Agenda item

The Committee considered the Annual Audit Letter 2017/18.

Helen Lillington, a Manager from Grant Thornton, the Council's external auditor introduced the report and commented that the Statement of Accounts for the County Council and the Pension Fund had received an unqualified opinion. However, risks had been identified in relation to Children's Services and Commissioning and as a result an except for VFM conclusion had been issued. The work on the Whole of Audit Accounts had now been concluded and the audit had been closed at the end of August. She highlighted the additional fees necessary to cover the extra audit work in relation to the Council and Pension Fund Accounts.

In the ensuing debate, the following principal points were raised:

·         In response to a concern about the VFM conclusion in relation to commissioning, Helen Lillington commented that the Council had failed to consider the potential disadvantages of providing services outside the Council in reports to members. There was a lot of information on the advantages but not on what could go wrong or whether members were content to accept that things could go wrong  

·         Did the failure to report the disadvantages of commissioning reflect a general lack of cognisance of the associated risks throughout the organisation? Helen Lillington responded that there was an understanding within the organisation of risk but it was not well reported or articulated to be able to demonstrate that this was the case

·         Andrew Spice, the Director of Commercial and Change stated that processes had improved since these historical reports had been considered by Cabinet. The comments from the external auditor had been taken on board to further improve processes going forward. The Council had good contract management arrangements but it was important to have the appropriate support mechanisms in place. A Commissioning Board had been introduced to provide ongoing support and focus to the procurement process

·         In response to a query, Andrew Spice considered that there would be an enhanced role for scrutiny in the commissioning process given that structures were now in place with better support mechanisms and relevant data collection

·         Some risks were not obvious to members and there was a sense that members were only being provided with the information they wanted to hear because of the drive towards making savings

·         It was important when considering commissioning arrangements that this Committee differentiated between the commissioning of service provision as opposed to individual capital projects which had its own element of calculated risk analysis

·         Was there a link between the lack of risk awareness in the commissioning process and the failure of previously outsourced services to realise the anticipated savings? Andrew Spice responded that a good commissioning exercise should properly assess the risks associated with a project and a structure should be in place to manage those risks and therefore the value of the project 

·         It was requested that officers look into the possibility of adding risk as a standard element of the format of Cabinet reports

·         In terms of closing the Statement of Accounts on time, how did this Council fare compared to other councils and how many councils had failed to meet the deadline? Helen Lillington responded that at 1 August, 4 of her clients in the midlands had failed to meet the deadline. This Council sat with the majority of councils who had met the deadline. Nationally around 35-40% had failed. The PSAA had expected that a percentage of councils would fail and therefore would only be reporting those councils that failed to close their accounts by the end of September

·         As a result of the difficulties experienced with Carillion, the Council should have timely access to the financial standing of those organisations who were the subject of a procurement exercise 

·         Was the involvement by AuditWest, the auditors to the Council's contractor, Liberata at the request of the Council or the external auditor? Helen Lillington explained the Grant Thornton had highlighted this as something missing from the control environment for the financial system. Michael Hudson, the Chief Financial Officer added that direct contact had been made with AuditWest which had speeded up the audit process

·         In response to a query, Helen Lillington explained that an except for conclusion had been issued for commissioning because although the Council was aware of the associated risks, there remained a further risk, particularly with new chief officers being appointed, that lessons from the implementation of major contracts were not being appropriately disseminated to all officers and commissioning departments did not have the necessary skills and expertise to secure the best outcomes for the users of the service. 

RESOLVED: that

a)    The Annual Audit Letter 2017/18 be noted;

b)    The Independent Auditor's Report opinion on the Financial Statements be noted; and

c)    The External Auditor's closure of the audit of the Worcestershire County Council and Pension Fund Accounts Letter be noted