Agenda item

The purpose of this report is to present the Annual Audit and Inspection Letter (AAIL) which has been received from the Audit Commission.  The External Auditor will attend the meeting to present the Letter and answer any questions.

Alan Nash, Chief Officer: Financial Services introduced the annual audit inspection letter. He told the meeting that the letter summarised the 2008/2009 Audit, and gave four recommendations which it was proposed would be picked up by Directors to go into their 2010/2010 business plans.

Phil Sharman, District Auditor, gave background to the letter. He told the meeting that the Audit Commission had decided that Audit and Inspection reports would be published separately in future. The audit report was available earlier this year than in previous years, and had been agreed with officers in December 2009. The financial statements on page 11 of the agenda papers had been re-approved at the last meeting of Governance and Audit, and the overall outcome was that in spite of a challenging year, he had been able to give an unqualified opinion on the financial statements.

Under value for money and use of resources, which was a new part of the report, the District Auditor had been able to given an unqualified opinion as all requirements had been met. The Council had also performed well in managing use of natural resources. The Council continued to focus on value for money, procurement had been strengthened, and risk management developed. Data quality had also been strengthened and governance arrangements were being strengthened.

The recommendations in the letter gave potential areas for improvement. There were common areas across three East Berkshire unitary authorities, and partnership working was in place, giving opportunities for further development. An impairment for the Icelandic banks had been provided for in the 2009/2009 accounts. Treasury management had been strengthened.

On the subject of his fee, Mr Sharman told the meeting that it was a significant investment of resource, but represented less than 0.5% of Council spending. There was a statutory requirement that the fee should cover only the cost of services, with no element of profit.

The Chairman thanked the District Auditor for his comments, and asked for questions. He was asked whether the four-point scale, of which the Auditor had spoken, consisted of equal divisions or a matrix. He was told that Level 1 was the lowest, and it would be rare for a unitary authority of this size to have any Level 1 scores; Level 2 indicated that the Council met professional standards; Level 3 met professional standards, arrangements were embedded, and were yielding positive outcomes. Level 4 was awarded for national exemplars, and there were very few of these. The District Auditor told the meeting that it was purely a judgement, but from the first year of scoring on these levels, there was a spread of scores.

The Committee drew the Auditor’s attention to paragraph 30 of the letter, noting that the Auditor had recognised the Council’s consistently-managed spending over the past 11 years, and asked whether there were exemplars the Council could learn from. In response, he was told that there was more detail on page 21 under Appendix 1 where the KLOE 1.2 score was already at Level 3. The Audit Commission intended to publish the results of those at Level 4 as examples of good practice.

The Committee asked what outcomes were the auditors seeking, which they didn’t find, and the Auditor explained that achieving level 2 was difficult in the new system, but he recognised that the Council wanted to aspire to reach higher level scores. He suggested that for data quality the Council had recognised weaknesses in that some data were not very reliable, and were addressing this issue. A positive outcome would be to see these fairly stated in relation to outcome, with error-free published data. The system around caring had produced some unreliable results when tested, and some other arrangements could be strengthened. He explained that the Council could not move to another level when there were still some lower level issues to address. In 2009/2009 there was no data quality strategy in place, but he would expect that this year the data strategy would begin to bite and there would be good outcomes. He would be happy to supply a schedule of outcomes which the Audit Commission was seeking. The Committee was keen to have a list of outcomes as they were concerned about the areas of data which needed improvement, and suggested that there needed to be some specific pointers to help bring this area up to Level 3. The Committee emphasised that although it was important that good records were kept, it was of paramount importance that care was being delivered in a timely fashion. He asked whether the judgments were made against a process or against an outcome.

The District Auditor thanked the members for their comments, and said that it was clear that as a Council Bracknell Forest was ambitious to progress. There was an Audit Commission framework which was used which posed the question ‘if Council got the basics right, what outcomes would we expect to see?’ For high-performing councils there was an additional outcome list. Data quality was an example he had used earlier in the discussion, but there were over 100 indicators nationally, of which each Council selected around 35. The Auditors chose to examine six of these in depth. He told the meeting he would bring to the next meeting a report, currently with officers, on what had been examined. With regard to financial management, the Council was already doing work to put in a documented strategy; there was a need for a 3-5 year revenue strategy and a 10-12 year capital strategy. Good progress had been made. He suggested that such strategies could set out broad parameters, although the Council needed to maintain some flexibility.

The Committee asked about Recommendation 1, bullet point 3, on the subject of monitoring financial performance of partnerships. The Auditor told him that for example, community safety would need input financially from several groups within a partnership. The Committee was reminded that a Partnership Scrutiny Group had been set up to monitor this and a recent report indicated that much of this monitoring was already being done. They felt the Council was close to having achieved this, and there was plenty of dialogue through scrutiny on how our partnerships worked.

The Auditor believed that arrangements needed to be in place to demonstrate to auditors that these systems were working. Costs were measured by looking at the systems, but through benchmarking and comparison the auditors found it was used in some areas but not in all – they did not see consistent comparisons being made.

Under Item 43, the Committee asked what was meant by the Standards Committee being reactive. It had a judicial-type function, and monitoring compliance was policing. In the ensuing exchange, the Auditor explained that it meant that the auditors would want to see promotion of training relative to the Committee’s work, and monitoring compliance of Codes of Conduct and protocols. A guidance framework could be shared with Standards Committee.

With regard to items 48 and 49, the Auditor told the meeting that he had undertaken a review of how effectively partners in East Berkshire were working together to address issues of health inequalities. He stressed that health needs across the three unitary authorities would be different, and all authorities needed to consult with each other. Partnership working allowed discussion to take place, but fair shares were not necessarily equal shares. The Committee believed this to be a flawed argument.

In response to the recommendations in the report which introduced the auditor’s letter, Cllr Ward proposed and Cllr Thompson seconded. The Committee pointed out that it had no option but to note the report, but felt that they should express reservations on some of the framework. An amendment was suggested which added qualification and asked for clarification.

The committee RESOLVED that the report and Auditors’ letter be noted, but asked for clarification concerning the Standards Committee (para 43), Health issues (para 48 to 57 and associated recommendations) and the issue of flawed data (para 42).