Audit Committee – 30 September 2009

Chair: Councillor Whiteley
Venue: Pittwood House, Scunthorpe, (Function Room 2)
Time: 10.00 am

AGENDA

  1. Substitutions (if any).
  2. Declarations of Personal or Personal and Prejudicial Interests (if any).
  3. To take the minutes of the meeting held on 30 June 2009 as a correct record and authorise the chair to sign.
  4. Sickness Absence – Report of the Head of Strategy Development.
  5. Internal Audit – Progress Report.
  6. External Audit Recommendations – Progress Report.
  7. Quarterly Treasury Management and Strategy Report.
  8. Risk Management Progress Report.
  9. Counter Fraud Work.
  10. Use of Resources Judgement 2009.
  11. Audit of Accounts 2008/09 – Matters arising from the Audit.
  12. Member Training Update.
  13. Any other items which the chair decides are urgent by reasons of special circumstances which must be specified.

Note: Reports are by the Service Director Finance unless otherwise stated.

MINUTES

PRESENT : Councillor Whiteley in the chair

Councillors Wilson (vice-chair), Cawsey, J Briggs and N Sherwood

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

The committee met at Pittwood House, Scunthorpe.

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

128 MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 30 June 2009, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chair.

129 (10) SICKNESS ABSENCE – Further to minute 125, the Head of Strategy Development submitted a report informing the committee of the current position of sickness absence of council employees. The Audit Commission in the council’s latest Annual Audit Inspection Letter had highlighted sickness absence as a risk to capacity.

The report outlined work that had been carried out previously and targets set by a Performance Improvement Panel (PiP) in response to the council already identifying sickness absence as a concern through BV12 – the nationally defined sickness absence performance indicator. Although an improvement target of 9.5 days was set, 10.24 days had been achieved over the last 6 years with a further reduction to 10.17 days in 2008/09. Consequently, a recommendation that sickness absence be subject to a further PiP had been approved by the Council’s Management Team. Sickness absence would also be monitored through the council’s Internal Programme Board.

The Head of Strategy Development at the meeting also informed the committee that sickness absence was now subject to a scrutiny review. Discussions were scheduled to move towards merging the review with the PiP, which at this stage would now seek assistance through a peer review conducted by another council. Recommendations from a recent Internal Audit of sickness would also assist members of the Economic Development and Corporate Issues Scrutiny Panel who were carrying out the scrutiny review.

The Head of Strategy Development responded to questions asked by the committee.

Resolved – (a) That the proposed action to be taken during the above scrutiny review, together with the Performance Improvement Panel and Internal Audit’s recent work carried out, provides sufficient assurance that sickness absence will be reduced, (b) that the position be monitored by this committee, and (c) that a progress report be submitted to the next meeting.

130 (11) INTERNAL AUDIT PROGRESS REPORT – Further to minute 104, the Service Director Finance submitted a report updating the committee of key issues arising from Internal Audit’s work. Regular reporting on Internal Audit Issues was an important source of assurance for the committee to fulfil their role and provided supporting evidence for the annual approval of the council’s Governance Statement.

The Service Director in his report addressed and commented upon the following –

  • Depleted resources in internal audit as a result of higher than anticipated levels of sickness;
  • A significant level of resources being devoted to finalising the council’s fundamental financial systems following External Audit’s review of this work and in response to issues arising from their audit of accounts work. Similarly, supplementary transactional testing work on the Benefits subsidy claim to be completed by the end of October 2009;
  • Confirmation of progress and completed audit work carried forward from the 2008/09 audit plan;
  • Slow progress on the submission of Financial Management in Schools (FMSiS) self-assessments. 37 primary schools were yet to submit their self-assessments. Children’s Services Finance Team had written to individual schools where accreditation was due by 31 March 2009. In addition the situation had been reported to the Schools Forum. Head teachers had indicated that they were aware of the FMSiS requirements.
  • Levels of response rates to audit recommendations from services, and
  • Work carried out to continue delivering an effective Internal Audit service

He also responded to questions asked by members and provided assurance that even though higher than anticipated levels of sickness had been experienced in Internal Audit recently, resources were being managed and were adequate to meet the Internal Audit work plan.

The Service Director suggested that the committee should consider whether the Internal Audit progress report provided a sufficient level of assurance on the adequacy of internal control arrangements detailed.

Resolved (a) 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 as detailed, (b) that progress on the Internal Audit Work Plan be reported to all future meetings of the committee, and (c) that the Service Director Finance and/or the Service Director Children and Young People write again to those primary schools which have not yet submitted their FMSiS self assessment requiring firm dates for conclusion of this exercise.

131 (12) EXTERNAL AUDIT RECOMMENDATIONS – PROGRESS REPORT – Further to minute 105, the Service Director submitted a progress report on the implementation of external audit recommendations in respect of the following key reports –

  • Annual Audit and Inspection Letter;
  • Report to those charged with governance (matters arising from the audit of the council’s accounts – ISA 260), and
  • Data Quality report (the last of these reports)

In addition, progress on other recommendations from specific one-off reports was also reported. These included –

  • Consequences of flooding in summer 2007;
  • Grants report, and
  • Review of Internal Audit

Corresponding action plans for the above reports were included as appendices to the report.

The Service Director in his report suggested that the committee should consider whether the report provided sufficient assurance on the progress made on external audit’s recommendations and to seek clarification on its contents as necessary.

Resolved – That following consideration of the above report and discussion of its content, the committee agrees that the response to external audit’s recommendations as detailed in the report provides a sufficient level of assurance on action taken.

132 (13) QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT – Further to minute 120, the Service Director Finance submitted a report providing the committee with a regular quarterly review of the treasury strategy approved each year by council.

The report summarised treasury management performance between April and August 2009 and explained how the strategy was implemented during this period, the state of the financial markets, what action had been taken to address the challenges and the results of that action. In particular, the report informed the committee that in the light of the experience of greater stability in money markets this financial year, the one month investment term limit had been relaxed and the treasury team would now make full use of the flexibility to invest for periods of up to three months as allowed by the council’s approved policy. This would provide the double benefit of wider spread of investments and better rates of return with no appreciable increase in investment risk.

The Service Director in his report also provided an update on the latest position with regard to the recovery of the council’s investment in Icelandic banks, and on expected new CIPFA best practice guidance for local authority treasury management.

The Service Director suggested that the committee should consider the assurance provided by the quarterly report on the effectiveness of arrangements for treasury management.

Resolved – (a) That following consideration of the above quarterly report and discussion of its content, the committee agrees that it provides a sufficient level of assurance on the effectiveness of arrangements for treasury management, and (b) that the key findings of the report be noted and the relaxation on the term of deposit from one to three months within the investment strategy be endorsed.

133 (14) RISK MANAGEMENT – PROGRESS REPORT – Further to minute 119, the Service Director Finance submitted a report updating the committee of key issues arising from Risk Management Work. Regular reporting of this work was an important source of assurance for the committee to fulfil its role, provided supporting evidence for the annual approval of the council’s Governance Statement and was recognised as good practice through the Comprehensive Area Assessment (CAA) Use of Resources criteria.

The Service Director in his report addressed and commented upon –

  • Updated operational risk registers had now been received from all service areas;
  • The outcome of Internal Audit’s review of Risk Management arrangements having been reported to the council’s Strategic Risk Management Group on 8 September 2009. The report had provided positive assurance that risks were being adequately managed;
  • Publication of the second edition of the risk management newsletter ‘Risk Roundup’, attached as appendix A to the report;
  • Self assessment work using the Code of Practice for Risk Management and CIPFA Toolkit available via CIPFA’s Better Governance Forum and ALARM’s National Performance Model for Risk Management in Public Services’, attached as appendix B to the report, and
  • Future scheduled Risk Management training events.

The Service Director suggested that the committee should consider the assurance provided by the progress report on the adequacy of risk management arrangements detailed.

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, as detailed in the report.

134 (15) COUNTER FRAUD WORK – Further to minute 111, the Service Director Finance submitted a report on proactive and reactive counter fraud work being carried out by officers. Regular reporting on counter fraud issues was an important source of assurance for members of the committee to fulfil their role and provides supporting evidence for the annual approval of the Governance Statement.

The Service Director in his report addressed and commented upon –

  • Good progress of this year’s exercise with the council fully participating in the Audit Commission’s National Fraud Initiative (Data Matching);
  • Proactive internal audit work on Debit Cards, Hospitality Expenditure, Car Hire and various income sources.
  • Outcomes of a recent leisure centre fraud and corrective work being undertaken;
  • Preventing potential frauds through council wide communications;
  • Continuing success of detecting benefit fraud with forty four prosecutions and sanctions being issued between April and the end of August 2009, and the council’s performance work in relation to fraud and error in the benefits system as measured by performance indicator NI180, and
  • The CIPFA publication ‘Combating Financial Crime – further guidance on anti money laundering for public sector organisations’.

The Service Director suggested that the committee should consider whether the above counter fraud work provides a sufficient level of assurance on the adequacy of counter fraud arrangements.

Resolved – (a) That following consideration of the above report and discussion of its content, the committee agrees that the counter fraud work detailed in the report provides a sufficient level of assurance on the adequacy of counter fraud arrangements, and (b) that an email be sent to all members of the committee on the outcome of the meeting referred to in paragraph 2.4 of the report between Asset Management and Culture managers and Internal Audit.

135 (16) USE OF RESOURCES JUDGEMENT 2009 – The Service Director Finance submitted a report on the outcome of council’s annual Use of Resources assessment for 2009. The independent assessment by the Audit Commission evaluated how well councils managed and used their resources. This was the first assessment under the Comprehensive Area Assessment (CAA) using new criteria comprising of three themes –

  1. sound and strategic financial management;
  2. strategic commissioning and good governance, and
  3. the management of natural resources, assets and people.

Judgements had also been made for each theme using the Audit Commission’s scale –

  1. below minimum requirements – inadequate performance
  2. meets minimum requirements – performs adequately
  3. exceeds minimum requirements – performs well
  4. significantly exceeds minimum requirements – performs excellently

The Service Director in his report summarised the outcome of the assessment stating that overall the council had achieved a score of 2 under the above new criteria (for 2008 the assessment was level 3). The score was a composite overview of the three themes which in turn was made up of one or more strands, some of which achieved level 3. The report explained that performance requirements were increasingly difficult to achieve year on year to ensure there was adequate challenge and continuous improvement. Also new areas had been introduced for the first time for example ‘natural resources’ which is an area for development for the council.

Attached as an appendix to the report was the full report of the Audit Commission which set out key findings. A completed action plan in response to suggested areas for improvement was circulated at the meeting. Overall the council was close to achieving performance at level 3 in several strands and with implementation of the action plan this should see this level achieved shortly. Every effort would be made to achieve this in 2010.

The Service Director invited the committee to consider the 2009 judgement and the assurance that could be implied from its conclusions.

Resolved – (a) That following consideration of the above report and discussion of its content, the committee agrees that assurance is available from the Use of Resources 2008/09 judgement as implied by its conclusions; (b) that external audit’s recommendations be implemented and monitored and reported to future meetings of the committee, and (c) that the action plan as circulated be approved.

136 (17) STATEMENT OF ACCOUNTS 2008/09 – MATTERS ARISING FROM THE AUDIT – Further to minute 124, the Service Director Finance 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 to be considered and approved by council or a committee by 30 June each year and be audited and published within six months of the financial year-end or 30 September. These deadlines were government requirements.

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, the Annual Governance Report from the council’s external auditors, the Audit Commission, was attached as an appendix to the report. It set out the matters arising from the audit of the council’s 2008/09 accounts.

The Service Director Finance in his report summarised the main findings of the external auditor’s report and the main changes resulting from the audit, and confirmed that he was in agreement with its findings. The representative of the Audit Commission in attendance at the meeting also gave a brief explanation of their report.

The council’s Statement of Accounts 2008/2009 was also included as an appendix to the report. The Service Director stated that although there were some amendments to the accounts following the audit, they did not change the position previously reported in terms of General Fund or balances available. He also referred to an error identified by external audit on the balance sheet relating to Government Grants Deferred, which he explained at the meeting. This also did not change the final position of the accounts.

International Standard on Auditing 580 ‘Management Representations’ also required auditors to obtain written confirmations of appropriate representations from management before the audit report was issued. The Service Director Finance informed members that the Annual Governance Report included a proposed Letter of Representation, which the committee was asked to approve and authorise the chair and him to sign.

Members asked questions on particular aspects of the Annual Governance Report and the council’s Statement of Accounts 2008/2009 to which the Service Director Finance and representative of the Audit Commission responded to.

Resolved – (a) That the Statement of Accounts for 2008/09 as amended in line with the auditors’ recommendations be received, approved and adopted; (b) that no adjustment be made in respect of the error identified on the balance sheet by external audit in respect of Government Grants Deferred; (c) that the action plan contained in the Annual Governance Report be approved, and (d) that the signing of the Letter of Representation by the Chair and Service Director Finance be approved.

137 MEMBER TRAINING UPDATE – Further to minute 126, the Service Director Finance updated members by informing them that further training events were scheduled as follows –

  • 2 October 2009 – Introduction to Risk Management
  • 4 November 2009 – Governance and Risk Management
  • 17 February 2010 – Budget Briefing

Also, it was proposed that some training would be provided for members on the expected revised CIPFA Treasury Management Guidance after it had been received.

Resolved – That the position be noted and welcomed.

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