Agenda and draft minutes

Audit Committee
Wednesday, 26 July 2017 6.30 p.m.

Venue: Georgian Room, Kendal Town Hall. View directions

Contact: Inge Booth 

Items
No. Item

AUD/1

Minutes pdf icon PDF 327 KB

To authorise the Chairman to sign, as a correct record, the minutes of the meeting of the Committee held on 20 April 2017 (copy attached).

Minutes:

RESOLVED – That the Chairman be authorised to sign, as a correct record, the minutes of the meeting of the Committee held on 20 April 2017.

AUD/2

Declarations of Interest

To receive declarations by Members of interests in respect of items on this Agenda.

 

Members are reminded that, in accordance with the revised Code of Conduct, they are required to declare any disclosable pecuniary interests or other registrable interests which have not already been declared in the Council’s Register of Interests.  (It is a criminal offence not to declare a disclosable pecuniary interest either in the Register or at the meeting.)

 

Members may, however, also decide, in the interests of clarity and transparency, to declare at this point in the meeting, any such disclosable pecuniary interests which they have already declared in the Register, as well as any other registrable or other interests.

 

If a Member requires advice on any item involving a possible declaration of interest which could affect his/her ability to speak and/or vote, he/she is advised to contact the Monitoring Officer at least 24 hours in advance of the meeting.

Minutes:

RESOLVED – That it be noted that Councillors Stan Collins and Ian Stewart declared an interest in Minute No. AUD/7.

AUD/3

Local Government Act 1972 - Excluded Items

To consider whether the items, if any, in Part II of the Agenda should be considered in the presence of the press and public.

Minutes:

RESOLVED – That it be noted that there are no excluded items on the agenda.

AUD/4

Terms of Reference pdf icon PDF 94 KB

To note the Terms of Reference for the Audit Committee, as attached.

Minutes:

It was queried whether the Audit Committee’s list of functions needed to be amended in respect of the monitoring of expenditure of funds transferred from the South Lakeland District Council Fund in Commemoration of the Wedding of His Royal Highness Prince Charles to Lady Diana Spencer. It was confirmed that this was being looked into by the Solicitor to the Council. Members requested that an update be presented to the Committee at the earliest opportunity.

 

It was highlighted that the Terms of Reference still made reference to the Audit Commission and it was confirmed that this would be updated to Public Sector Audit Appointments Ltd.

 

RESOLVED – That the Terms of Reference for the Audit Committee be noted.

AUD/5

Audit Committee 2017/18 Work Programme pdf icon PDF 102 KB

To consider progress against the Committee’s 2017/18 Work Programme.

Minutes:

The Financial Services Manager set out the progress made against the 2017/18 Work Programme.

 

RESOLVED – That the progress against the 2017/18 Work Programme be noted.

AUD/6

Risk Management Update pdf icon PDF 99 KB

To consider the Strategic Risk Register.

Additional documents:

Minutes:

The Principal Performance and Intelligence Officer presented the latest Strategic Risk Register. The Register contained all those risks above and below the line of risk tolerance.

 

A number of minor amendments to aid clarity were raised, and the Principal Performance and Intelligence Officer undertook to make the changes during the next update of the Strategic Risk Register.

 

Concern was raised regarding the risk log mitigation contained within Risk 15 (Customer Connect Programme). Members queried whether more information on the risks contained within that risk log was required and asked Management Team to consider whether there were additional areas that needed highlighting to Members.

 

A discussion was held regarding Risk 16 (Waste Collection - Reversing Manoeuvres). The Committee felt that consideration needed to be given to the practicality of the guidance provided to officers, and raised concerns regarding the training of agency staff. Members requested an update at the next meeting of the Audit Committee. The Director of Policy and Resources (Monitoring Officer) explained that a review of reversing manoeuvres had taken place and that the number of rounds requiring a vehicle to reverse had been drastically reduced. Those remaining cases were being looked at on an individual basis.

 

It was queried whether there was a need to split Risk 7 (Information Management is not effective) into more specific individual risks, particularly around the issues of cyber security.

 

The Committee asked whether the spending decisions for the Community Infrastructure Levy resource, referred to within Risk 8 (The infrastructure required to deliver the Council Plan priorities is not provided), were still expected to begin in 2017/18. The Principal Performance and Intelligence Officer undertook to respond to Members following the meeting. The Director of Policy and Resources (Monitoring Officer) explained that a report on the Governance of the Community Infrastructure Levy was due to be considered by Cabinet in September 2017.

 

RESOLVED – That the Strategic Risk Register, as at Appendix 1 to the report, be noted.

AUD/7

Statement of Accounts and Annual Governance Statement 2016/17 pdf icon PDF 114 KB

To consider and note the unaudited Statement of Accounts for 2016/17.

Additional documents:

Minutes:

Note – Councillor Ian Stewart declared a non-pecuniary interest in this item as the Chairman of the Cumbria LGPS Local Pension Board. Councillor Stan Collins declared a non-pecuniary interest in this item as a Member of the Cumbria Pensions Committee and the Cumbria Pensions Forum. Both councillors remained in the meeting during the discussion and voting on the item.

 

The Chief Accountant introduced the unaudited Statement of Accounts 2016/17. The Annual Governance Statement was published within the same document, however, this had been reviewed in detail by the Audit Committee in April 2017 and so would not require further review.

 

The audit of the statements was underway with the majority of the external auditor’s work scheduled for August 2017. The final statements would be presented to the Audit Committee for authorisation on 20 September 2017. The audit certificate would be included at Section I of the statements once the external auditors had completed the relevant assurance work and issued the certificate. This would be completed within the statutory deadline for 2016/17 accounts of 30 September 2017.

 

During the preparation of the accounts, a large increase in value had been reported by the Council’s new valuers, Lambert Smith Hampton (LSH), on the Council’s car park. This had led to further work by LSH to provide assurance over the other assets held at revalued amounts on the Council’s balance sheet. For the 2017/18 accounts the asset valuations were expected to be materially completed by 31 January 2018.

 

It was queried whether there was a need to separately identify the additional revenue income received from Cumbria County Council through additional Council Tax on second homes which had been referenced within the Medium Term Financial Plan 2018/19 to 2022/23 which had been considered by Council the previous evening. The Chief Accountant suggested that an additional disclosure would be considered. Confirmation of how this additional income was used was also requested, and the Financial Services Manager undertook to provide details following the meeting.

 

RESOLVED – That the unaudited Statement of Accounts for 2016/17 be noted.

AUD/8

External Auditor's Progress Report and Update Report pdf icon PDF 10 MB

To consider a summary of the External Auditor’s progress to date and emerging issues and developments that may be relevant to the Council.

Minutes:

John Farrar, External Auditor, presented a report providing Members with an update on the progress made by Grant Thornton in delivering their responsibilities as the Council’s external auditors. The report also set out emerging issues and developments that were relevant to the Council.

 

It was reported that the Council’s former External Audit Manager, Jackie Bellard, would be retiring in September. Members offered their thanks to Jackie for her work with the Council, and expressed that they had valued her input, comments and professionalism. Members wished Jackie well in her retirement.

 

Reference was made to the results of the IT Review’s penetration testing findings and it was queried whether further testing could be carried out by external audit. The External Auditor confirmed that this would not be carried as part of the regular external audit work unless an issue had arisen, however this was something that could be carried out separately by Grant Thornton’s IT team outside of the External Audit Contract. The Director Policy and Resources (Monitoring Officer) confirmed that assurance around this issue would be considered alongside the comments raised at Minute No. AUD/6.

 

RESOLVED – That the progress made by the External Auditors be noted.

AUD/9

Internal Audit Report pdf icon PDF 164 KB

To consider the Internal Audit Annual Report 2016/17, the progress achieved in delivering the 2017/18 Audit Plan, and the outcomes of completed audit reviews.

Additional documents:

Minutes:

Jane Butterfield, Internal Audit, introduced the 2016/17 Internal Audit Annual Report and the 2017/18 Internal Audit Progress Report. These reports included the Internal Audit Manager’s opinion on the effectiveness of the Council’s arrangements for risk management, governance and internal control in accordance with the requirements of the Public Sector Internal Audit Standards (PSIAS).

 

The Internal Audit opinion provided reasonable assurance over the Council’s systems of governance, risk management and internal control.

 

Members expressed their concerns regarding the additional work which had been required to confirm the existence of property files as the previous property services contract was drawing to a close. The Committee requested that a report be provided at the next meeting outlining the additional work undertaken, the impact on the Council and the new property services contract and the types of files which had been involved.

 

The Committee welcomed the Internal Audit findings of two substantial assurances, twelve reasonable assurances and no limited or no assurance findings in 2016/17. Members expressed their thanks to the Financial Services Manager and the officers involved for their work in achieving these results.

 

Jane Butterfield then presented the six individual audit reports that had been completed in the period. These were: Contract Management, Capital Investment, Flood Grants, Digital Innovation Project, National Non-Domestic Rates and Procurement. Of these, four had provided a reasonable assurance assessment, while two (Flood Grants and National Non-Domestic Rates) had resulted in a substantial assurance assessment.

 

During discussion on the Assurance Review of the Capital Investment Arrangements, it was suggested that closer analysis of the reasons behind the slippage of capital programmes could be beneficial, perhaps through the work of the Overview and Scrutiny Committee. The Financial Services Manager explained that consideration was currently being given to new ways to reduce these carry forwards, for example through the implementation of a two stage approval process.

 

The substantial assurance received for the Review of Flood Resilience Grants Arrangements was welcomed. The effectiveness of the scheme was emphasised, particularly in light of initial concerns when the scheme was first introduced.

 

Highlighting the substantial assurance received for the Review of National Non-Domestic Rates, the Committee thanked the staff and management involved.

 

In consideration of the Assurance Review of the Procurement Arrangements, it was queried whether recommendation four, relating to compliance with the Council’s Contract Procedure Rules, should be considered an urgent recommendation, rather than important as currently stated. The Financial Services Manager explained that there were mitigating circumstances in the majority of cases and that an update on progress could be provided to the Committee in six months. Jane Butterfield confirmed that Internal Audit would also be conducting a follow-up review.

 

RESOLVED – That the following be noted:-

 

(1)        the progress achieved in 2016/17 in delivering the Audit Plan and the outcomes of completed audit review set out in Appendix 1 to the report;

 

(2)        the Internal Manager’s opinion of reasonable assurance on the Council’s overall systems of governance, risk management and internal control for the year ended 31 March 2017;

 

(3)  ...  view the full minutes text for item AUD/9

AUD/10

Update on Appointment of External Auditors pdf icon PDF 183 KB

To consider the progress made in the selection and appointment of External Auditors by Public Sector Audit Appointments Ltd.

Minutes:

The Financial Services Manager presented a report which provided the Audit Committee with an update on the process to select and appoint External Auditors following the closure of the Audit Commission and the end of the transitional arrangements at the conclusion of the 2017/18 audits. The Committee would consider the proposals from the Public Sector Audit Appointments Ltd (PSAA) at its meeting in September 2017.

 

In response to a query, the Financial Services Manager explained that the likely reasons an audited body may object to their proposed auditor appointment would be due to an existing conflict of interest or where a group of authorities had requested that they be appointed the same auditor but that this had not occurred. She confirmed that the Cumbrian districts had requested that the same auditor be appointed across the county to ensure that any transactions between them would be treated in the same manner during the audit process.

 

RESOLVED – That the progress made in the selection and appointment of External Auditors by Public Sector Audit Appointments Ltd be noted.

AUD/11

Audit Committee Risk Register pdf icon PDF 485 KB

To consider the updated Audit Committee Risk Register.

Minutes:

The updated Audit Committee Risk Register was presented by the Financial Services Manager. The Risk Register had last been reviewed by the Committee on 1 December 2016 and the recommendations from that meeting had been included within the update.

 

It was queried whether Risk AC 3 (The Council fails to meet the tighter timescales for the preparation of final accounts from 2017/18 onwards) could be archived, with the Council having achieved the earlier target date for the preparation of the 2016/17 accounts. The Financial Services Manager advised that as the 2016/17 preparation dates were a pilot, it would be appropriate to keep the risk active until the completion of the 2017/18 accounts when the statutory deadline was in place.

 

The Committee felt that the likelihood of Risk AC 2, reflecting the risks to the Audit Committee’s effectiveness due to limited resources following Government changes to the funding of local government, should be reduced from medium to low.

 

RESOLVED – That

 

(1)        the updated Audit Committee Risk Register be noted; and

 

(2)        the likelihood of Risk AC 2 be reduced from medium to low.

AUD/12

Other Significant Financial Issues

To receive a verbal update from the Assistant Direction Resources (Section 151 Officer) on any other significant financial issues.

Minutes:

No other significant financial issues were reported.