Agenda and minutes

Audit Committee - Thursday, 20 April 2017 6.30 p.m.

Venue: Georgian Room, Kendal Town Hall. View directions

Contact: Inge Booth 

Items
No. Item

AUD/42

Chairman's Announcement

Minutes:

The Vice-Chairman, in the Chair, wished to place on record the Committee’s expression of condolence to Councillor Stephen Coleman, Chairman, following his recent bereavement.

AUD/43

Minutes pdf icon PDF 218 KB

To authorise the Chairman to sign, as a correct record, the minutes of the meeting of the Committee held on 1 December 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 1 December 2016.

AUD/44

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 under this item.

AUD/45

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/46

Audit Committee 2016/17 Work Programme pdf icon PDF 101 KB

To consider progress against the Committee’s 2016/17 Work Programme.

Minutes:

The Assistant Director Resources (Section 151 Officer) presented a report on progress against the Committee’s 2016/17 Work Programme.

 

RESOLVED – That progress against the 2016/17 Work Programme be noted.

AUD/47

Audit Committee 2017/18 Work Programme pdf icon PDF 101 KB

To consider a draft Work Programme for the year.  The programme can be adapted as necessary during the year.  Provisional dates are shown, dependent on confirmation of the Council’s Calendar of Meetings on 17 May 2017.

Minutes:

The Assistant Director Resources (Section 151 Officer) presented a draft Work Programme for the Audit Committee for 2017/18.  The provisional meeting dates shown were dependent on approval by Council of its Calendar of Meetings for 2017/18.

 

RESOLVED – That the draft Work Programme for 2017/18 be agreed, subject to confirmation of the Council’s Calendar of Meetings.

AUD/48

Chair of the Audit Committee's Annual Report 2016/17 pdf icon PDF 155 KB

To consider the Chair of the Audit Committee’s draft Annual Report which summarises the activities of the Committee during 2016/17.

Additional documents:

Minutes:

The Financial Services Manager introduced the Chair’s Audit Committee Annual Report 2016/17.  The report summarised the activities of the Committee during the current Council Year and, subject to approval, would be submitted to Council in May 2017.  The Financial Services Manager pointed out that the Committee was working effectively and providing independent assessment of the Council’s governance arrangements.

 

In response to a query on the section of the report on fraud prevention and whistleblowing, the Financial Services Manager reported that, out of approximately 500 flood resilience grant claims received to date, only four had required detailed investigation.

 

RESOLVED – That the Chair of the Audit Committee’s Annual Report 2016/17 be approved for submission to Council on 17 May 2017.

AUD/49

Annual Governance Statement and Review of Effectiveness of the Local Code of Governance pdf icon PDF 182 KB

To consider the draft Annual Governance Statement and draft Action Plan.

Additional documents:

Minutes:

The Chief Accountant informed the Committee that local authorities should have in place an effective system of internal control (SIC).  For South Lakeland District Council, the key features of the SIC were described within the Local Code of Governance.  Under the Accounts and Audit Regulations (2015), the Council was required to review the effectiveness of the SIC annually and to report this through an Annual Governance Statement (AGS). This was done alongside the statement of accounts and had to be prepared in accordance with proper practices.  The Chartered Institute of Public Finance and Accountancy (CIPFA) had recently published a revised version of their governance framework for local authorities, Delivering Good Governance in Local Government: Framework (2016). This counted as proper practice and was to be applied for financial years from 1/4/2016 onwards. This had slightly re-arranged the previous framework moving from six principles to seven. This was in line with CIPFA’s broader international framework, Good Governance in the Public Sector (2014). The underlying content of the new framework was broadly similar to the previous version although there were some amendments.  The provisions of CIPFA’s new framework have been reviewed with amendments made to the Local Code of Governance. These had been presented to the Audit Committee on 1 December 2016 (AUD/31), with the amendments to the Local Code having been approved by Council on 15 December 2016 (C/61).

 

Similar to the previous framework, CIPFA had issued detailed guidance which included specific examples around how each principle might be implemented. This best practice framework had been used to help review the effectiveness of the Local Code.  A self-assessment exercise had been completed by Officers, with a proposed action plan to address any areas where there may be scope for potential improvements. The outcome of this review and any other relevant sources of evidence (e.g. the internal audit annual opinion) was set out in the Annual Governance Statement. This was to be published as part of the Statement of Accounts. The self-assessment had not resulted in any significant governance issues, but a number of areas where there was an opportunity for improvement had been identified. The detailed results of this review were included at Appendix 1 to the report.  In prior years, a sub group of Audit Committee Members had met between the April and July meetings to review the AGS. Given the change to the accounts timescales, the draft AGS was now to be included on the April Audit Committee agenda. This still gave time for the Committee to review the AGS and supporting documents and to propose amendments prior to the draft statement being signed by the Leader and Chief Executive. The draft AGS was to be published alongside the (subject to external audit) statement of accounts by 31 May 2017. The final AGS would be brought back for consideration by Audit Committee in September, following the external audit of the accounts.

 

Alongside changes to the principles of good governance, CIPFA had also amended its guidance around preparation of the  ...  view the full minutes text for item AUD/49

AUD/50

Strategic Risk 12 - Health and Safety Management of Contracts pdf icon PDF 236 KB

Further to Minute AUD/29 (2016/17), the Chief Executive will brief Members with regard to the position of Risk 12 – Health and Safety Management of Contracts.

Minutes:

Further to Minute No.AUD/29 (2016/17), the Chief Executive briefed Members with regard to the position of Strategic Risk 12 – Health and Safety Management of Contracts.  He reported that the latest update stated that all of the health and safety training carried out by the Council with its employees had now been extended to contractors working on the Council’s behalf.  In addition, quarterly planned inspections would be carried out, as well as observation of new starters and random informal inspections, with the results of the observations and inspections being be placed on Sharepoint.  The Chief Executive felt comfortable that the risk was now being appropriately managed.

 

RESOLVED – That the briefing from the Chief Executive with regard to the position of Srategic Risk 12 be noted.

AUD/51

Annual Reporting of Operational Risks to Audit Committee pdf icon PDF 727 KB

To consider the operational risks which are positioned above the line of tolerance and the mitigations to manage them.

Minutes:

The Performance and Risk Officer reported that during November 2016, Internal Audit had recommended that the operational risks which were above the tolerance level should be reported to the Audit Committee, on an annual basis as a minimum, to ensure that Members were aware of the operational risks which had been identified and that they were being managed.  There were currently 18 operational risks that were above tolerance and these were shown at Appendix 1 to the report.

 

In addition, the Performance and Risk Officer pointed out that the Strategic Risk Register was also reported to Audit Committee every six months.

 

Concern was raised with regard to the fact that some of the risk target positions remained the same as the current risk positions and Member were advised, particularly in relation to “Windermere Lake encroachment debt recovery does not significantly reduce the amounts outstanding,” that the aim in these cases was to ensure that ongoing review and scrutiny were carried out in relation to the risks above tolerance.

 

In response to a suggestion, the Performance and Risk Officer undertook to indicate direction of travel in relation to the risk position within future reports.

 

RESOLVED – That the operational risks which are positioned above the line of tolerance and the mitigations to manage them, as listed in Appendix 1 to the report, be noted.

AUD/52

Review of Performance Management Framework and Risk Management Process pdf icon PDF 52 KB

To consider the changes required for the Performance Management Framework April 2017 and the updated Risk Management Process March 2017.

Additional documents:

Minutes:

The Performance and Risk Officer reported that the Council had an existing Performance Management Framework and Risk Management Process which were reviewed annually.  The 2017 update to the Council Plan for 2014-2019 had been taken into consideration as part of the annual review of the documents.

 

The Performance Management Framework described how the Council monitored its performance and reflected the performance monitoring structures and schedules.  Full Council, on 29 March 2017 (Minute No.C/91 refers) had considered changes to the Constitution and had agreed to discontinue the Performance Sub-Committee.  The quarterly performance reports would, in future, be reported to the Overview and Scrutiny Committee, and this had been reflected within the Framework.

 

Further to a recommendation brought about by an external audit of Risk Management during 2016, the Risk Management Process had been improved by providing further clarification and detail on the management of operational risks.

 

RESOLVED – That the following be noted:-

 

(1)        the changes required for the Performance Management Framework April 2017, as set out in Appendix 1 to the report; and

 

(2)        the updated Risk Management Process March 2017, as set out in Appendix 2 to the report.

AUD/53

Certification Work for South Lakeland District Council for Year ended 31 March 2016 pdf icon PDF 116 KB

To consider a letter from External Audit on certification work for South Lakeland District Council for year ended 31 March 2016.

Minutes:

The External Audit Manager presented a letter from Grant Thornton on certification work carried out for South Lakeland District Council for year ended 31 March 2016.  External Audit had certified the Council’s Housing Benefit subsidy claim for the financial year 2015/16 relating to subsidy claimed of £18,977,709, details of which were set out in Appendix A to the letter.

 

The indicative fee for the certification of the Council’s 2015/16 Housing Benefit claim had been based on the final 2013/14 certification fee, reflecting the amount of work required by the auditor to certify the subsidy claim that year.  The indicative fee set by the Audit Commission had been £5,082.  Initial sample testing of Housing Benefit cases reflected in the claim had, however, identified errors, and there had been errors identified in the 2014/15 certification work which had required External Audit to undertake additional testing.  External Audit had, therefore, agreed with the Council’s Financial Services Manager an additional fee of £2,470.

 

RESOLVED – That the letter from External Audit on certification work carried out for South Lakeland District Council for year ended 31 March 2016 be received.

AUD/54

The Audit Plan for South Lakeland District Council Year ended 31 March 2017 pdf icon PDF 736 KB

To consider the Audit Plan for South Lakeland District Council year ended 31 March 2017.

Minutes:

Note – During discussion on the item, Councillors Stan Collins (as Vice-Chairman of the Cumbria Pensions Committee) and Ian Stewart (as Chair of the Cumbria Pensions Board) declared non-pecuniary interests in relation to the Cumbria Pensions Fund.  They remained in the room during the discussion and voting on the item.

 

The External Audit Manager presented the External Audit Plan for the Council for the year ended 31 March 2017.  The Plan set out an overview of the planned scope and timing of the audit, as required by International Standard on Auditing (UK & Ireland) 260.  The document aimed to assist the Committee in understanding the consequences of External Audit’s work, discuss issues of risk and the concept of materiality and identify any areas where the Committee might request External Audit to undertake additional procedures.

 

Members were advised of revisions which were required in the audit timeline which meant that the final audited accounts would be presented to the Committee in September 2017 instead of as originally planned in July 2017.

 

RESOLVED – That the Audit Plan for South Lakeland District Council year ended 31 March 2017 be noted.

AUD/55

Planned Audit Fee for 2017/18 pdf icon PDF 206 KB

To consider a letter from External Audit on the planned audit fee for 2017/18.

Minutes:

The External Audit Manager presented a letter from Grant Thornton on the planned audit fee for 2017/18.  Public Sector Audit Appointments Limited had set the 2017/18 scale audit fees at the same level as the scale fees applicable for 2016/17.  The Council’s scale fee for 2017/18 had been set by PSAA at £55,851.  The audit planning process for 2017/18, including the risk assessment, would continue as the year progressed.

 

It was pointed out that, at the request of the Department for Work and Pensions, auditors appointed by PSAA would continue to certify local authority claims for housing benefit subsidy for 2017/18.  The Council’s indicative fee for this certification work had yet to be set by PSAA.  The Council would need to appoint separate auditors for this area of work in forthcoming years.  Members expressed disappointment at this arrangement and the Financial Services Manager indicated that discussions were being held with PSAA regarding the prospect of national procurement.  Members were keen for officers to provide them with guidance on how to raise this issue within Local Government Association Groups.

 

RESOLVED – That the Annual Audit Fee for 2017/18 be noted.

AUD/56

South Lakeland District Council Audit Committee Progress Report and Update Year ended 31 March 2017 pdf icon PDF 2 MB

To consider External Audit’s progress in delivering its responsibilities as the Council’s External Auditors.

Minutes:

The External Audit Manager presented a report providing Members of the Committee with a summary of progress made by Grant Thornton in delivering their responsibilities as External Auditors during year ended March 2017.  He reminded Members, further to Minute No.AUD/54 above, that the timetable would be updated in relation to the audit of final accounts.

 

RESOLVED – That the progress made by Grant Thornton in delivering its responsibilities as the Council’s External Auditors be noted.

AUD/57

Internal Audit Progress Report 2016/17 pdf icon PDF 157 KB

To consider the progress achieved in 2016/17 in delivering the Audit Plan and the outcomes of completed audit reviews (Appendix 1), audit reports (Appendix 2) and the status of outstanding recommendations (Appendix 3).

Additional documents:

Minutes:

The Internal Audit Manager presented a summary of the progress made against the Internal Audit Annual Plan to date during 2016/17.  He reported that the Internal Audit Plan for 2016/17 had been approved by the Committee in July 2016.  The first pieces of fieldwork had commenced in November and December 2016, and there had been a concerted push from January 2017 to complete the programme.  It was the intention that all reports would be issued at “draft” stage by the end of April 2017.  The progress report at Appendix 1 to the substantive report provided a summary of the position as at the end of March 2017.

 

In response to a query, the Internal Audit Manager advised that the audit on Electoral Registration had been deferred to 2017/18 as it was felt that, following the recent change in management of the Team, it would be more appropriate for this to take place following the forthcoming elections.

 

Appendix 2 to the report contained the executive summaries of the eight audit reports completed in the period and discussion took place as follows:-

 

·        Assurance Review of Cash Receipting – Car Parking Arrangements

 

The review had resulted in an assessment of reasonable assurance.  Members expressed concern with regard to the recommendation to enhance security arrangements for the collection and transportation of cash and sought further details with regard to this aspect.

 

Note – During consideration of the item, Members voted to move into Part II to discuss the process of cash transportation.

AUD/58

Press and Public

Minutes:

RESOLVED – That, under Section 100(A)(4) of the Local Government Act 1972, the press and public be excluded from the meeting for the following item of business on the grounds that it involves the likely disclosure of exempt information as defined in Part 1 of Schedule 12 A of the Act as amended by the Local Government (Access to Information) (Variation) Order 2006 by virtue of the Paragraph indicated.

AUD/59

Internal Audit Progress Report 2016/17

Minutes:

Discussion continued on Appendix 2 to the report with regard to the executive summary relating to the assurance review of cash receipting – car parking arrangements and the process of cash transportation.

 

Note – Following this discussion, Members voted to move back into Part I.

AUD/60

Re-admission of the Press and Public

Minutes:

RESOLVED – That the press and public be re-admitted to the meeting.

AUD/61

Internal Audit Progress Report 2016/17

Minutes:

Discussion continued on Appendix 2 to the report and the executive summaries of the remaining audit reports completed in the period:-

 

·        Review of Debtors

 

The review had resulted in an assessment of reasonable assurance.

 

·        ICT Review of the Data Assurance Arrangements

 

The review had resulted in an assessment of reasonable assurance.  A query was raised on the implications for data collection as a result of the Customer Connect Project and Members were advised that the recommendation regarding the need for an information asset inventory and data sharing register would address this.  The Assistant Director Resources (Section 151 Officer) informed Members that this work was integral to the Customer Connect Programme and would be carried out by September 2017.

 

·        ICT Review of Network Security and Cybercrime Arrangements

 

The review had resulted in an assessment of reasonable assurance.  Member were advised that a lot of work was carried out in relation to fraud awareness.  The Committee was, however, keen to ensure that there was confidence in the organisation’s systems and that interrogation was carried out on a more regular basis, with the correct audit trails in place to ensure cyber security.  Attention was drawn to the fact that Internal Audit used ICT auditors to carry out this area of work, however, the Internal Audit Manager acknowledged that specific elements could be delivered by highly specialist auditors.  The External Audit Manager indicated that, to ensure robustness, they also engaged with specialist auditors as regulations increased with regard to data security.  The Chief Executive undertook to raise the issue as an agenda item at the next meeting of the Customer Connect Programme Board.  The Financial Services Manager also clarified that the Council also received weekly briefings from the National Anti Fraud Network on current scams.

 

·        Assurance Review of the Main Accounting Systems Arrangements

 

The review had resulted in an assessment of reasonable assurance.

 

·        Appraisal Review of the Risk Management Arrangements

 

The review had resulted in an assessment of reasonable assurance.

 

·        Assurance Review of Taxi Licensing Arrangements

 

The review had resulted in an assessment of reasonable assurance.

 

·        Compliance Review of Local Government Transparency Code

 

The review had resulted in an assessment of reasonable assurance.

 

Appendix 3 to the report illustrated progress in relation to the implementation of previous internal audit recommendations.  With reference to the latest response on the Asset Management Audit, the Solicitor to the Council informed Members that discussions continued with the ongoing provider regarding the backlog issues relating to rent review cases.

 

RESOLVED – That the following be noted:-

 

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

 

(2)        the completed audit reports attached at Appendix 2 to the report; and

 

(3)        the status of outstanding recommendations contained in the follow-up report at Appendix 3 to the substantive report.

AUD/62

Internal Audit Annual Plan 2017-18 pdf icon PDF 180 KB

To consider the Internal Audit Annual Plan 2017-18.

Additional documents:

Minutes:

Members gave consideration to a proposed Internal Audit Annual Plan for 2017/18, presented by the Internal Audit Manager.

 

The Accounts and Audit Regulations required the Council to undertake an adequate and effective internal audit of its accounting records and of its system of internal control in accordance with proper practices in relation to internal control. Proper Practices were now defined within the Public Sector Internal Audit Standards (PSIAS) which became mandatory for all UK public sector internal auditors from 1 April 2013.  The PSIAS affirmed the need for annual risk based audit plans to be developed in order that the Head of Internal Audit could form an annual opinion on the Council’s systems of risk management, governance and internal control.

 

The draft Internal Audit Annual Plan attached at Appendix 1 to the report had been prepared following review of corporate documents including the Council’s Corporate Risk Register, corporate plans and recent internal audit coverage. There had also been consultation with the Council’s Senior Management Team, whose input had helped to determine those areas where it was considered that Internal Audit could add the greatest value.

 

The Committee’s attention was drawn to the fact that, following previous requests by the Committee for the inclusion of regulatory services within the Plan, both Development Control and Building Control would be audited during 2017/18.

 

Members stressed the importance of the risk of cybercrime and the need for the Committee to ensure that this was appropriately managed.  The Financial Services Manager explained that this was taken seriously and was being looked at as part of the Customer Connect Programme.

 

RESOLVED – That, subject to comments raised regarding the increasing importance of managing the risk of cybercrime being noted, the Internal Audit Annual Plan 2017/18, as attached at Appendix 1 to the report, be approved.

AUD/63

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) advised that all financial issues had been covered during the meeting.  However, in response to a query raised, she undertook to include an item on Business Rate Retention on the agenda for the Committee’s July 2017 meeting.

 

RESOLVED – That the verbal update be noted.