Transcript Sandwell MBC: Annual External Audit Report 0506

INFRASTRUCTURE, GOVERNMENT
& HEALTHCARE
Annual External
Audit Report
2006/07
Wyre Forest District
Council
December 2007
DRAFT
AUDIT
Content
The
at KPMG
LLP
Thecontacts
contacts
at KPMG
in connection
with with
this this
in
connection
report are:are:
report
Will
Carr
Jon Gorrie
Director
Director
KPMG LLP (UK)
Tel: 0121 232 3308
2741
Fax: 0121 232 3578
[email protected]
[email protected]
AndySkipp
Cardoza
Ian
Senior Manager
KPMG LLP (UK)
3869
Tel: 0121 232 2401
Fax: 0121 232 3578
[email protected]
ian.skipp
@kpmg.co.uk
Georgina Dickson
Assistant Manager
KPMG LLP (UK)
Tel: 0121 232 3694
Fax: 0121 232 3578
[email protected]
[email protected]
Page
Executive summary
•
•
•
•
1.1 Scope of this report
1.2 Summary of findings
1.3 Looking forward
1.4 Acknowledgements
Accounts and Statement on Internal Control
•
•
•
•
•
•
•
2
4
2.1 Audit of the Authority’s accounts
2.2 Whole of Government Accounts
2.3 Evaluation of Internal Audit
2.4 The Statement on Internal Control
2.5 The Authority’s financial position
2.6 Certification of grant claims and returns
2.7 Questions and objections from electors
Use of Resources
•
•
•
•
3.1 Use of Resources scored judgment
3.2 Audit of data quality
3.3 Best Value Performance Plan
3.4 Use of Resources conclusion
•
•
Accounting Policies
12
15
4.1 SORP 2007 and IFRS
Appendices





Appendix A: Summary of 2006/07 recommendations and action plan
Appendix B: Follow up of previous year’s recommendations
Appendix C: Audit reports issued
Appendix D: Fee summary
Appendix E: Statutory Report on Best Value Performance Plan
This report is addressed to the Authority and has been prepared for the sole use of Wyre Forest District Council (the Authority). We take no
responsibility to any member of staff acting in their individual capacities, or to third parties. The Audit Commission has issued a document entitled
Statement of Responsibilities of Auditors and Audited Bodies. This summarises where the responsibilities of auditors begin and end and what is expected
from the audited body. We draw your attention to this document.
External auditors do not act as a substitute for the audited body’s own responsibility for putting in place proper arrangements to ensure that public business
is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically,
efficiently and effectively.
If you have any concerns or are dissatisfied with any part of KPMG LLP’s work, in the first instance you should contact Jon Gorrie who is the engagement
partner to the Authority, telephone 0121 232 3308, email [email protected] who will try to resolve your complaint. If you are dissatisfied with
your response please contact Trevor Rees on 0161 246 4000, email [email protected], who is the national contact partner for all of KPMG’s work with
the Audit Commission. After this, if you are still dissatisfied with how your complaint has been handled you can access the Audit Commission’s
complaints procedure. Put your complaint in writing to the Complaints Team, Nicholson House, Lime Kiln Close, Stoke Gifford, Bristol, BS34 8SU or by e
mail to: [email protected]. Their telephone number is 0117 9753131, textphone (minicom) 020 7630 0421.
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
1
Section 1
Executive summary
1.1 Scope of this report
This report summarises the 2006/07 external audit work carried out by KPMG LLP (“KPMG”) at Wyre Forest District Council (“the Authority”) with regards to the areas of
our audit responsibility under the Audit Commission's Code of Audit Practice (“the Code”). Under the Code we are required to review and report on two specific areas
which we have used to structure this report:
• Accounts and Statement of Internal Control: This area is concerned with the accounts production process and the associated opinions that we provide on the Authority’s
financial statements and the Whole of Government Accounts (WGA) submission (section 2).
• Use of resources: This work is concerned with determining whether the Authority has sound arrangements in place to ensure value for money in the delivery of its services
and the deployment of its resources (section 3). The majority of the issues summarised in this report have previously been reported to the Authority by KPMG and a list of
all reports issued in relation to our 2006/07 audit is provided at Appendix C. Also included at Appendix A is a summary of our recommendations. Our findings are
summarised below, with more detailed findings presented in sections 2 and 3 of this report.
1.2 Summary of findings
Audit of accounts and Statement on Internal Control
To bring local government into line with other parts of the public sector, the timetable for preparation and publication of accounts has been gradually brought forward. For
2006/07, the accounts needed to be prepared by the end of June 2007 and published by the end of September 2007. Whilst this is not formally an audit deadline, it is
desirable for the accounts to be published with the audit opinion included, so we plan our audit work to deliver the opinion by this date.
We issued our unqualified opinion on the 2006/07 financial statements on 28 September 2007. We also reviewed the Authority's WGA submission and concluded that it was
consistent with the statutory accounts.
At the same time as giving our final opinion on the Authority’s accounts, we issued our audit certificate, which marks the conclusion of our statutory responsibilities for the
year.
Use of resources
We reported our conclusion on the Authority’s use of resources on 28 September 2007. The conclusion is based on to the extent to the Authority meets 12 criteria specified by
the Audit Commission which link to our other audit work – for example, on Use of Resources scored judgement and Data Quality. It is unqualified where these are all met,
and qualified if there are areas where the minimum standards are not fully addressed.
We concluded that the Authority has made proper arrangements to secure economy, efficiency and effectiveness on all 12 criteria determined by the Audit Commission. We
reported our findings in the report to those charged with governance (ISA 260) in September 2007.
Between August and October 2007, we completed our third scored judgement on the Authority’s use of resources. This assesses the Authority against Key Lines of Enquiry
(KLOEs) specified by the Audit Commission, on which the Authority is scored on a scale between 1 (below minimum requirements) and 4 (performing strongly). The scores
were reviewed as part of KPMG’s local and national quality control processes and then by the Audit Commission to ensure consistency with other auditors and authorities.
Overall the Authority achieved a score of 2 for its use of resources.
We identified scope for further improvement to the Authority’s scores in future years, notably in relation to risk management processes within the internal control function.
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
2
Section 1
Executive summary
Audit of data quality
In 2007, we completed our second review of data quality at the Authority using the Audit Commission’s methodology. We assessed the Authority’s arrangements for data
quality to be adequate. We have reported in detail on our findings and made appropriate recommendations in section 3.
1.3 Looking Forward
The Authority faces another challenging year in 2007/08. Our understanding of the Authority identifies the following issues for the 2007/08 financial year:
• Financial Standing - the Authority’s financial resources continue to come under significant pressure. This will require ever more innovative approaches to identifying,
securing and delivering efficiency savings whilst maintaining service levels in the future. As part of determining its medium term financial strategy, the Authority will need to
ensure that it sets council tax levels that are consistent with capping regulations yet at the same time maximises its revenue income at a time when has finite reserves and
capital receipts.
• Joint Working – there is an increasing expectation that local authorities will work more collaboratively. As a result there will is a need
to increase the amount of joint
working with neighbouring authorities and other public, private and volunteer sector partners. Wyre Forest District Council will need to facilitate such working through Local
Area Agreements. As a result this should enable it to work more closely with its various local and regional partners in order to address local and regional budget pressures and
to develop its capacity to deliver wider efficiency savings; whilst maintaining the range and quality of its service delivery. These arrangements will require robust scrutiny and
monitoring to ensure they are effectively governed and deliver agreed outcomes.
•Financial Reporting Requirements - Section 4 of this report outlines the changes to the implementation of the Statement of Recommended Practice (SORP) for 2007, and the
potential introduction of International Financial Reporting Standards (IFRS). This will pose challenges for local government and the introduction should be monitored carefully.
1.4 Acknowledgements
We would like to take this opportunity to thank officers and Members for their help and co-operation throughout our time as external auditors to the Authority.
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
3
Section 2
Accounts and Statement on Internal Control
Our Report to Those Charged with Governance (ISA 260) detailed our findings and initial conclusions in relation to the Authority’s 2006/07 accounts, including a number of
recommendations to strengthen arrangements in the future and our findings in relation to the Authority’s controls and internal audit function.
This report summarises our findings from the audit of the accounts and Statement on Internal Control for 2006/07, including the submission process for Whole of Government
Accounts (WGA).
2.1 Audit of the Authority’s accounts
Opinion and certificate
We noted that the accounts process at Wyre Forest District Council has been undertaken in accordance with relevant financial reporting standards, and also in line with agreed
deadlines. Following completion of our audit the accounts were amended for a number of errors and presentational disclosures. There were no uncorrected errors.
On 28 September 2007, we issued an unqualified opinion and certificate on the Authority’s 2006/07 accounts. We reported our findings from our audit in our ISA 260 Report
to Those Charged with Governance during September 2007. This report summarises these findings and focuses on those aspects of the accounts production process which
would merit further development.
Summary of issues arising
We reported performance improvement observations relating to the accounts production process in our Report to Those Charged with Governance, issued during September
2007. We have no further issues to report which have not already been addressed in sufficient detail in that document.
The Authority's accounts production process is also assessed as part of our Use of Resources assessment in the Financial Reporting Key line of Enquiry (see section 3 of this
report).
2.2 Whole of Government Accounts
Whole of Government Accounts (WGA) are “commercial-style” accounts that cover the whole of the public sector and include some 1,300 separate bodies. Each of these
bodies is required to submit a consolidation pack. This is based on, but separate from, their statutory accounts. In the case of Wyre Forest District Council, all disclosures
within the pack are based on the Authority’s group accounts.
2006/07 was the year of full “live” consolidation for the WGA process, and as auditors we were required to review and report on the WGA consolidation pack. We submitted
the Authority’s WGA pack to the Department for Communities and Local Government (DCLG) on 28 September 2007. This is in line with the deadline for submission of the
audited WGA pack to DCLG.
2.3 Evaluation of Internal Audit
As previously reported in our ISA 260 Report, our review of the work of Wyre Forest District Council’s Internal Audit Services has confirmed that the service complies with
the CIPFA Code of Practice for Internal Audit. In 2006/07, we are pleased to report that we were able to place the planned level of reliance on the work of Internal Audit
where it was relevant to our responsibilities.
2.4 The Statement on Internal Control
We reviewed the information supporting the Authority’s Statement on Internal Control (SIC) for 2006/07 and concluded that it was consistent with our understanding of the
Authority.
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
4
Section 2
Accounts and Statement on Internal Control
2.5 The Authority’s financial position
Revenue
For the year ended 31 March 2007 the Authority reported a General Fund surplus of £0.17 million, bringing its cumulative General Fund balance to £4.1 million. The year end
surplus represents an underspend of £1.1 million, i.e. 1.1%, against its total 2006/07 revised budget of £14.5 million (2006/07 original budget was £15.0 million, reduced
primarily due to the receipt of additional external interest and slippage of direct revenue funding).
The Authority managed its expenditure within budget in overall terms, and realised additional interest received of £0.5 million, which was generated primarily on the sales
proceeds received from the disposal of Rushock Trading Estate. The Authority also benefited from additional benefit subsidy awarded of £0.2 million, and a reduction in
employee expenses of a further £0.2 million due to vacancy savings.
For 2007/08, the Authority set a balanced revenue budget of £14.8 million, and as at the end of September 2007, was forecasting a year end underspend of £0.18 million
(0.2%). The main reason underpinning the forecast underspend continues to relate to an increase in interest due to the favourable rates achieved by the Authority, as well as
reductions forecast in relation to staff costs, through vacancy savings.
Although the Authority continues to examine ways of managing spending and activity levels, this is an area which requires careful and continuous monitoring throughout the
year to ensure that the overall financial position of the Authority remains robust.
Capital
The Authority approved an original capital programme of £7.1 million for 2006/07, later revised to £5.6 million in light of identified slippage. Of the revised programme, £4.6
million was actually spent. The £1 million underspend represented slippage of 18% against budget, and mainly related to the delays experienced in the refurbishment of the
Wyre Forest Glades Leisure Centre scheme, as well as delays in the progress of the converting the Town Hall to accommodate the Worcestershire Hub. A number of the
Authority’s capital schemes are partly funded by grants which are required to be fully spent in line with agreed deadlines. There is a risk that if these schemes are delayed
there may be a loss or claw back of funding. For 2007/08, the Authority’s Cabinet approved a capital programme of £7.5 million, which was revised within the year to £6.8
million due to the need for rephasing as a result of in-year programme slippage. £1.9 million had been spent of the revised capital programme as at the end of September 2007
(i.e. Month 6 of 2007/08).
Reserves and balances
1: The
Authority
needs
to ensure
that ofschemes
which are
partly
by grants
rigorously
and ofproactively
programme
delays
TheRecommendation
Authority reported
levels
of specific
revenue
reserves
£3.4 million
at the
endfunded
of 2006/07,
and are
working
balances
£0.7 million.
Withinmanaged
2007/08 toa avoid
net total
of £1.0
and/or
avoid
any
potential
subsequent
loss
or
claw
back
of
grant
funding.
million is expected to be transferred from specific revenue reserves, which will still enable the Authority to maintain a positive reserves balance.
The Authority’s ability to maintain its reserves in line with its medium term financial strategy depends on it robustly managing its budget to ensure that use of further working
balances is not required to deal with any unplanned for overspends, which are within its control.
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
5
Section 2
Accounts and Statement on Internal Control
2.6 Certification of grant claims and returns
We have now reviewed and certified the majority of the Authority’s grant claims and returns for the financial year 2006/07.
The approach to the certification of claims with a claim value in excess of £500,000 continues to be determined by risk and the adequacy of the Authority’s control
environment, which in the majority of cases we have been able to rely upon.
All claims related to 2006/07
All claims certified (as at 30 November 2007)
Claims due
5
Total claims certified by KPMG
5
Still outstanding (but within deadline)
0
0%
Claims qualified only
0
20%
Submitted over 3 months late
0
0%
Claims amended only
1
40%
Submitted within deadline
5
100%
Claims qualified and amended
1
20%
Neither qualified nor amended
3
60%
Recommendation 2: The Authority needs to review its systems and processes in relation to grants to ensure that are robust and will not result in future qualification of
claims.
2.7 Questions and objections from electors
Electors of Wyre Forest District Council can raise with the auditor questions or objections to items of account. Any such queries can then require us to investigate the issue
raised. We did not receive any such questions or objections during the 2006/07 audited year.
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
6
Section 3
Use of Resources
Our responsibilities under the Code of Audit Practice in relation to the Authority’s use of resources, and where we report these, is set out in the following table:
Area
Timing of work
Report
Report date
Use of Resources Conclusion
2006/07
August 2007 - December 2007
Report to those charged with
governance 2006/07
28 September 2007
2007 Use of Resources scored
judgement
August 2007-November 2007
Annual External Audit Report 2006/07
December 2007
The following section comments on our work on the Use of Resources scored judgement, and makes links to the risk areas we have identified in our 2006/07 Audit Plan
where relevant.
3.1 Use of Resources scored judgement
The Use of Resources assessment is based around five Key Lines of Enquiry (KLOEs): Financial Management; Financial Standing; Financial Reporting; Internal Control; and
Value for Money.
The Authority prepared a self assessment against the five KLOEs to help inform our review. We form our judgement against the KLOEs by considering the evidence in the
self assessment, interviewing relevant officers and Members and through consideration of evidence from our other audit work. Following internal quality control processes by
KPMG at both a local and national level, draft scores were submitted to the Audit Commission for its national review. These have now been approved. The 2007 scores for
the five individual KLOEs for Wyre Forest District Council are:
KLOE
2007 Score
2006 Score
Financial Reporting
3
3
Financial Management
2
2
Financial Standing
2
2
Internal Control
1
2
Value for Money
2
2
Overall Score
2
2
Good practice points identified at the Authority and improvement opportunities within each KLOE assessment area, are detailed in the following sections.
KLOE 1: Financial Reporting
1.1: Production of statutory annual accounts
3
1.2: Promoting external accountability
3
Overall score for KLOE 1
3
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
7
Section 3
Use of Resources
The objective of the financial reporting assessment is to understand how effective the Authority’s arrangements are for producing and publicising its annual accounts in
accordance with relevant standards and timetables.
The Authority has a strong finance team, led by an experienced Head of Financial Services. The review and scrutiny process of the draft accounts has been strengthened from
prior year to include an additional independent review by the Head of Financial Services, and the Financial Services Manager.
The Authority again prepared good quality of the working papers supporting the draft accounts, and presented an explanatory paper to the Audit Committee to accompany the
draft financial statements highlighting key financial terms and the principle messages behind the accounts.
In order to improve this score in future years, the Authority should ensure through a robust review process, that the accounts presented for audit contain a minimal number of
presentational and disclosure errors. Furthermore, although the working papers were considered to be of a standard consistent with prior year, there remains scope for
improvement in order that these may be considered exemplary.
The Authority’s score in relation to KLOE 1.2 is consistent with expectations, since the Council’s finance department strives to comply with all statutory and reporting
requirements, which, within our tenure as its external auditors, have been successfully met. In overall terms stakeholder satisfaction in relation to the level and content of
financial reporting is adequate.
In order to further improve its score in relation to KLOE 1.2, the Authority needs to demonstrate that a consultation process is undertaken with stakeholders to identify
whether an annual report should be produced, and whether further financial information would be considered beneficial.
In order to improve its performance on its use of resources, and improve the assessment scores, the Authority should consider the following recommendations.
Summary of recommendations on KLOE 1:
Recommendation 3: The Authority should undertake a robust review of the accounts prior to submission for audit to ensure that they are free from presentational and
disclosure errors.
Recommendation 4: The Authority’s working papers provided at the start of the audit visit should be developed in conjunction with the incoming auditor, to ensure that
KLOE
2: Financial
expectations
fromManagement
both sides are clarified and agreed prior to the final accounts process.
Recommendation 5: The Authority should evidence a clear process of consultation with a range of stakeholders, to establish their views in relation to the requirement to
publish an annual report.
2.1: Financial planning and budget setting
3
2.2: Managing performance against budgets
2
The financial management KLOE assesses how well the Authority plans its finances and delivers on these plans.
2.3: Asset management
2
The Authority’s arrangements for financial and service planning are based around a robust Medium Term Financial Strategy (MTFS) which reflects its agreed objectives and
priorities identified within the Council Overall
Plan andscore
the for
Community
KLOE 2 Strategy. To deliver its priorities, the Authority sets a comprehensive
2 and balanced revenue budget based on
realistic projections about pay, inflation and known service and capital development plans.
The Authority has an effective budgetary control process to manage performance against its budget, by identifying and reporting overspends, and taking corrective action on a
timely basis to manage any significant variances against budget.
We identified that there was some scope for further developments by the Authority to increase its score on KLOEs 2.1 and 2.2. Notably, the MTFS should be enhanced to
include balance sheet and cash flow projections over a three year period. In addition, the Authority’s Cabinet should ensure that recommendations raised by Internal Audit on
key financial systems, are implemented on a timely basis. This will reduce the number of systems awarded ‘limited assurance’ and improve the accuracy and reliability of the
information those systems produce.
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
8
Section 3
Use of Resources
The Authority’s asset management arrangements (KLOE 2.3) remain adequate to ensure that its asset base is appropriately managed.
An up to date asset register is in place, and the Authority has assessed its asset base in the year to identify surplus assets which are to be disposed of to fund the single site
initiative.
In order to improve the score further, the Authority would need to progress with the development of an estates- related benchmarking process, to include comparison with
similar organisations, in order to both learn from and share best practice.
Summary of recommendations from KLOE 2:
Recommendation 6: The Authority should consider incorporating into its Medium Term Financial Strategy balance sheet and cash flow forecasts across a three year
period.
Recommendation 7: The Authority should ensure that recommendations raised by Internal Audit on key financial systems, are implemented on a timely basis. This will
reduce the number of systems awarded ‘limited assurance’ and improve the accuracy and reliability of the information those systems produce
Recommendation 8: The Authority should progress with the development of an estates- related benchmarking process, to include comparison with similar organisations, in
order to both learn from and share best practice..
KLOE 3: Financial Standing
3.1: Managing spending within available resources
2
The objective of the financial standing KLOE is to evaluate the Authority’s arrangements for managing its spending within the available resources, including how the Authority
ensures that its finances are sustainable.
The Authority has maintained a score of two against this KLOE, which is consistent with the score awarded in 2005/06. However, we observed that there has been only
limited demonstrable progress in enhancing the monitoring information in relation to income and arrears, and in relation to setting challenging targets for these areas.
In addition the Authority's policy for the level of its reserves is not based upon a thorough understanding of its position and its needs, but has been based, as historically, on
a CIPFA model.
Summary of recommendations from KLOE 3:
Recommendation 9: The Authority should ensure that challenging targets are set in relation to the collection of income and recovery of arrears. The Cabinet should
monitor robustly against these targets to ensure that they are achieved.
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
9
Section 3
Use of Resources
KLOE 4: Internal Control
4.1: Risk management
1
4.2: Internal control
1
4.3: Ethics and conduct
2
Overall score for KLOE 4
1
The internal control KLOE assesses the Authority’s control arrangements, encompassing, risk management arrangements and how the Authority ensures a high standard of
conduct by Members and officers, in addition to considerations of financial control.
We assessed the Authority’s processes in place to manage its significant business risks (KLOE 4.1) as a level one, which is consistent with 2005/06. Whilst a Risk
Management Strategy exists, this was last updated in January 2004, and little action has been taken to in the year to strengthen risk management arrangements since the
prior year. This is because the Authority anticipated being able to appoint a Corporate Risk Manager in the year, however the officer started in post in October 2007. The
Authority also identified the weaknesses within the risk management arrangements as an area requiring improvement within the 2006-07 Statement on Internal Control.
It is therefore anticipated that progress in enhancing the risk management framework will be demonstrable in 2007-08.
Our assessment of the Authority’s internal control (KLOE 4.2) also resulted in the award of a level one. This is because arrangements in relation to business continuity
planning are still in development, and did not meet the requirements of level two.
The Authority’s score on its arrangements to promote probity and propriety (KLOE 4.3) has remained consistent with the prior year at a level two. Arrangements in place
include codes of conduct and registers of interest, and compliance with requirements is monitored by the Ethics and Standards Committee.
The main areas where there remains scope for improvement are the provision of ethics training to members, an assessment of overall standards of conduct, and the inclusion
with the Internal Audit work programme of a level of proactive counter fraud work.
Summary of recommendations from KLOE 4:
Recommendation 10: The Authority should ensure as a priority, that the Risk Management Strategy is updated, implemented and embedded throughout the
organisation, to ensure that the assurance framework in place to support the Statement on Internal Control is soundly based.
Recommendation 11: The Authority should ensure that in conjunction with Worcestershire County Council, a comprehensive Business Continuity Plan is developed to
ensure that it can continue to meet its strategic objectives in any given situation.
Recommendation 12: The Authority should ensure that the counter fraud culture is further promoted across the organisation by providing ethics training to members,
and by undertaking an assessment of overall standards of conduct (for example by undertaking an ethical governance audit). Furthermore, Internal Audit’s work
programme should include an element of proactive counter fraud work.
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
10
Section 3
Use of Resources
KLOE 5: Value for Money
5.1: Achievement of value for money
2
5.2: Processes to improve value for money
2
Overall score for KLOE 5
2
The Authority’s scores for the theme of value for money are consistent with those from the prior year. In order to make further improvements in the future, the most
important developments required are as follows:
In terms of demonstrating VFM, the most important aspect of the assessment is to consider how costs compare to performance and so, to achieve a score of 3 against KLOE
5.1, the Authority would need to move to a position where most services are both high performing and low cost, with a minimal number of services in the high cost/low
performance area.
The Authority needs to be able to fully identify all external factors drivers which impact on the cost of providing a given service, and quantify the impact of that these costs on
service delivery. We understand that the Authority is progressing with this in the current year, which should lead to improvements within 2007/08.
Furthermore the Authority is currently completing a series of value for money studies, to compare how costs of providing a service compare to the quality of the service
provided. This should lead to some demonstrable improvements in value for money.
Summary of recommendations from KLOE 5:
Recommendation 13: Whilst the Authority has made some progress in relation to identifying all external factors which impact upon service delivery, the results of these
exercises should form an action plan to reduce costs whilst maintaining the quality of service provided. The Cabinet should closely monitor achievement of these action
plans.
Recommendation 14: The results of the value for money studies currently being undertaken should be benchmarked against similar organisations. This will ensure that the
Authority can learn from best practice.
© 2007 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use
are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
11
Section 3
Use of Resources
3.2 Audit of data quality
Scope of our work
This is the second review of data quality using a methodology set out by the Audit Commission.
Data quality is important because of the reliance on information for decision-making and performance
management, so the accuracy of the information is vital for effective management of the organisation.
Data is also important to external stakeholders wishing to review authorities’ performance. Our work includes the
validation of certain indicators to assist the Audit Commission with the CPA process.
Our review of data quality was based upon Audit Guides produced by the Audit Commission. These divided
our work into three phases.
•
Stage 1: Review of management arrangements. We consider the arrangements in place by which the Authority defines its objectives for data quality and
aims
to
achieve
them.
The conclusion of this work also decides if the Authority has met the criterion relating to data quality out of the 12 for our Use of Resources Conclusion.
•
Stage 2: Comparison to other authorities. This step involves high-level validation of a selection of indicators, considering factors such as variances year
on year and disparities with the values reported by the Authority’s peers. This includes considering questions raised by the Audit Commission and
responding with our findings.
•
Stage 3: Data testing. We perform sample testing on some indicators from a list selected by the Audit Commission, carrying out the tests specified in
the Audit Guide. The number of indicators tested is dependent upon our assessment of the adequacy of arrangements in Stage 1 and any areas of
concern raised at Stage 2.
Summary of our assessment
From our assessment we concluded that the Authority’s arrangements for data quality to be adequate overall.
This is consistent with the prior year.
The assessment covers the following five areas:
1.
Governance arrangements;
2.
Policy framework;
3.
Information systems and processes;
4.
People and skills; and
5.
Using data effectively.
We have made a number of recommendations which should provide the Authority with an opportunity to improve
its scores in the coming year. The recommendations are summarised Appendix A.
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Section 3
Use of Resources
Governance arrangements
This section covers the Authority’s arrangements over data quality, including:
•
•
•
•
its top level commitment to data quality;
how responsibilities for data quality are defined and communicated;
its data quality objectives in place; and
how standards for data quality are monitored and reviewed.
This area is important because it defines what is expected from staff and how officers and Members will ensure that this is achieved.
The Authority ensures that responsibility for data quality is clearly defined, with overall responsibility for data quality falling under the responsibility of a CMT members.
However the main area in which there is scope for development is the requirement to formalise and embed the Data Quality Policy, which remained in developmental stage
throughout the financial year, and ensure that this links clearly to the risk management process. The Council however finally approved the Data Quality Policy on 28
November 2007.
Recommendation 15: The Authority should seek to formalise its Data Quality Policy as soon as possible, and ensure that this is clearly linked to, and embedded in the
risk management process.
The policy framework for data quality
This area considers the Authority’s policies in relation to data quality and how they are implemented.
Policies may exist at the service level, addressing the particular circumstances of each area of the Authority and outlining how the service will ensure that the corporate data
quality objectives are achieved.
Whereas no formal data quality policy had been defined within the year, there is evidence that procedures are in place at operational level. These are supported by guidance at
departmental level which is used in the preparation of specific performance information.
A Data Quality Policy was finally agreed by Cabinet in September 2007, and
further ratified by the Council on 28 November 2007.
Information systems and processes
Fundamental to the reliability of the Authority’s information is the robustness of the systems which store the underlying data. This section of the management arrangements
review considers the robustness of the systems in place, including management’s action in relation to previously identified weaknesses, and consideration of data security and
integrity. It also considers the systems for collating indicators and sharing information.
The Authority’s Covalent system is used to collate and analyse corporate performance information. This, and other systems are routinely reviewed by internal audit which
specifically considers data quality arrangements. Findings are reported accordingly, including summary in internal audit progress reports.
People and skills
The areas set out above require a range of skills for successful implementation – whether knowledge of information systems or the knowledge of processes in order to ensure
that they are appropriately designed to deliver high-quality data. It is, therefore, important for the Authority to consider the skills it needs to deliver its data quality objectives.
Once these have been identified, it will be necessary to implement training programmes and briefings in order to develop staff skills.
Data quality roles and responsibilities of staff within the performance unit and some other services (e.g. benefits) are defined and incorporated into the appraisal process and
personal targets, but this not as yet the case for all staff. Furthermore, although training needs are considered as part of the appraisal process, data quality is not specifically
addressed through training programmes.
Recommendation 16: Roles and responsibility of all staff in relation to data quality should be built into the appraisal process. Following this, data quality should be
incorporated into the Authority’s corporate training calendar and provided to all relevant staff, to ensure a consistency of approach to data quality across the Authority.
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Section 3
Use of Resources
Using data effectively
In order to gain the greatest benefit from the collection of performance data, this information needs to be used in decision-making. There should be evidence of action being
taken as a result of the review of performance information.
Moreover, there should be evidence of consideration of the appropriateness of performance information reported to management and members – for example, the timeliness of
information, and thorough review processes by senior staff before information is presented.
PI data for key priority areas is monitored by members on a monthly basis. The Authority’s Covalent system makes data available to officers and members and ensures that
information can be used for service improvement.
Findings of data testing
Number of indicators tested
5
Number of indicators amended 1
As part of our work on data quality we reviewed five performance
indicators
in detail, determined
by our0 assessment of the management arrangements around data quality at
Number
of reservations
placed
the Authority.
Of the five indicators tested, one (BV 214) required amendment, although we are satisfied that this was not due to inherent systems weaknesses. We did not place reservations
on any indicators this year.
3.3 Best Value Performance Plan
We are required to audit the Authority’s Best Value Performance Plan to ensure that its contents comply with statutory requirements. We issued an unqualified opinion on
the 2007/08 Plan in December 2007. Our opinion is included in Appendix E. There are no significant issues arising from our work which we wish to bring to the attention
of Members.
3.4 Use of Resources conclusion
We are required to give a conclusion on the Authority’s use of resources for 2006/07. The conclusion is based on whether the Authority meets 12 criteria specified by the
Audit Commission, and is unqualified where these are all met and qualified if there are areas where the minimum standards are not fully achieved. Our overall assessment
draws on our Use of Resources scored judgement (updated September to October 2007), our audit of data quality (which forms part of the 2007/08 Audit and Inspection Plan)
and a review of the Authority’s most recent Corporate Assessment.
We reported our conclusion on the Authority’s use of resources as part of our accounts audit opinion, which was issued on 28 September 2007. This was an unqualified
conclusion.
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Section 4
Accounting Policies
4.1 Financial Reporting Requirements
Further changes to accounting requirements take effect in 2007/08, a result of the 2007 SORP, including a new requirement for a Revaluation Reserve and Capital
Adjustment Account will significantly alter capital accounting requirements. They are expected to prove challenging for many authorities – this change was originally to
be brought in for 2006/07 but was postponed to allow more preparation time, given that significant changes will be required to fixed asset records going forward. The
Authority will need to evaluate the impact of any other changes and ensure appropriate actions are taken accordingly.
In a statement in the March 2007 budget the Chancellor confirmed that central government bodies would be required to adopt International Financial Reporting
Standards (IFRS), adapted as necessary for the public sector. The timetable announced by the Government is that adoption will be required for 2008/09. This will
require the 2007/08 accounts to be restated for comparative purposes.
The CIPFA/LASAAC Joint Committee which is responsible for the LA SORP has indicated that IFRS will not be adopted in the local government sector until 2009/10,
at the earliest, although the WGA returns for 2008/09 will have to be prepared under IFRS. CIPFA has published an analysis of the key differences between the SORP
and IFRS and two of the key issues for local government (accounting for PFI/PPP schemes and accounting for infrastructure) will be the subject of Treasury guidance to
be issued before the end of 2007.
The Authority’s finance team will need to ensure that they have appropriate plans in place to manage the transition with regards to how IFRS are to be adapted for the
public sector in the period leading up full adoption. We also believe that the extension of the period available to local government to prepare for IFRS must be used
wisely if some of the problems experienced by companies in moving to IFRS are avoided and we would be happy to work with you to identify the key areas where
progress really needs to be made.
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Appendices
Appendix A: Summary of 2006/07 recommendations and action plan
No.
Recommendation
Priority
Management response
1
The Authority needs to ensure that schemes which are partly funded by grants
are rigorously and proactively programme managed to avoid delays and/or avoid
any potential subsequent loss or claw back of grant funding.
Medium
Project Manager for capital projects
currently being recruited following the
CMT review in 2007/08.
Expected to commence April
2008
2
The Authority needs to review its systems and processes in relation to grants to
ensure that are robust and will not result in future qualification of claims.
Medium
Agreed – action to be taken in line with
Data Quality Policy
Following completion of Final
Accounts in June 2008
3
The Authority should undertake a robust review of the accounts prior to
submission for audit to ensure that they are free from presentational and
disclosure errors.
High
Review is now included as part of Final
Account process
Immediate effect
4
The Authority’s working papers provided at the start of the audit visit should be
developed in conjunction with the incoming auditor, to ensure that expectations
from both sides are clarified and agreed prior to the final accounts process.
Medium
Agreed – this takes place as part of the
above process
As above
5
The Authority should evidence a clear process of consultation with a range of
stakeholders, to establish their views in relation to the requirement to publish an
annual report.
High
This will be considered as part of the
Final Accounts process. Report to Audit
Committee
17 March 2008
6
The Authority consider incorporating into its Medium Term Financial Strategy
balance sheet and cash flow forecasts across a three year period.
Medium
To be considered as part of the MTFS
process
September 2008
7
The Authority should ensure that recommendations raised by Internal Audit on
key financial systems, are implemented on a timely basis. This will reduce the
number of systems awarded ‘limited assurance’ and improve the accuracy and
reliability of the information those systems produce
Medium
Agreed. Action will be taken to ensure
recommendations are acted upon within a
reasonable period of time
Immediate effect
8
The Authority should progress with the development of an estates- related
benchmarking process, to include comparison with similar organisations, in order
to both learn from and share best practice.
Medium
The Council has appointed Bruton
Knowles as corporate property
advisors, part of whose role is to
advise on asset management in
accordance with current trends and
developments with local government
& private sector market places
Ongoing
9
The Authority should ensure that challenging targets are set in relation to the
collection of income and recovery of arrears. The Cabinet should monitor
robustly against these targets to ensure that they are achieved.
High
Agreed. We have good performance on
council tax, business rates and benefits
overpayments. Monitoring system to be
developed for sundry debtors.
July 2008
10
The Authority should ensure as a priority, that the Risk Management Strategy is
updated, implemented and embedded throughout the organisation, to ensure that
the assurance framework in place to support the Statement on Internal Control is
soundly based.
High
Updated Risk Management Policy and
Strategy adopted and is in the process of
being implemented across the Council
March 2008
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Timescale
16
Appendices
Appendix A: Summary of 2006/07 recommendations and action plan
No.
Recommendation
Priority
Management response
11
The Authority should ensure that in conjunction with Worcestershire
County Council, a comprehensive Business Continuity Plan is developed
to ensure that it can continue to meet its strategic objectives in any
given situation.
Medium
Service Continuity Plan currently being
finalised with information from all
Divisions on high risk / essential services
Target completion date 31
March 2008
12
The Authority should ensure that the counter fraud culture is further
promoted across the organisation by providing ethics training to
members, and by undertaking an assessment of overall standards of
conduct (for example by undertaking an ethical governance audit). This
should be undertaken in addition to the work undertaken by Internal
Audit as part of their work programme, which includes completion of
the Audit Commission Anti Fraud & Corruption Checklist.
High
Ethics training to be continued
through Member development
training. Three sessions held in
2007/08.
Next session to be held in
May 2008
13
Whilst the Authority has made some progress in relation to identifying
all external factors which impact upon service delivery, the results of
these exercises should form an action plan to reduce costs whilst
maintaining the quality of service provided. The Cabinet should closely
monitor achievement of these action plans.
Medium
Action plan to be developed based on the
Council’s Value for Money Policy and
best practice identified from exercises
carried out in 2007/08.
Commence June 2008
14
The results of the value for money studies currently being undertaken
should be benchmarked against similar organisations. This will ensure
that the Authority can learn from best practice.
Medium
See 13 above
As above
15
The Authority should seek to formalise its Data Quality Policy as soon
as possible, and ensure that this is clearly linked to, and embedded in
the risk management process.
Medium
Data Quality Policy adopted and included
as part of risk management process (see
10 above).
28 November 2008
16
Roles and responsibility of all staff in relation to data quality should be
built into the appraisal process. Following this, data quality should be
incorporated into the Authority’s corporate training calendar and
provided to all relevant staff, to ensure a consistency of approach to data
quality across the Authority.
Medium
Training included in the Data Quality
action plan
2008/09
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Timescale
17
Appendices
Appendix B: Follow up of previous year’s recommendations
This appendix sets out the recommendations made in the previous year and details what progress has been made in implementing them.
No.
1
2
Recommendation raised in 2005/06
BVPI review process
The Authority should implement a robust and independent
review process prior to the submission of BVPIs. This should
include a review of the indicator for full compliance against
definitions. This is especially important for those indicators
which are new, or whose indicators have changed from prior
year.
Data Quality self assessment against Audit Commission KLOEs
The Authority should enhance its data quality arrangements by
routinely self assessing against the Audit Commissions Key Lines
of Enquiry for Data Quality. This would highlight areas where
the Authority can make improvements to its data quality
arrangements.
Priority
Status of implementation at December 2007
High
Performance indicators and data returns are supported by
audit trails and checks are carried out by divisions before
submissions. Further checks are also completed by corporate
performance staff.
Medium
The Authority provided a self assessment against the Audit
Commission’s KLOEs for Data Quality which we reviewed as
part of our work on data quality.
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Appendices
Appendix C: Audit reports issued
This appendix sets out the reports that we issued during the year of our audit.
Report title
Date issued
Annual Audit and Inspection Plan 2006/07
July 2006
Statement of Accounts 2006/07: ISA 260 Report to those charged with governance
September 2007
Auditors’ report on the Best Value Performance Plan 2007/08
December 2007
Auditors’ report on 2006/07 accounts
September 2007
Whole of Government Accounts opinion 2006/07
September 2007
Annual External Audit Report 2006/07
December 2007
Use of Resources Auditor Judgements 2007
December 2007
Annual Audit and Inspection Letter 2006/07
Pending (Scheduled for March 2008)
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Appendices
Appendix D: Fee summary
The table below summarises our fees for completing the 2006/07 audit to date
Area of audit work
Planned fee /£
Actual fee /£
Audit management
2,000
2,000
Audit of accounts
46,000
46,000
Use of Resources
48,000
48,000
Grant claim certification *
12,000
12,000
-
-
108,000
108,000
Additional reviews **
Total
Notes:
• * Our work on grant certification is summarised in section 2 above.
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Appendices
Appendix E: Auditor’s statutory report on the Best Value Performance Plan
Auditor’s Report to Wyre Forest District Council on its Best Value Performance Plan for the 2007/08 financial year
Certificate
We certify that we have audited the Best Value Performance Plan of Wyre Forest District Council (“the Authority”) in accordance with section 7 of the Local
Government Act 1999 (“the Act”) and the Audit Commission's Code of Audit Practice. We also had regard to supplementary guidance issued by the Audit
Commission.
This report is made solely to the Authority, in accordance with section 7 of the Act. A copy of this report will be sent to the Audit Commission under 7(5)(b) of
the Act in relation to our recommendation to the Audit Commission under section 7(4)(e). A copy of this report will be sent to the Secretary of State under
7(5)(c) of the Act if we include a recommendation under section 7(4)(f) that the Secretary of State should give a direction under section 15 of the Act.
Our audit work has been undertaken so that we might state to the Authority, to the Audit Commission and (where necessary) to the Secretary of State those
matters we are required to state to them in such an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than (i) the Authority, for our audit work, for this report, or for the opinions we have formed, (ii) the Audit Commission, for our
recommendation under section 7(4)(e) and (iii) the Secretary of State, for our recommendation (if positive) under section 7(4)(f) of the Act.
Respective Responsibilities of the Authority and the Auditor
Under the Local Government Act 1999, the Authority is required to prepare and publish a Best Value Performance Plan summarising its assessments of its
performance and position in relation to its statutory duty to make arrangements to secure continuous improvement to the way in which its functions are exercised,
having regard to a combination of economy, efficiency and effectiveness.
The Authority is responsible for the preparation of the Plan and for the information and assessments set out within it. The Authority is also responsible for
establishing appropriate performance management and internal control systems from which the information and assessments in its Plan are derived. The form and
content of the Best Value Performance Plan are prescribed in section 6 of the Act and statutory guidance issued by the Government.
As the Authority's auditors, we are required under section 7 of the Act to carry out an audit of the Best Value Performance Plan, to certify that we have done so,
and:
• to report whether we believe that the Plan has been prepared and published in accordance with
statutory requirements set out in section 6 of the Act and statutory guidance and, where appropriate,
recommending how the Plan should be amended so as to accord with statutory requirements;
• to recommend:
- where appropriate, procedures to be followed in relation to the Plan;
- whether the Audit Commission should carry out a Best Value inspection of the Authority under
section 10 of the Local Government Act 1999; and
- whether the Secretary of State should give a direction under section 15 of the Local Government
Act 1999.
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Appendices
Appendix E: Auditor’s statutory report on the Best Value Performance Plan
Opinion
Basis of this opinion
For the purpose of forming our opinion as to whether the Plan was prepared and published in accordance with the legislation and with regard to statutory guidance, we
conducted our audit in accordance with the Audit Commission’s Code of Audit Practice. In carrying out our audit work, we also had regard to supplementary guidance
issued by the Audit Commission.
We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide an opinion on whether the
Plan has been prepared and published in accordance with statutory requirements.
In giving our opinion, we are not required to form a view on the completeness or accuracy of the information or the realism and achievability of the assessments
published by the Authority. Our work therefore comprised a review and assessment of the Plan and, where appropriate, examination on a test basis of relevant
evidence, sufficient to satisfy ourselves that the Plan includes those matters prescribed in legislation and statutory guidance and that the arrangements for publishing the
Plan complied with the requirements of the legislation and statutory guidance.
Where we have qualified our audit opinion on the Plan, we are required to recommend how the Plan should be amended so as to comply in all significant respects with
the legislation and statutory guidance.
In our opinion, Wyre Forest District Council has prepared and published its Best Value Performance Plan in all significant respects in accordance with section 6 of the
Local Government Act 1999 and statutory guidance issued by the Government.
Recommendations on procedures followed in relation to the Plan
Where appropriate, we are required to recommend the procedures to be followed by the Authority in relation to the Plan.
For the current financial year, we have not made any such recommendations.
Recommendations on referral to the Audit Commission/Secretary of State
We are required each year to recommend whether, on the basis of our audit work, the Audit Commission should carry out a Best Value inspection of the Authority or
whether the Secretary of State should give a direction.
On the basis of our work:
• we do not recommend that the Audit Commission should carry out a Best Value inspection of Wyre Forest District Council under section 10 of the Local
Government Act 1999; and
• we do not recommend that the Secretary of State should give a direction under section 15 of the Local
Government Act 1999.
KPMG LLP
Chartered Accountants
December 2007
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