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London Borough of Newham 2001/02 Best Value Performance Plan - Audit Report. June 2001. pwc. Contents. Page 1 Executive summary 3 2 The audit framework for Best Value 7 3 Compliance with statutory requirements 11 4 Performance information systems 15
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London Borough of Newham2001/02 Best Value Performance Plan - Audit Report June 2001 pwc
Contents Page 1 Executive summary 3 2 The audit framework for Best Value 7 3 Compliance with statutory requirements 11 4 Performance information systems 15 5 Performance management framework 18 6 Follow-up of previous year’s action plan 21 Annex 1 - Auditor’s report on the 2001/02 Best Value Performance Plan 33 Annex 2 - Audit recommendations and action plan 40 In April 2000, the Audit Commission issued a revised version of the Statement of Responsibilities of Auditors and Audited Bodies. It is available from the Chief Executive of each audited body. The purpose of the Statement is to assist auditors and audited bodies by explaining where the responsibilities of auditors begin and end, and what is to be expected of the audited body in certain areas. Our reports to management and management letters are prepared in the context of this statement. Reports and letters prepared by appointed auditors and addressed to members or officers are prepared for the sole use of the audited body, and no responsibility is taken by auditors to any director or officer in their individual capacity, or to any third party.
Executive summary Overview The London Borough of Newham has continued to build upon the Best Value systems established since it became a Best Value Pilot Authority. In recent months the External Audit Team have been in close contact with the Corporate Management Team responsible for the production and publication of this year’s Best Value Performance Plan (BVPP). What is evident from working with the Authority is the commitment and the enthusiasm of this Corporate Management Team to producing a comprehensive BVPP. This can be seen in: • the project management approach to its production; • the timely distribution of both the BVPP and its Summary; • the regular progress reports to and contact with PricewaterhouseCoopers, the External Auditors; and • the Authority’s innovative ideas in encouraging residents to provide feedback to the Authority on this year’s Summary BVPP. As a Best Value Pilot Authority Newham is in an usual position whereby all services will have been subject to a Best Value review by the end of 2002. The successful completion of the initial three year Review Programme brings its own challenges. The Authority now faces the task of taking the Review Programme forward to maintain momentum and continuous improvement throughout the Authority. This is a situation that the majority of authorities will not face for another three years.
Executive summary (cont’d) Auditor’s report on the 2001/02 BVPP Our full statutory report is attached as Annex 1 to this report. In our statutory report we have: • certified that Newham’s BVPP for the year ended 31 March 2002 has been audited in accordance with Section 7 of the Local Government Act 1999 and the Audit Commission’s Code of Audit Practice; and • given an unqualified opinion.
Executive summary (cont’d) Auditor’s report on the 2001/02 BVPP (continued) We do have a number of concerns about the procedures by which the BVPP was compiled, and the quality of the review (including proof reading) prior to publication. The main issues are summarised below: • Calculation of cost Best Value Performance Indicators (BVPIs) for 2000/2001 - the Authority has not calculated cost performance indicators on the basis of total costs (including depreciation). • Missing BVPIs - the Authority is required by statutory guidance to include its performance for 2000/2001 on 122 specified indicators in the BVPP. Five of these specified indicators were not included. • Trading Accounts disclosures - the Authority has not complied with the requirements of the Best Value Accounting Code of Practice regarding reviewing each of the trading account types held to ensure that they satisfy the definition for disclosure in the BVPP. As such the Authority may have over disclosed. • Mathematical errors in the addition of the Trading Accounts - the Authority made a serious error in totalling the income and expenditure figures for 2000/01 in Table 8 of the BVPP, although individual accounts themselves were correctly casted.
Executive summary (cont’d) Audit recommendations and action plan We have identified a number of other improvement opportunities which we discuss in summary in Sections 3 to 5 (inclusive) of this report and in detail in the Action Plan at Annex 2. We are also required to report on progress made in implementing recommendations raised in our prior year’s report. This is done in Section 6.
The audit framework for Best Value A new audit framework The approach to the audit of BVPPs for the year ending 31 March 2002 has changed from that adopted last year. From this year a new audit approach has been introduced which reflects the new Code of Audit Practice (the Code). This updates and replaces the BVPP Audit Guide issued in October 1999. It also incorporates the audit approach set out in the Annual Local Authority Performance Indicators Guide. The criteria for the audit are set out in The Audit Commission’s publication ‘Framework for the Review of Aspects of Performance Management’. In undertaking this year’s audit we followed this Framework but also had regard to two other documents, namely the ‘Memorandum of Understanding for the Co-operation between Auditors and Inspectors’ and the ‘Procedures laid down for Referral’.
Performance Accounts Management Risk Based Corporate Governance Audit Planning Financial Aspects of Corporate Governance The audit framework for Best Value (cont’d) A new audit framework (cont’d.) Under the new Code all work on Performance Management arrangements now integrated i.e. not reviewed separately as a “stand alone” piece of work in relation to the audit of the BVPP, but as part of the Auditor’s wider responsibilities in respect of Performance Management. Conversely, the Auditor must also have regard for work carried out in relation to the Use of Resources and Performance Information as part of the audit of the BVPP. • Opinions • Use of resources • Performance information • Best Value Performance Plan • Financial Standing • Legality of financial transactions • Systems of financial control • Standards of financial conduct and the prevention and detection of fraud and corruption
The audit framework for Best Value (cont’d) Key Changes The key changes, in the approach to the audit of BVPPs, can be summarised as follows: • work in relation to the sub-module, known as 'module B' has now been subsumed into auditors' work in relation to Performance Information, and audit work leading to giving an opinion on the BVPP (previously ‘module A’); • audit work in relation to the sub-module known as 'module C’, on Performance Management has now been integrated with the auditors' work on Use of Resources. This reflects the fact that, in local government, the Best Value performance framework defines the criteria by which auditors should consider the 'adequacy' of an audited body's arrangements to secure economy, efficiency and effectiveness in its Use of Resources; • other elements of what was 'module C' have now been subsumed into audit work leading to giving an opinion on the BVPP (previously 'module A'); • auditors are no longer required to plan and perform their work to make recommendations on procedures followed in relation to the BVPP. In future, such recommendations may arise from any aspects of auditors' work in relation to aspects of performance management, including the Use of Resources and Performance Information; and • greater emphasis is to be given to this narrative report on the BVPP.
The audit framework for Best Value (cont’d) There are also additional statutory requirements contained within this year’s BVPP that we are required to audit for the first time. These include: • a comparison of performance with previous years; • key results of completed reviews, and of those in progress; • commentaries on performance targets set for future years; and • plans of action on audit reports and reviews. Reporting This report summarises our work on the 2001/2002 BVPP and some aspects of Performance Information. The remainder of this will be considered in our audit of the Audit Commission’s Performance Indicators (ACPIs) scheduled to take place later in the audit year. This audit should not be seen in isolation from the other pieces of Performance Management work. However, for clarity of reporting we have separated all our audit findings specific to the BVPP for your reference and consideration.
Compliance with statutory requirements Conclusion We have issued an ‘unqualified’ opinion in respect of compliance with statutory requirements. Objective: To review whether the Authority has prepared and published its BVPP in all significant respects in accordance with Section 7 of the Local Government Act 1999 and statutory guidance issued by the DETR.
Compliance with statutory requirements (cont’d) Areas for future consideration: Presentation and focus • The Authority has produced a comprehensive and readable document that met the statutory requirements. There was a lack of consistency in the written descriptions of the completed reviews for Year 2, which made comparisons more difficult. • We have also discussed with Officers the scope to present information in a manner which emphasises the accountability for each service areas. We have suggested different ways of presenting information, focusing on responsibilities, to Officers. Review Programme • The Authority’s five year Review Programme needs to specify in more detail the individual reviews/themes to be undertaken during that period. We understand that this has now been determined.
Performance information systems Objective: To review and assess the systems set in place for collecting and recording specified performance information. Conclusion Overall, the Authority has established systems for collecting, recording and monitoring performance information. However, certain service areas are more developed than others. At the corporate level the Authority needs to ensure that standards for collecting and recording performance information are consistent.
Performance information systems (cont’d) Areas for future consideration • We discussed with Officers our detailed observations on financial and performance information in the BVPP covering minor errors, omissions and recommendations for improvement to systems. The Authority has agreed to action all points raised in future years. These are discussed in the action plan at Annex 2 in more detail. • The Authority has produced a significant number of indicators (national and local). The complexity of information often makes it difficult to analyse information in a sensible manner. We have discussed with the Authority ways of presenting this information to make it more user-friendly i.e. graphical style.
Performance management framework Introduction To assist auditors in developing their approach to the work on Performance Management, and, in particular, in relation to Best Value, the Commission has developed a new integrated approach to reviews of aspects of Performance Management Audit. A key challenge facing Newham is sustaining the improvements that have already been made ensuring that the drivers for improvements are present in all Service areas and that Best Value is integrated into the Performance Management system. A mixed picture is emerging from the current round of external reviews of services. The Joint Review of Social Services and the Benefit Fraud Inspection report on Housing Benefits both reported critical findings and the Authority is now on Special Measures following the Joint Review. The Best Value Inspectorate has reported favourably on two Best Value reviews - Legal Services and Passenger Transport. As part of last year’s audit of Best Value (Performance Management) we reviewed the New Century Manager Programme (NCMP). We identified a number of strengths and significant innovation in both the design and delivery of this middle manager management development programme. We commented on the significant challenge of transferring learning, particularly behavioural and cultural change from a pilot programme to the wider organisation. In terms of immediate impact on corporate performance the coverage of middle managers at the end of 2001 will still be relatively small, with around 13% of middle managers having participated in the programme (based on an estimate of around 1200 officers at the grade S02-P04 level in Newham).
Performance management framework (cont’d) This year we recognise the Corporate Management Team’s high priority of embedding Best Value into the day-to-day Performance Management system of the Council. This is to ensure wide ownership and capacity to deliver effective performance and cost improvements.
Performance management framework (cont’d) Approach Our intention is to work in partnership with Members and Officers and adopt a facilitative action-research based approach to identify good practice and to generate improvement in current processes. Action research is a practical approach that involves successive cycles of action and reflection by the client in collaboration with an outside facilitator with the aim of improving current practice. This work is ongoing. Reporting We will report our findings in a separate report to the Authority.
Follow-up on previous year’s action plan Introduction In our detailed Audit Report on the Authority’s 2000/01 BVPP we made a number of recommendations to the Authority. We have had discussions with the Officers and followed-up management’s response to our prior year’s recommendations. We are pleased to report that the Authority has either implemented or made good progress on most of our recommendations.
Annex 1 - Statutory audit opinion and report Auditor’s Report to the London Borough of Newham on its Best Value Performance Plan for the year ending 31 March 2002 Certificate We certify that we have audited the London Borough of Newham's Best Value Performance Plan in accordance with Section 7 of the Local Government Act 1999 and the Audit Commission's Code of Audit Practice. We also had regard to supplementary guidance issued by the Audit Commission. Respective Responsibilities of the Council and the Auditors Under the Local Government Act 1999 (‘the Act’) the Authority is required to prepare and publish a best value performance plan summarising the Authority's assessments of its performance and position in relation to its statutory duty to make arrangements to secure continuous improvement to the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness. The Authority is responsible for the preparation of the plan and for the information and assessments set out within it. The Authority is also responsible for establishing appropriate performance management and internal control systems from which the information and assessments in its plan are derived. The form and content of the best value performance plan are prescribed in section 6 of the Act and statutory guidance issued by the DETR.
Annex 1 - Statutory audit opinion and report (cont’d) As the Authority's auditors, we are required under Section 7 of the Act to carry out an audit of the best value performance plan, to certify that we have done so, and: • to report whether we believe that the plan has been prepared and published in accordance with statutory requirements set out in Section 6 of the Act and statutory guidance and, where appropriate, recommending how the plan should be amended so as to accord with statutory requirements; • to recommend: • where appropriate, procedures to be followed in relation to the plan; • whether the Audit Commission should carry out a best value inspection of the Council under Section 10 of the Act; • whether the Secretary of State should give a direction under Section 15 of the Act.
Annex 1 - Statutory audit opinion and report (cont’d) Opinion Basis of this opinion For the purpose of forming our opinion whether the plan was prepared and published in accordance with the legislation and statutory guidance, we conducted our audit in accordance with the Audit Commission’s Code of Audit Practice. In carrying out our audit work we also had regard to supplementary guidance issued by the Audit Commission. We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide an opinion on whether the plan has been prepared and published in accordance with statutory requirements. In giving our opinion we are not required to form a view on the completeness or accuracy of the information or the realism and achievability of the assessments published by the Authority. Our work therefore comprised a review and assessment of the plan and, where appropriate, examination on a test basis of relevant evidence, sufficient to satisfy ourselves that the plan includes those matters prescribed in legislation and statutory guidance and that the arrangements for publishing the plan complied with the requirements of the legislation and statutory guidance. Included in the plan are the Authority's estimates for the year ending 31 March 2001. Actual results for the year are likely to be different from the figures reported, because events and circumstances frequently do not occur as expected, and the differences may be material. To the extent that figures included in the plan are estimates, our audit work comprised an assessment as to whether the estimates made by the Authority had been properly compiled in all significant respects on the basis of the assumptions stated by the Authority, as at the date at which the plan was prepared.
Annex 1 - Statutory audit opinion and report (cont’d) Opinion In our opinion, the Authority has prepared and published its best value performance plan in all significant respects in accordance with Section 6 of the Local Government Act 1999 and statutory guidance issued by the DETR. Recommendations on procedures followed in relation to the plan Where appropriate, we are required to recommend the procedures to be followed by the Authority in relation to implementation of the plan or the systems to support the production of future plans. Basis of recommendations For the purpose of making our recommendations, we conducted our audit in accordance with the Audit Commission’s Code of Audit Practice. In carrying out our audit work we also had regard to supplementary guidance issued by the Audit Commission. We planned and performed our work so as to obtain all the information and explanations that we considered necessary in order to enable us to determine whether or not to make recommendations in this report on the matters that came to our attention during the audit. However, our work cannot be relied upon to identify every weakness or opportunity for improvement. In particular, it has not necessarily covered the same areas as a best value inspection.
Annex 1 - Statutory audit opinion and report (cont’d) For this purpose, our audit included a review and assessment, and where appropriate, examination on a test basis of evidence relevant to: • the adequacy of the systems set in place by the Authority for collecting and recording specified performance information; • the extent to which the procedures followed by the Authority in relation to its best value performance plan comply with the performance management framework prescribed in the legislation and statutory guidance. Recommendations On the basis of our audit work, we consider that the matters set out below, as recommendations in the Statutory Report, should be brought to your attention: • Calculation of cost Best Value Performance Indicators (BVPIs) for 2000/2001 - the Authority has not calculated cost performance indicators on the basis of total costs (including depreciation). • Missing BVPIs - the Authority is required by statutory guidance to include its performance for 2000/2001 on 122 specified indicators in the BVPP. Five of these specified indicators were not included.
Annex 1 - Statutory audit opinion and report (cont’d) Recommendations (cont’d) • Trading Accounts disclosures - the Authority has not complied with the requirements of the Best Value Accounting Code of Practice regarding reviewing each of the trading account types held to ensure that they satisfy the definition for disclosure on the BVPP. As such the Authority may have over disclosed. • Mathematical errors in the addition of Trading Accounts - the Authority has made a serious error in totalling the income and expenditure figures for 2000/01 in table 8 of the BVPP, although individual accounts themselves were correctly casted.
Annex 1 - Statutory audit opinion and report (cont’d) Recommendations on referral to the Audit Commission/Secretary of State We are required each year to recommend whether, on the basis of our audit work, the Audit Commission should carry out a best value Inspection of the Authority or whether the Secretary of State should give a direction. On the basis of our work: • We do not recommend that the Audit Commission should carry out a best value inspection of London Borough of Newham under Section 10 of the Local Government Act 1999. • We do not recommend that the Secretary of State should give a direction under Section 15 of the Local Government Act 1999. Signature ……………………………. Date ………………………….
