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Annual Audit and Inspection Letter
March 2008
Annual Audit and Inspection Letter
Solihull Metropolitan Borough Council
External audit is an essential element in the process of accountability for public money and makes an important contribution to the stewardship of public resources and the corporate governance of public services. Audit in the public sector is underpinned by three fundamental principles.  Auditors are appointed independently from the bodies being audited.  The scope of auditors' work is extended to cover not only the audit of financial statements but also value for money and the conduct of public business.  Auditors may report aspects of their work widely to the public and other key stakeholders. The duties and powers of auditors appointed by the Audit Commission are set out in the Audit Commission Act 1998, the Local Government Act 1999 and the Commission's statutory Code of Audit Practice. Under the Code of Audit Practice, appointed auditors are also required to comply with the current professional standards issued by the independent Auditing Practices Board. Appointed auditors act quite separately from the Commission and in meeting their statutory responsibilities are required to exercise their professional judgement independently of both the Commission and the audited body.   Status of our reports This report provides an overall summary of the Audit Commission’s assessment of the Council, drawing on audit, inspection and performance assessment work and is prepared by your Relationship Manager. In this report, the Commission summarises findings and conclusions from the statutory audit, which have previously been reported to you by your appointed auditor. Appointed auditors act separately from the Commission and, in meeting their statutory responsibilities, are required to exercise their professional judgement independently of the Commission (and the audited body). The findings and conclusions therefore remain those of the appointed auditor and should be considered within the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission. Reports prepared by appointed auditors are:  prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission; and  addressed to members or officers and prepared for the sole use of the audited body; no responsibility is taken by auditors to any member or officer in their individual capacity, or to any third party.  Copies of this report If you require further copies of this report, or a copy in large print, in Braille, on tape, or in a language other than English, please call 0844 798 7070.
© Audit Commission 2008 For further information on the work of the Commission please contact: Audit Commission, 1st Floor, Millbank Tower, Millbank, London SW1P 4HQ Tel: 020 7828 1212 Fax: 020 7976 6187 Textphone (minicom): 020 7630 0421
Annual Audit and Inspection Letter   Contents  3  
Contents Purpose, responsibilities and scope How is Solihull Council performing? The improvement since last year - our Direction of Travel report Sustaining improvement Service inspections The audit of the accounts and value for money Looking ahead Closing remarks Availability of this letter
4  5  6  8  9  10  12  13  13  
Solihull Metropolitan Borough Council
4 Annual Audit and Inspection Letter  Purpose, responsibilities and scope
Purpose, responsibilities and scope 1 This report provides an overall summary of the Audit Commission's assessment of the Council. It draws on the most recent Comprehensive Performance Assessment (CPA), the findings and conclusions from the audit of the Council for 2006/07 and from any inspections undertaken since the last Annual Audit and Inspection Letter. 2 We have addressed this letter to members as it is the responsibility of the Council to ensure that proper arrangements are in place for the conduct of its business and that it safeguards and properly accounts for public money. We have made recommendations to assist the Council in meeting its responsibilities. 3 This letter also communicates the significant issues to key external stakeholders, including members of the public. We will publish this letter on the Audit Commission website at . (In addition the Council is planning to publish it on its website). 4 Your appointed auditor is responsible for planning and carrying out an audit that meets the requirements of the Audit Commission’s Code of Audit Practice (the Code). Under the Code, the auditor reviews and reports on:  the Council’s accounts;  whether the Council has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources (value for money conclusion); and  whether the Council's best value performance plan has been prepared and published in line with legislation and statutory guidance. 5 This letter includes the latest assessment on the Council’s performance under the CPA framework, including our Direction of Travel report and the results of any inspections carried out by the Audit Commission under section 10 of the Local Government Act 1999. It summarises the key issues arising from the CPA and any such inspections. Inspection reports are issued in accordance with the Audit Commission’s duty under section 13 of the 1999 Act. 6 We have listed the reports issued to the Council relating to 2006/07 audit and inspection work at the end of this letter.  
Solihull Metropolitan Borough Council
Annual Audit and Inspection Letter   How is Solihull Council performing?  5  
How is Solihull Council performing? 7 The Audit Commission’s overall judgement is that Solihull is improving well and we have classified the Council as three-star in its current level of performance under the Comprehensive Performance Assessment. These assessments have been completed in all single tier and county councils with the following results. Figure 1  
 Source: Audit Commission
Solihull Metropolitan Borough Council
6 Annual Audit and Inspection Letter  How is Solihull Council performing? 8 The detailed assessment for Solihull is as follows. Our overall assessment - the CPA scorecard  Table 1 CPA scorecard  Element Assessment Direction of Travel judgement Improving well Overall 3 star Previous corporate assessment, as included in overall CPA 2 out of 4 judgement in 2007  Current performance Children and young people* 3 out of 4 Social care (adults)* 3 out of 4 Use of resources* 3 out of 4 Housing 2 out of 4 Environment 3 out of 4 Culture 3 out of 4 Benefits 4 out of 4 (Note: * these aspects have a greater influence on the overall CPA score) (1 = lowest, 4 = highest) The improvement since last year - our Direction of Travel report What evidence is there of the Council improving outcomes? 9 Services in Solihull Council are improving well. Solihull Metropolitan Borough Council
Annual Audit and Inspection Letter   How is Solihull Council performing?  7  
10 Solihull has improved services across its priority areas. The Council has ten priorities organised around five customer outcomes. Outcomes are particularly improving in ensuring children and young people grow up in a safe environment with opportunities to make a positive contribution. Education results for 2007 show improvements and Key stages 1, 2 and 4 continue to improve. Significant improvements have been made in reducing crime, with the theft of vehicles halving in the last year. Housing issues are being tackled well. However, there is mixed performance in providing a cleaner, greener more sustainable borough. While, the level of missed collections has significantly improved, the proportion of waste being recycled is decreasing and they are now below the national average. This is being addressed through a new recycling contract. The number of teenage conceptions has decreased and the percentage of care leavers in education, training and employment has increased. There has also been progress on reducing worklessness. 11 Council services as measured by performance indicators (PIs), are improving well. Sixty one per cent of The Audit Commission's set of PIs selected to assess direction of travel improved between 2005/06 and 2006/07. Thirty two per cent of these indicators are now in the best quartile, ranking it at 51st of the 150 comparable authorities. It has improved the majority of its Best Value Performance Indicators (BVPIs) as well as consistently increasing the percentage of its BVPIs performing at the highest levels. Similarly 72 per cent of the Council's ‘Top 40’ indicators exceeded their previous year's performance. However there are still areas where improvements could be achieved such as reducing the proportion of schools causing concern. 12 Solihull has also maintained the relatively high levels of satisfaction that the public have with local services. Of twelve customer satisfaction indicators used by the Audit Commission as part of our Comprehensive Performance Assessment, six improved between 2003/04 and 2006/07, four declined and two remained constant. Areas where satisfaction improved included planning, public transport, sports and leisure, libraries, parks and open spaces. Satisfaction with cleanliness declined, but at 70 per cent remained in the upper quartile, showing that performance is still relatively good. Although, satisfaction with waste disposal sites remained constant at 78 per cent, satisfaction with recycling fell to 58 per cent and is now in the worst quartile. Tenant satisfaction has also declined. 13 The Council's good performance as measured by various inspectorates has been maintained in areas such as its Use of Resources and Adult Social Care and improved in Services for Children and Young People and Benefits. 14 The Council has continued to develop and implement its strategic vision for adult social care. Specific improvements include support to older people living at home and the range of social care services means that delays for people leaving hospital are minimised. However, there are areas for improvement around the opportunities for people with learning disabilities.
Solihull Metropolitan Borough Council
8 Annual Audit and Inspection Letter  How is Solihull Council performing?
15 Improvements to Council housing are also continuing. Solihull Community Housing is working towards meeting the Decent Homes standards with a 20 per cent reduction in the proportion of non-decent homes. The Council remains ahead of its targets for delivering the Decent Homes Standard for Council Housing management has also improved across a broad range of activities recording 83 per cent of BVPIs improved. 16 The Council is contributing well towards the wider outcomes as set out in the aims of the Community Strategy. There has been an increase in affordable houses although not to target, more homes have been brought out of unfitness or serious disrepair and empty privately owned homes brought back into occupation. The LSP is on track to meet the GCSE target included in the LAA. In making residents ‘feel safe from crime and disorder’ there has been a substantial reduction in domestic burglaries, robberies and theft of motor vehicles, although theft from a motor vehicle has increased. Violence and sexual offences against the person have also reduced. But road safety has deteriorated this year with the numbers of people killed and seriously injured rising, although this is not the case for children. Activities to increase the health of patients referred to the GP have been more successful than planned. 17 The Council has made significant progress improving both access and the quality of Council services. The One Front Line programme is delivering efficiency savings, service improvements (telephone answering has improved again although performance against the service level dropped). Internet contact has doubled and customer satisfaction has significantly improved. Complaints are being handled more effectively. The North Solihull Regeneration programme is delivering projects targeted at narrowing the ‘gap’ between the north and south of the borough. 18 The Council continues to deliver value for money within an increasingly tight financial climate, realising savings at the same time as improving performance. In 2007/08, £7m of ongoing savings and £4m of one-off savings have been identified so that a balanced budget is delivered. The Council is also very good at attracting external funding. In 2006/07 the Council secured £34.8m, which was a 34.6 per cent increase on the previous years £25.9m.
Sustaining improvement 19 The Council has robust plans for continuing its improvement, which are clearly focused on outcomes. It has a vision for the borough to be a place where well-being, pride and quality of life is enjoyed by all supported by values, five customer outcomes and ten priorities. It has a new three year Council Plan for 2007-2010 and a substantial refresh is planned for 2008 to take account of the Local Government and Public Involvement in Health Act 2007 and the Comprehensive Spending Review. Solihull has robust arrangements for monitoring its performance in priority areas. The Council is planning well for the future.
Solihull Metropolitan Borough Council
Annual Audit and Inspection Letter   How is Solihull Council performing?  9  
20 Improvement planning is being implemented effectively. The first year of the LAA began on 1 April 2007. The LAA mid-year results show that of the twelve reward targets seven are green and five, amber. The Council is scheduled to receive approximately £4.0 million in LPSA reward grant (equivalent to successful delivery of around nine out of twelve (75 per cent) of the LPSA targets). This would exceed the national average of 66 per cent of LPSA targets being achieved. Project milestones on building new children's centres have been met. The Council is well placed to sustain improvement. 21 The Council's capacity to improve services for Children and Young People continues to be good. Children and young people play a crucial role in shaping council services and determining future work. Children's services are therefore well placed for the future. 22 The authority's financial resources continue to come under significant pressure as central government funding becomes increasingly tight and comes at a time when it also faces reducing opportunities to draw on its reserves and capital receipts. These pressures will provide increasing challenges to the Council in determining its medium term financial strategy and require even more innovative approaches to identifying, and delivering efficiency savings whilst maintaining service levels in the future.
Service inspections 23 An important aspect of the role of the Relationship Manager is to work with other inspectorates and regulators who also review and report on the council’s performance. Relationship Managers share information and seek to provide ‘joined up’ regulation to the Council. During the last year the Council has had an inspection of the Council's arrangements for the Supporting People Programme. The results of the inspection were reported fully to the Council and the final report was published in May 2007. Overall the Council's administration of the Programme was assessed as 'fair' with 'promising prospects for improvement'. 24 The Audit Commission's Housing Inspectorate is currently undertaking a review of Solihull Community Housing as part of the Government's arms length housing management initiative. The result of this inspection is expected to be reported in May 2008. In addition a Corporate Assessment and Joint Area Review will be conducted throughout April and the outcome is programmed to be published in July 2008.  
Solihull Metropolitan Borough Council
10 Annual Audit and Inspection Letter  The audit of the accounts and value for money
The audit of the accounts and value for money 25 Your appointed auditor KPMG has reported separately to the Council on the issues arising from the 2006/07 audit and has issued: an audit report, providing an unqualified opinion on your accounts and a  conclusion on your vfm arrangements to say that these arrangements are adequate on 12 December 2007; and  a report on the Best Value Performance Plan confirming that the Plan has been audited. Use of resources 26 The findings of the auditor are an important component of the CPA framework described above. In particular the Use of Resources score is derived from the assessments made by the auditor in the following areas.  Financial reporting (including the preparation of the accounts of the Council and the way these are presented to the public).  Financial management (including how the financial management is integrated with strategy to support council priorities).  Financial standing (including the strength of the Council's financial position).  Internal control (including how effectively the Council maintains proper stewardship and control of its finances).  Value for money (including an assessment of how well the Council balances the costs and quality of its services). 27 For the purposes of the CPA KPMG has assessed the Council’s arrangements for use of resources in these five areas as follows. Table 2  
Element Financial reporting Financial management Financial standing Internal control Value for money Overall assessment of the Audit Commission (Note: 1 = lowest, 4 = highest)
Solihull Metropolitan Borough Council
Assessment 3 out of 4 3 out of 4 3 out of 4 3 out of 4 3 out of 4 3 out of 4
Annual Audit and Inspection Letter   The audit of the accounts and value for money  11  
28 Between August and October 2007, KPMG completed their third scored judgement on the Authority’s use of resources. This assesses the Authority against Key Lines of Enquiry (KLOEs) specified by the Audit Commission, scoring the Authority on a scale between one (below minimum requirements) and four (performing strongly). The scores were reviewed as part of KPMG’s local and national quality control processes and then by the Audit Commission to ensure consistency with other auditors and authorities. A notable achievement emerging from this assessment was the best practice identified in relation to Solihull’s risk management. Audit of accounts and Statement on Internal Control 29 To bring local government into line with other parts of the public sector, the timetable for preparation and publication of accounts has been gradually brought forward. For 2006/07, the accounts needed to be prepared by the end of June 2007 and published by the end of September 2007. Whilst this is not formally an audit deadline, it is desirable for the accounts to be published with the audit opinion included, so KPMG plan their audit work to deliver the opinion by this date. 30 In light of a number of ongoing challenges from local objectors, KPMG issued a provisional unqualified interim opinion on 27 September 2007. KPMG also reviewed the Authority's WGA submission and concluded that it was consistent with the statutory accounts. Following resolution of the challenges, which did not result in any changes to the Statement of Accounts, KPMG issued an unqualified final opinion on 12 December 2007. 31 At the same time as giving the final opinion on the Authority’s accounts, KPMG issued their audit certificate, which marks the conclusion of their statutory responsibilities for the year. Value for Money Conclusion 32 KPMG reported their conclusion on the Authority’s arrangements to provide value for money on 12 December 2007. The conclusion is based on to the extent to which the Authority meets 12 criteria specified by the Audit Commission. These link to our other audit work – for example, on Use of Resources scored judgement and Data Quality. It is unqualified where these are all met, and qualified if there are areas where the minimum standards are not fully addressed. 33 KPMG concluded that the Authority has made proper arrangements to secure economy, efficiency and effectiveness on all 12 criteria determined by the Audit Commission. KPMG reported their findings in the report to those charged with governance (ISA 260) in September 2007.  
Solihull Metropolitan Borough Council
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