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External Audit Report

The Authority's External Auditor issued a letter (reported to the Audit, Risk and Governance Committee on 19 November 2009) that summarises the findings from the Auditor's 2008/09 Audit. 

It includes messages arising from the audit of our financial statements and the results of the work that the Auditors have undertaken to assess our arrangements to secure value for money in your use of resources.

The Key Messages from the District Auditor:

1 You can take assurance from the fact that I have been able to give an unqualified opinion on the financial statements. The draft financial statements were changed to correct a few errors but officers have agreed to address the issues identified by our audit. This should improve the quality of next year's financial statements.

2 I have also given an unqualified value for money conclusion as you have adequate processes in place to manage and use your resources to deliver value for money. The next step is for you to prove that these processes are actually helping you deliver priority services to the community.

3 During the year you had to revise your spending plans because the Government would not let you increase Council Tax as much as you wanted to. You dealt with this well and kept spending within the revised limits. In the current year, spending is also being kept within the funds available. However, it remains a challenge to keep spending under control and you must continue to monitor this closely and take any necessary decisions promptly.

4 Finally, it is my view that you need to take action to stabilise your senior management team. You currently have no Chief Executive and are at an early stage in the process of recruiting a replacement.

Financial statements and annual governance statement

The Authority's financial statements and annual governance statement are an important means by which the Authority accounts for its stewardship of public funds.

Significant issues arising from the audit

5 I issued an audit report including an unqualified opinion on the financial statements on 29 September 2009. The financial statements presented to audit contained a number of non material errors which were amended. There were a further two non material errors that the Authority declined to amend.

Material weaknesses in internal control

6 I did not identify any significant weaknesses in your internal control arrangements.

However we have identified a number of weaknesses within the loans system which the Authority has agreed to address including:

  • authorisation arrangements for initiating new loans;
  • linking loans to the capital programme; and
  • the frequency of reconciliation between the ledger and the loans schedule.

7 I have not provided a comprehensive statement of all weaknesses which may exist in internal control, or all the improvements which may be made. I report only those matters which have come to our attention because of the audit procedures that we have performed.

Accounting Practice and financial reporting

8 I considered the qualitative aspects of your financial reporting. I reported four issues to the Authority and the Authority has agreed to review the following:

  • application monies from the public for data protection queries of £28k;
  • bad debt provision levels for all categories of debt over 30 days and the appropriate bad debt provision; and
  • fixed assets register for assets that are leased but not owned.

9 I also reported the restatement for 2007/08 entries relating to the East Midlands Special Operations Unit (EMSOU). It was our view that this restatement was unnecessary under the Statement of Recommended Practice. However, the restatement was in line with the other police authorities within EMSOU and the Authority decided not to amend the financial statements for this.

Financial position

10 During 2008/09 financial plans were re-written following the decision to cap the Authority's precept on the Council Tax and the requirement to re-issue Council Tax bills. However, the Authority achieved a 2008/09 underspend of £261k which is 0.2 per cent of the budget.

11 In 2009/10 the Authority is forecasting an overall underspend of £223k after releasing the budget contingency of £638k. Without the budget contingency release the Authority would be forecasting an overspend of £415k.

12 The financial position of the Authority remains challenging. The Authority will need to ensure that it monitors closely the delivery of the financial position and takes appropriate action to enable the Authority to remain within its budget.

Recommendation 1

The Authority needs to monitor closely the delivery of the financial position and to take appropriate action to enable the Authority to remain within its budget.

Value for money and use of resources

I considered how well the Authority is managing and using its resources to deliver value for money and better and sustainable outcomes for local people, and gave a scored use of resources judgement.

I also assessed whether the Authority put in place adequate corporate arrangements for securing economy, efficiency and effectiveness in its use of resources. This is known as the value for money (VFM) conclusion.

Use of resources judgements

13 In forming my scored use of resources judgements, I have used the methodology set out in the use of resources framework. Judgements have been made for each key line of enquiry (KLOE) using the Audit Commission’s current four point scale from 1 to 4, with 4 being the highest.

14 I have also taken into account, where appropriate, findings from previous use of resources assessments (updating these for any changes or improvements) and any other relevant audit work.

15 The Authority's use of resources theme scores are shown below:

  • Managing finances: 2
  • Governing the business: 2
  • Managing resources: 2

16 The Authority has achieved a score of 2 across all three use of resources themes.

17 Although the overall theme scores under the revised use of resources framework are lower than the scores achieved in previous years, this does not reflect any deterioration in overall performance as the basis of the assessment has been revised.

An overall theme judgement of 2 means that the arrangements we would expect to see are in place. In common with many authorities, the challenge in order to achieve higher scores is to demonstrate how your arrangements result in improved outcomes consistent with the Authority’s aims and those of its key partners.

Recommendation 2 The Authority needs to demonstrate how its arrangements result in improved outcomes consistent with the Authority's aims and those of its key partners.

VFM Conclusion

18 I assessed your arrangements to secure economy, efficiency and effectiveness in your use of resources against criteria specified by the Audit Commission. From 2008/09, the Audit Commission will specify each year, which of the use of resources KLOE are the relevant criteria for the VFM conclusion at each type of audited body.

19 I issued an unqualified conclusion stating that the Authority had adequate arrangements to secure economy, efficiency and effectiveness in its use of resources.

Senior management arrangements

20 The previous Chief Executive left the Authority at the end of August 2009 and the post is currently vacant. In addition, the Authority is at an early stage in the process of replacing her. In the interim the Monitoring Officer role is being undertaken through a local firm of solicitors who have previously provided monitoring officer support.

21 The remainder of the senior management team comprises an interim Deputy Chief Executive who joined the Authority in June 2009 and the Treasurer who has been in place for 3 years and is currently contracted for further 2 years.

22 The Authority is facing a challenging agenda to continue to deliver improved services in an environment of tightening financial resources. The Authority needs to progress its plans rapidly to create a stable senior management team that is best able to meet the agenda.

23 We are currently reviewing the arrangements relating to the Chief Executive's departure and will report any findings as part of our 2009/10 audit.

Recommendation 3 The Authority needs to progress its plans rapidly to stabilise the senior management team.

Closing Remarks

24 I have discussed and agreed this letter with the Deputy Chief Executive and the
Treasurer. I will present this letter at the Audit, Risk and Governance Committee on
19 November 2009 and will provide copies to all Authority members.

25 Further detailed findings, conclusions and recommendations in the areas covered by
our audit are included in the reports issued to the Authority during the year.

26 We were able to deliver the audit within the fee agreed at the start of the year - £67,335.

27 I can confirm that the audit has been carried out in accordance with the Audit Commission’s policies on integrity, objectivity and independence.

28 The Authority has taken a positive and constructive approach to our audit. I wish to
thank the Authority staff for their support and co-operation during the audit.

Sue Sunderland
District Auditor
October 2009

The full report and appendices is available below.