Audit Committee – 22 September 2015

Chairman:  Councillor Clark
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 23 June 2015 as a correct record and authorise the chairman to sign.

4.  Internal Audit Progress Report.

5.  External Audit Report.

6.  Risk Management Progress Report.

7.  Quarterly Treasury Management and Strategy Report.

8.  Annual Governance Statement 2014/15.

9.  Audit of Accounts 2014/15 – Matters Arising from the Audit.

10. Member Training – Update.

–    Relevant Scheduled Member Development –

15 September 2015 – Understanding the Council’s Final Accounts;

19 November 2015 – IT and Information Governance;

16 February 2016 – Budgets, Business Rates and Council Tax, and

9 March 2016 – Effective Governance, Managing Risk, Insurance and Fraud.

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 T Foster (vice-chairman) in the chair

Councillors Godfrey, Gosling, Glover, Grant, Mumby-Croft and K Vickers.

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

The committeemet at the Civic Centre, Scunthorpe.

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

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

408     (10)    INTERNAL AUDIT PROGRESS REPORT – Further to minute 388, 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 2015/16 which was summarised in Appendix A;

·  Significant Audit Findings – 2015/16 Audit Plan – no significant control weaknesses were reported and there were no reports issued that highlighted control weaknesses and an overall assessment of no assurance;

·   Unplanned Work – an allocation of 190 days had been set aside in  2015/16 for unplanned work, with 79 days been used to date. Also referrals received via the Whistleblowers’ hotline were summarised. Arrangements had also been made to re-route Benefit related referrals to the Department for Work and Pensions (DWP) from the end of September in preparation for the transfer of responsibilities as a result of the development of the Single Fraud Investigation Service from 1 November 2015;

·  Proactive Work – a summary of work undertaken was given together with two bids made for DCLG counter fraud funding in partnership with neighbouring Humber councils. To date, one had been successful for the funding of a data analysis hub;

·  Progress on the development of Shared Services with North East Lincolnshire Council, including a joint internal audit team with a target date for implementation of 1 April 2015, and

·  Progress in responding to External Audit Recommendations had all been addressed to date.

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.

409     (11)    EXTERNAL AUDIT REPORTS – The Director of Policy and Resources  submitted a report on two external audit reports – ‘Progress Report’ and ‘Technical Update Report’.

The Director explained that the Progress Report and the Technical Update Report provided the Audit Committee with a summary on progress in delivering external audit’s statutory responsibilities, and highlighted key emerging national issues and developments which may be of interest to members. A copy of the report was attached in appendix A.

A representative of KPMG, the council’s external auditor who was present at the meeting commented upon the reports and responded to members’ questions.

Resolved – That following consideration of the above reports and discussion of their content, the Progress Report and Technical Update Report be noted.

410     (12)    RISK MANAGEMENT PROGRESS REPORT – Further to minute 401, 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 annual review of strategic risks was currently underway and the revised Strategic Risk Register would be reported to the committee at its January 2014 meeting;

·   An analysis of operational risk registers across the council had been undertaken. The top ten risks by the number of registers were listed in Appendix A. Appendix B also analysed the risks by residual risk score;

·   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;

·   Edition 21 of the Risk Roundup newsletter issued in September 2015 was attached as appendix C of the report;

·   Progress on completion of 2015 CIPFA/ALARM risk management benchmarking questionnaire, with the results to be reported to the January 2016 meeting of the committee, and

·   A presentation on cyber risks was delivered to the Risk Management Group, identifying key risks facing the council and systems that were in place to mitigate risks.

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.

411     (13)    QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT – Further to minute 381, 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 August 2015. It explained how the strategy had been implemented to date and the response to changing conditions in financial markets.

Resolved – (a) That following consideration of the above report and discussion of its content, the committee agrees that 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.

412     (14)    ANNUAL GOVERNANCE STATEMENT 2014/15 – Further to minute 404, the Director of Policy and Resources submitted a report attaching the updated Annual Governance Statement (AGS) 2014/15 following the audit of the council’s accounts for the committee’s consideration and approval. The report explained that under the changes to the Accounts and Audit (England) Regulations 2015 the AGS must accompany the final accounts and be considered in its own right. This could take place in September, however the Audit Committee had decided it should be considered in June as well as in September to allow early action to be taken on any issues identified by the AGS. The Statement had now been updated to reflect the outcome of external audit’s final accounts work and future government funding considerations. The updated AGS was attached as an appendix to the report.

The Director stated that the AGS was generally positive and showed that the council’s governance arrangements continued to be generally good and met    best practice in most areas. Developments designed to address significant issues were also identified in the AGS. Although the AGS had been updated, there were no further development issues identified through the accounts audit process. The AGS also 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. Four governance issues requiring further development identified in the AGS had been approved at the June meeting of the committee.

Members asked questions on the content of the AGS, which the Director of Policy and Resources 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 2014/15 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 2014/2015 be approved.

413     (15)    AUDIT OF ACCOUNTS 2014/2015 – MATTERS ARISING FROM THE AUDIT – The Director of Policy and Resources submitted a report informing the committee that the Accounts and Audit Regulations required the council to publish a statement of accounts each financial year. These accounts were the formal statement of the council’s financial performance for the year and its financial position at the end of that period. A financial year ran from April to March.

The accounts had been considered and approved by the council’s Chief Financial Officer (Director of Policy and Resources) on 29 June 2015, which met the statutory requirement that they be approved by 30 June 2014.  Subsequently, they must then be audited and  published within six months of the financial year-end or 30 September.

The report explained that the International Standard on Auditing 260 – ‘The Auditor’s Communication with those Charged with Governance’ (‘ISA 260’) required auditors to report certain matters arising from the audit of the council’s final statements before giving an opinion on them. Consequently, a report from the council’s external auditors KPMG was attached as appendix A setting out matters arising from the audit of the council’s 2014/15 accounts.

The Director’s report summarised the main findings of the external auditor’s report and the main issues resulting from the audit, and confirmed that he was in agreement with its findings. A representative of KPMG in attendance at the meeting presented their report and thanked the Director and his team for their cooperation during the audit.

The Director in his report explained that the International Standard on Auditing 580 ‘Management Representations’ required auditors to obtain written confirmations of appropriate representations from management before the audit report was issued. Additionally IAS 570 required a specific statement on the applicability of the ‘Going Concern’ concept to the council. The council’s accounts had been prepared on a going concern basis, and the committee was asked to confirm its agreement with this view. Also a proposed letter of representation was attached, which the committee was requested to approve and authorise its Chairman (or the Vice Chairman in his absence) and Director of Policy and Resources to sign.

The Statement of Accounts 2014/15 was attached as an appendix B to the report. The Director referred to minor amendments to the accounts, which required approval, and confirmed that they did not change the final position of the accounts previously reported to cabinet in terms of General Fund or balances available. There was therefore, no impact on the Medium Term Financial Plan. The council’s external auditors were expected to issue an unqualified opinion on the accounts shortly.

Members asked questions on particular aspects of the council’s Statement of Accounts 2014/2015 and ISA 260 Report to which the Director of Policy and Resources and representatives of KPMG responded to.

Resolved – (a) That following consideration of the above report and discussion of its content the Statement of Accounts for 2014/15 prepared on a going-concern basis and as amended in line with the auditors’ findings, be received and approved; (b) that the content of the ISA 260 Report be noted; (c) that the signing of the Letter of Representation by the Vice-Chairman in the absence of the Chairman, and Director of Policy and Resources be endorsed, and (d) that the Director of Policy and Resources and his staff be thanked for their hard work in preparing and delivering the audited Statement of Accounts 2014/15, and the council’s external auditors also be thanked for their professional support.

414    MEMBER TRAINING UPDATE – The Director of Policy and Resources updated the committee informing members of relevant future training events scheduled in the council’s committee timetable/yearbook as follows-

19 November 2015 – IT and Information Governance;
16 February 2016 – Budgets, Business Rates and Council Tax, and

9 March 2016 – Effective Governance, Managing Risk, Insurance and Fraud.

Resolved – That the Director be thanked for the interesting schedule of training events, and members are encouraged to attend.