Audit Committee – 19 January 2016
Chairman: Councillor Clark
Venue: Civic Centre, Scunthorpe, (Function Room 1)
Time: 10 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 22 September 2015 as a correct record and authorise the chairman to sign.
4. Information Governance and IT Security Update – January 2016
5. External Audit Reports.
6. Final Accounts and Accounting Policies 2015/16.
7. Internal Audit Progress Report.
8. Risk Management Progress Report.
9. Counter Fraud Policies and Standards.
10. Quarterly Treasury Management and Strategy Report 2015/16.
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.
PRESENT: – Councillor Clark in the chair
Councillors T Foster (vice-chairman), Ellerby, Godfrey, Glover, Grant, and K Vickers.
Also in attendance was a representative of KPMG (the council’s external auditors).
The committeemet at the Civic Centre, Scunthorpe.
415 DECLARATIONS OF DISCLOSABLE PECUNIARY, PERSONAL OR PERSONAL AND PREJUDICIAL INTERESTS – There were no declarations of interests made at the meeting.
416 MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 22 September 2015, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.
417 (16) INFORMATION GOVERNANCE AND IT SECURITY UPDATE – JANUARY 2016 – Further to minute 398, the Director of Policy and Resources submitted a report providing members with an interim progress update following the annual assurance report presented to the committee at its meeting in June 2015.
The report set out further improvements since June 2015 that had been made to the control frameworks for information governance and IT security. Key developments were summarised in the report which enhanced the control frameworks and compliance with legislative requirements and recognised best practice.
Resolved – That following consideration of the above report and discussion of its content, the committee agrees that the update report provides sufficient assurance on the adequacy of the council’s Information Governance arrangements.
418 (17) EXTERNAL AUDIT REPORTS – The Director of Policy and Resources submitted a report on two external audit reports, ‘Annual Audit Letter 2014/15’ and ‘External Progress Report and Technical Update’ and the briefing note ‘Appointing Your External Auditor’.
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 2014/15 was attached as appendix A and its key messages were 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 briefing note on ‘Appointing Your External Auditor, attached as appendix C, had been prepared following a recent Government decision that local government bodies’ audit contracts would only be extended for one year following the end of the current PSAA contract to incorporate the 2017/18 financial year. The Director explained that the appointment of the council’s external auditor was recognised as an important future work item which needed to be considered in the context of the council’s needs and strategic direction (including shared services). A further report outlining some of the details and implications to consider in relation to this matter would be presented to the committee during 2016.
The Director and external audit responded to questions asked by members.
Resolved – (a) That following consideration of the report and discussion of its content, the Annual Audit Letter 2014/15, Progress and Technical Update and Appointing Your External Auditor briefing note be noted, and (b) that the committee receive a report on the appointment of the council’s external auditor during 2016.
419 (18) FINAL ACCOUNTS AND ACCOUNTING POLICIES 2015/16 – The Director of Policy and Resources submitted a report seeking approval of the accounting policies that the council would use to close the 2015/16 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 2015/16 (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 satisfy themselves that the Accounting Policies set out in appendix 1 were appropriate, paying particular attention to those policies highlighted as being modified to take account of local circumstances or removed in the interest of clarity, as listed and summarised in paragraphs 4.1 and 4.2 of the report.
Resolved – (a) That following consideration of the report and discussion of its content, the accounting policies, as set out in appendix 1 of the report be approved, and (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.
420 (19) INTERNAL AUDIT PROGRESS REPORT – Further to minute 408, the Director of Policy and Resources submitted a report updating the committee on key issues arising from work undertaken by Internal Audit in the 2015/16 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 from work undertaken in the 2015/16 audit plan year, which included –
- Progress on the Internal Audit Plan which was summarised in Appendix A;
- Significant Audit Findings – Since April 2015 there had been no reports issued that had highlighted control weaknesses or an overall assessment of no assurance. Internal controls in areas of Continuing Health Care and Construction Framework – Highways had been assessed as providing limited assurance and action agreed to mitigate risks were be monitored with relevant service managers;
- Unplanned Work – Requests for unforeseen work had continued to be received and met from the allocation set aside in the 2015/16 Audit Plan. Investigations had risen by 19% compared to last year;
- Shared Service Development – At its meeting in October 2015 the Shared Services Joint Committee had approved the structure of the Audit, Risk, Fraud and Insurance shared service with North East Lincolnshire, and it was anticipated that the target date for 1 April 2016 would be met. Joint or new strategies or plans developed through the shared service arrangements would be presented to the Audit Committee as appropriate;
- Delivering Good Governance in Local Government – Work and consultations undertaken by the CIPFA/Solace Joint Working Group on Good Governance in Local Government to produce a revised Delivering Good Governance in Local Government: Framework with guidance notes, to be published in early 2016 and apply from 2016/17.
The Director responded to questions asked by members.
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.
421 (20) RISK MANAGEMENT PROGRESS REPORT – Further to minute 410, 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 –
- The Strategic Risk Register had been reviewed using various sources of internal and external information. Details of the methodology used and the updated strategic risk register were shown in appendix A. The Strategic Risk Register enabled the council to meet its statutory requirements under the Accounts and Audit Regulations 2015;
- An important aspect of the risk management action plan was to continue raising awareness across the council. This was achieved through comprehensive training programmes and communication networks. In addition to information available on the council’s relevant web page, addition 22 of the Risk Roundup newsletter had been issued in December 2015 and was attached as appendix B of the report;
- CIPFA/ALARM 2014 risk management benchmarking club results had been received which showed an encouraging level of compliance with best practice and risk maturity, with a summary of the results provided in appendix C, and
- The completion of the annual review of directorate operational risk registers, with the overall standard found to be much improved.
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.
422 (21) 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. It was vital that the counter fraud arrangements remained strong.
The main revision made was the removal of the Housing Benefits Prosecution policy following the transfer of such investigations to the Department for Work and Pensions (DWP) through the introduction of the Single Fraud Investigation Service in November 2015. Other minor amendments (highlighted in red for ease of reference) had also been made to the strategy, which was attached as appendix A to the report. A further review would be undertaken during 2016 following the implementation of an Audit, Risk, Fraud and Insurance Shared Service with North East Lincolnshire Council and the development of a dedicated fraud team. Consultation would take place with the committee, and senior officers on opportunities to integrate counter fraud strategies across both councils.
The report informed the committee that in October 2014 CIPFA launched a Code of Practice on Managing the Risk of Fraud and Corruption to support good practice in public sector governance. The document was attached as appendix C. Guidance notes were also issued in December 2014 to support the Code of Practice. These were already embedded within the counter fraud work undertaken in North Lincolnshire, however, a more detailed self-assessment against the counter fraud plan would be undertaken to confirm this.
The Director in his report referred to a self-assessment carried out on providing an effective fraud response in accordance with the five core principles of good practice supported by CIPFA’s Code of Practice on Managing the Risk of Fraud and Corruption in public sector governance. The code was attached in Appendix B of the report, and the council’s results of the self-assessment against the code in Appendix C. 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 8% higher than last year as set aside in the 2015/16 Audit Plan. An update of the counter fraud plan was also attached as appendix D of the report.
The report also summarised and provided the committee with an update on ‘proactive’ and ‘reactive’ work being carried by internal audit, further work on the National Fraud Initiative (NFI), investigations into new cases of potential fraud within the council, and referrals received via the Whistleblowers’ hotline.
The Director in the report reminded the committee that as from 1 November 2015 the council ceased to have responsibility for investigating Housing Benefit fraud allegations when it became the responsibility of the DWP. Consequently the Benefit Fraud Investigation team migrated across to the DWP to allow investigations to continue. A small fraud team had been retained by the council in order to conduct Council Tax Reduction Scheme investigations amongst others, and would form part of the Audit, Risk, Fraud and Insurance shared services team with North East Lincolnshire Council. As the council’s responsibility to investigate benefit fraud had now ended the report highlighted how successful the team had been, and between 2000 and 2015 it had achieved the following results:-
- 309 successful prosecutions
- 275 successful Administrative Penalties
- 563 Formal Cautions issued
- 4 new Council Tax Reduction Scheme Penalties issued since the introduction of CTRS
- Over 2,500 taped interviews under caution conducted
- Over 40,000 visits conducted (this also includes visits conducted by the VF team between 2001 and 2012 when part of the fraud team)
- £13M’s worth of fraudulent and incorrectly claimed benefit identified.
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.
423 (22) QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT – Further to minute 411, the Director of Policy and Resources submitted areport which provided the committee with a review of the treasury strategy approved by the council as part of the 2015/16 budget.
The report gave details of progress to date and outlined treasury management performance between April and December 2015. It explained how the strategy had been implemented during the year and the response to changing conditions in those financial markets.
Resolved – (a) That following consideration of the above report and discussion of its content, the quarterly report provides sufficient assurance on the effectiveness of arrangements for treasury management, and (b) that the treasury management performance for the period be noted.
424 CAROL ANDREWS – HEAD OF AUDIT, RISK AND INSURANCE – The Chairman referred to minute 420 above, and informed the committee that with the future arrangements for Audit, Risk, Fraud and Insurance Shared Services with North East Lincolnshire Council coming into effect on 1 April 2016, Carol had decided to retire from her current post as Head of Service. This would therefore, be Carol’s last full Audit Committee meeting.
The chairman stated that Carol had been with North Lincolnshire Council since its inception in 1996, and had been a very successful Head of Service. He invited all members of the committee to place on record their thanks and appreciation of Carol’s professional hard work over the years and especially the support and advice she had provided this committee.
The Director of Policy and Resources echoed the chairman’s comments and also wished to thank Carol for her professionalism and hard work over the years.
Resolved – (a) That the comments of the Chairman and Director of Policy and Resources be endorsed, and (b) that Carol receive the best wishes of the committee for a long, healthy and happy retirement.