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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 27/06/2006
APPENDIX A - ANNUAL AUDIT LETTER 2004/2005



Summary & Purpose
This report summarises the District Auditor’s view of Waverley’s financial position and performance. The Draft Statement of Accounts was approved by the Executive in 2005, and the District Auditor subsequently undertook the annual audit of the accounts.

The District Auditor’s Annual Audit Letter (AAL) has normally been presented to the January/February meeting of the Executive. With effect from the 2004/05 audit, the Audit Commission has introduced a requirement for the District Auditor’s team to produce a judgement of the Council’s use of resources, its arrangements for securing value for money and an assessment of the Council’s “direction of travel” based on achieving priorities and performance. This has caused a delay in finalising the AAL.

The District Auditor and his senior staff will be present at the meeting and will make a presentation of their findings. A full copy of the AAL is attached at Annexe 1.

The consideration of the AAL is a significant part of the Council’s governance arrangements, and members will need to take note of the District Auditor’s comments.


APPENDIX A
Waverley Borough Council

EXECUTIVE – 27TH JUNE 2006
_________________________________________________________________________
Title:
ANNUAL AUDIT LETTER 2004/05
[Wards Affected: All]
_________________________________________________________________________
Summary and purpose:

This report summarises the District Auditor’s view of Waverley’s financial position and performance. The Draft Statement of Accounts was approved by the Executive in 2005, and the District Auditor subsequently undertook the annual audit of the accounts.

The District Auditor’s Annual Audit Letter (AAL) has normally been presented to the January/February meeting of the Executive. With effect from the 2004/05 audit, the Audit Commission has introduced a requirement for the District Auditor’s team to produce a judgement of the Council’s use of resources, its arrangements for securing value for money and an assessment of the Council’s “direction of travel” based on achieving priorities and performance. This has caused a delay in finalising the AAL.

The District Auditor and his senior staff will be present at the meeting and will make a presentation of their findings. A full copy of the AAL is attached at Annexe 1.

The consideration of the AAL is a significant part of the Council’s governance arrangements, and members will need to take note of the District Auditor’s comments.

___________________________________________________________________________________________________________________
Environmental implications:

There are no direct environmental implications from this report, although it discusses the District Auditor’s view on Waverley’s performance in delivering services such as waste collection and recycling.

Social / community implications:

As with environmental implications, there are no direct implications but comments on the Council’s services, including planning, are made in the AAL.

E-Government implications:

There are no implications for e-government arising from the report, but the District Auditor’s letter will be made available to the public through the Council’s website.

Resource and legal implications:

Whilst there are no direct resource implications, the District Auditor provides an assessment in his letter of Waverley’s arrangements for securing value for money and its use of resources, as well as an opinion on the Council’s accounts and systems and its financial standing. Additionally, the Council’s system of internal control is discussed. Any actions to be taken as a consequence of the District Auditor’s comments will have resource implications, but it is envisaged that the actions will be managed within existing resources.
_________________________________________________________________________
Introduction

1. The coverage of the District Auditor’s AAL is considerably more extensive than in previous years, following the introduction of additional work that will underpin future Comprehensive Performance Assessments (CPA). These are the Use of Resources assessment, the scoring of the Council’s self-assessment of its value-for-money arrangements, and the Direction of Travel statement, which takes account of performance indicator results and inspection findings.
2. The 2004/05 AAL provides a much wider view of the Council’s performance than just an opinion on its annual accounts and financial standing. New considerations, covered by the new pieces of work referred to above, are:
Improvement in priority areas
Actions required in the light of the CPA
Direction of travel assessment including
Performance in the specific Council priority areas
Performance management and Council capacity
Use of resources judgement
Financial reporting
Financial management
Financial standing
Internal control
Value for money
Statement on Internal Control.

Key messages

3. Once again, Waverley’s accounts received an unqualified opinion for 2004/05. Its financial planning is acknowledged as being central to the maintenance of a good financial position. Balances increased, due to factors largely outside the Council’s control (higher level of interest earned and more beneficial grant settlements than anticipated). The pressures posed by the housing ballot result are seen as being a significant challenge to achievement of all the Council’s priorities.
4. The Council is considered to have a “generally satisfactory” set of arrangements for corporate governance, with the caveat that the roles of an audit committee need to be fulfilled through an appropriate solution.
5. Overall progress is being made on performance (service improvement) and achievement against priorities. 62% of key performance indicators saw an improvement since 2002/03. Waverley has set about improving the management of performance, and credit is given for this.
6. Cost information and comparator information is available for managers’ use, and is used in assessing value for money. However, this could be extended beyond what is currently seen as a targeted basis. The capital programme is well managed, and the short- and long-term financial implications of decisions are understood. However, the impact of spending levels on service levels needs to be given greater consideration. The achievement of savings is confirmed as exceeding government targets.

Details

7. The AAL acknowledges that Waverley has made good progress in its priority areas of:

Planning – inspection rated the service as “good” with “promising prospects for improvement”; the adoption of a local development plan; improvements in the speed of processing application; changes to the committee decision-making process
Waste management – reduction in the tonnage collected and increases in recycling; cost reduction through the new contract; improvement in user satisfaction levels
Housing – the recent stock transfer ballot (acknowledging that the Council is now faced with a financial shortfall for meeting the Decent Homes Standard); improvements in Housing Benefit applications and renewals processing times; the encouraging outcome of the recent inspection by the Benefits Fraud Inspectorate and the action plan that will further improve the service
Wider community – actions to reduce social exclusion e.g. Passport to Leisure; representation on the Surrey Equality Partnership; development of a consultation strategy
Performance management and capacity – improvements in service planning and development of corporate service standards; appointment of staff in key areas; development of a workforce planning Action Plan.
8. The Use of Resources assessment involves scoring of each of the key lines of enquiry as outlined in paragraph 2 above. Waverley’s scores were as follows: 9. Officers asked for a re-assessment of the score in a number of areas, but the Audit Commission did not make any changes. Officers are now preparing for the 2006 Use of Resources assessment, and an action plan is in place to respond to the District Auditor’s judgments and to strengthen the evidence in key areas.
10. The Council’s finances, whilst properly managed, face considerable pressures with the need to achieve the Decent Homes Standard and a forecast level of spending on the General Fund that is higher than income. This will need careful management to produce a balanced budget.
11. Debt collection and arrears recovery have been maintained at high levels. Collection rates of 98.5% for Council Tax and 97.9% for business rates are, in themselves, high, and around average. In addition, rent arrears have reduced by 130,000.

12. Improvements to internal control have been identified in the Council’s Statement on Internal Control, and the District Auditor has commented positively that many elements are already in place to bring these to fruition. This includes a risk register, regular reporting of performance indicator results and regular review of Contract Procedure Rules, Financial Regulations and various codes of conduct.
13. There are no significant weaknesses in the steps and arrangements to ensure fraud and corruption are prevented and detected and ensuring that transactions are legal. Waverley is assessed as a low risk in respect of the national fraud initiative, in which Waverley plays its part in submitting data and examining the reports received.

Conclusion

14. Whilst the AAL relates to 2004/05, which ended nearly 15 months ago, members can be encouraged because Waverley has received a good overall assessment. Its efforts in financial management, service delivery, performance management and planning have received positive comment. The need to set a balanced budget, which is mentioned in the letter, was of course taken into account when setting the budget for the current financial year.

15. At the same time, it has been noted that there is scope for further improvement and action plans need to be progressed. In respect of the use of resources assessment, specific issues that will influence future scores are being addressed. Most important there is the process for ensuring the draft statement of accounts presented for audit are in full compliance with accounting rules, and the establishment of an audit committee or equivalent is being considered.

Recommendation

It is recommended that members note the comments of the District Auditor as contained in the Annual Audit Letter (AAL) and agree to implement the suggestions contained for future improvements as part of the corporate planning process.


Background Papers (DoF)

There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.


CONTACT OFFICERS:

Name: Mr M Hill Telephone: 01483 523240

E-mail: mhill@waverley.gov.uk

Name: Mr P Wenham Telephone: 01483 523236

E-mail: pwenham@waverley.gov.uk

Comms/exec/2006-07/050