PAPER B

 

Committee:    AUDIT COMMITTEE

 

Date:               22 SEPTEMBER 2005

 

Title:                STATEMENT OF INTERNAL CONTROL 2004-05

 

REPORT OF THE CHIEF FINANCIAL OFFICER

___________________________________________________________________

 

1.                  REASON FOR AUDIT COMMITTEE CONSIDERATION

 

This report sets out the Council’s Statement on Internal Control for 2004-05 which requires approval in time for its publication with the Statement of Accounts on or before 31 October 2005, and which this Committee has delegated authority to approve.

 

 

2.                  ACTION REQUIRED BY THE AUDIT COMMITTEE

 

The Committee is invited to note the contents of the report and to seek clarification of any issues arising there from. In particular, the Committee is asked to:

 

Ø      Approve the Statement on Internal Control in accordance with the requirements of the Accounts and Audit Regulations 2003

 

3.                  BACKGROUND

 

The requirements with regard to approval of the Statement on Internal Control (SIC) by Members are set out in the Accounts and Audit Regulations 2003. One of the main requirements of the Regulations is that the SIC should be approved at a meeting of the Council or delegated committee. There is no statutory timetable for approval, however the statement must be approved prior to its publication with the financial statements. Therefore, the statutory reporting requirement for the SIC is linked to the date of publication of the Statement of Accounts, which is 3 months after the deadline for approval. For the year ending 31 March 2005 the date specified for approval of the accounts is 31 July 2005, hence publication of the audited accounts should be on or before 31 October 2005. Within the next financial year i.e. for the year ending 31 March 2006 and in all subsequent years, the date for approval of the accounts by Members will be advanced to 30 June each year, with subsequent publication of audited accounts required by 30 September.

 

When an authority publishes the SIC with its financial statements, it should be satisfied that the SIC is still current in relation to its formal approval. Therefore, although the SIC is being reviewed for financial year 2004-05, it should reflect changes in the internal control environment up to the date of approval. Similarly, if there is a significant delay between approval and publication, the authority should consider the adequacy of the SIC at that point in time.

 

4.                  STRATEGIC CONTEXT

 

The purpose of the SIC process is to provide a continuous review of the effectiveness of the authority’s internal control and risk management systems. Such a review, throughout all services of the Council, enables assurances to be given on the effectiveness of the internal control environment and an action plan produced to address any identified weaknesses in either process. At its most effective, the SIC process will add value to the corporate governance and internal control framework of the Council. Furthermore, publication of the SIC provides assurances on the Council’s internal control arrangements to partners and stakeholders.

 

CIPFA’s proper practice guidance on the SIC requires it to be signed by the most senior officer (Chief Executive) and the most senior member (Leader). In order for them to do so they must be satisfied that the statement is supported by reliable evidence and provides an accurate reflection of the internal control environment in which the Council operates. This requirement emphasises the fact that the statement is about all corporate controls.

 

5.                  RELEVANT PLANS, POLICIES, STRATEGIES AND PERFORMANCE INDICATORS

 

None

 

6.                  CONSULTATION PROCESS

 

The SIC is essentially a corporate document concerned with the internal control environment. To that extent, a number of people have been involved with its production and approval, including strategic directors and service managers, the responsible finance officer, the monitoring officer, elected members and others involved with providing assurances, both internal to the organisation and those representing external inspection agencies.   

 

7.                  FINANCIAL, LEGAL, CRIME AND DISORDER IMPLICATIONS

 

The SIC must be published each year alongside the Statement of Accounts, but does not form a part of the accounts. However, the SIC is subject to independent review by the Council’s external auditors and, if not prepared in accordance with proper practices, could result in an adverse audit opinion on the accounts if the auditors have reason to believe that the internal control arrangements underlying the preparation of the accounts cannot be relied upon to a significant degree. In those circumstances, the result may well be a detrimental impact on the Council’s reputation, which could in turn affect the Council’s ability to attract inward investment to the Island, either from Central Government or other external agencies.

 

The Accounts and Audit Regulations 2003 require approval of the Statement on Internal Control to be by the Council sitting as a whole, or by a committee with delegated powers to make such a decision. For the accounting period ending on 31 March 2005 the statement must be approved and published on or before 31 October 2005.

8.                  EVALUATION/RISK MANAGEMENT

 

The Accounts and Audit Regulations require the Council to prepare a Statement of Internal Control each year in accordance with proper practices. For these purposes, proper practice is defined as the CIPFA publication ‘The Statement on Internal Control in Local Government: Meeting the Requirements of the Accounts and Audit Regulations 2003’.

 

9.                  APPENDICES ATTACHED

 

Isle of Wight Council Statement on Internal Control (Appendix A)

Council Statement on Internal Control – Detailed Procedures (Appendix B)

 

10.             BACKGROUND PAPERS USED IN THE PREPARATION OF THIS REPORT

 

Accounts and Audit Regulations 2003

CIPFA Statement on Internal Control in Local Government: Meeting the Requirements of the Accounts and Audit Regulations 2003

CIPFA Finance Advisory Network Statement on Internal Control: A Rough Guide for Practitioners

Statement on Internal Control – Assurance Declarations provided by Service Managers

Statement on Internal Control – Quality Assurance Review provided by Chief Internal Auditor

 

 

Contact Point : Stuart Fraser, Tel : 823657                      

E-mail : [email protected]

 

 

 

 

 

PAUL WILKINSON

Chief Financial Officer

COUNCILLOR JILLY WOOD

Cabinet Member for Resources, Audit, Council Efficiency and Customer Champion