Stockton-on-Tees Borough Council

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

Monday, 23rd September, 2013
4.00 p.m.
Conference Room 2, Second Floor, Municipal Buildings, Church Road, Stockton on Tees, TS18 1LD
Please note: all Minutes are subject to approval at the next Meeting

Attendance Details

Cllr Barry Woodhouse(Chairman), Cllr Derrick Brown, Cllr Phillip Dennis, Cllr Terry Laing, Cllr Mick Moore, Cllr David Wilburn
Paul Johnson, Martin Skipsey, Andrew Barber, Derek MacDonald (R); Michael Henderson (LD)
In Attendance:
Martin Barnes (Mazars)
Apologies for absence:
Cllr Ross Patterson, Cllr Alan Lewis, Cllr Mrs Kathryn Nelson
Item Description Decision
RESOLVED that the External Audit Progress Report be noted.
RESOLVED that the report be noted.
RESOLVED that the Statement of Accounts for 2012/13 be approved and the balance sheet be signed by the Committee Chairman at the conclusion of the meeting.
RESOLVED that the Annual Governance Statement for 2012/13 be approved.
RESOLVED that the information provided be noted.

1. the report be noted.

2, details of the risk register scoring matrix and risks scored between 12 and 15 be reported to the Committee's next meeting.
RESOLVED that the report and information be noted.
RESOLVED that the work programme be noted.


Councillor Phil Dennis declared a personal/non prejudicial interest in item 8 as he served on the Board of the Tees Valley Music Service, which was mentioned in the report.

Councillor Mick Moore declared a personal/non prejudicial interest in item 8 as he was served on a Housing Options Panel. Housing options was referred to during consideration of the item.
The minutes of the meeting held on 24 June 2013 were agreed and were signed by the Chairman.
Consideration was given to a report that updated Members on Mazars LLP progress, in meeting their responsibilities as the Council's external auditor. Also included in the report were the key emerging national issues and development.

It was explained that Audit Completion report was being considered later in the agenda . Work on the Council's Whole of Government Accounts was underway and the assurance statement to the National Audit Office would be submitted on or before 4th October 2013. It was also explained that work on the National Non-Domestic Rates Return was complete.

In February 2013 the Audit Strategy Memorandum was presented to Committee that included a list of significant risks to address in the audit. There had been one additional significant risk to be reported. This reflected the firm's approach to compliance with International Auditing Standards and was not a consequence of the indentification of weaknesses in the Council's framework of internal control. The new risk related to income recognition.

Members were provided with details regarding the emerging issues and developments. This included :-

- Financial Reporting Council's Audit Quality Inspections Annual Report 2012/13
- Audit Committee in the private sector
- The Future of local audit.

Members considered the report and a brief discussion on the the folowing took place

- the difficulty of maintaining the consistency of audits across authorities following the abolition of the Audit Commission
- the treatment of Local Enterprise Partnerships finances within accounts.
Members considered an audit completion report presented by Mazars, the Council's External Auditor's.

The report indicated the Auditors would be issuing an unqualified opinion on the Council's Statement of Accounts and concluded that the Council had made proper arrangements to secure economy, efficiency and effectiveness in the use of its resources.

The Committee noted the risks of material misstatement identified in the statement of accounts and the key areas of management judgement that impact on the statement:

- Management Override
- Pensions reserve liability, and related disclosures
- Income recognition
- Valuation including impairment and depreciation of non- current
- Reserves and provisions
- Debtors and creditors manual accruals

Members noted the significant matters discussed with management related to:

- Accounting for Tees Valley Unlimited and the Local Enterprise Partnership. It had been concluded that Tees Valley Unlimited transactions and balances should not be included in the Council's financial statements but a note would be included to provide clarity.

- Revaluation of school buildings and the inclusion of a £86million fall in the value of land and buildings. It had been concluded that the Council had done this correctly and the reduction in value had not arisen from error or misstatement.
Members considered the Council's Statement of Accounts 2012/13.

It was explained that 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.

The following key financial issues were included in the accounts:

• Fixed Assets - the Council’s valuation of its assets amounts to £392 million and was a decrease of £83 million over 2011/12. This follows the revaluation of school buildings under revised valuation guidelines.

• Investments and Cash amount to £102.8 million. This is an increase of £9 million from the previous year.

• The Council’s current Long and Short Term Borrowing levels had remained at £57 million.

• The Council’s earmarked reserves (excluding schools) had increased to £103.7 million which was an increase of £10 million from the previous year.

• The level of General Fund balances at the 31st March, 2013 stood at £10.6 million and School Reserves stand at £8.1 million.
• The Council’s Pension Scheme deficit had decreased from £224 million to £205 million following an actuarial gain in the year.

The statutory audit formally commenced on 8th July 2013. The audit process highlighted a small number of non-material errors that have been corrected within the accounts. The Auditor’s Audit Completion Report had previously been considered at this meeting 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, approve the Statement of Accounts enabling the Chair of the Audit Committee to undertake this role.
Members received a report that presented the Council's Annual Statement for 2012/13.

It was explained that the Accounts and Audit (Amended) Regulations 2011 require 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 provides. 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 2012/13 was provided to members. It was noted that the Council had not identified any significant issues that were not being addressed within the Statement.

Officers provided details of the governance framework and control environment in place, within the Council, that enabled the detailed preparation of the statement. Mazars LLP, the Council's external auditors, had been consulted on the process and the identification of key governance issues.
The Committee considered a report that provided details of work carried out by the Internal Audit Section and the progress made during the period April to August 2013 against the current annual audit plan.

Members noted that another level had been added to the assurance scoring methodology. Moderate assurance would now be used to indicate assurance above limited but below subsatntial. This would allow auditors to more correctly reflect their findings.
Consideration was given to a report relating to the Council's Corporate Risk Register for the period ending 30 June 2013.

The Committee was reminded that quarterly reports on the Corporate Risk Register were presented for the purpose of reviewing the key risks that have 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.

The Committee has 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.

All Service Groupings had been contacted and the returns indicated that there had been some changes to the Authority’s risk profile over the months in question. The changes comprised the removal of one risk, an update to one risk and the addition of one risk.

Summary details of these changes were provided to members and it was noted that these had been incorporated in the latest version of the full Corporate Risk Register.

Members asked if the Committee could receive a reminder of the scoring matrix. In addition the Committee asked that risks scored between 12 and 15 be reported the Committee's next meeting.
Members considered a report which detailed the services provided by the Council's Health and Safety Unit to improve the health,safety and wellbeing control environment for the period 1 April 2013 to 30 June 2013.

The report covered the significant activity of the Health and Safety Unit.

Particular discussion took place relating to physical and verbal abuse. It was noted that many assaults took place in care establishments where adults or children with complex needs were cared for.

It was explained that assaults that resulted in 7 work days being lost had to be reported to the Health and Safety Executive.

Reference was made to identifying members of the public who had sustained injuries from falls which may have been caused by the condition of paving, highways etc, which were the responsibility of the Council. It was noted that this information could be collated if individuals made insurance claims against the Council.
Consideration was given to the work programme 2013/14.

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