Agenda item
Annual Audit Letter 2009/10
This report introduces the Annual Audit Letter from the council’s external auditors, the Audit Commission.
Minutes:
Members had before them a revised report from the Director of Finance and Corporate Services appended to which were a revised version of the Audit Commission’s Annual Audit letter, dated 7 December, and also progress report from the Audit Commission, circulated after the publication of the original agenda.
Andrea White (Audit Commission) in introducing the Audit Letter, reminded members that the issues summarised in the Audit Letter had been reported previously, asked that members now look to the future and drew attention to the key messages outlined in the report. The committee noted that an unqualified opinion had been issued on the council’s financial statements with one material and one minor error. An unqualified opinion had also been issued on the Pension Fund’s financial statements. On foundation schools, attention was drawn to recommendations to improve the council’s risk management, internal control and performance management with particular reference to problems at Copland Community School. For this, and other cases where additional audit work had had to be carried out additional audit fees had been levied. On current and future challenges, Ms White considered that the council was well placed to deliver savings and improve efficiency through the One Council programme. A high level review had been conducted and robust arrangements were in place with expertise brought in where thought necessary. However, she advised the council to bear in mind the need to retain capacity to deliver quality services. Ms White referred to the government’s decision to cancel the Building Schools for the Future programme and the resultant loss of capital investment in the borough’s schools pointing out that the council would now have to consider how it would deal with the current pressure on school places. Finally, Ms White made reference to the challenge for all local authorities to implement the International Financial Reporting Standard in 2010/11 and was pleased to report that the council was making good progress. It would however need to maintain focus to ensure timely implementation.
On her specific recommendations, Ms White highlighted the need to improve year end financial reporting, strengthen risk management and control and performance arrangements in respect of foundation schools, embed good procurement practice and risk management arrangements. The committee were pleased to hear that the 2007/08 and 200/09 audits were closed in September 2010, together with the 2009/10 audit, outstanding issues relating to the council’s involvement in London Authorities Mutual Limited and Copland Community School having been resolved.
In discussion, members noted the intention to introduce an earlier audit review, moving eventually to monthly mini close-downs in line with good practice. In response to a question on the potential future risks, Andrea White stated that staff reductions, both front and back office, could affect services. Also internal controls and performance management would need to be monitored to ensure the council continued to perform at its chosen level. Any risks associated with changes need to be clearly established. Clive Heaphy (Director of Finance and Corporate Services advised that members would have the opportunity to consider a report reviewing the risk framework. On the health inequalities review and the involvement of the voluntary sector, Ms White contributed that the council would be better placed to increase outcomes with good working arrangements with partners such as the voluntary sector. This has been fed back to key stakeholders. A report would be submitted in due course on the implications of the transfer of responsibility for public health with associated funding. Members raised questions on progress being made to maximise cost savings through procurement. The Director responded that new expertise had been brought in to review contracts and was expected to make significant contributions to the council’s improvement and efficiency programme. The Procurement Board met on a regular basis and collaborative work was continuing with the West London Alliance. Members agreed that the current number of supplies in the region of 12,000 needed to be reduced.
The Director summarised the current and future challenges, in particular the savings target of approximately £90m to £95m over four years, the financial settlement and the need to ensure the organisation stays on track while achieving savings. He hoped monies would be forthcoming to make up for the loss of BSF funding however the council would ensure that there were sufficient school places. Basic Need Safety Valve funding would be spent.
The committee thanked Andrea White for her contribution.
Paul Viljoen (Audit Commission) introduced the progress report and made reference to the latest briefing paper on implementing International Financial Reporting Standards (IFRS) issued in October 2010, a new clarified framework that would apply the audit of the 2010/11 accounts and would introduce changes covering related party transactions, accounting estimates, group accounts and reporting deficiencies in internal controls. Discussions would be taking place with the Director of Finance and Corporate Services.
The committee discussed the reasons for the new arrangements and heard the Director’s view that the International Financial Reporting Standard, once in place, would assist their implementation.
RESOLVED:
(i) that the Annual Audit Letter and the council’s response be noted.
(ii) that the Audit Commission’s progress report be noted.
Supporting documents:
- audit-letter, item 5. PDF 50 KB
- audit-letter-app1, item 5. PDF 674 KB
- audit-letter-app2, item 5. PDF 44 KB
- 1 audit-letter-revised, item 5. PDF 51 KB
- Audit-comm-report, item 5. PDF 311 KB
- Audit-comm-progress-report, item 5. PDF 270 KB