SE005 Annual Audit Letter - FINAL
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audit 2003/2004 Annual Audit and Inspection Letter Selby District Council INSIDE THIS LETTER PAGES 2 - 9 • Key messages • Background • Council performance • Accounts and Governance • Other work • Looking Forwards • Closing remarks PAGES 10 - 11 Appendix 1 • Reports issued during 2003/04 Appendix 2 • Audit and Inspection fees Reference: SE005 Annual Audit Letter Date: November 2004 audit 2003/2004 ANNUAL AUDIT AND INSPECTION LETTER Other governance issues You adopted the CIPFA Solace framework in Key messages 2003 in its Code of Corporate Governance. Whilst partial monitoring takes place via the In the Comprehensive Performance Assessment audit panel it is not part of a coherent approach (CPA) reported in May 2004 we assessed the covering all aspects of the framework. Council as weak and reported the need to improve corporate performance and capacity In addition we have raised the following issues: and raise service performance levels. • Partnerships have been re-prioritised The Council has responded positively so far and although performance management systems has made progress in defining improvement are at an early stage of development. priorities and developing a change programme. • Risk management has progressed with strategic and operational risks identified Council performance although service and risk plans are not yet fully integrated. Compared with the previous year ...
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Extrait
Reference:
SE005 Annual Audit Letter
Date:
November 2004
Annual Audit and Inspection
Letter
Selby District Council
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Key messages
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Background
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Council performance
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Accounts and Governance
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Other work
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Looking Forwards
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Closing remarks
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Appendix 1
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Reports issued during 2003/04
Appendix 2
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Audit and Inspection fees
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ANNUAL AUDIT AND INSPECTION LETTER
Annual Audit and Inspection Letter 2003/2004
Selby District Council – Page
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Key messages
In the Comprehensive Performance Assessment
(CPA) reported in May 2004 we assessed the
Council as weak and reported the need to
improve corporate performance and capacity
and raise service performance levels.
The Council has responded positively so far and
has made progress in defining improvement
priorities and developing a change programme.
Council performance
Compared with the previous year 41 per cent of
your performance indicators recorded improved
services in 2003/04. Alongside these
improvements 33 per cent of your indicators
recorded declining performance and most of
your indicators are in the lower quartile
compared with other district councils.
The key findings of our work were:
•
Our re-inspection of housing still assessed
the service as one star (fair) but with
promising prospects for improvement, a step
forward on our previous assessment.
•
You have made considerable progress on
improving access to services through
computers, with increasing availability of
transactions via your web site.
•
The small improvements seen in Revenues
in 2003/04 may not be sustained in 2004/05
given further recruitment and retention
difficulties and the need to replace the
computer system. We note the plans you
have to deal with these issues.
Financial position
Financial reserves, whilst remaining high
compared with other authorities, have reduced
by 25 per cent over last three years and your
financial strategy recognises this pattern is not
sustainable. Initial indications are that 2005/06
position will be difficult with a potential budget
deficit of £1.5 million still to be addressed.
Other governance issues
You adopted the CIPFA Solace framework in
2003 in its Code of Corporate Governance.
Whilst partial monitoring takes place via the
audit panel it is not part of a coherent approach
covering all aspects of the framework.
In addition we have raised the following issues:
•
Partnerships have been re-prioritised
although performance management systems
are at an early stage of development.
•
Risk management has progressed with
strategic and operational risks identified
although service and risk plans are not yet
fully integrated.
Action needed by the Council
•
Finalise and deliver the improvement plan.
•
Focus on key service improvements in
priority areas.
•
Continue to work towards achievement of
the Government’s e-government targets
increasing access to services via the web.
•
Prioritise spending plans and develop a
sustainable medium term financial strategy.
•
Assess the adequacy and operation of the
governance framework.
•
Continue to develop Risk Management.
The purpose of this letter
This letter summarises the conclusions and
significant issues arising from our 2003/04 audit
and inspection programme and comments on
other current issues.
We have issued separate reports during the year
having completed specific aspects of our
programme. These reports are listed at
Appendix 1 for information.
The 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.
What we say in this letter should be viewed in
the context of that more formal background.
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ANNUAL AUDIT AND INSPECTION LETTER
Annual Audit and Inspection Letter 2003/2004
Selby District Council – Page
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Background to the audit and
inspection programme
To ensure councils receive a tailored seamless
service, integrated with the work of other
inspectorates, the Audit Commission appointed a
Relationship Manager for each Council. Your
Relationship Manager, Mark Kirkham, is the
Commission’s key point of contact with you and
he also acts as the interface between the
Commission and the other inspectorates.
Objectives of audit and
inspection
Audit
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.
Your corporate governance arrangements are
central to our audit which is structured around
the three elements of our responsibilities as set
out in the Code and shown in Exhibit 1.
EXHIBIT 1
The three main elements of our audit objectives
Accounts
•
Opinion.
Financial aspects of corporate governance
•
Financial standing.
•
Systems of internal financial control.
•
Standards of financial conduct.
•
Legality of transactions.
Performance management
•
Use of resources.
•
Performance information and BVPP.
Inspection
Inspection work is based around section 10 of
the Local Government Act 1999, which requires
us to carry out inspections that:
•
enable the Council and the public to judge
whether best value is being delivered;
•
enable the Government to assess how well
its policies are being implemented; and
•
identify failing services where remedial
action may be necessary.
Council Performance
Significant areas of weakness were highlighted
in our CPA assessment in May 2004. The Council
is starting to move forward to address these
weaknesses but much work is still needed.
Comprehensive Performance
Assessment (CPA) and
improvement
In May 2004 you were assessed as a Weak
Council. The CPA noted that you have a strong
political direction and progress will depend upon
chief officers working corporately and improving
outcomes for the public. You recognise this and
have established a Change Team and developed
a programme designed to attract significant
additional support from the ODPM. Improvement
priorities emerging are:
•
A single statement of priorities.
•
The operation of Strategic Management
Team.
•
The development of Elected Members.
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2003/2004
ANNUAL AUDIT AND INSPECTION LETTER
Annual Audit and Inspection Letter 2003/2004
Selby District Council – Page
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The allocation of resources to priorities.
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The relationship with the LSP.
Your focus for service improvement is to be on:
•
Benefits.
•
Development control.
•
Property services.
•
Street scene.
Progress is being monitored by Senior
Management Team. We plan to carry out a
formal assessment of progress in April 2005.
Housing maintenance
We inspected your housing maintenance service
three years ago, and concluded that it was a
fair, one star, service with uncertain prospects
for improvement. Our follow up inspection
concluded that the service is still fair, one star,
but with promising prospects for improvement.
Officers are keen to provide a customer focused
service and improvements have been
implemented. Customers think that the service
has improved, and they are now more involved
in service design and monitoring of
performance.
There are a number of areas which require
further attention:
•
There are no plans in place to demonstrate
the cost effectiveness of the repairs service.
•
Staff and customers could be more
effectively involved in service planning.
•
Office opening hours, and the repairs
appointment system could be made more
customer friendly.
•
The timeliness of the repairs service could
be better.
Performance Information
The Council’s 2003/04 Best Value Performance
Plan (BVPP) complied in all significant respects
with statutory requirements. Performance
Indicators (PIs) are used to monitor
performance although the checking procedures
for this information are not well developed.
Our duty under the Local Government Act 1999
is to audit the Council’s BVPP. The statutory
audit report includes an unqualified opinion.
Whilst the information was generally accurate
we found one calculation error and five
indicators where the collection methodology was
not fully consistent with the national definitions.
Work is on-going to update systems to reduce
the chance of similar problems in future.
PIs are a key part of your performance reporting
system and plans to improve this involve:
•
consulting with Members on the format of
reporting; and
•
replacing the existing spreadsheet based
performance management system.
While the Performance Manager carries out
limited checks and Internal Audit review BVPP
information quality assurance procedures are
needed to ensure in year reporting is accurate.
Accounts and Governance
We have almost completed our audit and plan to
give an unqualified opinion on the accounts
before the 30 November. Major amendments
seen in 2002/03 were not repeated in 2003/04.
The 2002/03 audit identified material errors in
the fixed assets of £33 million and working
capital £1.4 million. We are pleased to report
that similar problems were not encountered in
2003/04.
The published accounts are an essential means
by which you report your stewardship of public
funds and financial performance. You approved
your accounts on 3 August 2004.
In last year’s Letter we emphasised that
timeliness will become increasingly important as
the deadline for completion of the accounts is
brought forward in line with the Government’s
requirement. While the requirements were met
this year, the deadlines will become increasingly
more difficult to achieve and will require early
planning and scheduling of meetings next year.
audit
2003/2004
ANNUAL AUDIT AND INSPECTION LETTER
Annual Audit and Inspection Letter 2003/2004
Selby District Council – Page
5
Financial aspects of
corporate governance
Members have responsibility for the governance
framework. Although there are some reporting
arrangements in place, it is not clear how
Members gain assurance about the adequacy
and operation of this framework.
Overall Governance Arrangements
You adopted the CIPFA Solace framework in
2003 in your Code of Corporate Governance.
The intention of the framework is to bring
together aspects such as codes of conduct, Audit
Panel and the constitution under one framework.
This should be regularly monitored by Members
to ensure each element is effective.
Whilst partial monitoring takes place via the
Audit Panel in following up audit reports, this is
not part of a coherent approach across all
aspects of the framework.
The Audit Panel is due to review the code in late
2004. The Panel also needs to test adherence to
your code and set up a monitoring framework.
Partnership Arrangements
Last year we reviewed your arrangements for
partnership working. We are pleased to note:
•
You have strengthened the support to the
Selby Strategy Forum by appointing a
temporary assistant to the Chief Executive
to support, and a joint appointment with the
PCT of a Health Improvement Manager.
•
The Selby Strategy Forum has held an
‘awayday’ to identify priorities for the second
Community Strategy, and has created
opportunities to share and explore partners’
culture at its quarterly meetings.
•
Stakeholder representation has been
widened through the development of sub
groups with community representation.
•
The Selby Community Safety partnership
has enhanced partner training, and reviewed
consultation mechanisms.
A comprehensive review of terms of reference,
scrutiny arrangements, declarations of interest
and personnel matters has not yet been carried
out on key partnerships but is planned in 2005.
You also need to develop performance
management systems for partnerships.
Access to Services
We conducted a risk assessment of Information
Technology and Management processes which
concentrated on how you are using IT to
improve access to services and meet targets of
100 per cent provision of electronic access for
identified services by the end of 2005.
Due to uncertainties around local government
re-organisation (LGR) and affordability issues,
you withdrew from the NYICTP which had
previously been the core delivery method.
You have now developed an Access to Services
Strategy, which the Computer Service Manager
and e-Government Officer are working together
on. The approach is phased and key aspects are:
•
Phase 1 includes web site and intranet
development, to facilitate delivery of BVPI
157 targets.
•
Phase 2 will include 1 stop shop and Call
Centre/CRM.
All work is being managed using the Prince 2
method and the initial elements (including the
Product Initiation Document and Product
Development) are underway.
In October 2004 we have set in train a review of
the actual arrangements in place, which we will
be conducting concurrently across the North
Yorkshire District Councils in order to:
•
review progress to date against priority
service targets and future plans;
•
review costs and budgets;
•
compare approaches; and
•
highlight good practice and opportunities for
co-operation.
We aim to produce a draft report later this year.
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2003/2004
ANNUAL AUDIT AND INSPECTION LETTER
Annual Audit and Inspection Letter 2003/2004
Selby District Council – Page
6
Financial standing
The Council’s financial position from relative
strength is now under more pressure and the
medium term strategy for the use of reserves
needs to be clarified.
Last year we referred to your strong revenue
financial position. Whilst reserves levels are still
relatively high compared to other District
Councils, they have dropped by £3.7 million,
25 per cent over the past two financial years
(Exhibit 2).
EXHIBIT 2:
RESERVE BALANCES
March
2002
£m
March
2003
£m
March
2004
£m
General Reserves
2.0
1.6
1.3
HRA
0.9
0.9
0.8
Collection Fund
0.3
0.2
-0.1
Earmarked
HRA Special
Projects
3.0
2.7
2.4
Your Community
2.5
2.2
1.9
Other Earmarked
6.3
5.6
5.0
Total
15.0
13.2
11.3
This trend is planned to continue into 2004/05
with the predicted year end reserves likely to be
around £9.5 million.
Your financial strategy has recognised funding
year on year spending from reserves is not
sustainable in the long term. Options are being
considered to meet a predicted £1.5 million
budget shortfall in 2005/06 onwards.
You need to set out a medium term strategy for
reserves that sets out the minimum levels
required and how spending on reserves will be
linked to Council Priorities would facilitate this.
Budgetary Control
Although an improvement on 2002/03 there
were still some significantly overspent budgets
at the end of the year in 2003/04:
•
Refuse contract £137k due to an error in
calculating the budget.
•
Benefits due to unanticipated subsidy
reductions £139k.
In response accountancy staff have carried out
budget holder training. The current year end
prediction is that expenditure is on target and
overspending budgets will be matched with
savings elsewhere. We plan to review
arrangements in detail before March 2005.
Income collection and arrears
Income collection continues to be a challenge. In
2003/04 collection rates for council tax and
business rates improved although they were still
below target levels as seen in Exhibit 3.
EXHIBIT 3: COLLECTION RATES
2002/03
Actual%
2003/04
Target%
2003/04
Actual%
Business Rates
96.4
97.8
97.6
Council Tax
95.7
98.0
96.1
Overall arrears levels although improving slowly
have remained comparably high particularly for
business rates as seen in Exhibit 4 below. Once
again the high level of staff turnover in the
revenues section has hindered service
improvement. Scarce staffing resources were
directed to in year collection rates and old
arrears levels were not targeted.
EXHIBIT 4: TREND IN OUTSTANDING DEBTORS
2001/02
£m
2002/03
£m
2003/04
£m
Business Rates
3.5
3.2
3.5
Council Tax
2.1
2.5
2.1
Rent Payers
0.6
0.4
0.4
Total
6.2
6.1
6.0
In 2004/05 targets have been set to reduce
overall arrears levels in council tax by 1 per
cent, business rates by 3 per cent and Housing
Rents to £225,000. Staffing resources are now
being directed to clear old arrears but the
system changes discussed below may impact on
this target in the short term.
Revenues System
COMINO announced their intention to cease
support for the system from 2005/06. This
allowed a short timescale for replacement before
the issue of Council Tax and Business Rates
invoices planned for March 2005.
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2003/2004
ANNUAL AUDIT AND INSPECTION LETTER
Annual Audit and Inspection Letter 2003/2004
Selby District Council – Page
7
The Council reacted quickly reviewing the main
software suppliers on the market and has also
considered a more radical approach and is
currently in discussion with East Riding of
Yorkshire Council on a partnering solution.
We intend to review arrangements in
conjunction with our review on access to
services discussed earlier.
Community Charge
We raised the issue of outstanding Community
Charge from 1992/93 and earlier totalling
£0.8 million at March 2004 in last year’s letter.
We are disappointed to note that no action has
been taken to assess the cost and benefit of
recovery of these individual debts. Action should
be taken promptly.
Systems of internal financial
control
We have not identified any significant
weaknesses in the overall control framework and
whilst progress continues on risk management
there is still a need to link service and risk
planning.
Risk Management
You continue to make progress on fully
implementing risk management.
Adding to the strategic risk register, service
registers have been prepared and a risk
management group, lead by the Director of
Corporate Services set up.
There are plans to:
•
link risk and financial planning in the current
budget round; and
•
further extend training to members.
The Council still needs to fully embed the
system and:
•
align risk and service planning so the links
are explicit and reviews, reporting and
monitoring periods are consistent; and
•
develop critical success factors.
Internal Audit (IA)
Your IA function is carried out by the North
Yorkshire Audit Partnership (NYAP). Our
assessment is that they provide an effective
service. Our detailed review confirmed that we
were able to rely on their work of in forming an
opinion on the financial statements for 2003/04
thereby minimising our direct work.
Standards of financial conduct
and the prevention and detection
of fraud and corruption
We have not identified any significant
weaknesses in the Council’s arrangements for
maintaining proper standards of financial
conduct.
Overall Arrangements
The primary responsibility for the prevention and
detection of fraud, and taking reasonable steps
to limit the opportunity for corrupt practices, lies
with the Council. It is also the Council’s
responsibility to ensure that it has arrangements
in place to make sure that proper standards of
conduct are maintained. Our principal role is to
review the adequacy of your arrangements.
We have reviewed your overall arrangements
and, on the basis of the work done, there are no
matters that we wish to raise with Members.
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 from the 2002/03 national
exercise exceeded £83 million.
audit
2003/2004
ANNUAL AUDIT AND INSPECTION LETTER
Annual Audit and Inspection Letter 2003/2004
Selby District Council – Page
8
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.
Legality of transactions
We have not identified any significant
weaknesses in your arrangements. Permanent
arrangements for the Monitoring Officer post
need to be made.
In July 2004 the Director of Planning and Legal
with Legal Monitoring Officer responsibilities left
the organisation. You have temporary
arrangements in place until a new structure for
the senior management team is finalised when
permanent arrangements will be made.
Freedom of Information
The Freedom of Information Act 2000 gives a
general right of access to all types of ‘recorded’
information held by public authorities, sets out
exemptions from that right and places a number
of obligations on public authorities. We reviewed
your arrangements for meeting the
requirements and found you have taken positive
steps in relation to the information agenda by:
•
preparing a publication scheme, which has
been approved by the Information
Commissioner; and
•
appointing an Information Access Officer, a
shared appointment with 3 other North
Yorkshire District Councils.
There is scope for further improvement in
•
establishing policies for Freedom of
Information and records management; and
•
developing a corporate approach to
information management building on the
existing document image programme.
Other work
Grant Claims
We have adopted a more risk-based approach to
the certification of grant claims. With effect from
2003/04 the smaller claims, those less than
£100k, 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 your control environment.
Your arrangements for managing and quality
assuring grant claims submitted for audit has
improved in recent years. There are areas where
improvement could be made including:
•
ensuring a full audit trail is maintained;
•
strengthening checking procedures; and
•
ensuring the staff completing the forms in
service departments are aware of the grant
terms and conditions.
We will work with officers to improve
administrative arrangements after completion of
all the 2003/04 grant claims.
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, ie, Best Value and
programme management. The remaining
elements of that plan, including our audit of the
2004/05 accounts, will be reported in next
year’s Annual Letter.
We have sought to ensure, wherever possible,
that our work relates to your improvement
priorities. 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.
audit
2003/2004
ANNUAL AUDIT AND INSPECTION LETTER
Annual Audit and Inspection Letter 2003/2004
Selby District Council – Page
9
New Code of Audit Practice
The Audit Commission has consulted on a
revised Code of Audit Practice. The new Code,
which will be laid before Parliament in January
2005, is designed to secure:
•
more streamlined audit, which is
proportionate to risk;
•
stronger emphasis on value for money and;
•
better and clearer reporting of audit results.
Further details will be provided in the Audit and
Inspection Plan 2005/06.
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’ 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.
•
More robust and explicit view of vfm and
cost-effectiveness.
Closing remarks
This letter has been
discussed with the Director
of Corporate Services and we have consulted
with and taken account of the comments of the
Chief Executive in finalising the letter. The letter
will be presented at the Audit panel 1 December
2004.
Availability of this letter
This letter will be published on the Audit
Commission’s website at
www.audit-
commission.gov.uk
, and also on your website.
Mark Kirkham
District Auditor & Relationship Manager
November 2004
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.
.
audit
2003/2004
APPENDICES
Annual Audit and Inspection Letter – Audit 2003/2004
Selby District Council – Page
10
A
P
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1
Audit & Inspection reports issued
Reports
Date
Freedom of Information review
January 2004
Audit plan
March 2004
CPA Report
May 2004
Corporate Governance And Core Processes
August 2004
Housing Maintenance Re-Inspection
August 2004
audit
2003/2004
APPENDICES
Annual Audit and Inspection Letter – Audit 2003/2004
Selby District Council – Page
11
A
P
P
E
N
D
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X
2
Audit and Inspection fee
Audit fee update
Audit area
Plan 2003/04
£
Actual 2003/04
£
Accounts
17,900
17,900
Financial aspects of corporate governance
40,700
40,700
Performance, including inspection and Best Value
60,700
60,700
TOTAL CODE OF AUDIT PRACTICE FEE
119,300
119,300
Grant Claim certification
10,000
On-going
Additional Voluntary work (under Section 35)
0
0
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