Stockton-on-Tees Borough Council

Big plans, bright future

Audit Committee (ceased to operate 21/05/2019) Minutes

Date:
Monday, 24th September, 2012
Time:
04.00 p.m.
Place:
Second Floor Conference Room, Municipal Buildings, Chruch Road, Stockton on Tees, TS18 1LD
 
Please note: all Minutes are subject to approval at the next Meeting

Attendance Details

Present:
Cllr Barry Woodhouse (Chairman); Cllr Phillip Dennis, Cllr Ben Houchen, Cllr Ross Patterson, Cllr David Wilburn,
Officers:
P Johnston, D MacDonald, M Skipsey, S Winship (R); T Harrison (LD)
In Attendance:
C Andrew, M Kirkham (Audit Commission)
Apologies for absence:
Cllr Derrick Brown, Cllr Alan Lewis
Item Description Decision
Public
A
12/12
DECLARATIONS OF INTEREST
 
A
13/12
MINUTES
 
A
14/12
AUDIT COMMITTEE - UPDATE
RESOLVED that the report be noted.
A
15/12
ANNUAL GOVERNANCE REPORT
RESOLVED that the report be noted.
A
16/12
STATEMENT OF ACCOUNTS 2011-12
RESOLVED that Members approve the Statement of Accounts for 2011/12.
A
17/12
INTERNAL AUDIT ANNUAL REPORT
RESOLVED that the opinion on the Council's control environment and the performance of the Internal Audit Section be noted.
A
18/12
ANNUAL GOVERNANCE STATEMENT 2011-12
RESOLVED that Members approve the Annual Governance Statement for 2011/12.
A
19/12
DRAFT LOCAL AUDIT BILL
RESOLVED that the report and the Council's response be noted.
A
20/12
INTERNAL AUDIT PROGRESS REPORT
RESOLVED that the report be noted.
A
21/12
CORPORATE RISK REGISTER Q1
RESOLVED that the report be noted.
A
22/12
HEALTH & SAFETY REPORT
RESOLVED that the report be noted.
A
23/12
WORK PROGRAMME 2011/12
RESOLVED that the work programme be noted.
4.00 - 5.15pm

Preamble

ItemPreamble
A
12/12
There were no declarations of interest.
A
13/12
The minutes of the meeting held on 25th June 2012 were confirmed and signed by the Chair as a correct record.
A
14/12
Members considered a report on progress in delivering Audit Commission's responsibilities as the Council's external auditors. It included an update on the externalisation of the Audit Practice.

This paper also sought to highlight key emerging national issues and developments that could be of interest to members of the Audit Committee. The paper concluded by asking a number of questions that the Committee could wish to consider in order to assess whether it had obtained sufficient assurance on emerging issues.

Work on the financial statements was complete and the results were reported in the annual governance report on the agenda for this meeting.

Work on the value for money conclusion was complete and the results were reported in the annual governance report on the agenda for this meeting.

Discussion took place regarding the Localism Act dispensation rules.
A
15/12
Members were presented with a report that summarises the findings from the 2011/12 audit which was substantially complete. It included the messages arising from the audit of the Council's financial statements and the results of the work undertaken to assess the arrangements to secure value for money in the Council's use of resources.

As at 6 September an unqualified audit opinion was expected to be issued.

The accounts were prepared to a good standard before the 30 June deadline and the audit had not identified any material errors. The audit found some non-material errors, some of which had been corrected and some which management had chosen not to correct. None of the errors found had an impact on the Council's general fund balances. Corrected errors had increased the Council's net worth by 1.8 million; uncorrected errors would reduce cost of service and other operating expenditure by 118,000.

It was expected to conclude that the Council had made proper arrangements to secure economy, efficiency and effectiveness in its use of resources because:

- The Council continued to maintain arrangements to secure financial resilience through on-going medium term financial plan updates and detailed consideration of changes in funding and service provision; and

- The Council continued to maintain arrangements to secure economy, efficiency and effectiveness through its review of services. The three-year efficiency, improvement and transformation review programme had come to an end and predicted savings were being achieved. The Council was now focusing on the three big service areas of Adults' Services, Children's Services and energy, alongside cross-cutting issues such as procurement.

Members were advised that there were no matters arising from my Value For Money (VFM) work to report.

Discussion took place regarding the mechanism for working out the financial planning and long term projections.
A
16/12
Members were provided with a report which presented the Council's Statement of Accounts for 2011/12.

The Accounts and Audit Regulations (England) 2011 required all authorities in England to prepare their Statements of Accounts for 2011/12 by 30th June 2012. This was achieved and the accounts were passed to the auditors on 29th June 2012.

The Accounts and Audit Regulations changed the process for approving the Statement of Accounts last year. Members were now required to approve the accounts after the audit had been completed and by 30th September.

A full set of accounts that had been subject to audit were provided to Members.

The following key financial issues were included in the accounts:

• Fixed Assets
• Income and Expenditure Account
• Investments and Cash amounts
• The Council's current Long and Short Term Borrowing levels
• The Council's earmarked reserves (excluding schools)
• The level of General Fund balances at the 31st March 2012 has
• The Council's Pension Scheme

The statutory audit formally commenced on 9th July 2012. The audit process highlighted a small number of non-material errors that had been corrected within accounts and some non-material errors that had not been amended which were set out in the letter of representation that was attached to the report.

The Auditor's Annual Governance Report was provided to Members within another report on the agenda and set out the errors that were identified during the audit together with the overall audit opinion.

A requirement of the regulations stated that the lead Member of the Committee must sign the balance sheet and it was requested that the committee, having considered the Auditor's report, approved the Statement of Accounts enabling the Chair of the Audit Committee to undertake this role.

The Chairman agreed to sign the balance sheet at the conclusion of the meeting.
A
17/12
Members were provided with a report which advised that the Financial Planning and Audit Manager was required to produce a formal annual report and opinion under the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice for Internal Audit in Local Government 2006 (the "CIPFA Code"). This formed an integral part of the formulation of the Council's Annual Governance Statement, as required under the Accounts and Audit Regulations 2011 and the CIPFA "Framework for Delivering Good Governance in Local Government".

The report encompassed the reporting requirements specified in Standard 10.4 of the CIPFA Code for Internal Audit.

From the testing undertaken by the Internal Audit Section over the course of the year, it was felt that the Council continued to have an adequate, and overall, an effective system of internal control, upon which it could place reasonable reliance to deliver the Council's objectives, and detect fraud or other malpractice within a reasonable period of time.

This opinion would form part of the Annual Governance Statement that featured later on the agenda of this Committee.

The overall opinion provided in the report was based upon the work performed during the year. The opinion did not imply that Internal Audit had reviewed all the risks and assurances relating to the Council, but was based upon the range of individual opinions arising from risk based audit assignments completed during 2011/12.

Officer's individual opinions were summarised as was analysis of the recommendations supporting the opinions in level of priority.

No operational constraints had been placed upon Internal Audit, apart from agreed budgetary control provisions.

From the risk-based Internal Audit assignment work undertaken during 2011/12, there were no issues which were regarded as sufficiently significant to be considered in relation to the preparation of the Council's Annual Governance Statement.

Annual Plan
The 2011/12 Annual Audit Plan was approved by the Audit Committee on 27th June 2011. The plan was developed using risk-based principles that started with the maintenance of an audit needs assessment of all the areas of the council that could be included within an annual audit plan. This needs assessment was split into work on corporate governance issues, work on fundamental financial systems, and work of a service base or cross council nature.

Staffing
The 2011/12 Audit Plan comprised 1,536 audit days, based on 8 full time equivalent auditors. One member of staff was not replaced on leaving in November 2010, and following a service review, the Chief Financial Planner has managed the section following the retirement of the Chief Internal Auditor in June 2011. This level of coverage is considered sufficient to ensure that a confident, evidence-based opinion can be provided.

The 2011/12 Plan has now been fully completed.

The Council's Internal Audit service was operated in accordance with the CIPFA Code of Practice for Internal Audit in Local Government in the UK.

In accordance with the requirements of the Accounts and Audit (England) Regulations 2011, a review of the effectiveness of Internal Audit had been undertaken. That report was considered at the 25th June meeting of this Committee. The report concluded that:-

"The Internal Audit Service had satisfactory and appropriate arrangements in place in order to fulfil its duties and that it had continued to build on its performance and reputation notwithstanding a reduction in resources during 2011/12."

One recommendation arose from the review. It was recommended that a mid-year review be undertaken and reported to the Corporate Governance Group and to the Audit Committee regarding actual performance against planned productive audit days, highlighting any changes to the audit plan for 2012/13. This would be incorporated in the quarterly report showing the position at 30th September, which would be reported to the December meeting of this Committee.

The Internal Audit Section had a joint working arrangement with the Council's External Auditor. Close co-operation between the Council's internal and external auditors helped to ensure that audit resources were used efficiently and to maximum effect. The aim of the joint working arrangement was for External Audit to place reliance on the work undertaken on the Council's financial systems. This would help their judgement on the council's financial control environment.

Informal feedback indicated that External Audit had again been able to place reliance on Internal Audit's work on the key financial systems.

During the year the section successfully retained ISO 9001 accreditation.

Internal Audit sought feedback on the service it provided by issuing a customer satisfaction survey at the end of each audit. For 2011/12 the section received an average satisfaction rating of 90%.

Discussion took place regarding possible trends in recommendation and the how they are reported.
A
18/12
Members considered a report which presented the Council's Annual Governance Statement for 2011/12.

The Accounts and Audit (Amended) Regulations 2011 required all authorities in England to conduct a review at least once a year of the effectiveness of its governance framework and produce an Annual Governance Statement to accompany its Statement of Accounts.

A further requirement of the regulations stated that the Statement should be signed by the Chief Executive and the leading Member of the Council, following approval by the Committee. A key objective of this signing off process was to secure corporate ownership of the statement's contents.

The Annual Governance Statement included an acknowledgement of responsibility for ensuring that proper arrangements were in place around the governance of its affairs and an indication of the level of assurance that the system provided. The statement also included a description of the key elements forming the governance framework, a description of the process applied in reviewing the effectiveness of this framework, including the system of internal control, and an outline of the actions taken or, proposed to be taken, to deal with significant governance issues.

The Council's Annual Governance Statement for 2011/12 was provided to Members. At the time the Council had not identified any significant issues that were not being addressed within the Statement. Officers were present at the meeting to report on the governance framework and control environment in place within the Council that enabled the detailed preparation of the statement. The Audit Commission, the Council's external auditors, had been consulted on the process and the identification of key governance issues.
A
19/12
The purpose of this report was to update Members on the latest position on the Government's proposals to abolish the Audit Commission and replace it with a new local public audit framework. Following on from its consultation in 2011, the Government published the draft Local Audit Bill together with a range of further consultation questions on 6th July 2012. The deadline for responses to the Department for Communities and Local Government was 31st August.

The main provisions in the draft Bill were as follows:-

• The repeal of the legislation setting up the Audit Commission, and the transfer of assets, liabilities and continuing functions to other bodies.
• A requirement on local public bodies to appoint an external and independent auditor on the advice of an independent auditor panel.
• The creation of a new regulatory framework for local public audit, whereby the Financial Reporting Council and the professional accountancy bodies would regulate the provision of local public audit services.
• The transfer of responsibility for setting the high level Code of Audit Practice to the National Audit Office.
• Powers for the National Audit Office to undertake studies of thematic value for money issues relating to local government, and to access information needed to do so.

The provisions contained within the draft Bill were very detailed. One in particular had given some cause for concern. Clause 94 of the draft bill proposed to give new powers to the National Audit Office to undertake two types of studies:-

• To ensure that the use of resources by a government department to fund councils represented an economical, efficient and effective use of resources, and

• To identify improvements that could be made by local authorities in the economy, efficiency and effectiveness with which they used their resources.

There was general acceptance that the National Audit Office would have a role in the first type of study as this fitted into their wider role of helping to hold Government accountable on behalf of Parliament for how Government made use of their resources. However, given the spirit of localism it was felt that these studies should be limited to no more than six per year and that there should be consultation and agreement with the sector in advance. In addition it was felt that the studies carried out by the National Audit Office should not investigate and make judgements about the performance of individual local authorities.

In respect of the second type of study, there was a general belief that it was not appropriate for the National Audit Office to undertake this sort of study. It was felt that the sector itself was better suited to do this, working with the Local Government Association.

The proposals for the audit arrangements for smaller local public bodies were published alongside the draft Local Audit Bill. The key elements were:-

• Following a proposal by the National Association of Local Councils and Society of Local Council Clerks, to give smaller bodies the option of having the procurement and appointment of their audit services carried out by a sector-led body.

• Those bodies with a turnover below 25,000 would no longer be subject to external audit. This would be counter-balanced by new transparency requirements for all smaller bodies with turnover below 200,000 and local people would still be able to raise objections and have complaints investigated by an auditor if deemed appropriate.

The Council's response to the consultation questions was provided to Members. The draft Local Audit Bill was available on the Department for Communities and Local Government (DCLG) website.

Members received clarification on aspects of the report.
A
20/12
Consideration was given to a report on the work carried out by the Internal Audit Section and the progress made during the quarter April to June 2012 against the annual audit plan.

Internal Audit was an independent appraisal function established by the Council to objectively examine, evaluate and report on the adequacy of internal controls. This role ensured that there was proper economic, efficient and effective use of resources. It also ensured that the Council had adequate accounting records and control systems.

Members were reminded that the list of all audit work undertaken in the period covered by the report had been circulated to all Councillors prior to the meeting. The intention was to give Councillors the opportunity to raise questions on issues that affected their ward or other areas of responsibility and for answers to be provided at the meeting.

The appendices showed details of the sections performance in the following areas:-

Key Performance Indicators.

Details of audits by Service Groupings (20011/12 & 2012/13).

List of audits undertaken and number of recommendations made (20011/12 & 2012/13).

Members were advised that customer satisfaction was high and were then given the opportunity to ask questions.
A
21/12
Consideration was given to a report on the Corporate Risk Register Progress Report Quarter 1 (2012/13) - Period Ending 30th June 2012.

Members were reminded that quarterly reports on the Corporate Risk Register were presented for the purpose of reviewing the key risks that had been identified as having the potential to deflect services from achieving their objectives over the next 12 months and beyond. They also set out the actions being taken to ensure that the risks, and possible adverse outcomes, are minimised.

Members had requested that, in the absence of substantial changes to the register, quarterly reporting should be confined to highlighting significant additions and amendments since the previous update, with a detailed report incorporating a review of the Council's risk management process being produced annually at the end of Quarter 4.

This interim report covered the period 1 April to 30 June 2012. All Service Groupings had been contacted subsequently and the returns indicated that there had been some changes to the Authority's risk profile over the months in question. These comprised the removal of seven risks from the register and one addition of one new risk.

Full assessment details of the new entry in the register were provided to Members along with a summary.

Summary details of the risks removed from the register were provided to Members.

As one new risk had been added and seven deleted, the total number of significant risks in the Corporate Risk Register at the end of the current Quarter was 5.

For purposes of record, the changes referred to above had been incorporated in the latest version of the full Corporate Risk Register. This was available in the Member's Library and an electronic copy incorporating the supporting risk assessment would be placed on the intranet.
A
22/12
Members considered a report which detailed the services provided by the Council's Health and Safety Unit to improve the health, safety and well-being control environment for the period 1st April to the 30th June 2012.

The report covered the significant activity of the Health and Safety Unit, including partner and stakeholder involvement -

1. Health and Safety Training
2. Health and Wellbeing Update
3. Accidents Reported
4. Physical Assaults Reported
5. Verbal Assaults Reported
6. Premises Audited
7. Construction (Design and Management) Regulations 2007 (CDM)
8. School's Educational Residential Visits
9. Employee Protection Register Activity
10. Tendering Contractor Health and Safety Policy appraisal

Discussion took place regarding the high level of assaults recorded compared to the previous year.

Officers advised that intervention strategies were being reviewed and they were working with schools to ensure the reporting procedure was used uniformly throughout the schools in the Borough whilst raising awareness.
A
23/12
Consideration was given to the work programme 2012/13.

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