Office of the Comptroller and Auditor General: Annual Report and Accounts for the year ended 31 December 2017

Office of the Comptroller and Auditor General Annual Report and Accounts

for the year ended 31 December 2017

Prepared in discharge of the responsibility in Article 19 of the Comptroller and Auditor General (Jersey) Law 2014

R.126/2018

Office of the Comptroller and Auditor General

Annual Report and Accounts for the year ended 31 December 2017

Contents   Page

Introduction by the Chairman of the Board of Governance  3 Performance Report  4 Overview  4 Performance Analysis  9 Priorities for the Future  15 Accountability Report  16 Corporate Governance Report  16

Comptroller and Auditor General's Report  16 Statement of Responsibilities of the Comptroller and Auditor  16

General

Governance Statement  17 Remuneration and Staff Report  22 Accountability Statement and Audit Report  23

Report of the Board of Governance of the Office of the  23

Comptroller and Auditor General to the States Assembly on

the expenses of the Comptroller and Auditor General

Independent Auditor's Report to the Comptroller and Auditor  24 General

Annual Accounts  26 Statement of Comprehensive Net Expenditure  26 Statement of Financial Position  27 Statement of Comparison of Budget and Actual Amounts  28 Notes to the Financial Statements  29

Introduction by the Chairman of the Board of Governance

The Board of Governance was created to keep under review whether the Comptroller and Auditor General has used and is using the resources provided .. properly, efficiently and effectively'. This specific but limited role has two key elements – to provide a system of robust scrutiny and accountability while ensuring and even enhancing the independence of the Comptroller and Auditor General (C&AG) in her investigations and reports.

Our basic requirement is to review and comment on the estimates and annual accounts. We also provide assurance on the annual expenses of the C&AG and we review staff terms and conditions. This makes clear that our function is to provide assurance – to the States and to the people of Jersey – rather than creating an extra tier of management.

The Board having been appointed in September 2016, this Annual Report covers the first full year of the new structure. We began by putting in place appropriate governance arrangements – meeting the highest standards but designed to match the scale and special characteristics of Jersey. Next, we set up systems of regular reporting and began to receive those reports. We progressively adjusted the required content to maximise our effectiveness, as well that of the Office. That aim of continuous improvement will guide all our work.

These strides forward for the Board have been accompanied by matching progress in the strategic importance of the C&AG's work and in the responses of the key institutions, which are described in her Overview (page 4). Together, they mark an advance for Jersey – better scrutiny of public spending plus resulting action will lead to greater value for the taxpayer and enable more to be achieved.

Several reports on the operation of public bodies have attracted substantial media attention. That is often a sign of the importance of the findings and recommendations. But the aim of a good audit body is to help organisations to improve. The lessons to be learned can usually be applied to other bodies and so the gain can be multiplied. But it all depends on a willingness to read, heed and act.

The first part of this document describes and analyses the work of the C&AG and her professional team, showing how the resources have been used. The second part includes the Board's assurance report. Then the accounts themselves are shown. I hope that you will be interested in reading about the year in this small but crucial part of Jersey's governance.

Peter Price Chairman

Board of Governance

19 September 2018

Performance Report

1. The Performance Report provides an overview of the Office of the Comptroller and Auditor General (The Jersey Audit Office'). The following two sections set out the Office's purpose and structure and evaluate how it has performed against its objectives:

• an Overview that provides a short summary of the Office, its purpose, the key risks to the achievement of its objectives and how it has performed during the year; and

• a Performance Analysis that provides more information on how the Office measures its performance.

Overview

Statement by the Comptroller and Auditor General

2. The year has been one of change, both within the States and within the Office.
3. Following the appointment of a new Chief Executive, the States are facing a period of fundamental and rapid change. The findings from the due diligence' work undertaken for the new Chief Executive echoed many of my previous recommendations, such as those relating to financial management. My recommendations had usually been accepted by the States but action to implement them has often been slow and many recommendations have yet to be implemented. A clear focus on driving and monitoring the implementation of agreed actions is needed. In 2018 and beyond, I shall be monitoring progress on implementation of agreed changes.
4. 2017 saw the publication of a series of major reviews that went to the heart of the operation of the States. In January I reported on the operation of the Jersey Innovation Fund that identified fundamental weaknesses in the design and operation of the Fund. In November I reported on the States' arrangements for decision making, focussing on the process for selecting a site for the Future Hospital. I identified significant weaknesses in the decision making process. Addressing those will require fundamental changes in organisation, ways of working and culture.
5. Many of the findings from my reviews in 2017 echoed those from previous years. I drew together the themes from my work since 2013 and shared those with the Public Accounts Committee, senior officers and, subsequently, members of the new States Assembly. My findings informed the legacy report prepared by the outgoing Public Accounts Committee.
6. In 2017 I made changes to the operation of the Office. I secured improved efficiency and effectiveness by a restructuring that involved moving to serviced office accommodation better suited to the needs of the Office. The changes have allowed me to seek further support for the delivery of my work and I have subsequently appointed another affiliate to strengthen my team.
7. I look forward to delivering the challenging and highly relevant programme of work planned for the coming year.

The role of the Office and how it is discharged

8. The Office of the Comptroller and Auditor General (the Office') is established by statute. It is publicly funded and, by discharging its statutory responsibilities, provides assurance about the use of public funds (See Exhibit 1).

Exhibit 1: Discharging statutory responsibilities

Function  Discharged by

Providing assurance to the States Assembly that the public finances of Jersey are regulated, controlled, supervised and accounted for in accordance with relevant legislation, including reporting on internal control, value for money and corporate governance.

Preparing a series of reports to the States Assembly with the support of the Deputy Comptroller and Auditor General, affiliates and input from professional firms and other public audit agencies.

Appointment of auditors to the States  Appointment of professional firms and and certain other specified bodies.  overseeing their performance.

9. The Comptroller and Auditor General (C&AG), appointed by the States Assembly, leads the Office. The C&AG is independent of government and may not be directed in how she discharges her responsibilities. Her role is to evaluate the implementation of policy but she does not question policy decisions.

The Office's values

10. The Office adopts a set of core values that drive the way in which it works (see Exhibit 2).

Exhibit 2: Core values of the Office

Independence  Auditors should be independent of those they audit and be

seen to be. They should not undertake any work that might impair their independence or might reasonably be perceived to do so.

Audit work is undertaken as efficiently as possible

The C&AG and audit firms appointed by the C&AG should discuss the timetable for their work and the information they require. Where appropriate and in accordance with professional standards, they should seek to rely on the work of internal audit where relevant to their responsibilities.

Auditors adopt a  Auditors should adopt a constructive and positive constructive and  approach, supporting and encouraging worthwhile change. positive approach  In undertaking their work and making recommendations,

they should recognise the particular circumstances of the Island.

Audit work  In planning audit work, auditors should consider the recognises both  materiality or significance of the sums involved. In making costs and benefits  recommendations, they should recognise that there are

costs of implementing audit recommendations as well as benefits that might arise.

Auditors report in  As audit is an essential element of public accountability, public, accessibly,  reporting should be publicly available except where there without fear or  is a compelling case (such as commercial confidentiality) favour  for it not to be. Audit reports should be accessible and

relevant to stakeholders.

Confidentiality and  The C&AG and audit firms appointed by the C&AG should data security are  comply with statutory and professional requirements balanced with  relating to the security, holding and disclosure of

public  information received or accessed in the course of their accountability  work.

2017 review

11. Key outputs for 2017 are outlined in Exhibit 3.

Exhibit 3: Key outputs of the Office for 2017

12. In the course of the year, the Office also engaged with the States Assembly and government by:

• attendance at meetings and hearings of the Public Accounts Committee and provision of briefings to the Committee;

• attendance at meetings of the States of Jersey Audit Committee; and

• regular liaison with the Chief Executive, Treasurer of the States and other senior officers.

13. The Office drew together key themes emerging from its work over the previous four years. It identified areas where improvement was required, with findings and recommendations made in a number of reports. It communicated those themes to the Public Accounts Committee and senior officers and subsequently to Members of the States Assembly (see Exhibit 4).

Exhibit 4: Key themes emerging from the work of the Office

Organisational

culture

Financial management

eGovernment

Decision

making

Financial Directions

Performance management

Corporate

learning

Management

information

Governance

Source: The C&AG – reporting to the States Assembly, supporting PAC' https://www.jerseyauditoffice.je/wp-content/uploads/2018/06/CAG-NEW-STATES-MEMBERS- PRESENTATION-22-MAY-2018.pdf

Key issues facing the Office

14. The key issues and risks faced by the Office in delivering its objectives related to:

• managing within available resources;

• maintaining the quality of the Office's work;

• achieving economy, efficiency and effectiveness in the operation of the Office;

• ensuring good governance of the Office; and

• maintaining the reputation of the Office.

15. More information on how the Office approaches the management of risk is provided in the Accountability Report below.

Performance Analysis

How the Office performed against its priorities

16. The previous Annual Report highlighted priorities for the Office. Exhibit 5 sets out performance against those priorities.

Exhibit 5: Performance against priorities

Maximising the impact of the Office's work to support worthwhile change for the people of Jersey

Maintain focus on corporate governance and internal control in developing work programme.

The majority of the work programme has a strong focus on corporate governance and internal control, with recommendations for improvement made.

Driving improvements in financial management and accountability.

The proposed follow-up work on financial management was deferred following the decision of the States to commission consultants to assess financial management maturity. Subsequently, the incoming Chief Executive's due diligence review reflected many of the Office's previous recommendations on financial management.

Maintaining a focus on follow-up of previous audit recommendations to evaluate the extent and the effectiveness of implementation and to identify any barriers to implementation.

The work programme included follow- up of previous audit recommendations.

Given the slow pace of implementation of agreed recommendations, recurring themes from the Office's work were identified and reported to the Public Accounts Committee and senior officers.

Follow-up in a number of key areas was postponed given the appointment of a new Chief Executive.

Demonstrating  Moving to new office  The Office moved into serviced office proper  accommodation  accommodation in October 2017, stewardship of  appropriate to the needs  securing improved efficiency and

the public  of the Office and  effectiveness.

funds  

Priority  Planned Action  Action and impact

allocated to  facilitating modern ways the Office  of working.

Introducing quarterly reporting of expenditure, including the Comptroller and Auditor General's expenses.

Quarterly reports of expenditure of the Office, including the Comptroller and Auditor General's expenses, are now both presented to the Board and published on the Office's website (see https://www.jerseyauditoffice.je/about- us/what-we-do/what-we-spend/).

External impact

17. The Office looks beyond Jersey both to identify good practice and share lessons. In the course of the year, the C&AG accepted invitations to speak at two external events:

• the inaugural meeting of the UK Public Accounts Committee Network held in Cardiff on 18 September 2017. The C&AG spoke to members of UK Public Accounts Committees and the officers supporting them alongside the Comptroller and Auditor General of Northern Ireland and the Director of Performance Audit from Audit Scotland; and

• a Westminster Workshop' for Public Accounts Committees held in London on 4 December 2017. The C&AG addressed members of Commonwealth Public Accounts Committees alongside a representative of the UK National Audit Office.

18. Subsequently, the C&AG received invitations to participate in other external events in 2018.

Auditors appointed by the Comptroller and Auditor General

19. The Office appoints firms of accountants to audit the accounts of the States and certain other specified bodies. Annually, the C&AG seeks, obtains and evaluates feedback from the bodies to which she appoints auditors on their performance and engagement.
20. In the course of the year, the C&AG met regularly with the firm appointed to audit the accounts of the States to keep abreast of progress and to share information of common interest.
21. In accordance with contractual terms, the C&AG reviewed and, where appropriate, approved requests to provide non-audit services by the audit firms she had appointed. She only did so where she was satisfied that performing such work would not give rise to an actual or perceived threat to the independence of the audit firm or to the C&AG.

Financial performance

22. Resources for the Office are allocated through the States' Medium Term Financial Plan. Despite the incurrence of one-off costs associated with changes in the operating model for the Office, the Office operated within its budget (see Exhibit 6).

Exhibit 6: Financial performance 2017

Other costs:  Underspend general against final budget

Other costs:  £30,700 £35,600 accommodation-

related

£20,900

Chairman of the  Audit of the Board of  accounts of the Governance States of Jersey

£2,000 £307,200

Comptroller and Auditor General

£94,000

Employee and

similar costs: other Audit of the accounts £311,100 of the Office of the C&AG

£4,100

Source: Statement of Comprehensive Net Expenditure (page 26) and Statement of Comparison of Budget and Actual Amounts in the Annual Accounts (page 28)

23. The expenditure of the Office is broadly consistent with that in recent years (see Exhibit 7).

Exhibit 7: Financial performance of the Office 2014 to 2017

£900,000 £800,000 £700,000 £600,000 £500,000 £400,000 £300,000

£200,000 £100,000 £0

2014 2015 2016 2017

24. Further information on the financial performance of the Office is provided in the Annual Accounts.

Environmental impact

25. During the year, the Office worked to reduce its environmental impact:

• the major environmental impact of the Office relates to air travel to and from Jersey. The Office sought to minimise the use of air travel by effective use of remote working from the UK, including the use of telephone and video conferencing;

• the Office moved into smaller and more environmentally friendly accommodation; and

• the Office continued to transition to maintaining information wherever possible and appropriate only in electronic format.

Comparing performance with other audit offices

26. The Office has undertaken some benchmarking of performance against other audit offices using information in the public domain. The most obvious comparators, the other Crown dependencies, do not have Auditor Generals. Therefore a comparator group, comprising seven audit offices from British Overseas Territories, Canadian Provinces, Australian States and Territories and an independent country, all with populations of 61,000 to 525,000, was used.

27. There are inherent problems in making comparisons because of differences in the responsibilities of the audit offices, their business models, prevailing costs in the economy, budgetary arrangements and applicable accounting frameworks. However, the overall message is that the Office provides a significant volume of reports to the States Assembly at comparatively low cost (see Exhibit 8).

Exhibit 8: Comparison of performance with other audit offices

Source: Jersey Audit Office analysis

Priorities for the Future

28. I have identified key priorities for the Office (see Exhibit 9).

Exhibit 9: Priorities for the Office

Priority  Commentary

1  Reflecting in the Office's work  The States have embarked on a

programme the risks arising  substantial and rapid change

from organisational change in  programme to drive significant

the States  improvements. There are risks to

internal control and corporate governance arising from any major change programme and these are reflected in the audit work programme.

2  Delivering relevant, insightful

work that supports improvement

To secure greatest value, the work of the Office should not only hold to account and report clearly and impartially but also provide additional insight that supports improvement in public services.

3  Demonstrating high

standards of governance

The Office should embrace the high standards of governance that it expects of others. Reflection on those arrangements is particularly important to promote resilience in a period when the Office is preparing for the appointment of a new Comptroller and Auditor General from January 2020.

4  Delivering value for money  The Office is funded from public funds.

It is important to demonstrate that those funds are well used.

Karen McConnell

Comptroller and Auditor General

19 September 2018

Accountability Report

29. The Accountability Report provides key accountability information to the States Assembly. It comprises:

• the Corporate Governance Report;

• the Remuneration and Staff Report; and

• the Accountability Statement and Audit Report.

Corporate Governance Report Comptroller and Auditor General's Report

30. I served as Comptroller and Auditor General throughout the period and personally directed the activities of the Office.
31. The Board of Governance of the Comptroller and Auditor General throughout the period comprised Peter Price (Chairman), Professor Russel Griggs (Independent member) and me (ex officio).
32. All members of the Board of Governance have to complete a declaration of interests. There were no declarations of significant company directorships or other interests that may have conflicted with their responsibilities and no member of the Board had any other related-party interests.
33. There were no personal data related incidents during the year reported to the Office of the Information Commissioner.

Statement of Responsibilities of the Comptroller and Auditor General

34. Under the Comptroller and Auditor General (Jersey) Law 2014, I am required to prepare annual accounts. The accounts are prepared on an accruals basis.
35. I confirm that, as far as I am aware, there is no relevant audit information of which the external auditors are unaware. I have taken all the steps that I ought to have taken to make myself aware of any relevant audit information and to establish that the external auditors are aware of that information.
36. In preparing these accounts, I have adopted International Public Sector Accounting Standards issued by the International Public Sector Accounting Standards Board and, in particular, I have:

• observed the relevant accounting and disclosure requirements and applied suitable accounting policies on a consistent basis;

• made judgements and estimates on a reasonable basis; and

• prepared the accounts on a going concern basis.

37. I confirm that this Annual Report and Accounts as a whole is fair, balanced and understandable.

Governance Statement My responsibilities

38. I have responsibility for maintaining effective governance and a sound system of internal control that supports the achievement of the Office's policies, aims and objectives, while safeguarding the public funds and assets.

How I discharged my responsibilities

39. Given the small size of the Office, I perform these functions without a formal management team. In my absence I delegate my responsibilities to the Deputy Comptroller and Auditor General.
40. I secure an effective system of governance and a sound system of internal control including by:

• preparing, communicating and implementing appropriate policies and procedures, in areas such as complaints and data security;

• to the extent appropriate to the circumstances of the Office, using the corporate financial and other systems of the States of Jersey. For financial systems, a Service Level Agreement is in place. Using such systems means that the Office does not maintain its own bank account with the attendant risks;

• monitoring expenditure against budget;

• seeking professional advice from the States where necessary and appropriate, including from the Law Officers' Department and the Director of Strategic Procurement;

• maintaining a contracts register and a gifts and hospitality register; and

• reviewing the performance of the appointed auditors.

Risk management

41. I operate a risk register that captures those risks with the potential to have a significant adverse impact on the operation of the Office. The risk register is organised around key themes as summarised in Exhibit 10 below.

Exhibit 10: Risk register

Personal data related incidents

42. There were no protected personal data related incidents reportable to the Officer of the Information Commissioner in 2017. Neither were there any other personal data related incidents.

The Board of Governance

43. The Board of Governance, established under the Comptroller and Auditor General (Board of Governance) (Jersey) Order 2015, is responsible for keeping under review whether the resources provided to me by the States Assembly have been and are being used properly, efficiently and effectively.

44. The membership of the Board is detailed in Exhibit 11.

Exhibit 11: Membership of the Board of Governance

45. The Board is responsible for:

• scrutinising the use of resources by and the governance arrangements of the Comptroller and Auditor General;

• reporting any concerns to the Chief Minister and the Chairman of the Public Accounts Committee;

• if requested by the Chairman of the Public Accounts Committee, advising on the appointment of auditors of the accounts of the Comptroller and Auditor General;

• reviewing any estimates submitted by the Comptroller and Auditor General to the Chairman of the Public Accounts Committee for the purposes of the Medium Term Financial Plan or the budget;

• reviewing the audited accounts of the Comptroller and Auditor General; and

• if requested by the Comptroller and Auditor General, advising on the appointment, remuneration and terms and conditions of the Deputy Comptroller and Auditor General.

46. The Board also has a power to prepare an assurance report on the expenses of the Comptroller and Auditor General.

How the Board of Governance discharged its responsibilities

47. The Board met three times in the course of 2017. All members of the Board attended all those meetings. The key business of the Board in 2017 included:

• adopting key governance documents relating to its work - Standing Orders, a Code of Conduct and a Relationship Code;

• reviewing the Complaints Policy prepared for the Office;

• reviewing the risk register prepared for the Office;

• monitoring the financial performance of the Office, including the expenses incurred by the Comptroller and Auditor General;

• reviewing the gifts and hospitality register maintained for the Office;

• receiving and reviewing the report from the Office's external auditors on the 2016 accounts;

• reviewing proposals for changing the operation of the Office; and

• deciding to prepare an assurance statement on my expenses that is included within this Accountability Report.

48. The Board did not report any matter to the Chief Minister and Chairman of the Public Accounts Committee.
49. The Board is committed to reviewing its own effectiveness and is scheduled to review its way of working at its October 2018 meeting.

Quality of data used

50. Both the Board of Governance and I rely on financial information drawn from the States of Jersey's financial systems subject to review and scrutiny by the Deputy Comptroller and Auditor General and an affiliate working for me. Both the Board of Governance and I are satisfied that such financial information is acceptable for the purposes for which it is used.

Review of effectiveness

51. I have responsibility for reviewing the effectiveness of the system of internal control. My review is informed by my own work, the work of those working for me, the work of the Board of Governance and information received from the States. Based on that review I am satisfied with the arrangements in place for governance, risk and internal control.

Significant internal control weaknesses

52. I am able to report that there were no significant weaknesses in the Office's system of internal controls in 2017 that affected the achievement of the Office's key policies, aims and objectives.

Karen McConnell

Comptroller and Auditor General

19 September 2018

Remuneration and Staff Report

53. The Office relies on the services of seven independent contractors, including the C&AG and the Deputy C&AG. Expenditure on these independent contractors is reported in the Annual Accounts and expenditure on the C&AG and on the Deputy C&AG are identified separately. The remuneration of independent contractors comprises only fees and they do not receive any bonuses, non-cash benefits or pension benefits.
54. The C&AG is remunerated at a daily rate under the terms of a contract entered into on behalf of the Chief Minister and the Chairman of the Public Accounts Committee.
55. The remuneration of the Chairman of the Board of Governance is reported in the Annual Accounts. His remuneration is determined by the States Assembly.
56. The Office had one States employee assigned to it until October 2017. The employment policies of the States of Jersey applied in full to that member of staff. To preserve the confidentiality, disclosures around staff remuneration, sickness absence and certain other employee matters have not been made.
57. No payments in compensation for loss of office were made in the year.

Accountability Statement and Audit Report

Expenditure against the budget allocated to the Office is reported in the Statement of Comparison of Budget and Actual Amounts included in the Annual Accounts.

Report of the Board of Governance of the Office of the Comptroller and Auditor General to the States Assembly on the expenses of the Comptroller and Auditor General

Article 5(7) of the Comptroller and Auditor General (Board of Governance) (Jersey) Order 2015 provides that the Board may prepare an assurance report upon the annual expenses of the Comptroller and Auditor General.

Scope of our work

We have through the course of 2017 and in preparing this statement:

• received an analysis of the expenses incurred by and on behalf of the Comptroller and Auditor General for travel and subsistence for the year ended 31 December 2017;

• assessed the reasonableness of those expenses in light of the role of the Comptroller and Auditor General;

• sought explanations for any unusual items; and

• evaluated the reasonableness of such explanations.

Statement

No matters have arisen from our work that we wish to draw to the attention of the States Assembly.

Peter Price

Chairman

For and on behalf of the Board of Governance of the Comptroller and Auditor General

19 September 2018

Independent auditor's report

To the Comptroller and Auditor General

Opinion

We have audited the financial statements of the Office of the Comptroller and Auditor General (the Office of the C&AG') for the year ended 31 December 2017 which comprise the Statement of comprehensive net expenditure, Statement of financial position, Statement of comparison of budget and actual amounts, and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Public Sector Accounting Standards (IPSAS).

In our opinion, the financial statements:

• give a true and fair view of the state of the Office of the C&AG's affairs as at 31 December 2017 and of its total comprehensive net expenditure  for the year then ended;

• are in accordance with International Public Sector Accounting Standards; and

• are in accordance with the requirements of the Comptroller and Auditor General (Jersey) Law 2014.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISA') and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements' section of our report. We are independent of the Office of the C&AG in accordance with the ethical requirements that are relevant to our audit of the financial statements in Jersey, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Who we are reporting to

This report is made solely to the Comptroller and Auditor General and in accordance with Article 19 of the Comptroller and Auditor General (Jersey) Law 2014. Our audit work has been undertaken so that we might state to the Comptroller and Auditor General those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Comptroller and Auditor General, for our audit work, for this report, or for the opinions we have formed.

Other information

The Comptroller and Auditor General is responsible for the other information. The other information comprises the information included in the Annual Report and Accounts, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Responsibilities of the Comptroller and Auditor General for the financial

statements

As explained more fully in the Statement of Responsibilities of the Comptroller and Auditor General set out on page 16, the Comptroller and Auditor General is responsible for the preparation of the financial statements in accordance with the Comptroller and Auditor General (Jersey) Law 2014.

In preparing the financial statements, the Comptroller and Auditor General is responsible for applying the going concern principle, applying appropriate accounting policies in a consistent manner and making reasonable and prudent judgments and estimates.

Auditor's responsibilities for the audit of the financial statements

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable legal and regulatory requirements and International Standards on Auditing (UK). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Grant Thornton Limited Chartered Accountants

St Helier, Jersey, Channel Islands

20 September 2018

Annual Accounts

Statement of comprehensive net expenditure For the year ended 31 December 2017

Notes  2017  2016  2016

(Re- (As classified)  previously classified)

£ Expenses

Employee and similar costs:  2,000 Chairman of the Board of

Governance

Employee and similar costs:  94,000 Comptroller and Auditor

General

£ £

600  600 85,500  85,500

Employee and similar costs: other

Other costs: audit of the accounts of the States of Jersey

4  311,100 5  307,200

270,200  270,200 298,300  298,300

Other costs: audit of the Office  4,100  4,000 of the Comptroller and Auditor

General

Other costs: general  6  30,700  23,900  27,900 Other costs: accommodation- 7  20,900  15,700  15,700

related

Total comprehensive net  770,000  698,200  698,200 expenditure

Statement of financial position

Notes  31  31 December  December

2017  2016

£ £

Assets Current assets

Trade receivables from  8  5,000  5,200 exchange transactions

Receivables from non-exchange  436,900  319,700 transactions: States of Jersey

Consolidated Fund

Total assets  441,900  324,900

Liabilities Current liabilities

Trade payables from exchange  9  397,400  324,900 transactions

Provisions  10  20,700  - Total current liabilities  418,100  324,900 Non-current liabilities

Provisions  10  23,800  - Total non-current liabilities  23,800  - Total liabilities  441,900  324,900

Net assets  0  0

Statement of comparison of budget and actual amounts For the year ended 31 December 2017

Net revenue expenditure  Notes  2017 £

Original budget  18  804,400 Adjustments  18  1,200 Final budget  18  805,600 Actual on comparable basis  770,000 Performance difference  35,600

Notes to the financial statements 1 General Information

These financial statements were authorised for issue by the Comptroller and Auditor General on 19 September 2018.

The Comptroller and Auditor General is a corporation sole established by the States of Jersey under the Comptroller and Auditor General (Jersey) Law 2014. The financial activities of the Office of the Comptroller and Auditor General are included within the financial statements of the States of Jersey.

The Office of the Comptroller and Auditor General's principal activity is serving as a supreme audit institution for Jersey and is located in Jersey.

The financial statements cover the individual entity as no other entities have been identified for inclusion within the financial statements in accordance with applicable accounting standards.

2 Statement of compliance and basis of preparation

The financial statements have been prepared in accordance with and comply with International Public Sector Accounting Standards (IPSAS). The financial statements are presented in pounds sterling which is the functional and reporting currency of the Office of the Comptroller and Auditor General and all values are rounded to the nearest one hundred pounds.

The financial statements are prepared on the basis of historical cost unless otherwise stated. The financial statements are prepared on an accruals basis.

3 Summary of significant accounting policies

1. Reporting financial performance

The expenses of the Office of the Comptroller and Auditor General are directly met by the States of Jersey and no cash or equivalent is advanced to the Office of the Comptroller and Auditor General. Therefore:

• these financial statements include a Statement of Comprehensive Net Expenditure as the Office of the Comptroller and Auditor General receives no income;

• the Statement of Financial Position includes Receivables from non-exchange transactions representing the amounts payable by the States of Jersey's Social Security Funds to meet the liabilities of the proportion of the costs of the audit of the financial statements of the States falling on the Social Security Funds;

• the Statement of Financial Position includes Receivables from non-exchange transactions representing the amounts payable by the States of Jersey's Consolidated Fund to meet the liabilities of the Comptroller and Auditor General; and

• no Cash Flow Statement is prepared as there are no cash flows specifically attributable to the Office of the Comptroller and Auditor General.

2. Recognition of expenditure

Expenditure in respect of fees for the audit of the annual financial statements of the States of Jersey and the Office of the Comptroller and Auditor General are recognised in the period to which the financial statements relate. Expenditure is stated net of the amount falling on the Social Security Funds as full responsibility for the portion of the cost of the audit of the Social Security Funds rests with the Social Security Funds and the Comptroller and Auditor General is acting as an agent in respect of this amount.

Expenditure in respect of fees for other work undertaken for the Office of Comptroller and Auditor General is recognised in the period in which the service is provided.

Expenditure is reported net of Goods and Services Tax.

3. Property, plant and equipment

The Office of the Comptroller and Auditor General's policy is to recognise property, plant and equipment in the financial statements at cost less accumulated depreciation where the cost of an individual item or group of items exceeds £10,000. No such items were held at 31 December 2017 (or 31 December 2016).

4. Leases

Operating leases are leases that do not transfer substantially all the risks and benefits of ownership of the leased item to the Office of the Comptroller and Auditor General. Operating lease payments are recognised as an operating expense on a straight-line basis over the lease term.

5. Provisions

Provisions are recognised when the Office of the Comptroller and Auditor General has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The Office of the Comptroller and Auditor General does not recognise contingent liabilities but discloses details of any contingencies in the notes to the financial statements, unless the possibility of an outflow of resources embodying economic benefits or service potential is remote.

The Office of the Comptroller and Auditor General does not recognise contingent assets but discloses in the notes to the financial statements details of any possible assets whose existence is contingent on the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Comptroller and Auditor General.

6. Employee benefits

The Office of the Comptroller and Auditor General received the services of a member of staff employed by the States of Jersey who is a member of the Public Employees' Contributory Retirement Scheme (PECRS). The costs of that member of staff are included in the Statement of Comprehensive Net Expenditure.

Retirement benefits

The States of Jersey on behalf of the Office of the Comptroller and Auditor General made a fixed contribution to PECRS. Although PECRS plans to make specified payments to former employees in retirement, the Office of the Comptroller and Auditor General does not have any legal or constructive obligation to pay further contributions if PECRS does not hold sufficient assets to pay employee benefits relating to employee service in the current or prior periods. The contributions to PECRS are therefore charged in the year in which they become payable.

Short-term employee benefits

The cost of short-term employee benefits, such as payment for annual leave, is recognised in the period in which the employee provides the related service.

7. Related parties

The Comptroller and Auditor General regards a related party as a person or entity with the ability to exercise significant influence over the Office of the Comptroller and Auditor General.

8. Changes in accounting policies and estimates

The Comptroller and Auditor General recognises the effects of changes in accounting policy retrospectively. The effects of changes in accounting policy are applied prospectively if retrospective application is impractical.

There are no changes in accounting policy compared with the financial statements for the year ended 31 December 2017. However, the Comptroller and Auditor General has disclosed in Note 15 segmental information that, on grounds of materiality, was not disclosed in the financial statements for the year ended 31 December 2016.

The Office of the Comptroller and Auditor General recognises the effects of changes in accounting estimates prospectively by including them in net expenditure.

9. Classification of expenses

The Office of the Comptroller and Auditor General adopts an expenditure classification that is relevant to the circumstances of the Office.

A change in classification of expenses has been adopted for the year ended 31 December 2017: expenditure on the audit of the accounts of the Office of the Comptroller and Auditor General is now presented as a separate head in the Statement of Comprehensive Net Expenditure rather than within Other costs: General. To preserve comparability, the figures for expenditure for the year ended 31 December 2016 are stated on both the previous and new bases.

10. Budget information

The annual budget for the expenditure of the Office of the Comptroller and Auditor General is prepared on the basis of near cash' expenditure as defined in the Jersey Financial Reporting Manual (which is based on European Union-adopted International Financial Reporting Standards). The budget classification used is that adopted by the States of Jersey.

11. Significant judgements and sources of estimation uncertainty

The preparation of the financial statements of the Office of the Comptroller and Auditor General in conformity with IPSAS requires management to make judgements, estimates and assumptions that affect the reported amounts of expenses, assets and liabilities, and the disclosure of any contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

In the process of applying the accounting policies, the Comptroller and Auditor General has made judgements which have an effect on the amounts recognised in the financial statements. The most significant judgements relate to:

• the accounting policy for the recognition of expenditure on fees for the audit of the States of Jersey disclosed in Note 3 b) above;

• the accounting policy for audit fees in respect of the States of Jersey Social Security Funds disclosed in Note 3 b) above; and

• the accounting policy for retirement benefits disclosed in Note 3 f) above.

The Comptroller and Auditor General has identified an assumption concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, as described below. The Comptroller and Auditor General based her assumptions and estimates on parameters available when the financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to circumstances arising beyond the control of the Comptroller and Auditor General. Such changes are reflected in the assumptions when they occur.

Restructuring provisions were raised and the Comptroller and Auditor General determined an estimate based on the information available. Additional disclosure of the estimate of the provisions is included in Note 10. The provisions are measured at the Comptroller and Auditor General's best estimate of the expenditure required to settle the obligations at the reporting date.

12. New IPSAS

The Comptroller and Auditor General has determined that the following IPSAS for which first time adoption is required for financial periods beginning on or after 1 January 2018 but early adoption is permitted is not relevant to these financial statements:

• IPSAS 40 Public Sector Combinations.

Whilst IPSAS 39 Employee Benefits is relevant to the financial statements of the Office of the Comptroller and Auditor General, the Comptroller and Auditor General has determined that its adoption will have no impact on the reported financial position or performance of the Office.

4  Employee and similar costs: other  

2017  2016

£ £

Deputy Comptroller and Auditor General  87,300  69,400 Affiliates  75,300  98,800 States employee and communication &  148,500  102,000

administrative support

311,100  270,200

The staff costs for the States employee includes an employer contribution of £10,900 (2016: £5,600) to the Public Employees' Contributory Retirement Scheme.  

5  Other costs: audit of States' accounts

This expenditure is stated net of a charge to the States of Jersey's Social Security Funds of £60,000 (2016: £58,200).  

6  Other costs: general

2017  2016  2016

(Re- (As classified)  previously classified)

£ Other professional services bought in  2,900 ICT support  4,300 Communications  2,400

Travel and accommodation: Chairman of

the Board of Governance  600 Travel and accommodation: Comptroller  6,900

and Auditor General

Travel and accommodation: Deputy  4,600 Comptroller and Auditor General

Travel and accommodation: other  7,700

Audit of the accounts of the Office of the Comptroller and Auditor General

Administration  1,300 30,700

£ £

-  -

(3,400)  (3,400)

3,500  3,500

100  100 8,600  8,600

4,200  4,200 10,100  10,100

4,000

800  800 23,900  27,900

7  Other costs: accommodation-related  

2017  2016

£ £

Premises and maintenance  20,000  14,700 Printing and stationery  900  1,000 20,900  15,700

8  Trade receivables from exchange transactions  

2017  2016

£ £

Prepayments  5,000  5,200 5,000  5,200

9  Trade payables from exchange transactions  

2017  2016

£ £

Trade payables  90,600  15,600 Accruals  306,800  309,300 397,400  324,900

Trade payables are non-interest bearing and are normally settled on 30-day terms.

10  Provisions  

Current  Non- Total provision  current  provisions provision

£ Balance at 1 January 2017  0  0  0 Provision raised  20,700  23,800  44,500 Balance at 31 December 2017  20,700  23,800  44,500

The provisions relate to a restructuring of the operations of the Office undertaken in the course of the year and was calculated on the basis of the Comptroller and Auditor General's assessment of the most likely amount and timing of payments necessary to discharge contractual obligations. Uncertainty is related to the actual amounts and timing of sums necessary to discharge those contractual obligations.

11  Financial instruments – financial risk management

The fair value of receivables from exchange transactions is equal to their carrying value due to the short-term maturities of these instruments.

As the Office of the Comptroller and Auditor General has no assets arising from exchange transactions, the Office of the Comptroller and Auditor General is not exposed to any credit risk.

As the States of Jersey meet the liabilities of the Office of the Comptroller and Auditor General, the Office of the Comptroller and Auditor General is not exposed to any liquidity risk.

As the Office of the Comptroller and Auditor General does not enter into any contracts for supply of goods or services not denominated in sterling, the Office of the Comptroller and Auditor General is not exposed to any currency risk.

As the Office of the Comptroller and Auditor General does not have any interest- bearing assets or liabilities, the Office of the Comptroller and Auditor General is not exposed to any market risk.

12  Related party disclosures  

Terms and conditions of transactions with related parties

Peter Price is engaged as Chairman of the Board of Governance, Karen McConnell is engaged as Comptroller and Auditor General and Stephen Warr en is engaged as Deputy Comptroller and Auditor General on a self-employed basis. Purchases from Peter Price , Karen McConnell and Stephen Warr en are made at terms equivalent to those that prevail in arm's length transactions. Outstanding balances at the year end are unsecured, interest-free and settled in cash. There have been no guarantees provided or received from any related party payable.

Key management personnel

The key management personnel, as defined by IPSAS 20 Related Party Disclosures, comprise Karen McConnell, as Comptroller and Auditor General, a corporation sole established by Article 2 of the Comptroller and Auditor General (Jersey) Law 2014 and Stephen Warr en, Deputy Comptroller and Auditor General, who is empowered under Article 16 of the Comptroller and Auditor General (Jersey) Law 2014 to discharge the functions of Comptroller and Auditor General in Karen McConnell's absence. Karen McConnell and Stephen Warr en are engaged on a self-employed basis and total expenditure on their engagement is reported in the Statement of Comprehensive Net Expenditure.

States of Jersey

Article 9 of the Comptroller and Auditor General (Jersey) Law 2014 places a duty on the States to ensure that the Comptroller and Auditor General is provided with sufficient resources to perform her functions. Article 50 of the Public Finances (Jersey) Law 2005 placed a duty on the Chief Minister to ensure that the Comptroller and Auditor General is provided with sufficient resources to perform her functions.

The duty to ensure that sufficient resources are provided is discharged by the States meeting the costs of Office of the Comptroller and Auditor General.

States of Jersey Social Security Funds

The Social Security Fund, Social Security (Reserve) Fund, Health Insurance Fund and Long-Term Care Fund established by the States of Jersey meet the portion of the cost of the audit of the States' accounts relating to those Funds.

13 Operating lease payments

Future minimum lease payments under an operating lease relate to office accommodation and associated equipment and amount to £78,439 (2016: £6,600), £20,462 (2016: £6,600) of which is payable within one year, with the remaining £57,977 (2016: £0) being payable between 2 to 5 years inclusive.

Lease payments recognised as an expense during the period amounted to £19,200 (2016: £13,600).

14 Contingent liabilities

At the end of the financial year the Office of the Comptroller and Auditor General had no contingent liabilities (31 December 2016: nil).

15 Segment information

For management purposes the Office of the Comptroller and Auditor General is treated as comprising only two business units - one covering the governance of the Office of the Comptroller and General and one covering all other expenditure.

Expenditure attributable to the governance business unit comprises:

• the remuneration and expenses of the independent members of the Board of Governance established under the Comptroller and Auditor General (Board of Governance) (Jersey) Order 2015;

• a proportion of the remuneration of the Comptroller and Auditor General reflecting the time spent preparing for and attending meetings of the Board;

• a proportion of the remuneration of the Deputy Comptroller and Auditor General reflecting the time spent in his capacity as Secretary of the Board;

• the fee for the audit of the accounts of the Office of the Comptroller and Auditor General; and

• other costs directly related to the work of the Board.

The Office of the Comptroller and Auditor General operates in only one geographic location and therefore no segments are monitored geographically.

Reportable segments 2017

General  Governance  Total operations

£ £  £

Segment expenses  

Employee and similar costs: Chairman

of the Board of Governance  2,000  2,000 Employee and similar costs:  91,700  2,300  94,000

Comptroller and Auditor General

Employee and similar costs: other  301,800  9,300  311,100

Other costs: audit of the accounts of

the States of Jersey  307,200  307,200 Other costs: audit of the accounts of  4,100  4,100

the Office of the Comptroller and

Auditor General

Other costs: general  28,800  1,900  30,700 Other costs: accommodation-related

20,900  20,900 Total comprehensive net

expenditure  750,400  19,600  770,000

Other information

Segment assets  437,700  4,200  441,900 Segment liabilities  437,700  4,200  441,900

Reportable segments 2016

General  Governance  Total operations

£ £  £

Segment expenses

Employee and similar costs: Chairman of the Board of Governance

Employee and similar costs: Comptroller and Auditor General

Employee and similar costs: other

Other costs: audit of the accounts of the States of Jersey

Other costs: audit of the accounts of the Office of the Comptroller and Auditor General

Other costs: general

Other costs: accommodation-related

Total comprehensive net expenditure

Other information Segment assets Segment liabilities

600  600 84,900  600  85,500 268,300  1,900  270,200

298,300  298,300

4,000  4,000 23,100  4,800  23,900

15,700  15,700 690,300  7,900  698,200

319,700  5,200  324,900 319,700  5,200  324,900

16  Events after the reporting period

There are no material non-adjusting events after the reporting date.

17  Reconciliation of performance against budget to Statement of

Comprehensive Net Expenditure

There is potential for differences between the financial performance of the Office of the Comptroller and Auditor General reported in the Annex to the Financial Report and Accounts of the States of Jersey and that reported in these financial statements as a result of:

• use of a different definition of expenditure;

• use of different accounting policies;

• use of different estimation procedures;

• use of a different unit of rounding; and

• adoption of financial statements on different dates.

Performance against budget for the year ended 31 December 2017 can be reconciled as follows:

2017 £

Near cash expenditure for the Office of the Comptroller  759,000 and Auditor General reported on page 78 of the

Financial Report and Accounts of the States of Jersey

Plus: Increase in restructuring provision to reflect improved  9,300 information

Plus: Other adjustments  1,700 Total comprehensive net expenditure  770,000

18  Differences between original budget, final budget and actual

Original budget 2017' represents the sum for the year ended 31 December 2017 included in the Medium Term Financial Plan as Amended, approved by the States Assembly on 1 December 2016.

Final budget 2017' shows an in-year budget adjustment for the year ended 31 December 2017 notified by the Treasurer of the States to the Comptroller and Auditor General in April 2018. The increase in budget over that in the Medium Term Financial Plan reflects an uplift in budget to reflect pay awards for 2017.

The budget is prepared on an accruals basis using the States of Jersey budget classification.

Budget and actuals cover the activities of the Office of the Comptroller and Auditor General.

The principal reasons for the variance of actual performance against budget are lower than budgeted expenditure on:

• Employee and similar costs: other; and

• Other costs: general.