Meeting documents

Code of Audit Practice and Statement of Responsibilities of Auditors and of Audited Bodies

We perform our audit in accordance with the Audit Commission's Code of Audit Practice (the Code), which was issued in March 2002. This is supported by the Statement of Responsibilities of Auditors and Audited Bodies, which was issued in April 2000. Both documents are available from the Chief Executive of each audited body. The purpose of the statement is to assist auditors and audited bodies by explaining where the responsibilities of auditors begin and end, and what is to be expected of the audited body in certain areas. Our reports and audit letters are prepared in the context of this statement and in accordance with the Code.

Reports and letters prepared by appointed auditors and addressed to members or officers are prepared for the sole use of the audited body, and no responsibility is taken by auditors to any Member or officer in their individual capacity, or to any third party. A new Code of Audit Practice will be in place for the 2005/06 audit year, together with a new Statement of Responsibilities of Auditors and Audited Bodies, both of which were issued in March 2005.

Introduction

Assessment results

Financial Reporting

How good are the council's financial accounting and reporting arrangements?

Overview

Accounts presented for audit were complete and of a better standard than previously. There were no significant audit adjustments to the draft accounts and there were improvements in the quality of the supporting working papers. A new Audit Committee was created in July 2005 and training in the annual accounts has been provided. Whilst the draft accounts were considered at the inaugural audit committee meeting they were not subject to robust member scrutiny/discussion. The Council is already making preparations to meet the earlier accounts deadline for next year.

The Council publishes its annual accounts and annual audit letter in line with the regulations. The Council has not yet held a process of consultation with a range of stakeholders to establish their requirements in respect of the publication of summary accounts. The accounts are very detailed and but not currently produced in a summary format to help promote external accountability.

Key Lines of Enquiry

The Council produces annual accounts in accordance with relevant standards and timetables, supported by comprehensive working papers

The Council promotes external accountability.

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2

Areas for Improvement

Further training should be provided to members to improve the level of scrutiny of review of the accounts and Statement of Internal Control.

Consideration should be given to producing a summarised set of accounts possibly within an annual report or aBVPP.

A consultation exercise with stateholders should be undertaken to establish what summary financial information they would value.

Financial Management

How well does the council plan and manage its finances?

Overview

The Council has introduced an integrated financial planning process which enables the Council to focus on delivering its key improvement and strategic priorities.

The Council manages its performance against budget there have however been significant overspends in Social Services in the past 2 years. Internal audit have had insufficient resources available to them to complete their audit programme. As a result there has been slippage on the internal audit programme which has reduced the level of work undertaken on financial systems to ensure that processes are secure.

The Council's asset management plan is currently in the process of being updated.

Key Lines of Enquiry

The Council's medium-term financial strategy, budgets and capital programme are soundly based and designed to deliver its strategic priorities

The Council manages performance against budgets

The Council manages its asset base

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Areas for Improvement

The financial strategy should be developed to incorporate balance sheets and cash flows over a minimum of 3 years

The Council should put in processes to demonstrate how financial plans and strategies have contributed to the achievement of the corporate objectives

Ensure that internal audit has sufficient resources so that all key financial systems are tested and reviewed on a regular basis

The Council needs to complete and implement its Asset Management Plan and develop its performance indicators for asset management

Financial Standing

How well does the council safeguard its financial standing?

Overview

The Council has operated within its overall revenue budgets in recent years and the Council has been able to add to its revenue reserves. There have been reductions in Collections fund balances which will need to be addressed over the forthcoming year. The Council has enjoyed a relatively healthy position in respect of capital receipts however these have now been utilised and unsupported borrowing will now be needed to fund the ambitious capital programme.

Key Lines of Enquiry

The council manages its spending within the available resources

3

Areas for Improvement

Include prudential indicators in the monthly reporting information

The Council relies on significant sources of income to balance the budget. The Council should look to develop further the monitoring and reporting arrangements for all aspects income collection and recovery of debt.

The Council is currently reviewing its level of capital resources and needs to consider the affordability of its capital programme and the revenue implications in the light of his review.

Internal Control

How well does the council's internal control environment enable it to manage its significant business risks?

Overview

The Council has developed good risk management procedures in recent years at corporate and service level. The Director's Group has acted as the Council's Corporate Risk management group with input from an experienced Executive member. The recently formed Audit Committee has taken on the specific responsibility for risk management within the Authority. Risk management training is to be provided to members in the near future and a system of formal reporting to members is to be developed.

There have been weaknesses in the internal control environment and in particular key control account reconciliations in recent years. Whilst some improvements have been made further work is necessary. Officers have put in significant efforts to create an Audit Committee in the year. This should potentially improve overall governance arrangements within the Authority. Significant efforts have been made to review of the effectiveness of the system of internal control this year. Standing orders have recently been subject to a comprehensive review

The Council has processes and procedures in place to prevent and detect fraud. Anti fraud work has tended to be reactive rather than proactive.

Key Lines of Enquiry

The council manages its significant business risks.

The council has arrangements in place to maintain a sound system of internal control

The council has arrangements in place that are designed to promote and ensure probity and propriety in the conduct of its business

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Areas for Improvement

The Council should provide formal risk awareness training to members of the Audit Committee and develop a system of regular reporting of risks to members. The Councl should also review the risk register to ensure that corporate risks are clearly aligned to the overall corporate objectives.

The Council should keep under review the remit and reporting lines of the newly formed Audit Committee taking into account the outcome of the CIPFA review into the structure and standing of audit committees within Local Authorities. Effective coaching and training will be key to the Audit Committee being able to provide effective leadership on audit and governance issues within the Council over the next 12 months.

The Council must take further action to reconcile all key control accounts. Mechanisms should be put in place to review standing orders and standing financial instructions on an annual basis.

The Council need to ensure that it maintains procedure notes and manuals for business critical systems and put in place procedures to ensure that they are reviewed on an annual basis

The Council should be more pro active in the steps it takes to raise awareness of fraud. In particular the anti fraud and corruption policy needs to be more widely publicised throughout the Counci. In particular steps need to be taken to communicate with 93hard to reach94 individuals who do not have access to the Council's intranet.

Value for Money

Overview

B&NES serves a relatively affluent area with low levels of deprivation. This is reflected the Council's expenditure per head which is below average in relation to 6 of the 7 service areas identified. However central services per head is in the highest quartile. This will be partly reflected in the relatively low expenditure per head in other areas and the high property costs reflecting the large number of small offices occupied by the Council.

The Council is delivering VFM on most of its services. Education unit costs are very high but performance is strong. The Council has traditionally spent above FSS on Social Services and Education . However during the past 2 years has started to make efforts to divert resources away from the these services to provide funding for the Council's improvement priorities. There are a number of loss making activities trading activities in the Council; however apart from Leisure limited progress has been made to curb losses in recent years. The Council is high cost in other areas e.g. planning costs and waste costs and the Council recognise that further action is necessary in these areas. The Council has been able to minimise Council Tax increases relative to it nearest neighbours in recent years.

The Council has experienced difficulties delivering its capital programme. In particular major difficulties have been experienced in managing the Bath Spa project. This has led to a very large overspend arising, significant delays in completion and the Council receiving significant adverse publicity. A fundamental review of major capital projects was completed in 2004 and new procedures and arrangements have been introduced during the year. Early indications of the action taken to date are encouraging.

The introduction of the Corporate Plan in 2004 was a big step forward in the Council identifying its improvement prorities. The Corporate Plan incorporated a number of measures for reprioritisation and efficiency including strategies for creating financial headroom and capacity, and specific financial targets for service savings that the Council is planning to meet. The Council also has an Annual Service Planning process which requires service managers to identify savings around a range of headings. These savings targets have been built into the base budgets for a number of the years and the Council has generally achieved them.

As well as some of the more traditional means of making savings the Council has adopted some more forward thinking initiatives through strategic partnerships.
There is a good performance management system in place. Further improvements are currently being made and the Council has recently introduced a balanced scorecard system which builds upon the existing system. In spite of this there has been a steady reduction in the Council's comparative performance on the BVPPs over the past 3 years.

Key Lines of Enquiry

The council currently achieves good value for money

The council manages and improves value for money

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Areas for Improvement

The Council has comparative cost information within services but there is greater scope to analyse information centrally to help members and senior managers challenge how services compare to others

The Council should review comparative spend against other councils on Education, planning and waste to demonstrate Value for money more effectively.

Develop further the procedures for collecting and using cost information alongside performance information.

The Council need to embed the new performance management system and aim to drive up improvement in performance against its PIs.

There are many initiatives in place to achieve savings eg headroom, BIS, Social Services back office, Zero based budgeting and the Council recognises the needs to coordinate these at a corporate level

Continue to develop capital and major project planning and monitoring arrangements to ensure that future projects are completed on time and within budget.