northlincs.gov.uk

PRESENT: – Councillor Eckhardt in the chair

Councillors T Foster, Gosling, Wells, Whiteley and Wilson

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

The committee met at the Civic Centre, Scunthorpe.

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

350  MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 15 April 2014, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.

351  DATES AND TIMES OF MEETINGS – Resolved – That the dates and times of future meetings of the committee be held at 10:00 am on –

Tuesday 23 September, 2014
Thursday 22 January, 2015 and
Tuesday 14 April, 2015

352  (1)  DATA QUALITY UPDATE – Further to minute 329, 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 100% of the current priority performance indicators had been achieved;
• Findings from the audits indicated that overall data quality was robust, and
• A new Data Quality Framework had been developed to measure and improve the council’s data quality across key systems, processes and functions. The new framework was attached as appendix A to the report. 

  Resolved – (a) 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, and (b) that future update reports on Data Quality be submitted to the Audit Committee on an annual basis. 

  353  (2)  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. Further enhancement of the Framework had taken place during 2013-14 which saw addition of the following new policies and procedures – Internal Information Sharing Protocol, Caldicott Plan, Information Request Charging Policy, Re-use of Council Information, Information Security Classification Procedure and Data De-identification Procedure. The Caldicott Plan and Information Security Classification Procedure would be finalised and the necessary approval sought during 2014. 

  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 integration of public health functions required the council to carry out a second NHS Information Governance Self Assessment which provided assurance to the NHS that the council’s information was looked after properly and was in line with legislation. This was carried out in March 2014 with the council exceeding the ‘level two’ compliance and meeting eleven requirements of the level three standard. 

  The report also provided information on the confirmation of continued successful compliance with the requirements of the Public Sector Network (PSN) Code of Connection (CoCo), work with the Information Commissioner’s Office (ICO), a three year training plan 2013-16 for council employees, progress with the Electronic Document Records Management System (EDRMS) and the Security Classification Project. 

  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. 

  354  (3)  EXTERNAL AUDIT REPORTS – The Director of Policy and Resources submitted a report on two external audit reports, ‘Certification of Grant Claims’ and ‘Returns Fee Letter and Progress and Technical Update Report’. Further to minute 344, the Director in his report explained that the annual fee letter issued on the 18 April 2013 set out the indicative composite fee for the certification work of £20,700. Since then the Audit Commission had announced some changes to their programme of claims and returns they were making certification arrangements for in 2013/14 resulting in a reduced fee of £17,880. This 12% reduction reflected the change in the indicative fee for the Housing Benefit 

  Subsidy Claim as a result of the abolition of the council tax benefit. The Certification of Grant Claims and Returns Letter, attached at appendix A sets out the audit arrangements for 2013/14 Housing Benefit Subsidy Claim. The fee only provided for basic audit work and did not include additional testing requirements or if the claim or return was amended or qualified by external audit. 

  The Director also explained that The Progress and Technical Update report provided the Audit Committee with a summary on progress in delivering external audit’s statutory responsibilities. It also highlights key emerging national issues and developments which may be of interest to members. A copy of the report is attached in appendix B.Resolved – (a) That following consideration of the above reports and discussion of their content, the committee notes the Certification of Grant Claims and Returns Fee Letter and Progress and Technical Update Report, and (b) that the committee receives further reports as the work is concluded in the Certification of Grant Claims and Returns Report, Annual Governance Report and Annual Audit Letter.

  355  (4)  INTERNAL AUDIT – EFFECTIVENESS REPORT 2012/2013 – The Director of Policy and 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 Public Sector Internal Audit Standards (PSIAS). The assessment was based on the following –

   

• Compliance with Best Practice as defined by CIPFA’s PSIAS and Local Government Application Note and Statement on the Role of the Head of Internal Audit;
• Customer feedback and endorsement, and
• Achievement of performance targets. 

  The report explained that Regulation 6 of the Accounts and Audit Regulations 2011 required an annual review of the effectiveness of Internal Audit as part of the consideration of the system of internal control. The need for the review was to ensure the opinion in Internal Audit’s annual report could be relied on as an important source of assurance in support of the Annual Governance Statement. 

  The Regulation required that adequate and effective internal audit of its accounting records and its system of internal control was maintained in accordance with proper internal audit practice. 

  In April 2013 the Code of Practice for Internal Audit was replaced by Public Sector Internal Audit Standards (PSIAS). An assessment of the requirements set out in CIPFA’s PSIAS and Local Government Application Note was carried out and results reported in June 2013. This showed internal audit to be broadly compliant with PSIAS as summarised in appendix A. Areas of partial compliance and requirements that needed further consideration were addressed at the audit development session held on the 10^th July 2013.The Director in his report stated that in January 2011 CIPFA issued the Statement on the Role of the Head of Internal Audit. The Statement was not mandatory but set out what CIPFA considered best practice for Heads of Internal Audit. It set out principles that defined the core activities and behaviours that belonged to the role of the Head of Internal Audit in public service organisations. CIPFA recommended that organisations should use the Statement as the framework to assess their existing arrangements. Appendix B to the report showed the assessment presented to Audit Committee in June 2013 showing a significant level of compliance and no areas for improvement were identified; this remained the same.

  The Director’s report also informed the committee of –

   

• Feedback on internal audit work from services managers – of the questionnaires returned 98.46% considered the conduct, manner and attitude of the staff good or excellent, exceeding the target of 98%;
• The Internal Audit section has a quality assurance and improvement programme (QAIP) as required by PSIAS. There are predetermined performance measures and development issues set to monitor performance, set targets for improvements and provide comparison both internally and externally. The section also participates in national and local benchmarking exercises. Overall performance was good during 2013/14 and targets were generally met;
• Annual CIPFA benchmarking results used to determine audit’s VFM profile for 2013/14 indicated that the service was evaluated as providing value for money (low cost/ high performance), with net cost per chargeable day being 6^th lowest out of 50 authorities, and cost per auditor being 2nd lowest out of 50 authorities. 

  The Director concluded his report stating that based on the findings described in the above paragraphs Internal Audit was assessed as providing an effective service to the council. External Audit would be able to place reliance on the work of Internal Audit if auditing standards were met. Feedback would be provided to the Head of Audit, Risk and Insurance at the end of external audit’s planned work.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 2013/14 provides assurance on its adequacy as a key component of the council’s internal review processes and internal control environment.

  356  (5)  INTERNAL AUDIT – ANNUAL REPORT 2013/2014 – 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 2013/14 audit plan. This provided the committee with an important source of assurance when considering the Annual Governance Statement and complied with the Public Sector Internal Audit Standards (PSIAS).

  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 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. The audit plan was flexible to respond to changing circumstances and emerging risks and work was prioritised accordingly. It contained 134 planned assignments and 21 unplanned assignments, which were listed in appendix A.

  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 2013/14. 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 and summarised under the following headings:-

   

• Risk Management;
• Corporate Governance;
• Fundamental Systems;
• Schools Audits;
• Counter Fraud Work;
• Savings, and
• Performance 

  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 2013/14. 

  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 2013/14 be approved and adopted. 

  357  (6)  RISK MANAGEMENT PROGRESS REPORT – Further to minute 333, the Director of Policy and Resources submitted a report updating the committee of 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 – 

• Progress on the evaluation of controls to manage risks as part of the revised Strategic Risk Register, the outcome to be reported to the September meeting of the committee;
• Edition 16 of the Risk Roundup newsletter issued in April 2014 was attached as appendix A of the report;
• Progress on the council-wide review of operational risk registers, including the development of the Public Health Operational Risk Register;
• Information on a presentation on how risks are managed in Children’s Social care delivered to the Risk Management Group, and
• Work currently ongoing including – development and implementation of a risk appetite model for the council, producing a Risk Management Guidance leaflet and Embedding Risk Management in schools. 

  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. 

  358  (7)  COUNTER FRAUD PROGRESS REPORT – The Director of Policy and Resources submitted a report informing the committee of key issues arising from counter fraud work. Regular reporting on counter fraud issues was an important source of assurance for the committee to fulfil its role and provided supporting evidence for the annual approval of the Governance Statement. 

  The Director in his report addressed and commented upon counter fraud work which was summarised under the following headings –

• Counter Fraud Plan Progress – a summary of the work was provided in appendix A;
• Proactive Work – including the Audit Commission’s National Fraud Initiative annual exercise;
• Reactive Work;
• Work of the Benefit Fraud Investigation Team – including successful prosecutions and sanctions of several fraud cases, and
• As part of the government’s announcement of the creation of a single fraud service, the council’s benefit fraud function would transfer to the DWP in November 2015.Resolved – (a) That following consideration of the above report and discussion of its content the committee agrees that the progress report provides sufficient assurance on the adequacy of risk management arrangements, and (b) that the counter fraud work programme delivers a sufficient level of assurance on the adequacy of counter fraud arrangements.

  359  (8)  TREASURY MANAGEMENT AND INVESTMENT STRATEGY ANNUAL REPORT 2013/14 – The Director of Policy and Resources submitted a report on the council’s treasury performance in 2013/14. The benchmark for measuring performance was measured against the Treasury Strategy set by the council at its meeting on 19 February 2013.

  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 in the Public Service Fully Revised 2011;
• The Prudential Code Fully Revised Second Edition 2011;
• The Local Government Finance Act 2003, and
• Department for Communities and Local Government (DCLG) Guidance 

  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. The Audit Committee received progress reports at each meeting and an annual report on the outturn position. 

  The Code also required the Council to maintain suitable Treasury Management Practices (TMPs), setting out the manner in which the organisation would seek to achieve its Treasury Management policies and objectives, and prescribing how it would manage and control those activities. As part of this ongoing process the Treasury Management Practices adopted by the council were reviewed on a regular basis.The Director in his report outlined the annual strategy under headings which covered – the Strategy for 2013/14, the Investment Strategy; the Borrowing Strategy, and How the Council Performed, including key investment and borrowing statistics and associated arrangements indicating how the council had performed against the strategy.

  The report also gave the final position as regards to the council’s investment with two Icelandic owned institutions, Landsbanki and Heritable. The council had recovered a total of £5.16m from the total claim of £5.55m. The conclusion of recovery funds had allowed the council to release the impairment provision of £2m into balances to support council spending as part of the 2014/15 budget decision.

  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 2013/14 provides sufficient assurance on the effectiveness of arrangements for treasury management, and (b) that  Treasury Management’s performance for the 2013/14 financial year be noted.

  360  (9)  ANNUAL GOVERNANCE STATEMENT 2013/14 – The Director of Policy and Resources submitted a report presenting the council’s draft Annual Governance Statement (AGS) 2013/2014 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 revised 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 updated guidance to support councils to produce the AGS. The document provided an example of an AGS and 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, Assistant Director Legal and Democratic and Head of Audit, Risk and Insurance had reviewed the draft AGS.

  The draft Annual Governance Statement 2013/2014 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 2013/14 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 2013/2014, 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 2013/14 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 2013/2014 be approved and a further update be submitted to the committee alongside the audited accounts in September 2014.

  361  MEMBER TRAINING UPDATE – The Director of Policy and Resources updated the committee informing members that for 2014/15 training events had been scheduled in the council’s committee timetable/yearbook as follows –

  23 July 2014 – Information Governance;

  15 September 2014 – Understanding the Council’s final accounts;

  8 October 2014 – Decision Making and Integrated Impact Assessment;

  15 January 2015 – Better Care Fund, The Care Bill and Adult Health and Social Care;

  19 February 2015 – Budget, Business Rates and Council Tax, and

  22 April 2015 – Fighting Fraud in North Lincolnshire.

  Members of the committee were encouraged to attend the above, and to suggest any further training they may require over the council year.

  Resolved – (a) That the Director be thanked for interesting training events held during 2013/14, and (b) that the above training events for 2014/15 be noted and welcomed.