Agenda and minutes

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

Venue: Georgian Room, Kendal Town Hall

Contact: Sandip Mahajan 

Items
No. Item

AUD/1

MINUTES pdf icon PDF 225 KB

To authorise the Chairman to sign, as a correct record, the minutes of the meeting of the Committee held on 23 April 2015 (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 23 April 2015.

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 the following Other Registrable  Interests were declared: Councillors Stan Collins and Ian Stewart as Members of Cumbria County Council, whose Audit Service acts as the District Council’s current Internal Auditors - Minute No. AUD/14.

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 were no items in Part II of the Agenda.

AUD/4

TERMS OF REFERENCE pdf icon PDF 96 KB

To note, and receive a verbal update on the Terms of Reference for the Audit Committee (attached).

Minutes:

Members were requested to note the Committee’s Terms of Reference. Members would have an opportunity to comment later in the year, as part of the Council’s annual review of the Constitution, to ensure the Terms of Reference were focused and ‘fit for purpose’. Under the Audit Activity section, reference to the former Audit Commission would need to be updated (replaced by Public Sector Audit Appointments Ltd).

 

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

AUD/5

WORK PROGRAMME 2015/16 pdf icon PDF 102 KB

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

Minutes:

The Committee reviewed their Work Programme for 2015/16.

 

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

AUD/6

RISK MANAGEMENT UPDATE pdf icon PDF 140 KB

To note the Strategic Risk Register.

Additional documents:

Minutes:

The Policy and Partnerships Manager presented the comprehensive Strategic Risks Register update for quarter 1 of 2015/16. Members had been updated at their previous meeting (Minute AUD/55 (2014/15) refers) with risks above the ‘line of appetite’, i.e. outside acceptable tolerance levels. They had been informed that mitigation actions with due dates (for implementing actions) were listed in the Register. Risks being managed through mitigation would come off the Register if they moved to acceptable levels of risk.

 

The Performance Sub-Committee considered all strategic risks in greater detail. Members had requested a full register for this meeting including strategic risks below the ‘line of appetite’, i.e. within acceptable tolerance. Operational risks were controlled at service and management levels.

 

Members sought clarification on the target mitigation dates for Risks 11 and 12 (former - major contracts planning, latter - health and safety contract management). It was explained that the dates shown (31/3/15) were typos representing when mitigation actions commenced and the deadline for completing both sets of mitigations was 31/3/16 (within acceptable tolerance levels). This would be presented as appropriate in future.

 

Members expressed interest in seeing the progress between mitigation commencement dates and completion dates. They wanted assurance that issues and risks did not increase but effective progress was being made. Past, current and future risk information had been previously provided but had been disproportionate for what was needed. However, officers would review the potential best ways for presenting this requested additional information. Assurance was given that none of the risks had moved in a negative direction since the last quarterly monitoring.

 

RESOLVED – That

 

(1)       the Risk Management update, with the correction to target completion dates for mitigating Risks 11 and 12 (bringing within acceptable levels of tolerance), be noted; and

 

(2)       Officers be asked to review the presentation of risks in relation to reporting current mitigation status positions.

AUD/7

STATEMENT OF ACCOUNTS INCLUDING THE ANNUAL GOVERNANCE STATEMENT 2014/15 pdf icon PDF 102 KB

To consider and note the unaudited Statement of Accounts, including the Annual Governance Statement for 2014/15.

Additional documents:

Minutes:

The Financial Services Manager presented the unaudited Statement of Accounts, which included the Annual Governance Statement, for 2014/15. She explained that these were prepared in line with statutory accounting guidance which required strict formats to be followed.

 

The Foreword was consistent with the 2014/15 revenue and capital outturn report considered by Cabinet on 22 July 2015. The Balance Sheet had been signed off as contained within the Accounts. The Audit Panel had considered the Annual Governance Statement in detail and no significant governance issues had been identified. The External Audit of the Accounts was now beginning and the Auditors would give their opinion of the audited Accounts at the September meeting of the Audit Committee.

 

Accounting policies, agreed by Members in April 2015 (Minute AUD/53 (2014/15) refers) had been used for preparation of the Accounts with one change made concerning depreciation. The policy on depreciation has been enhanced following issues that arose during preparation of the accounts where leisure assets had a material change in value that meant using the opening value as the basis for the depreciation charge was not judged to give a fair presentation in the accounts; the additional policy wording has been included in consultation with External Audit.

 

In response to questions, it was explained that the value of the Ulverston Leisure Centre included both the building and site. The Kendal Leisure Centre was for the building only as the site was owned by Cumbria County Council.

 

The pie-chart outlining ‘where do resources go’ was queried in respect of highways and transport expenditure in view of this being a function of Cumbria County Council. It was explained that the format was set by the governing body, Chartered Institute of Public Finance and Accountancy (CIPFA). The expenditure related to the Council’s car parking service.

 

In response to a query about the costs of potentially rebuilding Berners Bridge, Grange-Over-Sands, it was explained that contingent liabilities were set aside for unlikely events, otherwise a provision would be required.

 

RESOLVED – That the unaudited Statement of Accounts, including the Annual Governance Statement, for 2014/15 be noted.

AUD/8

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

To note progress made with Internal Audit Recommendations, the Annual Governance Statement Action Plan 2015/16 and Anti-Fraud and Corruption.

Additional documents:

Minutes:

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

 

There were 29 Internal Audit recommendations of which 8 had future completion dates. Of the 21 recommendations due, 13 had been completed and 8 partially completed.

 

It was requested that a consistent format for presenting dates was used.

 

In response to a query, it was explained that deadlines in the Internal Audit recommendations progress report had been changed due to responsibility moving between services and more realistic implementation dates. Members felt there needed to be good progress made on implementing payroll recommendations concerning expenses and ensuring payroll procedures including strengthening passwords were complete. Implementing payroll procedures was on track for the revised deadline and password controls formed part of the wider Information Governance Project.

 

Members felt that the deadline of 31 March 2017 for the Asset Management recommendation to have an assets investment strategy could be earlier. It was explained that an implementation review had been carried out on the Asset Management audit recommendations and the results of the review would be reported in September 2015.

 

Reference was made to the recommendation to ensure Development Management administrative processes and staff guidance was clear for a consistent approach to processing planning applications. It was suggested that any emerging trends in the processing that impacted on decisions should be identified. It was explained that processes were being reviewed as part of the wider Digital Innovation Project. It was explained that the reference to 18 months was a typo (deadline of September 2017) and would be corrected.

 

The AGS Action Plan contained longer-term actions and progress would be reported back to the Audit Committee.

 

The report also covered the review of managing the risk of Anti-Fraud and Corruption. Six areas had been identified which required some improvement of which two had been actioned and previously reported (Minute AUD/65 (2014/15) refers).

 

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

AUD/9

INTERNAL AUDIT REPORTS 2015/16

To consider executive summaries of recently completed Internal Audit reports.

Minutes:

The Internal Audit Manager presented various reports for audits undertaken in 2015/16 as part of the agreed Audit Plan for the year. The scope of each audit was listed in the reports.

AUD/9a

FEES AND CHARGES pdf icon PDF 438 KB

Minutes:

This audit of fees and charges had reviewed the robustness of internal controls for establishing and managing income targets and developing new income streams. A reasonable assurance had been given with 1 medium priority recommendation and 1 advisory recommendation. The strengths of the service were also recognised.

 

The medium priority recommendation concerned strengthening the policy criteria for establishing fees and charges to increase support for delivering council priorities and ensuring that the policy was publicly available.

 

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

AUD/9b

INFORMATION GOVERNANCE pdf icon PDF 398 KB

Minutes:

This audit of the Information Governance Project had been undertaken during the early stages of the Project and was also a follow-up to a previous data quality review. The Project was a substantial piece of work developing a framework of information management for the wide range of information that concerned the Council.

 

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 the content of project ‘highlight’ reports focusing on ‘exceptions’ and more effective risk management. More frequent Project Board meetings were also recommended but it was acknowledged that this reflected the position of meetings during the early project stages and a Project Plan, including regular meetings, had now been established. Risks were also now considered by Senior Management. So the current picture reflected improvement actions that had been pursued and demonstrated that the Project was being managed effectively. Members felt it was important that there was robust assurance that risks were clearly defined and being managed.

 

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

AUD/9c

GENERAL IT CONTROLS pdf icon PDF 357 KB

Minutes:

This audit of general IT controls had reviewed policies and procedures, operating environments and security. The IT service was a joint arrangement with Eden District Council.

 

A reasonable assurance had been given with 2 medium priority recommendations and 1 advisory recommendation. The strengths of the service were also recognised.

 

The medium priority recommendations concerned strengthening the documentation recording users’ acceptance of policies and making available user procedures for security breaches. The user procedures recommendation was listed as an advisory recommendation but needed to be corrected to being a medium priority.

 

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

AUD/9d

IT DATA BACKUP AND RECOVERY ARRANGEMENTS pdf icon PDF 393 KB

Minutes:

This audit of IT data back-up and recovery arrangements had reviewed policies and procedures, back-up scheduling and data recovery. The IT service was a joint arrangement with Eden District Council.

 

A substantial assurance had been given with 3 advisory recommendations. The strengths of the service were also recognised. It had been noted that back-up systems and recovery arrangements had been fully effective when there were server issues in September 2014. Testing was a continual process.

 

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

AUD/10

INTERNAL AUDIT ANNUAL REPORT 2014/15 pdf icon PDF 231 KB

To consider Internal Audit’s Annual Report 2014/15.

Minutes:

The Internal Audit Manager presented the Annual Report which summarised Internal Audit work that had taken place in 2014/15 and also gave a reasonable assurance opinion on the overall effectiveness of the Council’s processes for governance, risk management and internal controls. It was confirmed that Internal Audit had been able to operate independently.

 

The Annual Report included an assessment of Internal Audit’s own performance. Fourteen audits had been undertaken with 1 deferred. It was explained that audits were undertaken on a new risk-based approach. Areas to review were agreed following discussion with management over where it was felt Internal Audit could add value. The Council had scored highly with 12 (86%) of the audits achieving a reasonable or substantial assurance. Two audits, on asset management and grounds maintenance, had resulted in partial assurance so appropriate follow-up work was being pursued.

 

Members felt that more substantial assurances would be good (1 achieved) but acknowledged that the risk-based approach concerned areas that potentially needed improvement so would be starting from a lower base than areas that were already strong.

 

RESOLVED – That the following be noted:

 

(1)       the progress achieved in 2014/15 in delivering the Audit Plan and the outcomes of completed audit reviews as set out in Appendix 1 of the report;

 

(2)       the Audit 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 2015;

 

(3)       the Audit Manager’s declaration of Internal Audit independence as required by the Public Sector Internal Audit Standards.

 

(4)       the Audit Manager’s declaration of conformance with the mandatory Public Sector Internal Audit Standards; and

 

(5)       the positive outturn performance of the Internal Audit Service as shown in section 4 and Appendix 1 of the report.

AUD/11

REVIEW OF THE EFFECTIVENESS OF INTERNAL AUDIT pdf icon PDF 277 KB

To review the effectiveness of the Internal Audit Service.

Minutes:

The Internal Audit Manager explained that the Council had a statutory duty to review the effectiveness of its Internal Audit service and report its findings. This was undertaken in line with the Public Sector Internal Audit Standards (PSIAS) and local government checklist.

 

The Internal Audit Manager was able to confirm that effectiveness was in line with statutory requirements. She added that two outstanding actions from the 2013/14 effectiveness review had now been completed for full compliance with the mandatory standards. It was explained that the formal review and reporting requirements were being revised for future years.

 

RESOLVED – That the following be noted:

 

(1)       the report on the effectiveness of Internal Audit and the supporting detail as set out at Appendix 1 to the report; and

 

(2)       the summary of the outcomes of the Quality Assurance and Improvement Programme as set out at Appendix 2 to the report.

AUD/12

INTERNAL AUDIT PROGRESS REPORT 2015/16 (No. 1) pdf icon PDF 189 KB

To note a summary of the work carried out by Internal Audit and details of the progress made on the delivery of the approved Audit Plan for the first period of 2015/16.

Minutes:

The Internal Audit Manager presented this report which summarised the work carried out by Internal Audit and progress made on the delivery of the approved Audit Plan in period one of 2015/16. As it was early in the timetable, no audits had been completed yet but several had been started. Reference was made to the risk-based approach for identifying areas that might benefit from review. These included the review of Electoral Services, following the introduction of individual electoral registration, and Bereavement Services, which was understood to be a core but complex service involving fees, detailed administrative requirements and a significant budget. Further details on the need for the Bereavement audit would be provided.

 

Members passed on their thanks to Finance and Internal Audit staff for their efforts and work.

 

RESOLVED – That the progress made against the agreed 2015/16 Audit Plan be noted.

AUD/13

EXTERNAL AUDIT PROGRESS REPORT pdf icon PDF 222 KB

To update Members of the Audit Committee on the progress made on the external audit and also on current issues for local government.

Minutes:

The External Audit Manager presented this report which summarised the work carried out by the External Auditors, Grant Thornton, and outlined current relevant issues of interest for local government.

 

Some core audit work had been completed during the year. The work being undertaken now focused on the final audited accounts for 2014/15 and included their opinion on the accounts and value for money assessment.  Value for money considerations included budget management and savings as well as future budget resilience in view of the challenging financial environment for local government. Outcomes would be reported to the Audit Committee at its September meeting.

 

Members were also informed of emerging issues of interest to local government. These included development of the Local Government Pension Scheme, impact of welfare reforms, devolution and using financial opportunities for innovation and growth. Reports on these issues had been produced for local government and contained ‘challenge’ questions that councils were encouraged to consider. They had also produced a Guide to Local Government Accounts.

 

Members expressed interest in relaying the ‘challenge’ questions across the Council. It was suggested that these questions could complement the regular policy briefings that were sent to all Members.

 

RESOLVED – That the progress made on the audit and the emerging issues of interest to local government be noted.

AUD/14

REVIEW OF INTERNAL AUDIT CONTRACT pdf icon PDF 164 KB

To approve the proposed arrangements for the tendering of the Internal Audit Service from 1 April 2016.

Minutes:

The Director of Policy and Resources (Monitoring Officer) presented this report which outlined the process requirements and indicative timetable to be followed for tendering of the Internal Audit Service contract which was currently jointly procured with Eden District Council. The current contract was due to expire on 31 March 2016 so to ensure a smooth transition, should there be any changes, the new contract was due to commence on 1 April 2016.

 

Members queried whether it was appropriate for the Executive to be responsible for awarding this contract in view of the Internal Audit Service being responsible for reviewing the Council’s arrangements for robust and efficient controls. It was suggested that the Audit Committee should have a responsible role in selecting an Internal Auditor. It was explained that this was an executive function but, subject to the timetable, it might be possible to involve Members of the Audit Committee with the process.

 

RESOLVED – That the proposed arrangements for the tendering of the Internal Audit Service, with contract arrangements to commence from 1 April 2016, be approved.

AUD/15

AUDIT COMMITTEE RISK REGISTER pdf icon PDF 80 KB

To review the updated Audit Committee Risk Register

Additional documents:

Minutes:

The Director of Policy and Resources (Monitoring Officer) explained that this Risk Register concerned ensuring the effectiveness of the Audit Committee in delivering its functions. Most risks were historic and had been archived but presented for completeness and two new risks had been identified by Members at their December 2014 meeting (Minute AUD/43 (2014/15) rerfers). Archived and current risks were reviewed annually.

 

The current risks concerned: the challenge from Members being ineffective due to inexperience; and future challenges faced by local government due to changes stemming from central government.

 

Members noted that there had been some changes in Audit Committee membership. However, the new Members were relatively experienced and had just received comprehensive training on the role of the Audit Committee, work of the Internal Audit Service and a final accounts briefing. They felt this Risk AC:1 had not been requested by them which needed to be clarified in the wording and the likelihood could be moved down one point on the scale.

 

Members felt that for future challenges faced by local government, Risk AC:2 needed to top of the scale for likelihood and impact. Revenue Support Grant was being cut further and funding such as New Homes Bonus was also volatile. It was recognised that the Medium Term Financial Plan was already identified as a strategic risk. It was explained that the wording of this risk might need reviewing as there were wider impacts on the Council that affected the ability of the Audit Committee to perform its functions well. This risk, with appropriate re-wording, needed to be considered by Members at the next meeting.

 

Members were reminded that the statutory timetable for final accounts reporting would next year be much closer to the end of the financial year. Whilst officers were already factoring this in, achieving quality accounts on time was a risk that the Audit Committee needed assurance on. Details of planning for this were requested for Members’ next meeting.

 

Reference was also made to the External Auditor’s contract ending on 1 April 2017. However, although central government had consulted on future arrangements for local government external auditing arrangements an announcement was overdue. Members suggested this could be pressed through the Local Government Association. Members would need to consider external audit arrangements in 2015/16 before budgets for 2016/17 were agreed. Public Sector Audit Appointments Ltd currently made external auditor appointments.

 

RESOLVED – That the updated Audit Committee Risk Register be noted with requested changes made to identified risks and a revised Register reported back to the September 2015 meeting.

AUD/16

OTHER SIGNIFICANT FINANCIAL ISSUES

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

Minutes:

The Financial Services Manager presented a brief topical update on significant financial issues. She explained that details of the Government’s spending review would be announced on 25 November 2015 concerning local government funding with a settlement figure expected on 17 December 2015.

 

Members were also informed that the Government was reviewing the balance of receipts for Community Infrastructure Levy funding. Currently parish and district councils received a percentage but upper-tier authorities provided the infrastructure. This review could result in lower amounts for districts.

 

RESOLVED – That the verbal report be noted.