Audit Committee – 23 January 2014

Chairman:  Councillor Eckhardt
Venue:  Civic Centre, Scunthorpe (Function Room 1)
Time:  10 am

 AGENDA

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 September 2013 as a correct record and authorise the chairman to sign.

4.  Sickness Absence – Report of the Assistant Director Human Resources.

5.  Information Governance Update.

6.  Data Quality Update.

7.  External Audit Reports.

8.  Final Accounts and Accounting Policies 2013/14.

9.  Internal Audit Progress Report.

10.  Risk Management Progress Report.

11.  Protecting the Public Purse.

12.  Counter Fraud Policies and Standards.

13.  Quarterly Treasury Management and Strategy Report.

14.  Member Training – verbal update.

15.  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.

MINUTES

PRESENT:  Councillor Eckhardt in the chair

Councillors England (vice-chairman), Glover, Gosling Whiteley, Wilson and Wells

Councillor Collinson attended the meeting in accordance with procedure rule 1.37 (b).

Also in attendance was a representative of KPMG (the council’s external auditors).

The committee met at the Civic Centre, Scunthorpe.

325  DECLARATIONS OF PERSONAL OR PERSONAL AND PREJUDICIAL INTERESTS – There were no declarations of personal or personal and prejudicial interests made at the meeting.

326  MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 24 September 2013, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.

327  (15)  SICKNESS ABSENCE – Further to minute 307, the Assistant Director Human Resources submitted a progress report providing the committee with the latest available data, April to November 2013, on sickness absence levels of employees of North Lincolnshire Council.

The Assistant Director explained that the average number of working days lost due to sickness absence in 2013/14 to date was 6.06 days against a part year target of 5.45 days. This was a decrease of 0.55 days compared to the same period in 2012/13. A year end figure of 9.18 days was projected (against an annual target of 8.25 days) which represented a 0.83 day reduction compared to 2012/13.

The report also provided statistical data by directorate, for short term and long term absences, periods of sickness absence, reasons for sickness absence, and continuing action being taken as part of the managing attendance improvement plan to address sickness absence.
The Assistant Director Human Resources, who was in attendance at the meeting, responded to questions asked by members.

Resolved – That following consideration of the above report and discussion of its content, the committee agrees that there is continuing assurance that adequate controls are in place to manage the risk to capacity due to sickness absence.

328  (16)  INFORMATION GOVERNANCE UPDATE – The Director of Policy and Resources submitted a report providing the committee with a position statement on the development of the council’s Information Governance function.

The report explained that information was a key council asset and it was crucial that it was looked after with the same care as other critical assets, such as finance, people and land/property. The council had a legal obligation to comply with information related legislation, notably the Data Protection Act 1998, Freedom of Information Act 2000 and the Environmental Information Regulations 2004.  Collectively these requirements and activities were referred to as ‘Information Governance’. An internal Information Governance Framework underpinned by associated policies set out how the council would comply with legislation and good practice.  Significant enhancement of the Framework had taken place during 2012-13 and an annual review process ensured that any changes in legislation or good practice were incorporated.

The Director in his report stated that the council was committed to the ongoing strengthening of its Information Governance arrangements and continued to strive to meet the standards set by both internal audit and external assessment. Examples of assurance were highlighted in the report which had enabled Internal Audit to award ‘adequate assurance’ for the council’s Information Governance Framework, Data Protection and Freedom of Information processes in June 2013 and January 2014 respectively. Similarly, the recent integration of public health functions required the council to provide assurance to the NHS that it had adequate information governance policies and processes in place. This was achieved in March 2013 with the council gaining ‘level two’ compliance and acceptable action plan. The compliance must be reviewed annually.

The report also provided information on the role of the Information Commissioner’s Office (ICO), a three year training plan 2013-16 for council employees, the Humber Information Sharing Charter and work being undertaken to monitor performance against statutory requirements, physical improvements to security of data, and records and archiving and requirements.

Resolved – (a) That following consideration of the above report and discussion of its content, the committee agrees that the action identified in the update report provides sufficient assurance on the adequacy of the council’s Information Governance arrangements, and (b) that a further update report on Information Governance be submitted in January 2015.

329  (17)  DATA QUALITY UPDATE – Further to minute 308, 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 also provided members with an overview of wider developments planned to improve data quality across the council and confirmed that –

  • The target of auditing 75% of the current priority performance indicators had been achieved
  • Findings from the audits indicated that overall data quality was generally robust, and
  • A plan was currently been developed to measure and improve the council’s data quality across key systems, processes and functions.The Director in his report also identified further developments to improve data quality using a risk based approach and stated that currently there was an Internal Audit review underway of the council’s data quality arrangements, and although not yet complete, there had been no material issues identified so far. Findings from the review would be presented to the next meeting of the committee.Resolved – That following consideration of the above report and discussion of its content, the committee agrees that the report provides sufficient assurance on the adequacy of the council’s data quality arrangements.330  (18)  EXTERNAL AUDIT REPORTS – The Director of Policy and Resources submitted a report on two external audit reports, ‘Annual Audit Letter 2012/13’ and ‘Progress Report and Technical Update’.

    The report explained that each year the council’s auditors provided the council with an Annual Audit Letter. This gave an overall summary of external audit’s assessment of the council, drawing on final accounts and value for money work. The Annual Audit Letter for 2012/13 was attached as appendix A and its key messages summarised in the director’s report. The ‘Progress and Technical Update’ report provided the Audit Committee with a summary on progress in delivering external audit’s statutory responsibilities. It also highlighted key emerging national issues and developments which may be of interest to members.  A copy of this report was also attached as appendix B.

    The Director and external audit responded to questions asked by members.

    Resolved – (a) That the Annual Audit Letter 2012/13 and Progress and Technical Update report be noted, and (b) that external audit and the Director of Policy and Resources and his staff be thanked for the excellent work carried out and associated professional working relationship.

    331  (19)  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 2013/14 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 2013/14 (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 where 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.

    332  (20)  INTERNAL AUDIT PROGRESS REPORT – Further to minute 319, the Director of Policy and Resources submitted a report updating the committee on key issues arising from work undertaken by Internal Audit in the 2013/14 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 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;
  • Significant Audit Findings – including work on two audit reports highlighting control weaknesses and no assurance, work on adult income systems and procedures, additional work to review all partnership risk management arrangements as part of the risk management plan, follow up work on Freedom of Information and Data Protection reviews and progress on IT Disaster Recovery and Business Recovery, and the successful conclusion of the audit of Housing and Council Tax Benefits Subsidy Grant;
  • The current position and progress of unplanned work;
  • Future of Local Audit – an update on the recent consultation from the Department of Communities and Local Government on the Future of Local Audit (Local Audit and Accountability) and the response submitted attached as appendix B;
  • Local Code of Corporate Governance – The CIPFA/SOLACE guidance ‘Delivering Good Governance in Local Government’ provided best practice guidance to assist local authorities to achieve and demonstrate good governance. It was recommended that each local council develop and maintain a local code of governance comprising the requirements for best practice outlined in the guidance. The updated code was presented in appendix C.Resolved – (a) 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, and (b) that the Local Code of Corporate Governance attached at appendix C to the report, be approved.333  (21)  RISK MANAGEMENT PROGRESS REPORT – Further to minute 320, the Director of Policy and Resources submitted a report updating the committee on key issues arising from Risk Management work. Regular reporting on risk management 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 Director in his report addressed and commented upon progress made including –
  • The Strategic Risk Register had been reviewed using methodology outlined in the report, and a copy of the updated Strategic Risk Register was attached as appendix A of the report;
  • Edition 14 of the Risk Roundup newsletter issued in November 2013 was attached as appendix B of the report, which continued to raise awareness across the council;
  • Information on the review of Partnership risk management arrangements, and
  • Ongoing recent integrated risk management work with the Business Performance Improvement Team to ensure risk was fully integrated within the council’s performance scorecard.Resolved – That following consideration of the above report and discussion of its content, the committee agrees that the Risk Management progress report contributes to assurance on the adequacy of risk management arrangements.334  (22)  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 2013’, 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 published in November 2013 showed that fraud continued to be a significant problem affecting the whole economy. For local government, organisations detected fewer frauds in 2012/13 (excluding tenancy fraud) however, significant amounts of money were still involved nationally. Detected fraud in 2012/13 amounting to £178m (a small decrease of 1% compared to 2011/12), and 107,000 individual fraud cases (a 14% decrease compared to 2011/12). 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 2014 meeting of the committee in the Internal Audit Annual 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 delivers 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.

    335  (23)  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 provided 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 and the economic conditions which increased the risk of fraud. Minor amendments (highlighted for ease of reference) had been made to the strategy which was attached as appendix A of the report. Supporting policies that underpinned the strategy, shown as appendices to the strategy, were updated as necessary, especially in accordance with changing legislation.

    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 334 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 3.5% lower than last year as set aside in the 2013/14 Audit Plan. 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, which included Housing Benefit Fraud work with the Department for Work and Pensions (DWP). Proposals to create a Single Fraud Investigation Service (SFIS) by merging the DWP, HMRC and local authority benefit fraud teams were also highlighted. The latest edition of ‘Fraud Focus’, the counter fraud newsletter was attached at appendix C.

    Resolved – (a) That following consideration of the report and discussion of its content, the progress report provides a sufficient level of assurance on the adequacy of counter fraud arrangements; (b) that the counter fraud 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.

    336  (24)  QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT – Further to minute 321, the Director of Policy and Resources submitted areport which provided the committee with a review of the treasury strategy approved each year by the council.

    The report outlined treasury management performance between April and December 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.

    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.

    337  MEMBER TRAINING – UPDATE – The Director of Policy and Resources referred tominute 324 and informed the committee of previous training events held to date, and of future dates and subjects of finance/audit related training events scheduled until April 2014.

    He also stated that consideration was now being given to training events for the next council year, and welcomed members comments and suggestions on this and other subjects.

    Linda Wild representing KPMG, the council’s external auditors, also informed members that through her organisation she would be willing to keep members up to date on any relevant matters, and would consult the Director of Policy and Resources accordingly.

    Resolved – (a) That the committee welcomes the training provided to date, and thanks all officers involved in delivering interesting events, and (b) that any suggestions for training be submitted to the Director of Policy and Resources.

    338  MR D MURRAY – KPMG – Linda Wild, representing KPMG informed the committee that Mr D Murray, Director Audit and Assurance, was leaving his position with KPMG and would be replaced by Mr John Prentice from 1 February 2014, who was likely to attend the next meeting. On Mr Murray’s behalf, Linda thanked all members and officers for their work, and for the excellent professional working relationship experienced.

    Resolved – That the committee and associated officers thank Mr Murray for his work with the council, and wished him well for the future.