Agenda and minutes

Audit Committee - Wednesday, 6 December 2017 6.30 p.m.

Venue: Georgian Room, Kendal Town Hall. View directions

Contact: Inge Booth 

Items
No. Item

AUD/33

Minutes pdf icon PDF 221 KB

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

Minutes:

During consideration of the minutes of the meeting of the Committee held on 20 September 2017, it was raised that John Farrar and Daniel Watson, External Audit, had indicated at Minute No. AUD/14 (Declarations of Interest) that they would be leaving the room during consideration of the Update on Appointment of External Auditors (Minutes Nos.AUD/28, AUD/30 and AUD/32 refer).

 

RESOLVED – That, subject to the inclusion at AUD/14 of the details outlined above, the Chairman be authorised to sign, as a correct record, the minutes of the meeting of the Committee held on 20 September 2017.

AUD/34

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/35

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/36

Audit Committee 2017/18 Work Programme pdf icon PDF 103 KB

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

Minutes:

The Financial Services Manager presented a report setting out the progress made against the 2017/18 Work Programme.  She drew attention to an additional item on the agenda regarding preparing for the introduction of the General Data Protection Regulation and the Data Protection Bill around which queries had been raised at the last meeting of the Committee.

 

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

AUD/37

Preparing for the Introduction of the General Data Protection Regulation (GDPR) and the Data Protection Bill pdf icon PDF 196 KB

To consider the requirements of the General Data Protection Regulation and the proposed approach for its implementation within the Council.

Additional documents:

Minutes:

The Principal Performance and Intelligence Officer presented a report which set out the preparation and proposed Action Plan for the introduction of the General Data Protection Regulation (GDPR) and the Data Protection Bill.

 

The overarching aim of the GDPR was to harmonise data protection law across Europe and bring it up to date with technological advancements. Implementing the GDPR would require a corporate, cross-organisational approach. A project initiation document (Appendix 1 to the report) set out the scope, objectives, outcomes and deliverables of the project to implement GDPR, and a General Data Protection Regulation Project Board had been established to ensure senior leadership, drive and accountability.

 

During discussion, the Principal Performance and Intelligence Officer confirmed that both staff and Members were to be provided with training on the relevant requirements early in the New Year.  In addition, reference was made to the principle of the right to be forgotten and the importance of ensuring that appropriate policy was put in place as soon as possible was raised.

 

The Vice-Chairman welcomed the report and, on behalf of the Committee, asked for thanks to be passed on to the officers involved in the work being carried out.

 

RESOLVED – That the following be noted:-

 

(1)        the requirements of the General Data Protection Regulation and the principles underpinning the regulations, in particular the need to adopt a ‘Privacy by Design’ approach; and

 

(2)        the approach set out in the report for General Data Protection Regulation implementation.

AUD/38

Risk Management Update pdf icon PDF 100 KB

To consider the Strategic Risk Register.

Additional documents:

Minutes:

The Performance and Risk Officer presented the Strategic Risk Register (Quarter 2) 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 and that review had informed this report.

 

The Performance and Risk Officer drew attention to the fact that, out of 14 risks in total, six were currently above the line of risk management and were being regularly monitored.  He also pointed out that Risk 17 (Cyber Security Incident) had been included further to a previous request made by the Committee.

 

In response to queries raised in relation to that status of Risks 12 (Health and Safety management of contracts – records for on site checks) and 16 (Waste Collection – Reversing Manoeuvres), the Chief Executive informed Members that Senior Management Team reviewed these risks on a regular basis.  These risks would remain on the Register until they could be categorically regarded as safe.

 

The Chief Executive also explained that there were risks included on the Register which had not yet taken place.  This assisted in maintaining a focus and awareness of the potential risk.  It was suggested that, in addition, consideration might be given to logging where a risk had occurred in order to assist in the assessment of tolerance.

 

In response to a concern raised with regard ambiguity in the risk matrix key, the Chief Executive and Performance and Risk Officer undertook to look at the wording relating to risks positioned in the blue zone.

 

Attention was drawn to Risk 8 and confirmation was sought regarding whether the two mitigations with a due date of 31 May 2017 had been complete.  The Vice-Chairman asked for a response in writing.

 

Concern was expressed with regard to Risk 17 and the fact that the likelihood of a cyber security incident as being very low.  The Vice-Chairman suggested, therefore, that an explanation for the low likelihood be brought to the next meeting, including information on the software in place to prevent cyber attacks and on the processes for escalation and alerting other authorities and agencies.

 

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

AUD/39

The Annual External Audit Letter for South Lakeland District Council pdf icon PDF 470 KB

To consider the Annual Audit Letter for South Lakeland District Council for the financial year ended 31 March 2017.

Minutes:

The External Audit 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 2017, was presented by the External Audit Manager.

 

The key messages were that External Audit had provided an unqualified opinion on the Council’s financial statements on 21 September 2017.  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 2017.  External Audit had certified that they had completed the audit of the accounts of South Lakeland District Council in accordance with the requirements of the National Audit Office’s Code of Audit Practice on 21 September 2017.

 

In closing, the External Audit Manager was pleased to confirm that the work on the Council’s Housing Benefit subsidy claim on behalf of the Department for Work and Pensions had been completed in the previous week and that the Council’s subsidy claim was unqualified for the first time in a number of years.  This was a great achievement and South Lakeland District Council was in a minority in this respect.

 

On behalf of the Committee, the Vice-Chairman expressed thanks to the staff involved for this exceptional outcome, pointing out that the bar had been set for future years.

 

RESOLVED – That the contents of the Annual External Audit Letter for the year ended 31 March 2017 be noted.

AUD/40

External Auditor's Progress Report and Update pdf icon PDF 2 MB

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

Minutes:

The External Auditor presented a report providing the Committee with a summary of the progress made by Grant Thornton in delivering their responsibilities as the Council’s External Auditors as of November 2017.  The report also included details of emerging national issues and developments that might be relevant to the Council.

 

The External Auditor drew particular attention to the Housing Benefit audit in 2018/19 and the Financial Services Manager confirmed that Grant Thornton had recently been selected through the Council’s procurement process to carry out the Housing Benefits audit.

 

The External Auditor referred to a recent National Audit Office publication providing guidance on cyber security which he undertook to have forwarded to all Members of the Council.

 

In presenting the report, the External Auditor announced that this would be Daniel Watson’s last appearance at Audit Committee as South Lakeland District Council’s External Audit Manager.  The Vice-Chairman thanked Mr Watson for his contribution and offered him best wishes for the future.

 

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

AUD/41

Internal Audit Progress Report 2017-18 pdf icon PDF 99 KB

To consider the Internal Audit Progress Report 2017/18 and the outcomes of completed audit reviews.

Additional documents:

Minutes:

The Internal Audit Manager introduced the Internal Audit Progress Report 2017/18. The report provided a summary of the progress against the Internal Audit Annual Plan to date.

 

Following the Internal Audit Plan’s approval by the Committee in April 2017, seven reviews had been finalised, with fieldwork having commenced on the review of the awarding of grants.

 

The report also contained the executive summaries of the four audit reports completed in the period: Insurance; Building Control; Payroll; and ICT Disaster Recovery. These reports were also presented by the Internal Audit Manager.

 

The Review of Insurance had resulted in a reasonable assurance assessment. Two action points had been identified, one categorised as ‘important’ and the other as ‘routine’.  Discussion took place with regard to the Priority 2 Recommendation around the requirement for contract documentation to be completed prior to the commencement of works and the Chief Executive drew attention to the fact that there were exceptional occasions where the risk of not carrying out the work outweighed that of not completing the documentation first.  These were rare occasions and the exception.  The Financial Services Manager explained that, in such cases, the contractor would already have confirmed within the tender documentation that they had adequate insurance cover.  The Chief Executive informed Members that any future decisions to commence with works prior to completion of all documentation would be taken in consultation with the Finance and Legal Teams.  The Internal Audit Manager confirmed to the Committee that Management recognised the need to move forward and address the recommendation.  The Chief Executive also highlighted the use of language “on-going, high impact risk”, yet the action point did not portray such urgency and requested that this be reviewed and the correct narrative/action point be inserted.

 

The Review of Building Control had resulted in a substantial assurance assessment. No action points had been identified.

 

The Review of Payroll had resulted in a substantial assurance assessment. Two action points had been identified, one categorised as ‘important’ and the other as ‘routine’.

 

The Review of ICT Disaster Recovery had resulted in a reasonable assurance assessment. Three ‘important’ action points and one ‘routine’ action point had been put forward following the review.  The Chief Executive reported that this area was currently being addressed.  Members, however, expressed concern and proposed that the Shared ICT Manager be asked to attend the next meeting of the Audit Committee in order to provide assurance that the necessary improvements were being made.  In addition, they asked that the matter be brought to the attention of both the Leader and Housing and Innovation Portfolio Holder.

 

Internal Audit had also assessed the extent to which previous internal audit recommendations had been implemented. The report showed that 19 recommendations were yet to be implemented but on target and that implementation was in progress for one where the original target date had not been met. Four of the recommendations had been implemented and were now considered closed.

 

The Vice-Chairman expressed the Committee’s thanks to those staff involved in providing  ...  view the full minutes text for item AUD/41

AUD/42

Accounting Policies 2017/18 pdf icon PDF 157 KB

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

Additional documents:

Minutes:

The Financial Services Manager presented a report outlining proposed accounting policies to be used for the closure of the 2017/18 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 2017/18.  She reported that, apart from changes to the dates, the policies had not changed from those for 2016/17 and did not depart from the provisions of the 2017/18 Code.

 

RESOLVED – That the accounting policies, as set out at Appendix 1 to the report, be adopted for closure of the 2017/18 Accounts.

AUD/43

Audit Committee Contribution to Review of Constitution pdf icon PDF 51 KB

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

Minutes:

The Audit Committee’s Contribution to the Review of the Constitution was presented by the Financial Services Manager.

 

The current review had identified some very minor changes to clarify that the Solicitor to the Council should be consulted before insurance claims are settled, that procurement exercises relating to insurance claims be carried out in accordance with the requirements of the insurer and that the Monitoring Officer should have delegation to approve virement of budgets relating to elections. In addition, the Audit Committee’s role in monitoring the expenditure of funds transferred from the South Lakeland District Council Royal Wedding Fund was no longer required and therefore it had been proposed that this be removed from the Committee’s list of functions.

 

The proposed minor changes would be included in the Monitoring Officer’s annual review of the Constitution due to be reported to Council in March 2018.

 

RESOLVED – That the proposals for changes to the Constitution be noted.

AUD/44

Audit Committee Risk Register pdf icon PDF 170 KB

To review the updated Audit Committee Risk Register.

Minutes:

The updated Audit Committee Risk Register was presented by the Financial Services Manager. The Risk Register had last been reviewed by the Committee on 26 July 2017 and the recommendations from that meeting had been included within the update.

 

The Financial Services Manager made particular reference to Risk AC 4 (External Auditor Appointment).  The Council having joined the sector-led national procurement exercise, it was expected that the external auditors would be appointed in December 2017.  It was, therefore, proposed that the likelihood be downgraded to very low and that officers be authorised to archive the risk once the appointment process was completed.

 

RESOLVED – That

 

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

 

(2)        the Assistant Director Resources (Section 151 Officer) be delegated authority to archive Risk AC 4 following completion of the process for the appointment of an External Auditor.

AUD/45

Review of the Local Code of Governance pdf icon PDF 162 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 Financial Services Manager.

 

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 main changes arising from the review had been to tidy up the local code provisions that refer to partnership working and to make these more principles-based with reference to a Partnership Guidance document. As part of the annual review, officers would also update the partnerships register to evidence that the principles of the local code were being followed and that partnership guidance was being considered.

 

The Vice-Chairman referred to a recent guidance issued by Grant Thornton on partnerships and asked John Farrar of External Audit to provide a copy for distribution to Members of the Audit Committee.

 

RESOLVED – That

 

(1)        the proposed revisions to the Local Code of Governance, as at Appendix 1 to the report, be noted;

 

(2)        full Council be recommended to approve the amended Code, as at Appendix 2 to the report; and

 

(3)        the Annual Governance Statement Action Plan, as at Appendix 3 to the report, be noted.

AUD/46

Review of Effectiveness of the Audit Committee pdf icon PDF 157 KB

To consider the results of the annual review of the Audit 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.

 

RESOLVED – That

 

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

 

(2)        the skills framework for members of the Audit Committee, as at Appendix 2 to the report, be noted.

AUD/47

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 Financial Services Manager had no further significant financial issues to report, however, in response to a query, explained the Council’s processes around potential misclassification of second homes for Council Tax.