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Annual Audit Letter 2001-02

25 pages
kpmgReading Borough CouncilAnnual Audit LetterAudit of Accounts 2001/0231 January 2003KPMG LLPThis report contains 21 pagesAppendices contain 5 pageskpmg Reading Borough CouncilAnnual Audit LetterKPMG LLP31 January 20031 Executive summary 11.1 Purpose of this letter 11.2 The 2001/02 audit year 11.3 Challenges for the coming year 11.4 Status of this letter 22 Performance management 32.1 Comprehensive Performance Assessment/ Inspections 32.2 Best value Performance Plan (BVPP) 42.3 Performance information 42.4 Early retirement follow up review 52.5 IS&T arrangements 53 Financial aspects of corporate governance 83.1 Financial standing 83.2 Systems of internal financial control 93.3 Fraud and corruption 103.4 Legality of transactions with a financial consequence 114 Accounts 124.1 Audit opinion 124.2 Issues arising from the audit 124.3 Comments on accounting treatment 12kpmg Reading Borough CouncilAnnual Audit LetterKPMG LLP31 January 2003AppendicesAppendix A: Audit objectives 13Appendix B: Summary of recommendations 14Appendix C: Status of 2000/01 recommendations 17kpmg Reading Borough CouncilAnnual Audit LetterKPMG LLP31 January 2003having either promising or excellent prospects for1 Executive summary improvement;ü taking robust steps to refresh and renew its corporategovernance arrangements and starting to develop its risk1.1 Purpose of this lettermanagement process;ü the Council receiving a positive IDEA peer review; ...
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Reading Borough Council
Annual Audit Letter Audit of Accounts 2001/02
31 January 2003
KPMG LLP
This report contains 21 pages
Appendices contain 5 pages
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1 1.1 1.2 1.3 1.4 2 2.1 2.2 2.3 2.4 2.5 3 3.1 3.2 3.3 3.4 4 4.1 4.2 4.3
Executive summary Purpose of this letter The 2001/02 audit year Challenges for the coming year Status of this letter Performance management Comprehensive Performance Assessment/ Inspections Best value Performance Plan (BVPP) Performance information Early retirement follow up review IS&T arrangements Financial aspects of corporate governance Financial standing Systems of internal financial control Fraud and corruption Legality of transactions with a financial consequence Accounts Audit opinion Issues arising from the audit Comments on accounting treatment
Reading Borough Council
Annual Audit Letter KPMG LLP 31 January 2003
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Appendices
Appendix A: Audit objectives
Appendix B: Summary of recommendations
Appendix C: Status of 2000/01 recommendations
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Annual Audit Letter KPMG LLP 31 January 2003
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Executive summary Purpose of this letter This letter summarises the key findings arising from the work we have carried out as part of the 2001/02 audit and highlights the issues facing Reading in the year ahead which we believe merit the particular attention of Members. Our audit work is carried out in accordance with the Audit Commission’s Code of Audit Practice. A summary of the work carried out under each element of the Code of Audit Practice is provided as Appendix A to this letter. The 2001/02 audit year The past year has been a challenging one for the Council, notable highlights of which were: ü responding well to the Comprehensive Performance Assessment in which the Audit Commission rated Reading as ‘good’; ü obtaining favourable overall assessments from the Social Services Inspectorate and the Benefits Fraud Inspectorate; ü housing maintenance and repairs, libraries and planning best value reviews being judged by the Inspectors as
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improvement; ütaking robust steps to refresh and renew its corporate  governance arrangements and starting to develop its risk management process; ü the Council receiving a positive IDEA peer review; and ü producing and approving the accounts much earlier than in previous years. Challenges for the coming year The Council will continue to face a number of challenges next year. The areas where we consider Members and the Corporate Management Team should focus on are: § resourcing and monitoring the achievement of improvement plans arising from the Comprehensive Performance Assessment, Inspections and the Peer Review; § continuing to make improvements to performance information; § monitoring developments with regard to E government and the IT contractors performance; § tracking the financial position closely to ensure that balances do not fall below the approved minimum level of £2 million and putting steps in place to build balances back
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Reading Borough Council Annual Audit Letter KPMG LLP 31 January 2003
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up to the recommended longer term minimum level of £5million; § monitoring the development of a risk management strategy and the corporate governance action plan. Our recommendations to Members are summarised in Appendix B to this letter. Status of this letter
This letter is presented to Members having been discussed with the Chief Executive and Head of Financial Services, with their comments reflected in Appendix B. Whilst we have sought to draw on our audit to make recommendations and suggestions that would be useful to the Council, our work has been designed solely for the purpose of discharging our responsibilities under the Audit Commission’s Code of Audit Practice. Accordingly, our work cannot be relied upon to identify every weakness or opportunity for improvement. This report is addressed to the Members and Officers of Reading Borough Council. It has been prepared for the sole use of the Council and we take no responsibility to any Member or Officer acting in their individual capacities or to third parties. Progress in implementing the recommendations we made last year, and discussed with the Council, are included at Appendix
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Annual Audit Letter KPMG LLP 31 January 2003
C. This progress was previously reported to the Corporate. Community and External Affairs Scrutiny Panel in July.
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Performance management We are required to consider the adequacy of the Council’s arrangements for managing its performance and securing economy, efficiency and effectiveness in its use of resources. We have summarised Reading’s performance during 2001/02 based upon the following work: Section Comprehensive performance assessment/ 2.1 Inspections/ Peer review Best Value Performance Plan 2.2 Performance information 2.3 Early retirement follow up review 2.4 IS&T arrangements 2.5
Comprehensive Performance Assessment/ Inspections
The Audit Commission’s Comprehensive Performance Assessment judged that Reading’s overall performance was in thegoodcategory. The Council was also marked3 out of 4in
Reading Borough Council Annual Audit Letter KPMG LLP 31 January 2003
terms of how the Council was run and3 out of 4for the performance of the Council’s main services. The full details of the CPA, the markings and the report on Reading can be obtained atiduaoc-tsimmnoisw.ww.gov.uk. A summary excerpt of the Audit Commission’s view of the Council is as follows:1' The Council has improved services in key areas, such as social care for children and education. The Council is working closely with the police to reduce street crime and has attracted funding to regenerate deprived areas, though it still needs to tackle poor public transport. Strong partnerships have extended the benefits of the town’s economic success to all residents. The Council’s finances are overstretched and it does not make the most of the people it employs. The Council has delivered key priorities against a difficult background, though it has not identified the resources for future improvements. ' The areas for improvement are being considered against the Council’s priorities and an improvement plan will be produced for discussion with ourselves, the Audit Commission and its Inspectors. A number of inspections and reviews have also been completed in the last calendar year and these are summarised as follows:
                                                1Source: Audit Commission website
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Service Area Service Standard Improvement Prospects Social ServicesServing most children Promising well Serving some adults Promising well Overall:Two stars Housing BenefitsFair towards Good Good Housing Repairs &Fair Promising Maintenance Library ServiceFair Promising Planning ServiceFair Excellent Arts and TheatresFair Uncertain It will be particularly pleasing for the Council to note the favourable gradings given on the prospects for improvement by the various inspectors. The Council also received a favourable IDEA peer review assessment during the year. It will be important for the Council to track the improvement plans flowing from all of these areas to ensure that it is able to demonstrate improvement and thereby consolidate its CPA rating. Recommendation 1 The Council should ensure that improvement plans arising from the CPA, Inspections and Peer Review are appropriately resourced and fully integrated into the Council’s performance management framework.
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Reading Borough Council Annual Audit Letter KPMG LLP 31 January 2003
Best value Performance Plan (BVPP) Our audit of the 2002/03 Best Value Performance Plan (BVPP) focussed on the following areas: § compliance with statutory guidance; § assessing the reliability of performance information. The audit did not include an assessment of the Council’s performance management arrangements, which has been included in previous years. This has been included in the corporate assessment of the Council by the Audit Commission as part of its Comprehensive Performance Assessment. The Council published its BVPP by the requisite date of 30 June 2002. We reviewed the BVPP and concluded that it complied in all significant aspects with the statutory guidance and, as in previous years, we were able to issue an unqualified report on the plan. Performance information We gave our opinion on the Council’s system for collecting and publishing performance indicators on 12 September 2002. We had reservations on approximately 5% of the Council’s stated indicators, an increase on previous years. Whilst this is relatively low, the Council needs to take action to reduce the number of reservations in future.
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Recommendation 2 The Council should continue to work towards improving its performance information. Early retirement follow up review We concluded our follow up of our early retirement review, which was originally reported as part of our 1997/98 audit. Since our original review we found that: § our recommendations have in the main been implemented; § early retirement activity appears to have peaked around the time of LGR and more recently due to internal reorganisation within the Education service; § the added years policy is relatively generous, although this is largely due to the LGR protocol which operated in Berkshire; § there is a high level of scrutiny of early retirement decisions by officers and Members; § health retirements are subject to independent medicalill opinions and were relatively low by comparison to other local authorities; and § the funding level of the pension fund remains robust. We have identified some areas where the Council will need to build on this progress, most notably by:
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Reading Borough Council Annual Audit Letter KPMG LLP 31 January 2003
§ improving performance management information from Windsor and Maidenhead and its reporting to Members; § reviewing the policies and procedures for early retirements to ensure that they continues to meet good practice and link with a fully developed human resources strategy; § demonstrating that the award of added years or other compensation gives a clear financial advantage and benefit to the Council – this should include limiting discretion on added years within the Council’s policy. We will be agreeing an action plan with officers once our report is finalised. IS&T arrangements Following a shared risk assessment on computer audit, we undertook the following reviews: ·E-service; and ·ICT Outsourcing. E-Service Review Our review has highlighted that whilst the Authority has made some progress in achieving the e-government targets during 2001/02, this progress was fairly limited. The Authority has put in place a Board to manage the e-government programme and has appointed the Director of Arts and Leisure as the E-Government Board Chairman and Corporate Lead. Provisional work to map and document business processes has also taken
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place however, interest in this at a departmental level appears to have been limited. Progress in meeting the 2005 Government target for electronic delivery of services, as measured by BVPI 157, now stands at 33%. A substantial proportion of the 33% comprises services that have been electronically available for some time and no significant new projects have been undertaken or commenced. The work that has been undertaken has largely been IT specific with little work undertaken in Directorates to identify the projects that would be required to meet service specific requirements. The Authority has now appointed external consultants to assist in the formulation of what is referred to as the modernisation “blueprint” and to act as programme managers. As a result, “quickwins” are anticipated in the first quarter of 2003/4 from a project that aims to deliver improved webservices underpinned by tighter controls over content management. Advancement of the e-government programme has in the past been hindered by a lack of corporate ownership and high level sponsorship. However, the arrival of a new Chief Executive, who together with the Leader, is an E Government ‘champion’ has increased the commitment to achieving modernisation. A ‘quickwin’ has also been gained recently with DIP/ workflow going live within housing benefits, a significant first for the Council. In addition, the recent appointment of the E-Government Board Chairman and Corporate Lead together with the external programme managers will enable the delivery of the programme to proceed on a more active basis. These appointments needs to be built upon to ensure that the programme has continuing support and sponsorship at senior level. At the time of our review the only funds that had been
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Reading Borough Council Annual Audit Letter KPMG LLP 31 January 2003
made available to the e-government programme were the £200k of Government funding provided as a result of the Implementing E-Government statement. However, there is now a structure in place to manage the funding of e-government projects going forward. ICT Outsourcing Review The Authority has outsourced the provision of the majority of its ICT services to external providers. The current contract with ICL for the VME mainframe terminates at the end of January 2003 and there are a number of projects underway to migrate the systems still operating on the mainframe over to a server based environment. The major system to be affected by this is Revenues and Benefits which is being replaced by a new system. The remaining systems not already migrated including Payroll are being migrated to server based versions of the existing systems. The tight timetable involved means that ICT management need to ensure that these projects are well managed and closely monitored. It is, however, noted that an extension to the contract has been put in place as a contingency against delays in the transfer to the new systems. The provision of desktop and server support has been outsourced to Northgate. According to officers, their level of performance in service delivery had not been as high as had been expected. We understand that over recent months there have been significant improvements in the delivery of service from Northgate and this is strongly supported by recent user surveys. This improvement has largely flowed from both
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robust contract management and improved partnership working between the parties. However, the performance of Northgate could have a significant impact of the delivery of IT services to users and as such the Council needs to ensure that improvements in service delivery and the working relationship continue to be sustained..
Recommendation 3
The Council should continue to closely monitor the progress being made in relation to E Government and the performance of the IT contractor.
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Annual Audit Letter KPMG LLP 31 January 2003
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