Audit Committee – 30 September 2008
Chair: Councillor Whiteley
Venue: Pittwood House, Scunthorpe
Time: 10.00 am
1. Substitutions (if any)
2. Declarations of Personal or Personal and Prejudicial Interests (if any)
3. To take the minutes of the meeting held on 30 June 2008 as a correct record and authorise the chair to sign
4. Comprehensive Area Assessment and Use of Resources Revised Criteria 2009 – Joint Report of the Chief Executive and Service Director Finance
5. Internal Audit/Risk Management Progress Report
6. External Audit Recommendations – Progress Report
7. Anti Fraud Work
8. Corporate Governance Audit
9. Audit of Accounts 2007/08 – Matters Arising from the Audit
10. Member Training Update – Finance, Value for Money rearranged dates – 23 October 2008 (9.30 – 12.30) and 31 October 2008 (13.30 – 16.30)
11. Any other items which the chair decides are urgent by reasons of special circumstances which must be specified.
Note: Reports are by the Service Director Finance unless otherwise stated.
PRESENT: Councillor Whiteley in the chair
Councillors Wilson (vice-chair), J Briggs, Cawsey and Wells
Also in attendance were representatives of the Audit Commission (the council’s external auditors).
The committee met at Pittwood House, Scunthorpe.
83 DECLARATIONS OF PERSONAL OR PERSONAL AND PREJUDICIAL INTERESTS – Councillor Briggs wished to declare a personal interest as a member of the Humberside Fire Authority and North Lincolnshire Homes Board.
84 MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 30 September 2008, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chair.
85 (57) COMPREHENSIVE AREA ASSESSMENT AND USE OF RESOURCES REVISED CRITERIA 2009 – The Chief Executive and Service Director Finance submitted a joint report which reminded the committee that as from 1 April 2009 the Comprehensive Performance Assessment (CPA) had been replaced by the Comprehensive Area Assessment (CAA). The report gave an overview of the CAA proposals and set out changes to the Use of Resources criteria for 2009 and action necessary to meet the requirements.
The Chief Executive and Service Director in their report explained that the Audit Commission had recently published revised proposals for the new CAA assessment which would apply to the 2008/09 financial year. The CAA had two main parts, an area assessment and organisational assessments for the council, Primary Care Trust, Police and Fire Services. The latter was composed of two parts, Use of Resources and a Managing Performance theme.
The report summarised the themes of the parts of the area assessment and organisational assessment and identified Key Lines of Enquiry (KLOE) in an appendix, which would be self-assessed by the council and evaluated by the Audit Commission.
The Chief Executive and Service Director in their report also stated that the Managing Performance element of the organisational assessment would be led and managed by the council’s Strategy and Performance team, however, a revised approach would be implemented for the Use of Resources. Currently, this was led by the Finance Service with supporting input from staff in other services.
The more wide-ranging nature of the CAA assessment meant that this was no longer appropriate, and there would be a professional lead outside of Finance for some of the KLOEs. These were identified in the report. The Finance Service would carry out overall co-ordination in order to ensure consistency. Although detailed guidance was still awaited and an assessment of new requirements and an action plan to follow, the report listed several areas where further Use of Resources assessment was likely to be carried out.
Resolved – (a) That the replacement of CPA by CAA and the revised approach to the Use of Resources assessment be noted, and (b) that a progress report be submitted to the next meeting.
86 (58) INTERNAL AUDIT/RISK MANAGEMENT PROGRESS REPORT – Further to minute 65, the Service Director Finance submitted a report updating the committee of key issues arising from Internal Audit and Risk Management work. Regular reporting of this work provided supporting evidence for the approval of the council’s Governance Statement and was recognised as good practice through the Comprehensive Performance Assessment (CPA) Use of Resources criteria.
The Service Director in his report addressed and commented upon the following –
- The audits of fundamental financial systems for 2007/08 had been completed;
- Progress on key issues raised in the Internal Audit Annual Report 2007/08;
- External Audit’s review of internal audit nearing completion with a final report to be presented to the committee at its meeting in January 2009;
- The outcome of external audit’s evaluation into the council’s Use of Resources self assessment for 2007/08 to be reported to the committee in January 2009;
- Notifications of new data matching categories had been actioned through an article in Direct magazine and incorporated on relevant application forms to comply with National Fraud Initiative (NFI) data matching protocols and ‘Fair Notice’ requirements;
- Audit recommendations retested and verified as implemented showing appropriate action being taken in respect of high-risk recommendations. An appendix to the report highlighted examples;
- Grant audits and certification had been carried out including the Local Area Agreement and notification was received that the Statement of Grant Usage met Government Office requirements;
- Workforce plan competencies for risk management had been defined and agreed, and
- Finance Service staffing resources had been strengthened through the appointment of a full-time insurance/risk management officer. The new post replaced an insurance officer post (20hours) and would provide resources for more analytical work to support the Strategic Risk Management Group (SRMG).
Resolved – (a) That the report be noted, and (b) that this committee acknowledges, welcomes and recognises the professional work being carried out by the council’s Internal Audit and Risk Management team.
87 (59) EXTERNAL AUDIT RECOMMENDATIONS – PROGRESS REPORT – The Service Director Finance referred to minute 66, and submitted a progress report on the implementation of external audit recommendations contained in the action plans of the Annual Audit and Inspection Letter, the Use of Resources report and the ISA 260 report to those charged with governance (matters arising from the audit of the council’s accounts). In addition, other recommendations resulting from specific one-off reports would be followed up and reported as appropriate. This report included two such reports ‘Tackling Drugs Misuse through Joint Working’ and ‘Consequences of flooding in summer 2007’.
The Service Director, under each of the above report headings, summarised progress of implementation of recommendations within their actions plans and commented upon work in progress in respect of other recommendations. Appendix A, B and C to the report provided the committee with the action plans of ISA 260 Report, Grants Report 2006/07 and ‘Tackling Drugs Misuse through Joint Working’ report.
The report made particular reference to the ‘Consequences of flooding in summer 2007’ report. It explained that in August 2008 the Audit Commission issued a letter on the outcome of their work. It provided follow up work to the Commission’s national study of the summer floods in 2007 ‘Staying Afloat -Financing Emergencies’, but focussed on the consequences of the flooding at North Lincolnshire Council. The purpose of the work was to gain assurance that the risks associated with flooding were adequately managed by the council, ascertain the total costs of the flood and examine the impact of the floods on services and performance. The Audit Commission’s four conclusions, two recommendations and management’s response were set out in the report.
Resolved -That the progress made as detailed in the report be noted.
88 (60) ANTI – FRAUD WORK – Further to minute 53, the Service Director Finance submitted a report which summarised further work undertaken to assess the risk of fraud across the council and evaluate the council’s current position in relation to the Chartered Institute of Public Finance and Accountancy (CIPFA) requirements for counter fraud.
The report explained that Her Majesty’s Treasury had published a document ‘Managing the Risk of Fraud – a Guide for Managers’ which included a six step assessment model, a useful checklist and examples of best practice that could be used as part of the process. The guide had been used as part of evaluation work and Appendix A to the report provided a summary of the risk assessment results for each of the steps. The results were generally positive and only a few areas for improvement were identified, all of which had already been planned as part of ongoing fraud development work by Internal Audit. The work also showed that for each potential area for fraud controls and mechanisms were in place for providing assurance that they were operating effectively.
The Service Director in his report reminded the committee that the risk assessment indicated that the council had a relatively low risk of fraud. The CIPFA counter self-assessment had been revisited and showed that a high level of full compliance and implementation of the action plan results, detailed in appendix B to the report, would ensure full compliance for all but two indicators. Most of the actions proposed were being considered as part of the 2008/09 fraud development exercise by Internal Audit. Compliance would be improved mainly through the refresh of the Anti Fraud Theft and Corruption Strategy and conclusion of the fraud development exercise. Criteria not considered necessary to meet due to low fraud risk, were also outlined in the report.
Resolved – (a) That the report be noted, and (b) that the action plan of further work to establish improvements to anti fraud arrangements designed to meet the council’s identified needs attached at Appendices A and B of the report, be approved.
89 (61) CORPORATE GOVERNANCE AUDIT – The Service Director Finance submitted a report on the outcome of the recent annual Corporate Governance audit carried out by internal audit. The audit was a review of the adequacy of the council’s corporate governance arrangements. It evaluated the council’s practices against the best practice framework produced by the Chartered Institute of Public Finance (CIPFA) and the Society of Local Authority Chief Executives and Senior Managers (SOLACE).
The report explained that the review was at a high level and examined independent inspection reports, strategies, policies and recent audit work. Discussions took place with key staff and relevant tests were carried out. Appendix A of the report summarised the results.
The Service Director in his report explained that the council had adopted a Local Code of Corporate Governance in 2002. It was reviewed as part of the annual audit and updated if necessary. The Code detailed the council’s commitment to good corporate governance and was publicised on the council’s website and intralinc. His report set out the key principles contained in the Corporate Governance framework and attached the revised Local Code of Corporate Governance at Appendix B. It included only minor changes to strengthen the council’s governance arrangements.
The internal audit review had concluded that the council had demonstrated good corporate governance through its policies and procedures. No aspects of the Corporate Governance framework were entirely unmet. However improvements had been identified and appropriate action was agreed with key officers at the conclusion of the audit.
Resolved – (a) That the revised Local Code of Corporate Governance attached at appendix B to the report be approved; (b) that the evaluation matrix be noted, and (c) that Local Code of Corporate Governance be circulated to all members of the council.
90 (62) AUDIT OF ACCOUNTS 2007/08 – MATTERS ARISING FROM THE AUDIT – Further to minute 82, the Service Director Finance submitted a report informing the committee that the Accounts and Audit Regulations required the Council to publish a statement of accounts each financial year. These accounts were the formal statement of the council’s financial performance for the year and its financial position at the end of that period. A financial year runs from April to March.
The accounts had to be considered and approved by council or a committee by 30 June each year and be audited and published within six months of the financial year-end or 30 September. These deadlines were government requirements.
The report explained that the International Standard on Auditing 260 – ‘The Auditor’s Communication with those Charged with Governance’ (‘ISA 260’) required auditors to report certain matters arising from the audit of the council’s final statements before giving an opinion on them. Consequently, the Annual Governance Report from the council’s external auditors, the Audit Commission, was attached as an appendix to the report. It set out the matters arising from the audit of the council’s 2007/08 accounts.
The Service Director Finance in his report summarised the main findings of the external auditor’s report and the main changes resulting from the audit, and confirmed that he was in agreement with its findings. Representatives of the Audit Commission attended the meeting and gave a brief presentation and explanation of their report.
The council’s Statement of Accounts 2007/2008 was also included as an appendix to the report. The Service Director reminded members that the committee needed to agree that the accounting policies set out in the accounts were appropriate.
International Standard on Auditing 580 ‘Management Representations’ also required auditors to obtain written confirmations of appropriate representations from management before the audit report was issued. The Service Director Finance informed members that the Annual Governance Report included a proposed Letter of Representation, which the committee was asked to approve and authorise the chair and him to sign.
Members asked questions on particular aspects of the Annual Governance Report and the council’s Statement of Accounts 2007/2008 to which the Service Director Finance and representatives of the Audit Commission responded to.
Resolved – (a) That the Statement of Accounts for 2007/08 as amended in line with the auditors’ recommendations be received, approved and adopted; (b) that the accounting policies contained within the accounts be approved; (c) that the signing of the Letter of Representation by the chair and Service Director Finance be approved, and (d) that this committee acknowledges, welcomes and recognises the professional work carried out by the Service Director Finance, his staff and the council’s external auditors.
91 MEMBER TRAINING UPDATE – The Service Director Finance reminded the committee of ‘Finance, Procurement and Value for Money’ training for all members of the council scheduled for either 23 October 2008 (9.30am to 12noon) and 31 October 2008 (1.30pm to 4.30pm). He provided the committee with the likely content of the training, which was welcomed and discussed briefly.
Resolved – (a) That the position be noted, and (b) that further training opportunities continue to be discussed with the committee.