Audit Committee – 14 April 2015

 

Chairman:  Councillor Eckhardt
Venue: Civic Centre, Scunthorpe, (Function Room 2)
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 22 January 2015 as a correct record and authorise the chairman to sign.

4.  Audit Committee Terms of Reference, Forward Plan and Assurance Map  2015/16.

5.  Internal Audit Plan 2015/16.

6.  External Audit Reports.

7.  Internal Audit Progress Report.

8.  Risk Management Strategy 2015/16.

9.  Quarterly Treasury Management and Strategy Report 2014/15.

10.  Member Training – Update.

11.  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), Armitage, T Foster, Wells, Whiteley and Wilson

Also in attendance were representatives of KPMG (the council’s external auditors).

The committeemet at the Civic Centre, Scunthorpe.

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

384  MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 23 January 2015, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.

385 (25) AUDIT COMMITTEE TERMS OF REFERENCE, FORWARD PLAN AND ASSURANCE MAP 2015/16 – The Director of Policy and Resources submitted a report reviewing the committee’s terms of reference, requesting the approval of the forward plan and assurance map of reports to be presented to the committee during 2015/16, and consideration of whether the assurances indicated in the plan provided adequate coverage to allow the committee to fulfil its terms of reference.

The Director in his report stated that the Chartered Institute of Public Finance and Accountancy (CIPFA) publication – ‘Audit Committees, Practical Guidance for Local Authorities and Police (2013 edition)’ set out guidance on the function and operation of audit committees in local authorities. In April 2014 (minute 342 refers), Members were informed of this publication which included a position statement on the role of audit committees in the sector that set out what CIPFA considered to be good practice for audit committees. The committee’s terms of reference were updated to reflect this professional guidance and minor changes had been made to the terms of reference to reflect changes such as the introduction of the Public Sector Internal Audit Standards.

CIPFA’s publication emphasised the importance of audit committees being in place and recognised them as a key component of governance ‘the primary purpose of an audit committee is to provide to those charged with governance independent assurance on the adequacy of the risk management framework, the internal control environment and the integrity of the financial reporting and annual governance processes’. In this way they had an important role to seek assurance about the council’s arrangements for managing risk, maintaining an effective control environment, and reporting on financial and other performance. The guidance encouraged authorities to explore how audit committees related to the organisation’s arrangements for managing and governing themselves.

The publication’s position statement, attached as appendix A to the report, set out the core functions of an audit committee; frequency of meetings; expected regular attendees; and characteristics of ‘good’ audit committees. The council’s arrangements remained compliant with good practice and no changes were recommended.

The Director’s report also stated that each year a forward plan of reports and map of assurances was presented for approval. The plan showed the assurance each report would provide to allow the Audit Committee to fulfill 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 2015/16 and minor changes had been made to reflect report scheduling adjustments. Appendix B of the report showed the categories and level of assurance the Audit Committee needed to fulfill 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 shown in Appendix C.

Resolved – (a) That following consideration of the report and discussion of its content, the committee agrees that CIPFA’s guidance on audit committees be noted; (b) that the Forward Plan for 2015/16 provides sufficient scope to provide an appropriate level of assurance on the adequacy of the council’s internal control and governance arrangements, and (c) that the Forward Plan for 2015/16 be approved.

386 (26)  INTERNAL AUDIT PLAN – The Director of Policy and Resources submitted a report to consider and approve the council’s audit charter and internal audit strategy and plan for 2015. His report explained that from April 2015 the Accounts and Audit Regulations 2015 placed a responsibility with the council to undertake an effective internal audit to evaluate the effectiveness of its risk management, control and governance processes, taking into account public sector auditing standards of guidance. Professional guidance was set out in Public Sector Internal Audit Standards (PSIAS) and CIPFA’s Local Government Application Note.  The PSIAS required the Internal Audit Manager to prepare:

At least annually, risk-based plans to determine internal audit priorities; and

Provide adequate coverage across the council’s systems so as to allow them to provide a written opinion on the overall adequacy and effectiveness of the council’s control environment.

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 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. In accordance with the PSIAS the purpose, authority and responsibility of the service was set out in the internal audit’s charter, attached as appendix A. The audit strategy described how the internal audit service would be delivered and developed in accordance with the audit charter and how it would be linked to the council’s objectives and priorities.

The strategy for 2015/16, attached as appendix B, had been revised to reflect some of the risks and challenges the council faced during 2015/16 and the impact future resource levels would have in delivering sufficient audit coverage to provide an audit opinion on the adequacy of the council’s risk management, control and governance arrangements. The audit strategy also reflected reducing resources as Internal Audit met its planned 2015/19 budget efficiency savings.

The Internal Audit Plan for 2015/16 also attached as part of appendix B of the report identified work to be carried out over the year. This 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.

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 2015/16 will provide the committee with a sufficient level of assurance to fulfil its role, and (b) that the Internal Audit Plan, Audit Charter and Strategy for 2015/2016 be approved.

387 (27) EXTERNAL AUDIT REPORTS – The Director of Policy and Resources submitted a report on two external audit reports, ‘External Audit Plan 2014/15’ and  ‘Certification of Grants and Returns Report 2013/14.

The Director in his report explained that the External Audit Plan 2014/15 attached as appendix A, 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 was £138,850. The Audit Commission had increased the scale fee by £1070 to take account of additional work required for business rates.

The Certification of Grant Claims and Returns 2013/14 report was attached at appendix B to the report and included no recommendations to improve the council’s claim completion process.

Representatives of KPMG, the council’s external auditors who attended the meeting presented the above reports and responded to members questions.

Resolved – That following consideration of the above reports and discussion of their content, the committee agrees that the following external audit reports be noted – External Audit Plan 2014/15 and Certification of Grants and Returns Report 2013/14.

388  (28)  INTERNAL AUDIT PROGRESS REPORT Further to minute 378, the Director of Policy and Resources submitted a report updating the committee on key issues arising from work undertaken by Internal Audit in the 2014/15 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 summarised key issues which included –

Progress on completion of the Internal Audit Plan which was summarised in Appendix A;

2015/16 Audit Plan – audit planning meetings had been held with Directors, Assistant Directors and the council’s external auditors (KPMG) to ensure reliance on internal audit’s work continued to be maximised;

Significant Audit Findings – 2014/15 Audit Plan – no significant issues had been identified that had highlighted control weaknesses and an overall assessment of no assurance. Audits of fundamental financial systems, risk management and corporate governance were nearing completion and the outcome would be reported in Internal Audit’s Annual Report in June 2015;

Unplanned Work – an allocation of 185 days set aside on the 2014/15 Audit Plan had been exceeded, 213 days spent, and referrals received via the Whistleblowers’ hotline were summarised;

Proactive Work – a summary of work undertaken was given together with data matching exercises through the National Fraud Initiative (NFI),

The impact of the Accounts and Audit Regulations 2015 for English local authorities (including police and fire), and

CIPFA’s review of the Corporate Governance Framework in 2015 to ensure that it remained fit for purpose and the development of revised guidance.

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.

389  (29)  RISK MANAGEMENT STRATEGY 2015/16 – The Director of Policy and Resources submitted a report which sought approval of the Risk Management Strategy for 2015/16 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 1 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 reshaping service delivery and operations. It had been evaluated against best practice and a risk management policy (endorsed by the Chairman of this Committee and Chief Executive) and 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 2014/15 (Appendix 2 of the report). The RMG’s terms of reference had also been reviewed and were attached at appendix 3 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 contributes to assurance on the adequacy of the council’s risk management arrangements in 2014/15; (b) that the strategy’s proposed work plan will deliver similar assurance in 2015/16; (c) that the Risk Management Strategy for 2015/2016 be approved, and (d) that the terms of reference for the Risk Management Group as detailed in appendix 3 of the report be approved.

390  (30)  QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT 2014/15 – The Director of Policy and Resources submitted aprogress report providing the committee with a review of the treasury strategy approved by council as part of the 2014/15 budget.

The report outlined treasury management performance for the above financial year. It explained how the strategy had been implemented during the year, the state of the financial markets and the response to changing conditions in financial markets.

Resolved – That following consideration of the above report and discussion of its content, the committee agrees that the treasury management report be noted.

391  MEMBER TRAINING UPDATE – The Director of Policy and Resources informed the committee of likely member training events he was proposing to schedule into the council’s committee timetable for the 2015/16 municipal year. This would be a balance of previous subjects and additional subjects for any new members of the Audit Committee. Dates 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.

The council’s external auditor (KPMG) stated that their officers would be willing to participate in any proposed training, where appropriate.

Resolved – (a) That the above member training events 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 2014/15 be thanked for interesting and informative events.

392  COUNCILLOR W ECKHARDT, CHAIRMAN OF THE AUDIT  COMMITTEE – Councillor T Foster reminded the committee that this was Councillor Eckhardt’s last meeting as chairman of the Audit Committee as he was not seeking re-election to the council in the forthcoming council elections in May 2015. Councillor Foster stated that Councillor Eckhardt had carried out a fantastic job as chairman in a responsible and difficult role. His knowledge of the subject was extensive and the council would miss this alongside his experience and friendly and professional manner. He emphasised his thanks and wished him well for the future.

Members of the committee and the Director of Policy and Resources echoed Councillor Foster’s comments, thanked and wished Councillor Eckhardt well for the future.

In response, Councillor Eckhardt thanked Mike Wedgewood, Director of Policy and Resources and all his staff for their professional support and hard work over the years. Also, to the officers of external audit, to members of the Risk Management Group and in particular, to all members of the Audit Committee for their hard work and support during his time as chairman. He also wished everyone the very best for the future.