Audit Committee – 28 September 2010
Chair: Councillor Whiteley
Venue: Pittwood House, Scunthorpe (Function Room 1)
Time: 10 am
- Substitutions (if any)
- Declarations of Personal or Personal and Prejudicial Interests (if any).
- To take the minutes of the meeting held on 30 June, 2010 as a correct record and authorise the chair to sign
- Value for Money Report
- External Audit Recommendations – Progress Report
- Pension Information Flows with North Lincolnshire Council Report
- Quarterly Treasury Management and Strategy Report
- Internal Audit Progress Report
- Risk Management Progress Report
- Strategic Risk Register
- Audit of Accounts 2009/10 – Matters Arising from the Audit
- Member training – update
- 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), Cawsey, T Foster and N Sherwood
Also in attendance were representatives of the Audit Commission (the council’s external auditors).
The committee met at Pittwood House, Scunthorpe.
176 DECLARATIONS OF PERSONAL OR PERSONAL AND PREJUDICIAL INTERESTS – The following members declared personal interests:
Nature of Interest
|Councillor Whiteley||180||Member of the East Riding Pension Fund Committee and member of the Councillor’s Superannuation Scheme|
|Councillor T Foster and Sherwood and Wilson||180||Members of the Councillor’s Superannuation Scheme|
177 MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 30 June 2010, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chair.
178 (10) VALUE FOR MONEY REPORT 2010 – The Service Director Finance submitted a report which reminded the committee that each year every local authority was assessed on how well it managed its resources. This was an independent assessment made by the Audit Commission as part of the Use of Resources assessment. Recently, the government had cancelled the Use of Resources for 2009/10, and although an assessment had been carried out no scores would be reported. However, the outcome of this work continued to be used to support external audit’s Value for Money (VFM) conclusion. The VFM report provided a commentary on the basis for that judgement and was attached as an appendix to the report. It showed that overall the council had good arrangements in place to achieve good value for money.
The Service Director in his report explained that the VFM report 2009/10 concluded that there were no major weaknesses in the council’s arrangements and there had been good progress in improvement areas reported in 2008/09. Some further areas for improvement had been identified and action agreed as shown in the report’s action plan.
The Service Director invited the committee to consider the judgement, the assurance that could be implied from its conclusion, and to agree to and monitor the implementation of the recommendations made.
Resolved – (a) That following consideration of the above VFM report and discussion of its content, the positive external audit judgement be welcomed; (b) that the committee agrees that assurance is available regarding the council’s Value for Money arrangements as implied by its conclusions, and (c) that the report’s recommendations be implemented and monitored.
179 (11) EXTERNAL AUDIT RECOMMENDATIONS – PROGRESS REPORT – Further to minute 156, the Service Director Finance submitted a progress report on the implementation of external audit recommendations in respect of the following key reports –
- Annual Audit Letter;
- Annual Governance Report;
- Use of Resources Report, and
- Certification of Claims and Returns – Annual Report 2008/09
Corresponding action plans for the last three reports were included as appendices A, B and C to the report.
There was no further progress to report on data quality recommendations following the update given to the committee at its June 2010 meeting (minute 171 refers). A further report would be submitted to the January 2011 meeting.
The Service Director in his report explained that regular reporting on action taken to implement external audit recommendations was an important source of assurance for the committee to fulfil its role and provided supporting evidence for the annual approval of the Governance Statement.
Resolved – That following consideration of the above report and discussion of its content, the committee agrees that the response to external audit’s recommendations as detailed in the report provides a sufficient level of assurance on action taken.
180 (12) PENSION INFORMATION FLOWS WITH NORTH LINCOLNSHIRE COUNCIL REPORT – The Service Director submitted a report on the outcome of external audit’s review on information flows (manual and electronic) between North Lincolnshire Council and the East Riding Pension Section. The external auditor’s report, which was attached as appendix A also informed their Value for Money opinion of the council.
The Service Director Finance in his report explained that the Pension Scheme Regulations required contributing organisations to supply information on time. Inaccurate or incomplete data would lead to wrong pensions calculations for members and an incorrect valuation of the Pension Fund. He stated that of the four main contributing authorities, North Lincolnshire Council provided the most accurate and timely data. Communication between the Pension Fund and the council was good and reflected the excellent working relationship. Also, the external auditor’s report commented that human resources and payroll staff worked well together, and highlighted several examples of arrangements which contributed to good quality data within the pension’s administration system. Some areas for improvement were identified in the report for this council and for the Pension Fund, and an action plan had been agreed to address them.
The Service Director invited the committee to consider the report, the assurance that could be implied from its conclusion, and to agree and monitor the implementation of the recommendations made.
Resolved – (a) That following consideration of the above report and discussion of its content, the positive external audit report be welcomed; (b) that a sufficient level of assurance can be applied from the conclusions of the report, and (c) that the report’s recommendations be implemented and monitored.
181 (13) QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT – Further to minute 172, the Service Director Finance submitted a report which provided the committee with a regular review of the treasury strategy approved each year by the council.
The report outlined treasury management performance between April and August 2010. It explained how the strategy had been implemented during the first part of the year, the state of financial markets, what action was taken to address the challenges and the results of that action.
The Service Director in his report also provided an update on the latest position with regard to recovering the council’s Icelandic investments.
Resolved – (a) That following consideration of the above report and discussion of its content, that the quarterly report provides a sufficient level of assurance on the effectiveness of arrangements for treasury management, and (b) that the treasury management performance for the period as outlined in the report, be noted.
182 (14) INTERNAL AUDIT PROGRESS REPORT – With reference to minutes 155 and 167, the Service Director submitted a report updating the committee of key issues arising from Internal Audit’s work. Regular reporting on Internal Audit issues was an important source of assurance for the committee to fulfil its role and provided supporting evidence for the annual approval of the council’s Governance Statement. The Service Director in his report addressed and commented on the following:
- The government’s cancellation of future Use of Resources and its impact on the council’s Value for Money report 2009/10 (minute 178 refers);
- The government’s decision to disband the Audit Commission (the council’s external auditors). Councils would be free to appoint their own independent external auditors with effect from April 2012;
- An update on internal audit staffing resources, its impact on delivering the Internal Audit Plan, and adjustments made due to a high level of unforeseen and irregularity work requested. Examples, including work associated with the audit of the Benefits and Council Tax subsidy claim and 18 other investigations so far this year, compared to a total of 27 last year, were outlined in the report.
- All audit reports published so far this year had not included any recommendations to address significant control weaknesses, and also there were no examples of systems so poor to be judged as providing no assurance.
- Counter Fraud work including the distribution of two further counter fraud newsletters, staff PC screensavers had carried details on how to report suspected fraud, and an article included in the council’s Direct magazine highlighting the council’s determination to stamp out fraud;
- Significant progress on Financial Management Standard In Schools self assessments (FMSiS);
- Work being carried out to improve responses to audit recommendations, which had improved with the introduction of the ‘audit management’ software, and
- CIPFA’s progress on the development of a statement on the role of chief internal auditors in public sector organisations. Consultation on the draft document finished at the end of September 2010, and further details would be reported to the committee when the statement had been finalised.
At this point in the proceedings Councillor T Foster left the meeting.
The Service Director responded to members’ questions on aspects of his report.
Resolved – That following consideration of the above report and discussion of its content, the committee agrees that the progress report contributes to a sufficient level of assurance on the adequacy of internal control arrangements.
At this point in the proceedings Councillor T Foster returned to the meeting.
182 (15) RISK MANAGEMENT PROGRESS REPORT – Further to minute 169, the Service Director Finance submitted a report updating the committee of key issues arising from Risk Management work. Regular reporting of this work was an important source of assurance for the committee to fulfil its role, provided supporting evidence for the annual approval of the council’s Governance Statement and was recognised as good practice by professional bodies CIPFA and ALARM (Association of Local Authority Risk Managers)
The Service Director in his report addressed and commented on progress made including:
- An important exercise to review and update the Strategic Risk Register had been completed, and submitted to this meeting for approval (minute 183 refers);
- Details of work undertaken to manage strategic risks – these were set out and explained in the report for each relevant strategic risk. Management of strategic risks was an ongoing process integrated in other management process. These were recorded at Quarterly Performance Reviews and reported to the Strategic Risk Management Group (SRMG).
- Outcomes of the CIPFA/ALARM risk management benchmarking work would be reported to the committee’s next meeting in January 2011 due to a delay in the benchmarking review meeting.
The Service Director suggested that the committee should consider the assurance provided by the progress report on the adequacy of risk management arrangements detailed.
Resolved – That following consideration of the above report and discussion of its content, the committee agrees that the progress report contributes to assurance on the adequacy of risk management arrangements, as detailed in the report.
183 (16) STRATEGIC RISK REGISTER – The Service Director Finance submitted a report seeking approval of the council’s revised Strategic Risk Register, which now included three potential additions contained within 20 strategic risks. The potential additions were highlighted in appendix A of the report, together with the revised Strategic Risk Register attached as appendix B. In revising the register, risks identified in the council’s new style service plans had been considered along with guidance provided by CIPFA and ALARM. National conditions and local factors including economic and funding constraints as well as governance and stewardship responsibilities were also incorporated.
The Service Director in his report also explained that external audit’s VFM report included a recommendation to improve risk management reporting to the Audit Committee. Consequently, an evaluation of controls in place to manage risks would be reported to the committee’s meeting in January 2011, and would include a description of the adequacy of controls. To improve reporting to the committee, it was suggested that the definitions, as detailed in report, be adopted under the following headings – Significant Assurance, Adequate Assurance, Partial Assurance, and No Assurance.
The report stated that strategic risks were defined as ‘those risks, which will significantly impair the achievement of the council’s principal aims and objectives, core service delivery and overall probity’.
Resolved – (a) That following consideration of the above report and discussion of its content, the committee agrees that the Strategic Risk Register report contributes to assurance on the adequacy of risk management arrangements as detailed, and (b) that the updated strategic risk register be approved.
184 (17) AUDIT OF ACCOUNTS 2009/10 – MATTERS ARISING FROM THE AUDIT – Further to minute 174, 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 ran 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 2009/10 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. The representatives of the Audit Commission in attendance at the meeting also gave a brief explanation of their report.
The council’s Statement of Accounts 2009/2010 was also included as an appendix to the report. The Service Director stated that although there were some amendments to the accounts following the audit, they did not change the position previously reported in terms of General Fund or balances available. He referred to an error identified on the Collection Fund Account, which he explained, with a corrected version circulated at the meeting. This also did not change the final position of the accounts. Also, an amendment to the accruals accounting policy was necessary to reflect accounting practice as it had been applied in the accounts, and to remove the need for an amendment to the accounts relating to Housing Benefit payments.
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 2009/2010 to which the Service Director Finance and representatives of the Audit Commission responded to.
Resolved – (a) That following consideration of the above report and discussion of its content, the amendment to the accruals accounting policy be approved, (b) that the Statement of Accounts for 2009/10 as amended in line with the auditors’ recommendations, together with the corrected version of the Collection Fund Account as circulated, be received, approved and adopted; (c) that the action plan contained in the Annual Governance Report be approved, and (d) that the signing of the Letter of Representation by the Chair and Service Director Finance be approved.
185 MEMBER TRAINING UPDATE – Further to minute 175, the Service Director Finance referred to forthcoming finance related training events, scheduled within the council’s committee timetable. Members of the committee were encouraged to attend.
Resolved – (a) That the position be noted, and (b) that the scheduled training events be welcomed.