Audit Sub-Committee – 31 January 2012
Chairman: Councillor Eckhardt
Venue: Civic Centre, (function room 1), Scunthorpe
. Substitutions (if any).
2. Declarations of Personal and/or Prejudicial interests (if any).
3. To take the minutes of the meeting of this sub-committee held on 27 September 2011 as a correct record and authorise the chairman to sign.
4. Sickness Absence – Report of the Assistant Director Human Resources.
5. Data Quality – Update.
6. External Audit Reports.
7. Internal Audit Progress Report.
8. Risk Management Progress Report.
9. Protecting the Public Purse.
10. Counter Fraud Policies and Standards.
11. Quarterly Treasury Management and Strategy Report.
12. Member Training – Update.
13. 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 Finance unless otherwise stated.
PRESENT: – Councillor Eckhardt in the chair
Councillors England (vice-chairman), and T Foster.
Also in attendance were representatives of the Audit Commission (the council’s external auditors).
The sub-committeemet at the Civic Centre, Scunthorpe.
239 DECLARATIONS OF PERSONAL OR PERSONAL AND PREJUDICIALINTERESTS – There were no declarations of personal or personal and prejudicial interests made at the meeting.
240 MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 27 September 2011, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.
241 (18) SICKNESS ABSENCE – Further to minute 188, the Assistant Director Human Resources submitted a report of the continuing impact of the improvement plan for sickness absence in the council.
The report explained that as at November 2011 (latest data available to date), all directorates were achieving their individual targets. This had resulted in a position whereby the council figure for the period April to November 2011 was 5.49 days against a target of 5.93 days. The impact of this was a reduction of just under half a day an employee, which represented enhanced employee capacity and contribution to the council’s financial position.
The report also stated that the council was on target to achieve the annual target of 9.00 days for 2011/12, and it was anticipated that the council would see a greater impact by the end of 2011/12, with a projected reduction of 0.67 days per employee.
The Assistant Director in her report informed the sub-committee that the average number of days lost per employee within the public sector was 9.01 days. Analysis of the reasons for sickness absence showed that the council mirrored trends throughout the public sector with the highest absences occurring in the categories of muscular skeletal, stomach and digestion, stress and depression. These areas were being targeted using the council’s procedures and relevant training.
Completion of the council’s sickness absence action plan had contributed significantly to the above reduction, and action taken to date was also summarised in the report.
Resolved – (a) That following consideration of the report and discussion of its content, the reduction in sickness absence be noted; (b) that the action taken to date provides continuing assurance that the risk to capacity due to sickness absence is being reduced, and (c) that a progress report be submitted to the June 2012 meeting of the sub-committee so that the position at the end of the 2011/12 year can be considered.
242 (19) DATA QUALITY UPDATE – The Director of Finance submitted a report providing the sub-committee with a position statement on the current status of the Data Quality Action Plan and improvements which had been implemented as a result of this work.
The report reminded the sub-committee of the outcomes of previous assessments of the council’s data quality carried out by the Audit Commission as part of specific audits, the Comprehensive Area Assessment (CAA), Use of Resources and Value for Money assessments. Although from May 2010, under the coalition government there had been a reduction in demand by central government for data, re-emphasis on local performance and less external inspection, a significant amount of work had been carried out by the council to ensure data quality arrangements were robust. A Data Quality Policy and Protocol had been developed and Data Quality Action Plan was continually monitored and reviewed.
The Data Quality Action Plan was attached as appendix B and the report outlined key elements of the plan to ensure compliance with Data Quality Policy and Protocol. This included, where feasible, an audit of all priority indicators and single data lists. An audit schedule of these for council services (except for Corporate and Community Services which was developing proposals) was also attached as appendix A of the report.
The Director in his report also summarised other significant developments that had also contributed to an improvement in the robustness of the council’s data quality arrangements, and additional developments planned to further enhance these.
Resolved – That following consideration of the report and discussion of its content, the action identified in the update report provides sufficient assurance on the adequacy of the council’s data quality arrangements.
243 (20) EXTERNAL AUDIT REPORTS – The Director of Finance submitted a report on four external audit reports, ‘Audit Plan 2011/12’, ‘Audit Committee Update Report’, ‘Certification of Claims and Returns – Annual Report’ and the ‘Annual Audit Letter 2010/11’.
The Director in his report explained that the Audit Plan set out external audit’s work 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 Audit Plan was attached at appendix A. The proposed fee for the audit of £229,633 showed a significant reduction on that for 2010/11 of £255,148.
The External Audit Update Report was designed to provide the Audit Sub-Committee with a report on progress in delivering its statutory responsibilities. The update also sought to highlight key emerging national issues and developments, which may be of interest to members. The report included an update on the externalisation of the Audit Practice and ongoing discussions with the Audit Commission. The report was attached at appendix B. The Director in his report also listed the council’s response to a series of questions contained in the Update Report for the sub-committee’s consideration.
The Certification of Claims and Returns Report summarised the council’s arrangements for claiming grants in 2010/11, and the level of assurance it provided on the operation of the council’s procedures. The report was attached at appendix C. Overall there were no significant weaknesses in the council’s arrangements to prepare grant claims reported and improvements in supporting working papers were also noted. Recommended improvements identified in the previous year’s report were implemented and issues identified during this year’s testing had been addressed.
The Annual Audit Letter 2010/11 provided an overall summary of the Audit Commission’s assessment of the council, drawing on final accounts and value for money work. The annual audit letter for 2010/11 was attached as appendix D. The report was positive and the key messages were: –
- An unqualified audit opinion was issued on the 2010/11 accounting statements on 30September 2011.
- An unqualified value for money conclusion was issued on 30 September 2011. This meant External Audit was satisfied that the council made proper arrangements to secure economy, efficiency and effectiveness of its use of resources.
The report contained one recommendation to improve internal control arrangements, specifically, ‘Members should review the structure, representation and attendance of the Audit Committee’.
Representatives of the Audit Commission (including Mr D Murray who had taken over as District Auditor from Mr M Kirkham) also explained elements of and commented upon the above reports.
Further to minute 236, the Chairman also updated the sub-committee on the outcome of his and the vice-chairman’s meeting with the Leader and Group Secretary of the council’s Labour Group, in order to progress the matter of audit committee/sub-committee membership and attendance.
Resolved – (a) That following consideration of the report and consideration of its content, the Audit Plan report be noted; (b) that the sub-committeereceives further reports as the work is concluded in the Annual Governance Report and Annual Audit Letter; (c) that the external audit Update Report and Certification of Claims and Returns Annual Report be noted; (d) that the sub-committee agrees that assurance has been provided by the conclusions of the Annual Audit Letter (including the council’s 2010/11 accounts, securing value for money and other significant aspects of the council’s operations); (e) that in response to the Annual Audit Letter’s recommendation identified in paragraph 2.5 of the report, this sub-committee requests that appropriate members should review the structure, representation, and attendance of the Audit Committee and it be considered at the Annual Meeting of the Council in May 2012, and (f) that the Director of Finance and his relevant staff be congratulated on the work carried out throughout 2010/11 financial year.
244 (21) INTERNAL AUDIT PROGRESS REPORT – Further to minute 231, the Director of Finance submitted a report updating the sub-committee of key issues arising from Internal Audit’s work. Regular reporting on Internal Audit issues was an important source of assurance for the sub-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 the following –
- Adequate progress of the Internal Audit Plan and an explanation of reprioritised work as a result of reduced resources and the impact of unforeseen work. The level of unforeseen work continued to be higher than anticipated. A summary was provided in appendix A of the report;
- The impact of office relocations as part of the council’s Worksmart initiative, the use of increased hours for part time staff and a secondment placement to offset some of the shortfall in resources, and a planned review of the Audit, Risk Management and Insurance section to consider the level and mix of resources necessary to meet the future needs of the council in these disciplines;
- Outcomes of evaluations in each audit review of internal audit arrangements, including Taxation audit (PAYE);
- Reasons given and action taken in response to external audit highlighting occasions when officers had accessed the council’s network after they had left employment with the council. No cases of inappropriate access were found, and improved controls for deleting access when system users leave were being investigated, and
- The service’s contribution to the ‘Services to Schools’ brochure setting out additional services available to maintained schools, and potential services that could be provided to academies using the skills and expertise of officers within internal audit.
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 sub-committee agrees that the progress report contributes to a sufficient level of assurance on the adequacy of internal control arrangements.
245 (22) RISK MANAGEMENT PROGRESS REPORT – Further to minute 234, the Director of Finance submitted a report updating the sub-committee of key issues arising from Risk Management work. Regular reporting of this work was an important source of assurance for the sub-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-
- A review and update of the council’s Strategic Risk Register using a number of sources listed in the report. This included rationalising the number of strategic risks from 21 to 12, with lead responsibilities being allocated. The updated strategic risk register was attached as appendix A, with a summary of changes explained in the report and summarised in appendix B;
- Progress of the new risk management system, having been operational for five months and welcomed by risk owners. A central review of all operational risk registers was currently taking place;
- Continue raising awareness across the council of risk management through comprehensive training programmes and communication networks. Further work was in progress to develop a risk management eLearning package;
- Edition 9 of the Risk Roundup newsletter issued in December 2011, which was attached as appendix C. This edition included articles of how the council’s Risk Management Group (RMG) was managing significant risks in service areas, and
- The Pocket Booklet – Managing Risk originally published in 2007 explaining the importance of risk management and outlining the types of risk and how the council manages them, had been reviewed and re-issued in December 2011. This was attached as appendix D.
The Director responded to members’ questions on aspects of his report.
Resolved – (a) That following consideration of the above report and discussion of its content, the updated strategic risk register be approved; (b) the sub-committee agrees that the progress report contributes to assurance on the adequacy of risk management arrangements, as detailed in the report, and (c) that Councillor T Foster be invited to attend future meetings of the council’s Risk Management Group.
246 (23) PROTECTING THE PUBLIC PURSE – The Director of Finance submitted a report informing the sub-committee of the main messages contained in the Audit Commission’s counter fraud report ‘Protecting the Public Purse, and invited members to consider the checklist to the report showing arrangements that should be in place in model counter fraud procedures.
The Director in his report explained that the Audit Commission published annual counter fraud reports ‘Protecting the Public Purse’. The latest report issued in November 2011 showed that fraud continued to be a significant problem affecting the whole economy. For local government, although detected fraud losses were low compared with total council spend, significant amounts of money was involved nationally – Detected fraud in 2010/11 amounting to £185m (an increase of 37% compared to 2009/10), and 121,000 individual fraud cases. High-risk areas and new and emerging fraud issues were also identified. All these areas were recognised locally and included in the audit plan. This outcome of this work would be reported to the June 2012 meeting of the sub-committee in the Internal Audit Progress Report.
The report identified some areas of good practice to maintain strong defences against fraud in the current economic climate. It also stated that the council was in a strong position and arrangements were continually reviewed against best practice and procedures, with partnerships developed to prevent and deter fraud. Examples were summarised in the report, together with a number of recommendations, which were attached in appendix A along with North Lincolnshire’s response. A checklist of best practice arrangements that members should look for was also included for information in appendix B.
Resolved – That following consideration of the report and discussion of its content, the committee agrees that the report contributes to a sufficient level of assurance on the adequacy of counter fraud arrangements.
247 (24) COUNTER FRAUD POLICIES AND STANDARDS– The Director of Finance submitted a report to provide the sub-committee with an appropriate level of assurance that the council’s counter fraud arrangements were adequate.
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 provide a framework to investigate instances of potential fraud. Over the last year or so the Strategy had been significantly strengthened and little further alteration was required. Given the minor nature of the changes made and overall size of the document the Strategy had not been included with this report but was available on the council’s website.
The Director in his report referred to the Audit Commission’s annual report on Fraud ‘Protecting the Public Purse’ issued in November. Its main messages and council’s response were reported in a separate report (minute 246 refers). He also explained that counter fraud work continued to be an important feature in the audit plan. Resources had been identified for preventative work and a contingency for responsive work such as investigations. During 2011/2012 emphasis had been placed on counter fraud work in response to CIPFA and Audit Commission guidance and the increased risk of fraud across the public sector as a result of the economic conditions. A summary of the work was provided in appendix A.
The Director in his report also addressed and commented upon the following:-
- Promotional work on the council’s counter fraud arrangements including warning bulletins through the council wide communication network, and the popular counter fraud newsletter November edition of ‘Fraud Focus’ which was attached as appendix C;
- Referrals received via the Whistleblowers hotline increasing steadily over the last few years indicated that the facility was being used properly and that users felt confident using it;
- The rate, content, scale of and outcomes of investigations carried out by internal audit. Overall, the number of fraud investigations had decreased on last year to date;
- Continuing proactive work and successful outcomes carried out by the Benefits Fraud Team;
- The impact of the government’s planned welfare reform on the Benefit’s Fraud Team including the introduction of the Universal Credit by the Autumn of 2013 and proposals for and consultation on a ‘Single Fraud Investigation Service SFIS’, and
- Successful work being carried out through the Audit Commission’s National Fraud Initiative (Data Matching ) exercise.
Resolved – (a) That following consideration of the report and discussion of its content, the progress report and minor changes to the Counter Fraud Strategy be noted, and (b) that the counter Fraud Strategy and counter fraud work programme delivers a sufficient level of assurance on the adequacy of counter fraud arrangements.
248 (25) QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT – Further to minute 235, the Director of Finance submitted areport which provided the sub-committee with a regular review of the treasury strategy approved each year by the council.
The report outlined treasury management performance between April and December 2011. It explained how the strategy had been implemented to date and the response to changing conditions in financial markets.
The Director in his report also provided an update on the latest position with regard to recovering the council’s Icelandic investments.
Resolved – (a) That following consideration of the above report and discussion of its content, the sub-committee agrees that the quarterly report provides a sufficient level of assurance on the effectiveness of arrangements for treasury management; (b) that the treasury management performance for the period as outlined in the report, be noted, and (c) that that the Director of Finance and his relevant staff be congratulated on the work carried out throughout 2010/11 financial year.
249 MEMBER TRAINING – UPDATE – The Director of Finance referred to minute 238 and reminded members of the dates and subjects of the finance/audit related training events scheduled for the last two months of 2011/12 financial year. (16 February 2012 – ‘Finance, balancing the books’ and to be rearranged in March 2012 – ‘Finance, tackling fraud’). He also stated that consideration was now being given to training events for next year and welcomed members comments and suggestions.
Resolved – (a) That the sub-committee welcomes the training provided to date; (b) that the further scheduled training opportunities identified above be noted, and (c) that members be encouraged to make suggestions for training and they be considered and delivered as soon as convenient.