Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 1

Ann

ual A

udit

Lette

r Lo

ndon

Bor

ough

of S

outh

war

k

Aud

it 20

10/1

1

APPENDIX A

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 2

Con

tent

s K

ey m

essa

ges

3 A

udit

opin

ion

and

finan

cial

sta

tem

ents

3

Val

ue fo

r mon

ey

3

Cur

rent

and

futu

re c

halle

nges

4

Fina

ncia

l sta

tem

ents

and

ann

ual g

over

nanc

e st

atem

ent

6 O

vera

ll co

nclu

sion

from

the

audi

t 6

Sig

nific

ant w

eakn

esse

s in

inte

rnal

con

trol

6 W

hole

of G

over

nmen

t Acc

ount

s 7

Valu

e fo

r mon

ey

8 R

evie

w o

f cap

ital a

rran

gem

ents

9

Clo

sing

rem

arks

10

App

endi

x 1

- Fee

s 11

App

endi

x 2

- Glo

ssar

y 12

Traf

fic li

ght e

xpla

natio

n R

ed

G

reen

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 3

Key

mes

sage

s Th

is re

port

sum

mar

ises

the

findi

ngs

from

my

2010

/11

audi

t. M

y au

dit c

ompr

ises

two

elem

ents

: ■

the

audi

t of y

our f

inan

cial

sta

tem

ents

; and

■

my

asse

ssm

ent o

f you

r arr

ange

men

ts to

ach

ieve

val

ue fo

r mon

ey in

you

r use

of r

esou

rces

. I h

ave

incl

uded

onl

y si

gnifi

cant

reco

mm

enda

tions

in th

is re

port

. The

Cou

ncil

has

acce

pted

thes

e re

com

men

datio

ns.

Key

aud

it ris

k O

ur fi

ndin

gs

Unq

ualif

ied

audi

t opi

nion

Pro

per a

rran

gem

ents

to s

ecur

e va

lue

for m

oney

Aud

it op

inio

n an

d fin

anci

al s

tate

men

ts

I iss

ued

unqu

alifi

ed o

pini

ons

on th

e C

ounc

il’s

finan

cial

sta

tem

ents

and

on

the

pens

ion

fund

acc

ount

s on

29

Sep

tem

ber 2

011.

I iss

ue a

n au

dit c

ertif

icat

e w

hen

the

audi

t is

form

ally

clo

sed

and

all o

f th

e w

ork

has

been

com

plet

ed. I

am

del

ayin

g th

e is

sue

of th

is c

ertif

icat

e un

til I

have

com

plet

ed m

y co

nsid

erat

ion

of m

atte

rs b

roug

ht to

my

atte

ntio

n by

mem

bers

of t

he p

ublic

. I a

m s

atis

fied

that

thes

e m

atte

rs d

o no

t hav

e a

mat

eria

l effe

ct o

n th

e fin

anci

al s

tate

men

ts fo

r the

yea

r end

ed

31 M

arch

201

1.

In S

epte

mbe

r 201

1 I p

rese

nted

ann

ual g

over

nanc

e re

ports

to th

e A

udit

and

Gov

erna

nce

Com

mitt

ee o

n th

e fin

anci

al s

tate

men

ts a

nd th

e

pens

ion

fund

acc

ount

s. T

he re

ports

hig

hlig

hted

a n

umbe

r of e

rror

s th

at

the

Cou

ncil

agre

ed to

adj

ust w

ithin

the

finan

cial

sta

tem

ents

.

The

Cou

ncil

prod

uced

Inte

rnat

iona

l Fin

anci

al R

epor

ting

Sta

ndar

ds

(IFR

S) c

ompl

iant

fina

ncia

l sta

tem

ents

for t

he fi

rst t

ime

in 2

010/

11.

Des

pite

the

chal

leng

es o

f IFR

S, t

he le

vel o

f err

ors

in th

e fin

anci

al

stat

emen

ts h

as re

duce

d fro

m th

e pr

evio

us y

ear.

Valu

e fo

r mon

ey

I iss

ued

an u

nqua

lifie

d va

lue

for m

oney

con

clus

ion

on 2

9 S

epte

mbe

r 20

11.

I am

sat

isfie

d th

at th

e C

ounc

il ha

s pr

oper

arr

ange

men

ts in

pla

ce to

se

cure

eco

nom

y, e

ffici

ency

and

effe

ctiv

enes

s in

its

use

of re

sour

ces

for

the

year

end

ed 3

1 M

arch

201

1.

The

conc

lusi

on is

bas

ed o

n m

y as

sess

men

t of t

he C

ounc

il ag

ains

t the

tw

o cr

iteria

spe

cifie

d by

the

Aud

it C

omm

issi

on.

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 4

Cur

rent

and

futu

re c

halle

nges

Th

e C

ounc

il fa

ces

cons

ider

able

cha

lleng

es in

the

com

ing

year

s as

a re

sult

of th

e ec

onom

ic s

ituat

ion

and

the

mov

e to

war

ds g

reat

er u

se o

f sha

red

serv

ices

and

join

t arr

ange

men

ts to

gai

n ef

ficie

ncie

s, a

s sh

own

in th

e fo

llow

ing

tabl

e:

Eco

nom

ic d

ownt

urn

and

pres

sure

on

the

publ

ic s

ecto

r Th

e w

ider

fina

ncia

l out

look

con

tinue

s to

be

chal

leng

ing

for t

he p

ublic

sec

tor.

The

Loca

l Gov

ernm

ent f

inan

cial

set

tlem

ent a

nnou

nced

in F

ebru

ary

2011

re

duce

d fu

ndin

g av

aila

ble

to th

e C

ounc

il by

11.

3% in

201

1/12

and

7.4

% in

20

12/1

3. T

hese

cut

s am

ount

to a

tota

l red

uctio

n in

spe

ndin

g po

wer

of £

46.9

m

illio

n ov

er th

e tw

o ye

ars.

Th

e C

ounc

il ha

s be

en w

orki

ng to

man

age

the

impa

ct o

f the

fina

ncia

l se

ttlem

ent b

ut a

num

ber o

f fun

ding

gap

s re

mai

n. A

dditi

onal

pre

ssur

es s

uch

as in

crea

sing

infla

tion

leve

ls a

nd v

olat

ility

in th

e fin

anci

al m

arke

ts w

hich

will

im

pact

on

inve

stm

ent r

etur

ns fo

r the

Cou

ncil

also

nee

d to

be

man

aged

.

Join

t arr

ange

men

ts /

shar

ed s

ervi

ces

The

Cou

ncil

has

a nu

mbe

r of j

oint

arra

ngem

ents

in p

lace

suc

h as

poo

led

budg

ets

with

the

prim

ary

care

trus

t and

a jo

int c

omm

unic

atio

ns te

am w

ith

Wes

tmin

ster

City

Cou

ncil.

Th

e C

ounc

il, a

long

with

five

oth

er c

ounc

ils fr

om th

e S

outh

Eas

t Lon

don

Sha

red

Ser

vice

s P

artn

ersh

ip (S

ELS

SP

), co

mm

issi

oned

an

inde

pend

ent

repo

rt th

at c

onsi

dere

d th

e po

tent

ial f

or c

olla

bora

tive

wor

k. T

he re

port

iden

tifie

d op

portu

nitie

s fo

r pos

sibl

e sa

ving

s in

the

rang

e of

£2.

5 m

illio

n - £

8 m

illio

n, o

ver a

per

iod

of th

ree

year

s ac

ross

the

six

Cou

ncils

, in

park

ing,

re

side

ntia

l and

nur

sing

car

e, a

nd h

ome

care

ser

vice

s. C

olla

bora

tive

oppo

rtuni

ties

wer

e id

entif

ied

in a

reas

suc

h as

pro

cure

men

t, su

pplie

r m

anag

emen

t and

oth

er a

reas

suc

h as

kno

wle

dge

shar

ing.

Inco

me

stre

ams

The

Cou

ncil’

s m

ain

inco

me

stre

ams

are

the

reve

nue

supp

ort g

rant

(RS

G),

scho

ols

gran

t, ho

usin

g an

d co

unci

l tax

ben

efit

subs

idy,

and

hou

sing

sub

sidy

. O

ther

key

inco

me

sour

ces

incl

ude

non-

dom

estic

rate

s an

d co

unci

l tax

. The

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 5

C

ounc

il is

faci

ng s

igni

fican

t red

uctio

ns in

a n

umbe

r of i

ts in

com

e st

ream

s.

The

Cou

ncil’

s ch

arge

s fo

r som

e ar

eas

of m

isce

llane

ous

inco

me

are

belo

w th

e Lo

ndon

ave

rage

. The

Cou

ncil

has

an o

ppor

tuni

ty to

brin

g fe

es a

nd c

harg

es in

lin

e w

ith th

e re

st o

f Lon

don.

The

Cou

ncil

has

purs

ued

a pr

ogre

ssiv

e po

licy,

in

line

with

its

Med

ium

Ter

m R

esou

rce

Stra

tegy

for c

omm

erci

al re

nts

and

has

mai

ntai

ned

inco

me

leve

ls w

hils

t rat

iona

lisin

g th

e ov

eral

l pro

perty

por

tfolio

.

Ref

orm

of l

ocal

gov

ernm

ent f

inan

ce

The

Hou

sing

Rev

enue

Acc

ount

(HR

A) s

ubsi

dy s

yste

m c

omes

to e

nd fr

om

Apr

il 20

12 a

nd H

RA

sel

f fin

anci

ng w

ill be

intro

duce

d w

hich

will

resu

lt in

ch

ange

s to

cap

ital f

inan

cing

and

acc

ount

ing

arra

ngem

ents

. Th

e C

ounc

il ne

eds

to d

evel

op a

30

year

bus

ines

s pl

an in

whi

ch it

set

s fu

ture

re

nt le

vels

. The

Dep

artm

ent o

f Com

mun

ities

and

Loc

al G

over

nmen

t (D

CLG

) al

low

s a

trans

ition

al p

erio

d of

up

to fi

ve y

ears

with

aut

horit

ies

able

to m

ove

acro

ss to

full

depr

ecia

tion

acco

untin

g be

fore

hand

sho

uld

they

wis

h. T

his

trans

ition

al p

erio

d w

ill a

llow

the

Cou

ncil

to d

eal w

ith th

e sh

ort t

erm

af

ford

abili

ty is

sues

as

a re

sult

of th

e in

trodu

ctio

n of

the

new

mod

el.

Con

sulta

tion

is c

urre

ntly

und

erw

ay fo

r the

pro

posa

l to

repa

triat

e bu

sine

ss ra

te

inco

me

to lo

cal a

utho

ritie

s, a

nd a

llow

them

to b

orro

w a

gain

st fu

ture

gro

wth

of

this

inco

me,

from

201

3/14

.

Rec

omm

enda

tion

R1

The

Cou

ncil

shou

ld re

view

the

cost

effe

ctiv

enes

s of

col

labo

rativ

e w

ays

of w

orki

ng to

ach

ieve

add

ition

al e

ffici

ency

sav

ings

.

R2

Dev

elop

arr

ange

men

ts fo

r the

tran

sitio

n to

HR

A s

elf f

inan

cing

mod

el a

nd im

plem

ent p

lans

to m

inim

ise

the

impa

ct o

f affo

rdab

ility

issu

es a

s a

resu

lt of

this

intro

duct

ion.

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 6

Fina

ncia

l sta

tem

ents

and

an

nual

gov

erna

nce

stat

emen

t

The

Cou

ncil'

s fin

anci

al s

tate

men

ts a

nd a

nnua

l gov

erna

nce

stat

emen

t are

an

impo

rtan

t mea

ns b

y w

hich

the

Cou

ncil

acco

unts

for i

ts s

tew

ards

hip

of p

ublic

fund

s.

Ove

rall

conc

lusi

on fr

om th

e au

dit

1 I i

ssue

d an

unq

ualif

ied

opin

ion

on th

e C

ounc

il’s

finan

cial

sta

tem

ents

and

pen

sion

fund

acc

ount

s on

29

Sep

tem

ber 2

011,

in a

dvan

ce o

f the

dea

dlin

e of

30

Sep

tem

ber 2

011.

2 B

efor

e gi

ving

my

opin

ion

I rep

orte

d to

thos

e ch

arge

d w

ith g

over

nanc

e, th

e A

udit

and

Gov

erna

nce

Com

mitt

ee, o

n th

e is

sues

aris

ing

from

the

2010

/11

audi

t. D

etai

led

repo

rts w

ere

pres

ente

d to

the

Aud

it an

d G

over

nanc

e C

omm

ittee

on

27 S

epte

mbe

r 201

1.

3 Th

e fin

anci

al s

tate

men

ts s

ubm

itted

for a

udit

wer

e ge

nera

lly c

ompl

ete

and

wer

e ad

equa

tely

sup

porte

d by

wor

king

pap

ers.

My

audi

t ide

ntifi

ed a

nu

mbe

r of n

on-tr

ivia

l err

ors

whi

ch w

ere

amen

ded

by o

ffice

rs. T

he c

hang

es h

ad n

o im

pact

on

the

Cou

ncil’

s ou

tturn

for t

he y

ear o

r its

ava

ilabl

e re

sour

ces.

Sign

ifica

nt w

eakn

esse

s in

inte

rnal

con

trol

4

My

test

ing

foun

d th

at th

ere

wer

e de

lays

in u

nder

taki

ng a

full

reco

ncili

atio

n be

twee

n th

e fix

ed a

sset

regi

ster

and

gen

eral

ledg

er. T

his

was

not

pr

ovid

ed u

ntil

the

end

of A

ugus

t and

resu

lted

in th

e id

entif

icat

ion

of s

igni

fican

t am

endm

ents

to th

e pl

ant,

prop

erty

and

equ

ipm

ent n

ote.

5 M

y te

stin

g of

the

Cou

ncil’

s fin

anci

al s

yste

ms

foun

d a

num

ber o

f ins

tanc

es w

here

the

oper

atio

n of

con

trols

was

not

evi

denc

ed. E

xam

ples

incl

uded

, bu

t wer

e no

t lim

ited

to:

■ Th

e m

onth

ly re

view

by

HR

man

ager

s of

pay

roll

star

ters

and

leav

ers;

■

Jour

nal a

utho

risat

ion;

and

■

Ver

ifica

tion

of th

e co

mpl

eten

ess

and

accu

racy

of t

he fi

xed

asse

t reg

iste

r.

6 In

resp

onse

to th

e co

ntro

l wea

knes

ses

the

Cou

ncil

has

resp

onde

d by

: ■

Und

erta

king

a re

view

of t

he p

roce

sses

for e

vide

ncin

g co

ntro

ls fo

r sta

rters

and

leav

ers;

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 7

■ U

nder

taki

ng a

n ex

erci

se c

heck

ing

com

plia

nce

with

the

Cou

ncil’

s pr

otoc

ol o

n pr

epar

ing

and

auth

oris

ing

jour

nals

. Thi

s in

volv

es lo

okin

g at

sam

ples

of

trans

actio

ns e

nter

ed in

to S

AP

eac

h m

onth

. Th

e re

sults

from

the

exer

cise

will

be

revi

ewed

in D

ecem

ber;

■ V

erify

ing

the

info

rmat

ion

cont

aine

d in

the

fixed

ass

et re

gist

er a

nd th

e ho

usin

g re

ntal

sys

tem

. In

addi

tion

offic

ers

are

revi

ewin

g pr

oces

ses

to b

ette

r tri

angu

late

ass

et d

ispo

sal i

nfor

mat

ion

betw

een

diffe

rent

dep

artm

ents

with

in th

e C

ounc

il.

Ove

rall

conc

lusi

on fr

om th

e pe

nsio

n fu

nd a

udit

7

In m

y P

ensi

on F

und

Ann

ual G

over

nanc

e re

port,

I re

porte

d th

e pe

nsio

n fu

nd fi

nanc

ial s

tate

men

ts s

ubm

itted

for a

udit

wer

e su

bsta

ntia

lly c

ompl

ete.

Th

e C

ounc

il ha

d no

t dis

clos

ed a

n an

alys

is o

f fin

anci

al in

stru

men

ts w

hich

is re

quire

d un

der t

he tr

ansi

tion

to In

tern

atio

nal F

inan

cial

Rep

ortin

g S

tand

ards

(IF

RS

) in

2010

/11.

The

Cou

ncil

had

not s

epar

atel

y di

sclo

sed

asse

ts o

ver 5

% o

f any

cla

ss o

r typ

e of

sec

urity

. Th

ese

disc

losu

res

wer

e al

l mad

e in

the

final

ver

sion

of t

he s

tate

men

ts. T

here

was

no

impa

ct o

n th

e N

et A

sset

s S

tate

men

t, no

r the

Fun

d A

ccou

nt d

ue to

thes

e ad

ditio

nal d

iscl

osur

es.

Who

le o

f Gov

ernm

ent A

ccou

nts

8 I w

as a

ble

to c

ertif

y th

e C

ounc

il's W

hole

of G

over

nmen

t Acc

ount

s (W

GA

) ret

urn

on 2

Nov

embe

r 201

1. T

he d

elay

was

as

a re

sult

of s

uppo

rting

pa

pers

bei

ng u

nava

ilabl

e fo

r aud

it. A

sig

nific

ant n

umbe

r of a

men

dmen

ts w

ere

repo

rted

due

to c

hang

es b

etw

een

the

draf

t ret

urn

and

audi

ted

finan

cial

st

atem

ents

.

Rec

omm

enda

tion

R3

Alig

n pr

oduc

tion

of th

e W

hole

of G

over

nmen

t Acc

ount

s re

turn

and

sup

porti

ng w

orki

ng p

aper

s ea

rlier

in th

e cl

osed

own

timet

able

. O

ther

mat

ters

9

Aud

it ce

rtific

ates

con

clud

ing

the

audi

ts fo

r the

yea

rs e

nded

31

Mar

ch 2

008

and

31 M

arch

200

9 w

ere

issu

ed o

n 15

Jun

e 20

11.

10

The

audi

ts fo

r the

yea

rs e

nded

31

Mar

ch 2

010

and

31 M

arch

201

1 ca

nnot

be

form

ally

con

clud

ed a

nd a

n au

dit c

ertif

icat

e is

sued

unt

il I c

ompl

ete

my

cons

ider

atio

n of

mat

ters

bro

ught

to m

y at

tent

ion

by lo

cal g

over

nmen

t ele

ctor

s. T

hese

mat

ters

rela

te to

the

finan

cial

sta

tem

ents

for t

he y

ears

end

ed 3

1 M

arch

201

0 an

d 31

Mar

ch 2

011.

11

At t

he ti

me

of w

ritin

g th

is re

port,

my

audi

t of t

he C

ounc

il’s

2010

/11

gran

t cla

ims

and

retu

rns

is in

pro

gres

s. O

f the

ten

whi

ch re

quire

aud

it ce

rtific

atio

n, s

even

hav

e be

en c

ertif

ied

and

subm

itted

on

time

to th

e ap

prop

riate

gra

nt p

ayin

g bo

dy. T

he re

mai

ning

thre

e cl

aim

s an

d re

turn

s ar

e on

co

urse

for b

eing

cer

tifie

d w

ithin

the

requ

ired

timef

ram

es.

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 8

Valu

e fo

r mon

ey

I con

side

red

whe

ther

the

Cou

ncil

is m

anag

ing

and

usin

g its

mon

ey, t

ime

and

peop

le to

del

iver

va

lue

for m

oney

. I a

sses

sed

your

per

form

ance

aga

inst

the

crite

ria s

peci

fied

by th

e A

udit

Com

mis

sion

and

hav

e re

port

ed th

e ou

tcom

e as

the

valu

e fo

r mon

ey (V

FM) c

oncl

usio

n.

I ass

ess

your

arr

ange

men

ts to

sec

ure

econ

omy,

effi

cien

cy a

nd e

ffect

iven

ess

in y

our u

se o

f res

ourc

es a

gain

st tw

o cr

iteria

spe

cifie

d by

the

A

udit

Com

mis

sion

. My

over

all c

oncl

usio

n is

that

the

Cou

ncil

has

adeq

uate

arr

ange

men

ts to

sec

ure,

eco

nom

y, e

ffici

ency

and

effe

ctiv

enes

s in

its

use

of

reso

urce

s.

My

conc

lusi

on o

n ea

ch o

f the

two

area

s is

set

out

bel

ow.

Valu

e fo

r mon

ey c

riter

ia a

nd k

ey m

essa

ges

Crit

erio

n K

ey m

essa

ges

1. F

inan

cial

resi

lienc

e

The

orga

nisa

tion

has

prop

er a

rran

gem

ents

in

plac

e to

sec

ure

finan

cial

resi

lienc

e.

Focu

s fo

r 201

0/11

: Th

e or

gani

satio

n ha

s ro

bust

sys

tem

s an

d pr

oces

ses

to m

anag

e ef

fect

ivel

y fin

anci

al ri

sks

and

oppo

rtuni

ties,

and

to s

ecur

e a

stab

le

finan

cial

pos

ition

that

ena

bles

it to

con

tinue

to

oper

ate

for t

he fo

rese

eabl

e fu

ture

.

The

com

preh

ensi

ve s

pend

ing

revi

ew (C

SR

) req

uire

s th

e C

ounc

il to

sav

e 25

% b

etw

een

2011

/12

and

2013

/14.

Thi

s eq

uate

s to

£84

.3 m

illio

n of

effi

cien

cies

and

sav

ings

ove

r the

thre

e ye

ars.

My

revi

ew fo

und

that

the

Cou

ncil

has

adeq

uate

arr

ange

men

ts in

pla

ce to

resp

ond

to th

e C

SR

. S

igni

fican

t fur

ther

sav

ings

are

requ

ired

to a

chie

ve a

bal

ance

d m

ediu

m te

rm fi

nanc

ial p

lan.

Whi

lst

the

Cou

ncil

is w

ell-p

ositi

oned

, the

sca

le o

f the

cha

lleng

e m

eans

that

ther

e is

a ri

sk it

cou

ld fa

il to

m

ake

the

requ

ired

savi

ngs.

Th

e C

ounc

il sh

ould

con

tinue

to w

ork

to id

entif

y an

d im

plem

ent s

avin

gs to

ach

ieve

its

med

ium

te

rm fi

nanc

ial p

lan,

whi

lst d

eliv

erin

g ag

ains

t sta

tuto

ry re

quire

men

ts a

nd th

e C

ounc

il’s

prio

ritie

s.

2. S

ecur

ing

econ

omy

effic

ienc

y an

d ef

fect

iven

ess

The

orga

nisa

tion

has

prop

er a

rran

gem

ents

The

Cou

ncil

has

prio

ritis

ed it

s re

sour

ces

with

in ti

ghte

r bud

gets

. The

Cou

ncil

deliv

ered

£17

mill

ion

of e

ffici

enci

es a

nd s

avin

gs in

201

0/11

aga

inst

a ta

rget

of £

20.8

mill

ion.

Th

e C

ounc

il ha

s a

good

und

erst

andi

ng o

f its

cos

ts. T

he C

ounc

il ha

s re

duce

d co

sts

incl

udin

g:

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 9

Crit

erio

n K

ey m

essa

ges

for c

halle

ngin

g ho

w it

sec

ures

eco

nom

y,

effic

ienc

y an

d ef

fect

iven

ess.

Fo

cus

for 2

010/

11:

The

orga

nisa

tion

is p

riorit

isin

g its

reso

urce

s w

ithin

tigh

ter b

udge

ts, f

or e

xam

ple

by a

chie

ving

co

st re

duct

ions

and

by

impr

ovin

g ef

ficie

ncy

and

prod

uctiv

ity.

■ C

hild

ren’

s Se

rvic

es -

£2.2

mill

ion

of s

avin

gs w

ere

targ

eted

at i

mpr

oved

com

mis

sion

ing

and

proc

urem

ent,

mor

e ef

fect

ive

com

bini

ng o

f fun

ding

stre

ams

£400

,000

, and

ser

vice

re

conf

igur

atio

n an

d re

desi

gn £

1.35

mill

ion;

and

■

Adu

lt S

ervi

ces

savi

ngs

incl

ude

£600

,000

for r

edes

ign

of s

uppo

rt fo

r peo

ple

with

lear

ning

di

fficu

lties

, £70

0,00

0 fo

r re-

tend

er o

f con

tract

s an

d £2

mill

ion

from

re-m

odel

ling,

and

re

conf

igur

atio

n of

ser

vice

are

as.

In 2

010/

11, t

he C

ounc

il m

ade

the

trans

ition

to a

cab

inet

. The

Cou

ncil

upda

ted

its g

over

nanc

e ar

rang

emen

ts in

resp

onse

to th

is c

hang

e. I

unde

rtook

a re

view

of t

he C

ounc

il’s

gove

rnan

ce

arra

ngem

ents

whi

ch fo

und

that

ther

e ar

e ad

equa

te a

rran

gem

ents

in p

lace

. I d

o no

t hav

e an

y re

com

men

datio

ns a

risin

g fro

m m

y w

ork

in th

is a

rea.

Rev

iew

of c

apita

l arr

ange

men

ts

12

To s

uppo

rt m

y re

view

of t

he c

riter

ia I

unde

rtook

a re

view

of t

he c

apita

l arra

ngem

ents

at t

he C

ounc

il. I

have

repo

rted

my

deta

iled

findi

ngs

to th

e C

ounc

il in

a s

epar

ate

repo

rt.

13

My

revi

ew h

as fo

und

that

the

Cou

ncil

has

adeq

uate

arr

ange

men

ts in

pla

ce fo

r man

agin

g its

cap

ital p

rogr

amm

e to

ens

ure

that

it a

chie

ves

valu

e fo

r m

oney

, but

impr

ovem

ents

are

nee

ded

in a

num

ber o

f are

as.

■ Th

e C

ounc

il’s in

vest

men

t in

stoc

k co

nditi

on s

urve

ys a

nd k

ey p

erfo

rman

ce in

dica

tors

sup

port

the

Cou

ncil’

s un

ders

tand

ing

of th

e pr

oper

ty p

ortfo

lio. A

cl

ear s

et o

f eva

luat

ion

crite

ria h

elp

to g

uide

the

deve

lopm

ent o

f the

cap

ital p

rogr

amm

e, a

lthou

gh th

e st

anda

rd o

f com

plet

ion

of s

chem

e bi

d su

bmis

sion

s co

uld

be im

prov

ed.

■ Th

e m

ain

corp

orat

e fo

rum

for t

he m

anag

emen

t of t

he C

ounc

il's c

apita

l pro

gram

me

is th

e C

apita

l Wor

king

Gro

up. T

his

prov

ides

a k

ey o

ppor

tuni

ty to

ta

p in

to s

taff

expe

rtise

and

kno

wle

dge

acro

ss th

e bo

roug

h. H

owev

er g

reat

er e

ngag

emen

t by

offic

ers

is n

eede

d to

mak

e th

e gr

oup

mor

e ef

fect

ive.

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 10

Clo

sing

rem

arks

I h

ave

disc

usse

d an

d ag

reed

this

lette

r with

the

Chi

ef E

xecu

tive

and

the

Fina

nce

Dire

ctor

. I w

ill p

rese

nt th

is le

tter a

t the

Aud

it an

d G

over

nanc

e C

omm

ittee

on

9 Ja

nuar

y 20

12.

Furth

er d

etai

led

findi

ngs,

con

clus

ions

and

reco

mm

enda

tions

in th

e ar

eas

cove

red

by o

ur a

udit

are

incl

uded

in th

e re

ports

issu

ed to

the

Cou

ncil

durin

g th

e ye

ar.

Rep

ort

Dat

e is

sued

Aud

it op

inio

n pl

an

Apr

il 20

11

Cap

ital a

rran

gem

ents

repo

rt M

ay 2

011

Ann

ual g

over

nanc

e re

port

Sep

tem

ber 2

011

Aud

itor r

epor

t S

epte

mbe

r 201

1

VFM

con

clus

ion

Sep

tem

ber 2

011

Fina

l acc

ount

s m

emor

andu

m

Nov

embe

r 201

1

The

Cou

ncil

has

take

n a

posi

tive

and

cons

truct

ive

appr

oach

to o

ur a

udit.

I w

ish

to th

ank

the

Cou

ncil

staf

f for

thei

r sup

port

and

co-o

pera

tion

durin

g th

e au

dit.

Sus

an M

. Ext

on

Dis

trict

Aud

itor

Nov

embe

r 201

1

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 11

App

endi

x 1

- Fee

s

A

ctua

l Pr

opos

ed

Varia

nce

Tota

l aud

it fe

e *1

£581

,000

£5

81,0

00

nil

Pen

sion

Fun

d au

dit f

ee

£35,

000

£35,

000

nil

Non

-aud

it w

ork*

2 £8

6,20

0 n/

a £8

6,20

0

Tota

l

*1 Th

e to

tal a

udit

fee

is s

how

n gr

oss.

The

Aud

it C

omm

issi

on is

pay

ing

a re

bate

of £

19,8

98 to

you

.

*2 N

on-a

udit

wor

k in

clud

es £

35,0

00 fo

r wor

k on

reve

nue

and

bene

fits

and

£51,

200

for w

ork

on e

lect

or q

uerie

s.

Aud

it C

omm

issi

on

Ann

ual A

udit

Lette

r 12

App

endi

x 2

- Glo

ssar

y

A

udit

opin

ion

On

com

plet

ion

of th

e au

dit o

f the

fina

ncia

l sta

tem

ents

, I m

ust g

ive

my

opin

ion

on th

e fin

anci

al s

tate

men

ts, i

nclu

ding

: ■

whe

ther

they

giv

e a

true

and

fair

view

of t

he fi

nanc

ial p

ositi

on o

f the

aud

ited

body

and

its

spen

ding

and

inco

me

for t

he y

ear i

n qu

estio

n; a

nd

■ w

heth

er th

ey h

ave

been

pre

pare

d pr

oper

ly, f

ollo

win

g th

e re

leva

nt a

ccou

ntin

g ru

les.

If I a

gree

that

the

finan

cial

sta

tem

ents

giv

e a

true

and

fair

view

, I is

sue

an u

nqua

lifie

d op

inio

n. I

issu

e a

qual

ified

opi

nion

if:

■ I f

ind

the

stat

emen

ts d

o no

t giv

e a

true

and

fair

view

; or

■ I c

anno

t con

firm

that

the

stat

emen

ts g

ive

a tru

e an

d fa

ir vi

ew.

Valu

e fo

r mon

ey c

oncl

usio

n

The

audi

tor’s

con

clus

ion

on w

heth

er th

e au

dite

d bo

dy h

as p

ut in

pla

ce p

rope

r arr

ange

men

ts fo

r sec

urin

g ec

onom

y, e

ffici

ency

and

effe

ctiv

enes

s in

its

use

of re

sour

ces

base

d on

crit

eria

spe

cifie

d by

the

Aud

it C

omm

issi

on.

If I f

ind

that

the

audi

ted

body

had

ade

quat

e ar

rang

emen

ts, I

issu

e an

unq

ualif

ied

conc

lusi

on. I

f I fi

nd th

at it

did

not

, I is

sue

a qu

alifi

ed c

oncl

usio

n.

If yo

u re

quire

a c

opy

of th

is d

ocum

ent i

n an

alte

rnat

ive

form

at o

r in

a la

ngua

ge o

ther

than

Eng

lish,

ple

ase

call:

08

44 7

98 7

070

© A

udit

Com

mis

sion

201

1.

Des

ign

and

prod

uctio

n by

the

Aud

it C

omm

issi

on P

ublis

hing

Tea

m.

Imag

e co

pyrig

ht ©

Aud

it C

omm

issi

on.

The

Sta

tem

ent o

f Res

pons

ibili

ties

of A

udito

rs a

nd A

udite

d B

odie

s is

sued

by

the

Aud

it C

omm

issi

on e

xpla

ins

the

resp

ectiv

e re

spon

sibi

litie

s of

aud

itors

an

d of

the

audi

ted

body

. Rep

orts

pre

pare

d by

app

oint

ed a

udito

rs a

re a

ddre

ssed

to n

on-e

xecu

tive

dire

ctor

s, m

embe

rs o

r offi

cers

. The

y ar

e pr

epar

ed fo

r th

e so

le u

se o

f the

aud

ited

body

. Aud

itors

acc

ept n

o re

spon

sibi

lity

to:

■ an

y di

rect

or/m

embe

r or o

ffice

r in

thei

r ind

ivid

ual c

apac

ity; o

r ■

any

third

par

ty.

w

ww

.aud

it-co

mm

issi

on.g

ov.u

k

N

ovem

ber 2

011