Meeting documents

1 THE ISSUE

1.1 The Accounts and Audit Regulations 2003 introduced a new requirement for local authorities to produce an annual Statement on Internal Control (SIC). This statement must be signed by the Leader of the Council and Chief Executive and included within the Council's Statement of Accounts which are subject to External Audit.

1.2 To enable a Statement to be produced, a review of the Council's system of internal control must be carried out. The 2005/6 review has followed the methodology used to inform the 2004/5 Statement.

1.3 This report records the findings of the 2005/6 review to date.

2 RECOMMENDATION

2.2 Confirms it has considered the reported issues and recommends that the Leader of the Council and Chief Executive sign the Statement on Internal Control 2005/06 which will include those significant issues contained in Appendix 3 to this report.

3 FINANCIAL IMPLICATIONS

3.1 There are no direct financial implications relevant to this report. However, the implementation of some of the actions related to the issues may have financial implications, for example Business Continuity Management actions. If this is the case these will be brought back to the Executive as appropriate.

4 THE REPORT

4.1 The Accounts and Audit Regulations 2003 have established requirements related to systems of internal control, and the review and reporting of those systems. Specifically it says:

4.2 The internal control environment is designed to:

4.3 The Authority has also approved and adopted a code of corporate governance, which is consistent with the principles and reflects the requirements of the CIPFA/SOLACE framework `Corporate Governance in Local Government: A Keystone for Community Governance'.

4.4 Corporate Governance is defined as `the system by which local government directs and controls its functions and relates to its communities'.

4.5 The overriding principles which were adopted by this Council are:

4.6 The statement will include details of the process and what constitutes Corporate Governance and the Internal Control environment and at the end includes an Action Plan of significant internal control issues and our plans to address them.

4.7 Authorities are required to exercise judgement in deciding whether or not a particular issue is a `significant internal control issue', however the following are provided as factors to make that judgement:

a) The issue has seriously prejudiced or prevented achievement of a principal objective.

b) The issue has resulted in a need to seek additional funding to allow it to be resolved, or has resulted in significant diversion of resources from another aspect of the business.

c) The issue has led to a material impact on the accounts.

d) The audit committee, or equivalent, has advised that it should be considered significant for this purpose.

e) The Head of Internal Audit has reported on it as significant, for this purpose, in the annual opinion on the internal control environment.

f) The issue, or its impact, has attracted significant public interest or has seriously damaged the reputation of the organisation.

g) The issue has resulted in formal action being taken by the Chief Financial Officer and/or the Monitoring Officer.

4.8 The SIC methodology was agreed by Directors Group in March 2005. It consists of seeking assurance from 5 key areas using a CIPFA/IPF set of matrices which covered every aspect of the Internal Control environment. This ensures the process is robust and meets best practice.

4.9 The review has been carried out at `desktop' level by the Audit and Risk Management Service, with the exception being the Senior Management Assurance questionnaires which have gone to Statutory Officers, Other Directors, Heads of Service & Senior Managers and Project Managers.

4.10 The review for 2005/6 has taken into account the issues identified during the 2004/5 review and progress in implementing actions. A Position Statement in relation to those significant issues recorded in the 2004/5 Statement is attached (Appendix 1). To ensure completeness of reporting, a position statement in relation to the `Other Issues' reported for 2004/05 is also attached (see Appendix 2).

4.11 Issues identified during the 2005/6 review have been considered against the factors recorded in Section 4.7 above. This has resulted in a provisional listing of `Significant' Issues for 2005/06 (see Appendix 3).

4.12 The evidence used to draft these two listings is available for inspection by the Council's External Auditors.

5 RISK MANAGEMENT

6 RATIONALE

6.1 The Statement on Internal Control represents good governance practice in its own right as well as being a statutory requirement.

7 OTHER OPTIONS CONSIDERED

7.1 None

8 CONSULTATION

8.1 Consultation was carried out with Directors Group at its meeting on 15^th May 2006. The report has been approved by the Monitoring Officer and the Council's Section 151 Officer.