Audit Commission’s Annual Governance Report – MPA audit 2008/09

Report: 4
Date: 14 September 2009
By: Acting MPA Treasurer and Director of Resources on behalf of the Commissioner

Summary

The report brings to the attention of the Committee the Audit Commission’s Annual Governance report on the MPA audit 2008/09.

A. Recommendation

That the Audit Commission’s annual report be received.

B. Supporting information

1. Attached at Appendix 1 is the Audit Commission’s annual governance report on the MPA audit 2008/09. This is the annual governance report covering the audit of the Authority for the year ended 31 March 2009 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 purpose 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 main 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, the Audit Commission’s responsibilities are to view 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.

Financial statements audit opinion

6. Based on the Audit Commission’s current work the District Auditor proposes issuing an unqualified audit opinion by 30 September, subject to satisfactory completion of outstanding work and resolution of the discussions taking place with the Department of the Communities and Local Government, on the treatment of pension costs for officers in the new (2006) pension scheme. This matter affects all police authority accounts and guidance is awaited from central government.

7. The areas of audit testing that are still being undertaken are:

• Fixed Assets;
• Debtor and deferred government grants;
• Housing allowances;
• Overtime;
• Income and expenditure; and
• Pension fund and FRS 17 disclosure.

8. The audit testing is planned to be completed before the opinion deadline of 30 September 2009. If any matters arise in concluding the outstanding work, that needs to be reported, they will be raised with the MPA Acting Treasurer, MPS Director of Resources and the chair of the Corporate Governance Committee.

9. The auditors have identified areas where adjustments are required to the accounts and these have been accepted by the officers:

1. Fixed Assets -The Committee will recall that when the draft accounts were presented on 15 June 2009, the MPS had asked the Audit Commission to award extra time to properly reflect the decline in market conditions at 31 March 2009, prior to the auditors’ review of Fixed Assets. The need to perform an additional valuation at year end, coupled with the sheer scale of the MPS estate had resulted in extra work at the year end, involving complex accounting treatment, to record and offset the gains and subsequent losses on individual properties during the year. Following the extra time awarded, officers were able to properly validate the accounting assumptions in relation to fixed asset impairments and consequently make adjustments for impairment of £10.3m (less than 1%) on the total asset value of the estate which now stands at £1.4bn.
2. Finance Leases - the Auditors recommend that all the finance leases within the Balance Sheet are fully disclosed in the notes to the accounts to present a complete picture of the Authority’s leases.

10. Whilst not material to the financial statements, the auditors noted that contract extensions had not been managed well by the MPA/MPS in the past, and that steps had been taken by the MPA/MPS to make improvements in this area. As well as the improvements listed in the Governance Report and in addition to the controls put in place by the MPA to strengthen the Authority’s oversight and approval of contract extensions, Members will be aware of the significant level of work undertaken by the Service, in consultation with MPA officers, over the last 12 to 18 months including:

• the establishment of a full contracts database
• the continuing implementation of compliance controls through the P2P programme
• new procedures to control the use of single tender action
• improved procedures on contract planning and timetabling.

11. In respect of qualitative issues, the Auditors make reference to:

1. Service specific grant income. For 2008/09 the MPA/S has adopted the same presentation as in previous years. The new Police Objective Analysis (POA) to be introduced in 2009/10 will provide an opportunity for the MPA/MPS to review the presentation of grant income in the accounts.
2. A long term debtor for amounts due from the Inner London Probation Service (ILPS) and the Greater London Magistrates Court Authority (GLMCA) in respect of loans taken out on their behalf and transferred to the Authority on its inception in 2000. During 2008/09 considerable progress has been made with the Ministry of Justice and others in resolving this issue. As the remaining balance is expected to be resolved within the coming months, the MPA does not expect there to be a need for a bad debt provision in the 2009/10 accounts but the position will be kept under review.

Value for money opinion

12. It is pleasing to report that for the second year, the District Auditor has awarded the Authority an unqualified Value for Money Conclusion stating that the Authority has maintained adequate arrangements to secure economy, efficiency and effectiveness in its use of resources in 2008/09.

13. The Auditor’s work on the use of resources is substantially complete, and the national quality and moderation process is in progress. Once this has been concluded the Auditors will report to the MPA on the final Use of Resources assessments against each criteria with a commentary on the main findings and areas to address. This will be reported in their annual audit letter.

C. Race and equality impact

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

D. Financial implications

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.

E. Background papers

None

F. Contact details

Report author: Anne McMeel, Director of Resources, MPS

For information contact:

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

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