northlincs.gov.uk

Audit Committee – 15 April 2014

Chair:  Councillor Eckhardt
Venue:  Civic Centre, Scunthorpe (International Room)
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 January 2014 as a correct record and authorise the chairman to sign.

4.  Audit Committee Terms of Reference, Forward Plan and Assurance Map  2014/15

5.  Internal Audit Plan 2014/15

6.  External Audit Reports

7.  Internal Audit Progress Report

8.  Risk Management Strategy 2014/15

9.  Quarterly Treasury Management and Strategy Report

10.  Member Training – Update

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 Eckhardt in the chair.

Councillors T Foster, Oldfield, Robinson, Whiteley, Wilson and Wells.

Also in attendance were representatives of KPMG (the council’s external auditors).

The committeemet at the Civic Centre, Scunthorpe.

339  MR J PRENTICE – DIRECTOR, KPMG – Further to minute 338, thechairman welcomed Mr J Prentice – Director, KPMG to his first meeting of the Audit Committee.

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

341  MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 23 January 2014, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.

342  (25)  AUDIT COMMITTEE TERMS OF REFERENCE, FORWARD PLAN AND ASSURANCE MAP 2014/15 – The Director of Policy and Resources submitted a report requesting the committee to consider new guidance from the Chartered Institute of Public Finance and Accountancy (CIPFA) – Audit Committees, Practical Guidance for Local Authorities and Police (2013 edition), approve the forward plan and assurance map of reports to be presented to the Audit Committee during 2014/15 and also consider whether the assurances indicated in the plan provided adequate coverage to allow the committee to fulfil its terms of reference.

The report explained that the new guidance from CIPFA included a position statement on the role of audit committees in local government and police bodies which set out what CIPFA considered to be good practice for audit committees. The position statement was attached as appendix A. It set out the core functions of an audit committee, frequency of meetings, expected regular attendees, and characteristics of ‘good’ audit committees.

Although CIPFA’s guidance was new, many of the changes reflected issues already incorporated in the Audit Committee’s Terms of Reference such as the introduction of the Annual Governance Statement and its associated governance responsibilities and various legislative requirements around Treasury Management.  The new guidance also reflected developments since the original document, for example Public Sector Internal Audit Standards and recognised the significant changes affecting other areas of the public sector such as police following the Police Reform and Social Responsibility Act 2011. An important new section on effectiveness emphasised an evaluation of the impact of an audit committee rather than compliance with a checklist. For example, the audit committee could support improvement across a range of objectives such as good governance, arrangements to secure value formoney and the operation of an ethical governance framework.

The Director in his report also stated that a forward plan of reports and map of assurances was first introduced in June 2009. The plan showed the assurance each report would provide to allow the Audit Committee to fulfil its terms of reference. In addition to categories of assurance provided, the forward plan showed whether the source of assurance was primary or supporting. The forward plan had been refreshed for 2014/15 and minor changes had been made to reflect timing adjustments to some external audit reports.  Appendix B of the report showed the categories and level of assurance the Audit Committee needed to fulfil its terms of reference and approve the council’s audited accounts and Annual Governance Statement. A forward plan of reports for the Audit Committee to consider was shown in Appendix C.

Resolved – (a) That following consideration of the report and discussion of its content, the committee agrees that the CIPFA’s guidance on audit committees be noted; (b) that the Forward Plan for 2014/15 provides sufficient scope to provide an appropriate level of assurance on the adequacy of the council’s internal control and governance arrangements, and (b) that the Forward Plan for 2014/15 be approved.

343  (26)  INTERNAL AUDIT PLAN – The Director of Policy and Resources submitted a report to consider and approve the council’s internal audit plan for 2014/15. His report explained that the Accounts and Audit (England) Regulations 2011 placed a responsibility with the council to undertake an adequate and effective internal audit of its accounting records and of its system of internal control, in accordance with the proper practices in relation to internal control. The regulations also required that the council reviewed the effectiveness of its internal audit at least once a year and must be considered, as part of consideration of the system of internal control which informed the Annual Governance Statement.

The report stated that professional guidance was set out in the Public Sector Internal Audit Standards (PSIAS) and CIPFA’s Local Government Application.

The Director in his report explained that an important role for the Audit Committee, as set out in the terms of reference, was to assist the council by providing independent assurance on the adequacy of internal control and governance arrangements throughout the council. In undertaking this role the committee was responsible for:

• Approving (but not directing) Internal Audit’s strategy;
• Approving the annual plan of audits;
• Monitoring progress on delivery of the plan and considering the internal control issues that arise from the work undertaken, and
• Considering the assurance provided by the annual opinion report.Also, Internal Audit was a key part of the council’s internal assurance and governance system. In accordance with the PSIAS the purpose, authority and responsibility of the service was set out in the internal audit’s charter, attached as appendix A. The audit strategy described how the internal audit service would be delivered and developed in accordance with the audit charter and how it would be linked to the council’s objectives and priorities.The strategy for 2014/15 reflected some of the risks and challenges the council was likely to face, together with the impact future resource levels would have in delivering sufficient audit coverage to provide an audit opinion on the adequacy of the council’s internal control environment. The audit strategy also reflected reducing resources as Internal Audit met its planned 2014/18 budget efficiency savings.The Internal Audit Plan for 2014/15 was attached as appendix B of the report. Work to be carried out over the year was planned adopting a risk-based approach targeting high risk areas to make the best use of resources. Progress in achieving the plan and issues arising would be reported to the committee throughout the year.  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 committee agrees that the Internal Audit plan for 2014/15 will provide the committee with a sufficient level of assurance to fulfil its role, and (b) that the Internal Audit Plan, Audit Charter and Strategy for 2014/2015 be approved.

344  (27)  EXTERNAL AUDIT REPORTS – The Director of Policy and Resources submitted a report on five external audit reports, ‘External Audit Plan 2013/14’, ‘Certification of Grants and Returns Report 2012/13’, ‘External Audit Interim Report’,  ‘External Audit Progress Report and Technical Update’, and ‘Protecting the Public Purse Fraud Briefing’.The Director in his report explained that the External Audit Plan 2013/14 attached as appendix A, provided details of external audit’s work required to give an opinion on whether the accounts give a true and fair view and a statutory conclusion on the council’s arrangements to secure economy, efficiency and effectiveness. The proposed fee for the audit was £137,780. This was unchanged from the position set out in the Audit Fee Letter 2013/14. Also, on 1 April the council received a rebate of £18,855 applied to the 2012/13 audit fee.The Certification of Grant Claims and Returns 2012/13 report, attached at appendix B showed the council generally had good arrangements for preparing its grants and returns and produced high quality working papers in a timely manner. The report included one recommendation to improve audit testing arrangements for Housing and Council Tax Benefits. Additional testing required attracted a fee variation (increase) of £2,255.External audit’s Interim Report, attached as appendix C, summarised key findings arising from:

• Interim work in relation to the 2013/14 financial statements; and
• VfM conclusion work.No additional risks were identified at this time and the overall conclusion reached so far was that the council has an effective control environment that should prevent, detect and correct material misstatements caused by either fraud or error.The Progress and Technical Update report at appendix D provided the Audit Committee with a summary on progress in delivering external audit’s statutory responsibilities. It also highlights key emerging national issues and developments which may be of interest to membersThe Director’s report also included External audit’s fraud briefing report attached at appendix E, which provided further analysis of the survey’s findings including comparisons with other authorities.Representative of KPMG, the council’s external auditors who attended the meeting presented the above reports and responded to members questions.

  Resolved – (a) That following consideration of the above reports and discussion of their content, the committee agrees that the following external audit reports – External Audit Plan 2013/14, Certification of Grants and Returns Report 2012/13, External Audit Interim Report, External Audit Progress Report and Technical Update, and Protecting the Public Purse Fraud Briefing, be noted, and (b) that the committee emphasises the need for the council to retain an effective level of fraud investigation resource when the Single Fraud Investigation Service  comes into operation.

345  (28)  INTERNAL AUDIT PROGRESS REPORT – Further to minute 332, the Director of Policy and Resources submitted a report updating the committee on key issues arising from work undertaken by Internal Audit in the 2013/14 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 2013/14 audit plan year, which included –

• Progress on completion of the Internal Audit Plan which was summarised in Appendix A;
• 2014/15 Audit Plan – audit planning meetings had been held with Directors, Assistant Directors and the council’s external auditors (KPMG) to ensure reliance on internal audit’s work continued to be maximised;
• Significant Audit Findings – 2013/14 Audit Plan – no significant issues had been identified so far, apart from an improvement necessary to recording and maintaining partnership risk registers, which is referred to in the Risk Management Action Plan 2014/15 report (minute 346 refers);
• Unplanned Work – an allocation of 165 days set aside on the 2013/14 Audit Plan had been exceeded, 285 days spent, and referrals received via the Whistleblowers’ hotline were summarised;
• Proactive Work – a summary of work undertaken was given together with data matching exercises through the National Fraud Initiative (NFI), and
• Progress on the Local Audit and Accountability Act, including an update provided by CIPFA’s Better Governance Forum, and information on the Local Government Association taking over management of the Audit Commission’s outsourced audit contracts following its abolition and future arrangements.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.

346  (29)  RISK MANAGEMENT STRATEGY 2013/14 – The Director of Policy and Resources submitted a report which sought approval of the Risk Management Strategy for 2014/15 and Terms of Reference for the Risk Management Group. The strategy was an important source of assurance for the committee as it described the council’s risk management framework, the work completed during the year and a comprehensive action plan for the forthcoming year. The strategy was attached as appendix A of the report.The Director explained that each year the council’s Risk Management Strategy was reviewed and updated. The Strategy reflected national and local economic and financial risks which may impact on the council along with significant change through reshaping service delivery and operations. It had been evaluated against best practice and a risk management policy (endorsed by the Chairman of this Committee and Chief Executive) and had been developed to demonstrate commitment to the promotion of sound risk management throughout the council.The report stated that good progress had been made to maintain and improve the risk management framework and the Risk Management Group (RMG) had been successful in achieving most of the action plan set for 2013/14 (Appendix B). The RMG’s terms of reference also had been reviewed and were attached at appendix C for the committee to consider and approve.

The Risk Management Strategy and action plan and quarterly progress reports provided important sources of assurance to the Audit Committee that all significant risks to the council achieving its priorities were adequately managed. The council’s high level commitment to corporate governance and risk management would inform the Annual Governance Statement that the Audit Committee would be invited to approve to accompany the Statement of Accounts.

Resolved -(a) That following consideration of the above report and discussion of its content, the committee agrees that the Risk Management Strategy and action plan contributes to assurance on the adequacy of the council’s risk management arrangements in 2013/14; (b) that the strategy’s proposed work plan will deliver similar assurance in 2014/2015; (c) that the Risk Management Strategy for 2014/2015 be approved, and (d) that the termsof reference for the Risk Management Group as detailed in appendix C of the report be approved.

347   (30)  QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT – The Director of Policy and Resources submitted areport which provided the committee with a regular review of the treasury strategy approved each year by the council.The report outlined treasury management performance between April 2013 and March 2014. It explained how the strategy had been implemented to date and the response to changing conditions in financial markets.The Director also reported the successful conclusion to the council’s recovery of Icelandic investments

Resolved – (a) That following consideration of the above report and discussion of its content, the 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; (c) that the successful conclusion to the council’s recovery of Icelandic Investments be noted, and (d) that the Director and his finance teams be thanked for their work and continuing efforts during a difficult financial climate.

348  MEMBER TRAINING UPDATE – The Director of Policy and Resources informed the committee that he was proposing to schedule the following member training events into the council’s committee timetable for the 2014/15 municipal year – ‘Understanding the Council’s Final Accounts’ – September 2014, ‘Budget, Business Rates and Council Tax, The Budget Decision’ -February 2015, and ‘Fighting Fraud in North Lincolnshire’ – April 2015. The Director also suggested that a further three new events be included ‘Information Governance’, ‘Decision Making and Integrated Impact Assessment’ and ‘Better Care Fund and the Care Bill’ (dates to be finalised). These would be confirmed in due course and members informed accordingly. It was recommended that Audit Committee members attend these events, together with other members of the council.

The council’s external auditor (KPMG) stated that their officers would be willing to participate in any proposed training, where appropriate.

Resolved – (a) That the above member training be welcomed and that they be supported by members of the committee and all other members of the council, and (b) that the Director of Policy and Resources and his staff involved in delivering training held in 2013/14 be thanked for interesting and informative events.