Audit Committee – 19 January 2018

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 26 September 2017 as a correct record and authorise the chairman to sign.
4.       External Audit Reports

External Audit Plan 2017/18
Annual Reports on grants and returns 2016/17

5.       Final Accounts and Accounting Policies 2017/18
6.       Treasury Management and Investment Strategy – Quarter 3 report 2017/18
7.       Internal Audit Update Report
8.       Local Code of Corporate Governance
9.       Risk and Opportunities Protocol Report
10.     Any other items which the chairman decides are urgent by reasons of special circumstances which must be specified.

Note:  Reports are by the Director: Governance and Partnerships unless otherwise stated.

MINUTES

PRESENT: – Councillor Glover in the chair

Councillors T Foster (Vice-Chair), Gosling, Kirk, Ogg, Perry and K Vickers.

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

The committeemet at the Civic Centre, Scunthorpe.

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

491     MINUTES – Resolved – That the minutes of the proceedings of the meeting held on   26 September 2017, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.

492    (15)        EXTERNAL AUDIT REPORTS – ANNUAL REPORTS ON GRANTS AND RETURNS 2016/17 AND EXTERNAL AUDIT PLAN 2017/18  – A representative of KPMG, the council’s external auditor, submitted two reports, ‘Annual Reports on Grants and Returns 2016/17’ and ‘External Audit Plan 2017/18’.

The report summarised the results of work carried out on the Council’s 2016/17 grant claims and returns.

This included the work completed under the Public Sector Audit Appointment certification arrangements, as well as the work completed on other grants/returns under separate engagement terms.

The annual report and grants and returns for 2016/17 was attached to the report which provided the committee with the certification and assurance results and fees. No recommendations had been made during the year and there were no recommendations outstanding from previous years’ work on grants and returns.

The representative of KPMG, introduced the Audit Plan for 2017/18. The report supplemented the Audit Fee Letter 2017/18 which was presented to the committee in April 2017, this also set out details of the appointment by Public Sector Audit Appointments Ltd (PSAA).

The statutory responsibilities and powers were set out in the Local Audit and Accountability Act 2014, the National Audit Office’s Code of Audit Practice and the PSAA Statement of Responsibilities.

The report referred to financial statements audit planning, identifying significant risks and other areas of audit focus, along with other areas considered by the audit approach.

Members commented on particular aspects of the reports to which the representative of KPMG and the Director: Governance and Partnerships responded to.

Resolved – That following consideration of the reports and discussion of their content, the committee agreed that the Annual Reports on Grants and Returns 2016/17 and the External Audit Plan for 2017/18 be received and noted.

493 (16) FINAL ACCOUNTS AND ACCOUNTING POLICIES 2017/18 – The Director: Governance and Partnerships submitted a report informing the committee that the Code of Practice on Local Authority Accounting in the United Kingdom 2017/18 (The Code) required each local authority to adopt accounting policies that set principles for recording financial transactions within the Council’s accounts.

The report explained that The Code was, in effect, a legal requirement as it was recognised in Government legislation as “Proper accounting practice”. The Code required that policies were set to comply with UK accounting standards which incorporate International Financial Reporting Standards (IFRS) but otherwise they 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 satisfy themselves that the Accounting Policies at Appendix 1 were appropriate.

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

Resolved – (a) That following consideration of the report and appendix, and discussion of their content, the accounting policies set out at Appendix 1 of the Directors report be approved, and (b) that the Director: Governance and Partnerships be authorised to make new accounting policies and amend existing policies as may become necessary in the production of the accounts, with any such changes being reported to the next meeting of this committee.

494     (17)    TREASURY MANAGEMENT AND INVESTMENT STRATEGY – QUARTER 3 REPORT 2017/18 – The Director: Governance and Partnerships submitted a report on the council’s Treasury Management and Investment Strategy quarter 3 for 2017/18.  The benchmark for measuring performance was the treasury strategy which the council set at its meeting on 16 February 2017.

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

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

The code of practice required that Council receive a report on treasury management strategy at the start of the financial year, at mid-year and at year end. In addition the committee are to receive reports quarterly to provide it with assurance on the effectiveness of treasury management arrangements.

The High Level objectives of the council’s treasury management activities were set out in the Treasury Management Policy Statement.

The Code 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. The Treasury Management Practices adopted by the Council were reviewed on a regular basis.

A list of approved counterparties, key investment and borrowing statistics, and prudential guideline indicators were included with the report.

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

Resolved – (a) That following consideration of the report and appendices and discussion of their content, the committee agreed that the Treasury Management and Investment Strategy quarter 3 report provided sufficient assurance on the effectiveness of arrangements for treasury management, and (b) that the Treasury Management performance for the 2017/18 financial year to date be noted.

495 (18)  INTERNAL AUDIT UPDATE REPORT (INCLUDING THE UPDATED AUDIT CHARTER) – The Director: Governance and Partnerships submitted a report that updated the committee on Internal Audit activity up to 30 November 2017 and an updated Audit Charter to take account of changes to the Public Sector Internal Auditing Standards (PSIAS).

Members were informed that it was a requirement of the PSIAS for the committee to receive regular updates on the activities of Internal Audit, in particular:

  • providing assurance that sufficient work would be carried to provide a reliable risk based annual opinion on the effectiveness of the control environment and any amendments to the audit plan;
  • bringing to the committee’s attention any issues identified during the course of the 2017/18 audit which could impact on the annual opinion; and
  • providing assurance of Internal Audit’s compliance with Public Sector Internal Audit Standards (PSIAS).

Appendix 1 of the report prepared by the Head of Audit and Assurance provided an update on the delivery of the audit plan up to 30 November 2017. Sufficient work should be carried out by May 2018 to provide a reliable opinion on the Council’s control environment. In addition work had been prioritised so that key pieces of assurance, such as those in relation to the fundamental financial systems, were completed in sufficient time.

The report also showed that there had been a reduction in the overall size of the audit plan from 1250 days to 1100. This was due to re-prioritisation of work, particularly the initial contingency not been required.

The Director also referred to Audit’s Quality and Assurance Improvement Plan (QAIP). As previously reported the audit arrangements would be subject to a five year inspection in early 2018. In December 2017 a tender exercise was initiated to identify a suitable provider of the inspection.

In addition it was a requirement for the Audit Charter (which set out the purpose, authority and responsibility of Internal Audit) to be annually reviewed. The updated charter was attached at Appendix 2, and had been subject to some small amendments to reflect:

  • changes in the council’s structure; and
  • amendments to the PSIAS, particularly those relating to the additional roles carried out by the Head of Audit and Assurance, consultancy engagements carried out by Internal Audit, and the compilation of the audit plan.

Resolved – (a) That following consideration of the report and appendices, and discussion of their content, the Internal Audit progress report at Appendix 1 be noted, and (b) that the updated Audit Charter at Appendix 2 be approved.

496 (19) LOCAL CODE OF CORPORATE GOVERNANCE – The Director: Governance and Partnerships submitted a report informing the committee of the updated Code of Corporate Governance which had been compiled in accordance with guidance provided by the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Society of Local Authority Chief Executives (SOLACE) in their document “Delivering Good Governance in Local Governance Framework” (2016).

It was based on seven principles underpinning the framework:

  • Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law
  • Ensuring openness and comprehensive stakeholder engagement
  • Defining outcomes in terms of sustainable economic, social and environmental benefits
  • Determining the interventions necessary to optimize the achievement of intended outcomes
  • Developing the entity’s capacity, including the capacity of its leadership and the individuals within it
  • Managing risks and performance through robust internal control and strong financial management
  • Implementing good practices in transparency, reporting and audit to deliver effective accountability

In 2016/17 the council updated its Local Code using the principles in the framework, which was approved by the committee on 27 September 2016. The Code was subject to annual review and the revised version was shown at Appendix 1. Although some changes had been made to the Code to reflect revision to council processes and policies there was no significant changes.

The updated Code showed that overall the council continued to comply with the principles outlined in the CIPFA/SOLACE Framework. As part of the process, areas for further development had been identified, which would be addressed as part of the completion of the Annual Governance Statement.

Resolved – That following consideration of the report and appendix, and the discussion of its content, the Code of Corporate Governance be approved.

497     (20)    RISK AND OPPORTUNITIES PROTOCOL REPORT – The Director: Governance and Partnerships submitted a report to the committee outlining the council’s approach to the effective management of risk and provided evidence for the approval of the Risk and Opportunities Protocol for 2017-2020.

The council’s Risk and Opportunities Protocol had been reviewed and updated and was attached at Appendix 1.

The Protocol had been evaluated against best practice and described the risk management framework that was in place. The Protocol also demonstrated commitment to the promotion of sound risk management throughout the council.

The Risk and Opportunities Protocol provided a framework by which the committee could seek assurance that any significant risks to the council achieving its priorities were adequately managed. The council’s commitment to effective corporate governance and risk management would inform the Annual Governance Statement would be presented to the committee in June 2018.

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

Resolved – (a) That following consideration of the report and appendix, and discussion of its content, the committee agreed that the Risk and Opportunities Protocol provided adequate assurance in respect of the council’s risk management arrangements, and (b) to approve the Risk and Opportunities Protocol.