Agenda and minutes

Councillors Raymond Graham and Richard Lewis declared Non-Pecuniary Interests in Agenda Item 6– Deloitte – 2012/13 Annual Audit Plan as they were both Members of the Pensions Committee. They both remained in the room and took part in discussions on the item.

Councillors Raymond Graham and Richard Lewis declared Non-Pecuniary Interests in Agenda Item 14 – Corporate Services & Partnerships Policy Overview Committee review into the Effectiveness of the Audit Committee and its Terms of Reference as both Members were Members of the Corporate Services & Partnerships Policy Overview Committee. They both remained in the room and took part in discussions on the item.

Councillor George Cooper declared a Non-Pecuniary Interest in Agenda Item 7 - Internal Audit Progress Report and Agenda Item 9 - Internal Audit Operational Plan, as his wife was a Governor at Charville Primary School. He remained in the room and took part in discussions on the items.

Agreed as an accurate record.

To confirm that all items marked Part I will be considered in public and that any items marked Part II will be considered in private.

It was agreed that Agenda Items 15 – Risk Management and Agenda Item 16 – Internal Audit Report which were in Part II of the Agenda be considered in private. The rest of the Agenda was considered in public.

Heather Bygrave from Deloitte attended the meeting and provided Members with a summary of the key findings on the grant work undertaken.

The Committee was informed that Deloitte was responsible for certifying 6 claims and returns, all of which were certified by the required deadline and their key findings from this work were that as a result of errors identified during the audit, adjustments were made to 3 of the 6 grant claims prior to certification. Qualifications letters were issued in respect of 2 grant claims.

The reasons for the qualifications were relating to Housing and Council Tax benefit scheme, where errors had been identified in 10 out of the 80 cases tested. Also a qualification letter was issued in respect of three points relating to the Single Programme and asking the Authority to revisit the capital and revenue split in relation to the costs of Home Energy Advisors.

The Committee noted that such qualifications were not unusual, and could be because of very minor errors.  The total fees for the grant certification work had reduced to £115,399 which had been due to the considerable testing undertaken by the Internal Audit Team which had helped contain the overall cost.

RESOLVED:

1. That the contents of the report be noted.

Heather Bygrave from Deloitte attended the meeting and introduced the report to Members.

Members were informed that the key changes from last year were:

• Changes to the Housing Revenue Account which was considered an audit risk
• The HRA settlement payment no longer being considered a significant audit risk on the basis that this was a one-off transaction in 2011/12

The Committee was informed that for the 2012/13 financial statements, Deloitte had estimated materiality of £7.5million, which was based on the prior year outturn.

The significant audit risks were identified and the main areas on which specific audit work would focus would be

·        Contributions

·        Benefits

·        Financial Instruments

·        Management of Key Controls

Reference was made to the number of identified control deficiencies at the Council in monitoring housing repair and construction contracts. If controls were not designed and implemented correctly the Council would not be achieving value for money for procurement of construction contracts.

The Committee noted that the indicative fee for the audit for 2012/13, excluding the audit of the pension’s scheme and certification of claims and returns was £207,090, which was a reduction of £138,000 from last year. Reference was made to the fees payable in relation to the monitoring of a building contract for the expansion of six primary schools. This was £242,231, with £177,808 retained by Drivers Jonas Deloitte, with £64,423 being paid to a sub-contractor.

Audit Plan for the Pension Fund

Members were informed that the approach was the same as for the last two years.

Reference was made to the number of complexities surrounding the calculation of both benefits in retirement and ill-health and death benefits remained a key area of audit risk.

Deloitte reported that in relation to Financial Instruments, during 2012/13, the scheme had transferred investments between Investment Managers using Nomura as transition managers. The assets were transferred to the equity portfolio from Marathon to both Kempen Global and Newton Global via a holding period at State Street Global Advisors.

Members were informed that the plan would be considered by the Pensions Committee on 27 March 2013.     

RESOLVED -    

1.    That the information contained in the report be noted.

The Chairman welcomed the new Interim Head of Internal Audit, Simon Bailey to his first meeting of the Audit Committee.

The Director of Finance updated Members on the structural changes which had taken place in the Council, and the implications this had in relation to this Committee. The Committee was assured that the effectiveness of the Internal Audit Team would not be affected by the changes.  

Reference was made to the proposals to transfer the Fraud Team to the Residents Services Directorate, but Members were informed that Corporate Fraud Reports would still be submitted to this Committee every six months.

The Interim Head of Internal Audit provided Members with a summary of Internal Audit activity in the period from 24 November 2012 to 8 February 2013.

During the period of the fourteen audits completed, two had received Full Assurance, ten audits had received Satisfactory Assurance and two had received Limited Assurance.

The following issues were raised by Members:

·        The implementation rate for follow up reviews was 75% which was an improvement on last quarter’s rate of 64%.

·        Housing Services Major Works and Housing Gas and other Services Contracts – the Director of Finance reported that this service was undertaking a major BID review so it was not appropriate to carry out a full audit at the moment. These audits would be covered in 2013-14 as part of the planned Property Maintenance audit.

·        Schools Buildings Programme – Permanent - The  Committee expressed some concern at the lack of a Corporate Construction Procedures Handbook which had been identified as a high risk area. The Director of Finance reported that the number of high risks was being addressed.

·        Licensing Service – Reference was made to the two high risk areas identified and in particular the required action plan to clear the backlog. Members asked that an update be provided at the next meeting on what level of management had been made aware of this backlog.

·        Northgate IT Disaster Recovery Arrangements – Reference was made to the two data centres and subsequent to the meeting the Director of Finance reported that these were located within the UK, at London Docklands and in Woking.

·        Self Directed Support – The Committee was informed that clients were not yet managing their own Personal Budgets so there was no increased risk to vulnerable people.

·        Commissioning Third Sector Providers – Concern was expressed at the high risk which had been identified in relation to three unsigned contracts. Members were assured that Corporate Procurement was now tightening up procedures to ensure this did not happen in the future.

·        Caravan Site (Colne Park) – Concern was expressed at the identified high risk recommendation regarding the collection of annual gas certificates from residents at the site. The Committee asked that Members be emailed progress on the implementation of this control improvement, together with the management response.

·        Golf Courses Follow Up Review – The Committee noted the progress made in implementing the recommendations but officers were asked to provide  ...  view the full minutes text for item 41.

Members were informed that the report set out the strategy for delivery and development of the Internal Audit Service 2013-14 and the associated Annual Internal Audit Operational Plan.This detailed how the service would be delivered, the assurance that it would provide and how the Head of Internal Audit would contribute to corporate governance arrangements, risk management processes and key internal control systems.

This report also took into account that from April 2013 the current CIPFA Code of Practice was being replaced by new UK standards for internal audit in the public sector. CIPFA was publishing an Application Note for the Local Government sector in April. There would then be a review of how the new standards and Application Note would affect the internal audit framework for 2013/14 and later years, and the results of the review would be reported to the next meeting of this Committee.

RESOLVED –

1.   That approval be given to the Internal Audit Strategy for 2013-14 and it be noted that a review of the Terms of Reference would be reported to the next meeting of this Committee.

Members were informed that the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice for Internal Audit in Local Government required the Head of Internal Audit to produce a risk based plan, which was fixed for no longer than a year and was designed to implement the Audit Strategy.

RESOLVED –

1. That approval be given to the Internal Audit   Operational Plan.

The report provided Members with an update on the process to be adopted and the approach to be taken in compiling the Annual Governance Statement.

RESOLVED –

1. That the sources of management information and assurance used to produce the AGS be noted.  

The Committee had considered the draft Annual Treasury Management Strategy Statement and Investment Strategy for 2013/14 to 2015/16 at the meeting on 6 December 2012. 

The Committee reviewed the changes from the draft to the final version of the Statement.

RESOLVED –

1. That the contents of the report be noted.

The report was noted.

Noted.

Corporate Services & Partnerships Policy Overview Committee review into the Effectiveness of the Audit Committee and its Terms of Reference

The Committee is informed that the Leader of the Council is considering changes to the Audit Committee Terms of Reference in light of the Corporate Services & Partnerships Policy Overview Committee's review. The Leader is aware that the current Terms of Reference need to be updated and better aligned with the new Cabinet and Officer structures that came into force in late 2012.

The Audit Committee will be consulted on any proposals, with any changes likely to take effect at the Annual meeting of the Council to be held in May. It should be noted that any constitutional proposals, recommended to Council for approval, should come from the Leader in the first instance.

CORPORATE SERVICES & PARTNERSHIPS POLICY OVERVIEW COMMITTEE REVIEW INTO THE EFFECTIVENESS OF THE AUDIT COMMITTEE AND ITS TERMS OF REFERENCE

The Committee was provided with an update on the progress of the implementation of the recommendations of the review.

The report on this item was included in Part II as it contained information relating to the financial or business affairs of any particular person (including the Authority holding that information) and the public interest in withholding the information outweighed the public interest in disclosing it (exempt information under paragraph 3 of Part 1 of Schedule 12 A to the Local Government (Access to Information) Act 1985 as amended.

RESOLVED –

1. That approval be given to the risk management arrangements and the information contained in the report be noted.

The report on this item was included in Part II as it contained information relating to the financial or business affairs of any particular person (including the Authority holding that information) and the public interest in withholding the information outweighed the public interest in disclosing it (exempt information under paragraph 3 of Part 1 of Schedule 12 A to the Local Government (Access to Information) Act 1985 as amended.

RESOLVED –

1.      That the information contained in the report be noted.