Audit Commission annual governance report on the MPA audit 2006/07

Report: 6
Date: 14 September 2007
By: Chief Executive and Treasurer

Summary

The report brings to the attention of the Committee the Audit Commission’s Annual Governance report on the MPA audit 2006/07.

A. Recommendation

That the Audit Commission’s annual governance report be noted.

B. Supporting information

1. Attached at Appendix 1 is the Audit Commission’s annual governance report on the MPA audit 2006/07. This is the annual governance report covering the audit of the Authority for the year ended 31 March 2007 and is presented by the District Auditor.

2. The Audit Commission is required by the Audit Commission's statutory Code of Audit Practice for Local Government bodies (the Code) to issue a report to those charged with governance summarising the conclusions from their audit work. For the purposes of the audit, the Authority's Corporate Governance Committee is considered to fulfil the role of those charged with governance.

3. The Audit Commission is required by professional auditing standards to report to the Corporate Governance Committee certain matters before it gives its opinion on the financial statements. The section of their report covering the financial statements fulfils this requirement.

4. The principle purposes of the governance report are:

• to reach a mutual understanding of the scope of the audit and the respective responsibilities of the auditor and the Corporate Governance Committee;
• to share information to assist both the auditor and those charged with governance to fulfil their respective responsibilities; and
• to provide the Corporate Governance Committee with recommendations for improvement arising from the audit process.

5. In undertaking its audit, District Audit’s responsibilities are to review and report on, to the extent required by the relevant legislation and the requirements of the Code:

• the Authority’s financial statements; and
• whether the Authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources.

Audit opinion

6. Based on the District Auditor’s current work they propose issuing an unqualified audit opinion by 30 September.

Systems of internal control

7. The Annual Governance Report has highlighted that there was a period during 2006/07 when the cashbook to bank reconciliation and payroll control accounts and bank accounts were not reconciled. The reasons were primarily technical IT interface problems following the change of payroll provider. Extensive pro-active work was undertaken by the MPS to investigate and resolve anomalies and considerable work was undertaken with the payroll provider to strengthen the control environment to a satisfactory level. In both cases, required year-end reconciliations were completed to a satisfactory level and have continued satisfactorily during 2007/08.

8. The Committee has previously received the District Auditor’s recommendation in his Annual Letter (December 2006) that the position on Safer Neighbourhoods property procurement be regularised. Action has now been taken to regularise the procurement process for the provision of Safer Neighbourhoods’ estates, including assessing value for money and to deliver ongoing compliance with standing orders and required procurement practice. However, during 2006/07 the issue had not been fully resolved.

9. Based on the position on internal control outlined in the two paragraphs above, the Value for Money conclusion issued by the District Auditor will be qualified to the extent that in all significant respects the Authority has made proper arrangements to secure economy, efficiency and effectiveness in the use of its resources, except for putting in place adequate arrangements to maintain a sound system of internal control. In this respect the internal control element of the overall VfM conclusion forms one of twelve criteria the District Auditor assesses.

C. Race and equality impact

There are no race and diversity implications directly arising from this report.

D. Financial implications

1. The Audit Commission has reported on the Authority’s financial statements; and whether the Authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources.

2. The qualification of the VfM assessment continues to be an issue for concern. However the District Auditor has recognised the improvements made by the Authority / Service since the 2005/06 Management Letter. The District Auditor has now indicated he will be able to issue a certificate for the closure of the 2005/06 as well as the 2006/07 accounts. Work is continuing to improve the systems of internal control within the Service.

E. Background papers

None

F. Contact details

Report author: Ken Hunt, MPA.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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