Audit Committee – 28 June 2012
Chair: Councillor Eckhardt
Venue: Civic Centre, Scunthorpe (Function Room 1)
Time: 10 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 17 April 2012 as a correct record and authorise the chairman to sign.
4. To note the date and time of future scheduled meetings of the committee.
- Thursday 27 September, 2012 at 10.00 am
- Thursday 24 January, 2013 at 10.00 am
- Thursday 16 April, 2013 at 10.00 am
5. Sickness Absence Update
6. Data Quality Update
7. Internal Audit – Effectiveness Report 2011/2012
8. Internal Audit – Annual Report 2011/2012
9. Risk Management Progress Report
10. Counter Fraud Progress Report
11. External Audit Report
12. Treasury Management and Investment Strategy – Annual Report 2011/2012
13. Annual Governance Statement – 2011/2012
14. Member Training – Update
15. Any other items which the chair 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.
Note: Reports are in Portable Document Format (PDF) and therefore require a suitable reader to view them. A reader can be downloaded free from the Adobe website (full instructions for downloading the reader are provided on the site).
PRESENT: – Councillor Eckhardt in the chair
Councillors England (vice-chairman), T Foster, Gosling, Wells, Wilson and Whiteley
Also in attendance were representative of the Audit Commission (the council’s external auditors).
The committeemet at the Civic Centre, Scunthorpe.
262 DECLARATIONS OF PERSONAL OR PERSONAL AND PREJUDICIAL INTERESTS – There were no declarations of personal or personal and prejudicial interests made at the meeting.
263 MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 17 April 2012, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.
264 DATES AND TIMES OF MEETINGS – Resolved – That the dates and times of future meetings of the committee be held at 10:00am on –
Thursday 27 September, 2012
Thursday 24 January, 2013 and
Tuesday 16 April, 2013
265 (1) SICKNESS ABSENCE – UPDATE – Further to minute 241, the Director of Policy and Resources submitted a progress report providing the committee with the 2011/2012 year end position of sickness absence levels of employees of North Lincolnshire Council. The Director explained that the average number of working days lost due to sickness absence in 2011/12 was 8.5 days against a target of 9 days. This was a reduction of 0.5 days compared to 2010/11. The council continued to demonstrate year-on-year sickness absence reduction. Between 2008/09 and 2011/12, sickness absence had fallen by 1.77 days, which equated to a 17% reduction overall.
The report also outlined performance across categories of length of sickness, benchmarking comparison nationally, improvement plans, monitoring and targets set for services, taking into consideration the council’s new management and service structure.
The Assistant Director Human Resources, who was in attendance at the meeting, responded to questions asked by members.
Resolved – (a) That following consideration of the above report and discussion of its content, the reduction in sickness absence detailed in the report be noted; (b) that the committee agrees that there is continuing assurance that the risk to capacity due to sickness absence is being reduced; (c) that a report on Sickness Absence for the 2012/2013 year, including statistics for office based staff and other more manual staff, be submitted to the April 2013 meeting, and (d) that all staff be congratulated in the council’s ‘People’ newsletter.
266 (2) 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 report explained that public bodies were accountable for the money they spent. The financial and performance information they used to account for their activities, both internally and externally to their users, partners, commissioners, and to government departments and regulators, must be based on good quality data. Historically, the council was subject to an audit of its data quality arrangement by the Audit Commission. From May 2010, under the new coalition government, there had been a reduction in demand by central government for data and a re-emphasis on local performance, coupled with less external inspection of the council’s systems and procedures. The council was committed to data quality and continued to support the standards set out by the Audit Commission. It was vital that the authority did not allow the focus on the quality of local data to decline.
The Director in his report stated that over the past two 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 were appropriate. Data quality had been included in staff competencies and training sessions had been carried out.
The report also informed the committee that 48% of priority performance indicators had now been audited across council services, and findings from the audits had indicated that the data quality was robust. The council’s Data Quality Action Plan was updated in November 2011 and was regularly monitored by the corporate performance team, who were also currently refreshing the council’s priority performance indicators
Resolved – (a) 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, and (b) that the words ‘their own regime’ in paragraph 2.7 of the report be substituted by the words ‘the national regime’ for clarification.
267 (3) INTERNAL AUDIT – EFFECTIVENESS REPORT 2011/12 – The Director of Policy Resources submitted a report which provided the committee with an audit opinion on the effectiveness of the council’s internal audit in accordance with the Accounts and Audit Regulations 2011 and the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice. The assessment was based on the following –
- External Audit’s assessment of Internal Audit’s work;
- Compliance with Best Practice as defined by CIPFA’s Code of Practice for Internal Audit and Statement on the Role of the Head of Internal Audit;
- Customer feedback and endorsement, and
- Achievement of performance targets.
The report explained that external audit (the Audit Commission) undertook a full review of internal audit every three years and provided an assessment of compliance with the Code. The last review was reported to the committee in June 2009 (minute 117 refers). The review had concluded that the internal audit function had met all eleven standards as set out within the CIPFA code, and that external audit could rely on the work of Internal Audit to discharge their own audit responsibilities. There had been no major changes to working practices since this time and regular self-assessments showed that the section continued to meet the requirements of the Code of Practice. Appendix A to the report provided evidence how standards in the code were being adhered to.
The Director in his report also identified positive feedback received on internal audit’s work from service questionnaires sent to managers following audits. Positive results from national and local benchmarking exercises were also summarised. Internal Audit through its CIPFA benchmarking results was assessed as being value for money (low cost/high performance). The updated assessment on the Statement of the Role of the Head of Internal Audit (not mandatory) was also summarised in appendix B to the report, which identified two areas for improvement to current arrangements.
The report stated that the 2011/12 audit plan continued to be managed using the benefits of the audit management software, and based upon the findings of the report, Internal Audit had been assessed as providing an effective service to the council. The Director suggested that the committee should consider whether the level of effectiveness of Internal Audit’s work in 2011/12 provided sufficient assurance to fulfil its role as set out in the committee’s terms of reference. He also responded to members’ questions on his report.
Resolved – That following consideration of the above report and discussion of its content, the committee agrees that the level of effectiveness of Internal Audit in 2011/12 provides assurance on its adequacy as a key component of the council’s internal review processes and internal control environment.
268 (4) INTERNAL AUDIT – ANNUAL REPORT 2011/2012 – The Director of Policy and Resources submitted a report which provided an audit opinion on the adequacy and effectiveness of the council’s control environment based upon work carried out by Internal audit in accordance with the approved 2011/12 audit plan. This provided the committee with an important source of assurance when considering the Annual Governance Statement and complied with the CIPFA Code of Practice for Internal Audit in local government in the United Kingdom. All audit work was also risk assessed to ensure it was prioritised to target areas of highest risk.
The report explained that the requirement for internal audit was supported by statute in the Accounts and Audit Regulations 2011 and the Local Government Act 1972. The Accounts and Audit Regulations stated that a “relevant body shall maintain an adequate and effective system of internal audit of their accounting records and control systems”. Each year internal audit provided an independent appraisal of internal control as a contribution to the proper economic, efficient and effective use of resources.
In his report, the Director of Policy and Resources explained that the level of audit coverage during the year was considered sufficient to be able to offer an opinion on the overall adequacy and effectiveness of the organisation’s control environment. Notwithstanding that, some of the planned reports for the year had yet to be finalised, the fieldwork for the outstanding reports had been completed, and there was nothing within the reports that would cause the overall opinion to change. An opinion on the level of adequacy of internal control was given on each audit and the level and explanation of opinions and associated performance was highlighted in the report. Based on knowledge of the council’s systems and procedures, the extent of work undertaken by Internal Audit, and as a result of the responses to audit recommendations, the overall assessment was that Internal Audit could provide assurance that systems were adequate and internal control generally effective during 2011/12, except for the area identified I paragraph 2.10 of the report. It was acknowledged that this statement was given to provide reasonable and not absolute assurance of the effectiveness of the system of control.
In reaching this opinion the report identified factors that were taken into particular consideration under the following headings:-
- Risk Management;
- Corporate Governance;
- Fundamental Systems, including payroll, creditors, sundry debtors, local taxation (council tax and NNDR), council tax and housing benefits, accounting system (eFinancials), cash receipting, treasury management, Carefirst and asset management;
Key elements of Internal Audit’s work during 2011/12 were also summarised including:-
- Audit Plan 2011/12 (planned and unforeseen audit assignments, appendix A, and action plans);
- Audit of schools under Financial Management Standards in Schools (FMSiS) and it being replaced by the Schools Financial Value Standard (SFVS) which became operational in September 2011;
- Counter Fraud work, and
- Performance work.
The Director suggested that the committee should consider whether Internal Audit’s Annual Report provided sufficient assurance on the adequacy of the council’s internal control environment in 2011/12. He also 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 Annual Report provides sufficient assurance on the adequacy and effectiveness of the council’s internal control environment, and (b) that the Internal Audit Annual report for 2011/12 be approved and adopted.
269 (5) RISK MANAGEMENT PROGRESS REPORT – Further to minute 245, 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 sub-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 –
- Strategic Risk Register – lead responsibility for each risk had been designated and updated to reflect changes following the senior management review. The revised register was attached as appendix A;
- Summary of the main findings of the Internal Audit review of risk management arrangements. Evidence of adequate assurance on the adequacy of internal control arrangements was provided;
- Progress of work of the Risk management team including development of an eLearning package and an examination of risk management arrangements in schools. Work with the Strategy Development team concerning the ongoing review of Integrated Impact Assessment being built into cabinet and cabinet member reports;
- Raising awareness across the council of risk management, including edition 10 of the Risk Roundup newsletter included in appendix B of the report, and
- The CIPFA/ALARM risk management benchmarking questionnaire had been completed, with results due in July/August and the benchmarking club outcomes to be reported to the committee in September.
The Director of Policy and Resources suggested that the committee considered whether this update provided sufficient assurance on the adequacy of risk management arrangements detailed in his report.
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.
270 (6) COUNTER FRAUD PROGRESS REPORT – 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.
The Director explained that counter fraud work was an important feature in the audit plan. Resources had been identified for preventative work and a contingency for responsive work for such investigations. During 2012/2013 the emphasis would remain high on counter fraud work in response to CIPFA and Audit Commission guidance and the increased risk of fraud across the public sector as a result of the economic conditions. A summary of work was provided in appendix A to the report.
In addition, the Director of Policy and Resources in his report addressed and commented upon the following counter fraud work :-
- The added benefit of the National Fraud Authority (NFA) ‘Fight Fraud Locally’ toolkit to assess local counter fraud arrangements;
- Recent work undertaken as part of the Audit Commission’s National Fraud Initiative;
- Referrals from the Whistle Blowers hotline and the rate and nature of investigations carried out by Internal Audit;
- Another successful year for the benefit fraud team during 2011/12, with 1029 allegations received, 921 investigations completed with 256 resulting in a reduction in the customer’s benefit;
- Extensive work and pro-active work carried out with the DWP, including prosecutions;
- Further joint working initiatives with DWP and their impact, including the revised Housing Benefit Fraud Prosecution Policy, also reflecting changes following introduction by the recent Welfare Reform Act, which was attached as appendix B.
Resolved – (a) That following consideration of the above report and discussion of its content, the report be noted, and the necessary changes to the Housing Benefit Fraud Prosecution Policy be approved and included as an appendix to the Counter Fraud Strategy, and (b) that the committee agrees that the counter fraud work programme delivers a sufficient level of assurance on the adequacy of counter fraud arrangements.
271 (7) EXTERNAL AUDIT REPORT – The Director of Policy and Resources submitted a report which considered external audit’s Update Report. The Update Report attached as an appendix to the report, provided the committee with progress on delivering external audit’s statutory responsibilities as well as highlighting key emerging national issues and developments which maybe of interest to members.
Representatives of the Audit Commission, the council’s external auditors, presented their report and responded to questions asked by members.
Resolved – That the Update Report be noted.
272 (8) TREASURY MANAGEMENT AND INVESTMENT STRATEGY ANNUAL REPORT 2011/12 – The Director of Policy and Resources submitted a report on the council’s treasury management and investment performance in 2011/12. The benchmark for measuring performance was measured against the Treasury Strategy set by the council at its meeting on 23 February 2011.
The report explained that each year the council approved a treasury management and investment strategy which was prepared in line with –
- The CIPFA (Chartered Institute of Public Finance and Accountancy);
- Code of Practice for Treasury Management April 2009;
- The Prudential Code;
- The Local Government Finance Act 2003, and
- Guidance on Local Government Investments from the Department for Communities and Local Government (DCLG)
The code of practice required that the council received a report on treasury management strategy at the start of the financial year, at mid year and at year end. Also our local requirements required a quarterly report to the Audit Committee
The Director of Policy and Resources in his report outlined the annual strategy under headings which covered – the Strategy for 2011/12, the Investment Strategy; the Borrowing Strategy, and How the Council Performed including key investment and borrowing statistics indicating how the council had performed against the strategy.
The report also gave the up to date position as regards to the council’s investment with two Icelandic owned institutions, Landsbanki and Heritable.
Resolved – (a) That following consideration of the above report and discussion of its content, the committee agrees that the Treasury Management and Investment Strategy Annual Report 2011/12 provides sufficient assurance on the effectiveness of arrangements for treasury management, and (b) that Treasury Management’s performance for the 2011/12 financial year be noted.
273 (9) ANNUAL GOVERNANCE STATEMENT 2011/12 – The Director of Policy and Resources submitted a report presenting the council’s draft Annual Governance Statement (AGS) 2011/2012 for the committee’s comments and approval. The report explained that the Accounts and Audit (England) Regulations 2011 required the council to publish with its accounts an AGS. The AGS must accompany the final accounts and be considered in its own right, as had been the case at this meeting. Under the new regulations this could take place in September. However the Audit Committee had previously decided to consider the AGS in June as well as in September to allow early action to be taken on any issues identified by the AGS. The Statement would be updated to reflect assurance provided through the outcome of external audit’s final accounts work and presented again in September for approval.
The Director in his report stated that CIPFA had also provided guidance to support councils to produce the AGS. The document provided examples of sources of assurance and evidence to compile the AGS. The report explained that the Annual Governance Statement set out the council’s governance framework and the results of the annual review of the effectiveness of the council’s arrangements. Sources of assurance to support the statement were gathered throughout the council in the form of annual assurance statements prepared by Directors. These statements provided an evaluation of the adequacy of internal control within their service area and were evidenced by sources of assurance and managerial processes. Independent reviews carried out by internal audit in key areas such as risk management, corporate governance and fundamental financial system work were also important sources of assurance. External audit reviews and inspections also contributed as sources of assurance.
In accordance with best practice, a management team comprising the Director of Policy and Resources, Director of Corporate and Community Services, Assistant Director Legal and Democratic and Head of Audit, Risk and Insurance had overseen the process using key objectives.
The draft Annual Governance Statement 2011/2012 was attached as appendix A to the report and showed that the council had well-established governance arrangements that were monitored and reviewed on a regular basis. Changes and enhancements described in the AGS demonstrated the council’s commitment to continual improvement. Significant governance issues requiring further development were identified in the AGS and summarised in the report.
The Director also reminded the committee that the Annual Governance Statement for 2011/12 was currently in draft and represented the culmination of internal and external assurance sources. Therefore, the statement would need to be updated to reflect the outcome of the final accounts audit process prior to resubmission to the committee alongside the audited accounts.
The Director suggested that members should consider whether the AGS provided the committee with sufficient assurance on the council’s governance arrangements in 2011/2012, prior to approval and make any amendments or seek clarification as necessary.
Members asked question on the content of the AGS which the Director responded to.
Resolved – (a) That following consideration of the above report and discussion of its content, the committee agrees that the Annual Governance Statement for 2011/12 provides a sufficient level of assurance on the adequacy of governance arrangements throughout the council to allow the committee to fulfil its role, and (b) that the Annual Governance Statement for 2011/2012 be approved and a further update be submitted to the committee alongside the audited accounts in September.
274 MEMBER TRAINING UPDATE – The Director of Policy and Resources updated the committee informing members that further training events had been scheduled in the council’s committee timetable/yearbook as follows –
12 September 2012 Corporate Strategy and Performance Scorecard;
26 September 2012 Accounts and Accountability – How to make sense of accounts;
12 October 2012 – Local Taxation and Benefits;
12 February 2013 – Budget, Business Rates and Council Tax, and
9 April 2013 – Governance, Risk Management and Fraud.
Members of the committee were encouraged to attend the above, and to suggest any further training they may require over the council year.
Resolved – That the above training events be noted and welcomed.