|Members were presented with the Terms of Reference for the Audit Committee and the proposed Work Programme for the Audit Committee for 2010/11.|
|Members were provided with a briefing that gave a summary of the progress on the audit to date and also highlighted key emerging national issues and developments.|
The fee planning letter was discussed with officers and the audit fee agreed with the Corporate Director of Resources. It was presented to the Audit Committee in May 2010. The more detailed audit plan was considered at the last meeting in February and included the updated risk assessment and areas of planned work.
The Audit Commission had completed the interim systems planning work (walk through tests) and most of the cyclical controls testing of systems. In addition the Audit Commission had completed their work on the restatement of last year's accounts, required for the introduction of International Financial Reporting Standards and early testing in the following areas:-
* external confirmations of loans and investments;
* council tax and NNDR opening debits;
* pension fund information supplied to Teesside Pension Fund; and
* income and expenditure analysis within the general ledger
There were no issues to bring to Members attention from the work completed to date.
With regard the value for money conclusion the Audit Commission were assessing the Council's arrangements against two criteria:-
* securing financial resilience; and
* challenging how it secures economy, efficiency and effectiveness
The Audit Commission would consider whether there were robust financial systems and processes to effectively manage financial risks and opportunities and how resources were being prioritised within tighter budgets. The Audit Commission would undertake risk based work to support the assessment of the arrangements in place where necessary, including ongoing monitoring of the Council's:-
* approach to efficiencies, including the EIT programme; and
* management of the capital programme.
There were no issues to bring to Members attention from the work completed to date.
The fee planning letter had been discussed with Officers and the audit fee agreed with the Corporate Director of Resources. 2011/12 fees were a 10 per cent reduction compared to 2010/11. The fee letter was on the agenda for this meeting for information.
|Members were presented with Audit Commission Annual Audit Fee letter for 2011/12.|
The letter confirmed the audit work that was proposed to be undertaken for the 2011/12 financial year at Stockton on Tees Borough Council. The fee reflected the risk-based approach to audit
planning set out in the Code of Audit Practice and work mandated by the Commission for 2011/12. The audit fee covered the:-
* the audit of financial statements;
* value for money conclusion; and
* whole of Government accounts
As the audit for 2010/11 had not yet been completed, the audit planning process for 2011/12, including the risk assessment, would continue as the year progressed.
The Audit Commission proposed to set the scale fee for each audited body for 2011/12, rather than providing a scale fee with fixed and variable elements. The scale fee reflected proposed decreases in the total audit fee, as follows:-
* no inflationary increase in 2011/12 for audit and inspection scales of fees and the hourly rates for certifying claims and returns;
* a cut in scale fees resulting from our new approach to local VFM audit work; and
* a cut in scale audit fees of 3 per cent for local authorities, police and fire and rescue authorities, reflecting lower continuing audit costs after implementing IFRS
The scale fee for Stockton on Tees Borough Council had been set by the Audit Commission at £279,900. The scale fee was based on the planned 2010/11 fee, adjusted for the proposals summarised above, and as below. Variations from the scale fee would only occur where the assessments of audit risk and complexity were significantly different from those identified and reflected in the 2010/11 fee.
Audit Area Scale Fee 2011/12 Planned Fee 2010/12
Audit Fee £279,900 £311,000
Certification of C&R £40,565 £41,853
A separate audit plan would be issued in December 2011. This would detail the risks identified to both the financial statements audit and the vfm conclusion. The audit plan would set out the audit procedures that were planned to be undertaken and any changes in fee.
If any significant amendments to the audit fee were needed, these would be discussed first with the Corporate Director of Resources. A report would then be provided outlining the reasons the fee needed to change for discussion with the Audit Committee.
Several reports would be issued over the course of the audit and these were listed as an attachment to the report. The fee excluded work the Audit Commission may agree to undertake using the advice and assistance powers. Any such work would be negotiated separately and a detailed project specification agreed.
In delivering the audit, the Audit Commission would work to a high specification to ensure that they:-
* understand the Council, the priorities and challenges and provide the Council with fresh, innovative and useful support;
* are readily accessible and responsive to the Council needs, but independent and challenging to deliver a rigorous audit;
* understand national developments and have a good knowledge of local circumstances; and
* communicate relevant information to you in a prompt, clear and concise manner.
|Consideration was given to a report that provided the Audit Committee with details of the Monitoring Officer's Annual Report for 2010/11. The report had been considered by the Standards Committee. |
Annual Reports were a key part of the Council's performance monitoring, reporting and planning procedures.
It was appropriate that the work of the Monitoring Officer, as one of the Council's Statutory Officers, should equally therefore include an annual reporting process as best practice.
Attached to the report was the Monitoring Officer's Annual Report for 2010/11. This had been considered and accepted by the Standards Committee.
The report outlined the Monitoring Officer's main Statutory responsibilities, summarised how they had been discharged during the year and drew attention to some of the main issues that would require attention in the year ahead.
The report had also been submitted to Cabinet. Cabinet had recommended it to full Council for acceptance. Council would consider the report and Cabinet's recommendation on 29th June 2011.
Consultation on the report had also taken place with Group Leaders and the relevant Cabinet Member, the Head of Legal Services as Deputy Monitoring Officer, the Head of Democratic Services, the Corporate Governance Group (which included the Corporate Director of Resources and the Chief Internal Auditor) and the Corporate Management Team. Once agreed the report would also be placed on the intranet and the internet.
|Consideration was given to a report that provided Members with details of the Standards Committee's Annual Report for 2010/11. The report was presented by the Chair of the Standards Committee. |
Annual reports were an important part of the Council's performance monitoring, reporting and planning procedures.
The report for 2010/11 had been agreed by the Standards Committee.
The report provided an overview of the work of the Committee in the past year, and identified and promoted examples of best practice in relation to standards and probity. The report also set out the Committee's main Statutory responsibilities and summarised how they had been discharged, drawing attention to some of the main issues that would require attention in the year ahead. In particular, the Annual Report had been prepared in the context of significant changes proposed to the national standards regime, and identified in the Localism Bill.
The report had also been presented to Cabinet. Cabinet had recommended it to full Council for acceptance and had also recommended that in advance of the Localism Bill becoming law, a report be submitted to a future Cabinet meeting regarding the options available to the Council for introducing a new Standards Framework, including the adoption of a Voluntary Code of Conduct, once the Bill had been enacted. Council would consider the report and Cabinet's recommendations on 29th June 2011.
Consultation on the report had also taken place with Group Leaders and the relevant Cabinet Member; the Head of Legal Services as Deputy Monitoring Officer; the Head of Democratic Services; the Corporate Governance Group (which included the Corporate Director of Resources and the Chief Internal Auditor) and the Corporate Management Team. Once agreed the Report would also be placed on the intranet and the internet and would be made available to Town/Parish Councils.
|Consideration was given to a report that detailed the services provided by the Council's Health and Safety Unit to improve the health, safety and well-being control environment during the financial year 2010/11.|
The report outlined the Health and Safety at Work Act 1974 and the role of the Health and Safety Unit.
The report covered the activities undertaken to further improve the workplace control environment by the Health and Safety Section in the financial year 2010/11.
Accidents and incident data included in the report included:-
1. Improvements Made To The Workplace Control Environment
2. Health and Safety Audits/Inspections
3. Community Managed Community Centres
4. Sub-Contractors Safety Policy Appraisals
5. Construction Design and Management Regulations 2007
6. Tristar Homes Ltd, Decent Standards Site Inspections
7. Raising Workforce Competence
8. The Health and Well-being Team Activities.
9. Educational Visits Adviser - Schools Residential Adventure Activities Appraisals.
10. Event Safety Management
11. Involvement With External Organisations
12. Continuous Professional Development
13. Reported Accidents
14. Reported Assaults
15. Employee Protection Register
16. Health and Safety Policy Target Progress
17. Opportunities for Further Improvement
18. Service Plan 2011/2012
The improvements made to the workplace control environment and the examples of further measures were included in the report.
The report also detailed:-
Health and Safety Audits / Inspections
Committee Managed Community Centres
Sub Contractor Health and Safety Policy Appraisal
CDM Co-ordinator duties. (CDM-C)
Tristar Homes Ltd, site inspections.
Raising Workforce Competence
The Well-being Team
Educational Visits Adviser's role
Event Safety Management
Involvement with external Organisations
Continuous Professional Development
Occupational Health and Safety Management System standards.
Employee Protection Register (EPR)
Health & Safety Policy Target Progress
Opportunities for Further Improvement
NE WISH (Waste Industry Safety & Health) working party.
Service Plan 2011/12
Members were given the opportunity to ask questions and make comments on the report.
|Consideration was given to a report that outlined that on 30th March 2011, the Government published its proposals on the future of public audit following its announcement to disband the Audit Commission. The consultation would closes on 30th June 2011. Draft responses to the proposals were attached to the report in the form of a letter to the Department for Communities and Local Government. |
On 13th August 2010 the Secretary of State for Communities and Local Government announced plans to disband the Audit Commission with the aim of refocusing the audit of local public bodies.
The Government had published a consultation paper which sought to replace the current, centralised audit systems managed by the Audit Commission, with a new decentralised regime that would allegedly cut both bureaucracy and costs.
Since the consultation was published the Council had received a letter, dated 2nd June 2011, from Sir Bob Kerslake, Permanent Secretary to the Department of Communities and Local Government, providing an update on the future of the Audit Commission. This was attached to the report.
Members felt that agreed with the comments to the Governments proposals in the letter and that these should form the Council's response to the consultation.
|Member were presented with the Internal Audit Annual Report 2010/11.|
The report outlined that events in 2010/11 brought about the need to amend the annual audit plan to a considerable extent. The change of Government quickly identified the need for the strategic rethinking on a number of key partnerships. This was therefore not the time to be undertaking much work in this area. However as these partnerships were a significant part of the Council's overall control environment, assurances on the adequate monitoring of them had been obtained from Service Directors.
In December Tristar Homes Ltd (THL) became an independent housing association. As the transition was being monitored internally and externally there was little or no benefit in Internal Audit undertaken the previously agreed audit programme on the Housing Revenue Account, contract management, etc. This would also be the last year of supplying an internal audit service to THL. These and other issues, e.g. 5 associated with THL becoming a housing association, the scrapping of the Financial Management Standard in Schools, resulted in 13 audits being cancelled and a number of others being reduced in size and scale.
As these changes were discussed and agreed with management, it was also a contributing factor in one member of staff not being replaced on leaving in November. This was quickly followed by a service review which would lead to the section coming under the Chief Financial Planner on the forthcoming retirement of the current Chief Internal Auditor.
Key performance indicator results for the year were as follows:-
* 90.6% of the original planned work achieved (annual target - 93%). This was due to 13 audits being cancelled as stated above. An additional 22 ad-hoc audits were undertaken that were either additional work asked for or investigations.
* 100% acceptance of audit recommendations.
* Satisfactory management satisfaction survey ratings (89%);
* Satisfactory annual report from the External Auditor;
* ISO9001 (2008 standard) accreditation retained;
The expected standard of service provision was as set out in the "Code of Practice for Internal Audit in Local Government in the UK, 2006". The on-going annual reviews of the service by internal and external assessments had given continued assurances that the service complied with the code of practice framework and to a satisfactory standard. These standards also applied in the reporting to Darlington Borough Council's (DBC) Audit Committee on appropriate Xentrall work.
The underlying principles of the audit process were based on the identification and management of risks within the services the Council provides. Consequently methods had been developed to analyse risks in each audit over a number of headings, e.g. information, financial, asset and performance management and Governance arrangements. This was as a result of maximising technology capabilities that would give more information to support the audit and Corporate Governance opinion statements.
Significant activities during the year were:-
* All significant services of the Authority were reviewed to the point of providing evidence to support the Audit Opinion Statement in section 4 of the report.
* The ISO 9001: 2008 control environment standard was successfully retained.
* Planning for next year had had to recognise there were a considerable number of service reorganisations across the Council that would take some time to undertake. This applied particularly to some key partnerships. Altogether this meant next years audit plan would have to be flexible with the quarterly reports giving details of changes as they become necessary.
* The scrapping of the schools' Financial Management standard (FMSiS) part way through the year meant the audit programme had to be revised. However, the basic principle of FMSiS that ensured sufficient information was given to Governors to enable the effective carrying out of their role was retained within the revised testing undertaken.
* Preparation for the next National Fraud Initiative data matching exercise.
Attached to the report were details of the Section's performance in the following areas:-
* Key Performance Indicators
* Operational Performance
* Details of Audits by Department
* Analysis of recommendations into priorities and categories by Department
* The performance during the final quarter of the year.
* Results of sample testing on the implementation of internal audit recommendations
Significant monetary value savings were difficult to identify but the following examples showed how the section continued to add value to the Council's activities:-
1. Data matching undertaken to provide evidence in DWP grant dispute with the Housing Benefits service that resulted in securing an additional £1.1m of funding.
2. Took a major part in the quality review of CESC client documentation prior to external inspection.
3. Periodic testing introduced to identify any duplicate payments to creditors.
4. Undertook a significant re-write of the Councils Partnership Guidance toolkit and an update to the Councils Anti Fraud procedures.
5. Anti- fraud and staff records (Single Central Record) training given to Governors, HTs and admin staff in schools.
6. Guide produced for schools on the checks needed on private school funds.
7. Although usually not significant, the standard audit process still identifies areas where savings can be made, e.g. timesheets at odds with the hours paid; the streamlining of management processes to save staff time, etc.
No issues arose from either the external auditors, the ISO 9001 assessor or the peer reviews on the quality or reliability of the audit service provided.
The Council had a responsibility for maintaining sound systems of internal control that support the achieving of its objectives and for reviewing their effectiveness. From the evidence of work undertaken, Internal Audit was required to provide an opinion on whether these systems were adequately and properly applied.
The system of internal control was based on a risk assessment and management process designed to identify the principal risks to the achieving of Council objectives, to evaluate the nature and extent of those risks and to manage them efficiently, effectively and economically. It was designed to manage rather than eliminate the risk of failure in achieving the Council's objectives. It could therefore only provide reasonable and not absolute assurance of effectiveness in its ability to deliver its objectives or detect fraud or other malpractice within a reasonable period of time.
The process was underpinned by complying with the core assurance standards of:-
* Corporate Governance,
* Financial management,
* Risk management, and
* Openness and transparency.
From the audit work undertaken, the Council had an adequate and, overall, an effective internal control environment upon which it could place reasonable reliance to deliver the systems' objectives, or detect fraud or other malpractice within a reasonable period of time. This platform of controls was of great service to the Council in helping it through the current period of significant change.
Members raised questions on the Completed Audits (Q4) 2010/11 CESC Integrated Commissioning - Nursing and Residential Care (Previous Recommendations Follow Up) as the previous recommendations had not been implemented. Liz Hanley (Interim Head of Adult Strategy) and Rob Papworth (Performance Manager) were in attandance at the meeting to answer questions and to detail the current situation.
|Consideration was given to a report on the proposed annual audit plan for the financial year 2011/12.|
Each year Internal Audit prepared a plan of work based upon a risk assessment of all the Council's activities. The risk assessment took into consideration the perceived qualities of management, staff, systems and the importance of the service. It was not possible to review all activities each year, therefore the Council's key systems were reviewed annually and the remainder of the significant areas of activity were reviewed at least once in a five-year period.
Corporate risk management assessments of Council wide risks and Internal Audits were compared and analysed.
The 5-year plan showed work carried out in the previous two year's, the proposed coming year's work and an indication of the plans for the next two years. There had been a significant reduction in Internal Audit staff as a result of the recent service reviews. This reduction was being offset with additional resources from Financial Planning staff. However, it had been acknowledged that considerable training would be needed for these personnel before becoming effective members of the team hence the reduction in planned days in 2011/12 compared to 2010/11.
In addition the section of the plan to accommodate services allocated to the Xentrall Stockton/ Darlington partnership showed a number of audits split between the two Councils. This would reflect the fact that there were separate systems that required separate reporting.
It was very likely that the plan would be subject to amendments as service, structural and partnership reorganisations became clearer. If the required changes became significant as to warrant a revised plan, then this would be reported and submitted for approval when necessary.
The plan was attached to the report and had been discussed with the Corporate Director of Resources (the 1972 Local Government Act section 151 officer), Service Groupings and the Audit Commission. Comments had been taken into account accordingly. At this stage, plans for the year 2012/13 and onwards were an indication of what could be expected.
|Consideration was given to a report on the role of Internal Audit. The report outlined that in December 2006, a revised code of conduct was published on the standards to be expected from an Internal Audit service. A similar report was last presented to the Audit Committee in May 2010. The report informed Members of the code and how the Internal Audit service complied with it. This would ensure the Members could then discharge its responsibility to approve the role of the Internal Audit service.|
Internal Audit was an assurance function that provided an independent and objective opinion to the organisation on risk management, control and governance by evaluating their effectiveness in achieving the organisation's objectives. It objectively examined, evaluated and reported on the adequacy of the control environment as a contribution to the proper, economic, efficient and effective use of resources.
An effective Internal Audit service would:-
understand its position in respect to the organisations other sources of assurance and plan its work accordingly;
understand the whole organisation, its needs and objectives;
be seen as a catalyst for change at the heart of the organisation;
add value and assist the organisation in achieving its objectives;
be involved in service improvements and projects as they develop, working across internal and external boundaries to understand shared goals and individual obligations;
be forward looking;
be innovative and challenging; and,
ensure the right resources are available.
The report covered expected standards. However, over recent years there had been a number of significant happenings, mainly in the private sector, that had called into question the role and positioning of the Head of the Internal Audit service within all organisations. Consequently, CIPFA had been reviewing the role, responsibilities and positioning within public sector organisations and a document was out for consultation. It remained to be seen if this would result in a revised Code of Practice.
|Members were presented with a report on the Council's Annual Governance Statement for 2010/11.|
The Accounts and Audit Regulations 2011 required all authorities in England to conduct a review at least once a year of the effectiveness of its governance framework and to produce an Annual Governance Statement to accompany its' Annual Financial Statements. The deadline for approval of the Annual Governance Statement was 30th June.
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 2010/11 was attached to the report. The Council had not identified any significant issues that were not being addressed within the Statement. Officers reported on the governance framework and control environment in place within the Council that enabled the detailed preparation of the statement. The Audit Commission had been consulted on the process and the identification of key governance issues.
|Members were presented with a report on the Stockton on Tees Borough Council Annual Financial Statements 2010/11.|
The report outlined the Movement in Reserves Statement for the year ended 31 March 2011.
The statement showed the movement in the year on the different reserves held by the authority, analysed into "usable reserves" (ie those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Surplus or (Deficit) on the Provision of Services line showed the true economic cost of providing the authority's services, more details of which were shown in the Comprehensive Income and Expenditure Statement. These were different from the statutory amounts required to be charged to the General Fund Balance and the Housing Revenue Account for council tax setting and dwellings rent setting purposes. The Net Increase / Decrease before Transfers to Earmarked Reserves line showed the statutory General Fund Balance and Housing Revenue Account Balance before any discretionary transfers to or from earmarked reserves undertaken by the council.
The report also highlighted the Comprehensive Income and Expenditure Statement for the year ended 31 March 2011.
This Statement showed the economic cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position was
shown in the Movement in Reserves Statement.
The report then detailed the Stockton on Tees Borough Council - Annual Financial Statements 2010/11 Balance Sheet as at 31 March 2011.
The Balance Sheet showed the value as at the Balance Sheet date of the asset and liabilities recognised by the authority. The net assets of the authority (assets less liabilities) were matched by the reserves held by the authority. Reserves were reported in two categories. The first category of reserves were usable reserves, i.e. those reserves that the authority may use to provide services, subject to the need to maintain a prudent level of reserves and any
statutory limitations on their use (for example the capital receipts reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves were those that the authority was not able to use to provide services. This category of reserves included reserves that held unrealised gains and losses (for example the revaluation reserve), where amounts would only become available to provide services if the assets were sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line Adjustments between accounting basis and funding basis under regulations.
The report also detailed the Stockton on Tees Borough Council - Annual Financial Statements 2010/11 Statement Of Cash Flows For The Year Ended 31 March 2011.
The Cash Flow Statement showed the changes in cash and cash equivalents of the authority during the reporting period. The statement showed how the authority generated and used cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities was a key indicator of the extent to which the operations of the authority were funded by way of taxation and grant
income or from the recipients of services provided by the authority. Investing activities represented the extent to which cash outflows had been made for resources which were intended to contribute to the authority's future service delivery. Cash flows arising from financing activities were useful in predicting claims on future cash flows by providers of capital (ie borrowing) to the authority.
Members were given the opportunity to ask questions and make comment on the report.
|Members were provided with the Corporate Risk Register and Annual Risk Management Report 2010/11.|
The Annual report provided details of risk management activity that had taken place over the previous 12 months. It also outlined risk management policies and practices in place and the key issues that would be addressed in the next financial year. Additionally the report provided the latest version of the Corporate Risk Register with amendments made over the final quarter of the year ending 31st March 2011.
Members were informed of progress relating to the risk strategy during the year 2010/11, these included:-
- External Consultants
- Internal Assessments
- Improving the framework for identifying and managing risk across the authority
- Projects and Partnerships
- Cleveland Resilience Forum
- Insurance Renewals
- Insurance Issues
- Actuarial Review of Self Insurance Provisions and Reserves
- Benchmarking with other public sector organisations
- Risk Management Services Customer Satisfaction Survey
Other on-going strategic and operational activities included:-
- Partnership and Project Management Risks
- Annual Assurance Statements
- Anti-Fraud and Corruption Strategy
- Business Continuity Plans
- Training and Support
The key issues for 2011/12 and beyond included:-
- Comprehensive Spending Review
- Future Insurance Costs
- Self-retained liability claims handling
- Partnership Risk Management
Attached to the report for Members information were the Performance Indicators and a copy of the Corporate Risk Register. Members noted the risk issues and the risk identification and assessment and the proposed risk management arrangements.