To receive the Audit Commission’s Use of Resources report 2008 to the Committee (Appendix 1 to this report). The external auditor will present the report to the Committee.

To receive a progress report and action plan in respect of the improvement opportunities identified in the Use of Resources report 2008 from the Corporate Management Board (Appendix 2 to this report).

[Note: The Committee agreed to consider this Agenda Item (5), and Agenda Item 6 (Annual Audit and Inspection Letter 2008) together, in view of the strong link between subject matters.]

The Chairman welcomed Ms Liz Cave and Mr Terry Tobin, both External Auditors from the Audit Commission, to the meeting.  They presented the Audit Commission’s report on the Council’s use of resources during 2006/07.  The report was a routine assessment of how the Council had managed and used its resources over a twelve-month period, and it had focussed on the importance of strategic financial management, sound governance, and effective financial reporting arrangements.  In addition to assessment, the report had also provided a comprehensive list of improvement opportunities, detailing who would be responsible for each improvement, and by when. 

Mr Tobin drew the Committee’s attention to the following in particular:

• The Audit Commission had assessed the Council’s use of resources in terms of financial reporting, financial management, financial standing, internal control and value for money. 

• He said that the drop in overall rating from Level Three to Level Two was largely due to the findings of the Crookall report, which had impacted on the assessment of internal control and value for money.  The other three areas of assessment had retained their ratings from the previous year, and he said that good progress had been made. 

• Overall, the audit process had been quicker and easier, and he had noted a marked improvement in the availability of information.  The Council had produced a good summary of its accounts, and now had a robust medium term financial plan with strong links to other areas.  Debt collection had also improved, and there was a much clearer picture of the Council’s resources. 

• He noted that the influence of the Council’s internal audit section, and of the Audit and Corporate Governance Committee, was increasing, and he described this as positive.  Areas requiring improvement were: the review of revenue and capital, option appraisal (costs and benefits) in ICT and Herefordshire Connects, procurement, and assessment of value for money.  He added that the Council’s action plan in respect of the use of resources was full and thorough, and would greatly assist in making improvements. 

During the ensuing discussion, the following principal points were made:

• Councillor Toon highlighted what she felt were insufficient controls over disposals and acquisitions of Council property.  She said that there was a need for improvements in fixed asset management, particularly in relation to schools which was a major area because of the sheer number of buildings involved.  The Audit Services Manager said that he would review the asset register in respect of the issues mentioned. 

• Councillor Toon felt that there might still be some areas where Prince2 methodology was not being applied to procurement projects as a measure to improve internal control, as suggested in the Use of Resources report.  She acknowledged that this requirement would form part of the Constitution, and stressed that all projects should be carefully monitored to ensure compliance, and to ensure that disciplinary action was taken in relation to any breaches. 

• In response to a question, the Director of Resources advised that the opportunities for improvement appended to the report were ultimately the Chief Executive’s responsibility, and she suggested that one way of monitoring progress with them would be to track them via quarterly audit reports. 

RESOLVED:   that it be recommended to Cabinet that:

(i)                 Subject to the Committee’s observations above, the report of the Audit Commission in respect of the Use of Resources be noted, and the opportunities for improvement identified therein, and the Corporate Management Board’s progress report and action plan be approved; and

(ii)               The Council’s asset register and policies relating to it be reviewed, particularly in respect of the acquisition and disposal of school property, and the Audit Services Manager will report his findings to a future meeting of the Audit and Corporate Governance Committee.