Meeting documents

Finance, Audit and Risk Committee
Monday, 6th June, 2011 7.30 pm


Time:	7.30pm	Place:	Committee Room 1, Council Offices, Gernon Road, Letchworth Garden City

PRESENT:	Councillor David Levett (Chairman), Councillor John Booth (Vice-Chairman),Mrs A.G. Ashley, Councillor David Kearns, Councillor Marilyn Kirkland,Councillor Paul Marment and Councillor Lawrence Oliver.
IN ATTENDANCE:	Norma Atlay - Strategic Director of Finance, Policy and Governance Andy Cavanagh - Head of Finance, Performance and Asset Management Katie White - Corportate Legal Manager Fiona Timms - Performance and Risk Manager Helen Maneuf - Head of Assurance at Hertfordshire County Council Nigel Schofield - Committee and Member Services Officer Denis Thorpe - Grant Thornton
ALSO PRESENT:

Item	Description/Resolution	Status	Action
PART I
1	APOLOGIES FOR ABSENCE An apology for absence was received from Councillors Paul Clark and Bill Davidson and in accordance with the agreed procedures of North Hertfordshire District Council it was confirmed that Councillors Lawrence Oliver and Paul Marment would be the respective substitutes. The Chairman also advised that Phil Westerman from Grant Thornton had tendered his apologies.	Noted
2	MINUTES As this was the first meeting of the Finance, Audit and Risk Committee there were no Minutes from a previous meeting to approve.	Noted
3	NOTIFICATION OF OTHER BUSINESS There was no other item of business tabled.	Noted
4	CHAIRMAN'S ANNOUNCEMENTS The Chairman welcomed everyone to this first meeting of the Finance, Audit and Risk Committee. The Chairman proposed and it was unanimously agreed that the following agenda items would be withdrawn as this part of the agenda had not been distributed to Members or third parties outside of the five clear working days: Agenda Item 6: Revenue Budget Outturn for 2010 - 2011, Agenda Item 7: Capital Budget Outturn for 2010 - 2011, Agenda Item 8: Risk Management Update. With regard to Items 9, 11 and 14, which were also received outside the five clear working days the Chairman proposed and it was agreed to accept these reports as they were time limited or a matter of urgency. The Chairman reminded officers that reports should be sent to members of the Committee as soon as they were available prior to and if necessary after despatch of the agenda. The Chairman next advised the Committee that with their agreement the running order would be as follows: Agenda Item 14: Anti Bribery Policy, Agenda Item 9: Annual Governance Statement for 2010 - 2011, Agenda Item 11: Corporate Business Planning Process for 2012 - 2013, Agenda Item 15: Audit Approach Memorandum, Agenda Item 12: Review of the effectiveness of the system of internal audit for 2010 - 2011, Agenda Item 13: Internal Audit Report for 2010 - 2011, Agenda Item 10: Introduction to Shared Internal Audit Services. The Chairman reminded Members that, in line with the Code of Conduct, any Declarations of Interest should be declared immediately prior to the item in question.	Agreed
5	PUBLIC PARTICIPATION There was no public participation.	Noted
6	REVENUE BUDGET OUTTURN 2010/11 Report Appendix A Appendix B Appendix C This item was withdrawn.	Agreed
7	CAPITAL PROGRAMME OUTTURN 2010/11 Report Appendix A Appendix B This item was withdrawn.	Agreed
8	RISK MANAGEMENT UPDATE Report Appendix A Appendix B Appendix C This item was withdrawn.	Agreed
9	ANNUAL GOVERNANCE STATEMENT Report Appendix A Appendix B Appendix C The Performance and Risk Manager (PRM) presented the report of the Head of Finance, Performance and Asset Management and referred the Committee to Appendix A - Annual Governance Statement for 2010 - 2011, to Appendix B - The Action Plan arising from the AGS for 2010 - 2011 to be implemented in 2011 - 2012 and Appendix C - The Assurance Statement from the Chairman of the Audit and Risk Committee. The PRM reminded the Committee that there were four outstanding actions arising from the 2009 - 2010 Action Plan for completion viz. AGS 004, AGS 010.003, AGS 017.001 and UOR 003.001 of which AGS 017.001 remained outstanding concerning the Financial Regulations which would be presented to the next meeting of this Committee on 19 September 2011. The PRM was pleased to advise the Committee that there were no outstanding actions from the 2010 - 2011 Action Plan that had to be carried forward into 2011 - 2012 Action Plan. The PRM next described the Action Plan arising from the 2010 - 2011 Annual Governance Statement and in particular Actions: AGS 020, AGS 021, AGS 022 and AGS 023 which were summarised in Sections 4.9 to 4.12 of the Annual Governance Statement and on the Action Plan at Appendix B. With regard to AGS 022 the PRM advised that no connection with NHDC property was established but the incident highlighted the need for NHDC to review its monitoring programme. The Committee noted that there would be further updates on the Action Plan at the September and March meetings. The Committee reviewed the Annual Governance Statement for 2010 - 2011 as presented at Appendix A. In response to an enquiry the text at Paragraph 3.2.9 was noted as being correct as this referred to the review of effectiveness of the arrangements in place in 2010-2011 rather than for the current financial year. The PRM was pleased to confirm that at Appendix C - Assurance Statement the Heads of Service and Corporate Managers had all replied to the Chairman of the Audit and Risk Committee about outstanding high risk recommendations following the September 2011 internal audit report. RESOLVED: (1)That the contents of the draft Annual Governance Statement as presented at Appendix A be noted; (2)That the proposal to note the final Annual Governance Statement at the same time as the Statement of Accounts (September 2011) be agreed; (3)That the proposal to receive an updating report on progress against the Action Plan as presented at Appendix B at the meetings to be held in September 2011 and March 2012; (4)That the Chairman and Vice-Chairman be authorised to review a revised Annual Governance Statement and if appropriate approve for consideration by Council at the meeting to be held on 8 September 2011. REASON FOR DECISION: For the Finance, Audit and Risk Committee to assess and consider the Annual Governance Statement and review the governance arrangements.	Agreed	Performance and Risk Manager
10	INTRODUCTION TO THE SHARED INTERNAL AUDIT SERVICE Report The Head of Assurance - SIAS (HA) at Hertfordshire County Council thanked the Chairman for the opportunity to address the Committee and clarify the arrangements for the new Shared Internal Audit Service. The new SIAS was a partnership of six councils which commenced its duties on 1 June with a one month settling in period. The HA emphasised that sharing services would increase resilience in internal audit and give a greater economy of scale. This new combined service evolved from the Pathfinder Programme and the SIAS would meet the needs of the participating Councils and meet the requirements of CIPFA code of practice for Internal Audit 2006 and the HA was pleased to advise the Committee that the NHDC internal audit service was well regarded. The HA also advised the Committee that efficiencies would be delivered by standardising work and removing duplication, allow reduction in audit days with an estimated cost savings of some Â£300,000 per annum in total across participating Councils. There would be a detailed partnership agreement complemented by individual contract between HCC and each partner Council and the HA referred the Committee to Appendix 1 which gave details of the roles and responsibilities between partnership Councils, Section 151 Officers and the SIAS Board and to Appendix 2 which detailed the SIAS structure from 1 July 2011. In response to a question on staff numbers the HA confirmed that there would be 26 full time equivalent staff and that there had been no enforced redundancies. Members also requested that current internal audit staff should remain at NHDC to maintain continuity. The HA confirmed that each Council would buy a set number of audit days and SIAS would only charge for days used e.g. if 15 audit days were ordered and only 10 audit days were used the fee would only be for 10 days. In response to other questions the Strategic Director for Finance, Policy and Governance confirmed that there would still be an audit plan for NHDC with an assumed 485 audit days and that other authorities could be permitted to join this partnership in future subject to a review of the impact on the current arrangements by the SIAS Board. The HA also confirmed that there would be a common reporting format for all internal audits and from September 2011 there would be a common methodology for all internal audits undertaken by the Partnership. The Chairman thanked the Head of Assurance for the clarification of the SIAS and welcomed the attendance at two meetings of this Committee each year to provide updates on progress. RESOLVED: (1)That the contents of the report be noted; (2)That the governance roles in respect of Internal Audit and Shared Internal Audit Services as presented at Appendix 1 be noted; (3)That the Shared Internal Audit Services Structure (with grades) with effect from 1 July 2011 as presented at Appendix 2 be noted. REASON FOR DECISION: To allow the Finance, Audit and Risk Committee review the arrangements for the Shared Internal Audit Service.	Noted
11	CORPORATE BUSINESS PLANNING PROCESS FOR 2012 - 2013 Report Appendix A The Strategic Director of Finance, Policy and Governance (SD) advised the Committee that the Corporate Business Planning Process draft timetable for 2012 -2013 was presented at Appendix A for consideration. The SD advised the Committee that the draft timetable reflected a request from Members to be included in the process as soon as possible and a major change continued from last year was the inclusion of two member workshops. The SD reminded Members that the major component of the process was the setting of the budget as informed by the Council's Priorities document and that the Challenge Board Forum would scrutinise all budgets in detail. The SD referred the Committee to Appendix A and indicated those activities which were complete or part complete and that there would be consideration given to the appropriate level of resources that could undertake service reviews as there had been a reduction in FTE employees following the restructure. The Chairman thanked the Strategic Director for the clarification on the Corporate Business Planning Process for the financial year 2012-2013 and a Member questioned that as the process was well underway that it might be worthwhile to consider the presentation of the process for 2013-2014 as soon as possible. RESOLVED: (1)That the Corporate Business Planning Process for 2012-2013 as described in the report be noted; (2)That the Corporate Business Planning Process draft timetable for 2012-2013 as presented at Appendix A be noted. REASON FOR DECISION: To allow the Finance, Audit and Risk Committee the opportunity to review and comment on the Corporate Business Planning Process.	Noted
12	REVIEW OF THE EFFECTIVENESS OF THE SYSTEM OF INTERNAL AUDIT FOR 2010 - 2011 Report The Head of Finance, Performance and Asset Management (HF) reminded the Committee that NHDC was required to review and report to Members on the effectiveness of its internal audit function as part of the systems of internal control against the Practice for Internal Audit in Local Government 2006. The HF also reminded the Committee that it had been agreed not to develop an improvement plan for 2011 - 2012 due to the proposal for a formal partnership between Councils for shared internal audit. The HF referred the Committee to Appendix A which gave the status of Internal audit against each assessment criteria at 31 March 2011 with a comparator against March 2010. The HF advised that he had undertaken the review in consultation with the Chief Financial Officer/Section 151 Officer and was pleased to advise the Committee that the assessment was in the main compliant with the CIPFA Code of Practice and there were no material divergences from the Code. Consequently the HF was able to confirm that NHDC had an effective internal audit service during the year 2010-2011. The HF also thanked Members of the Audit and Risk Committee who through examination of internal audit reports (Minutes passim) had contributed greatly to the monitoring of internal audits. In addition feedback from officers was received on the performance of internal audit through an annual audit survey with a standard template. The HF referred the Committee to the satisfaction survey results presented at Paragraph 4.9 where more than 95 per cent of replies were given as good/satisfied or better. A member commented on the large increase in â€˜no answer' to the survey for 2010 -2011 and the HF commented that that not all audits had a full set of answers and in response to another question the HF advised that the follow up opinion as referred to at 10.3.3 was there as â€˜backstop' and was regarded as good practice. The Chairman thanked the HF for the updating on the effectiveness of internal audit and the Committee were pleased to note this and the previous reference made by the Head of Assurance (SIAS) that the internal audit team at NHDC was well regarded. RESOLVED: (1)That the contents of the report be noted; (2)That the requirement for an annual review of the effectiveness of an internal audit function be noted; (3)That the positive view of the Head of Finance, Performance and Asset Management concerning the arrangements for an effective internal audit process during 2011 - 2012 be welcomed. REASON FOR DECISION: The recommendations made at Paragraphs 8.1 and 8.2 allowed the Finance, Audit and Risk Committee fulfil its obligations as the Audit Committee of North Hertfordshire District Council.	Noted
13	AUDIT AND CONSULTANCY SERVICES - ANNUAL AUDIT REPORT FOR 2010 - 2011 Report The Head of Finance, Performance and Asset Management (HF) reminded the Committee that under the requirements of the CIPFA Code of Practice the Head of Internal Audit must present a formal annual report which covered inter alia: an opinion on adequacy and effectiveness of internal audit; disclosure of any qualification to that opinion plus reasons, a summary of audit work, any issues effecting the Annual Governance Statement; comparison of work completed against planned work, results from the internal audit quality assurance programme and any comments on compliance with the Code. The HF advised the Committee that in 2010-2011 there were 28 completed audits with reports (compared to 19 in the previous year). Eleven were assigned substantial to full assurance (compared to three in the previous year), ten at substantial (compared to nine in the previous year) and seven moderate assurance (seven also in the previous year). The HF referred the Committee to Appendix A which contained a full list of all audits undertaken in 2010 - 2011 with level of assurance for each audit. In addition to the above audits several audits had been carried out for East Herts District Council. The HF next described to the Committee the eight audits that were given moderate assurance rating (although not all moderate audits had recommendations made in the same areas) and the comments against each audit were noted by the Committee. The Chairman thanked the HF for the presentation of the report and the Committee proceeded to examine each audit report in turn as presented at Appendix C. A specific comment was made as to how an audit could be declared as â€˜substantial assurance level' when in fact there were several high/medium risks identified e.g. Sundry Debtors and Creditors, and the Chairman enquired if any audit result could be challenged if the assurance levels seemed to be inappropriate. The HF advised that all audit results could be challenged by management before finalisation and that the presentation system would change following the implementation of SIAS. The Strategic Director for Finance, Policy and Governance (SD) advised that to fully understand the outcomes of any audit it was essential to view the full details of the audit. The Committee discussed the audit of â€˜Consultants' at considerable length as there had been past criticism on the total expenditure and the SD confirmed although this audit was shown as complete the outcome of this audit had yet to be approved and advised that all expenditure to date on Consultants had been approved. The Committee still expressed concern over the Consultant Audit, was it value for money, need to differentiate between revenue and capital budgets, what is the purpose of the audit, procedures or measuring expenditure? What were the levels of authorisation? With the above criticism and comments in mind the Chairman proposed and it was agreed to request a report to the next meeting which would clarify in detail all procedures and findings behind the Consultants Audit and include a description of audit procedure. The report should also include: The Consultants used, the fees paid to Consultants, measurement of value for money, if any former members of staff were re-appointed as Consultants to NHDC and the time between cessation of full time employment at NHDC and commencement as a Consultant to NHDC. RESOLVED: (1)That the confirmation of an adequate overall internal control environment at North Hertfordshire District Council be noted; (2)That the internal audit work undertaken by Audit and Consultancy Services between February and May 2010-2011 as related to the Annual Audit Plan for 2010 - 2011 be noted; (3)That the issues judged relevant for inclusion in the Annual Governance Statement be noted; (4)That Audit and Consultancy Services year end performance against the 2010 - 2011 Internal Audit Performance Indicators and the feed back from the quality assurance exercises be noted; (5)That the compliance of Audit and Consultancy Services with the Code of Practice be noted; (6)That the Head of Finance, Performance and Asset Management be requested to present a report on the â€˜Use of Consultants' to the meeting scheduled for Monday 19 September 2011. REASON FOR DECISION: Recommendations made at Paragraphs 8.1.1 to 8.1.5 were made to ensure that North Hertfordshire District Council complied with the requirements of the Code of Practice for Internal Audit in Local Government 2006.	Agreed	Head of Finance/Performance and Asset Management
14	ANTI - BRIBERY POLICY Report Appendix A Appendix B The Corporate Legal Manager (CLM) advised the Committee that NHDC needed to consider and agree an Anti - Bribery Policy following the entry onto the statute book of the Bribery Act 2010. The CLM brought this new policy forward for approval as this authority needed to ensure that it had a policy in place which would give it protection on bribery matters. The CLM confirmed that there were two general offences under the Act: the offering or paying of bribes (active bribery) and secondly the request or receipt of bribes (passive bribery). The Committee noted that under the new Act, bribery applied to all members of the organisation and more pertinently the organisation could be guilty of an offence if a person associated with an organisation was found guilty. However, the CLM assured the Committee that if adequate procedures were in place a defence could be made. The CLM referred the Committee to Appendix B which contained the quick start guide on the Bribery Act and to meet the key six principles an anti - bribery policy for NHDC had been prepared and was presented at Appendix A. The CLM reminded the Committee that NHDC had an Anti - Fraud and Corruption Policy (which included Confidential reporting, Conflicts of Interest and Anti - Money laundering ) in place, which was affected by the requirements of the Bribery Act. The Committee reviewed the draft Anti - Bribery Policy which was based on a CIPFA template and the CLM added that it would be prudent to amend the pre - qualification questionnaire and Invitation to Tender documents to enquire if a bidder had been convicted of a section 7 Bribery Act Offence. However, the CLM advised the Committee that any blanket ban policy on any bidders convicted of a section 7 might be difficult to defend if challenged by judicial review and therefore a blanket approach was not suggested. The CLM concluded her report stating the fines that might be levied and could in fact be unlimited for an organisation. The Chairman thanked the Corporate Legal Manager for the report and questioned whether current policies at NHDC did not adequately meet the demands of the Bribery Act and did not the Members Code of Conduct and Officers Code of Conduct also meet the guidelines set out in Appendix B. The CLM accepted that current policies did go a long way to meet the new Act and agreed to provide a cross reference to each policy in the three policies. However, it was also very clear in the guidelines that such policies could not meet the requirements of the Act in full and where there was a risk of bribery and a defence might be required then having an Anti - Bribery Policy would be correct. The Strategic Director of Finance, Policy and Governance advised the Committee that the Corporate Management Team supported a separate policy which met the requirements of the Bribery Act. In response to a final question the CLM agreed to ensure that the Anti - Bribery Policy would be advised to staff via Team Talk and placed in Members Information Service and on the NHDC web site. There were no amendments or revisions proposed by the Committee to the Anti - Bribery Policy as presented at Appendix A. RESOLVED: (1)That the contents of the draft Anti - Bribery Policy as presented at Appendix A be noted; (2)That the contents of the Bribery Act 2010 quick start guide as presented at Appendix B be noted; (3)That the proposal to amend the NHDC Anti-Fraud and Corruption Policy with a cross reference to the Anti - Bribery Policy be agreed. REASON FOR DECISION: To ensure that NHDC had adequate procedures in place designed to prevent bribery by or of persons associated with the Council.	Agreed	Corporate Legal Manager
15	AUDIT APPROACH MEMORANDUM Introduction Report Mr Denis Thorpe, The Audit Manager from the NHDC external auditors - Grant Thornton thanked the Chairman for the opportunity to present the Accounts Audit Approach Memorandum. Mr Thorpe provided a comprehensive description of the Grant Thornton accounts audit approach, an update on accounts audit risk assessment and the results of interim audit work. In response to an enquiry Mr Thorpe confirmed that there would be very little if no effect on the work carried out by the SIAS on the Grant Thornton audit programme. The Chairman thanked Mr Thorpe for the information and it was agreed to note the Memorandum. RESOLVED: (1)That the details provided by Grant Thornton in the Accounts Audit Approach Memorandum be noted; (2)That the update on the Accounts Audit Risk Assessment by Grant Thornton be noted. REASON FOR DECISION: To allow the Finance, Audit and Risk Committee comment where appropriate on the Approach to Audit of NHDC by Grant Thornton.	Noted