Meeting documents

Finance, Audit and Risk Committee
Wednesday, 20th March, 2013 7.30 pm

Time: 7.30pm Place: Committee Room 1, Council Offices, Gernon Road, Letchworth Garden City
 PRESENT: Councillor David Levett (Chairman), Councillor M.E.Weeks (Vice-Chairman), Councillor Bill Davidson, Councillor S.K. Jarvis (substitute), Councillor David Kearns and Councillor Ian Mantle.
 IN ATTENDANCE: Norma Atlay - Strategic Director of Finance and Governance
Andy Cavanagh - Head of Finance, Performance and Asset Management
Fiona Timms - Performance and Risk Manager
Nigel Schofield - Committee and Member Services Officer
Terry Barnett - SIAS Audit Manager
Alan Copper - SIAS Principal Auditor
Richard Lawson - Grant Thornton
 ALSO PRESENT:
Item Description/Resolution Status Action
PART I
61 APOLOGIES FOR ABSENCE

An apology for absence had been received from Councillor Lawrence Oliver and in accordance with NHDC regulations Councillor S.K. Jarvis advised the Chairman that he would be a substitute for Councillor Oliver. An apology was also received from Mr Phil Westerman of Grant Thornton.
 Noted   
62 MINUTES
Minutes

RESOLVED: That the Minutes of the Meeting of the Finance, Audit and Risk Committee held on 28 January 2013 be confirmed as a true record of the proceedings and be signed by the Chairman.

A Member was concerned that a request made at the previous meeting held on 28 January 2013 for a report on Debt Recovery (identification, processes and recovery) had not been included on this agenda as there were several known instances of large debts still to be paid to NHDC. The Head of Finance, Performance and Asset Management advised that work was underway to gather all the information together and was taking some time but the requested report would be brought to this Committee at the meeting scheduled for 13 June 2013.
 Agreed  Head of Finance/Performance and Asset Management
63 NOTIFICATION OF OTHER BUSINESS

There was no other item of business tabled.
 Noted   
64 CHAIRMAN'S ANNOUNCEMENTS

The Chairman welcomed everyone to the meeting and 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   
65 PUBLIC PARTICIPATION

There was no public participation.
 Noted   
66 THE ANNUAL AUDIT PLAN FOR THE YEAR ENDED 31 MARCH 2013
Report
Appendix

Mr Richard Lawson the Audit Manager for Grant Thornton thanked the Chairman for the opportunity to address the Committee and advised the Committee that in order to plan the Annual Audit for 2012-2013 Grant Thornton would need to understand the challenges and opportunities facing NHDC. Mr Lawson confirmed that in addition Grant Thornton would consider the impact of key developments in the local government sector and take account of national audit requirements as set out in the Code of Audit Practice and the audit would focus on risks. The Plan had been prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission.

Grant Thornton had identified two significant risks namely Fraudulent Transactions and Management of over - ride controls which were applicable to all financial audits. Other possible risks such as Operating Expenses, Employee Remuneration, Welfare Expenditure and Property, Plant and Equipment would be reviewed.

Mr Lawson advised that the interim audit work had considered: the effectiveness of the internal audit function; the internal audit work on the Council's key financial systems; walk through testing of areas where there had been a risk of material misstatement and a review of Information Technology Controls. Mr Lawson confirmed that the Internal Audit Service provided an independent and satisfactory service to the Council and that no significant issues were noted in the walkthrough testing. Mr Lawson confirmed that the Review of Information Technology Controls and Journal Entry Controls had yet to be completed.

Mr Lawson confirmed to the Committee that a Value for Money audit was required under two criteria set down by the Audit Commission to assess whether the Council had in place the proper arrangements for securing economy, efficiency and effectiveness in the use of its resources. Grant Thornton would also assess whether there was Value for Money concerning the Council's Priority Areas and the Committee noted that the results of this work would be reported in the Audit Findings report and the Annual Audit Letter (September 2013) with any additional reporting to the Council on a review by review basis.

Mr Lawson advised the Committee that the audit cycle would take place between February and October 2013 and referred the Committee to the Audit Fee which was set item and was 40 per cent less than the fees set by the Audit Commission.

The Chairman thanked Mr Lawson for the details of the Annual Audit Plan and invited comments and or questions from the Committee.

A Member enquired about the re-valuation of property and equipment and what would the impact be if the valuation was incorrect as it would be important not to misrepresent the assets in the NHDC balance sheet. The Strategic Director for Finance, Policy and Governance advised the Committee that the assets were valued each year and did fluctuate, and the Head of Finance, Performance and Asset Management confirmed that the asset base was valued at £80M and that any disposals of NHDC land would be at market values confirmed by external valuers. The Committee noted that a lot of work was required of officers to calculate the correct value of NHDC property and equipment.

RESOLVED: That The Audit Plan for North Hertfordshire District Council for the year ended 31 March 2013 be agreed and that the Annual Audit Fee be noted.

REASON FOR DECISION:
To ensure that the Finance, Audit and Risk Committee would receive updates on the progress of The Audit Plan for 2013.
 Noted   
67 THE ANNUAL AUDIT PLAN - AUDIT COMMITTEE UPDATE 2012-2013
Report
Appendix

Mr Lawson provided an oral update on the progress with the Annual Audit Plan.

1.The 2012-2013 Accounts Audit Plan (Agenda Item 6) was prepared for this meeting of the Finance, Audit and Risk Committee;
2.The Interim Accounts Audit took place in the week commencing 25 February 2013 for one week;
3.2012-2013 Final Accounts Audit would commence on 1 July 2013;
4.Value for Money Conclusion would commence in late March/ early April 2013;
5.Mutual Municipal Insurance - There will be a transfer of economic benefit. If this liability was not discharged by 31 March 2013 it was expected that local authorities would recognise a creditor with a provision in financial statements if the timing or amount of the payment was uncertain;
6.Redundancy Costs - this falls under IAS 19 ‘Employee benefits'.

The Chairman thanked Mr Westerman for the oral update on the Audit plan for 2012-2013.

RESOLVED: That the oral update on progress with the Annual Audit Plan for 2012-2013 be noted.

REASON FOR DECISION:
To note progress on the Annual Audit Plan for 2012-2013.
 Noted   
68 SIAS UPDATE REPORT - PROGRESS AGAINST THE 2012-2013 AUDIT PLAN
Report
Appendix

The SIAS Principal Auditor (PA) presented the report of the Head of Assurance and referred the Committee to Appendix A which detailed the progress on each individual audit against the 2012-2013 Audit Plan as at 1 March 2013. The PA advised the Committee that at 1 March 2013, 76 per cent of the 2012-2013 Audit Plan days had been delivered. The PA confirmed that following discussions with officers the following audits would not take place in 2012- 2013: Waste Management - Northern Transfer Station and IT Needs Assessment., and since the issue of the update report, the North Herts Museum Service. For this latter audit the Head of Service's areas of concern would be addressed as part of the audit of Community Partnerships which, at the request of the Chairman would now take place in Quarter 1 as a priority audit.

The PA referred the Committee to the Table detailing the six audits issued since 10 November 2012. One of the audits one had a Full Assurance (Freedom of Information) and four had Substantial Assurance and one was without assessment as it was a benchmarking exercise on Financial Regulations for all SIAS clients.

The PA next reported on Performance Management and Targets for North Herts where planned audit days at 1 March were 76 per cent against the annual target of 95 per cent, that planned audit projects had achieved 57 per cent completion against the annual target of 95 per cent at 1 March. However, the PA was pleased to report that Client Satisfaction and the Number of High Priority Audit Recommendations agreed had both achieved 100 per cent at 1 March 2013.

The PA was pleased to advise the Committee that following publication of this agenda there had been good progress towards completing 95 per cent of the audit plan for 2012-2013. Nine key financial audits were scheduled for the final Quarter and with other pieces of work this led to proportionally more reports reaching draft and final report stage at the end of the financial year. There were 12 audits to complete to draft report stage - although fieldwork was substantially complete on all audits - however, Price Waterhouse (SIAS audit partner) had given assurance that their six audits would be at draft report stage by 28 March 2013 as would the other six audits being completed in-house within SIAS.

The PA referred the Committee to Appendix B which detailed the implementation status of High Priority Recommendations with a proposal that two audits be removed as the actions had been completed viz. Housing and Council Tax Benefits and Debt Recovery.

The Chairman thanked the Principal Auditor for the updating on the progress against the Audit Plan at 1 March 2013 and invited questions and comments from the Committee.

The Committee reviewed in depth the progress against the 2012 - 2013 Internal Audit Plan as presented at Appendix A and the status of High Priority Recommendations at Appendix B.

Members questioned why the completion targets were set at 95 per cent and not 100 per cent. The PA advised that a target of 95 per cent was set by SIAS and that it would be very unlikely due to reasons beyond auditors control that a 100 per cent completion could be achieved. The objective was to complete planned audits and that if an audit was to take 10 days and it took 12 days then SIAS would not charge for the two additional days. For each audit SIAS would charge only up to the agreed number of audit days available for each project unless there was an agreed need to carry out any additional work or to reduce the scope of work, in which case the charge would be amended accordingly. Although there was contingency number of audit days this would not be used unless it was necessary and the Strategic Director of Finance, Policy and Governance advised that NHDC was part of SIAS and all partners in SIAS had to ensure that SIAS could function properly and efficiently.

However, Members were very concerned at the lack of progress with the IT Software Audit (Appendix B - Implementation of High Priority Recommendations - Item 3) as the three phases had commenced in August 2012 and were not complete at February 2013. A Member commented that it appeared that implementation of this audit recommendation had gone backwards rather than forwards. In mitigation the Head of Finance, Performance and Asset Management advised that IT officer time had during this outstanding audit been devoted in the main to the proposal for Shared Services with other Local Authorities of which IT was a major component. Not withstanding the reasons for delays the Committee were most anxious that this software audit action should be completed as a matter of urgency. The Chairman reminded the Committee this audit was essentially about Software Licensing and that requests had been made at previous meetings of this Committee (Minutes Passim) that the IT software audit should take priority over a hardware audit.

The Committee agreed that management must complete this outstanding action as soon as possible and that Cabinet should be requested to allocate sufficient IT officer support to achieve this outcome.

RESOLVED:

(1)That the Internal Audit Progress Report be noted;

(2)That the proposed amendments to the Internal Audit Plan at 1 March 2013 including removal of three audits; Waste Management - Northern Transfer Station, IT Needs Assessment and North Herts Museum Service be agreed;

(3)That the proposal to remove High Priority Recommendations: Housing and Council Tax Benefits and Debt Recovery (Appendix B) be agreed;

(4)That the audit of the Community Partnerships Audit including the North Herts Museum Service be brought forward to Quarter 1 as a priority audit in the 2013 - 2014 Internal Audit Plan;

(5)That the Committee were not satisfied by the lack of progress with the IT software audit (Appendix B - Implementation of High Priority Recommendations - Item 3) and that Cabinet be requested to take immediate action to complete this outstanding audit actions as soon as possible.

RECOMMENDED TO CABINET: That Cabinet be requested to note the concerns of the Finance, Audit and Risk Committee that the completion by Management in respect of the Software Licensing Audit was very much behind schedule and that sufficient IT resources should be allocated to complete this audit as soon as possible.

REASON FOR DECISION:
To note and support the changes to the Internal Audit Plan and seek completion of audits within the 2012-2013 Audit Plan.
 Noted   
69 PROPOSED NHDC ANNUAL AUDIT PLAN FOR 2013-2014
Report
Appendix

The Audit Manager (AM) presented the report of the Head of Assurance which detailed the proposed NHDC Internal Audit Plan for 2013-2014 against the SIAS Strategy and Terms of Reference. The AM advised that at 1 April 2013 the current strategy would be updated to reflect the new United Kingdom Public Sector Internal Standards (PSIAS) and then included in an Audit Charter for consideration by this Committee at a future meeting.

The AM referred the Committee to Appendix A which was the draft Internal Audit Plan for 2013-2014 and the allocation of 440 audit days (including a contingency of 20 days). The AM advised that the Audit for 2013-2014 was 50 days less (10.2 per cent) and covered inter alia Strategic Support; Follow up on high priority recommendations; Key Financial Systems; IT Audit; Procurement and Counter Fraud. The AM referred the Committee to Appendix B which listed possible audits for 2013-2014 but on assessment these audits were not considered for the 2013-2014 Internal Audit but would be held in reserve should confirmed audits in the plan be considered to be no longer relevant.

The AM confirmed that the implementation of any agreed high priority recommendations would be monitored by Internal Audit and subsequent progress reported to this Committee as part of the Internal Audit updating reports.

The Chairman thanked the Audit Manager for the presentation of the 2013-2014 Internal Audit Plan and invited questions and or comments from the Committee.

The Committee again referred to the proposed target of achieving 95 per cent of the planned projects and there ensued considerable discussion on why the target was not 100 per cent and that the target should be 100 per cent. The Strategic Director of Finance, Policy and Governance advised the Committee that performance targets that could be achieved were discussed by the SIAS Board and set for the forthcoming audit year. A 100 per cent audit of projects was considered to be an unreasonable target and may not be met for various reasons but a target of 95 per cent could be over achieved.

Several Members raised the position of some audits within the schedule and a connection to work by other Committees and or Task and Finish Group e.g. Area Committees Grants Audit to be linked to the outcomes of the Overview and Scrutiny Committee Task and Finish Group - Grants Process and that it would be appropriate to bring forward the audit of the North Herts Museum Service within the Community Partnerships Audit. Another Member questioned the timing of the audit of the Local Development Plan Framework and that the process should be reviewed and that the Audit of Assets of Community Value should be completed before the Overview and Scrutiny undertook examination of the Community Assets. In response to a question on Open Data audit the Risk and Performance Manager confirmed that all aspects of a risk were reviewed before any risk was removed from the Risk Register with reference to the accuracy and integrity of data available to the public.

RESOLVED:

(1)That the proposed NHDC Internal Audit Plan as detailed at Appendix A be agreed;

(2)That the SIAS Audit Manager be requested to proceed with the prioritisation of the Community Partnerships Audit including the North Herts Museum Service as per Minute 68 (4) above;

(3)That the SIAS Audit Manager be requested to contact the NHDC Scrutiny Officer with a request for a copy of the outcomes report following completion of the NHDC Overview and Scrutiny Task and Finish Group - The Grants Process;

(4)That the Strategic Director of Finance, Policy and Governance be requested to present the decision made by this Committee for a 100 per cent target of planned project audits in each Internal Audit Plan for NHDC to the next meeting of the SIAS Board.

REASON FOR DECISION:
To approve the Internal Audit Plan for 2013-2-014.
 Agreed  Strategic Director of Finance/Policy & Governance
70 RISK MANAGEMENT UPDATE
Report
Appendix A
Appendix B
Appendix C

The Risk and Performance Manager (RPM) presented the report of the Head of Finance, Performance and Asset Management. The RPM advised the Committee that there were two recommendations for consideration: 1. To approve the reduction in the overall assessment of the Top Senior Management Team Risk of Organisational workload and 2. The Removal of the Authority's Response to Climate Change as a Senior Management Team Top Risk as presented on the Risk Matrix at Appendix A.

The RPM advised the Committee that the Top Risk of Organisational Workload had a number of sub risks each of which had been reviewed, risk description amended and the impact and likelihood had been reassessed. Following this review the overall assessment of this risk had been reduced to a new risk score of ‘5'. There were no changes to The Localism Act and Health and Social Care risks, Open Data risk was to be deleted and the following risks had reduced impact: Council Tax Reduction Scheme, Universal Credit, NNDR/Resource Review, Open Public Services and Localism Act 2011. The RPM advised that there was a new sub risk added namely Community Right to Bid and the RPM referred the Committee to Appendix B for a full description of the Organisational Workload Risk and the sub risks.

The RPM stated that it was considered that the Council could only have a limited impact on Climate Change and the Senior Management Team (SMT) did not consider that this Risk could be regarded as a Top Risk, and the RPM proposed that this SMT Top should be deleted.

The RPM next referred the Committee to Tables 1, 2 and 3 which summarised the financial risks for the last three years as identified in the Corporate Business Planning Cycle, to Tables 4, 5 and 6 which listed the financial risks allowed for in the General Fund from 2010-2011 to the third quarter of 2012-2013 and to Table 7 which gave the financial risks for the General Fund and the effect of charging Churchgate Capital to Revenue in 2012-2013. The RPM advised the Committee that overall it was not possible to determine a pattern to risks that had been realised but confirmed that financial risks were assessed each year in light of the most up to date information. The RPM reminded the Committee that Grant Thornton had expressed no concern in their Financial Resilience Report (8 December 2011 - Minute 44 refers) other than there should be appropriate levels of reserve. Comparative figures released by the Audit Commission for 2011-2012 gave an average reserve figure of £6.49M whereas NHDC held £2.77M in reserves as illustrated in the bar chart diagram on page 68 of the agenda for NHDC against other District Councils for 2011 - 2012.

The Chairman thanked the Risk and Performance Manager for the update on Risk Management and invited questions or comments from the Committee.

In response to a question regarding the transfer of Churchgate costs from Revenue to Capital the Head of Finance, Performance and Asset Management stated that despite two requests this cost would remain as Revenue allocation. There ensued a short debate on the costs allocated to the Churchgate Project and the Committee wished to be advised of the effect of monies spent on this project on budgets and agreed that officers should present a full report on all financial aspects of the Churchgate Project to the meeting of this Committee scheduled for 13 June 2013

In response to another question concerning reduced impact on the risk linked to Council Tax Reduction Scheme and Universal Credit the Strategic Director of Finance, Policy and Governance (SD) advised that this risk was concerning work by officers in implementing changes to benefits and therefore did not include the impact on members of the public in receipt of such benefits. The SD confirmed that all risks were monitored on a regular basis throughout the year.

Discussion took place on the impact on this Authority of the cancellation of the Shared Services Project and it was agreed that officers should present an outcomes report on Shared Services including incurred costs where for example what would be the savings on IT.

RESOLVED:

(1)That the reduction in the overall assessment of the Top Senior Management Team Risk of Organisational Workload be agreed;

(2)That the proposal to remove the Authority's Response to Climate Change as a Senior Management Team Top Risk be agreed;

(3)That the current provisions for financial risks be noted.

(4)That the Head of Finance, Performance and Asset Management be requested to present a report on the costs incurred on the Churchgate Project to the meeting of this Committee on 13 June 2013;

(5)That the Head of Finance, Performance and Asset Management be requested to present an outcomes report including the costs incurred on the Shared Services Project to the meeting of this Committee on 13 June 2013.

REASON FOR DECISION:
To acknowledge and support the Senior Management Team's proposals for Risk Management.
 Agreed  Head of Finance/Performance and Asset Management
71 REVIEW OF ANNUAL GOVERNANCE STATEMENT ACTION PLAN AND LOCAL CODE OF CORPORATE GOVERNANCE
Report

The Risk and Performance Manager (RPM) presented the report of the Head of Finance, Performance and Asset Management which indicated progress against the improvement actions that arose from the Annual Governance Statement (AGS) for 2011-2012 for implementation in 2012-2013. and sought the Committee's approval to note that the Local Code of Corporate Governance did not require amendment.

The RPM reminded the Committee that the final Annual Governance Statement for 2011 - 2012 was agreed on 19 September 2012 (Minute 26 refers) and that the Committee had agreed to review progress against the actions at this meeting. The RPM advised the Committee that the AGS clarified how the Council had complied with the Local Code of Corporate Governance throughout 2012-2013. The RPM confirmed that the Local Code was last reviewed and updated in March 2012 to reflect the Corporate Priorities applicable from 1 April 2012 and would not be reviewed again until 2015 unless there were any significant changes.

The RPM referred the Committee to Table 1 which detailed the remaining actions from the September 2012 Action Plan and that completed actions had not been included in Table 1.

The Chairman thanked the Risk and Performance Manager for the updating on the actions arising from Annual Governance Statement for 2011-2012 and the Local Code of Corporate Governance and invited the Committee to raise comments and ask questions of the officer.

A Member questioned the long delay to the implementation of the outstanding action from the 2011- 2012 AGS Plan - Revised Officer /Member Protocol as it was 18 months since the Overview and Scrutiny Committee Task and Finish Group had delivered its findings and it was confirmed that this had been tabled at the Meeting of the Overview and Scrutiny Committee held on 19 March 2013.

RESOLVED:

(1)That completion of the majority of the Annual Governance Statement actions be noted;

(2)That there were no revisions required to the Local Code of Corporate Governance be noted;

(3)That the Chairman of the Finance, Audit and Risk Committee be requested to complete an Assurance Statement which would support the Annual Governance Statement for 2012-2013.

REASON FOR DECISION:
For the Finance, Audit and Risk Committee to approve the governance arrangements, to review the Local Code of Corporate Governance on an annual basis and to approve the Annual Governance Statement.
 Agreed   
72 FUTURE MEETINGS - POSSIBLE AGENDA ITEMS

There were no suggestions for agenda items at future meetings other than as requested at Minutes 62, 70 (4) and (5) above.
 Noted