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 You are in:  Front Page > About Us > Annual Report
BBC World Service Annual Review 2001 | 2002
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4 Corporate governance
BBC World Service's commitment
The BBC, including BBC World Service, has an obligation under its Charter to apply the highest standards of corporate governance.
BBC World Service follows the seven principles of public life set out in the Nolan Committee reports on Standards in Public Life.
The Combined Code, issued by the London Stock Exchange in June 1998, sets out principles of good governance. BBC World Service voluntarily complies with the Combined Code to the extent it is applicable. The requirements of the Combined Code apply to BBC World Service with the following exceptions:
+ those requirements relating to shareholders
BBC World Service is not accountable to external shareholders. Rather, through the stewardship of the Governors, it is accountable to the FCO, to Parliament and to taxpayers.
+ those requirements relating to non-executive directors, remuneration and audit committees
The Governors consider that BBC World Service should comply with the Combined Code in a manner which is common practice for an entity whose parent is complying with it. Hence the Governors do not consider it appropriate for BBC World Service to have separate non-executive directors or remuneration and audit committees from those established by the BBC, or to disclose the remuneration of the members of the BBC World Service Management Board, except to the extent that this is required by the Companies Act 1985.
Details of how BBC World Service has applied the remuneration principles are covered separately within the remuneration report.
Board structure
The structure of the BBC World Service Management Board is shown on the Management Board page. As explained above, BBC World Service does not have any non-executive directors. However, the Management Board is represented on the BBC's Executive Committee and is accountable to the Governors who constitute the members of the Corporation and act as trustees for the public interest.
The Governors are appointed by the Queen on advice of ministers. They are appointed for a term of four years and are independent of BBC executive management. A register of interests of the Governors is maintained and may be inspected by written application to the Secretary of the BBC.
The Board of Governors refers some matters relevant to BBC World Service to its sub-committees as follows:
+ Audit Committee
+ Fair Trading Compliance Committee
+ Remuneration Committee
The Governors' World Service Consultative Group also provides the Governors with independent external advice on the range and quality of BBC World Service output.
During the year, the Chairman of the Governors conducted a review of the governance arrangements of the BBC. As a result, from 2 April 2002 the distinction between the roles and responsibilities of the Governors and the BBC Executive Committee has been clarified and enhanced. In particular, the Governance and Accountability department now provides greater independent support to the Governors.
The BBC World Service Management Board meets every two weeks. Other members of management attend as required.
A formal schedule of matters is reserved for Management Board decisions. This includes:
+ considering management structure and senior management responsibilities
+ agreeing membership and terms of reference of board committees and task forces and receiving minutes, reviewing decisions taken and deciding action on recommendations
+ agreeing contracts with major suppliers
+ deciding significant staff and industrial relations issues
+ agreeing business strategy
+ approving financial statements
+ approving annual budgets, subject to final approval by the Governors
+ agreeing a code of ethics and business practice, establishing an overall framework for proper controls
Management Board members are given appropriate documentation in advance of each Board meeting. The Management Board members have access to the advice and services of the BBC World Service Secretary who is responsible for ensuring that Board procedures are followed.
Relationship with Foreign and Commonwealth Office (FCO)
BBC World Service Broadcasting is primarily funded by parliamentary Grant-in-Aid received through the FCO. BBC Monitoring is funded by stakeholder subscriptions. The relationship between the FCO and BBC World Service is defined in the FCO/BBC World Service Broadcasting Agreement which sets out the aims and objectives of BBC World Service and provisions for performance assessment. The financial arrangement with the FCO is set out in the FCO/BBC World Service Financial Memorandum.
Accountability and internal control
Financial reporting and going concern

The respective responsibilities of the Governors, Management Board and the external auditors are set out in the report of the independent auditors.
A review of the financial position of BBC World Service is included in the financial review. This, together with the director's overview, provides an assessment of BBC World Service's performance and current position.
The going concern basis has been adopted in the preparation of the financial statements as the Governors and Management Board believe that BBC World Service will continue to receive adequate resources to continue its operations for the foreseeable future.
Internal control
The BBC World Service Management Board is responsible for maintaining an adequate system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable, and not absolute, assurance against material misstatement or loss.
The Governors and Management Board consider that there is an ongoing process for identifying, evaluating and managing significant risks faced by BBC World Service. This process has been in place for the year ended 31 March 2002 and up to the date of approval of this report and financial statements. As part of the BBC's overall risk management process it has been reviewed by the Governors and BBC Executive Committee and accords with the guidance set out in the ICAEW's guidance for directors Internal Control: Guidance for directors on the Combined Code.
The key control procedures operating during the year are described below:
+ risk management
The Management Board is responsible for identifying and managing risk on an ongoing basis. BBC World Service has a formally constituted Internal Control Committee (ICC), comprising the members of the Management Board, World Service Financial Controller and a representative of BBC Internal Audit. The ICC meet three times a year to update their assessment of BBC World Service's exposure to risk, and the extent to which these risks are controlled.
+ monitoring of controls
BBC Internal Audit undertakes testing of control systems and compliance with core business processes, based on a regularly updated assessment of key risks and issues facing BBC World Service.
+ business unit controls
Management have defined the controls and procedures with which each business unit is required to comply. Key controls over major business risks include performance review and exception reporting. Reviews by BBC Internal Audit monitor the operation of controls.
+ business continuity
In common with other organisations, the events of September 11th led BBC World Service to review its arrangements for dealing with unplanned contingencies. The Controller, Distribution and Technology, has initiated a review of broadcasting contingency arrangements, including those in respect of overseas activities.
+ computer systems
BBC World Service has established controls and procedures over the security of data held on computer systems. Arrangements are in place for computer processing to continue and data to be retained in the event of failure of BBC World Service's own data processing facility.
+ controls over outsourced transaction processing
The majority of BBC World Service's financial transaction processing is outsourced to a service company, Medas, which is independent of the BBC. The Finance and Business Development Director has established monitoring procedures to review the performance of Medas on a regular basis. These include regular review by BBC Internal Audit in a programme of work based on a continuing assessment of key risks and issues.
+ whistle-blowing
The BBC has put in place a 'whistle-blowing' policy. This policy facilitates the anonymous communication to the BBC of any incident in which there is a suspicion that there has been wrongdoing. The process is administered by an independent external company to ensure anonymity. Each reported incident is investigated, a response communicated and action taken as appropriate.
+ financial reporting and controls
There is a comprehensive budgeting system with an annual budget approved by the Governors, prepared in line with the BBC World Service Three Year Plan. Monthly financial information is reported against budget figures, with corrective action being taken by the Management Board as appropriate. All capital expenditure over certain upper thresholds must be approved by a BBC investment approval committee and, in some cases, by the FCO and HM Treasury. In April 2001 BBC World Service successfully implemented new financial and business processes and software, as part of the BBC-wide SAP implementation.
Governors' Audit Committee
Matters relating to BBC World Service are also considered by the Governors' Audit Committee, which comprises four of the Governors.
The Audit Committee meets four times a year and is charged with reviewing the effectiveness of internal control; approving and monitoring the BBC Internal Audit work plan; considering issues arising from Internal Audit's work; reviewing management's response to internal control issues; approving the external audit fee; considering the external audit strategy and plans; reviewing the external auditors' reports; and reviewing and approving the financial statements.
The Audit Committee regularly reviews the independence of its external auditors, currently KPMG. The Committee holds discussions with the external auditors without management being present. The Committee reviews the nature and level of non-audit fees paid to KPMG. Any significant consulting work is put out to competitive tender. Recruitment from KPMG into any senior management position requires the prior approval of a member of the Audit Committee. The Committee also considers, with management, the performance of the external auditors each year and provides feedback to senior members of KPMG unrelated to the audit.
Statement of compliance with the Combined Code of Best Practice
BBC World Service has complied throughout the year ended 31 March 2002 with the specific provisions in section 1 of the Combined Code with the exception of those provisions relating to non-executive directors, remuneration and audit committees and shareholder requirements which, as discussed earlier, are not applicable to BBC World Service.
 
 
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