Stockton-on-Tees Borough Council

Big plans, bright future

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

Date:
Monday, 3rd December, 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 (Chair); Cllr Derrick Brown, Cllr Phillip Dennis, Cllr Ben Houchen, Cllr Ross Patterson, Cllr Mrs Sylvia Walmsley and Cllr David Wilburn.
Officers:
D Macdonald, P Saunders, M Skipsey, S Winship (R); P K Bell (LD).
In Attendance:
M Kirkham, R Tribe (Mazars LLP)
Apologies for absence:
Cllr Kathryn Nelson and Cllr Alan Lewis.
Item Description Decision
Public
A
24/12
DECLARATIONS OF INTEREST
Councillor Dennis declared a personal interest in respect of agenda item 8 - Corporate Risk Register Progress Report Q2 as he worked for a company that was named within the report.
A
25/12
MINUTES
The minutes of the meeting held on 24th September 2012 were confirmed and signed by the Chair as a correct record.
A
26/12
EXTERNAL AUDIT PROGRESS REPORT - VERBAL UPDATE
It was reported that Mazars LLP were now the external audit service for the Council. As the appointment had only recently taken place the External Audit Progress Report would be presented to the next meeting of the Audit Committee.
A
27/12
EXTERNAL AUDIT ANNUAL AUDIT LETTER - VERBAL UPDATE
As with the previous item it was reported that the External Audit Annual Audit Letter would be presented to the next meeting of the Audit Committee.
A
28/12
INTERNAL AUDIT PROGRESS REPORT
RESOLVED that the report be noted.
A
29/12
TREASURY MANAGEMENT STRATEGY UPDATE
RESOLVED that the report be noted.
A
30/12
CORPORATE RISK REGISTER PROGRESS REPORT Q2
RESOLVED that the report be noted.
A
31/12
HEALTH & SAFETY REPORT
RESOLVED that the report be noted.
A
32/12
ANNUAL REPORT OF THE AUDIT COMMITTEE FOR DISCUSSION
RESOLVED that the Annual Report of the Audit Committee be presented to the next meeting of the Committee.
A
33/12
WORK PROGRAMME 2012/13
RESOLVED that the Work Programme be noted.
4.00 pm - 5.00 pm

Preamble

ItemPreamble
A
28/12
Consideration was given to a report on the work carried out by the Internal Audit Section and the progress made during the quarter July to September 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 provided assurance that there was proper economic, efficient and effective use of resources. It also ensured that the Council had adequate accounting records and control systems.

The peer review of Internal Audit that was reported to the Committee on 25th June 2012 recommended that a mid year review be undertaken regarding actual performance against planned productive audit days and highlighting any changes to the audit plan for 2012/13.

The plan for 2012/13 that was approved on 27th February 2012 was based on eight auditors providing 1518 productive audit days. A senior auditor commenced maternity leave during September and as a consequence the number of productive audit days available for 2012/13 had to be reduced to 1426.

From the table in attached to the report it could be seen that as at 30th September, 33 planned audits had been completed with a further twenty one ongoing. 4 unplanned audits had been added, of which 2 had been completed, 1 was currently ongoing and 1 had yet to start. Of the total of 22 audits currently ongoing, 17 final reports were with clients awaiting agreement. Therefore out of 123 audits due to be completed in 2012/13, 52 were either completed or at the final stage of completion as at 30th September 2012.

In respect of the remaining 6 months of the plan, the reduction of 92 productive days had meant a re-examination of the plan. 6 audits had been cancelled / deferred. All Saints School was converting to an Academy and therefore the audit had been cancelled. The 3 remaining audits in CESC could be covered within other audits that were planned. The 2 procurement audits had been deferred as other review work was being carried out in these areas. In addition, at the time of establishing the plan a number of audit days were set aside to provide audit assistance for a new payroll system. Those days would no longer be required. Similarly a number of days were set aside for unplanned work and based on the position to date all those days would not be needed. It was also very unlikely that the sickness provision in the plan would be fully utilised thereby freeing up more productive days. Taken together, and providing that the section was not hit with an unprecedented amount of unplanned work, there was confidence that the 2012/13 plan could be completed in good time.

Discussions were under way with Corporate Directors and Heads of Service on finalising the Audit Plan for 2013/14.

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

* Key Performance Indicators.

* Details of audits by Service Groupings (2011/12 & 2012/13).

* List of audits completed and in progress and number of recommendations made (2012/13).

Further information was given regarding the audit for Child Protection Systems & Procedures (Family Contact Contract Payments) that had received limited assurance opinion.

Members were then given the opportunity to ask questions and make comment on the report. A Member asked the representatives from the external audit providers (Mazars LLP) if there was national trend of the number of audits being reduced due to the cuts in Local Government budgets and if they felt that there was a point where the internal audit function was not providing the necessary service. The external audit providers (Mazars LLP) outlined that as local authorities try to make savings one area that may be looked at would be the number of internal audits that are carried out but it is the responsibility of the local authorities to ensure that their internal audit function is carrying out the number of audits that they think they needed.
A
29/12
Consideration was given to a report that gave an update on the Treasury Management Strategy.

The target for investment return in 2012/13 was 1.2m. At the end of October the return achieved was just over 1 million meaning the target should be comfortably achieved. However an unintended consequence of the Funding for Lending Scheme means it was highly unlikely the target would be met in 2013/14. The last report mentioned the Government had announced the principle of this scheme, and subsequently an e-mail was circulated that showed the detail of its operation. Under the scheme banks were able to borrow money at the very low rate of 0.25%. Given this availability of cheap funding they had consequently reduced rates for private and establishment investors. To give an example. At the beginning of October, Santander was offering a rate of 1.4% for an investment of 3 months. At the time of producing this report they were offering a rate of only 1% for a 12 month investment. Clearly these reductions in rates would have an impact on the ability to achieve investment returns for the future. An exercise on calculating when deals would expire, and the anticipated returns at the new lower rates was being conducted. The outcome would be reflected in the Medium Term Financial Plan for the 2013/14 budget process.

With regards to the banks performance the last quarter results were in the main particularly poor. This was largely due to additional provisions for the mis-selling of PPI, now at 10.8bn for the major banks, and provisions in anticipation of fines from regulators for inappropriate past actions. The provisions for losses on loans and mortgages were slightly lower in most cases. A further worrying aspect was that the executive in charge of banking supervision at the FSA had stated that in the future banks would need to hold an additional 150bn of capital, over and above the 186bn require by the Basel global bank safety rules. If this was considered to be the correct level of funds to absorb potential losses, it had to raise the question of how safe the banks were until they reached that position.

After many months of discussion about ways forward to resolve the Eurozone debt problem there had finally been some progress made towards alleviating some of the pressures. In September the President of the European Central bank announced that the ECB would step in and buy bonds directly from governments to reduce the interest rates having to be paid. Spain was an immediate beneficiary of this change. In October there was agreement to a Single Supervisory Mechanism for banks, to prevent banking risks and cross border contagion from emerging. It was intended this mechanism would be put in place across the Eurozone during 2013. Once it was in place it would allow the ECB to provide money directly to banks without it being recorded against the public sector debt of that country. Whilst these initiatives lessen the prospect of a short term collapse, the current lack of economic growth meant the overall debt position was not improving, and there was still some considerable way to go before any comfort could be felt about the situation. In light of the above circumstances the Stockton approach on investments continued to be short term placements with the inevitable impact on the MTFP.
A
30/12
Consideration was given to a report on the Corporate Risk Register Progress Report Q2.

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, were 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.

The interim report covered the period 1 July to 30 September 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 deletion of one risk from the register, revision and update of a number of existing entries and of the numbering sequence where necessary, as more particularly described in an attachment to the report.

As one risk had been deleted and none added to the Corporate Risk Register, the total number of entries at the end of the Quarter was reduced to 4.

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 details was placed on the Stockton Council intranet.
A
31/12
Consideration was given to a report that provided the details the services provided by the Council's Health and Safety Unit to improve the health, safety and well-being control environment for the period 1 July to the 30 September 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

Members were then given the opportunity to ask questions and make comments on the report. A discussion took place regarding physical assaults.

The Health & Safety Manager reported that the predominance of reported incidents are attributed to children with challenging behaviours.

The Health & Safety Manager had consulted with the Early years and Complex Needs Manager to review and to further improve information sharing intelligence with need to know professionals, ensuring local care plans are actively revised to reflect individual children's changing circumstances and needs.

The Health and Safety Manager informed Members that in collaboration with the Schools Workforce Joint Consultative Committee, the Schools Workforce Joint Consultative Panel and the schools Inclusion Service, considerable effort has been invested in promoting and encouraging assault reporting to schools and children's services workforce.
A
32/12
Members discussed the contents of the Annual report of the Audit Committee. The report would be presented to the next meeting of the Audit Committee.
A
33/12
Consideration was given to the Work Programme 2012/13.

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