|There were no declarations of interest.|
|Consideration was given to the minutes of the meeting which was held on the 24th February 2014 for approval and signature.|
|Consideration was given to a report that updated Members on Mazars progress in meeting their responsibilities as the Council's external auditor. Also included in the report were key emerging national issues and developments.|
Mazars had completed their initial audit planning processes for 2013/14 and had agreed the following:
- Audit Strategy Memorandum 2013/14; and
- Certification Plan 2013/14.
Formal responses had been obtained from the Corporate Director of Resources and the Audit Committee Chair to letters seeking their views on the Council's management processes.
Since the meeting of the Audit Committee which was held in September 2013, which reported on Audit Quality Inspection arrangements, Mazars' 2012/13 audit was subject to an Audit Quality Review by the Financial Reporting Council. The review found that the audit had provided a safe opinion and Value for Money(VFM) conclusion, but also that there were some areas for improvement which were being actioned.
Mazars highlighted to the Committee that although they were commissioned to complete certification procedures in January 2014 on the Councils European Regional Development Fund (ERDF), Outputs Return for the Digital City project. ERDF schemes were no longer within the certification remit of the Audit Commission but the Council still had to arrange certification. Mazars had completed the agreed procedures and submitted the report to the Department for Communities and Local Government within the applicable timescale. Mazars fee for the work was £1200, excluding VAT.
Mazars went on to highlight emerging issues and developments in respect of the following:
- Annual fraud and corruption survey, Audit Commission April 2014 had been completed and submitted by Internal Audit, within the applicable timescale.
- April 2013 had seen no fraudulent cases however this year there had been 7 cases of fraud which were each over £10,000 in value. Mazars confirmed to the committee that the cases in question were from external housing benefit fraud.
Members queried whether there were any fraudulent cases below the £10,000 threshold. Mazars confirmed that they would not deal with those cases. The Internal Audit Senior Audit Team Manager did inform members however that there had been 2-3 cases which had been identified with a value of less than £1000. It was confirmed that these types of cases were not increasing and a series of checks were in place to enable early detection.
|Consideration was given to the Mazars Audit Strategy Memorandum report for Stockton on Tees Borough Council for the year ending March 2013.|
The purpose of the report was to summarise the audit approach that Mazars had taken, highlight significant audit risk areas of key judgements and provide details of Masars audit team.
The main issues discussed were as follows:
- Significant risks and key judgment areas.
- Revenue recognition risk and the procedures implemented to minimise significant risks.
- Pension reserve and liability, specifically in relation to balance sheet fluctuation and the reasons why.
- Key areas of management judgement specifically in relation to 'Valuation of non-current assets'.
- Applying the concept of 'Materiality', when dealing with the risk of giving the wrong opinion.
- It was explained that materiality had initially been set at £10.568m however this had been recalculated to £8.7m with a clear trivial threshold of £261,000, below which identified errors would not usually be reported, however management would be informed.
Members sought clarification in relation to the 'Value for Money Conclusion'. Mazars explained to Members that Stockton Borough Council were continuing to deliver value for money and as long as they continued to follow and update procedures this should continue however the scale of savings needed and number of projects and workstreams involved meant there remained significant management challenges ahead.
|Consideration was given to a report on Mazars Certification of Claims and Returns.|
Stockton on Tees Borough Council received more than £155m in funding from various grant-paying government departments. These departments attached conditions and restrictions to those grants which the Council must meet, otherwise funding could be withdrawn or clawed-back.
It was therefore important that the Council could demonstrate that it:
- Had put in place adequate arrangements to prepare and authorise each claim and return; and
- Could evidence that it had met the terms and conditions put in place by the grant paying body for each claim or return.
As the Councils appointed auditor, Mazars acted as an agent of the Audit Commission to certify specified claims and returns.
Discussion took place in relation to fees associated with claims and returns within the Audit Commission regime. It was highlighted that the claims and returns fee for 2013/14 was solely in respect of Housing Benefit Subsidy (BEN01), and had been set by the Audit Commission at £15,965 (2012/13 - £32,250).
Teachers Pensions (PEN05) and NNDR (LA01) were removed from the Commission's certification regime for 2013/14, having been certified in 2012/13.
Mazars highlighted that fees for claims and returns outside of the Audit Commission regime were based on an estimate of the hours taken to complete the work. This took into consideration such factors as the complexity and value of the claim, and any issues identified in previous years. Appendix A of the report included those returns which were expected to receive which are outside the Audit Commission regime. The fees charged last year for this work were:
- S256 agreements (4) - new for 2013/14, fee not yet known
- Initial Teacher Training - the estimated fee is £2,000;
- ERDF Digital City - work was now complete on the 2012/13 return, for which the fee was £1,200. The 2013/14 return was not yet agreed; and
- Teachers Pension Return - no longer within the Audit Commission regime, would now be certified under a tri-partite agreement between Mazars, the Council and the Audit Commission. The fee was not yet known.
It was highlighted that the scale fee for the 2013/14 Benefits Subsidy Claim was around half that set in 2012/13. Whilst there would be less work involved this year due to the removal of Council Tax Benefits, the Claim remained very complex and the fee would only cover the baseline work required. If additional work was needed in response to errors, as in recent years, additional fees may need to charged. A better indication would be given towards the end of November 2014
Concerns were raised in relation to Housing Benefit as this was not funded anymore and was extremely complex which made certification work difficult. Fees for this could not be prejudged at this stage.
|Members were asked to consider and note the Draft Statement of Accounts for 2013/14.|
The report before Members included a full set of accounts which would be subject to some minor amendments before being presented to Audit.
Members' attention was drawn to the reduction in fixed assets by £40m which was a result of a number of schools attaining academy status thus being removed from the Councils asset register.
Council Pension deficit had improved from £204.5m to £165.9m.
Member's were informed that the statutory audit would formerly commence on 14th July 2014 during which time interested parties could examine the accounts and make representation to the auditor.
Member's asked whether the valuations in respect of the £40m fixed asset decrease had been an accurate valuation. The Chief Accountant confirmed that it was an accurate valuation. Previously the audit plan had been based on a 5 year rolling plan however this had now been shortened to 3 years, resulting in more up to date and accurate information.
Brief discussion took place surrounding general fund balances.
|Members were asked to consider and note the draft Annual Governance report.|
The Committee was informed that there were further amendments to be made to the report which would be presented at the Audit Committee meeting to be held in September 2014.
|Members were asked to consider the Internal Audit Annual report and Opinion 2013/14 incorporating the opinion on the Council's control environment (paragraph 1.14) and the performance of the Internal Audit Section.|
The Financial Planning and Audit Manager were required to produce an annual report as required by the Public Sector Internal Audit Standards (PSIAS). The report included the Financial Planning and Audit Manager's annual opinion on the overall adequacy and effectiveness of the Council's internal control and governance processes. As such it 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 2450 of the PSIAS.
The Senior Audit Team Manager informed the Committee that a new format had been adopted this year which showed the Committee more detail and gave a better insight. The main points of discussion were as follows:
- Background information in relation to the annual report.
- Opinion on the overall adequacy and effectiveness on the Council's governance, risk and control framework. It was considered that Stockton Borough Council had appropriate controls & systems upon which it could place reasonable reliance to deliver the Councils objectives, and detect fraud and other malpractice within a reasonable period of time.
- Two areas of non compliance.
- Performance indicator targets which had been met.
- Head of Internal Audit appraisal procedures were not fully compliant with the new internal audit standards.
- The number of actual productive audit days 2013/14 was down compared to the planned number of productive audit days which was due to staffing changes.
- The Audit Plan was constantly revised during the year taking into account changing requirements.
- In addition to the audits contained within the Audit Plan for 2013/14, provision was made within the plan for Internal Audit to carry out follow up work on all recommendations that were made. During the year 24 audits were followed-up and of the 169 recommendations made in those audits, 133 were found to have been implemented.
- Audit Output.
- Details of audits by service group with a further analysis of recommendations by category.
- Details of all audit engagements undertaken during the year together with their assurance and opinion.
- Specific issues surrounding creditors and community transport.
- Audit findings and recommendations on the Agresso system.
-It was explained to Members that although the Audit findings of some schools highlighted a relatively high number of 2* recommendations which was due to SVFS standards. 1 and 2* recommendations were not considered major issues.
|Consideration was given to a report that provided details of the review of the Internal Audit Service for 2013/14. |
The Accounts and Audit Regulations 2011 required an assessment of the Internal Audit service to be carried out annually against specific criteria set out in the CIPFA Code of Practice for Internal Audit' (the Code). A revised standards checklist had been introduced since the last review and the assessment had therefore been carried out against that check list. The review had again been undertaken by two designated members of the Corporate Governance Group.
The Code identified the following key themes of the Internal Audit process that needed to be considered in the assessment
Definition of Internal Audit
Independence and objective
Ethics for internal auditors
Relationship with Audit Committees
Resource and risk management
Communication and relationships
Staffing, training and continuing professional development
Audit strategy and planning
Undertaking audit activity
Proficiency and due professional care
Performance, quality assurance and improvement programme
The assessment process involved gathering evidence of compliance with the Code through discussion with the Financial Planning and Audit Manager and the Senior Audit Team Manager and by reference to the following key documents and supporting records
The previous assessment report and accompanying documentation
Internal Audit Strategy and Audit Plan
Annual Governance Report
Internal Audit Progress Reports
Customer Satisfaction Surveys
Recommendations from the Previous Assessment
The previous assessment report had been presented to the Audit Committee on 23 June 2013 and contained the following recommendation.
Improvements set out in Appendix 2 were to be implemented to the agreed timescales and reported to Audit Committee as part of the quarterly progress reports.
The Appendix referred to was attached as Appendix 1 to the current Report.
The position regarding the specified improvement actions was as follows:-
All of the improvement actions had been completed, save for the actions specified at code ref 1.2.3 of Appendix 1.
The assessment against the new checklist and supporting evidence had confirmed that there was a good level of compliance with the Code which facilitated the provision of a good Internal Audit service.
The detailed assessment of compliance with the Code was attached at Appendix 2.
Whilst the overall standard of Internal Audit was good, the assessment identified the following areas of excellent practice that were worthy of acknowledgement.
Ethics and professional care of auditors
Relationship with Senior Management and Members
Effective working with external auditors
Training and continuing professional development
Opportunities for Improvement
The assessment did not identify any specific opportunities for improvement. Conformance with the Standard was confirmed in relation to each of the standards.
In a report to the Audit Committee on the 24 February 2014, it was indicated that the following actions had been identified to further enhance the internal audit service:-
Extend the amount of specific anti-fraud work being undertaken, specifically additional data matching
Undertake a process mapping exercise in CESC to ensure coverage within the audit universe was adequate and that the structure of the work was appropriate
Review and update monitoring and reporting procedures
Introduce a programme of standard testing to ensure consistency of testing of corporate processes and procedures across all audits
Improve promotion of the service to provide Managers and individuals with more information about the audit service and the audit process itself.
Bring together audit instructions/documentation into a simple audit manual.
It would be beneficial if progress on introducing these improvements were reported regularly to Members.
The Internal Audit Charter, which was also reported to the Audit Committee on 24 February 2014 indicated that in order to maintain the quality of the service a number of activities would be undertaken or were planned:-
The annual internal review of the service by Members of the Council's Corporate Governance Group
The requirement introduced by the Public Sector Internal audit Standards for an external review of the service every five years
An annual self-assessment against the relevant audit standards
Bench-marking with other Authorities
ISO accreditation of the service, reviewed annually
Customer satisfaction surveys sent out at the end of each audit to provide feedback on the audit process
The Internal Audit service complied fully with all key requirements of the Code, and overall the level of compliance was very high.
On the basis of the assessment and supporting evidence the Internal Audit service was shown to be well managed. It provided a good standard of service covering all key aspects of its remit and was well regarded and effectively utilised by senior management.
No significant issues had been identified by the assessment process. The opportunities for improvement would improve service delivery and effectiveness, but they do not in themselves represent a material risk to the Internal Audit service or its ability to deliver the audit programme.
|Consideration was given to a report that provided an update to Members of the practical implementation, in year, of the Treasury Management Strategy approved by Council in February 2014.|
The main issues discussed were as follows:
- Average balances were slightly higher than expected.
- Overall interest rates throughout the y2013/14 had averaged below 1% on investments.
- The impact of the economic recession had been reflected in this year's target which was between 0.73 - 0.74%, however it had been advised that due to a change in the economic climate it was estimated that the Medium to Long term rate would pick up.
|Consideration was given to a report relating to the Risk Management Annual Report & Corporate Risk Register for quarter 4 (2013/14) - period ending 31 March 2014.|
The report included the Annual Risk Management Report providing details of progress made in developing and embedding risk management into the Council's business. The report included details of the updated risk register 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, were minimised.
The Annual Risk Management Report was attached at Appendix A and provided details of progress in embedding and delivering risk management. In addition, the report included details of the key risk issues facing the Council over this next year.
The Corporate Risk Register had been reviewed and updated to reflect changes in risk profile over the period 1st January 2014 to 31st March 2014. There were no overall changes to the risks over the last period. The full Corporate Risk Register was attached at Appendix B of the Annual Risk Management report.
The total number of risks on the Corporate Risk Register at the end of the current quarter was eleven.
Members attention was specifically drawn to the 'Risks Financing and Claims Management' section of the report. It was highlighted that the Council re-tendered for insurance policies in 2013 and awarded long term agreements to Zurich Municipal for property and other miscellaneous covers and Travelers Insurance Company for liability and motor covers. The arrangement had worked well during 2013/14 however in February, the Council received notification from Travelers that they would break the long term agreement for liability covers and significantly increase premium. The increase reflected a deteriorating claims position at Travelers who had been hit hard by abuse type claims and some high value highway related claims nationally. It was important to note, that Stockton had not been a party to these claims but had seen an increase along with other Councils regardless of their individual claims history as the company attempts to cover the cost of claims from all customers.
As a result of the break in the long term agreement, the Council were released to seek tenders from other insurers and in May 2014, awarded a new long term agreement for liability covers to Risk Management Partners (RMP).
Discussion took place surrounding the number of claims received over the last 6 years. Claims had generally averaged out around 600 - 650 in each year which was considered good especially when the authority had been faced with budget cuts.
With reference to the Corporate Risk Register at Appendix B of the report, the Committee were informed that risks that scored 15 or above had had detail updated. There were 11 risks in total.
|Members were presented with the Health and Safety Report which provided an account of the planned, proactive and responsive measures undertaken by the Health and Safety Unit for the fiscal year 2013-14, to maintain and to improve the workplace health and safety control environment.|
Recent changes to the legislative landscape and the interpretation of existing health and safety laws, aimed to free employers from the burdens of bureaucracy.
The main issues discussed were as follows:
- Health and Safety Training
- First Aid at work Regulations
- First Aid training providers could now offer training specific to client needs.
- Occupational Health referrals.
- The diverse range of underlying musculoskeletal conditions, which may in part be attributed to life style choices contributing to the number of referred physiotherapy and workplace assessments.
|Consideration was given to the Work Programme 2014/15. |