Audit Committee – 24 January 2013
Chair: Councillor Eckhardt
Venue: Civic Centre, Scunthorpe (Function Room 2)
Time: 100 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 27 September, 2012 as a correct record and authorise the chairman to sign.
4. Priority Performance Indicators – Data Quality Update.
5. External Audit Reports.
6. Final Accounts and Accounting Policies 2012/13.
7. Internal Audit Progress Report.
8. Risk Management Progress Report.
9. Protecting the Public Purse.
10. Counter Fraud Policies and Standards.
11. Quarterly Treasury Management and Strategy Report 2012/13.
12. Member Training – Update.
13. Any other items which the chairman decides are urgent by reasons of special circumstances which must be specified.
Note: Reports are by the Director of Policy and Resources unless otherwise stated.
PRESENT: Councillor Eckhardt in the chair
Councillors England (vice-chairman), T Foster, Gosling, Kataria, Wells and Whiteley
Also in attendance were representatives of KPMG (the council’s recently appointed new external auditors).
The committeemet at the Civic Centre, Scunthorpe.
284 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.
285 MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 27 September 2012, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.
286 (16) PRIORITY PERFORMANCE INDICATORS – DATA QUALITY UPDATE – The Director of Policy and Resources submitted a report providing the committee with a position statement on the current status of Data Quality Audits of the council’s priority Performance Indicators (PI’s).
The Director in his report stated that over the past three years a significant amount of work had been carried out to ensure that the council’s data quality arrangements were robust. A Data Quality policy and protocol had been developed and was continually reviewed and refreshed, ensuring it was aligned with new and emerging government initiatives and internal council agenda’s where appropriate. Data quality had been included in workforce competencies and training sessions had been carried out. The Performance and Value for Money team continually supported council directorates in striving for robust data quality arrangements.
The report explained that the council’s Corporate Performance Team had developed a set of web pages which contributed to meeting the requirements of the government’s transparency agenda. In addition, audit reviews of priority performance indicators were being carried out to check compliance with the Data Quality Policy and Protocol. As at December 2012, 51% of the 95 priority performance indicators had been audited achieving the target of 50%. A target of a further 25% by the end of 2012/13 had now been set.
Audits were awarded a rating based on the number of recommendations identified within each of the five sections of the audit checklist. A maximum of five stars was awarded where no recommendations were identified and all expected data quality controls were in place. Where a data quality rating had been allocated, the current average was 4.27 out of 5, which indicated robust data quality controls were in place.
Resolved – That following consideration of the above report and discussion of its content, the action identified in the update report provides sufficient assurance of the adequacy of the council’s data quality arrangements.
287 (17) EXTERNAL AUDIT REPORTS The Director of Policy and Resources submitted a report on three external audit reports, ‘Audit Fee Letter 2012/13’, ‘Audit Plan 2012/13’ and ‘Certification of Claims and Returns 2011/12’.
The Audit Fee Letter, attached as appendix A to the report set out the audit arrangements for 2012/13 covering personnel, the indicative fee, billing arrangements and audit quality. The Audit Plan 2012/13 as appendix B of the report, provided details of external audit’s work required to give an opinion on whether the accounts gave a true and fair view and a statutory conclusion on the council’s arrangements to secure economy, efficiency and effectiveness. The proposed fee for the audit of £137,780 showed a significant reduction on that for 2011/12 of £229,633. However the fee only provided for basic audit work and does 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 Certification of Claims and Returns Report summarised the council’s arrangements for claiming grants in 2011/12, and the level of assurance it provided on the operation of the council’s procedures. The report was attached at appendix C. Overall there were no significant weaknesses in the council’s arrangements to prepare grant claims reported.
Resolved – (a) That following consideration of the report and consideration ofits content, the Audit Plan Report and Audit Fee Letter be noted; (b) that the committeereceives further reports as the work is concluded in the Annual GovernanceReport and Annual Audit Letter, and (c) that the external audit Certification of Claims and Returns Report be noted.
288 (18) FINAL ACCOUNTS AND ACCOUNTING POLICIES 2012/13 – The Director of Policy and Resources submitted a report seeking approval of the accounting policies that the council would use to close the 2012/13 accounts. The committee was also asked to delegate to the Director of Policy and Resources the power to make new accounting policies and amend existing policies as may become necessary in the production of the accounts.
The report explained that The Code of Practice on Local Authority Accounting in the United Kingdom 2012/13 (CoP) required each local authority to adopt accounting policies that set principles for recording financial transactions within the Council’s accounts. The CoP was, in effect, a legal requirement as it was recognised in Government legislation as “Proper accounting practice”.
The CoP required that policies were set within UK accounting standards, which were based on International Financial Reporting Standards (IFRS), but otherwise may reflect matters appropriate to an authority’s circumstances.
The policies proposed for North Lincolnshire were based upon guidance issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) and took account of local circumstances.
The report requested that members satisfied themselves that the Accounting Policies set out in appendix A were appropriate, paying particular attention to those policies highlighted as being modified to take account of local circumstances or added, as listed and summarised in paragraphs 4.1 and 4.2 of the report.
Resolved – (a) That the accounting policies, as set out in appendix A of the report be approved; (b) that the power to make new accounting policies and amend existing policies as may become necessary in the production of the accounts be delegated to the Director of Policy and Resources, with any such changes being reported to the next meeting of the committee, and (c) that the chairman be briefed by the Director of Policy and Resources on matters referred to in (b) above as they arise.
289 (19) INTERNAL AUDIT PROGRESS REPORT – Further to minute 277, the Director of Policy and Resources submitted a report updating the committee of key issues arising from Internal Audit’s work undertaken in the 2012/13 audit plan. 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 the 2012/13 Audit Plan as set out in Appendix A of the report. Overall there was adequate plan cover to ensure that there would be a sufficient level of completed planned work to provide an opinion on the adequacy of the control environment. Additional temporary cover had also been secured to offset some of the shortfall in resources;
- Significant Audit Findings – including work on 2012/13 fundamental systems, risk management and corporate governance reviews had been started and the outcome would be reported to the committee in June 2013. Also corporate governance arrangements had been evaluated against CIPFA/SOLACE ‘The Framework Delivering Good Governance in Local Government’;
- Ongoing audit work on income collection procedures including more detailed work on financial assessments with subsequent action being acted upon promptly;
- Further to minute 277(b) and (c), the outcome of further work carried out to resolve poor imprest account handling in one establishment;
- The external audit of the Benefits Subsidy claim for 2011/12 had been successfully completed;
- The current position and progress of unplanned work;
- Summary of the consultation response to the draft Local Audit Bill;
- Update on the Public Sector Internal Audit Standards (PSIAS) which applied from 1 April 2013 and replaced the Code of Practice for Internal Audit in Local Government in the United Kingdom, and
- 2013/14 audit planning to commence in January 2013.
Resolved – That following consideration of the above report and discussion of its content, the committee agrees that the Internal Audit progress report contributes to a sufficient level of assurance on the adequacy of internal control arrangements.
290 (20) RISK MANAGEMENT PROGRESS REPORT – Further to minute 279, the Director of Policy and Resources 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.
The Director in his report addressed and commented upon progress made including –
- Following the review of strategic risk controls (minute 269 refers) all strategic risks have been populated in the 4Risk system. This provided improved management information and automated reminders of risk control improvement actions due dates;
- Edition 12 of the Risk Roundup newsletter issued in November 2012 was attached as appendix A of the report;
- Membership of the council’s Risk Management Group, and the Group’s and members roles, and work progressing to date;
- Completion of the follow up audit of the council’s response to the provisions of the Bribery Act, showing that all relevant policies and procedures had been updated and awareness training had been provided across the council;
- The transfer of Public Health responsibilities to local authorities from 1st April 2013 presented new risks to the council. The Public Health Transition Steering Group was responsible for overseeing management of these risks during the transfer. At its last meeting, a Governance Workstream Group was established to ensure risks were adequately managed and to update the Transition Steering Group, and
- Results from the CIPFA/ALARM benchmarking club, showing that the risk management service had been evaluated as providing VFM to the council.
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.
291 (21) PROTECTING THE PUBLIC PURSE – The Director of Policy and Resources submitted a report informing the committee of the main messages contained in the Audit Commission’s counter fraud report ‘Protecting the Public Purse 2012’, and invited members to consider the checklist to the report showing arrangements that should be in place in model counter fraud procedures.
The Director in his report explained that the Audit Commission published annual counter fraud reports ‘Protecting the Public Purse’. The latest report issued in November 2012 showed that fraud continued to be a significant problem affecting the whole economy. For local government, although detected fraud losses were low compared with total council spend, significant amounts of money was involved nationally – Detected fraud in 2011/12 amounting to £179m (a small decrease of 3% compared to 2010/11), and 124,000 individual fraud cases (a 2% decrease). High-risk areas and new and emerging fraud issues were also identified. All these areas were recognised locally and where applicable, included in the audit plan. The outcome of this work would be reported to the June 2013 meeting of the committee in the Internal Audit Progress Report.
The report also identified some areas of good practice to maintain strong defences against fraud in the current economic climate. It also stated that the council was in a strong position and arrangements were continually reviewed against best practice and procedures, with partnerships developed to prevent and deter fraud. Examples were summarised in the report, together with a number of recommendations, which were attached in appendix A along with North Lincolnshire’s response. A checklist of best practice arrangements that members should look for was also included for information in appendix B.
Resolved – (a) That following consideration of the report and discussion of its content, the committee agrees that the report contributes to a sufficient level of assurance on the adequacy of counter fraud arrangements, and (b) that the response to the report’s recommendations as set out in Appendix A, and the assessment against the checklist of best practice arrangements shown in appendix B of the report, be noted.
292 (22) COUNTER FRAUD POLICIES AND STANDARDS– The Director of Policy and Resources submitted a report to provide the committee with an appropriate level of assurance that the council’s counter fraud arrangements were adequate, and to consider and approve the Counter Fraud Strategy.
The report explained that the Counter Fraud Strategy set out the council’s determination to deter, prevent and detect fraud and safeguard its assets. The Strategy was revised periodically to reflect changes in legislation and recommend best practice guidance. This ensured that the council remained at the forefront of the prevention and detection of fraud and corruption. The Strategy encompassed policies and procedures that collectively helped to drive down the risk of fraud and provide a framework to investigate instances of potential fraud. Year on year, the strategy had been significantly strengthened and reference was made throughout the document of the council’s response to key publications that represented best practice. It also recognised the changing environment for the public sector including the transfer of public health services to councils. The updated strategy was attached as appendix A of the report.
The Director in his report referred to the Audit Commission’s annual report on Fraud ‘Protecting the Public Purse’ issued in November 2012. Its main messages and council’s response were reported in a separate report (minute 291 refers). He also explained that Internal Audit continued to focus on the delivery of a programme of proactive counter fraud. The volume of unforeseen and irregularity work was higher than last year as set aside in the 2012/13. An update of the counter fraud plan was also attached as appendix B of the report.
The Director in his report also summarised and provided the committee with an update on ‘proactive’ and ‘reactive’ work being carried by internal audit. This included successful investigation and prosecution of Housing Benefit Fraud in partnership with the DWP of 15 cases, and issuing 35 formal cautions and 16 administrative penalties.
Resolved – (a) That following consideration of the report and discussion of its content, the progress report be noted; (b) that the counter fraud work programme delivers a sufficient level of assurance on the adequacy of counter fraud arrangements, and (c) that the Counter Fraud Strategy attached at appendix A of the report be approved.
293 (23) QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT – Further to minute 280, 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 between April and December 2012. 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.
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.
294 MEMBER TRAINING – UPDATE – The Director of Policy and Resources referred tominute 283 and informed the committee of previous training events held, a re-scheduled event and future dates and subjects of finance/audit related training events scheduled until April 2013.
He also stated that consideration was now being given to training events for the next council year, which would include an event relating to Public Health issues, and welcomed members comments and suggestions on this and other subjects.
Resolved – (a) That the committee welcomes the training provided to date, and thanks all officers involved in delivering interesting events, and (b) that members’ suggestions for training be submitted to the Director of Policy and Resources.