Agenda and minutes

To authorise the Chairman to sign, as a correct record, the minutes of the meeting of the Committee held on 10 November 2022.

RESOLVED – That the Chairman be authorised to sign, as a correct record, the minutes of the meeting of the Committee held on 10 November 2022.

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.

No declarations of interest were raised under this item.

To consider whether the items, if any, in Part II of the Agenda should be considered in the presence of the press and public.

There were no excluded items on the agenda.

Following agreement with Members and Officers in attendance, the Chairman of Audit Committee set out the agreed running order for the meeting, as below:-

·        Agenda Item No. 14 – Risk Management Update

·        Agenda Item No. 9 – Internal Audit Progress Report 2022/23 (February 2023)

·        Agenda Item No. 10 – Internal Auditor’s Annual Report 2022/203

·        Agenda Item No. 5 – Audit Committee 2022/23 Work Programme (March 2023)

·        Agenda Item No. 6 – Housing Benefit (Subsidy) Assurance Process Report

·        Agenda Item No. 7 – External Auditor’s Annual Report 2021/22

·        Agenda Item No. 8 – External Audit Progress Report and Sector Update

·        Agenda Item No. 21 – Urgent Item – Review of Local Government Reorganisation in Cumbria

·        Agenda Item No. 11 – Review of Effectiveness of Internal Audit

·        Agenda Item No. 12 – 2022/2023 Accounting Policies

·        Agenda Item No. 13 – Annual Review of Anti-Fraud Policy and Activity

·        Agenda Item No. 15 – Review of Local Code of Governance and Governance Update

·        Agenda Item No. 16 – Audit Committee Risk Register

·        Agenda Item No. 17 – Review of Effectiveness of the Audit Committee

·        Agenda Item No. 18 – Final Audit Committee Meeting

·        Agenda Item No. 19 – Chair of the Audit Committee’s  Annual Report 2022/23

·        Agenda Item No. 20 – Other Significant Financial Issues.

To consider the Strategic Risk Register.

The Case Management Officer (Support Services) presented the Council’s Strategic Risk Register which contained details of all those risks above and below the line of risk tolerance.  The most recent review of the Register during Quarter 3 2022/23 showed that six of the 19 risks (32%) were positioned above appetite.  Those risks above the line of tolerance included details relating to mitigations which were designed to reduce the risks in terms of likelihood or impact, or both.

Members noted that whilst were concerned over positioning of Risks 24, 25 and 26, set out in Appendix 1 to the report, it was felt that there was very little the Council could do to manage these risks in the remaining time for SLDC.

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

To consider a summary of the progress in delivery the Internal Audit Annual Plan in 2022/23.

Copies of Appendix No.3 to the report had been omitted from the agenda pack and were circulated to Members at the start of the meeting.  They would be published on the Council’s Website on the following day.

The Internal Audit Manager introduced the Internal Audit Progress Report 2022/23 as at February 2023.  Appendix 1 of the report provided a summary of the progress against the Internal Audit Annual Plan as at February 2023.  With the exception of the Data Integrity Review, which had been cancelled, all 2022/23 internal audit reports had been finalised.

The Internal Audit Manager presented executive summaries relating to the 11 audit reports which had been completed in the period, as set out in Appendix 2 to the report and as follows:-

Council Tax Rebate Payments had received an assessment of substantial assurance, no action points or recommendations were made, details of the assessment were provided.

Development Control had received an assessment of substantial assurance, no action points or recommendations were made, details of the assessment were provided.

Procurement had received an assessment of reasonable assurance, whilst no action points or recommendations were made, the Internal Audit Manager noted that one previous recommendation, which had been made in the previous review was outstanding.

Income Management – Car Parking had received an assessment of reasonable assurance.  Two action points had been identified, details of the assessment were provided.  In response to a query regarding a contract for cash collection, the Finance Lead Specialist (Section 151 Officer) informed Members that the current suppliers had been given the contract for the Westmorland and Furness Council.

Land Charges and Building Control had received an assessment of reasonable assurance.  One action point had been identified, details of the assessment were provided.

In response to a query regarding the transfer of land registry responsibility, the Finance Lead Specialist (Section 151 Officer) highlighted that the aspiration of the Government to transfer all responsibility to Land Registry. She added that there was a national programme that was being followed.

NNDR had received an assessment of substantial assurance, with no action points or recommendations being provided, details of the assessment were provided.

Disabled Facilities Grants (DFG) had received an assessment of reasonable assurance. Six action points had been identified, alongside six recommendations, details of the assessment were provided. Members expressed their concern at the results of the assessment of DFGs. The Finance Lead Specialist (Section 151 Officer) informed Members of a number of issues which had occurred in the team which had contributed to this result.

Cash Receipting had received an assessment of reasonable assurance with two action points having been identified, details of the assessment were provided.

ICT – Asset Management had received and assessment of reasonable assurance.  Three action points had been identified, details of the assessment were provided.

Main Accounting System had received an assessment of substantial assurance with no action points or recommendations having been identified, details of the assessment were provided.

Business Continuity had received an assessment of substantial assurance with  ...  view the full minutes text for item AUD/28

To consider the outcomes of the work of the Internal Audit for 2022/23.

The Internal Audit Manager, introduced the 2022/23 Internal Audit Annual Report.  The report provided a summary of the outcomes of the work of the Internal Audit and included the Head of Internal Audit’s opinion on the effectiveness of the Council’s arrangements for risk management, governance and internal control in accordance with requirements of the Public Sector Internal Audit Standards (PSIAS).

The report concluded that internal audit work had been carried out in accordance with the mandatory standards for internal audit.  The work of internal audit was considered to be sufficient to provide an opinion on the systems of governance, risk management and internal control.  There had been no threats to internal audit independence that would impact on the provision of an annual opinion statement.  The annual opinion had concluded reasonable assurance over the systems of governance, risk management and internal control.  The report referred to Local Government Reorganisation in Cumbria and the overall aim to unlock efficiencies from the rationalisation of council structures and assets and improving systems and processes.  It further referred to a number of critical challenges in relation to Local Government Reorganisation.

Members thanked the Internal Audit Manager for the quality and efficiency of reporting to the Committee.

RESOLVED – That the following be noted:-

(1)        the Head of Internal Audit’s opinion of reasonable assurance on the Council’s overall systems of governance, risk management and internal control for the year ended 31 March 2023, as set out in Appendix 1 to the report;

(2)        the progress achieved in 2022/23 in delivering the Audit Plan and the outcomes of completed audit reviews, as set out Appendix 1 to the report;

(3)        the Head of Internal Audit’s declaration of Internal Audit independence, as required by the mandatory PSIAS; and

(4)        the Head of Internal Audit’s declaration of conformance with the mandatory PSIAS.

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

The Finance Lead Specialist (Section 151 Officer) introduced the Audit Committee 2022/23 Work Programme.  She drew attention to the fact that, since publication of the Agenda, Members had been provided with copies of the External Auditor’s Annual Report, a copy of which had also been published on the Council’s website.  In addition, she pointed out that the Annual Review of the Anti-Fraud Policy and Activity, marked “to follow” on the agenda, had also been circulated to Members and published on the Website.  She further referred to an urgent item on the agenda with regard to a review of Local Government Reorganisation in Cumbria, which the Chairman had agreed to accept for consideration at the meeting, copies of which had also been circulated and published.

Members were informed that the Work Programme for the year had been completed as planned with the exception of the review of the constitution and the review of whistleblowing.

RESOLVED – That the progress made against the Committee’s 2022/23 Work Programme be noted.

To consider the Housing Benefit (Subsidy) Assurance Process Report.

Gareth Kelly, External Audit, presented a letter from Grant Thornton, advising that, for the form MPF720A dated, 22 April 2022, for the year ended 31 March 2022, External Audit had completed the specific test requirements detailed in the DWP reporting framework HBAP and had identified the results set out in Appendices A, B, C and D to the report, which provided a report on housing benefit certification work carried out for South Lakeland District Council for year ended 31 March 2022.

RESOLVED – That the letter from External Audit on Housing Benefit (Subsidy) Assurance Year ended 31 March 2022 be received.

To consider a verbal update on the External Auditors Annual Report for South Lakeland District Council for the financial year ended 31 March 2022.

Whilst the agenda referred to a verbal report, copies of a written report which had been prepared following the despatch of the agenda pack had been circulated to Members and published on the Councils Website prior to the meeting.

The External Auditor’s Annual Report 2021/22, which summarised the key findings arising from work carried out by External Audit at the Council for the year ended 31 March 2022, was presented by Gareth Kelly, External Audit.

The key messages were that External Audit had provided an unqualified opinion on the Council’s financial statements on 25 November 2022. External Audit concluded that there had been no significant weaknesses in arrangements identified for financial sustainability, governance and improving economy, efficiency and effectiveness in its use of resources during the year ended 31 March 2022. External Audit had certified that it 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 25 November 2022.

Members thanked Officers for the hard work leading to a positive Annual Report and noted that they were pleased with the unqualified opinion issued by External Audit.

RESOLVED – That the contents of the External Auditor’s Annual Report 2021/22 be noted.

To consider the Audit Committee Progress Report.

Hebe Dyson, External Audit, 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 February 2023.  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 as of February 2023 be noted.

To consider the External Auditor’s Review of Local Government Reorganisation in Cumbria.

Note – This matter was being included as an urgent item of business under Section 100B(4)(b) of the Local Government Act 1972, as the Chairman of the Audit Committee was of the opinion that it required consideration without delay.  A decision was required prior to the report being presented to the meeting of Council on 29 March 2023 in compliance with the expectation that the External Audit Opinion on the Council’s accounts would be reported to a meeting of Full Council.

Copies of the report had been circulated to Members and published on the Council’s Website prior to the meeting.

Grant Thornton was the external auditor of all seven local authorities in Cumbria, the Police and Crime Commissioner for Cumbria and the Chief Constable of Cumbria.  The company had undertaken an over-arching review of Local Government Reorganisation (LGR) as part of their 2021/22 Value for Money work in relation to the seven local authorities.  The report summarised the findings in relation to the activity of the seven local authorities in the context of the Value for Money work.  All seven councils were demising bodies and, given the timing of reporting, Grant Thornton had taken into account LGR transition and implementation during 2022/23.  The key findings were set out based on this over-arching review.

The report concluded that the move from seven to two councils provided an opportunity to realise financial benefits and improve service delivery and the financial sustainability of local government in Cumbria.  The overall aim was to unlock efficiencies from the rationalisation of council structures and assets and improving systems and processes.  The report summarised a number of critical challenges and opportunities and, in particular, the following key priorities:-

·        Financial Sustainability;

·        Governance; and

·        Improving Economy, Efficiency and Effectiveness.

Members requested clarity on the projected £19 million budget gap for Westmorland and Furness Council. The External Audit Manager informed Members that this was a challenging environment and that it was crucial for the incoming authority to put a plan in place to resolve the issue. The Finance Lead Specialist (Section 151 Officer) added that discussions with the Department for Levelling Up, Housing and Communities (DLUHC) had taken place to discuss solutions which included borrowing to capitalise on the budget gap. She noted that any borrowing would be similar to an overdraft facility and would only be used where required.

RESOLVED – To note External Audit’s Review of Local Government Reorganisation in Cumbria.

To provide the Audit Committee with assurance on the effectiveness of the Council's Internal Audit function.

The Finance Lead Specialist (Section 151 Officer) presented a report which provided the Committee with assurance to enable it to endorse the view that the Council has an effective system of Internal Audit.

The Council’s internal audit service was provided by TIAA Ltd under a contract which had commenced on 1 April 2016 and had since been extended.

The Accounts and Audit Regulations 2015 included a requirement for the Council to conduct a review of the effectiveness of its system of internal control at least once a year.  The internal audit function was a key element of that internal control. For the purposes of the review, the report set out various areas of assurance that had been relied upon when reviewing whether the system of internal audit was effective to allow the Committee to conclude the review.

A checklist based on the CIPFA Statement on the Role of the Head of Internal Audit 2010 was attached at Appendix 1 to the report, together with self-assessment of compliance; all responses regarding conformance were positive.

RESOLVED – That the conclusion that the Council has an effective system of internal audit in place that complies with the principles of the Public Sector Internal Audit Standards be endorsed.

To consider the proposed accounting policies to be adopted for the 2022/23 financial year.

The Finance Lead Specialist (Section 151 Officer) presented a report outlining proposed accounting policies to be adopted for the 2022/23 financial year and to be used in the preparation of the Statement of Accounts for the financial year ending 31 March 2023.  These had been prepared in line with the Chartered Institute of Public Finance and Accounting’s (CIPFA) Code of Practice on Local Authority Accounting in the UK 2022/23 (the Code).  Adopting the proposed policies would support timely production of a high quality set of annual accounts.

As part of its statement of accounts, the Council needed to disclose the accounting policies it had applied to all material balances and transactions.  There was little discretion to the Council, as the proper accounting practices that all local authorities followed were set down in the Code.

The 2022/23 CIPFA Code of practice and guidance notes had now been published.  There were no major changes required for accounting polices compared to 2021/22.  The accounting treatment for infrastructure assets had been clarified by CIPFA in a temporary solution for 2022/23 accounts.

The introduction of IFRS (International Financial Reporting Standards) 16 Leases had been delayed once again until the financial year 2024/25.  Details of the changes required to the accounts had been reported as part of the review of the accounting policies for the 2022/23 Accounts.

RESOLVED – That the accounting policies, as set out at Appendix 1 to the report, be approved for the 2022/23 financial year and to be used in the preparation of the Statement of Accounts for the financial year ending 31 March 2023.

To consider the results of the Audit Committee’s annual review of the Council’s Anti-Bribery, Fraud and Corruption Policy and statistical data on cases where sources of information indicated that fraudulent activity might be occurring. (report to follow)

Copies of the report, which had been marked “to follow” on the agenda, had been circulated to Members and published on the Council’s Website prior to the meeting.

The Finance Lead Specialist (Section 151 Officer) presented a report outlining the results of the Audit Committee’s annual review of the Council’s Anti-Bribery, Fraud and Corruption Policy.  The report also provided statistical data on cases where sources of information indicated that fraudulent activity might be occurring.  The Policy formed part of the Council’s Policy Framework.  The last review of the Anti-Bribery, Fraud and Corruption Policy had been by the Audit Committee in December 2021.  No amendments were proposed.

RESOLVED – That the following be noted:-

(1)        the review of the Anti-Bribery, Fraud and Corruption Policy (Appendix 1 to the report), Counter Fraud Strategy 2021-2024 (Appendix 2 to the report), Anti-Money Laundering Policy (Appendix 3 to the report) and Anti-Tax Evasion Policy Procedures and Reporting Arrangements (Appendix 4 to the report);

(2)        the review against the CIPFA Code of Practice on Managing the Risk of Fraud and Corruption Counter-Fraud Assessment Tool (Appendix 5 to the report) and Fighting Fraud and Corruption Locally 2020 Checklist (Appendix 6 to the report); and

(3)        the anti-fraud activity (Appendix 7 to the report).

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

The Finance Lead Specialist (Section 151 Officer) presented a report to show the results of the review of the Council’s Local Code of Governance and to enable consideration of the Annual Governance Statement (AGS) for 2022/23.

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’s (CIPFA’s) governance framework for local authorities constituted proper practice and was to be applied for financial years from 1 April 2016 onwards.

For 2022/23 the statement of accounts was required to be prepared by the deadline of 31st May 2023 and reviewed by the Audit Committee (or equivalent) of the new Westmorland and Furness Council. For continuity it was good practice for the Annual Governance Statement to be approved in draft by the outgoing Audit Committee. Accordingly a delegation was sought in recommendation 2.1 in the report for the Section 151 Officer to make appropriate amendments during the preparation of the 2022/23 Statement of Accounts.

RESOLVED – That

(1)        the review of the Local Code of Governance and associated documents, as attached as appendices to the report, be noted;

(2)        Council be recommended to approve the amendments to the Local Code of Governance as at Appendix 1 and detailed in paragraph 3.4 of the report; and

(3)        the draft Annual Governance Statement for 2022/23, at Appendix 3 to the report, be approved, and the Finance Lead Specialist (Section 151 Officer) be delegated authority to make appropriate amendments during the preparation of the 2022/23 Statement of Accounts.

To consider the updated Audit Committee Risk Register.

The updated Audit Committee Risk Register was presented by the Finance Lead Specialist (Section 151 Officer).  The Risk Register had last been reviewed by the Committee on 22 July 2022 and the recommendations from that meeting had been included within the update, details of which were included within the report.  No further changes were being proposed by the Finance Lead Specialist (Section 151 Officer) to the Committee’s four current risks or to the archived risks.

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

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

The Finance Lead Specialist (Section 151 Officer) 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 was that, with the exception of the inclusion of an independent member, the Committee could demonstrate that it had been established in accordance with best practice and that it had operated effectively during the last year, whilst operating without an independent member.  The Committee needed to be alert to any changes in its membership and the expertise of its Members so that suitable training could be arranged.

CIPFA’s Practical Guidance also included possible wider functions for audit committees and a questionnaire at Appendix 2 to the report included a question of whether these possible wider functions, listed below, had been considered by the Committee.

•           considering governance, risk or control matters at the request of other committees or statutory officers;

•           working with local standards committees to support ethical values and reviewing the arrangements to support those values; and

•           reviewing and monitoring treasury management arrangements in accordance with the CIPFA Treasury Management Code of Practice.

The Audit Committee did support some work of the Standards Committee to support ethical values, particularly around reviewing whistleblowing arrangements.  For South Lakeland District Council, the treasury management scrutiny function was carried out by the Overview and Scrutiny Committee.  The Terms of Reference did not refer to requests for consideration of matters from other committees or statutory officers: any such proposals would be considered on a case-by-case basis, bearing in mind the need to maintain the independence of the Audit Committee.

RESOLVED – That the review, and its conclusion that the Audit Committee is operating effectively in all material aspects, be approved.

To delegate authority for the sign-off of the final set of minutes to the Monitoring Officer in consultation with the Chair.

RESOLVED – That authority for the sign-off of the final set of Committee minutes be delegated to the Monitoring Officer, in consultation with the Chairman of the Committee.

To consider the Chair of the Audit Committee’s draft Annual Report which summarises the activities of the Committee during 2022/23.

The Committee considered the Chair’s Audit Committee Annual Report 2022/23.  The report summarised the activities of the Committee during the current Council Year and, subject to approval, would be submitted to Council on 29 March 2023.  The report demonstrated that the Committee was functioning in accordance with best practice and providing independent assurance of the Council’s governance arrangements.

Members thanked the Finance Lead Specialist (Section 151 Officer) and the wider finance team for their hard work over the years and reiterated their earlier comments on the positive reports from both Internal and External Audit.

RESOLVED – That

(1)             The draft Annual Report 2022/23 be noted; and

(2)             The Chairman be authorised to submit the Annual Report, with any agreed amendments, to Council on 29 March 2023.

To consider a verbal update from the Finance Lead Specialist (Section 151 Officer).

The Finance Lead Specialist (Section 151 Officer) informed the Committee that the budget for Westmorland and Furness Council had been approved by the Shadow Authority Cabinet and would be considered by the Shadow Authority meeting in the coming weeks. She noted that a significant challenge for the new Council would be procuring a new finance system which would bring all 4 sovereign councils into one system.

RESOLVED – That the verbal update be noted.