Isle of Anglesey CC - Audit Letter 2002-2003
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Isle of Anglesey County Council Audit Letter 2003 pwc Isle of Anglesey County Council Audit Letter 2003 Contents Section PageI Executive summary 1II Financial aspects of corporate governance 6III Accounts 14IV Performance management 17V Audit plan 2003/04 30 Appendix A Work undertaken during 2002/2003 Statement of responsibilities of Auditors and Audited Bodies In April 2000 the Audit Commission issued a revised version of the Statement of Responsibilities of Auditors and Audited Bodies. It is available from the Chief Executive of each audited body. The purpose of the statement is to assist auditors and audited bodies by explaining where the responsibilities of auditors begin and end, and what is to be expected of the audited body in certain areas. Our reports and audit letters are prepared in the context of this statement. Reports and letters prepared by appointed auditors and addressed to Members or Officers are prepared for the sole use of the audited body, and no responsibility is taken by auditors to any Member or officer in their individual capacity, or to any third party. December 2003 Isle of Anglesey County Council Audit Letter 2003 Foreword I have pleasure in enclosing our first Audit Letter to the Isle of Anglesey County Council covering the 2002/03 audit. In our first year as auditors, we have been learning about the Authority, its strategy and its ...
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| Publié par | Mephar |
| Nombre de lectures | 40 |
| Langue | English |
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Isle of Anglesey County Council
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Work undertaken during 2002/2003
Isle of Anglesey County Council Audit Letter 2003
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Contents Section I Executive summary II Financial aspects of corporate governance III Accounts IV Performance management V Audit plan 2003/04 Appendix A Statement of responsibilities of Auditors and Audited Bodies In April 2000 the Audit Commission issued a revised version of the Statement of Responsibilities of Auditors and Audited Bodies. It is available from the Chief Executive of each audited body. The purpose of the statement is to assist auditors and audited bodies by explaining where the responsibilities of auditors begin and end, and what is to be expected of the audited body in certain areas. Our reports and audit letters are prepared in the context of this statement. Reports and letters prepared by appointed auditors and addressed to Members or Officers are prepared for the sole use of the audited body, and no responsibility is taken by auditors to any Member or officer in their individual capacity, or to any third party. December 2003
Isle of Anglesey County Council Audit Letter 2003
Foreword I have pleasure in enclosing our first Audit Letter to the Isle of Anglesey County Council covering the 2002/03 audit. In our first year as auditors, we have been learning about the Authority, its strategy and its organisation. We recognise that the Authority has been involved in a number of activities this year with continued work on developing its approach to corporate risk assessment, continuing to implement its Performance Management framework, specifically around business planning and the development of its community strategy. Looking forward the Authority continues to face a number of challenges and opportunities including the need to: •in respect of its share of the pension deficit ofaddress the significant liability Gwynedd Council Pension Fund; •maintain budgetary control over services; •implement the recommendations from our statutory Report on the 2003/04 Improvement Plan; •focus on the ongoing implementation of its performance management framework; • continue to explore opportunities to ensure that the priorities of the Authority are effectively communicated to staff; •explore the opportunities for further developing joint working relationships with its partners as part of its approach to community engagement. The Authority has faced a number of significant changes during the last year, in particular the new appointment of a political leadership. The ongoing challenge for the Authority is to ensure that despite this change process, service delivery is maintained and improved. We trust that our targeted work identified in the Regulatory Plan will assist the Authority in delivering on this improvement agenda. On behalf of the audit team, I would like to extend my gratitude to Officers and Members of the Authority for the considerable assistance and co-operation afforded to us during our audit. I look forward to discussing this report with Members. Gareth Jones Appointed Auditor for Isle of Anglesey County Council December2003
December 2003
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Isle of Anglesey County Council Audit Letter 2003
Executive summary The purpose of this report We are pleased to issue our first Annual Audit Letter to the members of the Isle of Anglesey County Council (the Authority) in relation to our 2002/03 Audit. As auditors, we are required, under the Audit Commission's Code of Audit Practice (the Code), to issue an Annual Audit Letter to the Authority each year by 31 December. As noted in the Audit Service Plan, the Audit Commission has changed the audit year to match the financial year of Local Authorities. This change has meant that we are currently in a 17 month audit period, running from November 2002 until March 2004. This Annual Audit Letter summarises our work to date, including our audit of the 2002/03 financial statements and will serve as the basis for our meeting with Members in 2004. Figure 1 (below) summarises our responsibilities under the Code: Figure 1: Our Code of Audit Practice responsibilities
iUse of resources iOpinioniPerformance information iImprovement Plan
Risk Based Accounts Performance Management Corporate Governance
Audit Planning
Financial Aspects of Corporate Governance iThe legality of financial transactions iFinancial standing iSystems of internal financial control iStandards of financial conduct and the prevention and detection of fraud and corruption It is the responsibility of the Authority to identify and address its operational and financial risks and to develop and implement proper arrangements to manage them, including adequate and effective systems of internal control. In planning and performing our audit work we have considered the significant operational and financial risks that are relevant to our responsibilities under the Code, and we have tailored our work accordingly. Furthermore, the Audit Commission in Wales (ACiW) formerly District Audit identified a number of areas for member and management attention in 2001/02 and we have tailored our work accordingly to consider these issues. 1.5 For the purpose of this Annual Audit Letter, we have classified our audit responsibilities under the three headings used in the Code. Our overall findings and conclusions from this years audit are summarised below. December 2003 1
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Isle of Anglesey County Council Audit Letter 2003
Financial Aspects of Corporate Governance (Section II) The Authority reported a final outturn underspend of £2.649 million against the original budget of £0.156 million. The reported deficit on the Consolidated Revenue Account amounted to £0.370 million after appropriations to and from reserves. Part of the appropriations to and from reserves was a contribution of £2.701 million towards earmarked reserves. The Authority achieved a surplus of £389,000 on the Housing Revenue Account during the year after a repatriation of £469,000 from the Building Maintenance Service. Our work on the financial systems has not identified any matters of major concern or any fundamental weaknesses in the Authoritys arrangements. We have, however, made some recommendations for improvement in respect of the controls and procedures in an interim report to management. Accounts (Section III) The accounts for the year ended 31 March 2003 were prepared and approved by 30 September 2003 in accordance with the Accounts and Audit Regulations. The accounts and working papers presented for audit were generally of a high standard. We have substantially completed our audit and anticipate issuing an unqualified audit opinion by 31 December 2003. The ACIW has not issued an audit certificate in respect of the 2000/01 and 2001/02 audits due to two unresolved formal objections from members of the public. Consequently, we are unable to issue an audit certificate in respect of the 2002/03 audit until the work in respect of these objections has been completed by the ACiW. The deadline for the submission of the Housing Benefit and Council Tax grant claim was 30 September 2003. The Authority has not yet submitted this claim to the Department of Work and Pensions resulting in a delay to our audit. As a consequence we are unable to issue a certificate for this claim and will not being doing so before the 31 December deadline for claims submitted by 30 September. Performance Management (Section IV) In our statutory opinion on the 2003/04 Improvement Plan we were pleased to report that we did not recommend referral to the Audit Commission in Wales (Section 10 LGA 1999) or the Assembly Government (Section 15 LGA 1999). However, there were a number of areas where the Improvement Plan and the processes associated with it need improvement. The Authoritys Whole Authority Analysis (WAA) was robust at the service level with good engagement of services and challenge from the centre, although risks and improvement actions required prioritisation. However, the corporate risk assessment, a key part of the Improvement Plan, was incomplete and lacked consultation and an external perspective. The Improvement Plan acknowledges that the corporate element of the WAA was not fully completed and identifies steps to address this.
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Isle of Anglesey County Council Audit Letter 2003
There has been some progress on the corporate risk assessment by both the Executive and Management Team in recent weeks. The current position is that the Authority is using the ACiW developed Corporate Improvement Diagnostic (CID). The outputs from this corporate assessment have identified key corporate themes and high and medium risk areas, which have recently been approved by the Executive. The Authority recognises that its next critical step is the development of action plans and the identification of solutions. It will need to ensure that its progress in moving forward on identifying the issues is maintained in its implementation of solutions. The proposed deadline of April 2004 for the drafting of the corporate implementation action plans is generous. The Authority must ensure that it employs robust project management skills to ensure this date is not pushed back still further. This is of particular significance in light of our recent review of some of the high-risk improvement action plans. A performance management framework, including reporting protocols, has been developed but a decision on the agreed format for monitoring arrangements including the roles of Executive and Scrutiny has not yet been made. Nevertheless, positive steps have been taken to develop performance management systems and processes, and key elements are now in place. However, the links between vision, service plans, budgets, indicators, targets, individuals objectives and appraisal are currently not fully imbedded within the Authority. Out of the 70 indicators reviewed from the 2003/04 Improvement Plan, the targets that had not been achieved decreased to 43% showing an improvement of almost 17%. Although this reflects a positive movement, it could mean that the Authoritys aspirations and strategic intentions could still be undermined by a lack of effective performance monitoring. The Welsh comparative graph (See section on Authority Performance in Main Report) shows that for 68 % of its indicators Anglesey is either average or above average in comparison to other Welsh Councils. This positive performance suggests that despite some of the corporate weaknesses, services generally continue to perform well. Performance studies - during the year we have undertaken a number of discrete pieces of performance work at the Authority. A number of the Health-Check type reviews undertaken in November are still to be finalised with the Authority. Whole Authority Analysis Corporate Assessment Support - we undertook to support the Authority to move forward on the Corporate Risk Assessment journey using the PwC Excelsior model. The outputs from this were joint Executive and Management team facilitated workshops identifying relative priorities. This served to act as a first step in the Authoritys approach to its Corporate Assessment. Action Planning Development Programme the request of the Authority, to meet a- at specific capacity need in understanding and implementing robust action planning, we developed a programme running over two workshops. In all, eight half-day sessions were held, with over 40 delegates attending. The programme was designed to stimulate a progressive learning curve on action plan development, of which these workshops represented step one.
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Key issues
Isle of Anglesey County Council Audit Letter 2003
Financial standingfaces significant financial pressures in the future the Authority to fund its share of the deficit on the Gwynedd Council Pension Fund. Following the introduction of FRS17, this liability will have to be recognised in the Authoritys Statement of Accounts for 2003/04. The shortfall attributable to the Authority of £40.90 million (at 31 March 2003) represents a most significant financial pressure facing the Authority and it is important for the Authority, alongside the actuarial advisors to the pension fund, to determine the potential medium to long term funding implications across a range of assumptions. Housing stock the Welsh Assembly Government has given local authorities a deadline of 2012 to bring council stock up to a new quality standard. This represents a major challenge, since it is estimated that there is a backlog of some £750 million of essential repairs and modernisation in council stock in Wales and resources are tightly constrained. For the great majority of local authorities, there will be a significant funding gap. The Authority has responded by identifying a lead officer, who was previously responsible for preparing the local authority housing stock business plan, covering the management, maintenance and investment needs of their housing stock. In addition, the Authority has responded to the removal of the current system of grant aid by preparing an interim private sector renewal strategy, by the July 2003 deadline. Wales Programme for Improvement -there were a number of areas where the Improvement Plan and the processes associated with it need improvement. In particular the Authority will need to ensure that the: -development of action plans and associated solutions to address corporate risks is effectively project managed. -vision, service plans, budgets, indicators, targets, individualslinks between objectives and appraisal are fully imbedded within the Council. Business Planning and employee appraisal processes. These need to become more performance focussed, linked to the Medium-term Financial Strategy, supported by local performance indicators and based on targets connected to corporate objectives at departmental and service levels
Performance indicators despite an improvement of 17% in achievement of set targets, of the 70 indicators reviewed from the 2003/04 Improvement Plan, the targets that had not been achieved decreased to 43%. The Welsh comparative graph (See section on Authority Performance in main report) shows that for 68 % of its Indicators the Authority is either average or above average in comparison to other Welsh Councils. This positive performance suggests that despite some of the corporate weaknesses, services generally continue to perform well: •the majority of the required national PIs had been included in the Improvement Plan. We found that 12% of the 2002/03 estimate PIs and 11% of the 2003/04 target PIs were missing from the Improvement Plan; and •we found that approximately 9% of the PIs tested during our audit were incorrectly calculated and/or inadequately supported.
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Acknowledgements
Isle of Anglesey County Coun
cil Audit Letter 2003
We would like to thank officers and members for their assistance during our audit.
We confirm that we have shared this Annual Audit Letter with the Relationship Manager from the ACiW.
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II 2.1
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Isle of Anglesey County Council Audit Letter 2003 Financial aspects of corporate governance Introduction In this section we summarise the results of our reviews of the financial aspects of the Authoritys corporate governance arrangements relating to: •the financial standing of the Authority; •the systems of internal financial control; •standards of financial conduct and the arrangements for the prevention and detection of fraud and corruption; and •the legality of transactions that might have significant financial consequences. Financial standing 2002/03 financial performance The Authority reported a final outturn underspend of £2.649 million against the original budget of £0.156 million. The reported deficit on the Consolidated Revenue Account amounted to £0.370 million (2001/02 £2.879 million surplus) after appropriations to and from reserves. A contribution of £2.701 million was made towards earmarked reserves. The net revenue expenditure (including capital charges) for 2002/03 amounted to £82.693 million in comparison to the original budget of £84.965 million. The significant variances by service are summarised below. Figure 2: Budgetary position as at 31 March 2003 M on Training Social Services Property Services Highw ays & Transportation Planning & Env Services Econom ic Developm ent Housing Education & Leisure Finance -500 -400 -300 -200 -100 0 100 200 300 400 (-U nder)/Overspend (£'000)
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Isle of Anglesey County Council Audit Letter 2003
Budget underspends- the main underspends arising during the year were in respect of the following: •the Education service underspend occurred as a result of a lower number of threshold payments made to teaching staff reflecting the rate of staff passing through the assessment. •the Planning underspend is mainly due to the budget being set to reflect the cost of the Unitary Development Plan public inquiry, which is now being held in 2003/04. •the Economic Development underspend was in respect of projects which have slipped where the expenditure will be incurred in future years. Budget overspendsoverspend arising during the year occurred within the the main Highways and Transportation services. The overspend related to an increase in costs for road maintenance due to the earlier timing of work and should be recoverable in 2003/04. The Authority has also benefited from gains following rateable value appeals on some council properties, which represent windfalls to individual service budgets. These windfalls have been treated as exceptions so that the gain is taken to general balances and not service reserves. Balances and reserves The level of working balances and reserves over the past three years to 31 March 2003 are shown below: Figure 3: Balances and reserves
General balances 1,164 3,697 3,645 Housing revenue account 463 893 1,282 Other earmarked reserves 7,014 6,512 9,213 School balances (delegated to schools) 2,140 2,486 2,168 Total 10,781 13,588 16,308 General balance the Authority has reported a significant increase in the level of working balances and reserves over the last three years. The General Balance provides some flexibility to the Authority to cover unexpected expenditure commitments during the year. The General Balance represents over two weeks and over 4% of the Authoritys annual net expenditure and is considered to be prudent. Other earmarked reserves the Authority has continued to earmark funds for future projects in 2002/03. The level of earmarked reserves has increased by £2.701 million during the year. This is mainly due to a £1.050 million increase in service reserves and a £0.891 million increase in the capital expenditure reserve.
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Isle of Anglesey County Council Audit Letter 2003
2.9Schools balances the level of school balances has decreased by £0.318 million during the year as schools have drawn on the reserves to finance in year spending. The schools balance remains high and the Authority should ensure schools continue to utilise this reserve as necessary. There were three primary schools with a combined deficit of £0.026 million at the end of the financial year.
2.10Housing Revenue Account (HRA) the HRA generated a surplus of £389,000 during the year, compared with a revised budgeted surplus of £71,000. This was due mainly to an underspend on special costs (Communal Services) such as grounds maintenance. The Authoritys Building Maintenance Service generated a substantial surplus in the year in respect of repairs and maintenance work undertaken to council dwellings. In line with the provisions of the Best Value Accounting Code of Practice, £469,000 of this surplus was repatriated to the Housing Revenue Account. The balance on the Housing Revenue Account reserve is £1.282 million at 31 March 2003.
2.11 The Welsh Assembly Government has given local authorities a deadline of 2012 to bring council stock up to a new quality standard. This represents a major challenge, since it is estimated that there is a backlog of some £750 million of essential repairs and modernisation in council stock in Wales and resources are tightly constrained. For the great majority of local authorities, there will be a significant funding gap. We are pleased to note that the Authority has identified a lead officer who has prepared a local authority housing stock business plan covering the management, maintenance and investment needs of their housing stock. 2.12 The recent Welsh Assembly Government guidance has also changed, substantially, the traditional approach to housing renewal - in particular the basis for providing grant aid. In effect, the current system for providing grants will be removed and local authorities were expected to have comprehensive private sector renewal strategies in place by July 2003. This is a major step change for local authorities requiring a more strategic approach. We are pleased to report that the Authority has identified a lead officer and presented the interim private sector renewal strategy to the Executive on 14 July 2003. Capital 2.13 The capital expenditure outturn in 2002/03 was approximately £16.4 million compared with a budget of £24.1 million resulting in an underspend of approximately £7.8 million. The underspend arose mainly due to slippage of £5.2 million on the general programme and £2.6 million on the Housing programme (private).
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