Agenda and minutes

Audit Committee - Thursday, 23 April 2015 6.30 p.m.

Venue: Georgian Room, Kendal Town Hall

Contact: Sandip Mahajan 

Items
No. Item

AUD/47

MINUTES pdf icon PDF 160 KB

To authorise the Chairman to sign, as a correct record, the minutes of the meeting of the Committee held on 4 December 2014 (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 4 December 2014.

AUD/48

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 no declarations of interest were made.

AUD/49

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 were no items in Part II of the Agenda.

AUD/50

APPOINTMENT OF THE AUDIT PANEL

Subject to any necessary changes after Annual Council, to appoint an Audit Panel, and agree a meeting date, to review the Annual Governance Statement for 2015/16.

Minutes:

An Audit Panel of three Members would consider, in detail, the Annual Governance Statement, with recommendations to the Audit Committee in time to meet statutory reporting deadlines.

 

RESOLVED - Subject to any membership changes that arose at Annual Council, a provisional Audit Panel comprising of Councillors Berry, Coleman and Jupe be convened on Thursday 4 June, 6.00 pm.

AUD/51

WORK PROGRAMME 2014/15 pdf icon PDF 104 KB

To review the Audit Committee’s Work Programme for 2014/15.

Minutes:

The Financial Services Manager explained that the Audit Committee’s agreed Work Programme for 2014/15 would be completed as presented. Two additional items had been added to the Programme and were reported at the meeting. These were Future Corporate Fraud Arrangements and Anti-Bribery & Anti-Money Laundering Policies. The Policies report took into account Internal Audit recommendations which were also presented at the meeting.

 

RESOLVED – That the Work Programme for 2014/15 be noted.

AUD/52

WORK PROGRAMME 2015/16 pdf icon PDF 102 KB

To review the Audit Committee’s Work Programme for 2015/16.

Minutes:

The Financial Services Manager presented the Audit Committee’s proposed Work Programme for 2015/16 which was subject to meeting dates being confirmed at Annual Council. The Programme was similar to 2014/15. The current internal and external audit contracts were in their final year so would need to be reviewed. The External Auditor had been agreed by Public Sector Audit Appointments Ltd (successor to the ceased Audit Commission).

 

RESOLVED – That the proposed Work Programme for 2015/16 be noted.

AUD/53

ACCOUNTING POLICIES 2014/15 pdf icon PDF 153 KB

To adopt the Accounting Policies for the closure of the 2014/15 Accounts.

Additional documents:

Minutes:

The Chief Accountant explained that approved accounting policies were required to produce robust annual accounts. The policies were reviewed each year to ensure compliance with the latest national requirements and best practice, as stipulated by the CIPFA Code of Practice on Local Authority Accounting.

 

A few minor changes needed to be made based on local circumstances. These included accounting changes required for retained gilt holdings; prepayments made to the pension fund counting as pension liability reductions; and the estimated value of heritage assets to be based on insurance valuations.

 

Responses were given to Members’ questions. It was explained that, following the investment function coming in-house, there was no longer any active gilt trading but a gilt was being retained for long-term maturity so different accounting treatment was required. It was confirmed that the pension prepayments represented good value for money with savings being achieved (estimated in the region of £25k) over the next three year period. Heritage assets had previously been mixed valuation with a simpler approach now proposed using insurance valuations for individual assets.  Some assets might be classified as operational assets although they might also have heritage value. Recovery of debts were managed through a structured approach with longer-term debts acquiring greater potential write-off provision.

 

RESOLVED – That the Accounting Policies, at Appendix 1 of the report, be adopted for using to close the 2014/15 Accounts.

AUD/54

PERFORMANCE MANAGEMENT FRAMEWORK 2014-19 AND REPORTING TIMETABLE 2015-16 pdf icon PDF 82 KB

To note the updated Performance Management Framework 2014-19 and Reporting Timetable 2015-16.

 

Additional documents:

Minutes:

The Policy and Partnerships Manager presented the updated Performance Management Framework 2014-19 and Reporting Timetable 2015-16. She explained that the Framework was reviewed annually and no significant changes were proposed. One minor change had been made following the Internal Audit review of Performance Management which was also being considered at this meeting. The change stated that Directorate performance monitoring took place quarterly (in line with quarterly performance monitoring) rather than weekly.

 

RESOLVED – That the updated Performance Management Framework 2014-19 and Reporting Timetable 2015-16 be noted.

AUD/55

RISK MANAGEMENT UPDATE pdf icon PDF 136 KB

To note the Risk Management activity update.

 

Additional documents:

Minutes:

The Policy and Partnerships Manager presented the Risk Management update report. She explained that the Risk Management process was reviewed annually and no significant changes were proposed.

 

Risks were also currently being reviewed as part of the annual process. Two new risks had been added to the Strategic (Corporate) Risk Register. Mitigations actions with due dates (for implementing actions) were listed in the Register. Risks that were being managed with mitigation would come off the Register if they were within acceptable levels of risk.

 

One new risk was ensuring compliance with emerging procurement legislation. The other new risk concerned business continuity which was being effectively managed through a number of scheduled mitigating actions.

 

It was felt unusual that some portfolios had no strategic risks. It was explained that there might still be risks although below the ‘line of appetite’ (acceptable tolerance level of risk) therefore not appearing in the Risk Report. Operational risks were managed at service level.

 

It was noted that risks were considered in greater detail by the Performance Sub-Committee.

 

RESOLVED – That

 

(1)       the Risk Management updates be noted; and

 

(2)       the more detailed Risks Report, considered by the Performance Sub-Committee, also be presented at the next Audit Committee meeting for noting purposes only.

AUD/56

INTERNAL AUDIT REPORT RECOMMENDATIONS AND ANNUAL GOVERNANCE STATEMENT ACTION PLAN - PROGRESS MONITORING REPORT pdf icon PDF 137 KB

To note progress made against Internal Audit Report Recommendations and the Annual Governance Statement Action Plan for 2014/15.

Additional documents:

Minutes:

The Assistant Director Resources (Section 151 Officer) presented a progress report on implementation of Internal Audit recommendations and the Annual Governance Statement Action Plan.

 

There were 54 Audit recommendations of which 9 had future completion dates. Of the 45 recommendations current, 39 had been completed, 3 partially completed and 3 would not benefit from further action. So 93% (39 out of 42) of the recommendations had been completed.

 

In June, the Audit Panel would review the three outstanding actions from the Annual Governance Statement Action Plan. None were significant but did require reviewing.

 

Members referred to the Internal Audit recommendation 48 which concerned development of a management agreement between the Council and the Lake District National Park Authority for provision of services and other matters. The Council’s property contractor, NPS, was finalising the documentation for this agreement although the target completion date had moved from 31/12/14 to 31/05/15. Assurance was given that the contractual agreement would be finalised promptly.

 

RESOLVED – That the progress made with implementing Internal Audit recommendations, and progress made against the Annual Governance Statement Action Plan, be noted.

AUD/57

INTERNAL AUDIT REPORTS 2014/15

To consider recently completed Internal Audit reports.

Minutes:

The Internal Audit Manager presented various reports for audits undertaken in 2014/15 as part of the agreed Audit Plan for that year. The scope of each audit was listed in the reports.

AUD/57a

PERFORMANCE MANAGEMENT pdf icon PDF 498 KB

Minutes:

This audit of Performance Management had reviewed development of performance management plans, reporting and monitoring, and improvement actions. A reasonable assurance had been given with 2 medium priority recommendations and 2 advisory recommendations. The strengths of the service were also recognised.

 

The medium priority recommendations concerned strengthening performance scrutiny through quality-checking data (and reporting any discrepancies to the Performance Sub-Committee), and effective tracking of the progress of improvement actions where performance needed to be improved.

 

RESOLVED – That the Internal Audit report be noted and progress reports on implementation of recommendations be provided at future meetings as appropriate.

 

AUD/57b

PAYROLL pdf icon PDF 493 KB

Minutes:

This audit of Payroll had reviewed a range of areas including system controls, staffing duties, legal requirements, security and reconciliation. A reasonable assurance had been given with 3 medium priority recommendations and 2 advisory recommendations. The strengths of the service were also recognised and testing of the system had identified no transactional errors.

 

The medium priority recommendations concerned strengthening procedural documentation, supervision of staff and segregation of duties, data quality control using exception reports, performance scrutiny through quality-checking data (and reporting any discrepancies to the Performance Sub-Committee), and effective tracking of the progress of improvement actions where performance needed to be improved.

 

RESOLVED – That the Internal Audit report be noted and progress reports on implementation of recommendations be provided at future meetings as appropriate.

 

AUD/57c

CREDITORS pdf icon PDF 492 KB

Minutes:

This audit of Creditor Payments had reviewed a range of areas including supplier maintenance controls, management of purchase orders and invoices, reconciliations and processing targets. A reasonable assurance had been given with 2 medium priority recommendations and 3 advisory recommendations. The strengths of the service were also recognised.

 

The medium priority recommendations concerned ensuring robust arrangements were in place to prevent any potential fraud when creditor banking details changed, and ensuring accuracy of refunds to creditors.

 

Members requested that quality-control checks took place to ensure procedures were being robustly followed. This would be actioned and reported upon at the next meeting.

 

RESOLVED – That

 

(1)      the Internal Audit report be noted and progress reports on

implementation of recommendations be provided at future meetings as appropriate; and

 

(2)     the results of procedural quality control checks be reported upon at the

next meeting.

 

AUD/57d

COUNCIL TAX pdf icon PDF 586 KB

Minutes:

This audit of the Council Tax service had reviewed a range of areas including payments and refunds, discounts, recovery policy and performance. A reasonable assurance had been given with 4 medium priority recommendations and 3 advisory recommendations. The strengths of the service were also recognised.

 

The medium priority recommendations concerned ensuring robust debt recovery procedures, effective debt recovery reports and follow-up actions, quality control of work and clarity over authorisation procedures for refunds.

 

RESOLVED – That the Internal Audit report be noted and progress reports on implementation of recommendations be provided at future meetings as appropriate.

 

AUD/57e

COUNTER FRAUD MEASURES pdf icon PDF 548 KB

Minutes:

This audit of Counter Fraud Arrangements had reviewed a range of areas including checking the effectiveness of an established counter fraud framework and robust counter fraud measures.

 

A reasonable assurance had been given with 3 medium priority recommendations and 5 advisory recommendations. The strengths of the service were also recognised.

 

The medium priority recommendations concerned promoting zero tolerance to fraud and raising public awareness of this, regular reviews and reporting of counter fraud measures, annual fraud briefings, self-assessment to ensure counter fraud measures are in line with best practice and counter fraud applies to procurement and contracts.

 

RESOLVED – That the Internal Audit report be noted and progress reports on implementation of recommendations be provided at future meetings as appropriate.

 

AUD/58

INTERNAL AUDIT - PROGRESS REPORT 2014/15 (NO.4) pdf icon PDF 304 KB

To note work carried out by Internal Audit and progress made on delivering the Audit Plan for 2014/15.

Minutes:

The Internal Audit Manager presented the fourth progress report for 2014/15 which summarised Internal Audit activity to the year-end (31 March 2015). She explained that this was a standard progress report based on the agreed Audit Plan.

 

She added that five internal audits had been presented to this meeting, two of which (Council Tax and Payroll) had been completed early meaning that the three main financial systems had all been audited. The report on Fees and Charges had been drafted and would be presented to the Audit Committee in July. Two remaining audits were ongoing - Information Governance and Business Continuity and General IT Controls.

 

RESOLVED – That the progress made against the agreed 2014-15 Audit Plan be noted.

AUD/59

INTERNAL AUDIT PLAN AND CHARTER 2015/16 pdf icon PDF 494 KB

To approve the Internal Audit Plan for 2015/16 and the Internal Audit Charter.

Minutes:

The Internal Audit Manager presented the risk-based Internal Audit Plan of work for 2015-16, which was required under the Public Sector Internal Audit Standards. The Plan comprised of 255 audit days, which had been prepared in consultation with the Council’s Senior Management, and would provide effective use of audit resources. The Internal Audit Charter was also presented, with no changes proposed to the existing Charter.

 

RESOLVED – That

 

(1)       the report be noted;

 

(2)       the 2015/16 Internal Audit Plan, at Appendix 1 of the report, be approved; and

 

(3)       the Internal Audit Charter, at Appendix 2 of the report, be approved.

AUD/60

EXTERNAL AUDIT CERTIFICATION REPORT 2013/14 pdf icon PDF 93 KB

To consider the findings set out in the External Audit Certification Report for 2013/14.

 

Additional documents:

Minutes:

The External Audit Manager presented the findings of grant certification work for 2013/14.  The number of grants claimed in recent years had reduced with just one claim (Housing Benefit Subsidy Claim) made in 2013/14 which required certification. Therefore a certification letter had been produced rather than a full report. The certification had been made on time.

Some quality issues had been identified which were noted in the letter. These concerned details of some claimants’ income being incorrectly entered onto the system and use of incorrect classification codes. This had resulted in some over-payments with the need to reduce the claim by £1,491. This was a nominal amount set in the content of the full claim being for over £19.8m. Members requested that staff be complimented upon achieving such a low level of error.

The External Audit Manager added that the audit fee for the certification work had reduced to £6,776 reflecting the range of certification work (National Non-Domestic Rates and Council Tax Benefit) which was no longer required. 

RESOLVED – That the External Audit Grant Certification report for 2013/14 be noted.

AUD/61

EXTERNAL AUDIT PLAN 2014/15 pdf icon PDF 34 KB

To consider the planned External Audit work for the financial statements and Value for Money Conclusion and note the findings from the interim audit work.

Additional documents:

Minutes:

The External Audit Manager presented details of the risk-based accounts Audit Plan 2014/15 work required to review the Council’s financial statements and provide a Value for Money conclusion. This work would largely take place from July 2015 and conclude by the end of September 2015.

He explained that financial review work would include considering the Council’s Medium Term Financial Plan and other key local and national factors. He outlined the wider approach to audit work and the range of risks identified, such as fraud and welfare spend, where it was important to have a strong governance framework and robust financial system controls.

Audit work would include testing financial risk management. Interim audit work had not identified any major weaknesses. Value for Money work was ongoing.

RESOLVED – That

 

(1)       the planned work (Audit Plan 2014/15) for the audit of the Council’s financial statements and Value for Money conclusion be noted; and

 

(2)       the findings from the interim audit work be noted.

AUD/62

EXTERNAL AUDIT FEE LETTER FOR 2015/16 pdf icon PDF 35 KB

To note the fee set out in the External Audit Fee Letter for 2015/16.

Additional documents:

Minutes:

The External Audit Director presented the 2015/16 External Audit Fee Letter. She explained that the scale of the fee had been set by the Audit Commission, which was ceasing and would be replaced. The fee scale was based on a work programme which comprised of statutory requirements and was largely the same as 2014/15. The fee was being significantly reduced from £79.3k in 2014/15 to £59.5k in 2015/16. Any extra work would be in agreement with the Council and charged as such.

 

RESOLVED – That the Audit Fee for 2015/16, as set out in the External Audit Fee Letter, be noted.

AUD/63

EXTERNAL AUDIT - PROGRESS REPORT pdf icon PDF 34 KB

To note progress made on the external audit and on current issues for local government.

Additional documents:

Minutes:

The External Audit Manager presented the progress report of Audit work undertaken during the year and remaining planned work. Interim audit work had taken place on the accounts and remaining work from July concluding in September was planned. Value for Money work was on-going.

 

He outlined other work that had taken place or was due to. A number of practical workshops had been held in Cumbria with relevant officers attending. One workshop outlined the Place Analytics service offered by the External Auditor. Another workshop was about the much earlier closedown of annual accounts that would become mandatory in future years.

 

An informal approach of gradual closedown (for the end of each quarter and then monthly towards year-end) was promoted so that much of the work was done well in advance of the official, much earlier, closedown deadline. For smaller district councils, this would prove challenging so the workshop was an opportunity to share ideas. Essentially an approach of producing reliable estimates at the various stages would make the overall process more manageable. The External Audit Director added that they would be consulting councils who had made significant progress in this direction.

 

External Audit would also need to adopt a refined approach. It was noted that Audit Committee dates would need to fit the right timetable. Officers advised that the Council was already pursuing an approach of a gradual earlier closedown so that by the time this became mandatory, the Council would be in a good position to comfortably achieve early close-down.

 

Members felt it was useful to know of the new approach and the active planning that was already taking place.

 

Other sections in the report referred to early payment of pension contributions (to reduce deficits and gain discounts) and planning provision for business rate appeals. The Council was already active in both these areas. The remaining sections concerned wider topical issues for local government.

 

RESOLVED – That the progress made on the audit and summary of emerging issues be noted.

AUD/64

ANTI-BRIBERY AND ANTI-MONEY LAUNDERING POLICIES pdf icon PDF 223 KB

To note the proposed Anti-Bribery Guidelines, approve the draft Anti-Bribery Policy for consultation; and approve the revised Anti-Money Laundering Policy.

           

Minutes:

The Financial Services Manager presented the draft Anti-Bribery Policy and associated Guidelines; and Anti-Money Laundering Policy.

She referred to the Internal Audit report concerning counter-fraud measures. The Anti-Bribery documents were part of these measures. The Anti-Money Laundering document was a revision of the existing policy which had not been reviewed for several years although few actual changes were required.

It was planned over the next year to create a single document with an action plan to tackle bribery and money laundering.

Members queried the wording at Section 8, paragraph 8.1 of the draft Anti-Bribery Policy which stated ‘All allegations relating to bribery or corrupt practices may be investigated’. It was clarified that all allegations would be reviewed appropriately but the level of any investigation would be proportionate to the level of seriousness.

RESOLVED – That

 

(1)       the draft Anti-Bribery Policy, at Appendix 1 of the report, be approved for consultation and referral to the Human Resources Committee subject to appropriate rewording of paragraph 8.1 of the Policy along the lines of ‘All allegations relating to bribery or corrupt practices will be reviewed and investigated as appropriate’;

 

(2)       the proposed Anti-Bribery Guidelines, at Appendix 2 of the report, be noted; and

 

(3)       the revised Anti-Money Laundering Policy, at Appendix 3 of the report, be approved.

AUD/65

FUTURE CORPORATE FRAUD ARRANGEMENTS pdf icon PDF 170 KB

To note the planned arrangements to ensure the adequate provision of services in the area of fraud; and that the role of Corporate Anti-Fraud Officer forms part of the staffing establishment approved at Human Resources Committee and that it commences from 1 June 2015.

Minutes:

The Assistant Director (Resources) and Section 151 Officer presented details of proposed arrangements which would safeguard against any non-welfare and corporate fraud. With the move to Universal Credit, the Council’s Housing Benefit responsibilities (and associated staff including those with fraud duties) would transfer to the Department for Work and Pensions (DWP).

 

As part of this move, DWP would create a single fraud resource. The Assistant Director (Resources) and Section 151 Officer referred to the Internal Audit report concerning counter-fraud measures and added that the Council needed to maintain sufficient fraud resource to tackle any fraud responsibilities which still came within the Council’s remit. This included areas such as money-laundering, and whistle-blowing as well as training requirements.

 

This resource would be created through a new Corporate Anti-Fraud Officer role which would be funded through existing budgets.

 

RESOLVED – That

 

(1)       the planned arrangements to ensure the adequate provision of services in the area of fraud be noted; and

 

(2)       it be noted that the role of Corporate Anti-Fraud Officer forms part of the staffing establishment approved by the Human Resources Committee on 31 March 2015 and that the role will commence from 1 June 2015.

AUD/66

AUDIT COMMITTEE ANNUAL REPORT 2014/15 pdf icon PDF 91 KB

To consider the Audit Committee’s draft Annual Report for 2014/15.

Additional documents:

Minutes:

The Chairman presented the Audit Committee’s Annual Report for 2014/15 which was similar in format to previous annual reports.

 

He invited comments on the content. It was clarified that the External Auditor, Grant Thornton, actually took over the external audit contract for the North West from September 2012 not October 2013. It was also clarified that the reference to ‘Internal Audit struggled to provide resources in 2014/15’ related to extra non-planned work (testing of housing benefit subsidy claims) taken on by Internal Audit. This had been an effective approach but Internal Audit lost a member of staff due to ill health so the work had then been tackled through a mixture of staff resources. This clarification of extra non-planned work, the issue and how it had been tackled needed to be added to the report.

 

RESOLVED – That the Audit Committee’s Annual Report for 2014/15 be noted and the Chairman be authorised to submit the Report to Council subject to the following changes:

 

·         the start date for the External Auditor, Grant Thornton, taking over the external audit contract for the North West, be changed to September 2012; and

·         the reference to ‘Internal Audit struggled to provide resources in 2014/15’ be clarified with reference to this having been extra non-planned work, staff ill health and how this issue had been tackled through a mixture of staffing resource.

AUD/67

OTHER SIGNIFICANT FINANCIAL ISSUES

To receive a verbal report from the Assistant Director (Resources) and Section 151 Officer.

Minutes:

The Assistant Director (Resources) and Section 151 Officer presented a brief topical update on significant financial issues. She explained that the main update was the development work in-hand to manage future much earlier close-down of accounts. This had been covered earlier in the meeting under the External Auditor’s update report (Minute AUD/63 above refers). In response to a query about capital investment required for the proposed redevelopment of the Westmoreland Shopping Centre car-park, this would need to be considered in due course as part of the Medium Term Financial Plan as a future long-term strategic project.

 

RESOLVED – That the verbal report be noted.

 

 

The meeting ended at 8.00 pm.