The Audit Committee of Wandsworth Council met on Thursday 6th September 2012 to review the Council's accounts for 2011-12, its governance arrangements, and its anti-fraud and anti-corruption strategy. The committee approved the Council's revised statement of accounts for the financial year ending 31st March 2012 and its Annual Governance Statement for 2011/12.

The Council's Accounts 2011-12

The committee received a report from PWC on the external audit of the Council's accounts for the 2011-12 financial year. Janet Dawson of PWC confirmed that an issue regarding the valuation of Council dwellings had been resolved and that minor changes had been made to schools' bank reconciliations. She noted changes to external audit requirements, including the assessment of heritage assets and the disclosure of exit packages for departing staff. Overall, the accounts were deemed sound and reliable, with an unqualified opinion expected.

The committee discussed the likely trend in external audit fees, with Ms Dawson anticipating reductions of 20% to 40% in 2012-13, particularly for authorities with higher fees. Councillor Mark Thomas inquired about the work of external consultants on the reconciliation of accounts receivable. Ms Dawson confirmed detailed testing had been carried out, with no material errors found and progress being made. The Director of Finance added that while the cause of previous problems hadn't been definitively established, reconciliations were now being secured via the system.

Councillor Mrs Antonia Dunn sought clarification on the allocation and earmarking of reserves shown in the draft accounts. The Head of Corporate Finance explained that only the first column represented General Fund reserves available for use, with the remainder earmarked for specific purposes, despite being classified as useable in the accounts.

Key issues in preparing the accounts included housing subsidy arrangements, heritage assets, staff exit packages, and guidance from CIPFA leading to a lengthy document. A more user-friendly version was published in the Council magazine, Brightside. The Chairman raised concerns about school balances, the deficit on the Adult Care trading account, and central HR function charges. The Cabinet Member for Education and Children's Services had written to schools regarding balances, though legislation made clawing back unused funds more difficult. The Adult Care trading account was showing improvement, and HR costs reflected the centralisation of functions.

The committee also discussed pooled budget deficits and the integrated community equipment service. The Assistant Director of Adult Social Services stated that pooled budgets were governed by Section 75 agreements with health sector agencies, with deficits and surpluses regularly monitored. The integrated community equipment service was managed over a long-term timescale.

The committee resolved to receive the communication from the external auditor, approve the management representations letter for signature by the Chairman, and approve the revised statement of the Council's accounts for the financial year ended 31st March 2012.

Review of the Council's Governance Arrangements

The Head of Audit presented a report on the Council's governance arrangements, highlighting issues such as IT system scrutiny, weak controls in some devolved management organisations, procurement consistency, personal budgets, and the need for regular financial reconciliations. While the organisation had effective reporting and control mechanisms, weaknesses often stemmed from their underutilisation.

Councillor Thomas questioned whether the Council could incentivise better performance from devolved management organisations. The Head of Audit explained that this depended on the relationship, with assistance and training often sufficient, but sometimes ineffective. Persuasion and support were often the only realistic options.

The committee discussed the approach to schools where auditors had identified problems. Members stressed the role of governors in scrutinising and prompting remedial action. The Assistant Director of Children's Services confirmed that Governor Support Services provided advice, and a briefing for Chairs of Governors was planned, focusing on the importance of appropriate controls.

Equality Impact Assessments were confirmed to be considered for all committee reports, with an officer in the Council Policy Unit advising on equalities implications. The Chairman suggested departmental Directors should attend Audit Committee meetings to account for cases where progress had been limited.

The committee reviewed specific items in Appendix B of the report, noting progress on IT systems, Merton IT arrangements, mobile phone contracts, and document management systems. Concerns were raised regarding schools' financial management, with the Director of Children's Services having written to schools and governors. The withdrawal of delegated powers from schools was noted as a measure used sparingly. The appointment of new bursars and assistance from Deloittes were mentioned in relation to addressing problems. One item was being investigated by the Police as a possible fraud case.

The Head of Audit noted that similar issues in the audit of schools reflected the cyclical nature of the audit programme, with problems relating to the use of accounting systems rather than the systems themselves. Updates were promised for future meetings on various items, with some resolved and others moved to qualified assurance.

The Director of Housing reported concerns over Resident Management Organisations (RMOs), with the Council struggling to ensure robust governance. A report on RMOs subject to audit concerns was suggested for the Audit Committee and Housing Overview and Scrutiny Committee. Progress was noted for the Battersea Fields, Patmore, and Carey Gardens organisations. The Director of Housing outlined the support structure within the department.

Councillor Mrs Dunn commended officers for recovering 44 properties due to investigations into sub-letting and suggested a press release.

The committee resolved to note the Council's statutory annual review of its governance arrangements and approve the proposed Annual Governance Statement for 2011/12 for signature and publication.

Draft Local Audit Bill 2012

Janet Dawson of PwC confirmed that the Draft Local Audit Bill 2012 represented a move away from traditional arrangements governed by the Audit Commission, towards more independent oversight. The Director of Finance noted the aim to balance paymaster influence with local democratic monitoring. Councillor Thomas queried the implementation timescale, which was explained as relating to existing five-year contracts with audit providers. The committee resolved to note the Government's proposals and the Council's response to the consultation.

Annual Quality and Performance Review

In response to a question about the deferral of work on Schools Governance (Phase 2), the Head of Audit cited a lack of engagement from schools as the reason for writing directly to governors and attending their meetings. The committee resolved to note the report and confirm the timetable and arrangements for monitoring and review.

Review of the Council's Anti-fraud and Anti-corruption Strategy

Councillor Thomas inquired about the protection and anonymity provided to whistleblowers. The Head of Audit confirmed appropriate arrangements were in place, though complete anonymity could not always be guaranteed. The committee resolved to approve the revised Anti-Fraud and Anti-Corruption Strategy and commend its principles to school governing bodies and other stakeholders.

Regulation of Investigatory Powers Act 2000

The Director of Finance reported a declining use of the Regulation of Investigatory Powers Act 2000 (RIPA), particularly for Blue Badge parking permit cases, with RIPA provisions expected to be used only on an exceptions basis. It was explained that less formal methods were being used to detect abuse and fraud, with prosecutions remaining significant. Further training for officers was scheduled.

Regarding the investigation of unauthorised occupation of Council property, direct surveillance was used sparingly, with other methods such as electoral register analysis, benefits and tenancy records, credit agency data, and information from whistleblowers being effective.

The Head of Audit clarified that a report from the Interception of Communications Commissioner's Office did not deal with surveillance and raised no significant concerns, with training programmes implemented to address points raised. The potential impact of the Protection of Freedoms Act 2012, restricting surveillance to offences with a maximum penalty of at least six months imprisonment, was discussed. It was noted that some offences previously subject to RIPA surveillance carried such sentences, and other legislation, such as the Fraud Act, could be used for serious cases. The committee resolved to note the report.