ITEM BV8 - ANNEX ABEST VALUE COMMITTEE – 23 JUNE 2004INTERIM STATEMENT ON INTERNAL CONTROL 2003/04OXFORDSHIRE COUNTY COUNCIL INTERIM STATEMENT
ON INTERNAL CONTROL 2003/04 - ACCOUNTS AND AUDIT REGULATIONS 2003
Oxfordshire County Council is responsible for ensuring its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. The Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness. In discharging this overall responsibility, the Council is also responsible for ensuring that there is a sound system of internal control which facilitates the effective exercise of the Council’s functions and which includes arrangements for the management of risk.
The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the Council’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. The system of internal control as outlined below has been in place at the Council for the year ended 31 March 2004 and up to the date of approval of the annual report and accounts.
The key elements of the internal control environment operating within the Council are detailed below:
The Council’s objectives are developed by the Executive working with the County Council Management Team (CCMT). Within each objective ‘priorities for action’ are identified. The Oxfordshire Plan for 2003/04 had in excess of 50 priorities and for 2004/05 there are 5 Objectives and 13 ‘priorities for action’. The Executive’s initial proposals are referred to the relevant Scrutiny Committee for further advice and consideration and then submitted to full Council for approval, taking into account any amendments. Corporate priorities are then referred to Directorates and Service areas to work up the operational arrangements, including targets, resource requirements. Budget requirements to meet Service priorities are considered at this stage against available resources and external sources of funding. This stage also sees the development of directorate and service specific priorities. These are documented within the Service Plans of the service responsible for delivering the priority and are used to monitor implementation progress. Quarterly Performance Monitoring reports are provided to the Executive and CCMT to track progress of the implementation plans and performance against targets.
The Council’s Constitution sets out the roles of and relationships between the full Council, the Executive and Scrutiny and other Committees in the policy and decision making process and sets out their legal requirements. It also sets out a record of what responsibility each Council body or individual has for particular types of decisions or for decisions relating to particular areas or functions. The Constitution requires that all decisions of the Council taken on behalf of the Council, will be made in accordance with the principles set out in the Constitution The Constitution also sets out how the public can access the decision making process and the Executive’s forward programme of decisions sets out what consultation will be undertaken before a decision is taken and with whom. Many of the statutory responsibilities of the Council committees require statutory consultation to precede a decision being taken. The Constitution is reviewed annually.
Ensuring compliance with established policies, procedures, laws and regulations involves a range of measures which include:
d. Ensuring the economical, effective and efficient use of resources
The Council has established a Best Value Review programme. The programme of reviews is agreed by the Best Value Committee annually and focuses upon improving the levels of efficiency and effectiveness in key areas of the Council. Reviews for inclusion in the programmes have historically been proposed by directorates. For 2004 and beyond, efficiency savings have been identified as a key organisational issue. A Steering Group has been established to develop and propose to the Best Value Committee a ‘Value for Money’ programme of initiatives, including best value reviews, to achieve this. The Best Value Review programme is documented within the Oxfordshire Plan (Best Value Performance Plan).
e. Financial management and Reporting of Financial Management
Financial management is based on a framework of regular management information, financial regulations, contract standing orders and a structure of delegation and accountability. Development and maintenance of the system is undertaken by managers within the Council. In particular the system includes:
f. Performance Management and the Reporting of Performance Management
The Council has operated under a performance management framework since 2002. This describes the arrangements that are regarded as the key elements of performance management and covers both organisational and individual performance. The framework led to a revised method of organisational planning, driven by corporate objectives and priorities, quarterly monitoring of the performance by the Executive and CCMT, the introduction of a common Council appraisal process, a pocket guide to performance management and revised Training and Development modules. Directors and their Services are held to account by the Executive for their budgetary performance.
The Council has responsibility for conducting, at least annually, a review of the effectiveness of the system of internal control. The review of the effectiveness of the system of control is informed by
In addition:- The Executive receive a number of review and monitoring reports. The Best Value Committee, whose terms of reference include both best value and audit, is responsible for approving the annual financial statements and for monitoring the performance and effectiveness of Audit and Risk Management processes. The Scrutiny Committees play an active role in the review of policies and their outcomes, development of new policies, and in the performance of services. They undertake much of this through scrutiny reviews which are supported by officers who are independent of directorates. The Internal Audit Service works with managers in assessing control environments and enhancing controls where necessary. Internal Audit’s objectives include:
For 2003/04, the Council has produced an interim Statement on Internal Control (SIC). A Working Group of senior officers, led by the Head of Legal Services, has coordinated the production of this interim SIC. In reviewing the effectiveness of the system of internal control, the Working Group has also drawn upon the work undertaken on Corporate Governance and action plans for improvements in the Auditor Scored Judgements in the Comprehensive Performance Assessment (CPA). The Working Group has also drawn upon a review of financial control undertaken by each Directorate in assessing their own view of their financial control environment. However it has not been possible to implement a comprehensive system of assurance for the current year. The key findings are dealt with in paragraph 5 below. In order to compile the Statement for 2004/05, the Council will need to ensure that a full review of the effectiveness of the system of internal control is undertaken including the submission of appropriate assurance statements.
In his Annual Letter for 2002/03 the District Auditor raised the following issues:
Additionally, in his 2003/04 review of the Internal Audit Service (formerly ARMS) and member involvement, the District Auditor raised concerns about the independence, status and resources of the Internal Audit Service. Internal Audit undertook an independent assessment of those financial systems considered to be of highest control risk. The opinions ranged from no assurance to qualified assurance, with no system found to be adequate. Controls were found to be weakest in the more complex corporate financial systems, which incorporated a high degree of delegation to Directorates. Controls were found to be better managed where there was clearer management accountability and the system was generally stable. This applied equally to corporate and directorate financial systems. The review of financial control undertaken by each directorate has identified risks which will be incorporated into the Internal Audit and other action plans for the coming year. As a result of the financial control issues identified, an external review of financial management in Oxfordshire is currently being undertaken. A review of Corporate Governance arrangements (including risk management) has been carried out, which has identified a number of issues which are set out in the action plan below. The Council has recognised and made additional resources available in the 2004/05 Revenue Budget for strengthening the internal financial control environment, including the establishment of a team to lead on financial control issues within Financial Services Accountability and responsibility for managing, monitoring progress and achieving these identified actions within the specified timescales is essential. All action plans will incorporate these principles and formally identify Officers accountable for this process. Key actions arising from the control weaknesses highlighted above are as follows:
Detailed action plans covering related areas of planned organisational improvement are contained within Raising Our Performance 2.
Chief
Executive Leader of the Council |