The Audit Plan – template user guide
Contents
1. Grant Thornton The Audit Plan Mayor s Office for Policing and Crime Commissioner of Police of the Metropolis Year ended 31 March 2013 25 March 2013 Paul Grady Engagement Lead T 020 7383 5100 E _ paul d grady uk gt com Tom Edgell Richard Smith Manager Manager T 020 7728 3188 T 01293 554 101 E thomas edgell uk gt com E richard c smith uk gt com Richard Hewes Executive T 020 7728 3250 E richard hewes uk gt com The contents of this report relate only to the matters which have come to our attention which we believe need to be reported to you as part of our audit process It is not a comprehensive record of all the relevant matters which may be subject to change and in particular we cannot be held responsible to you for reporting all of the risks which may affect the organisation or any weaknesses in your internal controls This report has been prepared solely for your benefit and should not be quoted in whole or in part without our prior written consent We do not accept any responsibility for any loss occasioned to any third party acting or refraining from acting on the basis of the content of this report as this report was not prepared for nor intended for any other purpose Contents Section 1 Go vi 10 11 12 Understanding your business Developments relevant to your business and the audit Our audit approach An audit focused on risks Significant risks identified Other risks Grou2. Material or Transaction Cycle Material Description of Risk Substantive potentially misstatement testing material risk balance Police Officer Yes Pension Scheme Recorded contributions not v Pension Fund Contributions correct contributions receivable Police Officer Yes Pension Membership Actuarial amounts not i Pension Fund Data determined properly contributions receivable benefits payable Police Officer Yes Pension Membership Member data not correct ef Pension Fund Data contributions receivable benefits payable Police Officer Yes Pension Membership Regulatory legal and scheme va Pension Fund Data rules requirements not met contributions receivable benefits payable Police Officers Yes Pension Scheme Benefits improperly computed va Pension Fund Benefits Payments Claims liability understated benefits payable 2013 Grant Thornton UK LLP Significant risks identified Significant risks often relate to significant non routine transactions and judgmental matters Non routine transactions are transactions that are unusual either due to size or nature and that therefore occur infrequently Judgmental matters may include the development of accounting estimates for which there is significant measurement uncertainty ISA 315 In this section we outline the significant risks of material misstatement which we have identified There are two presumed significant risks which are applicable to all audits un
3. long amp Short term Provisions long amp short term Pension liability Reserves 2013 Grant Thornton UK LLP ENCE E ole potentially material balance Yes Yes Yes Yes Yes Transaction Cycle Debt Operating Expenses Provision Employee remuneration Equity Material misstatement risk Description of Risk Material balance but no specific risk identified Creditors understated or not recorded in the correct period Material balance but no specific risk identified Material balance but no specific risk identified other than in relation to accounts recognition Material balance but no specific risk identified Substantive testing An audit focused on risks CPM financial statements ENCE E ole Transaction Cycle Material Description of Risk Substantive potentially misstatement testing material risk balance Police Objective Yes Operating Expenses Operating expenses oe Analysis of understated expenditure Police Objective Yes Employee remuneration Remuneration expenses not ov Analysis of correct expenditure Provisions long amp Yes Provision Material balance but no specific v short term risk identified Pension liability Yes Employee remuneration Material balance but no specific va risk identified other than in relation to accounts recognition 2013 Grant Thornton UK LLP An audit focused on risks continued Police Officer Pension Fund
4. We will review governance arrangements as part of our Value for Money Conclusions e We will keep proposed accounting for 12 13 under review 2013 Grant Thornton UK LLP in 201 13 to support future years budgets Develop detailed plans for delivery of 508 million savings over the next three years equivalent to 20 of the 2012 13 budget while as far as possible protecting front line services We will review the robustness of plans for the delivery of medium term efficiency savings while maintaining service capability as part of our work on the Value for Money Conclusion to secure planned improvements in productivity and policing performance e Ensure risks to major change are understood and mitigated through effective senior oversight e We will review the governance and oversight arrangements for the MetChange programme as part of our work on the Value for Money Conclusion policing and victim satisfaction e Improve staff confidence and pride in the MPS by setting strong example on ethical issues and ensuring fair outcomes e We will review management s progress in implementing the Raising Fraud Awareness action plan summarising the results of workshops bodies to work collaboratively together to deliver efficiencies and improve services During 2011 12 the MPS focused on sharing its services internally as effectively as possible so had not implemented significant external shared arrangem
5. and MPS Commissioner financial statements are met as part of our audit Our audit approach T a Understanding and the entity gt Understanding the business a Understanding _ management s focus gt Evaluating the year s results Voyager 2013 Grant Thornton UK LLP _ the environment Creates and tailors audit programs Global audit technology Inherent Develop audit plan to risks obtain reasonable assurance that the Financial Statements a as a whole are free Significant from material risks misstatement and prepared in all gt material respects with the CIPFA Code ae of Practice framework using our global methodology and audit software Material balances Note a An item would be considered material to the financial statements if through its omission or non disclosure the financial statements would no longer show a true and fair view Stores audit evidence Ensures compliance with International Standards on Auditing ISAs Devise audit strategy planned control reliance Extract your data Y e Test controls e Substantive analytical review e Tests of detail General audit procedures Financial statements Y e Test of detail Anal d e Substantive Report output nalyse data ETEMITE using relevant i to teams review parameters Conclude and report Documents processes and controls An audit focused on risks MOPAC an
6. ant Thornton is a member firm of Grant Thornton International Ltd Grant Thornton International References to Grant Thornton are to the brand under which the Grant Thornton member firms operate and refer to one or more member firms as the context requires Grant Thornton International and the member firms are not a worldwide partnership Services are delivered independently by member firms which are not responsible for the services or activities of one another Grant Thornton International does not provide services to clients grant thornton co uk
7. ce the risks of material misstatement at the assertion level to an acceptably low level with audit evidence obtained only from substantive procedures ISA 315 Other risks Operating expenses Employee remuneration Property Plant amp Equipment Property Plant amp Equipment Police officer pension fund Description Operating expenses understated Creditors understated or not recorded in the correct period Remuneration expenses not correct PPE activity not valid Revaluation measurement not correct Pension expenses or contributions not valid 2013 Grant Thornton UK LLP Work completed to date interim visit e Review and re performance of Directorate of Audit Risk and Assurance internal audit testing on Accounts Payable controls for Months 1 9 Substantive testing of Accounts Payable transactions for Months 1 9 Review and re performance of Directorate of Audit Risk and Assurance internal audit testing on Payroll controls for Months 1 9 Substantive testing of Payroll transactions including overtime payments for Months 1 10 n a Valuation report qualifications assumptions independence instructions to valuer completeness Existence testing of large and unusual PPE balances Substantive testing of contributions receivable and benefits payable including lump sums for Months 1 10 Further work planned final accounts visit Top up testing of Accoun
8. d MOPAC group We undertake a risk based audit whereby we focus audit effort on those areas where we have identified a risk of material misstatement in the accounts The table below shows how our audit approach focuses on the risks we have identified through our planning and review of the national risks affecting the sector Definitions of the level of risk and associated work are given below Significant Significant risks are typically non routine transactions areas of material judgement or those areas where there is a high underlying inherent tisk of misstatement We will undertake an assessment of controls if applicable around the risks and carry out detailed substantive testing Other Other risks of material misstatement are typically those transaction cycles and balances where there are high values large numbers of transactions and risks arising from for example system changes and issues identified from previous years audits We will assess controls and undertake substantive testing the level of which will be reduced where we can rely on controls None Our tisk assessment has not identified a risk of misstatement However where a balance is material we will undertake substantive testing Where an item in the accounts is not material we do not carry out detailed substantive testing We have calculated MOPAC group materiality at 74 million based on 2 of gross cost of services in line with Grant Thornton s audit approach We wil
9. der auditing standards International Standards on Auditing ISAs which are listed below These do not feature in the table above as they relate to more than one area of the financial statements Significant risk The revenue cycle includes fraudulent transactions Management override of controls 2013 Grant Thornton UK LLP Description Under ISA 240 there is a presumed risk that revenue may be misstated due to the improper recognition of revenue Under ISA 240 there is a presumed risk that the risk of management override of controls is present in all entities Substantive audit procedures Work completed to date e Review and testing of revenue recognition policies e Substantive testing of material revenue streams Further work planned e Reconciliation of early testing above to financial statements Work completed to date e Review of accounting estimates judgments and decisions made by management e Testing of large and unusual journal entries Further work planned e Testing of year end accounting estimates judgments and decisions made by management e Testing of significant year end journal entries e Review of any further unusual significant transactions 11 Other risks The auditor should evaluate the design and determine the implementation of the entity s controls including relevant control activities over those risks for which in the auditor s judgment it is not possible or practicable to redu
10. e for 1 securing financial resilience 2 challenging how it secures economy efficiency and effectiveness in its use of resources Our high level approach We will consider whether the MOPAC and CPM are prioritising financial resources effectively with tighter budgets 2013 Grant Thornton UK LLP Focus of detailed work e We will review the robustness of plans for the delivery of medium term efficiency savings while maintaining service capability We will review the effectiveness of developing MOPAC governance arrangements We will review the governance and oversight arrangements for the MetChange programme We will review progress in maximising efficiencies through improved sharing of MPS services 16 Value for money continued Focus of detailed work Risk to CPM VFM Conclusion Risk to MOPAC VFM Conclusion Planning for medium term efficiencies e We will review the robustness of plans for medium term efficiency savings while maintaining service capability e We will focus our work on police staff savings 94 million over the next three years Technology 60 million and the Estate 51 million Developing MOPAC and CPM governance arrangements e We will review the effectiveness of the developing MOPAC and CPM governance arrangements e We will focus our work on the key elements of the framework established since 2011 12 and how these help to support the Deputy Mayor s decision making through eff
11. e risk tables above specifically e Payroll e Pensions e Accounts payable e Property plant and equipment e Accounts receivable 2013 Grant Thornton UK LLP Conclusion Summary Evaluation currently in progress Oral update to be provided to Audit Panel Currently work in progress Oral update to be provided to Audit Panel 14 Results of interim audit work continued Work performed Conclusion Summary Journal entry controls We are reviewing journal entry policies and procedures as part of Currently work in progress Oral update to be provided to Audit determining our journal entry testing strategy Panel Information Technology Controls Work to be commenced in May n a 1 2013 Grant Thornton UK LLP 5 Value for Money Introduction The Code of Audit Practice requires us to issue a conclusion on whether the MOPAC and the MPS Commissioner has each put in place proper arrangements for secuting economy efficiency and effectiveness in its use of resources This is known as the Value for Money VFM conclusion 2012 13 VFM conclusion Our Value for Money conclusions will be based on two reporting criteria specified by the Audit Commission We have included further information on the detailed work we plan to undertake and how this work relates to both the Value for money conclusion for the MOPAC and for the MPS Commissioner Reporting criteria The MOPAC and CPM has each put proper arrangements in plac
12. ective scrutiny Delivering of major change e We will review the governance and oversight arrangements for the MetChange programme Using shared services to deliver improvement e We will review progress in maximising efficiencies through improved sharing of MPS services 2013 Grant Thornton UK LLP The savings required to balance the MPS budget over the medium term are not achieved or lead to a loss of service capability Effective governance underpins the delivery of services in an efficient economical and effective way by e ensuring delivery of service in line with management objectives and e reducing the costs associated with rectification The MetChange programme fails to deliver in a co ordinated way or benefits generated in one area have significant unintended consequences for areas of operation Opportunities to gain further savings or service improvements by identifying areas were services can be shared with other organisations are missed The resources available to support delivery of the Policing and Crime Plan are put at risk over the medium term The MOPAC s ability to hold the CPM to account and monitor delivery of the Policing and Crime Plan is dependent on the effectiveness of governance arrangements The resources available to support delivery of the Policing and Crime Plan are put at risk over the medium term The targets set in the Policing and Crime Plan are missed 17 Log
13. ents We will review progress in maximising efficiencies through improved sharing of MPS services as part of our work on the Value for Money Conclusion Developments relevant to your business and the audit In planning our audit we also consider the impact of key developments in the sector and take account of national audit requirements as set out in the Code of Audit Practice and associated guidance Developments and other requirements 1 Financial reporting 2 Legislation 3 Corporate governance e Following the implementation e Annual Governance 4 Preparation for Stage 2 e The Government anticipates 5 Financial Pressures 6 Other requirements e Following the implementation e The MOPAC is required to e Managing service provision of Police Reform nationally CIPFA has issued updated accounting guidance LAAP Bulletin 95 which is relevant to MOPAC and MPS Commissioner We will ensure e your financial statements comply with the requirements of the CIPFA Code of Practice through our substantive testing of MOPAC and MPS Commissioner s financial statements 2013 Grant Thornton UK LLP of the Police Reform and Social Responsibility Act the Government has recognised the need for further legislation to remove anomalies in relation to the taxation status of Chief Constables and statutory accounting overrides We will discuss the impact of the legislative changes with the MOPAC and the MPS Commis
14. istics and our team The audit cycle March April 2013 interim audit visit June August 2013 September 2013 Final accounts Completion visit reporting Key phases of our audit October 2013 Debrief Our team Paul Grady Engagement Lead T 020 7383 5100 M 07880 456 183 E paul d grady uk gt com Tom Edgell Manager T 020 7728 3188 M 07880 456 180 E thomas edgell uk gt com Richard Hewes Team Leader T 020 7728 3250 E richard hewes uk gt com 2013 Grant Thornton UK LLP Richard Smith Manager T 01293 554 101 M 07880 454 151 E richard c smith uk gt com Date Jan Feb March Apr 25 March 10 June 4 Sept TBC Sept By 30 September By 31 October Activity Planning meetings with MOPAC and MPS Commissioner management teams Interim site work The audit plan presented to Audit Panel Year end fieldwork commences Audit findings clearance meeting Audit Panel meeting to report our findings Sign financial statements and VFM conclusion Issue Annual Audit Letter 18 Fees and independence Fees Financial statements audit and value for money conclusion Mayor s Office for Policing and Crime 189 000 Commissioner of Police of the Metropolis 160 000 Total 349 000 Our fee assumptions include Our fees ate exclusive of VAT e Supporting schedules to all figures in the accounts are supplied by the agreed dates and in acco
15. l revisit this on receipt of the draft financial statements and review which account balances and transaction cycles are material The table below is based on our current expectations ENCE E ole Transaction Cycle Material Description of Risk Substantive potentially misstatement testing material risk balance Cost of services Yes Operating expenses Operating expenses v operating expenses understated Cost of services Yes Employee remuneration Remuneration expenses not v employee correct remuneration Cost of services Yes Other revenues Material balance but no specific v other revenues specific grants fees risk identified amp charges Gains Loss on No Property Plant and Immaterial balance x disposal of non Equipment current assets 2013 Grant Thornton UK LLP An audit focused on risks MOPAC and MOPAC group continued Material or Transaction Cycle Material Description of Risk Substantive potentially misstatement testing material risk balance Interest payable and No Borrowings Immaterial balance x similar charges Pension Interest cost Yes Employee remuneration Material balance but no specific vA risk identified Interest amp No Investments Immaterial balance x investment income Investment properties No Property Plant amp Immaterial balance x valuation changes Equipment Non specific revenue Yes Grant Income Material balance but no specific v grant income risk identified Ma
16. oval of the financial statements and will present key issues and other matters arising from the audit together with an explanation as to how these have been resolved We will communicate any adverse or unexpected findings affecting the audit on a timely basis either informally or via a report to the MOPAC and the MPS Commissioner Respective responsibilities This plan has been prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission www audit commission gov uk We have been appointed as the MOPAC s and the CPM s independent external auditors by the Audit Commission the body responsible for appointing external auditors to local public bodies in England As external auditors we have a broad remit covering finance and governance matters Our annual work programme is set in accordance with the Code of Audit Practice the Code issued by the Audit Commission and includes nationally prescribed and locally determined work Our work considers the MOPAC s and the CPM s key risks when reaching our conclusions under the Code It is the responsibility of the MOPAC and the CPM to ensure that proper arrangements are in place for the conduct of its business and that public money is safeguarded and properly accounted for We have considered how the MOPAC and the CPM are fulfilling these responsibilities 2013 Grant Thornton UK LLP Audit Audit Our communication plan
17. p scope and risk assessment Results of interim work Value for Money Logistics and our team Fees and independence Communication of audit matters with those charged with governance 2013 Grant Thornton UK LLP Introduction Purpose This Audit Plan highlights the key elements of our 2012 13 external audit strategy for the Mayor s Office for Policing and Crime the MOPAC and the Commissioner of Police of the Metropolis CPM the MPS Commissioner We have compiled the plan based on our audit risk assessment and discussion of key risks with management in both the Mayor s Office for Policing and Crime the MOPAC and the Metropolitan Police Service the MPS We report it to the Deputy Mayor for Policing and Crime DMPC and the MPS Commissioner as the individuals charged with overall governance for the MOPAC and the CPM respectively We also report it to the joint MOPAC MPS Audit Panel for information Our responsibilities As external auditors we are responsible for performing the audit in accordance with ISAs UK and Ireland and to give an opinion on the MPS Commissioner s financial statements and the financial statements of the MOPAC including the group accounts which consolidate the accounts of the MPS Commissioner The audit of the financial statements does not relieve management or those charged with governance of their responsibilities for the preparation of the financial statements The Audit Commission Act 1998 also requires u
18. plan findings Respective responsibilities of auditor and management those charged v with governance Overview of the planned scope and timing of the audit Form timing v and expected general content of communications Views about the qualitative aspects of the entity s accounting and v financial reporting practices significant matters and issue arising during the audit and written representations that have been sought Confirmation of independence and objectivity A statement that we have complied with relevant ethical requirements regarding independence relationships and other matters which might be thought to bear on independence Details of non audit work performed by Grant Thornton UK LLP and network firms together with fees charged Details of safeguards applied to threats to independence Material weaknesses in internal control identified during the audit ka Identification or suspicion of fraud involving management and or others which results in material misstatement of the financial statements Non compliance with laws and regulations Expected modifications to the auditor s report or emphasis of matter Uncorrected misstatements Significant matters arising in connection with related parties 1 le el Significant matters in relation to going concern 20 Grant Thornton 2013 Grant Thornton UK LLP All rights reserved Grant Thornton means Grant Thornton UK LLP a limited liability partnership Gr
19. rdance with the agreed upon information request list e The scope of the audit and the activities of the MOPAC CPM have not changed significantly e MOPAC CPM management will make available management and accounting staff to help us locate information and to provide explanations 2013 Grant Thornton UK LLP Fees for other services Service Fees None Nil Independence and ethics We confirm that there are no significant facts or matters that impact on our independence as auditors that we are required or wish to draw to your attention We have complied with the Auditing Practices Board s Ethical Standards and therefore we confirm that we are independent and are able to express an objective opinion on the financial statements Full details of all fees charged for audit and non audit services will be included in our Audit Findings report at the conclusion of the audit We confirm that we have implemented policies and procedures to meet the requirement of the Auditing Practices Board s Ethical Standards 19 Communication of audit matters with those charged with governance International Standards on Auditing ISA 260 as well as other ISAs prescribe matters which we are required to communicate with those charged with governance and which we set out in the table opposite This document The Audit Plan outlines our audit strategy and plan to deliver the audit while The Annual Governance Report will be issued prior to appr
20. s to assess annually the adequacy of the Deputy Mayor s and MPS Commissioner s arrangements for securing economy efficiency and effectiveness in its use of resources known as the value for money conclusion Communicating the results of audit work We will communicate progress and findings from our audit work to management the Deputy Mayor for Policing and Crime and the MPS Commissioner at key points during the year For information we will also communicate this Audit Plan and all subsequent audit reports with the joint MOPAC MPS Audit Panel Page 18 of this Plan includes the timescale for the audit and audit reporting which sets this out in more detail 2013 Grant Thornton UK LLP Understanding your business In planning our audit we need to understand the challenges and opportunities you are facing We set out a summary of our understanding below Challenges opportunities 1 A new national framework e Continue to develop governance 2 Managing the finances 5 Collaboration e The Home Office expects police 4 Build trust and confidence e Improve public confidence in 3 Delivering major change e Deliver planned 50 million surplus Deliver the MetChange programme arrangements in the MOPAC and MPS to support effective decision making and scrutiny by the DMPC e Keep accounting treatments under review in light of any changes in local agreements emerging national guidance and views from the police sector e
21. sioner through our regular meetings with senior management In practice we plan to rely on the Ministerial statement of 17t January that the change to exempt the Commissioner from Corporation tax will be applied retrospectively Statements AGS Explanatory forewords We will review your arrangements for the production of the MOPAC and MPS Commissioner s AGS We will review the AGS and the explanatory foreword to consider whether they are consistent with our knowledge that a second stage transfer of relevant staff and assets from the MOPAC to CPM will take place by 1 April 2014 We will continue to review the proposals for a second stage transfer as they develop and consider any impact on our audit of accounts of MOPAC and MPS Commissioner and the value for money conclusion for each with less resource Progress against savings plans We will review your performance against the 2012 13 budget including consideration of performance against the savings plan We will undertake a review of Financial Resilience as part of our VFM conclusion submit a Whole of Government accounts pack on which we provide an audit opinion The MOPAC and MPS must submit accounting information to the GLA to support preparation of the GLA group accounts We will carry out work on the WGA pack in accordance with requirements We will liaise with the GLA group auditor to ensure his requirements in respect of the MOPAC
22. terial balance but no specific v risk identified Capital grants amp Yes Property Plant amp Contributions Equipment including those received in advance 2013 Grant Thornton UK LLP An audit focused on risks MOPAC and MOPAC group continued ENCE LE lg Transaction Cycle Material Description of Risk Substantive potentially misstatement testing material risk balance Actuarial gains Yes Employee remuneration Material balance but no specific F Losses on pension risk identified fund assets amp liabilities Property Plant amp Yes Property Plant amp PPE activity not valid v Equipment Equipment Property Plant amp Yes Property Plant amp Revaluation measurements not v Equipment Equipment correct revaluation Heritage assets amp No Property Plant amp Immaterial balance x Investment property Equipment Intangible assets No Intangible assets i ee ee Immaterial balance x Investments long amp No Investments Immaterial balance x short term Debtors long amp short Yes Revenue Material balance but no specific v term risk identified Assets held for sale No Property Plant amp Immaterial balance X Equipment Inventories No Inventories E Immaterial balance x Cash amp cash Yes Bank amp Cash Material balance but no specific v Equivalents risk identified 2013 Grant Thornton UK LLP An audit focused on risks MOPAC and MOPAC group continued Borrowing long amp short term Creditors
23. ts Payable controls for Months 10 12 Top up substantive testing of Accounts Payable transactions for Months 10 12 Top up testing of Payroll controls for Months 10 12 Top up substantive testing of Payroll transactions for Months 11 12 Additions substantive testing Additions depreciation impairments Completion of interim testing through to accounts Testing top up grant Testing transfers in out if material 12 Group audit scope and risk assessment ISA 600 requires that as Group auditors we obtain sufficient appropriate audit evidence regarding the financial information of the components and the consolidation process to express an opinion on whether the group financial statements are prepared in all material respects in accordance with the applicable financial reporting framework For accounting purposes the CPM is a wholly owned subsidiary of the MOPAC In addition the MOPAC group is a significant component of the Greater London Authority GLA Group In completing our audit of the MOPAC group we will comply with the group audit instructions issued by Ernst amp Young as auditors of the GLA group Should compliance with GLA group audit instructions require any additional work we will discuss this with you first Component of Level of response required MOPAC Group Significant under ISA 600 Risks identified Planned audit approach CPM Yes Comprehensive Allocation of overheads across MOPAC and MPS Full scope UK statutor
24. y audit Commissioner financial statements performed by Grant Thornton Recognition of IAS19 liability across group entities and the elimination of intra group transactions ensuring no impact on local taxation 2013 Grant Thornton UK LLP 13 Results of interim audit work Scope As part of the interim audit work and in advance of our final accounts audit fieldwork we have considered e the effectiveness of the internal audit function e internal audit s work on the key financial systems used by management to prepare the MOPAC and MPS Commissioner s financial statements e walkthrough testing to confirm whether controls are implemented as per our understanding in areas where we have identified a risk of material misstatement e a review of journal entry controls e areview of Information Technology IT controls Work performed Internal audit We are reviewing internal audit s overall arrangements against the CIPFA Code of Practice Where the arrangements are deemed to be adequate we can gain assurance from the overall work undertaken by internal audit and can conclude that the service itself is contributing positively to the internal control environment and overall governance arrangements We are evaluating specific work completed by internal audit in relation to e Payroll e Accounts Payable Walkthrough testing We are completing walkthrough tests in relation to the specific risks of material misstatement identified in th
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