northlincs.gov.uk

Audit Committee – 11 April 2017

Chairman:  Councillor Glover
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 17 January 2017 as a correct record and authorise the chairman to sign.

4.       Internal Audit Plan 2017/18.

5.       External Audit Reports.

6.       Internal Audit Progress Report.

7.       Treasury Management and Investment Strategy – Period 11 Update

8.       Annual Fraud Report

9.       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 Governance and Partnerships unless otherwise stated.

MINUTES

PRESENT: – Councillor Glover in the chair

Councillors T Foster (Vice-Chair), Clark, Kirk, and K Vickers.

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

The committeemet at the Civic Centre, Scunthorpe.

463     MINUTE’S SILENCE – The Chairman referred to the recent sad and untimely death of Councillor Pauline Carlile.  Councillor Carlile had held many roles since being elected in 1999.  The Panel then observed a minute’s silence in memory of Councillor Carlile.

464     DIRECTOR: GOVERNANCE AND PARTNERSHIPS – The Chairman welcomed Becky McIntyre to the meeting, the council’s newly appointed Director: Governance and Partnerships, whose role included the statutory position of Section 151 Officer.

465     DECLARATIONS OF DISCLOSABLE PECUNIARY, PERSONAL OR PERSONAL AND PREJUDICIAL INTERESTS – There were no declarations of interests made at the meeting.

466     MINUTES – Resolved – That the minutes of the proceedings of the meeting held on   17 January 2017, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.

467     (21)    INTERNAL AUDIT PLAN 2017-18 – The Director: Governance and Partnerships submitted the internal audit plan for 2017-18.

The Accounts and Audit Regulations 2015 required the council to ensure there were sound systems of internal control and to undertake effective internal audit to evaluate the effectiveness of its risk management, control and governance processes.  Internal audit must take into account Public Sector Internal Auditing Standards (PSIAS) and guidance.

The PSIAS required that an Internal Audit Plan was agreed by the Audit Committee annually.  The audit plan must be risk-based and take into account the organisation’s risk management framework and reflect changes in the organisation’s business, risks, operations, programs, systems and controls.  The plan also confirmed the resources available and required to support a reliable year-end Audit opinion.

The North Lincolnshire Audit Charter, approved by this committee on 17 January 2017, defined the internal audit activity’s purpose, authority and responsibility and defined the scope of internal audit activities.  Appendix 2 provided a detailed commentary about the methodology and delivery from the Head of Audit and Assurance.

The Internal Audit plan for 2017-18 was included at Appendix 3 of the report.

The Director responded to members’ questions on aspects of her report.

Resolved – (a) That following consideration of the above report and discussion of its content, the committee agreed that the Internal Audit plan for 2017-18 would provide the committee with a sufficient level of assurance to fulfil its role, and (b) that the Internal Audit Plan for 2017-18 be approved.

468    (22)    EXTERNAL AUDIT REPORTS – The Director: Governance and Partnerships submitted three external audit reports, namely the ‘External Audit Plan 2016/17’, ‘Certification of Grants and Returns Report 2015/16’, and ‘Technical Update and Progress Report’.

The Director, in her report, explained that the External Audit Plan 2016-17, which was attached to the report at appendix A, provided details of external audit’s work which was 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 Certification of Grant Claims and Returns 2015-16 report was attached at appendix B to the report.  No recommendations had been made during the year and the one recommendation previously made was confirmed as implemented.

The Technical Update and Progress Report at appendix C to the 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 representative 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 External Audit Plan 2016-17, Certification of Grants and Returns Report 2015-16 and Technical Update and Progress Report be noted.

469     (23)    INTERNAL AUDIT PROGRESS REPORT – The Director: Governance and Partnerships submitted a report that informed the committee of the outcomes from the annual programme of internal audit and highlighted key issues identified.

The Internal Audit Plan 2016/17 was approved by the Audit Committee on 12 April 2016.  The completion of the Plan was monitored and reported regularly to the committee.

An effective Internal Audit service contributed to the achievement of strategic objectives by assessing, providing comment and where relevant recommending improvement to, the council’s assurance and control frameworks.  The latest position was provided at appendix A of the report.

The plan was revised in February to ensure that resources were concentrated on key areas.  Three audits had been deferred to 2017/18 at the request of the relevant service manager, due to operational reasons within the service areas.  Following an assessment of resources, four audits, as shown in appendix A of the report, would not be completed as part of the 2016/17 plan.  None of these were critical to the year-end audit opinion on the overall control environment.  These audits would be risk assessed along with other audit areas for inclusion in the 2017/18 audit plan.  Other audits were still in progress and would be completed by the end of May to feed into the Head of Audit’s annual report.  There would be a sufficient level of completed planned work to provide an opinion on the adequacy of the control environment.

Members were informed that there were no fundamental control weaknesses to bring to the committee’s attention.  Appendix B of the report showed 2016-17 completed audits where an audit opinion on the control environment was provided.  An audit opinion of limited assurance was given in respect of a supplementary audit to the planned work on Community Meals; this covered the interface between Catering and Adult Services.  Improvements to controls had been agreed with service managers and progress would be assessed in the future.  Two follow up audits had been completed and the assurance level improved from Limited to Satisfactory.

Other areas of work and support which Internal Audit had committed time to during the period, in addition to the delivery of the audit plan, included:

• representation on the IT Security and Incident Group, including the provision of advice in relation to data breaches;
• providing advice and support on the development of council wide assurance mapping.
• requests for advice from services relating to the control environment in their specific area e.g. schools.

During the period, significant work had been carried out in relation to risk management as part of the Audit and Assurance Shared Service with North East Lincolnshire.  This work had included:

• reviewing the council’s Risk Management strategy – to inform a Risk Management Policy.
• reviewing the approach to defining the council’s risk appetite.
• beginning the process for introducing common risk management software across both councils with an expectation of implementation by June 2017.

Other planned activities between March and June 2017, in relation to risk included the following:

• reviewing the council’s Strategic Risks;
• working with the Insurance team to identify areas were risk management can effectively be used to reduce claims against the council; and
• using risk management approaches to identify those areas at greater risk of fraud and therefore prioritise areas for anti-fraud activity; and
• the development of risk management eLearning packages.

In addition, issue 26 of the Risk Roundup newsletter was attached to the report at appendix C.

The Director responded to members’ questions on aspects of her report.

Resolved – That following consideration of the above report and discussion of its content, the committee agreed that the progress report contributes to a sufficient level of assurance on the adequacy of internal control arrangements.

470     (24)    TREASURY MANAGEMENT AND INVESTMENT STRATEGY – PERIOD 11 UPDATE – The Director: Governance and Partnerships submitted a report that informed the committee of the current position in respect of the council’s Treasury Management Strategy and its performance.

The annual treasury management and investment strategy was prepared in line with –

• CIPFA Code of Practice in the Public Service Fully Revised 2011
• CIPFA The Prudential Code Fully Revised Second Edition 2011
• DCLG Guidance
• Local Government Act 2003

The code of practice required that Full Council receive 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.

It 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 were reviewed on a regular basis.

The report outlined treasury management performance for period 11 of the 2016-17 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.

The Director responded to members’ questions on aspects of her report.

Resolved – (a) That following consideration of the above report and discussion of its content, the committee agreed that the effectiveness of arrangements for treasury management would provide the committee with a sufficient level of assurance to fulfil its role, and (b) that the period 11 treasury management performance for the 2016-17 financial year be noted.

471     (25)    ANNUAL FRAUD REPORT – The Director: Governance and Partnerships submitted a report that informed the committee of the progress that had been made in implementing counter fraud arrangements

The council’s framework to combat fraud, corruption and misappropriation was approved by the committee in January 2016.  The framework followed national guidance as laid out in the document “Fighting Fraud Locally”, and was based upon three key principles:

• Acknowledging and understanding fraud risks
• Preventing and detecting fraud
• Pursue – Being stronger in punishing fraud and recovering losses

The Annual Fraud Report, which was attached at appendix A to the report, highlighted the work which had been undertaken in each of these areas.

The Director responded to members’ questions on aspects of her report.

Resolved – That following consideration of the report and discussion of its content, the Annual Fraud Report provided a sufficient level of assurance on the adequacy of counter fraud arrangements.