Agenda and minutes

Governance and Audit Committee
Thursday, 25th September, 2014 2.00 pm

Venue: Witham Room - Council Offices, St. Peter's Hill, Grantham. NG31 6PZ

Contact: Jo Toomey 

No. Item




Disclosure of interests


Minutes of the meeting held on 22 July 2014


    The minutes of the meeting held on 22 July 2014 were proposed, seconded and agreed as a correct record subject to noting that the role of District Auditor mentioned on page 1 of the minutes ceased to exist with the introduction of the new audit arrangements.


Annual Governance Report 2013/14

    KPMG will present its Annual Governance Report for 2013/2014.    (Enclosure)


    Representatives from KPMG presented and summarised key messages from the Annual Governance Report 2013/14. Members noted that external audit anticipated issuing an unqualified audit opinion by 30 September 2014. This could only be issued following receipt of a signed management representation letter and the sign-off of the Statement of Accounts 2013/14. As part of the audit of the authority’s financial statements, KPMG did not identify any material adjustments however a small number of presentational adjustments were required to ensure compliance with the ‘Code of Practice on Local Authority Accounting in the United Kingdom 2013/14’.


    External Audit also reported that the Annual Governance Statement was compliant with ‘Delivering Good Governance in Local Government: A Framework’, which was published by CIPFA/SOLACE and that it was not misleading or inconsistent with information received as part of the audit of financial statements. The Committee was asked to approve this with the Statement of Accounts.


    The External Audit Plan 2013/14 that was presented to the Committee in March 2014 identified two key audit risk areas: the Local Government Pension Scheme Triennial Valuation and Business Rate Retention. The Audit tested controls and procedures in relation to these risks and did not identify any issues.


    In accordance with ISA 260, KPMG reported on qualitative aspects of the authority’s accounting practices and financial reporting, together with the process for preparing the accounts and support for the audit. KPMG found that the authority had maintained strong financial reporting processes and considered the accounting practices appropriate. A complete set of draft accounts was received on 20 June 2014, the quality of working papers was good and officers responded to queries in a reasonable time. The report also included KPMG’s declaration of independence and objectivity (also a requirement of ISA 260).


    External Audit was also required to give an opinion on two value for money criteria around securing financial resilience and securing economy, efficiency and effectiveness. KPMG concluded that the authority had made proper arrangements to secure economy, efficiency and effectiveness in its use of resources and anticipated issuing an unqualified opinion to this end.


    Members’ attention was drawn to a government proposal that would bring the timetable for the production of accounts from 2017/18 to the end of May with completion of the audit due by the end July. If the government did proceed with this proposal, working priorities and practices would need to change to ensure work was completed on time. Committee members expressed concerns about the impact such a change might have on the accuracy of the accounts and the potential resource implications.


     The Committee congratulated the officers for their work and noted KPMG’s report. The Strategic Director, Corporate Focus also added his thanks.


Statement of Accounts 2013/14

    Report number HOF285 by the Head of Finance.                          (Enclosure)




    Members of the Governance and Audit Committee:


    1.    Approve the revised Statement of Accounts 2013/14

    2.    Note the commentary on the outcome of the audit work

    3.    Approve the publication of the summary of accounts and that it be published on the Council’s website

    4.    Approve the final Annual Governance Statement (considered on 22 July 2014 subject to adjustments circulated) as an accurate summary of how the Council is run and approve its publication alongside the Statement of Accounts

    5.    Approve the signing of the letter of representation.


    The Head of Finance presented report number HOF285 on the Statement of Accounts 2013/14. An addendum had been circulated to Committee members, which gave a summary of amendments made since the Committee had considered the draft document.


    The Senior Financial Accountant briefly explained the key amendments that had been made, all of which were explained fully either in report HOF285 or the summary of addendums document that was circulated at the meeting.


    Committee members noted the amendments that had been made and the recommendations in report number HOF285, together with the additional recommendations included on the summary of addendums document, were proposed, seconded and agreed.


    The meeting was adjourned between 14:31 and 14:37.


Internal Audit Progress Report

    Report number HOF291 by the Head of Finance.                          (Enclosure)


    Representatives from Internal Audit informed the Committee that nine reports had been finalised since the start of the financial year including one follow-up report. Of the eight completed reports (excluding the follow-up report), four had been given a green opinion (payroll and expenses, council tax, NNDR and corporate governance), three were given an amber/green assurance (data protection, purchase orders and creditors and planning enforcement) and one was given an amber/red assurance (waste and recycling). An ‘adequate progress’ opinion was given in relation to the follow-up report. Across the audits 31 recommendations were made (1 high risk, 10 medium risk and 20 low risk), of which 30 had been accepted by management.


    The report provided headline findings for each audit, which Mr Barnett summarised, together with any medium and high risk recommendations that were raised, officer comments and an implementation deadline and the responsible officer.


    The Waste and Recycling Service Manager was invited to comment on the Waste and Recycling Inventory/Stock Audit. Ten recommendations had been raised as a result of the audit (five medium risk and five low risk), nine of which had been agreed by management. The service manager explained that the recommendations relating to excess stock, signing-out of stock, stock takes and maintenance of management records would be implemented by the agreed dates.


    The recommendation that related to keeping workshop stock in an area that could only be accessed by supervising staff and issued to the requesting staff member had not been agreed because of the arrangement of the workshop and the staffing levels within the workshop. Instead, it had been proposed that monthly stock checks would take place with reconciliation of records. In the event anomalies were identified, internal audit’s recommendation would be re-considered. Mr Barnett stated that subject to the other controls being introduced and the caveat that the recommendation would be reconsidered in the event of any anomalies, he was comfortable with this approach.


    Committee members also clarified arrangements for stock management of sundry goods and asked questions about the proposed arrangements for stock taking. It was suggested that the frequency of stock-takes should be dependent on the value of the items. The high turnover in some items was also recognised (e.g. cleaning products).


    Some discussion ensued around recommendations raised through the audit of Data Protection arrangements and rollout of training to all staff. The audit had revealed that some staff, including cleaning staff, had not received refresher training. While members of the Committee acknowledged that the onus should be placed on officers to ensure the secure storage of information, there was recognition that it was appropriate to ensure all staff received refresher training.


    Recommendations around purchase orders and creditors highlighted instances when purchase orders had been raised following receipt of invoices. There was an acknowledgement that in some instances it was not possible to raise orders (e.g. in relation to utility bills). For routine orders with regular creditors, Councillors suggested a system of call-off orders. Officers added that an exemption list of items where  ...  view the full minutes text for item 23.


Treasury management annual report 2013/14

    Report number HOF290 by the Head of Finance.                          (Enclosure)




    To note and approve the contents of the annual report on treasury management activity for 2013/14.


    The Head of Finance presented HOF290, which was the annual report on treasury management activity and the actual prudential and treasury indicators for 2013/14. The Committee was provided with an overview of national economic factors and an explanation of how they had impacted on the Council’s treasury management activity.


    During the year the Council experienced short-term fixed-term investment rates which ranged from 0.5% to 1.10%. At the end of 2013/14 the Council had total investments of approximately £34m and a net borrowing position of approximately £82m.


    The Treasury Management Strategy had been approved by Council on 1 March 2013 and subsequently updated by the Governance and Audit Committee to enable more information sources to be taken into account when selecting counterparties to invest with and enable diversification while providing security and minimising risk.


    In respect of debt management activity in 2013/14, the Council had £113m long-term debt (of which £112m related to the self-financing and the Housing Revenue Account and £1m to Public Works Loan Boards loans) and £3.7m short-term debt outstanding.


    Over the period of the report no long-term fixed-term deposits were made. The average rate of interests achieved on the portfolio was 0.74%.


    Committee members were also assured that the prudential and treasury indicators for the period had been met.


    In response to a question on benchmarking, officers explained that the authority was part of the East Midlands benchmarking club. They added that the exercise was useful to a point however it could not provide an exact like-for-like comparison because of differing organisational policies and risk appetite.


    The Committee noted the report.


Counter-Fraud Annual Report 2013/14

    Report number HOF286 by the Head of Finance.                          (Enclosure)




    The Governance and Audit Committee notes the Counter Fraud Annual Report 2013/14 and approves the action plan.


    The Head of Finance presented report number HOF286, on the Counter Fraud Annual Report 2013/14 and action plan. The report also summarised the results of national initiatives and looked at future arrangements following the abolition of the Audit Commission in 2015 and the closure of the National Fraud Authority in March 2014.


    The report also provided a summary of Housing Benefit and Council Tax Support fraud performance. This summarised the number of referrals and the action taken by the authority’s fraud investigators.


    Members were also informed that during 2013/14 seven whistle-blowing concerns were reported and investigated, with improvements to systems and controls being implemented. Following reports in 2012/13 about an increase in suspicious insurance claims, the Council actively worked with its insurers to review any claims it considered suspicious and investigated by its dedicated Claims Investigation Unit.


    During November 2013 the Council ran a fraud awareness-raising campaign for staff and rolled-out a counter fraud and corruption e-learning package as part of the corporate training programme.


    Members noted planned changes to fraud investigation; from 2014 the Council’s resources for fraud investigation would transfer to the Department of Works and Pensions as the government created a single fraud investigation service. When this happened the authority would need to review its arrangements to make sure investigation mechanisms were in place for those areas not covered by the government’s service.


    Councillors asked about the number of whistle-blowing reports in relation to 2012/13 and they were advised that numbers were comparable. A further question was asked about the National Fraud initiative which matched data within public and private sector bodies to prevent and detect fraud; 1,985 matches were identified for investigation following the exercise. Matches were given a quality assurance rating to help local authorities prioritise their investigation.


    The External Audit Director highlighted a potential future financial risk following the introduction of Universal Credit in respect of the reclamation of monies lost as a result of fraud.


    The Committee noted the report and approved the action plan.


Ombudsman Annual Review Letter 2013/14

    Report number LDS135 by the Executive Manager – Corporate.       (Enclosure)




    To note the contents of the Ombudsman Annual Review letter for the period 1 April 2014 to the 31 March 2014 and to feedback to the Ombudsman about the presentation of information and being able to distinguish complaints from queries.


    The Committee noted LDS135, which incorporated the Ombudsman Annual Report letter for 2013/14. The Ombudsman had received 16 complaints and enquiries about the Council, (including premature complaints). During the reporting period 7 complaints were referred to the Council for local resolution, of those, 3 were subsequently referred to the Ombudsman having completed the Council’s complaints procedure. Of the three complaints investigated by the Ombudsman, no findings of fault were found.


    In discussing the report, members commented that the new way in which information was presented made year-on-year comparison difficult. They added that the number of complaints could not be distinguished from the number of enquiries. It was suggested that this feedback should be presented to the Ombudsman.


    Members noted the contents of the report.


Close of meeting