Stockton-on-Tees Borough Council

Big plans, bright future

Audit Committee Minutes

Date:
Monday, 24th September, 2018
Time:
4.00 pm
Place:
Conference Room 2, Second Floor, Municipal Buildings, Church Road, Stockton on Tees
 
Please note: all Minutes are subject to approval at the next Meeting

Attendance Details

Present:
Cllr Chris Barlow (Vice-Chairman), Cllr Stefan Houghton, Cllr Eileen Johnson, Cllr Ross Patterson, Cllr Paul Rowling, Cllr Mick Stoker
Officers:
Andy Bryson, Andrew Barber, Martin Skipsey (F&BS), P Bell (DCE)
In Attendance:
Gareth Roberts (Mazars)
Apologies for absence:
Cllr Mrs Kathryn Nelson, Cllr Laura Tunney, Cllr Barry Woodhouse
Item Description Decision
Public
A
18/18
EVACUATION PROCEDURE
 
A
19/18
DECLARATIONS OF INTEREST
 
A
20/18
MINUTES FROM THE AUDIT COMMITTEE MEETING WHICH WAS HELD ON THE 30TH JULY 2018.
RESOLVED that the minutes be approved and signed by the Chair as a correct record.
A
21/18
EXTERNAL AUDIT - ANNUAL AUDIT LETTER
RESOLVED that Members note the contents of the letter.
A
22/18
INTERNAL AUDIT UPDATE
RESOLVED that the report be noted.
A
23/18
TREASURY MANAGEMENT STRATEGY - ANNUAL REPORT
RESOLVED that the report be noted.
A
24/18
CORPORATE RISK REGISTER UPDATE REPORT
RESOLVED that the report be noted.
A
25/18
HEALTH AND SAFETY REPORT
RESOLVED that the report be noted.
A
26/18
WORK PROGRAMME
 

Preamble

ItemPreamble
A
18/18
The Evacuation Procedure was noted.
A
19/18
There were no declarations of interest.
A
20/18
Consideration was given to the minutes of the meeting which was held on the 30th July 2018 for approval and signature.
A
21/18
Members were provided with the External Audit Annual Audit Letter for 2017/18.

Members would recall that in 2012 the Audit Commission appointed Mazars LLP to act as external auditors to the Council. Following the abolition of the Audit Commission, audit appointments were now made by Public Sector Audit Appointments Limited.

A formal stage in the annual audit process was the production of the "Annual Audit Letter". The Annual Audit Letter for 2017/18 had now been received and was provided with the report.

The Annual Audit Letter summarised the auditor's findings from the 2017/18 audit. In line with previous practice, a copy of the Annual Audit Letter would be sent to all Members of the Council. Mazars LLP were required to submit the Annual Audit Letter to Public Sector Audit Appointments Limited and it would appear on the their website in due course.

Members were given the opportunity to ask questions/comments and these could be summarised as follows:

- In terms of the Value for Money Conclusion, questions were raised as to the formula that was used to calculate whether the authority was providing value for money and whether this was an industry set formula or did it change and who decided how this was calculated?

Gareth Roberts from Mazars explained the formula wasn't arithmetic. When carrying out the Value For Money Conclusion, Mazars would look at the arrangements the authority had in place and if those arrangements were not in place that were expected to be, then it would be deemed that the Council did not have the appropriate arrangements in place, for instance, regular updates of information such as the Medium Term Financial Plan (MTFP). In terms of how Mazars knew what to look for, it was explained that guidance was set out by the National Audit Office.

Members were informed to maintain Mazars independence as set out by the National Audit Office, this was to be Mark Kirkhams (Mazars) last audit report for Stockton Borough Council. Marks replacement for Stockton, Gavin Barker, would present his first report at the next Cabinet meeting. Officers of the Council had been informed.
A
22/18
Members were presented with the Internal Audit Progress Report which provided the Committee with an update of the work carried out by the Internal Audit Section and the progress made against the Audit Plan 2018/19.

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 affected 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 2018/19 audit plan and the results of the work that had been undertaken.
Members recalled an updated approach which included setting up a system of continuous audit. Significant progress continued to be made towards this with testing now being automated on a monthly basis in a number of areas. Because testing was undertaken continuously there would be a number of audits shown as on-going that would be finalised at the year end.

The main topics discussed were as follows:

- In relation to audit progress, a good steady start to the year had been made with 3 audits completed, 23 in progress, 3 in draft and 3 under review. It was expected by the next Audit Committee meeting many more of the 23 audits in progress would be coming through.

- Members attention was brought to paragraph 1.4 of the committee report ‘Counter Fraud'. Members were informed that the action plan associated with the counter fraud strategy that was presented in February 2018 was currently being implemented, details of which were contained within the main report.

Members were given the opportunity to ask questions/comments and these could be summarised as follows:

- Questions were raised in relation to the counter fraud strategy and whether this was a national initiative.

- In terms of phishing emails, were Stockton Borough Council staff required to undertake any training in this area.

Officers were given the opportunity to respond to members questions/comments. These could be summarised as follows:

- It was explained there were many national counter fraud campaigns at the moment such as computer hacking and cold calling.

- In terms of staff training relating to phishing emails, there was no requirement to provide this to members of staff however as part of the fraud strategy was one of the actions being looked with a view to provide training material.
A
23/18
The Committee considered a report that informed Members of the performance against the treasury management and prudential indicators set in the Treasury Management Strategy approved by Council in February 2017.

The Council operated under the Chartered Institute of Public Finance and Accountancy's Treasury Management in the Public Services: Code of Practice (the CIPFA Code) which required the Council to approve a treasury management annual report after the end of each financial year.
The report fulfilled the Council's legal obligation to have regard to the CIPFA Code.
The Council's Treasury Management Strategy for 2017/18 was approved at a meeting of the Council on 22nd February 2017. The Council had invested and previously borrowed substantial sums of money and was therefore exposed to financial risks including the loss of invested funds and the revenue effect of changing interest rates. The successful identification, monitoring and control of risk were therefore central to the Council's Treasury Management Strategy.
The main issues discussed were as follows:

- Members attention was drawn to ‘Economic Commentary' which detailed background information on what was happening with the UK economy and how this impacted on interest rates.

- A brief overview was given in relation to ‘Revised CIPFA Codes' and future reporting. The 2017 Prudential Code introduced the requirement for a Capital Strategy alongside an Investment Strategy and Treasure Management Strategy which would be produced for the 2019/2020 financial year. Decisions were still being made as to what indicators would appear in each report.

- MHCLG had also published revised guidance on Local Government and Investment and Statutory Guidance on Minimum Revenue Provision (MRP). This would include a wider definition of investments as Local Authorities around the country were diversifying from an investment point of view and the changes MHCLG had introduced was to improve and encourage transparency with tighter controls.

- In terms of ‘Local Context' and Capital Financing Requirement (CFR), borrowing had risen by 4.9 million. Usable reserves had decreased due to planned expenditure on the capital programme and a fall in working capital due to timing of receipts and payments.

- It was explained to members that to date there had been no borrowing for the capital programme as internal funds had been available and resulted in savings against borrowing costs, however it was highly probable that borrowing for the capital programme would commence this financial year.

- In terms of ‘Investment Activity', at the 31st March 2018 the authority held 49.2 million worth of investments. During 2017/2018 investments generated 539,000 in interest. This was boosted from the previous year due to the authorities investment in CCLA property fund which had generated 4.4% interest, and was much higher than the revenue from money market funds.

- In terms of Treasury Management Indicators it was highlighted that all management activities undertaken during 2017 complied with various CIPFA codes.

- The Prudential Indicators for 2017/2018 set out the controls for the authorities borrowing for the year, details of which were contained within the main report.

- The report contained information detailing that the authority did not break their operational boundary or authorised limit and total debt for the year. The Ratio of Financing Costs to Net Revenue streams identified how much of the council's revenue was used to fund borrowing which was extremely low.

Members were given the opportunity to ask questions / make comments and these could be summarised as follows:

- Questions were raised relating to the borrowing limit of 59 million and how that figure was reached.

- In terms of the ‘Ratio of Financing Costs to Net Revenue Stream', questions were asked how this compared to other local authorities.

- Officers were asked if they knew how much revenue the authority had saved from internal borrowing.

- In light of the interest gained from the CCLA Property Fund compared to money market funds brief discussion took place around what the authority was able to invest in and the regulations around that and the risks involved.

Officers were given the opportunity to respond to members questions/comments. These could be summarised as follows:

- Where questions had been raised relating to the under borrowing figure of 59 million it was explained that over previous years there had been significant investment in capital schemes, such as leisure centres, town centres, roads where approval had been given by Cabinet and Council to borrow money, however that option had not been taken due to the fact the authority was able to manage the funding of those schemes internally known as internal borrowing. This in turn had saved the authority borrowing charges. The limit to borrow was set through the Treasure Management Strategy. Borrowing had to be affordable to the authority based on what was happening at that time and set within the operational boundary.

- It was agreed that for the next Meeting of the Audit Committee, information would be brought back detailing the Ratio of Financing Costs to Net Revenue Stream of other neighbouring authorities.

- Members heard that in terms of saving revenue due to internal borrowing, the current long term borrowing rate was 2.6% to 2.7% however this had been higher in the past at a rate of 4% and 5%.
A
24/18
Members were asked to consider and note the quarterly Corporate Risk Register Progress Report.

The Committee were 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 ‘likelihood'. The scores were multiplied to generate a total score and any risks with a score of 15 or above were included in detail in the update. All other risks on the strategic risk register were reported in summary detail only.
A
25/18
Members were presented with a report which detailed the regular non-responsive 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 for the period 1st April 2018 - 30th June 2018.

The detail encapsulated the regular, non-responsive activity of the Health and Safety Unit, and accident and assault statistics:

1. Health and Safety Training
2. Health and Wellbeing Update
3. Premise Audit Findings
4. Construction (Design and Management) Regulations 2015
5. School's Educational Residential Visits
6. Employee Protection Register Activity
7. Safety Warnings, Advice or Reminders Issued
8. Accidents Reported
9. Physical Assaults Reported
10. Verbal Assaults Reported

The main issues discussed were as follows:

- Members attention was drawn to ‘Fire Safety in Care Establishments', where it was heard that this had come about as a reminder to Stockton Borough Councils in-house care establishments to ensure that they reviewed and updated their fire risk assessments. Following that advice visits were made to a number of the in-house care establishments to ensure the advice given was being followed. Personal evacuation plans were put in place for those residents who had mobility problems.
A
26/18
The Work Programme was noted.

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