HBLB Levy Assessment
Reference As shown in our correspondence to you.
Secret
Password Sign In | Reset Password
Home 
 
Due to page inactivity you will shortly be signed out of this website - to prevent this please refresh this page.

Report of the Independent Accountant

Background

The annual Levy Scheme requires that the Form of Declaration (FOD) submitted by Category 1 Bookmakers, Category 3 Bookmakers and Category 4 Bookmakers must be accompanied by a Report by an Independent Accountant.

Category 2 Bookmakers are not required to provide an Independent Accountant's Report.

In autumn 2010 the Horserace Betting Levy Board commenced a review of the guidance given to the Independent Accountant who verifies the Bookmaker’s year end FOD to ensure that it fully reflected the growing trend for accountancy firms to restrict their non-statutory audit work to ‘Agreed upon Procedures’. 

Therefore, with effect from the 49th Levy Scheme, the Horserace Betting Levy Board replaced the guidance notes, which were worded quite generally, with more prescriptive procedures for the Independent Accountant to follow and report on. These ‘Agreed upon Procedures’ achieved uniformity in the verification procedures performed. It is worth highlighting that, in recommending these procedures, the Horserace Betting Levy Board took into consideration whether the requirements were significantly different to the type of work that the Independent Accountant might be expected to be performing in order to allow them to sign the report contained within the previous FOD. The Horserace Betting Levy Board concluded that the procedures should not necessitate more onerous testing than procedures derived from the pre-existing guidance. Furthermore the Horserace Betting Levy Board concluded that these procedures satisfied the terms of the Levy Scheme, which states that the Independent Accountant's Report “shall contain such information as the Chief Executive of the Board may reasonably require for the purposes of assessing and/or collecting the amount of levy due”.

The 'Agreed upon Procedures' were circulated to the Bookmakers’ Committee for comment prior to adoption and reflect many of the comments made by the Bookmakers' Committee. The procedures were reviewed again in November 2011 following initial user feedback and, consequently, minor adjustments were made to simplify or clarify the existing procedures. 

 

Failure to provide an Independent Accountant's Report

If a Bookmaker fails to provide an Independent Accountant's Report where such a report is required, that Bookmaker shall be deemed to have failed to submit a properly completed Form of Declaration in accordance with the rules of the Levy Scheme. In such circumstances the Chief Executive of the Board shall have power (but no obligation) to instruct an Independent Accountant to provide the required report. All costs and expenses reasonably incurred by the Board in connection with obtaining such a report shall be recoverable by, and due as a debt to, the Board from the relevant Bookmaker. On receipt of the required Independent Accountant's Report, the Board will issue a Notice of Assessment, or Certificate of Exemption, as applicable.

 

The Procedures, set out below, must be performed by the Independent Accountant in preparing his/her Report to the Horserace Betting Levy Board.

 

Agreed Upon Procedures for the Independent Accountant

This work is designed to be performed as an Agreed Upon Procedures (AUP) engagement in accordance with the International Standard on Related Services (ISRS) 4400 “Engagements to perform agreed-upon procedures regarding financial information”. We therefore request that any exceptions identified during the performance of these procedures are formally reported to HBLB as part of the completion of the Independent Accountant’s Report. If a particular test is not deemed to be relevant to the bookmaker, a statement to this effect must be included in the Report of the Independent Accountant.

 

Procedures for all Bookmakers

  1. State whether your firm act as the statutory auditors (in an independent engagement) for the company or group that has produced the Horserace Betting Levy Board (HBLB) Form of Declaration being reviewed.      
             
  2. Agree the total of British Horseracing Betting Business gross profit and Levy payable as shown on the Form of Declaration to the Levy Summary created by the bookmaker, including the split between all Betting Activities (i.e. Cash, Telephone, Internet, Betting Exchange business and On-Course trading).   
     
  3. Obtain a detailed breakdown of the back-up for the Levy Summary, including a list of all Licensed Betting Offices (LBOs), and check that the totals provided by Betting Activity agree to the Levy Summary. 
     
  4. Agree the mathematical accuracy of the gross profit breakdown provided by the bookmaker on the Levy Summary. 
     
  5. Identify the total number of LBOs that were trading for either a full year or only part of the year and agree these totals to the Form of Declaration. 
     
  6. For a sample of LBOs that only traded for part of the year (the lower of 5 LBOs or all of the bookmaker’s LBOs that only traded for part of the year), agreed to management's records the date they started or ceased trading and check that this has been properly reflected in the breakdown that supports the Levy Summary. 
     
  7. State whether the bookmaker has utilised the default percentage in the Levy calculation for their LBO shop or estate.

 

Procedures 8 to 13 - To be undertaken for a bookmaker where the gross profit on British Horserace Betting Business can be accurately determined from the bookmaker's accounting records

  1. For each Betting Activity other than LBOs, select one month and trace the total British Horserace Betting Business turnover and gross profit to management’s records. 
     
  2. EITHER:-

    9(a)    Perform a walkthrough of one British horseracing bet and one non-British horseracing bet, from the original betting transaction to management’s final gross profit data, agreeing the classification of the stake and payout within the gross profit data. (It is recognised that in performing this test the original betting transaction may/will be aggregated within the bookmaker’s accounting records.)

    OR:-

    9(b)    Review the internal controls over the completeness of turnover and determine whether they are adequate and test that they were operating during the Levy Period. Confirm that the accounting system provides a sound basis for recording turnover and gross profit on British Horserace Betting Business.
     
  3. Obtain an analysis of turnover and gross profit figures for British Horserace Betting Business by Betting Activity for the current and previous year to 31st March. Compare the trends observed in the analysis to expectations based on your knowledge of the business. Identify any differences to expectations and obtain explanations from management for any unusual or significant variations. (The Horserace Betting Levy Board would consider an unexpected variance of more than 10% of the total value to be significant.)
     
  4. Where a Betting Activity has started or ceased to be liable for Levy during the year: 

    (a) review the monthly turnover and gross profit figures to assess whether the trends seen are in line with expectations and explanations received from management; and

    (b) from winning British horseracing betting transactions select a sample of 5 bets placed on the day before the change and 5 placed on the day after the change. For each of the items selected, check that they have been properly included or excluded from the Levy calculation.
     
  5. For a sample of LBOs (as specified in the table below), agree their total British Horserace Betting Business turnover and gross profit to management’s records.

    Total number of LBOs operated by the bookmaker

    Sample size
    (subject to a minimum sample of 1 LBO)

    1 to19 50% of the LBO estate
    20 to 39 10 LBOs
    40 to 100 25% of the LBO estate
    Greater than 100 25 LBOs


     
  6. For the same sample of LBOs identified for Procedure 12 above, check that each LBO is appropriately classified as: 

    (a) being above or below the gross profit threshold; and

    (b) trading for the full year or part of the year.

 

Procedures 14 to 20 - To be undertaken for a bookmaker where the gross profit on British Horseracing Betting Business cannot be accurately determined from the bookmaker's accounting records

  1. In respect of those Betting Activities for which the bookmaker is unable to accurately determine the gross profit derived from British Horseracing Betting Business, confirm that the appropriate Default Percentage of the total gross profit (excluding machines) of each Betting Activity has been adopted in respect of British Horserace Betting Business.

    The Default Percentage is set towards the end of each Levy Scheme and in recent years has been set as follows:

    Levy
    Scheme
    Default
    Percentage
    54th 36%
    53rd 35%
    52nd 38%
    51st 38%
    50th 41%
    49th 39%

 

  1. For each Betting Activity other than LBOs, select one month and trace the total Betting Business turnover and gross profit to management’s records. 
     
  2. EITHER:-

    16(a)    Perform a walkthrough of one bet, from the original betting transaction to management’s final gross profit data, agreeing the classification of the stake and payout within the gross profit data. (It is recognised that in performing this test the original betting transaction may/will be aggregated within the bookmaker’s accounting records.)

    OR:-

    16(b)    Review the internal controls over the completeness of turnover and determine whether they are adequate and test that they were operating during the Levy Period. Confirm that the accounting system provides a sound basis for recording turnover and gross profit.
     
  3. Obtain an analysis of turnover and gross profit figures for Betting Business for the current and previous year to 31st March. Having applied the HBLB default percentage to gross profit, compare the trends observed in the analysis to expectations based on your knowledge of the business. Identify any differences to expectations and obtain explanations from management for any unusual or significant variations. (The Horserace Betting Levy Board would consider an unexpected variance of more than 10% of the total value to be significant.)
     
  4. Where a Betting Activity has started or ceased to be liable for Levy during the year: 

    (a) review the monthly turnover and gross profit figures to assess whether the trends seen are in line with expectations and explanations received from management; and 

(b) from winning bets select a sample of 5 betting transactions placed on the day before the change and 5 placed on the day after the change. For each of the items selected, check that they have been properly included or excluded from the Levy calculation.

  1. For a sample of LBOs (as specified in the table below), agree their total Betting Business turnover and gross profit to management’s records. 

    Total number of LBOs operated by the bookmaker Sample size
    (subject to a minimum sample of 1 LBO)
    1 to 19 50% of the LBO estate
    20 to 39 10 LBOs
    40 to 100 25% of the LBO estate
    Greater than 100 25 LBOs

     
  2. For the same sample of LBOs identified for Procedure 19 above, check that the correct default percentage has been utilised in the Levy calculation and that each LBO is appropriately classified as:

    (a) being above or below the gross profit threshold; and

    (b) trading for the full year or part of the year.