Annual Audit Letter
Today the Council is publishing its Annual Audit Letter 2011/12. This is written by the Council’s External Auditor and is an important element of the governance arrangements of the Council, giving the Auditor’s independent assessment as to whether the Council has the proper arrangements in place for the conduct of its business, and that public money is safeguarded and accounted for.
The main conclusion of the report is that it is satisfied with the Council’s arrangements for securing value for money, with a qualification regarding the increasing impact of equal pay claims. However, the Annual Audit Letter is clear that the Council continues to manage is finances well, with a positive performance in its budgetary control for 2011/12, and has a continued focus on the delivery of this year’s savings plans.
The Auditor recognises that this is being achieved in a very difficult environment given the financial pressures on the Council, the impact that the Government grant reductions have had and the level of savings that the Council has made.
The Auditor has recognised that the new political leadership has set out its policy vision, with a focus on tackling inequality and promoting social cohesion, a renewed focus on the creation of a prosperous city, and a drive to involve local people and communities in public services. It also recognises the speed in which the Council has restructured itself under the new administration to deliver this agenda.
The Auditor states that the Council continues to provide a good level of service, and that in many instances services have improved. Notable service achievements quoted are:
- the improvement in GCSE results with 61 per cent of 16 years olds achieving 5 A-C GCSE grades including English and Maths
- the delivery of all safeguarding targets in adult social services
- building a number of new homes under its affordable homes programme, and delivering the decent homes standard
- reducing the level of waste sent to landfill
- reducing the number of delayed discharges from hospital
- a reduction in teenage pregnancy rates (although they are comparatively high)
- continuing with its regeneration programme throughout the City
Despite the positive results, however, the Annual Audit Letter notes that there remain service areas where continued action is necessary by the Council, in particular, the Council’s Safeguarding of Childrens Services which continues to perform inadequately (as detailed in the recent OFSTED report).
The Audit Letter also says that last year spend per young person on Children’s Social Care was below the comparator authorities average and that the Council needs to consider the level of resources alongside its response to the OFSTED report. The Council is presently considering the implications of the Auditor’s latest Value for Money work in its preparation of its budget for 2013/14 and its future year’s financial strategy.
The Auditor says that we need to continue to focus on:
- ensuring value for money in adult social services where the expenditure per head is comparatively high to that of similar authorities
- ensuring it is achieving value for money from aspects of its expenditure in children’s education, such as home to school transport
- ensuring it has appropriate governance over the housing revenue account following the introduction of HRA self financing
- reducing worklessness (as unemployment remains high within the region)
- • improving levels of recycling, and reducing the costs of waste collection services
- reducing sickness absence (where performance remains below target).
Regarding the Equal Pay Value for Money qualification, the Council shares the Auditor’s concern about the increase in equal pay claims against the Council, which impact on its financial resilience and the resources available to deliver services.
The Council’s accounts from 2006/07 to 2011/12 reflect combined actual and potential Equal Pay settlements totalling £757m (including the effect of recent case law) and this liability could increase further if more claims are received by the Council. The affordability of this presents a major challenge to the Council.
The Council has recently announced that it expects to have to make savings increasing cumulatively to over £600m per annum in the 6 years period from 2011/12 to 2016/17, around 48% of the total spending over which the Council has control, with over £120m of this to be delivered next year in 2013/14. Equal Pay is one of the major cost pressures included in these projections. The Council needs to borrow to make Equal Pay payments, repaying the debt over twenty years. We forecast that by 2015/16 the Council may be paying around £75m per annum to finance this debt.
The Council’s liability has also been considerably worsened by the developments in Equal Pay case law. Recently, the Supreme Court has delivered its decision that Equal Pay cases can be brought not only in the Employment Tribunal, where the time limit for bringing these claims is six months, but also in the Civil Courts where the time limit is six years. As a result of this decision, which was a majority decision by three judges to two, there is a further potentially significant cost implication for the Council, and indeed for other public and private sector employers.
As well as the service issues, the Annual Audit Letter reviews our financial performance for last year and says that “given the level of financial challenge, the Council has managed its finances well in 2011/12”. The Audit Letter says that we have a comparatively high level of borrowing but recognises that the increase in the year was largely due to the Government’s implementation of the HRA self financing system (the extra debt costs are offset by the Council no longer having to pay a share of rent income to the Government).
Regarding the Council’s Accounts, the Annual Audit Letter recognises that financial statements presented for audit were a significant improvement on the previous year’s and that the late production of the 2011/12 statements beyond the statutory timescales represented a balanced approach between deadlines and quality.
The Auditor plans to report the outcome of his audit of the Accounts to the Council in February 2013.
Overall the Annual Audit Letter has 5 recommendations for which the Council has put an action plan in place. This is a significant decrease on the 14 recommendations made for the previous year, recognising the improvements made by the Council.
Draft Statement of Accounts 2011/12
At the same time as the audit is underway, the Council must make its draft accounts available for public inspection and this period starts today and runs until 7 December.