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Annual Audit Letter

14 pages
Annual Audit Letter Shepway District Council Audit 2009/10 The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone. Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, auditing the £200 billion spent by 11,000 local public bodies. As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for local people. Contents Key messages 2 Audit opinion and financial statements 2 Value for money 2 Current and future challenges 2 Financial statements and annual governance statement 3 Overall conclusion from the audit 3 Value for money 4 2009/10 use of resources assessments 4 VFM conclusion 4 Approach to local value for money work from 2010/11 6 Grant Claim Certification 7 Current and future challenges 8 Future challenges 8 Closing remarks 9 Appendix 1 Audit fees 10 Appendix 2 Glossary 11 Audit Commission Annual Audit Letter 1 Key messages This report summarises my findings from the 2009/10 audit. My audit comprises two elements: ■ the audit of your financial statements (page 3); and ■ my assessment of your arrangements to achieve value for money in your use of resources (pages 4 ...
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Annual Audit Letter
Shepway District Council
Audit 2009/10
     The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone.  Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, auditing the £200 billion spent by 11,000 local public bodies.   As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for local people.  
 
 
Contents
Key messages Audit opinion and financial statements Value for money Current and future challenges Financial statements and annual governance statement Overall conclusion from the audit Value for money 2009/10 use of resources assessments VFM conclusion Approach to local value for money work from 2010/11 Grant Claim Certification Current and future challenges Future challenges Closing remarks Appendix 1 Audit fees Appendix 2 Glossary    
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Key messages
This report summarises my findings from the 2009/10 audit. My audit comprises two elements:  the audit of your financial statements (page 3); and  my assessment of your arrangements to achieve value for money in your use of resources (pages 4 to 6). Audit opinion and financial statements 1 I issued an audit report including an unqualified opinion on the financial statements on 29 September 2010. The financial statements presented for audit were of a high quality, containing only a few minor errors that management have corrected. This is a positive achievement and a significant improvement on previous years. Value for money 2 I issued an unqualified value for money conclusion stating that the Council has adequate arrangements to secure economy, efficiency and effectiveness in its use of resources during the year ending 31 March 2010. Current and future challenges 3 The Council has managed its budget well over the last year, delivering service efficiencies and financial savings. The economic downturn and the recent comprehensive spending review are however imposing unprecedented financial pressures on the public sector. The Council is currently revisiting its medium term financial strategy in the light of this. Efficiency savings alone are unlikely to enable the Council to achieve the necessary spending cuts. Members and officers are therefore working through the difficult choices which they will need to make in terms of service delivery. The success of this will be critical to the future of the Council.  
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Financial statements and annual governance statement
The Council's financial statements and annual governance statement are an important means by which the Council accounts for its stewardship of public funds. I gave an unqualified opinion on the Council's 2009/10 financial statements on 29 September 2010. Overall conclusion from the audit 4 The Council's accounts have been produced to a high standard, with only a small number of adjustments required. There is a robust closedown process in place and working paper trails to support the financial statements have also been strengthened.   5 During my audit I reported two recommendations to the Audit and Compliance Committee in the Annual Governance Report. These related to:  the need for more timely completion of Related Party Transaction returns by Members; and  improved documentation in respect of renovation loans. 6 The Council is taking appropriate action to address both my recommendations. 7 The Audit Commission carried out a national survey during 2010 to assess the Council's preparation for implementing the International Financial Reporting Standards (IFRS) with effect from 2010/11. This is a complex new area which will require significant input from staff, in finance and across the Council over the next year. 8 As part of this survey I have assessed the Council's performance as 'Amber'. The Council has a comprehensive implementation plan, has provided some training for Members and officers and is undertaking necessary preparatory work. Although it is currently running slightly behind on its timetable, the Council is still on track for final production of the accounts in June 2011. The Council has also identified the most complex areas for review, including accounting for leases and is putting appropriate time aside to deal with these. This represents sound progress overall. I will continue to work with Council over the coming months as it finalises its restated accounts.
Audit Commission  Annual Audit Letter  
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Value for money
I considered whether the Council is managing and using its money, time and people to deliver value for money. I assessed the Council's performance against the criteria specified by the Audit Commission and have reported the outcome as the value for money (VFM) conclusion. 2009/10 use of resources assessments 9 At the end of May 2010, the Audit Commission wrote to all chief executives to inform them that following the government's announcement, work on CAA would cease with immediate effect and the Commission would no longer issue scores for its use of resources assessments. 10 However, I am still required by the Code of Audit Practice to issue a value for money conclusion. I have therefore used the results of the work completed on the use of resources assessment up to the end of May to inform my 2009/10 conclusion. 11 I report the significant findings from the work I have carried out to support the vfm conclusion. VFM conclusion 12 I assessed your arrangements to achieve economy, efficiency and effectiveness in your use of money, time and people against criteria specified by the Audit Commission. The Audit Commission specifies each year, which Key Lines of Enquiry (KLOE) are the relevant criteria for the VFM conclusion at each type of audited body. 13 I concluded that the Council has adequate arrangements in all the areas I assessed. This is shown in the following table.
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Ade uate arrangements?
Criteria Managing finances Planning for financial health Yes Understanding costs and achieving efficiencies Yes Financial Reporting Yes Governing the business Commissioning and procurement Use of information Good governance Risk management and internal control Managing resources Natural Resources
Yes Yes Yes Yes
Yes
 14 I issued an unqualified conclusion stating that the Council had satisfactory arrangements to secure economy, efficiency and effectiveness in its use of resources. 15 Key findings from the review are set out below. Managing Finances 16 During 2009/10 the Council revisited its priorities and used these to update its five-year Medium Term Financial Strategy (MTFS). The MTFS was robust, well set out and had an appropriate focus on efficiencies, growth in priority areas and maintaining overall financial health. The Council achieved a balanced budget for 2009/10 and as at 31 March 2010 had general reserves of £3.1 million, housing revenue reserve of £2.1 million and specific revenue reserves of £3.6 million. I consider this to represent a reasonable position in difficult external circumstances. 17 The Council has demonstrated a good understanding of its cost base. It has monitored its financial position carefully, has reduced costs and stabilised its financial status. It is investing in efficiency reviews and new technology to reduce costs. Many of its cost saving strategies are based on reducing costs through partnership working and the Council actively examines options such as shared premises or service delivery. The Council will face further challenges over the next year and I have more to say on this below.
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Governing the Business 18 The Council has a clear vision of how it wants to serve customers. It engages with stakeholders and residents and is working to improve the quality of life for its disadvantaged communities. There are sound arrangements for collecting, recording and reporting data. Members take a pro-active role in managing performance. Information is clearly presented for decision makers to understand. Reports are based on good quality data which includes benchmarking and external consultancy advice as appropriate. Every major procurement or investment decision is required to submit a full business case. Overall costs are reducing although are higher than at some other neighbouring councils. The Council is continuing to focus on cost reduction which will be critical over the coming months. 19 The Council has sound governance arrangements and a clear vision which has been refreshed in light of the current economic climate. Partnership governance is effective and improvements have been made in terms of capacity and post-implementation review. Risk management arrangements have also developed and are operating effectively.
Managing Resources 20 The Council is developing a strategy to reduce its impact on the environment. The local environmental quality strategy is progressing well. Some initiatives show promise such as composting and decent homes. The challenges will be to maintain this progress in a difficult economic climate and to demonstrate in a tangible form the outcomes which have been achieved. Approach to local value for money work from 2010/11 21 Given the scale of pressures facing public bodies in the current economic climate, the Audit Commission has reviewed its work programme for 2010/11 onwards. This review has included discussions with key stakeholders of possible options for a new approach to local value for money (VFM) audit work. The Commission will introduce a new, more targeted and better value approach to our local VFM audit work. 22 Our work will be based on a reduced number of reporting criteria, specified by the Commission, concentrating on:  securing financial resilience; and  prioritising resources within tighter budgets. 23 For your audit, I will determine a local programme of VFM audit work based on my audit risk assessment, informed by these criteria and my statutory responsibilities. I will no longer be required to provide an annual scored judgement relating to my local VFM audit work. Instead I will report the results of all my local VFM audit work and the key messages for the Council in my annual report to those charged with governance and in my annual audit letter.
Audit Commission  Annual Audit Letter  
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Grant Claim Certification
24 In addition to my annual audit work, I am required to ensure certification of the following 2009/10 claims to provide assurance to grant paying bodies that claims for grants and subsidies comply with terms and conditions.  National Domestic Rates Return.  Disabled Facilities Grant.  HRA subsidy base data return.  HRA subsidy.  Housing and Council Tax Benefit Subsidy. 25 Last year, I highlighted quality issues identified during our audit of the Housing Benefit and Council Tax Subsidy claim. I reported that the Council had made errors in approximately a quarter of the claims reviewed, with particular problems in correctly applying earned income. 26 I am pleased to note the commitment and actions put in place by the Corporate Director  Resources and her team have resulted in significant quality improvements in this area. This will enable me to reduce the grant claim fee I charge to £24,616 (final estimate) compared to last year's fee of £34,668. 27 I will set out the detailed findings from all my certification work in a separate annual report on grant claims later this year.  
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Current and future challenges
Future challenges 28 During 2009/10 the Council has demonstrated good financial management in difficult circumstances. However, in common with the rest of the public sector, it is facing significant financial challenges ahead. The scale of the financial savings required by the government's Comprehensive Spending Review are unprecedented. This is exacerbated by the fact that demand for some services, notably benefits, is increasing and the income from fees and charges may reduce. Efficiency savings alone will therefore not be sufficient to balance the books. 29 Both Members and officers realise that difficult decisions will be required regarding spending priorities. My audit team and I will work with you over the coming months, sharing good practice where appropriate and providing support as a 'critical friend' where we can.    
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Closing remarks
Date issued June 2009 June 2010 September 2010
30 I have discussed and agreed this letter with the Chief Executive and the Corporate Director  Resources. I will provide copies to all members and present this letter to Cabinet on 8 December and to the Audit and Compliance Committee in March 2011. 31 Full detailed findings, conclusions and recommendations in the areas covered by my audit were included in the reports I issued to the Council during the year.  Report Audit Fee Letter Opinion Audit Plan Annual Governance Report  32 The Council has taken a positive and helpful approach to my audit. I wish to thank the Council staff for their support and cooperation during the last year.    Andy Mack District Auditor November 2010   
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