Audit Committee – 16 April 2013
Chair: Councillor Eckhardt
Venue: Civic Centre, Scunthorpe (Function Room 1)
Time: 10 am
1. Substitutions (if any).
2. Declarations of Disclosable Pecuniary Interests and Personal or Personal and Prejudicial Interests (if any).
3. To take the minutes of the meeting held on 24 January 2013 as a correct record and authorise the chairman to sign.
4. Forward Plan and Assurance Map 2013/14.
5. Internal Audit Plan 2013/14.
6. External Audit Reports.
7. Internal Audit Progress Report.
8. Risk Management Strategy 2013/14.
9. Quarterly Treasury Management and Strategy Report 2012/13
10. Member Training – Update.
11. Any other items which the chairman decides are urgent by reasons of special circumstances which must be specified.
PRESENT: Councillor Eckhardt in the chair
Councillors England (vice-chairman), T Foster, Godfrey, Grant, Wells and Whiteley
Also in attendance was a representative of KPMG (the council’s external auditors).
The committee met at the Civic Centre, Scunthorpe.
295 DECLARATIONS OF DISCLOSABLE PECUNIARY INTERESTS, PERSONAL OR PERSONAL AND PREJUDICIAL INTERESTS – There were no declarations of disclosable pecuniary interests, personal or personal and prejudicial interests made at the meeting.
296 MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 24 January 2013, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.
297 (24) FORWARD PLAN AND ASSURANCE MAP 2013/14 – The Director of Policy and Resources submitted a report requesting the committee to approve the forward plan and assurance map of reports to be presented to the Audit Committee during 2013/14, and to consider whether the assurances indicated in the plan provided adequate coverage to allow the committee to fulfil its terms of reference.
The report explained that a forward plan of reports and map of assurances was first introduced in June 2009. The plan showed the assurance each report would provide to allow the Audit Committee to fulfil its terms of reference. In addition to categories of assurance provided the forward plan showed whether the source of assurance was primary or supporting. The forward plan had been refreshed for 2013/14 and minor changes had been made to reflect timing adjustments to some external audit reports.
Appendix A of the report showed the categories and level of assurance the Audit Committee needed to fulfil its terms of reference and approve the council’s audited accounts and Annual Governance Statement. A forward plan of reports for the Audit Committee to consider was set out in Appendix B.
Resolved – (a) That following consideration of the report and discussion of its content, the committee agrees that the Forward Plan for 2013/14 provides sufficient scope to provide an appropriate level of assurance on the adequacy of the council’s internal control and governance arrangements, and (b) that the Forward Plan for 2013/14 be approved.
298 (25) INTERNAL AUDIT PLAN 2013/14 – The Director of Policy and Resources submitted a report to consider and approve the council’s internal audit plan for 2013/14. His report explained that the Accounts and Audit (England) Regulations 2011 placed a responsibility with the council to undertake an adequate and effective internal audit of its accounting records and of its system of internal control, in accordance with the proper practices in relation to internal control. The regulations also required that the council reviewed the effectiveness of its internal audit at least once a year and must be considered, as part of consideration of the system of internal control which informed the Annual Governance Statement.
The report stated that the CIPFA Code of Practice for Internal Audit in Local Government in the UK 2006 (the 2006 Code) required councils to agree terms of reference, an audit strategy and plan for Internal Audit, and to review those items at least annually. However the 2006 Code was replaced by a new set of Public Sector Standards (PSIAS) from 1 April 2013. CIPFA was preparing an Application Note to accompany PSIAS and to provide details of how to apply the new standards in a local government setting. The Director’s report had been prepared in compliance with the 2006 Code, but also within the broad requirements of PSIAS. An assessment would be carried out against the requirements set out in the Application Note and any amendments necessary would be reported to the Audit Committee at its meeting in June 2013.
The Director in his report explained that an important role for the Audit Committee, as set out in the terms of reference, was to assist the council by providing independent assurance on the adequacy of internal control and governance arrangements throughout the council. In undertaking this role the sub-committee was responsible for:
- Approving (but not directing) Internal Audit’s strategy;
- Approving the annual plan of audits;
- Monitoring progress on delivery of the plan and considering the internal control issues that arise from the work undertaken, and
- Considering the assurance provided by the annual opinion report.
Also, Internal Audit was a key part of the council’s internal assurance and governance system. Internal Audit’s terms of reference set out the purpose, authority and responsibility of the service. In the context of the 2006 Code they remained fit for purpose, however under PSIAS the Terms of Reference would be incorporated into a larger document called the Audit Charter, which would need to be drafted with reference to the Application Note. The audit strategy described how the internal audit service would be delivered and developed in accordance with the terms of reference, and how it was linked to the council’s objectives and priorities.
The Director’s report summarised how the audit strategy described how the internal audit service would be delivered and developed in accordance with its terms of reference and how it was linked to council objectives and priorities. The strategy for 2013/14 reflected some of the risks and challenges the council was likely to face, together with the impact future resource levels would have in delivering sufficient audit coverage to provide an audit opinion on the adequacy of the council’s internal control environment. The reduced costs of new external audit arrangements would impact on the work of internal audit, requiring the service to target high value transactions in the council’s accounts, thereby assurance thresholds would have changed.
The Internal Audit Plan for 2013/14 was attached as appendix A of the report. Work to be carried out over the year was planned adopting a risk-based approach targeting high risk areas to make the best use of resources. Progress in achieving the plan and issues arising would be reported to the committee throughout the year. A separate counter fraud plan was set out in appendix B and similar progress would be reported to provide members with clear assurance on the adequacy of counter fraud arrangements.
The Director responded to members’ questions on aspects of his report.
Resolved – (a) That following consideration of the above report and discussion of its content, the committee agrees that the Internal Audit plan for 2013/2014 will provide committee with a sufficient level of assurance to fulfil its role; (b) that the Internal Audit plan for 2012/2013 be approved, and (c) that the committee receives revised Internal Audit terms of reference, strategy and plan for 2013/14 following evaluation against professional guidance, at a future meeting.
299 (26) EXTERNAL AUDIT REPORTS – The Director of Policy and Resources submitted a report which considered external audit’s (KPMG) Annual Audit Fee Letter for 2013/14.
The report explained that the Audit Fee Letter, attached as appendix A to the report, set out the audit arrangements for 2013/14 covering audit team members, the indicative fee, audit fee assumptions, planned outputs and audit quality. The proposed fee for the audit of £137,780 was in line with the scale fee recommended by the Audit Commission. The fee only provided for basic audit work and did not include items such as challenge from ratepayers or following up detailed audit issues. Some extra costs above the basic fee could be incurred.
The fee for 2013/14 was £4,890 lower than the planned fee for 2012/13. This reflected the additional assurance work requested on the 2012/13 accounting treatment of Property Plant and Equipment that the Audit Committee was informed of at its meeting in January 2013.
The Director and representative of the council’s external auditor (KPMG) responded to members’ questions on the report.
Resolved – (a) That following consideration of the above report and discussion of its content, the Audit Fee Letter be noted, and (b) that the committee receives further reports as the work is concluded in the Annual Governance Report and Annual Audit Letter.
300 (27) INTERNAL AUDIT PROGRESS REPORT – Further to minute 289, the Director of Policy and Resources submitted a report updating the committee on key issues arising from work undertaken by Internal Audit in the 2012/13 audit plan year. Internal Audit delivered an annual programme of audit work designed to raise standards of governance, risk management and internal control across the council. This work culminated in the Internal Audit’s Annual Report that was used to inform the Annual Governance Statement. The Director in his report addressed and commented upon the following –
- Progress on completion of the Internal Audit Plan which was summarised in Appendix A;
- 2013/14 Audit Plan – audit planning meetings had been held with Directors, Assistant Directors, key financial officers and the council’s external auditors (KPMG) to ensure reliance on internal audit’s work continued to be maximised;
- Significant Audit Findings – 2012/13 Audit Plan – no significant issues had been identified so far;
- Unplanned Work – an allocation of 165 days set aside on the 2012/13 Audit Plan had been exceeded, 234 days, and referrals received via the Whistleblowers’ hotline had increased steadily over the last few years, with 377 in 2012/13;
- Proactive Work – a summary of work undertaken was given together with details of £208k identified savings made through the National Fraud Initiative (NFI) data matching exercise, and
- An update on responses to External Audit Recommendations was provided.
The 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, as detailed.
301 (28) RISK MANAGEMENT STRATEGY 2013/14 – The Director of Policy and Resources submitted a report which sought approval of the Risk Management Strategy for 2012/13 and Terms of Reference for the Risk Management Group. The strategy was an important source of assurance for the committee as it described the council’s risk management framework, the work completed during the year and a comprehensive action plan for the forthcoming year. The strategy was attached as appendix A of the report.
The Director explained that each year the council’s Risk Management Strategy was reviewed and updated. The Strategy reflected national and local economic and financial risks which may impact on the council along with significant change through major restructure, reshaping service delivery and operations and new legislation. It had been evaluated against best practice and a risk management policy (endorsed by the Chairman of this Committee and Chief Executive) had been developed to demonstrate commitment to the promotion of sound risk management throughout the council.
The report stated that good progress had been made to maintain and improve the risk management framework and the Risk Management Group (RMG) had been successful in achieving most of the action plan set for 2012/13 (Appendix B). The RMG’s terms of reference also had been updated and were attached at appendix C for the Committee to consider and approve.
The Risk Management Strategy and action plan and quarterly progress reports provided important sources of assurance to the Audit Committee that all significant risks to the council achieving its priorities were adequately managed. The council’s high level commitment to corporate governance and risk management would inform the Annual Governance Statement that the Audit Committee would be invited to approve to accompany the Statement of Accounts.
Resolved -(a) That following consideration of the above report and discussion of its content, the committee agrees that the Risk Management Strategy and action plan for 2012/13 contributes to assurance on the adequacy of the council’s risk management arrangements in 2012/13; (b) that the strategy’s proposed work plan will deliver similar assurance in 2013/2014; (c) that the Risk Management Strategy for 2013/2014 be approved, and (d) that the terms of reference for the Risk Management Group as detailed in appendix C of the report be approved.
302 (29) QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT – The Director of Policy and Resources submitted areport which provided the committee with a regular review of the treasury strategy approved each year by the council.
The report outlined treasury management performance up to March 2013. It explained how the strategy had been implemented to date and the response to changing conditions in financial markets.
The Director in his report also provided an update on the latest position with regard to recovering the council’s Icelandic investments.
The Director responded to members’ questions on aspects of his report.
Resolved – (a) That following consideration of the above report and discussion of its content, the committee agrees 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.
303 MEMBER TRAINING UPDATE – The Director of Policy and Resources informed the committee that he was proposing to schedule the following member training events into the council’s committee timetable for the 2013/14 municipal year – ‘Corporate Commissioning Strategy and Performance Scorecard Issues’ – June/July 2013, ‘Understanding the Council’s Final Accounts’ – September 2013, Public Health (Finance and Risk Issues) – Autumn 2013, ‘Budget, Business Rates and Council Tax’ – February 2014 and ‘Fighting Fraud in North Lincolnshire’ – April 2014. These would be confirmed in due course and members informed accordingly. It was recommended that Audit Committee members attend these events, together with other members of the council.
A discussion was also held on the council’s external auditor (KPMG) being involved in the above proposed training for September 2013.
Resolved – (a) That the above member training be welcomed and that they be supported by members of the committee and all other members of the council, and (b) that the Director of Policy and Resources and his staff involved in delivering training held in 2012/13 be thanked for interesting and informative events.