17 March 2006 REDDITCH BC Annual Audit and Inspection Letter

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Annual Audit Letter Date Last saved: 17/03/2006 17:53:00 Annual Audit and Inspection Letter Redditch Borough Council The Audit Commission is an independent body responsible for ensuring that public money is spent economically, efficiently and effectively, to achieve high-quality local services for the public. Our remit covers around 11,000 bodies in England, which between them spend more than £180 billion of public money each year. Our work covers local government, health, housing, community safety and fire and rescue services. As an independent watchdog, we provide important information on the quality of public services. As a driving force for improvement in those services, we provide practical recommendations and spread best practice. As an independent auditor, we ensure that public services are good value for money and that public money is properly spent. Document Control Author Audit Commission KPMG LLP Filename Redditch BC AAIL 2004/2005 Status of our reports to the Council Our reports are prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission. Reports are prepared by appointed auditors and addressed to members or officers. They 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. Copies of this report If you require ...

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• Publié par: Licod
• Nombre de lectures: 26
• Langue: English

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Annual Audit Letter

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Last saved: 17/03/2006 17:53:00

Annual Audit and Inspection Letter

Redditch Borough Council

 

 

 

                   

 

The Audit Commission is an independent body responsible for ensuring that public money is spent economically, efficiently and effectively, to achieve high-quality local services for the public. Our remit covers around 11,000 bodies in England, which between them spend more than £180 billion of public money each year. Our work covers local government, health, housing, community safety and fire and rescue services. As an independent watchdog, we provide important information on the quality of public services. As a driving force for improvement in those services, we provide practical recommendations and spread best practice. As an independent auditor, we ensure that public services are good value for money and that public money is properly spent.    

Document Control Author Filename

Audit Commission KPMG LLP Redditch BC AAIL 2004/2005

Status of our reports to the Council Our reports are prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission. Reports are prepared by appointed auditors and addressed to members or officers. They 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. 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 0845 056 0566.

© Audit Commission 2005 For further information on the work of the Commission please contact: Audit Commission, 1st Floor, Millbank Tower, Millbank, London SW1P 4HQ Tel: [phone] Fax: [phone] Textphone (minicom): 020 7630 0421 www.audit-commission.gov.uk

Annual Audit and Inspection Letter │ Contents 3 

Contents  Key messages Council performance Accounts and governance Other work Looking forwards Closing remarks Appendix 1  Background to this letter Appendix 2  Audit and Inspection reports issued Appendix 3  Audit and Inspection fee Appendix 4 - Current year recommendations Appendix 5 - Follow up of prior year recommendations  

4  6   8   14   15   16   17   19   20   21   22  

Redditch Borough Council

4Annual Audit and Inspection Letter│Key messages

Key messages

The purpose of this letter 1 This Annual Audit and Inspection Letter (AA&IL) for Members, which incorporates the Annual Audit Letter, is presented by Redditch Borough Councils (The Council) Relationship Manager, Kristine Goodman of the Audit Commission and the Appointed Auditor, KPMG LLP (Jon Gorrie the Engagement Director). The letter summarises the conclusions and significant issues arising from the 2004/05 audit plan and inspection programme. 2 Both the Audit Commission and KPMG LLP (KPMG) have issued separate reports during the year having completed specific aspects of the audit and inspection programme. These reports are listed at Appendix 2 for information. 3 Auditors responsibilities are summarised in the Audit Commissions statement of key responsibilities of auditors. The responsibilities of Audit Commission Inspectors are detailed in section 10 of the Local Government Act 1999. The contents of this Letter should be viewed in the context of that more formal background.  4 expedite the timeliness of reporting its audit findings for 2004/05,In order to KPMG has produced an Interim and Final Accounts Memorandum in August 2005 and an Interim Management Letter in January 2006. KPMG has not included in this report the detailed findings from those reports but have included the summaries and conclusions.

Council performance 5 RELATION MANAGER TO COMPLETE

Accounts and governance issues 6 The Council produced its financial statements within the statutory deadline and KPMG issued an unqualified opinion on 7 September 2005. 7 KPMG presented an Interim Management Letter to the Council in January 2006 which set out the work of its audit across all of its objectives except for the Use of Resources work which was presented to the Council in a separate report in March 2006. The table below presents the final scores issued to the Council from KPMG's work on the Key Lines of Enquiry and Use of Resources. Element Assessment Financial reporting 3 out of 4 Financial management 2 out of 4

Redditch Borough Council

Annual Audit and Inspection Letter │ Key messages 5 

Element Assessment Financial standing 2 out of 4 Internal control 2 out of 4 Value for money 2 out of 4 Overall 2 out of 4 8 The Council's overall level 2 score represents "adequate performance".

Action needed by the Council 9 The Council should: • the recommendations raised in KPMG's Interim Management implement Letter; and • review the actions required to improve the Council's Use of Resources score and develop action plans on those areas the Council deems appropriate.

Redditch Borough Council

6Annual Audit and Inspection Letter│Council performance

Council performance RELATIONSHIP MANAGER TO COMPLETE

Direction of travel report 10 Anywhere DC was assessed as [Excellent/Good/Weak/Fair/Poor] in the Comprehensive Performance Assessment carried out in [year]. These assessments have now been completed in all district councils with the following results. Figure 1 Overall performance of district councils in CPA Three times as many district councils are rated Good or Excellent than Poor or Weak Overall performance of district councils in CPA 100 86  86 80 60 40 20 9 0 poor weak

29

fair

28

good excellent

  Source: Audit Commission 11 assessment, the Council has identified its priorities for improvementSince the and we have been working with the council as it seeks to improve further. [Guidance - include commentary on the councils progress and Direction of Travel in relation to its priorities for improvement. The commentary should not provide a DoT score or label or follow the KLOEs we have for STCC. Paragraphs in this section constitute the formal reporting on DoT. There should be no other, separate report unless the council is poor or weak and we have already produced a progress report. Any performance audits or inspections (including Housing Inspections - liaison is needed with LHIs on these) that relate to improvement priorities or other aspects of Direction of Travel assessment should be reported, or at least referred to here, otherwise such work should be included below.]

Redditch Borough Council

Annual Audit and Inspection Letter │ Council performance 7 

Other performance work Best Value Performance Plan (BVPP) 12 The Council published its comprehensive Best Value Performance Plan before the 30 June deadline. KPMG issued an unqualified opinion on the BVPP on 14 December 2005 and no statutory recommendations were identified to which the Council is required to respond. Best Value Performance Indicators (BVPIs) 13 audit of the Council's Best Value PerformanceKPMG satisfactorily completed its Indicators during which the Council was required to make a small number of audit adjustments. 14 KPMG issued an unqualified opinion on the Councils systems for compiling its 2004/05 BVPIs and the accuracy of the Audit Commission's selected BVPIs on 7 October 2005. 15 arising from KPMG's audit of the BVPP and BVPIs wereThe detailed findings reported   in its   Interim Management Letter.

Other Audit Commission inspections RELATIONSHIP MANAGER TO COMPLETE

Redditch Borough Council

8Annual Audit and Inspection Letter│Accounts and governance

Accounts and governance

Audit of 2004/05 accounts 16 accounts are an essential means by which the Council dischargesThe published its stewardship of the public funds at its disposal and its financial performance in the use of those resources. 17 The 2004/05 Statement of Accounts was approved by Members before the statutory deadline of 31 July 2005 which allowed KPMGs audit of the accounts to take place during August 2005 with an unqualified opinion issued on 7 September 2005. 18 The timeliness in producing the accounts will become increasingly important next year as the deadline for completion of the accounts continues to be brought forward in line with the Whole of Governments Accounts (WGA) timetable. KPMG will continue to work closely with the Council to ensure that it meets the deadline. 19 final accounts audit were discussed in a combinedThe matters arising from the Interim and Final Accounts Memorandum issued by KPMG in August 2005.

Financial standing 20 the adequacy of the arrangements the CouncilDuring the year, KPMG reviewed has in place to ensure that its financial standing is soundly based. KPMG has reported and made recommendations around the Council's financial management and financial standing in its Interim Management Letter including: • that there are no significant variations between the original budget Ensuring and final outturn caused by unrealistic budget setting.  Reviewing the Council's maintenance and management services budget to • ensure there are no significant over-spends in the future. • Reviewing the performance management of individual capital projects at the project implementation stage which is where the main areas of slippage have previously occurred. 21 KPMG reported in its Interim Management letter that the Council's deficit of £0.21million was £1.13million less than its original general fund revenue budget, forecast £1.34million.

Systems of internal financial control 22 KPMG is required to consider whether the Council has adequate arrangements in place to satisfy itself that its systems of internal financial control are adequate and effective.

Redditch Borough Council

Annual Audit and Inspection Letter │ Accounts and governance 9 

23 KPMGs work did not identify any significant weaknesses in the overall control framework for the systems of internal financial control and reported its findings in its Interim and Final Accounts Memorandum. 24 KPMG also reported on the Council's progress in implementing risk management in its Interim Management Letter and have no other issues to raise recommending that: •that risk management remains a key issue to the Council should ensure address and ensure that it is embedded in its day-to-day operations; and • Council should consider incorporating its performance management the framework with risk management to create a culture of risk awareness which is linked to its performance.

Standards of financial conduct and the prevention and detection of fraud and corruption 25 KPMG is required to review the adequacy of the Council's arrangements to manage its affairs in accordance with proper standards of financial conduct and to prevent and detect fraud and corruption. 26 It remains the Council's management's responsibility to ensure that there are appropriate controls in place to prevent loss through fraud and error and to ensure that appropriate governance arrangements are in place and operating satisfactorily. 27 KPMG reported its findings originally in its Interim and Final Accounts Memorandum and updated its assessment in its Interim Management letter. KPMG has not identified any significant weaknesses in the Councils arrangements to prevent and detect fraud and corruption.

Legality of transactions 28 KPMG is required to review the arrangements that the Council has in place to identify whether transactions that might have a significant financial consequences and contracts that it enters into are legally sound. 29 As reported in its Interim Management Letter, KPMG has not identified any significant weaknesses in the framework established by the Council for ensuring the legality of its significant financial transactions.

Electors' Questions and Objections 30 the Audit Commission Act 1998 provide local electors withSections 15 and 16 of an annual opportunity to inspect the accounts of a local authority and subsequently, to put questions and/or objections relating to those accounts to the external auditor. Any such representations must be resolved prior to the closure of the audit.

Redditch Borough Council

10Annual Audit and Inspection Letter│Accounts and governance

31 KPMG can report that it has not received any questions or objections on the 2004/05 accounts from local authority electors under Sections 15 and 16 of the Audit Commission Act 1998.

Assessment  3 out of 4 2 out of 4 2 out of 4 2 out of 4 2 out of 4 2 out of 4

Use of resources judgements 32 The Use of Resources assessment is a new assessment which focuses on financial management but links to the strategic management of the Council. It looks at how financial management is integrated with strategy and corporate management, supports council priorities and delivers value for money. It will be carried out annually, as part of each council's external audit. KPMG and the Audit Commission anticipate the Use of Resources judgements will form part of the future CPA framework. 33 assessed and scored the Councils arrangements in five areas as theKPMG has table shows. Table 1 Council's assessment   Element Financial reporting Financial management Financial standing Internal control Value for money Overall (Note: 1=lowest, 4=highest) 34 has drawn on the above work andIn reaching these judgements KPMG supplemented this with a review against specified Key Lines of Enquiry. 35 KPMG reported the findings to Members in March 2006 which included references to the improvements needed to progress to the next level. The most significant area where further development is needed is risk management and its incorporation into the various aspects of the Council's operations, which could be facilitated by devolving responsibility for risk management to a sub-committee or steering group. 36 to help the Council move to the nextThe other headline areas for development level are summarised in the table below.    

Redditch Borough Council

Key Line of Enquiry Financial reporting

Financial management 

Financial standing

Annual Audit and Inspection Letter │ Accounts and governance 11 

Good Practice Points

The Council produced its accounts in accordance with its timetable and relevant accounting standards. The Council has strong closedown procedures in place and the Finance Department are prepared to meet future earlier accounts deadlines. Sufficiently skilled and helpful staff were available throughout the audit to deal with any additional queries. Redditch has the main elements of a Medium Term Financial Strategy (MTFS) but still needs to demonstrate this is driven by a risk management framework. The Council sets a balanced budget each year based on projections about pay, inflation, and known service developments. The Council also manages performance against budgets and manages its asset base and capital programme effectively.

The Council exercises adequate budgetary control procedures that allows it to manage any variances if and when they occur and develop action plans to deal with them. The Council also shows some awareness of the impact of the budget on reserves and balances. It reports formally to Members in line with the Local Government Act 2003 and CIPFAs Treasury Management Code of Practice. The Council has managed to retain its debt-free status.

Areas for development

The Council should establish a clear process of consultation with a range of stakeholders to establish their requirements in respect of the publication of summary accounts or an annual report. The Council needs to develop and integrate the business and financial planning process by ensuring that budgets are linked to risk assessments of material items of revenue and capital income and expenditure, incorporating lessons learned from previous years. The Council should also introduce regular monitoring and reporting of its progress in achieving planned savings and efficiency gains. The Council should demonstrate that the minimum level of revenue balances is based on a risk assessment, linked to the Medium Term Financial Strategy and clearly illustrates why that level of balances is required. The Council should also monitor the costs of recovering debt and the costs of not recovering debt promptly. This

Redditch Borough Council