Audit Committee – 22 January 2015
Chairman: Councillor Eckhardt
Venue: Civic Centre, Scunthorpe, (Function Room 1)
Time: 10 am
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 September 2014 as a correct record and authorise the chairman to sign.
4. Information Governance Update.
5. External Audit Reports.
6. Final Accounts and Accounting Policies 2014/15.
7. Protecting the Public Purse.
8. Internal Audit Progress Report.
9. Risk Management Progress Report.
10. Counter Fraud Policies and Standards.
11. Quarterly Treasury Management and Strategy Report.
12. Member Training – Verbal 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 Policy and Resources unless otherwise stated.
PRESENT: – Councillor Eckhardt in the chair
Councillors England (vice-chairman), Clark, Gosling, Wells, Whiteley and Wilson
Also in attendance were representatives of KPMG (the council’s external auditors).
The committee met at the Civic Centre, Scunthorpe.
372 DECLARATIONS OF DISCLOSABLE PECUNIARY, PERSONAL OR PERSONAL AND PREJUDICIAL INTERESTS – There were no declarations of personal or personal and prejudicial interests made at the meeting.
373 MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 23 September 2014, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.
374 (17) INFORMATION GOVERNANCE UPDATE – Further to minute 328, The Director of Policy and Resources submitted a report providing the committee with a position statement on the development of the council’s Information Governance function.
The report explained that information was a key council asset and it was crucial that it was looked after with the same care as other critical assets, such as finance, people and land/property. The council had a legal obligation to comply with information related legislation, notably the Data Protection Act 1998, Freedom of Information Act 2000 and the Environmental Information Regulations 2004. Collectively these requirements and activities were referred to as ‘Information Governance’. An internal Information Governance Framework comprising 16 schedules, underpinned by associated policies, set out how the council would comply with legislation and good practice.
The Director in his report summarised examples of compliance with Information Governance legislation and good practice, work carried out which demonstrated Information Governance progress over the past 6 months, and highlighted further planned Information Governance improvements over the forth coming year. This work to date aimed to proved the committee with assurance on the council’s Information Governance arrangements.
Resolved – (a) That following consideration of the above report and discussion of its content, the committee agrees that the update report provides sufficient assurance on the adequacy of the council’s Information Governance arrangements, and (b) that a further update report on Information Governance be submitted in June 2015.
375 (18) EXTERNAL AUDIT REPORTS – The Director of Policy and Resources submitted a report on two external audit reports, ‘Annual Audit Letter 2013/14’ and ‘Progress Report and Technical Update’.
The report explained that each year the council’s auditors provided the council with an Annual Audit Letter. This gave an overall summary of external audit’s assessment of the council, drawing on final accounts and value for money work. The Annual Audit Letter for 2013/14 was attached as appendix A and its key messages summarised in the director’s report. The ‘Progress and Technical Update’ 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 copy of this report was also attached as appendix B.
The Director and external audit responded to questions asked by members.
Resolved – That following consideration of the report and discussion of its content, the Annual Audit Letter 2013/14 and Progress and Technical Update report be noted.
376 (19) FINAL ACCOUNTS AND ACCOUNTING POLICIES 2014/15 – The Director of Policy and Resources submitted a report seeking approval of the accounting policies that the council would use to close the 2014/15 accounts. The committee was also asked to delegate to the Director of Policy and Resources the power to make new accounting policies and amend existing policies as may become necessary in the production of the accounts.
The report explained that The Code of Practice on Local Authority Accounting in the United Kingdom 2014/15 (CoP) required each local authority to adopt accounting policies that set principles for recording financial transactions within the Council’s accounts. The CoP was, in effect, a legal requirement as it was recognised in Government legislation as “Proper accounting practice”.
The CoP required that policies were set within UK accounting standards, which were based on International Financial Reporting Standards (IFRS), but otherwise may reflect matters appropriate to an authority’s circumstances.
The policies proposed for North Lincolnshire were based upon guidance issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) and took account of local circumstances.
The report requested that members satisfied themselves that the Accounting Policies set out in appendix 1 where appropriate, paying particular attention to those policies highlighted as being modified to take account of local circumstances or added, as listed and summarised in paragraphs 4.1 and 4.2 of the report.
Resolved – (a) That following consideration of the report and discussion of its content, the accounting policies, as set out in appendix A of the report be approved, and (b) that the power to make new accounting policies and amend existing policies as may become necessary in the production of the accounts be delegated to the Director of Policy and Resources, with any such changes being reported to the next meeting of the committee.
377 (20) PROTECTING THE PUBLIC PURSE – The Director of Policy and Resources submitted a report informing the committee of the main messages contained in the Audit Commission’s counter fraud report ‘Protecting the Public Purse 2014’, 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 published in October 2014 provided those charged with governance in local government with information of councils’ experience of fraud during 2013/14 and guidance on how they could fight fraud more effectively. It also showed that public sector fraud continued to be a significant problem affecting the whole economy. For local government, organisations detected fewer frauds in 2013/14 compared to the previous year, however their value increased by six per cent and councils were detecting more housing tenancy fraud.
Further detection statistics were also summarised in the report, including for North Lincolnshire Council where proven fraud was relatively low, with the majority detected being housing benefit and council tax fraud.
The report also 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.
Representatives of KPMG (the council’s external auditors) gave a presentation to the committee provided by the Audit Commission on ‘Protecting the Public Purse Fraud Briefing 2014 – North Lincolnshire Council’ and responded to members’ questions.
Resolved – (a) That following consideration of the report and discussion of its content, the committee agrees that the report delivers a sufficient level of assurance on the adequacy of counter fraud arrangements; (b) that the response to the report’s recommendations as set out in Appendix A, and the assessment against the checklist of best practice arrangements shown in appendix B of the report, be noted, and (c) that the council’s external auditors be thanked for the presentation.
378 (21) INTERNAL AUDIT PROGRESS REPORT – Further to minute 365, the Director of Policy and Resources submitted a report updating the committee on key issues arising from work undertaken by Internal Audit in the 2014/15 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 2014/15 audit plan year, which included –
• Progress on completion of the Internal Audit Plan which was summarised in Appendix A;
• Significant Audit Findings – 2014/15 Audit Plan – Since April 2014 there had been no reports issued that had highlighted control weaknesses and an overall assessment of no assurance;
• Unplanned Work – Requests for unforeseen work had continued to be received and met from the allocation set aside in the 2014/15 Audit Plan. Investigations had risen by 17% compared to last year;
• An update on the progress of the Local Audit and Accountability Act, Future of Local Audit – Consultation on secondary legislation: summary of responses and the Government’s Response was outlined in the report, and
• Shared Service Development – The cabinet at its meeting in July 2014 had endorsed further development work associated with the potential establishment of shared back office services with North East Lincolnshire. The development of a joint internal audit team was being considered to achieve service outcomes such as resilience, efficiency and high service standards.
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.
379 (22) RISK MANAGEMENT PROGRESS REPORT – Further to minute 367, 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 Strategic Risk Register had been reviewed using various sources of internal and external information. Details of the methodology used and the updated strategic risk register were shown in Appendix A;
• 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. In addition to information available on the council’s relevant web page, addition 18 of the Risk Roundup newsletter had been issued in December 2014 and was attached as appendix B of the report;
• CIPFA/ALARM 2014 risk management benchmarking club results had been received which showed an encouraging level of compliance with best practice and risk maturity; and
• The outcome of audit reviews of two corporate systems completed recently and action taken to address the audit findings and follow-up work which would re-evaluate the adequacy of system controls.
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.
380 (23) COUNTER FRAUD POLICIES AND STANDARDS – The Director of Policy and Resources submitted a report to provide the committee with an appropriate level of assurance that the council’s counter fraud arrangements were adequate, and to consider and approve the Counter Fraud Strategy.
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 provided a framework to investigate instances of potential fraud. Year on year, the strategy had been significantly strengthened and reference was made throughout the document of the council’s response to key publications that represented best practice. It also recognised the changing environment for the public sector and the economic conditions which increased the risk of fraud. It was vital that the counter fraud arrangements remained strong. Minor amendments (highlighted in red for ease of reference) had been made to the strategy which was attached as appendix A of the report. Supporting policies that underpinned the strategy, shown as appendices to the strategy, were updated as necessary, especially in accordance with changing legislation, this included the Whistleblowers Charter.
The report informed the committee that in October 2014 CIPFA launched a Code of Practice on Managing the Risk of Fraud and Corruption to support good practice in public sector governance. The document was attached as appendix C. Guidance notes were also issued in December 2014 to support the Code of Practice. These were already embedded within the counter fraud work undertaken in North Lincolnshire, however, a more detailed self-assessment against the counter fraud plan would be undertaken to confirm this.
The Director in his report referred to the Audit Commission’s annual report on Fraud ‘Protecting the Public Purse’ issued in November 2014. Its main messages and council’s response were reported in a separate report (minute 377 refers). He also explained that Internal Audit continued to focus on the delivery of a programme of proactive counter fraud. The volume of unforeseen and irregularity work was 17% lower than last year as set aside in the 2014/15 Audit Plan. An update of the counter fraud plan was also attached as appendix B of the report.
The report also summarised and provided the committee with an update on ‘proactive’ and ‘reactive’ work being carried by internal audit, further work on the National Fraud Initiative (NFI), progress on Housing Benefit Fraud Work and the development of the Single Fraud Investigation Service (SFIS. He also referred to a successful partnership bid for government funding of £129k by North Lincolnshire, North East Lincolnshire, East Riding and Hull City Councils to fund a fraud intelligence hub.
Resolved – (a) That following consideration of the report and discussion of its content, the progress report provides a sufficient level of assurance on the adequacy of counter fraud arrangements; (b) that the counter fraud programme delivers a sufficient level of assurance on the adequacy of counter fraud arrangements, and (c) that the Counter Fraud Strategy attached at appendix A of the report be approved.
381 (24) QUARTERLY TREASURY MANAGEMENT AND STRATEGY REPORT – Further to minute 368, the Director of Policy and Resources submitted a report which provided the committee with a review of the treasury strategy approved by the council, as part of the 2014/15 budget.
The report outlined treasury management performance between April and December 2014. It explained how the strategy had been implemented to date, the state of the financial markets and the response to changing conditions in financial markets.
Resolved – (a) That following consideration of the above report and discussion of its content, the treasury management performance for the period as outlined in the report be noted, and (b) that the committee thanks the Director and external audit for their ongoing good working partnership, which continues to provide the committee with further assurance and confidence.
382 MEMBER TRAINING – UPDATE – The Director of Policy and Resources referred to minute 371 and informed the committee of previous training events held to date, and of future dates and subjects of finance/audit related training events scheduled until April 2015.
He also stated that consideration was now being given to training events for the next council year, and welcomed members comments and suggestions on this and other subjects.
Resolved – (a) That the committee welcomes the training provided to date, and thanks all officers involved in delivering interesting events, and (b) that any suggestions for training be submitted to the Director of Policy and Resources.