VFM conclusion guidance for auditors 2012/13 v3 issued 13 May 2013
The following tools and review guides are available from the Commission and other bodies to support auditors’ local VFM work:
VFM profiles tool;
financial ratios tool; and
local review guides.
Auditors are not required to undertake work on the topics covered by the tools and review guides as a matter of course. The tools and guides support auditors’ work where they have identified a local risk through their risk assessment process.
It is not envisaged that auditors will produce separate reports for any aspects of their local VFM work. See section 10 for further guidance on reporting.
The Commission publishes VFM profiles tools for councils and FRAs. The tool provides a key reference source for auditors’ risk assessments by helping them, and local public bodies, to understand costs and to take an overview of comparative spend and performance.
The VFM profiles can highlight areas where costs and performance may not be commensurate or where costs look high compared to similar bodies. The tools provide comparative information about costs, service outputs and performance. The Commission selects relevant cost data and divides this by suitable population or service user denominators to show comparable financial information such as expenditure, reserve levels, asset values and income per head. The information is then presented alongside related performance or service output data. Auditors can use the tools to identify areas where they may want to undertake further work, or to support discussions with the audited body.
The VFM profiles use a wide range of data sourced from government departments and other national agencies. The data used are often quality assured to National Statistics or Official Statistics standards. The profiles show data over several years. Financial data is adjusted to remove the effect of inflation to allow ‘real’ comparisons to be made over time, as well as between organisations.
The profile tools have been redeveloped for 2012/13 on a new platform – this was released on 1 November 2012. The new system closely resembles the previous profile tools software, although auditors may note some formatting changes.
The profiles are updated as relevant data becomes available. The Commission updated the profiles in:
November 2012: data on 2012/13 planned council budgets added to the local government profile;
January 2013: 2011/12 expenditure out-turn data added to the local government and fire and rescue profiles; and
March 2013: planned expenditure data for 2012/13 added to the Children and Young People section of the local government profile; 2011/12 expenditure data in the Adult Social Care section of the local government profile updated.
The Commission expects to update the profiles tool in June 2013 by updating the 'per head' data for 2010/11 and previous periods to reflect revised population data for 2002 to 2010 from the Office of National Statistics.
No other updates to the profiles tool are scheduled until the planned budget section is refreshed with 2013/14 financial year budget data in autumn 2013. However, any updates that are required will be announced in the WAC.
The financial ratios analysis tool is designed to help bodies compare their financial performance on a range of financial ratios against similar authorities.
The tool was updated in February 2013, with data for the 2011/12 financial year.
The financial ratios tool continues to hold the ratios data from:
2007/08 to 2011/12 for district, unitary and county councils;
2008/09 to 2011/12 for police authorities and GLA bodies; and
2009/10 to 2011/12 data for standalone fire authorities.
The tool provides information on the following:
Working capital ratio – indicates if an authority has enough current assets to cover its immediate liabilities.
Useable capital and revenue reserves as a percentage of general revenue expenditure – shows usable capital and revenue reserves as a share of expenditure.
Long-term borrowing compared to tax revenue – shows long-term borrowing as a share of tax revenue.
Long-term borrowing compared to long-term assets – shows long-term borrowing as a share of long-term assets.
School balances as a percentage of DSG – shows the share of schools balances in relation to the total DSG allocation received for the year.
The Commission has developed the following local review guides which may be helpful in supporting auditors’ local VFM work.
Auditors should only undertake work using these local risk-based savings reviews at audited bodies where they identify local audit risks relevant to their VFM conclusion. Auditors do not need to apply the review guides in their entirety and only need to undertake sufficient work on any of the topics to deliver a safe VFM conclusion.
Review guide |
Description |
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The review guide was issued in 2011/12, and has been subject to minor updating for 2012/13. It considers arrangements for delivering savings and improved productivity through shared services and management, in particular:
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Review guide |
Description |
Rising to the challenge: improving fire service efficiency (applicable to FRAs only, including county councils with fire services) |
The Commission’s 2008 national study identified potential efficiency savings of £200 million. The review guide focuses on key aspects of these potential savings, including resource use, procurement and collaboration. The results of work on this topic may provide evidence for the VFM conclusion criterion on how organisations are challenging the way they secure economy, efficiency and effectiveness. This guide has not been updated for 2012/13. |
Other review guides previously available in this guidance, on the administration costs of revenues and benefits services and the efficiency of back office functions, are now out-of-date and have been removed. The guides are available to auditors on request (contact the ACTS technical query service, as set out in section 1.4) where they consider them to be relevant.