RU001 - Annual Audit and Inpsection Letter

RU001 - Annual Audit and Inpsection Letter

-

Documents
13 pages
Lire
Le téléchargement nécessite un accès à la bibliothèque YouScribe
Tout savoir sur nos offres

Description

2004 Annual Audit and Inspection Letter Rugby Borough Council INSIDE THIS LETTER PAGES 2 - 9 • Executive summary • Key messages • Council performance • Accounts and governance • Other work • Looking forward • Closing remarks PAGES 10 - 1 Appendices • Appendix 1 – Audit and inspection reports issued • Ax 2 – Scope of audit and inspection • Appendix 3 – Audit and inspection fee Reference: RU001 – Audit and Inspection Letter Date: December 2004 2004 ANNUAL AUDIT AND INSPECTION LETTER These include: • providing leadership through the Local Executive summary Strategic Partnership; • supporting broad ambitions with detailed The purpose of this letter actions; • moving resources to match priorities; This is our audit and inspection ‘Annual Letter’ for Members which incorporates the Annual • developing a corporate approach to Audit Letter for 2003/04, and is presented by consultation and engagement in deciding the Council’s Relationship Manager and District ambitions and priorities; Auditor. The letter summarises the conclusions • engaging with those who are economically and significant issues arising from our recent or socially excluded; audit and inspections of the council. • ensuring that scrutiny panels provide focus We have issued separate reports during the and clarity for members and officers; year. • consistently making the most of the council’s These reports are listed at ...

Sujets

Informations

Publié par
Nombre de visites sur la page 65
Langue English
Signaler un problème
2004    Annual Audit and Inspection Letter Rugby Borough Council
I N S I D E T H I S L E T T E R
P A G E S 2 - 9  Executive summary  Key messages  Council performance  Accounts and governance  Other work  Looking forward  Closing remarks
P A G E S 1 0 - 1 Appendices  Appendix 1 – Audit and inspection reports issued  Appendix 2 – Scope of audit and inspection  Appendix 3 – Audit and inspection fee                        Reference: RU001 – Audit and Inspection Letter Date: December 2004  
 
 2004  
Executive summary The purpose of this letter This is our audit and inspection ‘Annual Letter’ for Members which incorporates the Annual Audit Letter for 2003/04, and is presented by the Council’s Relationship Manager and District Auditor. The letter summarises the conclusions and significant issues arising from our recent audit and inspections of the council. We have issued separate reports during the year. These reports are listed at Appendix 1 for information. Appendix 2 sets out the scope of audit and inspection. Appendix 3 provides information about the fees charged.  Key messages Council performance The council was assessed as fair in its recent Comprehensive Performance Assessment (CPA). It was recognised that the council:  delivers good service quality;  is investing to achieve its priorities; and  learns from others. It was also noted that: ‘The council has committed and motivated staff and councillors and has increased operational capacity through partnerships and operational funding.’ [CPA Report, page 4] Although there are positive messages for the council from its CPA there were also some significant areas of weakness. It is now important that there is a clear focus in the improvement plan in tackling issues identified in the report.
 Annual Audit and Inspection Letter - 2004  
 
 
ANNUAL AUDIT AND INSPECTION LETTER  
These include:  providing leadership through the Local Strategic Partnership;  supporting broad ambitions with detailed actions;  moving resources to match priorities;  developing a corporate approach to consultation and engagement in deciding ambitions and priorities;  engaging with those who are economically or socially excluded;  ensuring that scrutiny panels provide focus and clarity for members and officers;  consistently making the most of the council’s human resources;  implementing a fully effective performance management system directed at improving service performance in priority areas; and  developing robust strategies and future plans, setting out how the council will achieve its ambitions. We will work with you to develop an improvement plan to deliver these changes and tailor our programme of inspections to support this. Governance issues We assessed the council’s governance arrangements as adequate for the Auditor Scored Judgement element of the CPA. The 2003/04 accounts were delivered for audit promptly, and we issued an unqualified opinion on them. Change of auditor The council’s external auditor changed from the Audit Commission to KPMG from the financial year 2004/05. As the out going auditors we would like to thank members and officers for their help and support and wish the council well in meeting its future challenges. Action needed by the Council We have included four recommendations in this letter requiring action. These are included in the text.
Rugby Borough council – Page 2
 2004  
 Council performance The council was assessed as fair in its Comprehensive Performance Assessment. Priority now needs to be given to developing an improvement plan which tackles the weaknesses identified by the CPA team. CPA and improvement In October 2004 the council was assessed as fair under the Comprehensive Performance Assessment (CPA) framework. The CPA methodology considers ten themes grouped around four top level questions: EXHIBIT 1: CPA TOP LEVEL QUESTIONS AND THEMES Top level question Theme What is the council trying Ambition to achieve? Prioritisation Focus How has the council set Capacity about delivering its Performance priorities? management What has the council Achievement of quality of achieved/not achieved to service date? Achievement of improvement Investment In the light of what the Learning council has learned to Future plans  date, what does it plan to do next? The CPA concluded that the council is best at:  achieving quality of service;  investment; and  learning. The assessments and key conclusions under each of these themes are summarised below.
 Annual Audit and Inspection Letter - 2004  
ANNUAL AUDIT AND INSPECTION LETTER  
What is the council trying to achieve? Ambition - weaknesses outweigh strengths Although it was noted that the council has provided community leadership on specific issues, such as the Rugby airport proposal, it was concluded that the council does not have clear long term ambitions and is not providing leadership through the Local Strategic Plan. There is also a lack of detail about when and how aspirational ambitions will be achieved. Prioritisation weaknesses outweigh strengths -The council has maintained a sound financial position for a number of years. Although this is a position of strength it was noted that there is not a consistent matching of resources to priorities. This is particularly relevant to ensuring that capital expenditure plans support corporate objectives and priorities. The council does not have a corporate approach to consultation and engagement in determining ambitions and priorities and is aware that it is not engaging with economically or socially excluded people. Public involvement and consultation in the planning and delivery of services is also inconsistent, although some services have undertaken good consultation work. Focus - weaknesses outweigh strengths It was recognised that the council has put in place arrangements to help improve focus, but these are not yet fully effective. The consistent focus on town centre regeneration and providing decent homes was commented on favourably, but it was also noted that the overview and scrutiny process does not help the council stay focused. How has the council set about delivering its priorities? Capacity - weaknesses outweigh strengths The report states that: ‘The council has committed and motivated councillors, managers and staff.’ [CPA Report, page 14]
Rugby Borough council – Page 3
 2004  
However it was concluded that the council does not consistently make the most of its human resources and inconsistencies in training were cited. Corporate governance needs to develop further, both in respect of effective scrutiny (referred to above) and the clarity of portfolio holders’ roles and responsibilities. IT provision does not enable all services to be fully effective. The CPA report cites the housing and performance management systems as examples. The inadequacies of these systems has been recognised by the council and new systems are being procured. Performance management - weaknesses outweigh strengths We commented in last year’s letter that progress was being made with developing performance management. This progress was noted in the CPA but it was also concluded that the performance monitoring system is not yet fully effective. What has the council achieved/not achieved to date? Achievement in quality of service – strengths outweigh weaknesses In considering quality of service improvements the CPA noted:  forty four per cent of the 2002/03 performance indicators were in the top quartile;  in 2003/04, 50 per cent of respondents were satisfied with the way the council run things; and  three best value inspections achieved a score of ‘good’ and one ‘fair’. The report also provides a commentary on achievement in quality of service in five of the council’s priority areas.
 Annual Audit and Inspection Letter - 2004  
ANNUAL AUDIT AND INSPECTION LETTER  
EXHIBIT 2: QUALITY OF SERVICE IN PRIORITY AREAS Priority area Track record Affordable housing Mixed Borough development Good Customer services Mixed Environment Good Partnership and Mixed community engagement Achievement of improvement - weaknesses outweigh strengths The CPA conclusion was that the council has a mixed record of service performance improvement, but with significant weaknesses. It was noted that:  in 2002/03 performance declined or did not meet targets in some priority areas; and  two best value inspections assessed prospects for improvement as promising, whilst the other two rated prospects as ‘uncertain . The report also provides a commentary on achievement of improvement in five of the council’s priority areas: EXHIBIT 3: ACHIEVEMEN T OF IMPROVEMENT IN PRIORITY AREAS Priority area Track record Affordable housing Mixed Borough development Improving Customer services Mixed Environment Improving Partnership and Mixed community engagement       
Rugby Borough council – Page 4
 2004  
Investment -strengths outweigh weaknesses The CPA report notes that the council is investing in: customer services with the new contact  centre arrangements;  the environment with the ‘pride of place’ initiative and in street cleansing; and  initiatives to deal with urban deprivation and crime and disorder issues, along with its partners. It was recognised that major gaps in capacity were addressed with the 2003 restructuring and investment is being made in developing governance arrangements. There has however been insufficient investment in diversity and the target of CRE level 3 by July 2004 was not achieved. Although investment in ensuring disabled access to council buildings has an anticipated completion date of 2008 officers have pointed out that:  the programme is realistic and properly resourced;  all major public buildings already have full disabled access; and  temporary access measures are in place in all appropriate places pending completion of permanent works. The council is satisfied that it is meeting its obligations under the Disability Discrimination Act. In the light of what the council has learned to date, what does it plan to do next? Learning - strengths outweigh weaknesses Examples of the council learning from others include:  external expertise – the adoption of the IDeA’s community engagement criteria;  other local authorities – introducing public speaking at planning committees and kerbside recyclable collections;  partners – trying to deliver the outcomes from the first Crime and Disorder Reduction Strategy;
 Annual Audit and Inspection Letter - 2004  
ANNUAL AUDIT AND INSPECTION LETTER  
 local people – the ‘pride of place’ initiative began with two pilot communities; and  regulators – following inspections of the street cleansing and grounds maintenance best value reviews a public space co-ordinator was appointed. Although members and officers work well together internal cross department learning is not consistent. This has been recognised and the council is developing an organisational approach to learning.  Future Plans - weaknesses outweigh strengths It was concluded that: ‘Current strategies and future plans are not sufficiently robust to provide a clear picture of how the council is going to achieve its ambitions.’ [CPA Report, paragraph 119] This is recognised by the council and it is intended to put plans and strategies in place to support future capacity building. Social inclusion and engagement with stakeholders plans were found to be weak. As a result:  social inclusion is not developed in future planning; and  future engagement with stakeholders and communities is not consistently planned. Performance information The audit of 2003/04 performance information reported in the council’s 2004/05 Best Value Performance Plan was completed by KPMG. Seven (10 per cent) of the 2003/04 indicators reported in the Best Value Performance Plan did not meet the definitions. It is disappointing that this is the same number of failures as in 2002/03 and that three indicators were inadequately supported in both years.
Rugby Borough council – Page 5
 2004  
EXHIBIT 4 QUALIFIED PERFORMANCE INDICATORS BVPI Description 8 The percentage of undisputed invoices paid within 30 days* 66a Proportion of rent collected* 185 Percentage of appointments made and kept for responsive repairs. 76a Number of claimants visited, per 1,000 caseload. 79b Percentage of recoverable housing benefit overpayments due that were collected* 174 Racial incidents recorded by the LA per 100,000 population 175 Percentage of racial incidents that resulted in further action * Also qualified in 2002/03 Other performance work Implementing electronic government – follow up review The emphasis of the national e-government agenda is now on delivery. A third IEG Statement was submitted in November 2003. We followed up our previous recommendations to assess the council’s progress in delivering its e-government outcomes. We found that good progress had been made and recommended the following actions were taken:  monitoring to ensure programme control roles and progress management processes are complied with;  development of a corporate change management policy; and  issuing of the revised IT Security Policy and monitoring compliance.  
 Annual Audit and Inspection Letter - 2004  
ANNUAL AUDIT AND INSPECTION LETTER  
 Accounts and governance We have given your 2003/04 accounts an unqualified audit opinion. Your overall corporate governance arrangements are satisfactory in key areas. Audit of 2003/04 accounts We gave an unqualified opinion on the council’s accounts on 16 November 2004.  The accounts were delivered for audit by the agreed deadline and we were able to issue our opinion before the statutory deadline of the 30 November 2004. The 2003/04 accounts were the first requiring:  the full reporting of pension liabilities under Financial Reporting Standard 17; and  a Statement on Internal Control. Pension liabilities Rugby Borough Council is a member of the Warwickshire County Council pension fund and the Borough Council’s accounts report a pensions funding deficit of £7.7 million at 31 March 2004. Although this amount is not directly funded from Council Tax, it indicates that there is significant under funding that needs to be addressed. The Warwickshire Pension Fund is currently being re-valued by the actuary who will recommend revised employer’s contributions rates for all members of the fund effective from April 2005. The council’s revised contribution rates will be confirmed in January 2005. Statement on Internal Control The purpose of the statement is to document how the council’s controls, and in particular its risk management function, has operated to manage risks to a reasonable level. 2003/04 was the first year that this statement was required and it was recognised that a transitional disclosure would be required. The council’s statement identifies three internal control issues relating to internal audit that need action during 2004/05.
Rugby Borough council – Page 6
 2004  
Recommendation R1 The council needs to ensure that the control weaknesses identified in the Statement on Internal Control are ade uatel addressed in 2004/05. Financial standing The council continues to manage its financial position well. The strong financial base that the council has established and maintained was noted in its CPA. In considering the council’s capacity it was noted that: ‘External auditors have confirmed that the council has adequate financial capacity with sound financial management……This ensures that services have a sound financial base to work from.’ [CPA report, paragraph 47] It was also noted when considering investment that:  the medium term financial strategy outlines the principles of allocating resources to corporate and service priorities; and  a base budget review is in progress. Budget setting Budgeted expenditure for 2004/05, including parish precepts, is £11. 0 million (compared to £11.1 million in 2003/04). The revenue budget includes £820,000 planned use of balances and growth items totalling £322,000. Members were issued with a booklet prior to council tax and budget setting which included details of:  current position of the General Fund Capital and Revenue Budget;  planned spending;  uncommitted growth items;  spending restrictions;  earmarked reserves and revenue balances;  general fund capital budget 2004/05 onwards;  prudential indicators; and  calculation of council tax. We noted this good practice.
 Annual Audit and Inspection Letter - 2004  
ANNUAL AUDIT AND INSPECTION LETTER  
There was some evidence of risk assessment of uncommitted growth items in the 2004/05 budget process but strategic risks were not fed into the 2004/05 budget setting process. Recommendation R2 Budget setting should demonstrate how strategic risks are considered in making spending decisions. Capital budgeting We assessed capital budgeting as good as part of the Auditor Scored Judgement for CPA. This was because the council has:  a good asset management plan and capital strategy (as assessed by the Office for the Deputy Prime Minister);  a capital strategy which links key capital schemes to the council’ corporate priorities and cross cutting objectives;  a capital programme is split between essential and desirable schemes; and  a scored capital appraisal process for individual projects – although this is not yet being used for all schemes. There is a clear linkage between the capital and revenue budgets, with the 2004/05 revenue budget including the revenue consequences of capital expenditure. Systems of internal financial control Internal Audit do not comply fully with the Internal Audit Code of Practice. New revenues IT systems are being implemented. Internal audit Internal audit have a key role in ensuring that sound systems of internal financial control are maintained and action taken when weaknesses are identified. As part of our work to support the Auditor Scored Judgement we reviewed the council’s internal audit function against the revised Code of Practice of for Internal Audit in Local Government. We concluded that of the ten standards internal audit complied fully with five and partially with the remaining five.
Rugby Borough council – Page 7
 2004  
The Statement of Internal Control, published with the 2003/04 accounts identifies the actions needed to improve compliance. These are:  adoption of an internal audit strategy;  integrating internal audit planning with corporate risk management; and  ensuring that members carry out the functions of an audit committee. Revenues IT systems The council’s new Revenues IT systems ‘went live’ in November 2004. This is a significant capital investment which should help to improve operational efficiency. These systems are key to the integrity of the council’s financial information and it is important that their post implementation operation is subject to audit testing and reporting. Recommendation R3 Members need ade uate internal audit assurance that the new Revenues IT s stems include adequate controls. Standards of financial conduct and the prevention and detection of fraud and corruption The Auditor Scored Judgement highlighted the need to review governance arrangements . The CPA found that although governance arrangements have been updated they are not fully effective. In assessing the governance arrangements for the Auditor Scored Judgement we looked for evidence that the council has arrangements in place to periodically review its governance arrangements against the CIPFA/SOLACE framework. These arrangements are not in place. Recommendation R4 The council needs to review its overnance arran ements a ainst the CIPFA/SOLACE framework.
Legality of transactions We have not identified any significant weaknesses in the council’s framework for ensuring the legality of its significant financial transactions.  Annual Audit and Inspection Letter - 2004  
ANNUAL AUDIT AND INSPECTION LETTER  
 
Other work Grant claims Over recent years the number of claims requiring audit certification has grown and audit fees have risen in line with this growth. 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 not been subject to audit or have received a lighter touch. The approach to larger claims has been determined by risk and the adequacy of the Council’s control environment. National Fraud Initiative The Council took part in the Audit Commission’s national fraud initiative (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 nationally from the 2002/03 exercise exceeded £83 million. 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.
Rugby Borough council – Page 8
 2004  
 Looking forward Change of auditors Under the Audit Commission’s policy of rotating appointed auditors we are handing over to the council’s new external auditors, KPMG. They have responsibility for the 2004/05 audit onwards. KPMG have an agreed audit plan for 2004/05 and we will work with them and the council to have a co-ordinated post CPA inspection programme. We will seek to ensure, wherever possible, that our work relates to the improvement priorities of the council when planning our programme of work for 2005/06. 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, focussing on 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  
ANNUAL AUDIT AND INSPECTION LETTER  
Closing remarks This letter has been  discussed and agreed with the Corporate Management Team. A copy of the letter will be presented at Cabinet. The council has taken a positive and constructive approach to our audit and inspection 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.    
 
   David Rigg Sandy McMillan District Auditor Relationship Manager  January 2005   Status of our reports to the council Our annual audit and inspection letter is prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission. Annual audit and inspection letters are prepared by relationship managers and appointed auditors and addressed to members and officers. They are prepared for the sole use of the audited and inspected body, and no responsibility is taken by the Audit Commission or its appointed auditors to any member or officer in their individual capacity, or to any third party.
 
Rugby Borough council – Page 9
 2004   
Audit and inspection reports issued  
   
Reports issued e-Government follow up 2004/05 Audit Plan Auditor Scored Judgement feedback CPA Report
 Annual Audit and Inspection Letter - 2004  
Date February 2004 March 2004 July 2004 October 2004
APPENDICES  
A P P E N D I X 1
Rugby Borough Council – Page 10
 2004   
Scope of audit and inspection Audit
APPENDICES  
A P P E N D I X 2
Our main objective as your appointed auditor is to plan and carry out an audit that meets the requirements of the Code of Audit Practice. We adopt a risk-based approach to planning our audit, and our audit work has focused on your significant financial and operational risks that are relevant to our audit responsibilities. Central to our audit are your corporate governance arrangements. Our audit is then structured around the three elements of our responsibilities as set out in the Code and shown in Exhibit 1.
EXHIBIT 1 THE THREE MAIN ELEMEN TS OF OUR AUDIT OBJECTIVES
 
Accounts  Opinion. Financial aspects of corporate governance  Financial standing.  Systems of internal financial control.  Standards of financial conduct and the prevention and detection of fraud and corruption.  Legality of transactions. Performance management  Use of resources.  Performance information.  Best Value Performance Plan.
 Annual Audit and Inspection Letter - 2004  
Rugby Borough Council – Page 11