Annual Audit Letter

Annual Audit Letter

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Annual Audit Letter West Mercia Police Authority Audit 2009/10 The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone. Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, auditing the £200 billion spent by 11,000 local public bodies. As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for local people. Contents Key messages 2 Overall 2 Audit opinion and financial statements 2 Value for money 3 Current and future challenges 3 Financial statements and annual governance statement 4 Overall conclusion from the audit 4 Internal control 4 International Financial Reporting Standards 4 Value for money 5 2009/10 use of resources assessments 5 VFM conclusion 5 Approach to local value for money work from 2010/11 9 Current and future challenges 11 Future developments 11 Closing remarks 13 Appendix 1 Audit fees 14 Appendix 2 Glossary 15 Audit Commission Annual Audit Letter 1 Key messages This report summarises my findings from the 2009/10 audit. My audit comprises two elements: the audit of your financial statements and my assessment of your arrangements to achieve value for ...

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Annual Audit Letter
West Mercia Police Authority
Audit 2009/10
     The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone.  Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, auditing the £200 billion spent by 11,000 local public bodies.  As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for local people.  
 
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Key messages Overall Audit opinion and financial statements Value for money Current and future challenges Financial statements and annual governance statement Overall conclusion from the audit Internal control International Financial Reporting Standards Value for money 2009/10 use of resources assessments VFM conclusion Approach to local value for money work from 2010/11 Current and future challenges Future developments Closing remarks Appendix 1 Audit fees Appendix 2 Glossary      
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Key messages
This report summarises my findings from the 2009/10 audit. My audit comprises two elements: the audit of your financial statements and my assessment of your arrangements to achieve value for money in your use of resources. Overall 1 During 2009/10 West Mercia Police (WMP) had total income of £197.6 million against which it spent £196 million. The difference of £1.6 million was applied to capital expenditure and to increasing earmarked reserves. 2 This financial result was achieved at the same time as overall recorded crime was declining, sanction detection rates were increasing and public confidence in WMP was improving. 3 The joint inspection between the Audit Commission and HM Inspector of Constabularies (HMIC) concluded that overall the Authority was 'performing well'. 4 HMIC also reviewed progress of delivery of the Policing Pledge and assessed progress as 'Good'. WMP was one of only eight police authorities to achieve this rating. 5 The annual HMIC report card gave an assessment of Good for 'Local crime and policing' and 'Confidence and satisfaction' and Fair for 'Protection from serious harm'. Audit opinion and financial statements 6 On 8 July 2010, I issued an unqualified opinion on your 2009/10 financial statements. My audit of the financial statements went well and there were no adjustments to any of the primary statements 7 2010/11 will be the first year the Authority will prepare financial statements under the International Financial Reporting Standards (IFRS). 8 I have assessed that both the Authority and Force are making good progress to prepare for IFRS.
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Value for money 9 In addition to giving an opinion on the financial statements I am also required to issue a Value for Money (VFM) conclusion. I issued an unqualified conclusion that the Authority had adequate arrangements to secure economy, efficiency and effectiveness in its use of resources. Current and future challenges 10 The recent Comprehensive Spending Review confirmed that central government police funding will reduce by 20 per cent in real terms by 2014/15. 11 In the past three months, inspectorates have issued national reports which look at the future of value for money and governance in policing. 12 The reports note the police service has reduced crime and increased public confidence during a time of expansion. In a new era of austerity with reduced funding, the reports challenge both police authorities and constabularies to review current ways of service delivery to meet public expectations in future years covering:  taking decisive leadership action to bridge the funding gap;  redesigning police services;  challenging effectively all spending and efficiency targets;  devising medium term plans to address the cuts required;  saving up to £1 billion (12 per cent of government funding); and  prioritising visible policing over all the police do to achieve savings of beyond 12 per cent of government funding. 13 WMP has already responded to these challenges and during 2009/10 conducted an organisational review (the Futures Review) which considered options for streamlining the organisational structure whilst maintaining consistent service delivery. The results of the review are reflected in a revised structure for the Force. 14 Although the 145 Local Policing Teams remain the basis of the Force structure, the decentralised basic command units have been replaced by five territorial policing units under a single command unit. There is an operational support command along with a separate protective services command. Organisation-wide services such as human resources, strategy and legal services are under the direction of the Deputy Chief Constable whilst support services such as finance, IT and estates remain the responsibility of the Director of Finance. 15 By reducing senior posts and using resources more efficiently the force is planning to save £9.8 million over the next three years. These proposals will also be reviewed in the light of Comprehensive Spending review (CSR) and the detailed guidance to consider whether this is sufficient to meet the requirements of the CSR or further actions will be required.  
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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. Overall conclusion from the audit 16 My audit of the financial statements went well and there were no adjustments to the primary statements. On 8 July 2010, I issued an unqualified opinion on your 2009/10 financial statements. WMP was the first police authority in the country to receive an audit opinion in 2010. 17 The financial statements presented for audit were complete and provided by the agreed deadline. All working papers were presented at the start of the audit and were comprehensive and well prepared. Officers responded quickly to our audit queries. Internal control 18 I did not identify any significant weaknesses in your internal control arrangements. International Financial Reporting Standards 19 2010/11 will be the first year that the Authority will prepare financial statements under the International Financial Reporting Standards (IFRS). 20 Successful implementation of IFRS will testify to the ability of WMPA to manage a major change in its financial arrangements. Failure, on the other hand, could result in late or qualified opinions on accounts and will reflect badly on the reputation of individual authorities and, potentially, the sector as a whole. 21 The Audit Commission has issued several briefing papers highlighting key aspects of the change to authorities. Auditors have undertaken surveys of progress in key technical areas. 22 My work has assessed the Police Authority and Force are making good progress with implementation. 23 I will continue to monitor progress at the Authority and undertake a review of the restated balances, once complete.
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Value for money
I considered whether the Authority is managing and using its money, time and people to deliver value for money. I assessed your performance against the criteria specified by the Audit Commission and have reported the outcome as the value for money (VFM) conclusion. 2009/10 use of resources assessments 24 At the end of May 2010, the Commission wrote to all chief executives to inform them that following the government's announcement, work on CAA would cease with immediate effect and the Commission would no longer issue scores for its use of resources assessments. 25 However, I am still required by the Code of Audit Practice to issue a value for money conclusion. I have therefore used the results of the work completed on the use of resources assessment up to the end of May to inform my 2009/10 conclusion. 26 I report the significant findings from the work I have carried out to support the vfm conclusion. VFM conclusion 27 I assessed your arrangements to achieve economy, efficiency and effectiveness in your use of money, time and people against criteria specified by the Audit Commission. The Audit Commission specifies each year, which Key Lines of Enquiry (KLOE) are the relevant criteria for the VFM conclusion at each type of audited body. 28 This is a summary of my findings.
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Criteria Managing finances Planning for financial health Understanding costs and achieving efficiencies Financial Reporting Governing the business Commissioning and procurement Use of information Good governance Risk management and internal control Managing resources Natural Resources Asset management Workforce planning
Ade uate arrangements?
Yes Yes Yes Yes Yes Yes Yes
Yes N/A for police authorities Yes
 29 I issued an unqualified conclusion stating that the Authority had satisfactory arrangements to secure economy, efficiency and effectiveness in its use of resources. 30 The key findings on each of the ten KLOE's are set out below. The Authority has made improvements in a number of areas, including use of information and procurement and has arrangements in place for this improvement to continue. Planning for Financial Health – KLOE 1.1 31 The force has planned well to maintain good financial health. There is a robust Medium Term Financial Plan (MTFP) in place which informs the annual budget. The annual budget process is completed by February each year. The budget includes efficiency saving measures and the Force has used a Strategic Resource Leverage (SRL) process to identify efficiency gains with specific projects already in progess. Scenario analysis is used in the budget model in respect of council tax/grant income and future pay awards.
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32 In anticipation of the Comprehensive Spending Review (CSR) the force set efficiency savings targets. The Medium Term Financial Plan includes detailed measures to achieve these efficiency savings. A report on progress in achieving the Efficiency Plan for the CSR period 2008-2011 detailed identified efficiency savings of £14.3 million (73 per cent of target). Further reviews are taking place and it is anticipated that the target will be achieved. 33 In addition the Futures Review Team's 'Planning for the Future' Report proposed significant internal re-structuring measures and a Target Operating Model has been developed which focuses on 6 main business areas to deliver cash savings in the short and medium term. The current financial forecast anticipates savings of £9.8 million over a three-year period without a reduction in service provision. Understanding costs and achieving efficiencies – KLOE 1.2 34 The success of cost-saving exercises shows a good understanding of the cost structure of the force. There has been effective delivery of efficiency savings over the last ten years (£57.1 million since 1999) and there are continuous efforts to reduce the gap between funding and projected costs and to identify further cost savings measures 35 For 2009/10 the new 'Police Objective Analysis' (which replaced ABC) has enabled an improved view of deployment of resources against objectives and comparison with other Forces. Financial Reporting – KLOE 1.3 36 Financial and performance monitoring information is clear, easily understood and produced on a timely basis. This information is distributed to Divisional Finance Managers for review on a line by line basis. Forecasting information is prepared using spend to date and profiled spend for remainder of year to generate predicted outturn. A monthly report is presented to the Police Authority's Finance and Resources Panel to inform members of the current spending position against budget and forecasted outturn. 37 The Accounts are produced within a strict timeframe to allow audit opinion to be given by the end of June, enabling the Authority to publish audited accounts in a prompt manner. The Accounts have demonstrated compliance with statutory requirements and financial reporting standards and have never been qualified Commissioning and Procurement – KLOE 2.1 38 Performance continues to be strong with some improvements since last year. There is a consistent focus on delivering vfm through procurement. The force has shaped the supply market to secure improved outcomes and value for money through its procurement of new police cells.
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39 Methods to involve a range of stakeholders in commissioning services continue to be developed. The force and the Authority aim to ensure that information on the views and needs of diverse communities influence priorities although methods for this are still developing. 40 The commitment of the Authority and force to fundamentally reviewing services is demonstrated by the Futures Review which is proposing wide range changes to the way that services are configured and provided. Use of information – KLOE 2.2 41 Data on performance is presented in formats that aid decision making. The performance group receives easy to interpret information on progress on key areas of performance across the force area and uses this to compare performance against target and to drive improvement. The force uses comparative information on performance to review progress and to identify whether improvements can be made. The information provided to the performance group includes information on the approach of surrounding forces to new initiatives. 42 The quality of data is kept under consistent review. The authority has appointed a member of staff with specific responsibility for data quality. There are well established arrangements to oversee and test data quality. Internal crime audits have been carried out on a regular basis by the Force Audit and Inspection Team. Examples of under performance across divisions are highlighted and recommendations for improvement made. 43 The force examines data in depth to provide improved services. Data analysis is directly used to engage front line staff in identifying and delivering improvements. Good Governance – KLOE 2.3 44 Governance arrangements continue to be very effective. There is a strong focus on the importance of ethical behaviour. Authority structures have been changed to bring them into line with the strategic aims in the Policing Plan. 45 The Authority actively monitors and challenges the force's performance towards strategic priorities. The Authority reviewed its structure and process to ensure that they were in line with the strategic aims in the policing plan. A new structure was introduced in July 2009. It identified how delivery of each strategic aim could be monitored. As a result appropriate information is then presented to the Police Authority's Executive Board and Panels to enable them to scrutinise and challenge performance.
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Risk Management and Internal Control – KLOE 2.4 46 Risk Management (RM) is embedded throughout the organisation. The Authority and Force's RM Arrangements are outlined in its formal RM Policy and Strategic RM Procedures. Risks are formally recorded and reported to and monitored by the Force Risk Management Group, Audit Committee and Police Authority. The Risk Registers include financial/business continuity, partnership and reputational risks all linked to strategic objectives. The Risk Register does not include sensitive risks identified as part of the Futures Programme and re-organisation  these are recorded and monitored separately by the Futures Review Team. 47 The Anti Corruption Unit (ACU) acts to prevent and identify potential instances of fraud/corruption/unethical behaviour. The team is supported by commissioning in other covert services as required. The ACU develops intelligence relating to corruption which incorporates fraud and other criminal acts. Use of Natural Resources – KLOE 3.1 48 There is a corporate strategy for reduction in the use of natural resources. Detailed action plans for its delivery are still being put in place and gaps in information on energy usage are being filled. The authority and force are committed to increasing recycling and engaging staff in reducing the use of natural resources but work on both is at a relatively early stage. Asset Management – KLOE 3.2 49 In accordance with the national programme of work, this KLOE has not been assessed at Police Authorities. It is therefore 'not applicable' for the VFM conclusion. Workforce Planning – KLOE 3.3 50 In accordance with the national programme of work, this KLOE was not assessed at Police Authorities in 2009/10. In reaching my judgement for the VFM conclusion I therefore relied on findings from the 2008/09 assessment. Approach to local value for money work from 2010/11 51 Given the scale of pressures facing public bodies in the current economic climate, the Audit Commission has been reviewing its work programme for 2010/11 onwards. This review has included discussions with key stakeholders of possible options for a new approach to local value for money (VFM) audit work. The Commission aims to introduce a new, more targeted and better value approach to our local VFM audit work. 52 My work will be based on a reduced number of reporting criteria, specified by the Commission, concentrating on:  securing financial resilience; and  prioritising resources within tighter budgets.
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