Meeting documents

1 THE ISSUE

1.1 The Accounts and Audit Regulations 2003 introduced a requirement for all Local Authorities to produce an annual Statement on Internal Control. This statement must be signed by the Leader of the Council and Chief Executive and included within its Final Accounts, all of 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 has been carried out. The 2006/07 review has followed the methodology used in previous years which was developed following consultation with Strategic Directors and the External Auditor.

1.3 This report records the findings of the 2006/07 review to date.

2 RECOMMENDATION

2.1 The Cabinet is asked to confirm it has considered the Statement and `significant' issues and recommends that the Leader of the Council and Chief Executive sign the Statement on Internal Control 2006/07.

3 FINANCIAL IMPLICATIONS

3.1 There are no direct financial implications relevant to this report.

4 COMMUNITY STRATEGY OUTCOMES

4.1 Reviewing the Council's system of internal control and reporting issues and implementing action plans will assist Services to contribute efficiently and effectively to the Community Strategy Outcomes.

5 CORPORATE IMPROVEMENT PRIORITIES

5.1 Reviewing the Council's system of internal control and reporting issues and implementing action plans will assist Services to efficiently and effectively contribute to the achievement of the Council's priorities.

6 CPA KEY LINES OF ENQUIRY

6.1 Conducting an annual review of the effectiveness of the system of internal control, and reporting the Statement on Internal Control ensures that the criteria judgements recorded in the `Use of Resources' Key Lines of Enquiry 4.2 - "The council has arrangements in place to maintain a sound system of internal control" - are met.

7 THE REPORT

7.1 The Accounts and Audit Regulations 2003 requires that:

7.2 The internal control environment is designed to:

7.3 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'.

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

7.5 The overriding principles adopted by this Council are:

`Openness'

7.6 The statement includes details of the process and what constitutes Corporate Governance and the Internal Control environment, and a listing of significant internal control issues and our plans to address them.

7.7 Authorities are required to exercise judgement in deciding whether or not a particular issue is a `significant internal control issue'. The following factors have been considered in making the 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.

7.8 The SIC methodology was agreed by Directors Group in March 2005. It seeks assurance from 5 key areas against CIPFA best practice covering every aspect of the Internal Control environment.

7.9 The review has been carried out at `desktop' level by the Risk Management Team within the Audit, Risk & Information Service. Senior Management input has been provided by the completion of Service Assurance questionnaires (completed by Assistant Directors) and meetings with the Chief Executive, Council Solicitor and Strategic Directors to discuss the issues identified. Following advice from the Chief Executive, the Executive Member for Resources was also consulted in relation to the `draft' `significant' issues.

7.10 The review for 2006/07 has taken into account the issues identified during the 2005/06 review and progress in implementing agreed actions (see Appendix 1).

7.11 Issues identified during the 2006/07 review have been considered against the factors recorded in Section 7.7 above and following consultation with Strategic Directors Group on 14^th May 2007 a listing of `Significant' Issues has been agreed. The `significant' issues have been recorded within the Statement on Internal Control & Corporate Governance 2006/07 (see Appendix 2).

7.12 The review documentation is available for inspection by the Council's External Auditors.

8 RISK MANAGEMENT

8.1 The report author and Lead Cabinet member have fully reviewed the risk assessment related to the issue and recommendations, in compliance with the Council's decision making risk management guidance. The Statement on Internal Control is a key component of the Council's risk management framework.

9 CONSULTATION

9.1 Consultation was carried out with Strategic Directors Group at its meeting on 14^th May 2007. The report has been approved by the Monitoring Officer and the Council's Section 151 Officer.