OFCOM - Annual Report 2005-2006

7/29/2019 OFCOM - Annual Report 2005-2006

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Heading


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Statement of Accounts and Corporate Governance | Section D

Statement ofAccounts and

Corporate

Governance


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Report of the Board

The Board presents its Report and the audited financial

statements for the year ended 31 March 2006.

Statement of Accounts

This Statement of Accounts has been prepared in accordance

with Schedule 1 of the Office of Communications Act 2002 and

as directed by the Secretaries of State for Trade and Industry

and for Culture, Media and Sport. The Accounts cover the

period from 1 April 2005 to 31 March 2006.

Principal activities

Ofcom is a statutory corporation without shareholders,

established under the Office of Communications Act 2002.

Ofcom is empowered, under the Communications Act 2003, to

regulate and license television, radio, the use of the radio

spectrum and telecommunications in accordance with the duties

imposed upon it under the Act.

Operating and Financial Review

The Chairmans Message on pages 2 to 3, the Chief

Executives Report on pages 4 to 9 and the Operating and

Financial Review on pages 65 to 87 form part of this Report and

provide information on the activities of Ofcom during the year.

The financial statements of Ofcom are set out on pages 126 to

153

External auditors

The Comptroller and Auditor General, whose staff is the

National Audit Office (NAO), is appointed as Ofcoms external

auditor under the Office of Communications Act 2002. The cost

of the statutory audit for 2005/6 was 90,000.

In so far as the Accountable Officer is aware, there is no

relevant audit information of which Ofcoms auditors are

unaware, and the Accountable Officer has taken all the steps

that he ought to have taken to make himself aware of any

relevant audit information and to establish that Ofcoms auditors

are aware of that information.

The Board

The Board has full responsibility for deciding and operating

Ofcoms affairs. The details of the Board Members are set out

on pages 94 and 95. Details of Members remuneration are set

out on pages 116 to 122.

Members interests

Ofcom embraces full disclosure of Members interests. The

details of these can be found online at www.ofcom.org.uk .

Post balance sheet events

There have been no significant post balance sheet events

between the end of the period under review and the date of

issue of this Annual Report and Accounts.

Foreword


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Ofcom mission and values

Ofcoms commitment to its mission and values is shared by

Board Members and Ofcom colleagues. The purpose of the

shared mission and values is to ensure each Board Member

and colleague undertakes Ofcoms work by reference to a clearset of core values which include:

a commitment to colleagues, including a positive working

culture and dedication to diversity;

a commitment to be dynamic, responsive and commercially

aware; and

a commitment to incisive thinking, rigorous evidence-based

analysis and engagement with stakeholders.

Colleague involvement and consultation

The quality, commitment and effectiveness of Ofcom colleaguesare crucial to its success. Colleague involvement is actively

encouraged as part of all Ofcoms day-to-day processes.

Ofcom specifically informs and consults its colleagues through:

the Ofcom Colleague Forum, an information and

consultation forum which is made up of representatives of

colleagues from across Ofcom and which meets regularly

with senior management at Joint Consultative Group

meetings;

the Ofcom intranet, which is available to all colleagues in

all of Ofcoms offices;

presentations hosted by senior managers during which

new strategic initiatives are explained to colleagues and

updates are provided regarding continuing projects;

regular inter-group meetings both to listen to colleagues

and to disseminate information;

regular messages from the Chief Executive; and

an annual all-colleague event to review progress and the

year ahead.

Additionally, Ofcom signed a recognition agreement with

BECTU and Prospect, who work together as one body the

Partner Union.

Employment policies, performance developmentand public sector duties

As a public body, Ofcom has a number of statutory duties

placed upon it relating to social responsibility. These include

specific duties aimed at promoting equality and diversity and

general duties which include considering the environmental

impact of its policies.

Ofcom is an equal opportunities employer and recruits

colleagues regardless of age, gender, cultural and ethnic

background, disability, religion or belief and sexual orientation.

Ofcom is committed to building an organisation where all

colleagues are treated fairly, with dignity and respect and has

developed a range of policies which are consistent with the

requirements of employment law, and in particular with

legislation aimed at eliminating discrimination including the

Race Relations (Amendment) Act 2001, the Disability

Discrimination Act 1995 and, in relation to activities in Northern

Ireland, section 75 of the Northern Ireland Act 1998.

During 2005/6 Ofcom continued to roll out its integrated

diversity policy, designed to deliver equality of opportunity in all

areas of employment, including development and promotion. All

managers and colleagues attended a diversity workshop as part

of a programme of diversity training designed specifically for

Ofcom. In May 2005 Ofcom published the final version of itsRace Equality Scheme which sets out how Ofcom as an

employer will promote equal opportunities among different racial

groups and how as a regulator it will ensure its policies do not

discriminate against any racial group. In September 2005 the

Equality Commission for Northern Ireland approved Ofcoms

Equality Scheme, which requires Ofcom to conduct impact

assessments in relation to its policies and their potential impact

on nine designated groups in Northern Ireland.


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Ofcom has also published a Welsh Language Scheme that

clarifies which of its documents will be made available in Welsh.

Ofcom has an internal whistle-blowing policy setting out the

procedure colleagues should follow if they wish to raise a

concern about malpractice within the organisation.

Ofcom has a performance management process to ensure

colleagues agree clear objectives for both performance and

their ongoing development. The number of development

activities delivered across the organisation during the period

exceeded 400.

Statement on health and safety policy and practice

Ofcom now has an established health and safety committee

which reviews health and safety policy. Policy and performance

are reviewed annually to ensure colleagues are unharmed by

their work. For example, during the reporting period Ofcomimplemented postural assessment for all computer users.

Ofcom has a dedicated Member of the Executive Committee

(ExCo) specifically responsible for safety, and during the year

Ofcom appointed an occupational health adviser.

Colleagues at all levels are involved in prioritised risk

management, and particularly high-risk activities are reviewed

internally for example in Field Operations, substantial

progress has been made against the top two risks: driving and

work on dangerous rooftops.

Data protectionOfcom is a Data Controller under the Data Protection Act 1998

(the Act) and is committed to processing all personal data in a

manner which meets the requirements of the Act, including the

data protection principles. Ensuring compliance with the data

protection standards is not simply an issue of operating within

the law; it is also about the effective handling of personal data

and respecting the interests and rights of individuals. It is for

these reasons that Ofcom has undertaken an internal

awareness campaign to ensure all colleagues understand their

responsibilities to comply with good information handling

practice. Ofcom is also in the process of reviewing policies and

processes for collecting and holding personal data, to ensure

that it is fully compliant with the Act and that Ofcom

communicates these policies and processes effectively with

those whose data it holds.

Freedom of Information

Under the Freedom of Information Act 2000 which established a

general right of access to all types of recorded information held

by public authorities, Ofcom has continued via its publication

scheme to make a wide range of information readily accessible

on its website. Ofcom received 835 requests for information

between 1 April 2005 and 31 March 2006 and in keeping with

the Acts purpose to foster a culture of openness Ofcomprovided information requested in 87 per cent of cases.

Foreword


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Going concern

Based on normal business planning

and control procedures, the Board has

a reasonable expectation that Ofcom

has adequate resources to continue in

operational existence for the

foreseeable future. For this reason, the

Board continues to adopt the going

concern basis for preparing the financial

statements.

David Currie

Chairman

Stephen A CarterChief Executive

27 June 2006

Charitable donations

Ofcom has chosen to play a positive role

in the London locality of its headquarters.

Within the Borough of Southwark, Ofcom

has chosen the St Mungos organisation

for the homeless as its nominated

voluntary organisation.

The Ofcom Board has decided that it

would not be appropriate for executives

to retain gifts with a value greater than

25; instead, organisations wishing to

make a courtesy gift to an Ofcom

executive (for example, a speakers fee)

are requested to pay the equivalent as a

charitable donation to St Mungos.

The relationship with St Mungos was

formalised in December 2003; by the end

of the period under review Ofcom had

passed almost 6,500 in charitable

donations to the organisation.

Thanks to Ofcom's continuing

commitment St Mungo's is able to help

thousands of homeless men and women

off the street and hundreds of people

back into work every year.

Charles FraserChief Executive

St Mungos


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Millie Banerjee CBE (age 60)

Millie Banerjee CBE is a Non-Executive

Member of Ofcom. She is the Chair

of Postwatch, the Chair of the

Carnegie UK Trust and a Member

of the Advisory Board of the Tanaka

Imperial College Business School.

Millie Banerjee is Chairman of the

Remuneration Committee.

Stephen A. Carter (age 42)

Stephen Carter is the Chief Executive

of Ofcom. He is the organisations

Accountable Officer and Chair of the

Executive Committee. Previously he was

Managing Director and Chief Executive

at J. Walter Thompson UK Limited and

MD and Chief Operating Officer of NTL

UK & Ireland. He is a law graduate from

Aberdeen University and completed the

Harvard Business Schools Advanced

Management Programme (A.M.P. 152)

in 1997. He is the current Chairman of

the Marketing Group of Great Britain, a

Non-Executive Director of Travis Perkins

PLC, a Governor of the Ashridge Business

School, and a Vice President of UNICEF.

David Currie (age 59)

David Currie is the Non-Executive Chairman

of Ofcom. David has been Dean of Cass

Business School at City University since

January 2001. He was Professor of Economics

at London Business School from 1988 to

2000 and Deputy Dean from 1992 to 1995

and again in 1999-2000. He is Chairman

of Independent Audit and a Board member

of the Dubai Financial Services Authority.

He sits on the cross-benches in the House

of Lords as Lord Currie of Marylebone.

David Currie is a Member of the Audit and

Remuneration Committees of Ofcom.

Stephanie Liston (age 48)

Stephanie Liston is a Non-Executive Member

of Ofcom, appointed on 1 September

2005. She is a Corporate Partner in Howes

Percival, Norwich. A qualified lawyer in

the US and the UK, she is co-chairman of

the Communications Committee of the

International Bar Association and co-

founder and chair of Women in Telecoms

and Technology. She has more than 15years of experience advising on strategic

regulatory issues, contractual negotiations

and commercial transactions in the UK

and international communications and

technology sector.

Kip Meek (age 51)

Kip Meek is an Executive Member of Ofcom

and Chief Policy Partner. Prior to joining

Ofcom, he was Managing Director of

Spectrum Strategy Consulting, and one of its

two founders. His consulting career focused

on major decisions in the communications

industry, particularly those that involved

integration of the media, telecommunications

and information sectors.

The Ofcom Board


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Phillip Graf CBE (age 59)

Philip Graf was appointed Non-Executive

Deputy Chairman of Ofcom in November

2005. Philip Graf joined the Liverpool Daily

Post and Echo in 1983, which became

Trinity International Holdings in 1985. He

subsequently became Chief Executive in

1993. He became Chief Executive of Trinity

Mirror Group when the company merged

with the Mirror Group in 1999 a position

he held until February 2003. He is a former

Chairman of the Press Standards Board of

Finance and of the Broadband Stakeholder

Group. He is currently a partner with Praesta

Partners LLP and a non-executive director

of Archant Limited. He is Chairman of the

Content Board and is a Member of the

Remuneration and Audit Committees.

Sara Nathan (age 50)

Sara Nathan is a Non-Executive Member

of Ofcom. She is also a member of the

Judicial Appointments Commission and

chairs the Animal Procedures Committee

for the Home Office. She is also on the

Regulatory Decisions Committee, Financial

Services Authority and a Member of ICSTIS,

the premium rate regulator. Sara Nathan is

a member of the Audit Committee.

Ed Richards (age 40)

Ed Richards is the Chief Operating

Officer for Ofcom and the Senior Partner,

Strategy and Market Developments. He

was previously Senior Policy Advisor to

the Prime Minister for media, telecoms,

internet and e-government. He has

been Controller of Corporate Strategy

at the BBC and worked in consulting

at London Economics Ltd. He is a Non-Executive Board Member of the Donmar

Warehouse Theatre.

Sean Williams (age 43)

Sean Williams is an Executive Member

of Ofcom and Competition Partner,

responsible for the development and

enforcement of Ofcoms economic

regulation and competition policies in

communications markets. He is also a Non-

Executive Director of Williams Lea Holdings

PLC. Previously he was a partner of LEK

Consulting, a strategy consulting firm,from 1997 to 2003, where he advised on

competition and business strategy issues,

and a special advisor in the Prime Ministers

Policy Unit from 1995 to 1997.

Stephanie Liston joined the Board

as a Non-Executive Member

on 1 September 2005

Richard Hooper CBE was Non-Executive

Deputy Chairman of Ofcom and

Chairman of the Content Board until

his retirement on 31 December 2005

Philip Graf joined the Board as

Non-Executive Deputy Chairman of

Ofcom and Chairman of the Content

Board on 1 January 2006

Sean Williams joined the Board as an

Executive Member on 1 January 2006

Ian Hargreaves (age 55)

Ian Hargreaves is a Non-Executive

Member of Ofcom. Since January 2003,

he has been Director of Corporate

and Public Affairs at BAA plc, but has

retained his position as Professor of

Journalism at Cardiff University. He

is a regular contributor to Radio 4.

Ian Hargreaves is Chairman of the

Radio Licensing Committee.


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The Combined Code on Corporate Governance, appended to

the Listing Rules of the Financial Services Authority, is a set of

principles of good governance and a code of best practice.

The Combined Code does not apply to Ofcom as Ofcom is an

independent statutory corporation. However, its principlesprovide a useful benchmark for all bodies wishing to make a

statement about their corporate governance performance.

Ofcom has complied with the main principles of the Combined

Code during the period 1 April 2005 until 31 March 2006; it has

adopted the principles of the Code where it was either capable

of doing so, or it was appropriate to do so, given its status as an

independent statutory corporation.

Board Members remuneration

Details of Members remuneration are set out on pages 116 to

122.

Board

The Ofcom Board comprises both Executive and Non-Executive

Members. The Chairman and Non-Executive Members of the

Ofcom Board are appointed jointly by the Secretaries of State

for Trade and Industry and for Culture, Media and Sport for a

period of up to five years. In this capacity the Departments have

effectively carried out the role of a Nominations Committee for

the Non-Executive Members of Ofcom. Executive Members to

the Board are appointed by the Chairman and all of the

independent Non-Executive Members. Members biographical

details are set out on pages 94 and 95.

Ofcom has adopted a unitary Board model. The Board consists

of six Non-Executive Members including the Chairman, who is

responsible for running the Board, and four Executive Members

including the Chief Executive. The Board is responsible and

accountable for the discharge of Ofcoms statutory functions

and provides strategic leadership and manages overall control

of Ofcoms activities. Members duties and responsibilities are

set out in a Members Code of Conduct. A register of Members

interests is available on the Ofcom website.

For the purposes of compliance with the Combined Code:

the Board considers all of the Non-Executive Members to

be independent of management and free of any business

or other relationship which could materially interfere with

the exercise of their judgement;

the Board believes that the Members have, between them,

a wide range of experience which ensures an effective

Board to lead and control Ofcom;

the Non-Executive Members comprise a majority of the

Board. Millie Banerjee is regarded as being the senior Non-

Executive Member for the purposes of the Combined

Code;

on appointment all Members are given a full induction on

their responsibilities and thereafter receive furtherguidance and briefings as and when required;

the Board meets at regular intervals during the year. The

Board reserves certain matters to itself but otherwise

delegates specific responsibilities to senior managers and

committees. The role of executive management is to

implement Board policies. The work of both the Board and

Executive is informed by the contributions of a number of

advisory bodies;

the Board is supplied in a timely manner on a regular basis

with information in a form and of a quality appropriate to

enable it to discharge its functions; and

all Members have access to the Secretary to the

Corporation, who is responsible to the Board for ensuring

that correct rules and procedures are followed. All

Members have access to advice from independent

professionals at Ofcoms expense.

The Board undertook an evaluation of its performance during

February 2006.

Corporate Governance


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In general terms, the Chairman manages the Board to ensure

that:

Ofcom has appropriate objectives and an effective

strategy;

the Chief Executives team is able to implement the

strategy;

there are procedures in place to inform the Board of

performance against objectives; and

Ofcom is operating in accordance with the highest

standards of corporate governance.

As a statutory corporation, the principles and provisions of the

Combined Code in respect of relations with shareholders are

not directly applicable; however, Ofcoms Annual Report is sent

to the Department of Trade and Industry which lays copies of it

before each House of Parliament, to which Ofcom is

accountable.


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In the exercise of its powers under the Office ofCommunications Act 2002, the Board delegatescertain of its responsibilities to the executiveswithin Ofcom and certain responsibilities to Board

Committees with clearly defined authority andterms of reference. The composition and mainfunctions of these Committees are describedbelow.

The Executive Committee

The Executive Committee (ExCo) was established in April

2004 and is the senior management team responsible for

running Ofcom. It is responsible for the management of the

overall direction and strategy of the organisation, including the

setting of internal organisational priorities, the management of

Ofcoms operational resources and activity and the review of

major projects. ExCo meets weekly. The members of ExCo

during the year were:

Stephen A Carter (Chairman)

Rona Chester

Robin Foster (resigned 31/07/05)

Graham Howell

Peter Ingram

Sandra Jenner (resigned 31/01/06)

Kip Meek

Dominic Morris CBE

Peter Phillips (appointed 13/03/06)

Ed Richards

Philip Rutnam

Tony Stoller CBE (retired 31/01/06)

Tim Suter

Sean Williams

Other senior Ofcom colleagues are invited to attend meetings of

ExCo on an ad-hoc basis.

The Content Board

The role and remit of the Content Board is set out in the report

from the Chairman of the Content Board on pages 10 to 13. The

Content Board meets monthly and held 12 meetings during the

year. The Members of the Content Board during the year were:

Richard Hooper CBE (Chairman, resigned 31/12/05)

Philip Graf CBE (Chairman, appointed 01/01/06)

Sara Nathan (Deputy Chairman)

Sue Balsom

Floella Benjamin OBE

Kevin Carey

Jonathan Edwards CBE (resigned 28/02/06)

Pam Giddy

Rosemary Kelly (resigned 28/02/06)

Matthew MacIver

Kip Meek

Adam Singer

Tim Suter

Kath Worrall

Non-Executive Members of the Content Board were appointed

for an initial extended period of three years and two months

until June 2006. A recruitment and re-application process for

the appointment of Members to the Content Board concluded in

July 2006. Kip Meek and Tim Suter are the only Executive

Members of the Content Board.

Board Committees


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The Audit Committee

The Audit Committee comprises three Non-Executive Members

of the Ofcom Board and an independent external non-executive

Chair. The members of the Audit Committee during the year

were:

Anne Bulford (Chairman, resigned 30/06/05)

Peter Teague (Chairman, appointed 18/10/05)

David Currie

Richard Hooper CBE (resigned 31/12/05)

Philip Graf CBE (appointed 1/1/06)

Sara Nathan

Peter Teague, the external independent Chair, is a qualified

chartered accountant and satisfies the requirement under the

Combined Code that one Member of the Committee has

relevant financial experience. The additional requirements of

the Combined Code are met to the extent that three Members

of the Committee are independent Non-Executive Members of

the Ofcom Board.

The Chief Executive, Chief Operating Officer and Finance

Director are invited to attend Committee meetings, as are the

internal and external auditors. The Chairman of the Audit

Committee reports the outcome of Audit Committee meetings to

the Ofcom Board through the Chairman of Ofcom, David Currie.

The main duties of the Audit Committee are to:

review and direct the internal audit function and the

appointment of the internal auditors;

review the nature and scope of the external audit and the

findings of the external auditors;

to monitor and review, on behalf of the Board, the

effectiveness of the systems of internal control and risk

management;

to monitor and review, on behalf of the Board, the integrity,

quality and reliability of the financial statements, Annual

Plan and Accounts;

to continually review the scope and results of both internal

and external audits; and

to approve the financial authority framework.

The internal audit function is carried out independently from

Ofcom by KPMG. The Audit Committee believes it is

appropriate for the internal auditors, in addition, to provide

Ofcom with specific advice on internal risks. The provision of

other services by KPMG to Ofcom is decided on a case-by-case

basis. The external audit function is carried out by the National

Audit Office.

Meetings are held not less than three times a year. The terms of

reference are available on the Ofcom website.

Peter Teague is paid 5,000 per annum for the provision of his

services as Chair of the Audit Committee. However, as Peter

was appointed during the year, he was actually paid 2,276 for

the period.

The Remuneration Committee

The Remuneration Committee consists of three Non-Executive

Members of the Ofcom Board. The members of the

Remuneration Committee during the year were:

Millie Banerjee CBE (Chairman)

David Currie Richard Hooper CBE (resigned 31/12/05)

Philip Graf CBE (appointed 01/01/06)

The Chief Executive and the HR Director attend meetings at the

invitation of the Remuneration Committee.

The Committee advises Ofcom on the remuneration and terms

and conditions of service for the Chief Executive, other

7/29/2019 OFCOM - Ann

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OFCOM - Annual Report 2005-2006