Meeting documents

Finance, Audit and Risk Committee
Monday, 16th January, 2012 7.30 pm


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

PRESENT:	Councillor David Levett (Chairman), Councillor Mrs A.G. Ashley, Councillor Paul Clark, Councillor Bill Davidson, Councillor David Kearns and Councillor Marilyn Kirkland.
IN ATTENDANCE:	Norma Atlay - Strategic Director of Finance, Policy and Governance Andy Cavanagh - Head of Finance, Performance and Asset Management Tim Neill - Accountancy Manager Helen Maneuf - Head of Assurance - SIAS Alan Cooper - SIAS Principal Auditor Nigel Schofield - Committee and Member Services Officer Denis Thorpe and Phil Westerman - Grant Thornton
ALSO PRESENT:

Item	Description/Resolution	Status	Action
PART I
46	APOLOGIES FOR ABSENCE An apology of absence was received from the Vice - Chairman Councillor John Booth.	Noted
47	MINUTES Minutes RESOLVED: That the Minutes of the Meeting of the Finance, Audit and Risk Committee held on 8 December 2011 be confirmed as a true record of the proceedings and be signed by the Chairman.	Agreed
48	NOTIFICATION OF OTHER BUSINESS There was no other item of business tabled.	Noted
49	CHAIRMAN'S ANNOUNCEMENTS The Chairman welcomed everyone to the meeting and advised that Covalent Training would be arranged for the first meeting of the Finance, Audit and Risk Committee in the next Civic Year 2012-2013. 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.	Noted
50	PUBLIC PARTICIPATION There was no public participation.	Noted
51	SHARED INTERNAL AUDIT SERVICES - PROGRESS REPORT Report The Head of Assurance (HA) advised the Committee that this report was in a new format that was being introduced throughout Hertfordshire and included an update on progress with the Audit Plan. The HA welcomed any comments on the revised template. The HA advised the Committee that 52 per cent of the internal audits at NHDC had been completed and referred the Committee to Appendix A which gave a status update on each deliverable audit within the audit plan, and the HA assured the Committee that a minimum of 90 per cent of the amended 2011-2012 Audit Plan would be delivered by 31 March 2012. The Committee noted the six audit reports and assignments that had been issued since 23 August 2011 of which five were at substantial assurance and two of the five had a high priority recommendation and one was at full assurance with a high priority recommendation. The HA referred the Committee to Paragraph 2.4 which detailed three audits that officers had agreed to defer until 2012-2013 which allowed SIAS to undertake specific tasks and prioritise audit resources on high risk activity. The HA referred the Committee to Appendix B which indicated the implementation process of previously agreed high priority audit recommendations and confirmed that it was the responsibility of Internal Audit to notify the Committee of non-implementation of high priority recommendations by officers at the agreed date. The Chairman thanked the HA for the report and acknowledged that the new format was intended to be applicable to all authorities in Hertfordshire but one significant omission was the presentation of an Executive Summary for each audit. A Member questioned whether there was sufficient time to complete the balance of 38 per cent (90 per cent less completed 52 per cent) audits by 31 March 2012 and the HA advised that there had been considerable downtime at the change over and very good progress had been made on the Audit Plan and there was no reason to anticipate that the target would not be met. Another Member expressed concern about the delays to the audit of the Bancroft Parks and Gardens re-development project and that this audit should be undertaken in the current audit plan if at all possible and requested that the Principal Auditor should report back to the next meeting to be held on 1 March 2012. The PA advised that it had been agreed to look at this audit and the audit of Mrs Howard Gardens re-development at the same time as both projects had similar aspects and it would be beneficial to look at both projects in tandem and review lessons learned. A Member sought clarity on the Risk of Fraud Audit and what was the likelihood of finding fraud. The HA stated that no audit deliberately set out to find fraud and the audit purpose was to assess how well Councils managed the risk of fraud and that fraud or the suspicion of fraud often came about from received information. In response to another question the HA advised that a follow up audit was necessary to ensure that high risk recommendations had been followed up and assurance was sought from the Senior Management Team on these issues. The HA confirmed that Members should contact the Audit Team for additional clarification. The Member considered that the Committee would need to know the progress by officers assessing the completion of the high priority recommendations and referred to Appendix B Item 14 - Land Charges and Item 15 - Leisure Management Contract as examples and whether these audits were say 90 per cent complete as completion was due by February 2012. The Strategic Director of Finance, Policy and Governance advised the Committee that this was the first progress report in this format and that the next report would include the progress on the assessment of audit recommendations. The Chairman returned to his initial comment on the omission of an Executive summary for each completed audit and sought assurance that there would be access to a more detailed account of each audit as medium risks were not listed even if there was a substantial assurance and another query was the possible problem of an audit that had substantial assurance but still had a high priority recommendation. The HA acknowledged the comments and questions made by the Committee and it was agreed that the Principal Auditor would investigate the Bancroft audit and the HA would advise Members of how access to more details of audits. RESOLVED: (1)That the details within the Internal Audit Progress Report be noted; (2)That the proposed amendments to the 2011 - 2012 Internal Audit Plan as detailed at Paragraphs 2.3 and 2.4 be agreed; (3)That the Principal Auditor be requested to provide an update on the audit of Bancroft Development in the next Shared Services Internal Audit Progress Report to be presented at the meeting of this Committee scheduled for 1 March 2012; (4)That the Head of Assurance be requested to investigate the best method for providing access to Members of the Internal Audit Executive Summary Sheets and/or a full Internal Audit Report whether by email or access â€˜online' and indicate such a procedure in the next Shared Internal Audit Services Report to be presented to this Committee on 1 March 2012. REASON FOR DECISION: To allow the Finance, Audit and Risk Committee make comments and observations on the Shared Internal Audit Services Report.	Agreed	Audit Manager
52	CORPORATE BUSINESS PLANNING - BUDGET SETTING 2012/13 Report Appendix 1 Appendix 2 Appendix 3 Appendix 4 The Accountancy Manager (AM) presented the report of the Strategic Director of Finance, Policy and Governance and advised that this report was an updated report to the document reviewed by this Committee on 8 December 2012 and that there had been little change to the report. The Committee noted that the main purpose of the report was for Cabinet to consider the proposed final budget for 2012-2013 which contributed to the determination of the District Council Tax level for next year. The AM advised that there would be a base budget of Â£15.5M and a General Fund balance of Â£1.6M and that the base budget had been adjusted by Â£95K to take account of the ongoing impact of the 2011-2012 variances reported as at the end of November 2011 The Committee noted that there had been no changes to the assumptions on the budget and in response to a question the Strategic Director of Finance, Policy and Governance confirmed that the 2011-2012 Council Tax freeze grant was for four years and had been included in the budget setting process with an assumed further receipt of Council Tax freeze grant in 2012-2013 for one year only. The AM referred the Committee to Paragraph 4.6 and Appendices 2 and 3 which detailed the 11 efficiencies (E6 and E7 removed) and identified efficiencies of Â£609K and the six revenue investment proposals respectively. The AM advised Members that the proposed efficiency from the cessation of the Chairman's Civic Reception remained in the budget as an indication of intention of a saving but was not considered to have a significant impact on the budget. The AM identified the sum of Â£29K in 2012-2013 as a saving in the closure of additional public conveniences and the revenue investment of Â£44K for Olympic and Queens Diamond Jubilee events management in 2012-2013 as both items were not in the first report to Cabinet. There ensued a short discussion on the process for budget setting and it was considered that the earlier timing of the Members Workshops had been beneficial although comment was made that there did not appear to be a long list of proposals for Members to consider at the first workshop. The SD assured the Committee that officers had considered many proposals prior to the Workshops and the list presented to Members at the second workshops were those that had merit and were a genuine cost saving and had been influenced by the high level strategic discussion at the first workshops. A Member confirmed that the first set of workshops should be used for discussion of more â€˜blue sky thinking' ideas which could then influence the proposals brought forward by officers. The Committee discussed the current arrangements for the Members Courier Service which had been suggested as a possible efficiency at the November workshop and noted in the December Cabinet report. Officers had not been asked at that stage to investigate further the proposal although the SD confirmed that it would still be possible to review the position and make an in-year saving during 2012-2013 should Cabinet request further work be undertaken. and were aware that it had been discounted due to lack of support. The Committee considered that this efficiency should be re-visited and a Member considered that staff might be interested in taking on the delivery of papers to Members. In response to a question on the effect of the Welfare Reform Bill the SD advised that the latest outcome from the consultation was that Hertfordshire County Council and Hertfordshire Constabulary would bear a proportionate share of the cost of the Council Tax Benefits. The SD also advised that if certain groups claiming benefits were protected then this would ultimately affect others receiving benefit payments which would be reduced. The SD also confirmed that there would not be any contributions from Parish Councils. Another question involved the presentation of proposals for re-organisation at NHDC and that the details of the proposals were not released to Members sufficiently in advance. The SD stated that due to the confidential nature of staffing proposals it was not easy to present all the detail of the proposals to Members before a sufficient amount of the consultation with staff had been completed and detailed staffing and structural issues were delegated to the Head of Paid Service under the NHDC Constitution The Heads of Service would discuss various options as to viability e.g. should a service be provided in a different way? with the relevant portfolio holders and Member suggestions for areas to consider would always be welcomed. The Chairman thanked Members and Officers for their contributions and all agreed that the budget setting progress had improved year on year. RESOLVED: (1)That the information presented in the amended report that will be considered by Cabinet at the meeting to be held on 24 January 2012 be noted; (2)That the Committee were content with the process used for the Corporate Business Planning Process for 2012-2013 and Members acknowledged the benefits of an early Members' Workshop which considered initial areas for subsequent efficiency proposals; (3)That the efficiencies for the closure of several public conveniences (Royston Cross, Baldock Town Hall, Ashwell, Knebworth and Markets) be noted; (4)That the Revenue Investment R1 for the management of Olympics and Queen's Diamond Jubilee in North Hertfordshire (Â£44K) including the Olympic Torch Procession be noted; (5)That the Committee considered that further review should be undertaken by Cabinet of the Member Courier Service costs and whether moving to a single despatch would be expedient; RECOMMENDED TO CABINET: That Cabinet be requested to give further consideration to efficiencies in the Member Courier Service as discussed at the earlier Members' Workshops and invite officers to report back on possible options with a view to making an in-year saving during 2012-2013. REASON FOR DECISION: For the Finance, Audit and Risk Committee to review and comment on the Corporate Business Planning Process for 2012-2013.	Agreed
53	CAPITAL PROGRAMME 2012/13 ONWARDS Report Appendix A Appendix B Appendix C The Accountancy Manager (AM) presented the report of the Strategic Director of Finance, Policy and Governance which sought Cabinet's approval of the Capital programme for 2012 - 2013 and onwards. The AM reported that there were no significant changes to the capital schemes for next year as stated at the second quarter report and referred the Committee to Appendix A which summarised the Capital Programme by priority and that the details of the capital schemes were given at Appendix B with an estimated spend of Â£5.930M including an investment of Â£697K for schemes as listed at Appendix C. The Committee noted that Appendix C had been put into two parts: 12 schemes funded from capital receipts and three schemes funded from IT reserves and were reminded that all IT schemes would require a business case that was to be reviewed by the Challenge Board. The AM advised the Committee that there was one additional proposal for investment at Westmill Community Centre in Hitchin as it was considered to be prudent to provide funds for roofing works. The Chairman thanked the Accountancy Manager for the updates to the Capital programme since the last meeting of the Committee on 8 December 2011. In response to a question the AM confirmed that the capital sum for Hitchin Town Hall/ Museum Facility did not include any monies to be received from Futurebuilders England Ltd but the estimated grant from the Heritage Lottery Bid would contribute nearly Â£1M to the fit out costs and any additional monies were anticipated to be funded from prudential borrowing. A Member enquired if the overall funds allocated to the works at Hitchin Town Hall included any commitment to remedial measures at the Museums Store in Burymead as the condition of the building fabric could lead to the deterioration of the collection. The AM advised that the capital programme did not currently include any planned work for the Burymead Site. However, a revenue investment proposal for a feasibility study to consider the rationalisation of Burymead to release part of it for sale was included for Cabinet consideration in the budget proposals. RESOLVED: (1)That the information presented in the amended report that will be considered by Cabinet at the meeting to be held on 24 January 2012 be noted; (2)That the inclusion of Westmill Community Centre - Roof replacement in the Capital Programme for Leisure Facilities 2012-2013 (Appendix B) be noted; REASON FOR DECISION: To allow the Finance, Audit and Risk Committee undertake a review of the Capital Programme for 2012 - 2013 onwards and comment as appropriate.	Noted
54	TREASURY MANAGEMENT STRATEGY FOR 2012/13 Report Appendix A Appendix B Appendix C The Accountancy Manager (AM) presented the report of the Strategic Director of Finance, Policy and Governance which detailed the Treasury Management Strategy for 2012-2013 for presentation to Cabinet on 24 January and subsequently to Council for adoption. The AM reviewed the clauses in the Code of Practice on Treasury Management and the NHDC Treasury Management Policy Statement and advised Members that the key principles of the Strategy adopted by NHDC were: Security, Liquidity and Yield. The AM next described to the Committee the Council's approach to Credit Risk, Liquidity Risk and Market Risk and confirmed to Members that there would be no change to the practice of a maximum of Â£20m to be invested for longer than 364 days at any one time, also that any deal of longer than two years must have approval of the S151 Officer (Appendix C refers). Of particular note was the caution exercised by officers in declining an investment deal proposed by a cash manager to invest in a Building Society which upon enquiry had a high exposure to the Eurozone. The Committee noted that officers were hoping to increase the amount of borrowing either in the short or longer term (as asset disposals were not progressing) to ensure sufficient cash was available to fund the immediate capital programme, and that officers would be monitoring the cost of the borrowing in the quarterly monitoring reports. The AM concluded his report with advice that there seemed to be progress on the release of set aside Housing Capital Receipts and that this may lead to an adjustment to the Prudential Indicators and the investment interest forecast. The Chairman thanked the Accountancy Manager on the update on the Treasury Management Strategy and invited comments and questions from the Committee. There was only one question raised as to whether there could be savings on interest by paying off loans before end of term. The Accountancy Manager and the Strategic Director of Finance, Policy and Governance assured the Committee that the early fore-closing penalties of loans was regularly reviewed by officers including capital and the last review was in the Autumn of 2011. There was one loan with a very high interest, but the â€˜losses' were becoming closer and it was confirmed that the overall payment total was examined during budget setting. RESOLVED: (1)That the information presented in the amended report that will be considered by Cabinet at the meeting to be held on 24 January 2012 be noted; (2)That the Treasury Limits for 2012 - 2013 as detailed at Appendix C be noted; REASON FOR DECISION: To allow the Finance, Audit and Risk Committee comment as appropriate on the Treasury Management Strategy for 2012 - 2013.	Noted
55	CERTIFICATION WORK - GRANT CLAIMS Report Mr Phil Westerman of Grant Thornton thanked the Chairman for the opportunity to address the Committee. Mr Westerman was pleased to advise the Committee that the Council's performance in preparing claims and returns had improved since 2009-2010, all claims and returns had been submitted on time and that no claims (in excess of Â£76.5M) had been qualified. Mr Westerman referred the Committee to Appendix A for details of all claims and returns and to Appendix B which detailed recommendations to support improvement following three amended claims. The Chairman thanked Mr Westerman for the presentation and the Committee were pleased to note the reduction in the Grant Thornton fee for the claims and returns work. RESOLVED: (1)That the information in the Certification Report - Grant Claims and at Appendix A be noted; (2)That the Council's excellent performance in preparing claims and returns be noted and that three claims were without qualification be applauded; (3)That the reduction in the Grant Thornton fee for the certification report be welcomed. REASON FOR DECISION: To allow the Finance, Audit and Risk Committee comment as appropriate on the Certification Report on Grant Claims from Grant Thornton.	Noted
56	ANNUAL AUDIT PLAN FOR 2011 - 2012 Report Mr Denis Thorpe of Grant Thornton thanked the Chairman for the opportunity to address the Committee. The report stated the Grant Thornton proposals for the Audit Plan for 20011 - 2012 which would give an opinion on the Council's financial statements and a conclusion on the Council's arrangements for achieving Value for Money. Mr Thorpe advised the Committee that Grant Thornton would examine closely the valuation of property and equipment to ensure compliance with IFRS and CIPFA Code of Practice and check that all issues highlighted previously in 2010-2011 had been addressed. Although the audit plan would always include examination of VAT and PAYE the next audit would be more intense as Grant Thornton would include specialist auditors to ensure that the Council was following the correct procedures. Grant Thornton did not anticipate any problems but it was essential to ensure compliance. The Committee noted that this additional work was included in the audit fee estimate and were pleased to note that the overall audit fee had fallen by 35 per cent since 2009 - 2010 which was reflected in the plan. Mr Thorpe confirmed that there would be an increase of the VfM audit for 2011-2012 with a follow up review of financial resilience and the outcomes of the first year of SIAS Internal Audit. Other work would cover: National Fraud Initiative, Whole of Government Accounts, Certification of Grants and Returns and the Annual Governance Statement. The Chairman thanked Mr Thorpe for the clarification of the Audit Plan for 2011-2012 and the reduction in fee. The Chairman queried the need for additional work by the external auditors on fraud as this work was done in-house and Mr Thorpe advised that Grant Thornton would examine any matters referred to the auditors and the objective was to ensure robust practices at NHDC. In response to a question as to whether there would be any benchmarking on VfM Mr Thorpe advised there would be some benchmarking but not on a geographical basis and that there was limited value from nearest neighbours. However, using the â€˜audit family' had been of benefit previously and Grant Thornton would always try and use the best practice of other audits. RESOLVED: (1)That the details of the Annual Audit Plan for 2011 - 2012 be noted; (2)That additional specialist audits for PAYE and VAT in the Plan (without additional fee) be noted; (3)That the reduction in Audit fee of approximately 35 per cent since 2009-2010 be noted and welcomed. REASON FOR DECISION: To allow the Finance, Audit and Risk Committee comment as appropriate on the Annual Audit Plan for 2011 - 2012 proposed by Grant Thornton.	Noted
57	FUTURE MEETINGS - POSSIBLE AGENDA ITEMS Introduction The Chairman advised the Committee that he and the Strategic Director of Finance, Policy and Governance would be meeting soon with the Chairman of the Overview and Scrutiny Committee and the Strategic Director of Planning, Housing and Enterprise to discuss potential items to be considered by both Committees to ensure that there would be no duplication of effort and that the application of recharging would be one of the items for discussion.	Noted