|Cllr Barry Woodhouse, Cllr Ross Patterson, Cllr Philip Dennis and Cllr David Wilburn declared a none prejudicial interest in relation to Item 5. Statement of Accounts at Appendix B as it listed the Annual Financial Statement 2013/14 for Members Allowances.|
Cllr Philip Dennis declared a personal interest in relation to Item 8. Internal Audit Progress Report as reference was made to Oakdene Primary School which Cllr Philip Dennis was a Parent Governor of.
|Consideration was given to the minutes which were held on the 23rd June 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 which may have been of interest to the Committee and actions which the Committee may have wanted to consider.|
It was explained that the Audit Completion report was being considered later in the agenda. The process was expected to be complete by the 30th September 2014.
The main issues discussed were as follows:
- The External Audit Completion report referred to an additional significant risk in relation to the Value for Money conclusion.
- The Audit Commission issued a variation to the scale fee to reflect the additional work required of auditors, due to the NDR3 Non-Domestic Rates Return no longer being independently certified.
- Mazars were required to submit their assurance statement to the NAO by 3rd October 2014, but were expecting to do so by the 30th September 2014.
- Mazars were still working on the 2013/14 Housing Benefits Subsidy claim and were expecting to complete the work and certify the claim before the Department of Work and Pensions deadline of 30th November 2014.
- Emerging issues and Developments.
The Audit Commission recently published the outcomes from its monitoring of the performance of all its audit firms. The report concluded that audit quality was maintained in the year following transfer of staff from the Commission's Audit Practice to firms, and the introduction of new firms to the regime.
The Commission was satisfied that the risks of audit failure remained low; that all firms were meeting the Commission's regulatory requirements; and that all firms were continuing to produce work to an acceptable standard.
The report, published in June 2014, summarised the results of monitoring work by the Audit Commission as described within the report, for Mazars LLP.
The Firm was rated Green' overall, and the Audit Commission concluded that the Firm had performed well in its first year in the Commission's regime. All of the 2013/14 regulatory compliance indicators had been scored as green. In addition, audited bodies were satisfied with the performance of Mazars as their auditor.
The Audit Commission had distributed information packs for elected members with responsibility for finance and audit at councils. Copies were also sent to directors of finance and NFI key contacts for information. The pack brought together key facts about the NFI, the Council's NFI outcomes and comparisons to your nearest neighbours.
Members were informed that the Local Authority Accounting Panel (LAAP) Bulletins included some significant developments for local authority accountants and Finance departments.
CIPFA had recently published:
LAAP Bulletin 99 - Local Authority Reserves and Balances
LAAP Bulletin 100 - Project Plan for Implementation of the Measurement Requirements for Transport Infrastructure Assets by 2016/17
Mazars explained that this would mean massive change for finance departments and that all authorities would have to comply.
|Members considered an audit completion report presented by Mazars, the Council's External Auditor's.|
A letter was distributed during the Committee meeting to Members and Officers, which concluded pending matters contained within the main Audit completion Report.
The main issues discussed were as follows:
- It was highlighted that risks had been identified under the section 'Management override of controls', that in all entities, management at various levels within an organisation were in a unique position to perpetrate fraud because of their ability to manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively. Due to the unpredictable way in which such override could occur, Mazars considered there to be a risk of material misstatement due to fraud and thus a significant risk on all audits. Mazars had addressed the risk as detailed within the report and concluded that their audit had provided the assurance they sought and had not identified any matters to bring to the Councils attention.
- Discussion took place around risks relating to pension reserve and liability, and related disclosures. The Committee heard that there had been no evidence of accounting estimates being over or under and no transactions carried out outside of normal hours. All this was a positive message as nothing untoward had been found at Stockton Borough Council. In addition, on the 26th September 2014 Mazars had received the information they required from the Teesside Pension Fund administering authority (Deloitte LLP). The information provided the assurance Mazars required for their audit, details of which were contained within the update.
- It was highlighted that there was a risk of fraud in financial reporting relating to revenue recognition, however after extended testing of receipts and payments at the end of 2013/14 and the start of 2014/15, it was concluded that Mazars audit had provided the reassurance they sought.
- Discussion took place in relation to the Valuation of non-current assets. Mazars concluded that the management arrangements for using expert valuers were appropriate to property estimate the value of properties in line with accounting policies. Questions were raised in relation to estimating the value of none building assets. Who was the valuer? were they qualified? and what valuation system had they used? There were however no values that had been materially over or under-valued.
- Following comprehensive testing Mazars had informed the Committee that there had been no evidence of fraud identified in Reserves and Provisions.
- Members were informed that during the prior year audit of Internal control recommendations; Mazars had recommended that Xentrall change their reconciliation process in line with recommendations from both internal and external audit. Xentrall had changed their processes in line with the recommendations. There were no new internal control issues raised during the audit for 2013/14.
- Brief discussion took place surrounding the Summary of misstatements. Members were informed that the accounting treatment for Tees Valley Unlimited (TVU) was driven by its governance arrangements, but these dated back many years to other regeneration organisations, and were not clearly set out. Remedial action proposed clarified the Council's role and responsibilities as the accountable body for TVU, and agreed with LEP partners. Management response discussions regarding the future governance arrangements of Tees Valley Unlimited were progressing with the other Tees Valley local authorities. In the meantime the Council had strengthened financial governance arrangements in support of TVU.
- Members discussed Value for money and the 'Big Ticket' savings scheme including the 'Spark of Genius' partnership. Mazars were satisfied there was sufficient evidence which showed Stockton Borough Council was providing Value for Money.
|Members were asked to consider and approved the Statements of Accounts 2013/14.|
The accounts had been completed in accordance with the "Code of Practice on Local Authority Accounting in the United Kingdom 2013/14" which was prepared under International Financial Reporting Standards.
The Accounts and Audit Regulations (England) 2011 required all authorities in England to prepare their Statements of Accounts by 30th June each year. The completed accounts for 2013/14 were passed to the external auditor on 30th June 2014.
The Accounts and Audit Regulations (England) 2011 required that Members approved the accounts after the audit had been completed and by 30th September.
The following key financial issues were included in the accounts:
Non-Current Assets amounted to £356 million; this was a decrease of £36 million over 2012/13. The reduction in value was mainly due to a number of schools attaining academy status as thus being removed from the Council's asset register.
Investments and Cash amounted to £97.2 million. This was a decrease of £4.9 million from the previous year.
The Council's current Long and Short Term Borrowings totalled £56.9m which was a reduction of £0.1m.
The Council's earmarked reserves (excluding schools) had increased to £106.4m which was an increase of £2.7 million from the previous year.
The level of General Fund balances at the 31st March, 2014 stood at £8.7 million and School Reserves stood at £8.1 million.
The Council's Pension Scheme deficit had decreased from £204.5 million to £165.9m. This followed the change to the relevant accounting standard and the re-measurement of scheme assets and liabilities.
The statutory audit formally commenced on 14th July 2014. The audit process highlighted a small number of non-material errors that had been corrected within the accounts and some non-adjusting errors which were set out in the letter of representation and the Audit Completion Report. The Auditor's Audit Completion Report appeared elsewhere 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, approve the Statement of Accounts enabling the Chair of the Audit Committee to undertake this role.
|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 Head of Finance and Assets informed Members that following Council approval to a change to the Treasury Management Strategy from 2013/14 which increased the investment limit on call accounts a lot of the Councils investments had been moved to call accounts as they were offering the same interest rates as medium to long term investment plans and which also allowed money to be repaid on demand, unlike medium to long term investments which were usually fixed from 1 month to a number of years.
Call accounts would be monitored through the Treasury Management Advisors should interest rates change significantly, in which case funds would be repaid more swiftly should any of the institutions invested in encounter viability issues.
The rates of return on call accounts had fallen recently, and in accordance with the Strategy, the Treasury Management Team had started to reduce the amount the Council held in call accounts an d increased the use of term deposits.
It was highlighted that the Council continued with the policy of reducing its cash balances to finance the Capital Programme rather than take out further borrowing. This was because the cost of borrowing in relation to what the Council received on its investments (the cost of carry) was high as was the risk of counter-party failure. The Council last borrowed on 15th August 2008, however it was stated that the Authority would need to borrow at some point.
Given the interest rate climate, there were no opportunities for rescheduling. Interest rates would have to rise several percentage points before rescheduling became a viable option.
|Members were asked to consider and approve the Annual Governance Report.|
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 the 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 2013/14 was attached at Appendix A. At this 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. Mazars LLP, Stockton Borough Councils external auditors, had been consulted on the process and the identification of key governance issues.
|Members were asked to consider and note the Internal Audit Progress report which provided members with an update of the work carried out by the Internal Audit Section and the progress made against the Audit Plan 2014/2015.|
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.
Committee Members were reminded that the list of audit assignments undertaken in the current year to date had been circulated to all Councillors prior to the meeting. The intention was to give Councillors the opportunity to raise questions on issues that affect their ward or other areas of responsibility and for answers to be provided at the meeting.
The attached update report showed the current position in respect of the progress against the 2014/2015 audit plan and the results of the work that had been undertaken.
It was highlighted to Members that a service review had recently been completed by the Head of Finance, Governance and Assets which had an impact on the Internal Audit Service. The service would now be managed by the Procurement and Governance Manager with an additional line of reporting to the Head of Finance, Governance & Assets.
Internal Audit would now be responsible for managing the risk management process within the authority. The service would be reviewing the approach to counter fraud and also the audit plan to ensure resources continued to be prioritised to areas of risk.
The Senior Audit Team Manager drew Members attention to the fact that the department for Communities and Local Government announced the bidding arrangements for a Fraud fund. Stockton Borough Council intended to submit a bid to purchase a piece of software that would support the actions within the strategy to enhance data matching arrangements.
Discussion also took place around the following:
- Details of Audits by Service Group 2014/2015 and also 2013/2014;
- 2014/2015 Audit Plan as at 5th September 2014;
- Tees Archive SFA Sub Contracting Arrangements;
- CFYA - Refuse Collection.
Members queried the lack of responses to customer satisfaction surveys. Officers explained that a different approach was to be considered as the same groups of people had been receiving the surveys and were no longer responding. Officers also explained that Heads of Service and Managers would be contacted to gain insight into overall quality of Services and how best to obtain customer feedback.
Officers also informed Members that in relation to refuse collection, a new electronic system was to be introduced on the collection wagons which would highlight any potential issues employees needed to be aware of on refuse collection rounds.
|Members were asked to consider and note the Corporate Risk Register Progress Report.|
The Committee was 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, were minimised.
As a reminder, risks were scored on a scale of one to five for both impact' and livelihood'. The scores were multiplied to generate a total score and any risks with a score of 15 or above were included on the Corporate Risk Register. For information, any risks scored between 9 and 12 were included on Service Group Risk Registers.
The Committee 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 2014. All Service Groups had been contacted subsequently and the returns indicated that there had only been some minor updating to the risks previously included on the Authority's risk register over the months in question. The changes comprised a general update to all risks to reflect ongoing progress.
As there hadn't been any new risks added or any risk removed, the total number of significant risks in the Corporate Risk Register at the end of Quarter 1 was 11.
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 Appendix A.
|Members were presented with the Health and Safety Report - Q1. The Health and Safety manager presented the report to the Committee which detailed the services provided by the Council's Health and Safety Unit to monitor, improve and to ensure compliance of the health, safety and well-being control environment during the period 1st April to 30th June 2014. The report encapsulated the regular, non responsive activity of the Health and Safety Unit including the following:-|
1. Health and Safety Training
2. Health and Wellbeing Referral Update
3. Accidents Reported
4. Physical Assaults Reported
5. Verbal Assaults Reported
6. Premises Audited
7. Construction (Design and Management) Regulations 2007 (CDM) Activity
8. School's Educational Residential Visits Vetting
9. Employee Protection Register Activity
10.Tendering Contractor Health and Safety Policy Appraisal
12.Occupational Health Referrals
13.Work Experience Placement Vetting
Members noted and were happy to see that there had been a decline in reported accidents and abuse. It was also noted that there had been fewer trips, bumps and slips reported to the HSE.
|Consideration was given to the Work Programme 2014/15.|