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Waverley Borough Council Committee System - Committee Document

Meeting of the Standards Committee held on 19/07/2006
APPENDIX C - DISTRICT AUDITOR'S REPORT ON STANDARDS OF CONDUCT



Summary & Purpose
To advise the Standards Committee on the comments and findings in the Audit Commission’s Annual Audit and Inspection letter and the Use of Resources Assessment relating to members conduct.

APPENDIX C
Waverley Borough Council

STANDARDS Committee – 19TH JULY 2006
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Title:
DISTRICT AUDITOR’S REPORT ON STANDARDS OF CONDUCT

[Wards Affected: All]
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Summary and purpose:

To advise the Standards Committee on the comments and findings in the Audit Commission’s Annual Audit and Inspection letter and the Use of Resources Assessment relating to members conduct.
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Environmental implications:

There are no environmental implications arising from this report.

Social / community implications:

There are no social/community implications arising from this report.

Resource and legal implications:

There are no resource or legal implications arising from this report.
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Background

1. In each year, the Director of Finance sends each member a declaration form, attached at Annexe 1, requiring members to declare whether or not a member has any Related Party Transactions.

2. The Director of Finance, as part of his duties, is required to meet proper practice requirements when compiling the Council’s Annual Statement of Accounts which is published at the end of June in each year. A copy of the letter setting out the reasons for the required declaration and guidance is attached at Annexe 2.

3. One member has refused to complete this Declaration of Related Party Transactions for years 2004/05 and 2005/06 on the ground that the member believes the requirement to be too onerous. Despite efforts by officers to explain the importance of declaring any such interest the member has advised that he will not be acceding to the requests. Material correspondence is attached at Annexe 3. In a further recent response from the member, Annexe 4, the member has raised a number of concerns which he has asked to be brought to the attention of the Committee.



Legal Status

4. The requirement for the Declaration of Related Party Transaction comes from the Financial Reporting Standards (FRS)8. The Companies Act 1989 requires that organisations follow the FRS. For local authorities, the Statement of Recommended Practice (SORP) determines that certain FRS, including FRS8, are applicable and necessary to ensure that the accounts present fairly the financial position of the Council.

5. The Statement of Recommended Practice is advisory and recommends that local authorities follow it to meet the “proper practice” requirements of the Local Government Act 2003 in accordance with the statutory framework established in the Accounts and Audit Regulation 2003 and to enable the audit of the accounts in accordance with the Audit Commission Act 1998.

6. However, neither the 2003 legislation nor the Regulations appear to oblige a member to make the declaration, nor unlike the Waverley Code of Conduct for members, does it include any sanctions for non-compliance. In this respect, discussion with the Audit Commission has not taken the matter any further forward.

District Auditor’s Annual Audit and Inspection Letter

7. The District Auditor undertakes at the end of each financial year an Annual Audit and Inspection which includes an opinion on the Council’s annual accounts and financial standing. A copy of an extract from the District Auditor’s Annual Audit and Inspection letter for 2004/05 is attached at Annexe 5.

8. In paragraph 33 the importance the Audit Commission attaches to the Related Party Transactions Declaration is reinforced. It is about the public having confidence in the Council’s accounts to know that they have been prepared on a fair basis, and that they have disclosed any significant transactions between the Council and its members/officers. Significantly, the District Auditor does not say that the Council is in breach of any statutory duty.

9. The Audit Commission has also during 2005/06 undertaken a Use of Resources Assessment that will underpin the forthcoming Comprehensive Performance Assessment. This Assessment involves scoring a number of Key Lines of Enquiry (KLOE) which include Performance Management – a component part of which is Internal Control. Within the Assessment relating to standards of council behaviour, the District Auditor has specifically referred to the member not complying with the request for Declaration of Related Party Transactions. A copy of the relevant extract from the Assessment is included at Annexe 6.

Waverley Code of Conduct for Members

10. The member’s refusal to complete the Declaration of Related Party Transactions does not fall within Part 2 of the Waverley Code of Conduct for Members covering declarations of Member Interests. However, the member’s failure to comply with a reasonable request of the Director of Finance, to declare Related Party Transactions could be regarded as a breach of Part 1 of the Code in that by not complying with a reasonable request to supply key information, to be included in the Annual Statement of Accounts, the member has brought the Council into disrepute. This is particularly so given the importance the District Auditor attaches to it in his letter which is a public document where he believes that failure to give the information could undermine public confidence in the Council’s accounts.

Conclusion

11. The District Auditor has formally expressed a concern through his Annual Audit and Inspection letter and the Use of Resources Assessment about a Member not declaring whether or not the Member has any Related Party Transactions. There is clearly an expectation by the District Auditor that the Council will take action to redress this.

12. For the future, it is intended to include a requirement for compliance with this declaration of interest to be included within Members’ Acceptance of Office. However, given the District Auditor’s specific reference to unsigned Declaration of Related Party Transactions forms in the Use of Resources Assessment, the matter is referred to the Committee to enable the Committee to have the opportunity to consider the District Auditor’s comments.

Recommendation The Standards Committee is asked to:

(i) note the papers before it, in particular the findings of the District Auditor in Annexe 6; and (ii) consider what action, if any, should be taken arising from the District Auditor’s comments on unsigned Declaration of Related Party Transactions forms.

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Background Papers (HCMS)

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

Name: Anne Bott Telephone: 01483 523415

E-mail: .abott@waverley.gov.uk
comms\standards\2006-07\005.doc