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DE007 Annual Audit and Inspection Letter Published final.d.

16 pages
2004 Annual Audi t and I nspect on Let t er Devon County Council INSIDE THIS LETTER PAGES 2 - 12 • Executive summary • Key messages • Council performance • Accounts and governance • Other work • Looking forwards • Closing remarks PAGES 13 - 16 Appendices • Appendix 1 - Reports issued during 2003/04 • Ax 2 – Scope of audit and inspection • Appendix 3 - Audit and inspection fees Reference: DE007 Annual Audit and Inspection Letter Date: January 2005 i 2004 ANNUAL AUDIT AND INSPECTION LETTER There is scope for improvement in some areas of procurement. In particular, the council has made Executive summary only limited progress in aggregating high volume, low-value purchases. There are also weaknesses in the letting and of management of The purpose of this letter some low-value contracts. This is our audit and inspection ‘Annual Letter’ Waste management for members which incorporates the Annual Audit Letter for 2003/04, and is presented by The overall conclusion from our inspection is the council’s Relationship Manager and District that the council provides a ‘good’ service with Auditor. The letter summarises the conclusions ‘excellent’ prospects of improvement. While the and significant issues arising from our recent service has a number of strengths the greatest audit and inspections of the council. potential for improvement is through improved We have issued separate ...
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2004   Annual Audit and Inspection Letter Devon County Council
P A G E S 2 - 1 2  Executive summary  Key messages  Council performance Accounts and governance   Other work  Looking forwards  Closing remarks
P A G E S 1 3 - 1 6 Appendices  Appendix 1 - Reports issued during 2003/04  Appendix 2  Scope of audit and  inspection  Appendix 3 - Audit and inspection fees                        Reference: DE007 Annual Audit and Inspection Letter Date: January 2005  
 2004  ANNUAL AUDIT AND INSPECTION LETTER    is pe for improvemen There sco t in some areas of procurement. In particular, the council has made Executive summary only limited progress in aggregating high volume, low-value purchases. There are also and The purpose of this letter swoemaken leosws-evsa ilnu et hceo lnettrtaicntgs. of management of   This is our audit and inspection Annual Letter for members which incorporates the Annual Waste management Audit Letter for 2003/04, and is presented by s tion is  the councils Relationship Manager and District tThhaet  othvee rcaollu cnocinl clpursoivoind efrs oam  goouor din seprevcice with Auditor. The letter summarises the conclusions s of rovement. While and significant issues arising from our recent seexrcveilclee nhta sp rao snpuemctber o if mstprengths the greatetshte  audit and inspections of the council. potential for improvement is through improved We have issued separate reports during the year understanding and working with partners. having completed specific aspects of our programme. These reports are listed at Accounts and Governance Appendix 1 for information. Appendix 2 sets out the scope of audit and The council performs well in preparing its inspection. dacecaodluinntes.  tIot  ias  hwigelhl  sptlaacnedda rtdo  amnede tt ot haen  early Appendix 3 provides information about the fees increasingly tight deadlines required to comply charged. with whole of Government accounts over the next few years.   Financial systems are sound and the councils financial position is stable with reserves close to Key messages the level regarded as prudent by the council.  Overall performance  The council has achieved improvement in a Overall performance number of services and has strengthened some internal processes to support improvement in service delivery, particularly in corporate risk CPA Scorecard management, community planning and The council has maintained its rating as a good information systems. However, its overall performance in social services has fallen to a authority. disappointing one-star rating. Overall the council The Audit Commission annually updates the CPA remains rated as Good under CPA. ratings of principal local authorities in England and publishes this as a scorecard. We set out in Procurement Exhibit 1 below a table summarising the scores from individual elements of the assessment . The councils procurement arrangements have a The text that follows the table appears on the number of strengths. In particular, the council Audit Commissions website as a brief delivers a wide range of services and capital commentary on the councils performance. projects through partnering and collaboration with other organisations and adopts major new service delivery arrangements when there is a clear business case for doing so. It also has effective processes for letting and managing  major contracts. It has developed a central pool of expertise to support the directorates in procurement activities.  Annual Audit and Inspection Letter - 2004 Devon County Council  Page 2  
 2004  ANNUAL AUDIT AND INSPECTION LETTER   EXHIBIT 1 THE CPA 2004 UPDATE CPA Improvement Report Ambition The council has shown improvement in some services but not enough to improve its overall The CPA improvement report in 2003 rating commented that the council was demonstrating its ambitions in key areas such as education and Element Assessment has entered into a local public service agreement (LPSA) covering a number of services Overall Good to support improvements.  Current performance out of 4 The councils current ambitions are clear and  Education 3 reflect those identified in the community  Housing n/a strategy. The ambitions are supported by  Use of resources 4 medium and long term targets which include  Social care (children) 2 those in the LPSA. Some of these targets are  Social care (adults) 2 extremely challenging and the council oirst iaown aorfe   Benefits n/a tthhaetm i.t  iOst huenlri ktaelryg ettos  mhaevete  ab leaerng ea ffpercotped by  Environment 4 external events and are no longer challenging  Libraries and leisure 2 and hence are not driving improvement.  Capacity to improve 3 For example those relating to broadband access (not reassessed in 2004) have already been exceeded. The council will (Note: 1=lowest, 4=highest) need to ensure that target setting is continually reviewed to ensure ambitions are realistic.  How is Devon County Council run and what Prioritisation progress has the council made in the last The council has ident rior year?   These relate both to sifpieecdi faicr esaesr voifc eps asi twy.e ll as It has made improvements in some services systems and processes which support service over the last year. These include waste delivery. These are translated into service and management, education and support to victims action plans. of domestic violence. The council is less clear about what is not a The council has strengthened its approach to priority. In the face of budget pressures the equality and developed a customer service council needs to be clearer about how resources strategy to improve access to its services. It has can be directed away from areas of lower also strengthened some internal processes that priority and towards the challenges it faces. will support improvements in service delivery, It also needs to explicitly state what it will for example in risk management, and has contribute towards the delivery of the agreed a community strategy with partner community strategy. The council has recognised organisations which sets out a clear strategic that the forty five priorities outlined in this direction for the area. Action is also being taken strategy need to be ranked according to how far to further increase recycling rates in order to they match corporate ambitions and has begun meet national targets for 2005/06. Some work with partners to determine the main aspects of social services have got better but challenges it faces. others need to improve significantly. The council needs to focus on improving its  social care services and identifying non-priority areas before there can be any real improvement  in the overall service it provides to local people. It has developed plans to do this and we will be  monitoring progress over the next 12 months.   Annual Audit and Inspection Letter - 2004 Devon County Council  Page 3  
Focus The council has introduced further mechanisms to enhance focus. Examples include:  regular performance reports on corporate objectives;  leading councillors taking responsibility for each corporate priority; and  scrutiny activities are now framed around delivery of strategic goals. The council has also established a corporate improvement steering group with newly agreed terms of reference but as yet the impact of this work on service improvement is unclear. The council has demonstrated focus on some matters of local importance, for example through the reorganisation of schools in Exeter and the related PFI initiative and on domestic violence where the council is on course to meet its LPSA targets. Capacity The councils financial management continues to develop and is firmly centred upon a rolling medium term financial strategy and greater coordination with its risk management strategy. Greater integration is needed with risk management to ensure that all significant risks to the councils funding capacity are costed. The council is standing firm in preserving capacity within the social services budget to re-shape aspects of service. The council has carried out a best value review of workforce planning. Many of the actions have been implemented but the workforce planning implication of corporate and service plans are not routinely considered. Levels of sickness across the council have improved and the council has exceeded its target in this area. The council has yet to successfully address the high levels of both staff turnover and sickness identified in the 2003 report on social services. The council has approved a framework for the governance of partnerships which seeks to ensure that all partnerships have appropriate terms of reference. It is not yet clear what impact this work has had on ensuring that the councils participation in partnerships is targeted to those areas that contribute towards delivering corporate objectives.  Annual Audit and Inspection Letter - 2004  
There are examples of successful work to increase capacity. The council has successfully established a Childrens Trust which is facilitating partnership working. Also the council is one of thirteen authorities involved in the Devon Improvement Group which has secured £1.13 million pounds in government grant to increase skills and capacity. Performance Management The council has developed a stronger performance management framework which includes key objectives, action plans and targets. The reporting of performance has increased and there are examples of where performance information has been used successfully to turn around services that were failing to meet targets. One example is in relation to children looked after by local authorities and the stability of placements. Although the council took some action in relation to the LPSA targets for passenger transport, many areas of the LPSA are not going to be delivered. This may be a weakness in relation to the original targets rather than in relation to monitoring. The council is planning to implement a new electronic performance management system in the coming months. This will provide greater support to the performance monitoring and management process by giving greater and more timely access to performance data during the course of the year and placing less reliance upon year-end regimes. The introduction of the new Carefirst system in 2003 for social services is already providing improved performance information. Achievement The council has delivered improvements in some key service areas, for example:  72 per cent of indicators across all services where comparisons can be made, show improved performance;  for education further improvements were delivered, with 68 per cent of performance indicators improving overall; for social services only four indicators were comparable with the previous year but all four showed improvement over 2002/03; and
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 recycling and composting rates have shown further improvement. However, there are some areas where improvements are still needed.  Only five of the thirteen LPSA themes are likely to have their targets met in full with education being a key area where targets will not be achieved.  11 per cent of indicators are amongst the worst performing 25 per cent of councils nationally. The council has also secured improvements in relation to developing a tourism website marketing Devon in relation to environmental themes, supported deprived towns and set up a commissioning partnership for the provision of joint substance misuse prevention and treatment services. Significantly however performance in social care services has declined with the service now ranked as a one-star service compared to its previous two-star rating. Investment The council has made some significant improvements in corporate arrangements for procurement. These have included the restructuring of Devon Purchasing and the development of a central specialist procurement service. The council has also introduced new framework arrangements for the governance of of partnerships and the assessment of partnership performance. The council has strengthened its approach to diversity by developing an equalities steering group. This is supporting work in relation to engaging with hard to reach groups and improving access to services. It has also supported the development of affordable housing initiatives and has strengthened the capacity of the voluntary sector through providing extra funding and resources. Future Plans The councils strategic plan which outlines its ambitions and priorities provides a clear strategic direction for the council. In addition the community strategy sets out longer term goals for the local community and to which the council will contribute.  Annual Audit and Inspection Letter - 2004  
ANNUAL AUDIT AND INSPECTION LETTER   Devon has been chosen as one of 21 councils to pilot local area agreements which will strengthen partnership working arrangements. As outlined above, it is also part of the Devon Improvement Group which has secured government money to increase capacity to deliver improvement within the participating councils. The council has recognised the need to ensure that resources are focused on areas of priority and are working to ensure that all improvement plans are aligned to these priorities. Other performance work Procurement In common with other councils, Devon County Council spends a significant proportion of its total resources on purchasing goods, services and works from third parties. Procurement expenditure was approximately £401 million in 2003/04. Procurement is, therefore, of central importance to the achievement of strategic aims and to improving the quality and cost-effectiveness of local services. As part of our performance audit work for the year, we carried out a review of the councils procurement arrangements. We found that these have a number of strengths. In particular:  high-value/high-risk procurements are carried out by experienced technical and professional staff with specialist knowledge of service-user and client-side requirements in their fields;  the council delivers a wide range of services and capital projects through partnering and collaboration with organisations in the public, private and voluntary sectors, using a variety of delivery models;  the council adopts major new service delivery arrangements when there is a clear business case for doing so;
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  processes for letting and managing major contracts are generally effective and the council has adopted procurement best practice in several areas  for example, in the case of some construction contracts;  Devon Purchasing, the councils purchasing unit, is price-competitive for most goods and supplies, and well-regarded by most internal and external customers; and  the council expects to achieve 100 per cent e-enablement of procurement interactions by the end of 2004/05, in line with the national target.  Following internal reviews, the council has taken a number of steps to strengthen procurement arrangements. These include:  updating the procurement strategy;  developing a dedicated intranet site, with a range of procurement-related information and toolkits;  implementing new business strategies for Devon Purchasing that are designed to strengthen the units trading position in an increasingly competitive market-place; and  introducing corporate procurement standards. Although the council has strengthened procurement arrangements during the past two years, it recognises that there is scope for improvement in several key areas. In particular:  the council has made only limited progress in aggregating high-volume, low-value purchases;  the council has not monitored the implementation of all the action plans and targets that have been developed for procurement; and  contract standing orders and financial regulations have not been updated to reflect best value principles and procurement best practice. We have submitted our detailed report to the council, together with an action plan that addresses the issues raised. We will monitor progress in implementing this action plan as part of next years audit.   Annual Audit and Inspection Letter - 2004  
ANNUAL AUDIT AND INSPECTION LETTER   Performance information We have issued an unqualified opinion on your best value performance plan for 2004/05. We have completed our audit of your best value performance plan for 2004/05 and issued our statutory report. We concluded that the report was compliant with the relevant legislation and contained all stipulated information. Performance indicators included in the plan were generally accurate and procedures were more robust than the previous year. Fewer errors were found, but 14 PIs were amended during the audit and three were qualified for insufficient supporting information. We found that quality assurance arrangements had improved within the Council to support the integrity of the data that underpins the BVPIs, thereby supporting the reliability and accuracy of the reported BVPIs both in the BVPP and throughout the year. However, there is still scope for the arrangements to be improved, which we hope will be the case with the advent on the new collation system in place for next year. Other Audit Commission inspections Waste management The overall assessment arising from this inspection is that the council provides good waste management services and there are excellent prospects for improvement, as shown in Exhibit 2.              
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 EXHIBIT 2 THE WASTE MANAGEMENT INSPECTION SCORING CHART A good service that has excellent prospects for improvement Prospects for improvement?            Poor Fair Good Excellent Excellent Promising Agood servic Uncertain Poor  Source: Audit Commission Waste Management inspection report The main strengths noted are:  the council is delivering value for money in providing high quality waste management services;  there is an excellent track record of improving the service by working with community and voluntary sector groups and by attracting significant external grant aid;  partnerships with the district councils are good and improving; and  the councils clear commitment to the waste management service is resulting in the overall amount of household waste reducing with high recycling levels. To assist the council rise to the challenge of continuous improvement we recommend that it:  improves the way it manages its own waste;  works more closely with the district councils in Devon to establish a longterm vision for the service and to provide a more uniform waste collection service across the county; and  improves the value for money of the countywide waste management service by working with its partners to make best use of available resources.  Annual Audit and Inspection Letter - 2004  
ANNUAL AUDIT AND INSPECTION LETTER   Working with other inspectorates and regulators 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. These include:  Ofsted;  Commission for Social Care Inspection (CSCI);  Benefits Fraud Inspectorate (BFI);  DfES; and  Local Government Office contact. We share information and seek to provide joined up regulation to the council. During the last year the council has received an assessment of its social care services by the Commission for Social Care Inspection (CSCI). CSCI found that there have been improvements in services for Children and Families and for Adults and Older people. However there are also a number of areas for improvement in both these services. The overall assessment of the service is one-star, which is a reduction from two-stars awarded last year.   Accounts and governance Audit of 2003/04 accounts We gave an unqualified opinion on the council s accounts on 17 November 2004.  Matters arising from the final accounts audit Members approved the councils annual accounts on 30 July 2004 well in advance of the deadline set by government of 31 August. The accounts include some additions and amendments to the form of the statements used in prior years to comply with revised accounting requirements. The most notable of these is the inclusion of a statement on internal control.
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We identified a number of errors during the audit, all of which were relatively minor and all have been corrected where appropriate. None of these are sufficiently significant to be brought to the specific attention of members. Timeliness in producing the accounts will become increasingly important over the next few years as the deadline for completion of the accounts is brought forward to 31 July for 2004/05 and 30 June for 2005/06 in line with the Governments requirement. Officers are actively planning to meet the requirements and we will be discussing with officers their preparations. Report to those with responsibility for governance in the council We are required to report to those charged with governance certain matters which are relevant to our opinion on the accounts before we issue an opinion. Nothing has arisen during the audit of your accounts necessitating such  a report.  Financial standing The council has continued to strengthen its financial position and overall has performed well against its budget. The councils county fund outturn for 2003/04 showed a surplus of £1.5 million for the year allowing it to achieve an increase of that sum in its working balances as planned. This brings the level of working balances to £12.9 million equivalent to 2.1 per cent of the amount to be met from government grant and council tax and close to the sum the council has identified through risk management as prudent of £13 million. Taken with the budget carry forward of £4.6 million it puts the council in a stable financial position. In addition to the general working balance the council has increased the level of earmarked reserves it holds to £20.5 million, including £5.6 million in the transition fund held to finance costs of restructuring service delivery and working practices. Schools balances of £10.9 million show little movement since 2002/03.
 Annual Audit and Inspection Letter - 2004  
Exhibit 3 summarises the councils financial performance for 2003/04: EXHIBIT 3 COMPARISON OF OUTTURN TO BUDGET The council has performed well in holding spending to within budget overall   Actual Actual Budget 2002/03 2003/04 003/04 (£m) (£m) (£m) Net revenue 541.1 615.0 616.5 spend Surplus for 5.2 1.5 1.5 year  County Fund 11.4 12.9 12.9 balance County Fund 2.1% 2.1% 2.1% balance as a percentage of net budget spend Budget carry 5.3 4.6 0 forward Net 4.2 6.6 4.6 contribution to reserves Earmarked 14.3 20.5 reserves Schools 10.7 10.9 balances  Source: Devon County Council budget book and statement of accounts 2003/04 While the councils financial performance for the year falls inside the identified best practice outturn level of 1 per cent of net budget expenditure there are greater contributions to earmarked reserves than planned and a budget carry forward. A significant additional contribution to reserves arose from underspending on waste disposal attributed to a slowing in the growth of waste associated with a Waste Minimisation campaign.     
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Further contributions to working balances of £1 million and to earmarked reserves of £8.6 million are budgeted in 2004/05. Projections of overall outturn in the current year indicate that there is potentially a full-year underspend of £0.25 million, which would result in the council achieving the level of working balance that it has identified as prudent. However, particular cost pressures continue upon aspects of the social services budget where an overspend of £1.2 million is projected and in education where the projected overspend is £0.96 million. The council will need to maintain rigorous monitoring and management of its finances and should develop further the links to its improved risk management processes to ensure that the potential financial impact of major corporate risks are fully costed in its MTFS and periodic monitoring reports to management and members. Systems of internal financial control Our review of the authoritys systems of internal control has identified no areas of significant weakness that need to be brought to members attention. Timely action has been agreed with officers on detailed points in our interim report.  Supporting people From 1 April 2003 the council took on responsibility for delivering the Supporting People programme from various bodies with separate funding streams. Officers are aware of the need for, and have a programme for the development of, additional corporate governance controls such as terms of reference for the Joint Commissioning Body, completion of a joint assessment of need and risk, consideration of the controls over referral and a programme of review of the service provision acquired from previous providers. An inspection of this service is planned to be carried out in 2005.
 Annual Audit and Inspection Letter - 2004  
Partnerships with health bodies Partnerships with health bodies continue to develop with the introduction of the first pooled budget for the provision of equipment to the disabled in 2003/04 and the intention to develop a further pool for the Learning Disability service in 2005/06; currently a partnership agreement is the precursor to a pool. We have examined the controls in the pooled budget and agreed with officers that an assessment of the adequacy of the contributions from the partners to the pool should be made to ensure the funding is sufficient. In respect of the Learning Disability partnership we have agreed that partners will document and approve all protocols, procedures, systems and ancillary contracts to be operated by the partnership prior to the commencement of pooled funding. Issues that will be considered include:  eligibility criteria;  performance indicators, targets and monitoring arrangements;  accounting arrangements including processes for costing the care services, monitoring of cost, treatment of over and underspends;  governance arrangements; and  exit strategy. Auditor scored judgments As part of the annual CPA refresh we update our assessment of key aspects of your governance and financial administration using a scored criteria developed by the Audit Commission. The results of this update show that the council has improved overall, most notably in the timeliness and quality of your financial statements and in risk management. Further potential for improvement exists through better financial quantification of major risks in financial monitoring reports and by making these reports available to members online.     
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 Standards of financial conduct and the prevention and detection of fraud and corruption We have not identified any significant weaknesses in the overall control framework. We found that, overall the authority has adequate arrangements in place to prevent and detect fraud and corruption. Internal audit continues to meet appropriate professional standards. This enables reliance to be placed on its work when considering our responsibilities under the Code of Audit Practice. Legality of transactions The council has established adequate arrangements to ensure the legality of transactions that may have a financial consequence. Our review of the councils overall control environment, minutes and consideration of new legislation and current local government issues did not identify any major areas of concern. We also note that during the year neither the councils monitoring officer nor the S151 officer exercised their formal powers associated with unlawful or potentially unlawful action. We have received a number of questions from local government electors and responded to these throughout the year. No formal objections have been lodged.
 Annual Audit and Inspection Letter - 2004  
Other work Grant claims The number of claims requiring audit certification and audit fees have remained similar over the last two complete audit years. In accordance with Strategic Regulation, the Audit Commission has adopted a more risk-based approach to the certification of grant claims. With effect from 2003/04 the smaller claims have either not been subject to audit or have received a lighter touch. The approach to larger claims is determined by risk and the adequacy of the councils control environment. The councils arrangements for managing and quality assuring grant claims submitted for audit has improved in recent years with the number of reports falling from 22 in 2001/02 to eight in 2002/03. National Fraud Initiative (NFI) The council took part in the Audit Commissions NFI 2002/03. The NFI, which is undertaken every two years, brings together data from local authorities, NHS bodies, government departments and other agencies, to detect a wide range of frauds against the public sector. Total savings from the 2002/03 exercise exceeded £83 million across the country. Internal Audit have followed up the data matches for Devon County Council. Their work has identified some weaknesses and errors that have been reported but no frauds have been identified. The Commission are repeating the exercise this year and will again collect payroll, pensions, housing benefits, student loan and housing rents data from Authorities. Alongside the core exercise a number of pilot initiatives are being undertaken at selected sites. These are focused on risk areas that were highlighted by Authorities and include payments made to privately run care homes, abuse of blue badge parking permits, serial insurance claimants and duplicate payments to suppliers. These pilot areas, if they prove effective, will be incorporated into future NFI exercises.
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  Looking forwards Future audit and inspection work We have an agreed plan for 2004/05 and we have reported in this letter those aspects that have already been completed. The remaining elements of that plan, including our audit of the 2004/05 accounts, will be reported in next years Annual Letter. Our planned work, together with that of other inspectorates, is included on both the Audit Commission and LSIF (Local Services Inspectorates Forum) websites. We have sought to ensure, wherever possible, that our work relates to the improvement priorities of the council. We will continue with this approach when planning our programme of work for 2005/06. We will seek to reconsider, with you, your improvement priorities in the light of the latest CPA assessment and your own analysis, and develop an agreed programme by 31 March 2005. We will continue to work with other inspectorates and regulators to develop a co-ordinated approach to regulation. Revision to the Code of Audit Practice The Audit Commission has consulted on a revised Code of Audit Practice for application to the audit of the 2005/06 accounts. The new Code, which will be laid before Parliament in January 2005, is designed to secure:  a more streamlined audit, which is proportionate to risk and targeted on areas where auditors have most to contribute to improvement;  a stronger emphasis on value for money, focusing on bodies' corporate performance and financial management arrangements (rather than individual services and functions); and  better and clearer reporting of the results of audits. Further details will be provided in the Audit and Inspection Plan 2005/06.  Annual Audit and Inspection Letter - 2004  
CPA 2005 and beyond The Audit Commission has also consulted on a new framework  for CPA in 2005 and beyond. The main changes proposed are as follows:  rationalization of service blocks;  achievement assessment element of Corporate Assessment to be driven by review of Community Plan and shared priority themes;  move away from rigid numerical model, to one based on rules;  Corporate Assessments to be undertaken on rolling programme, integrated with Joint Area Reviews of children and young people;  stronger focus on service delivery for users and customers; and  more robust and explicit view of vfm and cost-effectiveness.   Closing remarks This letter has been  discussed and agreed with officers on 10 December 2004. A copy of the letter will be presented at the executive on 18 January 2005. I would like to take this opportunity to express my appreciation for the councils assistance and cooperation. Availability of this letter This letter will be published on the Audit Commissions website at www.audit-commission.gov.uk , and also on the councils website.       Alun Williams District Auditor and Relationship Manager  January 2005      
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