Archived decisions

Hampshire Fire & Rescue Authority

Audit 2008/09

Date October 2009

Contents

Key messages 3

Financial statements and annual governance statement 7

Value for money and use of resources 10

Closing remarks 20

Appendix 1 - Use of resources key findings and conclusions 23

Key messages

This report summarises the findings from our 2008/09 audit. It includes messages arising from the audit of your financial statements and the results of the work I have undertaken to assess your arrangements to secure value for money in your use of resources.

Audit Opinion and Financial Statements

1 We completed our work in line with the statutory timetable and issued an unqualified opinion on your financial statements and whole of government accounts consolidation pack on 29 September 2009.

2 The financial statements submitted for audit were produced on time, to a good standard and contained no material errors.

Value for money

3 The Use of Resources exercise for 2008/09 is new. This year the scoring focuses much more heavily on outcomes being achieved by the Authority from its resources. The scored assessment criteria establishes that, at level 3, the Authority has implemented effective arrangements that:

· are forward looking and proactive in identifying and developing opportunities for improvement;

· include sophisticated measuring and assessment techniques; and

· lead to outputs and outcomes which have the intended impact, and show clear evidence of effective partnership working.

4 We concluded that the Authority is performing consistently above minimum acceptable levels and achieving value for money and scored all areas at level 3. It is clear that you continue to drive forward an ambitious improvement programme and there is evidence of tangible outcomes. If you aspire to level 4 you will need to demonstrate that performance is excellent across the entire scope of each Key Line of Enquiry (KLOE). This requires robust evidence that strong arrangements have led to demonstrably excellent outcomes throughout the year under review. You will also need to decide to take relevant action only where you believe that the actions and resources required would be commensurate to the improvements gained.

5 Based on the work completed for our use of resources assessment we issued an unqualified Value for Money (VFM) Conclusion on your arrangements for securing economy, efficiency, and effectiveness in the use of resources on 29 September 2009.

Audit Fees

6 We reported our fee proposals as part of the Audit Plan for 2008/09. The table below reports the forecast outturn fee against that plan.

Table 1 Audit fees

	Actual	Proposed	Variance
Financial statements and annual governance statement	£44,350	£44,350	£0
Value for money	£39,150	£39,150	£0
Total audit fees	£83,500	£83,500	£0
Non-audit work	£0	£0	£0
Total	£83,500	£83,500	£0

Actions

7 Recommendations made within our detailed reports have been agreed with your officers. Reports issued for 2008/09 are shown in table 3. There were no recommendations that were significant enough to be repeated in this letter.

Independence

8 I can confirm that the audit has been carried out in accordance with the Audit Commission's policies on integrity, objectivity, and independence.

Financial statements and annual governance statement

The Fire Authority's financial statements and annual governance statement are an important means by which the Authority accounts for its stewardship of public funds.

Significant issues arising from the audit

9 Our overall materiality level for the opinion audit at Hampshire Fire and rescue Authority was set at £1.5M in line with guidance issued by the Audit Commission and International Auditing Standards. With this overall level of materiality the level of error for reporting to those charged with governance was set at £14,600.

10 There was only one unadjusted misstatement noted during the audit process. This related to the accounting treatment of the Fire and Rescue Authorities Mutual Limited (FRAML). Expenditure with the FRAML has been treated as an Investment within the accounts rather than a JANE (a joint working arrangement but not a separate accounting entity).

11 The effect of the Authority's accounting treatment is that both income and cash relating to the FRAML are understated by £97,000. As this is not material and, following relevant decisions made by the High Court and subsequently the Court of Appeal, it is likely that FRAML will be wound up in 2009/10, you decided not to amend the accounts.

12 Whilst we were required under auditing standards to report this issue to you, in giving our opinion we were satisfied with your decision not to amend based on your representations.

Material weaknesses in internal control

13 I did not identify any significant weaknesses in your internal control arrangements.

Accounting Practice and financial reporting

14 The Financial Statements were produced in line with agreed timetables and approved by the Authority prior to the 30 June statutory deadline. Working papers were once again produced on time and were of a good standard to support the entries and disclosures in the accounts.

Value for money and use of resources

I considered how well the Authority is managing and using its resources to deliver value for money and better and sustainable outcomes for local people, and gave a scored use of resources judgement.

I also assessed whether the Authority put in place adequate corporate arrangements for securing economy, efficiency, and effectiveness in its use of resources. This is known as the value for money (VFM) conclusion.

Use of resources judgements

15 In forming my scored use of resources judgements, I have used the methodology set out in the use of resources framework. Judgements have been made for each key line of enquiry (KLOE) using the Audit Commission's current four point scale from 1 to 4, with 4 being the highest. Level 1 represents a failure to meet the minimum requirements at level 2.

16 I have also taken into account, where appropriate, findings from previous use of resources assessments (updating these for any changes or improvements) and any other relevant audit work.

17 Your use of resources theme scores are set out in Table 2 below. The definition of the scores achieved is set out in subsequent paragraphs.

18 The key findings for the three themes, and the underlying KLOE, are summarised in Appendix 1.

Table 2 Use of resources theme scores

Use of resources theme	Scored judgement
Managing finances	3
Governing the business	3
Managing resources	3

Approach

19 The Use of Resources exercise for 2008/09 is new. It is significantly more demanding than previous assessments. The KLOE are more broadly based than previously and embrace wider resource issues such as workforce planning and the use of natural resources. The KLOE focus more on value for money achievements, outputs, and outcomes rather than on processes. The KLOE are also strategic and less detailed.

20 This year the scoring focuses much more heavily on outcomes being achieved by the Authority from its resources. The aggregation of your theme scores gives an overall use of resources score at level 3. This is a very commendable achievement given the tougher test described above. A level 3 score indicates, the Authority has implemented effective arrangements that:

· are forward looking and proactive in identifying and developing opportunities for improvement;

· include sophisticated measuring and assessment techniques; and

· lead to outputs and outcomes which have the intended impact, and show clear evidence of effective partnership working.

21 We found evidence that the Authority is performing consistently above minimum acceptable levels and achieving value for money.

22 There are similarities to the previous process but comparison of scores with last year is not possible nor would it be appropriate. However, within the detailed analysis there is evidence that the Authority continues to improve.

Conclusion

23 The key message from our assessment is that you continue to perform well. There is good evidence of beneficial outcomes for the community, strong partnership working, and some innovative practices. You are also able to demonstrate that best professional practice is being applied across all areas of business with generally effective and embedded processes. In reaching our assessment we noted that:

Managing Finances

24 You manage your resources well to ensure that you deliver your aims and objectives. Priorities are clearly integrated within the Integrated Risk Management Plan (IRMP) and Medium Term Financial Plan and are thoroughly reviewed each year to take into account new and emerging risks.

25 Efficiency improvements of £3.8million have been achieved, exceeding targets. There is an excellent record of accomplishment in making efficiencies and reducing costs for services. You have engaged extensively and frequently with local communities in the planning of service delivery and value for money. You have implemented both consultation and engagement and participation strategies, to ensure that all parts of the community are effectively involved in the development of services, including hard-to-reach groups.

26 There is a strong history of achieving financial budgets and you maintain a prudent level of balances based on a risk analysis.

27 This overall sound financial management has enabled Council Tax levels to be maintained at well below average while continuing to demonstrate performance in the upper quartile for the majority of Performance Indicators.

28 External reporting is good and you are proactive in improving accessibility for all residents. Partnership working is strong and has enabled the service to maximise the value gained from partnerships' overall resources.

29 You continue to promote and achieve value for money through reviews of emergency cover and crewing arrangements, for example, meeting efficiency targets by closing one station and upgrading three stations from day crewing to whole time crewing, thus improving service performance at no additional cost.

30 The economic downturn and banking crisis is having a very significant impact on public finances and the bodies that manage them. You have responded with a prompt review of treasury management, risk management and medium term financial strategies and have fed the potential risks into your budget plans for 2010/11 to 2012/13.

Governing the business

31 You have established a clear vision to manage resources in a cost-effective way and to evaluate activities and new initiatives to ensure that investment is worthwhile. You have established community outreach teams and local advocates to ensure effective communication with all parts of the community, especially hard to reach groups. National recognition has been received for work in reaching and engaging with the Black and Minority Ethnic Community.

32 Development of the Rural Safety Team has continued which provides specialist emergency response and targeted safety initiatives to rural communities. This programme has received national recognition and is now being shared with other fire and rescue services. You work closely with community safety partners to provide the most effective and tailored services to their communities. For example, you use MOASIC to plot community intelligence and commission the most appropriate activities.

33 The Service has relevant and reliable data quality arrangements in place. All expected basic governance controls and processes are in place and there is a strong risk management culture supported by action plans which have successfully mitigated all significant risks.

34 You recognise that member involvement can be enhanced through a good understanding of current and emerging issues, as well as knowledge of the Service's day-to-day procedures, initiatives, activities, vehicles and equipment. This is achieved through regular member `briefing and awareness sessions', the Chief Officer's regular `Members' Bulletin', and the new style `Activity Report'.

35 A successful partnership with the Ambulance Service has assisted the FRA with recruitment, and development of retained staff whilst significantly improving local ambulance response times. As a result, it is anticipated that the Authority will receive a financial reward in excess of £300,000 for the Hampshire local Strategic Partnership. Further, agreement has been reached for the 14 co-responder schemes to be fully funded by the South Central Ambulance Service NHS Trust.

Managing resources

36 For 2008/09 the Audit Commission specified that the KLOE to be assessed for fire authorities was workforce planning. We have not assessed the KLOEs on managing natural resources and strategic asset management.

37 Your approach to workforce development and planning is strong with a clear understanding of workforce needs in the medium to longer term. The benefits of effective succession planning are well understood and the organisation actively seeks to develop staff through mentoring and secondment opportunities.

38 You have developed a comprehensive Workforce Strategy to support current and future service delivery. The Workforce Strategy 2009-2012 integrates training, recruitment and people management in a cradle to grave approach. It concentrates on outcomes rather than outputs and makes clear links between the people development plan and the IRMP.

39 Staff are well engaged in service development and organisational change. The Authority is committed to improving equality and diversity both in the workplace and in the community. It has formed a dedicated team to identify strategic and practical actions that enabled it to achieve level 3 of the Equality Standards for Local Government in December 2008. The Authority has also developed a network of advisors from vulnerable groups to help the communities it serves.

Data Quality Spot Check

40 Our work on data quality and the national indicator set supports the Use of Resources assessment and gives assurances over individual indicators. We have followed the Audit Commission's three-stage approach to the review of data quality, which includes:

· A review of management arrangements (as part of Use of Resources KLOE 2.2)

· An Analytical review and reasonableness check, and

· Indicator Spot Checks on a sample of indicators specified by the Audit Commission.

41 The spot check element of the data quality work is new to the use of resources assessment for fire authorities. The indicators selected and summary of spot check findings are shown below:

· NI33. Number of arson incidents. We concluded that the underlying data for producing NI 33 has been reported accurately and in accordance with guidance. We did note however, some minor errors on locally produced performance data. These were due to timing differences and have now been corrected.

· NI49. Number of primary fires and related fatalities and non-fatal casualties. As for NI33 we concluded underlying data was accurately reported. The timing errors on internal reports also apply to this indicator.

· Local Indicator - working days/shifts lost to sickness absences. There were no issues noted in the compilation of this indicator.

· Local Indicator - number of injuries and shifts lost to injury for fire fighters and all staff. We concluded that the underlying data for producing NI 33 has been reported accurately. We noted a minor difference between reporting formats used locally for reporting and the guidance. This did not affect data quality and the format is now being changed to enable more effective benchmarking.

42 As there were no significant issues arising from our use of resources assessment or any recommendations to report, we have not produced a separate detailed report on Use of Resources for 2008/09. More detailed conclusions and potential areas for further improvement where applicable are shown for each of the KLOE in Appendix 1.

VFM Conclusion

43 I assessed your arrangements to secure economy, efficiency and effectiveness in your use of resources against criteria specified by the Audit Commission. As your use of resources judgements and the scored assessment of each of the underlying key lines of enquiry were marked in all areas as exceeding the minimum standards required, I was able to issue an unqualified conclusion stating that, in all significant respects, you had proper arrangements to secure economy, efficiency and effectiveness in your use of resources. A summary of my conclusions on each key line of enquiry are set out in Appendix 1.

Closing remarks

44 I have discussed and agreed the content of this letter with the Chief Officer, Director of Corporate Services, and the Treasurer. I will present this letter at the Governance Committee on 20th November 2009 and will provide copies to all committee members.

45 Further detailed findings, conclusions, and recommendations in the areas covered by our audit are included in the reports issued during the year.

Table 3

Report	Date issued
Audit and inspection plan	April 2008
Annual Governance Report	September 2009
Opinion on financial statements	September 2009
Value for money conclusion	September 2009
Annual audit letter, including Use of Resources	November 2009

46 The Authority continues to take a very positive and constructive approach to our audit. I wish to thank members and staff for their support and co-operation during the audit.

Kate Handy

District Auditor

November 2009

Appendix 1 - Use of resources key findings and conclusions

The following tables summarise the key findings and conclusions for each of the three use of resources themes.

Managing finances

Theme score 3

Key findings and conclusions

The Fire Authority manages its resources well to ensure that it delivers its aims and objectives. Priorities are clearly integrated within the Integrated Risk Management Plan (IRMP) and Medium Term Financial Plan and are thoroughly reviewed each year to take into account new and emerging risks. Efficiency improvements of £3.8million have been achieved over three years, exceeding targets. There is an excellent record of accomplishment in making efficiencies and reducing costs for services. The Fire Authority engages extensively and frequently with local communities in the planning of service delivery and value for money. It has implemented both consultation and, engagement and participation strategies, to ensure that all parts of the community are effectively involved in the development of services, including hard-to-reach groups.


KLOE 1.1 (financial planning) Score VFM criterion met	3 Yes
Key findings and conclusions
The integration of financial planning with strategic and corporate planning is well embedded at HFRA through the rolling 3-year IRMP process. The annual review of the corporate plan and performance management framework ensures that new and emerging risks are fully taken into account as well as the impact on strategic priorities of current performance. Over the period 2006 to 2009 the savings included within budgets have been achieved and cashable efficiency improvements of £3.8M have been achieved against Government targets of £3.3M. Group and departmental plans have SMART objectives, which align to the corporate plan objectives. The policy on the level of reserves and balances is based on a thorough assessment of risk which is understood by Members and has enabled the FRA to achieve the objective set out in its Medium Term Financial Strategy (MTFS) - "to keep tax increases below increases in state pensions". This year consultations on financial plans were held with trade union representatives, business interests groups and strategic partners. There have been regular user focus groups where budgets are explained. High level of customer satisfaction (66%) with supportive comments received on financial plans. HFRA can demonstrate that financial planning contributes to improved outcomes in relation to key priorities: · Reduce deaths and injuries from accidental fires by 20% by 2010. Deaths have reduced from 0.54/100K pop in 2005/06 to 0.24/100K pop by 2008/09. This performance is now in the best quartile. Injuries have reduced from 8.29/100K pop in 2005/06 to 6.09/100K pop in 2008/09. · Reduce the number of deliberate fires by 20% by 2010. Financial plans have targeted resources from efficiency savings to closer working on Arson with the Hants Arson task Force partnership with Hants Police. This has enabled arson incidents to reduce from 6.3/10K pop in 2005/06 to 5.0/10K pop. This is best quartile performance. · Reduce the number of fires by 20% by 2010. Resources allocated to increasing home visits through IRMP and budget plans. From April 2008 some 20,000 visits have been carried out using crews and support staff and a pilot scheme, using retained staff, which is now being rolled out further. The number of primary fires has reduced from 10.9/10K pop in 2005/06 to 8.3/10K pop. This has achieved the target reduction ahead of schedule. · Work with others to reduce deaths and serious injuries on the road by 40% by 2010. Partnership working has been supported for road safety teams and resources have been adjusted and re-allocated to provide additional watch managers to improve joint working on road safety. HFRA also delivered corporate driver awareness programmes for Southern Electric and to sixth form colleges. Road collisions have reduced from 1597 to 2005/06 to 1310 in 2007/08 (18%) and is indicating further reduction in 2008/09. · To be in the top 10 performing fire and rescue services in the country by 2010. HFRA is ranked 12th out of 48 for the percentage of performance indicators improved in the last year (76 %). In addition 45 % of performance indicators were above the best quartile breakpoint. HFRA can also demonstrate further outcomes of a good financial planning process including: · timely and efficient completion and approval of the annual budget in November 2008 with FRA approval February 2009; · stable and responsive financial environment for service planning and delivery; · budget has been achieved in all of the previous 10 years; · structured medium-term approach to delivering savings and efficiencies within the MTFS; · savings achieved in excess of targets; · a well managed capital programme linked to priorities and supporting service improvements covering the medium term and based on affordability and sustainability; and · reviewed and updated treasury management strategy subsequent to the collapse of the Icelandic Banks.


KLOE 1.2 (understanding costs and achieving efficiencies) Score VFM criterion met	3 Yes
Key findings and conclusions
The FRA financial planning and management processes ensure that there is a sound understanding of the costs incurred, the main cost drivers, and factors that influence these and how these change with activity over time. Management accounting processes enable detailed analysis of cost information across the range of services provided. Costs are analysed at unit or transaction level, particularly for significant, priority or high spending areas. The Authority continues to seek and achieve value for money. Overall costs compare well with others. For example, its expenditure per head of population is £40.53 compared to the combined fire average of £42.08. It spends below average on fire fighting, rescue operations and community safety whilst maintaining high performance in all areas (45% of PIs in upper quartile and 76% improved year on year). The service continues to keep within its budget and has restricted the level of council tax increase to 3.9 per cent in 2008/09 and has maintained a longer-term strategy of keeping the three-year average of council tax increases below the level of state pension increases. This has been achieved through financial prudence, innovation, and extensive partnership working. Comparative information is regularly used to benchmark these areas of spend. A service wide approach to whole life costing of assets and services has been implemented and continues to develop. In 2008/09 uniform and vehicle replacement programmes have been subject to whole life costing reviews. This approach has proved useful in identifying efficiencies and is being applied to energy and transport reviews in 2009/10. Cost and performance information is used in the financial and service planning process to make decisions about policies and service provisions and to identify efficiency savings in the annual update of the IRMP. The impact of modernisation is apparent through a significant shift in resources to community safety activities. The costs and benefits of planned changes and improvements are clearly set out and monitored, evaluating the impact of changes on performance. The service can demonstrate continued performance improvements against strategic priorities. All new investments, both capital and revenue, are subject to an investment appraisal process. In planning efficiency savings and service developments performance information, risk analyses and comparisons with other fire services are considered and monitored. For example exceeding targets for annual cashable and non-cashable savings. Savings have been achieved through a wide range of initiatives such as revising shift systems and crewing arrangements and changing management structures. Sensitivity analysis is used for medium term planning to ensure services are sustainable, for example, increasing reserves to reflect emerging economic risks in the budget. To support and continue pursuit of value for money the service commissioned its own "value for money" statistical review from CIPFA and continues to undertake best value reviews to ensure it is maximising the use of resources. In 2008 reviews were undertaken of mobile working and transport usage. There is an excellent record in making efficiencies and reducing costs of services, such as the reduction in insurance premiums through negotiating 40% better insurance covers from Zurich, saving £100,000. HFRA are currently consulting on flexible crewing which has the potential to achieve efficiency savings upwards of £2M. Efficiency targets for 2008/09 were met through closing a station and upgrading 3 stations from day crewing to whole time, thus improving service without extra cost. Members receive good levels of financial and performance information.


KLOE 1.3 (financial reporting) Score VFM criterion met	3 Yes
Key findings and conclusions
Budget monitoring and forecasting information is reliable, relevant, and understandable. It is produced regularly and on a timely basis throughout the year and leads to prompt action to address any variances. Virement between budgets is used to deal with any projected over-spends and to ensure funding for existing and emergent high priority initiatives and activities. There are regular reviews of key partnerships through the partnership framework and register and a partnership evaluation toolkit has been developed to analyse and evaluate the benefits of partnership working including costs and financial performance. Partnerships evaluated in 2008/09 included: The Hampshire Arson Task Force (ATF); the Ministry Of Defence Fire and Rescue Service and participation in the Safer Roads Partnership. All were considered for benefits of the financial input and all found to have contributed to improved performance. Financial monitoring and reporting during the year is relevant, understandable and accruals based, ensuring a clear link between the budget, in-year forecasts, and the actual year-end position. In-year monitoring utilises traffic light codes to focus attention on key issues. The accounts were presented to the Authority on 25 June 2009 and were available for audit with full working papers on 6 July 2009. A sensitivity analysis of the Medium Term Financial Plan has been completed to identify likely risks and options to mitigate them, especially in relation to the current volatile economic climate. Budget managers receive appropriate levels of financial training through their Personal Development Plans. Training plans and staff surveys have indicated they are confident they are equipped to manage and control performance and spending. In 2009 HFRA have implemented traffic light variance controls to monitoring reports to focus members' attention on critical areas and link the financial performance to non-financial information. Group and station plans include efficiency targets which has given ownership of savings plans to stations and delivered in excess of plans. Budget monitoring reports include financial and non-financial information in a written commentary. The 2008/09 budget was achieved in line with expectations with a small additional underspend of £114K whilst continuing to deliver improvements in service standards. Accounts comply with statutory requirements, timetables, relevant accounting, and reporting standards. Only presentational issues have been reported in our Annual Governance Reports to improve clarity. The FRA utilises its website as a key method of communicating performance to stakeholders. The most recent published accounts and Annual Audit Letter are available to the public on the website. Policies and protocols are in place to meet duties under the equalities legislation and the FRA has undertaken an Equalities Impact Assessment (EIA) of its website development so it knows communities needs for accessing information and has responded to these in external reporting. As a result in 2008/09 the FRA are publishing an annual report and accounts linking together the information previously provided via the IRMP, Activity reports and Accounts. There are arrangements in place for translation services and work is underway to have standard text available in the most favoured languages about accessibility. All core policy documents are available in Braille, large print, audio versions and other languages on request. The IRMP has received Crystal mark accreditation and includes comprehensive reporting on environmental, social, and economic issues and on the FRA's impact on the environment. Hampshire is currently the only FRA to monitor and report regularly on its carbon footprint and supports the Police in measuring and reporting environmental issues. A summary of the accounts is published to be more accessible to the general public. The 2009/10 Council Tax leaflet gives assessment of achievements and finances for 2008/09 and was distributed to all households.