Archived decisions

Hampshire County Council Executive Member - Education 17 July 2003 Final Accounts 2002/03 Report of the County Treasurer and County Education Officer

Item 3

Contact: Trevor Mansley, Education Finance Unit (01962 847545)

1 Summary

1.1 The accompanying report summarises the expenditure and income of the education service for the year ended 31 March 2003. The following decisions are sought:

· to approve the final accounts for 2002/03

· to request the Cabinet to approve the carry forward of £8,000 representing the Education Service's 50% share of the net under spending for 2002/03.

2 Reason

2.1 To obtain approval to the final accounts for 2002/03 for the education service, including agreement to any requests to the Cabinet arising.

3 Other options considered and rejected - not applicable

4 Conflicts of interest declared by the decision maker or a member or officer consulted - none

5 Dispensation granted by the Standards Committee - not applicable

6 Reason(s) for the matter being dealt with if urgent - not applicable

Approved by: Date:

Councillor D.G. Allen

Hampshire County Council Education Policy Review Committee 15 July 2003 Final Accounts 2002/03 Report of the County Treasurer and County Education Officer

Item 7

Contact: Trevor Mansley Education Finance Unit (01962 847545)

1 Summary

1.1 This report summarises the expenditure and income of the Education Service for the year ended 31 March 2003.

1.2 It recommends that the final accounts for 2002/03 be approved and that £8,000 representing the Service's 50% share of the underspending be carried forward and added to the 2003/04 budget.

1.3 The education revenue expenditure, which is subject to a cash limit, shows an overall net under spending of £16,000 against the 2002/03 revenue cash limit of £583.0 million. This compares with an underspending of £60,000 in 2001/02 and is further evidence of effective financial management.

1.4 The net under spending is in line with earlier forecasts to the Education Policy Review Committee. The variations from the revised budget are summarised below and explained later.

	£000
Home to school transport (para 2.3)	+47
Inclusion (paras 2.4 to 2.6)	+38
Schools centrally-held budgets (para 2.7)	+34
Services to schools and support (para 2.8)	-63
Other (para 2.9)	-72
	-16

1.5 When approving the 2003/04 budget, the Cabinet allowed planned savings to be carried forward and included in services' budgets. For Education a total of £1,284,000 was approved to be carried forward in this way.

1.6 The County Council's policy is that 50% of any underspending should be added to the Service's budget in the following year. The Cabinet decides what use should be made of the other 50%. It is proposed, at this stage, to put the additional sum (£8,000) into the Education general contingency and to review the position as part of budget monitoring.

1.7 Business and trading units with Financial Regulation 20 status are able to retain planned surpluses for purposes approved in their business plans or to take them into account in setting future budget strategies. The trading activities of the Education business units resulted in a surplus of £133,000 for 2002/03.

1.8 During 2002/03 the overall level of school reserves under LMS decreased in all sectors by a total of £2.6 million. Primary balances decreased by £1.5 million, secondary by £0.8 million and special schools by £0.3 million. They now stand at £28.3 million, which will be retained by the schools, and represents 5.8% of schools' budgets. The number of schools in deficit did however increase, from 31 in March 2002 to 55 by the end of March 2003.

1.9 On capital, schemes to the value of £36.6 million were started in the year and schemes to the value of £4.9 million have been approved by the Cabinet to be carried forward to start in 2003/04. In total, this amounts to £90,000 more than the approved cash limit for the capital programme.

1.10 Further details on the main differences between the actual revenue expenditure and the revised budget are given in Part A below whilst details of revenue expenditure, which is not included in the cash limit, are contained in the appendices at the end of the report. The results of the trading units are reported in Part B. Part C deals with capital. Part D explains the basis of the financial control assurance statement (appendix 8).

2 Part A - Revenue Expenditure under the Service's Control

2.1 Revenue expenditure under the Service's direct control is subject to a cash limit. For 2002/03 the adjusted amount was £583.0 million as set out in appendix 1.

2.2 The final outturn was £582.984 million, which was £16,000 less than the cash limit. The overall position is analysed in appendices 2 and 3, and appendix 4 provides a more detailed statement of variations from the revised budget. The most significant variations are explained in the following paragraphs.

Home to School Transport +£47,000

2.3 The revised budget for home to school transport was set at £18.330 million reflecting a reduction of £706,000 on the original cash limit for 2002/03. In the event the final outturn showed a small overspending of £47,000 (0.25%) resulting from an increase in the cost of escorts (£14,000) and minor variations across a number of contracts.

Inclusion (SEN) +£38,000

2.4 Planning and controlling the expenditure on demand-led budgets for pupils with special educational needs continues to be a challenging management task. The outturn for the various non-delegated budgets in 2002/03 shows a net overspend of £38,000, made up as follows:

	£'000
Statements in mainstream/additional resources in special schools	+3
Out-county placements	-53
Inter-authority special school recoupment	-60
Education otherwise than at school	+148
	+38

2.5 As a result of intensive management action, including the targeted use of Standards Fund to support individual inclusion packages, expenditure on statements in mainstream schools has been managed in line with the revised budget of £5.4 million, whilst out-county placements show a saving of £53,000 against a budget of £5.3million. In addition, inter-authority recoupment also shows a net underspending of £60,000 due, mainly, to fewer placements in establishments run by other local education authorities.

2.6 The level of spending on the provision of education otherwise than at school (EOTAS) continues to be volatile and difficult to predict because it is subject to individual decisions by schools and exclusions appeal panels which have resulted in a rise in permanent exclusions of over 60% since 2000/01. Despite the re-instatement of the virement proposed in January 2003 (see Appendix 1) the final outturn for 2002/03 shows an overall net overspending of £108,000 against a revised budget of £4.1 million. This results, mainly, from additional staffing costs (including allocations to schools to support behaviour management and children at risk of exclusion) not being appropriately reflected in budgets or subsequent forecasts. The situation has been exacerbated by the inability to recruit fully to the Behaviour Intervention Service (see paragraph 2.8) increasing the pressure on the EOTAS budget. In addition increasing demand on the Portage home visiting service for pre-school children with special needs has led to additional staffing requirements resulting in an overspending of £40,000 against the revised budget of £574,000. The overall budget for EOTAS results, therefore, in an overspending of £148,000.

Other School Centrally-held Budgets +£34,000

2.7 In total, budgets managed centrally on behalf of schools, excluding elements of special education needs and home to school transport dealt with above, show a net overspending of £34,000. The most significant variations resulted from additional expenditure on the local management contingency (£54,000), trade union and public duties (£34,000), partially off set by an underspending on teachers' premature retirement provision (-£60,000).

Services to Schools and Support -£63,000

2.8 The overall support services expenditure has been contained within the cash limit during this period of continuing change resulting, mainly, from government initiatives. In total a net underspending of £63,000 resulted on a revised budget of £23.9 million. This situation arises mainly from the inability to recruit staff for the Behaviour Intervention Service and delays in replacing outdated ICT systems offset by increased expenditure on telephones, additional (Inclusion Branch) staffing costs particularly in the Education Psychology Service and the provision of replacement accommodation for the Early Years and Childcare Unit.

.

Other Variations -£72,000

2.9 Other variations produced a further net underspending of £72,000 with the major variation relating to the Careers Service. The County Council has a share in the equity of Vosper Thorneycroft Southern Careers and is entitled to a proportion of any profits released. The actual share for 2002/03 is £55,000 above the original budget.

3 Local Management of Schools

3.1 Any balance of budget allocation held by schools at the year end, whether surplus or deficit, must be carried forward into the next financial year. At 1 April 2002 the schools in Hampshire had accumulated reserves of £30.954 million. By the end of the 2002/03 financial year schools' balances had decreased, in total, by £2,623,000 (primary - £1,475,000, secondary - £821,000, special - £326,000, nursery - £1,000). The cumulative reserve balance at 31 March 2003 amounts to £28.331 million as shown in the table below:

	Balance 1/4/02 £'000	Allcns 2002/03 £'000	Net Expend 2002/03 £'000	Cumul. Balance 31/03/03 £'000	As a % of Allcn %
Nursery Schools	83	766	767	82	10.7
Primary Schools	17,969	243,348	244,823	16,494	6.8
Secondary Schools	10,843	217,336	218,157	10,022	4.6
Special Schools	2,059	24,108	24,434	1,733	7.2
	30,954	485,558	488,181	28,331	5.8

3.2 The above figures reflect reducing balances with schools experiencing budgetary pressures. 55 schools were in deficit at 31 March 2003 after taking account of retrospective number on roll adjustments. This compares with 31 in March 2002. There are 35 primary (up from 18), 18 secondary (up from 12) and two special (up from one) schools in deficit situations. Recovery plans have been, or are being agreed. Of the schools with large surplus balances, many have capital schemes in the pipeline towards which contributions will be made. There are just two nursery schools so care should be taken in interpreting these figures. The annual report analysing school balances will be presented later in the year.

4 Part B - Trading Units

4.1 The trading activities of the Education business units during 2002/03 have resulted in an overall in-year surplus of £133,000, compared with a planned deficit of £728,000, on gross budgets of £23.6 million.

4.2 All business units have either achieved, or in most cases, improved on their original plans. In particular, the results of the Education ICT Unit and HIAS (including the Professional Development and Training Service) have significantly exceeded their earlier forecasts:

(a) EdICT

At revised budget stage the Unit took a very cautious approach and forecast a deficit of £541,000 but by the 31 March 2003 this had been reduced to £134,000. This significant improvement has been due, mainly, to increased contributions of £289,000 from the Standards Fund via the National Grid for Learning (NGFL) and the Information Management Systems (IMS) initiatives. Delays in both the appointment of consultants to assist with projects and internal infrastructure changes within the Unit accounted for the balance although such costs will still need to be incurred during 2003/04.

(b) HIAS

The final outturn for 2002/03 has turned an expected deficit at revised budget stage of £162,000 into a surplus of £200,000. Despite writing down stock by £31,000, due to obsolete publications, savings have been achieved on other expenditure headings, in particular provision for potential redundancy costs of £80,000 was not required in 2002/03 and sold services generated additional income of £75,000. The most significant variation, however, arose within the Professional Development and Training Service where a 15% increase in the number of delegates ( to 25,751) attending training courses improved the overall surplus forecast in this area by £159,000. These increases accrued mainly in the final quarter as a result of more comprehensive analysis of costing and charging for all activities.

4.3 As a result of the 2002/03 outturn, business units' cumulative surplus as at 31 March 2003 amounts to £1,408,000. Current business plans earmark significant parts of this for service developments. In addition consideration is being given to provide further medium term support to schools in resource management, technological change and workforce remodelling. The summarised trading accounts of the individual business units and a comparison with the revised budget are shown at appendix 5.

5 Part C - Capital Expenditure 2002/03

5.1 The revised cash limit and outturn for 2002/03 are set out below with details of the individual schemes started in the year appearing in appendix 7.

	£'000	£'000
Revised Programme Limit (January 2002)		38,201
Developers' Contributions / Increased capital receipts		49
		38,250
Contributions - Other Bodies	1,220
- Schools	1,950
		3,170
Total Resources		41,420
Value of schemes started in 2002/03	36,639
Value of schemes carried forward to 2003/04	4,871	41,510
Overcommitment against cash limit		-90

5.2 The total starts limit for 2002/03 amounted to £41.4 million and schemes to the value of £36.6 million were started in the year. The programme included the new primary school at Elvetham Heath, major extensions at Wildern Secondary School, West End, at Calthorpe Park Secondary School and an Early Years Centre at Warren Park Primary School, Havant together with major extensions and alterations at a number of other schools. The programme continued to utilise funds provided by the Prices Trust as well as Government initiatives such as New Deal for Schools and Devolved Formula Capital Allocations.

5.3 In addition to resources of £5.582 million deferred in January 2003, a further £4.871 million worth of schemes could not be started in 2002/03.

5.4 The combined value of the schemes started and those to be carried forward to start in 2003/04 is £41.510 million, which is £90,000 more than the cash limit. This amount includes an, as yet, unutilised portion of the developers' contributions amounting to £49,000. These items and the resultant overall over-commitment of £139,000 will be addressed when the 2003/04 capital programme is reviewed later in the year.

5.5 Devolved capital allocations to schools, totalling some £7.4 million, were brought forward from 2001/02. Allocations during 2002/03 amounted to £9.2 million. Expenditure during the year amounted to £8.4 million. The unexpended balance of £8.2 million has been carried forward to 2003/04. Devolved capital has been made available to schools as a three year programme, with carry forward allowed to meet asset management plan priorities.

6 Part D - Departmental Assurance Statement

6.1 A statement of internal financial control will be included in the 2002/03 statement of accounts. As part of the process of enabling the County Treasurer to form a view on the effectiveness of internal financial control the Chief Internal Auditor has produced an independent assurance statement on the adequacy and effectiveness of the system of internal control in each department. Appendix 8 contains the statement relating to the education service and concludes that the Education Service has an effective framework of control which provides reasonable assurance regarding the effective, efficient and economic achievement of the department's objectives.

Recommendations

That:

1 The final accounts for 2002/03 be approved.

2 The Cabinet be requested to approve the carry forward of £8,000 representing the Education Service's 50% share of the net underspending for 2002/03.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

TITLE FILE

None

Summaries of Actual Spending 2002/03

Appendix Contents

1 Construction of the cash limit

2 Summary of revenue expenditure

3 Analysis of cash limited revenue expenditure over services

4 Major variations in cash limited expenditure

5 Trading Units - summarised accounts 2002/03

6 Revenue expenditure 2002/03 not included in the cash limit

7 Capital expenditure 2002/03

8 Departmental assurance statement

Appendix 1

Education Service

Revenue Expenditure 2002/03

Construction of Cash Limit

1. Revenue expenditure under the service's direct control was subject to a cash limit set by the Cabinet of £587.201 million. Business rates are an exception because the level of business rates on the County Council's own properties could not be determined precisely when the revenue budget was set. As a result of revaluations actual expenditure on rates is £175000 lower than was provided for in the revised budget and the cash limit has been adjusted accordingly. (The LM scheme provides that schools are funded for the actual costs of rates, so schools' delegated budgets were adjusted and there is no net cost or benefit to them).

2. Further adjustments to the cash limit are required. A net reduction of £3,916,000 is necessary to reflect the fact that expenditure supported by specific government grants was, overall, less than expected. As unused Standards Fund can be carried forward to be spent by the end of the summer term, the equivalent County Council contribution (for centrally managed schemes) amounting to £1,335,000, also needs to be carried forward. In addition teachers' sickness and maternity cover, which is subject to a three year service level agreement with schools, was underspent by £54,000 and therefore needs to be carried forward specifically.

3. At the budget meeting in January 2003 approval was given to vire £190,000 from forecast EOTAS revenue underspending to capital to fund adaptations at the Bridge Centre. Unfortunately it now transpires that this forecast was subject to the volatility of exclusions and will not be achieved requiring the proposed virement to be reinstated. However, an additional virement from revenue to capital in respect of the Youth Service project at Hamble Secondary School, reported to the Executive Member Education in March 2003, was approved in the sum of £27,000. The net impact is therefore to increase the cash limit by £163,000.

4. The Education cash limit for 2002/03 has also been increased by £508,000 as a result of difficulties in apportioning teachers' superannuation contributions and supply teacher national insurance costs between different schools following the transfer of payrolls to SAP. This was only completely resolved in all respects after 31 March 2003 and will require some of the apportionments to be made to individual schools in 2003/04. A compensating cash limit adjustment will occur in 2003/04, providing all costs can be apportioned to specific schools.

5. Finally, adjustments are required to delegated budgets in respect of self-funded capital schemes (-£2,015,000) and net transfers from schools' reserves reflecting actual spending (+£2,623000).

6. The adjustments referred to above are incorporated in the table below which summarises the position for the service in the year.

Appendix 1

	£'000	£'000
Revised Budget 2002/03		587,201
Reduction for the lower level of business rates payable		-175
Net reduction in level of expenditure financed by Government grants: Teachers' pay threshold payments Standards Fund Access and other grants Nursery Education Early years and childcare	-231 -2,884 4 264 -1,069	-3,916
Carry forward of County Council contribution re Standards Fund		-1,335
Carry forward of underspending on teachers' sickness and maternity cover.		-54
Revenue to capital virement adjustments		163
SAP payroll transfer issues		508
Revenue contributed to capital for self-funded projects		-2,015
Net transfer from schools' reserve account		2,623
Amended Cash Limited 2002/03		583,000
Net Expenditure 2002/03	582,851
Add Back net transfer to business units reserve accounts	133
		582,984
Net under spending against Service's controllable expenditure		-16

Appendix 2

Education Service

Final Accounts 2002/03

Summary of Revenue Expenditure

	Adjusted Revised 2002/03	Actual 2002/03	Variation (Col 2 - Col 1)
	£'000	£'000	£'000
Cash Limited Expenditure	583,000	582,984	-16
Other expenditure which is the responsibility of the Committee - Mandatory Awards	2,457	2,464	7
(Income) / Expenditure transferred (to) / from reserves - Business Units	728	-133	-861
Capital Charges	118,879	118,879	-
Other expenditure which is controlled centrally by Policy and Resources Committee - Repair and Maintenance of Buildings * - Central Support Services *	43 6,066	369 5,961	326 -105
	711,173	710,524	-649
Less Government Grants	77,400	77,409	-9
Total Net Expenditure	633,773	633,115	-658
Net expenditure (on page B3 of the budget book)	632,617
Adjustments
Reduction for lower business rates	-175
Capital expenditure from revenue	-2,015
Net reduction in schools' reserves	2,623
Increase in capital charges	1,441
Revenue to capital virement adjustments	163
SAP payroll transfer issue	508
Underspending teachers sickness and maternity cover	-54
County Council contribution re: Standards Fund	-1,335
	633,773

* Net of funds delegated to schools.

Appendix 3

Education Service

Revenue Expenditure 2002/03

Analysis of Cash Limited Expenditure over Services

	(1) Adjusted Revised Estimate £'000	(2) Actual 2002/03 £'000	(3) Variation (Col 2 - Col 1) £'000
Local Schools Budget Primary	218,413	218,413	-
Secondary	191,570	191,570	-
Special	21,397	21,397	-
Strategic management of schools	6,508	6,558	50
Specific grants (excluding Standards Fund)	17,134	17,149	15
Special Education - Education otherwise than at school	5,342	5,492	150
Mainstream statements/out- county placements	10,695	10,645	-50
School Improvement	106	106	-
Access School catering	215	212	-3
Other (mainly home to school transport)	18,017	18,035	18
Other Non-local schools budget (recoupment etc)	827	776	-51
Nursery education	16,640	16,616	-24
Adult education	150	150	-
Other continuing education	948	901	-47
Youth service	3,951	3,942	-9
Community education	1,828	1,824	-4
Services to schools and support	23,871	23,808	-63
Training and curriculum development	45,388	45,390	2
Net Cash Limited Expenditure	583,000	582,984	-16

Appendix 4

Education Service

Revenue Expenditure 2002/03

Major variations in cash limited expenditure - underspending £16,000

Budget Heading	Variation £'000	Adjusted Revised Budget £'000	Reason
Strategic management of schools	50	6,508	The most significant overspendings occurred on the LM contingency (£54,000), insurance (£23,000) and trade union and public duties (£34,000), offset by an underspending on premature retirements (-£60,000)
Specific grants	15	17,134	Additional costs re: Ethnic Minority Achievement
Education otherwise than at school	150	5,342	The overspending resulted from additional costs of excluded pupils (£108,000) and extra staffing for the Portage Service (£40,000)
Mainstream statements/out-county placements	-50	10,695	Underspending on out-county placements
Other access	18	18,017	The main overspending arose on home to school transport (£42,000) offset by underspendings on pupil support (-£24,000)
Non-local schools budget	-51	827	Net underspending on inter-authority recoupment
Nursery education	-24	16,640	Claims from private and voluntary providers less than grant allocation
Other continuing education	-47	948	Increased share of profits from Careers Service partnership
Services to schools and support	-63	23,871	Mainly due to delays in replacing outdated ICT systems and inability to recruit staff.

Appendix 6

Education Service

Revenue Expenditure 2002/03 not included in the Cash Limit

1. Mandatory Awards (£2,464,000)

The mandatory awards outturn for 2002/03 totals £2,464,000. Apart from the non -recovery of any overpayments, mandatory awards are 100% grant aided, so the County Council is not affected by any over or underspendings.

2. Capital charges (£118,879,000)

Capital charges are made to services for capital assets used in the provision of services. The actual charges are £1,441,000 more than the budget. This will have no direct effect upon the overall budget requirements of the County Council as the capital charges are replaced by actual financing costs in the central asset management revenue account.

3. Central support services, repairs and maintenance of buildings (£6,330,000)

These items are within the control of Policy and Resources. Support services are apportioned to services in accordance with the level of services provided and office accommodation occupied. The revenue budget for the repair and maintenance of school buildings is delegated to schools, although most schools `buy back' a service from the Director of Property, Business and Regulatory Services with part of their delegated budget. Actual repair and maintenance expenditure recorded as non-cash limited expenditure in the final accounts represents repair and maintenance expenditure on Education buildings other than schools, as adjusted for the variation between actual expenditure on school repairs incurred centrally under the `buy back' arrangements and the `buy back' income received from schools.

Appendix 7

Education Service

Capital Programme 2002/03

	Locally Resourced Programme £'000	Supported by Government Approvals £'000
Construction of total resources Original programme limit per 2002/03 budget book	11,578	18,795
Cash limit brought forward from 2001/02	4,480	309
Share of capital receipts	593
Developers' Contributions	49
Deferral Warblington Secondary		-169
Deferrals (Jan 2003)	-3,451	-2,131
Virement from revenue	940
Additional Devolved Capital Grant virement from revenue	27	1,620
Other Grants
Staff work places		216
Special Status		1,100
DDA (Youth and Adult/Community)		526
Supplementary Credit Approvals- Schools Access Initiative		1,614
Special Status		300
Sixth Form		1,606
Local Public Services Agreement		400
LEA Liability	-152
	14,064	24,186
Schemes started during 2001/02 Major Schemes Balksbury Junior (net of contribution)	300	235
Knightwood Primary	758
Elvetham Heath Primary	2,423	35
Sharps Copse Primary	100	805
Warren Park Primary (net of contribution)	238	133
Hook Junior (net of contribution)	164	255
Lymington Junior (net of contribution)		246
Wickham Primary	789
Thornden Secondary	827
	Locally Resourced Programme £'000	Supported by Government Approvals £'000
Calthorpe Park Secondary (net of contribution)	1,316
Bridgemary Secondary	704
Wildern Secondary (net of contribution)	2,594	456
Ringwood Secondary		276
Ashley Infant (net of contribution)	383
Droxford Junior (net of contribution)	281
Hounsdown Secondary (net of contribution)	716
Mill Chase Secondary	1,249
Lee on Solent Junior	412
St Bede Primary	498	234
Minor Schemes Specialist Schools		600
School Security		231
Devolved Capital		9,188
Seed Challenge		1,267
Schools Access Initiative		1,614
New Deal for Schools	30	1,384
Other		1,791
Furniture and Equipment	937	______
	14,719	18,750
Schemes carried forward Already approved by the Executive Member to start in 2003/04	2,157	2,714
Other schemes to be recommended to the Cabinet to be carried forward to start in 2003/04 (list as appropriate)	-	-
	2,157	2,714
Summary Total Resources	14,064	24,186
Value of schemes started in 2002/03	-14,719	-18,750
Value of schemes carried forward to 2003/04	-2,157	-2,714
Overcommitment against the cash limit	-2,812	2,722

Appendix 8

Education Department

Departmental assurance statement for the year ended 31 March 2003

Introduction

The Accounts and Audit Regulation 2003 require the County Treasurer to maintain an adequate and effective system of internal audit.

From 2002/03 The Code of Practice on Local Authority Accounting in the UK requires the Chief Internal Auditor to provide an independent opinion on the adequacy and effectiveness of the system of internal financial control operating in the County Council. To enable him to do this, an independent opinion on the adequacy and effectiveness of the system of internal control has been prepared for each department.

The much broader issue of Corporate Governance has risen in prominence in the public sector, most recently as a result of the publication of the Chartered Institute of Public Finance and Accountancy (CIPFA) / Society of Local Authority Chief Executives (SOLACE) framework document, "Corporate Governance in Local Government - Keystone for Community Governance", and the introduction of Comprehensive Performance Assessment (CPA) for local authorities. This requires local authorities to develop their own codes of corporate governance and report on how they have monitored the effectiveness of corporate governance arrangements in the year.

The Standards Committee approved Hampshire County Council's Code of Corporate Governance in January 2003 and the Chief Internal Auditor has been given the responsibility to independently review the adequacy and effectiveness of the Code and the extent of compliance with it. This is reflected in internal audit plans for 2003/04, working towards providing an independent opinion on the adequacy and effectiveness of the system of corporate governance operating in the County Council in the future.

Responsibilities

It is a management responsibility to develop and maintain the internal control framework, and to ensure that resources are properly applied in the manner and on the activities intended. It is the responsibility of Internal Audit to form an independent opinion, based on reviews during the year, on the adequacy and effectiveness of the system of internal control.

Basis of opinion

The strategic and annual internal audit plans were prepared by the Chief Internal Auditor to take account of the characteristics and relative risks of the activities involved and were approved by the County Treasurer.

The internal audit plan has been delivered in accordance with the Code of practice for internal audit in local government in the United Kingdom, issued by CIPFA.

Work has been planned and performed so as to obtain all the information and explanations which were considered necessary in order to provide sufficient evidence to give reasonable assurance that the internal control system is operating effectively. However, this assurance can never be absolute. The most that the internal audit service can do is to provide reasonable assurance that there are no major weaknesses in the system of control.

Opinion

In my opinion the Education Service has an effective framework of control which provides reasonable assurance regarding the effective, efficient and economic achievement of the department's objectives.

Ejner Knudsen

Chief Internal Auditor

County Treasurer's Department

Hampshire County Council