Agenda and minutes

Audit Committee - Thursday, 1 December 2016 6.30 p.m.

Venue: Georgian Room, Kendal Town Hall. View directions

Contact: Inge Booth 

Items
No. Item

AUD/25

Minutes pdf icon PDF 145 KB

To authorise the Chairman to sign, as a correct record, the minutes of the meeting of the Committee held on 21 September 2016 (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 21 September 2016.

AUD/26

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 raised.

AUD/27

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/28

Audit Committee 2016/17 Work Programme pdf icon PDF 58 KB

To review the Committee’s Work Programme for 2016/17.

Minutes:

The Financial Services Manager presented the Committee’s Work Programme for 2016/17.  She pointed out that the Review of the Whistleblowing Policy had been programmed for this year, however, that this was only required on a biennial basis and was not, therefore, due until December 2017.   She also reported that the report on the Review of Accounting Policies for 2016/17 was ready and had, therefore, been brought forward from the April 2017 meeting to this one.  Also, on the agenda for consideration at this meeting was an additional report on the Appointment of External Auditors.

 

RESOLVED – That the Audit Committee Work Programme for 2016/17 be noted.

AUD/29

Risk Management Update pdf icon PDF 102 KB

To note the Strategic Risk Register – Quarter 2, 2016/17.

Additional documents:

Minutes:

The Performance and Risk Officer presented the Strategic Risk Register which outlined all of those risks above and below the line of risk tolerance. Mitigations designed to reduce the risks in terms of likelihood or impact or both were listed against each risk above the line of tolerance.

 

The Strategic Risk Register was reviewed by Senior Management Team each quarter as part of the Council’s quarterly performance monitoring and reporting arrangements. A new risk around Waste Collection (Risk Number 16) had been added to the Register. A further review of by Senior Management Team had taken place on 10 November 2016.

 

In response to queries raised, the Assistant Director Resources (Section 151 Officer) explained the difficulty of moving the risk position of Risk 6 (Medium Term Financial Planning – delivery of a balanced budget) due to the fact that this was an externally-controlled area.  Regarding Risk 12 (Health and Safety management of contracts), Members expressed concern that the risk position had remained unchanged since an improvement in Quarter 1 of 2016/17.  Members felt that there should be robust health and safety measures in place where Council contracts were concerned and were uncomfortable that the risk remained in the unacceptable zone.  It was felt that the Chief Executive, as owner of the risk, should be asked to attend the next meeting in order to provide an explanation.

 

RESOLVED – That

 

(1)        the Strategic Risk Register, as attached at Appendix 1 to the report, be noted; and

 

(2)        the Chief Executive be requested to attend the next meeting of the Audit Committee to brief Members with regard to the position of Risk 12 (Health and Safety management of contracts).

AUD/30

Accounting Policies 2016/17 pdf icon PDF 171 KB

To consider the adoption of proposed accounting policies to be used for the closure of the 2016/17 accounts.

Additional documents:

Minutes:

The Chief Accountant presented a report outlining proposed accounting policies to be used for the closure of the 2016/17 accounts. These had been prepared in line with the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Code of Practice on Local Authority Accounting in the UK 2016/17.

 

The presentation of the Comprehensive Income and Expenditure Statement had been revised so that it would better reflect how the Council was structured and managed its resources. This was a change from 2015/16 where the format had followed a national standard for service expenditure.

 

In addition, a new funding and expenditure note would be introduced which would explain the statutory adjustments made to figures calculated in line with International Financial Reporting Standards (IFRS). Although these disclosures already existed within the accounts, the proposed changes had been designed to help make the accounts clearer for readers.

 

The proposed accounting policies were presented at Appendix 1 to the report. These had not changed from the 2015/16 policies.  These policies had been presented to the Audit Committee at the April meeting in previous years, however the earlier adoption of the accounting policies would assist in the production of the draft accounts by 31 May 2017.  This would aid the Council in preparing for the statutory requirements relating to the preparation of draft accounts by 31 May from 2017/18 onwards.

 

RESOLVED – That the accounting policies at Appendix 1 to the report for closure of the 2016/17 Accounts be adopted.

AUD/31

Review of the Local Code of Governance pdf icon PDF 350 KB

To consider the results of the review of the Council’s Local Code of Governance.

Additional documents:

Minutes:

The review of the Local Code of Governance was presented by the Chief Accountant.

 

Under the Accounts and Audit Regulations (2015), the Council was required to review the effectiveness of the system of internal control annually and report this through an Annual Governance Statement. The Chartered Institute of Public Finance and Accountancy (CIPFA) had published a revised version of their governance framework for local authorities. This counted as proper practice and was to be applied for financial years from 1 April 2016 onwards. The new framework had been re-arranged from the previous framework’s six principles to seven, in line with CIPFA’s broader International Framework: Good Governance in the Public Sector (2014). The underlying content of the new framework was broadly the same as the previous version.

 

The Audit Committee conducts an annual review of the Local Code of Governance. As the framework had changed, there were a number of amendments to the Local Code required. A large part of this was to realign the Local Code with the new framework’s seven principles.

 

CIPFA had also issued detailed guidance which included specific examples around how each principle may be implemented. This best practice framework would be used to help review the effectiveness of the Local Code, with a proposed action plan to address any areas where there may be scope for potential improvements. The outcome of this review would be set out within the Annual Governance Statement.

 

In previous years a sub group of Audit Committee Members had met between the April and July meetings to review the Annual Governance Statement. Due to the change in the accounts timescales, it was now planned to bring the draft Statement to the April meeting of the Audit Committee.  Members wished to ensure that, should the need arise to convene an Audit Panel, as in previous years, consideration be given to the issue of limited Member availability in early May during election time.

 

On behalf of the Committee, the Chairman thanked the Chief Accountant for the clear report.

 

RESOLVED – That

 

(1)        Council be recommended to approve the proposed revisions to the Local Code of Governance; and

 

(2)        the revised arrangements and timetable for the Annual Governance Statement be noted.

AUD/32

Internal Audit Recommendations Progress Report pdf icon PDF 58 KB

To consider progress made in implementing the Internal Audit Report recommendations.

Additional documents:

Minutes:

The Assistant Director Resources (Section 151 Officer) presented a report providing an update on the progress made in implementing the Internal Audit Report recommendations.

 

Appendix 1 to the report contained details of 46 recommendations, of which 23 had future completion dates. Of the 23 remaining recommendations, 17 had been completed, two had been superseded and four were partially completed.

 

The Assistant Director Resources (Section 151 Officer), the Financial Services Officer and the Solicitor to the Council responded to queries raised.

 

Members were advised of progress in relation to Recommendation 4 regarding the Audit of Asset Management and the need to ensure that a system was in place to enable proper co-ordination between the contractor and relevant Council departments to ensure that all tenants/leaseholders were invoiced for the correct amount on a timely basis and for Management to monitor the effective operation of the system.  Improvements had already been made.  The Solicitor to the Council and the Corporate Assets Manager were in regular contact with the new provider and a new system had been implemented, resulting in a more streamlined process.  Progress had been made in relation to Recommendation 3 of the Audit of Use of Agency Staff.  There was now an arrangement in place through Nepro, an organisation that procured professional services on behalf of the UK public sector, to purchase more specific professional services.  It was hoped that the Council might also in future be able to engage other casual workers through a framework arrangement.  With regard to the recommendations relating to the Audit of Bereavement Services, it was clarified that a lot of the issues raised were being addressed as part of the Parks and Open Spaces Strategy which would come through the committee process in Spring 2017.

 

RESOLVED – That the progress made with implementing the Internal Audit Report recommendations be noted.

AUD/33

External Audit Progress and Update Report pdf icon PDF 1 MB

To note a summary of external audit progress to date and emerging issues and developments that may be relevant to the Council.

Minutes:

Neil Krajewski, External Audit, presented a report providing Members of the Committee with a summary of the progress made by Grant Thornton in delivering their responsibilities as External Auditors as at 11 November 2016.  The report also included details of emerging national issues and developments that might be relevant to the Council.

 

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

AUD/34

External Audit Annual Audit Letter for South Lakeland District Council pdf icon PDF 237 KB

To receive the Annual Audit Letter for year ended 31 March 2016.

Minutes:

Neil Krajewski, External Audit, presented External Audit’s Annual Audit Letter which summarised the key findings arising from work carried out by External Audit at the Council for the year ended 31 March 2016.

 

The key messages were that External Audit had provided an unqualified opinion on the Council’s financial statements on 22 September 2016.  External Audit were satisfied that the Council had in place proper arrangements to ensure economy, efficiency and effectiveness in its use of resources during the year ended 31 March 2016.  External Audit’s work on the Council’s Housing Benefit subsidy claim on behalf of the Department for Work and Pensions was not yet complete, and would be finalised by 30 November 2016, when the final fee in respect of this work would be confirmed.  The letter looked ahead to 2016/17 when External Audit would support the Council in bringing forward its audit timetable so that the audit could be concluded by 31 July 2017.

 

RESOLVED – That the contents of the External Audit Annual Audit Letter for the year ended 31 March 2016 be noted.

AUD/35

Appointment of External Auditors pdf icon PDF 165 KB

To consider an invitation to join a national procurement exercise 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.

Additional documents:

Minutes:

Note – Neil Krajewski, External Audit, left the room during the discussion and voting on this item of business.

 

The Financial Services Manager provided an update on the invitation to join a national procurement exercise 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.  This approach was likely to deliver the best value for money and would also avoid the requirement to set up an auditor panel.  The Cumbria Chief Finance Officers had considered the options at their meeting in March 2016 and had supported the sector led body approach.

 

PSAA, the body set up by the Local Government Association, had now been specified by the Secretary of State as the sector led body who would appoint external auditors for opted-in authorities for the five financial years from 1 April 2018.  PSAA had sent a formal invitation for the Council to opt-in to the new arrangements.  The decision to opt-in had to be taken in accordance with the Local Audit (Appointing Person) Regulations 2015 which required Council to make the decision.

 

RESOLVED – That Council, at its meeting on 15 December 2016, be recommended to opt-in to the Sector Led Body approach for the appointment of External Auditors.

AUD/36

Internal Audit Progress Report pdf icon PDF 154 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 2016/17.

Additional documents:

Minutes:

Jane Butterfield, Internal Audit, presented an update on progress in delivering the Internal Audit Programme.  Although late in commencing, it had been intended that the Programme would be complete by the end of March 2017.  She reported that, although this would substantially be the case, there were two reviews where it would be more optimum timing to carry them out in April 2017: National Non-Domestic Rates and Flood Grants.

 

Members queried whether the Council’s regulatory services, such as development control, required auditing from time to time in order to ensure that the Council’s procedures were appropriate and being adhered to.  It was suggested that discussion could take place with regard to their inclusion within next year’s Internal Audit Programme.

 

RESOLVED – That the progress in scheduling and undertaking the Internal Audit Annual Plan be noted.

AUD/37

Review of Constitution pdf icon PDF 157 KB

To consider the results of the annual review of the Council’s Constitution for consideration by the Audit Committee.

Additional documents:

Minutes:

The Financial Services Manager reported that the Audit Committee’s Work Programme for 2016/17 included the annual review of the Constitution.   Last year, there had been a major re-write of the Financial Procedure Rules and the Contract Procedure Rules.  This year, a number of proposed changes were recommended to clarify some areas of ambiguity, namely:-

 

·        to clarify that in the absence of the Chief Finance Officer then her responsibilities for the proper financial arrangements are delegated to the Financial Services Manager;

·        to clarify that the Chief Finance Officer is responsible for designating bank signatories;

·        to clarify the arrangements for cheque signatures as pre-printed cheques are no longer used.

·        to include references to insurances in the Contract Procedure Rules and that the Chief Finance Officer has to agree the level of insurances for each contract based on an assessment of risks; and

·        to amend references to Pre-Qualification Questionnaires to Selection Questionnaires in line with new government terminology.

 

Reference was made to Section 3 of the Contract Procedure Rules and the need to alter reference to ITT in the title of Rule 19 to “INVITATION TO TENDER”.

 

RESOLVED – That the proposed amendments to the Constitution, as set out in the appendices to the report, together with the additional amendment raised at the meeting and outlined above, be recommended to Council for approval.

 

AUD/38

Review of Anti-Fraud Policy and Activity pdf icon PDF 190 KB

To note the results of the Audit Committee’s annual review of the Council’s Anti-Bribery, Fraud and Corruption Policy.

Additional documents:

Minutes:

The Financial Services Manager presented the results of the annual review of the Anti-Bribery, Fraud and Corruption Policy which was included within the Committee’ Work Programme for 2016/17.  The policy linked closely with the Whistleblowing Policy, which was reviewed biennially.

 

Members were informed that the Policy required a central log to be kept of all reported cases of fraud and whilstleblowing by the Assistant Director (Resources).  A summary of anti-fraud activity was attached at Appendix 4 to the report.

 

In response to queries raised by Members regarding Council Tax discount-related fraud, the Financial Services Manager reported that examination was going to be given to Council Tax discounts in the next few months, followed by National Non-Domestic Rates.  She also undertook to ensure that the data shown within the review of anti-fraud activity summary were clearer in future years.

 

RESOLVED – That the following be noted:-

 

(1)        the review of the Anti-Bribery, Fraud and Corruption Policy; and

 

(2)        anti-fraud activity.

AUD/39

Audit Committee Risk Register pdf icon PDF 477 KB

To review the updated Audit Committee Risk Register.

Minutes:

The Financial Services Manager reported that the Audit Committee’s Risk Register had last been reviewed by the Committee on 21 July 2016 (AUD/14) and was now being brought back for reconsideration with the inclusion of the recommendations made at that meeting.

 

Discussion took place with regard to the possibility of archiving Risks AC1 (The challenge from the Committee is ineffective due to inexperience) and AC4 (External Auditor Appointment).  Although the current Members of the Committee had the necessary experience, it was felt that there may be potential for some change in 2018 following all-out district elections, and that Risk AC1, therefore, needed to remain on the Register.  It was also raised that, although Council was due to consider opt-in to the Sector Led Body approach for the appointment of External Auditors, AC4 should be kept on the Register until the Council was notified of the appointment of the new External Auditors.

 

RESOLVED – That the updated Audit Committee Risk Register be noted.

AUD/40

Review of Effectiveness of the Audit Committee pdf icon PDF 156 KB

To consider the results of the annual review of the Committee’s effectiveness.

Additional documents:

Minutes:

The Financial Services Manager reported that the annual review of the Audit Committee’s effectiveness had been carried out using principles established by the Chartered Institute of Public Finance and Accountancy (CIPFA).  The conclusion of the review, which had been carried out using a questionnaire approach, was that the Committee could demonstrate that it had been established in accordance with best practice and that it continued to operate effectively.

 

The report drew attention to the fact that the Committee should be alert to any changes in its membership and the expertise of its Members so that it could arrange suitable training.  The Financial Services Manager drew attention to Appendix 2 of the report which included a skills framework for Members of the Audit Committee, produced by CIPFA.

 

Members queried the negative responses to the questions on effectiveness of the Audit Committee at Section I on the Assessment Checklist at Appendix 1.  The need for the Committee to be able to demonstrate its effectiveness was felt to be of importance.

 

RESOLVED – That

 

(1)        the following be noted:-

 

(1)        the review and its conclusion that the Audit Committee is operating effectively in all material aspects; and

 

(2)        the skills framework for Members of the Audit Committee, attached at Appendix 2 to the report; and

 

(2)        with regard to Section I (51, 52 and 53) on the Assessment Checklist at Appendix 1 to the report, the Assistant Director Resources (Section 151 Officer), in consultation with the Chairman of the Committee, be requested to examine mechanisms whereby the Audit Committee can in future demonstrate its effectiveness and to report back to the next meeting in order for these measures to be considered for approval.

AUD/41

Other Significant Financial Issues

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

Minutes:

The Assistant Director Resources (Section 151 Officer) informed Members that the draft Budget was due to be considered by Council on 15 December 2015.  In addition, she reported that the Council’s application for a four year local government finance settlement had been accepted. It was, however, pointed out that the move to a new business rate retention scheme in 2020 would change the finance settlement process.  It was anticipated that the 2017/18 settlement would be announced shortly during week commencing 19 December 2016.

 

RESOLVED – That the verbal update be noted.