CHWARAEON CYMRU SPORT

INTERNAL AUDIT REPORT

Review of National Governing Body Grants /Local Authority Partnership Agreements

May/June 2012

REPORT STATUS: FINAL

DISTRIBUTED TO:

Director of Corporate Services: Chris James

Central South Manager: Tom Overton Manager: Debbie Austin

Sport1/2012/2013/Review of LAPAS & NGB/July 12/Review of LAPAS & NGB July 12 Sport Wales Review of National Governing Body Grants and Local Authority Partnership Agreements May/June 2012

CONTENTS

Page(s)

Executive Summary 1-2

1. Introduction 3

2. Objectives 4

3. Scope 5

4. Summary of findings 6 - 18

Appendices

1 Extended Management Comments in Response to Observation Point 4.1

2 Risk Assessment Criteria

Sport Wales Review of National Governing Body Grants and Local Authority Partnership Agreements May/June 2012

EXECUTIVE SUMMARY

Following consultation with the Senior Management and in line with our consideration of risk, we have undertaken an audit review of National Governing Body (NGB) grants and Local Authority Partnership Agreements (LAPAs) which has focussed upon the following key areas:

Effectiveness of controls and procedures relating to the awarding of grants Adherence to policies and procedures in relation to the authorisation, awarding and payment of grant funding The extent of revised processes now in place and ascertaining how these processes have adapted (or are planned) to incorporate the change in focus towards the measurement of outcomes of Investments

Our audit work established that the existing documented procedures relating to LAPAs and NGB’s were not up to date within the context of the development in this area and also that there are some procedural improvements to be made.

We have made several detailed observations and recommendations as set out in section 4 of this report and have prioritised them in order of risk for the Audit Committee’s attention.

Based on the sample selected of three LAPAs and four NGB’s for review, we identified the following themes:-

1. The processes as currently documented are not entirely consistent with the emerging practice.

In particular this impacts:- - The consistency of information collated/presented at varying stages of the process - The requirement for certain procedures that appear to be supplemental to the revised decision making procedures (ie certain procedures are now superceded).

This would indicate that there is a need for clarity and alignment in the documentation of the process. We are aware that this area is still evolving therefore there is necessity to continue to identify and implement the preferred and appropriate procedures which are commensurate with ensuring that all relevant and appropriate internal controls and procedures are consistently applied and adequately documented.

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Sport Wales Review of National Governing Body Grants and Local Authority Partnership Agreements May/June 2012

2. The presentation of “target” information by partners is not entirely consistent and the adequacy of evidence as to the reliability of target data for LAPAs in particular is reliant upon the relationship between Officers and Partners with varying degrees of challenge applied.

We also noted that it was possible for inaccuracies to manifest themselves in the target data held in AIMS and the Partner Investment Sheet (PIS form).

Whilst many aspects of the LAPA and NGB processes at present remain unchanged from previous years, the points noted above also have relevance in those areas in which the approach has now been modified by the organisation. We are aware that there are additional adjustments and modifications to be made. This transitional phase may well generate inconsistencies and errors until the processes have been finalised, documented and fully implemented. As such, management will continue to need to be cogniscent of the impact of any delays in the transition and the increased risk associated in this transitional phase.

Of our ten recommendations, we consider one to be high risk, eight to be medium risk and one low risk.

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Sport Wales Review of National Governing Body Grants and Local Authority Partnership Agreements May/June 2012

1 INTRODUCTION

1.1 An internal audit of the review of NGB’s and LAPAs was undertaken in May/June 2012

1.2 Following a thorough Internal Audit planning exercise involving discussion with The Financial Controller and Director of Corporate Services, a detailed audit programme was prepared. A sample of three LAPAs and four NGBs (covering nineteen separate grant streams) formed the basis of selection for audit review.

1.3 The 2012/13 grants selected for audit were as follows:-

LAPAs Cardiff (total £1,410,588) Gwynedd (total £1,025,353) Neath/Port Talbot (total £1,090,372)

NGB’s

Welsh Hockey Union (total £659,000) Welsh Union (total £749,200) Golf Union of Wales (total £426,500) (total £787,000)

1.4 We would like to thank all Sport Wales staff involved for their assistance and co-operation during the course of our audit.

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Sport Wales Review of National Governing Body Grants and Local Authority Partnership Agreements May/June 2012

2. OBJECTIVES

2.1 The objectives of our audit were to document, review and test the procedures and controls relating to the awarding and payment of NGB and LAPA grants. In particular, we sought to confirm: There are clearly documented procedures in place with regard to awarding and processing of grants. That all grants are correctly awarded and authorised. That payment of grants are correct agree to the authorised amounts. That contracts by way of signed offer and acceptance letters are correct. That adequate systems exist to ensure that targets agreed at the offer stage of grants are realistic and will be correctly monitored, compared to actual outcomes in due course and that there are clear procedures in place on how the process will operate.

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Sport Wales Review of National Governing Body Grants and Local Authority Partnership Agreements May/June 2012

3. SCOPE

3.1 We evaluated the system for the awarding, processing and payment of grants in place, and the controls established by management and carried out appropriate testing with regard to the following:

a) The internal control system per se; b) Compliance with policies and procedures and best practice regarding processing of grants. c) Compliance with required authorisation.

3.2 To establish the systems, controls and procedures in place we held interviews and discussions with:

Tom Overton – Sport Wales Central Manager Debbie Austin – Sport Wales Manager Katherine O’Brien – Sport Wales Administrator

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Sport Wales Review of National Governing Body Grants and Local Authority Partnership Agreements May/June 2012

SUMMARY OF FINDINGS

Adopting the Sport Wales’s risk matrix shown at Appendix 1 we have risk scored our observations using the following colour coding notation:

An extreme risk (red) should be addressed immediately. A high risk (orange) should be addressed as a matter of urgency. A medium risk (yellow) should be resolved within a reasonable timescale. A low risk (green) should be resolved when practicable.

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Sport Wales Review of National Governing Body Grants and Local Authority Partnership Agreements May/June 2012

Priority Ref. Findings Risk Recommendation Management comments Rating Responsibility Implementation L I S of date 4.1 LAPAs The audit points Weaknesses as Sport Wales to consider Agreed 5 4 20 Corporate Review to be included in the LAPAs identified by the the recommendations Directors completed by 30th follow up audit in previous audit may made in the follow up September 2012. 2011 were revisited still exist and have audit as part of their and each point was not as yet, been fully planned strategy towards discussed with Sport addressed an outcomes approach. Wales Central South Manager.

To date no action has been taken relating to these points but a board meeting was planned for 9th July 2012 to consider a way forward into the next stage of the new outcomes approach with a view to improving systems, quality of information and action points to be addressed.

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility Implementation comments L I S of date 4.2 NGB/LAPAs LAPAs At present, Sport Wales Inaccurate data may Consideration be given Sport Wales Senior 5 3 15 Sports April 2013 relies on the close be presented to and to the introduction of Officers work with LA Development relationship between its accepted by Sport sample checking of data partners to ensure Managers officers and grant recipient Wales which could provided by partners in targets, outputs and partners to obtain influence investment order to verify the outcome measures are confidence in the accuracy decisions. Inaccurate accuracy and reliability of both challenging and of information presented data may also result in data presented by accurate. Measures have regarding targets at both trends and partners. been put in place to the application stage and benchmarks being better evidence more importantly, in the difficult to interpret outcomes: presentation of data in over time. a) School Sport respect of outcomes during Survey launched in the review processes. In addition close 2011 will provide relationships may benchmark data impact the ability or every other year at desire of Officers to a national and area challenge fully the data level. presented by Partners. b) Output measures have been reduced to 7 key indicators on the PIS Sheet.

NGBS

See Extended Response in Appendix 1.

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility of Implementation comments L I S date 4.3 NGB/LAPAs LAPAs Sport Wales has been Lack of clarity in Procedures to be Corporate support to 5 3 15 Sarah Powell/ December 2012 moving towards an relation to systems updated to reflect the update procedures Graham Williams outcomes basis for at operational level. new system. following the Sport both NGB/LAPA’s. Wales Board discussion This approach is still Procedural changes regarding Partner in its infancy and are introduced Investment Principles some system changes piecemeal and (July 2012). have already been ineffectively. introduced, e.g. all NGB NGBS/Institute/ grants are now Procedures are not Procedures are already Mark Frost December 2012 recorded on a Partner undertaken on a in place to consider long Investment Sheet consistent basis. term funding for NGB’s. (PIS). This is Desk notes will be presented to Board revised to reflect Members for approval new timelines. at a board meeting and this is the main procedural difference at this stage from the previous system. Procedure notes have not been updated to reflect adjustments to the system as they have occurred.

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility of Implementation comments L I S date 4.4 NGB It has been noted that As additional It is good practice to Agreed. Revised offer 5 3 15 Chris James Now addressed if an additional awards are subject introduce a procedure letters are sent out amount of grant is to the same terms for an offer and stipulating original offer awarded there is and conditions as acceptance letter letter terms and currently no the original offer, if (contract) to be signed conditions apply. Sport procedure in place there is no signed similar to that of the Wales will ensure there for the governing acceptance there is original offer. is a signed acceptance of body to acknowledge potential for dispute the revised offer. this formally by virtue in the future. of signing any additional paperwork.

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility of Implementation comments L I S date 4.5 NGB If the total of a grant As the total extra If the existing Agreed. The findings 5 3 15 NGBS/Institute/ Now addressed awarded over the investment over the procedures to be relate to the old Mark Frost period of an investment period of the adhered to, the chair of process that was, in (e.g. 4 years) exceeds investment is the original Members’ practise, too the total agreed at the approved after the Panel (or CEO) should complex. The Board original Members’ Panel offer letter has been approve the total have since agreed by more than 20 per sent, and payment amount of the grant in approval for NGB cent or £100,000, made, there is no the final year if the funding is agreed at approval by the chair of opportunity to total exceed the the start of the year the original panel is decrease the level of specified amounts when the budgets required. the grant for the final before the offer is are approved. Any year if it is not made to the NGB. increased awards to This level of excess considered to be NGBs are reported applies to all NGB’s acceptable by the Alternatively if this to the Board via the reviewed as part of this Chair of the original authorisation is now Finance Report. The exercise, i.e. Welsh panel for whatever deemed to be first such report will Athletics, Welsh reason. supplemental to the be presented at the Hockey Union, Welsh existing September 2012 Cycling Union and Golf approval/authorisation Board meeting. Union of Wales. process, revised guidelines may be At the time of the audit required to supercede the four year funding those now in place to sheets had not been more appropriately signed or put onto reflect the activities AIMS. They have been consistent with these subsequently signed by processes. the CEO and have been

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility of Implementation comments L I S date entered onto AIMS (the chair of the original panel has left Sport Wales).

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility of Implementation comments L I S date 4.6 NGB It has been noted Appropriate delegated All offer letters to be Agreed. 2 4 8 NGBS/Institute/ Immediate that the Grant authorities not being signed by Senior Officers Mark Frost Administrator adhered to resulting in with appropriate sometimes signs risk of delegated authority. grant offer letters on inappropriate/incorrect behalf of the Senior offers being made. Officer, e.g. an offer Furthermore this of an additional dilutes the personal £42,000 to Welsh accountability of the Cycling Union was Senior Officer in this signed on behalf of part of the process. the Senior Officer by the Administrator.

The offer of funding (and by implication the signing of offer letters) is outside the remit of the Administrator.

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility Implementation comments L I S of date 4.7 LAPAs The delivery plans for This may cause Sport Wales should Cardiff submitted a 2 year 2 4 8 N/A N/A Neath Port Talbot difficulty in ensuring instruct Local Authorities plan in January 2011 with and Cardiff did not that information is to summarise the targets 2 year targets. In year state the total figures correctly collated for under the same headings targets were agreed for the targets that the PIS and offer required by Sport Wales locally and these are included in the letters, and for an for the PIS and offer populated the PIS offer letters on PIS appropriate letters when submitting (Partner Investment (Partner Investment summary to be their delivery plans. Sheet) sheet and a copy is Sheet), (although it is available in regards on AIMS. noted that various those targets when Additional clarity over Neath Port Talbot – individual targets considering the consistency of approach targets and outcomes were included). overall investment would be desirable in this were agreed at a local and success against regard. level and these were these targets. subsequently populated the PIS sheet.

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility of Implementation comments L I S date 4.8 NGB Comparisons were The potential Sport Wales staff to There is a difference in 2 4 8 NGBS/Institute/ April 2013 made in respect of exists for the ensure that all target terminology used by Mark Frost target data held or Board to be information is completed sports and that of reported between presented with in the application form. If applications made by application forms, inaccurate target there are specific NGB’s. panel meetings, offer information when reasons for changes in letters and PIS making decisions targets between the A new NGB (Partner Investment relating to various stages leading up application form is Sheet). These investments. to the decision making being developed which comparisons and approval by the can be tailored by the identified that board (i.e. recorded on sports to ensure there were some the PIS), these should be consistency of differences between clearly documented. terminology. the targets stated on Sport Wales staff to the various ensure that up to date Comments on AIMS documents in the information is promptly noted. following instances: filed on AIMS.

Golf Union of Data supplied on PIS Wales forms and stored on The target number of AIMs should be cross clubs was omitted checked to ensure all from the application data is drawn from up to form and the target date sources. for ‘Elite/World’ was different on the PIS form as it was taken from a

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility of Implementation comments L I S date previous application form which was not up to date.

Welsh Athletics The target figure for ‘Active Coach Officials’ differed between documents. An out of date application form was used and the up to date application form cannot be found in hard copy or on AIMS.

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility Implementation comments L I S of date 4.9 LAPAs For Neath Port Talbot Information could be Ensure that all delivery Human error-additional 2 2 4 Area Managers Implemented. and Gwynedd LAPAs submitted to Sport plans are either signed or checks have been built there were no Wales by a person Endorsement Forms are into future investment signatures or without adequate signed by appropriate processes. endorsements relating authority to do so. individuals with the to the delivery plans relevant authority. The on documents filed on signed forms should then AIMS. be filed on AIMS.

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Priority Ref. Findings Risk Recommendation Management Rating Responsibility Implementation comments L I S of date 4.10 NGB The application form If information on All documentation, Agreed. Comments 1 1 1 NGBS/Institute/ Immediately. for Welsh Hockey on AIMS is not up to including updates, should about timelines to Mark Frost AIMS at the time of date informed be promptly filed on update documentation the audit did not decisions may not be AIMS. onto to AIMS. include targets. possible. Further to the audit query on this matter, an updated form, which included targets, was put onto AIMS. (The Administrator confirmed that this form actually was prepared in January 2012 but not put onto AIMS at that time).

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APPENDIX 1

EXTENDED MANAGEMENT COMMENTS IN RESPONSE TO OBSERVATION POINT 4.1

NGBS

Sport Wales is not totally reliant on the close relationship between its officers and grant recipient partners. Having said this, the nature of the relationship (attendance at Board meetings, close liaison with CEO’s, engagement in visioning and long term strategy road show/seminars ) will mean that serious inaccuracies in the trends that NGB’s suggest are very unlikely not to be challenged.

A more significant safeguard is the self-regulatory nature of governing bodies. Below Board level, the machinations of NGBs often comprise operational type councils/ regional boards/ development committees be they national or regional in nature. If, in the instance that an NGB is claiming inaccurate data about its activity trends, those representative type members of the NGB infrastructure will challenge this robustly. Some governing bodies have coaching associations and / or local league committees who monitor closely actual trends in participation at age group levels. So there is a wealth of data within the NGB that serves to challenge inaccurate NBG claims.

We also monitor wider interpretations of sports data through our large sample surveys and where trends vary between NGB trends and the sport specific data (young people and adult), this gives us a fair case to investigate reasons why. We also have a close liaison with clubs and Local Government sport development units. This gives us a reasonable sample of anecdotal evidence in regard to trends typically at club and community level. For example we have lots of evidence of gymnastic clubs growing both in terms of applications to Sport Wales and via intervention work that our local government partners are aware of.

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APPENDIX 2 RISK ASSESSMENT CRITERIA

Risk classification of internal audit findings

The following terms are used to describe the degrees of risk associated with the cells in the matrix:

L: Low; M: Medium; H: High; E: Extreme

Impact 1 2 3 4 5

1 1 2 3 4 5 2 2 4 6 8 10 3 3 6 9 12 15

Likelihood 4 4 8 12 16 20 5 5 10 5 20 25

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MEASURE OF IMPACT Level Descriptor Description 1 Low Financial Loss up to £200. Slight impact on working arrangements, unlikely to damage reputation. 2 Medium Financial loss up to £1,000. Up to 1-day interruption of working arrangements unlikely to damage reputation. 3 High Financial loss up to £5,000. Up to 2-day interruption of working arrangements and short-term damage to reputation. 4 Extreme Major Financial loss >£15,000. Significant breach of policies. Major interruption to working arrangements in excess of 2 days, & long term damage to reputation. 5 Catastrophic Financial loss over >£50,000. Significant breach of policies. Long-term damage to reputation & working arrangements. MEASURE OF LIKELIHOOD Level Descriptor Description 1 Rare The event could occur in exceptional circumstances. E.g. Once a year 2 Unlikely The event could occur occasionally. E.g. once a month 3 Moderate The event could occur regularly. E.g. weekly 4 Likely The event will occur in most circumstances. E.g. daily 5 Certain The event is expected to occur in most circumstance. E.g. Whenever the activity is carried out.

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Each audit finding has also been given a risk score by assessing the impact of the risk and multiplying the score for likelihood of it occurring. This gives a minimum score of 1 and a maximum score of 25. A risk score has been shown for each finding in the text of this report.

Impact 1 2 3 4 5

1 4.10

4.4 4.7 2 4.9 4.8

3

Likelihood

4

4.2 4.1 5 4.3 4.4 4.5

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