annual Review. The overall management of risk within أغر؟´«أ½ World Service is considered to be most effectively managed through the engagement of the أغر؟´«أ½ World Service Board and the أغر؟´«أ½ World Service Audit Committee. The أغر؟´«أ½ World Service Audit Committee forms a key part of the risk management process and is separate from the أغر؟´«أ½ Executive Audit Committee. The أغر؟´«أ½ World Service Audit Committee has reviewed the risks associated with the achievement of أغر؟´«أ½ World Service's objectives for the year. The risks identified, and the actions planned in response, are maintained in a risk register. The risk register is subject to regular review and assessment throughout the year and feeds into the consideration of risk exposure at both أغر؟´«أ½ World Service Board and أغر؟´«أ½ Executive Board level.
ii) business unit controls
The أغر؟´«أ½ World Service Board has defined the system of controls and procedures with which each business unit within أغر؟´«أ½ World Service is required to comply. This system is designed to manage rather than eliminate the risk of failure to achieve business objectives: although no system of internal control can provide absolute assurance against material misstatement or loss, the أغر؟´«أ½ World Service's controls are designed to provide reasonable assurance that assets are safeguarded, transactions are appropriately authorised and material errors or irregularities are either prevented or detected on a timely basis. Key controls over major business risks include formal authorisation processes, regular financial reporting, the annual performance review process, and exception reporting of financial and non-financial matters. Internal audit reviews by أغر؟´«أ½ Business Assurance monitor the operation of controls.
iii) financial reporting and business performance
أغر؟´«أ½ World Service has a comprehensive budgeting system with an annual budget approved by the أغر؟´«أ½ Executive Board, prepared in line with the أغر؟´«أ½ World Service Three Year Plan. Monthly financial information is reported against budget figures, with corrective action being taken by the أغر؟´«أ½ World Service Board as appropriate. All capital expenditure over certain upper thresholds must be approved by a أغر؟´«أ½ investment approval committee and, in some cases, by the FCO.
iv) business and broadcast continuity
أغر؟´«أ½ World Service business continuity plans have been strengthened in the past year. A new emergency production facility outside central London has been brought into service and the second phase of this project is nearing completion; this will considerably enhance our capability to maintain programme output in the event of an incident. Continuity plans have been tested and successfully invoked on a number of occasions to respond to incidents both in the UK and internationally. Work has also been completed with key suppliers to ensure the readiness of their contingency plans. أغر؟´«أ½ World Service has established controls and procedures over the security of data held on computer systems. Arrangements are in place for computer processing to continue and data to be protected and retained in the event of failure of أغر؟´«أ½ World Service's own systems for whatever reason.
v) controls over outsourced functions
The outsourcing of key services presents a significant change to the أغر؟´«أ½'s risk profile and, as a consequence, that of أغر؟´«أ½ World Service. Risk is not necessarily outsourced with these services. To address this, the أغر؟´«أ½ has processes in place to manage the risks associated with the outsourcing of key business services (e.g. finance transaction processing, HR services, technology systems and support) and to ensure continuity of ongoing business operations.
vi) whistle-blowing
The أغر؟´«أ½ has a â€کwhistle-blowing' or â€کprotected disclosure' policy. This policy facilitates the confidential communication via a number of routes of any incident in which there is a suspicion that there has been a breach of the أغر؟´«أ½'s codes. The أغر؟´«أ½ fosters an environment where all staff should feel free to report concerns and suspicions to line management. However, as there may be sensitivities regarding actual or suspected incidents, we also provide the alternative of a â€کwhistle-blowing' hotline. This is administered by an independent external company to ensure anonymity. Each incident or suspicion reported via any route is investigated in a confidential manner, a response is communicated and action taken as appropriate. The أغر؟´«أ½ Executive Audit Committee ensures that there are suitable arrangements in place for the proportionate and independent investigation of matters reported, and for appropriate follow-up action.
vii) fraud awareness
Although incidents of fraud are rare, أغر؟´«أ½ World Service takes its responsibilities to minimise the risk of fraud, and the consequential loss to the taxpayer, very seriously. The أغر؟´«أ½ has implemented a clear fraud policy that clarifies responsibilities for ensuring that the appropriate controls are in place to minimise the risk of fraudulent activity and to ensure that all suspected incidents of fraud are thoroughly investigated. The policy is managed by the أغر؟´«أ½ Anti-Fraud Group, which reports to the أغر؟´«أ½ Executive Audit Committee. From time to time أغر؟´«أ½ World Service undertakes anti-fraud workshops to identify key fraud risks and to promote fraud awareness across the business.
Internal Audit
أغر؟´«أ½ World Service is within the remit of the أغر؟´«أ½'s Business Assurance function, which is led by the Director of Risk and Assurance. Business Assurance comprises Internal Audit, Risk Management and Investigation Services.
The authority and independence of Internal Audit is assured by the Director of Risk and Assurance's independent and direct access to the أغر؟´«أ½ Executive Audit Committee and to the أغر؟´«أ½ Director-General.
Internal Audit undertakes regular testing of control systems and core business processes, evaluating their adequacy and effectiveness and ensuring their consistent application across the أغر؟´«أ½.
The work plan is based on a continuing assessment of key risks and is agreed annually with the أغر؟´«أ½ Executive Audit Committee. It covers financial, operational and compliance controls, including the exercise of the أغر؟´«أ½'s right of audit over external parties, including independent production companies and suppliers of key outsourced business services. Any significant control failings or weaknesses identified are reported promptly to appropriate levels of management. The findings, and the status of corrective actions taken to address them, are reported to the أغر؟´«أ½ Executive Audit Committee.
أغر؟´«أ½ Executive Audit Committee
The أغر؟´«أ½ Executive Audit Committee has its authority delegated to it by the أغر؟´«أ½ Executive Board. The members of the أغر؟´«أ½ Executive Audit Committee, all appointed in January 2007, are non-executive Directors David Robbie (Chairman), Dr Mike Lynch and Dr Samir Shah.
The أغر؟´«أ½ Executive Board is satisfied that David Robbie has significant, recent and relevant financial experience. The Committee augments the broad range of skills of its three members, gained from considerable experience in senior roles with other organisations, with advice as necessary from internal and external professionals, on relevant matters including developments in financial reporting and company law. During the year, the أغر؟´«أ½ Executive Audit Committee has reviewed its terms of reference and has approved their continued application, deeming them appropriate to ensure the Committee's continued effectiveness.
The أغر؟´«أ½ Executive Audit Committee met four times during the financial year. The meetings were attended by the Director- General, the Chief Financial Officer (for three meetings, with one meeting being attended by the Acting Chief Financial Officer) and from June 2008 onwards the new Director of Risk and Assurance. Representatives from Internal Audit, Risk Management and the external auditors were also present. The Committee meets at least annually with the external auditors without any member of management present. The Chairman of the أغر؟´«أ½ Executive Audit Committee meets with the Director of Risk and Assurance, alone or with the external auditors, but without management, and also meets privately with the external audit lead partner. Minutes of each Committee meeting, once approved, are available to the أغر؟´«أ½ Executive Board and to the أغر؟´«أ½ Trust. Recommendations of the Committee on any area within its remit where action or improvement is needed are reported back to the Board by whatever route is deemed most appropriate to the nature and circumstances of the issue. The Committee Chairman formally reports to the Board at least once a year on all matters within the Committee's duties and responsibilities.
The أغر؟´«أ½ Executive Audit Committee has fulfilled its responsibilities for the year. It has:
• reviewed the effectiveness of the system of internal controls. In doing so it has considered the findings of the internal and external auditors and sought assurance from management that any control issues highlighted are being addressed. It has also considered reports from management on processes for managing significant risks;
• reviewed the أغر؟´«أ½'s group financial statements and those of أغر؟´«أ½ World Service, including accounting policies, compliance with legal and regulatory requirements, and the findings of the external auditors;
• overseen the أغر؟´«أ½'s relationship with the external auditors, including their engagement, the scope of and approach to their work, their fees, their performance and their independence, including the approval and compliance with the policy on non-audit work;
• approved the work plan of Internal Audit; and,
• reviewed the fraud detection processes and whistle-blowing arrangements.
Independence of external auditors
أغر؟´«أ½ World Service, as part of the أغر؟´«أ½, complies with the 2006 FRC Code guidance on maintaining an appropriate relationship with external auditors. The external auditors appointed by the أغر؟´«أ½ are KPMG LLP, who have safeguards in place to avoid the possibility of their audit objectivity and independence being compromised.
The أغر؟´«أ½ Executive Audit Committee also reviews the audit objectivity and independence of its external auditors, and recruitment from KPMG LLP into any senior management position in the أغر؟´«أ½ requires its prior approval. The أغر؟´«أ½ Executive Audit Committee has set a clear policy that defines the threshold above which proposed non-audit work to be carried out by KPMG LLP must be approved in advance by the Committee, and also defines when it must be submitted to competitive tender. In all cases, KPMG LLP are not considered for work that might compromise their ability to independently opine on the أغر؟´«أ½'s financial statements.
Fair trading
The أغر؟´«أ½ must work to ensure that it meets its fair trading obligations as set out in the أغر؟´«أ½'s Charter, Agreement and the أغر؟´«أ½ Trust's Statement of Policy on Fair Trading. These are encapsulated in the أغر؟´«أ½'s Fair Trading Guidelines, which can be found at . These guidelines, which include the أغر؟´«أ½ World Service Trading Protocols, were updated on 1 April 2009, following a public consultation. Compliance with the Fair Trading Guidelines was overseen during the year through formal sub-committees of the أغر؟´«أ½ Trust (Finance & Compliance Committee, formerly the Public Value and Fair Trading Committee) and أغر؟´«أ½ Executive Board (Executive Fair Trading Committee).
The أغر؟´«أ½ Trust commissions independent auditors, Deloitte LLP, to undertake an annual fair trading audit to determine whether أغر؟´«أ½ management has established and applied a system of internal controls, which provide reasonable assurance that it has complied with the fair trading policy. Details of the audit and opinion can be found at .